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

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

Introduction The Food and Drug Administration (FDA) regulates the safety of foods (including animal feeds) and cosmetics, and the safety and effectiveness of drugs, biologics (e.g., vaccines), and medical devices. With new authority that began in FY2010, FDA also regulates tobacco products according to their impact on public health. The Agriculture, Rural Development, Food and Drug Administration, and Related Agencies appropriations bill provides FDA's annual funding. The total amount that FDA can spend, its program level, consists of direct appropriations (which FDA calls budget authority) and other funds, most of them user fees. An appropriations bill specifies both the budget authority and user fee amounts each year. It dictates the total for each of FDA's major program areas (foods, human drugs, biologics, devices and radiological health, animal drugs and feeds, tobacco products, and toxicological research) and several agency-wide support areas (Office of the Commissioner and other headquarter offices, rents to the General Services Administration, and other rent and rent-related activities). Traditionally, the appropriations committees have used report language to recommend, urge, or request specific activities within major programs. The standard appropriations procedure involves congressional passage of 12 annual regular appropriations acts, of which agriculture (including FDA) is one. For 7 of the previous 11 fiscal years, Congress had not completed that standard process and had passed omnibus or consolidated appropriations legislation, as shown in Table 1 . Recent examples include FY2009, when Congress acted in the final days of FY2008 to provide appropriations for the start of FY2009 as part of the larger Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 , signed on September 30, 2008), and passed an omnibus FY2009 appropriations bill that included FDA ( P.L. 111-8 ) in March 2009. The FY2010 agriculture appropriations ( P.L. 111-80 ) followed the standard process except that final passage occurred after the start of the fiscal year. The process for FY2011 began on February 1, 2010, when the President released his budget request. FDA Budget and the President's Request for FY2011 In February of each year (except for when a new President has taken office the month before), the President presents a budget request to Congress. The annual Food and Drug Administration Justification of Estimates for Appropriations Committees contains program-level details of the President's request, while also highlighting successes, needs, and special initiatives for the coming year. Because the topics selected for discussion vary over the years, analysts cannot use this information to track exact changes over time. The program-level detail, however, provides a window into the priorities and activities of the agency. Budget Authority and User Fees Table 2 displays the President's FY2011 request by major program area. For historical context, the table also has columns for FY2009-enacted appropriations, FY2009 actual appropriations (as of February 2010), and FY2010-enacted appropriations. The FY2011 request—$4.032 billion—is 22.8% higher than FY2010-enacted appropriations. The increase would be mostly in user fees. The request for $2.508 billion in budget authority (BA) is 6.2% higher than the FY2010 appropriations. For continuing user fee programs (prescription drug, medical device, animal drug, animal generic drug, tobacco product, mammography quality standards, export certification, and color certification fees), the requested $1.233 billion is 33.7% above FY2010. Tobacco product fees account for much of this increase as FDA ramps up the regulatory authority that Congress gave it in 2009. The requested increase in continuing user fee programs excluding tobacco product fees is 14%. The FY2011 request includes an additional $290 million in proposed new user fees that Congress has not yet authorized. These are generic drug user fee authority ($38 million), food export certification fees ($4 million), reinspection fees ($27 million), and food inspection and facility registration fees ($220 million). The total user request is for $1.523 billion, a 65.2% increase over FY2010. Budget Justification Description of Activities In addition to program-specific descriptions, which coincide with the program-specific funding shown in Table 2 , the budget justification documents describe major initiatives planned for the upcoming year. Initiatives . The budget justification documents describe major initiatives planned for FY2011 with all the requested funds. The three major initiatives cut across program areas. The first described is Transforming Food Safety . The agency outlines its plans to set standards for safety; establish an integrated national food safety system; enhance surveillance and improve risk analysis and research for food and feed safety; expand laboratory capability; increase inspection capacity; pursue pilot studies with industry using track and trace technology; and increase inspections of domestic and foreign facilities. In the Protecting Patients initiative FDA would seek to invest in new scientific tools and partnerships, modernize the agency's approach to supply chain safety for medical products, and expand its capacity to conduct medical product safety assessments. This would include launching an electronic drug registration and listing system to stop illegal drug imports and expanding foreign inspections. The third initiative, Advancing Regulatory Science for Public Health , involves FDA plans to build its scientific infrastructure, develop standards for new and emerging technologies, modernize the standards for evaluating products, and accelerate the development of essential medical therapies. Programs . The program-specific narratives highlight elements of these initiatives along with other activities. For the Food program, these include more closely integrating with state and local governments; working with public health organizations in foreign countries to shift burden of assuring imported food safety from the FDA to the foreign production/processing environment; developing tools to identify, evaluate, prioritize, and communicate risks; enhancing the reportable food registry and the consumer complaint reporting system; participating in the nanotechnology initiative; and hiring additional laboratory staff. For the Human Drugs program, the budget justification narrative includes expanding involvement with the science of nanotechnology and developing new biomarkers; implementing a quantitative risk-based program to target clinical site inspections; increasing inspections; improving human subject protection; completing and validating a new electronic drug registration and listing system, allowing information about specific drug products, specific ingredients, and specific facilities around the world; working with other countries' regulatory authorities; targeting high risk manufacturing facilities for inspections; continuing implementation of the National Sentinel System Network, a public-private collaboration; and staffing the Safe Use Initiative. Biologics program activities in FY2011 would include increasing outreach to improve industry practices and performance; building capacity to reduce the risk of disease transmission caused by infected tissues; evaluating the use of nanoparticles in analytic tests; developing analytic tests with stem cells to facilitate clinical translation of therapies; hiring and training investigators to conduct complex medical product inspections; and developing biological markers and other approaches to evaluate the safety of vaccines and vaccine components. For the Animal Drugs and Feeds program, the budget justification describes hiring and training scientific staff to build expertise to regulate new animal biotechnology products; expanding the National Antimicrobial Resistance Monitoring System, which would allow FDA to make more informed science based decisions; establishing an Integrated National Food Safety System with Strengthened Inspection and Response Capacity; and coordinating and increasing surveillance of state activities and data-sharing. The FDA-listed activities for the Devices and Radiological Health program include participating in the development and implementation of a national strategy for the best public health use of health-related electronic data; systematically integrating all available internal and external data involving the pediatric population; broadening targeted surveillance; building infrastructure to analyze pediatric postmarket device information; increasing oversight of foreign manufacturing facilities; developing standards for safe and effective CT scanners and fluoroscopes; and recruiting scientists in fields such as biostatistics, epidemiology, modeling, and risk sciences. FY2011 will be the second year of the Tobacco Products program at FDA. It is funded solely by user fees. Planned activities include conducting research and evaluation programs to better understand how the FDA regulations and tobacco control and prevention programs protect the public from the adverse health consequences of tobacco use; implementing a comprehensive framework for a research and testing program to support tobacco product standards development and other activities; developing comprehensive education and communications programs designed to reach the public; and contracting with states and territories to conduct inspections. The narrative for the National Center for Toxicological Research describes developing and deploying rapid detection tests; developing and training scientific staff; and engaging in collaborative and interdisciplinary research. To carry out these initiatives, as well as continue standard FDA activities, the agency would rely on direct congressional appropriations and user fee revenue. Congressional Action on Appropriations The appropriations committees in the House and the Senate each have subcommittees that parallel the 12 annual appropriations bills. The subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies consider FDA appropriations. The textbook order of activity is as follows: In each chamber, the subcommittee considers the issues, perhaps holds hearings, and marks up a bill for the full committee's consideration. In each chamber, the full committee considers the subcommittee-marked bill or a version that the full committee chair presents, and reports a bill, perhaps with committee amendments, to the full House or the full Senate for consideration. The full House considers the House Committee on Appropriations-reported bill, perhaps amending it on the floor, and passes the bill; the full Senate considers the Senate Committee on Appropriations-reported bill, perhaps amending it on the floor, and passes the bill. If the House-passed and Senate-passed bills are not identical, each chamber assigns Members to meet in conference to work out one acceptable bill. Each chamber must vote to approve the conference bill; the second chamber that passes the conference bill sends it to the President for signing. Current Status The annual appropriations process began in February 2010 with the President's submission of his proposed budget for FY2011. The budget justification documents for the Food and Drug Administration, available online through the White House Office of Management and Budget and the FDA Web sites, describe the agency's programs, provide some funding history, and outline plans for the use of the requested funding. On September 29, 2010, neither the full Senate nor the full House had approved an agriculture appropriations bill for FY2011, nor had Congress passed any other of the regular FY2011 appropriations bills. The Senate amended and approved H.R. 3081 , the Continuing Appropriations Act, 2011, which would allow federal operations, including the FDA, to generally continue at FY2010 levels from October 1, 2010, the start of FY2011, through December 3, 2010. The House passed the continuing resolution early on September 30, 2010, and the President signed it later that day as P.L. 111-242 . Table 3 presents the action taken thus far this appropriations cycle. The next steps for FDA's FY2011 appropriations will likely occur within congressional negotiations either for an omnibus, government-wide appropriations bill for the remainder of FY2011 or in incremental continuing resolutions. House The Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of the House Committee on Appropriations held a hearing on March 10, 2010, on the President's FY2011 Request for FDA. FDA Commissioner Margaret Hamburg testified and responded to questions. On June 30, 2010, Chair Rosa DeLauro held a markup of a bill distributed to committee Members but not to the public. Representative DeLauro stated that the bill would include $2.571 billion in budget authority for FDA; including user fee revenue, the total FDA program level would be $3.773 billion for FY2011, as shown in data column 6 of Table 2 . She said that the bill differed from the President's request by including, for example, additional money for the Office of Generic Drugs ($15 million), review of direct-to-consumer ads ($3 million), review of communications to medical professionals ($2 million), Center for Devices and Radiological Health ($7 million), and food safety activities ($16 million). DeLauro also said that the report to accompany the bill (neither of which are yet available) would mention the "need to create an independent office of post-market drug evaluation." It would also direct FDA to provide a status report on its work on track-and-trace technologies for improving drug supply chain safety. Neither subcommittee Chair DeLauro nor the Committee on Appropriations has released bill text of the mark. Senate The Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of the Senate Committee on Appropriations held a hearing on March 9, 2010, on the President's FY2011 budget request for FDA. FDA Commissioner Margaret Hamburg testified and responded to questions. On July 15, 2010, the Senate Committee on Appropriations reported S. 3606 . For FY2011, the bill would provide $2.516 billion in budget authority and $1.233 billion in user fees for a total FDA program level of $3.75 billion. The accompanying S.Rept. 111-221 , submitted by subcommittee Chair Herb Kohl, noted that the committee did not include $290 million in Administration-requested user fees for which Congress has not passed authorizing legislation (for generic drug review, reinspection, export certification, and food inspection and facility registration). Data column 7 of Table 2 shows the committee-reported amounts. S.Rept. 111-211 described the committee's rationale for its recommendations, in agreement with the President's request, to increase FY2010 amounts for food safety ($83 million); drug, device, and biologics safety ($43 million); and regulatory science ($20 million). Repeating concerns it had raised in its FY2010 appropriations report, the committee strongly encouraged FDA to develop a program, with states, for increasing the inspection of imported shrimp for banned antibiotics. Regarding antibiotic development, it directed FDA to report on its progress toward the committee's request last year for development of guidance on clinical trials. It specified that the report cover the guidance on community-acquired bacterial pneumonia, FDA plans for guidances on multi-drug and pan-resistant organisms, and progress regarding development and appropriate use of antibacterial drugs for humans. The committee recommended several FDA activities relating to antimicrobial resistance, specifically regarding use of antibacterial drugs in animals. The committee directed that the agency use $22 million for its critical path initiative, with $6 million of that going to partnerships. Of the $6 million, at least $2 million must be used to support research in prevention, diagnosis, and treatment of tuberculosis. It directed FDA to report on critical path spending semi-annually. The committee recommended $3 million for demonstration grants for improving pediatric device availability. Regarding the drug supply chain (e-pedigrees), it directed FDA to report on the status of its work with electronic track-and-trace and authentication technologies. The committee stated its support of an Administration-requested $1.4 million increase for studies to develop a modernized food label. It recommended $97 million for the generic drugs program, of which $56 million is for the Office of Generic Drugs ($4 million more than FY2010 and $2 million more than the Administration's request). The committee directed FDA to report on Emergency Use Authorizations to include an assessment of whether the authority is sufficient. It recommended that $7 million in appropriated funds, as well as the $19 million in user fees, be used for Mammography Quality Standards Act activities; supported the expansion of nanotechnology research; recommended $16 million for orphan product development grants ($2 million more than the budget request); recommended $6 million for the Office of Women's Health; and recommended a $1 million increase to hire staff "facilitating the development of drugs to treat rare diseases." The committee reiterated its encouragement for FDA to work with states to more aggressively combat fraud in the seafood industry; it supported FDA's work with the National Oceanic and Atmospheric Administration on seafood safety and encouraged sharing information with the Federal Trade Commission regarding fraud in seafood marketing and labeling. It again directed FDA to respond to a proposed standard of identity to prevent the misbranding and adulteration of honey. Finally, the committee directed FDA to initiate traceability projects on food products or ingredients linked to foodborne disease outbreaks. Updates to this report will track legislative activity.

The President's budget request for FY2011 included $4.032 billion for the Food and Drug Administration (FDA). The total is made of $2.508 billion in direct appropriations (which FDA calls budget authority) and $1.523 billion in user fees. Overall, the request is 22.8% more than the enacted FY2010 total appropriation, with budget authority up 6.2% and fees up 65.2%. Most of the increase would come from proposed new user fees to support generic drug activities, food export certification, reinspection, and food inspection and facility registration. For continuing user fee programs (prescription drug, medical device, animal drug, animal generic drug, tobacco product, mammography quality standards, export certification, and color certification), the $1.233 billion request is 33.7% above FY2010. Budget justification documents describe FY2011 agency initiatives in food safety, medical product safety, and regulatory science. They also show the program-level budget request (both budget authority and user fees) and describe activities in each of FDA's program areas: human drugs, biologics, animal drugs and feeds, devices and radiological health, tobacco products, and toxicological research. The Commissioner of Food and Drugs has testified to the subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of both the Senate and House Committees on Appropriations. On June 30, 2010, the House subcommittee approved Chair Rosa DeLauro's mark, copies of which were not made public. It included, for FY2011, $2.571 billion in budget authority for FDA. It recommended a total FDA program level, including user fees, of $3.773 billion. The Senate Committee on Appropriations reported S. 3606 on July 15, 2010. It would provide FDA with $2.516 billion in budget authority and $1.233 billion in user fees for a total FY2011 program level of $3.75 billion. On September 29, 2010, neither the full Senate nor the full House had approved an agriculture appropriations bill for FY2011, nor had Congress passed any other of the regular FY2011 appropriations bills. The Senate amended and approved H.R. 3081, the Continuing Appropriations Act, 2011, which would allow federal operations, including the FDA, to continue at FY2010 levels from October 1, 2010, the start of FY2011, through December 3, 2010. The House passed the continuing resolution early on September 30, 2010, and the President signed it that day as P.L. 111-242. Updates to this report will track legislative activity.

Introduction The National Science Foundation (NSF) supports both basic research and education in the non-medical sciences and engineering. Congress established the foundation through the National Science Foundation Act of 1950 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 major source of federal support for U.S. university research, especially in certain fields such as mathematics. 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. This report describes selected items from the Obama Administration's FY2017 budget request for NSF and tracks legislative action on FY2017 appropriations to the foundation. It also details selected authorizations of NSF appropriations proposed in the 114 th Congress, summarizes budget and appropriations action from FY2015 and FY2016, and presents information on historical funding for the foundation. NSF has six major appropriations accounts: Research and Related Activities (RRA), Education and Human Resources (EHR), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), National Science Board (NSB), and the Office of the Inspector General (OIG). At times, authorizations and appropriations have been specified at the RRA subaccount level, and NSF's budget justifications detail activities and obligations at that level. The majority of NSF's primary mission activities are funded through RRA, EHR, and MREFC. NSF adopted its current appropriations account structure in FY2003. In general, NSF's major accounts have been comparable since then. Appropriations to NSF are typically included in annual Commerce, Justice, Science and Related Agencies Appropriations Acts. (The Congressional Research Service tracks these acts on CRS.gov, at http://www.crs.gov/AppropriationsStatusTable/index .) NSF's budget justifications are published on the agency's website at http://www.nsf.gov/about/budget/ . FY2017 Budget and Appropriations Actions The Obama Administration sought $7.964 billion for NSF in FY2017, a $501 million (6.7%) increase over the FY2016 estimate of $7.463 billion (see Table 1 ). This request included $7.564 billion in discretionary budget authority and $400 million in new one-time mandatory budget authority (excluding new mandatory funding, the total NSF request was $101 million (1.3%) greater than the FY2016 appropriation). The request would have increased budget authority in three accounts relative to the FY2016 estimate: RRA by $392 million (6.5%), EHR by $73 million (8.3%), and AOAM by $43 million (13%). The NSB and OIG accounts would have received about the same amount as in FY2016. Funding for the MREFC account would have decreased by $7 million (3.6%). The requested mandatory budget funding would have been split between two accounts—$346 million for RRA and $54 million for EHR. It is not typical for NSF to request or receive mandatory funding for major accounts. As reported by the Senate Committee on Appropriations on April 21, 2016, S. 2837 , the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2017, would have provided a total of $7.510 billion to NSF for FY2017. This amount would have been $46 million (0.6%) above the FY2016 estimated funding level, $54 million (0.7%) below President Obama's FY2017 discretionary funding request, and $454 million (5.7%) below the request including new mandatory funding. This bill would have kept funding for each of the major accounts at nearly the same level as the FY2016 estimate, except for the MREFC account, which would have increased by $46 million (23%). As reported by the House Committee on Appropriations on June 6, 2016, H.R. 5393 , the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2017, would have provided a total of $7.406 billion to NSF for FY2017. This amount would have been $57 million (0.8%) below the FY2016 estimated funding level, $158 million (2.1%) below President Obama's FY2017 discretionary funding request, and $558 million (7.5%) below the request including new mandatory funding. The bill would have kept funding for the EHR, NSB, and OIG accounts nearly the same as the FY2016 estimate, increased the RRA and AOAM accounts by $46 million (0.8%) and $10 million (3%), respectively, and decreased the MREFC account by $113 million (57%). The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), signed by the President on May 5, 2017, provides $7.472 billion in discretionary funding to NSF, 0.1% above the FY2016 enacted amount. The Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ), provided funding at about 99.8% of the FY2016 funding level for the NSF through April 28, 2017. The Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017 ( P.L. 114-223 ), provided funding for the NSF from October 1, 2016 through December 9, 2016, at the FY2016 funding rate subject to a 0.496% across-the-board decrease. The FY2017 NSF budget justification highlighted many of the same programs as in FY2016. Specifically, the document identified two areas of major emphasis, four cross-foundation investments, and six on-going NSF-wide priorities. The two areas of major emphasis—a new classification in the FY2017 budget document—are Clean Energy Research and Development (R&D) and strengthening support for core activities: The FY2017 request would have increased funding across multiple offices and RRA directorates for Clean Energy R&D by $141 million to $512 million total, a 37.9% increase. Clean Energy R&D appears to have broadly included Clean Energy Technology, listed as one of the cross-foundation investments in FY2016. Strengthening support for core activities would have been funded by the new mandatory budget authority request of $400 million to support "fundamental, curiosity-driven research," with a focus on supporting early-career investigators. The budget justification reported that the mandatory funding would have allowed for an estimated 800 additional research grants to be funded. The foundation's four cross-foundation investments aim to bring researchers from different fields of science and engineering together to address cross-disciplinary questions. As in FY2016, these activities included the following: Understanding the Brain (UtB, $142 million requested, 3.6% decrease from FY2016 estimate); Risk and Resilience ($43 million requested, 4.9% increase); Innovations at the Nexus of Food, Energy, and Water Systems (INFEWS, $62 million requested, 27.7% increase); and NSF Inclusion across the Nation of Communities of Learners of Underrepresented Discoverers in Engineering and Science (NSF INCLUDES, $16 million requested, 3.2% increase). NSF identified six ongoing foundation-wide priorities for FY2017. These included the following: Cyber-Enabled Materials, Manufacturing, and Smart Systems (CEMMSS, $257 million requested, 0.3% increase over the FY2016 estimate); Cyberinfrastructure Framework for 21 st Century Science, Engineering, and Education (CIF21, $100 million requested, 24.4% decrease); Innovation Corps (I-Corps, $30 million requested, no change); Research at the Interface of Biological, Mathematical, and Physical Sciences (BioMaPS, $30 million requested, 4.8% decrease); Science, Engineering, and Education for Sustainability (SEES, $52 million requested, 29.8% decrease); and Secure and Trustworthy Cyberspace (SaTC, $150 million requested, 15.4% increase). The NSF Research Traineeship (NRT) program was no longer included in the foundation-wide priorities list, though NRT was noted as a crosscutting program with funding from the RRA and EHR accounts. The overall FY2017 request for NRT was $58.6 million, an 8.3% increase from the FY2016 estimate (including a 9.4% decrease in requested funding through RRA and a 21.4% increase through EHR); this remained lower than the $74.4 million in enacted funding level for NRT in FY2015. For another widely tracked crosscutting program, the Graduate Research Fellowship (GRF), the FY2017 request was about the same as the FY2016 estimate ($332 million). The report to accompany S. 2837 , S.Rept. 114-239 (referred to as the "Senate report" in this section), specifically addressed one of these NSF-wide funding priorities, stating "The Committee supports the NSF's request for the Innovation Corps [I–Corps] program ..." The report to accompany H.R. 5393 , H.Rept. 114-605 (referred to as the "House report" in this section), recommended $5 million above the requested level for I-Corps "to enable greater participation nationally." The explanatory statement accompanying P.L. 115-31 directs NSF to provide the requested level of $30 million for I-Corps. Broadly, both reports expressed support for programs that focus on such things as cybersecurity and broadening participation in STEM fields from underrepresented populations. As reported, neither S. 2837 nor H.R. 5393 would have included the $400 million in new mandatory funding requested to strengthen support for core services. The requested mandatory funding is not included in the Consolidated Appropriations Act, 2017. Research and Related Activities (RRA) The Obama Administration sought a $392 million (6.5%) increase in funding for RRA in FY2017, for a total of $6.425 billion. Of this amount, $6.079 billion was requested as discretionary funding and $346 million was requested as new mandatory budget authority. As reported by the Senate Committee on Appropriations, S. 2837 would have provided $6.034 billion in discretionary funding, keeping RRA funding at the same level as in FY2016. As reported by the House Committee on Appropriations, H.R. 5393 would have provided $6.079 billion in discretionary funding, which was the same as the level of requested discretionary funding and represents a $45.8 million increase over FY2016. Neither bill would have provided mandatory funding. The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), provides $6.034 billion for RRA, equal to the FY2016 estimate. The FY2017 budget request sought increases for all of the RRA subaccounts except for the U.S. Arctic Research Commission (USARC), which would not have changed (see Table 2 ). The largest percentage increase would have gone to Engineering (ENG, 9.4%). The largest increase in dollars would have gone to Mathematical and Physical Sciences (MPS, $87.3 million). Other subaccounts would have received an increase of between 6.0% and 6.5%, except for Integrated Activities (IA), which would have received a 2.9% increase. The FY2017 request also included an increase for the widely tracked Experimental Program to Stimulate Competitive Research (EPSCoR) from $160 million to $171 million (an increase of 6.7%), of which $8.56 million was requested as new mandatory funding. S. 2837 did not specify funding allocations within RRA. However, Senate report language did specify funding levels for three programs: $10 million for the Historically Black Colleges and Universities Excellence in Research program, $18 million for the Advancement of Women in Academic Science and Engineering Careers program (ADVANCE), and "not less than the fiscal year 2016 enacted level for EPSCoR" ($160 million). Similarly, H.R. 5393 did not specify allocations within RRA, but House report language did specify funding levels for three programs: $171 million for EPSCoR; $48 million for the International Ocean Drilling Program (IODP); and $147 million for "NSF's contributions to the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) initiative," which are part of NSF's Understanding the Brain (UtB) cross-foundation investment. Both the House and Senate reports noted support for NSF's peer review process. The House report further directed agency actions regarding research abstracts, including a continuation of agency efforts to ensure that award abstracts are written in "plain English," stating that they "serve as a public justification for NSF funding decisions by articulating how the project serves the national interest." The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) did not specify funding allocations within RRA, except to direct that no more than $544 million remain available for polar research and operations support and U.S. Antarctic program activities. The explanatory statement accompanying the act further directed that, of RRA funding, no less than $160 million is for EPSCoR. Education and Human Resources (EHR) The FY2017 budget request included $953 million for EHR, a $73 million (8.3%) increase over the FY2016 estimate. Of the total, $54 million was requested as mandatory budget authority. As reported by the Senate and House Committees on Appropriations, both S. 2837 and H.R. 5393 would have kept EHR funding at the FY2016 enacted level by providing $880 million in discretionary funding and no mandatory funding. Similarly, P.L. 115-31 provides a total of $880 million in discretionary funding for EHR. Within EHR, there are four divisions: Division of Graduate Education (DGE), Division of Undergraduate Education (DUE), Division of Human Resource Development (HRD), and Division of Research on Learning in Formal and Informal Settings (DRL). The FY2017 request included increases over FY2016 for each division, the largest of which were requested for DRL ($249.3 million total, an 11.9% increase) and DGE ($305.3 million total, a 9.6% increase). New mandatory funding was requested for each division except for DGE. By program, the largest increase in the FY2017 EHR budget request was for EHR Core Research (ECR): STEM Learning, within DRL. The FY2017 request for ECR: STEM Learning was $52 million (including $9 million in requested mandatory funding), double the FY2016 estimate of $26 million. Congress did not fund a similar requested increase for FY2016. The Senate and House reports did not specify an appropriations amount for DRL or its ECR program, nor does the final appropriations act. NSF's budget justification stated that "overall, there are no significant shifts in EHR's priorities between FY2016 and FY2017," and noted that EHR would intensify its engagements and cross-discipline collaborations. One of the ongoing EHR priority programs is CyberCorps: Scholarships for Service, for which President Obama requested $70 million, an increase of $20 million over the FY2016 estimate (40% increase). The Senate report recommended $55 million for this program (10% increase); the House report did not specify an amount. The explanatory statement accompanying P.L. 115-31 directs NSF to provide $55 million for CyberCorps—a $5 million increase over the FY2016 estimate—and "no less than $7.5 million for qualified community colleges as directed by the Senate." President Obama requested no change in total funding for several EHR programs including Advancing Informal STEM Learning (AISL, $63 million—no change in total, but $8 million of the $63 million was requested as mandatory funding), STEM+C Partnerships ($52 million—no change in total, but $31 million of the $52 million was requested as mandatory funding), Advanced Technological Education (ATE, $66 million), Robert Noyce Teacher Scholarship Program ($61 million), Louis Stokes Alliance for Minority Participation (LSAMP, $46 million), Historically Black Colleges and Universities Undergraduate Program (HBCU-UP, $35 million), and Tribal Colleges and University Program (TCUP, $14 million). The Senate report recommended funding these programs at the requested level using only discretionary funds. The House report specified not less than the requested levels for ATE, LSAMP, HBCU-UP, and TCUP. Additionally, the Senate and House reports recommended $5 million and $30 million, respectively, to establish a broadening participation program in STEM fields at Hispanic Serving Institutions (HSIs). The explanatory statement accompanying P.L. 115-31 also directs NSF to provide funding at the requested levels for AISL, STEM+C, TCUP, the HBCU program, and LSAMP. The explanatory statement further directs NSF to provide at least $15 million to establish an HSI program and "encourages NSF to use this program to build capacity at institutions of higher education that typically do not receive high levels of NSF grant funding." Major Research Equipment and Facilities Construction (MREFC) The Major Research Equipment and Facilities Construction (MREFC) account supports large construction projects and scientific instruments. The Obama Administration sought just over $193 million for MREFC in FY2017, $7 million less than FY2016 (3.6% decrease). The Senate report recommended increasing MREFC funding to $247 million ($54 million above the request). The House report recommended decreasing funding to $87 million ($106 million below the request). The Consolidated Appropriations Act, 2017, provides $209 million for MREFC, which is $9 million more than the FY2016 estimate. MREFC is the only NSF account to receive an increase over FY2016 estimated funding levels. The FY2017 budget request included support for continued construction of the Large Synoptic Survey Telescope (LSST, $67 million requested, 32.7% decrease) and Daniel K. Inouye Solar Telescope (DKIST, $20 million requested, no change). The Senate report recommended funding these activities at the requested level. The House report also recommended funding at the requested level for the LSST ($67 million); it further directed NSF to provide quarterly briefings to the committee on the status of the LSST project but did not specify a funding amount. Neither project was referenced in P.L. 115-31 or the explanatory statement. The budget request included $106 million to begin the construction of two Regional Class Research Vessels (RCRVs) to support science in U.S. coastal waters. The Senate report would have increased funding to $159 million to support the construction of three new RCRVs; the House report did not discuss this program. The explanatory statement directs NSF to provide $122 million to build three RCRVs. This amounts to $41 million per ship, compared to the FY2017 request of $53 million per ship. The House report stated that the "recommendation fully funds the requested amounts for the Antarctic Infrastructure Modernization for Science program" (AIMS, $5 million requested for preconstruction planning). P.L. 115-31 specifies that up to $544 million shall remain available for polar research and operations support and for U.S. Antarctic program activities. Both the Senate and House reports also directed the Government Accountability Office (GAO) to provide an independent perspective on the technical risks and cost overruns for MREFC programs. The National Ecological Observatory Network (NEON) is transitioning from the construction phase to the operational phase, and NSF reported that construction is expected to be complete by the end of FY2017. Consequently, no MREFC funding was requested for NEON, and NSF requested $65 million through the Research and Related Activities account for ongoing operations and maintenance costs for the project. Other Accounts and Initiatives The Obama Administration sought $373 million for the Agency Operations and Award Management (AOAM) account, a $43 million (13%) increase over FY2016. A multi-year plan to relocate NSF headquarters accounted for $34 million of this increase. The Senate report recommended $330 million (same as FY2016). The House report recommended $340 million ($10 million above FY2016). The Consolidated Appropriations Act, 2017, provides $330 million for AOAM. The act further specifies that up to $40.7 million shall be available for costs associated with NSF relocating to the new headquarters, which is $2.6 million below the FY2017 request of $43.3 million. The budget request included funding for the National Science Board (NSB) and the Office of Inspector General (OIG) at approximately the same levels as in FY2016 ($4 million and $15 million, respectively). In line with the House and Senate report recommendations, P.L. 115-31 provides funding amounts nearly equal to the FY2016 estimates for both accounts ($4.4 million for NSB and $15.2 million for OIG). The FY2017 request also included funding for NSF activities under three multi-agency initiatives including the National Nanotechnology Initiative (NNI, $415 million requested, about the same as in FY2016), Networking and Information Technology Research and Development (NITRD, $1.254 billion requested, an increase of $59 million [4.9%], most of which [$56 million] was requested as new mandatory funding), and U.S. Global Change Research Program (USGCRP, $348 million, which is $9 million [2.6%] more than the FY2016 estimate). The Senate and House reports did not include recommendations for these initiatives. As well, the Consolidated Appropriations Act, 2017, and the accompanying explanatory statement do not specify funding levels for the initiatives. Authorizations of Appropriations Authorizations of appropriations to NSF, which were last enacted in the America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ), expired in FY2013. Members of the 114 th Congress introduced measures to reauthorize provisions from P.L. 111-358 , including provisions that would have authorized appropriations to NSF. As reported by the Senate Committee on Commerce, Science, and Transportation on June 29, 2016, S. 3084 , the American Innovation and Competitiveness Act (AICA), would have authorized $7.510 billion for NSF in FY2017. However, provisions to authorize appropriations for NSF were not included in the AICA bill language as enacted on January 6, 2017 ( P.L. 114-329 ). As passed by the House in 2015, H.R. 1806 , the America COMPETES Reauthorization Act of 2015, would have authorized $7.597 billion for NSF in FY2017, specifying funding levels for major accounts and RRA subaccounts. Funding levels initially proposed in each of these acts would have provided reduced authorizations of appropriations compared to the FY2013 NSF authorization levels under P.L. 111-358 . Compared to NSF budget amounts, the proposed reauthorization levels were higher than NSF's actual and estimated budget amounts in FY2015 and FY2016. Table 3 shows the FY2013 authorization levels, appropriations to NSF in FY2015 and FY2016, FY2017 requested amounts, and proposed authorized funding levels for NSF in FY2017 under selected reauthorization measures from the 114 th Congress. NSF Funding History The following sections provide information on authorizations of appropriations, as well as funding data and trends, since the foundation was established in 1950. Long-term Funding Trends Table 4 , Figure 1 , and Figure 2 show the trends in NSF authorizations, budget requests, and appropriations since the foundation was first authorized in the early 1950s. Except in FY1957, current and constant dollar actual appropriations to NSF grew rapidly between FY1951 and FY1966. After FY1967, appropriations fluctuated (up some years and down in others) until about FY1988. NSF experienced periods of generally sustained growth in current and constant dollar appropriations between FY1989 and FY1995 and again between FY1998 and FY2003. Since FY2004, growth in the NSF budget has slowed compared to prior years. NSF Obligations by Major Account Table 5 shows NSF obligations by major account since FY2003. Prior years are not comparable due to changes in NSF account structure. Most of the growth in total NSF obligations since FY2003 has accrued to the main research account, RRA, which increased by about $1.890 billion in current dollars (45.6%) between FY2003 and the FY2017 enacted amount. Total NSF obligations increased by about $2.094 billion (39%) during this same period. Policy Implications Continuing appropriations acts (often known as continuing resolutions [CRs]) that provide short-term funding until appropriations decisions are finalized can lead to uncertainty for agencies. On one hand, CRs allow for ongoing appropriations discussions without a funding gap. On the other hand, they may lead to reductions or delays in agency operations, such as hiring staff, beginning new projects, and granting awards and contracts. Further, the three CRs that affected agency funding levels for the first approximately seven months of FY2017 reduced NSF operations slightly below FY2016 estimated levels, including a 0.496% across-the-board decrease from FY2016 funding levels that was in effect until December 9, 2016, and a 0.19% decrease in effect from December 10, 2016 until April 28, 2017. In the longer term, differences between program authorizations and appropriations, and a lack of consensus between some House and Senate Appropriations Committee recommendations, may lead to planning challenges for agencies and the broader scientific community. For example, the COMPETES acts sought to double funding for NSF; while the NSF budget increased between FY2008 and FY2013, appropriations did not reach authorized levels. For FY2017, there was a distinct difference between House and Senate recommended funding levels for the major facilities (MREFC) account; such discrepancies in recommendations may reflect broader policy disagreements. Having a clear signal from Congress on likely budgetary resources may better aid future program planning.

The National Science Foundation (NSF) supports both basic research and education in the non-medical sciences and engineering. NSF is a major source of federal support for U.S. university research, especially in certain fields such as 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. Overall, the Obama Administration sought $7.964 billion for NSF in FY2017, a $501 million (6.7%) increase over the FY2016 estimate of $7.463 billion. This request included $7.564 billion in discretionary budget authority and $400 million in new one-time mandatory budget authority. NSF has six major appropriations accounts: Research and Related Activities (RRA), Education and Human Resources (EHR), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), National Science Board (NSB), and Office of Inspector General (OIG). The FY2017 request would have increased total budget authority in three accounts relative to the FY2016 estimate: RRA by $392 million (6.5%), EHR by $73 million (8.3%), and AOAM by $43 million (13%). The request would have provided NSB and OIG with about the same amount as in FY2016 and decreased MREFC account funding by $7 million (3.6%). The new mandatory budget funding request was split between two accounts—RRA ($346 million) and EHR ($54 million). Mandatory funding is not usually part of NSF's budget request for major accounts. As reported by the Senate, S. 2837 would have provided a total of $7.510 billion to NSF for FY2017. This amount is $46 million (0.6%) above the FY2016 estimated funding level, $54 million (0.7%) below the FY2017 discretionary funding request, and $454 million (5.7%) below the request including new mandatory funding. The bill would have kept funding for the major accounts nearly the same as the FY2016 estimate, except for MREFC, which would have increased by $46 million (23%). As reported by the House, H.R. 5393 would have provided a total of $7.406 billion to NSF for FY2017. This amount is $57 million (0.8%) below the FY2016 estimated funding level, $158 million (2.1%) below the President's FY2017 discretionary funding request, and $558 million (7.5%) below the request including new mandatory funding. The bill would have kept funding for the EHR, NSB, and OIG accounts nearly the same as in the FY2016 estimate, increased the RRA and AOAM accounts by $46 million (0.8%) and $10 million (3%), respectively, and decreased the MREFC account by $113 million (57%). A series of continuing appropriations acts (P.L. 114-223, P.L. 114-254, P.L. 115-30) provided funding for NSF from October 1, 2016, through May 5, 2017, at 99.5-99.8% of the FY2016 funding level. The Consolidated Appropriations Act, 2017 (P.L. 115-31), signed by the President on May 5, 2017, provides $7.472 billion in discretionary funding to NSF, which is 0.1% above the FY2016 enacted amount. Overall growth in the NSF budget slowed after FY2003. Median annual growth in NSF funding was 9% between FY1953 and FY2003 and 3% between FY2004 and FY2016. Most of NSF's funding supports scientific and technological research. Further, the portion of NSF spending that goes to research increased over the past decade. Within the NSF total, RRA has accounted for the lion's share of growth in obligations since FY2003. Agency appropriations levels were last authorized in FY2010 and expired in FY2013; various reauthorization measures were introduced in the 114th Congress that included proposed funding levels for FY2017.

Background and Overview of the Framework Agreement The Framework Agreement is the latest achievement in the Doha Development Agenda(DDA) round of trade negotiations at the WTO. This round of trade negotiations was launched atthe 4th Ministerial of the WTO at Doha, Qatar in November 2001. Trade ministers set an ambitiousagenda to negotiate an accord by January 1, 2005. The 5th Ministerial Conference, to take place in2003, would serve as a mid-term review for the negotiations. The work program devised at Doha folded in continuing talks (the built-in agenda) onagriculture and services and launched negotiations on the reduction or elimination of non-agricultural(industrial) tariffs, clarification and improvement of disciplines for existing WTO agreements onantidumping and subsidies, and topics relating to special and differential (S&D) treatment fordeveloping countries and assistance to developing countries with the implementation of existingWTO commitments. Trade ministers at Doha agreed to continue discussions on the "Singaporeissues" (government procurement, trade facilitation, investment, and competition policy) and tolaunch negotiations if an "explicit consensus" was reached on these issues at the 5th MinisterialConference in 2003. The Doha Ministerial Declaration also directed negotiators to resolve a disputerelated to the ability of least developing countries to access generic medicines for HIV/AIDS andother epidemics. The Doha Ministerial documents paid special attention to the concerns of developingcountries, and the round was formally entitled the Doha Development Agenda. This emphasis waspartly in order to get the developing countries -- a majority of the WTO's membership -- to agree tothe commencement of the round. However, some developing countries had difficulty inimplementing their Uruguay Round commitments, and many developing countries have expressedconcern about undertaking new obligations. At Doha, negotiators agreed to resolve issues related totheir implementation of the Uruguay Round agreements, to negotiate special and differentialtreatment for developing countries in the new round, and to provide technical assistance in thenegotiations and implementation of the agreements. Negotiations proceeded at a slow pace. Several deadlines for agreement on negotiatingmodalities -- i.e. methodologies by which negotiations are conducted -- were missed in theagriculture, industrial market access, and other negotiating groups. In addition, deadlines forsubmitting requests and offers in the services negotiations were also missed by many participants. Negotiators looked toward the 5th Ministerial -- which took place September 10-14, 2003 in Cancún,Mexico -- to resolve the modalities. In the weeks before Cancún, negotiating documents to achievethis resolution were criticized by all sides, and expectations for the Ministerial were reduced fromagreeing on modalities to achieving an agreement on the framework for negotiating the modalitiesto be used in future negotiations. From Cancún to Geneva. The CancúnMinisterial, however, failed to achieve even these expectations. Trade ministers at Cancún becameembroiled in disputes over agriculture and the Singapore issues. The G-20, an informal group ofdeveloping countries led by Brazil, India, China, and South Africa, demanded substantialconcessions from developed countries in the agriculture negotiations in response to perceived UnitedStates-European Union (EU) collaboration. Some developing countries also refused to support thebeginning of negotiations over the Singapore issues, which had been pushed by the EU, because ofsovereignty issues or capacity constraints. In the end, deadlock over the Singapore issues broke upthe talks before agriculture issues were even formally discussed. Subsequent to the collapse of the talks, U.S. and EU negotiators criticized both the substanceand tactics of the G-20 group. Developing countries defended their actions as representing theirparamount interest in breaking down the agricultural barriers and subsidies in the United States andthe EU. Initially, U.S. reaction in the aftermath of the Ministerial was to give increased emphasisto the negotiation of bilateral and regional free trade agreements (FTA). The European Unionundertook a review of its policy towards the WTO and multilateral trade negotiations. However, signs of movement in the negotiations could be detected by the beginning of 2004. In January, U.S. Trade Representative Robert B. Zoellick sent a letter to the 147 WTO tradeministers expressing the hope that 2004 would not be "a lost year for the WTO negotiations." Whileeschewing concrete proposals, the letter signaled U.S. reengagement with the process. The EU'sacceptance, meanwhile, of the elimination of agricultural export subsidies "by date certain" alsomoved the negotiations along. Compromise was also achieved over the negotiation of the Singaporeissues as the EU and others decided that the inclusion of competition policy, investment, andgovernment procurement in the round had to be abandoned if the negotiations were to move forwardin the face of developing- country resistance. Developing countries too played an active part innegotiations this year, first by India and Brazil negotiating directly with the developed countries (asthe so-called "non-party of five") on agriculture, and second by working toward acceptance of tradefacilitation as a subject for negotiation. After intense negotiations in late July 2004, WTO members reached what has become knownas the Framework Agreement (or the July package) which provides broad guidelines for completingthe Doha round negotiations. The agreement contains a 4-page declaration, with four annexes (A-D)covering agriculture, non-agricultural market access, services, and trade facilitation, respectively. In addition, the agreement acknowledges the activities of other negotiating groups (such as those onrules, dispute settlement, and intellectual property) and exhorts them to fulfill their Doha roundnegotiating objectives. The agreement also abandons the January 1, 2005 deadline for thenegotiations, but instead sets December 2005 as the date for the 6th Ministerial to be held in HongKong. U.S. Priorities. Throughout the Doha Round,increased market access for U.S. agriculture, industrial goods, and services has been the primary goalfor U.S. negotiators. In the agricultural negotiations, the United States has sought improved marketaccess, especially from developing countries, and the end of all export subsidies. The United Stateshas also sought expansive tariff liberalization in the non-agricultural market access talks, includingsupport for an early proposal for a "tariff-free world" by the year 2015 and for sectoral tariffelimination. The United States has also made cross-border trade in services a priority, reportedlyseeking to have services make up one of the pillars of the Framework Agreement. (1) The United States has beenless concerned with the disposition of the Singapore issues, with USTR Zoellick at one pointreportedly referring to them as a "distraction." (2) The United States has also sought to limit the scope of negotiationson disciplines to WTO rules, especially in light of Congressional support for maintaining currentU.S. trade remedy practices. Previous rounds of trade liberalization were successful in reducing tariffs in the manufacturedgoods sector. That negotiated liberalization has proceeded further in this area perhaps is reflectedin the distribution of world trade. Of the $7.6 trillion exchanged in world trade in 2002, industrialgoods comprised 71.9%, agriculture 7.6%, and services 20.5%. Trade in services was only broughtunder world trade rules by the Uruguay Round's General Agreement on Trade in Services in 1995.Agriculture, though previously negotiated, remains a thorny issue for both producer and consumer,and developed and developing countries. The liberalization of these sectors potentially offers thegreatest boost to world trade, but also potentially the most wrenching changes to the societies thatundertake them. The Agriculture Framework Agreement(3) Introduction. The agreement on a framework forcompleting the agriculture negotiations in the DDA is contained in Annex A of the "July package." The Framework Agreement addresses the three "pillars" of agricultural trade liberalization identifiedin the 2001 Doha Ministerial Declaration: substantial reductions in trade-distorting domestic support;the phase-out, with a view to total elimination, of all export subsidies; and substantial improvementsin market access. (4) Failureto agree on a framework for the agriculture negotiations would have contributed to uncertainty aboutprospects for concluding the DDA and about the viability of the WTO as a global forum fornegotiating further farm trade liberalization. The Framework now becomes the basis forestablishing specific formulas, schedules, end dates and other parameters (referred to as"modalities") for achieving DDA objectives for agriculture during the next phase of negotiationswhich seem likely to continue into 2006. U.S. aims for the DDA negotiations include substantial market opening for agriculturalproducts by all WTO members, especially, the developing countries. The United States wants allagricultural export subsidies eliminated. The United States has consistently maintained thattrade-distorting domestic support should be reduced substantially, but also wants to preserve"safety-net" farm income programs enacted in the 2002 farm bill. (5) The European Union (EU),while willing to eliminate export subsidies over time, wants an end to export credit guarantees andsome food aid programs that it claims are export subsidies. The EU also wants to maintain directdecoupled payments to farmers (along with payments linked to production) established underrecently enacted reforms of its Common Agricultural Policy (CAP). The developing countries, alarge and diverse group that constitutes a majority of WTO members, want special and differentialtreatment with respect to tariff or subsidy reduction. The poorest or least developed countries(LDCs) among them want to maintain the trade preferences they currently enjoy. Many U.S. agricultural interest groups support multilateral agricultural trade liberalization.These groups believe that trade-offs possible in a comprehensive negotiation would result inimproved market prospects for U.S. agricultural exports. For most U.S. farm groups, the trade-offof most interest is substantial market opening by developing countries in exchange for substantialreductions in domestic support by developed countries. U.S. producers of import-sensitive crops(e.g., citrus, dairy, sugar, some fruits and vegetables), who feel disadvantaged by previous tradeagreements (e.g., NAFTA) or threatened by possible new agreements, are less supportive ofagricultural trade liberalization. Key provisions in the agriculture framework address trade-distorting domestic support,export competition, market access, cotton subsidies, and other issues. Trade-Distorting Domestic Support. Overall,trade-distorting support of agriculture will be reduced by means of a "tiered" or "banded" approachapplied to achieve "harmonization" in the levels of support. (6) Harmonization in this casemeans that WTO member countries having higher levels of trade-distorting domestic support willmake greater overall reductions. Developed subsidizing countries will make a "down payment" onthe overall cut by reducing trade-distorting domestic support 20% from bound (maximum permitted)levels of support in the first year after negotiations are completed. WTO member countries willmake separate reduction commitments in the components of trade-distorting support, i.e., amber box(most trade-distorting), de minimis (a category of spending now exempted from cuts if it accountsfor less than 5% of the value of production), and blue box (currently defined as payments based onfixed areas and yields; a fixed level of production or a fixed number of livestock). Product specific amber box support will be capped at average levels according to amethodology to be negotiated; and the definition of the blue box will be modified to include directpayments that do not require production (e.g., U.S. counter-cyclical support) (7) , and capped at 5% of amember country's average total value of agricultural production during an historical period. Deminimis spending also will be reduced according to a formula to be negotiated. Non-trade distortingmeasures (green box) will be reviewed to ensure that they have no, or at most minimal, tradedistorting effects or effects on production. Developing countries will receive special and differentialtreatment for all types of trade-distorting support in the form of longer implementation periods andlower reduction commitments; least developed countries (LDCs) will not be required to make anycuts in domestic support. Export Competition. By "the end date" to benegotiated, WTO member countries will eliminate: export subsidies, and export credits, creditguarantees or insurance programs with repayment periods beyond 180 days. By the same end date,WTO member countries will eliminate trade-distorting practices of exporting State TradingEnterprises (STEs) and the provision of food aid not in conformity with disciplines to be agreed,including disciplines to prevent commercial displacement. Developing country WTO members willbenefit from longer implementation periods for phasing out export subsidies. Furthermore, WTOmember countries will ensure that export credit programs appropriately provide for differentialtreatment in favor of least-developed and net food-importing countries. STEs in developingcountries which enjoy special privileges to preserve domestic price stability and ensure food securitywill receive special consideration for maintaining monopoly status. Market Access. All WTO member countries(except the least developed countries -- LDCs) will reduce import tariffs using a tiered formula. Harmonization of tariff levels will be achieved through deeper cuts in higher tariffs. Tariffreductions will be made from bound, not applied, rates; higher tariffs will be subject to deeper cutswith some flexibility for "import-sensitive" products. The number of tiers (bands) and the tariffreduction for each band remain to be negotiated. WTO countries may designate a number (to benegotiated) of sensitive products for which "substantial improvement" in market access must beachieved through a combination of tariff quota increases and tariff reductions applied to eachproduct. Developing countries will be able to designate a number of products as "special products,"based on criteria of "food security, livelihood security, and rural development needs." These specialproducts will be eligible for more flexible treatment as regards market access. A Special SafeguardMechanism (SSM) will be established for developing countries, while a Special AgriculturalSafeguard (SSG) for developed countries (as currently provided for in the Uruguay RoundAgreement) remains under negotiation. (Safeguards permit reversion to previous tariff levels ifimports surge.) Cotton. Cotton was not mentioned in the 2001Doha Ministerial Declaration. However, a number of African cotton producing and exportingcountries proposed a sectoral initiative on cotton that called for eliminating all trade-distorting cottonsubsidies and providing compensation for economic losses of African cotton producers whilesubsidies were phased out. (8) The United States, while not agreeing with the African proposal,worked with the African countries on a formulation in the Framework to address the cotton initiative. The "July package" stresses the importance of the sectoral initiative on cotton (the decision) , whilethe agriculture Framework (Annex A) provides that work on cotton will be carried out under all threepillars and that the DDA will work to achieve "ambitious results expeditiously." Other Issues Addressed in the Framework. Theagriculture Framework states that "particular concerns of recently acceded countries will beeffectively addressed through specific flexibility provisions." This provision is viewed as aconcession to China who argued that it had already made substantial commitments in all three pillarsin its accession negotiations. Sectoral initiatives (e.g., a proposal for zero-for-zero tariffs in oilseedsadvanced earlier by the United States), differential export taxes (as employed by Argentina), andgeographical indications (GIs, protection for products with geographical names (9) , an important issue for the EUand some other countries) remain "issues of interest but not agreed." Disciplines on exportprohibitions and restrictions will be strengthened. Rules on agricultural trade policy monitoring andsurveillance will be enhanced so as to ensure transparency, including "through timely and completenotifications" with respect to commitments in the three pillars. Implications for U.S. Agriculture. An eventualagreement on agricultural trade liberalization in the DDA round would have both market effects forthe U.S. agricultural sector as well as effects on U.S. agricultural policies and programs. Market Effects. Market effects of global agriculturaltrade liberalization are difficult to estimate at this point in the negotiations because such specificsas the extent of tariff reduction, the timing for the elimination of export subsidies, or the percentagereductions in trade-distorting support remain to be negotiated. In general, however, substantial tariffreductions (or increased market access quotas) could result in expanded exports of many U.S.commodities including grains, oilseeds, cotton, and fruits and vegetables. Other U.S. commoditysectors such as dairy or sugar could experience more intense competition from foreign suppliers, butthose effects would be mitigated by designating such products as import-sensitive (as provided inthe Framework Agreement) and therefore subjecting them to longer phased reductions in tariffsand/or increases in quotas. Export subsidy elimination could also benefit a number of U.S.commodity sectors, e.g., dairy, meat and livestock products, and cereals by improving competitiveconditions in third-country markets, but tightening of disciplines on U.S. export credit programscould penalize producers of commodities that have benefitted from such programs, e.g., grains andcotton. Market effects of reducing trade-distorting domestic support should be to increase prices forcommodities that have benefitted from payments that encourage excess production and downwardpressure on prices. Policy and Program Effects. The harmonizingapproach in the agriculture Framework suggests that others, notably the European Union (EU),would have to cut trade-distorting support more than would the United States. In the EU case, itsbound level of amber box support is currently (depending on exchange rates) around $80 billionwhile the U.S. bound level is $19 billion. According to U.S. trade negotiators, the United Stateslikely should have no difficulty in meeting the aim of cutting the sum of trade-distorting supportlevels by 20% in the first year as reductions would be made from "bound", or permitted, rather than"applied", or actual, levels. The U.S. Dept. of Agriculture (USDA) estimates that the U.S. boundlevel of domestic support under a new WTO agreement could be as high as $39 billion (the currentU.S. bound level of support for amber box spending plus estimates of the future bound levels of deminimis and blue box spending), while actual spending could be considerably less, rendering the20% cut in the first year meaningless for the United States. However, depending on the outcome ofthe negotiations, future cuts could be higher, provided that other countries also substantially reducetheir trade-distorting support and tariffs. Some in Congress have expressed opposition to cuts in"safety-net programs" put in place by the 2002 farm bill, as would be required by the agricultureFramework agreement. Cotton is the only agricultural commodity mentioned by name in theagriculture Framework. U.S. cotton producers object to this singling out of cotton for specialattention. (10) The elimination of EU export subsidies has been a longstanding objective of U.S. agriculturaltrade policy as has requiring greater transparency by STEs such as the Canadian Wheat Board. Pressure from U.S. and developing country WTO members in the DDA round plus successivereforms of the EU's Common Agricultural Policy (CAP), which has reduced its reliance on exportsubsidies, led the EU to offer to eliminate them by a date certain. In exchange, however, the EUcountered that all forms of export subsidies, including U.S. export credit guarantees and food aid,should be eliminated. This trade-off between export subsidies and export credit and food aidprograms is reflected in the Framework Agreement. USDA's export credit guarantee programs,which have provided guarantees for about $4 billion of agricultural exports annually in recent years,apparently would be substantially altered by the agreement. Current U.S. export credit programs canguarantee financing of from 180 days to 10 years. (11) U.S. food aid programs (e.g., P.L. 480 Title II commodity donations for humanitarianpurposes) which meet the criterion of not displacing commercial sales appear to be unaffected bythe Framework Agreement. (12) Although earlier versions of the Framework implied thatcommodity food aid would be eliminated in favor of cash grants, the agreed-upon framework statesthat "...(t)he question of providing food aid exclusively in fully grant form" will be addressed in thenegotiations. The role of international organizations vis-a-vis WTO member countries' food aidprograms will also be addressed in the negotiations. The DDA and the Next Farm Bill. DDAnegotiations seem likely to be concluding just as Congress would be taking up a new farm bill tosucceed the six-year Food Security and Rural Investment Act of 2002 ( P.L. 107-171 ). Whileimplementing legislation, as called for in the Trade Act of 2002 (Title XXI of P.L. 107-210 ), wouldbe a vehicle for conforming U.S. law to a DDA trade agreement, farm bill changes may be neededto meet U.S. commitments in a final DDA agreement on agriculture. Farm bill programs that mostlikely would be candidates for change would include commodity price and farm income support(Title I of P.L. 107-171 ) and export and food aid programs (Title III of P.L. 107-171 ). Members andcommittees will be monitoring the continuing agriculture negotiations with attention to the economicbenefits anticipated from further global agricultural trade liberalization and to the adjustments thatcould accompany a new multilateral agricultural trade agreement. Non-Agricultural Market Access(13) Non-agricultural market access (NAMA) received less scrutiny than agriculture innegotiations for the Framework Agreement. The Framework integrated draft language on NAMAprepared for the Cancún Ministerial in September 2003; a text that was neither approved norconsidered at Cancún. In the Geneva deliberations, developed nations sought to include the Cancúnlanguage wholesale, yet developing countries resisted. They insisted on a paragraph, included in thefirst paragraph of the text, indicating that "additional negotiations are required to reach agreementon the specifics of some of these elements," the elements being the formula, treatment of unboundtariffs, flexibilities for developing countries, participation in sectoral tariff modalities, andpreferential tariff beneficiaries. USTR Zoellick reportedly minimized the importance of thislanguage, emphasizing that it was about "specifics" of already agreed upon "elements." (14) However, the insistenceof developing countries to the incorporation of this language in the text, and not as a preamble orchairman's statement- implying a lesser legal status, indicates that developing countries place adifferent significance on this paragraph. Depending on the interpretation accorded it, this paragraphcould reopen many of the issues worked-out in the Framework text. It also reflects the continuedlack of consensus on many of the basic components of the market access negotiations. Future progress in the market access negotiations rests on the resolution of several issues, onwhich the Framework Agreement often provides only general guidance. These include the modalityfor reducing tariffs, the binding of developing country tariffs, the issue of sectoral tariff elimination,and special and differential treatment (SDT) for developing countries. As indicated by the openingparagraph, inserted at the insistence of developing countries, none of these issues have been settled. While other areas of WTO negotiations have received greater scrutiny in the Doha round,trade of industrial and primary products, the subject of the NAMA negotiations, continue to makeup the bulk of world trade. Nearly $5.5 trillion in manufactures and primary products were tradedworldwide in 2002, accounting for 72% of world trade activity. (15) In the United States,industrial and primary products accounted for 65% of exports and 79% of imports in 2003. (16) Hence, the outcome ofthese negotiations could have a substantial impact on U.S. trade patterns and on the world economy. Tariff Reduction. The Framework Agreementendorsed the use of a non-linear formula applied on a line-by-line basis as a modality to conducttariff reduction negotiations. A non-linear formula can work to even out or harmonize tariff levelsbetween participants. This type of formula could result in a greater percentage reduction of highertariffs than lower ones, resulting in a greater equalization of tariffs at a lower level than before. Bycontrast, an example of a linear formula would be one that reduced tariffs by a certain percentageacross the board. Consequently, this formula would not change the relative tariff rates betweenmembers. A country with relatively high tariffs before undergoing the formula would still have hightariffs relative to other countries afterwards. This approach is generally favored by countries withhigh tariffs or certain tariff peaks that the country seeks to preserve. Certain non-linear formulas,such as an harmonization formula, seek to even out or harmonize the tariff rates among nations. An harmonization formula would also work to reduce tariff peaks and tariff escalations,another stated goal of the declaration. Tariff peaks are considered to be tariff rates of above 15% andoften protect sensitive products from competition. Tariff escalation is the practice of increasingtariffs as value is added to a commodity. As an example of tariff escalation, cotton would come inwith a low tariff, fabric would face a higher tariff, and a finished shirt would face the highest tariff.Tariff escalation is often employed to protect import-competing, value-adding industry. Theemphasis on tariff peaks and escalation results from findings that the use of peak tariffs andescalations are particularly levied against the products of developing countries, as well as becomingincreasingly costly to the consumer in developed countries. (17) The Framework does notspecify implementation period for tariff cuts, but developing countries are to be afforded longerimplementation periods. Tariff Binding. The Framework encourages thecontinued binding of tariffs. Tariffs are bound when a country commits not to raise them beyonda certain level. Therefore, binding has been seen as the first step in tariff reduction. Bound tariffsare often significantly higher than tariff levels that are actually applied, which has led to questionsas to the usefulness of reductions from bound rather than applied rates. The United States supports reduction from applied rates, which would result in greater cutsto actually levied tariffs. Some contend that the use of the applied rate may serve as a disincentivefor countries to undertake unilateral liberalization. Countries would likely hesitate to undertakeunilateral tariff reductions if they know that multilateral liberalization efforts would use such ratesas a starting point. It may also increase the incentive to raise applied rates prior to negotiation. (18) Under the Framework Agreement, tariff reductions would be calculated from the bound,rather than the applied, level. Reductions in unbound tariff lines would be calculated from twice thecurrently applied rate. Participants (i.e., developing countries) who have bound less than 35% of theirtariff lines would be exempt from tariff reduction commitments in the Round provided that they bindthe remainder of their non-agricultural tariff lines. In addition, all tariffs would be bound in ad valorem terms; all remaining non ad valorem tariffs would be converted and bound by a methodology to be determined by negotiation. An advalorem tariff is set as a percentage of the value of an imported good, while a non- ad valorem tariffuses some other measurement such as a fixed rate per unit or weight of goods. While non-ad valorem tariffs are more prevalent in agriculture, they continue to be employed for non-agricultural tariffs andare not solely a developing country phenomenon. A recent study calculated that 4.2% of lines in theUnited States tariff schedule remained non ad-valorem and for Switzerland the figure was 82.8percent. (19) Non-Tariff Barriers. The industrial market accesstalks also encompass negotiations on the reduction of non-tariff barriers (NTBs). NTBs include suchactivities as import licensing, quotas and other quantitative import restrictions, conformityassessment procedures, and technical barriers to trade. The Framework instructs members to submitnotification of NTBs by October 31, 2004 for negotiators to identify, examine, categorize and,ultimately, negotiate. The Framework "takes note" of several modalities by which negotiations onNTBs could proceed. Sectoral Tariff Reductions. The Framework alsoidentifies sectoral tariff elimination as a modality for NAMA negotiations. The Framework instructsnegotiators to define issues of product coverage and participation. This represents a retreat fromprevious draft texts that specifically proposed sectors (electronics, fish and fish products, footwear,leather goods, motor vehicle parts and components, stones, gems and precious metals, and textilesand clothing) for sectoral tariff elimination. (20) While the text anticipates flexibility for developing countrymembers, it also stresses the importance of involvement "by all participants," thus discouraging thepossibility that developing countries could opt out of these negotiations. Special and Differential Treatment for DevelopingCountries. The text affords several flexibilities to developing country members.The Framework permits developing countries longer periods to implement tariff reductions.Developing countries may also avail themselves of either of the following flexibilities: (1) applyingless than formula cuts for up to 10% of tariff lines provided that the cuts applied are no less than halfthe formula cuts and that the tariff lines do not exceed 10% of the value of imports; or (2) keepingtariff lines unbound, or not applying formula cuts for 5% of tariff lines provided they do not exceed5% of a member's imports. LDCs would not be required to apply formula cuts, nor participate in thesectoral cuts, but would undertake to "substantially" increase the level of bound tariffs.Developed-country participants and others are encouraged to grant LDCs duty-free and quota-freeaccess to their markets by a date not specified. Newly- acceded countries would also be givenflexibilities based on the market access commitments of their accessions. The Framework alsoacknowledges the challenge of designing tariff reductions for countries that are already beneficiariesto various preference programs such as the U.S. African Growth and Opportunity Act or theEuropean Union's Everything But Arms Initiative. In devising the formula, credit is to be given forautonomous liberalization in developing countries. Services(21) Background. Trade in services is only mentionedbriefly in the WTO negotiating framework and was given its own annex in the FrameworkAgreement only after proponents strongly argued for such treatment. Authors of initial drafts of theFramework had lumped services trade in with "other issues." "Services" refers to a broad range ofeconomic activities, essentially any economic activity that is not a tangible good, for examplefinancial services, tourism, transportation, and legal services. Services account for a major and growing portion of the U.S. economy and for a good portionof the rest of the world economies. (22) In 2003, services accounted for about 58% of U.S. GrossDomestic Product (GDP), a sharp increase from 42% of GDP in 1965. In 2003, services industriesemployed 83% of the U.S. workforce, a substantial rise from 66% in 1965. (23) The World Bankestimates that in 2002, services accounted for 68% of total world GDP. (24) Services, while important, play a smaller role in U.S. trade than they do in the U.S. economyas a whole. In 2003, services accounted for 30.1% of U.S. exports of goods and services and 14.1%of U.S. imports of goods and services. (25) Several factors may account for the smaller figure: mostservices must be bought and sold through direct contact between the buyer and seller and are notconducive to cross-border trade; while nations have reduced or eliminated tariffs and other barriersto trade in goods, they have been more reluctant to liberalize trade in services; and data limitationshave resulted in under-reporting of trade in services. Services are bought and sold via four means or "modes": (1) cross-border trade; (2)consumption abroad where the consumer physically travels to another country to buy the service; (3)commercial presence where the service is provided by a firm in one country via its branch, agency,or wholly-owned subsidiary located in the country of the buyer; and (4) the temporary presence ofnatural persons where an individual supplier travels temporarily to another country to supply services(so-called mode 4 services). Negotiations in bilateral, regional or multilateral fora, to liberalize tradein services, focus on reducing barriers in one or more of these four modes. Multilateral rules on trade in services are very new and were established under the GeneralAgreement on Trade in Services (GATS) as part of the set of agreements reached during the UruguayRound negotiations. They are administered by the World Trade Organization(WTO) which wasestablished on January 1, 1995 also as part of the Uruguay Round. The GATS contains basicprinciples and rules on trade in services, some of which, for example, national treatment andmost-favored-nation treatment, are parallel to long-established rules for trade in goods under theGeneral Agreement on Tariffs and Trade. Article XIX of the GATS required WTO members to begina new set of negotiations on services in 2000 as part of the so-called WTO "built-in agenda." It wasagreed before the Doha Ministerial that services negotiations would operate in a request-offer format.The new set of GATS negotiations began in February 2000, and during the remainder of that year,the members reviewed the status of commitments already made and developed a set ofguidelines. (26) Doha Round Negotiations. The negotiations onservices were folded into the agenda of the new round at the November 2001 WTO Ministerial inDoha, Qatar. In their declaration establishing the agenda for the new round, the ministers affirmedtheir support for the work that had already been accomplished in the services negotiations. EachWTO member first indicates what general concessions they request from the other members andthen, separately, each member indicates what concessions it is willing to offer. Members stipulatedon the Doha documents that by June 30, 2002, GATS members should have submitted their requestsfor commitments from other members to liberalize trade in services and, by March 31, 2003, shouldsubmit their offerings of what their initial commitments would be toward liberalizing trade inservices in their economies. The United States had completed its requests for commitments from other member countries on July 1, 2002. The U.S. requests call for many of the countries to improve transparency inregulations of services to boost efficiency across all services industries. In addition, U.S. requestscentered on reduction of trade restrictions in 12 service industries: telecommunications; finance;express delivery; energy; environment; distribution services; education and training; lodging andother tourism services; professional services; computer and related services; advertising services;and audiovisual services. (27) Other countries, including the 15 members of the EU, submitted their own requests, includingrequests made of the United States to reduce trade barriers in services. Of note, is a request by theEU, Japan, South Korea, and Norway that the United States provide greater access to its markets forforeign maritime services providers. Japan, for example, points to the Jones Act of 1920, whichlimits shipping within the United States to vessels manufactured, owned, and operated by U.S.companies. The EU has also focused some of its requests on the U.S. financial sector, particularlyrestrictions on the foreign establishment of state-chartered subsidiaries, branches, or representativeoffices. (28) On March 31, 2003, the United States submitted its offer on reducing trade barriers inservices to meet the deadline established in the Doha Ministerial statement. The U.S. offer covers15 areas: accounting services; advertising and related services; audiovisual and related services;distribution services; education and training services; energy services; environmental services;express delivery services; financial services; legal services; movement of natural persons (mode 4);small and medium-sized services enterprises; telecommunications, value-added network, andcomplementary services; and transparency in domestic regulation. (29) The negotiations on services have gone slowly since the Doha Development Agenda waslaunched. Besides the United States, 43 other WTO members (the EU is counted as one member)have made offers on reducing their trade barriers. Some negotiators and other observers have arguedthat not much progress would be made until the WTO negotiators resolved how agricultural issueswould be addressed. (30) Developing countries were reluctant to make offers on services until they saw how far some of thedeveloped countries were willing to go on agriculture. Because the Framework Agreementaddressed many agricultural trade issues, supporters of liberalized trade in services are anticipatingthat the services negotiations will gain momentum. Framework Issues. The Framework itselfmentions services only briefly because they were not the focus of the negotiations over theframework and the parameters of the negotiations had already been established as part of the "built-inagenda" and in the Doha Ministerial Declaration that launched the new round. The Frameworkreaffirms the commitments made in the Doha Ministerial Declaration and charges the negotiatorsto complete and submit their initial offers as soon as possible, to submit revised offers by May 2005and to ensure that the offers are of high quality. The Framework also charges the negotiators to bearin mind when making their offers the sectors and modes of supply that are of interest to developingcountries. The negotiating Framework notes the particular interest that developing countries have inissues pertaining to mode-4 supply of services. A number of developing countries, includingAfrican countries and India, have complained that developed countries' offers to date have beenlargely deficient in the area of mode-4. They assert that the developed countries often require acommercial presence by the foreign supplier and/or employ strict requirements, such aspre-employment conditions, economic needs tests, and quota restrictions on visas before permittingtemporary entry of foreign professionals. (31) Because developing country concerns run head-on into U.S. andEU heightened post-9/11 concerns about entry of foreigners, this issue could be difficult as theservices negotiations progress. In many member countries, services are a large portion of economic activity. Yet, servicesaccount for only a small portion of total trade, indicating many untapped opportunities for trade inservices if barriers are eliminated. However, for many countries, especially developing countries,liberalization in services trade is a very sensitive issue that may make achieving the opportunitiesdifficult if not elusive. Trade Facilitation(32) Background. The WTO negotiating Frameworksets forth modalities for negotiations on trade facilitation. As one of the Singapore issues, tradefacilitation was pushed by the EU and other countries but met resistance from some developingcountries. Developing country members were not necessarily opposed to the goals of tradefacilitation, but they were reluctant to negotiate new commitments in the WTO for many reasons,mainly because they wanted the Doha round to focus on settling implementation issues fromprevious agreements. They were also concerned about their capacity to implement potentially costlytrade facilitation agreements. However, developed country members (including the United States)insisted that trade facilitation would benefit all members by creating a more efficient global tradingsystem, and they agreed to include provisions on technical assistance and special and differentialtreatment in the negotiating Framework to ensure that developing country needs were met. This mayhave influenced the developing countries to agree to the inclusion of trade facilitation in thenegotiating Framework. Previous WTO rules have addressed trade facilitation, but it was first introduced as a separatetopic in the WTO at the Singapore Ministerial in 1996. The Doha Ministerial statement agreed tocontinue discussions on trade facilitation and to begin negotiations after setting modalities at theCancun Ministerial. The trade facilitation discussions in the WTO since Doha have concentratedon three core areas: improving the relevant articles of the GATT 1994; individual country needs andpriorities regarding trade facilitation, especially those of developing countries; and technicalassistance to developing countries in the area of trade facilitation. Trade facilitation aims to improve the efficiency of international trade through strengtheningtrade rules concerning customs procedures. It has become a more important issue in recent years astrade has been liberalized and trade flows have increased. Because of these trends, the costs ofcomplying with administrative trade procedures comprise a greater portion of the total costs of tradethan before. (33) Thesecosts can come from overly cumbersome and redundant documentation requirements, delays inprocessing goods through customs, and nontransparent or unequally enforced importation rules andrequirements. In the modern "just in time" economy, where traders rely on quick turnaround andshipping to meet orders, this poses a significant problem. According to the United NationsConference on Trade and Development (UNCTAD), the average customs transaction involves 20-30different parties, 40 documents, 200 data elements (30 of which are repeated 30 times), and there-keying of 60-70% of all data at least once. (34) WTO negotiations on trade facilitation seek to improve trade procedures by utilizingtechnology more effectively, enhancing cooperation among customs and other officials, reducingdocumentation requirements and other administrative burdens, and ensuring a fair and transparentsystem of administering trade. Trade facilitation has the potential to reduce the cost of trade,increase opportunities for trade, diminish corruption associated with customs procedures, increasecompliance with customs rules, and reduce the cost of goods to consumers for both developed anddeveloping countries. Trade facilitation may have the most visible impact on small and mediumenterprises (SMEs), because they are often priced out of international trade due to the relatively highcosts of administrative barriers for small volumes of goods. Since SMEs are said to contributesignificantly to job creation and economic growth in both developed and developing countries,increasing their ability to benefit from trade may positively affect world economic growth. U.S. Position. The United States has the potentialto benefit from trade facilitation in the same way as other countries. Certain U.S. industries inparticular rely on the ability to quickly clear goods through customs, such as agricultural importersand exporters, and the express delivery industry. U.S. trade with developing countries may alsobenefit. Such trade has been increasing; total U.S. trade with LDCs nearly doubled from 1996 to2003, from $7.6 billion to $14.1 billion, and U.S. trade with its Generalized System of Preferences(GSP) beneficiaries increased by 73%, from $193 billion in 1996 to $261 billion in 2003. (35) This trade has traditionallybeen hindered by several factors, including the fact that developing countries tend to have the leastefficient administrative trade procedures. Now that other barriers to trade with developing countries,such as protective tariff regimes, are being dismantled, trade facilitation may help both the UnitedStates and developing countries further realize gains from trade with each other. Reducing the costsof trade with developing countries could help U.S. businesses establish new export markets andlower-cost suppliers in developing countries. The United States may also become more involvedin providing technical assistance as part of a negotiated agreement in trade facilitation. The United States has worked with other WTO members toward launching trade facilitationnegotiations, through its membership in the so-called "Colorado Group." This group comprises adiverse group of entities, including the United States, Australia, Canada, Chile, Columbia, CostaRica, the European Union, Hong Kong China, Hungary, Japan, Korea, Morocco, New Zealand,Norway, Paraguay, Singapore, and Switzerland. The current controversy in trade facilitation is thatmany of the developing countries are opposed to new WTO disciplines, and they would preferoptional guidelines. However, many other countries agree with the U.S. position that a rules-basedsystem is essential for establishing accountability and implementing concrete changes to facilitatetrade. They also agree that developing country concerns can be adequately addressed throughattention to technical assistance and special and differential treatment. Issues for Negotiation. The negotiatingFramework modalities cover the three core issues of trade facilitation that member countries havebeen discussing since Doha: clarifying and improving aspects of certain existing WTO rulesconcerning trade facilitation; providing technical assistance to developing countries; and identifyingand considering the needs and priorities of all countries, especially developing countries, includingspecial and differential treatment. It does not specifically state whether the negotiations will resultin guidelines or new rules, yet it provides for assistance to developing countries in implementingwhatever rules may be negotiated. The existing WTO rules singled out for attention are Articles V, VIII, and X of the GeneralAgreement on Tariffs and Trade (GATT). (36) Each of these articles concern different aspects of tradefacilitation, and they were initially agreed on prior to the formation of the WTO. Trade facilitationwas seen as less important than market access and other areas negotiated under the GATT during thistime, and thus the GATT does not provide specific rules for customs procedures. Article V dealswith Freedom of Transit, the rights of goods passing through a territory between countries. ArticleVIII deals with Fees and Formalities Connected with Importation and Exportation, requiring efficientand fair fees for moving goods in and out of countries. Article X deals with the Publication andAdministration of Trade Regulations, requiring transparent trade regulations and the equalenforcement of these regulations, including a judicial review process. In order to carry out its task,the Framework further directs the Trade Negotiations Committee to establish a Negotiating Groupon Trade Facilitation, and appoint its chair. The negotiations are to consider the principle of special and differential treatment fordeveloping countries. Special and differential treatment has traditionally meant granting longertransition periods for developing countries, but the Framework states that the extent and timing ofentering into commitments shall be related to the implementation capabilities of developing countrymembers. Also, the members agreed that developing countries will not be required to undertakeinfrastructure investments beyond their means. The Framework encourages developed countrymembers to provide technical assistance to developing countries within the area of trade facilitation. Through the negotiations, members agree to identify their own trade facilitation needs andpriorities, and consider the concerns of developing countries regarding the potential costs ofproposed measures. Technical assistance and capacity building for developing country participationin the negotiations is emphasized, and developed member countries are expected to provide thisassistance. Developed country members are also expected to provide support in implementing thecommitments that arise from the negotiations, whether that be in building human and institutionalcapacity or physical infrastructure. The Framework recognizes that a negotiated agreement mayrequire some members to further develop their infrastructure, and this may be burdensome for somedeveloping countries. In this case, developed countries are expected to make every effort to ensuresupport and assistance for implementing the commitments. However, a developing country will notbe required to implement a commitment with costs beyond its means if it does not receive adequatesupport from developed member countries. That stipulation is necessary because the Frameworkpoints out that developed countries cannot commit to open-ended support. The members also agreeto review the support and assistance provided, and assess whether it supports implementing thenegotiated agreements. Looking Ahead The Framework Agreement resolved several contentious issues regarding the negotiation ofa future agriculture agreement. For other issues, the Framework was less clear or the issue was leftunaddressed. Much work remains to be done to flesh out the Framework to an actual agreement ontrade liberalization. For the Doha negotiations to succeed, however, these issues must be addressedand resolved. In turn, the manner by which these issues are resolved may influence the level ofCongressional support for any resulting agreement. Agriculture. Agreement to reduce domestic support according to aharmonizing formula (WTO members with higher levels of trade-distorting support must cut more)represents substantial progress, but difficult negotiations are expected over specifics such as thepercentage cuts in overall support and in specific categories of trade distorting support (amber box,newly-defined blue box, and de minimis ). Similarly, the EU's concession on eliminating export subsidies is supposed tobe matched with U.S. cuts in export credit guarantees and food aid programs. Just how parallelreductions in these programs might be achieved as well as the schedule and end date for eliminatingexport subsidies likely will be difficult negotiating issues. The market access provisions of theagricultural Framework Agreement are less precise than those for domestic support or exportcompetition. A critical trade-off to be resolved is the extent of market opening by mid-leveldeveloping countries such as Brazil or India versus the extent of reduction in trade-distortingdomestic support that developed countries will make. Resolving this trade-off is critical to bothrealizing market benefits from further agricultural trade liberalization as well as gaining eventualsupport in Congress for a WTO trade agreement. Services. Regarding the services negotiations, mode-4 delivery of services(temporary entry of foreign personnel) will likely be an issue of critical interest to some membersof Congress. Provisions pertaining to temporary entry of personnel were included in the free tradeagreements that the United States entered into with Chile and Singapore. Members were stronglycritical of trade agreements that included provisions affecting U.S. immigration policy, and vowedto oppose future agreements that did so. (37) Mode-4 is the most critical issue for a number of largedeveloping countries, including India and China who have criticized the offers made by developedcountries, including the United States, that have restricted Mode-4 liberalization to foreigners whoare executives and highly skilled employees of foreign firms that have an established presence in thelocal economy. Non-Agricultural Market Access. Although the NAMA language wasreplicated from the 2003 Cancún text, language inserted at the insistence of the developing countriescasts doubt on the finality of these decisions. The first activity of negotiators is to determine the tariffformula, or whether to use or whether to use a different tariff reduction modality. The success of theNAMA negotiations may also depend on cooperation of developing countries, some of which arewithholding active participation awaiting progress in the agriculturenegotiations. Trade Facilitation. In establishing talks on trade facilitation, membercountries may first reach an agreement on whether to negotiate new rules, or merely guidelines, fortrade facilitation. This may be accomplished by first reaching agreement on concrete steps for theprovision of technical assistance, and the application of special and differential treatment. Developing countries may prove more likely to engage in the talks if they are confident that they willnot be forced to take measures beyond their capacity, and it may be possible to agree to negotiatenew rules.

On July 31, 2004, the 147 members of the World Trade Organization (WTO) reached aFramework Agreement for conducting future Doha Round trade negotiations. The FrameworkAgreement is the latest step in the Doha Development Agenda (DDA) round of trade negotiationsat the WTO, which was launched at the 4th Ministerial of the WTO at Doha, Qatar in November2001. This report provides analysis of the framework agreement and its significant results(agriculture, industrial market access, services, and trade facilitation) in the context of U.S.objectives. The Framework addresses the three "pillars" of agricultural trade liberalization identified inthe 2001 Doha Ministerial Declaration: substantial reductions in trade-distorting domestic support;the phase-out, with a view to total elimination, of all export subsidies; and substantial improvementsin market access. A crucial trade-off for the negotiations is the extent to which developed countriesreduce their trade-distorting domestic support in return for additional market access from largedeveloping countries. Non-agricultural market access (NAMA) received less scrutiny. The agreement providesgeneral guidance for future negotiations on the modality for reducing tariffs, the binding ofdeveloping country tariffs, sectoral tariff elimination, and special and differential treatment (SDT)for developing countries. The NAMA talks may benefit from the new impetus in the agriculturalnegotiations. The parameters of the services negotiations were established as part of the pre-Doha "built-inagenda" and in the Doha Ministerial Declaration that launched the new round. The frameworkreaffirms the commitments made at Doha and charges the negotiators to complete and submit theirinitial offers as soon as possible, to submit revised offers by May 2005, and to ensure that the offersare in sectors and modes of supply that are of interest to developing countries. Services involvingthe temporary movement of natural persons will remain contentious for both developed anddeveloping countries. The Framework sets forth modalities for negotiations on trade facilitation, includingassessing the needs and priorities of member countries; providing technical assistance to developingcountries; and addressing trade facilitation language in the GATT agreement. An early matter forclarification is whether the negotiations will yield enforceable rules, or merely guidelines, for tradefacilitation. While the Framework Agreement resolved several contentious issues regarding thenegotiation of a future agriculture agreement, other issues were addressed in a cursory fashion, ifat all. Much work remains to be done to flesh out the Framework to achieve an actual agreement ontrade liberalization. The manner in which these issues are resolved may influence the level ofCongressional support for any resulting agreement. The agreement also abandons the January 1,2005, deadline for the negotiations, but instead sets December 2005 as the date for the 6th Ministerialto be held in Hong Kong. This report will be updated as appropriate.

Types of Exchange Rate Policies There are a number of different types of exchange rate policies that a nation may adopt, depending on what it perceives to be in its best interest economically and/or politically. At one extreme, a country may decide to allow the value of its currency to fluctuate relative to other major currencies in international foreign exchange (forex) markets—a policy commonly referred to as a "free float." One advantage of a "free float" policy over other exchange rate policies is that it permits the nation more autonomy with its domestic monetary policy. However, disadvantages of a "free float" policy include greater exchange-rate risk for international transactions, potentially destabilizing balance sheet effects, and possible rapid shifts in capital flows. At the other extreme, a nation may decide to fix the value of its currency relative to another currency or a bundle of currencies—usually referred to as a "pegged" exchange rate policy. Pegged exchange rate policies can take several forms. The pegged exchange rate may be set by law, without special provisions to defend the value of the currency. Alternatively, a nation may create a "currency board"—a monetary authority that holds sufficient reserves to convert the domestic currency into the designated reserve currency at a predetermined exchange rate. The currency board utilizes those reserves to intervene in international forex markets to maintain the fixed exchange rate. For example, Hong Kong's three designated currency-issuing banks—The Bank of China, HSBC, and Standard Chartered Bank—must deposit with the Hong Kong Monetary Authority sufficient U.S.-dollar-denominated reserves to cover their issuance of Hong Kong dollars at the designated exchange rate of HKD 7.80 = USD 1.00. Some economies that are heavily dependent on trade—such as Hong Kong and Singapore—perceive extensive currency volatility as a burden to trading enterprises, and manage their currencies to avoid it. An advantage of a pegged exchange rate is that it virtually eliminates exchange-rate risk. Disadvantages are the loss of autonomy in domestic monetary policy, potentially rapid changes in domestic prices (including fixed asset values), and exposure to speculative attacks on the pegged exchange rate. A third common exchange rate policy is a "managed float." A nation that adopts a "managed float" allows the value of its domestic currency to fluctuate in international forex markets until certain designated economic indicators reach critical levels. In some cases, the country may designate a band around a determined exchange rate, and intervene in international forex markets if its currency hits the upper or lower value limits. One special form of a managed float is a "crawling peg," in which the nation allows its currency gradually to appreciate or depreciate in value against one or more other currencies over time. China initiated a "crawling peg" policy on July 21, 2005, which it maintained until the summer of 2008, a period in which the renminbi appreciated 21% against the U.S. dollar. Other forms of managed float policies do not rely on the exchange rate but on other economic factors such as the trade balance, current account balance, inflation, and overall economic growth. Contemporary economic theory asserts that a nation cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. If a nation wishes to peg its currency and allow free capital movement (for example, Hong Kong) it must tie its monetary policy to that of the reserve currency nation (for Hong Kong, the United States). Many nations with pegged exchange rates choose to restrict the movement of capital to allow them greater autonomy in their monetary policies (such as anti-inflation measures, interest rate adjustments, or regulating the money supply). East Asia's Exchange Rate Policies Table 1 lists the current de facto exchange rate policies of East Asia according to the International Monetary Fund (IMF) as of April 30, 2016. According to the IMF, only Japan allows its currency, the yen, to float freely on international foreign exchange (forex) markets. Five nations allow their currencies to float, but they reserve the right to intervene in forex markets to maintain stability. Seven countries manage their exchange rates according to certain economic objectives, such as domestic price stability or moderate swings in the forex rate relative to one or more currencies. Brunei and Hong Kong operate a currency board system that effectively pegs their exchange rates. The Hong Kong dollar is pegged to the U.S. dollar; the Brunei dollar is pegged to the Singaporean dollar. Categorizing a government's exchange rate policy can be complicated, particularly during periods of financial turbulence, as was seen, for example, during the global financial crisis of 2008. For example, according to South Korea's central bank, the Bank of Korea, the nation's official exchange rate policy has been a free floating system since December 1997. However, it was reported that the South Korean government sold about $1 billion for won on March 18, 2008, to stop a "disorderly decline" in the value of Korea's currency (see Figure 1 ). There were also reports that Korea sold more dollars for won in early April 2008. At the time, some forex analysts claimed that the new South Korean government had adopted a de facto pegged exchange rate policy of holding the exchange rate between the won and the U.S. dollar at 975-1,000 to 1. The value of the won declined further to nearly 1,500 won to the U.S. dollar in the spring of 2009, before gradually recovering over the next four years to about 1,100 won to the U.S dollar. Allegations of South Korea's intervention into forex markets reappeared in 2015 and 2016, when the won experienced another period of sustained depreciation against the U.S. dollar. The U.S. Treasury's Report to Congress on International Economic and Exchange Rate Policies , released on October 19, 2015, indicated that South Korea appeared to have attempted to resist the appreciation of the won in early 2015, only to switch to efforts to prevent the won's depreciation in July and August. In February 2016, the Bank of Korea stated that the recent declines in the value of the won were "excessive" and that it was concerned about possible "herd behavior" in forex markets, contributing to speculation that Bank of Korea would intervene in forex markets to support the won. Claims that South Korea was intervening in forex markets resurfaced in early 2017; the South Korean government sent a letter to the Financial Times , denying claims that it was managing exchange rates to prevent the won's appreciation. One South Korean think tank conjectured (incorrectly) that the Department of the Treasury might identify South Korea as a currency manipulator in its April 2017 report, given President Trump's statements about currency manipulation and its alleged negative effects on the U.S. economy. Another source of complication arises when there is a seeming discrepancy between the official exchange rate policy and observed forex market trends. For example, China officially maintained a "crawling peg" policy prior to the global financial crisis that allowed its currency—the renminbi—to adjust in value with respect to an undisclosed bundle of currencies within a specified range each day. In theory, this allowed the renminbi to appreciate or depreciate in value gradually over time, depending on market forces. After the global financial crisis began in late 2007, however, the renminbi was comparatively stable in value relative to the U.S. dollar from July 2008 to May 2010 (see Figure 1 ). Initially, this led some analysts to assert that China had abandoned the crawling peg in favor of a pegged exchange rate. Other analysts maintained that the stability of the renminbi with respect to the U.S. dollar was an artifact of the basket of currencies being used by China. Because some major currencies strengthened against the U.S. dollar while others weakened, the weighted average used by China in determining the band for the crawling peg has resulted in a relatively unchanged value when compared to the U.S. dollar. On June 19, 2010, China's central bank, the People's Bank of China, announced it would "proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility," implying that it had been intentionally maintaining a stable exchange rate during the global economic downturn. Starting from the summer of 2010, the RMB once again gradually strengthened against the U.S. dollar to around 6.13 yuan to the U.S. dollar as of February 2015. Since then, the renminbi has weakened against the dollar. As of March 31, 2017, the exchange rate was 6.89 yuan = 1.0 U.S. dollar. Japan's yen has undergone major shifts in value relative to the U.S. dollar over the past 10 years, ranging from a low of 125.35 yen to the U.S. dollar in June 2015 to a high of 76.14 yen to the U.S. dollar in February 2012 (see Figure 1 ). The fluctuations in the value of the yen have also shown some major shifts, such as its strong appreciations in late 2008 and early 2016, or its major depreciations in the winter of 2012-2013, the autumn of 2014, and the end of 2016. Analysts differ on the causes for the shifting value of the Japanese yen. Financial news reports during that time generally maintained that the fluctuations in the value of the yen reflected market confidence (or lack thereof) in Japan's economy and the Bank of Japan's monetary policy. According to these accounts, the weakening of the yen is the result of expansionary fiscal and monetary policies, part of the government's program to stimulate economic growth in Japan ("Abenomics"). However, some U.S. business leaders assert that the decline in the value of the yen in 2015 was the result of Japanese government intervention in foreign exchange markets. The Abe government and the Bank of Japan repeatedly denied claims that they were actively attempting to lower the value of the yen relative to the U.S. dollar, asserting their economic policies are designed to stimulate growth and end price deflation. The last confirmed time Japan intervened in foreign exchange markets was in 2011. Emerging Renminbi Bloc? There are indications that some East Asian monetary authorities monitor the region's exchange rates and attempt to keep the relative value of their currencies in line with the value of selected currencies in the region. These "competitive" adjustments in exchange rates are allegedly made to maintain the competitiveness of a nation's exports on global markets. Some observers have speculated that competitive adjustments are particularly an issue in Southeast Asia, especially countries with closer economic ties to China. For example, one scholar noted in 2007 that, "Countries that trade with China and compete with China in exports to the third market are keen not to allow too much appreciation of their own currencies vis-à-vis the Chinese RMB [renminbi]." The scholar, Taketoshi Ito, also speculated, "China most likely is more willing to accept RMB appreciation if neighboring countries, in addition [South] Korea and Thailand, allow faster appreciation." Trends in selected Southeast Asian exchange rates over the last 10 years have led some analysts to surmise that a "renminbi bloc" emerged in 2007 and early 2008, and reemerged between 2011 and 2013 (see Figure 2 ). In 2007 and until March 2008, the currencies of Malaysia, Singapore, and Thailand generally followed the appreciation of China's RMB against the U.S. dollar. As the 2008 global financial crisis spread in 2008, first the Thai bhat, then the Malaysian ringgit, and finally the Singaporean dollar began to weaken relative to the U.S. dollar, while China's RMB remained relatively fixed in value. Starting in late 2010 and continuing until the spring of 2013, the currencies of Indonesia, Malaysia, the Philippines, Singapore, and Thailand seemingly once again followed the gradual strengthening of China's RMB against the U.S. dollar. Since then, the Southeast Asian currencies have all weakened relative to the U.S. dollar, while the renminbi continued to strengthen until August 2015. The more recent divergence in exchange rates could be interpreted as a weakening of what some analysts previously had suggested were signs of an emerging "renminbi bloc." In addition to the apparent similar movements in the value of their currencies relative to China's renminbi, there is other anecdotal evidence consistent with the existence of a "renminbi bloc" in Southeast Asia, at least for a period of time. According to International Monetary Fund trade data, China has emerged as the largest trading partner for many Asian nations, including Indonesia, Malaysia, the Philippines, Singapore, and Thailand. China has also been actively promoting the use of the renminbi to settle trade payments, as well as to arrange currency swap agreements. While the apparent weakening in 2008 of what some analysts had suggested was an emerging "renminbi bloc" may have been attributable to the global financial crisis, the more pronounced divergence of exchange rates in 2013 and thereafter is not as readily explained. More recently, some observers speculate that slower economic growth in China and tightening monetary policy in the United States led to slower growth for the Southeast Asian economies and applied downward pressure on their currencies. Meanwhile, China's RMB continued its gradual appreciation relative to the U.S. dollar until August 2015. The Trade Facilitation and Trade Enforcement Act of 2015 For nearly 30 years, the Department of the Treasury has been required to provide biannual reports to Congress on the exchange rate policies of foreign countries. The Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ) required the Secretary of the Treasury to analyze on an annual basis the exchange rate policies of foreign countries, in consultation with the International Monetary Fund, and consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade. The act also stipulated that the Secretary of the Treasury shall submit to the Committee on Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, on or before October 15 of each year, a written report on international economic policy, including exchange rate policy. The Secretary shall provide a written update of developments six months after the initial report. The first report was provided to Congress in October 1988. Since the act was enacted, the Department of the Treasury has identified South Korea and Taiwan in 1988 and China in 1992 for manipulating their currencies under the Trade Act's terms. In February 2016, Congress passed the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA; P.L. 114-125 ), which, in addition to other provisions, requires the Secretary of the Treasury to "submit to the appropriate committees of Congress a report on the macroeconomic and currency exchange rate policies of each country that is a major trading partner of the United States." These reports are due every 180 days; the "appropriate committees" are the Committee on Banking, Housing, and Urban Affairs and the Committee on Finance of the Senate; and the Committee on Financial Services and the Committee on Ways and Means of the House of Representatives. The TFTEA also requires the report contain an enhanced analysis of macroeconomic and exchange rate policies for each country that is a major trading partner of the United States that has— (I) a significant bilateral trade surplus with the United States; (II) a material current account surplus; and (III) engaged in persistent one-sided intervention in the foreign exchange market. The latest report was released on April 14, 2017. According to its analysis, "Treasury has found in this Report that no major trading partner met all three criteria for the current reporting period [August-December 2016]." The report did, however, place six major trading partners—China, Germany, Japan, South Korea, Switzerland, and Taiwan—on a "Monitoring List" of "major trading partners that merit close attention to their currency practices." Four of the six major trading partners are in East Asia. Among the report's observations on these four major trading partners were the following: China —"China has a long track record of engaging in persistent, large-scale, one-way foreign exchange intervention, doing so for roughly a decade to resist renminbi (RMB) appreciation even as its trade and current surpluses soared." The report, however, also noted that China has allowed the renminbi to appreciate in recent years, and "China's recent intervention in foreign exchange markets has sought to prevent a rapid RMB depreciation [emphasis in original text] that would have negative consequences for the United States, China, and the global economy." Japan —"Japan has a significant bilateral trade surplus with the United States, with a goods surplus of $69 billion [in 2016]. Japan has not intervened in the foreign exchange market, however, in five years." South Korea —"Korea has a track record of asymmetric foreign exchange interventions, highlighting the urgency of authorities durably limiting foreign exchange intervention only to circumstances of disorderly exchange market conditions and making foreign exchange operations more transparent. In its last analysis of the won, the IMF maintained its assessment that the won is undervalued." Taiwan —"Taiwan has a track record of asymmetric foreign exchange interventions.… Treasury urges Taiwan's authorities to demonstrate a durable shift to a policy of limiting foreign exchange interventions to only exceptional circumstances of disorderly market conditions, and to increase the transparency of foreign exchange market intervention and reserve holdings." Exchange Rate Policies and Issues for Congress While U.S. policy has generally supported the adoption of "free float" exchange rate policies, many East Asian governments consider a "managed float" exchange rate policy more conducive to their overall economic goals and objectives. In part, East Asian governments may be resistant to a "free float" policy because of the commonly held view in Asia that the economies with more liberal exchange rate policies suffered more during the 1997-1998 Asian financial crisis than the economies that moved more forcefully to maintain pegged or managed exchange rates. As a result, there may be skepticism about U.S. recommendations for adoption of "free float" exchange rate policies. In addition, it is uncertain if the adoption of "free float" exchange rate policies by more monetary authorities in East Asia would significantly reduce the U.S. trade deficits with countries in the region. The United States generally runs trade deficits with East Asia. Among economists, there is no consensus that the resulting appreciation of East Asian currencies against the U.S. dollar would either significantly increase overall U.S. exports or reduce U.S. imports. However, for some price-sensitive industries where U.S. companies are competitive, the appreciation of a competing nation's currency may stimulate U.S. export growth and/or a decline in U.S. imports. The debate over foreign exchange rate policies of other nations and its impact on the U.S. economy continues in the 115 th Congress. The Currency Reform for Fair Trade Act ( H.R. 2039 ) would amend the Tariff Act of 1930 (19 U.S.C. chapter 4) to permit the imposition of countervailing duties on the imports of countries whose currency is determined to be "fundamentally undervalued." The act also stipulates that a currency is to be determined undervalued if 1. The government of the country "engages in protracted, large-scale intervention in one or more foreign exchange markets"; 2. The real effective exchange rate of the currency is undervalued by at least 5%; 3. The country has experienced "significant and persistent global current account surpluses"; and 4. The foreign asset reserves held by the government of the country exceed the amount necessary to repay the government's debt obligations for the next 12 months; 20% of the country's money supply; and t he value of the country's imports for the previous four months.

According to the International Monetary Fund (IMF), monetary authorities in East Asia (including Southeast Asia) have adopted a variety of foreign exchange rate policies, varying from Hong Kong's currency board system which links the Hong Kong dollar to the U.S. dollar, to the "independently floating" exchange rates of Japan, the Philippines, and South Korea. Most Asian monetary authorities have adopted "managed floats" that allow their currency to fluctuate within a limited range over time as part of a larger economic policy. Regardless of their exchange rate policies, monetary authorities on occasion may intervene in foreign exchange (forex) markets in an effort to dampen destabilizing fluctuations in the value of their currencies. Legislation has been introduced during past Congresses designed to pressure nations seen as "currency manipulators" to allow their currencies to appreciate against the U.S. dollar. The Trade Facilitation and Trade Enforcement Act of 2015 (P.L. 114-125) requires the Secretary of the Treasury to provide Congress every 180 days with "enhanced analysis of macroeconomic and exchange rate policies" for each major trading partner that has a significant trade surplus with the United States, a current account surplus, and "engaged in persistent one-sided intervention in the foreign exchange market." In its latest report, Treasury determined that "no major trading partner met all three criteria for the current reporting period." Treasury did place six major trading partners—China, Germany, Japan, South Korea, Switzerland, and Taiwan—on its "Monitoring List." Four of those six major trading partners are in East Asia. In the 115th Congress, the Currency Reform for Fair Trade Act (H.R. 2039) would allow the imposition of countervailing duties on goods imported from a foreign country whose currency is determined to be "fundamentally undervalued" in accordance with the provisions of the act. Most East Asian monetary authorities consider a "managed float" exchange rate policy conducive to their economic goals and objectives. A "managed float" can reduce exchange rate risks, which can stimulate international trade, foster domestic economic growth, and lower inflationary pressures. It can also lead to serious macroeconomic imbalances if the currency is, or becomes, severely overvalued or undervalued. A managed float usually means that the nation has to impose restrictions on the flow of financial capital or lose some autonomy in its monetary policy. Over the last 10 years, the governments of East Asia have differed in their response to the fluctuations in the value of the U.S. dollar. China, for example, allowed its currency, the renminbi, gradually to appreciate against the U.S. dollar between 2007 and 2015, and has been actively intervening in foreign exchange (forex) markets since then to prevent the depreciation of its currency. Indonesia, however, has allowed its currency, the rupiah, to depreciate in value relative to the U.S. dollar over the last decade. Between 2011 and 2013, some Southeast Asia nations—such as Malaysia, the Philippines, Singapore, and Thailand—appeared to have adopted exchange rates regimes to keep their currencies relatively stable with respect to China's renminbi. This supposed "renminbi bloc" may have emerged because those nations' economic and trade ties were increasingly with China. In addition, China was actively promoting the use of its currency for trade settlements, particularly in Asia. Exchange rate patterns for the last four years, however, have led some analysts to suggest the "renminbi bloc" may have weakened. This report will be updated as events warrant.

Unemployment Compensation and Exhaustion of Benefits The cornerstone of an unemployed worker's income support is the joint federal-state Unemployment Compensation (UC) program, which may provide income support through the payment of UC benefits. The underlying framework of the UC system is contained in the Social Security Act. Title III of the act authorizes grants to states for the administration of state UC laws, Title IX authorizes the various components of the federal Unemployment Trust Fund (UTF), and Title XII authorizes advances or loans to insolvent state UC programs. UC is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under the State Unemployment Tax Acts (SUTA). The federal government funds federal and state UC program administration, the federal share (50% under permanent law) of Extended Benefit (EB) payments, and federal loans to insolvent state UC programs. States fund regular state UC benefits and the state share (50%) of EB payments. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 , as amended) temporarily provided for 100% federal funding of EB from February 22, 2009, through December 31, 2013. UC Benefits and Duration 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. Those workers who find new full-time employment on average experience significantly decreased earnings relative to what they earned before they lost employment. The UC program pays benefits to workers in covered employment who become involuntarily unemployed for economic reasons or other good cause 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 temporary unemployment insurance benefit is designed to be sufficient to meet an unemployed worker's basic obligations until the worker finds a new position. Generally, benefits are based on wages for covered work over a 12-month period. The entitlement formula varies by state, typically requiring a substantial work history and replacing up to 50% of workers' wages. Generally, the maximum benefit amount is capped (often half of the average wage in the state or less), which lowered the average national replacement rate to 33% of the average weekly wage in the first quarter of 2014. Maximum weekly benefit amounts in January 2014 ranged from $133 (Puerto Rico) to $679 (Massachusetts) and, in states that provide dependents' allowances, up to $1,019 (Massachusetts). In June 2014, the average weekly benefit was $314. Benefits are available for up to 26 weeks in most states (30 weeks in Massachusetts; 28 weeks in Montana; eight other states have maximum durations that are fewer than 26 weeks). The average regular UC benefit duration in June 2014 was 16.6 weeks, with less than half (43%) of all beneficiaries exhausting their regular benefits. In June 2014, approximately 2.4 million unemployed workers received regular state UC benefits in a given week. In 2013, on average, 26% of all U.S. unemployed workers received regular state unemployment benefits (when all extended unemployment benefits were included, that percentage increased to 40%). Generally, the UC recipiency rate (the ratio of unemployed receiving UC benefits to all unemployed) rises during economic recessions (as workers with strong labor market experience are laid off) and falls during economic expansions (as new entrants to the labor market begin to comprise a greater proportion of the unemployed). Monitoring Search, Generosity of Unemployment Benefits, and Disincentives to Find Work The difficulty in monitoring job search intensity creates the risk the unemployed will abuse a system designed to alleviate the worst financial aspects of job loss. Although most economists would agree that UC benefits create some disincentives to find work quickly, these disincentives are somewhat balanced by a relatively low replacement rate of wages by UC benefits and a recognition that proper allocation of human resources and human capital requires adequate job search time. The job search behavior of the unemployed can be influenced by changing the timing, generosity, and duration of UC benefits. Higher benefit levels and easier program requirements for benefits will cause recipients to be less willing to accept jobs and may alleviate some of the social stigma from being unemployed. The availability of benefits may create a disincentive to search for and accept reemployment, increasing unemployment and unemployment duration. Economic research has suggested that this disincentive effect is relatively small and not a particularly large contributor to the high unemployment rates found during economic recessions. UC Benefit Exhaustion The limited duration of UC benefits (generally 26 weeks) will result in some unemployed individuals exhausting their UC benefits before finding work or voluntarily leaving the labor force for other reasons such as retirement, disability, family care, or education. Empirical research suggests that workers who exhaust benefits search at similar or higher levels of intensity as workers who find employment before benefit exhaustion. All state programs attempt to identify potential benefit exhaustees through a state-specific profiling system. Workers who are identified as likely to become unemployed long term may be offered intensive employment services. Figure 1 displays UC beneficiaries as the monthly rate of UC benefit exhaustees since 1979 and as a percentage of all unemployed workers (the "recipiency rate"). The proportion of UC recipients who exhaust their benefits varies according to economic conditions, state benefit duration formulas, and the composition of the labor force. Some evidence suggests that an aging work force may have increased the proportion of unemployed workers who are long-term unemployed; at the same time, this aging work force may also have contributed to the decrease in the overall unemployment rate. Recessions Determination of a Recession The National Bureau of Economic Research (NBER)—not the federal government—declares when a recession began. A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in measures of real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between a trough and a peak, the economy is in an expansion. Most Recent Recession Began December 2007 and Ended June 2009 The NBER maintains a time line of the U.S. business cycle. This chronology identifies the dates of peaks and troughs that frame economic recessions or expansions. According to the NBER, a peak was reached in December 2007, marking the end of the expansion that began in November 2001 and the beginning of the recession that ended in June 2009. Recessions from 1980 to Present Since 1980, there have been five separate periods that the NBER has identified as recessions: January 1980-July 1980; July 1981-November 1982; July 1990-March 1991; March 2001-November 2001; and December 2007-June 2009. Federal Programs of Extended Unemployment Compensation The UC program's two main objectives are to provide temporary and partial wage replacement to involuntarily unemployed workers and to stabilize the economy during recessions. These objectives are reflected in the current UC program's funding and benefit structure. When the economy grows, UC program revenue rises through increased tax revenues while UC program spending falls because fewer workers are unemployed and receive benefits. The effect of collecting more taxes while decreasing spending on benefits dampens demand in the economy. This also creates a surplus or "cushion" of available funds for the UC program to draw upon during a recession. In a recession, UC tax revenue falls and UC program spending rises as more workers lose their jobs and receive UC benefits. The increased amount of UC payments to unemployed workers dampens the economic effect of lost earnings by injecting additional funds into the economy. In response to economic recessions, the federal government sometimes has augmented the regular UC benefit with both permanent (the Extended Benefit program) and temporary extensions (including the Emergency Unemployment Compensation of 2008 program) of the duration of unemployment benefits. Extended Benefit Program (Determined at the State Level) The Extended Benefit (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). EUCA may extend receipt of unemployment benefits (EB) at the state level if certain economic situations exist within the state. The Omnibus Budget Reconciliation Act of 1981, P.L. 97-35 , among other items, amended the EUCA to require that claimants have worked at least 20 weeks of full-time insured employment or the equivalent in insured wages. The EB program is triggered when a state's insured unemployment rate (IUR) or total unemployment rate (TUR) reaches certain levels. All states must pay up to 13 weeks of EB if the 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 2 previous years. There are two other optional thresholds that states may choose. (States may choose one, two, or neither of the additional options.) If the state has chosen the option, it 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 TUR is at least 6.5% and at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years; an additional 20 weeks of benefits if the TUR is at least 8% and at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years. The EB program imposes additional restrictions on individual eligibility for benefits. It requires that a worker be actively searching and available for work. Furthermore, the worker may not receive benefits if he or she refused an offer of suitable work. Finally, claimants must have recorded at least 20 weeks of full-time insured employment or the equivalent in insured wages during their base period (the four quarters of earnings used to determine UC benefit eligibility). EB Provisions in the American Recovery and Reinvestment Act of 2009 As amended, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 , also known as ARRA or the 2009 stimulus package, signed into law on February 17, 2009) contained several provisions affecting EB. Among these provisions was a temporary change increasing the federal share to 100% in the cost-sharing agreement for EB from February 22, 2009, through December 31, 2013. (The permanent funding arrangement is 50% federal funding and 50% state funding.) ARRA also provided a supplemental $25 weekly benefit from February 22, 2009, through June 5, 2010, for recipients of unemployment benefits, including EB. Finally, ARRA also allowed states, at their option, to temporarily change the eligibility requirements for the EB program to expand the number of persons eligible for EB. Temporary EB Trigger Modifications in P.L. 111-312 Beginning on December 17, 2011, P.L. 111-312 made some temporary changes to certain triggers in the EB program. P.L. 111-312 , as amended, allowed states to temporarily use lookback calculations based on three years of unemployment rate data (rather than the permanent law lookback of two years of data) as part of their mandatory IUR and optional TUR triggers if states would otherwise trigger off of or not be on an EB period. Using a two-year versus a three-year EB trigger lookback was a significant adjustment because some states would have otherwise triggered off of their EB periods despite high, sustained—but not increasing—unemployment rates. States implemented the lookback changes individually by amending their state UC laws. These state law changes had to be constructed in such a way that if the two-year lookback was functioning and the state would have an active EB program, no action would be taken. But if a two-year lookback was not sufficient to trigger on to an EB period, then the state would have been able to use a three-year lookback. This temporary option to use three-year EB trigger lookbacks expired the week ending on or before December 31, 2013. Temporary Federal Extensions of Unemployment Benefits: Congressional Intervention in Recessions During most economic recessions in recent history, Congress has created federal temporary programs of extended unemployment compensation. In total, Congress acted eight times—in 1958, 1961, 1971, 1974, 1982, 1991, 2002, and 2008—to establish these temporary programs of extended UC benefits. These programs extended the time an individual might claim UC benefits (ranging from an additional 6 weeks to 63 weeks) and had expiration dates. Some extensions took into account state economic conditions; many temporary programs considered the state's total TUR, IUR, or both. Historically, these programs started operation after the trough of a recession had passed (i.e., after the recession had officially ended) for several reasons. One is that the exact date of the recession is not known until months after that recession has started. NBER often announces a recession has begun three or more months after what is later determined to be its official start. Another cause of this lag in response time is that often the severity of the recession and its impact on unemployment levels do not become apparent until several quarters after the recession begins. The 1958 and 1961 programs were proposed and enacted after the trough of those recessions but before the unemployment rate had peaked. The 1971 program was enacted after the end of the recession in November 1970. Both the 1974 and 1982 programs became effective toward the end of those recessions. The 1991 program was enacted eight months after the 1990-1991 recession trough but eight months before the unemployment rate peaked. Likewise, the 2002 program was enacted after the recession had ended but before the unemployment rate peaked. The Emergency Unemployment Compensation (EUC08) program of 2008 was enacted seven months after the most recent recession began. Table A-1 in the Appendix briefly summarizes these temporary programs as well as the permanently authorized EB program. The 1982 Federal Supplemental Compensation (FSC) and 1991 Emergency Unemployment Compensation (EUC) programs had extremely complicated—and changing—benefit triggers. Table A-2 and Table A-3 provide detailed information on benefit triggers for those two temporary programs. Table A-4 provides information on the EUC08 program benefits and triggers. Temporary Extended UC Benefits as Economic Stimulus In the 110 th Congress, congressional and popular debate examined the relative efficacy of expanding UC benefits and duration compared with other potential economic stimuli. Job loss means that many of the unemployed are severely cash constrained and would be expected to rapidly spend any increase in benefits that they may receive. The certainty of this behavior is very high, and this is the underlying reasoning why some economists consider temporary unemployment benefits a fairly effective economic stimulus. For example, in his January 22, 2009, congressional testimony, the Director of the Congressional Budget Office (CBO) stated that increasing the value or duration of UC benefits may be one of the more effective economic stimulus plans. Mark Zandi of Moody's Economy.com estimated multiplier effects for several different policy options, including extending unemployment benefits. Unemployment benefits had one of the highest estimated effects (1.64, where all proposed interventions ranged from 0.25 to 1.73). Others pointed out that increasing either the value or length of UC benefits may, however, discourage recipients from searching for work and accepting less desirable jobs or that their spouses might forestall seeking additional work. A rationale for making any extension in unemployment benefits temporary would be to mitigate disincentives to work, as the extension would expire once the economy improves and cyclical unemployment declines. Assessing the Labor Market: Determining When to Intervene Various measures are typically used to assess the state of the labor market. These measures may include statistics that are absolute measures, such as employment and unemployment levels, as well as relative measures, such as the insured unemployment rate and the total unemployment rate. A vigorous debate on how to determine when the federal government should intervene by extending unemployment benefits has been active for decades. Generally, this debate has examined the efficacy of using the IUR or TUR as a trigger for extending unemployment benefits. The debate also has examined whether the intervention should be at a national or state level. Serious consideration of other measures of the labor market has become increasingly common. In particular, the increase in the number of unemployed from the previous year has emerged in several proposals as a new trigger for a nationwide extension of unemployment benefits. Improving the UC System as an Automatic Stabilizer The President's 2010 budget proposal suggested changes to the UC system through the modification of the EB program to make the program more responsive to changing economic conditions. Although little information was provided as to the specifics of the legislation, the broad description echoes the recommendations of the Advisory Council on Unemployment Compensation first published in 1994. The President's 2011 (and subsequent) budget proposals did not have similar suggestions. Advisory Council on Unemployment Compensation's 1994 Findings and Recommendations for the EB Program The Advisory Council stated that the changing demographics of the work force—coupled with state funding problems—had led to a decline in UC recipients. This had, in turn, caused the IUR to be a less reliable indicator of economic conditions at the state level and thus reduced the likelihood that the EB program would be active in the states during economic recessions. The Advisory Council also found that the temporary federal extensions of unemployment benefits have been "extremely inefficient" as they have been neither well timed nor well targeted. The Advisory Council generally supported that the EB program use a state TUR of 6.5% as an indicator of economic conditions meriting an active EB program. It also suggested that any indicator not use historical comparisons or thresholds (e.g., 110% of previous year's level), which the Advisory Council labeled as "not helpful" because the threshold triggers caused the activation of the EB program to occur later and deactivate earlier than what the Advisory Council believed was appropriate. Finally, the Advisory Council suggested raising the FUTA tax base from $7,000 to $8,500 to raise the additional funds needed for this suggested change. The President's 2012, 2013, 2014, and 2015 budget proposals included measures that would have increased the federal unemployment tax base to $15,000 while lowering the tax rate. Using the Insured Unemployment Rate Versus Total Unemployment Rate The Federal-State Extended Benefit Program, created by P.L. 91-373, originally assessed the labor market through both IURs and TURs and included both national- and state-level triggers for extended UC benefits. The EB's federal trigger was eliminated by the Omnibus Reconciliation Act of 1980 ( P.L. 96-499 ). That act also required that the IUR measure no longer include those who had exhausted benefits or who were receiving EB. This effectively made the IUR statistic a less generous measure of unemployment as it counted only the recently unemployed. Since the adoption of the permanent EB program in 1970, there has been considerable debate concerning the relative merits of the IUR versus the TUR as an EB trigger. The IUR is defined as the 13-week moving average of continuing regular UC claims divided by the average number of individuals in UC-covered employment. This means the IUR itself is an output of the UC program. Because calculation of the IUR is based upon the number of individuals currently receiving UC benefits, each state's IUR depends on various noneconomic factors, including state eligibility rules and administrative practices. Thus, the IUR is not a precise reflection of the health of a state's economy. In comparison, the TUR is defined as the number of all unemployed individuals actively seeking work divided by the size of the civilian labor force. The TUR represents a larger population than the IUR because it counts as unemployed all those who are out of work and actively looking for work, on layoff, or waiting to start a new job within 30 days. National, State, and Sub-State Triggers A perennial question concerns the appropriate level at which to measure changes in unemployment. Generally this debate has centered on the EB program and whether the EB trigger should be based on national, regional, state, or sub-state data. At the beginning of the most recent recession (but before the recession had been identified), the debate on the EB triggers was expanded to question what measure should be used if a new temporary extension of UC benefits were enacted. In particular, should Congress act as it has in the most recent recessions and create a nationwide extension of UC benefits with a nod to higher unemployment states through an additional "high-unemployment" trigger? Or would it be more appropriate and a better use of scarce resources to target only those states with current economic difficulties? In the most recent recession, Congress first created a temporary program that did not target states based upon state unemployment rates ( P.L. 110-252 ). Eventually, Congress expanded the temporary program and targeted much of the expansion of benefits to the unemployed in states that had higher levels of unemployment (first in P.L. 110-449 and then again in P.L. 111-92 ). The argument in favor of a national trigger is that the definition of a recession is national in scope and the federal government's interest in reversing an economic decline is national as well. However, recessions have often been primarily regional in impact. Thus, a national trigger can result in the payment of extended benefits to individuals in states that do not face unusually weak labor markets. There have also been proposals to create regional and sub-state level triggers. The logic behind the regional or sub-state trigger is that it might improve the targeting of benefits because state boundaries are often of little relevance to the workings of labor markets. Considerable labor market differences may exist between urban and rural areas within a state or among urban areas within a state. Furthermore, some labor markets are located in more than one state. A statewide trigger can deny benefits to areas facing severe labor market problems because other regions of the state are not facing the same conditions. There are a variety of arguments against regional and sub-state triggers. It would be difficult to define appropriate regional or sub-state boundaries, and it is unclear whether these newly defined regions would be any less arbitrary than current state boundaries. In addition, there are significant obstacles to be overcome in the financing and administration of an EB program on the basis of regional or sub-state areas because the state has always been the operational unit for UC. Concern also exists regarding the accuracy and availability of regional or sub-state data and the costs of data improvements that would be needed. Increases in Unemployment of at Least 1 Million Unemployed as Compared with the Same Month in the Previous Year In the 110 th Congress, debate moved away from using the IUR or TUR as a trigger for a national program. Serious consideration of other measures of the labor market has become increasingly common. In particular, the increase in the number of unemployed from the previous year emerged in several proposals for new triggers in a nationwide extension in unemployment benefits. In the 110 th Congress, H.R. 4934 , the Emergency Unemployment Compensation Act of 2008, was introduced on January 15, 2008. This bill would have extended UC benefits for up to 26 weeks when the number of unemployed persons 16 years of age or older increased by at least 1 million individuals as compared with the same month in the previous year. Table A-5 in the Appendix provides information on the timing of the recessions, changes in unemployment of at least 1 million compared with same month in the previous year, and federal enactment of the temporary extensions of benefits. During this period, the temporary extensions of unemployment benefits take effect between 4 months and 14 months after the onset of the recession. The first changes in unemployment compared with the same month in the previous year of at least 1 million occur between 3 months and 5 months after the onset of the recession. Therefore, if the "1 million" trigger had been in place in the past, the extension of UC benefits would have been triggered between 8 months and 12 months earlier than actually occurred. Figure 2 provides a graphical presentation on the changing levels of unemployment since 1979 and the corresponding unemployment rates for each year. Figure 2 uses different numerical scales for changes in unemployment levels and for the unemployment rate. Because the correspondence between these two scales was determined by page size rather than by a particular reason, readers should not place any significance in the two lines crossing each other. The scale for the changes in unemployment levels compared with same month in the previous year is located on the left-hand y-axis. The scale for the unemployment rate is located on the right-hand y-axis. Other Measures: Changes in UC Benefits Exhaustions and Changes in Long-Term Unemployment Beyond the IUR, TUR, and changes in the total number of unemployed, several other measures of unemployment are often used in assessing the severity of employment conditions. These measures include the number of unemployed workers who exhaust UC benefits and the number of workers who have been unemployed for more than 26 weeks (i.e., long-term unemployed). Figure 3 shows the change in the number of workers who exhaust UC benefits. That is, Figure 3 shows the change in the number of UC beneficiaries who have been unemployed for longer than the number of weeks for which UC benefits are available to them. Figure 4 shows another measure of the severity of unemployment, the change in the number of workers (regardless of whether they received UC benefits) who have been unemployed for more than 26 weeks. Generally, both the changes in the number of exhaustees and the changes in the number of long-term unemployed peak after a recession's end. Congressional Interest in "Paying for Temporary Benefits" Increases in Revenues or Decreases in Expenditures Related to Temporary Unemployment Benefit Legislation Debate in Congress has included substantial interest in whether benefit extension legislation should include measures to "pay for" the proposals and be subject to House and Senate PAYGO requirements or whether these extensions should be considered "emergency" measures and exempt from the PAYGO requirements. With the exceptions of P.L. 111-92 , P.L. 112-78 , and P.L. 112-96 , all laws that created, extended, or altered the EUC08 program were treated as emergency expenditures or part of larger appropriation legislation. Historical comparisons with previous extensions of temporary unemployment benefits are difficult because of differing internal House and Senate PAYGO rules that have changed over time. Table A-6 in the Appendix lists all public laws that have created or altered these temporary unemployment benefit programs. The second column lists all decreases in federal expenditures or increases in federal tax revenues that are related to unemployment benefits within these laws. The last column includes explanatory notes that may put the laws into better context within this particular discussion. The Congressional Research Service (CRS) identified 11 laws that included reduced expenditures or increased revenues related to temporary unemployment benefits. Five laws increased the federal unemployment tax (FUTA) on employers. One law increased income tax on unemployment benefits received by individuals. Two laws increased the estimated withholding requirements for certain corporate income taxes. One law began to require interest payments from states for federal loans to allow states to continue to provide regular UC benefits to their workers. P.L. 112-78 required new fees be paid when certain new federally guaranteed mortgages were issued. P.L. 111-92 expanded the EUC08 program from two to four tiers (from a potential maximum duration of 33 weeks to 53 weeks) but did not extend the authorization of the program. The law included a 1.5-year extension of the FUTA surtax. P.L. 112-96 did not declare the temporary benefits to be emergency spending and did include some offsets, including the auction of spectrum licenses and increased contributions to federal retirement plans. Some of the other laws did have reduced expenditures or increased revenues but are not included in this tally because (1) they were part of large appropriation bills and generally not subject to PAYGO rules, or (2) CRS was unable to directly link these measures to any type of unemployment benefits. CRS did not attempt to identify whether these reductions in expenditures or increases in revenues fully offset the expected costs of the changes in expenditures on temporary unemployment benefits. Congressional Interest in the "Maximum Length of Total UI [Unemployment Insurance] Benefits over Time" Debate in Congress has included substantial interest in whether the total number of weeks of unemployment insurance (UI) benefits available to workers is overly generous as compared with previous recessions. Table A-7 in the Appendix lists the total number of potential maximum available weeks of unemployment benefits available to the unemployed since 1935. At the height of the EUC08 program, the potential maximum number of weeks of all unemployment benefits (UC + EB + EUC08) reached 99 weeks. This maximum was available to states (if state economic conditions and state laws met the availability requirements) from December 2009 through August 2012. In comparison, the next-highest maximum potential duration of unemployment benefits was during the Temporary Emergency Unemployment Compensation (TEUC) program in 2002 and 2003, when up to a total of 72 weeks of unemployment insurance (UC + EB + TEUC) was available in some states. This maximum was available to states (if state economic conditions and state laws met the availability requirements) from March 2002 through December 2003. Appendix. Related Tables

This report describes the history of temporary federal extensions to unemployment benefits from 1980 to the present. Among these extensions is the Emergency Unemployment Compensation (EUC08) program created by P.L. 110-252 (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). This report contains five sections. The first section provides background information on unemployment compensation (UC) benefits. It also provides a brief summary of UC benefit exhaustion and how exhaustion rates are related to the business cycle. The second section provides the definition of a recession as well as the determination process for declaring a recession. It also provides information on the timing of all recessions since 1980. The third section summarizes the legislative history of federal extensions of unemployment benefits. It includes information on the permanently authorized Extended Benefit (EB) program as well as information on temporary unemployment benefit extensions. It also includes a brief discussion on the role of extended unemployment benefits as part of an economic stimulus package. The fourth section provides figures examining the timing of recessions and statistics that may be considered for extending unemployment benefits. The fifth section briefly discusses previous methods for financing these temporary programs. In particular, it attempts to identify provisions in temporary extension legislation that may have led to increases in revenue or decreases in spending related to unemployment benefits.

Introduction The Constitution guarantees those accused of a federal crime the right to trial in the state where the crime was committed, U.S. Const. Art. III, §2, cl.3, and the right to trial by a jury selected from the district where the crime was committed, U.S. Const. Amend. VI. In 1998, the Supreme Court held that federal charges involving money laundering, in Florida but of the proceeds from drug trafficking in Missouri, could not be tried in Missouri, United States v. Cabrales , 524 U.S.1, (1998). The following year, the Court held that use of a firearm, in Maryland, in connection with a multi-state kidnaping could be tried in New Jersey, United States v. Rodriguez-Moreno , 526 U.S. 275 (1999). Subsequent Congresses have seen a number of proposals to expand venue for the trial of various federal criminal offenses. The pattern continued in the 109 th . Constitutional venue requirements understood in light of Cabrales and Rodriguez-Moreno might have precluded realization of the full literal benefits of some of these proposals. Cabrales and Rodriguez-Moreno Cabrales is not as restrictive as it might seem at first; nor is Rodriguez-Moreno as permissive. Cabrales laundered the Missouri drug money in Florida, but there was no evidence that she was a member of the Missouri drug trafficking conspiracy or that she had transported the money from Missouri to Florida. The Court acknowledged that she might have been tried in Missouri had either been the case, 524 U.S. at 8, 10. Rodriguez-Moreno and his confederates kidnapped a drug trafficking associate and transported him over the course of time from Texas to New Jersey and then to Maryland. Rodriguez-Moreno acquired the firearm with which he threatened the kidnap victim in Maryland but was tried in New Jersey for using a firearm "during and in relation to a crime of violence [kidnaping]" in violation of 18 U.S.C. 924(c)(1). Section 924(c)(1) in the eyes of the Court has "two distinct conduct elements . . . using and carrying of a gun and the commission of a kidnaping," 526 U.S. at 280 (emphasis added). A crime with distinct conduct elements may be tried wherever any of those elements occurred; kidnaping is a continuous offense that in this case began in Texas and continued through New Jersey to Maryland; venue over the kidnaping, a conduct element of the section 924(c)(1), was proper in Texas, New Jersey or Maryland; consequently venue over the violation of section 924(c)(1) was proper in either Texas, New Jersey or Maryland, 526 U.S. at 280-82. The Court was quick to distinguish Cabrales from Rodriguez-Moreno : "The existence of criminally generated proceeds [in Cabrales ] was a circumstance element of the offense but the proscribed conduct—defendant's money laundering activity—occurred after the fact of the offense begun and completed by others." In Rodriguez-Moreno , "given the 'during and in relation to' language, the underlying crime of violence is a critical part of the §924(c)(1) offense," 526 U.S. at 280-81 n.4. The Court also declined to address the so-called "effects" test used by the some of the lower federal courts in obstruction of justice and Hobbs Act ("effect") cases to determine the presence of proper venue, 526 U.S. at 279 n.2. Obstruction of Justice One of the most common venue proposals in the 109 th Congress related to retaliation against witnesses in federal proceedings, 18 U.S.C. 1513. It is found in H.R. 970 / S. 155 (§207), S. 1968 (§8), H.R. 1751 (as passed by the House, §10/ as passed by the Senate, §204), H.R. 4028 (§312), H.R. 4472 (§715) (as passed by the House), and S. 2767 (§1086) (as passed by the Senate). Under the proposal a new subsection would have been added to section 1513 of Title 18 reading, "A prosecution under this section may be brought in the district in which the official proceeding (whether or not pending, about to be instituted or completed) was intended to be affected or was completed, or in which the conduct constituting the alleged offense occurred," proposed 18 U.S.C. 1513(g). The language replicated that found in 18 U.S.C. 1512(h) concerning venue in federal witness tampering cases and added to section 1512 in 1988 prior to Cabrales or Rodriguez-Moreno . The "official proceeding affected" would appear to have more closely resembled the "circumstance element" found insufficient in Cabrales than the "conduct element" approved in Rodriguez-Moreno . In what seems to be the only federal appellate decision to address the question, the Fourth Circuit concluded that its earlier approval of venue under section 1513 in the district where the official proceeding had been, were being or would be held "cannot be reconciled with the Supreme Court's later decisions in Cabrales and Rodriguez-Moreno . Rather the Supreme Court's recent venue decisions instruct that the nature of the crime refers only to the conduct constituting the offense and that the conduct constituting the offense is limited to essential conduct elements," United States v. Bowens , 224 F.3d 302, 312 (4 th Cir. 2000). Violence During and In Relation to Drug Trafficking A second common proposal would have built upon the scheme approved in Rodriguez-Moreno . The statute before the Court, 18 U.S.C. 924(c)(1) outlaws the use of a firearm "during and in relation" to a crime of violence or serious drug offense. Several bills—e.g., H.R. 970 / S. 155 (§108), H.R. 1279 (as passed the House) (§106)—proposed a new federal crime, one that would have prohibited the commission of a crime of violence "during and in relation" to a drug trafficking offense, proposed 21 U.S.C. 865. They would have permitted prosecution for such an offense "in (1) the judicial district in which the murder or other crime of violence occurred; or (2) any judicial district in which the drug trafficking crime may be prosecuted," proposed 21 U.S.C. 865(b). This analogy to Rodriguez-Moreno seems likely to have worked, especially if the drug trafficking offense, like the kidnaping offense in Rodriguez-Moreno , was considered a continuous offense in time and space. Many drug trafficking offenses are likely to be considered continuing offenses for venue purposes, see e.g. , United States v. Zidell , 323 F.3d 412, 422 (6 th Cir. 2003)(possession with intent to distribute); United States v. Brown , 400 F.3d 1242, 1250 (10 th Cir. 2005)(manufacturing methamphetamine). Moreover, although Rodriguez-Moreno used a firearm during and in relation to a continuing offense (kidnaping) that occurred in the same district, that does not appear to have been necessary for the Court's analysis. The Court's analysis suggests no different result if the kidnap victim had been kept in New Jersey and never been transported to Maryland, but Rodriguez-Moreno had traveled to Maryland and used a firearm there to a discourage an informant from disclosing the victim's whereabouts to authorities. "Where a crime consists of distinct parts which have different localities, the whole may be tried where any part can be proved to have been done," 526 U.S. at 281. In the case of the proposal, the new crime apparently would have consisted of two conduct elements, a crime of violence and a drug trafficking crime; it would seem to have followed that the new crime might have been tried wherever either the crime of violence or a continuous drug trafficking offense occurred. Venue in Capital Cases The same bills that propose venue changes for drug-related crimes of violence, would have replaced an existing provision relating to venue in capital cases, H.R. 970 / S. 155 (§203), H.R. 1279 (as passed by the House)(§110), and H.R. 4472 (as passed by the House)(§810). Existing law provides that where possible capital cases should be tried in the county in which the crime occurred, 18 U.S.C. 3235. Section 3235 is followed by a section that provides that murder and manslaughter cases should be tried where the death-causing injury was inflicted regardless of where death actually occurs, 18 U.S.C. 3236. The more specific instruction of section 3236 overrides the general multi-district venue provisions of 18 U.S.C. 3237(a) which provides that multi-district crimes may be tried where they are begun, continued, or completed and that offenses involving the use of the mails, transportation in interstate or foreign commerce, or importation into the United States may be tried in any district from, through, or into which commerce, mail, or imports travel. At least one federal appellate court has held that the specific instruction of section 3236 overrides the general instructions of section 3237(a) only with regard to "unitary" murder offenses, such as murder by a federal prisoner, 18 U.S.C. 1118. Section 3236 does not apply, the court held, to "death resulting" cases, cases where murder is a sentencing element rather than a substantive element of the offense, such as in cases of a violation of 18 U.S.C. 924(c)(use of a firearm during and relating to the commission of crime of violence), the sentence for which is determined in part by whether death resulted from the commission of the offense, United States v. Barnette , 211 F.3d 803, 814 (4 th Cir. 2000). The proposal would have repealed the "county trial" language of section 3235 and replaced it with language reminiscent of the multi-district terms of section 3237(a): "(a) the trial of any offense punishable by death shall be held in the district where the offense was committed or in any district in which the offense began, continued, or was completed. (b) If the offense, or related conduct, under subsection (a) involves activities which affect interstate or foreign commerce, or the importation of an object or person into the United States, such offense may be prosecuted in any district in which those activities occurred." Although it is far from certain, the proposal apparently intended to repeal the "county trial" feature of section 3235 and, by indirection, repeal the section 3236 override of multi-district section 3237 in murder cases. The manslaughter features of 3236 would presumably have continued in place since they are not capital cases and thus by definition would have been beyond the reach of the proposed capital venue provisions of the amended section 3235. Constructional quandaries aside, it is not clear that predicating venue upon the interstate impact of related conduct will always survive analysis under Cabrales . The proposal apparently would have permitted trial of an offense in a district in which related conduct affecting interstate or foreign commerce occurred even if the offense itself was committed entirely in another district. The Cabrales ' money generating drug trafficking in Missouri would seem to qualify as conduct related to the laundering in Florida. Nor would the proposal always meet Rodriguez-Moreno 's "conduct element" standard. There was nothing in the proposal that would have required that the "related conduct affecting interstate commerce" be an element of the offense to be tried. In fact, the alternative wording—"if the offense, or related conduct . . . involves activities which affect interstate commerce"—seemed to contemplate situations in which affecting commerce was not an element, conduct or otherwise, of the offense. False Statements in Passport Applications H.R. 4437 (§213), as passed by the House, would have outlawed making false statements in a passport application, mailing or presenting a passport application containing a false statement, or causing the production of a passport by fraud or false application, proposed 18 U.S.C. 1542. The bill's additional venue section would have allowed prosecution in "(1) any district in which the false statement or representation was made; or (2) any district in which the passport application was prepared, submitted, mailed, received, processed, or adjudicated; or (3) in the case of an application prepared and adjudicated outside the United States, in the district in which the resultant passport was produced," proposed 18 U.S.C. 1551. Similar provisions were found in S. 2611 (§208), as passed by the Senate, S. 2612 (§208), and S. 2454 (§208). The proposals seemed compatible with constitutional requirements as explained in Cabrales and Rodriguez-Moreno . With the exception of subsection (3), venue seemed to be pegged to the conduct elements of the new offense. As to subsection (3), the Constitution authorizes Congress to provide venue for crimes committed outside of the United States, U.S. Const. Art.III, §2, cl.3; Amend. VI. Violence in Aid of Racketeering Section 105 of H.R. 1279 , as passed by the House, would have amended 18 U.S.C. 1959(a) to outlaw crimes of violence committed (1) for hire at the behest of a racketeering enterprise, (2) to further the purposes of a racketeering enterprise, or (3) to acquire, maintain or enhance the offender's position within a racketeering enterprise. It would have added a new subsection 1959(c) under which violations of the section may be prosecuted in "(1) the judicial district in which the crime of violence occurred; or (2) in any judicial district in which racketeering activity of the enterprise occurred ." Section 1959 would have used the definition of "racketeering activity" found in 18 U.S.C. 1961 that lists the crimes which mark the activities of a racketeer influenced and corrupt organization (RICO), 18 U.S.C. 1959(b). It is uncertain whether venue over a section 1959 offense would have been constitutionally proper in any district where a RICO predicate offense ("racketeering activity") had been committed. For instance, the section 1959 "for hire by a RICO enterprise" crime of violence might easily have been compared to the "after the fact" money laundering in Cabrales . On the other hand, the section 1959 "in furtherance of a RICO enterprise" crime, and perhaps the "in furtherance of a position in a RICO enterprise" crime, seem to more closely resemble the conspiratorial or aiding and abetting exceptions suggested in Cabrales . Runaway Spouses H.R. 229 would have outlawed interstate flight to avoid court ordered payments to a spouse or ex-spouse and the failure to make such payments with respect to spouse or ex-spouse living in another state, proposed 18 U.S.C. 228A(a). Venue would have been proper in the district in which either party resided or any other district recognized by law, proposed 18 U.S.C. 228A(e). In a case prior to Rodriguez-Moreno but after Cabrales , the Eleventh Circuit upheld an identical venue provision found in the child support provisions of 18 U.S.C. 228, United States v. Muench , 153 F.3d 1298, 1300-304 (11 th Cir. 1998). The results would seem to have been compatible with Rodriguez-Moreno . Since payment would have involved both tender and receipt, failure to pay would have constituted a "conduct element" occurring both where the debtor and the creditor were found. Trial in Emergency Conditions In emergency conditions and with the consent of the accused, P.L. 109-63 , the Federal Judiciary Emergency Special Sessions Act of 2005, criminal trials may be held outside the state in which the offense occurred before a jury drawn from outside the district in which the offense occurred, 28 U.S.C. 141(b). Although there is no Supreme Court precedent directly on point, the lower federal appellate courts have held without exception that the accused may waive the Constitution's venue requirements, see e.g. , United States v. Grenoble , 413 F.3d 569, 573 (6 th Cir. 2005); United States v. Ebersole , 411 F.3d 517, 525 (4 th Cir. 2005); United States v. Strain , 396 F.3d 689, 693 (5 th Cir. 2005); United States v. Rendon , 354 F.3d 1320, 1326 n.5 (11 th Cir. 2003); 2 Wright, Federal Practice and Procedure §306 (2000). War Profiteering and Fraud Section 502 of S. 12 would have outlawed wartime profiteering and fraud and permitted trial anywhere the general venue chapter of Title 18 (chapter 211) would have authorized it as well as in "any district where any act in furtherance of the offense took place" or where "any party to the contract or provider of goods or services is located." The proscription extends to fraud, concealment or falsification of material facts, and overvaluation in a procurement context, proposed 18 U.S.C. 1038(c). It does require the participation of multiple defendants. Comparable proposals appeared in H.R. 4682 (§705), S. 2356 (§2), S. 2361 (§101), and S. 3875 (§1402). Other than in cases brought in reliance on chapter 211 or where the misconduct occurred overseas, establishing compatibility between the new venue claims and the constitutional requirements as explained in Cabrales and Rodriguez-Moreno might have proved challenging.

Venue, the place where federal criminal trials may be held, is a matter of constitutional and statutory law. Several proposals in the 109th Congress would have expanded federal venue. The Supreme Court's recent decisions in Cabrales and Rodriguez-Moreno suggest that a few of the proposals might have been more limited than their terms might indicate. The proposals dealt with venue in cases involving capital offenses, obstruction of justice, violent crime, drug trafficking offenses, false statements, failure to pay spousal support, wartime procurement fraud, and trial in emergency conditions. They appeared in H.R. 229, H.R. 970, H.R. 1279, H.R. 1751, H.R. 4437, H.R. 4472, S. 12, S. 155, S. 1968, S. 2356, S. 2361, S. 2454, S. 2611, S. 2612. S. 2767, and S. 3875. Related reports include CRS Report RL33223, Venue: A Legal Analysis of Where a Federal Crime May Be Tried, by [author name scrubbed], which is available in abbreviated form as CRS Report RS22361, Venue: A Brief Look at Federal Law Governing Where a Federal Crime May Be Tried, by [author name scrubbed].

Overview Since the terrorist attacks of 2001 and the creation of the new Department of Homeland Security, there has been widespread interest in reorganizing the Houseand Senate committee systems to handle homeland security issues more effectively. Some changes to the committeesystems have already been made, but thereare calls for still more comprehensive action. Recommendations of the 9/11 Commission. Among the many issues discussed in the report of thecommission were a group of recommendations intended to "strengthen congressional oversight of intelligence andhomeland security." Concerning homelandsecurity, the commission recommended establishment of a standing committee in each chamber to assumeresponsibility over the topic. Congress should create a single, principal point of oversight and review for homeland security. Congressionalleaders are best able to judge what committee should have jurisdiction over this department and its duties. But webelieve that Congress does have theobligation to choose one in the House and one in the Senate, and that this committee should be a permanent standingcommittee with a nonpartisanstaff. (1) Two House Homeland Security Committees. The House created a temporary Select Committee onHomeland Security that was directed to coordinate recommendations on the bill made by a half dozen differentHouse standing committees. The HomelandSecurity Committee compiled a comprehensive proposal, led House floor debate on the bill, and served as thecentral negotiating team in resolving differencesbetween the House and Senate versions of the bill. When P.L. 107-296 was signed into law, the Select Committeeon Homeland Security was abolished, butnot before the new law included language in Section 1503 stating, "It is the sense of Congress that each House ofCongress should review its committeestructure in light of the reorganization of responsibilities within the executive branch by the establishment of theDepartment." The House deferred immediate action, creating in January 2003, a new Select Committee on Homeland Security. This new committee was to serve during the108th Congress as the House focus for legislative and oversight coordination for homeland securityissues, while other House committees retained their morelimited legislative and oversight authority over homeland security. Most significantly, the Select Committee wasdirected to report by September 30, 2004, itsrecommendations for changes in the House committee system. By comparison, the Senate, in the 108thCongress, has continued to consider homeland securityissues within its existing committee structure. Appropriations Subcommittee for Homeland Security. The structure of the House and SenateAppropriations Committees have been changed to account for the creation of the new department. In early February2003, the House AppropriationsCommittee approved an internal reorganization plan which abolished the former Subcommittee on Treasury andPostal Service Appropriations and transferredits responsibilities to a renamed Subcommittee on Transportation, Treasury, and Independent AgenciesAppropriations. With this consolidation, a newthirteenth Subcommittee on Homeland Security was established and it was assigned jurisdiction over appropriationsfor the new department and for bureaus inother departments transferred to it. The Senate Appropriations Committee shortly thereafter followed suit, to ensurethat the subcommittee structures of the twocommittees were parallel. Calls for Further Change. Many Members have already endorsed further changes to the committee system. A number of proposals have been offered in the House and Senate to establish a new temporary select, permanentselect, or standing committee on homelandsecurity, to alter the appropriations process, or to make other changes in congressional structures dealing withhomeland security issues. A senior House leaderobserved in 2002 that creation of the new department "probably will require at least a reorganization of the currentcommittees." A Senator active in crafting thefinal version of the Homeland Security Department bill stated "It is hard to see how Congress could do a decent jobof authorizing and overseeing what the newdepartment does without a new Committee of Homeland Security." On the other hand, a number of Members havepublicly opposed any alteration of House orSenate committee structures, while others have endorsed or opposed such action at different times. (2) From the perspective of the executive branch, areductionin committee jurisdiction fragmentation limits the number of panels to which officials of the new agency will beanswerable. Although the House and Senate have undertaken some initial steps to revise their committee structures, the report of the 9/11 Commission may add additionalpressure for congressional action. This report examines various options for the House and Senate individually orjointly to consider in reorganizing itsstructures dealing with homeland security and discusses possible advantages and disadvantages of each. Options for Congressional Organization (3) Timetable for Reform. Not only is there discussion about what changes should be made in congressionalstructures, but there is also discussion about when such changes should be made. With the 9/11 Commission'srecent recommendations and the September 30,2004, deadline for committee system reform proposals from the House Homeland Security Committee, some sayreforms are so vital that they should beadopted before Congress adjourns for the election. These advocates can point to the 1974 House committee reformswhich were passed just before the electionsthat year. Other say it would be best to defer such action until the beginning of the new Congress in January. After the election, the voters will have supplied freshmandates and the House and Senate will have time in January before the inauguration to consider morecomprehensive reform options thoroughly. The Houseadopts its rules for the new Congress on the first session day, and these reforms could include substantial changesto its committee structure. The Senate's rulesare deemed to be in place automatically at the beginning of a new Congress. However, some believe there will beattempts on the first day of the new Congressto change the Senate's Cloture Rule and other rules relating to the consideration of executive nominations. Theseefforts could open the door to considerationof committee system changes as well. Retain Current Structure. Congress could decide that the current system is sufficient to monitor the work ofthe new department. No changes would be made in either jurisdiction or referral procedures. Some may argue thatit is too soon to know how much legislativeworkload the new department will cause House and Senate committees. In the immediate aftermath of the 2001terrorist attacks, all congressional committeessought involvement in terrorism matters. More recently, the involvement of committees with only minor claimsto jurisdiction seems to have tapered off. Historically, there has been no necessary connection between an executive reorganization and congressional committee reorganization. Several House andSenate committees were combined to create the new Armed Services Committees in 1947, at about the same timethat the Department of Defense was created. The Armed Services Committees promptly created subcommittees that closely matched the former standingcommittees that had been merged in the committeereorganization. On the other hand, the Department of Energy was created after the Senate had consolidated energyjurisdiction in its committees, but before theHouse completed a realignment of its energy jurisdictions in 1980. The creation of the Department of Health,Education, and Welfare (now Health and HumanServices) was not accompanied by any change in House or Senate committee jurisdictions. Reorganize Entire System. Either chamber or both chambers, acting separately or jointly, could undertake anextensive reorganization of the committee system. A substantial House committee reorganization took place in1995, but it has been a quarter century since theSenate comprehensively reorganized its committees. The Joint Committee on the Organization of Congress in the103rd Congress considered numerous optionsfor such reorganization, but did not directly address the issue of terrorism or anti-terrorism jurisdiction. (4) A comprehensive reorganization could allow bothchambers to address other jurisdiction issues which have emerged in recent years. (5) Nevertheless, a comprehensive reorganization is normally controversialand rarely contemplated under very short deadlines. Realign Committee Jurisdiction. Within the existing system, either or both chambers could choose to realigntheir committee jurisdictions within the existing structure. That would entail changing chamber rules. Pastexperience indicates that Members generally havebeen loathe to overhaul the committee system, especially during a Congress. Rules changes are traditionally adoptedat the beginning of a new Congress. In theSenate, because there is no need to readopt Senate rules at the beginning of a new Congress, a committeereorganization would have to be consideredseparately. In either chamber, it would be possible to add jurisdictional aspects of certain homeland security topics to the jurisdiction of specific committees, withoutaltering the existing subject jurisdictions of committees over other topics. For example, jurisdiction over "nationalenergy policy generally" was assigned to theHouse Energy and Commerce Committee in 1980 without significant alteration to other committees' jurisdictions. Change Referral System. Both chambers typically refer measures to a single committee, by determiningprimary jurisdiction in the House and predominant jurisdiction in the Senate. In the House, most multiple referralsare sequential, although joint referrals werepermitted until 1995. Changing the referral system could enable all interested committees to maintain legislativeand oversight jurisdiction. For example, theSpeaker of the House (who has the discretionary authority to impose time limits on referrals) could be required toimpose one on all committees involved in amultiple referral of a homeland security-related bill. In addition, for legislation on homeland security, the Housecould allow joint referrals. (In the 108thCongress, House rules allow referral without designation of a primary committee "under exceptionalcircumstances.") In the Senate, which generally requires unanimous consent for multiple referrals, party leaders could invoke their little-used authority to recommend referrals toseveral committees by debate-limited motion. However, major changes in House or Senate bill referral rules couldcomplicate action on homeland securitymatters and could be nearly as controversial as a jurisdictional realignment. Create New Standing Committee over Homeland Security. A new standing committee could be created ineither or both chambers. Such a panel could have legislative responsibility over all aspects of the Department ofHomeland Security. Questions regardingwhether the new committee would absorb jurisdiction from existing panels or overlap with them would need to bedecided. Would special oversight authority(broader in scope than the committee's legislative jurisdiction) be granted to it? Create Select Committee over Homeland Security. The House has created two temporary select committeesto deal with homeland security in the wake of the 2001 attacks. A select committee with the same or a revisedjurisdiction could be established in the 109thCongress, with or without the creation of a companion select committee in the Senate. If such a new panel werecreated, would it have legislative authority (forexample, in the same manner as do the current intelligence select committees)? If it were limited to conductingoversight, how and through what process wouldits findings be converted into legislative recommendations? In view of the recommendations of the 9/11Commission about the House and Senate PermanentSelect Committees on Intelligence, will the views of the House and Senate about creating such select committeeson other subjects change? Create a Joint Committee on Homeland Security. The House and Senate could create a joint committee tooversee the work of the new department. However, only one joint committee in the last half-century has beengranted legislative jurisdiction. If such a jointpanel were created, the question of sequential referrals to existing standing committees could still be raised. TheHouse and Senate acted separately in the 107thCongress to permit the two intelligence committees to hold an inquiry into intelligence failures prior to the terroristattacks. Nothing in House or Senate ruleswould preclude existing House or Senate committees from holding joint hearings in the interests of greaterefficiency. Some view joint committees as a meansto permit more efficient congressional review of policy areas, while others believe that separate committees help preserve chamber autonomy and encourageindependent committee initiatives. Create Leadership Committee. A small committee comprised of members named by chamber party leaderscould act to coordinate homeland security legislative and oversight work among other committees in the chamber. The 107th Congress House HomelandSecurity Select Committee was just such a leadership panel, and a similarly constituted panel could be reestablishedon a more permanent basis. (6) Use less Formal Means to Coordinate Policy. In both the House and Senate, many committees claimingresponsibility for specific policy areas have entered into "memoranda of understanding," or agreements among theconcerned committees, reflecting eachpanel's appropriate jurisdiction over a disputed policy area. These memoranda serve as guidance to theparliamentarians' offices in making bill referrals andmay obviate the immediate need for a formal revision in committee jurisdictions. The Senate also makes use of "temporary standing orders," unanimous consent agreements typically in force for the current Congress only, that modify thestanding rules of the Senate. One or more temporary standing orders could be used to allocate jurisdiction amongSenate committees over homeland securityissues, subject to renewal or modification at the beginning of each succeeding Congress. If successful, the temporaryorders could be converted into morepermanent changes in Senate procedure; if not, other realignments could be attempted. Further Realign Appropriations Committees' Subcommittees. The House and Senate AppropriationsCommittees adapted their structures in 2003 to create a new Subcommittee on Homeland Security. (7) Additional recommendations by the 9/11 Commissioninclude a proposal to set out intelligence appropriations in a separate appropriations bill, or to combine authorizationand appropriations for intelligenceactivities in only one panel in each chamber. Additional changes may be required in the AppropriationsCommittees' structures and the procedures throughwhich they draft both regular and supplemental appropriations bills.

The 9/11 Commission Report recommended that the House and Senateeach have a "permanent standingcommittee" as the principal committee for conducting oversight and review for homeland security. Earlier, pursuantto PL 107-296, the Homeland SecurityAct, a new Department of Homeland Security was established. Congress began discussions regarding theappropriate congressional structure to conductoversight and fund the new department. Section 1503 of the legislation states the sense of Congress that eachchamber should review its committee structure inlight of the reorganization of the executive branch, and the House, in the 108th Congress, establisheda Select Committee on Homeland Security with a mandateto report recommendations for changes in the House committee system by September 30, 2004. Each chamber might decide to retain its current structure, make minor alterations to its current jurisdictionalalignment, make extensive jurisdictional changes,create a standing committee, re-establish the existing House select committee, or establish one or more new selectcommittees with revised authorities. Furtherchanges might also be made in the structure of the Appropriations Committees. This report addresses some of theseoptions and will be updated as eventswarrant.

Background Many Americans view health care for their children and themselves as one of their top concerns. The adverse consequences of going without health insurance may include unmet health and dental needs, lower receipt of preventive services, avoidable hospitalizations, increased likelihood of receiving expensive emergency room care, and reduced likelihood that the doctor is familiar with the patient's medical history. From a public health perspective, early and frequent monitoring of children's health is a key component to ensuring the appropriate growth and development of children. From a family perspective, health insurance coverage can reduce parental financial and emotional stress. Child support is the cash payment that noncustodial parents are obligated to pay to custodial parents for the financial support of their children. Child support payments enable parents who do not live with their children to fulfill their financial obligation to their children by contributing to the payment of childrearing costs. Ensuring that children get health care is one of the basic responsibilities of the Child Support Enforcement (CSE) program. Operating under federal and state statutes and regulations, state and local child support agencies are required to ensure that health care costs, generally referred to as medical support, are included in every child support order. These costs may include payment of medical, dental, prescription and other health care expenses for children and provisions to cover health insurance costs as well as cash payments for unreimbursed medical expenses. State child support guidelines, as well as state law and guidance, operationalize what constitutes medical support in a particular state. This broad definition of medical support is relatively recent. Originally, federal requirements for child support orders focused on reimbursement for Medicaid expenses and employer-related health insurance available to the noncustodial parent. Beginning in 1977, Congress has tried to offset some of the state costs associated with the Medicaid program (Title XIX of the Social Security Act) by allowing states to require Medicaid recipients to assign their child support rights to the state and allowing the state to pursue private health insurance coverage and/or noncustodial parents for reimbursement of the cost of Medicaid benefits provided to the child. The underlying assumption was that children enrolled in public health coverage (i.e., Medicaid) might obtain employer-based coverage (to offset the cost of Medicaid) through the noncustodial parent. Beginning in 1984, mandatory assignment became law. In 1984, federal law required that state CSE agencies petition for the inclusion of medical support as part of any child support order whenever health care coverage was available to the noncustodial parent at reasonable cost. A 1993 amendment to the Employee Retirement Income Security Act (ERISA) required employer-sponsored group health plans to extend health care coverage to the children of a parent/employee who is divorced, separated, or never married when ordered to do so by the state CSE agency via a Qualified Medical Child Support Order (QMCSO). The 1996 welfare reform law further strengthened medical support by stipulating that all orders enforced by the state CSE agency must include a provision for health care coverage. The 1996 law also directed the CSE agency to notify the noncustodial parent's employer of the employee's medical child support obligation. To help obtain health care coverage for children, a 1998 law authorized the creation of the National Medical Support Notice (NMSN), a standardized form that is the exclusive document which must be used by all state CSE agencies. An appropriately completed NMSN is considered to be a "Qualified Medical Child Support Order," and as such must be honored by the noncustodial parent's group health plan. This legislation also required the establishment of a Medical Support Working Group to make further recommendations to the Secretaries of Labor and Health and Human Services on how to improve medical support and to submit those recommendations to Congress. As evidenced in this brief history, since 1984, Congress has tried to increase provision of private health care coverage for children whose noncustodial parent has access to employer-based or group health insurance that is provided at a reasonable cost. This strategy was seen as a way to make noncustodial parents responsible for their children and lessen taxpayer burden by shifting the cost of providing health care to children from the taxpayers back to the noncustodial parents. For a detailed legislative history of provisions related to medical child support, see Appendix A . In 2006, federal law defined the term "medical support" and required that states have procedures under which all child support orders that are enforced by CSE agencies must include a provision for medical support for the child to be provided by either or both parents. Federal law further stipulated that CSE agencies may enforce medical support against a custodial parent if health care coverage is available to the custodial parent at a reasonable cost. Medical support adds complexity to the CSE program, in part, because the provision of medical child support can be imposed on either the noncustodial parent, the custodial parent, or both parents. Medical child support may be a significant additional expense for noncustodial parents. In addition to the child support payment, noncustodial parents may be legally liable for paying health insurance premium costs, co-payments, deductibles, and/or unreimbursed medical expenses. High health insurance premiums may negatively impact how much disposable income the noncustodial parent has available to meet his or her financial child support order. If the premium is high, cash support may be substantially reduced, leaving the custodial parent without enough money to take care of the child's food, clothing, and shelter needs. Health care coverage of children and medical child support are not synonymous. A child could be covered by a custodial parent's health insurance plan and the child support order may not contain any provision for medical support from the noncustodial parent. Conversely, a child may be receiving cash medical support but not be insured. Based on information from the federal Office of Child Support Enforcement (OCSE) in the Department of Health and Human Services (HHS), in the future, the establishment and enforcement of medical child support may become a CSE program performance measure, however, more needs to be done before that can occur. Thus, even though states submit medical support data, the information is not subject to an audit to determine if it is "complete and reliable." Also, because medical support establishment allows states to initiate legal medical support orders before determining whether or not the health insurance is affordable/reasonable, state CSE agencies are severely hampered, if not totally stymied, in successfully enforcing medical child support orders. Data from OCSE indicate that there has been some improvement in the establishment of medical child support but considerably less improvement in the enforcement of medical child support. According to OCSE data, in FY2011, 81% of child support cases that had a child support order included medical child support. In comparison, in FY1995, 61% of child support cases that had a child support order included medical child support. In contrast, the enforcement of medical support orders continues to be problematic. In FY2011, the medical support order was complied with in only 33% of the cases in which medical support had been ordered. (See Appendix B.) The comparable figure in FY1995 was the same, 33%. The CSE program has at its disposal a wide variety of methods by which to obtain child support obligations. Collection methods used by state CSE agencies include income withholding, intercept of federal and state income tax refunds, intercept of unemployment compensation, liens against property, reporting child support obligations to credit bureaus, intercept of lottery winnings, sending insurance settlement information to CSE agencies, authority to withhold or suspend driver's licenses, professional licenses, and recreational and sporting licenses of persons who owe past-due support, authority to seize assets of debtor parents held by public or private retirement funds and financial institutions, and authority for the Secretary of State to deny, revoke, or restrict passports of debtor parents. Also included in their available methods to collect child support obligations, states use the threat of jail and actual incarceration. Efforts to improve the establishment and enforcement of medical child support have a better chance of success if analyzed in the context of factors such as high health care costs, a decline in employer-provided health insurance coverage, an increase in the share of health insurance costs borne by employees, and a significant number of noncustodial parents who have low or moderate incomes. Moreover, it is important to recognize, as mentioned earlier, that cash support and medical support are not always compatible. For example, if premiums, co-payments, and deductibles for health insurance and medical care owed by noncustodial parents rise, equity might suggest that the cash child support payment of noncustodial parents be reduced to reflect their payment of these medical costs. Custodial parents may then have less income to provide for the basic food, clothing, and shelter needs of their children. Conversely, if medical child support is not available, the family would be more likely to be financially disadvantaged by routine health care needs of children and could face dire economic circumstances if a child becomes seriously ill. However, it must be recognized that there is a lot of overlap between cash support and medical support. According to some CSE administrators, a primary reason for upward modifications of child support awards is care needed for a child with special needs. Many states combine any cash medical support payment to the custodial parent with the regular child support order as a single payment. Some states order that the parents will split all medical costs leaving it to the parents to work it out between themselves. Additionally some experts argue that routine medical expenses, including health insurance costs, are in fact rolled into the expenditures data used to calculate the cost of raising a child upon which child support guidelines are based. The public and policymakers generally agree that establishment and enforcement of medical support promotes equity in allocating childrearing costs between custodial and noncustodial parents, and usually saves federal and state dollars. In 2010, health reform legislation, P.L. 111-148 (the Patient Protection and Affordable Care Act; ACA), as amended by P.L. 111-152 (the Health Care and Education Reconciliation Act of 2010; HCERA) was enacted. The primary goal of the ACA is to increase access to health insurance for the millions of Americans without coverage. The ACA expands federal private health insurance market requirements, and requires the creation of health insurance exchanges to provide individuals and small employers with access to insurance. It also expands Medicaid coverage at state option. The ACA has at least one shared goal with the CSE program in that both are attempting to ensure that children have health care coverage. Current Federal Policy Current federal law requires every child support order established by a state CSE agency to include a provision for medical child support. States are required to include provisions for medical child support in their child support guidelines, and the CSE program is required to pursue private health care coverage when such coverage is available through a noncustodial parent's employer at a "reasonable" cost. A court or administrative agency may require an employee to provide health insurance for his/her children. They may also require an employee to purchase family coverage if child-only coverage is not available. Courts require coverage if it is available at a reasonable cost to an employee through the employer or other group health insurance (for example, a union). Employers are required to honor medical support orders established under state law. The cost of private health insurance or cash medical support is considered reasonable if the cost to the parent responsible for providing medical support does not exceed 5% of his or her gross income or, at state option, a reasonable alternative income-based numeric standard defined in state law, regulations, or court ruling. In applying the 5% or alternative state standard for the cost of private health insurance, the amount is the cost of adding the child(ren) to the existing coverage or the difference between self-only and family coverage. For example, if a noncustodial parent is required to purchase family coverage in order to cover the requisite child(ren), the entire cost of the family coverage is not taken into account in calculating the 5% of the gross income amount. Federal law mandates that health insurance coverage for children be enforced, where appropriate, through the use of the National Medical Support Notice (NMSN). To ensure that children receive health care coverage when it is available and required as part of a child support order, state CSE agencies send the NMSN to employers. The notice is designed to simplify the work of employers and plan administrators by providing uniform documents requesting information about health care coverage. States now are able to enforce such orders against both custodial and noncustodial parents. If health insurance is not available, states can pursue the joint sharing of expenses (i.e., cost-sharing) associated with the child's medical care. Providing for children's health care is a stated purpose of the CSE program. By connecting children to coverage through either of their parents' employers, Medicaid, CHIP, Health Insurance Exchanges (beginning in 2014), or other options—the CSE program can assure that children will have continuous, stable access to health care as they grow up, and that the resources of both parents are being used most effectively for the child. To recap, medical child support can take several forms. States generally seek medical child support as sequenced below. The noncustodial or custodial parent may be ordered to provide health insurance if it is available at reasonable cost through the parent's employer. The noncustodial parent may be ordered to pay for other private health insurance (health care coverage) premiums. The noncustodial parent may be ordered to reimburse the custodial parent for all or a portion of the costs of health insurance obtained by the custodial parent (on behalf of the child(ren)). If neither parent is able to obtain health insurance at a reasonable cost, the custodial parent may be ordered to apply on behalf of the child to a government-funded medical program such as Medicaid or the State Children's Health Insurance Program (CHIP). The cost of any Medicaid expenses or CHIP coverage (including premiums, co-pays, or coinsurance costs) may be added to the noncustodial parent's monthly child support payment. Both parents may be required to pay a percentage of "out-of-pocket" medical expenses that are not covered through insurance. The percentage is determined by the financial circumstances of each parent. If neither parent has private insurance and the children are not eligible for Medicaid or CHIP, the court may order the noncustodial parent to provide cash medical support in addition to the monthly child support payment; and/or the noncustodial parent may be ordered to pay additional amounts to cover a portion of ongoing medical bills or as reimbursement for uninsured medical costs. When the noncustodial parent is ordered to pay cash medical support, generally it is included in the cash child support order and a single notice of income withholding is sent to the employer to withhold from the parent's paycheck. If the parent is ordered to provide insurance through the employer, the employer is required to enroll the child in health insurance coverage and withhold the necessary premium payments from the parent's income. The employer is required to send any amount withheld directly to the health care plan. In addition, employers must promptly notify the CSE agency whenever the noncustodial parent's, and, at state option, the custodial parent's employment is terminated. Conversely, state CSE agencies are required to promptly notify the employer when there is no longer a current medical support order in effect. Establishing and Enforcing Medical Child Support Regulations on medical child support require that child support guidelines (at a minimum) address how the parents will provide for the child's or children's health care needs through health insurance coverage and/or through cash medical support. The guidelines cover whether the noncustodial parent, the custodial parent, or both parents will be required to carry health care insurance for the child or children, how uninsured health care expenses for children will be allocated between the parents, and whether there is a need for other types of medical support. Establishment The CSE agency is required, on behalf of both welfare and non-welfare families, to pursue health care coverage when such coverage is available through a parent's employer. The CSE agency must petition the court to include medical support in any order for child support when employment-related or other group health insurance is available to either parent at a reasonable cost. States have laws stipulating that insurers can no longer refuse to enroll a child in a health care plan because the parents are not married or because the child does not live in the same household as the enrolled parent. In addition, CSE agencies can require an employer to include a child on a medical insurance plan when the noncustodial parent participates in a group health plan but does not enroll the child. Unless a custodial parent has satisfactory health insurance for the child or children other than Medicaid, the CSE agency can petition the court or administrative authority to include health insurance in a child support order when health insurance is, or may be, available to the noncustodial parent at reasonable cost. If a custodial parent has access to better health insurance than the noncustodial parent or prefers to cover the child/children, the child support order may increase the noncustodial parent's obligation to offset the cost. Court orders can also be modified to include medical child support. The process of establishing medical child support is designed to determine, when neither parent has health insurance available to them at a reasonable cost, whether other coverage through the Medicaid or the State Children's Health Insurance Program (CHIP) is appropriate for the child. The guidelines process also is designed to consider whether the noncustodial parent has the resources to provide a set monetary amount ("cash medical support") towards a portion of the cost of health insurance provided by the custodial parent or coverage provided by the government. As mentioned earlier, federal law requires every child support order established by a state CSE agency to include a provision for medical child support (i.e., the child support order includes a medical support order/provision). Neither federal law nor regulations mandate the payment of medical costs as a stand-alone item. In some cases, medical support is imbedded in the general child support order. For example, an income shares child support guidelines schedule usually incorporates some medical costs within the guideline schedule itself (e.g., $250 per year per child) and medical costs are considered as part of the basic child support obligation amount that is ordered to be paid by the obligated parent. Additionally, the costs of health insurance and/or medical costs not covered by insurance are apportioned between the parents based on the percentages of their respective shares of their combined net income. In other cases, a provision requiring health insurance coverage and/or cash medical support could be included in the child support order. Enforcement Although there is widespread agreement that many children still lack health care coverage, OCSE data indicate some improvement in the establishment and enforcement of medical child support. For example, in FY2011, 81% of child support cases with a child support order included medical child support and the medical support order was complied with in 33% of the cases. In that same fiscal year, medical support orders that stipulated the provision of health insurance coverage were applicable to 88% of all child support cases with a child support order, and were provided as ordered in 31% of those cases. These data do not reflect children who might be covered by public programs such as Medicaid or CHIP. The option to include public coverage in the data reporting was not available to states until FY2012. As previously noted, in practice some medical child support orders are established before it has been determined that the employer-sponsored health coverage is affordable. Thus, one reason why coverage may not be provided as ordered (i.e., why enforcement rates of medical support are relatively low) may be because it is not available to the obligated parent at a reasonable rate. There is little that the CSE agency can do to enforce the existing medical support order in these circumstances. New Hire Reporting A major reform to the CSE program was established in the 1996 welfare reform law ( P.L. 104-193 ). It required states, by October 1, 1997, to establish an automated directory of new hires containing information from employers, including federal, state, and local governments and labor organizations, for each newly hired employee. The State Directory of New Hires (SDNH) must include the name, address and social security number of the employee and the employer's name, address, and tax identification number. This information is to be supplied by employers to the state's new hires directory within 20 days after the employee is hired. Within 3 business days after receipt of new hire information, the state directory of new hires is required to furnish the information to the National Directory of New Hires (NDNH). The NDNH is a database that contains personal and financial data on nearly every working American, as well as those receiving unemployment compensation. The NDNH includes information from State Directories of New Hires (SDNHs), State Workforce Agencies (SWAs), and federal agencies. The NDNH database does not include information about health insurance availability, cost, or quality. The state CSE agency compares the information maintained in its SDNH with its database of noncustodial parents, and also uploads the SDNH information to the NDNH, which contains new hire information reported by all states. Through automated computer interfaces, states regularly compare their databases of noncustodial parents responsible for paying child support or providing medical child support with the information available through the NDNH. Within two business days of identifying a new employer of a noncustodial parent through either the state or federal matching process, the state must send an income withholding order and/or a National Medical Support Notice (NMSN) to the employer. National Medical Support Notice (NMSN) To help obtain health care coverage for children, Congress passed laws requiring states to send the NMSN to employers to enroll children in health care plans. Its purpose is to ensure that children receive health care coverage when it is available at a reasonable cost and required as part of a child support order. It is designed to simplify the employers' and plan administrators' workflow by providing uniform documents to obtain health care coverage for children. Some states have chosen to centralize the National Medical Support Notice issuance process while other states allow local child support agencies to issue and provide follow-up on these notices. An appropriately completed NMSN is considered a "Qualified Medical Child Support Order (QMCSO)," and as such must be honored by all health plans including federal agencies' group health plans. Pursuant to federal law, if a QMCSO names an employee who is not enrolled in the plan, but is eligible to enroll, the order is considered a legitimate/legal medical child support order. As mentioned earlier in this report, establishing a medical child support order before it has been verified that the health plan is affordable can be problematic because CSE agencies have no authority to require a noncustodial parent to purchase health insurance that is not affordable and thereby these agencies are not in a position to enforce such an order. The NMSN is usually mailed to the employer along with the income withholding notice. The NMSN contains two parts: (1) Part A - Notice to Withhold for Health Care Coverage and (2) Part B - Medical Support Notice to Plan Administrator. When the employer receives a NMSN, the employer has two legally permissible options: (1) to inform the CSE agency that such coverage is not available, or (2) to notify the health insurance plan administrator to enroll the child or children. Once the health insurance plan administrator receives notification from the employer to enroll the children, the administrator has two options: (1) to provide an explanation to the CSE agency for non-enrollment; or (2) to enroll the child or children. If the employer provides health insurance to employees, the employer must forward Part B of the NMSN to the plan administrator. Once the employer is notified of enrollment, the employer must begin withholding for premiums. If employees have group health coverage through a union, the employer must forward the NMSN to the appropriate union representative. If the employer does not provide health insurance for employees, the employer must complete the Employer Response page of the NMSN and return it to the issuing CSE agency. The CSE program has at its disposal a wide variety of methods by which to obtain child support obligations. The most effective child support enforcement tool is income withholding, a procedure by which automatic deductions are made from wages or other income. Once initiated, income withholding can keep child support flowing to the family on a regular basis. In FY2011, about 70% of the $31 billion ($22 billion) collected by the states for child support payments was obtained through income withholding, 5% (almost $2 billion) from the unemployment intercept offset, 7% ($2 billion) by way of the federal income tax refund offset, less than 1% ($209 million) from the state income tax refund offset, and 17% ($5 billion) from other sources. The states are not required to provide data on the results from sending employers the NMSN. However, the perception is that most NMSNs sent to employers do not result in a child being enrolled in an employer-sponsored health plan primarily because affordable family coverage is not offered. One study shows that issuing a NMSN to the noncustodial parent's employer results in 10-23% of children being enrolled in such a health plan. Medicaid Provisions Related to Child Support Enforcement Medicaid Basics The Medicaid program was enacted in 1965 as Title XIX of the Social Security Act (P.L. 89-97). Medicaid is a program funded by both the states and the federal government to provide health care coverage to low-income children, pregnant women, families with dependent children, the elderly, and individuals with disabilities. Although Medicaid is an entitlement program in federal budget terms, states choose whether to participate, and all 50 states, the District of Columbia and five territories (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands) do so. If a state chooses to participate, it must follow federal rules in order to receive federal reimbursement that offsets at least 50% of its Medicaid costs. Federal rules require states with Medicaid programs to cover certain benefits (i.e., mandatory benefits). Certain other services may also be offered at state option. Most children eligible for Medicaid receive a comprehensive package of services including physician care; inpatient and outpatient hospitalization; laboratory testing and x-rays; and early and periodic screening, diagnostic and treatment (EPSDT) services. States must agree to pursue any third party who might be liable to pay medical bills of families enrolled in the Medicaid program. If a family has access to private health care insurance (including that obtained through a child support order), that coverage is primary and Medicaid is secondary. The Medicaid program may pay other uncovered expenses. Among the groups of persons that are mandatorily covered are: poor families that meet the financial requirements (based on family size) of the former Aid to Families with Dependent Children (AFDC) program (as it was in effect in July 16, 1996); pregnant women and children through age 6 with family income at or below 133% of the federal poverty level (FPL); and children ages 6 through 18 with family income at or below 100% FPL, rising to 133% FPL beginning in 2014 (or sooner at state option). States that choose to participate in the expansion of Medicaid under the ACA (beginning in 2014) will cover most adults under age 65 with incomes below 133% of the federal poverty level. Assignment Provision Pursuant to the Deficit Reduction Act of 1984 ( P.L. 98-369 ) custodial parents applying for or receiving Medicaid are required to assign to the state any medical support rights they or their children have, including any rights to medical support arising out of a divorce decree or child support order. "Assigning one's rights" to medical support to the state means that the custodial parent is giving the state the right to collect and retain any medical support that is owed to the custodial parent. Either an insurance company or an individual (such as the noncustodial parent) can be pursued by the state for payment of medical support. Custodial parents who refuse to assign their child support rights to the state can be denied Medicaid coverage. If these parents are already receiving Medicaid benefits, their benefits can be terminated. However, the children are entitled to receive Medicaid benefits and those benefits cannot be terminated even if their parents refuse to assign to the state the children's medical support rights. In addition, Section 1902(a)(25)(H) of the Social Security Act requires states to have laws which automatically assign to the state a custodial parent's right to medical payments by third parties, to the extent that the Medicaid program has made a payment. This provision of law assigns to a state an individual's right to medical support whether or not an assignment has been put into effect and if the case is referred to the CSE agency, it is the CSE agency's responsibility to seek medical support for that child. Cooperation Requirements In addition, as a condition of eligibility for Medicaid coverage, custodial parents applying for or receiving Medicaid are required by Section 1912(a) of the Social Security Act to cooperate with the state in establishing the paternity of any eligible child born out of wedlock and in obtaining medical support and payment. Custodial parents applying for or receiving Medicaid must identify the noncustodial parent, be actively involved in establishing paternity (if that is an issue), participate in obtaining a medical support order, and assist in obtaining any benefits available under that order. As with assignment, if a custodial parent refuses to cooperate, her or his Medicaid benefits, but not the child's can be terminated. The purpose behind the Medicaid assignment and cooperation requirements is to assist the state in pursuing any third party who may be legally liable for the payment of medical care and services on behalf of persons receiving Medicaid. Successful identification of any third party capable of providing or paying for medical care and services (1) releases the Medicaid program from paying for services that others should have been financing, (2) reduces medical costs to the states and the federal government provided under Medicaid, and (3) reinforces the concept of Medicaid as the payor of last resort. The term "third party" includes any individual, entity, or program that may be liable to pay all or part of the costs for medical care and services available under the Medicaid program. The term may also include any employment-related or other individual or group health insurance available to or through the child's parents. In addition, it includes cash medical support payments from the noncustodial parent for Medicaid costs. The CSE agency decides whether custodial parents are being cooperative in this process. The CSE agency makes an initial determination and periodically redetermines whether parents are "cooperating in good faith." The CSE agency notifies the parents and the Medicaid agency when such determinations are made. If the CSE agency decides that a custodial parent is not being cooperative, the notice will delineate the reasons for the finding. The Medicaid agency will then inform the parent that benefits are being denied or terminated for noncooperation with the CSE agency. The parent can request a hearing if he or she wishes to contest the finding. As discussed later, children remain eligible for Medicaid regardless of the parent's cooperation with the CSE program. Medicaid Birthing Costs The Medicaid program covers costs associated with the birth of a child for pregnant women whose income is below 133% of the federal poverty level or up to 185% of the federal poverty level at state option. The Medicaid-paid birth costs are an entitlement to the mother, and federal and state laws preclude recovery of these costs from the mother. However, in some states, paternity judgments and/or child support orders may require the repayment of birth costs that were paid by the state Medicaid program or by an individual, including the custodial parent, a grandparent, or another third party who paid the expenses for the pregnancy and the birth of the child. Some state statutes permit the state to recover these costs from a child's father if the parents are not married. The cost recovery effort is generally undertaken by CSE agencies. The CSE agencies generally retain a percentage of all recoveries, and the remainder is used to reimburse the Medicaid program. In the child support policy arena, there is concern that recovery of Medicaid birthing costs from low-income noncustodial fathers may increase the probability that such fathers will accumulate high child support arrearages which in some cases leads to reduced child support collections. Some observers assert that it may be ineffective to try to collect Medicaid birthing costs from fathers of children on Medicaid in many instances because many of those fathers themselves have low incomes and are unable to make the payments. They argue that such birthing costs inflate the amount of arrearages owed by noncustodial parents and often deter the noncustodial parent from paying any child support. When noncustodial parents perceive that the system is unfair or that the debt is too great to overcome, the likelihood that they will pay any child support decreases. More recently, some commentators have indicated that it is unproductive to require uninsured low-income noncustodial fathers, who may soon (pursuant to the ACA, as amended) be Medicaid-eligible themselves, to provide cash payments to the Medicaid program. Exemptions from Medicaid CSE Rules There are three exemptions from the Medicaid CSE rules: two good cause exemptions and the pregnancy exemption. Both the assignment and the cooperation requirement can be waived if a custodial parent can establish good cause for doing so. One way to establish good cause is to show that establishing paternity or pursuing medical support is against the best interests of the child. The other way is to show that establishing paternity or pursuing medical support is against the best interests of the individual or the person to whom Medicaid is being furnished because it is anticipated that cooperation will result in reprisal against, and cause physical or emotional harm to, that individual or another person. In 1990, Congress added another exception to the cooperation requirement. Pursuant to P.L. 101-508 (the Omnibus Budget Reconciliation Act of 1990) poverty level pregnant women are not required to cooperate in establishing paternity or pursuing medical support from the child's father. This exemption is only available during the pregnancy and for 60 days postpartum. After that, the mother must assign her medical support rights to the state and cooperate in establishing paternity and pursuing medical child support in order to continue her Medicaid coverage. According to one report: " In creating this exception, Congress acknowledged studies that showed that it was both morally right and fiscally prudent to encourage as many pregnant women as possible to obtain pre-natal care. In the absence of such care, children suffer and public costs soar. ...It also recognized that the child support cooperation requirement was a potential barrier for the high-risk, low income women that would benefit most from it [pre-natal care]. " State Children's Health Insurance Program (CHIP) In 1997, P.L. 105-33 (the Balanced Budget Act of 1997) established the State Children's Health Insurance Program (CHIP) under a new Title XXI of the Social Security Act. Unlike the Medicaid program, CHIP is not an individual entitlement program. In 2009, P.L. 111-3 (the Children's Health Insurance Program Reauthorization Act of 2009; CHIPRA) extended federal funding through FY2013. In 2010, the ACA, as amended, extended federal funding through FY2015. CHIP is a federal-state matching program that provides enhanced federal funds to states that offer health care coverage to uninsured children who are not eligible for Medicaid. CHIP builds on the Medicaid program by extending coverage to uninsured children whose family income is too high to qualify for Medicaid but who cannot afford private coverage. In order to encourage enrollment, many states use streamlined applications for CHIP and do not impose an assets test. States can offer CHIP coverage by expanding their Medicaid programs (financed with CHIP funds), creating separate CHIP programs, or devising a combination of both approaches. If a state expands its Medicaid program for CHIP purposes, then Medicaid rules (including the child support assignment and cooperation rules) apply. However, if the state sets up a separate CHIP program then the rules are somewhat different. There are no explicit child support assignment or cooperation provisions in CHIP. Whether they are Medicaid or CHIP eligible, children are to be covered regardless of whether or not their parents comply with CSE rules. Even so, some commentators note that the administrative cost of enforcing cooperation rules, and the requirements placed on the custodial parent do in fact impact both programs. Health Insurance Exchanges The ACA, as amended, requires health insurance exchanges to be established by January 1, 2014. Exchanges are new organizations that are intended to create a more organized and competitive marketplace for buying health insurance. Exchanges are to offer a choice of different health plans, certify plans that participate, and provide information to help consumers better understand their options. Essentially, exchanges are intended to bring together buyers and sellers of insurance, with the goal of increasing access to coverage. To make exchange coverage more affordable, certain individuals will receive premium assistance in the form of federal tax credits. Beginning in 2014, exchanges will serve primarily individuals buying insurance on their own and small businesses with up to 100 employees, though states can choose to include larger employers in the future. States are expected to establish exchanges—which can be a government agency or a nonprofit organization—with the federal government stepping in if a state does not set one up. States can create multiple exchanges, so long as only one serves each geographic area, and can work together to form regional exchanges. The federal government will offer technical assistance to help states set up exchanges. Exchanges will also screen individuals for eligibility for certain public insurance programs (e.g., Medicaid) and connect them with appropriate agencies. For individuals seeking health coverage, exchanges will offer qualified health plans for purchase, and help certain individuals obtain federally subsidized premium and cost-sharing assistance to assist low to middle income individuals. To qualify for subsidies in the exchanges, individuals, among other things, may not have access to employer-sponsored health insurance that is considered affordable. The ACA considers employer coverage "unaffordable" if the employee's contribution toward the employer's lowest-cost self-only premium exceeds 9.5% of household income. Given that the premium assistance will be provided in the form of tax credits, they will be administered through individual income tax returns (although advance payments will go directly to insurers). The tax credits can only be obtained by qualifying individuals who file federal income tax returns. Moreover, with the new tax-based definition of family size (pursuant to the ACA), a child claimed as a dependent on a custodial parent's tax return will not be counted in determining the family size of the noncustodial parent's household. The ACA states that in such cases, an exchange premium tax credit would not be allowed for the noncustodial parent with respect to the child. This means that although such a child could receive coverage as part of the noncustodial parent's coverage, the noncustodial parent would not be eligible for the premium tax credit to offset some of the cost of that coverage. Since only one parent can claim the child as a dependent, this may result in different choices about which parent claims the child for tax purposes. In other words, noncustodial parents would only be allowed to benefit from the exchange premium tax credit on behalf of their nonresident child(ren) if, and only if, the noncustodial parent could legitimately claim the child(ren) as a dependent on his or her federal income tax return. Collaboration Among CSE, Medicaid, and CHIP Agencies (and the Exchanges) Many analysts agree that one way to increase the establishment and enforcement of medical child support is to encourage the coordination of activities of the state Medicaid and CSE agencies. The state CSE agency and the state Medicaid agency could be mandated to work out automatic referrals between the two programs to assure that children in the Medicaid program have access to CSE services and that children in the CSE program have access to health care coverage options. The medical child support assignment and cooperation requirements link low-income families with the CSE program, automatically enabling them to obtain CSE services at no cost. Moreover, if the CSE program can use the assignment to obtain private health care coverage for a child through a noncustodial parent's private health insurance, there are potential savings to the Medicaid program. Some custodial parents do not comply with the medical child support assignment and cooperation requirements because of fear of domestic violence if they pursue support. Others don't have a clear understanding of what they are supposed to do or have a hard time doing what they are supposed to do in order to comply. Still others may be inappropriately denied an exemption from the requirements. The penalty for noncompliance with the Medicaid rules for the custodial parent is denial of Medicaid coverage for that parent. Many analysts contend that the medical child support assignment and cooperation requirements, originally mandated in 1984, are no longer necessary. They argue that most low-income families with noncustodial parents are fully aware of the CSE program and its benefits and are already program participants, thus there is no need to try to coerce them into the CSE program. Some analysts assert that instead of helping families acquire medical care, the Medicaid assignment and cooperation requirements often add unnecessary confusion and/or increase the complexity of a complicated program. Other observers argue that the underlying assumption of medical child support—namely that substantial numbers of noncustodial parents have access to employer-based health insurance which if pursued and obtained would significantly reduce Medicaid costs—is flawed, resulting in unnecessary barriers to eligible custodial parents enrolling in the Medicaid program. As mentioned earlier, children remain eligible for Medicaid regardless of the parent's cooperation with the CSE program. Children who are not eligible for Medicaid (i.e., family income too high) may be eligible to participate in CHIP. In contrast to Medicaid, this program does not contain a child support cooperation requirement. Administratively, it is difficult to streamline the Medicaid and CHIP application process given that Medicaid rules require states to obtain child support information and CHIP rules do not. Different forms and procedures for the two programs that stem from the medical child support requirements generally lengthen the Medicaid application process, require additional paperwork and verification of certain information (with actual social security cards and birth certificates), and possible in-person interviews if the parent is trying to make a case for a good cause exemption. The ACA's coverage provisions to a certain extent overshadow CSE/Medicaid/CHIP application reporting requirements. P.L. 111-148 (ACA) requires simplification of the application/enrollment process. Beginning in 2014, income eligibility for most Medicaid eligible groups will be based on Modified Adjusted Gross Income (MAGI). With the switch to MAGI, states will no longer rely on disregards and deductions in determining whether someone qualifies for benefits for most Medicaid eligibility groups. Instead, there will be a single methodology that will determine how income is counted. The use of MAGI is intended to standardize and simplify income eligibility across states and between Medicaid, CHIP and the exchange premium subsidies, and help lower state administrative costs related to eligibility determinations, by adopting what is essentially a gross income test. The ACA also requires coordination with state Health Insurance Exchanges. The ACA's coverage provisions related to the expansion of Medicaid eligibility and establishment of health insurance exchanges were designed to be mutually exclusive. For example, the ACA requires exchanges to identify individuals eligible for Medicaid, CHIP, and premium credits. Likewise, Medicaid and CHIP programs must be able to determine an applicant's eligibility for subsidized exchange coverage. These eligibility determination and enrollment provisions are intended to ensure that there is coordination between the exchanges, Medicaid, and CHIP, and to ensure that individuals are enrolled in a plan that offers benefits and cost-sharing protections suited to their family income. How this collaboration will work when both noncustodial and custodial parents are eligible is unclear. Medicaid Eligibility Final Regulation (MEFR) Section 435.940 and Section 435.945 require states to administer their programs in the best interest of applicants and beneficiaries and establish an eligibility verification plan. MEFR Section 435.1200 provides that in determining eligibility, state Medicaid and CHIP agencies will have the option to either make the final Medicaid and CHIP eligibility determination based on the exchange's initial review or accept a final eligibility determination made by an exchange that uses state eligibility rules and standards. The regulation goes on to clarify the standards and guidelines to ensure a simple, coordinated, accurate, and timely eligibility determination process regardless of the option elected by the state. MEFR Section 435.912 provides that in cases where the Medicaid agency is evaluating an individual's eligibility for another insurance affordability program, the agency must transfer the information promptly and without need for further information or verification, and requires that the Medicaid agency make a website available to provide program information and to facilitate enrollment in insurance affordability programs. MEFR Section 457.343 provides for a data-driven CHIP eligibility review using information already available to the agency in the electronic account or from other reliable data sources. This section of MEFR provides that individuals determined ineligible for CHIP will be assessed for eligibility for other insurance affordability programs and provides for electronic transfer of account information and the timely reporting of and action on changes in an individual's circumstances. Beginning in 2014, the health insurance exchanges will be part of the health care arena. According to HHS, exchanges will be best able to perform verification of access to employer-sponsored coverage on a real-time basis during the enrollment process if they can access one or more authoritative data sources that capture the relevant information in an automated fashion. However, data sources that contain all the information exchanges will be seeking to verify do not currently exist. Until more comprehensive data sources are available, an interim strategy for verifying employer-sponsored coverage is needed to meet the following goals: (1) ensuring access to affordable coverage for consumers, (2) minimizing burdens on exchanges, individuals and employers, and (3) supporting eligibility determinations to ensure accuracy in the administration of advance payments of the premium tax credit. The interim strategy that HHS has proposed would allow an individual requesting an eligibility determination for advance payments of the exchange premium tax credit to attest to whether he or she has access to affordable employer-sponsored coverage that meets minimum value standards, and whether he or she reasonably expects to be enrolled in such coverage during the months in which he or she plans to seek coverage through the exchange. An exchange would then verify this information. HHS is considering proposing that the exchange compare the individual's attestation to existing data sources and records that could potentially be available to the exchange such as the National Directory of New Hires or unemployment databases. HHS anticipates using this interim approach for two years while additional data sources become available. Some commentators note that the state-based nature of exchanges may result in many challenges for the CSE program given that about a third of CSE cases are interstate cases. Potential Impact of the ACA on the CSE Program For more than 20 years, from 1984 through 2005, many in Congress held the view that noncustodial parents with affordable private health insurance should be made to include their children in such coverage. This was seen as the way to make noncustodial parents responsible for the health care needs of their children and lessen taxpayer burden by shifting costs from the taxpayers back to the noncustodial parents. Before 2006, the medical child support requirement was based on the assumption that most children enrolled in public health coverage could obtain private coverage through the noncustodial parent. However, the ability of a noncustodial parent to provide private health coverage to his or her children is largely a function of income. In most cases, low-income noncustodial parents do not have access to employer-sponsored health insurance, and never did, and when such insurance is available, it is often not affordable or actual coverage by the provider is inaccessible or impractical because the noncustodial parent's employer-sponsored coverage relies on a local network of health care providers that are too far from his or her children. Pursuant to P.L. 111-148 (ACA, as amended), beginning in 2014 larger employers (i.e., certain employers with at least 50 full-time equivalent employees) will be required to either offer health insurance or be subject to a penalty if one of their full-time workers receives a subsidy to buy coverage through an exchange. It is not yet known whether these aspects of the ACA will increase the number of employers who will offer private health insurance to their employees. Also, pursuant to the ACA (as amended), certain individuals will have guaranteed access to health coverage outside the employment setting. It is expected that many employers will still decline to offer health insurance, and workers in those firms (and others) will either purchase insurance through the new exchanges or enroll themselves and their families in Medicaid if they are eligible or enroll their children in CHIP. In addition to small employers, beginning in 2014, the exchanges will provide new opportunities for individuals to access private health insurance, and provide access to premium tax credits and cost-sharing subsidies offered through the exchanges to make coverage in the private health insurance market more affordable for families no longer eligible for Medicaid. Under the ACA, as amended, beginning in 2014, individuals with household income between 100% and 400% of the federal poverty level will be able to obtain federally subsidized health insurance coverage through the health insurance exchanges. In addition, the ACA currently prohibits coverage exclusions for preexisting health conditions in children under age 19 and effective January 1, 2014, the ACA will prohibit coverage exclusions for preexisting health conditions for all individuals regardless of age. Moreover, currently, health plans that provide dependent coverage must extend that existing coverage to children under age 26. The ACA adds more complexity to the CSE program but also may lead to health care coverage for more U.S. children. Most analysts maintain that existing medical child support policies must be updated and/or revised to align with ACA reforms (and anticipated reforms) to children's health care coverage. There are many unanswered questions and many concerns. The four questions raised below highlight some issues about how the ACA will interact with the CSE program. Although the discussion below does not answer the questions per se, it provides background and context to the four concerns. Will the Eligibility-Enrollment Gap in Federally Funded Health Care Be Eliminated? In 2011, 9.4% of the 74.1 million children under age 18 in the U.S. did not have health insurance (7 million children). Children in poverty are more likely to be uninsured than all children. This is somewhat surprising given that the Medicaid and CHIP programs were established to provide health care to low-income children and adults. In 2011, 13.8% of children in poverty did not have health insurance. Earlier data (2008) shows that 11% of child support-eligible children did not have any source of health insurance. It appears that the child support-eligible population and the child poverty population overlap. According to earlier data found in a 2011 HHS report, 44% of the estimated 26 million child support-eligible children lived in low-income families with incomes less than 100% of the federal poverty level, 24% lived in families with incomes between 100% and 199% of the federal poverty level, an additional 21% lived in families with incomes between 200% and 399% of the federal poverty level, and 11% lived in families with incomes above 400% of the federal poverty level (based on 2008 data). The 2011 HHS report indicated that the majority of child support-eligible children qualify for public health care coverage through their state Medicaid or CHIP programs, but that many of them are not enrolled. Expanded efforts to enroll eligible children could have a major impact on reducing the number of uninsured in the child support population and in reducing the rate of uninsurance among children. P.L. 111-3 (CHIPRA) included a five-year performance bonus payment program to states (that started in 2009) to encourage states to find and enroll eligible children in CHIP, in an effort to make enrollment and retention easier for eligible children and their families. In addition, a number of provisions in the ACA (as amended) require states to design and operate coordinated, technology-supported enrollment processes to assist individuals who lack access to affordable employer-based coverage in obtaining health coverage through Medicaid, CHIP, or the exchange. The law requires states to develop consumer-friendly application processes for these public health subsidy programs, coordinate across them to enable seamless transitions, and reduce the burdens of application and renewal by minimizing the up-front information and documentation required to establish eligibility and instead developing procedures that tap available data from other sources. (These provisions are sometimes referred to as the screen and enroll requirements.) There is general agreement that the CSE agency should work more closely with Medicaid/CHIP to ensure that children who have access to private health care coverage obtain such coverage, and that those who are only eligible for publicly-subsidized health coverage are actually enrolled in the Medicaid or CHIP programs. In conjunction with P.L. 111-3 (CHIPRA), HHS Secretary Kathleen Sebelius has stressed the importance of ongoing outreach efforts and simplification strategies through the Connecting Kids to Coverage Challenge , calling upon leaders at all levels of government and the private sector to find and enroll all uninsured children who are eligible for Medicaid and CHIP, and keep them covered for as long as they qualify. In keeping with this initiative, state CSE programs were given the flexibility to improve the coordination between the CSE program, Medicaid, and CHIP to be consistent with P.L. 111-3 and the Secretary's goal of enrolling all eligible uninsured children in Medicaid and CHIP by 2014. Will Concerns Related to Affordability and Adequacy of Health Care Be Resolved? In the child welfare arena, it is urged that health care coverage be available, accessible, affordable, and stable. However, requiring and enforcing health insurance may negatively affect the custodial parent and child as well as the noncustodial parent. As explained earlier, state medical child support laws and the NMSN process are designed to ensure enrollment of a child in an appropriate health care plan, if health care coverage is available at "reasonable cost" to the noncustodial parent or the custodial parent through his or her employer. With respect to the CSE program, health care coverage is considered "reasonable" if the cost does not exceed 5% of the noncustodial or custodial parent's gross income (or another reasonable alternative income-based numeric standard provided by the state). As mentioned earlier, federal regulations have defined reasonable cost so that it is not based on the actual cost the parent pays for health insurance coverage, but rather on the marginal cost of covering the child or children in question. Federal law, under the Consumer Credit Protection Act (CCPA), stipulates that income withholding for child support purposes must not exceed 65% of the disposable earnings of a parent who owes child support. The average annual health insurance premium contribution of workers for 2012 was estimated to be $4,316 for family plan coverage. According to a recent report that summarized 2012 health care benefits of nonfederal private and public employers: For family coverage, 6% of covered workers are in plans that require no contribution for family coverage, 43% of covered workers are in plans that require them to make a contribution of less than or equal to a quarter of the total premium, 37% are in plans that require them to pay more than a quarter but no more than half of the premium, and 14% are in plans that require more than half of the premium. According to another study, in 2008, 24% of child support-eligible children were living in families with income under the federal poverty level, 44% lived in families with income between 100% and 199% of the federal poverty level, 21% were in families with income between 200% and 399% of poverty, and 11% were in families with income of 400% of the federal poverty level or more. The federal poverty level for a family of 3 was $17,600 in 2008. Based on 2008 data, a health plan contribution of $880 or more generally would be considered above "reasonable cost" (5% of gross income) for a mother with two children living in any state other than Alaska or Hawaii. In recent years, health insurance premiums have increased and fewer employers offer health care benefits. Some observers contend that these are some of the factors that have diminished the value of the 5% standard. There are some data that indicate that the 5% threshold is too low and that in many, if not most, instances such a threshold would result in relatively few cases of employer-provided health insurance being considered reasonable. The final regulations regarding medical child support stipulate that in applying the 5% threshold or alternative state standard for the cost of private health insurance, the cost is the cost of adding the child or children to the existing coverage or the difference between self-only and family coverage. HHS agreed with commenters in the preamble to the final rule who responded to the proposed rule by stating that the full cost of a family health care insurance plan probably would exceed the reasonable cost standard thereby making it considerably less likely that the designated parent would be required to provide coverage through private health insurance. Some observers contend that low-income noncustodial parents should never have to pay more than 5% of their gross income on health coverage. They recommend that once premiums, deductible, and cost sharing exceed 5% of the noncustodial parent's gross income, all charges should stop for the year. Most states operate under the premise that if the custodial parent provides the health care coverage, the noncustodial parent's basic child support payment is supposed to increase, to reflect some contribution from the noncustodial parent toward the cost. Conversely, if the noncustodial parent provides the coverage, the cash support award is supposed to decrease, to reflect the fact that the noncustodial parent is subsidizing the cost of health care coverage through a separate deduction from wages toward the premium. The results may be problematic. If the premium associated with the health care coverage is too high, the result may be that the basic child support payment would be substantially reduced, leaving the custodial parent without enough money to take care of the child's or children's food, clothing, and shelter needs. If a child support order is not appropriately adjusted downward, the noncustodial parent is less likely to be able to comply with his or her child support order and this could lead to the accumulation of unmanageable arrearages. The Medicaid program currently covers pregnant women and children through age 6 with family income at or below 133% of the federal poverty level (FPL) and children ages 6 through 18 with family income at or below 100% FPL, rising to 133% FPL beginning in 2014 (or sooner at state option). Moreover, under the ACA, as amended, (beginning in 2014) states will have the option to expand Medicaid coverage to include nearly all adults under age 65 with modified adjusted gross income (MAGI) at or below 133% of the FPL. Given that the majority of uninsured children are currently already eligible for Medicaid or CHIP, the Medicaid expansions are expected to have more impact on their parents or childless adults. Even so, some research indicates that when parents are insured so too are their children. As noted earlier, beginning in 2014, individuals who do not have access to affordable employer-sponsored insurance or other minimum essential coverage may be eligible to receive advanced premium tax credits for private insurance that they purchase through the health insurance exchange. According to a CRS report: While there is no widely accepted definition of individual "affordability" when it comes to health insurance premiums, and other health-care related out-of-pocket costs, ACA sets insurance premium credits for persons, and their covered dependents, such that individuals and families will be required to spend no more than a specified percentage of income on premiums for specified health insurance plans in an exchange. Insurance premium credits under ACA will extend to individuals and families with modified adjusted gross income (hereinafter referred to simply as "income" with respect to ACA) between 100% and 400% FPL. ACA will provide premium credit support scaled to individual and family income relative to poverty such that eligible families' and individuals' premium contributions will be limited from 2.0% to 9.5% of income. Individuals and families with income at or above 400% of poverty will be ineligible for premium credits. As indicated earlier, only one parent can claim the child as a dependent on his or her federal income tax return, and the policies under the ACA may result in different choices about which parent claims the child for tax purposes. Noncustodial parents would be able to benefit from the exchange premium tax credit on behalf of their nonresident child(ren) if, and only if, the noncustodial parent could legitimately claim the child(ren) as a dependent on his or her federal income tax return. Although private health care coverage has some advantages over public coverage—namely greater likelihood of full family coverage, a wider range of providers, no stigma, less taxpayer burden, and greater satisfaction with various aspects of care —there are some instances when Medicaid or CHIP is preferred over private coverage. For example, public coverage often results in lower out-of-pocket costs, and for children, especially those with chronic or long-term disabilities, Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefits are unlimited (based on medical necessity, if access is not an issue). Does Mandatory Health Care Coverage Negate the Need for Medical Child Support? Securing medical coverage for children is a stand-alone goal and not merely a subset of other CSE goals. According to OCSE documents, the medical support goal is operationalized by establishing child support orders with a medical support component and by actually securing health coverage for children. As mentioned earlier, health care coverage of children and medical child support are not synonymous. A child could be covered by a custodial parent's health insurance plan but the noncustodial parent may not be sharing in the paying of premiums, co-payments, or other costs associated with the child's medical care. Conversely, a child may be receiving cash medical support but not be insured. When the ACA is fully implemented, access to affordable health care coverage may be less of an issue. If that is the case, policymakers might consider eliminating the establishment of health care coverage as a component of medical child support. Medical child support could thereby be defined as the noncustodial parent's payment of deductibles, co-payments, and other costs associated with a child's medical care and expenses. Whether or not this should require a separate medical support order or just be another component of the child support would need to be considered. The federal government provides 66% of the funding for CSE program activities, including those related to medical support. In order to receive any federal funding, states and/or local governments must provide 34% of the funds needed to operate their CSE programs. In the past, when Congress wanted to encourage activity in an area it considered vital to the effectiveness of the CSE program, it offered federal financial participation (FFP) at a higher level. The 2003 report of the Medical Child Support Working Group recommended that Congress provide enhanced FFP at a 90% rate for medical child support activities to encourage states to more aggressively pursue medical support enforcement. In addition to the 66% federal matching rate, the federal government provides to states an incentive payment to encourage them to operate effective CSE programs. A state's incentive payment is based on its success in meeting certain performance criteria. P.L. 105-200 (enacted in 1998) established the revised CSE incentive payment system and also required the HHS Secretary, in consultation with state CSE directors and representatives of children potentially eligible for medical support, to develop a medical support incentive measure based on the state's effectiveness in establishing and enforcing medical child support obligations. The medical support incentive was to be part of the performance-based child support incentive system. The 1998 law required that a report on this new incentive measure be submitted to Congress not later than October 1, 1999. Although a report was submitted (in March 1999), it recommended that the use of a medical support performance measure be postponed due to data limitations. To date, the CSE program has never had an incentive performance measure for medical child support. Although medical support data is now collected by the states, that information is not currently used to compute incentive payments or penalties and, according to OCSE, there are no immediate plans to use it in connection with the incentive payment system. A medical support incentive measure has been put on hold so as to determine what policy is appropriate given the ACA. Medical support data currently provided by states are not required to be determined complete and reliable based on an audit by OCSE. It should also be noted that although incentive payments are additional income for state CSE programs, in that they are required to be reinvested into the CSE program (or a related activity), they are no longer matched with federal dollars. Thus, their impact on the CSE program has been significantly lessened. Some observers maintain that the CSE program is very complex and that success in terms of increased child support collections is not merely based on the proper functioning of the program but also on the economy and whether noncustodial parents are employed. They note that child support payments collected by CSE agencies increased from $1 billion in FY1978 to $27.3 billion in FY2011, and that the number of children whose paternity was established or acknowledged increased from 111,000 in FY1978 to 1.687 million in FY2011. But they further point out that regardless of some success, the CSE program still collects only 20% of child support obligations for which it has responsibility if arrearage payments are taken into account (otherwise, 62%) and collects payments for only 57% of its caseload. They contend that it should be expected that enforcement of medical child support by identifying and enrolling children in health insurance plans would be at least as hard as the enforcement of cash child support. Also, with the federal government no longer matching state incentive payments, the CSE program during this time of added complexity and many unknowns is likely to have less revenue at its disposal. The underlying question remains unanswered—given that the ACA mandates health insurance coverage beginning in 2014, should the CSE program be revised and restructured so that the responsibility of establishing health insurance coverage is no longer under its bailiwick? There is no easy answer. Some commentators who support narrowing the focus of the CSE program with regard to medical child support maintain that the CSE program is well positioned and has strong tools to collect cash support, so focusing on cash support (including cash medical support) would be an efficient and effective role for the CSE program given the enactment of the ACA. Others contend that medical support including health care coverage is an integral part of the CSE program and should remain so. Does the ACA Create an Overlap of CSE and IRS Duties and Responsibilities? Among the new responsibilities of the Internal Revenue Service (IRS) in connection with the ACA is administering the mandate for individuals to purchase health coverage or be subject to a penalty on their individual federal income tax returns. Pursuant to P.L. 111-148 (ACA), both custodial and noncustodial parents may become eligible for Medicaid coverage, or one or both parents may qualify for subsidies to purchase coverage in the health insurance exchange (beginning in 2014). However, the parent who claims the child as a dependent for tax purposes (generally the custodial parent) will be legally responsible for complying with the requirement to obtain health insurance coverage for the child. Such parents also will be eligible for any subsidies (i.e., the exchange premium tax credit) on behalf of her or his child as well as be subject to any penalties resulting from noncompliance with the health insurance mandate. Some commentators contend that it is inequitable and unfair to subject custodial parents to penalties for noncompliance with ACA health insurance mandates especially if the relevant noncustodial parent is not required to pay his or her appropriate share of the costs associated with their child's medical care (i.e., co-payments, deductibles, and other expenses). They note that under federal regulations, states have the option not to enforce medical support orders ascribed to custodial parents. Others note that custodial parents can agree in writing to allow the noncustodial parent to claim the child as a dependent and thereby use the exchange. The noncustodial parent would thus benefit from the exchange premium credit and be held accountable to ACA compliance requirements as well. However, they point out that noncustodial parents living in different states from their children would not be permitted to enroll such child(ren) in a state that is not the home state of the child(ren). Given that about one-third of CSE cases are interstate cases, this exception is notable. Some observers indicate that there probably will be a need for a lot of coordination between the exchanges and the CSE program and perhaps revised CSE and/or exchange regulations. Beginning in 2014, taxpayers will have to start providing proof on their federal income tax returns that they have health insurance. Those who do not get qualified health insurance will be required to pay the penalty or tax starting in the 2014 tax year, unless they are exempt because of low income or religious beliefs, or because they are a member of an American Indian tribe. P.L. 111-148 (ACA) allows the IRS to withhold federal income tax refunds to collect the penalty. As mentioned earlier, the CSE program also has a program under which past-due child support is withheld from federal income tax refunds. The result may be increased competition for the limited resources of noncustodial parents between the IRS and the CSE program. The CSE program is required by federal law to enforce medical child support. If in the case in question, medical child support includes health insurance coverage then the duties of both the CSE and IRS agencies will overlap because in that case they are both required under existing federal law to ensure that health insurance is actually provided. Program administrators generally agree that it is inefficient to duplicate another program's functions and duties. Concluding Remarks During the debate on the original CSE legislation that was enacted in 1975, its chief sponsor, Senator Russell Long, who at the time was the chairman of the Senate Finance Committee, stated: Should our welfare system be made to support the children whose father cavalierly abandons them—or chooses not to marry the mother in the first place? Is it fair to ask the American taxpayer—who works hard to support his own family and to carry his own burden—to carry the burden of the deserting father as well? Perhaps we cannot stop the father from abandoning his children, but we can certainly improve the system by obtaining child support from him and thereby place the burden of caring for his children on his own shoulders where it belongs. Back in the early days of the CSE program, families receiving Aid to Families with Dependent Children (AFDC) benefits comprised about 85% (FY1978 data) of the CSE caseload. AFDC families were automatically eligible for and entitled to Medicaid benefits. In fact, during that period the primary goals of the CSE program were (1) to reduce public expenditures on the AFDC (and Medicaid) program by obtaining child support from noncustodial parents on a consistent and ongoing basis and (2) to help some families to remain self-sufficient and off public assistance by providing the requisite CSE services. Just as the CSE program expanded/revised its mission over the years from welfare cost-recovery to service delivery, the CSE program, pursuant to the Deficit Reduction Act of 2005 ( P.L. 109-171 ; enacted in February 2006) expanded its view of who should be responsible for obtaining health care for children. The CSE agency no longer focuses exclusively on the noncustodial parent, but rather considers a wider range of options. The CSE agency now examines the ability of either or both parents to secure and/or provide medical support. Medical support is generally provided in the form of private health care coverage, but it also can be in the form of cash payments. If private health insurance is not available to either parent, Medicaid and/or CHIP benefits are sought and either the noncustodial parent or custodial parent or both are responsible for paying any applicable co-pays and deductibles. As noted earlier, most Americans view health care for their children and for themselves as one of their top concerns. There is evidence that health care coverage improves prenatal care (thereby reducing infant mortality and low birth weight); reduces avoidable hospitalizations of children; and increases the probability that children will receive recommended immunizations. It is generally agreed that access to and provision of health care improves outcomes for children. One of the goals President Obama set for health reform is provision of quality, affordable coverage to those who don't have health insurance. By connecting children to the right coverage for them—coverage through either of their parents' employers, Medicaid, CHIP, exchanges, or other options—the CSE program can help assure that children will have continuous, stable access to health care as they grow up, and that the resources of both parents are being used most effectively for the child. There is general agreement that new methods need to be devised to help families who say that they do not know whether their child is eligible for publicly funded health care, do not know how to apply, or find the application processes too difficult. Some experts note that sharing data among programs can cut administrative costs, strengthen programs, and help more families access the benefits for which they are eligible. Because CSE data and information are often stored in disconnected systems across a multitude of data centers and because data elements are defined differently by various organizations, programs, and entities, it is often hard to exchange data and correctly understand its meaning. According to the OCSE Commissioner: Technology has the power to help break down silos between state health and human services programs and improve customer service. The promise of interoperable computer systems is that families will not have to go through multiple applications, interviews, and appointments to receive services and taxpayers will save money. According to testimony related to data standards and electronic information exchange in the CSE program: Sound standards establish a technological vocabulary that allows parties with various perspectives to speak the same language when discussing electronic information and data exchanges. Further, the existence of quality standards provides a level playing field for the vendors that provide software and services to the governmental entities using them. ... As the quantity and complexity of the systems we operate increases, standards can help to insure that a common vocabulary exists for all of us to use in facilitating good and efficient government. The OCSE Commissioner also has stated that data exchange standardization requirements " will eventually establish a common set of data elements and definitions in a format easily exchanged between different human services systems, and in fact with any system ." The Commissioner further stated: " With interoperable systems, we may do a better job of serving the whole person and the whole family; we may more effectively share services, streamline information and business systems, and minimize duplicative costs to build, maintain and update redundant computer systems ." Moreover, according to the Commissioner: The Affordable Care Act (ACA) is spurring states across the Nation to create new eligibility and enrollment computer systems for Medicaid and health insurance exchanges. The ACA presents a unique opportunity for state health and human services programs to integrate their systems both vertically and horizontally, and bring our programs one step closer to the "no wrong door" approach to service delivery. In the past, this was not possible due to the requirement to cost allocate federal dollars across multiple programs. However, through December 31, 2015, states can design, develop and implement system modules that perform common functions across all health and human services programs with enhanced 90/10 federal funding if they request a federal cost allocation waiver. The technology is here to begin to integrate health and human services systems. Linking them will accomplish two goals: improve client outcomes and enhance operational efficiency. The purpose behind this approach is to develop a standard format so as to improve the ability of two or more systems or entities to exchange information and to correctly use the information that has been exchanged. It is asserted that this approach together with streamlined applications, automatic enrollment, telephone interviews, e-signatures, and other efforts to share data across programs help individuals and families get the assistance and support they need quickly without the need for redundant eligibility screenings, applications, or data verification. Proponents of these methods contend that by reducing steps in the eligibility determination and recertification processes, efficiencies and administrative savings can be obtained. As mentioned earlier, the ACA (as amended) requires states to implement an electronic look up of eligibility information that the state may have on file from some other sources (e.g., income, citizenship status, family composition, information on file from another social welfare program such as TANF or SNAP, etc.). With the transition to MAGI (modified adjusted gross income) and this new beneficiary-focused system, individuals will only be required to supply eligibility information that does not match that which is on record with the state, or information that is missing from the shared eligibility system. Beginning January 1, 2014, the ACA is expected to expand health insurance coverage to millions of individuals through new health insurance exchanges and expansions in Medicaid. However, questions remain regarding how the ACA will impact medical child support. Some observers contend that with its history of developing new strategies for collection of child support payments and better customer service, the CSE program will successfully handle future challenges. They suggest that the CSE program may have to redefine medical support, or pursue medical support only in cases in which children receive health care from public programs such as Medicaid or CHIP, or allow the Internal Revenue Service to take over the enforcement of medical support. Others note that the CSE program is already having a hard time successfully serving custodial parents. They suggest that the CSE program re-emphasize the need to include medical expenses in the child support order and perhaps expend any resources gained from eliminating its role in the enforcement of medical support on helping low-income noncustodial parents obtain employment so they can fulfill their child support obligations. Appendix A. Legislative History of Medical Child Support Provisions Just as Temporary Assistance for Needy Families (TANF) recipients must assign their child support rights to the state, so too must Medicaid recipients assign their medical support rights to the state. The impetus for the federal government moving into the arena of financial child support was to reduce federal expenditures on the former Aid to Families with Dependent Children (AFDC) entitlement program (replaced in 1996 by the time-limited TANF block grant program). Similarly, the impetus for the federal government moving into the arena of medical support for those children eligible for child support was to reduce federal costs in the Medicaid program. This section of the report summarizes major medical child support provisions. P.L. 95-142 , Medicare-Medicaid Anti-fraud and Abuse Amendments ( H.R. 3 ), Enacted October 25, 1977 The first link between child support and medical support came as an attempt to recoup the costs of Medicaid provided to public assistance families under Title XIX of the Social Security Act. Just two years after the creation of the Child Support Enforcement (CSE) (i.e., Title IV-D of the Social Security Act) program, the Medicare/Medicaid Anti-fraud and Abuse Amendments of 1977 established a medical support enforcement program that allowed states to require Medicaid applicants to assign their rights to medical support to the state. Further, in an effort to cover children with private insurance instead of public programs, when available, it permitted CSE and Medicaid agencies to enter into cooperative agreements to pursue medical child support assigned to the state. Activities performed by the CSE agency under a cooperative agreement with the Medicaid agency must be funded by the Medicaid agency. The 1977 law also required state CSE agencies to notify Medicaid agencies when private family health coverage was either obtained or discontinued for a Medicaid-eligible person. P.L. 98-369 , the Deficit Reduction Act of 1984 ( H.R. 4170 ), Enacted July 18, 1984 This law mandated states to require that Medicaid applicants assign their rights to medical support to the state (Section 1912(a) of the Social Security Act). P.L. 98-378 , the Child Support Enforcement Amendments of 1984 ( H.R. 4325 ), Enacted August 16, 1984, and Corresponding Regulations Section 16 of P.L. 98-378 required the HHS Secretary to issue regulations requiring state CSE agencies to petition for inclusion of medical support as part of any new or modified child support order whenever health care coverage is available at "reasonable cost" to the noncustodial parent of a child receiving AFDC, Medicaid, or foster care benefits or services. Federal regulations further stipulated that any employment-related or other group coverage was considered reasonable, under the assumption that health insurance is inexpensive to the employee/noncustodial parent. A 1993 study by Cooper and Johnson that analyzed 1987 data from the Center for Health Expenditures and Insurance Studies indicated that for workers with income below the poverty line and employer-provided family health insurance, 77% of the premium was paid for by the employer. Regulations On October 16, 1985, the Office of Child Support Enforcement (OCSE) published regulations amending previous regulations and implementing section 16 of P.L. 98-378 . These regulations required state CSE agencies to obtain basic medical support information and provide this information to the state Medicaid agency. The purpose of medical support enforcement is to expand the number of children for whom private health insurance coverage is obtained and thereby reduce Medicaid costs for both the states and the federal government. If the custodial parent does not have satisfactory health insurance coverage, the child support agency must petition the court or administrative authority to include medical support in new or modified support orders, and to also inform the state Medicaid agency of such support orders that include a medical support obligation. The regulations also require CSE agencies to enforce medical support that has been ordered by a court or administrative process. States receive child support matching funds from the federal government at the 66% rate for required medical support activities. Before these 1985 regulations were issued, medical support activities were pursued by CSE agencies only under optional cooperative agreements with Medicaid agencies. Some of the functions that the CSE agency performed under these agreements included receiving referrals from the Medicaid agency, locating noncustodial parents, establishing paternity, determining whether the noncustodial parent had a health insurance policy or plan that covered the child, obtaining sufficient information about the health insurance policy or plan to permit the filing of a claim with the insurer, filing a claim with the insurer or transmitting the necessary information to the Medicaid agency, securing health insurance coverage through court or administrative order, and recovering amounts necessary to reimburse Medicaid payments. On September 16, 1988, OCSE issued additional regulations expanding the medical support enforcement provisions. These regulations required the CSE agency to develop criteria to identify existing child support cases that had a high potential for obtaining medical support, and to petition the court or administrative authority to modify support orders to include medical support for these cases even if no other modification was anticipated. The CSE agency was also required to provide the custodial parent with information regarding the health insurance coverage obtained by the noncustodial parent for the child. Moreover, the regulation deleted the condition that CSE agencies may secure health insurance coverage under a cooperative agreement only when it did not reduce the noncustodial parent's ability to pay child support. P.L. 101-508 , the Omnibus Budget Reconciliation Act of 1990 ( H.R. 5835 ), Enacted November 5, 1990 Section 4606 of P.L. 101-508 amended one provision of section 1912(a)(1) of the Social Security Act to provide an exemption from the requirement of cooperating in establishing paternity and obtaining medical support and payments for poverty-level pregnant women described in section 1902(l)(1)(A) of the act. While poverty level pregnant women are exempt from the cooperation requirements in section 1912(a)(1)(B), these individuals are required to comply with similar provisions in sections 1912(a)(1) (A) and (C). In order to reconcile this apparent inconsistency, the exemption in section 1912(a)(1)(B) has been interpreted by the federal CSE agency (OCSE) as applying only to the father of a child born out of wedlock and entities whose liability derives from the father (e.g., the father's insurer). Therefore, poverty-level pregnant women may not be required as a condition of Medicaid eligibility to cooperate with the state in establishing paternity or in obtaining support and payments for medical care from, or derived from, the father of the child born out of wedlock. The poverty-level pregnant woman is still required to assign her rights, and the rights of any other person eligible for Medicaid for whom she can legally make an assignment, to the state for support and payment of medical care from any third party. She must also cooperate with the state and provide information to be used in pursuing any other third party that may be liable for care and services under the plan. P.L. 103-66 , the Omnibus Budget Reconciliation Act of 1993 ( H.R. 2264 ), Enacted August 10, 1993 Before late 1993, employees covered under their employers' health care plans generally could provide coverage to children only if the children lived with them. However, as a result of divorce proceedings, employees often lost custody of their children but were nonetheless required to provide their health care coverage. While the employee would be obliged to follow the court's directive, the employer that sponsored the employee's health care plan was under no similar obligation. Even if the court ordered the employer to continue health care coverage for the nonresident child of their employee, the employer was under no legal obligation to do so. Aware of this situation, Congress took the following legislative actions in the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ): 1. Insurers were prohibited from denying enrollment of a child under the health insurance plan of the child's parent on the grounds that (a) the child was born out of wedlock, (b) is not claimed as a dependent on the parent's federal income tax return, or (c) does not reside with the parent or in the insurer's service area. 2. In any case in which a parent is required by court order to provide health coverage for a child and the child is otherwise eligible for family coverage through the insurer, insurers and employers were required: to permit the parent, without regard to any enrollment season restrictions, to enroll the child under such family coverage, to allow the custodial parent or the Medicaid agency to enroll the child in the noncustodial parent's health plan when the noncustodial parent has family coverage but fails to provide health insurance coverage for a dependent child, and with respect to employers only, not to dis-enroll the child unless there is satisfactory written evidence that the order is no longer in effect or the child is or will be enrolled in comparable health coverage through another insurer that will take effect not later than the effective date of the disenrollment. 3. Employers doing business in the state, if they offer health insurance and if a child support order is in effect, were required to withhold from the employee's compensation the employee's share of premiums for health insurance and to pay that share to the insurer. The HHS Secretary may provide by regulation for such exceptions to this requirement (and other requirements described above that apply to employers) as the Secretary determines necessary to ensure compliance with an order, or with the limits on withholding that are specified in section 303(b) of the Consumer Credit Protection Act. 4. Insurers were prohibited from imposing requirements on a state agency acting as an agent or assignee of an individual eligible for Medicaid that are different from requirements applicable to an agent or assignee of any other individual. 5. Insurers were required to, in the case of a child who has coverage through the insurer of a noncustodial parent: (a) provide the custodial parent with the information necessary for the child to obtain benefits; (b) permit the custodial parent (or provider, with the custodial parent's approval) to submit claims for covered services without the approval of the noncustodial parent; and (c) make payment on claims directly to the custodial parent, the provider, or the state agency. 6. The state Medicaid agency was permitted to garnish the wages, salary, or other employment income of, and to withhold state tax refunds to, any person who (1) is required by court or administrative order to provide health insurance coverage to an individual eligible for Medicaid; (2) has received payment from a third party for the costs of medical services to that individual; and (2) has not reimbursed either the individual or the provider. The amount subject to garnishment or withholding is the amount required to reimburse the state agency for expenditures for medical services provided under the Medicaid program. Claims for current or past due child support take priority over any claims for the costs of medical services. P.L. 104-193 , the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( H.R. 3734 ), Enacted August 22, 1996 Under the 1996 welfare reform legislation, the definition of "medical child support order" in the Employee Retirement Income Security Act (ERISA) was expanded to clarify that any judgment, decree, or order that is issued by a court or by an administrative process has the force and effect of law. In addition, the 1996 welfare reform law stipulated that all orders enforced by the state CSE agency must include a provision for health care coverage. If the noncustodial parent changes jobs and the new employer provides health coverage, the state must send notice of required coverage to the new employer; the notice must serve to enroll the child in a health plan of the new employer. (Before enactment of P.L. 104-193 , families who were not receiving public assistance benefits could choose not to seek medical support.) P.L. 105-200 , the Child Support Performance and Incentive Act of 1998 ( H.R. 3130 ), Enacted July 16, 1998 P.L. 105-200 provided a uniform manner for states to inform employers about their obligation to enroll the children of noncustodial parents in employer-sponsored health plans. It required the CSE agency to use a standardized "National Medical Support Notice" (developed by HHS and the Department of Labor) to communicate to employers the issuance of a medical support order. Employers were required to accept the form as a "Qualified Medical Support Order" under ERISA. States were required to begin using the national medical support notice in October 2001, although many states had to delay implementation until enactment of required state enabling legislation. An appropriately completed national medical support notice is considered to be a "Qualified Medical Child Support Order" and as such must be honored by the employer's group health plan. P.L. 105-200 also called for the joint establishment of a Medical Support Working Group by the Secretaries of HHS and Labor to identify impediments to the effective enforcement of medical support by state CSE agencies and to submit to the Secretaries of HHS and Labor a report containing recommendations addressing the identified impediments. In consultation with state CSE directors and representatives of children potentially eligible for medical support, the HHS Secretary was directed to develop a performance measure based on the effectiveness of states in establishing and enforcing medical support obligations, and to make recommendations for the incorporation of the measure in a revenue neutral manner into the Child Support Incentive Payment System. These recommendations were due no later than October 1, 1999. P.L. 106-394 , the Federal Employees Health Benefits Children's Equity Act of 2000 ( H.R. 2842 ), Enacted October 30, 2000 P.L. 106-394 provides federal agencies authority under the Federal Employees Health Benefits Children's Equity Act of 2000 to enroll an employee and his or her family in the Federal Employee Health Benefits Program (FEHBP) when a state court or administrative authority orders the employee to provide health insurance coverage for a child of the employee but the employee fails or refuses to provide the coverage. Federal agencies may also enforce a child support order providing for direct income assignment (i.e., an amount of money for medical purposes as specified in the order). If the employee is not enrolled for any FEHBP coverage, the agency employing office must enroll the dependents and/or the employee in the standard option of the Blue Cross/Blue Shield Service Benefit Plan. If the employee has a self-only enrollment in a fee-for-service plan, the agency must change the enrollment to self-and-family in the same option of the same plan. Authorized enrollment changes may be processed retroactively, if necessary, to comply with the effective date of the court or administrative order. The Federal agency employer will receive a National Medical Support Notice from the state child support enforcement agency and will be required to notify the plan administrator to enroll the children in an insurance plan. Upon enrollment, the Federal agency employer will withhold premiums from the employee's income. This order may be subsequent to, or in conjunction with, an order to withhold a monetary child support obligation. P.L. 109-171 , the Deficit Reduction Act of 2005 ( S. 1932 ), Enacted February 8, 2006, and Final Regulations P.L. 109-171 required child support orders enforced by the CSE program to include a provision for medical child support. It required states to consider either or both parents' access to health insurance and permits enforcement of medical child support against both parents. P.L. 109-171 defines "medical support" to include both health insurance (coverage under a health insurance plan, including payment of premiums, co-payments, and deductibles) and payment for children's medical expenses. If health insurance is not available, states may require both parents to share the cost of their children's medical expenses. Regulations On July 21, 2008, the Administration for Children and Families at HHS issued final regulations related to medical child support. The regulations include both the Deficit Reduction Act changes and recommendations by the Medical Child Support Working Group (MCSWG). Among other actions, the final regulations stipulate that cash medical support or private health insurance is considered reasonable in amount if the cost to the obligated parent does not exceed 5% of his or her gross income or, at state option, a reasonable alternative income-based numeric standard defined in state child support guidelines. The final regulations also require the state CSE agency to inform the Medicaid agency when there is a new or modified court or administrative order for child support that includes health insurance and/or cash medical support in the case of a child who is a Medicaid applicant or recipient. Also, the state CSE agency is required to communicate periodically with the Medicaid agency to determine if there have been lapses in Medicaid coverage for Medicaid applicants or recipients. To the extent that medical support has been assigned to the state, medical support collections are forwarded to the Medicaid agency for distribution in accordance with federal regulations. Otherwise, the amount is forwarded to the family. Appendix B. Medical Support Coverage of Children The following medical support data are drawn from the CSE program's annual data reports to Congress. It is the only available state data on medical child support. States submit medical support data to the federal Office of Child Support Enforcement (OCSE), but the data are not subject to an audit to determine if they are complete and reliable. Also, because medical support establishment allows states to initiate legal medical support orders before determining whether the health insurance is affordable, state CSE agencies are severely hampered in successfully enforcing medical child support orders in cases in which a medical support order is established but the health insurance is not considered affordable by federal/state standards. Thus, one reason why coverage may not be provided as ordered (i.e., why enforcement rates of medical support are low) may be because it is not available to the obligated parent at a reasonable rate. There is little that the CSE agency can do to enforce the existing medical support order in these circumstances. Thus, the medical support data in the following two tables should be used with caution. With regard to Table B-1, information from the state CSE programs indicates the following for FY2011: There were 15.8 million CSE cases. As mentioned earlier the services provided by the CSE program include among other things, locating noncustodial parents, establishing paternity, establishing child support orders, and collecting child support payments. There were 12.8 million child support orders established. Some of the reasons why child support orders are not established for all cases are the following: the noncustodial parent's whereabouts is unknown, paternity has not been established, and/or income and resource information concerning the noncustodial parent has not yet been determined. There were 2.8 million arrearages-only cases in which child support orders were established. Arrearages-only cases are cases in which the noncustodial parent does not owe any current child support but still owes past-due child support (i.e., the noncustodial parent did not pay the entire amount of child support owed in a prior given month). In accordance with CSE accounting procedures, cases with arrearages only are subtracted from the number of cases with an order established in determining medical support statistics. There were 10.0 million cases with child support orders established if the arrearages-only cases are excluded. Medical child support was ordered in 8.1 million of the 10.0 million cases in which child support was established (81% of the cases). The medical support order was complied with in 3.3 million of those 10.0 million cases (33% of the cases). As indicated in the body of this report, the existence of medical support (whether or not it is complied with) is not directly related to whether a child has health care coverage. In many cases in which the custodial parent has private health insurance or has enrolled her or his children in a publicly-funded health care program (such as Medicaid or CHIP), there might not be a medical support order. Health insurance coverage is the primary form of medical support. In FY2001, 93% of medical support orders stipulated health insurance coverage. In FY2011, the percentage was 88%. The information in Table B-2 is a subset of the information in Table B-1 . The compliance rates for medical support in the form of health insurance are similar to medical support compliance in general. In FY2011, medical support orders that stipulated the provision of health insurance coverage applied to 55% of all CSE cases that had a child support order, and as mentioned 88% of cases with a medical support order. Health insurance coverage was provided as ordered in 31% of those cases. (See Table B-2 .)

Medical child support is defined as the legal provision of payment of medical, dental, prescription, and other health care expenses for children living apart from one of their parents. It can include provisions for health care coverage (including payment of costs of premiums, co-payments, and deductibles) as well as cash payments for a child's medical expenses. The establishment and enforcement of medical support is intended to promote fairness in allocating childrearing costs between custodial and noncustodial parents and, when employer-sponsored health care is obtained, it saves federal and state dollars. Medical child support has evolved over time. In the early days of the establishment and enforcement of medical child support, the primary goal was to make noncustodial parents responsible for their children and thereby lessen taxpayer burden by shifting costs to noncustodial parents. With the enactment of P.L. 109-171 (the Deficit Reduction Act of 2005), the emphasis on solely looking to the noncustodial parent for obtaining private health care coverage for children was replaced with the view that provision of medical child support is the goal regardless of which parent can provide it. A study was commissioned by the Department of Health and Human Services (HHS), and conducted by the Urban Institute, to shed light on health care coverage of child support-eligible children. Based on an analysis using 2008 data, the Urban Institute found that out of an estimated 26 million U.S. children age 18 or under who had at least one parent living outside the home, approximately 51% of such child support-eligible children were enrolled in the Medicaid or the State Children's Health Insurance Program (CHIP). An additional 31% of the child support- eligible population had private coverage from someone in their household and 6% obtained insurance coverage from someone outside the household (generally the noncustodial parent but sometimes a stepparent). A small proportion of children (1%) obtained coverage from other federal sources. The remaining 11% of child support-eligible children were classified as uninsured. Health care coverage of children and medical child support are not synonymous. A child could be covered by a custodial parent's health insurance plan and the child support order may not contain any provision for medical support. Conversely, a child may be receiving cash medical support but not be insured. Although there is agreement that many children still lack health care coverage, full implementation of the Patient Protection and Affordable Care Act (P.L. 111-148; ACA, as amended) should further reduce the problem of uninsured children, but the issue of successful establishment and enforcement of medical child support may become even more complex. Although states submit medical support data to the federal government, the information is not subject to an audit to determine if it is complete and reliable. Also, medical support establishment allows states to initiate legal medical support orders before determining whether or not health insurance is affordable. However, state Child Support Enforcement (CSE) agencies are severely hampered, if not totally stymied, in enforcing medical child support orders in cases in which a medical support order is established but the health insurance is not considered affordable by federal/state standards. Even though it is not likely that medical child support will receive congressional attention this year, with the continued implementation of the ACA in 2014, Congress may examine the impact of the ACA on the CSE program and address unresolved issues. This report describes current federal policy with respect to medical child support. It also examines the potential impact of the ACA on the CSE program. It provides a legislative history of medical support provisions in the CSE program (see Appendix A) and state data on the medical support coverage of children in the CSE program (see Appendix B).

The Biotechnology Industry At its simplest, biotechnology is technology based on biology; it involves the use of a broad range of techniques and procedures for modifying living organisms to suit human purposes. Biotechnology has applications in engineering, manufacturing, food science, and, most prominently, medicine, in which it has facilitated a number of innovations. Without biotechnology, a variety of cell and tissue culture technologies, pharmaceuticals, and combined diagnostic-therapeutic treatments could not exist. The biotechnology industry is relatively young and exhibits significant growth potential. Revenue for 2012 is expected to increase 3.9% to $87 billion, and the five-year annual growth rate for 2012 to 2017 is projected to reach 8.7%. By comparison, the GDP of the United States is expected to expand 2.1% annually through 2017. The biotechnology industry first attained profitability in 2009, due in part to rising revenue and increasing cost efficiencies. Profit for 2012 is expected to reach nearly $5 billion. The structure of the biotechnology market is currently rather fragmented. The three largest actors, Amgen Inc., Roche Holding AG, and Monsanto Co., account for 14.0%, 11.5%, and 5.8% market share respectively, while the remaining 68.7% is held by hundreds of smaller firms. Mergers and acquisitions (M&A) within the industry steadily grew from 2007 to 2012, with further increases expected through 2017. As a result, despite a projected expansion of the industry, the number of operators is expected to remain flat. Human health technologies represent the most significant component of the biotechnology market, accounting for 57% of revenues. Pharmaceuticals are expected to remain the most significant component of the biotechnology market for the foreseeable future, with growth in this segment likely outpacing the rest of biotechnology. According to the Pharmaceutical Research and Manufacturers Association (PhRMA), more than 900 biotechnology medicines are under development. Within the field of human health, personalized medicine represents a major avenue of growth. Personalized medicine involves tailoring medical treatment to the individual characteristics of each patient, as well as classifying individuals based on their susceptibility to a particular disease or their response to a specific treatment. Preventative or therapeutic interventions can then be concentrated on those who will benefit, resulting in more efficient and effective treatment. Among the first and most prominent examples of such interventions is Genentech's Herceptin and its companion HER2 diagnostic test. Herceptin, a "targeted" breast cancer therapy, is prescribed only for patients whose genetic tests reveal an over-expression of the HER2 protein. Since the Herceptin/HER2 "theranostic" intervention was introduced in 1998, it has been joined by numerous other such drug-diagnostic combinations. The market for such diagnostic and therapeutic treatments is estimated to grow by 10% annually, reaching $42 billion by 2015. Biotechnology companies often rely heavily on intellectual property rights, as patents are often the most crucial asset in a research-intensive sector that at times produces products that may be readily imitated. Adequate patent protection improves the likelihood that biotechnology companies can appropriate their R&D results and may reduce copying by competitors. Investors in biotechnology firms are generally well aware of the importance of patents, and the survival of such firms may depend on their convincing investors that they have a strong intellectual property protection strategy. Venture capital (VC) serves as the primary source of funding for small biotechnology firms. Start-ups with patenting activity receive greater and more diverse VC funds, with one study finding that by filing at least one patent application, a firm increases its chance of obtaining VC funding by 97%. VC firms must carefully weigh the economic value of a company's patent portfolio in determining whether to make an investment, and the security of intellectual property is a key component in this analysis. If changes in regulation lead to insufficient protection for biotechnology patents, VC firms may reduce investments in biotechnology and shift their focus to other, less risky industries. Introduction to the Patent System Innovation in the biotechnology industry is impacted by the U.S. patent system, which allows an inventor to seek the grant of a patent by preparing and submitting an application to the USPTO. USPTO officials known as examiners then determine whether the invention disclosed in the application merits the award of a patent. USPTO procedures require examiners to determine whether the invention fulfills certain substantive standards set by the patent statute. To be patentable, the invention must be novel, or different, from subject matter disclosed by an earlier patent, publication, or other state-of-the-art knowledge. In addition, an invention is not patentable if "the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." This requirement of "nonobviousness" prevents the issuance of patents claiming subject matter that a skilled artisan would have been able to implement in view of the knowledge of the state of the art. The invention must also be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit. Even if these requirements of novelty, nonobviousness, and utility are met, an invention is not patentable unless it falls within at least one category of patentable subject matter. According to Section 101 of the Patent Act, an invention which is a "process, machine, manufacture, or composition of matter" may be patented. The range of patentable subject matter under this statute has been characterized as "extremely broad." The courts and USPTO have nonetheless concluded that certain subject matter, including abstract ideas and laws of nature, is not patentable under Section 101. This report further discusses this legal standard below. In addition to these substantive requirements, the USPTO examiner will consider whether the submitted application fully discloses and distinctly claims the invention. In particular, the application must enable persons skilled in the art to make and use the invention without undue experimentation. If the USPTO allows the patent to issue, its owner obtains the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. Those who engage in those acts without the permission of the patentee during the term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined from further infringing acts. The patent statute also provides for an award of damages "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." The maximum term of patent protection is ordinarily set at 20 years from the date the application is filed. At the end of that period, others may employ that invention without regard to the expired patent. Patent rights do not enforce themselves. Patent owners who wish to compel others to respect their rights must commence enforcement proceedings, which most commonly consist of litigation in the federal courts. Although issued patents enjoy a presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on a number of grounds. The Court of Appeals for the Federal Circuit (Federal Circuit) possesses nationwide jurisdiction over most patent appeals from the district courts. The Supreme Court enjoys discretionary authority to review cases decided by the Federal Circuit. Fundamentals of Patentable Subject Matter Section 101 of the Patent Act of 1952 allows a patent to issue upon a "process," which the statute elsewhere defines to mean a "process, art, or method." Process patents claim a series of steps that may be performed to achieve a specific result. Process patents typically relate to methods of manufacture or use. A process patent may claim a method of making a product, for example, or a method of using a chemical compound to treat a disease. Although the statutory term "process" is broad, courts and the USPTO have nonetheless established certain limits upon the sorts of processes that may be patented. In particular, abstract ideas, mathematical algorithms, mental processes, and scientific principles have been judged not to be patentable. The Supreme Court has described these sorts of inventions as the "basic tools of scientific and technological work" that should be "free to all men and reserved exclusively to none." Prior to its issuance of Mayo v. Prometheus , the Supreme Court most recently considered Section 101 in Bilski v. Kappos . That 2010 decision addressed a claimed risk hedging method, useful in particular for commodities buyers and sellers in the energy market. The Federal Circuit had earlier held that the claimed hedging method did not constitute patentable subject matter because it (1) was not tied to a particular machine or apparatus and (2) did not transform a particular article into a different state or thing. The Supreme Court subsequently agreed to hear the appeal and affirmed the Federal Circuit's patentability determination, although it did so under different reasoning. According to a majority of the Court, the "machine-or-transformation" test should not serve as the exclusive test for determining whether a claimed method was patent-eligible or not. As Justice Kennedy explained, although patents that did not meet the machine-or-transformation standard were rarely granted in earlier eras, this test "would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques," and other technologies of the Information Age. As a result, while the machine-or-transformation test provided a "useful and important clue" towards deciding the patentability of methods, it was not the "sole test." The Court nonetheless agreed with the Federal Circuit that the claimed hedging method was an "unpatentable abstract idea." The Court reasoned that allowing a patent to issue on the hedging method "would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea." The Federal Circuit was therefore affirmed. Following Bilski v. Kappos , whether diagnostic methods appropriately constitute patentable subject matter remained uncertain. As noted previously, at one point the Court's decision suggests that "advanced diagnostic medicine techniques" might be patented. On the other hand, the Court confirmed that "laws of nature" could not be patented and explained that broadly preemptive claims were likely unpatentable. Diagnostic methods might well be classified under either of these headings. Two years after deciding Bilski v. Kappos , the Supreme Court would address the patentability of diagnostic methods in Mayo v. Prometheus . The Mayo v. Prometheus Decision Prometheus Laboratories, Inc. is the sole licensee of two patents (U.S. Patent Nos. 6,355,623 and 6,680,302) claiming methods for determining optimal dosages of thiopurine drugs used to treat autoimmune diseases. Stated generally, the patents claim methods of (a) administering a thiopurine drug to a patient, and (b) determining the levels of the drug or the drug's metabolites in red blood cells in the patient. The measured metabolite levels are then compared to known metabolite levels. If the measured metabolite levels in the patient are outside the known range, then the physician should increase or decrease the level of drug to be administered so as to reduce toxicity and enhance treatment efficacy. Claim 1 of the `623 patent, which reads as follows, was representative of the claims of the two patents at issue: A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising: (a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder, wherein the level of 6-thioguanine less than about 230 pmol per 8x10 8 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and wherein the level of 6-thioguanine greater than about 400 pmol per 8x10 8 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject. Prometheus brought suit against Mayo Clinic Rochester and Mayo Collaborative Services (collectively "Mayo") for infringement of the `623 and `302 patents. The District Court held that the two patents did not comprise patentable subject matter because they claimed a natural law—namely the correlation between thiopurine metabolite levels and the toxicity and efficacy of thiopurine drug dosages. Following an appeal, the Federal Circuit reversed. Applying the machine-or-transformation test, the Court of Appeals concluded that the patent claims called for the transformation of the human body or of blood taken from the body. Following its decision in Bilski v. Kappos , the Supreme Court directed the Federal Circuit to rehear the appeal in Mayo v. Prometheus . The Court of Appeals again concluded that the claims of the `623 and `302 patents constituted patentable subject matter. According to Judge Lourie, the claims of Prometheus were "drawn not to a law of nature, but to a particular application of naturally occurring correlations, and accordingly do not preempt all uses of the recited metabolite levels and drug efficacy or toxicity." Following the second Federal Circuit opinion in Mayo v. Prometheus, the Supreme Court again vacated the decision of the lower court . In a unanimous decision authored by Justice Breyer, the Court concluded that the claims were directed towards natural laws and were therefore unpatentable. The Court reviewed its precedents in order to explain that phenomena of nature and abstract concepts could not be patented because the "monopolization of these basic tools through the grant of a patent might tend to impede innovation more than it would tend to promote it." The earlier cases recognized that all inventions at some level embody or apply laws of nature, however, and that processes that applied natural laws in a particular, useful way were eligible for patenting under Section 101 of the Patent Act. Applying these principles to the case at hand, the Court recognized that the claims in part recited "laws of nature," in particular relationships between the concentration of thiopurine metabolites and the likelihood that a dosage of a thiopurine drug will prove ineffective or harmful. However, the claims included steps in addition to the law of nature—in particular, they called for "administering" the thiopurine drug and "determining" the level of the relevant metabolites, "wherein" the drug dosage should be adjusted. According to Justice Breyer, the question before the Court was whether the claims amounted merely to the natural laws, or whether they added enough to the statement of the correlations to qualify as patent-eligible processes that applied natural laws. The Court reasoned that the three additional claimed steps did not suffice to render the claimed inventions patentable subject matter. Justice Breyer explained that the "administering" step referred simply to the relevant audience of the invention, namely, physicians who treat patients with certain diseases with thiopurine drugs. However, merely limiting the use of a natural law to a particular technological environment cannot render the principle patentable. Similarly, the "determining" step merely advised physicians to measure the level of metabolites in a patient's blood—a step that had been done for years and was routine in the field. Justice Breyer stated that conventional or obvious pre-solution activity did not convert an unpatentable law of nature into a patent-eligible application of such law. Finally, the "wherein" clauses simply informed physicians that they should take account of pertinent natural laws in their practices. According to Justice Breyer, an unpatentable law of nature does not become patentable merely by advising individuals to use the law. As a result, the Court concluded that the three steps recited in the claim did not "transform unpatentable natural correlations into patentable applications of those regularities." The Supreme Court's opinion in Mayo v. Prometheus addressed a number of additional contentions raised during the litigation. First, the Court rejected the argument that the Prometheus patents satisfied the machine-or-transformation test. The Federal Circuit had reasoned that the patents-in-suit transformed both human blood (by analyzing it to measure metabolite levels) and the human body (by administering a thiopurine drug). Justice Breyer countered that the claims at issue required only that the metabolite levels be measured, not that human blood be transformed. And he also explained that the transformation of the human body was not pertinent to the patentability determination, for that claim limitation merely identified the group of individuals who might be interested in applying the law of nature. The Court also responded to the position that virtually any step beyond a statement of a law of nature should be deemed to fulfill Section 101 standards. Under this view, Section 101 might be satisfied fairly readily; other requirements imposed under the Patent Act, including novelty and nonobviousness, would play a more significant role in deciding whether patent should issue or not. Justice Breyer rejected this proposal, stating that the policy concerns that underlie Section 101 were distinct from those of the other patentability requirements. Third, the Court responded to concerns that rejecting the Prometheus patents would discourage diagnostic research. Justice Breyer observed that other interested parties had asserted that patents claiming the body's natural responses to illness and medical treatment should not be granted because they might limit physician access to critical scientific data. In view of these competing views, the Court was reluctant to depart from precedent denying patents on natural laws. Response to Mayo v. Prometheus The Supreme Court decision in Mayo v. Prometheus has prompted diverse reactions. Some patent lawyers with biotechnology backgrounds have reportedly issued scathing reviews of its opinion, with one describing it as "the worst patent decision in the history of the Supreme Court." Another is reported as stating that under "Breyer's analysis, potentially every patent in biotechnology is not valid because most use 'natural processes.'" For example, suppose that a researcher discovers a new marker—such as a protein expressed by a gene that indicates a propensity to develop cancer or is an indicator of Alzheimer's disease. Under Mayo v. Prometheus , this innovation might be considered a natural phenomenon that is not patentable. Others offered more measured criticism. Some believe that the Supreme Court did not provide sufficient guidance on the criteria needed to develop an unpatentable natural law into a patentable application of a natural law. In their view, the extent to which future diagnostic methods may be patented is unclear. This lack of clarity may discourage firms that need to support costly research and development programs in the area of diagnostics. Still other observers believe that the impact of Mayo v. Prometheus will be most keenly felt by firms focused upon diagnostics and personalized medicine. According to patent attorney Warren Woessner, predictive diagnostic methods that depend on the presence or absence of a marker, as well as diagnostic methods that measure the level of a marker, may be subject to narrow patents or may be difficult to patent at all. Christopher Holman, a member of the faculty of the University of Missouri-Kansas City School of Law, views the Supreme Court opinion as allowing clinical labs to conduct testing "without patents in their way," to the particular detriment of small biotech companies. On the other hand, some interested parties believe that Mayo v. Prometheus was correctly decided. Patent attorney Richard H. Stern asserted that the Supreme Court issued "a very high quality piece of legal craftsmanship" that resolved numerous issues with respect to Section 101 and provided sufficient guidance to the intellectual property community. In addition, the American Medical Association explained that the Supreme Court "prevented irreparable harm to patient care" by ensuring that "critical scientific data remain widely available for sound patient care and innovative medical research." The chair of the AMA Board, Robert M. Wah, explained that "[m]edical innovations that provide insight into natural human biology must remain freely accessible and widely disseminated. Blocking this information from physicians and researchers inhibits future discoveries." Still others observe that the patent laws of other nations disallow patents on diagnostic methods. For example, Article 53(c) of the European Patent Convention states that "European patents shall not be granted in respect of ... diagnostic methods practiced on the human or animal body." As a result, the ruling in Mayo v. Prometheus is not necessarily out of step with global intellectual property norms. Finally, a third group of observers believe that the impact of Mayo v. Prometheus upon the medical field as a whole will not be significant. Hank Greely, director of the Center for Law and the Biosciences at Stanford University, stated that "I don't see any reason to believe the medical world will look much different because of this decision; some players will be harmed, some will benefit." The Myriad Litigation Following the Supreme Court's opinion in Mayo v. Prometheus , considerable attention has been placed upon another well-publicized litigation, Association for Molecular Pathology v. U.S. Patent & Trademark Office . More commonly known as Myriad —after the name of the patent holder—this litigation may determine whether patents may appropriately issue on isolated deoxyribonucleic acid (DNA) molecules that encode sequences identical to human genes. The USPTO has allowed inventors to obtain patents on genes for some 30 years. But some observers believe that the reasoning of Mayo v. Prometheus may have an impact upon these patents because they are arguably directed towards a product of nature. The Myriad litigation commenced on May 12, 2009, when the Association for Molecular Pathology and 19 other plaintiffs, including individual physicians, patients, and researchers, filed a lawsuit against the USPTO, Myriad Genetics, Inc. ("Myriad"), and the Directors of the University of Utah Research Foundation. The plaintiffs challenged several patents owned by Myriad that claim isolated human genes known as BRCA1 and BRCA2. Certain alterations or mutations in these genes are associated with a predisposition to breast and ovarian cancers. Due to its intellectual property rights, Myriad is the sole commercial provider of genetic testing related to breast and ovarian cancer associated with the BRCA1 and BRCA2 genes. The plaintiffs asserted that Myriad's gene patent claims were invalid because, in their view, human genes were naturally occurring materials that do not constitute patentable subject matter. The U.S. District Court for the Southern District of New York sided with the plaintiffs and held that Myriad's gene patent claims were invalid under 35 U.S.C. Section 101. Judge Sweet reasoned that Myriad's claimed isolated DNA was not "markedly different from native DNA as it exists in nature" and therefore could not be patented. Following an appeal, the Federal Circuit reversed this holding. The Court of Appeals reasoned that "isolated" DNA is not merely "purified" DNA—rather, it has been "manipulated chemically so as to produce a molecule that is markedly different from that which exists in the body." Under this reasoning, human genes consist of patentable subject matter. The Supreme Court subsequently agreed to hear the Myriad case but did not issue a ruling in the matter. Rather, on March 26, 2012, the Court vacated the judgment and remanded the matter back to the Federal Circuit with instructions to reconsider the appeal in view of Mayo v. Prometheus . On August 12, 2012, the Federal Circuit again held that isolated human genes could be patented because, as explained by the Court of Appeals, "each of the claimed molecules represents a nonnaturally occurring composition of matter." It remains to be seen whether the Federal Circuit will rehear and reconsider its decision, or whether the Supreme Court will rule on the matter itself. One other aspect of the Myriad litigation bears mention. Myriad has also raised the argument that the plaintiffs do not possess "standing" to pursue their lawsuit because they are not directly harmed by the existence of the patents. If this argument proves to be successful, a determination of whether genes may be patented or not would await future litigation. Should the courts reach a definitive ruling about gene patenting in Myriad , the implications for the biotechnology industry could potentially be significant. Dennis Crouch, a member of the law faculty of the University of Missouri, observed that under the reasoning of the District Court for the Southern District of New York, "essentially all gene patents are invalid." Because the USPTO has reportedly issued patents covering over 40,000 genes, the Myriad ruling will potentially impact a significant amount of intellectual property. Congressional Issues and Options Some observers believe that Mayo v. Prometheus may prompt legislative review of the patentability of diagnostic methods, gene patents, and biotechnology more generally. If Congress believes that the current circumstances with respect to patentable subject matter are satisfactory, then no action need be taken. Should Congress choose to take action, however, a number of options exist. One possibility is an amendment to Section 101 of the Patent Act stipulating that certain subject matter is or is not patentable. An example of this approach may be found in legislation introduced, but not enacted, in the 110 th Congress. The Genetic Research and Accessibility Act, H.R. 977 , would have provided: Notwithstanding any other provision of law, no patent may be obtained for a nucleotide sequence, or its functions or correlations, or the naturally occurring products it specifies. The proposed amendment would not have applied to a patent issued prior to the date of enactment of the Genetic Research and Accessibility Act. Another option is to allow patents on particular inventions to issue, but to limit the remedies available to proprietors of such patents. The Patent Act currently stipulates that damages and injunctions are not available for patent infringement caused by "a medical practitioner's performance of a medical activity" under certain circumstances. This provision could potentially be amended to include other categories of inventions. Such an approach was taken by the Genomic Research and Diagnostic Disability Act of 2002, which was introduced, but not enacted, in the 107 th Congress. That legislation would have created a research exemption from infringement for research on genetic sequence information and an infringement exemption for genetic diagnostic testing. Concluding Observations In Mayo v. Prometheus , the Supreme Court arguably limited the ability of medical innovators to patent diagnostic methods. The implications of this ruling for other laws and products of nature, including human genes, may soon be realized. Some have welcomed judicial decisions that narrow the scope of patentable subject matter, asserting that these patents are harmful to healthcare and medical research. On the other hand, some believe that patents in these fields provide powerful incentives for innovation and public disclosure of new technologies. As judicial rulings continue to influence the availability of patent protection in the healthcare and biotechnology fields, interested parties may encourage Congress to clarify the doctrine of patentable subject matter through legislative amendments.

The recent enactment of the Leahy-Smith America Invents Act (AIA), P.L. 112-29, suggests congressional interest in patents on diagnostic methods. In particular, Section 27 of the AIA required the U.S. Patent and Trademark Office to conduct a study on the patenting of genetic diagnostic tests. The 2012 decision of the Supreme Court in Mayo Collaborative Services v. Prometheus Laboratories, Inc. also addressed these sorts of patents. The Court's decision arguably placed severe limitations on the ability of inventors to obtain diagnostic method patents. Some observers have welcomed Mayo v. Prometheus, asserting that patents on diagnostic methods are harmful to healthcare and medical research. On the other hand, detractors of the opinion state that patents provide powerful incentives for innovation and public disclosure of new technologies. They believe that the Supreme Court's decision will negatively impact medical research in the areas of biotechnology and personalized medicine. The holding in Mayo v. Prometheus may impact another well-publicized litigation, Association for Molecular Pathology v. U.S. Patent & Trademark Office. More commonly known as Myriad—after the name of the patent holder—this litigation may determine whether patents may appropriately issue on human genes. Congressional policymakers may contend that current circumstances with respect to patentable subject matter are satisfactory and therefore may advocate that no further legislative action need be taken. Should Congress choose to take action, however, a number of options exist. One possibility is an amendment to the Patent Act stipulating that certain subject matter is or is not patentable. Another is to allow patents on particular inventions to issue, but to limit the remedies available to proprietors of such patents.

Background The United States has approximately 608,000 bridges on public roads subject to the National Bridge Inspection Standards mandated by Congress. About 48% of these bridges are owned by state governments and 50% by local governments. State governments generally own the larger and more heavily traveled bridges, such as those on the Interstate Highway system. Only 1.5% of highway bridges are owned by the federal government, primarily those on federally owned land. About 9% of all bridges carry Interstate Highways, and another 25% serve arterial highways other than Interstates. Interstate and other major arterial bridges carry almost 80% of average daily traffic. The highest traffic loads are on Interstate Highway bridges in urban areas; these account for only 5% of all bridges, but carried 37% of average daily traffic in 2013. Bridge Conditions Federal law requires states to periodically inspect public road bridges and to report these findings to the Federal Highway Administration (FHWA). This information permits FHWA to characterize the existing condition of a bridge compared with one newly built and to identify those that are structurally deficient or functionally obsolete. A bridge is considered structurally deficient "if significant load-carrying elements are found to be in poor or worse condition due to deterioration and/or damage, or if the adequacy of the waterway opening provided by the bridge is determined to be extremely insufficient to the point of causing intolerable traffic interruptions." A functionally obsolete bridge, on the other hand, is one whose geometric characteristics—deck geometry (such as the number and width of lanes), roadway approach alignment, and over/underclearances—do not meet current design standards or traffic demands. A bridge can be both structurally deficient and functionally obsolete, but structural deficiencies take precedence in classification. As a result, a bridge that is both structurally deficient and functionally obsolete is classified in the FHWA's National Bridge Inventory as structurally deficient. A bridge classified as structurally deficient or functionally obsolete is not necessarily unsafe, but may require the posting of a vehicle weight or height restriction. The proportion of bridges classified as structurally deficient has declined 57% since 1990, and fell almost every year between 1990 and 2013 (see Figure 1 ). In 2013, approximately 64,000 bridges, or 10% of the total number of bridges, were classified as structurally deficient, as compared to 138,000 in 1990. The number of functionally obsolete bridges fell from 100,000 to 84,000 over the same period, a drop of 16%. The share of bridges classified as functionally obsolete in 2013 was 14%. In total, then, almost a quarter of U.S. bridges were deficient in that year. Bridges on the most heavily traveled roads, such as Interstates and other arterials, are generally in better condition than bridges on more lightly traveled routes. For example, 4.4% of urban Interstate Highway bridges were considered structurally deficient in 2013, about half of the 9.4% structural deficiency rate of urban bridges on local roads. Likewise, 3.8% of rural Interstate Highway bridges were structurally deficient in 2013, about a quarter of the 16.5% structural deficiency rate of bridges on rural roads handling local traffic. As the bridges on local roads are usually owned by local governments, locally owned bridges had more than twice the structural deficiency rate of state-owned bridges in 2013. Some 14.1% of locally owned bridges were categorized as structurally deficient in 2013, versus 6.7% of state-owned bridges. For bridge deficiency and obsolescence rates by state see Appendix A . Future Bridge Funding Needs Every two years, FHWA assesses the condition and performance of the nation's highways and bridges, documents current spending by all levels of government, and estimates future spending needs to maintain or improve current conditions and performance. As with any attempt to forecast future conditions, a host of simplifying assumptions, omissions, and data problems influences these estimates. Among other things, they rely on forecasts of travel demand and assume that the most economically productive projects (i.e., projects with the highest benefits relative to costs) will be implemented first. Despite such uncertainties and assumptions, these estimates provide a way to assess the level of current spending compared with what would be needed in the future under different scenarios. The 2013 needs assessment, the most recent available, shows that in 2010 $100.2 billion was spent on capital improvements to the nation's highways and bridges. Of that amount, $82.2 billion was spent on roadways and $18.0 billion was spent on bridges. The vast majority of the expenditure on bridges, $17.1 billion, went to rehabilitate or replace existing bridges, with the remainder devoted to construction of new bridges. The $17.1 billion spent in 2010 was an increase of 35% over the $12.7 billion spent in 2008. The funding increase was largely due to the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ; ARRA). Because of the modeling involved, FHWA's future needs estimates for bridges are limited to fixing deficiencies in existing bridges only when the benefits outweigh the costs. The future needs estimate can therefore be measured against the $17.1 billion expenditure in 2010. The U.S. Department of Transportation (DOT) estimates that fixing all existing bridge deficiencies would cost $106.4 billion (in 2010 dollars). Of course, fixing all deficient bridges overnight is not feasible. FHWA, therefore, estimates how this investment backlog will change at various levels of spending over the 2011-2030 period, taking into account the deterioration of existing bridges over that period. The results of this analysis, seen in Figure 2 , are strongly influenced by the ARRA funding. ARRA appropriated general funds for highways to add to the funding from the highway trust fund that had already been authorized. According to FHWA, to keep the backlog at the 2010 level through 2030 would require $8.9 billion annually (in 2010 dollars), less than the level of spending in 2010. To eliminate the backlog by 2030 would require an investment of $20.2 billion annually, implying roughly a 1.6% annual increase in inflation-adjusted spending. Spending between $8.9 billion and $20.2 billion per year, FHWA estimated, would improve the conditions of the nation's bridges but would not entirely eliminate the investment backlog. At the level of spending in 2010, $17.1 billion per year, the total dollar cost of correcting all remaining deficiencies would decline by 93% by 2030. Federal and State Roles Federal assistance for the maintenance, rehabilitation, and construction of highway bridges comes principally through the federal-aid highway program administered by FHWA. FHWA, however, does not make the determination as to which bridges should benefit from federal funding. Almost all funding under the federal-aid highway program is distributed to state departments of transportation, which determine, for the most part, where and on what the money is spent. States must comply with detailed federal planning guidelines as part of the decision-making process, but otherwise are free to spend their federal highway funds in any way consistent with federal laws and regulations. Bridge projects are developed at the state level, and state departments of transportation let the contracts, oversee the construction process, and provide for the inspection of bridges. The 2012 surface transportation reauthorization, the Moving Ahead for Progress in the 21 st Century Act (MAP-21, P.L. 112-141 ), further strengthened the states' ability to determine spending on bridges by eliminating the Highway Bridge Program (HBP), which provided money to the states specifically for bridge construction and rehabilitation. Bridge improvements remain eligible for funding under two programs created by MAP-21 that distribute funds to the states under formulas specified in the law, the National Highway Performance Program (NHPP) and the Surface Transportation Program (STP). Under both programs, the states determine how much of their federal funding goes for bridges as opposed to other uses, primarily highway construction and improvement. These funds may also be used for the seismic retrofitting of bridges to reduce earthquake failure risk. FHWA is involved in the project decision-making process in two significant ways. First, MAP-21 (§1111) requires FHWA, in consultation with the states and federal agencies, to classify public road bridges according to "serviceability, safety, and essentiality for public use ... [and] based on that classification, assign each a risk-based priority for systematic preventative maintenance, replacement or rehabilitation." However, none of the MAP-21 programs appear to require the new classification and risk-based priority metric be used to determine program eligibility. In addition to developing this metric, FHWA imposes certain performance measures that states must meet to avoid funding penalties pursuant to MAP-21. For example, if more than 10% of the deck area of a state's bridges on the National Highway System is structurally deficient, the state is subject to a penalty requiring it to dedicate an amount of its NHPP funds equal to 50% FY2009 HBP spending to bridge projects. While the HBP existed, bridge program apportionments—the money states were entitled to receive each year under the HBP—were trending upward. Spending (obligations) on bridge projects, however, tended to be substantially lower than the apportioned amounts. The transfer by the states of HBP funding to other highway programs, while permitted by law, was controversial following the collapse of the I-35W Bridge in Minnesota in 2007. At the time, critics saw the widening gap between annual apportionments and spending as evidence of state transfer of resources to nonbridge uses. However, bridge spending was an eligible expense under all the core formula programs, not just HBP, and total federal grants obligated for bridge work exceeded HBP apportionments every year between FY2007 and FY2012 ( Table 1 ). Under MAP-21, which eliminated the HBP, the states have even more freedom to decide how much of their federal surface transportation grants to spend on bridges. During FY2013, states obligated roughly 8% more federal-aid highway funds for bridge work than in FY2012. However, the FY2013 level was substantially lower than during FY2008 through FY2011. Those higher levels reflect the availability of stimulus funds during FY2009 through FY2011. Typically, federal-aid highway funds are available for obligation for four years, so through FY2016 the states may continue to obligate funds authorized prior to MAP-21. Bridge Inspection Under the National Bridge Inspection Program (NBIP), all bridges longer than 20 feet on public roads must be inspected by state inspectors or certified inspection contractors, based on federally defined requirements. Federal agencies are subject to the same requirements for federally owned bridges, such as those on federal lands. Data from these inspections are reported to FHWA, which uses them to compile a list of deficient or functionally obsolete bridges. States may use this information to identify which bridges need replacement or repair. FHWA sets the standards for bridge inspection through the National Bridge Inspection Standards (NBIS). The NBIS set forth how, with what frequency, and by whom bridge inspection is to be completed. The standards provide the following: Each state is responsible for the inspection of all public highway bridges within the state except for those owned by the federal government or Indian tribes. Although the state may delegate some bridge inspection responsibilities to smaller units of government, the responsibility for having the inspections done in conformance with federal requirements remains with the state. Inspections can be done by state employees or by certified inspectors employed by consultants under contract to a state department of transportation. Inspection of a federally owned bridge is the responsibility of the federal agency that owns the bridge. The NBIS set forth the standards for the qualification and training of bridge inspection personnel. In general, the required frequency of inspection is every 24 months. States are to identify bridges that require less than a 24-month frequency. States can also, however, request FHWA approval to inspect certain bridges on an up to 48-month frequency. Frequency of underwater inspection is generally 60 months but may be increased to 72 months with FHWA permission. The most common on-site inspection is a visual inspection by trained inspectors, one of whom must meet the additional training requirements of a team leader. Damage and special inspections do not require the presence of a team leader. Load rating of a bridge must be under the responsibility of a registered professional engineer. Structures that cannot carry maximum legal loads for the roadway must be posted. The vast majority of inspections are done by state employees or consultants working for the states. FHWA inspectors do, at times, conduct audit inspections to assure that states are complying with the bridge inspection requirements. FHWA also provides on-site engineering expertise in the examination of the reasons for a catastrophic bridge failure. However, FHWA bridge engineers have only limited time available for audits and other bridge oversight. FHWA's Emergency Relief Program The Emergency Relief Program (ER) provides funding for bridges damaged in natural disasters or that are subject to catastrophic failures from an outside source. The program provides funds for emergency repairs immediately after the failure to restore essential traffic, as well as for longer-term permanent repairs. ER is authorized at $100 million per year, nationwide. Funding beyond this is commonly provided for in supplemental appropriations acts. In the case of most large disasters, additional ER funds are provided in an appropriations bill, usually a supplemental appropriations bill. The federal share of emergency repairs to restore essential travel during the first 180 days following a disaster is 100%. Later repairs, as well as permanent repairs such as reconstruction or replacement of a collapsed bridge, are reimbursed at the same federal share that would normally apply to the federal-aid highway facility. Recently, Congress has sometimes legislatively raised the federal share under the ER program to 100% (as happened with the I-35W collapse in Minnesota). As is true with other FHWA programs, the ER program is administered through state departments of transportation in close coordination with FHWA's division office in each state. ER was the source of funds for replacement of the I-5 Skagit River Bridge in Washington State, which collapsed on May 23, 2013, after being struck by a truck that was hauling an oversized load. Issues for Congress The Skagit River Bridge collapse led to warnings that the large number of structurally deficient bridges indicates an incipient crisis, even though the bridge itself was not structurally deficient. FHWA data do not substantiate this assertion. The numbers of bridges classified as structurally deficient or functionally obsolete have fallen consistently since 1990, and the proportion of all highway bridges falling into one or the other category is the lowest in decades. The condition of roads has not experienced the same degree of improvement as the condition of bridges. This raises the policy question of what priority should go to bridge repairs as opposed to roadway repairs. In MAP-21, Congress implicitly addressed this issue by giving states greater flexibility to use federal funding for roads or for bridges, at their discretion. By doing this, Congress chose not to mandate bridge spending levels sufficient to reduce the number of deficient bridges by a certain date or eliminate deficient bridges altogether (described in Figure 2 ). Instead, responsibility for determining the amount that should be spent on bridges each year was assigned to the states. A related issue is one of terminology. The terms "structurally deficient" and "functionally obsolete" are not synonymous with "unsafe." An effort to eliminate all structurally deficient bridges quickly could lead to inefficient spending if a significant percentage of these bridges do not actually have major safety problems. Under MAP-21, FHWA is to develop performance measures in regard to bridges. The speed of their development and the effectiveness of implementation will be oversight issues for Congress. Federal Pressure for State Bridge Spending To encourage state spending on structurally deficient bridges, MAP-21 sets a penalty threshold under the NHPP: any state whose structurally deficient bridge deck area on the National Highway System within the state's borders exceeds 10% of its total National Highway System bridge deck area for three years in a row must devote NHPP funds equal to 50% of the state's FY2009 Highway Bridge program apportionment to improve bridge conditions during the following fiscal year and each year thereafter until the deck area of structurally deficient bridges falls to 10% or below. Even if a state were required to spend more of its federal highway funding on bridges (and therefore less on roadway projects) due to this penalty, its mandated spending on deficient bridges would be less than was required prior to the enactment of MAP-21. Given the lags in state reporting and the time required to complete major bridge projects, it is not clear whether the states' desire to spend their STP or NHPP funds on nonbridge projects is obstructing the declared national policy of reducing the number of deficient bridges. Providing More Money for Bridges Federal motor fuel tax revenues, which have provided most of the funding for the federal-aid highway program since 1956, have been insufficient to support the program as authorized by Congress for several years. MAP-21 allocated money from the Treasury's general fund for highway and bridge programs in FY2013 and FY2014. The Highway and Transportation Funding Act of 2014 ( P.L. 113-159 ) also used transfers to extend MAP-21's funding levels and policies for eight months, through May 31, 2015. If Congress wishes to increase spending on bridges in a long-term reauthorization bill, it has a number of options: Provide general fund monies to accelerate the repair of structurally deficient and functionally obsolete bridges. Consider resurrecting a stand-alone program for structurally deficient bridges, which would essentially reverse the change made in MAP-21 and would force the states to provide minimum spending levels for bridge maintenance and repair. Raise the fuel taxes that finance the vast majority of surface transportation outlays, possibly with a portion of the increase dedicated to a federal bridge program. Emphasize public-private partnerships (P3s) as a mechanism to help reduce the number of structurally deficient bridges, for example, by allowing states to offer long-term leases of toll facilities to private investors in return for large up-front payments that could be used to supplement normal state and federal spending on bridge replacement and repair. Encourage Tolling of Nontolled Bridges Heavily traveled bridges can be attractive targets for conversion to toll facilities: many bridges have no convenient alternatives, so many drivers may be unable to avoid paying whatever toll is imposed. An expansion of tolling could allow for more rapid improvement of major bridges. The revenue stream provided by tolls can also make bridge building and reconstruction an attractive investment for private entities that are interested in participating in a P3 and can help projects become eligible for a federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. Bridge tolls, however, are often very unpopular, and their acceptance varies greatly from region to region. Some states have sought to make bridge tolls more acceptable within a state by charging out-of-state users at a much higher rate than in-state residents, a practice that may face legal challenges. Redirect Spending Away from Off-System Bridges Historically, nearly all federal highway funding was restricted to roads and bridges on the federal-aid highway system. The Surface Transportation Assistance Act of 1978 ( P.L. 95-599 ) stipulated that not less than 15% of a state's bridge apportionments nor more than 35% be spent "off-system." Off-system spending of federal bridge funds has been required in every highway authorization bill ever since. Under MAP-21, STP funds equal to at least 15% of the amounts apportioned to a state for the Highway Bridge Program in FY2009 are to be obligated for off-system bridge projects. Off-system bridges, by definition, are inherently local in nature. By eliminating the set-aside for off-system bridges, Congress could enable states to spend more of their federal funds on bridges that are more heavily used, but states would not be required to spend funds for that purpose without additional legislation. Maintenance The FHWA requirement that federal funding be directed to bridges with relatively low sufficiency ratings may encourage states to substitute bridge replacement for maintenance-type projects. During FY2012, of the total obligation of federal funds from all FHWA sources, 11% was obligated for new bridges, 55% was obligated for bridge replacement, 4% was for major rehabilitation, and 30% was for minor bridge work. Although these figures indicate that the lion's share of bridge funding has been obligated for new and replacement bridges, these percentages are less than they were in the late 1990s. The percentage spent on minor bridge work has increased significantly since then. Still, the case can be made that as the number of deficient bridges decreases it might make sense to shift spending toward preventive maintenance. Oversight and Inspection Issues20 Risk-Based Approach to Federal Bridge Oversight MAP-21 requires that the National Bridge Inventory classify bridges according to serviceability, safety, and essentiality for public use and, based on this classification; assign each bridge a risk-based priority for systematic preventative maintenance, replacement, or rehabilitation. The risk-based approach would provide an additional metric to the traditional focus on bridges that are "structurally deficient" and "functionally obsolete." In particular, the risk-based approach, which is still under development by FHWA, could provide statistics that more clearly identify unsafe bridges. An August 21, 2014, report by the Department of Transportation Office of Inspector General Audit Report found that FHWA had not fully implemented all MAP-21 bridge provisions, including the provision that DOT establish a risk-based bridge prioritization process. Once the metric is developed, Congress could consider making its use an eligibility requirement for bridge project funding under NHPP and STP. Oversight of State Transportation Implementation Plans (STIPs) MAP-21 maintains the previous requirement that states' spending of federal funds on bridges be based on priorities established in state transportation implementation plans (STIPs). Following the elimination of the Highway Bridge Program in 2012, Congress may want to examine state spending on bridges under MAP-21 and, in particular, whether STIPs pay adequate attention to bridge needs as opposed to highway needs. Inspection Auditing FHWA could be directed to take a more active role in ensuring that inspections done by the states or their contractors are done in conformance with the National Bridge Inspection Standards, including on-site audits of state inspections. However, to have an impact, FHWA would have to be provided with sufficient funding to hire additional engineers and support personnel at FHWA Division offices and dedicate these resources to oversight of the inspection program. Inspector Training and Personnel Qualifications MAP-21 included requirements for establishment of minimum inspection standards and an annual review of state compliance with the standards established in the act. Within two years of enactment the Secretary of Transportation is to update the standards for the methodology, training, and qualifications of inspectors. Congress may wish to oversee implementation of these provisions. Appendix A. Bridge Condition by State Appendix B. Bridge Obligations by FHWA Program: FY2007-FY2013

Of the 608,000 public road bridges in the United States, about 64,000 (10%) were classified as structurally deficient in 2013, and another 84,000 (14%) were classified as functionally obsolete. The number of structurally deficient and functionally obsolete bridges has been declining steadily for more than two decades, and those that remain are not necessarily unsafe. Nonetheless, several high-profile bridge failures, including the 2013 collapse of a bridge on Interstate 5 in Washington State, have drawn public attention to the condition of bridges on federal-aid highways. As it debates reauthorization of the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), the 2012 law which reauthorized federal surface transportation programs, Congress may consider mandating increased spending on bridge improvements. The choice Congress makes will largely determine how quickly deficient and obsolete bridges will be replaced or improved. At the spending level of 2010, which included a significant amount of money provided by the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), the Federal Highway Administration (FHWA) estimates that the bridge investment backlog (in dollar terms) would be reduced by 93% by 2030. Reducing the backlog to near zero during the same period is estimated to require an annual spending rate about 2% higher than the 2010 level. MAP-21 eliminated the former Highway Bridge Program, which distributed federal money specifically for bridge improvements. States may use funds received under two major FHWA programs, the National Highway Performance Program and the Surface Transportation Program, for bridge repairs or construction, but the decision about how much of its funding to devote to bridges rather than roadway needs is up to each state. FHWA enforces certain planning requirements and performance standards established in MAP-21, but it does not make the determination as to which bridges should benefit from federal funding. Congressional issues regarding the nation's highway bridge infrastructure include Given the steady decline in the number of structurally deficient bridges during recent decades, should Congress accelerate work on the remaining deficient bridges? Should Congress encourage the states to spend more of their federal funds on their deficient bridges, potentially reducing the flexibility states were granted under MAP-21? Given large projected shortfalls in highway trust fund revenues relative to authorized spending, should Congress encourage increased use of tolling and public-private partnerships (P3s) to improve bridges? Should Congress redirect spending away from off-system bridges to more heavily used bridges on the designated federal-aid highways? Congressional oversight of bridge conditions could be complicated by the absence of a freestanding program. How quickly can FHWA develop the MAP-21 performance measures to report to Congress on progress on bridge conditions? A brief CRS video on this subject may be viewed at http://www.crs.gov/video/detail.aspx?PRODCODE=WVB00009&Source=search.

Background Trade Adjustment Assistance Community College and Career Training (TAACCCT) grants are competitive grants to institutions of higher education (IHEs) to support career training programs that can be completed in two years or less. Statute specifies that TAACCCT-funded programs should target workers who have been adversely affected by international trade and are eligible for the Trade Adjustment Assistance for Workers (TAAW) program. TAAW offers subsidized training and other supports for displaced workers who have lost their jobs due to foreign trade. While the TAACCCT program targets TAAW-eligible workers, other adults may also be served by programs with TAACCCT funding. The program is administered by the Department of Labor (DOL). TAACCCT was created as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) and is codified as part of the Trade Act of 1974, as amended. The Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) provided four years of annual mandatory funding through FY2014. Additional details are in the " Legislative and Funding Histories " section at the end of this report. The statutory provisions of TAACCCT are somewhat general. DOL has not established regulations related to the program, so the department's solicitation for grant applications (SGA) clarifies many details. To present the most up-to-date information possible, this report will focus on program elements and applicant requirements as they are conveyed in the most recent SGA, issued in April 2014. Program Description Purpose of the Program and Target Population Statute authorizes grants for "developing, offering, or improving educational or career training programs" for TAAW-eligible workers. The most recent SGA operationalizes these aims by establishing three program objectives: (1) increasing the attainment of employment-related credentials, (2) developing, implementing, and replicating innovative training curricula, and (3) improving employment outcomes. The most recent SGA also notes that while the statutory purpose of the program is to meet the training needs of TAAW-eligible workers, it expects that grantees will develop and deliver programs that are appropriate for a broad range of adult workers. The SGA also specifies that TAACCCT grants emphasize capacity-building and the transferability and scalability of the projects they fund. All intellectual property created under the grants is openly licensed for free use, adaptation, and improvement by other education and training providers. Eligible Institutional Structures Statute specifies that eligible institutions are IHEs that offer programs that can be completed in no more than two years. The most recent SGA further specifies that qualified IHEs include public, private not-for-profit, and private for-profit institutions. Grantee institutions must partner with other local stakeholders. These partnerships are described in the " Core Elements of TAACCCT Projects " section later in this report. IHEs may apply for TAACCCT funding as an individual institution or as a member of a multi-institution consortium. Consortia may be from a single state or may be from multiple states if the consortium members share a common labor market. Each consortium application must specify a lead institution that will have fiscal and administrative responsibility over the grant. Institutions in the 50 states, the District of Columbia, Puerto Rico, and other U.S. territories are eligible to apply for TAACCCT grants. Since the TAAW program is limited to workers in the 50 states, the District of Columbia, and Puerto Rico, the SGA notes that U.S. territories other than Puerto Rico may be at a disadvantage in the application process because they do not have TAAW-eligible workers and therefore will not be able to meet all of the SGA's criteria. The SGA states the intention of awarding approximately $150 million of the $450 million available for grants in FY2014 to single-institution applicants. The remaining funds (approximately $300 million) are intended for larger awards to consortium applicants. As required by statute, at least 0.5% of total funds for grants (approximately $2.25 million) must be allocated to institutions in each state. This minimum can be met through a single-institution award or as an institution's share of funding as part of a consortium. Allowable Uses of Funds Allowable uses of TAACCCT funds are the development, improvement, and expansion of education and career training programs. This may include both personnel and non-personnel costs. Grant funds may be used to hire and train staff that will develop or deliver new curricula or other program components. Allowable non-personnel costs include purchasing classroom supplies or technological investments that directly support grant activities. Capital expenditures may be allowable with approval from DOL. Non-allowable activities include any kind of payment to training participants, including using grant funds for participants' tuition, fees, or other personal expenditures. In all cases, TAACCCT funds must supplement and not supplant any other sources that are funding existing activities. Duration of Grants The most recent SGA specified that grants are for a 48-month period of performance. Grantees must develop and offer programs within the first 36 months and spend the final 12 months gathering information and reporting outcome data. Grant Application Requirements and Award Criteria Statute establishes basic requirements for grant proposals and general criteria for choosing grantees. The law also specifies that DOL will promulgate guidelines for the submission of grant proposals. These guidelines have been issued through SGAs and both clarify and expand upon the requirements established in statute. Statutory Requirements Statute specifies that grant proposals must describe the proposed project and how it will develop, offer, or improve a training program; how the project will meet the needs of TAAW-certified workers in the community; any previous experience the applicant has in providing training to TAAW-eligible workers (a lack of experience does not disqualify an applicant); outreach the applicant has conducted in the community to identify unmet training needs that will likely result in employment outcomes; and outreach to local employers who demonstrate a commitment to hiring individuals who partake in the proposed training. Statute further specifies that, when awarding grants, DOL will consider the merits of the proposal to develop, offer, or improve training programs to be made available to TAAW-eligible workers; the employment opportunities available to workers who complete a program that is developed, offered, or improved by TAACCCT funding; and the prior and anticipated demand for training programs by TAAW-eligible workers served by the applying institution as well as the capacity of existing programs to meet anticipated demand. Core Elements of TAACCCT Projects The most recent SGA specifies an expanded set of requirements, establishing six core elements of TAACCCT projects. The project's approach, which accounts for 55% of the criteria on which applications are evaluated, must demonstrate the following core elements. 1. Evidence-based design. Proposed programs must demonstrably improve educational and employment outcomes. Applicants replicating or adapting existing strategies should provide evidence of effectiveness. Applicants proposing new strategies should cite "preliminary research findings, related research findings, and/or reasonable hypotheses to support the design of the program[.]" 2. Career Pathways . Applicants must develop a curriculum that offers a clear sequence of coursework and/or credentials focused on one or more industry sectors. Applicants must also offer accelerated and contextualized remediation, competency-based assessments, stacked and latticed credentials, and transferability of credits to other two-year and four-year institutions within the state or consortium. 3. Advanced online and technology-enabled learning . TAACCCT proposals must consist of courses that are conducted online, in hybrid (combining traditional and online coursework), or otherwise incorporate technology. The SGA suggests that applicants may use technology or online courses to "enable rolling and open enrollment processes, modularize content delivery, simulate assessments and training, and accelerate course delivery strategies." The SGA also expressed interest in technology that will customize content to the student's prior knowledge or expand upon technology developed in prior TAACCCT projects. 4. Strategic alignment with the workforce system and other stakeholders . Applicants must partner with at least one local Workforce Investment Board and the state agency that administered the TAA for workers program. Applicants must illustrate local needs and avoid duplication by demonstrating alignment with the governor's Economic Development plan and the state's Workforce Investment Act-Wagner Peyser (WIA-WP) integrated workforce plan. Applicants are also encouraged to coordinate their proposal with any private sector or philanthropic entities that may align with the proposed project. 5. Sector strategies and employer engagement . Applicant institutions must partner with at least two employers and a regional industry representative for each industry that the proposed program targets. These partners are expected to support curriculum development and provide work-based training opportunities, as appropriate. 6. Alignment with previously-funded TAACCCT projects . Applicants are expected to research projects that received funding under prior rounds of TAACCCT and design their applications to decrease duplication and strengthen the geographic reach of projects. Since all resources developed in previous TAACCCT grants are openly licensed, applicants may also align with prior grantees by incorporating existing resources into a new curriculum. Reporting and Evaluation Statute requires DOL to report annually to the Senate Committee on Finance and the House Committee on Ways and Means on each TAACCCT grant awarded and the impact of each award on TAAW-eligible workers. The SGA establishes reporting requirements for grantees. Grantees must provide quarterly financial reports, quarterly progress reports, and annual performance reports. The last annual performance report will serve as the grant's final performance report and should include annual and cumulative information on the grant's activities. Single institution grantees will submit data directly to DOL. Consortium member institutions will submit reports to the consortium's lead institution, which will compile data and submit a single report to DOL. The SGA specifies that each TAACCCT application must also include a budget, design, and implementation plan for a third-party evaluation of the proposed project. All evaluation designs must include (1) impact or outcome analysis of participants in grant-funded activities, and (2) implementation analysis. Grantees must also participate in a national evaluation that will be conducted by a contractor on behalf of DOL. Legislative and Funding Histories Legislative History TAACCCT was created by the Trade Globalization Adjustment Assistance Act of 2009 (TGAAA), part of the ARRA. TAACCCT was in a subsection of TGAAA that created several programs targeting communities that were adversely affected by international trade. The Trade Adjustment Assistance Extension Act of 2011 (TAAEA; Title II of P.L. 112-40 ) repealed all components of the subsection except TAACCCT. Funding History The original statute outlined the provisions of the TAACCCT and authorized $40 million in each of FY2009 and FY2010 as well as $10 million for the first quarter of FY2011. It also specified that no institution could receive more than one grant or a grant in excess of $1 million. No funds were appropriated for TAACCCT until March 30, 2010, when President Obama signed the Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ). This act provided $500 million in mandatory funding for TAACCCT in each of the four years from FY2011 through FY2014 (see Table 1 ). This act also specified that institutions in each state receive at least 0.5% of each year's TAACCCT funding and explicitly supersedes the $1 million per-state limit established by prior law. Funding levels in FY2013 and FY2014 were reduced under sequestration. Application and Award Activity The first SGA for TAACCCT funding was issued by DOL in January 2011 and closed in April 2011. DOL announced the grantees under this SGA on September 27, 2011. Among the grantees were 17 single institution applicants, 18 single-state consortia, and 5 multi-state consortia. Each state received at least $2.5 million in funding either directly or as their share of a grant to a multi-state consortium. The second SGA was issued in February 2012 and closed May 24, 2012. DOL announced the grantees on September 19, 2012. Among the grantees were 27 community college and university consortia and 27 individual institutions. In its announcement, DOL stated that the 25 states without a winning submission for an individual institution would each be contacted to develop a qualifying project that would be awarded $2.5 million. The third SGA was issued in April 2013. DOL announced the grantees September 18, 2013. The grants included 23 awards to individual institutions and 20 awards to consortia. In its announcement, DOL stated that 14 states and territories were not awarded funds during the competitive process and would be contacted by DOL to develop a qualifying project that would be awarded a grant of approximately $2.5 million. The fourth SGA was issued in April 2014. This SGA represents the final round of TAACCCT grants under the funding provided under HCERA. The SGA's closing date was July 7, 2014.

Trade Adjustment Assistance Community College and Career Training (TAACCCT) grants are competitive grants to institutions of higher education to support the development, offering, and improvement of career training programs that can be completed in two years or less. The program targets workers who have been adversely affected by international trade, though non-trade-affected workers may also participate in TAACCCT-funded programs. TAACCCT is administered by the Department of Labor (DOL). It was created by the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) and is authorized under the Trade Act of 1974, as amended. The Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152) provided $500 million per fiscal year in mandatory appropriations for TAACCCT for FY2011 through FY2014. In FY2013 and FY2014, the funding for the program was reduced to $474.5 million and $464 million, respectively, due to sequestration. Funds equal to at least 0.5% of the total annual funding for grants must be awarded to institutions in each state. TAACCCT grantees may use funds to design, develop, and offer career training programs. Allowable uses of funds include personnel as well as materials and other expenses related to content development and delivery. Under the most recent solicitation for grant applications (SGA), TAACCCT grants provide a 48-month period of performance. This period includes 36 months for the design, development, and delivery of a training program and 12 months for data gathering and evaluation. Statute requires that grant applications include a description of the proposed project and how it will serve trade-affected workers. Statute further specifies that grants will be judged on the merit of the proposed project and the local employment prospects for individuals who would complete the proposed program. SGAs have specified an expanded set of criteria for program grants to operationalize the aims of the TAACCCT program. The first SGA was issued in January 2011 and grantees were announced in September 2011. The second SGA was issued in February 2012 and grantees were announced in September 2012. The third SGA was issued in April 2013 and grantees were announced in September 2013. The fourth SGA, representing the final round of grants under the HCERA funding, was issued in April 2014.

Introduction Most measures considered by the Senate are taken from its Calendar of Business, which lists measures available for floor consideration under the heading "General Orders." Usually, measures are placed on the calendar under General Orders when they are reported by the committee to which they have been referred. A bill or joint resolution may also be placed directly on the Calendar of General Orders upon introduction (or receipt from the House) under provisions contained in Senate Rule XIV. Normally, introduced measures are immediately read twice and referred to a committee. If objection is heard to a second reading on the same day, the measure is held over until the next day. After a second reading, if objection is heard to further proceedings, the measure is not referred but is placed directly on the Calendar of General Orders. Conference reports do not come up for consideration from the calendar. Instead they may be called up at any time when the conference papers are filed at the "desk" in the Senate. Over the Senate's history, the majority leader has acquired responsibility for arranging the schedule of the Senate's business. Although the presiding officer of the Senate is required to recognize any Senator seeking recognition, the long-standing practice of the Senate is to allow the majority leader (or minority leader) to have priority for recognition if seeking recognition at the same time as another Senator. Likewise, the majority leader (or a designee, such as the bill manager) is, by custom, the one who offers motions or makes unanimous consent requests concerning the floor agenda and scheduling, including the consideration of legislation or the time for the Senate to meet, recess, or adjourn. In general, the standing rules of the Senate place a strong emphasis on the prerogatives of individual Senators, even at the expense of the majority. As a result, the Senate and its agenda are greatly influenced by the preferences of individual Senators. Senators may exercise their prerogatives at any time, but comity and compromise often lead Senators to relinquish the opportunity to exercise their prerogatives fully. In exchange they enable the Senate to conduct its business more efficiently and may receive corresponding concessions in relation to measures they favor. Unanimous Consent A large majority of measures reach the floor of the Senate when the Senate accepts a unanimous consent request to proceed to consider them made by the majority leader (or his designee). Normally, before the majority leader requests unanimous consent, he will consult with interested Senators to ensure that no objection will be made. Although the measures taken up are generally those that have been placed on the calendar, the Senate may, by unanimous consent, agree to take up any measure, whether it is already on the calendar, has been previously reported, or has even been introduced. Unanimous consent agreements may provide for the Senate to immediately proceed to consider a measure or may be made in advance of actual consideration. The agreement may provide that the measure in question come up at a specific time in the future or that the majority leader (usually in consultation with the minority leader) bring it up unilaterally at any time thereafter. Unanimous consent agreements to bring a measure to the floor, perhaps by discharging a Senate committee from its further consideration, as well as to pass it without debate, are common. Such agreements often permit Senators to have their statements placed in the Congressional Record as if they were delivered. The process of consultation and negotiation used to craft such unanimous consent agreements is sometimes referred to as the "clearance" process. The request for unanimous consent to take up a measure is often made in a freestanding form, but sometimes it is part of a more extensive unanimous consent request that also sets terms for the measure's consideration. The majority leader often seeks to negotiate such terms in advance, placing limits on the ability of Senators to debate a measure or offer amendments, because the rules of the Senate place no general limits on such prerogatives. These negotiations are designed to produce unanimous consent agreements (sometimes called "time agreements," since one of their primary objectives is to limit the time available for debate) that govern consideration of a measure in place of the regular standing rules of the Senate. Motions to Proceed Alternately, the majority leader may instead offer a motion that the Senate proceed to consideration of a measure, particularly if he has been unable to negotiate a unanimous consent agreement to do so. Although this motion requires only a simple majority for approval, in most parliamentary situations it is debatable. As a result, the motion to proceed is itself susceptible to extended debate. As a result, even before a measure can itself reach the Senate floor, there may be a filibuster on the question of whether the Senate should consider it at all. The majority leader may attempt to invoke cloture on the motion to proceed but may still be faced with a filibuster against the underlying measure. Since 1959, the rules of the Senate have allowed cloture to be invoked on the motion to proceed regardless of the type of underlying measure. On January 24, 2013, the Senate amended Senate Rule XXII to establish an additional, optional process of invoking cloture on a motion to proceed that differs in some respects from the normal cloture process. Under this process, if a cloture motion filed on a motion to proceed to consider a measure or matter is signed by both floor leaders, seven additional Senators not affiliated with the majority party, and seven additional Senators not affiliated with the minority party, it will be eligible for a vote on the next session day (as opposed to the second day of session, as would otherwise be the case). If cloture is invoked, the vote will immediately be put on the motion to proceed without the usual 30 hours of post-cloture consideration. Under certain circumstances the motion to proceed is not debatable. In particular, the motion is non-debatable when offered: on a conference report or amendments between the houses, on a measure considered pursuant to a rule-making statute, or during the morning hour. Although a non-debatable motion to proceed could be made during the morning hour on a wide variety of m easures, it is not a frequent occurrence in modern chamber practice. When the Senate adjourns it will routinely stipulate by unanimous consent that at the start of the next legislative day the morning hour be deemed to have expired and, thus, no motion to proceed be in order. Additionally, a motion made during legislative session to proceed to consider executive calendar business (described below) is also not debatable. Holds14 The practice of Senate majority leaders seeking advance clearance for unanimous consent to call up measures often serves to give them notice of potential objections to consideration from other Senators. A complex network of formal and informal avenues of information flows between the majority leader's office and those of all other Senators. This network is used to notify Senators of scheduling proposals from the majority leader's office and in return to provide the majority leader's office with specific requests or objections of other Senators. Similar information flows through the minority leader's office. Notifications of prospective objections to requests to take up a measure are referred to as "holds." Senate rules provide a Senator placing a hold with at least two possible ways of enforcing it. First, if a unanimous consent request to consider a measure is made despite the hold, the Senator may object to the request. Because one objection suffices to defeat a unanimous consent request, the majority leader will frequently refrain from propounding the request on the floor when one or more Senators have made it known that they would object. Second, if a request for unanimous consent meets objection, the majority leader may instead attempt to bring the measure up by offering a motion to proceed. Inasmuch as the motion to proceed is usually debatable, a Senator who wishes not to see the measure reach the floor may attempt to block its consideration by engaging in or threatening to engage in extended debate of this motion, a form of filibuster. Holds are given serious consideration by the majority leader when negotiating the Senate's floor agenda. A hold is the prerogative of any Senator and may be placed for any reason. In some cases, a hold may simply reflect a request by a Senator that he or she be given advance notice before a measure will be brought to the floor. In others, a hold may be part of a complex negotiation over unanimous consent agreements covering consideration of one or more measures or even part of a deliberate plan to block consideration. In recent years, there have been efforts to regulate the use of holds in the Senate. Section 512 of P.L. 110-81 , the Honest Leadership and Open Government Act, directs the majority and minority leaders of the Senate to recognize an anonymous hold only when public notice procedures outlined in that section are followed by Senators. At the beginning of the 112 th Congress (2011-2012), the Senate adopted a standing order that was designed to supplement this law. Executive Business Senate rules provide that executive business (i.e., treaties and nominations) be considered in executive session rather than in legislative session like other business of the Senate. Under Rule XXV, all treaties are referred to the Foreign Relations Committee and, when they are reported, are placed on the Executive Calendar. Treaties must lie over for one calendar day before any subsequent Senate consideration. Similarly, under Rule XXXI, nominations must be referred to the appropriate committee and cannot be voted on the same day they are received from the President or on the same day they are reported, except by unanimous consent. The majority leader will typically seek to obtain unanimous consent to go into executive session to consider specific executive business. However, a majority leader may alternatively make a motion to go into executive session that may specify a particular treaty or nomination to be considered. The motion to go into executive session is neither debatable nor amendable and is highly privileged. It takes precedence over all motions except to adjourn or recess and is not subject to a motion to table. If the motion provides that the Senate go into executive session to consider a specific piece of executive business, the effect is to raise executive business for consideration by non-debatable motion. Although infrequent in current practice, the Senate may also agree to a request or motion to go into executive session without an item of executive business being specified. In that case, once the Senate is in executive session, it may proceed to specific executive business by unanimous consent or by motion, but the motion would be debatable. On November 21, 2013, and April 6, 2017, the Senate voted to establish new precedents related to the number of votes necessary to bring debate to a close on presidential nominations. Under these precedents, invoking cloture on presidential nominations requires a vote of a majority of Senators present and voting (51 votes if all 100 Senators vote). Prior to the establishment of these two precedents, the cloture threshold for nominations was three-fifths of the Senators duly chosen and sworn, or 60 votes if there are no vacancies in the Senate's membership. Multiple nominations are frequently considered together ("en bloc") but only by unanimous consent. Upon objection by any Senator a nomination must be considered separately.

Two basic methods are used by the Senate to bring legislation to the floor for consideration: (1) The Senate, at the majority leader's request, grants unanimous consent to take up a matter, or (2) it agrees to his motion to proceed to consider it. Because the motion to proceed is subject to debate in most circumstances, it is less frequently used. Both methods are derived from the basic premise that the Senate as a body may decide what matters it considers. The Senate may also use the same two methods to bring up executive business (nominations and treaties). This report will be updated to reflect changes in Senate practice.

Introduction Security-related implications are of concern in the lead-up to a Presidential election. These concerns are present when it is known there will be a change of Administration or in cases where the sitting president is running for reelection against an opponent vying for the office. A prospective presidential transition period—ranging from candidate's campaign-related activities through placement of new Administration personnel—is a unique time in American politics and holds the promise of opportunity as well as a real or perceived vulnerability to the nation's security interests. On a given day the outgoing Administration has the ability to change the policies of a nation and possibly affect the international security environment, yet the following day the President and the national security leadership team may be replaced by a new set of leaders who could have very different strategy and policy goals. This political dynamic, coupled with the inherent uncertainty accompanying a presidential transfer of power, may provide an opportunity for those who wish to harm U.S. security interests. Unlike other man-made incidents that may occur with little warning, the presidential election period offers a broadly defined time frame in which an enemy of the United States may decide to undertake an incident of national security significance to manipulate the electoral process or change the nation's foreign and domestic policies. Presidential transitions during times of global uncertainty, U.S. involvement in military operations, and risks to national security-related activities are not unique to the 2012-2013 presidential election period (see Appendix A ). History shows that some state enemies purposefully select periods of government transition to undertake significant acts of violence with a desire to disrupt a peaceful transfer of power (see Appendix B ). While the mere occasion of presidential transition does not ensure an incident of national security significance will occur, security experts argue that this window of potential opportunity is not lost on the enemies of the United States. For example, according to a 2008 presidential transition-related report provided to the Department of Homeland Security (DHS) by the Homeland Security Advisory Committee (HSAC), "briefings, research, and recent history have provided an appreciation of the potential vulnerabilities during transition periods. Not only are we [United States] aware that vulnerabilities exist, but our enemies are as well." While no claims of attempting to influence the United States presidential election have been offered as a factor in the September 11, 2012, terrorist attacks on the U.S. consulate in Benghazi, Libya, incidences such as this could have policy implications during the transition period. The executive branch is not alone in attempting to ensure the country passes power from one Administration to the next in a safe and thoughtful manner. However, the outgoing and incoming Administrations are viewed as primarily responsible for addressing risks to the nation and taking actions to prevent and respond to any incident that may affect the electoral process. Whether the enemies of the United States choose to undertake action that may harm national security interests during this prospective period of transition or the new President experiences a relative peaceful period shortly after entering office, many national security issues will be awaiting a new Administration. How a newly elected president recognizes and responds to these challenges will "depend heavily upon the planning and learning that takes place during the transition from one Administration to another." During recent presidential transitions, the current and incoming Administrations and Congress have traditionally undertaken numerous activities to facilitate a smooth transfer of executive branch power. Some of the actions taken during a presidential transition period include consulting with government and private sector experts who have presidential transition expertise, providing information to the President-elect after the election and prior to the inauguration, offering operational briefings on ongoing national security matters to prospective presidential nominees and their staff, preparing briefings books and policy memos detailing the issues of most concern to the current Administration, and expediting security clearances for president-elect transition team members. Other activities that the current and incoming Administrations and Congress may wish to consider undertaking during the presidential transition period include pursuing public outreach efforts to discuss possible risks to the nation, involving the national security representatives of presidential candidates in all transition-related discussions, establishing joint advisory councils responsible for addressing all transition-related risks, requiring the Director of National Intelligence (DNI) to undertake efforts to support the nation's awareness of risks, reflecting the national security priorities of the newly elected Administration in the upcoming budget, passing fiscal year appropriations without undue delay, quickly assigning newly elected and existing Members of Congress to committees focused on national security, holding hearings comprised of national security experts to gather ideas on prospective U.S. national security policies and goals, and holding hearings soon after the inauguration of the new President to determine the Administration's national security-related priorities. The Presidential Election Period From a national security perspective, the presidential election period runs from the formal announcement of candidates for the office of the presidency to long past the inauguration, members of the current Administration and potential incoming Administration may wish to initiate substantive transition activities as soon as possible. Specifically, some scholars state that "enhanced cooperation and communication between the two Administrations is demanded by national security and foreign policy concerns." It is further observed that, "as the world becomes more dangerous and the risks to harm more immediate, the need for effective and seamless transitions becomes correspondingly greater." Thus, with respect to national security issues in particular, the need for outgoing and incoming Presidents to work together is no longer an option, but an unavoidable demand of the contemporary world. Considerations and Options that Span the PresidentialElection Period Throughout the entire presidential election period, a number of national security-related concerns and opportunities may be presented to the incoming and outgoing Administrations. However, many observers argue that the national security-related collaborative efforts of the current Administration and members of the potential new Administration, coupled with oversight activities throughout the transition period, offer the nation the best hope of being prepared to recognize and respond to acts taken to disrupt the transfer of power or change U.S. policies. In order to assess the federal governments actions related to the following issues, Congress may wish to hold classified and unclassified hearings and request reports regarding the Administration's knowledge of risks during the Presidential election period and ascertain information about the efforts by departments and agencies to ensure all applicable security and election officials are informed of potential concerns. Possible Actions by Entities Wishing to Disrupt the PresidentialElection Period Threats during a presidential election period may be numerous with "dangers associated with the transition emanating both from within the homeland and internationally." It is argued that enemies of the United States may see the nation as physically and politically vulnerable and that disseminating threatening propaganda or undertaking an incident of national security significance during the election period could potentially result in a change in the election results or future policies. Statements or incidents may be undertaken with the desire to demonstrate a group's ability to reestablish its status as an entity to be feared, intimidate the voting public, suggest perceived weaknesses in a candidate's national security experience, change the results of the election, or change future U.S. policies. Many national security observers speculate that, if an incident of national security significance is to occur, enemies of the United States may prefer to take action just prior to the presidential election date. However, such acts at anytime during the presidential transition period could have desired and unintended effects on the presidential election and resulting policies. Conversely, while many national security experts speculate that extremist groups and some foreign powers may see the presidential election period as a desirable time to undertake action against U.S. interests, the timing of such acts may be solely based on the convergence of an entity attaining a desired capability with a perceived best opportunity to successfully complete its objective. Planning for the Unforeseen and Communicating Transition-Related Information to the Public During previous presidential elections, some officials in the federal government have seen the need to develop options that might be pursued should the presidential election be delayed. While noting federal election dates are set by law requiring congressional action to change the current schedule, DeForest Soaries, former Chair of the United States Election Assistance Commission, wrote to then-Department of Homeland Security (DHS) Secretary Tom Ridge on June 25, 2004, that the process and procedures for changing election dates vary significantly across the nation's 8,000 voting jurisdictions. Chair Soaries suggested that the DHS and the federal interagency structure collaborate with state and local governments on a plan to address voting options, should a terrorist attack occur around the time of the election. Many security experts argue that federal, state, and local election-contingency planning and coordination should occur during the early phases of the election period. It is further suggested that, in the absence of such discussions, the issuance of general guidelines, or a genuine effort toward collaboration, the prospects for electoral chaos are more likely to occur if an incident of national security significance takes place just before or on the date of election. During all phases of the presidential transition process, many security experts suspect the federal government will receive information of concern to U.S. national security interests. Should such a heightened risk environment occur, observers suggest that one of the best ways to meet this challenge is by a showing of national unity among the outgoing Administration and individuals vying for the presidency. To support a collaborative environment, the 2008 Homeland Security Advisory Council report suggested the nominees issue a joint statement addressing potential threats to the nation or in response to an incident of national significance. Some foreign policy experts suggest joint statements and activities by the current President and the prospective President-elect take place with regularity to put forth a common voice to both the American public and the enemies of the United States that security issues will be addressed in a unified and coordinated manner. Throughout the presidential transition period the federal government may wish to undertake outreach and education efforts directed at the American public. A public awareness campaign discussing a need for citizens to be more-vigilant during the election period and providing insight into what the federal government will do in the event of an incident prior to election day may provide confidence to a concerned voting public. Activities such as this may prove useful in preparing the public for the possibility of an incident of national security significance occurring during the presidential transition period. With respect to security-related issues in the homeland, many observers argue that public awareness offers the best opportunity to provide indicators of anomalies that might be indicative of a group's preparation to undertake criminal activity to affect the presidential election process. To this degree, the DHS HSAC contends that continuous interaction with the media and the public on potential threats during this time period will improve the preparedness of the nation for an incident of national security significance. The DHS HSAC report specifically opined: It is important that the American public become engaged in understanding the unique vulnerabilities posed by this transition period. This will require public education and media engagement during this critical period in our history. Before, during, and after the transition, the public must learn about the choices faced by the Nation, communities, families, and individuals. The public must become a partner with their government, sharing the burden. In addition, [the] DHS should continue to engage the media as an ally in the timely dissemination of accurate and actionable information. [The] DHS must work with the multiple messengers, trusted within diverse communities, to effectively communicate this information. The DHS has the responsibility to notify the American public of current or prospective threats to U.S. domestic security interests, and the Department of State has the responsibility to alert U.S. citizens located overseas of security-related concerns. Both organizations have numerous communication mechanisms to inform U.S. citizens and organizations regarding concerns related to the presidential transition period and, when required, to share threat information. Communication mechanisms for conveying information about the presidential transition period include the following: DHS: Official public announcements to the media, public service announcements, changes to the Homeland Security Advisory System, dissemination of information to state and local fusion centers and to private sector organizations, and posting information to DHS-managed websites. Department of State: Official public announcements to the media, warden system alerts, travel alerts, country specific warnings, country background notes, and posting information to State Department managed websites. Considerations and Options Unique to Each Phase of the Presidential Transition Period Modern presidential transition activities are no longer constrained to the time between election day and the inauguration. Some presidential historians argue that, "history tells us that any winning candidate who has not started (transition efforts) at least six months before the election will be woefully behind come the day after the election day." While the time period and phases of a presidential transition are not statutorily derived, for purposes of this paper, the presidential transition period is comprised of five phases extending from presidential campaigning activities to the new President's establishment of a national security team and accompanying strategies and policies. Each phase identifies issues to consider by the outgoing and incoming Administrations and the Congress. The phases of the presidential transition are as follows: Phase 1: Campaigning by presidential candidates. Phase 2: Selection of party nominees. Phase 3: Election day. Phase 4: Post election day to prior to the inauguration. Phase 5: Presidential inauguration to formation of the new Administration's national security team and issuance of policy directives. Phase 1: Campaigning by Presidential Candidates Phase 1 of the presidential transition includes the time frame from campaigning by presidential hopefuls to the national political conventions that officially select the party nominee. This period can last a few months to a year or longer depending on a number of factors, including the current President's desires and constitutional ability to run for reelection, the plans of individuals from the same party as that of the sitting President to challenge the President's reelection bid, and the opposing party's time frame for launching unofficial or official presidential nomination activities. Prospective Outgoing Administration Considerations and Options A number of activities can occur during the first phase of presidential transition activities that would benefit the incoming President and may prove useful toward providing continuity with respect to U.S. national security matters. As noted in the 2008 HSAC report, "it is important that [the] DHS take action now to ensure a seamless and agile transition to new leadership and optimize the new leadership's ability to assume operational control of the Department." Recommendations offered by the Advisory Council that could be undertaken during the first phase of the transition include clarifying the meaning of "heightened threat" during the transition period by notifying all homeland security partners of historical patterns; developing contingency plans around the homeland security themes of prevent, prepare, respond, and recover; providing prospective presidential nominees information regarding lessons learned from incidents occurring during previous leadership transitions; and offering operational briefings on ongoing national security matters to prospective presidential nominees and their staff. The current Administration may wish to consider initiating information exchanges and collaborative efforts with the opposing party candidate in this initial phase of the transition. Generally, as the campaign for President progresses through the spring and leads to the presidential conventions, relatively few candidates will emerge as viable contenders for gaining the nomination of a given political party. The current Administration could bring this relatively limited number of individuals, and their designated senior national security staff, into briefings and discussions regarding national security issues that will likely be of concern in the following year. An issue of concern to some presidential transition observers is the turnover of personnel occupying key positions in the federal government. There are more than 7,000 federal government leadership, management, and support positions that are non-competitively filled by political appointees. Some observers suggest that many of these positions have, as part of their primary function, national security responsibilities. Should large numbers of political appointees depart in the months preceding the inauguration, the federal government would likely rely on Senior Executive Service personnel, Senior Foreign Service diplomats, senior military officers, and senior general-schedule employees for continuity of operations, leadership, and management of most national security-related activities. While the occupation of senior policy positions by career government employees may not necessarily be a problem, a number of considerations arise in such an environment. Appointing career civil servants to mid- to high-level positions in federal departments and agencies has been offered by national security observers as a way to provide continuity during presidential transitions. This action may allow agencies to operate without interruption and provide the future congressionally confirmed or presidentially appointed agency directors with in-house expertise and historical context about the organization. As a proponent of converting some of the federal government's national security leadership positions to career civil service positions, former DHS Acting Deputy Secretary Schneider noted "it's important to realize that major terrorist attacks, both here and abroad, are often launched shortly before or after national elections or inaugurations. By promoting dedicated civil servants who've proven their mettle, we're not only building for the future, but are helping ensure that during the transition, as the perceived weakness grows, our Department is prepared." While the promotion of civil servants into federal agency deputy positions is welcomed by many national security observers, others are concerned with the selection process that supports this activity. Some security observers may be concerned that the individuals chosen for these positions are being selected by the current Administration's political leadership and that this may be a way for individuals with like-minded political philosophies to maintain control over an agency and pursue policies that are counter to a new Administration. Possible Role of National Security Staff and the Homeland Security Council The National Security Staff (NSS) is the President's principal forum for considering national security and foreign policy matters with senior national security advisors and cabinet officials, whereas as the Homeland Security Council's (HSC) purpose is to ensure coordination of all homeland security-related activities among executive departments and agencies, and to promote the effective development and implementation of all homeland security policies. The current Administration might consider temporarily establishing a joint advisory council that draws on the expertise and experience of both the NSS and HSC to assist with transition issues. This new body could be comprised of political and career staff from the NSS and HSC, outside experts with transition expertise, and members of a prospective president-elects national security team. Organizational responsibilities could include coordinating the presidential transition policies of agencies having national security missions. In assisting the transition process, the entity could attempt to ensure presidential transition period activities are coordinated in an interagency manner and are cognizant of the effects current efforts may have on a new Administration. If so desired by the President-elect, this organization could continue for a period of time into the next Administration. The council could have responsibility for advising the outgoing and incoming Presidents on possible policy implications of national security decisions made and actions taken during all phases of the presidential transition. Office of the Director of National Intelligence The Office of the Director of National Intelligence (ODNI) is responsible for assessing and reporting on risks to the nation and has many organizations that directly or indirectly provide analytical and operational support to the President and senior members of the national security community. The following options are activities that the DNI could undertake to facilitate the federal government's understanding and ability to respond to risks during the 2012-2013 presidential transition. Require the National Intelligence Council (NIC) to lead an analytic effort to assess risk to U.S. interests during the presidential transition period. This effort could result in the issuance of a classified and unclassified National Intelligence Estimate discussing the intelligence aspects of the upcoming transition. Establish a Presidential Transition Mission Manager to lead and coordinate all federal intelligence and law enforcement analytic efforts. Enhance the National Counterterrorism Center's (NCTC) ability to receive and assess threat information directly related to the election period. Ensure the DHS' Office of Intelligence and Analysis receives relevant threat information in a timely manner to facilitate sharing activities with domestic federal, state, local, tribal, and private sector organizations. Enhance the Interagency Threat Assessment Coordination Group's ability to coordinate and report federal and local threat information that may be related to the presidential transition. Provide the nation's state fusion centers information and specific indicators of suspicious activity that may portend possible risks associated with the presidential transition. Incoming Administration Considerations and Options During phase 1 of the transition, the presidential candidates and their assembled national security teams may attempt to ascertain the current Administration's national security policies and activities and collaborate with it on issues that may affect the prospective presidency. The 2008 HSAC report proposed that the following issue areas be addressed during the transition: threats, leadership, congressional oversight, policy, operations, succession, and training. While many national security observers found the report to be useful for addressing transition-related issues for the DHS, others argue that the report fell short of addressing a government-wide approach to risks and responses during the election period. Specifically, some national security observers argued that the options put forth were too narrow in scope and found the report lacking in the following areas: Too much focus on outgoing Administration efforts, and too little attention given to the activities related to preparing the incoming Administration for the challenges it will likely face. Too much emphasis on the administrative process of transitioning to a new Administration, rather than ensuring incoming Administration employees are cognizant of current and projected substantive homeland security issues likely to be faced during the first year of the Presidency. No discussion of how state, local, tribal, and private sector leaders with homeland security responsibilities should prepare for activities related to the upcoming presidential Administration transition. Little detail provided on how training, education, and exercise activities can be used to prepare incoming Administration officials with national security responsibilities to be better prepared to meet current and future challenges. Congressional Considerations and Options Some national security observers see congressional interest in and support of presidential transitions as a crucial aspect of orderly transfers of power in the executive branch. Others argue that Congress should confine its activities to simply providing the funds necessary to support the transfer of presidential authority and act quickly to confirm the President-elect's nominated senior leadership. Regardless of the level of involvement in the presidential transition desired by the incoming and outgoing Administrations, congressional leaders may wish to pursue an active role in overseeing transition-related implementation efforts. Some suggest that without early and substantive congressional involvement in presidential transition activities foreign and domestic security risks may not be addressed in as full a manner as possible. Possible Congressional Activity . During phase 1, congressional support and inquiry may include appropriating resources to support outgoing and incoming national security collaboration efforts, holding classified and unclassified hearings and meetings with the both the incoming and outgoing Administrations to ascertain current transition activities, submitting questions to the outgoing Administration to ascertain transition planning activities and the known and projected risks during the transition period, and providing a sense of the Congress resolution that notes the importance of effective and collaborative activities between the departing Administration and the incoming Administration. Congress may also wish for the current Administration to provide the names of agency leaders responsible for making national security-related decisions during the presidential transition period, briefings on the possible risks to the presidential transition process, information about the significant national security operations that will be ongoing during the transfer of power, and briefing about the Administration's efforts to engage and collaborate with prospective new Administration senior security officials. An area of congressional interest in the past is the departure of knowledgeable political appointees and career managers during a presidential transition that may significantly hamper the federal government's ability to prevent and respond to issues of national security importance. Former Chair Thompson of the House Homeland Security Committee noted that vacancies at the DHS were "an enormous security vulnerability should an attack occur during the upcoming presidential transition." Early in the presidential transition period, Congress may choose to determine the executive branch departments and agencies with national security responsibilities, review the projected leadership succession plan, and obtain the names of the individuals who have the authority to undertake action in the event an incident occurs during the transfer of power. Phase 2: Selection of Party Nominee Phase 2 of the presidential transition includes the time frame from the selection of individuals at the two major political party presidential nominating conventions to the day of the presidential election. This phase will last a few months as the political party conventions usually occur in the summer preceding the November election. Outgoing Administration Considerations and Options Many national security experts suggest that phase two may be the time when the specter of increased risks to the nation is heightened. Officials at all levels of government may become concerned about national security interests being affected during the time leading up to election day. It is possible that the current Administration may consider undertaking military or law enforcement-related actions during this time to prevent a group from disrupting the election or threatening national security interests. Such actions, while possibly needed to safeguard the nation's security interest, are often the source of frustration as some question the veracity of the threat information and the need for related preventative actions. Some see these activities as pursued purely for political purposes. Others have argued that the current national security leaders are placed in an unenviable position of trying to protect national security interests during times of heightened political skepticism. With the field of potential presidential candidates likely reduced to two major party candidates, the outgoing Administration may wish to consider continuing the historical pattern of routinely providing presidential nominees and their senior staff information and briefings on matters of national security. Scholars who follow matters of national security note that, "in the pre-election period, it has proved feasible and desirable to provide intelligence briefings to candidates from both or even multiple political parties. For the most part this has been done and it should certainly be continued." Incoming Administration Considerations and Options Section 7601 (c)(2) of the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA ( P.L. 108-458 ; 50 U.S.C. 435b)) allows each major party candidate for President to submit, before the date of the general election, requests for security clearances of prospective transition team members who will require access to classified information to carry out their responsibilities as a member of the President-elect's transition team. The act further states that, to the fullest extent practicable, necessary background investigations and eligibility determinations of prospective transition team members shall be completed by the day after the date of the general election. During phase 2 of presidential transition activities, the prospective President and staff will likely undertake efforts to fully understand current U.S. national security policies and related operational activities, and may request meetings with current Administration security officials. Expedited completion of security clearance reviews for relevant personnel would greatly assist these efforts. Congressional Considerations and Options During phase 2 of the federal transfer of executive branch power, Congress may desire to hold hearings assessing transition-related plans, and provide resources to federal and non-federal security entities to facilitate the transition efforts, effectuate incident deterring activities, and shore up programs that may be required to respond to an incident. Support to Non-Federal Entities with Security Responsibilities . Some national security observers are concerned that a lack of sufficient coordination and planning between federal and state security entities could affect the presidential electoral results should an incident of national security significance occur prior to or on election day. In addition to providing funds to the prospective incoming and outgoing Administrations to support transition related activities, including national security-related support provided by departments and agencies, Congress may wish to provide resources to non-federal entities responsible for safeguarding the homeland during the presidential transition. Just as all homeland security-related incidences occur at the community level, local first responders will initially be responsible for addressing and mitigating any ongoing security concerns. Whether it's a man-made incident or natural disaster, some scholars state that all levels of government may wish to consider the constitutional and practical options associated with a domestic security incident occurring just prior to or on the day of election. Should such an incident occur, greater burden would be placed on local homeland security entities to support federal election-related activities. Phase 3: Election Day Phase 3 of the presidential transition is the day of the presidential election. Outgoing Administration Considerations and Options Consistent with the opportunities for public outreach efforts noted in phase 2, senior federal government leaders may wish to address risks to the homeland on the day of election. In addressing any known or possible threats, senior federal officials might offer that citizen involvement in the democratic process is an effective way to demonstrate to those who wish to harm the nation that acts of intimidation will not affect the electoral process. Other actions the Administration might take to support the voting public's confidence in participating in the presidential elections include providing relevant threat information to state homeland security fusion centers in a expedited manner, working with state and local security officials to secure the nation's polling places, and increasing security for suspected targets in the United States to prevent or mitigate damage from attacks meant to disrupt the voting activities. Incoming Administration Considerations and Options Resolving the presidential election in a timely manner is crucial to allowing the incoming Administration the time necessary to prepare for current and future national security challenges. The longer the presidential election results are delayed, the less time the current Administration has to assist the new Administration. Also, a lack of resolution could result in a delay in President-elect national security personnel appointments and possibly the U.S. being seen as increasingly vulnerable due to an uncertainty as to who will lead the country. Congressional Considerations and Options While the actual day of the presidential election may be uneventful, some observers argue that legislative oversight of transition activities of the current Administration taken to this point may be key to ensuring the incoming Administration is as well prepared as possible. In enacting the Presidential Transition Act of 1963, Congress provided the current Administration significant discretion in deciding the level of support to be given to the incoming Administration. In recognizing the potential risks that may be associated with a presidential transition, the act noted the need for an orderly transfer of executive power. The national interest requires that such transitions in the Office of the President be accomplished so as to assure continuity in the faithful execution of the laws and in the conduct of the affairs of the Federal Government, both domestic and foreign. Any disruption occasioned by the transfer of the executive power could produce results detrimental to the safety and well-being of the United States and it people. Accordingly it is the intent of Congress that appropriate actions be authorized and taken to avoid or minimize any disruption. Phase 4: Post-Election Day to Presidential Inauguration Phase 4 of the presidential transition includes the approximately 11-week time frame from the selection of a winning candidate to the date the President-elect is sworn in to office: inauguration day. Unique Risks to Phase 4 National security considerations unique to this phase of the transition period include incidents of national security significance that are intended to take advantage of perceived vulnerabilities attributed to an Administration that is coming to an end and a newly elected President attempting to quickly identify and designate national security personnel. Such incidents may be undertaken with the idea of attempting to have the outgoing and incoming Administrations at odds with one another with respect to presidential decision-making desires and to try and take advantage of perceived interagency coordination confusion. During phase 4 many of the current Administration's political appointees resign from their positions causing some security observers to be concerned about the ability of the federal government to effectively recognize, prevent, or respond to a national security-related incident. Such a scenario may be exacerbated as the designated career civil servants that have been placed in acting capacities of political appointee positions may receive conflicting policy or operational direction from outgoing and incoming national security leaders. Outgoing Administration Considerations and Options While some presidential observers argue that there is little motivation for the staff of the outgoing Administration to cooperate with incoming Administration members, others suggest that, when it comes to matters of national security, the desire to protect U.S. interests and preserve the outgoing President's legacy will supersede a lack of collaboration by those soon to depart the White House. It is often observed that the level of animus shown by the outgoing President to the President-elect will have a great deal to do with the cooperation the incoming Administration's transition planning team receives from individuals currently in positions of power. It has also been noted that transitions between Administrations of the same party appear to go smoother. The President's statements and actions with respect to the ongoing transition, specifically as it involves matters of national security, will set the tone and spirit of efforts taken by current staff to assist members of the incoming Administration. Any actions or statements that are perceived to undermine the incoming Administration's policy views on national security matters could be seen as attempting to frustrate the transition process and have negative repercussions for the new Administration's efforts to conduct foreign policy or address national security-related issues. Some presidential historians see the primary role of the outgoing Administration during the post-election day period as facilitating a transparent and productive transition environment. The desire is that such actions will allow the incoming Administration to be in the best possible position to identify and respond to any significant national security issues that may arise soon after taking office. Such security-related strategic, operational, and policy transition-related activities can be offered in the form of briefings, written product, exercises to simulate day-to-day and crisis environments, and other forms of collaborative and coordinating activities. Activities that could facilitate an effective national security transition include the providing of timely and relevant national security information, the formation of a transition council specifically focused on national security issues, and expediting the security clearance process for incoming members of the President-elect's national security team. Effective Use of Presidential Transition Funds . Prior to 1963, funds were not allocated by Congress to support the presidential transition and coordination between incoming and outgoing Administrations was generally limited to the administrative issues. Since the enactment of the Presidential Transition Act of 1963, Congress has provided the General Services Administration (GSA) funds to support the substantive aspects of the incoming and outgoing change of Administration activities. Historically, funds allocated for presidential transition activities have been used for travel expenses, the hiring of consultants, and reimbursing federal agencies for various types of support. As authorized by the act, funds provided by GSA to the incoming Administration can only be used from the day following the general election to 30 days after the presidential inauguration. The Presidential Transition Act of 1963, as amended by the Act of 2000, authorizes the GSA to provide a greater level of support to the President-elect and prospective senior leaders of the incoming Administration. The act allows the GSA to coordinate briefings for incoming Administration leaders, provide communication devices to these individuals, and create a directory of legislative and administrative materials that would be useful for new Administration leaders. Ensure the President-Elect is Aware of Issues that May Affect National Security Interests . During this phase of the transition, every effort should be taken to apprise the incoming President and the senior national security staff of current and near-term threats that may affect United States interests. While the new Administration may be aware of many strategic foreign policy and national security issues, activities relating to tactical, operational, and near-term threats will be the items most likely unknown and possibly negatively affect the new Administration soon after the inauguration. Consistent with section 7601 of IRPTA of 2004 and a recommendation contained in the 9/11 Commission report, Congress requires the outgoing Administration to "prepare a detailed classified, compartmented summary by the relevant outgoing executive branch officials of specific operational threats to national security; major military or covert operations; and pending decisions on possible uses of military force." To assist with Administration national security-related transition efforts, the act also requires the aforementioned summaries to be provided to the President-elect "as soon as possible after the date of the general elections." Establishment of a Presidential Transition National Security Coordination Council . The outgoing President may wish to consider creating a Presidential Transition Coordinating Council comprised of national security leaders from the outgoing and incoming Administrations. However, unlike the formation of previous Councils, this entity would allow all members to participate in interagency discussions and decision-making activities. In assessing the concerns the incoming Administration is likely to encounter the Presidential Transition National Security Coordination Council could focus on current and short-term national security risks and applicable policy considerations. A joint Administration Presidential Transition National Security Coordinating Council could oversee the national security transition related activities of federal departments and agencies, facilitate national security focused training and orientation activities to prepare incoming appointees, discuss and collaborate on substantive national security issues that are currently underway or pending decision, and offer lessons learned from past policy and operational national security activities. Expedited Security Clearance Processing for President-Elect Transition Team Members and Nominated Members of the New Administration . If not already occurring during an earlier phase of the transition period, soon after the election, it is common for the President-elect, Vice President-elect, and senior members of the incoming Administration's transition security team to start receiving classified intelligence briefings. For those individuals who do not already possess an active security clearance, the IRPTA of 2004 allows the President-elect to submit to the FBI or other appropriate agency the names of candidates to be nominated for high-level national security positions through the position of departmental under secretary as soon as possible after the date of the general elections. Prior to the inauguration, the FBI or other appropriate agencies are responsible for undertaking the background investigations necessary to provide appropriate security clearances to individuals who have been designated by the President-elect as key Administration officials. While the adjudication of security clearances is often a concern for individuals who have recently been hired into the federal government, it appears the FBI does have the ability to put forth the resources necessary to ensure senior national security officials are investigated and, where warranted, receive the approval to view classified material in an expeditious manner. Incoming Administration Considerations and Options From a national security standpoint, phase 4 of the transition period is quite possibly the most hectic and exciting. With 11 weeks between election day and the inauguration ceremony, the outgoing and incoming Administrations have much work to accomplish. As the presidential transition period continues and the window for affecting the electoral process narrows, some see this phase as the most likely time for an enemy of the United States to undertake an action to attempt to throw the country into presidential decision-making chaos. With the campaigning and the election no longer a concern, the President-elect will have little time for celebration and reflecting on the past, as collaboration with the current Administration is now seen as an essential element of future success. In this regard the 2008 HSAC report proposed, the incoming and outgoing Administrations work closely together toward a shared commitment to ensuring a smooth transition of power. This is facilitated by a positive attitude and open mind in both incoming and outgoing Administrations, combined with the willingness to respect and listen to each other's concerns and priorities. The same attitude must also characterize the behaviors of the senior career personnel who remain with the Department and will be counted on to ensure a smooth transition between Administrations. While numerous transition-related activities commence shortly after a presidential election, some national security experts suggest that none is more important than the efforts undertaken by the national security and intelligence communities to assist in providing information and context to the incoming President and the accompanying new national security team. Given current and projected security challenges, "the transition can no longer be taken for granted as a honeymoon [period] and significant attention needs to be provided to managing the transition." While the incoming Administration has nearly three months to prepare for assuming the presidency, many activities will need to occur in an expedited manner. The President-elect will formally announce leaders of the transition team; personnel will be interviewed to possibly occupy positions in the new Administration; and interaction with the outgoing Administration, Congress, and foreign leaders may occur. The incoming Administration may also: Select prospective cabinet members with the desire to formally submit to Congress, for confirmation soon after the presidential inauguration (phase 5), a prioritized list of names of those individuals selected to fill key national security leadership positions. Select individuals to be appointed to the NSS, HSC, and others to serve as the President's and Vice-President's senior national security advisors. Generally, senior department and agency positions are left vacant until the Senate has confirmed the President's nominee. While many senior leaders of the national security community require Senate confirmation, other senior political staff with significant national security responsibilities do not require Senate confirmation, including staff of the NSS and HSC. Create a presidential transition website to seek out individuals with national security expertise who will be needed to meet the near- and long-term challenges Request current Administration political appointees to remain in their jobs through the inauguration and possibly the confirmation of new national security leaders to allow for mission continuity and collaboration with new members of the Administration. Overlap in key positions is allowed for limited circumstances. While agencies cannot employ multiple individuals in the same job billet ("dual incumbency"), options exist to temporarily allow both outgoing and incoming Administration personnel to be assigned to an organization. Select career federal employees with significant national security expertise to be detailed to the transition team. Specific focus may be given to members of the military, intelligence community, and diplomatic corps with expertise in the policy priorities of the new Administration. Request substantive briefings on policies and programs of interest to assess historical challenges prior to making decisions related to revising or eliminating current activities. Some security observers are concerned about a perceived leadership void that can occur during the transition period when the outgoing Administration has constitutional authority, but diminished influence, and the President-elect has much influence, but no authority. However, actions can be taken by the outgoing President and President-elect to ameliorate any suspected appearance of presidential decision-making ambiguity. For example, issues of foreign policy were hotly debated during the presidential campaign of 1992. After the general election, in which Bill Clinton was elected President, many wondered if the President-elect would attempt to initiate foreign policy changes prior to the inauguration. During the transition period, President-elect Clinton addressed these concerns by stating, "President Bush is to be viewed as the sole voice of United States policy and that the greatest mistake any adversary could make would be to doubt America's resolve during this period of transition." Also during this phase of the transition period the incoming Administration may wish to discuss prospective strategy and policy changes to national security programmatic activities with Members of Congress. If the new Administration desires to announce any new initiatives or changes to existing national security policy or programs, much work will have to be done between the time of the inauguration and the time in which the budget will need to be transmitted to Congress. After the inauguration, the new Administration will have approximately two weeks to submit to Congress a revision of the fiscal year budget proposal submitted by the previous Administration. Congressional Considerations and Options During phase 4 of previous presidential transitions, Congress has required some agencies to have a current senior departmental official "develop a transition and succession plan to be presented to the incoming Secretary and Under Secretary for Management to guide the transition of management functions in a new Administration." The deadline for submission of such a plan was the first of December of the year in which a presidential election occurs. While this legislative requirement appears to provide agency transition guidance that some security experts argue was lacking during prior transfers of power, others see potential problems in the manner in which it will be implemented. For an Administration's transition policy to be of strategic and substantive value, some observers recommend that the individuals responsible for drafting the plan should be career civil servants with significant experience in the agency and an expectation of remaining with the organization for the foreseeable future. This requirement would allow the main author(s) and proponent of the transition plan to remain with the agency for a prescribed period of time and provide continuity and advice to members of the new Administration. Traditionally, Congress is out of session during much of the phase 4 transition period and may also be undergoing a change in membership. Thus congressional oversight activities during this phase are uncommon. However, some security experts contend that given contemporary risks to U.S. national security interests, a special session of Congress may be beneficial to ensuring the two Administrations are properly coordinating on national security-related issues. Once Congress returns to session and the new members are sworn in, little time is available prior to the presidential inauguration to inquire about past actions and recommend changes. A special session of Congress might be considered soon after the election to ascertain what the outgoing and incoming Administrations will do with respect to transition-related activities. If still in session during the later stages of phase 4, Congress may wish to hold hearings to assess the Administration's progress on stated national security transition-related activities. Congressional concerns during this phase might include the status of incoming and outgoing Administration collaboration efforts, how resources are being expended and toward what purpose, and to ascertain the incoming Administration's national security foreign and domestic policy goals. Congress may also wish to make itself available during phase 4 to address resource requests that emanate from the two Administrations should an incident of national security significance occur. Phase 5: Presidential Inauguration: Placement of New Administration Officials and Formation of New Policies Phase 5 of the presidential transition includes the time frame from the presidential inauguration to a period when the new Administration has its senior national security leaders confirmed, other non-congressionally confirmed political appointees and advisors in place, and established and implemented new national security policies. This phase can last a few months to well into the first year of the presidency. Unique Risks to Phase 5 National security considerations unique to this phase of the transition period would include incidents of national security significance that are intended to subject the new Administration to a crisis and test the actions and policies of the new leaders. An incident of national security significance could occur while the new Administration's national security leadership positions are vacant; personnel have been confirmed, but are new to their respective positions; or national security policies are being developed. Entities that wish to affect U.S. national security interests may see this time period as uniquely vulnerable, with the President and newly assigned staff being perceived as ill-equipped to handle a domestic or foreign national security crisis. Departed Administration Considerations and Options While the outgoing Administration will no longer have constitutional responsibility or authority for safeguarding the country, the actions that were or were not taken prior to the presidential inauguration will be a part of the departing President's legacy. The "Protective Power" as referenced in the presidential oath "has been interpreted as investing the President with expansive authority to take actions necessary to protect the property and personnel of the United States from attack or other dangers." Some scholars argue that the President's duty to protect the country is not limited to the time in which the office was occupied with responsibility extending into the next President's term to a point at which the new Administration has had reasonable opportunity to organize itself and formulate national security policies. As such, any "failure to alert and cooperate with the incoming President with respect to imminent dangers facing the nation directly exposes the country to substantial risk," and may negatively affect the previous President's legacy. Similarly, the outgoing President should be cautious of any activity taken in the last few days of the Administration or after the inauguration that could hamper the incoming Administration's transition efforts. Such actions might include establishing or revising national security organizations, policies, or programs that are clearly counter to the positions of the incoming President, interacting with foreign leaders that may have the perception of attempting to portray future U.S. foreign policy desires, and undertaking any steps that would have a negative effect or produce unintended national security consequences. New Administration Considerations and Options The newly elected President, who will wish to quickly set an agenda and move toward implementing goals stated during the campaign, may find the issuance of executive orders and other presidential directives as a way to distinguish new policies from the outgoing President. This may be particularly desirable when outgoing and new President are from different parties and such changes might offer the appearance of instituting a new policy direction in the early days of the Administration. Likewise, the new Administration may wish to quickly promulgate national security policies and strategies for applicable departments and agencies. While the issuance of new strategies and policies may not, in and of themselves, make the country safer, they will convey the Administration's national security priorities and provide the nation an opportunity to assess the new President's intentions. In undertaking efforts to memorialize the new national security policies, many national security observers suggest that the President may be well served to proceed cautiously and take the time to review and assess current policies, and listen to the views of outgoing political officials and remaining career government, military, and diplomatic personnel prior to implementing significant changes in current strategies or operations. To support continued transition efforts and to be afforded the opportunity to learn of the previous Administration's national security policy and program successes and failures, the new President may wish to have prior Administration officials maintain their security clearances and routinely receive briefings regarding current and emerging threats to United States interests. Congressional Considerations and Options Some presidential historians suggest that legislative inquiry and support during the incoming Administration's transition efforts is crucial if Congress is to provide effective oversight during the new presidency. Professor Williams of the Massachusetts Institute of Technology argues that, "the coming transition to a new Administration and Congress opens a window for reform of the organizational structures and processes that surround planning and resource allocation for homeland (and national) security in the executive branch and Congress." While the transition is an opportunity for Members and staff to interact and have substantive discussions regarding the national security policies and goals of the new Administration, some presidential historians note that "transitions are hit-and-miss affairs that handicap the new President in shifting from campaigning to governing and create problems for the Congress." Should the new Administration not make an effort to avail Congress of its foreign and domestic security policy intentions and Legislative Branch does not undertake an active role in understanding the policies and direction of the new Administration, both entities might encounter frustration as neither will feel it is receiving the necessary support to fully uphold its responsibilities. As noted by Mr. Ink, President Emeritus of the Institute of Public Administration, "new appointees are in danger of stumbling during the first crucial weeks and months of an Administration, not so much from what they are striving to do, but from how they are functioning and a lack of familiarity with the techniques that are most likely to get things done in a complex Washington environment." In overseeing and supporting the new Administration's national security objectives, Congress has a number of activities it can undertake. Prioritize Hearings for Nominated Senior Executive Branch Leaders Who Have Significant National Security Responsibilities . A congressional authority that is often noted for making it possible for the incoming Administration to be in the best position to address national security issues shortly after inauguration is to quickly confirm qualified key political appointees. While Congress will also be undergoing a transition having just been sworn in two weeks prior to the presidential inauguration, some analysts see this as the ideal time for the new Congress to meet with the incoming President's national security leadership team and put in place a foundation to allow for expedited confirmation hearings soon after the President takes the oath of office. As noted by a recommendation of the 9/11 Commission Report of 2004: Since a catastrophic attack could occur with little or no notice, the federal government should minimize as much as possible the disruption of national security policymaking during the change of Administrations by accelerating the process for national security appointments. We (9/11 Commission) think the process could be improved significantly so transitions can work more effectively and allow new officials to assume their new responsibilities as quickly as possible. Consistent with recommendations contained in the 9/11 Commission report, the IRPTA of 2004 provides a sense of the Congress regarding an expedited consideration of individuals nominated by the President-elect to be confirmed by the Senate. The act further holds that the Senate committees to which these nominations are referred and the full Senate should attempt to complete consideration of these nominations within 30 days of submission by the newly elected President. In undertaking this responsibility, many security observers see a healthy tension between Congress's desire to act quickly to hold confirmation hearings and the need to ensure that individuals with the relevant national security background and experience have been put forth by the President-elect. In many cases, highly qualified career Senior Executive Service personnel will be in an acting capacity for some of these Senate confirmed positions. Thus the perceived urgency to fill these positions quickly may be negated while Congress ensures individuals capable of meeting the demands of the position are selected and confirmed. Congress may also work with the new Administration to understand its national security priorities and where applicable have the changes in policies and programs reflected in the forthcoming budget; pass an appropriations bill without undue delay; quickly assign new and existing Members of Congress to committees focusing on national security issues to allow these individuals to receive briefings and understand the issues for which they have oversight; hold hearings comprised of national security experts and members of the new Administration to gather ideas on prospective U.S. national security policies and goals; and hold hearings soon after the new Administration has produced its national security strategies, policies, and presidential directives to discuss objectives and determine presidential priorities. Conclusion The Presidential election and transition period are characterized by unique national security challenges. In particular, if the election results in a change of Administration, a new President will likely face many national security-related challenges upon taking office. Risks during the transition period may be minimized with proactive executive branch and congressional actions. Whether the enemies of the United States choose to undertake action counter to the nation's security interests or the new President experiences a relatively peaceful period during the transition, a new Administration's recognition and response to these security-related challenges will depend heavily on the preparation and education activities that have occurred prior to the inauguration. While it may be impossible to stop an incident of national security significance during the presidential election process, there are steps that can be taken during all phases of the transition to lessen the risks to the nation. Such actions may be helpful in preparing the nation for possible risks during the presidential election period and mitigating the effects of acts taken by those that wish to cause confusion during the transfer of presidential power. The transition-related actions or inactions of the outgoing and incoming Administration may have a long-lasting affect on a new President's ability to effectively safeguard U.S. interests and may also affect the legacy of the outgoing President. Appendix A. Recent Military Operations Occurring During U.S. Presidential Transition Periods Appendix B. Representative Examples of Incidents of National Security Interest Occurring During Periods of Governmental Transition This appendix provides a representative listing of incidents of terrorism that have occurred during times of transitions of heads of state. The criteria for inclusion in this chart was based on the aggressor's real or perceived intent to change the course of an election or affect future policy of the country during a time of transfer of presidential authority. It should be noted that, barring relatively few examples, there is little evidence that incidents of national security significance were planned for a specific date prior to an election. While varying levels of planning occur prior to an incident, as with most criminal acts, the leader directs, or the individuals act, when opportunity for the best possible outcome is presented. With respect to times of presidential transition, the optimal time for an attack, for a variety of reasons, may not present the best opportunity for the aggressors to attempt an incident. As such, the potential time frame for risk is present during any phase of the transition, with the effects of an incident differing based on the location of the event, the proximity to the election date, and the reaction and actions of the U.S. national security enterprise. Many security experts believe that some of the incidences noted below had a significant impact on the outcome of the country's national election or subsequent policies. National security observers are fearful that terrorists groups may see some of the incidences as successes and feel emboldened to attempt to affect future national transfers of power by launching attack just before the election. These groups may see the timing of such an action as a viable strategic opportunity to further the goals of their cause. However, it should be noted, other security experts suggest that incidences of national significance taken prior to a national election could produce a reaction that is counter to the long-term goals of the terrorist group. Appendix C. Congressional Legislation Addressing Various Aspects of National Security Considerations During Presidential Transitions, in Chronological Order (1963-2008)

A presidential election period is a unique time in America and holds the promise of opportunity, as well as a possible risk to the nation's security interests. While possible changes in Administration during U.S. involvement in national security-related activities are not unique to the 2012-2013 election period, many observers suggest that the current security environment may portend a time of increased risk to the current presidential election period. Whether the enemies of the United States choose to undertake action that may harm the nation's security interests during the 2012-2013 election period, or the existing or new President experiences a relatively peaceful period during the transition, many foreign policy and security challenges will await the Administration. Collaboration and coordination during the presidential election period between the current Administration and that of a potentially new one may have a long-lasting effect on the new President's ability to effectively safeguard U.S. interests and may affect the legacy of the outgoing President. This report discusses historical national security-related presidential transition activities, provides a representative sampling of national security issues a new Administration may encounter, and offers considerations and options relevant to each of the five phases of the presidential election period. Each phase has distinct challenges and opportunities for the incoming Administration, the outgoing Administration, and Congress. This report is intended to provide a framework for national security considerations during the current election period and will be updated to reflect the election outcome.

Background Since achieving political independence in 1943, Lebanon has struggled to overcome a series of internal and external political and security challenges. Congress and the executive branch historically have sought to support pro-U.S. elements in the country, and in recent years the United States has invested more than $1 billion to develop Lebanon's security forces. Some Members of Congress have supported this investment as a down payment on improved security and stability in a contentious and volatile region. Other Members have criticized U.S. policy and sought to condition U.S. assistance to limit its potential to benefit anti-U.S. groups. The Lebanese population is religiously diverse, reflecting the country's rich heritage and history as an enclave of various Christian sects, Sunni and Shia Muslims, Alawites, and Druze. The Ottoman Empire controlled the territory that is now Lebanon until 1918 and administered the Maronite Christian enclave of Mount Lebanon and neighboring predominantly Muslim districts as separate entities. In 1920, the French authorities who were administering what is now Lebanon and Syria pursuant to post-World War I Mandate arrangements combined Mount Lebanon and several surrounding districts into a single entity they called Greater Lebanon. That entity adopted a constitution in 1926 and gained its independence as the Republic of Lebanon in 1943. In order to mitigate a tendency for their religious diversity to fuel political rivalry and conflict, Lebanese leaders have attempted with limited success since independence to manage sectarian differences through a power-sharing-based democratic system. Observers of Lebanese politics refer to these arrangements as "confessional" democracy. Historically, the system served to balance Christian fears of being subsumed by the regional Muslim majority against Muslim fears that Christians would invite non-Muslim foreign intervention. Lebanese leaders hold an unwritten "National Covenant" and other understandings as guarantees that the president of the republic be a Maronite Christian, the prime minister a Sunni Muslim, and the speaker of Parliament a Shia Muslim. The large Christian community benefitted from a division of parliamentary seats on the basis of six Christians to five Muslims. This ratio was adjusted to parity following Lebanon's 1975-1989 civil war to reflect growth in the Muslim population. Lebanon has not held a national census in decades, largely because of the sensitivity of confessional power-sharing arrangements. Sectarianism is not the sole determining factor in Lebanese politics. These factors, combined with the tensions that have accompanied regional conflicts and ideological struggles, overshadow limited progress toward what some Lebanese hold as an alternative ideal—a non-confessional political system. The consistent defining characteristic of U.S. policy during the Bush and Obama Administrations has been an effort to weaken Syrian and Iranian influence in Lebanon. Parallel U.S. concerns focus on corruption, the weakness of democratic institutions, the future of Palestinian refugees, and the presence of Sunni extremist groups. The latter threat was illustrated by the Lebanese Armed Forces' (LAF's) 2007 confrontation with the Sunni extremist group Fatah al Islam, which resulted in the destruction of much of the Nahr al Bared Palestinian refugee camp. The threat continues to be reflected in some Lebanese Sunnis' support for extremist groups that are fighting in Syria and in the recent campaign of anti-Hezbollah bombings and sectarian attacks in Lebanon. While some Sunni extremist groups appear to have grown in strength since 2012, Hezbollah remains the most prominent, capable, and dangerous U.S. adversary in Lebanon. Congress has appropriated more than $1 billion in assistance ( Table 3 ) for Lebanon since the end of the 34-day Israel-Hezbollah war in 2006 to strengthen Lebanese security forces and promote economic growth. Some Members of Congress have expressed support for the goals and concerns outlined by Bush and Obama Administration officials since 2006, but periodically have questioned the advisability of continuing to invest U.S. assistance funds, particularly at times when the political coalition that includes Hezbollah has controlled the Lebanese cabinet. U.S. engagement nominally seeks to support the development of neutral national institutions and to drive change that will allow Lebanon's citizens to prosper, enjoy security, and embrace non-sectarian multiparty democracy. In practice, U.S. policy makers have sought to walk a line between maintaining a neutral posture and marginalizing those in Lebanon who are hostile to the United States, its interests, and its allies. Some Lebanese—particularly Hezbollah supporters and others who reject calls for non-state actors to disarm—have decried U.S. policy as self-interested intervention in the zero-sum games of Lebanese and regional politics. Other Lebanese welcome U.S. support, whether as a means of fulfilling shared goals of empowering neutral national institutions or as a means to isolate their domestic political rivals. Some groups' views of U.S. involvement fluctuate with regional circumstances and their personal fortunes. The challenges Lebanon presents to U.S. policy makers, with its internal schisms and divisive regional dynamics, are not new. After Lebanon emerged from French control as an independent state in the 1940s, the United States moved to bolster parties and leaders that offered reliable support for U.S. Cold War interests. The influx of Palestinian refugees to Lebanon following Arab-Israeli wars in 1948 and 1967 further complicated the regional and domestic scenes, just as an influx of close to 1 million Syrian refugees has done since 2011. Palestinian refugee camps ( Figure 2 ) became strongholds for the Palestine Liberation Organization, staging areas for cross-border Fedayeen terrorist attacks inside Israel, and ultimately targets for Israeli military retaliation. In recent years, some of these camps have become safe havens for transnational Sunni extremist groups. The late 1960s and early 1970s saw a slow drift toward civil war, as the United States provided support for the Lebanese Armed Forces (LAF) "to improve the army's capability to control the Fedayeen." This policy foreshadowed current U.S. concerns and approaches, which similarly seek to strengthen the LAF and build its reputation as a neutral body capable of weakening a different set of anti-U.S. non-state groups. Lebanon's civil war erupted in 1975 over unresolved sectarian differences and the pressure of external forces, including the Palestinians, Israel, and Syria. Hundreds of thousands were killed and displaced over 14 years of brutal war among a bewildering array of forces with shifting allegiances. Syria sent military forces into Lebanon in 1976 and they remained until 2005. Israel sent military forces into Lebanon in 1978 and again in 1982; they remained in southern Lebanon until 2000. The United States deployed forces to Lebanon in the early 1980s as part of a multinational peacekeeping force. They targeted anti-U.S. forces and were withdrawn under considerable congressional scrutiny after 241 U.S. personnel were killed in the 1983 U.S. barracks bombing. U.S. policy toward Lebanon since the end of the Lebanese civil war has reflected a desire to see the country move toward the vision outlined by Lebanese leaders in 1989 at Taif, Saudi Arabia, where they met to reach a national agreement to end the fighting. Among the goals enshrined in the Taif Agreement were the withdrawal of foreign military forces from Lebanon, the disarming of non-state groups, and the development of strong national security institutions and non-confessional democracy. Successive U.S. Administrations have embraced the Taif principles, while acting to limit opportunities for U.S. adversaries and anti-Israeli forces. Syria's security presence in Lebanon was acknowledged at Taif, but security negotiations called for in the agreement did not occur until Syrian forces withdrew from Lebanon following the assassination of former Lebanese Prime Minister Rafiq Hariri in 2005. Hariri's assassination and the mass national demonstrations that followed marked a defining political moment and led to the emergence of the pro-Asad "March 8" coalition and the anti-Asad "March 14" coalition that now dominate the political scene ( Figure 3 ). The intervening years have been marked by conflict, political gridlock, and further assassinations of anti-Syria figures. Each coalition has held power, although attempts at unity government have proven fruitless, with both sides periodically resorting to resignations, mass protests, and boycotts to hamper their rivals. External players such as Syria, Iran, Israel, Turkey, Saudi Arabia, Qatar, the United States, and others have all struggled for influence. Recent Developments The war in neighboring Syria, the influx of Syrian refugees, Hezbollah's intervention on behalf of President Asad, Lebanese Sunni support for Syrian opposition forces and a wave of sectarian violence and terrorist attacks by Sunni extremist groups have heightened tensions and complexities surrounding all of these issues. As of April 2014, U.S. officials continue to call on Lebanese leaders to avoid a political vacuum in the midst of volatile regional conditions. Politics and Planned Elections Lebanese leaders were unable to agree on the formation of a new cabinet from March 2013 through mid-February 2014, when parties accepted an inclusive cabinet arrangement proposed by Prime Minister-designate Tammam Salam. The prior cabinet, led by Najib Miqati, resigned amid disputes over terms for a parliamentary election law and security issues. That law and several security issues remain unresolved as the Salam cabinet begins its work. In the new cabinet ( Table 1 ), two-thirds of the 24 cabinet positions are distributed equally among the March 8 and March 14 coalitions ( Figure 3 ), with one-third of the seats reserved for nominally non-affiliated centrists. Some centrists are considered to be loyal to one of the two coalitions and may support efforts to force the cabinet's resignation. Parliament endorsed the cabinet's ministerial policy statement on March 20. The statement "stresses the state's unity, power and exclusive authority in all matters pertaining to the general policy of the country, including the protection of Lebanon and the preservation of its national sovereignty." It further identifies as among the cabinet's most important challenges "the creation of the appropriate atmosphere for running the presidential elections as scheduled" by late May 2014. Parliament Speaker Nabih Berri reportedly has formed consultative committees to determine whether a required parliamentary quorum can be assembled to elect a new president. Political negotiations related to the presidential contest have begun, with a series of prominent Christian candidates from across the political spectrum considered possible candidates. Army commander General Jean Kahwaji and Central Bank Governor Riad Salameh are considered potential centrist candidates; Free Patriotic Movement leader Michel Aoun and Marada Movement leader Sleiman Franjieh are seen as possible pro-March 8 candidates. Lebanese Forces leader Samir Geagea has announced his candidacy, and Kataeb party leader Amine Gemayel is considered another possible pro-March 14 candidate. Gemayel and Geagea have been outspoken in their recent criticism of Hezbollah's military intervention in Syria. The key issue in the presidential election is the continuation of the relatively centrist orientation of the presidency under Michel Sleiman, which U.S. officials have credited with having helped steer Lebanon through the turbulent and politically divisive period since 2008. As the conflict in Syria has destabilized Lebanon and as Hezbollah's blatant defiance of the government's policy of dissociation from the Syria conflict has grown, Sleiman has made increasingly critical statements about Hezbollah's activities and has advocated for more direct assertions of state authority in security affairs. Hezbollah has taken issue with President Sleiman's recent statements, and Sleiman rejected Hezbollah's boycott of a recently held National Dialogue session by saying, ... we must complete the discussion of a defense strategy that can protect the country from the Israeli dangers and the threat of rampant arms and terrorism.... We called ... to continue discussion of the defense strategy with the aim of benefiting from the national and resistance capabilities, bolstering the Lebanese Army's capability and restoring the Army's exclusive authority over arms. This will enhance [the military's] capacity in uprooting terrorism.... No red lines can be drawn for the Army. Lebanon's constitution requires that a cabinet resign following the election of a new president, and statements by Prime Minister Salam and cabinet members acknowledge that the current cabinet may have a very limited tenure. However, if presidential elections are delayed, the cabinet could become more involved in preparations for parliamentary elections planned for November 2014. In any event, the recently endorsed ministerial policy statement includes a pledge to seek a new parliamentary election law. Any cabinet would similarly have to resign following parliamentary elections, meaning that even if elections occur, a series of potentially contentious cabinet formation negotiations may lie ahead. Security Challenges The 10-month 2013-2014 cabinet dispute was one symptom of the deeper current of mistrust and animosity prevailing among some Lebanese political leaders and citizens and producing systemic paralysis in the country's key political institutions. The ongoing war in neighboring Syria is severely exacerbating these tensions, particularly given the direct support of armed Lebanese militia groups for opposing sides in that war and the war-related influx of more than 1 million predominantly Sunni refugees. A series of high-profile bombings and armed clashes (see Table 2 ) have shaken Lebanon in the past year, increasing sectarian tensions and straining already fragile security conditions. Hezbollah's participation in the Syrian conflict on the side of the Asad government antagonizes its critics, who allege that Hezbollah has caused the spread of the conflict into Lebanon. In December 2013, Jabhat al Nusra leader Abu Mohammad al Jawlani described Hezbollah's overt intervention in Syria as having "opened the door wide open for us to enter Lebanon and rescue the Sunni people in Lebanon." Hezbollah claims it is fighting extremist groups in Syria that threaten all Lebanese. Its leaders argue that extremists will target Lebanon even if Hezbollah withdraws, and its supporters are critical of Lebanese Sunni support for extremism at home and in Syria. Even before the recent escalation in sectarian violence and terrorist attacks, non-state actors such as Hezbollah and predominantly Palestinian extremist groups like Jund al Sham and Fatah al Islam posed a constant challenge to state security. Moreover, the Abdullah Azzam Brigade, an Al Qaeda-linked terrorist organization, was operating in the country, posing a risk to Lebanese officials, international targets, and rival groups. Joint claims of attacks and pledges of affiliation among Sunni extremist groups in Lebanon suggest that members of these groups are collaborating with both Jabhat al Nusra and ISIL in their efforts to attack Shia civilians, Hezbollah, and Lebanese security forces. The Obama Administration also has become more vocal and active in its attempts to highlight and counteract the activities of Al Qaeda-influenced terrorists in Lebanon. In December 2013, the State Department named Usamah Amin al Shihabi as a specially designated terrorist for his role in the extremist group Fatah al Islam and as the appointed head of Jabhat al Nusra's Palestinian organization in Lebanon. As violence has escalated since mid-2013, the Lebanese Armed Forces (LAF) increasingly has been drawn into confrontations with Sunni extremist groups seeking to attack Shia communities and Hezbollah strongholds in retaliation for Hezbollah's overt pro-Asad intervention in Syria. The LAF's operations have been endorsed by a broad spectrum of political leaders in Lebanon, including prominent Sunnis. Nevertheless, the all-but-unavoidable appearance of the LAF frequently targeting Sunni militants and protecting targeted Shia communities may be giving rise to increased perceptions among some Lebanese Sunnis that the LAF is biased toward Hezbollah. National figures such as President Michel Sleiman, Sunni political leader Saad Hariri, and a number of Christian and Shia leaders continue to stress the neutrality of state security forces and the importance of the preservation of the armed forces as a national and nonsectarian institution. At the same time, President Sleiman and some Christian leaders, including Lebanese Forces leader Samir Geagea, have been assertive in recent weeks about the primacy of state security entities in national security matters. These trends lead many non-government observers to express concern for Lebanon's stability and warn of the risk of broader conflict. Echoing these concerns, the U.S. intelligence community told Congress in its 2014 Worldwide Threat Assessment that, "Lebanon in 2014 probably will continue to experience sectarian violence among Lebanese and terrorist attacks by Sunni extremists and Hezbollah, which are targeting each-others' interests. …Increased frequency and lethality of violence in Lebanon could erupt into sustained and widespread fighting." Hezbollah Hezbollah emerged during the early 1980s, when Lebanon's Shia leaders split in their responses to the Israeli invasion and occupation of southern Lebanon in 1982. Leaders favoring a more militant response and supporting the long-term creation of an Iranian-style Islamic republic in Lebanon broke away from the then-leading Amal movement and formed the Al Amal al Islamiya (Islamic Amal) organization. The Amal movement continued as a political, social, and militia organization and disarmed following the civil war. By leveraging direct support from Iran's Revolutionary Guards and recruiting from other revolutionary Shiite groups, Islamic Amal became the vanguard of the religiously inspired groups that would later emerge under the rubric of Hezbollah. Considerable financial and training assistance from Iran allowed Islamic Amal/Hezbollah to expand from its base of operations in the Bekaa valley of eastern Lebanon to the southern suburbs of Beirut and the occupied Shiite hill towns of the south. Attacks on Israeli Defense Forces (IDF) and U.S. military and diplomatic targets allowed Islamic Amal and other Iran-supported Shiite militants to portray themselves as the leaders of resistance to foreign military occupation, while their social and charitable activities in Shiite communities solidified popular support. Hezbollah remained loosely organized and largely clandestine until 1985, when it released a manifesto outlining a militant, religiously conservative, and anti-imperialist platform. The document served as one of the movement's defining ideological statements until November 2009, when Hezbollah Secretary General Hassan Nasrallah issued a new political manifesto highlighting the group's continued hostility to Israel and the United States. Hezbollah leaders remain adamant that Hezbollah's military capabilities serve to defend Lebanon and should be preserved rather than dismantled. Hezbollah has traditionally defined itself and justified its paramilitary actions as legitimate resistance to Israeli occupation of Lebanese territory and as a necessary response to the relative weakness of Lebanese state security institutions. However, Israel's withdrawal from Lebanese territory in May 2000 and the strengthening of the Lebanese Armed Forces (LAF) and Internal Security Forces (ISF) with international and U.S. support since 2006 have undermined these arguments and placed pressure on Hezbollah to adapt its rhetoric and policies. Hezbollah increasingly has pointed to disputed territory in the Shib'a Farms area of the Lebanon-Syria-Israel tri-border region, Israeli overflights of Lebanese territory, and, more recently, to Sunni extremist groups operating in Syria and Lebanon as justifications for its posture ( Figure 5 ). Hezbollah's Lebanese critics share its objections to Israeli military incursions in Lebanon and have long emphasized the need to assert control over remaining disputed areas with Israel, such as the Shib'a Farms, the Kfar Shouba Hills, and the northern part of the village of Ghajar ( Figure 5 ). However, current Hezbollah policy statements suggest that, even if disputed areas were secured, the group would seek to maintain a role for "the resistance" in providing for Lebanon's national defense and would resist any Lebanese or international efforts to disarm it as called for in the 1989 Taif Accord that ended the civil war and more recently in U.N. Security Council Resolutions 1559 (2004) and 1701 (2006). The United States contributes more than $100 million annually ( Table 3 ) for the United Nations Interim Force in Lebanon (UNIFIL), established in 1978 by Security Council Resolutions 425 and 426, as modified by Resolution 1701. Hezbollah enjoys considerable but not uniform appeal among members of the Lebanese Shia constituency, which is widely assumed to have become a larger percentage of the Lebanese population than it was when the current proportional arrangements were established. With political endorsement from Iran, Hezbollah has participated in elections since 1992 and it has achieved a modest, variable, yet generally steady degree of electoral success. Hezbollah won 10 parliament seats in 2009 and now holds two cabinet posts: Minister of State for Parliamentary Affairs Mohammed Fneish and Industry Minister Hussein Hajj Hassan ( Table 1 ). In recent years, Hezbollah candidates have fared well in municipal elections, winning seats in conjunction with allied Amal party representatives in many areas of southern and eastern Lebanon. Hezbollah, like other Lebanese confessional groups, vies for the loyalties of its Shiite constituents by operating a vast network of schools, clinics, youth programs, private business, and local security—which many Lebanese refer to as "a state within the state." Though the organization's policies promote a distinct Shiite religious identity, over time, even Hezbollah has had to accommodate its fundamentalist religious messaging to Lebanon's pluralistic culture. This has required a gradual shift from the group's Khomeinist roots toward a more contemporary Islamist nationalist approach. Hezbollah's ties to Iran and its status as a defender of Lebanese security and priorities have been placed under increased scrutiny in Lebanon because of the group's military intervention in Syria on behalf of the Iran-aligned Asad government. Hezbollah's intervention in Syria is leading its rivals to become more vocal in their criticism of the group, and popular criticism also is reportedly growing across sectarian lines. Hezbollah's Military Capabilities and Intervention in Syria9 The central security question for Lebanon since the departure of Syrian forces from Lebanon in 2005 has been the future of Hezbollah's substantial military arsenal and capabilities, which rival and in some cases exceed those of Lebanon's armed forces and police. Debate on Hezbollah's future and Lebanon's national defense posture intensified after Hezbollah provoked the 2006 war with Israel, which brought destruction to large areas of Lebanon. Following an attempt in 2008 by government forces to assert greater security control in the country, Hezbollah used force to confront other Lebanese factions. During this period, Hezbollah operatives are alleged to have trained Iraqi militia groups and participated in attacks on U.S. and coalition forces in Iraq in cooperation with Iranian forces. U.S. officials report that Hezbollah has provided assistance and training to Shia militia forces in Syria, and in 2013, it overtly intervened in Syria on behalf of the Asad government. These actions illustrate the lengths to which Hezbollah leaders are willing to go to defend their prerogatives and position. These issues dominate Lebanese debates and are rooted in decades-old struggles to define Lebanon's political system, regional orientation, and security institutions. In August 2012, the U.S. Treasury Department placed additional sanctions on Hezbollah for providing training, advice, and logistical support to the Syrian government. U.S. officials noted that Hezbollah has helped the Syrian government push rebel forces out of some areas in Syria. Hezbollah Secretary General Hassan Nasrallah, who was personally sanctioned for his role in overseeing Hezbollah's assistance to Damascus, publicly acknowledged Hezbollah's involvement in Syria in May 2013. As of April 2014, Hezbollah fighters remained active in the Qalamoun region northwest of Damascus ( Figure 4 ), after they reportedly assisted in the Asad government's recapture of the opposition stronghold of Yabroud. A senior Israeli military official in March 2014 stated that Hezbollah maintains 4,000 to 5,000 fighters in Syria. Hezbollah has worked with the Syrian military to protect regime supply lines by helping to clear rebel-held towns along the Damascus-Homs stretch of the M-5 highway. Hezbollah personnel in 2013 played significant roles in battles around Al Qusayr and the Qalamoun Mountains region, in which rebel presence along the highway threatened the government's ability to move forces and to access predominantly Alawite strongholds on the coast. Hezbollah forces on the Lebanese side of the border reportedly monitor and target rebel positions near the border that aid attacks in Syria and Lebanon. U.S. Assistance and Issues for Congress Following Syrian withdrawal from Lebanon in 2005 and the war between Israel and Hezbollah in the summer of 2006, the George W. Bush Administration requested and Congress appropriated a significant increase in U.S. assistance to Lebanon. Since 2006, the United States has granted over $1 billion in assistance to Lebanon, with the following goals: Supporting the implementation of United Nations Security Council resolutions, including resolutions 1559 and 1701; Reducing sectarianism and unifying national institutions; Providing military equipment and basic supplies to the Lebanese Armed Forces (LAF); Providing support to the Internal Security Forces (ISF) for training, equipment and vehicles, community policing assistance, corrections reform, and communications; and Increasing economic opportunity. U.S. security assistance since 2006 has been administered in line with multi-year, bilaterally-agreed and congressionally-notified development plans to modernize and equip the LAF and ISF to serve as effective and nonsectarian guarantors of security. Current U.S. assistance to the LAF includes Section 1206 funding for border security and counterterrorism programs, International Military Education and Training (IMET) programs, the provision of Excess Defense Articles, and Foreign Military Financing programs that equip and train LAF units. From June 2012 through May 2013, the United States supplied more than $180 million worth of equipment and weaponry to the LAF, including "aircraft, a naval vessel, armored and unarmored vehicles, guns, ammunition, equipment, and medical supplies." The LAF's multi-year capability development plan reportedly envisions a further expansion of the force beyond its current 65,000 personnel and further improvements in its armaments and logistical support capabilities. The Obama Administration believes that "international donors can complement each other's efforts in order to maximize the growth of needed capabilities for an armed force whose troops are badly stretched across the country." In December 2013, Saudi Arabia pledged $3 billion to finance French training and equipment programs for the LAF, and the Administration remains "in contact with the governments of Saudi Arabia and France regarding this assistance to promote maximum coordination." Press reports suggest that U.S. engagement with Saudi, French, and Lebanese interlocutors regarding the Saudi funding pledge have focused on ensuring that weapons systems delivered do not threaten Israel's security and or duplicate current U.S. plans. The April meeting of the International Support Group for Lebanon in Rome, Italy, is expected to address the needs of the LAF and solicit further international pledges of support for its development. In this context, Acting Deputy Assistant Secretary of State for Near Eastern Affairs Lawrence Silverman has stated that the Administration seeks "to increase [U.S.] assistance in order to modernize the LAF, and in particular to build its capabilities to secure its own borders with Syria." The Administration's FY2015 budget request for foreign operations includes a request for increased Foreign Military Financing assistance to Lebanon, offset by declines in Economic Support Fund assistance and International Narcotics Control and Law Enforcement Assistance. Recent U.S. investment in improvements in Lebanon's border surveillance and control capabilities has proven particularly relevant in light of the porous nature of the Syrian-Lebanese border and its exploitation by various forces involved in the Syrian conflict and in terrorist attacks inside Lebanon. Over the long term, U.S. officials intend to build an apolitical, competent state security apparatus to improve internal stability and public confidence in the LAF and ISF. Such public confidence could in theory create space for the Lebanese government to address more complex, politically sensitive issues ranging from political reform to developing a national defense strategy. A more fundamental, if less often acknowledged, hope among some U.S. officials and some Members of Congress has appeared to be that building up the LAF might eventually enable the Lebanese government to contain, or even potentially dismantle, Hezbollah's military capabilities. Similar hopes were advanced in the 1970s, but U.S. assistance proved unable to sufficiently empower the LAF to take action against the Palestinian Fedayeen . The political consequences of LAF confrontations with the Palestinians contributed to the outbreak of civil conflict, which in turn led to foreign intervention in the civil war that followed. Legislation in the 112th and 113th Congress During the 112 th Congress, some Members questioned the advisability of funding U.S.-sponsored initiatives in Lebanon at prevailing levels, citing both U.S. budgetary constraints and Hezbollah's then-increased participation in the Lebanese government. Since FY2012, Congress has enacted conditions in annual appropriations legislation that have prohibited U.S. assistance to the LAF if it is controlled by a terrorist organization. LAF command rests with General Jean Kahwaji (Maronite Christian), who is not a Hezbollah member. Samir Muqbil (Greek Orthodox Christian) of the centrist block serves as Defense Minister and Deputy Prime Minister in the Salam cabinet. Most recently, Section 7041(e) of the FY2014 Consolidated Appropriations Act ( P.L. 113-76 ) carries forward the terrorism-related prohibition on the use of funds appropriated under the State Department and Foreign Operations division of the act, and limits the use of U.S. Foreign Military Financing (FMF) account-funded assistance to specific purposes. Those purposes are "to professionalize the LAF and to strengthen border security and combat terrorism, including training and equipping the LAF to secure Lebanon's borders, interdicting arms shipments, preventing the use of Lebanon as a safe haven for terrorist groups, and to implement United Nations Security Council Resolution 1701." The act requires the Administration to submit to the Appropriations Committees "a detailed spend plan, including actions to be taken to ensure that equipment provided to the LAF is used only for the intended purposes," as well as regular notification of the Appropriations Committees of planned obligations of funds for Lebanon programs, including any lethal assistance. While some Members support greater conditionality on aid to the LAF, others suggest that the best way to weaken Hezbollah and Sunni extremist groups is to provide a military and security counterweight by continuing to assist the LAF. Syrian Refugees in Lebanon As of April 3, 2014, there were 1,001,543 Syrian refugees registered with UNHCR or awaiting registration in Lebanon—representing a 267% increase in the number of registered refugees in just 12 months. Lebanese officials estimate that the actual number may be as much as 30% higher, which would make the overall registered and nonregistered refugee population equivalent to nearly one-third of Lebanon's population. Of those registered and awaiting registration, approximately 34% are in the eastern governorate of Bekaa, 26% are in Beirut and Mount Lebanon, 13% are in South Lebanon, and 27% are in North Lebanon. Syrian refugees in Lebanon are not collocated in fixed camps because of Lebanese sensitivities about establishing potentially permanent settlements for refugee populations. As such, refugees from Syria have sought shelter and services in more than 1600 communities across Lebanon, and U.S. officials report that "[s]chools have moved to double-shifts to accommodate Syrian children, hospital beds are filled by Syrian patients, rents have risen and wages have fallen." In December 2013, Lebanon's Ambassador to the United States said in Senate testimony that The impact on the country so far is deep and threatens to unravel the country economically, politically, and socially. The World Bank's impact assessment estimates the total economic loss to the country to be around $7.5 billion for the period extending from 2012 to 2014. Unemployment is likely to reach 20 percent as 324,000 Lebanese plunge into unemployment. Exports have plummeted and the 20 percent growth rate in 2010 has turned into a minus 1 percent decline in 2012. Tourism tells the same story with the increase of 20 percent in October 2010, also turned into a disastrous 30 percent decline in October 2012. The impact on the budget has been severe. Direct budgetary support needed to maintain the same level of government services is $2.5 billion. The direct impact on budget revenues is a decline of $1.5 billion. In addition to government needs and the needs of the local community, there are also humanitarian needs related to the crisis. This was estimated at $1.7 billion for 2013, 32 percent of which has been funded so far. The price of shouldering the Syrian crisis is proving too much to bear for Lebanon. As of April 2014, the Administration reported that it had provided $340.7 million in humanitarian assistance for Syrian refugees and host communities in Lebanon since the beginning of the conflict in Syria. Administration officials report they are "working with Lebanon to identify additional ways we can help address deteriorating economic conditions and gaps in the delivery of important services, particularly in the health and education sectors." Of the $340.7 million identified to date, the Administration announced in January 2014 that $76 million in assistance would be allocated for additional efforts in Lebanon. These funds support the provision of immediate cash assistance for food cards, rent assistance, education, healthcare and shelter assistance and basic relief items like blankets, heaters, and hygiene kits by U.N. and U.S. partner entities. In addition, U.S. funding will support "job placement and expanded vocational training programs" for refugees and host communities, including for "women and vulnerable groups." U.S. support to the United Nations Relief and Works Agency (UNRWA) in Lebanon also provides cash assistance, relief supplies, education, and medical care to more than 50,000 Palestinian refugees that have fled Syria and joined already overcrowded Palestinian camps and Lebanese communities. Eastern Mediterranean Energy Resources and Disputed Boundaries In 2010, the U.S. Geological Survey estimated that there are considerable undiscovered oil and gas resources that may be technically recoverable in the Levant Basin, an area that encompasses coastal areas of Syria, Lebanon, Israel, Gaza, and Egypt and adjacent offshore waters. Israel has verified that some of these resources are economically recoverable, and natural gas production is underway from offshore Israeli fields with proven reserves of 10.1 trillion cubic feet (Tcf). Further natural gas reserves and production are expected from the Leviathan field, which may begin production in 2016-2017 or later. According to the U.S. Energy Information Administration, Leviathan and other newly discovered offshore fields "should allow [Israel] to become a significant exporter of natural gas in the next decade." U.S. officials believe that the eventual production of gas resources in Lebanese waters "could be a great, great boon ... to the Lebanese economy," and are working with Lebanese and Israeli leaders to resolve maritime boundary disagreements. Israel and Lebanon hold differing views of the correct delineation points for their joint maritime boundary relative to the Israel-Lebanon 1949 Armistice Line that serves as the de facto border between the two countries. Lebanon objects to an Israeli-Cypriot agreement that draws a specific maritime border delineation point relative to the 1949 Israel-Lebanon Armistice Line and claims roughly 330 square miles of waters that overlap with areas claimed by Israel ( Figure 6 ). The discovery of resources by Israel near the maritime boundary and the presumption that there are Lebanese resources close to the disputed area has amplified controversy over the disagreement. Both Israeli and Lebanese officials have taken steps to assert and protect their respective claims. The Obama Administration has sought to mediate the dispute privately, and press reports suggest the U.S. approach seeks to allow Lebanon to begin exploration and production activities in areas not subject to dispute while Lebanese differences with Israel regarding disputed areas are more fully addressed. The Lebanese government enacted a law defining its maritime boundaries and Exclusive Economic Zone in 2011 and created a national Petroleum Authority in November 2012 to serve as a regulator for the domestic oil and gas production industry, in conjunction with the Energy Ministry and cabinet. As of April 2014, the Salam cabinet was expected to discuss two long-awaited decrees. One regards the delineation of Lebanon's territorial waters into 10 exploration blocks, and the other proposes terms for a model exploration and production sharing agreement to govern future commercial arrangements with investors. Nearly 50 companies have been prequalified to bid on exploration and production licenses in Lebanese waters, and a bidding round that opened in 2013 is expected to begin in earnest once the cabinet adopts the required decrees. The Salam cabinet's recently approved ministerial statement makes reference to plans to proceed with the development of offshore energy resources and "confirms the total adherence to Lebanon's right to its waters and its oil and gas riches, and it pledges to speed up the necessary measures in order to secure its maritime borders, particularly in the disputed areas with the Israeli enemy." During a visit to Lebanon on April 1, U.S. Deputy Assistant Secretary of State for Energy Diplomacy Amos Hochstein reportedly said, I think the most advisable policy for choosing where to drill is to reach an agreement on the disputed zone so there isn't a disputed zone. I think it would be good not to touch the disputed zone until there is a resolution for this dispute.... The maritime dispute between Lebanon and Israel needs to be resolved. We [the United States] have gone to both sides on a number of occasions to share some ideas on how to solve this issue. The reason that it is critical to resolve this dispute between Lebanon and Israel is because in order to attract investments, there needs to be some kind of accommodation. There has to be certainty that the investments will be sound.... The longer you wait on resolving this dispute, the less likely it is that international oil companies will wholeheartedly invest in that area. For this reason, we have come up with certain ideas to solve this issue.... The main goal here is to allow Lebanon to be in a position to attract foreign investors: come to the offshore of Lebanon and be part of the economic revival. With regard to a potential delay of the scheduled April 2014 opening of bidding for exploration and production licenses, Hochstein said, It's always ideal to run things on time. But I think it's better to delay than to launch it before its ready. If you launch something before there is political consensus then this will have risks too because if companies invest money and resources and later the political attitudes change then this is worse. I think it would be good for Lebanon to move quickly and at the same time it is better to move correctly. Outlook Conditions in Lebanon are fragile and the country's stability is jeopardized by the fighting in Syria. At the same time, some in the Administration and Congress may view the Syrian uprising as an opportunity to weaken Hezbollah, as well as its key patron, Iran, and to limit Hezbollah's role in Lebanese affairs. It remains to be seen whether a weakened Hezbollah would be amenable to increased cooperation with its sectarian rivals. The rise in Lebanon of Sunni extremist forces linked to Syria, such as Jabhat al Nusra and ISIL, creates new threats for U.S. policy makers to consider. Since 2006, Hezbollah, its allies, and their Sunni extremist rivals have viewed U.S. assistance programs as a thinly veiled attempt to build proxy forces to target them. During this period, some Members of Congress have argued that the LAF and ISF should act more forcefully to limit weapons smuggling to Hezbollah, if not to confront Hezbollah directly. Persistent congressional concerns about the trustworthiness of the LAF and its potential to threaten Israel have placed limits on the extent of U.S. engagement. The Obama Administration, like its predecessor, has sought to underscore that the intent of U.S. support is to build national institutions in Lebanon that can impartially confront a range of security challenges, of which there is no shortage at present. Lebanese leaders and their U.S. interlocutors are acutely focused on the threat that potential power vacuums in executive, legislative, and security force leadership positions may pose to Lebanon's security in 2014. Two key domestic political issues remain unresolved: who will succeed President Michel Sleiman when his term expires on May 25, 2014, and which election law will govern parliamentary elections that have been delayed until November 2014. As of April 2014, parties appear no closer to consensus on election law reform proposals that could alter the electoral fortunes of certain factions considerably. In the meantime, rising insecurity has made the prospect of grand political compromise appear more necessary but less likely. Overall, the prevailing political balance in Lebanon continues to reflect fundamental communal divisions and different perspectives on events in neighboring Syria. These divisions and differences show little sign of abating, and have intensified as the conflict in Syria has continued and as attacks have spread in Lebanon. Some Lebanese leaders signal that they want to move beyond the sectarian politics that have paralyzed the country, while others seek to perpetuate the confessional system to defend or advance personal or communal interests. Lebanon's rival political coalitions accuse each other of jeopardizing the country's security by choosing sides in Syria's conflict as each contemplates the potential change in sectarian power dynamics that could be ushered in by prolonged conflict or regime change in Syria. Hezbollah and its Shia and Christian allies fear that an empowered Syrian Sunni majority will undermine their interests and empower their domestic rivals. The March 14 coalition seeks to undermine its competitors by linking them to the violent oppression of the Asad government, even as questions rise about the tactics and long-term intentions of fellow Asad opponents among small Sunni extremist community. U.S. decision makers face a delicate series of choices as the Syrian conflict drags on and Lebanese leaders seek to carry out needed elections and avoid slipping further toward crisis. Congress may seek to influence U.S. policy in the short run through its consideration of notifications for the obligation of foreign assistance funds for Lebanon and for any proposed arms sales. Consideration of the Administration's FY2015 foreign assistance funding request offers further opportunities for oversight and policy review. Broader evaluation of the direction of U.S. policy toward Syria is ongoing in both chambers and may include new assessments of U.S. engagement in Lebanon. The choices that Lebanese leaders make with regard to the Syrian crisis, their own political disputes, and the use of state security forces to assert sovereignty and combat non-state actors may further shape the future of U.S. assistance to and relations with Lebanon. In the interim, Lebanon is likely to remain an arena for sectarian and geopolitical competition, with political paralysis and insecurity as the result.

Lebanon's small geographic size and population belie the important role it has long played in the security, stability, and economy of the Levant and the broader Middle East. Congress and the executive branch have recognized Lebanon's status as a venue for regional strategic competition and have engaged diplomatically, financially, and at times, militarily to influence events there. For most of its independent existence, Lebanon has been torn by periodic civil conflict and political battles between rival religious sects and ideological groups. External military intervention, occupation, and interference have exacerbated Lebanon's political struggles in recent decades. Lebanon is an important factor in U.S. calculations regarding regional security, particularly regarding Israel and Iran. Congressional concerns have focused on the prominent role that Hezbollah, an Iran-backed Shia Muslim militia, political party, and U.S.-designated terrorist organization, continues to play in Lebanon and beyond, including its recent armed intervention in Syria. Congress has appropriated more than $1 billion since the end of the brief Israel-Hezbollah war of 2006 to support U.S. policies designed to extend Lebanese security forces' control over the country and promote economic growth. The civil war in neighboring Syria is progressively destabilizing Lebanon. According to the United Nations High Commissioner for Refugees, more than 1 million predominantly Sunni Syrian refugees have fled to Lebanon, equivalent to close to one-quarter of Lebanon's population. Regional supporters and opponents of Syrian President Bashar al Asad are using Lebanon as a transit point and staging ground in a wider regional conflict. Hezbollah has intervened in Syria in support of Asad, and Sunni extremist groups based in Syria are cooperating with Lebanese and Palestinian Sunni extremists in Lebanon to carry out retaliatory attacks against Hezbollah targets. The U.S. intelligence community told Congress in its 2014 Worldwide Threat Assessment that, "Lebanon in 2014 probably will continue to experience sectarian violence among Lebanese and terrorist attacks by Sunni extremists and Hezbollah, which are targeting each-others' interests.... Increased frequency and lethality of violence in Lebanon could erupt into sustained and widespread fighting." In January 2014, the U.S. State Department warned against all travel to Lebanon in light of growing terrorist threats. The question of how best to marginalize Hezbollah and other anti-U.S. Lebanese actors without provoking civil conflict among divided Lebanese sectarian political forces remains the underlying challenge for U.S. policy makers. Ongoing political deadlock and the prospect of executive, legislative, and security force leadership vacuums amplify this challenge. This report provides an overview of Lebanon and current issues of U.S. interest. It provides background information, analyzes recent developments and key legislative debates, and tracks legislation, U.S. assistance, and recent congressional action. It will be updated to reflect major events or policy changes. For more information on related issues, see CRS Report RL33487, Armed Conflict in Syria: Overview and U.S. Response, coordinated by [author name scrubbed]; CRS Report R43119, Syria: Overview of the Humanitarian Response, by [author name scrubbed] and [author name scrubbed]; and CRS Report RL33476, Israel: Background and U.S. Relations, by [author name scrubbed].

The Farm Credit System The Farm Credit System (FCS) was created to provide a permanent, reliable source of credit to U.S. agriculture. Before the Federal Farm Loan Act was enacted in 1916, credit was often unavailable or unaffordable in rural areas. Many lenders avoided farm loans due to the inherent risks of agriculture. Statutory authority is in the Farm Credit Act of 1971, as amended (12 U.S.C. 2001 et seq. ). Comprehensive changes were enacted in the Agricultural Credit Act of 1987. The FCS is authorized by statute to lend to farmers, ranchers, and harvesters of aquatic products. Loans may also be made to finance the processing and marketing activities of these borrowers; for home ownership in rural areas; certain farm- or ranch-related businesses; and agricultural, aquatic, and public utility cooperatives. FCS is a commercial for-profit lender and is not a lender of last resort. Borrowers must meet creditworthiness requirements similar to those of a commercial lender. FCS has "young, beginning, and small" (YBS) farmer lending programs, but they do not have statutory targets or mandates. The FCS holds nearly 41% of the farm sector's total debt (about the same as the 42% share by commercial banks) and has the largest share of farm real estate loans (46%). As of March 31, 2016, FCS had $238 billion in loans outstanding, of which about 46% was in long-term agricultural real estate loans, 19% in short- and intermediate-term agricultural loans, 15% in loans to agribusinesses, 8% in energy and water/waste water loans, 2% in export financing loans and leases, 3% in rural home loans, and 3% in communications loans ( Figure 4 ). Government-Sponsored Enterprise (GSE) As a GSE, FCS is a privately owned, federally chartered cooperative designed to provide credit nationwide. It is limited to serving agriculture and related businesses and homeowners in rural areas. Each GSE is given certain benefits, such as implicit federal guarantees or tax exemptions, presumably to overcome barriers faced by purely private markets. FCS is the only direct lender among the GSEs. Other GSEs, such as Fannie Mae, are secondary markets. FCS is not a government agency, and it is not explicitly guaranteed by the U.S. government. The tax benefits for FCS include an exemption from federal, state, municipal, and local taxation on the profits earned by the real estate side of FCS (12 U.S.C. 2098). Income earned by the non-real-estate side of FCS is subject to taxation. The exemption originated in the 1916 act. Commercial bankers estimate that the annual value of these tax benefits amounted to over $1 billion in 2011. For investors who buy FCS bonds on Wall Street, the interest earned is exempt from state, municipal, and local taxes. This makes FCS bonds more attractive to the investing public and helps assure a plentiful supply of funds for loans. Commercial bankers say that the tax benefits let FCS offer lower interest rates to borrowers and thus give FCS an operating advantage, since they compete in the same retail lending market. Cooperative Business Organization FCS associations are owned by the borrowers who purchase stock, which is required as part of their loans (the smaller of $1,000 or 2% of the loan amount). FCS stockholders elect the boards of directors for banks and associations. Each has one vote, regardless of the loan size. Most directors are members, but federal law requires at least one from outside. If an association is profitable, the directors may choose to retain the profits or distribute some of it through dividends or patronage refund s that are proportional to the size of the loan. Patronage refunds can effectively reduce the cost of borrowing. Funded with Bonds and Stock and Insured With the exception of seed money that was repaid by the 1950s and a temporary U.S. Treasury line of credit in the 1980s, FCS operates without any direct federal appropriations. FCS banks and associations do not take deposits like commercial banks. Instead, the Federal Farm Credit Banks Funding Corporation uses capital markets to sell FCS bonds and notes. These debts become the joint and several liabilities of all FCS banks. The funding corporation allocates funding to the banks, which provide funds to associations, which lend to borrowers. Profits from loans repay bondholders ( Figure 1 ). FCS also raises capital through two other methods. Borrowers are required to buy stock (the lesser of $1,000 or 2% of the loan amount) and become cooperative members. FCS also retains profits that are not returned as patronage to borrowers. Besides relying on the capital that the FCS has built, obligations of the FCS are further insured by the F arm Credit System Insurance Corporation , which was established by statute in 1988 to ensure timely payment of principal and interest on FCS debt securities. Annual premiums are paid by each bank through an assessment based on loan volume until the secure base amount of 2% of total outstanding loans is reached. National System of Banks and Associations FCS is composed of four regional banks ( Figure 2 ) that provide funds and support services to 74 smaller Agricultural Credit Associations (ACAs), Federal Land Credit Associations (FLCAs), and Production Credit Associations (PCAs). These associations ( Figure 3 ), in turn, provide loans to eligible borrowers. The most common operating structure (due to favorable tax and regulatory rules) is a "parent ACA" with FLCA and PCA subsidiaries. There are 72 ACAs and two FLCAs. In addition to its charter as one of the regional banks, CoBank has a nationwide charter to finance farmer-owned cooperatives and rural utilities. It finances agricultural exports and provides international services for farmer-owned cooperatives through three international offices. The number of banks and associations has been declining for decades through mergers and reorganizations. This consolidation has continued in recent decades through the "parent ACA" structure. In the mid-1940s, there were over 2,000 lending associations. There were nearly 900 in 1983, fewer than 400 by 1987, 200 in 1998, 95 in 2006, and 80 in 2015. The system operated with 12 districts into the 1980s, 8 districts in 1998, 5 districts in 2004, and 4 regional banks since 2012. Twenty years ago, the typical FCS association covered several counties and specialized in either land or farm production loans. Today, the typical FCS association covers a much larger region, delivers a wide range of farm and rural credit programs and services, and has an extensive loan portfolio. FCS may benefit when consolidation creates more diversified portfolios. Customers may benefit if greater institutional efficiency is passed along through lower interest rates. However, consolidation may weaken the original cooperative concept of local borrower control. Each association within FCS has a specific "charter territory." If an association wants to lend outside its charter territory, it must first obtain approval from the other territory's association. Charter territories help ensure that borrowers are served locally and maintain local control of the association. Charter territories and any changes must be approved by FCA. Types of Loans and Borrowers The FCS provides three types of loans to farm producers: (1) operating loans for the short-term financing of consumables such as feed, seed, fertilizer, or fuel; (2) installment loans for intermediate-term financing of durables such as equipment or breeding livestock; and (3) real estate loans for long-term financing (up to 40 years) of land, buildings, and homes. The FCS has a statutory mandate to serve agriculture, certain agribusinesses, and rural homeowners (e.g., 12 U.S.C. 2019 and 2075). Borrowers must meet eligibility and creditworthiness requirements. Types of eligible borrowers and the scope of their financing can be grouped into the following categories (e.g., 12 U.S.C. 2017, 2075, and 2129): Full-time farmers. For individuals with over 50% of their assets and income from agriculture, FCS can lend for all agricultural, family, and non-agricultural needs (including vehicles, education, home improvements, and living expenses). Part-time farmers. For individuals who own farmland or produce agricultural products but earn less than 50% of their income from agriculture, FCS can lend for all agricultural and family needs. Non-agricultural lending is limited. Farming-related businesses. FCS can lend to businesses that process or market farm, ranch, or aquatic products if more than 50% of the business is owned by farmers who provide at least some of the "throughput." FCS can also lend to businesses that provide services to farmers and ranchers, such as crop spraying and cotton ginning. The extent of financing is based on the amount of the business's farm-related income. Rural homeowners. FCS can lend for the purchase, construction, improvement, or refinancing of single-family dwellings in rural areas (2,500 population limit). Farmer-owned cooperatives and certain rural utilities (electric and telecom). Figure 4 illustrates FCS's portfolio of loans outstanding ($238 billion as of March 31, 2016). About 65% of the loan portfolio is in the primary categories of farm real estate and operating loans. Figure 5 presents the loan portfolio by size of loan and the number of borrowers in each size category. About 74% of borrowers (402,000 out of 527,000) have loans under $250,000 in size and account for 14% of the loan portfolio. At the other extreme, 49 borrowers (0.009% of 527,000) have loans over $250 million and account for 9% of the loan portfolio. Federal Regulation Congressional Oversight Congressional oversight of FCS is provided by the House and Senate Agriculture Committees, which have primary jurisdiction for the FCS statutes. The most recent congressional hearings on agricultural credit were in the House on December 2, 2015 (with witnesses from the FCA), and in the Senate on June 13, 2006 (on agricultural credit but not specifically the FCS). The Senate Agriculture Committee also holds hearings on nominees for the Farm Credit Administration board of directors, most recently in March 2015. Farm Credit Administration (FCA) FCA is an independent agency and the federal regulator responsible for examining and ensuring the safety and soundness of all FCS institutions (12 U.S.C. 2241 et seq .; 12 C.F.R. 600 et seq .). FCA is directed by a three-member board nominated by the President and confirmed by the Senate ( Table 1 ). Board members serve six-year terms and may not be reappointed after serving a full term or more than three years of a previous member's term. The President designates one member as chairman, who serves until the end of that member's term. Members may continue to serve on the board until their replacements are confirmed. FCA's operating expenses are paid through assessments on FCS banks and associations. Even though FCA does not receive an appropriation from Congress, the annual agriculture appropriations act places a limit on FCA's administrative expenses ($65.6 million in FY2016). Issues for Congress Competition and "Similar Entity Lending" Competition between the FCS and commercial banks is an ongoing source of contention related to congressional oversight and statutory jurisdiction. The FCS is unique among the GSEs because it is a retail lender making loans directly to farmers and thus is in direct competition with commercial banks. Because of this direct competition for creditworthy borrowers, the FCS and commercial banks often have an adversarial relationship over policy. Commercial banks assert unfair competition from the FCS for borrowers because of tax advantages that can lower the relative cost of funds for the FCS. They often call for increased congressional oversight. The FCS counters by citing its statutory mandate (and limitations) to serve agricultural borrowers in good times and bad times. Recently, the assertion of unfair competition and inappropriate lending has been leveled over the characteristics of some borrowers that have obtained FCS loans and/or the purposes of those loans. The policy-related issue is the purpose and extent of the statutory authority for "similar entity lending" that certain FCS banks have used to participate (i.e., have a partial interest, or to buy part of a loan from another bank) in loans to borrowers that would otherwise be ineligible for direct FCS loans. The authority to make "similar entity loans" was added to the Farm Credit Act in 1994 ( P.L. 103-376 , Section 5). It allows the FCS to participate in loans that are originated by a commercial bank to borrowers that are expressly not eligible for FCS loans but for purposes that are "functionally similar" to activities that are conducted by FCS-eligible borrowers (12 U.S.C. 2206a; 12 C.F.R. 613.3300, 62 Federal Register 4444, January 30, 1997). The provision is meant to allow greater diversification in the FCS loan portfolio for risk management along with traditional means of diversification (such as geographic breadth) and lending to a range of commodity sectors. "Similar entity loans" cannot exceed 15% of the FCS entity's total loan volume and must be less than 50% of the individual loan. Commercial banking advocates charge that many of the similar entity loans fail a perception test of meeting the original statutory intent that FCS makes credit available to farmers and rural communities and are often inappropriately large or risky. FCS advocates counter that the loans are legal under the statute, follow the intent of achieving diversification, and help commercial banks by jointly cooperating through loan participations. Several Members at a House Agriculture Committee hearing in December 2015 raised questions about the appropriateness and perception of some similar entity loans, despite statements about the legality of such loans. In response to the hearing, FCA issued a "bookletter" in March 2016 that provided further guidance and reporting requirements for FCS associations to guard against reputation risk from similar entity lending. Recent Farm Bills The most recent statutory changes to the Farm Credit Act have been in omnibus farm bills, and those changes have been relatively minor in terms of the scope of FCS lending or the structure of the institution. For example, the 2014 farm bill ( P.L. 113-79 ) established the intent that compensation disclosure of FCS executives rests with FCS boards of directors rather than elsewhere, such as with shareholders. The previous farm bill in 2008 ( P.L. 110-246 ) allowed the Federal Agricultural Mortgage Company (Farmer Mac, see below) to participate in rural utility loans and made technical changes to the premiums paid by FCS banks to the FCS Insurance Corporation, but it did not expand the scope of FCS authority as some advocates had hoped. Farmer Mac—Another Farm Credit Act Institution The Federal Agricultural Mortgage Company (Farmer Mac) was established in the Agricultural Credit Act of 1987 as a secondary market for agricultural loans. It purchases and pools qualified loans and may sell them to investors as securities or hold them in its own portfolio. Although Farmer Mac is statutorily part of the Farm Credit Act and is regulated by FCA, it has no liability for the debt of any other FCS institution, and the other FCS institutions have no liability for Farmer Mac debt. It is considered a separate GSE. Farmer Mac is an investor-owned corporation, not a member-owned cooperative. Voting stock may be owned by banks, insurance companies, and FCS institutions. Nonvoting stock may be owned by any investor. Its board of directors has members from the FCS, commercial banks, and the public at large. Farmer Mac operates two programs: Farmer Mac I (loans not guaranteed by the U.S. Department of Agriculture [USDA]) and Farmer Mac II (USDA-guaranteed loans). A majority of Farmer Mac I volume comes from the sale of "long-term standby purchase agreements." Farmer Mac promises to purchase specific agricultural mortgages, thus guaranteeing the loans against default risk while the participating lender retains interest rate risk. Under Farmer Mac II , the company purchases the portion of individual loans that are guaranteed by USDA. On these purchases, Farmer Mac accepts the interest rate risk but carries no default risk.

The Farm Credit System (FCS) is a nationwide financial cooperative lending to agricultural and aquatic producers, rural homeowners, and certain agriculture-related businesses and cooperatives. Established in 1916, this government-sponsored enterprise (GSE) has a statutory mandate to serve agriculture. It receives tax benefits but no federal appropriations or guarantees. FCS is the only direct lender among the GSEs. Farmer Mac, a separate GSE but regulated under the umbrella of FCS, is a secondary market for farm loans. Federal oversight by the Farm Credit Administration (FCA) provides for the safety and soundness of FCS institutions. Current issues and legislation affecting the FCS are discussed in CRS Report RS21977, Agricultural Credit: Institutions and Issues.

Introduction Program evaluations can play an important role in public policy debates and in oversight of government programs, potentially affecting decisions about program design, operation, and funding. Many different techniques of program evaluation can be used and presented with an intention to inform and influence policy makers. One technique that has received significant recent attention in the federal government is the randomized controlled trial (RCT). This report discusses what RCTs are and identifies a number of issues regarding RCTs that might arise when Congress considers making program evaluation policy. For example, in the 109 th Congress, Section 3 of S. 1934 (as introduced) would establish a priority for RCTs when evaluating offender reentry demonstration projects; Section 114 of S. 667 (Senate Finance Committee-reported bill) would require RCTs for demonstration projects for low-income families; and Section 5 of S. 1129 (as introduced) would call for RCTs for projects and policies of multilateral development banks. Issues regarding RCTs could also arise when actors in the policy process present specific program evaluations to Congress (e.g., in the President's budget proposals) to influence Congress's views and decision making. For many reasons, evaluations often merit scrutiny and care in interpretation. Before discussing RCTs in detail, the report places them in context by discussing (1) questions that program evaluations are typically intended to address, (2) how RCTs relate to other program evaluation methods, and (3) two major roles that Congress often takes with regard to program evaluation. The report next describes the basic attributes of an RCT, major ways to judge an RCT's quality, and diverse views about the practical capabilities and limitations of RCTs as a form of program evaluation. In light of concerns about the reliability of individual studies to support decision making, the report also discusses how RCTs can fit into systematic reviews of many evaluations. The report next highlights two areas where RCTs have garnered recent attention—in education policy and the President's annual budget proposal to Congress. Finally, the report identifies potential issues for Congress that could apply to the highlighted cases, oversight of other policy areas, and pending legislation. Because the vocabulary of program evaluation can be confusing, an appendix provides a glossary with definitions of selected terms. Congress, Program Evaluation, and Policy Making Key Questions about Government Programs and Policies Citizens, elected officials, civil servants, interest groups, and many other participants in governance of the United States have an interest in the performance and results of government programs and policies. To that end, stakeholders might want answers to many questions about programs and policies. For example, how should public policy problem(s) be defined? Is a program addressing some or all of the problem(s)? How well are federal programs and policies managed? What are they achieving? How can they improve? How are stakeholders affected? What unintended consequences might result? In the future, what activities and policies should the federal government pursue in order to best serve the public? What resources should be devoted to a program or policy? In addition, stakeholders might want answers to questions about the quality of evaluations that are brought to policy discussions, given that participants in the policy process will not always advertise weaknesses in studies that also happen to support their policy positions. What might those weaknesses be? Stakeholders might also ask how well federal agencies evaluate the programs they lead and administer. For example, what methods are appropriate to assess a given type of program or policy? Given the available quantity and quality of research, what degree of confidence should be placed in findings, to date? Do agencies have sufficient capacity to evaluate their programs? Are they performing the necessary types of evaluation? Do agencies have sufficient independence to credibly evaluate their programs and policies? What role should agencies play in evaluating programs? At times, many or all of these questions might be of interest to Congress and program stakeholders. All of them will typically be of interest to agency program managers and leaders. Therefore, any of these questions might be potential subjects of congressional oversight or law making. Program Evaluation and Informed Policy Making In response to questions like those posed above, program evaluations can be introduced into policy discussions by actors in the policy-making process. These actors—who include organizations and individuals both inside and outside of government—might be interest groups, think tanks, academics, legislators, state or local governments, the President, federal agencies, or nonpartisan institutions. Many actors bring evaluations to policy discussions on their own initiative, oftentimes to emphasize the results or findings that they interpret to support their positions. Some actors (e.g., federal agencies) might bring evaluations in response to legislative or executive branch requirements. Depending on many circumstances, the evaluations that agencies bring might, or might not, support the policy views of the agency's head or the President. When actors bring program evaluations into policy discussions, the studies will oftentimes use different approaches, because there are many possible ways to help answer the questions cited previously. The term program evaluation , therefore, has in practice been interpreted in several ways. For example, there is no consensus definition for the term program . In practice, the term has been used to refer to a government policy, activity, project, initiative, law, tax provision, function, or set thereof. Accordingly, this report uses the term program to refer to any of these things, as appropriate, that someone might wish to evaluate. The term evaluation can seem similarly ambiguous. A recent reference work in the program evaluation literature defined evaluation as "an applied inquiry process for collecting and synthesizing evidence that culminates in conclusions about the state of affairs, value, merit, worth, significance, or quality of a program, product, person, policy, proposal, or plan." Perhaps with many of these considerations in mind, Congress defined program evaluation, for purposes of the Government Performance and Results Act of 1993 (GPRA), as "an assessment, through objective measurement and systematic analysis, of the manner and extent to which Federal programs achieve intended objectives." GPRA requires most executive branch agencies to develop five-year strategic plans, annual performance plans (including goals and performance indicators, among other things), and annual program performance reports. When reporting GPRA to the Senate, the Senate Committee on Governmental Affairs contemplated that not all forms of evaluation and measurement would necessarily be quantifiable, because of the diversity of federal government activities. In sum, program evaluation has been considered in practice, in the scholarly literature, and under GPRA as concerned with investigating both a program's operations and its results. Furthermore, program evaluation has been seen as (1) informing conclusions at particular points in time, and also (2) a cumulative process over time of forming conclusions, as more evaluation information is collected and interpreted. Program evaluations might help inform policy makers, including Members and committees of Congress in their authorizations, appropriations, and oversight work. However, viewpoints about program evaluations can be contentious, both in policy debates and among expert evaluators. In their interactions with Congress, many actors cite program evaluations as part of the rationale for policy changes. In addition, observers and practitioners sometimes disagree about the practical capabilities and limitations of various program evaluation methods, the quality of an individual evaluation, or how a study's findings should be interpreted and used. Therefore, many observers believe it is important for policy makers, including Members and committees of Congress, to be informed consumers of evaluation information when weighing these considerations and making policy decisions. Types of Program Evaluation Practitioners and theorists categorize different types of program evaluation (sometimes referred to as different designs or methods) in several ways. Unfortunately, these categorizations are not always consistent with each other, and practitioners and theorists do not always use consistent terminology to describe program evaluations. They sometimes use different definitions for the same term, or use different terms as synonyms for the same definition. This report discusses some of these methods, but does not attempt to provide an overall taxonomy for program evaluation types. The sections below provide basic descriptions of RCTs and other methods. A more detailed description and discussion of RCTs is located later in the report. Randomized Controlled Trials (RCTs) One program evaluation method that has been a subject of recent interest at the federal level, as well as some controversy, is the RCT. As discussed later in this report, an RCT attempts to estimate a program's impact on an outcome of interest . An outcome of interest is something, oftentimes a public policy goal, that one or more stakeholders care about (e.g., unemployment rate, which many actors might like to be lower). An impact is an estimated measurement of how an intervention affected the outcome of interest, compared to what would have happened without the intervention. A simple RCT randomly assigns some subjects to one or more treatment groups (also sometimes called experimental or intervention groups ) and others to a control group . The treatment group participates in the program being evaluated and the control group does not. After the treatment group experiences the intervention, an RCT compares what happens to the two groups by measuring the difference between the two groups on the outcome of interest. This difference is considered an estimate of the program's impact. The terms randomized field trial (RFT) , random assignment design , experimental design , random experiment , and social experiment are sometimes used as synonyms for RCT, and vice versa. However, use of the word field in this context is often intended to imply that an evaluation is being conducted in a more naturalistic setting instead of a laboratory or other artificial environment. Many Other Methods Many other types of program evaluation that are not RCTs can also be conducted in order to address one or more of the questions posed at the beginning of this report. Some of these "other" methods have been called, as a group, observational designs. The term observational design has been used in different ways, but often refers to empirical and qualitative studies of many types that are intended to help explain cause-and-effect relationships, but that do not attempt to approximate an experimental design. Quasi-experimental designs refer to studies that attempt to estimate a treatment's impact on a group of subjects, but, in contrast with RCTs, do not have random assignment to treatment and control groups. Some quasi-experiments are controlled studies (i.e, with a control group and at least one treatment group), but others lack a control group. Some quasi-experiments do not measure the outcome of interest before the treatment takes place. Many observers and practitioners consider quasi-experiments to be a form of observational design, but others put them in their own category. Methods that attempt to estimate an impact are sometimes called impact analysis designs. Qualitative evaluation often refers to judging the effectiveness of a program (e.g., whether it accomplishes its goals) by conducting open-ended interviews, directly observing program implementation and outcomes, reviewing documents, and constructing case studies. As used by different researchers, the term nonexperiment has been used at times to refer specifically to quasi-experiments and other times to anything that is not an RCT. Systematic reviews synthesize the results of many studies, as discussed later in this report. Many other program evaluation methods, including surveys and cost-benefit analyses, are also used to assess programs. Because this report focuses on RCTs and related issues, only some of these "other" methods are discussed further in this report. Possible Congressional Roles Concerning Program Evaluation Congress can assume at least two major roles regarding program evaluation. These roles might be called (1) "making program evaluation policy" and, (2) when presented with one or more program evaluations, "scrutinizing and learning from program evaluations." Each of these broad roles can raise a number of issues for Congress regarding program evaluations generally, as well as RCTs specifically. Making Program Evaluation Policy First, Congress might make policy regarding how, when, and the extent to which agencies are to conduct, fund, or use program evaluations. For example, Congress might, among other things, establish agencies or offices that have missions to evaluate programs, require that a percentage of a program's funding be devoted to program evaluation activities, appropriate funds for specific evaluations, articulate what questions should be studied, or specify what methods should or must be used. When policy makers consider and make these decisions, two considerations that many observers would likely consider important are for policy makers to be aware of both the practical capabilities and limitations of various program evaluation methods, and also how those capabilities and limitations might be balanced in light of multiple evaluation objectives. Scrutinizing and Learning From Program Evaluations Second, Members of Congress might use specific program evaluations to help inform their thinking, policy making, and oversight of federal policies. In the course of Congress's lawmaking and oversight work, actors inside and outside of government frequently cite program evaluations to justify their policy proposals and recommendations. In these situations, consumers of evaluation information, including Congress, can face challenges of assessing (1) quality and depth of evaluation information, which can be uneven, and (2) the relevance of evaluation information to a policy problem, which can vary. Therefore, should Congress wish to critically assess or scrutinize program evaluations, having insight into how to assess the quality, depth, and relevance of evaluation methods might be helpful. Program evaluations themselves can help inform policy in several ways. Among other things, they can provide deeper understanding of a policy problem, suggest possible ways to modify or improve a program or policy, provide perspectives on whether goals are being accomplished, reveal consequences that might not have been intended, and inform deliberations regarding the allocation of scarce resources. Nonetheless, observers and stakeholders frequently disagree on the appropriate goals of government activities, which can make evaluations controversial. Furthermore, because "[p]rogram evaluation is a site for the resolution of ethical and democratic dilemmas," any assessment of a program's merit or worth is arguably always made in part through the lens of an observer's priorities, beliefs, values, and ethics. Merit and worth are program evaluation terms that often are defined as the overall intrinsic and extrinsic value, respectively, of a program to individuals and society. Even when there is some consensus on goals, it has sometimes been difficult or impossible to specify with a single number, program evaluation, performance measure, or even group of evaluations and performance measures, how to comprehensively judge an organization's or program's success in accomplishing its mission. Thus, as experience has shown, the concepts of merit and worth are often in the eye of the beholder. Still, evaluations might help clarify what programs are accomplishing, and, when evaluations are done well, help policy makers make informed judgments when reconciling diverse views about policy problems and values. Randomized Controlled Trials (RCTs) What are RCTs? RCT Defined As briefly noted earlier, an RCT is a type of program evaluation that seeks to assess whether a program had an impact for one or more outcomes of interest (e.g., number of weeks a person remains unemployed) compared to what would have happened without the program. An impact is usually calculated for a large sample of subjects as the difference between (1) a measurement of the outcome of interest after an intervention takes place, averaged across subjects who received the treatment, and (2) a measurement of the outcome of interest after the intervention, averaged across subjects who did not receive the treatment. The study randomly assigns the subjects (also called units of analysis ) to one or more treatment groups and also a control group. A treatment group experiences the intervention, and the control group does not. After the intervention, measurement of the outcome of interest for the treatment group provides information on how the intervention might have affected these subjects. The control group, by contrast, is intended to simulate what would have happened to the treatment group subjects if they had not received the intervention. Depending on the policy area studied, an intervention could be, for example, a training regimen for unemployed workers or a new policy to reduce crime. Because the estimated impact is an average across subjects, the impact reflects the weighted average of the subjects who experienced favorable impacts, subjects who did not experience a change, and others who experienced unfavorable impacts. In theory, random assignment helps ensure that all of the groups in the study are made statistically equivalent at the beginning of the study. If the only important difference in the subsequent experience of each group is the intervention, then differences in the outcome of interest that are observed at the end of the trial can be attributed with greater confidence to the intervention, rather than to initial differences between the groups. Various statistical tools can be used to estimate whether observed differences are likely due to the intervention (i.e., the difference is found to be statistically significant with a small chance of error) or to chance. The quality of an RCT is often assessed by two criteria: internal validity and external validity . A third criterion, construct validity , is not always discussed, but is also considered important for judging an evaluation's quality. Internal Validity Internal validity is typically defined as the confidence with which one can state that the impact found or implied by a study was caused by the intervention being studied. For example, if an RCT of an aftercare program for juveniles shows that the juveniles who attended a program re-commit crimes (recidivate) at a lower rate than the juveniles who did not attend the program (the control group), an assessment of the study's internal validity would suggest whether this result was due to the aftercare program or whether it might have been due to some other factor. Internal validity is predicated on the methodological rigor of the study and an absence of other factors, unrelated to the program, affecting the outcome of interest for either the treatment or control group differently from the other group. The term also reflects that the better designed and implemented a study is, the more reliable its conclusions about causation will tend to be. From the perspective of internal validity, the methodological rigor of an RCT study can depend on a number of factors, including, but not limited to the following: how effectively the random assignment of units creates statistically equivalent groups; whether the group of subjects is sufficiently numerous to ensure that an impact large enough to be of interest to stakeholders, if it occurs, will be found statistically significant (the more numerous the units in the group being studied, the better chance there is of detecting a program's potential impact); whether attrition in the treatment and control groups (e.g., subjects dropping out of the study) is comparable with respect to the attributes of subjects; whether factors other than the treatment "contaminate" one group but not the other (e.g., due to problems with delivering the treatment or incomplete environmental controls); whether the behavior of researchers or subjects is affected because they know who is receiving a treatment or not receiving a treatment (ideally, RCTs are double-blind studies, in which neither the subjects nor the researchers know which group gets the treatment, but double-blind studies in social science are uncommon); whether the units being studied comply with the intervention being provided (e.g., did the patient take the medicine being studied?); whether the presence of a randomized evaluation influences the treatment group's experience (e.g., randomization altering the process of selection into the program); whether subjects in the control group can obtain close substitutes for the treatment outside the program; and whether data collection and analysis procedures are reliable. External Validity External validity is typically defined as the extent to which an intervention being studied can be applied to other settings, times, or groups of subjects and be expected to deliver a similar impact on an outcome of interest. Thus, external validity relates to both (1) whether the intervention itself can be replicated with high confidence and (2) whether an intervention will most likely result in a similar impact in other situations or environments, or with other subjects. In practice, some users of the term emphasize the second aspect noted here. The terms generalizability , replicability , and repeatability are sometimes used as synonyms for external validity. The external validity of a study can depend on a variety of factors. As noted above, one factor is the confidence a person has that an intervention itself can be replicated. For example, if a new curriculum is introduced in a school, it is possible that the school might deviate from the prescribed curriculum in order to accommodate events or student needs unanticipated by the designers of the new curriculum or the study researchers. Unless the deviation were clearly documented, it might be difficult or impossible to replicate the same intervention in other sites. Furthermore, if the deviation affects the study's outcome of interest either positively or negatively compared to what it would have been without the deviation, the study's findings might not be generalizable. Another major factor relating to external validity, and one of the most frequently cited, is the way in which a study's subjects were selected. For example, the results of a study measuring the impact of a certain curriculum in schools in Boston, New York City, and Philadelphia might not be generalizable to classrooms in small towns in the Midwest due to potential differences among the underlying populations and environments. The results also might not be generalizable to classrooms in other large cities. Among RCTs, the most generalizable are often those that estimate the same intervention's impact in different settings (also known as multi-site RCTs), as well as those which feature samples of subjects with diverse socioeconomic and demographic characteristics. RCTs can also be more generalizable if subjects are randomly selected from a certain population to participate in the RCT, in order to make the subjects more representative of that population. This is not always possible, however, because sometimes subjects can be selected only in a nonrandom way (e.g., if subjects volunteer for the program). Attrition can also affect external validity. Even if attrition among the treatment and control groups is equivalent, if too many people with certain characteristics drop out of a study, a treatment group that was diverse enough to provide some generalizability at the beginning of the study may no longer have as much at the end, even if the sample remains large enough to produce statistically significant results concerning the intervention's impact. In response to many of these considerations, researchers sometimes carefully describe the intervention, a study's subjects, and the local environment so that other researchers and stakeholders can attempt to assess a study's external validity. Construct Validity A third type of validity that is considered to be important in any type of evaluation, but is not always explicitly discussed, is construct validity . As one reference work explains, [s]implistically, construct validity is about naming something (a program, an attribute) accurately. For example, when an evaluator measures student achievement, the issue of construct validity entails a judgment about whether the measures or the operationalization of achievement are really measuring student achievement, as opposed to, for example, social capital. The "construct" in this example is a specific way of measuring student achievement. Thus, one definition of construct validity concerns the extent to which a study actually evaluates the question it is being represented as evaluating. Perhaps unsurprisingly, actors in the policy process will sometimes have different views on appropriate ways to measure student achievement, or more generally, appropriate ways to measure "success" in achieving a program's mission and goals. Alternatively, when the term construct validity is used in relation to a program rather than a measurement method, it often refers to the extent to which an actual program reflects one's ideas and theories of (1) how the program is supposed to operate, and (2) the causal mechanism through which it is supposed to achieve outcomes. This view of construct validity can be important when attempting to improve a program (e.g., modifying it to better achieve goals) or to understand the circumstances that are necessary for the program to achieve similar results at another time or place, or with different subjects. With insight into the mechanism of causation, it might also be possible to mitigate any unintended consequences. Evaluation Quality Each type of validity is considered important to the overall quality of an RCT. High internal validity helps to ensure that estimated impacts were due to the intervention being studied and not to other factors such as contamination of the experiment (e.g., improper treatment delivery or incomplete or improper environmental controls, when the treatment and control groups experience different events aside from the treatment). High external validity helps to ensure that an intervention could achieve similar results for other subjects, at another time, or in a different setting. High construct validity helps to increase confidence that (1) the outcome of interest actually measures what it is being represented as measuring and (2) the program actually caused an impact in the way that was theorized or intended. However, it is not necessarily always possible to enjoy the best of all of these worlds in an evaluation. For example, many scholars and practitioners have viewed RCTs as an evaluation design that, although potentially having high internal validity, in certain cases can lack external validity (e.g., if random assignment makes it more difficult to use typical subjects and natural or representative settings). Some have seen RCTs as trading off external validity in order to achieve high internal validity, but others disagree that there is an implied tradeoff. RCTs with low internal validity cannot be used to confidently state that an intervention caused an observed impact, because the evidence they provide may be dubious. RCTs with high internal validity but low external validity may indicate that an intervention somehow made an impact for one population, but not whether the intervention can be replicated and would make an impact in a different population or setting. With regard to construct validity, there is not always consensus that a particular outcome of interest represents the "best" way to evaluate a program. In addition, establishing the mechanisms of causation (e.g., to ensure the intervention caused an impact in the theorized way) can be difficult. Complementary evaluation methods, in addition to an RCT, might be required to do so. Commentators have also suggested other criteria for assessing quality. For example, some have concluded that "[e]ven within [RCTs], quality is an elusive metric," and that in addition to internal validity, "a complete definition of quality also should take into account the trial's external validity and its statistical analysis, as well as, perhaps, its ethical aspects." Practical Capabilities and Limitations of RCTs Claims about RCTs' practical capabilities and limitations, both in comparison with other research designs and in isolation, have at times been controversial. Although there is much regarding RCTs about which many observers agree, certain issues have at times sparked controversy. Sorting out these arguments can be challenging, however, because the terms that observers use to describe RCTs can be difficult to interpret. For example, some observers and practitioners view RCTs as the best way to determine a program's "effectiveness." However, it is not always clear whether these observers are using the term effectiveness as a synonym for impact, merit and worth, or accomplishment of specific, intended goals, as illustrated later in this report in connection with education policy and recent uses of program evaluation during the federal budget process. Apart from complications stemming from terminology, some observers appear to have advocated that government social and economic activities should be funded only if they can be "proven effective" by RCTs and certain quasi-experiments. Others might dispute such emphasis on RCTs or have a different threshold for what "proven" means. In addition, some observers appear to see RCTs and "non-RCTs" (i.e., any evaluation design other than an RCT) primarily as competitors or substitutes for each other when judging "effectiveness." For example, they might see value in RCTs and quasi-experiments for their ability to estimate an impact, but less in other evaluation methods that are not designed to estimate an impact. Observers might also see less value in other methods that do attempt to estimate an impact but that are judged to be so unreliable as to have little or no value. As noted in the next section, other observers argue observational and qualitative methods can be appropriate for estimating impacts in various circumstances. At the same time, many observers have seen RCT and non-RCT designs as complements rather than substitutes in some situations. For example, many observers have argued that non-RCT studies, such as in-depth case studies and other observational or qualitative methods, are, among other things, (1) capable of casting doubt on an RCT's findings or causal claims by showing the RCT was contaminated or had poor design or implementation (i.e., revealing poor internal validity); (2) capable of showing a study's inferences are flawed or questionable (e.g., if the measured outcome of interest is judged to not fully reflect the program's goal(s), raising questions of construct validity); (3) essential for establishing the theory and conditions under which an intervention would be expected to make a favorable impact (increasing external validity); and (4) capable of establishing or strongly suggesting causation in certain circumstances (increasing internal validity), even if a study was not intended to estimate an impact. Nonetheless, different observers have at times seen either quantitative or qualitative methods as misguided, and the other methods as preferable or more legitimate. In light of the issues noted above, among others, several considerations about the practical capabilities and limitations of RCTs are summarized below. RCT Capabilities There is wide consensus that, under certain conditions, well-designed and implemented RCTs provide the most valid estimate of an intervention's average impact for a large sample of subjects, as measured on an outcome of interest. This is the reason for the often stated claim by some observers, particularly in the medical field, that well-designed and implemented RCTs that are also double-blind are the "gold standard" for making a causal inference about an intervention's impact on an outcome of interest. (Usage of the term "gold standard" in fields other than medicine to describe the value of RCTs, however, has been considerably more contentious.) RCTs have been extensively used for decades in the medical arena as, usually, the third of four phases of the process for helping the Food and Drug Administration (FDA) evaluate drugs, devices, and biological products for approval, and for helping the medical community identify procedures that yield the most favorable health outcomes on selected outcomes of interest. Rigorously estimating an impact is highly valued, because it provides a measurement of the magnitude of a program's impact on one or more outcomes that a stakeholder values and permits comparison among alternative treatments. In contrast, studies that rely on non-random assignment between treatment and control groups (e.g., quasi-experiments), or no control group at all, can be subject to certain threats to internal validity that undermine one's ability to make a causal inference when estimating an average impact for a large number of subjects. For example, if subjects are not randomly assigned to treatment and control groups, there is greater risk that a prior existing difference between the two groups might be responsible for observed differences on an outcome of interest after an intervention. This threat to validity is often called selection bias . In view of these strengths and advantages, among others, there seems to be some consensus among program evaluation theorists and practitioners in a variety of disciplines (public policy analysis, evaluation, economics, statistics, etc.) that, generally speaking, more RCTs should be performed in social science-related areas, when appropriate as part of a broad portfolio of evaluation strategies and methods. Nonetheless, there appears to be less consensus, in a variety of disciplines, about what proportion of evaluations intended to estimate impacts should be RCTs (e.g., as opposed to quasi-experiments and other designs); what proportion of evaluations overall should be RCTs, in light of diverse evaluation needs; and the conditions under which RCTs would be most valuable, appropriate, and likely to result in valid findings. For example, many economists and other observers argue that RCTs have an important and often preferred role to play in estimating impacts, compared to quasi-experiments, due to their high potential internal validity. However, they have also argued that certain types of quasi-experimental methods (i.e., those often called econometric methods) are, under certain conditions for each method, capable of validly estimating impacts in ways that come reasonably close to the estimates from experimental methods. They furthermore have argued that quasi-experimental methods can provide useful information if an RCT is judged inappropriate due to factors like research needs, program circumstances, expense, timing requirements, ethical considerations, or other factors. It should also be noted, however, that some academics and practitioners have perceived arguments for RCTs and other quantitatively oriented evaluation methods as attempts to exclude some kinds of qualitative research from being considered "scientific" or being funded or considered in policy-oriented research or debates. RCT Limitations Scholars and practitioners have also qualified what they view as practical capabilities of RCTs, particularly in areas of public policy that closely relate to the social sciences. RCTs are seen as very strong in making cause-effect inferences about impacts for large samples of subjects, if they are designed and implemented well. However, RCTs are often seen as difficult to design and implement well. A number of observers argue that "[t]here is a sizable divergence between the theoretical capabilities of evaluations based on random assignment and the practical results of such evaluations." Some policy areas have been seen as more difficult compared to others for successfully implementing RCTs, leading some observers to disavow the "gold standard" title for RCTs, while still supporting increased use of RCTs as the most credible way to estimate an impact. Some researchers in the medical field have argued that certain types of well-designed and implemented observational studies can yield similar results to RCTs. As with all forms of study, poorly designed or implemented RCTs can yield inaccurate results. In addition, an RCT's capability to support causal inferences does not necessarily hold for determining causality in small numbers of subjects or individual cases, for which other methods are often judged more appropriate. Nor do RCTs necessarily provide an advantage, compared to other evaluation research designs, in generalizing a specific intervention's ability to make an impact to a broader or different population. RCTs have therefore been seen by some observers as often having external validity limitations. Frequently, RCTs rely on support from other evaluation methods for making inferences about external validity. As discussed in more detail later in this report, RCTs can sometimes be seen as impractical, unethical, requiring too much time, or being too costly compared to other designs that also seek to assess whether a program causes favorable impacts and outcomes. There is wide consensus that RCTs are particularly well suited for answering certain types of questions, but not necessarily other questions, compared to other evaluation research designs. For example, RCTs typically do not assess how and why impacts occur, how a program might be modified to improve program results, or a program's cost-effectiveness. RCTs also typically do not provide a full picture of whether unintended consequences may have resulted from a program or indicate whether a study is using valid measures or concepts for judging a program's success (e.g., assessing a study's or a measure's construct validity). Many of these kinds of questions have been considered to be more appropriately addressed with observational or qualitative designs. RCTs in Context: Program Evaluation and Systematic Review Concerns About Single Studies and Study Quality In a variety of research fields, there appears to be consensus that a single study, no matter how well designed or implemented, is rarely sufficient to reliably support decision making. For example, in health care, where RCTs are often seen as the "gold standard" (for making causal inferences about impacts) and are more widely used than in any other field of study, there is strong reluctance to rely on a single RCT study. According to the Cochrane Collaboration, an international non-profit group founded in 1993 that supports the production and dissemination of RCT information about health care interventions, most single RCTs are seen as "not sufficiently robust against the effects of chance" and often having limited external validity. Moreover, there have been widespread concerns about the quality of individual studies of any design. The Cochrane Collaboration has said that the amount of information about health care, including from individual RCTs, is overwhelming, but that "much of what [information] is available is of poor quality." In seeking to address questions of how to use single studies and how to judge study quality, two major strategies that researchers have used include (1) classifying study types within "hierarchies of evidence" and (2) conducting systematic reviews. Study Quality: A Hierarchy of Evidence? In recent years, there has been considerable debate on how to define what "quality" should mean when describing evaluations. Some observers in medicine and the social sciences hold the view that RCTs should be placed at the top of a hierarchy, in view of an RCT's potential for high internal validity in estimating an impact. Due to concerns about the varying quality of individual studies, however, some participants in health care evaluation have reoriented their approach. The U.S. Preventive Services Task Force (USPSTF), an independent panel of experts in primary care and prevention that systematically reviews evidence regarding clinical preventive services, offered this assessment: For some years, the standard approach to evaluating the quality of individual studies was based on a hierarchical grading system of research design in which RCTs received the highest score.... The maturation of critical appraisal techniques has drawn attention to the limitations of this approach, which gives inadequate consideration to how well the study was conducted, a dimension known as internal validity. A well-designed cohort study may be more compelling than an inadequately powered or poorly conducted RCT. In response to these conclusions, the USPSTF listed a hierarchy of research designs, but as only one among several inputs to evaluating the quality of individual studies. That hierarchy placed designs in the following rankings, largely on the basis of a design's potential internal validity: RCTs; controlled trials without randomization (also called quasi-experiments, with a treatment group and a control group whose subjects were not assigned randomly); cohort or case-control analytic studies (observational studies in which similar groups serve as control and treatment groups); multiple time series with or without the intervention (uncontrolled experiments which look at the effects of an intervention on units over a significant amount of time); and opinions of respected authorities (based on clinical experience, descriptive studies and case reports, or reports of expert committees). To determine a study's overall quality, however, the task force also included realized internal validity (including design and implementation aspects) and, in addition, external validity, which the task force considered "on par" in importance with internal validity. Thus, an RCT might rank high in terms of potential internal validity, but it might have experienced implementation problems leading to poorly realized internal validity, or it might have limited external validity. In either case, or to provide assurance against chance, researchers and decision makers often wish to consider other studies, including studies other than RCTs, to inform their thinking and potential decision making. Two additional USPSTF criteria for judging quality included assessments of internal and external validity of all relevant studies for a given research question, and also the extent to which relevant studies or groups of studies linked interventions directly or indirectly to outcomes of interest. These latter efforts relate closely to systematic review. Systematic Review in Health Care In response to concerns about reliance on single studies and study quality, the health care field has broadly embraced systematic review as a method for identifying gaps in knowledge, drawing whatever conclusions are possible about interventions based on available evidence (including impact analyses), and thereby helping to inform decision making about research priorities and provision of health care to patients. Systematic review has been defined as "a form of structure[d] literature review that addresses a question that is formulated to be answered by analysis of evidence, and involves objective means of searching the literature, applying predetermined inclusion and exclusion criteria to this literature, critically appraising the relevant literature, and extraction and synthesis of data from evidence base to formulate findings." This leads some researchers to place a systematic review as an additional category above RCTs at the top of an evidence hierarchy focused solely on potential internal validity. Some researchers also place a meta-analysis (of RCTs or perhaps other intervention studies) at the top of an evidence hierarchy. A meta-analysis is a type of systematic review that uses statistical methods to derive quantitative results from the analysis of multiple sources of quantitative evidence. However, for various reasons, both conducting and interpreting a systematic review can be challenging and can require caution. A systematic review, like an RCT or other evaluation, might not be comprehensive for all stakeholders, or even necessarily for a single stakeholder, in assessing their evaluation needs. Systematic reviews typically focus on a specific question by looking at a specific outcome of interest, as described in relevant studies or chosen by an evaluator (e.g., in health care, outcomes like mortality, quality of life, clinical events). However, they would not necessarily focus on all important outcomes of interest. This might raise issues in the context of evaluating public policies, because a program's mission might encompass a variety of potential outcomes of interest, or be difficult to represent with one or more outcome measures. Furthermore, different stakeholders might not agree about the relative importance of varying outcome measures or might be interested in different ones. Finally, although systematic reviews typically focus much attention on concerns about internal validity of various studies, judgments about external validity, or generalizability of findings, are often left to readers to assess, based on their implicit or explicit decision, "how applicable the [systematic review's] evidence is to their particular circumstances." Unfortunately, these judgments are often hindered, because many studies provide little information that might assist in assessing external validity. Systematic Review in Social Science-Related Areas Usage of systematic review in health care raises the question of how systematic review might be used in other contexts (e.g., when evaluating government programs of various types, which are often assessed with social science research methods). In program evaluation, systematic reviews have been performed under various names (e.g., evaluation synthesis, integrative review, research synthesis) and in different ways. However, they have been much less common in social science-related areas than in health care. This might be the case, in part, because RCTs and other, non-RCT evaluations have been relatively more scarce in policy areas related to the social sciences, as compared to medicine. For example, over 250,000 RCT studies had reportedly been published in the medical literature as of 2002, but about 11,000 were known in all of the social sciences combined. Other possible historical reasons for a relative lack of systematic review in the social sciences, compared with health care, might include the following: comparatively less funding devoted to evaluation; more technically challenging research settings and problems (e.g., absence of laboratory controls that can make experimental evaluations more difficult to successfully design and implement, increasing the risk that studies might result in evaluation funding being wasted); resistance to using RCTs; disagreements about appropriate ways to evaluate programs; and less interest from policy makers and institutions. In response to such comparisons, some efforts have been undertaken to increase production of systematic reviews in social science-related areas. For example, a group of social science researchers created the Campbell Collaboration, a non-profit organization that promotes the use of systematic reviews in the social sciences. In defining "evidence," the Campbell Collaboration has focused primarily on RCTs and secondarily on quasi-experiments in order to determine impacts. However, the organization's guidelines also allow implementation studies and qualitative research to be included in a systematic review. Recent Attention to Using RCTs in Program Evaluation The following two subsections briefly illustrate how RCTs have been a subject of attention in two contexts: (1) setting program evaluation policy in one specific policy area (education) and (2) the citation and use of individual studies, or claimed lack thereof, to justify policy and budget proposals to Congress (in this case, as a component of the George W. Bush Administration's Program Assessment Rating Tool). Because this report's purpose is limited to providing an overview of RCTs and related issues, these cases are not analyzed in detail in the report. However, many of the issues identified in this report could be applied to these and other cases. Controversy in Education Policy: A Priority for RCTs? In January 2005, the U.S. Department of Education (ED) published a "notice of final priority" in the Federal Register . The notice established a department-wide "priority" for the use of specific types of program evaluation, and especially RCTs, when evaluating certain education programs. Under the priority, ED asserted that RCTs were "best for determining project effectiveness," and with some exceptions, would be preferred for funding compared to other evaluation methods. If ED determined an RCT to be infeasible, a quasi-experimental design would receive priority over other designs. The ED priority has provoked controversy in the education policy area and evaluation field generally. Authority Cited for the ED Priority: NCLB and "Scientifically Based Research" The ED priority was established at the discretion of the Secretary of Education and was not required by law. However, the priority appeared in a broader context of program evaluation-related statutory provisions enacted by Congress. Specifically, ED cited the Elementary and Secondary Education Act of 1965 (ESEA), as reauthorized by the No Child Left Behind Act of 2001 (NCLB; 115 Stat. 1425; P.L. 107-110 ), as the statutory authority for establishing the priority. In its Federal Register notice, ED asserted [t]he ESEA as reauthorized by the NCLB uses the term scientifically based research more than 100 times in the context of evaluating programs to determine what works in education or ensuring that Federal funds are used to support activities and services that work. This final priority is intended to ensure that appropriate federally funded projects are evaluated using scientifically based research. Under ESEA as reauthorized by NCLB, scientifically based research is defined as "research that involves the application of rigorous, systematic, and objective procedures to obtain reliable and valid knowledge relevant to education activities and programs." The statutory definition also enumerates several kinds of research that are included within the term. The first enumerated item explicitly includes research that employs either observational or experimental methods. In the fourth enumerated item, the definition also includes research that is evaluated using experimental or quasi-experimental designs. Among experimental and quasi-experimental designs, the definition expresses "a preference for random-assignment experiments ..." (Section 9101(37)(B)(iv)). Thus, the statutory definition of scientifically based research does not appear to give higher priority to experimental designs above designs that draw on observation, except when contrasting experimental and quasi-experimental designs versus one another. Apparently in light of these definitions, ED's notice of priority also said [t]he definition of scientifically based research in section 9201(37) [sic] of NCLB includes other research designs in addition to the random assignment and quasi-experimental designs that are the subject of this priority. However, the Secretary considers random assignment and quasi-experimental designs to be the most rigorous methods to address the question of project effectiveness. Additional statutory provisions related to program evaluation in education, located within the Education Sciences Reform Act of 2002 (ESRA; 116 Stat. 1940; P.L. 107-279 ), were enacted after NCLB and a year before the ED priority was proposed. The ED priority did not cite ESRA, but ESRA's provisions privilege RCTs in some ways that appear to be related to ED's subsequent actions. ESRA established ED's Institute of Education Sciences (IES) and set forth its functions. ESRA's definition for scientifically based research standards holds that when IES-funded research is intended to "mak[e] claims of causal relationships," the IES research should include only "random assignment experiments" and "other designs (to the extent such designs substantially eliminate plausible competing explanations for the obtained results)." ESRA does not specify what these "other" designs are or what it means to "make claims of causal relationships." Therefore, it appears that a claim of causal relationship need not be restricted to evaluations that seek to estimate an impact. ESRA's definition for scientifically valid education evaluation holds that when IES's National Center for Education Evaluation and Regional Assistance conducts evaluations to estimate the impact of programs, it should "employ experimental designs using random assignment, when feasible, and other research methodologies that allow for the strongest possible causal inferences when random assignment is not feasible." These ESRA definitions hold for funding controlled by IES, not for the entire Education Department. Reactions to the Priority Originally proposed in November 2003, the ED priority generated considerable debate in the evaluation field. The priority did not explicitly define the word effectiveness . As noted earlier in this report, effectiveness is a program evaluation term that has been used in multiple ways (i.e., synonym for impact, goal achievement, or merit and worth). Upon close reading, the priority's usage of the term appeared to indicate the term was probably used in most cases as a synonym for impact . However, the priority's use of the term effectiveness and the phrase what works appeared to be interpreted by many observers to go beyond the definition of impact . In addition, some text in the priority appeared to be interpreted to claim RCTs were best for demonstrating causation, even apart from estimating an impact. During the proposed priority's month-long comment period, nearly 300 parties sent comments to ED. These comments were summarized and analyzed in the ED January 25, 2005, notice of final priority, which also included statements from then-Secretary of Education Rod Paige regarding where he agreed or disagreed with comments that were submitted. From ED's summary and categorization of the comments, it appears many more comments were critical of the priority than supportive. ED determined that while the comments it received were substantive, the comments did not warrant changes in the priority. Both prior to and after publication of the ED priority, many observers who supported the priority (as well as some who opposed the ED priority) agreed that more RCTs were needed in education policy, in certain circumstances, in order to estimate impacts of different educational interventions. Many also agreed that RCTs had been unjustifiably de-emphasized in the past compared to other evaluation methods, to greater or lesser extents. Furthermore, many supporters of the ED priority argued the priority was an appropriate change in the education field, because they believed more information about the impacts of educational interventions was needed to help inform practitioners and policy makers, and because they believed ED's research agenda had been previously influenced by hostility to RCTs and similar types of studies. However, many critics of the ED priority argued that RCTs have been oversold in terms of their practical capabilities; that the priority unjustifiably de-emphasized other evaluation designs in terms of their practical capabilities to contribute to understanding of causes, effects, impacts, "effectiveness," and in some cases to making claims of causal relationships (even if some of the designs are not intended to calculate impacts); and that the ED priority would detrimentally affect overall priorities for evaluation. Implications and Related Developments To the extent that evaluations help frame future choices, it appears the way in which the ED priority will be implemented could affect the future course of education programs and policy. At a minimum, the priority has influenced the use of hundreds of millions of research dollars controlled by ED and arguably education policy, as implemented by ED. For example, ED's department-wide strategic planning documents and activities appear to reflect the priority. The ED strategic plan established a goal that 75% of "new research and evaluation projects funded by the Department that address causal questions ... employ randomized experimental designs." The question of what types of research can make causal claims, or make causal claims while substantially eliminating plausible competing explanations, has often been contentious in the evaluation field and the philosophy of science. The ED "performance budget" accompanying the department's FY2007 budget proposal contains a department-wide objective to "encourage the use of scientifically based methods within federal education programs." One performance measure is listed for that objective: "[t]he proportion of school-adopted approaches that have strong evidence of effectiveness compared to programs and interventions without such evidence." The ED strategic plan also states that "[t]he Department will seek funding for programs that work, and will seek to reform or eliminate programs that do not." The strategic plan does not define what is meant by the word "work," but the word might mean "increases student achievement," in some cases. However, if ED determined that some programs "increase student achievement," but at undesirable cost or with unintended side effects, then presumably ED would not seek funding for those programs. Thus, the word "work" might instead be intended to indicate merit and worth , in some cases. A month after the priority was originally proposed, ED issued a prominent guidance document "to provide educational practitioners with user-friendly tools to distinguish practices supported by rigorous evidence from those that are not." The ED guidance asserted that evaluation methods other than RCTs and certain quasi-experiments (1) have "no meaningful evidence" to contribute to establishing whether an intervention was "effective" and (2) cannot be considered "scientifically-rigorous evidence" or "rigorous evidence" to support using an educational practice to "improve educational and life outcomes for [children]." The document appears to define "evidence" that would support these decisions to include only estimations of impact. The document also cites NCLB as calling on "educational practitioners to use 'scientifically-based research' to guide their decisions about which interventions to implement," but does not discuss roles many observers argue that other evaluation methods can play in complementing, bolstering, or undermining an RCT's findings. In addition, the department established a What Works Clearinghouse (WWC) to "evaluate the strength of the evidence of effectiveness of educational interventions ... to help educators and education policymakers incorporate scientifically based research into their educational decisions." In this formulation, it appears the WWC might be using the word effectiveness and the phrase what works as synonyms for "showing favorable impact on an outcome of interest." According to the WWC website, the WWC "was established in 2002 by the U.S. Department of Education's Institute of Education Sciences (IES) to provide educators, policymakers, researchers, and the public with a central and trusted source of scientific evidence of what works in education." WWC study reports state that "neither the What Works Clearinghouse (WWC) nor the U.S. Department of Education endorses any interventions." The WWC states it includes only certain evaluation designs in its databases—which happen to be only the designs that were listed in the ED priority —because they "provide the strongest evidence of effects." It appears the term effects is used here as a synonym for impacts . The WWC excludes other types of evaluations, because the WWC asserts they are not "outcome evaluations." However, in the latest Government Accountability Office (GAO) pamphlet on definitions of major types of program evaluation, GAO defined outcome evaluation to also include evaluations that focus on unintended effects and that "assess program process to understand how outcomes are produced." These other types of evaluations would appear to be excluded from the WWC and, perhaps, from ED determinations of "what works." In addition, the ED strategic plan states under the department's Objective 1.4 that every ED program will develop a "'what works' guide," to be distributed to program grantees, that "whenever possible ... will be informed by the What Works Clearinghouse." Therefore, it appears that ED and IES determinations of "what works" might be drawn primarily, or only, from studies that include RCTs, certain quasi-experiments, and the exceptions allowed for in the ED priority, and not other kinds of program evaluation. At the time of this report's writing, the WWC website presents a definition for the term scientifically based research that is at variance with the term's definition under NCLB. As noted previously, the NCLB definition for scientifically based research includes observational studies and experimental studies, expressing a preference for RCTs over quasi-experiments, but not expressing a preference for RCTs over other evaluation research designs, even when questions of causation are being examined. However, the WWC website presents a different definition for the term scientifically based research . Specifically, the WWC website instead presents what appears to be the ESRA definition for scientifically based research standards , which applies only to IES-funded research. The ESRA term's definition for scientifically based research standards holds, as noted earlier, that when IES-funded research is intended to "mak[e] claims of causal relationships," the IES research should include only "random assignment experiments" and "other designs (to the extent such designs substantially eliminate plausible competing explanations for the obtained results)." Although ESRA does not indicate what these "other designs" could be, the WWC appears to include only the designs mentioned in the ED priority in that category. Nevertheless, the ED priority was established for the entire department. At the same time, the WWC website appears to tie WWC to NCLB's term scientifically based research . In effect, as demonstrated through ED policy and strategic planning documents, the ED priority appears in some respects to be extending ED's interpretation of ESRA definitions and preferences for certain types of evaluations (especially RCTs) beyond IES to the entire Education Department, notwithstanding the apparently differing definitions and preferences expressed in NCLB. Assessing Programs in the Budget Process: The PART The Bush Administration's Program Assessment Rating Tool (PART) In 2004, the Bush Administration elevated RCTs as the preferred way to evaluate federal executive branch "programs" under portions of its Program Assessment Rating Tool (PART) initiative. The PART is a set of questionnaires that the Office of Management and Budget (OMB) developed in 2002 and annually revised thereafter to determine the "overall effectiveness" of programs included in the President's annual budget proposal. Although OMB did not provide an explicit definition for the term overall effectiveness , OMB and the Bush Administration appeared to use the term as at least a partial synonym for merit and worth . The Administration has used the PART, with some controversy, to justify budget proposals and the proposed elimination or reduction of many programs. OMB first presented the PART to Congress for the FY2004 budget cycle, assessing programs that represented approximately 20% of the federal budget. For succeeding budget cycles, OMB said that cumulative 20% increments of federal programs would be assessed with the PART, in addition to some reassessments of programs previously "PARTed." The Administration subsequently released PART ratings for selected programs along with the President's FY2004, FY2005, FY2006, and FY2007 budget proposals. An additional round of ratings is planned to be released with the President's FY2008 budget proposal, with the final year assessing all remaining executive branch spending and programs. Thereafter, all programs would presumably be assessed or reassessed each year. Depending on how a PART questionnaire is filled in and evaluated for a program, it will produce a single numerical score in percentage terms between 0% and 100%. This figure determines the program's overall effectiveness rating. Four ratings are possible based on the score: "effective" (a score of 85% to 100%), "moderately effective" (70% to 84%), "adequate" (50% to 69%), and "ineffective" (0% to 49%). OMB characterizes these ratings as qualitative rather than quantitative. A different designation was created, regardless of PART score, for programs that OMB decided "do not have acceptable performance measures or have not yet collected performance data." The designation was called "results not demonstrated." GAO has said "[i]t is important for users of the PART information to interpret the 'results not demonstrated' designation as 'unknown effectiveness' rather than as meaning the program is 'ineffective.'" GAO also found that disagreements between OMB and agencies on appropriate performance measures for certain programs helped lead to the 'results not demonstrated' designation being given to these programs for purposes of the PART. Use of the PART While the Administration has called the PART a management tool, it has also said the PART's overall purpose is to "lay the groundwork" for funding decisions. Furthermore, the Administration also provided guidance to agencies that a program's PART questionnaire should include "good" performance goals that "provide information that helps make budget decisions," but need not include "performance goals to improve the management of the program." In the context of the President's FY2006 budget proposal, which called for terminating or substantially reducing 154 discretionary programs, an OMB official reportedly said "we have to focus more resources on what works, and the PART is the primary tool to make that judgment." Of 99 discretionary programs proposed by the Administration for termination for FY2006, 48, or nearly half of all proposed terminations, were in the Department of Education. In the Administration's justification document, RCT evaluations were explicitly cited as supporting termination of the ED Even Start program, and the Administration further cited lack of performance information or lack of "rigorous evaluations" to support termination of many of the other ED programs. On December 23, 2005, the White House reportedly sent to "reporters and surrogates" a listing of "terminations accepted in whole or in part" by Congress, which some media posted on their websites. Neither the White House nor OMB posted the document on their websites. According to the OMB document, 17 of the 49 proposed ED terminations were accepted by Congress in whole or in part, including a 56% cut in Even Start. For the President's FY2007 budget proposal, the Administration proposed "141 programs that should be terminated or significantly reduced in size," government-wide. Of these, the Administration proposed to terminate 42 programs within the Department of Education (nearly 30% of the government-wide total proposed for termination or major reduction), "including many that the PART has shown to be ineffective or unable to demonstrate results." The department said in a press release the 42 programs were "proven ineffective." ED also stated in budget justification documents that a requested termination was "consistent with the Department's goal to eliminate support for programs that show limited or no evidence of effectiveness." RCTs and the PART For purposes of the PART, in 2004, OMB elevated RCTs as the preferred way to evaluate a program's "effectiveness" with release of a document entitled What Constitutes Strong Evidence of a Program ' s Effectiveness? This document, intended to provide guidance to agencies on appropriate evaluations, particularly highlighted RCTs as "best" for evaluating "effectiveness." The document was apparently written with the assistance of the Coalition for Evidence-Based Policy (CEBP), an organization sponsored by the Council for Excellence in Government. According to CEBP's website, the PART and OMB's annual guidance to agencies for the PART (in this case, for the FY2006 budget) were "revised," as a result of collaboration between CEBP and OMB, "to endorse randomized controlled trials as the preferred method for measuring program effectiveness, and well-matched quasi-experimental studies as a possible alternative when randomized trials are not feasible." Nevertheless, the OMB document also stated that RCTs are not suitable for every program and generally can be employed under very specific circumstances. Therefore, agencies often will need to consider alternative evaluation methodologies. In addition, even where it is not possible to demonstrate impact, use of evaluation to assist in the management of programs is extremely important. In OMB's What Constitutes document, OMB used the term effectiveness in at least two senses: (1) arguably as a partial synonym for merit or worth (consistent with the PART's usage) or (2) referring to demonstrating impact , which OMB defined as "the outcome of a program, which otherwise would not have occurred without the program intervention." These concepts do not necessarily represent the same thing, because merit or worth can be judged by many other factors in addition to impact on a specific outcome of interest. In some cases, the What Constitutes document is clear which definition of effectiveness is being used (e.g., when using the term impact ). However, other instances are less clear or could potentially be interpreted by agencies as treating the definitions impact and merit and worth equivalently. A sampling is reprinted below. "The [PART] was developed to assess the effectiveness of federal programs and help inform management actions, budget requests, and legislative proposals directed at achieving results" (p. 1). "The revised PART guidance this year underscores the need for agencies to think about the most appropriate type of evaluation to demonstrate the effectiveness of their programs. As such, the guidance points to the [RCT] as an example of the best type of evaluation to demonstrate actual program impact" (p. 1). "Few evaluation methods can be used to measure a program's effectiveness, where effectiveness is understood to mean the impact of the program" (p. 1). "The most significant aspect of program effectiveness is impact —the outcome of the program, which otherwise would not have occurred without the program intervention" (p. 2, italics in original). "[Non-experimental direct analysis studies] often lack rigor and may lead to false conclusions if used to measure program effectiveness, and therefore, should be used in limited situations and only when necessary. Such methods may have use for examining how or why a program is effective, or for providing information that is useful for program management" (p. 3, italics in original). "Well-designed and implemented RCTs are considered the gold standard for evaluating an intervention's effectiveness across many diverse fields of human inquiry, such as medicine, welfare and employment, psychology, and education" (p. 4). OMB's annual guidance to agencies for the FY2006 budget's PART similarly elevated RCTs as the preferred way to assess effectiveness and impact . The guidance called impact "the most significant aspect of program effectiveness," called RCTs "generally the highest quality, unbiased evaluation to demonstrate the actual impact of the program," and further asserted that "[t]he most definitive data supporting a program's overall effectiveness would be from [an RCT], when appropriate and feasible." The guidance also stated that RCTs are not suitable or feasible for every program, because "[f]ederal programs vary so dramatically." In such situations, the guidance suggested well-designed quasi-experimental studies as another way to assess impact, and other types of evaluations to "help address how or why a program is effective (or ineffective)" (italics in original). For the FY2007 PART, however, the tenor of OMB's statements in its guidance about RCTs may have changed to some degree. OMB's discussion in the revised guidance largely mirrored that of the FY2006 guidance, but eliminated the description of RCTs as "the highest quality, unbiased evaluation to demonstrate the actual impact" and replaced it with language calling RCTs "particularly well suited to measuring impacts." When RCTs are judged by OMB and agencies to not be feasible or suitable, the guidance exhorts agencies and OMB to consult with in-house or external evaluation experts, and directs them to "supplemental guidance" in the What Constitutes document. Judging "Success" In practice, it appears that OMB's judgments regarding quality and suitability of evaluation designs have sometimes trumped agency judgments and therefore determined what evaluation methods are to be used for the PART, in spite of disagreements between OMB and agencies. Disputes about the proper ways to judge program success have also emerged. For example, in the context of controversy over the Administration's "ineffective" PART rating of the Community Development Block Grant (CDBG) program and FY2006 budget proposal to significantly cut and consolidate 18 community and economic development programs, an article quoting OMB's Deputy Director for Management Clay Johnson III suggested that political views, or at least different views about program goals, might play a role: Johnson acknowledges that CDBG fails the [PART] test in part because the administration is applying a new definition of success. "We believe the goal of housing programs is not just to build houses, but the economic development that comes with them. So those are the results we want to focus on," Johnson said. "You can say we are imposing our political views on people, or our favored views of the housing world or the CDBG world on people. Well, guilty as charged. It's important to focus on outcomes, not outputs." Another example might be what OMB has called for purposes of the PART the Vocational Education State Grants program, within ED, which the Administration proposed for termination for the FY2007 budget. This program is the largest budgetary component relating to the Carl D. Perkins Vocational and Technical Education Act of 1998, commonly called Perkins III. For the FY2007 budget's PART, the Administration deemed the program "ineffective," the lowest PART rating. The Administration justified termination by citing a particular study, the National Assessment of Vocational Education (NAVE), stating that the NAVE "found no evidence that high school vocational courses themselves contribute to academic achievement or college enrollment." This perspective appears to consider academic achievement and college enrollment to be the goals of federally supported vocational education. However, the June 2004 NAVE also found that "[t]he short- and medium-term benefits of vocational education are most clear when it comes to its longstanding measure of success—earnings," citing research findings that "students earned almost 2 percent more for each extra high school vocational course they took," extending to varying degrees "to the large group of high school graduates who enroll in postsecondary education and training, to both economically and educationally disadvantaged students, to those with disabilities, and to both men and women." The study authors further observed: Perkins III and its legislative predecessors have largely focused on improving the prospects for students who take vocational education in high school, a group that has historically been considered low achieving and noncollege-bound. However, students who participate most intensively in vocational progams ... are actually quite diverse... . ... The vocational courses most high school students take improve their later earnings but have no effect on other outcomes that have become central to the mission of secondary education—such as improving academic achievement or college transitions... . Whether the program as currently supported by federal legislation is judged successful depends on which outcomes are most important to policymakers. The PART assessment of the program released with the FY2007 budget was originally released with the FY2004 budget in February 2003, reflecting data available in 2002, and had not been updated to reflect the June 2004 NAVE. The PART assessment's worksheet provided only brief reference to evidence regarding the impact of vocational education on earnings. Neither the Administration's justification document for terminating the program nor ED's FY2007 Budget Summary mentioned earnings benefits of federally supported vocational education. Disputes about an existing program's proper goals can raise questions about the construct validity of studies that purport to evaluate the program, regardless of whether the study is an RCT, the PART, or another type of evaluation. How should one measure "success"? What outcome of interest—or outcomes—are the most important ones? Proponents of the PART have viewed favorably the initiative's effort to raise program performance to a more salient place in budget deliberations. Many observers have also seen favorably the PART's transparency, with detailed justifications for the Administration's views available on the Web for consideration by Congress and the public. However, critics and other observers have said the Administration's criteria for evaluating programs sometimes deviated from the programs' purposes, as determined by Congress, or that the Administration and OMB substituted their views about appropriate program goals and measures over those developed by agencies under the statutory framework established by GPRA, which explicitly provides for stakeholder views, including those of Congress. Potential Issues for Congress The previous section of this report illustrated how RCTs have been subjects of prominent attention in two contexts: (1) setting program evaluation policy and (2) citation and use of individual studies, or lack thereof, to justify policy and budget proposals to Congress. In these and potentially other cases, a focus on RCTs might raise multiple issues for Congress. Some relate specifically to RCT studies, including an RCT's structural requirements and constraints. Other issues relate to program evaluation generally, and therefore to RCTs. A number of these issues are identified and analyzed below. Issues When Directing or Scrutinizing RCTs If Congress wants to focus on RCTs in the context of program evaluation policy (e.g., developing legislation for, or conducting oversight over, a program, agency, or the entire government; or prospectively deciding whether to fund specific evaluations), Congress might consider a number of issues related to the parameters of these studies and prospective risks to their internal and external validity. In addition, issues could arise if Congress wants to interpret or scrutinize individual RCT studies (e.g., when they are presented to Congress in the budget or authorization processes). Considering Study Parameters When making program evaluation policy, Congress might opt to focus on some key parameters of studies, including random assignment, the cost of an RCT, the length of time that an RCT would take before producing findings, and privacy or ethical considerations. Random Assignment As discussed earlier, the central attribute of an RCT is the random assignment of subjects to treatment and control groups, which helps a researcher to make inferences that a particular intervention was responsible for an impact and to estimate that impact with reliable statistical tools. In some programs, however, it may not be feasible or cost-effective to randomly assign units to an intervention group and a control group. For example, it is not possible to conduct an RCT on whether a policy regulating the release of chlorofluorocarbons into the environment contributes to overall global warming, because there is only one planet earth to study. Thus, if Congress is considering whether to require certain types of evaluation for a program, or if Congress is asked by an actor in the policy process to change funding for a program due to lack of experimental evidence of program impact, it might be important to question whether random assignment is possible or practical. On the other hand, if a program would appear to allow for an evaluation using random assignment but none is planned, or an alternative is planned (e.g., a quasi-experiment), it might be important to consider whether an RCT evaluation would be more appropriate. For example, with respect to the cases discussed in this report, what programs assessed by the PART are practically suitable for evaluation by an RCT? Under the ED priority, why should quasi-experiments also receive a priority for funding, in addition to RCTs? Cost of RCTs If Congress considers setting evaluation policy or directing specific studies for an agency or program, it might take the likely costs of an evaluation method or study into consideration, to weigh against the study's potential benefits. Large scale multi-site RCTs are typically expensive, especially when the units being studied are not individual persons but rather organizations such as schools or jails. Large multi-site RCTs of K-12 education funded by ED have reportedly cost $10 million to $50 million. In many cases, this level of funding is not available for the study of a federal program, due in part to tight budgetary constraints and the fact that program evaluations frequently must be paid for out of a program's budget. Smaller scale RCTs featuring the random assignment of 100-200 individuals might be relatively inexpensive, reportedly costing from $300,000 to $700,000. Even this cost, however, can often be as much as a studied program's funding level. Quasi-experiments are frequently, but not always, less expensive, but also might bring a different set of potential benefits and risks compared to an RCT. Even if considerable funding is available for evaluations, pursuing a particular evaluation will leave fewer resources for other evaluation needs that might be judged important. The opportunity cost of pursuing certain evaluations rather than others (i.e., cost associated with opportunities that are foregone by not putting resources to their highest value use) can be high. Nevertheless, because the potential benefits and costs of evaluations can vary widely depending on an agency's or program's portfolio of evaluation needs, weighing these considerations can be difficult. In addition, priorities might change depending on developments in an agency or policy environment. In light of these and other considerations, Congress might weigh the possible benefits of a study against the likely cost in view of the broader portfolio of evaluation needs, mindful of the risk that a study might be poorly designed or implemented or suffer from contamination that reduces confidence in the study's findings. Evaluation designs that do not offer the theoretical advantages of RCTs regarding internal validity might, or might not, be worthwhile alternatives to RCTs, depending on Congress's evaluation objectives in specific situations. Length of Time to Yield Findings RCTs might take a long period of time to yield findings that can inform thinking and policy decisions. For example, an RCT that aims to estimate whether a certain aftercare program reduces the recidivism of juvenile offenders must follow the program's graduates, and the control group, over a multi-year time span. This elongated time window might be problematic if policy decisions need to be made expeditiously. However, the length of time necessary to conduct an RCT (and perhaps other complementary evaluations) might justify waiting to make a policy decision until more evidence becomes available. Furthermore, programs or the external environment might have changed by the time the "old" program was evaluated. How should the possible benefits of evaluations be weighed against risks of evaluation information becoming dated or obsolete? What are the implications for the types and extent of evaluation research to be conducted? Congress could be called upon to consider these issues if it chose to establish program evaluation policy or directing and funding specific evaluations. Privacy, Ethics, and Study Oversight When considering whether to direct the use of RCTs or other evaluations of public programs and policies, Congress might consider whether the agencies conducting them are charged, or should be charged, with ethical duties to protect RCT study participants' privacy, access to programs, and opportunity to give informed consent. In addition, if Congress determined that an agency should be charged with the ethical duties, Congress might consider requiring oversight—by law, regulation, or institutional action—to help ensure that the duties were fulfilled. Privacy issues may arise in an RCT if, for example, a program evaluation captures information about individual citizens or clients that could be used inside the government for a purpose other than for which it was collected, or released to the public in some form. What, if any, safeguards should be required of those collecting the information? Several privacy protections are currently legally required for agency-conducted program evaluations and RCTs by the Privacy Act (5 U.S.C. § 552a). Among other things, the act sets conditions concerning the disclosure of personally identifiable information, prescribes requirements for the accounting of certain disclosures of the information, requires agencies to specify their authority and purposes for collecting personally identifiable information from an individual, and provides civil and criminal enforcement arrangements. If a program evaluation is funded or directed by an agency but conducted by a non-federal entity (e.g., if a non-federal entity creates and maintains records about program evaluation participants), the Privacy Act's coverage is often stated in contracts. The issue of access to government programs might arise in an RCT if, for example, the RCT were designed with a control group that was to be denied access to a program as a part of the evaluation. Although access in some cases might not be required by law, its denial raises the question of whether the benefits of testing a program outweigh the burden of denying access to certain prospective subjects. Would it be appropriate to design RCTs for entitlement programs, which guarantee services to clients, with such control groups? The issue of informed consent might arise in an RCT if it were deemed appropriate to enroll only willing participants. Although informed consent would not always be required by law for many RCTs and other types of program evaluation, its use would guarantee that persons who participate in RCTs fully understand and agree to their participation. Would the benefits of this outweigh burdens of the time and money that must be spent to achieve such a goal? If Congress chose to ensure that some or all of the above individual protections were implemented in RCTs and other forms of program evaluation, it might consider requiring some form of protection-specific oversight. Although probably not required by law for RCTs, the institutional review of a proposed research trial's protections for human participants is a common requirement for a great deal of research. These reviews generally require that researchers obtain the approval of an institutional board prior to beginning the research. The board checks to make certain that each proposal includes adequate protections for participants' privacy and ensures that the plan to obtain participants' informed consent is sufficient, among other things. Though this type of review may be time consuming and add additional costs to a research project, it can prove beneficial not only by protecting the study's participants, but also by incidentally improving a study's design. Congress and agencies have also instituted other oversight mechanisms for program evaluations, including competitions for grants and peer review of grant applications. Scrutinizing, or Prospectively Assessing, Studies' Internal and External Validity Whether making program evaluation policy or scrutinizing studies, Congress might also focus on issues of study interpretation and implementation (e.g., deciding whether to direct or fund evaluations in light of potential contamination risks and projected external validity, or judging how much confidence to put in the internal and external validity of a study presented during the budget or reauthorization processes). Contamination and Internal Validity Actors in the policy process will not necessarily advertise any defects in the studies they present to influence Congress. With that in mind, when actors in the policy process present Members or committees of Congress with program evaluations intended to influence a policy decision, Congress might consider the evaluation's realized, and not merely theoretical, internal validity. In addition, when Congress sets program evaluation policy for a given policy area, it might be possible to prospectively consider the probability of a study's successful design, implementation, and corresponding internal validity. A major threat to the internal validity of RCTs and quasi-experiments has been called contamination . It should be noted that other designs that attempt to estimate impacts are subject to additional threats, including selection bias, as noted previously. To avoid contamination, well-designed and implemented RCTs ideally insulate the treatment and control groups from events that might affect one group during the study differently from the other group in a way that will affect outcomes. Doing so is intended to ensure the only systematic difference in the experience of the two groups is whether or not they received the intended treatment. RCTs also ideally ensure that the intended treatment was administered properly. Because social science research usually does not occur under tightly controlled laboratory conditions, however, it is often difficult to insulate a study from, or control for, unforeseen variables that might systematically affect the treatment and control groups differently. Three examples might help illustrate the threat of contamination. First, if an experiment is not double-blinded, subjects in the treatment group might be aware of their inclusion in a special program. If this awareness results in psychological effects that are not considered part of the treatment and subjects behave differently, the study's results might be contaminated. Similarly, some subjects in a control group might learn they are not in the treatment group and either decide to avail themselves on their own initiative of alternative treatments that are not associated with the intervention, or resent or undermine the treatment being given to the other group. Second, if a program to curb crime in a city were evaluated with an RCT, certain districts might be the units of analysis. Perpetrators of crimes might move from experimental districts to control districts, contaminating findings for both groups. Third, with regard to treatment delivery, it might be difficult in some studies to ensure that the intended treatment is delivered properly for all subjects or all sites. If some subjects in the control group get the treatment, for example, or if the intended treatment is not delivered properly, inferences about the intended intervention's impact might be contaminated. In light of these considerations, several questions might be of concern. When Congress is presented with program evaluation findings, for example, what confidence should Congress have that contamination did not degrade a study's internal validity? Does the study adequately address these risks? Also, when setting program evaluation policy, how much confidence should Congress have that studies in certain policy areas or contexts will be able to avoid contamination? What is the track record in a given area? What are the implications for how Congress and agencies should allocate scarce evaluation resources and structure an agency's portfolio of evaluations? Generalizability (External Validity) When Congress is presented with a program evaluation to justify a policy position, the program that was evaluated presumably operated at a specific time and place, and under specific conditions. Without further analysis to gauge an evaluation's external validity, however, it will not always be clear whether the intervention itself or the study's findings can be generalized to other circumstances (e.g., future conditions, other subjects), as noted earlier in this report. If generalizability were of concern, Congress might in the first place consider whether the intervention itself (i.e., as it was actually implemented) is replicable at a different time or place. If the intervention was highly customized to a particular time or locale, for example, an evaluation's findings might not be generalizable elsewhere unless the intervention were fully replicated in all important respects. Alternatively, if an actual intervention were not clearly documented (e.g., how it operated, whom it served), it might be unclear how to replicate the intervention. In that case, if the intervention were evaluated, it might not be reasonable to expect the evaluation's findings would be repeated elsewhere. With regard to generalizability of findings (as opposed to the intervention itself), if a single-site RCT finds that an intervention had an impact for a group of subjects in one instance, it might not necessarily follow that it will have a similar impact for other subjects, times, and circumstances. Congress might therefore look for multiple impact analysis studies on the subject. Large scale, multi-site RCTs are often considered more generalizable than single-site RCTs, because they estimate an intervention's impact in a potentially wider array of geographic locations and populations. However, multi-site RCTs are also typically more expensive and difficult to successfully implement compared to single-site RCTs. In addition, complementary studies are often considered necessary to make assessments of generalizability. Complementary studies might include observational or qualitative evaluations, which can potentially be used to better understand an intervention's mechanism of causation, potential unintended consequences, and conditionality (i.e., the conditions that are required for the intervention to work as intended). If these considerations were a source of concern, Congress might scrutinize an evaluation's findings for external validity to other times, conditions, and subjects. Alternatively, if Congress is setting evaluation policy for an agency or program, or is directing that specific studies occur, Congress might provide direction or guidance regarding the evaluation methods that might be necessary for establishing a program's generalizability to other circumstances. Issues When Directing or Scrutinizing Program Evaluations Congress might also consider issues that apply to program evaluation generally. Because an RCT is one of many types of program evaluation, these issues might be important when Congress (1) considers making program evaluation policy for specific agencies or programs (e.g., what types of evaluations to direct or fund) or (2) scrutinizes individual evaluations, including RCTs, when making policy decisions and conducting oversight. For example, if Congress considers legislation that provides for program evaluation in one or more policy areas, to what extent should RCTs be the focus of these evaluation policies? To what extent should other evaluation methods be the focus? Should multiple methods fit into a broader evaluation framework? The potential issues discussed below raise these and further questions. What Types of Evaluations are Necessary? Given the nature of a policy area and the diverse needs of stakeholders—including agency program managers, the President, citizens, and notably Congress—what different types of evaluations should be directed, funded, and considered? This report began with a subsection titled " Key Questions about Government Programs and Policies ," which outlined a number of questions that stakeholders often want to be informed about. In response, a wide array of program evaluation techniques have been developed. Certain evaluation types often address, or help address, multiple kinds of questions. Indeed, many evaluation types are considered complementary to each other. At the same time, the different types of evaluations bring their own sets of practical capabilities and limitations, and experts and practitioners sometimes disagree on the nature and importance of these capabilities and limitations. Because only finite resources are available for evaluation activities and staff, it can be challenging and controversial to determine the appropriate methods to be used to help answer certain stakeholder questions. Furthermore, when scrutinizing evaluations, it can be challenging to discern potential gaps in the perspectives provided by an actor in the policy process. For example, it can be challenging to discern clues that might suggest other complementary evaluation types are needed. Given these considerations, many issues might be of congressional concern. For example, in Congress's view, how should the executive branch be pursuing evaluations under the PART initiative, which particularly highlighted RCTs? How should Congress oversee and respond to the Administration's efforts to achieve "budget and performance integration" through use of the PART? In the education policy arena, to what extent is ED appropriately implementing the program evaluation aspects of NCLB and ESRA? To what extent is the ED priority, which elevated RCTs and quasi-experiments above other evaluation types, consistent with congressional intent? How is ED implementing the priority? As Congress considers legislation in other policy areas, should Congress provide direction or guidance regarding program evaluation policy or methods? If so, what kinds of studies might agencies, Congress, and outside stakeholders need? When actors in the policy process present evaluations to influence Congress, are the actors presenting the full story, or are there gaps in the presentation? Are the evaluations they present capturing the key questions that need to be answered? Any of these multiple questions might be ripe for attention. What Definitions and Assumptions are Being Used? As noted earlier, many actors in the policy-making process use program evaluations to help justify their policy recommendations and to attempt to persuade Congress to make decisions consistent with their policy objectives. Therefore, many observers have considered it important that policy makers, including Members and committees of Congress, be informed consumers of evaluation information. Unfortunately, however, the vocabulary of program evaluation can sometimes be confusing. For example, many observers and practitioners use the same terms, but with differing definitions for those terms. When someone says a program is "effective," in what sense is the term being used? As noted previously, the term effectiveness might refer to (1) a program's overall merit or worth, (2) the extent to which a program is accomplishing its goals, (3) the program's impact on a particular outcome of interest, or (4) an ambiguous mix of all three prior definitions. These are very different concepts. In any of these senses, determining whether a program is "effective" can hinge upon an observer's views and assumptions about the program's mission, objectives, appropriate outcome(s) of interest, and progress. Thus, should these definitional aspects of program evaluations be of concern, Congress might scrutinize them closely. Furthermore, assumptions that are implicit in an evaluation might go unstated. Some stakeholders or evaluators might implicitly argue that their preferred way of evaluating a program is "best" and that other methods are comparatively inappropriate or less appropriate. However, there is not always consensus among well-respected experts regarding when certain methods are best or most appropriate. Should these matters be of concern to Congress when they occur, Congress might investigate a number of questions. For example, if one method is claimed to be "best" compared to others, what are the stated and unstated reasons for that opinion? What would other stakeholders and evaluators say? To what extent, if any, might opinions of appropriateness be due to an underlying agenda (e.g., to support policy views) or self-interest (e.g., to get funding for a program or a type of evaluation)? These questions might also be applied to the cases discussed in this report. For example, in justifying the ED priority for RCTs, which claimed RCTs are "best" for determining "effectiveness," which definition for effectiveness is ED using? Is the ED definition consistent with how ED intends to use RCTs? Should ED employ additional or alternative types of evaluation for these intended uses of RCTs? In its strategic planning, budgeting, and operations, is ED using multiple definitions? What definition is being used for overall effectiveness , for purposes of the PART? How Should Congress Use Evaluation Information When Considering and Making Policy? When Congress is presented with evaluation information in the policy process by various actors (e.g., lobbyists, experts, think tanks, academics, or agencies, among others), how should Congress use the information and findings? There is widespread consensus that program evaluations can help policy makers gain insights into policy problems and make better-informed decisions regarding ways to improve government performance, transparency, accountability, and efficiency. Nonetheless, the use of evaluation in the policy-making process can be controversial. For example, some advocates of performance-based budgeting and evidence-based policy have argued that a program's future funding or existence should be "based" on its "performance" or on "evidence" of its "effectiveness." The terms performance-based budgeting and evidence-based policy , however, do not have consensus definitions, because different actors typically have, among other things, different definitions for what constitutes "performance" and "evidence," conceptions of what it means to "base" decision making on performance or evidence, views about whether a decision should be "based" on past performance or evidence, and views about what other factors should legitimately help drive decision making. Another fundamental question might be of concern to policy makers and stakeholders. What role should evaluation of past events play in forming future strategies and plans? A prominent argument in favor of using evaluations to shape future strategies is that past performance (by a person, program, agency, etc.) is usually the best predictor of future performance. However, a prominent counter-argument is that focusing primarily on the past can be compared to "driving a car using only the rearview mirror." Although evaluation of past performance is widely considered helpful for informing thinking and decisions, the process of strategic decision making has been found in the social science and management literatures to be legitimately driven by many more factors. These have included, among others, basic and applied research, forecasting and scenario planning, risk assessment, professional judgment from individual and group experience, theoretical extrapolation, intuition (especially when information is incomplete, consensus interpretations of information are lacking, the future is uncertain, or synthesis is necessary), and values. In addition, in spite of efforts to make decisions as rational as possible in the face of uncertainty and limited information, a wide body of social science has found that there are practical limits to rationality in decision making. Should these considerations be of concern to Congress when considering policy questions or conducting oversight, several questions might be asked. For example, in an RCT context, when considering or scrutinizing RCT studies, how should these studies be used by Congress to inform thinking and decision making? How should they be used by agencies and OMB? Are agencies and OMB using them in appropriate ways? What other factors can or should be considered? How Much Confidence Should One Have in a Study in Order to Inform One's Thinking and Decisions? If Congress is presented in a decision-making situation with a single program evaluation, is the evaluation enough to have high confidence in the findings? Program evaluations can provide helpful insight into policy problems and the manner and extent to which federal policies address those problems. Unfortunately, however, one or more program evaluations do not always produce information that is comprehensive, accurate, credible, or unbiased. For example, a program evaluation can be designed to answer a certain question, but the way someone frames the original evaluation question can influence how a program is ultimately portrayed. Most prominently, this can be the case when setting criteria for "success," such as a program's goals or the preferred outcomes of interest. However, actors in the policy process often have varying views on how to judge a program's or policy's success. It is not always clear, therefore, that a study's research question will be viewed by most observers as covering what should have been covered to validly or comprehensively evaluate a program. In addition, a program evaluation will not always necessarily be well designed or implemented. In such cases, a study might produce results that are flawed or inaccurate. Even in the best case—if an evaluation is appropriate for the research question being studied, is well designed and implemented, and there is widespread consensus on how to judge "success"—it is still possible that random chance or unforeseen events might result in an evaluation that produces information that is inaccurate or flawed. For example, it is possible that an evaluation might provide a "false positive" or "false negative" result (e.g., the study finds the program successful when actually it was not, or finds a program unsuccessful when it actually was successful). If this situation were the case, the study findings might not reveal it. The subject of data or information quality is also oftentimes a subject of concern when conducting or interpreting program evaluations. How might Congress cope with these possibilities? How confident must a Member or committee be in evaluation information, including from RCTs, in order to use the information to inform thinking and conclusions about a policy? In response, social science researchers have recommended that consumers of evaluation information be aware of the practical capabilities and limitations of various program evaluation methods and also scrutinize a study's claims of internal, external, and construct validity. They have also suggested looking for multiple studies and, if available, systematic reviews. Other observers have suggested using the resources of GAO or other congressional support agencies to help interpret or validate conclusions and scrutinizing these matters through hearings and oversight. Finally, Congress might consider whether federal agencies have sufficient capacity and independence to conduct, interpret, and objectively present program evaluations to Congress. Do Agencies Have Capacity and Independence to Properly Conduct, Interpret, and Objectively Present Program Evaluations? At times, Congress and other actors have expressed concern over the capacity of agencies to adequately perform certain tasks, including management functions that range from procurement to financial management. One management function that has been frequently cited as a topic of concern is program evaluation. Over a long period of time, GAO has "found limited (and diminishing) resources spent on ... program evaluation" and "reason to be concerned about the capacity of federal agencies to produce evaluations of their programs' effectiveness." Even with recent emphasis on program evaluation under GPRA and the Bush Administration's PART, it is unclear the extent to which agencies have capacity to properly conduct, interpret, or use program evaluations. Many, if not all, of the issues discussed in this report could apply equally to organizations and decision makers within federal agencies. Should program evaluation capacity in federal agencies be seen as a topic of concern, several questions might be considered by Congress. Given the complex issues and debates involved in the production, interpretation, and use of program evaluations—as well as complex debates about the appropriateness of different evaluation types in certain circumstances—do agencies have capacity to use evaluation information to soundly inform strategic and operational decisions? In addition, do agencies have the capacity to make objective, methodologically sound presentations and interpretations of evaluation information to Congress, including information from RCTs? Furthermore, do agency program evaluation offices and personnel have the necessary independence from politics (e.g., partisan or institutional) and self-interest to, without undue hindrance, raise potentially uncomfortable issues and surface objective, valid, and reliable findings for consideration by policy makers, including Congress? Should they have this kind of independence? Finally, and more broadly, Congress might consider issues of evaluation capacity that go beyond federal programs. In the past, Congress has established agencies that focus on evaluation issues in entire policy areas. For example, in 1989, Congress established a new agency within the Department of Health and Human Services to serve as a focal point in health care research. Congress reauthorized the agency, now called the Agency for Healthcare Research and Quality (AHRQ), in 1999. Rather than focus only on evaluating federal programs, AHRQ's statutory mission is to conduct and support research in all aspects of health care, synthesis and dissemination of available scientific evidence for use by multiple stakeholders, and initiatives to advance health care quality. As noted previously in this report, Congress also established IES within ED in 2002. IES has a multi-part mission "to provide national leadership in expanding fundamental knowledge and understanding in education from early childhood though post-secondary study" for many stakeholders, providing them with reliable information about "the condition and progress of education in the United States...," "educational practices that support learning and improve academic achievement and access to educational opportunities for all students," and "the effectiveness of Federal and other education programs" (116 Stat. 1944). Although there are differences in the missions of these agencies, one aspect that arguably makes them similar is the scope of their research and evaluation work. Specifically, their focus goes beyond federal programs to instead encompass research and evaluations throughout an entire policy area such as "education" or "health care," whether interventions are delivered by the federal government or another entity. Should Congress view program evaluation capacity as an issue for an entire policy area, Congress could move to consider whether establishment of a policy research and evaluation agency might be warranted. Appendix. Glossary of Selected Terms and Concepts The Vocabulary of Program Evaluation Unfortunately for consumers of evaluation information, the vocabulary of program evaluation can sometimes be technical and difficult. The field is multi-disciplinary and some concepts are complex. Sometimes it is not always clear in what sense a term is being used and whether the term is being used appropriately. Technical experts and actors in the policy process sometimes use the same terms for different concepts or use different terms for the same concept. Nonetheless, in program evaluations, understanding the meanings of and distinctions between key terms can make a significant difference in how to interpret study findings and limitations and in how to scrutinize evaluations to see if they are being represented objectively and forthrightly. This appendix draws on the report to briefly define and, if necessary, explain several recurring terms and to briefly identify several definitions for the same term, as appropriate. However, the definitions provided below are illustrative only and do not necessarily indicate what an evaluation's author or what an actor in the policy process intends to communicate. More definitive assessments typically must be made on a case-by-case basis. The footnotes in this report provide written resources that can help with understanding evaluations and the terms they employ, and CRS analysts can provide additional assistance or refer readers to other resources. In each entry, a term that is included elsewhere in the glossary is written in italics the first time it is used. Selected Terms and Concepts Construct validity In practice, there are several definitions of this term: (1) in measuring outcomes, the extent to which a study actually evaluates what it is being represented as evaluating (e.g., does the study's outcome of interest actually measure "student achievement"?); and (2) in relation to a program , the extent to which the actual program reflects one's ideas and theories of how the program is supposed to operate, and the causal mechanism through which it is supposed to achieve outcomes. Contamination In an RCT , something aside from the intended treatment that might affect the treatment group or control group differently from the other group in a way that will affect observed outcomes. For example, RCTs should ideally insulate the treatment and control groups from contaminating events in order to ensure that the only difference in the experience of the two groups is whether or not they received the intended treatment. In addition, RCTs should ideally ensure that the treatment was administered properly; otherwise, the treatment might be considered contaminated. Control group In an RCT , a group of subjects chosen by random assignment that is comparable to the treatment group but that does not experience the program being studied. Effect Depending on usage, something that inevitably follows an antecedent (as a cause or agent); for example, the act of dropping a pen—a cause—is closely followed by a noise—an effect—when the pen strikes the floor. Also used sometimes as a synonym for impact . Effective (effectiveness) A term with multiple possible definitions. In practice, it is used as a synonym for impact , merit and worth , or accomplishment of specific, intended goals. Evaluation An applied inquiry process for collecting and synthesizing evidence that culminates in conclusions about the state of affairs, value, merit , worth , significance, or quality of a program, product, person, policy, proposal, or plan. External validity The extent to which an intervention being studied can be (1) applied to and replicated in other settings, times, or groups of subjects and (2) expected to deliver a similar impact on an outcome of interest . The terms generalizability, replicability, and repeatability are sometimes used as synonyms for external validity. Some usage of this term refers only to one of the two aspects noted here. Government Performance and Results Act (GPRA) of 1993 A federal law that requires most executive branch agencies to develop five-year strategic plans, annual performance plans (including goals and performance indicators, among other things), and annual program performance reports. In GPRA's legislative history, it was contemplated that not all forms of program evaluation and measurement would necessarily be quantifiable because of the large diversity of federal government activities. Impact An estimated measurement of how a program intervention affected the outcome of interest for a large group of subjects, on average, compared to what would have happened without the intervention. For example, if the unemployment rate in a geographic area would have been 6% without an intervention, but was estimated to be 5% because of the intervention, the impact would be a 1% reduction in the unemployment rate (i.e., 6% minus 5% equals an impact of 1%), or, alternatively, a 16.7% reduction in the unemployment rate, if one characterizes the impact as a proportion of the prior unemployment rate. Depending on the chosen outcome of interest, the average impact across all subjects usually reflects the weighted average of the subjects who experienced favorable impacts, subjects who did not experience a change, and others who experienced unfavorable impacts. Some theorists and practitioners use the term effect as a synonym for impact. Internal validity In an RCT , the confidence with which one can state that the impact found or inferred by a study was caused by the intervention being studied. Merit The overall intrinsic value of a program to individuals. This term is usually paired with the term worth . Meta-analysis A type of systematic review that uses statistical methods to derive quantitative results from the analysis of multiple sources of quantitative evidence. Observational design A term that has been used in different ways, but that often refers to empirical and qualitative evaluations of many types that are intended to help explain cause-and-effect relationships but do not attempt to approximate an RCT . Outcome of interest Something, oftentimes a public policy goal, that one or more stakeholders care about (e.g., unemployment rate, which many actors might like to be lower). There can be many potential outcomes of interest related to a program . Actors in the policy process will not necessarily agree which outcomes are important. Outcomes of government programs need not always be quantitative (e.g., sending humans safely to the moon and back to earth). Performance measurement (performance measure) A term that can mean many things but is usually considered to be different from program evaluation . Typically, the term refers to ongoing and periodic monitoring and reporting of program operations or accomplishments (e.g., progress toward quantitative goals) and sometimes also statistical information related to, but not necessarily influenceable by, a program. Occasional synonyms for "measure" are indicator, metric, and target. Sometimes the word "performance" is dropped, especially when stakeholders believe the measure does not necessarily indicate whether the program itself caused changes in favorable or unfavorable directions. Program A government policy, activity, project, initiative, law, tax provision, function, or set thereof, that someone might wish to evaluate. In program evaluation , synonyms for program include treatment and intervention. Program evaluation Under the Government Performance and Results Act (GPRA) of 1993 , "an assessment, through objective measurement and systematic analysis, of the manner and extent to which Federal programs achieve intended objectives." Program evaluation has been seen as (1) informing conclusions at particular points in time and also (2) a cumulative process over time of forming conclusions, as more evaluation information is collected and interpreted. Practitioners and theorists categorize different types of program evaluation in several ways. The varying types are sometimes referred to generically as designs or methods. Typical synonyms for this term include evaluation and study. Qualitative evaluation A wide variety of evaluation types that judge the effectiveness of a program (e.g., whether it accomplishes its goals) by, among other things, conducting open-ended interviews, directly observing program implementation and outcomes, reviewing documents, and constructing case studies. Quasi-experimental design A type of evaluation that attempts to estimate a treatment's impact on an outcome of interest for a group of subjects but, in contrast with RCTs , does not have random assignment to treatment and control groups . Some quasi-experimental designs are controlled studies (i.e, with a control group and at least one treatment group), but others lack a control group. Some quasi-experiments do not measure the outcome of interest before the treatment takes place. Some observers and practitioners consider quasi-experiments to be a form of observational design , but others put them in their own category. Random assignment The process of assigning subjects into a control group and one or more treatment groups by random chance. Random selection The process of drawing a sample by random chance from a larger population (e.g., to undertake a survey that is intended to be representative of a broader population). This term is different from, and sometimes confused with, random assignment . Randomized controlled trial (RCT) In its basic form, an evaluation design that uses random assignment to assign some subjects to a treatment group and also to a control group . The treatment group participates in the program being evaluated and the control group does not. After the treatment group experiences the intervention, an RCT attempts to compare what happens to the two groups, as measured by the resulting difference between the two groups on the outcome of interest , in order to estimate the program's impact . The terms randomized field trial (RFT), random assignment design, experimental design, random experiment, and social experiment are sometimes used as synonyms for RCT, and vice versa. Use of the word "field" in this context is often intended to imply that an evaluation is being conducted in a more naturalistic setting instead of a laboratory or other artificial environment. Double-blind studies are those in which neither the subjects nor the researchers know which group gets the treatment. Single-blind studies are those in which the subjects do not know they are getting the treatment being investigated. Statistical significance In the context of an RCT , a finding of statistical significance is typically interpreted as a level of confidence (usually expressed as a probability, e.g., 95%, which is also referred to as "significance at the .05 level") that an estimated impact is not merely the result of random variation. Assuming the RCT suffered from no defects, this finding would indicate that at least some of the measured impact may with substantial confidence (e.g., 95% confidence) be attributed to the treatment as a cause. Stated another way, significance at the .05 level indicates that there is a 1 in 20 chance that the observed difference could have occurred by chance, if the program actually had no impact. However, simply because an estimated impact is found to be statistically significant does not necessarily mean the impact is large or important. Systematic review A form of structured literature review that addresses a question that is formulated to be answered by analysis of evidence, and involves objective means of searching the literature, applying predetermined inclusion and exclusion criteria to this literature, critically appraising the relevant literature, and extraction and synthesis of data from the evidence base to formulate findings. Although systematic reviews typically focus much attention on concerns about internal validity of various studies, judgments about external validity , or generalizability of findings, are often left to readers to assess, based on their implicit or explicit decision how applicable the systematic review's evidence is to their particular circumstances. In program evaluation , systematic reviews have been performed under various names (e.g., evaluation synthesis, integrative review, research synthesis), in different ways, and usually in decentralized fashion. Some systematic reviews focus on RCTs (and might include quasi-experiments ), and others include disparate types of studies. Treatment group In an RCT , the group of subjects chosen by random assignment that experiences or participates in a program ; also sometimes called an experimental or intervention group. Unit of analysis In an RCT , the subjects of the study who are randomly assigned to one or more treatment groups and also a control group . Subjects are typically individual persons but sometimes might be things or organizations like schools, hospitals, or police stations. Validity See entries for internal validity , external validity , and construct validity . Worth The overall extrinsic value of a program to society. This term is usually paired with the term merit .

Program evaluations can play an important role in public policy debates and in oversight of government programs, potentially affecting decisions about program design, operation, and funding. One technique that has received significant recent attention is the randomized controlled trial (RCT). There are also many other types of evaluation, including observational and qualitative designs. An RCT attempts to estimate a program's impact upon an outcome of interest (e.g., crime rate). An RCT randomly assigns subjects to treatment and control groups, administers an intervention to the treatment group, and afterward measures the average difference between the groups. The quality of an RCT is typically assessed by its internal, external, and construct validity. At the federal level, RCTs have been a subject of interest and some controversy in education policy and the George W. Bush Administration's effort to integrate budgeting and performance using the Program Assessment Rating Tool (PART). In addition, in the 109th Congress, pending legislation provides for RCTs (e.g., Sections 3 and 15 of S. 1934; Section 114 of S. 667 (Senate committee-reported bill); and Section 5 of S. 1129). Views about the practical capabilities and limitations of RCTs, compared to other evaluation designs, have sometimes been contentious. There is wide consensus that, under certain conditions, well-designed and implemented RCTs provide the most valid estimate of an intervention's impact, and can therefore provide useful information on whether, and the extent to which, an intervention causes favorable impacts for a large group of subjects, on average. However, RCTs are also seen as difficult to design and implement well. There also appears to be less consensus about what proportion of evaluations that are intended to estimate impacts should be RCTs and about the conditions under which RCTs are appropriate. Many observers argue that other types of evaluations are necessary complements to RCTs, or sometimes necessary substitutes for them, and can be used to establish causation, help bolster or undermine an RCT's findings, or in some situations validly estimate impacts. There is increasing consensus that a single study of any type is rarely sufficient to reliably support decision making. Many researchers have therefore embraced systematic reviews, which synthesize many similar or disparate studies. A number of issues regarding RCTs might arise when Congress considers making program evaluation policy or when actors in the policy process present program evaluations to influence Congress. Should Congress focus on RCTs in these situations, a number of issues might be considered, including an RCT's parameters, capabilities, and limitations. In addition, Congress might examine the types of program evaluations that are necessary, question an evaluation's definitions or assumptions, consider how to appropriately use evaluation information in its learning and decision making, evaluate how much confidence to have in a study, and investigate whether agencies have capacity to properly conduct, interpret, and objectively present evaluations. This report will be updated in the 110th Congress.

Background In March 2010, the 111 th Congress passed the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010. Jointly referred to as the Affordable Care Act (ACA), the ACA expands Medicaid eligibility, increases access to health insurance coverage, expands federal private health insurance market requirements, requires the creation of health insurance exchanges to provide individuals and small employers with access to insurance, and in some instances, mandates the provision and purchasing of health insurance. Following the enactment of the ACA, state attorneys general and others brought several lawsuits challenging various provisions of the ACA on constitutional grounds. One of these cases included a federalism challenge to the ACA's expansion of Medicaid eligibility. This case, National Federation of Independent Business (NFIB) v. Sebelius , addressed the issue of whether withholding Medicaid reimbursement to a state unless that state complies with the expansion of its Medicaid program exceeds Congress's enumerated powers under the Spending Clause and violates the Tenth Amendment. In NFIB , the Court held that the withdrawal of all Medicaid funds from the states for failure to comply with the expansion of the program did violate the Tenth Amendment, but that withholding of just the funds associated with that expansion raised no significant constitutional concerns. Medicaid is an entitlement program that finances the delivery of certain health care services to a specific population. Medicaid is financed jointly by the federal and state governments, and states choose whether or not to participate. Currently all 50 states participate. If a state chooses to participate, it must follow federal rules in order to receive federal reimbursement that offsets most of the state's Medicaid costs. It should be noted, however, that a number of these requirements may be waived, with approval from the Secretary of Health and Human Services (HHS). In general, Medicaid expansion under the ACA: (1) increases Medicaid eligibility by raising the income criteria for certain people; (2) adds both mandatory and optional benefits to Medicaid; (3) increases the federal matching payments for certain groups of beneficiaries and for particular services provided; (4) provides new requirements and incentives for states to improve quality of care and to encourage more use of preventive services; and (5) makes a number of other Medicaid program changes. The most significant of these changes amends a section of federal law outlining what states must offer in their Medicaid coverage plans. Starting in 2014, states were to be required to cover adults under age 65 (who are not pregnant and not already covered) with incomes up to 133% of the federal poverty level ("FPL"). This is a significant change because previously the Medicaid Act did not set a baseline income level for mandatory eligibility. Thus, many states currently do not provide Medicaid to childless adults and cover parents only at much lower income levels. Failure to comply with such expansion could, in theory, result in the withholding of all Medicaid reimbursements to the states, including payments for persons previously covered by the Medicaid program. The federal government predicted that if all states chose to participate in the Medicaid expansion, enrollment would increase by approximately 16 million by the end of the decade. To finance the expansion, the federal government calculated that its share of Medicaid spending would increase by $434 billion by 2020, and state spending would increase by at least $20 billion over the same time frame. Other estimates suggest that both federal and state costs could be higher. The constitutional challenge to the Medicaid expansion in NFIB was that, under the Spending Clause and the Tenth Amendment, states would be coerced into paying for the increased Medicaid requirements, as the failure to comply with these increased Medicaid requirements might result in the federal government withholding all Medicaid funding. The argument was bolstered by the states noting that Medicaid represents 40% of all federal funds that states receive; that the majority of states receive more than $1 billion in Medicaid funding each year; and that this number is projected to increase under the ACA. The states argued that the withdrawal of this aid would have a dramatic effect on the ability of the states to provide health care to their populations, and that the states had no choice but to comply with the Medicaid expansion provisions. The Spending Clause The authority of Congress to specify under what conditions the states will receive Medicaid funds is generally considered to be the Spending Clause. Under the Spending Clause, Congress can allocate money to states, private entities, or individuals, but then require those recipients to engage in or refrain from certain activities as a condition of receiving and spending that money. The question arises, however, whether under precepts of federalism, there are limitations on Congress' ability to apply such requirements to the states. The lines of authority between states and the federal government are, to a significant extent, defined by the United States Constitution and relevant case law regarding federalism. In recent years, the Supreme Court has decided a number of cases that would seem to be a reevaluation of this historical relationship. In particular, a number of these cases have cited the Commerce Clause, the Tenth Amendment, and the Eleventh Amendment of the Constitution as establishing limitations on the power of the federal government over the states. In contrast to this trend, the Court has generally interpreted congressional power under the Spending Clause expansively, even when that legislation arguably intrudes on state sovereignty. For instance, many areas of federal law that regulate states, such as civil rights statutes, have been enacted pursuant to the Spending Clause. In many situations, such as where these statutes apply to state agencies or institutions, Congress is using its spending power to accomplish goals that cannot be legislated directly because such direct legislation would be unconstitutionally intrusive on state sovereignty or beyond the authority of Congress. The Tenth Amendment One of the limits on federal power that would appear to most often stand in contrast with this Spending Clause doctrine is the Tenth Amendment. The Tenth Amendment provides that "powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The significance of this language has varied over time. For awhile, the Supreme Court interpreted the Tenth Amendment to provide that certain "core" state powers or "functions" would be beyond the authority of the federal government to regulate. The Court, however, soon overruled that decision, suggesting that the states should look for relief from direct federal regulation of state activities through the political process, not through the courts. Modern Tenth Amendment doctrine may be traced to the Court's 1992 decision in New York v. United States . In New York , Congress had attempted to regulate in the area of low-level radioactive waste by providing that states must either develop legislation on how to dispose of all low-level radioactive waste generated within the states, or the states would be forced to take title to such waste, which would mean that it became the states' responsibility. The Court found that although Congress had the authority under the Commerce Clause to regulate low-level radioactive waste, it only had the power to regulate the waste directly. Here, Congress had attempted to require the states to perform the regulation, and decreed that the failure to do so would require the states to deal with the financial consequences of owning large quantities of radioactive waste. In effect, Congress sought to "commandeer" the legislative process of the states. In the New York case, the Court found that this power was not found in the text or structure of the Constitution, and it was thus a violation of the Tenth Amendment. A later case presented the question of the extent to which Congress could regulate through a state's executive branch officers. P rintz v. United States , which involved the Brady Handgun Act, required state and local law enforcement officers to conduct background checks on prospective handgun purchasers within five business days of an attempted purchase. This portion of the act was challenged under the Tenth Amendment, under the theory that Congress was without authority to "commandeer" state executive branch officials. After a historical study of federal commandeering of state officials, the Court concluded that commandeering of state executive branch officials was, like commandeering of the legislature, outside of Congress's power, and consequently a violation of the Tenth Amendment. In the instant case, if the federal government had directly required states to fund and implement new responsibilities under the Medicaid expansion, then it would appear likely that a legal challenge could be made that Congress was commandeering the states to implement a federal program. However, while Congress will be requiring states to provide expanded service under Medicaid as a condition of receiving federal funds under that program, there is no requirement on states to accept those funds. For this reason, a challenge to the Medicaid expansion does not fit comfortably into the commandeering line of cases. Since the state is free to choose not to receive such funds, then it is difficult to argue that such state is being directly commandeered, as was the case in New York and Printz . However, in a separate line of cases, the Supreme Court has considered the question of whether conditioning a government benefit on the waiver of a constitutionally based right may in itself be a constitutional violation. The legal theory behind these cases is generally referred to (although not always explicitly by the courts) as the doctrine of "unconstitutional conditions." Thus, the question which was before the Supreme Court in NFIB was whether a state may constitutionally be required to accede to the Medicaid expansion as a condition of receiving federal funds, despite the fact that, under New York and Printz , such requirements could not be imposed directly. Voluntary Waiver of States' Rights The Supreme Court has long held that constitutional rights may be "waived" voluntarily by either individuals, private entities, or states. Even rights of the most profound importance, such as the right of the individual to challenge the imposition of capital punishment under the Eighth Amendment, may knowingly be waived. A more difficult question arises, however, where some form of inducement is offered that is conditioned on such a waiver, bringing into question whether such waiver is voluntary. In some cases, such a waiver is considered unremarkable, even though the rights waived are significant and the inducements are serious. For example, the Court has held that as a result of plea bargaining, a criminal defendant may choose to waive his or her right to a trial in exchange for a reduction in the level of penalty to which the defendant may be subjected. Arguably, such an inducement is unlikely to violate a defendant's rights because the defendant can use his or her estimation of the likelihood of conviction in deciding whether to accept such a bargain. In other cases, it may be more difficult to evaluate whether the circumstances surrounding the waiver of a constitutional right are so coercive as to in some way infringe on the waived right. In other words, in some cases a grant requirement may be an "unconstitutional condition," because the recipient of the grant is being asked to give up a constitutional right to receive the federal benefit. It is of some concern that the Court has not laid out a universal doctrine for evaluating which rights may be made as a condition of receiving a government benefit, and what circumstances must be in place for such conditioning to be valid. Rather, the Court appears to vary significantly in its approach, changing its level of scrutiny based on the nature of the governmental inducements and the importance of the constitutional right which is sought to be waived. At least one scholar has suggested that attempting to discern doctrinal consistencies in the area yields little predictive benefit. Despite this lack of a universal approach, there are two consistent themes in evaluating the possibility that a required waiver of a constitutional right is an "unconstitutional condition." First, a court will evaluate whether there is a logical relationship between the purposes of the overall legislation and the burden imposed (relatedness). In addition, a court will evaluate the subjective value of the governmental interest to determine whether the threatened loss of the benefit so outweighs the burdens of compliance that the recipient has little choice but to comply (coercion). The relative weight of two of these factors and their relationship to each other, however, may vary depending on the circumstance to which they are applied. It should be noted that many recipients of federal money are private individuals or entities. In general, the Court has been more sensitive to grant conditions that limit these private grant recipients' constitutional rights than it has been to states. One theory suggests that the reason for this deference is that the Supreme Court is most concerned in the area of unconstitutional conditions when there is an imbalance in bargaining power, such as can occur between individuals and the government. Such imbalances are particularly exacerbated when the government holds a monopoly power over the offered benefit. For this reason, the doctrine of unconstitutional conditions has been most robust when the cases have involved private individuals being limited in the exercise of either personal autonomy or property rights. Prior to NFIB , the doctrine of unconstitutional conditions had not been successfully invoked by the states. For instance, neither the Supreme Court nor any other court had held that a grant condition imposed on a state failed either a relatedness or coercion test. In part, this appears to reflect the view that states, holding far more financial and political power than most private entities, were more able to withstand federal coercion. Consequently, the Supreme Court's decision in NFIB , to the extent that it represents a shift in the Court's approach to Spending Clause cases, could have a significant impact on federal authority to impose spending conditions on states. An example of a grant condition that does not violate the Tenth Amendment can be found in South Dakota v. Dole. In Dole , the Court found that Congress was well within its authority to withhold 5% of federal highway funds from states in which the age for purchase of alcohol was below 21. In that case, the State of South Dakota, which permitted nineteen-year-olds to purchase beer, brought suit challenging the grant requirement, arguing that the law was an invalid exercise of Congress's power under the Spending Clause to provide for the "general welfare." Finding that the legislation was a clear exercise of Congress's power under the Spending Clause, the Court went on to hold that, under this Clause, the condition must be related to the particular national projects or programs to which the money was being directed (relatedness). Further, the Court considered whether other constitutional provisions, such as the Tenth Amendment, may independently bar the conditional grant of federal funds. The relatedness requirement was of some concern to the Court. In Dole , however, the congressional condition imposing a specific drinking age was found to be related to the national concern of safe interstate travel, which was one of the main purposes for expenditure of highway funds. It should be noted that this standard of relatedness was relatively lenient, in that the condition was only indirectly related to how the federal money was being spent or to the specific federal projects involved. Instead, the condition was related to the overall regulatory goal (transportation safety) of the provided funds. Next, the Court turned to the question of whether the Tenth Amendment (which provides that state legislatures or executive branch officials may not be "commandeered") was an independent constitutional bar to the grant condition. The argument that the Court considered was whether the grant condition was intruding on the state's authority to regulate alcohol or on the right of the state legislature to be free from federal directives as to how to legislate regarding its own state liquor laws. The Court held that because the state had voluntarily agreed to comply with the grant condition in question, the statute was not a violation of the Tenth Amendment. The Court did suggest, however, that there were some Tenth Amendment limits to Congress's power under the Spending Clause, noting that financial inducements offered by Congress might be so coercive as to pass the point at which "pressure turns into compulsion." In Dole , however, the percentage of highway funds that were to be withheld from a state with a drinking age below 21 was relatively small, so that Congress's program did not coerce the state to enact higher minimum drinking ages than it would otherwise choose. NFIB v. Sebelius In NFIB , the Supreme Court reviewed a decision by the U.S. Court of Appeals for the Eleventh Circuit (Eleventh Circuit) regarding a challenge to the Medicaid expansion. In its opinion, the Eleventh Circuit considered a Spending Clause/Tenth Amendment "coercion" challenge to the Medicaid expansion provisions of the ACA, and rejected it. First, the court noted the difficulty of distinguishing persuasion and coercion. The Eleventh Circuit also noted that after Dole , the Court had never devised a test to ascertain when financial pressure would lead to coercion, which had led many appeals courts to hold that the doctrine was not a viable defense to Spending Clause legislation. The Eleventh Circuit did, nonetheless, proceed to analyze whether the ACA Medicaid expansion had passed the point where "pressure turns into compulsion," and found that those provisions were not unduly coercive under Dole . The court relied on a variety of factors. First, the Medicaid-participating states were warned from the beginning of the Medicaid program that Congress reserved the right to make changes to the program, and since that time Congress had made numerous amendments to the program. Second, most of the cost of the Medicaid expansion will be borne by the federal government until 2016, after which states will gradually become responsible for up to 10% of the increase. Third, the court noted that the states would have nearly four years from the date the bill was signed into law to decide whether they will continue to participate in Medicaid, or, if they declined to do so, to develop a replacement program in their own states. Finally, the court noted that, under the Medicaid Act, HHS need not withhold all Medicaid funding to a state refusing to comply with the expansion, but it may withhold only a portion of such funding. The Supreme Court reversed the Eleventh Circuit, and held that the threat of withholding all Medicaid funding for failure to comply with the ACA Medicaid expansion was coercive, and so it violated the Tenth Amendment. The Supreme Court went on to hold, however, that to the extent that enforcement of the ACA Medicaid expansion through withdrawal of existing Medicaid funds was unconstitutional, that the remedy was to sever that enforcement mechanism. Based on both an explicit statutory severability clause and on discernment of congressional intent, the Court held that the Congress would have wanted the ACA Medicaid expansion to go forward. Thus the Court limited withholding of funds for failure to serve the expanded Medicaid population to withholding of those new funds, effectively making state participation in the Medicaid expansion voluntary. As noted, the Supreme Court in Dole had identified two important factors in evaluating whether a congressional spending condition should be struck down under the Tenth Amendment – relatedness and coercion. The NFIB decision seemed to have most explicitly focused on the issue of coercion, but strains of relatedness permeate the opinion. This is seen most clearly in the concern expressed by the Court as to whether the states, upon entering the original Medicaid program, had been given sufficient notice of the possibility that such a significant expansion of the program might be imposed as a condition of participation. The specific question accepted for consideration by the Supreme Court in NFIB was whether the ACA "violates basic principles of federalism" by "coerc[ing]" states into accepting "onerous conditions" in violation of Dole . It should also be noted that the Court granted argument on this issue despite the fact that the Eleventh Circuit upheld the Medicaid expansion; that no other circuit has struck down these provisions; and that no similar spending provisions have been previously invalidated under the coercion theory. Justice Roberts did not suggest that the decision in NFIB was inconsistent with prior Supreme Court cases, although it can be argued that the cursory analysis of relatedness and coercion in Dole were elaborated significantly by his opinion, and may have been in some ways modified. Further, as will be discussed later, it would appear that coercion and relatedness were treated as separate factors by the Court in Dole . In NFIB , however, the concepts appear to have become closely intertwined, so that in some contexts, relatedness and coercion must be considered together, not separately. This latter approach is not inconsistent with unconstitutional conditions cases in non-state contexts. Where conditions associated with a governmental benefit have been challenged by a private person or entity, the "fit" of the benefit condition to the stated governmental purpose has been considered to increase concerns regarding coercive governmental behavior. For instance, in Nollan v. California Coastal Commission, the owners of beachfront property in California sought a permit to demolish a bungalow and replace it with a three-bedroom house. The permit was granted subject to the condition that the owners record an easement allowing the public to cross their property in order to reach the beach. The permit condition was challenged as a taking of property without the just compensation required by the Constitution. The California government argued that the new construction would increase blockage of the view of the ocean, creating a psychological barrier to beach access, and that the easement was necessary to counter this effect. The Court, however, evaluated whether the condition in question, providing "physical access," served the purpose put forward as the justification for the prohibition, since the remedy for losing visual "access" to the beach was to provide the more significant physical "access" to the beach. Thus, the Court found that, at least in the takings context, there must be a close "fit" between the purpose of the regulation and the burden imposed, and that the conditioning of the permit in this manner was unconstitutional. Relatedness Justice Roberts' decision in NFIB appears to contemplate that when a court evaluates a grant condition, it must determine the relationship between that grant condition and the underlying grant program. It had been suggested previously that the more closely federal grant conditions on states are tied to the purpose of the grant, the less likely courts will be to find coercion. While the Justice Roberts' opinion in NFIB did not explicitly establish such a relationship between relatedness and coercion, it did indicate that certain categories of grant conditions are more vulnerable to a constitutional challenge under the doctrine of coercion than others. In evaluating this relationship, Justice Roberts discusses several types of grant conditions: 1) conditions directly related to the expenditure of federal funds (hereinafter "directly related conditions"); 2) conditions related to the policy goals underlying grants (hereinafter "indirectly related conditions)"; 3) conditions related to the goals of a "new and independent" grant program ("independent grant conditions"); and 4) grant conditions not-related to the policy goals of the underlying grant ("unrelated grand conditions"). It should be noted, however, that these categories are not presented by Justice Roberts systematically, but rather are identified explicitly or implicitly at various places in the opinion. Consequently, it is not clear if the above categories should be considered as an exclusive listing of all possible types of grant conditions; whether one or more of these are variants of the same category; or whether these categories may to some extent overlap. However, for purposes of this report, it would appear that once it is determined what type of grant condition is before the court, this will inform whether the grant condition is likely to be coercive or not. For instance, Justice Roberts indicated that if a grant condition was directly related to the expenditure of federal funds, then it would appear that the condition will usually be constitutional under the Spending Clause. Second, if the grant condition is generally related to the policy goals of the underlying grant, then in most foreseeable cases, withdrawal of all the program funds would be constitutional under the Spending Clause and the Tenth Amendment. However, if the grant condition is for a new and independent program; the government threatens the funding of an existing program; and the withholding of federal funding represents a significant portion of a state's budget, then the condition would be coercive under the Tenth Amendment. Finally, if a grant condition is unrelated to the general policy goals of the underlying grant, then it is most likely unconstitutional under the Spending Clause. Directly Related Conditions: Use of Federal Funds It has long been suggested in unconstitutional conditions cases that there is a distinction to be made between grant conditions that limit how federal funds are used, and conditions that limit or direct how a recipient will act in activities that are separate from such expenditures. In effect, concerns about coercion are substantially diminished when there is a direct relationship between the activity being directly subsidized by the government and the conditions imposed. This line of reasoning appears to hold true regardless of whether the grant recipient is a state or a private individual or entity, and it would appear to include situations where federal dollars provide just a part of the funding for a program or activity. For instance, in the case of Rust v. Sullivan , a First Amendment free speech challenge was brought against regulations that prohibited health care providers who received federal funds under Title X (which provided funds for family-planning services) to engage in abortion advocacy and counseling in any program receiving these funds. If persons or entities associated with Title X projects sought to engage in these activities, they were required to do so in "physically and financially separate" locations. Based on this distinction, the Court rejected the challenge to these regulations, holding that the government was not denying a subsidy or benefit because of the exercise of a constitutional right, but was only requiring that the federal funds be used for the purposes required by the statute: "to support preventive family planning services, population research, infertility services, and other related medical, informational, and educational activities." Unlike other less related statutes, the Court here seemed to find that the direct relationship between the federal benefit and the activity in question justified the First Amendment limitations. As noted, this same distinction has been true for Tenth Amendment challenges to federal grants to states. When a state is voluntarily receiving and spending federal funds, it is generally required to comply with federal conditions on how those funds are to be spent. For instance, in Oklahoma v. Civil Service Comm'n , the Court considered the validity of the Hatch Act as applied to the political activities of state officials whose employment was financed in whole or in part with federal funds. The state contended that the withholding of federal funds unless a state official was removed invaded its sovereignty in violation of the Tenth Amendment. Though finding that the United States did not have the power to regulate the local political activities of such state officials, the Court held that the federal government "does have power to fix the terms upon which its money allotments to states shall be disbursed." This distinction between conditions on spending federal funds and other grant conditions was confirmed by Justice Roberts in NFIB. Justice Roberts' opinion stated that Congress's authority to condition the receipt of funds on the states' complying with restrictions on the use of those funds was the "means by which Congress ensures that the funds are spent according to its view of the 'general Welfare.'" Although not explicitly finding that such restrictions could never be unconstitutional, there appears to be no suggestion in NFIB or any previous case that a state could be relieved from compliance with federal conditions on how to spend federal grant funds based on the size of the federal program or the amount of funds that would be withheld from that program for a violation. Although a survey of existing state grant programs is beyond the scope of this report, it would appear that many federal grant conditions are conditions either directing or limiting certain behaviors in programs or activities that are spending federal funds. Under the above analysis, it would appear that these restrictions would not be amenable to constitutional challenge under the Tenth Amendment. With regard to adding new federal conditions to existing state programs using federal funds, relevant case law does not appear to make a distinction between directly related grant conditions imposed at the time of a grant program's inception and conditions imposed later. Thus, adding grant conditions to existing programs or activities receiving federal funds appears to be unremarkable, and arguably would not be subject to significant Tenth Amendment challenge. Indirectly Related Conditions: Meeting Similar Policy Goals Under a Dole analysis, a court will first analyze whether a grant condition is sufficiently related to an underlying grant. This inquiry, however, appears to be highly deferential to Congress, so that if any reasonable relationship between the policy goals of a program and the policy goals of the grant condition can be discerned, then the grant condition will be upheld. As noted, the relationship in Dole between raising the drinking age to 21 and the withholding of transportation funds was that both were associated with the issue of transportation safety. One can suggest that the Court's resort to such a high level of generality in finding that a condition was related would indicate that the relatedness standard in Dole would in most cases be easy to meet. Thus, in the NFIB case, one would expect the Court to have little problem finding that grant conditions directly related to Medicaid's purpose of providing medical treatment to disadvantaged populations would meet the standard set forth in Dole . At a minimum, the new benefits provided under the Medicaid expansion would appear more closely tied to the purposes of the Medicaid program than the 21-year-old drinking age was to the purpose of the federal highway transportation funds under Dole . Justice Ginsburg, in dissent, suggests that the relatedness of Medicaid and the Medicaid expansion is undeniable. Justice Roberts' opinion, however, did not directly address whether the policy goals of the Medicaid expansion or any previous Medicaid amendments were related to the policy goals of the existing Medicaid program. Rather, as discussed below, Justice Roberts' opinion explored the narrower question as to whether the Medicaid expansion was a "new and independent" program. While this analysis might be seen as a variant of the Dole relatedness standard, Justice Roberts did not make this point explicitly. However, the opinion did suggest that all prior grant conditions which had been added to Medicaid over the years since its inception were constitutional. This would imply that, under Dole , those previous grant conditions were generally related to the policy goals of the program to which they were attached. As discussed by Justice Ginsburg in her dissent, since 1965, Congress has amended the Medicaid program on more than 50 occasions. The most dramatic expansion occurred between 1988 and 1990, when Congress required participating states to include among their beneficiaries pregnant women with family incomes up to 133% of the federal poverty level; children up to age 6 at the same income levels; and children ages 6 to 18 with family incomes up to 100% of the poverty level. According to Justice Ginsburg, these amendments added millions of people to the Medicaid-eligible population. Justice Roberts, however, makes clear in his opinion that the 1988-1990 Medicaid expansion was not of such a degree as to raise concerns about coercion under Dole. In NFIB , Justice Roberts argues that this previous modification should not be considered a major change in the Medicaid program, because Medicaid had always provided health care for "families with dependent children." Justice Roberts also suggested that none of the other 50 amendments would fall into the same category as the ACA expansion. Although not an explicit holding of the Court, Justice Roberts' opinion would suggest that most changes to federal spending programs will not raise significant constitutional concerns. Many of the amendments to Medicaid imposed grant conditions that, if not met, would result in the loss of all Medicaid funding. And, as will be discussed later, Medicaid funding represents one of the largest federal programs providing money to the states. The suggestion of the Roberts' opinion is that even as significant a loss of federal funds as would occur with the withdrawal of federal Medicaid funding would pass constitutional muster, as long as the grant condition fell into the category of indirectly related conditions. Independent Conditions: Requirement to Implement New Program In NFIB , seven Justices held that the requirement that states either comply with the requirements of the Medicaid expansion under the ACA or lose all Medicaid funds violated the Tenth Amendment. However, these seven Justices either wrote or joined one of two separate opinions on this issue, and did not join in either the reasoning or judgment of the other opinion. The opinion of Chief Justice Roberts, which was joined by Justices Breyer and Kagan, appears to be significantly narrower than the dissenting opinion authored Justices Scalia, Kennedy, Thomas and Alito. Thus, it would appear that for purposes of the Tenth Amendment challenge to the ACA, that the opinion by Chief Justice Roberts is the controlling opinion. The core of Justice Roberts' opinion is that the ACA Medicaid expansion creates a "new and independent" program, and that failure to comply with this new program will result in the withdrawal of funds for the existing Medicaid program. There were several aspects of the Medicaid expansion under the ACA that were deemed important in reaching this conclusion. It is unclear, however, whether all these factors needed to be present, or whether a challenge to a Spending Clause condition could be successful even if there had been less differentiation between Medicaid and this expansion. It does appear that the factors that were important in this case are unlikely to occur in other legislative contexts. Thus, if these factors mark the outer limits of Congress's power, then the case may have minimal impact on existing or future funding grant conditions. Justice Roberts' opinion notes that Congress's power under the Spending Clause has been repeatedly characterized as "much in the nature of a contract," meaning that the states voluntarily and knowingly enter into an agreement with the federal government in order to receive federal funds. Previously, the significance of this theory has gone to the issue of statutory interpretation, so that conditions imposed on the states generally need to be explicit, and that the Supreme Court will presume against the creation of "implicit" conditions under the Spending Clause. In Justice Roberts' opinion, however, the "contract" analogy serves a different purpose. In arguing that the Medicaid expansion should be viewed as a modification of an existing program, the United States noted that the original Medicaid program, found in the Social Security Act, contained a clause expressly reserving "[t]he right to alter, amend, or repeal any provision" of that statute. However, Justice Roberts' opinion found that under the "contract" theory, the changes imposed by the Medicaid expansion were not of the type that were contemplated by the statute. Specifically, Justice Roberts' opinion indicated that the Medicaid expansion "accomplishes a shift in kind, not merely degree." The opinion noted that the original program had required states to cover medical services for four categories of persons in financial need: the disabled, the blind, the elderly, and needy families with dependent children. Although previous amendments to Medicaid had altered the scope of these categories, the Medicaid expansion arguably changed the nature of the program by requiring recipient states to meet the health care needs of the entire nonelderly population with income below 133% of the poverty level. According to the opinion, this change meant the program was no longer to provide care for the neediest, but rather was an element of a comprehensive national plan to provide universal health care. Justice Roberts also wrote that the way this new Medicaid population is treated is different from how the existing Medicaid program works. For instance, under the ACA, Congress created a separate funding provision to cover the costs of providing services to any person made newly eligible by the expansion. While Congress pays 50%– 83% of the costs of covering individuals currently enrolled in Medicaid, once the expansion is fully implemented, Congress will pay 90% of the costs for newly eligible persons. Congress also mandated, however, that newly eligible persons would receive a level of coverage that is less comprehensive than the traditional Medicaid benefit package. In essence, Justice Roberts seems to have found that the states received insufficient notice upon their commitment to Medicaid that they might be required, as a condition of continuing in that program, to include significant new populations in their Medicaid coverage. Despite the language in the Social Security Act regarding possible future alterations, the opinion found that this language did not confer on Congress the authority to transform the program so dramatically. Unrelated Conditions: Does Not Address Similar Policy Goals Justice Roberts indicated that, under Dole , if a Court finds that a policy goal is unrelated to the underlying grant condition, then that grant condition will not survive constitutional scrutiny under the Spending Clause. After Dole , however, those lower courts that have considered relatedness challenges to grant conditions do not appear to have engaged in particularly close scrutiny of this requirement. In fact, some courts have even expressed a reluctance to engage in such an inquiry at all, suggesting that the difficulty of the analysis and the ability of states to seek relief through the political process precluded meaningful review. The question arises as to whether NFIB significantly affects this prong of the Dole analysis, so that lower courts would be likely to increase scrutiny of the relatedness requirement. It might be argued that the Roberts' opinion, with its emphasis on "new and independent" programs, is implicitly addressing the "relatedness" inquiry of Dole . Justice Roberts' opinion, however, does not explicitly discuss whether the "new and independent" grant condition analysis was intended to be considered separately from a relatedness inquiry; whether this analysis is a variant of the relatedness inquiry; or whether it was intended to supplant it. An argument can be made, however, that there is a significant difference between the Dole "relatedness" inquiry and the NFIB "new and independent" program inquiry. First, as noted, the "relatedness inquiry" in Dole was identified as a limitation on the Spending Clause, while the NFIB discussion of "new and independent programs" emphasized the concerns of the Tenth Amendment. Second, under Dole, the "relatedness" and "coercion" inquiries appear to be disjunctive, in that failure to comply with either of these factors would mean that the statute was unconstitutional. Under NFIB, however (as is discussed below), the "new and independent program" inquiry and the "coercion" inquiry are conjunctive, so that a grant condition must apparently fail both tests to be found unconstitutional. If the NFIB analysis were either a supplement to or a replacement for the Dole "relatedness" doctrine, that doctrine would be significantly narrowed. It would seem premature, without further clarification by the Court, for a lower court to apply such a limiting rule of construction to Dole (requiring challenges to successfully challenge both "relatedness" and "coercion"). Thus, arguably, the Dole "relatedness" test was not directly at issue in NFIB , and it is still the case that an unrelated grant condition will be found unconstitutional under the Spending Clause without the further requirement that such a condition be coercive. However, as noted previously, no federal statute has every been found by any court to fail under this requirement. Coercion When Coercion Analysis is Important As suggested above, there are four types of grant conditions recognized by the Court: "Directly Related Conditions," "Indirectly Related Conditions," "Independent Program Conditions," and "Unrelated Program Conditions." And, as discussed above, a coercion analysis may not be particularly important for three of them. "Directly Related Conditions" are likely to be upheld and "Unrelated Conditions" conditions are likely to fail regardless of the level of funds withheld. Since, under Dole and NFIB , a coercion analysis still exists for "Indirectly Related" conditions, the implicit approval of Justice Roberts' opinion to the withholding of all Medicaid funding for the many amendments to Medicaid prior to the ACA makes it unlikely that past or future "Indirectly Related Conditions" will be constitutionally infirm. Thus, it would appear that only when a court ascertains that a grant condition associated with an "Independent Program Condition" is used to withhold existing funds that coercion analysis is likely to be relevant. How Much Federal Funding Can be Withheld Prior to NFIB , the Supreme Court had noted the inherent difficulty in determining when a state was being "coerced." In Steward Machine Co. v. Davis , a corporation challenged a provision of the then newly enacted Social Security Act, arguing that the federal government had improperly coerced states into participation in the Social Security program. The Supreme Court rejected this argument, stating that: [T]o hold that motive or temptation is equivalent to coercion is to plunge the law in endless difficulties. The outcome of such a doctrine is the acceptance of a philosophical determinism by which choice becomes impossible. Till now the law has been guided by a robust common sense which assumes the freedom of the will as a working hypothesis in the solution of its problems.... Nothing in the case suggests the exertion of a power akin to undue influence, if we assume that such a concept can ever be applied with fitness to the relations between state and nation. Even on that assumption the location of the point at which pressure turns into compulsion, and ceases to be inducement, would be a question of degree, at times, perhaps, of fact. Thus, in Steward , the Court declined to establish a bright line test, instead just finding that the law in question did not fall outside of an acceptable level of persuasion. In NFIB , Justice Roberts took a similar approach. Rather than establishing a standard by which future coercion cases are to be judged against, the opinion merely concluded that the economic burden imposed by the withdrawal of all federal Medicaid funds would cross the line into coercion. Although the level of Medicaid expenditures in relationship to particular state budgets may vary, Justice Roberts characterized such levels as "the threatened loss of over 10 percent of a State's overall budget." Justice Roberts contrasted this amount with the amount of federal transportation funds threatened to be withheld in Dole , which Justice Roberts characterized as "less than half of one percent" of South Dakota's budget. Justice Roberts noted that the level of withdrawal of funds in Dole left that state with the "prerogative" to reject Congress's desired policy, "not merely in theory but in fact." The loss of 10% of a state's budget, on the other hand, represents a "gun to the head" and a form of "economic dragooning" which leaves the state no real option but to agree to the Medicaid expansion. How courts are to consider grant withdrawals between 10% and one-half of 1%, however, is not addressed by the Roberts' opinion, and Justice Roberts declined to speculate where such a line would be drawn. Justice Roberts' failure to "draw a line" in NFIB would seem, on its face, to make future predictions regarding grants conditions problematic. Medicaid is one of the largest federal programs currently in existence, and consequently, withdrawal of all Medicaid funds for failure to meet the Medicaid expansion requirements under the ACA would be disruptive to state finances. It is not clear, however, how the court might compare the levels of withdrawal threatened under the ACA from a variety of other large federal programs. It should be noted that, prior to the Court's decision in NFIB , various federal courts of appeals had considered and rejected coercion claims with respect to grants for state prisons, education, welfare, and transportation. Whether Cost of Complying with Conditions is Relevant One additional question that may be asked is whether a court should analyze the burden of compliance imposed by a federal grant condition as part of a coercion analysis. This question was considered an important part of the challenge to the Medicaid expansion – whether the grant condition in question was financially "onerous." In general, analysis under Dole has focused on the amount of federal funds withheld. In NFIB , however, the states argued that the Court should also consider the additional amounts of money that the states would have to expend to comply with the ACA Medicaid requirements. The Court in Dole did not indicate that a coercion analysis varied based on the existence of a high burden of compliance (financially "onerous" or otherwise) imposed on the states by a grant condition. Instead, the Court appeared to focus its analysis on whether the grant condition in question threatened South Dakota's sovereignty and its ability to make its own policy decisions. Arguably, the Court's decision in Dole would suggest that any grant condition that was "coercive" and intruded on a state's sovereignty would be unconstitutional, regardless of whether the financial or other burden of compliance was substantial or insignificant. In either instance, the withdrawal of too much federal funding could have a coercive effect. In NFIB, Justice Roberts appears to have confirmed the implication of Dole – that the burdens of compliance are not a factor to be considered in a Tenth Amendment challenge to a federal spending condition. In a footnote, Justice Roberts summarily adopts this reasoning, noting that: [t]the size of the new financial burden imposed on a State is irrelevant in analyzing whether the State has been coerced into accepting that burden. "Your money or your life" is a coercive proposition, whether you have a single dollar in your pocket or $500. Thus, arguably, relatively minor grant conditions which involve the expenditure of some state funds (either directly or as administrative costs), would still be subject to a coercion analysis. Conclusion The successful federalism challenge to Medicaid expansion under the ACA in the case of NFIB required the Supreme Court to address whether states are being "coerced" into compliance with the expanded state requirements by the threat of withholding existing Medicaid reimbursements. This "coercion" test, articulated in South Dakota v. Dole in 1987 , had never been applied by the Supreme Court or the lower federal courts to strike down a federal statute, and had been so little developed by the Court that most federal courts of appeals had simply rejected similar challenges with little analysis. It is unclear, however, whether NFIB has significantly changed the Dole analysis, or whether the combination of factors that led to the Court's decision to limit how the ACA Medicaid expansion would be enforced is likely to be repeated. As noted, Justice Roberts' decision in NFIB seems to contemplate the existence of several types of grant conditions: 1) conditions directly related to the expenditure of federal funds; 2) conditions related to the policy goals underlying grant; 3) conditions related to the goals of a "new and independent" grant program; and 4) grant conditions not related to the policy goals of the underlying grant. Categories 1, 2 and 4 (direct, indirect, and unrelated conditions) are derived principally from prior case law, while category 3 (new and independent programs) appears to be the principal focus of NFIB . Prior case law holds (and NFIB confirms) that if a grant condition is directly related to the expenditure of federal funds in a state program or activity, then the condition is constitutional under the Spending Clause. Second, if the grant condition is generally related to the policy goals of the underlying grant, then, under Dole and NFIB, withdrawal of all program funds would, in most foreseeable cases, be constitutional under the Spending Clause and the Tenth Amendment. However, if the grant condition is attached to a new and independent program; the government threatens the funding of an existing program; and the withholding of federal funding represents a significant portion of a state's budget, then that condition may be unconstitutionally coercive under the Tenth Amendment. Finally, if a grant condition is unrelated to the general policy goals of the underlying grant, then it is most likely unconstitutional under the Spending Clause. Thus, to the extent that a coercion remains relevant after NFIB , it would appear to apply principally where there is an existing program, and states are mandated to adopt a new and independent program at the risk of the state losing the existing funds. In this case, a court will need to consider whether the loss of funds for failure to adopt this new and independent program is coercive. Justice Roberts did not identify a standard to determine what level of funding withholding would be coercive, although he did conclude that withdrawal of federal program funds which represents 10% of an average state's budget constituted a "gun to the head" and was a form of "economic dragooning." How courts are to consider grant withdrawals below 10%, however, is not addressed by the Roberts opinion, and Justice Roberts declined to speculate where such a line would be drawn. Finally, to the extent that such a new and independent program is found to be coercively mandated, then a court would need to fashion a remedy. In Justice Roberts' opinion, the Tenth Amendment remedy was not to strike down the "new and independent programs" (the ACA Medicaid expansion), but to disallow the threat of withholding existing funds (Medicaid). Based on both an explicit statutory severability clause and on discernment of congressional intent, the Court held that Congress would have wanted to preserve the authority to withhold funds from the expanded Medicaid population for failure to comply with its conditions. This ultimately had the effect of allowing the ACA Medicaid expansion to go forward, but effectively made state participation voluntary.

In March 2010, Congress passed the Patient Protection and Affordable Care Act (ACA). The ACA, among other things, requires states to expand Medicaid eligibility or lose Medicaid funding. Following the enactment of the ACA, state attorneys general and others brought several lawsuits challenging various provisions of the act on constitutional grounds. In National Federation of Independent Business (NFIB) v. Sebelius, the Supreme Court, among other things, decided that the enforcement mechanism for the ACA Medicaid expansion, withdrawal of all Medicaid funds, was a violation of the Tenth Amendment. The Court went on to hold, however, that the remedy was to sever that enforcement mechanism, effectively making state participation in the Medicaid expansion voluntary. In the 1987 case of South Dakota v. Dole, the Supreme Court held that, in order for a federal grant condition imposed on a state to pass constitutional muster under the Spending Clause, the condition must be related to the particular national projects or programs to which the money was being directed. In addition, in order to comply with the limits of the Tenth Amendment, the level of funds withheld for failure to comply with that condition cannot be coercive. In a controlling opinion in NFIB, Justice Roberts suggested that this analysis may vary based on the type of grant condition that was at issue. It is unclear, however, whether NFIB significantly changed the Dole analysis, or whether the combination of factors that led the Court's decision to limit how ACA Medicaid expansion would be enforced is likely to be repeated. For instance, if a grant condition is directly related to the expenditure of federal funds in a state program or activity, then, according to Justice Robert's opinion in NFIB, the condition is usually constitutional under the Spending Clause. Or even if a grant condition is only generally related to the policy goals of the underlying grant, NFIB suggests that withdrawal of all program funds would still, in most foreseeable cases, be constitutional under the Spending Clause and the Tenth Amendment. If a grant condition is unrelated to the general policy goals of the underlying grant, however, then it is most likely unconstitutional under the Spending Clause. This latter standard, however, has been in place since the Dole case, and no court has ever struck down a federal law on this basis. Justice Roberts' concern in NFIB arguably dealt with a different question: whether a grant condition attached to a new and independent program (here, the Medicaid expansion) which threatens the funding of an existing program (here Medicaid) is constitutional. In such cases, if the withholding of federal funding represents a significant portion of a state's budget, and there are distinguishing factors among the programs, then that condition may be unconstitutionally coercive under the Tenth Amendment. Justice Roberts did not identify a standard to determine what level of withholding funds would be coercive, or specify what kind of distinguishing factors were necessary. He did conclude, however, that withdrawal of federal program funds which made up 10% of an average state's budget represented a "gun to the head" and was a form of "economic dragooning." How courts are to consider grant withdrawals below 10%, however, is not addressed by the Roberts' opinion, and Justice Roberts declined to speculate where such a line would be drawn. It should be noted, however, that few federal programs even approach the level of Medicaid funds provided to the states. Thus, if the 10% threshold and the need for distinguishing factors mark the outer limits of Congress's power, then the case may have minimal effect on existing or future federal grant conditions.

Water Rights in the Colorado River Basin Generally The law of water rights is traditionally an area regulated by the states, rather than the federal government. Individual states may choose the system under which water rights are allocated to water users. Western states, including Colorado, Utah, and Wyoming, generally follow the prior appropriation doctrine of water rights, often referred to as "first in time, first in right." These states typically are drier and experience regular water shortages. The prior appropriation system allows water users to acquire well-defined rights to certain quantities of water by designating senior and junior rights to avoid uncertainty during times of water scarcity. Under the prior appropriation doctrine, a person who diverts water from a watercourse and makes reasonable and beneficial use of the water acquires a right to use of the water. The user's location relative to the watercourse (whether upstream, downstream, adjacent, or remote) does not affect the ability to obtain a water right. Typically, under a prior appropriation system of water rights, users apply for a permit from a state administrative agency which manages the acquisition and transfers of such rights. The prior appropriation system limits users to the quantified amount of water the user secured under the permit process with a priority based on the date the water right was conferred by the state. The user's right that was appropriated first (the senior water right) is considered superior to later appropriators' rights to the water (the junior water right). Appropriators fill their needs according to the order in which they secured the right to the water and not based on the available quantity. Therefore, in times of shortage, junior rights holders could be without the water they need. Colorado Basin States' Laws Affecting Water Rights The issues regarding water rights in the Colorado River Basin arise from the fact that a limited supply of water is sought after by many different users. Junior rights holders who use waters from the Basin to meet agricultural and municipal interests potentially are limited by what oil companies, as senior rights holders, use. These junior rights holders have been able to use water to fill their needs for decades, while senior rights holders have not used the water. The dispute over a possible water shortage when both groups wish to use water likely will raise questions about the nature and administration of water rights, whether existing water rights may be amended to account for the changed circumstances, and the options available for users who seek to claim unused water rights from other users. Water rights typically are established through an administrative permit system of the state in which the water is being appropriated. Water rights seekers must file an application with the proper state administrative organization, which dates the seniority of the water right. State law provides that the water is the property of the state, but a water right is considered an individual's property right in the priority of the use of the state's water. The specific nature of water rights may vary depending on the state. For example, in Colorado, water rights can be either absolute or conditional. Absolute rights are assigned to users who have diverted water and put the water to beneficial use, whereas conditional water rights allow the user to maintain the priority of the right he intends to acquire until the diversion is complete. In other words, a user with an absolute right has fulfilled all the requirements necessary to acquire a right to the water. A user with a conditional right has asserted an intention to acquire a right but has not yet fulfilled all of the requirements necessary to do so, and that right is conditioned on the completion of all requirements. Utah law provides that water rights become real property only when the application has been perfected under the required legal process, meaning that title of the right is properly filed with the state. Wyoming issues permits to applicants for water rights, which allow the user time to construct and complete a project to put water to a beneficial use. The water right is not considered permanent until the process is complete and may be disputed or removed until that time. In the context of oil shale in the Colorado River Basin, oil companies hold both absolute and conditional rights for water in Colorado. The nature of the rights held could influence the future use of the water and may provide a basis for junior rights holders to challenge the continuing validity of the senior rights holders' rights. Both junior and senior rights holders may seek to alter certain water rights if circumstances of water use change. For example, in Colorado, senior rights holders may seek to convert their conditional rights to absolute rights, as discussed. Other state laws provide for water rights to be altered as circumstances change. Junior or senior rights holders may seek to change the geographic or purpose parameters set at the time they acquired their rights. Water rights generally are allocated based on a specific point of diversion, location of use, and purpose of use. In order to change the point from which water is diverted from its source or to change the place or purpose of use, a water right holder must apply to the appropriate state office for approval. The state office considering the change may consider factors such as whether the change would exceed historical levels and whether other users' vested water rights would be impaired by the change. Junior rights holders may seek to secure water by acquiring the rights of senior rights holders under the water rights transfer process in each state. In Colorado, a water right may be bought, sold, or leased to other entities if the transfer is filed with the appropriate state office and the transfer would not injure the vested rights of another user. Similarly, Utah water law provides that a water right may be bought or sold if the transfer is approved by the state. Under Wyoming law, a water right attaches to the lands or the place of use in the permit rather than to an individual. Water rights may be transferred only if included in the sale of land, or by petition for a change in place of use to the appropriate state office. Senior rights holders may lose their rights if those rights are not used. Conditional rights in Colorado require rights holders to demonstrate continuous efforts in developing the water right on a regular basis. Other water rights also may be lost under certain circumstances according to state law. If senior rights holders lose their rights, the water supply available for junior rights holders to fill their needs would increase. In Colorado, a water right may be considered abandoned if it is not used for a 10-year period and there is an intent to abandon. In Utah, water rights may be abandoned or forfeited. For a water right to be abandoned, there must be intent to abandon by the user and there is no time requirement. For a water right to be forfeited, the water right must not be used for a five-year period. In Wyoming, abandonment may take three forms. First, the user may voluntarily abandon the water right. Second, one user may allege that another user's right has been abandoned because the other user has not used the right for a five-year period and that reactivation of that right would injure the user's right. Third, the state may allege an abandonment if the water is not put to beneficial use for a five-year period and reallocation would serve the public interest. Water rights that are lost under these processes revert to the state and may be appropriated in the future. The Law of the River and Interstate Water Allocation State water laws govern the allocation of water within the state, but water resources rarely are confined to state boundaries. Rather, like the Colorado River Basin, water basins spread across several states. As a result, states often compete for resources from shared basins, and the competition often leads to water disputes between states in regions with shared water resources. Interstate water disputes may be resolved in various manners. Two of the most common methods are equitable apportionment in the U.S. Supreme Court and interstate compact negotiated by the parties and approved by Congress. The Colorado River Basin is no exception to the likelihood of disputes and is subject to a number of judicial decisions and interstate compacts, commonly referred to as the "Law of the River." The Law of the River governs the waters of the Colorado River Basin in addition to regulation by the individual states in which water rights are allocated. The Law of the River is a collection of laws and agreements that govern the distribution of the water throughout the Basin as a whole. Because the Colorado River Basin includes seven states, which have varying needs and all draw upon the same resources, a series of court decisions, statutes, interstate compacts, and international treaties address the use and management of Colorado River water. The laws and agreements that form the Law of the River attempt to allocate the waters of the Colorado River Basin among the states, providing broad parameters for the distribution of the Basin's waters. Thus, the Law of the River would not govern individual water rights directly, but it would place limits on the water available for allocation by each state. Congressional Interest Development of oil shale resources has been a controversial political issue. Some have expressed an interest in pursuing more aggressive oil shale development programs. Others have suggested that such programs would be harmful to environmental protection policies. In 2008, the Department of Interior announced proposed regulations that would promote oil shale development and issued final regulations that took effect in January 2009. The 111 th Congress may consider directing future activity in oil shale development, whether in accordance with the regulations or enacting legislation providing other direction for future agency actions.

Concerns over fluctuating oil prices and declining petroleum production worldwide have revived interest in oil shale as a potential resource. The Energy Policy Act of 2005 (EPAct; P.L. 109-58) identified oil shale as a strategically important domestic resource and directed the Department of the Interior to promote commercial development. Oil shale development would require significant amounts of water, however, and water supply in the Colorado River Basin, where several oil shale reserves are located, is limited. According to news reports, oil companies holding water rights in the region have not exercised those rights in decades, which has allowed other water rights holders to use the water for agricultural and municipal needs. Because of the nature of the water rights systems in the relevant states, these users might face significant limitations in their future use of water from the Colorado River Basin if the oil companies exercise their rights. This report will provide a brief overview of water rights in Colorado, Utah, and Wyoming, including changes that may be made to currently held water rights and the possibility for abandonment of unused water rights.

Brief History of the 2015 Clean Water Rule The Clean Water Act (CWA) is the principal federal law governing pollution of the nation's surface waters. The CWA protects "navigable waters," defined in the statute as "waters of the United States, including the territorial seas." The scope of this term— waters of the United States , or WOTUS—determines which waters are federally regulated and has been the subject of debate for decades. The CWA does not define the term. Thus, in implementing the CWA, the Army Corps of Engineers and U.S. Environmental Protection Agency (EPA) have defined the term in regulations. For much of the past three decades, regulations promulgated by the Corps and EPA in 1986 and 1988, respectively, have been in effect. In 2001 and 2006, the Supreme Court issued rulings pivotal to the definition of WOTUS— Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers and Rapanos v. United States , respectively. Both rulings interpreted the scope of the CWA more narrowly than the Corps and EPA had done previously in regulations and guidance, but they created uncertainty about the intended scope of waters that are protected by the CWA. The Court's decision in Rapanos , split 4-1-4, yielded three different opinions. The four-Justice plurality decision, written by Justice Scalia, states that the dredge and fill provisions in the CWA apply only to wetlands connected to relatively permanent bodies of water (streams, rivers, lakes) by a continuous surface connection. Justice Kennedy, writing alone, demanded a "significant nexus" between a wetland and a traditional navigable water, using a case-by-case test that considers ecological connection. Justice Stevens, for the four dissenters, would have upheld the existing reach of Corps/EPA regulations. In response to the rulings, the agencies developed guidance in 2003 and 2008 to help clarify how EPA regions and Corps districts should implement the Court's decisions. This guidance identified categories of waters that remained jurisdictional or not jurisdictional and required a case-specific analysis to determine whether jurisdiction applies. The guidance did not resolve all interpretive questions, and diverse stakeholders requested a formal rulemaking to revise the existing rules. Accordingly, the Corps and EPA proposed a rule in April 2014 defining the scope of waters protected under the CWA. On June 29, 2015, the Corps and EPA finalized the rule—known as the Clean Water Rule or WOTUS rule. It reflects over 1 million public comments on the 2014 proposed rule as well as input provided through public outreach efforts that included over 400 meetings with diverse stakeholders. Brief Overview of the 2015 Clean Water Rule The 2015 Clean Water Rule retained much of the structure of the agencies' prior definition of WOTUS. It focused on clarifying the regulatory status of waters with ambiguous jurisdictional status following the Supreme Court's rulings, including isolated waters and streams that flow only part of the year and nearby wetlands. As explained in the 2015 Clean Water Rule's preamble, the Corps and EPA used Justice Kennedy's "significant nexus" standard in developing the rule as well as the plurality opinion (written by Justice Scalia) in establishing boundaries on the scope of jurisdiction. The 2015 Clean Water Rule identified categories of waters that are and are not jurisdictional as well as waters that require a case-specific evaluation (see Figure 1 ). Broad categories under the final rule include the following: Jurisdictional by rule in all cases . Traditional navigable waters, interstate waters, the territorial seas, and impoundments of these waters are jurisdictional by rule. All of these waters were also jurisdictional under pre-2015 rules. Jurisdictional by rule, as defined . Two additional categories—tributaries and adjacent waters—are jurisdictional by rule if they meet definitions established in the 2015 Clean Water Rule. According to the rule's preamble, the definitions ensure that the rule covers waters that meet the significant nexus standard. Tributaries, under pre-2015 rules, were jurisdictional by rule without qualification but lacked a regulatory definition. The 2015 Clean Water Rule newly defined tributaries . Tributaries that meet the new definition are jurisdictional by rule. Similarly, "adjacent waters"—including wetlands, ponds, lakes, oxbows, impoundments, and similar waters that are adjacent to traditional navigable waters, interstate waters, the territorial seas, jurisdictional tributaries, or impoundments of these waters—are jurisdictional by the 2015 Clean Water Rule if they meet the rule's established definition. Under the 2015 Clean Water Rule, adjacent means "bordering, contiguous, or neighboring" one of the aforementioned waters. The rule established a definition of neighboring that set new limits for the purposes of determining adjacency. Neighboring is defined to include waters (1) located within 100 feet of the ordinary high water mark (OHWM) of a traditional navigable water, interstate water, the territorial seas, jurisdictional tributary, or impoundment of these waters; (2) located in the 100-year floodplain and within 1,500 feet of the OHWM of a traditional navigable water, interstate water, the territorial seas, jurisdictional tributary, or impoundment of these waters; or (3) located within 1,500 feet of the high tide line of a traditional navigable water or the territorial seas and waters located within 1,500 feet of the OHWM of the Great Lakes. Under pre-2015 rules, adjacent was defined to mean "bordering, contiguous, or neighboring" and did not include specific limits on "neighboring." Waters requiring a case-specific evaluation . Some types of waters—but fewer than under practices used prior to the 2015 Clean Water Rule—would remain subject to a case-specific evaluation of whether or not they meet the standards for federal jurisdiction. This case-specific evaluation examines whether the water has a significant nexus to traditional navigable waters, interstate waters or wetlands, or the territorial seas. Similarly situated waters (i.e., prairie potholes, Carolina bays and Delmarva bays, pocosins, western vernal pools, and Texas coastal prairie wetlands) are combined for the purposes of a significant nexus analysis. In addition, the 2015 Clean Water Rule provides that two other categories of waters are subject to case-specific significant nexus analysis: (1) waters within the 100-year floodplain of a traditional navigable water, interstate water, or the territorial seas; and (2) waters within 4,000 feet of the high tide line or the OHWM of a traditional navigable water, interstate water, the territorial seas, impoundments, or jurisdictional tributary. Exclusions . Certain waters would be excluded from CWA jurisdiction. Some were restated exclusions under pre-2015 rules (e.g., prior converted cropland). Some have been excluded by practice and would be expressly excluded by rule for the first time (e.g., groundwater and some ditches). Some were new in the final rule (e.g., stormwater management systems). The 2015 Clean Water Rule did not affect existing statutory exclusions—that is, exemptions for existing "normal farming, silviculture, and ranching activities" and for maintenance of drainage ditches (CWA §404(f)) as well as for agricultural stormwater discharges and irrigation return flows (CWA §402(l) and CWA §502(14)). Issues and Controversy Much of the controversy since the Supreme Court's rulings has centered on instances that have required CWA permit applicants to seek a case-specific analysis to determine if CWA jurisdiction applies to their activity. The Corps and EPA's stated intention in promulgating the Clean Water Rule was to clarify questions of CWA jurisdiction in view of the rulings while also reflecting their scientific and technical expertise. Specifically, they sought to articulate categories of waters that are and are not protected by the CWA, thus limiting the water types that require case-specific analysis. Industries that are the primary applicants for CWA permits and agriculture groups raised concerns over how broadly the 2014 proposed rule would be interpreted. They contended that the proposed definitions were ambiguous and would enable agencies to assert broader CWA jurisdiction than is consistent with law and science. The final 2015 Clean Water Rule added and defined key terms, such as tributary and significant nexus , and modified the proposal in an effort to improve clarity, but the concerns remained. Some local governments that own and maintain public infrastructure also criticized the 2014 proposed rule. They argued that it could increase the number of locally owned ditches under federal jurisdiction because it would define some ditches as WOTUS under certain conditions. Corps and EPA officials asserted that the proposed exclusion of most ditches would decrease federal jurisdiction, but the issue remained controversial. The final 2015 Clean Water Rule excluded most ditches and expressly excluded stormwater management systems and structures from jurisdiction. Some states supported a rule to clarify the scope of CWA jurisdiction, but there was no consensus on the 2014 proposed rule or the final 2015 Clean Water Rule. Many states asserted that the changes would too broadly expand federal jurisdiction, some believed that the agencies did not adequately consult with states, and some were largely supportive. Environmental groups generally supported the agencies' efforts to protect waters and reduce uncertainty. Still, some argued that the scope of the 2014 proposed rule should be further expanded—for example, by designating additional categories of waters and wetlands (e.g., prairie potholes) as categorically jurisdictional. The final 2015 Clean Water Rule did not do so. Instead, such waters would require case-specific analysis to determine if jurisdiction applies. Corps and EPA officials under the Obama Administration defended the 2014 proposed rule but acknowledged that it raised questions they believed the final 2015 Clean Water Rule clarified. In their view, the 2015 Clean Water Rule did not protect any new types of waters that were not protected historically, did not exceed the CWA's authority, and would not enlarge jurisdiction beyond what is consistent with the Supreme Court's rulings as well as scientific understanding of significant connections between small and ephemeral streams and downstream waters. The agencies asserted that they had addressed criticisms of the 2014 proposed rule by, for example, defining tributaries more clearly, setting maximum distances from jurisdictional waters for the purposes of defining neighboring waters , and modifying the definition of WOTUS to make it clear that the rule preserves agricultural exclusions and exemptions. Issuance of the final 2015 Clean Water Rule did not diminish concerns amongst stakeholders. Many groups contended that the rule did not provide needed clarity, that its expansive definitions made it difficult to identify any waters that would fall outside the boundary distances established in the rule, and that the threshold for determining "significant nexus" was set so low that virtually any water could be found to be jurisdictional. The 2015 Clean Water Rule would impose costs, critics said, but have little or no environmental benefit. Environmental groups were supportive but also faulted parts of the final rule. Some environmental groups believed the rule reduced the jurisdictional reach of the CWA and rolled back protections for certain waters, including minor tributaries and some ephemeral aquatic habitats. Current Status of the 2015 Clean Water Rule Currently, the 2015 Clean Water Rule is in effect in 22 states and enjoined in 28 states (see Figure 2 ). In states where the 2015 Clean Water Rule is enjoined, regulations promulgated by the Corps and EPA in 1986 and 1988, respectively, are in effect. Since the 2015 Clean Water Rule was finalized, its implementation has been influenced both by the courts and administrative actions. Court Actions Following issuance of the 2015 Clean Water Rule, industry groups, more than half the states, and several environmental groups filed lawsuits challenging the rule in multiple federal district and appeals courts. By the time the 2015 Clean Water Rule entered into effect (August 28, 2015), a district court had already prevented its enforcement in 13 states. Specifically, on August 27, 2015, the U.S. District Court for the District of North Dakota issued a preliminary injunction on the 2015 Clean Water Rule in the 13 states challenging the rule in that court. In October 2015, the U.S. Court of Appeals for the Sixth Circuit ordered a nationwide stay of the 2015 Clean Water Rule and later ruled (in February 2016) that it had jurisdiction to hear consolidated challenges to the rule. However, in January 2018, the Supreme Court unanimously held that federal district courts, rather than appellate courts, are the proper forum for filing challenges to the 2015 Clean Water Rule. Accordingly, on February 28, 2018, the appeals court vacated its nationwide stay. On November 22, 2017, the Corps and EPA proposed to add an "applicability date" to the 2015 Clean Water Rule. The agencies finalized this rule on February 6, 2018, effectively delaying the implementation of the 2015 Clean Water Rule until February 6, 2020. According to the preamble of the 2018 Applicability Date Rule, the agencies' intention in adding an applicability date to the 2015 Clean Water Rule was to maintain the legal status quo and provide clarity and certainty for regulated entities, states, tribes, agency staff, and the public regarding the definition of waters of the United States while the agencies work on revising the 2015 Clean Water Rule. Environmental groups and states immediately filed lawsuits challenging the 2018 Applicability Date Rule, asserting that it violated the Administrative Procedures Act. On August 16, 2018, the U.S. District Court for the District of South Carolina issued a nationwide injunction of the rule. As a result, the 2015 Clean Water Rule went into effect in the states where injunctions had not been issued. During the period between when the 2018 Applicability Date Rule was finalized and the district court issued a nationwide injunction of that rule, the U.S. District Court for the Southern District of Georgia enjoined the 2015 Clean Water Rule in 11 states. Since that time, two additional court actions have enjoined the 2015 Clean Water Rule in four additional states. The U.S. District Court for the Southern District of Texas enjoined the 2015 Clean Water Rule in three states on September 11, 2018. On September 18, 2018, the U.S. District Court for the District of North Dakota granted a request from the Governor of Iowa to clarify that the preliminary injunction applied to Iowa. Accordingly, the 2015 Clean Water Rule is currently in effect in 22 states and enjoined in 28 states. (See Figure 3 for a timeline of actions.) Administrative Actions The Administration has also taken steps to rescind and revise the 2015 Clean Water Rule. On February 28, 2017, President Trump issued an executive order directing the Corps and EPA to review and rescind or revise the rule and to consider interpreting the term navigable waters as defined in the CWA in a manner consistent with Justice Scalia's opinion in Rapanos . On July 27, 2017, the agencies proposed a rule that would "initiate the first step in a comprehensive, two-step process intended to review and revise the definition of 'waters of the United States' consistent with the Executive Order." The first step proposes to rescind the 2015 Clean Water Rule and re-codify the regulatory definition of WOTUS as it existed prior to the rule. On July 12, 2018, the Corps and EPA published a supplemental notice of proposed rulemaking to clarify, supplement, and seek additional comment on the agencies' proposed repeal. The public comment period closed on August 13, 2018. The agencies have not yet issued a final step-one rule. On December 11, 2018, the Corps and EPA announced a proposed step-two rule that would revise the definition of WOTUS. The EPA press release states that the proposal is intended to clarify federal authority under the CWA and more clearly define "the difference between federally protected waterways and state protected waterways." Actions in the 115th Congress Considering the numerous court rulings, ongoing legal challenges, and issues that Administrations have faced in defining the scope of WOTUS, some stakeholders have urged Congress to define WOTUS through amendments to the CWA. In the 115 th Congress, Members of Congress have shown continued interest in the 2015 Clean Water Rule and the scope of WOTUS. Some Members have introduced the following free-standing legislation and provisions within appropriations bills that would repeal the 2015 Clean Water Rule, allow the Corps and EPA to withdraw the rule without regard to the Administrative Procedures Act, or amend the CWA to add a narrower definition of navigable waters . H.R. 1105 would repeal the 2015 Clean Water Rule. H.R. 1261 would nullify the 2015 Clean Water Rule and amend the CWA by changing the definition of navigable waters . The language, as proposed, would narrow the scope of waters subject to CWA jurisdiction. H.R. 7194 would repeal the 2015 Clean Water Rule and amend the CWA by changing the definition of navigable waters . The language, as proposed, would narrow the scope of waters subject to CWA jurisdiction. H.Res. 152 and S.Res. 12 would express the sense of the House and Senate, respectively, that the 2015 Clean Water Rule should be withdrawn or vacated. H.R. 2 (the farm bill) included an amendment ( H.Amdt. 633 ) in the House-passed version that would repeal the 2015 Clean Water Rule. However, the Senate-passed version did not include that provision. The conference report—as released on December 11, 2018, and agreed to in the Senate—did not contain a provision to repeal the 2015 Clean Water Rule. H.R. 6147 —the Interior, Environment, Financial Services and General Government, Agriculture, Rural Development, Food and Drug Administration, and Transportation, Housing and Urban Development Appropriations Act of 2019—includes a provision in the House-passed version that would repeal the 2015 Clean Water Rule. However, the Senate-passed version does not include that provision. On September 6, 2018, the Senate agreed to the House's request for a conference to reconcile differences on H.R. 6147 . The House-passed version of H.R. 5895 —the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019—included a provision that would have repealed the 2015 Clean Water Rule. However the Senate-passed version and enacted public law ( P.L. 115-244 ) did not include that provision. Two House-passed appropriations bills ( H.R. 3219 , Make America Secure Appropriations Act, 2018, and H.R. 3354 , Interior and Environment, Agriculture and Rural Development, Commerce, Justice, Science, Financial Services and General Government, Homeland Security, Labor, Health and Human Services, Education, State and Foreign Operations, Transportation, Housing and Urban Development, Defense, Military Construction and Veterans Affairs, Legislative Branch, and Energy and Water Development Appropriations Act, 2018) contain provisions that would have authorized withdrawal of the 2015 Clean Water Rule "without regard to any provision of statute or regulation that established a requirement for such withdrawal" (e.g., the Administrative Procedures Act). Conclusion For several decades, Administrations have struggled to interpret the term navigable waters for the purpose of implementing various requirements of the CWA, and courts have been asked repeatedly to weigh in on those interpretations as manifest in regulations and policy. Stakeholders have asked the various Administrations and the courts to resolve issues involving scope, clarity, consistency, and predictability. Some stakeholders assert that the scope of waters under federal jurisdiction is overly broad, infringing on the rights of property owners, farmers, and others. Other stakeholders argue that the scope of federally protected waters is too narrow, leaving some hydrologically connected waters and aquatic habitats unprotected. The regulations the Corps, EPA, and states are currently using to determine which waters are protected under the CWA vary across the United States. The jurisdictional scope as laid out in the 2015 Clean Water Rule is in effect in 22 states, while the jurisdictional scope laid out in regulations from the late 1980s is in effect in 28 states. Actions from the courts, the Administration, and Congress all have the potential to continue to alter the scope of federal jurisdiction under the CWA. Some observers argue that the term navigable waters , defined under the act as WOTUS, is too vague and should be addressed by Congress or the courts. Others argue that the Corps and EPA, with their specific knowledge and expertise, are in the best position to determine the scope of the term.

The Clean Water Act (CWA) is the principal federal law governing pollution of the nation's surface waters. The statute protects "navigable waters," which it defines as "the waters of the United States, including the territorial seas." The scope of the term waters of the United States, or WOTUS, is not defined in the CWA. Thus, the Army Corps of Engineers and U.S. Environmental Protection Agency (EPA) have defined the term in regulations several times as part of their implementation of the act. Two Supreme Court rulings (Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers and Rapanos v. United States), issued in 2001 and 2006 (respectively), interpreted the scope of the CWA more narrowly than EPA and the Corps had done previously in regulations and guidance. However, the rulings also created uncertainty about the intended scope of waters that are protected by the CWA. In 2014, the Corps and EPA proposed revisions to the existing 1980s regulations in light of these rulings. After reviewing over 1 million public comments and holding over 400 meetings with diverse stakeholders, the Corps and EPA issued a final rule in June 2015. The final rule—the Clean Water Rule—focused on clarifying the regulatory status of waters with ambiguous jurisdictional status following the Supreme Court rulings, including isolated waters and streams that flow only part of the year and nearby wetlands. Since the Clean Water Rule was finalized in 2015, its implementation has been influenced both by the courts and administrative actions. Following issuance of the 2015 Clean Water Rule, industry groups, more than half the states, and several environmental groups filed lawsuits challenging the rule in multiple federal district and appeals courts. A federal appeals court ordered a nationwide stay of the 2015 Clean Water Rule in October 2015 and later ruled that it had jurisdiction to hear consolidated challenges to the rule. In January 2018, the Supreme Court unanimously held that federal district courts, rather than appellate courts, are the proper forum for filing challenges to the 2015 Clean Water Rule. As a result, the appeals court vacated its nationwide stay. Three district courts have issued preliminary injunctions on the 2015 Clean Water Rule effective in the states challenging the rule in those courts. Accordingly, the 2015 Clean Water Rule is currently enjoined in 28 states and in effect in 22 states. In states where the 2015 Clean Water Rule is enjoined, regulations promulgated by the Corps and EPA in 1986 and 1988, respectively, are in effect. The Trump Administration has taken actions to delay implementation of the 2015 Clean Water Rule and rescind and replace it: In February 2018, the Corps and EPA published a rule that added an "applicability date" to the 2015 Clean Water Rule delaying implementation until February 2020. However, environmental groups and states filed lawsuits challenging the 2018 Applicability Date Rule, and in August 2018, a district court issued a nationwide injunction. The Trump Administration has also taken steps to rescind and replace the 2015 Clean Water Rule. In February 2017, President Trump issued Executive Order 13778 directing the Corps and EPA to review and rescind or revise the rule and to consider interpreting the term navigable waters in a manner consistent with Justice Scalia's opinion in Rapanos, which proposed a narrower test for determining WOTUS. In July 2017, the Corps and EPA published a proposed rule that would "initiate the first step in a comprehensive, two-step process intended to review and revise the definition of 'waters of the United States' consistent with the Executive Order." The proposed step-one rule would rescind the 2015 Clean Water Rule and re-codify the regulatory definition of WOTUS as it existed prior to the rule. In July 2018, the agencies published a supplemental notice of proposed rulemaking to solicit comment on additional considerations supporting the agencies' proposed repeal. A final step-one rule has not been issued. On December 11, 2018, the Corps and EPA announced a proposed step-two rule that would revise the definition of WOTUS. In the 115th Congress, some Members have introduced free-standing legislation and provisions within appropriations bills that would either repeal the 2015 Clean Water Rule, allow the Corps and EPA to withdraw the rule without regard to the Administrative Procedures Act, or amend the definition of navigable waters in the CWA. Two bills—H.R. 2 and H.R. 6147—have each passed the House and Senate in different forms. The House-passed versions of both bills would repeal the 2015 Clean Water Rule, while the Senate-passed versions of both bills do not include such provisions. The conference report for H.R. 2, released on December 11, 2018, did not include a provision to repeal the 2015 Clean Water Rule.

Introduction Background Public diplomacy is the promotion of America's interests, culture, and policies by informingand influencing foreign populations. From 1977 to the 1990s, all functions of State's Bureau ofEducational and Cultural Affairs and the USIA's international information and broadcasting activitiesmerged to become the International Communication Agency (ICA). Subsequently, in 1982, Section303(b) of P.L. 97-241 renamed ICA to be the U.S. Information Agency (USIA). In 1994, theinternational broadcasting activities were consolidated by Title III, P.L. 103-236 and administeredby a new entity referred to as the Broadcasting Board of Governors. As of October 1, 1999, USIAwas abolished and its functions were merged back into the Department of State. Currently, public diplomacy primarily consists of three categories of activities: (1)international information programs, (2) educational and cultural exchange programs, and (3)international nonmilitary broadcasting. The Under Secretary of State for Public Diplomacy andPublic Affairs administers the Bureau for International Information Programs and the Bureau forEducational and Cultural Affairs, while the Broadcasting Board of Governors manages and overseesinternational broadcasting. Other public diplomacy efforts involve the White House, the U.S.Agency for International Development (USAID), and the Department of Defense (DOD). After the abolishment of the United States Information Agency (USIA) in 1999 and theterrorist attacks two years later, the U.S. government expedited implementation of public diplomacyto help win its war on terrorism. Some observers noted as evidence that the Administration was newat conducting public diplomacy when immediately after 9/11 it referred to the U.S. response as"Operation Enduring Crusade," a name that experts pointed out could be viewed by Muslims asinflammatory." (1) Over the past four years, the Bush Administration has taken numerous actions to improve theeffectiveness of its public diplomacy. For example, in November 2001, two months after theterrorist attacks, the Bush Administration created the Coalition Information Center (CIC)headquartered in the Old Executive Office Building. The CIC, which was touted by theAdministration as public diplomacy, coordinated U.S. government agency press conferences andtalking points, dispersing them rapidly and around-the-clock worldwide. Soon thereafter, thePresident created, by Executive Order, the Office of Global Communications (OGC), which replacedthe CIC with a primary mission to "coordinate strategic communications with globalaudiences." (2) Also,then-National Security Advisor Condoleeza Rice established a Strategic Communication PolicyCoordinating Committee (PCC) in September 2002. The PCC mission was to coordinateinteragency activities, develop the White House message, and disseminate it abroad. More recently, the President created the Muslim World Outreach Policy CoordinatingCommittee in July 2004 which replaced the Strategic Communications Policy CoordinatingCommittee. The State Department also established an Office of Policy, Planning, and Resources inthe Office of the Under Secretary for Public Diplomacy and Public Affairs. Informally in 2002 and officially in 2003, the Pentagon created the Office of StrategicInfluence (OSI) to oversee military propaganda and other information related to the war on terrorism. The Secretary of Defense dissolved OSI after press coverage claimed the Office was to placedisinformation deliberately in foreign media. In October 2003, the Department of Defense issued Information Operations Roadmap which involves the direction that DOD wants to take in publicdiplomacy and other information operations. DOD has appointed its Under Secretary of Defense forPolicy as the Defense point person for public diplomacy and will be continuing to define DOD's rolein public diplomacy. USAID became more involved in public diplomacy after the 9/11 Commission reported toCongress that some of the largest recipients of U.S. foreign aid had very strong anti-Americansentiment among its population. Since 2004, USAID has acted to more prominently inform U.S.aid recipients that the aid they have received was a gift from American taxpayers. Also, byestablishing a State-USAID Policy Council and a Public Diplomacy Working Group, it hasestablished closer ties with the Department of State and embassies around the world to publicizeAmerica's humanitarian and development aid initiatives. The Public Diplomacy Matrix Since 1999, U.S. public diplomacy has been rigorously examined to determine whetherimproved methods, structure, and goals could help the United States win the war on terrorism. Thisreport reviews 29 articles and studies on public diplomacy that have been identified by theDepartment of State as being credible reports with valuable suggestions and compares therecommendations. These 29 documents, listed in reverse chronological order from 2005 to 1999 in AppendixA , vary in scope, depth, and purpose. Some focus on public diplomacy and include numerous,specific recommendations; others are more general in nature and deal with public diplomacy in thecontext of broader foreign policy issues. Some reports represent the consensus of a group of authors;others state the views of a series of individuals. For the purposes of this review, each document hasbeen given an abbreviation, for example, "PDC" for the Public Diplomacy Council, to make it easierto identify. Appendix B provides each report's specific recommendations. Following in Table 1 is a matrix indicating the major recommendations of all 29 reports.(Note, however, that the U.S. Institute of Peace (USIP1) report from 2003 did not have relevantrecommendations for this review.) The matrix lists 14 categories of recommendations that appearedmost frequently. A second matrix in Table 2 lists only those reports that include specificrecommendations concerning international broadcasting. A brief discussion of recommendationsimilarities and differences follows each matrix. Note that this discussion deals only with thecontent of the documents. An author or organization listed in the Appendix may have written onpublic diplomacy at an earlier or a later date, and the views expressed in a particular document maynot represent those of the organization that published the document. (For more detail on publicdiplomacy, in general, please see CRS Report RL32607 , U.S. Public Diplomacy: Background andthe 9/11 Commission Recommendations , by [author name scrubbed].) Table 1. Key Recommendations for Public Diplomacy Reform Note: See Table 2 for recommendations for international broadcasting reform. a. WP : Washington Post op-ed; PDC1 : Public Diplomacy Council 2005; PDC2 : Public Diplomacy Council 2004; ADV1 : U.S. AdvisoryCommissionon Public Diplomacy; DSB1 : Defense Science Board 2004; GAO1 : Government Accountability Office 2004; 911 : 9/11 Commission Report; NSFR : National Strategy Forum Review ; PDC3 : Public Diplomacy Council 2004; RAND : RAND Corporation; FPA : Foreign PolicyAssociation; KIE : Kiehl, William; DJE1 : Djerejian, Edward, October 7, 2003; DJE2 : Djerejian, Edward, October 2003; USIP1 : U.S. Institute of Peace 2003; GAO2 : Government Accountability Office 2003; CFR1 : Council on Foreign Relations 2003; HER1 : Heritage Foundation, May 2003; HER2 :Heritage Foundation, April 2003; ISD : Institute for the Study of Diplomacy; USIP2 : U.S. Institute of Peace 2002; BRO : Brown, John; CFR2 :Council on Foreign Relations 2002; PBS : Public Broadcasting Service; ADV2 : U.S. Advisory Commission on Public Diplomacy 2002; DSB2 :Defense Science Board 2001; NWC : National War College; CFR3 : Council on Foreign Relations 2001; HRC : Hart/Rudman Commission b. Public Diplomacy General Recommendation Comparisons From 1999 through 2005 numerous reports, articles, studies, and op-ed pieceshave been written touting the importance of public diplomacy as a foreign policy tooland focusing on how the United States government can improve its public diplomacyoperations to help win the war on terrorism. Among the many writings are the 29considered here. (See Appendix A for a reverse chronological list of the reportsincluded in this CRS review.) Define Overall Strategy Several reports suggest that the Administration has not sufficiently definedor verbalized an overall strategy for the use of public diplomacy to both improve theU.S. image around the world, but also counter the threat of terrorism againstAmericans. The 9/11 Commission Report states that the United States shouldidentify what it stands for and communicate that message clearly. Of the ten reportsthat recommend defining an overall strategy, the Government Accountability Office(GAO) reports that the United States needs to do a better job of defining its publicdiplomacy message, and that while the Broadcasting Board of Governors (BBG) doeshave a strategy for its broadcasting activities, the Department of State (DOS) does nothave an integrated strategy for its public diplomacy operations. GAO states that the"absence of an interagency strategy complicates the task of conveying consistentmessages." Furthermore, GAO offers that the Administration needs to define publicdiplomacy success and determine how it can be measured. The Advisory Group on Public Diplomacy for the Arab and Muslim Worldreport recommends that the White House establish strategic goals and oversee theimplementation of programs that meet those goals. The U.S. Advisory Commissionon Public Diplomacy study claims that the State Department lacks authority toimplement an overall strategy for the various agencies engaged in public diplomacyand recommends that the DOS Policy, Planning and Resources Office coordinate allpublic diplomacy efforts. The Heritage Foundation recommends that the U.S.government view public diplomacy as a long-term effort, saying that publicdiplomacy should be "enshrined in a doctrine that emphasizes consistent efforts." Themore recent Council on Foreign Relations report recommends rethinking how theUnited States formulates, strategizes, and communicates its foreign policy and should"move public diplomacy from the margins to the center of foreign policy making."The National War College report notes a "lack of strategic planning," and the earlierCouncil on Foreign Relations study says there is an absence of an overall strategyand recommends the Administration develop a coherent strategic and coordinatingframework for public diplomacy activities. Presidential Directive/Reorganize Public Diplomacy at the WhiteHouse Ten of the studies discuss the White House taking a more proactive role inpromoting public diplomacy, coordinating public diplomacy activities throughout theexecutive branch agencies, and reorganizing or initiating public diplomacy taskforces or coordinating committees at the White House. For example, reports by theDefense Science Board Task Force and the Council on Foreign Relations urge thePresident to issue a directive to strengthen the importance of communication andpublic diplomacy and coordinate all activities through the White House. TheHeritage Foundation also recommends that inter-agency coordination of publicdiplomacy activities be carried out through the White House. The Advisory Groupon Public Diplomacy for the Arab and Muslim World report recommends thePresident appoint a cabinet-level Special Counselor to the President for PublicDiplomacy. This person would, in consultation with the President and otheragencies, establish strategic goals and messages, and oversee the implementation ofprograms that meet those stated goals, the report suggests. Similar ideas are offeredby the Public Diplomacy Council which suggests that a cabinet level InteragencyCommittee on Public Diplomacy should be established by Presidential Directive,cochaired by the Deputy National Security Advisor for Communication and theDirector of a new U.S. Agency for Public Diplomacy (USAPD). Create a New Agency Several of the studies suggest that the existing public diplomacy structure atthe Department of State is not working. The Washington Post op-ed piece by Marks,Wick, Gelb, and Catto states that "shutting down the USIA was a major mistake,"a sentiment that has been expressed by others in recent years. (3) The op-edpiece goes on to say that public diplomacy is not very effective under DOS and "there-creation of an effective instrument of public diplomacy has been urged by many." Other reports propose establishing an entirely new agency to have primaryresponsibility for U.S. public diplomacy activities and coordination with othergovernment entities. The Council on Foreign Relations recommends establishing aCorporation for Public Diplomacy to be modeled after the Corporation for PublicBroadcasting. The Public Diplomacy Council suggests establishing an agency, theU.S. Agency for Public Diplomacy (USAPD), within the Department of State and theNational Security process. The Defense Science Board reports that the Presidentshould establish a permanent strategic communications structure within the NationalSecurity Council (NSC). That report goes on to state that "the President should workwith Congress to establish and fund a non-profit, non-partisan Center for StrategicCommunication to support the NSC, departments, and organizations represented ona newly-recommended Strategic Communication Committee." Reorganize Public Diplomacy at the Department of State Since the 1999 elimination of the USIA, numerous experts and observershave critiqued how the Department of State has conducted public diplomacy. According to the GAO, public diplomacy activities at State are fragmented amongvarious organizational entities within the Department, with insufficient directionfrom the top. Many of the studies here agree that public diplomacy in theDepartment of State could be working better, but there are differing views as to howDOS should improve it. The 2002 U.S. Advisory Commission on Public Diplomacy report says thereshould be a review of the 1999 consolidation of USIA into State with the Secretaryof State making recommendations on new training, location, and reporting structureof public diplomacy personnel at the Department. The Defense Science Board's 2004report recommends redefining the role of the Under Secretary of State for PublicDiplomacy to be policy advisor and manager. Furthermore, it suggests raising thepublic diplomacy office Directors to the level of Deputy Assistant Secretary or SeniorAdvisor to the Assistant Secretary. The report urges DOS to strengthen the Bureauof International Information Programs (IIP) with an Assistant Secretary and modernize and diversify its products. The Heritage Foundation suggests restoring the independent reporting andbudget channels that public diplomacy lost during the USIA merger and recreatinga public diplomacy hierarchy within the Department of State as previously existedat USIA. Another suggestion by author William Kiehl proposes creating a new publicdiplomacy organization within the State Department, including a new Bureau ofPublic Diplomacy Operations. Also, he writes, "regional bureaus must include seniorpublic diplomacy officers at least at the Deputy Assistant Secretary level." The Hart/Rudman Commission recommends repealing laws that establish anUnder Secretary for Public Diplomacy and having some of those functions migrateto an Assistant Secretary level official reporting directly to the Secretary of State. Other functions could be folded into the Assistant Secretary for Economic andTransnational Affairs, according to the Commission. Overhauling the ForeignService system, including ending the oral exam's policy so that applicants could bebetter matched to particular cones, like public diplomacy, would be beneficial, theCommission asserts. Beyond reorganizing public diplomacy at State, several of the reports referto the need for a new "culture" at State: seeking to change the perception that publicdiplomacy personnel are second class citizens in the Department; recruiting andhiring practices that would encourage public diplomacy skills to be highly valued;and a "much more open approach in which innovation trumps the caution," accordingto the National War College report. Redefine the Role of the Under Secretary of State for PublicDiplomacy Six of the studies refer to the need for redefining the role of the UnderSecretary of State for Public Diplomacy. Most call for strengthening the role, thechain of authority leading to the Under Secretary, and the authority to make decisionsregarding public diplomacy funding, policy, personnel, and direction. In contrast, theHart/Rudman Commission recommends repealing the laws establishing an UnderSecretary for Public Diplomacy and having some of those functions migrate to anAssistant Secretary-level officer reporting directly to the Secretary of State. Otherpublic diplomacy functions should become the responsibility of the AssistantSecretary for Economic and Transnational Affairs, the Commission said. Increase Embassy Involvement Several reports speak of a need to increase embassy involvement in publicdiplomacy activities. Suggestions include expanding U.S. diplomats' personalcontacts in the host country, sending the message from the top tiers of theAdministration and the Department of State that public diplomacy is central to U.S.foreign policy, and requiring at least one tour in a public diplomacy assignment forForeign Service Officers to be promoted to Senior Foreign Service Officers or Chiefof Mission. Another suggestion involves embassies maintaining networks ofindividuals (such as former Peace Corps volunteers, exchange students, and retiredForeign Service Officers) who could be tapped to help portray America in the bestlight. Coordination Several studies suggest a lack of coordination of U.S. government publicdiplomacy activities by the White House and within the Department of State. TheU.S. Advisory Commission on Public Diplomacy notes that there have been attemptsto improve coordination, citing the January 2003 creation of the Office of GlobalCommunications within the White House, as well as the September 2002 formationof the Strategic Communication Policy Coordination Committee and the December2002 interagency Strategic Communications Fusion Team. Nevertheless,coordination is still inadequate, according to several of the reports. Recommendations on improving government coordination of public diplomacy entities and programs include (1) the Advisory Commission on Public Diplomacy suggests assigning the StateDepartment's Office of Policy, Planning, and Resources with the responsibility foroverseeing the strategic planning of all public diplomacy programming andresources; (2) the Heritage Foundation seeks better coordination through the White House,specifically through the Office of Global Communications; (3) the Public Diplomacy Council recommends that a new U.S. Agency for PublicDiplomacy be responsible for coordinating all U.S. government public diplomacyefforts and establish an Interagency Committee on PD at the Cabinet level tocoordinate and direct the national PD strategy; (4) the Council on Foreign Relations recommends that a coherent strategic andcoordinating framework for public diplomacy be developed, including a presidentialdirective on public diplomacy and a Public Diplomacy Coordinating Structure led bythe president's personal designee; (5) the Advisory Group on Public Diplomacy for the Arab and Muslim World advisesa strengthening of the role of the Under Secretary for Public Diplomacy to coordinategovernment-wide public diplomacy activities, review country program plans withrespect to public diplomacy, allocate human and financial resources, and play a rolein performance evaluations. The Group asserts that strengthening the UnderSecretary's role is essential. Increase Financial and Human Resources About half of the reports state that public diplomacy resources are inadequateand call for increased monetary and human resources. The Council on ForeignRelations said that funding should be increased to "significantly higher levels" to bemore in line with public diplomacy's role as a vital component of U.S. foreign policyand national security. The Council put forth the idea of establishing a PublicDiplomacy Reserve Corps patterned after FEMA's disaster-relief model. The PublicDiplomacy Council specifically recommends a 300% increase in public diplomacy overseas staffing and a four-fold budget increase over five years. Some, such as theAdvisory Group on Public Diplomacy for the Arab and Muslim World, state thatadditional professional staff dedicated only to Arab and Muslim issues would bevaluable. Increase Public Diplomacy and/or Language Training Coupled with the view since 9/11 that public diplomacy is an essential toolin U.S. foreign policy and national security is the belief that all personnel involvedwith conducting U.S. foreign policy should be trained about the importance of publicdiplomacy and given skills needed to fully utilize public diplomacy effectively. TheCouncil on Foreign Relations states that there is a deficit of trained professionalsregarding public diplomacy. GAO suggests expanding public diplomacy and foreignlanguage training of Foreign Service Officers; the Council on Foreign Relationsoffers the idea of establishing an independent public diplomacy training institute; and the Advisory Group on Public Diplomacy for the Arab and Muslim Worldrecommends that all State Department personnel receive public diplomacy training. Taking that a step further, the Foreign Policy Association argues that "public affairsdiplomacy officers should be encouraged to develop language fluency and countryand regional expertise and should not be rotated among regions like other FSOs[Foreign Service Officers]." Increase Technology Use Most of the eight reports that speak about increased, more effective, andcreative uses of technology referred to use of the Internet. For example, the NationalWar College report states that there are "deficiencies in information technologies andthe mindsets needed to integrate new technologies into the conduct of diplomacy....State Department needs to learn how to leverage the Internet's capabilities andpotential in the conduct of diplomacy." In addition, some reports promote increasedsatellite broadcasting and more creative use of all available informationtechnologies. Increase Private Sector Involvement Some studies make the observation that the private sector has manyadvantages in getting things done quickly, being highly effective, and efficient ininfluencing people. By incorporating the best practices of the private sector in U.S.government public diplomacy activities, it is believed that public diplomacy can become a more valuable foreign policy tool. RAND suggested that "outsourcing"public diplomacy would put some distance between a "favorable message and anunfavorable messenger," and that identifying private sector talents could bemotivated through a competitive bidding process. Another idea comes from thePublic Diplomacy Council to create a public-private partnership "Foundation for theGlobal Future" to provide permanent off-budget funding for international exchangesconducted by civilian and military federal agencies. The U.S. Advisory Commissionon Public Diplomacy agrees with the Council on Foreign Relations about creating anindependent Corporation for Public Diplomacy. Additionally, the Commissionwould encourage overseas posts to explore local public-private partnerships, findways for visitor exchanges to take advantage of private sector generosity, anddevelop Internet and media programming that would utilize public/privatepartnerships. The Advisory Commission also proposes that private sectorcommunication consultants could become more involved in public diplomacy effortswith advertising, as well as entertainment programs, and that the academiccommunity could offer public diplomacy majors at American colleges anduniversities. GAO adds that the U.S. government could collaborate with the privatesector to develop optimal methods for measuring effectiveness of public diplomacyefforts. Improve Communication Improved and increased communication between the United States andforeign, particularly Arab and Muslim, populations was cited by a few of the studies. The Defense Science Board's 2004 report asserts that "nothing shapes U.S. policiesand global perceptions of U.S. foreign and national security objectives morepowerfully than the President's statements and actions, and those of senior officials." The Board suggests that the President communicate directly with overseas audiences. The 9/11 Commission Report recommends that the United States shouldidentify what it stands for and communicate that message clearly. The 9/11Commission observed that many foreign populations receive large amounts of aidfrom U.S. citizens and never know from where it came. The Council on Foreign Relations proposes a more customized, "two-way"dialogue, as contrasted to conventional one-way, "push-down" mass communication,including an "engagement" approach that involves listening, dialogue, and debate thatincreases the amount and the effectiveness of public opinion research. Furthermore,communication should foster increasingly meaningful relationships between U.S.government, foreign publics, and foreign journalists. The Council says the U.S.government should: support voices of moderation, especially among the young;identify and develop indigenous talent; and craft messages highlighting culturaloverlaps between American values and those of the rest of the world. The RAND study encourages finding different ways of promoting two-waycommunication, such as call-in talk shows, live interaction among different elementsof an audience, and broadcasting debates, rather than offering monologues. TheAdvisory Group on Public Diplomacy for the Arab and Muslim World proposesestablishing an Arab and Muslim Countries Public Communications Unit under thedirection of the Under Secretary for Public Diplomacy to work closely with theOffice of Global Communications and coordinate U.S. government media outreachto Arab and Muslim populations and promote a 'rapid response' team to react andcorrect inaccuracies and distortions in foreign media. Increase Exchanges and Libraries More than half of the 29 reports recommend expanding U.S. exchangeprograms and/or U.S. libraries overseas, making it the most common proposal amongthis group of reports. Some ideas for exchanges include expanding the U.S. Speakerand Specialist Program, expanding shorter duration exchange programs, creating American studies programs in local universities in Arab and Muslim populations,creating a public-private partnership, "Foundation for the Global Future," to providepermanent off-budget funding for international exchanges conducted by civilian andmilitary federal agencies, significantly broadening Middle East/U.S. exchangeprograms, and expanding exchanges to government officials and businessprofessionals. Several studies echoed recommendations to expand Americanoverseas libraries as well as the American Corners Program. (4) In addition,the Advisory Group on Public Diplomacy for the Arab and Muslim World proposesimplementing a new American Knowledge Library to translate the best Americanbooks and make them available to local libraries and universities. Increase Oversight A few of the studies recommend greater and continuous oversight of publicdiplomacy activities. One suggestion was for Congress to provide legislativeauthority for a quadrennial review of public diplomacy. Another would create a newcongressional committee structure with sustained oversight of all U.S. government public diplomacy programs and activities. Table 2. Key Recommendations for International Broadcasting a. PDC1 : Public Diplomacy Council 2005; ADV1 : U.S. Advisory Commission on Public Diplomacy 2004; GAO1 : Government Accountability Office2004; NSFR : National Strategy Forum Review; PDC3 : Public Diplomacy Council 2004; DJE2 : Djerejian, Edward, October 2003; HER1 :Heritage Foundation, May 2003; HER2 : Heritage Foundation, April 2003; USIP2 : U.S. Institute of Peace 2002; CFR2 : Council on ForeignRelations 2002; PBS : Public Broadcasting Service b. Broadcasting Board of Governors Broadcasting Recommendation Comparisons Of the 29 reports and articles, 11 offer recommendations specifically for U.S.government international broadcasting. Recommendations range from havingstrategic objectives to reorganizing the broadcasting entities to increasing resourcesand using more technologies to focusing on combating jamming. (See Table 2.) Define Overall Objectives GAO, the Public Diplomacy Council (PDC), and the PBS News Hourbroadcast suggest the need for the Broadcasting Board of Governors (BBG) to betterdefine its overall objectives and strategy of obtaining the objectives. The 2002 PBSbroadcast states that there is no grand strategy or coordinated approach of U.S.broadcasting with other public diplomacy activities. GAO's 2004 report states thatwhile the BBG does have a strategic plan and has made progress in some measuringof its progress, the BBG has not defined a plan to adequately measure audience sizeor its programming credibility overseas. The PDC's January 2005 report urges the"Administration and Congress to take a hard look at how international broadcastingis managed to serve broad U.S. public diplomacy goals and the American taxpayerand integrate broadcasting more closely with other public diplomacy tools." ThePDC believes that international broadcasting should be more closely integrated withother elements of strategic communication. Reorganize Broadcasting Although the U.S. government international broadcasting structure wasreorganized in 1994, some reports recommend reorganizing U.S. internationalbroadcasting again. The U.S. Institute of Peace states that, "the current array of USgovernment broadcasting services is duplicative, expensive, and evencounterproductive." The Heritage Foundation's May 2003 report asserts that internationalbroadcasting has "lapsed into a jumble of duplicative efforts, led by a part time Boardof Governors." Reorganizing broadcasting would make it more streamlined andmore efficient, the report claims. Furthermore, according to Heritage, revitalizing theVoice of America's resources and program content is in order as VOA has beenneglected while Middle East programing has "proliferated in a confusing array." The Council on Foreign Relations (July 30, 2002) "supports an independentand well-qualified broadcasting board with a full-time, top-caliber Chief ExecutiveOfficer who would report to the current BBG and be empowered to direct andsupervise all U.S. nonmilitary international broadcasting activities. Furthermore, theDepartment of State and the BBG should strengthen the Secretary of State's role inproviding information and guidance on foreign policy to the BBG by clarifying andspecifying the Secretary's role in making decisions on broadcast languages and otherforeign policy matters." Develop Rapid Response to Anti-American Messages The Advisory Group for the Arab and Muslim World proposes that U.S.government media should reach out to Arab and Muslim populations and promotea 'rapid response' team to react and correct inaccuracies and distortions in foreignmedia. Bring Broadcasting Board of Governors under White House The Advisory Group for the Arab and Muslim World states that about halfof the fund for public diplomacy goes for international broadcasting. The Groupbelieves that U.S. government international broadcasting should be brought under thestrategic direction of their proposed new Special Counselor to the President, saying"[broadcasting] must be part of the public diplomacy process, not marching to itsown drummer with its own goals and strategy, sources of funding and board." Special Attention to Arab/Muslim Populations Five reports provide various proposals regarding additional broadcasting toArab and Muslim populations. As previously mentioned, the Heritage Foundationargues that the various Middle East surrogate broadcasting entities such as RadioSawa and Al Hurra TV have distracted the BBG from properly maintaining VOAresources and programming. The Advisory Group for the Arab and Muslim Worldrecommends a thorough independent review of the Middle East Television Network,saying that there is a high level of skepticism in the Middle East region aboutstate-owned television of any sort. The Group suggests that paring up with privatesector programming might be more effective. The U.S. Advisory Commission onPublic Diplomacy recommends expanding communication with Arab press bycreating a network of 24-hour message dissemination and monitoring centers. ThePublic Diplomacy Forum (February 2004) held a panel discussion on Middle Eastbroadcasting. One panelist referred to Radio and Al Hurra TV as being state-run, andtherefore, less successful with Middle East audiences. The panelist said that, "theArab public is interested in American programming, but they are not necessarilyinterested in programming that is under tight U.S. government direction." Anotherpanelist said that "there is no market waiting for Al Hurra's message." The thirdpanelist strongly disagreed and said that "the United States should have started RadioSawa and Al Hurra a long time ago." Other reports generally support ongoing Middle East broadcasting or thinkmore resources and expanded programming to Muslim and Arab populations shouldbe forthcoming. More Resources As with public diplomacy, most reports that addressed resources urged agreater long-term monetary commitment for international broadcasting. Reachinglarger audiences and improving the ability to measure impact are two primary needsfor additional broadcast funding. New Technologies International broadcasting is one area of foreign policy that can make use ofnew technologies to become more effective. The Advisory Commission on PublicDiplomacy encourages the BBG to look for better software to improve broadcasting'sreach to foreign audiences over the Internet. The Commission suggests theeducational programs teaching the English language or American culture might beuseful. Also, the Commission recommends that satellite television programs can befurther developed to increase local language programming available via satellite TV. The Public Diplomacy Council recommends more innovative broadcasting, Internetprograms for youth, and interactive radio programming. Combat Jamming The Advisory Commission on Public Diplomacy notes that there are someareas of the world such as North Korea, China and Cuba where the United States hasdifficulty reaching audiences because of local government jamming. TheCommission notes that technologies such as the Internet and direct broadcast satellitehave made it more difficult, but not impossible, for governments to block Americanprogramming from their citizens. The Commission urges the BBG to continue todevelop new methods to combat jamming. Appendix A -- Reports (WP) Leonard H. Marks, Charles Z. Wick, Bruce Gelb and Henry E. Catto. "America Needs a Voice Abroad," Washington Post, February 26, 2005. http://www.washingtonpost.com/wp-dyn/articles/A54764-2005Feb25.html (PDC1) Public Diplomacy Council. Call for Action on Public Diplomacy . January2005. http://pdi.gwu.edu/merlin-cgi/p/downloadFile/d/7536/n/off/other/1/name/ACALLFORACTIONONPUBLICDIPLOMACY01-2005prin/ (PDC2) Public Diplomacy Council. "Transformation Not Restoration." Statementof Dissent to Call for Action on Public Diplomacy . January 2005. http://pdi.gwu.edu/merlin-cgi/p/downloadFile/d/7537/n/off/other/1/name/Dissent_12-21-04pdf/ (ADV1) United States Advisory Commission on Public Diplomacy. 2004 Reportof the United States Advisory Commission on Public Diplomacy . September 28,2004. http://www.state.gov/r/adcompd/rls/36275.htm (DSB1) Defense Science Board. Report of the Defense Science Board Task Forceon Strategic Communication . September 2004. http://www.acq.osd.mil/dsb/reports/2004-09-Strategic_Communication.pdf (GAO1) U.S. Government Accountability Office. U.S. Public Diplomacy: StateDepartment and Broadcasting Board of Governors Expand Post-9/11 Efforts butChallenges Remain . GAO-04-1061T. August 23, 2004. http://www.gao.gov/new.items/d041061t.pdf (911) National Commission on Terrorist Attacks Upon the United States. The 9/11Commission Report . July 22, 2004. http://www.gpoaccess.gov/911/index.html (NSFR) Walter R. Roberts and Barry Fulton. "Rebuilding Public Diplomacy." National Strategy Forum Review . Spring 2004. http://ics.leeds.ac.uk/papers/vp01.cfm?outfit=pmt&requesttimeout=500&folder=7&paper=1611 (PDC3) Public Diplomacy Council. "Engaging the Arab/Islamic World - Next Stepsfor U.S. Public Diplomacy." Summary of Public Diplomacy Forum. February 27,2004. http://pdi.gwu.edu/merlin-cgi/p/downloadFile/d/6504/n/off/other/1/name/SummaryoftheFeb27Forumdoc/ (RAND) Charles Wolf, Jr. and Brian Rosen. Public Diplomacy - How To ThinkAbout and Improve It . RAND Corporation. 2004. http://www.rand.org/pubs/occasional_papers/2004/RAND_OP134.pdf (FPA) Jerrold Keilson. "Public Diplomacy and U.S. Foreign Policy." GreatDecisions 2004. Foreign Policy Association. http://www.fpa.org/topics_info2414/topics_info_show.htm?doc_id=200548 (KIE) William Kiehl. "Can Humpty Dumpty be Saved?" American Diplomacy. November 13, 2003. http://www.unc.edu/depts/diplomat/archives_roll/2003_10-12/kiehl_humpty/kiehl_humpty.html (DJE1) Peter G. Peterson and Edward Djerejian. A New Strategic Direction for U.S.Public Diplomacy in the Arab & Muslim World . Transcript. Council on ForeignRelations. October 7, 2003. http://www.cfr.org/publication.php?id=6417 (DJE2) Advisory Group on Public Diplomacy for the Arab and Muslim World. Changing Minds, Winning Peace: A New Strategic Direction for U.S. Publicdiplomacy in the Arab and Muslim World . October 1,2003. http://www.state.gov/documents/organization/24882.pdf (USIP1) Richard Solomon and Sheryl J. Brown. Creating a CommonCommunications Culture: Interoperability in Crisis Management . United StatesInstitute of Peace. September 12, 2003. http://www.usip.org/virtualdiplomacy/publications/reports/17.html (GAO2) U.S. General Accounting Office. U.S. Public Diplomacy: State DepartmentExpands Efforts but Faces Significant Challenges.GAO-03-951. September 2003. http://www.gao.gov/new.items/d03951.pdf (CFR1) Council on Foreign Relations. Finding America's Voice: A Strategy forReinvigorating Public Diplomacy. September 2003. http://www.cfr.org/content/publications/attachments/public_diplomacy.pdf (HER1) Stephen Johnson and Helle Dale. Reclaiming America's Voice Overseas . Web Memo #273. The Heritage Foundation. May 4, 2003. http://www.heritage.org/Research/NationalSecurity/wm273.cfm (HER2) Stephen Johnson and Helle Dale. How to Reinvigorate U.S. PublicDiplomacy . Backgrounder #1654. The Heritage Foundation. April 23, 2003. http://www.heritage.org/Research/NationalSecurity/bg1645.cfm (ISD) Talking with the Islamic World: Is the Message Getting Through? Institute forthe Study of Diplomacy. Working Paper. October 2002. http://www.ciaonet.org/wps/sites/isd.html (USIP2) Barry Fulton, ed. Net Diplomacy I, II, and III. Virtual Diplomacy Report. United States Institute of Peace. October 2002. http://www.usip.org/virtualdiplomacy/publications/pubs.html#vdr (BRO) John Brown. "The Purposes and Cross Purposes of Public Diplomacy." American Diplomacy. August 15, 2002. http://www.unc.edu/depts/diplomat/archives_roll/2002_07-09/brown_pubdipl/brown_pubdipl.html (CFR2) Council on Foreign Relations. Public Diplomacy: A Strategy for Reform .Report of a Council on Foreign Relations Independent Task Force. July 2002. (PBS) "Public Diplomacy, U.S. Outreach to Arab World." OnlineNewsHour, thewebsite of the NewsHour with Jim Lehrer. February 18, 2002. http://www.pbs.org/newshour/media/public_diplomacy/ (ADV2) United States Advisory Commission on Public Diplomacy. Building PublicDiplomacy Through a Reformed Structure and Additional Resources . 2002. http://www.state.gov/documents/organization/13622.pdf (DSB2) Defense Science Board. Report of the Defense Science Board Task Forceon Managed Information Dissemination . September 2001. http://www.acq.osd.mil/dsb/reports/mid.pdf (NWC) Information Age Diplomacy . National War College/Northwestern UniversitySymposium. April 5-6, 2001. http://www.ndu.edu/nwc/activities/public/SymposiumWebsite/symposium_main.htm (CFR3) Council on Foreign Relations and Center for Strategic and InternationalStudies Task Force. State Department Reform . 2001. (HRC) U.S. Commission on National Security/21st Century (Hart/RudmanCommission). Phase I report: New World Coming: American Security in the 21stCentury (1999); Phase II report: Seeking a National Strategy: A Concert forPreserving Security and Promoting Freedom (2000); Phase III report: Road Map forNational Security: Imperative for Change (2001). http://govinfo.library.unt.edu/nssg/Reports/reports.htm Appendix B -- Recommendations by Report WP -- Leonard H. Marks, Charles Z. Wick, Bruce Gelb and Henry E. Catto. "America Needs a Voice Abroad," Washington Post, February 26, 2005. This editorial by former USIA directors is a general call to rebuild U.S. publicdiplomacy. While it does not make specific recommendations, it does call for theUnited States to explain its policies directly and openly; argues for the importanceof public affairs officers and USIA libraries; states that shutting down USIA wasmajor mistake; and supports the Public Diplomacy Council's recommendation tocreate a U.S. Agency for Public Diplomacy (see below). PDC1 -- Public Diplomacy Council. Call for Action on Public Diplomacy. January2005. Recommendations: Establish U.S. Agency for PublicDiplomacy; Increase public diplomacy staffing overseas by 300% andbudgets for international broadcasting and exchange programs by 400% over fiveyears; Provide long-term resources necessary for global internationalbroadcasting capability; Establish an Interagency Committee on Public Diplomacy atthe Cabinet level; and Create a public-private partnership "Foundation for the GlobalFuture" to provide permanent off-budget funding for internationalexchanges. PDC2 -- Public Diplomacy Council. "Transformation Not Restoration." Statement of Dissent to Call for Action on Public Diplomacy . January 2005. This statement of dissent refutes each of the five recommendations made ina Call for Action on Public Diplomacy (see above), arguing that the report draws tooheavily on the past. The dissent emphasizes that understanding what is credible inthe context of other societies is the foundation upon which effective publicdiplomacy is constructed; that the reference point for U.S. public diplomacy must bethe hopes, aspirations, and fears of foreign citizens; and that the United States' firstpriority must be observing and listening. ADV1 -- Report of the US Advisory Commission on Public Diplomacy, 2004 Reportof the United States Advisory Commission on Public Diplomacy , September 28,2004. Recommendations: Message dissemination Have more U.S. government staff employed abroad serve asmessengers of public diplomacy; Expand the London Media Outreach Center's ability tocommunicate with Arab press by creating a network of 24-hour messagedissemination and monitoring centers; Model a public diplomacy strategy in a test region throughconcentrated programs, programming, exchanges, andinitiatives; Evaluate the success by measuring publicperception. Coordination Bridge disparate public diplomacy mechanisms within the StateDepartment by tasking the Policy, Planning and Resources Office with overseeingthe strategic planning of all public diplomacy programming andresources. Third party credibility Require embassies to maintain networks of individualsinterested in communicating positive concepts on behalf of the UnitedStates; Provide electronic products, through the Bureau of InternationalInformation Programs (IIP), to support the efforts of individuals interested inadvocating U.S. policies and perspectives. Cross-cultural communications Implement the language continuum strategy aggressively tohelp Foreign Service officers achieve language proficiency, and providecross-cultural and language training for other government personnel and contractorsabroad; Support the Administration's efforts to negate certain terroristmessages and convey ideas through the skillful use ofsemantics. Border security Fund a significant marketing campaign, either through theprivate sector or the government, to explain visa processes and recruit visitors, andhelp the United States maintain its competitive advantage; Encourage Congress to ensure that international citizens notbear the entire costs of new security measures dedicated to visaprocesses; Phase out redundant and duplicative checks based primarily onethnic origin and gender once US-visit is completely functional, and encourageCongress to allow Visa Waiver Program countries sufficient time to incorporatebiometric identifiers in their passports. Exchange programs Allocate the resources necessary to develop a comprehensiveexchange alumni database; Encourage the resourcefulness of posts in offering exchangeprograms by requiring the submission of competitive proposals for suchprograms. Centers, corners, virtual consulates, and libraries Encourage each American Corner with Internet access toprovide a virtual consulate Website as a start-up page on allworkstations; Fund American centers/libraries wherever security constraintspermit their existence, in order to continue benefitting from the great publicdiplomacy value they provide; Encourage Congress to give the Secretary of State the authorityto create American presence posts, and thereby expand this concept, by notifying theHouse International Relations Committee and the Senate Foreign RelationsCommittee. USAID and public diplomacy Create, for multiple areas of the globe, director of publicdiplomacy positions in the Bureau of Legislative and Public Affairs, as has been donefor the Middle East; Continue to enhance efforts to publicize the substantial amountof financial aid that the American people contribute abroad; Continue to coordinate with USAID to better publicize thenumerous contributions America makes to foreign societies. English language programs Seek the support of the private sector to bolster programsdesigned to increase knowledge of the English language around theworld; Continue efforts to reach English teachers through officialtraining programs and exchanges, for better use of government resources and greaterresults from the programs. Private sector Encourage individual posts to explore public-privatepartnerships on a local level; Create a means of allowing visitors to overcome restrictionsand take advantage of private sector generosity while on visitorexchanges; Use the small Cultural Affairs budget as seed money to initiateprojects that ultimately will be self-sustaining; Continue to foster the kinds of Internet and media programmingdeveloped by the private sector that exemplify mutually beneficial public-privatepartnerships in public diplomacy. Broadcasting: War on Terror Grant more resources. Broadcasting: Educational Programs Continue circumventing heavy jamming and reaching Chineseaudiences through websites and teaching products that educate users in both theEnglish language and American culture. Broadcasting: Satellite Programs Develop satellite television technologies further and expand onrecent successes in making native language programming available via satellitetelevision to missions of viewers in other countries. Internet Encourage the Broadcasting Board of Governors (BBG) toactively look for ways to use emerging software developments to expand itsbroadcasting reach over the Internet. Hard-to-reach areas Continue the BBG development of new transmission methodsto combat jamming. DBS1 -- Department of Defense, Report of the Defense Science Board Task Forceon Strategic Communication, September 2004. The President should issue a directive to strengthen,understand, and communicate with global audiences; coordinate all components ofstrategic communication including public diplomacy, public affairs, internationalbroadcasting, and military information operations; and provide a foundation for newlegislation for planning, coordination, conduct and funding of strategiccommunications. The President should establish a permanent strategiccommunication structure within the National Security Council (NSC) and work withCongress to create legislation and funding. The President should work with Congress on legislation toestablish and fund a non-profit and non-partisan [501(c) (3) hybrid organization suchas Rand or the National Endowment for Democracy] Center for StrategicCommunication to support the NSC and departments and organizations representedon its Strategic Communication Committee. The Department of State should providea core funding grant for the Center. The President should redefine the role of Under Secretary ofState for public diplomacy and public affairs to be both policy advisor and managerfor public diplomacy. Responsibilities should include approving public diplomacyassignments, setting program direction and evaluation, reviewing performance ratingsof the public diplomacy office director and embassy public affairs officers. Allforeign policy initiatives and directives should have a public diplomacy componentapproved by the Under Secretary. Personnel and funding resources should be tripledand placed under the control of the Under Secretary. State Department public diplomacy office directors should beraised to level of Deputy Assistant Secretary or Senior Advisor to the AssistantSecretary. Officers promoted to Chief of Mission or Senior Foreign Service shouldhave at least one tour in a public diplomacy assignment in the Department or in aninteragency assignment related to public diplomacy. The Bureau of IIP should bedirected by an Assistant Secretary. DOD's Under Secretary for Policy should act as the DOD focalpoint for strategic communication and serve as the DOD's principal on NSC'sStrategic Communication Coordinating Committee. DOD's Under Secretary for Policy and the Joint Chiefs of Staffshould ensure that all military plans and operations have appropriate strategiccommunication components, ensure collaboration with DOS and with theater securitycooperation plans. DOD should triple resources -- personnel and funding -- available to combatant commanders for DOD support to public diplomacy andreallocate information operations funding within U.S. STRATCOM (U.S. StrategicCommand) for expanded support for strategic communicationprograms. GAO1 -- U.S. Government Accountability Office. U.S. Public Diplomacy, StateDepartment and Broadcasting Board of Governors Expand Post-9/11 Efforts butChallenges Remain. August 23, 2004. This report discusses some findings of post-9/11 public diplomacy efforts. The report includes criticisms, including some by public affairs officers, ofinsufficient time spend on public diplomacy, insufficient public affairs resources; theamount of time devoted to public diplomacy training is inadequate; and often theForeign Service Officers lack foreign language skills. This report did not list specificrecommendations, but the following were implied in the text of the report: Implement an overall public diplomacystrategy; Improve interagency communication and coordinationefforts; Define success and how it should bemeasured; Collect polling data and establish reportingrequirements; The Department of State public diplomacy operation isfragmented among various entities within State and needs betterorganization; The U.S. Government must define itsmessage; BBG's strategic plan does not, but should, include a single goalor related program objective to gage progress; BBG's plan needs measurable program objectives to support itsstrategic goals; U.S. public diplomacy resources need to be expanded to areasof the world thought to breed terrorist activities. 911 -- National Commission on Terrorist Attacks Upon the United States. The 9/11Commission Report , July 22, 2004. Expand funding for public diplomacy activities, such as information programs, broadcasting, exchanges, scholarships, libraries, and U.S.aid; Clearly identify that U.S. assistance comes from the citizens ofthe United States; The U.S. should identify what it stands for and communicatethat message clearly; The U.S. government should join other nations in generouslysupporting a new International Youth Opportunity Fund to improve education andprovide textbooks that do not teach hate, offering a choice of schools other thanmadrassas; Establish a forum for engaging both Western and Arab/Muslimrepresentatives to discuss each culture's needs and perspectives. This would helpcreate long-term relationships and understanding amongcultures. NSFR -- Walter R. Roberts and Barry Fulton. "Rebuilding Public Diplomacy."National Strategy Forum Review. Spring 2004. Recommendations: Substantially increase public diplomacyresources; Conduct a careful assessment of America's public diplomacyreadiness; New broadcast programs (e.g. Radio Sawa and Al Hurra) haveto be initiated and adequately funded; Better coordination with White House, other governmentagencies, and the private sector is needed. PDC3 -- Public Diplomacy Council. "Engaging the Arab/Islamic World - Next Steps for U.S. Public Diplomacy." Summary of Public Diplomacy Forum. February 27,2004. This forum dealt specifically with American public diplomacy in the Arab/Islamicworld. Its recommendations and comments include: Public diplomacy must be more engaged in advising the policycommunity; Increase resources and trained personnel; Elites must lead in creating a civil discourse and in breakingdown stereotypes; Use the potential of Radio Sawa and Al HurraTV; Increase foreign language training and knowledge of cultureand history; Create a White House Counselor for Public Diplomacy at theCabinet level; The Djerejian Report (see DJE ) should beadopted; Arabs and Muslims need to study and understand the UnitedStates much more deeply; Break down stereotypes on both sides; reveal more of U.S.diversity and complexity; Improve personal contact by professionals, especially publicaffairs, political, and economic officers and ambassadors; Strengthen foreign press centers; Send American speakers abroad; Encourage more robust educational exchangeprograms. RAND -- Charles Wolf, Jr. And Brian Rosen. Public Diplomacy -- How to ThinkAbout and Improve it , 2004. Rand Observations: Public diplomacy should not come from government alone; The United States should seek creative talents in the privatesector, business, and academia which could be motivated through a competitivebidding process; It may be useful to find different modes of communicating bigpicture ideas of public diplomacy through debate and discussion, call-in shows, liveinteraction among different elements of the audience, rather than through the typicalmonologic conveyance of the message; Outsourcing public diplomacy may be helpful to put somedistance between a favorable message and an unfavorable messenger (i.e. the UnitedStates). FPA -- Jerrold Keilson. "Public Diplomacy and U.S. Foreign Policy." G reatDecisions 2004 . Foreign Policy Association. This edition of the annual "Great Decisions" series offers mostly historicaland background information. While it refers to recommendations of other reports,it makes relatively few of its own. Among its recommendations and comments are: Educational exchange programs areimportant; The evidence on international broadcast programmingeffectiveness is mixed; The USIA realignment has reduced flexibility and independentaction; Foreign public opinion of the United States has declined evenas financial support for public diplomacy has increased in the last threeyears; Significant investment in number and quality of trained publicdiplomacy officers is needed; Public diplomacy officers need language proficiency andregional expertise and should not be rotated among regions like other foreign serviceofficers; The United States should create special libraries of key bookson America in accessible libraries, rather than in security-conscious embassylibraries; The United States should consolidate exchange, cultural, andinformation programs into one agency. Public diplomacy is now lost within overalloperation of the State Department; America should dramatically increase the number ofinternational visitors from the Muslim world; The possibility of policies being profoundly unpopular overseasshould be taken into account when developing the policy; modifications should beconsidered that might make them less so. KIE -- William Kiehl. "Can Humpty Dumpty be Saved?" American Diplomacy . November 13, 2003. Among Kiehl's comments and recommendations: Public diplomacy must be proactive, more akin topsychological operations than to public relations; Regional bureaus must include senior public diplomacy officersat least at the Deputy Assistant Secretary level; Establish a new organization for public diplomacy that wouldbe a middle ground between the old USIA and the current weak structure [includesorganizational chart]; Amend Smith-Mundt to lift restriction on domesticdissemination of American international informationalmaterial. DJE1 -- Peter G. Peterson and Edward Djerejian. A New Strategic Direction for U.S.Public Diplomacy in the Arab and Muslim World , Council on Foreign Relations,October 7, 2003. This article presented a question and answer session between the moderator,Peter G. Peterson of the Council on Foreign Relations at the Council on ForeignRelations and the speaker, Edward Djerejian of the Advisory Group on PublicDiplomacy in the Arab and Muslim World. In this article, Mr. Djerejian presentsAdvisory Group recommendations that the U.S. government: needs strategic coordination at the top -- Special Counselor tothe President; should create an office to monitor what is being done and saidabout America and immediately craft talking points to support orrefute; would benefit by getting the private sector more involved inpublic diplomacy; should create a Corporation for Public Diplomacy (modeledafter the Council on Foreign Relations concept); should get embassies more involved in publicdiplomacy; identify policies that would benefit the people in a region, suchas outreach to high school students; recognize solving the Israeli-Palestinian conflict is the centerof most of U.S. public diplomacy problems; realize that there is a gap between what we stand for and whatwe do. DJE2 -- Advisory Group on Public Diplomacy for the Arab and Muslim World. Changing Minds, Winning Peace: A New Strategic Direction for U.S. PublicDiplomacy in the Arab and Muslim World , October 1, 2003. This report organizes recommendations under three specific headings:Structure, Financial and Economic Resources, and Programs. Structure -- The White House should: create a cabinet-level Special Counselor to the President forPublic Diplomacy which would, in consultation with the President, and othergovernment agencies, establish strategic goals and messages, oversee theimplementation of programs that meet the strategic goals, and ensure effectivemeasurement of those programs; establish a board -- President's Public Diplomacy Experts'Board; reactivate the interagency Strategic Communications PolicyCoordinating Committee to be co-chaired by the Under Secretary of State for publicdiplomacy as well as a high-level representative from the National SecurityCouncil. Structure -- The Department of State should: emphasize to all its personnel that public diplomacy is ofprimary interest in doing their job; encourage every employee abroad to participate in publicdiplomacy activities; provide training on the basics of public diplomacy to everyemployee who serves abroad; strengthen the role of the Under Secretary of State for PublicDiplomacy to coordinate public diplomacy government-wide and set strategic publicdiplomacy guidance, review country program plans, allocate human and financialresources, monitor public opinion and program results, and play a role inperformance evaluation. The Advisory Group is convinced that strengthening theUndersecretary's role is essential. establish an Office of Policy, Plans, and Resources within theUndersecretary's office to coordinate the development of strategy and strategicguidance, oversee country-specific plans, monitor execution of plans, and assist inallocation and management of financial and human resources; establish an Arab and Muslim Countries PublicCommunications Unit under the direction of the Undersecretary; it would workclosely with the Office of Global Communications in the White House and wouldcoordinate the U.S. government's media outreach to Arab and Muslim nations andpromote 'rapid response' in disseminating messages and reacting and correctinginaccuracies and distortions in foreign media; find creative ways to measure effectiveness of public diplomacyprograms. Structure -- The U.S. Agency for International Development should: get the same public diplomacy training as the Department ofState; publicize that aid is from the UnitedStates. Structure -- The Department of Defense should: be better connected to the other agencies involved in publicdiplomacy and better coordinated with strategic plan. Structure -- The Broadcasting Board of Governors should: be brought under the White House's Office of SpecialCounselor to the President. Financial and Human Resources -- U.S. Public Diplomacy: needs a dramatic increase in funding; needs additional professional staff dedicated to Arab andMuslim issues; should increase funding AIDscholarships; needs a greater concentration of budget on tapping into uses ofthe Internet and information technology; should provide a greater effort to aiding Arabs and Muslims togain access to U.S. education. Programs -- The U.S. government should: expand English language trainingprograms; expand the American Corners Program; implement a new American Knowledge Library -- to translatethe best American books and make them available to local libraries anduniversities; create American studies programs in Arab and Muslimcountries in collaboration with local universities; expand the U.S. Speaker and SpecialistProgram; expand shorter duration exchangeprograms; thoroughly review the Middle East TelevisionNetwork. USIP1 -- Richard Solomon and Sheryl J. Brown. Creating a CommonCommunications Culture: Interoperability in Crisis Management . United StatesInstitute of Peace. September 12, 2003. Originally this was presented as a speech at the Conference on CrisisManagement and Information Technology in Helsinki, Finland, which focused onways of developing interoperable communications systems that can facilitateinformation sharing during crises. The speech did not directly address publicdiplomacy. GAO2 -- Government Accountability Office, U.S. Public Diplomacy: StateDepartment Expands Efforts but Faces Significant Challenges , September 2003. Recommendations: That the Secretary of State: develop and widely disseminate throughout the Department astrategy that considers the techniques of private sector public relations firms inintegrating all of State's public diplomacy efforts and directing them towardachieving common and measurable objectives; consider ways to collaborate with the private sector to employbest practices for measuring efforts to inform and influence target audiences,including expanded use of opinion research and better use of existingresearch; designate more administrative positions to overseas publicaffairs sections to reduce the administrative burden; strengthen efforts to train Foreign Service officers in foreignlanguages; program into State's assignment process adequate time forpublic diplomacy training. The Department of State's response to this GAO report was that it generallyconcurred with the report and intended to implement recommendations and said ithas already begun to do so in some areas. CFR1 -- Council on Foreign Relations. Finding America's Voice: A Strategy forReinvigorating U.S. Public Diplomacy . September 2003. In addition to the following recommendations, this report includes appendiceson State Department organizational reforms, a draft mission program plan on publicdiplomacy, and an overview of U.S. international broadcasting. I. Rethink how the U.S. formulates, strategizes, and communicates its foreign policy. Make the formulation of foreign policy more sensitive to publicdiplomacy concerns; Strengthen the public diplomacy coordinating structure so thatit resembles the National Security Council; Issue Presidential Decision Directive on publicdiplomacy; Initiate a "Quadrennial Public DiplomacyReview;" Improve U.S. capacity to listen to foreign publics, e.g. pollingand research; Craft messages highlighting cultural overlaps betweenAmerican values and those of the rest of the world. II. Build new institutions to bolster public diplomacy efforts Create independent, not-for-profit "Corporation for PublicDiplomacy" as focal point for private sector involvement in publicdiplomacy; Establish an "Independent Public Diplomacy TrainingInstitute;" Establish a Public Diplomacy Reserve Corps (patterned onFEMA's disaster-relief model). III. Improve the practice of public diplomacy Through State Department reforms, ensure that publicdiplomacy is central to the work of all U.S. ambassadors anddiplomats; Enhance training for U.S. ambassadors; Expand the range of America's messengers abroad. Identifyand develop credible local messengers and increase the use of independent, diverseU.S. messengers; Foster increasingly meaningful relationships between the U.S.government and foreign journalists; Support voices of moderation in other countries, especiallyamong young people; Adopt an "engagement" approach that involves listening,dialog, debate, and relationship building, as opposed to our traditional "push-down"method; Make better use of satellite broadcasting and theInternet; Create bridges between U.S. society and others using commoncultural pursuits in every genre of art, music, theater, religion, andacademia. IV. Improve funding and allocation Bring public diplomacy funding in line with its role as a vitalcomponent of foreign policy and national security; Build congressional support for publicdiplomacy. HER1 -- Stephen Johnson and Helle Dale. Reclaiming America's Voice Overseas , The Heritage Foundation, May 4, 2003. Recommendations -- The U.S. government should: provide control of the public diplomacy budget and personnelto the Under Secretary of State for Public Diplomacy and create reporting channelsin State Department from embassy personnel up to the Under Secretary for PublicDiplomacy; expand academic exchanges and U.S.-supportedlibraries; reorganize and streamline international broadcasting andeliminate waste; enhance public diplomacy and public affairs career training atthe State Department; improve inter-agency coordination through the White HouseOffice of Global Communications. OGC should do more than keep senior politicalleaders on message; it should ensure that all agencies involved with public diplomacycooperate to do the best job possible to win hearts and minds offoreigners; adopt a doctrine that would enshrine public diplomacy practicesof emphasizing consistent efforts to explain to foreign publics U.S.policies. HER2 -- Stephen Johnson and Helle Dale. How to Reinvigorate U.S. PublicDiplomacy , The Heritage Foundation, April 23, 2003. This article recommends that the Bush Administration and Congress should: recognize that public diplomacy is a long-termeffort; restore public diplomacy's independent reporting and budgetchannels that were lost during the USIA/State merger in 1999; return public diplomacy currently dispersed among other StateDepartment bureaus into a public diplomacy hierarchy; strengthen exchange programs and revive overseaslibraries; reorganize foreign broadcasting to streamline management,eliminate duplicative and ineffective services, and improveprogramming; enhance public diplomacy career training and increase thenumber of experienced foreign service personnel in State Department's public affairsoffice; strengthen inter-agency coordination through the White Houseand define DOD communications efforts for use on thebattlefield; modify outdated legislation, such as the 1948 Smith-Mundt Actthat place irrelevant restrictions on public diplomacyactivities. ISD -- Talking with the Islamic World: Is the Message Getting Through? Institute forthe Study of Diplomacy. Working Paper. October 2002. This document is comprised of the text of speakers' statements and oftranscripts of discussions from three sessions. Key comments from the discussionsinclude: It is not enough for U.S. to change its public diplomacy; it mustchange its foreign policy. The U.S. must address [Arab] peoples' real problems anddo something to change the Arab condition; Mutual understanding between American and Muslim worldsis the most important first step; The U.S. must change (particularly regarding the Palestinianissue) before Muslims embrace Americans; Examples of what the State Department is doing to improvecommunication between the United States and the Middle East include live video ontheir website, links with secondary schools, expanded Fulbright program, Englishlanguage teaching, teacher training, sports and musicexchanges; Much more is needed in the way of resources. Publicdiplomacy resources have been dismantled over the past years; Better coordination between civilian and military publicdiplomacy efforts is needed; The U.S. should seek and embrace coalition efforts as opposedto unilateralism; The dialogue between Americans and Muslims should bebroadened and deepened; Expand exchange programs and fund major exchange programswith the Islamic world; The United States is most successful when Americans interactwith foreign citizens in business, education, culture, music, and technology, outsideofficial American foreign policy. Engage in real dialogue; be more humble; practice what wepreach; Stop the contradictions between rhetoric andaction. USIP2 -- Barry Fulton, ed. Net Diplomacy I, II, and III. Virtual Diplomacy Report. United States Institute of Peace. October 2002. This series of individual articles looks ahead to diplomacy in 2015. Amongits predictions and recommendations are: State broadcasting will continue as element of publicdiplomacy. Current array of U.S. government broadcasting services is duplicative,expensive, and even counterproductive; Training of diplomats must give greater attention to interactionin cyberspace, public diplomacy, international financial markets, and results-orientedmanagement; Public diplomacy needs to be thought of as at the core offoreign affairs. The job done well by USIA must be carried on at an intensifiedlevel; Exchange programs are important; U.S. diplomats must have languageskills; The State Department should change the perception that publicdiplomacy generalists are second class citizens in the Foreign Service Officercorps; The State Department should change its culture and personnelsystem to recruit "change agents"; Public diplomacy will be a key element in dealing with newnational security challenges; Public diplomacy requires active engagement with bothdomestic and foreign publics and their representation in civil society, based ontransparency and information sharing; Internet-based technology has a big impact on publicdiplomacy; Effective public diplomacy requires a willingness to search forcommonality through well-funded cultural diplomacy; Americans need to fund, support, and embark on genuinevoyages of discovery -- bilaterally through embassies, at home, and through globalforums (e.g. UNESCO); Educational exchanges have become the cornerstone of publicdiplomacy; International broadcasting is an important element in theconduct of public diplomacy; Traditional diplomacy will increasingly need to besupplemented by public diplomacy; The Department of State needs to follow the example of theDepartment of Defense and train and educate its employees to meet the Department'srequirements. BRO -- John Brown. "The Purposes and Cross Purposes of Public Diplomacy." American Diplomacy . August 15, 2002. Comments and recommendations include the following: A truthful and accurate information campaign, if bothpersuasive and credible, can set the record straight about U.S. policies andintentions; There is no substitute for long-term educational exchangeprograms. It is especially important to bring responsible Muslim opinion-makers tothe United States; There is a need for serious, but not solemn, cultural activitiesregarding the United States that would appeal to Muslim audiences, especially to theyoung; Adequate funding is necessary. CFR2 -- Council on Foreign Relations. Public Diplomacy: A Strategy for Reform . July 2002. The Council on Foreign Relations offered the following recommendations: I. Develop a coherent strategic and coordinating framework for public diplomacy Issue a presidential directive on publicdiplomacy; Create a Public Diplomacy Coordinating Structure led by thepresident's personal designee; Move public diplomacy from the margins to the center offoreign policy making. II. Increase customized, "two-way" dialogue, as contrasted to conventional one-way,"push-down" mass communication Adopt an "engagement" approach that involves listening,dialogue, debate, and relationship-building and increases the amount and theeffectiveness of public opinion research; Support voices of moderation, with particular attention over thelonger term to the young to empower them to engage in effective debate throughmeans available or created in their societies; Foster increasingly meaningful relationships between the U.S.government and foreign journalists; Craft messages highlighting cultural overlaps betweenAmerican values and those of the rest of the world. III. Significantly increase private sector involvement Broaden use of credible and independent messengers fromdiverse sectors of American life; Create an independent, not-for-profit "Corporation for PublicDiplomacy." IV. Raise the effectiveness of public diplomacy resources Initiate State Department reforms (details are included in anappendix to the report). Initiate a structured evaluation of diplomatic readiness andprioritized spending through a "Quadrennial DiplomacyReview;" Establish a quasi-public/private "Independent Public DiplomacyTraining Institute;" Establish a Public Diplomacy ReserveCorps; Use Internet-age technologieseffectively. V. Increase public diplomacy resources Build congressional support for public diplomacy throughsustained oversight and the formation of a new congressional committeestructure; Bring public diplomacy funding in line with its role as a vitalcomponent of foreign policy and national security; Build a stronger public diplomacy through enhancements in keyareas: foreign public-opinion research, recruiting, training, media studies, programevaluation, significantly expanded field staffing and exchanges, increases in U.S.international broadcasting via the Middle East Radio Network and AmericanEmbassy Television Network, and enhancements of content, marketing, and brandingof multi-language websites. Appendix V deals specifically with the Broadcasting Board of Governors. The Task Force supports an independent and well-qualified broadcasting board witha full-time, top-caliber Chief Executive Officer who would report to the current BBGand be empowered to direct and supervise all U.S. nonmilitary internationalbroadcasting activities. Furthermore, the Department of State and the BBG shouldstrengthen the secretary of state's role in providing information and guidance onforeign policy to the BBG by clarifying and specifying the Secretary's role in makingdecisions on broadcast languages and other foreign policy matters. PBS -- "Public Diplomacy, U.S. Outreach to Arab World." OnlineNewsHour, thewebsite of the NewsHour with Jim Lehrer. February 18, 2002. This series of interviews with four individuals examines the U.S.government's efforts to counter anti-American sentiment in the Arab world throughbroadcasts and ad campaigns. Among the speakers' comments and recommendationsare: The United States is not spending or doing enough oninternational broadcasting. There is no grand strategy or coordinatedapproach; The United States needs more official representation on theground around the world; More cultural exchanges are needed ($1.5 billion budgetsuggested); The United States needs a "salesperson," preferably local or, atleast, people who are close to local sentiment, to sell the U.S.message; Need to know basic facts about Arab media consumption andnature of the audience; Any person carrying the U.S. message [to Arab world] shouldbe Muslim or a native speaker of the language in which they are broadcasting; There must be a meticulous, careful, methodical selection ofbroadcasters; Help from businesses and governments in the region to get U.S.message across would be useful; There's been a significant drop in human and material resourcesfor public diplomacy since the Cold War. ADV2 -- U.S. Advisory Commission on Public Diplomacy. Building America'sPublic Diplomacy Through a Reformed Structure and Additional Resources. September 2002. Recommendations: I. Structural Reform Issue a Presidential mandate that public diplomacy has strategicimportance in U.S. foreign policy and significant reform isneeded; Fully implement the White House Office of GlobalCommunications -- coordinate various agencies' efforts and work closely with theUnder Secretary of State for Public Diplomacy and PublicAffairs; Review the consolidation of the USIA into the Department ofState -- the Secretary of State should review and make recommendations on training,location, and reporting structure of public diplomacy units at the Department ofState; Integrate Congress into public diplomacy efforts -- legislativeauthority for a quadrenniel review of public diplomacy should beprovided; Involve the private sector -- communications consultants, the academic community (i.e., colleges offering majors in public diplomacy), advertising,and entertainment sectors. II. Expanding resources Money alone will not fix the problems -- assess the state ofAmerica's public diplomacy readiness worldwide; Examine the nation's public diplomacy investment relative toother areas. DSB2 -- Defense Science Board. Report of the Defense Science Board Task Forceon Strategic Communication, Managed Information Dissemination, October 1, 2001. The earlier of two reports done by the Defense Science Board recommends: The President issue a National Security Presidential Directive(NSPD) on international information dissemination to strengthen, coordinate, assessimpact, and develop strategies; The NSPD should establish an NSC Policy CoordinatingCommittee (PCC) on International Information Dissemination to be chaired by aperson of Under Secretary rank to specify who and which agencies will be on thePCC; The NSPD should delegate to the PCC authority to coordinatepublic diplomacy activities including analysis for foreign public opinion,development of strategic themes and messages for long-term and crisis responsecommunications, identification of appropriate media channels, and production ofinformation products; The Secretary of State should support the PCC through adedicated and expanded Secretariat in the DOS consisting of the current interagencyworking group on International Information Programs, augmented by an expandedstaff, budget, and executive staff drawing on expertise from DOS, DOD, JointChiefs of Staff, the 4th PSYOP Group, the CIA, commercial media, andcommunication entities to facilitate audience research and develop channels andinformation products; DOS should strengthen International Information Bureau underan Assistant Secretary, substantially increase funding for the Bureau, with much ofthe increase going for contracted products and services; DOS should make theseassets available to support the strategic objectives of the PCC; DOS should modernize and diversify products of theInformation Bureau to include expanded use of: Internet websites, streamingaudio/video, leased emerging satellite TV and FM radio broadcasts channels,American Embassy TV and radio and Washington File print services, the ForeignPress Center by U.S. policymakers and military leaders to communicate with foreignpublics, interactive information networks containing key foreign audiences, JointState-DOD training and increased interagency assignments, and a reserve cadre ofretired, language-qualified State and DOD officers available for crisis responsedeployment; DOD should establish an International Public InformationCommittee to coordinate all DOD open information programs carried out under theauthority of the PCC; The Secretary of Defense should implement DOD's draftguidelines to increase coordination between PSYOP forces and the Commander inChief (CINC)/Joint Forces (JFC) staff, revitalize CINCs' Theater Engagement Plans,strengthen PSYOP capability to support the U.S. government's strategic informationprograms, and effectively integrate these programs into the activities of the PCCSecretariat; The Secretary of Defense should enhance DOD's informationdissemination capabilities worldwide in support of the regional CINCs TheaterEngagement Plans and in anticipation of crisis response requirements. In addition,the Secretary should make these capabilities available to support U.S. strategic policyobjectives at the direction of the PCC. Enhancements include expanded use of directsatellite FM radio and TV; additional use of regional magazines such as Forum and Dialogue ; expanded use of regional Internet websites; and establishment of a publicdiplomacy office within the Office of the Secretary ofDefense; The President and his senior national security advisors shouldstrengthen U.S. international information dissemination by 1) insisting that civilianand military information capabilities be harnessed to the Internet revolution, 2) takingfull advantage of commercial media production methods, and 3) significantlyincreasing foreign opinion research and studies of foreign media environments andinfluence structures. NWC -- Information Age Diplomacy . National War College/NorthwesternUniversity Symposium. April 5-6, 2001. Symposium overview followed by statements by individual speakers. Symposium Overview: Change is needed in State Department culture, i.e. more openapproach in which innovation trumps caution; State Department change efforts have fallen short due to:inadequate financial and personnel resources, lack of training and strategic planning,and deficiencies in information technology and the mindsets to integrate newtechnologies into the conduct of diplomacy; Public diplomacy should be given higherpriority; The merger of USIA into the State Department hasn't beenaccompanied by a fundamental change in the culture ofdiplomacy. From individual speakers: Public diplomacy and information technology must be at thecenter of statecraft; Diplomats need to give much more attention to publicdiplomacy; The Jeffersonian concept of the State Department didn'tdistinguish between internal and external functions. This concept has relevancetoday; Unlike the Department of Defense, the State Departmentpersonnel system is antiquated and doesn't put proper emphasis ontraining; No government agency is in greater need of reform than theState Department. It must revamp culture, procedures, and infrastructure and givegreater attention to public outreach; The Under Secretary for Public Diplomacy needs to be at thetable on the first day of a crisis. Public diplomacy is substantive engagement overa long period of time with a broad range of people. CFR3 -- Council on Foreign Relations and Center for Strategic and InternationalStudies Task Force. State Department Reform . 2001. This report was prepared for the incoming Bush administration and isbroader in scope than public diplomacy. The main body of the report states that theState Department is impaired by a professional culture that emphasizesconfidentiality over public diplomacy and public affairs. Among the additional viewsincluded at the end of the report are: Merging of USIA and the State Departmenthasn't enhanced public diplomacy; and State Department leadership should do asmuch as it can to ensure that the talents, perspective, and methodology of formerUSIA officers aren't lost. HRC -- U.S. Commission on National Security/21st Century (Hart/RudmanCommission). Series of three reports, 1999-2001. Phase I contains a series of broad conclusions, but no recommendations. Phase II report: Public diplomacy is an important part of Americandiplomacy; The United States should help spread information technologyworldwide; The United States should employ new technologies creativelyto improve its public diplomacy. Phase III report: State Department was weakened by having many of its corefunctions parceled out to other agencies, e.g. USIA; Tailor public diplomacy to policy goals and integrate theseactivities with other aspects of U.S. diplomacy; Overhaul the U.S. Foreign Service system, including endingoral exam's blindfolding policy so that applicants could be better matched toparticular cones, e.g. public diplomacy; Repeal the United States Code provisions establishing an UnderSecretary for Public Diplomacy and have some of those functions migrate to anAssistant Secretary-level officer reporting directly to the Secretary of State, andothers be folded into the Assistant Secretary for Economic and TransnationalAffairs.

Public diplomacy has been officially acknowledged as a tool in the foreign policy arsenalsince World War I. Later, during World War II, it became part of the U.S. government structurewhen in 1942 the President issued an executive order to create the Office of War Information (OWI). OWI aired the first Voice of America program on February 24, 1942, in Europe. These activitieswere carried out without any authority or formal recognition by Congress. More recently, during the post-Cold War era of the 1990s, public diplomacy was viewed asa low priority, and was often seen by lawmakers as a source of funds to tap for other programs. Thisculminated in 1999 when Congress abolished the agency primarily concerned with public diplomacy-- the U.S. Information Agency (USIA) -- and merged its public diplomacy functions into theDepartment of State. Following the elimination of the USIA and after the September 11, 2001 attacks, U.S.government officials, foreign policy experts, and academicians began to assess the direction of, andthe increased need for, public diplomacy. This report looks at 29 articles and studies on public diplomacy that have been identified bythe Department of State as being credible reports with valuable suggestions. Variousrecommendations from these studies are similar. This report organizes the recommendations andprovides a brief discussion of them. CRS takes no position on the recommendations. This report will not be updated.

Resolutions of Inquiry Generally A resolution of inquiry is a resolution that formally calls on the executive branch to provide specified factual information to Congress. The use of resolutions of this type as a tool of oversight dates to the earliest days of Congress. Although there are historical examples of resolutions of inquiry being used in the Senate, they are far more common in the House of Representatives, and this report examines their use only in that chamber between 1947 and October 20, 2017. House resolutions of inquiry are simple resolutions (designated "H.Res."), which are submitted in the same manner as other legislation. Under House rules and precedents, however, resolutions of inquiry, if properly drafted and under specific circumstances, are afforded a privileged parliamentary status. Clause 7 of House Rule XIII makes a resolution of inquiry privileged for consideration at any time after it is reported or discharged from committee, consistent with the normal three-day layover period required of most committee reports. If a resolution of inquiry is not reported to the House within 14 legislative days after its introduction (not counting the days of introduction and discharge), a motion to discharge a committee from its further consideration is in order on the House floor. Should the committee or committees of referral report (or be discharged under a time limit imposed by the Speaker) within the 14-day period, however, only a Member acting at the formal direction of the committee may move to proceed to its consideration on the floor. Thus, even when a House committee opposes a resolution of inquiry, the committee will virtually always mark it up and report it, often adversely, in order to retain control over the measure and prevent a supporter from making the privileged motions on the House floor to discharge the committee and call up the resolution. To retain the privileged parliamentary status described above, resolutions of inquiry may not contain a preamble and must call only for facts within the executive branch's control. Such resolutions may not seek opinions or require an investigation and are traditionally framed as "requesting" the President or "directing" the head of a Cabinet-level agency to respond. As is the case with other types of privileged business, committee reports accompanying resolutions of inquiry are presented from the floor, rather than submitted through the hopper. If the House chooses to consider a resolution of inquiry, it is considered under the One-Hour Rule. When raised, such resolutions may be agreed to, rejected, or tabled by majority vote. In prior eras it was common for the majority party Member managing a resolution of inquiry on the House floor to quickly move to table it, either because he or she opposes its provisions, or because the request has been rendered moot by the executive branch having provided some or all of the requested information. Finally, but importantly, as simple resolutions, resolutions of inquiry have no legal force. Thus, compliance by the executive branch with the House's request for factual information in such a resolution is entirely voluntary, resting largely on a sense of comity between coequal branches of government and recognition of the necessity for Congress to be well-informed as it legislates. While there is no direct way for the House to enforce its request for information, executive branch compliance with resolutions of inquiry might be indirectly influenced by a general respect for congressional legislative and oversight power, including Congress's power to appropriate or withhold money for agency functions. Use of Resolutions of Inquiry: 1947-2017 Some Congresses Show High Levels of Activity The Congressional Research Service has identified 313 resolutions of inquiry submitted in the House between 1947 and October 20, 2017—an average of just under 9 per Congress. These statistics are represented in Table 1 and the resolutions are described in detail in Table 7 . The number of resolutions of inquiry introduced in individual Congresses over this 70-year period varies widely. Two distinct periods, however (as shown in Figure 1 ), saw a number of resolutions of inquiry introduced in the House that far exceeded the overall average: the 92 nd -94 th Congresses (1971-1976), during which a total of 87 resolutions of inquiry were introduced, and the 108 th and 109 th Congresses (2003-2006), during which 53 resolutions were put forward. The number of resolutions of inquiry introduced in these five Congresses alone accounts for a full 45% of all such resolutions submitted during the 70-year period examined. The number of House resolutions of inquiry introduced in the 108 th (2003-2004) and 109 th (2005-2006) Congresses reflected a sharp increase in the number introduced over the preceding decade. In each Congress between the 102 nd (1991-1992) and 107 th (2001-2002) Congresses, an average of 1 resolution of inquiry was introduced. In the 108 th Congress, 14 such resolutions were introduced, and 39 resolutions of inquiry were submitted in the 109 th Congress. The 53 resolutions of inquiry introduced in these two Congresses exceeded the total number of such resolutions introduced in the previous two decades combined. During the period under examination (1947-October 20, 2017), the 39 resolutions of inquiry introduced in the 109 th Congress are exceeded only by the 44 resolutions introduced in the 93 rd Congress (1973-1974). But this latter total may be misleadingly high due to parliamentary rules in effect at that time. In the 93 rd Congress, House rules limited the cosponsorship of measures to a maximum of 25 Representatives. Several of the 44 resolutions of inquiry introduced in the 93 rd Congress appear to be identically worded resolutions introduced separately, apparently to enable more than 25 Members to cosponsor them. When these "doubles" are taken into account, more resolutions of inquiry were introduced in the 109 th Congress than in any single Congress since World War II. In the 111 th Congress (2009-2010), 29 resolutions of inquiry were introduced. Subsequent Congresses have seen activity on House resolutions of inquiry below historic averages. Three resolutions of inquiry were submitted in the 112 th Congress (2011-2012), five were submitted in the 113 th Congress (2013-2014), and no resolutions of inquiry were put forward in the 114 th Congress (2015-2016). Early indications suggest, however, that the House may be entering another period of high resolution of inquiry activity: The 13 resolutions submitted thus far in the 115 th Congress (2017-2018) exceed the average for a Congress and are more than the number of resolutions of inquiry put forward in the previous three Congresses combined. The reason for the sharp increase in the number of such resolutions introduced during some recent Congresses is open to interpretation. Some have charged that instead of using resolutions of inquiry as an oversight tool to obtain information from the executive branch, in at least some instances, minority party Members have purposely used the privileged status such resolutions enjoy as a way to "force" committees to act on a given subject or get Members to record votes on politically controversial policy questions, in essence, enabling the minority party to "schedule" a committee markup meeting on a subject of its choosing. Those holding this view point to the high number of resolutions introduced during periods when the House and the President are of the same political party as evidence of the "political" use of resolutions of inquiry. The sharp uptick in such resolutions submitted in the GOP-controlled 115 th Congress, where a Republican President has taken over for a Democratic chief executive, arguably supports this viewpoint. One 2005 committee report took a skeptical view of several resolutions of inquiry referred to the committee that sought information on pre-Iraq war intelligence, saying, "[these] resolutions are politically-calculated attacks on the ... administration." Still another report argued that "the Minority [party] is attempting to use this parliamentary tool for political means. Perhaps most importantly, as a matter of procedure, [the resolution of inquiry] challenges the Majority's prerogatives and its right to set the legislative agenda, and for that reason alone should be rejected." Members holding this viewpoint argue that recent activity on resolutions of inquiry is more about "message politics" than obtaining information from the executive branch. Other Members have taken a different view, arguing that resolutions of inquiry have increased in number recently because the executive branch has frequently responded "grudgingly" to information requests from Congress, particularly those made by minority party Members relating to politically sensitive issues. Such Members argue that the White House has treated letters from lawmakers requesting information "as if they are junk mail, routinely tossing them aside without responding." This executive branch behavior, these Members contend, coupled with what they characterize as an ambivalence by majority parties to the rights of the minority in the House, has led to the increased use of such resolutions. Members holding this view argue that resolutions of inquiry, precisely because they are privileged, are one of the few parliamentary tools available to individual Representatives—including those in the minority—to hold the executive branch to account. Most Resolutions Relate to Defense or Foreign Affairs The most commonly identified subjects of House resolutions of inquiry over the past seven decades have been defense, foreign affairs, and intelligence. This may help to explain in part the significant increases noted above during the 92 nd -94 th (1971-1976) and 108 th -109 th (2003-2006) Congresses, periods where Members were focused on military conflicts in Vietnam, Iraq, and Afghanistan and on foreign affairs and intelligence issues stemming from the so-called Global War on Terrorism. When resolutions of inquiry are submitted, the Speaker, acting through the Parliamentarian, refers them to committee based on the subject matter of the measure and the jurisdiction of House committees as codified in clause 1 of Rule X. With the exception of the Committees on Budget, Rules, and Ethics, every standing committee of the House has, at some point over the 70 years examined, had at least one resolution of inquiry referred to it. However, as is reflected in Figure 2 , and as may be inferred from the most common subjects of such resolutions mentioned above, three House committees have received the greatest share of such referrals: Armed Services, which was referred 74 resolutions of inquiry over this period; Foreign Affairs, with 71; and Judiciary, which received 42. These three panels were the committees of primary referral for 60% of all resolutions of inquiry introduced between 1947 and October 20, 2017. The referral of legislation to more than one House committee has been permitted in the House since 1975, and over the period examined, several resolutions of inquiry were multiply referred. The House Parliamentarian has recently written, however, that "the modern practice is to refer [resolutions of inquiry] to a single committee only." Since 2004, three resolutions of inquiry have been multiply referred. It is not clear if this is the case because the subject of recent resolutions fell exclusively into the jurisdiction of one committee, because resolution sponsors have introduced separate resolutions directed to different officials (as opposed to one multiply-referred resolution directed to all of them), or because House Speakers, acting through the Parliamentarian, have consciously chosen to avoid the multiple referral of resolutions of inquiry wherever possible. Most Resolutions of Inquiry Are Directed to the President As has been noted, privileged resolutions of inquiry are directed to the President of the United States, or, under House Rule XIII, to the "head of an executive department." Under chamber precedents, the "head of an executive department" has been interpreted to mean the Secretary of a Cabinet-level executive agency—that is, those listed in 5 U.S.C. 101, not subordinate government officials such as the Administrator of the Environmental Protection Agency or the Director of National Intelligence. As such, although a resolution of inquiry directed to an officer below the Cabinet level could be introduced, it would not enjoy privileged status. The inclusion of lesser officials is viewed as destroying the privilege of an entire resolution, even in cases where the resolution is also directed to the President or a Cabinet Secretary. Since 1947, 114 of the 313 resolutions of inquiry introduced in the House (36%) have been directed to the President of the United States; 59 (19%) have been directed to the Secretary of Defense or his predecessor; 38 resolutions (12%) sought information from the Secretary of State; and 27 (9%) sought information from the Attorney General. Various other executive branch officials, including the Secretaries of Commerce, Energy, Health and Human Services, Homeland Security, Labor, and the Treasury, have been the target of House resolutions of inquiry. These statistics are represented in Figure 3 . A small number of resolutions of inquiry introduced during the period examined were directed solely or in part to sub-Cabinet officials, including the Directors of Central Intelligence and National Intelligence, the Chairman of the Nuclear Regulatory Commission, and the Internal Revenue Service Commissioner. As noted, such resolutions were arguably not privileged for consideration in the House, and, in at least once instance, the Speaker sustained a point of order to that effect when an effort was made to raise the measure on the floor. House Action on Resolutions of Inquiry Committees Are Acting on More Resolutions of Inquiry A committee has a number of choices after a resolution of inquiry is referred to it. It may mark up and report the resolution without amendment, or it may recommend amendments to it. It may report the resolution to the House favorably, adversely, or without recommendation. It may also take no action; however, as has been noted, in failing to act, it risks a Member, after the expiration of the 14-legislative-day period, making a privileged motion on the House floor to discharge the committee of further consideration of the resolution. Just over half of the resolutions of inquiry introduced between 1947 and October 20, 2017, were acted on by the primary House committee of referral. Approximately 52% (162 of 313) of the resolutions of inquiry submitted were actively considered at the committee level. As is discussed in more detail below, however, in recent Congresses, House committees have chosen to mark up virtually every privileged resolution of inquiry referred to them, presumably in order to retain control of the resolution and prevent another Member from triggering floor votes on the motion to discharge the committee. As is reflected in Table 2 , during the period examined, committees which chose to mark up a resolution of inquiry and report it to the House chose frequently (73%) to report the resolution "adversely," a parliamentary designation which means that the committee did not recommend that the House agree to the resolution. In a smaller percentage of cases during the time period examined, House committees have chosen to report resolutions of inquiry favorably (13%) or without recommendation (14%). On occasion, the committees have reported amendments to the resolution, oftentimes recommending the adoption of a full substitute. No generalizations can be made about adverse reports on resolutions of inquiry. A House committee may choose to report a resolution adversely because they oppose it or to ensure that no Member except a designee of the committee may try to call up the resolution on the floor. In several instances over the period examined, however, an adverse report was clearly made because the executive branch had produced some or all of the requested information, and the committee did not want the House to expend its time on a moot question. It has also been common for committees to report adversely with the rationale that production of the information would compromise an ongoing investigation. An adverse report might also occur because, in the view of the committee, the requested information was too sensitive to be provided or, conversely, was already widely available, and thus, not the proper subject of a privileged resolution. As mentioned, data show that since the 108 th Congress (2003-2004), committees have almost universally marked up every properly drafted resolution of inquiry referred to them regardless of its subject, sponsor, or how the committee viewed the resolution. This was not the case in earlier Congresses during the 70-year period studied. This suggests that, today, committees are acting on resolutions of inquiry at least in part to retain control of the resolution. The fact that more resolutions of inquiry have been introduced in some recent Congresses, and House committees are marking up virtually every such resolution referred to them, has led some to question whether resolutions of inquiry are improperly increasing the workload of House committees. Those holding such a view argue that if committees feel they "have to" mark up a resolution of inquiry because it is privileged, the potential exists for minority party Members to flood a committee with such resolutions and wrest partial control over a committee's markup agenda from the majority. Those holding this view note that certain House committees are disproportionately affected by such resolutions, and they argue that using resolutions of inquiry in this way is not the purpose such measures were created for or given privileged status under chamber rules. They note, for example, that in the 109 th Congress (2005-2006), 45% (10 out of 22) of the reports made to the House by the Committee on International Relations (now named Foreign Affairs) were on minority-party sponsored resolutions of inquiry. During the same period, 21% (3 out of 14) of the reports made to the House by the Committee on Armed Services were on minority-party sponsored resolutions of inquiry. Members holding the opposite view argue that although resolutions of inquiry may have increased in number in recent years, they still represent a small fraction of the overall legislative workload and are easily managed by the chamber's committee system. They further argue that such resolutions actually aid the House, by compelling its committees to seek information from the executive branch that Members need to legislate effectively. Those holding this view might argue that resolutions of inquiry motivate committees to focus not just on legislating but also on the oversight responsibilities they have been charged with by the House. Few Resolutions of Inquiry Reach the House Floor As is reflected in Table 3 , House floor consideration of resolutions of inquiry during the 70-year period examined was generally rare. In recent Congresses it has been virtually nonexistent. In the last 26 years, two resolutions of inquiry have received action on the House floor. Between 1947 and October 20, 2017, 64 resolutions of inquiry have been considered on the House floor, about 20% of those introduced, and approximately 40% of those reported by the chamber's committees. Of the resolutions receiving floor action, 52 (81%) were laid on the table by majority vote, effectively killing them. Eleven resolutions of inquiry have been agreed to by the House since 1947, the most recent occurring in the 104 th Congress (1995-1996). It is worth reiterating that the tabling of a resolution on the House floor may have been undertaken because the question had been made moot by the executive branch being in substantial compliance with the request. For example, in a handful of instances during the period examined, it was the sponsor of the resolution of inquiry who moved to lay the resolution on the table, apparently satisfied it had produced the desired result. During the 91 st -95 th Congresses, several resolutions of inquiry that were submitted received no action either in committee or on the floor. This might be due to the fact that, as has been noted, several of the resolutions of inquiry introduced during this period appear to be identically worded resolutions introduced separately, apparently to enable more Members to cosponsor them. One might speculate that no action was taken on other resolutions during this period because the executive branch provided the requested information. In current practice, House committees will virtually always mark up and report a resolution of inquiry in order to retain control of the measure and avoid floor votes. Resolutions of Inquiry Are Increasingly a Minority Party Tool Resolutions of inquiry are sometimes assumed to be an oversight tool that is used disproportionately, or even exclusively, by congressional minorities. This view is, in a sense, understandable. The majority party in the House arguably has far more effective oversight tools at its disposal than nonbinding resolutions of inquiry: committee hearings, subpoenas, and the ability to pass legislation. An examination of resolutions of inquiry introduced between 1947 and October 20, 2017, however, reveals a far more bipartisan overall picture than this view might suggest. Over the 70 years examined, the party affiliation of resolution of inquiry sponsors is fairly evenly divided. Of the 313 resolutions of inquiry introduced between 1947 and October 20, 2017, 132 were introduced by Members of the congressional majority party and 181 by minority party Members. The political affiliation of resolution of inquiry sponsors versus that of the President is more divided. Of the 313 resolutions of inquiry submitted in the House between 1947 and October 20, 2017, 239 (76%) were introduced by Members of Congress belonging to the opposite political party of the President. If one examines only recent Congresses, the statistical picture is much starker and supports the view that resolutions of inquiry have become overwhelmingly a minority party tool. In recent years, the sponsorship of resolutions of inquiry has become far more partisan and more lopsided in party division than at any time during the seven decades studied. Since 2005, 2 of the 91 resolutions of inquiry submitted were authored by a Member of Congress having the same political party as the President. The others were submitted by Members directed at Presidents of the opposite party. Effectiveness of Resolutions of Inquiry Is Unclear Because resolutions of inquiry are primarily intended to be an information-gathering tool, one question is whether available evidence suggests such resolutions have been successful in producing information from the executive branch. The data in Table 6 and in Figure 3 are gleaned from an examination of legislative history documents, such as committee reports and floor debate, accompanying resolutions of inquiry introduced between 1947 and October 20, 2017. Based on these documents and the measures themselves, resolutions of inquiry were divided into three categories: (1) Yes, evidence suggests the resolution did produce full or partial information from the executive branch; (2) No, the evidence suggests that no information was received from the executive branch in response to the resolution; or (3) Whether information was produced is unknown, unclear, or in dispute. In half of the resolutions submitted between 1947 and October 20, 2017, whether the resolution resulted in the production of information was unknown, unclear, or in dispute based on an examination of the legislative history. Twenty-eight percent of the resolutions of inquiry introduced over the period studied appear to have resulted in the production of some or all of the information requested of the executive branch. Twenty-two percent of the resolutions authored during this period appear to have failed to produce any requested information. When a similar examination is limited to the most recent period of high resolution of inquiry activity noted above, 2003-2006, the effectiveness of such resolutions in producing information from the executive branch is far less. During these years, such resolutions failed to produce information 64% of the time and succeeded in 19% of cases. As these statistics suggest, making determinations about the "success" of resolutions of inquiry can be difficult. As has been noted, slightly under half of the resolutions of inquiry introduced between 1947 and October 20, 2017, were never marked up by House committee or considered on the chamber floor. In such cases there are no legislative history documents to examine to find clues as to whether the Member's information request was answered or ignored. It is easy to imagine that, in at least some of these instances, information was in fact obtained. This supposition seems particularly likely in cases of resolutions introduced in the early years studied, where requests were commonly made for routine, noncontroversial data, such as labor statistics or documents about the government's use of railroad cars. It seems reasonable to suppose that such resolutions' sponsors never tried to call the measures up on the floor precisely because their request had been satisfied; in such a scenario, inaction on a resolution would be an indication of its success. But that is only a supposition. Likewise, the very introduction of a resolution of inquiry might encourage an executive department to hand over information, but it may not be immediately apparent that the resolution was the motivating factor. Although the established purpose of a resolution of inquiry is to acquire factual information, that may not be the only goal a Member has when authoring such legislation. Calling attention to an issue, seizing a committee's agenda from the majority party, forcing other legislative action (such as a hearing), getting Members on the record with difficult policy votes, or demonstrating interest in a particular subject area may all be possible goals for introducing a resolution of inquiry. As has been noted above, in recent Congresses, some have argued that the increase in resolutions of inquiry introduced is precisely because the resolutions are being used for goals such as these, rather than as a purely information-gathering mechanism. Conclusion and Questions for Consideration An examination of resolutions of inquiry introduced in the House between 1947 and October 20, 2017, raises several questions for the potential consideration of policymakers. Overall, the data suggest that resolutions of inquiry have become more common in some recent Congresses, have resulted in more work at the committee level, and have increasingly been used by minority party Members in the House. As noted, the data examined raise the question of whether increases in the number of House resolutions of inquiry submitted in some recent Congresses are affecting the workload of certain chamber committees. If policymakers were to determine that this is the case, and that it merits action, they might consider whether changes in the treatment of such resolutions under House rules are warranted. The House might respond, for example, by making such resolutions privileged only if a House committee chose to report them favorably. Or, the House might choose instead to extend the time period that committees have to report a privileged resolution of inquiry from the present 14 legislative days to a longer period of time. A change of this latter type might preserve the traditional use of resolutions of inquiry for all Members and give committees more freedom to choose when they will act on them. It might also discourage resolutions of inquiry from being introduced in an attempt to gain political advantage by highlighting important, but transient, hot-button political issues. Perhaps the clearest picture emerging from a systematic examination of resolution of inquiry activity in the post-WWII period, however, relates to the efficacy of such resolutions. Although the data show that in some cases—particularly in earlier eras—such resolutions have produced information, half the time it is unclear if resolutions of inquiry result in the production of any information to the House, and if so, to what degree. The possibility that the standing committees of the House are spending an increased amount of time acting on resolutions whose efficacy is largely unknown may lead policymakers to try to institute a more rigorous accounting of future resolutions of this type. Lawmakers might do so in a number of ways. Committees, for example, might direct the agencies they oversee to formally catalogue and submit to them what response, if any, they have made to recently introduced resolutions of inquiry. Committees might be encouraged to report this information to the House in the activities report they are already required to submit to the House each Congress under clause 1(d)(1) of Rule XI, or by some other mechanism. Executive branch communications to the House in response to a resolution of inquiry might be designated as such in the Congressional Record , or noted in a special category when received by the Clerk of the House, so that the cause and effect (or lack thereof) of such resolutions might become clearer. Policymakers might also consider standardizing the procedures House committees use to handle resolutions of inquiry, for example, by requiring them to transmit the resolution to the executive branch within a stated time frame with a letter from the chairman formally requesting executive comment on the resolution. Other options also exist. The House Committee on Rules, as the panel with jurisdiction over chamber rules, might examine whether resolutions of inquiry, as a mechanism rooted in the earliest days of Congress, should continue to enjoy privileged parliamentary status considering advances in information technology, including the development of oversight tools available to Members in recent decades. The House Oversight and Government Reform Committee, which has special duties under House Rule X to report committee oversight plans to the House along with any recommendations to promote "more effective and coordinated oversight," might also consider examining the use of such resolutions as oversight tools. Whether policymakers ultimately determine that changes in the use of resolutions of inquiry are warranted or not, such an examination might arguably give all Members of the House a better understanding of the resolution's use in the ongoing oversight relationship between the legislative and executive branches of government.

A resolution of inquiry is a simple resolution making a direct request or demand of the President or the head of an executive department to furnish the House with specific factual information in the Administration's possession. Under the rules and precedents of the House of Representatives, such resolutions, if properly drafted, are given a privileged parliamentary status. This means that, under certain circumstances, a resolution of inquiry can be brought to the House floor for consideration even if the committee to which it was referred has not reported it and the majority party leadership has not scheduled it for action. Between 1947 and October 20, 2017, 313 resolutions of inquiry were submitted in the House of Representatives. Two periods in particular, 1971-1975 and 2003-2006, saw the highest levels of activity on resolutions of inquiry during the 70 years studied. Early evidence suggests that the House may be entering another period of heightened activity on resolutions of inquiry: The number of such resolutions submitted thus far in the 115th Congress (2017-2018) already exceeds the number introduced in the previous three Congresses combined. Although nearly every standing House committee has been referred at least one resolution of inquiry during the post-World War II period, the Committees on Armed Services, Foreign Affairs, and the Judiciary have received the largest share of references because the most commonly sought information has related to matters of defense, foreign relations, and intelligence. Most resolutions of inquiry are directed to the President himself, but other executive branch officials have been the subject of such information requests as well. Just over half of the resolutions of inquiry introduced between 1947 and October 20, 2017, were reported by the House committee to which they were referred—in most cases adversely, indicating that the committee opposed the resolution. This opposition might be because the resolution had been made moot by the executive branch complying in whole or in part with the request, or because such a request would, in the view of the committee, compromise an ongoing investigation, endanger sensitive information, or seek already-available information. Approximately one-fifth of the resolutions of inquiry introduced during the period studied received House floor action, the last one in 1995. Although Representatives of both political parties have utilized resolutions of inquiry, in recent Congresses, such resolutions have overwhelmingly become a tool of the minority party in the House. This development has led some to question whether resolutions of inquiry are being used primarily for partisan gain or are unduly increasing the workload of certain House committees. Others have attributed the increase to a frustration among minority party Members over their inability to readily obtain information from the executive branch. Available data suggest that 28% of the time, a resolution of inquiry has resulted in the production of information to the House. In half of the cases examined here, however, it is simply unknown, unclear, or in dispute whether the resolution of inquiry produced any of the requested information, a fact which might suggest the need for additional investigation of the efficacy of this parliamentary oversight tool by policymakers. This report will be updated as events warrant.

Implications of the Death of Osama bin Laden Issues and questions related to the killing of Osama bin Laden (OBL) are multifaceted and may have operational, regional, and policy implications. Operational policy issues include congressional notification, legal considerations, and current and future military activities. Congressional Notification1 The chairmen of the House and Senate intelligence committees have stated that they were briefed on OBL's whereabouts during the past few months including, according to Representative Mike Rogers, chairman of the House Intelligence Committee, some details regarding the Abbottabad compound. The Senate majority leader, Senator Harry Reid, has also indicated that he had been briefed on the plans to confirm OBL's location and take action. Chariman Rogers indicated that the entire "Gang of Eight" had been briefed on the plans although not all were briefed at the same time. The Gang of Eight refers to the eight Members of Congress (the Speaker, House minority leader, the Senate majority and minority leaders, and the chairmen and ranking Members of the two intelligence committees) who, by statute, must be advised of presidential findings of covert actions (along with other members of the congressional leadership as may be included by the President). A finding is an official determination by the President that a specific covert action is in the national interest. A covert action is an activity to influence political, economic, or military conditions abroad where the role of the United States will not be apparent or acknowledged publicly. In a PBS News Hour interview on May 3, CIA Director Leon Panetta stated, "this was what's called a 'Title 50' operation, which is a covert operation, and it comes directly from the President of the United States who made the decision to conduct this operation in a covert way." He added that, consistent with Title 50, he commanded the mission but it was carried out by Vice Admiral William McRaven, the commander of the Joint Special Operations Command. For additional background on covert action notification issues, see CRS Report R40691, Sensitive Covert Action Notifications: Oversight Options for Congress . Possible Questions Notwithstanding the notification process that was carried out with this particular operation, other considerations and questions may still emerge. For example, In retrospect, was congressional notification overly restrictive? When was the written presidential finding (required by 50 USC 413b(a)(1)) reported to the several members of the Gang of Eight? Has the written finding now been shared with all members of the two intelligence committees? Did the operation necessarily constitute a covert action? Could it have been considered a traditional military activity? Was the role of the CIA Director essential to carrying out the operation? Could it have been carried out by the Secretary of Defense? Other than the role of Director Panetta what was the contribution of CIA officials to carrying out the raid? Should there be statutory provisions requiring that the Armed Services committees (or their respective leaderships) be advised of activities such as the Abbottabad raid? Legal Considerations5 The death of OBL appears to have little, if any, immediate consequence for the legal framework governing the conflict with Al Qaeda (AQ) and its affiliates. Shortly after the attacks of September 11, 2001, Congress passed the Authorization to Use Military Force (AUMF, P.L. 107-40 ), which authorized the President: 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. By conferring authority "to use all necessary and appropriate force" against entities involved in the 9/11 attacks, the AUMF is understood to not only authorize the use of force against such groups, but also to permit other fundamental incidents to the waging of war, including the detention of captured enemy belligerents to prevent their return to hostilities. Pursuant to this authority, the United States has engaged in military operations against AQ, the Taliban, and associated forces located in Afghanistan and other locations, and it has detained belligerents captured in these operations at the U.S. Naval Station at Guantanamo Bay, Cuba, and other locations. Due to OBL's position in AQ's command structure, along with his role in the 9/11 attacks, there appears to be clear consensus that he constituted a legitimate target under the AUMF at the time of his death. Additionally, the AUMF does not restrict the exercise of the authority it confers to a particular geographic location. Accordingly, at least for purposes of domestic law, the fact that OBL was killed outside of Afghanistan, where U.S. operations against AQ have primarily occurred, does not appear to affect the lawfulness of his targeting. While OBL was a legitimate target under the AUMF, his death does not result in the termination of the authority conferred by the act. The AUMF authorizes the use of force against all "nations, organizations, or persons" determined to have been involved in the 9/11 attacks. OBL's demise would not appear to affect the AUMF's continued application to AQ and any other entity believed to have "planned, authorized, committed, or aided" the 9/11 attacks or harbored such persons or groups, so as to prevent any future terrorist attacks by such entities against the United States. Even though OBL's death does not have the immediate legal consequence of modifying the authority conferred by the AUMF, it is nonetheless possible that his demise may inform future deliberations by policymakers as to whether to alter the legal framework governing U.S. policy towards AQ and its affiliates. Military Considerations10 The successful U.S. military operation against OBL carries with it possible military implications for the future. In terms of U.S. adversaries, it can be argued that the operation can serve as a powerful deterrent to both current and aspiring terrorist leaders. The search for OBL took almost a decade to develop and execute, spanned two very different Administrations with the operation conducted in a sovereign nation, apparently without their knowledge or consent, against a target that was considered by some analysts as well hidden and protected. Some contend that this sends the message that no matter how long it takes and how difficult the circumstances, the United States will ultimately kill or capture senior terrorist leadership. While this could convey a potential deterrence message, it also suggests that in the future, more concerted measures will need to be taken by terrorist organizations to protect their leadership, which could make military operations against them more difficult. Another implication is that the U.S. military has demonstrated a highly refined and sophisticated ability to locate, track, and interdict high-value targets anywhere in the world. While this capability has been associated with counterterrorism efforts, there are also implications for counter weapons of mass destruction (WMD) efforts as well as other national security-related efforts. These capabilities could also affect physical security planning and measures of adversarial countries or non-state actors that either aspire to or possess WMDs. Command and Control of the Operation During the President's May 1, 2011, address to the nation about the killing of OBL, he noted that, "and so shortly after taking office, I directed Leon Panetta, the director of the CIA, to make the killing or capture of Osama bin Laden the top priority of our war against Al Qaeda." During later briefings, it was revealed that the operation was carried out by U.S. Navy SEALs from the U.S. Special Operations Command. These and other briefings seem to suggest that the military operation to kill OBL was commanded by the CIA as opposed to the more traditional military chain of command. While this would not be unprecedented, it can be considered unusual and Congress might wish to clarify the operation's actual chain of command with the Administration. There could also be concerns that this arrangement might have been a less than optimal arrangement and that there could have been undue friction between the CIA and the Department of Defense (DOD), resulting in a negative impact on mission planning, resourcing, and execution. On the other hand, if this arrangement proved to be highly successful and relatively problem-free, the CIA/military command arrangement might serve as a model for future operations of a similar nature. Possible Questions Reports that the CIA commanded the operation suggest a number of considerations that might merit further examination. For example: Why was this particular command arrangement chosen over a more traditional CIA-commanded/CIA-conducted operation or a military-commanded/military-conducted operation? Was there a legal basis for this command arrangement or were special authorities or arrangements required? If the command arrangement is seen as a model, do current U.S. laws and policies support this type of arrangement, to include legal provisions pertaining to congressional notification and oversight? Al Qaeda, Regional, and Country Implications The killing of OBL nearly 10 years after the September 11, 2001, terrorist attacks on the United States poses many questions about the continuing destructive capabilities of AQ, the effects on regional affiliates, and U.S. policy implications in Pakistan and Afghanistan. Implications for AQ, Affiliates, and Unaffiliated Adherents12 Ascertaining the near- and long-term implications of OBL's death on AQ operations will be the subject of much analysis and debate for U.S. policymakers. Those implications may differ for core AQ leaders, their global affiliates, and non-affiliated ideological adherents of AQ around the world. In describing the significance of OBL's role in AQ government leaders and analysts offer a variety of perspectives. Some argue that OBL's role in AQ at the time of his death was largely inspirational, as his ability to communicate with followers and offer strategic and operational guidance and support had increasingly been degraded since the U.S. invasion of Afghanistan. Others argue that OBL remained an active participant in both the strategic direction and operational activities of all aspects of the AQ movement. With the death of OBL and U.S. seizure of documents and electronic data devices from his compound some analysts suggest further disruption to global AQ-related activities may be expected, including infighting between the remaining leaders of core AQ, lack of cohesion in and between the affiliated organizations, and fewer individuals recruited or radicalized to support AQ's goals. Should these events materialize, U.S. security agencies and international partners may have an opportunity to exploit vulnerabilities with the goal of hastening the demise of AQ and its affiliated organizations. However, some analysts may argue that the regional global affiliates are the least likely AQ entity to be affected by OBL's death. In December 2010, National Counterterrorism Center (NCTC) Director Michael Leiter offered the following assessment of the relationship between core AQ and its affiliates: affiliates have no longer simply relied upon their linkages to al-Qaida senior leadership in Pakistan but they have in fact emerged more as self-sustaining, independent movements and organizations. Now, they still have important tentacles back to al-Qaida senior leadership—I don't want to downplay that—but in many ways, especially in the case of al-Qaida and the Arabian Peninsula, operate with a greater level of independence. And, frankly, they operate at a different pace and with a different level of complexity than does al-Qaida senior leadership, and that has complicated our task significantly. Implications of OBL's Death on AQ's Global Affiliates18 The potential impact of OBL's death on AQ's global affiliates remains uncertain, in part because the specific operational ties between regional groups and core AQ elements in Afghanistan and Pakistan are not well understood outside of the intelligence community. In many instances, both operational and ideological ties appear to be limited, and most regional affiliates appear to have operated largely autonomously. The most common reported type of linkage between the core and global affiliates has taken the form of pledges of ideological fealty by regional affiliates to OBL, along with mutual statements of support for shared goals. A second, more opaque link between the core and the global affiliates is reported periodic exchanges for strategic planning between the core and affiliates and, in some cases, the exchange of financing or the deployment of technical experts to the affiliates by the core group. To the extent that the killing of OBL disrupts the organizational cohesion of the core group, these pledges and apparently limited exchanges may decline in frequency and scope. That possibility may be magnified if post-OBL leadership succession within the core group is contested—as implied by some analyses suggesting that Ayman al Zawahiri may be viewed unfavorably, for various reasons, by some core group elements. Such ties may also decline if intelligence gleaned from the operation targeting OBL spurs follow-on operations resulting in core group leadership killings, arrests, or other disruptions. Weakened core-regional ties may also lead global affiliates to become even more operationally autonomous and diverse, and potentially more politically differentiated as well. Global affiliates may see a need to rely more on local financial, human, and technical resources and may focus increased attention on local political grievances and social dynamics. Alternatively, in the short term, affiliates may re-orient their current local operations to respond to OBL's death, for instance, by moving up the timeline for planned attacks or by changing the terms of ongoing hostage negotiations that would have transnational implications. Another possibility is that one or more affiliates might eclipse or replace the core Afghanistan-Pakistan based leadership, whether intentionally or due to the course of events. The success of the U.S. operation targeting OBL may also motivate an increased U.S. operational emphasis on targeting key leaders of regional groups, especially if post-OBL field assessments of the core group indicate that its operational capacity has been degraded and if, as a result, the perceived threat posed by global affiliates takes on relatively greater importance. Increasing autonomy and differentiation among regional affiliates may, however, make tracking and targeting these groups and their members more difficult, as operations to do so may require increasingly focused, specialized, and dedicated expertise and human and intelligence assets. If global affiliates become more insular, this could prompt a decline in communications and resource exchanges between the core group and global affiliates, and thus a relative decline in opportunities to exploit or interdict these connections. The findings from future assessments of core and affiliated AQ capabilities may have significant global policy implications for the United States. While the consequences of OBL's death are unknown at present, U.S. actions leading up to and after his death may have implications for numerous U.S. policy issues. Pakistan19 OBL was located and killed in the mid-sized Pakistani city of Abbottabad, a military cantonment in the northwest Khyber Pakhtunkhwa province, in a compound one-half mile from the country's premier military academy. The location and circumstances of OBL's killing have exacerbated Washington's long-held doubts about Pakistan's commitment to ostensibly shared goals of defeating religious extremism, and may jeopardize future U.S. assistance to Pakistan. The news of OBL's whereabouts led to almost immediate questioning of Pakistan's role and potential complicity in his refuge; a senior Administration official expressed being "very concerned" that OBL was inside Pakistan and indicated that the U.S. government would carefully question Islamabad in this regard. President Obama's chief counterterrorism advisor, John Brennan, told reporters it was "inconceivable that Osama bin Laden did not have a support system" in Pakistan. The development has made much more acute already-existing doubts about Pakistan's role as a U.S. ally in counterterrorism (CT) efforts. In the representative words of one senior, U.S.-based nongovernmental expert on AQ and OBL, It stretches credulity to think that a mansion of that scale could have been built and occupied by OBL for six years without its coming to the attention of anyone in the Pakistani Army. The initial circumstantial evidence suggests that the opposite is more likely—that OBL was effectively being housed under Pakistani state control.... Perhaps the circumstantial evidence in the OBL case is misleading; only a transparent, thorough investigation by Pakistani authorities into how such a fugitive could have lived so long under the military's nose without detection would establish otherwise. That sort of transparent investigation is unlikely to take place. Given this, contends another leading analyst, some Americans feel that they have seen their worst suspicions confirmed by the fact that Osama bin Laden lived in a large, well-protected compound right under the Pakistani military's nose. Either Pakistan's intelligence service is terribly incompetent, fatally compromised, or both, raising questions about its utility as a partner. Thus, for a wide array of observers, the outcome of the years-long hunt for OBL leaves only two realistic conclusions: either Pakistani officials were at some level complicit in hiding the fugitive, or the country's military and intelligence services were exceedingly incompetent in their search for top AQ leaders. In either case, after many years of claims by senior Pakistani officials—both civilian and military—that most-wanted extremist figures were finding no refuge in their country, Pakistan's credibility has suffered a serious blow. Although relatively subdued in their responses, Pakistani leaders welcomed the news of OBL's death as a major victory in the battle against terrorism. Pakistani President Asif Zardari penned a May 2, 2011, opinion piece in which he claimed for his country partial credit for the elimination of OBL, reiterated the suffering and loss of life Pakistan has endured in combating terrorism, and called media suggestions that Pakistan has lacked determination or sincerity in this effort "baseless speculation," declaring, "Pakistan has never been and never will be the hotbed of fanaticism that is often described by the media." Such claims, already considered dubious, are now widely viewed as lacking credibility by most independent observers. Implications for the U.S.-Pakistan "Strategic Partnership" Pakistan is praised by U.S. leaders for its post-2001 cooperation with U.S.-led CT and counterinsurgency efforts, although long-held doubts exist about Islamabad's commitment to some core U.S. interests. A mixed record on battling Islamist extremism includes ongoing apparent tolerance of Taliban elements operating from Pakistan's territory. In his nationally televised address of May 1, 2011, President Obama stated that OBL had been found hiding "deep within Pakistan," and he reiterated again his long-standing intention to "take action within Pakistan" if OBL was located there. While giving no hint as to the extent of Pakistani cooperation in the specific operation, the President said that, "going forward, it is essential that Pakistan continue to join us in the fight against Al Qaeda and its affiliates." Subsequently, other top Administration officials have emphasized the need for close cooperation with Pakistan. These sentiments track well with the view of many independent observers that—despite ample reasons for discouragement and distrust—the United States has no good options other than continuing to engage Pakistan in what one analyst calls "the geostrategic equivalent of a bad marriage." These experts contend that a U.S. disengagement from Pakistan would likely only facilitate greater extremism and anti-American sentiment there, and that a sustained effort to assist in improving Pakistan's political, economic, and security circumstances is the best strategy. There are hopes among some analysts that the circumstances of OBL's death will inspire soul-searching in Pakistani leaders and perhaps more robust cooperation with the United States in the future. At the same time, Pakistan's main international rival, India, is now set to increase its long-existing efforts to convince Washington to more intensely scrutinize its relationship with Islamabad. Some senior Members of Congress have voiced the opinion that present circumstances call for "more engagement [with Pakistan], not less." Yet Capitol Hill has also been the site of sometimes pointed questioning of the wisdom of continued engagement with a national government that may at some levels have knowledge of OBL's whereabouts, with figures from both major parties expressing disbelief at Pakistan's allegations of ignorance and calling for greater oversight and accountability for future U.S. assistance to Pakistan. Questions About U.S. Foreign Assistance to Pakistan Although there is considerable agreement in U.S. government circles that disengaging from Pakistan is an unwise course, intensive congressional scrutiny of U.S. assistance to Pakistan is already underway. In the post 9/11 era, Congress has appropriated more than $20 billion in foreign assistance and military "reimbursements" for Pakistan, placing that country among the top recipients of U.S. financial support over the past decade. The Obama Administration has requested nearly $3 billion in further security- and development-related assistance to Pakistan for FY2012, along with more than $1 billion for continued reimbursements to the Pakistani military. As the incidence of Islamist militancy spread in recent years, anti-United States and anti-Western terrorist plots increasingly were traced to Pakistan-based extremist groups, and the Afghan insurgency continued to benefit from "safe havens" in western Pakistan, many in Congress began to question the efficacy of major aid disbursements to a country that was making little or no progress toward long-standing U.S. goals ostensibly shared by Islamabad. Such questioning sharpened in late 2010 and early 2011, especially with the acrimony surrounding the early 2011 Raymond Davis affair, in which a CIA contractor shot and killed two Pakistani men in Lahore and was imprisoned for seven weeks before his mid-March release. In the wake of revelations that the world's most-wanted terrorist had apparently been living for years in a comfortable home in a relatively affluent city and only one kilometer away from Pakistan's premier military academy, congressional skepticism about the continuation of large aid disbursements to Pakistan has deepened even further. On May 3, 2011, H.R. 1699 , the Pakistan Foreign Aid Accountability Act, was introduced in the House. The act would prohibit future foreign assistance to Pakistan unless the Secretary of State certifies that the Pakistani government was not complicit in hiding OBL. Depending on the course of Pakistan's future policy statements and levels of cooperation with the United States, Congress may choose to adjust current assistance funding levels. Such funding flows are already hindered by U.S. concerns about corruption and lack of transparency in Pakistan's implementing partners. Questions About Bilateral Security and Intelligence Cooperation U.S. government suspicions about some level of official Pakistani complicity in protecting wanted terrorists pre-date the 9/11 attacks. Obama Administration officials have at times been explicit in expressing such suspicions, perhaps more strongly than did their predecessors. The developments of May 1 appear for many to strongly vindicate these kinds of concerns. The U.S. government is now likely to ramp up pressure on Islamabad to locate and capture OBL's deputy, Ayman al-Zawahri, and Taliban leader Mullah Omar, both of whom are widely believed to be in Pakistan. No intelligence on the May 1 operation was shared with Pakistan; only after the raid were Pakistani leaders briefed on the results. Lead U.S. counterterrorism advisor John Brennan has stated that there is no evidence Pakistani officials knew of OBL's whereabouts, but that the United States is not ruling out the possibility. Unnamed Pakistani intelligence officials initially claimed that the raid was a joint operation "based on intelligence input from" and carried out "primarily" by the ISI, with some going so far as to say the operation could not have succeeded without Pakistani involvement. They later conceded that no Pakistanis participated. Yet some analysts are suspicious of the timing of the operation, noting that Pakistan has a record of producing high-value terrorist suspects at seemingly opportune moments and perhaps "played the Osama card" just as U.S.-Pakistan relations were at an acutely low ebb. Among the key questions yet to be answered in the wake of OBL's killing is what response the Pakistani government gives to the covert U.S. mission on its territory. The Pakistani military and intelligence services are now under pressure to explain how the mastermind of the 9/11 attacks was able to stay so deep inside Pakistan near a military academy. Whatever the answer—incompetence or complicity—the dynamics provide the U.S. government new leverage in pushing Pakistan to take more positive steps, though some argue that they also point to the limitations of what intelligence cooperation can be expected to achieve. To the extent that official Pakistan is subdued in its criticism or even implicitly accepting of the development, most analysts believe intelligence cooperation can continue and even improve, perhaps with the United States recalibrating incentives and disincentives for Pakistan's security services. Such a course could reverse some of the damage seen in the bilateral intelligence relationship in recent months, especially following the early 2011 Raymond Davis episode (noted above). Increased bilateral acrimony remains a possibility, however. In what is described as an effort to recover from an initial day of confusion and paralysis, Islamabad stiffened its stand on the May 1 events, with the Foreign Ministry expressing "deep concerns and reservations" about the manner in which the U.S. government carried out the operation "without prior information or authorization" from Islamabad: This event of unauthorized unilateral action cannot be taken as a rule. The Government of Pakistan further affirms that such an event shall not serve as a future precedent for any state, including the U.S. Such actions undermine cooperation and may also sometime constitute threat to international peace and security. Islamabad is in the difficult situation of having to balance a need to maintain appearances of strength and competence with a need to avoid antagonizing the United States, a key partner and foreign aid donor. The Foreign Ministry statement also includes extensive discussion of Pakistan's alleged intelligence prowess—even as related to surveillance in Abbottabad—and of its ability to protect Pakistani territory and airspace from foreign intrusion. While it is an open question whether Pakistan will take an increasingly adversarial position going forward, current signs are that Islamabad remains fundamentally committed to cooperative efforts in combating terrorism and militancy, although perhaps not to the point desired by U.S. officials. Implications for Existing Anti-American Sentiment in Pakistan Anti-American sentiments and xenophobic conspiracy theories remain rife among ordinary Pakistanis. Many across the spectrum of Pakistani society express anger at U.S. global foreign policy, in particular when such policy is perceived to be unfriendly or hostile to the Muslim world. Pakistani citizens were already angered by U.S.-launched drone strikes and perceptions of unilateral U.S. intelligence operations on Pakistani territory. Such anger is likely to spike in the wake of an apparently unilateral U.S. commando raid deep inside Pakistan. To date, the tone and tenor of Pakistani media reporting on OBL's death has been seen as largely positive. The information minister's emphasis on OBL's status as a foreigner was widely reported in a positive light. Yet some outlets have harshly questioned the apparent absence of a Pakistani government role in the operation and a perception that it had permitted the country's sovereignty to be violated. Much anger was expressed that Pakistan's leaders had allowed the country to be embarrassed and shamed. Some high-profile critics of the United States declared that OBL's death removed all justification for a continued U.S. presence in the region. Still, no media outlets are known to have openly expressed sympathy for OBL, and in only a single instance was his death referred to as "martyrdom." OBL did have a sizeable contingent of supporters in Pakistan, although many or most of these had favorable views rooted more in his embodiment of anti-American resistance than in his violent jihadi methods. Yet the numbers of Pakistanis willing to take to the streets in OBL's honor were quite few; two notable rallies took place immediately following the killing (in Quetta and Karachi), and these were comprised of perhaps 1,000 participants each. Possible Implications for Pakistan-India Relations The circumstances of OBL's death could affect the course of relations between Pakistan and its historic rival India. Indian Prime Minister Manmohan Singh called the killing "a significant step forward" and expressed hope that it would represent a decisive blow to AQ and other terrorist groups. The Indian External Affairs Ministry hailed the "historic development and victorious milestone in the global war against forces of terrorism." India's foreign and home ministers both took the opportunity to focus on the new evidence that terrorists find sanctuary in Pakistan, and concerns were raised that reprisal attacks could come in Indian Kashmir. Still, most analysts do not foresee the development as derailing New Delhi's recent decision to reengage a robust peace dialogue with Pakistan, even if such dialogue is made more complicated by May 1's events. At the same time, however, there may be some apprehension in New Delhi that the development could hasten a U.S. withdrawal from Afghanistan in ways that could be harmful to India's foreign policy interests. India is averse to seeing a Kabul government too friendly with Islamabad in the future and has a keen interest in precluding the resurgence of Islamist extremist groups in Afghanistan, which it fears could be the case if the Pakistani military has excessive influence on the anti-Taliban campaign's endgame. New Delhi also sees the discovery of OBL in Pakistan as an opportunity to more energetically press its demands that Islamabad extradite the alleged perpetrators of the 2008 Mumbai terrorist attack, Lashkar-e-Taiba figures believed to be in Pakistan, as well as other most-wanted anti-India terrorists such as Dawood Ibrahim. Possible Implications for Pakistan-Afghanistan Relations The ongoing insurgency in Afghanistan and its connection to developments in Pakistan remain matters of serious concern to U.S. policymakers. NATO remains reliant upon logistical routes through Pakistan to supply its forces in Afghanistan, and these landlines of communication regularly come under attack by militants. It is widely held that success in Afghanistan cannot come without the close engagement and cooperation of Pakistan, and that the key to stabilizing Afghanistan is to improve the long-standing animosity between Islamabad and Kabul. Pakistan's relations with its western neighbor have warmed in the past year, but remain tense given historic differences over Pashtun nationalism and contending accusations about cross-border militancy and terrorism. Afghan officials have stated flatly that Pakistan's security services "should have known" about OBL's whereabouts. Afghan President Karzai claimed that OBL's killing inside Pakistan vindicated his government's opposition to increased U.S. military operations in Afghanistan, saying the "war on terror" should focus on "the safe havens of terrorism outside Afghanistan." Some Afghan officials are wary that OBL's death would provide justification for a "premature" U.S. disengagement from the region. At the same time, OBL's death could ease Pakistan-Afghanistan tensions if it leads Islamabad to reevaluate its more direct efforts to shape the outcome of Afghan political reconciliation. There has been concern in Washington, DC, and other Western capitals that Pakistan had in 2010 begun to take a more aggressive and even unilateralist approach to shaping the course of peace negotiations and potential reconciliation in Afghanistan. This was seen in its arrests of certain Taliban figures in Pakistan who were pursuing reconciliation with the Karzai government and in Islamabad's purported protection of the hard line insurgent faction of Jalaluddin Haqqani in North Waziristan. Issues in Pakistan's Domestic Setting OBL's demise could have significant political and security ramifications for Pakistan. Islamabad's already fragile civilian government—widely viewed as unable to govern effectively and overwhelmed with mere survival—will see its standing further complicated. In the days immediately following the death, a dearth of official Pakistani responses—in particular from its military and intelligence services—was taken as an indication of national shock and embarrassment. Early official government statements emphasized U.S. action and refrained from portraying a Pakistani role, possibly in an effort to avoid antagonizing extremist organizations already promising revenge attacks, and also to direct public anger away from the federal government and toward the perceived infringement of Pakistani sovereignty by a foreign power. With official Pakistani acknowledgement that the raid was a wholly U.S. operation and that Pakistani leaders had not been consulted beforehand, the government and security services, alike, were placed in the awkward position of having to defend against new accusations that they are unable to stand up to foreign powers and protect Pakistani territory and interests. Such accusations are especially stinging in the wake of the Raymond Davis imbroglio and an increasingly unpopular U.S.-led drone campaign in western Pakistan. This means that even the relatively well-respected Pakistan army is coming under intense criticism for either knowing of OBL's whereabouts or not, a significant embarrassment for them in either case. Pakistan is also bracing for an expected wave of revenge attacks from AQ and its numerous affiliates based in the country. A statement from a Tehrik-e-Taliban Pakistan ("Pakistani Taliban") spokesman vowed retaliation for OBL's killing, saying, "President Zardari and the army will be our first targets, America will be our second target." Intelligence agencies reportedly have warned that Pakistan could see a steep rise in domestic terrorist attacks in the near term, with U.S. diplomatic missions named as primary targets, along with Pakistani government and military facilities. Afghanistan58 The death of OBL may have profound implications for the U.S. and NATO mission in Afghanistan. Following a strategy review, President Obama, in a major speech on Afghanistan policy at West Point on December 1, 2009, defined the mission in Afghanistan as follows: Our overarching goal [in Afghanistan] remains the same: to disrupt, dismantle, and defeat AQ in Afghanistan and Pakistan, and to prevent its capacity to threaten America and our allies in the future. With OBL now dead, some argue that this overarching goal has now been accomplished, and that U.S. forces can now be withdrawn from Afghanistan. Others argue that AQ's network of operatives and supporters in Afghanistan and Pakistan remains robust, in spite of the loss of its nominal leader. The death of OBL occurred as the Administration was already debating the size and scope of an initial drawdown, to begin in July 2011 as per the West Point speech discussed above, of the 99,000 U.S. forces currently in Afghanistan. Press reports quoting Administration officials say these officials recognize that the death of OBL could increase U.S. public pressure for a more rapid drawdown in Afghanistan than might have been considered before. Others, reportedly including those in the U.S. military who recommended current policy, believe that the death of OBL is likely to have minimal effect on the threat profile in Afghanistan, and that the U.S.-led mission there would be jeopardized by a rapid withdrawal. Although the stated goal of U.S. policy focuses on eliminating safe haven for terrorist groups, preventing reinfiltration of terrorist groups into Afghanistan is predicated on establishing durable security and capable and effective governance throughout Afghanistan. The death of OBL, and potential weakening of AQ, does not, in and of itself, accomplish these objectives. As noted in Defense Department reports, the most recent of which was released on May 3, 2011, security is being challenged by a confluence of related armed groups whose tactics continue to evolve based on experiences from previous fighting. Of these groups, AQ has been among the least materially significant to the fighting in Afghanistan, but may pose the greatest regional threat and transnational threat to the United States and its allies. Director of Central Intelligence Leon Panetta said on June 27, 2010, that AQ fighters in Afghanistan itself might number 50-100. NATO/ISAF officials said in October 2010, that AQ cells may be moving back into remote areas of Kunar and Nuristan provinces, particularly in areas vacated by U.S.-led forces. A targeted effort against AQ operatives in those areas in April 2011 killed a leading Saudi AQ operative. Press reports in April 2011 added that some AQ training camps might have been established inside Afghanistan. Top U.S. and NATO commander in Afghanistan General David Petraeus said that although the AQ presence in Afghanistan remains small at "less than 100 or so," in his view, operations to stabilize Afghanistan are necessary to prevent a broader reinfiltration. There is broad agreement among experts and U.S. officials that the core of the insurgency remains the Taliban movement centered around Mullah Umar, who led the Taliban regime during 1996-2001. Mullah Umar and many of his top advisers remain at large and are reportedly running their insurgency from safe haven in Pakistan. They are believed to be primarily in and around the city of Quetta, according to Afghan officials, thus accounting for the term usually applied to Umar and his aides: "Quetta Shura Taliban" (QST). Some believe that Umar and his inner circle blame their past association with AQ for their loss of power and seek to distance themselves from AQ. Other experts see continuing close association that is likely to continue were the Taliban movement to return to power. Other insurgents, particularly fighters associated with long-time commander Jalaluddin Haqqani and his son Sirajuddin, remain a potentially less reconcilable threat to the Afghan government, and the Haqqani faction has long had close ties to AQ. It is unclear if internal Taliban debates might be affected by the death of AQ founder OBL. Some within the movement might argue that OBL's removal from the regional picture might lessen international military pressure on all Afghanistan militant groups, and that continued association with AQ carries fewer costs than when OBL was still at large. Others in the Taliban movement might argue that his death leaves AQ weakened and therefore of little value to the Taliban effort. Still others say that the personal relationship between Umar and OBL has become irrelevant now that OBL is dead, and removes this as a factor in continuing to associate with AQ. Other experts and Administration commentary offer an alternate interpretation of OBL's death. According to some, the death of OBL might facilitate a political solution to the conflict in Afghanistan. Under a "reconciliation" initiative originated by President Karzai in 2009 and generally backed by the United States, there have been informal talks between Afghan officials and those close to or purporting to represent the Taliban movement, or at least parts of it. Some believe that the U.S. killing of OBL, which demonstrates U.S. reach to find and strike Pakistan-based militants directly—coupled with the pre-existing pressure from the 2009-2011 "surge" of U.S. forces in Afghanistan—could prompt key Taliban leaders to engage in serious settlement negotiations. Possible Questions A number of key questions and indicators about U.S. policy in Afghanistan may be considered in the wake of the death of OBL, including: How might the Afghan government react to signs of U.S. domestic pressure to accelerate a withdrawal from Afghanistan? Will the Afghan government try to more closely align with other powers, such as China and Russia, if it feels it is about to be "abandoned" by the United States? Within Afghanistan, could the perception of an accelerated U.S. drawdown cause some Afghans to give support to the Taliban-led insurgency, believing the insurgency likely to prevail in the absence of U.S. forces? Does the death of OBL make a Taliban role in a future Afghan government more palatable to some Afghans? If there is a U.S. decision to accelerate talks with the Taliban or withdraw from Afghanistan, how will key segments of the Afghan population react? For example, will women's groups oppose negotiations with the Taliban, fearing backsliding of their rights if the Taliban is given a share of power? How will the ethnic minorities of the north and west, who fought the Taliban regime during 1996-2001, respond to accelerated negotiations with Taliban figures? Discussions about a more rapid transition to Afghan security leadership might hinge on the quality and quantity of the Afghan National Security Forces. How capable are they? If there were a decision on a more rapid transition, to what extent could these Afghan forces be expanded and trained more quickly? What U.S. financial requirements would be involved in a more rapid expansion of the Afghan forces than has been planned to date? How will the Afghan government be able to financially and materially support forces trained to date? U.S. Strategy and Security Implications Near- and long-term security and foreign policy considerations may be reassessed with the killing of OBL. The national security community may seek to revise foreign policy and counterterrorism priorities while pursing actions to limit the possible threats to U.S. interests resulting from OBL's death. National Security Considerations64 In the wake of OBL's death, many practitioners and observers have expressed interest in the implications for U.S. national security strategy—whether and to what extent the U.S. government's prioritization of CT relative to other national security imperatives, the distribution of CT efforts among U.S. government agencies, and the relative balance of emphasis between CT and other concerns within key U.S. government agencies, ought to be adjusted. Such decision-making is likely to be shaped in part by assessments of the impact that OBL's death has on the AQ organization and its affiliates, by developments and considerations concerning other key U.S. national security interests, and by the current climate of relatively constrained resources. Background The 2010 National Security Strategy (NSS) repeatedly underscores the importance of the mission to "disrupt, dismantle and defeat Al Qaeda and its violent extremist affiliates in Afghanistan, Pakistan, and around the world." That mandate has been understood to include a broad range of activities including—according to the NSS —protecting the homeland, securing weapons of mass destruction, denying safe havens, and building partnerships around the world. In addition, there is a generally shared understanding among practitioners that multiple U.S. government agencies share responsibility for the mission to disrupt and defeat violent extremist organizations (VEOs). The NSS calls for an "integrated campaign that judiciously applies every tool of American power—both military and civilian." The Department of Defense's (DOD's) 2010 Quadrennial Defense Review ( QDR) recognizes a military role, naming "succeed[ing] in counterinsurgency, stability, and counterterrorism operations" as one of DOD's six key missions. The State Department's First Quadrennial Diplomacy and Development Review (QDDR), also released in 2010, stresses that "the threat of terrorism and violent extremism has become more acute and more immediate," and it argues that countering that threat is not exclusively a military responsibility, but rather one shared by multiple agencies. The NSS , QDR, and QDDR do not prioritize among the goals and objectives they name. While countering violent extremist threats is understood to be important, existing unclassified strategic guidance does not make clear how important that mission is compared to other key missions. Some practitioners suggest that a sense of relative importance generally comes directly from senior leadership—from statements by the President and from guidance issued by the National Security Council (NSC) process (i.e., the tiered system of Interagency Policy Committees, the Deputies Committee, the Principals Committee, and the NSC itself). Possible Questions U.S. National Priorities President Obama has repeatedly stressed the goal of defeating AQ and other VEOs in both written strategic guidance and public speeches. He has further stated that under that rubric he directed, at the beginning of his Administration, that killing or capturing OBL would be the "top priority of our war against AQ", but that the United States would also continue to "disrupt, dismantle and defeat his network." In the wake of the U.S. operation against OBL, President Obama stressed, "his death does not mark the end of our effort." That statement does not, however, indicate whether the overall "defeat" mission will retain the same de facto importance relative to other national security priorities or to broader U.S. national interests. To what extent might OBL's death prompt a reduction in the relative importance of countering VEOs, compared to other U.S. national security imperatives, and to broader U.S. national interests? Balance of Responsibilities among Departments and Agencies In the wake of OBL's demise, the U.S. government may reconsider not only how much effort to apply to countering VEOs, but also what balance of instruments of national power to apply to that effort. That could affect the relative burdens borne by various U.S. agencies in countering VEOs. Key factors—about which assessments are likely to differ—include not only whether the threat has diminished (or grown); but also how and in what ways the threat may have changed qualitatively. A more diffuse, less well-known, more opportunistic, less predictable set of violent extremist networks, for example, could pose different kinds of challenges and require different kinds of approaches to counter it. A further factor is likely to concern how U.S. allies and partners around the world perceive the nature of the terrorist threat in the wake of OBL's death. While current national-level unclassified guidance—in particular the NSS —does not assign roles and responsibilities in any detail, individual agencies, in their own unclassified guidance—including the QDR and the QDDR —do assign roles and responsibilities to themselves, under the "defeating VEOs" rubric. Going forward, some may argue, for example, that OBL's death and its expected impact on AQ and its affiliates should signal both a decreased use of large-scale conventional military operations to counter VEOs, and an increased use of precision operations that leverage sophisticated intelligence assets and high-end surgical military capabilities, on the model of the OBL operation. Others, focusing less on identified terrorist targets and more on the root causes of terrorism, may call for reassessing the efficacy of the mix of U.S. instruments applied to ameliorating conditions that feed recruitment and tacit popular acceptance of VEOs. Such measures include, for example, countering extremist ideology, and partnering with states around the world to help them develop security forces and/or judicial systems well suited for countering violent extremism. In turn, those missions—and others—are typically executed by a combination of efforts by multiple U.S. government agencies. For example, both DOD and the State Department execute "communications" programs, targeting a range of audiences in various ways, designed to counter violent extremist ideology. A reassessment of the mix of tools might also include re-evaluation of agencies' respective roles. To what extent will, and should, OBL's demise trigger a reassessment of the balance of instruments of national power that the U.S. government commits to countering violent extremism, and of the distribution of roles and responsibilities among U.S. government agencies appropriate to that balance? Priorities within Departments and Agencies In considering refinements to the relative priority of CT, departments and agencies are likely to be steered primarily by guidance from the White House concerning both overall prioritization and the inter-agency distribution of responsibilities. In addition, agencies are likely to conduct their own more detailed internal assessments of the requirements of their respective parts in a potentially refined CT mission, in the context of a resource-constrained environment. DOD's current unclassified guidance does not prioritize. The 2010 QDR names four "priority objectives": "prevail in today's wars; prevent and deter conflict; prepare to defeat adversaries and succeed in a wide range of contingencies; and preserve and enhance the all-volunteer force." Under the "defeat" objective, in turn, the QDR describes a range of future challenges, which include "defeating AQ and its allies." Other challenges include responding to natural disasters, prevailing against state adversaries, securing weapons of mass destruction, stabilizing fragile states, protecting U.S. citizens, conducting cyberspace operations, and preventing human suffering—in short, a robust but non-prioritized list. For DOD, the President's guidance in April 2011 to identify $400 billion in additional cuts to the defense budget between now and 2023, and DOD's plans to conduct a "comprehensive review of missions, capabilities and America's role in the world" to inform that decision-making process, are likely to force the question of prioritization. For the State Department, internal debates might include, for example, the relative weights of the communications efforts to counter violent extremism, and to build partner capacity, as well as its proposal, pending congressional approval, to establish a Bureau (instead of the current Office) for Counter-Terrorism. Possible Implications for the Homeland73 It is unknown how OBL's death will affect AQ-inspired homegrown jihadist terrorists targeting the United States. On May 2, 2011, the Federal Bureau of Investigation (FBI, the Bureau) and Department of Homeland Security (DHS) issued a joint bulletin indicating that OBL's death may motivate revenge- or publicity-seeking homegrown jihadists to attack the United States. However, it is unlikely that his death will significantly change the counterterrorism investigative efforts of the FBI, the lead agency for investigating the federal crime of terrorism. Regardless, OBL's demise underscores a number of issues the Bureau confronts. Homegrown Jihadists It is too early to chart the specific effects of OBL's death on homegrown jihadists, who have accounted for more than 40 terrorist plots—4 of which resulted in attacks—since 9/11. These plots and attacks reflect a global shift in terrorism toward decentralized, autonomously radicalized, violent jihadist individuals or groups who strike in their home countries. Global counterterrorism efforts have made it harder for international terrorist networks to formulate plots, place their recruits in targeted countries, and carry out violent strikes in locations far from their bases of operation. AQ and affiliated groups are moving "away from what we are used to, which are complex, ambitious, multilayered plots." Possible Questions Regarding the nature of homegrown jihadist terrorism, at least four issues may emerge from OBL's death: Will homegrown jihadist plotting increase? How will his death affect the radicalization of people interested in violent jihad who live in the United States? How will it shape the popularity of surviving key jihadist intermediaries who inspire U.S. residents to radicalize and turn to jihadist terrorism? Intermediaries such as Anwar al-Aulaqi have allegedly influenced people involved in a number of recent homegrown terrorist plots. Finally, because OBL's death potentially affects the radicalization process, it may be of value to assess the Administration's progress toward developing and implementing a domestic counter-radicalization strategy. It has not been entirely settled which agencies have what responsibilities when it comes to identifying domestic radicalization and interdicting attempts at terrorist recruitment. FBI Investigations Since 9/11, the Bureau has arguably taken a much more proactive posture, particularly regarding counterterrorism. It now views its role as both "predicting and preventing" the threats facing the nation, drawing upon enhanced resources. In light of this transformed role, OBL's death may offer Congress the opportunity to explore issues related to the Bureau. How, if at all, will the demise of such a prominent terrorist figure alter the Bureau's mission, priorities, and allocation of resources? Does the FBI, and the homeland security community more broadly, have the proactive capacity to quickly and efficiently task its human sources (informants) to ascertain what impact OBL's death may have on homegrown jihadist extremists? This addresses a broader issue: does a coherent domestic intelligence collection strategy exist to coordinate the efforts of the FBI, the Department of Homeland Security (DHS), other federal partners, and state and local law enforcement elements ? How will the FBI use strategic, big-picture intelligence to develop a corporate understanding of the ways that the domestic threat will evolve in the wake of OBL's demise? In other words, has the Bureau developed effective predictive capacity that can continually re-assess the changing terrorist landscape? Will the FBI alter its operations based on predictive strategic assessments in this area? Possible Implications for U.S. Security Interests84 Near-Term Implications for U.S. Security Interests Some government leaders and security analysts predict that the death of OBL may be accompanied by near-term threats to U.S. global security interests. Numerous reasons are offered in support of this assessment, including the need for the core, affiliates, and adherents to prove viability and relevance in response to OBL's death; retribution to avenge his killing; and the need to quickly conduct an attack due to concerns that information gleaned during the raid of OBL's compound may jeopardize operational security. Long-Term Implications for U.S. Security Interests If it is determined that OBL remained an active decision-maker in the development of core AQ strategy and terrorist operations, his death may have negative implications for the organization's ability to continue as a viable threat to U.S. interests. While some analysts suggest that OBL may have provided some level of support to AQ-affiliated organizations, most of these entities appear to be self-sufficient and it is likely regionally focused terrorism-related activities would not be affected. Some fear that the death of OBL could lead to a further degradation of the standing of core AQ, which in turn may lead to an attempt by a leader of an affiliated AQ organization to pursue a more aggressive global terrorist agenda in hopes of rising to place of prominence. Implications for U.S. Foreign Policy in the Middle East While some experts argue that OBL's limited ideological appeal and operational role in AQ suggest that the implications of his death will also be limited, senior U.S. counterterrorism officials view the death of OBL as the possible beginning of the end of AQ. In a press briefing at the White House on May 2, 2011, an unnamed senior Administration official offered the following assessment of the significance of OBL's death and the prospect of continued threats to the nation: Without a doubt, the United States will continue to face terrorist threats. There's also no doubt that the death of Osama bin Laden marks the single greatest victory in the U.S.-led campaign to disrupt, dismantle, and defeat Al Qaeda. It is a major and essential step in bringing about Al Qaeda's eventual destruction. Although Al Qaeda may not fragment immediately, the loss of Osama bin Laden puts the group on a path of decline that will be difficult to reverse. As intelligence operations in the wake of the recent raid on OBL's compound shed light on core AQ and its affiliates' activities, policymakers may be presented with new information to help in determining how the U.S. and international counterterrorism communities might initiate changes to transnational security and foreign policy strategies. These actions coupled with the ongoing activities by individuals in the Middle East pursuing changes to the policies of current regimes may offer an opportunity for a reevaluation of U.S. foreign policy in the region. Some analysts argue that recent anti-authoritarian demonstrations and political change in some Arab states run counter to OBL's vision for the region. Others suggest that the outcome of political upheaval in the region has yet to be determined and that groups and individuals supportive of OBL's ideology may yet successfully exploit recent developments. On May 2, Secretary of State Clinton argued that "history will record that bin Laden's death came at a time of great movements toward freedom and democracy, at a time when the people across the Middle East and North Africa are rejecting the extremist narratives and charting a path of peaceful progress based on universal rights and aspirations. There is no better rebuke to al-Qaida and its heinous ideology." If demonstrators seeking change are successful in managing political transitions and ensuring lasting security in their countries, their efforts could further contribute to the decline of AQ and its ideology.

The May 1, 2011, killing of Osama bin Laden (OBL) by U.S. forces in Pakistan has led to a range of views about near- and long-term security and foreign policy implications for the United States. Experts have a range of views about the killing of OBL. Some consider his death to be a largely symbolic event, while others believe it marks a significant achievement in U.S. counterterrorism efforts. Individuals suggesting that his death lacks great significance argue that U.S. and allied actions had eroded OBL's ability to provide direction and support to Al Qaeda (AQ). For these analysts, OBL's influence declined following the U.S. invasion of Afghanistan to a point where prior to his death he was the figurehead of an ideological movement. This argument reasons that a shift of terrorist capability has occurred away from the core of AQ to affiliated organizations. Still others argue that OBL pursued a strategy of developing the AQ organization into an ideological movement thus making it more difficult to defeat. They contend that, even if OBL were no longer involved in the decision-making apparatus of AQ, his role as the inspirational leader of the organization was far more important than any operational advice he might offer. As such, his death may not negatively affect the actions of the ideological adherents of AQ and as a martyr he may attract and inspire a greater number of followers. Individuals suggesting that his death is a major turning point in U.S. counterterrorism efforts contend that OBL remained an active participant in setting a direction for the strategy and operations of AQ and its affiliates. In addition to disrupting AQ's organizational activities some believe his death may serve as a defining moment for the post 9/11 global counterterrorism campaign as current and potential terrorists, other governments, and entities that wish to threaten U.S. interests will take note of the U.S. success in achieving a long-held security goal. The death of OBL may have near- and long-term implications for AQ and U.S. security strategies and policies. The degree to which OBL's death will affect AQ and how the U.S. responds to this event may shape the future of many U.S. national security activities. Implications and possible considerations for Congress related to the U.S. killing of OBL in Pakistan are addressed in this report. As applicable, questions related to the incident and U.S. policy implications are also offered. They address: Implications for AQ (core, global affiliates, and unaffiliated adherents) Congressional notification Legal considerations National security considerations and implications for the homeland Military considerations Implications for Pakistan and Afghanistan Implications for U.S. security interests and foreign policy considerations The death of OBL is a multifaceted topic with information emerging frequently that adds perspective and context to many of the issues discussed in this report. This report is based on open-source information and will be updated as necessary.

What Is the Farm Bill? The farm bill is an omnibus, multi-year law that governs an array of agricultural and food programs. Although agricultural policies sometimes are created and changed by freestanding legislation or as part of other major laws, the farm bill provides a predictable opportunity for policymakers to comprehensively and periodically address agricultural and food issues. The farm bill is renewed about every five years. Since the 1930s, farm bills traditionally have focused on farm commodity program support for a handful of staple commodities such as corn, soybeans, wheat, cotton, rice, dairy, and sugar. Yet farm bills have grown in breadth in recent decades. Among the most prominent additions have been nutrition assistance, conservation, horticulture, and bioenergy programs. The omnibus nature of the farm bill can create broad coalitions of support among sometimes conflicting interests for policies that individually might not survive the legislative process. This can lead to competition for funds. In recent years, more parties have become involved in the debate, including national farm groups, commodity associations, state organizations, nutrition and public health officials, and advocacy groups representing conservation, recreation, rural development, faith-based interests, local food systems, and certified organic production. The Agricultural Act of 2014 ( P.L. 113-79 , H.Rept. 113-333 ), referred to here as the "2014 farm bill," is the most recent omnibus farm bill. It was enacted in February 2014 and expires mostly in 2018. It succeeded the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , "2008 farm bill"). The 2014 farm bill contains 12 titles encompassing commodity price and income supports, farm credit, trade, agricultural conservation, research, rural development, energy, and foreign and domestic food programs, among other programs. (See titles described in the text box below.) Provisions in the 2014 farm bill reshaped the structure of farm commodity support, expanded crop insurance coverage, consolidated conservation programs, reauthorized and revised nutrition assistance, and extended authority to appropriate funds for many U.S. Department of Agriculture (USDA) discretionary programs through FY2018. Potential expiration and the consequences of expired law may also motivate legislative action. When a farm bill expires, not all programs are affected equally. Some programs cease to operate unless reauthorized, while others might continue to pay old obligations. The farm commodity programs not only expire but would revert to permanent law dating back to the 1940s. Nutrition assistance programs require periodic reauthorization, but appropriations can keep them operating. Many discretionary programs would lose statutory authority to receive appropriations, though annual appropriations could provide funding and implicit authorization. Other programs have permanent authority and do not need to be reauthorized (e.g., crop insurance). Figure 1 provides a timeline of selected important dates for U.S. farm bill policy and other related laws. In many respects, agricultural policy in the United States began with the creation of USDA, homesteading, and subsequent creation of the land grant universities in the 1800s. Many stand-alone agricultural laws were passed during the early 1900s to help farmers with credit availability and marketing practices, and to protect consumers via meat inspection. The economic depression and dust bowl in the 1930s prompted the first "farm bill" in 1933, with subsidies and production controls to raise farm incomes and encourage conservation. Commodity subsidies evolved through the 1960s, when Great Society reforms drew attention to food assistance. The 1973 farm bill was the first "omnibus" farm bill; it included not only farm supports but also food stamp reauthorization to provide nutrition assistance for needy individuals. Subsequent farm bills expanded in scope, adding titles for formerly stand-alone laws such as trade, credit, and crop insurance. New conservation laws were added in the 1985 farm bill, organic agriculture in the 1990 farm bill, research programs in the 1996 farm bill, bioenergy in the 2002 farm bill, and horticulture and local food systems in the 2008 farm bill. What Is the Estimated Cost of the Farm Bill? The farm bill authorizes programs in two spending categories: mandatory and discretionary. Mandatory spending programs generally operate as entitlements. A bill pays for them using multi-year budget estimates (baseline) when the law is enacted. Discretionary spending programs are authorized for their scope but are not funded in the farm bill. They are subject to annual appropriations. While both types of programs are important, mandatory programs often dominate the farm bill debate and are the focus of the farm bill's budget. How Much Was It Expected to Cost at Enactment in 2014? When the current farm bill was enacted in February 2014, the Congressional Budget Office (CBO) estimated that the total cost of mandatory programs would be $489 billion for the 12-title farm bill over the five years FY2014-FY2018. Four titles accounted for 99% of anticipated farm bill mandatory outlays: nutrition, crop insurance, conservation, and farm commodity support. The nutrition title, which includes the Supplemental Nutrition Assistance Program (SNAP), comprised 80% of the total. The remaining 20% was mostly geared toward agricultural production across several other titles ( Table 1 ). Farm commodity support and crop insurance combined to be 13% of mandatory program costs, with another 6% of costs in USDA conservation programs. All other farm bill titles accounted for about 1% of all mandatory expenditures. Although their relative share is small, titles such as horticulture and research saw their shares increase compared to the 2008 farm bill. What Are the Current Projections? In the years since enactment of the farm bill, CBO has updated its projections of government spending several times a year based on new information about the economy and program participation. Outlays for FY2014-FY2016 have become final (actual), estimates are available for FY2017, and updated projections for FY2018 have generally reflected lower farm commodity prices and lower costs for SNAP. The new five-year estimated cost of the 2014 farm bill, as of April 2018, is $455 billion for the four largest titles, compared with $484 billion for those same four titles four years ago (right side of Table 1 ). This is $28 billion less than what was projected at enactment (-6%). Figure 2 shows these projections and actual outlays for the four major titles of the 2014 farm bill. The result of these new projections is that SNAP outlays are projected to be $26 billion less for the five-year period FY2014-FY2018 than was expected in February 2014 (-7%). Crop insurance is projected to be $10 billion less for the five-year period (-25%) and conservation programs about $5 billion less (-19%). In contrast, farm commodity and disaster program payments are projected to be about $13 billion higher than was expected at enactment (+55%) due to lower commodity market prices (which raises counter-cyclical payments) and higher livestock payments due to disasters. How Much Has the Farm Bill Cost in the Past? The cost of the farm bill has grown over time, though relative proportions across the major program groups have shifted ( Figure 3 ). Conservation program spending has steadily risen as conservation programs have become more numerous and expansive in their authorized scope. Farm commodity program spending has both risen and fallen with market price conditions and policy responses. For the past decade, though, program costs have generally decreased as counter-cyclical payments were smaller due to higher market prices. (This trend, however, has reversed at least temporarily as shown in the current projections for future farm bill spending [ Table 1 ]). Crop insurance costs have increased steadily as the program has expanded to cover more commodities and become a primary means for risk management. Higher farm commodity market prices and increased covered acreage have raised the insured value of production and consequently program costs. Crop insurance costs have overtaken the traditional farm commodity programs in total costs. Nutrition program assistance in the farm bill (SNAP) rose sharply after the recession in 2009 but has begun to decline more slowly during the recovery. How Have the Allocations Changed over Time? The allocation of baseline among titles, and the size of each amount, is not a zero-sum game over time. Every year, CBO reestimates the baseline to determine expected costs. Baseline projections rise and fall based on changes in economic conditions, even without any action by Congress. For example, when the 2008 farm bill was enacted, the nutrition title was 67% of the five-year total. When the 2014 farm bill was enacted, the nutrition share had risen to 80% ( Table 2 ). This growth in size and proportion does not mean, however, that nutrition grew at the expense of agricultural programs. Legislative changes that are made in each farm bill account for only a fraction of the observed change between farm bills. Nutrition . Projected five-year SNAP outlays rose at an annualized rate of 13% per year from enactment of the 2008 farm bill to the 2014 farm bill. This $202 billion increase was entirely from changing economic expectations, since legislative changes in the 2014 farm bill scored a $3.2 billion reduction. Crop insurance. Projected five-year crop insurance outlays rose at an annualized rate of 11% per year from 2008 to 2014—nearly the same rate as SNAP, though smaller in dollars. The $20 billion increase was mostly from changing economic expectations rather than the $1.8 billion increase that was legislated in the farm bill. Farm commodity programs. Projected five-year farm commodity program outlays fell at an annualized rate of 9.1% per year between the 2008 and 2014 farm bills, given the $18 billion reduction that was scored from restructuring program payments. Title-by-Title Summaries Following are summaries of the major provisions of each title of the 2014 farm bill. For more detailed information see CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side , which compares the provisions in the final 2014 farm bill to previous law and the House- and Senate-passed versions of the farm bill. Title I: Commodity Programs9 Under the enacted 2014 farm bill, farm support for traditional commodity crops—grains, oilseeds, and cotton—is restructured by eliminating what were formerly known as direct payments, the counter-cyclical program, and the Average Crop Revenue Election program. Under the 2014 farm bill, producers may choose between two programs that respond to declines in either price or revenue: (1) Price Loss Coverage (PLC), which is a counter-cyclical price program that makes a farm payment when the farm price of a covered crop declines below its statutory "reference price"; and (2) Agriculture Risk Coverage (ARC), which is a revenue-based program designed to cover a portion of a farmer's out-of-pocket loss (referred to as "shallow loss") when crop revenue declines . These farm programs are separate from a producer's decision to purchase crop insurance (Title XI). The 2014 farm bill makes significant changes to U.S. dairy policy by eliminating the dairy product price support program, the Milk Income Loss Contract (MILC) program, and export subsidies. These are replaced by a new program that makes payments to participating dairy producers when the national margin (average farm price of milk minus an average feed cost calculation) falls below a producer-selected margin. The farm bill does not change the objective and structure of the U.S. sugar program. The 2014 farm bill also sets a $125,000 per person cap on the total of PLC, ARC, marketing loan gains, and loan deficiency payments. It also makes changes to the eligibility requirement based on adjusted gross income (AGI), setting a new limit to a single, total AGI limit of $900,000. For disaster assistance, Title I reauthorizes and funds four programs covering livestock and tree assistance. Coverage is retroactive beginning with FY2012 and continues without expiration. The crop disaster program from the 2008 farm bill (the Supplemental Revenue Assistance, or SURE) was not reauthorized, but elements of it are folded into the new ARC program by allowing producers to protect against farm-level revenue losses. Title II: Conservation12 Prior to the 2014 farm bill, the agricultural conservation portfolio included over 20 programs. The bill reduces and consolidates the number of conservation programs, and reduces mandatory funding. It reauthorizes many of the larger existing programs, such as the Conservation Reserve Program (CRP), the Environmental Quality Incentives Program (EQIP), and the Conservation Stewardship Program (CSP), and rolled smaller and similar conservation programs into two new programs—the Agricultural Conservation Easement Program (ACEP) and the Regional Conservation Partnership Program (RCPP). Previous easement programs related to wetlands, grasslands, and farmland protection were repealed and consolidated to create ACEP, which retains most of the provisions by establishing two types of easements: wetland reserve easements that protect and restore wetlands, and agricultural land easements that prevent non-agricultural uses on productive farm or grasslands. Previous programs that focused on agricultural water enhancement, and two programs related to the Chesapeake Bay and Great Lakes, were repealed and consolidated into the new RCPP, which partners with state and local governments, Indian tribes, cooperatives, and other organizations for conservation on a regional or watershed scale. The 2014 farm bill also adds the federally funded portion of crop insurance premiums to the list of program benefits that could be lost if a producer is found to produce an agricultural commodity on highly erodible land without implementing an approved conservation plan or qualifying exemption, or converts a wetland to crop production. This prerequisite, referred to as conservation compliance, has existed since the 1985 farm bill and previously affected most USDA farm program benefits, but has excluded crop insurance since 1996. Title III: Trade13 The 2014 farm bill reauthorized and amended USDA's food aid, export market development, and export credit guarantee programs. The bill reauthorizes all of the international food aid programs—including the largest, Food for Peace Title II (emergency and nonemergency food aid). It also amends existing food aid law to place greater emphasis on improving the nutritional quality of food aid products and ensuring that sales of agricultural commodity donations do not disrupt local markets. The bill creates a new local and regional purchase program in place of the expired local and regional procurement (LRP) pilot program of the 2008 farm bill and increases the authorized appropriations for the program. The 2014 farm bill also reauthorizes funding for the Export Credit Guarantee program and three other agricultural export market promotion programs, including the Market Access Program (MAP), which finances promotional activities for both generic and branded U.S. agricultural products, and the Foreign Market Development Program (FMDP), which is a generic commodity promotion program. It also made changes to the credit guarantee program to comply with the WTO cotton case against the United States won by Brazil, and proposes a plan to reorganize the trade functions of USDA, including establishing an agency position to coordinate sanitary and phytosanitary matters and address agricultural non-tariff trade barriers across agencies. Title IV: Nutrition14 The 2014 farm bill's nutrition title accounts for 80% of the law's forecasted spending. The majority of the law's Nutrition funding and policies pertain to the Supplemental Nutrition Assistance Program (SNAP), which provides benefits redeemable for eligible foods at eligible retailers to eligible, low-income individuals. The bill reauthorizes SNAP and The Emergency Food Assistance Program (TEFAP, the program that provides USDA foods and federal support to emergency feeding organizations such as food banks and food pantries). The bill retains most of the eligibility and benefit calculation rules in SNAP. However, it does amend how Low-Income Home Energy Assistance Program (LIHEAP) payments are treated to calculate SNAP benefits. It disqualifies certain ex-offenders from receiving SNAP benefits if they do not comply with the terms of their sentence. The law establishes a number of new policies related to the SNAP Employment and Training (E&T) program, including a pilot project for work programs for SNAP participants. The bill makes changes to SNAP law pertaining to retailer authorization and benefit issuance and redemption, including requiring stores to stock a greater variety of foods and more fresh foods, requiring retailers to pay for their electronic benefit transfer (EBT) machines, and providing additional funding for combatting trafficking (the sale of SNAP benefits). It also includes new federal funding to support organizations that offer bonus incentives for SNAP purchases of fruits and vegetables (called Food Insecurity Nutrition Incentive grants). It also includes other changes to SNAP and related programs, including amendments to the nutrition programs operated by tribes and territories, the Commodity Supplemental Food Program (CSFP), and the distribution of USDA foods to schools. Title V: Credit18 The 2014 farm bill makes relatively minor changes to the permanent statutes for two types of farm lenders: the USDA Farm Service Agency (FSA) and the Farm Credit System (FCS). It gives USDA discretion to recognize alternative legal entities to qualify for farm loans and allow alternatives to meet a three-year farming experience requirement. It increases the maximum size of down-payment loans, and eliminates term limits on guaranteed operating loans (by removing a maximum number of years that an individual can remain eligible). It increases the percentage of a conservation loan that can be guaranteed, adds another lending priority for beginning farmers, and facilitates loans for the purchase of highly fractionated land in Indian reservations. Title VI: Rural Development19 The 2014 farm bill reauthorizes and/or amends rural development loan and grant programs and authorizes several new provisions, including rural infrastructure, economic development, and broadband and telecommunications development. The bill reauthorizes funding for programs under the Rural Electrification Act of 1936, including access to broadband and the Distance Learning and Telemedicine Program. It reauthorizes the Northern Great Plains Regional Authority and the three regional authorities established in the 2008 farm bill. It also increases funding for several programs, including the Value-Added Agricultural Product Grants, rural development loans and grants, and the Microentrepreneur Assistance Program. It retains the definition of "rural" and "rural area" under current law for purposes of program eligibility. However, it amends the definition of rural area in the 1949 Housing Act so that areas deemed rural retain their designation until the 2020 decennial census and raises the population threshold for eligibility from 25,000 to 35,000. Title VII: Research21 USDA conducts agricultural research at the federal level and provides support for cooperative research, extension, and post-secondary agricultural education programs. The 2014 farm bill reauthorizes funding for these activities through FY2018, subject to appropriations, and amends authority so that only competitive grants can be awarded under certain programs. Mandatory spending for the research title is increased for several programs, including the Specialty Crop Research Initiative and the Organic Agricultural Research and Extension Initiative. Also, mandatory funding is continued for the Beginning Farmer and Rancher Development Program. The bill provides mandatory funding to establish the Foundation for Food and Agriculture Research, a nonprofit corporation designed to accept private donations and award grants for collaborative public/private partnerships among USDA, academia, and the private sector. Title VIII: Forestry22 General forestry legislation is within the jurisdiction of the Agriculture Committees, and past farm bills have included provisions addressing forestry assistance, especially on private lands. The 2014 farm bill generally repeals, reauthorizes, and modifies existing programs and provisions under two main authorities: the Cooperative Forestry Assistance Act (CFAA), as amended, and the Healthy Forests Restoration Act of 2003 (HFRA), as amended. Many federal forestry assistance programs are permanently authorized, and thus do not require reauthorization in the farm bill. However, the 2014 farm bill reauthorizes several other forestry assistance programs through FY2018. It also repeals programs that have expired or have never received appropriations. The bill also includes provisions that address the management of the National Forest System, and also authorizes the designation of treatment areas within the National Forest System that are of deteriorating forest health due to insect or disease infestation, and allows for expedited project planning within those designated areas. Title IX: Energy23 USDA renewable energy programs encourage research, development, and adoption of renewable energy projects, including solar, wind, and anaerobic digesters. However, the primary focus of these programs has been to promote U.S. biofuels production and use. Cornstarch-based ethanol dominates the U.S. biofuels industry. Earlier, the 2008 farm bill refocused U.S. biofuels policy initiatives in favor of non-corn feedstocks, especially the development of the cellulosic biofuels industry. The most critical programs to this end are the Bioenergy Program for Advanced Biofuels (pays producers for production of eligible advanced biofuels); the Biorefinery Assistance Program (assists in the development of new and emerging technologies for advanced biofuels); the Biomass Crop Assistance Program, BCAP (assists farmers in developing nontraditional crops for use as feedstocks for the eventual production of cellulosic biofuels); and the Renewable Energy for America Program, REAP (funds a variety of biofuels-related projects). The 2014 farm bill extends many of the renewable energy provisions of the 2008 farm bill through FY2018. Title X: Horticulture and Organic Agriculture24 The 2014 farm bill reauthorizes many of the existing farm bill provisions supporting farming operations in the specialty crop and certified organic sectors. Many provisions fall into the categories of marketing and promotion; organic certification; data and information collection; pest and disease control; food safety and quality standards; and local foods. The bill provides increased funding for several key programs that benefit specialty crop producers. These include the Specialty Crop Block Grant Program, plant pest and disease programs, USDA's Market News for specialty crops, the Specialty Crop Research Initiative (SCRI), and the Fresh Fruit and Vegetable Program (Snack Program) and Section 32 purchases for fruits and vegetables under the Nutrition title. The final law also reauthorizes most programs benefitting certified organic producers provisions as well as provisions that expand opportunities for local food systems and also beginning farmers and ranchers. Provisions affecting the specialty crop and certified organic sectors are not limited to this title but are also contained within several other titles of the farm bill such as the research, nutrition, and trade titles. Title XI: Crop Insurance25 The crop insurance title enhances the permanently authorized Federal Crop Insurance Act. The federal crop insurance program makes available subsidized crop insurance to producers who purchase a policy to protect against losses in yield, crop revenue, or whole farm revenue. More than 100 crops are insurable. The 2014 farm bill increases funding for crop insurance relative to baseline levels, most of which is for two new insurance products, one for cotton and one for other crops. A new crop insurance policy called Stacked Income Protection Plan (STAX) is made available for cotton producers, since cotton is not covered by the new counter-cyclical price or revenue programs in Title I. For other crops, the 2014 farm bill makes available an additional policy called Supplemental Coverage Option (SCO), based on expected county yields or revenue, to cover part of the deductible under the producer's underlying policy (referred to as a farmer's out-of-pocket loss or "shallow loss"). Additional crop insurance changes in the 2014 farm bill are designed to expand or improve crop insurance for other commodities, including specialty crops. New provisions revise the value of crop insurance for organic crops to reflect the higher prices of organic crops rather than conventional crops. Finally, USDA is required to conduct more research on whole farm revenue insurance with higher coverage levels than currently available. Title XII: Miscellaneous The miscellaneous title in the 2014 farm bill includes various provisions affecting livestock production, socially disadvantaged and limited-resource producers, oilheat efficiency, research, and jobs training, among other provisions. The livestock provisions include animal health-related and animal welfare provisions, creation of a production and marketing grant program for the sheep industry, and requirements that USDA finalize the rules on catfish inspection and also conduct a study of its country-of-origin labeling (COOL) rule. The farm bill also extends authority for outreach and technical assistance programs for socially disadvantaged farmers and ranchers and adds military veteran farmers and ranchers as a qualifying group. It creates a military veterans agricultural liaison within USDA to advocate for and to provide information to veterans, and establishes an Office of Tribal Relations to coordinate USDA activities with Native American tribes. Other provisions establish grants for maple syrup producers and trust funds for cotton and wool apparel manufacturers and citrus growers, and also provide technological training for farm workers.

The farm bill is an omnibus, multi-year law that governs an array of agricultural and food programs. Titles in the most recent farm bill encompassed farm commodity price and income supports, agricultural conservation, farm credit, trade, research, rural development, bioenergy, foreign food aid, and domestic nutrition assistance. Because it is renewed about every five years, the farm bill provides a predictable opportunity for policymakers to comprehensively and periodically address agricultural and food issues. The most recent farm bill—the Agricultural Act of 2014 (P.L. 113-79; 2014 farm bill)—was enacted into law in February 2014 and expires in 2018. It succeeded the Food, Conservation, and Energy Act of 2008. Provisions in the 2014 farm bill reshaped the structure of farm commodity support, expanded crop insurance coverage, consolidated conservation programs, reauthorized and revised nutrition assistance, and extended authority to appropriate funds for many U.S. Department of Agriculture (USDA) discretionary programs through FY2018. When the 2014 farm bill was enacted, the Congressional Budget Office (CBO) estimated that the total cost of mandatory programs would be $489 billion over the five years FY2014-FY2018. Four titles accounted for 99% ($483.8 billion) of anticipated farm bill mandatory program outlays: nutrition, crop insurance, conservation, and farm commodity support. The nutrition title, which includes the Supplemental Nutrition Assistance Program (SNAP), comprised 80% of the total. The remaining 20% was mostly geared toward agricultural production across several other titles. CBO has updated its projections of government spending based on new information about the economy and program participation. Outlays for FY2014 to FY2017 are completed, and updated projections for FY2018 have generally reflected lower-than-expected farm commodity prices in the near term and lower-than-expected participation in SNAP. The new five-year estimated cost of the 2014 farm bill, as of April 2018, is now $455 billion for the four largest titles, compared with $484 billion for those same four titles four years ago. This is $28 billion less than what was projected at enactment. SNAP outlays are projected to be $26 billion less for the five-year period FY2014-FY2018 than was expected in February 2014. Crop insurance is projected to be $10 billion less for the five-year period and conservation about $5 billion less. In contrast, farm commodity and disaster program payments are projected to be about $13 billion higher than was expected at enactment due to lower commodity market prices (which raises counter-cyclical payments) and higher livestock payments due to disasters.

History of the Secretary of the Senate The first Secretary of the Senate, Samuel Allyne Otis, was elected on April 8, 1789, two days after the Senate first achieved a quorum. The Secretary of the Senate was initially responsible for keeping the minutes and records of the Senate, transmitting messages to the House of Representatives, and purchasing supplies. Today, the Secretary of the Senate's jurisdiction has been expanded beyond the original duties. These additional responsibilities include supervision of the clerks, curators, official recorders of debates, and the parliamentarian; the disbursement of payroll; the education of the Senate pages; and the maintenance of public records. The Secretary also serves as the chief financial officer of the Senate and is the custodian of the Senate seal. In the event that the Secretary dies, resigns, or is disabled, the Assistant Secretary of the Senate acts as Secretary until a new Secretary is elected or the disability has ended. Acting jointly, only the majority and minority leaders and the President pro tempore can certify that the Secretary is unable to perform her duties. Origins of Duties and Responsibilities The duties and responsibilities of the Secretary of the Senate have developed over time through several sources. These sources include statutes, Senate rules and orders, and custom and precedent. Statutes, rules and orders, and other materials may be found in the United States Code , which is the codification, by subject matter, of the general and permanent laws of the United States; the United States Statutes at Large , which is the collection of all laws and resolutions enacted during each session of Congress; the Senate Manual , which contains the texts of the (1) Standing Rules of the Senate, (2) standing orders of the senate, (3) rules for the Regulation of the Senate Wing of the United States Capitol, and (4) excerpts from laws applicable to the Senate; and through custom and precedent. Many of the duties of the Secretary of the Senate are defined by the Senate Committee on Appropriations and the Senate Committee on Rules and Administration. As a consequence of its jurisdiction over Senate administrative matters, the Senate Committee on Rules and Administration oversees operations of the Secretary of the Senate. Areas of Responsibility The Secretary of the Senate's duties and responsibilities can be divided into three broad categories: financial, administrative, and legislative. Financial Responsibilities The Secretary is the chief financial officer of the Senate. As such, the Secretary is responsible for funds appropriated to the Senate and for managing and supervising the disbursing office, which among its financial duties handles the Senate payroll and related personnel matters. The Secretary also conducts audits of Senate financial activities. Details on expenditures of funds appropriated to the Senate are published semi-annually by the Secretary in the Senate document, Report of the Secretary of the Senate. Administrative Responsibilities The Secretary of the Senate is responsible for a number of services within the Senate. These responsibilities include the Senate Stationery Room; the Senate Library; the Conservation and Preservation Office; the Office of Public Records; the Senate Historical Office; the Office of Senate Curator; the Office of Senate Security; the Office of Interparliamentary Services; the Office of Printing and Document Services; the Disbursing Office; the Senate Page Program; and the Senate Gift Shop (including Gift Shop Revolving Fund). Other duties of the Secretary of the Senate include maintenance of the Senate public website; supervision of Senate staff displaced by the death or resignation of a Senator; and supervision of the Senate legal counsel. Legislative Responsibilities The Secretary of the Senate manages functions that support the legislative process in the Senate, such as signing legislation after Senate passage. The Secretary also supervises the following staff (listed with their roll in the Senate legislative process): Bill Clerk (records the Senate's official activities and status of legislation); Enrolling Clerk (prepares Senate-passed legislation before it is sent to the President); Executive Clerk (records Senate actions during executive sessions, produces the Executive Calendar, and processes nominations and treaty resolutions received from the President); Journal Clerk (records the Senate's daily legislative proceedings and prepares a history of legislation for the Senate Journal ); Legislative Clerk (reads aloud bills and amendments, the Senate Journal , messages to the Senate; calls the roll and prepares the daily Calendar of Business); Official Reporters of Debates (prepare verbatim reports of Senate floor proceedings for the Congressional Record ); and Parliamentarian (advises Senators and staff on Senate precedents and rules, precedents, and statutes related to Senate proceedings). In addition, the Secretary of the Senate manages the following offices: Daily Digest (preparing the resume of each day's activities of the Senate for the Congressional Record , including committee hearings and meetings, and floor actions); Captioning Services Office (provides captions of Senate proceedings for the hearing-impaired); Continuity of Operations Program (supports the Senate's ability to conduct business and access data at an offsite location, in conjunction with the Senate Sergeant at Arms). Appendix. Secretary of the Senate Since 1789, 32 men and women have been elected Secretary of the Senate. Table A-1 lists those individuals, the Congress, when their terms began, and when their terms concluded.

The Secretary of the Senate is an officer of the Senate elected at the beginning of each Congress by the membership of the Senate. The Secretary has financial, administrative, and legislative responsibilities derived from law, Senate rules, and other sources. In addition, the Senate Committee on Rules and Administration maintains oversight authority over the Secretary of the Senate and issues policies and regulations governing the Secretary's duties and responsibilities. The Secretary of the Senate was established during the First Congress (1789-1791), when Samuel Allyne Otis was elected on April 8, 1789.

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

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

Overview of the America COMPETES Act The America COMPETES Act was a response to concerns that the United States may not be able to compete economically with other nations in the future. The act mainly addresses concerns about insufficient investment in science and engineering research; STEM education; and STEM workforce development. The America COMPETES Act authorizes an increase in federal science and engineering research funding and support for kindergarten through postdoctoral education. The act authorizes funding increases for the National Science Foundation (NSF), the National Institute of Standards and Technology (NIST) laboratories, and the Department of Energy (DOE) Office of Science through FY2010. The act also authorizes the establishment of the Advanced Research Projects Agency-Energy (ARPA-E) and Discovery Science and Engineering Innovation Institutes at DOE. The act also established new STEM education programs at DOE and the Department of Education (ED), and enhances the authorization level for NSF STEM education programs. The America COMPETES Act is an authorization act. New programs established by the act will not be initiated unless funded through subsequent appropriations. Similarly, increases in the authorization level of existing programs may or may not translate into increased funding. Agency Programs and the America COMPETES Act The following section discusses some of the America COMPETES Act programs in relation to the President's FY2009 budget submission. The FY2009 request information is based on the Bush Administration FY2009 Congressional Budget Request documents from the DOE and the NSF. The ED FY2009 request information is based on the its Budget Summary. The NIST FY2009 request information is from the Fiscal Year 2009 Budget of the U.S. Government and a series of amendments to that budget submitted by President Bush on June 6, 2008. National Institute of Standards and Technology The mission of NIST, a laboratory of the Department of Commerce, is to increase the competitiveness of U.S. companies by supporting industrial development of precompetitive, generic technologies, diffusing government-developed technological advances, and providing measurement, calibration, and quality assurance techniques. The America COMPETES Act authorizes funding for NIST's Scientific and Technical Research and Services (STRS) and Industrial Technology Services (ITS) programs. The ITS includes the existing Hollings Manufacturing Extension Partnership (MEP) and a new Technology Innovation Program (TIP), which replaced a program with similar goals, the repealed Advanced Technology Program (ATP). The act authorizes $541.9 million for STRS in FY2009; the Bush Administration's FY2009 budget proposed $535.0 million. The act authorizes $131.5 million for TIP in FY2009, but the Bush Administration's FY2009 budget proposed eliminating TIP, so its proposed budget was zero. For MEP, the act authorizes $122.0 million in FY2009, while the President's FY2009 budget proposed $2.0 million to end federal support for the program. Department of Energy The mission of DOE is to "advance the national, economic, and energy security of the United States; to promote scientific and technological innovation in support of that mission; and to ensure the environmental cleanup of the national nuclear weapons complex." The DOE is the largest federal government supporter of basic physical sciences research. This research is conducted at its national laboratories as well as through its support of investigator-initiated, merit-reviewed, competitively selected awards, conducted primarily at universities. The America COMPETES Act authorizes the establishment of the ARPA-E and the Discovery Science and Engineering Innovation Institutes within DOE. Based on the Defense Advanced Research Projects Agency (DARPA) model, ARPA-E is designed to support transformational energy technology research projects with the goal of enhancing the nation's economic and energy security. Discovery Science and Engineering Innovation Institutes would be multidisciplinary research institutes located at DOE national laboratories that would apply fundamental science and engineering discoveries to technological innovations. Up to three institutes may be created each fiscal year. The DOE FY2009 budget request did not propose funding for either ARPA-E or the Discovery Science and Engineering Innovation Institutes. Rather than create ARPA-E or the Discovery Science and Engineering Innovation Institutes, the Bush Administration Secretary of Energy issued a policy on technology transfer, and proposed establishing 25-30 multi-investigator Energy Frontier Research Centers (EFRCs) at universities or other nonprofit organizations. As a result of the technology transfer policy, DOE now reportedly pools funds from the Office of Science and other programs to fund six collaborations that integrate basic and applied research. Funding for these collaborations are reportedly based on congressional language that required DOE to set aside 0.9% of its applied energy research and development budget for technology transfer. The goal of EFRCs would be to focus on transformative research. The requested FY2009 EFRC budget was approximately $100.0 million, with initial five-year awards of $2.0-5.0 million annually per center. In contrast, each of the three Discovery Science and Engineering Innovation Institutes is authorized at $10.0 million annually for a maximum of three years. The act also authorizes the establishment of several new STEM education programs at the K-12 and post-secondary level within DOE. These activities include K-12 student and teacher programs such as specialty high schools for science and mathematics pilot program, experiential based learning opportunities (e.g., summer internships) for middle and high school students, and summer institutes for teachers. Post-secondary programs include a nuclear science talent expansion program and a hydrocarbon systems science talent expansion program to enhance existing and create new educational programs in nuclear science and hydrocarbon systems. In addition, the act establishes a new position within DOE to direct STEM education programs across the department, and a Science, Engineering, and Mathematics Education Fund, that is to include not less than 0.3% of DOE's research, development, and commercial application funding. Although the relevant sections in the FY2009 DOE budget submission note the authorization of the America COMPETES Act, DOE did not make clear what specific educational programs within the act to which the request was responding. For example, the FY2009 request for the Office of Nuclear Energy referenced the America COMPETES Act and stated it would designate 20% of its research funds for university research activities as a way to increase support for U.S. nuclear science and engineering education, but it did not cite the act's nuclear science talent expansion program. In the section entitled "Workforce Development for Teachers and Scientists" in the Office of Science budget justification, DOE noted the America COMPETES Act and mentioned many DOE STEM educational programs, but it did not identify any of them as either new America COMPETES Act initiatives or specify if some of the existing programs have been modified to accommodate the act. In addition, the DOE Office of Science did not mention the Early Career Awards for Science, Engineering, and Mathematics Researchers program. In congressional testimony, however, the Bush Administration identified two DOE STEM education programs and the early career researcher program in the act as included in the FY2009 budget request. The Bush Administration OMB contended that the following DOE programs correspond to programs authorized by the America COMPETES Act: Summer Institutes (§5003) to the pre-existing DOE Academies Creating Teacher Scientists program (DOE ACTS); Early Career Awards for Science, Engineering, and Mathematics Researchers (§5006) to pre-existing High Energy Physics Outstanding Junior Investigator, Nuclear Physics Outstanding Junior Investigator, Fusion Energy Sciences Plasma Physics Junior Faculty Development; Advanced Scientific Computing Research Early Career Principle Investigator; and the Office of Science Early Career Scientist and Engineer Award programs; and Protecting America's Competitive Edge (PACE) Graduate Fellowship Program (§5009) to pre-existing Computer Science Graduate Fellowships; Graduate Research Environmental Fellowships; American Meteorological Society/Industry/Government Graduate Fellowships; Spallation Neutron Source Instrumentation Fellowships, and the Fusion Energy Sciences Graduate Fellowships. The DOE Summer Institutes authorization in the act was $20 million in FY2009. Based on the information provided in DOE's budget request for the programs identified above, funding for these institutes was requested for $6 million in FY2009. The Early Career Awards program is authorized for $25 million in FY2009; the testimony states that FY2009 funding of $10 million was requested for the programs specified above. For the PACE fellowships, DOE requested $19 million, above the act authorization level of $12 million in FY2009, based on the programs listed above and the DOE budget request. Some of the COMPETES Act programs have additional requirements that may be beyond that of existing programs. For example, the America COMPETES Act's DOE summer institutes programs has prioritization criteria focused on teachers from a wide range of school districts, high-need school districts, and underrepresented groups; coordination and consultation requirements with DOE and NSF; and mentoring program, evaluation, and accountability plan requirements, which may or may not be an element of the existing DOE ACTS program. The FY2009 budget request did not mention either establishing a DOE STEM Education fund or appointing a DOE STEM education program director. Department of Education The ED's mission is to "promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access." Among its activities, ED establishes policies on and distributes and monitors federal financial aid for education. The America COMPETES Act authorizes the establishment of several new STEM education programs, including Teachers for a Competitive Tomorrow, the Advanced Placement and International Baccalaureate Program, Math Now, and the Advancing America Through Foreign Language Partnership Program. Congress appropriated FY2008 funding for the Teachers for a Competitive Tomorrow program, which supports the development and implementation of higher education programs including a STEM baccalaureate degree with concurrent teacher certification, a part-time master's degrees in STEM or critical foreign languages for current teachers, and programs for professional scientists and engineers to pursue master's degrees that enable teacher certification. The FY2009 ED budget summary proposed to eliminate this program, indicating that these "activities can be funded under other Federal programs." The FY2009 ED budget summary indicated that the America COMPETES Act's Advanced Placement and International Baccalaureate Program would provide a new vision for the existing ED Advanced Placement Incentive Program (API) authorized under Title I, Part G, of the Elementary and Secondary Education Act (ESEA). This new direction included increasing access to classes and tests for low-income students, preparation of teachers in high-need schools, and non-federal organizations contributing funds to the program. The America COMPETES Act authorizes $75.0 million for the Advanced Placement and International Baccalaureate Program in FY2009. The President's FY2009 budget requested $70.0 million. Of this, approximately $22.0 million would have supported previously existing API activities, while approximately $47.0 million would have supported America COMPETES Act activities. The ED FY2009 budget summary proposes funding Math Now at its full authorization level, $95 million. The Advancing America Through Foreign Language Partnership Program funds partnerships between higher education institutions and school districts to enhance postsecondary level language learning. For this program, the act authorizes $28.0 million in FY2008 and such sums as may be necessary for FY2009. The President's FY2009 budget requested $24.0 million to support 24 new awards in languages such as Arabic, Chinese, Indic, Iranian, and Turkic. This program supports the President's National Security Language Initiative. No funding was mentioned in the ED budget summary for the following America COMPETES Act authorized programs: the Summer Term Education Program, the P-16 Alignment of Secondary School Graduate Requirements with the Demands of 21 st Century Postsecondary Endeavors and Support for P-16 Education Data Systems, or the Mathematics and Science Partnership Bonus Grants. As noted previously, this may or may not mean that the programs will be funded, as some are below the organizational level specified in the budget documents. National Science Foundation The NSF supports science and engineering in general and funds basic research across many disciplines by supporting investigator-initiated, merit-reviewed, competitively selected awards, state-of-the-art tools, and instrumentation and facilities, primarily at U.S. colleges and universities. The America COMPETES Act authorizes $5,742.0 million for NSF's research and related activities (R&RA) account. The President's FY2009 budget requested funding of $5,594.0 million. In some cases, such as the Major Research Instrumentation (MRI) and Faculty Early Career Development (CAREER) programs, the requested levels are close to those authorized in the act. Funding for other R&RA programs was requested at amounts below that authorized, including the Experimental Programs to Stimulate Competitive Research (EPSCoR), which the President's budget requested funding at $113.5 million rather than the authorized level of $133.2 million, and the Integrative Graduate Education and Research Traineeship (IGERT), for which the request was$38.8 million rather than authorized level of $52.5 million. In the Education and Human Resources (EHR) directorate, the America COMPETES Act authorization is $995.0 million, while the President's FY2009 budget requested $790.0 million. Programs with Bush Administration requested funding well below that authorized include the Robert Noyce Teacher Scholarship program (at $11.6 million compared with an authorization of $115.0 million) and the Mathematics and Science Education Partnership (at $51.0 million compared with an authorization of $111.0 million). In contrast, the Graduate Research Fellowship (GRF) program was proposed for $116.7 million, more than the authorization of $107.2 million. The Bush Administration did not request funding for the two new NSF programs authorized in the America COMPETES Act: the Professional Science Master's Degree Program and the Laboratory Science Pilot Program. Congressional Activities Table 1 summarizes FY2009 appropriations for America COMPETES Act programs for which the act provided an authorization of appropriation. Budget Resolution The initial response of the 110 th Congress to the Bush Administration's FY2009 budget request was to develop a budget resolution that sets the budget spending amounts for each functional category of the budget. The budget resolution does not allocate funds among specific programs or accounts. Major program assumptions underlying the functional amounts, however, are often discussed in the reports accompanying the resolution. These program assumptions and budget functions are not binding. In June 2008, the House and Senate of the 110 th Congress approved the Conference Report on S.Con.Res. 70 , The Concurrent Budget Resolution for 2009. Section 522 of the report provided a sense of the 110 th Congress on the Innovation Agenda and the America COMPETES Act, stating "the Congress should provide sufficient funding so that our Nation may continue to be the world leader in education, innovation and economic growth." The resolution "supports the efforts authorized in the America COMPETES Act, providing substantially increased funding above the President's requested level for 2009, and increased amounts after 2009 in Function 250 (General Science, Space and Technology) and other functions." The resolution also states that "additional increases for scientific research and education are included in Function 270 (Energy), Function 300 (Environment and Natural Resources), Function 500 (Education, Employment, Training and Social Services), and Function 550 (Health), all of which receive more funding than the President's budget provides." The budget resolution also included agreeing to an allocation to the House Committee on Appropriations and the Senate Committee on Appropriations. These committees then subdivided the amounts they received from the House and Senate Budget committees among the appropriations committees' 12 subcommittees. The committee's jurisdictions for the federal agencies that have programs authorized by the America COMPETES Act programs are divided among at least three Appropriations subcommittees: Commerce, Justice, Science, and Related Agencies (CJS): NSF, NIST, NASA, and OSTP; Energy and Water Development (Energy-Water): DOE; Labor, Health and Human Services, Education, and Related Agencies (Labor-HHS-Education): ED. Committee on Appropriations During the 110 th Congress, the House Appropriations Committee reported the CJS and Energy-Water bills to the House, but did not report the Labor-HHS-Education bill. The Senate Appropriations Committee reported all of these bills to the Senate. The following are highlights of House and Senate Committee on Appropriations actions during the 110 th Congress FY2009 appropriations process: National Institute of Standards and Technology Both the Senate and House Appropriation Committees included funding for TIP and MEP proposed for elimination by the Bush Administration. Reported funding for TIP is approximately half that authorized ($65 million reported; $131.5 million authorized), while MEP is close to that that authorized ($122 million reported in House; $110 million reported in Senate; $122 million authorized). While STRS is authorized at $541.9 million, the Senate committee approved $489.5 million and the House committee $500.7 million. Department of Energy The DOE Office of Science authorized level is $5.2 billion. The House committee approved $4.9 billion, and the Senate committee $4.6 billion. The House committee recommended $15 million for ARPA-E, while the Senate committee did not include any funding. Department of Education The Senate committee reported $2 million for the Teachers for a Competitive Tomorrow program, while the House subcommittee did not provide any funding. The authorized level is $125 million. The Senate committee approved $43.5 million for the new Advanced Placement and International Baccalaureate (AP/IB) program authorized by the America COMPETES Act, while the House subcommittee did not provide any funding stating that the "2 to 1 match from non-Federal sources would preclude low-income schools from participating." Both the Senate and House committee recommend Congress not fund two new programs authorized by the act: Math Now and the Advancing America Through Foreign Language Partnership Program. National Science Foundation Both the Senate and House committees recommended funding for NSF at the level requested by the Bush Administration, $6.9 billion. The authorized level is $7.3 billion. The Senate committee reported $55 million for the Robert Noyce Teacher Scholarship program, and the House committee $50 million. Continuing Resolution For FY2009, the 110 th Congress then funded federal government programs related to the America COMPETES Act from October 1, 2008 until March 6, 2009 through an interim continuing resolution ( P.L. 110-329 ) that became law on September 30, 2008. The resolution funded these programs at the FY2008 level, but did not include funding from the Supplemental Appropriations Act, 2008 ( P.L. 110-252 ) in determining the level of funding during this time for the America COMPETES Act programs. American Recovery and Reinvestment Act The 111 th Congress passed the American Recovery and Reinvestment Act ( P.L. 111-5 ), signed into law by President Obama on February 17, 2009, which supplements FY2009 funds (if any are provided). These funds are available for obligation until September 30, 2010. The act includes funding for NIST's research and construction activities, NSF, ARPA-E, and DOE's Office of Science. At NIST, funding is specified for its Scientific and Technical Research and Services ($220 million) and Construction of Research Facilities ($360 million) activities; no funding is provided for the MEP or TIP programs. DOE's Office of Science is funded at $1,600 million. The $400 million of funding provided for ARPA-E is the first it has received, and would establish the agency within DOE. At NSF, funding is provided for its Research and Related Directorate ($2,500 million); Education and Human Resources Directorate ($100 million); and the Major Research Equipment and Facilities Construction ($400 million) activity. Congress specified the following funding for these America COMPETES Act programs: Major Research Instrumentation ($300 million), Robert Noyce Scholarship Program ($60 million), Math and Science Partnerships ($25 million), and the Professional Science Master's Programs ($15 million). This is the first funding provided for the Professional Science Master's program and would establish that activity within NSF. Extension of Continuing Resolution An extension of the continuing resolution discussed in the earlier section was signed into law on March 6, 2009 ( P.L. 111-6 ). This bill amended the Continuing Appropriations Resolution, 2009 (Division A of P.L. 110-329 ) to extend until March 11, 2009. FY2009 Appropriation Funding for all of FY2009 for America COMPETES Act programs is included in the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ). The House passed the measure February 25, 2009, by a vote of 245-178. It was passed by the Senate without amendment on March 10, 2009, following a cloture vote of 62-35. President Obama signed the bill on March 11, 2009. As discussed in the earlier section, these funds, are supplemented by those provided in the American Recovery and Reinvestment Act ( P.L. 111-5 ). The following are highlights of the Omnibus Act: National Institute of Standards and Technology The act provides STRS funding of $472.0 million – less than that recommended by either the Senate ($489.5 million) or House ($500.7 million) Committee on Appropriations. Construction and maintenance are funded at $172.0 million – above that recommended by the Senate ($149.0) and House ($129.0) committees. Funding for TIP ($65.0) and MEP ($110.0) are the same as that recommended by the Senate Committee on Appropriations. The House Appropriations committee level is similar for TIP, and slightly higher ($122.0) for MEP. Department of Energy The act provides the DOE Office of Science $4.8 billion. This is about midway between that proposed by the House ($4.9) and Senate ($4.6) Committee on Appropriations. ARPA-E receives funding of $15 million, the same as recommended by the House Committee. The Senate Committee did not include any funding. Department of Education The act provides $2 million for a new Teachers for a Competitive Tomorrow program, similar to that recommended by the Senate committee. The House committee did not provide any funding. No funding is provided for a new Advanced Placement and International Baccalaureate (AP/IB) program. The Senate Committee on Appropriations recommended $43.5 million. The House Committee on Appropriations recommended not funding the program. National Science Foundation NSF funding ($6.5 billion) is less that that recommended by both the Senate and House committees ($6.9 billion). Funding for the Experimental Programs to Stimulate Competitive Research (EPSCoR) is $133.0 million. This is the same as that reported by the House Committee on Appropriations, and slightly above that recommended by the Senate Committee ($125.0 million). The Robert Noyce Teacher Scholarship program would receive funding of $55.0 million, the same as that reported by the Senate committee, and slightly above that reported by the House committee ($50 million). Table 1 summarizes the congressional activities for each of the America COMPETES Act programs. Programs Funded at Authorized Levels A review of Table 1 finds that the combined funding provided by the Omnibus Appropriation Act (Omnibus) and the American Investment and Recovery Act (ARRA) led to funding of several America COMPETES Act programs at the authorized level (see Table 2 ). Other programs were either funded below authorized levels, or not funded. In the case of ARPA-E, the FY2008 authorization was $300.0 million and the FY2009 authorization is for "such sum as are necessary." The FY2009 appropriation is $415.0 million. One issue for the future is whether or not these funding levels will be maintained at the authorization level when there may or may not be a supplemental for those funds as was the case in FY2009. If not, this may pose challenges for institutions and individuals sponsored by some programs, particularly those related to research or education. Programs Presumably Not Funded As mentioned earlier, a lack of an enumerated appropriation does not necessarily mean that a given program is not funded. At DOE, in particular, the budget proposed in the Bush Administration did not align with that in the America COMPETES Act making it challenging to determine the status of these programs. If the Obama Administration does align its existing programs with the America COMPETES Act, the situation regarding these activities may be clearer. However, at this time, there is insufficient evidence that the following new America COMPETES Act programs are funded: DOE Pilot Program of Grants to Specialty Schools for Science and Mathematics Experiential Based Learning Opportunities Summer Institutes National Energy Education Development Nuclear Science Talent Expansion Program Hydrocarbon Systems Science Talent Expansion Program Early Career Awards for Science, Engineering, and Mathematics Researchers Discovery Science and Engineering Innovation Institutes Protecting America's Competitive Edge Graduate Fellowship Program Distinguished Scientist Program ED Advanced Placement & International Baccalaureate Program Math Now Summer Term Education Program Math Skills for Secondary Skill Students Advancing America Through Foreign Language Partnership Program Mathematics and Science Partnership Bonus Grants NSF Laboratory Science Pilot Program Obama Administration Implementation of Programs Funded by FY2009 Appropriation This section discusses several aspects of the implementation of programs funded by the FY2009 appropriations by federal agencies that members of Congress might wish to monitor. The primary challenge federal agency funds face regarding FY2009 funding is the speed with which they will be able to obligate those funds. This is particularly true for funds provided through the ARRA. At DOE, the Acting Director of the Office of Science (SC) indicates that the following actions will be taken with ARRA funds: •    Facility Construction –Funds accelerate completion of a number of ongoing construction projects for major scientific user facilities, major items of equipment for those facilities, and laboratory infrastructure. General Plant Projects (GPP) update laboratory infrastructure and establish new laboratory research space, renovate existing laboratory space, demolish inadequate facilities, and improve utility systems across SC labs. •    Facility Operations/Infrastructure –Funds increase operations, experimental support, and infrastructure improvements at scientific user facilities across SC. •    Research –Funds support selected research programs across SC and are chosen to minimize out-year mortgages. Energy Frontier Research Centers are included. •    Computing –Funds support advanced networking; mid-range distributed computing; and computation partnerships in areas important to DOE energy missions. •    Fellowships –A program to support graduate students and early career scientists was proposed by SC and is under discussion within DOE. Within the Office of Science is the Workforce Development for Teachers and Scientists office. Although this office is funded at the level requested by the Bush Administration, neither the ARRA nor the explanatory statement specify any funding for specific America COMPETES Act activities within this program. At this point, the degree to which the Obama Administration will agree with the Bush Administration regarding how these funds are implemented for specific America COMPETES Act authorized STEM education programs at DOE is unknown. Also at DOE, ARPA-E faces a unique challenge, as this new organization received its first funding prior to the appointment of a director, or hiring of any staff. Special steps may need to be taken to assure these funds are spent appropriately, and to achieve the desired outcomes. Possible policy options to respond to this concern are discussed further in CRS Report RL34497, Advanced Research Projects Agency - Energy (ARPA-E): Background, Status, and Selected Issues for Congress , by [author name scrubbed]. News report indicate that NSF plans to make the bulk of the new awards from its existing pool of applicants. NIST indicated that it is drafting a spending plan. At ED, states must take actions to improve the collection and use of data in order to receive additional funding from ARRA funds. The Obama Administration has set up a website, http://www.recovery.gov . The agencies whose America COMPETES Act activities that received ARRA funds have launched subsidiary websites. These websites are: NIST: http://www.nist.gov/recovery/ DOE: http://www.energy.gov/recovery/science_technology.htm NSF: http://www.nsf.gov/recovery/

The America COMPETES Act (P.L. 110-69) became law on August 9, 2007. The act responds to concerns that the United States may not be able to compete economically with other nations in the future due to insufficient investment today in science and technology research and science, technology, engineering, and mathematics (STEM) education and workforce development. The America COMPETES Act is intended to increase the nation's investment in science and engineering research, and in science, technology, engineering, and mathematics (STEM) education from kindergarten to graduate school and postdoctoral education. It is designed to focus on two perceived concerns believed to influence future U.S. competitiveness: inadequate research and development funding to generate sufficient technological progress, and inadequate numbers of American students proficient in science and mathematics or interested in science and engineering careers relative to international competitors. The act authorizes increases in funding for the National Science Foundation (NSF), National Institute of Standards and Technology (NIST) laboratories, and the Department of Energy (DOE) Office of Science over FY2008-FY2010. If maintained, the increases would double the budgets of those agencies over seven years. Within DOE, the act would establish the Advanced Research Projects Agency – Energy (ARPA-E), designed to support transformational energy technology research projects with the goal of enhancing the economic and energy security of the United States. A new program, Discovery Science and Engineering Innovation Institutes, would establish multidisciplinary institutes at DOE National Laboratories to apply fundamental science and engineering discoveries to technological innovations. Among the act's education activities, many of which are focused on high-need school districts, are programs to recruit new K-12 STEM teachers, enhance existing STEM teacher skills, and provide more STEM education opportunities for students. The new Department of Education (ED) Teachers for a Competitive Tomorrow and existing NSF Robert Noyce Teacher Scholarship program provide opportunities, through institutional grants, for students pursuing STEM degrees and STEM professionals to gain teaching skills and teacher certification, and for current STEM teachers to enhance their content and teaching skills. The act also authorizes a new program at NSF that would provide grants to institutions of higher education to create or improve professional science master's degree (PSM) programs that emphasize practical training and preparation for the workforce in high-need fields. The America COMPETES Act is an authorization act, so new programs established by the act will not be initiated, and increases in the authorization of appropriation level of existing programs may not occur, unless funded through subsequent appropriations. An issue for Congress was whether to fund America COMPETES Act programs at authorized funding levels. The 111th Congress passed the Omnibus Appropriations Act, 2009 (P.L. 111-8) and the American Recovery and Reinvestment Act (P.L. 111-5) to supplement FY2009 funds. While some America COMPETES Act programs were funded at authorized levels, others were not. The following activities were funded at or above authorized levels: NIST Scientific & Technical Research and Services; NIST Construction & Maintenance; DOE Office of Science; NSF and its Research & Related Activities; Major Research Instrumentation; Major Research Equipment and Facilities Construction; and its Professional Science Master's; Robert Noyce Teacher Scholarship; and Graduate Research Fellowship programs. Other programs were funded either below authorized levels or not funded. The acts provide funding to establish DOE's ARPA-E and NSF's PSM program.

Introduction The Employee Retirement Income Security Act of 1974 (ERISA) protects the interests of participants and beneficiaries in private-sector employee benefit plans. Governmental plans and church plans generally are not subject to the law. ERISA supersedes state laws relating to employee benefit plans except for certain matters such as state insurance, banking and securities laws, and divorce property settlement orders by state courts. An employee benefit plan may be either a pension plan (which provides retirement benefits) or a welfare benefit plan (which provides other kinds of employee benefits such as health and disability benefits). Most ERISA provisions deal with pension plans. ERISA does not require employers to provide pensions or welfare benefit plans, but those that do must comply with its requirements. ERISA sets standards that pension plans must meet in regard to: who must be covered (participation), how long a person has to work to be entitled to a pension (vesting), and how much must be set aside each year to pay future pensions (funding). ERISA sets fiduciary standards that require employee benefit plan funds be handled prudently and in the best interests of the participants. It requires plans to inform participants of their rights under the plan and of the plan's financial status, and it gives plan participants the right to sue in federal court to recover benefits that they have earned under the plan. ERISA also established the Pension Benefit Guaranty Corporation (PBGC) to insure that plan participants receive promised benefits, up to a statutory limit, should a plan terminate with a lack of sufficient assets to pay promised benefits. In order to encourage employers to establish pension plans, Congress has granted certain tax deductions and deferrals to qualified plans. To be qualified for tax preferences under the Internal Revenue Code (IRC), plans must meet requirements with respect to pension plan contributions, benefits, and distributions, and there are special rules for plans that primarily benefit highly compensated employees or business owners. Responsibility for enforcing ERISA is shared by the Department of the Treasury, the Department of Labor, and the Pension Benefit Guaranty Corporation (PBGC). In the Department of the Treasury, the Internal Revenue Service oversees standards for plan participation, vesting, and funding. The Department of Labor regulates fiduciary standards and requirements for reporting and disclosure of financial information. The PBGC—a government-owned corporation—administers the pension benefit insurance program. Historical Development of Pension Plans in the United States The first employer-sponsored pension plans in the United States were established in the late 19 th century in the railroad industry. At that time, pensions were regarded as gifts in recognition of long service rather than as a form of compensation protected by law. Pension benefits often were paid from employers' annual revenues and sometimes were reduced or terminated if the company paying the pension became unprofitable or went out of business. Congress first gave pensions and profit-sharing plans preferential income tax treatment in the 1920s. At that time, few households paid income taxes, so these tax benefits did not immediately spur the growth of the private pension system. The Revenue Acts of 1938 and 1942 outlined more specific requirements for "tax-qualified" pension plans, including the requirement that benefits and contributions not discriminate in favor of highly compensated employees. Tax qualification means that the employer can deduct the amounts contributed to the plan, the earnings on the pension trust fund are exempt from taxes until distributed, and covered employees do not have to pay income tax on the employer's contributions to the plan. Employers also are allowed to "integrate" their pension benefit formulas with Social Security benefits to partly offset the relatively more generous income replacement rates that Social Security pays to low-wage workers. During the Second World War (1941-1945), pensions and other deferred compensation arrangements were exempt from wartime wage controls. Employers who were unable to pay higher wages due to these controls could increase workers' total compensation by offering new or increased pension benefits. Also in 1940s, the federal courts declared that pensions were subject to collective bargaining, and that employers had to include pensions among the benefits for which unions could negotiate. In addition, the expansion of the income tax to include more households and the introduction of higher marginal income tax rates made the tax advantages of pensions considerably more valuable to workers. Both of these developments led to more widespread adoption of employer-sponsored pensions during the 1950s and 1960s. Origins of ERISA As the number and size of private pension plans grew in the 1950s and 1960s, so did the number of instances in which employers or unions attempted to use the assets of these plans for purposes other than paying benefits to retired workers and their surviving dependents. In 1958, Congress passed The Welfare and Pension Plans Disclosure Act, which required public disclosure of pension plan finances. Advocates of the legislation expected that greater transparency of pension funding would ensure that the funds held in trust for workers' pensions would not be misused by plan sponsors. After the Studebaker automobile company terminated its underfunded pension plan in 1963, leaving several thousand workers and retirees without the pensions that they had been promised, Congress began considering legislation to ensure the security of pension benefits in the private sector. During the early 1970s, both the House and Senate labor committees drafted bills to regulate the private pension system. The Senate Labor and Public Welfare Committee reported a pension bill in 1972. Up to that point, the legislation had been handled exclusively as a labor issue, but since most private pension plans benefitted from the favorable tax treatment accorded them under the Internal Revenue Code, the Senate Finance Committee also asserted its jurisdiction. As passed by Congress in 1974, ERISA included elements produced by the House and Senate labor committees, the House Ways and Means Committee, and the Senate Finance Committee. Title I of the law, which sets standards for pension plans of employers engaged in interstate commerce, is under the jurisdiction of the House Committee on Education and Labor and the Senate Committee on Health, Education, Labor, and Pensions. Title II, which makes conforming amendments to the Internal Revenue Code for tax-qualified plans, is under the jurisdiction of the House Ways and Means Committee and the Senate Finance Committee. The labor and tax committees share jurisdiction over the PBGC. ERISA was signed into law by President Gerald Ford on Labor Day, September 2, 1974. Congress has amended ERISA over the years to provide greater protection to survivors and spouses of pension plan participants, improve pension funding practices, strengthen the finances of the PBGC, alter the limits on tax-deductible pension plan contributions, and to ensure that tax-favored plans are broadly based and do not unduly favor a firm's owners and other highly compensated employees. Before ERISA was enacted, an employer could terminate an unfunded pension plan without being liable for any additional pension contributions. If there were insufficient assets in the pension plan to pay all claims, participants had no legal recourse to demand that employers use company assets to continue funding the plan. ERISA protects the benefits of participants in most private-sector pension plans by requiring companies with defined benefit pension plans to fully fund the benefits that participants have earned. The law prohibits companies from using pension funds for purposes other than paying pensions and retiree health benefits. It also limits the age and length-of-service requirements that firms can require participants to meet to receive a pension. ERISA also requires all private-sector sponsors of defined benefit pension plans to purchase insurance from the Pension Benefit Guaranty Corporation. Types of Qualified Retirement Plans ERISA and the IRC classify employer-sponsored retirement plans as either defined benefit (DB) plans or defined contribution (DC) plans. A defined benefit plan specifies either the benefit that will be paid to a plan participant or the method of determining the benefit. The plan sponsor's contributions to the plan vary from year to year, depending on the plan's funding requirements. Benefits often are based on average pay and years of service. For example, the benefit might be defined as 1.5% of the average of the employee's highest five years of pay multiplied by his or her number of years of service. This would result in a benefit equal to 45% of a participant's "high-five" average pay after 30 years of service. Some DB plans, particularly plans covering workers who belong to unions, pay a flat benefit per year of service. For example, if the benefit is defined as $30 per month for each year of service, the monthly pension benefit after 30 years of service would be $900. ERISA requires DB plans to be fully funded. The assets held in the pension trust must be sufficient to pay the benefits that the plan's participants have earned. The employer bears the investment risk for the assets held by the plan. If the assets decrease in value, or if the plan's liabilities increase, the plan sponsor must make additional contributions to the pension trust fund. The assets of qualified DB plans are exempt from creditors' claims if the sponsor is in bankruptcy, and DB plan benefits are insured up to certain limits by the Pension Benefit Guaranty Corporation. A defined contribution plan is one in which the contributions are specified, but not the benefits. A defined contribution plan (also called "an individual account" plan) is one that provides an individual account for each participant that accrues benefits based solely on the amount contributed to the account and any income, expenses, and investment gains or losses to the account. The employee bears the investment risk in a DC plan, and DC plans are not insured by the PBGC. When ERISA was enacted in 1974, most employer-sponsored retirement plans were defined benefit plans. The number of defined benefit plans continued to grow until the mid-1980s. The number of DB plans then began to fall while the number of DC plans increased. Analysts have suggested several possible reasons for these trends, including rising global competition that put greater pressure on companies to reduce costs, a more mobile workforce that preferred the portability of benefits earned in DC plans, the higher costs of maintaining DB plans after stronger funding requirements were put into place by ERISA, and the greater attractiveness of DC plans after Section 401(k) of the tax code was added by the Revenue Act of 1978. Although the standards established under ERISA have made workers' pensions more secure, some employers—especially small employers—apparently decided that the plan funding requirements of ERISA made DB plans too expensive to maintain. The decline in the number of DB plans since the 1980s has been the result mainly of terminations of small plans. By the late 1990s, defined contribution plans had overtaken defined benefit plans in number of plans, number of participants, and total assets. ( Table 1 .) Hybrid Plans In recent years, many employers have converted their traditional DB plans to "hybrid" plans that have characteristics of both defined benefit and defined contribution plans. The most common of these hybrids is the cash balance plan . A cash balance plan looks like a defined contribution plan in that the accrued benefit is defined in terms of an account balance. The employer contributes an amount equal to a fixed percentage of pay to the plan and pays interest on the accumulated balance. However, a cash balance plan is not an individual account owned by the participant. Assets are held in a common trust, and each participant's "account balance" is merely a record of his or her accrued benefit. Because plan sponsors are obligated to provide the participants with benefits that are no less than the sum of contributions to the plan plus interest, cash balance plans are considered to be defined benefit plans. The Revenue Act of 1978 and 401(k) Plans The most common defined contribution plans are 401(k) plans, named for the section of the IRC added by the Revenue Act of 1978 under which they were authorized. In 1981, the IRS published regulations for IRC §401(k). Soon after, the first 401(k) plans were established. A 401(k) plan is an "individual account plan." Its defining feature is that the employee, as well as the employer, can make pre-tax contributions to the account. Taxes on these contributions and on investment earnings are deferred until the money is withdrawn. Before Section 401(k) was enacted, DC plans for private-sector employees were funded by employer contributions or by after-tax employee contributions. Typically, participants in a 401(k) plan can allocate their account balances among a menu of investment options selected by the employer or by a plan administrator appointed by the employer. The participant's retirement benefit consists of the balance in the account, which is the sum of all the contributions that have been made plus interest, dividends, and capital gains (or losses) minus fees and expenses. Upon separating from the employer, the participant usually has the choice of receiving these funds through a series of withdrawals or as a lump sum. Some 401(k) plans allow participants to purchase a life annuity through an insurance company, but defined contribution plans are not required to offer annuities. In most 401(k) plans, the employee must elect to have contributions to the plan deducted from his or her pay, decide how much to have deducted, and direct these contributions among the plan's investment options. The employer often contributes either a fixed dollar amount or percentage of pay to the account on behalf of each participant. Employer contributions are sometimes conditioned on the employee also making contributions. In a 401(k) plan, the employer can reduce or suspend its contributions to the plan if business conditions are unfavorable for the firm, or for any other reason. Although 401(k) plans are the most numerous DC plans, they are not the only kind of DC plan. (See box below .) ERISA and the pension provisions of the Internal Revenue Code have been amended several times since ERISA was enacted in 1974. The most significant changes to ERISA since its original passage were enacted in the Pension Protection Act of 2006 (PPA)( P.L. 109-280 ). In December of 2008, Congress passed the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) ( P.L. 110-455 ), which makes several technical corrections to the Pension Protection Act of 2006 ( P.L. 109-280 ) and contains provisions designed to help pension plans and plan participants weather the current economic downturn. Amendments made to ERISA by the PPA and WRERA are discussed below. ERISA: An Overview ERISA consists of four titles. Title I sets out specific protections of employee rights in pensions and welfare benefit plans. Title II specifies the requirements for plan qualification under the Internal Revenue Code. Title III assigns responsibilities for administration and enforcement to the Departments of Labor and Treasury. Title IV of ERISA establishes the Pension Benefit Guaranty Corporation. ERISA Title I: Protection of Employee Benefit Rights A. Coverage Title I of ERISA covers employee pension and welfare benefit plans established or maintained by employers in the private sector. The law specifically exempts governmental plans and church plans. Plans that are maintained only for the purpose of complying with applicable workmen's compensation laws, unemployment compensation, or disability insurance laws, as well as plans that are maintained outside of the United States (primarily for the benefit of persons who are non-resident aliens) are also exempted from ERISA's Title I requirements. B. Reporting and Disclosure Section 2(b) of ERISA states that it is the policy of ERISA "to protect ... the interests of plan participants and their beneficiaries by requiring disclosure and reporting of financial and other information." Both pension and welfare benefit plans can be subject to extensive reporting and disclosure requirements that can be found under Sections 101 through 111 of ERISA. These sections may require disclosure of information to plan participants and beneficiaries, as well as reporting of pension and welfare plan information to governmental agencies. Some of the reporting and disclosure requirements provide that certain materials must be disseminated or made available to participants at reasonable times and places. Other requirements arise only upon the written request of a plan participant or beneficiary or upon the occurrence of a specific event. Reports and disclosures required by ERISA include summary plan descriptions, annual reports, and summaries of plan modifications. In addition, the Pension Protection Act of 2006 (PPA) made enhancements to the reporting and disclosure requirements, requiring the provision of statements of a participant's total accrued benefits, an annual funding notice for single-employer plans, as well as a notice of eligibility to divest employer securities. 1. Summary Plan Description As a mechanism for informing plan participants of the terms of the plan and its benefits, ERISA requires that plan administrators furnish to participants a summary plan description (SPD). A SPD is a written summary of the provisions of an employee benefit plan that contains the terms of the plan and the benefits offered. It must be written in a manner that can be understood by the average plan participant and be sufficiently accurate and comprehensive to reasonably apprise participants and beneficiaries of their rights and obligations under the plan. ERISA specifies what the SPD must contain. It must state when an employee can begin to participate in the plan, describe the benefits provided by the plan, state when benefits become vested, and describe the remedies available if a claim for benefits is denied in whole or in part. If a plan is altered, participants must be informed, either through a revised SPD, or in a separate document, called a summary of material modifications (discussed below), both of which must also be given to plan participants. 2. Summary of Material Modifications Under Section 104(b)(1), a plan administrator must provide a summary of any material modification (SMM) in the terms of the plan as well as any change in information required to be included in the SPD. This summary must be provided, in most cases, within 210 days after the close of the plan year in which the modification was adopted, and also must be furnished to the Labor Department upon request. Similar to the SPD, the materials must be written in a manner that can be understood by the average plan participant. While ERISA does not define "material modification" and does not specifically cover what changes warrant an SMM, courts have addressed this issue. Courts have held plan amendments such as the establishment and elimination of benefits are material modifications. However, as courts have also pointed out, not all plan amendments are material modifications. 3. Annual Report Section 103 of ERISA provides that certain employee benefit plans must file an annual report with the Department of Labor. The annual report is considered to be a primary source of information concerning the operation, funding, assets, and investments of employee benefit plans. It is regarded as a compliance and research tool for the Labor Department, and a source of information and data for use by other federal agencies, Congress, and private groups in assessing employee benefit, tax, and economic trends and policies. While the annual report can also be an important disclosure document for plan participants, participants must request a copy from a plan administrator. The annual report must include a detailed financial statement containing information on the plan's assets and liabilities, an actuarial statement, as well as various other information, depending on the type of the plan and the number of participants. Plan administrators must make copies of the annual report available at the principal office of the plan administrator and at other places as may be necessary to make pertinent information readily available to plan participants. The annual report must be filed within seven months after the close of a plan year, and extensions may be available under certain circumstances. The annual report is to be filed with the Department of Labor on Form 5500. In 2006, the DOL published a rule requiring electronic filing of Form 5500 annual reports for plan years beginning on or after January 1, 2008. 4. Benefit Statements Under Section 105 of ERISA, plan administrators are required to periodically furnish a pension benefit statement to participants and beneficiaries. For defined contribution plans, a pension benefit statement must be provided (1) every calendar quarter to participants and beneficiaries who have the right to direct the investments of the account, or (2) once each calendar year for participants and beneficiaries who have accounts with the plan, but do not have control over the investment in the account. Section 105 also provides that plan administrators of defined benefit plans must furnish benefit statements to participants and beneficiaries at least once every three years to any individual who has both a non-forfeitable accrued benefit and is employed by the employer maintaining the plan at the time the statement is furnished. Statements to participants in defined benefit plans must also be provided upon request. Pension benefit statements must indicate information such as amount of non-forfeitable benefits, accrued benefits, and the earliest date on which accrued benefits become non-forfeitable. Benefit statements covering a defined contribution plan must also include the value of each investment to which assets have been allocated in a participant or beneficiary's account. 5. Annual Funding Notice Defined benefit plan administrators must also provide an annual plan funding notice. While in previous years funding notices have been furnished by multiemployer plans, single-employer plans must provide this notice beginning in 2008. The required annual notices include information about the plan's funding policy, assets, and liabilities; a statement of the number of participants; and a general description of the benefits that are eligible to be guaranteed by the PBGC. The notice must be provided to the PBGC, plan participants and beneficiaries, labor organizations representing such participants or beneficiaries, and, in the case of a multiemployer plan, to each employer who has an obligation to contribute to the plan. 6. Notice of Freedom to Divest Employer Securities The PPA amended the disclosure provisions of ERISA to require plan administrators to provide participants with a notice of their eligibility to divest employer securities held in a defined contribution plan. Section 101(m) of ERISA requires plan administrators to provide this notice to applicable individuals at least 30 days before the date on which the individual is eligible to divest these securities. The notice must inform the participant that he or she has the right to direct divestment of the employer securities and informed of the importance of diversifying the investment of retirement account assets. The notice must be written in a manner that can be understood by the average plan participant. It may be delivered in written, electronic, or other appropriate form that is reasonably accessible to the recipient. C. Participation Requirements ERISA restricts the amount of time an employee can be excluded from participating in a pension plan. Under ERISA Section 202(a)(1)(A), an employee can only be excluded from an ERISA pension plan on account of age or service if the employee is under age 21 or has not yet completed a year of service. The term "year of service" is defined as a 12-month period during which the employee has worked at least 1,000 hours. Alternatively, in the case of a plan under which a participant's benefits are 100% vested after no more than two years of service, a plan may require two years of service prior to participating in the plan. Plans maintained for employees of certain educational institutions which provide for 100% vesting after one year may condition participation on an employee's becoming 26 years old or completing one year of service, whichever is later. Once an employee becomes eligible to participate, a plan must enroll the employee no later than (1) the first day of the plan year or (2) six months after the date of satisfaction of the participation requirements, whichever is earlier. ERISA also prohibits pension plans from excluding employees from participation in the plan after an employee has attained a certain age. D. Benefit Accrual Section 204 of ERISA governs benefit accrual, which generally refers to the rate at which benefits are earned by a plan participant. An "accrued benefit" is defined differently for defined benefit and defined contribution plans. For defined benefit plans, accrued benefit means an individual's benefit determined under the plan and expressed in the form of an annual benefit commencing at normal retirement age, subject to exceptions. ERISA provides three primary methods for benefit accrual under a defined benefit plan: Under the "133-1/3 rule," generally, a later rate of accrual for one year of plan participation cannot be more than 133-1/3 percent of the rate for any other plan year. Under the "3% rule," a participant must accrue at least 3% of the participant's anticipated normal retirement benefit in each year of participation, up to a maximum of 33-1/3 years. Under the "fractional rule," benefit accrual is focused on a worker's proportionate years of service under the plan. For example, if benefits can accrue for a maximum of 40 years up to the date of the plan's normal retirement age (such as 65), a worker starting under the plan at age 25 and working to age 60 would get 35/40 of the maximum credit toward a pension. These tests limit the amount of "backloading," a practice of providing a higher benefit accrual rate for later years of service than for earlier years. "Front loading" benefits (providing a higher accrual rate for earlier years of service than for later years) is permitted, but decreases in the rate of benefit accrual cannot be based on the participant's age. In a defined contribution plan, the participant's accrued benefit is the balance in his or her account. Participants begin accruing a benefit in a defined contribution plan once they have met the participation requirements under the terms of the plan. However, if an employer makes contributions to an employee's account, the accrued benefit received may be treated differently for vesting purposes than the accrued benefit from employee contributions. 1. Anti-cutback Rule ERISA Section 204(g) prohibits plan amendments that eliminate or reduce benefits already accrued by plan participants. This prohibition is commonly referred to as the "anti-cutback rule." Benefits subject to the anti-cutback rule include basic accrued benefits, as well as any early retirement benefits, "retirement-type" subsidies, and other optional forms of benefits that an individual who has met certain requirements (as defined by the plan) is eligible to receive. However, the anti-cutback rule does not prevent a plan from freezing accrued benefits, reducing the rate at which benefits will accrue in the future, or eliminating future benefit accruals altogether. Although an accrued benefit is generally defined in monetary terms, the Supreme Court has held that the anti-cutback rule applies not only to a particular sum of money, but to a plan amendment which hinders a participant's receipt of benefits. In Central Laborers ' Pension Fund v. Heinz , a retired plan participant's benefits were suspended by the plan following a plan amendment that prohibited participants from engaging in the type of post-retirement employment he performed. The plaintiff claimed that this suspension violated ERISA's anti-cutback rule. The plan argued, among other things, that the anti-cutback rule applies only to amendments affecting the dollar amount the plan was obligated to pay, and that a mere suspension of benefits did not eliminate or reduce an accrued benefit. The Court rejected this argument and affirmed the decision of the lower court, stating that "as a matter of common sense, a participant's benefits cannot be understood without reference to the conditions imposed on receiving those benefits, and an amendment placing materially greater restrictions on the receipt of the benefit 'reduces' the benefit just as surely as a decrease in the size of the monthly benefit payment." 2. Benefit Accrual and Age Discrimination ERISA contains provisions designed to prevent age discrimination in benefit accrual. Section 204(b)(1)(H) of ERISA prohibits a defined benefit plan from ceasing accruals or reducing the rate of accrual on account of the employee's age. Section 204(b)(2)(A) of ERISA provides that for defined contribution plans, allocations to an employee's account may not cease, and the rate at which amounts are allocated to an employee's account may not be reduced on account of age. Over the past few years, several courts have evaluated these provisions in determining whether cash balance plans are age-discriminatory. Discrimination has been alleged, among other things, because of the structure of a cash balance plan, under which employees receive both pay credits and interest credits. After the employee terminates employment, pay credits will generally cease, but an employee will typically continue to earn interest credits. Because a younger employee has more time before retirement age in which to earn interest than an older employee, an accrued benefit may be greater for a younger employee. This result, some have argued, violates the age discrimination provisions. While certain district court decisions have held that cash balance plans violate the age discrimination provisions, all appellate courts to evaluate this issue have found that the plans are not age discriminatory. The PPA amended the benefit accrual requirements of ERISA, as well as other federal laws, by adding new standards under which a plan can be considered inherently non-age discriminatory. Under the act, a plan is not considered age discriminatory if a participant's entire accrued benefit, as determined under the plan's formula, is at least equal to that of any similarly situated, younger individual. A "similarly situated" individual is defined as an individual who is identical to the participant in every respect, including length of service, compensation, position, and work history, except for age. The PPA provides that cash balance plans do not discriminate against older workers if, among other things, benefits are fully vested after three years of service and interest credits do not exceed a market rate of return. In general, the new provisions regarding cash balance plans are effective for periods beginning on or after June 29, 2005. Thus, cash balance plans in existence prior to this date may still be subject to legal challenge. E. Minimum Vesting Standards While benefit accrual refers to the amount of benefits earned under ERISA, vesting occurs when a plan participant's accrued benefit is considered to be nonforfeitable. Once benefits have vested, the participant may be able to receive the vested portion of his or her retirement benefits even if he or she leaves the job before retirement. Vesting requirements apply only to benefits derived from employer contributions to a plan. Participant contributions to a pension plan must be automatically nonforfeitable to the participant. ERISA imposes two general vesting requirements: one depending on age and one depending on length of service. First, under Section 203(a) of ERISA, all plans must provide that the employees' rights to their "normal retirement benefits" are fully vested upon attainment of "normal retirement age." While a plan may choose a "normal retirement age" for purposes of determining when a participant's benefits vest, ERISA provides that this age must be the earlier of: (1) the time a participant attains normal retirement age as specified under a plan or (2) the later of the time the participant attains age 65 or the fifth anniversary of the time the participant commenced participation in the plan. Second, ERISA's vesting provisions also require benefits to vest based on an employee's years of service to the employer. Under ERISA § 203(b), a qualified defined benefit plan must meet one of two vesting schedules. The first schedule is met if a participant's benefits are fully vested after five years of service, commonly referred to as five-year "cliff" vesting. Alternatively, a participant's benefits may vest under the following graded vesting schedule: Most defined contribution plans are subject to similar vesting requirements. Exceptions include the SIMPLE 401(k) and the Safe Harbor 401(k) plans, in which participants are immediately vested in employer contributions. For other defined contribution plans, employers have a choice between two vesting schedules for employer contributions. Under cliff vesting, participants must be 100% vested in employer contributions after no more than three years of service. Under graduated or graded vesting, an employee must be at least 20% vested after two years, 40% after three years, 60% after four years, 80% after five years, and 100% vested after six years. Both employer matching contributions ( i.e. , employer plan contributions made on behalf of an employee and on account of an employee's elective contributions) as well as employer nonelective contributions (such as profit-sharing contributions) must vest under these rules. Breaks in Service ERISA protects plan participants from losing credit for earlier service in cases in which workers leave their jobs and then return to work within five years. Once an employee becomes eligible to participate in a pension plan, all years of service with the employer during which the employer maintained the plan (including service before becoming a plan participant) must be taken into account for purposes of determining how much service will be counted toward meeting the plan's vesting requirement. In the case of a nonvested participant, years of service before any break in service must be taken into account upon re-employment. In a defined contribution plan, if a participant who is not 100% vested incurs a break in service of less than five years and subsequently returns to work, all service after returning to work must be added to the pre-break service in determining the vested portion of the pre-break benefit. A break in service occurs in any year in which the employee completes less than 500 hours of service. Generally, workers will not incur a break in service for up to one year's absence due to pregnancy, childbirth, infant care, or adoption. F. Benefit Protections for Spouses The Retirement Equity Act of 1984 (REA) amended ERISA to increase pension protections for the survivors of deceased plan participants. As amended by the REA, ERISA requires defined benefit plans and money purchase plans to provide preretirement and postretirement survivor annuities to married employees unless a written election to waive the survivor annuity is signed by both the employee and his or her spouse. In the event of divorce, ERISA requires plan administrators to honor qualified domestic relations orders (QDROs) issued by state courts that divide the pension or account balance between the two parties. This requirement ensures that a court order awarding a share of a vested pension benefit to the former spouse of a divorced plan participant will be honored by the plan. 1. Preretirement Survivor Benefits ERISA requires defined benefit plans to provide a survivor annuity to the spouse of a vested active participant or vested former participant. The cost of the preretirement survivor annuity may be paid by the employer or passed on to covered participants through reduced benefits or increased contributions. To waive the preretirement survivor benefit, both participant and spouse must sign a waiver form. The plan can defer payment of the survivor annuity until the month in which the deceased participant would have reached the plan's earliest retirement age. Profit-sharing plans (including 401(k) plans) and stock bonus plans must provide for automatic payment of the participant's vested account balance to his or her spouse upon the death of the participant unless both parties designate an alternate beneficiary in writing. If either a profit-sharing plan or stock bonus plan offers a life annuity option, it must provide a pre-retirement survivor annuity. 2. Postretirement Survivor Benefits ERISA requires the default form of benefit paid to a married participant in a defined benefit plan to be a joint and survivor annuity that provides a life annuity to the survivor equal to at least 50% of the joint benefit paid while the participant was living. Beginning in 2008, the PPA requires plans to offer a 75% survivor annuity option if the plan's survivor annuity is less than 75%, and to offer a 50% survivor annuity option if the plan's survivor annuity is greater than 75%. Waiving the survivor benefit requires the written consent of both the participant and spouse. The participant and spouse must have at least 90 days ending on the annuity starting date to waive the survivor annuity. The decision to waive the survivor annuity also can be revoked during this period. Because a joint and survivor annuity is based on the joint life expectancy of the participant and spouse instead of a single life, the amount of the joint annuity is lower than it would be if it were a single-life annuity. Once a joint and survivor annuity is in effect and the retirement annuity has commenced, the spouse to whom the participant was married on the date that the annuity started is entitled to the survivor annuity, even if the couple is no longer married when the participant dies. Before the annuity begins, the employer must provide each participant with a written notice that states: the terms and conditions of the qualified joint and survivor annuity; the right of the participant and spouse to decline the survivor annuity and the effect of the decision; the rights of the spouse; and the right to reverse the decision and the effect of reversing it. 3. Qualified Domestic Relations Orders The REA of 1984 amended ERISA to allow plans to honor state court orders awarding a share of a worker's pension to a former spouse. ERISA sets forth procedures the plan administrator must follow to determine if a court order is a qualified domestic relations order (QDRO). While ERISA generally requires pension plans to provide that "benefits under the plan may not be assigned or alienated," an exception to this requirement is made for QDROs. Payments to the former spouse of a participant may begin when the participant becomes eligible to retire, even if the participant is still employed. A QDRO must specify: the name and last known address of the participant and each person to receive money, the amount or percentage of the participant's benefits to be paid to each person, the number of payments or the time period to which the order applies, and each plan to which the order relates. A QDRO generally will qualify only if it does not require the plan to: provide a form of benefit not otherwise provided by the plan, pay more benefits than it would have paid in the absence of the order, or pay benefits that the plan must already pay to another beneficiary because of an earlier QDRO. The PPA directed the Secretary of Labor to issue regulations to clarify whether a domestic relations order that supersedes or revises an earlier QDRO will be considered to be qualified, and to state the conditions under which a QDRO will not be treated as qualified because of the time at which it was issued. G. Buyouts, Mergers, and Consolidations If a company is purchased by another firm, participants and beneficiaries in the acquired company may not be denied pension benefits already earned, and PBGC insurance protections continue to apply to those benefits. In the event of a plan merger, consolidation, or transfer of plan assets or liabilities, the participant's benefit must be equal to, or greater than, the benefit to which the participant would have been entitled had the plan been terminated immediately before the merger, consolidation, or transfer. H. Plan Funding To ensure that sufficient money is available to pay promised pension benefits to participants and beneficiaries, ERISA sets rules that require plan sponsors to fully fund the pension liabilities of defined benefit plans. These rules were substantially modified by the PPA. The funding requirements of ERISA recognize that pension liabilities are long-term liabilities. Consequently, plan liabilities need not be funded immediately, but instead can be amortized (paid off with interest) over a period of years. Single-employer plans generally are required to amortize initial past service liabilities and past service liabilities arising under plan amendments over no more than seven years. Defined contribution plans do not promise a specific benefit, and so these plans have no funding requirements. ERISA requires employers that sponsor defined benefit plans to fund the pension benefits that plan participants earn each year. This is referred to as funding the normal cost of the plan. In addition, DB plan sponsors must amortize the cost of any pension benefits granted to employees for past service, but for which no monies were set aside. Furthermore, if a DB plan retroactively increases the level of benefits by plan amendment, these new liabilities must be amortized as well. The assets of the pension plan must be kept in a trust that is separate from the employer's general assets. Assets in the pension trust fund are protected from the claims of creditors in the event that the plan sponsor files for bankruptcy. 1. Funding Requirements for Single-employer Plans ERISA requires companies that sponsor defined benefit pension plans to fully fund the benefits that plan participants earn each year. If a plan is underfunded, the plan sponsor must amortize this unfunded liability over a period of years. The PPA established new rules for determining whether a defined benefit plan is fully funded, the contribution needed to fund the benefits that plan participants will earn in the current year, and the contribution to the plan that is required if previously earned benefits are not fully funded. In general, the new rules are effective with plan years beginning in 2008, but many provisions of the PPA will be phased in over several years. a. Minimum funding standards for single-employer plans Pension plan liabilities extend many years into the future. Determining whether a pension is adequately funded requires converting the future stream of pension payments into the amount that would be needed today to pay off those liabilities all at once. This amount—the "present value" of the plan's liabilities—is then compared with the value of the plan's assets. An underfunded plan is one in which the value of the plan's assets falls short of the present value of its liabilities. Converting a future stream of payments (or income) into a present value requires the future payments (or income) to be discounted using an appropriate interest rate. Other things being equal, the higher the interest rate, the smaller the present value of the future payments (or income), and vice versa. When fully phased in, the new funding requirements established by the PPA will require plan assets to be equal to 100% of plan liabilities. Any unfunded liability will have to be amortized over no more than seven years. Sponsors of severely underfunded plans that are at risk of defaulting on their obligations will be required to fund their plans according to special rules that will result in higher employer contributions to the plan. Plan sponsors are allowed to use credit earned for past contributions (called "credit balances") to offset required contributions, but only if the plan is funded at 80% or more. The value of credit balances must be adjusted to reflect changes in the market value of plan assets since the date the contributions that created the credit balances were made. A plan sponsor's minimum required contribution is based on the plan's target normal cost and the difference between the plan's funding target and the value of the plan's assets. The target normal cost is the present value of all benefits that plan participants will accrue during the year. The funding target is the present value of all benefits—including early retirement benefits—already accrued by plan participants as of the beginning of the plan year. If a plan's assets are less than the funding target, the plan has an unfunded liability . This liability—less any permissible credit balances—must be amortized in annual installments over no more than seven years. The plan sponsor's minimum required annual contribution is the plan's target normal cost for the plan year, but not less than zero. The 100% funding target is being phased in at 92% in 2008, 94% in 2009, 96% in 2010, and 100% in 2011 and later years. The phase-in does not apply to underfunded plans that were required to make deficit reduction contributions in 2007. Those plans have a 100% funding target in 2008. ERISA requires plans to discount future liabilities using three different interest rates, depending on the length of time until the liabilities must be paid. A short-term interest rate is used to calculate the present value of liabilities that will come due within five years. A mid-term interest rate is used for liabilities that will come due in five to 20 years, and a long-term interest rate is applied to liabilities that will come due in more than 20 years. The Secretary of the Treasury determines these rates, which are derived from a "yield curve" of investment-grade corporate bonds averaged over the most recent 24 months. The yield curve is being phased in over three years beginning in 2007. It will replace the four-year average of corporate bond rates established under the Pension Funding Equity Act of 2004, which expired on December 31, 2005. b. "At risk" plans Pension plans that are determined to be at risk of defaulting on their liabilities must use specific actuarial assumptions to determine plan liabilities. A plan is deemed to be at-risk if it is unable to pass either of two tests. Under the first test, a plan is at-risk if it is less than 70% funded under the "worst-case scenario" assumptions that (1) the employer is not permitted to use credit balances to reduce its cash contribution and (2) employees will retire at the earliest possible date and will choose to take the most expensive form of benefit. If a plan does not pass this test, it will be deemed to be at-risk unless it is at least 80% funded under standard actuarial assumptions. This latter test will be phased in over four years, with the minimum funding requirement starting at 65% in 2008 and rising to 70% in 2009, 75% in 2010, and 80% in 2011. If a plan passes either of these two tests, it is not deemed to be at-risk; however, it is required to make up its funding shortfall over no more than seven years. Plans that have been at-risk for at least two of the previous four years also will be subject to an additional "loading factor" equal to 4% of the plan's liabilities plus $700 per participant, which is added to the plan sponsor's required contribution to the plan. Plan years prior to 2008 will not count for this determination. Plans with 500 or fewer participants in the preceding year are exempt from the at-risk funding requirements. c. Mortality tables To estimate a pension plan's future obligations, the plan's actuaries use mortality tables to project the number of participants who will claim a pension and the average length of time that participants and their surviving beneficiaries will receive pension payments. ERISA requires the Secretary of the Treasury to prescribe the mortality tables to be used for these estimates. Large plans can petition the IRS to use a plan-specific mortality table. 2. Valuation of Plan Assets Prior to enactment of the PPA, a plan sponsor could determine the value of a plan's assets using actuarial valuations, which can differ from the current market value of those assets. For example, in an actuarial valuation, the plan's investment returns could be "smoothed" (averaged) over a five-year period, and the average asset value could range from 80% to 120% of the fair market value. Averaging asset values reduces volatility in the measurement of plan assets that can be caused by year-to-year fluctuations in interest rates and the rate of return on investments. Averaging therefore reduces the year-to-year volatility in the plan sponsor's required minimum contributions to the pension plan. The PPA narrowed the range for actuarial valuations to no less than 90% and no more than 110% of fair market value and it reduced the maximum smoothing period to two years. Plans with more than 100 participants are required to use the first day of the plan year as the basis for calculations of plan assets and liabilities. Plans with 100 or fewer participants can choose another date. Plan contributions and credit balances Within limits, plan sponsors can offset required current contributions with previous contributions. However, these so-called "credit balances" can be used to reduce the plan sponsor's minimum required contribution to the plan only if the plan's assets are at least 80% of the funding target, not counting prefunding balances that have arisen since the PPA became effective. Existing credit balances and new prefunding balances must both be subtracted from assets in determining the "adjusted funding target attainment" percentage that is used to determine whether certain benefits can be paid and whether benefit increases are allowed. Credit balances also have to be adjusted for investment gains and losses since the date of the original contribution that created the credit balance. Credit balances must be separated into balances carried over from 2007 and balances resulting from contributions in 2008 and later years. 3. Benefit Limitations in Underfunded Plans ERISA places limits on (1) plan amendments that would increase benefits, (2) benefit accruals, and (3) benefit distribution options (such as lump sums) in single-employer defined benefit plans that fail to meet specific funding thresholds. a. Shutdown Benefits Shutdown benefits are payments made to employees when a plant or factory is shut down. These benefits typically are negotiated between employers and labor unions, and usually they are not prefunded. ERISA prohibits shut-down benefits and other "contingent event benefits" from being paid by pension plans that are funded at less than 60% of full funding unless the employer makes a prescribed additional contribution to the plan. The PBGC guarantee for such benefits is phased in over a five-year period commencing when the event occurs. b. Restrictions on benefit accruals ERISA requires benefit accruals to cease in plans funded at less than 60% of full funding. Once a plan is funded above 60%, the employer—and the union in a collectively bargained plan—must decide how to credit past service accruals. This provision does not apply if the employer makes an additional contribution prescribed by statute. However, Section 203 of WRERA provides that for the first plan year beginning during the period of October 1, 2008, through September 30, 2009, this restriction on benefit accruals is determined using the funding levels from the preceding year, instead of the current year, if the funding levels for the preceding year are greater. Thus, for plans that have lost a lot in the value of plan assets, looking to the funding levels for the previous year may allow some plans to continue providing future benefit accruals that would otherwise have to cease them. c. Restrictions on benefit increases Plan amendments that increase benefits are prohibited if the plan is funded at less than 80% of the full funding level, unless the employer makes additional contributions to fully fund the new benefits. Benefit increases include—but are not limited to—increases in the rate of benefit accrual and increasing the rate at which benefits become vested. d. Restrictions on lump-sum distributions Lump-sum distributions are prohibited if the plan is funded at less than 60% of the full funding level or if the plan sponsor is in bankruptcy and the plan is less than 100% funded. If the plan is funded at more than 60% but less than 80%, the plan may distribute as a lump sum no more than half of the participant's accrued benefit. e. Notice to participants ERISA requires plan sponsors to notify participants of restrictions on shutdown benefits, lump-sum distributions, or suspension of benefit accruals within 30 days of the plan being subject to any of these restrictions. The restrictions on benefits in underfunded plans are effective in 2008, but not before 2010, for collectively bargained plans. 4. Lump-sum Distributions ERISA requires defined benefit pensions to offer participants the option to receive their accrued benefit as a life annuity: a series of monthly payments guaranteed for life. Many defined benefit plans also offer participants the option to take their accrued benefit as a lump sum at the time they separate from the employer. The amount of a lump-sum distribution from a defined benefit pension is inversely related to the interest rate used to calculate the present value of the benefit that has been accrued under the plan: the higher the interest rate, the smaller the lump sum and vice versa. To protect employees' accrued benefits, ERISA prescribes interest rates and mortality tables to be used in determining the minimum value of a participant's benefit expressed as a lump sum. Before the PPA, minimum lump-sum values were calculated using the interest rate on 30-year Treasury bonds. As amended by the PPA, ERISA requires lump-sum payments from defined benefit plans to be no less than the amount that would result from using the applicable corporate bond interest rate. It requires plans that use an interest rate that results in larger lump sums to treat these larger payments as a subsidy to plan participants, which must be funded by the plan sponsor. The new rules for lump sums are being phased in over five years, beginning in 2008. When fully phased in, minimum permissible lump-sum distributions will be based on a three-segment interest rate yield curve, derived from the rates of return on investment-grade corporate bonds of varying maturities. Plan participants of different ages will have their lump-sum distributions calculated using different interest rates. Other things being equal, a lump-sum distribution paid to a worker who is near the plan's normal retirement age will be calculated using a lower interest rate than will be used for a younger worker. As a result, all else being equal, an older worker will receive a larger lump sum than a similarly situated younger worker. The interest rates used to calculate lump sums will be based on current bond rates rather than the three-year weighted average rate used to calculate the plan's funding target. Plans funded at less than 60% are prohibited from paying lump-sum distributions. Plans funded at 60% to 80% can pay no more than half of a participant's accrued benefit as a lump-sum distribution. The PPA also established a new interest rate floor for testing whether a lump sum paid from a defined benefit plan complies with the benefit limitations under IRC §415(b). In general, IRC §415(b) limits the annual single-life annuity payable from a qualified defined benefit plan to the lesser of 100% of average compensation over three years or $195,000 (in 2009). A benefit paid as a lump sum must be converted to an equivalent annuity value for purposes of applying this limit. As amended by the PPA, ERISA requires plans making this calculation to use an interest rate that is no lower than the highest of (1) 5.5%, (2) the rate that results in a benefit of no more than 105% of the benefit that would be provided if the interest rate required for determining a lump sum distribution were used, or (3) the interest rate specified in the plan documents. 5. Funding Requirements for Multiemployer Plans A multiemployer plan is a collectively bargained plan maintained by several employers—usually within the same industry—and a labor union. Multiemployer defined benefit plans are subject to funding requirements that differ from those for single-employer plans. The PPA established a new set of rules for improving the funding of multiemployer plans that the law defines as being in "endangered" or "critical" status. These new requirements will remain in effect through 2014. As amended by the PPA, ERISA requires each multiemployer plan to certify the plan's current funding status and project its funding status for the following six years within 90 days after the start of the plan year. If the plan is underfunded, it has 30 days after the certification date to notify participants and eight months to develop a funding schedule that meets the statutory funding requirements and to present it to the parties of the plan's collective bargaining agreement. Multiemployer plans must amortize any increases in plan liabilities that are due to benefit increases or to changes in the actuarial assumptions used by the plan over a period of 15 years. The PPA increased the limit on tax-deductible employer contributions to multiemployer plans to 140% of the plan's current liability (up from 100%), and it eliminated the 25%-of-compensation combined limit on contributions to defined benefit and defined contribution plans. The PPA also allows the Internal Revenue Service to permit multiemployer plans that project a funding deficiency within ten years to extend the amortization schedule for paying off its liabilities by five years, with a further five-year extension permissible. It requires the plans to adopt a recovery plan and to use specific interest rates for plan funding calculations. a. Requirements for underfunded multiemployer plans The PPA established mandatory procedures, effective through 2014, to improve the funding of seriously underfunded multiemployer plans. A multiemployer plan is considered to be endangered if it is less than 80% funded or if the plan is projected to have a funding deficiency within seven years. A plan that is less than 80% funded and is projected to have a funding deficiency within seven years is considered to be seriously endangered . An endangered plan has one year to implement a "funding improvement plan" designed to reduce the amount of under-funding. Endangered plans have 10 years to improve their funding. They must improve their funding percentage by one-third of the difference between 100% funding and the plan's funded percentage from the earlier of (1) two years after the adoption of the funding improvement plan or (2) the first plan year after the expiration of collective bargaining agreements that cover at least 75% of the plan's active participants. Seriously endangered plans that are less than 70% funded have 15 years to improve their funding. They must improve their funding percentage by one-fifth of the difference between 100% funding and the plan's funded percentage from the earlier of (1) two years after the adoption of the funding improvement plan or (2) the first plan year after the expiration of collective bargaining agreements that cover at least 75% of the plan's active participants. A plan that is endangered or seriously endangered may not increase benefits. If the parties to the collective bargaining agreement are not able to agree on a funding improvement plan, a default funding schedule applies that will reduce future benefit accruals. A multiemployer plan is not endangered in any plan year in which the required funding percentages are met. A multiemployer plan is considered to be in critical status if (1) it is less than 65% funded and it has a projected funding deficiency within five years or will be unable to pay benefits within seven years; (2) it has a projected funding deficiency within four years or will be unable to pay benefits within five years (regardless of its funded percentage); or (3) its liabilities for inactive participants are greater than its liabilities for active participants, its contributions are less than carrying costs, and a funding deficiency is projected within five years. A plan in critical status has one year to develop a rehabilitation plan designed to reduce the amount of underfunding. b. Reductions in adjustable benefits In general, ERISA's anti-cutback rule prohibits reductions in accrued, vested benefits. The PPA relaxed the anti-cutback rule so that multiemployer plans in critical status are permitted to reduce or eliminate early retirement subsidies and other "adjustable benefits" to help improve their funding status if this is agreed to by the bargaining parties. Benefits payable at normal retirement age cannot be reduced, and plans are not permitted to cut any benefits of participants who retired before they were notified that the plan is in critical status. Adjustable benefits include certain optional forms of benefit payment, disability benefits, early retirement benefits, joint and survivor annuities (if the survivor benefit exceeds 50%), and benefit increases adopted or effective less than five years before the plan entered critical status. c. Disclosure requirements As amended by the PPA, ERISA requires multiemployer plans to send funding notices to participants within 120 days after the end of the plan year. The Department of Labor will post information from plans' annual reports on its website, and plans are required to provide certain information to participants on request. For plans in endangered or critical status, the plan actuary must certify that the funding improvement is on schedule. Annual reports must contain information on funding improvement plans or rehabilitation plans. Notification must be provided to participants, beneficiaries, bargaining parties, the PBGC, and the Secretary of Labor within 30 days after the plan determines that it is in endangered or critical status. I. Fiduciary Responsibility ERISA imposes certain obligations on plan fiduciaries, persons who are generally responsible for the management and operation of employee benefit plans. ERISA Section 3(21)(A) provides that a person is a "fiduciary" to the extent that the person: (1) exercises any discretionary authority or control with respect to the management of the plan or exercises any authority with respect to the management or disposition of plan assets; (2) renders investment advice for a fee or other compensation with respect to any plan asset or has any authority or responsibility to do so; or (3) has any discretionary responsibility in the administration of the plan. Every plan governed by ERISA must have one or more named fiduciaries, and these fiduciaries must be named in the plan document. Section 404(a)(1) of ERISA establishes the duties owed by a fiduciary to participants and beneficiaries of a plan. This section identifies four standards of conduct: (1) a duty of loyalty, (2) a duty of prudence, (3) a duty to diversify investments, and (4) a duty to follow plan documents to the extent that they comply with ERISA. 1. Duty of Loyalty Section 404(a)(1)(A) of ERISA requires plan fiduciaries to discharge their duties "solely in the interest of the participants and beneficiaries" and for the "exclusive purpose" of providing benefits to participants and beneficiaries and defraying reasonable expenses of administering the plan. The duty of loyalty applies in situations where the fiduciary is confronted with a potential conflict of interest, for instance, when a pension plan trustee has responsibilities to both the plan and the entity (such as the employer or union) sponsoring the plan. However, just because an ERISA fiduciary engages in a transaction that incidentally benefits the fiduciary or a third party does not necessarily mean that a fiduciary breach has occurred. One case to address this idea is Donovan v. Bierwirth , a case under which pension plan trustees, who were also corporate officers, were responsible for deciding whether they should tender shares of company stock in order to thwart a hostile takeover attempt. The trustees not only decided against tendering the stock, but also decided to purchase additional company stock for the pension plan. In finding that the trustees had breached their fiduciary duties, the court in Donovan noted that it is not a breach of fiduciary duty if a trustee who, after careful and impartial investigation, makes a decision that while benefitting the plan, also incidentally benefits the corporation, or the fiduciaries themselves. However, fiduciary decisions must be made with an "eye single to the interests of the participants and beneficiaries." The court articulated that the trustees have a duty to "avoid placing themselves in a position where their acts as officers and directors of the corporation will prevent their functioning with the complete loyalty to participants demanded of them as trustees of a pension plan." In addition to providing benefits, a plan fiduciary must "defray[] reasonable expenses of administering the plan." The Department of Labor has stated that "in choosing among potential service providers, as well as in monitoring and deciding whether to retain a service provider, the trustees must objectively assess the qualifications of the service provider, the quality of the work product, and the reasonableness of the fees charged in light of the services provided." On November 16, 2007, the Department of Labor issued a final regulation that revises the Form 5500, which plans file each year to report their funding status and other financial information that ERISA requires to be disclosed to the Department. The regulation will require disclosure of information regarding the fees paid by the plan to administrators, record keepers, and other service providers. On December 13, 2007, the Department of Labor published a proposed regulation that would require service providers to disclose to plan fiduciaries, in advance of entering into a contract with the plan, all fees and any other direct or indirect compensation that the service provider would receive while under contract to the plan. 2. Duty of Prudence Section 404(a)(1)(B) of ERISA requires fiduciaries to act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man would use in the conduct of an enterprise of a like character with like aims." When examining whether a fiduciary has violated the duty of prudence, courts typically examine the process that a fiduciary undertook in reaching a decision involving plan assets. If a fiduciary has taken the appropriate procedural steps, the success or failure of an investment can be irrelevant to a duty of prudence inquiry. Regulations promulgated by the Department of Labor provide clarification as to the duty of prudence in regard to investment decisions. These regulations indicate that a fiduciary can satisfy his duty of prudence under ERISA by giving "appropriate consideration" to the facts and circumstances that the fiduciary knows or should know are relevant to an investment or investment course of action. "Appropriate consideration" includes (1) "a determination by the fiduciary that the particular investment or investment course of action is reasonably designed, as part of the portfolio ... to further the purposes of the plan, taking into consideration the risk of loss and the opportunity for gain (or other return) associated with the investment," and (2) consideration of the portfolio's composition with regard to diversification, the liquidity and current return of the portfolio relative to the anticipated cash flow requirements of the plan, and the projected return of the portfolio relative to the plan's funding objectives. 3. Duty to Diversify Investments Section 404(a)(1)(C) of ERISA requires fiduciaries to diversify the investments of a plan "so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so." In general, it is believed that fiduciaries should not invest an unreasonably large proportion of a plan's portfolio in a single security, in a single type of security, or in various securities dependent upon the success of a single enterprise or upon conditions in a single locality. Courts have agreed that ERISA Section 404(a)(1)(C) does not create a diversification obligation in terms of fixed criteria, but instead requires a determination based on the specific facts of each individual case. In GIW Industries, Inc. v. Trevor Stewart , the court concluded that the defendant investment manager breached its duty to diversify investments by investing too heavily in long-term government bonds. By investing 70 percent of the plan's assets in long-term bonds rather than short-term bonds, the firm exposed the fund to a greater degree of risk. Expert testimony had indicated that short-term bonds or bonds with staggered maturity dates would have minimized exposure if the bonds were sold before maturity. The court maintained that Trevor Stewart's investment exposed the fund "to greater risk of cash outflows than was prudent." Similarly, in Brock v. Citizens Bank of Clovis , the Tenth Circuit determined that trustees of the Citizens Bank of Clovis Pension Plan breached their duty to diversify investments by investing over 65 percent of the plan's assets in commercial real estate mortgages. The court maintained that the trustees' significant investment in one type of security exposed the plan to a multitude of risks. Moreover, the court found that the trustees failed to establish that the investments were prudent notwithstanding the lack of diversification. However, in Metzler v. Graham , the court found that a plan trustee had not breached his duty under Section 404(a)(1)(C), even though he had invested more than half of the plan's assets in one piece of real estate. While the court found that the trustee had not diversified investments, the court concluded that the lack of diversification of the plan's investments was prudent under the facts and circumstances of the case. 4. Duty to Act in Accordance with Plan Documents Section 404(a)(1)(D) of ERISA requires fiduciaries to discharge their duties "in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with [ERISA]." Courts have interpreted this section to apply not only to a document or instrument that establishes a plan or maintains a plan, but also to other writings that have a substantive effect on the plan. These writings have included investment management agreements, collective bargaining agreements, and even internal memoranda regarding the sale of plan assets. Under Section 404(a)(1)(d), if a plan provision conflicts with ERISA, a fiduciary is obligated to ignore the plan provision. Courts have evaluated this requirement in the context of when compliance with a plan provision leads to a breach of other fiduciary duties. The Department of Labor has argued that "if obeying a plan provision requires the fiduciary to act imprudently and disloyally in violation of ERISA section 404(a)(1)(A) and (B) ... the provision is not consistent with ERISA and the fiduciary has a duty to disregard it." This situation was addressed in Tittle v. Enron , in which the pension plan in question required employer contributions to be made "primarily in Enron stock." The court in Enron held that the plan fiduciaries had a duty to ignore this provision if it would be imprudent to follow it. In interpreting Section 404(a)(1)(D), courts have also held that fiduciaries do not breach the duty to act in accordance with plan documents if their failure to follow such documents results from erroneous interpretations made in good faith. In Morgan v. Independent Drivers Association Pension Plan , the Tenth Circuit found that the trustees of a pension plan did not violate Section 404(a)(1)(D) because their decision to terminate the plan based on an erroneous interpretation of the effect of a new plan funding method was both considered in good faith and based on consultation with experts. 5. Prohibited Transactions In addition to requiring plan fiduciaries to adhere to certain standards of conduct, ERISA prohibits fiduciaries from engaging in specified transactions deemed likely to injure a pension plan. Engaging in a prohibited transaction is a per se violation of ERISA. Thus, in evaluating a fiduciary's role in a prohibited transaction, it may be considered irrelevant to examine whether the transaction would be considered prudent had it occurred between independent parties. Section 406(a) of ERISA bars certain transactions between a plan and a party in interest with respect to a plan. Subject to certain exemptions, a fiduciary must not cause a plan to engage in any transaction with a party in interest if the fiduciary knows or should know that the transaction is a: sale or exchange, or leasing, of any property; lending of money or other extension of credit; furnishing of goods, services, or facilities; transfer or use of any plan assets; or acquisition, on behalf of the plan, of any employer security or employer real property in violation of ERISA § 407, which limits the amount of employer securities and property that may be held by a plan. Section 406(b) prohibits certain transactions between a plan and a plan fiduciary. A fiduciary may not: deal with the assets of the plan in his own interest or for his own account; act in any transaction involving the plan on behalf of a party (or represent a party) whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries, or receive any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan. ERISA also places a limit on the amount of investment in the sponsoring employer's stock and property held in a defined benefit plan. Section 407 generally provides that a plan may not invest in securities of an employer unless they are "qualifying employer securities." Further, under this section, a plan may not acquire or hold employer real property unless it is "qualifying employer real property." However, a plan may not acquire qualifying employer securities or qualifying employer property, if immediately after the acquisition, the aggregate fair market value of employer securities and employer real property held by the plan is more than 10% of the fair market value of the assets of the plan. The Section 407 requirements generally do not apply to defined contribution plans, unless the plan requires a portion of an elective deferral to be invested in qualifying employer securities or qualifying employer real property. However, the PPA created new diversification requirements for qualifying employer securities held in defined contribution plans. Section 204(j) of ERISA provides that an individual must be allowed to elect to direct a plan to divest employee contributions and elective deferrals invested in employer securities, and reinvest these amounts in other investment options. A plan must offer at least three investment options (besides employer securities) to which an individual may direct the proceeds from the divestment. Individuals must be allowed to diversify their employee contributions out of employer stock as often as other investment changes are allowed, but at least quarterly. In addition, employees who have completed three years of service must also be allowed to diversify employer matching contributions and employer nonelective contributions out of employer stock. This requirement is phased in over three years for existing amounts contributed in plan years before 2007. The section also provides that, except as provided in regulations, plans cannot impose restrictions on employer stock investment or diversification that are not imposed on other plan investments. ERISA provides for various exemptions from the prohibited transactions provisions. Section 408(a) directs the Secretary of Labor to establish a procedure for granting administrative exemptions for certain individuals and classes. The section provides that the Secretary may not grant an exemption under this section unless it is (1) administratively feasible, (2) in the interests of the plan and of its participants and beneficiaries, and (3) protective of the rights of participants and beneficiaries of the plan. The Labor Department has promulgated regulations outlining the procedures for filing and processing prohibited transaction exemption applications. Section 408(b) of ERISA provides a number of statutory exemptions. These exemptions, found in Section 408(b), include certain loans to participants and beneficiaries (so long as certain conditions are met); reasonable arrangements with parties in interest for office space or legal, accounting, or other services needed for the establishment or operation of the plan; certain plan investments (in the form of deposits) made in banks or in similar financial institutions whose employees are covered by the plans; as well as the purchase of life insurance, health insurance, or annuities from a qualifying insurer who is the employer maintaining the plan. 6. Investment Advice Prior to the PPA, ERISA's prohibited transaction restrictions were believed to have discouraged the provision of investment advice. Because it was perceived that "[v]irtually any transaction could fall within one of these [prohibited transaction] categories," individuals were reluctant to provide investment advice to plan participants. The PPA amended both ERISA and the Internal Revenue Code to add a statutory prohibited transaction exemption with regard to providing investment advice. This exemption allows fiduciaries to provide investment advice without fear of fiduciary liability under the prohibited transaction provisions. Section 408(g)(1) of ERISA, as added by Section 601(a)(2) of the PPA, states that the act's prohibited transaction restrictions shall not apply to transactions involving investment advice if such advice is provided by a fiduciary adviser pursuant to an "eligible investment advice arrangement." An "eligible investment advice arrangement" is defined as an arrangement that either (1) provides that any fees (including any commission or other compensation) received by the fiduciary adviser for investment advice or with respect to the sale, holding, or acquisition of any security or other property for purposes of investment of plan assets do not vary depending on the basis of any investment option selected, or (2) uses a computer model under an investment advice program meeting the requirements of Section 408(g)(3) in connection with the provision of investment advice by a fiduciary adviser to a participant or beneficiary. To be considered an "eligible investment advice arrangement," an arrangement must meet other requirements identified in subsequent paragraphs of Section 408(g). These requirements include the following: the express authorization of the arrangement by a plan fiduciary other than the person offering the investment advice program, any person providing investment options under the plan, or any affiliate of either; the performance of an annual audit of the arrangement by an independent auditor; compliance with various disclosure requirements; the writing of participant notifications in a clear and conspicuous manner; and the maintenance of any records showing compliance with the relevant provisions of Section 408(g) for not less than six years. If investment advice is provided through the use of a computer model, such model must also meet certain specified requirements. 7. Fiduciary Duty and Participant-Controlled Investment Under Section 404(c) of ERISA, if a defined contribution plan permits a participant or beneficiary "to exercise control over the assets in his account," a fiduciary will not be liable for any loss which may result from the participant's or beneficiary's investment choices. However, in order for a fiduciary to be immune from liability, a plan must meet certain requirements. Labor Department regulations describe two basic requirements for a plan to be considered a "404(c) plan." First, a plan must provide the participant or beneficiary the opportunity to exercise control over the assets in the individual's account. Individuals must, among other things, have a "reasonable opportunity to give investment instructions" as well as "the opportunity to obtain sufficient information to make informed decisions" about investment alternatives under the plan. Second, a plan must allow a participant or beneficiary to choose from a "broad range of investment alternatives." A participant or beneficiary is deemed to have access to this range of alternatives if, among other things, the individual has the opportunity to "materially affect" the potential return and the degree of risk on the portion of the individual account with respect to which he is permitted to exercise control. In addition, a participant or beneficiary must be given a choice of at least three investment alternatives, each of which is diversified, has different risk and return characteristics, and which, in the aggregate, enable the participant to achieve a portfolio with risk and return characteristics that are "normally appropriate" for the participant or beneficiary. In addition, in order for a fiduciary to be immune from liability under Section 404(c), a participant or beneficiary must not only have the ability to exercise control of plan assets, but must also have taken the opportunity to "exercise independent control" with respect to the investment of assets in the individual's account. The 404(c) regulations provide guidance as to when a participant or beneficiary will be deemed to have exercised control over plan assets, as well as certain circumstances under which a participant or beneficiary's exercise of control will not be considered "independent." 8. Fiduciary Liability under ERISA Section 409 Plan fiduciaries may be personally liable if the fiduciary breaches a responsibility, duty, or obligation under ERISA. Section 409 of ERISA provides that a fiduciary may be liable to a plan for any losses resulting from such breach and may be responsible for forfeiting to the plan any profits that have been made through the improper use of plan assets. Besides this monetary relief available, a court may also award "equitable and remedial relief" as it deems appropriate. In addition, Section 409(b) provides that a fiduciary is not liable with respect to a breach of fiduciary duty "if such breach was committed before he became or after he ceased to be a fiduciary." Courts have found that fiduciaries are not liable for losses caused by an imprudent investment made prior to when the individual assumed fiduciary responsibility. Still, a fiduciary may have an obligation to rectify breaches of fiduciary duty committed by a previous fiduciary and may be liable if he or she fails to take remedial action. J. Administration and Enforcement One of the primary goals in enacting ERISA was to "protect ... the interests of participants and ... beneficiaries" of employee benefit plans, and assure that participants receive promised benefits from their employers. To this end, ERISA "provid[es] for appropriate remedies, sanctions, and ready access to the Federal courts." ERISA contains an "integrated enforcement mechanism" that is also "essential to accomplish Congress' purpose of creating a comprehensive statute for the regulation of employee benefit plans." An integral part of the civil enforcement scheme is ERISA Section 502, which allows both private parties as well as government entities to bring various civil actions to enforce provisions of ERISA. 1. Civil Enforcement under Section 502(a) Section 502(a) authorizes civil actions under ERISA as well as the remedies available to a successful plaintiff. Civil actions under Section 502(a) include the following actions that may be brought by a participant or a beneficiary, or, in some cases, a plan fiduciary or the Secretary of Labor, to: redress the failure of a plan administrator to provide information required by ERISA's reporting and disclosure requirements or COBRA requirements (Section 502(a)(1)(A)); recover benefits due to a participant or beneficiary under the terms of his plan, to enforce his rights or to clarify his rights to future benefits under the terms of the plan (Section 502(a)(1)(B)); receive appropriate relief due to breaches of fiduciary duty (Section 502(a)(2)); enjoin any act or practice which violates ERISA or the terms of the plan, as well as to obtain other appropriate equitable relief to redress such violations (Section 502(a)(3)); collect civil penalties (Section 502(a)(6)). The Supreme Court has found the enforcement scheme under Section 502(a) to contain "exclusive" federal remedies. Accordingly, Section 502(a) may preempt state law under the jurisdictional doctrine of "complete preemption." As the Supreme Court has reasoned, Congress may so completely preempt a particular area that "any civil complaint raising [a] select group of claims is necessarily federal in character." In other words, complete preemption can occur "when Congress intends that a federal statute preempt a field of law so completely that state law claims are considered to be converted into federal causes of action." Under the doctrine of complete preemption, a state claim that conflicts with a federal statutory scheme may be removed to federal court. In the context of ERISA, if a state law claim is considered within the scope of ERISA's 502(a) civil enforcement provisions, the state law claim is completely preempted. Under these circumstances, a plaintiff is limited to bringing a claim under Section 502 of ERISA and may only receive the remedies available under the federal statute. Courts have frequently examined the scope of the remedies available under Section 502(a), in light of preemption and other factors. Questions have arisen as to which plaintiffs are eligible to bring a Section 502(a) claim and what remedies are available to them. The following discussion addresses how the Supreme Court has evaluated various claims under Section 502. 2. Claims to Enforce Benefit Rights Section 502(a)(1)(B) of ERISA authorizes a plaintiff ( i.e. , a participant or a beneficiary in an ERISA plan) to bring an action against the plan to recover benefits under the terms of the plan, or to enforce or clarify the plaintiff's rights under the terms of the plan. Under this section, if a plaintiff's claim for benefits is improperly denied, the plaintiff may sue to recover the unpaid benefit. A plaintiff may also seek a declaration to preserve a right to future benefits or an injunction to prevent a future denial of benefits. In terms of monetary remedies, Section 502(a)(1)(B) provides that a successful plaintiff may receive the benefits the plaintiff would have been entitled to under the terms of the plan. Compensatory or punitive damages are not available. In addition, as Section 502 of ERISA is considered to contain "exclusive" federal remedies, Section 502(a)(1)(B) has been held to preempt state or common law causes of action that may provide for more generous remedies than what is available under ERISA. The preemption of these state law claims has been controversial, as it can significantly impact plaintiffs relative to their opportunity to recover various types of damages under state law. The question of which state law claims are preempted by ERISA 502(a)(1)(B) has been controversial and has received significant attention from the courts. The Supreme Court in Pilot Life v. Dedeaux evaluated whether a state law claim for wrongful denial of benefits was preempted by Sections 514 and 502 of ERISA . The plaintiffs in Pilot Life claimed that the denial of disability benefits by insurers of ERISA-regulated plans violated a Mississippi common law relating to bad faith. In finding the state law claim preempted by Section 502, the Court reasoned that the civil enforcement provisions of 502(a) of ERISA are intended to be the "exclusive vehicle" for actions asserting improper processing of a claim for benefits. Further, in explaining why state law claims (and remedies) were not available, the Court explained: ... the provisions of 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans ... the policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. In Aetna Health Inc. v. Davila , two individuals sued their insurance carriers, claiming the carriers violated the Texas Health Care Liability Act when they failed to exercise ordinary care in denying benefit coverage. The insurance carriers removed the cases to the federal district court and argued that Section 502(a)(1)(B) of ERISA completely preempted the respondents' causes of action. At issue for the Supreme Court was whether the individual's causes of action were preempted by Section 502(a) of ERISA and, thus, removal to federal court was proper. Respondents argued, among other things, that their state law claim for violating the "duty of ordinary care" arises independently of any duty imposed under ERISA. However, the Court disagreed, finding that "respondents bring suit only to rectify a wrongful denial of benefits promised under ERISA-regulated plans and do not attempt to remedy any violation of a legal duty independent of ERISA." The Court, relying on its decision in Pilot Life , among other cases, explained that a state cause of action that "attempts to authorize" a larger remedy than ERISA Section 502(a) does not place it outside of an ERISA claim. 3. Claims to Redress Breaches of Fiduciary Duty Section 502(a)(2) of ERISA authorizes the Secretary of Labor, a participant, a beneficiary, or a plan fiduciary to bring a civil action caused by a breach of fiduciary duty under Section 409 of ERISA. That section makes a plan fiduciary personally liable for breaches against an ERISA plan, and a breaching fiduciary must make good to the plan "any losses to the plan resulting from a breach" and restore to the plan any profits made from using the assets of the plan in improper ways. It also subjects such a fiduciary to other relief as a court may deem appropriate, including removal of the fiduciary. One controversial issue with respect to breach of fiduciary duty claims under ERISA has been that while an individual plaintiff ( e.g ., a plan participant) may bring a civil action under Section 502(a)(2), the Supreme Court has found that any recovery must "inure ... to the benefit of a plan as a whole." In Massachusetts Mutual Life Insurance Co. v. Russell , the Supreme Court evaluated whether a plan beneficiary could bring a civil action for monetary damages against a plan fiduciary who had been responsible for the improper processing of a benefit claim. The plaintiff, who was disabled with a back injury, sought to recover damages after her employer's disability committee terminated (and later reinstated) her disability benefits. The Court rejected the beneficiary's claim, explaining that ERISA Section 409 did not authorize a beneficiary to bring a claim against a fiduciary for monetary damages. Based on the text of Section 409 and the legislative history of ERISA, the court opined that relief for an individual beneficiary was not available under Section 409; a plaintiff could only recover losses on behalf of the plan. The Supreme Court's 2008 decision in LaRue v. DeWolff, Boberg & Associates addressed whether Section 502(a)(2) authorizes a participant in a defined contribution plan to sue a plan fiduciary and recover losses to the plan, if the losses only affected an individual's plan account. In LaRue , a participant in a 401(k) plan requested that plan administrators change an investment in his individual account. The plan administrators failed to make this change, and the individual's account suffered losses of approximately $150,000. LaRue brought an action under Section 502(a)(2) alleging that the plan administrator breached his fiduciary duty by neglecting to properly follow the investment instructions. The Court held for the plan participant, finding that "although §502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant's individual account." In the decision, Justice Stevens, writing for the majority, distinguished LaRue from the Russell case in two ways. First, the Court explained that the type of fiduciary misconduct occurring in La Rue violated "principal statutory duties" imposed by ERISA that "relate to the proper plan management, administration, and investment of fund assets." Conversely, in Russell , the fiduciary's breach ( i.e. , a delay in processing a benefit claim) fell outside of these principal duties. Second, the Court found that in Russell, the emphasis placed on protecting the "entire plan" from fiduciary breach under Section 409 applies to defined benefit plans, which were the norm at the time of the case. However, as the Supreme Court noted in LaRue , defined contribution plans are more popular today, and the "entire plan" language in Russell does not apply to these plans. The Court explained that for defined benefit plans, fiduciary misconduct would not affect an individual entitlement to a benefit unless the misconduct detrimentally affected the entire plan. By contrast, "for defined contribution plans ... fiduciary misconduct need not threaten the solvency of the entire plan to reduce benefits below the amount that participants would otherwise receive." The Court went on to note that "whether a fiduciary breach diminishes plan assets payable to all participants and beneficiaries, or only to persons tied to particular individual accounts, it creates the kinds of harms that concerned the draftsmen of §409." 4. Claims to Enforce Plan Provisions and "Other Equitable Relief" Section 502(a)(3) of ERISA permits a participant, beneficiary, or fiduciary, to bring a civil action to enjoin any act or practice which violates ERISA or the terms of the plan, or obtain "other appropriate equitable relief" due to an ERISA violation. Section 502(a)(3) of ERISA has been referred to as a "catchall" provision—claims that may not be brought under other Sections of 502, but are nevertheless violations of ERISA or the plan, can be brought under this section. The Supreme Court in Varity v. Howe found that individual relief under Section 502(a)(3) is available. However, courts have struggled with the scope and meaning of the term "other appropriate equitable relief" in Section 502(a)(3). This issue has been considered one of the most controversial areas of ERISA jurisprudence. The controversy has often arisen in cases in which plaintiffs had sought monetary relief for ERISA Section 502(a)(3) violations. The Supreme Court first evaluated the meaning of "equitable relief" in Mertens v. Hewitt Associates . In this case, plan participants brought an action under Section 502(a)(3) seeking monetary relief after the plan actuary failed to make proper actuarial assumptions in calculating plan assets. Participants claimed that this error contributed to plan underfunding, and subsequently, to the plan's defaulting on promised retirement benefits. The Court found that the monetary relief the participants sought was nothing other than compensatory damages, and held, in a 5-4 decision, that ERISA Section 502(a)(3) did not authorize suits for compensatory damages against a non-fiduciary. In explaining why these damages were not available, the Court articulated that "equitable relief" with respect to Section 502(a)(3) is relief that was "typically available in equity," such as injunction, mandamus, or restitution. While it had been argued that the relief petitioner sought was considered equitable under the common law of trusts, the Court rejected this argument. It explained that while "legal" remedies may have been available to plaintiffs in a court of equity, this idea did not "define the reach" of Section 502(a)(3), and that what was available under Section 502(a)(3) were the more "traditional" forms of equitable relief. The Supreme Court applied the reasoning of Mertens in another decision interpreting Section 502(a)(3), Great West Life & Annuity Insurance Co. v. Knudson . In this case, a group health plan sought reimbursement from a plan beneficiary for amounts the plan had paid after the beneficiary was severely injured in an automobile accident. After the accident, the beneficiary brought an action against the automobile manufacturer and others, and she received a settlement. The plan claimed it was entitled to the settlement amount based on a provision in the plan requiring plan participants to reimburse the plan for any amounts the beneficiary receives from a third party. In another 5-4 decision, the Court found for the beneficiary, holding that Section 502(a)(3) did not authorize the reimbursement sought by the plan. The health plan claimed the relief sought was restitution, which could be characterized as equitable relief. The Court refused to accept this reasoning, explaining that while restitution could be found traditionally in courts of equity, what mattered for purposes of Section 502(a)(3) was whether the restitution sought was to restore to the plaintiff particular funds or property in the defendant's possession. Because the proceeds of the settlement were not in the identifiable defendant's possession (i.e., they had been paid to a trust, to the plaintiff's attorney, etc.), the plaintiff's claim for equitable relief failed. 5. Criminal Enforcement under ERISA and Other Federal Law ERISA provides for three types of criminal sanctions. First, Section 501 provides that any person who willfully violates the reporting, disclosure and other related provisions of ERISA may be fined up to $100,000, imprisoned up to 10 years, or both. Persons other than individuals ( e.g. , corporate entities) may be fined up to $500,000. Conduct that may be prosecuted under Section 501 includes a willful act as well as an omission to perform reporting or disclosure required by ERISA. Second, Section 511 states that it is unlawful for any person to use (or threaten to use) fraud, force, or violence in interfering or preventing a person from exercising rights under an employee benefit plan. Persons who willfully violate this section can be fined $100,000 or imprisoned for not more than ten years, or both. Third, Section 411 bars individuals convicted of various crimes from holding certain positions with regard to an employee benefit plan. Individuals convicted of these crimes may not serve (1) as an administrator, fiduciary, officer, trustee, custodian, counsel, agent, employee, or representative of a plan in any capacity; (2) as a consultant or advisor to a plan; or (3) in any capacity that involves decision-making authority or custody or control of the moneys, funds, assets or property of any plan. Under this section, individuals may be barred from service during or for the period of 13 years after conviction or after imprisonment, whichever is later. This time period is subject to certain exceptions. In addition, Section 411 prohibits an individual from knowingly hiring, retaining, employing, or otherwise placing someone to serve in any capacity which violates this section. Individuals who intentionally violate this provision are subject to a fine of no more than $10,000, up to five years imprisonment, or both. Besides the three provisions under ERISA, the Federal Criminal Code prohibits certain conduct relating to employee benefit plans. Provisions under the Federal Criminal Code include the following: Under Section 664 of Title 18, any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use (or to the use of another) any assets of an employee benefit plan, will be fined, imprisoned no more than five years, or both. Assets of a plan include money, securities, premiums, and property. Under Section 1127 of Title 18 of the United States Code, any individual who knowingly makes a false statement or representation of fact, or knowingly conceals, covers up, or fails to disclose any fact on certain documents required under ERISA may be subject to criminal penalties of up to $10,000, five years in prison, or both. Section 1954 of Title 18 prohibits various persons serving in positions relating to employee benefit plans from (1) soliciting or receiving or (2) giving or offering any fee, kickback, commission, gift, loan, money or other item of value because of, or to influence, a certain question or matter concerning an employee benefit plan. Persons violating this section may be fined, imprisoned for up to three years, or both. An exception to Section 1954 may be made for a person's salary, compensation, or other payments made for goods and services furnished or performed in the regular course of a person's duties to the plan. Section 506(b) of ERISA provides that the Secretary of Labor has the responsibility and authority to detect, investigate, and refer both civil and criminal violations of ERISA as well as other related federal laws, including the provisions under the United States Criminal Code. ERISA also requires the Secretary of Labor to provide evidence of crimes to the United States Attorney General, who may consider this evidence for purposes of criminal prosecution. K. Preemption of State Laws A critical feature of ERISA is its preemption of state laws. According to the Supreme Court, Congress provided for ERISA preemption in order to "avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans." ERISA preemption reflects this objective of ERISA: to regulate employee benefit plans "as exclusively a federal concern." The question of whether ERISA preempts state law has, at times, been complex and controversial. The provisions at issue in the preemption debate are (1) Section 514, ERISA's express preemption section, under which ERISA may supercede state law, and (2) Section 502(a), which provides for claims that may be brought and remedies a plaintiff may recover under ERISA, and may preempt a state law cause of action. 1. Section 514 ERISA's express preemption provision, Section 514, has three important parts. First, under Section 514(a), ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." The Supreme Court has examined the scope of this provision on several occasions. In one of the first key cases to address ERISA preemption, Shaw v. Delta Airlines , the Court interpreted the term "relate to" as applying to any state law that "has a connection with or reference to such a plan." The Court has stated that "[u]nder this 'broad common sense meaning,' a state law may 'relate to' a benefit plan, and thereby be pre-empted, even if the law is not specifically designed to affect such plans, or the effect is only indirect." While the Court's early decisions ( e.g., Shaw ) suggested that the application of ERISA's explicit preemption clause was virtually limitless, its decision in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co. signaled a change in the Court's interpretation of Section 514(a). In Travelers , several commercial insurers challenged a state law that required them, but not Blue Cross and Blue Shield, to pay surcharges. The commercial insurers argued that the law was preempted by ERISA because it "relate[d] to" employer-sponsored health insurance plans. In addressing the issue of ERISA's preemption clause, the Court first noted that there is a "presumption that Congress does not intend to supplant state law." The Court then turned to whether Congress intended to preempt state law by looking to "the structure and purpose of the act." The Court concluded that "nothing in the language of the act or the context of its passage indicates that Congress chose to displace general health care regulation, which historically has been a matter of local concern." In other cases, the Court has similarly recognized the states' ability to regulate matters of health and safety, and has concluded that state laws of general applicability are not necessarily preempted by ERISA. However, despite the Traveler s case arguably narrowing the scope of Section 514(a), this section still is considered to broadly preempt state law. The second important part is the "savings clause" under ERISA Section 514(b), which provides exemptions to ERISA preemption. The savings clause allows states to enforce any "law ... which regulates insurance, banking, or securities." The issue of which state laws "regulate insurance" under Section 514(b) has received considerable attention from the Supreme Court. An important case interpreting the savings clause is Kentucky Association of Health Plans, Inc. v. Miller, where the Supreme Court found that Kentucky's "any willing provider" (AWP) laws, which prohibited insurers from discriminating against a health care provider willing to meet the insurer's criteria for participation in the health plan, was saved from ERISA preemption. In finding that the AWP laws "regulated insurance," the Court departed from reasoning it had used in earlier savings clause cases, and articulated a new two-part test. Under this test, a state law falls within the ambit of the savings clause if it is "specifically directed toward" the insurance industry and "substantially affects the risk pooling arrangement between the insurer and insured." In evaluating whether the law was specifically directed toward the practice of insurance, the Court explained that the savings clause regulates insurance , not insurers, and that insurers may only be regulated "with respect to their insurance practices. Petitioner HMOs argued, among other things, that the AWP laws were not directed toward insurers, as the laws regulated both the insurance industry and doctors who seek to form and maintain provider networks. The Court rejected this argument and pointed out that the law did not impose any prohibitions or requirements on health providers, and that health care providers were still able to enter into exclusive health care networks outside the state. In regard to the second part of the new test, the Court explained that it was necessary for a law to affect the risk pooling arrangement between the insurer and the insured to be covered under the savings clause; otherwise, any law imposed upon an insurance company could be deemed to "regulate insurance." Petitioners had argued that the AWP laws do not alter or affect the terms of insurance policies, but instead concern the relationship between insureds and third-party providers. The Court disagreed and pointed out that it had never held that a state law must alter or control the terms of the insurance policies in order to "regulate insurance." The Court found that AWP laws affected the risk pooling arrangement because they altered the scope of permissible bargains between insurers and insureds, and restricted insurers' ability to offer lower premiums in exchange for acceptance of a closed network of providers. The third important part of ERISA preemption, known as the "deemer clause," generally provides that an employee benefit plan governed by ERISA shall not be "deemed" an insurer, bank, trust company, investment company, or a company engaged in the insurance or banking business in order to be subject to state law (and accordingly, avoid ERISA preemption). In FMC v. Holliday , the Supreme Court found that a Pennsylvania law that prevented subrogation when applied to a self-funded health plan was preempted by ERISA by virtue of the deemer clause. In its decision, the Court held that although the statute did "relate to" an ERISA benefit plan, the law fell within the ambit of the savings clause because the law controlled the terms of insurance contracts by invalidating any subrogation provisions that they contain. However, because the plan in question was a self-funded plan ( i.e., it did not offer benefits through health insurance), it was found that the plan could not be "deemed" an insured plan for the purpose of state regulation. 2. Section 502 ERISA preemption can also be found in ERISA's remedial provisions under Section 502. Section 502(a) creates a civil enforcement scheme that allows a participant or beneficiary of a plan to bring a civil action for various reasons, including "to recover benefits due to him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." If a plaintiff seeks to bring a state law claim "within the scope" of Section 502(a), the state law claim can be preempted. See section " J. Administration and Enforcement " for additional discussion of ERISA Section 502. L. Special Regulation of Health Benefits Besides the regulation of pension plans, ERISA also regulates welfare benefit plans offered by an employer to provide medical, surgical and other health benefits. ERISA applies to health benefit coverage offered through health insurance or other arrangements ( e.g ., self-funded plans). Health plans, like other welfare benefit plans governed by ERISA, must comply with certain standards, including plan fiduciary standards, reporting and disclosure requirements, and procedures for appealing a denied claim for benefits. However, these health plans must also meet additional requirements under ERISA. As enacted in 1974, ERISA's regulation of health plan coverage and benefits was limited. However, beginning in 1986, Congress added to ERISA a number of requirements on the nature and content of health plans, including rules governing health care continuation coverage, limitations on exclusions from coverage based on preexisting conditions, parity between medical/surgical benefits and mental health benefits, and minimum hospital stay requirements for mothers following the birth of a child. 1. COBRA The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) added a new Part 6 to Title I of ERISA, which requires the sponsor of a group health plan to provide an option of temporarily continuing health care coverage for plan participants and beneficiaries under certain circumstances. Under ERISA Section 601, a plan maintained by an employer with 20 or more employees must provide "qualified beneficiaries" with the option of continuing coverage under the employer's group health plan in the case of certain "qualified events." A qualifying event is an event that, except for continuation coverage under COBRA, would result in a loss of coverage, such as the death of the covered employee, the termination (other than by reason of the employee's gross misconduct) or reduction of hours of the covered employee's employment, or the covered employee becoming entitled to Medicare benefits. Under Section 602 of ERISA, an employer must typically provide this continuation coverage for 18 months. However, coverage may be longer, depending on the qualifying event. Under ERISA 602(1), the benefits offered under COBRA must be identical to the health benefits offered to "similarly situated non-COBRA beneficiaries," or in other words, beneficiaries who have not experienced a qualifying event. The health plan may charge a premium to COBRA participants, but it cannot exceed 102% of the plan's group rate. After 18 months of required coverage, a plan may charge certain participants 150% of the plan's group rate. However, the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) includes provisions to subsidize health insurance coverage through COBRA. ARRA includes COBRA premium subsidies of 65% to help the unemployed afford health insurance coverage from their former employer. The subsidy is available for up to nine months to those individuals who meet the income test and who are involuntarily terminated from their employment on or after September 1, 2008, and before January 1, 2010. For more information on the COBRA premium subsidies, see CRS Report R40420, Health Insurance Premium Assistance for the Unemployed: The American Recovery and Reinvestment Act of 2009 , coordinated by [author name scrubbed]. 2. HIPAA The Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new Part 7 to Title I of ERISA to provide additional health plan coverage requirements. Other federal legislation amended Part 7 of ERISA to require plans to offer specific health benefits. The requirements of Part 7 generally apply to group health plans, as well as "health insurance issuers" that offer group health insurance coverage. HIPAA amended ERISA to limit the circumstances under which a health plan may exclude a participant or beneficiary with a preexisting condition from coverage. This exclusion from coverage cannot be for more than 12 months after an employee enrolls in a health plan (or 18 months for late enrollees). HIPAA prohibits pre-existing condition coverage exclusions for any conditions relating to pregnancy. Similarly, newborns and adopted children may not be excluded from plan enrollment if they were covered under "creditable coverage" within 30 days after birth or adoption, and there has not been a gap of more than 64 days in this coverage. HIPAA also requires health plans to provide a special enrollment opportunity to allow certain individuals to enroll in the plan without waiting until the plan's next regular enrollment season. For example, special enrollment rights must be extended to a person who becomes a new dependent through marriage, birth, adoption or placement for adoption, or to an employee or dependent who loses other health coverage. Effective April 1, 2009, the Children's Health Insurance Program Reauthorization Act of 2009 amended ERISA to provide that group health plans must permit employees and dependents who are eligible for, but not enrolled in, coverage under the terms of the plan to enroll in two additional circumstances: (1) the employee's or dependent's coverage under Medicaid or SCHIP is terminated as a result of loss of eligibility, or (2) the employee or dependent becomes eligible for a financial assistance under Medicaid or SCHIP, and the employee requests coverage under the plan within 60 days after eligibility is determined. Under these two circumstances, an employee must request coverage within 60 days after termination of Medicaid or SCHIP coverage, or becoming eligible for this coverage. HIPAA also created ERISA Section 702, which provides that a group health plan or health insurance issuer may not base coverage eligibility rules on certain health-related factors, such as medical history or disability. In addition, a health plan may not require an individual to pay a higher premium or contribution than another "similarly situated" participant, based on these health-related factors. HIPAA also added Section 703 of ERISA, which provides that certain health plans covering multiple employers cannot deny an employer (whose employees are covered by the plan) coverage under the plan, except for certain reasons, such as an employer's failure to pay plan contributions. 3. Mental Health Parity In 1996, Congress enacted the Mental Health Parity Act (MHPA), which added Section 712 of ERISA to create certain requirements for mental health coverage, if this coverage was offered by a health plan. Under the MHPA, health plans are not required to offer mental health benefits. However, plans that choose to provide mental health benefits must not impose lower annual and lifetime dollar limits on these benefits than the limits placed on medical and surgical benefits. The MHPA allows a plan to decide what mental health benefits are to be offered; however, the parity requirements do not apply to substance abuse or chemical dependency treatment. Certain plans may be exempt from the MHPA. Plans covering employers with 50 or fewer employees are exempt from compliance. In addition, employers that experience an increase in claims costs of at least 1% as a result of MHPA compliance can apply for an exemption. Recently, Congress enacted legislation which expands the MHPA's requirements. Included as part of the Emergency Economic Stabilization Act of 2008, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act expands the parity requirements under the current version of the MHPA for mental health and substance use disorder coverage if such coverage is offered by a group health plan. In general, the act amends Section 712 of ERISA, as well as other federal laws, to require parity between mental health/substance use disorder benefits and medical/surgical benefits in terms of the predominant (1) financial requirements and (2) treatment limitations imposed by a group health plan. The new requirements apply to group health plans for plan years beginning after October 3, 2009. 4. Maternity Length of Stay In 1996, Congress passed the Newborns' and Mothers' Health Protection Act (NMHPA), which amended ERISA and established minimum hospital stay requirements for mothers following the birth of a child. In general, the NMHPA prohibits a group health plan or health insurance issuer from limiting a hospital length of stay in connection with childbirth for the mother or newborn child to less than 48 hours, following a normal vaginal delivery, and to less than 96 hours, following a cesarean section. 5. Reconstructive Surgery Following Mastectomies The Women's Health and Cancer Rights Act, enacted in 1998, amended ERISA to require group health plans providing mastectomy coverage to cover prosthetic devices and reconstructive surgery. Under Section 713 of ERISA, this coverage must be provided in a manner determined in consultation between the attending physician and the patient. ERISA Title II: Internal Revenue Code Provisions In order for an employer-sponsored retirement plan to qualify for federal income tax deferrals and deductions, it must comply with the pension-related provisions of the Internal Revenue Code (IRC). The pension-related provisions of the IRC require plans to cover rank-and-file workers, and they include "nondiscrimination rules" that prohibit qualified plans from favoring highly-compensated employees with respect to eligibility or benefits. A. Limits on Plan Contributions and Benefits The IRC limits the amount of money that can be contributed on a tax-deductible basis to a defined benefit plan or defined contribution plan, the amount that can be paid annually from a defined benefit plan, and the amount of income that can be taken into consideration when establishing benefits under a defined benefit plan. 1. Defined Benefit Plan Provisions In 2009, no more than the first $245,000 of an employee's annual compensation can be used in computing benefits or contributions under a DB plan. The maximum annual benefit payable in 2009 under a defined benefit plan at age 62 is the lesser of $195,000 or 100% percent of the participant's average compensation for his or her three highest years of earnings. This dollar limit is adjusted annually by the increase in the consumer price index (CPI), and rounded down to the next lower multiple of $5,000. IRC §415(b) requires the dollar limit on benefits to be actuarially reduced for retirement before age 62. For qualified police and firefighters with at least 15 years of service, no actuarial reduction is required. Consequently, the dollar limit for police and firefighters is the same as the unreduced §415(b) dollar limit, or $195,000 in 2009, regardless of age. a. Tax on asset reversions ERISA prohibits plan sponsors from withdrawing money from a pension trust fund. However, they can recover "excess" assets upon terminating a plan, provided they have satisfied all pension claims. The employer must pay both a corporate income tax and a federal excise tax on the amount of the asset reversion. The Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) amended the IRC to increase the excise tax on pension asset reversions from 15% to 50%, unless the employer: (1) establishes or maintains a "qualified replacement plan;" (2) provides significant benefit increases; or (3) is in bankruptcy liquidation. In these cases, the excise tax is 20%. A qualified replacement plan must cover at least 95% of the active participants in the terminated plan, and 25% of the amount the employer could otherwise receive in a reversion must be transferred to the replacement plan. The amount transferred is not subject to the excise tax or corporate income tax. b. Transfers of assets to fund retiree health benefits P.L. 101-508 permitted the transfer of excess assets from a single-employer defined benefit pension plan to a retiree health plan. The amount that could be transferred was the excess of the market value of the plan's assets over the full funding limit, but could not exceed what the employer expected to pay in retiree health benefits in that year. Transfers were limited to the greater of amounts above the plan's full-funding limit or 125% of the plan's current liability. The PPA amended IRC §420 to expand the ability of defined benefit plan sponsors to transfer surplus plan assets to retiree health plans. Sponsors of single-employer plans may now transfer excess pension assets to fund the estimated retiree medical costs for a period of up to 10 years. Plan sponsors are required to maintain the plan's funded status during the transfer period, either by additional contributions or transfers back from the health accounts, and they must maintain retiree medical benefits at a certain level for the transfer period and for four years subsequent to the transfer period. c. Limit on tax deductions for employer contributions In 2007, the maximum tax-deductible employer contribution to a defined benefit plan was 150% of the plan's current liability minus the value of the plan's assets. Beginning in 2008, the maximum tax-deductible employer contribution is (1) the plan's target normal cost plus (2) 150% of the funding target plus (3) an allowance for future pay or benefit increases minus (4) the value of the plan's assets. Excess employer contributions to defined benefit plans are subject to a 10% excise tax. 2. Defined Contribution Plan Provisions IRC §415(c) limits the maximum "annual addition" to a defined contribution plan (the sum of employer and employee contributions). In 2009, the maximum annual addition is the lesser of $49,000 or 100% of annual compensation. The maximum employee contribution (called an "elective deferral") to a 401(k), 403(b), or 457(b) plan is $16,500 in 2009. This amount is indexed annually. a. Combined limit under IRC §404(a)(7) IRC §404(a)(7) establishes limits on employer tax deductions for contributions made in connection with one or more defined contribution plans and one or more defined benefit plans. One effect of these limits is that large contributions to a defined benefit plan could result in the employer's contributions to the defined contribution plan being nondeductible for that year. The PPA revised the law such that the combined contribution limit under §404(a)(7) is determined without regard to defined benefit plans that are insured by the PBGC. In addition, only employer contributions to a defined contribution plan that exceed 6% of participant compensation are subject to the limit. Employees' elective deferrals are disregarded from the deduction limits. b. "Catch-up" contributions The Economic Growth and Tax Relief Reconciliation Act of 2001 added §414(v) to the Internal Revenue Code. This amendment allows additional ("catch-up") contributions by participants in 401(k), 403(b), 457(b), SEP, IRA, and SIMPLE plans who are or will be age 50 or older by the end of the plan year. These contributions were to "sunset" in 2010, but they were made permanent by the PPA. The maximum catch-up contribution is the lesser of (1) a specific dollar limit or (2) the participant's compensation for the year reduced by any other elective deferrals made during the year. In 2008, the catch-up dollar limit for 401(k), 403(b), SEP, and 457(b) plans is $5,500. For SIMPLE plans, the 2009 catch-up dollar limit is $2,500. For IRAs, the catch-up dollar limit is $1,000. B. Coverage and Nondiscrimination Tax-qualified retirement plans may not discriminate in favor of highly-compensated employees (HCEs) with regard to coverage, amount of benefits, or availability of benefits. A "highly compensated employee" is defined in law as any employee who owns 5% or more of the company or whose compensation in 2009 exceeds $110,000 (indexed to inflation). An employer can elect to count as HCEs only employees who rank in the top 20% of compensation in the firm, but must include anyone who owns 5% or more of the company. 1. Nondiscrimination Test IRC §410(b) specifies who a qualified plan must cover. A plan must meet one of the following tests: The plan must benefit at least 70% of non-highly compensated employees. This is called the percentage test. or The plan must benefit a percentage of nonhighly compensated employees which is at least 70% of the percentage of highly compensated employees benefitting under the plan. This is called the ratio test. or The plan must benefit a classification of employees that does not discriminate in favor of highly-compensated employees (nondiscriminatory classification test) and the average benefit percentage of the nonhighly compensated employees must be at least 70% of the average benefit percentage of the highly-compensated employees (average benefit percentage test). In a defined contribution plan, either the proportion of non-highly compensated employees (NHCEs) covered by the plan must be at least 70% of the proportion of highly compensated employees (HCEs) covered by the plan, or the average contribution percentage for NHCEs must be at least 70% of the average contribution percentage for HCEs. Plans that have after-tax contributions or matching contributions are subject to the "actual contribution percentage" (ACP) test, which measures the contribution rate to HCEs' accounts relative to the contribution rate to NHCEs' accounts. Some §403(b) plans are subject to nondiscrimination rules; §457 plans generally are not. The actual contribution percentage of HCEs in a §401(k) plan generally cannot exceed the limits shown in Table 2 . 2. Safe Harbor Plans Any of three "safe-harbor" 401(k) plan designs are deemed to satisfy the ACP test automatically for employer matching contributions (up to 6% of compensation): The employer matches 100% of employee elective deferrals up to 3% of compensation, and 50% of elective deferrals between 3% and 5% of compensation, and all employer matching contributions vest immediately. Employer matching contributions can follow any other matching formula that results in total matching contributions that are no less than under the first design. All employer matching contributions must vest immediately. The employer automatically contributes an amount equal to at least 3% of pay for all eligible NHCEs. Employer contributions must vest immediately. All 401(k) plans must satisfy an "actual deferral percentage" (ADP) test, which measures employees' elective deferrals. The same numerical limits are used as under the ACP test. Three "safe-harbor" designs, similar to the safe-harbor designs for the ACP test, are deemed to satisfy the ADP test automatically. In addition, "cross-testing" allows defined-contribution plans to satisfy the nondiscrimination tests based on projected account balances at retirement age, rather than current contribution rates. This permits bigger contributions for older workers. Because higher-paid employees receive proportionally smaller Social Security benefits relative to earnings than lower-paid workers, employers are permitted to make larger contributions on earnings in excess of the Social Security wage base ($106,800 in 2009). Regulations limit the size of the permitted disparity in favor of workers whose earnings are above the wage base. C. Distributions from Qualified Plans The Tax Reform Act of 1986 created uniform distribution rules for pension plans and established an excise tax to be imposed for failure to make a required minimum distribution. This law also specified that, if there were after-tax employee contributions to a plan, a portion of each payment to the participant is to be considered a return of employee contributions (and not taxed) and that a portion is to be considered a return of employer contributions (and subject to tax). Defined benefit plans and money purchase plans must offer participants a benefit in the form of a life annuity. Defined benefit and money purchase plans may also offer other payment options, such as lump-sum distributions. Defined contribution plans other than money purchase plans usually pay benefits in a single lump-sum or as payments over a set period of time, such as 5 or 10 years. Some of these plans also offer an annuity option. A qualified plan must allow participants to begin receiving benefits by the latest of (1) age 65 (or the plan's normal retirement age, if earlier than 65), or (2) after ten years of service, or (3) upon terminating service with the employer. Defined benefit plans and money purchase plans usually allow participants to receive benefits only after they have reached the plan's normal retirement age, but some have provisions for early retirement, often at age 55. Most 401(k) plans allow participants to receive their account balances when they leave the employer. A 401(k) plan may allow for distributions while the worker is still employed if he or she has reached age 59½ or has suffered a severe financial hardship, such as facing imminent eviction or foreclosure. Profit-sharing plans may permit participants to receive their vested benefits after a specific number of years or when they leave the employer. Distributions from employer-sponsored plans must start no later than April 1of the year after the year in which the participant attains age 70½, unless the participant is still employed by the form that sponsors the plan. Failure to make a required distribution results in an excise tax equal to 50% of the excess of the minimum required distribution over the amount actually distributed. The amount of the required minimum distribution is based on the participant's age and remaining life expectancy. If a participant in a DB plan retires after age 70½, his or her accrued pension benefit must be actuarially increased to reflect the value of benefits that would have been received had the employee retired at age 70½. The actuarial adjustment rule does not apply to defined contribution plans. Some employers now offer a "phased retirement" option that allows employees at or near retirement age to reduce their work hours to part-time and receive a pension distribution to supplement their reduced earnings. The PPA amended ERISA to allow defined benefit plans to make in-service distributions to employed plan participants beginning at the earlier of age 62 or the plan's normal retirement age. Distributions from a 401(k) plan can be made to a current employee without penalty beginning at age 59½. In-service distributions from either a DB plan or a DC plan are subject to income taxes. 1. Plan Loans Qualified plans are permitted, but are not required, to offer loans to participants. The loan must charge a reasonable rate of interest and be adequately secured. A loan from a tax-qualified pension plan is treated for federal income tax purposes as a taxable plan distribution if it exceeds prescribed limits. The maximum permissible loan amount takes into account other outstanding plan loans as well as the present value of the benefits earned by the recipient. A participant can borrow up to half of the present value of accrued benefits, but no more than $50,000. The loan must be repaid within five years unless it is used to purchase a principal residence. Loans that are not repaid when due are treated as taxable distributions and may also be subject to a 10% additional tax if the recipient was under age 59½. Defined contribution plans established under §401(k), §403(b), or §457 also can make distributions in case of financial hardship, such as imminent eviction or foreclosure. Hardship distributions are subject to income taxes, and if the recipient is under age 59½, they may be subject to an additional 10% tax. 2. Additional Tax on Early Withdrawals With certain exceptions, a 10% additional tax is imposed on distributions from a qualified plan unless the individual is age 59½, dies, or becomes disabled. This additional tax does not apply to early distributions if they are paid: (1) after the plan participant has reached age 59½; (2) to a beneficiary after the death of the participant; (3) because the participant has become disabled; (4) as part of a series of substantially equal periodic payments (SEPPs) over the life of the participant or the joint lives of the participant and survivor; (5) to an employee who has separated from service under an early retirement arrangement after reaching age 55; (6) as dividends paid from an Employee Stock Ownership Plan (ESOP); (7) through an IRS levy to collect back taxes owed by the plan participant; (8) to pay medical expenses of the plan participant, a spouse, or dependent, but only to the extent that they exceed 7.5% of adjusted gross income; or (9) to an alternate payee under a qualified domestic relations order (QDRO). 3. Rollovers Departing plan participants can roll over (transfer) distributions from a qualified plan to an individual retirement account (IRA) or to another employer's plan, if the plan accepts such transfers. If the accrued benefit is less than $5,000 when the participant leaves an employer, the plan can make an immediate distribution without the participant's consent. Amounts of $5,000 or more may be cashed out only with the written consent of the participant. For married workers, the consent of the worker's spouse is also required. If the distribution is more than $1,000, the plan must automatically roll over the funds into an IRA that it selects, unless the participant elects to receive a lump sum payment or to roll it over into an IRA that he or she chooses. The plan must first send a notice allowing the participant to make other arrangements, and it must follow rules regarding what type of IRA can be used (for example, it cannot combine the distribution with savings the individual has deposited directly in an IRA). Rollovers must be made to an entity that is qualified to offer individual retirement plans. Also, the rollover IRA must have investments designed to preserve principal. The IRA provider may not charge more in fees and expenses for such plans than it would to its other IRA customers. If the departing employee elects to receive a lump sum payment and does not transfer the money to another qualified employer plan or to an IRA, the participant will owe a 10% tax penalty if he or she is under age 59½ and does not meet the exceptions listed in §72(t). Distributions paid directly to the plan participant rather than being rolled over into an IRA or a qualified employer plan are subject to mandatory tax withholding equal to 20% of the total distribution. If the rollover—which must be equal to the cash received plus the 20% withheld—is completed within 60 days of the distribution, the tax that was withheld is applied to the individual's income tax liability. D. Integration with Social Security The Social Security benefit formula is designed to replace a greater percentage of wages for lower-income workers than for higher-income workers. The Social Security Administration estimates that for benefits claimed at the full retirement age, Social Security currently replaces 55% of the average earnings of a low-wage worker and 27% of the earnings of a high-wage worker. Since the Revenue Act of 1942, it has been permissible for private pension plans to narrow the difference in total wage replacement by providing larger pension benefits as a percentage of compensation to higher-paid workers than to lower-paid workers. Plans may coordinate or "integrate" their retirement benefit formulas with Social Security under an "offset method" or an "excess method." In defined benefit plans, integration with Social Security is usually related to the benefit paid to participants, while in defined contribution plans it most often relates to the contributions made by employers. In an integrated defined benefit plan, the amount of the worker's monthly pension is reduced or "offset" by a percentage of his or her Social Security benefit. In an integrated defined contribution plan, the amount contributed by the employer is higher for the portion of the employee's salary that is in excess of a specific amount, called the integration level. The most common integration level is the maximum amount of annual income that is subject to Social Security taxes ($106,800 in 2009). The maximum offset allowed under an offset plan and the "maximum permitted disparity" allowed under an excess plan are both limited by the tax code. E. Special Rules for "Top-heavy" Plans A defined benefit pension plan is considered "top-heavy" if more than 60% of benefits (in a DB plan) are earned by key employees or if more than 60% of contributions (in a DC plan) are made on behalf of key employees. Key employees are defined as company officers with earnings over $160,000 in 2009, owners of at least 1% of the company who receive over $150,000 in annual compensation, and owners of 5% or more of the company. For any plan year in which a plan is found to be top-heavy, special requirements must be met if the plan is to retain its tax-qualified status. Top-heavy plan requirements fall into two main areas: (1) faster vesting schedules for non-key employees; and (2) minimum nonintegrated benefits and contributions for non-key employees. Top-heavy plans must implement an accelerated vesting schedule. The benefits vested must include all benefits accrued (earned) under the plan, not just those accrued while the plan is operating under the special top-heavy rules. Top-heavy plans may choose from one of two special vesting schedules. Under the first, plan participants must be 100% vested in their benefits after three years of service. Under the second, 100% vesting occurs after six years and is reached by stages: 20% of the employee's accrued benefits are vested after two years of service, and an additional 20% become vested after each of the next four years. For years in which a plan is deemed to be top-heavy, the plan must meet specific minimum benefit and contribution levels for every non-key employee covered by the plan. The specified minimum benefit or contribution may not be reduced or eliminated through integration with Social Security. For each year that a defined benefit plan is top-heavy, a minimum benefit is required equal to 2% of the employee's average compensation earned for the five highest consecutive years of compensation. The highest minimum benefit does not have to exceed 20% of the non-key employee's average compensation. For each year that a defined contribution plan is top-heavy, the employer must make a contribution on behalf of each non-key employee equal to at least 3% of the employee's annual compensation. ERISA Title III: Jurisdiction, Administration, and Enforcement Title III of ERISA covers jurisdictional, administrative and enforcement matters. Under this title, various enforcement and regulatory responsibilities are coordinated between the Department of Labor, the Treasury Department, and the Pension Benefit Guaranty Corporation (PBGC). Under Section 3001 of ERISA, before the Treasury Department issues a determination letter regarding whether a plan has met certain requirements under the Internal Revenue Code, the Treasury Department must allow certain employees, as well as the Department of Labor and the PBGC, the opportunity to comment on the application. Section 3002 provides that if the Secretary of Labor or the PBGC want to bring a claim against a party for violation of the participation, vesting, or funding provisions of ERISA, the Secretary and the PBGC must give the Secretary of the Treasury a reasonable opportunity to review the brief. ERISA also gives the Secretary of the Treasury the right to intervene in these cases. Section 3003 provides that unless collection of the tax is in jeopardy, the Secretary of the Treasury must notify the Secretary of Labor before sending a notice of deficiency relating to a tax imposed on a prohibited transaction. The Secretary of the Treasury must also give the Secretary of Labor an opportunity to comment on the imposition of the tax. Under Section 3004 of ERISA, whenever the Secretary of the Treasury and the Secretary of Labor are required to carry out provisions in ERISA (or a federal law amended by ERISA) that relate to the same subject matter, the Secretaries must consult with each other to develop rules, regulations, practices, and forms. This collaboration is to encourage efficient administration of the provisions, and prevent duplication of efforts by the agencies, as well as creation of additional burden for plan administrators, employers, participants and beneficiaries. ERISA Title IV: Pension Benefit Guaranty Corporation and Plan Termination Title IV of ERISA established the Pension Benefit Guaranty Corporation (PBGC) as a government-owned corporation to protect the retirement income of participants and beneficiaries in private-sector defined benefit pension plans. Defined contribution plans such as ESOPs, profit-sharing plans, 401(k), 403(b), thrift/savings plans, and stock bonus plans are not insured by the PBGC. The insurance program treats pension plans differently depending on whether they are single-employer plans or multiemployer plans (i.e., collectively bargained plans to which more than one company makes contributions). The PBGC maintains separate reserve funds for single-employer plans and multiemployer plans. A. Premiums for Single-employer Plans The PBGC receives no appropriations from Congress. Its revenues come from premiums paid by employers that sponsor defined benefit pension plans, the assets of the terminated plans that it has taken over, investment income on its trust funds, and amounts recovered from the general assets of firms that terminate underfunded pension plans. Although it receives no appropriations, the Multiemployer Pension Plan Amendments Act of 1980 ( P.L. 96-364 ) requires the PBGC's receipts and disbursements to be included in the federal budget. The PBGC does not have the legal authority to set its own premiums, which are set in law by Congress. The PBGC single-employer insurance program receives two types of premiums from plan sponsors: a per-capita premium that is charged to all single-employer defined benefit plans and a variable premium charged to underfunded plans. The Deficit Reduction Act of 2005 increased the per capita premium from $19 per year to $30 per year for single-employer plans and indexed future premiums to average national wage growth. The per-capita premium is $34 in 2009. The variable premium is equal to $9 per $1,000 of underfunded vested benefits. The interest rate for determining the amount of underfunding subject to the variable rate premium is based on a composite corporate bond rate for the month preceding the month in which the premium payment year begins. Under prior law, an underfunded plan was exempted from the variable-rate premium if it was not underfunded in any two consecutive years out of the previous three years. Under the PPA, the variable premium is assessed on all underfunded plans, regardless of the plan's funding status in earlier years. For employers with 25 or fewer employees, the variable premium is $5 per participant. The PPA made permanent a surcharge premium for certain distress terminations that was added by P.L. 109-171 and was to expire in 2010. An annual surcharge of $1,250 per participant will be assessed for three years against any firm that terminates an underfunded pension plan during bankruptcy if it later emerges from bankruptcy. B. PBGC Insurance Limit The PBGC guarantees only "basic benefits." Basic benefits include pension benefits beginning at normal retirement age (usually age 65), certain early retirement and disability benefits, and benefits for survivors of deceased plan participants. Only vested benefits are insured. ERISA sets a limit on the benefits insured by the PBGC. This limit is adjusted annually for increases in wage growth in the economy. For pension plans ending in 2009, the maximum yearly pension guarantee is $54,000 for a participant retiring at age 65. The maximum insured benefit is reduced actuarially if a participant retires before age 65 or if the pension plan provides benefits in a form other than a life annuity. Benefits are insured at their nominal value: once the insured benefit amount is determined, it is not adjusted for inflation. Benefit increases that went into effect less than five years before a plan was terminated are not fully insured. Insurance on these benefits is phased in, guaranteeing 20% of the increase in benefits for each full year since the amendment that increased plan benefits was adopted. C. Plan Terminations305 A sponsor of a single-employer plan can voluntarily end the pension plan in one of two ways: (1) a "standard" termination if the plan is fully funded; or (2) a "distress" termination that allows a sponsor in serious financial trouble to terminate a plan that may be less than fully funded. In addition, the PBGC may terminate a plan involuntarily if certain conditions are met. The PBGC becomes responsible for paying benefits in the case of a distress or involuntary termination. 1. Standard Termination An employer can end a plan through a standard termination only if the plan's assets are sufficient to cover all of the plan's liabilities. Participants and beneficiaries must be informed of the amounts due them, including the data and underlying actuarial assumptions used to compute the benefits. An actuary must certify that the assets are sufficient to meet all plan liabilities. If the rules for a standard termination have been met, the plan sponsor purchases annuities from a commercial insurer or distributes lump-sum payments to beneficiaries. The employer then has no further liability to the PBGC or plan participants and can recapture any remaining assets after paying all applicable taxes. 2. Distress Termination An employer can terminate an underfunded plan under a distress termination only if one of the following conditions applies: Bankruptcy proceedings seeking liquidation have been filed by or against the company under Chapter 7 of the Bankruptcy Code; The company is undergoing reorganization under Chapter 11of the Code and the bankruptcy court has approved a plan termination; The company is unable to pay its debts when due and will be unable to continue in business unless the plan is ended; or The company has experienced unreasonably burdensome pension costs solely as a result of a decline in its workforce. One of the criteria for a distress termination must be met by each company that is a contributing sponsor of the plan or a "substantial member" of the sponsor's controlled group. Generally, a substantial member is a company whose assets comprise 5% or more of the total assets of the controlled group. The controlled group includes corporate parents and affiliates of the plan sponsor. 3. Involuntary Termination The PBGC may end a pension plan even if a company has not filed to do so on its own initiative. PBGC may end the plan if: The plan has not met the minimum funding requirements; The plan cannot pay current benefits when due; A lump-sum payment has been made to a participant who is a substantial owner of the sponsoring company; or The loss to the PBGC is expected to increase unreasonably if the plan is not ended. D. Employer Liability to the PBGC306 In a distress termination, or in an involuntary termination initiated by the PBGC, a pension plan sponsor is liable to the PBGC for any unfunded benefit liabilities. The plan sponsor and members of the controlled group are jointly and severally liable for such obligation, so each member can be held responsible for the entire liability. Each contributing sponsor also would be liable to the PBGC if the plan had an accumulated funding deficiency or a waived funding deficiency. The employer liability to the PBGC is due on the termination date, except that the PBGC can prescribe commercially reasonable terms for payment of employer liability that exceeds 30 percent of the net worth of the employer. If a company sells or transfers a business with an underfunded pension plan for the purpose of evading pension liabilities and the plan is ended within five years of the sale or transfer, the firm can be held liable for unfunded liabilities existing at the time of sale. E. Reportable Events The PBGC must be notified of certain events, including: (1) if the plan is deemed not in compliance with the law; (2) if an amendment has been adopted decreasing benefits; (3) if there has been a substantial drop in the number of active participants; (4) if the plan does not meet the minimum funding standards or is unable to pay benefits; or (5) if there is a distribution of $10,000 or more to a substantial owner. The PBGC also must be notified if a controlled group member leaves the group, liquidates, declares an extraordinary dividend, or redeems 10% or more of total voting stock. F. Notice Requirements As amended by the PPA, ERISA requires that if a defined benefit plan terminates while it is underfunded through a distress termination under ERISA §4041(c), or is subject to an involuntary termination under ERISA §4042, the plan sponsor must provide to plan participants the same information that the plan is required to submit to the PBGC—subject to confidentiality limitations—within 15 days of the PBGC filing. This requirement applies to notices of intent to terminate and involuntary termination determinations. G. Premiums for Multiemployer Pension Plans308 Multiemployer pension plans were covered by PBGC insurance by the Multiemployer Pension Plan Amendments Act of 1980 ( P.L. 96-364 ). The rules for multiemployer plans differ from those applicable to single-employer plans because of the special nature of these arrangements. The PBGC is required to provide financial assistance to insolvent multiemployer plans, whether or not they are terminated, when the assistance is needed to enable the plan to pay guaranteed benefits. The PBGC guarantees 100% of the first $11 of monthly benefits earned per year of service plus 75% of the next $33 of monthly benefits per year of service. The 75% guarantee is reduced to 65% if the plan does not meet specified funding requirements. The annual insurance premium charged for each plan participant in a multiemployer plan is $9 in 2009 and is indexed to wage growth in future years. H. Withdrawal Liability309 Employers who leave a multiemployer plan for any reason continue to be liable for a portion of any underfunding. The purpose of the withdrawal liability is to protect the remaining contributing employers and the PBGC from having to assume the burden of funding the pension obligations of employers who cease contributing to the plan. The withdrawal liability is imposed at the time of withdrawal and does not depend on the actual termination of the plan. This rule is designed to discourage withdrawals by requiring each employer to continue funding its share of the plan's unfunded vested liability. Withdrawal liability is equal to an employer's share of the plan's unfunded vested liability determined under one of several rules that may be adopted by the plan, and is payable to the plan in annual installments for a period of up to 20 years. An employer first entering a multiemployer plan is allowed a six-year "free look" during which it can participate in the plan without incurring withdrawal liability. This provision is not available if the employer would account for 2% or more of total contributions to the plan. This glossary contains terms used within ERISA and the Internal Revenue Code. It also contains certain abbreviations used within this report.

Due to the recent economic decline and the desire to enact large-scale health reform, the current federal regulation of pension plans, health plans, and other employee benefit plans has received considerable congressional attention. The Employee Retirement Income Security Act of 1974 (ERISA) provides a comprehensive federal scheme for the regulation of employee pension and welfare benefit plans offered by private-sector employers. ERISA contains various provisions intended to protect the rights of plan participants and beneficiaries in employee benefit plans. These protections include requirements relating to reporting and disclosure, participation, vesting, and benefit accrual, as well as plan funding. ERISA also regulates the responsibilities of plan fiduciaries and other issues regarding plan administration. ERISA contains various standards that a plan must meet in order to receive favorable tax treatment, and also governs plan termination. This report provides background on the pension laws prior to ERISA, discusses various types of employee benefit plans governed by ERISA, provides an overview of ERISA's requirements, and includes a glossary of commonly used terms.

Most Recent Developments On November 29, 1999, President Clinton signed into law the ConsolidatedAppropriations Act for FY2000 ( H.R. 3194 ; P.L. 106-113 ), legislationthat enacts by reference H.R. 3422 , the Foreign OperationsAppropriations Act, FY2000. H.R. 3422 was the third ForeignOperations measure debated by Congress in 1999 and represented the results ofextensive negotiations between Congress and the White House to resolve fundingdifferences. President Clinton had vetoed the first Foreign Operations measure( H.R. 2606 ) because it cut $1.92 billion from his request. H.R. 3422 provides $13.5 billion for regular foreign aid programs, plus$1.8 billion over three years for the Wye River/Middle East peace accord, for a totalpackage of $15.3 billion. H.R. 3422 remains about $900 million belowthe President's amended budget proposal. In addition to including the Wye River money, the new Foreign Operations measure adds $799 million for several accounts that Congress had reduced earlier,including the World Bank's International Development Association and funds for thePresident's counter-proliferation Expanded Threat Reduction Initiative in the formerSoviet Union. New funding is offset by delaying the transfer beyond FY2000 of $550million of Israel's military aid. This will not reduce Israel's $1.92 billion militaryaid, but because the funds would have been placed in an interest bearing account,it will result in the loss to Israel of interest earned on the early disbursement. The most significant Administration funding priority not included in the revised Foreign Operations measure is multilateral debt relief for poor developing countries. Congressional negotiators agreed to an additional $90 million for bilateral debtrelief -- bringing the debt reduction total to $123 million -- and they adopted amodified authorization (in H.R. 3425 , also enacted by reference in P.L.106-113 ) for the U.S. to support the IMF off-market sale of gold. Congress,however, would not add another $250 million to forgive debt owed to multilateralinstitutions or $600 million requested for debt relief in FY2001-2003. On the mostcontentious issue, the Administration further accepted abortion-related internationalfamily planning policy restrictions in exchange for congressional approval of nearly$1 billion in U.N. arrears payments. On November 30, President Clinton exercisedhis waiver authority to exempt the abortion conditions from applying to $15 millionof the $385 million population aid appropriation and said he would oppose inclusionof these restrictions in future spending measures. Introduction 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 70% -- of total international affairs spending by the UnitedStates (see Figure 1 ). The legislation funds all U.S. bilateral development assistanceprograms, managed mostly by the U.S. Agency for International Development(USAID), together with several smaller independent foreign aid agencies, such as thePeace Corps and the Inter-American and African Development Foundations. ForeignOperations includes separate accounts for aid programs in the former Soviet Union(also referred to as the New Independent States (NIS) 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 decade. 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 increasingly have expanded their scopebeyond spending issues and played a major role in shaping, authorizing, and guidingboth executive and congressional foreign aid and broader foreign policy initiatives. It has been largely through Foreign Operations appropriations that the United Stateshas modified aid policy and resource allocation priorities since the end of the ColdWar. The legislation has also been a key tool used by Congress to apply restrictionsand conditions on Administration management of foreign assistance, actions thathave frequently resulted in executive-legislative clashes over presidentialprerogatives in foreign policy making. Status President Clinton submitted his FY2000 federal budget request to Congress onFebruary 1, 1999, including funding proposals for Foreign Operations Appropriationsprograms. Subsequently, House and Senate Foreign Operations Subcommittees have held a series of hearings, including testimony from Secretary of State Albright,Treasury Secretary Rubin, and USAID Administrator Atwood. Skipping a formalsubcommittee markup, the Senate Appropriations Committee reported on June 17, S. 1234 . The full Senate approved the bill on June 30 by a vote of 97-2. The House Foreign Operations Subcommittee marked up its bill on July 14, followedby full Committee approval of H.R. 2606 on July 20. The Houseapproved the legislation on August 3. The following day, the Senate took up H.R. 2606 , deleted all of the House-passed text, substituted language in S. 1234 , passed H.R. 2606 , as amended, and requested aconference with the House. House and Senate conferees met on September 22, 1999, agreeing to all issues in dispute except international family planning. Members resolved this final issuein disagreement on September 27 and filed a conference report. With PresidentClinton threatening to veto H.R. 2606 because of reductions to hisbudget request, the House (214-211) and Senate (51-49) agreed on October 5 and 6,respectively, to the conference report, clearing the measure for the White House. President Clinton vetoed the legislation, however, on October 18, because of lowfunding levels and the absence of appropriations for several initiatives, including theWye River/Middle East peace package and an expansion of the Heavily IndebtedPoor Country (HIPC) debt relief program. The House, on November 5, approved a revised Foreign Operations measure ( H.R. 3196 ) that was acceptable to the White House. Furthernegotiations yielded a few additional changes to H.R. 3196 ,modifications that are reflected in a third Foreign Operations appropriation measure, H.R. 3422 . That bill is enacted by reference as part of the H.R. 3194 , the Consolidated Appropriations Act for FY2000 ( P.L.106-113 ), that includes five appropriation measures and other legislation. Table 1. Status of Foreign Operations Appropriations, FY2000 H.R. 2606 H.R. 3196 H.R. 3422 * * H.R. 3422 is enacted by reference in H.R. 3194 , the Consolidated Appropriations Act for FY2000. Conference report 106-479 pertainsto H.R. 3194 . Foreign Operations Funding Trends 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. 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 muchsmaller amounts -- the State Department and other executive agencies launched anaggressive campaign in to reverse the decade-long decline in the foreign policybudget. 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 $13.8 billion in FY1999 when lawmakers, atthe urging of the White House, added nearly $900 million in the final days of the105th Congress. As shown in Table 2 , the amount for FY1999 was the highest in five years, bolstered especially by $2.1 billion supplemental funding for Central Americahurricane relief, Kosovo humanitarian aid, and several other foreign assistanceemergencies. For FY1999, Foreign Operations represented 0.87% of the entirefederal budget and 2.6% of total discretionary budget authority. By comparison,these same figures in FY1985 were 2% and 4.6%, respectively. Table 2. Foreign Operations Appropriations, FY1993 to FY1999 (discretionary budget authority in billionsof current dollars) * The amount for FY1999 includes the "base" Foreign Operations Appropriations (the regular appropriation approved in P.L. 105-277 ) plus $2.1 billion in emergencysupplementals enacted in P.L. 105-277 and P.L. 106-31 . It excludes, however,$17.861 billion for the IMF. Over the past 20 years, Foreign Operations spending has experienced three distinct trends when calculated in real terms, taking into account the effects ofinflation. The first period was marked by a steady growth in Foreign Operationsappropriations levels during the early 1980s when the United States rapidly expandedsecurity-related aid programs in Central America, Pakistan, and to countriesproviding the U.S. with military bases. Funding peaked in FY1985 at $31.9 billion(in FY1999 dollars) followed by a sharp cut in FY1986 as the effects of theGramm-Rudman deficit reduction initiative took hold and limited federal spendingin most areas. For the next five years, during a second phase of Foreign Operationsbudget trends, appropriations remained relatively stable at about $19.5 billion peryear (real terms). Towards the end of the Cold War, foreign aid spending in real terms began to fall steadily -- from about $16.7 billion in FY1992, to $15 billion in FY1995, to $13billion in FY1997. Appropriations for FY1997 were the lowest since 1975 whenCongress slashed foreign assistance spending during the U.S. withdrawal fromVietnam. FY1999 Foreign Operations spending is about 29% below the averageappropriation level approved by Congress during the late 1980s, 17% less thanFY1992, a year that might be considered the first post-Cold War foreign aid budget,and 8% less than FY1995 when the majority in Congress changed. Foreign Operations, the FY2000 Budget Resolution, and Section 302(b) Allocations In most years, Appropriation Committees do not begin markups of their spending bills until Congress has adopted a budget resolution and funds have beendistributed to the Appropriations panels under what is referred to as the Section302(a) allocation process, a reference to the pertinent authority in the CongressionalBudget Act. Following this, House and Senate Appropriations Committeesseparately decide how to allot the total amount available among their 13subcommittees, staying within the functional guidelines set in the budget resolution. This second step is referred to as the Section 302(b) allocation. As noted above,foreign policy funds are appropriated within four bills with Foreign Operationshaving the largest share of around 68-70% 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 FY2000 budget resolution that cleared Congress on April 15 ( H.Con.Res. 68 ) strongly suggested that the Foreign Operationssubcommittees would receive a significantly reduced Section 302(b) allocation thanassumed in the President's budget. H.Con.Res. 68 set a $17.7 billiontarget for total international affairs budget, a figure 15% below the request. In late May 1999, House and Senate Appropriations Committees approved Section 302(b) funding allocations for each of their 13 appropriation bills, settingamounts for Foreign Operations programs sharply below the President's $14.6 billionrequest and the $13.3 billion "base" appropriation for FY1999. (2) The SenateCommittee initially provided $12.5 billion in budget authority but later raised theamount to $12.7 billion. It is 12.8% less than the budget proposal and 4.8% belowthe current Foreign Operations "base." The House Appropriations panel originallyallocated $10.36 billion for Foreign Operations, 29% below the President's requestand 22% under the "base." After shifting funds among several subcommitteeaccounts, the House panel subsequently increased the Foreign Operations amount byover $2.2 billion, resulting in a $12.625 billion level. Limitations on outlays under the Section 302(b) allocation were also problematic. (3) Congress can only influence "new"outlays -- those that willspend-out in FY2000 as a result of enactment of new budget authority. House andSenate outlay allocations provide about the same amount in controllable, or "new"outlays -- $5.43 billion and $5.25 billion, respectively. These levels were about 11%less than the request. Moreover, funding limits at these levels constrained the abilityof the Appropriations Committees to respond to new aid initiatives such as the WyeRiver-Middle East peace package and expanded debt reduction for the world'spoorest nations. Secretary of State Albright told the Senate AppropriationsCommittee on May 20 that "cuts of this magnitude would gravely imperil immediateand long-term American interests." A major reason that the Foreign Operations allocation, as well as the allocation for several other spending measures, were so low, was the congressional and WhiteHouse desire to stay within discretionary spending "cap" limits agreed to in 1997. The caps, which were negotiated at a time of budget deficits, were intended toprovide the means to balance the U.S. budget by FY2002. With the far earlieremergence of a budget surplus, some lawmakers, including members of theAppropriations Committees, called for revisions to the budget caps so that a portionof the surplus could be used to ease the spending limitations posed by the currentceilings. Other Members, however, argued that the surplus was largely made up ofsocial security resources; that Congress must not endanger the future of socialsecurity by utilizing part of the surplus, nor should it abandon the spending disciplineestablished by the 1997 budget agreement. Foreign Operations Appropriations Request for FY2000 and Congressional Consideration Funding Issues for Foreign Operations Appropriations,FY2000 Total Foreign Operations Funding Levels. President Clinton, in his initial February 1999 request,asked Congress to appropriate $14.1 billion for Foreign Operations programs inFY2000, plus $1.9 billion in support of the Wye River/Middle East peace accord inFY1999-2001. The total proposal, with the Wye River money, came to $16 billion. The request (excluding the Wye River agreement) was about $700 million, or 5%higher than the "base" Foreign Operations spending level Congress approved forFY1999 (see footnote 3). Congress further enacted an additional $2 billion in twoFY1999 emergency supplementals for Central American hurricane relief, Kosovohumanitarian assistance, and a series of other foreign aid accounts. Compared withthe $15.4 billion total FY1999 Foreign Operations spending -- the "base" plussupplementals -- the FY2000 request, without the Wye River funds, was about $1.35billion, or 9% less than FY1999 amounts. (See below for discussion of thesupplemental/advance appropriation requests.) Subsequently, the President amendedhis request from $14.1 billion to $14.38 billion, primarily through a September 1999proposal that added $250 million for poor country debt relief in FY2000 and $600million more during FY2001-2003. Including the Wye River funds, the total FY2000request, as amended, came to $16.186 billion. Funding for Selected Foreign Operations Accounts. For the most part, portions of the $700 million increaseabove the "base" sought for FY2000 were spread out over many Foreign Operationsaccounts, resulting in small boosts for these aid activities. Development assistancewould grow by about $175 million (9%) above the "base," (4) non-proliferation andcounter-terrorism programs would increase by $33 million (17%), military trainingfunds would rise by $2 million (4%) and military aid grants would move up by $100million (3%). The military aid grant hike mainly would provide additional supportto Israel. The budget request also included a few large increases from FY1999,representing special priorities of the Administration: Export promotion programs were slated for an increase of $92 million (11.6%), mainly to provide the Export-Import Bank with the resources tomeet what it believed will be increased demands in FY2000. Debt reduction funds would grow from $33 million to $120million in order to launch two new debt relief initiatives for FY2000. In September,this request was amended to $370 million in FY2000 and a total of $970 million overfour years (FY2000-2003). (See below for more discussion of thisissue.) Peace Corps funding would rise by $30 million (12.5%) to maintain the plan to increase the number of Peace Corps volunteers from 6,700 to10,000 within the next few years. (See CRS Report RS20082, Peace Corps: 10,000Volunteer Goal , by [author name scrubbed].) Table 3. Summary of Foreign Operations Appropriations (Discretionary funds -- in millions of dollars) Source: House and Senate Appropriations Committees. FY1999 excludes a one-time IMF appropriation of $17.861 billion. H.R. 3196 represents levels approved by theHouse on Nov. 5. * Includes "base" appropriations plus emergency supplementals enacted in P.L. 105-277 and P.L. 106-31 . U.S. assistance to Russia and the former Soviet states would grow by $179 million (21%), the result of a new Administration program -- theExpanded Threat Reduction Assistance Initiative -- addressing the securityimplications of the economic crisis in Russia and other NIS states. (See below underregional aid priorities for more discussion.) Peacekeeping for non-U.N. missions would increase by $54 million (71%), mainly due to recommendations to boost funding from $10 millionto $43 million for the OSCE Kosovo operation, and for smaller increases in Africaand OSCE Bosnia/Croatia peacekeeping activities. For the first time in several years, the Administrations sought funding ($5.1 million) for the African Development Bank, an institution that has hadits operations suspended until recently due to administrative and economic problemsin the region. In one area, the FY2000 Foreign Operations request proposed a small program reduction -- U.S. assistance to Eastern Europe would drop by $37 million (-8.6%)with most of the cuts coming in aid to Bosnia. Table 4. Leading Recipients of U.S. Foreign Aid: FY1998 - FY2000 (Appropriation Allocations; $s in millions) *Includes $100 million supplemental appropriation in P.L. 106-31 . ** Includes regular request for Israel, Jordan, the Palestinians, plus amounts for Wyepeace accord: Israel--$300 million; Jordan--$100 million; Palestinians--$100 million. 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 projected for FY2000 includes Peru--$50 million; Haiti--$26 million;Bangladesh--$25 million; and Guatemala--$17 million. Moreover, because of alarge food aid program, Ethiopia, India and North Korea (FY1998/99) would alsorank among the lower 10 of this top 15 list. Funding for Country Aid Programs. At the country level, the FY2000 proposal recommendedgenerally the same roster of major recipients as for FY1999. The proposal reflectedcontinuing U.S. policy emphasis on Middle East peace, democratic transition in theformer Soviet Union, implementation of the Dayton Peace accords in Bosnia, and toa somewhat lesser extent, efforts to counter the drug trade in Latin America. Israel($2.85 billion) and Egypt ($2 billion) would continue to be the largest recipients,although levels would decline as the United States continues to implement areduction in economic assistance to both countries. (5) Russia, and to a lesser extentUkraine, were scheduled for increases in FY2000, mainly due to the Expanded ThreatReduction Assistance Initiative. U.S. assistance to Israel, Jordan, and thePalestinians (West Bank/Gaza) would rise significantly in FY2000 if Congress agreesto a request of $500 million to back the Wye Memorandum peace accord. Congressional Debate on Foreign Operations Spending Summary of Debate. In separate actions during the summer, the House and Senate approved bills spending roughlythe same amount of money overall -- $12.624 billion and $12.691 billion,respectively -- but at levels less than appropriated in FY1999 and well below thePresident's request. The legislation, however, included some significant differencesin how to allocate funds among the various foreign aid accounts. Confereesapproved $12.693 billion, nearly identical to the Senate's level, but still belowamounts for FY1999 and the President's request. On very close votes largely alongparty lines, the House (214-211) and Senate (51-49) agreed on October 5 and 6,respectively, to the $12.693 billion spending measure. Most democrats supported thePresident's opposition to the measure because of the sizable cuts made to his foreignaid request. Other Members voted against the bill because the conference agreementremoved House-passed abortion restrictions related to international family planningprograms and included funding for the U.N. Population Fund which maintainsactivities in China. Keeping to an earlier pledge, President Clinton vetoed H.R. 2606 on October 18 because of inadequate funding levels. Asprimary reasons for his veto, the President specifically cited cuts to his request forvoluntary peacekeeping activities, the Expanded Threat Reduction Initiative designedto safeguard weapons of mass destruction in Russia and other former Soviet states,contributions to multilateral development banks, and support for the HeavilyIndebted Poor Country (HIPC) debt relief program, as well as the absence of fundingfor the Wye River Accord supporting the Middle East peace process. Following the mid-October veto of H.R. 2606 , the White House and congressional leaders negotiated the terms of a compromise package thatnarrowed the gap between executive-legislative funding differences. On November5, the House approved a revised Foreign Operations measure ( H.R. 3196 ) that added $799 million for White House priorities, plus $1.8 billion for theWye River agreement. Although acceptable to the President, the bill fell about $900million short of the Administration's amended request, including denial of $247million for the cancellation of poor country debt owed to multilateral developmentbanks. Subsequent negotiations followed as Congress and the President attempted to complete an omnibus spending package for the five remaining appropriation bills. The most important changes for Foreign Operations -- reflected in the introductionof a third measure, H.R. 3422 and a separate authorization bill, H.R. 3425 -- regarded congressional authorization for the IMF to makean off-market sale of gold to finance the HIPC debt relief initiative( H.R. 3425 ) and the attachment of abortion restrictions to internationalfamily planning funds that Republican leaders had demanded in exchange forapproval of money to pay U.S. arrears to the United Nations ( H.R. 3422 ). H.R. 3194 , a consolidated spending bill passed by the House onNovember 18 and by the Senate on November 19, enacted by reference H.R. 3422 and H.R. 3425 . President Clinton signed intolaw H.R. 3194 on November 29, 1999. Senate Debate. The Senate approved its version of the Foreign Operations request for FY2000 on June 30, 1999( S. 1234 ). The $12.691 billion was about $1.9 billion, or 13%, less thanthe President's request. Compared to FY1999 levels, the recommendation was about$700 million, or 5%, below the "base" foreign aid appropriation (regular ForeignOperations funding approved in the FY1999 Omnibus spending bill ( P.L. 105-277 ),and over $2.7 billion, or 17.7%, under total Foreign Operations appropriations forFY1999 that includes large Central America and Kosovo emergency reliefsupplementals. House Debate. It had been expected that the House Appropriations bill would fall far below the Senate measuredue to an initial $10.4 billion budget authority allocation to the Subcommittee (seediscussion above under the section on 302(b) allocations and Foreign Operations). Immediately prior to the House Committee markup on July 20, however, the panelrevised the Foreign Operations figure upwards to $12.6, making available roughlythe same amount of money as passed the Senate. As adopted in the House on August3, H.R. 2606 appropriated $12.624 billion in discretionary funds, $1.99billion, or 13.6 % less than the FY2000 request. It was $777 million below the"base" FY1999 appropriation, and $2.8 billion (18%) under the total ForeignOperations enacted amounts for this year, including both "base" funding andemergency supplementals. Conference Consideration, Veto of H.R. 2606, and a Revised Foreign Operations Bill. On September 22, House-Senateconferees resolved all differences except one in their respective versions of H.R. 2606 . Subsequently, Members worked out their disagreement oninternational family planning and contributions to the U.N. Population Fund, andapproved on September 27 a $12.93 billion measure. Like the Senate-passed bill,the conference fell about $700 million, or 5%, below the "base" spending level forFY1999 and $1.9 billion, 13% less than the President's request. President Clintonand his senior foreign policy advisors argued that the conference agreement shirkeda number of U.S. financial responsibilities and jeopardized American interests inpromoting Middle East peace, safeguarding nuclear weapons and scientist expertisein the former Soviet Union, and stabilizing several global "hot spots." Following theveto of H.R. 2606 and several weeks of negotiations, congressionalleaders and White House officials agreed to a compromise package which thePresident says he supports. The agreement, approved by the House on November 5in a second Foreign Operations measure, H.R. 3196 , added $1.825billion for the Wye River peace accord and $799 million for a range of foreign aidprograms the White House charged were under-funded in the earlier H.R. 2606 . The total package in H.R. 3196 representedfull funding for the Wye River agreement and roughly half of Administration'srequest that had been cut in H.R. 2606 . As negotiations to resolve all budget issues continued after House passage of H.R. 3196 , a third Foreign Operations spending measure -- H.R. 3422 -- was introduced on November 17, legislation representingthe final agreement over foreign aid spending. The major difference between H.R. 3196 and H.R. 3422 is the addition in H.R. 3422 of abortion restrictions that apply to international familyplanning programs. Congressional negotiators had been insisting that the WhiteHouse accept such conditions on population assistance in exchange for congressionalapproval of nearly $1 billion to pay off U.S. arrears at the United Nations. Invirtually all other respects, the two bills are the same. The ConsolidatedAppropriations Act for FY2000 ( H.R. 3194 ; P.L. 106-113 ) enacts H.R. 3422 and several other spending and authorization measures byreference. The House approved H.R. 3194 , and therefore H.R. 3422 , on November 18 and the Senate approved the bill onNovember 19. With the exception of over $2.6 billion in additional funding for selected accounts and the inclusion of abortion restrictions for international family planningprograms, H.R. 3422 is virtually identical to the conference agreementon H.R. 2606 , a bill vetoed by the President. Three major congressionalpriorities funded in the vetoed measure and continued in H.R. 3422 include: Kosovo and Balkan assistance -- H.R. 3422 includes about $535 million for Balkan reconstruction and regional economicstabilization, with a $150 million recommendation specifically for Kosovo. Thisfollows closely what the Senate had passed in S. 1234 . The President'sbudget, prepared before the outbreak of hostilities, included only $393 million for theregion. The House measure did not include earmarked funds for a Kosovo and aregional reconstruction initiative. H.R. 3422 stipulates, however, thatnone of the funds for Kosovo are to be used for large scale infrastructure projects orbe available until the President certifies that the U.S. commitment at a late-1999Kosovo donor pledging conference does not exceed 15% of totalpledges. Child Survival and Disease programs -- H.R. 3422 provides a separate account, as proposed by the House, at $715 million forchildren and infectious disease activities. Overall, the revised Foreign Operationsbill increases the account from the "base" FY1999 appropriation of $650 million andthe amended $700 million FY2000 request. (6) Inaddition, if the President exerciseshis authority to waive abortion-related family planning restrictions, $12.5 million willbe transferred from population aid programs to child survival and diseaseactivities. Aid to Israel, Egypt, and Jordan -- Following the lead of Senate and House-passed levels, H.R. 3422 increases aid to Israel andEgypt beyond the Administration's regular funding request. The President's budgethad proposed accelerating to $150 million the ten-year, $100 million per year pacefor reducing U.S. assistance to the two countries that Congress began last year. Thebill increases the request by $50 million, restoring the ten-year, $100 million peryear reduction. Under the H.R. 3422 , Israel will receive $2.88 billionand Egypt $2.035 billion. In addition, the bill earmarks $225 million for Jordan, asrequested. In many other areas, the revised Foreign Operations bill increases spending levels that had led to the President's veto of H.R. 2606 : Wye River accord. H.R. 3422 provides full funding of $1.8 billion through FY2002 for the Middle East peace pledge made byPresident Clinton in late 1998. At the time, the U.S. committed $900 million forFY1999, $500 million for FY2000, and $500 million for FY2001 in additionalassistance to Israel Jordan, and the Palestinians. During a period when little progresswas made by the parties in implementing the Wye accord, Congress approved in May1999 only $100 million for Jordan in the FY1999 Supplemental Appropriations. With the more recent meetings between President Clinton and newly elected IsraeliPrime Minister Ehud Barak, the Administration once again pressed Congress toapprove expeditiously the remaining Wye accord aid pledges. H.R. 3422 further adds an additional $25 million in military aid for Egypt. Although notlinked with the Wye accords, the Administration had requested for FY2000 thatCongress approve early disbursement of some of Egypt's military aid that could bedeposited into an interest bearing account that would enhance Egypt's aid package. This would be similar to an arrangement extended for several years to Israel. Because of budget limitations and the outlay impact of early disbursement of funds,Congress rejected the proposal in H.R. 2606 . The $25 million includedin H.R. 3422 represents roughly the amount of interest Egypt wouldhave earned under the early disbursement plan. Aid to Russia and nuclear weapons safeguards. A top Administration priority has been $241 million for its Expanded Threat Reductionprogram, a counter-proliferation initiative in the former states of the Soviet Union. The amounts approved in H.R. 2606 for Russia and other independentstates -- $735 million -- would have jeopardized funding for the threat reductionproject, plus squeezed aid for Russia and some of the other countries in the region. H.R. 3422 adds $104 million for the account, bringing the total to $839million, and specifically earmarks $241 million for the counter-proliferationinitiative. The new bill continues other provisions from H.R. 2606 bysetting aid targets of $180 million for Ukraine, $95 million for Georgia, and $90million for Armenia. Even with the additional funding, bilateral economic aid forRussia and several other countries in the region are likely to fall below requestedlevels, and perhaps below FY1999 amounts. Multilateral development bank funding. Multilateral assistance, funded within title IV of the Foreign Operations appropriation receivedone of the deepest cuts under the terms of H.R. 2606 -- over $500million, or one-third less than requested. H.R. 3422 , restores $233million to title IV, including $150 million for the World Bank's InternationalDevelopment Association (IDA). Congress initially cut the $803 million request to$625 million, primarily due to disagreement with Bank policy over extending a loanto China that would involve the resettlement of poor Chinese farmers into atraditionally Tibetan area. The new Foreign Operations measure also fully funds($128 million) the African Development Fund and increases from $1 million to $4.1million resources for the U.S. to subscribe to a new African Development Bankreplenishment. H.R. 3422 also adds $16 million for the Inter-AmericanInvestment Corporation, funding that was not provided in H.R. 2606 . U.S. voluntary contributions to international organizations received an additional $13million, funds that most likely will be used to increase payments to the U.N.Development Program. The amount and terms of a $25 million Americancontribution to the U.N. Population Fund did not change under the revised ForeignOperations bill. The major remaining resource shortfall for multilateral programs in H.R. 3422 is for the Global Environment Facility for which theappropriation remains at $35.8 million, or one-fourth of therequest. Economic Support Fund (ESF) assistance. ESF, a bilateral economic aid channel through which the United States extends support largely forpolitical and security purposes, had been cut significantly under H.R. 2606 , except for Middle East recipients. After subtracting earmarks for Israel, Egypt,Jordan, and Lebanon, the vetoed Foreign Operations measure had reduced thePresident's request for all other ESF activities by roughly 45%. Most vulnerablewould have been aid programs in Haiti, Guatemala, Cambodia, and Indonesia, aswell as a series of regional human rights, democracy building, environment, andother global issue initiatives. H.R. 3422 restores $168.5 million to theESF account, leaving a more modest $95 million, or 17%shortfall. USAID operating expenses. Under H.R. 2606 , Congress approved the Senate-passed level of $495 million for the costs of staffsalaries and living expenses overseas for the primary U.S. bilateral aid agency. Agency officials argued that without higher funding, they would be forced to initiatea reduction-in-force as had occurred in 1997. Moreover, USAID continues to beplagued by ineffective financial management systems and failed attempts to replacethem. H.R. 3422 provides an additional $25 million that should allowUSAID to cover its operating costs as well as complete plans for a new financialmanagement initiative. Peacekeeping operations. Voluntary contributions to non-U.N. sponsored peacekeeping activities had been reduced in H.R. 2606 to $78 million, $52 million less than the request. H.R. 3422 addsback $75 million, for a total of $153 million, that will cover American payments topeacekeeping operations included in the original requests, plus those, such as inSierra Leone and East Timor, that have developed since early1999. Peace Corps. Under the terms of the conference agreement of H.R. 2606 , Peace Corps funding was cut to $235 million, $35 millionless than the request and $5 million under FY1999 levels. H.R. 3422 restores some of the reduction by adding $10 million. The $245 million FY2000appropriation, however, will still fall short of the Administration's goal of achievinga 10,000 volunteer Peace Corps. In a few areas, the third Foreign Operations bill does not substantially alter funding shortfalls that had been approved in the vetoed H.R. 2606 . Themost significant, from the Administration's perspective, is debt relief for the world'spoorest nations. In the original budget request submitted in early 1999, the Presidentsought $120 million for debt reduction, including funds for U.S. participation in the World Bank/IMF managed Heavily Indebted Poor Country (HIPC) initiativedesigned to provide extensive reduction of debts owed to both bilateral governmentsand multilateral institutions. Following a G-7 agreement in June and World Bank/IMF endorsement in September to significantly expand HIPC, the President asked Congress on September21 to increase debt relief funding to $370 million in FY2000, plus $600 million forFY2001-2003. The conference agreement on H.R. 2606 included only$33 million for debt cancellation, none of which could be used for helping reducemultilateral debt. The revised H.R. 3422 increases debt relief fundingby $90 million, all of which must be used for bilateral reduction. HIPC proponentsfear that if the United States does not contribute to the multilateral portion of theHIPC initiative, other bilateral donors will follow, leaving a large funding shortfallfor HIPC implementation. Although the White House did not achieve full fundingfor debt relief, Congress agreed in a separate bill, H.R. 3425 (that is alsoenacted by reference to the Consolidated Appropriations Act), to authorize U.S.support for an IMF off-market sale of gold that would finance the Fund's ability towrite-down poor country debts. In perhaps the most controversial provision included in H.R. 3422 , the White House agreed to accept restrictions on international family planningpolicy that prohibit U.S. grants to private foreign non-governmental and multilateralorganizations that either perform abortions or lobby to change abortion laws inforeign countries. The President can waive the restrictions for up to $15 million ingrants, but if he does, population aid funding declines from $385 million to $372.5million. The restrictions apply only to FY2000 and will expire on September 30,2000. Although the President exercised his waiver authority on November 30, 1999,and instructed USAID to minimize any adverse impact the provision might have onU.S.-funded family planning programs, the legislation represents the first time in 15years of heated congressional debate that such restrictions have been enacted intolaw. Critics of abortion restrictions are concerned primarily about the precedent thatthis sets and the effect it will have on another contentious debate in Congress nextyear when the current restrictions expire. The White House reluctantly agreed to theabortion conditions when congressional leaders refused to approve funds to pay offU.S. arrears to the United Nations unless the restrictions were also added. Another funding reduction in H.R. 2606 not addressed in H.R. 3422 is for the Inter-American Foundation . The IAF is a small,independent grass-roots aid organization supporting projects in Latin America since1969. Under both H.R. 2606 and H.R. 3196 , the IAF willreceive $5 million in FY2000, less than a quarter of the Administration's $22.3million request. Further, the bills authorize the President to abolish the IAF nextyear. The Foundation had been heavily criticized for recent managementirregularities and for the continuation of funding for certain NGOs that had beeninvolved in the kidnaping of Americans in 1997. The third Foreign Operations bill further does not include funding for two emerging foreign aid initiatives that the Administration had announced earlier itwould pursue during the final budget negotiations. Although the executive branchnever submitted formal requests, it had consulted extensively with congressionalcommittees for additional funds for Balkan reconstruction and stabilization effortsand counter-narcotics programs in Colombia. As noted above, both H.R. 2606 and H.R. 3422 provide more for Balkan andKosovo assistance than requested by the Administration earlier in 1999. But thereremains about a $300-$400 million gap between amounts provided in H.R. 3422 and what the executive wants to pledge for reconstructionneeds. Presumably, the Balkan aid package will come before Congress in 2000 aspart of a supplemental to provide additional DOD costs of peacekeeping operationsin the region. For counter-narcotics, an initiative with strong congressional support, H.R. 3422 increases spending by $20 million for FY2000. Nevertheless,this remains far short of preliminary proposals recommending $1 billion-$1.5 billionfor Colombia and the Andean region over three years. Two non-funding, but controversial policy issues that had been narrowly approved during House and Senate floor debate and settled by conferees in H.R. 2606 , are continued unchanged in H.R. 3422 : School of the Americas. H.R. 3422 drops a House provision that would have denied International Military Education andTraining Funds (IMET) for the Army's School of the America's, located at FortBenning, Georgia. The School trains Latin American military officers, drawing onIMET for some of its operating costs, although most of its funding comes fromDefense Department money. Critics of the school contend that it has trained someof the most ruthless human rights violators among Latin American militaries,especially during the 1970s and 1980s. The Administration, which argues that theSchool's curriculum has been overhauled during the 1990s and is designed topromote the observance of human rights principles by its graduates, strongly opposedthe House amendment. Prior to releasing funds to the School, however, H.R. 3422 requires the President to issue certain certifications regardingthe curriculum at the School of the Americas. Silk Road Strategy Act. The new Foreign Operations bill includes the Senate-passed text authorizing aid programs for the South Caucuses andCentral Asia -- the so-called Silk Road Strategy Act. As originally offered duringSenate debate by Senator Brownback, the text would have allowed the President towaive the ban of non-humanitarian aid to Azerbaijan found in Section 907 of theFreedom Support Act. An amendment by Senator McConnell and others, however,struck the waiver provision (53-45), thereby maintaining the Section 907 restriction. The House had approved similar legislation, including retention of Section 907, ina separate bill, H.R. 1152 . Offsets for Higher Foreign Operations Spending. A congressional and White House priority foradditional FY2000 funding in any spending measure has been to package them insuch a way that the total amount does not exceed discretionary spending caps or drawon budget surpluses derived from Social Security payments. The $2.624 billionadd-on for Foreign Operations is offset in two ways. First, the Wye River/MiddleEast Peace package is designated as an emergency which means none of the $1.825billion will count against the discretionary caps. To offset the outlay impact of theadditional spending, something that could potentially dip into the Social Securitysurplus, H.R. 3422 limits to $1.37 billion the amount that Israel canreceive earlier than it would otherwise of its total $1.92 billion military aid transfers. For many years, Congress has approved the immediate transfer of economicassistance to Israel that could then be invested in interest-bearing accounts beforeIsrael needed the funds to service debts owed the United States. Several years ago,Congress extended this benefit by allowing the early disbursement -- and the outlay-- of $1.8 billion in annual U.S. military aid. Normally, for other countries little orno military assistance would be drawn upon in the year it was appropriated, andtherefore, would not result in any outlays. Consequently, the lower outlays estimatedunder H.R. 3422 because Israel will not receive $550 million in earlydisbursement of military aid fully offsets the outlay impact of funding for the WyeRiver accord and other foreign aid spending. Although this does not cut the $1.92billion military aid package for Israel, it will result in the loss to Israel of whateverinterest would have accrued. Major Policy and Spending Issues in the Foreign Operations Debate In addition to funding decisions made by Congress in the Foreign Operations appropriation 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 Operations legislationoften becomes the vehicle for debate on the conduct of U.S. foreign policy moregenerally. Many of these policy provisions take the form of conditions or restrictionson how the President can use money included in the spending bill. Many of theseprovisions are opposed by the Administration as excessively limiting his ability tomanage American foreign policy. The legislative-executive policy differences havein the past delayed the enactment of the Foreign Operations bill or have prompted apresidential veto. Among the most significant funding and policy issues raised during congressional debate this year on the Foreign Operations appropriation measureconcern conflicting executive-legislative branch development assistance strategypriorities, restrictions on international family planning programs, regional aidallocations, competing initiatives to reduce debt burdens of the poorest developingcountries, and the terms and conditions under which the United States provides heavyfuel oil to North Korea. Policy Priorities of U.S. Development Aid. Since the end of the Cold War, a recurring debate has focusedon what should replace the anti-communist foreign aid rationale of the past 50 years. A more fundamental question raised by some, especially critics of developmentassistance, is whether the United States needs to maintain an active, globally focusedeconomic aid program. Many of these critics argue that aid can be transformed intoa smaller, more targeted, and often privatized instrument to support only the highestpriority U.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 principles can be maintained. Congress, forexample, limited development aid for population programs in FYs1996-99 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 places a high priority on environment programs and presses USAID toallocate the maximum amount possible to such activities. As a result, theenvironment sector of sustainable development likely has not declined as much as itmight have otherwise. At the center of this issue for the past four years has been differences between Congress and the executive branch regarding funding levels for programs supportingchild survival, basic education, and efforts against HIV/AIDs and other infectiousdiseases. Despite cutting overall development aid in FYs1996-97 by about 23% fromFY1995 levels, Congress earmarked children and disease programs at amounts equalto or somewhat greater than those allocated in FY1995, making the cuts on all otherelements of sustainable development closer to 30%. Congress boosted developmentaid appropriations for FY1999 by about $20 million beyond the President's request,but lawmakers set funding targets for child survival and infectious disease activitiesat about $460 million, $85 million more than the Administration proposed. As aresult, USAID cut funding for economic growth programs by $47 million andenvironment projects by $42 million below what the agency had planned forFY1999. (7) 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. Table 5. USAID Sustainable DevelopmentPrograms (in millions of dollars) Source: USAID. Amounts in this table only apply to USAID "development aid" programs and do not include funds used for the same purposes, although to a lesserextent, in other accounts, including Economic Support Fund (ESF), East Europe andformer Soviet aid programs. For example, USAID estimates that it will spend inFY1999 $385 million across all accounts for family planning programs and about$331 million across all accounts for Child Survival activities. * Includes $40 million for Child Survival and $10 million for HIV/AIDs provided in supplemental appropriations. ** Includes a July 19 budget amendment seeking $45 million more to support a presidential AIDS initiative aimed primarily at sub-Saharan Africa. 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 programs that also benefit children. As has been the pattern the past few years, USAID's sustainable development request for FY2000 reduced or maintained at current levels funding for severalcongressional priorities while increasing development aid overall by $59 million, orabout 3%. The $1.89 billion original request would have cut funds for child survivalprograms by $40 million from FY1999 appropriations, and hold spending for otherinfectious diseases activities at the current allocation of $50 million. (8) Environmental funds, especially those for global climate change programs, would grow the mostunder the Administration's request -- up $42 million (17%) from existing amounts. Family planning spending would also increase slightly, rising by $16 million (5 %)from FY1999 levels. Other congressional development aid priorities would alsoreceive higher funding under the President's budget for FY2000. For example,microenterprise, agriculture, and basic education programs each would grow by10-12% for FY2000. Congressional Action. H.R. 2606 , as approved by the conferees and continued largelyunchanged in the revised H.R. 3422 , reduces the amended USAIDdevelopment aid account by $87 million, while at the same time increases funds forselected activities. Some of the largest development assistance and child survivalearmarks and recommendations, including those mentioned in House and Senatecommittee reports on the legislation, are: international population aid -- $385 million, as passed by the House. The President requested $400 million, while the Senate had earmarked $425million within development assistance and as much as $45 million under otheraccounts. HIV/AIDS and other infectious diseases -- $180 million forHIV/AIDS, including $35 million specifically for Africa. Conferees did not earmarkfunds for other disease programs. The Senate had recommended $225 million, ofwhich $150 million was for HIV/AIDS; the House had included $227 million,including $127 million HIV/AIDS. maternal health -- $50 million in the Senate bill; no mentionin the conference agreement. tuberculosis -- $30 million recommended in the House bill andan expectation in the Senate bill to increase funding in FY2000. Conferees did notset a specific amount, although they support USAID's $3 million tuberculosisprograms in Mexico. polio eradication -- $25 million in both House and Senatebills. Conferees did not set a specific level. basic education -- $98 million earmarked in H.R. 3422 . Senate and House bills had recommended $110 million and $98 million,respectively. displaced children and orphans -- $30 million in the Housebill. Conferees did not set a specific level. agriculture -- $305 million recommended in the conferenceagreement. The Senate bill had earmarked $305 million. microenterprise -- $152 million in the House measure, whilethe Senate bill directed USAID to increase microenterprise funding above FY1999levels. H.R. 3422 does not specify an amount for microenterprise otherthan to require that at least 50% of the loans made be less than$300. biodiversity -- The conference committee, following a Senateamendment, directs USAID to restore biodiversity funding to the same proportionof development assistance funds it received in FY1995. This would result in about$99 million for biodiversity activities in FY2000. Funding had fallen by nearly halfin recent years -- from about $100 million in FY1995 to $55 million in FY1998. With the support of Congress, USAID increased the FY1999 program level to $68million. The net result of the overall reduction to development assistance, plus increases for selected Senate and House priorities, would likely be lower funding levels for othersustainable development activities. Economic growth and private sector programs, environmental activities other than biodiversity, and democracy promotion programsare the most likely areas to face modest funding cuts under H.R. 3422 . Population and Family Planning Assistance. Another aspect of the discussion regarding policypriorities of U.S. development aid is the continuing controversy regardinginternational family planning restrictions. For FY2000, the President sought $400million for USAID population programs, a $15 million increase over FY1999 levels. The principal dispute over population assistance, however, goes well beyond fundingissues, centering more directly on abortion-related activities of foreign recipients ofUSAID grants. For over a decade, Congress has engaged in contentious debates overU.S. international family planning policy, often as part of the Foreign OperationsAppropriations. Twice, congressional positions on this issue have been one of themajor reasons prompting a presidential veto. U.S. international family planning programs had been one of the largest growth areas of the foreign aid budget in the 1990s. From an average of about $250 millionin the late 1980s, FY1995 spending across all Foreign Operations accounts totaledapproximately $548 million. In the following years, when Congress deadlocked overabortion-related restrictions and U.S. population aid policy, a situation that blockedmovement of the entire Foreign Operations bill, lawmakers adopted interimprovisions that, among other things, strictly limited the amount of funding forUSAID family planning programs. The appropriation cap of $385 million enacted ineach of FY1997-1999 is roughly two-thirds the amount provided in FY1995. As aresult of the impasse over abortion restrictions, Congress established a delayedtimetable for making these funds available, a schedule that included monthlyapportionments or "metering" of the appropriation. A second issue in the population aid debate, and one directly connected to funding reductions and metering of the past four years, deals with abortionrestrictions and the eligibility requirements for foreign organizations receiving fundsto implement U.S.-sponsored family planning programs. During the mid-1980s, inwhat has become known as the "Mexico City" policy, the Reagan, and later the Bush,Administration, restricted funds for foreign non-governmental organizations thatwere involved in performing or promoting abortions in countries where they worked,even if such activities were undertaken with non-U.S. funds. Several groups,including International Planned Parenthood Federation-London (IPPF), becameineligible for U.S. financial support. In some years, Congress narrowly approvedmeasures to overturn this prohibition, but White House vetoes kept the policy inplace. President Clinton in 1993 reversed the position of his two predecessors,allowing the United States to resume funding for all family planning organizationsso long as U.S. money was not used in abortion-related work. During the past four 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 side, has rejected House provisions dealing with Mexico City policy, favoringa policy that leaves these decisions in the hands of the Administration. Moreover,Administration officials have stated that President Clinton would veto any bills thatinclude the House-passed Mexico City restrictions, a threat he carried out in October1998 when he rejected legislation authorizing family planning programs that includedMexico City policy ( H.R. 1757 ). Unable to reach an agreement satisfactory to both sides, Congress has adopted interim arrangements for FY1996-1999 that do not resolve the broad populationprogram controversy, but has permitted the stalled Foreign Operations measure tomove forward. It was hoped that the arrangement, which neither side liked, wouldprovide incentives for those involved in the debate to find a middle ground. Underthe terms of the FY1999 temporary arrangement, as included in P.L. 105-277 ,Congress deleted the House-supported Mexico City restrictions, limited populationaid funding to $385 million, down from $435 million passed by the Senate, anddelayed, or "metered" the availability of the funds at a rate of one-twelfth of the $385million per month. Congress further enacted for FY1999 a ban on U.S. contributions to the U.N. Population Fund (UNFPA), a prohibition that had been in place during the Reaganand Bush Administrations but which was lifted by President Clinton in 1993. Atissue are UNFPA programs in China, a country where there have been continuingreports for many years of coercive family planning practices. During the mid-1990s,Congress reduced UNFPA contributions by an amount the organization spent inChina, but when UNFPA ended its China program in 1997, the controversy subsided. UNFPA, however, reinstituted activities in China soon thereafter, resulting in thewithholding in FY1998 of $5 million for UNFPA and the enactment for FY1999 ofa total prohibition on the U.S. $25 million contribution, so long as the organizationremained active in China. Nevertheless, the Clinton Administration sought $25million for the UNFPA in FY2000. (9) A new element in the family planning issue added during the FY1999 debate emerged following reports that Peru, where USAID has population aid programs, hadestablished national targets for tubal ligations and vasectomies There were alsoallegations that some Peruvian health workers may have conditioned the receipt offood and medical care on the acceptance of sterilizations. USAID maintains a policyof strict voluntarism for family planning programs it supports, and opposes the useof performance-based quota systems. The Agency says that Peru's government hasinstituted significant reforms in its family planning programs, including criteria thatensure voluntary informed consent. To reinforce U.S. policies opposing programsbased on coercive practices or quota systems, Congress adopted for FY1999 anamendment by Representative Tiahrt that more precisely defines the term, voluntary family planning programs, and establishes criteria for USAID to apply regarding thevoluntary nature of its population projects. (10) (Formore information, see CRS Issue Brief IB96026, U.S. International Population Assistance, Issues for Congress, by[author name scrubbed].) Congressional Action. S. 1234 , as approved by the Senate , increased family planning funds within thedevelopment aid account from the $355 million request to $425 million. Across allaccounts, including ESF, NIS, and SEED programs, the Senate recommendationwould set population aid at about $470 million, a $70 million increase above theAdministration's overall $400 million recommendation. The bill further earmarkedUNFPA funding at $25 million, as requested. The House measure, like previous bills, capped family planning assistance at $385 million. But unlike enacted Foreign Operations laws the past few years, theHouse bill would not "meter" the availability of these funds. An amendment offeredby Representative Pelosi at the House Committee's markup restored the $25 millionrequest for the U.N. Population Fund, but made it subject to a reduction by whateveramount UNFPA spends in China in 2000. During floor debate, the House adopted two competing and apparently conflicting amendments affecting U.S. international family planning policy. On a228-200 vote, the House approved a modified Mexico City policy amendment byRepresentative Smith (NJ) prohibiting U.S. funds to foreign NGOs that performabortions or lobby to change abortion laws in foreign countries, regardless of whethersuch activities are financed with U.S. funds. The House also adopted (221-208) acounter amendment by Representative Greenwood permitting U.S. grants to foreignNGOs as long as they do not use U .S.-provided money to perform abortions orviolate abortion laws in foreign nations. The Greenwood amendment further requiressuch organizations to support programs that reduce the incidence of abortion as amethod of family planning. Because the Smith language is more restrictiveconcerning foreign NGO eligibility for receiving USAID grants, it would be theoperative text if both amendments are enacted. Requirements in the Greenwoodprovision that NGOs support programs reducing abortions as a method of familyplanning and adhere to abortion laws in foreign countries, nevertheless, would alsoapply should conferees adopt both positions. Theoretically, however, some foreignNGOs that would be eligible recipients of USAID grants under the Greenwoodamendment would be barred from receiving U.S. population aid under the Smithrestrictions. The White House said the President would veto any bill that includedthe Smith language. As has been the case in the past, the Foreign Operations conference committee meeting could not resolve the House-Senate differences on the family planning issue. Senate conferees insisted that UNFPA funding remain in the bill, while their Housecounterparts agreed to drop the modified Mexico City abortion restrictions containedin the Smith amendment if the UNFPA contribution was also removed. Followingfurther negotiations, conferees agreed to continue current law regarding populationaid funding levels and abortion restrictions -- that is, $385 million, metered on amonthly basis, but the deletion of both the Smith and Greenwood amendments. Theyalso added the $25 million UNFPA earmark, with conditions that passed the Houseand Senate. The revised Foreign Operations bill ( H.R. 3422 ) makes no changes to the conference agreement of H.R. 2606 regarding UNFPA fundingand conditions, but the issue of abortion restrictions became one of the last and mostcontentious issues resolved in the final budget package. When congressional leadersrefused to include U.N. arrearage payments without revised Mexico City language,the White House reluctantly agreed to the abortion restrictions. This is the first timethat Mexico City restrictions are included in legislation. Under the terms of H.R. 3422 , private foreign non-governmental and multilateralorganizations that either perform abortions or lobby to change abortion laws inforeign countries are prohibited from receiving USAID population aid grants. ThePresident can waive the restrictions for up to $15 million in grants, but if he does,population aid funding declines from $385 million to $372.5 million. Therestrictions apply only to FY2000 and will expire on September 30, 2000. Althoughthe President used his waiver authority on November 30 and the impact onU.S.-funded family planning programs is expected to be minimal, critics of abortionrestrictions are concerned primarily about the precedent that is set and the effect itwill have on another contentious debate in Congress next year when the currentrestrictions expire. Regional Allocations of U.S. Foreign Aid and the Request for an Africa-specific Account. Although the Middle Easthas received by far the largest proportion of U.S. assistance over the past threedecades -- 55-63% of bilateral aid appropriated in Foreign Operations spendingmeasures in most years-- allocations to other regions have fluctuated considerably,especially since the end of the Cold War. Asia, which received substantial assistancein the 1980s associated with the presence of U.S. military bases in the Philippines,had its share drop to 16% to 4% by FY1997. Latin America, where CentralAmerican governments were confronted with internal conflict, had its share dropfrom 16% to 6%. Africa's proportion remained about the same -- 7-8% -- adevelopment that disappointed those who argued that the world's poorest regionshould receive higher priority, especially with the reduction in emphasis on securityassistance. U.S. aid to the emerging democracies and market-oriented economies inEastern Europe and the former Soviet Union, where the United States had noprograms prior to 1990, grew to represent 14% of American bilateral assistancefunded in the Foreign Operations bill for FY1997. 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 estimates include supplemental appropriations for Central America hurricane reconstruction ($621 million), economic aid for countries surroundingKosovo ($225 million), and assistance to Jordan ($100 million). A number of observers, including some Members and congressionalcommittees, 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 to promote economic development inLatin America in order to counter the trend of rising illegal immigration to the UnitedStates. Foreign Operations appropriations measures the past two years haveemphasized the need to maintain or increase assistance especially to Latin America. In the case of Africa, others argued that not enough has been reallocated to offersufficient help to meet the region's unmet needs and to promote future U.S.-Africantrade opportunities. As 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 and that if the Administration wanted to pursuenew Middle East peace initiatives using foreign aid as an implementing tool,resources should be found within existing Middle East programs and not be takenfrom other regions. 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. Following this, Israel put forth in January 1998 a plan tocut its aid over the next ten to twelve years. The concept behind the Israeli initiativeto decrease assistance from the United States was first raised by Prime MinisterNetanyahu in a speech before a joint session of Congress on July 10, 1996. Asoutlined to congressional and Administration officials by Israeli Finance MinisterNeeman in late January 1998, the United States would cut 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 ten-year period, U.S. aid to Israel would fall $60 millioneach year in net terms, with a total savings of $600 million by 2009. For FY1999,Congress supported the $60 million net reduction of aid to Israel, also adding asimilar $40 economic aid cut for Egypt. The President's FY2000 Foreign Operations request reflected several of these regional allocation views expressed by Congress in recent years. Highlights of theAdministration's recommendations include the following. Creation of the Development Fund for Africa Account. After a three-year absence, the President askedCongress to re-establish a separate Foreign Operations account for African aid andto increase funding slightly over FY1999 levels. Ten years ago, Congress and theAdministration launched a joint initiative to create special legislative authority forU.S. economic aid to Africa. The Development Fund for Africa (DFA -- authorizedin Chapter 10 of the Foreign Assistance Act of 1961) was intended to extend moreflexibility to USAID program managers and to protect aid resources for Africa frombeing transferred to other regions as new foreign policy crises unfolded. At its peak,the United States channeled 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 has proposed a directDFA appropriation account for FY2000. The budget includes $745 million forAfrican development aid, including funds from both the DFA and Child Survivalaccounts. Combined with funds requested under the Economic Support Fund, largelyfor democracy and economic growth initiatives, and smaller amounts of militaryassistance, the FY2000 budget includes $893 million for Africa. This compares toFY1999 allocations of $883 million. Increased Funding for Asia. The FY2000 foreign aid budget proposed significant increases in assistance programsthroughout the Asian region. The $424 million requested is nearly $100 million, or30% higher than allocations for FY1999. This represents the largest percentageincrease sought in the FY2000 foreign aid request for any of the five major regionsunder USAID's portfolio. Much of the increased funding is for a new East Asianeconomic recovery initiative. This multi-year plan, administered by USAID, wouldsupport job creation opportunities, social safety net programs, transparency andanti-corruption activities, and regional economic recovery programs. TheAdministration plans to spend about $53 million for the initiative out of bothdevelopment aid and ESF accounts. The Administration is also proposing anexpansion of various East and South Asian regional programs aimed at meetingglobal climate change goals and deterring forest and marine/coastal zone degradation,and promoting democratization and governance initiatives in South Asia. TheFY2000 budget request further includes a new item: a $5 million program to counterviolence against women and to promote increased participation by women in thepolitical process. Modest Increases for Most Latin America Programs; Central America Reconstruction Supplemental. Excludingcounter-narcotics assistance and emergency Central American hurricane relief, LatinAmerica would receive a modest increase in U.S. assistance for FY2000. (TheFY1999 Omnibus Appropriation Act included a separate emergency supplementalfor drug control programs -- most of which was earmarked for Colombia -- thatdoubled the regular counter-narcotics budget.) The $735 million proposed level forthe region is roughly 8% higher than the "base" allocations for FY1999, afteradjusting for the supplemental drug and Central America disaster funds. The mostsignificant regional initiative Congress addressed in 1999 was a supplemental forreconstruction and other assistance for the victims of Hurricanes Mitch and Georges,which struck Central America and the Caribbean in 1998, and the more recentearthquake in Colombia. Of the $1 billion appropriated for hurricane relief andreconstruction (enacted in P.L. 106-31 ), $621 million will finance a Central Americaand Caribbean Recovery Fund to assist Nicaragua, Honduras, and other states tore-build their countries. Middle East Aid Reduced for FY2000, but Large Supplemental Package Sought for Wye Peace Accord. ThePresident's FY2000 foreign aid request for the Middle East reduced slightly U.S.assistance to the region -- from $5.47 billion enacted for FY1999 to $5.24 billionproposed for next year. The $230 million reduction stemmed largely fromlarger-than-expected cuts in assistance for Israel and Egypt. Many assumed whenCongress first began this downsizing in FY1999, that phased cuts would continue ata steady pace of $100 million per year for ten years. The FY2000 proposal,however, recommends a cut of $150 million: $60 million for Egypt and $90 million(net) for Israel. Administration officials say that they still intend to follow theten-year time period, but that they have not established a firm pace at which amountswould be reduced. The budget also included a $1.9 billion supplemental/advanceappropriation proposal -- to be allocated over three years -- in support of the WyeMemorandum and the next phase in the Middle East peace process. The $1.9 billionWye Memorandum proposal would provide $900 million in FY1999 and an advanceappropriation of $500 million in both of FY2000 and FY2001. Israel would receive$1.2 billion, the Palestinians and Jordan, $400 million and $300 million, respectively. Although the President had hoped that Congress would dispense with this proposal as part of an FY1999 supplemental ( P.L. 106-31 ), Congress only considered$100 million requested for Jordan in FY1999, deferring the balance to subsequentlegislation, including the Foreign Operations measure for FY2000. Sharp Increase in Aid to Russia and Other Former Soviet States. In dollar terms, U.S. assistance to Russia and theother Newly Independent States (NIS) of the former Soviet Union would grow morethan for any other region. The $1.032 billion FY2000 request for the NIS accountis $185 million, or 22% higher than for this year; aid to Russia would rise from $172million in FY1999 to $295 million. The increase sought for FY2000, however, istotally the result of a $241 million Expanded Threat Reduction Assistance Initiativeplanned to be launched in Russia and other NIS countries next year. The ETRinitiative is aimed at reducing the risks of weapons proliferation, weapons deliverysystems, materials, and technology, and the transfer of scientific and technicalexpertise. The $241 million requested in Foreign Operations spending is part of alarger $1 billion Administration proposal for increasing amounts dedicated toproliferation issues in the NIS, with the remaining funds coming from theDepartments of Defense ($486 million) and Energy ($265 million). (For moreinformation, see CRS Report RS20203(pdf) , The Expanded Threat Reduction Initiativefor the Former Soviet Union: Administration Proposals for FY2000 , by Amy Woolfand [author name scrubbed], and CRS Issue Brief IB95077, The Former Soviet Union and U.S.Foreign Assistance , by [author name scrubbed].) Congressional Action. The conference agreement on H.R. 2606 made a number of changes to the President'sregional and country aid proposals, some of which were significant factors in thePresident's decision to veto the bill. The second Foreign Operations measure( H.R. 3422 ) makes several adjustments that accommodate a number ofexecutive concerns: Kosovo and other Balkan reconstruction assistance would grow considerably under the bill's $535 million earmark for East European assistance. This represents no change from the vetoed H.R. 2606 . Funding levels for former Soviet states received a major boost in the revised Foreign Operations bill from amounts approved in H.R. 2606 . The new bill sets spending at $839 million -- up $104 million from H.R. 2606 -- a level $38 million higher than FY1999, but $193 millionless than requested for FY2000. H.R. 3422 earmarks $241 million forthe one of the President's top priorities, the counter-proliferation Expanded ThreatReduction Initiative. Other earmarks for Ukraine, Armenia, and Georgia protectfunding for these countries, while allocations for Russia and several other formerSoviet states might be reduced because of overall account reductions and theearmarks. Middle East assistance, especially for Israel, Egypt, and Jordan, would be funded at or above requested levels for regular aid programs. Moreover,the new Foreign Operations measure fully funds the Wye River accord, the absenceof which in H.R. 2606 had been a primary reason for theveto. Given the worldwide reductions in H.R. 2606 under both the development assistance and ESF accounts, it was likely that spendingin Africa, Latin America, and Asia would fall below the President's request. Anadditional $168.5 million in ESF aid added in H.R. 3422 will reduce thisimpact somewhat, although the decisions of how to allocate the specific cuts will beup to the Administration. H.R. 3422 further does not re-establish aseparate Development Fund for Africa, as proposed. Korean Energy Development Organization (KEDO) and U.S. North Korea Policy. At the heart of the ClintonAdministration's North Korea policy is the 1994 U.S.-North Korea AgreedFramework, an arrangement under which the United States provides the DPRK witha package of nuclear, energy, economic, and diplomatic benefits, in exchange forsuspension by North Korea in the operations and infrastructure development of itsnuclear program. As part of the accord, two new light water nuclear reactors will beconstructed -- financed largely by South Korea and Japan -- to replace the nuclearfacilities shut down under the Agreed Framework that have the potential to producenuclear weapons grade material. While the new reactors are being built, the UnitedStates and other nations have been contributing funds to the Korean EnergyDevelopment Organization (KEDO) for the purchase of heavy fuel oil to supplementNorth Korea's power and electricity production. Administration officials previouslyestimated that annual KEDO contributions, appropriated in the Foreign Operationsbill, would total about $20-$30 million. The Administration's policy of engagement with North Korea and the approach outlined in the Agreed Framework have been a frequent source of controversy incongressional debates in recent years. But a series of actions in 1998 by the NorthKorean government -- missile sales to Iran, suspected construction of a new nuclearsite, and the launch of a rocket that traveled over Japanese airspace -- prompted asharp reaction from congressional critics, during which the House voted to prohibitthe President's FY1999 $35 million request for KEDO. Although lawmakers ultimately agreed to provide the $35 million payment of heavy fuel oil, Congress attached stiff conditions that had to be met in 1999 prior tothe full transfer of funds. Under terms provided in P.L. 105-277 , the first $15 millionbecame available only after March 4, 1999, when the President certified that progresswas occurring on implementing several nuclear-related agreements with North Korea,that the DPRK was cooperating fully in the canning and storage of all spent fuel fromits graphite-moderated nuclear reactors, that North Korea had not diverted anyassistance, and that the U.S. was moving ahead with efforts to block DPRK'sdevelopment and export of ballistic missiles. The remaining $20 million became available June 1 following a second presidential certification that progress has been made on the nuclear and ballisticmissile issues, and that the U.S. and North Korea had agreed on the means to satisfyU.S. concerns about the DPRK's suspect underground construction. P.L. 105-277 further limited the President's "special" waiver authority (Section 614 of the ForeignAssistance Act of 1961), blocking its use to provide more than $35 million to KEDOin FY1999. In addition, Congress required the President to appoint a senior NorthKorea Policy Coordinator by January 1, 1999, to review U.S.-DPRK policy and todirect negotiations with North Korea. The President named former Secretary ofDefense William Perry to the position in late 1998. The review of North Korean policy was delayed until after a visit by Secretary Perry to North Korea in May and a separate visit by U.S. inspectors to the suspectedunderground nuclear site. In a preliminary report, the inspectors said, that althoughthey found an extensive underground tunnel complex, work had ceased, the tunnelswere empty, and there was not evidence that North Korea was in violation of theAgreed Framework. Reportedly, North Korea had been demanding payment for aU.S. inspection, something the United States rejected. Nevertheless, shortlyfollowing the mid-March announcement by the State Department that North Koreahad agreed to multiple site visits, officials said that the United States would proceedwith a bilateral pilot agricultural project designed to improve potato production inNorth Korea and contribute an additional 200,000 metric tons of food aid to helpNorth Korea deal with its continuing food shortage and widespread starvation andmalnutrition. This was followed by an another 400,000 food pledge on May 17. While officials argue that food assistance is based solely on humanitarianconsiderations and need, some observers contend there is a connection betweenarrangements to visit the suspected nuclear site and the food decision. Beyond issues related to conditions in last year's Foreign Operations measure and the release of FY1999 funds for KEDO, Congress considered this year theAdministration's $55 million request for KEDO payments in FY2000. The proposalis the highest since the U.S. first began financing heavy fuel oil in FY1995, largelydue to past shortfalls in U.S. funding and lower-than-anticipated contributions fromother nations. (For further information, see CRS Issue Brief IB91141, North Korea'sNuclear Weapons Program, by Larry Niksch.) Congressional Action. H.R. 3422 , drawing on the same language in H.R. 2606 ,reduces the President's $55 million KEDO request to $35 million and, like forFY1999, makes available the first $15 million before June 1, 2000, and $20 millionafter June 1, subject to certain Presidential certifications regarding North Korea'snuclear program, ballistic missile threat, and several other items. The President maywaive the certification requirements for vital national security interests. The billfurther drops a House-passed provision that would have blocked the President fromreprogramming funds to increase the $35 million appropriation if he chose to do soat a later date. Debt Reduction Initiatives for Poor Countries. Providing debt relief to poor developing nations thatborrowed in the past from the United States, other creditor governments, andinternational financial institutions has emerged as one of the key issues in the ForeignOperations debate for FY2000, the result of several factors. First, theAdministration's initial request of $120 million was nearly four times the amountappropriated for FY1999 in support of continuing debt reduction programs and twonew activities for FY2000. Secondly, encouraged by various international campaignspromoting more expansive debt relief that will target poverty reduction, including theJubilee 2000 movement, (11) several congressionalinitiatives have been introduced in1999 that go beyond the President's FY2000 request. Further, on March 16, 1999,the White House announced more ambitious U.S. debt reduction policies for theworld's most heavily indebted poor nations. At the G-7 Summit in June, thePresident's new policy was largely endorsed by the other major creditor governments. Finally, during World Bank/IMF meetings in September the institutions endorsed theG-7 proposals for reforming the Heavily Indebted Poor Country (HIPC) Initiative. For the past decade, the United States has engaged in various forms of debt relief for developing nations, resulting in the cancellation of about $14.4 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 countries must 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 with particularly large debt overhangs, the appropriation requirement may be quite smallrelative to the loan's face value -- perhaps 10% or less. When it was first introduced in 1996, HIPC was hailed as the first arrangement that included relief from debts owed to the World Bank, the IMF, and otherinternational institutions, organizations that hold over 25% of debt held by the mostheavily indebted nations. Previously, multilateral organizations had declined toparticipate in debt cancellation, arguing that it would increase their costs of raisingnew money to lend, expenses that would have to be passed on to borrowers. Forty-one countries -- mostly in Africa -- are eligible for HIPC, although only 29likely have "unsustainable" debt, a further criterion for being a HIPC participant. Countries deemed eligible for HIPC terms may have their bilateral public debtreduced by 80% after they have maintained a record of strong economic performancefor as much as six years. At present, Uganda, Bolivia, and Mozambique are the onlynations that enjoy full HIPC benefits. Strong critics of HIPC emerged, especially among non-governmental organizations and religious groups working in developing countries. They chargethat HIPC terms are not deep enough -- that 90% or 100% of bilateral debt owedshould be canceled and multilateral debt write-offs should go further -- and that sixyears is far too long a period for countries to qualify. They further believe that thenon-sustainable debt criteria, based largely on a ratio of a country's debt-to-exports,is too high and therefore excludes many countries that are also in need of debt relief. Some critics oppose the economic reform requirements and argue for unconditionaldebt reduction. A number of organizations further advocate instituting mechanismsthat would ensure that savings realized by debtor governments would be channeledinto spending on basic services, such as health and education, that would improve thequality of life of the very poor. Many of these arguments are reflected in legislativeinitiatives launched in 1999, including H.R. 1095 (Debt Relief PovertyReduction Act of 1999), H.R. 772 (Hope for Africa Act), and H.R. 2232 (Debt Relief and Development in Africa Act of 1999). Complicating enactment of such bills, however, is the large additional costs thatwould be associated with efforts to broaden, deepen, and accelerate HIPC or U.S.bilateral debt reduction policies. For FY2000, the President sought in February 1999 $120 million for three debt reduction activities funded under the Foreign Operations legislation. But betweenMarch and June the White House expanded U.S. debt reduction policy addressingmany of the concerns expressed by HIPC critics. The President's new initiative,much of which was endorsed by other leaders at the June G-7 economic summit inCologne, would provide deeper debt relief to more poor developing countries. Someof these steps are similar to those proposed in pending legislation -- especially H.R. 1095 -- although all congressional initiatives would expand HIPCbeyond the Administration's revised policy. Reflecting the higher costs of anenhanced HIPC initiative, the White House sent to Congress on September 21 an$850 million budget amendment to cover the anticipated U.S. costs. The revised$970 million total request over three years have the following major components: $110 million (plus $210 million more in FY2001-2003) to continue U.S. bilateral debt relief agreements for reforming poorcountries. $210 million (plus $390 million more in FY2001-2003) for U.S. contributions to the HIPC Trust Fund. While the World Bank and the IMF willfinance their own participation in HIPC, some multilateral organizations, such as theAfrican Development Bank, do not have the necessary resources to extend debt reliefto their debtors. The Trust Fund, which has received contributions of over $450million from about 19 countries, is designed to assist these international agencies toreduce debt owed by eligible HIPC nations. $50 million for debt relief to countries that are committed to protecting their tropical forests. Congress enacted last year the Tropical ForestConservation Act of 1998 ( P.L. 105-214 ), authorizing the President to buy back,swap, or cancel concessional U.S. economic and food aid loans in order to generatelocal currencies that will be used to support tropical forest conservationprograms. Congressional Action. The $33 million appropriation for debt reduction, limited entirely for bilateral relief, was a majorfactor in the President's decision to veto H.R. 2606 . While the revisedForeign Operations bill adds $90 million for bilateral debt cancellation, no U.S.contributions can be made to the HIPC Trust Fund and funding for FY2001-2003must be dealt with in the future. Nevertheless, in separate legislation( H.R. 3425 ) that is also enacted by reference in the ConsolidatedAppropriations measure, the White House gained congressional approval anauthorization that would allow the United States to vote in favor of an IMFoff-market gold sale that will finance the Fund's costs of HIPC participation. FY1999 Supplemental Appropriations and Foreign Operations Congress considered several major FY1999 supplemental appropriation requests as part of S. 544 and H.R. 1141 , and a separate emergencyKosovo military and humanitarian initiative. H.R. 1141 , which clearedCongress and was signed by the President on May 21 ( P.L. 106-31 ), includes $1billion for Central American and Caribbean reconstruction aid in the wake ofhurricanes that struck the region in late 1998; $100 million for Jordan, the mosturgently sought portion of a $1.9 billion, three-year aid package for Israel, Jordan,and the Palestinians to help implement the terms of the Wye Memorandumnegotiated in October 1998; and $819 million in humanitarian and refugee aid toKosovo and surrounding countries. All of the Middle East and Kosovo assistance,and nearly $700 million of the Central American relief package fall under thejurisdiction of the Foreign Operations measure. Because of congressional decisions to offset the costs of the new spending, however, the President threatened to veto preliminary House and Senate bills. Proposed offsets -- cuts to existing appropriations -- affected Foreign Operationsprograms especially in H.R. 1141 . Among the most controversialoffsets in the House bill was the rescission of $648 million in callable capitalappropriated prior to 1980 that is used by multilateral development banks to leverageborrowing in global markets and to maintain their high credit ratings. Administrationofficials claimed this might lead to higher borrowing costs by the World Bank andothers, and thereby, recommend that the President veto the legislation. H.R. 1141 would have further cut existing funds for the Export-ImportBank and USAID development assistance programs. As enacted, most of the ForeignOperations offsets were dropped, except for a $25 million rescission of priorappropriations for U.S. contributions to the Global Environment Facility, and $5million in ESF funding. (For further information, see CRS Report RL30083(pdf) , Supplemental Appropriations for FY1999: Central America Disaster Aid, MiddleEast Peace, and Other Initiatives, by [author name scrubbed].) For Additional Reading Foreign Operations Programs CRS Issue Brief IB88093. Drug Control: International Policy, by Raphael Perl. 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. Selected World Wide Web Sites CRS Foreign Affairs, Defense and Trade Division http://www.loc.gov/crs/foreign/fandpage.html 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/ 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/ Appendix -- Detailed Foreign Operations Accounts Table 7. Foreign Operations Appropriations: DiscretionaryBudget Authority (millions of dollars) a. The FY2000 request includes amendments made since the initial submission on Feb. 1, 1999, as well as the complete three year request for the Wye River/Middle East peace accord. b. The account structure for development aid differs among various versions of the bills. This tableshows a consistent and comparable account structure based on the conference agreement fordevelopment aid, FY2000. c. Amounts reflect the transfer of $12.5 million from development assistance/population aid to childsurvival due to the President's exercise of his waiver authority to exempt abortion restrictionsfrom applying certain population funds. d. For FY2000, the Administration requested a separate account under development assistance forAfrica (the Development Fund for Africa, or DFA). African aid was also proposed within theChild Survival account. The total amount requested for Africa -- DFA plus Africa ChildSurvival -- was $745 million. This compares to an FY1999 level of $730 millionappropriated within the Child Survival and Development Assistance Fund accounts. e. The Administration requested $1.9 billion in ESF and FMF funds to support the Wye RiverAccord over the period FY1999-2001. Congress approved $100 million of the total for FY1999and an additional $1.825 billion that is available through FY2002. f. The Administration request included the Ireland Fund as part of the Economic Support Fund. g. On September 21, 1999, the Administration amended its pending budget request for debtreduction, seeking $250 million more for debt reduction in FY2000, and $600 million forFY2001-2003. h. Of this amount, however, $21 million is not available until September 30, 2000. i. IMF funding occurs only occasionally -- about every five years. There was no request forFY2000. j. The "Base" Appropriation refers to amounts funded in the regular Foreign OperationsAppropriations for FY1999, as included in Division A of the Omnibus Appropriations Act,FY1999 ( P.L. 105-277 ). Congress approved additional Foreign Operations funds in twosupplemental measures: $411 million for Child Survival programs, aid to Russia, victims ofthe Kenya/Tanzania embassy bombings, counter-narcotics, counter-terrorism, and Y2Kupgrades (Division B of P.L. 105-277 ); and $1.641 billion for Central America hurricane relief,Kosovo humanitarian assistance, counter-narcotics, and the administration of three foreignaffairs commissions. All but about $5 million of the supplementals were declared"emergencies" and do not count against the Foreign Operations FY1999 allocation limits. Under special allowances provided in the Balanced Budget Act of 1997, Foreign OperationsAppropriations for multilateral development bank arrearage payments and IMF funds also donot count against the FY1999 allocation limits.

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. For FY2000, President Clinton requested $14.1 billion (later amended upward to $14.4 billion), plus $1.9 billion over three years for the Wye River/Middle East peace accord. The President'sproposal, excluding the Wye River funds, was about $1.35 billion, or 9% less than FY1999 amounts. Congressional action on the FY2000 budget resolution resulted in preliminary funding allocations for Foreign Operations programs well below the requested amount. H.Con.Res. 68 , which cleared Congress on April 15, cut the $20.9 billion overallforeign policy discretionary budget request to $17.7 billion, 15% less than the President seeks. Because Foreign Operations funds represent over two-thirds of the foreign policy budget, a reductionof this order would substantially limit amounts available for Foreign Operations programs. In addition to total funding levels, five issues were among those that received the most attention during the FY2000 debate, and in some cases, resulted in the sharpest split between House andSenate, and Congress-Executive branch positions: 1) U.S. development aid policy and spendingpriorities; 2) population aid and international family planning policy; 3) regional aid allocations; 4)U.S. funding for North Korea's heavy fuel oil and broad U.S.-North Korean policy; and 5)competing initiatives to reduce debt owed to the United States and other creditors by the world'spoorest and most highly indebted nations. During the summer, the Senate ( S. 1234 ) and House ( H.R. 2606 ) approved FY2000 Foreign Operations spending measures providing $12.69 billion and $12.62billion, respectively. Because of the reduced funding levels and a House-passed abortion restriction,the White House said the President would veto either bill. A House-Senate conference committee,after deleting the House abortion restriction, agreed to $12.69 billion for Foreign Operations. President Clinton vetoed the bill, however, due to cuts totaling $1.92 billion to his budget request. Following weeks of negotiations, Congress and the White House agreed to a revised ForeignOperations bill ( H.R. 3422 , enacted by reference in H.R. 3194 , P.L.106-113 ) that totals $15.3 billion, including $1.8 billion for the Wye River/Middle East peaceaccord. The compromise package further funds $799 million of White House spending prioritiesthat Congress had rejected in the vetoed H.R. 2606 . Key Policy Staff CRS Division abbreviation: "FDT" = Foreign Affairs, Defense, and Trade Division.

Introduction1 Eight times since the enactment of the War Powers Resolution in 1973, Members of Congress have filed suit to force various Presidents to comply with its requirements or otherwise to recognize Congress's war powers under the Constitution. In each instance where a ruling was delivered, the reviewing court refused to render a decision on the merits. In four of these cases, the suits foundered on the political question or equitable discretion doctrines, which the federal courts use to insulate themselves from what they view as essentially political disputes. In two other cases the suit failed on grounds of standing, and in two other cases the suits foundered on the ripeness doctrine. Most recently, 10 Members of Congress filed suit to enjoin U.S. military operations against Libya in the absence of a declaration of war, but the reviewing federal district court dismissed the case on jurisdictional grounds due to lack of standing. Article I, Section 8, of the Constitution confers on Congress the power to "declare War," and Congress has enacted declarations eleven times in American history. It has also enacted a number of authorizations for the use of military force not rising to the level of a declaration of war. Nonetheless, concern that Congress had allowed its war power to atrophy in the contexts of the Cold War and the wars in Korea and Vietnam led to the enactment in 1973, over President Nixon's veto, of the War Powers Resolution (WPR; P.L. 93-148 ). The legislation's supporters hoped that its enactment would ensure that a national consensus precedes the use of U.S. Armed Forces in hostilities. Accordingly, the WPR requires the President to consult with Congress "in every possible instance" prior to introducing U.S. Armed Forces into hostilities and to report to Congress within 48 hours when, absent a declaration of war, U.S. Armed Forces are introduced into "hostilities or ... situations where imminent involvement in hostilities is clearly indicated by the circumstances." After this report is submitted (or after such date that it was required to be submitted), the WPR requires that U.S. troops be withdrawn at the end of 60 days (90 days in certain circumstances), unless Congress authorizes continued involvement by passing a declaration of war or some other specific authorization for continued U.S. involvement in hostilities. Several Presidents have viewed aspects of the War Powers Resolution as unconstitutionally trenching upon their constitutional authorities in matters of war and foreign relations. Nonetheless, Presidents from Ford to Obama have submitted more than 125 reports to Congress giving notice of the involvement of U.S. Armed Forces in hostile situations, as is required under the War Powers Resolution. With one exception, however, all of these reports have characterized themselves as being "consistent with," rather than pursuant to, the requirements of the War Powers Resolution. This language appears intended to leave open the question as to whether the executive recognizes the reported activities to fall under the purview of the War Powers Resolution, or perhaps whether the executive deems the Resolution's requirements to be legally binding upon it. The practice has frustrated numerous lawmakers and has led some to pursue other avenues, including litigation, to compel the President to recognize the legal necessity of obtaining congressional authorization for the use of force Both the Members who have initiated suits and the White House have claimed that their respective position will ultimately prevail if the courts ever pass judgment on the merits of the controversy. But in the cases where final rulings have been issued, the reviewing courts have found that neither side has taken steps that would give the courts a viable statutory or constitutional issue to resolve, rather than a policy dispute. On the one hand, despite periodic claims by the executive branch that it would welcome a court test, the Justice Department has consistently raised threshold obstacles to court challenges such as Member standing to sue and the political question doctrine—obstacles which have so far successfully forestalled judicial rulings on the merits. On the other hand, litigation by Members of Congress to force a decision has not been preceded by legislative actions that have been sufficient to create the "irreconcilable conflict" between the executive and legislative branches that might make a judicial decision possible, if not probable. This report summarizes the eight suits that have been brought by Members of Congress since the enactment of the War Powers Resolution which have alleged presidential noncompliance with the Resolution or the requirements of the Constitution with respect to the involvement of U.S. Armed Forces in El Salvador, Nicaragua, and Grenada; U.S. escort operations in the Persian Gulf; Iraq's invasion of Kuwait; NATO's actions against Yugoslavia, Iraq's noncompliance with its obligation to disarm; and U.S. military operations against Libya. El Salvador In the 1982 case of Crockett v. Reagan , 16 Senators and 13 House Members asked a federal district court to declare that military aid supplied to the government of El Salvador by President Reagan usurped Congress's war powers under the Constitution and violated the War Powers Resolution and the Foreign Assistance Act. In particular, the lawmakers charged that the unreported dispatch of at least 56 members of the U.S. Armed Forces as military advisers to war-racked El Salvador constituted a violation of the Resolution. The Reagan Administration moved to dismiss the action on the grounds the suit involved a political question, and the district court granted the motion. The U.S. Court of Appeals for the District of Columbia affirmed. Examining the categories of political questions set forth by the Supreme Court in Baker v. Carr , the trial court rejected the Administration's arguments that judicial resolution was inappropriate because it would interfere with executive discretion in the foreign affairs field or because the suit involved the apportionment of power between the executive and legislative branches. However, it concluded, judicial resolution was inappropriate because there were no "judicially discoverable and manageable standards for resolution" of the case: The questions as to the nature and extent of the United States' presence in El Salvador and whether a report under the WPR is mandated because our forces have been subject to hostile fire or are taking part in the war effort are appropriate for congressional, not judicial, investigation. Further, in order to determine the application of the 60-day provision, the Court would be required to decide at exactly what point in time U.S. forces had been introduced into hostilities or imminent hostilities, and whether that situation continues to exist. This inquiry would be even more inappropriate for the judiciary. .... The Court lacks the resources and expertise (which are accessible to the Congress) to resolve disputed questions of fact concerning the military situation in El Salvador. The trial court contrasted the situation in El Salvador with the conflict in Vietnam, noting that the latter conflict had persisted for seven years, resulted in more than 1 million deaths (including over 50,000 Americans), and involved the expenditure of $100 billion. In El Salvador, the court noted, the American military personnel were relatively few in number and had suffered no casualties. Accordingly, the court concluded, the question of whether U.S. forces had been introduced into hostilities in El Salvador was less obvious than Vietnam, and "[t]he subtleties of fact-finding in this situation should be left to the political branches." The court declined to speculate about the kind of congressional actions that might give rise to a judicially manageable issue, noting simply that "Congress has taken absolutely no action that could be interpreted to have that effect." However, it did state that "were Congress to pass a resolution to the effect that a report was required under the WPR, or to the effect that the forces should be withdrawn, and the President disregarded it, a constitutional impasse appropriate for judicial resolution would be presented." On appeal the U.S. Court of Appeals for the District of Columbia affirmed the dismissal in a brief per curiam opinion "for the reasons stated by the District Court." The Supreme Court subsequently denied a petition of certiorari to review the decision. Nicaragua In Sanchez-Espinoza v. Reagan in 1983, 12 Members of the House of Representatives, 12 Nicaraguan citizens, and 2 United States citizens sued for damages, injunctive relief, and a declaration that President Reagan and other executive officials violated various federal statutes, including the War Powers Resolution, by supporting paramilitary operations designed to overthrow the government of Nicaragua. A federal district court dismissed the litigation as raising nonjusticiable political questions, and the U.S. Court of Appeals for the District of Columbia again affirmed. The district court stated as a predicate that the separation of powers doctrine affords the judiciary a very limited role in matters related to foreign policy and national security, stating that such matters are largely, if not exclusively, entrusted to the political branches. The court then examined various benchmarks established by the Supreme Court for application of the political question doctrine, and found three of the criteria established in Baker v. Carr, supra, for determining whether a question falls into that category to be particularly relevant. In accord with the Crockett decision, the district court held that resolution of the issue raised by the congressional plaintiffs called for fact-finding that exceeded the court's competence. In political question terms, the court said that resolution of the issue raised by the lawmakers was difficult if not impossible because of the lack of "judicially discoverable and manageable standards." According to the court, the circumstances before it were even more egregious than those in Crockett since "the covert activities of CIA operatives in Nicaragua and Honduras are perforce even less judicially discoverable than the level of participation by U.S. military personnel in hostilities in El Salvador." In addition, the court stated, in light of the wide differences between the President and Congress concerning Nicaraguan policy, "[a] second reason for finding this matter non-justiciable is the impossibility of our undertaking independent resolution without expressing a lack of the respect due coordinate branches of government." Finally, the court averred, because Administration policy was under constant review at both ends of Pennsylvania Avenue, attempts at a resolution by the judiciary presented a real danger of embarrassment from multifarious pronouncements by various departments on the question of U.S. involvement. "Such an occurrence," it said, "would, undoubtedly, rattle the delicate diplomatic balance that is required in the foreign affairs arena." The U.S. Court of Appeals for the District of Columbia affirmed on appeal. With respect to the claim of the congressional plaintiffs that the assistance given to the Nicaraguan Contra rebels by the executive branch violated the Boland amendment forbidding the CIA and the Department of Defense from providing any such assistance, the court noted that the Boland amendment was an appropriations rider and had expired at the end of the 1983 fiscal year. As a consequence, it held that the claim had to be dismissed as moot. With respect to the congressional plaintiffs' claim that the assistance to the Contras amounted to waging war and that, as a consequence, they had "been deprived of their [constitutional] right to participate in the decision to declare war," the appellate court, citing Crockett , held that the "war powers issue presented a nonjusticiable political question." Future Justice Ginsburg, at the time an appellate court judge, filed an opinion concurring in the latter ruling on the grounds the issue was "not ripe for judicial review." She stressed that the political branches had not as yet reached "a constitutional impasse" on the issue. Congress, she said, has "formidable weapons at its disposal ... [b]ut no gauntlet has been thrown down here by a majority of the Members of Congress." Grenada In Conyers v. Reagan , 11 Members of the House challenged the President Reagan's use of force in Grenada as an executive usurpation of Congress's war powers under the Constitution. The federal district court dismissed the action on the basis of the doctrine of equitable/remedial discretion, which counsels the courts to refrain from hearing cases brought by congressional plaintiffs who can obtain substantial relief by legislative action. In particular, the court said, "[w]hat is available to these plaintiffs are the institutional remedies afforded to Congress as a body; specifically, The War Powers Resolution, appropriations legislation, independent legislation or even impeachment...." On appeal the U.S. Court of Appeals for the District of Columbia affirmed largely on mootness grounds because the invasion had been concluded. The congressional plaintiffs' attempt on appeal to raise the war powers issue because of the post-invasion presence of U.S. military personnel in Grenada, the appellate court said, came too late and did not alter the moot character of the case. Persian Gulf Conflict Between Iran and Iraq In the 1987 case of Lowry v. Reagan , a federal district court dismissed an action brought by 110 Members of the House to compel President Reagan to file a report under the WPR in connection with the initiation of U.S. escort operations of reflagged Kuwaiti oil tankers in the Persian Gulf during the war between Iran and Iraq. The grounds for dismissal this time were both the equitable discretion and political question doctrines. Once again, the U.S. Court of Appeals for the District of Columbia affirmed. Taking note of the divisions in Congress with respect to the applicability of the War Powers Resolution and the wisdom of the escort operation, the district court observed: "Although styled as a dispute between the legislative and executive branches of government, this lawsuit evidences and indeed is a by-product of political disputes within Congress regarding the applicability of the War Powers Resolution to the Persian Gulf situation." The court also took note of several unsuccessful legislative efforts to force presidential compliance with the law and to revise and strengthen the WPR, leading the court to conclude that the plaintiffs' "dispute is 'primarily with [their] fellow legislators.'" Accordingly, the court said it was proper as a matter of equitable discretion to withhold the exercise of jurisdiction and the requested relief. It noted, however, that if Congress enacted legislation to enforce the Resolution and the President ignored it, "a question ripe for judicial review" would be presented. Analyzing the complex international political situation as it impacted on the Gulf in light of the benchmarks set by the Supreme Court in Baker v. Carr, discussed supra, the district court also concluded "that plaintiffs' request for declaratory relief presents a nonjusticiable political question." A judicial resolution of the matter, it said, would risk "the potentiality of embarrassment ... from multifarious pronouncements by various departments on one question." In an unpublished opinion, the U.S. Court of Appeals for the District of Columbia dismissed the appeal on grounds the suit presented a nonjusticiable political question and on grounds of mootness. By the time of its decision Iran and Iraq had agreed to a cease-fire. Iraq's Invasion of Kuwait In the 1990 case of Dellums v. Bush , 53 House Members and one Senator sought to enjoin President George H. W. Bush from initiating an offensive attack against Iraq without first obtaining congressional authorization. Iraq had invaded and occupied Kuwait in August, 1990, and President Bush, with the sanction of the United Nations Security Council, had assembled a massive military force in the vicinity with the apparent purpose of reversing that occupation. He had not yet, however, sought or obtained congressional authorization for the use of force. In those circumstances, the reviewing federal district court ruled that the issue was not yet ripe for judicial decision and dismissed the case. In contrast to the preceding decisions, the court concluded that neither the political question nor the equitable/remedial discretion doctrines precluded it from resolving the issue presented by the suit. It said that "in principle, an injunction may issue at the request of Members of Congress to prevent the conduct of a war which is about to be carried on without congressional authorization." On the political question issue, it noted the plain language of the Constitution authorizing Congress to declare war and the absence of any serious factual dispute that the initiation of combat operations against Iraq by several hundred thousand troops would constitute a war. It further asserted that the courts were not excluded from resolving suits merely because they involved questions of foreign policy. On the remedial discretion issue, the court concluded, without further explanation, that the plaintiffs "cannot gain substantial relief by persuasion of their colleagues alone." Nonetheless, the court refused to resolve the case on the merits on the grounds that not all the elements necessary for a decision were yet present; that is, the case was not yet "ripe" for decision. On the one hand, it noted, a majority of the Congress had taken no action on the matter of whether congressional authorization was needed in this instance; the plaintiffs, it observed, represented only about 10% of the Congress. On the other hand, it said, it was also not yet irrevocably certain that the President intended to initiate a war against Iraq. Both elements, it asserted, were necessary before a court could address the constitutional issue. It said that a majority of Congress had to request relief "from an infringement on its constitutional war-declaration power," and the executive branch had to be shown to be committed to "a definitive course of action." No appeal was taken from this decision. NATO's Air War in Kosovo and Yugoslavia In 1999, 26 Members of the House initiated a suit in the case of Campbell v. Clinton , asking for a declaratory judgment that U.S. participation in NATO's military actions against Yugoslavia in the Kosovo situation violated Congress's constitutional power to declare war or otherwise authorize military action and that the War Powers Resolution required the termination of U.S. participation "no later than sixty calendar days after March 24, 1999" (the date NATO began bombing Yugoslavia), unless Congress authorized continued U.S. involvement. A federal district court dismissed the action on the grounds that the Members lacked standing to bring the suit, and the U.S. Court of Appeals for the District of Columbia affirmed on the same grounds. The Supreme Court denied a request to review the decision. The district court noted that the House and Senate had taken a number of actions with respect to NATO's offensive in Yugoslavia. On March 23, 1999, the Senate had approved a concurrent resolution authorizing the President to "conduct military air operations and missile strikes in cooperation with our NATO allies against ... Yugoslavia" by a vote of 58-41. On March 24, the day the attacks began, the court said, the House approved a resolution stating that it "supports the members of the United States Armed Forces who are engaged in military operations against the Federal Republic of Yugoslavia and recognizes their professionalism, dedication, patriotism, and courage" by a vote of 424-1. On April 28 the House defeated a joint resolution declaring war on Yugoslavia by a vote of 2-427; rejected the concurrent resolution that had been approved by the Senate on a tie vote of 213-213; rejected a concurrent resolution directing the President to withdraw U.S. Armed Forces from their involvement in the NATO campaign by a vote of 139-290; and passed a bill barring the use of Department of Defense funds for the deployment of ground forces in Yugoslavia without specific authorization by voice vote. Finally, the court noted that Congress had enacted a supplemental emergency appropriations bill on May 20 providing funds for the conflict in Yugoslavia but had not stated, as seemingly required to satisfy the War Powers Resolution, that the measure constituted specific statutory authorization for the continued involvement of U.S. Armed Forces. The trial court stated that the lawsuit raised "especially grave separation of powers issues" and observed that courts traditionally have been reluctant "to intercede in disputes between the political branches of government that involve matters of war and peace." It rejected the argument, however, that courts can never adjudicate disputes that involve foreign relations. But it said that in this instance it did not need to determine whether the case was properly subject to judicial decision because the congressional plaintiffs lacked standing to bring the suit. While the D.C. Circuit had in the past followed a fairly relaxed standard with respect to congressional standing, it said, the Supreme Court in Raines v. Byrd had "dramatically" altered the legal landscape. In that case, the Court had held that Members of Congress who voted against the Line Item Veto Act ( P.L. 104-130 ) lacked standing to challenge the constitutionality of the act because they retained a political remedy, namely, the repeal of the act or the exemption of individual appropriations from its purview. Any injury they suffered with respect to their votes on future appropriations bills and to the balance of power between Congress and the President, the Court had ruled, was "wholly abstract and widely dispersed" and lacked the particularity and concreteness necessary to confer standing. Thus, the district court in Campbell concluded that it was not sufficient for the congressional plaintiffs in the case before it to allege simply that the President had ignored the Declaration of War Clause of the Constitution or the War Powers Resolution. Nor, it held, was it sufficient to allege that Congress had taken actions in this instance which the President had nullified or ignored by initiating and continuing U.S. involvement in the NATO campaign. For Members of Congress to have standing, the court said, there had to be a genuine "constitutional impasse." Had Congress directed the President to withdraw U.S. forces and he had refused to do so, or had Congress refused to appropriate funds for the air strikes and the President had used other funds for that purpose, the court suggested, "that likely would have constituted an actual confrontation sufficient to confer standing on legislative plaintiffs." But the congressional votes here, the court stated, did "not provide the President with such an unambiguous directive" but instead sent "distinctly mixed messages." The court concluded: "Where, as here, Congress has taken actions that send conflicting signals with respect to the effect and significance of the allegedly nullified votes, there is no actual confrontation or impasse between the executive and legislative branches and thus no legislative standing." The court also noted that the 26 Members had not been authorized by the House to institute the suit. On February 18, 2000, the U.S. Court of Appeals for the District of Columbia affirmed on standing grounds. The court noted that in Coleman v. Miller the Supreme Court had ruled that state legislators who claimed their votes had been sufficient to defeat the ratification of a constitutional amendment had standing to challenge the actions of the Kansas Secretary of State in authenticating the amendment as approved, because the effect of the authentication was to nullify the effectiveness of their votes. The majority of the appellate panel interpreted Coleman to mean that the legislators had standing only if they had no legislative remedy whatsoever. Applying this analysis to the case before it, the Campbell court concluded that the plaintiffs enjoyed "ample legislative power to have stopped prosecution of the 'war.'" The panel majority listed several options by which Congress could act legislatively to limit hostilities: In this case, Congress certainly could have passed a law forbidding the use of U.S. forces in the Yugoslav campaign; indeed, there was a measure—albeit only a concurrent resolution—introduced to require the President to withdraw U.S. troops. Unfortunately, however, for those congressmen who, like appellants, desired an end to U.S. involvement in Yugoslavia, this measure was defeated by a 139 to 290 vote. Of course, Congress always retains appropriations authority and could have cut off funds for the American role in the conflict. Again there was an effort to do so but it failed; appropriations were authorized. And there always remains the possibility of impeachment should a President act in disregard of Congress' authority on these matters. Because legislative remedies were available to the plaintiffs, the appellate court found their situation dissimilar to that of the legislators in Coleman and held that they lacked standing to bring their challenge. Each of the three judges on the appellate panel filed concurring opinions as well. Judge Silberman stated that in his opinion the plaintiffs' claims (and, apparently, any other war power claim) should also be dismissed on grounds of nonjusticiability, because "[w]e lack 'judicially discoverable and manageable standards' for addressing them, and the War Powers Clause claim implicates the political question doctrine." The 60-day withdrawal mandate of the War Powers Resolution, he stated, is triggered only if U.S. forces are engaged in hostilities or are in imminent danger of hostilities. But that standard, he contended, "is not precise enough and too obviously calls for a political judgment to be one suitable for judicial determinations." Similarly, he asserted, there is no constitutional test for determining what constitutes a war or when a declaration of war is necessary, and the judiciary is ill-equipped to engage in the fact-finding involved in making such determinations. Finally, Judge Silberman said, such issues are necessarily ones of "the greatest sensitivity for our foreign relations" on which conflicting pronouncements by the different branches of government ought to be avoided. Judge Tatel's concurring opinion took issue with the assertion that the case presented a nonjusticiable political question. Determining whether war exists or not, he contended, "is no more standardless than any other question regarding the constitutionality of government action"; and, he said, courts have frequently made that determination. Moreover, he asserted, the plaintiffs' claim regarding the War Powers Resolution did not even require the court to make that determination but only whether U.S. Armed Forces were introduced into "hostilities." "One of the most important functions of Article III courts," he said, "[is] determining the proper constitutional allocation of power among the branches of government." Claims that a case involves issues of foreign relations and risks the danger of government speaking with "multifarious voices," Judge Tatel concluded, should not prevent a court from determining "whether the President exceeded his constitutional or statutory authority by conducting the air campaign in Yugoslavia": If in 1799 the Supreme Court could recognize that sporadic battles between American and French vessels amounted to a state of war, and if in 1862 it could examine the record of hostilities and conclude that a state of war existed with the confederacy, then surely we, looking at similar evidence, could determine whether months of daily airstrikes involving 800 U.S. aircraft flying more than 20,000 sorties and causing thousands of enemy casualties amounted to "war" within the meaning of Article I, section 8, clause 11. Finally, Judge Randolph wrote an opinion concurring with the judgment of the panel but disagreeing with its reasoning. He contended that the panel had misapplied the Supreme Court's decisions in Coleman and Raines but that the case still should have been dismissed on the grounds of standing and also of mootness. The plaintiffs lacked standing, he said, not because they retained legislative remedies for what they claimed to be the President's illegal actions but because their votes had not, as required by Raines, been completely nullified. In fact, he said, their vote against a declaration of war deprived the President of the greatly expanded powers he obtains under a number of statutes in a declared war and deprived him as well of the "authority to introduce ground troops into the conflict." Thus, he asserted, "plaintiffs' votes against declaring war were not for naught," and for that reason they lacked standing to sue. The reasoning of the majority opinion was wrong, he contended, because it "confused the right to vote in the future with the nullification of a vote in the past." In addition, he said, the case was moot, because hostilities had ended at least by June 21, 1999. If the issue were one "capable of repetition, yet evading review," Judge Randolph noted, it would not be moot. But neither element was satisfied here. The D.C. Circuit's prior decision in Conyers v. Reagan, supra, he stated, had held that wars initiated without congressional approval are not matters that inherently evade review. Moreover, he said, it was doubtful that the statutory claim that the President continued the war for more than 60 days without congressional authorization met the "capable of repetition" element. President Clinton, he noted, was the first President "who arguably violated the 60-day provision," and the plaintiffs themselves stated that in modern times most U.S. attacks on foreign nations "will be over quickly, by which they mean less than 60 days." The congressional appellants sought further review in the Supreme Court, but on October 2, 2000, the Court denied review. Regime Change and Disarmament in Iraq In Doe v. Bush , 12 Members of the House of Representatives, 3 members of the military, and 15 parents of service members instituted suit to enjoin President George W. Bush from launching a military invasion of Iraq to remove Saddam Hussein from power and to enforce Iraq's disarmament. Notwithstanding enactment in October 2002 of the Authorization for the Use of Force Against Iraq Resolution ( P.L. 107-243 ), the plaintiffs contended that the authorization unconstitutionally delegated Congress's power to declare war to the President or, alternatively, that an invasion of Iraq would exceed the authority granted by the authorization. On February 24, 2003, the reviewing federal district court held the suit to raise a nonjusticiable political question and dismissed the case. On March 13, 2003, the U.S. Court of Appeals for the First Circuit affirmed on the basis that the issues in the case were not ripe for judicial review and that the October authorization did not constitute an unlawful delegation of Congress's constitutional authority. Citing Baker v. Carr , discussed supra , the trial court held that judicial resolution of a war powers issue would be appropriate "only when the actions taken by Congress and those taken by the Executive manifest clear, resolute conflict." The Constitution, it said, commits the conduct of the nation's foreign relations to the political branches of the federal government. As a consequence, "absent a clear abdication of this constitutional responsibility by the political branches, the judiciary has no role to play." In this instance, the court ruled, there was no "intractable constitutional gridlock." In the October 2002 authorization, it noted, "Congress has expressly endorsed the President's use of the military against Iraq"; and as of the day of its decision, it said, "the President, for his part, has not irrevocably committed our armed forces to military conflict in Iraq." Given the "day to day fluidity" in the situation, the court concluded, the case raised "political questions ... which are beyond the authority of a federal court to resolve." On March 13, 2003, the U.S. Court of Appeals for the First Circuit affirmed. Eschewing reliance on the political question doctrine, the appellate court held that there was no "constitutional impasse" between Congress and the President regarding the use of force against Iraq and, as a consequence, the issue was not ripe for judicial review. Ripeness, the court said, "mixes various mutually reinforcing constitutional and prudential considerations." One, it stated, is to prevent rulings on "abstract disagreements." A second is "to avoid unnecessary constitutional decisions." A third element simply recognizes that courts can benefit "from a focus sharpened by particular facts." In this instance, it asserted, "[m]any important questions remain unanswered about whether there will be a war, and, if so, under what conditions." Even if the plaintiffs' assertion that the October authorization does not authorize the use of force against Iraq is granted, it said, "it is impossible to say yet whether or not those commands will be obeyed." "If courts may ever decide whether military action contravenes congressional authority," the court concluded, "they surely cannot do so unless and until the available facts make it possible to define the issues with clarity." The appellate court did, however, reach the merits of the issue on the plaintiffs' other claim; namely, that the discretionary authority to use force conferred on the President by the October authorization unconstitutionally delegated Congress's power to declare war. That issue might be "clearly framed," the appellate court stated, "if Congress gave absolute discretion to the President to start a war at his or her will." But, it said, "the mere fact that the October Resolution grants some discretion to the President fails to raise a sufficiently clear constitutional issue." Even with respect to the exercise of powers that are entirely legislative in nature, it noted, the Supreme Court has upheld "enactments which leave discretion to the executive branch ... as long as they offer some 'intelligible principle' to guide that discretion." Moreover, it stressed, in the area of foreign affairs the Supreme Court has made clear that "the nondelegation doctrine has even less applicability...." In addition, it said, "there is [no] clear evidence of congressional abandonment of the authority to declare war to the President." For more than a decade, it noted, Congress "has been deeply involved in significant debate, activity, and authorization connected to our relations with Iraq...." The October resolution itself, the court said, "spells out justifications for a war and frames itself as an 'authorization' of such a war." These circumstances, the court concluded, did not warrant judicial intervention. On March 18, 2003, the appellate court rejected an emergency petition for rehearing of its decision. The court stated: "Although some of the contingencies described in our opinion appear to have been resolved, others have not. Most importantly, Congress has taken no action which presents a fully developed dispute between the two elected branches. Thus, the case continues not to be fit for judicial review." NATO-Led Military Action Against Libya In June 2011, 10 Members of the House of Representatives brought suit in the case of Kucinich v. Obama to challenge the lawfulness of U.S. participation in military operations against Libya. In March, President Obama had ordered U.S. forces to take action as part of the NATO-led mission against Muammar al Qadhafi's regime in Libya. Although U.S. operations, including the use of manned and unmanned aircraft to destroy Libyan military targets, extended beyond the 60-day deadline for unauthorized hostilities established by the WPR, Obama Administration officials claimed that these actions were sufficiently limited so as not to constitute "hostilities" restricted by the WPR, and also argued that the President's role as Commander-in-Chief provided a legal basis for such operations even in the absence of congressional authorization. Although Congress considered a number of legislative proposals in response of the Libyan mission—including measures which would have alternatively authorized or required termination of U.S. operations—none were adopted. The Kucinich plaintiffs alleged that the ongoing military action violated the requirements of the WPR and contravened Congress's constitutional authority over matters of war. They sought a judgment declaring that U.S. military action against Libya constituted a "war" for purposes of the Constitution, and was unconstitutional absent authorization from Congress. The plaintiffs also requested the issuance of a judicial order enjoining further military operations against Libya absent a declaration of war. On October 20, 2011, the U.S. District Court for the District of Columbia dismissed the plaintiffs' claims on standing grounds. The court concluded that it lacked jurisdiction over plaintiffs' claim that they had been deprived of their constitutional role in matters of war. The court noted that the plaintiffs had not initiated legal proceedings at the behest of the House of Representatives as a whole, but rather had brought suit in their individual capacity as Members of Congress. The district court characterized prior jurisprudence as having "all but foreclosed the idea that a Member of Congress can assert legislative standing to maintain a suit against a Member of the Executive Branch." The court found the alleged harm suffered by the plaintiffs—to be "squarely within the holding" of the Supreme Court's ruling in Raines v. Byrd , which "teaches that generalized injuries that affect all Members of Congress in the same broad and undifferentiated manner are not sufficiently 'personal' or 'particularized,' but rather are institutional, and too widely dispersed to confer standing." The court also rejected plaintiffs' assertion that, because they had voted against a legislative proposal which would have authorized hostilities in Libya (and which ultimately failed to be enacted), continued military operations effectively nullified their votes and conferred upon them a concrete injury which entitled them to standing. The court noted that the President had asserted independent constitutional authority to carry out the Libyan operation, and ruled that this action "cannot be construed as actions that nullify" a vote which occurred several months after U.S. military action in Libya had been initiated. The court also noted that prior D.C. Circuit jurisprudence recognized that the claim for nullification "necessitates the absence of a legislative remedy." The court characterized plaintiffs' attempts to limit continued U.S. operations via legislative action, including holding votes on defunding military operations or directing the withdrawal of U.S. troops from Libya, as belying their arguments that no legislative remedy existed for their alleged injury. The court then turned to plaintiffs' argument that they possessed standing on account of their status as taxpayers. The court noted that taxpayer standing occurs in very narrow circumstances. For standing to exist, the challenged spending must have been authorized and directed by Congress; taxpayer standing may not serve as a basis to challenge either discretionary executive expenditures or spending that is done in a manner contrary to that which Congress intended when appropriating funds. The court concluded that "because the military actions challenged by the plaintiffs do not arise from expenditures expressly authorized by Congress, the plaintiffs … do not have standing to bring this action as taxpayers." Because the district court concluded that plaintiffs lacked standing to bring their claims, it declined to assess whether those claims raised nonjusticiable political questions. No appeal was taken from this decision. Conclusion Historically, the courts have been reluctant to act in cases involving issues of national security and foreign policy. The enactment of the War Powers Resolution in 1973 does not appear to have altered that situation. Eight subsequent efforts by lawmakers to effectively call upon federal judges to put traditional scruples aside have proven unavailing. In each and every case brought since the WPR's enactment to resolve the political branches' impasse over the law and/or the constitutional division of the war power in which a final judicial ruling has been issued, the reviewing court has concluded that the factors calling for abstention outweigh those in favor of involvement. The courts have variously relied on the political question doctrine, the equitable/remedial discretion doctrine, ripeness, mootness, and congressional standing. In the one ruling arguably on the merits, the U.S. Court of Appeals for the First Circuit ruled that a discretionary grant of authority to the President to use force under specified circumstances does not constitute an unlawful delegation of Congress's power to declare war. The courts have made clear, however, that while formidable, none of the aforementioned procedural barriers constitutes an insurmountable obstacle to resolving the statutory or constitutional issues concerning war powers. All of the opinions to date indicate that the barrier to the exercise of jurisdiction stems from the posture of the cases, not some institutional shortcoming. If this view prevails, both statutory and constitutional war powers issues can be judicially determined if a legal, as distinguished from a political, impasse is created. It has been suggested that this can come about by congressional action that directs the President to take a particular action, or bars him from doing so, and by presidential noncompliance. Absent such an irreconcilable conflict, however, many believe it is unlikely that the courts will venture into this politically and constitutionally charged thicket.

Article I, Section 8, of the Constitution confers on Congress the power to "declare War." Modern Presidents, however, have contended that, notwithstanding this clause, they do not need congressional authorization to use force. Partly in response to that contention, and because of widespread concern that Congress had allowed its war power to atrophy in the Korean and Vietnam conflicts, Congress in 1973 enacted the War Powers Resolution (WPR; P.L. 93-148). Among other things, the WPR generally requires the President to report to Congress within 48 hours when, absent a declaration of war, U.S. Armed Forces are introduced into "hostilities or ... situations where imminent involvement in hostilities is clearly indicated by the circumstances." After a report is submitted or required to be submitted, the WPR requires that the forces be withdrawn within 60 days (90 days in specified circumstances) unless Congress declares war or otherwise authorizes their continued involvement. Nonetheless, subsequent Presidents have continued to maintain that they have sufficient authority independent of Congress to initiate the use of military force, and several Presidents have viewed aspects of the WPR as unconstitutionally infringing upon their Commander-in-Chief authority. Congress has on four occasions enacted authorizations specifically waiving the 60-90 day limitation on the use of force otherwise imposed by the WPR. But on eight occasions Members of Congress have filed suit to force various Presidents to comply with WPR requirements or otherwise to recognize Congress's war powers under the Constitution. In seven of the eight cases where final rulings were issued, the courts have found reasons not to render a decision on the merits of the plaintiffs' claims. In one case, involving the President's authority to pursue military action against Iraq following congressional authorization, the court ruled on the merits of the plaintiffs' claim concerning the constitutionality of this authorization, but dismissed all other claims on jurisdictional grounds. The courts have variously found the political question doctrine, the equitable/remedial discretion doctrine, the issue of ripeness, and the question of congressional standing to preclude judicial resolution of the matter. Although the courts have not ruled out the possibility that a conflict over the use of force between Congress and the President could require a judicial resolution, they have thus far deemed the matter to be one for the political branches to resolve. On June 15, 2011, 10 Members of Congress brought suit in federal court seeking a declaratory judgment that U.S. military operations against Libya violated Congress's constitutional power to declare war, and also requested a judicial order enjoining further operations against Libya absent a declaration of war. The reviewing federal district court dismissed the case on jurisdictional grounds due to lack of standing. This report summarizes the eight cases initiated by Members of Congress in which final rulings were reached, which concerned U.S. military activities in El Salvador, Nicaragua, and Grenada; military action taken during the Persian Gulf conflict between Iraq and Iran; U.S. activities in response to Iraq's invasion of Kuwait (prior to the congressional authorization); U.S. participation in NATO's action in Kosovo and Yugoslavia; and U.S. military action in Libya. This report will be updated as circumstances warrant.

Introduction In the United States, births to unmarried women (i.e., nonmarital births) are widespread, including families of varying income class, race, ethnicity, and geographic area. Many analysts attribute this to changed attitudes over many years about fertility and marriage. They find that many adult women and teenage girls no longer feel obliged to marry before, or as a consequence of, having children. During the period from 1940 to 2008, the percentage of births to unmarried women increased from 3.8% in 1940 to 40.6% in 2008, and has remained at about 41% each subsequent year through 2013. This represented 1.6 million children in 2013 (see Table A-1 .). Although nonmarital childbearing is not a new phenomenon, the relatively recent factors associated with historically high levels of nonmarital childbearing are that women are marrying later in life and more couples are cohabiting. Other factors include decreased childbearing of married couples, increased marital dissolution, increased sexual activity outside of marriage, participation in risky behaviors that often lead to sex, improper use of contraceptive methods, and lack of marriageable partners. "Nonmarital births" can be first births, second births, or higher-order births; they can precede a marriage or occur to a woman who has never married. "Nonmarital births" can occur to divorced or widowed women. Moreover, a woman with several children may have had one or more births within marriage and one or more births outside of marriage. A majority of nonmarital births now are to cohabiting parents. Between 2006 and 2010, 58% of nonmarital births were to cohabiting parents, compared with 40% in 2002. Unlike in years past, although most of the children born outside of marriage are raised by a single parent (who may or may not have a "significant other"), many, especially during their infancy, live with both of their biological parents who are not married to each other. Parents and family life are the foundation that influences a child's well-being throughout the child's development and into adulthood. The family also is the economic unit that obtains and manages the resources that meet a child's basic needs while also playing an instrumental role in stimulating the child's cognitive, social, and emotional development. Most children who grow up in mother-only families, father-only families, step-parent families, or families in which the mother is cohabiting with a male partner become well-adjusted, productive adults. However, a large body of research indicates that children who grow up with only one biological parent in the home are more likely to be financially worse off and have worse socioeconomic outcomes (even after income differences are taken into account) compared to children who grow up with both biological parents in the home. To emphasize, this research indicates that all family situations in which both biological parents are not living together (regardless of whether the mother is divorced, separated, widowed, or was never married) are more likely to result in less favorable outcomes for children than a family situation in which the child is living in a household with both biological parents. It is also noteworthy that some researchers conclude that even among children living with both biological parents, living with married parents generally results in better outcomes for children than living with cohabiting parents, mainly because marriage is a more stable and longer lasting situation than cohabitation. In 2012, 70% of the children under age 18 who lived with both of their married parents were in households with incomes at least 200% above the poverty level, whereas 44%-46% of children who lived with their mother only, two unmarried parents, or no parents were living below the poverty level. The federal concern about nonmarital childbearing generally centers on its costs via claims on public assistance. These federal costs primarily reflect the fact that many of these "nonmarital children" are raised in single-parent families that are financially disadvantaged. Federal concern also arises because of the aforementioned research indicating that children living in single-parent families are more likely to face negative outcomes (financially, socially, and emotionally) than children who grow up with both of their biological parents in the home. As mentioned earlier, many children born outside of marriage are raised in single-parent families. This report analyzes the trends in nonmarital childbearing in the United States, discusses some of the characteristics of unwed mothers, addresses some issues involving the fathers of children born outside of marriage, and offers some concluding remarks. Background Declining marriage rates, increased childbearing among unmarried women, an increased number of unmarried women in the childbearing ages (i.e., 15-44), and decreased childbearing among married women have contributed to the rising share of children being born to unwed women. Many social science analysts attribute the increase in nonmarital births to the decades-long decline of "shotgun marriages," rather than to an increased incidence of nonmarital conceptions. They contend that when the social pressure to get married once pregnancy became obvious lessened, the likelihood that women would marry between conception and birth decreased substantially. The entry of more and more women into the paid labor force also made childbearing outside of marriage more economically feasible. Through the 1960s, most Americans believed that parents should stay in an unhappy marriage for the sake of the children. By the 1970s, this view was not as prominent. Divorce and not getting married to the father of a child—which were generally considered not to be in the best interest of the child—became more acceptable if they resulted in the happiness of the adult. Thus, many observers and analysts agree that marriage is now more likely to be viewed through a framework of adult fulfillment rather than through a framework of child well-being. Marriage Postponement On average, those who marry are marrying later. The age at which persons in the United States first marry has increased significantly since the 1950s. The typical age of first marriage in the United States is currently 27 for women and 29 for men. It is now not uncommon for first births to precede first marriage. The difference between the average age of first intercourse (17) and the age at first marriage (25) for women is eight years. For the majority of adult women, living without a spouse does not mean living without sex, nor in many cases does it mean living without having children. The report entitled "Knot Yet: The Benefits and Costs of Delayed Marriage in America," indicates that "at the age of 24, 44 percent of women have had a baby, while only 38 percent have married; by the time they turn 30, about two-thirds of American women have had a baby, typically out of wedlock." Cohabitation Cohabitation has now become a common method of family formation. Based on data covering the period 2006-2010, the first union of women (ages 15 through 44) was more likely to be cohabitation than marriage. According to the survey data, 48% of the women interviewed in 2006 through 2010 cohabited as a first union as compared to 23% who married as a first union (29% were single/unattached). The same survey data also indicated that by age 30, 74% of women had lived with a male partner without being married to him. According to a report entitled Household Change in the U nited States : One of the major trends driving the growth in nonfamily households with two or more people is the increase in cohabitation among unmarried adults. In 1970, less than 1 percent of all households included unmarried couples, yet by 2010, this share had increased to nearly 7 percent. This share may seem too low given that the majority of young adults today cohabit at some point, and that more than half of recent marriages were preceded by cohabitation. This apparent anomaly is due to the fact that most cohabiting unions in the United States don't last long, either transitioning to marriage or ending within a few years. Therefore, the number of unmarried-partner households counted at one point in time, such as in the 2010 Census, is relatively small. The long‐term trend toward nonmarital births may be attributed, in part, to an increase in cohabiting unions and in births within such relationships. According to several studies, a majority of nonmarital births now occur to cohabiting parents. During the period 2006-2010, it was estimated that 58% of nonmarital births were to cohabiting parents. Recent data indicate that the notion that unmarried births equal mother-only families is no longer fully correct. The decline in the percentage of births to married women has in large measure been in tandem with the increase in births to parents who are living together but who are not married (in cohabiting relationships). Some children live with cohabiting couples who are either their own unmarried parents or a biological parent and a live-in partner. The Census Bureau data do not indicate the number of newborns by the marital status of their parents, but data are available for children under age one by parents' marital status. In 2012, 16.7% of the 3.9 million children under age one were living with their biological mothers who had never married, 1.4% were living with their biological fathers who had never married, and 12.4% were living with both biological parents who were not married to each other (67.6% of those children under age one were living with both of their biological parents who were married to each other). Another view of the data indicates that of the 1.2 million children under age one who were living with parents who had never married or were not married to each other, 55.6% lived with their mothers, 4.6% lived with their fathers, and 39.8% lived with both parents. Some analysts contend that the increase in nonmarital childbearing could be seen as less of an issue if viewed through a framework that portrays out-of-wedlock births as babies born to cohabiting couples rather than to "single" women. Others point out that cohabitation is a complex phenomenon that has an array of meanings. Some view it as a precursor to marriage while others view it as an alternative to marriage. According to one study: cohabitation is a continuous rather than a dichotomous variable. At both ends of the continuum, there is substantial agreement across measures about who is (not) cohabiting. In the middle of the continuum, however, there is considerable ambiguity, with as much as 15% of couples reporting part-time cohabitation. How we classify this group will affect estimates of the prevalence of cohabitation, especially among African Americans, and may impact the characteristics and outcomes of cohabitors. It is estimated that two-fifths of all children in the United States will live in a cohabiting household by age 12. Cohabiting relationships are generally considered less stable than marriages. According to several sources, cohabiting relationships are fragile and relatively short in duration. Survey data covering the period 2006-2010 indicated that the length (i.e., median duration) of first premarital cohabitation (among women ages 15 through 44) was a little less than two years (22 months). The median length of marriage before divorce was eight years. Trends in Nonmarital Births: 1940-2013 In this report, births to unmarried women are termed nonmarital births. Data on nonmarital births are usually expressed by three measures: the number of nonmarital births, the percent of births that are nonmarital, and the rate of nonmarital births per 1,000 unmarried women. The number of nonmarital births provides the total count of babies who are born to women (including adolescents) who are not married. The percent of all births that are nonmarital is the number of all nonmarital births divided by all births (both nonmarital births and marital births). The nonmarital birth rate is defined as the number of nonmarital births (to females of any age) per 1,000 unmarried women ages 15-44. Number of Nonmarital Births The number of nonmarital births reached a record high in 2008 with 1,726,566 births to unmarried women. As mentioned above, the number of births to unmarried women has generally increased over the years, with some downward fluctuations. Nonmarital births rose 17-fold from 1940-2013, from 89,500 in 1940 to 1,605,643 in 2013. (See Figure 1 and Table A-1 .) The average annual increase in nonmarital births has slowed substantially from earlier decades. The average annual increase in nonmarital births was 4.9% from 1940-1949; 5.6% from 1950-1959; 6.1% from 1960-1969; 5.0% from 1970-1979; and 6.4% from 1980-1989. The 1990s showed a marked slowing of nonmarital births, dropping from an average increase of 6.4% a year in the 1980s to an average of 1.2% a year in the 1990s. Nonmarital births increased an average of 2.6% per year from 2000-2009. During the four years from 2010 through 2013, nonmarital births decreased , on average, 0.2% per year. In 2013, there were 1.6 million nonmarital births. Percentage of All Births That Are Nonmarital The percent of births to unmarried women increased substantially during the period from 1940-2013 (see Figure 2 and Table A-1 ). (However, from 1994-2000, there was almost no change in this measure.) In 1940, 3.8% of all U.S. births were to unmarried women. By 2009, a record 41.0% of all U.S. births were to unmarried women. In 2013, the percent of births to unmarried women had decreased slightly to 40.6%. Birth Rates of Unmarried Women The birth rate is the total number of births per 1,000 of a population each year. The nonmarital birth rate provides a measure of the likelihood that an unmarried woman will give birth in a given year. The nonmarital birth rate is defined as the number of births to unmarried women (regardless of the age of the mother) per 1,000 unmarried women ages 15 through 44. The nonmarital birth rate reflects both overall fertility and the percentage of births that are nonmarital. The birth rate for unmarried women increased dramatically during the 1940-2013 period, with many upward and downward fluctuations. (However, during the years 1995-2002, the nonmarital birth rate remained virtually unchanged. ) The nonmarital birth rate increased from 7.1 births per 1,000 unmarried women ages 15 through 44 in 1940 to a record high of 51.8 births per 1,000 unmarried women ages 15 through 44 in 2007 and 2008 (a six-fold increase). In 2013, the nonmarital birth rate was 44.8 births per 1,000 unmarried women ages 15 through 44. (See Figure 3 and Table A-1 .) Composition of Nonmarital Births The composition of nonmarital births reflects the size of the population of women of childbearing age, overall fertility, and the percent of births that are nonmarital. The share of unmarried births for a group can increase, for example, through a decline in the marital birth rate, an increase in the nonmarital birth rate, or both. In addition, the share of nonmarital births for a group can increase through a shift in the proportion of women of childbearing age who are not married. Teen marriage and birth patterns have shifted from a general trend of marrying before pregnancy, to marrying as a result of pregnancy, to becoming pregnant and not marrying. Early nonmarital childbearing remains an important issue, especially in the United States, because young first-time mothers are more likely to have their births outside of marriage than within marriage, and because women who have a nonmarital first birth are more likely to have all subsequent births outside of marriage, although often in cohabiting unions. Until recently, a commonly held view was that teenagers had the highest share of nonmarital births. However, as Figure 4 shows, women in their 20s had the greatest share of nonmarital births. In 2013, 15% of the 1.6 million nonmarital births in the U.S. were to teenagers (under age 20), 37% were to women ages 20 through 24, 25% were to women ages 25 through 29, 15% were to women ages 30 through 34, 6% were to women ages 35 through 39, and 2% were to women ages 40 and above. The largest share of children born to unmarried women are white; however, minority children, particularly black children and Hispanic children, are overrepresented. Of the 1.6 million children who were born outside of marriage in 2013, 39% were white (whites constituted 64% of the U.S. population), 26% were black (blacks constituted 13% of the population), 2% were American Indian/Alaskan Native (American Indians or Alaskan Natives constituted 1% of the population), 3% were Asian or Pacific Islander (Asians or Pacific Islanders constituted 6% of the population), and 30% were Hispanic (Hispanics constituted 17% of the population). Moreover, the age and nonmarital birth data for 1990 and 2013 displayed in Figure 5 show that for all age groups a growing share of women are having nonmarital births. Characteristics of Unwed Mothers This section discusses some of the characteristics of unmarried mothers. Some of the highlights include the following: black women are more likely to have children outside of marriage than other racial or ethnic groups; it is not teenagers but rather women in their early twenties who have the highest percentage of births outside of marriage; single motherhood is more common among women with less education than among well-educated women; a substantial share of nonmarital births (44%) were to women who had already given birth to one or more children; a significant number of unwed mothers are in cohabiting relationships; and women who have a nonmarital birth are less likely than other women to eventually marry. Race and Ethnicity The rate at which unmarried women have children varies dramatically by race and ethnicity. As mentioned earlier, in 2013 the nonmarital birth rate for all U.S. women was 44.8 births per 1,000 unmarried women (in 2012, it was 45.3). In 2012, Hispanic women had the highest nonmarital birth rate at 72.6 births per 1,000 unmarried Hispanic women. The nonmarital birth rate in 2012 was 62.6 for black women, 32.1 for non-Hispanic white women, and 22.9 for Asian or Pacific Islander women. In 2013, 40.6% of all U.S. births were to unmarried women. In that year, 71.4% of births to black women were nonmarital births. The percentage of nonmarital births for American Indians or Alaska Natives was 66.4%. The nonmarital birth percentage was 53.2% for Hispanic women, 29.3% for non-Hispanic white women, and 17.0% for Asian or Pacific Islander women. (See Table 1 .) In 2013, the percentage of nonmarital births to black women (71%) was more than three times the 22% level of the early 1960s that so alarmed Daniel Patrick Moynihan, then President Johnson's Assistant Secretary of Labor. Moynihan addressed the issue in a report called "The Negro Family: The Case for National Action." One theory that attempts to explain the disproportionate share of nonmarital births to black women hypothesizes that the universe of males (ages 15 and above) who are unmarried is disproportionately lower for blacks. For example, in 2012 there were 75 black unmarried males for every 100 black unmarried females; 88 white non-Hispanic unmarried males for every 100 white non-Hispanic unmarried females; 90 Asian unmarried males for every 100 Asian unmarried females; and 105 Hispanic unmarried males for every 100 Hispanic unmarried females. Supporters of this theory argue that if the universe of possible marriage partners is reduced even further to desirable marriage partners (e.g., heterosexual men, men with steady jobs, men without a criminal record, and men with a similar educational background), the black "male shortage" is drastically increased. Age In recent years, most teenagers who give birth are not married. For example, 13% of the 419,535 babies born to teens (ages 15 through 19) in 1950 were born to females who were not married. By 2013, 89% of the 274,641 babies born to teens (ages 15 through 19) were born to unwed teens. (See Table 1 .) There are two reasons for this phenomenon. The first is that marriage in the teen years, which was not uncommon in the 1950s, has become quite rare. The second is that this general trend of marriage postponement has extended to pregnant teens as well. In contrast to the days of the "shotgun marriage," very few teens who become pregnant nowadays marry before their baby is born. Educational Attainment One of the factors that causes economic disadvantage, especially among unmarried mothers, is low educational attainment. Single motherhood has always been more common among women with less education than among well-educated women. In 2011, among unmarried women (ages 15 to 50) who had a child in the last year, those with less education had higher percentages of nonmarital births. For instance, among those who had not completed high school, 57% had a nonmarital birth. In contrast, among those who had a bachelor's degree or more, 9% had a nonmarital birth. Income Status An examination of never-married mothers shows that in 2012, 45.5% of never-married mother families (with children under age 18) had income below the poverty level. With respect to the various income categories, 23.9% of never-married mother families had income below $10,000, 43.3% had income below $20,000, and 80.2% had income below $50,000; and 19.8% had income above $50,000. Additional Children Some studies have found that a woman is most likely to have a second birth while in the same type of situation (single, cohabiting, or married) as she was in for the first birth. The public perception is that nonmarital births are first births. The reality is that in recent years fewer than half of all nonmarital births were first births. According to a Child Trends report, over 50% of nonmarital births were second- or higher-order births. In 2013, of the one-parent unmarried family groups maintained by a never-married mother, 41.5% had more than one child. Subsequent Marriage of Unwed Mothers Several studies indicate that nonmarital childbearing is associated with reduced rates of marriage. A study based on retrospective life histories found that girls who had a nonmarital birth at age 17 were 69% more likely to have never married by age 35 than 17-year old girls who did not have a nonmarital birth (i.e., 24% vs. 14%). Women who had a nonmarital birth at ages 20 to 24 were more than twice as likely not to be married at age 35 than women who did not have a nonmarital birth at ages 20 to 24 (i.e., 38% vs. 19%). The reported implication of these findings is that there probably is a causal relationship between nonmarital childbearing and subsequent marriage. Another study points out the racial differences associated with the eventual marriage of many women who had a nonmarital birth. The study found that white women were more likely to be married than their minority counterparts. Some 82% of white women, 62% of Hispanics, and 59% of blacks who had a nonmarital first birth had married by age 40; the corresponding proportions among those who avoided nonmarital childbearing were 89%, 93%, and 76%, respectively. By some estimates, having a child outside of marriage decreases a woman's chances of marrying by 30% in any given year. Even when they do marry, women who have had a nonmarital birth generally are less likely to stay married. Analysis of data from the 2002 National Survey of Family Growth indicates that women ages 25 to 44 who had their first child before marriage and later got married are half as likely to stay married as women who did not have a nonmarital birth (42% compared to 82%). Fathers of Children Born Outside of Marriage This section highlights several demographic factors associated with the fathers of children born outside of marriage. It also discusses the importance of establishing paternity for children born outside of marriage. It has been pointed out that fathers are far too often left out of discussions about nonmarital childbearing. It goes without saying that fathers are an integral factor in nonmarital childbearing. It appears that one result of the so-called sexual revolution was that many men increasingly believed that women could and should control their fertility via contraception and abortion. As a result, many men have become less willing to marry the women they impregnate. There are myriad reasons why so many children live in homes without their fathers. Some reasons are related to choices people make about fertility, marriage, and cohabitation. But others are the result of unexpected events, such as illness, or incarceration. Some noncustodial fathers are active in the lives of their children, whereas others are either unable or unwilling to be involved in their children's lives. Whatever the reason, a father's absence from the home results in social, psychological, emotional, and financial costs to children and economic costs to the nation. A 2008 report maintains that the federal government spends about $99.8 billion per year in providing financial and other support (via 14 federal social welfare programs) to father-absent families. This section of the report discusses the race and ethnicity of fathers to children born outside of marriage, age of fathers, educational attainment of fathers, and the importance of establishing paternity for children born outside of marriage. One of the prominent, but perhaps not unexpected, findings related to fathers and nonmarital births is that when older men have sexual relationships with young women it often results in nonmarital births. Race and Ethnicity Data from the Fragile Families and Child Well-Being study indicate that 18% of white men, 44% of black men, and 35% of Hispanic men were unmarried at the time of their first child's birth. According to the 2002 National Survey of Family Growth, 33% of unmarried Hispanic men and 33% of unmarried non-Hispanic black men have had a biological child, compared with 19% of unmarried non-Hispanic white men. Age In the United States, it is not unusual for a man to be several years older than his female partner. Some data indicate that the man is three or more years older than the woman in almost 4 in 10 relationships today. However, such age differences often have adverse consequences for young women. Several studies have found that the unequal power dynamic that is often present in relationships between teenage girls and older men is more likely to lead to sexual contact not wanted by the female, less frequent use of contraceptives, and a greater incidence of sexually transmitted diseases (STDs) among the adolescent females. According to a couple of older studies, a significant share of teenagers in relationships with older men have children outside of marriage. According to one study, about 20% of births to unmarried, teenage girls are attributed to men at least five years older than the mother. According to another report, unmarried teenagers younger than 18 were especially likely to become pregnant when involved with an older partner: 69% of those whose partner was six or more years older became pregnant, compared with 23% of those whose partner was three to five years older and 17% of those whose partner was no more than two years older. Educational Attainment Data from the Fragile Families and Child Well-Being study indicate that at the time of their first child's birth, 37% of unwed fathers had less than a high school education, 39% had a high school diploma, 20% had some college, and 4% had a B.A. degree or more. Paternity Establishment Paternity is presumed if a child is conceived within marriage. In other words, the husband is presumed to be the father of a child born to his wife. In cases in which the child is born outside of marriage, paternity can be voluntarily acknowledged or it can be contested. It would be contested in cases in which (1) the mother does not want to establish paternity, thereby forcing the father to take his case to court to assert his rights, (2) the biological father does not want to pay child support and denies paternity to delay establishment of a child support order, or (3) the alleged father has genuine doubt about his paternity. If paternity is contested it is generally resolved through either an administrative process or a judicial proceeding. A child born outside of marriage has a biological father but not necessarily a legal father. Paternity establishment refers to the legal determination of fatherhood for a child. In 2013, 40.6% of children born in the United States were born to unmarried women. Data from the federal Office of Child Support Enforcement (OCSE) indicate that in 2013 the total number of children in the Child Support Enforcement (CSE) caseload who were born outside of marriage amounted to about 11 million. Paternity has been established or acknowledged for about 9.7 million (88%) of these children (1.6 million were established or acknowledged during FY2013). Most of the children in the CSE caseload without a legally identified father are primarily older children (not newborns). Paternity establishment is not an end in itself, but rather a prerequisite to obtaining ongoing economic support (i.e., child support) from the other (noncustodial) parent. Once paternity is established legally (through a legal proceeding, an administrative process, or voluntary acknowledgment), a child gains legal rights and privileges. Among these may be rights to inheritance, the father's medical and life insurance benefits, and social security and possibly veterans' benefits. It also may be important for the health of the child for doctors to have knowledge of the father's medical history. The child also may have a chance to develop a relationship with the father and to develop a sense of identity and connection to the "other half" of his or her family. The public policy interest in paternity establishment is based in part on the dramatic increase in nonmarital births over the last several decades and the economic status of single mothers and their children. The poorest demographic group in the United States consists of children in single-parent families. Paternity establishment generally is seen as a means to promote the social goals of (1) providing for the basic financial support of all minor children regardless of the marital status of their parents, (2) ensuring equity in assessing parental liability for the financial support of their children, and (3) promoting responsibility for the consequences of one's actions. Many observers maintain that the social, psychological, emotional, and financial benefits of having one's father legally identified are irrefutable. They suggest that paternity should be established, regardless of the ability of the father to pay child support. They argue that the role of both parents is critical in building the self-esteem of their children and helping the children become self-sufficient members of the community. Current literature and studies suggest that in most cases visitation with the noncustodial parent is important to the healthy emotional development of children. It is now widely accepted that positive, engaged fathering together with child support are associated with lower levels of behavioral problems and improved academic achievement among children. Children with regular contact with their noncustodial parent often adjust better than those denied such contact. Moreover, generally it is in the best interest of the child to receive the social, psychological, and financial benefits of a relationship with both parents. Visitation (i.e., contact with one's children) is the primary means by which noncustodial parents carry out their parenting duty. Summary Remarks The language regarding births to unmarried women has changed in significant ways. What once were referred to as "bastard" or "illegitimate" children are now termed "out-of-wedlock," "outside of marriage," or "nonmarital" births. The stigma and shame that was once attached to these children is generally no longer recognized by the public. Some commentators in fact claim that our nation has gone too far and that now the media, in particular, tends to glorify unwed mothers, especially if they are famous. Others contend that it is often the case that adults pursue individual happiness in their private relationships, which may be in direct conflict with the needs of children for stability, security, and permanence in their family lives. It also is recognized that most people, especially unmarried parents, have a positive attitude towards marriage. Most unmarried parents value marriage but may be reluctant to marry because of real or perceived barriers. Based on information from the Fragile Families and Child Wellbeing study, at the time of their child's birth 72% of unmarried mothers said that their chances of getting married were 50/50 or better and 65% said that marriage is better for children (the comparable percentages for unmarried fathers were 90% and 78%). Some researchers maintain that many couples, to a certain extent, put marriage on a pedestal and are thus reluctant to marry until everything is perfect (e.g., they have a middle-class income, can afford a nice wedding, can afford a house). Some observers contend that the problem is not the weakening of marriage (about 80% of all women ages 15 and older eventually marry), but rather the de-linking of marriage and having children and the abdication of the traditional view of marriage as a life-long commitment. Some researchers and policymakers argue that although couple relationships are a private matter, an overwhelming body of evidence suggests that not all family structures produce equal outcomes for children. They maintain that there is widespread agreement that a healthy, stable (i.e., low-conflict) family with two biological parents is the best environment for children. Finally, some observers assert that we as a society have not strayed too far, and that it is not too late to return to the somewhat old-fashioned, but not simplistic, precept of falling in love, getting married, and having a baby, in that order. An examination of nonmarital births from a demographic perspective is perhaps the only analysis that does not view nonmarital births as a negative phenomenon. Having the birth rate reach the replacement rate is generally considered desirable by demographers and sociologists because it means a country is producing enough young people to replace and support aging workers without population growth being so high that it taxes national resources. The replacement rate is the rate at which a given generation can exactly replace itself. The fertility level required for natural replacement of the U.S. population is about 2.1 births per woman (i.e., 2,100 births per 1,000 women). The nation's total fertility rate—the number of children the average woman would be expected to bear in her lifetime—generally has been below the replacement level since 1972. In 2006 and 2007, the U.S. total fertility rate reached the replacement rate. However, the total fertility rate has steadily declined over the last six years. The total fertility rate for the United States was 1,869.5 births per 1,000 women in 2013. Given that the marital birth rate has been decreasing over time, if the birth rate of unmarried women significantly decreased, the U.S. population would cease growing (if immigration is excluded). This means that those who support policies to lower nonmarital fertility do so at the risk of lowering overall U.S. fertility that has been hovering near replacement levels. Although marriage and family life are generally considered private issues, they have become part of the public arena primarily because of public policies that help families affected by negative outcomes associated with nonmarital births to maintain a minimum level of economic sufficiency. The abundance of research on the subject of the impact on children of various living environments also raises the stakes, in that it is now almost unanimously agreed that children living with married biological parents fare better on a host of measures—economic, social, psychological, and emotional—than children living with a single parent or in a step-parent or cohabiting situation. Some observers contend that although women of all age groups are having children outside of marriage, given the scarcity of resources in most areas of public finance, it may be wiser to pursue a strategy that focuses primarily on reducing nonmarital births of adolescents and women in their early twenties. One of the trends that this report highlights is that although there has been a rise in nonmarital births, it does not mean that there has been a subsequent rise in mother-only families. Instead, it reflects the rise in the number of couples who are in cohabiting relationships. Because the number of women living in a cohabiting situation has increased substantially over the last several decades, many children start off in households in which both of their biological parents reside. Nonetheless, cohabiting family situations are disrupted or dissolved much more frequently than married-couple families. Given the patterns of swift transitions into and out of marriage and the high rate of single parenthood, a family policy that relies too heavily on marriage will not help the many children who will live in single-parent and cohabiting families—many of them poor—during most of their formative years. Moreover, national data from the 2002 panel of the National Survey of Family Growth indicate that 14% of white men, 32% of black men, and 15% of Hispanic men had children with more than one woman. Thus, children in the same family may potentially face different outcomes. For example, children with the same mother and different fathers may potentially face less desirable outcomes if their mother marries the biological father of their half-brothers or half-sisters. The large number of nonmarital births has added to the complexity of families. Children now live in a myriad of living situations. Some may live with both biological parents who may or may not be married, some live with a mom and her cohabiting partner or a dad and his cohabiting partner, others live with a mom and another adult who may or may not be related to the child, or a dad and another adult who may or may not be related to the child. Others live with their mothers only or with their fathers only. Moreover, in each of the family living arrangements mentioned there may or may not be other children, some full siblings, some half-siblings, some step-siblings or perhaps unrelated. Nonmarital childbearing, cohabitation, divorce, re-partnering, and multi-partner fertility (i.e., adults who have biological children by more than one partner) significantly impact children, and public policies that may work for less complicated families may not work for them. Appendix. Data Table

Although nonmarital births (i.e., births to unmarried women) are not a new phenomenon, their impact on families has not diminished and there is much agreement that the complexity of modern family relationships and living arrangements may further complicate the well-being of children born to unwed mothers. For the past six years (2008-2013), the percentage of all U.S. births that were nonmarital births remained unchanged at about 41% (1.6 million births per year), compared with 28% of all births in 1990 and about 11% of all births in 1970. Many of these children grow up in mother-only families. Although most children who grow up in mother-only families or step-parent families become well-adjusted, productive adults, the bulk of empirical research indicates that children who grow up with only one biological parent in the home are more likely to be financially worse off and have worse socioeconomic outcomes (even after income differences are taken into account) compared to children who grow up with both biological parents in the home. In the United States, nonmarital births are widespread, touching families of varying income class, race, ethnicity, and geographic area. Many analysts attribute this to changed attitudes over the past few decades about fertility and marriage. They find that many adult women and teenage girls no longer feel obliged to marry before, or as a consequence of, having children. With respect to men, it appears that one result of the so-called sexual revolution is that many men now believe that women can and should control their fertility via contraception or abortion and have become less willing to marry the women they impregnate. Factors that are associated with the historically high levels of nonmarital childbearing include an increase in the median age of first marriage (i.e., marriage postponement), decreased childbearing of married couples, increased marital dissolution, an increase in the number of cohabiting couples, increased sexual activity outside of marriage, participation in risky behaviors that often lead to sex, improper use of contraceptive methods, and lack of marriageable partners. The data indicate that for all age groups, a growing share of women are having nonmarital births. Women ages 20 through 24 currently have the largest share of nonmarital births. Although there has been a rise in nonmarital births, it does not mean that there has been a subsequent rise in mother-only families. Instead, it reflects the rise in the number of couples who are in cohabiting relationships; in fact, recent data indicate that more than half of nonmarital births are to cohabiting parents. Because the number of women living in a cohabiting situation has increased substantially over the last several decades, many children start off in households in which both of their biological parents reside. Nonetheless, cohabiting family situations are disrupted or dissolved much more frequently than married-couple families. Moreover, the family complexity that sometime starts with a nonmarital birth may require different public policy strategies than those used in the past for mother-only families. This report analyzes the trends in nonmarital childbearing, discusses some of the characteristics of unwed mothers, addresses some issues involving the fathers of children born outside of marriage, and offers some concluding remarks.

Introduction On January 30, 2009, a Monaco Declaration was signed by more than 150 marine scientists from 26 countries, calling for immediate action by policymakers to reduce carbon dioxide emissions so as to avoid widespread and severe damage to marine ecosystems from ocean acidification. The Monaco Declaration is based on the Research Priorities Report developed by participants in an October 2008 international symposium on "The Ocean in a High-CO 2 World," organized by UNESCO's Intergovernmental Oceanographic Commission, the Scientific Committee on Oceanic Research, the International Atomic Energy Agency, and the International Geosphere Biosphere Programme. In December 2010, the United Nations Environment Programme highlighted the emerging concerns over the relationship between ocean acidification and food security. While not yet fully understood, the ecological and economic consequences of ocean acidification could be substantial. Legislative attention by Congress on ocean acidification currently is focused on authorizing, funding, and coordinating research to increase knowledge about ocean acidification and its potential effects on marine ecosystems. What Is Ocean Acidification? The complex interplay between rising carbon dioxide (CO 2 ) levels in the atmosphere and the ocean's chemistry is a process that scientists have recognized for more than a century. As increasing CO 2 from the atmosphere dissolves in seawater, seawater chemistry is altered. The prevailing pH (a measure of hydrogen ion concentration) of water near the ocean surface is around 8.1, or slightly alkaline. Ocean acidification is the name given to the ongoing process whereby pH decreases as seawater becomes less alkaline when increasing amounts of anthropogenic CO 2 from the atmosphere dissolve in seawater. When atmospheric CO 2 dissolves into the ocean, it forms carbonic acid (H 2 CO 3 ). Some of the carbonic acid dissociates in ocean waters, producing hydrogen ions (H + ). As the number of hydrogen ions increases, the pH of the ocean decreases, and the water becomes less alkaline. Scientists are concerned that this change in seawater pH could alter biogeochemical cycles, disrupt physiological processes of marine organisms, and damage marine ecosystems. This report does not discuss the effects of increasing thermal stress to marine organisms and ecosystems (e.g., coral bleaching) related to climate change. However, marine ecosystems are likely to be affected by the synergistic effects of factors involved in both thermal and chemical processes. At What Rate Is Ocean Acidification Occurring, and What Factors Affect This Rate? Over the past several decades, the oceans annually have absorbed about 2 billion metric tons of the approximately 7 billion metric tons of carbon that all the countries in the world release as CO 2 into the atmosphere each year. It has been estimated that a total of more than 530 billion tons of CO 2 have been absorbed by the ocean between 1800 and 1994, with the average pH of water near the ocean surface decreasing by almost 0.1 pH unit. That decrease sounds small, but it represents a 26% increase in the concentration of hydrogen ions, because the pH scale is logarithmic (i.e., water with a pH of 6 is 10 times less acidic than water with a pH of 5, and 100 times less acidic than water with a pH of 4). Open ocean observational records of declining pH are available from the Hawaiian Ocean Time-Series Station in the Pacific and the Bermuda Atlantic Time-Series Station in the Atlantic. Up to a point, as atmospheric CO 2 continues to increase, ocean pH will continue to decrease; one estimate suggests that the rate of CO 2 uptake by the oceans could stabilize at around 5 billion metric tons per year by 2100. One prediction suggests that continued burning of fossil fuels and future uptake of CO 2 by the ocean could reduce ocean pH by 0.3-0.5 units. All gases, such as CO 2 , are less soluble in water as temperature increases. Thus, marine waters near the poles have a much greater capacity for dissolving CO 2 than do ocean waters in the tropics. In addition, dissolved CO 2 is transported into ocean depths at these high latitudes (i.e., deep water formation mechanism) since the lower-temperature waters are of higher density, causing greater convection to occur than happens in the more stratified tropical oceans. If temperature were the only factor affecting the rate of ocean acidification and its impacts on physical and biological features, these impacts might be more likely to occur in marine waters nearer the poles. However, in addition to temperature, other factors modulate the impact of CO 2 on marine waters. Cellular respiration and organic decomposition add CO 2 to seawater, and photosynthesis removes it. Deep oceanic water is enriched in CO 2 due to respiration in the absence of photosynthesis and, when brought to the surface by equatorial currents (i.e., upwelling), can place CO 2 -enriched seawater in contact with the atmosphere where it can absorb even more CO 2 . Hence, the tropics, and most notably tropical coral reefs, are also vulnerable to near-term effects. An additional factor is the potential increase in storm activity at higher latitudes, as some climate models suggest. CO 2 and other acidic gasses such as nitrogen dioxide are also dissolved in rainwater. An increase in North Atlantic or western North Pacific storms could significantly accelerate the pH decrease of surface ocean waters in these regions. Key scientific questions concern which factors may affect the future rate at which seawater pH might decrease, especially whether the rate of decrease will remain constant in direct relationship to the amount of CO 2 in the atmosphere or whether other factors, such as rising ocean temperatures diminishing CO 2 absorption, will decelerate the rate that pH changes. There is also the question of equilibrium—that is, how long might it take the process whereby the pH of warming ocean waters is decreasing to come into equilibrium with the concentration of atmospheric CO 2, should the currently increasing atmospheric emission rate of CO 2 eventually stabilize or diminish? An adjunct to this question is how long might it take the rate of ocean acidification to slow (or even reverse) in response to increasing water temperatures and any measures that might be taken to slow, halt, or even reverse the increasing concentration of CO 2 in the atmosphere? Additional questions relate to how ocean circulation, which partially controls the CO 2 uptake rate, might change in response to changes in the overlying climate as a result of greenhouse gas emissions. What Are Some of the Potential Effects of Ocean Acidification? Since the marine environment is complex and some of the likely changes may be years in the future, the potential effects identified in this section, although many are supported by laboratory experimentation, are primarily conjecture and/or forecasts. However, field studies are beginning to provide a more direct view of potential ocean acidification problems. Effects of Changing Ocean Chemistry A lower pH affects marine life in the oceans and is related to other changes in ocean chemistry. In addition to the lower pH, another consequence of the increased amount of dissolved CO 2 in the ocean is the production of more bicarbonate ions (HCO 3 1- ). As more CO 2 dissolves into the ocean, bicarbonate ions form at the expense of carbonate ions (CO 3 2- ), which scientists often describe by the following reaction: CO 2 + CO 3 2- + H 2 O = 2HCO 3 1- The abundance and availability of carbonate ions are critical to many shell-forming marine organisms. At current average ocean pH levels (about 8 or above), ocean waters near the surface have ample carbonate ions to support shell formation and coral growth. However, as increased amounts of carbonic acid form in the ocean as a result of higher atmospheric CO 2 levels, pH decreases and the amount of carbonate ions in the oceans declines, resulting in fewer carbonate ions available for making shells. Organisms make biogenic calcium carbonate for their shells and skeletons by combining calcium ions (Ca 2+ )—which are abundant in the oceans—with carbonate ions to form solid calcium carbonate (CaCO 3 ). Certain marine organisms (e.g., corals and pteropods) precipitate one mineral type of calcium carbonate called aragonite, and other marine organisms (e.g., foraminifera and coccolithophorids) use another type called calcite. A third type of calcium carbonate—high magnesium calcite—is precipitated by echinoderms (sea urchins and starfish) and some coralline algae (an encrusting form of red algae that forms calcareous crusts like coral). Under present conditions of ocean chemistry, these forms of calcium carbonate are relatively stable in waters near the ocean surface, except for certain areas of high upwelling activity. Water near the ocean surface currently is supersaturated (i.e., more concentrated than normally possible and therefore not in equilibrium) with calcite, high magnesium calcite, and aragonite, meaning that organisms easily can form shells from all of these mineral types. However, as more carbonic acid is formed in water near the ocean surface from higher levels of CO 2 in the atmosphere, the level of saturation decreases. If the ocean waters become undersaturated, then shells made from all of these minerals would tend to dissolve. Shells made from high magnesium calcite would tend to dissolve first, at lower concentrations of carbonic acid (and thus at higher pH values) than would shells made from aragonite. Shells made from calcite would dissolve at higher concentrations of carbonic acid than those made from aragonite. Thus, organisms that incorporate high magnesium calcite (i.e., echinoderms and some coralline algae) are likely to be the "first responders" to ocean acidification. Ocean waters at depths of thousands of feet are undersaturated with respect to all forms of biogenic calcite, which is why most of the shells from dead organisms that "rain" down from the ocean surface dissolve before reaching the ocean floor. Because of the combined effects of increased CO 2 and calcium carbonate solubility in cold water, some suggest that marine surface waters closer to the poles may become undersaturated within the next 50 years. Researchers at the Antarctic Climate and Ecosystems Cooperative Research Centre have demonstrated significant reductions in shell mass and thickness of several Southern Ocean marine algae and animals that appear consistent with the projected effects of recent decreases in seawater pH. Response of Marine Life to Changing Ocean Chemistry Although there has been a great deal of work growing organisms under different pHs, most species have biochemical mechanisms to regulate internal pH and are able, within limits, to grow skeletons even when the external medium is less alkaline. A lower pH environment may cause these organisms to expend more energy, but overall they may be able to adapt in complex and species-specific ways. Understanding how marine life might respond to less alkaline conditions is more complicated than the simple claims that all will dissolve, which may ignore the actual physiology of these organisms. Corals Some have raised questions downplaying the potential harm to coral reefs from ocean acidification. Differences of opinion exist on the relative effects of climate change as expressed in increased CO 2 when compared to increased ocean temperature. Opinion has been expressed that, in marine systems, increased temperature may have detrimental effects comparable to or larger than those seen from increased CO 2 concentration, for corals and for phytoplankton. Although calcification rates in massive Porites coral were reported to have declined over a 16-year study period by approximately 21% in two regions on Australia's Great Barrier Reef, these findings were consistent with other studies of the synergistic effect of elevated seawater temperatures and CO 2 concentrations on coral calcification. Concerns have also been expressed for coral reefs in the eastern tropical Pacific. While ocean acidification may not appear currently to be killing corals, decreasing seawater pH is slowing development of coral larvae into juvenile colonies. Some project that, in coral reef ecosystems, coral calcification will be reduced by 30% on average by the end of the century. Calcareous algae, another contributor to building the reef frame, will recruit, grow, and calcify under lower pH. However, the dissolution of reef carbonate by boring microflora could increase by 50% under less alkaline conditions by the end of the century. The decrease in coral and crustose coralline algae combined with the increase of carbonate dissolution under less alkaline conditions has the potential to jeopardize the maintenance and resilience of coral reefs and their services to human populations (in terms of food and economic resources). Emerging evidence for the variability in coral response to acidification as well as response to past climate change suggest greater heterogeneity in the pace and degree of reef degradation. In addition, shallow-water coral reefs with long water residence times may be able to mask the effects of ocean acidification in some downstream habitats. In support of the ability of certain corals to survive decreasing pH, stony and soft corals have been grown successfully in open systems with water from a saltwater well at a pH between 7.5 and 7.8 since the 1970s. However, given the high level of adaptation in corals to facilitate calcification via complex processes, at least some corals may be sensitive to changes in pH because of adaptation to invariant pH, with evidence coming primarily from the discovery that periods of high CO 2 in the geological past were often also periods of low aragonite-coral abundances and diversity. Others have found that certain species of coral survive in the laboratory at a pH of 7.3 to 7.6 after their calcified structure dissolves by functioning similar to sea anemones, and retaining the ability to recalcify when pH is increased. However, in the natural marine environment, predation could be a significant factor in limiting the viability of such "naked" corals, and it is unlikely that such organisms could form reefs and attract the diverse community that constitutes a coral reef. Other Invertebrates Increasing acidification may alter marine microbial activity, resulting in fundamental changes to how nitrogen is cycled in the ocean. Ocean acidification appears to decrease nitrification, which could reduce emissions of the greenhouse gas nitrous oxide to the atmosphere. In addition, an unknown but potentially significant proportion of the ocean's primary productivity could shift from nitrate- to ammonium-supported, possibly resulting in cascading effects in marine food webs. In the open ocean, some species of phytoplankton (i.e., microscopic floating plant life) may respond positively (increasing their primary production rate) to rising CO 2 concentrations in the ocean, while others, such as the calcifying coccolithophores, could be negatively affected (decreasing their calcification rate) by lower pH. Regarding the latter, however, some have suggested that several larger coccolithophore species may be able to increase their calcification in response to anthropogenic CO 2 release. Investigating 40,000 years of deposition in sediment core samples, others find a marked pattern of decreasing calcification of coccolithophores with increasing CO 2 and decreasing bicarbonate. There is also the concern that decreasing seawater pH may dissolve marine calcium carbonate sediments with potential harm to species and communities residing in and on these sediments. Since many of these organisms provide food or modify habitat for other organisms, the well-being of these carbonate-dependent species will affect other species. Because of these interrelationships, the potential indirect effects of decreased seawater pH on other marine organisms is not well understood. While some have raised concerns that ocean acidification, by harming calcifying plankton species, could shift ecological balances so as to increase populations of some noncalcifying species, there appears to be no significant relationship between jellyfish abundance and lower pH conditions, and any role of pH in structuring zooplankton communities is believed to be tenuous. There are also concerns that decreasing seawater pH could alter the ability of some invertebrate organisms to conduct essential biochemical and physiological processes. For example, scientists have found that, when exposed to water of pH 7.7, roughly equivalent to pH levels predicted for the year 2100, sea urchin sperm swam much more slowly. Overall, fertilization fell by 25%, and in almost 26% of cases where the eggs were fertilized, they did not survive long enough to develop into larvae. While marine invertebrates in general, and their early developmental stages in particular, are believed to be more sensitive to environmental disturbance, available data to assess their vulnerability to ocean acidification is contradictory. In a controlled study at pH values anticipated in 2100, calcification was reduced 28% in the pteropod Limacina helicina . These animals continued to grow and produce their shells even under high CO 2, but at a slower rate. Many species, including Pacific salmon, mackerel, herring, cod, and baleen whales, feed upon pteropods. Effects, if any, on the food web are unknown, since pteropod growth is strongly influenced by food availability and temperature, among other things. It is possible that higher temperatures could compensate for growth depression by CO 2 . Coastal areas with upwelling of deeper waters may be at risk from detrimental effects of ocean acidification much more quickly. Concerns have been expressed for benthic calcareous organisms living in the nearshore shelf along the North American west coast. More specifically, scientists in one of the Intergovernmental Panel on Climate Change (IPCC) scenarios have projected that mussel and oyster calcification, and thus shell strength, could decrease significantly by the end of the 21 st century. Recently, oyster growers in the Pacific Northwest have experienced severe larval mortalities resulting in multi-year reproductive failures which may be related to changing ocean chemistry. In addition, laboratory experiments indicate that mussels may exhibit significant signs of deterioration under acidified conditions predicted by the IPCC. Others have attempted to project the timing and severity of the effects of ocean acidification on commercial mollusc harvests. Vertebrates Answering the question of how acidification may affect fisheries will likely require the integration of knowledge across multiple disciplines. Although evidence suggests that larval and juvenile fish are more susceptible to changes in ocean water pH than adults, larval and juvenile fish exposed to exceedingly high CO 2 concentrations (more than 100 times current levels) suffered little apparent harm. Fish appear to be among the more tolerant marine animals. These scientists believe that "the relative tolerance of fish may relate to high capacity for internal ion and acid-base regulation via direct proton excretion, and an intracellular respiratory protein that results in a high oxygen-carrying capacity and substantial venous oxygen reserve." Other studies indicate that ocean acidification can impair olfactory discrimination and homing ability of a marine fish such as the clown fish in coral reefs. Physical Effects of Changing Ocean Chemistry Concern has also arisen that lower ocean water pH will diminish low-frequency (below 10 KHz) sound absorption in the ocean, increasing noise levels within the auditory range critical for environmental, military, and economic interests. Frequency-dependent decreases to sound absorption related to the current decrease in pH of about 0.1 pH unit may exceed 12%, and an anticipated pH decrease of 0.3 pH units by mid-century may result in an almost 40% decrease in sound absorption. It is unknown how marine mammals might be affected by and adapt to an ocean increasingly transparent to sound at low frequencies. Worst-Case Scenarios Worst-case scenarios can be particularly hard to characterize, due to unforeseen consequences and possible tipping points, where environmental response may suddenly no longer be directly or linearly related to the causative factors. Although the likelihood of a "worst-case scenario" coming to pass is uncertain and probably low, these circumstances require attention because ignoring them could be potentially disastrous. Mass extinction events of marine organisms have occurred in geologic history, and some of these events may have had some relationship to significant changes in ocean pH. The fossil record indicates that marine organisms may be quite sensitive to ocean acidification—about 55 million years ago, a large injection of CO 2 into the deep ocean, presumably resulting from a massive methane release, was followed by the extinction of some species of benthic foraminifera. In addition, the extensive loss of marine biodiversity in the Late Triassic, about 200 million years ago, appears to coincide with increased atmospheric CO 2 concentration. Mass extinctions in the geological record correspond to gaps of millions of years in coral reef building, and were likely caused by problems in the carbon cycle, among which acidification is a strong possibility. Some, however, caution that paleo-events may be imperfect analogs to current conditions. The Intergovernmental Panel on Climate Change has predicted that, under their worst-case scenario of no reduction or control of CO 2 emissions, ocean pH could decrease to 7.7 by 2100. Worst-case scenarios for ocean acidification focus on the potential for disruption of marine ecosystems to the extent that food production from the ocean—finfish, shellfish, and other invertebrates—could be compromised. Physiological changes caused by ocean acidification and affecting ocean primary productivity—phytoplankton—have the potential to alter marine ecosystems significantly, because primary production is at the base of almost all marine food chains. According to the most recent report on the status of the world's fisheries by the United Nations Food and Agriculture Organization, fisheries supply at least 15% of the animal protein consumed by humans, provide direct and indirect employment for nearly 200 million people worldwide and generate $85 billion annually. Any significant disruption of this industry could have broad dietary as well as economic consequences. Other consequences of a worst-case scenario include the loss of coral reefs, which, in addition to being unique ecosystems supporting extensive biodiversity, provide coastal protection to mediate storm and wave action as well as the basic structure for many island nations. Reef fish provide subsistence for hundreds of millions of coastal residents, particularly in Southeast Asia. In addition, reef tourism contributes significantly to the economy in the tropics—accounting for about $2 billion dollars of income to Queensland, Australia, about $6 billion dollars of income in the Caribbean (where developing countries can ill afford the loss of it), and a significant portion of the $6 billion that all tourism contributes in the Florida Keys. What Are the Natural and Human Responses That Might Limit or Reduce Ocean Acidification? Several natural feedback mechanisms can act to moderate the process of seawater pH change. The less alkaline the ocean becomes, the less CO 2 will be dissolved. In addition, the warmer the seawater becomes, the less CO 2 will dissolve. Speculative questions exist about what might occur should the oceans reach a ceiling (i.e., equilibrium) in their ability to take up CO 2 , and atmospheric CO 2 levels continue to increase. Even with increasing concentrations of atmospheric CO 2 , scientists predict that the oceans are not likely to reach pH values of less than 7 (neutral). Our ability to reduce ocean acidification through artificial means is unproven. Proposals have suggested the addition of chemicals to the ocean, such as (1) using iron compounds to stimulate planktonic algae growth, whereby the increased photosynthesis might capture/remove dissolved CO 2 ; (2) using limestone to neutralize (i.e., buffer) the lower-pH streams and rivers near where they enter oceans and close to sources of limestone, or adding limestone powder directly to the ocean where deeper, lower-pH water upwells; or (3) pumping the calcium bicarbonate byproduct from limestone scrubbers at natural gas power plants into the ocean. Other measures might include habitat restoration/creation, such as planting seagrass. Unless a massive global effort is mounted, these techniques will at best be effective only on a very local scale. In addition, manipulation of ocean chemistry has the potential to damage or otherwise alter the marine environment and ecosystems in unforeseen ways. Reducing CO 2 emissions to the atmosphere and/or removing CO 2 from the atmosphere (i.e., carbon sequestration) currently appear to be the only practical ways to minimize the risk of large-scale and long-term changes to the pH of marine waters. Because of the continuing increase in CO 2 levels in the atmosphere, and its resident time there, decreasing pH of ocean waters will likely continue for decades. Even if atmospheric CO 2 were to return to pre-industrial levels, it could possibly take tens of thousands of years for ocean chemistry to return to a condition similar to that occurring at pre-industrial times more than 200 years ago. What Is the Federal Government Doing About Ocean Acidification? Much of the current federal attention to ocean acidification focuses on research to better understand the chemical processes involved and to become better able to predict how ocean ecosystems might respond to decreasing pH. The National Science Foundation (NSF) was the first federal agency to become involved in research related to ocean acidification. The modern surveys of CO 2 in the oceans can be traced to the NSF-sponsored Joint Global Ocean Flux Study (JGOFS), which originated in recommendations from a National Academies of Science workshop in 1984. The more modern concerns over ocean acidification arose from a May 2004 Paris workshop chaired by the now-president of the National Academy of Sciences, Ralph Cicerone. In April 2005, NSF, the National Oceanic and Atmospheric Administration (NOAA), and the U.S. Geological Survey sponsored a workshop on the impacts of ocean acidification on coral reefs and other marine calcifiers. In Section 701 of P.L. 109-479 , Congress called for an 18-month comprehensive national study by the National Research Council of the National Academies of Science on how CO 2 emissions absorbed into the oceans may be altering fisheries, marine mammals, coral reefs, and other natural resources. This study was commissioned by NOAA and NSF in October 2008, and a summary of Ocean Acidification: A National Strategy to Meet the Challenges of a Changing Ocean was released in late April 2010; the full report was published in September 2010. The Federal Ocean Acidification Research and Monitoring Act of 2009 (FOARAM; P.L. 111-11 ) established the interagency working group on ocean acidification (IWGOA). The IWGOA is chaired by a representative from the National Oceanic and Atmospheric Administration and includes representatives from the National Science Foundation, Bureau of Ocean Energy Management, U.S. Department of State, Environmental Protection Agency, National Aeronautics and Space Administration, U.S. Geological Survey, U.S. Fish and Wildlife Service, and U.S. Navy. The IWGOA was charged with developing a strategic research and monitoring plan to guide federal research on ocean acidification. In 2012, a draft of the Strategic Plan for Federal Research and Monitoring of Ocean Acidification was released and sent to the National Research Council for review. The strategic research plan attempts to provide a common vision and specific goals to coordinate activities of federal agencies. The plan is organized into the following seven themes, 1. monitoring of ocean chemistry and biological impacts, 2. research to understand responses to ocean acidification, 3. modeling to predict changes in the ocean carbon cycle, 4. technology development and standardization of measurements, 5. assessment of socioeconomic impacts and development, 6. education, outreach, and engagement strategy, and 7. data management and integration. FOARAM also directed the IWGOA to submit a report to Congress every two years that summarizes federally funded ocean acidification activities. The most recent report for FY2010 and FY2011 identifies funding levels by agency and by the strategic themes used in the strategic research plan. In FY2011, total funding for ocean acidification activities was approximately $29 million. Funding for activities with a primary focus on ocean acidification was approximately $21 million and funding for activities related to ocean acidification was approximately $8 million. What Is the Congressional Interest in Ocean Acidification? In comparison to previous sessions of Congress, legislative interest in ocean acidification expanded significantly in the 110 th Congress. Congressional attention focused primarily on addressing the cause of ocean acidification—increasing atmospheric CO 2 . To date, legislative attention to ocean acidification has focused on authorizing, funding, and coordinating research to increase knowledge about ocean acidification and its potential effects on marine ecosystems. In the 111 th Congress, FOARAM directed the Secretary of Commerce to establish an ocean acidification program within NOAA, established an interagency committee to develop an ocean acidification research and monitoring plan, and authorized appropriations through FY2012 for NOAA and the National Science Foundation. On April 22, 2010, the Senate Commerce, Science, and Transportation Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard held a hearing on the environmental and economic impacts of ocean acidification. Several additional measures were introduced in the 111 th Congress to address this issue. The only bill related to ocean acidification that has been introduced during the 113 th Congress is the Coral Reef Conservation Act Amendments of 2013 ( S. 839 ). S. 839 would include ocean acidification in the criteria used to evaluate project proposals for studying threats to coral reefs and developing responses to coral reef losses. On July 30, 2013, the Senate Committee on Commerce, Science and Transportation ordered S. 839 to be reported. Additional Selected References R.P. Kelly, et al., "Mitigating Local Causes of Ocean Acidification with Existing Laws," Science , v. 332 (May 27, 2011): 1036-1037. Quirin Schiermeier, "Earth's Acid Test," Nature , v. 471 (March 10, 2011): 154-156.

With increasing concentrations of carbon dioxide (CO2) in the atmosphere, the extent of effects on the ocean and marine resources is an increasing concern. One aspect of this issue is the ongoing process (known as ocean acidification) whereby seawater becomes less alkaline as more CO2 dissolves in it, causing hydrogen ion concentration in seawater to increase. Scientists are concerned that increasing hydrogen ion concentration could reduce growth or even cause death of shell-forming animals (e.g., corals, mollusks, and certain planktonic organisms) as well as disrupt marine food webs and the reproductive physiology of certain species. While not yet fully understood, the ecological and economic consequences of ocean acidification could be substantial. Scientists are concerned that increasing hydrogen ion concentration in seawater could alter biogeochemical cycles, disrupt physiological processes of marine organisms, and damage marine ecosystems. This report does not discuss the effects of increasing thermal stress to marine organisms and ecosystems (e.g., coral bleaching) related to climate change. However, marine ecosystems are likely to be affected by the synergistic effects of factors involved in both thermal and chemical processes. Congress is beginning to focus attention on better understanding ocean acidification and determining how this concern might be addressed. In the 111th Congress, the Federal Ocean Acidification Research and Monitoring Act of 2009 (Title XII, Subtitle D, of P.L. 111-11) directed the Secretary of Commerce to establish an ocean acidification program within NOAA, established an interagency committee to develop an ocean acidification research and monitoring plan, and authorized appropriations through FY2012 for NOAA and the National Science Foundation. The only bill related to ocean acidification that has been introduced during the 113th Congress is the Coral Reef Conservation Act Amendments of 2013 (S. 839). S. 839 would include ocean acidification in the criteria used to evaluate project proposals for studying threats to coral reefs and developing responses to coral reef losses. On July 30, 2013, the Senate Committee on Commerce, Science and Transportation ordered S. 839 to be reported.

Introduction The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans who meet certain eligibility criteria. These benefits and services include, among other things, hospital and 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 department carries out its programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. 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 BVA reviews all appeals made by veterans or their representatives for entitlement to veterans' benefits, including claims for service connection, increased disability ratings, pensions, insurance benefits, and educational benefits, among other things. This report provides a preliminary analysis of the President's budget request for FY2013 for the programs administered by the VA. The information provided in this report is based on the President's budget proposal provided to Congress on February 13, 2012. The report begins with a brief introduction to the department's budget. Next, it provides funding levels requested by the President for FY2013 for VA health related programs. This is followed by a discussion of funding levels requested for mandatory programs and administration, including programs such as construction of VA facilities and information technology. This not an exhaustive discussion of VA's budget request for FY2013. The Department of Veterans Affairs Budget To provide some context to the discussion that follows, this section briefly introduces the various accounts that fund the department. The VA's budget is composed of both mandatory and discretionary spending accounts. Mandatory funding supports disability compensation, pension benefits, education, vocational rehabilitation, life insurance, and burial benefits, among other benefits and services. Discretionary funding supports a broad array of benefits and services with a majority of funding going toward providing medical care to veterans. According to the President's budget documents, in FY2012 the total VA budget authority was approximately $127.0 billion. The FY2013 budget request for the VA is for approximately $140.3 billion in budget authority. The VA's health care program is funded through multiple appropriations accounts that are supplemented by other sources of revenue. The appropriation accounts used to support VA health care programs include (1) medical services, (2) medical administration (currently known as medical support and compliance), (3) medical facilities, and (4) medical and prosthetic research. In addition to the direct appropriations accounts mentioned above, the Consolidated Omnibus Budget Reconciliation Act of 1985 ( P.L. 99-272 ), enacted into law in 1986, gave the VA the authority to bill some veterans and most health care insurers for non-service-connected care provided to veterans enrolled in the VA health care system to help defray the cost of delivering medical services to veterans. The Balanced Budget Act of 1997 ( P.L. 105-33 ) gave the VA the authority to retain these funds in the Medical Care Collections Fund (MCCF). The funds deposited into the MCCF would be available for medical services for veterans. These collected funds do not have to be spent in any particular fiscal year and are available until expended. In 2009, Congress passed the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ) that authorized advance appropriations for three of the four accounts that comprise the VHA: medical services, medical support and compliance, and medical facilities. The medical and prosthetic research account is not funded as an advance appropriation, but is funded through the regular appropriations process. The medical services account funds health care services provided to eligible veterans and beneficiaries in VA's medical centers, outpatient clinic facilities, contract hospitals, state homes, and outpatient programs on a fee basis. The medical support and compliance account funds management and administration of the VA health care system, including financial management. The medical facilities account includes funds for the operation and maintenance of the VA health care system's capital infrastructure (excluding construction), such as costs associated with utilities, facility repair, laundry services, and groundskeeping. The Budget Request for FY2013—Health Care Programs Background The Veterans Health Administration (VHA) operates the nation's largest integrated direct health care delivery system. Although Medicare, Medicaid, and the Children's Health Insurance Program (CHIP) are also publicly funded programs, most health care services under these programs are delivered by private providers in private facilities. In contrast, the VA health care system could be categorized as a veteran-specific national health care system, in the sense that the federal government owns the medical facilities and employs the health care providers. The VA's health care system is organized into 21 geographically defined Veterans Integrated Service Networks (VISNs). Although policies and guidelines are developed at VA headquarters to be applied throughout the VA health care system, management authority for basic decision making and budgetary responsibilities are delegated to the VISNs. As of FY2012, VHA operates 152 hospitals (medical centers), 133 nursing homes, 824 community-based outpatient clinics (CBOCs), 6 independent outpatient clinics, and 300 Readjustment Counseling Centers (Vet Centers). In 2009, VA began a pilot Mobile Vet Center (MVC) program to improve access to services for veterans in rural areas, and the Department has deployed 70 MVCs to date. VHA also operates 10 mobile outpatient clinics. VHA provides most health care services to eligible veterans through its integrated network of facilities. However, current law authorizes VHA to pay for non-VA providers: (1) when a clinical service cannot be provided at a VA medical center (VAMC); (2) when VA health care facilities are geographic inaccessibility to the veteran; or (3) in emergencies when delays could lead to life threatening situations. These are generally referred to as Fee Basis Care services. Fee Basis Care may include dental services, outpatient care, inpatient care, emergency care, and medical transportation. Pre-authorized inpatient services include non-emergency and emergency care. 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 also provides grants for construction of state-owned nursing homes and domiciliary facilities and collaborates with the Department of Defense (DOD) in sharing health care resources and services. Apart from providing direct patient care to veterans, VHA's other statutory missions are to conduct medical research, serve as a contingency backup to the DOD medical system during a national security emergency, provide support to the National Disaster Medical System and the Department of Health and Human Services as necessary, and train health care professionals to provide an adequate supply of health personnel for the VA and the nation. The Veteran Patient Population27 In FY2012, approximately 8.7 million of the 22.1 million living veterans in the nation were enrolled in the VA health care system. It is estimated that in FY2013 there will be approximately 8.8 million veterans enrolled in the system. Of the total number of enrolled veterans in FY2012, VA anticipated treating approximately 5.6 million unique veteran patients. For FY2013, VHA estimates that it will treat about 5.7 million unique veteran patients or 2.0% over the FY2012 estimate. Included within this estimate are 610,416 Operation Enduring Freedom, Operation Iraqi Freedom, and Operation New Dawn (OEF/OIF/OND) veteran patients (9.7% of the total patient population) who VA anticipates treating in FY2013. The VHA also estimates that outpatient visits will increase from 87.7 million in FY2012 to 91.1 million in FY2013, an increase of 3.3 million, or 3.8 %. It also anticipates an increase in inpatients treated from 919,487 in FY2012 to 936,201 in FY2013, an increase of 16,714, or 1.8%. President's Request The VA's annual appropriations for the medical services, medical support and compliance, and medical facilities accounts, include advance appropriations that become available one fiscal year after the fiscal year for which the appropriations act was enacted. Therefore, funding levels for FY2013 for these three accounts were provided by the Consolidated Appropriations Act 2012 ( P.L. 112-74 ). However, in any given year the Administration could request additional funding for the upcoming fiscal year and Congress could revise these amounts through the annual appropriations process. For FY2013, the President's budget is requesting $41.5 billion for the medical services account. This amount is $165 million over the FY2013 advance appropriated amount of $41.4 billion. According to the VA, this increase reflects the increased costs of the implementation of the Caregivers and Veterans Omnibus Health Services Act ( P.L. 111-163 ) and the Agent Orange and Amyotrophic Lateral Sclerosis (ALS) presumptions established by the VA. , For the medical support and compliance, and the medical facilities accounts, the President's FY2013 budget is proposing the same amount as the advance appropriated amount of $5.7 billion and $5.4 billion, respectively (see Table 1 ). The President's budget is requesting approximately $583 million for the medical and prosthetic research account, an increase of $1.7 million, or 0.3%, above the FY2012 enacted amount of $581 million. VHA's major research priorities in FY2013 will include, among others, mental health, Gulf War veterans' illnesses and exposures, prosthetics, traumatic brain injury (TBI), spinal cord injury, women veterans, and a special initiative on researching pain. In total the FY2013 budget request for VHA is $56.3 billion, including medical care collections (see Table 1 ). As required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the President's budget is requesting $54.5 billion in advance appropriations for the three medical care appropriations (medical services, medical support and compliance, and medical facilities) for FY2014, an increase of approximately 3.3% over the FY2013 requested amount of $52.7 billion for the same three accounts. In FY2014, the Administration's budget request would provide $43.6 billion for the medical services account, $6.0 billion for the medical support and compliance account, and $4.9 billion for the medical facilities account (see Table 1 ). The Budget Request for FY2013—Mandatory Benefit Programs and Administration Table 2 shows the VA budget for mandatory benefit programs and administration as reported by the VA for FY2011 through FY2013. The changes in certain accounts between FY2011 and FY2013 may reflect changes due to law, regulations, or other factors as discussed below. Disability Compensation The Disability Compensation category includes payments for a number of benefits, such as disability compensation; dependency and indemnity compensation (DIC); pension benefits for low-income disabled or elderly combat veterans and their survivors; burial benefits (allowances, flags, headstones, etc.); and a clothing allowance for certain disabled veterans. The large increase ($10.5 billion, or 20.5%) between FY2012 and FY2013 is overstated due to the impact of carryovers (unobligated balances). There was a large carryover between FY2011 and FY2012 of $12.9 billion, of which $9.9 billion is anticipated to be obligated in FY2012 (for a total obligation in FY2012 of $61.2 billion), leaving a carryover of $3.0 billion into FY2013. The carryover has been the result of lower than anticipated retroactive payments associated with the recent presumptions related to Agent Orange. In general, the average payments for benefits, including disability compensation, pension, and survivor benefits are expected to increase due to the annual cost-of-living adjustment (COLA). Readjustment Benefits The Readjustment Benefits category reflects a number of benefits related to the transition of servicemembers from active duty status to veteran status, as well as disabled veterans, including education benefits, vocation rehabilitation, financial assistance for adaptive automobiles and equipment, and housing grants. The increase in readjustment benefits between FY2012 and FY2013 reflects increases in two programs: (1) the Post-9/11 GI bill (primarily due to the COLA) and (2) the Veterans Retraining Assistance Program that was established by P.L. 112-56 . Insurance (Mandatory) The Insurance (Mandatory) category includes supplemental funding for National Service Life Insurance (NSLI), Service-Disabled Veterans Insurance (S-DVI), and Veterans Mortgage Life Insurance (VMLI). The increase between FY2012 and FY2013 for insurance reflects the deaths associated with the NSLI and S-DVI programs and the increase in the maximum coverage under the VMLI program. Housing and Other Mandatory Benefits The Housing and Other Mandatory Benefits category includes guaranteed and direct loan programs for veterans, Native American housing loans, and various proprietary receipts (from the public). The decrease in the mandatory housing category between FY2012 and FY2013 reflects the timing of the re-estimates for the programs. The FY2013 re-estimates will not be completed until the end of FY2012 and will be reflected in the FY2014 budget submission. Because of the timing of the re-estimates, the FY2012 housing category is $1.3 billion higher than the original budget submission. Veterans Employment and Infrastructure Enhancement Transfer Fund This is a new category reflecting a proposal for legislation to create a Veterans Job Corps. General Operating Expenses—VBA The increase in the VBA general operating expenses between FY2012 and FY2013 is primarily due to an increase in personal services costs, associated with personnel and the proposed cost-of-living adjustment. Information Technology The Information Technology category includes maintenance and improvements to the information technology of all VA functions. For FY2013, the Administration's budget requests $3.3 billion for Information Technology, an increase of $216 million over the FY2012 enacted level of $3.1 billion. Major Construction The Major Construction category, which is for construction related projects for all VA components in which the total project cost is $10 million or more, reflects a decrease of 9.7% between FY2012 and FY2013. Minor Construction The Minor Construction category, which is for construction related projects for all VA components in which the total project cost is less than $10 million, reflects an increase of 25.9% between FY2012 and FY2013.

The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans who meet certain eligibility criteria. These benefits and services include hospital and 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. This report provides a preliminary analysis of the President's budget request for FY2013 for the programs administered by the VA. For FY2013, the Administration is requesting approximately $140.3 billion for the VA, an increase of $13.4 billion over FY2012 budget authority. This amount includes approximately $64.0 billion in discretionary funds and approximately $76.4 billion in mandatory funding. The FY2013 budget request for VA medical care programs is $56.3 billion, with a FY2014 request of advance appropriations of $54.5 billion. This report is not an exhaustive discussion of VA's budget request for FY2013. A full CRS report on FY2013 VA budget and appropriations issues is planned after initial congressional consideration of appropriations legislation.

Introduction Detection of and protection against illicit acquisition and use of special nuclear material (SNM) is a longstanding concern of the U.S. government. Since the development of nuclear weapons, federal agencies have been involved in securing U.S. nuclear assets against diversion, theft, and attack. Similarly, concerns that terrorists or non-state actors might acquire a nuclear weapon or the materials necessary to construct one have led to federal efforts to track, detect, and secure such materials domestically and abroad. Preventing a terrorist or non-state nuclear attack within the United States involves more than detection of the nuclear weapon. A larger system of deterrence, counterproliferation, and response activities are established to address the nuclear threat. Intelligence information gathering regarding the intent and capability of terrorist and non-state groups and law enforcement activities that disrupt the formation and action of these groups play key roles in preventing initial acquisition of nuclear and radiological materials. Another crucial step subsequent to the detection of illicit nuclear or radiological materials is successful interdiction of these materials. Nevertheless, this report addresses only the global nuclear detection architecture, not programs focusing on events prior or subsequent to the detection opportunity. Federal Efforts The federal government has implemented a series of programs focused on detecting the illicit shipment of nuclear and radiological materials and protecting and securing nuclear weapons and material. Following the events of September 11, 2001, these programs were augmented by new programs focusing on preventing radiological and nuclear terrorism within the United States. Some of these new and existing efforts had overlapping goals, but they generally used different approaches to improve the detection and security of nuclear materials. These programs largely reside within the Departments of Defense, Energy, and State; agencies that became part of the Department of Homeland Security (DHS) upon its creation in 2002; and the Nuclear Regulatory Commission. Many of these agencies have both national and international roles in nuclear defense, protecting domestic nuclear assets while aiding in securing or detecting the transport of foreign nuclear material. Programs established by the Departments of Defense and Energy and the Nuclear Regulatory Commission have focused on the security of nuclear and radiological materials. For example, the Department of Energy (DOE) International Nuclear Materials Protection and Cooperation program aids in securing foreign special nuclear material. The Department of Defense (DOD), through the Defense Threat Reduction Agency (DTRA), has enhanced the security and safety of fissile material storage and transportation in the former Soviet Union while dismantling and destroying associated infrastructure. Other programs have focused on detection of nuclear and radiological materials in transit, in order to detect attempts to illicitly transport a nuclear weapon or special nuclear material across borders. The DOE Second Line of Defense (SLD) program aids in establishing capabilities to detect nuclear and radiological materials in foreign countries at ports of entry, border crossings, and other designated locations. The Department of State Export Control and Related Border Security Assistance Program undertakes similar efforts to provide radiation detection capabilities at border crossings. Other programs are designed to detect nuclear and radiological materials in transit towards the United States, through screening either at foreign ports or at the U.S. border. For example, U.S. Customs and Border Protection uses both handheld and portal-based radiation monitoring to detect nuclear and radiological materials entering the United States. Once created, DHS expanded the deployment of radiation detectors, both portal monitors through the Radiation Portal Monitor (RPM) program and handheld and portable detectors through the U.S. Coast Guard and Customs and Border Protection. The DHS Science and Technology (S&T) Directorate began research and development activities to develop an improved radiation detection portal and an integrated plan and structure for the use of federal radiation detection equipment. Additionally, DHS developed several overarching initiatives, such as the Container Security Initiative and the Secure Freight Initiative, to increase the likelihood that nuclear and radiological material or a nuclear weapon would be detected, identified, and interdicted during shipping. These initiatives built on other federal efforts, such as the DOE Megaports Initiative, which deploys radiation detection equipment and aims to increase detection of nuclear materials at ports of departure rather than at ports of entry. The early post-September 11, 2001, efforts of the federal government, taking place in several agencies and departments, were criticized by experts who perceived these activities as uncoordinated and insufficient to protect the United States from nuclear terrorism. The Defense Science Board, among others, recommended that the federal government make a greater, more organized effort to protect the United States against the nuclear terrorism threat. Domestic Nuclear Detection Office The Domestic Nuclear Detection Office (DNDO) was established by President Bush on April 15, 2005. Intended to centralize coordination of the federal response to an unconventional nuclear threat, DNDO is located within the Department of Homeland Security. Its first budget was requested as part of the S&T Directorate, but DNDO was subsequently established as an independent office whose Director reports directly to the Secretary. The SAFE Port Act ( P.L. 109-347 ) gave the office statutory authority and specific responsibilities to protect the United States against radiological and nuclear attack. Among these responsibilities is to develop, with the approval of the Secretary and in coordination with the Attorney General, the Secretary of State, the Secretary of Defense, and the Secretary of Energy, an enhanced global nuclear detection architecture with implementation under which (A) the Office will be responsible for the implementation of the domestic portion of the global architecture; (B) the Secretary of Defense will retain responsibility for implementation of Department of Defense requirements within and outside the United States; and (C) the Secretary of State, the Secretary of Defense, and the Secretary of Energy will maintain their respective responsibilities for policy guidance and implementation of the portion of the global architecture outside the United States, which will be implemented consistent with applicable law and relevant international arrangements. The development and implementation of a global nuclear detection architecture is a challenging endeavor. Because federal efforts to protect against nuclear attack are spread among multiple agencies, determining the full range of existing efforts, coordinating the outcomes of these efforts, identifying any overlaps and gaps between them, and developing an architecture integrating current and future efforts are likely to be evolving, ongoing tasks. What Is the Global Nuclear Detection Architecture? The SAFE Port Act requires that DNDO establish an "enhanced global nuclear detection architecture," but it does not define this term. A variety of interpretations are possible. For example, an architecture could be a collection of federal and nonfederal programs, a grouping of sensors or other technologies designed to detect nuclear and radiological material, a mechanism for collecting and distributing information about nuclear and radiological material, a framework for investment and prioritization of detection assets, or various combinations of the above and more. The DNDO describes the global nuclear detection architecture as comprising several key elements: "a multi-layered structure of radiological/nuclear (rad/nuc) detection systems, deployed both domestically and overseas; a well-defined and carefully coordinated network of interrelationships among them; and a set of systems engineering-based principles and guidelines governing the architecture's design and evolution over time." In implementing this definition, DNDO solicited information about existing programs from agencies involved in nuclear detection. The DNDO then performed a "net assessment" of federal nuclear detection capabilities. This assessment determined that 72 programs contributed in whole or in part to the existing global nuclear detection architecture, with total funding of more than $2.2 billion in FY2006. This existing global nuclear detection architecture includes programs at DHS, the Department of Defense (DOD), the Department of Energy (DOE), the Department of State (DOS), and other agencies. According to DHS, before the formation of DNDO these programs were "a disparate patchwork of systems, distributed and implemented in recent years across multiple departments, jurisdictions and locations without any degree of coordination." The DNDO has organized these programs into a global nuclear detection architecture framework, a combined system of systems, which relies heavily on its technological component. The deployment of radiation detectors at points of entry, commercial ports, and other border crossings is key to its effectiveness. Although much focus has been given to technologies to detect nuclear or radiological material that have been developed or procured by DNDO, the global nuclear detection architecture encompasses more than just these sensors. Other elements include site security of known nuclear or radiological material, use of sensor data to inform decision makers, effective reaction to a detection event, and interdiction following detection. According to the Government Accountability Office, "combating nuclear smuggling requires an integrated approach that includes equipment, proper training of border security personnel in the use of radiation detection equipment, and intelligence gathering on potential nuclear smuggling operations." Other experts have concluded that the deployment of radiation detectors needs to be highly integrated with other federal efforts, prioritized on identified threats, configured for flexibility and efficiency, and organized as a global approach including international institutions. The DNDO has attempted to align existing federal programs so that their capabilities can be compared and integrated into an organizing framework that can help identify gaps and duplication. This framework consists of three partially overlapping layers with nine sub-layers. See Figure 1 . The layers are distinguished geographically: interior, border, and exterior. The overlap between the exterior and border layers may make analysis of priorities between and within the layers more difficult. The sublayers correspond mainly to conceptual steps in the transportation of a threat object to a target. The global nuclear detection architecture has a broad, international scope, so implementing it is difficult. Multiple agency initiatives and programs must be relied on to achieve the architecture's goals, and its effectiveness is dependent on many factors outside of DNDO's direct authority and control. By categorizing existing programs in this architecture, DNDO could analyze federal nuclear detection capabilities, identifying gaps and vulnerabilities through which a potential adversary might be able to avoid detection. These gaps may be filled by redirecting existing efforts, increasing existing efforts, deploying available technology, and implementing research and development programs that develop solutions to such gaps. Layered Defense A layered, defense-in-depth approach to a global nuclear detection architecture was recommended by the Defense Science Board when considering how to protect DOD assets against unconventional nuclear threats. Successful application of a layered defense provides multiple opportunities to detect and interdict threats. According to DNDO, "It is recognized that no single layer of protection can ever be one hundred percent successful," and a layered defense strategy acknowledges this difficulty. If one sublayer fails to detect a threat, the next may succeed. This increase in the likelihood of detection occurs in two different ways. In one case, a threat may avoid the detector in an outer layer, but then encounter a detector in an inner layer. In this case, having more detection opportunities makes it more likely that a detector is encountered. An example of this approach could be the use of detection technology at U.S. borders coupled with random truck screening at weigh stations on interstate highways. The DNDO has explicitly attempted to incorporate such redundancy into its global nuclear detection architecture, identifying numerous areas where detection capabilities might be integrated into existing operations: Examples include, but are not limited to, fixed and mobile detection systems integrated into commercial vehicle inspection activities, detection enabled law enforcement, and screening conducted for special events. Capabilities that may require additional operational costs include mobile teams sweeping of areas of concern, chokepoint screening at bridges and tunnels, roadway monitoring concepts, and options for reducing the risk posed by the small maritime craft pathway. Alternatively, a threat may encounter a detector in an outer layer that fails to detect it, but then may encounter a different type of detector in an inner layer that is more successful. In this case, it is the use of different detection technologies or procedures that provides the increased likelihood of success. Examples might include the screening of manifest information for shipments entering the United States, followed by the use of radiation detection equipment; the use of both radiation detectors and non-intrusive imaging technologies; or the physical search of a vehicle triggered by suspicious behavior even though a radiation detector did not detect any emitted radioactivity. Prior experience has shown that nuclear smuggling detection occurs not only through the raising of alarms by radiation detection equipment at borders, but also by intelligence information and through police investigations. An additional advantage to a layered system is that its multiple detection and interdiction opportunities may increase the number of steps that a terrorist group must take to evade detection. Because of these additional steps, the group may be more likely to be detected by other means unrelated to the global nuclear detection architecture. For example, if it is necessary to disassemble a nuclear device to avoid detection, the reassembly of the device within the United States might be prevented by unrelated law enforcement activities. Even better, the increased complexity of evading detection might deter an attacker from even attempting a particular type of attack. The ability to correlate information from different layers may also enhance the detection capability of the global nuclear detection architecture. Fusion of data from the different layers may reveal patterns or information not apparent in any single layer. It is the intent of the global nuclear detection architecture to integrate detection and notification systems at the federal, state, and local level, but accomplishing that goal may take significant time and effort, as procedures, technology, and data formats may need to be harmonized to allow easy information exchange. Methodology and Metrics for Evaluation A significant advantage to establishing a global nuclear detection architecture is that it provides a framework for analysis of the overall effectiveness of federal nuclear detection efforts. Thus the performance of programs in each layer of the architecture can be measured and judged within the context of the overall structure rather than in isolation. In this way, effectiveness and efficiency can be maximized for the architecture overall rather than for each program individually. Decision makers attempting to analyze the architecture effectiveness and efficiency will likely require a methodology and establishing metrics, qualitative or quantitative, for each layer or sublayer. The DNDO uses the global nuclear detection architecture framework to identify gaps in existing detection capabilities. Methodology to map existing and future capabilities onto an analytical construct that is sensitive to changes in the architecture would provide a more robust tool for prioritization and assessment. According to DNDO, application of such a risk- and cost-based assessment methodology to radiological and nuclear countermeasures would be relatively new, and DNDO planned to validate the employed methodology in 2008 on the basis of independent peer review. In 2004, the DHS S&T Directorate requested studies for the development of such an analytic framework and the identification of appropriate metrics. This work was transferred to DNDO upon its creation in 2005. Since then, additional studies of general aviation and maritime pathways have expanded the analytic basis for assessment of investments in the global nuclear detection architecture. The degree to which existing programs can be related to these analytic frameworks likely determines their utility and applicability. A notional analytic framework—one in which some elements of the framework may not reflect the actual systems in place or some parameters are estimated or extrapolated rather than based on empirical data—may not be adequate for deciding which programs to invest in, alter, or otherwise optimize for maximum effect within the framework. On the other hand, a framework derived only from existing programs may overvalue the existing assets while undervaluing the potential contributions of new programs. A further concern with respect to analytic methodology is its ability to reflect the effects of both large and small changes. The global nuclear detection architecture is a multi-billion dollar enterprise composed of dozens of programs. A methodology that encompasses all these programs but omits significant detail may not be sensitive enough to reflect the impact of incremental changes. For example, some experts have advocated deployment of radiation detection sensors at specific sites based on identified smuggling routes and at ports of entry where nuclear and radiological materials are not adequately secure. Ideally, an analytic methodology would provide the means to compare that strategy to other strategies, such as a general increase in border detectors. A methodology that addresses all programs in sufficient detail may be cumbersome to use and may not reflect the value of intangible concepts, such as deterrence or misdirection. An approach involving analysis of selected components of the global nuclear detection architecture, rather than the architecture as a whole, may make the analytical methodology more tractable. However, this may lead to inaccuracy when considering areas that fall between the individual component analyses or when considering the overall context of the architecture. Optimizing the efficiency and effectiveness of each individual component may not optimize the overall architecture. Even if it does, such an approach may not be cost effective. The DNDO has stated that it takes a systems engineering approach to developing and refining the global nuclear detection architecture. Such an approach attempts to optimize the overall performance of the architecture rather than optimizing any particular program within it. Treating the global nuclear detection architecture as a "system of systems" may efficiently develop an effective architecture, but such treatment requires clear metrics around which the system is to be engineered. The DNDO may find identifying the appropriate metrics for evaluation challenging. Outcome-oriented metrics, such as the number of false positives resolved, the number of threats found, or the number of vehicles cleared, may not be suitable for judging the effectiveness of the architecture, though these metrics may help determine the efficiency or completeness of the planned architecture. On the other hand, more desirable measures, such as the degree of risk reduction, may require a more complete understanding of global risk than is currently available. Metrics based on analysis of the existing global nuclear detection architecture may have similar difficulties. If the existing architecture has insufficient detection capability or coverage, incremental improvement to that architecture may lead to a new architecture that still has insufficient detection ability or coverage. Conversely, if the performance of the architecture is acceptable, incremental improvements may not yield substantial benefit when compared with the incremental cost. Vulnerability or gap analysis could be used to prioritize and assess architecture effectiveness. A challenge for this approach is the difficulty of determining an acceptable level of detection and geographic coverage. The DNDO has identified gaps in the global nuclear detection architecture and is attempting to develop options and strategies for reducing these gaps. A vulnerability- or gap-based approach relies on identifying, developing, or implementing solutions to these vulnerabilities or gaps. Determining whether a vulnerability or gap exists may require judging the sufficiency of existing detection capabilities. This judgment of the sufficient or acceptable detection capability, unlikely to be 100%, may be open to debate. Finally, the nature of the terrorist nuclear threat, potentially a changing threat based on an intelligent adversary, implies that any metrics and methodology developed to assess the global nuclear detection architecture's effectiveness will need to evolve as the threat does. When advances in technology, new intelligence information, and other factors are considered, the effectiveness of the global nuclear detection architecture may need to be judged on active testing or "red teaming" of the architecture. The results of such active testing may be misleading if the testing does not conform to the threat for which the architecture is designed. For example, if the architecture is designed to detect only large amounts of a nuclear material, testing it with a small amount of nuclear material may highlight current limitations but not address the effectiveness of the architecture at the tasks for which it is designed. Moreover, a robust architecture containing sublayers with varying detection success rates may still provide sufficient protection against a particular threat, even if a single sublayer is insufficiently protective. In order to validate the results of "red teaming" exercises, DNDO plans to "conduct and quantify assessment results in various directions, including scenario-based 'bottom-up' assessments, capabilities-based 'top-down' assessments, and complex metrics development." Priority Setting Gaps and vulnerabilities in the global nuclear detection architecture, depending on their nature, may be addressed now or in the future. In some cases, no solutions to these gaps and vulnerabilities are currently available, and a solution will need to be identified through research and development. The DNDO has stated that "there are still key, long-term challenges and vulnerabilities in our detection architecture that require long-range, higher risk research programs that will need to be evaluated in terms of risk reduction, direct and indirect costs, operational feasibility, and other relevant decision factors." In other cases, the available near-term solution is an incremental improvement over existing approaches. In these cases, policymakers must decide whether to invest in a near-term, potentially incomplete solution; accept the presence of a gap or vulnerability and invest in a long-term program to develop a more complete solution; or do both. Choosing between these options requires an understanding of the risk posed by the existing vulnerabilities, the benefits available through the near- and long-term options, and their relative costs. Decision makers are faced with difficult choices when setting priorities for implementing the global nuclear detection architecture. In the case of existing programs, incremental increases in the performance of a system may be challenged on the basis of their perceived costs and benefits. In the case of new programs, questions may arise about whether the effort expended on a new program would have provided more benefits if applied elsewhere. Finally, given that improvement of the global nuclear detection architecture is a multi-year project, one must determine which portion of the architecture to focus on at any given time. A likely benefit of casting federal efforts at nuclear detection into the framework of a global architecture is the ability to prioritize, in a quantitative or qualitative fashion, across programs. Even without a rigorous method to discriminate finely between the results of different investments, the global nuclear detection architecture may be able to provide a rank ordering of vulnerabilities and gaps, and thus a rank ordering of investment priorities. Thus, it may provide an interagency tool to analyze current technology options and R&D investments relative to the federal government's detection needs. According to the DNDO, the analysis methodology underpinning the global nuclear detection architecture continues to undergo revision and refinement: In order to maximize the effectiveness of the FY 2008 edition of the [global nuclear detection architecture], DNDO will leverage the independent observation of a full peer review to ensure that the requirements called forth in the [global nuclear detection architecture] continue to reduce the risk from nuclear terrorism. Accordingly, risk and economic impact methodology documents (carefully prepared and reviewed to protect sensitive/classified vulnerability information) will be produced and subjected to broad peer review. This review and these documents have not been made public. Congress may wish to determine whether the review addresses congressional concerns and whether the underlying architecture methodology is sufficiently robust. Alternatively, Congress may wish to direct DNDO to perform a review of the analysis methodology through an open process. Similarly, a global nuclear detection architecture may be able to highlight regions or modalities where investment or additional focus may provide a steeper or quicker reduction of vulnerability. For example, following the development of the baseline global nuclear detection architecture, DNDO decided to focus efforts on addressing vulnerabilities associated with aviation and maritime domains. Similarly, DNDO has issued a request for comments on options for regional detection architectures. The Government Accountability Office (GAO) has recommended that DNDO establish a strategic plan for the global nuclear detection office. The GAO recommends that establishing a comprehensive strategy with clearly defined objectives, roles, responsibilities, funding, and monitoring mechanisms would strengthen the development and coordination of the global nuclear detection architecture. As of December 2008, the DNDO had reportedly not developed an overarching strategic plan. Interagency Coordination As well as developing the global nuclear detection architecture, DNDO is also responsible for coordinating the activities of other federal agencies whose programs make up the global nuclear detection architecture. For the architecture to be successful, substantial interagency coordination must occur on the operational and policy levels. Congress recognized the need for DNDO to have access to specific talent resident in other agencies. The SAFE Port Act authorizes the DHS Secretary to "request that the Secretary of Defense, the Secretary of Energy, the Secretary of State, the Attorney General, the Nuclear Regulatory Commission, and the directors of other Federal agencies, including elements of the Intelligence Community, provide for the reimbursable detail of personnel with relevant expertise to [DNDO]." Under this authority and that of the Intergovernmental Personnel Act (IPA), DNDO has established a significant interagency workforce, including personnel from DOD, DOE, the Federal Bureau of Investigation, the Department of State, and the Nuclear Regulatory Commission, as well as intra-agency personnel from the Science and Technology Directorate, U.S. Customs and Border Protection, the Transportation Security Administration, and the U.S. Coast Guard. The DNDO uses the detailees and IPAs as part of its coordinating function. By using these experts as conduits back to their agencies, DNDO is able to draw on the expertise and address the needs and concerns of these agencies. The DNDO also has established a more senior policy coordinating body, the Interagency Coordination Council, to address higher level policy issues and further coordinate activities between agencies, but the extent to which this body is able to implement and develop new policy for the participating agencies is not known. The Interagency Coordination Council was reportedly used to develop the deployment strategy for the global nuclear detection architecture and studies of maritime and aviation threats. The successful operation of the Interagency Coordination Council, or a similar high-level coordinating body, is critical for oversight and implementation of the global nuclear detection architecture, but procedural and organizational issues may pose barriers to its success. The Director of DNDO may not be equal in authority to the officials in other agencies with whom he is coordinating. Other officials may have more or less control of budgets, activities, and policies. Additionally, other agencies may perceive the global nuclear detection architecture as a DNDO document, rather than as a consensus coordination document. If so, other agencies may not quickly adopt the premises or analytical constructs expressed as part of the global nuclear detection architecture, preferring to continue to operate under individual agency priorities. The DNDO also has implemented an Advisory Council consisting of officials from other DHS components. The DNDO uses the Advisory Council to solicit the opinions of and resolve intra-agency issues within DHS. Beyond the interagency activities organized within DNDO, coordination of DNDO activities with other portions of the federal government occurs within the White House through the Domestic Nuclear Defense Policy Coordinating Committee. This joint policy coordination body was created jointly by the Homeland Security Council and the National Security Council and provides a high-level forum for the generation of guidance and coordination among federal agencies with responsibilities for nuclear defense, detection, and interdiction. Other interagency planning activities, such as coordination of long-term research and development, occur through subcommittees of the National Science and Technology Council. Congress has identified coordination and cooperation as a key issue for DNDO, and in the Department of Homeland Security Appropriations Act, 2007, withheld $15 million from DNDO until a memorandum of understanding had been established with each federal entity and organization participating in DNDO activities. The DNDO entered into these agreements throughout FY2007. Issues for Congress Multiple agencies implement the global nuclear detection architecture, even though its development is located within a single agency. Congress, in its oversight role, may be able to assess agency implementation of the global nuclear detection architecture across the federal government and thus identify weaknesses or inefficiencies that may occur. Additionally, Congress may be uniquely positioned to address policy challenges. Mechanisms for policy setting, the establishment of funding levels within the global nuclear detection architecture, implementation of development plans for the architecture and the identification of solutions to gaps and vulnerabilities, and the continued maintenance of the global nuclear detection architecture all are issues that Congress may choose to address. Priorities and Funding Levels Within the Global Nuclear Detection Architecture The annual federal investment in the global nuclear detection architecture is spread across multiple agencies and across the layers and sublayers of the global nuclear detection architecture. The appropriate balance of funds in each of the different layers and sublayers, as well as between the different programs and agencies, is likely an issue of policy interest. When Congress established the Cooperative Threat Reduction program in 1991, it focused on securing nuclear materials at their source and preventing these materials from being transferred into non-state hands. These continuing programs represent significant investment in the exterior layer of the architecture. More recently, DNDO and Congress have focused on the border layer of the global nuclear detection architecture. The DNDO has invested in Advanced Spectroscopic Portal (ASP) and Cargo Advanced Automated Radiography System (CAARS) technologies to improve the ability to detect nuclear and radiological materials at the borders, and Congress has mandated the improved screening of cargo containers shipped to the United States. Investment in the interior layer of the architecture has arisen mainly through existing programs designed to protect and safeguard national nuclear facilities and laboratories. The GAO has reported the distribution of funding in the global nuclear detection architecture using a framework slightly different than that expressed by DNDO. See Table 1 . According to the GAO, the DNDO is not using existing information on funding in the various architecture levels to coordinate with other agencies on the overall strategic direction of detection efforts. Congress might expand or reduce agency funding levels to more closely match the levels determined by DNDO to meet the needs of the global nuclear detection architecture, increase overall funding for all aspects of the global nuclear detection architecture to increase redundancy, or decrease funding if it believes other funding priorities are more important. Shifting funding between layers of the architecture has complex ramifications: it may imperil international agreements, lead to perceptions of weakness or strength in the various programs, or cause interagency disagreements. Unless the global nuclear detection architecture has a robust evaluative system with clear metrics that tie architecture performance to program funding, changes in investment in the different layers of the global nuclear detection architecture may not yield optimal risk reduction. It is difficult to assess without careful evaluation whether shifting funds from one program to another will have a positive or negative net impact; the relative size of the two programs is not necessarily the relevant criterion for assessing its impact on the global nuclear detection architecture. Moreover, DNDO is not statutorily empowered to direct changes in the funding of other agencies. Only through higher-level budgetary policy decisions can interagency funding profiles be changed. This situation may result in a mismatch between the optimal investment levels for the global nuclear detection architecture and the actual investments made. Congress might choose to provide the DNDO Director with the authority to review and assess the budgets of other departments and agencies involved in the global nuclear detection architecture and to comment or recommend alternative budget allocation to other departments and agencies or directly to the Office of Management and Budget. Another possible approach would be for Congress to require that agencies create a single global nuclear detection architecture budget, to provide Congress with a more transparent correlation between agency funding and the global nuclear detection architecture. For example, an annual budget supplement is issued for the National Nanotechnology Initiative, another multi-agency federal endeavor with a large budget. Such a budget supplement for nuclear detection might be coordinated by DNDO through an interagency process; the Homeland Security Council, National Security Council, or National Science and Technology Council; or through one of the agencies participating in the global nuclear detection architecture. Alternatively, Congress might vest a budgetary coordinating role within the Office of Science and Technology Policy rather than within DNDO. Congress established an Office of the United States Coordinator for the Prevention of Weapons of Mass Destruction Proliferation and Terrorism within the White House. The head of this office is to advise the President, formulate national strategy and policy, lead interagency coordination and implementation, and oversee development of a comprehensive, coordinated budget for weapon of mass destruction proliferation and terrorism prevention. While the scope of the Coordinator's responsibilities is broader than nuclear and radiological issues, the comprehensive, coordinated budget so developed might be one mechanism for clarification of priorities for nuclear detection investment. As of the writing of this report, the position of Coordinator has not been filled. The affected agencies may not support a unified budget or additional review of agency budget decisions. Reportedly, agencies resisted similar options considered during the creation of DNDO, leading to "major limits on both its scope and its power." Agencies may perceive a bottom-up process to be more effective in meeting agency and national needs than a top-down process. Congress has mandated an annual interagency review of the global nuclear detection architecture. This review is to be overseen by the Secretaries of Homeland Security, State, Defense, and Energy, the Attorney General, and the Director of National Intelligence. Its purpose is to ensure that each participating agency assesses and evaluates its participation in the global nuclear detection architecture. The review is to include evaluation of detection technologies, identification of deficiencies, and assessment of agency capacity for implementation of its responsibilities within the global nuclear detection architecture. This interagency review process may cause the agencies involved to clarify their priorities and funding requirements and thereby cause further evolution of the global nuclear detection architecture. The GAO has identified that this joint annual interagency review generally is not used in this fashion. The joint annual interagency review is not used as a tool to analyze nuclear detection budgets across agencies to address the highest priority gaps or to strategically align global detection efforts. Instead the review is being used to provide agencies and Congress with an overview of existing programs and responsibilities across the government. The joint annual interagency review is not used to determine whether funding levels are reasonable according to agency or government needs. Balance Between Incremental and Transformational Changes to the Global Nuclear Detection Architecture The DNDO aims to improve "the probability of detection by integrating and deploying current technologies, continually improving these technologies through both near-term enhancements and transformational research and development, and expanding detection capabilities at the Federal, State and local levels." In expanding and improving the global nuclear detection architecture, DNDO and other participating agencies are faced with a temporal choice. Vulnerabilities and gaps identified through the global nuclear detection architecture could be reduced by applying immediately available technologies that provide a partial solution or by investing in research and development to develop technologies that will provide a more complete solution in the long-term. In the first case, the abilities of the global nuclear detection architecture would be incrementally improved as technologies that marginally increase the detection capabilities of the existing architecture are adopted and then serially replaced. Such a strategy might be costly, as multiple generations of equipment, each with some advantage over the previous version, are purchased and deployed. Although each generation would be an improvement, it would not provide a fully acceptable level of detection and security. In the other case, known vulnerabilities might not immediately be addressed at all, allowing the possibility that attackers could exploit them while a research and development program attempted to develop a single system that would remove the vulnerability. Thus, an appreciable risk would remain, even though it could be partly reduced in the near term, until the results of the research and development program came to fruition. In practice, expansion and improvement of the global nuclear detection architecture requires a balance of these two approaches, using incremental advances and transformational research in coordination to develop a robust architecture. A key concern is how this balance is achieved and identified. The DNDO is addressing this complex problem by developing time-phased plans to address the most important gaps in the existing global nuclear detection architecture. These plans will allow "for the integration of current and near-term technologies and approaches, as well as longer-term options that may draw upon technologies that are currently in the R&D phase and that may not be available for implementation for several years." Additionally, DNDO has taken a spiral development approach that appears to lean toward deploying available technologies, even if they serve only as partial solutions, rather than leaving a gap unaddressed. In spiral development, technologies are refined as they are implemented based on information generated during their deployment. Thus, though the technology may serve only as a partial solution when first implemented, the goal is for it to become a more complete solution over time. Finally, DNDO has adopted a multi-faceted approach to architecture development, funding multiple types of detector technology. Successes in developing and deploying these detector types may lead to significant advances in DNDO's ability to detect and prevent a radiological or nuclear attack. In addition to developing and procuring such technologies, DNDO also must weigh the relative advantages to integrating these new systems into the existing architecture versus replacing existing systems with these new systems. Among key issues facing Congress are determining the optimal process for creating a robust global nuclear detection architecture, understanding the capabilities of near- and long-term technology and their potential effect on the global nuclear detection architecture, and assessing the adequacy of the metrics used to measure the risk reduction benefits. Congress bestowed upon DNDO the responsibility for developing and implementing a global nuclear detection architecture as part of efforts to safeguard the United States. The success of DNDO's activities in establishing this architecture will likely require ongoing evaluation and oversight into the future. Long-Term Maintenance of the Global Nuclear Detection Architecture Although the use of detailees, IPAs, and liaisons from other agencies has helped DNDO to maintain contact with other stakeholders, its reliance on these temporary personnel may make long-term efforts difficult to sustain. As temporary personnel return to their home agency, institutional memory may be lost. As of April 2007, 79% of DNDO's employees were either detailees, liaisons, or contractors rather than permanent staff. Efforts that rely on continued improvement and adjustment over time, as the global nuclear detection architecture does, will likely depend on DNDO's ability to clearly enunciate and document the rationale and approaches that it developed and considered when they were established. Otherwise, these efforts may be delayed as new personnel have to reevaluate the ongoing process. Similarly, coordination between agencies through the Interagency Coordinating Council may suffer if consensus decisions are not well understood by the successors of the Council participants. The DNDO may be able to offset this potential loss of institutional memory in a number of ways. One possibility is a mentoring process in which outgoing personnel actively mentor their replacements during an overlap period in order to provide continuity of information and expertise. Another would involve comprehensive documentation of decisions, both positive and negative, so that future staff have a written record to refer to when trying to understand why a particular approach was taken and why a competing approach was set aside. Finally, expanding DNDO's permanent staff might provide long-term stability and more retention of core knowledge. The DNDO does appear to be increasing its permanent federal staff. As seen in Table 2 , the number of detailees has decreased and the number of permanent staff has increased since the creation of the office. Some positions within DNDO may be best filled by permanent DNDO staff, while others may require the expertise possessed only by detailees. A key issue facing decision makers is balancing DNDO's need for technical or subject matter experts with building a core of permanent DNDO staff able to develop and evolve the nascent global nuclear detection architecture. The DNDO is aware of the need to retain institutional knowledge. Succession planning is one mechanism DNDO uses to retain this knowledge. According to DNDO, before each detailee returns to their home agency, their replacement is identified and prepared to take over the departing detailee's responsibilities. The effectiveness of this succession planning and DNDO's strategic decisions regarding the use of detailees may require oversight from Congress to ensure that congressional interests in program and agency continuity are met. Research and Development Coordination Research and development investment plays a role in strategies for addressing the architecture's gaps and vulnerabilities. The aim is to develop technologies to fill the gaps in the global nuclear detection architecture. Both DHS and DOE fund research and development in the area of nuclear and radiological detection equipment. The SAFE Port Act of 2006 gave DNDO the statutory authority to conduct, support, coordinate, and encourage an aggressive, expedited, evolutionary, and transformational program of research and development to generate and improve technologies to detect and prevent the illicit entry, transport, assembly, or potential use within the United States of a nuclear explosive device or fissile or radiological material, and coordinate with the Under Secretary for Science and Technology on basic and advanced or transformational research and development efforts relevant to the mission of both organizations. The research and development activities DNDO undertakes under this authority address gaps and vulnerabilities in the global nuclear detection architecture. The DNDO has highlighted detecting threat materials from greater distances, in highly cluttered backgrounds, and in the presence of shielding and masking materials as particular challenges. Although Homeland Security Presidential Directive 14 required DNDO to "conduct, support, coordinate, and encourage an aggressive, expedited, evolutionary, and transformational program of research and development efforts," it also directed the Secretary of Energy to "lead the development of nonproliferation research and development and, where appropriate, make available dual-use counter-proliferation and counter-terrorism nuclear detection research and development to DNDO and other entities and officials to support the development of the domestic nuclear and radiological detection system." The long-term coordination of this research appears to be occurring through the Subcommittee on Nuclear Defense Research and Development of the National Science and Technology Council Committee on Homeland Defense and National Security. Additional coordination occurs between agencies participating in the global nuclear detection architecture as well. The coordination of these research and development activities is likely to remain of interest in Congress, to prevent duplication of effort and ensure that agencies meet their missions and roles. Congress may use its oversight authority to assess the balance of investments between agencies, address undue duplication of research and development activities, and increase or decrease the resources available for particular technology approaches under consideration.

The U.S. government has implemented a series of programs to protect the nation against terrorist nuclear attack. Some of these programs predate September 11, 2001, while others were established since then. Most programs are within the Nuclear Regulatory Commission; the Departments of Defense, Energy, and State; and agencies that became part of the Department of Homeland Security (DHS) upon its creation, and they are focused on detecting the illicit acquisition and shipment of nuclear and radiological materials and protecting and securing nuclear weapons. These disparate programs have historically been viewed as lacking coordination and centralized oversight. In 2005, the Domestic Nuclear Detection Office (DNDO) was established within the Department of Homeland Security to centralize coordination of the federal response to an unconventional nuclear threat. The office was codified in 2006 through the passage of the SAFE Port Act (P.L. 109-347) and given specific statutory responsibilities to protect the United States against radiological and nuclear attack, including the responsibility to develop a "global nuclear detection architecture." Determining the range of existing federal efforts protecting against nuclear attack, coordinating the outcomes of these efforts, identifying overlaps and gaps between them, and integrating the results into a single architecture are likely to be evolving, ongoing tasks. The global nuclear detection architecture is a multi-layered system of detection technologies, programs, and guidelines designed to enhance the nation's ability to detect and prevent a radiological or nuclear attack. Among its components are existing programs in nuclear detection operated by other federal agencies and new programs put into place by DNDO. The global nuclear detection architecture is developed by DNDO in coordination with other federal agencies implementing nuclear detection efforts and this coordination is essential to the success of the architecture. This architecture is a complicated system of systems. Measuring the success of the architecture relative to its individual components and the effectiveness of additional investments are challenges. The DNDO is developing risk and cost methodologies to be applied to the architecture in order to understand and prioritize the various nuclear detection programs and activities in multiple federal agencies. Congress, in its oversight capacity, has shown interest in the development and implementation of the global nuclear detection architecture and in the decision-making process attendant to investments in it. Other issues that may be foci of congressional attention include the balance between investment in near-term and long-term solutions for architecture gaps, the degree and efficacy of federal agency coordination, the mechanism for setting agency investment priorities in the architecture, and the efforts DNDO has undertaken to retain institutional knowledge regarding this sustained architecture effort.

Introduction Foster care is a temporary living arrangement for children who cannot remain safely in their own homes. For nearly every child who enters foster care, a first goal of the child welfare agency is to ensure necessary services are identified, and provided, so that the child can quickly and safely return to his or her parents. Most children who leave foster care do so to be reunited with parents or other family members. For some children, however, this is not possible. In those cases, the child welfare agency must work to find a new permanent home for these children and this may be accomplished through adoption or legal guardianship. As the U.S. Constitution has been interpreted, responsibility for the protection of children and the well-being of children and their families, is considered primarily a state duty. However, Congress has long sought to assist states in improving their child welfare services. In exchange for federal funding to support provision of foster care and other child welfare services, states must meet certain federal requirements. Under Title IV-E of the Social Security Act, states, territories, and tribes who meet those requirements are entitled to claim partial federal reimbursement for the cost of providing foster care, adoption assistance, and kinship guardianship assistance to children who meet federal eligibility criteria. The Title IV-E program, as it is commonly called, provides support for monthly payments on behalf of eligible children, as well as funds for related case management activities, training, data collection, and other costs of program administration. In FY2011, states (including the 50 states and the District of Columbia) spent $12.4 billion under the Title IV-E program, and received federal reimbursement of $6.7 billion, or 54% of that spending. At the federal level, the Title IV-E program is administered by the Children's Bureau, an agency within the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF), Administration on Children, Youth, and Families (ACYF). At the state level, the child welfare agency, which is often a part of the state's human services or social services department, administers the Title IV-E program. Some state agencies administer the program centrally, while others supervise the administration of the Title IV-E program by counties. In either case, the state child welfare agency is the recipient of the federal Title IV-E funding and is responsible for ensuring that the Title IV-E program is administered in accordance with federal policy. Roughly two-thirds of the Title IV-E dollars spent in FY2011 supported provision of foster care. Further, the very large majority of children who receive Title IV-E adoption assistance were previously in foster care, as were all children who receive Title IV-E kinship guardianship assistance. This report begins with a brief discussion of why children come to the attention of the child welfare agency and how they may subsequently enter foster care. It next outlines the requirements states must meet to receive federal Title IV-E funds; the kinds of assistance and activities that can be provided with Title IV-E dollars, and on whose behalf those dollars may be spent; and the way that federal funding is authorized for this program. Finally, the majority of the report focuses on Title IV-E program eligibility criteria and spending that is specific to each of the program's three components: foster care maintenance payments, adoption assistance, and kinship guardianship assistance. Why Do Children Enter Foster Care? In response to the mandatory and voluntary reports of child abuse or neglect, public child protection (or child welfare) agencies annually conduct an estimated 2 million family investigations involving some 3 million children. The purpose of these investigations is to determine whether abuse or neglect of a child has occurred, or is likely to occur, and, as necessary, to provide services to ensure children are safe and that their families are able to care for and support them. The most common concern that brings children to the attention of child welfare agencies is neglect (either a lack of supervision or a failure to provide for the child's basic needs). Physical abuse is less frequently alleged, followed by sexual abuse, or emotional abuse. In most cases, investigative caseworkers determine that children may safely remain in their own home. (This is true without regard to whether the investigation determines that abuse and/or neglect occurred.) A national survey of children in families investigated for abuse or neglect found that approximately 4 to 6 months after the investigation, 87.1% of the children were living at home (either because they were never removed or because they had already been reunited), 6.1% were living in informal kinship arrangements, and the remaining 6.3% were in formal out-of-home placements (including 2.4% in a formal kin care arrangement, 3.4% in foster family care, and 0.5% in a group setting). Investigative caseworkers frequently identify certain underlying factors that directly lead to the child abuse/neglect investigation and/or might jeopardize the ability of that family to safely care for and support a child. These include high stress in the family (e.g., unemployment, drug use, poverty, or neighborhood violence), low social support, trouble paying for basic necessities (e.g., food, shelter, clothing, electricity or heat), substance abuse by the caregiver, a history of domestic violence and/or of child abuse or neglect against the primary caregiver, mental health problems of the caregiver, a recent history of arrest of the primary caregiver, and other factors. In nearly every case, these risk factors are more likely to be identified in families from which children are removed from the home following an investigation as compared to those in which the children remained living in the home. There was no statistically significant difference between children removed from the home and those remaining in the home with regard to two factors: history of domestic violence against the primary caregiver, or current domestic violence against that caregiver. Figure 1 shows presence of risk factors in a national sample of families investigated for child abuse or neglect, by whether the child was living in the family home, or outside that home, approximately four months after the investigation. Each family may be identified with one or more risk factors. Title IV-E Supports Children in Foster Care, Adoption, and Kinship Guardianship The Title IV-E program funds foster care maintenance payments to provide direct financial assistance for children who are placed in foster care for their safety. Foster care, however, is a temporary living arrangement and for nearly every child who enters foster care, the first goal of the agency (and as spelled out in federal policy) is to reunite children with their parents. Figure 1 gives some sense of the challenges that child welfare agencies face in meeting that goal. As part of required case planning for children in foster care, Title IV-E funds are used to assess what services and supports may be needed to enable reunification and to plan for provision of those services. However, Title IV-E may only pay for that work when it is done on behalf of a child who meets Title IV-E eligibility criteria. Title IV-E funding may not be used to pay for any of the services identified as necessary to enable reunification, nor may it be used to provide post-reunification services to ensure the continued success of the family. To support those child welfare purposes, states may rely on funding under Title IV-B of the Social Security Act (both Subpart 1, the Stephanie Tubbs Jones Child Welfare Services Program and Subpart 2, the Promoting Safe and Stable Families Program). They may also use other federal funding streams that are not wholly dedicated to child welfare purposes but may be used to support child welfare goals. Most states rely on the Temporary Assistance for Needy Families (TANF) block grant (Title IV-A of the Social Security Act) and the Social Services Block Grant (SSBG) (Title XX, Subpart 1 of the Social Security Act) to support their child welfare programs. For some children, returning home is not possible and the goal for the child welfare agency with regard to these children is to find them a new safe and permanent home. To facilitate this, Title IV-E funds ongoing adoption assistance and, in states that elect this option, kinship guardianship assistance, as a way to encourage and sustain legally established, new permanent families for children. Under Title IV-E, states provide direct financial assistance to eligible children after they leave foster care for adoption or kinship guardianship. However, as is true with children who are reunited with their parents, states may not use Title IV-E funds to provide post-adoption or post-guardianship support services to those families or their children. Again, the child welfare programs under Title IV-B, as well as TANF and SSBG (to the extent they are available to the child welfare agency) may be used for these purposes. Finally, some youth leave, or are expected to leave, foster care because they reach the age at which the state ends foster care support (often age 18), rather than because they return to their families or are placed in a new permanent family. Title IV-E includes unique support for services to these youth. That support is authorized under the Chafee Foster Care Independence Program. Although included in Title IV-E of the Social Security Act, the Chafee program has separate requirements and funding distribution rules and is outside the scope of this report. For more information see CRS Report RL34499, Youth Transitioning from Foster Care: Background and Federal Programs , by [author name scrubbed]. Title IV-E Program Basics The Title IV-E program is jointly funded by the federal government and the states. All 50 states, the District of Columbia, Puerto Rico, and one tribe (Port Gamble S'Klallam) participate directly in the Title IV-E program. This means they are entitled to seek federal reimbursement for a part of the cost of providing foster care, adoption assistance and kinship guardianship assistance on behalf of children who meet federal eligibility criteria. As used in this report, the term "states," refers to all 50 states, the District of Columbia and Puerto Rico, each of which must meet all the same program requirements to receive Title IV-E funding. Direct access to federal Title IV-E support was authorized for Indian tribes, tribal organizations or tribal consortia, effective with the first day of FY2010. As of early September 2012, only one tribe had completed the process of developing, submitting, and receiving approval of a tribal Title IV-E program. However, additional tribes continue to work toward this goal and HHS anticipates more tribal plans will be approved in the upcoming year. To receive direct Title IV-E funding, a tribal entity must meet substantially the same program requirements as those made of states. (For further details related to tribal Title IV-E participation requirements, see Appendix A .) Table 1 shows the total dollars spent under the Title IV-E program by program component, as well as the share of that total spending provided by the federal government and the states. The Title IV-E program was created in 1980 as part of the Adoption Assistance and Child Welfare Act ( P.L. 96-272 ). That law moved earlier authorized federal funding for foster care from Title IV-A of the Social Security Act to the new Title IV-E and established initial support for adoption assistance. Notable among the many acts that have amended the Title IV-E program since its 1980 enactment are the Adoption and Safe Families Act of 1997 (ASFA, P.L. 105-89 ), which emphasized children's safety, along with achieving permanency for children as quickly as possible (particularly via adoption when appropriate); and the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ), which focused new attention on ensuring the well-being of children in foster care, allowed states to choose to extend federal foster care assistance to youth up to age 21, phased in expanded federal eligibility for Title IV-E adoption assistance, and gave states the option of providing kinship guardianship assistance under the Title IV-E program. Policies That Apply for All Three Program Components In some respects the Title IV-E program encompasses three separate programs—foster care, adoption assistance, and kinship guardianship assistance—each with its own eligibility requirements and specific kinds of assistance. However, the program has a single funding authorization in federal law and certain policies apply regardless of the kind of assistance being provided. These overarching program policies and the program's funding authority are discussed next. Must Have an Approved Title IV-E Plan Any state seeking federal funding under the Title IV-E program must have a federally approved Title IV-E plan that meets all the requirements of the law. Under a Title IV-E plan, a state is required to provide foster care maintenance payments, and enter into adoption assistance agreements, on behalf of eligible children. Additionally, as of October 2008, if the state amends its Title IV-E plan to enable it to claim federal support for kinship guardianship assistance, it is required to enter into kinship guardianship assistance agreements on behalf of eligible children. Any approved Title IV-E plan must also provide that the state will perform required "administrative" tasks under the program. These are primarily focused on ensuring the safety, permanence, and well-being of children in foster care. Although Title IV-E administrative plan requirements mostly address meeting the needs of children while they are in foster care, those requirements are meaningful to other children served under the program because most children who receive Title IV-E adoption assistance, and all of those who receive Title IV-E kinship guardianship assistance, were previously in foster care. Further, the Title IV-E plan is a single document that applies to all three Title IV-E program components (foster care, adoption, and kinship guardianship). No state may receive funding under any one of the Title IV-E components without meeting each of the plan requirements—whether that requirement is directed toward children receiving foster care maintenance payments, adoption assistance, or kinship guardianship assistance. Funds Available for Eligible Costs Incurred on Behalf of Eligible Children Title IV-E plan requirements affect allowable spending under the Title IV-E program because they largely define "eligible costs"—that is what may be supported with state and federal program dollars. Eligible Title IV-E program costs include provision of direct financial assistance to eligible children, as well as program administration. Generally, any program cost authorized by the Title IV-E plan that is not direct financial assistance on behalf of an eligible child is considered an "administrative" cost. The kind of "administrative" activities that may be supported by Title IV-E are wide ranging. They may include required actions by caseworkers on behalf of individual children, e.g., developing a case plan for a child in foster care; visiting a child in care; preparing for and participating in administrative and court proceedings regarding a child's removal from the home, status in foster care, and permanency plan; and finding a safe and appropriate foster or adoptive home for a child. Other Title IV-E administrative activities include child welfare agency actions on behalf of individual children or in support of the Title IV-E program overall, e.g., conducting background checks of prospective caregivers, establishing and implementing licensing standards for foster family homes and institutions, developing required program policies, and participating in federal compliance reviews. These examples are meant to be illustrative and do not describe every kind of administrative activity that may be supported under Title IV-E. In addition, there are two categories of administrative costs for which states are required to submit separate reports of their spending. These are program training costs and costs for the development and operation of an approved Statewide Automated Child Welfare Information System (SACWIS). In general, Title IV-E dollars—whether state or federal—may only be spent on eligible costs and on behalf of eligible children. Federal Title IV-E eligibility criteria are different for each of the three Title IV-E components and are described in more detail later in this report. However, eligibility for any kind of Title IV-E assistance is limited by a child's age and citizenship or immigration status. Further, children may not receive Title IV-E assistance if they are placed in a home where the background check of the foster or adoptive parent shows certain felony convictions. Finally, most—but not all—Title IV-E assistance is available only to children who were removed from a home with very low household income. Level of Federal Support Varies by Kind of Cost The share of Title IV-E program costs the federal government has agreed (in statute) to reimburse states varies based on the kind of program cost. Direct financial assistance for eligible children (foster care maintenance, adoption assistance and kinship guardianship assistance payments), is reimbursed at the state's unique "FMAP" (federal medical assistance percentage). For each of the 50 states, the FMAP is annually computed by HHS. No state may have an FMAP that is less than 50% or more than 83% and the formula, which is provided in statute, ensures that states with higher per capita income receive lower federal reimbursement rates and vice versa. For example, if a state has an FMAP of 50%, for every dollar in foster care maintenance payments it makes on behalf of an eligible child, the federal government reimburses the state 50 cents; if a state has an FMAP of 62%, for every dollar in foster care maintenance payments the state makes on behalf of an eligible child, the federal government reimburses the state 62 cents; etc. All states receive the same federal reimbursement rates for additional Title IV-E program costs. "Administrative" costs are reimbursed at 50% of the state's eligible spending. Costs related to developing and operating an approved Statewide Automated Child Welfare Information System (SACWIS) are also reimbursed at 50%. Finally, Title IV-E program training costs are reimbursed at 75% of the state's eligible claims. Temporary FMAP Increase as Part of Fiscal Stimulus From October 1, 2008 through June 30, 2011, Congress enacted a temporary increase in the federal share of Title IV-E foster care maintenance, adoption assistance, and kinship guardianship assistance payments. It did this as part of a larger package of state fiscal relief offered to ease the strain on state budgets caused by the Great Recession. Specifically, under the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ), each state's FMAP was raised by 6.2 percentage points for October 1, 2008 through December 30, 2010. Subsequently ARRA was amended ( P.L. 111-226 ) to extend enhanced FMAP support for six months at a phased down level: For the first three months of 2011 each state's FMAP was increased by 3.2 percentage points and for the second three months it was increased by 1.2 percentage points. After June 30, 2011, the level of federal participation in the Title IV-E program returned to its regular reimbursement rate. (The ARRA did not authorize any changes in the share of funding provided to states under the Title IV-E program for general administrative, training, or SACWIS costs.) As of August 30, 2012, the federal government had obligated $968 million to states under the Title IV-E program as a result of the enhanced FMAP. Because states still have some time to make Title IV-E claims adjustments for the period of time for which enhanced funding was made available, that number may change somewhat. However, it is expected to represent the bulk of Title IV-E funding provided to states because of the temporary enhanced funding made available from October 1, 2008 through June 30, 2011. Program and Funding Authorization is Permanent and Open-Ended Federal reimbursement for Title IV-E program costs is authorized on a permanent and open-ended entitlement basis. This means authority to appropriate the funding needed to reimburse states for a part of their Title IV-E program costs remains in place without any periodic reauthorization. It also means that there is no upper or lower limit on the amount of annual federal funding that must be appropriated for this purpose. Instead, Congress typically appropriates the amount of funding that HHS estimates will be necessary to reimburse each eligible Title IV-E program cost submitted by states. This estimate is included in the Administration's annual budget request and is based on anticipated state Title IV-E spending as well as the share of that spending the federal government has agreed to pay for under current law. (Appropriation of this level of funding is referred to as "definite budget authority.") If this estimated amount exceeds actual funds needed to reimburse states for eligible costs, then the additional funds will lapse and are eventually returned to the federal treasury. If the estimate is less than what is needed, additional funds are made available (and are typically authorized in annual appropriations bills under what is called "indefinite budget authority.") Are There Any Limits to Title IV-E Funding? While there is no dollar limit on the amount of funding that may be provided to a state under Title IV-E, the actual funding that a state may receive is limited by the amount of money that the state spends under the program. This is because the federal government only provides a state partial reimbursement if the state has already spent its own funds on Title IV-E eligible assistance or activities. Funding is also limited by the statutory (and regulatory) definitions of what is an eligible program cost and who is eligible for assistance. For example, Title IV-E funding is only available for the costs of providing foster care, adoption assistance, or kinship guardianship assistance to children who meet the federal eligibility criteria specific to each of those Title IV-E program components. A state may not, for example, submit as part of its total Title IV-E costs, any spending for foster care maintenance, adoption assistance, or guardianship assistance payments made on behalf of children who are not eligible for Title IV-E assistance. Additionally, while Title IV-E funds may also be used to ensure proper administration of the program on behalf of eligible children, unless specifically authorized under a waiver of program rules, Title IV-E program funds may not be used to provide social services to any child or family of a child. Neither may states spend Title IV-E funds for "other activities not specifically included in the Title IV-E plan, including child abuse prevention or investigatory activities and medical or education expenses." The remainder of this report focuses on eligibility criteria and particular funding provided under each of the three separate Title IV-E program components: foster care; adoption assistance; and kinship guardianship assistance. Title IV-E Foster Care Most Title IV-E dollars are used to provide foster care to children who meet federal eligibility criteria. On the last day of FY2011, there were fewer than 401,000 children in foster care, but one-half or fewer of those children were estimated to be receiving Title IV-E assistance. Foster care is a temporary living arrangement intended to ensure a child's safety and well-being while the state child welfare agency works to ensure the child may be safely and permanently returned to his or her own home. If a court determines this is not possible or appropriate, the agency must then work to find a new permanent home for the child via adoption, legal guardianship, or placement with another fit and willing relative. The number of children entering foster care each year hovered just above or below 300,000 from the late 1990s through the middle of the 2000s. Since that time, however, it has declined to roughly 250,000 children annually. Children entering care in a given fiscal year join those who previously entered care and have not yet exited. The total number of children in foster care on the last day of the fiscal year peaked in FY1999 at 567,000 but has since declined in nearly every year and, as of the last day of FY2011, stood at fewer than 401,000. The decline in the overall number of children in foster care has long been driven by an increase in children leaving foster care for adoption (or guardianship) and, more recently, by the decrease in children entering care. On a national basis, less than half of all children who are in foster care receive federally supported foster care maintenance payments under the Title IV-E program. (The share of children in foster care who receive this support varies significantly by state.) Children for whom foster care is determined necessary for their safety (or in their best interest) but who do not meet the federal Title IV-E eligibility criteria may not be assisted with Title IV-E program funds. Instead states must use state, local, or other (non-Title IV-E) federal dollars to provide support to children who do not meet Title IV-E eligibility criteria. Federal Title IV-E foster care eligibility criteria are discussed next in this report, and this discussion is followed by a look at foster care spending trends under the Title IV-E program. Federal Foster Care Eligibility Criteria Federal foster care eligibility criteria under Title IV-E are multifaceted. As detailed in Table 2 , below, they reflect Congress's concern that children should only be involuntarily removed from their parents' homes with judicial approval, children must be kept safe at all times, and they must have a permanent home re-established (via reuniting with their parents) or newly established (via adoption or legal guardianship). Congress has recently permitted states to extend Title IV-E assistance to youth beyond age 18 for whom reunification or placement in a new permanent family is not achieved. This change responded to research that suggested better outcomes could be achieved for youth who remained in foster care after age 18 (when compared to those who were simply discharged from care at that age). Finally, Title IV-E foster care assistance is only available for children who are removed from very low income, and primarily single-parent, households. These eligibility criteria reflect the legislative history of federal foster care assistance. Eligibility for Youth Age 18 or Older As part of the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ), Congress amended the Title IV-E program to give states the option to provide assistance to youth in foster care beyond their 18 th birthday. This amendment became effective on the first day of FY2011. As of October 2012, 16 states had received approval to extend Title IV-E foster care to otherwise eligible youth beyond their 18 th birthday and four additional states were seeking this approval. Most of the states with this approval intend to provide Title IV-E foster care assistance to otherwise eligible youth up to age 21, which is the maximum age permitted under federal law. Congress further stipulated that for a youth at age 18 or older to be eligible, he or she must be in school (i.e., high school, college, or equivalent level training program), working (i.e., at least 80 hours month), engaged in an activity to promote or remove barriers to employment, or have a documented medical condition that makes the youth unable to do any of these things. HHS has informed states that they may choose to permit eligibility for youth who meet any one of those criteria, or they may limit eligibility to youth meeting only those criteria selected by the state (e.g., only youth who are in school but not those who are employed, or have a medical condition). Most states plan to provide foster care assistance to an otherwise eligible youth who meets any one of the education, work, or other criteria listed in federal law. Origin of the Income Standard Title IV-E foster care support is limited to those children who are removed from homes with very low income (in most states the income standard is well below 100% of the federal poverty guideline). Federal funding dedicated to foster care originated in 1961 (P.L. 87-31) as a part of a prior law cash aid program, known as Aid to Families with Dependent Children (AFDC). Federal foster care eligibility criteria remain linked to income standards and other eligibility rules established under that program. This is true even though Congress established independent funding for foster care when it created the Title IV-E program in 1980 ( P.L. 96-272 ) and despite the fact that it subsequently repealed the AFDC program in 1996 (replacing it with the TANF block grant, P.L. 104-193 ). Table 2 describes each of the federal foster care eligibility criteria in four categories: (1) Removal requirements-judicial findings; (2) AFDC-related requirements; (3) Age; and (4) Placement and other requirements. Title IV-E Foster Care Spending During FY2011, states submitted claims totaling $8.327 billion in Title IV-E foster care expenses and received federal reimbursement of $4.340 billion, or 52% of that amount. Spending for maintenance payments represented just 29% of all Title IV-E foster care spending for FY2011 while spending for general foster care administrative purposes under the Title IV-E program represented close to half of the total (46%). Nearly 3% of the FY2011 Title IV-E foster care spending supported development and operation of Statewide Automated Child Welfare Information Systems (SACWIS), and a similar share (just above 3%) was spent on foster care-related Title IV-E training. The remaining FY2011 foster care spending under the Title IV-E program (19%) was reported under the "demonstrations" (i.e., waiver projects) category. Trend in Title IV-E Foster Care Spending by Kind of Program Cost Overall spending under the Title IV-E foster care program has trended downward since FY2002; spending for foster care maintenance payments began a nearly uninterrupted decline as early as FY1999. (See Figure 2 .) This is consistent with the decline in the Title IV-E foster care caseload over that time period. The average monthly number of children who received a Title IV-E foster care maintenance payment peaked in FY1998 at close to 305,200 and declined by nearly 45%, to fewer than 168,400, by FY2011. (During roughly the same time frame, the number of all children in foster care, both Title IV-E eligible and not eligible, fell by more than 29%, from a peak of 567,000 children on the last day of FY1999 to fewer than 401,000 on last day of FY2011.) Total Title IV-E spending for general foster care administrative costs exceeded total Title IV-E spending on foster care maintenance payments as early as FY2000. Foster care administrative spending continued to climb for several years, even as the foster care caseload declined, but since the middle of the last decade it too has trended down. Title IV-E foster claims related to the development and operation of a SACWIS were at their highest level in the late 1990s, soon after Congress authorized this federal support and during the period that enhanced federal support was available for this purpose. Spending for Title IV-E foster care training purposes has not increased, despite broadened authority (enacted in 2008) for states to claim federal Title IV-E support for this purpose. Finally, Title IV-E foster care spending under child welfare demonstration projects, which states were first required to report on separately for FY2000, jumped significantly in FY2007 and FY2008 as several large projects were implemented. This category refers to spending under what are often referred to as "waiver projects." For FY2011, more than 90% of the spending reported in this category was related to the projects being implemented in Florida (on a statewide basis) and in California (in Los Angeles and Alameda counties). Waiver projects must be designed to be cost neutral to the federal government. Apart from certain project development and evaluation costs, no state should expect to receive more Title IV-E funding under the demonstration project than it would if the project were not in place. However, Title IV-E funding spent under authority of the demonstration project may support a broader range of activities, including services, and be provided to individuals who would not otherwise be eligible for Title IV-E assistance. In all cases, however, the kind of Title IV-E spending must be authorized under the state's approved waiver project. Figure 2 shows total Title IV-E spending by federal and state share for each of FY1997-FY2011, as well as total (federal and state) spending in those years by claim category. The amounts are shown in inflation-adjusted (i.e., constant) dollars. Title IV-E Foster Care Maintenance Payments Federal support is available to states for 50%–83% of the cost of providing foster care maintenance payments to eligible children in foster care. The exact share of the cost that will be provided by the federal government is based on a state's FMAP, or federal medical assistance percentage. As noted above, that state-specific amount is determined by HHS each year using a statutory formula. The formula ensures that states with higher per capita incomes receive the lower federal reimbursement rates and states with low per capita income receive the highest federal reimbursement rates. States are required to provide foster care maintenance payments on behalf of every Title IV-E eligible child in foster care. The law defines a foster care maintenance payment to include specific costs (see text box). However, there is no federal minimum or maximum foster care maintenance payment rate. States are permitted to set these rates and are required (under Title IV-E) to review them periodically to ensure their "continuing appropriateness." The specific rate provided to a child typically varies by the age of the child, the child's placement setting, and by any special needs the child may have. In 2008-2009, the average monthly foster care maintenance payment among a national sample of children living in non-relative foster family homes was $679. Payment rates for children living with kin are expected to be lower and rates for children placed in group or institutional settings are expected to be higher. States also vary in the way they provide foster caregivers with support for certain items, such as clothing, school supplies, and child care. Some states may wrap this into the daily or monthly foster care maintenance payment rate while others provide discrete and separate payments. Among non-relative foster caregivers surveyed in 2008-2009, three-fourths (78%) indicated that the foster care payments they received covered the basic living expenses of the child for whom they cared. However, more than two-thirds of those foster caregivers (68%) indicated they sometimes supplemented those payments with their own funds to cover the child's expenses. The majority of non-relative and relative caregivers of children removed from their homes have income above the poverty level. However, this is less likely to be true for relative caregivers than for non-relative caregivers. Specifically, 82% of non-relative caregivers had household income above 100% of the federal poverty guideline, compared to 66% of formal kin caregivers and 58% of informal kin caregivers. As shown in Table 3 , in most years, the overall share of Title IV-E foster care maintenance payments paid by the federal government is between 54% and 55% of all states' spending for this purpose. However, the federal share of Title IV-E foster care maintenance payments reached a high of almost 63% during FY2010. As discussed above, that year was part of a 33-month-period (FY2009, FY2010, and the first 9 months of FY2011) for which the ARRA ( P.L. 111-5 , as amended by P.L. 111-226 ) provided enhanced federal support to states. As of August 30, 2012, states had obligated $463 million in additional federal support for foster care maintenance payments under this ARRA provision, most of this in FY2009 ($183 million) and in FY2010 ($190 million). How Are Children in Foster Care Who Are Not Eligible for Title IV-E Assisted? Children in foster care who are not Title IV-E eligible may not be supported with Title IV-E foster care maintenance payments and none of the dollars shown in Table 3 reflect spending for those children. Additional state and local funds are expended to meet the full foster care maintenance payment costs of children who do not meet the Title IV-E foster care eligibility criteria. States may also use certain other federal funding streams to provide monthly assistance to children living in foster care who are not eligible for Title IV-E assistance. A TANF "child-only" payment (typically less than a Title IV-E foster care maintenance payment) may be paid to a child in foster care who is not eligible for Title IV-E and who is living with a relative. This kind of TANF assistance may be provided without regard to the income of that relative. Separately, states may also use TANF to provide foster care maintenance payments to other children in foster care (whether or not they are living with a relative), if this kind of spending was authorized under the state's prior law AFDC Emergency Assistance (EA) program. (Funding for that program was rolled into the TANF block grant when it was created in 1996.) Although states are known to spend significant sums of TANF funds for child welfare purposes, the extent to which those funds are used to provide monthly assistance, as opposed to other child welfare services (e.g., family support or family preservation) is less clear. Other federal funding streams sometimes tapped by states for monthly room and board payments include Supplemental Security Income (SSI) and Social Security (Title II) "survivors" or disability benefits for children in foster care who meet the eligibility criteria for those federal programs. In addition, states may use Medicaid to supplement payments for children with special medical needs or those whose regular care must include medical treatment. However, the use of Medicaid for any child welfare purposes has declined in recent years. States have limited ability to use program funds under the Title IV-B, Subpart 1 program (Stephanie Tubbs Jones Child Welfare Services program) to provide foster care maintenance payments. They are largely prohibited from using Social Services Block Grant (SSBG) funds to do so. Federal Foster Care Coverage Rate The estimated federal foster care coverage rate—that is the share of all children in foster care who receive Title IV-E foster care maintenance payments—is believed to have grown from roughly 35% in the early 1980s to more than 54% in the middle 1990s. Since then it has declined and was estimated to be about 40% in FY2011. These rough estimates are based on a comparison of two sets of administrative data. Separately, survey data collected from state budget officials suggests a higher federal foster care coverage rate. Based on information from the 36 states that provided an estimate for each of state fiscal years 2000, 2002, 2004 and 2006, the survey reported a federal foster care coverage rate of 68% in state FY2000, declining to 58% in state FY2006. Among the 51 states that reported information on this question for state fiscal years 2008 and 2010, the national federal foster care rate was estimated at 55% for both years. The discrepancy between the administrative and survey data is not easy to explain. One likely factor might be differences in how the overall population of children in care are counted for purposes of the administrative data as compared to how states understand that total population for purposes of reporting (via the survey) the share of children in foster care who are receiving Title IV-E foster care assistance. The quality of the administrative data is another concern, including the lack of strict comparability of the numbers. Apart from their different reported foster care coverage rates, however, both the survey and administrative estimates indicate wide variation in the federal foster care coverage rate by state (see table in Appendix B ). Additionally, both sets of estimates indicate a decline in the federal foster care coverage rate over the past decade. Relationship of Income and Other Criteria to Federal Foster Care Coverage Rate The static income test that is a part of Title IV-E foster care eligibility criteria through its link to the prior law AFDC program is often cited as a key determinant in the share of children in foster care who are eligible for Title IV-E support. As shown in Table 2 , to be eligible for Title IV-E foster care support a child must have been removed from a home that met the income criteria for a needy family under the AFDC program, as that program existed in the state on July 16, 1996 and without adjustment for inflation. Under the prior law AFDC program, states were able to establish their own "need standards" or income test for purposes of determining eligibility for cash assistance. While those standards vary significantly by state, they are generally quite low. The median state need standard (annualized for a family of three) is $7,740. That amount represented roughly 60% of the federal poverty guideline for a family of that size in 1996 but represents just 41% of the federal poverty guideline for a family of three in 2012. In a large majority of states (37), eligibility for federal Title IV-E foster care assistance is limited to children removed from homes with monthly countable income that (on an annual basis) is less than 50% of the 2012 federal poverty guideline. The fact that the income test is not adjusted for inflation makes it an obvious factor in the decline in federal foster care coverage. At the same time, the multi-faceted nature of Title IV-E foster care eligibility—encompassing specific court findings, requiring placement in a licensed setting, stipulating requirements related to citizenship or immigration status, requiring removal from a relative's home and other criteria—means that income is not always the reason children in foster care are ineligible for federal foster care support. Remembering that there are multiple Title IV-E foster care eligibility criteria may help to explain why the relationship between a state's AFDC income test and its coverage rate does not always appear straightforward. If the income standard was the only relevant factor for determining a state's Title IV-E coverage rate, then presumably states with higher income tests would be more likely to have higher Title IV-E foster care coverage rates. However, this is not always the case. (See each state's AFDC income standard alongside estimated and reported Title IV-E foster care coverage rates in the state in Appendix B .) Why Are Children Determined Ineligible? Almost no research has been done on the reasons states find children ineligible for Title IV-E foster care. However, in a survey conducted by the research group Child Trends, 26 states were able to provide numerical data on at least one or more reasons children in out-of-home placements were not eligible for Title IV-E foster care maintenance payments during state FY2010. Parent's income was cited as a cause for ineligibility in each of those 26 states; although, its significance in a given state ranged widely from almost no cases in some of those states to the large majority in others. Across all of the reporting states, it was the reason for ineligibility in fewer than half of the cases (40%). Other factors frequently cited by states as reasons for a child's ineligibility included, a lack of required judicial determinations (25 states), unlicensed homes or facilities (22 states), and ineligible placement settings (18 states). Again, the significance of these factors varied greatly by state. However, on average, among the states that reported some children were found ineligible because they lacked required judicial determinations, or were in unlicensed or otherwise ineligible homes or other placement settings, between 10%–20% of the ineligible cases were linked to these factors. Finally, 17 states cited a wide range of "other" reasons that led to ineligible cases in their jurisdictions, including several that—like the family income requirement—are linked to AFDC eligibility rules. These included child must be deprived of parental care or support, child must be removed from the home of a specified relative, and resources in home of removal must not exceed specified limit. Additional "other" reasons for Title IV-E foster care ineligibility, as cited by states in the Child Trends survey, included "child's age/school attendance," "missing legal requirements," and citizenship issues." If eligibility criteria other than income are driving a state's federal foster care coverage rate down, then changes in the state's policy or practice might address this decline. However, depending on the specific criteria, this may be more or less possible. For example, if a state increases the use of relative placements for children in foster care (a practice supported in federal policy), this might also increase Title IV-E foster care ineligibility as the practice of routinely licensing relatives is relatively recent in some states and some continue to report that relatives resist, or are unable to meet, foster family home licensing standards. Unlike the income test, however, states may attempt to address this issue by more actively seeking to license relatives, including by using the authority (granted in statute) to waive any non-safety licensing standards for children placed with relatives. Separately, if children are found not eligible for Title IV-E foster care because the required judicial determinations were not made, or were not made in the specified time frames (see Table 2 ), a state may review its procedures to ensure courts have time to act and may also work to raise awareness of the court concerning needed findings and their time frame. At the same time, any improvement will also likely depend on the cooperation of the courts and their willingness to engage with the child welfare agency on this issue. The share of children eligible for Title IV-E foster care maintenance payments is significant to federal funding for other kinds of Title IV-E foster care purposes because it is a primary factor in determining the amount of "administrative" and other program costs that states may assign to the Title IV-E program. Further, any cost not assigned to the Title IV-E program is not eligible for federal Title IV-E support. Title IV-E Administrative Spending for Foster Care Federal support is available to all states for 50% of their cost of providing "child placement services and for the proper and efficient administration" of a foster care program under the Title IV-E plan. These costs are commonly referred to as "administrative." There are many "administrative" purposes under the Title IV-E program. However, most foster care administrative spending is tied to the amount of caseworker time spent to perform required child protection activities on behalf of individual children in foster care and on behalf of children at imminent risk or removal to foster care. (See Figure 3 below.) Additional administrative spending supports background checks of prospective foster parents, eligibility determination, rate setting, licensing, policy development, compliance review participation, and other agency activities related to operating a Title IV-E foster care program. (See text box.). In general, states may only claim federal Title IV-E support for an administrative cost to the extent that the cost was incurred on behalf of a child who is eligible to receive a Title IV-E foster care maintenance payment. There are some instances, however, in which a larger share of all foster care administration costs may be submitted and these instances are described below. Case Planning and Case Management More than half of all state and federal Title IV-E foster care administrative spending in FY2011 (53%, or $2.0 billion in FY2011) was for child-specific case planning and management activities. This funding primarily supports caseworkers who are carrying out the requirements of the case review system. These include assessing a child and family's needs and developing a written case plan for each child, preparing for and participating in periodic administrative or court reviews of a child's status in foster care, preparing for and participating in the court's establishment and review of a child's permanency plan, assisting a youth who is about to age out of foster care in the preparation of a transition plan and other requirements. A state child welfare agency can receive federal reimbursement for 50% of the costs of providing these child-specific activities provided they are carried out on behalf of children who are eligible to receive a Title IV-E foster care maintenance payment. Additionally, a state child welfare agency may claim federal Title IV-E support for these same activities, provided to children in foster care who would be eligible for a Title IV-E foster care assistance except that they are living in the unlicensed home of a relative. However, a state may claim this Title IV-E administrative support for that child only if it is working toward licensing the relative's home and for no longer than the lesser of 12 months or average length of time it takes the state to license a foster family home). Finally, a state may also claim this kind of Title IV-E administrative support for a child who is temporarily living in an ineligible foster care setting (e.g., a locked juvenile detention facility) but only for one month and provided the child is moved back to an eligible placement setting. Pre-placement Activities A sizeable share of state and federal Title IV-E foster care administrative funds (16%, or $613 million in FY2011) are spent on "pre-placement" activities. This is the only form of Title IV-E foster care funding that is provided on behalf of children who are not in foster care. Pre-placement activities include many of the same kinds of child-specific activities as those for children who are in foster care—for example, making referrals for services, preparing for and participating in court proceedings related to a child's removal, or finding a home for the child. To claim this Title IV-E support for efforts made on a child's behalf, the state agency must determine that the child is at "imminent risk of removal" from the home. These children are sometimes described as "candidates" for foster care. A child may be a candidate for no more than 6 months without a redetermination that he/she continues to be at "imminent risk of removal." Eligibility Determination The combined federal and state cost for determining Title IV-E foster care eligibility was $184 million in FY2011 (5% of all Title IV-E administrative costs). States are permitted to seek federal support for all costs related to Title IV-E eligibility determinations. This includes both the cost of determining that a child is not eligible for Title IV-E foster care maintenance payments, as well as determining that a child is eligible for Title IV-E assistance. Other Foster Care Administrative Costs Finally, states may seek federal Title IV-E foster care support for other administrative costs necessary to operate a Title IV-E foster care program. These may include establishing and implementing licensing requirements, operating a rate setting unit, conducting background checks, developing required program policies, participating in federal compliance reviews, and other program costs. In general, the part of these costs that may be supported with Title IV-E dollars is the same share as for case planning and case management costs; however, funding for specific "other" administrative purposes (e.g., school transportation) may require separate cost allocation processes. Figure 3 indicates an apparent increase in the Title IV-E foster care administrative costs shown as "other" for FY2011. This may reflect an actual change in state spending patterns, but more likely reflects a change in how the data were reported. FY2011 was the first year that states were required to use a new form to submit their Title IV-E foster care spending claims to HHS. Among other changes, the new form does not include an "other" administrative costs category. However, two new categories, presumably intended to capture those expenses and likely additional costs that were previously reported by states as part of case planning and management, were added. These new categories are described as "provider management" related to Title IV-E children in foster care (e.g., recruiting foster families, licensing homes and institutions, conducting criminal record and child abuse registry checks, holding fair hearings, and operating a rate setting unit) and "agency management" related to Title IV-E foster care (e.g., policy development, data collection and reporting, operation of a quality assurance system, proportionate share of related agency overhead, and other costs allocable to Title IV-E program administration). For FY2011, states submitted provider management costs of $298 million (8% of all Title IV-E foster care administrative costs) and agency management costs of $708 million (18% of all Title IV-E administrative costs). In Figure 3 this spending is combined and shown as "other" administrative costs for FY2011. Comparable data, however, are not available for earlier years shown in that Figure. The new specificity providing on the reporting form, as well as the renaming of certain other administrative spending categories, very likely affected how states reported their Title IV-E foster care administrative spending. Therefore, any comparisons across all years shown in Figure 3 should be made with caution. What Drives Program "Administrative" Costs? Spending on foster care "administrative" purposes surpassed spending for Title IV-E foster care maintenance payments in FY2000. Despite the decline in caseload, and accompanying decline in spending for foster care maintenance payments, Title IV-E foster care administrative spending continued to climb for several more years. (See Figure 2 .) In FY2006, Title IV-E foster care administrative costs comprised 55% of all Title IV-E foster care spending, compared to 35% for Title IV-E foster care maintenance payments. The share of Title IV-E foster care spending for administrative purposes has declined since that year (due in large part to increased Title IV-E spending that occurred as part of child welfare demonstration projects ("waivers")). However, in FY2011 foster care administrative costs under Title IV-E continued to represent a significantly larger share of program costs (46%) than did foster care maintenance payments (29%). The amount and, at least until recent years, the growth of Title IV-E foster care "administrative claims" has been of recurring concern for policymakers. Since the late 1990s, the expansion of Title IV-E state plan requirements, coupled with increased attention to state compliance with those requirements, likely helped to expand or maintain spending on Title IV-E foster care administrative purposes even as the overall number of children in foster care declined. Both the new state plan requirements and the increased attention to compliance were in large measure meant to improve outcomes for children and families served by the state child welfare agencies. Some examples of requirements that states must meet include to ensure an initial permanency hearing at 12 months following a child's entry to foster care (rather than previous 18 months); petition a court for the termination of parental rights in cases where children are not going to be reunited with their parents; conduct background checks for prospective foster care and adoptive parents, including finger-print checks of FBI-maintained databases and checks of state child abuse registries; make a plan for the educational stability of children in foster care; help youth about to "age-out" of foster care develop a transition plan; identify and provide notice to, relatives when a child enters foster care; and annually check any credit reports associated with older children in care and help those children address any irregularities in the reports. , Outside those specific Title IV-E plan requirements noted here, the 2001 implementation of federal "conformity reviews," including the Child and Family Services Review and the Title IV-E Eligibility Review has also added to Title IV-E administrative costs. A central purpose of these reviews is to determine state compliance with the Title IV-E (and Title IV-B) state plan. To the extent the reviews caused states to pay closer attention to their child welfare system, they may have driven increased Title IV-E administrative costs for case planning and review, pre-placement, and provider management costs. In addition, the planning for and participation in the reviews is considered an agency management cost under the Title IV-E program. Providing Protections to Children Who Are Not Title IV-E Eligible All children in foster care—whether Title IV-E eligible or not—must receive case planning and review services (primarily caseworker activities on a child's behalf). With limited exceptions (discussed above) states may not use Title IV-E funds to provide these protections to children who are not eligible for Title IV-E foster care maintenance assistance. However, states may supplement state and local spending for these purposes with certain other federal funds, including the Title IV-B, Subpart 1 program (Stephanie Tubbs Jones Child Welfare Services), SSBG and TANF funds. Some states have used Medicaid for certain case planning activities on behalf of children in foster care (particularly non-title IV-E eligible children). However, recent survey data show a decline in state child welfare agency spending of Medicaid funds. Title IV-E Training Title IV-E training support is available for all three program components: foster care, adoption assistance and kinship guardianship. Since FY2000, the total amount of Title IV-E program dollars spent for training purposes has declined in most years. The federal share of the total Title IV-E training costs is the same for all states and is generally 75%; (certain time-limited exceptions are discussed below). Most dollars spent for training under the Title IV-E program are related to its foster care component and are included in this report under the discussion of the Title IV-E foster care program. However, all kinds of Title IV-E training, whether related to foster care, adoption assistance, or kinship guardianship, are discussed in this section of the report. (See Figure 4 ). Federal reimbursement related to training is largely limited to costs that are incurred by the state to train individuals who will provide care, or other services, to Title IV-E eligible children and for training on topics that directly relate to activities required under the Title IV-E plan. States may seek partial federal reimbursement for the cost of providing short-term training, directly or via a contract, to individuals specified in the law (see text box). Topics that may be covered with these training funds must be related to carrying out the Title IV-E program and may range from administrative tasks (e.g., how to maintain confidential records) to social work practice (e.g., how to assess needs in a family-centered manner). While Title IV-E-supported training may also address broad topics relevant to carrying out the Title IV-E program—for example, caregiver mental health or substance abuse issues—it may not support training related to treating those needs (i.e., providing mental health services or substance abuse treatment). Similarly, while Title IV-E funds may be used to provide training about the impact of child abuse and neglect on children, it may not be used to provide training to workers on how to specifically conduct a child abuse and neglect investigation. This is because neither treating a caregiver for substance abuse or mental health issues, nor investigating child abuse and neglect are considered within the scope of the Title IV-E program. The state agency may also use Title IV-E to support "long-term" training for individuals who are employed by a public child welfare agency or those who are preparing for that employment. Long-term training may be provided as direct financial assistance to current or prospective employees who are students or through grants to schools. Expanded Ability to Seek Title IV-E Training Support Phased In As of the first day of FY2013, the federal reimbursement rate for all Title IV-E training claims is again 75%. That day marked the end of a four-year phase-in period that provided lower reimbursement rates for some Title IV-E training claims. Specifically, as permitted by the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ), states may make Title IV-E training claims for short-term training provided to workers at private , licensed child welfare agencies providing assistance to Title IV-E eligible children; prospective relative guardians; and for certain individuals handling child abuse and neglect cases in court (see text box above). The 2008 act set the reimbursement rates for these newly authorized Title IV-E training claims at 55% in FY2009, rising five percentage points annually until it reached 75% as of the first day of FY2013. Most Title IV-E claims for federal reimbursement of training costs continue to be submitted under provisions in place before the changes made by P.L. 110-351 . For FY2011, 19 states submitted less than $13 million in Title IV-E training claims under the broadened authority while all states submitted a combined $284 million in training claims under the pre-existing authority. State Discretion in Spending Title IV-E Training Dollars The overall decline in Title IV-E spending for training over the last decade might be traced to a decline in the share of children who are eligible for Title IV-E assistance. This is because, generally, federal Title IV-E support for training is only available to the extent the training is provided to individuals caring for or otherwise serving children eligible for Title IV-E assistance. In addition, the phase in of broadened authority to seek federal Title IV-E training support was not complete as of FY2011 (last year for which spending data are available). At the same time, the relatively limited spending by states on training—and, through FY2011, the limited use of the new broadened authority to provide training with Title IV-E support—may reflect the greater level of discretion states have over training dollars as compared to other aspects of Title IV-E. The Title IV-E plan does specifically require states to prepare prospective foster parents "adequately with the appropriate knowledge and skills to provide for the needs of the child" and to continue this after the child's placement as necessary—but it is otherwise mostly silent regarding training. Further, unlike the need to ensure there are caseworkers to, for example, visit children in foster care or prepare for and participate in required court proceedings for them, the need to train staff may appear less immediate. These facts combined with the generally weak fiscal position of most states since the enactment of P.L. 110-351 —may help to explain why there has been no increase in overall Title IV-E training claims since the enactment of the broadened authority to submit Title IV-E training claims. Statewide Automated Child Welfare Information System (SACWIS) States may claim federal reimbursement under the Title IV-E program for 50% of the cost to plan, develop, and operate a Statewide Automated Child Welfare Information System (SACWIS). Most SACWIS costs are believed to follow from operation of a foster care program. However, as is the case with Title IV-E training costs, costs related to SACWIS may stem from provision of foster care, adoption assistance, or kinship guardianship assistance. The following discussion includes all SACWIS-related spending reported by states, whether categorized as an operation or a development cost. States are not required to have a SACWIS, but choosing to do this enables a state to seek federal reimbursement under Title IV-E for costs that would otherwise not be allowed. As of September 2012, 36 states have an operational SACWIS, three are developing a SACWIS, and 13 states have a non-SACWIS model information system. (See Table 4 .) In establishing the ability of states to make SACWIS claims, Congress stipulated that any system developed must comply with HHS regulations, interface with state child abuse and neglect data collection and AFDC (now TANF) data collection systems (to the extent practicable); and provide more efficient, economical, and effective administration of state child welfare programs, as determined by HHS. Under the SACWIS rule, states are required to develop "comprehensive" child welfare data collection systems that include child welfare services, foster care and adoption assistance, family preservation and support services, and independent living. Further, to encourage states to establish a SACWIS, Congress initially approved an enhanced Title IV-E reimbursement rate of 75% for SACWIS development costs (and a 50% reimbursement rate for operation). The enhanced development rate was in place from FY1994-FY1997. Beginning with FY1998, however, federal reimbursement of costs for both the development and operation of SACWIS is available at 50%. States operating or developing an approved SACWIS may claim federal Title IV-E reimbursement for an approved system (both development and operation costs) without regard to whether the system serves foster or adoptive children who meet or do not meet the Title IV-E assistance criteria. A SACWIS must be designed to allow access to case level information across federal programs; accordingly states may also claim certain system development costs across more than one program. However, most SACWIS costs that are not related to operation of a child welfare program under Title IV-E or Title IV-B must be allocated to the program they benefit. Since the establishment of this funding under Title IV-E, states have invested $4.7 billion in SACWIS operation and development costs and the federal government has reimbursed more than half (55% or $2.6 billion) of those costs. Table 5 shows Title IV-E SACWIS claims made by states for FY1994–FY2011. Title IV-E Adoption Assistance As part of the Adoption Assistance and Child Welfare Act of 1980 ( P.L. 96-272 ), Congress established federal support for assistance to any child that the state determines cannot, or should not, be returned home; there is a specific factor or condition that makes it reasonable to conclude that the child cannot be placed for adoption without assistance (e.g., child is older or part of a sibling group to be adopted together); and, efforts have been made to place the child without assistance, unless this would be against the child's best interest (e.g., if the child has bonded with a foster parent who is clearly the best person to adopt the child but cannot do so without assistance). In the Title IV-E program, children who meet these criteria are referred to as children with "special needs," and the very large majority of these children were previously in foster care. In its report on the legislation that became the 1980 Adoption Assistance and Child Welfare Act, the House Ways and Means Committee wrote that the "primary objective" of the bill was to "promote reforms in State foster care and child welfare services programs that will significantly increase the number of children placed in permanent homes. Those reforms would not be complete without the provision of adoption assistance." All states were required to establish a Title IV-E Adoption Assistance component as part of their Title IV-E program (no later than the first day of FY1983). By FY1984 there were 11,600 children receiving Title IV-E adoption assistance on an average monthly basis. That number rose steadily, reaching 146,900 for FY1997. In November 1997 Congress enacted the Adoption and Safe Families Act (ASFA, P.L. 105-89 ). Among other purposes, that law sought to increase the number of children who left foster care for permanent adoptive homes. It sped up the permanency planning time frame for children who entered foster care, and also required states to take steps to ensure the legal availability of a child for adoption if the child had been in care for a certain length of time or if there was no requirement to make "reasonable efforts" to reunite the child with his or her parent. ASFA also authorized Adoption Incentives to provide cash awards to states that increased adoptions of children out of foster care. The law's enactment was followed by strong growth in the number of children adopted with public child welfare agency involvement. That number stood at roughly 31,000 in FY1997, grew to more than 51,000 by FY2000 and—despite a significant decrease in the number of children in foster care across this time period (i.e., a decline in the pool of children out of which most special needs adoptions occur)—has remained at or above 50,000 adoptions in all but one fiscal year, through FY2011. Adoptions out of foster care also began to occur more quickly in this time period. The average length of time a child who was adopted from foster care had spent in care declined by roughly one year, from 46 months for those adopted in FY2000 to 34 months for those adopted in FY2011. The increased number of children adopted from foster care helped to drive significant growth in the number of children who receive Title IV-E adoption assistance. As of FY1997, there were about 146,400 children receiving Title IV-E adoption assistance on an average monthly basis. That number rose to 285,600 during FY2002—the first year in which the number of children receiving Title IV-E adoption assistance surpassed the number who were receiving Title IV-E foster care maintenance payments—and it climbed to 423,200 by FY2010. States reported the first ever decline in the Title IV-E adoption assistance caseload for FY2011, when an estimated 413,800 received that assistance on a monthly basis. Some of the reported caseload decline for FY2011 might be due to children who joined the caseload following ASFA and are now leaving it because of age. (In most cases, adoption assistance does not extend beyond age 18, although there are situations in which it may continue until age 21.) Separately, the decline may be related to those federal adoption assistance eligibility criteria that are linked to the income test and other requirements of the prior law cash welfare program known as Aid to Families with Dependent Children (AFDC). While Congress has acted to phase out those federal eligibility criteria for purposes of Title IV-E adoption assistance, the AFDC criteria are expected to continue to apply to the majority of adopted children until at least FY2015 and will not be entirely irrelevant to Title IV-E adoption assistance eligibility until the first day of FY2018. Apart from these potential reasons for the change in the caseload, some of the reported "decline" might also be related to data quality concerns. Specifically, there were significant changes in the reporting form used to collect data on the number of children receiving Title IV-E adoption assistance, and that form first went into effect with FY2011. Figure 5 shows the change in Title IV-E foster care and adoption assistance caseloads beginning with FY1984. Federal Adoption Assistance Funding and Eligibility Federal adoption assistance under Title IV-E is authorized to provide states with partial reimbursement for the cost of providing adoption assistance payments on behalf of eligible adopted children who have special needs. To receive reimbursement for adoption assistance expenses, states must meet all of the same requirements necessary to receive Title IV-E foster care funding, including having an approved Title IV-E plan and meeting data collection and reporting requirements. Further, states are required to enter into a written adoption assistance agreement with the adoptive parent(s) of any adopted child determined to have special needs. Under that agreement, the state must make payments for non-recurring adoption expenses to the adoptive parents of the special needs child and, if the child meets additional federal eligibility criteria, it may make ongoing monthly adoption subsidies to those parents on the child's behalf. Until FY2010, these additional federal eligibility criteria always included income and other resource limits that are linked to the prior federal cash aid program (AFDC, as it existed on July 16, 1996) or, alternatively, to the Supplemental Security Income (SSI) program. The Fostering Connections to Success and Increasing Adoptions Act ( P.L. 110-351 ) phases in (from FY2010 to FY2018) new federal adoption assistance eligibility rules that delink the program from income or resource tests, whether as part of the prior law AFDC program or the current SSI program. Federal reimbursement for Title IV-E adoption assistance costs made on behalf of eligible children are available for most of the same categories of costs, and at the same reimbursement rates, as is the case for foster care. Specifically, adoption assistance payments for eligible children are reimbursed at the state's FMAP, which ranges from 50% to 83%. Program administration costs are reimbursed at 50% and include reimbursement for non-recurring adoption expenses that are related to the legal costs of finalizing an adoption as well as other program administration costs. Finally, as discussed above, program-related training costs (related to the adoption assistance component of the Title IV-E program) are reimbursed at 75% in most cases. As is true with the foster care component of the Title IV-E program, states with an approved Title IV-E plan may submit adoption assistance claims to HHS, on a quarterly basis, showing all eligible costs incurred and they are entitled to reimbursement for the federal share of those costs. States may submit these claims any time within two years of incurring an eligible expense. Title IV-E Adoption Assistance Spending Overview States submitted claims totaling $4.009 billion in Title IV-E adoption assistance expenses during FY2011, of which they received federal reimbursement of $2.315 billion or 57.8%. States can expect a higher overall reimbursement for their Title IV-E adoption assistance spending (as compared to foster care spending) because the very large part of the program cost (80% in FY2011) is tied to ongoing assistance payments and, for most states, that spending is reimbursed at a higher rate than most other Title IV-E adoption assistance claims. Title IV-E adoption assistance administrative spending (reimbursed at 50% in all states) has represented between 16% and 18% of total Title IV-E adoption assistance spending annually over the past decade. Less administrative spending is expected under the Title IV-E adoption assistance program (as compared to the Title IV-E foster care program) because there are far more limited purposes for which federal reimbursement of those costs may be claimed. This is because most of the policies and other procedures required under the Title IV-E plan—and for which federal Title IV-E support is available—apply only to children in foster care. (For example, none of the protections offered to children via the case review system are applicable to children once they have left foster care for an adoptive home.) The federal share of Title IV-E adoption assistance funding is typically between 54.0% and 54.5% of the total (state and federal) spending for the program. However, it reached 60% of Title IV-E adoption assistance spending in both FY2009 and FY2010 and was close to 58% for FY2011. The larger federal share of Title IV-E adoption assistance funding in those years is tied to temporary enhanced federal support provided to states via the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 , as amended by P.L. 111-226 ). As discussed above, that enhanced funding ended as of June 30, 2011. As of August 30, 2012, states had obligated more than $502 million in federal Title IV-E adoption assistance spending under this temporary provision, most of this in FY2009 ($195 million) and FY2010 ($209 million). Combined state and federal spending under the Title IV-E adoption assistance component rose rapidly between FY1997 and FY2002, continued to rise at a slower pace through FY2010, and showed its first ever decline in FY2011. As noted above, FY2011 was also the first year in which states reported some decline in the adoption assistance caseload. It is not possible to know yet whether the lower spending represents the start of a trend or if it is anomalous (perhaps reflecting a data quality issue due to states' use of a new reporting form). However, as part of its mid-session review of the FY2013 budget (conducted in the summer 2012), HHS assumed continued annual growth in the Title IV-E adoption assistance caseload of between 3% to 5% through FY2017 and it estimates federal outlays for Title IV-E adoption assistance of $2.527 billion for FY2013 with annual growth in those outlays of between 4% and 7% through FY2017. Federal Adoption Assistance Eligibility Criteria No child may be eligible for Title IV-E adoption assistance without being determined as a child with "special needs." However, not all special needs children qualify for Title IV-E adoption assistance. Instead, a child must also meet the eligibility criteria of at least one of four separate federal eligibility pathways. Additionally, to receive a Title IV-E adoption assistance payment, the child must meet age criteria, be a U.S. citizen or hold a certain immigration status, and meet several other criteria. Over an eight-year period that began with the first day of FY2010 and will be completed as of the first day of FY2018, the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ) removes all income or resource-related tests that are embedded in three of the four current federal eligibility pathways. During that phase-in time period, the revised eligibility pathway may be used to determine eligibility for anyone that the statute defines as an "applicable child." An applicable child must be a certain age, have spent a certain amount of time in foster care, or be the sibling of a child who meets the age or length of stay in care criteria. (See text box.) Eligibility Pathways The most common Title IV-E adoption assistance pathway requires the special needs child to have been removed from his or her home via a voluntary placement agreement (signed by the child's parent or legal guardian and the agency), or in accordance with a judicial determination that the child's home was "contrary to the welfare" of the child. Further, unless the child is an applicable child, to qualify under this pathway, the state must determine that the child, while living in the home from which he or she was removed, would have been considered a "needy" child under the income and other eligibility criteria of the AFDC program, as it existed in the state on July 16, 1996. Under a second pathway, any special needs child who meets the medical, disability, income, resource, and other requirements of the Supplemental Security Income (SSI) program may be eligible for Title IV-E adoption assistance payments. However, if the special needs child is an applicable child, he/she need only meet the medical and disability criteria. No additional income, resource or other SSI program criteria are relevant. Third, a special needs child may be eligible for Title IV-E adoption assistance if he/she is living with his/her minor parent and a Title IV-E foster care maintenance payment—that includes funds to cover the cost of the child—is being made on behalf of the minor parent. However, if the child is an applicable child with special needs, he/she may be eligible under this pathway, without regard to whether the foster care maintenance payment being paid to the minor parent is a Title IV-E payment or a non-Title IV-E payment. Finally, any special needs child that was receiving Title IV-E adoption assistance payments in an adoption that subsequently dissolves (meaning the parental rights of those adoptive parents are terminated), or if the adoptive parents die, is eligible for Title IV-E adoption assistance payments in any subsequent adoption. This pathway is also available to a special needs child who would have been eligible for Title IV-E adoption assistance in the earlier (and now dissolved or ended) adoption, if an eligibility determination had been made at the time of that adoption. This pathway is also available for an applicable child under effectively the same rules. As part of expanding federal Title IV-E adoption assistance coverage to include (as of the first day of FY2018) nearly all children adopted from foster care and determined to have special needs, Congress required states to re-invest any state savings resulting from this broadened federal support in other child welfare-related child and family services, including post adoption services. To implement this provision, HHS required states to provide a signed assurance that they would meet this requirement. The Child and Family Services Improvement and Innovation Act (2011, P.L. 112-34 ) further required states to document how these re-invested funds are spent, including for post adoption services. Accordingly, HHS has required states to amend, and re-submit an assurance that they will reinvest any state savings as required by P.L. 110-351 , to further assure that they will document this spending as required. The revised assurance was to be submitted to HHS by January 31, 2012. The eligibility changes made in the Fostering Connections to Success and Increasing Adoptions Act of 2008 are expected to expand eligibility for Title IV-E adoption assistance to nearly all children determined by a state to have special needs. However, a presumably small number of adoptive children may not be eligible because of additional federal eligibility criteria which remain in effect and apply to all children (both "applicable" and non-applicable.). Specifically, those requirements include completion of an adoption assistance agreement between the Title IV-E agency and the prospective adoptive parents before the child's adoption was finalized; a background check of the child's prospective adoptive parent(s), which must not reveal convictions for certain felonies (i.e., the individual must never have been convicted of committing any of the felonies that would preclude an individual from becoming a foster parent of a child receiving Title IV-E assistance, as discussed above); and age and citizenship/immigration status requirements for the child. Table 6 shows criteria that a child must meet to be eligible for ongoing Title IV-E adoption assistance payments. No child may be eligible for this assistance without a determination by the state that he or she meets the "special needs" criteria. Further, the child must meet the criteria included in at least one of the four listed eligibility pathways. Those criteria vary based on whether a child is an "applicable child" or not an "applicable child." Finally, the child must meet other specified requirements including age, citizenship/immigration status rules, placement with a prospective adoptive parent that meets federal background check requirements, and other requirements. Conditions or Factors Used by States in Determining Special Needs Only children who are determined by a state to have "special needs" may be eligible for Title IV-E adoption assistance. As outlined above, this determination must include a finding by the state that the child cannot be returned to his/her parents and that there is a factor or condition specific to the child that makes it "reasonable to conclude" that the child will not be adopted without provision of adoption assistance or medical assistance. Finally, unless it is not in the child's best interest, the state must determine that reasonable, but unsuccessful, efforts to place the child have been made without providing such assistance. States establish what specific conditions or factors make it unlikely that a child will be adopted without some form of assistance. They may define those conditions or factors as they choose and are also free to change how they are defined. However, once a child has been defined as having special needs, and an adoption assistance agreement has been put in place, they must continue to honor that agreement. Special needs conditions or factors, as they are used by the states, are summarized below. Typically, a child must meet at least one of the conditions or factors; however, as described below, some of those factors combine two or more criteria (e.g., age + race). Membership in a Sibling Group Every state considers membership in a sibling group to be a special need factor, but size and characteristics of the sibling group may affect whether or not this membership is considered a special need. Approximately 40 states permit special needs to be established if a sibling group of any size (i.e., two or more) is being placed together for adoption at the same time. However some of those states (circa 10) require additional findings if a sibling group includes only two children. For example, they may require that at least one of the siblings be of a certain age, or have another identified special need condition or factor. The remaining 11 states allow establishment of special needs if a sibling group of three or more is being placed together in an adoptive home, although a few require that at least one of those siblings meet additional specific criteria. Among all states, some explicitly require that the siblings be placed in the same adoptive home at the same time, while others explicitly permit establishment of special needs for siblings placed in the same home but at different times. However, this latter group of states may require that one or more of the siblings placed in the same adoptive family but at different times meet some additional special needs factor or condition (e.g., earlier placed sibling was already receiving adoption assistance or one or more of the siblings has reached a certain age). Age Nearly every state uses age alone as a special needs condition but the minimum age chosen to establish "special need" ranges widely, from one year to 12 years. The majority of states (at least 30) established a minimum age of five, six, seven, or eight years. Further, a small number of states do not specify but permit establishment of special needs at any age if the child's age is determined a barrier to adoptive placement. Approximately 14 states provide a separate minimum age to establish special need, provided a child also meets certain minority group criteria (e.g., is African- American, of "blended parentage," or is a member of a minority group over-represented in state foster care). Most of these states established the minimum special needs age as two to three years of age for the identified racial or other minority group. (These states often establish a separate, older age at which a "white" or "Caucasian" child may be considered to have special needs.) Race/Ethnicity Almost half of all states considered a child's membership in a minority group or race (independent of the child's age or other criteria) to be a factor that established a child's special needs status. Medical Conditions; Physical, Emotional, or Mental Disabilities Every state takes into account some combination of medical conditions, as well as physical, emotional or behavioral factors. These are defined differently by states but typically require documentation by a qualified professional. Further, some states stipulate that the conditions must be identified as "severe" or, alternatively "severe or moderate" and/or they must require ongoing rehabilitation or treatment or be "non-correctable." High Risk Roughly two-thirds of the states also include "high risk" factors in their special needs determination. "High risk" typically means there is some reason to believe that—based on the experiences or characteristics of a child prior to the adoption—he or she will develop one of the medical conditions, or physical, emotional or mental disabilities identified as a special needs factor. For example, these prior characteristics or experiences might include that the child—has a genetic history that pre-disposes him/her to mental illness; was prenatally exposed to "toxins;" or has a history of serious abuse or neglect. A number of states that permit establishment of "special needs" based on a high risk factor, further stipulate that adoption assistance payments may not be made on the child's behalf unless, or until, symptoms of the condition or disability actually occur. Additional Factors A few states include additional special needs factors. These include, for example, the length of time the child has been legally available for adoption but not placed; the child previously experienced a disrupted or dissolved adoption; the child experienced multiple placements while in care; determination that language is a barrier to the child's placement; the child is to be adopted by a relative; the child has significant emotional ties with foster parents who are seeking to be the adoptive parents; or the child has a documented history of abuse or neglect. Primary Factor or Condition Associated with Special Needs Determination On a national basis the share of children adopted each year who are determined to have special needs has fluctuated between roughly 84% and 88% of all children adopted with public agency involvement for each of FY2000-FY2011. There is no discernable trend (i.e., regular decline or regular increase) in this national percentage and the percentage also varies significantly by state. Membership in a sibling group, or having a diagnosed medical condition or physical, social or emotional disability, represents the primary factor or condition identified for a little more than half of all children determined to have special needs. Age has declined in importance for determining special needs status over the past several years, while membership in a sibling group and "other" reasons have increased in significance. A child's racial/ethnic background is least commonly used, however, it is counted as the primary special needs factor in roughly one of ten (10%-11%) special needs determinations. (See Table 7 .) Adoption Assistance Agreements States are required to enter into an adoption assistance agreement with the adoptive parents of any child having special needs. This written agreement must be between the adoptive parents, the state Title IV-E agency, and any other relevant agencies. The agreement must specify the nature and amount of any payments, services and assistance to be provided and must stipulate that it will remain in effect regardless of the state in which the adoptive parents are residents. Under provisions of Title IV-E, any child who is eligible for Title IV-E adoption assistance payments is also eligible for Medicaid. Further, a state is required to assure it will provide Medicaid, or comparable health insurance coverage for any child who does not qualify for Title IV-E adoption assistance payments, but for whom the state finds there is a special need that requires medical, mental health, or rehabilitative care. Once an adoption assistance agreement is executed it is binding on all parties and may only be ended under the following circumstances: the adopted child reaches the age limit for Title IV-E adoption assistance, which is 18 years of age, at the youngest, and up to 21 years at the oldest (see Table 6 for details); the state determines that the parents are no longer legally responsible for the support of the child (i.e., because their parental rights have been terminated, or the child marries, enlists in the military, or becomes an emancipated minor); or the parents are not providing any support for the child. (A child does not need to be living with the parents to be receiving support from them. HHS has defined "any support" to include, for example, payments for tuition, family therapy, clothing, or other items. The 2007 National Survey of Adoptive Parents, which looked at a nationally representative sample of children who were adopted (in any year), found that among children adopted from foster care, more than 9 out of 10 (92%) had an adoption assistance agreement with the public child welfare agency. Of those children, the large majority had an agreement that included an on-going adoption subsidy and/or Medicaid (or other form of public health insurance). Among children adopted from foster care with adoption assistance agreements (at age 5 or older), close to one in five (19%) had used mental health care that was guaranteed in the agreement but an additional one in four (27%) has used mental health care even though it was not a part of the adoption assistance agreement. More than one in three of children in this group had used tutoring services (36%) although that service was very infrequently included in their adoption assistance agreement. Finally, the large majority of children who were adopted from foster care at age 8 or older (88%) had not used residential treatment, although among those who did, not all had this service included in their adoption assistance agreement. Adoption Assistance Payments States may provide federally subsidized monthly adoption assistance payments on behalf of eligible children as soon as an agreement is signed and the child has been placed in an adoptive home. The amount of the adoption assistance payment is to be determined through negotiation with the adoptive parents and must be based on the individual needs of the child and circumstances of the adoptive parents. (However, the income or resources of the adoptive parents must not be used to determine a child's eligibility for Title IV-E adoption assistance.) Payments may be adjusted periodically if circumstances change, but only with the concurrence of the adopting parents. However, in no case may the payment amount exceed what the child would receive if he or she had remained in a foster family home. This does not preclude adjustments for inflation, or for a child's different needs, as long as the adjustment is consistent with what would have occurred if the child had remained in foster care. There is no list of "allowable" adoption assistance costs and once an adoption assistance agreement is executed specifying the amount the agency will provide, the adoptive parents are free to spend that money as they see fit for their family. Basic adoption assistance payment rates vary by state and all states have "specialized" rates for particular situations where a child has extraordinary needs and/or requires additional parenting skills. The 2007 National Survey of Adoptive Parents found that among children adopted out of foster care who were receiving a monthly subsidy, more than four out of 10 received a monthly subsidy ranging from $301 to $500 and approximately one-quarter (24%) received a subsidy of between $501 and $750 a month. Of the remaining children, roughly equal shares received subsidies at the high or low end of the spectrum: 18% received a monthly subsidy between $1 and $300 and 15% received a monthly subsidy of $750 or more. The parents of two-thirds (67%) of the children adopted from foster care (and who were receiving a subsidy on the child's behalf) felt that the payment amount met the child's needs. Not all families of adopted Title IV-E-eligible children with special needs actually receive ongoing adoption assistance payments (and some may receive very low payments). In these instances, the adoptive parent may only have been eligible to receive federal support for costs associated with finalizing the adoption (see discussion of " Non-recurring Adoption Expenses " below) or the parents' circumstances may be such that an adoption subsidy is not needed or wanted. However, having an adoption assistance agreement in place before the adoption of the child is finalized permits payments to be established at some later date if the circumstances of the parents or needs of the child change. It also ensures the child's eligibility for Medicaid. Table 8 shows total state spending for Title IV-E adoption assistance payments, including the share reimbursed by the federal government, for each of FY1997 to FY2011. All of this s pending concerns children who m et the Title IV-E adoption assistance eligibility criteria shown in Table 6 . Support for payments on behalf of special needs adoptees who do not meet all the federal criteria—believed to comprise roughly one-quarter of the children receiving adoption assistance support—must be provided out of state, local, or other non-Title IV-E sources. There are no reliable administrative data regarding the total number of special needs adoptees who were adopted in any year and who are receiving adoption assistance payments. As part of a survey on child welfare agency spending, however, state agencies provided information to researchers at Child Trends on the share of children in their states who were receiving a monthly adoption assistance payment under the Title IV-E program (during state fiscal year 2010). The median Title IV-E adoption assistance coverage rate reported was 76%. Close to two-thirds of the states responding (32) reported Title IV-E adoption assistance coverage rates of 71% or more; most of the remaining states (13) reported coverage rates of between 61% and 70%; five states reported a Title IV-E adoption assistance coverage rate of 60% or less. Non-recurring Adoption Expenses Non-recurring adoption expenses are defined as "reasonable and necessary adoption fees, court costs, attorney fees, and other expenses which are directly related to the legal adoption of a child with special needs and which are not incurred in violation of State or Federal law." The Tax Reform Act of 1986 ( P.L. 99-214 ) amended Title IV-E to require states to provide reimbursement for "non-recurring adoption expenses" incurred by, or on behalf of, the adoptive parents of any child with special needs. For adoptive parents to receive this assistance, the children they are adopting must be determined to have special needs and they must be placed in accordance with any applicable state and local laws. They do not need to meet the criteria of any of the federal eligibility pathways (see Table 6 ) for this non-recurring Title IV-E assistance to be paid. However, the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ) does stipulate that a child who would be determined by a state to have special needs and meets the definition of an "applicable child" (see text box shown earlier) is not eligible to receive any kind of federal adoption assistance (non-recurring or on-going payments) if the child is not a citizen or resident of this country and was adopted outside the United States or brought to the United States for the purpose of adoption. States may claim federal reimbursement for 50% of the amount of the non-recurring adoption expenses that they provide to the adoptive parent(s) of a child with special needs. States may choose to pay all, or just some portion, of those non-recurring costs. However, by regulation, HHS has provided that states may only seek federal support for a maximum of $2,000 in non-recurring adoption costs per child. For example, if a state provides a family with $2,000 to meet expenses related to completing the legal adoption of a child, the federal government will reimburse the state for one-half of that cost ($1,000). Roughly half the states (26) reimburse non-recurring adoption costs up to $2000, but others limit reimbursement of those costs to smaller amounts. (For most families who are adopting special needs children with public child welfare agency involvement, the federal adoption tax credit provides support for a higher portion of non-recurring adoption expenses and this would likely remain the case even if, as current law provides, the adoption tax credit reverts to its earlier, less expansive form). FY2011 is the first year for which states were asked to report on the amount of funds they provided as reimbursement for non-recurring adoption expenses. Forty-one states (including the District of Columbia) reported total spending of $37.7 million for these non-recurring costs in that year and they received federal reimbursement of one half of that amount. Trend in Receipt of Federal Adoption Subsidy For FY2000 through FY2011, the share of children adopted with public child welfare agency involvement, who receive a monthly subsidy, has remained relatively stable (at between 88% and 91%), while the share of such children whose adoption subsidies are supported with federal Title IV-E dollars has steadily declined. Children who received a federally supported adoption subsidy represented about three-fourths (75%) of all adoptions finalized in FY2000 but just two-thirds (66%) of all adoptions finalized in FY2011. (See Table 9 .) Please note: This percentage is not comparable to the adoption assistance coverage rate discussed above—and as reported for state FY2010. This is because the earlier discussed rate looks only at the universe of children who received a subsidy and it includes children, regardless of the year in which they were adopted. By contrast, the data below are percentages of the total universe of adoptions completed with public child welfare agency involvement, including those receiving or not receiving assistance, and it includes only those children who were adopted during a given fiscal year. Given that adoption assistance payments are generally provided to children who meet special needs criteria and, as discussed above, the federal government is committed to providing support to nearly all special needs adoptees as of FY2018, this decline is expected to be reversed. However, that reversal may take several years. The Title IV-E adoption assistance pathway most frequently used has been, and presumably continues to be, the pathway that is linked to the eligibility criteria of the prior law AFDC program. Under this pathway, a child must have been removed from a home that met the income standards of that prior law cash welfare program. Given that in nearly three-fourths of all states, the applicable AFDC income standard is below 50% of the poverty line this criteria may be expected to depress federal eligibility for as long as it continues to apply to some children. FY2011 represented only the second year of the phase-in of new eligibility rules that remove that income standard from eligibility for federal Title IV-E adoption assistance. During that year, children for whom an adoption assistance agreement was executed after they had reached age 14 or older, did not need to meet income criteria to be found eligible for Title IV-E adoption assistance. Given that just between 7% or 8% of the adoptions finalized in FY2011 were of children age 14 or older (see Table 10 ), the AFDC income criteria are expected to have been applied to the large majority of children for whom Title IV-E adoption assistance was determined (in both FY2010 and FY2011). Further, the median age of children adopted from foster care has held constant at just above five years for at least half a decade. Because the median age represents the point at which half of the group was adopted at an older age and half at a younger age, it's likely that the "applicable child" eligibility rules—i.e., the eligibility rules that apply without regard to income status of the home from which a child was removed—will not apply to a majority of children adopted from foster care in a given year until at least FY2015. Kinship Guardianship Assistance The Fostering Connections to Success and Increasing Adoptions Act of 2008 (P.L. 110-351) authorizes states to seek partial federal reimbursement for kinship guardianship assistance payments made on behalf of eligible children who leave foster care for placement in a "legal guardianship" with a grandparent or other relative. Enactment of this form of Title IV-E assistance followed more than a decade of state experimentation with subsidized guardianship programs both independently, and under child welfare demonstration projects (as authorized by Section 1130 of the Social Security Act). In a 2007 report, the Government Accountability Office (GAO) recommended that Congress consider enacting federal support of guardianship as a way to reduce the disproportionate representation of African American children in foster care. Like the foster care and adoption assistance components of the Title IV-E program, this federal support is authorized on a permanent and open-ended basis. However, states are not required to provide this assistance to eligible children. Instead a state may choose to amend its Title IV-E plan to provide for this kind of assistance. If a state amends its plan to add a kinship guardianship assistance component, it must enter into a written and binding kinship guardianship agreement with the prospective relative guardians of eligible children. As of early September 2012, 31 states had submitted a Title IV-E plan amendment to enable them to seek federal reimbursement for kinship guardianship assistance provided on behalf of eligible children. The plan amendment for one of those states (Virginia) remained under review, but all of the others had been approved. Through FY2011, most of those states had not yet submitted any claims for federal reimbursement of Title IV-E kinship guardianship assistance. However, states may seek this reimbursement for up to two years from the date on which they incurred the expense—provided the expense was incurred on or after the effective date of their plan amendment. (See Table 11 for states with approved plan amendments, effective dates of those amendments, and states that had made claims through the end of FY2011.) The law permits states that previously operated a subsidized guardianship assistance program as part of a child welfare demonstration project (a.k.a., a waiver project) to receive federal reimbursement for assistance and services provided to children who were receiving assistance and services under that project as of September 30, 2008. A state does not need to have an approved Title IV-E plan amendment related to kinship guardianship assistance to make these Title IV-E claims (but it may). Through FY2011, three states had submitted post-demonstration related kinship guardianship assistance claims. Two of those states have an approved Title IV-E plan that includes kinship guardianship assistance (Illinois and Michigan) and one state does not (Iowa). For states providing kinship guardianship assistance under an approved Title IV-E plan amendment, the same general rules apply with regard to the general kinds of costs and the amount of federal reimbursement that may be claimed. Kinship guardianship assistance payments made on behalf of eligible children are reimbursed at the state's FMAP (which may range from 50% to 83%). Administrative costs for the program may be reimbursed at 50%. As is true for Title IV-E adoption assistance, the kinds of administrative claims that may be made are generally more limited than those for foster care (in large part because once a child is no longer in foster care the requirements for case planning and review no longer apply). However, states are required to provide a relative guardian with funds necessary to meet the full non-recurring costs of finalizing a legal guardianship or $2,000, whichever is less, and they may claim federal reimbursement of 50% of the cost of that assistance. Finally, states may also seek reimbursement for Title IV-E program training related to serving children who receive Title IV-E kinship guardianship assistance. The federal reimbursement rate for most of those training claims is 75%. Spending for Kinship Guardianship Assistance Under Title IV-E Table 12 shows all eligible spending claimed by states under the Title IV-E kinship guardianship assistance component, and the federal share of those claims that were reimbursed to states, through FY2011. (All spending related to children who were previously assisted as part of a Title IV-E subsidized guardianship demonstration project is shown in the payments column of Table 12 .) The average monthly number of children assisted is also shown as it was reported by states. However, these data are known to be incomplete for FY2011 because some states that made claims for kinship guardianship assistance did not report the average monthly number of children receiving assistance. As part of its mid-session budget review (conducted in summer 2012) HHS estimates that federal outlays for Title IV-E kinship guardianship assistance will rise to $81 million for FY2013 (with 14,000 children assisted on an average monthly basis) and will climb to $174 million by FY2017 (with 28,000 children assisted on an average monthly basis). Required Case Plan Determinations for a Child in Foster Care Whose Permanency Plan is Kinship Guardianship If a child's plan for permanently leaving foster care is placement with a relative guardian and receipt of kinship guardianship assistance, the Title IV-E agency must describe all of the following in the foster child's written case plan: The steps taken to determine that neither reuniting the child with his/her parents(s) nor adoption are the appropriate permanency option for the child. The efforts the agency has made to discuss with the relative foster parent the option of adopting the child "as a more permanent alternative to legal guardianship" and, if the relative foster parent has chosen not to pursue adoption, why this is the case. The reason that placement with a fit and willing relative under a kinship guardianship assistance arrangement is in the child's best interests. The reason for any separation of siblings during placement. The efforts made by the state agency to discuss with the child's parent, or parents, the kinship guardianship assistance arrangement or the reasons why the efforts were not made. The ways in which the child meets the eligibility requirements for a kinship guardianship assistance payment. This case plan requirement applies to children while they are in foster care. Once a child leaves foster care permanently, there is no requirement for the Title IV-E agency to maintain a case plan for the child. Federal Eligibility Criteria for Kinship Guardianship Assistance To be eligible for Title IV-E kinship guardianship assistance payments, there must be a kinship guardianship assistance agreement in place—between the state agency and the eligible prospective relative guardian –under which the child is placed with the relative who becomes his/her legal guardian. Further, the child must have been eligible for Title IV-E foster care maintenance payments while living in the home of that prospective relative guardian, and the child must also meet certain age and limited other criteria. Finally, the state must make certain determinations regarding the appropriateness of kinship guardianship as a permanency goal for the child. Link to Title IV-E Foster Care Eligibility for Title IV-E kinship guardianship assistance payments is tied to a child's previously established eligibility to receive a title IV-E foster care maintenance payment. Specifically, a child must have been eligible to receive Title IV-E foster care maintenance payments while living for no less than six consecutive months in the home of his or her prospective relative guardian. Among other things, the link to the Title IV-E foster care eligibility criteria effectively means that the child must have entered foster care through a voluntary placement agreement (between the Title IV-E agency and the child's parent(s)/guardian) or after a judge determined that continuing to live in his or her own home would be "contrary to the welfare" of the child. Further, the income available in the family home from which the child was removed must be at or below the eligibility standard for the prior law cash welfare program, known as AFDC, as that program existed in the state on July 16, 1996. The link to the Title IV-E foster care eligibility criteria also means that the home of the prospective relative guardian must have met the licensing requirements for a foster family home and, further, that the prospective guardian met the federal background check and approval procedures (including the requirement that the relative must not have been found to have committed certain felonies). (For all the criteria linked to Title IV-E foster care maintenance payment eligibility see Table 2 .) States are separately required to have specific background check procedures for prospective relative guardians, including fingerprint-based checks of national crime databases and child abuse and neglect registry checks, and these checks must be conducted before a relative guardian may receive kinship guardianship assistance payments on behalf of an eligible child. In program guidance, however, HHS notes that if a state has established an "appropriate" time frame during which a background check remains valid, and that time frame had not expired when the foster parent seeks to become the child's relative guardian, the state does not need to redo that check but may consider the prospective relative guardian background check requirement as met. Requirements Related to the Relative Guardian As discussed above, for an individual to be eligible to receive Title IV-E kinship guardianship assistance payments on a child's behalf, he or she must have been the foster parent of the child for at least six consecutive months, must have met the foster family home licensing requirements, and must not have any of the statutorily prohibited felony convictions on his or her record. In addition, an eligible legal guardian must be the grandparent or other relative of that child and must, as determined by the state, have a strong commitment to permanently care for the child through legal guardianship. The term "relative" is not defined in the statute for purposes of the Title IV-E kinship guardianship assistance program. States are permitted to define "relative" for purposes of their Title IV-E kinship guardianship assistance program (as part of their Title IV-E plan amendment). For example, they may choose to define the term to include only individuals who have biological or legal ties to the child, or they can define it more broadly to include "[t]ribal kin, extended family and friends or other 'fictive kin.'" Other Required State Determinations Additionally, for a child to be eligible for Title IV-E kinship guardianship assistance payments, a state must determine that neither being reunited with his or her parents, nor adoption, are appropriate permanency options for the child; that the child demonstrates a strong attachment to the prospective relative guardian; and that, if the child is age 14 or older, he or she has been consulted about the kinship guardianship arrangement. Child's Age A child may not receive Title IV-E kinship guardianship assistance after the age of 18 unless the state determines that the child has a mental or physical disability that warrants continued assistance (but only up to age 21); or if the state has elected the option to extend Title IV-E assistance to youth after age 18, up to the age of 19, 20, or 21 (as the state specifies in the plan) and provided that the child entered the guardianship arrangement after his or her 16 th birthday and he/she is a secondary or post-secondary student, is employed at least 80 hours a month, is participating in an activity designed to promote or reduce barriers to employment, or is medically unable to do any of those activities. States that elect to amend their Title IV-E plan to permit Title IV-E foster care maintenance assistance to youth in foster care after their 18 th birthday must also provide extended assistance to an otherwise eligible youth in a Title IV-E kinship guardianship arrangement (up to same age as for youth in foster care), provided that youth entered the arrangement after his or her 16 th birthday and meets all other relevant requirements. Sibling of a Child Who Is Eligible for Title IV-E Kinship Guardianship Assistance A state may, but is not required to, provide Title IV-E kinship guardianship assistance to a sibling of a child who is eligible for that assistance, provided the sibling is placed with the same relative guardian as the eligible child and both the relative guardian and the Title IV-E agency agree that this joint placement is appropriate for the siblings. The placement does not have to occur at the same time. Further, the sibling of the eligible child does not need to meet certain other eligibility requirements (e.g., previously eligible for a Title IV-E foster care maintenance payment while living with the relative guardian). Ability of State to Set Other Conditions on Receipt of Assistance HHS has advised states that they may establish additional conditions on receipt of Title IV-E kinship guardianship assistance that make eligibility for this assistance more limited in their state than what federal law would permit. However, HHS must approve those conditions as part of the state's Title IV-E plan amendment related to kinship guardianship. Some examples of conditions state might impose, as provided by HHS in July 2009 guidance, include requiring that a child must have lived in foster care with the prospective relative guardian for more than the 6-month time period required in federal law; requiring a child to be a certain age before he/she is eligible (e.g., 12 or older); requiring the relative guardian to inform the agency if the child's biological parents plan to stay with the guardian on a long term basis and/or requiring cooperation with child support enforcement. Kinship Guardianship Assistance Agreement States that seek reimbursement for kinship guardianship assistance payments must enter into a written and binding kinship guardianship agreement with the prospective relative guardian of an eligible child. The agreement must, at a minimum, stipulate that it will remain in effect without regard to the state in which the relative guardian lives and must specify: (1) the amount of, and manner in which, the kinship guardianship assistance payments will be made on the child's behalf, including the manner in which the amount may, in consultation with the relative guardian, be adjusted periodically based on the circumstances of the relative and the needs of the child; and (2) the additional services and assistance the child and relative will be eligible for under the agreement, including the procedure the relative guardian may use to apply for additional services as needed; and (3) that the state will pay all non-recurring expenses associated with obtaining legal guardianship of the child, or $2,000 of those expenses, whichever is less. A kinship guardianship assistance agreement remains in effect (as provided in the terms of the agreement) as long as the child meets the eligibility criteria for age (described above), the relative guardian remains legally responsible for the child, and as long as he/she is providing support to the child. Amount of Kinship Guardianship Assistance Payment The law provides that a kinship guardianship assistance payment may never be more than the amount the child would receive as a foster care maintenance payment, if he or she remained in a foster family home. (This does not preclude adjustments for inflation or changes due to different needs of the child, provided the changes are consistent with what would happen if the child were in foster care.) While the kinship guardianship agreement does not need to specifically address health care coverage, the law provides that any child who meets the federal eligibility criteria to receive a Title IV-E kinship guardianship assistance payment remains categorically eligible for Medicaid. Appendix A. Tribal Participation in the Title IV-E Program Direct federal support for tribes under the Title IV-E program was first authorized effective with FY2010. Specifically, the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ) permits any Indian tribe, tribal organizations or tribal consortia that has an approved Title IV-E plan to receive support for foster care, adoption assistance, and if the tribe chooses this, kinship guardianship assistance. As of April 1, 2012, the Port Gamble S'Klallam tribe (located on the Kitsap Peninsula in Washington state) became the first tribe to independently operate a Title IV-E program. Other tribes are working toward approval of a Title IV-E plan and HHS expects to approve some new tribal plans during FY2013. Alternatively, P.L. 110-351 also continues to permit states and tribes to enter into agreements whereby the state agrees to pass through certain Title IV-E funds to tribes for support of children in tribal custody, including for costs related to child placement, training, and other Title IV-E program administration costs. Further, the law, as amended by P.L. 110-351 , requires states to negotiate in good faith with any tribe in the state that seeks to enter into an agreement with the state to operate some or all parts of a Title IV-E program for children under tribal authority. The federal Title IV-E reimbursement rate (paid to a state) for children under tribal authority who are covered by a Title IV-E agreement is equal to the tribal FMAP (as described below and which may be greater than a state's FMAP but not less than that amount). This Appendix provides an overview of the statutory provisions related to tribal receipt of direct federal funding under the Title IV-E program. Requirements for Direct Title IV-E Funding to Tribes The law requires that HHS apply the requirements and entitlements of the Title IV-E program to any tribe that has an approved Title IV-E plan in the same manner as those requirements and entitlements apply to a state—unless the statute specifically directs otherwise. The large majority of Title IV-E provisions apply to tribes seeking direct Title IV-E funding and states in the same manner. However, in the case of a tribe, the law modifies the Title IV-E plan requirement related to statewide operation, requiring instead that a tribe define the service area or areas that are to be covered in the plan. Tribal Title IV-E plans must also include evidence demonstrating that the tribe has not had any uncorrected significant or material audit exceptions under federal grants or contracts that directly relate to the administration of social services for the three years prior to the date on which the tribe submits its Title IV-E plan for approval. Further, the law also clarifies that, under a tribal Title IV-E plan, licensing of foster family homes or child care institutions must be done by an established tribal authority. A tribal child's eligibility for Title IV-E foster care, adoption assistance, and kinship guardianship assistance is generally the same as eligibility for a child under a state-operated Title IV-E program. For children in foster care under a tribal Title IV-E plan, the law stipulates that the AFDC rules of the state in which the child lived when he/she was removed from his/her home (as those rules were in effect on July 16, 1996) apply for purposes of determining the child's Title IV-E eligibility. As noted above, tribal licensing standards apply for purposes of approving or licensing tribal foster family homes and tribal child care institutions. However, the law does not modify the separate Title IV-E plan requirements related to background checks of prospective caregivers. Therefore, under a tribal Title IV-E plan, background checks for prospective foster or adoptive parents must meet all of the requirements included in Title IV-E of the Social Security Act. These checks are similar, but not identical to background checks implemented in Indian country under the Indian Child Protection and Family Violence Act. Like states, tribes seeking direct Title IV-E funding must have an approved Title IV-E plan that points to tribal law or policy that meets federal requirements for the program and they must also have an approved Child and Family Services Plan, under which they receive Title IV-B, Subpart 1 (Stephanie Tubbs Jones Child Welfare Services Program) funding. Finally, they must develop processes to enable them to successfully claim federal Title IV-E reimbursement, including those to determine eligibility for Title IV-E assistance as well as cost allocation methodologies, and they must regularly report certain data to HHS, Children's Bureau regarding children in tribal foster care custody and those who are adopted. Federal Reimbursement for Tribal Title IV-E Program Costs Foster care maintenance payments, as well as adoption assistance and guardianship assistance payments, are to be reimbursed at a tribe's unique "FMAP" ("federal medical assistance percentage"). That percentage is determined by statutory formula and is based on the per capita income of the population in the tribe's Title IV-E service area (as defined in the tribe's Title IV-E plan). A tribal FMAP (or reimbursement rate) must never be lower than the rate of reimbursement for any state in which the tribe is located and may not be higher than 83%. As is the case for states, tribal training costs under the Title IV-E program are to be reimbursed at 75% of the tribe's eligible spending and Title IV-E child placement, data collection and reporting, and any other costs necessary for the proper and efficient administration of the program are to be provided at 50% of the tribe's eligible spending. With a few exceptions (which are the same as those provided for states as described in the body of this report), tribes may only seek federal reimbursement for costs related to children who are eligible for Title IV-E assistance. Therefore, tribes operating a Title IV-E program must be able to accurately determine (subject to periodic federal review) Title IV-E eligibility in order to receive any federal support under the program. For training and administrative claims, tribes must have a valid cost allocation methodology that determines both what share of training, child placement, and other program administration costs are done on behalf of Title IV-E eligible children, as well as a method to determine what part of the administrative and training costs are allocable to Title IV-E. HHS notes that—while Title IV-E program rules, and general HHS cost allocation principles apply—the U.S. Department of the Interior, Bureau of Indian Affairs (BIA) is the "cognizant" agency for purposes of tribal cost allocation. Further, the indirect cost rates established for use in BIA programs may be used in the Title IV-E program, provided the methodology for the cost rate is supplied in the tribe's Title IV-E cost allocation methodology (CAM). In general, any part of Title IV-E spending that is not reimbursed by the federal government must be provided from non-federal sources. However, certain federal laws explicitly provide that funds received by a tribe via a limited number of specific programs may serve as "non-federal" dollars in other programs. Accordingly, tribes may use any federal funds from such a program to provide the "non-federal" share of Title IV-E spending. In addition, tribes are permitted to use in-kind third party expenditures to meet the non-federal share of Title IV-E administrative and training costs. Beginning with FY2012, the Tribal Child Welfare Interim Final Rule permits tribes to use in-kind expenditures to meet the full non-federal Title IV-E administrative (50%) and training (25%) costs. Data Collection and Reporting Requirements Tribes operating a Title IV-E program must collect and report data to the HHS Children's Bureau regarding children in foster care or those adopted under the auspices of the public child welfare agency. Data must be submitted electronically as part of the Adoption and Foster Care Analysis and Reporting System (AFCARS) and in a format prescribed by federal regulations. Twice a year, the tribe must submit data on 1) each child who spent at least 24 hours in foster care under the tribal Title IV-E agency's care and placement responsibility (during the prior six months); and 2) each child who was placed for adoption by the tribal Title IV-E agency or for whom that agency provided adoption assistance during that same 6-month period. Data must be reported without regard to whether the child is eligible for Title IV-E foster care or adoption assistance. Tribes seeking direct Title IV-E funding are required to have a statewide information system capable of tracking each child in foster care. As part of meeting this requirement, they may develop a Tribal Automated Child Welfare Information System (TACWIS) but are not required to do so . A TACWIS (referred to for states as SACWIS, or Statewide Automated Child Welfare Information System) facilitates cross-program and cross-agency sharing of data by the tribe (and within the tribe) and must meet federal design standards. Tribes with an approved planning document for a TACWIS may make Title IV-E claims for federal reimbursement that are related to the development of a data collection system (including hardware costs). Those tribes may also submit claims for federal reimbursement related to the operation of a required Title IV-E data collection and reporting system. Tribes with an approved Title IV-E plan that do not have a TACWIS may only submit regular Title IV-E administrative claims related to operation (not development) of a required data collection and reporting system. States report certain additional, closely related child welfare data via the National Child Abuse and Neglect Data System (NCANDS) and the National Youth in Transition Database (NYTD). However, neither of these data systems is defined or required in the Title IV-E foster care, adoption assistance and guardianship assistance program. Tribes operating a Title IV-E program are not required to report data via these systems. Transfer of a Child's Care and Placement Responsibility The Indian Child Welfare Act (ICWA) provides specific federal rules regarding notice and transfer of certain child custody proceedings (e.g., removal and placement in foster care) from a state court to a tribal court or authority. Those requirements remain unchanged by the authorization of direct federal support to tribes under Title IV-E of the Social Security Act. Separately, for purposes of ensuring continued Title IV-E eligibility and/or payments (as well as Medicaid eligibility), the Fostering Connections Act required HHS to regulate on the issue of transferring care and placement responsibility of a child from a state child welfare agency to a tribal child welfare agency. The regulations are to apply whenever the tribal child welfare agency has an approved Title IV-E plan to receive direct federal Title IV-E funding, or, if the tribe receives Title IV-E funding via a tribal-state Title IV-E agreement. HHS issued interim final regulations on this matter in early 2012. They provide that each state must establish and maintain transfer procedures, in consultation with Indian tribes. At a minimum those procedures must 1) provide for the state to determine the child's eligibility for Title IV-E assistance at the time of the transfer of care and placement responsibility (if this determination has not already been made); and 2) provide that the state will supply to the tribe essential documents and information necessary to continue a child's eligibility for Title IV-E assistance and for Medicaid. Essential documentation and information includes, but is not limited to—judicial determinations that the home from which the child was removed was contrary to his/her welfare and that reasonable efforts to reunite the child and/or to complete the child's permanency plan have been made consistent with Title IV-E requirements; other documentation the state has, related to the child's Title IV-E eligibility, and information and documentation related to his/her eligibility or potential eligibility for other federal programs; the child's written case plan, including health and education records; and information and documentation of the child's placement settings, including a copy of the most recent provider's license or approval. Tribal Title IV-E Implementation Grants and Technical Assistance Implementation Grants As the above discussion indicates, preparing to submit and gain approval of a Title IV-E plan requires significant planning. To assist tribal entities seeking to prepare a Title IV-E plan, the Fostering Connections to Success and Increasing Adoptions Act established Tribal Title IV-E implementation grants valued at up to $300,000. These one-time grants are available only to tribes that plan to develop and submit a Title IV-E plan to HHS within 24 months of receiving the funding. The statute provides that a tribal grantee must repay the full grant amount if it does not submit a Title IV-E plan for approval within 24 months of its receipt of these funds. However, HHS is permitted to waive this repayment if it determines that the failure to submit such a plan within that time frame was due to circumstances beyond the control of the tribe. A tribe is not required to seek (or receive) this grant funding prior to submitting a Title IV-E plan for approval. However, a tribe that seeks and receives these funds may use them to support any effort necessary to develop a plan to carry out a Title IV-E program. These include costs relating to the development of data collection systems, a cost allocation methodology, agency and tribal court procedures necessary to meet the case review system requirements under the Title IV-E program, or any other costs attributable to meeting any other requirement necessary for approval of a Title IV-E plan. Through September 1, 2012, HHS had awarded tribal implementation grants to 12 tribes, tribal organizations or consortiums: Tohono O'odham Nation–Sells, AZ; Confederated Salish & Kootenai Tribes–Pablo, MT; Keweenaw Bay Indian Community–Baraga, MI; Sac and Fox Nation–Stroud, OK; Washoe Tribe of Nevada and California–Gardnerville NV; Navajo Nation–Window Rock, AZ; Chickasaw Nation–Ada, OK; Yurok Tribe–Del Norte, CA; Shoshone-Bannock Tribes–Fort Hall, ID; Lummi Nation–Bellingham, WA; and South Puget Intertribal Planning Agency–Shelton, WA; and the Confederated Tribe of Siletz Indians–OR. According to HHS, as of early September 2012, all of these tribes continue to work to finalize a Title IV-E plan. Technical Assistance P.L. 110-351 also requires HHS to provide "information, advice, educational materials, and technical assistance" to tribes, generally, regarding the services or other activities funded under the child welfare programs authorized in Title IV-B and Title IV-E of the Social Security Act. This technical assistance is to be available to tribes seeking to operate Title IV-E or Title IV-B programs and to tribes and states seeking to enter into Title IV-E tribal-state agreements or otherwise to satisfy the requirements for state and tribal collaboration or cooperation included in Title IV-E or Title IV-B of the Social Security Act. In September 2009, HHS awarded funding to the Tribal Law and Policy Institute (based in West Hollywood, California) for a National Resource Center for Tribes. The award is expected to last for up to five years. For more information about what the resource center offers, readers are encouraged to visit its website at http://www.NRC4tribes.org . Appendix B. AFDC Income Standard and Federal Foster Care Coverage Rate Appendix C. Additional Tables

Under Title IV-E of the Social Security Act, states, territories, and tribes are entitled to claim partial federal reimbursement for the cost of providing foster care, adoption assistance, and kinship guardianship assistance to children who meet federal eligibility criteria. The Title IV-E program, as it is commonly called, provides support for monthly payments on behalf of eligible children, as well as funds for related case management activities, training, data collection, and other costs of program administration. In FY2011, states (including the 50 states and the District of Columbia) spent $12.4 billion under the Title IV-E program and received federal reimbursement of $6.7 billion, or 54% of that spending. At the federal level, the Title IV-E program is administered by the Children's Bureau, an agency within the U.S. Department of Health and Human Services (HHS). More than two-thirds of all Title IV-E spending supports provision of foster care, which is a temporary living arrangement for children who cannot remain safely in their own homes. Title IV-E foster care maintenance payments are subsidies provided to foster caregivers to support the daily living costs of eligible children. Title IV-E program administration primarily supports caseworker and agency efforts to ensure the safety and well-being of each child in foster care and to plan for, and achieve, permanency for them via family reunification, adoption, or legal guardianship. Just 29% of the $8.3 billion in total (state and federal) Title IV-E foster care spending for FY2011 was used for maintenance payments, while close to half (46%) of those Title IV-E foster care dollars supported program administration (primarily for case planning and case management). Close to one-third of all Title IV-E spending (state and federal) supports children in permanent adoption or guardianship placements. Title IV-E adoption assistance payments are monthly subsidies provided for eligible adopted children (most of whom were previously in foster care), for whom the state determined they could not be returned home and that there was a condition or factor that precluded their adoption without assistance (e.g., age, medical condition, or membership in a sibling group). Kinship guardianship assistance payments are ongoing subsidies for eligible children placed with a legal relative guardian, for whom returning home from foster care is not possible or appropriate and for whom the agency also determines adoption is not appropriate. In FY2011, more than 80% of the total spending for Title IV-E adoption assistance ($4.0 billion) and Title IV-E kinship guardianship assistance ($51 million) supported ongoing subsidies for eligible children. States receiving Title IV-E funding are required to provide foster care and adoption assistance to eligible children. They may also choose to provide kinship guardianship assistance to all eligible children. Federal eligibility for all types of Title IV-E assistance is limited by age. Additional criteria vary by the kind of assistance but often require children to have been removed from low income households. Each month during FY2011, an average of 168,400 children received a Title IV-E foster care maintenance payment and 413,800 received Title IV-E adoption assistance. On a national basis, children who received Title IV-E foster care maintenance payments comprise less than half of all children in foster care and about one-quarter of those receiving ongoing adoption subsidies. The number of children in foster care overall, as well as the number of those children receiving Title IV-E foster care support has been in decline for most of the past decade; the amount of money spent for Title IV-E foster care is also declining. During most of the same time period, however, the number of children receiving Title IV-E adoption assistance and the amount of spending for Title IV-E adoption assistance grew rapidly. Although representing a small part of the program now, both the number of children assisted via Title IV-E kinship guardianship assistance and the amount of spending for that purpose are expected to increase.

Introduction Every year, disasters such as wildfires, floods, earthquakes, hurricanes, tornadoes, volcanoes, and winter storms affect American communities. In the aftermath of a major disaster, a potential threat to safety and obstacle to recovery is the presence of significant amounts of disaster debris. Depending on the type of disaster, debris may include waste soils and sediments; trees, limbs, and shrubs; man-made structures (e.g., collapsed homes, buildings, or bridges); and personal property. Residents' ability to return to the area and live in a safe and healthy environment may depend on how quickly and effectively a community manages its debris. To avoid overburdening existing landfill space, many communities attempt to divert as much debris as possible from area landfills through recycling, burning, composting, or another method of volume reduction. The logistics of such diversion can prove complicated without proper pre-disaster planning. Improperly managing debris can have detrimental long-term repercussions. During or after a disaster, some debris will likely become mixed with hazardous constituents. For example, under flooding conditions, household hazardous waste or sewage may contaminate otherwise benign personal property or building materials, such as drywall or carpeting. Improper disposal of contaminated debris may lead to future environmental, health, or safety problems, such as groundwater contamination. This report provides an overview of federal and state waste management requirements relevant to debris removal, as well as the challenges that can make it difficult for communities to manage debris quickly and safely. To support those communities, a number of federal agencies may provide certain types of debris removal assistance. This report provides an overview of federal and state agency roles in disaster debris removal. A number of federal agencies are authorized to support communities with disaster debris removal. This report focuses on support provided by the Federal Emergency Management Agency (FEMA), the U.S. Army Corps of Engineers (the Corps), and the U.S. Environmental Protection Agency (EPA). Each agency that provides debris removal support may do so under a number of different conditions or statutory authorities. A discussion of those various conditions or authorities is beyond the scope of this report. Disaster Debris Management Federal and State Waste Management Requirements Federal waste management standards are established in the Solid Waste Disposal Act—more commonly referred to as the Resource Conservation and Recovery Act of 1976 (RCRA; 42 U.S.C. §6901 et seq.). Under Subtitle C of RCRA, EPA has primary authority to regulate solid waste identified as hazardous. Non-hazardous solid wastes and wastes explicitly excluded from the Subtitle C requirements are regulated under Subtitle D of RCRA. EPA's role in regulating solid waste under Subtitle D has largely been to promulgate federal landfill criteria as necessary to meet RCRA's prohibition on "open dumping." Under Subtitle D, states have primary authority to regulate waste and to implement and enforce federal standards related to RCRA's open dumping prohibition. Generally, the overwhelming majority of disaster debris involves wastes regulated under Subtitle D. While not specifically defined in federal law, the term disaster debris generally refers to waste materials created by or in the aftermath of a natural or man-made disaster, such as: construction and demolition (C&D) waste from destroyed buildings; vegetative debris, soils, and sediment; rotting materials, such as food or dead animals (e.g., pets or livestock); damaged vehicles, consumer appliances, and electronic devices; and hazardous chemicals or products, including those released from commercial, industrial, agricultural, or residential sites. These materials are handled by municipal waste management agencies every day—but not as they would be after a disaster that destroys homes, businesses, and institutions, potentially turning entire structures, their contents, and surrounding vegetation into waste. Decisions about how the waste will be managed are made largely by local or state agencies. If requested by a state or local government, EPA and/or the Corps may provide technical assistance or operational oversight of the state's debris removal activities (see discussion in the " Federal Agency Roles " section). Ultimately, however, it is generally the state's decision how its debris will be managed. Typically, management will include some activity to reduce its volume. Disaster debris reduction primarily involves open burning/incineration, recycling, chipping and grinding, or composting. The remaining waste is generally disposed of in a landfill. The fact that disaster debris may not be subject to federal hazardous waste management standards does not mean the waste is not hazardous or will pose no risk to human health or safety or the environment. State agencies responsible for managing disaster debris can face a number of challenges in managing disaster debris quickly and safely. Keys Challenges with Managing Disaster Debris After a disaster, states generally attempt to manage disaster debris in a way that limits short- and long-term threats to public health and safety or to the environment. Those threats arise if the debris is not managed quickly, but they can also arise through improper reduction and disposal practices. There are a number of factors that may make it difficult to both quickly and safely manage disaster debris. After discussing several key challenges, Table 1 at the end of this section lists the common categories of disaster debris and the challenges often associated with properly managing each category. Volume One of the greatest challenges facing a community recovering from a disaster is the overwhelming volume of debris generated. In 2005, Hurricane Katrina created more than 118 million cubic yards (CY) of debris over a 93,000-square-mile area. Most disasters have not generated debris on the scale of Hurricane Katrina (although Hurricane Harvey may). Still, many have, in a single incident, generated debris in amounts that were several times greater than a region would otherwise manage in an entire year. The logistics of managing tens of thousands or millions of cubic yards of vegetative or C&D waste may be a daunting task, even in a community that is prepared for such an event. When not prepared, a region must coordinate the physical removal of debris and likely designate a temporary staging area to sort and separate the waste before determining the appropriate management method. If debris removal contractors have not already been identified, it may be time-consuming to find a sufficient number of waste haulers able or qualified to do the work. States generally try to lessen the burden on existing landfill facilities and potentially reduce costs by reusing and recycling high volume wastes. However, those communities may lack the physical space to fully implement reduction strategies. Also, if residents have begun to return to a disaster area, there may be significant opposition to burning by community members who would be affected by the smoke. Difficulty Separating Contaminated Wastes The fact that most disaster debris is not subject to the RCRA Subtitle C hazardous waste management requirements does not mean that the waste poses no hazard. Debris may be inextricably mixed with or contaminated by harmful or hazardous constituents. Safe management options, as well as the cost and time it takes to implement those options, will depend on whether, or the degree to which, the contaminated debris can be separated from more non-hazardous waste (see Figure 1 ). For example, vegetative debris often represents a significant proportion of disaster debris. When clean, it can be chipped or ground up for re-use. It is estimated that the volume of vegetative debris can be reduced by as much as 75% using this method of waste reduction. Because of the potentially huge volume of vegetative debris following a disaster, burning may be a preferred method of waste-handling (which is estimated to reduce the waste by as much as 90%). However, burning or chipping for reuse may not be safe options for reducing vegetative debris contaminated with sewage, oil, or other contaminants. In the past, a sizable proportion of disaster debris was classified as C&D waste. Under federal law, C&D waste is classified neither as hazardous waste nor as municipal solid waste (MSW). Therefore, C&D landfills are not subject to federal design and operational criteria. For example, C&D landfills are not required under federal law to have protective liners that an MSW landfill would have. Instead, states determine what criteria a C&D landfill must meet, as well as what materials constitute C&D waste . In the event of an emergency, a state may change the regulatory definition of C&D waste to more broadly include large volumes of debris generated in the wake of the disaster. If that C&D waste is commingled with hazardous materials, it may be disposed of at landfills that are not designed to accept such wastes. EPA suggests, and most states generally attempt, to remove hazardous materials such as asbestos, lead-based paint, and other contaminated materials from C&D waste before landfill disposal. States may also attempt to lessen the burden on disposal facilities and potentially reduce costs by reusing and recycling C&D waste. However, if hazardous materials are mixed with C&D waste to the point that they cannot be segregated (see photo of mixed disaster debris in Figure 1 ), that waste may end up being disposed in a landfill that is not meant to safely receive such waste. Potential for Limited Participation by Returning Residents Generally, debris removal from private property does not qualify for federal funding because it is considered a responsibility of individual property owners that may be covered by private insurance. However, if home and business owners move disaster-generated debris to a public right-of-way, federal funding may be available for its removal. Therefore, the speed with which cleanup and rebuilding occurs may depend on how quickly residents are able to return to the area and assist in debris removal from private property. As noted, safe and efficient management of disaster debris may be difficult if different types of debris cannot be separated. Returning residents are generally asked to separate debris as much as possible (see FEMA Debris Removal Guidelines illustrated in Figure 2 ). The greater the devastation, the longer it may take before residents can return and, in turn, the greater the chance that some wastes will become contaminated and/or cannot be safely or easily separated. If residents do not or cannot separate their waste, waste management contractors or landfill operators may have to do so. Separating debris at a staging area or disposal facility is a time-consuming, costly, and potentially dangerous process. (See Figure 3 , a photo of mixed debris left by residents in the right-of-way after Hurricane Sandy.) Table 1 lists the categories of disaster debris and factors that may affect the management options, including factors that may affect whether it can be safely or efficiently separated to reduce its volume by burning, recycling, or reuse or disposed in a landfill that may not meet federal standards of protection. Agency Roles in Supporting Debris Removal Federal Agency Roles Federal debris removal assistance is most commonly provided in accordance with provisions of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , as amended, the Stafford Act). The Stafford Act and its implementing regulations set forth a process for a governor to request and the President to declare an "emergency" or "major disaster" when an event beyond the combined response capabilities of the state and affected local governments occurs. The presidential declaration may also authorize all federal agencies, as necessary, to provide assistance to respond to a disaster, including support for debris removal activities. Federal agencies may provide technical or other forms of assistance to communities affected by a disaster under authorities other than those provided in the Stafford Act. The Department of Homeland Security's National Response Framework (NRF) presents the guidelines under which all authorized federal agencies may respond to any disaster (i.e., not just those involving a presidential declaration). Among other functions, the NRF summarizes the roles and responsibilities of federal agencies to respond to an incident, under their existing authorities, and establishes coordinated processes for agencies to take action within their respective areas of expertise. The NRF identifies and groups the capabilities of federal departments and agencies into 14 Emergency Support Functions (ESFs). The ESFs provide the structure for coordinating federal interagency support for the federal response to an incident. The ESFs are mechanisms for providing the planning, support, resources, program implementation, and emergency services most likely to be needed. Two ESFs include debris removal missions: 1. ESF #3, Public Works and Engineering. This includes infrastructure protection and emergency repair, infrastructure restoration, engineering services, construction management, and critical infrastructure liaison. The Corps is the lead agency to complete this ESF. 2. ESF #10, Oil and Hazardous Materials Response. This includes oil and hazardous materials response and environmental safety and short- and long-term cleanup. EPA is the lead agency to complete this ESF; the Corps provides support. The following sections provide an overview of the role that FEMA, the Corps, and EPA may play in providing support to a local or state government's disaster debris removal activities. FEMA FEMA serves two primary roles in debris removal operations. First, it provides funding to eligible applicants for eligible debris removal activities. Second, it may approve direct federal assistance to an applicant (state or local government) that does not have the capability to respond to a presidentially declared disaster. Federal funding for disaster-related debris removal is coordinated and provided by FEMA primarily through its Public Assistance (PA) Grant Program. Under that program, FEMA provides grant assistance to reimburse state, tribal, and local governments and certain types of private nonprofit organizations for their response and recovery efforts. To be eligible for PA funding, the debris removal work must be: required as a result of the disaster event, located within a designated disaster area, and the legal responsibility of an eligible applicant. Activities eligible for assistance must be in the public interest, defined as activities that will: eliminate an immediate threat to lives, public health, and safety; eliminate immediate threats of significant damage to improved public or private property; ensure the economic recovery of the affected community to the benefit of the community at large; or mitigate the risk to life and property by removing substantially damaged structures and associated appurtenances as needed to convert property acquired through a FEMA hazard mitigation program to uses compatible with open space, recreation, or wetlands management practices. If a local or state government determines that it lacks the capability to perform or contract for eligible debris removal activities, the applicant may ask for assistance from the federal government to complete the work. If FEMA approves the request, it may call upon another federal agency to complete the activity. Support provided by outside agencies for debris removal may be done in accordance with a "mission assignment" from FEMA. The assignment functions as a work order issued by FEMA to another federal agency to assist with disaster response. The Corps and EPA are the agencies most commonly mission-assigned responsibilities involving disaster debris removal. The Corps The Corps generally provides debris removal assistance after receiving a mission assignment from FEMA. As delineated under ESF#3, the Corps may coordinate federal public works and engineering-related support, as well as provide technical assistance, engineering expertise, and construction management to prevent, prepare for, respond to, and/or recover from domestic incidents. Depending on issues specific to the disaster, such as the type and scope of damage, FEMA may mission assign to the Corps the responsibility to remove disaster debris from rights-of-way (e.g., roads and bridges), private property, or drainage structures or undertake emergency demolition activities. The Corps may also provide technical assistance by helping local agencies develop debris removal contracts. It may also provide personnel for debris removal teams, obtain contractors to execute the mission, coordinate landfill and burn sites and the final disposal of debris, and train and coordinate FEMA and local government debris monitors (entities tasked with ensuring that debris is managed in a way that complies with the Stafford Act, federal and state waste management requirements, or any other applicable law). If the debris is contaminated, the Corps may coordinate with EPA to ensure that it is managed properly. Apart from its potential to provide disaster assistance via a mission assignment from FEMA, the Corps is responsible for maintaining navigable channels and waterways. With respect to debris removal, the Corps is authorized to: develop projects to collect and remove drift and debris from federally maintained commercial harbors and land and water immediately adjacent to those areas, remove sunken vessels or other obstructions from navigable waterways under emergency conditions, and assist with debris removal from flood control works as necessary to protect human life and improved property or to help communities recover from the effects of disasters. EPA As delineated in ESF #10, Oil and Hazardous Materials Response, EPA may respond to incidents involving oil or hazardous materials. More specifically, EPA may respond to actual or potential discharges of oil, hazardous substances, pollutants, and contaminants that may present an imminent and substantial danger to public health or welfare. Such a response would be carried out in accordance with the National Oil and Hazardous Substances Pollution Contingency Plan, more commonly referred to as the National Contingency Plan. Also, EPA may be mission assigned activities to ensure that hazardous wastes or materials are managed properly. If requested by a local or state agency, EPA may assist with locating proper sites for debris separation and disposal, managing contaminated debris and regulated wastes such as refrigerants or asbestos-containing materials. EPA may help monitor debris management methods (e.g., landfilling or burning) to ensure they are not implemented in a way that poses a risk to human health or the environment. EPA may also work with other federal agencies (particularly the Corps and the Coast Guard) to facilitate waste collection, segregation, and disposal. State and Local Agency Roles States help coordinate local government requests for federal assistance and work with FEMA to define the mission. The Corps coordinates with state representatives regarding operational issues. Alternatively, state or local governments may accept the debris removal mission themselves and apply to FEMA for reimbursement. State environmental protection agencies or departments of environmental quality are the environmental regulatory arms of state governments. A state environmental agency may issue its own declaration of emergency after a disaster. A state declaration would specify how debris removal operations should be carried out for the particular disaster. For example, after Hurricane Katrina, the Louisiana Department of Environmental Quality expanded the definition of C&D waste to essentially allow the entire contents of flooded homes in New Orleans to be disposed of in C&D landfills. As noted, each state is authorized to implement its own waste management program that includes making decisions about siting and regulating debris handling and disposal sites. Local agencies are generally responsible for providing rights-of-entry permits to allow the Corps or its contractors to enter private property for debris removal activities (consistent with Corps authorities), establishing criteria and procedures for classifying different types of debris, selecting disposal methods, approving disposal operations, condemning properties, providing demolition plans, and designating the appropriate type of landfill. Federal Role in Debris Management Planning Without proper pre-disaster planning, managing potentially huge volumes of mixed debris can be complicated for an already overwhelmed community. According to FEMA, communities with a proper plan in place are better prepared to restore public services and ensure the public health and safety in the aftermath of a disaster and are better positioned to receive the full level of assistance available to them from FEMA. FEMA encourages state, territorial, tribal, and local governments to establish a Debris Management Plan (DMP), written procedures and guidance that the governments will use to manage debris in an expeditious, efficient, and environmentally sound manner. FEMA provides technical assistance to communities to develop DMPs and will approve plans that meet its required criteria. Among other elements, a FEMA-approved DMP must identify the types of incidents likely to occur in the region and the types of debris that would likely be handled after those incidents. It must also identify the existing state or federal laws that would apply to the handling and disposal of the types of debris likely handled. On January 29, 2013, President Obama signed into law the Sandy Recovery Improvement Act of 2013 ( P.L. 113-2 ). The law amends the Stafford Act to add Section 428, which authorizes "alternative procedures" for FEMA's Public Assistance program through a pilot program. More specifically, the law directed FEMA to adopt alternative procedures that would further the goals of: reducing costs to the federal government of providing assistance, increasing flexibility in administering assistance, expediting the process of providing assistance, and providing financial incentives and disincentives for the timely and cost-effective completion of projects. Section 428 allows FEMA to take a number of actions to meet those goals with respect to debris removal activities. For example, FEMA is authorized to fund debris management planning and to provide incentives to state, tribal, or local governments to prepare a DMP for FEMA approval. The incentive for having a FEMA-approved DMP is a one-time, 2% increase in funding above the approved federal cost share for debris removal activities. Currently, FEMA is implementing debris-related alternative procedures in accordance with pilot programs authorized through June 27, 2018. For Additional Information The following information may be useful to understand requirements and federal agency roles in various aspects of disaster debris removal: FEMA, April 2017 Public Assistance Program and Policy Guide , https://www.fema.gov/media-library/assets/documents/111781 . See particularly the discussion of issues and requirements related to debris removal on pages 43-61 and "Appendix D: Debris Management Plan Job Aid." FEMA, Public Assistance: Debris Management Guide , FEMA-325, July 2007, https://www.fema.gov/media-library/assets/documents/25649 . FEMA, "Debris Removal and Demolition Fact Sheet," https://www.fema.gov/media-library/assets/documents/90745 . FEMA, "Alternative Procedures", https://www.fema.gov/alternative-procedures . Army Corps of Engineers, "Debris Management," http://www.usace.army.mil/Missions/Emergency-Operations/National-Response-Framework/Debris-Management/ . FEMA, "FEMA and U.S. Army Corps Debris Mission," Video discussing the Corps' mission assignment to manage debris removal from Hurricane Sandy. Posted Nov. 22, 2012, https://www.fema.gov/media-library/assets/videos/81313 . EPA, Planning for Disaster Debris , March 2008, https://www.epa.gov/homeland-security-waste/guidance-about-planning-natural-disaster-debris . CRS Report R43990, FEMA's Public Assistance Grant Program: Background and Considerations for Congress , by Jared T. Brown and Daniel J. Richardson. CRS Report R41981, Congressional Primer on Responding to Major Disasters and Emergencies , by Jared T. Brown.

Every year, communities in the United States are affected by disasters such as hurricanes, earthquakes, tornadoes, volcanoes, floods, wildfires, and winter storms. After a disaster, when a region turns its attention to rebuilding, one of the greatest challenges often involves properly managing disaster-related debris. Disaster debris typically includes soils and sediments, vegetation (trees, limbs, shrubs), municipal solid waste (common household garbage, personal belongings), construction and demolition debris (in some instances, entire residential structures and all their contents), vehicles, food waste, "white goods" (refrigerators, freezers, air conditioners), and household hazardous waste(cleaning agents, pesticides, pool chemicals). Each type of waste may contain or be contaminated with toxic or hazardous constituents. In the short term, debris removal is necessary to facilitate the recovery of a geographic area. In the long term, the methods by which these wastes are managed requires proper consideration to ensure that their management (e.g., by landfilling) will not pose future threats to human health or the environment. Under a number of different conditions and authorities, several agencies may provide debris removal assistance to communities affected by a disaster. For example, under certain conditions, the Federal Emergency Management Agency (FEMA) provides funding for disaster debris removal and/or approves direct federal assistance to certain entities that do not have the capability to respond to a disaster. Also, under certain conditions, the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency (EPA) may assist communities with debris removal activities. For example, the Corps may perform right-of-way clearance, curbside waste pickup, private property debris removal, and property demolition, and EPA may help coordinate the collection and management of contaminated debris and household hazardous wastes. This report focuses on the requirements applicable to disaster debris management and the challenges that communities face when attempting to manage it both quickly and safely. This report also provides an overview of the types of support provided by FEMA, the Corps, and EPA with respect to disaster debris removal. A discussion of the programs or statutory authorities under which that support may be provided is beyond the scope of this report. There are a number of conditions under which federal agencies may support communities with disaster debris removal. With respect to FEMA's involvement in debris removal assistance, this report focuses on support that may be provided after the President declares the incident to involve a "major disaster" under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act, P.L. 93-288, as amended).

Categories of Disadvantaged Small Businesses 8(a) Participants Small businesses that are at least 51% unconditionally owned and controlled by "socially and economically disadvantaged individuals" or groups are eligible for the Minority Small Business and Capital Ownership Development Program. Implemented by the SBA under the authority of Sections 7(j) and 8(a) of the Small Business Act, as amended, this program is commonly known as the 8(a) Program, and participants in it are often called 8(a) participants or 8(a) firms. Social Disadvantage Owners of 8(a) firms must be "socially disadvantaged," or have been subjected to "racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities." Members of the following racial and ethnic groups are presumed to be socially disadvantaged: Black Americans; Hispanic Americans; Native Americans (Alaska Natives, Native Hawaiians, or enrolled members of a Federally or State recognized Indian Tribe); Asian Pacific Americans (persons with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China (including Hong Kong), Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, or Nauru); Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal); and members of other groups designated from time to time by SBA.... Persons who are not members of these groups must establish individual social disadvantage by a preponderance of the evidence, including (1) at least one objective distinguishing feature contributing to social disadvantage, such as race, ethnic origin, gender, or physical handicap; (2) personal experiences of substantial and chronic disadvantage in American society; and (3) negative impact on entry into or advancement in the business world because of this disadvantage. Economic Disadvantage Owners of 8(a) firms must also be "economically disadvantaged" in that their "ability to compete in the free enterprise system has been impaired due to diminished credit and capital opportunities as compared to others in the same or similar line of business who are not socially disadvantaged." Economic disadvantage is not presumed for any individual owners. Rather, all individuals upon whom an 8(a) firm's eligibility is based must describe their economic disadvantage in a narrative statement and submit personal financial information to the SBA. This information generally includes, among other things, income for the past three years, personal net worth, and the fair market value of all assets. An individual's net worth, excluding ownership interest in the 8(a) firm and equity in his or her primary personal residence, must be less than $250,000 at the time of application to the 8(a) Program, and less than $750,000 thereafter. The value of retirement accounts was historically not excluded when the net worth of prospective 8(a) participants was calculated, but the SBA amended its regulations in February 2011, allowing the value of retirement accounts to be excluded in certain circumstances. Formerly, the SBA also compared the financial condition of firms applying to the 8(a) Program to the financial profiles of small businesses in the same primary industry classification, or similar line of business, that were not owned by socially and economically disadvantaged individuals when determining economic disadvantage. However, in the February 2011 amendments, the SBA removed this provision from its regulations on the grounds that the provision caused "confusion," although the SBA noted that it would continue to review the financial condition of 8(a) applicants in determining whether they have "potential for success." Applications to the 8(a) Program Firms must apply to participate in the 8(a) Program and generally may not receive contracting or other federal assistance based upon 8(a) status until the SBA approves their application. The application form requires submission of various materials including, but not limited to, financial statements, federal personal and business tax returns, and personal history statements. Once accepted into the 8(a) Program, firms must inform the SBA in writing of any changes in circumstances that adversely affect their eligibility. Each firm must also complete an annual review, which requires submission of (1) certifications that the firm meets the eligibility requirements and no changes in circumstances adversely affect its eligibility; (2) personal financial information for each disadvantaged owner; and (3) a financial statement for the firm, among other things. Depending upon the firm's annual gross receipts, its financial statement may need to be audited by an independent public accountant, as Table 1 illustrates. Maximum Nine-Year Term in the 8(a) Program Firms may participate in the 8(a) Program one time, for a period of no more than nine years. Once a firm has exited the program after participating in it for any period of time, it is generally ineligible for further participation. Additionally, socially and economically disadvantaged individuals may confer eligibility for the 8(a) Program upon only one firm over their lives. In contrast, disadvantaged groups (i.e., Indian tribes, Alaska Native Corporations (ANCs), Native Hawaiian Organizations (NHOs), and Community Development Corporations (CDCs)) may confer eligibility upon multiple 8(a) firms, which may participate in the 8(a) Program concurrently (subject to certain limitations on the primary industries in which they operate), or at different times. Contracting and Related Assistance for 8(a) Participants Federal agencies "set aside" certain contracts for 8(a) firms by conducting procurements in which only 8(a) firms may compete. They can also award contracts to 8(a) firms on a sole-source basis, sometimes in circumstances in which they could not otherwise make sole-source awards. Federal agencies reportedly spent $16.3 billion on competitive or sole-source contracts with 8(a) participants in FY2014. However, 8(a) participants are not assured of receiving federal contracts, and only 44% of 8(a) firms not owned by Alaska Native Corporations reportedly received contracts in one recent fiscal year. 8(a) firms are also eligible for (1) direct and guaranteed loans from the SBA; (2) transfer of technology and surplus property owned by the United States; and (3) management and technical assistance, including training in financing, management, accounting, bookkeeping, marketing, the operation of small businesses, and the identification and development of new business opportunities. Additionally, the SBA sponsors a mentor-protégé program for eligible 8(a) participants. Mentors are established firms that provide their 8(a) protégés with technical or management assistance; financial assistance in the form of equity investments or loans; subcontracts; and assistance in performing prime contracts through joint venture arrangements. In particular, mentors and protégés may form joint ventures that could qualify as "small" for purposes of government procurements, including sole-source awards under Section 8(a). Small Disadvantaged Businesses "Small disadvantaged businesses" (SDBs) include 8(a) participants and other small businesses that are at least 51% unconditionally owned and controlled by socially or economically disadvantaged individuals or groups. SDBs that are not 8(a) firms need not demonstrate potential for success, and individuals owning and controlling non-8(a) SDBs may have net worth of up to $750,000 (excluding ownership interests in the SDB firm and equity in their primary personal residence). Otherwise, however, SDBs must generally satisfy the same eligibility requirements as 8(a) firms, although they do not apply to the SBA to be designated SDBs in the same way that 8(a) firms do. Certification of SDBs At one time, SDBs had to be certified by the SBA, or a private certifying entity acting in compliance with SBA regulations, to qualify for certain federal programs as prime contractors. However, most federal programs for SDB prime contractors have been discontinued, with only the government-wide and agency-specific goals for the percentage of federal contract and/or subcontract dollars awarded to SDBs each year remaining. Because of the discontinuance of these programs, the SBA ceased certifying SDBs in October 2008, and no longer issues regulations for private certifiers. In the few cases where SDB certification is currently required, 8(a) participants are deemed to be certified, and other firms may be certified by the agency conducting the procurement, private certifying entities, or state and local governments. Firms not relying on their 8(a) status that have submitted applications for SDB certification to a procuring agency are treated as if they are certified so long as the agency has not rejected their application. Certification generally lasts for three years, and the same firm could apparently be certified as an SDB repeatedly, so long as it meets the requirements for certification. Firms do not need to be certified SDBs to qualify for federal programs for subcontractors. Rather, [a] firm may represent that it qualifies as an SDB for any Federal subcontracting program if it believes in good faith that it is owned and controlled by one or more socially and economically disadvantaged individuals. Prime contractors "acting in good faith" may rely on subcontractors' written representation of their status as an SDB. However, the SBA retains the authority to review the status of uncertified firms that represent themselves as SDBs for purposes of federal subcontracts when it receives "credible information" that they are not disadvantaged. The SBA, agency contracting officers, and other "interested parties" (such as business competitors) may also protest firms' SDB status. Contracting Programs for SDBs The government promotes contracting and subcontracting with SDBs by setting government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars awarded to SDBs each fiscal year. The government-wide goal is that "not less than 5 percent of the total value of all prime contract and subcontract awards" be made to SDBs, a goal that was met in FY2014, when $34.7 billion was awarded to SDBs. Agency specific goals are generally also set at 5% of the total value of prime contracts and subcontracts awarded each fiscal year, although agency achievements range from 2.3% (Department of Energy) to 47.8% (SBA). In the past, agencies also had authority to "us[e] less than full and open competitive procedures and partial set-asides," including a 10% price evaluation adjustment, when evaluating bids or offers involving SDB contractors or subcontractors. However, such authorities have either expired or been subject to statutory conditions or judicial decisions precluding their use. Other federal programs focus specifically on promoting SDBs as subcontractors on federal prime contracts. Agencies must negotiate "subcontracting plans" with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. Subcontracting plans set goals for the percentage of subcontract dollars to be awarded to SDBs, among others, and describe efforts that will be made to ensure that SDBs "have an equitable opportunity to compete for subcontracts." Failure to make a good faith effort to comply with the subcontracting plan constitutes a material breach of the contract, potentially allowing the agency to terminate the contract for default and subjecting the contractor to liquidated damages. Federal agencies may also consider the extent of subcontracting with SDBs in determining to whom to award a contract, or give contractors "monetary incentives" to subcontract with SDBs. Such incentives reward prime contractors by paying them up to 10% of the amount by which their actual performance in subcontracting with SDBs exceeds their proposed performance. Disadvantaged Business Enterprises Like 8(a) participants and SDBs, "disadvantaged business enterprises" (DBEs) are small businesses at least 51% unconditionally owned and controlled by socially and economically disadvantaged individuals. However, DBEs differ from 8(a) participants and SDBs in that members of the following groups—which include women—are presumed to be both socially and economically disadvantaged: (i) "Black Americans," which includes persons having origins in any of the Black racial groups of Africa; (ii) "Hispanic Americans," which includes persons of Mexican, Puerto Rican, Cuban, Dominican, Central or South American, or other Spanish or Portuguese culture or origin, regardless of race; (iii) "Native Americans," which includes persons who are enrolled members of a federally or State recognized Indian tribe, Alaska Natives, or Native Hawaiians; (iv) "Asian-Pacific Americans," which includes persons whose origins are from Japan, China, Taiwan, Korea, Burma (Myanmar), Vietnam, Laos, Cambodia (Kampuchea), Thailand, Malaysia, Indonesia, the Philippines, Brunei, Samoa, Guam, the U.S. Trust Territories of the Pacific Islands (Republic of Palau), Republic of the Northern Marianas Islands, Samoa, Macao, Fiji, Tonga, Kirbati, Tuvalu, Nauru, Federated States of Micronesia, or Hong Kong; (v) "Subcontinent Asian Americans," which includes persons whose origins are from India, Pakistan, Bangladesh, Bhutan, the Maldives Islands, Nepal or Sri Lanka; (vi) [w]omen; (vii) [a]ny additional groups whose members are designated as socially and economically disadvantaged by the SBA, at such time as the SBA designation becomes effective. Members of these groups must submit a signed, notarized statement regarding their group membership, as well as certain information concerning their economic condition. Additionally, their net worth cannot exceed $1.32 million, excluding their ownership interest in the DBE firm and equity in their primary residence. Individuals who are not members of designated groups must demonstrate by a preponderance of the evidence that they are socially and economically disadvantaged. Certification of DBEs DBEs are certified by Department of Transportation (DOT) funding recipients, who must determine DBEs' eligibility based upon (1) an on-site visit with the firm, including interviews with its principal officers; (2) an on-site visit to any job sites operated by the firm; (3) an analysis of the legal structure, ownership, and control of the firm, as well as its bonding and financial capacity; (4) the firm's work history, including the contracts it has received and the work it has completed; (5) a statement from the firm indicating its preferred type(s) of work and work locations; (6) a list of equipment and licenses owned by or available to the firm, as well as its key personnel to perform the work it seeks to do as part of the DBE program; (7) federal income tax returns for the past three years; and (8) a completed application form. All certifications must be final before the due date for bids or offers for any contract on which a firm seeks to participate as a DBE. Once certified, DBEs must provide written notices of any changes in circumstances affecting their eligibility as these changes occur. They must also produce a sworn affidavit affirming that there have been no changes in circumstances affecting the firm's eligibility each year on the anniversary of their date of certification. Firms that have been certified as DBEs generally remain certified "until and unless" the funding recipient removes their certification, in whole or in part, using procedures spelled out in federal regulation. Assuming firms must be recertified, there is no apparent limit on the number of times they may be recertified. Certifications are state-specific, although states may recognize one another's certifications. Contracting Programs for DBEs DBEs are eligible for various contracting programs, most of which are operated by state governments and other entities that receive certain federal highway or transit funds, or airport funds. The federal government has as a goal that 10% of such funds be awarded to DBEs. However, this is "an aspirational goal at the national level" and "does not authorize or require [funding] recipients to set overall or contract goals at the 10 percent level, or any other particular level, or to take any special administrative steps if their goals are above or below 10 percent." Funding recipients also generally set goals for DBE participation overall and on individual contracts that have the possibility of subcontracting. However, they are barred from using "quotas," or requiring that certain percentages of their contract dollars go to DBEs, and they can "set aside" contracts for DBEs only "in limited and extreme circumstances … when no other method could be reasonably expected to redress egregious instances of discrimination." Instead, they must use race-neutral means to meet "the maximum feasible portion" of these goals. Such means include arranging solicitations, times for the presentation of bids, quantities, specifications, and delivery schedules so as to facilitate DBE participation; providing assistance in overcoming limitations that DBEs may encounter in obtaining bonding or financing; providing technical assistance and other services; publicizing contract opportunities and providing information about contracting procedures; assisting DBEs in developing and improving their business management, record keeping, and financial and accounting capabilities; providing services to help DBEs develop, participate in various kinds of work, and achieve self-sufficiency; assisting new start-up firms, particularly in fields where DBE participation has historically been low; distributing DBE directories to potential prime contractors; and assisting DBEs to develop their capability to utilize emerging technology and conduct business through electronic media. Funding recipients cannot be penalized for failure to meet their goals unless they did not administer their DBE program in good faith. Recipients may also establish development and mentor-protégé programs for DBEs, although participants in any mentor-protégé programs do not enjoy the same exemption from the SBA size standards when they form joint ventures as 8(a) firms participating in the SBA mentor-protégé program do. Tabular Comparison of the Various Types of Disadvantaged Small Businesses Table 2 provides a comparison of the various types of disadvantaged small businesses for purposes of federal and federally funded contracting programs. Constitutionality of Federal Programs for Disadvantaged Small Businesses All federal programs for disadvantaged small businesses currently define "disadvantage," in part, based on the presumption that racial and ethnic minorities, or women, are disadvantaged. Presumptions based on race have been found to constitute "explicit racial classifications," subjecting programs that incorporate them to "strict scrutiny" if they are challenged on the grounds that they violate the constitutional guarantee of equal protection. For a challenged program to survive strict scrutiny, the government must show that the program is necessary to meet a compelling government interest. Presumptions based on gender are similarly subject to heightened scrutiny, with the Supreme Court in United States v. Virginia having required the state of Virginia to provide an "exceedingly persuasive justification" for its policy of maintaining an all-male military academy. In contrast, classifications that are not based on race, gender, or another suspect classification, and that do not involve the exercise of a fundamental right, will generally be upheld so long as they are rationally related to a legitimate government interest. The ability of programs to withstand strict or other heightened scrutiny may depend, in part, upon how the program is structured. In a recent decision, the U.S. District Court for the District of Columbia found that the 8(a) Program is not unconstitutional on its face, although it is unconstitutional as-applied in the military simulation and training industry. Particularly in its rejection of the facial challenge to the 8(a) Program, the court emphasized certain aspects of the program's history and requirements when finding that "breaking down barriers to minority business development created by discrimination" constituted a compelling government interest, and the government had a strong basis in evidence for concluding that race-based action was necessary to further this interest. For example, the court rejected the plaintiff's assertion that the 8(a) Program was "not truly remedial," but rather favored "virtually all minority groups … over the larger pool of citizens," because non-minority individuals may qualify for the program, and all 8(a) applicants must demonstrate economic disadvantage. Similarly, in finding that the program was narrowly tailored to meet the government's interests, the court noted (1) that goals for contracting with small disadvantaged businesses are purely aspirational, and there are no penalties for failing to meet them; (2) the nine-year limits on program participation for individual owners and firms; and (3) that SBA may not accept a requirement for the 8(a) Program if it determines that doing so will have an adverse effect on another small business or group of small businesses. The court emphasized that the last two factors, in particular, helped ensure that race-conscious remedies do not "last longer than the discriminatory effects [they are] designed to eliminate," and "work the least harm possible to other innocent persons competing for the benefit." On the other hand, in 2008, the U.S. Court of Appeals for the Federal Circuit focused less on the details of the program than on the evidence of discrimination before Congress when Congress reauthorized the program when striking down a Department of Defense (DOD) program for SDBs. Specifically, the Federal Circuit found that the DOD program—which allowed DOD to take 10% off the price of bids or offers submitted by SDBs when determining which bid or offer had the lowest price or represented the best value for the government—was unconstitutional on its face because Congress lacked a strong basis in evidence for concluding that race-conscious contracting was necessary to remedy discrimination in the defense industry when it reauthorized the program in 2006. The district court, which had upheld the constitutionality of the challenged SDB program, had found that six state and local disparity studies, along with other statistical and anecdotal evidence, constituted a strong basis in evidence for the re-enactment. However, the Federal Circuit disagreed. It found that the six state and local disparity studies—which had been the "primary focus of the district court's compelling interest analysis and of the parties' arguments on appeal" —did not constitute a strong basis in evidence because they did not provide the "substantially probative and broad-based statistical foundation ... that must be the predicate for nationwide, race-conscious action." A similar lack of evidence of discrimination also played a part in the U.S. District Court for the District of Columbia finding that the 8(a) Program is unconstitutional as applied in the military training and simulation industry. However, in this case, DOD conceded that it had "no evidence of discrimination, either in the public or private sector, in the simulation and training industry."

Three primary categories of "disadvantaged" small businesses are currently eligible for various contracting programs under federal law: (1) small businesses participating in the Small Business Administration's (SBA's) Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) Program) (8(a) participants); (2) "small disadvantaged businesses" (SDBs); and (3) "disadvantaged business enterprises" (DBEs). All programs are based in statute. Section 8(a) of the Small Business Act authorizes the 8(a) Program; Section 8(d) of the Small Business Act, the SDB program; and various transportation statutes, the DBE program. However, many of the specific requirements pertaining to these programs derive from agency regulations. 8(a) firms, SDBs, and DBEs are all characterized as "disadvantaged" because they are at least 51% owned and controlled by one or more socially and economically disadvantaged individuals or groups. However, social and economic disadvantage is defined somewhat differently for each program. Members of certain racial and ethnic groups are presumed to be socially disadvantaged for purposes of the 8(a) and SDB programs, while women are also presumed to be socially disadvantaged for purposes of the DBE program. Similarly, individuals' net worth must be $250,000 or less for entry into the 8(a) Program, while net worth can be as high as $750,000 for newly designated SDBs and $1.32 million for newly designated DBEs. The programs for the various types of firms also differ in their operation. The 8(a) Program is open only to firms that have been certified by SBA, and firms and individual owners may generally participate in the 8(a) Program for a maximum of nine years. 8(a) participants are eligible for set-aside or sole-source contracts, as well as other assistance from the SBA. All 8(a) firms qualify as SDBs. Non-8(a) firms must be certified as SDBs by procuring agencies, private certifying entities, or state or local governments to qualify for federal programs for SDB prime contractors, although they may self-certify for similar programs for SDB subcontractors. SDB certification, when required, generally lasts three years, but could last longer and apparently be renewed. There are government-wide and agency-specific goals for the percentage of federal contract and subcontract dollars awarded to SDBs. Additionally, certain prime contractors must have "plans" for subcontracting with SDBs as terms of their contracts. Agencies may also use past performance in subcontracting with SDBs as an evaluation factor in source selection decisions, or give prime contractors "monetary incentives" for subcontracting with SDBs. DBEs must be certified by the state of the funding recipient. Certifications generally last "until and unless revoked," and there is no apparent limit on the number of times firms may be recertified. There is a national goal that 10% of federal funding for certain transportation-related projects be awarded to DBE contractors and subcontractors. Funding recipients must generally set similar goals, including on individual contracts. Contracting opportunities for disadvantaged small businesses are perennially of interest to the Members and committees of Congress because of small businesses' widely asserted role in job creation. Also, there has recently been concern that the recession of 2007-2009 disproportionately affected disadvantaged small businesses, and that such businesses have been slow to recover. A separate report, CRS Report R43573, Federal Contracting and Subcontracting with Small Businesses: Legislation in the 113th Congress, by [author name scrubbed], discusses recently enacted and introduced legislation pertaining to the 8(a) and SDB programs.

Overview The Nuclear Security Enterprise Responsibility for U.S. nuclear weapons resides with both the Department of Defense (DOD) and the Department of Energy (DOE). DOD develops, deploys, and operates the missiles and aircraft that can deliver nuclear warheads. It also generates the military requirements for the warheads carried on those platforms. The National Nuclear Security Administration (NNSA), which is a semi-autonomous agency within the Department of Energy, oversees the research, development, test, and acquisition programs that produce, maintain, and sustain the warheads. Moreover, DOE is responsible for storing and securing the warheads that are not deployed with DOD delivery systems and for dismantling warheads that have been retired and removed from the stockpile. Congress authorizes funding for both DOD and NNSA nuclear weapons activities in the annual National Defense Authorization Act (NDAA). While Congress considers appropriations for DOD's nuclear weapons activities in the Defense Appropriations bill, it funds the NNSA budget through the Energy and Water Development Appropriations bill. This report focuses on the portion of the Energy and Water Development Appropriations Bill that funds NNSA's nuclear weapons activities. Reorganization of the Nuclear Security Enterprise During World War II, when the United States first developed nuclear weapons, the Army managed the nuclear weapons program. In 1946, Congress passed the Atomic Energy Act of 1946 to establish the Atomic Energy Commission (AEC). The AEC was an independent civilian agency tasked with managing the U.S. nuclear weapons program. In the Energy Research and Development Act of 1974, Congress dissolved the AEC and created the Nuclear Regulatory Commission and the Energy Research and Development Administration (ERDA), which among other functions managed the nuclear weapons program. That program was moved again by the Department of Energy Organization Act of 1977, which dissolved ERDA and created DOE. Congress, in passing the National Defense Authorization Act for Fiscal Year 2000 ( P.L. 106-65 , Title XXXII), established the National Nuclear Security Administration. NNSA is a semi-autonomous agency operating within DOE. In addition to managing the nuclear weapons program, NNSA also manages the Defense Nuclear Nonproliferation and Naval Reactors programs. These reorganizations stem, in part, from long-standing concerns about the management of the nuclear weapons complex. Many reports and legislative provisions have been written over the past several decades to address this issue. Most recently, in the National Defense Authorization Act for Fiscal Year 2013 ( P.L. 112-239 ), Congress established the Congressional Advisory Panel on the Governance of the Nuclear Security Enterprise and directed the panel to make recommendations on "the most appropriate governance structure, mission, and management of the nuclear security enterprise." In its report to Congress, the panel stated The panel finds that the existing governance structures and many of the practices of the enterprise are inefficient and ineffective, thereby putting the entire enterprise at risk over the long term. These problems have not occurred overnight; they are the result of decades of neglect. This is in spite of the efforts of many capable and dedicated people who must nonetheless function within the confines of a dysfunctional system.… One unmistakable conclusion is that NNSA governance reform, at least as it has been implemented, has failed to provide the effective, mission-focused enterprise that Congress intended. The panel's recommendations included strengthening presidential guidance and oversight of the nuclear enterprise; establishing new congressional mechanisms for leadership and oversight of the enterprise; replacing NNSA with a new Office of Nuclear Security within DOE, renamed to the Department of Energy and Nuclear Security, with the Secretary responsible for the mission; and building a culture of performance, accountability, and credibility. NNSA, in its review of the report, supported many of the suggested changes in management and contracting within NNSA, but did not support the proposed changes in the name and structure of the organization or its leadership. Congress has also expressed concerns about cost growth and transparency in NNSA's programs. These concerns focus on both major construction projects and weapons refurbishment programs. Congress addressed these concerns in the Consolidated and Further Continuing Appropriations Act for 2015 ( P.L. 113-235 ). Section 304 required that NNSA's construction of high-hazard nuclear facilities have independent oversight by the Office of Independent Enterprise Assessments "to ensure the project is in compliance with nuclear safety requirements." Section 305 required an independent cost estimate for approving performance baseline and starting construction for projects with total cost over $100 million. Section 308 required the Secretary of Energy to provide an analysis of alternatives for each major warhead refurbishment program reaching the development engineering stage. The Senate reiterated its concerns in S.Rept. 114-54 , its report on H.R. 2028 , the Energy and Water Development and Related Agencies Appropriations Act, 2016. In this report, the committee expressed its concern "with the continued poor cost estimating by the Department, particularly within the NNSA," and directed the Secretary of Energy to "provide a report … that outlines the Department's plan for improving cost estimating for major projects and programs." The Nuclear Weapons Complex At the end of the Cold War in 1991, the U.S. nuclear weapons complex consisted of 14 sites—3 laboratories, the nuclear weapons test site in Nevada, and a number of manufacturing plants for weapons materials and components. As the number of nuclear weapons in the U.S. arsenal declined and demand for new warheads and materials abated in the 1990s, the United States closed several facilities in the complex. The complex now consists of eight sites in seven states. These sites include three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City Plant, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 National Security Complex, TN); and the Nevada National Security Site (formerly Nevada Test Site). NNSA manages and sets policy for the complex; contractors operate the eight sites. Despite the post-Cold War reductions in the complex, some in Congress have pressed for further changes, seeking additional reductions in personnel, greater efficiencies in production, a smaller footprint at each site, and increased security. Many Members have also supported calls for increased investments within the complex, both to replace aging facilities and improve operations and security. The Obama Administration requested increased funding for the nuclear weapons complex in each of its annual budgets. In an editorial published in late January 2010, Vice President Biden noted that U.S. nuclear laboratories and facilities had been "underfunded and undervalued" for more than a decade. He stated that the President's budget request for FY2011 would include "$7 billion for maintaining our nuclear-weapons stockpile and complex, and for related efforts," an amount that was $600 million more than Congress appropriated for FY2010. He also stated that the Administration would "boost funding for these important activities by more than $5 billion" over the next five years. While the passage of the Budget Control Act in late 2011 slowed the increases in NNSA budgets, as is evident in the figure below, the actual appropriations for NNSA's weapons activities have begun to exceed the expectations outlined in the 1251 Report in 2010. The Obama Administration further outlined its funding plans for the nuclear weapons enterprise in a report submitted to Congress in May 2010, and updated in November 2010, in support of the ratification of the New START Treaty. Congress had requested this report, known as the "1251 report" in the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 ), Section 1251, and mandated that it outline a comprehensive plan to "(1) maintain delivery platforms [that is, bombers, missiles, and submarines that deliver nuclear weapons]; (2) sustain a safe, secure, and reliable U.S. nuclear weapons stockpile; and (3) modernize the nuclear weapons complex." In the November 2010 update of that document, the Administration projected weapons stockpile and infrastructure costs for FY2011-FY2020 at between $85.4 billion and $86.2 billion. As is shown on Figure 1 , above, funds appropriated for these programs fell below the projected levels early in the decade. However, the FY2017, FY2018, and FY2019 budget requests and projections for subsequent years now exceed the amount predicted in the 2010 report. The Trump Administration, in its budget for FY2018, requested an additional $1 billion for NNSA weapons activities over the level appropriated in FY2017. (NNSA's budget request showed an increase of $1.4 billion, but this compared FY2018 with FY2016 funding levels.) While the Administration had indicated in its "skinny budget" that this increase would support both deferred maintenance requirements among the NNSA weapons facilities and the warhead life extension programs in the directed stockpile area of the budget, funding for deferred maintenance in infrastructure and operations accounts remained essentially unchanged from the FY2017 appropriated levels. Most of the increases in the funding request for FY2018 divided between the life extension programs and research and development activities. Congress enacted a budget of $10.642 billion for weapons activities NNSA in FY2018, in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). The Trump Administration's budget for FY2019 continued to fund increases in NNSA's weapons activities, requesting $11.02 billion, an increase of nearly $400 million over the funding enacted in FY2018. Congress enacted a budget of $11.1 billion for weapons activities in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Managing the Nuclear Weapons Stockpile The United States conducted 1,030 nuclear weapons test explosions between 1945 and 1992. These were the primary means by which the United States both determined whether its nuclear weapons designs would work and confirmed that the weapons remained reliable and effective as they aged. In 1992, Congress enacted a moratorium on U.S. nuclear weapons testing when it attached the Hatfield-Exon-Mitchell amendment to the Energy and Water Development Appropriations Act, 1993. President George H. W. Bush signed the bill into law ( P.L. 102-377 ), October 2, 1992. In the absence of nuclear weapons testing, the United States has adopted a science-based program to maintain and sustain confidence in the reliability of the U.S. nuclear stockpile. Congress established the Stockpile Stewardship Program in the National Defense Authorization Act for Fiscal Year 1994 ( P.L. 103-160 ). This program, as amended by the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 , §3111), is to ensure "that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing." NNSA implements the Stockpile Stewardship Program through the activities funded by Weapons Activities account in the NNSA budget. This account includes three major program areas, each with a budget in excess of $2 billion, and several smaller programs. These are detailed below. The aggregate funding for these programs appears in Table 1 . Directed Stockpile Work (DSW) According to NNSA's budget materials, Directed Stockpile Work includes those programs that directly support the nuclear weapons currently in the U.S. nuclear stockpile. These activities include maintenance and surveillance of existing warheads; refurbishment and life extension of existing warheads; assessments of the reliability of existing warheads; and the dismantlement and disposition of retired warheads. It also includes programs that support research, development, and certification of technology needed to meet stockpile requirements and strategic materials. The NNSA budget requested $3,977 million for Directed Stockpile Work in FY2018. The House Energy and Water Appropriations Subcommittee, in its version of the bill ( H.R. 3266 ), recommended the requested amount of $3,977 million for Directed Stockpile Work, while the Senate Energy and Water Appropriations Subcommittee ( S. 1609 ) recommended $3,912.6 million for Directed Stockpile Work, a reduction of $64.4 million from the budget request. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) includes 4,009.4 million for Directed Stockpile Work. NNSA requested $4,666.2 million for Directed Stockpile work in FY2019, an increase of 16.3% over the amount enacted in FY2018. The request would increase funding in each of the program areas of DSW, although the Life Extension Programs and Strategic Materials programs would receive a proportionally larger share. Congress appropriated $4,658.3 for directed stockpile work in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Life Extension Programs Life Extension Programs are designed to extend the life of existing warheads through design, certification, manufacture, and replacement of components. An LEP for the W76 warhead for the Trident II (D-5) submarine-launched ballistic missile (SLBM) is ongoing, as is an LEP for the B61 mod 12. (A "mod," such as B61 mod 12 or B61-12, is a modification or version of a bomb or warhead type.) NNSA is also pursuing an alteration for the W88 warhead currently deployed on Trident II (D-5) missiles and is in the early stages of a life extension program for the W80 cruise missile warhead. The new W80-4 will be deployed on the new Long Range Standoff missile (LRSO) currently under development by the Air Force. NNSA requested, and Congress appropriated, $1,744.1 million for life extension programs in FY2018. According to the budget documents, the increased funding would support work planned "for the W80-4 LEP, and updates baseline estimates for the B61-12 LEP, and the W88 Alteration program." NNSA has requested $1,920 million for LEPs in FY2019. As NNSA notes in its budget documents, this increase is "primarily due to planned ramp-up of production activities for the B61-12 LEP and the W80-4 LEP." NNSA's FY2019 budget documents also introduce a new component to the W76 LEP. NNSA notes that "the 2018 Nuclear Posture Review states that the United States will modify a small quantity of existing SLBM warheads to provide a low-yield option in the near-term." This warhead has been referred to as the W76-2. NNSA's FY2019 initial budget request did not request any funding specifically allocated to this modification, but did note that "as the Nuclear Weapons Council translates policy into military requirements, the Administration will work with Congress for appropriate authorizations and appropriations to develop options that support the modification." The White House, however, included $65 million funding for this modification in a budget amendment package submitted to Congress on April 13, 2018. This document states that the amendment would "authorize the production of low-yield ballistic missiles to replace higher-yield weapons currently deployed, maintaining the overall number of deployed U.S. ballistic missile warheads." It notes that a delay in the program past FY2019 "would require a restart of the W76 production line, increase costs, and delay delivery to the Department of Defense." The funding requests and enacted amounts for FY2019, along with the legislative direction for FY2019, include the following: NNSA requested $48.9 million for the W76-1 LEP in FY2019; Congress enacted this amount in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). The first production unit (FPU) of this warhead was completed in FY2008, and NNSA expects the "warhead refurbishments and associated deliveries to the Navy are scheduled to complete in FY 2019." NNSA requested $65 million for the W76-2 LEP—the low-yield version of the warhead—in FY2019. Congress enacted this amount, but noted, in the conference report to accompany H.R. 5895 ( H.Rept. 115-929 ), that NNSA must "comply with the direction in the House report regarding the W76-2." The House report ( H.Rept. 115-697 ) mandated that NNSA provide Congress with "a report detailing the plan, rationale, costs, and implications of producing a low-yield variant of the W76 warhead." The report is to include not only cost and schedule estimates, but also a "detailed discussion of the military requirements associated with the W76-2." NNSA requested $794 million for the B61-12 LEP in FY2019; Congress enacted this amount. This modification would combine four existing types of B61 warheads, and would eventually allow a reduction in the number of gravity bombs in the U.S. nuclear arsenal. The LEP would refurbish both nuclear and non‐nuclear components on the weapon to address aging, to extend the bomb's service life, and to improve the safety, effectiveness, and security of the bomb. The FPU is scheduled for FY2020. NNSA requested $304.3 million for the W88 Alteration in FY2019, to provide an arming-fuzing-firing system and to refresh the warhead's conventional high explosives. Congress enacted this amount. NNSA expects to provide the First Production Unit of this warhead in 2020. NNSA requested $664.8 million for the W80-4 in FY2019. This is the warhead for the new long-range cruise missile. The LEP would seek to use common components from other LEPs and to improve warhead safety and security. NNSA has begun to "the ramp up engineering activities for development and design on the W80-4," leading to the significant increase over the FY2018 budget request of $399 million. Congress enacted the requested amount of $664.8 million for FY2019. The FPU is scheduled for FY2025. NNSA has requested $53 million for an IW1 in FY2019; this is an interoperable warhead (W78/88-1) that could be used on land-based intercontinental ballistic missiles (ICBMs) and SLBMs. The FY2016 budget request had suspending work on this warhead, and the FY2017 and FY2018 budgets did not request any funding. The funding for FY2019 would, according to NNSA, resume research and development activities on the IW1. Congress enacted this amount. The House report ( H.Rept. 115-697 ) noted that the committee was concerned that NNSA was making a premature decision about proceeding with the IWI, and, instead of approving the funding, requested a study on alternatives for the future of the W78 warhead. The conference report ( H.Rept. 115-929 ) replaced the House language, but also requested a study on the rationale for and alternatives to the plan to use an interoperable warhead as a part of the W78 life extension program. Stockpile Systems According to NNSA, Stockpile Systems programs provide for routine maintenance, replacement of limited-life components, surveillance, and assessment of fielded systems for all weapons types in the active stockpile. NNSA requested $619.5 million for Stockpile Systems in FY2019. According to the budget documents, the increase of $175.8 million over the amount appropriated in FY2018 includes funding needed to support the entry of the B61-12 into the stockpile and sustainment costs associated with the full integration of the W76 into the stockpile as the LEP completes its production run. It also supports ongoing surveillance and assessment programs that "ensure adequate understanding of the health of the stockpile." the Senate approved the requested amount, but the House reduced it; Congress enacted $599.5 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Weapons Dismantlement and Disposition (WDD) The number of warheads in the U.S. stockpile has fallen sharply since the end of the Cold War, and continues to decline. According to a fact sheet released by the State Department, the stockpile peaked at 31,255 warheads in 1967, stood at 19,008 warheads in 1991, and declined to 4,571 warheads by 2015. It had declined further, to 4,014 warheads by 2016 and 3,822 by 2017. Warheads removed from the stockpile are awaiting dismantlement. The WDD program includes the interim storage of warheads to be dismantled; actual dismantlement; and disposition (i.e., storing or eliminating warhead components and materials). NNSA requested $68.9 million for WDD for FY2017, an increase over the appropriated level of $52 million in FY2016. According to NNSA, this increase was designed to support President Obama's commitment, pledged at the 2015 Nuclear Nonproliferation Treaty Review Conference, to accelerate dismantlement of retired U.S. nuclear warheads by 20%. The Senate Energy and Water Development Appropriations Subcommittee approved this request and noted in its report ( S.Rept. 114-236 ) that it supported the accelerated dismantlement plan "as a way of preparing its workforce for necessary stockpile production work beginning later this decade." The House subcommittee, however, objected to the accelerated dismantlement plan and reduced total funding for directed stockpile work. The final version of the Consolidated Appropriations Act for FY2017 ( P.L. 115-31 ) allocated only $56 million to weapons dismantlement and disposition. NNSA requested $56 million for warhead dismantlement in FY2018; Congress approved this amount. NNSA requested, and Congress again approved, this amount in FY2019. The budget documents note that funding for this program is capped at $56 million at the direction of the FY2017 and FY2018 National Defense Authorization Acts. NNSA also notes that dismantlement activities serve as "a significant supplier of material for future nuclear weapons production and Naval Reactors." Unlike in previous years, however, the FY2019 budget documents do not reiterate the goal, supported by previous budgets, of dismantling weapons retired prior to FY2009 by FY2022. Stockpile Services According to NNSA's budget documents, programs under Stockpile Services "provide the logistical, mechanical and support foundation for all DSW operations that are applicable to multiple weapon system in the enduring stockpile." These activities include Production Support; Research and Development (R&D) Support; R&D Certification and Safety; Management, Technology, and Production; and Plutonium Infrastructure Sustainment. According to NNSA, "all enduring systems, LEPs, and dismantlements rely on Stockpile Services to provide the base development, production and logistics capability needed to meet program requirements." Stockpile Services also funds research, development, and production activities that support two or more weapons types, and work that is not identified or allocated to a specific weapon type. NNSA requested $1,068.4 million for Stockpile Services in FY2019. The budget documents note that the increase of $178.2 million over the FY2018 request is "mainly due" to the increased level of activity needed to support the "increased LEP workload." Congress approved $1,048,7 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Strategic Materials According to NNSA's budget request, this program, which was new in FY2016, "consolidates management of nuclear material processing capabilities within the nuclear security enterprise." The program includes Uranium, Plutonium and Tritium Sustainment, Domestic Uranium Enrichment, and Strategic Materials Sustainment. NNSA requested $695.3 million for Strategic Materials in FY2018. Congress approved $708.7 million for FY2018 and noted that the increase in funding was to "support material de-inventory at the Chemistry and Metallurgy Research facility and to optimize material staging at the Nevada National Security Site." NNSA requested 1,002.4 million in FY2019. According to NNSA's budget documents, the substantial increase over FY2018 is needed "to meet future pit production and tritium requirements." Specifically, the budget request indicates that increases in the account for plutonium sustainment "support fabrication of four to five development" pits for the W87 warhead, investments to replace aging pit production equipment, and the installation of equipment that will increase pit production capacity. Moreover, as the 2018 Nuclear Posture Review emphasized the need to move forward on the design of a new pit production facility, the increased funding for plutonium sustainment also supports costs associated with design efforts that will support the "selection of a single preferred alternative for plutonium pit production beyond 30 war reserve pits per year." In addition, according to the budget documents, the increase in funding for domestic uranium enrichment "supports the start of an effort to down blend available stocks of highly enriched uranium for use in tritium production, which delays the need date for a domestic uranium enrichment capability." Congress approved $1,034.1 million for Strategic Materials in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Within this total, Congress added $75 million to begin a Plutonium Pit production project. It noted in the conference report ( H.Rept. 115-929 ) that some of this funding was to support ongoing programs at Los Alamos and it directed NNSA "to budget for capital improvements and equipment installations to meet plutonium pit production targets." It also mandated that NNSA provide Congress with a report "on the current scope, costs, and schedule required to meet its plutonium mission targets." Research, Development, Test and Evaluation (RDT&E) Programs According to NNSA's budget request, RDT&E includes five programs that focus on efforts "to develop and maintain critical capabilities, tools, and processes needed to support science based stockpile stewardship, refurbishment, and continued certification of the stockpile over the long-term in the absence of underground nuclear testing." It funds not only the science and engineering programs, but also large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory. NNSA requested $1,995.4 million for RDT&E programs in FY2019, Congress appropriated $2,014.2 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Specific programs under RDT&E include the following. Science Program According to NNSA's budget documents, the Science Program provides "the knowledge and expertise, and the confidence needed to maintain the nuclear stockpile without nuclear testing." It performs experiments that allow NNSA to understand the physics of nuclear explosions and to validate nuclear weapons performance simulations. Its goals include improving the ability to assess warhead performance without nuclear testing, improving readiness to conduct nuclear tests should the need arise, and maintaining the scientific infrastructure of the nuclear weapons laboratories. According to NNSA, this program provides the basis for annual assessments of weapon performance, the understanding of the impacts of surveillance findings to ensure that the nuclear stockpile continues to meet military requirements, and the core technical expertise required to be responsive to global nuclear security policy questions. NNSA requested $564.9 million for the Science Program in FY2019, an increase of 19% over the enacted amount of $474.5 million in FY2018. The budget request included a significant increase in funding for the Dynamic Materials Properties program (from $120 million to $131 million) and for Enhanced capabilities for subcritical experiments (from $40.1 million to $117,6 million). This increase "supports an acceleration of the pace of subcritical experiment execution at the Nevada National Security Site underground laboratory complex.... This will facilitate the increased pace, as well as greater flexibility and relevance of subcritical experiments using plutonium." Congress approved $480.5 million for this program area in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). It did not approve the increase for the DMP program, holding its FY2019 funding to the $120 million approved for FY2018. It also reduced the request for Enhanced capabilities for subcritical experiments to $50 million. Engineering Program The Engineering Program is responsible for "creating and maturing advanced toolsets and capabilities necessary to maintain a safe, secure, and effective nuclear weapons stockpile and enhance nuclear weapon safety, security, and use-control." According to NNSA, this program "matur[es] advanced technologies to improve weapon surety; provid[es] the tools for qualifying weapon components and certifying weapons without underground testing; and support[s] annual stockpile assessments." NNSA requested $211.4 million for the Engineering Program in FY2019. According to the budget documents, this request includes funding to conduct "a robust Stockpile Responsiveness Program in coordination with DOD." NNSA had added this program to its budget request in FY2018, in response to congressional direction, to establish a joint working group with the DOD that will pursue "efforts that sustain, enhance, and exercise capabilities required to conceptualize, study, design, develop, engineer, certify, produce, and deploy nuclear weapons to ensure the U.S. nuclear deterrent remains safe, secure, reliable, credible, and responsive." Congress approved $190.1 million for the Engineering Program in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Inertial Confinement Fusion Ignition and High Yield Program This program is developing tools to create extremely high temperatures and pressures in the laboratory—approaching those of a nuclear explosion—to support weapons-related research and to attract scientific talent to the Stockpile Stewardship Program. The centerpiece of this campaign is the National Ignition Facility (NIF), the world's largest laser, located at Lawrence Livermore National Laboratory. NIF is intended to produce "ignition," the point at which a nuclear fusion reaction generates more energy than is used by the lasers to create the reaction. While achieving ignition has been delayed, NIF has nonetheless proven to be of value to stockpile stewardship at energy levels that do not reach ignition. NIF was controversial in Congress for many years, but controversy waned as the program progressed. NIF was dedicated in May 2009. The program also supports the Z Facility at the Sandia National Laboratories (SNL), and the Omega Laser Facility (Omega) at the University of Rochester's Laboratory for Laser Energetics (LLE). NNSA requested $419 million for this program area in FY2019, a steep reduction from the $544.9 million appropriated in FY2018. Within this total, NNSA requested $258.8 million for NIF, $63.1 million for the Z facility (with an additional $55 million for the Z facility coming from the Science program) and $40.4 million for the Omega Laser Facility. Congress rejected the Administration's request to "to discontinue major experimental activities" in this program area and appropriated $544.9 million for this program area in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Within this total, Congress allocated $344 million for NIF, $63.1 million for the Z Facility, $80 million for Omega, and 7 million for the Naval Research Laboratory. Advanced Simulation and Computing (ASC) Program The ASC program develops computation-based models of nuclear weapons that integrate data from other campaigns, past test data, and laboratory experiments, to create what NNSA calls "the computational surrogate for nuclear testing to determine weapon behavior." NNSA notes that "modeling the extraordinary complexity of nuclear weapons systems is essential to maintaining confidence in the performance of our aging stockpile without underground testing." This program also supports nonproliferation, emergency response, and nuclear forensics. NNSA requested $656.4 million for FY2019, a reduction from the $721 million appropriated in FY2018. According to the budget documents, this funding will continue "NNSA's Exascale activities to include infrastructure upgrade projects to prepare for siting of future Exascale computing platforms." Congress approved $670.1 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). It also specified that $163 million should shall be for the exascale initiative, that $20 million should be used for "advanced memory technology research," and that $13 million should be used for "work on integrating artificial intelligence approaches into mechanistic modeling and prediction." Advanced Manufacturing Development Through FY2015, this program was called the Readiness Campaign. It had several subprograms, but the entire FY2015 request was for the Nonnuclear Readiness subprogram, which "develops capabilities to manufacture components used for Directed Stockpile Work." Congress did not fund this program in FY2015, and, instead, recommended that NNSA establish an Advanced Manufacturing Development program "to develop, demonstrate, and utilize advanced technologies that are needed to enhance the NNSA's secure manufacturing capabilities and ensure timely support for the production of nuclear weapons and other critical national security components." According to NNSA, this program allows it to significantly reduce cost and schedule risk associated with the development and production of stockpile components by exploring the development of an array of advanced technologies and then ensure those technologies can be used to produce components for the stockpile. NNSA requested $80.5 million for this program area in FY2018; Congress approved $85.5 million. NNSA requested $96.8 million for this program area in FY2019. Congress approved $81.6 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Infrastructure and Operations (I&O) Prior to FY2016, the Infrastructure and Operations Program area was known as Readiness in Technical Base and Facilities. According to NNSA's budget documents, funding for this program "maintains, operates, and modernizes the National Nuclear Security Administration (NNSA) infrastructure." It not only provides "a comprehensive approach to arresting the declining state of NNSA infrastructure while maximizing return on investment," but also "constructs state-of-the-art facilities, infrastructure, and scientific tools" needed to maintain a safe, secure, and effective nuclear arsenal. There is widespread agreement that NNSA's infrastructure is in need of significant upgrades, with some facilities dating from early in the nuclear age. NNSA requested a nearly 20% increase in funding for I&O in FY2017, from the level of $2,279.1 million enacted in for FY2016 to $2,722 million requested for FY2017. Congress allocated $2,808.4 million in FY2017, $86.4 million more than the budget request. This level declined slightly in the FY2018 budget, with a request for $2,803.1 million. The House committee added $5.2 million, returning the budget to the FY2017 level of 2,808.4 million. The Senate committee reduced the request, approving 2,722.1 million for FY2018. However, Congress provided $3,117.8 million in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 .) NNSA has requested $3,002.7 million for this program area in FY2019. The budget documents note that the increase in funding over the 2018 request is designed to "continue the long-term effort to reverse the declining state of NNSA infrastructure, improve working conditions of NNSA's aging facilities and equipment, and address safety and programmatic risks." Congress approved $3087.9 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). The House report ( H.Rept. 115-697 ) had specifically raised concerns that NNSA was "undercutting the investments needed to address the entirety of its aging infrastructure problems and to build a nuclear weapons workforce that possesses the skills and knowledge needed to design, develop, test, and manufacture warheads" to "pay for the projected costs of its major nuclear modernization programs." Specific programs under I&O include the following. Operations of Facilities The Operations of Facilities program includes the funding needed to "operate NNSA facilities in a safe and secure manner." It contains, essentially, the operating budgets for each of the eight NNSA sites, funding such areas as "water and electrical utilities; safety systems; lease agreements; and activities associated with Federal, state, and local environmental, and worker safety and health regulations." NNSA requested $868 million for this program area in FY2018. According to NNSA's budget documents, this budget would support necessary work on transuranic waste in preparation for shipment to the Waste Isolation Pilot Plant (WIPP); the transition to operations of new waste facilities at Los Alamos National Lab; and rising reimbursement requirements for Savannah River Nuclear Solutions pension plans at SRS. Congress approved $848.4 million for this program area in FY2018. Congress included funding to prepare and ship transuranic waste, but noted that, prior to the use of these funds "the NNSA's Office of Cost Estimating and Program Evaluation shall conduct a comparative analysis of the costs and benefits of shipping TRU waste from LLNL to Idaho for processing that includes consideration of the benefits of compacting waste for disposal in the Waste Isolation Pilot Plant." NNSA requested $891 million for this program area in FY2019, an increase over the $848.4 million approved in FY2018. According to the budget documents, the funding increase would "provide for transitioning new facilities to operations, lease payments, and programmatic tempo increases." There is no mention, in the budget, of preparing transuranic waste for shipment to WIPP. Congress approved $870 million for this program area in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Safety and Environmental Operations According to NNSA's budget documents, the Safety and Environmental Operations program "support[s] safe, efficient operation of the nuclear security enterprise through the provision of safety data; environmental monitoring; and nuclear material packaging." NNSA requested $115 million for FY2019; Congress approved $110 million. Maintenance and Repair of Facilities The Maintenance and Repair of Facilities funds the "recurring day-to-day work required to sustain and preserve NNSA facilities and equipment in a condition suitable for their designated purpose." This is the program area that addresses the backlog in deferred maintenance at NNSA facilities. NNSA requested $294 million for this program area in FY2017; Congress provided $324 million as a part of the effort to address the backlog. NNSA requested $360 million for this program area in FY2018. In the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), Congress provided $515.1 million. It noted that it had included "funds above the budget request to address the significant backlog of deferred maintenance at the NNSA's sites and to make progress on the direction provided in the Fiscal Year 2012 Energy and Water Appropriations Act to establish standardized policies for the direct funding of facility and infrastructure maintenance costs at each of the NNSA sites." NNSA requested $365 million for this program area in FY2019. The budget documents note that, at the direction of Congress and the 2018 NDAA, NNSA has created an Infrastructure Modernization Initiative (IMI) to reduce deferred maintenance and repair needs across the enterprise "by not less than 30 percent by 2025." Congress approved $515 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ), noting in the conference report ( H.Rept. 115-697 ) that it had added funding to "to address the significant backlog of deferred maintenance at the NNSA's sites." Recapitalization According to NNSA, the Recapitalization program is key to arresting the declining state of NNSA infrastructure. The program, which funds two subprograms—Infrastructure and Safety and Capabilities-Based Investments—is intended to address obsolete support and safety systems, revitalize aging facilities, and improve the reliability, efficiency, and capability of core infrastructure. This is a key area where NNSA sought to increase funding in FY2017. NNSA requested $667.3 million for FY2017, an increase of almost 90% over the appropriated level of $352.5 million in FY2016. In the Consolidated Appropriations Act of 2017, Congress provided $743.1 million, as a part of the effort to address the deteriorating infrastructure and backlog of deferred maintenance at NNSA facilities. NNSA requested $427.3 million in FY2018, showing a reduction from the FY2017 appropriation. Budget documents note that this reduction reflected the completion of the work at the Bannister Federal Complex in Kansas City. Congress, however, provided $612.6 million for this program area, noting it had included "funds above the budget request to address the NNSA's high-risk excess facilities and deferred maintenance." NNSA requested $540.7 million in FY2019; Congress approved $559 million. Construction According to NNSA's budget documents, the Construction program focuses on two primary objectives: identifying construction projects that are needed to support the objectives of the weapons program and developing and executing of these projects within approved cost and schedule baselines. NNSA is currently planning or managing 20 projects through this program area. This includes two controversial and expensive projects—the Uranium Processing Facility (UPF) at the Y-12 National Security Complex (TN) and the Chemistry and Metallurgy Research Replacement (CMRR) Project, which deals with plutonium, at Los Alamos National Laboratory (NM). Both have been significantly revised over the past several years due to cost growth and schedule slippage. NNSA requested $1031.8 million for Construction in FY2018. Within this total, it requested $663 million for UPF and $180.9 million for CMRR. The budget documents note that FY2018 funding would allow it to initiate construction and procurement for UPF's Main Process Building, Mechanical Electrical Building, and Salvage and Accountability Building subprojects. It also noted that the funding would support continued construction in CMRR to sustain plutonium science activities. The Senate committee recommended the requested amount for UPF, but the House committee recommended only $620 million for UPF. It noted, in its report, that this had been the expected FY2018 appropriation in FY2017. The committee deferred the funding that NNSA had requested "to address project cost growth until a full independent cost estimate has been provided to the Committees on Appropriations of both Houses of Congress." In the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), Congress provided $663 million for UPF and $177.2 million for CMRR. NNSA requested $1,091 million for construction in FY2019. Within this total, it requested $703 million for UPF and $235.1 million for CMRR. The budget documents note that NNSA remains "committed to complete UPF by 2025 for no more than $6,500 million," assuming consistent and stable funding for the program. The documents also note that NNSA plans to move forward with three sub-projects under CMRR that have already received funding and to begin design work on two additional sub-projects. Congress approved $1033.8 million for Construction in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ), and included the $703 million for UPF and $219,8 million for CMRR. Other Programs Weapons Activities has several smaller programs, including the following. Secure Transportation Asset This program provides for safe and secure transport of nuclear weapons, components, and materials. It includes special vehicles for this purpose, communications and other supporting infrastructure, and threat response. NNSA requested $282.7 million for this program area in FY2017. NNSA noted that this budget request was 19% greater than the FY2016 enacted level, but stated that this funding was necessary to continue to modernize the program's transportation assets and to improve its workforce capabilities. This included increasing the number of federal agents working on the program, a number that was 20% below full staffing levels; maintaining and replacing critical vehicles; and resuming candidate training classes that had been cancelled for several years due to budget shortfalls. In the Consolidated Appropriations Act for 2017, Congress provided $249 million for this program area. NNSA requested $325 million for FY2018; Congress approved $291.1 million. NNSA noted that the significant increase over FY2017 levels was needed to develop specialized vehicles, maintain a force of well-trained agents, and sustain a robust communication system. Specifically, the funding will support the development and testing of a new vehicle, the Mobile Guardian Transporter (MGT). NNSA requested $278.6 million for this program area in FY2019, a reduction of 14% from the FY2018 request. Nevertheless, in its budget documents, NNSA indicates that this funding level will allow it to continue to support improvements in its specialize vehicles and staffing needs. Congress approved $278.6 million in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ). Defense Nuclear Security According to NNSA's budget documents, this program "provides protection for NNSA personnel, facilities, and nuclear weapons and materials from a full spectrum of threats, ranging from local security incidents to terrorism." It provides operations, maintenance, and construction funds for protective forces, physical security systems, and personnel security. NNSA requested $670.1 million for Defense Nuclear Security in FY2017. The request noted that funding would help fill vacant positions in key security programs at NNSA sites. Congress provided $685.5 million for this program area in the Consolidated Appropriations Act of 2017. NNSA requested $687 million for Defense Nuclear Security in FY2018; Congress approved $770.5 million. As was the case in FY2017, the budget documents indicate that the funding will allow NNSA to fill positions in key security program areas at the sites, and will provide planning and conceptual design funds for projects to sustain and recapitalize the Perimeter Intrusion Detection and Assessment Systems (PIDAS) at the Pantex Plant and Y-12 site. NNSA requested, and Congress approved, $690 million for this program area in FY2019. Information Technology and Cybersecurity According to NNSA's budget documents, this program provides funding "to develop information technology and cybersecurity solutions, including continuous monitoring, and security technologies to help meet increased proliferation-resistance and security." It also funds programs to consolidate NNSA's IT services. NNSA requested and Congress approved $221.2 million for this program area in FY2019. The budget documents indicate that the increases "continue recapitalization of the Enterprise Secure Network, modernize the federal and site Cybersecurity infrastructure, and implement the Identity Control and Access Management project at NNSA Headquarters and site elements." Legacy Contractor Pensions For many decades, the University of California (UC) operated Los Alamos and Lawrence Livermore National Laboratories. Laboratory employees, as UC employees, could participate in the UC pension plan. When the contracts for the labs' operations were taken over by private corporations, the contracts between DOE and the new laboratory operators included provisions that provided pensions to employees who had worked under the UC contract that mirrored the UC pension benefits. These pensions were larger than those provided to employees hired after the contracts were granted to private employers. To make up the difference, NNSA has paid into the pension plan for those current employees who formerly worked under the UC system. NNSA requested, and Congress appropriated, $162.3 million in FY2019.

The annual Energy and Water Development appropriations bill funds civil works projects of the Army Corps of Engineers, the Department of the Interior's Bureau of Reclamation, the Department of Energy (DOE), and several independent agencies. The DOE budget includes funding for the National Nuclear Security Administration (NNSA), a separately organized agency within DOE. NNSA operates three programs: Defense Nuclear Nonproliferation, which secures nuclear materials worldwide, conducts research and development (R&D) into nonproliferation and verification, and operates the Nuclear Counterterrorism and Incident Response Program; Naval Reactors, which "is responsible for all U.S. Navy nuclear propulsion work"; and Weapons Activities. The last is the subject of this report. The Weapons Activities account supports programs that maintain U.S. nuclear missile warheads and gravity bombs and the infrastructure programs that support that mission. Specifically, according to DOE's budget documentation, these programs "support the maintenance and refurbishment of nuclear weapons to continue sustained confidence in their safety, reliability, and performance; continued investment in scientific, engineering, and manufacturing capabilities to enable certification of the enduring nuclear weapons stockpile; and manufacture of nuclear weapons components." Congress approved $11.1 billion for Weapons Activities, within a total budget of $15.29 billion for NNSA, in the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 (P.L. 115-244). NNSA's budget request for FY2019 had sought $11.02 billion for Weapons Activities within a total of budget of $15.09 billion for NNSA. The FY2019 appropriation represents a 4.3% increase over the $10.642 billion for Weapons Activities in the Consolidated Appropriations Act, 2018 (P.L. 115-141) and a 19% increase over the $9.314 billion enacted for Weapons Activities in the Consolidated Appropriations Act, 2017 (P.L. 115-31). Weapons Activities has three main programs, each with a request of over $2 billion for FY2018, as follows: Directed Stockpile Work supports programs that work directly on nuclear weapons. It includes life extension programs, maintenance, and other activities. The FY2017 appropriation was $3,308.3 million, and the FY2018 appropriation was $4,009 million; the FY2019 appropriation is $4,658.3 million, an increase of 16% over the FY2018 appropriation. Research, Development, Test and Evaluation Programs, which advance the science, engineering, computation, and manufacturing, support Directed Stockpile Work. The FY2017 appropriation was $1,842.2 million, and the FY2018 appropriation was $2,034 million; the FY2019 request is $1,995 million. Infrastructure and Operations maintains, operates, and modernizes the National Nuclear Security Administration infrastructure. It supports construction of new facilities and funds deferred maintenance in older facilities. The FY2017 appropriation was $2,808.4 million, and the FY2018 appropriation was $3,118 million; the FY2019 request is $3,002 million. Weapons Activities also includes several smaller programs, all of which are described in this report: Secure Transportation Asset, Defense Nuclear Security, Information Technology and Cybersecurity, and Legacy Contractor Pensions. This report will be updated as necessary.

Overview The 113 th Congress has made fighting trafficking in persons (TIP) within the United States a legislative priority. TIP is believed to be one of the most prolific areas of contemporary criminal activity and is of significant interest to the United States as a serious human rights concern. TIP is both an international and domestic crime that involves violations of labor, public health, and human rights standards, as well as criminal law. The United States is a source, transit, and destination country for men, women, and children subject to trafficking in persons. In the United States, human trafficking occurs in every state, and it victimizes both U.S. citizens and noncitizens. As many as 17,500 people are believed to be trafficked into the United States each year, and some have estimated that 100,000 U.S. citizen (USC) children are victims of trafficking within the United States. The trafficking of individuals within U.S. borders is commonly referred to as domestic or "internal" human trafficking. Domestic human trafficking occurs primarily for labor and most commonly in domestic service, agriculture, manufacturing, janitorial services, hotel services, construction, health and elder care, hair and nail salons, and strip club dancing. However, more investigations and prosecutions have taken place for sex trafficking offenses than for labor trafficking offenses. Noncitizens are more susceptible than U.S. citizens to labor trafficking, and more foreign victims are found in labor trafficking than in sex trafficking. Although labor trafficking can happen to U.S. citizens, significantly more U.S. citizens are found in sex trafficking than in labor trafficking. Research indicates that most of the victims of sex trafficking into and within the United States are women and children. In addition, migrant labor camps tend to be common settings for labor exploitation and domestic trafficking. Domestically, anti-TIP efforts include protection for victims, education of the public, and the investigation and prosecution of trafficking offenses. The Departments of Justice (DOJ), Health and Human Services (HHS), and Labor (DOL) have programs or administer grants to other entities to provide assistance specific to the needs of trafficking victims. This assistance includes temporary housing, independent living skills, cultural orientation, transportation, job training, mental health counseling, and legal assistance. Both HHS and the Department of Homeland Security (DHS) administer public awareness campaigns on recognizing human trafficking victims. In addition, at the federal level, the majority of the cases are investigated by agents in DOJ's Federal Bureau of Investigation (FBI) and DHS's U.S. Immigration and Customs Enforcement (ICE), who coordinate as appropriate; the cases are prosecuted by DOJ. For more than a decade, Congress has been actively engaged in anti-human-trafficking efforts within the United States. Through the Trafficking Victims Protection Act of 2000 (TVPA, Division A of P.L. 106-386 ) and its four reauthorizations (TVPRAs), Congress has aimed to eliminate human trafficking within the United States by creating domestic grant programs for both victims and law enforcement, creating new criminal laws, and conducting oversight on the effectiveness and implications of U.S. anti-TIP policy. Most recently, in March 2013, the TVPA's grant programs were reauthorized through FY2017 in the Violence Against Women Reauthorization Act of 2013 (Title XII, P.L. 113-4 ). This report discusses domestic human-trafficking-related issues that have received legislative action or are of significant congressional interest in the 113 th Congress. The most recent reauthorization of the TVPA is not reviewed in detail in this report. This report accompanies CRS Report RL34317, Trafficking in Persons: U.S. Policy and Issues for Congress , by [author name scrubbed] and Liana Rosen and CRS Report R41878, Sex Trafficking of Children in the United States: Overview and Issues for Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Definition of Human Trafficking Federal statutes do not formally define human trafficking or trafficking in persons. Instead, the TVPA defines "severe forms of trafficking in persons" to mean, sex trafficking in which a commercial sex act is induced by force, fraud, or coercion, or in which the person induced to perform such act has not attained 18 years of age; or the recruitment, harboring, transportation, provision, or obtaining of a person for labor or services, through the use of force, fraud, or coercion for the purpose of subjection to involuntary servitude, peonage, debt bondage, or slavery. There appears to be a consensus that prostitution by minors fits the definition of "severe forms of human trafficking" as defined under the TVPA. Select Anti-Trafficking Legislation in the 113th Congress This report examines the trafficking-related provisions in legislation that has at least been reported out of committee in the 113 th Congress. Where applicable, it discusses companion legislation that may not have been considered in committee or other legislation that has received significant Congressional interest. The legislation includes the following: The Trafficking Victims Protection Reauthorization Act of 2013 (Title XII of P.L. 113-4 ) enacted on March 7, 2013. This act was part of the larger The Violence Against Women Reauthorization Act of 2013. The E. Clay Shaw, Jr. Missing Children's Assistance Reauthorization Act ( P.L. 113-38 ), enacted on September 30, 2013. The Fraudulent Overseas Recruitment and Trafficking Elimination Act ( H.R. 3344 ). The Justice for Victims of Trafficking Act of 2013 ( H.R. 3530 ), passed by the House on May 20, 2014. The companion legislation ( S. 1738 ) has not been taken up in committee. The Stop Exploitation Through Trafficking Act of 2013 ( H.R. 3610 ), as passed by the House on May 20, 2014. The companion legislation ( S. 1733 ) has not been taken up in committee. The Preventing Sex Trafficking and Improving Opportunities for Youth in Foster Care Act ( H.R. 4058 ), as passed by the House on May 20, 2014. The SAVE Act of 2014 ( H.R. 4225 ), as passed by the House on May 20, 2014. International Megan's Law to Prevent Demand for Child Sex Trafficking ( H.R. 4573 ), as passed by the House on May 20, 2014. The Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ), as passed by the Senate on June 27, 2013. The Supporting At-Risk Children Act ( S. 1870 ), as ordered reported by the Senate Finance Committee on December 12, 2013. The following sections lay out issues raised in the bills. The issues are grouped under the following themes: (1) restoring victims through services and benefits, (2) unaccompanied minor trafficking victims, (3) protection of foreign national workers, (4) criminal justice, (5) improving data, (6) domestic sex trafficking of children, and (7) other issues that include inter-agency coordination and sex offender registry and notification. Restoring Victims: Services and Benefits In general, the trafficking business feeds on continuing demand and conditions of vulnerability, such as youth, gender, poverty, and social exclusion. Actors engaged in human trafficking range from amateur family-run organizations to sophisticated transnational organized crime syndicates. Trafficking victims are often subjected to mental and physical abuse in order to control them. Abuses may include debt bondage, social isolation, removal of identification cards and travel documents, violence, and fear of reprisals against them or their families. A major aspect of U.S. anti-trafficking efforts is victim assistance: providing immediate services when victims are identified and helping the victims recover from the victimization and reclaim their lives. Pending legislation ( H.R. 3610 / S. 1733 and H.R. 3530 / S. 1738 ) seeks to improve victim services and provide greater access to resources for victims. Adequacy of Services for Victims One issue surrounding U.S. policy to combat human trafficking involves whether the United States provides equal treatment of all victims—foreign nationals and U.S. citizens, as well as victims of labor trafficking and sex trafficking. Related to this is whether current services are adequate to combat sex trafficking of minors in the United States (i.e., the prostitution of children). There is confusion over whether U.S. citizens, as well as noncitizens, are eligible for services under all the anti-trafficking grant programs authorized by the TVPA and whether Congress has provided funding for programs that target U.S. citizen and lawful permanent resident (LPR) victims. Under the TVPA, the Departments of Justice (DOJ), Health and Human Services (HHS), and Labor (DOL) have programs or administer grants to other entities to provide services to trafficking victims. Only the DOJ and HHS programs receive specified funding for trafficking victims services. A related issue is the overall amount of funding for victims services; especially as the focus on sex trafficking is broadening to include minor sex trafficking victims in the United States who are U.S. citizens. Between FY2002 and FY2013, Congress appropriated approximately $20 million each year for victim services, and the amount was increased to approximately $28 million in FY2014. Between FY2009 and FY2013, HHS used all of its appropriated money on services for trafficking victims before the end of the fiscal year—and all of the services were provided to noncitizen victims. Notably, the most recent Department of State's Trafficking in Persons Report (FY2012) recommends increasing funding for relevant agencies to provide victims services. In addition, there is no targeted federal funding to support state child welfare agencies' anti-trafficking efforts. Non-governmental organizations (NGOs) report a critical need for an increase in the overall funding for comprehensive services. Recently, Congress has amended certain grant programs so that sex trafficking victims would be eligible for those programs. For example, the 2013 reauthorization of the Violence Against Women Act ( P.L. 113-4 ) clarifies that victims' services and legal assistance under VAWA include services and assistance to victims of domestic violence, dating violence, sexual assault, or stalking who are also victims of severe forms of trafficking in persons . In addition, P.L. 113-4 amended the purpose for grants to tribal governments to combat violence against women to include sex trafficking and creates a new purpose to provide services to address the needs of youth who are victims of several crimes including sex trafficking. The act also created a new tribal coalition grant program, administered by DOJ, which, among other purposes, seeks to enhance access to essential services for Indian women victimized by domestic and sexual violence, including sex trafficking; and to assist Indian tribes in developing and promoting state, local, and tribal law and policies that enhance best practices for responding to violent crimes against Indian women, including sex trafficking. P.L. 113-4 also amended the grant program for state and local law enforcement's anti-trafficking programs focusing on U.S. citizen victims, so these grants can be used for anti-trafficking programs for noncitizen victims as well. In the same vein, pending legislation in the 113 th Congress would create new programs to enhance services to trafficking victims. The Stop Exploitation Through Trafficking Act of 2013 ( H.R. 3610 and S. 1733 ) would require, beginning in FY2017, that the Secretary of HHS make grants for a national communication system to help victims of severe forms of trafficking communicate with service providers. The Justice for Victims of Trafficking Act of 2013 ( H.R. 3530 / S. 1738 ) would authorize the Attorney General to make grants to an eligible entity to develop, improve, or expand domestic child human trafficking deterrence programs designed to aid victims while investigating and prosecuting the trafficking offenses. An eligible entity is a state or unit of local government that meets specified criteria. The grants could be used to establish or enhance specialized training programs on the prevention of child trafficking for law enforcement, first responders, health care officials, child welfare officials, juvenile justice personnel, prosecutors, and judicial personnel; establish law enforcement and prosecution units dedicated to fighting trafficking of children; and establish or enhance court programs to assist child trafficking victims. Funding for Victims Services As discussed, the Department of State's TIP report recommends increasing funding for relevant agencies to provide victims services. S. 1738 would require courts to impose a $5,000 assessment on any person or entity convicted of certain criminal offenses, including trafficking, sexual abuse and exploitation of children, transportation of children for illegal sexual activity, and alien smuggling. The assessment would be paid after the person paid all court-ordered fines and orders of restitution arising from the criminal conviction on which the assessment was based. S. 1738 would put these assessments into a new "Domestic Trafficking Fund" at the federal treasury. The Attorney General and Secretary of HHS would be directed to use the new fund to award grants or enhance victims programs under the TVPA and its reauthorizations. Alternatively, H.R. 3530 would steadily increase the cap on the existing Crime Victims Fund (CVF) over several years. The CVF, which collects a wide range of fees and assessments tied to federal crimes, was established in the mid-1980s to provide funding for state victim compensation and assistance programs. The CVF is administered by DOJ, and Congress establishes an annual obligation cap as part of the appropriations process. Certification Under the TVPA, noncitizen victims of trafficking are certified as victims by HHS and this makes them eligible for services. U.S. citizen and LPR trafficking victims are not required to be certified by HHS, and indeed would not meet the criteria to be certified because certification applies only to foreign nationals who need an immigration status (e.g., T status or continued presence) to remain in the United States. Thus, an issue that has arisen is whether U.S. citizen and LPR victims are eligible for certain victims services (e.g., those funded by HHS and DOL) since they do not need to undergo certification. S. 1738 would amend the TVPA to create a process by which the Secretary of HHS would determine that a U.S. citizen or LPR is a victim of severe forms of trafficking. This amendment would be made to the current TVPA section requiring that the Secretary of HHS and the Attorney General establish a program to assist U.S. citizen and LPR victims of severe forms of trafficking. Job Corps Program Job Corps is an employment and job training program for 16-to-24 year olds that is administered by the Department of Labor. H.R. 3610 / S. 1733 would amend the Workforce Investment Act of 1998 to specify that victims of a severe form of trafficking (as defined in the TVPA) do not need to meet the income requirement to be eligible for the Job Corps program. Restitution & Damages Victims of human trafficking often suffer injuries that can affect them for the rest of their lives. Medical care, psychological treatment, job training, and more may be necessary to assist victims in recovering. Current law allows a victim of peonage, slavery, or trafficking in persons to bring a civil action against his/her perpetrator and obtain civil remedies. S. 1733 would, among other things, triple the amount that such a victim would be eligible to recover. H.R. 3610 and S. 1733 would also require the Attorney General to collect and tabulate data on mandatory restitution orders (the TVPA requires the court to order restitution—paid by the defendant to the victim—for any crime of peonage, slavery, or trafficking in persons). Also with respect to restitution for trafficking victims, S. 1738 would, among other things, increase restitution for human trafficking victims. Unaccompanied Minor Trafficking Victims42 Congress has expressed concern that unaccompanied minors attempting to enter into the United States may be victims of trafficking or may be at heightened risk of becoming trafficking victims. Unaccompanied minors are aliens who are in the United States without a parent or guardian. The 2013 TVPA reauthorization ( P.L. 113-4 ) contains provisions related to the custody and care of unaccompanied minor trafficking victims. P.L. 113-4 requires that the DHS Secretary create a pilot program to provide independent child advocates at immigration detention sites for child trafficking victims and other vulnerable unaccompanied alien children. In addition, P.L. 113-4 specifies that children in the custody of HHS who receive U status (for crime victims) are eligible for programs and services to the same extent as refugees, and the federal government will reimburse states for foster care provided to these children. Beyond these newly enacted protections, S. 744 contains additional provisions that seek to protect unaccompanied alien children from becoming victims of human trafficking. The bill would transfer, from HHS to DOJ, the responsibility for ensuring, to the greatest extent possible, that unaccompanied alien children in DHS custody have counsel to represent them and access to child advocates. It would require that the Secretary of DHS, in consultation with child welfare experts, create mandatory training for DHS Customs and Border Protection (CBP) personnel and other personnel who come in contact with unaccompanied alien children. In addition, the bill would direct HHS to hire child welfare professionals to provide assistance in no fewer than seven of the CBP offices or stations with the largest number of unaccompanied minors. Such professionals would be required to have trauma-centered and developmentally appropriate interviewing expertise and, among other duties, would be responsible for screening unaccompanied alien children to ensure that they are not trafficking victims, among other items. Protecting Foreign National Workers45 Some Members of Congress have argued that migrant workers and other foreign workers are especially vulnerable to exploitation at the hands of foreign labor contractors, smugglers, and human traffickers. Contractors often play a critical role in the labor migration process by matching willing workers with willing employers. Yet because many prospective migrants depend on such "middle men" to help them enter the United States (legally or otherwise) and to connect them with employers, contractors may take advantage of migrant workers to extract unfair payments or other such concessions. Current law has outlined some protections for foreign workers. The 2013 TVPA reauthorization ( P.L. 113-4 ), requires that a video be shown in consular waiting rooms to provide information on the rights and responsibilities of employees under U.S. immigration, labor, and employment law. Further, P.L. 113-4 made it a criminal offense to knowingly destroy, or for a period of more than 48 hours, conceal, remove, confiscate, or possess another person's passport, or immigration or personal identification documents in the course of committing or attempting to commit the offense of fraud in foreign labor contracting, alien smuggling, or in order to unlawfully maintain, prevent, or restrict the labor or services of the individual. S. 744 , as passed by the Senate, and H.R. 3344 would establish new requirements to regulate foreign labor contractors and to combat human trafficking. The bill would require foreign labor contractors to provide workers with written information (in English and the worker's native language) about the terms and conditions of employment, including information about the worker's visa, among other items. Employers and contractors would be prohibited from discriminating against workers on the basis of race, sex, national origin, religion, age, disability, or other similar factors; and could not charge workers a fee for contracting activity. To facilitate enforcement of these provisions, contractors would be required to register with the Department of Labor (DOL) every two years, to provide annual reports on their activities, and to post a bond ensuring their ability to fulfill their responsibilities. The Secretary of Labor would maintain a list of registered contractors, and the Secretary of State would provide relevant information to certain nonimmigrant visa applicants. DOL would establish procedures to investigate complaints and impose civil fines against noncompliant contractors or employers; and individuals also could sue contractors for civil damages. Employers would be required to use registered contractors. Criminal Justice While the United States has a number of statutes that can and have been used to combat human trafficking, law enforcement and policy makers have been interested in ways to enhance investigations and prosecutions of individuals who commit trafficking offenses. In general, federal law enforcement has targeted criminal networks that may involve individuals operating in a number of capacities. In an effort to help law enforcement combat the advertising side of commercial sexual exploitation, H.R. 4225 aims to permit the prosecution of entities (including websites) that "knowingly" advertise a person, knowing, or in reckless disregard of the fact, that force or fraud has been used to cause the person to engage in a commercial sex act or that the victim is a minor. For entities that have not advertised, but "benefit" from participating in a venture which has engaged in such advertising, reckless disregard of the fact that force or fraud has been used or that a minor was involved would not be enough; they would have to know either fact exists. In addition, in order to enhance law enforcement targeting of criminal enterprises engaged in human trafficking, S. 1738 would, among other things, set forth provisions prohibiting "aggravated human trafficking racketeering." S. 1738 would also expand state and local prosecutors' ability to obtain wiretap orders from state courts for certain investigations by including human trafficking, child sexual exploitation, and child pornography production as allowable investigations. In addition to expanding law enforcement's "toolbox" for investigating sex trafficking, S. 1738 would enhance penalties for certain crimes involving human trafficking, child exploitation, and repeat sex offenders. The bills would also revise the statutes related to travel for purposes of engaging in illicit sexual conduct. Such provisions are intended to help law enforcement combat sex tourism. Reducing Demand Experts widely agree that any efforts to reduce the prevalence of trafficking should address not only the supply, but also the demand . While statutes exist to allow federal law enforcement to prosecute the buyers of commercial sex, federal legislation has focused more extensively on penalizing the traffickers and has placed less emphasis on the buyers. To increase focus on combating the demand for sex trafficking, H.R. 3530 and S. 1738 would, among other things, prohibit the patronizing or soliciting of commercial sex (or benefiting from these activities). These bills would also require the Attorney General to ensure that working groups and task forces within the Innocence Lost National Initiative work to enhance state and local law enforcement investigative capabilities to detect, investigate, and prosecute individuals who patronize or solicit children for sex. The Innocence Lost National Initiative is a partnership between the FBI, DOJ's Child Exploitation and Obscenity Section and the National Center for Missing and Exploited Children (NCMEC), that develops task forces and working groups to recover children who are prostituted and prosecutes perpetrators of child sex trafficking. Improving Data Due to the nature of human trafficking, it is difficult to estimate the number of trafficking victims in the United States. Despite mandates in the TVPA, data on trafficking crimes or number of victims is not uniformly collected by federal, state, and local law enforcement agencies. In 2012, the FBI began developing software to capture all human trafficking cases and to ensure uniform reporting at the federal and state levels. S. 744 , as passed by the Senate, would create new reporting requirements for human trafficking offenses in the FBI's Uniform Crime Reports, and would make human trafficking a Part I crime for purposes of calculating funding under the Edward Byrne Memorial Justice Assistance Grant Program. Domestic Sex Trafficking of Children Domestic sex trafficking of children is trafficking within the United States involving a commercial sex act in which the person induced to perform such act has not attained 18 years of age. Regardless of whether a child is believed to have consented to sex or whether the child represents himself/herself as an adult, the child is considered a trafficking victim under federal law. The exact number of child victims of sex trafficking in the United States is unknown because of challenges in defining the population and varying methodologies used to arrive at estimates. Most of the victims are U.S. citizens and LPRs. Commercial sexual exploitation of children appears to be fueled by a variety of individual (e.g., homelessness or history of child abuse), relationship (e.g., family conflict or dysfunction), community (e.g., peer pressure or gang involvement), and societal (e.g., sexualization of children) variables. These factors may interact in ways that can increase the risk of exploitation. As part of its 2013 report on child sex trafficking, the National Academy of Sciences recommended that multiple stakeholders—such as the federal government, state and local governments, academic and research institutions, foundations and nongovernmental organizations, and the commercial sector—collaborate to address this issue. The 113 th Congress has taken up legislation to address sex trafficking of children. The legislation touches on a variety of policy areas (e.g., the child welfare system, juvenile justice, runaway and homeless youth). Congress passed H.R. 3092 (enacted as P.L. 113-38 ), which requires the federal Missing and Exploited Children's program to provide assistance to law enforcement on child sex trafficking. Other legislation ( H.R. 3530 and S. 1738 ) would direct funds to provide support to child victims of pornography and human trafficking, and require reporting of children missing from foster care. In addition, two bills under consideration ( S. 1870 and H.R. 4058 ) would require state child welfare agencies and HHS to respond to sex trafficking of children, including those who may or may not be in foster care. Further, another bill ( S. 1733 and its companion, H.R. 3610 ) would, in different ways, incentivize states to enact "safe harbor laws" that would discourage charging minors for prostitution or sex trafficking offenses, and encourage the diversion of these minors to child protective services. Missing and Exploited Children The Missing and Exploited Children's (MEC) program is administered by the Department of Justice, and authorizes supports for children who are missing and/or sexually exploited. This assistance is provided primarily to the National Center for Missing and Exploited Children (NCMEC), a non-profit organization that operates the national clearinghouse on missing and sexually exploited children. The E. Clay Shaw, Jr. Missing Children's Assistance Reauthorization Act ( P.L. 113-38 ) reauthorized the MEC program. The law adds a new requirement for NCMEC that pertains to child sex trafficking. Specifically, the law directs NCMEC to provide technical assistance to law enforcement agencies and first responders in identifying, locating, and recovering victims of, and children at risk for, child sex trafficking. Although this responsibility was not specified in the law as it existed before P.L. 113-38 was enacted, generally such activities have been carried out by NCMEC in recent years. Children's Advocacy Centers Subtitle A of the Victims of Child Abuse Act supports the expansion and improvement of Children's Advocacy Centers (CACs). CACs are intended to coordinate a multi-disciplinary response to child abuse (e.g., law enforcement, child protection/social service, medical, mental health) in a manner that ensures child abuse victims (and any non-offending family members) receive the support services they need and do not experience the investigation of child abuse as an added trauma. CACs are located in all 50 states and the District of Columbia. The law also requires the establishment and support of four regional children's advocacy centers to increase the number of communities with CACs, help improve their practice, and support development of state chapter organizations for CACs. The law funds training and technical assistance to attorneys and others involved in criminal prosecution of child abuse. H.R. 3530 and S. 1738 would amend Subtitle A of the Victims of Child Abuse Act by expanding the definition of "child abuse" used by CACs—meaning physical or sexual abuse or neglect of a child—to include the production of child pornography and human trafficking. The bills would enable DOJ to make grants for the development and implementation of specialized programs to identify and provide direct services to victims of child pornography. In addition, H.R. 3530 would direct grantees receiving funding for CACs or training and technical assistance to meet certain oversight and accountability requirements, and to disclose other sources of federal funding. H.R. 3530 would also reauthorize funding for CACs, the regional children's advocacy centers, and training and technical assistance through FY2019. Response by the Child Welfare System State and local child welfare agencies are responsible for carrying out child welfare policies that are intended to promote the safety, well-being, and permanency of all children. Child victims of sex trafficking may come to the attention of the child welfare agency if they are reported to the agency's child protective services (CPS) hotline. In addition, children in foster care—who are placed out of their homes typically due to abuse or neglect by their parents or caregivers—may be vulnerable to trafficking. Youth who run away from foster care are perceived to be especially susceptible to this type of victimization. The capacity for state and local child welfare agencies to respond to the needs of sex trafficking victims is believed to be limited. This may be due, in part, to inadequate training, insufficient resources, high caseloads, and the perception that victims should be handled in the juvenile justice system. In addition, states may not have mechanisms in place to "screen in" cases involving children who are sex trafficked because the perpetrator involved is not the child's parent or caregiver as these terms are defined under state law. Both S. 1870 and H.R. 4058 , would specify a role for state child welfare agencies to respond to child sex trafficking. The bills refer to the definition of "sex trafficking" under Section 103(10) of the TVPA, and the definition of "severe forms of trafficking in persons" as it relates to victims of sex trafficking under Section 103(9)(A). The bills also include other amendments to child welfare provisions that do not touch on sex trafficking. Identifying and Serving Victims S. 1870 and H.R. 4058 would amend Title IV-E of the Social Security Act, which authorizes partial federal reimbursement to states for the cost of providing foster care maintenance payments to eligible children in foster care. To be eligible for Title IV-E support, a state, territory, or tribe must have a Title IV-E plan that is approved by HHS. The plan must provide that the state, tribal, or territorial child welfare agency that operates the Title IV-E program adhere to all federal requirements related to providing direct financial assistance to all eligible children, including those related to ensuring the safety, permanence, and well-being of children receiving Title IV-E assistance. The bills would require state child welfare agencies to develop and implement policies and procedures to identify, screen, and determine appropriate state actions and services for any child believed to be a victim of sex trafficking or at risk of being a sex trafficking victim. Under S. 1870 , policies and procedures must apply to any child (individuals up to age 18) regardless of their current or past foster care status and any youth in foster care up to age 19, 20, or 21 (if the state elects to provide Title IV-E foster care up to that age). Under H.R. 4058 , the policies would need to apply to any child under the supervision of the state child welfare agency (including a child in foster care, a child who has an open case file but has not been removed from the home, and a youth who is receiving services under the Title IV-E Chafee Foster Care Independence Program for youth who have aged out of foster care or are likely to do so). In either bill, a state could choose to apply these policies to any youth up to age 26, regardless of whether they are or were in foster care. S. 1870 and H.R. 4058 would separately add new Title IV-E requirements pertaining to child victims of sex trafficking. First, the bills would direct state child welfare agencies to identify and document in agency records each child identified as a victim of sex trafficking who is in foster care or otherwise under the supervision of the state. Second, S. 1870 and H.R. 4058 would direct each state child welfare agency to report and regularly update description of the specific measures it takes to protect and provide services to children who are victims of sex trafficking, including efforts to coordinate with law enforcement, juvenile justice agencies, and social service agencies, such as runaway and homeless youth shelters. Third, H.R. 4058 would require state welfare agencies to "immediately" report to law enforcement information on children identified as being victims of sex trafficking after having received such information. Data Collection and Reporting Under the Social Security Act, HHS was required to establish a data collection system that provides for comprehensive national information with respect to children in foster care and those who are adopted. In response, HHS developed the Adoption and Foster Care Analysis and Reporting System (AFCARS). HHS must annually submit to Congress a report on the performance of each state with regard to achieving specific child welfare outcomes (e.g. ensuring placement stability for children in foster care, finding children adoptive homes as appropriate) and other information. This outcome data must be developed, to the maximum extent practicable, from AFCARS. The annual report is known as Child Welfare Outcomes . Both S. 1870 and H.R. 4058 would seek to revise the AFCARS data collection and reporting requirements to incorporate information on sex trafficking, either within the Child Welfare Outcomes report ( S. 1870 ) or in a separate report to Congress ( H.R. 4058 ). Recommendations to Congress for Expanding Housing for Youth Victims of Trafficking Shelters specifically for child sex trafficking victims/survivors are available on a very limited basis. Other facilities, such as runaway and homeless youth shelters as well as foster care homes, do not appear to be adequate for meeting the needs of sex trafficking victims or keeping them secure from pimps/traffickers and other abusers. S. 1870 would require that within one year of enactment, five agencies—the Departments of Defense, HHS, Housing and Urban Development, Homeland Security, and Justice—submit a report to Congress that contains recommendations for administrative or legislative changes necessary to use programs, properties, or other resources owned, operated, or funded by the federal government to provide safe housing for youth who are victims of trafficking and to provide support to entities that provide housing or other assistance to such victims. Children Missing From Foster Care Runaways are particularly vulnerable to becoming victims of sex trafficking, because they may be perceived as easy targets for pimps/traffickers since they often cannot go home and have few resources. For example, the Dallas Police Department found a strong correlation between sex trafficking and runaway status: the more times a child runs away, the greater the likelihood that he or she will be victimized. S. 1870 and H.R. 4058 would amend Title IV-E to require that state child welfare agencies "immediately" report information on missing or abducted children to law enforcement authorities for entry into the National Crime Information Center (NCIC) and to the National Center for Missing and Exploited Children (NCMEC). H.R. 3530 and S. 1738 would require that law enforcement agencies notify NCMEC of each report involving a child missing from foster care. H.R. 4058 would further amend Title IV-E to require state child welfare agencies to develop and implement protocols related to children who run away from foster care. The bill specifies certain conditions that must be addressed including determining what happened to the child while absent from care, including screening the child to determine whether he or she may be a victim of sex trafficking. The protocols would need to be implemented within one year of the bill's enactment. Within two years of the bill's enactment, HHS would be required to submit a report to Congress that summarizes information on children who run from care and their risk of becoming victims of sex trafficking. National Advisory Committee on the Nation's Response to Domestic Sex Trafficking of Minors Although there are several established entities responsible for coordinating and overseeing the country's response to human trafficking generally, there is not a specific entity statutorily responsible for coordinating efforts on sex trafficking of minors. S. 1870 would require HHS to establish the National Advisory Committee on Domestic Sex Trafficking and to appoint all members of the committee (in consultation with the Attorney General) within 180 days after the bill's enactment. The legislation would require the committee to be composed of up to 21 members "whose diverse experience and background enable them to provide balanced points of view with regard to carrying out the duties of the committee." The committee would be charged with advising the HHS Secretary and the Attorney General on policies concerning improvements to the nation's response to domestic sex trafficking of minors from the child welfare system; advising the HHS Secretary and the Attorney General on policies concerning the cooperation of several entities—various levels of government, child welfare agencies, social service providers, state or local courts with oversight of children and family matters, law enforcement juvenile detention centers, and others—on responding to domestic sex trafficking of minors; and developing recommended best practices for states to follow in combating the domestic sex trafficking of minors. Grant Programs for Domestic Minor Victims of Sex Trafficking One overriding issue concerning minor victims of sex trafficking is the extent to which federal agencies can and do provide services to U.S. citizen and lawful permanent resident (LPR) minor sex trafficking victims. P.L. 113-4 created a discretionary new grant program for child sex trafficking victims. The new grant program authorizes DOJ, in consultation with HHS, to award one-year grants to six grantees to combat sex trafficking of children in the United States. Of the grant amounts, at least 67% must be allocated to non-governmental organizations (NGOs) to provide counseling, legal services, shelter, clothing, and other social services to victims, while not less than 10% has to be allocated to provide services to victims or training for service providers on sex trafficking of children. Juvenile Justice Under the TVPA, the federal government treats individuals under the age of 18 who are involved in commercial sexual activity as victims rather than perpetrators, and victims are eligible for specialized services. The same is not always true at the state level; at times, minors involved in commercial sexual activity may be labeled as child prostitutes or juvenile delinquents and treated as criminals rather than being labeled and treated as victims. The 2013 TVPA reauthorization ( P.L. 113-4 ) specifies that the model state anti-trafficking laws created by the Attorney General should include safe harbor provisions that treat an individual under 18 years of age who has been arrested for prostitution as a victim of a severe form of trafficking, prohibit the prosecution of such a person, and refer them to the service providers who provide assistance to victims of commercial sexual exploitation. In addition, S. 1733 and H.R. 3610 would incentivize states to enact "safe harbor laws" that would (1) treat each minor involved in commercial sexual activity as a victim of a severe form of trafficking in persons, (2) discourage the charging and prosecution of these minors for prostitution or sex trafficking offenses, and (3) encourage the diversion of these minors to child protection services. The Senate version of this bill would also link states' compliance with the proposed safe harbor mandate to the receipt of Edward Byrne Memorial Justice Assistance Grant (JAG) funds; the bills would authorize the Attorney General to withhold a specified proportion of JAG funding for noncompliance. Instead of linking states' JAG funds to the adoption of safe harbor laws, the House version would allow the Department of Justice to give community policing grants preference to applicants from states that had adopted safe harbor laws. Other Issues Inter-agency Coordination/Efficiency There have been concerns about possible duplication of efforts and a lack of coordination among the agencies that conduct anti-trafficking activities, and whether the fact that so many agencies are involved with anti-trafficking policy leads to duplication or funds not being used in the most efficient manner. The TVPA established the Senior Policy Operating Group (SPOG) in part to facilitate coordination on anti-trafficking policy across U.S. government agencies to ensure that there is not a duplication of efforts. However, the federal government does not currently have a national strategy broadly directed at combating human trafficking. S. 1733 would direct the Attorney General to implement and maintain a National Strategy for Combating Human Trafficking. This strategy would be required to include, among other things, (1) integrated efforts (at the federal, state, local, and tribal levels) to investigate and prosecute human trafficking; (2) internal Department of Justice case coordination; (3) federal interagency coordination on the prevention, investigation, and apprehension of persons who target and exploit others for trafficking; and (4) measurable objectives and quantifiable goals for combating human trafficking. In addition, S. 1733 would require the Attorney General, as part of the annual report to Congress on U.S. government trafficking activities, to report the number of human trafficking investigations opened by FBI, DHS, DOL or the Human Smuggling and Trafficking Center; and the number of such investigations that were reported to the U.S. attorneys, the DOJ Human Trafficking and Prosecution Division, or the DOJ Child Exploitation and Obscenity Section. Sex Offender Registry The Sex Offender Registration and Notification Act (SORNA) provides a set of minimum standards for sex offender registration and notification in the United States. SORNA defines sex offenders according to three tiers, Tier III being the highest classification and includes those individuals convicted of the most egregious crimes (predicate offenses for sex offender registration and notification). The SORNA requirements involve Tier III offenders being subject to the strictest registration and notification requirements. Tier I: Predicate offenses include whatever offenses do not support a higher classification, such as misdemeanor registration offenses and child pornography possession. Tier II: Predicate offenses include most felonious sexual abuse or sexual exploitation crimes involving victims who are minors, including distribution and production of child pornography. Tier III: Predicate offenses generally encompass sexual assaults involving sexual acts regardless of victim age, sexual contact offenses against children below the age of 13, nonparental kidnapping of minors, and attempts or conspiracies to commit such offenses. Currently, a Tier II sex offender means, among other things, a sex offender whose offenses are "comparable to or more severe than" offenses including sex trafficking when committed against a minor. S. 1733 would, among other things, amend SORNA so that a Tier II sex offender no longer includes sex trafficking, and would instead amend the definition of a Tier III sex offender to mean, among other things, a sex offender whose offenses are "comparable to or more severe than" offenses including sex trafficking when committed against a minor, or an attempt or conspiracy to commit such an offense against a minor. In addition, H.R. 4573 , as passed by the House, would direct the Secretary of DHS to establish a center in ICE, to be known as the "Angel Watch Center." The Angel Watch Center would receive information on travel by child-sex offenders, and would establish procedures for notifying or making the decision not to notify a destination country of current or impending travel by a child-sex offender. H.R. 4573 would also express a sense of Congress that the President should negotiate bilateral agreements with foreign governments to transmit and receive information on international travel by child-sex offenders, including U.S. citizens who are arrested or convicted for child-sex offenses in a foreign country. Appendix. Table of Pending Bills that Have Received Congressional Action or Are of Significant Congressional Interest

Legislation aimed at preventing trafficking in persons (TIP) is unambiguously part of the legislative agenda of the 113th Congress. TIP is believed to be one of the most prolific areas of contemporary criminal activity and is of significant interest to the United States as a serious human rights concern. TIP is both an international and domestic crime that involves violations of labor, public health, and human rights standards, as well as criminal law. The Trafficking Victims Protection Act (TVPA) is the primary law that addresses human trafficking. Domestically, anti-TIP efforts provided under the TVPA include protection for victims, the investigation and prosecution of trafficking offenses, and education of the public. Congress reauthorized the TVPA in March 2013 (Trafficking Victims Protection Reauthorization Act; Title XII of P.L. 113-4). While this report covers P.L. 113-4, a more complete treatment of that bill can be found in CRS Report RL34317, Trafficking in Persons: U.S. Policy and Issues for Congress. This report discusses TIP issues that have received legislative action or are of significant congressional interest in the 113th Congress. The House and Senate have acted on other TIP-related bills in the 113th Congress. Since human trafficking issues intersect with many different policy areas (e.g., immigration, child welfare, the criminal justice system, missing and exploited youth), legislation to address human trafficking is varied. For example, the Fraudulent Overseas Recruitment and Trafficking Elimination Act (H.R. 3344) and Title III subsection F of the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744), as passed by the Senate, would make changes to immigration policy altering how foreign labor contractors operate to help prevent trafficking of noncitizen workers. The Preventing Sex Trafficking and Improving Opportunities for Youth in Foster Care Act (H.R. 4058), as passed by the House, and the Supporting At-Risk Children Act (S. 1870), as reported by Senate Finance, would address trafficking prevention through the child welfare system. In addition to other provisions, the bills would require state child welfare agencies to develop and implement policies to identify, screen, and determine appropriate state actions and services for children believed to be victims of sex trafficking or at risk of being victims. The Stop Exploitation Through Trafficking Act (H.R. 3610/S. 1733) and the SAVE (Stop Advertising Victims of Exploitation) Act of 2014 (H.R. 4225) would amend criminal justice policy in an attempt to obstruct human trafficking. H.R. 3610, as passed by the House, and S. 1733 would incentivize states to enact safe harbor legislation—legislation providing that children who were found in prostitution would be treated as victims rather than perpetrators—and increase restitution amounts for victims. H.R. 4225, as passed by the House, would additionally provide penalties for knowingly advertising or knowingly selling advertising that offers certain commercial sex acts. Other bills adopt a multi-prong approach to anti-TIP efforts. The Justice for Victims of Trafficking Act of 2013 (H.R. 3530, as passed by the House, and S. 1738) would create new grant programs for law enforcement and victims services, and would amend the criminal code (Title 18 of the U.S. Code) to create new crimes and enhance criminal penalties for certain trafficking-related activities. The International Megan's Law (H.R. 4573), as passed by the House, would create a new center in DHS that would be responsible for possibly notifying the destination country of international travel by child-sex offenders. The report accompanies CRS Report RL34317, Trafficking in Persons: U.S. Policy and Issues for Congress, by [author name scrubbed] and Liana Rosen and CRS Report R41878, Sex Trafficking of Children in the United States: Overview and Issues for Congress, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

Population Size and Growth—The United States Is Getting Bigger The U.S. population has experienced remarkable growth since 1950. From a base of about 152 million Americans in 1950, an additional 156 million persons were added to the population between 1950 and 2009, with the number of additional women slightly outnumbering additional men (see Figure 1 ). This increase (of about 103%) in the size of the U.S. population was remarkable compared with other industrialized countries. Germany and Italy, for instance, grew by only 21% and 30% respectively during the same period. And, a number of countries, most notably in Eastern Europe, have recently experienced absolute reductions in the size of their populations. Despite the growth of the U.S. population over this period, the United States' share of the world's population has been declining as less developed, higher fertility countries have grown more rapidly. Pakistan, Bangladesh and Nigeria, for instance, now rank #6, #7 and #8 in total population size, surpassing more developed countries—such as Germany, France, the United Kingdom, and Italy—that are no longer among the world's 10 most populous countries. The Census Bureau projects that the U.S. population will continue to grow, to almost 440 million persons by year 2050, albeit at a slower pace than the growth recorded over the past half-century. Note, however, that population projections, which rely upon assumptions about the future courses of mortality, fertility, and immigration are uncertain. More pessimistic growth projections are offered by the United Nations and the Social Security Administration, which estimate that the U.S. population will be 404 million or 411 million respectively in the same year. Average annual growth rates for each 10-year intercensal period between 1950 and 2000 were positive, but have generally been declining over time (see Figure 2 ). Expressed as a percentage of the population at the beginning of the period, the average population growth rate in the 1950s, for example, was 1.7% per annum while it was only 0.9% per year during the 1980s. The Census Bureau assumes that the growth rate will remain positive through year 2050, but will fluctuate over the time period. The current level of 0.8% per annum will increase through 2030 to closer to 0.9% per annum. After 2030 the growth rate is expected to return to 0.8% per annum. Trends in the size and growth of the U.S. population reflect the interactions of three underlying determinants: The role of human reproduction and the fertility behavior of American couples; Trends in disease risk and subsequent mortality , and, The net effect of international immigration to and from the United States. Figure 2 and the Appendix (at end of this report), in addition to highlighting the estimated and projected trends in population growth for the period 1950-2050, also highlight trends and projections for these three underlying components of population change. Characteristics of U.S. fertility, mortality, and immigration are discussed in the following sections. Fertility12 Average fertility in the United States reached a post-World War II maximum during the peak of the "baby boom" in the late 1950s. The highest observed number of annual births (4.3 million) and birth rates (25.3 births per 1,000 population) since 1950 were recorded in 1957. Steep declines were observed in the 1960s and early 1970s, a broad trend that was also observed in Europe, Canada, Japan, Australia, and New Zealand. U.S. birth rates since the early 1970s have remained remarkably constant, mostly fluctuating in the mid-teens, and reached an all-time low of 13.9 live births per 1,000 population in 2002. In 2008, the most recent year for which final data are available, there were 14.0 live births per 1,000 in the population and almost 4.25 million births were recorded. This represents a small decline from 2007 when the largest number of births were recorded in nearly 4 decades, though the birth rate remains lower than levels seen during the baby boom. Characteristics of American Fertility Highlights of American fertility behavior in 2008 include the following: There were approximately 4.25 million live births, a 2% decrease from the 2007 record high. The crude birth rate (CBR) was 14.0 live births per 1,000 total population, which represents a slight decrease since 2007, but is an increase from 2002, the year in which the lowest U.S. CBR was recorded. The general fertility rate (GFR), which relates births to the number of women in their childbearing ages, was 68.6 live births per 1,000 women aged 15-44 years, a 1% decline from 2007. Fertility rates, as measured by the GFR, declined for women below the ages of 40, but increased to the highest levels recorded in more than 40 years for women ages 40 to 44. Fertility is slightly below "replacement level" in 2008 at 2.08. This rate is in contrast with the fertility rates recorded in 2006 and 2007, which were above replacement level for the first time since 1971. Although the U.S. fertility rate in 2008 was below replacement level, it remains higher than the rates observed in other developed countries. Specifically, the 10 countries with the lowest recorded fertility rates (Macao SAR, Hong Kong, Bosnia Herzegovina, Republic of Korea, Malta, Japan, Poland, Singapore, Slovakia, and Belarus) have reached historically unprecedented fertility rates with rates below 1.3 children per woman. Teenage childbearing declined by 2% in 2008, this is in contrast to increased rates found in 2006 and 2007. These increases followed a 14-year decline. Childbearing by unmarried women reached record levels in 2008. More than 1.7 million babies or 40.6% of all births were to unmarried women. Beginning in 1980, nonmarital births have become an important factor driving increasing fertility rates. However, since 1980, the age distribution of nonmarital births has changed—shifting away from teenager mothers. Recent increases in non-marital births have been driven by increased rates of non-marital births among women over the age of 30. There also continues to be wide variation in nonmarital birth rates by race and Hispanic origin, with the highest rates for black and Hispanic women. The mean age of all first-time mothers in the United States was 25.1 years, which is slightly higher than the rates observed in 2006 and 2007. This increase is driven by a decline in births to women under the age of 25. The mean age of first time mothers, reflects a continuing tendency for women to postpone childbearing and increased birth rates for women over the age of 35. Mean age at first birth varies considerably by race and Hispanic origin. Women of Asian and Pacific Islander descent had the highest age at first birth (28.7 years), whereas American Indian women had the lowest (21.9 years). U.S. fertility rates declined in 2008 for women below the age of 40, a change from prior years where rates had been increasing steadily ( Table 1 ). Beyond the current year estimates presented above, the Census Bureau uses demographic projection techniques to predict future trends in American fertility. They project that the total fertility rate will remain at or above replacement level (2.1 births per woman age 15-44) through 2050. This is in contrast to much of Europe and to Canada, where fertility rates are below replacement level and not expected to increase. Experts suggest that these falling fertility rates are a result of societal changes, such as the increasing costs of raising a child, rising levels of women's labor force participation, and delayed childbearing. While the U.S. has experienced these same societal changes, U.S. fertility remains higher because of societal adaptations such as increased access to child care and increased male involvement in household labor and childrearing. Additionally, differences in U.S. fertility rates may be in part driven by differential fertility rates by racial and ethnic groups. For example, the average fertility rates for women of Hispanic origin was approximately 2.9 in 2008, while the fertility rate for non-Hispanic whites was 2.0 or slightly below replacement level. Despite these projections, future trends in fertility are notoriously difficult to predict and specialists continually question the underlying assumptions of the models. Mortality As is evident from Figure 2 and Figure 3 , crude death rates (CDR) in the United States have been remarkably constant since 1950, fluctuating within the range of 8.1 to 9.7 deaths per 1,000 persons. The record low of 8.0 was attained in 2007, the most recent year for which final data are available. In general, crude death rates are referred to as crude because they are influenced by two underlying characteristics of a population, making it difficult to interpret trends in the CDR without disentangling trends in these two underlying components: The population's age structure. An older population generally has higher crude death rates because a higher proportion of persons are in the older age groups where death rates are higher. Mortality risk, or the likelihood of death at a particular age. The risk of mortality reflects the health and disease profile of the underlying population, public health and sanitation, the availability of and access to health care, the education of the population, and other factors. Age-adjusted death rates are better indicators (than crude rates) to measure mortality risk across time or across populations. If age-adjusted rates are considered for the United States over time, a striking pattern of the mortality risk emerges (see Figure 3 ): age-adjusted death rates have exhibited a dramatic decline since 1950 (rather than being remarkably constant , as suggested by the crude death rates). Use of the age-adjusted rates has allowed a much more refined evaluation of trends in American mortality over time. Specifically, they show that, despite the fact that the U.S. population has been aging over the past half-century, the risk of mortality has actually been falling. Characteristics of American Mortality Highlights of trends in American mortality in 2007 include the following: More than 2.4 million resident deaths were registered in the United States in 2007. The crude death rate was about 7.6 deaths per 1,000 total population, a record low. Life expectancy at birth was 77.9 years, this continues a long-term trend of increasing life expectancy. Record high life expectancy was attained by the total population, as well as by both the black and white populations. Both males and females in both of the two major race groups attained record high levels. U.S. life expectancy continues to fall short of that attained by a number of other countries, including Japan (82.7 years), Hong Kong (82.2), Iceland and Switzerland (81.8). The 10 leading causes of death were (1) heart disease, (2) malignant neoplasms (cancer), (3) cerebrovascular diseases (stroke), (4) chronic lower respiratory diseases, (5) accidents (unintentional injuries), (6) Alzheimer's disease, (7) diabetes mellitus (8) influenza and pneumonia, (9) nephritis (kidney disease), and (10) septicemia. Age-adjusted death rates continued to decrease for the three leading causes. The top 10 causes of death did not change between 2006 and 2007; however, the Alzheimer's disease and diabetes mellitus changed ranks. The infant mortality rate was 6.75 infant deaths per 1,000 live births, a slight increase from the 2006 rate. U.S. infant mortality rates are higher than many other developed countries. In 2005, the last year for which comparable international data was available, the U.S. ranked 30 th compared to a number of developed countries, behind developed countries such as Japan, England, and Canada. Differences in mortality between men and women increased slightly from 2006 to 2007. In 2007, the age-adjusted death rate for men was 40.8% greater than it was for women. Life expectancy at birth for females was 80.4 years, while it was 75.4 years for men (both increased from the previous year). The sex gap in life expectancy is 5.0 years, a very slight decrease from 2006. This gap has narrowed since its late 1970s peak of 7.8 years. Differences in mortality between the black and white populations persist. The age-adjusted death rate for the black population was 1.3 times greater than for the white population. This means that the risk of dying is 30% higher for the black population than for the white population This ratio has remained constant since 1997. In 2006, the infant mortality rate was 2.3 times greater, and maternal mortality rate was 2.7 times greater for the black population than for the white population. Average life expectancy is also 4.8 years higher for the white population than for the black population. There are also differences between the white and Hispanic populations with the Hispanic populations experiencing lower age-specific death rates than the white population. However, this may be due to underreporting of Hispanic origin on death certificates. The Asian Pacific Islander population and the American Indian and Alaska Native population both have age-adjusted death rates that are lower than the white population, 40% and 20% lower rates respectively. However, the low death rates of the American Indian and Alaska Native population is likely attributed to the underreporting of deaths. As with the data for fertility, demographers use demographic projection techniques to predict the future trends in American mortality. The Census Bureau projects that (crude) death rates will remain low through 2050 in the narrow range of 8.6 to 9.7 deaths per 1,000 persons in the population. The rate will gradually increase, reflecting the Census Bureau's assumption that the aging of the population will not be fully offset by continued reductions in the risk of dying. As with other demographic variables; however, future mortality and survival are difficult to predict and specialists disagree on not only the level but also the direction of future trends. Research suggests that current models may be too pessimistic in their assumptions about mortality and survival probabilities, i.e., Americans may live longer than currently projected. While some assert that life expectancy is approaching its natural limit, there has been a steady increase in life expectancy observed with an increase of three months per year for every year between 1840 and 2000. Projections of future life expectancy vary. For example, one optimistic assumption predicts that international life expectancy will increase to 91.6 years for women by 2050. Others argue that this projection is too optimistic because it does not take into account that declines in mortality in early life (which increase life expectancy the most) are slowing. Additionally, smoking and obesity-related mortality is slowing life expectancy gains. However, there have been gains in life expectancy at the oldest ages and evidence that social and medical interventions are still effective at extending life thereby demonstrating that life expectancy may still be increasing and mortality rates may still be declining. Net Immigration Immigration has been an important component of population growth in the United States. The net immigration rate ( Figure 2 ) has been and is projected to be positive (with in-migration exceeding out-migration) for the full century (1950 to 2050). It fluctuated in the low range of 1.5 to 2.4 net migrants per 1,000 resident population between 1950 and 1979. An increasing trend has been noted since 1980, and the annual rates in the 1990s were generally in the range of 3.0 to 3.9. The U.S. Census Bureau projects that net migration will continue to be an important component of population growth in the United States through 2050 with net immigration continuing at higher rates than currently observed. Both gross immigration and gross emigration are important to consider when examining how immigration effects population growth and change. In general, the balance of gross immigration (of persons moving permanently to the United States) has exceeded gross emigration (of persons leaving) over the past century. A notable exception was observed during the Great Depression, when the number of out-migrants exceeded new immigrants (see Table 2 ). Reflecting fluctuations in economic conditions (in the United States and abroad) and U.S. immigration policies, the volume of immigrants flow to the United States has fluctuated over time. Starting in 1915, immigration to the United States was curtailed because of World War I, the introduction of numerical limits (or "quotas"), the economic depression of the 1930s, and World War II. Starting in the 1950s, the volume of immigration flows to the United States has been steadily increasing. The average annual inflow was about 252,000 in the 1950s, about 332,000 in the 1960s, 449,000 in the 1970s, and jumped to 734,000 in the 1980s. More than 9 million foreigners were admitted as legal immigrants to the United States between 1991 and 2000, an average of almost 910,000 a year. The number of legal immigrants in the last decade has fluctuated, surpassing 1 million in 2001 and 2002, falling below 1 million annually for 2003 and 2004 and rising above 1.1 million for 2005 through 2009. There are few timely and reliable estimates of emigration of persons who leave the United States to permanently take up residence elsewhere (whether native-born or foreign-born Americans). Partly because of inherent methodological difficulties, the collection of emigration statistics was discontinued in 1957 and no direct measure has been available since then. , Using indirect demographic techniques, the Census Bureau estimated that the number of emigrants leaving the United States has been increasing over the past decades—reaching about 234,000 persons annually during the 1990s (compared to 910,000 annual immigrants during the same time period) (see Table 2 ) and increasing steadily through the first decade of the 21 st Century. The Population Reference Bureau estimates almost 330,000 emigrants in 2009. Characteristics of Net Immigration Highlights of American immigration in FY2009 include the following: Current U.S. policy on permanent immigration is based on four principles: the reunification of families, the admission of immigrants with special skills, the protection of refugees, and the diversity of admissions by country of origin. The number of persons granted lawful permanent residence in the United States was relatively stable between 2008 and 2009 increasing from 1.11 million to 1.13 million. The leading regions of origin of legal immigrants were North America and Asia. These regions accounted for 36% and 33%, respectively, of all legal immigrants in 2009. The leading source countries (of birth) for legal immigrants in 2009 were Mexico (164,067 persons or 14.6%), followed by China (6.0%), the Philippines (5.3%), India (5.1%), Dominican Republic (4.4%), Cuba (3.4%), and Vietnam (2.6%). The primary destination states in 2009, as in every year since 1971, were California, New York, Texas, Florida, Illinois, and New Jersey. Sixty-two percent of all (legal) persons immigrating to the United States in 2009 lived in these six states. In 2009, ten metropolitan areas were the intended residence of 57% of all legal immigrants. The leading destinations were New York-Northern New Jersey-Long Island, NY-NJ-PA; Los Angeles-Long Beach-Santa Ana, CA; Miami-Fort Lauderdale-Pompano Beach, FL; Washington-Arlington-Alexandria, DC-VA-MD-WV; Chicago-Naperville-Joliet, IL-IN-WI; and the San Francisco-Oakland-Fremont, CA metro area. Unauthorized foreigners, also referred to as illegal aliens, deportable aliens, or undocumented workers, are persons in the United States in violation of U.S. immigration laws. Researchers at the Pew Hispanic Center estimated that there are more than 11.1 million unauthorized foreigners currently living in the United States which is approximately 4% of the population. The resident unauthorized foreigner population decreased between March of 2007 and March of 2009, the first reversal in growth in two decades. These researchers also found that this decline is driven by fewer unauthorized immigrants coming from Latin Americans countries other than Mexico, whereas the number of illegal aliens peaked in 2007 (at 7 million) and has since leveled off. The Changing Age Profile—The United States Is Getting Older Aside from its total size, one of the most important demographic characteristics of a population for public policy is its age and sex structure. In general, a "young" population structure is seen in countries experiencing high fertility and rapid population growth, and the relevant policy considerations are whether there are sufficient schools and, later, enough jobs and housing to accommodate them. On the other hand, critical policy challenges in countries with "old" population structures are to develop retirement and health systems to serve the older population, often with simultaneous reductions in the number of working-age persons to support them. The population of the United States had been relatively "young" in the first half of the 20 th century, a consequence of a history of three demographic trends acting in concert—relatively high fertility, declining infant and childhood mortality, and high rates of net immigration to the United States by young workers and families. Since 1950, the United States has been in the midst of a profound demographic change: rapid population aging, a phenomenon that is replacing the earlier "young" age-sex structure with that of an older population. As seen in Table 3 , the population aged 65 and older has been increasing as a percentage of the total U.S. population. The older population represented 8.1% of the total population in year 1950. That percentage increased to 12.8% in 2009 (not in table), and is projected to reach 20.2% in 2050. Stated another way, one in five persons in 2050 will be aged 65 or older. Figure 4 graphically displays three population pyramids of the United States population at three points in time—in census years 1950 and, 2000, and projected to year 2050. The figure shows the proportion of persons in each five-year age and sex group in these three selected years. Note the increasing numbers on the x-axis, which highlights the increasing size of the U.S. population over time. In 1950, the U.S. population, which numbered 152 million persons, was relatively young and its population pyramid generally resembled a Christmas tree. The widest portion, representing the most populous age group, was at the base—where 16.4 million new births and children under age 5 accounted for 10.8% of the total population. Bars representing persons at older ages gradually narrow as deaths occur. The median age was 30.2 years and births outnumbered deaths by a margin of 2.5 to 1.0. Three characteristics of the 1950 pyramid are especially worth noting: The only significant departure from a pyramidal shape is notches representing persons aged 10-24 years. Unusual bulges or bites in population pyramids are usually caused by short-term fluctuations in birth and death rates that can be traced to such historical events as wars, epidemics, economic booms, or depressions. In this case of persons aged 10-24 years in this population pyramid, these persons were born primarily during the economic depression of the 1930's when birth rates were comparatively low. Early "baby boom" births are evident in the youngest age group. The number of persons aged 65 and older in the population was still relatively low—12.4 million persons, representing 8.1% of the U.S. population. The population pyramid in year 2000, the most recent year in which the U.S. population was enumerated by the decennial census, is typical of a population experiencing slow growth. Reflecting lower fertility, fewer people entered the lowest bars of the pyramid, and as life expectancy has increased, a greater percentage of persons have survived until old age. As a result, the population has been aging. By 2000, the median age of the population had risen to 35.3 years while infants and children under the age of five numbered 19.2 million, accounting for only 6.8% of the population. Important characteristics of the U.S. population in year 2000 included: The U.S. population grew by roughly 85% between 1950 and 2000—from 152 million to 282 million persons. The pyramid, which is significantly larger in all age groups, reflects this fact (see x-axis scaling in Figure 4 ). The bulge of the baby-boom generation, those born between 1946-1964, can be seen in the pyramid for ages 35-54 years in 2000. After 1964, birth rates moved downward until the late 1970s. As the last members of the baby boom approached their childbearing years during the 1980s, the number of births rose again, peaking in 1990. These children, the youngest generation, are represented by the slightly widening base of the pyramid. Even though the number of births per woman had been near an all time low, the population continued to grow in part because of the children and grandchildren of the huge baby-boom generation. The number of persons aged 65 and older had been steadily increasing and reached 35.1 million persons, representing 12.4% of the U.S. population. The fact that female survival chances exceed those of men, especially at the older ages, becomes noticeably more evident in the 2000 pyramid. About 4.3% of the total female population was aged 80 and above in 2000 compared to only 2.2% of men. By year 2050, projections of the U.S. population suggest that the population "pyramid" will no longer resemble a Christmas tree; rather, it will be increasingly rectangular. In this population of 439.0 million persons, the most striking feature is the projected number of people who will be aged 65 and older—88.5 million, just over one in every five persons in the total U.S. population. To put these figures into perspective, the "oldest" state in 2009 was Florida with 17.2% of the state's population in the age category 65 years and older. By year 2050, the percent elderly in the national population will surpass the figures observed in the "oldest" states today. The oldest-old, those aged 80 and above and including the youngest of the baby boomers, will be the most populous age group—32.5 million persons or 7.4% of the entire U.S. population. The oldest-old women of the same age will account for 8.5% of all women. The "baby boom" generation will have accelerated population aging, but aging will continue to be one of the most important defining characteristics of the population, even after the youngest of the "baby boom" population has passed away. This reflects projections of continuing low fertility coupled with improving survival in the United States. Race and Ethnicity—The United States Is Becoming More Diverse The U.S. population is becoming more racially and ethnically diverse. This reflects two forces. First , immigration has been a major influence on both the size and the age structure of the U.S. population. Although most immigrants tend to be in their young adult ages, when people are most likely and willing to assume the risks of moving to a new country, U.S. immigration policy has also favored the entry of parents and other family members of these young immigrants. Second , major racial and ethnic groups are aging at different rates, depending upon fertility, mortality, and immigration within these groups. Federal standards for collecting and presenting data on race and Hispanic origin were established by the Office of Management and Budget (OMB) in 1997. Race and Hispanic origin are considered to be two separate and distinct concepts and are considered separately in this report. Race The OMB standards require federal agencies to use a minimum of five race categories in their data collection and presentation efforts. The new standards were required to be used by the Census Bureau for the 2000 decennial census and by other federal programs "as soon as possible, but not later than January 1, 2003." White refers to people having origins in any of the original peoples of Europe, the Middle East, or North Africa. Black or African American refers to people having origins in any of the Black racial groups of Africa. American Indian and Alaska Native refers to people having origins in any of the original peoples of North and South America (including Central America), and who maintain tribal affiliation or community attachment. Asian refers to people having origins in any of the original peoples of the Far East, Southeast Asia, or the Indian subcontinent. Native Hawaiian and Other Pacific Islander refers to people having origins in the original peoples of Hawaii, Guam, Samoa, or other Pacific Islands. For respondents unable to identify with any of these five race categories, the OMB approved including a sixth category—"some other race." Going beyond the minimum standards set by OMB, the American Community Survey question on race included 15 separate response categories and three areas where respondents could write in a more specific group. Individuals were instructed to mark "one or more races to indicate what this person considers himself/herself to be." The response categories and write-in answers were combined by the Census Bureau to create the five minimum OMB race categories, as seen in Table 4 . Based on data from the 50 states and the District of Columbia, the overwhelming majority of the U.S. population—almost 98%—reported only one race. The most prevalent group, accounting for about 74% of the U.S. population, was those who reported that they are white alone, followed by those who are Black or African American alone (12%). The smallest race group was the Native Hawaiian and other Pacific Islander alone population, with 448,000 members, representing less than 0.2% of the U.S. population. Referring to Table 5 , while about 81% of the population was white in 2000, that figure is projected to fall to 74% by year 2050. Increases will be most dramatic for Asians and for persons in the "other races" category (which includes American Indians and Alaska Natives, Native Hawaiians and other Pacific Islanders, and individuals who identify with two or more races). Between 2000 and 2050, the number of Asians is expected to increase by 23.7 million persons, an increase of 220%, while the number in the "all other races" (which includes persons who identify with two or more races) category will increase by almost 15.8 million, or 223%. Hispanic Origin OMB defines Hispanic or Latino as "a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin regardless of race." Federal agencies are required to use a minimum of two ethnicities: "Hispanic or Latino" and "Not Hispanic or Latino" in data collection and presentation. The new standard was used by the Census Bureau in the 2000 decennial census; other federal programs were expected to adopt the standards no later than January 1, 2003. Beginning with census 2000, respondents of all races were asked if they were Spanish, Hispanic, or Latino, and were given the opportunity to differentiate between: (1) Mexican, Mexican American, Chicano; (2) Puerto Rican; (3) Cuban; and (4) other Spanish/Hispanic/Latino. Based on this definition, in 2009, almost 45 million persons, or about 15.1% of the U.S. population, identified themselves as Hispanic. The remaining 256 million people, or 84.9%, were not Hispanic. As mentioned earlier, OMB and the U.S. Census Bureau consider race and Hispanic origin to be distinct concepts. The results from census 2000, however, suggest that such a distinction is not made by persons of Hispanic origin themselves. The most commonly reported race for Hispanics was white alone—almost 17 million persons or almost 48% of the Hispanic population. But, a staggering 14.9 million Hispanics—or 42.2%—reported that they belonged to "some other race," indicating that they did not identify with any of the 14 other categories offered on the census questionnaire. Table 6 presents modified estimates of the Hispanic and non-Hispanic populations of the United States. The modification reconciles the census 2000 race categories with those race categories that appear in the data from administrative records, which are used to produce population estimates and projections. These are also consistent with the recommended set of five categories by OMB. With the release of the results of the 2000 census, the growing role of Hispanics in the United States became apparent. Numbering over 35 million at that time—and growing by more than 1.5 annually from both immigration and natural increase—Hispanics are now the nation's largest minority. If current demographic trends continue, the population of Hispanic or Latino origin is projected to steadily increase as a percentage of the total U.S. population through 2050, rising from 12.6% in 2000 (or about one in seven persons) to 30.2% in 2050 (approaching one in every three persons) (see Figure 5 ). The National Research Council (2006) characterizes the Hispanic population in the U.S. as having "a youthful age structure; a large number of foreign born, including many 'undocumented'; [with] low levels of education; and a disproportionate concentration in low-skill, low-wage jobs. Of particular policy interest is the Hispanic second generation, the children of Spanish-speaking immigrants, who are coming of age as the white majority population is aging." Some Policy Considerations The changing demographic profile will impact upon a wide range of social and economic issues in the United States. The following section presents a short discussion of some major policy considerations that are related to these changes. Neither the list nor the discussions are comprehensive. Work, Retirement, and Pensions The increasing financial pressure faced by public pension systems, such as Social Security, is often attributed to demographic trends that have led to aging populations. However, beyond the simple mathematics of the worsening age dependency ratio, decreasing labor force participation rates have contributed to financial imbalances within pension programs, further increasing the number of retired persons relative to those in the workforce. The declining labor force participation of older men is one of the most dramatic economic trends of the past four decades in the United States. Between 1963 and 2008, labor force participation rates declined from 90% to 76% among men aged 55-61. Over this period, labor force participation rates dropped from 76% to 53% for men aged 62-64 and from 21% to 15% for men aged 70 and over. For all of these groups, most of the declines occurred prior to the early 1980s. An individual's decision of whether to stay in the workforce or to retire is based on the complex interaction of a number of factors including, but not limited to the following: Eligibility for Social Security benefits. Availability of and benefits under an employer-financed pension plan. Work incentives to stay in the labor force (such as continued benefit accrual after attaining the early retirement age, options for phased retirement or to work reduced hours, etc.). The physical and cognitive health of the worker and potentially other family members (spouse, an aging parent, an adult child with a disability). Availability (and eligibility for) disability and unemployment insurance programs. The worker's relative preference for "leisure" compared to employment. Policy levers are, however, available to influence labor force participation and retirement decision-making. For instance, the federal government influences employers' decisions about whether to offer benefits like pensions and health insurance through direct legislation, such as ERISA and the Age Discrimination Act; through social insurance programs, such as Social Security and Medicare; and through the financial incentives created for both employers and employees by the Internal Revenue Code. Private Wealth and Income Security74 Income security during retirement, coupled with an increase in the number of post-retirement years during which individuals can enjoy family and leisure, is one of the primary social achievements of the 20 th century. At the same time, this accomplishment has introduced some fundamental public policy challenges associated with population aging. From an individual's perspective, the two most basic challenges are to ensure that they have sufficient income security during their retirement years and that they have protection against the increasing risk of experiencing periods of poor health and/or disability. For policy-makers, there are fundamental questions with respect to what the federal role should be in helping individuals meet these objectives. A major domestic political challenge of the 21 st century will be how to adapt our old-age income security and health insurance systems to ensure financial solvency while ensuring that there is an adequate safety net to protect the most vulnerable in the population. One option that is likely to be considered involves relying on individual private savings and wealth accumulation to offset any reductions that may take place in the level of public-tier support. The underlying question is how realistic it is to assume that individuals will save sufficiently over their lifetimes to contribute significantly to their own income needs during retirement. Another central question regarding income security for older persons is whether individuals and families will assume greater responsibility for their own retirements if current government programs are scaled back because of budgetary pressures. The Federal Budget and Inter-generational Equity Several decades of population aging have occurred in the United States wherein the proportion of young persons has declined while the number of older persons has expanded dramatically. The changing age structure has raised philosophical questions around the theme of inter-generational equity. Many analysts might expect such demographic changes to have favorable consequences for children and troubling ones for older persons. Fewer children should mean less competition for resources in the home as well as greater availability of social services earmarked for children, especially public schooling. The sharp rise in the number of elderly should put enormous pressure on resources directed towards the older ages, such as medical care facilities, nursing homes, and social security funds. However, Preston, in his 1984 presidential address to the membership of the Population Association of America documented that exactly the opposite had occurred: conditions for children had, in fact, deteriorated while they had improved dramatically for older Americans. Now, over two decades later, the issue continues to be one of considerable debate. Analysts have argued that, without an overhaul of entitlement programs (which largely favor older persons) or tax-revenue reform, the ever-expanding Social Security, Medicare, and Medicaid budgets will tighten the squeeze on other domestic spending (including programs for children, welfare, education, the environment, community development, housing, energy, and justice—programs that reach the majority of all Americans.) But, others argue that there are potentially catastrophic outcomes associated with the redistribution of federal resources among age categories. For instance, the safety nets for the most vulnerable may be interrupted. Costs might be transferred to the states, with limited capacity to absorb the additional expenditures. Individuals may be unable to assume the additional responsibilities asked of them. There is no generally accepted rule in welfare economics for how an age group's interests ought to be represented in public decision-making. As noted by Preston, however, we are continually faced with two questions. First, do we care about our collective future—the commonwealth—or only about our individual futures? And, if we have collective concerns, we face an even more difficult decision about what mix of private and public responsibilities will best serve the needs of the generations. Health, Healthcare, and Health Spending Health policy is interrelated with population change. Changes in the population size, racial and ethnic composition, and age structure affect the healthcare resources needed, spending levels, and health conditions observed. For example, recent fertility changes with more births occurring to women at the beginning and end of childbearing years—to teenagers and women over 40 respectively—could have profound consequences on the health of the children born to these mothers. Specifically, there have been large increases in the birth rate of women over the age of 40. Children born to mothers at later ages are at greater risk for a number of health conditions including Downs Syndrome. Infants born to women at later ages are also more likely to be low birth weight which is associated with higher infant mortality rates, premature birth, and a number of other health problems. Increasing numbers of women delaying childbearing past age 40 may increase the number of children born with health conditions which may, among other things, increase health spending and increase the need for specific health resources such as neonatal intensive care. At the other end of the age spectrum, babies born to teenage mother are also at increased risk for a number of health conditions. Babies born to teenage mothers are more likely to be premature and low birth weight. Additionally, teenage mother receive less prenatal care than women giving birth at later ages which may exacerbate or cause adverse outcomes. Changes in the racial and ethnic composition of the population will also have profound effects on the health and healthcare needs of the population. There are observed differences in how different groups use health services with non-Hispanic whites more likely to visit physicians in an office-setting while non-Hispanic blacks more frequently seek care in emergency rooms. There are also differences in the types of care sought and utilized by race and ethnicity, differences in health conditions experienced, and differences in both mortality rates and mortality rates for specific conditions. These differences, which are in part related to socioeconomic differences across racial and ethnic groups could mean that there will be a growing proportion of the population in poorer health, with higher incidence of certain health conditions, less access to health insurance and health services, and higher mortality rates at certain ages. Current racial and ethnic differentials coupled with future population growth create challenges for healthcare planning in terms of the services needed and the workforce required to best serve an increasingly diverse population. The Health and Healthcare Needs of an Aging Population Beyond the increasing diversity of the population, the aging of the population can have profound impacts on the health and health services needed. Although population aging may or may not result in increasing proportions of older persons in poor health, the numbers experiencing that condition are almost certain to rise. Thus, as the U.S. population ages, the social and economic demands on individuals, families, communities, and the government will grow, with a substantial impact on the formal and informal health and social care systems and on the financing of medical services in general. A report issued by the Institute of Medicine in 2008 found that the U.S. healthcare workforce will be too small and not appropriately organized or trained to meet the health needs of a growing aging population. They cited both a lack of physicians and other providers who specialize in providing care for older adults and a lack of competence in providing care for older adults throughout the health workforce. In conjunction with, and driven by, the growing numbers of older persons, the United States faces secular change in health status, as reflected in rates and outcomes of various conditions and disabilities. Trends in cognitive impairment and dementia have enormous policy implications, but whether changes in disease and disability rates will alter the rates of long-term care in institutions or in other settings is unclear. The use of long-term care, because of cognitive impairment or other health conditions, is expected to increase as Americans live longer. The future need for long-term care has financial implications for states, and for the federal government as the majority—nearly three quarters—of long-term care expenses are funded by public programs most commonly Medicaid. While recognizing the necessity to address the changing health needs of the older population, critical questions remain regarding the best mechanisms for health system organization, delivery of and access to services, administration, and financing. The Patient Protection and Affordable Care Act ( P.L. 111-148 ), recently enacted health reform legislation, may address some of these concerns, but critics contend that the law may exacerbate provider shortages and do little to control growing healthcare costs or reduce inefficiency. Immigration Policy Immigration has historically been a major contributor to population growth in the United States. The number of foreign-born people residing in the United States is higher than at any point in U.S. history and at 12.5% (in 2008) has reached a proportion of the U.S. population not seen since the early 20 th century. Of the 38 million foreign-born residents, approximately one-third are naturalized citizens, one-third are legal permanent residents, and one-third are estimated to be unauthorized (illegal) residents." The growing number of illegal immigrants has given rise to a consensus that the immigration system is seriously flawed. Despite this consensus, there are major disagreements over proposed solutions. U.S. policy on permanent immigration has been based on four principles: the reunification of families, the admission of immigrants with special skills, the protection of refugees, and the diversity of admissions by country of origin, the balance of these four principles and whether the balance changes has implications for the size and composition of the U.S. population. For example, those who immigrate under family reunification policies tend to be older; while those entering for employment reasons are generally younger. The number of immigrants seeking to enter the U.S. and the needs of businesses seeking workers are linked to economic conditions and trends. The current recession has lowered immigration levels, but companies still want an immigration policy that allows the entry of both highly skilled workers and low-skilled temporary workers. Other argue that immigration policies could adversely affect the economic well-being of the U.S population by creating competition for jobs in a context of high unemployment. Immigration issues and potential reform have broad implications for a number of policy areas. Immigration may stimulate the economy by providing both low and high skilled workers. Pursuing an immigration strategy that favors workers entering for employment reasons may also slow U.S. population aging thus averting or delaying a number of the policy challenges that could arise from population aging. Immigration may also create a number of policy challenges. For example, immigrants are often concentrated in certain geographic areas which may strain local governments and infrastructure. The number and type of immigrants seeking to enter the U.S. may also impact areas such as homeland security, the workforce, and crime and law enforcement policy. The country of origin of immigrants will also affect the racial and ethnic composition of the U.S. population and contributes to the increasing diversity in the U.S. which, as discussed below, has a number of policy implications. America's Changing Color Lines The U.S. population is becoming more racially and ethnically diverse. Once a mainly biracial society with a large white majority and relatively small black minority—and an impenetrable color line dividing these groups—the United States is now a society composed of multiple racial and ethnic groups. Along with increased immigration are rises in the rates of racial/ethnic intermarriage, which in turn have led to a sizeable and growing multiracial population. These trends are projected to continue for the next decades. This diversity presents policy challenges in a number of areas. For instance: Assimilation. Many Asian Americans speak their native languages at home and maintain their distinct ethnic cultures and values, signaling that they either face difficulties fully assimilating into the American mainstream or purposefully resist full assimilation. The continued flows of Latino immigrants ensure that the Spanish language and diverse Latino cultures will endure in the United States. The degree to which there are language barriers or lack of assimilation of immigrants has important implications for both entry into and achievement in the educational system and the labor force. Income Disparities. There are persistent differences in household incomes among racial/ethnic groups in the United States. For instance, in 2009, the real median income level for a black household—at about $33,000—was about $19,000 lower than that of a non-Hispanic white household (about $52,000). One consequence of this disparity had been that low-income/low-wealth persons had faced hurdles when attempting to become homeowners. Key findings from a study from the Department of Housing and Urban Development showed that subprime loans are three times more likely in low income neighborhoods than in high-income ones, and that predatory lending practices made homeownership far more costly for poor families. Poverty. The official poverty rate in 2009 was 14.3 percent, up from 13.2 percent in 2008; the most recent figure is the highest poverty rate since 1994. Nonetheless, it was still 8.1 percentage points lower than in 1959, the first year for which poverty estimates are available. In 2009, 43.6 million people were counted as poor—the third consecutive increase in the number of people in poverty. According to Gabe, the most recent increase in poverty reflects the worsening economic conditions since the onset of the economic recession in December 2007 and is expected to remain comparatively high even after the economy begins to recover. America's racial minorities continue to have disproportionately high poverty rates. In 2009, African Americans and Hispanics had poverty rates that exceed those of whites by several times. In 2009, 25.8% of blacks (9.9 million) and 25.3% of Hispanics (12.3 million) had incomes below poverty, compared to 9.4% of non-Hispanic whites (18.5 million) and 12.5% of Asians (1.8 million). Poverty and welfare receipt are inextricably linked. Government programs may help low-income persons meet their basic daily needs (through cash assistance programs such as TANF, Medicaid, or food stamps (now called the Supplemental Nutrition Assistance Program or SNAP), though some observers fear that welfare creates economic dependency and perpetuates the cycle of poverty. Appendix. U.S. Population Growth Rates, Birth Rates, Death Rates, and Net Immigration Rates: 1950-2050

The United States, the third most populous country globally, accounts for about 4.5% of the world's population. The U.S. population—currently estimated at 308.7 million persons—has more than doubled since its 1950 level of 152.3 million. More than just being double in size, the population has become qualitatively different from what it was in 1950. As noted by the Population Reference Bureau, "The U.S. is getting bigger, older, and more diverse." The objective of this report is to highlight some of the demographic changes that have already occurred since 1950 and to illustrate how these and future trends will reshape the nation in the decades to come (through 2050). The United States Is Getting Bigger. U.S. population growth is due to the trends over time in the interplay of increased births, decreased deaths, and increased net immigration. The United States Is Getting Older. Aside from the total size, one of the most important demographic characteristics of a population for public policy is its age and sex structure. This report illustrates how the United States has been in the midst of a profound demographic change: the rapid aging of its population, as reflected by an increasing proportion of persons aged 65 and older, and an increasing median age in the population. The United States Is Becoming More Racially and Ethnically Diverse , reflecting the major influence that immigration has had on both the size and the age structure of the U.S. population. This section considers the changing profile of the five major racial groups in the United States. In addition, trends in the changing ethnic composition of the Hispanic or Latino Origin population are discussed. Although this report will not specifically discuss policy options to address the changing demographic profile, it is important to recognize that the inexorable demographic momentum will have important implications for the economic and social forces that will shape future societal well-being. There is ample reason to believe that the United States will be able to cope with the current and projected demographic changes if policymakers accelerate efforts to address and adapt to the changing population profile as it relates to a number of essential domains, such as work, retirement, and pensions; private wealth and income security; the federal budget and inter-generational equity; health, healthcare, and health spending; and the health and well-being of the aging population. These topics, among others, are discussed briefly in the final section of this report. This report will be updated as needed.

Introduction The U.S. government's national security system includes the organizations, structures, and processes that govern decision-making, budgeting, planning and execution, and congressional oversight of executive branch national security activities. National security strategic guidance documents, including publicly available reports and classified internal instructions, and the various review processes that help generate them, are a key element of that system. While some strategy-making activities are carried out in response to statutory requirements, others are conducted on the basis of mandates from within the executive branch. As a rule, such activities help guide policy and resourcing decisions, and convey intent to internal and external audiences. Core national security strategic guidance documents include the President's national security strategy (NSS), the Secretary of Defense's national defense strategy (NDS) and its associated quadrennial defense review (QDR) report, and the Chairman of the Joint Chiefs of Staff's national military strategy (NMS). In theory, these documents and review exercises are all "nested" with each other, such that guidance issued at higher levels of the executive branch, for example by the President, informs guidance issued at lower levels, for example by the Secretary of Defense, whose guidance, in turn, informs that issued by the Chairman of the Joint Chiefs of Staff (CJCS). In recent years, other agencies have adopted analogues to the Department of Defense's (DOD) QDR process: the Department of Homeland Security's Quadrennial Homeland Security Review (QHSR), the Department of State's Quadrennial Diplomacy and Development Review (QDDR), and the intelligence community's Quadrennial Intelligence Community Review (QICR). Arguably, all of these reviews fall under the broad rubric of national security. Indeed, in recent years, many have suggested defining the concept of "national security" more broadly, beyond its traditional focus on national defense. The Obama Administration, at the start of its first term, declared the concepts of "national security" and "homeland security" to be "indistinguishable," and it institutionalized that concept organizationally by merging the previously separate National and Homeland Security Councils. Others would stretch the concept of national security even further to include economic, energy, and/or environmental security. Some critics charge that executive branch processes for developing strategy are flawed because, for example, they fail to establish clear priorities, consider and apply fiscal constraints, or assign roles and responsibilities to specific agencies. Some note that executive branch conduct of strategic reviews and submission to Congress of statutorily required strategic guidance documents do not always fully comply with legislative mandates, while others note that some of the mandates themselves could be improved—for example, by better synchronizing requirements for related documents. For Congress, examining and shaping the Administration's national security strategy activities may be one effective avenue for providing congressional oversight of executive branch national security activities. For example, Congress as a whole may enact or amend requirements for the conduct of strategic reviews and/or the creation and submission to Congress of strategy reports. Committees, in turn, may hold hearings to probe the processes and thinking behind required strategy reports or internal strategic review processes. And individual Members may shape the crafting or application of strategy through public statements or private correspondence with the executive branch. This report provides an overview of mandates, statutory and otherwise, for key national security strategic reviews and reports; assesses recent execution; and raises issues that Congress may wish to consider as it conducts future oversight activities. Why Strategy? In general, strategy articulates "ends" and then links "means" (resources) and "ways" (activities that utilize those resources) in a plan of action designed to achieve those ends, in a given context. Strategy may also indicate the relative priority of each desired end. A strategy may be narrowly targeted, designed to achieve one specific goal, such as a strategy for a marketing campaign for a single new product, or it may address a broad field including multiple, prioritized objectives and initiatives, such as a company's overall strategy to succeed in the marketplace. At its best, strategy is iterative—that is, there are feedback loops in place to facilitate updating the strategy changes in the strategic environment and on lessons learned as the strategy is implemented. National security strategy for the U.S. government as a whole theoretically can serve several distinct purposes: By offering prioritized objectives and indicating which elements of national power are to be used to meet them, it can provide guidance to departments and agencies to use in their internal processes for budgeting, planning and executing, and organizing, training, and equipping personnel. By clearly linking goals with approaches designed to meet them, national security strategy can provide the executive branch with a key tool for internal decision-making, and for justifying requested resources and authorities to Congress. By laying out a detailed strategic vision, it can help inform public audiences both at home and abroad about U.S. government intent. At the level of an individual agency, in turn, strategy can help locate that agency's efforts in the context of the national security efforts of the government as a whole; confirm agency priorities; clarify internal roles and missions; and provide a foundation for external communications including with Congress. Strategic Reviews and Reports with Statutory Requirements Congress has enacted, and sometimes amended, an array of requirements for the executive branch to conduct strategic reviews and/or to publish strategy documents. In many cases, these strategic efforts are required to be synchronized with each other, though in some cases, the specified timelines arguably make synchronization a challenge. Executive branch compliance with these mandates, in form and substance, has varied a great deal over time. Evaluating the effectiveness of congressional oversight of executive branch strategy-making may depend in part on how one defines "effective strategy-making." National Security Strategy (NSS) NSS documents are issued by the President and pertain to the U.S. government as a whole. Requirement: The NSS was initially required by the Goldwater-Nichols Department of Defense Reorganization Act of 1986 (Goldwater-Nichols Act), P.L. 99-433 , §603, and is codified in Title 50, U.S. Code, §3043. Contents of the mandate: The NSS is a report "on the national security strategy of the United States" from the President to Congress. It is required to be submitted annually on the date the President submits his annual budget request, and in addition not more than 150 days from the date a new President takes office. It must be submitted in both classified and unclassified forms. The report must address U.S. interests, goals and objectives; the policies, worldwide commitments, and capabilities required to meet those objectives; and the use of elements of national power to achieve those goals; and it must provide an assessment of associated risk. Execution: From 1987 through 2000, an NSS was submitted every year except in 1989 and 1992, though on various dates. The George W. Bush Administration submitted two NSSs—in September 2002 and in March 2006. The Obama Administration has submitted one so far, in May 2010. As a rule, recent NSS reports have described objectives and activities designed to meet those objectives; they have not as a rule directly tackled "risk"—that is, the gap between anticipated requirements and planned ability to meet them. NSSs to date have been resource-unconstrained. They have not typically prioritized among the objectives they describe, or delineated responsibilities across agencies of the U.S. government—nor are they required to do so. Quadrennial Defense Review (QDR) Quadrennial defense reviews, required by law, are internal DOD processes designed to formulate national defense strategy, and to determine the policies, approaches, and organization required to achieve that strategy, in broad support of national security strategy. Requirement: The original QDR mandate was provided by the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 1997, P.L. 104-201 , §923. The requirement was amended and made permanent by the NDAA for FY2000, P.L. 106-65 , and codified in Title 10, U.S. Code, §118. The mandate has been further amended by the NDAAs for FY2002, FY2003, FY2007, FY2008, FY2010, and FY2012. The QDR was preceded by several other attempts to take a comprehensive look at defense strategy. These included DOD's Base Force work, an attempt spearheaded by then-CJCS Colin Powell to define the minimum sufficient force structure for the post-Cold War era; its results were incorporated into the President's August 1991 NSS and CJCS's January 1992 National Military Strategy. That effort was followed by DOD's 1993 Bottom-Up Review (BUR), a "comprehensive review" of "defense strategy, force structure, modernization, infrastructure, and foundations," launched by Secretary of Defense Les Aspin that built on his work from his previous role as Chairman of the House Armed Services Committee. Contents of the mandate: The QDR itself is a review process, required to be conducted during the first year of every presidential administration. The review is required to take a 20-year outlook, and to be resource-unconstrained. The process is required to "delineate a national defense strategy"; to determine the force structure, modernization plans, and infrastructure required to implement that strategy; and to craft an associated budget plan. Secretary of Defense is required to deliver a report based on the review to the House and Senate Armed Services Committees the year following the year in which the QDR is conducted, no later than the date on which the President delivers his budget request to Congress. Legislation does not specify a classification level for the report. The report is required to address 16 specific points including the results of the review, as well as any other items the Secretary deems appropriate. Execution: To date, each QDR report has been submitted to Congress as required—in 1997, 2001, 2006, and 2010. The next report is due in February 2014. Substantive compliance has arguably been mixed, depending on how much detail one believes is required to meet congressional intent. For example, while QDR reports all address some capability requirements, they rarely if ever specify the "number and type of specific military platforms." QDR reports typically do not prioritize among defense objectives or specifically delineate roles and responsibilities within the Department. As of mid-2013, the 2014 QDR process is reportedly underway, but many defense officials wonder whether, and to what extent, the scope and depth of the QDR may be curtailed by the conclusions of the Strategic Choices and Management Review process conducted in spring 2013. National Defense Strategy (NDS) National defense strategy articulates the ends that the Department of Defense will pursue to help execute the national security strategy, together with the ways and means that DOD will use to do so. Requirement: Title 10, U.S. Code, §118 requires that the QDR process "delineate a national defense strategy" and that the QDR report include a "comprehensive discussion of the national defense strategy of the United States." There is no separate statutory mandate for an NDS. Contents of the mandate: §118 requires that the NDS—as part of the QDR report—be submitted to Armed Services Committees every four years, no later than the President's budget submission. There is no statutory description of the discrete contents of defense strategy, but §118 requires that it be consistent with the most recent NSS. Execution: The 1997 and 2001 QDR reports each explicitly included a national defense strategy. The 2006 and 2010 QDRs did not. Instead, DOD issued stand-alone NDSs in 2005 and 2008. In addition, on January 5, 2012, DOD issued "Sustaining U.S. Global Leadership: Priorities for 21 st Century Defense," commonly referred to as the 2012 Defense Strategic Guidance (DSG). It is generally expected that this DSG will serve as the basic foundation for the QDR report due in 2014; but many have raised questions about the DSG's continued pertinence, since it explicitly did not account for the pressures on the defense budget associated with sequestration-level topline budget caps. National Military Strategy (NMS) In general, national military strategy concerns the organized application of military means in support of broader national (political) goals. Requirement: The NDAA for FY2004, P.L. 108-136 , §903, introduced a permanent requirement for an NMS, codified in Title 10, U.S. Code, §153(b), as amended by the NDAAs for FY2012 and FY2013. While no explicit permanent mandate for an NMS was enacted until 2003, the general need for a military strategy was recognized in both law and practice much earlier. Title 10, U.S. Code, §153(a), as introduced by the Goldwater-Nichols Act, assigns responsibility to CJCS for "assisting the President and Secretary of Defense in providing for the strategic direction of the armed forces." In the early 1990's, Congress enacted a temporary NMS requirement; §1032 of the NDAA for FY1991, P.L. 101-510 , required CJCS to submit to the Secretary of Defense a strategic military plan, in both classified and unclassified form, by the first day of each calendar year from 1991 through 1993. Each plan would address three different scenarios based on specified strategic contexts and fiscal constraints. For each scenario, the plan would address strategic threats, the requirements for meeting those threats, the roles and missions of the Military Services, and force structure. In turn, the Secretary of Defense was required to forward each plan to Congress—during fiscal years 1992, 1993, and 1994 respectively—together with his comments and recommendations. Before that time, it had been common practice for CJCS to craft a classified NMS as a vehicle for advising the Secretary and the President. After the expiration of the temporary mandate, CJCS issued unclassified NMSs in 1995 and 1997. Contents of the mandate: CJCS is required, every two years, to determine whether to prepare a new NMS or to update the previous one; and to submit the new NMS or update, through the Secretary of Defense, to the House and Senate Armed Services Committees by February 15 of each even-numbered year. The legislation does not prescribe the classification level. The NMS is required to be consistent with the most recent NSS, the most recent QDR, and with "any other national security or defense strategic guidance issued by the President or the Secretary of Defense." Each NMS is required to address strategic challenges and opportunities; U.S. military objectives; the missions and activities required to accomplish those objectives; force planning and sizing; contributions from interagency and international partners and from contractors, and resource constraints that affect the strategy. The Secretary is required to include with the strategy transmittal any comments the Secretary considers appropriate. Execution : The first NMS issued on the basis of the permanent requirement was the 2004 National Military Strategy. It stated that it "supports the aims of the National Security Strategy and implements the National Defense Strategy." While it was issued in advance of the March 2005 NDS, key concepts in both strategies were developed in tandem, for example the "four strategic challenges"—traditional, irregular, catastrophic, and disruptive. The subsequent, and most recent, NMS was issued in 2011, following the release of both an NSS and a QDR report in 2010. Quadrennial Roles and Missions Review (QRM) While mandates have varied over time, both law and practice have long recognized the potential value of a rigorous assessment of roles and missions within DOD. Requirement: The permanent statutory requirement for a separate QRM review by the Secretary of Defense, in coordination with CJCS, is found in Title 10, U.S. Code,§118b, as amended by §941 of the NDAA for FY2008, P.L. 110-181 . An earlier requirement for a roles and missions review by CJCS was created by the Goldwater-Nichols Act, §201, which amended Title 10, U.S. Code to include the requirement, in §153(b), that CJCS provide the Secretary of Defense a report on the assignment of roles and missions to the armed forces. The report was to be produced not less than once every three years, or at the request of the President or the Secretary. It was to take into account threats, changes in technology, and the need to prevent unnecessary duplication of effort. There was no requirement to submit the report to Congress. The NDAA for FY2001, P.L. 107-107 , preserved the premise that CJCS should assess roles and missions but made that responsibility part of the Chairman's assessment of the QDR—thus mandating that the assessment be quadrennial rather than triennial, and that its results be presented to Congress (as part of the QDR submission). Contents of the Mandate: The current QRM mandate requires the Secretary of Defense, in coordination with CJCS, to conduct a roles and missions review every four years, and to submit a report based on the review to the Armed Services Committees no later than the submission of the President's budget request, in February of the following year. As part of the review, the Secretary is required to identify the "core mission areas" of the armed forces, the capabilities required to perform those missions, the assignment of responsibility within DOD for providing those capabilities, and any gaps or unnecessary duplication of effort. The Secretary is required to base these findings in part on the results of a separate, independent military review of roles and missions conducted by CJCS. P.L. 110-181 §941(c) required that the first QRM under this mandate be conducted in 2008, and that subsequent QRMs be conducted every four years beginning in 2011. Execution: To date, DOD has complied with QRM mandated timelines, submitting the first report in 2009 and the second in 2012. Some observers suggested that the 2012 QRM report—compared with its 2009 predecessor—reflected a certain lack of rigor, not least because the 2012 report appeared to pull most of its contents directly from the 2012 DSG. The next QRM report is due to Congress in 2016. Some observers have raised questions about the division of labor, in theory and in practice, between the QRM and the QDR. Statutory requirements space QRM execution and submission squarely in the middle of the QDR cycle. In theory, DOD's "core missions," as laid out in the QRM, might be derived from the assessment of the strategic landscape and DOD's strategy for meeting its challenges, as laid out in the QDR and its built-in NDS. As long as the basic premises of the defense strategy still hold, which is by no means a given, a two-year gap between adjudication of defense strategy, and assessment of the appropriateness of the assignment of roles and missions for executing that strategy, might in principle allow sufficient time to gauge the effectiveness of the division of labor. However, the practice of de-linking the NDS from the QDR might distort the logic of that timeline somewhat. Chairman's Risk Assessment (CRA) Formal strategy-making and planning both include, by definition, a consideration of "risk"—the gap between what the strategy or plan is designed to accomplish, and what it would take to fully meet identified challenges. Statute requires that CJCS regularly assess the risk associated with the NMS. Requirement: The permanent requirement for a CRA is codified in Title 10, U.S. Code, §153(b). The original requirement was introduced by the NDAA for FY2000, P.L. 106-65 , §1033, which amended Title 10, U.S. Code, §153, adding the requirement that CJCS, not later than January 1 each year, submit to the Secretary of Defense "a report providing the Chairman's assessment of the nature and magnitude of the strategic and military risks associated with executing the missions called for under the current national military strategy." The Secretary was required to forward that report to Congress, together with the annual budget request. If the Chairman assessed any "significant" risk, the Secretary was required to include in the transmittal to Congress a plan for mitigating that risk. The creation of a requirement to address risk associated with the NMS actually pre-dated the permanent statutory requirement for an NMS itself by several years, although it was already established practice for the CJCS to craft an NMS. The NDAA for FY2003, P.L. 107-314 , re-designated the CRA provision as §153(b), and the NDAA for FY2004, P.L. 108-136 , made the mandate biennial by substituting "each odd-numbered year" for the previous annual submission requirement. The NDAA for FY2012, P.L. 112-81 , § 941, refined the content of the CRA; and the NDAA for FY2013, P.L. 112-239 , §952, substantially re-organized §153 of Title 10, U.S. Code, changed the CRA back to an annual requirement, and significantly revised the required contents of the NMS as well as of the CRA. Contents of the Mandate: By current mandate, CJCS is required, every year, to prepare an assessment of risks associated with the most current NMS (or update), and to submit that assessment, through the Secretary of Defense, to the Armed Services Committees, no later than February 15. The CRA must address strategic risks to U.S. interests, and military risks to executing the missions required by the NMS, distinguishing as it does so between the probability and severity of those risks. It must give attention to fiscal constraints and address anticipated contributions by others including other U.S. agencies, international partners, and contractors. The Secretary is required to produce and submit to Congress, with the CRA, a risk mitigation plan (RMP) that addresses any "significant" risks identified by the CRA. The RMP must include steps designed to mitigate the risks, and it must describe the extent to which, and the timeline by which, it is anticipated that the risks will be mitigated. Execution: Over the past decade, as statutory requirements regarding CRA submission timelines were adjusted several times, DOD has submitted CRAs to Congress frequently, if not always in compliance with the current mandate at the time. The most recent CRA was submitted in April 2013. All have been submitted in classified format, although the legislation does not specify a classification level. In substance, CRAs have defined the statutory categories of strategic and military risk in somewhat varied ways, with some apparent impact on the issues selected for inclusion. The RMPs, as a rule, have struggled to distinguish between "risks"—that is, the gaps, given existing threats to national security, between what it would take to meet those threats and current capacity and capabilities for doing so—and simple "threats"; and thus the plans for "risk mitigation" have more typically been, instead, descriptions of ways and means designed to meet threats. National Defense Panel (NDP) Many practitioners and observers have suggested the value of a competition of ideas, to spur the rigor and creativity of any strategic review process. Such a competition may be internal or external—aimed respectively at improving the process itself or at fostering a robust debate that weighs the findings of the process against alternatives. The current NDP requirement is the most recent expression of congressional interest in fostering a competition of ideas associated with the QDR. Requirement: The current statutory mandate for the NDP is found in Title 10 U.S. Code, §118(f), as amended most recently by §1071 of the Ike Skelton NDAA for FY2011, P.L. 111-383 . This mandate borrows its name and broad intent from a series of prior requirements. The original requirement for an NDP was introduced by §923 and 924 of the NDAA for FY1997, P.L. 104-201 , which also created the initial, one-time requirement for the 1997 QDR. That law called for a one-time "nonpartisan, independent" panel of universally-recognized senior defense experts to do a mid-course assessment of the DOD QDR process; to provide an assessment of DOD's review upon completion; and to conduct an "alternative force structure assessment." The permanent requirement for a QDR assessment panel dates to 2006. In the wake of the 2006 QDR process, Congress, in the John Warner NDAA for FY2007, P.L. 109-364 , §1031, amended Title 10 U.S. Code, §118, to revive the basic premise of the NDP. The provision created a permanent mandate for a QDR independent panel (QDRIP) to conduct an "assessment of the [QDR] review, including the recommendations of the review, the stated and implied assumptions incorporated in the review, and the vulnerabilities of the strategy and force structure underlying the review." In the NDAA for FY2010, P.L. 111-84 , §1061, Congress, without amending Title 10, provided one-time guidance, regarding panel membership and duties, for the work of the QDRIP in support of the 2010 QDR process. In terms of substance, the QDRIP was tasked that year to review the Secretary's terms of reference; assess the assumptions, strategy, findings and risks in the QDR report; conduct an independent assessment of possible force structures; and compare the resource requirements of its own alternative force structures with the QDR's budget plan. Contents of the Mandate: The current NDP mandate flows directly from that legislative history. In the Ike Skelton NDAA for FY2011, P.L. 111-383 , §1071, Congress amended Title 10, US Code, §118(f), regarding the QDRIP. It renamed the panel the National Defense Panel. And it incorporated key provisions, including the panel's mandate, from the FY2010 NDAA one-time mandate regarding the role of the QDRIP in the 2010 QDR process. By statute, the NDP must be established no later than February 1 of any year in which a QDR process is conducted. The NDP must include ten members total—two each appointed by the Chairmen and Ranking Members of the two Armed Services Committees, and two by the Secretary of Defense. And the NDP must submit its findings to the Armed Services Committees no later than three months after the date of the QDR's submission. Execution: The original NDP, constituted to support the 1997 QDR, did not meet the requirements specified by law. It found itself unable to conduct a full alternative assessment, and it did not attempt to evaluate the work of the formal QDR process. Instead, it crafted an alternative conceptual approach—the need for "transformation" as the foundation for determining future force structure. The QDRIP, to support the 2010 QDR, completed its final report in July 2010 and presented its findings to Congress in a public forum shortly thereafter. Rather than grade the homework of the 2010 QDR, per se, the QDRIP critically assessed the conduct of QDRs since their inception, and it called for the discontinuation of the QDR process in favor of normal DOD planning cycles and a proposed new interagency-level strategic planning process. The QDRIP did provide its own alternative strategic assessment and force structure recommendation as required by law; it did not provide the required comparative cost estimates. The NDP, to support the 2014 QDR, got off to a somewhat late start, in part to allow time for new Secretary of Defense Chuck Hagel, sworn in on February 27, 2013, to appoint the panel's leadership. Quadrennial Homeland Security Review (QHSR) The U.S. government's homeland security architecture was created in response to the terrorist attacks of September 11, 2001. The QHSR ("kisser" in common parlance), modeled explicitly on DOD's QDR, was part of that set of changes. Requirement: The permanent mandate for a QHSR was introduced by §2401 of the Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 , §2401, which amended Title VII of the Homeland Security Act of 2002, P.L. 107-296 , adding §707. The requirement is codified at Title 6, U.S. Code, §347. Contents of the Mandate: Statute requires that every four years, beginning in FY2009, the Secretary of Homeland Security conduct a "review of the homeland security of the nation." The review must be conducted in consultation with a number of specified governmental and nongovernmental agencies. The review must delineate a national homeland security strategy; outline and prioritize missions; describe interagency cooperation and preparedness; identify the budget plan required; assess organizational alignment; and assess the procedures of the Department of Homeland Security (DHS) for acquisition and expenditure. The legislation does not specifically require the QHSR to be consistent with the current National Security Strategy, but the requirement for consistency with "appropriate national and Department strategies" might be understood to include the NSS. The legislation does require, however, that the QHSR be consistent with the National Strategy for Homeland Security. The Secretary must submit a report based on the review to Congress by December 31 of the year in which the QHSR is conducted. The report is to be unclassified, and DHS is further instructed to make the report publicly available on its website. The next report is due to be conducted in 2013 and submitted to Congress by December 31, 2013. Execution: To date, one QHSR has been required; it was submitted to Congress in February 2010. The first QHSR report included a striking disclaimer up front: "The report is not a resource prioritization document, although in identifying key mission areas for priority focus, it is highly indicative of where those priorities should lie. Nor does the QHSR detail the roles and responsibilities of Federal or other institutions for each mission area." Selected Strategic Reviews and Reports without Statutory Requirements Departments, agencies, and the executive branch as a whole may conduct strategic reviews and craft strategic guidance apart from any congressional mandate. Such efforts have the potential to contribute constructively to U.S. national security efforts, but they may, however, raise questions for Congress concerning whether and how to provide oversight. Department of Defense Comprehensive Review DOD's 2011 comprehensive review was reportedly driven by both strategic and budgetary imperatives. Falling under the auspices of two consecutive Secretaries of Defense, Robert Gates and Leon Panetta, the review went by several different names rather than a single acronym. Requirement: While DOD's 2011 comprehensive review had no explicit statutory mandate, executive and legislative branch actions variously prompted or catalyzed the conduct of the review. In April 2011, President Obama directed DOD to identify $400 billion in "additional savings" in the defense budget, as part of a broader effort to achieve $4 trillion in deficit reduction over 12 years. DOD's efforts to comply with that guidance received an additional jumpstart from the enactment, in August 2011, of the Budget Control Act of 2011 (BCA), P.L. 112-25 , which established topline budget caps. Contents of the Mandate: The mandate for the comprehensive review explicitly included strategy as well as resources. President Obama indicated from the outset that the search for savings should be driven by strategic considerations, calling for "a fundamental review of America's missions, capabilities, and our role in a changing world." In May 2011, then-Secretary of Defense Gates, accepting the assigt from the President, stressed that DOD's review would help "ensure that future spending decisions are focused on priorities, strategy, and risks, and are not simply a math and accounting exercise." And in August 2011, new Secretary of Defense Panetta confirmed that DOD was implementing the President's April guidance by conducting a "fundamental review." He added that key questions in the review included: "What are the essential missions our military must do to protect America and our way of life? What are the risks of the strategic choices we make? What are the financial costs?" Execution: Publicly and privately, DOD officials confirmed that based on the President's guidance, DOD launched a robust, senior-level review process that gave some consideration to strategic imperatives and involved iterative engagement with the White House. According to DOD officials, the results were manifested in the January 2012 DSG and in the defense budget request for FY2013. Department of Defense Strategic Choices and Management Review (SCMR) The SCMR ("skimmer" in common parlance), like the comprehensive review, was an internally-driven exercise nominally concerned with both strategy and resourcing. Requirement: The SCMR had no external mandate. Instead, it was conducted based on direction given by new Secretary of Defense Chuck Hagel in March 2013, not long after he assumed office. Contents of the mandate: Secretary Hagel assigned responsibility for the conduct of the SCMR to Deputy Secretary of Defense Ashton Carter, in coordination with the Joint Staff, and established a deadline for completion of May 31, 2013. OSD CAPE (Cost Assessment and Program Evaluation) was given day-to-day management responsibility for the effort, and the process, like recent QDR processes, was designed to be participatory. A number of participants later suggested that the SCMR was fundamentally budget-driven—designed to examine, in Deputy Secretary Carter's words, "every nickel" that DOD spends. DOD officials indicated that the review would be used to inform revisions to the FY2014 defense request should sequestration continue; to inform the fiscal guidance given to Military Services as they build their FY2015 and associated five-year budget plans; and to serve as the anchor for the 2014 QDR process. According to DOD officials, the SCMR considered three potential budget scenarios: the President's FY2014 budget; the BCA's sequester-level topline caps; and an "in-between" scenario. The review examined three substantive areas—management efficiencies and overhead reductions; compensation reforms; and changes to force structure and modernization plans. In the force structure and modernization arena, the SCMR considered the two sides of a core trade-off, between the size of the force and high-end technology. Execution: DOD concluded the SCMR on schedule, briefed the results to President Obama, and then briefed the major conclusions to Congress and also to the public. DOD officials noted that the SCMR took the 2012 DSG as its baseline. Yet the tenor of the 31 July roll-out and associated discussions underscored that the primary focus of the review was budgetary—"the purpose" of the SCMR "was to understand the impact of further budget reductions on the Department, and develop options to deal with these additional cuts." The SCMR concluded that even the most drastic options under consideration in all three categories—efficiencies, compensation, and force structure/modernization—could help DOD meet sequester-level topline caps only toward the end of the BCA's ten-year application. DOD officials stressed that the SCMR generated ideas not decisions—it would be the 2014 QDR process, they argued, that would help DOD make tough strategic choices, and those choices would require, as a prerequisite, further clarity about fiscal constraints. Some DOD officials and outside observers have suggested that at some unspecified point of increased austerity, it becomes time to reconsider both the most fundamental aims that defense strategy seeks to realize, and the role that the U.S. intends to play on the world stage. Quadrennial Diplomacy and Development Review (QDDR) In 2010, the Department of State and the U.S. Agency for International Development issued the first—and to date only—QDDR report, based on a robust internal review process that broadly echoed the QDR process. Requirement: There was no external mandate for the QDDR. Secretary of State Hillary Clinton directed the State Department to conduct the review. Contents of the mandate: The QDDR process was explicitly based on the QDR and the QHSR. It was designed to consider priorities, resourcing, and organization. Execution: The QDDR report was issued in December 2010 as an unclassified public document. It explicitly proposed a reform agenda, calling for specific changes in both the focus and the organizational structure of the State Department. The QDDR report described the 2010 NSS as an overall "blueprint," and specifically invoked a number of its concepts, including "smart power" and its approach toward development. State Department officials have suggested that there are no immediate plans to conduct a second QDDR. Quadrennial Intelligence Community Review (QICR) In the wake of the 9/11 terrorist attacks, the national intelligence architecture—like that for homeland security—was overhauled, through legislation and presidential directives. None of this guidance explicitly included a requirement for an intelligence strategy or a formal review, but the advent of the QICR ("quicker" in common parlance) may be considered a reflection of broadly shared interest, post-9/11, in improving the ways in which intelligence supports national security writ large. The lack of an external mandate for the QICR and the classification of most of its outputs may be responsible for the relative lack of attention that has been paid to the QICR, compared to its quadrennial counterparts, in the national security debates. Requirement: The QICR does not have a statutory mandate, but Congress has shown interest in the possible creation of such a mandate. In its Report on the Intelligence Authorization Act for FY2006, the House Permanent Select Committee on Intelligence recommended that the Director of National Intelligence develop a "formalized, periodic, and structured" quadrennial intelligence review modeled on the QDR. There is also no statutory mandate for a national intelligence strategy (NIS) which might serve as a conceptual umbrella for a more detailed QICR. However, two NISs have been issued in recent years, in 2005 and in 2009, by the Director of National Intelligence (DNI), addressing both mission and organization. Contents of the mandate: QICR mandates are not statutory and do not appear to be publicly available. However, the basic quadrennial timeline, and the broad notion of considering the link between strategy and resourcing over a relatively long time frame, follow the basic contours of the QDR. Execution: QICRs have been conducted in 2001, 2005, and 2009. The first two produced classified outcomes. The third was a scenario-based exercise, looking out to 2025, which considered an array of alternative futures and the missions that would be required to address them. The 2009 QICR unclassified report merely described the scenarios; a separate, classified QICR Final Report reportedly addressed the implications of those scenarios for missions and capabilities. Issues for Congress Over time, there has been no shortage of debate and commentary about the role of "strategy" in the national security system, which also includes decision-making, budgeting, planning and execution, and congressional oversight. Attention has been focused on both congressional requirements for strategic reviews and reports, and execution of those activities by the executive branch. This section highlights issues that have been raised in these debates, and provides questions which, among others, Congress may wish to consider in evaluating current performance and considering proposals for change. Frequency Most observers would suggest that the optimal frequency for any given national security strategic review would balance the need to update strategic thinking based on changing circumstances and priorities, with the need to provide sufficient continuity for effective and efficient execution. The available time of senior leaders and their staffs might also be a consideration. In the defense arena of national security, Congress requires the submission of a national security strategy (NSS) at least once per year, of a national defense strategy (NDS) as part of the quadrennial defense review (QDR) report every four years, and of a national military strategy (NMS) or update every two years. Some observers have suggested that in today's fast-paced, globalized age, any written document is by definition too static—that agencies need more frequently updated internal guidance, and that both Congress and the public can gain a more accurate understanding of current Administration intent from public statements and congressional testimony. Others still see a role for formal strategic reviews and published strategic guidance, but question currently mandated frequency. In particular, some have questioned the rationale for requiring a new NSS every year, arguing that the broad contours of the global security environment do not change rapidly enough to warrant a complete overhaul of the nation's basic outlook that frequently. Responses to specific changes in the global environment might be captured instead, they suggest, in specific policies or approaches. Too-frequent NSSs, they add, might introduce the risk of routinization. A number of observers, following that line of thinking, have proposed that NSSs be crafted and issued less frequently—for example, once every four years, rather than annually. Evaluating the advisability of possible revisions to statutory requirements regarding the frequency of strategy-crafting is complicated somewhat by the fact that, in practice, Administrations do not always comply with mandated frequency. For example, the George W. Bush Administration submitted only two NSSs in two terms, while the Obama Administration, by six months into its second term, had submitted only one. Such non-compliance can make it difficult to gauge the value of strategy mandates as written. Balancing real-world change with the importance of consistency for effectiveness and efficiency, how frequently should each key strategic review be conducted, and each key piece of strategic guidance issued? Does it make sense, in principle, that the higher-level the strategy—for example, national-level strategy versus strategy for a single Department—the less frequently it is likely to require substantial revision? What, if any, would be the costs of taking too long to revise a strategy, or of revising a strategy too frequently? At what point does the value of iterative strategy-generation run into the problem of diminishing returns? Does the failure of many Administrations to comply with the statutorily mandated frequency for NSS submissions suggest that Administrations need to be reminded of this statutory provision? Does it suggest, instead, that the requirement is not realistic and/or necessary? And in any case, what is the appropriate locus in Congress for NSS oversight responsibility? Synchronization In theory, it might make sense that national-level strategic guidance inform agency-level strategic guidance, which would in turn inform the strategies of agency components; and that individual agency strategies under the broad national security umbrella constructively inform each other. For example, the NSS might inform the QDR and its NDS, and they, in turn, might inform the NMS and the Chairman's risk assessment (CRA). In turn, the QDR, the quadrennial diplomacy and development review (QDDR), the quadrennial homeland security review (QHSR), and the quadrennial intelligence community review (QICR) all might cross-reference each other, to ensure that there are no conceptual disconnects, and no major gaps or unnecessary overlaps, in implementing the NSS. Statute explicitly requires some of this synchronization, and some non-statutorily-mandated strategic efforts explicitly note their relationships to other strategic reviews or guidance. To make such synchronization possible, the timelines, formal or otherwise, for the conduct of reviews and the submission of reports, must line up appropriately. In principle, a strategic review may inform another by taking place earlier, although not too much earlier; and it could also do so while taking place concurrently if the two efforts are properly coordinated. In the defense arena, current submission timelines are fairly well-suited for logical, sequential development of strategies. The QDR report and its accompanying NDS are due to Congress at the beginning of an Administration's second calendar year in office, by the date the President submits the budget for the next fiscal year. The NSS is due to Congress on the same day. In theory, the QDR report and defense strategy could draw on the previous year's NSS, required "150 days" after an Administration takes office, and on the concurrent development process for the second-year NSS. The NMS, in turn, is required to be submitted to Congress by February 15 of even-numbered years—that is, just several days after the submission of the NSS, and either several days, or two years and several days, after the submission of the QDR report with its accompanying NDS. By these timelines, development of the NMS could draw on the defense strategy from two or four years earlier, as well as on the concurrent NDS/QDR process. In practice, review and reporting timelines have been less coherent. In the defense arena of national security, for example, the 2001 QDR Report (with its embedded NDS) was issued in September 2001, before the George W. Bush Administration issued its first NSS (September 2002) from which the NDS might naturally take guidance. The NMS followed, but not until 2004, arguably a significant gap after the preceding NDS; and its publication almost immediately preceded the publication of the next NDS (March 2005), which arguably trumped the 2004 NMS. The 2005 NDS, in turn, preceded its "accompanying" QDR Report (February 2006) by almost a year, while that QDR Report was published just ahead of a new NSS (March 2006), which ought, arguably, to have informed the QDR process. How important is it that national security-related strategic efforts at all levels reinforce each other? What are the potential pitfalls of developing strategy at lower levels without higher-level strategic top cover? What are the potential benefits, if any, of strategy-formulation unconstrained by parameters set by other strategies? To what extent does current statute support synchronization? To what extent if any might adjustments to statutory timelines help foster greater synchronization? Prioritization and Assignment of Roles and Responsibilities Most observers consider that both prioritization and the assignment of roles and responsibilities are critical for the effective, efficient implementation of strategy. Attention to prioritization during a strategic review process can improve the rigor of that process, providing a clear, agreed framework for making follow-on programmatic and policy decisions. Prioritization of objectives and activities by leadership at one level can help leaders at the next subordinate level more appropriately shape their own strategies and focus their planning and budgeting. And prioritization can also facilitate clearer communications with key audiences, including Congress and international partners. The assignment of roles and responsibilities, in turn, is typically necessary because many missions could be performed, in principle, by any of several different agencies or components. At the national level, for example, a call to strengthen international partnerships could be met through military exercises led by DOD, development assistance programs led by the U.S. Agency for International Development, or participation in multi-lateral organizations led by the Department of State, among other options. If systemic-level priorities are named, but roles and responsibilities are not assigned, subordinate agencies or components may assume that the systemic-level priorities apply to each of them equally and that they should each apply their own respective tool kits against those priorities. Clear assignment of roles and responsibilities could help agencies, or agency components, far more effectively plan and resource; could help prevent unnecessary duplication of effort; and could help ensure that there are no major gaps in responsibility for strategy implementation. Generally speaking, most recent strategic efforts—reviews and reports—have not prioritized the objectives or missions they prescribe, or assigned roles and responsibilities for implementing various facets of the strategy. For example, the 2012 defense strategic guidance (DSG) named ten "priority missions" but did not prioritize among those missions, and did not assign responsibility for those missions to specific actors. Those strategic reviews and reports that have statutory mandates are, as a rule, not required by law either to prioritize or to assign roles and missions. Some observers trace the failure to include sufficiently specific guidance in strategy documents to the fact that explicit prioritization may not always be appropriate for unclassified discussions and publications. Some point to a tension between the need to provide detailed guidance to subordinates who will implement it, and the need to explain—and sell—a strategic vision to broader, potentially skeptical, public audiences. Those two imperatives may not be easily reconcilable in a single product. Frustration with the lack of prioritization and assignment of roles and responsibilities has prompted some to call for institutionalizing the use of national security planning guidance (NSPG)—classified, internal guidance, at the national level, that includes both priorities and specific assignments. Such guidance could be one product of a strategic review process that could also generate an unclassified strategic guidance document—typical national security strategy—thus satisfying the requirements of two audiences, internal and external, in one broad effort. Such a process might be modeled loosely on DOD processes, in which a strategic review, the QDR, informs the production of both unclassified strategic documents for public consumption, including the QDR Report and its organic NDS; and internal classified guidance that does prioritize and assign responsibilities, such as the Guidance for the Employment of the Force (GEF), which reportedly names specific overall and Combatant Command-based priorities; and the Defense Planning Guidance (DPG), which reportedly assigns responsibilities, lead and supporting, to specific Military Services, agencies and components. In its "Beyond Goldwater-Nichols" project, the Center for Strategic and International Studies called for institutionalizing the use of a national-level Quadrennial National Security Review (QNSR) that would yield both NSPG and unclassified national security strategy; and the 2006 QDR echoed the call for the use of NSPG. Congress took one step in this direction, in §1032 of the NDAA for FY2012, by requiring the President to issue national security planning guidance—specifically including priorities and assigned roles—in the arena of counter-terrorism. Do current strategic efforts in the arena of national security sufficiently prioritize among national interests, objectives, and the approaches designed to achieve those objectives? Do such strategic efforts sufficiently assign roles and responsibilities for executing the strategy to subordinate agencies and components? To what extent if any might additional statutory mandates to incorporate prioritization and/or the assignment of roles and responsibilities into strategic reviews and reports be likely to produce constructive changes? What are the potential advantages and drawbacks, if any, of institutionalizing the use of national security planning guidance? Strategy and Resourcing Both in practice and in theory, the relationship between strategy-making and resourcing can be fraught. Experts and practitioners differ markedly regarding how the two exercises ought to inform each other. Some argue that good strategy should begin with resource-unconstrained consideration of the strategic context, U.S. national interests, U.S. objectives, and approaches designed to achieve those objectives, before considering the fiscal implications. Others argue that—particularly in tougher economic times—strategy is only germane if it takes into account current fiscal realities. In theory that might be done in a number of ways, for example by predicating strategy on a single set of fiscal assumptions, or by testing draft strategy against several different fiscal scenarios. As a rule, statutory mandates for strategic reviews and reports do not require the incorporation of fiscal constraints. Indeed, the mandate for the QDR—which is required to make recommendations that are not constrained by the President's budget request—expressly prohibits it. Some mandates—for example, those for the QHSR, the QDR, and the NDP's alternative force structure proposal—do require a cost estimate or budget plan, but those exercises are unconstrained in the sense that no parameters are specified for those plans or estimates. In turn, most observers and practitioners agree that strategy is powerful only when it shapes decision-making, and in particular, when it is reflected in budget requests. To that end, some observers have recommended the adoption of more "unified" approaches to national security budgeting that would link budgeting more closely with strategy. What are the potential advantages and disadvantages of using fiscal constraints to shape the conduct of strategy reviews and the content of strategy reports? What mechanisms might help ensure that conclusions of strategic reviews and the content of strategic guidance directly shape specific policy and resourcing decisions? Competition of Ideas Many observers suggest that strategic review processes can benefit greatly from a competition of ideas. Such competitions can take an internal form. In one internal approach, a "red team" that enjoys full access to the formal review process regularly grades the homework of that formal process by challenging its assumptions and conclusions. DOD used a red team to support the conduct of its 2006 QDR. In another internal approach, several groups are tasked simultaneously with the same assignment. The best-known historical example may be President Eisenhower's top secret "Project Solarium," carried out shortly after Stalin's death in 1953 to reassess U.S. "containment" policy toward the Soviet Union. The methodology included the formation of three teams of seasoned experts and practitioners, both military and civilian. Each team was assigned a strategy to elaborate and defend. After working for six weeks at the National War College, the teams presented the strongest cases they could muster at a session with the President Eisenhower, attended by the rest of the National Security Council, senior military leaders, and others. A competition of ideas can also take an external form. In this approach, one or more external reviews might be conducted in parallel with a formal process. Their results might be considered together with, and compared to, those of the formal process, by some outside adjudicator such as the President or Congress. Part of the mandate for the national defense panel (NDP), conducted in conjunction with the QDR, is "external"—to produce and cost out alternative force structures. No such mandate exists for a "competition of ideas" mechanism to run in parallel with the crafting of national security strategy. But the QDR independent panel (QDRIP), which paralleled the work of the 2010 QDR, recommended the creation, by the executive and legislative branches, of a standing Independent Strategic Review Panel of leading experts to review and assess the national security environment; review and assess the current NSS; review and assess current national security missions and organization; and make recommendations to inform the formal national security strategy process. How important is it to the crafting of good strategy to build a competition of ideas into the process? What are the respective advantages of internal and external versions of a competition of ideas? How important is it effective, "honest broker" adjudication of a competition of ideas, to the effectiveness of that competition?

Strategy—together with decision-making, planning and execution, budgeting, and congressional oversight—is a critical component of U.S. government thinking and practice in the arena of national security. In theory, effective national security strategy-making can sharpen priorities and refine approaches; provide a single shared vision for all concerned agencies; clarify the roles and responsibilities of all concerned agencies so that they may more effectively plan and resource; offer a coherent baseline for congressional oversight; and communicate U.S. government intent to key audiences at home and abroad. While there is no single shared view of the boundaries of the concept of "national security," many would include homeland security, and an array of economic, energy and/or environmental concerns, as well as traditional military affairs. In practice, the U.S. government—at the levels of both the White House and individual agencies—conducts a wide array of strategic reviews, and issues many forms of strategic guidance. The pinnacle of the national security strategic architecture is the national security strategy, issued by the President. That effort is supported by an array of subordinate quadrennial reviews—the Quadrennial Defense Review by the Department of Defense, the Quadrennial Diplomacy and Development Review by the Department of State, the Quadrennial Homeland Security Review issued by the Department of Homeland Security, and the Quadrennial Intelligence Community Review issued by the Office of the Director for National Intelligence—as well as a number of subordinate strategies including national defense strategy, national military strategy, national homeland security strategy, and national intelligence strategy. Yet in practice, the strategic architecture is more complex and less coherent than this synopsis might suggest, because these core strategic efforts are joined by a number of one-off strategic reviews and documents, and because timelines, content, and relationships among the various documents have all varied a great deal over time. Congress has provided statutory mandates for many but not all U.S. government strategy-making activities. In principle, congressional oversight of Administration strategic efforts can help hold the executive branch accountable for both the content and the rigor of its thinking. To the extent that strategy actually shapes policy-making and resourcing, such strategy oversight can be a powerful tool for shaping real-world outcomes. In practice, executive branch compliance with statutory mandates—in terms of both form and content—has been mixed at best in recent history. This report offers a brief overview of the role of strategy in conducting the business of national security; and it reviews the major statutory and non-statutory mandates for national security activities, addressing both requirements and execution to date. It analyzes key issues that may be of interest to Congress in exercising oversight of executive branch strategy-making, including the frequency of strategy updates; the synchronization of timelines and content among different strategies; the prioritization of objectives; the assignment of roles and responsibilities among relevant agencies; the links between strategy and resourcing; and the value of a competition of ideas.

Introduction Lying, or making a false statement, is a federal crime under a number of circumstances. It is a federal crime to make a material false statement in a matter within the jurisdiction of a federal agency or department. Perjury is also a federal crime. Perjury is a false statement made under oath before a federal tribunal or official. Moreover, some false certifications are punishable as perjury by operation of a federal statute. Subornation of perjury is inducing someone else to commit perjury. It too is a federal crime if the perjury induced is a federal crime. Finally, conspiracy to commit any of these underlying crimes is also a separate federal crime. Moreover, a defendant under investigation or on trial for some other federal offense may find upon conviction his sentence for the underlying offense enhanced as a consequence of a false statement he made during the course of the investigation or trial. This is an overview of federal law relating to the principal false statement and to the three primary perjury statutes. False Statements (18 U.S.C. § 1001) The principal federal false statement statute, 18 U.S.C. § 1001, proscribes false statements, concealment, or false documentation in any matter within the jurisdiction of any of the three branches of the federal government. It applies generally within the executive branch. Within the judicial branch, it applies to all but presentations to the court by parties or their attorneys in judicial proceedings. Within the legislative branch, it applies to administrative matters such as procurement, as well as to "any investigations and reviews, conducted pursuant to the authority of any committee, subcommittee, commission, or office of the Congress consistent with applicable rules of the House or Senate." In outline form, Section 1001(a) states the following: I . Except as otherwise provided in this section; II . whoever; III. in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States; IV . knowingly and willfully; V. a. falsifies, conceals, or covers up by any trick, scheme, or device a material fact; b. makes any materially false, fictitious, or fraudulent statement or representation; or c . makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both. If the matter relates to an offense under chapter 109A [sexual abuse], 109B [sex offender registration], 110 [sexual exploitation], or 117 [transportation for illicit sexual purposes], or section 1591 [sex trafficking], then the term of imprisonment imposed under this section shall be not more than 8 years. Elements Whoever : The Dictionary Act provides that "in determining the meaning of any Act of Congress, unless the context indicates otherwise … the word[] … 'whoever' include[s] corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals … ." "Includes" is usually a "but-not-limited-to" word. As a general rule, use of the word "includes" means that the list that it introduces is illustrative rather than exclusive. The government has convicted corporations under Section 1001 which confirms that the section's prohibitions are not confined to individuals, that is, the section is not one where "the context indicates otherwise." Within the Jurisdiction : A matter is within the jurisdiction of a federal entity when it involves a matter "confided to the authority of a federal agency or department ... A department or agency has jurisdiction, in this sense, when it has power to exercise authority in a particular situation. Understood in this way, the phrase 'within the jurisdiction' merely differentiates the official, authorized functions of an agency or department from matters peripheral to the business of that body." Several courts have held that the phrase contemplates coverage of false statements made to state, local, or private entities relating to matters that involve federal funds or regulations. Section 1001(b) creates an exception, a safe harbor, for statements, omissions, or documentation presented to the court by a party in judicial proceedings. The exception covers false statements made to the court even if they result in the expenditure of executive branch efforts. The exception also includes false statements of indigency filed by a defendant seeking the appointment of counsel, and perhaps a defendant's false statement in a probation officer's presentence report, but not false statements made by one on supervised release to a probation officer. Section 1001's application to matters within the jurisdiction of the legislative branch is confined to two categories of false statements. One proscribes false statements in matters of legislative branch administration and reaches false statements made in financial disclosure statements. The other proscribes false statements in the course of congressional investigations and reviews, but does not reach false statements made concurrent to such investigations or reviews. Knowingly and Willfully : Section 1001 requires the government to prove that the defendant acted "knowingly and willfully." It requires the government to show the defendant knew or elected not to know that the statement, omission, or documentation was false and that the defendant presented it with the intent to deceive. The phrase "knowingly and willfully" refers to the circumstances under which the defendant made his statement, omitted a fact he was obliged to disclose, or included within his documentation, that is, "that the defendant knew that his statement was false when he made it or – which amounts in law to the same thing – consciously disregarded or averted his eyes from the likely falsity." Although the offense can only be committed "knowingly and willfully," that is, with the knowledge that it was unlawful, the prosecution need not prove that the defendant knew that his conduct involved a "matter within the jurisdiction" of a federal entity, nor that he intended to defraud a federal entity. Materiality : Prosecution for a violation of Section 1001 requires proof of materiality, as does conviction for perjury, and the standard is the same: the statement must have a "natural tendency to influence, or be capable of influencing the decisionmaking body to which it is addressed." There is no need to show that the decisionmaker was in fact diverted or influenced. Concealment, False Statements, and False Writings : Section 1001's false statement element is in fact three alternative elements that encompass concealment, false statements, and false writings. Subsection 1001(a)(1)(concealment) applies to anyone who "falsifies, conceals, or covers up by any trick, scheme, or device a material fact." Although the requirement does not appear on the face of the statute, prosecutions under Subsection 1001(a)(1) for concealment must also prove the existence of a duty or legal obligation not to conceal. A federal employee's general ethical obligation to "disclose waste, fraud, abuse, and corruption to appropriate authorities," however, will "not support a conviction under § 1001(a)(1)." Subsection 1001(a)(2)(false statements) applies to anyone who "makes any material false, fictitious, or fraudulent statement or representation." Conviction requires that the defendant knew that his statement or documentation was false, that is, it was not true. It follows that a defendant's response to a question that is so fundamentally ambiguous cannot provide the basis for a conviction under Subsection 1001(a)(2). Section 1001(a)(2) recognizes few defenses other than the government's failure to prove one or more of its elements. For instance, "there is no safe harbor for recantation or correction of a prior false statement that violates [Section] 1001." Under an earlier version of Section 1001, several lower federal courts recognized an "exculpatory no" doctrine under which Section 1001 did not reach a defendant's simple false denial to a law enforcement officer's incriminating question. The Supreme Court repudiated the doctrine "[b]ecause the plain language of [then] § 1001 admits of no exception for an 'exculpatory no' … ." Defendants have been largely unable to bring about recognition of an exculpatory no doctrine under Section 1001's current language, although the section's breadth occasionally seems to cause judicial discomfort. Section 1001(a)(3)(written false statements) covers written false statements and applies to anyone who "makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry." In order to establish a violation of Subsection 1001(a)(3), the government must prove the defendant "rendered a statement that: (1) is false, (2) is material, (3) is knowingly and willfully made, and (4) concerns a matter within the jurisdiction of a federal" entity. Perjury Generally (18 U.S.C. § 1621) Testimonial Perjury Generally (18 U.S.C. § 1621(1)) As noted earlier, there are three primary perjury statutes. Each involves a statement or writing offered under oath or its equivalent. One proscribes two forms of perjury generally. A second proscribes perjury before a court or grand jury. A third proscribes subornation of perjury that consists of arranging for someone else to commit perjury. Section 1621 consists of two offenses, one for testimony and the other written statements. The testimonial proscription provides: I. Whoever having taken an oath; II. before a competent tribunal, officer, or person; III. in any case in which a law of the United States authorizes an oath to be administered; IV. a. that he will i. testify, ii. declare, iii . depose, or iv , certify truly; or b. that any written i. testimony, ii. declaration, iii. deposition, or iv . certificate by him subscribed, is true; V . willfully and contrary to such oath; VI. a . states or b . subscribes any material matter which he does not believe to be true . . . is guilty of perjury and shall, except as otherwise expressly provided by law, be fined under this title or imprisoned not more than five years, or both. This section is applicable whether the statement or subscription is made within or without the United States. The courts generally favor an abbreviated encapsulation such as the one the Supreme Court provided in United States v. Dunnigan : "A witness testifying under oath or affirmation violates this section if she gives false testimony concerning a material matter with the willful intent to provide false testimony, rather than as a result of confusion, mistake, or faulty memory." Whoever : As mentioned earlier, the term "whoever" ordinarily encompasses individuals as well as entities, such as corporations, unless the context of the statute in which the term is used suggests a contrary congressional intent. As a general rule, a corporation is liable for the crimes of its employees, officers, or agents committed within the scope of their authority and at least in part for the benefit of the corporation. Corporations have been convicted for false statements under Section 1001, but rarely if ever under Section 1621(1). Willfully : Conviction under Section 1621(1) requires not only that the defendant knew his statement was false ("which he does not believe to be true"), but that his false statement is "willfully" presented. There is but scant authority on precisely what "willful" means in this context. The Supreme Court in dicta has indicated that willful perjury consists of " deliberate material falsification under oath." Other courts have referred to willful perjury as acting with an "intent to deceive" or as acting "intentionally." In the case of a violation of Section 1001, one court has pointed to the general statement from the Supreme Court that "willfully" means the defendant acted with the knowledge his conduct was unlawful. Be that as it may, the prosecution must show that the defendant believed that his statement was not true in order to convict him of Section 1621(1) perjury. Having Taken an Oath : Section 1621(1), in so many words ("whoever having taken an oath"), reaches sworn written or oral testimony presented to a federal tribunal, officer, or person. False— Truth and Ambiguity : Perjury under Section 1621(1) condemns testimony that is false. The Supreme Court in Bronston v. United States explained that testimony that is literally true, even if deceptively so, cannot be considered perjury for purposes of a prosecution under Section 1621(1). Bronston testified at a bankruptcy hearing at which he was asked if he had a Swiss bank account. He truthfully answered that he did not. Then, he was asked if he had ever had a Swiss bank account, which he had. He answered, however, that his company had had such an account at one time, which was true but not responsive to the question of had he ever had an account. Yet, he was convicted for violating Section 1621(1) on the basis of that answer. The Supreme Court's final comment in the decision that threw out the conviction observed, "It may well be that [Bronston's] answers were not guileless but were shrewdly calculated to evade. Nevertheless, … any special problems arising from the literally true but unresponsive answer are to be remedied through the 'questioner's acuity' and not by a federal perjury prosecution." The Court's comment suggests that Section 1621(1) perjury may not be grounded on an ambiguous question. The lower federal appellate courts have not always been willing to go that far. True, "when a line of questioning 'is so vague as to be fundamentally ambiguous, the answers associated with the questions posed may be insufficient as a matter of law to support a perjury conviction.'" Yet, as one court stated, "our Court has 'eschewed a broad reading of Bronston, ' noting instead that, 'as a general rule, the fact that there is some ambiguity in a falsely answered question will not shield the respondent from a perjury … prosecution." Moreover, the line between permissible ambiguity and impermissible fundamental ambiguity is not easily drawn. In fact, some courts have concluded that "to precisely define the point at which a question becomes fundamentally ambiguous … is impossible." False— T he T wo - Witness Rule : Section 1621(1) requires compliance with the common law "two-witness rule" to establish that a statement is false. Under the rule, "the uncorroborated oath of one witness is not sufficient to establish the falsity of the testimony of the accused as set forth in the indictment as perjury." Thus, conviction under Section 1621(1) compels the government to "establish the falsity of the statement alleged to have been made by the defendant under oath, by the testimony of two independent witnesses or one witness and corroborating circumstances." If the rule is to be satisfied with corroborative evidence, the evidence must be trustworthy and support the account of the single witness upon which the perjury prosecution is based. Materiality : "To be guilty of perjury under 18 U.S.C. § 1621(1), a defendant's false statement must be material." A false statement is "material in a criminal prosecution for perjury under § 1621(a) if it is material to any proper matter of the decisionmaker's inquiry," that is, "if it is capable of influencing the tribunal on the issue before it." A false statement is no less material because the decisionmaker was not taken in by the statement. Defenses : Although a contemporaneous correction of a false statement may demonstrate the absence of the necessary willful intent to commit perjury, the crime is completed when the false statement is presented to the tribunal. Without a statute such as that found in Section 1623, recantation is no defense nor does it bar prosecution under Section 1621(1). False Writings as Perjury Generally (18 U.S.C. § 1621(2)) Congress added Section 1621(2) to the general perjury statute in 1976 in order to dispense with the necessity of an oath for various certifications and declarations. Section 1621(2) states the following: I. Whoever; … II. in any a. declaration, b. certificate, c. verification, or d. statement; III. under penalty of perjury as permitted under [Section] 1746 of title 28, United States ode; IV. willfully subscribes as true; V. any material matter; VI. which he does not believe to be true; is guilty of perjury and shall, except as otherwise expressly provided by law, be fined under this title or imprisoned not more than five years, or both. This section is applicable whether the statement or subscription is made within or without the United States. As in the case of violations under Section 1621(1), Section 1621(2) proscriptions apply in theory with equal force to corporations and other entities as well as to individuals, but in practice prosecutions appear to be confined to individuals. Section 1621(2) operates as an enforcement mechanism for Section 1746, which affords an under-penalty-of-perjury option wherever a federal statute or regulation requires a written statement under oath. Section 1746 is available regardless of whether the triggering statute or regulation seeks to ensure the validity of a written statement or the identity of its author. Section 1621(2) only proscribes material false statements in unsworn writings, i.e., a statement "capable of influencing or misleading a tribunal on any proper matter of inquiry." Perjury in a Judicial Context (18 U.S.C. § 1623) Congress enacted Section 1623 to avoid some of the common law technicalities embodied in the more comprehensive perjury provisions found in Section 1621 and thus "to facilitate perjury prosecutions and thereby enhance the reliability of testimony before federal courts and grand juries." Unlike Section 1621, Section 1623 permits a conviction in the case of two mutually inconsistent declarations without requiring proof that one of them is false. It recognizes a limited recantation defense. It dispenses with the so-called two-witness rule. And, it employs a "knowing" mens rea standard rather than the more demanding "willfully" standard used in Section 1621. Parsed into elements, Section 1623 declares that I . Whoever; II. a. under oath or, b. in any i. declaration, ii. certificate, iii. verification, or iv . statement, under penalty of perjury as permitted under [Section] 1746 of title 28, United States Code; I II . in any proceeding before or ancillary to a . any court, or b . grand jury of the United States; IV . knowingly; V. a . makes any false material declaration, or b . makes or uses any other information, including any i. book, ii . paper, iii. document, iv. record, v . recording, or vi . other material; VI. knowing the same to contain any false material declaration; shall be fined under this title or imprisoned not more than five years, or both. In most cases, the courts abbreviate their description of the elements and state in one form or another that to prove perjury the government must establish that "the defendant (1) knowingly made a (2) false (3) material declaration (4) under oath (5) in a proceeding before or ancillary to any court or grand jury of the United States." Whoever Again, the Dictionary Act defines the term "whoever" to encompass individuals as well as entities, such as corporations, unless the context of the statute in which the term is used suggests a contrary congressional intent. A corporation, as a general matter, is liable for the crimes of its employees, officers, or agents committed within the scope of their authority and at least in part for the benefit of the corporation. Corporations have been convicted for false statements under Section 1001, as mentioned earlier, but rarely if ever under Section 1623. Under Oath or Its Equivalent: Court or Grand Jury Section 1623 reaches both false statements under oath and those offered "under penalty of perjury" by operation of 28 U.S.C. § 1746. The allegedly perjurious statement must be presented in a "proceeding before or ancillary to any court or grand jury of the United States." An interview in an attorney's office in preparation for a judicial hearing cannot be considered such an ancillary proceeding, but the phrase "proceedings ancillary to" court or grand jury proceedings does cover proceedings to take depositions in connection with civil litigation, as well as a variety of proceedings in criminal cases, including habeas proceedings, bail hearings, venue hearings, supervised release revocation hearings, and suppression hearings. False or Inconsistent The Supreme Court's observation that a statement that is misleading but literally true cannot support a conviction under Section 1621 because it is not false applies with equal force to perjury under Section 1623. Similarly, perjury cannot be the product of confusion, mistake, or faulty memory, but must be a statement that the defendant knows is false, although this requirement may be satisfied with evidence that the defendant was deliberately ignorant or willfully blind to the fact that the statement was false. On the other hand, "[a] question that is truly ambiguous or which affirmatively misleads the testifier can never provide a basis for a finding of perjury, as it could never be said that one intended to answer such a question untruthfully." Yet ambiguity will be of no avail if the defendant understands the question and answers falsely nevertheless. Subsection 1623(c) permits a perjury conviction simply on the basis of two necessarily inconsistent material declarations rather than a showing that one of the two statements is false. Conviction does require a showing, however, that the two statements were made under oath; it is not enough to show that one was made under oath and the other was made in the form of an affidavit signed under penalty of perjury. Moreover, the statements must be so inherently contradictory that one of them of necessity must be false. Some years ago, the Supreme Court declined to reverse an earlier ruling that "[t]he general rule in prosecutions for perjury is that the uncorroborated oath of one witness is not enough to establish the falsity of the testimony of the accused set forth in the indictment." Because the two-witness rule rests on the common law rather than on a constitutional foundation, it may be abrogated by statute without offending constitutional principles. Subsection 1623(e) permits a perjury conviction without compliance with this traditional two-witness rule. Materiality Materiality is perhaps the most nettlesome of perjury's elements. It is usually said that a statement is material "if it has a natural tendency to influence, or is capable of influencing, the decision of the decisionmaking body to whom it is addressed." This definition is not easily applied when the precise nature of the underlying inquiry remains somewhat undefined such as in grand jury proceedings or in depositions at the discovery stage of a civil suit. On the civil side, the lower federal courts appear divided between the view (1) that a statement in a deposition is material if a "truthful answer might reasonably be calculated to lead to the discovery of evidence admissible at the trial of the underlying suit" and (2) that a statement is material "if the topic of the statement is discoverable and the false statement itself had a tendency to affect the outcome of the underlying civil suit for which the deposition was taken." In the case of perjury before the grand jury, rather than articulate a single standard, the courts have described several circumstances under which false testimony may be considered material. In any event, a statement is no less material because it did not or could not divert the decisionmaker. The courts seem to have had less difficulty dealing with a materiality issue characterized as the "perjury trap" doctrine. The doctrine arises where a witness is called for the sole purpose of eliciting perjurious testimony from him. Under such circumstances it is said the tribunal has no valid purpose to which a perjurious statement could be considered material. The doctrine poses no bar to prosecution in most cases, however, because the government is usually able to identify some valid reason for the grand jury's inquiries. Defenses Most of the other subsections of Section 1623 are designed to overcome obstacles that the common law placed in the path of a successful perjury prosecution. Subsection 1623(d), in contrast, offers a defense unrecognized at common law. The defense is stated in fairly straightforward terms, "[w]here in the same continuous court or grand jury proceeding in which a declaration is made, the person making the declaration admits such declaration to be false, such admission shall bar prosecution under this section if, at the time the admission is made, the declaration has not substantially affected the proceeding, or it has not become manifest that such falsity has been or will be exposed." Although phrased in different terms, the courts seem to agree that repudiation of the false testimony must be specific and thorough. There is some disagreement whether a recanting defendant must be denied the defense if both the substantial impact and imminent exposure conditions have been met or if the defense must be denied if either condition exists. Most courts have concluded that the presence of either condition dooms the defense. Early construction required that a defendant establish both that his false statement had not substantially affected the proceeding before his recantation and that it had not become manifest that his false statement would be exposed. One more recent appellate decision, however, concluded that the defense should be available to a witness who could show a want of either an intervening adverse impact or of likely exposure of his false statement. Even without the operation of subsection 1623(d), relatively contemporaneous corrections of earlier statements may negate any inference that the witness is knowingly presenting false testimony and thus preclude conviction for perjury. Subornation of Perjury (18 U.S.C. § 1622) Section 1622 outlaws procuring or inducing another to commit perjury: "Whoever procures another to commit any perjury is guilty of subornation of perjury, and shall be fined under this title or imprisoned for not more than five years, or both." The crime consists of two elements—(1) an act of perjury committed by another (2) induced or procured by the defendant. Perjury under either Section 1621 or Section 1623 will support a conviction for subornation under Section 1622, but proof of the commission of an act of perjury is a necessary element of subornation. Although the authorities are exceptionally sparse, it appears that to suborn one must know that the induced statement is false and that at least to suborn under Section 1621 one must also knowingly and willfully induce. Subornation is only infrequently prosecuted as such perhaps because of the ease with which it can now be prosecuted as an obstruction of justice under either 18 U.S.C. §§ 1503 or 1512 which, unlike Section 1622, do not insist upon suborner success as a prerequisite to prosecution. Conspiracy (18 U.S.C. § 371) Section 371 outlaws conspiring to commit another federal offense, including making a false statement in violation of Section 1001, perjury under Sections 1621 and 1623, and subornation of perjury under Section 1622. As a general matter, conspiracy requires the agreement of two or more people to commit a federal crime and for one of the parties to commit some affirmative act in furtherance of the scheme. Conspiracy under Section 371 is punishable by imprisonment for not more than five years. Conspiracy is a separate crime, and offenders may be punished for conspiracy, as well as for the commission of the crime that is the object of the offense, and for any crime committed in the foreseeable furtherance of the crime. Perjury as a Sentencing Factor (U.S.S.G. § 3C1.1) Perjury, subornation of perjury, and false statements are each punishable by imprisonment for not more than five years. They are also punishable by a fine of not more than $250,000 (not more than $500,000 if the defendant is an organization). When the defendant is convicted of a crime other than perjury or false statements, however, perjury or false statements during the investigation, prosecution, or sentencing of the defendant for the underlying offense will often be treated as the basis for enhancing his sentence by operation of the obstruction of justice guideline of the U.S. Sentencing Guidelines (U.S.S.G. § 3C1.1). Federal sentencing begins with, and is greatly influenced by, the calculation of the applicable sentencing range under the Sentencing Guidelines. The Guidelines assign federal felony offenses a base offense level to which they add levels for various aggravating factors. Obstruction of justice is one of those factors. Each of the final 43 offense levels is assigned to one of six sentencing ranges, depending on the extent of the defendant's past crime history. Section 3C1.1 provides that "If (1) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the investigation, prosecution, or sentencing of the instant offense of conviction, and (2) the obstructive conduct related to (A) the defendant's offense of conviction and any relevant conduct; or (B) a closely related offense, increase the offense level by 2 levels." The accompanying commentary explains that the section "is not intended to punish a defendant for the exercise of a constitutional right." More specifically, a "defendant's denial of guilt (other than a denial of guilt under oath that constitutes perjury), refusal to admit guilt or provide information to a probation officer, or refusal to enter a plea of guilty is not a basis for application of this provision." Early on, the Supreme Court made it clear that an individual's sentence might be enhanced under Section 3C1.1, if he committed perjury during the course of his trial. Moreover, the examples provided elsewhere in the section's commentary and the cases applying the section confirm that it reaches perjurious statements in a number of judicial contexts and to false statements in a number of others. When perjury provides the basis for a sentencing enhancement under the section, the court must find that the defendant willfully testified falsely with respect to a material matter. Thus, the court must find that "the defendant consciously act[ed] with the purpose of obstructing justice." When based upon a false statement not under oath, the statement must still be material, that is, it must "tend to influence or affect the issue under determination." Even then, false identification at the time of arrest only warrants a sentencing enhancement under the section when the deception significantly hinders the investigation or prosecution.

Federal courts, Congress, and federal agencies rely upon truthful information in order to make informed decisions. Federal law therefore proscribes providing the federal courts, Congress, or federal agencies with false information. The prohibition takes four forms: false statements; perjury in judicial proceedings; perjury in other contexts; and subornation of perjury. Section 1001 of Title 18 of the United States Code, the general false statement statute, outlaws material false statements in matters within the jurisdiction of a federal agency or department. It reaches false statements in federal court and grand jury sessions as well as congressional hearings and administrative matters but not the statements of advocates or parties in court proceedings. Under Section 1001, a statement is a crime if it is false regardless of whether it is made under oath. In contrast, an oath is the hallmark of the three perjury statutes in Title 18. The oldest, Section 1621, condemns presenting material false statements under oath in federal official proceedings. Section 1623 of the same title prohibits presenting material false statements under oath in federal court proceedings, although it lacks some of Section 1621's traditional procedural features, such as a two-witness requirement. Subornation of perjury, barred in Section 1622, consists of inducing another to commit perjury. All four sections carry a penalty of imprisonment for not more than five years, although Section 1001 is punishable by imprisonment for not more than eight years when the offense involves terrorism or one of the various federal sex offenses. The same five-year maximum penalty attends the separate crime of conspiracy to commit any of the four substantive offenses. A defendant's false statements in the course of a federal criminal investigation or prosecution may also result in an enhanced sentence under the U.S. Sentencing Guidelines for the offense that was the subject of the investigation or prosecution. This report is available in an unabridged form—with footnotes, quotations, and citations to authority—as CRS Report 98-808, False Statements and Perjury: An Overview of Federal Criminal Law.

Introduction On August 2, 2005, the President signed the Interior, Environment, and Related Agencies Appropriations Act for FY2006 ( P.L. 109-54 , H.R. 2361 ). Title II of P.L. 109-54 provided $7.73 billion for the Environmental Protection Agency (EPA), subject to an across-the-board rescission of 0.476%. The President signed the Department of Defense Appropriations Act for FY2006 ( P.L. 109-148 , H.R. 2863 ) on December 30, 2005, which included a 1% government-wide rescission, further reducing EPA's final appropriation. Even after both rescissions, the FY2006 appropriation for EPA is an increase above the Administration's request of $7.52 billion, but a decrease below the FY2005 appropriation of $8.03 billion. There were varying degrees of interest in specific programs and activities funded within EPA's appropriation. Among the prominent issues in the debate over the Interior bill were the adequacy of funding for wastewater infrastructure, cleanup of hazardous waste sites under the Superfund program, cleanup of commercial and industrial sites referred to as brownfields, EPA's homeland security activities, and "congressional project priorities" or earmarks. In addition to funding, another issue receiving significant attention was EPA's use and consideration of intentional human dosing studies for determining potential human health risks from exposure to pesticides. The following sections explain the methodology used in this report for funding comparisons, provide background information on the history and mission of EPA, include a brief overview of the President's FY2006 budget request for EPA, discuss congressional action on appropriations in the first session of the 109 th Congress, and examine funding levels and relevant issues for selected programs and activities by EPA appropriations account. (For a discussion of broader issues relevant to the statutes and programs that EPA administers, see CRS Issue Brief IB10146, Environmental Protection Issues in the 109 th Congress . For a discussion of FY2005 funding, see CRS Report RL32441, Environmental Protection Agency: Appropriations for FY2005 (pdf).) Methodology In general, the term appropriations used in this report refers to total funds available, including regular annual and supplemental appropriations, as well as rescissions, transfers, and deferrals, but excludes permanent budget authorities. FY2006 appropriations presented in this report have not been adjusted to account for the 0.476% rescission required in P.L. 109-54 , nor for the 1% government-wide rescission required in P.L. 109-148 . The White House's Office of Management and Budget (OMB) is responsible for applying rescissions to the budgets of affected agencies, including EPA, adjusting the amounts that Congress indicates in final appropriations bills and accompanying reports. Funding increases and decreases noted in this report are generally calculated based on comparisons among final FY2006 funding levels prior to the two rescissions above, House and Senate amounts prior to conference, the Administration's FY2006 request, and appropriations enacted for FY2005. Requested and appropriated funding amounts presented throughout this report have not been adjusted for inflation. In some cases, small increases above the previous year funding may actually reflect a decrease when adjusted for inflation. FY2006 appropriations amounts indicated in this report are from the final bill and conference report on H.R. 2361 and from the House- and Senate-passed versions of this bill and their accompanying reports. The House Committee on Appropriations is the primary source of the funding figures used throughout this report for FY2005 enacted amounts and the Administration's FY2006 request. Other sources of information include the Congressional Record, the U.S. Environmental Protection Agency FY2006 Justification of Appropriation Estimates for the Committee on Appropriations (referred to throughout this report as the EPA FY2006 budget justification), and OMB's Budget of the U.S. Government: FY2006 . History and Mission of EPA The Nixon Administration established EPA in 1970 in response to growing public concern about environmental pollution, consolidating federal pollution control responsibilities that had been divided among several agencies. EPA's responsibilities have grown as Congress has enacted an increasing number of environmental laws, as well as major amendments to these statutes, over three decades. Annual appropriations provide the funds necessary for EPA to carry out its responsibilities under these laws, such as the regulation of air and water quality, use of pesticides and toxic substances, management and disposal of solid and hazardous wastes, and cleanup of environmental contamination. EPA also awards grants to assist state, tribal, and local governments in controlling pollution in order to comply with federal laws. (For discussion of these laws, see CRS Report RL30798, Environmental Laws: Summaries of Major Statutes Administered by the Environmental Protection Agency (EPA) ). Figure 1 , below, provides a history of discretionary budget authority for EPA from FY1970 through FY2006, both adjusted and not adjusted for inflation. EPA's funding trends over the history of the agency generally reflect the evolution of statutory responsibilities and authorities enacted by Congress in response to a range of environmental concerns. In terms of the overall federal budget, EPA's annual appropriation has represented a relatively small portion of total discretionary budget authority (just under 1% in recent years). EPA's funding has grown from $1.0 billion when EPA was established in FY1970 to a high of $8.4 billion in FY2004. President's FY2006 Budget Request President Bush submitted his initial FY2006 budget request to Congress on February 7, 2005. The request included $7.52 billion for EPA, $506 million less than the $8.03 billion FY2005 appropriation. As in past years, the total request was divided among eight different accounts to which Congress traditionally allocates funding in the annual appropriations bills, listed in Table 2 below. EPA also presented its budget request in the form of performance goals, as required by the Government Performance and Results Act of 1993 (GPRA, P.L. 103-62 ). EPA reduced its number of goals from 10 to 5 in its FY2005 budget justification. The agency presented its FY2006 justification according to these same five goals: Goal 1: Clean Air and Global Climate Change; Goal 2: Clean and Safe Water; Goal 3: Land Preservation and Restoration; Goal 4: Healthy Communities and Ecosystems; and Goal 5: Compliance and Environmental Stewardship. Related to these goals, the Administration also uses OMB's Performance Assessment Rating Tool (PART) to measure the performance of federal programs. OMB issued PART ratings for 32 EPA programs, which were used in the formulation of the Administration's FY2006 request. (For further discussion of the PART, see CRS Report RS21416, The President ' s Management Agenda: A Brief Introduction .) The largest proposed decrease in the President's initial request for EPA was for grants to states for wastewater infrastructure projects. The President submitted a subsequent request on October 28, 2005, to rescind $166 million from EPA's FY2006 appropriation for wastewater infrastructure projects funded through the clean water State Revolving Fund (SRF). As discussed later, the rescission would have taken away nearly all of the increase that Congress provided for this purpose, reducing the appropriation close to what the Administration requested in February. In addition to proposed reductions for some ongoing programs, the President's FY2006 budget did not include funding designated by Congress in FY2005 for individual projects, locations, or institutions (often referred to as "earmarked funding") within EPA's appropriations accounts. This is consistent with past Administrations' budget requests. According to OMB, the President's FY2006 budget did not include $489 million appropriated in FY2005 for "unrequested projects." More than half of these appropriated funds were for water infrastructure projects. In the FY2006 appropriation, Congress restored earmarked funding for many of these projects and designated new earmarked funding for others as well. Although the President's budget proposed decreases for some programs relative to FY2005, it included steady or increased funding for other activities, such as cleanup of Superfund sites, cleanup and redevelopment of brownfields, homeland security, and several grant programs for scientific research on human health effects. The Administration submitted a subsequent request on October 28, 2005, that would have increased overall funds available to EPA by $15 million through a reallocation of emergency spending for disaster relief in Gulf Coast states affected by Hurricanes Katrina and Rita, of which Congress reallocated $8 million to EPA in the FY2006 Defense appropriations bill. This reallocated funding was targeted for EPA's response to leaking underground tanks in hurricane-affected areas. Congressional Action on Appropriations Early in the 109 th Congress, the House Appropriations Committee reduced the number of its subcommittees from 13 to 10. The Senate Appropriations Committee also approved the elimination of one of its subcommittees, leaving 12. Both reorganizations eliminated the Veterans Affairs, Housing and Urban Development (VA-HUD), and Independent Agencies subcommittee, which historically had funding jurisdiction over EPA. As a result of this reorganization, the House and Senate incorporated EPA's funding within the jurisdiction of the Department of the Interior subcommittee, beginning with the FY2006 appropriation. In the first session, the House and Senate passed the conference agreement on the Interior, Environment, and Related Agencies appropriations bill for FY2006 ( H.R. 2361 , hereafter referred to as the "Interior bill"). The President signed the final bill into law ( P.L. 109-54 ) on August 2, 2005. Funding for EPA was included in Title II. Table 1 indicates floor action in both chambers followed by enactment. Title II of P.L. 109-54 provided $7.73 billion for EPA, subject to an across-the-board rescission of 0.476%. The House had proposed $7.71 billion, and the Senate had proposed $7.88 billion, neither of which included an across-the-board rescission. P.L. 109-54 also "rescinded" $80.0 million from past fiscal year appropriations and treated these funds as an offset to increase EPA's total appropriation to $7.81 billion, yielding the net amount of $7.73 billion in new appropriations. The House-passed bill had included a $100-million rescission of prior year appropriations, and the Senate-passed bill had included $58.0 million. Overall, EPA's appropriation in P.L. 109-54 was an increase above the Administrations' request of $7.52 billion, but a decrease below the FY2005 appropriation of $8.03 billion. At the end of the first session, the 109 th Congress passed the conference agreement on the Department of Defense Appropriations Act for FY2006 ( H.R. 2863 , H.Rept. 109-359 ), and the President signed the bill into law ( P.L. 109-148 ) on December 30, 2005. It included a government-wide rescission that reduced FY2006 funding for EPA and all other federal agencies by 1%, except for the Department of Veterans Affairs and excluded spending designated as an "emergency" requirement. P.L. 109-148 also reallocated $8 million in emergency funds to EPA for responding to leaking underground tanks in Gulf Coast states affected by Hurricanes Katrina and Rita. As noted above, the Administration had recommended a $15 million reallocation for this purpose on October 28, 2005. This recommendation was part of a proposal to reallocate $17.1 billion among numerous federal agencies, which was provided in two supplemental appropriations acts ( P.L. 109-61 and P.L. 109-62 ) for disaster relief in Gulf Coast states affected by the hurricanes. P.L. 109-148 did not include a $166 million rescission for EPA's clean water State Revolving Fund (SRF). This fund provides federal assistance to states for issuing loans to communities for constructing and upgrading wastewater infrastructure to meet federal requirements, discussed later in this report. As indicated above, the Administration had requested this rescission on October 28, 2005, as part of a separate proposal to rescind $2.3 billion in funding from "lower-priority federal programs and excess funds." The Administration indicated that the rescission was intended to help offset the "unprecedented cost" of disaster relief in hurricane-affected areas and to "control growth in discretionary spending." Earlier in the first session, on April 28, 2005, the House and Senate had passed the conference agreement on the FY2006 budget resolution ( H.Con.Res. 95 , H.Rept. 109-62 ), including budget authority (BA) for the Natural Resource and Environment Function (300). This function includes several federal land management agencies and EPA. This resolution provided the framework for the consideration of appropriations, and its amounts were nonbinding. The resolution included $30.02 billion (BA) for function 300, but as in past years, it did not specify funding among individual agencies. Rather, funding levels for EPA and other federal agencies were determined in the appropriations process. For additional information on the FY2006 federal budget process, see CRS Report RL32791, Congressional Budget Actions in 2005 , and CRS Report RL32812, The Budget for Fiscal Year 2006 . EPA's FY2006 Appropriation by Account As in recent years, EPA's FY2006 appropriation is allocated among eight line-item accounts. Table 2 identifies each account, the amounts proposed and enacted for FY2006, and the funding levels enacted for FY2005. Figure 2 illustrates the portion of the enacted FY2006 appropriation allocated to each of the eight accounts. A discussion of specific activities and programs funded within each account and relevant issues follow. Science and Technology Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $772.3 million for the Science and Technology (S&T) account for FY2006. The final appropriation was more than the Senate had proposed but less than the House amount, the Administration's request, and the FY2005 appropriation. Prior to the two rescissions, the S&T appropriation included a transfer of $30.6 million from the Hazardous Substances Superfund account to support research related to cleanup of hazardous substances (discussed later in this report). The FY2005 appropriation included a transfer of $35.8 million from the Superfund account. Similar transfers have been made in prior year appropriations. Incorporating elements of the former Research and Development account in place until FY1996, the S&T account provides funding for developing the scientific knowledge and tools necessary to support decisions on preventing, regulating, and abating environmental pollution. It also supports efforts to advance the base of understanding for environmental sciences. These activities are conducted through contracts, grants, and cooperative agreements with universities, industries, other private commercial firms, nonprofit organizations, state and local government, and federal agencies, as well as through work performed at EPA laboratories and various field stations and offices. Recent congressional debate regarding the funding for scientific research administered by EPA and other federal agencies has often focused on the question of whether these agencies' actions are based on "sound science," and how scientific research is applied in developing federal policy. Relative to the Administration's FY2006 request and the FY2005 appropriation, P.L. 109-54 contained significant increases for some activities and programs within this account, while calling for sizeable decreases or steady funding in others. The FY2006 request for funding in the S&T account generally reflected the Administration's priorities across the various media programs (air, water, etc.) based, in part, on recent proposed and final rulemakings affecting air quality, and water quality. The FY2006 request also reflected priorities for broader cross-media analytical research areas, such as risks to children and other sub-populations. The following sections discuss funding issues regarding scientific research, and funding levels for specific research activities administered by EPA for which there has been ongoing interest among Members of Congress, scientists, stakeholders, and various interest groups Human Testing Section 201 of P.L. 109-54 included an administrative provision prohibiting EPA's use of FY2006 appropriations to conduct or to accept, consider, or rely on third-party, intentional human dosing studies for pesticides until the agency issues relevant final rulemaking on the subject. The provision further stipulated that the final EPA rule will not permit pregnant women, infants, and children to be used as subjects in such testing, and will be consistent with National Academy of Sciences (NAS) 2004 recommendations and human experimentation principles of the Nuremberg Code. The provision included in P.L. 109-54 reflects a combination of a Senate-adopted amendment regarding the rulemaking, and identical House and Senate-adopted amendments that would have prohibited EPA's use of FY2006 funds to conduct or consider intentional human dosing studies for pesticides for the entire fiscal year. As reflected in the House and Senate floor debate ( Congressional Record , H3671 and S7552-S7561) and amendments adopted during the debates, there is significant interest in Congress regarding EPA's policies for use of intentional human dosing studies in regulatory decision making for pesticides. Some manufacturers, scientists, and Members assert that human dosing studies provide valuable scientific evidence regarding risks of certain chemicals that cannot be obtained with non-human research. Others recognize the potential value and validity of such studies but advocate the establishment of strict safeguards and protocols to protect the health of those subjects participating in such studies. Some scientists, public interest groups, and other Members counter that, given ethical questions and potential economic motivation, caution and substantial further evaluation is needed to ensure that alternative approaches have been exhausted. Others suggest that purposefully exposing humans is not worth the potential risk under any circumstances. Research/Congressional Priorities (Earmarks) In past EPA appropriations, Congress has designated funds for individual projects, locations, or institutions (often referred to as earmarked funding ) within the various accounts. P.L. 109-54 provided less earmarked funding within EPA's FY2006 appropriation than Congress provided in FY2005. The conference report on H.R. 2361 identified earmarked funding for specific projects in FY2006 within three accounts: S&T, Environmental Programs and Management, and State and Tribal Assistance Grants (see discussions of these two latter accounts later in this report). Prior to the two rescissions, EPA's FY2006 appropriation included $33.3 million in earmarked funding within the S&T account for "Research/Congressional Priorities" ( H.Rept. 109-188 , p. 100). The House had proposed $40 million, and the Senate had proposed $50 million for these projects. The President's FY2006 request did not include any funding for such projects. Congress earmarked nearly $66 million for specific projects within the S&T account for FY2005. Unlike most grant funding, congressional earmarking of funds for specific projects traditionally has been awarded noncompetitively to designated recipients. In its report on H.R. 2361 ( H.Rept. 109-80 , pp. 105-106), the House Appropriations Committee had proposed a new practice for EPA in recommending a total amount for priority projects within the S&T and Environmental Programs and Management accounts, but allowing past recipients of earmarks to compete for these funds. The Senate Appropriations Committee opposed this approach in its report and recommended recipients of earmarked funding within these two accounts. The conferrees disagreed with the House in the final bill, identifying individual projects, locations, or institutions to receive designated funds. EPA and Homeland Security FY2006 funding for EPA's homeland security activities is allocated within five of the eight EPA appropriations accounts: S&T, Environmental Programs and Management, Hazardous Substance Superfund, Building and Facilities, and State and Tribal Assistance Grants. This funding would support various activities including, critical water infrastructure protection, laboratory preparedness, decontamination, protection of EPA personnel and operations, and communication. For the five accounts combined, P.L. 109-54 provided less funding for EPA's homeland security activities than requested for FY2006, but more than Congress appropriated for FY2005. Table 4 compares enacted and proposed funding for EPA homeland security activities in FY2006 with the FY2005 appropriation, within the five appropriations accounts. The largest single reduction in P.L. 109-54 for EPA's homeland security activities relative to the President's FY2006 request was for funding within the S&T account to support a new water quality surveillance and monitoring project referred to as the "Water Sentinel Initiative." The Administration had requested $44.0 million within the S&T account for this new initiative for FY2006. Prior to the two rescissions, P.L. 109-54 provided $9.0 million for this initiative in FY2006, as the House had proposed. The Senate had proposed $5.6 million. The scope of the initiative is unclear based on the substantial reduction in FY2006 funding below the requested level. The requested funding level would have supported a demonstration pilot program in five major U.S. cities. This proposed pilot was intended as a precursor to a new national system for early detection of, and warning for, "dangerous" chemical and biological contaminants as potential terrorist threats to public drinking water systems. The conference report did not include directives or comment with regard to EPA's administering of its Water Sentinel Initiative at the funding level provided in P.L. 109-54 . In its report on H.R. 2361 ( H.Rept. 109-80 , p. 94), the House Appropriations Committee recommended that EPA develop clear goals and milestones for this initiative and justify the request for the program more clearly for FY2007. The Senate Appropriations Committee report did not include similar recommendations or comment in its report. Clean Air Act Research and Implementation (S&T) EPA's implementation of and proposed changes to several Clean Air Act provisions, as well as efforts to address climate change, have been the subject of considerable debate among various stakeholders and Members of Congress. This has elevated interest in the level of funding for scientific research needed to understand the adequacy of air quality standards to protect human health, and the effectiveness of pollution controls to meet them. Prominent air quality issues include the adequacy of new ambient air quality standards for ozone and particulate matter, how best to reduce human exposure to mercury, and proposed regulations and legislation regarding the control of emissions from power plants, vehicles, and other sources. These issues are again being debated in the 109 th Congress. (See CRS Issue Brief IB10137, Clean Air Act Issues in the 109 th Congress, and CRS Report RL32755, Air Quality: Multi-Pollutant Legislation in the 109 th Congress .) As indicated in the conference report, the FY2006 EPA appropriation included $212.4 million within the S&T account for various air quality activities for FY2006 prior to the two rescissions ( H.Rept. 109-188 , pp. 148-149). In comparison, Congress appropriated $206.4 million for FY2005 within the S&T account for air quality programs. This funding supports various programmatic implementation, research, and monitoring activities focusing on air toxics and air quality, radiation, climate protection, and indoor air quality (including radon). P.L. 109-54 also provided funding for air quality activities in the accounts for Environmental Programs and Management, Hazardous Substance Superfund, and State and Tribal Assistance Grants. Table 5 presents enacted and proposed funding within the S&T account for selected air quality activities. In addition to funding, an administrative provision in Section 205 of Title II of P.L. 109-54 affects a pending EPA regulation to reduce emissions of new small engines (less than 50 horsepower). This provision is similar to language that the Senate had proposed. It prohibits the use of FY2006 funds provided in P.L. 109-54 , or in any other act, to propose or finalize small engine emissions regulations until EPA completes a study of safety issues associated with compliance. Among these issues are potential risks of fire and burns to individuals. Existing state standards for small engines would not be affected by this provision. This issue was not addressed in the House-passed bill. Environmental Programs and Management Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $2.38 billion for the Environmental Programs and Management (EPM) account for FY2006. The final appropriation was less than the House amount, but more than the Senate and Administration had proposed and Congress had appropriated for FY2005. The EPM account has historically represented roughly one-third of EPA's budget. This account reflects the heart of the agency's regulatory, standard-setting, and enforcement efforts for various media programs such as water quality, air quality, and hazardous waste management. Appropriations within the EPM account fund the development of environmental standards, monitoring and surveillance of pollution conditions, federal pollution control planning, technical assistance to pollution control agencies and organizations, and compliance assurance and assistance. Many complex regulatory/standard setting issues are associated with this account. (See CRS Issue Brief IB10146, Environmental Protection Issues in the 109 th Congress .) Among individual programs and activities, P.L. 109-54 included a broad mix of increases and decreases within the EPM account, when compared with the President's FY2006 request and the FY2005 appropriation. In some cases, reductions below the President's request reflect increases compared with the FY2005 appropriation. In other cases, Congress reduced funding below the FY2005 appropriation, which the Administration had requested. In yet other cases, Congress maintained funding in FY2006 at or near FY2005 levels for activities that would have received a cut under the President's budget. Because there have been varying levels of interest in the many activities funded within the EPM account, the following sections discuss funding for selected activities that are illustrative of those in which there has been broader interest in Congress. Brownfields Program Administration Prior to the two rescissions, P.L. 109-54 included $25.0 million in the EPM account for administrative expenses of the Brownfields Program, the same as the Senate had proposed. The House had proposed $24.6 million; the FY2006 request included $29.6 million; and Congress appropriated $24.3 million for FY2005. This program provides assistance to states and tribes for assessment, cleanup, and planning for redevelopment of abandoned, idled, or underutilized commercial and industrial sites where hazardous contamination may be present. There has been strong interest among communities in increasing federal funding for these efforts. The EPM account only funds the administrative expenses of the Brownfields Program. Grants for cleanup are funded out of the State and Tribal Assistance Grants account, discussed later in this report. Environmental Education Program Prior to the two rescissions, P.L. 109-54 included $9.0 million within the EPM account for the Environmental Education Program, the same as the House had proposed and approximately the same as Congress appropriated in FY2004 and FY2005. The Senate had proposed $7.0 million for FY2006. The President had proposed no funding for the Environmental Education Program in FY2006, as was the case in FY2003, FY2004, and FY2005. Congress has reinstated funding each fiscal year in response to widespread state and local support for grants to elementary and secondary schools awarded under this program. The Administration used OMB's measurement of the program's effectiveness, the Performance Assessment Rating Tool (PART; see discussion earlier in this report), to justify its proposal to eliminate funding, asserting that the program has not demonstrated results. Advocates of the program counter that it has had a positive impact on a national level, awarding grants to elementary and secondary schools in all 50 states for training teachers, purchasing textbooks, developing curricula, and supporting other educational activities. (See CRS Report 97-97, National Environmental Education Act of 1990: Overview, Implementation, and Issues for Congress .) Clean Air Act Research and Implementation (EPM) As discussed earlier in this report under the " Science and Technology " account heading, EPA's implementation for several Clean Air Act provisions, as well as efforts to address climate change, have been of considerable interest to Members of Congress. P.L. 109-54 provided funding for several air quality activities within multiple EPA appropriations accounts, including the EPM account ( H.Rept. 109-188 , pp. 149-152). The law included a total of $313.5 million within the EPM account for various air quality activities for FY2006 ( H.Rept. 109-188 , pp. 149-152). In comparison, Congress appropriated a total of $298.3 million for FY2005 within this account for these activities. Table 7 indicates enacted and proposed funding within the EPM account for several selected air quality activities in which there has been broader congressional interest. Pesticide Registration and Chemical Manufacturing Fees The President's FY2006 budget included $50 million in the form of "anticipated" revenues (offsetting receipts) to be derived from changes to fees for pesticide registrations and for toxic chemical notices. P.L. 109-54 , as well as the House and Senate-passed bills, did not include these anticipated revenues. Of the $50 million in revenues proposed in the President's FY2006 budget, $46 million would have been derived from pesticide registration fees, and $4 million from notices for new chemicals (chemicals not currently manufactured or imported for commerce in the United States). The fee changes proposed in the request would have required congressional approval through the enactment of legislation. In its report, the House Appropriations Committee noted that no relevant legislation had been proposed and commented that EPA should not continue to spend time and resources proposing such actions in conflict with current authority ( H.Rept. 109-80 , p. 105-106). The pesticide fees proposed by the Administration for FY2006 would have been in addition to those currently authorized under the Consolidated Appropriations Act for FY2004 ( P.L. 108-199 ). The pesticide fees provisions in Section G, Title V of P.L. 108-199 are referred to as the Pesticide Registration Improvement Act (PRIA). Also in PRIA, Congress rescinded EPA's authority to collect other pesticide registration fees. Title II of P.L. 109-54 included an administrative provision authorizing the Administrator of EPA to collect and obligate pesticide registration service fees for FY2006 in accordance with Section 33 of the Federal Insecticide, Fungicide, and Rodenticide Act (as added by Subsection (f)(2) of PRIA), as amended. For additional information regarding pesticide registration and tolerance fees, see CRS Report RL32218, Pesticide Registration and Tolerance Fees: An Overview . Earlier in the first session of the 109 th Congress, language contained in an FY2005 supplemental appropriations act (Sec. 6033 of P.L. 109-13 ) banned EPA from going forward with rulemaking for collecting pesticide tolerance fees as rescinded by PRIA. The 108 th Congress had rejected the President's FY2005 budget proposal to reinstate pesticide fees as prohibited in PRIA in the conference report on the Consolidated Appropriations Act for FY2005 ( H.Rept. 108-792 , Administrative Provisions, p. 1597). Environmental Protection/Congressional Priorities (Earmarks) As discussed earlier in this report, P.L. 109-54 provided less earmarked funding than in FY2005 for individual projects, locations, or institutions. Earmarked funding is identified in the conference report on H.R. 2361 within the EPM, Science and Technology, and State and Tribal Assistance Grants accounts (see discussion regarding earmarks in these two latter accounts elsewhere in this report). Prior to the two rescissions, EPA's FY2006 appropriation included $50.5 million within the EPM account for "Environmental Protection/Congressional Priorities" ( H.Rept. 109-188 , pp. 102-103). The House had proposed $40 million, and the Senate had proposed $50 million. The FY2005 appropriation included $92.3 million for these congressional priority projects. The President's FY2006 request did not include any funding for such projects. As explained earlier, the conferees on H.R. 2361 did not agree to a House Appropriations Committee recommendation to require competitive solicitations for these projects within the EPM and Science and Technology accounts ( H.Rept. 109-80 , pp. 105-106). Rather, the conferees designated funding for specific projects or locations in its report on the final bill. Geographic/Ecosystem Programs The EPM account includes funding for several geographic/ecosystem programs to address certain environmental and human health risks. Members of Congress have expressed ongoing interest in the funding and oversight of these programs, as they potentially affect sizeable populations across many states. These programs often involve collaboration among EPA, state and local governments, communities, and nonprofit organizations. Enacted and proposed funding for selected geographic/ecosystem programs are shown in Table 8 . Funding for the restoration of the Great Lakes has been of particular interest to many Members. As Table 8 indicates, P.L. 109-54 provided significantly less funding than the FY2006 request, but more than the FY2005 appropriation, to aid in the cleanup of contaminated sediments in the Great Lakes, as authorized by the Great Lakes Legacy Act of 2002 (Title I of P.L. 107-303 ). Although no specific comments regarding the Legacy program were included in the conference report on H.R. 2361 , the House Appropriations Committee recommended in its report that EPA develop a clear plan for implementing the Legacy Act specifying how funding would support this plan in future budget requests ( H.Rept. 109-80 , p. 106). The primary purpose of this funding is to address persistently high concentrations of contaminants in the sediments of rivers and harbors, which have prompted concern about potential risk to aquatic organisms, wildlife, and humans. Office of Inspector General Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $51.0 million for EPA's Office of Inspector General (OIG) for FY2006, similar to what the House, Senate, and Administration proposed and Congress appropriated for FY2005, although in differing amounts. As the House and Senate had proposed and the Administration had requested, the final appropriation included a transfer of $13.5 million, prior to the rescissions, from the Superfund account for investigative oversight of that program. Congress has made a similar transfer of funds for this purpose in past years. For example, the FY2005 appropriation included a $12.9 million transfer. The primary function of this office is to audit and investigate EPA functions to identify management, program, and administrative deficiencies, which may create conditions for instances of fraud, waste, and mismanagement of funds, and to recommend actions to correct these deficiencies. Buildings and Facilities Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $40.2 million for the Buildings and Facilities account for FY2006, the same as the House, Senate, and Administration had proposed. Congress appropriated $41.7 million for FY2005. This account funds repairs, improvements, extensions, or alterations of buildings, facilities, or fixed equipment. It also funds new construction projects. Hazardous Substance Superfund Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $1.26 billion for the Superfund account for FY2006, similar to what the House and Senate had proposed, but less than the Administration had requested. In comparison, Congress appropriated nearly $1.25 billion for FY2005. Prior to the two rescissions, P.L. 109-54 transferred $30.6 million from the Superfund account to the Science and Technology account, and $13.5 million to the Office of Inspector General, as the House, Senate, and Administration had proposed. After transfer of these funds, P.L. 109-54 provided a net amount of $1.22 billion for the Superfund account prior to the rescissions. An amendment introduced during the House floor debate of H.R. 2361 , but not adopted, would have provided an additional $130 million for the Superfund account through an offsetting reduction within the Science and Technology account. Table 11 indicates net funding for the Superfund account after the transfer of funds, but prior to the two rescissions. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) created the Superfund program to clean up the nation's worst hazardous waste sites, and directed EPA to prepare a National Priorities List (NPL) to identify sites that present the greatest risk to human health and the environment. The Superfund account in EPA's budget funds the agency's efforts to remove contamination that presents an immediate risk, and to remediate contamination for which there is a potential pathway of exposure. This account also funds EPA's efforts to enforce CERCLA and to require potentially responsible parties (PRPs), including federal facilities, to remediate contamination. The Superfund account pays for the cleanup when there is no financially viable party at private sector sites. The costs of remediation at federal facilities are paid by the federal agency that caused the contamination, rather than out of the Superfund account. Among the major concerns associated with the Superfund account is whether the funding level is adequate to meet cleanup needs and protect human health and the environment. The pace of cleanup has been an ongoing issue. Some Members of Congress have asserted that steady funding for the Superfund program is sufficient to meet cleanup needs. Other Members, states, environmental organizations, and communities have countered that more funding is needed to maintain an adequate pace of cleanup. Completing the construction of cleanup remedies at a site is often used as a measure of the pace of cleanup, because in many cases, construction of such remedies must be finished before operation can begin to treat or contain waste as a means to prevent exposure. EPA reported that the FY2006 request would have allowed the construction of 40 remedial actions to be completed at Superfund sites in FY2006, lower than the annual average of about 67 over the past five years. The most recent estimate of funding needs for the Superfund program was released in 2001 in a study by Resources for the Future (RFF), a private organization. Congress had directed EPA to fund this study, titled S uperfund ' s Future: What Will It Cost? RFF estimated that between $14 billion and $16 billion in total funding would be necessary from FY2000 through FY2009 to meet cleanup needs, based on the number of NPL sites and severity of contamination at that time. At a minimum, RFF projected that annual expenditures of $1.5 billion would be necessary through FY2006 to maintain an adequate pace of cleanup. Annual appropriations in recent years have been around $1.25 billion, prior to transfers. As noted above, Congress appropriated $1.26 billion for the Superfund account for FY2006, prior to transfers to two other accounts and the two rescissions. The source of funding for the Superfund program also has been an ongoing issue. P.L. 109-54 funds the Superfund program with general Treasury revenues in FY2006, as the House, Senate, and Administration had proposed. Three dedicated taxes (on petroleum, chemical feedstocks, and corporate income) historically provided the majority of funding for the Superfund program. However, these taxes expired at the end of 1995, and the remaining revenues were essentially expended by the end of FY2003. Since then, Congress has funded the program with general Treasury revenues. Some Members advocate reinstating the Superfund taxes, and argue that the use of general Treasury revenues to fund cleanup costs undermines the "polluter pays" principle, spreading cleanup costs across all taxpayers. Other Members and the Administration counter that financially viable parties still pay for the cleanup, and that polluters are therefore not escaping their responsibility. In recent years, EPA has stated that approximately 70% of sites on the NPL are cleaned up by responsible parties. (See CRS Report RL31410, Superfund Taxes or General Revenues: Future Funding Issues for the Superfund Program .) Cleanup of brownfields sites was funded within the Superfund account until FY2003, but funding for this activity is now provided within the State and Tribal Assistance Grants account and the Environmental Programs and Management account. (See discussions of these two latter accounts elsewhere in this report). Leaking Underground Storage Tank Program Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $73.0 million for the Leaking Underground Storage Tank (LUST) Program account for FY2006, the same as the House, Senate, and Administration had proposed, but less than the $69.4 million FY2005 appropriation. As discussed earlier, P.L. 109-148 also reallocated $8 million in emergency funds to EPA for responding to leaking underground tanks in Gulf Coast states affected by Hurricanes Katrina and Rita. The Administration had requested a reallocation of $15 million for this purpose in October 2005. The Superfund Amendments and Reauthorization Act of 1986 (SARA) established the LUST Trust Fund to help EPA and states cover the costs of responding to releases from leaking underground storage tanks containing petroleum when no responsible party performs the cleanup. The trust fund is used primarily to implement the LUST program through state cooperative agreement grants, to oversee and enforce corrective actions by responsible parties, and to recover expended funds used to clean up abandoned tank sites. Roughly 80% of the appropriated amount goes to the states. (For further discussion, see CRS Report RS21201, Leaking Underground Storage Tanks (USTs): Prevention and Cleanup .) Although the balance of the LUST Trust Fund exceeds $2 billion, appropriations have been around $70 million in recent years. Many state LUST programs report that they are understaffed and underfunded. States have asked Congress to provide more funds from the LUST Trust Fund to help them address more than 412,000 cleanups that are ongoing, and another 128,000 leaking tank sites that require remediation. Additionally, the presence of methyl tertiary butyl ether (MTBE) at many LUST sites is increasing the cost and complexity of cleaning up these sites. (See CRS Report RL32787, MTBE in Gasoline: Clean Air and Drinking Water Issues .) Oil Spill Response Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $15.9 million for EPA's Oil Spill Response account for FY2006, the same as the House, Senate, and Administration had proposed, and similar to the FY2005 appropriation (differences are not reflected in the table below due to rounding). While the U.S. Coast Guard responds to oil spills in coastal and inland navigable waterways, EPA responds to spills that occur on the land as a result of leaking pipelines, accidents in transport, or other events. Appropriations in this account only fund EPA's oil spill response activities. In recent years, EPA has reported that it responds to approximately 300 oil spills annually. EPA is reimbursed for site-specific response expenses from the Oil Spill Liability Trust Fund, administered by the U.S. Coast Guard. State and Tribal Assistance Grants Prior to the 0.476% and 1% rescissions, P.L. 109-54 provided $3.18 billion for the State and Tribal Assistance Grants (STAG) account for FY2006, less than the Senate amount, but more than the House and the Administration had proposed. In comparison, Congress appropriated $3.58 billion for FY2005. P.L. 109-54 also "rescinded" $80 million from past fiscal year appropriations. The rescission was to be taken from past appropriations unobligated for grants, contracts, and interagency agreements, for which the funding authorization had expired. Although the language rescinding these past funds was included within the STAG account, the conference report on H.R. 2361 ( H.Rept. 109-188 , p.112) clarified that the $80 million was rescinded from such grants, contracts, and interagency agreements that would have been funded within any EPA account. The House and Senate had proposed varying provisions for rescinding past year appropriations, which differed from the conference agreement, discussed below. Unlike the House-passed bill, neither P.L. 109-54 nor the conference report on H.R. 2361 specified the activities to which the $80 million in rescinded past year appropriations would be redirected in FY2006. The House-passed bill had specified that a rescission of $100.0 million in unobligated funds from past appropriations would have been used for increasing support for the clean water State Revolving Fund (SRF) under the STAG account (see the discussion under " State Revolving Funds " in this section of the report). The Senate-passed bill included $58.0 million in "rescinded" past year funds within the STAG account but, like the final bill, did not specify the allocation of these funds within EPA's FY2006 appropriation. Historically, the STAG account has represented the largest portion of EPA's annual appropriation, and has comprised about 40% of the agency's total budget in recent years. The majority of the funding within the account is for SRFs for water infrastructure projects. There are separate SRFs for clean water and drinking water projects. The clean water SRF provides funds for wastewater infrastructure, such as municipal sewage treatment plants. The drinking water SRF provides funds for drinking water treatment facilities and other projects needed to comply with federal drinking water requirements. The remainder of the STAG account funds other water infrastructure grants, categorical grants to states and tribes for numerous pollution control activities, grants for the cleanup of brownfields, and grants for clean school buses. Selected funding issues regarding activities within the STAG account are discussed below. State Revolving Funds Prior to the two rescissions, P.L. 109-54 provided $900 million for the clean water SRF for FY2006, less than the Senate amount, but more than the House and the Administration had proposed. In comparison, Congress appropriated $1.09 billion for FY2005. Prior to the two rescissions, P.L. 109-54 provided $850 million for the drinking water SRF, the same as the House, Senate, and Administration had proposed. Congress appropriated $843 million for the drinking water SRF in FY2005. Together, both SRFs provide seed monies for state loans to communities for constructing and upgrading wastewater and drinking water infrastructure in order to meet federal requirements. As noted in the table below, the House amount of $850 million for the clean water SRF included $100 million in the form of redirected unobligated balances from past EPA appropriations, which was not adopted in the final bill. As discussed earlier in this report, Congress also did not approve the Administration's subsequent request in October 2005 to rescind $166 million from the FY2006 appropriation of $900 million for the clean water SRF. The rescission would have taken away nearly all of the increase above the request that Congress provided and would have reduced the amount close to the Administration's original recommendation of $730 million. The adequacy of the funding level for both SRFs has been contentious. In recent years, Congress has appropriated significantly more funding than the Administration has requested for the clean water SRF. There has been less disagreement between Congress and the Administration about the appropriate funding level for the drinking water SRF. Some Members have advocated substantial increases for both SRFs in response to local water infrastructure needs generally, and more specifically, to help communities comply with new standards for drinking water contaminants (e.g., arsenic and radium). Two amendments to increase funding for the clean water SRF were introduced during the House floor debate on H.R. 2361 . One amendment, which would have increased the clean water SRF by $500 million, was rejected on a point of order. A second amendment would have increased funding by $100 million, but was not adopted. At the close of the House floor debate, the House did not agree to a motion to recommit the bill to the House Appropriations Committee to provide an additional $242 million for the clean water SRF (Cong. Rec. H3674). An amendment introduced during the Senate debate that would have modified the formula for distributing SRF funds to the states was withdrawn. Earlier this year, in agreeing to the FY2006 budget resolution ( S.Con.Res. 18 ), the Senate agreed to a floor amendment recommending $1.35 billion for the clean water SRF in FY2006. The amendment was not included in the final FY2006 budget resolution ( H.Con.Res. 95 ). As noted above, H.R. 2361 , as passed by the Senate, would have provided $1.1 billion in FY2006 for the clean water SRF. Numerous studies have estimated the future capital needs for water infrastructure. EPA issued its most recent needs survey for the construction of wastewater treatment facilities in August 2003, estimating remaining needs at a total of $181 billion nationwide over the long-term. EPA's latest drinking water needs survey, released in June 2005, projected that public drinking water systems need to invest $277 billion over 20 years. Some stakeholder groups have projected higher funding needs than those estimated by EPA. In 2000, the Water Infrastructure Network (WIN), a coalition of state, municipal, environmental and labor groups, issued a report entitled, Clean and Safe Water for the 21 st Century . This report estimated total wastewater and drinking water capital needs to be $940 billion over the next 20 years, even more if operation and maintenance needs are included (which currently are not eligible for federal assistance). Of the $940 billion amount, WIN estimates that 20-year capital funding needs for wastewater are about $460 billion and for drinking water are about $480 billion. WIN foresees a $23 billion per year funding gap between needs and current spending: $12 billion for wastewater and $11 billion for drinking water. Infrastructure Grants/Congressional Priorities (Earmarks) As in recent years, another issue in the appropriations debate was the extent to which funding should be earmarked for water infrastructure projects in specific communities, rather than provided competitively through the SRFs. Whereas communities compete for loan funds provided through the SRFs, which must be repaid, earmarked funding is awarded noncompetitively as grants that require matching funds, but not repayment. As in recent appropriations, P.L. 109-54 included provisions within the STAG account limiting the amount of grants earmarked for water infrastructure to 55% of a project's total cost, requiring the recipient to provide a 45% match. EPA was authorized to waive the matching funds requirement in certain circumstances, if providing the non-federal match would place an onerous burden on the recipient. Whether the needs of these communities should be met with SRF loan monies or grant assistance has become controversial. (See CRS Report RL32201, Water Infrastructure Projects Designated in EPA Appropriations: Trends and Policy Implications .) Prior to the two rescissions, P.L. 109-54 provided $200 million in earmarked funding for FY2006 within the STAG account for water infrastructure grants, the same as the House and Senate had proposed. The conference report refers to these projects as "Infrastructure Grants/Congressional Priorities" ( H.Rept. 109-188 , pp. 106-112). They include wastewater, drinking water, and storm water infrastructure projects in geographic-specific locations. Congress earmarked $309.5 million within the STAG account for these types of projects in FY2005. As in past years, the President's FY2006 budget did not include funding for such projects. In reporting its version of the FY2006 Interior bill, the House Appropriations Committee did not allocate the $200 million among specific community projects, as has been the practice in past years by both the House and Senate Appropriations Committees. The House committee commented in its report that the allocation of these funds would be determined later in conference. The Senate Appropriations Committee had designated funding for specific water infrastructure projects in its report, which the Senate resolved with the House in the final bill. The conference negotiation resulted in the allocation of $200 million in earmarked funding among 257 recipients identified in the conference report. Other Water Infrastructure Grants As in recent years, the Administration had requested additional funding for water infrastructure grants in three geographic-specific areas. Prior to the two rescissions, P.L. 109-54 provided the following amounts for these grants: $50 million for wastewater infrastructure projects along the U.S./Mexico border, the same as the House, Senate, and Administration had proposed, and close to the FY2005 appropriation; $35 million for the construction of wastewater and drinking water facilities in Alaska Native Villages, compared to $15 million proposed by the House and the Administration, and $40 million proposed by the Senate, all of which were less than the FY2005 appropriation of nearly $45 million; and no funding for drinking water infrastructure improvements to the Metropolitano community water system in San Juan, Puerto Rico, as the Senate had proposed, whereas the House and the Administration had proposed to maintain funding at the same level as the FY2005 appropriation of $4 million. Categorical Grants Prior to the two rescissions, P.L. 109-54 provided $1.13 billion for FY2006 to support state and tribal "categorical" grant programs within the STAG account, similar to what the House, Senate, and Administration had proposed and Congress appropriated for FY2005, although in differing amounts. EPA categorical funds are generally distributed through multiple grants to support various activities within a particular media program (air, water, hazardous waste, etc.). These grants are used by states to support the day-to-day implementation of environmental laws, including a range of activities such as monitoring, permitting and standard setting, training, and other pollution control and prevention activities. Grant funding is also used for multimedia projects such as pollution prevention incentive grants, pesticides and toxic substances enforcement, tribal assistance, and environmental information. EPA's FY2006 budget justification had presented 23 individual categorical grant programs in six sub-categories: air and radiation, water quality, drinking water, hazardous waste, pesticide and toxic substances, and multimedia. Examples of grants within these subcategories include air quality grants to support fine particulate matter (PM 2.5 ) monitoring and data collection, water quality grants to support implementation of non-point source management programs, grant assistance for development and implementation of hazardous waste programs, pesticide program implementation and pesticide enforcement, and pollution prevention incentive grants. Table 16 indicates enacted and proposed funding for each of the six subcategories of grant programs. Within the multimedia categorical grants in the STAG account, neither P.L. 109-54 , nor the House and Senate-passed bills, provided the $23 million included in the Administration's FY2006 request for a new competitive grant program to support "results-oriented" environmental protection work. According to the EPA FY2006 budget justification, these grants, referred to as the "State and Tribal Performance Fund," were intended to help states and tribes "measure, document and improve the results of their environmental protection programs." The Administration had proposed the same amount of funding for this new grant program in its FY2005 budget request, but Congress did not appropriate any funding for it. Brownfields Grants Prior to the two rescissions, P.L. 109-54 provided a total of $165.0 million for FY2006 for EPA's Brownfields Program, the same as the Senate amount, but less than the House and Administration had proposed. In comparison, Congress appropriated $163.2 million for FY2005. This program provides assistance to states and tribes for the cleanup of abandoned, idled, or underutilized commercial and industrial sites. Funding for the Brownfields program is provided within the STAG account for grants to states and tribes for environmental cleanup. Funding for EPA's expenses to administer the program is provided within the Environmental Programs and Management account, discussed earlier in this report. Table 17 indicates enacted and proposed funding within these two accounts for the Brownfields program. EPA had funded the program out of the Superfund account until FY2003. Once the land is cleaned up for reuse, grants for the economic redevelopment of brownfields traditionally have been awarded through the Department of Housing and Urban Development. In addition to specifying funding, P.L. 109-54 included an administrative provision that expanded eligibility for program grants or loans to include those who purchased property prior to the enactment of the Small Business Liability Relief and Brownfield Revitalization Act of 2001 ( P.L. 107-118 ). This provision is similar to language that the House and Senate had proposed and that Congress has included in recent appropriations bills for the past several fiscal years. The provision in P.L. 109-54 applied only to FY2006 and, unlike the Senate bill, did not provide permanent authority. P.L. 109-54 did not include language providing authority to use a portion of brownfields site characterization and assessment grants for "reasonable" administrative expenses. The Senate had proposed permanent authority for the use of grant funding for this purpose. Clean School Bus Initiative Prior to the two rescissions, P.L. 109-54 provided $7.0 million for FY2006 within the STAG account to fund cost-share grants awarded under EPA's Clean School Bus Initiative. The House had proposed $10 million to continue this initiative, the same as the Administration had requested. The Senate had proposed $1 million. In comparison, Congress appropriated just over $7 million for FY2005. Although the funding level for this program is relatively small compared to other grant programs supported within the STAG account, there has been strong interest among states and local school districts seeking grants to retrofit or replace older, polluting diesel buses. From its initial grant solicitation, EPA received more than 120 proposals from school districts, state and local agencies, and nonprofit organizations. These proposals sought a total of $60 million in grants, which significantly exceeded appropriations of $5 million each year in FY2003 and FY2004. In response to the amount of funding sought by grant applicants, EPA requested $65 million for the program in FY2005 to expand its support of diesel retrofit projects to reduce particulate matter, and for outreach efforts to raise awareness of the health risks posed to school children from diesel emissions. As noted above, Congress provided significantly less than this amount for FY2005, and the Administration followed by substantially reducing its request for FY2006. Conclusion Even after the 0.476% and 1% rescissions, P.L. 109-54 overall appropriated more funding for EPA in FY2006 than the Administration had requested, but provided less than Congress appropriated the previous fiscal year. As in past years, the largest portion of EPA's appropriation for FY2006 was allocated to the State and Tribal Assistance Grants (STAG) account. The adequacy of funding for this account was among the most prominent issues of congressional debate. The Administration's request to significantly reduce funding for the clean water state revolving fund (SRF) within the STAG account from $1.09 billion in FY2005 to $730 million in FY2006 was particularly contentious. Prior to the two above rescissions, P.L. 109-54 provided $900 million for the clean water SRF, a $170 million increase above the $730 million request but nearly a $200 million decrease below the FY2005 appropriation of $1.09 billion. Most of the increase relative to the request was made available by reducing funding for other activities within EPA's appropriation. In passing its version of the FY2006 Interior bill, the House had proposed $850 million for the clean water SRF, including $100 million rescinded from prior year appropriations. Amendments during the House debate to increase FY2006 funding for the clean water SRF closer to the FY2005 level were not adopted. The Senate had proposed $1.1 billion in passing its version of the Interior bill, which was slightly above the FY2005 appropriation. The extent to which Congress should designate or "earmark" funds for individual projects, locations, or institutions continued to be an issue. P.L. 109-54 provided less funding than Congress appropriated in FY2005 for projects identified in the conference report as "congressional priorities" (earmarks) within the Science and Technology, Environmental Programs and Management, and State and Tribal Assistance Grants accounts. Congress has traditionally awarded funding for these types of projects noncompetitively. The House Appropriations Committee had proposed a different approach for the earmarking of funds in the Science and Technology and Environmental Programs and Management accounts, recommending EPA award them competitively among past recipients of earmarked funds. This approach was not adopted in the final bill. The adequacy of funding for the Superfund program to clean up hazardous waste sites also continued to be a prominent issue in the debate over EPA's appropriation. P.L. 109-54 provided more funding for the Superfund program than Congress appropriated for FY2005. During the debate, some Members questioned whether the increase was sufficient. They, along with states, environmental organizations, and others, argued that higher funding is necessary to adequately address the risks to human health and the environment from hazardous waste sites. Other Members and the Administration asserted that the proposed funding would be sufficient to meet cleanup needs. In addition to the adequacy of funding for Superfund cleanup activities, the source of funds continued to be a point of contention in Congress. As the balance of the Superfund Trust Fund has been expended, the program is now supported with general Treasury revenues, leading some Members of Congress to advocate the reinstatement of the taxes on industry that once supported the trust fund. The Administration and other Members assert that individual polluters continue to pay for site cleanups and that a tax on industry as a whole is therefore not needed. Several bills were introduced in the first session of the 109 th Congress to reinstate Superfund taxes, but did not receive further action. P.L. 109-54 continued the use of general Treasury revenues to support the Superfund program in FY2006. EPA's use and consideration of intentional human dosing studies, whether conducted by EPA or others, for determining associated human health risks of pesticides were of interest to Members during the appropriations debate. Of particular interest were concerns about the adequacy of health safety standards for human research subjects and general ethical questions with respect to EPA's use of data from such studies. P.L. 109-54 included provisions directing EPA to complete relevant rulemaking according to specific congressional recommendations and banned the use of FY2006 funds to consider or to conduct human dosing studies in the agency's review of pesticides until a final rule is issued. Throughout the debate, there were varying levels of interest in specific funding for other EPA activities as well. The ability to increase funding for projects or add new projects in FY2006 ultimately was affected by competing priorities of Congress to allocate limited funding to numerous federal agencies within the Interior appropriations bill, where EPA's funding now falls. EPA's funding was moved from the jurisdiction of the House and Senate Appropriations Subcommittee on Veterans Affairs, Housing and Urban Development (VA-HUD), and Independent Agencies to that of the Interior subcommittees beginning with the FY2006 appropriation. This was the result of a reorganization during the first session of 109 th Congress that included the elimination of the VA-HUD and Independent Agencies appropriations subcommittee.

Early in the first session, the 109th Congress eliminated the Veterans Affairs, Housing and Urban Development (VA-HUD), and Independent Agencies appropriations subcommittee and moved funding jurisdiction for the Environmental Protection Agency (EPA) to the Interior subcommittee. As enacted in August 2005, Title II of the Interior, Environment, and Related Agencies Appropriations Act for FY2006 (P.L. 109-54, H.R. 2361) provided $7.73 billion for EPA, subject to an across-the-board rescission of 0.476%. The appropriation included an additional $80 million in unobligated funds "rescinded" from past appropriations. Overall, P.L. 109-54 provided more funding for EPA than the Administration's FY2006 request of $7.52 billion, but less than the FY2005 appropriation of $8.03 billion. Among individual programs, funding decreased for some activities and increased for others, compared with the FY2006 request and the FY2005 appropriation. At the end of the first session, the 109th Congress enacted a government-wide rescission in the Department of Defense Appropriations Act for FY2006 (P.L. 109-148, H.R. 2863). This rescission reduced FY2006 funding for EPA and all other federal agencies by 1%, except for the Department of Veterans Affairs and excluding "emergency" spending. P.L. 109-148 also reallocated $8 million in emergency funds to EPA for responding to leaking underground tanks in areas affected by Hurricane Katrina. The Administration had recommended $15 million for this purpose in October 2005, as part of a $17.1 billion reallocation of emergency funds. The law did not include the $166 million rescission for EPA's clean water State Revolving Fund (SRF) that the Administration also had proposed in October, as part of a $2.3 billion rescission affecting numerous federal agencies. In the debate over the Interior bill, considerable attention focused on the adequacy of federal assistance to states to support the clean water and drinking water SRFs. States use these funds to issue loans to communities for constructing and upgrading wastewater and drinking water infrastructure to meet federal requirements. Prior to the two rescissions noted above, P.L. 109-54 provided $900 million for the clean water SRF, an increase above the Administration's request of $730 million, but a decrease below the FY2005 appropriation of $1.09 billion. P.L. 109-54 also provided $850 million for the drinking water SRF, which was the same as the Administration had requested and similar to the FY2005 appropriation, prior to the two above rescissions. Other prominent issues in the debate over FY2006 appropriations for EPA included the adequacy of funding for the cleanup of hazardous waste sites under the Superfund program, the cleanup of commercial and industrial sites referred to as brownfields, EPA's homeland security activities, "congressional project priorities" or earmarks, and EPA's use and consideration of intentional human dosing studies for determining potential human health risks from exposure to pesticides. There also were varying levels of interest in numerous other activities funded within EPA's accounts. This report reflects final congressional action on FY2006 appropriations for EPA and will not be updated.

Introduction Estimates of military spending by foreign nations are available from a number of sources. ThisCRS report lists and compares military expenditures of the United States and foreign countries usingtwo of the most commonly cited and readily available publications: The Military Balance, publishedin October of each year by the London-based International Institute for Strategic Studies (IISS)andWorld Military Expenditures and Arms Transfers (WMEAT), published about annually by the U.S.Department of State, Bureau of Arms Control. (1) Although the IISS and U.S. State Department aim to provide figures that are as consistent and accurate as possible, cross-national comparisons of defense spending are inherently imperfect. Available sets of figures are useful for comparative purposes, but often do not correspond with oneanother for a variety of reasons. This report provides two sets of figures from widely recognizedsources in order to offer Congress a sample of the data published on this topic. The Military Balance In The Military Balance , military expenditures are defined as the cash outlays of a central orfederal government to meet the costs of national armed forces. The term "armed forces" includesstrategic, land, naval, air, command, administration, and support forces. It also includes paramilitaryforces such as the gendarmerie , as well as customs service and border guards if these are trained inmilitary tactics, equipped as a military force and operate under military authority in the event of awar. (2) The IISS produces the most current estimates of foreign military expenditures. The 2003-2004 edition of The Military Balance contains military expenditure figures from 2002, while the mostrecent edition of the U.S. State Department's WMEAT contains military expenditure figures from1999. The IISS obtains its figures using data from national governments, the North Atlantic TreatyOrganization (NATO), the United Nations, the Organization for Security and Cooperation in Europe(OSCE), and the International Monetary Fund (IMF). However, consistent and accurate data formany countries are not available even from these sources, as many countries neither publish theirmilitary expenditures nor report them accurately to these organizations. In these cases, the IISSestimates military expenditures "based on information from several sources." (3) Such cases aremarked with an "E" on Table 1 and Table 2 in this report. For most countries, the IISS converts budget data into dollars using current exchange rates in US Dollars. For countries where basic economic data are hard to obtain, such as former commandeconomies like China, Russia, or countries in conflict, the IISS uses purchasing power parity (PPP)estimates for its conversions. PPPs measure the relative purchasing power of different currenciesover equivalent goods and services. This method accounts for the substantial differences inestimated prices for defense goods. World Military Expenditures and Arms Transfers (WMEAT) The U.S. State Department Bureau of Arms Control's World Military Expenditures and ArmsTransfers (WMEAT) report, most recently published on February 6, 2003, provides figures for theten-year period from 1989 to 1999. (4) WMEAT usesthe World Bank's average 1999 market exchangerates in order to calculate military expenditures for most countries. (5) In cases where no appropriateexchange rate is available, WMEAT uses PPP estimates. For NATO members, WMEAT measures military expenditures according to a common definition that includes military retired pay and military-type expenditures of defense ministries. Inthis definition, a) civilian-related expenditures of defense ministries are excluded and military-relatedexpenditures of other ministries are included; b) grant military assistance is included in theexpenditures of the donor country; c) purchases of military equipment for credit are included at thetime the debt is incurred, not at the time of payment. For most other countries, figures represent the expenditures of the ministry of defense. When these are known to include the costs of internal security, an attempt is made to remove suchexpenditures. A wide variety of data sources is used for these countries, including the publicationsand data resources of other U.S. Government agencies, standardized reporting to the United Nationsby country, and other international sources. (6) For Russia, China, and many current or former communist countries, WMEAT estimates military expenditures in different ways. Figures for China are based on U.S. Government estimatesof the yuan costs of Chinese forces, weapons, programs, and activities. WMEAT warns that figuresfor Chinese military spending should be treated as having a wide margin of error. (7) Estimates for most states comprising the former Soviet Union and Warsaw Pact are made by establishing the ratio of military expenditures to Gross National Product (GNP) in nationalcurrencies and then multiplying this ratio by the World Bank's estimate of GNP in dollars asconverted to international dollars by estimated PPPs and reported in the World Bank Atlas 1997 . (8) Using the IISS and WMEAT data, this report presents the following tables and figures: Table 1: U.S. and Foreign Defense Spending (by Rank): Data from the IISS and U.S. Department of State (countries ranked according to WMEATfigures) Table 2: U.S. and Foreign Defense Spending (by Country): Data from the IISS and U.S. Department of State Figure 1: U.S. Defense Expenditures as a Percentage of the Top 10 Defense-Spending Countries, 2002 (IISS figures) Figure 2: U.S. Defense Expenditures as a Percentage of the Top 10 Defense-Spending Countries, 1999 (WMEAT figures) Figure 3: U.S. Defense Expenditures as a Percentage of the Top 25 Defense-Spending Countries, 2002 (IISS figures) Figure 4: U.S. Defense Expenditures as a Percentage of the Top 25 Defense-Spending Countries, 1999 (WMEAT figures) Figure 5: Defense Expenditures as a Percentage of GDP: Top 25 Countries, 1999 (WMEAT figures) Figure 6: Defense Expenditures as a Percentage of GDP: Top 25 Countries, 2002 (IISS figures) Table 3: NATO Defense Expenditures: Data from the IISS and U.S. Department of State (countries ranked according to IISS figures) Figure 7: U.S. Defense Expenditures as a Percentage of NATO Defense Expenditures, 1999 (WMEAT figures) Figure 8: U.S. Defense Expenditures as a Percentage of NATO Defense Expenditures, 2002 (IISS figures) Figure 9: NATO Defense Expenditures as a Percentage of GDP, 1999 (WMEAT figures) Figure 10: NATO Defense Expenditures as a Percentage of GDP, 2002 (IISS figures) Table 1. U.S. and Foreign Defense Spending (by Rank): Data from the IISS and U.S. Department of State (current year U.S. dollars inmillions) * These figures are based on purchasing power parity (PPP) estimates. PPPs measure the relative purchasing power of different currencies over equivalent goods and services. This method betteraccounts for the substantial differences in relative prices for defense goods. E These figures were estimated by IISS and not based on reported data from the individual country. Table 2. U.S. and Foreign Defense Spending (by Country): Datafrom the IISS and U.S. Department of State (current year U.S. dollars inmillions) * These figures are based on purchasing power parity (PPP) estimates. PPPs measure the relative purchasing power of different currencies over equivalent goods and services. This method betteraccounts for the substantial differences in relative prices for defense goods. E These figures were estimated by IISS and not based on reported data from the individual country. *Countries #2 - #10: China, Russia, France, United Kingdom, Germany, Italy, India, Japan, SaudiArabia * Countries #2 - #10: China, Russia, France, United Kingdom, Germany, Italy, Japan, SaudiArabia,China-Taiwan *Countries #2 - #25: China, Russia, France, Japan, United Kingdom, Germany, Italy, Saudi Arabia,India, South Korea, Brazil, Israel, Turkey, Spain, Canada, Australia, China - Taiwan, Netherlands,Indonesia, Greece, Mexico, Iran, Ukraine, N. Korea *Countries #2 - #25: China, Japan, France, United Kingdom, Russia, Germany, Italy, Saudi Arabia, China-Taiwan, South Korea, India, Turkey, Brazil, Israel, Canada, Spain, Australia, Netherlands,Poland, Iran, Greece, Sweden, Dem. Rep. of Congo, Ukraine Note: The United States, with defense spending at 3.0% of GDP in 1999 according toWMEAT,would rank #50 on this chart. Note: The United States, with defense spending at 3.3% of GDP in 2002 according to theIISS,would rank #47 on this chart. Table 3. NATO Defense Expenditures: Data from the IISS and U.S. Dept. of State (current year U.S. dollars in millions) *Non-U.S. NATO: United Kingdom, France, Germany, Italy, Turkey, Greece, Czech Republic,Norway, Portugal, Poland, Italy, Netherlands, Hungary, Denmark, Germany, Belgium, Canada,Spain, Luxembourg, Iceland *Non-U.S. NATO: United Kingdom, France, Germany, Italy, Turkey, Greece, Czech Republic,Norway, Portugal, Poland, Italy, Netherlands, Hungary, Denmark, Germany, Belgium, Canada,Spain, Luxembourg, Iceland

This report lists and compares military expenditures of the United States and foreign nations using two sources: the London-based International Institute for Strategic Studies' (IISS) The MilitaryBalance, and the U.S. State Department's World Military Expenditures and Arms Transfers (WMEAT). Although the IISS and the U.S. State Department aim to provide figures that are as consistent and accurate as possible, cross-national comparisons of defense spending are inherently imperfect. Available sets of figures are useful, but often do not correspond with one another for a variety ofreasons. This report provides two sets of figures from widely recognized sources in order to offerCongress a sample of the data published on this topic. This report will be updated as necessary.

Introduction The Earth's surface has warmed by 1.1 o to 1.5 o Fahrenheit since the Industrial Revolution and precipitation has increased over the past century, although some regions have become wetter while some have become drier. Increases in ocean temperatures, altered wind patterns, extreme weather events, melting glaciers and sea ice, and timing of seasons have also been observed. The Intergovernmental Panel on Climate Change (IPCC) in 2007 declared that "[w]arming of the climate system is unequivocal...." and that most of the observed change since the 1970s is likely due to greenhouse gases emitted as a result of human activities. Experts project that if greenhouse gas (GHG) emissions are not abated well below current levels, the Earth's climate will warm further—to levels never experienced by human civilizations. If, and as, the climate moves further from its present state, it will reconfigure the patterns to which current human and ecological systems are adapted, and the risk of abrupt changes will increase. Understanding of the magnitude, causes, and implications of climate change continues to grow. But alongside efforts to further that understanding, a sense of urgency is spurring many international, national, regional, and local policymakers, industry leaders, non-governmental organizations (NGOs), and citizens to mobilize toward more concrete actions. Concern about poorly understood but potentially catastrophic impacts of human-induced climate change drives the impetus to identify, evaluate, and initiate concrete policy actions to address human activities—such as the emissions of GHGs, land use changes, and forestry practices—believed to contribute to climate change. In parallel, growing attention is being given to characterizing and supporting adaptations to changes already observed or expected future changes. Domestic actions to address climate change are moving independently across many fronts. In the 110 th Congress, numerous bills have been proposed to address climate change research and policy; one bill ( S. 2191 ) that would cap and reduce greenhouse gas emissions was reported by the Senate Committee on Environment and Public Works and the Senate agreed on June 2, 2008 to consider the bill (now S. 3036 ). The Supreme Court in 2007 ruled that the Administration must consider regulating greenhouse gases from motor vehicles as air pollutants, and President George W. Bush in 2008 proposed a qualified national goal for U.S. greenhouse gas emissions to peak by 2025 and then decline. States and localities have moved forward with their own plans and regulations in lieu of a strong national framework. Primary concerns are the costs, which could reach trillions of dollars over coming decades, depending on policy choices; the distribution of those costs; and the effectiveness of policies, with the knowledge that U.S. greenhouse gas reductions would achieve success only if sufficient international cooperation can be achieved as well. Debate internationally has revived over how nations may commit to mitigation, adaptation, and technology actions beyond 2012, the end of the current commitment period of the Kyoto Protocol to the United Nations Framework Convention on Climate Change. Negotiations are aiming to produce a post-2012 decision by the end of 2009. U.S. domestic policy development could influence and support international cooperation or introduce impediments, depending on how the interplay is managed. The stakes are potentially high: the effectiveness of mitigating human-induced climate change depends on action by all major emitters, while the costs of delay, deferral or ineffectiveness have been projected by some analysts to reach many trillions of dollars over coming decades. This report does not discuss or analyze current legislative proposals. Rather, it introduces the reader to fundamentals of the climate change issue. Part One summarizes current understandings and controversies concerning the science, economics, international cooperation, and other aspects of the climate change policy problem. Part Two is a brief update on the status of domestic and international policies. Part Three outlines the policy toolbox seen as being available to policymakers to address the challenge as they define the emerging legislative agenda. Part One: Current Climate Change Issues Climate Change Science2 Observed Changes in Global Climate The Earth's surface has warmed by 1.1 o to 1.5 o Fahrenheit since the Industrial Revolution (measured since 1880), with most warming occurring since the 1970s. Precipitation has increased over the past century, although some regions have become wetter while some have become drier. These results are consistent with scientists' understanding of how heightened greenhouse gas concentrations affect climate regionally. Increases in ocean temperatures, altered wind patterns, extreme weather events, melting glaciers and sea ice, and timing of seasons have also been observed. The Intergovernmental Panel on Climate Change (IPCC) in 2007 declared that "[w]arming of the climate system is unequivocal.... Observational evidence from all continents and most oceans shows that many natural systems are being affected by regional climate changes." Causes of Observed Climate Change Although there is significant natural variability in the Earth's climate, scientists recognized more than a century ago that pollution from human activities could theoretically warm the Earth. GHGs in the Earth's atmosphere allow the Sun's short wave-length radiation to pass through to the Earth's surface. Once the radiation is absorbed by the Earth and re-emitted as longer wave-length radiation, GHGs trap the heat in the atmosphere. This is often called the "greenhouse effect." The natural presence of GHGs (especially water vapor and carbon dioxide) in the atmosphere warms the Earth to habitable temperatures. Studies show that solar variability has contributed some of the observed changes in global temperature, especially early in the 1900s. A few studies conclude that, at most, solar variability has contributed 10% to 40% of the observed change of the 20 th century. Further research would be required to quantify how some suggested influences, for example, galactic cosmic rays, contribute to observed climate changes. Most scientists conclude that a majority of the Earth's warming since the 1970s is due to GHG emissions from human activities, especially use of fossil fuels, clearing of land, and some industrial processes. While scientists agree that GHGs in the atmosphere are responsible for trapping the Sun's radiation and raising the Earth's temperature to current levels, some scientists disagree that projected increases in GHG concentrations would raise temperatures significantly. Sources of GHG Emissions, and Removals from the Atmosphere Beyond water vapor (which is thought not to be directly influenced by humans), the best-understood greenhouse gases include carbon dioxide (CO 2 ); methane (CH 4 ); nitrous oxide (N 2 O); and certain fluorinated compounds, including chlorofluorocarbons (CFC), hydrochlorofluorocarbons (HCFC), hydrofluorocarbons (HFC), perchlorofluorocarbons (PFC), sulfur hexaflouride (SF 6 ), and nitrous trifluoride (NF 3 ). These GHGs remain in the atmosphere for decades to thousands of years and are generally well-mixed around the globe; hence, their warming effects are largely global and persist for decades to millenia. The long atmospheric residence also means a long lag between policies to abate GHG emissions and their full effects on the climate system. When emissions of the long-lived GHGs are greater than their removals by, for example, photosynthesis, the GHGs accumulate in the atmosphere: the GHG concentrations increase. The increases of concentrations of specific GHGs since the Industrial Revolution (measured since about 1850) include CO 2 by more than 33%, from about 280 parts CO 2 per million (ppm) to current levels of over 380 ppm; Methane (CH 4 ) by about 150%, although the rate of increase has declined over the past decades to essentially no growth (but variable year-to-year); Nitrous oxide (N 2 O) by 16%; and essentially all concentrations of CFC, HCFC, HFC, PFC, and SF 6 . Human-related GHG emissions are partly offset by human-related carbon removals and sequestration in growing forests, some agricultural soils, and other reservoirs. Such "sinks" offset about 11% of U.S. GHG emissions in 2005. For the year 2005, CO 2 constituted approximately 74% of the global, human contribution to long-lived GHG emissions; CH 4 was about 16%, and N 2 O was about 8% ( Figure 1 ). Globally in 2005, the top 10 emitting countries contributed about 60% of global GHG emissions, and the top 20 emitting countries contributed about 72% of global GHG emissions. , China probably is now the leading emitter of human-related GHGs, likely having recently surpassed the United States ( Figure 2 ). Most experts expect that Chinese and other developing countries' GHG emissions will continue to grow more rapidly than those of the United States and other already industrialized countries. Projections of Greenhouse Gas-Induced Climate Change10 The climate-related impacts borne by human and ecological systems will depend on the combination of natural climate variability plus human-induced climate changes. Scientists project that, during the 21 st Century, it is very likely that rising GHG emissions, as expected with current trends and policies, and the resulting higher concentrations in the atmosphere, will raise the global average temperature above natural variability by at least 1.5 o Celsius (2.7 o Fahrenheit) above 1990 levels. The estimates considered most likely by many scientists are for GHG-induced temperature increases around 2.5 to 3.2 o C (4.5 to 5.8 o F) by 2100. There is a small but not trivial likelihood that the GHG-induced temperature rise may exceed 5 o C (9 o F) above natural variability by 2100. In context, the global average temperature is estimated currently to be approaching or exceeding the highest level experienced since the emergence of human civilizations. Future climate change may advance smoothly or sporadically, and some regions are likely to experience more fluctuations in temperature, precipitation, and frequency or intensity of extreme events than others. Almost all regions are expected to experience warming; some are projected to become warmer and wetter, while others would become warmer and drier. Sea levels could rise between 7 and 23 inches by 2100, not including the effects of possible accelerated melting of the Greenland or Antarctic ice sheets. Patterns consistent among different models have led to some common expectations: GHG-induced climate change would include more heat waves and droughts; decreased extreme cold episodes; and increased summer warming and dryness in the central portions of continents. Scientists also expect precipitation to become more intense when it occurs, thereby increasing runoff and flooding risks. Potential Impacts of Projected Climate Change A wide band of uncertainty surrounds projections of impacts, and in particular, critical thresholds for non-linear or abrupt effects. Some impacts of climate change are expected to be beneficial in some locations with a few degrees of warming (e.g., increased agricultural productivity in some regions, less need for space heating, opening of the Northwest Passage for shipping and resource exploitation). Most impacts are expected to be adverse (e.g., lower agricultural productivity in many regions, drought, rising sea levels, spread of disease vectors, greater needs for cooling). Risks of abrupt, surprising climate changes, with accompanying dislocations, are expected to increase as global average temperature increases, and could push natural and socio-economic systems past key thresholds of tolerance. Some populations will have the resources to migrate and adapt successfully—even profit from new opportunities that will emerge—while others could lose livelihoods or lives. Adaptations can help mitigate impacts and damage costs, but also impose costs, often on those who can least afford them. Because climate change will occur with different magnitudes and characteristics in different regions, resulting dislocations and disparities across locations may have implications for political stability and security. Some experts and stakeholders believe that likely ecological disruptions are among the most compelling reasons that humans must act to reduce their interference with the climate system. As the degree and distribution of climate changes continue, ranges of species are likely to change. Climate change is highly likely to create substantial changes in ecological systems and services in some locations, and may lead to ecological surprises. The disappearance of some types of regional environments also raises risks of extinctions of species, especially those with narrow geographic or climatic distributions, and where existing ecological communities disintegrate. One study projects that, under a high climate change scenario, 12% to 39% of the Earth's land areas may experience climates not found at present, while 10% to 48% of land areas' existing climates may disappear from the Earth by 2100. In the low climate change scenarios, 4% to 20% of land areas experience new climates and 4% to 20% see existing climates disappear. The researchers concluded, "[t]here is a close correspondence between regions with globally disappearing climates and previously identified biodiversity hotspots; for these regions, standard conservation solutions (e.g., assisted migration and networked reserves) may be insufficient to preserve biodiversity." Many different views exist regarding how much concern to give to ecological impacts: some people value the impacts only according to the services that natural systems provide to humans (for example, for recreational activities or provision of food); other people emphasize ethical perspectives, for example, for stewardship of the Earth's resources. Likewise, some people emphasize the relatively mild impacts possible for the United States, while others give weight to the catastrophic impacts likely for at least some populations in other countries. Such differences in values are behind many of the controversies in the public debates about how to address climate change, and what part of the global effort the United States should undertake. Growing attention to impacts and possible adaptations has led, in the 110 th Congress, to proposals in a number of bills that would increase research and programmatic attention on possible impacts of climate change and options for adaptation. Some bills are cross-sectoral, including some that propose to repeal and replace the Global Change Research Act of 1990; others are targeted to specific concerns, such as drinking water or wildlife. Some proposals are aimed at increasing research on impacts and adaptation, while others are intended to provide authority and resources to plan and carry out specific adaptations in selected sectors. Proposed Greenhouse Gas Concentration Targets The wide range of uncertainty regarding how much GHG emissions may rise, how much the climate may change, and how risky those changes may be (and how they are distributed among different populations) results in a broad spectrum of views regarding whether and how deeply to reduce GHG emissions. To limit future risks, many experts propose targets to cap or "stabilize" the concentrations of GHGs in the atmosphere; any level of stabilization is associated with a wide range of possible temperature outcomes. Current CO 2 concentrations are over 380 parts per million (ppm); future projections in the absence of changes from current policies range from about 550 ppm to almost 1000 ppm by 2100. Most debate concerning the appropriate level at which to stabilize GHG concentrations is around levels of 450, 550 or 650 ppm of CO2 or CO2-equivalents by 2100. Some people advocate targets of 350 ppm CO 2 e or lower (less than current concentrations), while others oppose setting stabilization targets altogether. Preferences for alternative targets are partially explained by differing views of how great the adverse impacts of climate change would be, associated with different stabilization targets, and differing views of how to address risks. The "Stern Report," discussed further in the economics sections below, concluded that, [s]tabilising [atmospheric concentrations] at or below 550 ppm CO 2 e would require global emissions to peak in the next 10 - 20 years, and then fall at a rate of at least 1 - 3% per year.... By 2050, global emissions would need to be around 25% below current levels. These cuts will have to be made in the context of a world economy in 2050 that may be 3 - 4 times larger than today - so emissions per unit of GDP would need to be just one quarter of current levels by 2050. To stabilise at 450 ppm CO 2 e, without overshooting, global emissions would need to peak in the next 10 years and then fall at more than 5% per year, reaching 70% below current levels by 2050. While technologies exist today to begin such a trajectory, the target would require development and deployment of new technologies over the longer term. Program Design and the Costs of GHG Mitigation Greenhouse gas control programs raise concerns about costs: that the costs may be large; that the costs of mitigation may exceed the benefits of mitigation; or, that the distribution of costs may not be "fair." Many studies show that costs would be influenced by the stringency of the reductions, timing of its reductions, and flexibility allowed by the program design. Designing "flexibility" in a GHG mitigation program (e.g., allowing trading of emission permits; generation by non-covered sources of emission reduction credits or "offsets" against allowances; banking or borrowing of permits; etc.) can significantly lower costs, according to economic modeling. Modeled estimates of costs for a given GHG reduction program typically vary because of differences in the models used; and methods and assumptions, regarding, among other factors: economic and energy growth rates without policies; future energy resource availability and prices; availability, efficiencies and costs of technologies; specific assumptions about program design (such as the scope of emission trading or offsets allowed; whether emission permits are given or auctioned; uses of any revenues, etc.); responsiveness of people's choices and technology development to policy incentives; and the scope of costs and "co-benefits" counted in the analysis. Some but not all differences among results represent irreducible uncertainties; specification (e.g., of program design) and study of appropriate assumptions can allow one to build more confidence in some estimates than others. Many insights may be gained from the sensitivity analyses provided, which illustrate how costs and distributional impacts may vary with alternative judgments regarding the future and the specific program designs. Studies indicate that mitigation and adaptation efforts could also support other policy objectives ("co-benefits"), such as improving energy security and reducing health costs of pollution. Such co-benefits are discussed in a later section. Distributional Impacts of Programs Critical to many policy makers in GHG mitigation and design of program are the distributions of costs on specific industry sectors and employment groups, U.S. regions, and income groups. One particularly challenging issue is how to address concerns regarding possible harm to trade and competitiveness of those countries and industries that shoulder the responsibilities of GHG reductions. To the degree that those industries (or companies within industries) increase their costs with mitigation measures, they may experience a price disadvantage in relation to competitors without GHG requirements or competitors that are advantaged by GHG regulation (for example, sources that have positioned themselves to reduce emissions at lower costs than their competitors). Other groups that are likely to be disproportionately impacted by policies to limit GHG emissions include low income populations, which typically spend more of their incomes on energy bills, and may not have choices or control over factors that determine their energy dependence (such as renters). Alternatively, some groups may gain disproportionately from GHG controls. For example, manufacturers that specialize in high-efficiency vehicles would experience different costs, market share, and profitability than manufacturers that specialize in high-powered vehicles. Some groups may benefit from certain policy designs, for example, depending on whether existing GHG emitters are given (rather than sold) their emission permits ("allowances"). These "equity" issues may drive policy design, and could make the emerging policy overall more costly, but with more acceptable distributional effects. Climate Change and Other Policy Issues: Commonality or Conflict? Because GHG emissions are related to so many sectors, climate change policy inevitably affects other national policy objectives, such as public well-being, reliable energy services, affordable food supply, and prudent management of natural resources. Many technologies and policy options can serve all or many policy objectives. For example, economical investment in energy efficiency can support all the goals above. Other options, such as promoting ethanol production from corn, may involve difficult trade-offs. Cross-issue analysis can help to maximize win-win choices and avoid conflicts, but may be under-utilized due to lack of resources, disciplinary or jurisdictional obstacles, or uneven input into policy processes. U.S. Costs of GHG Mitigation Analyses by the Energy Information Administration (EIA) and the Environmental Protection Agency (EPA) suggest that efficiently designed GHG reduction legislation could reduce U.S. GHG emissions from the reference case by about one-quarter by 2030, at a cost of roughly 0.3% to 3.8% of the business-as-usual Gross Domestic Product (GDP), with half the modeled cases at 1% of GDP or less. Technically and politically, though, an "efficiently designed" program may not be realistic. CRS analysis (Parker and Yacobucci) found from various studies that the uncertainties about the future reference ("business-as-usual") cases for incomes per capita were greater than the impact on them by the GHG mitigation proposed by the 110 th Congress' S. 2191 (now S. 3036 ), the "Lieberman-Warner" bill. (This bill was reported out of the Senate Committee on Environment and Public Works in 2007 and proceeded to debate by the Senate in June 2008.). Beliefs about the effectiveness of measures in S. 2191 ( S. 3036 ) to stimulate technological advance are an important difference among several cost analyses of the bill. Parker and Yacobucci found that: In its analysis, [Clean Air Task Force] CATF expresses confidence in S. 2191 's various technology and efficiency provisions and models the bill assuming EIA's Best Available Technology (BAT) case, banking, and offsets. In contrast, [the American Council for Capital Formation/National Association of Manufacturers] ACCF/NAM states that it is "unlikely" that technology, new energy sources, and market mechanisms (e.g., carbon offsets, banking) will be sufficiently available to achieve S. 2191 's emission targets. Accordingly, ACCF/NAM's assumptions differ substantially from CATF's and other studies by excluding banking, significantly capping the availability of various technologies, and assuming higher construction costs. This difference was among the main reasons that the CATF produced a cost estimate at -0.9% (a reduction) of Gross Domestic Product per capita in 2030, compared to the ACCF/NAM's -2.6% to -2.7%. Regarding the effects of S. 2191 ( S. 3036 ) on international trade and the possible movement abroad of manufacturing (and its emissions, termed "leakage"), the Environmental Protection Agency provided the only analysis to date: it found no "leakage" if currently developing countries were to undertake action to maintain their 2015 GHG emission levels beginning in 2025, and to return their GHG emissions to 2000 levels by 2050. In a worst case scenario, EPA's analysis of a no-international-actions-to-2050 scenario projected that developing countries' projected GHG emissions would be about 1% higher, equivalent to U.S. emission leakage rates of approximately 11% in 2030 and 8% in 2050. U.S. exports were projected to decline, but imports might increase or decrease, depending on assumptions. Global Costs of GHG Mitigation The Intergovernmental Panel on Climate Change (IPCC), in its Fourth Assessment Report (2007), found that most economic analyses indicate that policies aiming to stabilize GHG concentrations in the atmosphere at 590 to 710 parts per million (ppm) of CO 2 -equivalent could incur small aggregate costs—or possibly some gains—to economic growth. Achieving the lowest concentrations analyzed (e.g., 450 ppm) could dampen growth, with 90% of the studies indicating costs less than 3% of cumulative Gross World Product projected for 2010 to 2030, or less than 0.12 percentage points of the average annual growth rate. While the IPCC represents the consensus of a wide range of experts and governments, some other experts question its findings and conclusions. Policy choices would determine how the costs, or changes in growth, would be distributed across and within regions internationally. In addition, adaptation efforts are considered necessary because of climate changes occurring now and likely in the future that are attributed to past GHG emissions. Though adaptation costs typically are not factored adequately into economic analyses, the effects on economies and non-market processes of climate change policies will reflect both the costs of mitigation, the costs of adaptation, and residual damages or benefits. Benefits of Mitigating Climate Change Inadequate Data, Tools, and Understanding of Impacts Many people implicitly wish to compare the benefits of proposed action with the costs of that action; however, data and appropriate tools are inadequate to compare reliably and quantitatively the benefits and costs of abating climate change. Benefits analysis has received relatively little attention in the United States, with most analyses coming from other countries. A number of studies have attempted to estimate the benefits of mitigating GHG emissions, with a wide range of partial estimates. More rare are the few studies that integrate both mitigation and impacts of climate change, though the likely interaction between them is well recognized in the research community. No studies of benefits are comprehensive: all omit some sectors and types of impacts; all face challenges in quantifying and monetizing non-market effects; all require applying assumed (typically monetary) values to disparate nations and people potentially affected; and most do not address "multiplier effects" or variability and uncertainties in their methods. Further, the most commonly used metric of impacts is change in Gross Domestic Product or Gross World Product, although these are poor measures of the well-being of people and the world's natural systems. Moreover, the capability does not exist to assess all the nuanced and interacting ramifications of a changing climate. For example, although adverse climate change in many developing countries could exacerbate political instabilities and increase threats to U.S. security, calculating the magnitude and timing of added security risks—and the value of lessening them—would be guesswork. Furthermore, because many projections place the Earth's future climate into a range never experienced by human civilizations, observational evidence from the past is helpful but inherently not analogous to what may evolve; much will remain unknown no matter how much is invested in research. On the other hand, many flaws in current benefits analyses could be overcome with more study and improved analysis, and explicit methods for taking uncertainties into account (with value judgments) for more robust decision-making. Global Costs of Climate Change Almost all economists conclude that, while climate change in the near-term could have globally aggregated net benefits, further climate change would tend to decrease benefits while damages would increase. In net, they conclude that long-term climate change is likely to damage economic growth worldwide and incur cumulative costs that could reach many trillions of dollars. Nonetheless, most economists who have modeled both mitigation costs and its benefits conclude that well designed policies could have modest costs and save trillions of dollars over the coming century. Most economists would agree that the long-term costs of climate change merit some degree of near-term and mandatory action to reduce GHGs. However, beyond those general points, there is a wide range of views and controversies. The most comprehensive and rigorous review of the benefits of mitigating climate change is the "Stern Report," commissioned by the Government of the United Kingdom and released in 2006. The Stern Report has been strongly criticized by some notable economists, due to differences of views over methodological challenges, as well as to allegations of selectiveness of studies used. Other equally reputable economists have indicated their acceptance of the methods and/or provided analysis contending that the Stern estimates of possible climate change costs may be low. In brief, the Stern Report underscores that climate change policy must involve value-laden choices by public decision-makers. In support of this, the Stern Report laid out a hierarchy of different valuation choices, leading to estimates of climate change damages ranging from 0 to 20% or more of global consumption "now and in the future." Potential Costs of Climate Change to the U.S. Economy Several studies of the potential costs (or benefits) to the United States of projected GHG-induced climate change have been conducted, though none is comprehensive and all suffer from the general challenges of applying economic and ethical methods to the issue. A recent review of economic studies of impacts in the United States by the University of Maryland's Center for Integrative Environmental Research stated the following "Five Key Lessons," which reflect commonly held views among climate impacts researchers: Economic impacts of climate change will occur throughout the country. Economic impacts will be unevenly distributed across regions and within the economy and society. Negative climate impacts will outweigh benefits for most sectors that provide essential goods and services to society. Climate change impacts will place immense strains on public sector budgets. Secondary effects of climate impacts can include higher prices, reduced income, and job losses. The report cites a variety of regional studies that project costs of climate change impacts to localities or sectors in the tens of millions to hundreds of billions of dollars through the 21 st Century. The report also concludes, "[t]here is, however, a lack of research that quantifies and compares these impacts, and a deficiency in using what is known about climate impacts to guide adaptation actions from the national level down to the local level. Thus, the full economic costs will likely be much higher than what is reported currently." Few studies have attempted to aggregate the economic costs of climate change to the United States across sectors in the absence of effective mitigation policies, and all of those studies qualify their results by recognizing the uncertainty and methodological questions. One such study, by economist Dale Jorgenson and others, which examined a wide range of possible projections of climate change, though only market effects, concluded: Based on the market sectors and range of impacts considered for this analysis, projected climate change has the potential to impose considerable costs or produce temporary benefits for the U.S. economy over the 21 st century, depending on the extent to which pessimistic or optimistic outcomes prevail. Under pessimistic assumptions, real U.S. GDP in the low climate change scenario is 0.6 percent lower in 2100 relative to a baseline that assumes no change in climate; in the high climate change scenario, the predicted reduction in real GDP is 1.9 percent [lower in 2100]. Under the additional "high and drier" climate scenario, however, real GDP is reduced more dramatically—by as much as 3.0 percent by 2100 relative to baseline conditions. Furthermore, under pessimistic assumptions negative impacts on GDP grow progressively larger over time, regardless of the climate scenario. In contrast, under optimistic assumptions real U.S. GDP by 2100 is 0.7 to 1.0 percent higher than baseline conditions across the low, central and high climate scenarios, but these benefits eventually diminish over time. Nevertheless, to the extent that responses in certain key sectors conform to the optimistic scenarios, there is a distinct possibility that some degree of climate change can provide modest overall benefits to the U.S. economy during the 21 st century. Many studies underscore a key point: the impacts of climate change on people and on ecosystems, and the benefits or damages, will depend heavily on the ability to adapt by different populations and systems, and the effectiveness of actions to adapt. Concerns about climate change, consequently, often emphasize the vulnerabilities of populations with low financial and technical resources, or that may be otherwise constrained in their adaptations (e.g., native cultures that are dependent on, and value, a habitat that may be eliminated by climate change, as in some Arctic populations). "Co-Benefits" and Trade-offs of GHG Mitigation Adding to the benefits of GHG mitigation would be many measures that would help to avoid climate change and would serve other national goals, such as improving energy security, abating the world food crisis, reducing pollution, and conserving critical natural resources and biodiversity. For example, actions to suppress demand for petroleum would help suppress global oil prices and total U.S. expenditures for energy. Such "co-benefits" of GHG mitigation would boost the value of abating climate change. Offsetting the benefits would also be some trade-offs with other national or local goals, although many trade-offs could be minimized or eliminated through policy design that is mindful of the relationships among issues. For example, incentives to reduce GHG emissions by increasing biofuel use could raise food prices and reduce food security, or could enhance food security by selectively encouraging feedstocks that do not compete for agricultural land and key commodities, and by improving agricultural efficiencies. Importance of the Distribution of Losses (or Gains) Experts agree that climate change, in the near term, will create both those who gain (e.g., agricultural producers in cool to moderate and wet climates) and those who will suffer (e.g., agricultural producers in hot and dry climates). Some people are likely to experience slow and moderate changes, while others are likely to experience such radical changes in their climate that their current way of life—and possibly their locales—becomes unsustainable. Some people will have the resources to migrate and adapt successfully—even profit from new opportunities that will emerge—while others could lose livelihoods or lives. The same would be true also with policies to mitigate GHG emissions (e.g., the potential effects on coal producers). Embodied in any debate over climate change and what to do about it are the potential inequities of policies to mitigate or not to mitigate climate change. Despite these distributional hazards being fundamental to the debate, they are among the least researched of all climate change issues. Part Two: The International and Domestic Policy Fields The stage for upcoming policy deliberations is set by the existing frameworks internationally and domestically. The developing countries now contribute the major, and most rapidly increasing, share of GHG emissions globally. Effectively abating climate change would require GHG reductions in all major countries. Additionally, some industries fear adverse trade impacts if their competitors in other countries do not have similar requirements to reduce GHG emissions. In the United States, these issues, along with concerns about U.S. leadership and sovereignty, figure into the debate over long-term GHG concentration targets and near-term emission controls. Legislative actions would be superimposed on existing federal programs and a patchwork of state and local policies to reduce a part of U.S. GHG emissions. One legislative challenge would be to create a coherent strategy from the current components. Status of International Cooperation on Climate Change34 The United Nations Framework Convention on Climate Change Internationally, 192 countries—including the United States—joined the 1992 United Nations Framework Convention on Climate Change (UNFCCC) to stabilize "greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system" (Art. 2). Although science can help to identify the degree of "interference" and implications of climate changes at different concentration levels or degrees of temperature change, most scientists agree that the determination of "dangerous" is a political decision, not one that can be objectively decided by scientists. The Kyoto Protocol Agreeing that mandatory GHG reductions would be necessary to avoid "dangerous anthropogenic interference," most countries in 1997 signed the Kyoto Protocol. It sets legally binding GHG targets—an average 5% reduction below 1990 emissions levels during the period 2008-2012—for 38 industrialized countries. The Kyoto Protocol has been ratified by 175 countries, including 37 of the 38 industrialized countries. The United States Rejected the Kyoto Protocol The United States signed the Kyoto Protocol in 2007. However, President Bush in 2001 announced that the United States would not become a Party to the Kyoto Protocol. His principal arguments against it were (1) uncertainty of the science; (2) potentially high cost of GHG abatement programs; and (3) lack of GHG abatement commitments from developing countries. President Bush announced a U.S. policy to reduce the "greenhouse gas intensity" (ratio of emissions to economic output) of the U.S. economy by 18% from 2002 to 2012. This target represented up to a four percentage point increase above previous trends. "Common but Differentiated Responsibilities" Both the UNFCCC and the Kyoto Protocol operate under the principal of "common but differentiated responsibilities." Effective efforts would need to be made by all large emitting nations in order to stabilize global GHG concentrations. Nations' views diverge concerning the Kyoto Protocol and "post-Kyoto" steps (post-2012): industrialized nations fear harm to their economic competitiveness if developing countries do not also limit emissions; developing nations, a growing source of emissions, typically argue that industrialized countries have emitted most GHGs historically and can better afford to reduce emissions first and deeper. They argue that low-income nations must give first priority to alleviating poverty. The UNFCCC embodies the principle of "common but differentiated responsibilities" to reflect the agreement that each nation must contribute to addressing climate change, but that its priorities and the magnitude of its efforts should differ according to national circumstances. The differences of views concerning appropriate common responsibilities and differentiation are at the core of the international negotiations. The Bali Action Plan To negotiate the next round of international commitments, Parties to the UNFCCC agreed to the "Bali Action Plan" in December 2007. The Bali Action Plan established an Ad Hoc Working Group on Long-term Cooperative Action under the UNFCCC to complete and present its work to the 15 th meeting of the Parties, in November-December 2009. The first session of the Ad Hoc Working Group met in April 2008. In parallel to the UNFCCC process, President Bush announced in May 2007 that the United States would convene a series of meetings of major economies (MEM) to develop a post-2012 framework to address climate change. To the "MEM" process, President Bush proposed a multilateral "clean technology fund" totaling $3 billion to stimulate international investments in clean energy and adaptations to climate change. His FY2009 budget requests a first U.S. payment of $400 million to this fund. Japan has proposed a similar multilateral fund of $10 billion. Current Domestic Policy on Climate Change Goal On April 16, 2008, President George W. Bush announced a new national goal for climate policy—to halt increases in U.S. emissions of GHGs by 2025. Emissions would begin to decline thereafter "so long as technology continues to advance." According to the President, the United States would achieve this goal by regulatory measures and market incentives to encourage use of clean technologies. President Bush said that the United States would be willing to include this plan in a future international agreement as long as all other major emitting economies also include their plans in the agreement. Some stakeholders have criticized the new Bush policy for proposing any cap on future emissions, while others have criticized it as too little, too late. Federal Policies Current federal climate change policies provide incentives, but few requirements, to reduce GHG emissions. For example, a number of tax incentives are in place to encourage purchase of more efficient vehicles and to make efficiency improvements to buildings. Other incentives induce agricultural producers to enhance soil carbon. A suite of federal programs provides information, technical assistance and nominal awards to businesses, universities and other consumers to quantify and reduce their GHG emissions; such programs generally are intended to encourage emission reductions that are already economical but that do not occur because of market inefficiencies. Some GHG reductions are also achieved by existing regulations governing the energy efficiency of vehicles and appliances, methane emissions from landfills, and other controls. Again, these regulations have been put in place for reasons other than abating climate change. Large programs are devoted to developing new technologies that would be necessary to reduce GHG emissions below current levels. Many experts contend that voluntary efforts (such as the U.S. Climate Leaders Program), research on technologies, and existing regulatory and tax incentives cannot achieve the GHG reductions necessary to avoid "dangerous" climate change. The United States and the European Union have proposed, for the Doha Round of the World Trade Organization (WTO) negotiations, a New Environmental Goods and Services Agreement (EGSA) to eliminate tariff and non-tariff barriers to environmental technologies and services. The proposal aims particularly at lowering the cost and increasing access to "clean energy" technologies. Funding39 Of the $6.4 billion in U.S. federal funding in FY2008 for climate change activities, almost all is for scientific and technological research and development. In addition, tax incentives that could help to reduce GHG emissions are forecast to reduce federal revenues by about $1.5 billion in FY2008. Funding for regulatory, voluntary and public education programs is a few percent of the total. Legislative Actions The Congress faces increasing pressure from the public to address the risks of climate change; avoid creating a patchwork of state and local requirements; provide certainty for investors in U.S. systems; and position the United States for competitiveness in the growing world markets for "clean" energy. In the 110 th Congress, Members have introduced numerous bills to address various aspects of climate change. These bills cover a wide spectrum, ranging from climate change research to GHG emissions cap-and-trade programs or emissions taxes. Additional bills focus on GHG reporting or registration. Several bills would authorize planning and carrying out of adaptations to expected climate change in specific sectors, nation-wide or internationally. Annual appropriations for climate change programs directly affect the federal level of effort for authorized activities. As of the date of this report, the 110 th Congress has enacted two broad pieces of legislation—an omnibus energy bill ( P.L. 110-140 ) and a comprehensive appropriations act ( P.L. 110-161 )—that include climate change provisions. Both statutes increase climate change research efforts, and the energy act requires improvement in vehicle fuel economies, as well as other provisions that would reduce (or sometimes increase) GHG emissions. P.L. 110-161 directs the Environmental Protection Agency (EPA) to develop regulations that establish a mandatory GHG reporting program that applies "above appropriate thresholds in all sectors of the economy." In addition, in December 2007, the Senate Committee on Environment and Public Works approved a bill, S. 2191 (now S. 3036 )—the "Lieberman-Warner" bill, that would require "economy-wide" GHG reductions. This bill is scheduled to go to the Senate for consideration in June 2008. Regional, State, and Local GHG Policies41 In the absence of a federal regulatory framework to address U.S. GHG emission reductions, a majority of states have established formal GHG mitigation policies, including targets for future reductions. California, Hawaii, and New Jersey have passed laws establishing mandatory, economy-wide GHG emission limits, while a number of additional states have set controls on CO2 emissions from particular sources. In several regions, including the Northeast, the Midwest and the West, states are working together to create regional schemes to cap GHG emissions and allow trading of emissions permits across borders. The increasingly complicated mosaic of state, local, and regional GHG initiatives may place growing pressure on the federal government to establish a coherent national regulatory strategy to address GHG emissions. Climate Change Litigation A proliferation over the past five years of litigation relating to climate change may also press the federal government toward actions to reduce GHG emissions. For example, the Supreme Court ruled in 2007 that the EPA must consider regulating CO 2 and other GHGs emitted from motor vehicles as pollutants under the Clean Air Act. Further litigation has been pursued, to challenge the Executive Branch to action, using the Endangered Species Act, the Energy Policy and Conservation Act and the Outer Continental Shelf Lands Act. A few international-law claims have been filed against the United States as well. However, [w]hether these new paths will yield results, only time will tell. It is clear, however, that if there is to be a government response to climate change at all, a solution from the political branches is more likely to be comprehensive and fully reflective of societal priorities than the typically narrowly targeted results of litigation. Part Three: The Policy Tool Box With growing consensus on climate change science and pressures from interest groups, many legislators are deliberating whether and how to address climate change. Some may prefer to continue to employ the existing set of research and voluntary programs. Available for others who are considering additional actions is an assortment of policy tools that they see as stimulating further reductions of GHG emissions and reducing risks to the economy, specific populations, and natural systems. Part Three of this report identifies a variety of policy tools potentially affecting these objectives: regulatory, including market-based, tools to reduce GHGs; distribution of potential revenues from GHG programs; non-regulatory tools that help markets work more efficiently; tools to stimulate technological change; options to ease the economic transition to a lower GHG economy; instruments to encourage international actions; and tools to stimulate adaptation to climate change. The following sections summarize some potentially applicable instruments in each of these categories that have been proposed or used in the past. Many of these tools are complementary, and proponents often contend that they would produce results more efficiently when carefully matched than any one alone. Regulatory and Market Tools to Reduce Greenhouse Gases Most experts agree that the most economically efficient way to reduce GHG emissions substantially is to put a price on emissions that reflects the costs (or risks) of those emissions to others. Putting a price on GHG emissions can be done with traditional source-by-source regulation, and/or with "market mechanisms." Source-by-Source Regulations From the earliest decades of air pollution controls, emission reductions have been achieved by setting emission performance standards on each source of pollution, or requiring that sources use a particular type of technology, such as the "best available control technology"; practice has successfully included "technology-forcing" regulation, as well, that sets future performance standards well beyond contemporaneously achievable levels. Regulatory controls have proven to be effective through decades of experience, though studies have demonstrated that the compliance costs might have been reduced if strategies had given priority to cost-effectiveness and flexibility. Even when regulators have been allowed by law to consider costs in setting emission regulations, they have had additional factors to consider and often have had weak information about the costs of technology for each individual source. Also, regulations can be difficult to adjust as circumstances change. Although in some circumstances source-by-source regulation may be most effective and efficient, it often cannot achieve, by itself, a desired emission reduction target at the least possible cost. Market Mechanisms Regulatory approaches that utilize aspects of commodity markets can achieve, in some cases, similar emission reductions but at lower overall cost. Bills introduced in the 110 th Congress have proposed such "market mechanisms" to reduce GHG emissions because, for some sources, they can increase the efficiency of source-by-source regulation by allowing the least costly reductions first. Market mechanisms begin with regulations to reduce emissions, but then may allow flexibility in who makes the emission reduction, when the reductions are made, and where the emission reductions occur (outside of the regulated sources, or even internationally). Two principal types of market mechanisms pertinent to GHG reductions are GHG or carbon taxes, or cap-and-trade systems. The key contrast between these two mechanisms is that GHG taxes would provide certainty about the prices paid by sources, but uncertainty concerning how much GHGs would be reduced; conversely, cap-and-trade systems provide certainty in how much GHGs would be reduced, but not regarding the prices paid by sources. Both emission fees and cap-and-trade systems potentially generate revenues—potentially in the billions of dollars annually. Issues regarding what to do with revenues will be introduced following brief discussion of some potentially contentious design issues. GHG Fees or Carbon Taxes Fees would be charged to a source of emissions according to its total emissions. Theoretically, a source would reduce its emissions down to the level where it is no longer cheaper to make the reductions (per ton) than to pay the tax (per ton). There could be many variations on this basic model, including charging fees only on emissions above rates designated by source types. Aside from possible tax exemptions, emission fees would not allow flexibility in who or where GHG reductions would occur. A system might be designed to allow flexibility in when GHG reductions are made, though the principal flexibility would be the source's decision whether to make the reductions or pay the taxes. Many economists believe that emission fees or taxes would be the most economically efficient way to reduce emissions, though this might depend on micro-economic factors, and it would not guarantee an overall level of effectiveness for the program. Some people object to paying "taxes" in general, even if it is to correct an acknowledged problem. "Cap and Trade" In a cap-and-trade program, the regulator sets an overall cap on emissions, and must allocate responsibility for achieving the cap to individual sources, frequently termed "allowances" to emit. In cap-and-trade programs, the trade component allows entities to sell their unneeded emission "allowances," while emission sources that emit more than their allowances may comply by reducing their emissions and/or buying additional allowances. Cap-and-trade programs allow flexibility in who makes the required emission reductions. Within cap-and-trade systems are two additional types of flexibility: International credits or offsets: Flexibility in where reductions occur—in the United States or internationally—can also minimize costs, although some questions arise about enforceability, loss of program effectiveness, and financial flows. Allowing international credits or offsets, to the degree that GHGs could be reduced reliably at lower cost in other countries, could help reduce costs of complying with U.S. GHG requirements. Banking and borrowing: When flexibility could allow entities to save or "bank" unneeded allowances until they need them, or to "borrow" against their future allocations of allowances (with a charge for borrowing). Banking and borrowing could apply to source-by-source regulation as well as to cap-and-trade programs. Design Choices in Cap-and-Trade Programs Although there are numerous questions to resolve in designing a cap-and-trade program, such as the level at which to set the cap, which sources to cover under the cap, whether to allow offsets from non-covered sources and other countries, etc., this section discusses two: how to allocate the GHG reduction requirements, and whether to set a ceiling or floor on the prices a source must pay for any allowances it wishes to purchase. Allocating the GHG Reduction Requirements Policy makers would have to decide who would be responsible for reducing GHG emissions—this determines who pays for the reductions, not who actually makes the reductions. In a cap-and-trade system, allowances can be given away (e.g., "grandfathered" to existing GHG sources, or given to non-source entities), sold at a fixed price, auctioned, or a combination of these techniques. Allowances are a valuable commodity (because they can be sold). How this valuable commodity is allocated could potentially transfer billions of dollars of wealth across different groups. This transfer of wealth (from entities who need to buy allowances, to entities that sell them) could be many times greater than the economic cost of the GHG reductions. How to allocate allowances is therefore an important component—and among the most controversial—in the GHG reduction debate. Giving allowances to particular groups may be a tempting way to increase the acceptability of a GHG control program, or to improve the "fairness" of the program, but it could distort incentives and reduce the efficiency of the program. One way (among others) to minimize the transfer of wealth in a GHG control program would be to sell allowances rather than to give them away. Sales, including auctions, would increase the efficiency of an overall GHG reduction. Selling the allowances at a fixed price becomes very much like an emission fee or tax program. Many proposals would give away some allowances to both sources of emissions and other entities (e.g., states, other sectors) and would auction some allowances. "Safety Valves" and Allowance Price Floors GHG allowances under a cap-and-trade program become a market commodity; the prices of most commodities rise and fall—sometimes with great volatility—as daily, seasonal or annual conditions vary. Variance would be expected with GHG allowance prices. Prices could rise above anticipated levels if reducing GHGs turns out to be more difficult than projected, or if speculators bid up prices, or under other conditions. Some people concerned about the costs of GHG reduction programs advocate setting a ceiling on the maximum price a source might have to pay for allowances it may need to comply; some have termed this a "safety valve" on prices. If prices were to exceed a designated level for some period of time, either the regulatory authority could release additional allowances into the market through an auction, or sales at a fixed fee. While this would limit the overall cost of the program, it would also limit the overall GHG reductions (although these could be "borrowed" from future years), and it would reduce incentives for technological innovation: The profits that can be reaped when prices spike is part of the calculation that stimulates some investors to finance technological research. Other stakeholders argue that, to stimulate technological advance, a floor should be set on the prices for allowances in the market (i.e., the regulator set a "reserve price" for allowances sold at auction, or would buy allowances in the market until the prices rise to the minimum acceptable level). While constraining how little the GHG program may cost, a price floor assures investors there is a minimum value for the services their technologies could provide. Distributing the Revenues from Taxes or Sales If emissions are taxed, or allowances are sold to sources at flat fees or by auction, public revenues could be generated—as much as hundreds of billions of dollars per year (depending on the size of the tax or the quantity of reductions required). A key policy issue associated with taxes, sales or auctions is what to do with the revenues. Revenues can be used to offset reductions of other taxes, sometimes called "revenue recycling" (e.g., labor taxes); rebate to sources to help defray compliance costs of covered sources (e.g., according to their production levels); fund programs (or provisions) that could reduce transition costs, such as worker retraining and relocation programs, market facilitation programs, technology development programs, tax credits, loan guarantees, etc.; provide payments to address distributional concerns (e.g., tax credits to low-income consumers); or fund programs that may have little to do with reducing GHG emissions but that garner wider support for the legislation. As discussed in a later section, how any revenues are used may help to minimize the overall costs of the GHG reductions, or, conversely, may lead to higher costs. Market Facilitation Tools Even when market mechanisms are used to help control emissions, markets do not work perfectly; complementary, typically non-regulatory, policies may help to achieve reductions at the lowest possible costs. Public or targeted information programs can help prepare people for the changes a GHG control policy may demand, and gain their support for it. Additionally, technical assistance programs—like several existing federal voluntary programs, such as the Climate Leaders or Energy Star programs —can help consumers and businesses to make efficient choices. Technical assistance programs may provide, for example, calculation tools, training, and access to information. Programs may work with equipment suppliers to commercialize products that are more efficient or emit fewer GHGs, as has occurred with, for example, Energy Star home electronics initiatives, or the Mobile Air Conditioning Climate Protection Partnership. Most experts agree that such programs work best when targeted to address specific decision-makers or imperfections in the market, and that the GHG reductions they could yield by themselves are limited. Perceived risks can sometimes make consumers and investors reticent to make changes or invest in new technologies. Risk-sharing policy tools can include loan guarantees, insurance, or tax incentives. Public information and education campaigns are additional tools that can support a policy's acceptability and effectiveness. Tools to Stimulate Technological Change Achieving deep GHG reductions from projected levels—necessary to avoid most projected climate change—would require extraordinary changes in how energy is used and supplied over time. The cost of reducing GHG emissions would depend critically on development and deployment of improved technologies that can reduce emissions at lower costs than current technologies. While public policies clearly have led to major technological advances in other fields (e.g., developing nuclear energy, putting a man on the moon), the link between policy tools and the technological advance that could be expected is unpredictable. Policy tools can act on the demand for new technologies, or on the supply. Two types of policy tools act primarily to stimulate demand for new technologies: "Technology-forcing" regulations have effectively stimulated demand for better (and more cost-effective) technologies in the past. "... [T]echnology-forcing policies respond to the reality that the world is not static and that policy itself can create and shape the options society faces in meeting its needs." However, economists prefer price incentives to stimulate technological change, because it decentralizes decision-making to consumers and suppliers, and is arguably more cost-effective. Tax incentives can reduce the price to purchasers of certain technologies. The Energy Policy Act of 2005 ( P.L. 109-58 ), for example, extended numerous tax credits to individuals and businesses to make investments in energy efficiency or renewable energy generation that meet certain criteria, in order to accelerate technology deployment. Other policy tools primarily act on the supply of technologies—increasing incentives for technology suppliers to conduct research and development (R&D) and to commercialize more advanced technologies: Subsidies to research and develop new or improved technologies are a common tool of federal policy, including current approaches to mitigating climate change. Federal appropriations of billions of dollars have been enacted in recent years to stimulate more efficient energy technologies; renewable, nuclear, and "clean coal" technologies; and approaches like alternatives to gasoline or diesel fuel for vehicles. These subsidies can take the form of tax credits for R&D, cost-sharing grants or contracts, direct investments, loan guarantees and others. Technology awards or prizes are sometimes offered to innovators that develop advanced technologies that meet specified criteria. Government procurement policies can drive technological development forward, by setting challenging standards for performance and guaranteeing purchase of that technology at a particular (attractive) price, or by purchasing a less-emitting technology even if it is not the lowest cost alternative. Both types of procurement policies have been used by the federal government to advance technologies that emit fewer GHGs than more conventional technologies. "Manhattan Project"-like federal research has been proposed by some experts, who argue that a focused cadre of researchers, with sufficient resources and allowed to pursue high-risk, high-payoff projects could facilitate technological "breakthroughs" that could facilitate radical change in energy systems. Some policy tools that may affect the advance of technologies could be indirect. For example, incentives to ensure a sufficient supply from universities of well trained scientists and engineers in GHG mitigation-related fields could be a component of promoting technological advance. Unintended Consequences for Technology Incentives Some policy choices to address one problem may have ancillary effects on technology incentives. For example, if a GHG cap-and-trade program were to set a "safety valve" to limit maximum costs—by setting a ceiling on the maximum price of GHG allowances—it would tend to discourage investors who might take technology development risks in order to capture the profits of high prices or of temporary price-spikes that often occur in markets. Price floors, on the other hand, may help reduce the risks to technology investors by making certain the minimum value the investment may have. Options to Ease the Economic Transition A major component of costs to mitigate GHG emissions results because the U.S. economy has optimized its infrastructure to depend on fossil fuels, particularly coal, and on private, petroleum-dependent vehicles for transportation. This has been efficient (disregarding existing subsidies), without factoring in the environmental, energy security and other "external" costs. Several policy mechanisms can help to ease the transition of the current economy to one optimized around low-GHG emissions: timing the total required GHG reductions to coincide with normal retirements of equipment and infrastructure and when new investments may be made; trading, banking and borrowing of allowances allow sources to manage the timing of their reductions at least cost; market facilitation tools, described above, can help sources make optimal decisions, including information campaigns that help sources anticipate the regulatory regime; investment in appropriate infrastructure (important also for state, local and private entities) that enables deployment of emerging technologies; and regulatory and permitting regimes that are adequately prepared for new technologies in new locations (e.g., in permitting carbon capture and storage technologies, or resolving "solar rights" issues). In addition, the private sector is concerned about the possible international competitiveness and trade impacts of GHG reductions in the United States. Some policy tools that could be applied, although some could encounter potential challenges under the World Trade Organization (WTO) rules, include border tax adjustments that would raise the prices of imports from countries without GHG controls comparable to those of the United States; "international reserve" allowances that importers of certain goods must purchase (raising the cost of imports) if the country of origin does not apply GHG controls comparable to those of the United States; giving, over some period, allowances or revenues from sales of allowances to affected industries in order to facilitate adjustment; in the process of crafting domestic policies, negotiating with potentially affected WTO Members to seeks ways to avoid imposing restrictive import measures; working within the WTO to change or clarify rules to permit the imposition of import restrictions by countries adopting trade-vulnerable GHG control requirements; and working multilaterally to have GHG emission controls applied equitably to sources internationally (see discussion below) and to avoid WTO challenges. The design of competitiveness-oriented policy tools would require caution to avoid challenge under WTO as unfair trade practices. International Policy Tools The effectiveness of U.S. policies to address climate change will depend on the collaboration of almost all other countries, especially the largest emitters. Some of the large emitters, such as Japan and nations of the European Union, already have committed to reducing their GHG emissions below year 1990 levels and have proposed further reductions beyond the current Kyoto Protocol (discussed in a later section). However, the United States, China and other large developing country emitters have not committed to quantified GHG reductions, and the position of Russia beyond 2012 remains a question. The United States can use a number of policy tools in order to encourage effective, global GHG reductions: leadership and relationship-building; strategic policy leverage (including quid pro quo); capacity building and other technical assistance; financial assistance; agreement on standards for international investment; and contributions of research and technological developments. There are additional options, and a multitude of variants in designing each of these policy tools. Tools to Stimulate Adaptation to Climate Change While most of this section, and this report, emphasizes options to mitigate GHG emissions and projected climate change, a growing set of legislative proposals aims to promote understanding of climate change impacts, and to stimulate effective adaptation to climate change. Included in the policy toolbox to promote efficient adaptation to climate change are, to name a few: research to improve characterization of future climate change, its variability, and its potential implications for different sectors and ecosystems; public information, both broad and targeted to specific risks, including access to robust characterization of future climate conditions and associated risks; programs to develop practical tools to assist decision-makers to understand the implications of climate change for their areas of operation (e.g., water management, infrastructure engineering, disease vector prediction, etc.); financial or regulatory incentives to reduce risks (e.g., to discourage construction in vulnerable flood plains; to encourage insurers to include climate change risks in their premium schedules; etc.); improved emergency planning to reduce risks and respond to extreme weather events (e.g., droughts, tornadoes, etc.); and acquisition of key assets, such as easements in coastal zones or lands along wildlife migratory routes, that may be valuable for long-term adaptation. Policy tools to encourage private and public sector adaptations, like the research to support them, are relatively undeveloped compared to work on GHG mitigation. Choices Ahead for Policy Makers With the current flurry of activity to address GHG emissions at local, state, and international levels, as well as the introduction of numerous GHG reduction bills in the 110 th Congress, it seems likely that Members of Congress will have to decide whether the time is appropriate to legislate a climate strategy, and what forms legislation should take. In considering the alternatives, policy makers may wish to answer for themselves such questions as whether the risks of human-induced climate change are sufficiently certain to call for policy actions to mitigate the causes and/or adapt to perceived inevitable change; how a domestic policy package can be designed that balances the risks of climate change with costs that are accepted as reasonable and fairly distributed; how domestic policy would interact with international negotiations to avoid unacceptable climate risks while distributing the effort equitably among countries and sectors; and when and how to promote appropriate adaptation by private and public decision-makers to the uncertain climate ahead. Further Information Reports for Members of Congress, providing more detailed information on topics introduced in this report, can be found on the CRS website, on the Climate Change Issues in Focus pages, or by calling 707-5700.

On June 2, 2008, the Senate agreed to consider a bill (S. 3036) to control greenhouse gas emissions in the United States. In the 111th Congress, leadership in both chambers have announced their intentions to pass bills in 2009 to reduce greenhouse gas emissions. These actions are indicative of the pressures Members of Congress increasingly face on whether and how to address human-induced climate change. Contentious debates scrutinize issues of science, economics, values, geopolitics and a host of other concerns. Deliberations also weigh the appropriateness of alternative policy tools and program designs. The economic stakes are potentially large—with both the costs of controls and the "costs of inaction" ranging, by some estimates, into trillions of dollars over several decades. A major international assessment released in 2007 concluded that the Earth's climate had warmed unequivocally over the past century, and that elevated levels of so-called "greenhouse gases" (GHGs) were likely responsible for a major portion of the observed warming. Elevated concentrations of GHGs in the atmosphere are due mostly to human activities, especially emissions from use of fossil fuels, clearing of land, and some industrial processes. Continued population and economic growth, with dependence on fossil fuels and needs for expanding agricultural lands, are expected to drive GHG emissions and induced climate change over the 21st Century to levels never experienced by human civilizations. While benefits may accrue to some people who may experience a limited amount of climate change, the aggregate effects are expected to become increasingly adverse, with people living in dry regions or along low-lying coasts, and people with low incomes, expected to be especially vulnerable. Adaptations can moderate the impacts and expand opportunities, but at a cost. Besides the overall costs of climate change, key concerns include the distributional effects within and across generations, how to value ecological impacts, and the potential for abrupt and irreversible changes. While important uncertainties remain concerning future climate change and its impacts, many experts are convinced that the evidence calls for U.S. action to abate GHG emissions. Others argue that mandatory controls would be premature, unnecessary or too costly. For decision-makers considering actions to address climate change, an assortment of policy instruments is available; studies suggest that a combination could be most effective in achieving various climate policy objectives. Current policy attention has focused on "cap and trade" strategies to reduce GHG emissions, with additional policy tools aimed at promoting the technology development considered necessary to slow climate change significantly. In parallel, growing attention is being given to supporting adaptations to expected future changes, as well as to strategies to gain effective international engagement in reducing GHGs. One significant obstacle to consensus is concern about the potential costs of abating GHG emissions, since deep reductions would require extraordinary changes in energy use and technologies. Studies suggest that efficiently designed programs could moderate the costs of reducing GHG emissions; technically and politically, though, an "efficiently designed" program may not be realistic. Policy options can ease the adjustments required and modify the distribution of costs—or potential wealth embodied in distribution of emission allowances—across specific sectors or populations. A core challenge of policy design, then, is balancing the climate effectiveness of a policy, the economic costs, and its distributional effects.

Introduction Biomass energy, or bioenergy, may receive more attention from stakeholders as an alternative to fossil fuels because of its potential to minimize the environmental impacts of energy production, provide energy security, and promote economic development. Biomass is organic matter—woody biomass, agricultural biomass, animal wastes, and aquatic biomass—that can be converted to energy (e.g., heat, electricity, or liquid transportation fuels). One form of bioenergy is biopower, electricity generated from biomass (e.g., paper mill residues). As federal and state governments and others dedicate more resources to biopower, these same government agencies, along with environmentalists, biomass feedstock producers, and others, are paying more attention to the biopower carbon-neutrality issue. The carbon-neutral designation typically is assigned to an energy-production activity that essentially produces no net increase in greenhouse gas (GHG) emissions on a life-cycle basis (or one that absorbs the amount of carbon dioxide emitted during the power-production cycle). Where biopower stands among the other renewable energy sources with respect to GHG emissions may affect the level of future legislative support granted to it. Many views exist about whether biopower is carbon neutral and how its net carbon status is determined. Some biomass feedstock producers and biopower generators, among other stakeholders, contend that biopower is carbon neutral because the carbon released during bioenergy production comes from a feedstock that removed the carbon from the atmosphere as it was growing—biomass. Some environmentalists, among others, argue that biopower is not carbon neutral because the amount of GHG emissions released per unit of energy during simple biopower combustion may be higher for certain biomass fuels than for fossil fuels or because, even if the GHG emissions from certain biomass fuels are lower than those from fossil fuels, they are still not zero. Stakeholders often base their perspectives on differing assumptions, technologies, and time frames. The debate concerning biopower's designation as carbon neutral may intensify, given possible congressional and Administration decisions. Congress may consider legislation involving biopower (e.g., under renewable energy and clean energy assistance and energy efficiency). Additionally, biopower production may receive increased attention due to executive branch actions, such as the U.S. Environmental Protection Agency's (EPA's) Clean Power Plan and EPA's proposed framework to account for emissions of biogenic carbon dioxide (CO 2 ) from stationary sources. This report discusses some factors taken into account when considering whether biopower is carbon neutral. It does not discuss carbon accounting for other bioenergy pathways. Biomass Carbon Cycle The carbon cycle encompasses the many pathways through which carbon is exchanged between the atmosphere and the land and water. Human activities (also called anthropogenic activities ) contribute to the carbon cycle by emitting CO 2 . The human contribution of CO 2 to the carbon cycle is relatively small compared to other contributions, but CO 2 released to the atmosphere from human activities is taken up by soils, vegetation, and the ocean at a slower rate than the rate at which human activities are emitting CO 2 . If the excess carbon is not stored in land and ocean sinks, the atmospheric concentration of CO 2 increases, potentially impacting the Earth's climate. One significant anthropogenic source of CO 2 is energy production. The net effect of an energy activity on the carbon cycle can be classified in one of three ways. A carbon - positive activity releases CO 2 into the atmosphere. A carbon - negative activity removes more CO 2 from the atmosphere than it emits. A carbon - neutral activity is one in which the CO 2 release and absorption are essentially in balance. No commonly accepted definition for a carbon-neutral activity exists in the biopower arena. Those involved with bioenergy have put forth multiple assertions about carbon neutrality, including the following: Biomass energy is carbon neutral because biomass is naturally carbon neutral. The premise is that if biomass is carbon neutral, then any product resulting from its use is also carbon neutral. Biomass energy is carbon neutral if growing the biomass removes as much CO 2 as is emitted into the atmosphere from its combustion. Biomass energy is carbon neutral only if the net life-cycle emissions are zero. Emissions include the emissions from the cultivation, harvest, and transportation of the biomass, as well as from its combustion. Biomass energy is carbon neutral if it achieves lower net increases in atmospheric GHGs when compared to alternative energy activities. Each assertion raises issues. For instance, declaring that biomass energy is carbon neutral because biomass is naturally carbon neutral does not account for GHG emissions released due to management of crops grown for energy production (e.g., fertilizer). In addition, there may need to be additional plantings of certain biomass feedstocks to remove the CO 2 emitted from biomass cultivated for energy production. The carbon cycles for a bioenergy system and a fossil fuel system differ in at least two ways: the carbon source (finite versus renewable) and the atmospheric carbon concentration (potentially stable versus additional; see Figure 1 ). Three main factors contribute to the amount of carbon emitted from biopower generation: feedstock production (cultivation and harvest), feedstock transport, and the biopower technology type. However, as noted by many sources, feedstock production also absorbs carbon during growth. Greenhouse Gas Emission Accounting for Biopower Production Whether and how to conduct GHG emission accounting for biopower are issues that have been under consideration for the last few years. GHG emission accounting can be used to compare the environmental footprint of a biopower operation with that of a conventional fossil fuel operation (e.g., electricity from coal or natural gas). A life-cycle assessment (LCA) is one method to calculate the environmental footprint. The LCA is an analytic method for identifying, evaluating, and comparing the environmental impacts of emissions and the resource depletion associated with a specific process. An LCA generally uses observed data and assumptions to model what GHGs are being released at each phase of the process. Ideally, an LCA would encompass economic and social factors for a more comprehensive assessment (e.g., job growth, poverty). However, most LCAs focus exclusively on emissions and fossil fuel consumption. An LCA can be one element used in assessing a preferred energy approach, along with cost and performance data. In some cases, even if LCA results favor a particular approach, an LCA alone might not be the deciding factor when choosing an energy process; financial objectives, policy goals, and other factors may influence which approach is selected. GHG accounting with an LCA can be performed at each phase of the biopower pathway: biomass cultivation and harvest, biomass transport, electricity generation, electricity transmission and distribution, and electricity end use ( Figure 2 ). The first three phases of the biopower pathway (cultivation and harvest, transport, and electricity generation) are where the bulk of GHG emissions occur. GHG flux during the first three phases is site and operation specific and depends on many factors, including the biomass type, management strategies, and biopower generation technology. Published LCAs for biopower are limited and, as noted above, may not be applicable to specific cases. The LCAs performed often are tailored to one feedstock and one biopower technology type, and LCA results vary depending on assumptions such as the time frame of the assessment. The LCA time frame can be long (e.g., "cradle to grave") or relatively short (e.g., "cradle to gate"). Different LCA time frames can lead to radically different, even contradictory, results. The majority of biopower LCAs were completed for two biopower technology types: combustion and gasification. Both technologies have strengths and weaknesses. The technology to co-fire (or combust) biomass with coal is available at commercial scale and is in use today. Gasification technology is in the development and demonstration phase. Although biopower LCAs are scarce compared to liquid transportation biofuel LCAs, certain trends appear in existing assessments. For instance, the National Renewable Energy Laboratory (NREL) reviewed and analyzed 57 biopower LCAs. The NREL review shows that biopower reduces GHG emissions when compared with fossil-based generation of electricity. Elsewhere, some members of the academic community reviewed more than 25 LCAs. They determined that biopower is in the top tier of bioenergy pathways that avoid the most GHG emissions and replace the largest amounts of fossil energy. Approximately 15 of the LCAs reviewed included electricity as an end product, of which at least 10 had an LCA time frame of when the feedstock was extracted to when the biopower was produced (e.g., cradle to gate). There is an ongoing discussion about the foundation and underlying assumptions of LCAs, GHG modeling, and other methodologies used to evaluate the carbon impact of bioenergy. Some members of the academic community assert that the methodologies do not sufficiently address land use (e.g., land available to satisfy energy, food, and feed needs) and incorrectly account for biomass (e.g., double counting biomass). They contend that some biofuel systems and fossil fuel systems may not be compared easily using some of the methodologies that exist, among other concerns. Others maintain that some of these issues have been addressed, specifically that land-use concerns stem from multiple factors, not just bioenergy, that increased productivity (e.g., rising crop yields) must be considered when discussing global food and feed requirements, and that crops used for bioenergy have the ability to naturally re-sequester carbon under certain circumstances. Recent Developments Affecting Biopower Assessment Certain actions have kept the biomass carbon-neutrality issue a concern for the bioenergy and environmental communities, among others. Most notable are EPA's standards for greenhouse gas emissions from existing fossil-fueled power plants (e.g., the Clean Power Plan), EPA's 2014 framework for assessing biogenic CO 2 emissions from stationary sources, and EPA's permitting requirements under the Clean Air Act (CAA). The Clean Power Plan In June 2013, President Obama issued a Climate Action Plan. As part of the plan, EPA was directed to propose standards for "carbon pollution" (i.e., CO 2 , the principal GHG) from existing power plants by June 2014 and to finalize the standards by June 2015. In August 2015, the EPA released the final rule for CO 2 emission reductions from existing fossil fuel-fired electric power plants. This rule, commonly referred to as the Clean Power Plan (CPP), requires states to reach a state-specific CO 2 emission-reduction goal (measured in pounds of CO 2 emissions per megawatt-hour of electricity generation) by 2030. States are to develop a plan—using guidance from EPA—that can incorporate renewable energy, including biopower, among other things. EPA reports that "qualified biomass"—biomass feedstock that has been demonstrated to be a method to control increases of CO 2 levels in the atmosphere—may be included in a state's plan. However, there remains uncertainty about which forms of biomass EPA will deem acceptable. Further, there are various stipulations associated with the use of biomass to generate electricity for the CPP. Thus, it is not clear what role biopower will play in the implementation of the CPP. Framework for Assessing Biogenic CO2 Emissions from Stationary Sources EPA released two draft frameworks—the first in 2011 and the second in 2014—that establish a process to evaluate and account for GHGs associated with the use of biomass to produce energy at stationary sources (e.g., biopower). The frameworks indicate how EPA may treat bioenergy for the programs and regulations within its domain. In addition to seeking public comment about the framework, EPA entrusted its Science Advisory Board (SAB) with conducting an independent review of each framework. The 2014 framework addresses some of the SAB recommendations and stakeholder comments from the 2011 framework. The framework focuses on carbon flux corresponding to three stages of bioenergy production: (1) feedstock growth and harvest; (2) processing, transport, storage, and use of a biogenic feedstock at the stationary source; and (3) the possible alternative fate of biogenic feedstock materials if not used for bioenergy. In preparing the 2014 framework, EPA reports that it considered information that "supports the finding that use of waste-derived feedstocks and certain forest-derived industrial byproducts are likely to have minimal or no net atmospheric contributions of biogenic CO 2 emissions, or even reduce such impacts, when compared with an alternate fate of disposal." EPA acknowledges that the 2014 framework is an analytical methodology and that some stakeholders may consider the framework a precursor to how EPA treats biogenic emissions for both the standards for GHG emissions from existing fossil-fueled power plants and the Prevention of Significant Deterioration program (see " Prevention of Significant Deterioration/New Source Review Program and Title V Greenhouse Gas Permitting Requirements ," below). However, EPA reports that it "has not yet determined how the framework might be applied in any particular regulatory or policy contexts or taken the steps needed for such implementation." EPA has requested that the SAB peer review the 2014 framework. For the 2011 framework, EPA charged the SAB with reviewing and commenting on (1) EPA's characterization of the science and technical issues relevant to accounting for biogenic CO 2 emissions from stationary sources; (2) EPA's framework, overall approach, and methodological choices for accounting for these emissions; and (3) options for improving upon the framework for accounting for biogenic CO 2 emissions, among other issues. The SAB conducted the independent review of the agency's 2011 biogenic accounting framework and released its findings in September 2012. These findings included that "carbon neutrality cannot be assumed for all biomass energy a priori." The SAB acknowledged the "daunting task" of assessing the GHG implications of bioenergy and the "narrow regulatory boundaries" within EPA's purview that limit the consideration of GHG flux at various points along the bioenergy pathway. The SAB identified multiple factors (e.g., time scale, spatial scale, leakage) that require further assessment by EPA and provided recommendations to revise the biogenic accounting framework. The SAB "found that quantification of most components of the framework has uncertainties, technical difficulties, data deficiencies and implementation challenges." The SAB recommended an alternative biogenic accounting framework based on feedstock category, region, land management, and prior land use. Prevention of Significant Deterioration/New Source Review Program and Title V Greenhouse Gas Permitting Requirements The CAA's Prevention of Significant Deterioration (PSD)/New Source Review program requires a "new major stationary source or the major modification of any existing stationary source" to undergo preconstruction review and permitting, including the installation of Best Available Control Technology (BACT) to limit emissions. Title V of the act requires all new and existing facilities that have the potential to emit a GHG pollutant in amounts of 100 tons per year or more to obtain permits. In July 2011, EPA decided to defer for a period of three years the application of PSD and Title V permitting requirements for CO 2 emissions from bioenergy and other biogenic stationary sources. EPA proposed using the three-year time period to conduct a detailed examination of the science associated with biogenic CO 2 emissions from stationary sources to determine how to treat emissions from biomass-fired and biogenic sources (i.e., charging its SAB with reviewing EPA's approach to the assessment of CO 2 emissions from biogenic sources). In 2013, a District of Columbia Circuit court decision vacated the deferral rule because the rule "cannot be justified under any of the administrative law doctrines [de minimis, one-step-at-a-time, administrative necessity, and absurd results] relied on by EPA." The court issued its mandate on August 10, 2015. Best Available Control Technologies EPA noted in the PSD and Title V Permitting Guidance for Greenhouse Gases that it may consider certain types of biomass a best available control technology (BACT) after taking into account environmental, energy, and economic considerations and state and federal policies that promote biomass for energy-independence and environmental reasons. EPA provided specific guidance on how to consider the unique GHG attributes of biomass as fuel in the BACT selection process. PSD permits require that facilities apply the BACT, but individual states, with EPA guidance, determine BACT on a case-by-case basis. Considerations for the Regulation of Biogenic CO2 Emissions There are some key points to consider about the regulation of biogenic CO 2 sources. First, EPA is in the process of comprehensively assessing the GHG classification for biogenic CO 2 sources (which it is doing with the release of the second framework for assessing biogenic CO 2 emissions). Stakeholders likely will contest in the courts any decision the agency makes regarding these sources, although there is little to no precedent for the courts to follow. Second, EPA, thus far, has received no guidance from the courts (or the SAB) about how to exempt biogenic CO 2 sources from PSD requirements. The court stopped current practices without offering alternatives. Third, the legal and regulatory struggles over biogenic CO 2 sources reflect a larger issue: Congress's bioenergy policy typically has not included carbon accounting for bioenergy, with an exception for the Renewable Fuel Standard. Thus, it is not clear if Congress would treat biopower differently from other types of power generated from conventional energy and renewable energy sources. If EPA is to carry out the bioenergy legal requirements in a timely fashion, it may need better and more explicit direction from Congress. Such direction might include providing EPA with a predetermined amount of time—free of legal intrusions—to resolve issues with stakeholder and public input. Is Biopower Carbon Neutral? It Depends Carbon neutrality for biopower is calculated most accurately based on the carbon flux (i.e., GHG emission or sequestration) of several parameters over a specified time period. These parameters include at least the following: (1) the feedstock type; (2) the management and procurement of the energy source (in the case of biomass, how the feedstock is managed and harvested); (3) the feedstock transportation method; (4) the energy generation technology; and (5) the time frame to replenish the feedstock. Carbon flux attributed to the management and procurement of biomass feedstock deviates according to the type or mixture of feedstock used. For instance, agricultural biomass entails a different nutrient management plan than woody biomass. GHG emissions may be higher for agricultural biomass due to fertilizer treatments (e.g., emissions from the GHG nitrous oxide from biofuel-dedicated crops). Carbon flux also will vary given how the biomass feedstock is harvested. For example, removal of woody biomass (e.g., thinnings) in large quantities may reduce carbon, and some methane, emissions on a CO 2 -equivalent basis that would have been released if the woody biomass remained in the forest to decompose. Biomass-feedstock transport emits differing amounts of GHGs depending on how far one transports the feedstock and on fossil fuel usage. The carbon flux of the biopower generation technology will depend on the type of technology and any emission capture or sequestration. In addition, the time frame (e.g., 40 years, 100 years) assigned for biomass feedstock replenishment will determine CO 2 sequestration rates to balance out the GHGs emitted during biomass combustion, particularly for woody biomass, as growth periods (rotation ages for the trees) are often measured in decades. It could be argued that only an LCA for each biopower operation can accurately determine whether biopower generation is carbon neutral. Such an LCA would measure carbon flux for each phase of the biopower pathway and incorporate biomass feedstock replenishment. A standard approach to performing a biopower LCA could ensure uniformity in GHG accounting across the biopower sector. However, multiple LCAs can be expensive and time-consuming to complete. Biopower's carbon neutrality is a contentious aspect of the bioenergy debate. One reason the topic is so controversial is concern about unsustainable harvests of biomass feedstocks. Some environmentalists, among others, contend that if biopower proceeds with no carbon balance restrictions, it could lead to, for example, large amounts of woody biomass removal for energy production. Another reason for controversy is concern about the air quality of areas surrounding biopower plants, especially if particulate matter and select compounds from a plant exceed certain limits. These two concerns—sustainability and air quality—can be, and in some cases already are, addressed through other avenues (e.g., sustainability requirements, air-quality regulations) at the federal and state levels. Legislative Implications Congress may be prompted to further analyze the carbon status of biopower with congressional oversight or review due to recent and forthcoming developments (e.g., EPA's decisions regarding "qualified biomass" for the CPP and the framework to account for emissions of biogenic CO 2 from stationary sources). Biopower can be produced using multiple biomass feedstocks and technologies. Each feedstock and technology has its own environmental footprint. The time frame to analyze carbon neutrality is relevant because such an analysis would incorporate feedstock replenishment, and thus CO 2 removal rates, and consider technology developments. Congress could decide to use existing legislative authorities to address carbon accounting for biopower. Federal environmental regulatory controls exist for the three chief environmental concerns associated with a biopower plant—air quality, use of public land, and water discharges. GHG emissions may be accounted for with federal regulations regarding air quality. In addition, a biopower plant also has to meet state regulatory standards, which in some cases may be stricter than the federal regulatory controls. To the extent carbon neutrality continues to be a legislative concern, Congress could examine whether the current carbon-neutral assumption for biopower is adequate. Congress may consider if additional carbon accounting for biopower is warranted and what impact this accounting might have on renewable energy, agricultural, and environmental legislative goals. A key contributor to this discussion may be whether decisions concerning biopower made by the executive branch contradict legislative goals set by Congress. A full carbon accounting for biopower could result in slowing the achievement of multiple renewable energy, agricultural, and environmental goals. Alternatively, the carbon-neutrality debate for biopower may lead to requests for carbon accounting of some or all energy ventures—renewable and conventional. Lastly, an ill-defined carbon accounting assessment for biopower may limit public and private investment, feedstock production, and more. Scientists, investors, biomass producers, and others may hesitate to expend time and money on expanding biopower efforts if they are not certain about the future contribution of biopower to U.S. energy and environmental goals. If Congress chooses to address energy security and GHG emission increases, some stakeholders have argued that these goals could be met through the creation of a national renewable electricity standard (RES) or a clean electricity standard (CES). The mandate of a potential national RES or CES may require substantial quantities of baseload power, which some policymakers and others see as being achieved by using biopower. If biopower is a part of an RES or CES, the carbon-neutrality designation of biopower may need to be considered in response to environmental and sustainability concerns.

To promote energy diversity and improve energy security, Congress has expressed interest in biopower—electricity generated from biomass. Biopower, a baseload power source, can be produced from a large range of biomass feedstocks nationwide (e.g., urban, agricultural, and forestry wastes and residues). The two most common biopower processes are combustion (e.g., direct-fired or co-fired) and gasification, with the former being the most widely used. Proponents have stated that biopower has the potential to strengthen rural economies, enhance energy security, and minimize the environmental impacts of energy production. Challenges to biopower production include the need for a sufficient feedstock supply, concerns about potential health impacts to nearby communities from the combustion of biomass, and its higher generation costs relative to fossil fuel-based electricity. At present, biopower generally requires tax incentives to be competitive with conventional fossil fuel-fired electric generation. An energy production activity typically is classified as carbon neutral if it produces no net increase in greenhouse gas (GHG) emissions on a life-cycle basis. The legislative record shows minimal debate about the carbon status of biopower. The argument that biopower is carbon neutral has come under scrutiny in debate on its potential to help meet U.S. energy demands and reduce U.S. GHG emissions. Whether biopower is considered carbon neutral depends on many factors, including the definition of carbon neutrality, feedstock type, technology used, and time frame examined. Carbon flux (emission and sequestration) varies at each phase of the biopower pathway, given site- and operation-specific factors. A life-cycle assessment (LCA) is a common technique to calculate the environmental footprint, including the carbon flux, of a particular biopower pathway. However, past legislation would not have required a standardized LCA for biopower. The carbon-neutral status of biopower may be of concern to stakeholders, especially if Congress expands support for biopower. Questions such as where the feedstock supply for biopower originates, if it is managed in a sustainable manner, and whether the associated air-quality impacts from biopower generation are tolerable are part of the biopower carbon-neutrality debate. Congress may decide whether the current approach regarding the carbon status of biopower is acceptable or whether additional carbon accounting for biopower is warranted and what impact this accounting might have on renewable energy, agricultural, and environmental legislative goals. Two recent actions by the executive branch—the U.S. Environmental Protection Agency's (EPA's) Clean Power Plan (CPP), which addresses carbon dioxide (CO2) emission reductions from existing fossil fuel-fired electric power plants, and EPA's proposed framework to account for biogenic CO2 emissions from stationary sources—could focus attention on biopower's carbon neutrality. The CPP—which was granted a stay by the Supreme Court on February 9, 2016—requires states to devise a plan that allows them to reach a state-specific CO2 emission reduction goal by 2030, using various options, including renewable energy (e.g., biopower). In the CPP final rule, EPA specifies that "qualified biomass" may be included in a state plan given certain conditions. In November 2014, EPA released its second biogenic accounting framework. The framework addresses some of the EPA Science Advisory Board's recommendations from the first framework, released in 2011, including the finding that "carbon neutrality cannot be assumed for all biomass energy a priori." EPA acknowledges that the framework is an analytical methodology and that some stakeholders may consider it an example of how EPA may treat biogenic emissions in both the CPP and the Prevention of Significant Deterioration program. However, EPA reports that it "has not yet determined how the framework might be applied in any particular regulatory or policy contexts or taken the steps needed for such implementation."

2005 Defense Base Closure and Realignment Commission Recommendation In May 2005, the Secretary of Defense recommended to the 2005 Defense Base Closure and Realignment Commission, also known as the BRAC Commission, the establishment of a new Walter Reed National Military Medical Center (WRNMMC). Included in Commission Recommendation #169 was the realignment of several of the functions currently carried out at Walter Reed Army Medical Center (WRAMC). The Commission amended the Secretary's recommendation before forwarding it to the President, who approved it on September 15, 2005. The Commission recommended that the Secretary of Defense: 1. relocate all tertiary (sub-specialty and complex care) medical services to National Naval Medical Center, Bethesda, MD, establishing it as the Walter Reed National Military Medical Center Bethesda, MD; 2. relocate Legal Medicine to the new Walter Reed National Military Medical Center Bethesda, MD; 3. relocate sufficient personnel to the new Walter Reed National Military Medical Center Bethesda, MD, to establish a Program Management Office that will coordinate pathology results, contract administration, and quality assurance and control of DoD second opinion consults worldwide; 4. relocate all non-tertiary (primary and specialty) patient care functions to a new military community hospital at Ft Belvoir, VA; 5. relocate the Office of the Secretary of Defense supporting unit at WRAMC to Ft. Belvoir, VA; 6. dissolve all elements of the Armed Forces Institute of Pathology (AFIP) except the National Medical Museum (National Museum of Medicine and Health) and the Tissue Repository (National Pathology Repository); 7. relocate the Armed Forces Medical Examiner, DNA Registry, and Accident Investigation to Dover Air Force Base, DE; 8. Absorb AFIP capabilities not specified in this recommendation into other DoD, Federal, or civilian facilities, as necessary; 9. relocate enlisted histology technician training to Ft. Sam Houston, TX; 10. relocate the Combat Casualty Care Research sub-function (with the exception of those organizational elements performing neuroprotection research) of the Walter Reed Army Institute of Research (Forest Glen Annex) and the Combat Casualty Care Research sub-function of the Naval Medical Research Center (Forest Glen Annex) to the Army Institute of Surgical Research, Ft. Sam Houston, TX; 11. relocate Medical Biological Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) and Naval Medical Research Center (Forest Glen Annex) to Ft. Detrick, MD, and consolidate it with U.S. Army Medical Research Institute of Infectious Diseases; 12. relocate Medical Chemical Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) to Aberdeen Proving Ground, MD, and consolidate it with the U.S. Army Medical Research Institute of Chemical Defense; and 13. close the main post. Each action will be addressed in detail later in this report. These and all other BRAC recommendations must be completed within six years of their approval by the President. The Department of Defense (DOD) has specified that all BRAC recommendations will be implemented on or before September 15, 2011. Relationship to Other BRAC Recommendations The realignment of WRAMC is one of a set of seven designed by DOD to make a significant change in the makeup and character of the Military Health System (MHS). The 2005 BRAC round, the fourth such carried out under the Defense Base Closure and Realignment Act of 1990, is unique in its focus on interoperability among the military services, its transformation of defense organization and infrastructure away from the legacies of World War II and the Cold War, and its intention to reduce inter-service redundancy in facilities. According to DOD, these seven recommendations, taken together, transform DOD clinical, education and training, Biomedical Research and Development (R&D) capabilities: They include reorganization of the two largest medical markets (National Capital and San Antonio) into jointly staffed and managed health care systems, downsizing of several small hospitals to clinics, DOD-wide consolidation of basic medical enlisted training in San Antonio and consolidation of the fragmented Biomedical R&D technical base into centers of excellence. Existing Problems and the Independent Review Group In the midst of the planning for the realignment of WRAMC, reports appeared in the press relating the experiences of several injured soldiers and their families who felt that they had been offered inadequate housing and suffered inadequate administrative care at Walter Reed Army Medical Center. Soon thereafter, Secretary of Defense Robert M. Gates commissioned an independent panel (the Independent Review Group, or IRG) under the sponsorship of the Defense Health Board to review rehabilitative care and administrative processes at both Walter Reed Army Medical Center in the District of Columbia and National Naval Medical Center in Bethesda, Maryland. The panel was established on March 1, 2007, and consisted of nine members, cochaired by two former Secretaries of the Army, Togo D. West, Jr. (1993-1997), and John O. Marsh, Jr. (1981-1989). The IRG submitted its report, which included a series of findings and recommendations, to Secretary Gates on April 11, 2007. The panel focused most of its attention on patient administrative and clinical practices at the two installations. Nevertheless, several of their findings and recommendations dealt with BRAC and facilities management issues. Among their recommendations, the members of the panel suggested that: 1. Planned Base Realignment and Closure construction projects should be accelerated in establishing the Walter Reed National Military Medical Center (WRNMMC) and of the new Ft. Belvoir medical complex while fully funding existing operations. 2. Leadership should survey patients and family members to assess quality of services provided and the condition of physical facilities at WRAMC and NNMC. 3. A senior facilities engineer should be assigned at WRAMC to assume the responsibility of maintenance of non-medical facilities. 4. Tools for assessing the condition of existing facilities should be modernized; requirements for facility and infrastructure maintenance, repair, and restoration should be prioritized and appropriately addressed. In its report to the Secretary of Defense, the IRG focused on identifying additional problem areas and making recommendations to help the military services and DOD in this process. The IRG argued that the corrections suggested for WRAMC would require the attention of both the Secretary of Defense and Congress. These recommendations are among those listed in the " Options for Congress " section of this report. DOD Justification for WRAMC Realignment and Community Resistance The Department of Defense created its plan for the 2005 BRAC round as part of a worldwide adaptation of its installations to national security needs of the 21 st century. Included among these recommendations was one suggesting the creation of a new Walter Reed National Military Medical Center on the campus of the current National Naval Medical Center in Bethesda, Maryland, and the redistribution of military medical functions throughout the national capital region and beyond. DOD characterized this recommendation as part of the creation of a joint, modernized medical support structure for the armed forces. In executing its various elements, DOD recommended trimming excess military medical treatment capacity in the national capital area and relocating much of the remaining routine care capacity to a new community hospital on Ft. Belvoir, Virginia. The local and professional medical communities expressed a number of concerns with the DOD recommendation to the BRAC Commission before the realignment was finalized. The local community argued that the recommended moves would break up an integrated, mission-oriented principal military medical facility, would adversely impact the economy of the nation's capital, and could degrade homeland security in the national capital region. Community representatives also expressed apprehension over the quantity of family housing available on or near the planned WRNMMC. Insufficient housing, they contended, would obstruct the efforts of family members to collocate with and support seriously injured service members being cared for at the relocated facility. Witnesses suggested an alternative to the DOD recommendation – retaining the current WRAMC in place and realigning the mission of the NNMC to avoid any potential disruption of wartime casualty care. The extended professional civilian medical community expressed its own concerns with the proposed dissolution of the Armed Forces Institute of Pathology (AFIP), which is currently located at the WRAMC Main Post. Several professional organizations and individuals from various regions of the country submitted statements, testimony, and correspondence to the Commission, contending that the current AFIP is irreplaceable as a disease research and medical education resource whose influence is felt far beyond the narrowly focused body of military pathologists. The Commission acknowledged the importance of many of the expressed community concerns and objections. Nevertheless, the Commission judged that a new facility would offer the most effective means to offer state-of-the-art treatment and endorsed the Secretary of Defense's assessments of military value. The Commission did require DOD to address expressed community concerns regarding the perceived lack of family housing on the Bethesda campus of the new WRNMMC. The Commission also recognized the importance the professional community assigned to the services provided by the AFIP in the form of radiological resident training, continuing medical education, and pathology consultations. The Commission's decisions regarding the redress of these deficiencies were folded into their final list of recommended actions, which moved some functions to new locations and directed that the remaining capabilities be absorbed into other DOD, federal, and civilian facilities. The Commission concluded that DOD plans, as modified by the Commission, preserved the legacy of WRAMC, provided for continued needed medical care during the moves, and safeguarded the clinical and research functions being relocated. The Walter Reed Military Installation "Walter Reed" has been the premier Army medical facility since its founding on its current site during the first years of the 20 th century. In the decades since, hundreds of thousands of soldiers, their families, and government officials have received medical treatment at the hospital. The Walter Reed Military Installation consists of three separate sites: Main Post, Forest Glen Annex, and the Glen Haven Housing Area. It is a Department of Defense (DOD) site administered by the Department of the Army and provides military medical health care, medical education and training, advanced biomedical research, and diagnostic pathology consultative services. Together, the three sites cover 297 acres and contain more than 100 buildings, exclusive of family housing, with 5.9 million square feet of floor space. Main Post The Main Post is located at 7100 Georgia Ave. N.W. in the District of Columbia. The Main Post occupies 113 acres of land, acquired in three parcels (in 1908, 1918, and 1922), and contains 73 buildings with 4.6 million square feet of floor space. The major, though not the only, facility resident on the Main Post is the Walter Reed Army Medical Center (WRAMC). The Center employs more than 4,000 military and civilian personnel, or approximately half of the Military Installation's total, and a number of supporting contractors. WRAMC occupies 1.3 million square feet of usable floor space and provides primary, secondary, and tertiary medical care, medical research, and medical education and training. Forest Glen Annex The Forest Glen Annex lies on 164 acres to the northwest of Silver Spring, Maryland, acquired by the War Department in 1942. The site contains 33 buildings of 1.3 million ft.² of floor space. Its principal occupants are the Walter Reed Army Institute of Research (WRAIR) and the Naval Medical Research Center (NMRC). Both WRAIR and NMRC engage in medical research, and both are located in the Daniel K. Inouye Building on the Annex. The WRAIR employs more than 1,200 personnel and occupies 514,000 square feet of the building's floor space. Its activities include biomedical research in military-related infectious disease, combat casualty care, operational medicine and medical chemical and biological defense. The NMRC conducts research in infectious diseases, biological defense, combat casualty care, bone marrow and diving and environmental medicine. A major focus is vaccine development. The Center employs approximately 340 personnel and occupies 54,000 square feet of the Inouye Building. The Armed Forces Pest Management Board, described later in this report, is lodged in offices at the Annex. Glen Haven Housing Area The Glen Haven Housing Area contains 204 family housing units and is located north of the Capital Beltway (I-495) near Wheaton, Maryland. The site was acquired by the War Department in 1942, at the same time as the Forest Glen Annex. The homes at Glen Haven are not government-owned, having been privatized in 2004 as part of the Northeast Integrated (Phase I) housing project that incorporates a total of 590 housing units at Glen Haven and at Ft. Detrick, located near Frederick, Maryland. This housing complex was built and is owned, maintained, and operated by GMH Military Housing, LLC, in a 50-year public-private partnership between a private developer and the Department of the Army. Functions of Walter Reed Organizations12 The various significant Walter Reed organizations are listed at the text box at right. The organization and function of each of these will be taken up in order. Walter Reed Army Medical Center (WRAMC) WRAMC is a 261-bed military medical treatment facility (MTF) that provides emergency medical care, primary medical care, surgical services, orthopaedic and rehabilitative care, mental health services, allergy and immunology care, care in various medical sub-specialties, and ancillary services. North Atlantic Regional Medical Command The North Atlantic Regional Medical Command is one of six geographically defined units subordinate to Army Medical Command. The commander of Army Medical Command (MEDCOM) is "dual-hatted," also holding the position of Army Surgeon General, who heads the Army Medical Department (AMEDD) within the headquarters of the Department of the Army. The Surgeon General holds the rank of lieutenant general in the Army Medical Corps, is the medical expert on the most senior Army staff at the Pentagon, and is the medical advisor to the Secretary of the Army, the Army Chief of Staff, and other senior executives in the Army structure. Because the position of surgeon general is purely staff in its function, it has no command authority over operational medical units. In his other role as Commander, MEDCOM, the general does exercise command authority over the medical staffs at all of the Army's fixed medical facilities and other AMEDD commands and agencies. Before 1994, Army medical facilities were decentralized in management and operation. The Department of the Army began to consolidate their diverse medical operations into a single MEDCOM during the mid-1990s and placed the Surgeon General at its head. Thus, the Surgeon General, located in the Washington, D.C., area, now holds both that office and commands the Army Medical Command. His AMEDD staff is collocated with him in the national capital, while the MEDCOM staff is located at Ft. Sam Houston, Texas. The headquarters of the North Atlantic Regional Medical Command is located on the main post of the WRAMC. The region covers states from Maine to Minnesota and as far south as North Carolina, and the regional commander exercises command authority over medical staffs at facilities within that area. North Atlantic Regional Veterinary Command The North Atlantic Regional Veterinary Command is the veterinary functional equivalent of its Regional Medical Command counterpart. Its headquarters is sited in Building 1 of the WRAMC. Army Veterinary Command (VETCOM) is commanded by a colonel of the Army Veterinary Corps, and engages in animal care, food safety and defense against food-borne diseases, and veterinary research and development. Each Regional Veterinary Command is collocated with its MEDCOM counterpart. Armed Forces Institute of Pathology The Armed Forces Institute of Pathology is a joint agency, employing approximately 820 and specializing in pathology consultation, education, and research. It is located on the WRAMC Main Post. A number of subdepartments operate within the Institute. In addition to their strictly military functions, pathologists on the AFIP staff offer pathology consultations to civilian colleagues through the American Registry of Pathology, a non-profit organization. Some AFIP subsidiary organizations include: Legal Medicine Legal Medicine is an educational journal for physicians whose production staff is located within the AFIP. The journal addresses issues at the intersection of medical practice and the legal system, such as appearing as an expert witness at trials. Subscriptions to Legal Medicine can assist physicians to satisfy professional requirements for continuing medical education. National Museum of Medicine and Health The Army Medical Museum, predecessor to the National Museum of Medicine and Health, was established on May 21, 1862. The Museum's five major collections (Anatomical, Historical, Otis Historical Archives, Human Developmental Anatomy, and Neuroanatomical) are estimated to contain more than 24 million objects. Appropriated funding comes from the DOD Office of Health Affairs, with the remainder provided through grants, contributions, donations, and in-kind gifts. National Pathology Repository The National Pathology Repository, located at the AFIP, accepts, codes by pathologic diagnosis, and stores medical material. It has catalogued more than 2.8 million medical cases since 1917, including written records and more than 50 million microscope slides, 30 million paraffin tissue blocks, and 12 million preserved wet tissue specimens. Approximately 60,000 new cases are brought into the Repository each year. In addition, the Repository stores case files and specimens from more than 20 closed military medical facilities. Armed Forces Medical Examiner The Armed Forces Medical Examiner System (AFMES) is a Department of Defense standard system to conduct scientific forensic investigations for determining the cause and manner of death of members of the Armed Forces on active duty or on active duty for training and, under specific circumstances, civilians who die in areas of exclusive federal jurisdiction. The Office of the Armed Forces Medical Examiner (OAFME) is a component of the Armed Forces Institute of Pathology (AFIP), but is located at the AFIP Annex in Rockville, Maryland. Regional and Associate Medical Examiners, appointed by the Armed Forces Medical Examiner with the concurrence of the respective service Surgeon General, are stationed at designated military medical treatment facilities within the United States and overseas. Subordinate departments within the OAFME include: Armed Forces DNA Repository The Repository stores deoxyribonucleic acid (DNA) reference specimens and maintains a database to assist in their retrieval for human remains identification. It also purchases and distributes DNA collection supplies to field sites for collecting specimens. DNA Identification Laboratory The Laboratory provides scientific consultation, research, and education services in the field of forensic DNA analysis to the Department of Defense (DoD) and other agencies. It also provides DNA reference specimen collection, accession, and storage of DNA material gathered from U.S. military and other personnel. Forensic Toxicology The Division of Forensic Toxicology Post-Mortem and Human Performance Testing Laboratory is the DoD's centralized laboratory for routine toxicological examinations associated with military aircraft, ground, and ship (sea) mishaps in which no fatalities occur (referred to as incidents). Forensic Toxicology also assists in all military aircraft, ground and ship (sea) accidents involving fatalities; selected military autopsies; biological specimens from the Air Force Office of Special Investigations (AFOSI), Army Criminal Investigative Division (CID), and Navy Criminal Investigative Service (NCIS) criminal investigations; blood for legal alcohol and drug tests in medico-legal determinations; blood and urine in fitness for duty interrogations; and selected cases of national interest. Army Physical Disability Board The Washington, D.C., Physical Evaluation Board (PEB, also known as the Army Physical Disability Board) is located in Building 7 of the WRAMC main post and is one of three similar panels within the U.S. Army Physical Disability Agency. The Agency is not part of the Army Medical Command, but is an organization within the Adjutant General Directorate of the Army Human Resources Command. The PEB determines an injured individual's physical fitness for continued military service. If the PEB finds that a soldier is unfit for further service, the Physical Disability Agency is responsible to find the appropriate level and type of compensation to be awarded. If the soldier cannot continue on active duty because of a physical disability, the Agency takes the appropriate actions to separate or retire him or her. Two other Army PEBs exist and are located at Ft. Lewis, Washington, and Ft. Sam Houston, Texas. National Capital Multi-Service Market Office Military and military-sponsored medical care has been consolidated under a Tricare system of management. This Tricare system is divided into three regions, North, South, and West, and subdivided into 13 Multiple Service Market Areas. The National Capital Area is one of these, and the office of the Area Market Manager, created in 2004, is currently located within the Walter Reed Army Medical Center. The Area Market Manager is responsible for coordinating the development of a single, integrated business plan for the provision of military medical care throughout his assigned district. The National Capital Area contains nine major military treatment facilities that for which the Area Market Manager drafts plans for appointing services, resource sharing and optimization, and the sharing of DoD and Veterans Administration facilities. 2290th U.S. Army Hospital The 2290 th U.S. Army Hospital, an Army Reserve unit that was created in 1963, is physically located at 1850 Baltimore Road in Rockville, Maryland. Its mission when called to active duty is to move to the Walter Reed Army Medical Center and augment the hospital personnel there in order to accommodate surges in patient load. Walter Reed Army Institute of Research The Walter Reed Army Institute of Research (WRAIR) is the Army's largest, most diverse, and oldest medical laboratory. It is a subordinate command in the Army Medical Research and Materiel Command, which in turn is subordinate to Army Medical Command. As of mid-2005, WRAIR employed 1,286 military and civilian personnel. WRAIR conducts research on a range of military medical issues, including naturally occurring infectious diseases, combat casualty care, operational health hazards, and medical defense against biological and chemical weapons. WRAIR is the Department of Defense's lead agency for infectious disease research and research in support of both military and civilian medical product development. WRAIR also hosts five post-doctoral residency programs. WRAIR is located in the Daniel J. Inouye Building on the WRAMC Forest Glen Annex. Naval Medical Research Center The Naval Medical Research Center (NMRC) conducts basic and applied biomedical research in infectious diseases, biological defense, combat casualty care, bone marrow, and diving and environmental medicine. The major focus at NMRC is the development of vaccines against malaria, diarrhea, dengue fever, and rickettsial disease and the carrying out of clinical trials in support of vaccine development. The NMRC employed 339 military and civilian individuals as of mid-2005. Armed Forces Pest Management Board The Armed Forces Pest Management Board (AFPMB) recommends policy, provides guidance, and coordinates the exchange of information on all matters related to pest management throughout DOD. The AFPMB's mission is to ensure that environmentally sound and effective programs are present to prevent disease vectors from adversely affecting DOD operations. The AFPMB hosts meetings, maintains a virtual information library on relevant literature, and encourages continuing education and training in pest and disease vector management. The AFPMB staff is located in Building 172 of the WRAMC Forest Glen Annex. Parallel Chains of Command at the Walter Reed Installation Army Medical Command exercises command authority over the medical functions at WRAMC, but the caretaker of the Walter Reed complex (main post, Forest Glen Annex, and Glen Haven Housing area) is the Army's Installation Management Command (see Figure 1 ). As noted earlier, the commanding general of Army Medical Command (MEDCOM) also serves as the Army's Surgeon General. MEDCOM is headquartered at Ft. Sam Houston, Texas, and includes the North Atlantic Regional Medical Command as well as five other regional medical commands – Europe, Great Plains, Pacific, Southeast, and Western. Major commands subordinate to MEDCOM that are not depicted in Figure 1 include the Army Medical Department Center & School, Army Center for Health Promotion & Preventive Medicine, Army Dental Command, Army Medical Research & Materiel Command, and Army Veterinary Command. The North Atlantic Regional Medical Command is headquartered at the WRAMC Main Post. This region includes two Army medical centers (at Walter Reed and Ft. Bragg, North Carolina), eight other clinics, community hospitals, and equivalent facilities (Ft. Belvoir, Ft. Lee, and Ft. Eustis in Virginia, Ft. Drum and West Point in New York, Ft. Knox in Kentucky, Ft. Meade in Maryland, and Ft. Monmouth in New Jersey), and the research installations at the Forest Glen Annex and Ft. Detrick, Maryland. Army Installations Management Command (IMCOM) is headquartered in Ft. Monroe, Virginia. Just as MEDCOM is commanded by a lieutenant general who is dual-hatted as the Army's Surgeon General, IMCOM's commander is a lieutenant general who is dual-hatted as the Army's Assistant Chief of Staff for Installation Management. As illustrated in Figure 1 , both officers report directly to the Army Chief of Staff. IMCOM includes seven regions: Northeast, Northwest, Southeast, Southwest, Europe, Pacific, and Korea. It was created in October of 2006 with the consolidation of the former Installation Management Agency (IMA), Community and Family Support Center, and Army Environmental Center. IMCOM is responsible, among other missions, for bringing efficient oversight and business practices to the management of the Army's installations, inheriting this from its predecessor, the IMA. Before 2002, the Army did not have a single, consolidated management agency dedicated to the operation, modernization, and maintenance of its individual posts and other sites. Responsibility for the physical plant at any given installation was then vested in a senior post commander whose chain of command usually ran upward through a division, army, or other such operational unit. Because the funds used to maintain and modernize these posts come from the same operations and maintenance (O&M) appropriations accounts as funds for training, operations, and the direct day-to-day support of the post's military mission, many Army managers came to understand that, over time, infrastructure suffered as funding tended to migrate toward operations and away from maintenance. One of the reasons for establishing the IMA was to create an institutional advocate for the installations themselves and for the funding necessary for their upkeep and operation. IMA became the Army's "landlord" and took responsibility for operating posts, forts, etc. It did so by establishing the regions listed above, and then by creating "garrisons" at all installations within each region. Each garrison was commanded by an officer assigned to the position, usually a colonel, who was accountable for maintenance, construction, servicing, etc., on the site or sites constituting the installation. Funding for the operation of each post was then no longer funneled through the operational chains of command, but rather through the IMA and its regions to the individual garrisons. Garrison commanders, since the creation of the IMA and its transition into IMCOM, have supervised the installation of contract guard forces at posts on United States territory, military construction and building demolition, provision of supplies and services, privatization of installation utilities and military housing, and the creation of public-private partnerships, such as the two enhanced use lease projects at the Walter Reed installation. Therefore, all medical practice-related functions at the Walter Reed Army Medical Center are the responsibility of MEDCOM's installation commander, while all facility maintenance, operations, and services are the responsibility of the IMCOM garrison commander. Implementation of BRAC Recommendation #169 Under the guidance of the Department of the Army, the military departments and defense agencies affected by BRAC Commission Recommendation #169 negotiated and agreed on a plan of 13 distinct actions to distribute functions and establish the Walter Reed National Military Medical Center in time to meet the September 15, 2011, deadline. Figure 2 depicts in graphic form the timelines of the actions described in this section. Figure 3 illustrates the recommendation's geographic disposition of WRAMC functions resulting from the Commission's recommendation. 1. Relocate all tertiary (sub-specialty and complex care) medical services to National Naval Medical Center (NNMC), Bethesda, MD, establishing it as the Walter Reed National Military Medical Center Bethesda (WRNMMC), MD. Master planning for the creation of the WRNMMC and necessary NEPA (National Environmental Policy Act) actions began during Fiscal Year 2006. This planning is to be completed during Fiscal Year 2007. The current National Naval Medical Center (NNMC) at Bethesda requires additional clinical treatment, graduate medical education, ancillary, parking, and supporting facilities in order to absorb the functions being transferred from the WRAMC. A contract for the development of a Request for Proposal (RFP) for design and construction is to be awarded during Fiscal Year 2007. The construction contract is to be awarded during February 2008, and construction in itself is expected begin in March of that same year and continue through May 2011. Initial outfitting of the building and the first transition of personnel and activities is scheduled to begin during Fiscal Year 2009. Tertiary (sub-specialty and complex care) is scheduled to move from WRAMC to the WRNMMC in April 2010. The bulk of construction costs are being borne by the DOD TRICARE Management Agency. Some community support infrastructure, including a new physical training facility and an expansion of general administrative space, is funded by the Department of the Army. Community support construction is scheduled to begin in February 2009 and end in May 2011. The functional integration of the clinical departments at WRAMC and NNMC began during early 2007. Specialty and inpatient care at the two facilities is scheduled to be functionally integrated in early Fiscal Year 2008. The new Bethesda WRNMMC will be a joint military facility administered by the Department of the Navy. Civilian DOD employees transferred to Bethesda from WRAMC will become part of the Navy civilian workforce. WRNMMC is to officially open in September 2011. 2. Relocate Legal Medicine to the new Walter Reed National Military Medical Center Bethesda, MD. The move of Legal Medicine 's staff from the current AFIP location to new offices will not entail significant new construction. The transition is scheduled to occur in April 2010. 3. Relocate sufficient personnel to the new Walter Reed National Military Medical Center Bethesda, MD, to establish a Program Management Office that will coordinate pathology results, contract administration, and quality assurance and control of DoD second opinion consults worldwide. This recommendation involves the translation of a portion of the pathology consultation function currently administered by the AFIP from WRAMC to a new Program Management Office at WRNMMC. No significant new construction is involved. The move is scheduled to take place in April 2010. 4. Relocate all non-tertiary (primary and specialty) patient care functions to a new community hospital at Ft. Belvoir, VA. Because four separate BRAC recommendations will relocate functions and facilities onto Ft. Belvoir, the responsibility for funding a $152 million general upgrade of basic installation infrastructure (utilities, roads, etc.) has been apportioned to each recommendation. A $40 million share has been allocated to BRAC Recommendation #169 that is divided between Fiscal Years 2007 and 2008. The current DeWitt Army Community Hospital, which this construction will replace, was built in 1957 as a 250-bed inpatient facility that still utilizes its original heating, air conditioning, electrical, and other support facilities. Extensive use of asbestos throughout the building has encouraged plans to replace, rather than renovate, the facility. New construction will include the hospital, a medical office building, ambulance shelter, parking garage, and central energy plant, among other ancillary facilities. Master planning for on-base construction, moves, and necessary NEPA actions began during Fiscal Year 2006. This planning is scheduled to be completed during Fiscal Year 2007, when a design contract for the new hospital and design initiation are to begin. As part of the first phase, primary care functions at WRAMC and Ft. Belvoir are scheduled to integrate in early Fiscal Year 2009. The hospital's construction contract is to be awarded in January 2008 with construction set to begin in February. Hospital construction is to continue throughout Fiscal Year 2009 while the building's initial outfitting and the transition of activities from WRAMC begins. Construction is to be completed by May 2011. The non-tertiary patient care functions at WRAMC are scheduled to move to the Ft. Belvoir hospital in August 2011. At the same time, the design of a new dental clinic at Ft. Belvoir is to begin. Construction of the new dental clinic is scheduled to begin during Fiscal Year 2010. The clinic is scheduled to be completed and the WRAMC staff is set to transition into the new facility during Fiscal Year 2011. The Ft. Belvoir Community Hospital and Dental Clinic will be a joint military facility administered by the Department of the Army. Civilian DOD employees transferred from WRAMC to Ft. Belvoir will remain part of the Army civilian workforce. The final major building project, construction of a new headquarters for the Army's North Atlantic Regional Medical Command (NARMC) staff at Ft. Belvoir is scheduled to begin in Fiscal Year 2010. The staff is currently located at WRAMC. 5. Relocate the Office of the Secretary of Defense supporting unit to Ft. Belvoir, VA. The supporting unit is scheduled to move from WRAMC to Ft. Belvoir in August 2011. 6. Dissolve all elements of the Armed Forces Institute of Pathology (AFIP) except the National Medical Museum (National Museum of Medicine and Health) and the Tissue Repository (National Pathology Repository). The National Museum of Medicine and Health will relocate from the WRAMC main post to the new WRNMMC during the general move as space becomes available. Construction of a Medical Artifact Storage Facility at Bethesda is scheduled to commence during Fiscal Year 2010. 7. Relocate the Armed Forces Medical Examiner, DNA Registry, and Accident Investigation to Dover Air Force Base, DE. Design of a new Joint Medical Examiner Facility to receive the Armed Forces Medical Examiner staff and DNA Registry is scheduled to begin in December 2007. The Facility will support the existing DOD Port Mortuary at Dover Air Force Base. A construction contract is planned for award in January 2009. Construction is to be completed by September 2010. 8. AFIP capabilities not specified in this recommendation will be absorbed into other DoD, Federal, or civilian facilities, as necessary. There have been no public announcements regarding which of the remaining capabilities will migrate or when this will occur. 9. Relocate enlisted histology technician training to Ft. Sam Houston, TX. The Department of the Air Force is responsible for implementing the non-clinical portions of BRAC Commission Recommendation #172, the creation of the San Antonio Regional Medical Center at what is now the Brooke Army Medical Center, Ft. Sam Houston, Texas. One of those non-clinical actions is the construction of a Medical Enlisted Training Center (METC) to consolidate enlisted medical technician instruction now conducted at several installations. Construction of the METC is scheduled to be completed in September 2010. The training function is scheduled to move to Ft. Sam Houston not later than August 2011. 10. Relocate the Combat Casualty Care Research sub-function (with the exception of those organizational elements performing neuroprotection research) of the Walter Reed Army Institute of Research (Forest Glen Annex) and the Combat Casualty Care Research sub-function of the Naval Medical Research Center (Forest Glen Annex) to the Army Institute of Surgical Research, Ft. Sam Houston, TX. The Combat Casualty Care Research subfunction of the NMRC will join dental and biomedical research functions currently being carried out at Great Lakes Naval Station, Illinois, and Brooks City Base (San Antonio), Texas, in a Joint Center of Excellence for Battlefield Health and Trauma that is being established at Ft. Sam Houston, Texas (BRAC Commission Recommendation #174). Construction of this new facility is scheduled to be completed by June 2009. Movement of the Combat Casualty Care Research subfunction from the current Forest Glen Annex facility to Ft. Sam Houston is scheduled for January 2010. 11. Relocate Medical Biological Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) and Naval Medical Research Center (Forest Glen Annex) to Ft. Detrick, MD, and consolidate it with U.S. Army Medical Research Institute of Infectious Diseases. The Medical Biological Defense Research function is scheduled to move into facilities at Ft. Detrick, Maryland, in May 2010. This is associated with the consolidation of DOD biomedical research and management functions into a single Joint Biomedical Research, Development, and Acquisition Management Center at Ft. Detrick (BRAC Commission Recommendation #174). 12. Relocate Medical Chemical Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) to Aberdeen Proving Ground, MD, and consolidate it with the U.S. Army Medical Research Institute of Chemical Defense. The movement of the chemical defense research function will require building a new Chemical and Biological Defense Medical Research Laboratory at Aberdeen Proving Ground, Maryland. The construction contract is scheduled to be awarded in January 2008 with construction itself beginning two months later. The new facility is to be completed during March 2010. The research function is to move from its Forest Glen Annex facility in May 2010. Movement of an associated function, the Joint Program Executive Office for Chemical, Biological Defense, from leased facilities in Falls Church, Virginia, and Ft. Belvoir, Virginia, to Aberdeen Proving Ground is scheduled to occur in April 2009. 13. Close the main post. Closure will take place subsequent to the last relocation of official functions, currently scheduled for August 2011. The Department of State and the General Services Administration have requested that title to the property be transferred to them in roughly equal portions. Options for Congress Some legislation that could affect the implementation of BRAC Commission Recommendation #169 has already been proposed in the 110 th Congress. Appendix C lists these bills, quotes the relevant sections of each, and indicates their status. The bills that are most advanced include the proposed National Defense Authorization Act for Fiscal Year 2008 ( H.R. 1585 ), which would establish a funding floor for WRAMC operations, and the Dignified Treatment of Wounded Warriors Act ( S. 1606 ), which would require the Secretary of Defense to assess the feasibility of accelerating the construction of new medical facilities. Both bills are on the Senate's Legislative Calendar. Potential options for Congress regarding the creation of the Walter Reed National Military Medical Center – some of which might have the effect of legislatively altering the statutory deadline for completing BRAC Commission actions – include but are not limited to the following: Further modify, delay, or negate the BRAC Commission Recommendation #169. Require DOD to report one time or on a set schedule the progress of implementation of BRAC Commission Recommendation #169. Adjust or expand the proposed acceleration in implementation of BRAC Commission Recommendation #169. Create a dedicated funding stream to ensure the timely implementation of BRAC Commission Recommendation #169. Obligate the Department of the Army to track and report on the reforms suggested by the Independent Review Group on Rehabilitative Care and Administrative Processes and Walter Reed Army Medical Center and National Naval Medical Center in their report "Rebuilding the Trust," of April 2007. Commission a blue ribbon panel to monitor Department of Defense and Department of the Army implementation of Independent Review Group recommendations and BRAC Commission Recommendation #169. Require DOD or the Department of the Army to report on the organization of the newly created Installation Management Command (IMCOM) and its subordinate Installation Management Agency (IMA) and assess their performance in managing Army installations since IMA creation in 2002. Appendix A. Commission Recommendation #169 WALTER REED NATIONAL MILITARY MEDICAL CENTER, BETHESDA, MD RECOMMENDATION # 169 (MED 4) ONE-TIME COST: $988.8M ANNUAL RECURRING COSTS/(SAVINGS): ($145.3M) 20-YEAR NET PRESENT VALUE: ($830.6M) PAYBACK PERIOD: 6 YEARS SECRETARY OF DEFENSE RECOMMENDATION Realign Walter Reed Army Medical Center, Washington, DC, as follows: relocate all tertiary (sub-specialty and complex care) medical services to National Naval Medical Center, Bethesda, MD, establishing it as the Walter Reed National Military Medical Center Bethesda, MD; relocate Legal Medicine to the new Walter Reed National Military Medical Center Bethesda, MD; relocate sufficient personnel to the new Walter Reed National Military Medical Center Bethesda, MD, to establish a Program Management Office that will coordinate pathology results, contract administration, and quality assurance and control of DoD second opinion consults worldwide; relocate all non-tertiary (primary and specialty) patient care functions to a new community hospital at Ft. Belvoir, VA; relocate the Office of the Secretary of Defense supporting unit to Ft. Belvoir, VA; disestablish all elements of the Armed Forces Institute of Pathology except the National Medical Museum and the Tissue Repository; relocate the Armed Forces Medical Examiner, DNA Registry, and Accident Investigation to Dover Air Force Base, DE; relocate enlisted histology technician training to Ft. Sam Houston, TX; relocate the Combat Casualty Care Research sub-function (with the exception of those organizational elements performing neuroprotection research) of the Walter Reed Army Institute of Research (Forest Glen Annex) and the Combat Casualty Care Research sub-function of the Naval Medical Research Center (Forest Glen Annex) to the Army Institute of Surgical Research, Ft. Sam Houston, TX; relocate Medical Biological Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) and Naval Medical Research Center (Forest Glen Annex) to Ft. Detrick, MD, and consolidate it with US Army Medical Research Institute of Infectious Diseases; relocate Medical Chemical Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) to Aberdeen Proving Ground, MD, and consolidate it with the US Army Medical Research Institute of Chemical Defense; and close the main post. SECRETARY OF DEFENSE JUSTIFICATION This recommendation will transform legacy medical infrastructure into a premier, modernized joint operational medicine platform. This recommendation reduces excess capacity within the National Capital Region (NCR) Multi-Service Market (MSM: two or more facilities collocated geographically with "shared" beneficiary population) while maintaining the same level of care for the beneficiaries. Walter Reed Army Medical Center (AMC) has a military value of 54.46 in contrast to the higher military values of National Naval Medical Center (NNMC) Bethesda (63.19) and DeWitt Hospital (58). This action relocates medical care into facilities of higher military value and capacity. By making use of the design capacity inherent in NNMC Bethesda (18K RWPs) and an expansion of the inpatient care at DeWitt Hospital (13K RWPs), the entire inpatient care produced at Walter Reed AMC (17K RWPs) can be relocated into these facilities along with their current workload (11K RWPs and 1.9K RWPs, respectively). This strategically relocates healthcare in better proximity to the beneficiary base, which census data indicates is concentrating in the southern area of the region. As a part of this action, approximately 2,069 authorizations (military and civilian) will be realigned to DeWitt Hospital and 797 authorizations will be realigned to NNMC Bethesda in order to maintain the current level of effort in providing care to the NCR beneficiary population. DeWitt Hospital will assume all patient care missions with the exception of the specific tertiary care missions that will go to the newly established Walter Reed National Military Medical Center at Bethesda. Specialty units, such as the Amputee Center at WRAMC, will be relocated within the National Capitol Region. Casualty care is not impacted. Development of a premier National Military Medical Center will provide enhanced visibility, as well as recruiting and retention advantages to the Military Health System. The remaining civilian authorizations and contractors at Walter Reed AMC that represent unnecessary overhead will be eliminated. Military personnel filling similar "overhead positions" are available to be redistributed by the Service to replace civilian and contract medical personnel elsewhere in Military Healthcare System activities of higher military value. Co-location of combat casualty care research activities with related military clinical activities of the trauma center currently located at Brooke Army Medical Center, Ft. Sam Houston, TX, promotes translational research that fosters rapid application of research findings to health care delivery, and provides synergistic opportunities to bring clinical insight into bench research through sharing of staff across the research and health care delivery functions. This action will co-locate Army, Navy, Air Force and Defense Agency program management expertise for non-medical chemical and biological defense research, development and acquisition (each at Aberdeen Proving Ground, MD) and two separate aspects of medical chemical and biological research: medical biological defense research (at Ft. Detrick, MD) and medical chemical defense research (at Aberdeen Proving Ground, MD). It will promote beneficial technical interaction in planning and headquarters-level oversight of all defense biomedical R&D, fostering a joint perspective and sharing of expertise and work in areas of joint interest; create opportunities for synergies and efficiencies by facilitating integrated program planning to build joint economies and eliminate undesired redundancy, and by optimizing use of a limited pool of critical professional personnel with expertise in medical product development and acquisition; foster the development of common practices for DoD regulatory interactions with the US Food and Drug Administration; and facilitate coordinated medical systems lifecycle management with the medical logistics organizations of the Military Departments, already co-located at Ft. Detrick. The Armed Forces Institute of Pathology (AFIP) was originally established as the Army Medical Museum in 1862 as a public and professional repository for injuries and disease specimens of Civil War soldiers. In 1888, educational facilities of the Museum were made available to civilian medical professions on a cooperative basis. In 1976, Congress established AFIP as a joint entity of the Military Departments subject to the authority, control, and direction of the Secretary of Defense. As a result of this recommendation, in the future the Department will rely on the civilian market for second opinion pathology consults and initial diagnosis when the local pathology labs capabilities are exceeded. COMMUNITY CONCERNS The Washington, DC community argued that moving Walter Reed Army Medical Center to the National Naval Medical Center in Bethesda, MD would disrupt the mission of the premier military medical facility, and have a negative effect on the economy of the District of Columbia and homeland security in the nation's capital. Concerns were also expressed about whether there would be sufficient housing for family members visiting service members recovering from serious conditions or injuries. They claimed DoD substantially deviated from the BRAC criteria by incorrectly calculating Walter Reed's military value, underestimating the costs for closure and realignment, and ignoring environmental cleanup costs. They suggested Walter Reed remain open, and the mission of the National Naval Medical Center be aligned with Walter Reed to ensure there are no disruptions during a time of war. They also expressed concerns about the disestablishment of the Armed Force Institute of Pathology (AFIP), which is a part of the larger Walter Reed Recommendation. The community argued that AFIP is an irreplaceable resource for disease research and education, and disestablishing elements like the tissue repository would have far-reaching implications for military and civilian medicine. COMMISSION FINDINGS The Commission acknowledged Walter Reed Army Medical Center's rich heritage and earned reputation as a world-class medical center. However, the Commission found that service members deserve a state-of-the-art 21 st century medical center and that the Secretary's proposal would increase military value. The Commission considered the community's concerns that realigning medical services will disrupt Walter Reed's mission, but the Commission found that the Walter Reed legacy will be preserved in the plan for the new facility and that service members would continue to receive needed medical services during the implementation period. The Commission concurred with the Department's objective to transform medical infrastructure within the National Capital Region. However, the Commission agrees with the communities' concern about whether sufficient housing will be available for family members at the Bethesda Campus and urges the DoD to address this issue. The professional community regards AFIP and its services as integral to the military and civilian medical and research community, and relies on AFIP for pathology consultations and the training of radiology residents. The Commission found that DoD failed to sufficiently address several AFIP functions, such as the Radiologic Pathology program, with the associated tissue repository, veterinary pathology and continuing medical education. COMMISSION RECOMMENDATIONS The Commission found that the Secretary of Defense deviated substantially from final selection criteria 1, as well as from the Force Structure Plan. Therefore, the Commission recommends the following: Realign Walter Reed Army Medical Center, Washington, DC, as follows: relocate all tertiary (sub-specialty and complex care) medical services to National Naval Medical Center, Bethesda, MD, establishing it as the Walter Reed National Military Medical Center Bethesda, MD; relocate Legal Medicine to the new Walter Reed National Military Medical Center Bethesda, MD; relocate sufficient personnel to the new Walter Reed National Military Medical Center Bethesda, MD, to establish a Program Management Office that will coordinate pathology results, contract administration, and quality assurance and control of DoD second opinion consults worldwide; relocate all non-tertiary (primary and specialty) patient care functions to a new community hospital at Ft Belvoir, VA; relocate the Office of the Secretary of Defense supporting unit to Ft. Belvoir, VA; disestablish all elements of the Armed Forces Institute of Pathology except the National Medical Museum and the Tissue Repository; relocate the Armed Forces Medical Examiner, DNA Registry, and Accident Investigation to Dover Air Force Base, DE; AFIP capabilities not specified in this recommendation will be absorbed into other DoD, Federal, or civilian facilities, as necessary; relocate enlisted histology technician training to Ft. Sam Houston, TX; relocate the Combat Casualty Care Research sub-function (with the exception of those organizational elements performing neuroprotection research) of the Walter Reed Army Institute of Research (Forest Glen Annex) and the Combat Casualty Care Research sub-function of the Naval Medical Research Center (Forest Glen Annex) to the Army Institute of Surgical Research, Ft. Sam Houston, TX; relocate Medical Biological Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) and Naval Medical Research Center (Forest Glen Annex) to Ft. Detrick, MD, and consolidate it with U.S. Army Medical Research Institute of Infectious Diseases; relocate Medical Chemical Defense Research of the Walter Reed Army Institute of Research (Forest Glen Annex) to Aberdeen Proving Ground, MD, and consolidate it with the U.S. Army Medical Research Institute of Chemical Defense; and close the main post. Appendix B. Creating the Walter Reed National Military Medical Center Army Component On May 1, 1909, the staff and patients of the Army's General Hospital at the District of Columbia's Washington Barracks relocated to a new facility on the city's northwest periphery. After World War I, the General Hospital (now Building 1 at the Georgia Avenue campus of the Walter Reed Army Medical Center) was joined by the Army Medical School (Building 40), the combined facility being designated the Walter Reed Army Medical Center in 1951. The former Medical School was redesignated the Walter Reed Army Institute of Research in 1955. During the mid-1970s, the Army constructed Building 2, an additional 200-bed hospital, at the Army Medical Center, raising the inpatient capacity on the site to the current 261. The Institute of Research vacated Building 40 and moved to a new facility at the Center's Forest Glen Annex in nearby Maryland in 1999. Building 40 was then leased to a private concern by the Department of Defense under a so-called Enhanced-Use Lease. Navy Component In October 1906, a Naval Hospital was opened at 23 rd and E St., NW, replacing a 50-bed post-Civil War facility located near the Washington Navy Yard. By 1935, a Navy Medical School had been added and the combined facility was renamed the Naval Medical Center. A new Naval Medical Center, consisting of a 1,200-bed hospital, the Naval Medical School (now the Uniformed Services University of the Health Sciences), the Naval Dental School (now the National Naval Dental Center), and the Naval Medical Research Institute (now the Naval Medical Research Center), opened at the current 243-acre location in Bethesda, Maryland, in February 1942. Temporary World War II, Korean War, and Vietnam War inpatient facilities were gradually replaced by permanent structures, and the entire facility was reconstructed in the late 1970s. There are 257 inpatient beds available in the current facility, known since 1989 as the National Naval Medical Center. In 1999, the Naval Medical Research Center relocated to the Walter Reed Army Medical Center Forest Glen Annex, joining the Walter Reed Army Institute of Research in the Daniel J. Inouye Building. The Combined Facility The Army is scheduled to move all tertiary medical services, Legal Medicine, and some of the functions currently performed by the Armed Forces Institute of Pathology currently located at the Walter Reed Army Medical Center to the Bethesda Navy site during 2010 to create the Walter Reed National Military Medical Center. Appendix C. Legislation Proposed During the 110 th Congress Regarding the Creation of Walter Reed National Military Medical Center Various bills have been introduced during the 110 th Congress that would affect in some way the implementation of BRAC Commission Recommendation #169. As of the date of this report, the relevant bill sections and bill status are listed below: To prohibit the closure of Walter Reed Army Medical Center notwithstanding the 2005 recommendations of the Defense Base Closure and Realignment Commission. (Introduced in House) [ H.R. 1417 .IH] Status: Referred to the House Committee on Armed Services Subcommittee on Readiness on April 3, 2007. SECTION 1. PROHIBITION ON CLOSURE OF WALTER REED ARMY MEDICAL CENTER. Notwithstanding section 2904(a)(5) of the Defense Base Closure and Realignment Act of 1990 (part A of title XXIX of P.L. 101-510 ; 10 U.S.C. 2687 note) and the recommendations of the Defense Base Closure and Realignment Commission contained in the report transmitted to Congress on September 15, 2005, under section 2903(e) of such Act, the Secretary of Defense shall not close Walter Reed Army Medical Center. National Defense Authorization Act for Fiscal Year 2008 (Engrossed as Agreed to or Passed by House) [ H.R. 1585 .EH] Status: Laid before the Senate by motion on June 28, 2007. SEC. 712. GUARANTEED FUNDING FOR WALTER REED ARMY MEDICAL CENTER. The amount of funds available for the commander of Walter Reed Army Medical Center for a fiscal year shall be not less than the amount expended by the commander of Walter Reed Army Medical Center in fiscal year 2006 until the first fiscal year beginning after the date on which the Secretary of Defense certifies to the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives that the expanded facilities at the National Naval Medical Center, Bethesda, Maryland, and DeWitt Army Community Hospital, Ft. Belvoir, Virginia, as described in section 304(a), are completed, equipped, and staffed with sufficient capacity to accept and provide at least the same level of care as patients received at Walter Reed Army Medical Center during fiscal year 2006. U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (Enrolled as Agreed to or Passed by Both House and Senate) [ H.R. 2206 .ENR] Status: Became P.L. 110-28 on May 25, 2007. SEC. 3701. Notwithstanding any other provision of law, none of the funds in this or any other Act may be used to close Walter Reed Army Medical Center until equivalent medical facilities at the Walter Reed National Military Medical Center at Naval Medical Center, Bethesda, Maryland, and/or the Ft. Belvoir, Virginia, Community Hospital have been constructed and equipped: Provided, That to ensure that the quality of care provided by the Military Health System is not diminished during this transition, the Walter Reed Army Medical Center shall be adequately funded, to include necessary renovation and maintenance of existing facilities, to maintain the maximum level of inpatient and outpatient services. Sec. 3702. Notwithstanding any other provision of law, none of the funds in this or any other Act shall be used to reorganize or relocate the functions of the Armed Forces Institute of Pathology (AFIP) until the Secretary of Defense has submitted, not later than December 31, 2007, a detailed plan and timetable for the proposed reorganization and relocation to the Committees on Appropriations and Armed Services of the Senate and House of Representatives. The plan shall take into consideration the recommendations of a study being prepared by the Government Accountability Office (GAO), provided that such study is available not later than 45 days before the date specified in this section, on the impact of dispersing selected functions of AFIP among several locations, and the possibility of consolidating those functions at one location. The plan shall include an analysis of the options for the location and operation of the Program Management Office for second opinion consults that are consistent with the recommendations of the Base Realignment and Closure Commission, together with the rationale for the option selected by the Secretary. Effective Care for the Armed Forces and Veterans Act of 2007 (Introduced in Senate) [ S. 1044 ] Status: Read twice and referred to the Senate Committee on Armed Services on March 29, 2007. SEC. 4. LIMITATION ON IMPLEMENTATION OF RECOMMENDATION TO CLOSE WALTER REED ARMY MEDICAL CENTER. (a) Findings- Congress finds the following: (1) The final recommendations of the Defense Base Closure and Realignment Commission under the 2005 round of defense base closure and realignment include recommendations to close Walter Reed Army Medical Center and to build new, modern facilities at the National Naval Medical Center at Bethesda and at Ft. Belvoir to improve the overall quality of and access to health care for members of the Armed Forces. (2) These recommendations include the transfer of medical services from the Walter Reed Army Medical Center to the National Naval Medical Center at Bethesda and at Ft. Belvoir, but they do not adequately provide for housing for the families of wounded members of the Armed Forces who will receive treatment at such new facilities. (3) The recommended closure of the Walter Reed Army Medical Center has impaired the ability of the Secretary of Defense to attract the personnel required to provide proper medical services at such medical center. (b) Limitation on Implementation of Recommendations- The Secretary of Defense shall not take any action to implement the recommendations of the Defense Base Closure and Realignment Commission under the 2005 round of defense base closure and realignment relating to the transfer of medical services from Walter Reed Army Medical Center to the National Naval Medical Center at Bethesda and at Ft. Belvoir during the period beginning on the date of the enactment of this Act and ending on the date that is 60 days after the date on which Congress receives the plan required under subsection (c). (c) Plan Required- Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to Congress a plan that includes an assessment of the following: (1) The feasibility and advisability of providing current or prospective employees at Walter Reed Army Medical Center a guarantee that their employment will continue in the Washington, DC, metropolitan area for more than two years after the date on which Walter Reed Army Medical Center is closed. (2) Detailed construction plans for new medical facilities and family housing at the National Naval Medical Center at Bethesda and at Ft. Belvoir to accommodate the transfer of medical services from Walter Reed Army Medical Center to the National Naval Medical Center at Bethesda and at Ft. Belvoir. (3) The costs, feasibility, and advisability of completing all of the construction planned for the transfer of medical services from Walter Reed Army Medical Center to the National Naval Medical Center at Bethesda and at Ft. Belvoir before any patients are transferred to such new facilities from Walter Reed Army Medical Center as a result of the recommendations of the Defense Base Closure and Realignment Commission under the 2005 round of defense base closure and realignment. Dignified Treatment of Wounded Warriors Act (Introduced in Senate) [ S. 1606 ] Status: Placed on Senate Legislative Calendar under General Orders (Calendar No. 203) on June 18, 2007. SEC. 402. REPORTS ON ARMY ACTION PLAN IN RESPONSE TO DEFICIENCIES IDENTIFIED AT WALTER REED ARMY MEDICAL CENTER. (a) Reports Required- Not later than 30 days after the date of the enactment of this Act, and every 120 days thereafter until March 1, 2009, the Secretary of Defense shall submit to the congressional defense committees a report on the implementation of the action plan of the Army to correct deficiencies identified in the condition of facilities, and in the administration of outpatients in medical hold or medical holdover status, at Walter Reed Army Medical Center (WRAMC) and at other applicable Army installations at which covered members of the Armed Forces are assigned. (b) Elements of Report - Each report under subsection (a) shall include current information on the following: (1) The number of inpatients at Walter Reed Army Medical Center, and the number of outpatients on medical hold or in a medical holdover status at Walter Reed Army Medical Center, as a result of serious injuries or illnesses. (2) A description of the lodging facilities and other forms of housing at Walter Reed Army Medical Center, and at each other Army facility, to which are assigned personnel in medical hold or medical holdover status as a result of serious injuries or illnesses, including— (A) an assessment of the conditions of such facilities and housing; and (B) a description of any plans to correct inadequacies in such conditions. (3) The status, estimated completion date, and estimated cost of any proposed or ongoing actions to correct any inadequacies in conditions as described under paragraph (2). (4) The number of case managers, platoon sergeants, patient advocates, and physical evaluation board liaison officers stationed at Walter Reed Army Medical Center, and at each other Army facility, to which are assigned personnel in medical hold or medical holdover status as a result of serious injuries or illnesses, and the ratio of case workers and platoon sergeants to outpatients for whom they are responsible at each such facility. (5) The number of telephone calls received during the preceding 60 days on the Wounded Soldier and Family hotline (as established on March 19, 2007), a summary of the complaints or communications received through such calls, and a description of the actions taken in response to such calls. (6) A summary of the activities, findings, and recommendations of the Army tiger team of medical and installation professionals who visited the major medical treatment facilities and community-based health care organizations of the Army pursuant to March 2007 orders, and a description of the status of corrective actions being taken with to address deficiencies noted by that team. (7) The status of the ombudsman programs at Walter Reed Army Medical Center and at other major Army installations to which are assigned personnel in medical hold or medical holdover status as a result of serious injuries or illnesses. (c) Posting on Internet- Not later than 24 hours after submitting a report under subsection (a), the Secretary shall post such report on the Internet website of the Department of Defense that is available to the public. SEC. 403. CONSTRUCTION OF FACILITIES REQUIRED FOR THE CLOSURE OF WALTER REED ARMY MEDICAL CENTER, DISTRICT OF COLUMBIA. (a) Assessment of Acceleration of Construction of Facilities- The Secretary of Defense shall carry out an assessment of the feasibility (including the cost-effectiveness) of accelerating the construction and completion of any new facilities required to facilitate the closure of Walter Reed Army Medical Center, District of Columbia, as required as a result of the 2005 round of defense base closure and realignment under the Defense Base Closure and Realignment Act of 1990 (part A of title XXIX of P.L. 101-510 ; U.S.C. 2687 note). (b) Development and Implementation of Plan for Construction of Facilities- (1) IN GENERAL - The Secretary shall develop and carry out a plan for the construction and completion of any new facilities required to facilitate the closure of Walter Reed Army Medical Center as required as described in subsection (a). If the Secretary determines as a result of the assessment under subsection (a) that accelerating the construction and completion of such facilities is feasible, the plan shall provide for the accelerated construction and completion of such facilities in a manner consistent with that determination. (2) SUBMITTAL OF PLAN - The Secretary shall submit to the congressional defense committees the plan required by paragraph (1) not later than September 30, 2007. (c) Certifications- Not later than September 30, 2007, the Secretary shall submit to the congressional defense committees a certification of each of the following: (1) That a transition plan has been developed, and resources have been committed, to ensure that patient care services, medical operations, and facilities are sustained at the highest possible level at Walter Reed Army Medical Center until facilities to replace Walter Reed Army Medical Center are staffed and ready to assume at least the same level of care previously provided at Walter Reed Army Medical Center. (2) That the closure of Walter Reed Army Medical Center will not result in a net loss of capacity in the major military medical centers in the National Capitol Region in terms of total bed capacity or staffed bed capacity. (3) That the capacity and types of medical hold and out-patient lodging facilities currently operating at Walter Reed Army Medical Center will be available at the facilities to replace Walter Reed Army Medical Center by the date of the closure of Walter Reed Army Medical Center. (4) That adequate funds have been provided to complete fully all facilities identified in the Base Realignment and Closure Business Plan for Walter Reed Army Medical Center submitted to the congressional defense committees as part of the budget justification materials submitted to Congress together with the budget of the President for fiscal year 2008 as contemplated in that business plan. (d) Environmental Laws- Nothing in this section shall require the Secretary or any designated representative to waive or ignore responsibilities and actions required by the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) or the regulations implementing such Act.

The 2005 Defense Base Realignment and Closure (BRAC) Commission recommended that the Department of Defense (DOD) establish a new Walter Reed National Military Medical Center (WRNMMC) on the site of the current National Naval Medical Center (NNMC) in Bethesda, Maryland. The President approved the recommendation in September 2005, and the Secretary of Defense is required by statute to implement it within six years of the date of that approval. Part of that recommendation is the realignment of the Walter Reed Army Medical Center (WRAMC), which entails the transfer of many functions from organizations currently located on its Georgia Avenue main post in the District of Columbia and Forest Glen annex in suburban Maryland to other defense installations. The main post is scheduled to be closed. The Department of State and General Services Administration have requested that title to portions of the main post property be transferred to them. This report details the BRAC Commission recommendation to create the WRNMMC, and the concomitant realignment of the WRAMC. It describes the concerns raised by the community before the BRAC Commission regarding the closure of the WRAMC main post and explains each of the 13 parts of the overall recommendation. The report details the principal organizations currently resident at WRAMC and indicates the fate of each. It describes the timing of the necessary construction and moves, as currently planned by DOD. It also includes a discussion of BRAC-related recommendations made by an Independent Review Group in their April 2007 report to the Secretary of Defense on patient care at WRAMC. Appendix C includes legislative language regarding the creation of the WRAMC that has been proposed during the 110th Congress. Significantly, the proposed National Defense Authorization Act for Fiscal Year 2008 (H.R. 1585) includes a provision (Sec. 712) that would establish a floor for funding for WRAMC operations at the FY2006 level until new facilities are "completed, equipped, and staffed." Also, the Dignified Treatment of Wounded Warriors Act (S. 1606) would require the Secretary of Defense to assess the feasibility of accelerating the construction of new facilities needed before closing WRAMC (the planned realignment actually closes only the main post, not the entire installation). If such acceleration is deemed feasible, he would then plan and execute that construction. Both bills are on the Senate's Legislative Calendar. Other proposed bills that could affect the operation of WRAMC include H.R. 1417 (to prohibit the closure of Walter Reed Army Medical Center notwithstanding the 2005 recommendations of the Defense Base Closure and Realignment Commission), H.R. 2206 (U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, enacted as P.L. 110-28 on May 25, 2007), and S. 1044 (Effective Care for the Armed Forces and Veterans Act of 2007). This report will be updated as necessary.

Introduction The Elementary and Secondary Education Act (ESEA) was last comprehensively amended by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ). Appropriations for most programs authorized by the ESEA were authorized through FY2007. As Congress has not reauthorized the ESEA, appropriations for ESEA programs are currently not explicitly authorized. However, because the programs continue to receive annual appropriations, appropriations are considered implicitly authorized. During the 114 th Congress, the House Education and the Workforce Committee reported the Student Success Act ( H.R. 5 ), which would provide for a comprehensive reauthorization of the ESEA. The bill was subsequently passed on the House floor on July 8, 2015, based on a strictly partisan vote of 218-213. The Senate Health, Education, Labor, and Pensions (HELP) Committee reported the Every Child Achieves Act of 2015 (ECAA; S. 1177 ), which would also provide for a comprehensive reauthorization of the ESEA. S. 1177 was subsequently passed on the Senate floor on July 16, 2015, based on a bipartisan vote of 81-17. Both chambers agreed to a conference to resolve their differences. On November 19, 2015, the conference committee agreed to file the conference report of the Every Student Succeeds Act (ESSA) by a vote of 39-1. On December 2, 2015, the House agreed to the conference report based on a bipartisan vote of 359-64. This report highlights key provisions included in the ESSA and provides some context regarding the treatment of similar provisions in current law, where applicable. Table 1 highlights key provisions in the bill. An emphasis has been placed on issues that have received the most attention during the reauthorization process, including Title I-A accountability and formula issues and Title II-A formula issues. Table 2 depicts the proposed structure of the ESEA under the ESSA and includes all authorizations of appropriations for FY2017 through FY2020. The table also indicates whether a comparable program was included in current law. Table 3 provides examples of programs authorized under current law that would not be retained by the ESSA. The report does not aim to provide a comprehensive summary of ESSA or of technical changes that would be made by the bill. ESEA Flexibility Provided by the Administration As Congress had not enacted legislation to reauthorize the ESEA, on September 23, 2011, President Obama and the Secretary of Education (hereinafter referred to as the Secretary) announced the availability of an ESEA flexibility package for states and described the principles that states must meet to obtain the included waivers. The waivers exempt states from various academic accountability requirements, teacher qualification-related requirements, and funding flexibility requirements that were enacted through NCLB. State educational agencies (SEAs) may also apply for optional waivers related to the 21 st Century Community Learning Centers program and the use of funds, determinations of adequate yearly progress (AYP), and the allocation of Title I-A funds to schools. However, in order to receive the waivers SEAs must agree to meet four principles established by the U.S. Department of Education (ED) for "improving student academic achievement and increasing the quality of instruction." The four principles, as stated by ED, are (1) college- and career-ready expectations for all students; (2) state-developed differentiated recognition, accountability, and support; (3) supporting effective instruction and leadership; and (4) reducing duplication and unnecessary burden. Taken collectively, the waivers and principles included in the ESEA flexibility package amount to a fundamental redesign by the Administration of many of the accountability and teacher-related requirements included in current law. As of December 2015, 42 states, the District of Columbia, and Puerto Rico had approved ESEA flexibility applications, and ED was reviewing applications from other states. The ESSA would terminate all waivers associated with the ESEA flexibility package on August 1, 2016. The remainder of this report focuses only on current law and does not compare the provisions in the ESSA with the provisions included in the ESEA flexibility package. Highlights of the ESSA Table 1 highlights similarities and differences between the ESSA and current law. As previously discussed, areas of the ESSA that have received the most congressional interest are given a more in-depth review in the table. The major areas considered include the following: overall structural and funding issues; Title I-A accountability; Title I-A formulas; teachers, principals, and school leaders; flexibility and choice; and general provisions. No attempts, however, were made to provide a comprehensive analysis of the ESSA. Structure of the ESSA Table 2 depicts the structure of the ESSA by title. For each program with an authorization of appropriations, the amount authorized is provided for FY2017 through FY2020. The table also indicates whether the program is a new program or one that is similar to a program included in current law. An indication that a program is also included in current law does not mean that the program is being retained without changes. For example, while the ESSA would retain Title II-A, a state grant program focused on teachers, it would modify the formula used to award grants and the uses of funds. ESEA Programs That Would No Longer Be Authorized Under ESSA Table 3 provides examples of programs authorized under current law that would not be authorized under the ESSA. Activities supported by some of the programs that would no longer be authorized, however, may be required or allowable uses of funds under programs that would be authorized under the ESSA. For example, under the Student Support and Academic Enrichment Grants program (block grant program), LEAs could use funds to support counseling programs, create safe school environments, provide physical education, and support the use of technology; and states and LEAs could use funds to reimburse low-income students for the costs of accelerated learning examination fees, such as Advanced Placement (AP) exams. This is not intended to be a comprehensive list of all programs authorized under current law that would no longer be authorized. Rather, this list is based primarily on programs that have been included as line-items on appropriations tables in recent years and would not continue to be authorized by the ESSA.

The Elementary and Secondary Education Act (ESEA) was last comprehensively amended by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110). Appropriations for most programs authorized by the ESEA were authorized through FY2007. As Congress has not reauthorized the ESEA, appropriations for ESEA programs are currently not explicitly authorized. However, because the programs continue to receive annual appropriations, appropriations are considered implicitly authorized. Congress has actively considered reauthorization of the ESEA during the 114th Congress, passing comprehensive ESEA reauthorization bills in both the House (Student Success Act; H.R. 5) and the Senate (Every Child Achieves Act of 2015; S. 1177). Both chambers agreed to a conference to resolve their differences. On November 19, 2015, the conference committee agreed to file the conference report of the Every Student Succeeds Act (ESSA) by a vote of 39-1. On December 2, 2015, the House agreed to the conference report based on a bipartisan vote of 359-64. Table 1 in this report highlights key provisions included in the ESSA and provides some context regarding the treatment of similar provisions in current law, where applicable. The major areas considered in this examination include the following: overall structural and funding issues; Title I-A accountability; Title I-A formulas; teachers, principals, and school leaders; flexibility and choice; and general provisions. Table 2 depicts the proposed structure of the ESEA under the ESSA and includes all authorizations of appropriations for FY2017 through FY2020. Table 3 provides examples of programs authorized under current law that would not be retained by the ESSA. The report does not aim to provide a comprehensive summary of ESSA or of technical changes that would be made by the bill.

Introduction The federal government loses both individual and corporate income tax revenue from the shifting of profits and income into low-tax countries. The revenue losses from this tax avoidance and evasion are difficult to estimate, but some have suggested that the annual cost of offshore tax abuses may be around $100 billion per year. International tax avoidance can arise from wealthy individual investors and from large multinational corporations; it can reflect both legal and illegal actions. Tax avoidance is sometimes used to refer to a legal reduction in taxes, whereas evasion refers to tax reductions that are illegal. Both types are discussed in this report, although the dividing line is not entirely clear. A multinational firm that constructs a factory in a low-tax jurisdiction rather than in the United States to take advantage of low foreign corporate tax rates is engaged in avoidance, whereas a U.S. citizen who sets up a secret bank account in the Caribbean and does not report the interest income is engaged in evasion. There are, however, many activities, particularly by corporations, that are often referred to as avoidance but could be classified as evasion. One example is transfer pricing, where firms charge low prices for sales to low-tax affiliates but pay high prices for purchases from them. If these prices, which are supposed to be at arms-length, are set at an artificial level, then this activity might be viewed by some as evasion, even if such pricing is not overturned in court because evidence to establish pricing is not available. Most of the international tax reduction of individuals reflects evasion, and this amount has been estimated to range from about $40 billion to about $70 billion a year. This evasion has occurred in part because the United States does not withhold tax on many types of passive income (such as interest) paid to foreign entities; if U.S. individuals can channel their investments through a foreign entity and do not report the holdings of these assets on their tax returns, they evade a tax that they are legally required to pay. In addition, individuals investing in foreign assets may not report income from these assets. In 2010, Congress enacted the Foreign Account Tax Compliance Act (FATCA), which has recently become effective and requires foreign financial institutions to report information on asset holders or be subject to a 30% withholding rate. Its consequences for evasion have yet to be determined. Corporate tax reductions arising from profit shifting also have been estimated. As discussed below, estimates of the revenue losses from corporate profit shifting vary substantially, ranging from about $10 billion to about $90 billion, or even higher. This activity appears to have increased substantially in recent years. In addition to differentiating between individual and corporate activities, and evasion and avoidance, there are also variations in the features used to characterize tax havens. Some restrictive definitions would limit tax havens to those countries that, in addition to having low or non-existent tax rates on some types of income, also have such other characteristics as the lack of transparency, bank secrecy and the lack of information sharing, and requiring little or no economic activity for an entity to obtain legal status. A definition incorporating compounding factors such as these was used by the Organization for Economic Development and Cooperation (OECD) in their 2000 tax shelter initiative. Others, particularly economists, might characterize as a tax haven any low-tax country with a goal of attracting capital, or simply any country that has low or non-existent taxes. This report addresses tax havens in their broader sense as well as in their narrower sense. Although international tax avoidance can be differentiated by whether it is associated with individuals or corporations, whether it is illegal evasion or legal avoidance, and whether it arises in a tax haven narrowly defined or broadly defined, it can also be characterized by what measures might be taken to reduce this loss. In general, revenue losses from individual taxes are more likely to be associated with evasion and more likely to be associated with narrowly defined tax havens, while corporate tax avoidance occurs in both narrowly and broadly defined tax havens and can arise from either legal avoidance or illegal evasion. Evasion is often a problem of lack of information, and remedies may include resources for enforcement, along with incentives and sanctions designed to increase information sharing, and possibly a move towards greater withholding. Avoidance may be more likely to be remedied with changes in the tax code. Several legislative proposals have been advanced that address international tax issues. President Obama has proposed several international corporate tax revisions which relate to multinational corporations, including profit shifting, as well as individual tax evasion. Some of the provisions relating to multinationals had earlier been included in a bill introduced in the 110 th Congress by Chairman Rangel of the Ways and Means Committee ( H.R. 3970 ). Major revisions to corporate international tax rules were also included in S. 3018 , a general tax reform act introduced by Senators Wyden and Gregg in the 111 th Congress, and a similar bill, S. 727 , introduced by Senators Wyden and Coats in the 112 th Congress. This bill had provisions to tax foreign source income currently, which could have limited the benefits from corporate profit shifting. In the 113 th Congress, H.R. 694 (Representative Schakowsky) and S. 250 (Senator Sanders), also would have eliminated deferral. Former Ways and Means Chairman Dave Camp has proposed a lower corporate rate combined with a move to a territorial tax system (which would exempt foreign source income). His bill, H.R. 1 (a general tax reform bill), was introduced in the 113 th Congress. Because a territorial tax could increase the scope for profit shifting, the proposal contains detailed provisions to address these issues. A territorial tax proposal with anti-abuse provisions has also been introduced by Senator Enzi ( S. 2091 , 112 th Congress). The Senate Permanent Subcommittee on Investigations has been engaged in international tax investigations since 2001, holding hearings and proposing legislation. In the 111 th Congress, the Stop Tax Haven Abuse Act, S. 506 , was introduced by the chairman of that committee, Senator Levin, with a companion bill, H.R. 1265 , introduced by Representative Doggett. The Senate Finance Committee also has circulated draft proposals addressing individual tax evasion issues. A number of these anti-evasion provisions (including provisions in President Obama's earlier budget outlines) were adopted in the Hiring Incentives to Restore Employment (HIRE) Act, P.L. 111-147 . Subsequently, revised versions of the Stop Tax Haven Abuse Act have been introduced. The Permanent Subcommittee also released a study of profit shifting by multinationals in preparation for a hearing on September 20, 2012. The first section of this report reviews what countries might be considered tax havens, including a discussion of the Organization for Economic Development and Cooperation (OECD) initiatives and lists. The next two sections discuss, in turn, the corporate profit-shifting mechanisms and evidence on the existence and magnitude of profit-shifting activity. The following two sections provide the same analysis for individual tax evasion. The report concludes with overviews of alternative policy options, a summary of legislation enacted in the 111 th Congress, and a summary of specific legislative proposals. Where Are the Tax Havens? There is no precise definition of a tax haven. The OECD initially defined the following features of tax havens: no or low taxes, lack of effective exchange of information, lack of transparency, and no requirement of substantial activity. Other lists have been developed in legislative proposals and by researchers. Also, a number of other jurisdictions have been identified as having tax haven characteristics. Formal Lists of Tax Havens The OECD created an initial list of tax havens in 2000. A similar list was used in S. 396 , introduced in the 110 th Congress, which would have treated firms incorporated in certain tax havens as domestic companies; the only difference between this list and the OECD list was the exclusion of the U.S. Virgin Islands from the list in S. 396 . Legislation introduced in the 111 th Congress to address tax haven abuse ( S. 506 , H.R. 1265 ) used a different list taken from Internal Revenue Service (IRS) court filings but had many countries in common. The definition by the OECD excluded low-tax jurisdictions, some of which are OECD members that were thought by many to be tax havens, such as Ireland and Switzerland. These countries were included in an important study of tax havens by Hines and Rice. The Government Accountability Office (GAO) also provided a list. Table 1 lists the countries that appear on various lists, arranged by geographic location. These tax havens tend to be concentrated in certain areas, including the Caribbean and West Indies and Europe, locations close to large developed countries. There are 50 altogether. Developments in the OECD Tax Haven List The OECD list, the most prominent list, has changed over time. Nine of the countries in Table 1 did not appear on the earliest OECD list. These countries not appearing on the original list tend to be more developed larger countries and include some that are members of the OECD (e.g., Switzerland and Luxembourg). It is also important to distinguish between OECD's original list and its blacklist. OECD subsequently focused on information exchange and removed countries from a blacklist if they agree to cooperate. OECD initially examined 47 jurisdictions and identified a number as not meeting the criteria for a tax haven; it also initially excluded six countries with advance agreements to share information (Bermuda, the Cayman Islands, Cyprus, Malta, Mauritius, and San Marino). The 2000 OECD blacklist included 35 countries; this list did not include the six countries eliminated due to advance agreement. The OECD had also subsequently determined that three countries should not be included in the list of tax havens (Barbados, the Maldives, and Tonga). Over time, as more tax havens made agreements to share information, the blacklist dwindled until it included only three countries: Andorra, Liechtenstein, and Monaco. A study of the OECD initiative on global tax coordination by Sharman, also discussed in a book review by Sullivan, argues that the reduction in the OECD list was not because of actual progress towards cooperation so much as due to the withdrawal of U.S. support in 2001, which resulted in the OECD focusing on information on request and not requiring reforms until all parties had signed on. This analysis suggests that the large countries were not successful in this initiative to rein in on tax havens. A similar analysis by Spencer and Sharman suggests little real progress has been made in reducing tax haven practices. Interest in tax haven actions has increased recently. The scandals surrounding the Swiss bank UBS AG (UBS) and the Liechtenstein Global Trust Group (LGT), which led to legal actions by the United States and other countries, focused greater attention on international tax issues, primarily information reporting and individual evasion. The credit crunch and provision of public funds to banks has also heightened public interest. The tax haven issue was revived recently with a meeting of the G20 industrialized and developing countries that proposed sanctions, and a number of countries began to indicate commitments to information sharing agreements. The OECD currently has three lists: a white list of countries implementing an agreed-upon standard, a gray list of countries that have committed to such a standard, and a black list of countries that have not committed. On April 7, 2009, the last four countries on the black list, which were countries not included on the original OECD list—Costa Rica, Malaysia, the Philippines, and Uruguay—were moved to the gray list. The gray list includes countries not identified as tax havens but as "other financial centers." According to news reports, Hong Kong and Macau were omitted from the OECD's list because of objections from China, but are mentioned in a footnote as having committed to the standards; they also noted that a "recent flurry of commitments brought 11 jurisdictions, including Austria, Liechtenstein, Luxembourg, Singapore, and Switzerland into the committed category." As of May 18, 2012, only one country (Nauru) appeared on the gray list for tax havens and one (Guatemala) appeared on the gray list for financial centers. Many countries that were listed on the OECD's original blacklist protested because of the negative publicity and many now point to having signed agreements to negotiate tax information exchange agreements (TIEA) and some have negotiated agreements. The identification of tax havens can have legal ramifications if laws and sanctions are contingent on that identification, as is the case of some current proposals in the United States and of potential sanctions by international bodies. More recently, the OECD has focused attention on its Base Erosion and Profit Shifting (BEPS) initiative. Among the elements of this initiative is the Global Forum on Transparency and Exchange of Information for Tax Purposes, which has begun rating countries on various criteria. As of October 2014, it had under way 105 reviews of countries based on various standards. The countries are rated as compliant, largely compliant, partially compliant, or noncompliant. As of 2014, 71 jurisdictions had received a full review, with 42 of those rated as noncompliant. Of 34 countries that had undergone only a phase 1 review, which examines the legal and regulatory framework, 12 were not able to advance to the final (phase 2) review, which looks into the implementation of the regulatory framework in practice. As with the evolution of the OECD list, these evaluations focus on one aspect of the characteristics of tax havens. Other Jurisdictions with Tax Haven Characteristics Criticisms have been made by a range of commentators that many countries are tax havens or have aspects of tax havens and have been overlooked. These jurisdictions include major countries such as the United States, the UK, the Netherlands, Denmark, Hungary, Iceland, Israel, Portugal, and Canada. Attention has also been directed at three states in the United States: Delaware, Nevada, and Wyoming. Finally, there are a number of smaller countries or areas in countries, such as Campione d'Italia, an Italian town located within Switzerland, that have been characterized as tax havens. A country not on the list in Table 1 , but which is often considered a tax haven, especially for corporations, is the Netherlands, which allows firms to reduce taxes on dividends and capital gains from subsidiaries and has a wide range of treaties that reduce taxes. In 2006, for example, Bono and other members of the U2 band moved their music publishing company from Ireland to the Netherlands after Ireland changed its tax treatment of music royalties. A 2010 newspaper report explained the role of the Netherlands in facilitating movement to tax havens through provisions such as the various "Dutch sandwiches," which allow money to be funneled out of other countries that would charge withholding taxes to non-European countries, to be passed on in turn to tax havens such as Bermuda and the Cayman Islands. Issues have recently been raised in the Netherlands government about its role in tax avoidance. The European Commission also began investigating, in June 2014, whether certain arrangements in Ireland, Luxembourg, and the Netherlands constitute prohibited state aid; the inquiry was later expanded to all member states. In addition, the European Union has agreed to add an anti-abuse clause to its provision to prevent double taxation within member states, which may have implications for these arrangements in the future. Some have identified the United States and the United Kingdom (UK) as having tax haven characteristics. Luxembourg Prime Minister Jean-Claude Junker urged other EU member states to challenge the United States for tax havens in Delaware, Nevada, and Wyoming. One website offering offshore services mentions, in their view, several overlooked tax havens which include the United States, United Kingdom, Denmark, Iceland, Israel, and Portugal's Madeira Island. (Others on their list and not listed in Table 1 were Hungary, Brunei, Uruguay, and Labuan [Malaysia]). In the case of the United States the article mentions the lack of reporting requirements and the failure to tax interest and other exempt passive income paid to foreign entities, the limited liability corporation which allows a flexible corporate vehicle not subject to taxation, and the ease of incorporating in certain states (Delaware, Nevada, and Wyoming). Issues have recently been raised in the Netherlands about its role in tax avoidance Another website includes in its list of tax havens Delaware, Wyoming, and Puerto Rico, along with other jurisdictions not listed in Table 1 : the Netherlands, Campione d'Italia, a separate listing for Sark (identified as the only remaining "fiscal paradise"), the UK, and a coming discussion for Canada. Sark is an island country associated with Guernsey, part of the Channel Islands, and Campione d'Italia is an Italian town located within Switzerland. The Economist reported a study by a political scientist experimenting with setting up sham corporations; the author succeeded in incorporating in Wyoming and Nevada, as well as the UK and several other places. Michael McIntyre discusses three U.S. practices that aid international evasion: the failure to collect information on tax exempt interest income paid to foreign entities, the system of foreign institutions that act as qualified intermediaries (see discussion below) but do not reveal their clients, and the practices of states such as Delaware and Wyoming that allow people to keep secret their identities as stockholder or depositor. In a meeting in late April 2009, Eduardo Silva, of the Cayman Islands Financial Services Association, claimed that Delaware, Nevada, Wyoming, and the UK were the greatest offenders with respect to, among other issues, tax fraud. He suggested that Nevada and Wyoming were worse than Delaware because they permit companies to have bearer shares, which allows anonymous ownership. A U.S. participant at the conference noted that legislation in the United States, S. 569 (111 th Congress), would require disclosure of beneficial owners in the United States. Nicholas Shaxson, in his book Treasure Islands , organizes tax havens into four categories: (1) continental European havens such as Switzerland and Luxembourg; (2) a British zone of influence (which includes the City of London as well as countries formally related to the UK, such as Jersey, Guernsey, the Isle of Man, Bermuda, and many of the islands in the West Indies and Caribbean, and those influenced by the UK); (3) a U.S. zone of influence (the United States itself, some of its states, along with the Virgin Islands, Marshall Islands, Liberia, and Panama), and (4) other jurisdictions. Anthony van Fossen, in his study of Pacific Island tax havens, indicates that connection with the UK and specifically with the City of London is a contributor to a successful tax haven. While the United States has limited the activities of some islands in its sphere of influence, one of the most important tax havens in this area is the Marshall Islands, which specializes in flags of convenience. In addition, any country with a low tax rate could be considered as a potential location for shifting income to. In addition to Ireland, three other countries in the OECD not included in Table 1 have tax rates below 20%: Iceland, Poland, and the Slovak Republic. Most of the eastern European countries not included in the OECD have tax rates below 20%. The Tax Justice Network probably has the largest list of tax havens, and includes some specific cities and areas. In addition to the countries listed in Table 1 , they include in the Americas and Caribbean, New York and Uruguay; in Africa, Mellila, Sao Tome e Principe, Somalia, and South Africa; in the Middle East and Asia, Dubai, Labuan (Malaysia), Tel Aviv, and Taipei; in Europe, Alderney, Belgium, Campione d'Italia, City of London, Dublin, Ingushetia, Madeira, Sark, Trieste, Turkish Republic of Northern Cyprus, and Frankfurt; and in the Indian and Pacific oceans, the Marianas. The only county listed in Table 1 and not included in their list was Jordan. Ronen Palan, Richard Murphy, and Christian Chavagneux report 11 different lists of tax havens. Although the Tax Justice Network is the largest such list, a few countries not on this list appear on others. Eight countries appeared on all lists: the Bahamas, Bermuda, the Cayman Islands, Guernsey, Jersey, and Malta. Palan, Murphy, and Chavagneux also suggest adding Belgium to the Netherlands and Luxembourg as a location for holding companies in Europe. In addition, they discuss the aspects of rules in the United States and the United Kingdom that might justify identification as a tax haven. Methods of Corporate Tax Avoidance U.S. multinationals are not taxed on income earned by foreign subsidiaries until it is repatriated to the U.S. parent as dividends, although some passive and related company income that is easily shifted is taxed currently under anti-abuse rules referred to as Subpart F. (Foreign affiliates or subsidiaries that are majority owned U.S. owned are referred to as controlled foreign corporations, or CFCs, and many of these related firms are wholly owned.) Taxes on income that is repatriated (or, less commonly, earned by branches and taxed currently) are allowed a credit for foreign income taxes paid. (A part of a parent company treated as a branch is not a separate entity for tax purposes, and all income is part of the parent's income.) Foreign tax credits are limited to the amount of tax imposed by the United States, so that they, in theory, cannot offset taxes on domestic income. This limit is imposed on an overall basis, allowing excess credits in high-tax countries to offset U.S. tax liability on income earned in low-tax countries, although separate limits apply to passive and active income. Other countries either employ this system of deferral and credit or, more commonly, exempt income earned in foreign jurisdictions. Most countries have some form of anti-abuse rules similar to Subpart F. If a firm can shift profits to a low-tax jurisdiction from a high-tax one, its taxes will be reduced without affecting other aspects of the company. Tax differences also affect real economic activity, which in turn affects revenues, but it is this artificial shifting of profits that is the focus of this report. Because the United States taxes all income earned in its borders as well as imposing a residual tax on income earned abroad by U.S. persons, tax avoidance relates both to U.S. parent companies shifting profits abroad to low-tax jurisdictions and the shifting of profits out of the United States by foreign parents of U.S. subsidiaries. In the case of U.S. multinationals, one study suggested that about half the difference between profitability in low-tax and high-tax countries, which could arise from artificial income shifting, was due to transfers of intellectual property (or intangibles) and most of the rest through the allocation of debt. However, a study examining import and export prices suggests a very large effect of transfer pricing in goods (as discussed below). Some evidence of the importance of intellectual property can also be found from the types of firms that repatriated profits abroad following a temporary tax reduction enacted in 2004; one-third of the repatriations were in the pharmaceutical and medicine industry and almost 20% in the computer and electronic equipment industry. Allocation of Debt and Earnings Stripping One method of shifting profits from a high-tax jurisdiction to a low-tax one is to borrow more in the high-tax jurisdiction and less in the low-tax one. This shifting of debt can be achieved without changing the overall debt exposure of the firm. A more specific practice is referred to as earnings stripping, where either debt is associated with related firms or unrelated debt is not subject to tax by the recipient. As an example of the former earnings stripping method, a foreign parent may lend to its U.S. subsidiary. Alternatively, an unrelated foreign borrower not subject to tax on U.S. interest income might lend to a U.S. firm. The U.S. tax code currently contains provisions to address interest deductions and earnings stripping. It applies an allocation of the U.S. parent's interest for purposes of the limit on the foreign tax credit. The amount of foreign source income is reduced when part of U.S. interest is allocated and the maximum amount of foreign tax credits taken is limited, a provision that affects firms with excess foreign tax credits. There is no allocation rule, however, to address deferral, so that a U.S. parent could operate its subsidiary with all equity finance in a low-tax jurisdiction and take all of the interest on the overall firm's debt as a deduction. A bill introduced in 2007 ( H.R. 3970 ) by Chairman Rangel of the Ways and Means Committee would introduce such an allocation rule, so that a portion of interest and other overhead costs would not be deducted until the income is repatriated. This provision is also included in President Obama's proposals for international tax revision and in some congressional proposals. While allocation-of-interest approaches could be used to address allocation of interest to high-tax countries in the case of U.S. multinationals, they cannot be applied to U.S. subsidiaries of foreign corporations. To limit the scope of earnings stripping in either case, the United States has thin capitalization rules. (Most of the United States' major trading partners have similar rules.) A section of the Internal Revenue Code (163(j)) applies to a corporation with a debt-to-equity ratio above 1.5 to 1 and with net interest exceeding 50% of adjusted taxable income (generally taxable income plus interest plus depreciation). Interest in excess of the 50% limit paid to a related corporation is not deductible if the corporation is not subject to U.S. income tax. This interest restriction also applies to interest paid to unrelated parties that are not taxed to the recipient. The possibility of earnings stripping received more attention after a number of U.S. firms inverted, that is, arranged to move their parent firm abroad so that U.S. operations became a subsidiary of that parent. The American Jobs Creation Act of 2004 (AJCA; P.L. 108-357 ) addressed the general problem of inversion by treating firms that subsequently inverted as U.S. firms. During consideration of this legislation there were also proposals for broader earnings stripping restrictions as an approach to this problem that would have reduced the excess interest deductions. This general earnings stripping proposal was not adopted. However, the AJCA mandated a Treasury Department study on this and other issues; that study focused on U.S. subsidiaries of foreign parents and was not able to find clear evidence on the magnitude. Noted in the Treasury's mandated study, there is relatively straightforward evidence that U.S. multinationals allocate more interest to high-tax jurisdictions, but it is more difficult to assess earnings stripping by foreign parents of U.S. subsidiaries, because the entire firm's accounts are not available. The Treasury study focused on this issue and used an approach that had been used in the past of comparing these subsidiaries to U.S. firms. The study was not able to provide conclusive evidence about the shifting of profits out of the United States due to high leverage rates for U.S. subsidiaries of foreign firms but did find evidence of shifting for inverted firms. Inversions have recently become an issue. Although some firms inverted following the 2004 legislation based on an activity exception, that approach was limited by regulation. In 2014, a number of U.S. firms inverted, or considered inversion, by merging with a smaller foreign firm. The President has proposed tighter restrictions on these inversions, and two bills regarding this matter, H.R. 4679 and S. 2360 , were introduced in the 113 th Congress. Regulatory changes to limit some of the benefits have been made. Transfer Pricing The second major way that firms can shift profits from high-tax to low-tax jurisdictions is through the pricing of goods and services sold between affiliates. To properly reflect income, prices of goods and services sold by related companies should be the same as the prices that would be paid by unrelated parties. By lowering the price of goods and services sold by parents and affiliates in high-tax jurisdictions and raising the price of purchases, income can be shifted. An important and growing issue of transfer pricing is with the transfers to rights to intellectual property, or intangibles. If a patent developed in the United States is licensed to an affiliate in a low-tax country income will be shifted if the royalty or other payment is lower than the true value of the license. For many goods there are similar products sold or other methods (such as cost plus a markup) that can be used to determine whether prices are set appropriately. Intangibles, such as new inventions or new drugs, tend not to have comparables, and it is very difficult to know the royalty that would be paid in an arms-length price. Therefore, intangibles represent particular problems for policing transfer pricing. Investment in intangibles is favorably treated in the United States because costs, other than capital equipment and buildings, are expensed for research and development, which is also eligible for a tax credit. In addition, advertising to establish brand names is also deductible. Overall these treatments tend to produce an effective low, zero, or negative tax rate for overall investment in intangibles. Thus, there are significant incentives to make these investments in the United States. On average, the benefit of tax deductions or credits when making the investment tend to offset the future taxes on the return to the investment. However, for those investments that tend to be successful, it is advantageous to shift profits to a low-tax jurisdiction, so that there are tax savings on investment and little or no tax on returns. As a result, these investments can be subject to negative tax rates, or subsidies, which can be significant. Transfer pricing rules with respect to intellectual property are further complicated because of cost sharing agreements, where different affiliates contribute to the cost. If an intangible is already partially developed by the parent firm, affiliates contribute a buy-in payment. It is very difficult to determine arms-length pricing in these cases where a technology is partially developed and there is risk associated with the expected outcome. One study found some evidence that firms with cost sharing arrangements were more likely to engage in profit shifting. One problem with shifting profits to some tax haven jurisdictions is that, if real activity is necessary to produce the intangible these countries may not have labor and other resources to undertake the activity. However, firms have developed techniques to take advantage of tax laws in other countries to achieve both a productive operation while shifting profits to no-tax jurisdictions. An example is the double Irish, Dutch sandwich method that has been used by some U.S. firms, including, as exposed in news articles, Google. In this arrangement, the U.S. firm transfers its intangible asset to an Irish holding company. This company has a subsidiary sales company that sells advertising (the source of Google's revenues) to Europe. However, sandwiched between the Irish holding company and the Irish sales subsidiary is a Dutch subsidiary, which collects royalties from the sales subsidiary and transfers them to the Irish holding company. The Irish holding company claims company management (and tax home) in Bermuda, with a 0% tax rate, for purposes of the corporate income tax. This strategy allows the Irish operation to avoid even the low Irish tax of 12.5% and, by using the Dutch sandwich, to avoid Irish withholding taxes (which are not due on payments to European Union companies). More recently, European countries have complained about companies such as Google, Apple, Amazon, Facebook, and Starbucks using this strategy in some cases. Ireland has indicated it will be ending the rule that allows a firm to be incorporated in Ireland but have its tax home elsewhere, although the country will retain its low 12.5% corporate tax rate and is considering a lower rate for earnings from technology. Profits can also be shifted directly to a tax haven, as in the case of Yahoo, where the Dutch intermediary can transfer profits directly to the tax haven (in this case, the Cayman islands) because it does not collect a withholding tax, as would be the case with France or Ireland. Contract Manufacturing When a subsidiary is set up in a low-tax country and profit shifting occurs, as in the acquisition of rights to an intangible, a further problem occurs: this low-tax country may not be a desirable place to actually manufacture and sell the product. For example, an Irish subsidiary's market may be in Germany and it would be desirable to manufacture in Germany. But to earn profits in Germany with its higher tax rate does not minimize taxes. Instead the Irish firm may contract with a German firm as a contract manufacturer, who will produce the item for cost plus a fixed markup. Subpart F taxes on a current basis certain profits from sales income, so the arrangement must be structured to qualify as an exception from this rule. There are complex and changing regulations on this issue. Check-the-Box, Hybrid Entities, and Hybrid Instruments Another technique for shifting profit to low-tax jurisdictions was greatly expanded with the check-the-box provisions. These provisions were originally intended to simplify questions of whether a firm was a corporation or a partnership. Their application to foreign circumstances through the disregarded entity rules has led to the expansion of hybrid entities, where an entity can be recognized as a corporation by one jurisdiction but not by another. For example, a U.S. parent's subsidiary in a low-tax country can lend to its subsidiary in a high-tax country, with the interest deductible because the high-tax country recognizes the firm as a separate corporation. Normally, interest received by the subsidiary in the low-tax country would be considered passive or tainted income subject to current U.S. tax under Subpart F. However, under check-the-box rules, the high-tax corporation can elect to be disregarded as a separate entity. Thus, from the perspective of the United States, there would be no interest income paid because the two are the same entity. Check-the-box and similar hybrid entity operations also can be used to avoid other types of Subpart F income, for example from contract manufacturing arrangements. According to David R. Sicular, this provision, which began as a regulation, has been, albeit temporarily, codified (called the look-through rules ). The look-through rules expand the scope of check-the-box to more related parties and circumstances. They began as temporary provisions but have been extended numerous times. Currently, they expired at the end of 2014. Hybrid entities relate to issues other than Subpart F. For example, a reverse hybrid entity formerly could be used to allow U.S. corporations to benefit from the foreign tax credit without having to recognize the underlying income. As an example, a U.S. parent could have set up a holding company in a county that was treated as a disregarded entity, and the holding company could have owned a corporation that was treated as a partnership in another foreign jurisdiction. Under flow-through rules, the holding company was liable for the foreign tax and, because it was not a separate entity, the U.S. parent corporation was therefore liable, but the income could have been retained in the foreign corporation that was viewed as a separate corporate entity from the U.S. point of view. In this case, the entity was structured so that it was a partnership for foreign purposes but a corporation for U.S. purposes. Provisions in P.L. 111-226 eliminated this practice. In addition to hybrid entities that achieve tax benefits by being treated differently in the United States and the foreign jurisdiction, there are also hybrid instruments that can avoid taxation by being treated as debt in one jurisdiction and equity in another. Cross Crediting and Sourcing Rules for Foreign Tax Credits Income from a low-tax country that is received in the United States can escape taxes because of cross crediting: the use of excess foreign taxes paid in one jurisdiction or on one type of income to offset U.S. tax that would be due on other income. In some periods in the past the foreign tax credit limit was proposed on a country-by-country basis, although that rule proved to be difficult to enforce given the potential to use holding companies. Foreign tax credits have subsequently been separated into different baskets to limit cross crediting; these baskets were reduced from nine to two (active and passive) in the American Jobs Creation Act of 2004. Because firms can choose when to repatriate income, they can arrange realizations to maximize the benefits of the overall limit on the foreign tax credit. That is, firms that have income from jurisdictions with taxes in excess of U.S. taxes can also elect to realize income from jurisdictions with low taxes and use the excess credits to offset U.S. tax due on that income. Studies suggest that between cross crediting and deferral, U.S. multinationals typically pay virtually no U.S. tax on foreign source income. This ability to reduce U.S. tax due to cross crediting is increased, it can be argued, because income that should be considered U.S. source income is treated as foreign source income, thereby raising the foreign tax credit limit. This includes income from U.S. exports which is U.S. source income, because a tax provision (referred to as the title passage rule) allows half of export income to be allocated to the country in which the title passes. Another important type of income that is considered foreign source and thus can be shielded with foreign tax credits is royalty income from active business, which has become an increasingly important source of foreign income. This benefit can occur in high-tax countries because royalties are generally deductible from income. (Note that the shifting of income due to transfer pricing of intangibles, advantageous in low-tax countries, is a different issue.) Interest income is another type of income that may benefit from this foreign tax credit rule. Since all of this income arises from investment in the United States, one could argue that this income is appropriately U.S. source income, or that, failing that, it should be put in a different foreign tax credit basket so that excess credits generated by dividends cannot be used to offset such income. Two studies, by Harry Grubert and by Grubert and Rosanne Altshuler, have discussed this sourcing rule in the context of a proposal to eliminate the tax on active dividends. In that proposal, the revenue loss from exempting active dividends from U.S. tax would be offset by gains from taxes on royalties. In addition to these general policy issues, there are numerous other, narrower techniques that might be used to enhance foreign tax credits; several of these were the focus of legislation in H.R. 4213 , the American Jobs and Loophole Closing Act, with most provisions enacted in P.L. 111-226 . The Magnitude of Corporate Profit Shifting This section examines the evidence on the existence and magnitude of profit shifting and the techniques that are most likely to contribute to it. Evidence on the Scope of Profit Shifting There is ample, and simple, evidence that profits appear in countries inconsistent with an economic motivation. This section first examines the profit share of income of controlled corporations compared to the share of gross domestic product and how it has changed recently. The first set of countries, acting as a reference point, includes the remaining G-7 countries that are also among the United States' major trading partners. These countries account for 12% of pretax profits and 21% of rest-of-world gross domestic product. The second group of countries includes larger countries from Table 1 (with gross domestic product [GDP] of at least $15 billion), plus the Netherlands, which is widely considered a tax conduit for U.S. multinationals because of its holding company rules. These countries account for about 40% of earnings and 4% of rest-of-world GDP. The third group of countries includes smaller countries listed in Table 1 , with GDP less than $10 billion. These countries account for 18% of earnings and less than one-tenth of 1% of rest-of-world GDP. As indicated in Table 2 , income-to-GDP ratios in the large G-7 countries in 2010 ranged from 0.2% to 3.3%, the larger amounts reflecting in part the United States' relationships with some of its closest trading partners. Overall, this income as a share of GDP is 0.7%. Outside the UK and Canada, this income as a share of GDP is around 0.3% to 0.6% and does not vary with country size (Japan, for example, has over twice the GDP of Italy). Canada and the UK also have appeared on some tax haven lists, and the larger income shares could partially reflect that fact. There has been relatively little change in the aggregate between 2004 and 2010 (the latest year IRS data on earnings of multinational firms are available). Table 3 reports the share for the larger tax havens listed in Table 1 for which data are available, plus the Netherlands. In general, U.S. source profits as a percentage of GDP are considerably larger than those in Table 2 . In the case of Luxembourg, these profits were 18% of output in 2004 and 127% in 2010. Shares are also very large in Ireland and the Netherlands (42% and 17%, respectively), where they have both grown substantially. Shares in Switzerland and Cyprus have also grown. In most cases, the shares are well in excess of those in Table 2 . Table 4 examines the small tax havens listed in Table 1 for which data are available. In Bermuda, the British Virgin Islands, and the Cayman Islands profits are multiples of total GDP and in all cases have grown substantially. Profits are well in excess of GDP in four jurisdictions for 2004 (the three above plus the Marshall Islands), although data for the Marshall Islands are not available for 2010. In other jurisdictions in Table 4 , profits are a large share of output. These numbers clearly indicate that the profits in these countries do not appear to derive from economic motives related to productive inputs or markets but rather reflect income easily transferred to low-tax jurisdictions. These data suggest not only a significant amount of profit shifting but also a notable change. The share of pretax profits reported by controlled foreign corporations in countries identified as tax havens in Table 1 plus the Netherlands and reported in both years increased from 44% in 2004 to 59% in 2010, an increase of one-third. Evidence of profit shifting has been presented in many other studies. Grubert and Altshuler report that profits of controlled foreign corporations in manufacturing relative to sales in Ireland are three times the group mean. GAO reported higher shares of pretax profits of U.S. multinationals than of value added, tangible assets, sales, compensation, or employees in low-tax countries such as Bermuda, Ireland, the UK Caribbean, Singapore, and Switzerland. Costa and Gravelle reported similar results for tax havens using subsequent data. Martin Sullivan reports the return on assets for 1998 averaged 8.4% for U.S. manufacturing subsidiaries, but with returns of 23.8% in Ireland, 17.9% in Switzerland, and 16.6% in the Cayman Islands. More recently, he noted that of the 10 countries that accounted for the most foreign multinational profits, the 5 countries with the highest manufacturing returns for 2004 (the Netherlands, Bermuda, Ireland, Switzerland, and China) all had effective tax rates below 12% while the 5 countries with lower returns (Canada, Japan, Mexico, Australia, and the United Kingdom) had effective tax rates in excess of 23%. A number of econometric studies of this issue have been done. Estimates of the Cost and Sources of Corporate Tax Avoidance There are no official estimates of the cost of international corporate tax avoidance, although a number of researchers have made estimates, nor are there official estimates of the individual tax gap. In general, the estimates are not reflected in the overall tax gap estimate. The magnitude of corporate tax avoidance has been estimated through a variety of techniques and not all are for total avoidance. Some address only avoidance by U.S. multinationals and not by foreign parents of U.S. subsidiaries. Some focus only on a particular source of avoidance. Estimates of the potential revenue cost of income shifting by multinational corporations vary considerably, with some estimates in excess of $100 billion annually. The only study by the IRS in this area is an estimate of the international gross tax gap (not accounting for increased taxes collected on audit) related to transfer pricing based on audits of returns. They estimated a cost of about $3 billion, based on examinations of tax returns for 1996-1998. This estimate would reflect an estimate not of legal avoidance, but of non-compliance, and for reasons stressed in the study has a number of limitations. One of those is that an audit does not detect all non-compliance, and it would not detect avoidance mechanisms which are, or appear to be, legal. Some idea of the potential magnitude of the revenue lost from profit shifting by U.S. multinationals might be found in the estimates of the revenue gain from eliminating deferral. If most of the profit in low-tax countries has been shifted there to avoid U.S. tax rates, the projected revenue gain from ending deferral would provide an idea of the general magnitude of the revenue cost of profit shifting by U.S. parent firms. The Joint Committee on Taxation projected the revenue loss from deferral to be $83.5 billion in FY2014. The Administration's estimates for ending deferral were smaller at $63.4 billion. These estimates could be either an overstatement or an understatement of the cost of tax avoidance. They could be overstated because some of the profits abroad accrue to real investments in countries that have lower tax rates than the United States and thus do not reflect artificial shifting. They could be an understatement because they do not reflect the tax that could be collected by the United States rather than foreign jurisdictions on profits shifted to low-tax countries. For example, Ireland has a tax rate of 12.5% and the United States has a 35% rate, so ending deferral (absent behavioral changes) would only collect the excess of the U.S. tax over the Irish tax on shifted revenues, or about two-thirds of lost revenue. Altshuler and Grubert estimated for 2002 that the corporate tax could be cut to 28% if deferral were ended, and based on corporate revenue in that year the gain was about $11 billion. That year was at a low point because of the recession; if the share had remained the same, the gain would have been around $26 billion for FY2014. The projection of the effects of deferral in tax expenditures has increased much faster than revenues, however. Researchers have looked at differences in pretax returns and estimated the revenue gain if returns were equated. This approach should provide some estimates of the magnitude of overall profit shifting for multinationals, whether through transfer pricing, leveraging, or some other technique. Martin Sullivan, using Commerce Department data, estimates that, based on differences in pretax returns, the cost for 2004 was between $10 billion and $20 billion. Sullivan subsequently reports an estimated $17 billion increase in revenue loss from profit shifting between 1999 and 2004, which suggests that earlier number may be too small. Sullivan suggests that the growth in profit shifting may be due to check-the-box. Sullivan subsequently estimated a $28 billion loss for 2007 which he characterized as conservative. Charles Christian and Thomas Schultz, using rate of return on assets data from tax returns, estimated $87 billion was shifted in 2001, which, at a 35% tax rate, would imply a revenue loss of about $30 billion. Adjusted proportionally to revenue, that amount would be $70 billion in 2014. As a guide for potential revenue loss from avoidance, these estimates suffer from two limits. The first is the inability to determine how much was shifted out of high-tax foreign jurisdictions rather than the United States, which leads to a range of estimates. At the same time, if capital is mobile, economic theory indicates that the returns should be lower, the lower the tax rate. Thus the results could also understate the overall profit shifting and the revenue loss to the United States. Simon Pak and John Zdanowicz examined export and import prices, and estimated that lost revenue due to transfer pricing of goods alone was $53 billion in 2001. This estimate should cover both U.S. multinationals and U.S. subsidiaries of foreign parents, but is limited to one technique. Kimberly Clausing, using regression techniques on cross-country data, which estimated profits reported as a function of tax rates, estimated that revenues of over $60 billion are lost for 2004 by applying a 35% tax rate to an estimated $180 billion in corporate profits shifted out of the United States. She estimates that the profit-shifting effects are twice as large as the effects from shifts in actual economic activity. This methodological approach differs from others that involve direct calculations based on returns or prices and is subject to the econometric limitations with cross-country panel regressions. In theory, however, it had an overall of coverage of shifting (that is both outbound by U.S. parents of foreign corporations and inbound by foreign parents of U.S. corporations and covering all techniques). Clausing and Reuven Avi-Yonah estimate the revenue gain from moving to a formula apportionment based on sales that is on the order of $50 billion per year because the fraction of worldwide income in the United States is smaller than the fraction of worldwide sales. While this estimate is not an estimate of the loss from profit shifting (since sales and income could differ for other reasons), it is suggestive of the magnitude of total effects from profit shifting. A similar result was found by another study that applied formula apportionment based on an equal weight of assets, payroll, and sales. A more recent study by Clausing indicated that the revenue loss from profit shifting may have been as high as $90 billion in 2008, although an alternative data set indicates profit shifting of $57 billion. For the last five years, the first method yielded losses ranging from 20% to 30% of profits. Using the second method, the range was 13% to 20%. If rising proportional to revenue, the 2014 level would be $66 billion to $104 billion. Gabriel Zucman, using two different methodologies, found the revenue cost for profit shifting could range from $55 billion to $133 billion for 2013. The lower number is from estimating the share of profits booked in tax havens and not repatriated, which would be assumed to be taxed fully if made subject to U.S. taxes. The second examines the decline in effective tax rate over time, and the residual, after accounting for other factors (about two-thirds), is attributed to profit shifting. It is very difficult to develop a separate estimate for U.S. subsidiaries of foreign multinational companies because there is no way to observe the parent firm and its other subsidiaries. Several studies have documented that these firms have lower taxable income and that some have higher debt to asset ratios than domestic firms. There are many other potential explanations these differing characteristics, however, and domestic firms that are used as comparisons also have incentives to shift profits when they have foreign operations. No quantitative estimate has been made. However some evidence of earnings stripping for inverted firms was found. Importance of Different Profit Shifting Techniques Some studies have attempted to identify the importance of techniques used for profit shifting. Grubert has estimated that about half of income shifting was due to transfer pricing of intangibles and most of the remainder to shifting of debt. In a subsequent study, Altshuler and Grubert find that multinationals saved $7 billion more between 1997 and 2002 due to check-the-box rules. Some of this gain may have been at the cost of high-tax host countries rather than the United States, however. Some of the estimates discussed here conflict with respect to the source of profit shifting. The Pak and Zdanowich estimates suggest that transfer pricing of goods is an important mechanism of tax avoidance, whereas Grubert suggests that the main methods of profit shifting are due to leverage and intangibles. The estimates for pricing of goods may, however, reflect errors, or money laundering motives rather than tax motives. Much of the shifting was associated with trade with high-tax countries; for example, Japan, Canada, and Germany accounted for 18% of the total. At the same time, about 14% of the estimate reflected transactions with countries that appear on tax haven lists: the Netherlands, Taiwan, Singapore, Hong Kong, and Ireland. A study by Jost Hekemeyer and Michael Overesch based on an analysis of 25 empirical studies found that transfer pricing was considerably more important than debt, accounting for an estimated 72% of the total, although their review covered studies on non-U.S. multinationals. The growing importance of firms holding substantial intangible assets may point to a growing important of transfer pricing of intangibles. Hekemeyer and Overesch also found that reported profits on average decrease by 0.8% with a one percentage point change in the tax differential between two locations. Some evidence that points to the importance of intangibles and the associated profits in tax haven countries can be developed by examining the sources of dividends repatriated during the "repatriation holiday" enacted in 2004. This provision allowed, for a temporary period, dividends to be repatriated with an 85% deduction, leading to a tax rate of 5.25%. The pharmaceutical and medicine industry accounted for $99 billion in repatriations or 32% of the total. The computer and electronic equipment industry accounted for $58 billion or 18% of the total. Thus these two industries, which are high tech firms, accounted for half of the repatriations. The benefits were also highly concentrated in a few firms. According to a recent study, five firms (Pfizer, Merck, Hewlett-Packard, Johnson & Johnson, and IBM) are responsible for $88 billion, over a quarter (28%) of total repatriations. The top 10 firms (adding Schering-Plough, Du Pont, Bristol-Myers Squibb, Eli Lilly, and PepsiCo) accounted for 42%. The top 15 (adding Procter and Gamble, Intel, Coca-Cola, Altria, and Motorola) accounted for over half (52%). These are firms that tend to, in most cases, have intangibles either in technology or brand names. Finally, as shown in Table 5 , which lists all countries accounting for at least 1% of the total of eligible dividends (and accounting for 87% of the total), most of the dividends were repatriated from countries that appear on tax haven lists. Methods of Avoidance and Evasion by Individuals Individual evasion of taxes may take different forms, and they are all facilitated by the growing international financial globalization and ease of making transactions on the Internet. Individuals can purchase foreign investments directly (outside the United States), such as stocks and bonds, or put money in foreign bank accounts and simply not report the income (although it is subject to tax under U.S. tax law). There has been little or no withholding information on individual taxpayers for this type of action. They could also use structures such as trusts or shell corporations to evade tax on investments, including investments made in the United States, which may take advantage of U.S. tax laws that exempt interest income and capital gains of non-residents from U.S. tax. Rather than using withholding or information collection the United States has largely relied in the past on the Qualified Intermediary (QI) program where beneficial owners are not revealed. To the extent any information gathering from other countries is done it is through bilateral information exchanges rather than multilateral information sharing. The European Union had developed a multilateral agreement but the United States does not participate. New developments in information exchange may affect individual tax evasion both in the United States and abroad. In 2010, Congress enacted the Foreign Account Tax Compliance Act (FATCA) as part of the Hiring Incentives to Restore Employment Act (HIRE; P.L. 111-147 ). FATCA recently become effective and requires foreign financial institutions to report information on asset holders or be subject to a 30% withholding rate. Its effectiveness is yet to be determined, although revenue projections when enacted did not predict a significant effect. More recently, 51 other countries signed a multi-lateral information exchange agreement that set reporting standards which should eventually lead to fuller exchange of tax information by most countries. Tax Provisions Affecting the Treatment of Income by Individuals The ability of U.S. persons (whether firms or individuals) to avoid tax on U.S. source income that they would normally be subject to arises from U.S. rules that do not impose withholding taxes on many sources of income. In general interest and capital gains are not subject to withholding. Dividends, non-portfolio interest (such as interest payments by a U.S. subsidiary to its parent), capital gains connected with a trade or business, and certain rents are subject to tax, although treaty arrangements widely reduce or eliminate the tax on dividends. In addition, even when dividends are potentially subject to a withholding tax, new techniques have developed to transform, through derivatives, those assets into exempt interest. The elimination of tax on interest income was unilaterally initiated by the United States in 1984, and other countries began to follow suit. Currently, fears of capital flight are likely to keep countries from changing this treatment. However, it has been accompanied with a lack of information reporting and lack of information sharing that allows U.S. citizens, who are liable for these taxes, to avoid them whether on income invested abroad or income invested in the United States channeled through shell corporations and trusts. Citizens of foreign countries can also evade the tax, and the U.S. practice of not collecting information contributes to the problem. Based on actual tax cases, Guttenberg and Avi-Yonah describe a typical way that U.S. individuals can easily evade tax on domestic income through a Cayman Islands operation with little expense using current technology. The individual, using the Internet, can open a bank account in the name of a Cayman corporation that can be set up for a minimal fee. Money can be electronically transferred without any reporting to tax authorities, and investments can be made in the United States or abroad. Investments by non-residents in interest bearing assets and most capital gains are not subject to a withholding tax in the United States. In addition to corporations, foreign trusts can be used to accomplish the same approach. Trusts may involve a trust protector who is an intermediary between the grantor and the trustees, but whose purpose may actually be to carry out the desires of the grantor. Some taxpayers argue that these trusts are legal but in either case they can be used to protect income from taxes, including those invested in the United States, from tax, while retaining control over and use of the funds. Limited Information Reporting Between Jurisdictions In the past, the international taxation of passive portfolio income by individuals has been easily subject to evasion because there was no multilateral reporting of interest income. Even in those cases in which bilateral information sharing treaties, referred to as Tax Information Exchange Agreements (TIEAs) were in place, they had limits. As pointed out by Avi-Yonah, most of these agreements are restricted to criminal matters, which are a minor part of the revenues involved and pose difficult issues of evidence. Also, these agreements sometimes require that the activities related to the information being sought constitute crimes in both countries, which can be a substantial hurdle in cases of tax evasion. The OECD has adopted a model agreement with the dual criminality requirements. TIEAs usually allow for information only upon request, requiring the United States and other countries to identify the potential tax evaders in advance and they do not override bank secrecy laws. In some cases the countries themselves have little or no information of value. One article, for example, discussing the possibility of an information exchange agreement with the British Virgin Islands, a country with more than 400,000 registered corporations, where laws require no identification of shareholders or directors, and require no financial records, noted: "Even if the BVI signs an information exchange agreement, it is not clear what information could be exchanged." U.S. Collection of Information on U.S. Income and Qualified Intermediaries Under the QI program, the United States did not require U.S. financial institutions to identify the true beneficiaries of interest and exempt dividends. The IRS set up a QI program in 2001, under which foreign banks that received payments certify the nationality of their depositors and reveal the identity of any U.S. citizens. However, although QIs are supposed to certify nationality, apparently some relied on self-certification. QIs are also subject to audit. However, UBS, the Swiss bank involved in a tax abuse scandal that helped clients set up offshore plans, was a QI, and that event raised some questions about the QI program. A nonqualified intermediary must disclose the identity of its customers to obtain the exemption for passive income such as interest and or the reduced rates arising from tax treaties, but there are also questions about the accuracy of disclosures. The FATCA provisions in P.L. 111-147 strengthened the rules affecting qualified intermediaries' identification of asset holders, with backup withholding provisions. The projected revenue gain was quite small (less than $1 billion per year) relative to projected costs (discussed below). European Union Savings Directive The European Union, in its savings directive, has developed among its members an option of either information reporting or a withholding tax. The reporting or withholding option covers the member countries as well as some other countries. Three states, Austria, Belgium, and Luxembourg, have elected the withholding tax. While this multilateral agreement aids these countries' tax administration, the United States is not a participant. Estimates of the Revenue Cost of Individual Tax Evasion A number of different approaches have been used to estimate corporate tax avoidance, however, all of these approaches rely on data reported on assets and income. For individual evasion, estimates are much more difficult because the initial basis of the estimate is the amount of assets held abroad whose income is not reported to the tax authorities. In addition to this estimate, the expected rate of return and tax rate are needed to estimate the revenue cost. Joseph Guttentag and Avi-Yonah estimate a value of $50 billion in individual tax evasion, based on an estimate of holdings by high net worth individuals invested outside the United States at $1.5 trillion. Using a rate of return of 10% and a tax rate of approximately one-third, they obtain an estimate of $50 billion. They also summarize two other estimates in 2002 of $40 billion for the international tax gap by the IRS and $70 billion by an IRS consultant. To the extent that the earnings are interest, the 10% rate of return may be too high, while if it is dividends and capital gains, the tax rate is too high. Using a tax rate of 15% (currently applicable to capital gains and dividends) would lead to about $23 billion. In the case of equity investments, if a third of the return is in dividends and half of capital gains is never realized, the tax rate would be 10% or about $15 billion assuming the 10% return. During 2002 and beginning in 2011, however, the tax rate on capital gains and dividends is 20%, indicating a loss of $20 billion rather than $15 billion. For interest, since investors can earn tax free returns in the neighborhood of 4% to 5% on domestic state and local bonds, to yield a 5% after-tax return at a 35% tax rate would require a pretax yield of about 7.7%. The estimate would then be $40 billion. The Tax Justice Network has estimated a worldwide revenue loss for all countries of $255 billion from individual tax evasion, basically using a 7.5% return and a 30% tax rate. These assumptions would be consistent with a $33 billion loss for the United States using the $1.5 trillion figure. Their worldwide numbers are consistent with $11 trillion in offshore wealth. Their more recent estimates place wealth at $21 trillion to $32 trillion, which would double or triple these estimates. Thus the cost for the United States could be much larger approaching $100 billion. Zucman estimates $1.2 trillion in U.S. financial wealth abroad based on anomalies in investment data, with an estimated tax loss of $36 billion in 2013. There is no way to know whether the high-profile cases of prosecuting individuals, tax amnesty, or the imminent arrival of FATCA might have reduced these amounts of wealth. Alternative Policy Options to Address Corporate Profit Shifting Because much of the corporate tax revenue loss arises from activities that either are legal or appear to be so, it is difficult to address these issues other than with changes in the tax law. Outcomes would likely be better if there is international cooperation. Currently, the possibilities for international cooperation appear to play a bigger role in options for dealing with individual evasion than with corporate avoidance. Several of the issues addressed below, such as hybrid entities and instruments, transfer pricing for intangibles, and debt also have been considered in the OECD action plan on base erosion and profit shifting. Broad Changes to International Tax Rules The first set of provisions would introduce broad changes in international tax rules, and include significant restrictions in deferral or allocation of income and capital. Repeal Deferral One approach to mitigate the rewards of profit shifting is to repeal deferral, or to institute true worldwide taxation of foreign source income. Firms would be subject to current tax on the income of their foreign subsidiaries, although they would continue to be able to take foreign tax credits. According to estimates cited above, this change currently would raise from $63.4 billion to $83.4 billion per year. Many of the issues surrounding the repeal of deferral have focused on the real effects of repeal on the allocation of capital. Traditionally, economic analysis has suggested that eliminating deferral would increase economic efficiency, although recently some have argued that this gain would be offset by the loss of production of some efficient firms from high-tax countries. Some have also argued for retaining the current system or moving in the other direction to a territorial tax. These economic issues are discussed in detail in another CRS report. Repeal of deferral would largely eliminate the value of the planning techniques discussed in this report. There are concerns, however, that firms could avoid the effects of repeal by having their parent incorporate in other countries that continue to allow deferral. The most direct and beneficial to reducing firms' tax liabilities of these planning approaches, inversion, has been addressed by legislation in 2004. Mergers would be another method to counter the implementation of deferral, although mergers involve real changes in organization that would not likely be undertaken to gain a small tax benefit. Another possibility is that more direct portfolio investment (i.e., buying shares of stock by individual investors) in foreign corporations will occur. There has been a significant growth in this direct investment, although the evidence suggests this investment has been due to portfolio diversification and not tax avoidance. S. 767 , a broad tax reform bill introduced by Senators Wyden and Coats in the 112 th Congress, would have eliminated deferral. In the 113 th Congress, H.R. 694 (Representative Schakowsky) and S. 250 (Senator Sanders), also would have eliminated deferral. Targeted or Partial Elimination of Deferral More narrow proposals to address deferral and tax avoidance would tax income in tax havens currently or some additional income of foreign subsidiaries. They include eliminating deferral for specified tax havens; eliminating deferral in countries with tax rates that are below the U.S. rate by a specified proportion; eliminating deferral for income on the production of goods that are imported into the United States; eliminating deferral for income on the production of goods that are exported, requiring a minimum payout share; and taxing currently at a lower minimum rate. Restricting current taxation to tax havens would likely address some of the problems associated with transfer pricing and leveraging, without ending deferral entirely. Defining a tax haven under those circumstances would be crucial. A bill introduced in the 110 th Congress, S. 396 , which defined as a U.S. firm any U.S. subsidiary in a tax haven not engaged in an active business, had a list of countries that was the same as the original OECD tax haven list, except for the U.S. Virgin Islands. Some countries that are often considered tax havens, would not be subject to such provisions, leaving some scope for corporate tax avoidance. In addition, firms could shift some operations to other lower tax countries and increase the amount of foreign tax credits available, which would be a loss to U.S. revenue. Some concerns have also been expressed that listing specific tax haven countries would make cooperative approaches, such as tax information sharing treaties, more difficult. An alternative, which would not require identifying particular countries, would be to restrict deferral based on a tax rate that is lower than the U.S. rate by a specified amount. For example, the French, who generally have a territorial tax, tax income earned in jurisdictions with tax rates one-third lower than the French rate. For the United States, whose tax rate is similar to the French rate, this ratio would indicate a tax rate lower than 24%. Another proposal directed to runaway plans would eliminate deferral for investments abroad that produce exports into the United States. S. 1284 , also in the 110 th Congress, would have imposed current taxation on such activities by expanding Subpart F income to include income attributable to imports into the United States of goods produced by foreign subsidiaries of U.S. firms. The main problem with this proposal is administering it, which would include tracing selling to a third party for resale. A somewhat different and more restrictive proposal was made by Senator Kerry during the 2004 presidential campaign. He proposed to eliminate deferral except in cases in which income is produced and sold in the controlled foreign corporation's jurisdiction. This approach would, like deferral in general, be likely to significantly restrict opportunities for artificial profit shifting, because most of the income in tax haven or low-tax jurisdictions does not arise from real activity; indeed, these jurisdictions are too small in many cases to provide a market. As with the previous proposal, however, the administration of such a plan would be difficult. An option that would not go as far as eliminating deferral altogether would be to require some minimum share to be paid out. A related option would be to tax income currently but at a minimum rate that is lower than the U.S. rate. Then-Chairman Baucus of the Senate Finance Committee released, in 2013, a discussion draft of a proposal that would have taxed foreign source income when earned at rates 60% or 80% of the statutory rate. The 60% and 80% were only suggestions at this point. The President has also suggested minimum tax approaches, without providing specifics. Chairman Camp's tax reform proposal in the 113 th Congress ( S. 1 ) includes a minimum tax on intangible income as part of anti-abuse provisions in moving to a territorial tax system. Allocation of Deductions and Credits with Respect to Deferred Income/Restrictions on Cross Crediting A proposal that does not end deferral but makes the shifting of profits from high-tax countries less attractive is a provision to allocate deductions and credits, so as to deny those benefits until income is repatriated. This approach was included in a tax reform bill introduced by Chairman Rangel of the Ways and Means Committee in 2007 ( H.R. 3970 ) and is included in the current proposals by President Obama. Under this proposal, a portion of certain overall deductions, such as interest or overhead, that reflects the share of foreign deferred income, would be disallowed. The foreign tax credit allocation rule would allow credits for the share of foreign taxes paid that are equal to the share of foreign source income repatriated. Disallowed deductions and credits would be carried forward. (President Obama's proposal does not allocate research and experimental expenses.) The allocation-of-deductions provision would decrease the tax benefits of sheltering income in low-tax jurisdictions and encourage repatriation of income relative to current law and presumably reduce profit shifting, as well as decrease benefits of real investment abroad. The foreign tax credit allocation rule could have a variety of effects. It would make foreign investment abroad less attractive because it would increase the tax on income when eventually repatriated. It also would discourage investment in low-tax jurisdictions that could no longer be sheltered by foreign tax credits and discourage repatriation of earnings on existing activities because of the potential tax to be collected. The allocation of credits accomplishes some of the restrictions on cross crediting that could also be achieved by increasing the number of baskets. As discussed below, one possible separate basket would be for active royalties. Another possibility would be to impose a per country limit with a separate basket for each country (and baskets within each for passive, active, etc., income). S. 3018 , a broad tax reform bill introduced by Senators Wyden and Gregg in the 111 th Congress, and a similar bill, S. 727 , introduced by Senators Wyden and Coats in the 112 th Congress, would have provided for a per country limit, as would have H.R. 694 (Representative Schakowsy) and S. 250 (Senator Sanders) in the 113 th Congress. Formula Apportionment Another approach to addressing income shifting is through formula apportionment, which would be a major change in the international tax system. With formula apportionment, income would be allocated to different jurisdictions based on their shares of some combination of sales, assets, and employment. This approach is used by many states in the United States and by the Canadian provinces to allocate income. (In the past, a three factor apportionment was used, but some states have moved to a sales based system.) Studies have estimated a significant increase in taxes from adopting formula apportionment. Slemrod and Shackleford estimate a 38% revenue increase from an equally weighted three-factor system. A sales-based formula has been proposed by Avi-Yonah and Clausing that they estimate would raise about 35% of additional corporate revenue, or $50 billion annually over the 2001-2004 period. The ability of a formula apportionment system to address some of the problems of shifting income becomes problematic with intangible assets. If all capital were tangible capital, such as buildings and equipment, a formula apportionment system based on capital would at least lead to the same rate of return for tax purposes across high-tax and low-tax jurisdictions. Real distortions in the allocation of capital would remain, since capital would still flow to low-tax jurisdictions, but paper profits could not be shifted. An allocation system based on assets becomes more difficult when intangible assets are involved. It is probably as difficult to estimate the stock of intangible investment (given lack of information on the future pattern of profitability) as it is to allocate it under arms-length pricing. In the case of an allocation based on sales, profits that might appropriately be associated with domestic income as they arise from domestic investment in R&D would be allocated abroad. Moreover, new avenues of tax planning, such as selling to an intermediary in a low-tax country for resale, would complicate the administration of such a plan. Whether the benefits are greater than the costs is in some dispute. One problem is that if the United States adopted the system there could be double taxation of some income and no taxation of other income unless there were a multinational plan. The European Union has been considering a formula apportionment applied to its member states, based on property, gross receipts, number of employees and cost of employment. This proposal and the consequences for different countries are discussed by Devereux and Loretz. If the European Union adopted such a plan it would be easier for the United States to adopt a similar apportionment formula without as much risk of double or no taxation with respect to its major trading partners. Narrower Provisions Affecting Multinational Profit Shifting Various more narrow provisions could be considered that would be more focused on preventing abuses and have fewer consequences for the overall structure of international corporate taxation. Note that P.L. 111-226 addresses a number of problems with the foreign tax credit; these changes are summarized below along with other legislation in 2011 relating to international tax avoidance and evasion. Eliminate Check-the-Box, Hybrid Entities, and Hybrid Instruments A number of proposals have been made to eliminate check-the-box and in general to adopt rules that would require legal entities to be characterized in a consistent manner by the United States and the country in which an entity is established. This proposal has been made by McIntyre. Rules requiring that legal entities be characterized in a consistent manner by the United States and by the country in which they are established and that tax benefits arising from inconsistent treatment of instruments be denied would address this particular class of provisions that undermine Subpart F and the matching of credits and deductions with income. President Obama's first budget proposal included a provision that disallows a subsidiary to treat a subsidiary chartered in another country as a disregarded entity. Tighten Earnings Stripping Rules; Limit Interest Deductions In the American Jobs Creation Act of 2004, a further restriction on earnings stripping rules was considered as an alternative to the anti-inversion measure. These provisions were not enacted but were to be studied in a Treasury report. The 2004 House proposal would have raised revenue by dropping the debt-to-asset share test and lowering the interest share standard to 25% for ordinary debt, 50% for guaranteed debt, and 30% overall. In general, further restrictions on earnings stripping could be considered to address shifting through debt for U.S. subsidiaries of foreign parents. President Obama's budget proposals include a more restrictive rule for multinational firms, allocating interest across the firm's related groups in proportion to earnings. Allocation rules were also included in Chairman Camp's Tax Reform Proposal in the 113 th Congress ( H.R. 1 ). Foreign Tax Credits: Source Royalties as Domestic Income for Purposes of the Foreign Tax Credit Limit or Create Separate Basket; Eliminate Title Passage Rule; Restrict Credits for Taxes Producing an Economic Benefit As noted above, one of the issues surrounding the cross-crediting of the foreign tax credit is the use of excess credits to shield royalties from U.S. tax on income that could be considered U.S. source income. Two options might be considered to address that issue: sourcing these royalties as domestic income for purposes of the credit or putting them into a separate foreign tax credit basket. The same issue applies to the provision that allows half of the income from exports to be allocated to the country in which the title passes. President Obama's proposal includes a provision to restrict the crediting of taxes that are in exchange for an economic benefit (such as payments that are the equivalent of royalties). Transfer Pricing Michael McIntyre has suggested some other proposals to deal with transfer pricing, which include making transfer pricing penalties nearly automatic for taxpayers who have not kept contemporaneous records. He also suggests use of some type of formula apportionment plan as a default for transfer pricing for non-complying taxpayers so the IRS does not have to conduct a detailed transaction by transaction assessment for the court. President Obama's budget proposals would address some of the transfer pricing issues associated with the transfer of intangibles by clarifying that intangibles include workforce in place, goodwill, and going concern value and that they are valued at their highest and best use. The plan would allow the IRS commissioner to aggregate intangibles if that leads to a more appropriate value. These proposals would likely have small effects. Any significant solution to the transfer pricing problem, especially for intangibles, is difficult to entertain short of an elimination of deferral. The President's budget proposals also included a more significant proposal to treat excess returns on intangibles in a low-tax country as Subpart F income (and therefore not subject to deferral) and to place it in a separate foreign tax credit basket. If such an approach could be successfully implemented, it might have important consequences for transfer pricing using intangibles. Other Provisions There are numerous other proposals that often have a narrow focus, such as on methods of avoiding taxes on repatriation and shifting headquarters. These provisions are discussed as a part of proposed legislation in the final section of this report. Options to Address Individual Evasion Most of the options for addressing individual evasion involve more information reporting and additional enforcement. There are options that would involve fundamental changes in the law, such as shifting from a residence to a source basis for passive income. That is, the United States would tax this passive income earned in its borders, just as is the case for corporate and other active income. This change involves, however, many other economic and efficiency effects that are probably not desirable. The remainder of the proposals discussed here do not involve any fundamental changes in the tax itself, but rather focus on administration and enforcement. The options discussed below are drawn from many sources, including academics and practitioners, organizations, and the Internal Revenue Service, and contained in legislative proposals; citations to these sources are provided at this point and legislative proposals are summarized in the next section. Subsequent sections explain proposals that were adopted in the HIRE Act, P.L. 111-147 . Information Reporting Expanded information reporting can involve multilateral efforts, changes in the current bilateral treaties, or unilateral changes. Multilateral Information Sharing or Withholding; International Cooperation The European Union Directive, which would require information reporting (or withholding), is one example of a multilateral approach to information reporting. Avi-Yonah and Avi-Yonah and Guttentag have suggested that current Treasury policy is to focus on bilateral agreements to achieve information exchange, but that the United States should also focus on cooperation with the OECD and G-20 and other appropriate organizations to improve information and persuade tax havens to enter into exchanges based on the OECD model. Shay suggests this approach as well and particularly references electronic information exchange. The Tax Justice Network has proposed that the United Nations develop a global tax cooperation standard, set up a panel to determine compliant states, and deny recognition to non-compliant jurisdictions. They have also suggested that the IMF and World Bank country assessments address tax compliance. Expanding Bilateral Information Exchange A number of commentators have suggested an increase in the scope of bilateral information treaties to provide for regular and automatic exchanges of information. This would require the U.S. banks to increase their collection of information. Avi-Yonah and Avid-Yonah and Guttentag suggest adopting the model OECD bilateral Tax Information Exchange Agreement (TIEA ). This information exchange would relate to civil as well as criminal issues, it would not require suspicion of a crime other than tax evasion, and would override tax haven bank secrecy laws. Non-tax havens could be induced to make such agreements to obtain information, and thus, such a change would require collection of information on interest payments by banks and financial institutions. Treasury has proposed only 16 countries, but Avi-Yonah and Guttenberg suggest no reason to restrict the provision in this way. Treasury could use existing authority not to exchange information that might be misused by non-democratic foreign governments. Unilateral Approaches: Withholding/Refund Approach; Increased Information Reporting Requirements This step is one that the United States could undertake without multilateral or bilateral cooperation, namely imposing withholding taxes on interest income and other exempt income received from U.S. sources by foreign intermediaries and providing a refund upon proof that the beneficial recipient was eligible. Avi-Yonah suggests this change with the hope that it would be adopted multilaterally. A variation of this approach would be to require disclosure of the names of customers including beneficial owners, with withholding imposed if disclosure was not forthcoming as adopted in the HIRE Act, discussed subsequently. Other Measures That Might Improve Compliance Incentives/Sanctions for Tax Havens Avi-Yonah and Avi-Yonah and Guttenberg suggest a carrot and stick approach to tax havens. They argue that little of the benefit of tax havens flows to their sometimes needy residents, but rather to the professionals providing banking and legal services, who often live elsewhere. They suggest transitional aid to move away from these offshore activities. For non-cooperating tax havens, they suggest the Treasury use its existing authority to deny benefits of the interest exemption. They suggest that tax havens cannot continue to exist unless the wealthy countries permit it, because funds are not productive in tax havens. The Stop Tax Haven Abuse Act would extend to tax enforcement the sanctions of the Patriot Act used to impose penalties for money laundering and terrorist financing. Sanctions vary in severity and range from increased reporting on transactions to prohibitions. Sullivan points out that the U.S. government has used the Patriot Act sparingly, however, and questions whether this change would be a credible threat. Blessing suggests that sanctions should be multilateral rather than unilateral. Revise and Strengthen the Qualified Intermediary Program Several proposals relating to the QI program, which were discussed by witnesses at a Ways and Means Committee hearing on March 31, 2009, were reported by Sullivan. Some changes have already been made by FATCA (in the HIRE Act, discussed below). Place the Burden of Proof on the Taxpayer An important part of the Stop Tax Haven Abuse proposal is to place the burden of proof in court on the taxpayer; this approach was also suggested by Blum. As noted above, there is also a shift in the burden of proof for accounts with non-qualified intermediaries for filing an FBAR (Foreign Bank and Financial Account Report). President Obama's proposal would create a presumption that the funds in foreign accounts are large enough to require an FBAR, which is required when amounts exceed $10,000. It would treat failure to file for amounts in excess of $200,000 as willful, which permits criminal penalties and larger civil penalties. The HIRE Act ( P.L. 111-147 ) would assume that, when adequate information is not provided, foreign accounts exceed the $50,000 minimum that requires reporting (under other provisions) on the tax return for purposes of assessing penalties. Treat Shell Corporations as U.S. Firms The Stop Tax Haven Abuse Act includes a provision to treat any firm that is publicly traded or has assets over $50 million as a U.S. corporation. This provision would include hedge funds but would not affect subsidiaries of multinational firms because decisions are made by the parent firm. Sullivan argues that such a provision would have a devastating effect on the U.S. hedge fund industry, where offshore firms generally attract tax exempt U.S. investors and foreigners who wish to avoid filing tax returns, as well as U.S. tax evaders, and that legislative relief for U.S. tax exempt investors (pension funds, university endowments) would be likely. Extend the Statute of Limitations Extensions in the statute of limitations are said by some to be needed due to the complexity of the international cases and difficulty of obtaining information. Extension has been proposed by numerous commentators, is supported by the IRS officials and is included in the proposed Stop Tax Haven Abuse Act, proposals discussed by the Senate Finance Committee, and proposals made by President Obama. These legislative proposals would extend the statute of limitations from 3 years to 6 years, but Blum also suggests the possibility of 10 years. The HIRE Act ( P.L. 111-147 ) extends the statute of limitations to six years. Greater Resources for the Internal Revenue Service to Focus on Offshore Numerous suggestions have been made to expand IRS resources for combating overseas tax abuses. President Obama's proposal, for example, has proposed to fund 800 new positions to combat international abuses. Blum says that agents should not be pressured to give up difficult cases because of short-term performance goals based on closing cases and collecting revenues. Make Civil Cases Public as a Deterrent Blum suggests all settlements involving offshore schemes in excess of $1 million should be excluded from the restrictions of Section 6103 that require settled civil cases to be confidential. He argues that no one knows about these cases and thus taxpayers think the possibility of being caught is small. John Doe Summons A provision in the proposed Stop Tax Haven Abuse Act would make it easier to issue John Doe summons where the IRS does not know the names of taxpayers and now must ask courts for permission to serve the summons. This section provides that in any case involving offshore secret accounts, the court is to presume tax compliance is at issue, to relieve the IRS of the obligation when the only records sought are U.S. bank records, and to issue John Doe summons for large investigative projects without addressing each set of summons separately. Strengthening of Penalties Increased penalties are included in the proposed Stop Tax Haven Abuse Act, the Finance Committee Draft and President Obama's proposals. Among the penalty provisions in various proposals are increased penalties for failure to file FBARs; basing the FBAR penalty on the highest amount in period rather than on a particular day; and increased penalties on abusive tax shelters, failure to file information on foreign trusts, and certain offshore transactions. President Obama's proposals would double accuracy-related penalties for foreign transactions and increase penalties for trusts and permit them to be imposed if the amount in the trust cannot be established; this provision was included in The HIRE Act ( P.L. 111-147 ). The proposed Stop Tax Haven Abuse Act also includes a provision that legal opinions that take the position that a transaction is more likely than not to prevail for tax purposes will no longer shield taxpayers from penalties. S. 386 , the Fraud Recovery and Investment Act, would introduce criminal penalties. Some tax attorneys have questioned whether these proposals are too harsh or might undermine amnesty or voluntary compliance. Address Tax Shelters The proposed Stop Tax Haven Abuse Act would make a number of additional changes addressing tax shelters, including prohibiting the patenting of tax shelters, developing an examination procedure so that bank regulators could detect questionable tax activities, disallowing fees contingent on tax savings, removing communication barriers between enforcement agencies, codifying regulations, making it clear that prohibition of disclosure by tax preparers does not prevent congressional subpoenas, and providing standards for tax shelter opinion letters. Regulate the Rules Used by States to Permit Incorporation Blum suggests that all U.S. Limited Liability Companies (LLCs) have a taxpayer ID number, a requirement not imposed in Delaware and other states that keep no records of ownership. S. 569 would tighten regulations to require record-keeping and identification of beneficial owners of corporations and LLCs and commission a study of partnerships and trusts. Make Suspicious Activity Reports Available to Civil Side of IRS The proposal that information on suspicious activity reports filed by financial institutions under anti-money laundering acts be made available to the civil side of IRS was made by Blum, who indicated that agency policy at the top levels had prohibited this information sharing. It is included in a provision in the Stop Tax Haven Abuse Act. Summary of Enacted Legislation in 2011 Three bills enacted in 2011 contain provisions relating to international compliance: the HIRE Act, the Affordable Care Act, and P.L. 111-226 . The Hiring Incentives to Restore Employment (HIRE) Act (P.L. 111-147): FATCA The foreign provisions in this act are projected to have a relatively small effect, $8.7 billion over 10 years, when compared with estimated costs of international evasion of around $40 billion a year. This section of the act is referred to as the Foreign Account Tax Compliance Act, or FATCA. Reporting on Foreign Accounts This provision would institute withholding on payments, at a 30% rate, to foreign financial institutions and other institutions unless certain information requirements are met. Although the provision allows considerable regulatory scope, the requirements include providing specific details on U.S. beneficial owners. The institution determines U.S. beneficial owners, with oversight by the Treasury. Deduction of Interest for Bearer (Nonregistered) Bonds Non-registered bonds (with some exceptions, including those issued by natural persons, not for public sale, or of maturities of less than a year) are subject to restrictions, including an excise tax and denial of interest deductions; there is an exception for foreign targeted bonds. Foreign-targeted bonds are designed to be sold to non-U.S. persons, payable outside of the United States, and containing a statement that any bond held by a U.S. person will be subject to U.S. tax laws. This provision repeals the foreign targeted bond exception for purposes of interest deductibility. Non-registered state and local bond interest for these bonds are also not eligible for tax exclusion. Additional Information Reported on Tax Returns Individuals who are required to file an FBAR (Foreign Bank and Financial Account Report) would also be required to report this information on the tax return if the amount in the account is $50,000 or more. For purposes of this report on the tax return, interests in foreign trusts would also be included. A presumption will be made that the amount of the account is at least $50,000 when no detailed information is provided. Penalties The 20% accuracy-related penalty that already applies is increased to 40% for transactions involving foreign accounts where the taxpayer failed to disclose reportable information. A reasonable cause exception would not be available. In the case of failure to report or under-reporting foreign trusts, the initial penalty is 35% of the trust amount (5% in certain cases). If the failure to report continues for 90 days, an additional penalty of $10,000 is imposed for each 30-day period, but the total cannot exceed the amount of the trust. This provision would change the initial penalty from 35% (5%) of the trust amount a minimum of $10,000. The $10,000 for each 30-day period is continued indefinitely, with a refund of any excess when the taxpayer does report. This proposal addresses the problem of the IRS not being able to assess a penalty because it cannot determine the amount in the account. Statute of Limitations The statute of limitations for cross-border transactions is extended from three to six years in instances where more than $5,000 of income is omitted. Reporting on Foreign Passive Investment Companies The legislation addresses reporting by passive foreign investment companies (PFICs) by codifying proposed regulations requiring shareholders to file annual information reports. The Secretary of the Treasury has regulatory authority over the type of information and can also provide for regulations that address duplicate reporting from other provisions in the legislation. Electronic Filing Electronic filing is required of persons who file at least 250 returns (including information returns). This legislation requires electronic filing for financial institutions regardless of whether the institution provides 250 returns, which would generally be relevant to foreign financial institutions. Trusts The legislation would further restrict foreign trusts by treating the grantor as the owner if there is a future contingency for a U.S. beneficiary or an agreement the grantor is involved in that might provide for a U.S. beneficiary. It also places the burden of proof on the grantor, treats a loan or use of property without appropriate compensation as a benefit, and requires information reporting. Treat Equity Swaps as Dividends This provision addresses the problem of disguising dividends that are subject to taxation as interest that is not. This provision, which would generally treat equity swaps as dividends, would raise $1.1 billion for FY2011-FY2020 according to the President's proposals. Economic Substance Doctrine: The Patient Protection and Affordable Care Act, P.L. 111-148. The economic substance doctrine was adopted in the health reform legislation, P.L. 111-148 . This provision, although general in nature, is relevant to international tax evasion and avoidance. Firms that enter into tax savings arrangements that are found not to have economic substance can have their tax benefits disallowed by the courts under what has become known as the economic substance doctrine. The doctrine is sometimes interpreted differently by different courts, and recent legislative proposals have sought to make the doctrine more uniform through statute. Generally, this provision requires a transaction to meet both an objective test (profit was made) and a subjective test (profit was intended). Penalties are also imposed. Supporters argue that the stricter test will not only reduce tax avoidance but also make treatment more consistent across the courts. Some tax attorneys are concerned that more specific rules might provide a roadmap to structuring arrangements that will pass the test. P.L. 111-226 On May 20, 2010, the Ways and Means Committee Chairman Levin and Senate Finance Committee Baucus released a plan for combining Senate and House proposals for extending temporary tax benefits and providing for spending increases. Among the revenue raisers were several foreign provisions largely relating to the foreign tax credit, which were developed jointly with the Treasury Department. Some are also included in the President's 2011 budget proposals. They would raise $14.451 billion over 10 years. These provisions were adopted as part of H.R. 4213 on May 28, 2010. Some of these issues arise from the overall limit on the foreign tax credit, which allows aggregate foreign taxes paid abroad to be credited against U.S. tax on aggregate foreign earnings. Under these rules, firms are either in excess credit positions (they have foreign taxes that cannot be used because aggregate foreign taxes exceed aggregate U.S. tax on foreign source income) or in an excess limit position (they do not have enough foreign taxes to offset U.S. tax on foreign source income). In the former case, any technique that increases the amount of their income that is considered foreign source reduces overall tax because it increases the limit on foreign tax credits; in the latter case, any technique that allows recognition of foreign taxes without the accompanying income reduces taxes. H.R. 4213 was not enacted, but a smaller spending bill using H.R. 1586 as a vehicle included most of the foreign provisions in H.R. 4213 . H.R. 1586 provided money to the states for education and Medicaid funding, with costs paid for in part by these foreign revisions. It was signed into law on August 10, 2010. The provisions are summarized below. Preventing Splitting Foreign Tax Credits from Income This provision addresses the issue of reverse hybrids and mechanisms that allow firms to recognize and take credits for foreign taxes paid without reporting the income that gave rise to the foreign taxes (discussed earlier in this report), thus using those credits to offset tax on unrelated income. The proposal would implement a matching rule so that foreign tax credits would not be recognized until the income is taken into account. This proposal is estimated to raise $6.325 billion over 10 years. Denial of Foreign Tax credits for Covered Asset Acquisitions Taxpayers can acquire a firm by purchasing stock or by purchasing the underlying assets. In the latter case, assets are valued at current market value, which generally increases depreciation deductions. Certain U.S. tax rules allow a stock acquisition to be treated as an asset acquisition. Foreign governments may not apply a similar rule. As a result, depreciation deductions under the foreign rules are smaller than under the U.S. rules, and income and foreign taxes paid are higher. The excess of foreign taxes over U.S. taxes on this transaction can be used to offset U.S. tax on unrelated foreign income under the overall foreign tax credit limitation. Such an outcome can also occur when taxpayers acquire entities that are partnerships for U.S. purposes and corporations for foreign tax purposes. The provision prevents firms from obtaining credits for these excess taxes. This proposal is estimated to raise $4.025 billion over 10 years. Separate Foreign Tax Credit Limit for Items Resourced Under Treaties Current tax treaties provide that some income that would normally be considered U.S. source income can be resourced in foreign countries. For example, interest paid on U.S. securities to a firm's foreign subsidiary would normally be U.S. source income, but under a treaty may be sourced in the foreign country. The foreign country may tax net interest (interest income less interest paid), but the entire gross interest payment would be considered foreign source and eligible for offsetting foreign tax credits. This increase in foreign source income could, absent other provisions, lead to tax reductions from excess foreign taxes on other income. Current law places this operation in a separate foreign tax credit basket when the foreign firm is a subsidiary of a U.S. firm incorporated abroad. This provision extends the treatment to branch operations and disregarded entities (that are treated the same as branches under check-the-box rules). The provision would apply to taxable years beginning after the date of enactment. This proposal is estimated to raise $253 million over 10 years. Limitation on the Use of Section 956 (the "Hopscotch" Rule) The hopscotch rules issue arises from the combination of two different tax provisions. The first is the treatment of dividends from foreign subsidiaries when there are multiple tiers of these subsidiaries. For example, a U.S. parent might have a subsidiary (tier 1), which in turn has a subsidiary (tier 2). If a tier 2 firm wants to pay a dividend to the parent, it would first be paid to the tier 1 subsidiary, which would in turn pay it to the parent. The foreign tax credit allowed would be a blend of the tax rate in the tier one subsidiary and the tier 2 subsidiary. For example, if one-half of the income of the tier 1 subsidiary was its own and the tax rate was 10% and one-half was from the payment from the tier 2 firm with a 50% tax rate, and dividend paid by the tier 1 subsidiary to the U.S. parent would have a 30% rate. These deemed taxes paid could be used for foreign tax credits against any U.S. tax on foreign source income. The second provision is Section 956, which was designed to prevent firms from returning income to the U.S. parent without paying tax, but using methods such as lending to the parent or buying property from the parent. A payment made in this fashion is construed as a dividend. Therefore, if the tier 2 subsidiary made a transaction that fell into the Section 956 rules, it could "hopscotch" over the tier 1 subsidiary and receive a full 50% tax rate: two-thirds larger than the 30% rate allowed under the blended credit rule. This provision preserves the blended rate in the case of Section 956 transactions. This proposal is estimated to raise $1.010 billion over 10 years. Special Rule for Certain Redemptions by Foreign Subsidiaries This issue relates to circumstances where a foreign multinational company owns a U.S. firm, which in turn owns a foreign subsidiary, and the foreign subsidiary purchases stock in the U.S. firm from the foreign multinational with cash. The cash payment can be considered a direct dividend payment to the foreign multinational up to the earnings and profits of the foreign subsidiary and thus bypasses the U.S. tax system. (If earnings and profits of the subsidiary are exhausted the payment comes from earnings and profits of the U.S. company and are subject to dividend withholding taxes unless exempted by treaty.) The earnings and profits of the foreign subsidiary are reduced by the amount of the payment so that they are not available for future taxation. If the foreign subsidiary had paid a dividend directly to the U.S. parent, it would have been subject to tax at the firm level and to a withholding tax on the dividend (unless exempted by treaty). This provision would not allow earnings and profits of the foreign subsidiary to be taken into account if more than 50% of the dividend would bypass the U.S. tax system. It is estimated to raise $255 million over 10 years. Modification of Affiliation Rules for Allocating Interest Expense Foreign tax credits are limited to the U.S. tax that would be due on foreign source income if taxed in the United States. In determining foreign source income, a share of the interest paid by the U.S. parent and related U.S. affiliates is assigned to foreign income based on the share of total assets that are foreign. The more interest that is assigned to foreign sources, the smaller the foreign source income and the lower the foreign tax credit limit. Although the affiliate rules generally exclude foreign corporations, a special provision applies to foreign affiliates that are 80% owned and where 50% of earnings are effectively connected to U.S. business to prevent firms from hiding their interest in these types of affiliates. If the effectively connected earnings are greater than 80%, all interest and assets are taken into account. If the effectively connected earnings are between 50% and 80%, only the effectively connected assets and earnings are included. This change provides that all assets and interest are included as long as effectively connected earnings are 50% or more. This proposal is estimated to raise $405 million over 10 years. Repeal of 80/20 Rules Under current law, dividends and interest paid by a domestic corporation are generally U.S. source income and subject to gross basis withholding if paid to a foreign person. (As discussed earlier in this report, portfolio interest and bank deposit interest paid to foreigners is exempt.) Interest and dividends paid by a firm with a least 80% of its gross income foreign source and due to an active foreign business are not subject to withholding. This interest can also increase foreign source income and the foreign tax credit limit. The determination of eligibility is made during the previous three-year period. The provision repeals the 80/20 company rules (and also the 80/20 rules for resident alien individuals). It grandfathers existing 80/20 companies if they also meet a new test (that combines the company with its existing subsidiaries) and if it does not add a new substantial line of business. It also excludes payment of interest on existing obligations. This provision is estimated to raise $153 million over 10 years. Technical Correction to the HIRE Act The provision makes a technical correction to the foreign compliance provisions of the Hiring Incentives to Restore Employment Act ( P.L. 111-147 ) to clarify the statute of limitations. Summary of Legislative Proposals This section summarizes current legislative proposals that are designed to address or have consequences for international tax evasion and avoidance. American Jobs and Closing Loopholes Act (H.R. 4213, 111th Congress) As noted above, most foreign provisions in H.R. 4213 were included in the act, P.L. 111-226 . Below are two provisions, one specifically a foreign provision and one related to foreign tax issues, that were not included. Source Rules on Guarantees Dividends and interest are generally sourced depending on the residence of the payor, whereas payments for services are sourced to the country where the service is performed. The treatment of guarantee fees is unclear, depending on whether compared to interest or services. Sourcing these payments like services allows U.S. subsidiaries of foreign firms to make deductible payments that reduce U.S. income without paying the withholding tax (as they would with interest). This provision treats these fees the same as interest: sourced to the residence of the payor. Payments by foreign persons are also U.S. source if allocable to income effectively connected with U.S. business. Treasury is to identify other transactions that are in the nature of guarantees. This proposal is estimated to raise $2.025 billion over 10 years. Boot-Within-Gain Revisions The boot-within-gain revisions are generally applicable to domestic as well as foreign activities but have implications for international transactions. When a person or firm sells stock and uses the proceeds to purchase other stocks, capital gain is recognized to the extent that the sales price of the stock exceeds the basis of that stock (typically what was originally paid for it). In general, a gain is not recognized in exchanges of stock in corporate reorganizations. If the exchange includes cash or property ( boot ), gain is recognized to the extent of the boot. If the boot is more than the gain, all of the boot will not be taxed. However, if the boot is considered equivalent to a dividend, it will be taxed in full. One of the rules that allows the payment not to be considered as a dividend is a termination of interest (liquidation). Check-the-box rules permit a transaction to be considered a liquidation for U.S. purposes (i.e., a disregarded entity) but not for foreign purposes. Thus, one foreign subsidiary of a U.S. firm can pay cash to the U.S. parent for stock in another foreign subsidiary of the U.S. firm without the transactions being viewed as a dividend repatriation, thereby potentially reducing U.S. tax. In addition, two U.S. subsidiaries of a foreign parent can engage in a similar transaction without generating a U.S. withholding tax on the dividend. If the foreign parent does not have a treaty eliminating the tax, this treatment reduces U.S. taxes. This revision would treat payments in these cases as a dividend. This provision was included in the President's budget proposals and estimated to raise $3.6 billion from FY2015 to FY2024. President Obama's International Tax Proposals128 President Obama's international proposals include several proposals that relate to multinational corporations: allocation of deductions and credits, a restriction on use of foreign tax credits when associated income is not recognized, and a restriction on check-the-box. They also include proposals addressing individual tax evasion. International provisions have been presented in each budget. One provision in the first (FY2010) budget ending check-the-box was dropped in subsequent budgets. Otherwise, provisions were continued and expanded over time. Overall, these provisions are projected to raise $276 billion for FY2015-FY2024 as presented in the current FY2015 budget. The provisions are discussed in the order in which they are presented unless otherwise noted, because revenue effects depend on that order. The budget also proposes additional resources for the IRS for international enforcement. In addition to budget proposals, President Obama presented a separate corporate tax reform proposal that included international provisions. This proposal included five elements: the allocation of interest for deferred income (discussed below), a tax on excess intangibles (discussed below), a minimum tax on foreign source income in low tax countries, disallowing a deduction for the cost of moving abroad, and providing a 20% credit for costs of moving an operation from abroad to the United States. Some of the President's proposals have been adopted. Two provisions relating to foreign tax credits were enacted in P.L. 111-226 (foreign tax credits and reverse hybrids, and the 80/20 rule). The HIRE Act ( P.L. 111-147 ) included a provision treating equity swaps and other dividend equivalent payments as dividends; the other foreign compliance provisions were, in most cases, also in the President's. These provisions are not listed below. The remainder of this section summarizes provisions in the President's budget proposals. Provisions Affecting Multinational Corporations and Other Tax Law Changes Hybrid Entities and Check-the-Box (FY2010 Budget Only) The most significant provision in the FY2010 budget, based on revenue gain, is a revision directed at hybrid entities and check-the-box. This provision requires that a corporation cannot disregard a subsidiary corporation unless it is incorporated in the same jurisdiction. This rule does not apply to the parent and its first level subsidiary. Thus, a U.S. parent with a subsidiary in a low tax country could treat that subsidiary as a branch (disregard it as a separate entity). The subsidiary in the low-tax country, however, could not treat its own high-tax country subsidiary as a disregarded entity. This provision was included in the FY2010 proposals, where it was projected to raise $86.5 billion for FY2010-FY2019. It was not included in later budgets. Allocation of Deductions and Credits Two of these proposals would allocate deductions and credits, so as to deny those benefits until income is repatriated. This approach was included in a tax reform bill introduced by Chairman Rangel of the Ways and Means Committee in 2007 ( H.R. 3970 ). A portion of overall deductions, such as interest, that reflect the share of foreign deferred income, would be disallowed until the income is repatriated. The foreign tax credit allocation rule would allow credits for the share of foreign taxes paid that is equal to the share of foreign source income repatriated, a provision the discussion of the proposals refers to as pooling. Disallowed deductions and credits would be carried forward. The proposal specifically excludes deductions for research and experimentation from the allocation rule. The FY2011 and subsequent budget proposals were narrower and limited to interest deductions; they also included a different set of allocation rules. The revenue gain for FY2015-FY2024 was $43.2 billion for the limit on interest deductions and $74.6 billion for the foreign tax credit pooling. Taxing Excess Returns on Intangibles This provision, which did not appear in the 2010 budget proposal but appeared in subsequent budgets, would treat excess returns in a low-tax country on intangibles transferred to it from the United States as Subpart F income (subject to current taxation) and in a separate foreign tax credit basket (so that other foreign taxes could not offset U.S. taxes due on the excess returns). This provision is projected to raise $26.0 billion for FY2015-FY2024. Transfer Pricing of Intangibles The proposal would clarify several rules that are relevant to the transfer of intangibles. First, it would clarify that intangibles include workforce in place, goodwill, and going concern value. Second, it would allow the IRS commission to aggregate intangibles if that leads to a more appropriate value. Finally, it would clarify that intangibles are valued at their highest and best as it would be by a willing buyer and seller with reasonable knowledge of the relevant facts. This provision is projected to raise $2.7 billion for FY2015-FY2024. Disallow Deductions for Reinsurance Premiums to Foreign Affiliates U.S. insurance companies can reduce taxes by purchasing reinsurance from foreign affiliates, with a deduction of the premiums by the U.S. firm but no tax on the income of the foreign affiliate. This provision would disallow these deductions for reinsurance premiums when they are more than 50% of the basic premiums received. This provision was not in the FY2010 budget; it is projected to raise $7.5 billion in revenue for FY2015-FY2024. Restrict Deductions for Excessive Interest of Members of Financial Reporting Groups The proposal would allocate interest deductions among related firms that consolidate financial reporting, based on the share of earnings of each firm. This provision is projected to raise $48.6 billion for FY2015-FY2024. Prevent Repatriation of Earnings in Cross-Border Transactions (Boot Within Gain) The plan includes a proposal to require that distributions that are characterized as reorganizations but are in the nature of a dividend repatriation are subject to tax. This issue arises within the framework of an exchange of stock on the one hand for stock and property (called boot ) and rules that provide the minimum of gain be based on the boot or overall gain. This proposal was projected to raise $297 million from FY2010 to FY2019. The 2011 budget includes a broader provision regarding to boot within gain that covers domestic transactions as well, and such a provision is also included in H.R. 4213 . Foreign Tax Credits for Dual-Capacity Taxpayers This provision would restrict foreign tax credits for taxes paid where there is an income tax that is paid in part to receive a benefit (i.e., the firm is paying a tax in a dual capacity) to the amount that would be paid if the taxpayer were not a dual-capacity taxpayer. This provision typically relates to taxes being substituted for royalties in oil-producing countries; there is a provision that it will not abrogate any existing treaties. This provision was projected to raise $10.4 billion for FY2015-FY2024. Tax Gain on the Sale of a Partnership Interest on Look-Through Basis This provision, first appearing in the FY2013 budget outline, would require gain on sale of a partnership interest to be treated as income effectively connected to U.S. business (and thus taxable) to the extent of the transferor partner's effective connected income. It is projected to raise $2.8 billion for FY2015-FY2024. Prevent Use of Leveraged Distributions from Foreign Related Corporations to Avoid Dividend Treatment This provision, first appearing in the FY2013 budget outline, would address a mechanism to avoid treatment of a payment as a dividend (but rather a reduction in basis) when a foreign corporation funds the payment from a separate related foreign corporation. It is projected to raise $3.5 billion for FY2015-FY2024. Extend Section 338(h)(16) to Certain Asset Acquisitions This provision, first appearing in the FY2013 budget outline, extends rules limiting the ability of firms to increase foreign tax credits for certain asset acquisitions. It is projected to raise $1 billion for FY2015-FY2024. Remove Foreign Taxes from a Section 902 Corporation's Foreign Tax Credit Pool When Earnings Are Eliminated This provision first appears in the FY2013 budget outline. Current law allows a foreign tax credit for dividends paid or deemed paid or certain transactions. This provision reduces foreign tax credits for any action that reduces earnings and profits, since a reduction in earnings and profits will ultimately reduce the potential amount of dividends. It is projected to raise $0.4 billion for FY2015-FY2024. Create a New Category of Subpart F Income for Transactions Involving Digital Goods or Services The proposal would create a new category of Subpart F income, foreign base company digital income. It would include income of a controlled foreign company (CFC) from the lease or sale of a digital copyrighted article or from the provision of a digital service developed by a related party. It is projected to raise $11.7 billion for FY2015-FY2024. Present Avoidance of Foreign Base Company Sales Income Through Manufacturing Service Arrangements Among income included in Subpart F and subject to current taxation is foreign base company sales income, income from a purchase and resale by a related corporation of property manufactured outside the CFC's jurisdiction and sold outside that jurisdiction. This provision expands that treatment to property manufactured outside of, but on behalf of, the firm. This provision is projected to raise $24.6 billion from FY2015-FY2024. Restrict the Use of Hybrid Arrangements That Create Stateless Income The proposal would disallow deductions for interest and royalty payments made to related parties under hybrid arrangements in which the income is not taxed in the other jurisdiction. It is projected to raise $0.9 billion in FY2015-FY2024. Limit the Application of Exceptions Under Subpart F for Certain Transactions That Use Reverse Hybrids to Create Stateless Income Subpart F, which imposes tax on easily manipulated income, has a same-country exception so that it generally does not apply to payments between related firms organized in the same country under the presumption that there is a tax payment and deduction at the same tax rate. However, in the case of a foreign reverse hybrid, where the firm is viewed as a corporation by the United States but a partnership by the foreign country, the U.S. corporation is not seen as a distinct entity and not subject to tax. The proposal would provide that the exception to Subpart F not apply in these cases. This provision is projected to raise $1.3 billion for FY2025-FY2024. Limit the Ability of Domestic Entities to Expatriate This provision would allow U.S. firms that merge with other firms and establish a foreign headquarters (invert) to be treated as U.S. firms as long as the U.S. firm's shareholders retain more that 50% ownership (the current level is 80%). The proposal would also disallow inversions if the new firm has substantial business activities in the United States and is primarily managed and controlled in the United States. In addition, the proposal would extend the inversion rules now covering corporations and partnerships with a trade or business to all partnerships. This provision is projected to raise $17 billion for FY2015-FY2024. Provisions Relating to Individual Tax Evasion, Not Enacted in the HIRE Act The President's proposals included a number of provisions relating to individual evasion, including reporting of information, withholding, and various penalties. Overall these provisions were projected to raise revenues of $8.7 billion from FY2010 to FY2019 in the FY2010 budget and $5.4 billion from FY2011-FY2021 in the FY2011 budget. Most of these provisions, or some version of them, were adopted in the HIRE Act, including increased reporting on foreign accounts (withholding and information on U.S. beneficial owners). The remaining provisions are summarized below. These provisions were not in subsequent budgets. Reporting on Transfers U.S. persons' financial intermediaries and qualified intermediaries would be required to report financial transfers. U.S. persons and qualified intermediaries would be required to report the formation or establishment of a foreign entity. The floor is $10,000 in the FY2010 budget proposal, but $50,000 in the FY2011 proposal. Additional Information Reported on Tax Returns: Lower Floor The HIRE Act required individuals who are required to file an FBAR (Foreign Bank and Financial Account Reports) to report this information on the tax return if the amount in the account is $50,000 or more, a provision similar to the FY2011 budget proposal. The FY2010 proposal had a lower floor of $10,000. Burden of Proof and Presumption Provisions The FY2010 proposal contains a number of provisions that provide evidentiary presumptions (shifts in the burden of proof) in civil and administrative cases. If an individual has a foreign account it is presumed to be large enough to require filing an FBAR. If a person has an account of over $200,000 it is presumed that failure to file is willful (which opens the possibility of criminal as well as higher civil penalties). If a payment subject to withholding is made to a foreign person on an FDAP, the presumption is that that person is not eligible for withholding. Statute of Limitation: No Floor The statute of limitations for cross-border transactions is extended from three to six years with no floor in the FY2010 budget proposal; in the HIRE Act and the FY2011 budget, it applies to instances where more than $5,000 of income is omitted. The Wyden-Gregg and Wyden-Coats Tax Reform Bills Major revisions to corporate international tax rules are also included in S. 3018 , a general tax reform act introduced by Senators Wyden and Gregg in the 111 th Congress, and a similar bill, S. 727 , introduced by Senators Wyden and Coats in the 112 th Congress. As part of revenue to finance a lower tax rate, this bill eliminates deferral of tax on foreign source income (taxes income currently) which should largely eliminate any benefits of profit shifting, since income would be taxed in any case. It also imposes a per country foreign tax credit limit. Chairman Camp's Territorial Tax Proposal (Included in H.R. 1, 113th Congress) and Senator Enzi's Bill (S. 2091, 112th Congress) These proposals would shift from the current system of deferral to a territorial tax, where no tax would be imposed on active dividends of foreign subsidiaries. Moving to a territorial tax increases the benefits for profit shifting to low-tax jurisdictions because there is never an issue of subsequent taxation, as is the case with deferral. The Camp proposal would combine a territorial tax with a lower corporate tax rate, whereas S. 2091 is a stand-alone territorial tax provision. Both contain provisions to limit the scope of profit shifting, although it is not clear how effective they would be. The Camp proposal would limit the amount of borrowing by the U.S. parent and impose one of three anti-base-erosion options, two directed at intangible income. Option A is similar to a proposal made by President Obama in his budget proposals that would tax excess earnings on intangibles (in excess of 150% of costs) in low-tax jurisdictions as Subpart F. The inclusion would be phased out between a 10% and a 15% rate. Option B would tax income that is subject to an effective foreign tax rate below 10% unless it qualifies for a home country exception. The home country exception applies when a firm conducts an active trade or business in the home country, has a fixed place of business, and serves the local market. Option C would tax all foreign income from intangibles (whether earnings by the foreign subsidiary or royalty payments) but allow a deduction for 40%, resulting in a tax rate of 15% at a 25% statutory tax rate. Option C was adopted for the final tax reform bill, H.R. 1 , which also lowered the U.S. corporate tax rate to 25%. S. 2091 does not have provisions restricting borrowing. Its anti-base-erosion provisions are a version of Option B in the Camp proposal along with a version of the first part of Option C would be included. Income in countries with tax rates of half or less than the U.S. rate (17.5%) would be subject to tax. However, operations that conduct an active business, with employees and officers that contribute substantially, would be excepted except to the extent the income is intangible income of the CFC. The CFC's intangible income would be Subpart F income. These rules provide more scope for exemption as compared to the rules in the Discussion Draft which would require exempt income to carry out activities serving the home country market. The bill also includes the first part of Option C, allowing a 17.5% tax rate on intangible income (such as royalties) earned by a domestic corporation. Intangible income would be placed in a separate foreign tax credit basket. Stop Tax Haven Abuse Act132 This bill was introduced in the 111 th Congress by Senator Carl Levin ( S. 506 ) and by Representative Lloyd Doggett ( H.R. 1265 ). Some of the provisions or related provisions in the bills were included in the HIRE Act. Provisions in the Stop Tax Haven Abuse that are addressed in the HIRE Act ( P.L. 111-147 ) include burden of proof (Section 101), statute of limitations (Section 104), information reporting on U.S. beneficiaries of foreign accounts (Section 105), trust abuses (Section 106), treatment of dividend equivalents (Section 108), and passive foreign investment corporations (PFICs; Section 109). In addition, the health reform legislation, P.L. 111-148 , included the economic substance doctrine. The original bill's provisions are summarized below, followed by summaries of bills from the 112 th , 113 th , and 114 th Congresses. 111th Congress (S. 506 and H.R. 1245) Section 101 would provide a burden of proof change. It would require the taxpayer involved in offshore secrecy jurisdictions to produce evidence, based on the presumption that the taxpayer is in control, that funds or other property are not taxable income, and that the account is not large enough to trigger a reporting threshold. (The bill also addresses securities law issues.) This section also contains the list of 34 tax haven jurisdictions taken from IRS court filings, and provides Treasury with the authority to add or remove jurisdictions. An important standard for being excluded from the list is an effective, and automatic, exchange of information. Section 102 would expand the provisions in the Patriot Act of 2001, which gave Treasury the authority to require domestic financial institutions to take special measures (including providing information and prohibiting transactions) with respect to foreign jurisdictions relating to money laundering to cover instances of impeding U.S. tax enforcement. Section 103 would require a publicly traded corporation or one with gross assets of $50 million or more whose management and control occurs primarily in the United States to be treated as a U.S. company. This provision is directed at shell corporations, including hedge funds and investment management businesses, set up in jurisdictions such as the Cayman Islands. It would not apply to subsidiaries of U.S. corporations simply because some decisions are made at the parent headquarters, but would still apply to shell subsidiaries. Section 104 would extend the limit on audit periods from three years to six years for offshore jurisdictions with secrecy laws. Section 105 would require U.S. financial institutions and brokers to file 1099 forms for any foreign account when they know the beneficial owner is a U.S. person. It would also require these institutions to report to the IRS when they set up offshore accounts and entities. Section 106 addresses potential trust abuses. Foreign trusts have employed liaisons called trust protectors as a way for shielding U.S. taxpayers exercising control over the trust; the legislation provides that any powers held by a trust protector would be attributed to the trust grantor. It also provides that any U.S. person benefitting from a trust is treated as a beneficiary even if not named in the trust instrument, that future or contingent beneficiaries are treated as current ones, and that loans of assets and property as well as cash or security are treated as trust distributions. Section 107 addresses legal opinions, stating that an activity is more likely than not to survive challenge by the IRS, which are used to shield taxpayers from large penalties. The legislation provides that a legal opinion of this nature would not apply in an offshore secrecy jurisdiction, providing exceptions to protect legitimate operations. Section 108 would prevent dividend equivalents from escaping the dividend withholding tax. Section 109 addresses reporting by PFICs by codifying proposed regulations regarding PFIC reporting by direct or indirect shareholders who are U.S. persons, and also requiring reporting by U.S. persons who directly or indirectly cause the PFIC to be formed or sent or receive assets. Some of the sections of title II of the bill affect securities law rather than tax issues. Some provisions are tax-related, however. Section 204 addresses an IRS John Doe summons where the IRS does not know the names of taxpayers and now must ask courts for permission to serve the summons. This section provides that in any case involving offshore secret accounts, the court is to presume tax compliance is at issue, to relieve the IRS of the obligation when the only records sought are U.S. bank records, and to allow them to issue John Doe summonses for large investigative projects without addressing each set of summonses separately. Section 205 would address issues relating to the Foreign Bank and Financial Account Report (FBAR) requirement for a person controlling a foreign financial account of over $10,000. This is an additional rule from the requirement to report this information on the tax return, and IRS is now charged with enforcing this FBAR requirement. This provision would amend tax disclosure rules to more easily permit IRS to use tax data, change the penalty to refer to the highest average in the account during a year (and not on a specific day), and allow IRS access to information on Suspicious Activity Reports (SAR). The last title of the bill relates to abusive tax shelters, and contains several provisions. It would strengthen penalties, prohibit the patenting of tax shelters, require development of an examination procedure so that bank regulators could detect questionable tax activities, disallow fees contingent on tax savings for tax shelters, remove communication barriers between enforcement agencies, codify regulations and make it clear that prohibition of disclosure by tax preparers does not prevent congressional subpoenas, and provide standards for tax shelter opinion letters. It would also codify the economic substance doctrine, to require both an objective and subjective test for economic substance. 112th Congress (S. 1346 and H.R. 2669) Section 101 would extend the sanctions for money laundering to impeding tax enforcement (similar to previous provision in Section 102). Section 102 would strengthen and clarify FATCA (Foreign Account Tax Compliance Act, adopted as part of the HIRE Act) in a variety of ways, including additional burden of proof requirements, expand the types of accounts that need to be disclosed, and other revisions. Section 103 is similar to Section 103 in the previous bill. Section 104 is similar to Section 105 of the previous bill. Section 105 would require credit default swap (CDS) payments sent from the United States to be sourced as U.S. income and subject to tax. Section 106 would treat funds deposited in U.S. accounts as U.S. source income subject to tax. Some of the sections in the next title do not relate to taxes. Those that do include Section 201 would require multinational corporations to provide the Securities and Exchange Commission (SEC) with country by country information. Section 202 would provide a penalty up to $1 million for hiding offshore stock holdings. Section 205 is similar to Section 204 in the previous bill. Section 206 is similar to Section 205 in the previous bill. The final title of the bill relates to abusive tax shelters and is similar to provisions in the previous legislation. 113th Congress (H.R. 1554, S. 1533, and H.R. 3666) H.R. 1554 , introduced by Representative Doggett, is similar to the Stop Tax Haven Abuse Act in the 112 th Congress. S. 1533 , introduced by Senator Levin, and H.R. 3666 , introduced by Representatives DeLauro and Doggett, differ in some respects from H.R. 1554 . The first two major sections of these bills are the same as the previous bill (Sections 101-105) and Sections 201, 202, 205, and 206. The final section of the bills, entitled "Ending Corporate Offshore Tax Avoidance," contains substantive changes in the treatment of multinationals, similar to some of those that have been included in the President's proposals (discussed above). They include the allocation of expenses and foreign tax credit pooling, treatment of income from intangibles to low-taxed affiliates as Subpart F income, limitations on income shifting through intangible property transfers, a repeal of check-the-box rules for certain foreign entities and CFC look-through rules, and allocations of interest deductions. 114th Congress Representative Doggett and Senator Whitehouse announced introduction of a Stop Tax Haven Abuse Act in January 2014. The bill is similar to S. 1533 and H.R. 3666 , although the interest allocation is broader and an additional section introduces the changes in treatment of inversions in the President's budget (such as treating any merger with a foreign firm in which U.S. shareholders maintain majority interests as a U.S. firm). Finance Committee Proposal, 111th Congress A draft of this proposal was circulated on March 12, 2009, and has been discussed by Sullivan. Several of its proposals were included in the HIRE Act (statute of limitations, requiring FBAR information to be filed with the tax return, increasing trust penalties to a minimum of $10,000, expanding the definition of distributions, and increasing the penalties for underpayments associated with foreign accounts). It would require entities transferring funds offshore to report to the IRS the amount, destination, and account information. Publicly traded companies would be excluded. The statute of limitations would be extended from three to six years for tax returns that report or should have reported certain international transactions. It would require the foreign bank and financial account report (FBAR) to be filed with the tax returns. Tax preparers would be required to ask due diligence questions to determine whether an FBAR should be filed. The foreign trust failure-to-file penalty would be increased to a $10,000 minimum and the definition of property considered to be a distribution for foreign trusts would be expanded, and would include artwork and jewelry. Fines and penalties on payments attributable to certain offshore transactions would be doubled. A provision in the Heroes Earnings Assistance and Relief Tax Act of 2008 ( P.L. 110-245 ) would be modified to require offshore entities that hire workers under a government contract be treated as American employers by establishing a rule that any individual who performs at least 100 hours of service a month is an employee and not an independent contractor. Fraud Enforcement and Recovery Act, S. 386, 111th Congress This proposal, introduced by Chairman Leahy of the Senate Judiciary Committee, included a provision to apply the international money laundering statute to tax evasion, and set aside funds for the Justice Department to pursue financial fraud, including funds to the tax division. It had been passed by the Senate. The House version of the bill, H.R. 1748 , and the enacted law, P.L. 111-21 , did not include the tax provision but did include additional funds. Incorporation Transparency and Law Enforcement Assistance Act, S. 1483, H.R. 3416, 112th Congress This proposal (introduced as S. 569 in the 111 th Congress) would establish uniform requirements for states relating to the disclosure of beneficial owners of corporations and limited liability companies, including updating and maintenance of information after terminating, imposing additional requirements for those not U.S. citizens or permanent residents, providing penalties, and updating of such disclosures. It also authorizes a study of requirements of partnerships, trusts, and other legal entities. This bill is relevant, among other things, to issues raised about the use of states as international tax havens. Additional Proposals in the 113th Congress A number of bills introduced in the 113 th Congress would have made a variety of changes in the tax law affecting the treatment of foreign source income. H.R. 694 (Representative Schakowsky) and S. 250 (Senator Sanders) would have made fundamental changes similar in some respects to the Wyden-Coats bill: treat firms managed and controlled in the United States as domestic firms, repeal deferral, impose a per country foreign tax credit limit, and limit credits for dual capacity tax payers. H.R. 3793 (Representative Maffei) and S. 1844 (Senator Shaheen) would adopt the management and control provision. H.R. 1555 (Representative Doggett) also would adopt this provision, as well as repeal the look-through rule for royalties and certain intangible income and adopt the boot-within-gain provision discussed above. After the problem of firms inverting via merger became prominent, bills that incorporated the President's proposal to treat as domestic firms mergers with U.S. firms and other provisions included H.R. 4679 (Representative Levin), S. 2360 (Senator Levin), H.R. 4985 (Representative Van Hollen), and S. 2489 (Senator Walsh). H.R. 5338 also included the management and control provision, and S. 2489 also included allocation of income provisions. S. 268 (Senator Levin) is a bill that includes many of the provisions of the various Stop Tax Havens Abuse legislation but not the fundamental law changes of the Sanders bill ( S. 250 ).

Addressing tax evasion and avoidance through use of tax havens has been the subject of a number of proposals in Congress and by the President. Actions by the Organization for Economic Cooperation and Development (OECD) and the G-20 industrialized nations also have addressed this issue. In the 111th Congress, the HIRE Act (P.L. 111-147) included several anti-evasion provisions, and P.L. 111-226 included foreign tax credit provisions directed at perceived abuses by U.S. multinationals. Numerous legislative proposals to address both individual tax evasion and corporate tax avoidance have been advanced. Multinational firms can artificially shift profits from high-tax to low-tax jurisdictions using a variety of techniques, such as shifting debt to high-tax jurisdictions. Because tax on the income of foreign subsidiaries (except for certain passive income) is deferred until income is repatriated (paid to the U.S. parent as a dividend), this income can avoid current U.S. taxes, perhaps indefinitely. The taxation of passive income (called Subpart F income) has been reduced, perhaps significantly, through the use of hybrid entities that are treated differently in different jurisdictions. The use of hybrid entities was greatly expanded by a new regulation (termed check-the-box) introduced in the late 1990s that had unintended consequences for foreign firms. In addition, earnings from income that is taxed often can be shielded by foreign tax credits on other income. On average, very little tax is paid on the foreign source income of U.S. firms. Ample evidence of a significant amount of profit shifting exists, but the revenue cost estimates vary substantially. Evidence also indicates a significant increase in corporate profit shifting over the past several years. Recent estimates suggest losses that may approach, or even exceed, $100 billion per year. Individuals can evade taxes on passive income, such as interest, dividends, and capital gains, by not reporting income earned abroad. In addition, because interest paid to foreign recipients is not taxed, individuals can evade taxes on U.S. source income by setting up shell corporations and trusts in foreign haven countries to channel funds into foreign jurisdictions. There is no general third-party reporting of income as is the case for ordinary passive income earned domestically; the Internal Revenue Service (IRS) relies on qualified intermediaries (QIs). In the past, these institutions certified nationality without revealing the beneficial owners. Estimates of the cost of individual evasion have ranged from $40 billion to $70 billion. The Foreign Account Tax Compliance Act (FATCA; included in the HIRE Act, P.L. 111-147) introduced required information reporting by foreign financial intermediaries and withholding of tax if information is not provided. These provisions became effective only recently, and their consequences are not yet known. Most provisions to address profit shifting by multinational firms would involve changing the tax law: repealing or limiting deferral, limiting the ability of the foreign tax credit to offset income, addressing check-the-box, or even formula apportionment. President Obama's proposals include a proposal to disallow overall deductions and foreign tax credits for deferred income, along with a number of other restrictions. Changes in the law or anti-abuse provisions have also been introduced in broader tax reform proposals. Provisions to address individual evasion include increased information reporting and provisions to increase enforcement, such as shifting the burden of proof to the taxpayer, increased penalties, and increased resources. Individual tax evasion is the main target of the HIRE Act, the proposed Stop Tax Haven Abuse Act, and some other proposals.

Background The ADEA prohibits discrimination against workers over 40 years of age in compensation or with respect to employment "terms, conditions, or privileges." The act's legislative history contained a Statement of Managers, which suggested that the practice of coordinating retiree health plans with Medicare was not prohibited. In Erie County , however, the Third Circuit disregarded that evidence of congressional intent when it ruled that providing inferior benefits to Medicare-eligible retirees than to younger retired workers may be illegal age discrimination. It remanded the case for a trial court determination of whether the plan was saved by the equal-benefit or equal-cost provisions of the ADEA, which provide a "safe harbor" for employers who provide equal benefits to older and younger workers or who incur equal costs on behalf of each. In the Erie County case, a group of retirees who were over the age of 65 sued the county claiming that their retiree health program was inferior to the program offered to younger retirees. Designed to supplement Medicare benefits, older retirees were offered an HMO plan that coordinated all health care services through a primary care physician. The county provided former employees who were not Medicare-eligible with a "hybrid point of service program" that combined the features of an HMO with a traditional indemnity plan. The district court granted partial summary judgment for the county, holding that the ADEA was not intended to apply to retirees such as plaintiffs, who based their age discrimination claim on disparities in health coverage arising from Medicare eligibility. In its reversal, the Third Circuit found that age discrimination had occurred since the medical benefits for older retirees were based solely on their eligibility for Medicare, and "Medicare eligibility follow[s] ineluctably upon attaining age 65." In reviewing the ADEA, the Third Circuit concluded that an age-based disparity in retiree health benefits is only lawful if the program falls within a "safe harbor" established by the "equal benefit/equal cost" standard. Both the legislative history of the ADEA and the "plain language" of the safe harbor provision indicated Congress's intent that the section apply when an employer reduces health benefits on the basis of Medicare eligibility. In other words, the County of Erie could only prevail if it established that the benefits offered to Medicare-eligible retirees were equal to those provided to younger retirees or that its costs for providing benefits to the two groups were equal. The Third Circuit remanded the case back to the trial court, which ultimately found that the county's plan was unlawful because: (1) older retirees were required to pay a greater percentage of their overall premium than were younger retirees; and (2) younger retirees were given the option between HMO coverage or indemnity coverage, while older retirees could only elect HMO coverage. For these reasons, the trial court concluded that older retirees were provided inferior benefits in violation of ADEA. The EEOC had initially supported the position adopted by the Third Circuit in Erie County , which the agency then incorporated in its "Compliance Manual" as part of its national enforcement policy on the ADEA. In 2001, however, after consulting various labor and employer groups, the EEOC rescinded its policy regarding employer-sponsored retiree health plans, announcing that it would study the issue further. The EEOC study demonstrated a considerable decline in the number of employers providing retiree health benefits in the decade preceding, due to higher health care coverage costs, the number of employees nearing retirement age, and changes in accounting rules for retiree health benefits. In addition, it found that "concern about the potential application of the ADEA to employer-sponsored retiree health benefits is adversely affecting the continued provision of this important retirement benefit." In other words, when faced with the prospect of equalizing benefits, many employers were choosing not to increase benefits for Medicare-eligible retirees, but instead to reduce benefits for younger retirees or to eliminate retiree benefits altogether. Indeed, the Erie County case resulted in a settlement in which benefits were reduced for younger retirees. Ultimately, the EEOC concluded that a reversal of policy was required in the "public interest" to protect retiree health coverage as a valuable benefit to older individuals, and, therefore, the agency proposed to amend the EEOC's ADEA regulations. The EEOC's Proposed Rule As proposed, the EEOC rule would exempt from ADEA requirements the alteration, reduction, or elimination of employer-sponsored retiree health benefits when retirees become eligible for Medicare or other comparable state retiree health benefits. The EEOC cited § 9 of the ADEA, which permits the EEOC to "establish such reasonable exemptions to and from any or all provision of [the act] as it may find necessary and proper in the public interest," as its authority for issuing the regulation. Noting that employers are not legally obligated to provide any retiree health benefits and arguing that the safe harbor provisions of the ADEA have become unworkable given the broad diversity of employer health plan options currently available, the EEOC indicated that the exemption provides a "necessary and proper" incentive to employers not to eliminate all retiree health benefits, nor to reduce the benefits of younger retirees to equal those provided to their Medicare-eligible counterparts. Legal Challenges to the Proposed Rule Implementation of the proposed rule, however, was delayed in 2005 by a federal district court in Philadelphia that initially found the rule in conflict with the Third Circuit decision in the Erie County case. In AARP v. EEOC , the court first ordered a permanent injunction against enforcing the rule, finding that it "is contrary to congressional intent and the plain language of the Age Discrimination in Employment Act." The EEOC, according to the court, has the power to issue rules, regulations and exemptions within ... explicit or implicit gaps that Congress left in the ADEA. In the case of the challenged exemption, however, the Third Circuit held that Congress did not allow for ambiguity with regard to the applicability of the ADEA to retiree health benefits. In other words, the court found that the EEOC was interpreting too broadly its powers to create exemptions to the ADEA. The EEOC filed an appeal with the Third Circuit. Meanwhile, the U.S. Supreme Court decided National Cable and Telecommunications Association v. Brand X Internet Services in 2005. The Justices there ruled that a federal court under the " Chevron doctrine" is required to defer to an agency's interpretation of law—even if its differs from the court's own views—if the particular statute is within the agency's administrative authority, if it is ambiguous on the point in contention, and if the agency's interpretation is "reasonable." In other words, the agency's interpretation of a statute is entitled to deference except where a court finds that the law in question is clear and unambiguous, leaving no gaps for the agency decision to fill. In view of Brand X , the EEOC moved the district court to reconsider whether prior judicial precedent foreclosed issuance of the proposed rule on retiree health benefits. Ultimately, the district court reversed its earlier decision, holding that the EEOC does, indeed, have the authority to issue the challenged regulation. ... Brand X makes it clear that where a court's holding states merely the 'best' interpretation of a statute, not the 'only permissible' interpretation, the court decision does not foreclose a later, differing agency interpretation.... Because the Third Circuit's opinion in Erie County did not hold that it was the only permissible interpretation of the ADEA, it cannot foreclose a contrary interpretation by the EEOC. Despite the decision to vacate its earlier judgment, the court left in place the injunction preventing implementation of the proposed EEOC rule pending the outcome of appeals that the parties filed with the Third Circuit. In 2007, the Third Circuit issued its ruling in AARP v. EEOC . Although the appellate court affirmed the district court's decision upholding the EEOC's retiree health benefit rule, the Third Circuit reached its decision on different legal grounds. Specifically, the court held that the proposed rule does fall within the EEOC's exemption authority under § 9. According to the court, because "the power to grant exemptions provides an agency with authority to permit certain actions at variance with the express provisions of the statute in question ... Congress made plain its intent to allow limited practices not otherwise permitted under the statute, so long as they are 'reasonable' and 'necessary and proper in the public interest.'" Finding that the retiree health benefit rule was a reasonable, necessary, and proper exercise of the EEOC's exemption authority under the ADEA, the court upheld the rule and lifted the injunction, allowing the final regulations to become effective on December 26, 2007, when the EEOC published them in the Federal Register . Although the American Association of Retired Persons (AARP) filed a petition with the Supreme Court requesting review of the Third Circuit's decision, the Court recently declined to review the case. The EEOC's Final Rule The EEOC's final rule contains a narrowly drawn exemption from the ADEA to permit the practice of coordinating employer-provided retiree health coverage with eligibility for Medicare. Specifically, employers may, without violating the ADEA, alter, reduce, or eliminate health benefits for retirees when the participant becomes eligible for Medicare or comparable state health benefits. The EEOC emphasizes that the rule is not intended to encourage employers to eliminate any retiree health benefits they may currently provide. The final regulations also include an appendix with questions and answers that provide the following specific guidance: The exemption does not mean that the ADEA does not apply to retirees, or that all forms of retiree health coverage are exempted. Only the specific practice of coordinating retiree health benefits with Medicare or a comparable state health plan is exempted from ADEA. Employers may offer to retirees "Medicare carve out plans" under which Medicare is primary and the employer plan secondary for retirees, but they may not offer such plans to active employees. The exemption also applies to dependent and/or spousal health benefits included as part of retirees' benefits, although these may be altered, reduced, or eliminated even when the retirees' are not. No other aspects of ADEA coverage or employment benefits other than retiree health benefits are affected by the exemption. The exemption applies to existing, as well as newly created, employee health benefit plans. The exemption does not apply to active employees over the age of Medicare (or state health plan) eligibility. Conclusion As noted above, the Supreme Court recently denied a request to review the Third Circuit's decision upholding the EEOC regulation. As a result, the EEOC's new retiree health benefit rule has survived legal challenge and remains in effect.

Under the Age Discrimination in Employment Act (ADEA), the Equal Employment Opportunity Commission (EEOC) has the authority to issue reasonable exemptions the Commission finds to be in the public interest. In 2004, the EEOC approved a narrowly drawn exemption to permit the practice of coordinating employer-provided retiree health coverage with eligibility for Medicare. However, the proposed regulation was challenged in court, and a permanent injunction blocking its implementation remained in effect for several years while the courts considered the issue. Recently, a federal appeals court upheld the EEOC's promulgation of the proposed rule and lifted the injunction, allowing the EEOC to publish the final rule, which became effective in December 2007. The final rule states that it is not a violation of the ADEA to alter, reduce, or eliminate health benefits for retirees when the participant becomes eligible for Medicare or comparable state health benefits. According to the EEOC, if employers were required to provide equal health benefits to both younger and older retirees, employers would be more likely to reduce benefits for younger retirees or eliminate benefits for all retirees than to increase benefits for older, Medicare-eligible retirees. Thus, the ADEA exemption is designed to eliminate any incentive for employers to cut retiree health benefits.

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

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

Introduction Federal financial regulation encompasses vastly diverse markets, participants, and regulators. As a result, regulators' goals, powers, and methods differ between regulators and sometimes within each regulator's jurisdiction. This report provides background on the financial regulatory structure in order to help Congress evaluate specific policy proposals to change financial regulation. Historically, financial regulation in the United States has coevolved with a changing financial system, in which major changes are made in response to crises. For example, in response to the financial turmoil beginning in 2007, the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act; P.L. 111-203 ) was the last act to make significant changes to the financial regulatory structure (see Appendix A ). Congress continues to debate proposals to modify parts of the regulatory system established by the Dodd-Frank Act. In the 115 th Congress, proposals to change the regulatory structure include the Financial CHOICE Act of 2017 ( H.R. 10 ), which would modify and rename the Consumer Financial Protection Bureau (CFPB) and the Federal Insurance Office (FIO), change the relationship between the Financial Stability Oversight Council (FSOC) and the regulators, eliminate the Office of Financial Research (OFR, which supports FSOC), and make other changes to how financial regulators promulgate rules and are funded. This report attempts to set out the basic frameworks and principles underlying U.S. financial regulation and to give some historical context for the development of that system. The first section briefly discusses the various modes of financial regulation. The next section identifies the major federal regulators and the types of institutions they supervise (see Table 1 ). It then provides a brief overview of each federal financial regulatory agency. Finally, the report discusses other entities that play a role in financial regulation—interagency bodies, state regulators, and international standards. For information on how the regulators are structured and funded, see CRS Report R43391, Independence of Federal Financial Regulators: Structure, Funding, and Other Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The Financial System The financial system matches the available funds of savers and investors with borrowers and others seeking to raise funds in exchange for future payouts. Financial firms link individual savers and borrowers together. Financial firms can operate as intermediaries that issue obligations to savers an d use those funds to make loans or investments for the firm's profits. Financial firms can also operate as agents playing a custodial role, investing the funds of savers on their behalf in segregated accounts. The products, instruments, and markets used to facilitate this matching are myriad, and they are controlled and overseen by a complex system of regulators. To help understand how the financial regulators have been organized, financial activities can be separated into distinct markets: Banking —accepting deposits and making loans; Insurance —collecting premiums from and making payouts to policyholders triggered by a predetermined event; Securities —issuing contracts that pledge to make payments from the issuer to the holder, and trading those contracts on markets. Contracts take the form of debt (a borrower and creditor relationship) and equity (an ownership relationship). One special class of securities is derivatives, which are financial contracts whose value is based on an underlying commodity, financial indicator, or financial instrument; and Financial Market Infrastructure —the "plumbing" of the financial system, such as trade data dissemination, payment, clearing, and settlement systems, that underlies transactions. A distinction can be made between formal and functional definitions of these activities. Formal activities are those, as defined by regulation, exclusively permissible for entities based on their charter or license. By contrast, functional definitions acknowledge that from an economic perspective, activities performed by types of different entities can be quite similar. This tension between formal and functional activities is one reason why the Government Accountability Office (GAO), and others, has called the U.S. regulatory system fragmented, with gaps in authority, overlapping authority, and duplicative authority. For example, "shadow banking" refers to activities, such as lending and deposit taking, that are economically similar to those performed by formal banks, but occur in the securities markets. The activities described above are functional definitions. However, because this report focuses on regulators, it mostly concentrates on formal definitions. The Role of Financial Regulators Financial regulation has evolved over time, with new authority usually added in response to failures or breakdowns in financial markets and authority trimmed back during financial booms. Because of this piecemeal evolution, powers, goals, tools, and approaches vary from market to market. Nevertheless, there are some common overarching themes across markets and regulators, which are highlighted in this section. The following provides a brief overview of what financial regulators do, specifically answering four questions: 1. What powers do regulators have? 2. What policy goals are regulators trying to accomplish? 3. Through what means are those goals accomplished? 4. Who or what is being regulated? Regulatory Powers Regulators implement policy using their powers, which vary by agency. Powers can be grouped into a few broad categories: Licensing , Chartering , or Registration. A starting point for understanding the regulatory system is that most activities cannot be undertaken unless a firm, individual, or market has received the proper credentials from the appropriate state or federal regulator. Each type of charter, license, or registration granted by the respective regulator governs the sets of financial activities that the holder is permitted to engage in. For example, a firm cannot accept federally insured deposits unless it is chartered as a bank, thrift, or credit union by a depository institution regulator. Likewise, an individual generally cannot buy and sell securities to others unless licensed as a broker-dealer. To be granted a license, charter, or registration, the recipient must accept the terms and conditions that accompany it. Depending on the type, those conditions could include regulatory oversight, training requirements, and a requirement to act according to a set of standards or code of ethics. Failure to meet the terms and conditions could result in fines, penalties, remedial actions, license or charter revocation, or criminal charges. Rulemaking . Regulators issue rules (regulations) through the rulemaking process to implement statutory mandates. Typically, statutory mandates provide regulators with a policy goal in general terms, and regulations fill in the specifics. Rules lay out the guidelines for how market participants may or may not act to comply with the mandate. Oversight and Supervision . Regulators ensure that their rules are adhered to through oversight and supervision. This allows regulators to observe market participants' behavior and instruct them to modify or cease improper behavior. Supervision may entail active, ongoing monitoring (as for banks) or investigating complaints and allegations ex post (as is common in securities markets). In some cases, such as banking, supervision includes periodic examinations and inspections, whereas in other cases, regulators rely more heavily on self-reporting. Regulators explain supervisory priorities and points of emphasis by issuing supervisory letters and guidance. Enforcement . Regulators can compel firms to modify their behavior through enforcement powers. Enforcement powers include the ability to issue fines, penalties, and cease and desist orders; to undertake criminal or civil actions in court, or administrative proceedings or arbitrations; and to revoke licenses and charters. In some cases, regulators initiate legal action at their own bequest or in response to consumer or investor complaints. In other cases, regulators explicitly allow consumers and investors to sue for damages when firms do not comply with regulations, or provide legal protection to firms that do comply. Resolution. Some regulators have the power to resolve a failing firm by taking control of the firm and initiating conservatorship (i.e., the regulator runs the firm on an ongoing basis) or receivership (i.e., the regulator winds the firm down). In other markets, failing firms are resolved through bankruptcy, a judicial process. Goals of Regulation Financial regulation is primarily intended to achieve the following underlying policy outcomes: Market Efficiency and Integrity . Regulators are to ensure that markets operate efficiently and that market participants have confidence in the market's integrity. Liquidity, low costs, the presence of many buyers and sellers, the availability of information, and a lack of excessive volatility are examples of the characteristics of an efficient market. Regulators contribute to market integrity by ensuring that activities are transparent, contracts can be enforced, and the "rules of the game" they set are enforced. Integrity generally also leads to greater efficiency. Regulation can also address market failures, such as principal-agent problems, asymmetric information, and moral hazard, that would otherwise reduce market efficiency. Consumer and Investor Protection. Regulators are to ensure that consumers or investors do not suffer from fraud, discrimination, manipulation, and theft. Regulators try to prevent exploitative or abusive practices intended to take advantage of unwitting consumers or investors. In some cases, protection is limited to enabling consumers and investors to understand the inherent risks when they enter into a contract. In other cases, protection is based on the principle of suitability—efforts to ensure that more risky products or product features are only accessible to sophisticated or financially secure consumers and investors. Capital Formation and Access to Credit . Regulators are to ensure that firms and consumers are able to access credit and capital to meet their needs such that credit and economic activity can grow at a healthy rate. Regulators try to ensure that capital and credit are available to all worthy borrowers, regardless of personal characteristics, such as race, gender, and location. Illicit Activity Prevent ion . Regulators are to ensure that the financial system cannot be used to support criminal and terrorist activity. Examples are policies to prevent money laundering, tax evasion, terrorism financing, and the contravention of financial sanctions. Taxpayer Protection. Regulators are to ensure that losses or failures in financial markets do not result in federal government payouts or the assumption of liabilities that are ultimately borne by taxpayers. Only certain types of financial activity are explicitly backed by the federal government or by regulator-run insurance schemes that are backed by the federal government, such as the Deposit Insurance Fund (DIF) run by the Federal Deposit Insurance Corporation (FDIC). Such schemes are self-financed by the insured firms through premium payments, unless the losses exceed the insurance fund, and then taxpayer money is used temporarily or permanently to fill the gap. In the case of a financial crisis, the government may decide that the "least bad" option is to provide funds in ways not explicitly promised or previously contemplated to restore stability. "Bailouts" of large failing firms in 2008 are the most well-known examples. In this sense, there may be implicit taxpayer backing of parts or all of the financial system. Financial Stability. Financial regulation is to maintain financial stability through preventative and palliative measures that mitigate systemic risk. At times, financial markets stop functioning well—markets freeze, participants panic, credit becomes unavailable, and multiple firms fail. Financial instability can be localized (to a specific market or activity) or more general. Sometimes instability can be contained and quelled through market actions or policy intervention; at other times, instability metastasizes and does broader damage to the real economy. The most recent example of the latter was the financial crisis of 2007-2009. Traditionally, financial stability concerns have centered on banking, but the recent crisis illustrates the potential for systemic risk to arise in other parts of the financial system as well. These regulatory goals are sometimes complementary, but other times conflict with each other. For example, without an adequate level of consumer and investor protections, fewer individuals may be willing to participate in the markets, and efficiency and capital formation could suffer. But, at some point, too many consumer and investor safeguards and protections could make credit and capital prohibitively expensive, reducing market efficiency and capital formation. Regulation generally aims to seek a middle ground between these two extremes, where regulatory burden is as small as possible and regulatory benefits are as large as possible. As a result, when taking any action, regulators balance the tradeoffs between their various goals. Types of Regulation The types of regulation applied to market participants are diverse and vary by regulator, but can be clustered in a few categories for analytical ease: Prudential . The purpose of prudential regulation is to ensure an institution's safety and soundness. It focuses on risk management and risk mitigation. Examples are capital requirements for banks. Prudential regulation may be pursued to achieve the goals of taxpayer protection (e.g., to ensure that bank failures do not drain the DIF), consumer protection (e.g., to ensure that insurance firms are able to honor policyholders' claims), or financial stability (e.g., to ensure that firm failures do not lead to bank runs). Disclosure and R eporting . Disclosure and reporting requirements are meant to ensure that all relevant financial information is accurate and available to the public and regulators so that the former can make well-informed financial decisions and the latter can effectively monitor activities. For example, publicly held companies must file disclosure reports, such as 10-Ks. Disclosure is used to achieve the goals of consumer and investor protection, as well as market efficiency and integrity. S tandard S etting . Regulators prescribe standards for products, markets, and professional conduct. Regulators set permissible activities and behavior for market participants. Standard setting is used to achieve a number of policy goals. For example, (1) for market integrity, policies governing conflicts of interest, such as insider trading; (2) for taxpayer protection, limits on risky activities; (3) for consumer protection, fair lending requirements to prevent discrimination; and (4) for suitability, limits on the sale of certain sophisticated financial products to accredited investors and verification that borrowers have the ability to repay mortgages. Competition . Regulators ensure that firms do not exercise undue monopoly power, engage in collusion or price fixing, or corner specific markets (i.e., take a dominant position to manipulate prices). Examples include antitrust policy (which is not unique to finance), antimanipulation policies, concentration limits, and the approval of takeovers and mergers. Regulators promote competitive markets to support the goals of market efficiency and integrity and consumer and investor protections. Within this area, a special policy concern related to financial stability is ensuring that no firm is "too big to fail." Price and R ate R egulat ions . Regulators set maximum or minimum prices, fees, premiums, or interest rates. Although price and rate regulation is relatively rare in federal regulation, it is more common in state regulation. An example at the federal level is the Durbin Amendment, which caps debit interchange fees for large banks. State-level examples are state usury laws, which cap interest rates, and state insurance rate regulation. Policymakers justify price and rate regulations on grounds of consumer and investor protections. Prudential and disclosure and reporting regulations can be contrasted to highlight a basic philosophical difference in the regulation of securities versus banking. For example, prudential regulation is central to banking regulation, whereas securities regulation generally focuses on disclosure. This difference in approaches can be attributed to differences in the relative importance of regulatory goals. Financial stability and taxpayer protection are central to banking because of taxpayer exposure and the potential for contagion when firms fail, whereas they are not primary goals of securities markets because the federal government has made few explicit promises to make payouts in the event of losses and failures. Prudential regulation relies heavily on confidential information that supervisors gather and formulate through examinations. Federal securities regulation is not intended to prevent failures or losses; instead, it is meant to ensure that investors are properly informed about the risks that investments pose. Ensuring proper disclosure is the main way to ensure that all relevant information is available to any potential investor. Regulated Entities How financial regulation is applied varies, partly because of the different characteristics of various financial markets and partly because of the historical evolution of regulation. The scope of regulators' purview falls into several different categories: 1. Regulate Certain Types of Financial Institutions. Some firms become subject to federal regulation when they obtain a particular business charter, and several federal agencies regulate only a single class of institution. Depository institutions are a good example: a new banking firm chooses its regulator when it decides which charter to obtain—national bank, state bank, credit union, etc.—and the choice of which type of depository charter may not greatly affect the institution's business mix. The Federal Housing Finance Authority (FHFA) regulates only three government-sponsored enterprises (GSEs): Fannie Mae, Freddie Mac, and the Federal Home Loan Bank system. This type of regulation gives regulators a role in overseeing all aspects of the firm's behavior, including which activities it is allowed to engage in. As a result, "functionally similar activities are often regulated differently depending on what type of institution offers the service." 2. Regulate a Particular Market. In some markets, all activities that take place within that market (for example, on a securities exchange) are subject to regulation. Often, the market itself, with the regulator's approval, issues codes of conduct and other internal rules that bind its members. In some cases, regulators may then require that specific activities can be conducted only within a regulated market. In other cases, similar activities take place both on and off a regulated market (e.g., stocks can also be traded off-exchange in "dark pools"). In some cases, regulators have different authority or jurisdiction in primary markets (where financial products are initially issued) than secondary markets (where products are resold). 3. Regulate a Particular Financial Activity. If activities are conducted in multiple markets or across multiple types of firms, another approach is to regulate a particular type or set of transactions, regardless of where the business occurs or which entities are engaged in it. For example, on the view that consumer financial protections should apply uniformly to all transactions, the Dodd-Frank Act created the CFPB, with authority (subject to certain exemptions) over financial products offered to consumers by an array of firms. Because it is difficult to ensure that functionally similar financial activities are legally uniform, all three approaches are needed and sometimes overlap in any given area. Stated differently, risks can emanate from firms, markets, or products, and if regulation does not align, risks may not be effectively mitigated. Market innovation also creates financial instruments and markets that fall between industry divisions. Congress and the courts have often been asked to decide which agency has jurisdiction over a particular financial activity. The Federal Financial Regulators Table 1 sets out the current federal financial regulatory structure. Regulators can be categorized into the three main areas of finance—banking (depository), securities, and insurance (where state, rather than federal, regulators play a dominant role). There are also targeted regulators for specific financial activities (consumer protection) and markets (agricultural finance and housing finance). The table does not include interagency-coordinating bodies, standard-setting bodies, international organizations, or state regulators, which are described later in the report. Appendix A describes changes to this table since the 2008 financial crisis. Financial firms may be subject to more than one regulator because they may engage in multiple financial activities, as illustrated in Figure 1 . For example, a firm may be overseen by an institution regulator and by an activity regulator when it engages in a regulated activity and a market regulator when it participates in a regulated market. The complexity of the figure illustrates the diverse roles and responsibilities assigned to various regulators. Furthermore, financial firms may form holding companies with separate legal subsidiaries that allow subsidiaries within the same holding company to engage in more activities than is permissible within any one subsidiary. Because of charter-based regulation, certain financial activities must be segregated in separate legal subsidiaries. However, as a result of the Gramm-Leach-Bliley Act in 1999 (GLBA; P.L. 106-102 ) and other regulatory and policy changes that preceded it, these different legal subsidiaries may be contained within the same financial holding companies (i.e., conglomerates that are permitted to engage in a broad array of financially related activities). For example, a banking subsidiary is limited to permissible activities related to the "business of banking," but is allowed to affiliate with another subsidiary that engages in activities that are "financial in nature." As a result, each subsidiary is assigned a primary regulator, and firms with multiple subsidiaries may have multiple institution regulators. If the holding company is a bank holding company or thrift holding company (with at least one banking or thrift subsidiary, respectively), then the holding company is regulated by the Fed. Figure 2 shows a stylized example of a special type of bank holding company, known as a financial holding company. This financial holding company would be regulated by the Fed at the holding company level. Its national bank would be regulated by the OCC, its securities subsidiary would be regulated by the SEC, and its loan company might be regulated by the CFPB. These are only the primary regulators for each box in Figure 2 ; as noted above, it might have other market or activity regulators as well, based on its lines of business. Depository Institution Regulators Regulation of depository institutions (i.e., banks and credit unions) in the United States has evolved over time into a system of multiple regulators with overlapping jurisdictions. There is a dual banking system, in which each depository institution is subject to regulation by its chartering authority: state or federal. Even if state chartered, virtually all depository institutions are federally insured, so both state and federal institutions are subject to at least one federal primary regulator (i.e., the federal authority responsible for examining the institution for safety and soundness and for ensuring its compliance with federal banking laws). Depository institutions have three broad types of charter—commercial banks, thrifts, and credit unions. For any given institution, the primary regulator depends on its type of charter. The primary federal regulator for national banks and thrifts (also known as savings and loans) is the OCC, their chartering authority; state-chartered banks that are members of the Federal Reserve System is the Federal Reserve; state-chartered thrifts and banks that are not members of the Federal Reserve System is the FDIC; foreign banks operating in the United States is the Fed or OCC, depending on the type; credit unions—if federally chartered or federally insured—is the National Credit Union Administration, which administers a deposit insurance fund separate from the FDIC's. National banks, state-chartered banks, and thrifts are also subject to the FDIC regulatory authority, because their deposits are covered by FDIC deposit insurance. Primary regulators' responsibilities are illustrated in Figure 3 . Whereas bank and thrift regulators strive for consistency among themselves in how institutions are regulated and supervised, credit unions are regulated under a separate regulatory framework from banks. Because banks receive deposit insurance from the FDIC and have access to the Fed's discount window, they expose taxpayers to the risk of losses if they fail. Banks also play a central role in the payment system, the financial system, and the broader economy. As a result, banks are subject to safety and soundness (prudential) regulation that most other financial firms are not subject to at the federal level. Safety and soundness regulation uses a holistic approach, evaluating (1) each loan, (2) the balance sheet of each institution, and (3) the risks in the system as a whole. Each loan creates risk for the lender. The overall portfolio of loans extended or held by a bank, in relation to other assets and liabilities, affects that institution's stability. The relationship of banks to each other, and to wider financial markets, affects the financial system's stability. Banks are required to keep capital in reserve against the possibility of a drop in value of loan portfolios or other risky assets. Banks are also required to be liquid enough to meet unexpected funding outflows. Federal financial regulators take into account compensating assets, risk-based capital requirements, the quality of assets, internal controls, and other prudential standards when examining the balance sheets of covered lenders. When regulators determine that a bank is taking excessive risks, or engaging in unsafe and unsound practices, they have a number of powerful tools at their disposal to reduce risk to the institution (and ultimately to the federal DIF). Regulators can require banks to reduce specified lending or financing practices, dispose of certain assets, and order banks to take steps to restore sound balance sheets. Banks must comply because regulators have "life-or-death" options, such as withdrawing deposit insurance or seizing the bank outright. The federal banking agencies are briefly discussed below. Although these agencies are the banks' institution-based regulators, banks are also subject to CFPB regulation for consumer protection, and to the extent that banks are participants in securities or derivatives markets, those activities are also subject to regulation by the SEC and the Commodity Futures Trading Commission (the CFTC). Office of the Comptroller of the Currency The OCC was created in 1863 as part of the Department of the Treasury to supervise federally chartered banks ("national" banks; 13 Stat. 99). The OCC regulates a wide variety of financial functions, but only for federally chartered banks. The head of the OCC, the Comptroller of the Currency, is also a member of the board of the FDIC and a director of the Neighborhood Reinvestment Corporation. The OCC has examination powers to enforce its responsibilities for the safety and soundness of nationally chartered banks. The OCC has strong enforcement powers, including the ability to issue cease and desist orders and revoke federal bank charters. Pursuant to the Dodd-Frank Act, the OCC is the primary regulator for federally chartered thrift institutions. Federal Deposit Insurance Corporation Following bank panics during the Great Depression, the FDIC was created in 1933 to provide assurance to small depositors that they would not lose their savings if their bank failed (P.L. 74-305, 49 Stat. 684). The FDIC is an independent agency that insures deposits (up to $250,000 for individual accounts), examines and supervises financial institutions, and manages receiverships, assuming and disposing of the assets of failed banks. The FDIC is the primary federal regulator of state banks that are not members of the Federal Reserve System and state-chartered thrift institutions. In addition, the FDIC has broad jurisdiction over nearly all banks and thrifts, whether federally or state chartered, that carry FDIC insurance. Backing deposit insurance is the DIF, which is managed by the FDIC and funded by risk-based assessments levied on depository institutions. The fund is used primarily for resolving failed or failing institutions. To safeguard the DIF, the FDIC uses its power to examine individual institutions and to issue regulations for all insured depository institutions to monitor and enforce safety and soundness. Acting under the principles of "prompt corrective action" and "least cost resolution," the FDIC has powers to resolve troubled banks, rather than allowing failing banks to enter the bankruptcy process. The Dodd-Frank Act also expanded the FDIC's role in resolving other types of troubled financial institutions that pose a risk to financial stability through the Orderly Liquidation Authority. The Federal Reserve The Federal Reserve System was established in 1913 as the nation's central bank following the Panic of 1907 to provide stability in the banking sector (P.L. 63-43, 38 Stat. 251). The system consists of the Board of Governors in Washington, DC, and 12 regional reserve banks. In its regulatory role, the Fed has safety and soundness examination authority for a variety of lending institutions, including bank holding companies; U.S. branches of foreign banks; and state-chartered banks that are members of the Federal Reserve System. Membership in the system is mandatory for national banks and optional for state banks. Members must purchase stock in the Fed. The Fed regulates the largest, most complex financial firms operating in the United States. Under the GLBA, the Fed serves as the umbrella regulator for financial holding companies. The Dodd-Frank Act made the Fed the primary regulator of all nonbank financial firms that are designated as systemically significant by the Financial Stability Oversight Council (of which the Fed is a member). All bank holding companies with more than $50 billion in assets and designated nonbanks are subject to enhanced prudential regulation by the Fed. In addition, the Dodd-Frank Act made the Fed the principal regulator for savings and loan holding companies and securities holding companies, a new category of institution formerly defined in securities law as an investment bank holding company. The Fed's responsibilities are not limited to regulation. As the nation's central bank, it conducts monetary policy by targeting short-term interest rates. The Fed also acts as a "lender of last resort" by making short-term collateralized loans to banks through the discount window. It also operates some parts and regulates other parts of the payment system. Title VIII of the Dodd-Frank Act gave the Fed additional authority to set prudential standards for payment systems that have been designated as systemically important. National Credit Union Administration The NCUA, originally part of the Farm Credit Administration, became an independent agency in 1970 (P.L. 91-206, 84 Stat. 49). The NCUA is the safety and soundness regulator for all federal credit unions and those state credit unions that elect to be federally insured. It administers a Central Liquidity Facility, which is the credit union lender of last resort, and the National Credit Union Share Insurance Fund, which insures credit union deposits. The NCUA also resolves failed credit unions. Credit unions are member-owned financial cooperatives, and they must be not-for-profit institutions. Consumer Financial Protection Bureau Before the financial crisis, jurisdiction over consumer financial protection was divided among a number of agencies (see Figure A-1 ). Title X of the Dodd-Frank Act created the CFPB to enhance consumer protection and bring the consumer protection regulation of depository and nondepository financial institutions into closer alignment. The bureau is housed within—but independent from—the Federal Reserve. The director of the CFPB is also on the FDIC's board of directors. The Dodd-Frank Act granted new authority and transferred existing authority from a number of agencies to the CFPB over an array of consumer financial products and services (including deposit taking, mortgages, credit cards and other extensions of credit, loan servicing, check guaranteeing, consumer report data collection, debt collection, real estate settlement, money transmitting, and financial data processing). The CFPB administers rules that, in its view, protect consumers by setting disclosure standards, setting suitability standards, and banning abusive and discriminatory practices. The CFPB also serves as the primary federal consumer financial protection supervisor and enforcer of federal consumer protection laws over many of the institutions that offer these products and services. However, the bureau's regulatory authority varies based on institution size and type. Regulatory authority differs for (1) depository institutions with more than $10 billion in assets, (2) depository institutions with $10 billion or less in assets, and (3) nondepositories. The CFPB can issue rules that apply to depository institutions of all sizes, but can only supervise institutions with more than $10 billion in assets. For depositories with less than $10 billion in assets, the primary depository regulator continues to supervise for consumer compliance. The Dodd-Frank Act also explicitly exempts a number of different entities and consumer financial activities from the bureau's supervisory and enforcement authority. Among the exempt entities are merchants, retailers, or sellers of nonfinancial goods or services, to the extent that they extend credit directly to consumers exclusively for the purpose of enabling consumers to purchase such nonfinancial goods or services; automobile dealers; real estate brokers and agents; financial intermediaries registered with the SEC or the CFTC; and insurance companies. In some areas where the CFPB does not have jurisdiction, the Federal Trade Commission (FTC) retains consumer protection authority. State regulators also retain a role in consumer protection. Securities Regulation For regulatory purposes, securities markets can be divided into derivatives and other types of securities. Derivatives, depending on the type, are regulated by the CFTC or the SEC. Other types of securities fall under the SEC's jurisdiction. Standard-setting bodies and other self-regulatory organizations (SROs) play a special role in securities regulation, and they are overseen by the SEC or the CFTC. In addition, banking regulators oversee the securities activities of banks. Banks are major participants in some parts of securities markets. Securities and Exchange Commission The New York Stock Exchange dates from 1793. Following the stock market crash of 1929, the SEC was created as an independent agency in 1934 to enforce newly written federal securities laws (P.L. 73-291, 48 Stat. 881). Thus, when Congress created the SEC, stock and bond market institutions and mechanisms were already well-established, and federal regulation was grafted onto the existing structure. The SEC has jurisdiction over the following: Participants in securities markets issuers—firms that issue shares, asset managers—investment advisers and investment companies (e.g., mutual funds and private funds) that are custodial agents investing on behalf of clients, intermediaries (e.g., broker-dealers, securities underwriters, and securitizers) experts who are neither issuing nor buying securities (e.g., credit rating agencies and research analysts); Securities markets (e.g., stock exchanges) and market utilities (e.g., clearinghouses) where securities are traded, cleared, and settled; and Securities products (e.g., money market accounts and security-based swaps). The SEC is not primarily concerned with ensuring the safety and soundness of the firms it regulates, but rather with "protect[ing] investors, maintain[ing] fair, orderly, and efficient markets, and facilitat[ing] capital formation." This distinction largely arises from the absence of government guarantees for securities investors comparable to deposit insurance. The SEC generally does not have the authority to limit risks taken by securities firms, nor the ability to prop up a failing firm. Firms that sell securities—stocks and bonds—to the public are required to register with the SEC. Registration entails the publication of detailed information about the firm, its management, the intended uses for the funds raised through the sale of securities, and the risks to investors. The initial registration disclosures must be kept current through the filing of periodic financial statements: annual and quarterly reports (as well as special reports when there is a material change in the firm's financial condition or prospects). Beyond these disclosure requirements, and certain other rules that apply to corporate governance, the SEC does not have any direct regulatory control over publicly traded firms. Bank regulators are expected to identify unsafe and unsound banking practices in the institutions they supervise, and they have the power to intervene and prevent banks from taking excessive risks. The SEC has no comparable authority; the securities laws simply require that risks be disclosed to investors. Registration with the SEC, in other words, is in no sense a guarantee that a security is a good or safe investment. Besides publicly traded corporations, a number of securities market participants are also required to register with the SEC (or with one of the industry SROs that the SEC oversees). These include stock exchanges, securities brokerages (and numerous classes of their personnel), mutual funds, auditors, investment advisers, and others. To maintain their registered status, all these entities must comply with rules meant to protect public investors, prevent fraud, and promote fair and orderly markets. The degree of protection granted to investors depends on their level of sophistication. For example, only "accredited investors" that have, for example, high net worth, can invest in riskier hedge funds and private equity funds. Originally, de minimis exemptions to regulation of mutual funds and investment advisers created space for the development of a trillion-dollar hedge fund industry. Under the Dodd-Frank Act, private advisers, including hedge funds and private equity funds, with more than $150 million in assets under management must register with the SEC, but maintain other exemptions. Several provisions of law and regulation protect brokerage customers from losses arising from brokerage firm failure. The Securities Investor Protection Corporation (SIPC), a private nonprofit created by Congress in 1970 and overseen by the SEC, operates an insurance scheme funded by assessments on brokers-dealers (and with a backup line of credit with the U.S. Treasury). SIPC guarantees customer accounts up to $500,000 for losses arising from brokerage failure or fraud. Unlike the FDIC, however, SIPC does not protect accounts against market losses or examine broker-dealers, and it has no regulatory powers. Some securities markets are exempted from parts of securities regulation. Prominent examples include the following: Foreign exchange . Buying and selling currencies is essential to foreign trade, and the exchange rate determined by traders has major implications for a country's macroeconomic policy. The market is one of the largest in the world, with trillions of dollars of average daily turnover. Nevertheless, no U.S. agency has regulatory authority over the foreign exchange market. Trading in currencies takes place among large global banks, central banks, hedge funds and other currency speculators, commercial firms involved in imports and exports, fund managers, and retail brokers. There is no centralized marketplace, but rather a number of proprietary electronic platforms that have largely supplanted the traditional telephone broker market. Treasury securities . Treasury securities were exempted from SEC regulation by the original securities laws of the 1930s. In 1993, following a successful cornering of a Treasury bond auction by Salomon Brothers, Congress passed the Government Securities Act Amendments of 1993 ( P.L. 103-202 , 107 Stat. 2344), which required brokers and dealers that were not already registered with the SEC to register as government securities dealers, extended antifraud and antimanipulation provisions of the federal securities laws to government securities brokers and dealers, and gave the U.S. Treasury authority to promulgate rules governing transactions. (Existing broker-dealer registrants were simply required to notify the SEC that they were in the government securities business.) Nevertheless, the government securities market remains much more lightly regulated than the corporate securities markets. Regulatory jurisdiction over various aspects of the Treasury market is fragmented across multiple regulators. The SEC has no jurisdiction over the primary market. Municipal securities. Municipal securities were initially exempted from SEC regulation. In 1975, the Municipal Securities Rulemaking Board was created and firms transacting in municipal securities were required to register with the SEC as broker-dealers. The Dodd-Frank Act required municipal advisors to register with the SEC. However, issuers of municipal securities remain exempt from SEC oversight, partly because of federalism issues. Private securities. The securities laws provide for the private sales of securities, which are not subject to the registration and extensive disclosure requirements that apply to public securities. However, private securities are subject to antifraud provisions of federal securities laws. Private placements of securities cannot be sold to the general public and may only be offered to limited numbers of "accredited investors" who meet certain asset tests. (Most purchasers are life insurers and other institutional investors.) There are also restrictions on the resale of private securities. The size of the private placement market is subject to considerable variation from year to year, but at times the value of securities sold privately exceeds what is sold into the public market. In recent decades, venture capitalists and private equity firms have come to play important roles in corporate finance. The former typically purchase interests in private firms, which may be sold later to the public, whereas the latter often purchase all the stock of publicly traded companies and take them private. Commodity Futures Trading Commission The CFTC was created in 1974 to regulate commodities futures and options markets, which at the time were poised to expand beyond their traditional base in agricultural commodities to encompass contracts based on financial variables, such as interest rates and stock indexes. The CFTC was given "exclusive jurisdiction" over all contracts that were "in the character of" options or futures contracts, and such instruments were to be traded only on CFTC-regulated exchanges. In practice, exclusive jurisdiction was impossible to enforce, as off-exchange derivatives contracts such as swaps proliferated. In the Commodity Futures Modernization Act of 2000 ( P.L. 106-554 ), Congress exempted swaps from CFTC regulation, but this exemption was repealed by the Dodd-Frank Act following problems with derivatives in the financial crisis, including large losses at the American International Group (AIG) that led to its federal rescue. The Dodd-Frank Act greatly expanded the CFTC's jurisdiction by eliminating exemptions for certain over-the-counter derivatives. As a result, swap dealers, major swap participants, swap clearing organizations, swap execution facilities, and swap data repositories are required to register with the CFTC. These entities are subject to reporting requirements and business conduct standards contained in statute or promulgated as CFTC rules. The Dodd-Frank Act required swaps to be cleared through a central clearinghouse and traded on exchanges, where possible. The CFTC's mission is to prevent excessive speculation, manipulation of commodity prices, and fraud. Like the SEC, the CFTC oversees SROs—the futures exchanges and the National Futures Association—and requires the registration of a range of industry firms and personnel, including futures commission merchants (brokers), floor traders, commodity pool operators, and commodity trading advisers. Like the SEC, the CFTC does not directly regulate the safety and soundness of individual firms, with the exception of a net capital rule for futures commission merchants and capital standards pursuant to the Dodd-Frank Act for swap dealers and major swap participants. Standard-Setting Bodies and Self-Regulatory Organizations National securities exchanges (e.g., the New York Stock Exchange) and clearing and settlement systems may register as SROs with the SEC or CFTC, making them subject to SEC or CFTC oversight. According to the SEC, "SROs must create rules that allow for disciplining members for improper conduct and for establishing measures to ensure market integrity and investor protection. SRO proposed rules are published for comment before final SEC review and approval." Title VIII of the Dodd-Frank Act gave the SEC and CFTC additional prudential regulatory authority over clearing and settlement systems that have been designated as systemically important (exchanges, contract markets, and other entities were exempted). One particularly important type of SRO in the regulatory system is the group of standard-setting bodies. Most securities or futures markets participants must register and meet professional conduct and qualification standards. The SEC and CFTC have delegated responsibility for many of these functions to official standard-setting bodies, such as the following: FINRA —The Financial Industry Regulatory Authority writes and enforces rules for brokers and dealers and examines them for compliance. MSRB —The Municipal Securities Rulemaking Board establishes rules for municipal advisors and dealers in the municipal securities market; conducts required exams and continuing education for municipal market professionals; and provides guidance to SEC and others for compliance with and enforcement of MSRB rules. NFA —The National Futures Association develops and enforces rules in futures markets, requires registration, and conducts fitness examinations for a range of derivatives markets participants, including futures commission merchants, commodity pool operators, and commodity trading advisors. FASB —The Financial Accounting Standards Board establishes financial accounting and reporting standards for companies and nonprofits. PCAOB —The Public Company Accounting Oversight Board oversees private auditors of publicly held companies and broker-dealers. These standard-setting bodies are typically set up as private nonprofits overseen by boards and funded through member fees or assessments. Although their authority may be enshrined in statute, they are not governmental entities. Regulators delegate rulemaking powers to them and retain the right to override their rulemakings. Regulation of Government-Sponsored Enterprises Congress created GSEs as privately owned institutions with limited missions and charters to support the mortgage and agricultural credit markets. It also created dedicated regulators—currently, the Federal Housing Finance Agency (FHFA) and the Farm Credit Administration (FCA)—exclusively to oversee the GSEs. Federal Housing Finance Agency The Housing and Economic Recovery Act of 2008 ( P.L. 110-289 , 122 Stat. 2654 ) created the FHFA during the housing crisis in 2008 to consolidate and strengthen regulation of a group of housing finance-related GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The FHFA succeeded the Office of Federal Housing Enterprise Oversight (OFHEO), which regulated Fannie and Freddie, and the Federal Housing Finance Board (FHFB), which regulated the Federal Home Loan Banks. The act also transferred authority to set affordable housing and other goals for the GSEs from the Department of Housing and Urban Development to the FHFA. Facing concerns about the GSEs' ongoing viability, the impetus to create the FHFA came from concerns about risks—including systemic risk—posed by Fannie and Freddie. These two GSEs were profit-seeking, shareholder-owned corporations that took advantage of their government-sponsored status to accumulate undiversified investment portfolios of more than $1.5 trillion, consisting almost exclusively of home mortgages (and securities and derivatives based on those mortgages). OFHEO was seen as lacking sufficient authority and independence to keep risk-taking at the GSEs in check. The FHFA was given enhanced safety and soundness powers resembling those of the federal bank regulators. These powers included the ability to set capital standards, to order the enterprises to cease any activity or divest any asset that posed a threat to financial soundness, and to replace management and assume control of the firms if they became seriously undercapitalized. One of the FHFA's first actions was to place both Fannie and Freddie in conservatorship to prevent their failure. Fannie and Freddie continue to operate, under agreements with FHFA and the U.S. Treasury, with more direct involvement of the FHFA in the enterprises' decisionmaking. The Treasury has provided capital to the GSEs (a combined $187 billion to date), by means of preferred stock purchases, to ensure that each remains solvent. In return, the government received warrants equivalent to a 79.9% equity ownership position in the firms and sweeps the firms' retained earnings above a certain level of net worth. Farm Credit Administration The FCA was created in 1933 during a farming crisis that was causing the widespread failure of institutions lending to farmers. Following another farming crisis, it was made an "arm's length" regulator with increased rulemaking, supervision, and enforcement powers by the Farm Credit Amendments Act of 1985 ( P.L. 99-205 ). The FCA oversees the Farm Credit System, a group of GSEs made up of the cooperatively owned Farm Credit Banks and Agricultural Credit Banks, the Funding Corporation, which is owned by the Credit Banks, and Farmer Mac, which is owned by shareholders. Unlike the housing GSEs, the Farm Credit System operates in both primary and secondary agricultural credit markets. For example, the FCA regulates these institutions for safety and soundness, through capital requirements. Regulatory Umbrella Groups The need for coordination and data sharing among regulators has led to the formation of innumerable interagency task forces to study particular market episodes and make recommendations to Congress. Three interagency organizations have permanent status: the Financial Stability Oversight Council, the Federal Financial Institution Examination Council, and the President's Working Group on Financial Markets. The latter is composed of the Treasury Secretary and the Fed, SEC, and CFTC Chairmen; because the working group has not been active in recent years, it is not discussed in detail. Financial Stability Oversight Council Few would argue that regulatory failure was solely to blame for the financial crisis, but it is widely considered to have played a part. In February 2009, then-Treasury Secretary Timothy Geithner summed up two key problem areas: Our financial system operated with large gaps in meaningful oversight, and without sufficient constraints to limit risk. Even institutions that were overseen by our complicated, overlapping system of multiple regulators put themselves in a position of extreme vulnerability. These failures helped lay the foundation for the worst economic crisis in generations. One definition of systemic risk is that it occurs when each firm manages risk rationally from its own perspective, but the sum total of those decisions produces systemic instability under certain conditions. Similarly, regulators charged with overseeing individual parts of the financial system may satisfy themselves that no threats to stability exist in their respective sectors, but fail to detect systemic risk generated by unsuspected correlations and interactions among the parts of the global system. The Federal Reserve was for many years a kind of default systemic regulator, expected to clean up after a crisis, but with limited authority to take ex ante preventive measures. Furthermore, the Fed's authority was mostly limited to the banking sector. The Dodd-Frank Act created the FSOC to assume a coordinating role, with the single mission of detecting systemic stress before a crisis can take hold (and identifying firms whose individual failure might trigger cascading losses with system-wide consequences). FSOC is chaired by the Secretary of the Treasury, and the other voting members are the heads of the Fed, FDIC, OCC, NCUA, SEC, CFTC, FHFA, and CFPB, and a member appointed by the President with insurance expertise. Five nonvoting members serve in an advisory capacity—the director of the Office of Financial Research (OFR, which was created by the Dodd-Frank Act to support the FSOC), the head of the Federal Insurance Office (FIO, created by the Dodd-Frank Act), a state banking supervisor, a state insurance commissioner, and a state securities commissioner. The FSOC is tasked with identifying risks to financial stability and responding to emerging systemic risks, while promoting market discipline by minimizing moral hazard arising from expectations that firms or their counterparties will be rescued from failure. The FSOC's duties include collecting information on financial firms from regulators and through the OFR; monitoring the financial system to identify potential systemic risks; proposing regulatory changes to Congress to promote stability, competitiveness, and efficiency; facilitating information sharing and coordination among financial regulators; making regulatory recommendations to financial regulators, including "new or heightened standards and safeguards"; identifying gaps in regulation that could pose systemic risk; reviewing and commenting on new or existing accounting standards issued by any standard-setting body; and providing a forum for the resolution of jurisdictional disputes among council members. The FSOC may not impose any resolution on disagreeing members, however. In addition, the council is required to provide an annual report and testimony to Congress. In contrast to some proposals to create a systemic risk regulator, the Dodd-Frank Act did not give the council authority (beyond the existing authority of its individual members) to respond to emerging threats or close regulatory gaps it identifies. In many cases, the council can only make regulatory recommendations to member agencies or Congress—it cannot impose change. Although the FSOC does not have direct supervisory authority over any financial institution, it plays an important role in regulation because it designates firms and financial market utilities as systemically important. Designated firms come under a consolidated supervisory safety and soundness regime administered by the Fed that may be more stringent than the standards that apply to nonsystemic firms. (FSOC is also tasked with making recommendations to the Fed on standards for that regime.) In a limited number of other cases, regulators must seek FSOC advice or approval before exercising new powers under the Dodd-Frank Act. Federal Financial Institution Examinations Council The Federal Financial Institutions Examination Council (FFIEC) was created in 1979 ( P.L. 95-630 , 92 Stat. 3641) as a formal interagency body to coordinate federal regulation of lending institutions. Through the FFIEC, the federal banking regulators issue a single set of reporting forms for covered institutions. The FFIEC also attempts to harmonize auditing principles and supervisory decisions. The FFIEC is made up of the Fed, OCC, FDIC, CFPB, NCUA, and a representative of the State Liaison Committee, each of which employs examiners to enforce safety and soundness regulations for lending institutions. Federal financial institution examiners evaluate the risks of covered institutions. The specific safety and soundness concerns common to the FFIEC agencies can be found in the handbooks employed by examiners to monitor lenders. Each subject area of the handbook can be updated separately. Examples of safety and soundness subject areas include important indicators of risk, such as capital adequacy, asset quality, liquidity, and sensitivity to market risk. Nonfederal Financial Regulation Insurance42 Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. There are no federal regulators of insurance akin to those for securities or banks, such as the SEC or the OCC, respectively. The limited federal role stems from both Supreme Court decisions and congressional action. In the 1868 case Paul v. Virginia , the Court found that insurance was not considered interstate commerce, and thus not subject to federal regulation. This decision was effectively reversed in the 1944 decision U.S. v. South-Eastern Underwriters Association . In 1945, Congress passed the McCarran-Ferguson Act (15 U.S.C. §1011 et seq.) specifically preserving the states' authority to regulate and tax insurance and also granting a federal antitrust exemption to the insurance industry for "the business of insurance." Each state government has a department or other entity charged with licensing and regulating insurance companies and those individuals and companies selling insurance products. States regulate the solvency of the companies and the content of insurance products as well as the market conduct of companies. Although each state sets its own laws and regulations for insurance, the National Association of Insurance Commissioners (NAIC) acts as a coordinating body that sets national standards through model laws and regulations. Models adopted by the NAIC, however, must be enacted by the states before having legal effect, which can be a lengthy and uncertain process. The states have also developed a coordinated system of guaranty funds, designed to protect policyholders in the event of insurer insolvency. Although the federal government's role in regulating insurance is relatively limited compared with its role in banking and securities, its role has increased over time. Various court cases interpreting McCarran-Ferguson's antitrust exemption have narrowed the definition of the business of insurance , whereas Congress has expanded the federal role in GLBA and the Dodd-Frank Act through federal oversight. For example, the Federal Reserve has regulatory authority over bank holding companies with insurance operations as well as insurers designated as systemically important by FSOC. In addition, the Dodd-Frank Act created the FIO to monitor the insurance industry and represent the United States in international fora relating to insurance. Various federal laws have also exempted aspects of state insurance regulation, such as state insurer licensing laws for a small category of insurers in the Liability Risk Retention Act of 1986 (15 U.S.C. §§3901 et seq.) and state insurance producer licensing laws in the National Association of Registered Agents and Brokers Reform Act of 2015 ( P.L. 114-1 , Title II). Other State Regulation In addition to insurance, there are state regulators for banking and securities markets. State regulation also plays a role in nonbank consumer financial protection, although that role has diminished as the federal role has expanded. As noted above, banking is a dual system in which institutions choose to charter at the state or federal level. A majority of community banks are state chartered. There are more than four times as many state-chartered as there are nationally chartered commercial banks, but state-chartered commercial banks had less than one-half as many assets as nationally chartered banks at the end of 2016. For thrifts, nationally chartered thrifts make up less than half of all thrifts, but have 65% of thrift assets. Although state-chartered banks have state regulators as their primary regulators, federal regulators still play a regulatory role. Most depositories have FDIC deposit insurance; to qualify, they must meet federal safety and soundness standards, such as prompt corrective action ratios. In addition, many state banks (and a few state thrifts) are members of the Fed, which gives the Fed supervisory authority over them. State banks that are not members of the Federal Reserve System are supervised by the FDIC. However, even nonmember Fed banks must meet the Fed's reserve requirements. In securities markets, "The federal securities acts expressly allow for concurrent state regulation under blue sky laws. The state securities acts have traditionally been limited to disclosure and qualification with regard to securities distributions. Typically, the state securities acts have general antifraud provisions to further these ends." Blue sky laws are intended to protect investors against fraud. Registration is another area where states play a role. In general, investment advisers who are granted exemptions from SEC registration based on size are overseen by state regulators. Broker-dealers, by contrast, are typically subject to both state and federal regulation. The National Securities Markets Improvement Act of 1996 ( P.L. 104-290 , 110 Stat. 3416) invalidated state securities law in a number of other areas (including capital, margin, bonding, and custody requirements) to reduce the overlap between state and federal securities regulation. States also play a role in enforcement by taking enforcement actions against financial institutions and market participants. This role is large in states with a large financial industry, such as New York. Federal regulation plays a central role in determining the scope of state regulation because of federal preemption laws (that apply federal statute to state-chartered institutions) and state "wild card" laws (that allow state-chartered institutions to automatically receive powers granted to federal-chartered institutions). For example, firms, products, and professionals that have registered with the SEC are not required to register at the state level. International Standards and Regulation Financial regulation must also take into account the global nature of financial markets. More specifically, U.S. regulators must account for foreign financial firms operating in the United States and foreign regulators must account for U.S. firms operating in their jurisdictions. Sometimes regulators grant each other equivalency (i.e., leaving regulation to the home country) when firms wish to operate abroad, and other times foreign firms are subjected to domestic regulation. If financial activity migrates to jurisdictions with laxer regulatory standards, it could undermine the effectiveness of regulation in jurisdictions with higher standards. To ensure consensus and consistency across jurisdictions, U.S. regulators and the Treasury Department participate in international fora with foreign regulators to set broad international regulatory standards or principles that members voluntarily pledge to follow. Given the size and significance of the U.S. financial system, U.S. policymakers are generally viewed as playing a substantial role in setting these standards. Although these standards are not legally binding, U.S. regulators generally implement rulemaking or Congress passes legislation to incorporate them. There are multiple international standard-setting bodies, including one corresponding to each of the three main areas of financial regulation: the Basel Committee on Banking Supervision for banking regulation, the International Organization of Securities Commissions (IOSCO) for securities and derivatives regulation, and the International Association of Insurance Supervisors (IAIS) for insurance regulation. In addition, the G-20, an international body consisting of the United States, the European Union, and 18 other economies, spearheaded international coordination of regulatory reform after the financial crisis. It created the Financial Stability Board (FSB), consisting of the finance ministers and financial regulators from the G-20 countries, four official international financial institutions, and six international standard-setting bodies (including those listed above), to formulate agreements to implement regulatory reform. There is significant overlap between the FSB's regulatory reform agenda and the Dodd-Frank Act. The relationship between these various entities is diagrammed in Figure 4 . Appendix A. Changes to Regulatory Structure Since 2008 The Dodd-Frank Act of 2010 created four new federal entities related to financial regulation—the Financial Stability Oversight Council (FSOC), Office of Financial Research (OFR), Federal Insurance Office (FIO), and Consumer Financial Protection Bureau (CFPB). OFR and FIO are offices within the Treasury Department, and are not regulators. The Dodd-Frank Act granted new authority to the CFPB and transferred existing authority to it from other regulators, as shown in Figure A-1 (represented by the arrows). (With the exception of the OTS, the agencies shown in the figure retained all authority unrelated to consumer protection, as well as some authority related to consumer protection.) The section above entitled " Consumer Financial Protection Bureau " has more detail on the authority granted to the CFPB and areas where the CFPB was not granted authority. In addition, the Dodd-Frank Act eliminated the Office of Thrift Supervision (OTS) and transferred its authority to the banking regulators, as shown in Figure A-2 . The Housing and Economic Recovery Act of 2008 (HERA) created the Federal Housing Finance Agency (FHFA) and eliminated the Office of Federal Housing Enterprise Oversight (OFHEO) and Federal Housing Finance Board (FHFB). As shown in Figure A-3 , HERA granted the FHFA new authority, the existing authority of the two eliminated agencies (shown in orange), and transferred limited existing authority from the Department of Housing and Urban Development (HUD). Appendix B. Experts List

The financial regulatory system has been described as fragmented, with multiple overlapping regulators and a dual state-federal regulatory system. The system evolved piecemeal, punctuated by major changes in response to various historical financial crises. The most recent financial crisis also resulted in changes to the regulatory system through the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act; P.L. 111-203) and the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289). To address the fragmented nature of the system, the Dodd-Frank Act created the Financial Stability Oversight Council (FSOC), a council of regulators and experts chaired by the Treasury Secretary. At the federal level, regulators can be clustered in the following areas: Depository regulators—Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve for banks; and National Credit Union Administration (NCUA) for credit unions; Securities markets regulators—Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC); Government-sponsored enterprise (GSE) regulators—Federal Housing Finance Agency (FHFA), created by HERA, and Farm Credit Administration (FCA); and Consumer protection regulator—Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Act. These regulators regulate financial institutions, markets, and products using licensing, registration, rulemaking, supervisory, enforcement, and resolution powers. Other entities that play a role in financial regulation are interagency bodies, state regulators, and international regulatory fora. Notably, federal regulators generally play a secondary role in insurance markets. Financial regulation aims to achieve diverse goals, which vary from regulator to regulator: market efficiency and integrity, consumer and investor protections, capital formation or access to credit, taxpayer protection, illicit activity prevention, and financial stability. Policy debate revolves around the tradeoffs between these various goals. Different types of regulation—prudential (safety and soundness), disclosure, standard setting, competition, and price and rate regulations—are used to achieve these goals. Many observers believe that the structure of the regulatory system influences regulatory outcomes. For that reason, there is ongoing congressional debate about the best way to structure the regulatory system. As background for that debate, this report provides an overview of the U.S. financial regulatory framework. It briefly describes each of the federal financial regulators and the types of institutions they supervise. It also discusses the other entities that play a role in financial regulation.

Introduction(1) On November 15, 2002, Secretary of Defense Donald Rumsfeld issued a memorandum tosenior staff regarding the implementation of the new base realignment and closure (BRAC) roundauthorized by Congress in 2001. (2) He emphasized that, as part of the Department of Defense'stransformation initiative, "new force structures must be accompanied by a new base structure," andadded that "BRAC 2005 should be the means by which we reconfigure our current infrastructure[bases] into one in which operational capacity maximizes both war fighting capability andefficiency." (3) He, then,directed that the process begin immediately. It was, in effect, the formal launching of DOD's 2005base closure implementation process. (4) The Secretary of Defense also revealed in his memo a particularly important BRAC 2005objective, namely examining and implementing opportunities for greater joint activity as a meansof achieving a more efficient base structure. He explained that prior BRAC rounds had analyzedfunctions on a unique service-to-service approach and, therefore, did not benefit from jointexamination of functions that cross services. It would appear, for example, that DOD's network ofresearch laboratories, medical facilities, maintenance depots, and testing and evaluation facilities willbecome prime candidates for consolidation in the next round. In respect to the selection process, Secretary Rumsfeld declared that DOD would not makeany binding closure or realignment decisions prior to the submission of its final recommendationsto the new BRAC commission in May 2005. It should be noted, however, that his statement leftopen the possibility (if not likelihood) of DOD conducting internal, non-binding deliberations. To underscore the importance of the new BRAC round, Secretary Rumsfeld has created twoOffice of the Secretary of Defense-level groups to oversee and operate the BRAC 2005 process. First of these is the Infrastructure Executive Council (IEC), chaired by the Deputy Secretary. Itserves as the policy-making and oversight body for the entire process. The second, subordinategroup is the Infrastructure Steering Group (ISG), chaired by the Under Secretary of Defense(Acquisition, Testing, and Logistics). It will be responsible for the detailed direction necessary toconduct the BRAC 2005 analyses. (5) Early Requirements and Developments In implementing the 2005 round, DOD's first three requirements are (1) to develop a forcestructure plan, (2) to conduct a comprehensive inventory of military installations, and (3) toestablish criteria for selecting bases for closure or realignment. Force Structure Plan In regard to the first, the Secretary of Defense must develop a force structure plan based onan assessment of the probable threats to the national security over a 20-year period, beginning withFY2005. He is also required to estimate the end-strength levels and the major military force unitsneeded to meet such threats. Finally, the Secretary of Defense must estimate the anticipated levelof funding that will be necessary to carry out the plan. Comprehensive Inventory Second, the Secretary of Defense is required to conduct a comprehensive inventory of U.S.military installations. He must, under the terms of the new BRAC law, determine the anticipatedneed and availability of military installations outside the United States. In addition, the Secretaryof Defense must give special consideration to any efficiencies that might be gained from the use ofjoint tenancy by more than one branch of the Armed Forces at a military installation. Selection Criteria Third, the Secretary of Defense must develop a set of criteria for selecting bases for closureand realignment. He must address a broad range of military, fiscal, and environmental considerationslikely to affect closure and realignment decisions. In prior rounds, DOD assigned highest priorityto four criteria related to military value. An additional four included return on investment, economicimpact, community infrastructure, and environmental impact. The eight selection criteria asproposed for the 2005 round are, in almost every essential detail, the same as those adopted andimplemented in the three past rounds. The bolded sections of DOD's new draft criteria below reveal the pertinent additions, aspublished in the Federal Register on December 23, 2003 (vol. 68, no. 246, pp. 74221-74222). Military Value. 1. Current and future mission requirements and impacton operational readiness of DOD's total force, including the impact on joint warfighting, training,and readiness. 2. Availability and condition of land, facilities, andassociated airspace (including training areas suitable for maneuver by ground, naval, and air forcesthroughout a diversity of climate and terrain areas and staging areas for the use of the ArmedForces in homeland defense missions) at both the existing and potential receivinglocations. 3. Ability to accommodate contingency, mobilization,and future total force requirements at both the existing and potential receiving locations to supportoperations and training . 4. Cost and manpowerimplications. Other Considerations. 5. Extent and timing of potential costs and savings,including the number of years, beginning with the date of completion of the closure or realignment,for the savings to exceed the costs. 6. Economic impact on existing communities in thevicinity of military installations . 7. Ability of both existing and potential receivingcommunities' infrastructure to support forces, missions, andpersonnel. 8. Environmental impact, including the impact of costsrelated to potential environmental restorations, waste management and environmental complianceactivities . Significant features of the new list include (1) reassertion of the overall importance of "military value," (2) increased emphasis on joint war-fighting, training, and readiness, and (3)dependence on local communities to support military missions. BRAC Developments: 2003 In mid-January 2003, two senior members of the House Armed Services Committee(Representative Gene Taylor and Representative Joel Hefley) expressed the desire to either changeor repeal the new base closure law ( P.L. 107-107 ). (6) Several months later, on May 6, Representative Hefley, chairmanof the House Armed Services Readiness Subcommittee, announced he would be receptive to apostponement, but would not offer an amendment. (7) On May 9, 2003, the Readiness Subcommittee approved its part of the defense authorizationbill ( H.R. 1588 ), in which it adopted an amendment by Representative Taylor to repealthe 2005 round. A few days later, however, the full House Armed Services Committee voted torestore the 2005 closings. The chairman, Representative Duncan Hunter, argued that killing thebase-closing round would only lead to a veto by the President and make the committeeirrelevant. (8) On May 21, 2003, the White House threatened to veto any bill if it included languagedelaying or cancelling DOD's ability to conduct another round of closures. (9) On May 22, 2003, the House passed its defense authorization bill, including a provision thatwould exempt half of domestic bases from being closed. The bill, also, would require theDepartment of Defense to maintain a sufficient number of bases to handle a surge in military forcesin the event of a future crisis. In final conference action in early November 2003, the "exemption"initiative failed, while the "surge" initiative succeeded ( H.Rept. 108-354 ). (10) Also, on May 22, 2003, the Senate passed its defense bill ( S. 1050 ). It did notcontain any significant domestic base closure language, but did provide authority to create acommission to review overseas bases. In later conference action, however, the overseas basesinitiative was dropped. (11) The issue, nevertheless, remained alive. On November 4, 2003,the Military Construction Appropriations Act for FY2004 (Section 128) provided for a commissionof eight members to review overseas bases. It further stipulated that appointment of the membersmust be made no later than 45 days after enactment of the act. (12) On June 4, 2003, Senator Byron Dorgan offered an amendment to repeal the authority for anew base closure round in 2005. He said he could not think of a worse time to consider such a step. Senator Trent Lott, a co-sponsor of the amendment, concurred. He explained that "At this time, wehave not properly assessed our needs. We are at war. It sends a terrible signal, and it is bad for theeconomy." He later suggested that, perhaps, delaying the next round to 2006 might be worthconsidering." (13) Inopposition, Senator Saxby Chambliss said that "putting off the BRAC 2005 round now will onlyprolong the anxiety in our communities surrounding our military installations." (14) In the final vote, theamendment was defeated 42 to 53 -- a margin that many might regard as surprisingly close. In contrast, letters sent to the committees by Pentagon officials strenuously argued that DODwas overburdened with an infrastructure that was simply no longer needed to support the size of theU.S. forces. The Secretary of Defense stressed that "BRAC provides the opportunity to configureour infrastructure to maximize capability and efficiency." (15) On July 1, 2003, DOD officials issued a memo reorganizing its installations and environmentoffice in anticipation of the impending 2005 base realignment and closure round. It created a newBRAC directorate that would identify which bases to eliminate. In the past, DOD has acceded tothe individual services' recommendations on closures. In the new round, it appears the Office of theSecretary of Defense is poised to exercise a much greater degree of control. (16) The House defense appropriations bill for 2004 included a provision that would closeRoosevelt Roads Naval Station, Puerto Rico's largest employer. Several Members of Congressinsisted that without the live-fire bombing range on Vieques island, there was little military valuein retaining the military base. (17) The Senate's appropriations bill did not contain language forclosing the base. Under Section 8132 of the Department of Defense Appropriations Act for FY2004 ( P.L.108-87 ), the Secretary of the Navy was directed to close the Naval Station Roosevelt Roads not laterthan six months after its enactment, which occurred on September 30, 2003. Virtually all themilitary activity at the Naval Station has ceased, and military units and functions have beentransferred to other installations located in the southeastern continental United States. The act also required that the closure be carried out in accordance with the procedures andauthorities contained in the relevant Defense Base Closure and Realignment Act of 1990, ascurrently amended. On December 23, 2003, the Pentagon issued its initial criteria for selecting bases for closureand realignment, sending it to the Federal Register for public comment as required by law. (18) DOD stated that it wouldtake into consideration military installations' current and future capabilities, cost and manpower,location availability, economic impact on communities, ability to support personnel, andenvironmental impact. In addition, the President was required to certify that there was need for anew BRAC round and that there would be an annual net savings by the end of FY2011. BRAC Developments: 2004 DOD Implements Selection Criteria On January 6, 2004, the Department of Defense requested commanders of installations in theUnited States, its territories and possessions, to gather information as part of the 2005 base closureround. It stated, however, that no information would be released to the public until after DOD haddelivered its list to the independent base closure Commission in the spring of 2005. It also noted thatin the past four completed rounds, 85% of DOD's closures and realignments were approved by theCommission. (19) On January 22, 2004, Senator Kay Bailey Hutchison, chairman of the Military ConstructionAppropriations Subcommittee, sent a letter to the Pentagon stating that "While military value isimportant to assessing the necessity of installations, the DOD should also conduct a comprehensivestudy of U.S. facilities abroad and determine whether existing base structures and locations meet theneeds of current and future missions. It would be unwise to close or realign domestic bases that maybe needed for troops returning from outdated facilities abroad." Senator Hutchison, further, stated that "The DOD should also consider how closing orrealignment of installations affects our homeland security. The current draft criteria, very similarto that proposed in the previous BRAC rounds, do not fully reflect the security of issues our countryfaces in the wake of September 11, 2001. Our nation is not dealing with the same threats as we werein 1995 and, therefore, we must develop new strategies to insure the military does not close a baseonly to later realize its costly mistake." (20) On February 12, 2004, the Pentagon published its final criteria for the 2005 round. Thecriteria were identical to the initial draft version, leading some who took advantage of theopportunity to comment on the process to criticize the Department's selection. The principal concernamong commentators regarding the final criteria seemed to be its overall vagueness. RepresentativeSam Farr raised the issue on the same day in the House Appropriations Subcommittee hearings onmilitary construction. He stated that the criteria were so broadly constructed that they could suitalmost any desired outcome. (21) In reply to this charge, the Pentagon explained that, "The inherent mission diversity of themilitary departments and defense agencies makes it impossible for DOD to specify detailed criteria. Broad criteria allow flexibility of application across a wide range of functions within theDepartment." (22) The 2005 base closure law provided Congress with the option of passing an act ofdisapproval regarding the final selection criteria. It set a deadline of March 1, 2004, for undertakingsuch an action. The deadline having passed without congressional action, DOD's finalization of theselection criteria for closing bases automatically took place. DOD Sends Report to Congress On March 23, 2004, as part of the budget justification required by Congress each year, theSecretary of Defense submitted a detailed report on the need for a further BRAC round. He alsocertified that an additional round of closures and realignments would result in annual net savings foreach of the military departments, beginning not later than FY2011. (23) Absent the certification,the 2005 base closure round would have been cancelled. In the report, DOD developed a long-range force structure plan based on the probable threatsto national security from 2005 to 2025. It also constructed a comprehensive installation inventory,arrayed by military department and by active and reserve component installations. To assess theamount of excess infrastructure anticipated in FY2009, DOD used the parametric analytical approachthat it used in a similar earlier 1998 assessment. (24) The DOD report focused on major U.S. installations across broad categories, rather than theentire inventory, which includes myriad smaller sites. In addition, DOD weighed the anticipatedcontinuing need for installations outside the United States, as well as any efficiencies that might begained from joint tenancy. Also, DOD used its experiences with prior rounds to assess the economiceffects of base closures and realignments on communities in the vicinity of affected installations. The report estimated that DOD possessed, in aggregate, 24% excess installation capacity. Itpointed out, however, that "only a comprehensive BRAC analysis can determine the exact nature andlocation of potential excess." (25) It then went on to explain that DOD would conduct a thoroughreview of its existing infrastructure in the coming year, ensuring that all installations will be treatedequally and evaluated on their continuing military value to the nation. (26) The release of DOD's report was followed, on March 25, 2004, by a House Armed ServicesMilitary Readiness subcommittee hearing on base closures, at which some Members voiced strongopposition to the timing of the new round. Others were more conflicted -- wanting to support thewar on terror, on the one hand, but also concerned about the many open-ended challenges facingDOD and the country, on the other. (27) On the same day, the General Accounting Office issued a report on the new BRAC round. It stated that DOD's 2005 selection criteria followed a framework similar to that employed in the fourprior rounds. It also said that the criteria were generally sound but pointed out that DOD needed toconsider, in its analyses, the absence of total agency-related and environmental costs. (28) Congress Considers BRAC Delay On March 24, 2004, Representative Solomon Ortiz introduced legislation ( H.R. 4023 ), calling for a two-year delay in implementing a new BRAC round. His bill was supported by30 co-sponsors. He said: "This is not the time to be shutting down bases." He noted that the militaryhad on-going operations in Iraq and Afghanistan and might move troops home as it closes downbases overseas. (29) On March 25, 2004, Representative Joel Hefley, chairman of the House Armed ServicesMilitary Readiness Subcommittee, conducted a lengthy oversight hearing on BRAC. Thediscussions revealed significant emerging bipartisan support for delaying the BRAC process. On April 1, 2004, the Senate Armed Services Subcommittee on Readiness and ManagementSupport held hearings that included discussion of the 2005 base closure round. Deputy UnderSecretary of Defense Raymond DuBois argued that any delay in the BRAC process would upset theongoing global posture review aimed at determining which bases in the United States would receivethe overseas force structure. He emphasized that "We must do the overseas piece first ... and by theend of May." (30) Several weeks later, on May 6, 2004, the HASC subcommittee approved a two-year delaythat would postpone the next base closure round until 2007. Its chairman, Representative JoelHefley, expressed concern over the timing. "It would be a bad mistake to do it in the middle of awar," he said. On May 12, 2004, the full House Armed Services Committee addressed the base closureissue. Representative Gene Taylor offered an amendment to terminate the 2005 round. Thecommittee, however, adopted a more moderate stand offered by Representative Joel Hefley. Hissubstitute amendment called for delaying the round from 2005 to 2007. On May 18, 2004, Senator Trent Lott introduced an amendment to delay the 2005 BRACround. He explained that DOD should first close its bases overseas before closing those at home. The Senator was supported by a large number of bipartisan colleagues, but he also confronted strongopposition from Senator John Warner and other key leaders. The amendment was narrowly defeatedby a vote of 49 to 47. (31) Two days later, on May 20, 2004, the full House voted 259 to 162 to delay base closings until2007. In response to this action, the White House immediately released a statement declaring thatthe Secretary of Defense, and other senior advisers, would urge the President to veto any bill thatweakened, delayed, or repealed the current base closure authority. On September 23, 2004, at a Senate Armed Services Committee hearing on global forceposture, Secretary of Defense Rumsfeld reiterated the threat of a veto. He further stated that thetiming of the planned return of about 70,000 U.S. forces from overseas, along with the scheduledBRAC round, were inextricably linked. (32) In the same hearing, Senator John Warner, chairman of the defense committee, warned thatcommunities were already spending millions of dollars hiring experts to BRAC-proof theirinstallations. To perpetuate the situation for two more years, he stressed, would be an enormousburden to communities on top of the high cost of keeping open bases no longer needed. (33) On October 8, 2004, Senate and House conferees reached agreement on the National DefenseAuthorization Act for FY2005, which included continued support of DOD's authority to conduct the2005 base closure and realignment round. Senator John Warner stated, "This Administration priorityis absolutely essential and necessary ... to allow the Department to evaluate its infrastructure and tomake smart decisions to support a well-postured 21st Century military. We must complete thiscrucial process over the next year in order to reduce aging, excess infrastructure, provide resourcesfor the military where they need it the most, and provide investment and development opportunitiesfor the local communities that so strongly support our forces." (34) On the same day, Representative Duncan Hunter underscored four provisions of the lawintended to improve the BRAC implementation process. These included (1) prohibiting anyrevision of DOD's force-structure plan or infrastructure inventory after March 15, 2005; (2) codifyingthe Secretary of Defense's criteria for selecting bases to be closed and realigned; (3) repealing theauthority of the Secretary of Defense to place installations in inactive status; and (4) prohibiting theCommission from changing the Secretary of Defense's selections -- unless at least two members ofthe Commission visit the installation involved, and at least seven members of the Commissionsupport the decision. (35) This last provision was intended to ensure that a super-majority of BRAC commissionersprevailed. (36) Community Concerns about BRAC Local Efforts to Prevent Closures(37) As a result of the impending new round of base closures, many community leaders have beensearching for ways to protect nearby military installations. In these efforts, they have received muchencouragement and financial support from their respective state and local governments. Millionsof dollars are currently being spent to improve the infrastructure near bases, with the intent ofensuring their survival. The Pentagon, with an interest in paring down the military, is looking at bases with only oneor two missions, or some other critical vulnerability. At the other end of the continuum is FortJackson, SC which, besides including a basic combat and advanced individual Army trainingprogram, also is the home of a chaplain school, a drill sergeants' school, the Soldier Support Institute,and the Department of Defense Polygraph Institute. (38) In August 2003, leaders in San Antonio, Texas proposed a constitutional amendment authorizing the state to issue $250 million in bonds to help protect Texas military installations. Local communities, under this arrangement are able to borrow the bond proceeds at low rates forprojects that "enhance the military value" of facilities. (39) In another example, a non-profit community organization in Shreveport, LA offered to buildand refurbish more than 300 housing units at Barksdale Air Force Base -- at no additional cost toDOD. The offer was made after many complaints about the inadequacy of its military housing. In other cases, state "retention" grants have been awarded to help local communities (1)establish links between military bases and state universities; (2) utilize the potential forpublic-private partnerships; and (3) consider exchanging military land with private developers inreturn for building new base facilities. When asked for advice on how to prevent base closures, one leading former defense officialanswered that the communities should emphasize existing strengths and new partnerships with themilitary. "Our advice to the communities," he said, "was always the same -- make sure the strengthsof your facility are known." (40) Addressing the Encroachment Issue Of special concern to many communities, as well as the Department of Defense, is "rangeencroachment." It is the process whereby a military base is progressively hemmed in by urbangrowth, competition for air space, protection of an endangered species, and other factors. Such adevelopment can detract from a base's desirability, and thus make it a target for future closure andrealignment in the next round. In the past, the Department of Defense has regarded encroachment as a local governmentissue over which it had little or no control. According to one Pentagon official, John Leigh, thefederal government remained virtually powerless to intervene in local community growth issues. However, laws have been passed in the last few years that now require local jurisdictions to considerthe impact of new growth on military readiness when making land-use decisions. (41) An October 2002 study by the National Governors Association drew attention to the risingproblem of encroachment in many states. A condensed section of the study follows: Civilian encroachment is beginning to restrict oreliminate testing and training activities in many locations. Eighty percent of our nation's installationsare experiencing urban growth at a rate higher than the national average. Residential andcommercial communities are potentially exposed to artillery fire, aircraft noise, dust, and worse yetaccidents. As urban growth and development increase near andaround bases, so do land-use conflicts between mission activities and local communities. Forinstance, many military airports conduct night training exercises. The city lights of encroachingdevelopment often compromise the effectiveness of night vision equipment, making night trainingexercises impractical. The extent of urban encroachment and its effect onoperational activity of an installation is a consideration in determining its future viability, and suchmission constraint can lead to activity reductions or even closures. The resulting reduction ininstallation personnel and mission activities can jeopardize economic activity, jobs, and tax revenues.Encroachment puts local and state economies at risk. (42) The FY2003 defense authorization act ( P.L. 107-314 ) included a natural resource conversionprovision that addressed the impact of land development on military installations. The Pentagonargued that environmental requirements placed serious limitations on the use of certain lands. Asa result, Section 2881 authorized the Secretary of Defense to create conservation buffer zones outsideits installations to help prevent urban sprawl, while also providing habitat for endangered species.Environmental advocates have argued that DOD needs to work more closely with developers andlocal officials, who are likely to be focused on increasing the area's tax base. The FY2004 defense authorization conference report requires the Secretary of Defense toconduct a comprehensive study on the impact of various types of encroachment issues affectingmilitary installations and operational ranges. The report must be completed not later than January31, 2006. (43) U.S. Overseas Basing Initiative On August 16, 2004, the President announced that the Pentagon would redistribute itsoverseas bases as a means of achieving a more agile and flexible force. The initiative, as part of aGlobal Posture Review, came after three years of study and consultation. In his statement, thePresident made it clear he would retain a significant military presence overseas, but that he alsointended to bring home about 60,000 to 70,000 uniformed personnel and about 100,000 familymembers and civilian employees over the next ten years. (44) Opponents of the 2005 base realignment and closure plan have seized on the President'sannouncement, arguing that roughly one-third of the soldiers overseas will be returning home andthat, given the circumstances, it would be premature to close domestic facilities. Key Members ofCongress, most notably Senators Kay Bailey Hutchison and Dianne Feinstein (Chair and RankingMember of the Senate Appropriations' Subcommittee on Military Construction), expressed theirconcerns in this regard. On April 8, 2003, these two Senators sponsored a bill ( S. 949 ) to create abipartisan Overseas Basing Commission (OBC). (45) Its purpose was "to assess the adequacy of the U.S. militaryfootprint overseas, consider the feasibility and advisability of closing any current U.S. installations,and provide to Congress recommendations for a comprehensive overseas basing strategy that meetsthe current and projected needs of the United States." (46) On April 29, 2003, the sponsors explained: "If we reduce our overseas presence, we needstatewide bases to station returning troops. It is senseless to close bases on U.S. soil in 2005 onlyto determine a few years later that we made a costly, irrevocable mistake." (47) The two Members ofCongress also said that the new commission would last for one year, include eight congressionallyappointed members, and be completed for the opening of the 2005 BRAC process. (48) In a July 10, 2003 statement, the White House threatened not to cooperate with an OverseasBasing Commission, saying that it was already looking at current and future force structure andbasing needs. A congressional commission looking over DOD's shoulders, it argued, wasunnecessary. In spite of White House opposition, however, the OBC became law when PresidentGeorge Bush signed the Fiscal Year 2004 Military Construction Appropriations Act on November22, 2003 ( P.L. 108-132 ). The Overseas Basing Commission was originally scheduled to report its findings byDecember 31, 2004. As a result of delays in forming the OBC, its deadline was extended to August31, 2005 -- with a preliminary draft issued by the end of March. On November 9, 2004, the OBC held a hearing in which John Hamre, former deputySecretary of Defense, said that DOD had not thought enough about how realigning forces abroadcould be used strategically to shape the international environment in the coming decades. He notedthat the kinds of changes to the U.S. military posture DOD was contemplating at this time weredriven primarily by operational expediency, rather than strategy. "The problem," he emphasized, "isthat in order to be sustainable over the long-term, U.S. bases overseas must be part of an overallpolitical, diplomatic, and strategic framework." He did not feel that the Administration hadestablished "an enduring framework for the new bases DOD was contemplating." (49) Six months later, on May 5, 2005, the OBC unveiled its preliminary report regarding thePentagon's global basing plans. According to early press accounts, the commission is concerned thatthe Pentagon is pursuing global change too rapidly, and that it is providing insufficient support inseveral other important aspects: such as adequate airlift and sealift, the need for heavy forces inEurope, and "quality of life" issues. (50) BRAC Developments: 2005 The 2005 BRAC Commission The 2005 base realignment and closure statute entitled the President to nominate ninemembers to an independent base closure Commission, by a date no later than March 15, 2005. Hewas also given the opportunity to ignore the directive -- with the result that the new BRAC roundwould have been cancelled. (51) The President, however, declined to exercise that authority. (52) In appointing members to the new BRAC Commission, the statute states that the President should consult with the top congressional leadership, as outlined below: The three remaining appointments do not require consultation with Congress. A relatedmatter of likely interest will be the composition of the Commission members. In the past fourBRAC rounds, they have included Former Members of Congress Retired military leaders Former U.S. ambassadors Business leaders -- industry, banking, etc. Former House and Senate staff members Former White House staff members Over a period of two months, from February 1, 2005 to April 1, 2005, the President andsenior congressional leaders conducted a review and, ultimately, approved the selection of ninecommissioners to the 2005 base closure and realignment round. Speaker of the House J. Dennis Hastert recommended former Representative James V.Hansen of Utah, and Samuel K. Skinner of Illinois. The latter formerly served on President GeorgeBush's chief of staff. House Minority Leader Nancy Pelosi recommended Philip E. Coyle III of California, aformer Assistant Secretary of Defense and Director of Operational Test and Evaluation. Senate Majority Leader William H. Frist recommended retired General Lloyd W. Newton, USAF (Ret.) of Connecticut, and retired Admiral Harold W. Gehman, Jr. USN (Ret.) of Virginia. Senate Minority Leader Harry Reid recommended former Representative James Bilbray ofNevada. The President selected Anthony A. Principi of California to be the chairman of the2005BRAC Commission. He was, most recently, vice-president of the Pfizer Corporation. In earlieryears, he served as the Secretary of Veterans Affairs, the chief counsel for the Senate ArmedServices Committee and the Senate Veterans Affairs Committee, and as a top official with defensecontractor Lockheed Martin. In addition, he is a decorated Vietnam war veteran. The two other nominees selected by the President were Brigadier General Sue Ellen Turner, USAF (Ret.) of Texas, and General James T. Hill, USA (Ret.) of Florida . With its formal establishment, the BRAC Commission proceeded to conduct a series of local,D.C. -- area hearings to collect general information on DOD's force structure needs and goals for theBRAC process. It will also conduct regional hearings at locations throughout the country to provideaffected communities with the chance to express their views and concerns. At least onecommissioner, it has been said, will visit each base on DOD's designated list. An additional roundor two of hearings (local and regional) are possible before completion of the BRAC deliberativeprocess -- after which the Commission will send its final list to the President. It should be noted that, due to current BRAC law, the Commission can only add a base toDOD's list under the following circumstances. Two commissioners must visit the installation -- andseven of the nine commissioners must reach agreement on the final decision. (53) In past rounds, thereappears to be no evidence of such restrictions. A vote by a simple majority of commissioners wassufficient to justify adding a base to DOD's list. Debate On Status of the National Guard On March 24, 2005, Secretary of Defense Donald Rumsfeld received a letter from Illinoiscongressional leaders stating that, according to a provision of federal law, the Pentagon could notclose National Guard bases without a governor's consent. They called on the Secretary toimmediately stop any actions that might violate the law. On April 12, 2005, the Department of Defense sent a letter to the Illinois lawmakers rejectingtheir claim. The letter stated that, for BRAC to be a truly comprehensive process and to achievesuccess, "the process must involve all installations, including those used by the reservecomponents." (54) Othersources have stated that the BRAC law and the law prohibiting the closing of National Guardfacilities appear to be unrelated. With the swearing-in of the new base closure Commission on May 3, 2005, the NationalGuard issue resurfaced. In its first set of hearings, the chairman, Anthony J. Principi, asserted thatthe debate over the governor's legal authority would not slow his panel's consideration of DOD'sproposed list -- that it was an issue for the lawyers to decide. (55) DOD Lowers Estimate of Excess Capacity On March 29, 2005, Secretary of Defense Donald Rumsfeld acknowledged that the 2005 baseclosure and realignment round might be less extensive than initially expected. At a news conference,he explained that DOD's previous estimate of excess capacity had been 20 to 25 percent, but that "itlooks now like the actual number will be less than the lower figure of that range." He said thechange was due to the ongoing effort by DOD to close military facilities overseas, which in turnnecessitates moving tens of thousands of troops back to U.S. bases -- perhaps, as many as 70,000. Even so, Secretary Rumsfeld expects that the 2005 round of closures and realignments will affectmore installations than all of the four previous rounds. (56) Effort Made to Block Nominations On March 31, 2005, Senator Trent Lott placed a hold on the President's nomination of formerSecretary of Veterans Affairs, Anthony Principi, as head of the 2005 base closure Commission. Itwas also reported in the press that Senator Lott intended to place holds on each of the remainingBRAC Commission nominees who had yet to appear before the Armed Services Committee for theirconfirmation hearings. (57) A staunch opponent of BRAC, Senator Lott joined otherlawmakers last year in a bid to delay the 2005 round by two years. His amendment to the Senate'sFY2005 defense authorization bill was narrowly defeated by a vote of 49 to 47. (58) On April 1, 2005, President Bush took the unusual step of announcing the recess appointmentof all nine BRAC Commission members, thereby eliminating the requirement for Senateconfirmation. (59) Senator John Warner, who heads the Armed Services Committee supported the White Housedecision, saying that such delays might otherwise complicate completion of the 2005 BRAC round. Base Closure Commission Hearings On March 15, 2005, the U.S. Senate Armed Services Committee held a hearing on thenomination of Anthony Principi to be the chairman of the base realignment and closure commission.In his comments to the committee, Mr. Principi stressed that the new commission would bebipartisan, that it would comply with the both the intent and spirit of the BRAC law, and would seekall and any information needed from the Department of Defense to make the right decisions. (60) On April 7, 2005, the House Appropriations Subcommittee on Military Quality of Life helda hearing on base realignment and closure and its relationship to DOD's global posture review. (61) In his opening remarks,Deputy Undersecretary of Defense Phil Grone underscored three key imperatives: (1) furthering theongoing transformation of the armed forces; (2) maximizing the joint utilization of DOD's assets;and (3) eliminating DOD's excess infrastructure capacity, both at home and abroad. He saidsubsequently that global defense posture changes and domestic base realignment and closure werekey, interlinked elements that supported on-going force transformation. "A well-supportedcapability-based force structure," he stressed "should have infrastructure that is best sized and placedto support national security needs and emerging mission requirements." (62) On May 3, 2005, the new BRAC Commission held its first hearing, a morning session thatopened with the swearing-in of all nine members. In the first hearing, the Commission was briefedby witnesses from the Congressional Research Service and the Government Accountability Officeon the statute guiding the decisions and criteria that are to be applied in evaluating DOD's proposedselection, the issues it is likely to face in the months to come, as well as the lessons learned fromprior BRAC rounds. In the afternoon session, the panel was briefed by the chairman of the National IntelligenceCouncil on threats to the United States over the next 20 years. These threats included"unconventional tactics such as sabotage, terrorism, information attacks, and weapons of massdestruction used by terrorists insurgents and other non-state enemies that might alter how the militaryfights its battles." (63) A third hearing was held by the Commission on May 4, 2005, which addressed important DOD force structure issues, including the need to secure the United States from a direct attack and the need tostrengthen partnerships and alliances abroad. Pentagon Delivers 2005 BRAC List On May 13, 2005, the new BRAC Commission received DOD's list of base realignments andclosures. The Pentagon announced that it planned to close 33 major U.S. installations and realign 29 others -- in a move to consolidate forces and save almost $50 billion over 20 years. The overallnumber of current major bases, by DOD's account, is 318. In addition to the 62 major installations,DOD seeks to close or realign 775 smaller facilities. Table 1 compares the first four BRAC rounds (1988 to 1995), with the single, currentlyproposed 2005 round: Table 1. Results of BRAC-RelatedActions Table 2 provides information on the impact of new closures and realignments as it may affect state jobs. Table 2. Net Jobs Lost and Gained Source: Department of Defense On May 16, 2005, the BRAC Commission began an intensive schedule of hearings onCapitol Hill. It opened with the appearance of the Secretary of Defense, Donald Rumsfeld, andcontinued throughout the week, with testimony from each of the military chiefs of staff and theirsubordinates. A number of significant elements have emerged from the hearings, including the following: The Secretary of Defense stated that the U.S. military has only about 5 to 10percent excess capacity once it takes into consideration the space it will need to accommodate 70,000troops returning from Europe. The Pentagon had earlier estimated it had 20 to 25 percent morecapacity than it needed. The Secretary explained that the upper figure was imprecise, that it wasunclear whether past recommendations included leased space or requirements for maintaining a"surge capacity." (64) The Pentagon plans to consolidate military Reserve and Guard facilities into125 new multi-component Armed Forces Reserve Centers that would combine Army, Navy, AirForce and Marine Corps elements. The Army will close 176 ArmyReserve centers and 211 Army National Guard facilities, but it will build 125multi-service Reserve centers in places better suited to help its flaggingrecruiting efforts. Lt. Gen. H. Steven Blum, chief of the National Guard Bureau,stated that, "By closing or divesting ourselves of inefficient facilities andmoving to places where we have better demographics and constructing joinfacilities, I think we give better opportunity to the members of the Reservecomponent, make it more convenient and give them more choices." (65) Thisappeared to be the most contentious issue during the earlyhearings. The Pentagon plans to move thousands of military and civilian workers out ofleased commercial high-rise buildings near the Pentagon in Northern Virginia, and at other urbansites, in order to provide increased security at bases around the country. The Department of Defense has decided to shift significant numbers of U.S.military forces and assets from New England and the Mid-West to the South and the Far-West. Asquoted by one report, "[The] Pentagon has apparently found its ideal environment: proximity to thecoasts for rapid deployment, cheap and plentiful land, and a culture more tied to martialtraditions." (66) On May 18, 2005, Representative Jeb Bradley and several other House Armed ServicesCommittee members attempted to halt the BRAC process by introducing a bill that would havedelayed base closings and realignments. The amendment was defeated by voice vote. The Chairmanof the House Readiness Subcommittee, Representative Joel Hefley, sympathized with his colleagues,but allowed that there was not much that they could do to alter the situation. On May 23, 2005, the BRAC Commission announced that its members would visit 20military sites in many different parts of the country, beginning on May 24 and ending on May 27.A week or so later, the Commission is expected to conduct a series of 16 regional hearings,beginning on June 7 and ending on July 14. Chairman Principi has stated that these visits willprovide, not only a forum for the Commissioners and its staff to learn details of what is happeningat closing bases, but also a forum for them to understand the impact of BRAC decisions on the localcommunities involved. On May 24, 2005, the Missouri delegation of Congress sent a letter to Secretary of DefenseRumsfeld complaining about the absence of adequate information. It said that the lack of materialwas hurting their ability to make a case to keep bases open. The Pentagon replied that it hadprovided most of the important information and data, with the exception of a small amount ofclassified material that was undergoing DOD's security clearance process. (67) The following day, Representative Bradley again attempted to postpone the 2005 round bysubmitting an amendment to the FY2006 Defense Authorization bill ( H.R. 1815 ). Herecommended curtailing the next round until one year after certain conditions were met, namely:implementation of DOD's Review of Overseas Military Facility Structure; return of a substantialnumber of U.S. troops from Iraq; submission of DOD's Quadrennial Defense Review to the Houseand Senate Armed Services Committees; and other related requirements. His bill was defeated bya vote of 112-316. (68) The 2005 BRAC Timeline The timeline below identifies the key actions involving the 2005 base closure andrealignment round. The most important decisions are those of the President and Congress, whichhave the opportunity, in each of two cases, to completely shut down the overall BRAC process (seebold text). Table 3. The 2005 BRAC Timeline

On November 15, 2002, Secretary of Defense Donald Rumsfeld announced the first steps inimplementing the new 2005 base realignment and closure (BRAC) law. These includeddevelopment of a force structure plan, comprehensive inventory of military installations, andestablishment of criteria for selecting bases for closure and realignment. The Secretary of Defense submitted a report to Congress on March 23, 2004, confirming theneed for a further BRAC round and certifying that an additional round of closures and realignmentswould result in annual net savings, over a period ending no later than FY2011. On May 20, 2004, the House of Representatives voted 259 to 162 to delay base closings until2007. In response to this action, the White House immediately released a statement declaring thatthe Secretary of Defense, and other senior advisers, would urge the President to veto any bill that"weakened, delayed, or repealed" the current base closure authority. On October 8, 2004, Senate and the House conferees reached agreement on the NationalDefense Authorization Act for FY2005, which included continued support of DOD's authority toconduct a round of closures and realignments in 2005. Senator John Warner stated that it wasessential to allow DOD to complete its effort to reduce the size of its infrastructure. On March 15, 2005, the President appointed nine members to serve on the 2005 BRACCommission. In doing so, he consulted with leading Members of Congress. In addition, thePresident chose Anthony A. Principi to serve as the chairman of the new BRAC Commission. Once formally in-place, the Commission's next step was to institute a series of local, D.C.area hearings to collect general information on DOD's force structure needs and goals. It will befollowed later by regional hearings at locations throughout the country. At least one commissionerwill be required to visit each base on DOD's designated list. On May 13, 2005, the Pentagon announced that it would close 33 major U.S. military basesand realign 29 others -- in a move to consolidate forces and save almost $50 billion over 20 years. The overall number of existing U.S. major bases, according to DOD, is 318. In addition, 775 smallerfacilities are expected to be closed or realigned. This report will be updated as needed.

Department of Agriculture (USDA) Department of Commerce (DOC) Department of Defense (DOD) Department of Education (ED) Department of Energy (DOE) Department of Health and Human Services (HHS) Department of Homeland Security (DHS) Department of Housing and Urban Development (HUD) Department of the Interior (DOI) Department of Justice (DOJ) Department of Labor (DOL) Department of State (DOS) Department of Transportation (DOT) Department of the Treasury (TREAS) Department of Veterans Affairs (DVA) Appendix A. Nominations and Recess Appointments, 109 th Congress Appendix B. Appointment Action, 109 th Congress Appendix C. Senate Intersession Recesses, Intrasession Recesses of Four or More Days, and Numbers of Recess Appointments to Departmental Positions, 109 th Congress Appendix D. Abbreviations of Departments

During the 109th Congress, the President submitted to the Senate 283 nominations to executive department full-time positions. Of these 283 nominations, 233 were confirmed; nine were withdrawn; and 41 were returned to him in accordance with Senate rules. For those nominations that were confirmed, an average of 75 days elapsed between nomination and confirmation. The median number of days elapsed was 57. These statistics do not include the days during which the Senate was adjourned for its summer recesses and between sessions of Congress. President George W. Bush made a total of 13 recess appointments to the departments during this period. All 13 were made during recesses within the first or second session of the 109th Congress (intrasession recess appointments). None were made during the recess between the first and second sessions of the Congress (intersession recess appointments). Information for this report was compiled from data from the Senate nominations database of the Legislative Information System http://www.congress.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 "Plum Book" (United States Government Policy and Supporting Positions). This report will not be updated.

Eligibility for SNF Care To be eligible to receive Medicare Part A SNF coverage, a beneficiary must have had an inpatient hospital stay of at least 3 consecutive calendar days (not including the day of discharge) and must be transferred to a participating SNF, usually within 30 days after discharge from the hospital. In addition, Medicare requires SNFs to provide services for a condition the beneficiary was receiving treatment for during his or her qualifying hospital stay (or for an additional condition that arose while in the SNF). The treatment must require reasonable and necessary skilled nursing care or skilled rehabilitation services on a daily basis. Additionally, a limited number of services (e.g., rehabilitation services) may be reimbursed under Medicare Part B for non-covered SNF stays, such as SNF stays of beneficiaries that have not met the three-day inpatient hospital stay requirement. For more information and recent developments on this requirement, see CRS Report R44512, Medicare's Skilled Nursing Facility (SNF) Three-Day Inpatient Stay Requirement: In Brief . Overall, SNFs provide care to Medicare beneficiaries to treat a number of different diagnoses and conditions. Some of the more frequent hospital conditions of patients referred to SNFs for post-acute care are joint replacement, septicemia, kidney and urinary tract infections, hip and femur procedures not related to joint replacement, pneumonia, and heart failure. Covered SNF Services and Providers A Medicare beneficiary who qualifies for SNF coverage is entitled to up to 100 days of covered SNF care per spell of illness. Part A provides payment for daily skilled nursing, daily skilled rehabilitation, medical social services, drugs/biologicals, durable medical equipment, and bed and board when receiving such services, among other benefits. In general, nursing and rehabilitation services can be labeled skilled if they (1) require the skills of a health professional (e.g., registered nurse, physical therapist) and (2) are provided by or under the supervision of such personnel. Two examples of services that are both skilled nursing and skilled rehabilitation services are management and evaluation of the patient's plan of care, and observation and assessment of the patient. A few examples of skilled nursing services are intravenous injections, administration and replacement of catheters, administration of prescription medications, and supervision of bowel and bladder training programs. Some examples of skilled rehabilitation services are continuing assessments of a patient's rehabilitation needs, therapeutic exercises, and range-of-motion exercises. SNFs are more commonly found within urban areas and within long-term care nursing facilities (referred to as freestanding SNFs ). Of the 15,005 SNFs that furnished covered SNF care in 2014, roughly 95% were freestanding. The remaining 5% of SNFs were located in hospitals (referred to as hospital-based SNFs ). Additionally, approximately 70% of SNFs are for-profit facilities, 24% are nonprofit facilities, and 5% are government-owned facilities. SNF Prospective Payment System The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ) required most SNFs to be reimbursed under a prospective payment system (PPS) beginning on July 1, 1998. The SNF PPS reimburses providers a daily per diem amount after adjusting for urban or rural facility locale, case mix, and area wage differences (see Figure 1 ). Beginning April 1, 2013, through March 31, 2026, Medicare payments to SNFs will be reduced by 2% as a result of automatic spending reductions ( sequestration ). The SNF PPS covers most costs of furnishing SNF services to Medicare beneficiaries (routine, ancillary, and capital-related costs). To be reimbursed under the SNF PPS, Medicare requires SNFs to use consolidated billing practices. Under consolidated billing, the SNF bills Part A for most of the SNF services the Medicare beneficiaries receive, regardless of whether the service was provided by an outside contractor (e.g., physical therapist contractor) or by SNF personnel. In certain circumstances, consolidated billing does not apply and/or SNF services provided to the beneficiary are not billable to Part A. For instance, if an SNF resident were to exhaust his or her Part A benefits, coverage for some services, such as rehabilitation services, would still be provided under Part B for a beneficiary enrolled in Part B. Additionally, certain services are not reimbursed under the SNF PPS and may be separately billed to Part B. For the first 20 days of a Medicare-covered SNF stay, no beneficiary copayment is required. For the 21 st through the 100 th day, a daily copayment, indexed annually at one-eighth (12.5%) of the current Part A inpatient hospital deductible, is required. The copayment is not adjusted geographically or based on the amount of Medicare SNF reimbursement. In 2016, the daily SNF copayment is $161. The following sections explain in greater detail the SNF PPS formula depicted in Figure 1 , including the calculation of and update to (1) urban and rural base rates, (2) the case-mix classification system—Resource Utilization Groups (RUGs)—and (3) the wage index that is used to adjust payments for differences in area wages. Urban and Rural Base Rates The urban and rural base rates are the daily SNF reimbursement rates before any adjustments. Determination between an urban or rural base rate depends on whether the SNF is located within a core-based statistical area (CBSA). For SNF billing purposes, providers within CBSAs are reimbursed at an urban rate, while providers outside of CBSAs are reimbursed at a statewide rural rate. As shown in the left portion of Figure 1 , the urban and rural base rates are broken down into four separate components: noncase-mix, noncase-mix therapy, nursing case-mix, and therapy case-mix. The noncase-mix component reflects the administrative and room-and-board costs of providing SNF care, whereas the noncase-mix therapy component reflects the costs for minimal therapy use (e.g., rehabilitation evaluations). The base rate's nursing and therapy case-mix components respectively reflect the national average costs of nursing and more intensive therapy for a one-day stay in an SNF. Breaking down the base rate into four rate components allows the PPS to adjust the base rate by RUGs, which classify beneficiaries by varying levels of expected nursing and therapy intensity. Every RUG has a noncase-mix component and nursing case-mix component and either a noncase-mix therapy component or therapy case-mix component. The base rates were developed from FY1995 SNF cost reports and are updated annually for inflation by the percentage change in the SNF market basket index. The SNF market basket index is a composite of weighted price levels, based on FY2010 prices, which are estimated to capture an accurate picture of an average SNF provider's total costs. The change in the SNF market basket index from the prior year is referred to as the market basket update and is provided by IHS Global Insight, Inc. In the event actual cost report data shows the percentage change in SNF costs to be at least ½ percentage point greater than the market basket update, the base rate will receive an additional forecast error cor rection for the difference the following fiscal year. In addition to any forecast error correction, as required by the Patient Protection and Affordable Care Act of 2010 (ACA, as amended; P.L. 111-148 ), the market basket update is offset by a productivity adjustment rate that is equal to an average of the previous 10-year productivity rates in the broader economy. The SNF productivity adjustment began with the start of FY2012. Resource Utilization Groups The RUG classification system adjusts the urban or rural base rate for a beneficiary's expected SNF daily costs (i.e., nursing care, therapy care, bed and board, and drugs/biologicals). After admission to an SNF, a beneficiary is classified into a RUG, which can change over the course of his or her stay. The RUG is designed to be an accurate reflection of the beneficiary's SNF accommodation and service costs, given the beneficiary's medical conditions and current medical practices. The most recent version of the RUG classification system has 66 different groups within eight major categories: (1) Rehabilitation Extensive Services (Ultra High, Very High, High, Medium, Low); (2) Rehabilitation (Ultra High, Very High, High, Medium, Low); (3) Extensive Services; (4) Special Care High; (5) Special Care Low; (6) Clinically Complex; (7) Behavioral Symptoms and Cognitive Performance; and (8) Reduced Physical Function. The information used to assign a beneficiary into a RUG is gathered from the Minimum Data Set 3.0 (MDS). The MDS is one of three parts of the Resident Assessment Instrument (RAI), which must be completed for all residents in Medicare- and Medicaid-certified nursing homes. The additional two parts are the Care Area Assessment (CAA) and RAI Utilization Guidelines. The RAI is designed to help with "gathering definitive information on a resident's strengths and needs, which must be addressed in an individualized care plan." The MDS portion of the RAI gathers data over 15 different criteria: (1) hearing, speech, and vision; (2) cognitive patterns; (3) mood; (4) behavior; (5) preference for customary routine activities; (6) functional status; (7) bladder and bowel; (8) active diagnoses; (9) health conditions; (10) nutritional status; (11) dental status; (12) skin conditions; (13) medications; (14) special treatments, procedures, and programs; and (15) restraints. SNFs are required to complete the MDS for a beneficiary to receive reimbursement under Part A. The MDS assessments for Medicare payment are required to be completed on or about the 5 th day, 14 th day, 30 th day, 60 th day, and 90 th day of a patient's stay. For the most part, the MDS assessments' "look back" period, the time frame for gathering the patient's clinical information, is the seven days prior to the MDS payment assessment requirement dates. In addition to Medicare-required MDS assessments, federal law requires SNFs (as well as nursing homes) to complete the MDS and CAA for dual-eligible Medicare- and Medicaid-covered residents. These assessments must be completed near the beneficiaries' 92 nd day of stay, 366 th day of stay, and in the event of a significant change or correction in the beneficiary's status. Such assessments may be combined with the Medicare-required assessment dates when applicable. The most recent version of the RUG classification system is RUG-IV, which replaced the RUG-53 system on October 1, 2010 (start of FY2011). There are 66 RUGs; each RUG has a nursing case-mix index, and some RUGs have an additional therapy case-mix index, together known as RUG weights. The RUG weights are used to adjust the federal base rate for different levels of expected nursing and/or therapy intensity provided to the beneficiary. The federal base rate adjusted for a specific RUG is referred to as the case-mix adjusted rate. To create the case-mix adjusted rate, the relevant components of the urban or rural base rate must be added together. For each base rate, each RUG will have a noncase-mix component and a nursing component. The third and final component will be either a therapy case-mix component or a noncase-mix therapy component. The sum of all three components is the case-mix adjusted rate, which reflects the beneficiary's daily resource use before adjusting for area wage differences. The base rate's noncase-mix component is the same amount for every RUG. As shown in Figure 1 , the nursing component is determined by multiplying the base rate's nursing case-mix by the RUG-specific nursing case-mix index. Depending on the RUG, the third component will either be the base rate's non-casemix therapy amount, which is the same across RUGs, or the base rate's therapy case-mix multiplied by the RUG-specific therapy case-mix index, if applicable. Wage Index After adjusting for a beneficiary's case-mix, a share of the case-mix adjusted rate is adjusted for area wage differences. In order to calculate the area wage adjustment, the case-mix adjusted rate must be split into a labor-related share and a non-labor-related share. The labor-related share represents the amount of labor-related costs relative to total costs for providing SNF services to the average beneficiary. This labor-related share has historically been roughly 70% of the case-mix adjusted rate, with the remaining 30% allocated as the non-labor-related share. As shown in Figure 1 , the labor-related share of the case-mix adjusted rate is multiplied by a hospital wage index specific to the location of the SNF to account for differences in area wages. The SNF wage index is calculated from a survey of wages and wage-related costs from acute care hospitals (because specific SNF wage data does not exist). For areas with no hospitals and wage-related data available, adjacent areas are used as a proxy measure for the missing cost information. The wage index is updated every year but receives an adjustment so the updated wage index does not increase or decrease aggregate Medicare SNF payments. After the wage index number has been determined and multiplied by the labor-related portion, the product is added back to the non-labor-related share. Finally, as shown in Figure 1 , the global per diem rate is the sum of the labor-adjusted product and non-labor-related share. The global per diem rate is the final reimbursement rate of daily SNF care reimbursed through Part A. For the most part, the global per diem rate and the beneficiary's length of stay in the SNF determine the total reimbursement amount to the SNF for the stay. Medicare SNF Expenditures and Payment Adequacy The following provides a brief summary of total Medicare SNF expenditures and the Medicare Payment Advisory Commission's (MedPAC's) analysis on the adequacy of these payments and the potential implications of using SNF payments to subsidize Medicaid nursing facility payments. In 2014, Medicare FFS spending on SNF care totaled $28.6 billion. SNF payments have grown as an overall share of Medicare spending for the past two decades. In 1990, Medicare payments to SNFs represented 1.8% of total Medicare FFS spending, increasing to 8.0% of total Medicare FFS spending in recent years. In 2014, the for-profit Medicare margin and nonprofit Medicare margin were 14.9% and 3.9%, respectively, for freestanding SNFs. The total Medicare margin for freestanding SNF care in 2014 was 12.5%. While MedPAC has found that Medicare reimbursements appear to be well above costs for SNFs in the aggregate, Medicare contributes 21% of the median nursing care facility's total revenue, with Medicaid payments comprising the largest share of revenue. Therefore, MedPAC's analysis on the financial performance of Medicare payments for SNF care may capture only about a fifth of the financial picture of an average nursing facility. However, Medicare margins are only one factor that MedPAC considers when assessing the adequacy of Medicare's payments and determining its annual payment update recommendation. MedPAC weighs other indicators, such as beneficiaries' access to care (the capacity and supply of providers and the volume of services rendered), quality of care, and providers' access to capital as well. After examining these factors, MedPAC recommended that Congress implement a 0% update to SNF payment rates for FY2017 and FY2018. MedPAC has recommended a 0% update to SNFs since March 2002. Medicare SNF Rate-Setting Policy and Medicaid The largest payer to all nursing facilities is the Medicaid program. When stratifying freestanding SNFs by percentage of total Medicaid patient days, in the median nursing facility, roughly 61% of its patient days were covered by Medicaid in 2014. Industry advocates insist that Medicaid does not cover the total costs of providing nursing facility services to its beneficiaries and that Medicare should subsidize Medicaid payments through its SNF reimbursements. Evidence suggests payments from non-Medicare payers do not cover the costs of their residents. In 2014, the non-Medicare margin (nursing facility payments from Medicaid, private, and other public payers less costs) was -1.5%. When including Medicare, however, the nursing facility industry's total margin was 1.9%. MedPAC has examined potential implications of targeting Medicare SNF reimbursements to compensate for inadequate payments from other providers. According to MedPAC, this strategy results in poorly targeted subsidies. Facilities with high shares of Medicare payments—presumably the facilities that need revenues the least—would receive the most in subsidies from the higher Medicare payments, while facilities with low Medicare shares—presumably the facilities with the greatest need—would receive the smallest subsidies. MedPAC also states that if Medicare raises or maintains its high payment levels, states could be encouraged to further reduce their Medicaid payments and, in turn, create pressure to raise Medicare rates. SNF Value-Based Purchasing Program Section 215 of the Protecting Access to Medicare Act (PAMA; P.L. 113-93 ) requires the Secretary of Health and Human Services (the Secretary) to establish a Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program beginning on or after October 1, 2018. In general, VBP refers to the Centers for Medicare & Medicaid Services (CMS) initiative that rewards health care providers with incentive payments for the quality of care provided to beneficiaries. The intent of such a system is to reward quality of care and not just quantity of care. Similar VBP programs are already established within other Medicare provider payment systems (e.g., Hospital Value-Based Purchasing Program, End-Stage Renal Disease Quality Incentive Program). Under the SNF VBP Program, an SNF's current Medicare per diem reimbursement may be increased or reduced to reflect its SNF VBP performance score beginning on or after FY2019. The Secretary is required to develop a methodology for determining such total performance score based on performance standards. Performance standards will be established by the Secretary and reflect either the attainment of a certain level or improvement from the prior period (whichever scores better for the SNF) across a performance measure. The performance measure will be each SNF's all-cause, all-condition hospital readmission rate for Medicare SNF patients. In general, the hospital readmission rate will be the number of SNF residents readmitted to the hospital during their SNF stay in a given year divided by the total number of SNF residents. This all-cause all-condition hospital readmission rate measure will be replaced, when practicable, by an all-condition, risk-adjusted potentially preventable hospital readmission rate, which is to be further specified by the Secretary no later than October 1, 2016. The law does not require that these measures be endorsed by the National Quality Forum (NQF). Additionally, these measures do not have to be included in the pre-rule making selection process by NQF's Measure Application Partnership (MAP)—a multi-stakeholder group convened for the selection of quality measures pursuant to Section 1890A(a) of the Social Security Act. Further, beginning October 1, 2016, and every quarter thereafter, the Secretary will provide confidential feedback reports to SNFs on their all-cause hospital readmission performance and their risk-adjusted potentially preventable hospital readmission performance. Under the SNF VBP Program, SNFs will be ranked based on the performance score from high to low. High-performing SNFs (that have attained relatively low hospital readmission rates or greatly improved [reduced] their hospital readmission rates) will receive a percentage add-on—a "value-based incentive payment"—in addition to their regular Medicare SNF per diem payments. SNFs ranked higher will receive a higher percentage add-on. Such percentage add-on may be zero, and SNFs ranked in the lowest 40% will receive a reduction in their Medicare SNF per diem payment rates. Payment adjustments for each SNF, either incentive payments or a reduction in the per diem for a fiscal year, will apply only to such fiscal year. Value-based incentive payments awarded to high-performing SNFs will be funded through a portion of a 2% reduction in Medicare per diem payments applied to all Medicare-covered SNF days beginning in FY2019. Between 50% and 70% of the 2% reduction applied each fiscal year, subject to the Secretary's discretion, will be allocated for value-based incentive payments, while the remaining proportion will be retained as savings to the Medicare program. Information on the SNF VBP Program, including each SNF's performance score, which SNF was awarded incentive payments, and the total amount of incentive payments that had been provided, will be posted on the Medicare's Nursing Home Compare website. Post-Acute Care Reform Medicare SNF care has often been discussed in the context of other Medicare-covered post-acute care benefits. Observers have noted that there is wide geographic variation in Medicare payments and delivery of post-acute care (including SNF care). In response to such concerns, Congress passed the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act; P.L. 113-185 ) on October 6, 2014, and the Center for Medicare & Medicaid Innovation (CMMI), established under the ACA, has tested alternative payment models for reimbursing post-acute care. The IMPACT Act attempts to improve Medicare quality comparison and payment accuracy for post-acute care settings—LTCHs, IRFs, SNFs, and home health care—by gradually eliminating certain differences in post-acute care assessment instruments beginning on or after October 1, 2016. For SNFs, the IMPACT Act will result in changes to the MDS. The IMPACT Act will require the Secretary to provide feedback to post-acute care providers on quality measure and resource use measure performance beginning October 1, 2017. The Secretary will then create procedures for making quality measure performance and resource use measure performance publicly available beginning October 1, 2018. Following the public reporting stage, the Secretary will submit a report to Congress regarding alternative models for a post-acute care provider payment system that unifies payment across post-acute care settings including SNFs. This report will include recommendations on (1) a technical prototype of a post-acute care PPS, (2) methods to incorporate standardized patent assessment data, and (3) further clinical integration, among other recommendations. The report will be submitted no later than two years after the Secretary has collected two years of data on quality measures. Additionally, MedPAC is required to submit a report to Congress no later than June 30, 2016, that includes recommendations for a technical prototype for a post-acute care PPS that would satisfy the criteria submitted in the Secretary's report. The CMMI was created for the purpose of testing innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care. Under some of the CMMI Medicare models that affect post-acute care, providers are allowed to construct gainsharing agreements—agreements among providers (e.g., hospitals, post-acute care providers) to share monies—from increased efficiencies in delivering health care following a hospitalization. Incentive payments under gainsharing agreements can be available for reducing Medicare FFS spending for certain beneficiaries below a Medicare episode spending benchmark. For example, Model 3 of the Bundled Payment for Care Improvement Initiative allows post-acute care providers and other providers to collaborate and choose certain episodes (e.g., post-acute care following a pneumonia hospitalization) and certain episode lengths (e.g., 90 days of Medicare FFS spending after hospital discharge) to achieve such incentive payments. A similar payment model being tested at CMMI—the Comprehensive Care Joint Replacement (CJR) Model—provides a 90-day Medicare episode spending benchmark to participants who provide a lower-extremity joint replacement procedure to beneficiaries. For more information on the CJR Model, see CRS In Focus IF10310, The Comprehensive Care Joint Replacement Model .

A Medicare skilled nursing facility (SNF) is an institution, or distinct part of an institution (e.g., building, floor, wing), that provides post-acute skilled nursing care and/or skilled rehabilitation services, has in effect a written agreement to transfer patients between one or more hospitals and the SNF, and is certified by Medicare. In general, skilled nursing and rehabilitative care are services ordered by a physician that require the skills of professional personnel (e.g., registered nurse, physical therapist) and are provided under the supervision of such personnel. Over 95% of SNFs are within long-term care facilities (or nursing homes). A Medicare beneficiary is entitled to 100 days of SNF care for each Medicare-covered SNF stay. To be eligible for SNF coverage, a Medicare beneficiary must have been an inpatient of a hospital for at least 3 consecutive calendar days and transferred to a participating SNF usually within 30 days after discharge from the hospital. Beneficiaries must also receive treatment at the SNF for a condition they were receiving treatment for during their qualifying hospital stay (or for an additional condition that arose while in the SNF). For beneficiaries who meet these requirements, Medicare Part A may provide up to 100 days of coverage for the SNF stay. Under Medicare Part A, SNFs are reimbursed under a prospective payment system (PPS), which began on July 1, 1998. The SNF PPS provides payment for bed and board, nursing care, therapy services, drugs, durable medical equipment, and certain ancillary services under a bundled per diem "per day" reimbursement amount, rather than Medicare paying for each item or service individually. For the first 20 days of SNF coverage, Medicare beneficiaries have no copayment. Medicare beneficiaries have a daily SNF copayment for the 21st through the 100th day indexed annually at one-eighth (12.5%) of the current Part A deductible. For 2016, the daily copayment is $161. This report describes in further detail the Medicare SNF benefit and its resident population, covered SNF services and providers, and the SNF PPS. In addition, this report describes the Skilled Nursing Facility Value-Based Purchasing Program—a quality-based payment policy change included in the Protecting Access to Medicare Patients Act (PAMA; P.L. 113-93)—and other post-acute care reform efforts.

Introduction This report provides an analytic overview of the professional experiences and qualifications of those individuals who are currently serving as active U.S. circuit court judges. Ongoing congressional interest in the professional experiences of judicial nominees reflects, in part, the evaluative role of Congress in examining the qualifications of those who are nominated by the President to life-tenure positions. Senators, when giving floor speeches supporting circuit court nominations, routinely highlight certain professional experiences or qualifications often considered important to serving as a federal judge. Examples of such statements include the following: A Senator noting that a nominee to the Fourth Circuit Court of Appeals had 22 years of prior judicial experience "at the State courts and the Federal courts." The Senator stated that the nominee "has not only served as a distinguished judge, but also he came to the courts as an experienced prosecutor. He was with the Civil Rights Division at the Department of Justice and with the U.S. Attorney's Office in Maryland." A Senator noting that a nominee to the First Circuit had joined a prestigious law firm in the Senator's home state, "where over the subsequent 32 years [he] specialized in complex civil litigation at both the trial and appellate levels." The Senator also stated that the nominee had served as chairman of the state's Professional Ethics Commission and as president of the state's bar association, and that "his 30-plus years of real-world litigation experience would bring a valuable perspective to the court." A Senator emphasizing that a nominee to the Seventh Circuit Court of Appeals would "bring almost 12 years of judicial experience" to the bench as a result of her service on the Wisconsin Supreme Court and as a trial judge on the Milwaukee County Circuit Court. The Senator also noted that prior to the nominee's service as a state judge, the nominee had "practiced commercial litigation for 7 years at one of Wisconsin's most prestigious law firms." The professional experiences of judicial nominees are also of interest to interest groups, particularly professional organizations such as the American Bar Association (ABA). Judicial nominees are evaluated by the ABA's Standing Committee on the Federal Judiciary. The committee's evaluation criteria focus "strictly on professional qualifications: integrity, professional competence and judicial temperament." The committee "believes that a prospective nominee to the federal bench ordinarily should have at least twelve years' experience in the practice of law" and that "substantial courtroom and trial experience as a lawyer or trial judge is important." The committee also notes, however, that "distinguished accomplishments in the field of law or experience that is similar to in-court trial work ... may compensate for a prospective nominee's lack of substantial courtroom experience." For prospective circuit court nominees, the committee states that "because an appellate judge deals primarily with the review of briefs and the records of lower courts, the committee places somewhat less emphasis on the importance of trial experience as a qualification for the appellate courts." Additionally, the professional or career experiences of judges prior to the start of their judicial service has also been of interest to scholars examining whether particular professional experiences might influence or explain variation in aspects of judicial decision making (e.g., whether a judge votes in a consistent ideological direction, the sources relied upon by a judge in reaching his or her decisions, whether a judge decides to publish his or her opinions, etc.). For example, one study found that prior judicial experience for U.S. circuit court judges did not influence variation in judicial decision making in terms of the extent a judge voted in a consistent ideological fashion (such prior experience might have been hypothesized to be a source of consistency in judicial voting). Another study found that district court judges whose primary work before becoming a judge involved non-private practice work experience (e.g., working as a government attorney or law professor) were less likely to rely on regulations and other Internal Revenue Service pronouncements in interpreting the federal tax code than judges whose work prior to becoming a judge was predominately as an attorney in private practice. Other scholars suggest that the lack of career diversity among federal judges might be problematic, in terms of the lack of diversity diminishing the institutional performance of the courts. Specifically, they argue that, given appropriate procedural conditions, "the greater diversity of participation by people of different [professional] backgrounds and experiences, the greater the range of ideas and information contributed to the institutional process." Consequently, in the context of judicial decision making, "judges with varied career experiences bring distinct perspectives to the bench—perspectives that ultimately lead them to make distinct judicial choices—[and] merging jurists with diverse career paths on a particular court ought ... [to] lead to more effective decision making" by that court. In light of ongoing interest in the professional qualifications of those nominated to circuit court judgeships, this report seeks to inform Congress by providing statistics related to the professional qualifications or experiences of those currently serving on the bench as U.S. circuit court judges. Specifically, this report provides statistics and analysis related to (1) the percentage of active circuit court judges with judicial experience, as well as the type of judicial experience; (2) the percentage of active circuit court judges with private practice experience, as well as the length of time of such experience; and (3) the percentage of active circuit court judges by professional experience immediately prior to their appointment to a circuit court judgeship. Data Caveats Note that the statistics provided in this report are based upon the professional experiences of individuals serving, as of February 1, 2014, as active U.S. circuit court judges. Consequently, the statistics do not include circuit court judges who, prior to February 1, 2014, had assumed senior status, retired, or resigned. The total number of circuit court judges included in the analysis is 163. Consequently, this is the denominator used to calculate most of the statistics included in the report. The analysis is based on information provided by the Biographical Directory of Federal Judges . This report will be updated annually by CRS at the beginning of each calendar year. Most Common Types of Professional Experiences Figure 1 provides statistics related to the two most common types of professional experiences of U.S. circuit court judges who are currently serving on the bench—prior judicial experience and experience working as an attorney in private practice. The percentages reported for the two types of experiences are not mutually exclusive, meaning that there is some overlap between the two categories. For example, 47.9% of all active circuit court judges have both prior judicial experience as well as experience as an attorney in private practice (while 9.0% have neither prior judicial nor private practice experience). Altogether, 54.6% of U.S. circuit court judges who are currently serving had prior experience as another type of judge before their appointment to a circuit court (and 45.4% had no such experience). Of the judges with prior judicial experience, 22.7% served solely as another type of federal judge (e.g., a U.S. district court judge), while 20.9% served solely as a state judge and another 11.0% had both prior federal and state judicial experience. Of the 74 circuit judges with no prior judicial experience, 81.8% had worked as attorneys in private practice, including 39.2% who worked in private practice for 15 or more years (and another 14.9% who worked in private practice for 10 to 14 years). Although over half of active circuit court judges have prior judicial experience (54.6%), a greater percentage have at least some prior experience as attorneys in private practice (84.7%). Similarly, while 45.6% of active circuit judges do not have prior judicial experience, a much smaller percentage, 15.3%, have no prior experience in private practice. Figure 1 also shows that of active circuit court judges with private practice experience, a plurality (26.4%) had 15 or more years of experience as attorneys in private practice. Another 21.5% had less than 5 years of experience, while 17.2% had 5 to 9 years of experience and 19.6% had 10 to 14 years of experience. Altogether, 46.0% of active circuit court judges had 10 or more years of experience as attorneys in private practice (while 54.0% had less than 10 years of experience or no private practice experience). Professional Position Immediately Prior to Appointment Figure 2 reports the percentage of active U.S. circuit court judges who had a particular type of position or occupation immediately prior to their appointment as a circuit court judge. So, for example, a plurality of active circuit court judges, 27.0%, were U.S. district court judges immediately prior to being appointed as circuit court judges. Altogether, half (50.3%) of all active circuit court judges were serving as another type of judge (either a U.S. district court judge, another type of federal judge, or a state judge). The percentage of circuit court judges serving as another type of judge immediately prior to appointment might be lower than what has been the case, historically, for circuit court judges (at least during the first half of the 20 th century). For example, of circuit court judges appointed during the seven presidencies from Theodore Roosevelt to Franklin Roosevelt, 63.7% were serving as another type of judge at the time of appointment or promotion to the U.S. courts of appeals. Additionally, 55.6% and 57.5% of Eisenhower and Johnson circuit court appointees, respectively, were serving as judges prior to their appointment to a circuit court. In general, service as a U.S. district court judge was the most common type of judicial experience of those serving as judges immediately prior to their appointment as a circuit court judge. As noted by one scholar, the "federal district court bench is a training camp for the federal courts of appeals bench. A president faced with a vacancy on a court of appeals looks, though not exclusively, to sitting district court judges." Of circuit court judges currently serving on the bench, approximately one-quarter (25.8%) were working as attorneys in private practice prior to being appointed as a circuit court judge, with 22.1% having worked in private practice for 10 years or more. Additionally, of those working in private practice for 10 years or more, 80.6% had been working as an attorney in private practice for at least 15 years. As the percentages reported in Figure 2 indicate, a relatively large majority of active circuit court judges (72.4%) were, prior to being appointed as circuit judges, serving as either another type of judge or engaged in private practice for 10 or more years (and often for 15 or more years). Other types of positions held by active U.S. circuit court judges prior to being appointed include working as an attorney at the Department of Justice (DOJ) or a U.S. Attorneys' Office (7.4%) or working as a law professor (6.7%). Another 9.8% of active circuit court judges held other types of positions immediately prior to being appointed. Of appointees of Democratic Presidents who are currently on the bench, the most common type of position immediately prior to appointment as a circuit court judge was service as another type of judge (54.8% of all active appointees), with a plurality (31.0%) having prior service as a U.S. district court judge. Other types of positions or occupations held by active circuit court appointees of Democratic Presidents immediately prior to appointment were attorneys in private practice (26.2%), attorneys at the Department of Justice or a U.S. Attorney's Office (8.3%), and law professors (6.0%). Of appointees of Republican Presidents currently on the bench, the most common type of position immediately prior to appointment as a circuit court judge was service as another type of judge (45.6%), with a plurality (22.8%) having served as a U.S. district court judge. Other types of positions or occupations held by active circuit court appointees of Republican Presidents immediately prior to appointment were attorneys in private practice (25.3%), attorneys at the Department of Justice or a U.S. Attorney's Office (6.3%), and law professors (7.6%). Another 15.2% of Republican appointees had another type of position or occupation immediately prior to their appointment. Conclusion This report provides a statistical overview of the professional qualifications and experiences of active U.S. circuit court judges. Ongoing congressional interest in the professional background of those nominated to the federal bench reflects, in part, the role of Congress in evaluating the qualifications of those who are nominated by the President to life-tenure positions. As discussed above, a majority of current circuit court judges have prior judicial experience. A greater majority of active circuit judges also have experience working as attorneys in private practice, often for relatively lengthy periods of time. There are, however, judges without either type of experience who have other types of professional experiences such as working as an attorney for the federal government or as a law professor.

This report provides an analysis of the professional qualifications and experiences of U.S. circuit court judges who are currently serving on the federal bench. Interest in the professional qualifications of those nominated to the federal judiciary has been demonstrated by Congress and others. Congressional interest in the professional experiences of those nominated by a President to the federal courts reflects, in part, the evaluative role of Congress in examining the qualifications of those who are nominated to life-tenure positions. Other organizations, such as the American Bar Association (ABA), also have an ongoing interest in the professional qualifications of those appointed to the federal judiciary. Additionally, scholars have demonstrated an interest in this topic by examining whether a relationship exists between the professional or career experiences of judges and judicial decision making. The analysis in this report focuses on the professional experiences of 163 active U.S. circuit court judges who were serving as of February 1, 2014. Active judges are those who have not taken senior status, retired, or resigned. Consequently, the statistics provided do not necessarily reflect all circuit court judges who are sitting on the bench (which include judges who have assumed senior status). Some of this report's findings include the following: A majority, 54.6%, of active circuit court judges had prior judicial experience at some point before being appointed as circuit court judges (and 45.4% had no such experience). Of the judges with prior judicial experience, 22.7% served solely as another type of federal judge (e.g., a U.S. district court judge), while 20.9% served solely as a state judge and another 11.0% had both prior federal and state judicial experience. A majority, 84.7%, of active circuit court judges had at least some prior experience as an attorney in private practice at some point prior to their appointment as a circuit judge. Of active circuit court judges with private practice experience, a plurality (26.4%) had 15 or more years of experience as an attorney in private practice. While 45.4% of active circuit judges do not have prior judicial experience, a much smaller percentage, 15.3%, have no prior experience in private practice. Circuit court judges without either prior judicial experience or experience as an attorney in private practice had other professional experiences such as working as an attorney for the federal government or as a law professor. Immediately prior to their appointment to the appellate bench, most circuit court judges were either serving as another type of judge or had been engaged in private practice for at least 10 years. Approximately half, 50.3%, of all active circuit judges were serving as another type of judge immediately prior to their appointment (i.e., serving as a district court judge, another type of federal judge such as a bankruptcy judge, or a state judge). Approximately one quarter, 25.8%, of active circuit court judges were working as attorneys in private practice immediately prior to being appointed as a circuit judge (with 22.1% having worked in private practice for 10 years or more).

Introduction In 1996, Congress passed the Defense of Marriage Act (DOMA, P.L. 104-199 ) "[t]o define and protect the institution of marriage." DOMA (1) allows states to refuse to recognize same-sex marriages or partnerships and (2) limits the recognition of these same-sex partnerships for purposes of any act of Congress or by any federal bureau or agency. As codified, DOMA has three sections. The first provides the bill's name, the second section allows states to determine whether to recognize same-sex marriage, and the third defines the terms marriage and spouse for the purposes of federal enactments. Specifically, Section 3 of DOMA says the following: In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word "marriage" means only a legal union between one man and one woman as husband and wife, and the word "spouse" refers only to a person of the opposite sex who is a husband or a wife. The federal government provides a variety of benefits to its workforce, including health care, life insurance, pensions, and paid time off for vacation and sick leave. Federal employees are permitted by law to extend certain health, long-term care, and other benefits to their spouses. DOMA prohibits the distribution of these spousal benefits to same-sex partners. The federal government, however, provides other benefits to federal employees that may be extended to those who are associated with a federal employee, but who are not necessarily the employee's spouse. In some cases, these benefits have been extended to the partners of federal employees who are in same-sex relationships. On June 17, 2009, President Obama issued a memorandum directing executive agencies to examine ways to extend benefits to federal employees in same-sex domestic partnerships or same-sex marriages within the authority of existing law. On July 10, 2009, Office of Personnel Management (OPM) Director John Berry issued a memorandum directing all executive-branch agencies to review and report on the benefits offered to opposite-sex partners—whether married or not—of federal employees. OPM and the Department of Justice (DOJ) reviewed these reports and suggested to President Obama actions that would extend some benefits to the same-sex partners of federal employees. On June 2, 2010, President Obama released a second memorandum that extended specific benefits and perquisites to the same-sex partners of federal employees. For certain benefits, the term spouse is either not found in the benefit's authorizing language or the authorizing language widens the scope of eligibility. The benefits that were extended by the memorandum are those whose authorizing statutes do not use the term spouse to define or limit potential recipients of the benefit. The Administration argues that its actions comply with all federal laws, including DOMA. Among other benefits, the memorandum extended certain childcare and sick leave benefits that had previously only been available to opposite-sex spouses—including the authority to take up to 24 hours of unpaid leave when a same-sex partner or a partner's child is ill. The newly extended benefits were made available upon the second memorandum's release. In the 112 th Congress, two bills were introduced that, if enacted, would have permitted a federal employee to provide insurance, travel, and other benefits to his or her same-sex partner. On November 18, 2011, Senator Joseph Lieberman introduced S. 1910 , the Domestic Partnership Benefits and Obligations Act of 2011, and Representative Tammy Baldwin introduced a companion bill, H.R. 3485 . On May 16, 2012, S. 1910 was ordered to be reported favorably from the Committee on Homeland Security and Governmental Affairs. H.R. 3485 was referred to the House Oversight and Government Reform Committee's Subcommittee on Workforce Protections, the House Education and the Workforce's Subcommittee on Workforce Protections, the House Judiciary's Subcommittee on Courts, Commercial and Administrative Law, and the Committee on House Administration. No further action was taken on the bill. Congress may elect to examine, prohibit, or enact into law Administration initiatives that made some benefits available to same-sex partners. Congress has the authority to determine if some, all, or none of the benefits that are available to the opposite-sex spouses of federal employees should be made available to the same-sex partners of federal employees. The Defense of Marriage Act and Federal Benefits The federal government provides a variety of benefits to federal civilian and military employees and retirees. Among these benefits are health insurance; enhanced dental and vision benefits; retirement and disability benefits and plans; survivor benefits; family, medical, and emergency leave; and reimbursement of relocation costs. Various federal laws and regulations determine who is eligible to receive these benefits. A federal employee who is married to someone of the opposite gender can, pursuant to federal law, extend many of these benefits to his or her spouse. DOMA affects the application of benefits to the spouses and partners of federal employees. DOMA defines marriage explicitly as "only a legal union between one man and one woman as husband and wife." DOMA defines spouse as "a person of the opposite sex who is a husband or a wife." Pursuant to DOMA, these definitions are to be used when "determining the meaning of any Act of Congress." As such, DOMA prohibits the extension of any federal spousal benefit to the same-sex partners of federal employees. In addition, specific laws or regulations, like the regulations for the Family Medical Leave Act, explicitly define spouse as a member of the opposite sex. Report language from the House Committee on the Judiciary in support of H.R. 3396 (104 th Congress; later enacted as DOMA) stated in its introduction that DOMA sought to protect states' rights to determine whether same-sex couples could marry and be eligible for benefits. DOMA, the report argued, anticipated certain legal questions that could arise from this arrangement. The report said the following: With regard to federal law, a decision by one State to authorize same-sex "marriage" would raise the issue of whether such couples are entitled to federal benefits that depend on marital status. H.R. 3396 anticipates these complicated questions by laying down clear rules to guide their resolution, and it does so in a manner that preserves each State's ability to decide the underlying policy issue however it chooses. According to report language, the federal government had four specific interests in mind when drafting DOMA: defending and nurturing the institution of traditional, heterosexual marriage; defending traditional notions of morality; protecting state sovereignty and democratic self-governance; and preserving scarce government resources. The latter governmental interest was described in greater detail later in the report: Government currently provides an array of material and other benefits to married couples in an effort to promote, protect, and prefer the institution of marriage. While the Committee has not undertaken an exhaustive examination of those benefits, it is clear that they do impose certain fiscal obligations on the federal government. For example, survivorship benefits paid to the surviving spouse of a veteran of the Armed Services plainly cost the federal government money. If Hawaii (or some other State) were to permit homosexuals to "marry," these marital benefits would, absent some legislative response, presumably have to be made available to homosexual couples and surviving spouses of homosexual "marriages" on the same terms as they are now available to opposite-sex married couples and spouses. To deny federal recognition to same-sex "marriages" will thus preserve scarce government resources, surely a legitimate government purpose. Executive Branch Actions to Extend Benefits to Same-Sex Partners of Federal Employees Some benefits to federal employees are extended specifically to the spouse of the federal employee, while the laws and regulations governing other benefits may not explicitly use the term spouse. The Obama Administration has extended to the same-sex partners of federal employees some benefits that do not have the term spouse in their governing authorities. The Administration has argued that they have done so within the parameters of DOMA. Some organizations, however, including the non-profit Family Research Council, have argued that the extension of these benefits is both costly and could undermine the federal definition of marriage. President Obama has issued two memoranda that address the eligibility of same-sex domestic partners for federal employee benefits. The first memorandum directed agencies to determine which benefits could be offered within the parameters of existing law. The second memorandum required agencies to extend specific benefits to the domestic partners of federal employees. The First Memorandum On June 17, 2009, President Obama released a memorandum directing all executive departments and agencies to review and evaluate their existing employee benefits to determine "which may legally be extended to same-sex partners." In his public statement accompanying the memorandum's release, he said that his Administration "was not authorized by existing Federal law to provide same-sex couples with the full range of benefits enjoyed by heterosexual married couples." The President said many private companies already offer such benefits to same-sex domestic partners, which "helps them compete for and retain the brightest and most talented employees. The Federal Government is at a disadvantage on that score right now, and change is long overdue." The memorandum required each executive department and agency to provide to the Director of OPM a report that included "a review of the benefits provided by their respective departments and agencies" in order "to determine what authority they have to extend such benefits to same-sex domestic partners of Federal employees." Agencies were given 90 days to complete their reviews. In addition, the memorandum instructed OPM to issue guidance regarding compliance with anti-discrimination policies in the hiring of federal employees (5 U.S.C. §2302(b)(10)). The memorandum was explicit in stating that all extensions of benefits and protections be "consistent with Federal law." No extension of benefits, therefore, could violate DOMA or any other law prohibiting the extension of benefits to same-sex domestic partners. The agency reports were due on September 15, 2009. OPM reviewed these reports and worked with the Department of Justice (DOJ) to recommend the extension of several federal benefits to the partners of federal employees in same-sex relationships. The Second Memorandum On June 2, 2010, President Obama released a memorandum that detailed the benefits OPM and DOJ recommended for extension to same-sex partners. The memorandum stated that children of same-sex partners fall "within the definition of 'child' for purposes of [f]ederal child-care subsidies, and, where appropriate, for child-care services." Additionally, the memorandum required extension of the following benefits: A same-sex partner will be deemed to have an insurable interest in a federal employee with respect to survivor annuities under the Civil Service Retirement System and Federal Employee Retirement System (5 U.S.C. §§8339 and 8420). The employee will no longer have to file an affidavit with OPM certifying that his or her domestic partner is financially dependent on the employee. A federal employee in a same-sex partnership is now eligible for 24 hours of unpaid leave when the child of a same-sex partner is dismissed early from school, a routine medical purpose, or the same-sex partner or his or her child needs medical care. The same-sex partner of a federal employee is now eligible to collect travel and relocation payments incurred as a result of a partner's new job or reassignment. The benefit is also extended to a same-sex partner's children. A same-sex partner and his or her children are now eligible to join a credit union, use a fitness facility, or participate in planning and counseling services that are currently extended to an opposite-sex spouse and family members. The memorandum also required OPM to report annually to the President "on the progress of the agencies in implementing this memorandum until such time as all recommendations have been appropriately implemented." Pursuant to the memorandum, the benefit extensions were effective immediately. Media reports noted "lukewarm" reaction from gay rights groups to the extension of "marginal" benefits. Survey of Particular Benefits Both federal employees and federal annuitants have access to certain benefits. Some of these benefits can be transferred to spouses or other designated persons. In some cases, a federal employee's spouse may be explicitly authorized to receive a federal benefit. In other cases, a federal employee may designate a particular person to receive a federal benefit. This section reviews benefits that cannot be extended to same-sex partners, others that are available to same-sex partners, and still others that have been made available to same-sex partners by the Obama Administration. These benefits have been mentioned in both current and previous legislation and executive-branch memoranda. Table 1 summarizes some of the benefits provided to federal employees and their spouses. It also provides information on whether these benefits are available to the same-sex partners of federal employees. Benefits Expressly Provided to Spouses Health Benefits The Federal Employees Health Benefits Program (FEHBP; 5 U.S.C. §8909; 5 C.F.R. §890) offers health benefits to qualifying federal employees and encompasses nearly 300 different health care plans. As with health care plans in the private sector, FEHBP provides benefits to enrollees for costs associated with a health checkup, an injury, or an illness. Health care costs are shared between the federal government and the enrollee. According to a 2010 study, the federal government pays, on average, 72% of a health plan's premium and 28% of the premium's cost is paid by the employee. Pursuant to the Code of Federal Regulations , certain family members of a federal employee are eligible to enroll in FEHBP. Among those eligible are an employee's spouse and children under age 22. Neither same-sex domestic partners of federal employees nor the partners' children are eligible to enroll in FEHBP. OPM's website states the following: Same sex partners are not eligible family members. The law defines family members as a spouse and an unmarried dependent child under age 22. P.L. 104-199 , Defense of Marriage Act, states, "the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife." Dental and Vision Benefits Federal employees may choose to enroll in the Federal Dental and Vision Program (FEDVIP; P.L. 108-496 ; 5 U.S.C. Chapter 89A and 5 U.S.C. Chapter 89B), which provides vision and dental benefits in addition to the limited coverage provided by FEHBP. Unlike FEHBP, however, the enrollee pays all benefit premium costs—the federal government does not contribute to the benefit's premiums. Like federal health benefits, federal employees may extend FEDVIP benefits to family members. Eligibility rules are identical to FEHBP's regulations. Both the Enhanced Dental Benefits program (5 U.S.C. §8951) and the Enhanced Vision Benefits program (5 U.S.C. §8981) are not extended to the same-sex partners of federal employees who are eligible for the benefit. OPM states on its website that "[t]he rules for family members' eligibility are the same as they are for the" FEHBP for both the dental and the vision programs. Federal Employment Compensation Act Benefits A federal employee is eligible for up to $100,000 in compensation if he or she is disabled while performing his or her job, pursuant to the Federal Employment Compensation Act (FECA; 5 U.S.C. Chapter §§8101-8193). If an employee is killed while performing his or her job, 5 U.S.C. §8102a requires that payment go to the deceased employee's spouse or children. The federal employee may also designate his or her parents or siblings as the compensation recipient. The same-sex partner of a federal employee is not listed in statute among the eligible recipients of such compensation. Federal Benefits Provided to Spouses and Others As noted earlier, for certain benefits, the term spouse is either not found in the benefit's authorizing language or the authorizing language widens the scope of eligibility. This section describes federal benefits that are either explicitly extended to same-sex partners of federal employees or those that allow federal employees to designate same-sex partners as beneficiaries. Family and Medical Leave Act Pursuant to the Family and Medical Leave Act (FMLA; P.L. 103-3 ; 5 U.S.C. Chapter 63), certain federal employees are entitled to use up to 12 weeks of unpaid leave during any 12-month period for any of the following reasons: the birth of a child of the employee and follow-up care related to that birth; the adoption of a child by the employee or placement of a foster child with the employee; the care of an employee's ailing spouse, child, or parent; an illness or condition of the employee that renders him or her unable to work; or the spouse, child, or parent of the employee is on covered active duty or has been notified of an impending call or order to covered active duty in the Armed Forces. The 12 weeks of unpaid leave may be used intermittently throughout the year, when the employee meets statutory and regulatory requirements of FMLA. FMLA regulations (5 C.F.R. §630.1201) define spouse explicitly as "an individual who is a husband or wife pursuant to a marriage that is a legal union between one man and one woman, including common law marriage between one man and one woman in States where it is recognized." A federal employee, therefore, may not use leave acquired pursuant to FMLA to care for an ailing same-sex domestic partner. A June 22, 2010, Department of Labor (DOL) Administrator Interpretation of FMLA interpreted the act's definition of "son or daughter" to permit an employee in a same-sex partnership to use FMLA-approved leave to care for the child of his or her same-sex partner. Prior to the Administrator Interpretation, a federal employee was not permitted to use leave acquired pursuant to FMLA to care for the ailing child of a same-sex domestic partner, unless the employee had legally adopted the child. The DOL interpretation applies to all employees in both the public and private sectors. Other Types of Leave On June 14, 2010, OPM released a final rule clarifying the definitions of family member and immediate relative as they are used in determining eligibility for certain kinds of leave—including sick leave, funeral leave, voluntary leave transfer, voluntary leave bank, and emergency leave transfer. The regulation formerly had defined "family member" as any one of the following: spouse, and parents thereof; children, including adopted children and spouses thereof; parents; brothers and sisters; and any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship. Pursuant to the new regulation, the definition of family member now also includes grandparents and grandchildren, and spouses thereof; and a domestic partner and parents thereof, including the domestic partner of any of the relatives listed above. The new regulation also modified existing or added new definitions to criteria that determine if same-sex partners would be eligible for certain leave benefits. For example, the terms committed relationship , domestic partner , parent , and son or daughter were added into the Code of Federal Regulations. The modified regulation applies to leave benefits for both same-sex and opposite-sex partnerships, and includes but is not limited to partnerships recognized by a state, territory, or district government. The regulation became effective June 14, 2010. The regulation does not appear to affect FMLA. Life Insurance In some cases, a federal employee may not choose to enroll a spouse or same-sex partner in a federal benefit program. Instead, the employee may designate any individual as the recipient of a federal benefit. Pursuant to 5 U.S.C. Chapter 87, most federal employees, including part-time employees, are automatically enrolled in the Federal Employees' Group Life Insurance (FEGLI) program, which is administered by Metropolitan Life Insurance Company. Federal employees pay two-thirds of their life-insurance premium, and the federal government pays the remaining third. A federal employee may designate anyone, including a same-sex partner, as their life insurance beneficiary by filing an SF 2823 form. A federal employee's spouse would automatically receive the federal benefit if he or she did not specifically designate a different beneficiary, pursuant to federal law (5 U.S.C. §8705(a)). In 5 U.S.C. §8701, the section of U.S. Code that defines the terms used on statutes that govern federal life insurance, family member includes the phrase spouse of the individual when listing eligible beneficiaries. Title 5 U.S.C. §8705, the section of code that delineates the order of preference in which life insurance benefits would be distributed in the event of a federal employee's death, says life insurance benefits would first be distributed to any person or entity that was selected by the employee using the SF 2823 form. If no form was completed, the benefit would then go to "the widow or widower of the employee." It would appear, therefore, that DOMA would preclude same-sex domestic partners from qualifying as a widow or widower. Federal Employee Pensions and Survivor Benefits Federal employees with permanent appointments are eligible for retirement and disability benefits under either CSRS or FERS. Employees hired before January 1, 1984, are covered by CSRS unless they chose to switch to FERS during open seasons held in 1987 and 1998. Most federal employees initially hired into permanent federal employment on or after January 1, 1984, are covered by FERS. CSRS and FERS provide (1) a defined benefit pension plan, which pays a monthly dollar amount for the lifetime of the retiree; and (2) access to the Thrift Savings Plan (TSP), which is a defined contribution retirement savings plan in which employee and (for employees covered by FERS) agency contributions accrue tax-deferred investment earnings in a retirement savings account. Benefits Under CSRS/FERS Defined Benefit Pension Plan Workers covered by the CSRS or FERS defined benefit pension plan receive a monthly retirement annuity for the lifetime of the retiree if the retiree meets all eligibility requirements. The payment in retirement is determined by a formula that uses the worker's number of years in federal service, an accrual percentage, and salary base. The accrual rate is higher for employees under CSRS than under FERS. Workers covered by CSRS do not participate in Social Security, do not receive Social Security benefits, and do not pay Social Security taxes. Workers covered by FERS fully participate in Social Security. Under CSRS and FERS, an eligible spouse is entitled to receive monthly retirement benefits if (1) the covered worker dies while employed in federal service; or (2) the covered worker dies after retirement. When a federal employee dies, the surviving spouse of the deceased federal employee may be entitled to a survivor's benefit. When a married federal worker retires, the married couple receives a monthly retirement benefit for the longer of the lifetime of the worker or the spouse. The monthly benefit in retirement is reduced to account for the expected longer time period in which the benefit will be paid. The spousal benefit is the default option for married federal employees, unless both the federal worker and spouse provide written consent to waive the benefit. Title 5 of the U.S. Code , which governs benefits under CSRS and FERS, defines the term spouse without reference to the individual's gender. Title 5 does not define the word marriage ; however, the Code of Federal Regulations defines marriage for purposes of determining eligibility for federal retirement benefits under Title 5 as "a marriage recognized in law or equity under the whole law of the jurisdiction with the most significant interest in the marital status of the employee, member, or retiree unless the law of that jurisdiction is contrary to the public policy of the United States." Since DOMA defines a spouse as "a person of the opposite sex who is a husband or a wife," same-sex partners are ineligible to receive spousal benefits entitled to opposite-sex partners. If a federal employee dies, and no survivor annuity is payable to a spouse, former spouse, or a child, then the employee's contributions to CSRS and FERS may be returned as a lump-sum benefit. Under both FERS and CSRS, an employee may designate anyone, including a same-sex partner, as his or her beneficiary for a lump-sum refund of retirement contributions to the retirement system. If anyone qualifies to receive survivor annuity benefits by law (such as a spouse or dependent child), however, retirement contributions cannot be refunded. If no survivor benefit is payable and the employee has not designated a beneficiary, then the return of contributions will be distributed based on the order of precedence. The order of precedence awards the benefits in the following order: widow or widower; child or children equally, and to the descendants of deceased children; parents equally or surviving parent; appointed executor or administrator of estate; or next of kin who is entitled to your estate under the laws of the state in which the employee resided at the time of death. Insurable Interest Annuity Although a federal employee cannot name a domestic partner as his or her surviving beneficiary under either FERS or CSRS, an employee who is applying for a non-disability retirement can elect an Insurable Interest Annuity (IIA), which is a survivor annuity to an individual who is financially dependent on the employee. Only one person may be named as the beneficiary of the IIA, and the election must be made at the time of retirement. The employee must establish, through one or more affidavits from other people, the reasons why the beneficiary might reasonably expect to suffer loss of financial support as a result of the employee's death. The cost of an IIA can range from a 10% reduction in the employee's retirement annuity if the beneficiary is 10 years younger than the employee to a 40% reduction if the beneficiary is 30 or more years younger. TSP Defined Contribution Pension Plan Both CSRS- and FERS-covered workers may contribute up to $17,000 in 2012 ($22,500 for those age 50 and older) to the Thrift Savings Plan (TSP). Contributions to TSP are excluded from taxable income; taxes are paid when funds are withdrawn in retirement. Employees covered by FERS receive an agency matching contribution of up to 5% to their TSP account. Workers covered by CSRS do not receive agency matching contributions. A federal employee can name anyone, including a domestic partner, as the beneficiary under the TSP. The beneficiary will receive the amount in the TSP account following a participant's death. For spouses who are beneficiaries of a deceased TSP participant and the account is $200 or more, TSP establishes a beneficiary participant account. The beneficiary account is automatically invested in the Government Securities Investment (G) Fund until the spouse beneficiary elects different investment options. The spouse may keep the funds in the TSP beneficiary account or elect to withdraw or transfer the funds to an Individual Retirement Account (IRA) or other retirement plan, if the plan allows. Non-spouse beneficiaries cannot retain a TSP account. The funds in a deceased participant's account are either transferred directly to the non-spouse beneficiary or to an inherited IRA. Death Benefits If No Beneficiary Is Named If an employee does not designate one or more beneficiaries under FERS, CSRS, or the TSP, the funds will be distributed based on the order of precedence. The order of precedence awards the benefits in the following order: widow or widower; child or children equally, and to the descendants of deceased children; parents equally or surviving parent; appointed executor or administrator of estate; or next of kin who is entitled to the estate under the laws of the state in which the employee resided at the time of death. Thus, the funds from the TSP or CSRS/FERS lump-sum benefit will bypass a same-sex partner unless the federal employee actively designates that person as the beneficiary. Federal Long Term Care Federal employees may apply for the Federal Long Term Care Insurance Program (FLTCIP; P.L. 106-265 ; 5 U.S.C. §9001), which provides medical services for enrollees who suffer a chronic medical condition and are unable to care for themselves. Employees may voluntarily opt into FLTCIP, and the entire premium is covered by the enrollee. Pursuant to 5 U.S.C. §9001, qualifying federal employees; members of the uniformed services; federal annuitants; current spouses of federal employees, servicemembers, or annuitants; adult children of federal employees, servicemembers, or annuitants; and parents, parents-in-law, and stepparents of federal employees, servicemembers, or annuitants are eligible to enroll in FLTCIP. In addition, federal law states that OPM may prescribe regulations that permit an "individual having such other relationship" to a federal employee, servicemember, or annuitant to enroll in FLTCIP. On June 1, 2010, OPM published in the Federal Register a final rule that expanded the definition of qualified relative to include "the same-sex domestic partners of eligible Federal and U.S. Postal Service employees and annuitants." As of July 1, 2010, same-sex partners of federal employees are eligible for FLTCIP benefits. Several comments received by OPM during the regulatory review of the definition change of qualified relative requested that opposite-sex domestic partners—in addition to same-sex partners—be made eligible for the long term care benefit. In the final rule, however, OPM wrote that "opposite-sex domestic partners were not included because they may obtain eligibility to apply for Federal long term care insurance through marriage, an option not currently available to same-sex domestic partners." Legislation to Affect Benefits for the Same-Sex Partners of Federal Employees 113th Congress As a February 28, 2013, no bills have been introduced that would affect the benefits of same-sex partners of federal civilian employees. 112th Congress In the 112 th Congress, however, two bills were introduced that, if enacted, would have provided insurance, travel, and other benefits to the same-sex partners of federal employees. H.R. 3485 / S. 1910, Domestic Partnership Benefits and Obligations Act of 2011 On November 18, 2011, Senator Joe Lieberman—on behalf of himself and Senator Susan Collins—introduced S. 1910 , the Domestic Partnership Benefits and Obligations Act of 2011. That same day, Representative Tammy Baldwin introduced a companion bill, H.R. 3485 , in the House. S. 1910 was referred to the Committee on Homeland Security and Governmental Affairs. On May 16, 2012, the committee reported S. 1910 favorably with an amendment in the nature of a substitute. H.R. 3485 was referred to the Oversight and Government Reform Committee's Subcommittee on Workforce Protections, the House Education and the Workforce's Subcommittee on Workforce Protections, the House Judiciary's Subcommittee on Courts, Commercial and Administrative Law, and the Committee on House Administration. No further action was taken. Among the benefits the bills sought to extend were the following: health insurance and enhanced dental and vision benefits (5 U.S.C. Chapters 89, 89A, 89B); retirement and disability benefits and plans (5 U.S.C. Chapters 83, 84; 31 U.S.C Chapter 7; 50 U.S.C. Chapter 38); family, medical, and emergency leave (2 U.S.C. §1312; 3 U.S.C. §412; 5 U.S.C. Chapter 63 – subchapters II, IV, and V; 29 U.S.C. §2601 et seq.); federal group life insurance (5 U.S.C. Chapter 87); long-term care insurance (5 U.S.C. Chapter 90); compensation for work injuries (5 U.S.C. Chapter 81); benefits for disability, death, or captivity (5 U.S.C. §§5569 and 5570; 22 U.S.C. §3973; 42 U.S.C. §3796 et seq.); and travel, transportation, and related payments and benefits (5 U.S.C. Chapter 57; 22 U.S.C. §4981 et seq.; 10 U.S.C. §1599b; 22 U.S.C. Chapter 52; 33 U.S.C. §3071). Pursuant to S. 1910 , each qualifying federal employee seeking to enroll his or her same-sex domestic partner in a federal benefit program would have been required to file an affidavit of eligibility with OPM. In the affidavit, the employee would have had to "attest" that he or she was in a "committed domestic-partnership," which included the following conditions: the partners "are in a committed domestic-partnership relationship with each other ... and intend to remain so indefinitely"; the partners "have a common residence and intend to continue to do so"; the partners are at least 18 years old and are "mentally competent to consent to contract"; the partners "share responsibility for a significant measure of each other's common welfare and financial obligations"; the partners are not "married to or in a domestic partnership with anyone except each other"; the partners are not related by blood in a way that would prohibit legal marriage between individuals otherwise eligible to marry in the jurisdiction"; and the partners would be subject to the same ethical standards, financial disclosures, and conflict of interest requirements as those placed on the spouses of federal employees (5 U.S.C. Appendix; 5 U.S.C. §§3110, 7301, 7342(a)(1),7351, 7353; 2 U.S.C. §1602(4)(D); 18 U.S.C. §§205(e), 208(a); 31 U.S.C. §1353; 42 U.S.C. §290b(j)(2)). Additionally, the applicant would have had to attest that he or she understood that "as a domestic partner, each individual not only gains certain benefits, but also assumes some obligations." The bills' language provided for "criminal and other penalties" if certain legal obligations were violated. Both S. 1910 and H.R. 3485 would have required a federal employee to file a statement of dissolution within 30 days of the death of his or her same-sex partner or the dissolution of the relationship. Both bills would have provided benefits to the living partner of a deceased federal employee as if he or she were a widow or widower. Additionally, a former partner would have been entitled to benefits identical to that of a former spouse. Natural children or adopted step children of a federal employee's same-sex partner would have been entitled to benefits identical to that of a natural or adopted child of a federal employee's spouse, pursuant to the bills. Similar bills to both S. 1910 and H.R. 3485 were introduced in the previous seven Congresses. As of January 31, 2013, similar bills have not been introduced in the 113 th Congress. No bill was introduced in the 112 th Congress that sought to explicitly rescind the benefits extended by the Obama Administration. As of January 31, 2013, no bill has been introduced in the 113 th Congress that would rescind the benefits. Some Potential Policy Considerations Regarding Same-Sex Benefits and Federal Employees This section provides analysis of some potential policy considerations Congress may consider that are related to federal employees and the extension of health and other benefits to same-sex partners of federal employees. Congress may choose to examine or modify existing policies related to the extension of benefits to the partners of federal employees in same-sex relationships, or maintain existing policies. Currently benefits like health care, dental care and eye care are not available to the same-sex partner of a federal employee. Other benefits, like FMLA and life insurance, however, are. The Obama Administration has pledged its support for extending federal benefits to the same-sex partners of federal employees. The Administration has extended some benefits to same-sex partners and has argued that its actions are within the parameters of existing laws. DOMA, which was enacted by Congress and signed into law by President William J. Clinton, requires agencies to define spouse as a person of the opposite-sex, for the purpose of distributing federal benefits. Attracting and Hiring the Most Effective Employees Some may worry that not providing same-sex partner benefits makes the federal government a less attractive employment option to potential employees who have same-sex partners. They contend that to compete for the most effective and efficient workforce the federal government needs to offer benefits similar to those available in state and local governments and in the private sector. The Obama Administration, for example, has argued that by not extending same-sex benefits, the federal government faces difficulties recruiting and retaining high-performing employees who are in or who may enter into same-sex relationships. Estimates presented at congressional testimony in 2009 indicated that there were 34,000 federal employees in same-sex relationships, including state-recognized marriages, civil unions, or domestic partnerships. Such employees may instead choose to work for state, local, or tribal governments or private companies that provide benefits to same-sex domestic partners. When Congress enacted DOMA, report language that accompanied the legislation did not address whether denying such benefits could impede the federal government's ability to hire the most effective workers. At the time of DOMA's enactment, few employers offered same-sex benefits to their employees. There is no federal data that has tracked, over time, the availability of same-sex partner benefits to either public or private-sector employees. Such data could aid in the determination of whether private-sector employers or other levels of government have been offering benefits that the federal government has not. Domestic Partner Benefits in the Public and Private Sector Some private-sector and public-sector employers offer benefits to the domestic partners of their employees. The types and scope of the benefits offered, however, vary: some employers provide only health care benefits to domestic partners while other employers provide additional benefits—such as survivorship benefits under the employer's pension plan. A Congressional Research Service search of academic, legal, and other research databases, found that there appear to be few studies that track, over time, how many employers provide same-sex partner benefits to their employees and the scope of those benefits. Some studies, however, provide benefits data for a single date or over a short time span. This section provides data from these surveys. When DOMA was enacted, few employers in the private and public sector offered domestic partner benefits of any sort. For example, a study by Hewitt Associates LLC, a global management consulting company, found in 1997 that 10% of 570 large U.S. employers offered domestic partner benefits. In 2000, the percentage of companies surveyed by Hewitt that offered domestic partner benefits increased to 22%. According to the National Survey of Employer-Sponsored Health Plans conducted by Mercer, a global consulting company, 46% of corporations with 500 or more employees included same-sex domestic partners as eligible dependents in 2011, which was an increase from 39% in 2010. In testimony in July 2009 before the House Committee on Oversight and Government Reform, Dr. M.V. Lee Badgett, the research director of the Williams Institute, said that "[i]n the private sector, almost two-thirds of the Fortune 1000, and 83% of Fortune 100 companies" provide benefits to the same-sex partners of their employees and that 20 states, the District of Columbia, and "[m]ore than 250 cities, counties, and other local government entities cover domestic partners of other public employees." Many employers do not provide domestic-partner benefits. The nation's two largest private-sector employers—Walmart and Exxon Mobil—do not provide benefits to same-sex partners in the United States. Other employers that provide benefits to same-sex partners—including I.B.M., Corning, and Raytheon—reportedly require same-sex couples to marry, if they live in a state where same-sex marriage is legal, to become eligible for health and other benefits. The Bureau of Labor Statistics Data In 2011, the Bureau of Labor Statistics (BLS), for the first time in its history, released data on benefits provided to the domestic partners of employees. In March 2012, BLS updated its survey data. The BLS survey asked workers whether (1) they had access to a defined benefit pension plan at their place of employment and whether they had access to survivor benefits for an unmarried domestic partner and (2) they had access to health benefits at their place of employment and whether there was access for unmarried domestic partners. According to the surveys, workers in the public-sector (which would include state, local, and tribal—but not federal government) were more likely to be offered domestic partner benefits than workers in the private sector. BLS reported the following: Among private-sector workers with access to a defined benefit pension plan, 35% had access to survivorship benefits for an unmarried domestic partner in 2011 and 42% in 2012. Among private sector, civilian workers with access to health care benefits, 29% had access to health benefits for an unmarried domestic partner in 2011. In 2012, the survey data was more granular. According to the data, 30% of private industry employees had access to health care benefits for a same-sex partner (as opposed to an opposite-sex domestic partner). Among workers who worked for state and local governments, 54% had access to health benefits for an unmarried domestic partner. In 2012, the survey data was more granular. According to the data, 33% of state and local government employees had access to benefits for a same-sex partner (as opposed to an opposite-sex domestic partner). Generally, the 2012 data demonstrated that health care benefits were "more prevalent for same-sex partners than for [unmarried] opposite-sex partners." Cost Estimates of Providing Domestic Partner Benefits to Federal Employees In November 2012, CBO released its score of S. 1910 , which, as described above, sought to extend certain benefits and responsibilities to the same-sex partners of federal employees and annuitants. The score projected that the extension of benefits from FY2013 through FY2022 would cost the federal government $144 million in discretionary dollars over those 10 years. This estimate was $159 million and $211 million less than CBO's score of two similar bills from the 111 th Congress ( H.R. 2517 and S. 1102 , respectively). CBO's score of S. 1910 assumed less than 1% of the federal employee and annuitant population would have opted to enroll a same-sex partner in federal benefits programs. The score also estimated that federal government premiums for federal health care would have been reduced by $13 million over ten years if same-sex partners had been eligible to enroll. The savings would have emerged, according to CBO, because the law would have required health care providers to "recover payments when a third party is liable for the health care costs of a covered enrollee" and such recoveries would reduce government premiums. The CBO estimates of H.R. 2517 and S. 1102 from the 111 th Congress did not include recovery payment collections in their analyses. A 2008 academic study estimated the cost of extending same-sex partner benefits to federal employees and annuitants at $41 million in the first year and $675 million over 10 years. In testimony before the House Oversight and Government Reform Committee's Subcommittee on the Federal Workforce, Postal Service, and District of Columbia on July 8, 2009, Office of Personnel Management Director Berry estimated that extending benefits to the same-sex partners of federal employees and annuitants would have cost the government $56 million in 2010. Current budgetary circumstances may discourage Congress from extending benefits to the same-sex partners of federal employees and annuitants. As noted earlier in this report, when DOMA was enacted, the House report that accompanied the legislation stated that a primary goal of the law was to "preserve scarce government resources." Congress often considers more than the cost or cost savings of a policy when choosing whether to act on it. Extending benefits to the same-sex partners of federal employees is controversial, and may prompt moral or ethical concerns for Members on all sides of the issue. Some Members, for example, may believe that extending benefits to the same-sex partners of federal employees violates a law enacted to require that marriage, for purposes of federal benefit programs, be defined as the union of one man and one woman. Other Members, however, may believe that prohibiting the extension of benefits to same-sex partners results in unequal treatment of federal employees in same-sex relationships. Still other Members may argue that extending benefits to federal employees in same-sex domestic partnerships is unfair to employees in opposite-sex partnerships. For example, at a House Committee on Oversight and Government Reform hearing in July 2009, Representative Chaffetz said the following: Whether or not a heterosexual couple is dating and living together can meet all other standards except for the portion ... regarding ... same-sex status is of concern to me. If they ... are not afforded the same rights, this bill is directly discriminatory against heterosexual couples, and that, to me, is one of the unintended consequences that I have a serious concern [about] and question.... This report, however, does not address the ethical and legal debates surrounding DOMA and same-sex marriage. Policy Options and Specific Legislative Issues Policy Options in Response to the Administration's Actions As discussed earlier in this report, President Obama's June 2, 2010, memorandum to the heads of executive branch departments and agencies requires OPM to create and present to the President an annual report on agency progress toward the extension of certain benefits to same-sex domestic partners. Congress may choose to stop the extension of these benefits by enacting legislation explicitly prohibiting their extension. No legislation has been introduced that would scale back the same-sex partner benefits extended by the Obama Administration. Conversely, Congress has the authority to enact into law some, all, or none of the memorandum. Congress may choose to hold hearings to examine the implementation of the memorandum. Defining Same-Sex Partnerships The definition of "domestic partner" is in dispute. DOMA defines marriage, for purposes of federal benefit programs, as the union of one man and one woman. For the purposes of distributing federal benefits to the partners of opposite-sex couples, the federal government recognizes a spouse from the date of legal marriage to either divorce or death. State and local governments or companies that wish to provide domestic partner benefits need to define "domestic partner" for the purpose of the benefits. Some state and local governments and companies that operate in jurisdictions that recognize same-sex marriage or domestic partnerships have required that same-sex partners be married in order to receive domestic partner benefits. Employees in states that do not recognize same-sex marriage would be required to meet the definition required by the entity that is providing the benefits. It may be difficult to define the start and end of a same-sex partnership and because many same-sex partnerships are recognized in limited circumstances or not at all, the start and dissolution of such unions may vary based on jurisdiction. This could be problematic for the federal government as an employer because the federal government has employees in all 50 states, the District of Columbia, and the territories (as well as international employees)—some of which recognize same-sex marriages, some of which recognize domestic partnerships, and some of which do not recognize any same-sex partnership. If Congress chose to enact a law to extend same-sex partner benefits, it would have to define same-sex partnership to incorporate the various terms states use for such unions as well as capture such unions that exist in states that do not acknowledge same-sex relationships. In addition, Congress would have to specify what would constitute the start of such a partnership and what would qualify as its end. Verifying Who Qualifies for Benefits Married couples can use a marriage license to verify their committed relationship for legal purposes. Same-sex couples, however, have no license or other type of document to verify their relationship for federal legal purposes. If Congress were to provide benefits to the same-sex partners of federal employees, Congress may also decide that the federal government must verify that benefit applicants are in a committed, same-sex domestic partnership. Congress may determine that each agency should be given authority to verify whether an employee is in a same-sex relationship or if verification of a committed same-sex relationship would be more effective if it were centralized within OPM. Congress may choose to enact legislation that would make OPM the central clearinghouse for affidavits required to qualify for same-sex partner benefits. Designating OPM as the only agency with the authority to maintain those records could increase employee privacy, making it less likely that federal employees' private information is made public. Giving each individual agency the authority to maintain the affidavits could make the documents more susceptible to information leaks, as each agency could have a different system of recordkeeping. In addition, giving individual agencies the authority to file the affidavits makes it more likely that federal employees applying for the benefits may know the person with whom they must file the record, making the process less anonymous. Some federal employees may be less likely to enroll in the program if they must identify themselves as gay or lesbian in front of a co-worker. Moreover, many federal employees may leave one agency to take a temporary or permanent position in another. OPM may provide the most logical clearinghouse for benefits processing because it could remove the need for employees who move from one agency to another to reapply for the same benefits. On the other hand, Congress may determine that OPM's mission does not include this type of government-wide recordkeeping role related to federal benefits. Giving individual agencies the authority to certify employee affidavits would not task OPM with a responsibility it may not have the capacity to undertake. Some have expressed the concerns about the potential for abuse and that some employees may claim to be in a partnership solely for the purpose of receiving benefits. This could be the case if the requirements for obtaining recognition of a domestic partnership were less stringent than the requirements for opposite sex couples to obtain a marriage license. Benefits for Domestic Partners Some federal employees may not be married to their domestic partners, whether that partner is of the same or a different gender. As noted above, the domestic partners of these employees are not eligible to receive many federal benefits because they do not qualify as a "spouse," pursuant to federal law. In a House Oversight and Government Reform Committee report that accompanied a bill in the 111 th Congress that sought to extend same-sex partner benefits, the committee wrote the following: federal employees living with opposite sex domestic partners have the option of marriage, which would entitle the employee and his or her spouse to the receipt of these benefits. Same sex partners may only get married in a handful of states. Even in these cases, the federal government does not recognize the marriage because of the Defense of Marriage Act (DOMA). H.R. 2517 does not affect DOMA. Therefore, under current OPM guidelines, same sex partners, even where married, are ineligible to receive these benefits as spousal benefits. Congress may choose to extend benefits only to those in legally recognized same-sex domestic partnerships. This limitation would control the costs associated with extending partner benefits by restricting the number of possible beneficiaries. Congress, however, may also consider extending benefits to the domestic partner of any federal employee, regardless of that partner's gender. Such action may attract more candidates to federal jobs. Such action also would permit an employee to qualify for federal benefits without having to identify the gender of his or her domestic-partner. Some employees may be hesitant to identify the gender of their domestic partner, even if the affidavit is confidential. The extension of benefits to such partners regardless of gender, however, could increase the costs of the FEHBP. Taxation of Benefits105 DOMA precludes same-sex partners from being recognized as a married couple under the Internal Revenue Code (IRC). A complete overview and analysis of the tax implications of same-sex marriage is beyond the scope of this report. However, the tax treatment of health benefits may be relevant to federal employees who are in same-sex relationships, particularly when one member of the couple works in the private sector. Same-sex couples have a larger tax liability when one partner's health insurance benefits are extended to the other partner. While a federal employee's health plan cannot cover a same-sex partner, certain employers in the private sector choose to extend health insurance coverage to same-sex partners. The extension of this benefit often increases the tax liability of a same-sex couple. Under current law, opposite-sex spouses can exclude from gross income employer contributions to their health insurance plans. As a result of DOMA, same-sex couples must pay taxes on the employer contributions that cover a same-sex partner, sometimes referred to as "imputed income." For example, if an employer contributed $80 per paycheck to the cost of an employee's health insurance plan that covered a same sex partner, the employee would have to include some portion of the $80 in their gross income, increasing their taxable income (including payroll taxes) and ultimately their tax liability. In addition, if federal health benefits were extended to same-sex couples, but DOMA was not repealed, federal employees who extended their health coverage to their same-sex partner would also be subject to additional taxation from the "imputed income," as defined above.

The information provided in this report reflects law and policies prior to the 2013 Supreme Court decision in United States v. Windsor. The federal government provides a variety of benefits to its 4.4 million civilian and military employees and 4.7 million civilian and military retirees. Among these benefits are health insurance; enhanced dental and vision benefits; survivor benefits; retirement and disability benefits; family, medical, and emergency leave; and reimbursement of relocation costs. Pursuant to Title 5 U.S.C. Chapters 89, 89A, 89B, and other statutes, federal employees may extend these benefits to eligible spouses and children. In 1996, Congress passed the Defense of Marriage Act (DOMA, P.L. 104-199; 1 U.S.C §7) "[t]o define and protect the institution of marriage." DOMA contains two provisions. The first provision allows all states, territories, possessions, and Indian tribes to refuse to recognize an act of any other jurisdiction that designates a relationship between individuals of the same sex as a marriage. The second provision prohibits federal recognition of these unions for purposes of federal enactments. Pursuant to DOMA, the same-sex partners of federal employees are not eligible to receive federal benefits that are extended to the spouses of federal employees. An estimated 34,000 federal employees are in same-sex relationships—including state-recognized marriages, civil unions, or domestic partnerships. The Obama Administration has extended certain benefits to the same-sex partners of federal employees and annuitants—and argued that it has done so within the parameters of existing federal statutes. On June 2, 2010, President Obama released a memorandum that extended specific benefits to the same-sex partners of federal employees, including coverage of travel, relocation, and subsistence payments. Some Members of Congress argue that same-sex partners of federal employees should have access to benefits afforded married, opposite-sex couples in order to attract the most efficient and effective employees to federal service. Other Members of Congress argue that the law prohibits the extension of such benefits, and, therefore, actions to distribute any spousal benefits to same-sex couples is contrary to both the text and spirit of DOMA. Congress has had a long-standing interest in overseeing the benefits provided to federal employees. On the one hand, the federal government seeks to attract the most effective, highly trained workforce to address technical and complex issues. On the other hand, finite resources can present challenges when considering whether to extend benefits to federal employees. When DOMA was enacted, the House report that accompanied the legislation stated that a primary goal of the law was to "preserve scarce government resources." The Congressional Budget Office (CBO) estimated that extending benefits to the partners of employees in same-sex relationships pursuant to S. 1910 would cost the federal government $144 million in discretionary spending between 2013 and 2022. CBO also estimated, however, that extending the benefits could "limit future rate increases" in federal health care costs because health care providers would be required to recover certain health care costs that previously went unrecovered. These recovered costs could lower the federal government's health care premiums. In the 112th Congress, two bills were introduced that, if enacted, would have permitted federal employees to extend insurance, long-term care, and other benefits to same-sex partners. On November 18, 2011, Senator Joseph Lieberman introduced S. 1910, the Domestic Partnership Benefits and Obligations Act of 2011. That same day, Representative Tammy Baldwin introduced a companion bill, H.R. 3485, also called the Domestic Partnership Benefits and Obligations Act of 2011, in the House. On May 16, 2012, S. 1910 was ordered to be reported favorably from the Committee on Homeland Security and Governmental Affairs. H.R. 3485 was referred to multiple committees, but no further action was taken on the bill. This report examines current policies on the application of benefits to the same-sex partners of federal employees and reviews certain policy debates about the extension or removal of these benefits. This report also presents data on the prevalence of same-sex partner benefits in the private and public sector. This report focuses on federal benefits for same-sex partners and not on same-sex relationships in general. For more information on the implementation of DOMA and how it affects same-sex partnerships, see CRS Report RL31994, Same-Sex Marriages: Legal Issues, by [author name scrubbed]. For information on private sector employee benefit plans and same-sex partner benefits, see CRS Report R41998, Same-Sex Marriage and Employee Benefit Plans: Legal Considerations, by Jennifer Staman and CRS Report RS21897, The Effect of State-Legalized Same-Sex Marriage on Social Security Benefits, Pensions, and Individual Retirement Accounts (IRAs), by [author name scrubbed].

Introduction Most large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau of Reclamation (Reclamation) within the Department of Interior. Reclamation's mission is to manage, develop, and protect water and related resources in an environmentally and economically sound manner in the interest of the American public. In most cases, this means developing water supplies primarily for irrigation to reclaim arid lands in the West. Reclamation has constructed a significant number of assets since it was founded in 1902. It has over three-fourths of the Department of the Interior's (DOI's) constructed assets, making the agency a manager of significant infrastructure and supporting assets. Reclamation manages water resource facilities in 17 western states with an original development cost of approximately $21.2 billion. Citing engineering indices, the agency has estimated that the replacement value of all Reclamation infrastructure would be over $78 billion. Reclamation's inventory of assets includes 480 dams and dikes that create 348 reservoirs with a total storage capacity of 245 million acre-feet of water. Through its assets, Reclamation serves more than 31 million people, and provides irrigation water for 10 million acres of farmland that produce 60% of the nation's vegetables and 25% of its fruits and nuts. Reclamation is also the nation's seventh-largest producer of hydroelectric power, with 58 hydroelectric power plants that provide an average of more than 44 billion kilowatt-hours of energy each year. Reclamation is over 100 years old, and most of its facilities are more than 50 years old. (The average age of Reclamation's dams is provided in Figure 1 ). As with other structures, as these facilities reach their design lifetime, maintenance requirements tend to increase, and in some cases, the likelihood of failure also increases. Few large new projects are currently being built by Reclamation, and the bureau has in recent years increased its emphasis on responsibilities to operate, maintain, and repair its existing facilities. Assuming limited budgetary resources as this infrastructure continues to age, maintenance needs are likely to increase, as is competition for limited funding. An additional problem faced by Reclamation is the ability of project beneficiaries and/or sponsors to finance some major repairs and upgrades. While issues at facilities with the capacity for immediate repayment (such as power facilities) may receive prompt attention, issues that arise at other facilities, such as water supply and delivery facilities where there is limited ability to pay for large repair costs, may not always be acted upon. Reclamation's unique ownership and contractual responsibilities impact its approach to infrastructure management. Approximately one-third of Reclamation's facilities are owned, operated, and maintained by Reclamation ("reserved works"), with project beneficiaries responsible for repaying the federal government for construction and maintenance costs. These projects are typically multipurpose facilities. In contrast, the remaining two-thirds of Reclamation's facilities are also owned by Reclamation (i.e., Reclamation has title to the facilities), but their operation and maintenance has been transferred to a nonfederal entity ("transferred works"). Transferred works are often "single purpose" projects that must pay maintenance costs in the same year in which they are incurred. Both classes of projects are known to sometimes have difficulty in financing major maintenance costs. Previous legislation has attempted to address issues associated with Reclamation's aging infrastructure. The Rural Water Supply Act of 2006 ( P.L. 109-451 ) established a loan guarantee program for Reclamation's reserved and transferred works. The Omnibus Public Lands Management Act of 2009 ( P.L. 111-11 , Subtitle G) authorized actions to address Reclamation's aging infrastructure issues, including authorization of a program to conduct inspections at Reclamation-owned facilities in urban areas. The same bill provided Reclamation with authority to advance funds for emergency extraordinary operation and maintenance work on both reserved and transferred infrastructure. This report discusses Reclamation's approach to managing aging infrastructure. It notes potential issues with this approach, as well as recent funding trends in this area. It also discusses alternative approaches that have recently been proposed or enacted to deal with the issue of Reclamation's aging infrastructure, and the status of these efforts. It concludes with a discussion of how Reclamation's approach compares to other water resource agencies, and analysis of issues for Congress. Reclamation's Approach to Aging Infrastructure Management General Approach Maintenance, repair, and rehabilitation needs at Reclamation projects are typically identified through regular monitoring by project operators, or more formal facility condition assessments performed by technical experts. Maintenance activities are scheduled, funded, and accomplished based on an assessment of the work's necessity by multiple managers. Abrupt facility failures may receive immediate maintenance action to restore facility service or protect public safety. Finally, if the facility has reached or exceeded its expected service life, Reclamation may consider a major rehabilitation or replacement activity (i.e., recapitalization effort). The primary day-to-day responsibility for asset management lies with Reclamation's 25 area offices. Each office reports to one of the five Reclamation regional offices which, in turn, reports to the Deputy Commissioner for Operations. Ultimately, asset portfolio decisions are the responsibility of the Commissioner, who relies on several advisory bodies for assistance. Reclamation's Facilities Operation and Maintenance (O&M) Team addresses Reclamation-wide O&M-related priorities, issues, activities, program and budget formulation, and facilitates program accomplishment. The team's responsibilities include reviewing and making recommendations to the Deputy Commissioner for Operations on issues including: deferred maintenance, asset management, condition assessments/field review activities, replacements, additions, and extraordinary maintenance (RAX) items, facility security and public safety, and maintenance management practices and systems. The identification of maintenance needs is similar for both reserved works and transferred works. Maintenance needs are identified either by the local operating entities (either Reclamation or nonfederal users) or through periodic facility reviews conducted by Reclamation. However, for transferred works, Reclamation notes that performance data is in some cases limited. For instance, some transferred works are subject to O&M reviews, but do not have a documented performance rating that allows for project-to-project comparisons with reserved works. This may make it more difficult to compare and track these two classifications of facilities and to make related funding decisions. Major maintenance or rehabilitation activities for Reclamation's projects are typically funded through a line item in the facilities maintenance portion of the budget known as RAX (replacements, additions, and extraordinary maintenance) or else through the Safety of Dams Program. Some are directly funded by revenues from customers or other federal agencies (e.g., Bonneville Power Administration). Within the RAX program, funds are provided to each region on an annual basis. Non-reimbursable RAX expenditures typically make up 4%-7% of Reclamation's total appropriation. Notably, reviews by Reclamation and other entities have previously found that the bureau has difficulty budgeting for "non-routine" (i.e., major) items in its RAX program, and that there is room for improvement in the planning process. For instance, previous findings by the National Research Council indicated that there was no common quantifiable approach to prioritizing RAX across Reclamation regions and that inputs related to the program's priorities were applied with varying consistency. Reclamation also found that the RAX program could benefit from improved long-range planning, which would allow more lead time to prepare for large RAX expenditures. Reclamation notes that it is addressing concerns with its RAX program in a number of ways, including analyzing past RAX expenditures, developing a quantifiable prioritization framework for O&M needs across Reclamation, improving management practices, and developing a capital rehabilitation investment strategy for the next 10 to 20 years. Since most of these efforts remain internal to Reclamation, the extent to which they have impacted project planning and budget requests is unclear. Focus on Facility Types: Dam Safety Program The Reclamation Safety of Dams Act of 1978 ( P.L. 95-578 , and amended in 1984 under P.L. 98-404 ) gave the Secretary of the Interior permanent authority to modify Reclamation dams and related facilities to ensure their structural integrity and safety. The act provides direction on how repair or upgrade work is to be classified for repayment. Generally, repair costs that are the result of modifications due to age, normal deterioration, or nonperformance of normal maintenance are considered reimbursable project costs, while those resulting from new safety criteria or new hydrologic or seismic data are nonreimbursable. Reclamation's Dam Safety Program has two primary components, the Safety of Dams Evaluation and Modification Program and the DOI Dam Safety Program. The DOI Dam Safety Program is a relatively small program—the FY2012 budget request is $1.6 million—that provides facilitation and guidance to other DOI departments on their dam safety programs. The Safety of Dams Evaluation and Modification Program constitutes the bulk of the dam safety budget, with an FY2012 budget request of $83.7 million. It focuses specifically on Reclamation dams and has two primary sub-tasks, the Safety Evaluation of Existing Dams program (SEED) and the Initiate Safety of Dams Corrective Action program (ISCA). The SEED program is focused on the analysis and identification of potential hazards or increased risk at Reclamation dams, while ISCA is the implementation component of the program aimed at the study, identification, and accomplishment of repairs or rehabilitation. When a need for corrective action is identified, that action is funded under ISCA. Funding requests to begin and continue the construction of remedial actions identified through ISCA are transferred from the Dam Safety Program and assigned to the specific project. Work funded through ISCA is conducted under authority granted by the Safety of Dams Act; however, the SEED program is a response to the October 4, 1979, presidential memorandum directing federal agencies to implement the Federal Guidelines for Dam Safety . SEED work is considered a public benefit and its costs are not assigned to a specific project for reimbursement. Tracking Reclamation's Maintenance Backlogs Reclamation tracks its infrastructure needs internally, but it typically has not provided project-level lists to the public. Within its asset management budget, Reclamation distinguishes between "deferred maintenance," or regular maintenance which was not performed when it should have been, and "indicated maintenance," or maintenance that is recognized as needing to be achieved but which may or may not be scheduled. While deferred maintenance is tracked and reported on annually in Reclamation's Asset Management Plan, indicated maintenance is the result of internal inspections occurring every three to six years and is not typically updated in any regular reporting mechanism. Reclamation's deferred maintenance needs have have gradually increased over time. Over the last 10 years, Reclamation reported that it spent approximately $40 million-$45 million annually on deferred maintenance for aging infrastructure, which was enough to offset most new deferred maintenance needs. Most of this funding was provided under Reclamation's Facility Maintenance and Rehabilitation budget line item. In FY2008, documented deferred maintenance needs increased significantly, to approximately $82 million. (See Figure 2 .) Reclamation reported that this was mostly due to updates of multiple outdated cost estimates that had been the basis for some previous deferred maintenance estimates. It is unclear whether Reclamation will be able to continue to offset these increased expenditures under its current budget baseline, which has been essentially flat in recent years. Reclamation's indicated maintenance needs are not tracked publicly and are not available at the project level. In the past, these needs have provided informally by Reclamation to Congress as an approximate estimate of maintenance needs on all of Reclamation's infrastructure. For instance, in a 2008 hearing, Reclamation estimated that throughout the West, maintenance needs on Reclamation facilities exceeded $3.2 billion. At the same hearing, Reclamation noted that approximately $800 million of these needs were for transferred facilities and $600 million were for dams that would be funded under the Dam Safety Program. The remaining $1.4 billion encompassed needs for hydropower assets (which would be funded from power revenues) and funding for other reserved works. Citing the confidential nature of this information, Reclamation previously has not produced additional details on these figures, including projections related to the timing and nature of specific funding requirements for major maintenance upgrades. Reclamation has also emphasized the insufficient nature of its current data to support long-term planning decisions. In the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ), Reclamation received approximately $950 million, of which a portion was to be allocated for infrastructure reliability and safety. In its final project selection list, Reclamation budgeted $165 million for projects in this category. Of this funding, $91 million was for two large projects, and the remaining $74 million went to smaller rehabilitation projects. Since Reclamation has yet to update its deferred and indicated maintenance totals to reflect spending under the Recovery Act, the effect of these investments on its maintenance backlogs is not currently available. Other Approaches Concerns with Reclamation's aging infrastructure have led to congressional efforts to address needs both at individual projects and at Reclamation's facilities in general. In some instances, the rehabilitation and maintenance of specific Reclamation projects has been addressed directly by legislation that alters the required cost shares and repayment periods for these facilities. Additionally, a number of other efforts that would provide additional options to address aging infrastructure have been recently proposed or enacted by Congress. This section provides a summary of these efforts. Focus on Individual Projects Arrowrock Dam Arrowrock Dam is owned and operated by Reclamation. The 350-foot high concrete arch dam outside of Boise, ID, was completed in 1915. After nearly 90 years of continuous operations, Reclamation replaced all 10 of the lower valves with devices called clamshell gates that would permit inspection and maintenance without the need to draw down the level of the reservoir. In Section 206 of the Energy and Water Development Appropriations Act of 2002 ( P.L. 107-66 ), Congress stipulated that Reclamation was to recover no more than $6.9 million (35%) of reimbursable expenses typically charged to water users for project O&M costs at Arrowrock Dam. Congress further stipulated that these costs were to be recovered over a 15-year period. Reclamation typically requires O&M costs to be repaid by project beneficiaries within the fiscal year that the funds were disbursed. Jackson Gulch Dam The Mancos Project in southwestern Colorado includes the Jackson Gulch Dam and reservoir, as well as inlet and outlet canals. It provides supplemental irrigation water for nearly 14,000 acres. The project was approved by President Roosevelt on October 21, 1940. Construction began in 1941, and was completed nine years later. The first water from Jackson Gulch Reservoir was delivered to water users in 1949. The project is a transferred work, and responsibility for O&M at the project was turned over to the Mancos Water Conservancy District in 1963. Despite initial opposition by the Bush Administration in prior Congresses, the Jackson Gulch Rehabilitation Act was authorized in the 111 th Congress in the Omnibus Public Lands Act of 2009 ( P.L. 111-11 ). The act directs the Secretary of the Interior, through Reclamation, to pay 65% share of the cost of the Jackson Gulch Rehabilitation Project and authorizes $8.25 million for the federal share of rehabilitation work. Under the act, the Mancos Water Conservancy District is to remain responsible for O&M at the project. Prior to passage of the legislation, Reclamation argued that it considered rehabilitation for this and other transferred works to be O&M, and thus the responsibility of water users. In enacted appropriations for FY2010, the Jackson Gulch Rehabilitation project received an initial appropriation of $1.75 million. The authorization and funding for this project may be significant because it provides federal funding for a maintenance issue at a transfer project that would otherwise be the responsibility of non-federal users. The project may bring up larger questions around the federal role in maintaining the nation's aging infrastructure versus adherence to contractual obligations and reliance on the ability of project stakeholders to perform significant work associated with rehabilitation. St. Mary Dam and Diversion The St. Mary Diversion Dam is part of Reclamation's Milk River Project in northwestern Montana and is owned and operated by Reclamation. The dam, located on the St. Mary River, is 6 feet high and diverts water to the St. Mary Canal. The canal runs 29 miles to the point where the water is discharged into the North Fork of the Milk River. Features of the canal in need of repair are sections of the earthen canal itself; two large sets of pipes (one 3,600 feet long, another 1,405 feet long); and a series of five large concrete drops at the lower end of the canal. The canal's current capacity is 30% below the designed capacity, in part because of maintenance issues. In 2006, it was reported that the earthen canals are crumbling, the pipes that carry the water across the St. Mary River and Hall's Coulee are affected by slope instability and leakage, and the concrete drops at the end of the canal were cracking. The Water Resources Development Act of 2007 ( P.L. 110-114 , § 5103), authorized $153 million for the Secretary of the Army, in consultation with Reclamation, to study, plan, design, and construct the rehabilitation of the St. Mary Dam and Conveyance Works. This section also required that the federal share of the cost for this project be 75%. Except for construction associated with standard O&M and for emergency repairs that ensure water transportation or protect life or property, no construction was authorized to begin until January 2011. Reclamation has requested funding for studies related to this rehabilitation project in recent budget requests, but the Corps has yet to fund this authorization. Notably, Reclamation did not support authorization for construction in WRDA or the cost-sharing arrangement in the bill. Reclamation indicated that authorization of construction prior to the completion of feasibility studies was premature, and that pending tribal water rights claims should be resolved prior to rehabilitation work at the project. Further, Reclamation opposed the proposed project repayment terms, citing a concern that repayment terms which depart from standard Reclamation practice are precedent-setting and may pose problems for the agency in the future. Loan Programs and Extended Repayment Periods The one-time costs of extraordinary maintenance and rehabilitation efforts can be prohibitive for nonfederal entities that operate infrastructure owned by Reclamation (i.e., transferred works). As a result, securing loans or outside funding for these projects is often a priority for project operators. However, obtaining needed funding for rehabilitation can be difficult because the federal government retains title to these facilities, so the facilities themselves cannot be used by the operators as collateral to secure a private loan. Some have called for federal support of one or more credit (loan) programs to aid nonfederal entities in making repairs and/or upgrades to Reclamation infrastructure to resolve this issue. Congress has previously authorized loan programs that aim to address the issue of repair and maintenance of Reclamation's transferred works. In 2006, the 109 th Congress authorized a loan program for Reclamation under Title II of the Rural Water Supply Act of 2006 ( P.L. 109-451 ). The program is to provide federal loan guarantees to project beneficiaries and make it easier to secure private funding. However, this program has not yet received funding. The Bush and Obama Administrations have both been hesitant to support the loan program in practice because of executive branch interpretations of the required subsidy cost to administer the program under the Federal Credit Reform Act of 1990 ( P.L. 101-508 ). The executive branch has contended that the subsidy cost for federal loan guarantees under P.L. 109-541 must include an up-front appropriation equal to the full amount of the loan. User interests disagree with this interpretation and argue that the subsidy cost should be a percentage of guaranteed loans that may default, which would be a fraction of the cost of the loan itself. As a result of this disagreement, to date, no projects have been funded under this program. Other laws have recently authorized Reclamation and its users with authorities to address aging water infrastructure. The Omnibus Lands Act of 2009 ( P.L. 111-11 ) authorized the Secretary of the Interior to advance funding for emergency extraordinary operation and maintenance work on both transferred and reserved works. Similarly, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 , ARRA) provided authority for Reclamation to advance funds available through the Recovery Act and to extend the repayment period for such costs up to 50 years. Reclamation reports that while some users have expressed an interest in these provisions, to date no users have entered into a formal agreement under these provisions. Proposals to Utilize Reclamation Fund Balances Separately, some have also called for utilizing balances in the Reclamation Fund to provide dedicated funding for infrastructure needs. Funding from the Reclamation Fund is appropriated annually by Congress to certain projects operated by the Bureau of Reclamation and the Western Area Power Administration. Appropriations from the Reclamation Fund provide for construction and maintenance of reserved works and make up a large percentage of Reclamation's annual enacted appropriations. As a result of increasing receipts going into the fund (mostly from onshore mineral leasing), the balance of the Reclamation Fund has increased significantly and may soon exceed $9 billion. Users contend that without further action from Congress, these balances will continue to grow. Hypothetically, Congress could act to dedicate balances from the Reclamation Fund to Reclamation projects in any number of forms, including both direct funding for major repair and maintenance activities over one or more years, or funding to finance direct loans or loan guarantees (see above). Users note that the Reclamation Fund was intended to benefit western states, and making it available for major maintenance projects is a logical use of the fund. However, others note that since the Reclamation Fund is subject to appropriations by Congress, it is also subject to congressional scoring requirements, including annual appropriations caps and statutory PAYGO rules. These requirements would likely complicate efforts to dedicate these revenues to a specific purpose. Corps and NRCS Approaches to Aging Infrastructure Management Two other federal agencies associated with significant inventories of dams and other water resources infrastructure are the U.S. Army Corps of Engineers and the U.S. Department of Agriculture's Natural Resources Conservation Service (NRCS). They have different roles and responsibilities regarding O&M and rehabilitation. The Corps is an active federal dam operator, while NRCS was a partner in the construction of many agricultural dams that are the responsibility of local entities, and is now a partner in their rehabilitation. The O&M prioritization programs for the Corps and NRCS are summarized below. The Corps of Engineers The Corps is responsible for water resource projects that provide flood damage reduction, navigation, hydropower generation, and water supplies. The agency operates and maintains 650 dams, including 75 hydroelectric power stations that generate 24% of the nation's hydropower and 3% of its total electricity. It also operates and maintains 238 navigation locks, 138 of which are more than 50 years old. Overall, it is responsible for the fourth-largest asset portfolio among federal agencies. The estimated value of this infrastructure is $232 billion. The backlog for deferred maintenance on Corps projects has increased over the last 10 years, and was most recently estimated to exceed $2.6 billion. Notably, the Corps has not provided a publicly available figure that corresponds to Reclamation's "indicated maintenance" backlog. In contrast to Reclamation, the Corps does not distinguish between ongoing project operations and major repairs or extraordinary maintenance for these projects. All of these activities are included within one budget line, the operations and maintenance (O&M) line. For each budget cycle, the Corps publishes its procedures for ranking O&M actions for the portfolio of its infrastructure. Similar to Reclamation, the budget process starts at the Corps district and division level, where individual budget activities within business lines are identified. Business lines are functional categories such as hydropower, navigation, and water supply. Each activity is ranked based on the O&M procedures for its business line for that budget cycle, and the cost of each activity is estimated. The rankings are largely determined by project performance measures; most of these measures are based on economic (e.g., tons of commercial cargo moved, benefit-cost ratio), safety, or environmental outputs. Despite having organized some O&M requests by geographic regions or basins during the last Administration, recent budgets have returned to the practice of providing O&M totals for individual projects. As indicated by the Corps' budget development procedures, the process for developing the basin or region O&M estimates consists of aggregating estimates for individual actions. The actions included in the Administration's final budget request are determined by Corps headquarters in conjunction with the Office of Management and Budget. Based on the rankings supplied from the Corps Divisions, Corps headquarters works with the Administration to determine policy priorities that adhere to the procedures established for that budget cycle. Although the Administration identifies and prioritizes project O&M funding needs based on Corps procedures and Administration policy, Congress also directs Corps funding for specific projects during its annual consideration of Energy and Water Development appropriations bills. The Corps is similar to Reclamation in that major repair and replacement efforts are largely determined by internal criteria and congressional direction, and the process for selecting these projects has been criticized by some observers. Also similar to Reclamation, interest groups have in the past complained that Corps infrastructure is deteriorating and underfunded. The Corps is currently undergoing changes to modernize its asset management procedures. Among these are efforts to better evaluate and quantify deferred maintenance both at individual facilities and across Corps divisions, as well as efforts to examine cost and condition variances among similar asset types. Unlike Reclamation, the Corps is responsible for O&M at the majority of its projects. A notable exception is levees, which are often built by the Corps but maintained by local interests (however, in contrast to Reclamation, the Corps generally does not maintain title to these facilities). Deterioration and upkeep of federally built and locally operated levees is a current issue of concern for Congress, and shares issues in common with those faced by Reclamation, especially those pertaining to transferred works. Natural Resources Conservation Service49 The NRCS has participated in the construction of over 11,300 dams under the authority of the Watershed Protection and Flood Prevention Act (P.L. 83-566). Local sponsors own the dams and are responsible for their operation and maintenance. In 2000, the Watershed Protection and Flood Prevention Act was amended to authorize NRCS to assist with rehabilitation of these aging dams under a Watershed Rehabilitation Program. The NRCS approach to aging infrastructure is driven by the end user, with assistance from the Watershed Rehabilitation Program allocated based on the risk to public safety and availability of appropriations. Only dam structures built with NRCS assistance are eligible for rehabilitation assistance under this program. NRCS staff do not make estimates of future rehabilitation funding needs. Rehabilitation projects are identified by local entities, and they can apply for rehabilitation funding assistance. Local sponsors can apply for the Watershed Rehabilitation Program at any time as long as they are within the eligibility criteria for the program. When NRCS receives an application, NRCS's state conservationists perform a risk assessment of the hazards associated with the dam. The state conservationists forward assistance requests along with data from the risk assessment to NRCS headquarters annually. In FY2010, NRCS conducted 650 ongoing assessments of high-hazard dams as classified in the national dam safety classification system. The national office evaluates all requests and funds those that pose the highest risk to public safety within available appropriations. NRCS may provide 65% of the total rehabilitation costs but no more than 100% of the actual construction cost, and is prohibited from funding operation and maintenance expenses. As of the end of FY2010, 228 rehabilitation projects had been funded, and 95 dams in 14 states had been completely rehabilitated. In addition, project sponsors requested a total of $37.5 million to restore 90 high priority dams in 24 states in FY2010. The number of projects funded by NRCS is typically less than the total applications for aid, and total applications for aid do not necessarily reflect the total need. In recent years, appropriated funding for this program has ranged from $20 million-$40 million. The Administration's FY2012 budget request proposes to zero out funding for this program. Summary and Analysis There is a process within Reclamation for identifying and prioritizing rehabilitation funding needs of the water resources infrastructure that the agency has constructed since it was created in 1902. However, as a result of increasing needs, constrained budgets, and the unique nature of the ownership arrangements for Reclamation projects, many view the current process as inadequate. Outside of the Dam Safety Program, aging infrastructure that is owned and maintained by Reclamation (i.e., reserved works) is generally selected for expenditure either by internal criteria determined on the regional level, or else through directed spending by Congress that provides support to individual projects. For infrastructure that is owned by the federal government but maintained by nonfederal interests (i.e., transferred works), there is no formal process to identify and assist in paying for major upgrades. Other agencies, including the Corps (with regard to levees) and the NRCS (with regard to small dams) face similar problems with the upkeep of infrastructure that was built by the federal government but is now maintained by nonfederal interests. As Reclamation's maintenance needs increase, the prioritization process for aging infrastructure may receive increasing attention. An overarching question for Congress is whether the efforts of Reclamation and other agencies to identify and prioritize aging infrastructure are adequate. As previously noted, current practices within the Corps, Reclamation, and NRCS have generally provided limited funding for aging water resource projects that are owned and operated by the federal government, and have provided limited or no funding for upgrades to projects that are operated by nonfederal partners. Due to potential needs for costly repairs and upgrades on Reclamation facilities, the question of who should pay and how much, at both transferred and reserved works, will likely be raised repeatedly in the coming years. The question may be of particular concern for rehabilitation projects at transferred facilities, which the Administration has generally refused to support in the past, and which have on occasion experienced major failures and subsequently received attention from Congress. Some claim that it is in the nation's best interests for the federal government to provide increased support for all facilities that are federally owned (regardless of the operator) because there are major societal costs to allowing these facilities to deteriorate. Additionally, these interests argue that the difficulty that private entities have financing these upgrades necessitates aid by the federal government. On the other side of this issue, some (including the current Administration) note that allowing nonfederal entities to renege on their contractual responsibilities sets a troubling precedent, and that a major influx of federal funding is not practical in light of constrained budgets. Additionally, due to the inherently decentralized and at times sporadic documentation of needs to date, the actual extent of current needs is not well defined. Although numerous entities supported recently passed provisions that extended the repayment period for extraordinary maintenance expenses at both reserved and transferred works, to date few beneficiaries have taken advantage of these terms. This may call into question the urgency of some calls for aid from the federal government. Congress has recently enacted programs and funding for individual projects that fall outside of Reclamation's regular budget process for extraordinary maintenance needs at reserved facilities. For instance, it capped the total amount of O&M responsibility to be borne by water users at one reserved facility (Arrowrock Dam). In another case, the St. Mary Rehabilitation Project, Congress chose to authorize funding (and a 75% federal cost share) for another federal agency (in this case, the Corps) to do the work instead of Reclamation. Funding for this project has yet to be initiated, and may conflict with existing statutory requirements in § 4(a) of the Reclamation Safety of Dams Act of 1978. Rehabilitation of Jackson Gulch dam is an example of federal authorization and funding for a recapitalization effort at a transferred work. Although the Administration has refused to fund this project in its budget requests, Congress provided initial funding for the project in FY2010 enacted appropriations. While many argue that direct involvement by Congress is an acceptable way to designate high-priority projects and circumvent the executive branch prohibition on funding for transferred works, recent conference rules concerning earmarks could be problematic for this strategy. With or without a ban on these spending items, questions remain regarding whether an ad-hoc process in which funds are obtained for projects individually will be sustainable as needs for upgrades proliferate. Other means for funding aging infrastructure, including loan programs and dedicated funding from the Reclamation Fund for aging infrastructure, are often raised as potential solutions, but have encountered setbacks within the executive branch and the appropriations process that have hindered implementation or enactment. In the future, Congress may be called upon to reconsider these and other proposals which attempt to address the issue of Reclamation's aging infrastructure.

The Bureau of Reclamation (Reclamation) is responsible for the construction of most of the large irrigation and water resources infrastructure in the West. These water resource facilities are dispersed throughout 17 western states and have an original development cost of more than $21 billion. Most of Reclamation's infrastructure has an average age of over 50 years. This aging infrastructure requires increased maintenance and replacement efforts and expenditures. Reclamation estimates that the total cost for upgrades at all of its facilities exceeds $3 billion. Reclamation has a documented plan to assess the management needs of its portfolio of aging infrastructure. However, deferred maintenance needs are increasing, and water resource infrastructure management objectives require prioritization due in part to a finite budget. Reclamation's work on deferred maintenance and replacement is complicated by the fact that it maintains only one-third of the infrastructure that it owns. The remaining two-thirds are owned by Reclamation but have been transferred to local entities ("transferred works"). This makes for a unique combination of deteriorating infrastructure, patchwork management responsibilities, and limited financing that inevitably leads to conflicts over project priorities. As Reclamation's portfolio of infrastructure continues to age, these conflicts are likely to arise more often. Some have argued for changes to the existing processes that address Reclamation's aging infrastructure. To date, funds have been authorized and appropriated for a national program that focuses on a certain class of resources (dams). However, outside of this program, no national list of maintenance and upgrade priorities exists, and there are no major programmatic authorities for Reclamation to address these needs without repayment by users (which can make upgrades prohibitive in some cases). Recently, Congress has authorized a loan program to address aging infrastructure and has provided the Secretary of the Interior with the authority to advance federal funds and extend repayment periods for extraordinary maintenance projects. However, as a matter of policy, the Administration has generally refused to request funding for efforts that would primarily benefit nonfederal users. In the future, users are likely to continue to argue for more funding (particularly for transferred works), as well as for reforms to the overall process of documenting and selecting projects for improvements. At issue for Congress is whether to require additional analysis on the status of Reclamation's infrastructure needs. Additionally, Congress may consider whether Reclamation's existing planning and funding mechanisms for aging infrastructure are adequate, or whether new or enhanced mechanisms for these maintenance needs are required. This report describes Reclamation's approach to managing aging infrastructure as well as that of two other agencies—the Army Corps of Engineers and the Natural Resources Conservation Service—involved with significant portfolios of dams and related infrastructure. It includes discussion of several alternative approaches to managing Reclamation's aging infrastructure that have been enacted or proposed, and thus may be the subject of debate.

Introduction Growing demands on the transportation system and constraints on public resources have led to calls for more private sector involvement in the provision of highway and transit infrastructure through what are known as "public-private partnerships" or "P3s." As defined by the U.S. Department of Transportation (DOT), "public-private partnerships (P3s) are contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects." Typically, the "public" in public-private partnerships refers to a state government, local government, or transit agency. The federal government exerts influence over the prevalence and structure of P3s through its transportation programs, funding, and regulatory oversight, but is usually not a party to a P3 agreement. P3s can offer a means of injecting additional resources into highway and public transportation systems while reducing costs, project delivery time, and public sector risk. However, many individual surface transportation projects are not well suited to P3s, because, for example, they are too small to bear the transaction costs of a P3 or they offer limited opportunity for profit. P3s have the potential to distort transportation planning by directing public funds to projects that offer opportunity for private return rather than to projects that might offer greater social benefits—to construction of a new toll bridge, for example, rather than to repairing an existing highway. Depending upon the specific arrangements, a P3 may also leave the public sector bearing risks if a project does not perform as anticipated. A wide variety of public-private partnerships in highways and transit exists, but this report focuses on the two types that are generating the most debate: (1) the leasing by the public sector to the private sector of existing infrastructure, sometimes referred to as "brownfield" facilities; and (2) the building, leasing, and owning of new infrastructure by private entities, sometimes known as "greenfield" facilities. A common, though not essential, element of greater private sector participation in highway infrastructure provision is the use of tolling. Vehicle tolls provide a revenue stream to retire bonds issued to finance a project and to provide a return on investment. Highway tolling can be implemented by public authorities, but it is widely believed that the privatization of transportation infrastructure will hasten the spread of tolling and may raise toll rates. Consequently, a discussion of P3s must include, as this report does, the issue of vehicle tolling and other direct pricing mechanisms. Background Interest in public-private partnerships stems principally from concerns that public-sector resources are inadequate to sustain the nation's highway and transit infrastructure. A number of reports over the past decade have concluded that substantially increased funding of surface transportation infrastructure is needed to deal with physical deterioration, congestion, and future growth in demand for passenger and freight movements. A 2014 report by DOT estimated that inflation-adjusted spending on highways needs to be between 23% and 46% above the 2010 level to improve conditions and performance, and that spending on transit systems would need to rise between 33% and 48% to expand and achieve a good state of repair. Similar problems were found by two congressionally mandated commissions. At the same time, the main revenue mechanism at the federal level, the fuels tax, is in trouble. The federal contribution to highway and transit infrastructure is largely derived from the highway trust fund, which relies primarily on revenue from motor fuels taxes. The tax rates are set on a per-gallon basis and were last raised in 1993, while a reduction in auto travel and improved vehicle fuel efficiency mean that drivers are purchasing fewer gallons of fuel. As a result, the amount of revenue flowing into the highway trust fund has not increased in line with construction costs ( Figure 1 ). In its most recent estimates, the Congressional Budget Office (CBO) suggests that both the highway account and the mass transit account of the highway trust fund will approach a zero balance early in FY2015 absent congressional action. The gap between fuel tax revenues and future infrastructure investment needs has stimulated interest in P3s. Yet the 2007 report of the National Surface Transportation Policy and Revenue Study Commission illustrated divergent views about the role P3s should play in U.S. transportation policy. The majority view, supported by 9 of the 12 commissioners, contended that severe underinvestment is the main problem facing transportation infrastructure; the majority urged greater use of P3s and other mechanisms to attract private capital as adjuncts to greater federal spending financed by major increases in fuels taxes. An opposing viewpoint, expressed by three commissioners including the then U.S. Secretary of Transportation Mary Peters, asserted that "a failure to properly align supply and demand, not a failure to generate sufficient tax revenues, is the essential policy failure" in transportation infrastructure provision. A key ingredient of change, in their view, should be market-based reforms allowing for much greater reliance on tolls and private sector participation, including P3s. Types of Transportation Public-Private Partnerships In the traditional method of providing transportation infrastructure, known as "design, bid, build," the public sector decides there is a need for a new facility, plans its development with a wide variety of community input, organizes the funding and financing, lets out contracts to design and construct the facility, and operates and maintains the facility after completion. In contrast, a public-private partnership may involve private-sector participation in any or all phases of development and operation. The private-sector involvement may be predicated on a revenue stream from the operation of a facility, such as vehicle tolls, or it may be attracted by the promise of future government payments. According to DOT, P3s in highway and transit infrastructure provision can be categorized into seven basic types. Of these, five have been used to construct new infrastructure. From least to most private responsibility, they are the following: Private Contract Fee Service. This type of partnership involves the public sector contracting for program management services involving major projects or even capital programs. Program management services include strategic planning, financial management, and coordination in the areas of environmental studies and approvals, design, and construction. An example of this type of P3 is the Louisiana TIMED program, which involved the widening of 536 miles of state highways, widening or new construction of three major bridges, and improvements to the Port of New Orleans and Louis Armstrong International Airport. A private partner, Louisiana TIMED Managers, was hired in 2002 to manage overall program delivery including the financing strategy, public outreach, scheduling, pre-construction activities, and construction administration. Design-Build (DB). This type of partnership arrangement combines two services that are traditionally separate, design and construction, into one fixed-fee contract. The public sector retains control of the facility as well as responsibility for planning, preliminary engineering, funding and financing, and post-construction operation and maintenance. An example of this type of P3 is the Tappan Zee Bridge in New York. The New York State Thruway Authority is paying Tappan Zee Constructors, LLC, $3.1 billion to design and build the new bridge, which will be turned over to the Thruway Authority upon completion. Design-Build-Operate-Maintain (DBOM). These partnerships go even further than design-build P3s by adding private-sector responsibility for operation and maintenance once a facility goes into service. The public sector is still responsible for funding and financing, and retains the risks if operation costs more than anticipated or revenue falls short. The 21-mile Hudson-Bergen light rail system in New Jersey is an example of DBOM. The original fixed-price contract awarded to the 21 st Century Rail Corporation in 1996 was for design and construction of the initial 10 miles by a specified date and then 15 years of operation and maintenance. The contract was subsequently renegotiated for extensions to the system and to lengthen the operation and maintenance agreement. Design-Build-Finance (DBF). This adds short-term financing to a design-build contract. Payment by the public partner is typically deferred during the construction phase, requiring the private partner to arrange financing until the work is complete. As with DB projects, the public sector retains responsibility for planning, preliminary engineering, and operation and maintenance. An example of a DBF project is the I-75 expansion in Florida, which began in 2007 and was completed in 2010. For this project, payments began during construction and final payment was received about one year after completion. Design-Build-Finance-Operate -Maintain (DBFO M ). In addition to the designing, building, and operation of an infrastructure project, these types of P3s transfer to the private sector much of the long-term financing responsibility. Debt financing leveraged with a revenue stream, such as tolls, is the most common financing mechanism in this type of P3. However, financing may be supplemented with public-sector grants and/or in-kind contributions such as right-of-way. The I-635 LBJ Managed Lanes project near Dallas, TX, is an example of a DBFOM. After completion, which is expected in 2016, the concessionaire, LBJ Infrastructure Group, will operate and maintain the facility, including the collection of tolls, until 2062. In the case of existing infrastructure, DOT identified two basic types of P3s. These are the following: O&M Concession . The public agency turns over to the private sector responsibility for asset operation and maintenance, including service and management. The Anton Anderson Memorial Tunnel in Alaska, a road and rail tunnel, is an example of an O&M concession. VMS, the concessionaire, is responsible for toll collection, train and highway vehicle control, road and rail maintenance, and initial emergency response. Long - Term Lease Agreement. This type of partnership typically involves the leasing of an existing facility to a private company for a specified amount of time. The private partner usually pays an initial concession fee and must operate and maintain the facility to prescribed standards. The private company typically collects tolls on users and keeps the revenue to pay its bond holders and to generate a return on its equity investment. Examples of this type of P3 are the Chicago Skyway and the Indiana Toll Road. Prominent Examples of Public-Private Partnerships Chicago Skyway The Chicago Skyway is a 7.8-mile elevated toll road connecting the Dan Ryan Expressway (I-94) to the Indiana Toll Road (I-90). Built in 1958 without federal funds, the Skyway was operated and maintained by the City of Chicago Department of Streets and Sanitation until 2004, when it was leased for 99 years to the Skyway Concession Company (SCC), a consortium controlled by two well-known foreign companies involved in infrastructure investment, Cintra (Spain) and Macquarie Infrastructure Group (Australia). SCC won this concession with a bid of $1.83 billion in a competition that included four other detailed proposals. The city of Chicago and SCC signed a contract on October 27, 2004, and SCC began operating the Skyway on January 24, 2005. According to the lease agreement, SCC must operate and maintain the Skyway to certain standards, and, within limits, can collect and retain all toll revenue. For cars, tolls were limited to $2.50 through 2007, gradually rising to $5.00 in 2017. After that, tolls can be increased each year by the greater of 2%, the percentage change in the government's Consumer Price Index (CPI), or the percentage increase in per capita nominal Gross Domestic Product (GDP). As of February 2014, the toll for cars was $4. Of the single $1.83 billion upfront payment to the city of Chicago, $463 million was used to pay the outstanding debt on the road, $392 million was used to pay down the city's general obligation debt, and $875 million was placed into long-term and medium-term reserve funds. One criticism of the Chicago Skyway P3 is that the lease diverts resources from transportation to other uses. The city of Chicago contests this view, noting that much of the lease revenue was placed in reserve funds that generate interest revenue roughly equal to what the city formerly received in toll revenue. In any case, the city notes, when the Skyway was under public control excess toll revenues were directed to the city's general fund and were not necessarily used for transportation. The U.S. Government Accountability Office (GAO) has stated that the city's credit rating improved when it reduced its general obligation debt, thereby reducing the future cost of borrowing for capital projects. Indiana Toll Road The Indiana Toll Road (ITR) is a 157-mile segment carrying an Interstate designation that runs across northern Indiana linking with the Chicago Skyway in the west and the Ohio Turnpike in the east. Built largely without federal funds and opened in 1956, the toll road was operated by the Indiana DOT from 1981 to 2006. After a bidding process involving 11 proposals, a 75-year lease concession was awarded to the Indiana Toll Road Concession Company (ITRCC), a partnership between Cintra and Macquarie Infrastructure Group, for a single lump-sum payment of $3.8 billion. Cintra and Macquarie invested $374 million each and seven banks provided the remaining $3 billion. ITRCC began operating the facility on June 29, 2006. Tolls are regulated by the concession agreement. For example, the toll for a two-axle vehicle traveling the length of the road, $4.65 when the ITRCC took control, was limited to a maximum of $8.00 through June 30, 2010. After an initial adjustment in 2010, toll increases in subsequent years will be limited to the greater of 2%, the percentage change in the CPI, or the percentage increase in per capita nominal GDP. In February 2014, the toll for a two-axle vehicle traveling the length of the Indiana Toll Road was $9.70. As part of the contract, ITRCC agreed to upgrade the highway in specific ways, such as implementing electronic tolling and adding a third lane in congested areas. The proceeds from the lease were used by Indiana DOT to fund a large number of highway construction and preservation projects under the state's 10-year "Major Moves" initiative. In addition, the seven counties through which the toll road passes received payments of between $15 million and $40 million for local transportation projects. Northern Virginia I-495 HOT Lanes In December 2007, the Virginia Department of Transportation (VDOT) signed an agreement with a private consortium to build and operate four new high-occupancy toll (HOT) lanes, two in each direction, on a 14-mile stretch of the Capital Beltway (I-495) from the Springfield Interchange to north of the Dulles Toll Road. The partnership between VDOT and the private consortium is an example of a Design-Build-Finance-Operate-Maintain (DBFOM) P3. The contract is a fixed-price, fixed time, design-build contract, with an 80-year lease for operations, maintenance, and toll collection. The HOT lanes opened in November 2012 and are operated using congestion pricing technology that collects a variable toll based on traffic levels. High-occupancy vehicles with at least three passengers, motorcycles, buses, and emergency vehicles travel without charge. The private consortium of Fluor Corporation and Transurban financed most of the $2 billion project with $348 million in equity and another $1.2 billion borrowed using federal credit assistance. This involved a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan of $589 million and $589 million in tax-exempt private-activity bonds. The state committed $400 million in grant funding to the project for a number of additional highway improvements, including the final phase of the Springfield Interchange, improvements to the I-66 interchange, reconstruction of some bridges on the Beltway, and participation in a regional congestion plan. Las Vegas Monorail The ability to impose tolls on heavily trafficked roads provides an obvious source of returns on private investment. Public transportation systems, on the other hand, almost always cost more to run than can be generated from fares and other operating revenues. This makes it difficult to develop transit systems without significant public sector support, as the Las Vegas Monorail project demonstrates. The monorail is a four-mile system that connects hotels and other attractions on the Las Vegas Strip. Unlike most transit P3s, which have direct government ownership and financial support, the Las Vegas Monorail has been a private venture, owned and operated by the Las Vegas Monorail Company, a non-profit corporation. The original segment of the system, operating between two major hotels, was opened in 1995. The system was expanded in 2004 with financial and in-kind contributions from hotels and resorts in addition to the sale of tax-exempt bonds that are being repaid with passenger fares and advertising revenues. A proposal to extend the system to McCarren International Airport was approved by Clarke County in November 2006. Despite this approval, the project does not appear to have attracted the approximately $500 million needed to finance construction. Financial problems with the existing system may be to blame. The monorail has had difficulty meeting its operating and debt expenses, a problem exacerbated by the 2007-2009 recession. Newspaper reports in 2008 stated that the system was failing to meet its operating and debt expenses by about $30 million annually and that the company was drawing down its reserve funds. In January 2010, while continuing to provide service, the Las Vegas Monorail Company filed for Chapter 11 bankruptcy protection. The company emerged from bankruptcy in 2012 with its debts of $757 million, mostly outstanding bonds, reduced to $13 million. The monorail carried 4.2 million passengers in 2013 and generated $18.4 million of revenue, as compared to 10.3 million passengers in the peak year of 2005, when revenue reached $30.2 million. Missouri DOT Safe and Sound Program An example of a design-build P3 is the replacement of 554 mostly small bridges carrying local roads by a single contractor as part of the Missouri Department of Transportation's (MoDOT's) Safe and Sound Program. MoDOT awarded KTU Constructors a $487 million contract to complete the work by December 2013. Work was completed in November 2012. MoDOT financed the project by selling Grant Anticipation Revenue Vehicle (GARVEE) bonds. The bonds are being repaid in 24 annual installments of $50 million using a portion of the state's annual highway apportionment. This Design-Build P3 was originally proposed as a Design-Build-Finance-Maintain P3. The original P3 was to include a long-term maintenance contract element and private activity bonds as a financing mechanism. Problems in the financial markets in 2008 made the original proposal unaffordable. Texas SH-130 Designed to relieve congestion on I-35, SH-130 is a 90-mile, four-lane toll road on the east side of Austin, TX, connecting I-35 in the north and I-10 in the south. In 2007, the Texas Department of Transportation entered into an agreement with a concessionaire, the SH 130 Concession Company, to design, build, finance, operate, and maintain a 40-mile extension to the existing 50 miles of SH 130 on the south-east side of Austin. The agreement specified a 50-year concession from the opening of the new segment, which occurred in 2012. The $1.3 billion project was primarily financed by the concessionaire with $686 million in senior bank loans, $210 million in private equity, and a $430 million TIFIA loan. Since its opening in 2012, and despite a speed limit of at least 80 miles per hour, the 40-mile toll road extension has had much lower traffic volumes than forecast and, therefore, is generating much less revenue than the concessionaire needs in order to repay its loans. In March 2013, in an effort to get more trucks to use the toll road, the state decided to subsidize the toll for trucks for one year. TxDOT is paying the concessionaire $6 million as compensation for revenue lost due to reduced truck tolls. In October 2013, the project's debt was substantially downgraded and a rating agency stated the concessionaire is at risk of defaulting in 2014. This may force the state to terminate the concession and take full responsibility for the road. These problems also imperil the TIFIA loan to the project. Florida I-595 Express Lanes To relieve major highway congestion, the Florida Department of Transportation (FDOT) entered into a P3 agreement to make major improvements to I-595, a stretch of road near Fort Lauderdale linking I-75 and Florida's Turnpike to the west and I-95 to the east. The centerpiece of the project is the construction of three reversible toll lanes in the median of I-595. Started in 2010, construction is expected to be completed in 2014. The agreement requires the concessionaire, I-595 Express LLC, to design, build, finance, operate, and maintain the facility for 35 years. The $1.8 billion project was mostly financed by the concessionaire with $781 million in senior bank loans, a $603 TIFIA loan, and $208 million in equity. The concessionaire did not accept revenue risk associated with the payment of vehicle tolls. Instead, the private-sector financing is backed by "availability payments," regular payments made by FDOT to the private entity based on quality and performance measured against negotiated standards. Toll rates on the new express lanes will be set by FDOT, and revenue collected will be retained by the state. The Growth of Public-Private Partnerships Through most of the 20 th century, highway and transit construction were supported almost entirely by public funding, particularly from the federal government. The private sector's role was largely limited to bidding on and building what the public sector had planned, designed, and financed. The 1980s, however, saw federal spending on highways and transit projects grow at a slower rate than inflation, and the federal share of total capital spending on highways and transit declined. These trends spurred interest in the use of public-private partnerships, as states and localities, particularly those in fast-growing parts of the country, searched for new ways to fund and build transportation infrastructure. This interest was demonstrated in two state-level policy initiatives. With developments in automated toll collection technology that reduced both the cost of collecting tolls and the associated delays for motorists, seven states approved legislation by the late 1980s to allow private investment in highway projects on which the private partners could collect tolls. Two of the earliest projects developed under these new rules were the Dulles Greenway in Virginia and SR-91 in California, which both opened in 1995. According to DOT, 33 states and Puerto Rico currently have general P3 enabling legislation. In transit, new revenue was sought from the development of private facilities on or over transit agency land, a process known as joint development. For example, joint development was used in the construction of offices, retail space, and a hotel surrounding the Washington Metropolitan Area Transit Authority's Bethesda, MD, station. The station opened in 1984 and the mixed-use development was completed in 1985. The air-rights lease for this development generates $1.6 million annually in rents for the transit agency. Federal Legislation The growing state and local interest in seeking private investment in transportation prompted Congress to explore the inclusion of P3s in federal surface transportation programs starting in the late 1980s. This has resulted in legislative change in numerous areas. Highway Tolling In the Surface Transportation and Uniform Relocation Assistance Act of 1987 ( P.L. 100-17 ), Congress established a pilot program allowing federal funds to be used in construction or reconstruction of toll facilities, with a maximum federal share of 35%. However, these new or reconstructed facilities had to be publicly owned and operated and Interstate Highways were specifically excluded. Four years later, the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA; P.L. 102-240 ) removed the pilot program status, allowed states to convert non-tolled roads, bridges, and tunnels to tolled facilities, raised the federal cost share to 50%, and allowed for private ownership and operation. ISTEA also established the Congestion Pricing Pilot Program, which allowed federal funds to be used in the implementation of congestion pricing (variable tolls) on up to five projects, of which a maximum of three could be Interstate Highways. The Congestion Pricing Pilot Program was continued in the Transportation Equity Act for the 21 st Century (TEA-21; P.L. 105-178 ), enacted in 1998, but expanded to allow 15 projects and renamed the Value Pricing Pilot Project. Additionally, TEA-21 created another pilot program, the Interstate System Reconstruction and Rehabilitation Pilot Program, for up to three toll projects on the Interstate Highway system. The three slots were filled by I-70 in Missouri, I-81 in Virginia, and I-95 in North Carolina, but none of the proposed projects has been completed as a toll facility. In 2005, the Safe, Accountable, Flexible, Efficient Transportation Equity Act (SAFETEA; P.L. 109-59 ) allowed conversion of High Occupancy Vehicle (HOV) lanes to High Occupancy Toll (HOT) lanes. SAFETEA also created two new programs. The Express Lane Demonstration program authorized up to 15 new tolled facilities from the conversion of existing HOV facilities or where new lanes are constructed. The program explicitly provided for private investment. Five tolling agreements were signed under the program and will continue in force, although the program expired on September 30, 2012. The Interstate System Construction Toll Pilot program authorized tolling of three new Interstate Highways. SAFETEA also extended and modified the Value Pricing Pilot Program by setting aside a portion of the authorized funding for congestion pricing projects that do not involve highway tolls, such as parking pricing strategies and pay-as-you drive pricing involving innovative forms of car ownership and insurance. The most recent surface transportation authorization law, the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ), allows states to impose tolls on new federally aided bridges, tunnels, and highways, including Interstate Highways. Tolls may also be imposed on new lanes of an existing free highway, bridge, or tunnel, including Interstates, as long as the number of free lanes is unchanged. Furthermore, tolls may be placed on a reconstructed highway, bridge, or tunnel except on the Interstate system. MAP-21 also did away with the requirement that public authorities execute a toll agreement with FHWA on a federal-aid highway. A tolling agreement was required prior to imposing tolls on a federal-aid highway or before using federal-aid funds on an existing toll facility. A substantial number of toll-based projects have been initiated since the passage of ISTEA, and this activity appears to have accelerated. A survey sponsored by the Federal Highway Administration (FHWA) found that from the passage of ISTEA through December 2008, a total of 235 toll-based improvement projects were initiated in 32 states and one U.S. territory. About 20% of the toll-based projects identified in the survey involved a public-private partnership. Innovative Highway Finance Another way in which changes in federal law have encouraged P3s is through developments in innovative financing, a term that covers a broad set of ways to finance infrastructure outside the usual methods involving tax-funded appropriations, intergovernmental grants, and government revenue bonds. Language in ISTEA led to the creation in 1994 of the Innovative Finance Test and Evaluation (TE-045) program, which sought to implement and evaluate new highway financing tools. Some of the ideas developed in this experimental program were subsequently enacted in the National Highway System Designation Act of 1995 ( P.L. 104-59 ), including the State Infrastructure Bank (SIB) pilot program, which permitted certain states to set up revolving funds with federal money in an attempt to leverage other public and private resources for infrastructure projects. Congress advanced private participation in surface transportation projects in the Transportation Infrastructure Finance and Innovation Act (TIFIA), adopted in 1998 as part of TEA-21. TIFIA provides federal credit assistance to leverage non-federal funding, including investment from the private sector. Over time, Congress has authorized TIFIA to assist projects smaller than originally intended and has expanded its coverage to include freight rail and intermodal facilities. MAP-21 greatly expanded the TIFIA program, authorizing $750 million for FY2013 and $1 billion in FY2014. This authorization provided DOT with the capacity to lend about $16 billion. SAFETEA also designated certain private transportation activities as eligible for federally tax-exempt state and local bond financing. Historically, federal law has provided investors a federal income tax exemption on state and local government bonds issued to finance public activities, such as building a school, enabling the borrowers to take advantage of low interest rates, whereas private activity bonds issued to finance activities that are less public in nature pay taxable interest and therefore offer higher interest rates. Over the years, some types of private activities have been designated "qualified private activities," allowing their sponsors to access the tax-exempt bond market. Airports, docks and wharves, mass commuting facilities, and high-speed intercity rail facilities, highways, and surface freight transfer facilities all have been designated as qualified private activities. Congress has limited the amount of qualified private activity bonds that can be issued in each state and for certain activities. SAFETEA included a $15 billion limit on bond issuance for qualified highway or surface freight transfer facilities, although bonds issued under this section are exempt from the state volume caps that exist for the general issuance of private activity bonds. Under the law, the Secretary of Transportation is charged with deciding how to allocate the limited capacity among entities desiring to issue private activity bonds. It is possible that the $15 billion cap will be reached in the first quarter of FY2015, which could inhibit creation of transportation infrastructure public-private partnerships. The Obama Administration's FY2014 budget proposal included a provision to increase the limit for transportation PABs to $19 billion. Innovative Highway Contracting Since 1990, FHWA has undertaken Special Experiment Projects involving innovative contracting methods designed to reduce costs. One of these, design-build contracting, was made a permissible method of contracting in the federal-aid highway program in TEA-21, albeit with certain conditions. These conditions included limiting design-build contracting to projects over $50 million (over $5 million for Intelligent Transportation System projects) and restricting the start of final design until a project has met the requirements of the National Environmental Policy Act (NEPA), including environmental reviews. In 2005, Congress eliminated the $50 million floor for design-build contracts and permitted agencies to enter into contracts with private firms before NEPA approval. It also set a 180-day limit on the time for challenging federal approvals, including environmental approvals. This limitation was aimed at reducing risk and may be particularly important for projects financed by private investors. MAP-21 included several other provisions to encourage the creation of P3s at the state and local level. These provisions require DOT to compile and make available best practices in the use of P3s and to develop model contracts, and allow DOT to provide technical assistance in analyzing and drafting P3 agreements. Innovative Transit Financing One of the earliest legislative initiatives in mass transit, the National Urban Mass Transportation Act of 1974 ( P.L. 93-503 ), explicitly encouraged private financial participation in transit by permitting federal assistance for joint development projects, which typically involved commercial or residential development of land near transit stations. These types of projects, however, were discouraged by an administrative decision by the Urban Mass Transportation Administration (now known as the Federal Transit Administration or FTA) in the 1980s that federal subsidies should take contributions from private partners into account, which effectively meant that private dollars committed to a project would replace federal dollars. Congress directed FTA to revise this policy to allow land acquired with federal funding to be used in joint development projects and income derived from such projects to be used for transit operation. TEA-21 then made joint development eligible for reimbursement in federal transit grant programs. The law pertaining to joint development was last modified by SAFETEA, with regulations promulgated in 2007. Among other things, SAFETEA added intercity bus and rail terminals as permitted uses for joint development authority. Innovative Contracting in Transit ISTEA furthered the use of P3s in transit by initiating a demonstration program to explore the use of DB/DBOM in the New Starts program. FTA picked five projects to be a part of the demonstration program: Los Angeles Union Station Intermodal Terminal, Baltimore Light Rail Transit System Extensions, San Juan Tren Urbano, Bay Area Rapid Transit (BART) Airport Extension, and the Northern New Jersey Hudson-Bergen light rail project. ISTEA also directed FTA to issue guidance on the use of DB/DBOM in the Federal New Starts program. More recently, SAFETEA authorized the Secretary of Transportation to establish a pilot program to explore the use of P3s in new transit rail or bus rapid transit projects. This program was known as the Public-Private Partnership Pilot Program, or "Penta-P." The East Corridor and Gold Line Corridor Rail projects in Denver, CO, BART's Oakland Airport Connector, and two BRT projects in Houston, TX, were selected to participate in the program. Issues for Congress The widespread interest in encouraging P3s in surface transportation raises a number of important issues for Congress. These fall into two main categories: (1) the extent to which P3s can help finance the surface transportation system; and (2) the effects of long-term concessions on the planning, operation, and use of the surface transportation system. P3s offer a number of benefits for states and localities, but they also present a number of trade-offs and potential problems. Consequently, there is not one easily identifiable "public interest" but multiple stakeholders with overlapping interests that must be weighed against each other. The public interest in P3s has been protected on a project-by-project basis through the terms of concession agreements. Some, including GAO, have suggested that a more systematic approach to identifying and evaluating the public interest in P3s needs be developed and employed, as has been done in other countries such as Australia. As part of such an effort, the federal government might need to identify and evaluate the national public interest in highway projects that employ a P3. Can P3s Provide Additional Resources for Transportation? P3s are often touted as a means of providing resources for the provision of transportation infrastructure beyond those provided by government. In many cases, a P3 is designed to offer a return to private-sector capital from a project-related revenue stream such as vehicle tolls, container fees, or, in the case of transit station development, building rents. Of course, the public sector could raise revenue from transportation facilities in the same ways. The putative advantages of P3s are their ability to attract additional capital for infrastructure and to build and operate transportation facilities more efficiently than the public sector. The private share of a P3 can be financed with both debt (bond) and equity financing. Because equity investors have an opportunity to share in the profits, they may be less conservative than investors who would buy the municipal bonds used to finance a bridge or a transit system. In addition, the opportunity to invest in equity or taxable debt may lure pension funds and foreign investors, which generally are not subject to U.S. federal income tax and therefore do not benefit from the tax exclusion of interest on municipal bonds. Private concessions are often for terms longer than traditional municipal bond maturities of 25, 30, or 40 years, allowing the concessionaire to raise capital from very long-term investors. Based on these principles, one estimate suggests that the city of Chicago, which raised $1.83 billion for a 99-year concession of the Chicago Skyway, could have raised only $800 million by selling municipal bonds backed by Skyway revenues. P3 agreements involving toll facilities often include provisions regarding future toll increases. With such agreements, investors may be more confident in the ability of a private operator than a public operator to raise tolls in the future, given that toll increases at publicly controlled facilities are often politically contentious. Additionally, investors may believe a private operator will be more able to control operating costs and thereby increase its profit from any given level of tolls. Even if such advantages make P3s attractive to private capital, it is unclear how much private money could be attracted to investment in surface transportation infrastructure. In principle, hundreds of billions of dollars may be available for infrastructure development around the world. So far, however, the amount used to provide long-term financing through P3s appears to be small. According to one study, from 1989 through early 2011 there were 96 transportation P3s worth a total of $54.3 billion in the United States. Of these, 11 projects, built at a total cost of $12.4 billion, included a long-term private financing component. This suggests that the potential scale of private investment may be relatively modest when viewed in the context of total highway and transit infrastructure spending. Tolling, both public and private, accounts for about 5% of highway revenues. The American Association of State Highway and Transportation Officials (AASHTO) has projected that highway tolling may eventually be able to generate between 7% and 9% of future national highway investment needs. The potential of P3s in transit financing is likely smaller. As most transit lines cannot cover operating costs from fares, they are less tempting targets for private investment; transit P3s either involve availability payments or development of stations at which private investors can benefit from control of nearby land, leaving the public sector to provide the bus or rail lines that serve the stations. This suggests that P3s are likely to generate less than this estimated level of 7% to 9% of total investment needs for roads and transit. A related point, and one not fully considered in these estimates, is that the institution of a toll tends to suppress or divert travel demand. Widespread tolling could lead travelers to switch to other modes, change the time of a trip to avoid a charge, or forgo travel altogether. An estimate by DOT suggests that immediate imposition of widespread congestion pricing could reduce highway investment needs by as much as 30% from baseline estimates because of lower vehicle miles traveled. Of course, there is little likelihood that such widespread highway pricing could be instituted anytime soon, but the DOT estimate suggests that the ability to finance highway needs through tolls may have limitations. Will P3s Divert Resources from the Transportation Sector? State and local governments have significant demands for funding in many different areas. It is possible that asset leases of transportation facilities could be used to fund a wide range of government services other than transportation, a prospect that one expert has referred to as "revenue extraction." Diversion of resources may also be of more general concern in that new private resources attracted to transportation infrastructure may substitute for public resources in the transportation sector rather than supplementing them, with no net gain in funding. In a study of the effect of federal highway funding increases on state highway funding between 1982 and 2002, GAO observed a substitution effect, particularly between 1998 and 2002, when a 40% increase in federal capital spending was accompanied by a 4% drop in state and local capital spending. Are There Other Resource Benefits? P3s may generate new resources for transportation infrastructure in two other ways. First, they may improve resource efficiency through improved management and innovation in construction, maintenance, and operation, in effect providing more infrastructure for the same price. Private companies may be more able to examine the full life-cycle cost of investments, whereas public agency decisions are often tied to short-term budget cycles. On the other hand, some or all of these savings may not materialize if the public sector has to spend a substantial amount of time on procurement, oversight, and disputes that may result in litigation. GAO found in 2008 that most state governments did not have the necessary capacity to manage P3 contracts. To aid states, MAP-21 required DOT to "develop standard public-private partnership transaction model contracts for the most popular types of public-private partnerships for the development, financing, construction, and operation of transportation facilities." Second, through P3s the private sector may bear many of the financial risks of building, maintaining, and operating infrastructure. Such risks abound. One major risk is that construction will cost more and/or take longer than foreseen. Another is that a facility to be financed by tolls will have less demand than estimated, and will fail to generate the expected revenue. Transferring these and other risks to the private sector is not necessarily a money saver, as the private partner will require compensation for assuming them, but the risk transfer may provide greater certainty for the public sector. However, not all the risks can or should be shifted to the private sector. For instance, a major risk associated with transportation infrastructure projects that the private sector is unlikely to be able to accept is the delay and uncertainty associated with the environmental review process. Detractors argue that, at least in some cases, the transfer of risk in a P3 may prove illusory if miscalculations force the public sector to renegotiate the P3 contract or to assume project ownership. In the case of the extension of SH-130 near Austin, TX, discussed earlier, low traffic volumes prompted the state to provide an unanticipated subsidy of truck tolls for one year. If low traffic volumes cause the concessionaire to default on its financial commitments, repayment of a $430 million TIFIA loan to the federal government may be at risk. If a default occurs, the state may have to terminate the concession and take full responsibility for the road. In some P3s, the public sector retains revenue risk, thus putting itself on the line to repay creditors if the project fails to generate anticipated revenue. What Are the Effects of P3s on Operation of the Highway Network? If P3 projects involve highway tolls, some road users may claim to be charged twice, as they may also be paying tax on the motor fuel used to drive on the facility. A proliferation of tolled roads, particularly those under private control, thus has the potential to raise travel costs. Trucking groups have been particularly wary of proposals to fund highway construction through tolls, as they worry that toll rates could shift some costs from passenger vehicles to trucks. Tolls are not regulated by the federal government, but P3 contracts provide a mechanism for states to exercise control over tolls on privately operated highways. This may be particularly important in a situation in which there is no viable alternative to a particular road, bridge, or tunnel, allowing the operator to exercise monopoly power—although a concessionaire's ability to raise tolls is limited by the possibility that higher tolls will reduce traffic and revenue. If tolls imposed under P3s divert traffic, they could result in increased congestion and reduced safety on other routes. Diversion of truck traffic is seen as particularly problematic, as truckers facing high tolls may find it worthwhile to use toll-free roads less able to accommodate long or heavy vehicles. One study suggests that the safety impacts and infrastructure damage resulting from diversion may be substantial, although the scale of effects will vary by route and the size of the toll. Tolling also involves equity issues. In some cases, states or local governments have attempted to structure tolls or locate toll-collection facilities so that users from other states or localities provide a disproportionate share of the revenue, potentially burdening interstate commerce. Tolls place a greater burden on lower-income than higher-income households, although surveys of users on toll roads tend to show a significant level of usage by people from low income households. Moreover, projects that add a tolled alternative to non-tolled lanes, such as the I-495 HOT lanes in Northern Virginia, are likely to benefit all road users if they reduce congestion in "free" lanes. What Are the Effects of P3s on Infrastructure Planning? P3s may have longer-term effects on the transportation system insofar as they influence decisions about what to build and where. Public-sector investment decisions inevitably involve a political process, and it is frequently argued that government funding of transportation infrastructure is spread too widely, or worse, goes to projects with low ratios of benefits to costs. A number of studies have shown, for example, that geographic equity is often a basis for distributing transportation funding and selecting projects. Private-sector investors, on the other hand, will be drawn to projects that have the greatest potential financial returns, and are unlikely to be interested in financing facilities that have little revenue-generating potential or would be easy for users to circumvent. P3s reliant on tolls, therefore, are unlikely to address transportation issues in rural areas. They may also not be suitable for roads that carry relatively little traffic but provide important connections between the more heavily traveled segments. Concerns about the effects of P3s on transportation planning have been particularly acute when states receive unsolicited proposals. It is generally assumed that projects for which proposals are solicited from the private sector will have come through a public planning process. Unsolicited project proposals, on the other hand, may or may not reflect the priorities of the state, region, or locality as incorporated in short- and long-range plans. Consequently, it has been suggested that P3 enabling legislation should not permit unsolicited proposals. Proponents of P3s argue that this would stifle innovative ideas, and that while a proposal may be unsolicited, to come to fruition it would have to pass through the public review process. Some P3 contracts contain non-compete clauses that restrict what types of improvements a government agency can make near a privately operated facility. Such restrictions may impede the ability of public agencies to increase capacity and to devise coordinated congestion management policies. On the other hand, investors might be less willing to undertake P3s if there were no protection from unlimited competition by "free" roads provided by the taxpayer, requiring a balance between attracting private investment and protecting the public interest in mobility and choice. The exceedingly long terms of some concession agreements, 99 years in some cases, may further complicate transportation planning. While very long-term contracts may be required to provide investors with sufficient returns, contract provisions may tie the hands of planners and policy makers years into the future, when conditions may be very different. This may argue for limiting the term of a concession to the design life of a facility, although that may deter some investors. Another possible solution is for concession agreements to include provisions that allow for reasonable amendments and for third-party arbitration of disagreements. Policy Options MAP-21 made several changes to federal law that are likely to encourage the creation of P3s at the state and local level. These include greatly increasing the amount of funding available for TIFIA loans and making tolling on federal-aid highways less restrictive. MAP-21 also required DOT to provide technical support to P3s. These changes were a move away from the policy of incremental changes and experimentation in program incentives and regulation that existed prior to MAP-21. There are two broad policy options for expanding use of P3s. The first would be to actively encourage P3s with program incentives, as was done in MAP-21, but with relatively tight regulatory controls. The second would be to aggressively encourage the use of P3s through program incentives and deregulation, particularly in the areas of tolling and financing. It should be pointed out that at the level of detailed policy prescriptions these options are not necessarily mutually exclusive, as Congress could decide to deregulate in one area while enhancing regulation in another, and may add funding to one program and cut funding to another. Proponents of the first option tend to be cautious about the benefits of P3s and favor regulations designed to protect the public interest from their perceived problems. They emphasize that many P3s involve little private money or are subsidized by the public sector, that risk transfer from the public to the private sector can be illusory, and that P3 contracts may constrain government decisions about the transportation system. In response to such concerns, MAP-21 required that best practices complied by DOT "shall include policies and techniques to ensure that the interests of the traveling public and State and local governments are protected in any agreement entered into with the private sector for the development, financing, construction, and operation of transportation facilities." The debate over public oversight is not new. The proposed Surface Transportation Authorization Act (STAA) of 2009 would have made P3s involving federal-aid highway funds subject to various federal requirements, including a weighing of the costs and benefits of the P3 against traditional public delivery methods. The proposal also contained requirements regarding public information and public involvement and a prohibition against non-compete clauses in P3 agreements. These requirements would have been enforced by a new Office of Public Benefit (OPB) within FHWA to "provide for the protection of the public interest in relation to highway toll projects and public-private partnership agreements on Federal-aid highways." The requirement that the OPB review and approve a P3's compliance with new public transparency provisions raised particular concern among advocates of more widespread use of P3s, who asserted that the risk of OPB disapproval late in the process would discourage project partners from investing the substantial time and money required to develop projects. The more aggressive approach to P3s would provide program funding to encourage innovation and generally deregulate the use of tolling and private sector involvement, thereby letting states decide when and how to enter into agreements. The federal role in such a scenario could be limited to providing guidance about instituting good practices and avoiding common pitfalls, although it might be possible to set up a federal P3 office which, in addition to providing technical advice, could also provide consulting services in a fee-for-service arrangement, and could possibly help to develop the P3 market. Such entities exist in several other countries, such as Partnerships BC in British Columbia, Infrastructure Partnerships Australia, and Partnerships UK. Other past proposals have linked deregulation of tolling and public-private partnerships with devolution of federal responsibilities in highways and transit to the states. P3s and Interstate Highway Tolls Many parts of the Interstate Highway system have traffic levels that would make it financially viable to have toll-supported public-private partnerships. The need for reconstructing Interstates is likely to accelerate in the years ahead as many reach their approximately 50-year design life. Many of these projects are likely to be very expensive "mega-projects," running into the hundreds of millions of dollars. Although imposing tolls on "free" roads is likely to be unpopular, Congress could allow states to impose tolls on an Interstate after its reconstruction as a way to facilitate financing of such projects. Federal Financing Programs The TIFIA program has played an important role in the funding packages of several large P3s. MAP-21 greatly enlarged the program, authorizing $16 billion in loan capacity in FY2013 and FY2014, but there have already been enough applications to almost exhaust that budget authority. Further enlarging TIFIA could encourage creation of P3s. However, increased lending may also increase the likelihood that a project is unable to repay its loan. TIFIA loans can be subordinate to other debt financing for the project, except, as required by statute, in the event of bankruptcy, insolvency, or liquidation (although there are some exceptions). The possibility that the federal government will claim parity with other creditors, known as a "springing lien," may discourage the completion of some P3 agreements. Abolishing the springing lien, however, may expose the federal government to greater risk of loss if a project sponsor is unable to service its debt. Private activity bonds have been another important way in which the federal government has encouraged the development of P3s in transportation. As noted earlier, the current cap of $15 billion may be reached in FY2015, threatening the development of new projects. The Administration's FY2014 budget proposal includes a provision to increase this amount to $19 billion. Raising the cap is not cost free, however. This provision, if enacted, would reduce revenue by $515 million over the 2014 to 2023 budget window. A national infrastructure bank could be designed to promote development of P3. The central idea of a national infrastructure bank, or "I-bank," would be to provide low-cost, long-term loans on flexible terms, much like the TIFIA program. However, an I-bank might have more independence than TIFIA, which is controlled by the U.S. Department of Transportation, and as a separate organization might be able to build up a specialized staff, including expertise on the creation and oversight of P3s. Funding could come from an appropriation to pay for administrative costs and the subsidy cost of credit assistance, although in some formulations an I-bank would raise its own capital through bond issuance. Many different formulations of an I-bank have been proposed over the past few years. Three I-bank proposals that have been introduced in the 113 th Congress are the National Infrastructure Development Bank Act ( H.R. 2553 ) by Representative DeLauro, the Partnership to Build America Act ( H.R. 2084 ) by Representative Delaney, and the Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) Act ( S. 1716 ) by Senator Warner. State infrastructure banks (SIBs) already exist in 32 states. Most were created in response to a federal program enacted in 1995 ( P.L. 104-59 ). Although they tend to provide credit assistance to small projects that do not involve a P3, an expansion of their role may make them more supportive of projects involving a private partner. MAP-21 did not extend authority for a state to use a portion of its federal surface transportation funds to capitalize a SIB. Several bills have sought to encourage SIBs by allowing states to fund them from federal funds, by creating a dedicated federal funding stream, or by authorizing SIBs to issue bonds that would benefit from tax credits.

Growing demands on the transportation system and constraints on public resources have led to calls for more private sector involvement in the provision of highway and transit infrastructure through what are known as "public-private partnerships" or "P3s." A P3, broadly defined, is any arrangement whereby the private sector assumes more responsibility than is traditional for infrastructure planning, financing, design, construction, operation, and maintenance. Some P3s involve the leasing by the public sector to the private sector of existing infrastructure, while others provide for a private role in designing, financing, building, and operating new infrastructure. P3 proponents argue that, in addition to injecting additional resources into surface transportation infrastructure, private sector involvement potentially reduces costs, project delivery time, and public sector risk, and may also improve project selection and project quality. Detractors, on the other hand, argue that the potential for P3s is limited, and that, unless carefully regulated, P3s will disrupt the operation of the surface transportation network, increase driving and other costs for the traveling public, and subvert the public planning process. Evidence suggests that there is significant private funding available for investment in surface transportation infrastructure, but that it is unlikely to amount to more than 10% of the ongoing needs of highways over the next 20 years or so, and probably a much smaller share of transit needs. With competing demands for public funds, there is also a concern that private funding will substitute for public resources with no net gain in transportation infrastructure. The effect of P3s on the planning and operation of the transportation system is a more open question because of the numerous forms they can take, and because they are dependent on the detailed agreements negotiated between the public and private partners. Many highway and bridge P3s involve tolling, raising questions about equity and traffic diversion and, more broadly, concerns about whether there is a national public interest justifying federal oversight of P3s. This report discusses two broad policy options for Congress as it considers reauthorizing federal surface transportation programs. The first would be to actively encourage P3s with program incentives as has been done in the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), but with relatively tight regulatory controls. This might include a requirement for an evaluation of the costs and benefits of the P3 against traditional public delivery methods, new requirements regarding public information and public involvement, and a prohibition against non-compete clauses in P3 agreements (which could prevent public authorities from providing new, competitive infrastructure near a privately controlled facility). The second broad option would be to aggressively encourage the use of P3s through program incentives and deregulation. This might include fewer restrictions on the tolling of Interstate Highways and the enhancement of existing financing programs that encourage P3s, such as the TIFIA (Transportation Infrastructure Finance and Innovation Act) program and private activity bonds, or new initiatives, such as the creation of a national infrastructure bank.

Introduction Alien legalization or "amnesty," as well as special provisions to allow certain aliens to adjust to legal permanent resident (LPR) status, are among the most controversial issues of U.S. immigration policy. Among the thorny questions raised by such proposals are: would unauthorized aliens (i.e., illegal aliens) currently in the United States be eligible for the visa? and would the proposal include a mechanism for guest workers to obtain LPR status? This report summarizes the main options for foreign nationals currently in the United States—legally or illegally—to become LPRs. As discussed more fully below, most of these options would hinge on Congress enacting special legislation. Legislative Context In the 109 th Congress, both chambers passed major overhauls of immigration law but did not reach agreement on a comprehensive reform package. The Senate-passed bill ( S. 2611 ) would have enabled certain groups of unauthorized aliens in the United States to obtain legal permanent residence and certain guest workers to adjust to LPR status. In the 110 th Congress, a bipartisan compromise was negotiated with Bush Administration officials and introduced in the Senate on May 21, 2007. That bill would have enabled unauthorized aliens in the United States to become LPRs if they had met certain conditions, paid penalty fees, and fulfilled other requirements. During his time in the Senate, President Barack Obama supported comprehensive immigration reform legislation that included increased enforcement as well as a pathway to legal residence for certain unauthorized residents. Similar views have been expressed Secretary of Homeland Security Janet Napolitano. Migration Trends Immigrant admissions, as well as adjustments to LPR status, are subject to a complex set of numerical limits and preference categories that give priority for admission on the basis of family relationships, needed skills, humanitarian concerns, and geographic diversity. When Congress first codified the assortment of immigration laws into the Immigration and Nationality Act (INA) in 1952, the assumption was that most aliens who would receive LPR status would be coming to the United States from abroad. Indeed, 30 years ago, more than 80% of the 386,194 aliens who became LPRs of the United States had arrived from abroad. In FY2008, 58% of all LPRs were adjusting status within the United States. That the number of LPRs arriving from abroad has generally remained around 400,000 for the past 30 years while the total number of LPRs now hovers around one million annually, highlights the contribution that aliens adjusting to LPR status after being in the United States is making to the growth of permanent legal immigration. In addition to LPRs, each year millions of foreign nationals come temporarily on nonimmigrant visas (e.g., tourists, foreign students and intra-company business transfers). It is estimated that annually hundreds of thousands of foreign nationals either overstay their nonimmigrant visas or enter the country illegally and thus may become unauthorized aliens. As of March 2008, there were an estimated 11.9 million aliens living here without legal authorization to do so. Almost 40%, an estimated 4.4 million, arrived in the 2000-2005 period. Overview of Avenues to LPR Status There are several main options for aliens in the United States to become LPRs without leaving the country, and as Figure 1 illustrates, most involving unauthorized aliens would require Congress to enact a law. To adjust status under current law, aliens must be in the United States legally on a temporary visa and eligible for a LPR visa; aliens fleeing persecution may be granted asylum; or—in very limited circumstances—unauthorized aliens may become LPRs through cancellation of removal by an immigration judge. Even aliens in the United States legally on a temporary visa can only adjust to LPR status if they qualify under the statutory set of numerical limits and preference categories that give priority for admission on the basis of family relationships, needed skills, and geographic diversity. INA §245 permits an alien who is legally but temporarily in the United States to adjust to LPR status if the alien becomes eligible on the basis of a family relationship or job skills, without having to go abroad to obtain an immigrant visa. INA §245 was limited to aliens who were here legally until 1994, when Congress enacted a three-year trial provision (commonly referred to as §245(i)) that allowed aliens here illegally to adjust status once they became eligible for an LPR visa, provided they paid a large penalty fee. In 2000, Congress temporarily reinstated §245(i) through April 30, 2001 ( P.L. 106-554 ). Special Provisions for Adjustment of Status Over the years, Congress has enacted statutes that enable certain aliens in the United States on a recognized—but non-permanent—basis to adjust their status to legal permanent residence when they are not otherwise eligible for an immigrant visa. Since the codification of the INA in 1952, there have been at least 16 Acts of Congress that have enabled certain aliens in the United States in some type of temporary legal status to adjust to LPR status. Most of these adjustment of status laws focused on humanitarian cases, e.g., aliens paroled into the United States by the Attorney General or aliens from specific countries who were given blanket relief from removal such as temporary protected status (TPS), deferred enforced departure (DED), or extended voluntary departure (EVD). The other major group of aliens adjusting status through special provisions involved nonimmigrants and typically were employment-based. Beneficiaries of these special provisions included nonimmigrant alien physicians who had graduated from a medical school or qualified to practice medicine in a foreign state and were fully and permanently licensed and practicing medicine in a U.S. state on January 9, 1978; nonimmigrant retired employees of international organizations and/or their immediate families who have lived in the United States for specified periods of time, totaling at least 15 years for eligible adults and 7 years for children; and nonimmigrant nurses here as of September 1, 1989, who had been employed in the United States as registered nurses for at least three years before application for adjustment and whose continued employment met specified certification standards. Legalization The issue of whether aliens residing in the United States without legal authorization may be permitted to become LPRs has been debated periodically, and at various times Congress has enacted legalization programs. In 1929, for example, Congress enacted a law that some consider a precursor to legalization because it permitted certain aliens arriving prior to 1921 "in whose case there is no record of admission for permanent residence" to register with INS's predecessor agency so that they could become LPRs. In 1952, Congress included a registry provision (aimed at aliens who had been admitted but whose files were lost) when it codified the INA, and this provision ultimately evolved into an avenue for unauthorized aliens to legalize their status. When Congress passed the Immigration Reform and Control Act (IRCA) of 1986, it included provisions that enabled several million aliens illegally residing in the United States to become LPRs. Generally, legislation such as IRCA is referred to as an "amnesty" or a legalization program because it provides LPR status to aliens who are otherwise residing illegally in the United States. Although legalization is considered distinct from adjustment of status, most legalization provisions are codified under the adjustment or change of status chapter of INA. There were two temporary legalization programs created by IRCA. The "pre-1982" program provided legal status for otherwise eligible aliens who had resided continuously in the United States in an unlawful status since before January 1, 1982. They were required to apply during a 12-month period beginning May 5, 1987. The "special agricultural worker" (SAW) program provided legal status for otherwise eligible aliens who had worked at least 90 days in seasonal agriculture in the United States during the year ending May 1, 1986. They were required to apply during an 18-month period beginning June 1, 1987, and ending November 30, 1988. Approximately 2.7 million aliens qualified for legal status under the pre-1982 and SAW programs. Of this total, 1.6 million or 59% qualified under the pre-1982 program, and 1.1 million or 41% qualified under the SAW program. Cancellation of Removal The Attorney General has the discretionary authority under the INA to grant relief from deportation and adjustment of status to otherwise illegal aliens who meet certain criteria. Generally, aliens seeking this type of relief are those who have established "deep roots" in the United States and who can demonstrate good moral character as well as hardship to their family here if they are returned to their native country. Decisions to grant relief are made on a case-by-case basis. This avenue, formerly known as suspension of deportation, is now called cancellation of removal as a result of the Illegal Immigrant Reform and Immigrant Responsibility Act (IIRIRA) of 1996 ( P.L. 104-208 , Division C). In addition to changing the terminology, IIRIRA established tighter standards for obtaining this relief. The hardship threshold previously was "extreme" hardship to the alien, the alien's citizen or permanent resident alien spouse, children, or parent. Now the language states "exceptional and extremely unusual hardship." The length of time the alien had to be physically residing in the United States was increased from 7 to 10 years. Moreover, the time span used to calculate the 10-year physical presence requirement now terminates when the alien receives a notice to appear (the document that initiates removal proceedings) or when the alien commits a serious crime. IIRIRA also established for the first-time limits on the number of people who could receive cancellation of removal—4,000 each fiscal year.

Immigration patterns have changed substantially since 1952, when policy makers codifying the Immigration and Nationality Act (INA) assumed that most aliens becoming legal permanent residents (LPRs) of the United States would be arriving from abroad. In 1975, more than 80% of all LPRs arrived from abroad. By 2005, however, only 34% of all aliens who became LPRs had arrived from abroad; most LPRs adjust status within the United States. This report summarizes the main avenues for foreign nationals currently in the United States—legally or illegally—to become LPRs. Alien legalization or "amnesty," as well as adjustment of status and cancellation of removal options, are briefly discussed. Designed as a primer on the issues, the report provides references to other CRS products that track pertinent legislation and analyze these issues more fully. This report will be updated as needed.

Introduction The effectiveness of the nation's schools is a concern at all levels of government. It is generally held that all students in elementary and secondary education should have access to quality public schools, providing all students with an opportunity to meet rigorous academic standards. Examining whether students are being held to well-defined academic standards and achieving at desired levels has become one of the primary foci of federal education policy in elementary and secondary schools. Federal policies aiming to improve the effectiveness of schools have historically focused largely on inputs, such as supporting teacher professional development, class-size reduction, and compensatory programs or services for disadvantaged students. Over the last two decades, however, interest in developing federal policies that focus on student outcomes has increased. Perhaps most prominently, the enactment of the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ), which amended and reauthorized the Elementary and Secondary Education Act (ESEA), marked a dramatic expansion of the federal government's role in supporting standards-based instruction and test-based accountability, thereby increasing the federal government's involvement in decisions that directly affect teaching and learning. As Congress contemplates the reauthorization of the ESEA, it may grapple with issues related to standards and assessments and the extent to which requirements related to assessments and standards should be prescribed at the federal level versus determined by the states. In the last few years, there has been a grassroots movement spearheaded by the National Governors Association (NGA) and the Council of Chief State School Officers (CCSSO) to develop a common set of standards for mathematics and English/language arts (ELA), known as the Common Core State Standards Initiative (CCSSI). Numerous states participated in the process to develop these standards and many agreed to adopt and implement the standards. While the federal government had no role in developing the standards, the Administration has expressed support for the standards and the associated assessments being developed to align with the standards. This report begins with a brief overview of the requirements included in current law with respect to standards and assessments. Included in this section is a discussion regarding the difference between standards and curriculum. The second part of this report discusses the CCSSI, including its history and current status. The third part examines efforts by the Administration that may have supported, though not required, states' adoption of the standards included in the CCSSI. This includes a discussion of the Race to the Top (RTT) State Grants, Race to the Top (RTT) Assessment Grants, and the ESEA flexibility package currently being offered to states by the Administration. The next part discusses requirements for teacher and school leader evaluation that were included in the RTT State Grants and the ESEA flexibility package and how these requirements relate to the Common Core State Standards. The last part of the report examines various issues and criticisms related to the Common Core State Standards and the aligned assessments. Current Law Requirements for Standards and Assessments The NCLB required states participating in ESEA Title I-A to develop and adopt content and performance standards and aligned assessments in the subjects of mathematics and reading in each of grades 3-8 and for at least one grade in grades 10-12 by the end of the 2005-2006 school year, assuming certain minimum levels of annual federal funding were provided for state assessment grants; adopt content and performance standards in science (at three grade levels—grades 3-5, 6-9, and 10-12) by the end of the 2005-2006 school year; and adopt assessments in science (at three grade levels) by the end of the 2007-2008 school year. The academic achievement standards must include at least three levels of performance: partially proficient (basic), proficient, and advanced. The same academic content and achievement standards must apply to all students. The assessments must be aligned with the state's academic content and achievement standards. Each state was permitted to select its own reading, mathematics, and science content standards, performance standards, and assessments. Title VI-A of the ESEA provides grants to states to develop and administer the required assessments. Standards Under Current Law As discussed above, states are required to adopt and implement two types of academic standards as a condition of receiving Title I-A funding. These include content standards and performance (or achievement) standards. In general, content standards specify what students are expected to know and be able to do. Performance standards are explicit definitions of what students must know and be able to do to demonstrate proficiency. According to the U.S. Department of Education (ED), "Achievement standards further define content standards by connecting them to information that describes how well students are acquiring the knowledge and skills contained in academic content standards." In neither case are standards synonymous with curricula, method of instruction, or classroom materials. States are not required to have their content or performance standards approved or certified by the federal government in order to receive funding under the ESEA. ED does not review or approve the quality of the content or performance standards selected by a state. States are, however, required to submit evidence to ED that demonstrates that they have adopted and implemented standards in the required subjects at the required grade levels and a description of the process used to establish the standards. Thus, all states have the flexibility to select their own content and performance standards. Content Standards Non-regulatory guidance issued by ED specifies what content standards are to include. Academic content standards specify what all students are expected to know and be able to do. Academic content standards must contain coherent and rigorous content and encourage the teaching of advanced learning. Academic content standards should be clear and specific and give teachers, students, and parents sufficient direction to guide teaching and learning. Additionally, academic content standards should be understandable for educators to teach the expected content in their classrooms and for students to attain to the expected high levels of achievement. Thus, academic content standards should be written in clear, jargon-free, and straightforward prose that is accessible to a wide range of audiences. Thus, content standards guide what teachers need to be teaching in the classroom. Content standards do not tell teachers how to teach the specified content or what materials to use to teach the content. That is, content standards do not prescribe curricula, teaching methods, or materials. Performance Standards6 Performance standards define the requirements for students to meet or exceed in each content area and measure the extent to which a student's work meets the requirements. A performance standard is a generally agreed upon definition of a certain level of performance in a content area that is expressed in terms of a cut score. The predetermined cut score denotes a level of mastery or level of proficiency within a content area. An assessment system that uses performance standards typically establishes several cut scores that denote varying levels of proficiency. For example, under current law, states are required to establish performance standards that, at a minimum, denote whether a student performed at the basic, proficient, or advanced level on the state reading, mathematics, and science assessments required under ESEA Title I-A. Definitions are provided for each performance standard, describing the competencies and abilities associated with the label. Performance standards can be directly linked to the curriculum and results can be used for planning, modifying, and adapting instruction. As with content standards, performance standards do not prescribe curricula, teaching methods, or materials. Standards Versus Curriculum With respect to the ESEA Title I-A requirements, as previously discussed, standards are expectations for what students should know and be able to do, as well as explicit definitions of what students must demonstrate to indicate that they have achieved proficiency with respect to the standards. There is not a single, broadly agreed upon definition of curriculum. It can mean anything from lesson plans to textbooks to frameworks that can be generated at the state or local level or purchased off the shelf. In general, however, the development and use of curriculum is part of the process for operationalizing state standards. According to ED, "A curriculum aligned with the State's standards is necessary for students to achieve and demonstrate proficiency on a State's tests." Thus, according to ED, while standards and curriculum are different concepts, the alignment of standards and curriculum is needed for students to demonstrate proficiency on state assessments, which are required to be aligned with the standards. Prohibitions Against Federal Mandates, Direction, or Control There are several prohibitions included in federal law that attempt to limit the role of the federal government with respect to the approval of state standards and assessments, control of curriculum, control over educational materials, and the creation of a national test. Relevant prohibitions appear in the ESEA and in the General Education Provisions Act (GEPA). ESEA Provisions Section 1905 of the ESEA includes specific prohibitions related to Title I. Nothing in this title shall be construed to authorize an officer or employee of the Federal Government to mandate, direct, or control a State, local educational agency, or school's specific instructional content, academic achievement standards and assessments, curriculum, or program of instruction. The Section 1905 provision is reinforced by provisions in Section 1111 regarding the state plan that each state must submit in order to receive Title I-A funds. Under Section 1111(b)(1)(A), each state is required to "demonstrate" that the state has adopted challenging academic content and achievement standards, but the state is not required to submit the actual standards to the Secretary. Under Section 1111(b)(3)(A), each state shall "demonstrate" that it has implemented a set of "high-quality, yearly student academic assessments." Section 9527 of the ESEA also includes several provisions that limit the federal role with respect to standards and control of curriculum. Per the requirements of Section 9527(c), no state is required to have its content or performance standards approved by the federal government as a condition of receiving funds under the ESEA. Section 9527(b) prohibits ED from using any funds provided to the department under the ESEA "to endorse, approve, or sanction any curriculum designed to be used in an elementary school or secondary school." That is, ED is prohibited from requiring states, local educational agencies (LEAs), and schools to use specific curricula, and states, LEAs, and schools do not need ED's approval of their curricula in order to receive funds under the ESEA. There is also a more general prohibition placed on the federal government with respect to curriculum. Section 9527(a) states: Nothing in this Act shall be construed to authorize an officer or employee of the Federal Government to mandate, direct, or control a State, local educational agency, or school's curriculum, program of instruction ... Taken together, the plain statutory language of these ESEA provisions gives the federal government broader authority over state educational standards and assessments than it may appear at first glance. For example, although ED is prohibited from mandating, directing, or controlling a state educational agency's (SEA's), LEA's, or school's adoption of specified standards and assessments, the statutory language does not prevent states from voluntarily establishing such standards or assessments in response to incentives offered by ED. Thus, the statute does not appear to limit the federal government's authority to require states to maintain content standards, performance standards, or assessments as a condition of receiving funding under the ESEA, as occurred under the RTT program, nor does the statutory language prevent ED from imposing similar requirements as a condition of receiving an ESEA waiver. Furthermore, although these provisions do appear to prevent ED from requiring states to adopt specific standards or assessments or to win federal approval of the standards and assessments that states select, ED does not appear to be barred from participating in the development of such standards. It is also important to note that standards and curriculum are not the same thing. As a result, although the statutory language bars ED from prescribing the specific instructional content, curriculum, or program of instruction that will be used to teach the content included in a state's standards, this prohibition does not extend to cover other requirements related to standards. GEPA Provisions GEPA contains several provisions similar to the prohibitions set forth in the ESEA. For example, Section 438 of GEPA clarifies that no provision of any applicable program is intended to authorize the federal government to exercise any "direction, supervision, or control over the curriculum, program of instruction, administration, or personnel of any educational institution, school, or school system," or over the selection of "library resources, textbooks, or other printed or published instructional materials by any educational institution or school system." These prohibitions, which are designed to maintain state and local control over education, prevent ED from requiring SEAs, LEAs, or schools to adopt specific curricula or instructional programs, but the statutory language makes no reference to standards or assessments. Likewise, Section 447 of GEPA specifies that notwithstanding any other provision of law (except as discussed below), no funds provided to ED or to an applicable program may be used to "pilot test, field test, implement, administer or distribute in any way any federally sponsored national test in reading, mathematics, or any other subject that is not specifically and explicitly provided for in authorizing legislation enacted into law." The exceptions to this provision include the Third International Mathematics and Science Study (TIMSS) or other international comparative assessments that are administered to a sample of students in the United States and foreign countries and developed under the authority of Section 153(a)(6) of the Education Sciences Reform Act of 2002 (ESRA). Thus, unless Congress acts to support a federally sponsored national test in a subject area, the Secretary is prohibited from using funds for this purpose. While the Secretary is prohibited from using funding to develop such tests, the Secretary does not appear to be barred from providing federal funds to support non-federally led efforts to voluntarily develop a common test. Common Core State Standards Initiative As previously discussed, under the provisions of ESEA, states have had the flexibility to select their own content and performance standards. This flexibility has led to the development of different accountability systems in each state. Concerns related to the diversity of accountability systems as well as concerns related to student mobility, consistent expectations for students, preparation of students for global competition, and skills students need for employment spurred a grassroots movement led by the National Governors Association and the Council of Chief State School Officers to develop common standards for ELA and mathematics in grades K-12 (referred to as the Common Core State Standards). This effort is referred to as the Common Core State Standards Initiative. According to the CCSSI, "The purpose of this state-led initiative ... is to create a rigorous set of shared standards that states can voluntarily adopt. The standards are crafted to 'define the knowledge and skills students should have within their K-12 education careers so they graduate from high school able to succeed in entry-level, credit-bearing academic college courses and workforce training programs.'" The initial discussion of the need to have a common set of high standards began in November 2007 at a meeting of the state education chiefs in Columbus, OH, where the chiefs discussed developing a single-set of standards that would be benchmarked to college- and career-readiness. The following year, the CCSSO, NGA, and Achieve published a report, Benchmarking for Success: Ensuring U.S. Students Receive a World-Class Education , which recommended that state standards be upgraded by adopting a "common core" of internationally benchmarked standards in language arts and mathematics for grades K-12. In April 2009, CCSSO and NGA convened chief state school officers and governors' education policy advisors to discuss the CCSSI. By September 2009, governors and chief state school officers from 48 states, the District of Columbia, and two territories were participating in the CCSSI. The work to develop the Common Core State Standards was conducted in two phases. During the first phase, which began in summer 2009, two work teams (one for ELA and one for mathematics) developed the first drafts of college- and career-readiness Common Core State Standards. These drafts were reviewed by content experts and subsequently revised in July 2009. In August 2009, the second draft of the standards was provided to state and national organizations for review and comments. The work teams made subsequent revisions to the standards based on these comments. The revised draft of the standards was then released for public comment from September 21, 2009, though October 21, 2009. The standards were revised based on comments received from the public. They were then submitted to the Validation Committee. In September 2009, the CCSSI announced the members of a validation committee that was "tasked with reviewing and verifying the standards development process and the resulting evidence-based college- and career-readiness standards." The second phase of work on the standards began in November 2009 with the announcement of the Work Group that would develop the K-12 ELA and mathematics standards that would be aligned with the college- and career-readiness standards. The K-12 Work Group was composed of individuals with varied expertise and experience in areas such as assessment; curriculum design; early childhood education; child development; and elementary, secondary, and postsecondary education. The Work Group developed multiple drafts of the standards that were shared with a wide range of stakeholders including states, content experts, teachers, professional organizations, civil rights groups, and members of the higher education community. On March 10, 2010, the draft K-12 ELA and mathematics standards were posted for public comment. Nearly 10,000 people provided feedback on the drafts. Based on this feedback, subsequent revisions were made to the standards. Following these revisions, the Validation Committee met to review the standards. The final Common Core State Standards were released on June 2, 2010. Adoption of the standards is optional. However, according to the Common Core State Standard Initiative, a state is considered to have adopted the Common Core State Standards only if (1) a state adopts 100% of the standards in ELA and in mathematics (word for word), "with the option of adding up to 15% of standards on top of the core" standards, and (2) the standards-authorizing body in the state has taken formal action to adopt and implement the standards. As of August 2014, 43 states, the District of Columbia, 4 outlying areas, and the Department of Defense Education Activity (DODEA) had adopted the Common Core State Standards. This total does not include Indiana and Oklahoma, who recently became the first states to adopt and subsequently discontinue use of the Common Core State Standards. South Carolina has indicated that the Common Core State Standards will be fully implemented for the 2014-2015 school year but will be replaced by "new, high-level College and Career Ready standards" in the 2015-2016 school year. Minnesota has adopted the ELA Common Core State Standards but not the Common Core State Standards for mathematics. Alaska, Nebraska, Texas, Virginia, and Puerto Rico have not adopted either the Common Core State Standards for ELA or mathematics. It should be noted that the CCSSI did not develop assessments aligned with the standards. While having a set of common standards could arguably lend itself to the development of a single set of assessments that could be used to compare student performance across states, the CCSSI did not develop such assessments. As discussed below, federal funds were ultimately made available to states working with assessment experts to support the development of assessments aligned with the Common Core State Standards. Race to the Top and Common Core State Standards and Assessments The movement toward common standards and common assessments is not a federally led effort, per se. However, the movement has the support of the Obama Administration. In its blueprint for the reauthorization of the ESEA, the Administration proposed requiring states to adopt and implement common standards, which would presumably include the aforementioned standards, or to have their standards vetted by a local university system. As discussed in a subsequent section of this report, using waiver authority available to the Secretary under Section 9401 of the ESEA, the Administration has partially been able to achieve this goal. The Administration has also demonstrated support for the Common Core State Standards Initiative and assessments aligned with those standards through Race to the Top grants. In its RTT state grant competitions, states could receive points on their application for adopting "common" standards. The Administration also provided RTT grants to consortia to develop assessments aligned with a "common" set of standards being used by the states in the consortium. Both consortia that received grants are developing assessments that are aligned with the Common Core State Standards. Both RTT grant programs are discussed below. RTT State Grants The Race to the Top program was initially authorized under the State Fiscal Stabilization Fund (SFSF) included in the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ). Under the program, competitive grants were awarded to states that are implementing reforms in four areas: 1. enhancing standards and assessments; 2. improving the collection and use of data; 3. increasing teacher effectiveness and achieving equity in teacher distribution; and 4. turning around struggling schools. About $4 billion was awarded to 11 states and the District of Columbia in accordance with the ARRA provisions in two rounds of competitions (RTT Phase 1 and 2). A third round of state grants were awarded in FY2011 using $200 million provided through the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ). Only states that were finalists in Phase 2 of the state grant competition were eligible to apply for a grant during Phase 3 of the competition. With respect to enhancing standards and assessments, ED specified that states had to adopt "internationally-benchmarked standards and assessments that prepare students for success in college and the workplace." States received points for their applications to the extent to which they demonstrated their commitment to adopting the required standards, as evidenced by each state's participation in a consortium of states that was working toward developing and adopting a "common set of K-12 standards" that met the aforementioned requirements. Points were also awarded for states that were working with a consortium that included "a significant number of states." For the purposes of the grant competition, ED defined "common set of K-12 standards" to mean: a set of content standards that define what students must know and be able to do and that are substantially identical across all States in a consortium. A state may supplement the common standards with additional standards, provided the additional standards do not exceed 15 percent of the State's total standards for that content area. As previously discussed, states adopting the Common Core State Standards were required to adopt the standards in their entirety but were permitted to add additional standards to the Common Core State Standards provided the additional standards did not exceed 15% of the state's total standards for that content area, which mirrors the requirement included in the RTT state grant application. It should be noted that under current law, states were required to have standards in reading and mathematics for each of grades 3-8 and for at least one grade in grades 10-12. For Phase 1 applicants, states were evaluated based on their plans for demonstrating their commitment to and progress toward adopting a common set of K-12 standards by August 2, 2010, or a specified date later in 2010 and their plans for subsequently implementing the standards. Phase 2 applicants had to meet similar requirements but had to demonstrate that they were making "significant progress" toward meeting their "high-quality" reform plans. Phase 3 applicants were required to demonstrate that they were working "toward jointly developing and implementing common, high-quality assessments aligned with a common set of K-12 standards that prepare students for college and careers." With respect to assessments, states were evaluated on the extent to which they demonstrated a commitment to improving the quality of their assessments as evidenced by participation in a consortium of states that "is working toward jointly developing and implementing common, high-quality assessments ... aligned with the consortium's common set of K-12 standards." States were also evaluated based on whether the consortium in which they were participating included a "significant" number of states. In assigning points to applications, ED established general ranges for reviewers to use as a guide when reviewing applications. Different ranges were established for high-quality, medium-quality, and low-quality responses. Of a possible 500 maximum points overall, a state could receive up to 40 points for its responses related to developing and adopting common standards and up to 10 points for implementing common, high-quality assessments. ED instructed reviewers to assign "high" points to applications indicating participation in a consortium that was developing the required standards and that included a majority of the states in the nation. Reviewers were to assign "medium" or "low" points if the consortium included 50% or fewer of the states in the nation. It should be noted that aside from the Common Core State Standards, there was no other set of standards being developed by a consortium of states that included enough states to meet the criteria to receive "high" points. Similar scoring guidance was provided with respect to the state's participation in a consortium of states developing the required assessment. Reviewers were also given scoring guidance with respect to the date by which the state committed to adopting common standards. "High" points were to be awarded to states that committed to adoption by August 2, 2010, for Phase 1 applicants and states that had actually adopted the standards by August 2, 2010, for Phase 2 applicants. "Low" points were to be awarded to any state that indicated common standards after August 2, 2010, but before the end of the 2010 calendar year. No points were awarded for states planning to adopt common standards after the 2010 calendar year. Because states that agreed to adopt said standards received additional points in the RTT grant competition, more states may have agreed to adopt the Common Core State Standards than would have done so in the absence of such an incentive. Appendix A provides the date that each state adopted the Common Core State Standards. Based on an analysis of the dates by which states agreed to adopt the Common Core State Standards, 30 states and the District of Columbia had agreed to adopt the Common Core State Standards by August 2, 2010. An additional nine states agreed to adopt the Common Core State Standards at a later date during the 2010 calendar year. Six states adopted the Common Core State Standards after 2010. While states that failed to win a RTT state grant did not immediately alter their decisions about adopting the Common Core State Standards, as discussed above, some states that did not win RTT state grants are now reconsidering their adoption and implementation of the Common Core State Standards. For example, Indiana and Oklahoma are no longer using the Common Core State Standards. However, it should be noted (and is discussed in the next part of the report) that some states that did not win RTT state grants may have opted to continue with the adoption and implementation of the Common Core State Standards in response to requirements associated with receiving the ESEA flexibility package being offered to states by the Administration. It is not possible to assess how many states may have adopted the Common Core State Standards in the absence of the RTT State Grant competition or the ESEA flexibility package. RTT Assessment Grants ED also used a portion of the funds appropriated under ARRA to award Race to the Top Assessment grants to two consortia of states to "develop and implement common, high-quality assessments aligned with common college- and career-ready K–12 standards." This grant competition was run simultaneously with the RTT State Grant competition, so states were able to indicate whether they were going to participate in a consortium to develop assessments aligned with common standards in the RTT State Grant applications, which in turn made them eligible to receive extra points under the RTT State Grants program. Under the RTT Assessment Grant competition, ED sought proposals for Comprehensive Assessment Systems and High School Course Assessment Programs with the majority of the available funding targeted at the Comprehensive Assessment Systems. ED did not award grants with respect to the latter category of assessments, so the remainder of this discussion focuses on the Comprehensive Assessment Systems. In order to receive a grant under the Comprehensive Assessment Systems category, a consortium had to include a minimum of 15 states and an assurance from each state participating in the consortium that it would adopt a common set of college-and career-ready standards no later than December 31, 2011, and common achievement standards no later than the 2014-2015 school year. The absolute priority that applicants were required to meet focused on developing comprehensive assessment systems that measured student achievement against common college- and career-ready standards. The assessments developed by the consortium had to measure student knowledge and skills against a common set of college- and career-ready standards in mathematics and ELA. The definition of a "common set of college- and career-ready standards" was as follows: a set of academic content standards for grades K-12 that (a) define what a student must know and be able to do at each grade level; (b) if mastered, would ensure that the student is college- and career-ready by the time of high school graduation; and (c) are substantially identical across all States in a consortium. A state may supplement the common set of college- and career-ready standards with additional content standards, provided that the additional standards do not comprise more than 15 percent of the State's total standards for that content area. In September 2010, ED awarded grants under the RTT Assessment Grant competition to (1) the Partnership for the Assessment of Readiness for College and Careers (PARCC) and (2) the SMARTER Balanced Assessment Consortium (Smarter Balanced). Each consortium subsequently received a supplemental grant award from unallocated ARRA funds. The total amount of funding provided to PARCC was $185.9 million and to Smarter Balanced was $175.8 million, for a total of $361.7 million. The grants were made to support project work through September 2014. Various states are participating in each of the consortia as either governing states or participating states. Overall, 34 states and the District of Columbia were involved with one or both consortia as of July 30, 2014. State participation in this grant competition was voluntary, and, as noted by ED, the funds awarded support the development of common assessments based on common standards by non-federally affiliated groups. However, a recent survey conducted by Education Week indicates that not all of these states are still planning to use the consortia-developed tests. For example, 17 states are still planning to use the assessments developed by the Smarter Balanced assessment consortium and 9 states and the District of Columbia are still planning to use the PARCC assessment. Of these states, some are considering using a non-consortium test for either grades 3-8 or high school. Both the PARCC and Smarter Balanced consortia are using the Common Core State Standards as the common standards to which their assessments will be aligned. All states associated with these consortia are required to use the standards to which the assessments are being aligned and to adopt the assessments being developed by the consortium to which they belong. While states voluntarily joined a consortium knowing that they would be using the Common Core State Standards as their common standards upon which to align their assessments, the availability of RTT funding to develop the assessments may be further incentivizing the adoption and implementation of the Common Core State Standards and aligned assessments. And, while the federal government did not tell the consortia which common standards to use in their work, without federal financial support for the development of assessments associated with the Common Core State Standards, it is unclear where funding to support the development of those assessments would have been provided. It is possible that states may have been able to use federal funds provided for State Assessment Grants under Title VI-A of the ESEA to support the joint development of these assessments. ESEA Flexibility Package and Common Core State Standards and Assessments On September 23, 2011, President Obama and the Secretary of Education announced the availability of an ESEA flexibility package for states and described the principles that states must meet to obtain the included waivers. The waivers apply to school years 2011-2012, 2012-2013, and 2013-2014. States that were approved to begin implementing ESEA flexibility during the 2012-2013 school year are eligible to apply for a one-year extension of their flexibility packages that would continue to provide ESEA flexibility through the 2014-2015 school year. The waivers exempt states from various academic accountability requirements, teacher qualification-related requirements, and funding flexibility requirements that were enacted through NCLB. State educational agencies (SEAs) may also apply for optional waivers related to the 21 st Century Community Learning Centers program, the determination of adequate yearly progress (AYP), and the allocation of Title I-A funds. However, in order to receive the waivers, SEAs must agree to meet four principles established by ED for "improving student academic achievement and increasing the quality of instruction." The four principles, as stated by ED, are as follows: (1) college- and career-ready expectations for all students, including adopting college- and career-ready standards in reading/language arts and mathematics and aligned assessments; (2) state-developed differentiated recognition, accountability, and support; (3) supporting effective instruction and leadership; and (4) reducing duplication and unnecessary burden. Taken collectively, the waivers and principles included in the ESEA flexibility package amount to a fundamental redesign by the Administration of many of the accountability and teacher-related requirements included in current law. As of July 30, 2014, ED had approved ESEA flexibility package applications for 43 states, the District of Columbia, and Puerto Rico and was reviewing applications for two other states. The remainder of this section focuses on the first of the four principles that states are required to meet to receive the ESEA flexibility package. Compliance with this principle requires states to adopt college- and career-ready standards and assessments aligned with these standards. College- and Career-Ready Expectations for All Students To receive the ESEA flexibility package, an SEA must do the following: demonstrate that it has college- and career-ready expectations for all students by adopting college- and career-ready standards in reading/language arts and mathematics, at a minimum; implement such standards for all students and schools; develop and administer "annual, statewide, aligned, high-quality assessments" and corresponding academic achievement standards that measure student growth in grades 3-8 and once in high school; commit to adopting English language proficiency (ELP) standards that "correspond" to its college- and career-ready standards and that address the academic language skills needed to meet the new college- and career-ready standards; commit to developing and administering ELP assessments aligned with the ELP standards; and report annually to the public on college-going and college credit-accumulation rates for all students and student subgroups in each LEA and each high school. College- and Career-Ready Standards With respect to the adoption of college- and career-ready standards, states have to select from two options when completing the ESEA flexibility package application. A state can either adopt reading/language arts and mathematics standards that are common to a "significant number" of states or adopt college- and career-ready standards in reading/language arts and mathematics that have been approved and certified by a state network of institutions of higher education. The state is required to transition to and implement its new standards no later than the 2013-2014 school year. For the purposes of the ESEA flexibility package, "college- and career-ready standards" are defined as follows: content standards for kindergarten through 12 th grade that build towards college and career readiness by the time of high school graduation. A State's college- and career-ready standards must be either (1) standards that are common to a significant number of States; or (2) standards that are approved by a State network of institutions of higher education, which must certify that students who meet the standards will not need remedial course work at the postsecondary level. It should be noted that "common to a significant number of states" is not defined. One set of standards that would appear to satisfy this requirement, however, is the Common Core State Standards, which are college- and career-ready standards. At the time the ESEA flexibility package was announced, over 40 states had already adopted the Common Core State Standards. In addition, it appears that college ready means that a student would not require remedial coursework at the postsecondary level. There does not appear to be a comparable definition of "career ready." Based on an examination of the approved state applications for the ESEA flexibility package, nearly every state that has received approval has opted to implement the Common Core State Standards or is implementing the Common Core State Standards as part of a larger set of state standards. There are some states, however, that opted to have their standards approved by state institutions of higher education. For example, Minnesota has opted to implement the Common Core State Standards for ELA but not for mathematics. For mathematics, Minnesota is using the Minnesota College and Work Readiness Expectations for Math. Rather than using the Common Core State Standards, Virginia is using its Standards of Learning, Texas is using the Texas Essential Knowledge and Skills Curriculum Standards, and Alaska is using the Alaska Content and Performance Standards. High-Quality Assessments68 With respect to assessments, to receive a waiver an SEA must develop and administer, "annual, statewide, aligned, high-quality assessments, and corresponding academic achievement standards, that measure student growth in at least grades 3-8 and once in high school." Among other conditions, "high-quality assessments" must meet the following requirements: produce student achievement data and student growth data that can be used to determine whether individual students are college and career ready or on track to being college and career ready; assess all students, including English Learners and students with disabilities; provide for alternate assessments based on grade-level academic achievement standards or alternate assessments based on alternate academic achievement standards for students with the most significant cognitive disabilities, consistent with 34 C.F.R. §200.6(a)(2); and produce data that can be used to inform determinations of school effectiveness for the purposes of accountability; determinations of individual and principal teacher effectiveness for purposes of evaluation; determinations of principal and teacher professional development and support needs; and teaching, learning, and program improvement. The ESEA flexibility request lists three options for SEAs to demonstrate compliance with the "high-quality assessments" requirements: (1) the SEA is participating in a state consortium funded by RTT; (2) the SEA is not participating in a state consortium funded by RTT but plans to develop and administer "high-quality assessments" by school year 2014-2015; and (3) the SEA has developed and begun administering "high-quality assessments" independent of the state consortia funded by RTT. Common Core State Standards and Teacher Evaluation Further complicating the landscape of state standards and assessments are efforts by the Administration through the RTT State Grants and the ESEA flexibility package to increase the number of states that develop and implement teacher and school leader evaluation systems that are based in part on student achievement. The use of student assessments required under ESEA Title I-A could provide the means by which student achievement and growth are determined for purposes of teacher and school leader evaluation systems. Race to the Top Subsection (D)(2) of the Race to the Top State Grant application asked states to describe the extent to which they have developed plans and set annual targets to ensure that participating LEAs: establish clear approaches to measuring individual student growth; design and implement "rigorous, transparent, and fair evaluation systems for teachers and principals that (a) differentiate effectiveness using multiple rating categories that take into account data on student growth (as defined in this notice) as a significant factor, and (b) are designed and developed with teacher and principal involvement"; conduct annual evaluations of teachers and principals that include the provision of timely and constructive feedback; and use the results of these evaluations for "developing teachers and principals"; making decisions regarding compensation, promotion, and retention of teachers and principals; determining whether to grant tenure or full certification to teachers and principals; or removing ineffective tenured and untenured teachers and principals after providing opportunities for improvement. Of a possible 500 points on a grant application, states' plans for improving teacher and principal effectiveness based on performance accounted for a total of 58 points. With respect to student growth, the RTT application defines student growth to mean "the change in student achievement ... for an individual student between two or more points in time." Student achievement is defined as a student's score on the state assessments under ESEA for tested grades and subjects and, as appropriate, other measures of student learning provided they are rigorous and comparable across classrooms. Thus, teacher and principal effectiveness will be determined, in part, on student growth on assessments, which may include newly implemented assessments based on newly implemented standards, such as the Common Core State Standards. ESEA Flexibility Package To receive the ESEA flexibility package, state and local educational agencies must commit to develop, adopt, pilot, and implement teacher and principal evaluation and support systems that 1. will be used for continual improvement of instruction; 2. meaningfully differentiate performance using at least three performance levels; 3. use multiple valid measures in determining performance levels, including data on student growth, and other measures of professional practice; 4. evaluate teachers and principals on a regular basis; 5. provide clear, timely, and useful feedback, including feedback that guides professional development; and 6. will be used to inform personnel decisions. An SEA must develop and adopt guidelines for these systems, and LEAs must develop and implement teacher and principal evaluation and support systems that are consistent with SEA guidelines. As with the other principles associated with the ESEA flexibility package, if a state was unable to commit to developing and implementing a teacher and principal evaluation and support system that met the aforementioned requirements, the state was ineligible to receive the ESEA waiver package. States that had their ESEA flexibility packages approved in the first two windows of ED approval were required to (1) begin developing their evaluation and support systems no later than the 2012-2013 school year, (2) pilot their systems no later than the start of the 2013-2014 school year and implement the systems no later the 2014-2015 school year OR implement the systems no later than the 2013-2014 school year, and (3) have a plan in place by the end of the 2014-2015 school year to use the systems to improve instruction, guide professional development, and inform personnel decisions by the beginning of the 2015-2016 school year. States that had their ESEA flexibility packages approved in the third window of ED approval were required to (1) begin developing their evaluation and support systems no later than the 2013-2014 school year, (2) pilot their systems no later than the start of the 2014-2015 school year "with the intent to implement the systems" no later the 2015-2016 school year OR implement the systems no later than the 2014-2015 school year, and (3) have a plan in place by the end of the 2014-2015 school year to use the systems to improve instruction, guide professional development, and inform personnel decisions by the beginning of the 2016-2017 school year. Under the ESEA flexibility package, depending on when a state had its application approved, there may be little time between (1) implementing a new set of state ELA and mathematics standards, (2) implementing new assessments aligned with those standards, and (3) evaluating teachers based on student growth on those assessments. Issues Related to the Implementation of Common Core State Standards and Aligned Assessments This section examines some of the issues that have been raised in relation to the Common Core State Standards. However, it is not intended to be a comprehensive or exhaustive examination of issues that have been raised. States' Voluntary Adoption and Implementation of the Common Core State Standards As noted above, neither the RTT program nor the ESEA waiver package explicitly required states to adopt the Common Core State Standards. However, both initiatives provided significant incentives to states that adopted college- and career-ready standards that met specified requirements, and the Common Core State Standards was the most widely available set of standards that met such requirements. As a result, the RTT program and ESEA flexibility waivers could both be characterized as incentivizing the adoption of Common Core. Such incentives, however, are a common feature of federal grant programs, and they do not appear to violate any current education statute. Nevertheless, some critics have alleged that the significant financial and regulatory incentives provided under the RTT program and the flexibility waivers are unconstitutionally coercive because these initiatives made it extremely difficult for a state to reject the Common Core State Standards. Generally, a state's participation in programs that rely on such incentives is viewed as voluntary by the courts. The latter interpretation may be supported by the fact that several states have declined to adopt the Common Core State Standards or to seek flexibility waivers. This view may also be bolstered by Supreme Court doctrine on congressional authority under the spending clause of the Constitution. Under the Court's jurisprudence, a state's participation in a grant program that conditions receipt of federal funds on compliance with federal requirements has traditionally been treated as voluntary, and such conditions have been deemed unconstitutionally "coercive" only in rare instances. National Standards and National Assessments Concerns have been expressed that adoption and implementation of the Common Core State Standards and aligned assessments will result in national standards and national assessments. Despite grassroots efforts to develop the Common Core State Standards and actions by the Obama Administration to support the standards and the development of assessments aligned with these standards, the end result will not yield a single set of national standards in reading and mathematics or a single set of assessments in these subject areas. For example, states that adopt the Common Core State Standards are permitted to add additional standards of their own choosing to the Common Core State Standards. Thus, each state adopting and implementing the Common Core State Standards could continue to have a unique set of state standards that share common elements with other adopting states. As a result of the RTT common assessment competition, there will be at least two different assessments linked to the Common Core State Standards, and based on a recent survey conducted by Education Week , it appears that at least 17 states are planning to use something other than the assessments being developed by PARCC and Smarter Balanced. In addition, even among the states that are still planning to use tests developed by one of the two consortia, some states are planning on using a consortium developed test only for some but not all grade levels tested. National Standards Versus National Curriculum The Common Core State Standards are not synonymous with a national curriculum. As discussed earlier in this report, standards determine what needs to be taught and curriculum is used to help operationalize the standards. Decisions regarding how standards are taught to students and how students are prepared for assessments remain a state and local decision in states that adopt and implement the Common Core State Standards. However, if enough states that are implementing the Common Core State Standards voluntarily worked together to develop materials for teaching the standards, or textbook publishers and other organizations that create materials for classroom use developed materials that are clearly aligned with the Common Core State Standards and were adopted by multiple states, it is possible that these actions could result in multiple states using similar materials in the classroom. States that Initially Agree to Use the Common Core State Standards and Subsequently Drop Them While 43 states and the District of Columbia have adopted the Common Core State Standards, there are debates occurring in some states regarding continued state adoption or implementation of the Common Core State Standards. Indiana became the first state that agreed to adopt and implement the Common Core State Standards as part of its ESEA flexibility package application but subsequently decided to drop them. The state legislature passed legislation that required the state board of education to adopt new college- and career-readiness standards before July 1, 2014. In response, Indiana developed new standards that analysts have found to be similar, "if not identical," to the Common Core State Standards in many areas. The Secretary did not act to revoke Indiana's ESEA flexibility package. Rather, in a letter to the state, ED noted that Indiana must now submit an amendment to its approved ESEA flexibility package application that details how the state will remain in compliance with requirements related to college- and career-ready standards and assessments aligned with these standards for the 2014-2015 school year. On August 28, 2014, ED announced that it was granting Indiana a one-year extension of the approval of its ESEA flexibility package. Other states have also announced or considered changes in their use of the Common Core State Standards. For example, Oklahoma has also opted to drop the Common Core State Standards. Oklahoma plans to develop "more rigorous academic standards" than the Common Core State Standards. Oklahoma also received a letter from ED indicating that it needed to submit an amendment to its approved ESEA flexibility package. ED has since denied Oklahoma's request for an extension of the approval of its ESEA flexibility package because the state can no longer demonstrate that is has college- and career-ready standards in place. South Carolina has also announced changes in its use of the Common Core State Standards. Based on changes in state law, South Carolina must procure different assessments for the 2014-2015 school year and adopt new state standards prior to the start of the 2015-2016 school year. The state will fully implement the Common Core State Standards for the 2014-2015 school year and then adopt new standards for the following school year. State officials have indicated that they lack the time to completely rewrite the standards, so their new standards may resemble the Common Core State Standards with some changes, such as the addition of requiring students to memorize multiplication tables. ED recently granted South Carolina a one-year extension of the approval of its ESEA flexibility package that indicates that ED is satisfied with South Carolina's plans with respect to standards and assessments. Other states, such as Alabama, have considered dropping the Common Core State Standards. In general, if a state agrees to adopt and implement the Common Core State Standards and subsequently decides not to use these standards, the consequences of this action will differ depending on whether the state received a RTT grant based on an application that included the use of the Common Core State Standards, had an application approved for the ESEA flexibility package that included use of the Common Core State Standards, or has opted to use the Common Core State Standards only to meet the requirements of ESEA Title I-A. It should be noted that states that are using the Common Core State Standards for the purposes of a RTT grant or the ESEA flexibility package are also using them to meet the requirements of ESEA Title I-A. First, if a state received a RTT grant that included use of the Common Core State Standards and the state is no longer going to use those standards, the state would be out of compliance with the terms of its grant agreement. ED could take any action permitted under law in response, including withholding grant funds. For example, ED labeled Hawaii as a "high-risk" state for failure to meet its grant commitments. Under the designation of "high risk," Hawaii was able to access grant funds on a cost reimbursement basis only, meaning the state had to submit receipts for all expenditures for ED approval prior to drawing down any funds. In addition, the state was required to notify ED prior to obligating funds. ED also conducted an extensive on-site review in Hawaii, and the state was required to submit extensive monthly reports. ED also threatened to withhold RTT funds from Hawaii if it did not begin to demonstrate progress in meeting the terms of its grant agreement. There is precedent for ED to withhold funds from states for failing to comply with the requirements of their RTT state grants. In January 2014, ED informed Georgia that it was withholding $9.9 million of the state's $400 million RTT grant for failure to implement a performance-based compensation system. The state opted not to ask for an administrative hearing, as the state has until September to resubmit a performance-based compensation plan and possibly recoup some of the RTT funds. Thus, if a state were to be out of compliance with the requirements of its RTT state grant because it had decided to no longer use the Common Core State Standards, there are several actions that ED could take, including the withholding of funds. Second, if a state has an approved ESEA flexibility package application that is based on using the Common Core State Standards to meet the principle related to college- and career-ready expectations for all students, ED could revoke the state's ESEA flexibility package if the state ceased using these standards. If this were to occur, the state would revert to operating under the requirements of ESEA current law requirements. For example, this would include making adequate yearly progress (AYP) determinations and applying a specified set of outcome accountability requirements to LEAs and schools that failed to make AYP for at least two consecutive years. As waivers of ESEA requirements are granted at the sole discretion of the Secretary, the actions and the timing of the actions the Secretary may take in response to a state dropping its use of the Common Core State Standards are difficult to predict. The Secretary could choose to discuss the change with the state and consider next steps to either meet the principle in a new way or to revert back to the current law provisions. In addition, a state could act at a future time to comply with the requirements of the ESEA flexibility package and be re-approved. There is also precedent for the Secretary to rescind an ESEA flexibility package in an instance where a state has failed to adhere to the plan detailed in the state's application for a waiver. For example, Washington State's request to extend its ESEA flexibility package through the 2014-2015 school year was recently denied by ED as the state had failed to submit final guidelines for its teacher and principal evaluation and support system that met the requirements associated with the approval of its ESEA flexibility package application. This means that the state and its LEAs must resume compliance with ESEA current law requirements starting with the 2014-2015 school year, unless Washington is able to meet the ESEA flexibility package requirements before the start of the school year. More generally, if a state chooses to adopt and implement the Common Core State Standards as its state standards to meet the reading and mathematics standards requirements included in ESEA Title I-A and the state later opts to change its standards, the state would need to adopt and implement a new set of state standards to meet the requirements of Title I-A. This would be the case even if the state were using something other than the Common Core State Standards to meet the requirements of Title I-A and opted to change its standards. The failure to adopt and implement new standards could jeopardize the state's Title I-A funding and funding for any program that bases its funding on the amount of Title I-A funding received (e.g., School Improvement Grants). It should also be noted that ED has broad enforcement authority under GEPA. GEPA contains statutory provisions that are applicable to the majority of federal education programs administered by ED (including Title I-A programs), as well as provisions related to the powers and responsibilities of ED. Under GEPA, if the Secretary has reason to believe that the recipient of funds under any applicable program is failing to comply substantially with any legal requirement applicable to the funds, the Secretary may withhold further payments; issue a complaint to compel compliance through a cease and desist order; enter into a compliance agreement with the recipient; or take any other action authorized by law. As a result, SEAs failing to comply with Title I-A requirements related to standards may be subject to the penalties and other enforcement measures specified in GEPA. Teacher Evaluation and Implementation Timeline There are concerns among educators that the process of implementing new standards, new assessments, and new evaluation systems is moving too quickly. For example, while both the National Education Association and the American Federation of Teachers have supported the use of the Common Core State Standards, both organizations have been critical of the timeline for implementing curriculum and teacher evaluations associated with the standards. Similarly, the American Association of School Administrators, the National Association of Elementary School Principals, the National Association of Secondary School Principals, and the National School Boards Association also expressed their support for the Common Core State Standards, but argued that schools have not had sufficient time to prepare teachers to incorporate the Common Core State Standards and aligned assessments into their teaching and that principals lack the preparation to lead efforts to implement the Common Core State Standards and aligned assessments, including being able to evaluate teachers' use of the new standards and determining the best professional development to support their teachers in implementing the standards. They note that "(e)ducators also need time to adjust to the seismic shift in practices and expectations of CCSS and related assessments." In 2013, ED announced that it would consider on a case-by-case basis allowing states to take up to one additional year before using the new teacher and principal evaluation systems to inform personnel decisions. That is, depending on a state's approved timeline related to the teacher and principal evaluation systems, the state could delay for one year (but no later than the 2016-2017 school year) the use of these systems to determine personnel consequences, based in part on student growth data. In July 2014, ED agreed to allow states additional flexibility in implementing teacher and principal evaluation systems in its consideration of one-year extensions of the ESEA flexibility package. ED is focusing its review of one-year extension applications on states' progress in meeting the first two principles of the ESEA flexibility package (standards, assessments, and differentiated accountability systems) in states that need to make substantive changes to their implementation of teacher and principal evaluation systems. In addition, ED has indicated that it will be developing a process to provide states with more support in meeting the requirements associated with the teacher and principal evaluation systems. Under this process, ED will work with states that have a plan in place for implementing the required teacher and principal evaluation systems and have the authority to ensure that LEAs in the state implement those systems but need additional flexibility to implement the plan. This additional flexibility will be focused on "offering flexibility where needed for targeted, State-specific adjustments to implementation steps, timelines, and sequencing." The aforementioned 2014 correspondence from ED noted that additional flexibility will not be granted to states that have laws that prevent them from implementing teacher and principal evaluation systems that meet the requirements of the ESEA flexibility package. For states applying for a one-year extension of approval of their ESEA flexibility packages, if approval is granted for an extension through the 2014-2015 school year, the state will be expected to work with ED on any proposed changes to the implementation of its teacher and principal evaluation systems. Subsequently, in August 2014, in recognition that most states will transition to new assessments during the 2014-2015 school year, ED announced that it will provide two additional flexibilities to states. The first additional flexibility will be available to "SEAs that need flexibility to delay inclusion of student growth on State assessments in evaluation and support systems during the transition to new assessments aligned with college- and career-ready standards." ED will provide SEAs with one additional year to incorporate student growth on state assessments into evaluation systems during the transition to new assessments if the SEA provides the following assurances: 1. The SEA must continue to implement its teacher and principal evaluation systems using multiple measures of student growth and must calculate student growth data based on state assessments during the "transition year" (i.e., year of additional flexibility) for all teachers of tested grades and subjects. This will help to ensure that the SEA and LEAs have the capacity to make these determinations in subsequent years. 2. Each teacher of a tested grade and subject and all principals must be provided with their student growth data based on assessments for the 2014-2015 school year for information purposes. Second, SEAs that need other "implementation flexibility" with respect to their teacher and principal evaluation and support systems will have their requests considered on a case-by-case basis when ED considers requests for an extension of ESEA flexibility package approval beyond the 2014-2015 school year. SEAs requesting implementation flexibility will have to provide information on (1) the progress made in ensuring that each LEA is on track to implement the evaluation and support systems, (2) the reasons for the proposed change(s), and (3) the steps that the SEA will take "to ensure continuous improvement of systems that result in instructional improvement and enhanced student learning." SEAs interested in receiving these flexibilities will need to submit their requests with the required assurances or explanation in order to be eligible for an extension of ESEA flexibility beyond the 2014-2015 school year. During the current school year (2014-2015 school year), SEAs may continue to implement their teacher and principal evaluation and support systems as described in their current ESEA flexibility requests. Technology-Based Assessment The assessments being developed by PARCC and Smarter Balanced are computer-based assessments. They will require schools to possess access to a certain level of technology (e.g., computers, bandwidth) to administer the assessments. The distribution of technology among schools is not uniform across the nation. While some schools may be well positioned to implement the new assessments, others may lack the hardware or connectivity to implement the assessments. In addition, some schools may have students who are fairly computer savvy and have opportunities to work on computers regularly, while other schools may have students whose exposure to computers is more limited. In the latter case, these students may be challenged not only by the reading and mathematics assessment but also by the task of using a computer to take a test. For example, during the widespread administration of online assessments in spring 2013, some LEAs experienced technical difficulties (e.g., slow loading times, inability to log in). In Indiana, up to 8% of all test-takers experienced test interruptions, while in Kentucky school systems were ordered to suspend the administration of online end-of-course assessments due to dropped and slow connections in about 25 LEAs. These types of difficulties have raised questions about whether schools will be able to administer the Common Core aligned assessments online and whether states will be able to "protect the validity, integrity, and security" of the testing process. One option available to states and LEAs that are unable to meet the technological requirements associated with administering computer-based assessments, possibly at a greater cost than the computer-based assessments, is the use of paper-and-pencil tests. However, neither PARCC nor Smarter Balanced plans to make these types of tests available for the long term. PARCC estimates that the paper-and-pencil tests will be available for at least the first year of test administration (2014-2015). Smarter Balanced has indicated that a paper-and-pencil option will be available for the first three years of operational testing. Long-Term Maintenance of the Common Core State Standards and Aligned Assessments In addition to concerns regarding continued adherence to the Common Core State Standards, questions remain regarding their long-term viability. The CCSSI has indicated that the NGA and CCSSO will continue to work with stakeholders to revise the standards as needed. It is unclear whether the group of stakeholders, particularly the states that worked on the development of the current version of the Common Core State Standards, will continue to be involved or would be willing to make changes to the current version of the standards, assuming agreement could be reached on how often the standards need to be changed and who would pay for the updating process. Questions are also being raised about the cost of implementing the standards and the development of materials to teach the standards and professional development for staff charged with delivering the content. In addition to maintaining the Common Core State Standards, it is also unclear who will pay the costs of updating the assessments aligned to the Common Core State Standards over time. If no federal funding is provided specifically for this purpose, it is possible that states may seek to use funds provided annually under the State Assessment Grant program (ESEA Title VI-A) to support this effort. ESEA Reauthorization and the Common Core State Standards and Assessments The Common Core State Standards and the related assessments were not developed by the federal government or specifically called for or required by statutory language. With that said and as previously discussed, the Administration has taken steps through the RTT grants and the ESEA flexibility package to encourage the adoption and implementation of "common" standards by states. Possibly, at least partially in response to these incentives, 43 states and the District of Columbia have adopted and are implementing the Common Core State Standards. And, based on the requirements of ESEA Title I-A, if states use the Common Core State Standards to meet the accountability requirements under Title I-A, the states must also have assessments that are aligned with the standards. In order to assist states in meeting this requirement, the Administration used funds available under ARRA to support the efforts of two consortia of states to develop assessments aligned with the Common Core State Standards, which were the standards being used by states in each consortium. As Congress considers ESEA reauthorization, it is likely that attention will be devoted to the nature and extent of an ongoing federal role in encouraging or requiring the development and implementation of state academic standards and test-based accountability. Congress has several options for addressing current requirements regarding standards, assessments, and related issues. One option would be for Congress to amend the ESEA in such a way as to require states to use the Common Core State Standards and aligned assessments of either their own choosing or developed by one of the two consortia. Requiring adoption and implementation of a specific set of standards, however, would be more prescriptive than current law which allows states to select their own standards and assessments. Another option would be for Congress to amend the ESEA in such a way that states could choose to, but would not be required to, use the Common Core State Standards and aligned assessments to meet the requirements of Title I-A. Similarly, Congress could opt to not make changes to the current ESEA requirements related to standards and assessments, which would allow states to continue to use the Common Core State Standards. Congress could also choose to eliminate incentives used by the Administration to encourage the use of the Common Core State Standards by prohibiting ED from conditioning the receipt of grants, preferences, or waivers on a state's adoption of common standards. Regardless of the option selected, Congress may also wish to make related changes to current law. For example, Congress could alter existing accountability requirements by strengthening or weakening outcome accountability requirements. Related to these issues is whether Congress would modify the current statutory language that requires the adoption and implementation of "challenging" academic content standards and academic achievement standards to require the use of "college- and career-ready standards," as has been required by the Administration under the RTT grants and ESEA flexibility package. A change to "college- and career-ready standards" would not necessarily require the adoption and implementation of the Common Core State Standards, but depending on how Congress defined "college- and career-ready standards," the Common Core State Standards might be one readily available set of standards that states could use to meet the new requirements. In addition to modifying the requirements of Title I-A, Congress may also opt to amend the prohibitions included in Title I and Title IX of the ESEA and the waiver authority included in Section 9401 to clarify the extent of the Secretary's authority with respect to conditioning the receipt of federal aid or waivers on a grantee's compliance with certain requirements, such as those related to standards and assessments, prescribed by the Administration. Appendix A. State Participation in Race to the Top, Common Core State Standards, and ESEA Flexibility Package Table A-1 provides state-by-state information on whether a state applied for a Race to the Top (RTT) State Grant and, if so, under which phase(s) the state applied. It also provides information on whether a state received a RTT State Grant award and under which phase the award was granted. The table also includes information on the date on which the state adopted the Common Core State Standards, if applicable. Finally, the table details the date on which the state applied for the ESEA flexibility package and the date on which the application was initially approved, if applicable. Appendix B. Selected Acronyms Used in This Report ARRA: American Recovery and Reinvestment Act AYP: Adequate yearly progress CCSSI: Common Core State Standards Initiative CCSSO: Council of Chief State School Officers ED: U.S. Department of Education ELA: English/language arts ELP: English language proficiency ESEA: Elementary and Secondary Education Act DODEA: Department of Defense Education Activity GEPA: General Education Provisions Act IHE: Institution of higher education LEA: Local educational agency NCLB: No Child Left Behind Act NGA: National Governors Association PARCC: Partnership for the Assessment of Readiness for College and Careers SEA: State educational agency RTT: Race to the Top

Over the last two decades, there has been interest in developing federal policies that focus on student outcomes in elementary and secondary education. Perhaps most prominently, the enactment of the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110), which amended and reauthorized the Elementary and Secondary Education Act (ESEA), marked a dramatic expansion of the federal government's role in supporting standards-based instruction and test-based accountability, thereby increasing the federal government's involvement in decisions that directly affect teaching and learning. Under the ESEA, states are required to have standards in reading and mathematics for specified grade levels in order to receive funding under Title I-A of the ESEA. In response to this requirement, all 50 states and the District of Columbia have adopted and implemented standards that meet the requirements of the ESEA. Since the ESEA was last comprehensively reauthorized by NCLB, three major changes have taken place that have possibly played a role in the selection of reading and mathematics standards by states: (1) the development and release of the Common Core State Standards; (2) the Race to the Top (RTT) State Grant competition and RTT Assessment Grants competition; and (3) the ESEA flexibility package provided by ED to states with approved applications. As of August 2014, 43 states, the District of Columbia, 4 outlying areas, and the Department of Defense Education Activity (DODEA) had at some point adopted the Common Core State Standards. Indiana and Oklahoma recently became the first states to adopt and subsequently discontinue use of the Common Core State Standards. South Carolina has indicated that the Common Core State Standards will be fully implemented for the 2014-2015 school year but will be replaced by new standards in the 2015-2016 school year. This report examines each of the aforementioned changes and discusses how they are interrelated. More specifically, it provides (1) background information on current law, (2) a discussion of the development of the Common Core State Standards and state adoption of the standards, (3) an analysis of the RTT State Grant competition and how the structure of the grant application process may have incentivized state adoption of the Common Core State Standards, (4) an examination of the RTT Assessment Grants competition and the federal funds provided to support the development of assessments aligned with the Common Core State Standards, and (5) an analysis of the ESEA flexibility package and how the conditions that states had to meet to receive waivers of ESEA accountability provisions may have incentivized state implementation of the Common Core State Standards. This report also examines prohibitions in the ESEA and the General Education Provisions Act related to standards, assessments, and curriculum. Additionally, it includes a brief discussion of the relationship between teacher and school leader evaluation systems that are being developed by states and the Common Core State Standards. Finally, the report examines issues that have arisen in relation to the Common Core State Standards, including the following: whether states were incentivized by the Administration to adopt and implement the Common Core State Standards; whether state adoption and implementation of the Common Core State Standards could result in a national assessment and national standards; whether state adoption and implementation of the Common Core State Standards could lead to the development of a national curriculum; possible issues that may need to be addressed if a state chooses to discontinue its use of the Common Core State Standards; possible issues related to teacher evaluation and the Common Core State Standards; possible technology issues related to implementation of the Common Core State Standards; and possible issues related to the long-term maintenance of the Common Core State Standards.

Introduction Every four years, the two major political parties, and some third parties, select their presidential nominees at conventions. These conventions are run by and for parties, without a formal role for the federal government. Federal funds do, however, provide certain financial support to convention committees that choose to accept public money. Additionally, Congress appropriates federal funding for the securing of the convention venues. A variety of policy issues surrounds convention financing. Some observers have questioned why federal funds subsidize conventions, considering the availability of substantial private resources and that they are party, rather than governmental, events. Others have contended that private funds, particularly so-called "soft money," which falls outside the scope of federal campaign finance law, have become too pervasive in conventions and that tighter restrictions are needed. These divergent views on the use of public funds to support party conventions also appear in other contexts in the debate surrounding campaign finance policy. Two taxpayer-supported revenue sources are available to conventions: (1) presidential public campaign funds; and (2) security funds. Approximately $136.5 million from those sources went toward the 2012 Democratic and Republican national conventions. No third parties received convention funds for the 2012 election cycle. The 2012 Democratic and Republican conventions received a total of approximately $36.5 million from the Presidential Election Campaign Fund (which generally excludes security costs). Before proceeding, it is important to note the distinction between presidential public funds and security funds. Presidential public funds and security funds come from separate revenue sources. They are allocated differently, are used for different purposes, and are subject to different points of debate. Although both presidential public funds and security funds support conventions, Congress may reassess them separately. This report will not be updated.  Discussion of subsequent developments appears in another CRS product that supersedes this report. For additional detail, see CRS Report R43976, Funding of Presidential Nominating Conventions: An Overview , by [author name scrubbed] and [author name scrubbed]. Convention Financing: An Overview Federal Funds Two sources of federal funds support different aspects of presidential nominating conventions. First, funds for convention operations come from the Presidential Election Campaign Fund (PECF), which provides financial assistance to publicly financed presidential campaigns. Second, funds are appropriated by Congress to the Department of Justice (DOJ) for security costs incurred by state and local governments hosting the conventions. PECF Funds Congress makes no appropriations for PECF funds (including amounts used to support conventions). Rather, amounts in the PECF are determined by "checkoff" designations on individuals' federal income tax returns. Individuals may choose to designate $3 of their tax liability to the PECF. Married couples filing jointly may designate a total of $6 to the fund. Federal law permitted the two major parties' conventions to receive grants of approximately $18.2 million each for the 2012 election cycle (an inflation-adjusted base amount of $4 million each). These grants are awarded to the relevant party's convention committee. Qualifying convention committees are not obligated to accept PECF funds, but doing so is standard practice. Third parties are eligible for limited public convention funds, but they rarely qualify. Grants for 2016 have not yet been announced, but barring a change in law, the amounts will be the 2012 grants of $18.2 million adjusted for future inflation. Under federal law, PECF convention grants must first be reserved before other elements of presidential public funding can be distributed. Once convention grants are reserved, the Treasury Department may distribute general election grants and primary matching funds to participating presidential candidates. The Federal Election Commission (FEC) determines eligibility for PECF funds based on requirements established in Title 26 of the U.S. Code (the Internal Revenue Code), the Federal Election Campaign Act (FECA), and FEC regulations. DOJ Funds The second source of federal convention funds comes through the Office of Justice Programs (OJP), within the Department of Justice (DOJ). This OJP funding has only been available in FY2004, FY2008, and FY2012, arguably as a result of the September 11, 2001, terrorist attacks. In 2004, Congress appropriated $100 million, through DOJ, for the Democratic and Republican presidential nominating conventions in Boston and New York City. In 2008, Congress appropriated $100 million for the Democratic and Republican presidential nominating convention security in Denver and Minneapolis-St. Paul, respectively. In 2012, the $100 million was administered through OJP's Edward Byrne Memorial State and Local Law Enforcement Assistance Programs for convention security in Charlotte and Tampa. DOJ used most of this funding to reimburse state and local law enforcement entities for overtime costs associated with convention security. Even though DOJ administered the convention security funding, DOJ was not responsible for security at the presidential nominating conventions. Rather, the U.S. Secret Service (USSS) was responsible for planning, coordinating, and implementing security operations at conventions. Congress authorized the USSS—when directed by the President—to be the lead federal agency for convention security in P.L. 106-544 (the Presidential Threat Protection Act of 2000) because the conventions are designated as National Special Security Events (NSSE). In addition to presidential nominating conventions, NSSEs include such events as presidential inaugurations, major international summits held in the United States, and some major sporting events. Recent Federal Convention Funding As Table 1 shows, the federal government provided a total of approximately $136.5 million—combining PECF grants and security expenditures—to support the 2012 Democratic and Republican conventions. Each convention was allocated approximately $68.2 million. No third parties qualified for any federal funding in 2012. A third party most recently received PECF funds in 2000. That year, the Reform Party reportedly qualified for $2.5 million in federal funds. Congress has never appropriated funds for a third party's convention security. Conditions on PECF Funds In exchange for receiving public funds, a party's convention committee must agree not to raise or spend additional funds. Certain exceptions are permitted for legal or accounting fees. (As is discussed later in this report, nonfederal funds also supplement conventions, although those funds do not flow through the convention committees.) Among other requirements, convention committees receiving public funds must file disclosure reports with the FEC, agree to provide the commission with any requested documents, and submit to an audit of their PECF spending. Federal law places relatively few restrictions on how PECF convention funds are spent, as long as purchases are lawful and are used to "defray expenses incurred with respect to a presidential nominating convention." FEC regulations provide additional guidance on permissible and prohibited spending. Per FEC regulations, permissible PECF convention expenses include items such as: "preparing, maintaining, and dismantling" the convention site; personnel and staff expenses (including bonuses); convention operations and planning; security; transportation; certain entertainment; administrative items (e.g., office supplies); gifts for convention staff or volunteers (limited to $150 per person or $20,000 total); production of candidate biographical films; or investment of PECF funds if the profits are to be used to defray convention costs. It is important to note, however, that although federal regulations permit the types of spending described above, individual convention committees do not necessarily choose to fund all of those activities. Convention committees are prohibited from spending PECF funds on items including candidate or delegate participation in the convention, except in limited circumstances; any item that would violate federal or state laws; penalties resulting from enforcement of federal election law; or replacing lost or stolen items, except in limited circumstances. Conditions on Security Funds There were no conditions on security funds per se; however, convention security funding could only be used for costs associated with specifically identified presidential nominating conventions. In 2012, the Democratic convention in Charlotte and the Republican convention in Tampa were the only ones authorized to receive federal security funding. This funding was primarily used to reimburse state and local law enforcement entities directly for their expenses, thus neither major party was an eligible recipient of this security funding. The $100 million Congress appropriated for the FY2012 presidential nominating conventions was, reportedly, primarily to reimburse states and localities for law enforcement costs associated with their participation in securing the convention sites. In 2004, the main security costs that state and local law enforcement entities incurred involved overtime payments. This overtime of state and local law enforcement personnel might be the result of their participation in not only securing the convention venue, but participating in such activities as advance planning, conducting liaison for venue and air space security, training, and establishing and maintaining communications. Additionally, there may have been other security costs incurred by the federal government associated with the conventions that were not part of the $100 million appropriated in FY2012. Some of these additional security costs may have included the USSS protection of the major presidential candidates (whether at the convention or at other campaign locations) and the use of other federal government personnel which assisted in securing the convention sites, such as Federal Protective Service law enforcement officers. Other federal security costs included the securing of the convention venue through the positioning of fencing and barricades, as well as the pre-positioning of federal law enforcement K-9 units and other teams such as the U.S. Department of Homeland Security's (DHS's) Domestic Emergency Support Teams, and Urban Search and Rescue Teams. Nonfederal Funds As discussed below, conventions also benefit from nonfederal money that supports certain activities and security operations. In both cases, amounts of nonfederal funds can vary widely and are not necessarily centrally reported. Convention-Related Activities Nonfederal funds are a major source of money associated with the political (as opposed to security) side of presidential nominating conventions. The Campaign Finance Institute has estimated that more than 75% of money related to the 2004 Democratic and Republican conventions came from private sources. The 2008 conventions also appear to have been heavily subsidized, albeit indirectly, by nonfederal funds. In August 2008, CFI and the Center for Responsive Politics estimated that 80% of funds for the 2008 Democratic and Republican conventions would come from private (nonfederal) sources. Similar estimates for 2012 appear to be unavailable, but it is clear that substantial private fundraising surrounding conventions—albeit not for the convention committees themselves—remains steady. For 2012, the Charlotte "host committee" for the Democratic National Convention reported raising a total of $37.5 million, compared with $57.1 million for the Tampa Republican host committee. As is discussed below, state and local governments may also spend additional amounts on security. Nonfederal funds are generally not subject to the limits on contribution sources and amounts found in federal campaign finance law, although some FEC reporting requirements apply. Although convention committees may not accept private funds (other than certain amounts to offset legal and accounting needs), local host committees may solicit and spend private contributions for activities related to the convention, such as "use of an auditorium or convention center," promoting the convention city, and hosting receptions or tours for attendees. As a practical matter, the regulation of federal versus nonfederal funds rests largely on how FECA and the FEC have treated each source. FECA is largely silent on campaign finance aspects of nonfederal funds, and the FEC has determined that nonfederal funds do not explicitly support the conventions per se, even if they support events associated with those conventions. In particular, a 2003 FEC rulemaking reaffirmed the commission's long-held view that donations of funds to host committees are, as a matter of law, distinct from other donations by prohibited sources [defined in FECA] in that they are motivated by a desire to promote the convention city and hence are not subject to the absolute ban on corporate contributions in 2 U.S.C. 441b [a FECA provision]. This conclusion is buttressed by the fact that frequently members of the opposite political party have played prominent and active roles in convention host committees. State or local governments, or coalitions of those governments, may also provide financial assistance to conventions through entities known as "municipal funds." The FEC has also permitted corporations and labor unions, which may not provide direct financial support to federal campaigns, to make certain contributions of goods or services to host committees and municipal funds. In addition, "commercial vendors" may provide goods or services to convention committees "at reduced or discounted rates, or at no charge" in certain circumstances. Security Operations Even though the primary use of the $100 million of federal funds through DOJ's security grants was intended to offset the security costs incurred by state and local governments, additional funds may have been needed. Therefore, one can assume that nonfederal funding (state and local government funding) was also used to secure the conventions. The amount of nonfederal funding was based on the costs to state and local law enforcement entities that work with the USSS and other federal law enforcement agencies during the convention. Additionally, unlike the funding used by party convention committees, any nonfederal funds used for convention security came from state and local governments, not PECF designations. Recent Legislative Activity Legislation That Would Affect PECF Convention Funding Legislation introduced during the 113 th Congress that would affect convention financing is largely similar to other legislation considered in recent Congresses. On December 11, 2013, the House passed (295-103) H.R. 2019 . Relevant provisions of an amended version of the bill would eliminate PECF convention funding and convert amounts to a "10-Year Pediatric Research Initiative Fund." The Committee on House Administration has reported two other related bills ( H.R. 94 ; H.R. 95 ). H.R. 94 would eliminate convention financing; H.R. 95 would eliminate the entire public financing program. Other bills that would eliminate convention financing include H.R. 260 , H.R. 1724 , H.R. 2857 , and S. 118 . Another bill, H.R. 270 , would eliminate convention financing but revamp other parts of the presidential public financing program. In the 112 th Congress, both chambers passed separate bills to eliminate PECF convention funding, but none became law. In the Senate, an amendment (containing text from S. 3257 (Coburn)) to the 2012 Agriculture Reform, Food and Jobs Act, S. 3240 , would have eliminated PECF convention funding. The amendment and the underlying bill passed the Senate on June 21, 2012. Separately, S. 194 (McConnell) proposed to eliminate the entire public financing program. The House passed (239-160) H.R. 359 (Cole) on January 26, 2011. On December 1, 2011, the House passed (235-190) H.R. 3463 (Harper). That bill's public financing provisions were virtually identical to H.R. 359 . H.R. 3463 also would have eliminated the Election Assistance Commission (EAC), a topic that is unrelated to public financing of presidential campaigns and conventions. Another bill, H.R. 5912 (Cole), would have eliminated only convention financing. Other legislation would have maintained the public financing program for candidates but would alter convention financing. These bills include H.R. 414 (Price, NC) and S. 3312 (Udall, CO). Both would eliminate convention funding. In the 111 th Congress, H.R. 2992 proposed to eliminate PECF convention funding. Two other 111 th bills, H.R. 6061 and S. 3681 , although bolstering other elements of the public financing program, also would have eliminated convention funding. None of these measures appeared to affect separate security funding discussed in this report. Four bills introduced in the 110 th Congress would have affected PECF convention financing. Only one of those bills ( H.R. 72 ) was principally concerned with convention funding. Others emphasized broader presidential public financing issues. None of these measures became law. Additional discussion appears in the " Policy Issues and Options " section of this report. Presently, there is no legislation pending that would affect convention security funding. The 112 th Congress appropriated $100 million for convention security in FY2012 ( P.L. 112-55 ). Policy Issues and Options PECF Convention Funding As Congress considers whether, or how, to address PECF convention funds, Members may first examine what role it wishes those funds (or other federal funds) to play in modern conventions. The current system of PECF convention grants (and the presidential public financing program generally) has been in place since the 1976 election cycle and has remained essentially unchanged since that time. Although this report is not focused on nonfederal funds (e.g., "soft money"), it is widely accepted that such funds play a prominent, even if indirect, role in convention financing. As discussed below, the tension between federal and nonfederal funds is likely to shape congressional consideration of convention financing. Those who are wary of private, "interested" money in politics typically argue that public funds are a way to insulate conventions (or other aspects of elections) from undue individual, corporate, or labor influence and from real or apparent corruption stemming from private funds. From that perspective, maintaining or expanding public financing of conventions could be attractive. Similarly, Congress could choose to restrict sources of nonfederal funds. On the other hand, in light of the availability of nonfederal funds, even those who support public financing in general might argue that federal funding for conventions is unnecessary or that it should be diminished. Finally, those opposed to campaign finance regulation often view any public financial assistance to campaigns (or conventions) as an inappropriate use of taxpayer funds. As is evident from the preceding discussion, the policy options addressed below, or others, would likely be part of a larger debate surrounding convention financing and presidential public financing in general. Maintaining the Status Quo If Congress chooses to make no policy changes, the role of PECF convention funds will remain as it is today. Convention committees that choose to accept public funds would continue to be bound by the regulations discussed above, and nonfederal funds would likely continue playing a role in convention financing. Barring a statutory change, the amount of PECF funds available to convention committees will continue to increase incrementally with inflation. Options that Could Increase or Decrease Federal Convention Funding50 The policy options discussed below could change the amount of federal funding available to conventions. Some of these options are proposed in recent legislation. Others provide additional approaches that have been offered for consideration, but are not the subject of recent legislation. Regardless of the particular approach, expanding federal funding could decrease the perceived need for nonfederal funds. However, in the absence of additional regulation of nonfederal funds, or voluntary decreases in spending by entities providing nonfederal funds, expanded federal funding could also increase the total amount of money surrounding conventions. Any change in federal convention funding would require amending the amounts currently specified in federal law. Changing the Prioritization of Convention Funds As noted previously, PECF convention grants are reserved before matching funds or general-election grants are paid to publicly financed presidential candidates. If, however, Congress believes that funding candidates should be the top priority for the public financing program, de-prioritizing convention funding could be an option. Doing so might help avoid future financial shortfalls in other aspects of the public financing program (particularly primary matching funds). Nonetheless, it is possible that shortfalls could then affect convention funds, especially if convention funds were distributed after candidate funds. Appropriating Funds Appropriating funds would permit Congress to annually (or every four years) determine the amount of money available to conventions, as opposed (or in addition) to the most recent PECF amount of $18.2 million per major party. If the PECF grant structure were abandoned in favor of appropriated funds, Congress could legislate any other funding amount (or none, as discussed below). Accordingly, although appropriations might yield more funding for conventions than is currently available, Congress might also appropriate less funding. Appropriating convention funds would also mark a departure from Congress's traditional approach to presidential public financing, which has always emphasized taxpayers' roles in determining available funding. Altering the Checkoff-Designation Question As noted previously, federal financing of presidential campaigns—including convention financing—relies entirely on "checkoff" designations by individual taxpayers. Currently, the checkoff question allows taxpayers only to designate to the PECF $3 for individuals, or $6 for married couples filing jointly. Available funds are then distributed through convention grants, general election grants, and matching funds, as described previously. Congress could, however, choose to alter the checkoff designation by posing two separate questions to taxpayers: one for candidate financing, and another for convention financing. Of course, taxpayers might choose to either provide more or less funding to conventions (and candidate campaigns). Altering the Checkoff Amount Increasing the checkoff designation amount is frequently proposed as a way to provide additional funds to the PECF in general. The same could be proposed for convention funding in particular. For the first and only time, Congress tripled the checkoff amount (from $1 to $3 and $2 to $6) to their current levels in 1993. Although increasing the checkoff amount did provide an influx of money to the PECF, it did not increase the percentage of taxpayers contributing to the fund. If that same scenario occurred with another increase in the checkoff amount, more money would be available for public financing (including conventions if Congress so designates), but declining participation could threaten available funds in the long term. Repealing Convention Funding If Congress determined that convention funding were no longer necessary—or if it wanted to concentrate remaining funding on candidate campaigns—convention grants could be eliminated entirely. This outcome could be accomplished by repealing relevant sections of federal law, or by amending the law to prohibit the FEC from certifying convention grants, or the Treasury Secretary from making convention payments. Those concerned about the influence of private money, particularly soft money, in convention financing would likely object to conventions that are completely dependent upon private funds. Security Funds During the presidential election years of 2004, 2008, and 2012, Congress appropriated funding through DOJ for convention security; however, DOJ does not plan, provide training for, exercise, or implement convention security operations. Instead, the USSS (a DHS entity) is the lead federal agency for convention security and any other National Special Security Event, such as the 2013 inauguration of President Barack Obama. DOJ's role in providing convention security funding, the mission of the USSS, and the relationship between federal funding and nonfederal costs associated with convention security could be issues that Congress might choose to address prior to the conventions in 2016. Presently, the USSS is responsible for administering the convention security operations, in coordination with nonfederal entities, and using its own funding to cover any costs incurred by federal agencies involved in the security operations. However, state and local governments, following the convention, had to apply to DOJ for reimbursement of their costs associated with convention security. DOJ administered the security grants because the USSS is not authorized to reimburse state and local government costs associated with any NSSE, and specifically any costs associated with presidential nominating conventions. It may be argued that the federal security activities executed by the USSS require coordination with the distribution of federal funds. State and local law enforcement entities are responsible for providing personnel and equipment during conventions and working with the USSS to "develop and implement a seamless security plan that will create a safe and secure environment for the general public, event participants, Secret Service protectees, and other dignitaries." To support this effort, the 112 th Congress appropriated $19 million for NSSE costs within the USSS in FY2012. Maintaining the Status Quo If Congress chooses to make no policy changes, the routine of appropriating convention security funds during presidential election years would remain unchanged. State and local law enforcement entities would continue assisting the USSS in securing the convention venues and then apply to DOJ for reimbursement following the completion of the conventions. State and local governments can use some DHS grants, such as the Homeland Security Grant Program (HSGP) for convention security activities, even though DHS did not administer the convention security grants that Congress appropriated in FY2004, FY2008, and 2012. The grant approval process for the DHS programs, however, is not flexible, so the programs have limited application to conventions. States and localities, when hosting a convention, would need to incorporate plans to use HSGP funding for convention security in their grant applications. DHS does authorize states and localities to reprogram HSGP funding with the DHS Secretary's approval; however, that may result in states and localities not funding other planned homeland security activities. Options that Could Increase or Decrease Federal Convention Security Funding The policy options discussed below could change the amount of federal security funding available to conventions. None of these options have been proposed in legislation. Authorize HSGP Amounts for Convention Locations For presidential election years, Congress could fund convention security through DHS's HSGP grants. This could be achieved by either increasing the HSGP allocations for convention locations in election years, or by requiring convention states and localities to apply HSGP funding specifically for convention security during election years. As noted above, this is an option that states and localities can utilize; however, it may result in not funding other planned homeland security activities. This option would also remove DOJ from the convention security funding cycle. States and localities have an established grant application mechanism with DHS related to homeland security funding and activities, and the use of HSGP appropriations for convention security, arguably, are homeland security activities. Authorize USSS to Reimburse State and Local Government Costs Another option Congress may consider is authorizing the USSS to reimburse state and local convention security costs. Because the USSS is the federal agency responsible for convention security, one could argue that Congress could appropriate funding to the USSS to reimburse state and local costs. Arguably, the USSS could be more effective in auditing state and local law enforcement costs and determine reimbursement amounts since the USSS is the lead federal agency for convention security. This option, like the preceding one, would remove DOJ from administering the convention security funding. Conversely, this option would require the USSS to establish and administer a grant process that is not, at present, a responsibility of the agency. Discontinue Convention Security Funding to States and Localities Congress could also choose to not appropriate funding to reimburse state and local governments for convention security costs. This might result in a reduced security role for state and local law enforcement entities or force state and local governments to fund all of their convention security activities. However, this option seems unlikely given the present national concern with homeland security, and the national interest in protecting major presidential candidates and ensuring the security of mass political events. Conclusion Although PECF funding of convention operations has been in place since the 1976 election cycle, the role of federal convention funding remains subject to debate in Congress and beyond. Most of that debate, however, occurs within the broader discussions of presidential public financing and "hard" versus "soft" money in campaigns. Congress has several options for revisiting the federal role in PECF funding, if it chooses to do so. The role of the federal government in funding convention security is a fairly new development since the terrorist attacks of September 11, 2001. As federal, state, and local governments further refine their homeland security activities generally, and specifically convention security operations, Congress may consider different options for how the federal government provides funding for state and local costs incurred in securing convention venues.

This report provides overview and analysis of two recurring questions surrounding the federal government's role in financing presidential nominating conventions. First, how much public funding supports presidential nominating conventions? Second, what options exist for changing that amount if Congress chooses to do so? In the 113th Congress, the House passed legislation (H.R. 2019) to eliminate nonsecurity funding. The Committee on House Administration reported two other related bills (H.R. 94; H.R. 95). Other bills that would eliminate convention financing include H.R. 260, H.R. 1724, H.R. 2857, and S. 118. Another bill, H.R. 270, would eliminate convention financing but revamp other parts of the presidential public financing program. The 112th Congress also considered legislation to end convention funding. In the Senate, an amendment (containing text from S. 3257) to the 2012 Agriculture Reform, Food and Jobs Act, S. 3240, would have eliminated the convention funding portion of the presidential public financing program. Separately, S. 194 proposed to eliminate the entire public financing program. Another Senate bill, S. 3312, would reform the public financing program partially by eliminating convention funding. Two measures that would have eliminated convention funding passed the House (H.R. 359 and H.R. 3463). Both would have eliminated the entire public financing program. H.R. 5912 would have eliminated only convention financing. H.R. 414 would have revamped the public financing system but eliminated convention financing. These measures do not appear to affect separate security funding discussed in this report. The 112th Congress enacted one law (P.L. 112-55) in FY2012 that affected convention security funding with the appropriation of $100 million for the Democratic and Republican nominating conventions (each was allocated $50 million). This security funding was not provided to party convention committees but to the state and local law enforcement entities assisting in securing the convention sites. The 2012 Democratic and Republican convention committees each received grants, financed with public funds, of approximately $18.2 million (for a total of approximately $36.5 million, as rounded). A total of approximately $133.6 million in federal funds supported the 2008 Democratic and Republican conventions. Such funding was provided through separate federal programs that support public financing of presidential campaigns and convention security. Some Members of Congress and others have objected to federal convention funding and have argued that the events should be entirely self-supporting. Others, however, contend that public funding is necessary to avoid real or apparent corruption in this aspect of the presidential nominating process. If Congress decides to revisit convention financing, a variety of policy options discussed in this report might present alternatives to current funding arrangements. Additional discussion of public financing of presidential campaigns appears in CRS Report RL34534, Public Financing of Presidential Campaigns: Overview and Analysis, by [author name scrubbed] and CRS Report R41604, Proposals to Eliminate Public Financing of Presidential Campaigns, by [author name scrubbed]. For additional information on National Special Security Events, which include presidential nominating conventions, see CRS Report RS22754, National Special Security Events, by [author name scrubbed]. This report will not be updated.  Discussion of subsequent developments appears in another CRS product that supersedes this report.  For additional detail, see CRS Report R43976, Funding of Presidential Nominating Conventions: An Overview, by [author name scrubbed] and [author name scrubbed].

Introduction A small, densely populated Central American country that has deep historical, familial, and economic ties to the United States, El Salvador has been a focus of sustained congressional interest (see Figure 1 for a map and key country data). After a troubled history of authoritarian rule and a civil war (1980-1992), El Salvador has established a multiparty democracy, albeit with significant challenges. A 1992 peace accord ended the war and assimilated the leftist Farabundo Marti National Liberation Front (FMLN) guerrilla movement into the political process as a political party. Salvador Sánchez Cerén, a former FMLN commander, is in the final year of his five-year presidency. He leads the second consecutively elected FMLN government after years of conservative Nationalist Republican Alliance (ARENA) rule. El Salvador continues to face serious governance, security, and economic issues, many of which are interrelated. Deep scars and political polarization remain evident in El Salvador today from a war that resulted in significant human rights violations, more than 70,000 deaths, and massive emigration to the United States. Tension between the FMLN government and the ARENA-dominated legislature has hindered efforts to address fiscal and security challenges. Insecurity and poverty have fueled unauthorized emigration. With both the FMLN and ARENA tarnished by revelations of corruption by former presidents, the leading candidate in the February 3, 2019, presidential contest is Nayib Bukele, a 37-year-old who left the FMLN and is running for the Grand Alliance for National Unity (GANA) party (see " February 2018 Presidential Election "). This report examines political, economic, security, and human rights conditions in El Salvador. It then analyzes selected issues in U.S.-Salvadoran relations that have been of particular interest to Congress, including foreign assistance, migration, security cooperation in addressing gangs and counternarcotics issues, human rights, and trade. Politics and Governance After the signing of peace accords in 1992, successive ARENA governments from 1994 to 2008 sought to rebuild democracy and implement market-friendly economic reforms. ARENA proved to be a reliable U.S. ally but did not effectively address inequality, violence, and corruption. Development indicators generally improved, but natural disasters, including earthquakes in 2001 and periodic hurricanes, hindered progress. Moreover, despite ARENA's pro-business policies, economic growth averaged 2.4% over the post-war years in which it governed. The attorney general's office has brought cases against the two most recent ARENA presidents. Francisco Flores (1999-2004) passed away in January 2016 while awaiting trial for allegedly embezzling donations from Taiwan destined for earthquake relief. In August 2018, former president Anthony ("Tony") Saca (2004-2009) pled guilty to charges of money laundering and embezzlement of some $300 million. Saca is now serving a 10-year prison sentence. From 2009 to 2014, Mauricio Funes, a former journalist, served as El Salvador's first FMLN president. Funes remained popular even as he struggled to address security and economic problems. The government expanded crime prevention programs and community policing, but it also supported and then later disavowed a failed truce between the country's gangs. Observers criticized Funes's lavish travel, unfair awarding of government contracts, and conflicts with the private sector. In 2016, Funes came under investigation by the attorney general's office for allegedly embezzling more than $350 million in state funds. He received political asylum in Nicaragua in September 2016. A judge issued a warrant for Funes's arrest in June 2018 and Salvadoran officials now seek to have him extradited. In October 2018, the attorney general issued another arrest warrant for Funes on charges of involvement in a massive corruption scheme involving contractors, his family, and the former attorney general. Sánchez Cerén Administration In March 2014, Salvador Sánchez Cerén narrowly defeated ARENA's candidate, Norman Quijano, in a runoff election. Upon taking office, President Sánchez Cerén pledged to (1) boost growth and address the country's fiscal crisis through infrastructure projects and reforms to improve the business climate, (2) invest in education and health care, and (3) combat crime and violence. He promised to work with the United States and to promote trade with Latin America, Asia, and Europe. Four years later, President Sánchez Cerén has not implemented most of his inaugural pledges due, in part, to El Salvador's severe fiscal constraints and his party's lack of a congressional majority. Unlike former president Funes, President Sánchez Cerén reportedly is neither popular nor media savvy. Many observers maintain that Sánchez Cerén, who has faced health challenges, has not demonstrated strong leadership. El Salvador continues to contend with difficult security conditions despite reported reductions in homicides since 2015, modest economic growth (2.3% in 2017), and political polarization. The Central American University released an annual survey in June 2018 in which 67.5% of those polled said that Sánchez Cerén had governed poorly. Sánchez Cerén has had a difficult time garnering legislative support for his priorities, save those related to strengthening public security and a 2017 pension reform. Opposition has been particularly strong from the ARENA party, which, along with allied parties, now controls 48 of 84 seats in the legislature (up from 42 prior to the March 2018 legislative elections). ARENA has opposed many FMLN proposals to raise taxes or issue new debt, as ARENA generally supports lower spending rather than higher taxes. In mid-November, after months of wrangling, legislators appeared to have agreed on appointments to replace five Supreme Court justices whose nine-year terms ended on July 15, 2018. Since that time, the court has lacked four of the five judges on the constitutional chamber, a body that has issued several significant decisions over the past nine years. Although some of the constitutional chamber's decisions have been controversial, others, including its 2016 decision to overturn the country's 1993 Amnesty Law, have received praise. The legislators will soon have to decide whether to reelect Attorney General Douglas Meléndez, as his three-year term ends in January 2019. The Sánchez Cerén government has maintained relations with the United States, but it also has strengthened ties with Cuba and Venezuela and abandoned its long-standing relations with Taiwan in favor of China. President Sánchez Cerén has often traveled to Cuba for medical treatment and consultations, including an October 2018 trip during which the governments announced a revised trade accord. In 2014, El Salvador joined PetroCaribe, a program through which Venezuela provided subsidized oil to some Caribbean Basin countries. U.S. officials have been concerned about reported illicit ties between Venezuela's state oil company, its Salvadoran subsidiary, and some FMLN politicians. In a move that surprised the opposition and U.S. officials, the Salvadoran government established relations with China in August 2018. President Sánchez Cerén embarked on a state visit to China (the first for a Salvadoran president) in November 2018, seeking investment and trade. February 2018 Presidential Election El Salvador is to convene first-round presidential elections on February 3, 2019. If no candidate garners more than 50% of the vote, a second round will occur on March 10, 2019. Nayi b Bukele , a 37-year-old former mayor of San Salvador (2015-2018) and Nuevo Cuscatlan (2012-2015), leads among all candidates, with 44% support in a CID-Gallup poll released on November 1, 2018. After the FMLN expelled Bukele in 2017 after differences with party leaders, he tried to create his own political party. However, after El Salvador's electoral court did not approve its registration in time for him to run, Bukele joined the GANA party and became its candidate. Thus far, Bukele's support remains strong, partially because of his use of social media, despite GANA's reputation for corruption (its founder, Tony Saca, is in prison). The two other candidates are Carlos Calleja , a 42-year-old business executive standing for an ARENA-led alliance, with 31% support, and Hugo Mártinez , a 50-year-old former foreign minister of the FMLN, with 16% support (according to the November 1, 2018 CID-Gallup poll mentioned above). Both ARENA and the FMLN have lost support due to the previously discussed revelations of corruption involving former presidents. Economic and Social Conditions El Salvador continues to face significant economic challenges. According to the International Monetary Fund (IMF), El Salvador posted an economic growth rate of 2.3% in 2017, the lowest of any country in Central America. The IMF predicts growth of about 2.5% in 2018. Strong remittances, which contributed 20% of GDP in 2017, and low oil prices have benefitted the economy. Nevertheless, natural disasters, including flooding in mid-2017 and a drought in 2018, have hindered agricultural output. Economists have identified a lack of public and private investment in the economy as a primary reason for El Salvador's low growth rates. According to El Salvador's Central Bank, net foreign direct investment (FDI) reached $791.1 million in 2017, with a total stock of $9.6 billion. Despite El Salvador's relatively low inflation and stable, dollarized economy, FDI in El Salvador has been significantly less than the average among the other Central American countries for several years. Low levels of FDI have been attributed to the country's political polarization, complicated regulations and bureaucracy, security challenges (including violence and extortion), and ineffective justice system (discussed in " Judicial System ," below). In recent years, El Salvador's executive and legislature have clashed over how to respond to the country's social and infrastructure needs and significant financing gaps. The government has tended to swap short-term debt for longer-term debt rather than implement unpopular fiscal reforms. The legislature has been reluctant to approve multilateral financing requests from the executive branch for social programs. In addition, long-standing government practices in El Salvador that preceded FMLN rule—including cash payments to officials, shielded budgetary accounts, and diversion of government funds—have exacerbated fiscal woes. Since 2017, the IMF has credited the Salvadoran government and legislature with taking steps to improve the country's fiscal situation and implementing "pro-growth reforms." A September 2017 pension reform helped ease the financial burden on that system by raising both employee and employer contributions; the IMF urges a complementary reform to raise the retirement age and better target pension benefits to those most in need. The IMF also praised both major parties for agreeing to a fiscal responsibility law that led to legislative approval of all of the external financing needed for 2017 and the 2018 budgets. Few analysts predict the FMLN and ARENA will agree on a broader fiscal pact before the next president takes office, however. In its 2018 Doing Business report, the World Bank credited El Salvador with implementing four economic reforms (the most of any country in the region) and then moved it up 22 spots to 73 out of the 190 countries ranked. El Salvador has taken steps to ease the process for businesses to obtain permits for new construction and pay taxes online, to increase access to electricity, and to place more staff at its ports of entry to speed up border crossings. Nevertheless, the State Department characterized the still burdensome regulations, "contentious" relationship between the public and private sectors, insecurity, and lack of competitiveness as continuing to hinder the business environment in an August 2018 report. Insecurity remains a primary barrier to growth in El Salvador. A 2017 study by the Inter-American Development Bank (IDB) estimated the costs of crime and violence in El Salvador could reach 5.9% of GDP. El Salvador ranked last out of 137 countries evaluated in the World Economic Forum's estimates of business costs due to crime and violence. Crimes against small- and medium-sized businesses, which employ 55% of El Salvador's labor force, are of particular concern. According to a survey published in 2016, 42% of such businesses had been victims of crimes in the past year, with extortion the most common crime reported. Although progress in developing infrastructure, facilitating trade, and easing some regulations has occurred, another barrier to growth in El Salvador continues to be a lack of competitiveness in export sectors, as described in a 2011 joint U.S.-Salvadoran assessment. El Salvador's labor force lacks adequate education and vocational training to align with labor force needs, including English-language skills. According to the IMF, emigration by young Salvadorans has exacerbated this problem. In addition, the country has logistical and physical infrastructure deficiencies, including no direct access to Caribbean ports. El Salvador's small size and high levels of informality (percentage of businesses that do not pay taxes, provide benefits to employees, or register with the government) are widely considered key factors in its reduced competitiveness. In August 2018, El Salvador took several steps that could affect its economic trajectory. El Salvador joined an existing customs union with Guatemala and Honduras and launched a ferry to Costa Rica to bypass instability in Nicaragua. Both moves could bolster intraregional trade. El Salvador's decision to abandon relations with Taiwan and seek trade and investment from China could have long-term economic implications; it has already resulted in the announcement of $150 million in Chinese investment. The FMLN has proposed a law to establish a special economic zone that would appear to benefit Chinese companies. Since ARENA opposes the legislation, it is unlikely to pass. It is unclear how relations with China will evolve under the next Salvadoran government. Social development indicators in El Salvador generally are better than in neighboring Honduras and Guatemala, yet challenges exist, particularly in rural regions. Approximately 33% of Salvadorans live in poverty, as compared to 59% of Guatemalans and 66% of Hondurans, according to the U.N. Economic Commission for Latin America and the Caribbean (CEPAL). From 2012 to 2016, poverty and extreme poverty levels in El Salvador remained relatively level. According to a multidimensional measure of poverty published by the government in 2015, 35.2% of all households in the country and 58.5% of all rural households suffer from deprivations associated with poverty. The most common indicators of household poverty included low educational attainment by adults (81%), lack of access to the social security system (70%), precarious employment (56.6%), and living under self-imposed travel and other lifestyle restrictions caused by high levels of insecurity (54.4%). Income inequality declined by 5% from 2007 to 2016, according to the World Bank. This reduction occurred due to growth in income of the poorest 20% of the population aided by remittances, which some 20% of the population receive. CEPAL asserts that El Salvador is one of only five countries in the region to reduce inequality by 1% per year from 2014 to 2016. According to World Bank data, most social development indicators improved from 2010 to 2017, but some health and education indicators worsened. The mortality rate for children under the age of five fell from 19 per 1,000 live births in 2010 to 15 per 1,000 in 2017. By 2017, skilled health professionals attended nearly all births in El Salvador and the percentage of children underweight for their age fell to 5%. Despite this progress, immunization rates for children under the age of two fell to 85% (from 92% in 2010) and primary school completion rates declined to 85% (from 92% in 2010). According to the U.S. Agency for International Development (USAID), some 300,000 youth aged 15 to 24 in El Salvador neither work nor attend school. Gang-related intimidation and insecurity are two reasons why only about half of eligible Salvadoran youth attend seventh-ninth grades; of these youth, only half will complete secondary school. Food insecurity, often caused by drought or other natural disasters, has become a major driver of emigration from El Salvador. Although family members who are left behind eventually may benefit from remittances sent by relatives living abroad, they are often saddled with debts owed to smugglers, an increased work burden (especially in agriculture), and emotional trauma. As of September 2018, the government reported that this year's drought had damaged $37 million worth of crops and affected 77,000 families. Security Conditions El Salvador has been dealing with escalating homicides and generalized crime committed by gangs, drug traffickers, and other criminal groups for more than a decade. In 2015, El Salvador posted a homicide rate of 104 per 100,000—the highest in the world. Although the homicide rate decreased by 20% in 2016 to 81.2 per 100,000 and by another 25% in 2017 to 60 per 100,000, it remains among the highest in the world. In recent years, those homicides have included targeted killings of security forces by gangs, extrajudicial killings of gang suspects by police, and among the world's highest rates of femicides (killing of a woman or girl, often committed by a man, because of her gender). In addition, the attorney general's office has reported that it received more than 3,000 reports of disappeared persons from January through October 2018, nearly 10% higher than in 2017. Many of the disappeared are never found but are suspected dead. El Salvador has the highest concentration of gang members per capita in Central America. As a result, gangs are responsible for a higher percentage of homicides there than in neighboring countries. A government-facilitated truce between the country's major gangs (the MS-13 or Mara Salvatrucha and the 18 th Street gang) that unraveled in 2014 likely strengthened the gangs' internal cohesion. Gangs have been involved in a range of other criminal activities, including extortion, money laundering, and weapons smuggling. Although gangs engage in local drug distribution and other crimes that require control over a particular territory, they generally do not have a major role in transnational drug trafficking or human smuggling. Deportees have become targets for extortion and violence, with 70 deportees murdered since 2013. Gang-related violence has fueled internal displacement and irregular emigration. In August 2016, El Salvador's civil roundtable against forced displacement attributed more than 85% of internal displacement to gang activity. In 2017, El Salvador recorded 296,000 newly internally displaced persons, the highest of any country in Latin America that experienced displacement linked to conflict and violence . The government recently has acknowledged the phenomenon but struggled to address the needs of those fleeing violence. (For more information on gang-related human rights abuses, as well as extrajudicial killings of gang suspects by security forces, see " Recent Human Rights Violations " section, below.) Drug-trafficking organizations, including Mexican groups such as the Sinaloa criminal organization, have increased their illicit activities in El Salvador, albeit to a lesser extent than in Honduras and Guatemala. Judicial System Governance problems have made many actors in El Salvador's criminal justice system susceptible to the influence of criminal elements and unable to guarantee citizen security in many areas. Resource constraints in the security sector have hindered anti-crime efforts. A lack of confidence in the underfunded police has led many companies and citizens to use private security firms and the government to deploy soldiers to perform public security functions (see " Military Involvement in Public Security Efforts "). In 2017, El Salvador's ranking fell 12 places in Transparency International's Corruption Perception Index, to 112 out of 180 countries ranked, possibly because of the conviction of former president Saca and the investigation of former president Funes. Many also have had serious concerns about corruption in the police, prisons, and judicial system, although the attorney general's office and the Supreme Court have taken steps to address these issues. With a majority of the national civilian police (PNC) budget devoted to salaries and benefits, there has historically been limited funding available for investing in training and equipment. The PNC has deficient wages, training, and infrastructure. It has also lacked a merit-based promotion system. Corruption, weak investigatory capacity, and an inability to prosecute officers accused of corruption and human rights abuses have hindered police performance. The State Department maintains that "impunity persisted despite government steps to dismiss and prosecute" some officials who had committed abuses, partially due to "inefficiency and corruption" in the judiciary. As police and prosecutors are often loathe to work together to build cases, El Salvador's criminal conviction rate is less than 5%. International observers generally have praised the efforts to identify public officials who may have used their positions for illicit enrichment made by the Probity Section of the Supreme Court. They also have welcomed efforts to investigate abuses and reduce impunity by Attorney General Meléndez, a career prosecutor who began a three-year term in January 2016. Meléndez pursued cases against politicians of all parties (including three former presidents), former attorney general Luís Mártinez, security forces, and gang affiliates. In August 2017, a judge dismissed the government's case against former officials accused of illicit involvement in the 2012 gang truce. In September 2017, a judge acquitted five police that prosecutors had charged with committing the "summary execution" of a young man whom police claimed was a gang member in 2015. Despite those setbacks, thus far in 2018 the attorney general has convicted police officers for aggravated homicides and for participating in a death squad, former president Saca for corruption, and a key gang truce mediator for extortion. In October 2018, Meléndez issued new arrest warrants against former president Funes, former attorney general Mártinez, businessperson Enrique Raíz, and others for alleged involvement in a massive corruption scheme. Attorney General Meléndez has received criticism and faced periodic death threats throughout his term. In August 2018, President Sánchez Cerén vetoed a reform of the law governing the attorney general's office that would have granted independence to its financial investigative unity in line with international standards. It is unclear whether the Salvadoran legislature will reappoint Meléndez or someone equally independent to replace him in January 2019. Prison reform is another area in need of reform. Delays in the judicial process and massive arrests carried out during prior anti-gang sweeps made under mano dura (heavy-handed) policing efforts have resulted in severe prison overcrowding. According to a study cited by the U.S. State Department, prison capacity increased by almost 2,000 inmates but prisons continued to operate at more than 300% above capacity as of mid-2017. In May 2016, the constitutional chamber of El Salvador's Supreme Court issued a declaration finding prison overcrowding to be an unconstitutional violation of inmates' human rights and ordering regular visits to the country's prisons by the health ministry. In addition to building new facilities, the government has channeled more prisoners into rehabilitation and job training programs, some of which have received U.S. support. Nevertheless, human rights groups maintain that sanitation and access to medical services have worsened since the government adopted more restrictive prison conditions for gang inmates in 2016 (see "). Secure El Salvador Upon taking office, the government formed a National Council for Citizen Security, which designed an integrated security plan (with support from the U.S. government and the United Nations). In January 2015, the administration announced the plan Secure El Salvador ( El Salvador Seguro ), estimated to cost $2 billion over five years. It includes (1) violence prevention and job creation initiatives, which account for nearly three-quarters of the funding; (2) an increased state presence in the country's 50 most violent municipalities, with the goals of improving public spaces, expanding community policing, and increasing student retention in schools; (3) improved prison infrastructure; and (4) increased services for crime victims. Plan Secure El Salvador is now being implemented in 50 of the country's most violent municipalities. Although government figures point to 45% lower homicide rates and 32% lower reported extortions in those municipalities, citizens and analysts remain wary. Some 65% of those surveyed earlier this year by officials from the U.N. Development Program expressed fear of insecurity on public transportation. Some analysts also doubt the reliability of the Salvadoran government figures and have questions concerning whether apparent reductions in homicides may be due to other factors, such as certain gangs achieving territorial control over certain areas. Many critics question the plan's focus on bolstering security forces that continue to commit abuses and a judicial system that remains corrupt rather than emphasizing licit economic activities and education. "Extraordinary Measures" to Combat Gangs In April 2016, the Sánchez Cerén government started implementing "extraordinary measures" focused on moving gang leaders to maximum-security prisons, cutting off cell phone service around prisons and restricting visitors to those facilities. A majority of Salvadorans polled in 2017 and again in 2018 thought the extraordinary measures had little or no effect on crime levels. Nevertheless, the measures garnered support from a broad spectrum of politicians. In August 2018, the National Assembly made the "extraordinary measures," which they had previously extended, permanent. Salvadoran officials and legislators maintain that the measures have helped reduce communications between inmates and the outside, including incidents of murders ordered from imprisoned gang leaders. However, U.N. officials and human rights groups have raised concerns about the measures' impact on inmates' rights and health, including an uptick in tuberculosis cases, some of which have proved fatal, among inmates in overcrowded prisons. Military Involvement in Public Security Efforts For many years, El Salvador has deployed thousands of military troops to help the police carry out public security functions. In April 2014, the Salvadoran Supreme Court upheld former president Funes's October 2009 decree that authorized the military to carry out police functions. Three battalions each made up of 200 police and elite members of the Armed Forces were deployed in 2015 to control gang violence. In April 2016, Sánchez Cerén created the El Salvador Special Reaction Force, a 1,000-member force made up of 400 police and 600 soldiers, into rural areas to which gang members had fled. In November 2016, El Salvador, Honduras, and Guatemala launched a tri-national anti-gang force, comprised of military and police officers, to target gangs on the borders. According to U.S. estimates, roughly 8,000 of El Salvador's 17,000 active-duty armed forces personnel are involved in public security at any given time. Human Rights Violence and human rights abuses have been prevalent for much of El Salvador's modern history. Mass atrocities committed during the civil war (1980-1992) are just beginning to be investigated (since the Supreme Court overturned the 1993 amnesty law in July 2016), as discussed below. In addition to past crimes, many of the most serious human rights abuses in El Salvador today are related to gender and intra-familial violence, gangs and criminal groups, and the excessive use of force by security forces. The Salvadoran government's ability to address these challenges has been hindered by resource constraints, political polarization, and corruption. Recent Human Rights Violations Since the end of the civil war, El Salvador has had a relatively free press and civil society. Nevertheless, journalists and some non-governmental organizations focused on transparency have been harassed for reporting on corruption, police abuses, gangs, and drug trafficking. Human rights defenders have also suffered extortion and attacks, including Karla Avelar, a transgender advocate who reportedly received death threats in May 2017. Indigenous rights and land conflicts have not been as common in El Salvador as in neighboring countries, likely because only 0.2% of the population identified as Amerindian in 2007 (the most recent year available). Although a 2014 constitutional amendment recognized indigenous rights, no laws ensure that indigenous people benefit from natural resource development that occurs on land historically held by indigenous communities. Still, land rights advocates have praised El Salvador's decision to ban all metal mining to protect communities' water sources. Women, children, and lesbian, gay, bisexual, transgender, and intersex (LGBTI) people often are targets of gang violence. Gang initiations for men and women differ. Whereas men are subject to a beating, women often are forced to have sex with various gang members. Female gang members tolerate infidelity from their partners, but women may be murdered if they are unfaithful. Non-gang-affiliated women and girls have been murdered as a result of turf battles, jealousy, and revenge. Those who have refused to help gangs or reported crimes are particularly vulnerable, as are those who are related to, or have collaborated with, the police. Harassment by gangs has led thousands of youth to abandon school, including some 39,000 in 2016. In August 2017, prosecutors from a newly established specialized unit of the attorney general's office filed charges against eight gang members for murdering three transgender people. Gang-related violence is part of a broader spectrum of violence in El Salvador that often affects women and children. Child abuse and spousal rape are major problems. According to a 2015 study, El Salvador had the highest rate of femicide (killing of women) in the world. Femicides have been linked to domestic disputes, gangs, and other crimes such as human trafficking; they resulted in the deaths of some 551 women in 2017. There is a total ban on abortion, even in the case of rape or incest, and women in El Salvador have been imprisoned after suffering miscarriages that authorities have deemed illegal abortions. Human rights groups and journalists have warned the Salvadoran government that its aggressive anti-gang policies have exacerbated human rights abuses committed by underpaid and ill-trained security forces, some of which the State Department and U.N. entities have documented. In June 2017, authorities arrested 4 police and 10 soldiers suspected of involvement in some 36 murders that occurred between 2014 and 2016. In August 2017, reporters released evidence of death squads operating within the police. In 2017, Salvadoran officials downplayed those developments in cases before the Inter-American Commission for Human Rights. In 2018, El Salvador's attorney general has convicted four police officers for aggravated homicide and six others for participating in a death squad. Confronting Past Human Rights Violations Twenty years after a U.N. Commission released its report on the war in El Salvador, Amnesty International issued a statement lamenting that the perpetrators of crimes identified in that report had not been brought to justice in El Salvador and that survivors had not received reparations. In October 2013, then-President Funes signed a decree creating a program to provide reparations to the victims of the armed conflict. It is unclear how much funding has been budgeted for that program and how many people it has assisted thus far. In September 2017, President Sánchez Cerén launched a commission to help people find out what happened to their family members who disappeared. The commission includes two members proposed by families of the missing and is modeled after the government-sponsored national search commission that has located children who went missing during the conflict. In order for the commission to be successful, it is likely to need access to Salvadoran military records and some classified U.S. documents from the period of the conflict so that that information collected from the testimonies of survivors and witnesses can be corroborated. After the Supreme Court overturned the 1993 Amnesty Law in July 2016, Attorney General Meléndez created a small group of prosecutors to investigate past crimes. It is receiving technical assistance funded by USAID and implemented by experts from the Office of the High Commissioner for Human Rights. The group is providing complementary assistance to civil society organizations engaged in investigating historic crimes and carrying out transitional justice programs. In 2017, a Salvadoran judge ordered the case of the assassination of Archbishop Oscar Romero reopened. In October 2018, the judge issued a warrant for the arrest of a former military officer suspected of carrying out the killing whose whereabouts are unknown. The case against the intellectual authors of the 1989 murders of six Jesuit priests, their housekeeper, and her daughter also has been reopened but is proceeding slowly. Private human rights attorneys have re-opened the emblematic case against 18 surviving military officers charged with involvement in the El Mozote massacre carried out by an elite Salvadoran army battalion in December 1981 in Morazán that resulted in some 900 deaths. Investigators have encountered difficulties, with the military refusing to turn over its historical records on its operations in that region. Still, the case is before a provincial criminal court whose judge is committed to hearing all survivors' testimonies; he predicts the trial may last "well into 2019." Some remain skeptical that this and other emblematic cases will be solved. Parties on both the left and the right may feel vulnerable to political or legal attack about abuses that took place during the war and might prefer that the crimes of the past remain unexamined. An illustrative example of the problem confronting political actors is that shortly after the El Mozote case was re-opened against former military officers, a private party filed a case against President Sánchez Cerén and several others for alleged kidnappings that occurred in the late 1980s. U.S. Relations U.S. relations with El Salvador have remained friendly, although recent changes in U.S. immigration policies, particularly the January 2018 termination of Temporary Protected Status (TPS) for some 200,000 Salvadorans (discussed below), and U.S. threats to cut foreign assistance have tested relations. Combating gangs, particularly the MS-13, was a central focus of then-Attorney General Jeff Session's July 2017 visit to El Salvador. Migration and security issues likely will continue to figure prominently on the bilateral agenda, but other issues may emerge as well, including how the Trump Administration may respond to the Salvadoran government's recent establishment of diplomatic relations with China. Congress plays a key role in appropriating bilateral and regional aid to El Salvador and in overseeing implementation of U.S. assistance programs. Congress is likely to monitor how the Salvadoran government is or is not improving the investment climate in El Salvador, dealing with gangs, preventing emigration, and combating corruption. U.S. Foreign Assistance State Department Assistance: Bilateral and Regional The United States has provided significant foreign assistance to El Salvador over the past decade. Since FY2008, El Salvador has received regional security assistance through the Central America Regional Security Initiative (CARSI). From 2011 to 2016, El Salvador participated in the Partnership for Growth (PFG), a foreign aid initiative involving close U.S. whole-of-government cooperation with four selected countries on mutually agreed upon objectives. In 2014, the Millennium Challenge Corporation (MCC) signed a $277 million compact with El Salvador to develop the southern coastal region and help El Salvador take better advantage of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). El Salvador completed a $461 million MCC compact in 2012. Current assistance to El Salvador is guided by the U.S. Strategy for Engagement in Central America, which is designed to promote economic prosperity, strengthen governance, and improve security in the region. The Obama Administration introduced the new strategy and sought to increase assistance for El Salvador and its neighbors following a surge in migration from Central America in 2014. Congress has appropriated nearly $2.1 billion for the strategy since FY2016, including at least $341.7 million for El Salvador (see Table 1 ). The aid has been subject to two sets of legislative conditions that require the Salvadoran government to take steps to address a range of concerns, including border security, corruption, and human rights abuses, prior to receiving assistance. The State Department certified that El Salvador met both sets of conditions in FY2016 and FY2017. For FY2018, it has issued a certification that El Salvador met the first set of conditions but not the second set. El Salvador also has received regional security assistance provided through the Central America Regional Security Initiative (CARSI). In recent years, CARSI funds have supported justice sector reform, police unit vetting, border security, anti-gang efforts, and violence prevention efforts, among other initiatives. From FY2008 to FY2018, Congress appropriated more than $2.1 billion through CARSI. The State Department and USAID allocated $73.4 million in FY2016 CARSI funding to El Salvador and $70.2 million in FY2017 CARSI funding. The FY2018 CARSI funding total for El Salvador is not yet available. The Trump Administration has pledged to maintain the U.S. Strategy for Engagement in Central America, albeit with more of an explicit focus on combating transnational crime and drug trafficking, deterring illegal immigration, and encouraging private investment. The FY2019 foreign aid budget request includes some $45.7 million in bilateral assistance for El Salvador, $12 million less than Congress appropriated in FY2018. All of the bilateral aid, with the exception of $700,000 to train the Salvadoran military, would be provided through a new Economic Support and Development Fund foreign assistance account. The Administration proposed $13.9 million to support small businesses and government entities that promote exports; $5.4 million to improve education and workforce development; and $7.0 million for educational programs for out-of-school youth. The Administration also requested $263.2 million for CARSI, though it is unclear how much of that assistance would be allocated to El Salvador. The Senate and House Appropriations Committees reported their respective FY2019 Department of State, Foreign Operations, and Related Programs appropriations measures ( S. 3108 and H.R. 6385 ) on June 21 and July 16, 2018. According to S.Rept. 115-282 , the Senate committee bill would provide $47.7 million for El Salvador and $254.7 million for CARSI. The assistance would be provided under the same terms and conditions as the assistance appropriated in FY2018. According to H.Rept. 115-829 , the House Appropriations Committee's bill would provide up to $595 million for the U.S. Strategy for Engagement in Central America, but it does not specify an aid amount for El Salvador. A full-year appropriations measure has yet to be enacted, but a continuing resolution ( P.L. 115-245 ), signed by President Trump on September 28, 2018, continues to provide assistance at the FY2018 level until December 7, 2018. Millennium Challenge Corporation (MCC) Investment Compact89 El Salvador signed a second $277 million compact on September 30, 2014, to focus on improving transportation infrastructure, employment opportunities, and the investment climate. The Salvadoran government committed to match that contribution with $88 million in complementary investments. Key compact projects include the following: Investment Climate Project ($42 million MCC funds/$50 million Salvadoran funds): seeks to help the government develop and implement regulatory improvements and to better partner with private investors to build infrastructure and provide public services. Human Capital Project ($100.7 million MCC funds/$15 million Salvadoran funds): supports full-day schooling; reforms to the policies and operations that govern teacher training and student assessment; and a new technical, vocational, education, and training system that is aligned with labor market demands. Logistical Infrastructure Project ($109.6 million MCC funds/$15.7 million Salvadoran funds): will widen the part of El Salvador's coastal highway that connects the airport and the ports of La Unión and Acajutla and improve border crossing facilities into Honduras at El Amatillo. In response to some lingering concerns expressed by board members, the Salvadoran government designed a Priority Action Plan that was then agreed to by both governments to be completed prior to the compact's signing. The action plan required the Salvadoran government to (1) appoint a director and deputy director to a newly established financial crimes investigation unit in the police; (2) approve an asset forfeiture law; (3) approve reformed anti-money-laundering legislation that meets international standards; (4) approve reforms to the country's public-private partnership law to make it attractive to investors; and (5) issue a revised decree on how corn and bean seed are procured that is consistent with CAFTA-DR. The fifth condition was subsequently removed. The compact entered into force in September 2015. Department of Defense (DOD) Assistance DOD provides counternarcotics foreign assistance to train, equip, and improve the counternarcotics capabilities of relevant agencies of the Salvadoran government with its Counternarcotics Central Transfer Account appropriations. DOD assistance totaled $6.4 million in FY2016, $4.7 million in FY2017, and an estimated $4.5 million in FY2018. Migration Issues Migration is a major issue in U.S. relations with El Salvador. As of 2016, some 1.4 million people born in El Salvador resided in the United States, and an estimated 700,000 of them (50%) were in the country without authorization. In 2017, remittances sent from Salvadorans abroad contributed close to 20% of El Salvador's GDP, according to the World Bank. Recent unauthorized migration from El Salvador has been fueled by a combination of poverty, natural disasters, poor security conditions, and a desire for family reunification. Recent Migration Flows Since FY2013, the profile of migrants apprehended on the southwest border from El Salvador and neighboring Guatemala and Honduras (the so-called northern triangle countries of Central America) has changed. In years past, those apprehended from northern triangle countries were primarily single men; however, the U.S. Department of Homeland Security (DHS) began to track increasing arrivals of unaccompanied minors in FY2013 and of family units in FY2016 (see Figure 2 , below). Record apprehensions of families from northern triangle countries, many of whom are seeking asylum, have occurred during a period when overall apprehensions at the southwest border are at historic lows. Salvadoran officials have touted their recent successes in reducing crime rates as a major reason why illegal emigration from El Salvador to the United States declined over the past two years. U.S. apprehensions of unauthorized family units from El Salvador peaked in FY2016 at 27,114 before declining to 21,122 in FY2017 and to 13,669 in FY2018. Similarly, U.S. apprehensions of unaccompanied child migrants from El Salvador peaked in FY2016 at 17,512 before falling to 9,143 in FY2017 and 4,949 in FY2018. These declines in apprehensions from El Salvador stand in contrast to trends for Guatemala and Honduras. The number of other immigrants, including single adults, apprehended in FY2017 and FY2018 is not yet available. Human Trafficking and Alien Smuggling The U.S. Department of State has acknowledged El Salvador for its efforts to combat human trafficking, giving the country a tier two ranking in its annual Trafficking in Persons reports since 2008. In 2017, El Salvador investigated 76 cases, including 2 forced labor cases; convicted 6 sex traffickers; and opened 15 municipal-level offices to inform victims of trafficking of their rights and refer them to services. Services for boys and LGBTI victims remained lacking, and investigations into corrupt government officials accused of involvement in human trafficking failed to advance. In August 2018, the State Department certified that El Salvador had met the conditions related to combating human trafficking, alien smuggling, and other migration-related topics on assistance provided in P.L. 115-141 . In that certification, it described how the Salvadoran government has tried 43 cases related to human trafficking or alien smuggling thus far in 2018, with 28 individuals convicted for those crimes. Removals, Temporary Protected Status, and Deferred Action for Child Arrivals Some 18,830 Salvadorans were removed (deported) from the United States in FY2017, making El Salvador the fourth-largest recipient of deportees in the world. Salvadoran officials have expressed concerns about their country's ability to absorb deportees, as it is often difficult for those returning to the country to find employment and deported gang members may exacerbate security challenges. El Salvador has received some part of roughly $46 million that USAID has provided to help northern triangle governments receive those removed from the United States or Mexico and reintegrate them into their communities, but services remain limited, particularly at the municipal level. Deportees have become targets for extortion and violence, with at least 70 deportees reportedly murdered since 2013. Concerns about repatriations to El Salvador increased in January 2018 after DHS announced the decision to terminate TPS for El Salvador, originally provided in 2001 after a series of earthquakes and then renewed 13 times, after an 18-month transition period. The Salvadoran government has expressed hope that the U.S. Congress will enact legislation to protect its roughly 200,000 nationals whose TPS protection is scheduled to end, particularly since lawsuits have been filed challenging the termination. Although some press reports predict the end of TPS could have negative consequences for the Salvadoran economy (declining remittances, increasing fiscal demands by repatriated individuals), the IMF maintains that the impact probably will be minimal. The government is nevertheless working with USAID, other donors, and the private sector to prepare reintegration assistance for former TPS beneficiaries who may return voluntarily or face removal. The State Department also is preparing to be able to provide consular services to the U.S. citizen children of TPS beneficiaries (estimated to number more than 190,000) who may return to the country. In addition, Salvadoran officials are concerned about the future of another 26,520 young Salvadorans currently protected from deportation through their participation in the Deferred Action for Child Arrivals (DACA) initiative. If DACA ends and its Salvadoran beneficiaries return, they could have difficulty continuing their education or obtaining employment, as the country is already struggling with high levels of youth unemployment. On September 5, 2017, DHS announced its decision to rescind the DACA initiative. The future of the DACA initiative remains uncertain, as dueling lawsuits are under way in federal courts to preserve DACA and to force its termination. "Zero Tolerance" Immigration Enforcement and Restrictions on Access to Asylum105 In May 2018, the Department of Justice (DOJ) implemented a zero tolerance policy toward illegal border crossing. Under the policy, DOJ prosecuted all adults apprehended while crossing the border illegally, with no exception for asylum seekers or those with minor children. This policy resulted in up to 3,000 children being separated from their parents, including children from El Salvador. After a federal judge mandated that all separated children be reunited with their families in late June 2018, DHS reverted to some prior immigration enforcement policies. In August 2018, Salvadoran officials announced they would investigate allegations of abuse of three Salvadoran minors in U.S. detention facilities. The Trump Administration has changed U.S. asylum programs and policies that have affected Salvadorans. In August 2017, the Administration ended an in-country refugee/parole processing program known as the Central American Minors program for children with parents residing legally in the United States. On June 11, 2018, then-Attorney General Sessions issued a decision maintaining that victims of gang violence or domestic abuse perpetrated by nongovernmental actors generally do not meet the standards required for receiving asylum in the United States. This decision is likely to restrict the ability of many Central American migrants to quality for asylum. On November 9, 2018, President Trump issued a presidential proclamation prohibiting individuals who arrive between ports of entry on the U.S. southwest border from requesting asylum for a period of 90 days. A federal judge temporarily blocked those restrictions on November 19, 2018. Security Cooperation Counternarcotics Although El Salvador is not a producer of illicit drugs, it does serve as a transit country for narcotics, mainly cocaine and heroin, cultivated in the Andes and destined for the United States. In September 2018, President Trump included El Salvador on the annual list of countries designated as "major" drug-producing or "drug-transit" countries for the eighth consecutive year. A country's inclusion in the list, however, does not mean that its antidrug efforts are inadequate. In 2016, Salvadoran officials seized around 12.3 metric tons of cocaine, an amount roughly four times larger than the total seized in 2015. The government also denied some $203.4 million in illicit revenue to crime groups, including assets seized during a major takedown of gang-affiliated money launderers ("Operation Check") in July 2016 carried out, in part, by U.S.-funded vetted units. Drug seizures decreased in 2017 due to authorities' focus on anti-gang efforts, but successful maritime efforts and coordination with other countries pushed drug smugglers out of Salvadoran waters. According to the State Department, El Salvador needs to maintain funding for security forces and the attorney general's office and continue to combat corruption if it is to maintain successful antidrug efforts. In June 2017, some Members of Congress asked the Treasury Department to consider making José Luis Merino, a high-ranking FMLN party official and deputy minister of foreign affairs, subject to U.S. sanctions under the Foreign Narcotics Kingpin Designation Act. Over the past decade, Merino has amassed a fortune and served as the intermediary between Venezuela, ALBA Petróleos , and the party. He also reportedly has ties with the Revolutionary Armed Forces of Colombia (FARC) guerrillas and drug traffickers. In August 2018, some Members of Congress asked the Treasury and State Departments to examine whether Merino and a business executive named José Aquiles Enrique Rais López could be subject to sanctions under the Global Magnitsky Act for engaging in corruption. Gangs U.S. agencies have engaged with El Salvador and other Central American governments on gang issues for more than a decade, with some regional efforts housed in the U.S. Embassy in San Salvador. In July 2007, an interagency committee announced the U.S. Strategy to Combat Criminal Gangs from Central America and Mexico, which emphasized diplomacy, repatriation, law enforcement, capacity enhancement, and prevention. Between FY2008 and FY2016 (the most recent year available), Congress provided nearly $50 million to support a variety of anti-gang efforts in the northern triangle countries. On the law enforcement side, U.S. funds support vetted police units working on transnational gang cases with U.S. law enforcement. In cooperation with vetted law enforcement units in El Salvador, U.S. law enforcement has brought criminal charges against thousands of MS-13 members in both countries. Since 2012, anti-gang cases have been bolstered by the establishment of an electronic monitoring center in San Salvador and efforts to target the financing of MS-13, designated by the Treasury Department as a Transnational Criminal Organization subject to U.S. sanctions pursuant to E.O. 13581. National-level programs have been complemented by municipal-level model police precincts, which are designed to build local confidence in law enforcement by converting police forces into more community-based, service-oriented organizations. In addition to the model precincts, the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL) has sponsored educational programs to keep kids from joining gangs that are taught by police and police-run athletic leagues to improve police-community relations. According to a survey of municipalities in which those leagues are active, more than 98% of participants expressed increased confidence in the police. INL's policing initiatives have been integrated in a "place-based" strategy with USAID prevention programs and focused on municipalities targeted by the Salvadoran government's Plan Secure El Salvador. Ensuring that anti-gang efforts are not carried out using police tactics that violate human rights and supporting efforts to have civilian police rather than military forces in public security efforts are major goals of U.S. programs. The State Department reportedly has donated body cameras and other equipment to the internal affairs unit within the police that investigates reported abuses. As of August 2017, that unit reported that 38 officers were facing homicide charges. According to a September 2018 Government Accountability Office report, U.S. police training in El Salvador and the other northern triangle countries had not established consistent human rights-related objectives in its police professionalization programs. USAID has used CARSI funds to implement a variety of crime- and violence-prevention programs. USAID interventions include primary prevention programs that work with communities to create safe spaces for families and young people, secondary prevention programs that identify the youth most at risk of engaging in violent behavior and provide them and their families with behavior-change counseling, and, most recently, "tertiary" prevention programs that seek to reintegrate juvenile offenders into society. Youth in violent communities are also some of the beneficiaries of the 22,000 jobs USAID's economic programs have helped generate. Due to the aforementioned sanctions on MS-13, the State Department and USAID had to obtain a waiver from the Treasury Department to carry out programs involving former or inactive MS-13 members; the agencies reportedly did not receive a license for those types of programs until 2017. Since 2015, USAID programs have complemented the government's Plan Secure El Salvador efforts in the 50 most violent municipalities. Violence has been reduced by 61% in municipalities where USAID works, as compared to 42% nationally. Trade Relations In December 2004, El Salvador became the first country to sign the CAFTA-DR trade agreement and to pass its required legislative reforms, implementing CAFTA-DR on March 1, 2006. Since that time, the volume of U.S.-Salvadoran trade has tended to follow trends in growth rates in the United States, with a variety of factors inhibiting the performance of Salvadoran exports vis-à-vis the other CAFTA-DR countries. Those factors have included a continued dependence on the highly competitive apparel trade, low levels of investment, public security problems, and broader governance concerns. The United States is El Salvador's main trading partner, purchasing 46% of its exports and supplying 30% of its imports. Salvadoran exports to the United States, which totaled $2.6 billion in 2017, include apparel, electrical equipment, sugar, and coffee. El Salvador's top imports from the United States, which totaled $3.9 billion in 2017, are fuel oil, electrical machinery, nuclear reactors and parts, plastics, and vehicles. In 2017, the United States had a $1.3 billion trade surplus with El Salvador. Because the United States enjoys a trade surplus with CAFTA-DR countries, most analysts had not predicted that the Trump Administration would seek to renegotiate the agreement, as it has with the North American Free Trade Agreement. On October 2, 2017, U.S. Trade Representative Robert Lighthizer said that CAFTA-DR and a number of other U.S. free trade agreements with Latin American countries "need to be modernized, more or less." Human Rights Cases: Former Salvadoran Officials Tried in the United States Although the amnesty law made bringing cases against human rights abusers from the war era nearly impossible to do in El Salvador, some former Salvadoran military leaders who have resided in the United States have faced judicial proceedings regarding their immigration statuses. In recent years, the Human Rights Violators and War Crimes Unit within the Bureau of Immigration and Customs Enforcement (ICE) of the Department of Homeland Security (DHS) has conducted investigations focused on past human rights violations in El Salvador. In February 2012, an immigration judge ruled that former Salvadoran Defense Minister Carlos Eugenio Vides Casanova could be removed (deported) from the United States based on his role ordering the torture of Salvadoran citizens, the 1980 killings of four American churchwomen, and the 1981 killings of land reformers. That decision was upheld in March 2015, and Vides Casanova was deported to El Salvador on April 8, 2015. In September 2012, Colonel Inocente Orlando Montano, one of the officials named by the Spanish judge as responsible for the aforementioned Jesuit murders, pled guilty to immigration fraud. Montano had hidden his military past when applying for TPS in the United States. He was sentenced to 21 months in prison. In August 2017, a federal judge approved a lower court ruling that Orlando Montano could be extradited to Spain to face charges for his role in the 1989 killing of six Jesuit priests, most of whom were Spanish. The extradition took place in November 2017; he remains in a Spanish prison. In February 2014, a federal judge determined that a former Salvadoran defense minister, General José Guillermo García, can be removed based on his role in brutal human rights violations. The judge ruled that he "assisted or otherwise participated" in 11 violent incidents, including the 1980 killing of Archbishop Óscar Arnulfo Romero. He was deported to El Salvador in January 2016. In February 2017, the U.S. Attorney in the Eastern District of Texas filed a civil lawsuit against Arnoldo Antonio Vasquez, a Salvadoran who misrepresented his past in order to obtain U.S. citizenship. According to an investigation conducted by ICE, Vasquez failed to acknowledge his involvement as a military officer in the extrajudicial killing of 10 civilians in San Sebastian, El Salvador, in 1988. Both the prosecution and the defendant have submitted their written arguments, but the judge has not yet ruled on this case.

Congress has had significant interest in El Salvador, a small Central American nation that has had a large percentage of its population living in the United States since the country's civil conflict (1980-1992). During the 1980s, the U.S. government spent billions of dollars supporting the Salvadoran government's counterinsurgency efforts against the leftist Farabundo Marti National Liberation Front (FMLN). Three decades later, the United States has worked relatively well with two consecutive, democratically elected FMLN administrations. President Salvador Sánchez Cerén, a former guerrilla commander of the FMLN, is in the final year of his five-year term. Sánchez Cerén's approval ratings have been significantly lower than those of prior presidents, as security conditions remain serious and economic growth remains moderate (2.3% in 2017). Polarization between the FMLN government and the conservative Nationalist Republican Alliance (ARENA)-dominated National Assembly has magnified those challenges. Political attention is on the February 3, 2019, first-round presidential elections. Nayib Bukele, a former mayor of San Salvador (2015-2018) standing for the Grand Alliance for National Unity (GANA) party, leads the FMLN and ARENA candidates. Both of those parties have lost support due to revelations of corruption involving former presidents, including the August 2018 conviction of former ARENA president Tony Saca. U.S. policy in El Salvador continues to focus on promoting economic prosperity, improving security, and strengthening governance, the three objectives of the U.S. Strategy for Engagement in Central America. Congress appropriated $57.7 million in bilateral assistance for El Salvador in the FY2018 Consolidated Appropriations Act (P.L. 115-141) to support those objectives. P.L. 115-141 withholds 75% of assistance for the Salvadoran central government until it addresses concerns such as border security, corruption, and human rights abuses. El Salvador also benefits from regional security assistance provided through the Central American Regional Security Initiative (CARSI) and a Millennium Challenge Corporation compact (MCC). The Trump Administration requested $45.7 million for U.S. efforts in El Salvador in FY2019. The Senate Appropriations Committee's FY2019 foreign aid appropriations measure (S. 3108) would provide $47.7 million for El Salvador. The House Appropriations Committee's foreign aid appropriations bill (H.R. 6385) would not specify a funding level for El Salvador. Both bills maintain conditions on aid to the central government. A resolution adopted by the House, H.Res. 145, called on the Salvadoran government to support ongoing anti-corruption efforts, and a provision in the FY2019 National Defense Authorization Act (P.L. 115-232) requires the Secretary of State to name Salvadoran officials known to have engaged in, or facilitated, acts of grand corruption or narcotics trafficking. President Trump's shifts in U.S. immigration policies have tested bilateral relations. In January 2018, the Trump Administration rescinded the Temporary Protected Status (TPS) that has shielded some 200,000 Salvadorans from removal (deportation) since 2001. The future of TPS and the Deferred Action for Child Arrivals (DACA) initiative, which has protected some 26,500 Salvadorans brought to the United States as children from removal since 2012, remains uncertain pending litigation in federal courts. For more information, see CRS Report RL34112, Gangs in Central America; CRS Report RS20844, Temporary Protected Status: Overview and Current Issues; and CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress.

Introduction Beginning in 1986, Congress passed several pieces of legislation that placed individual limits on Members' mail costs and required public disclosure of each Member's overall franking expenditures. These changes helped reduce overall congressional mail postage costs to $23.8 million during the 113 th Congress (2013-2014), down from a high of $177.4 million during the 100 th Congress (1987-1988). Despite the significant reduction in costs, critics continue to raise concerns about the franking privilege. In particular, mass mailings—franked mailings of 500 or more substantially similar pieces of unsolicited mail sent by individual Members during the same session of Congress —have come under increased scrutiny as critics argue that the vast majority of franked mail is unsolicited and, in effect, publicly funded campaign literature. Between 1997 and 2008, the House publicly reported the volume and cost of individual Member mass mailings. At the direction of the Committee on House Administration, in January 2009 the House began reporting the volume and cost of individual mass communications instead of mass mailings. Mass communications include all unsolicited mailings or communications of substantially identical content distributed to 500 or more persons, regardless of media. In April 2011, the House began separately reporting mass mailing and mass communications volumes and costs. This report provides an analysis of Member mass mailings during the period 1997-2008; mass communications during the period 2009-2011; and both mass mailings and mass communications during the period 2011-2015. First, it examines aggregate Member mass mailing and mass communication data to ascertain how many pieces of mass mail or communication were sent by Representatives annually, the total cost of those communications, and the annual percentage of Members who sent at least one mass mailing or mass communication. Second, quarterly Member mass mailing and mass communication data are evaluated to determine whether there was quarterly variation in Member mass mailing and mass communication volume and whether the variation reflected cyclical trends. Finally, the question of whether mass mailing and mass communication volume was higher in election years than in non-election years is considered. Methodology Data Data on Member mass mailings and mass communications were compiled using the quarterly Statement of Disbursement s of the House , which report the number of pieces of mail sent by each Member of the House in mass mailings (1997-2008, 2011-2015) and mass communications (2009-2015) during the preceding quarter and the total postage cost of the quarter's mass mailings or mass communications. The unit of analysis is the mail/communication statistic for each Member's office. Therefore, any Congress might contain more or fewer than the typical 441 Members, due to vacancies or to Members elected in special elections to fill vacancies. Mass Mailings vs. Mass Communications A mass mailing is statutorily defined as "any mailing of newsletters or other pieces of mail with substantially identical content (whether such mail is deposited singly or in bulk, or at the same time or different times), totaling more than 500 pieces" in one session of Congress. An unsolicited mass communication is defined by the Committee on House Administration as "any unsolicited communication of substantially identical content to 500 or more persons in a session of Congress." Examples of mass communications include radio, television, newspaper, and Internet advertisements; automated phone calls; mass facsimiles; and mass emails distributed to a non-subscriber emailing list. All mass mailings sent through the first quarter of 2011 are mass communications. Beginning in the second quarter of 2011, mass communications no longer include mass mailings. Summary Statistics Mass mailing data were examined for 67 quarters, from the first quarter of calendar year (CY) 1997 through the fourth quarter of CY2008, and from the second quarter of CY2011 through the fourth quarter of CY2015. Mass communication data were examined for 28 consecutive quarters, from the first quarter of CY2009 through the fourth quarter of CY2015. The universe of data includes 84,626 observations, half corresponding to the number of pieces sent by an individual Member in a given quarter and half corresponding to the cost to an individual Member in a given quarter. Aggregate Volume and Costs Mass Mailings, 1997-2008; 2011-2015 House Members sent 1.6 billion pieces of mass mail between 1997 and 2008 and between 2011 and 2014, at a total cost of $322.8 million. As shown in Table 1 , House Members sent a calendar year average of 94.1 million pieces of mass mail, costing an average of $19.0 million. The total number of mass mail pieces sent by the House ranged from a low of 39.8 million pieces in 2013 to a high of 122.6 million in 1997. Recently, Members have been sending less mass mail. Both total pieces and constant dollar costs for mass mailings had remained relatively stable for most of the span of the dataset, but both have fallen by almost 50% since 2011. Between 1997 and 2013, an annual average of 81% of House Members sent at least one mass mailing. In 2014 and 2015, however, only 62% and 66% of Member sent at least one mass mailing, respectively. Mass Communications, 2009-2011 House Members sent 1.72 billion pieces of mass communication (including mass mailings) between 2009 and 2011, at a total cost of $131.5 million. As shown in Table 2 , House Members sent a calendar year average of 573.1 million pieces of mass communication, costing an average of $43.8 million. In the second quarter of 2011, the House began separately reporting mass mailing and mass communications volumes and costs. For the purpose of reporting, "mass communications" no longer includes mass mailings. For the purpose of the analysis presented here, this is not problematic. A 2011 figure comparable to the 2009 and 2010 "mass communication" figures can be obtained by summing total 2011 mass mailings and 2011 mass communications. The 2011 data in Table 2 reflect this summation. Between 2009 and 2011, an annual average of 92% of House Members sent at least one mass communication. Among Members who sent at least one mass communication, the average calendar year number of pieces of communication sent by a Member was 1,407,364 at a cost of $107,431. In 2011, there was a large increase in the total number of pieces of mass communications, but a decrease in total cost. This is probably attributable to a large increase in the use of electronic communication that has no marginal cost, as well as a decrease in overall amount of mass mailing. Mass Communications (Not Including Mass Mailings), 2012-2015 House Members sent 1.11 billion pieces of mass communication in 2012, at a total cost of $7.4 million, 801 million pieces of mass communication in 2013, at a total cost of $5.7 million, 623 million pieces of mass communication in 2014, at a total cost of $5.1 million, and 568 million pieces of mass communication in 2015, at a total cost of $5.7 million. These data are not directly comparable to previous years, as mass communications data for 2012-2015 no longer include the volume or cost of mass mailings. If, however, the total volume and cost of 2012-2015 mass mailings are added, comparable figures for 2012 and previous years of mass communications can be realized. These figures—1.17 billion pieces at a cost of $30.3 million in CY2012, 840 million pieces at a cost of $20.9 million in CY2013, 664 million pieces at a cost of $20.9 million in CY2014, and 611 million pieces at a cost of $22.3 million in CY2015—indicate similar use of mass communications in 2012-2015 as in 2011, but show a large reduction in total costs. Comparing Mass Mailings and Mass Communication Volumes and Costs As shown in Table 1 and Table 2 , the average number of pieces of mass communication sent annually between 2009 and 2011 was about 500% greater than the average number of annual pieces of mass mail sent between 1997 and 2008. This is an expected result; the definition of mass communication used during that period is inclusive of all mass mailings as well as numerous other forms of communication. It is important to note, however, that this should not be interpreted as an increase in overall communication between Members and constituents. While it is possible that total mass communications increased between 2008 and 2011, the lack of data on mass communications in 2008 makes it impossible to draw a valid comparison. If we were to assume that mass mailings between 2009 and 2011 remained roughly constant with 2007 and 2008, it would imply that non-mail mass communications accounted for approximately 83% of all mass communications in 2009 and 2010. The assumption, however, cannot be verified. However, the House began reporting separate mass mailing and mass communication figures in the second quarter of 2011. During the final three quarters of 2011, total pieces of mass mailings (77,609,370) were similar to the last comparable set of three quarters from the first session of a Congress (83,286,364 pieces in 2007). However, they accounted for just 8% of total communications, while mass communications aside from mass mailing accounted for 92%. In 2012, mass communications accounted for 94.7% of total mass constituent contact, and mass mailings accounted for 5.3% of total mass contact. Mass communications, however, were only 24.7% of total mass constituent contact costs. This reflects a significant difference in the per piece cost of mass mailings and mass communications. In 2012, the cost per piece of mass mailing in the House was 38 cents. The cost per piece of mass communication was less than 1 cent. Similarly, in 2013, mass communications accounted for 95.3% of total mass constituent contact, and mass mailings accounted for 4.7% of total mass contact. Mass communications, however, were only 27.4% of total mass constituent contact costs. Costs per piece were 38 cents per piece of mass mailing and less than a cent per piece for mass communications. In 2014, mass communications accounted for 93.9% of total mass constituent contact, and mass mailings accounted for 6.1% of total mass contact. Mass communications, however, were only 24.6% of total mass constituent contact costs. Costs per piece were 39 cents per piece of mass mailing and less than a cent per piece for mass communications. In 2015, mass communications accounted for 95.3% of total mass constituent contact, and mass mailings accounted for 4.7% of total mass contact. Mass communications, however, were only 27.4% of total mass constituent contact costs. Costs per piece remained stable at 38 cents per piece of mass mailing and less than a cent per piece for mass communications. Quarterly Variation Mass Mailings, 1997-2008 Although the overall amount and cost of House mass mailing remained relatively constant between 1997 and 2008, significant variations occurred within these years. As shown in Figure 1 , the total number of pieces of mass mail sent by House Members produced an eight-quarter cyclical pattern, corresponding to the two-year cycle of each Congress. If the timing of mass mailing was evenly distributed, one would expect 12.5% of total mass mailing to have occurred in each of the eight quarters of each Congress. As shown in Figure 1 , that is not the case; significant peaks and valleys occur in quarterly mass mailing. Above-average totals are observed in the fourth quarter of the first year of each Congress (marked as 'A' in Figure 1 ), as well as in the second and third quarters of the second year of each Congress (marked as 'B'). The highest peak occurs in the fourth quarter of the first year, when 24.7% of all pieces of mass mail are sent. Although mass mailing data are not available by month, monthly data on overall official mail costs indicate that almost all of the fourth quarter spike is due to a large amount of mail sent in December, at the end of the first session. Increased mailings in the second and third quarters (15.5% and 15.0% of the total) of the second year of each Congress corresponds to the period just prior to the 90-day pre-election period in which Members are not allowed to send mass mailings. In particular, mass mail sent in the third quarter of the second year of any Congress (July-September) must be sent during the first month of the quarter, prior to the beginning of the prohibited period in early August. Thus, the above-average third quarter mass mailing totals for even-numbered years somewhat understate the increased rate of mailing prior to the election; all third-quarter mail is sent in the six-week period between July 1 and the beginning of the prohibited period in early August. Below-average totals are observed in the fourth quarter of the second year of each Congress and the first quarter of the first year of each Congress (marked as 'C'). The fourth quarter of the second year of each Congress (October-December) includes approximately five weeks during which mass mailings are prohibited, and otherwise comprises the period between the election and the start of the next Congress, a period in which Congress is not typically in session. Mass Mail and Mass Communications, 2009-2015 Figure 2 reports both the quarterly number of pieces of mass mail sent between 1997 and 2008; and the quarterly number of pieces of mass communication sent between 2009 and 2015. Quarterly totals for mass communications between the second quarter of 2011 and the fourth quarter of 2015 were calculated by adding total mass communications costs and total mass mail costs for those quarters. The lighter-weighted line represents mass mailings; the heavier-weighted line represents mass communications. As shown in Figure 2 , there appears to be variation in the quarterly number of mass communications sent. Above-average totals are observed in the fourth quarter of 2009 and the second and third quarters of 2010; below-average totals are observed in the first quarter of 2009 and the fourth quarter of 2010. In 2011, the number of pieces of mass communications sent increases dramatically, only to return to lower levels in 2012. The number of pieces then again picks up, peaking in the fourth quarter of 2013, dropping off in 2014, and then beginning to rise again in 2015. These findings should be interpreted with some caution. With only 28 quarters of data on mass communications, it cannot be determined whether the observed variation is cyclical (like the mass mailing data from 1997-2008) by Congress or merely random variation within the observed seven-year period. Since mass mailings are a component of mass communications and it is probable that mass mailings volumes would continue on a cyclical pattern as in the past, it might be expected that mass communications would also systematically vary, in similar patterns. However, such observable variation may disappear or be strongly attenuated if the volume of mass communications other than mass mailings did not vary by quarter, or if such variation followed a different pattern than mass mailing variation. In addition, the large increase in 2011 suggests that Member use of mass communications is changing, and future use may defy past patterns. Election vs. Non-Election Year Critics of the franking privilege have often cited increased election-year mail costs as evidence of political use of the frank prior to elections. Although mass mail costs do rise in the quarters prior to the pre-election prohibited period (as shown in Figure 1 ), the structure of the fiscal calendar is also important in creating large disparities between election-year and non-election-year mail costs. As shown in Table 3 , between 1997-2008, when mass mailings are compared by fiscal year, both the December spike and the pre-election increase are in the same year, so the data show inflated election-year numbers and suppressed non-election-year numbers. When annual data are compared by calendar year, the December spike and the pre-election increase balance out, and the totals are relatively similar. Thus comparisons of fiscal year mass mail data tend to overstate the effect of pre-election increases in mail costs, since they also capture the effect of the December spike in mail costs. Because fiscal years run from October 1 to September 30, both the spike in mass mailings in the fourth quarter of the first session and the pre-election rise in mass mailings occur in the same fiscal year, despite taking place in different calendar years and different sessions of Congress. A similar result is obtained when examining mass communications during 2009 and 2010. A fiscal year comparison results in a large difference, while a calendar year comparison results in virtually no difference. In 2011 and 2012, however, there is a substantial difference. This is due to a large increase in the amount of mass communications sent in the third and fourth quarters of 2011. In 2013, fiscal year and calendar year totals are once again similar, and in 2014 and 2015 totals return to the traditional odd/even-numbered year pattern. Discussion Critics of the franking privilege have generally articulated two concerns. First, the franking privilege is financially wasteful and, second, the franking privilege gives unfair advantages to incumbents in congressional elections. In particular, mass mailings have come under increased scrutiny during the past 20 years as critics argue that the vast majority of franked mail is unsolicited and, in effect, publicly funded campaign literature. Critics assert that incumbent House Members may spend as much on franked mail in a year as a challenger spends on his or her entire campaign. Proponents of the franking privilege argue that the frank allows Members to fulfill their representational duties by providing for greater communication between the Member and individual constituents. Proponents of the franking privilege also argue that Representative accountability is enhanced by use of the frank. By regularly maintaining direct communication with their constituents, Members provide citizens with information by which they can consider current public policy issues, as well as information on policy positions by which voters can judge a Member in future elections. It is maintained that if legislative matters could not be easily transmitted to constituents free of charge to Members, most Members could not afford to pay for direct communications with their constituents. The analysis presented here offers three contributions to this debate. First, the analysis finds that most Representatives make use of mass communications, mass mailings, or both to communicate with their constituents, with an annual average of 84% of Members sending at least one mass mailing during the period 1997-2008, and an annual average of 94% of Members sending at least one mass communication between 2009 and 2015. Second, the analysis confirms that the cost per piece of mass communication is indeed less than the cost per piece of mass mailing. Although this is not an unexpected finding, it implies that new communications technology may lower the overall cost to Congress for constituent communication, or allow for a greater amount of communication at the same cost. Finally, the analysis finds significant and regular quarterly variation in Member mass mailing through 2008, with the total number of pieces sent by Members following an eight-quarter pattern that corresponds to the two-year cycle of each Congress. The analysis shows two peaks in mailings, the first during the last quarter of the first session of Congress and the second during the two quarters prior to the pre-election prohibition on Member mass mailings. While there is currently not enough data on mass communications to conclude that similar patterns exist beyond 2008, the observed variation implies that mass communications are probably not evenly distributed throughout a Congress. These findings provide insight regarding concerns about election-year mass mailing expenditures. Although they confirm that Members send more pieces of mass mail or communications in the quarters just prior to the biennial elections, the findings also show that mass mailing peaks twice, and the larger peak takes place not prior to the election, but at the end of the first session. These findings also suggest that previous comparisons of election-year and non-election-year franked mail data may need to be considered. When mass mailings are compared by fiscal year, both the first session spike and the pre-election increase are in the same year, so the data show inflated election-year numbers and suppressed non-election-year numbers. Thus comparisons of fiscal year official mail costs tend to overstate the effect of pre-election increases in mail costs, since they also capture the effect of the December spike in mail costs.

Despite significant reductions in congressional mail postage costs over the past 25 years, critics continue to raise concerns about the franking privilege. While proponents of the franking privilege argue that the frank allows Members to fulfill their representational duties by providing for greater communication between the Member and individual constituents, critics argue that it is both financially wasteful and gives an unfair advantage to incumbents in congressional elections. In particular, mass mailings have come under increased scrutiny as critics argue that the vast majority of franked mail is unsolicited and, in effect, publicly funded campaign literature. This report provides an analysis of House Member mass mailings (1997-2008, 2012-2015) and mass communications (2009-2015). A mass mailing is defined by statute as a franked mailing of 500 or more substantially similar pieces of unsolicited mail sent in the same session of Congress. Mass communications include all unsolicited mailings or communications of substantially identical content distributed to 500 or more persons, regardless of media. Examples of mass communications include radio, television, newspaper, and Internet advertisements; automated phone calls; mass facsimiles; and mass emails distributed to a non-subscriber emailing list. Between 1997 and 2008, House Members sent 1.34 billion pieces of mass mail at a total postage cost of $224.5 million, producing a calendar-year average of 111.6 million pieces of mass mail costing an average of $18.7 million (Table 1). Most Representatives sent mass mailings. During each calendar year 1997-2008, an average of 84% of House Members sent at least one mass mailing. Among Members who sent at least one mass mailing, the average annual number of pieces of mail sent by a Member was 303,270 at a postage cost of $50,834. Although the annual number of pieces of mail sent remained relatively constant between 1997 and 2008, significant quarterly variations occurred within each Congress (Figure 1). These expenditures continue a historical pattern of Congress spending less on official mail costs during non-election years than during election years (Table 3). However, analysis of quarterly data on Member mass mailing costs indicates that, due to the structure of the fiscal year calendar, comparisons of election-year and non-election-year mailing data tend to overstate the effect of pre-election increases in mail costs, since they also capture the effect of a large spike in mass mailings from the fourth quarter of the previous calendar year. At the direction of the Committee on House Administration, in January 2009, the House began reporting the volume and cost of individual mass communications instead of only mass mailings. Between 2009 and 2011, House Members sent 1.27 billion pieces of mass communication at a total cost of $131.5 million, producing a calendar-year average of 573.1 million pieces of mass communication costing an average of $43.8 million (Table 2). During 2009 and 2010, an annual average of 92% of House Members sent at least one mass communication. Beginning with the second quarter of calendar year 2011, the House began separately reporting the volume and cost of both mass mailings and mass communications. Since 2012, House Members have sent 3.1 billion pieces of mass communication, at a total cost of $23.9 million, and 183.7 million total pieces of mass mail, at a total cost of $70.5 million. See also CRS Report RL34188, Congressional Official Mail Costs; CRS Report RS22771, Congressional Franking Privilege: Background and Recent Legislation; and CRS Report RL34274, Franking Privilege: Historical Development and Options for Change.

Introduction Congress is deeply divided over implementation of the Affordable Care Act (ACA), which President Obama signed into law in March 2010. Since the ACA's enactment, lawmakers opposed to specific provisions in the ACA or the entire law have repeatedly debated its implementation and considered bills to repeal, defund, delay, or otherwise amend the law. Most of this legislative activity has taken place in the House, which reverted to Republican control in 2011. Over the past six years, the Republican-led House has passed numerous ACA-related bills, including legislation that would repeal the entire law. There has been less debate in the Senate, which remained under Democratic control through 2014. Most of the ACA legislation passed by the House during that period was not taken up by the Senate. However, a few bills to amend specific elements of the ACA that attracted sufficiently broad and bipartisan support were approved by both the House and the Senate and signed into law. Repealing core provisions of the ACA and replacing them with new law is a legislative priority for the Republican-controlled 115 th Congress. In addition to their attempts to repeal or amend the ACA through authorizing legislation, lawmakers have used the annual appropriations process in an effort to eliminate funding for the ACA's implementation and address other concerns they have with the law. ACA-related provisions have been included in enacted appropriations acts each year since the ACA became law. In October 2013, disagreement between the House and Senate over the inclusion of ACA language in a temporary spending bill for the new fiscal year (i.e., FY2014) resulted in a partial shutdown of government operations that lasted 16 days. This report summarizes the ACA-related language added to annual appropriations legislation by congressional appropriators since the ACA was signed into law. The information is presented in Table 1 . While a detailed examination of the ACA itself is beyond the scope of this report, a brief overview of the ACA's core provisions and its impact on federal spending is provided as context for the material in the table. This report is updated as necessary to reflect key developments in the annual appropriations process. A companion report, CRS Report R43289, Legislative Actions in the 112th, 113th, and 114th Congresses to Repeal, Defund, or Delay the Affordable Care Act , summarizes the authorizing legislation to amend the ACA that was enacted during the last three Congresses. It also reviews all the ACA legislation taken up and passed by the House during that period. A Brief Overview of the ACA The ACA made significant changes to the way U.S. health care is financed, organized, and delivered. Its primary goal is to increase access to affordable health care for the medically uninsured and underinsured. To that end, the law included a complex set of interconnected provisions that address the private health insurance market. First, the ACA requires health insurers to comply with a set of federal standards ("market reforms") to ensure that individuals may purchase, keep, and renew coverage that provides a minimum level of benefits and consumer protections, with some limits on costs. Second, the law establishes competitive health insurance exchanges (also known as marketplaces) through which individuals and small employers are able to compare and enroll in qualified health plans. Exchanges operate in every state and the District of Columbia. They are administered by states or by the federal government, or through a partnership between the state and federal governments. Qualified individuals who enroll in exchange plans may receive financial assistance if they meet income and certain other requirements. Refundable tax credits are available to individuals and families with incomes between 100% and 400% of the federal poverty level (FPL) to help pay the insurance premium. The premium tax credits are available upon enrollment so that eligible individuals and families can choose to receive the subsidy immediately rather than wait until they file taxes the following year. In addition, certain individuals and families receiving the tax credit may be eligible for cost-sharing subsidies to reduce their out-of-pocket costs (e.g., deductibles, copays) when receiving health services. Small employers with fewer than 25 full-time equivalent employees (FTEs) may also use the exchanges to purchase insurance coverage for their employees and may qualify for a tax credit to help cover the cost of providing that coverage. In June 2015, the U.S. Supreme Court in King v. Burwell ruled that the premium tax credits are available to all qualified individuals who enroll in exchange plans and meet the necessary income and other requirements, regardless of whether the exchange is administered by the state or the federal government. Third, the ACA's "individual mandate" requires most U.S. citizens and legal residents to obtain coverage. Those who remain uninsured may have to pay a penalty unless they qualify for an exemption. The individual mandate is intended to encourage healthy individuals to participate in the insurance market and not wait until they get sick to buy coverage. Finally, the law requires larger employers with 50 or more FTEs to offer health coverage that meets affordability and adequacy standards for their full-time employees and those workers' dependents. Employers who do not comply with these requirements may be subject to a tax if one or more of their employees purchase coverage through an exchange and receive a subsidy. The purpose of the ACA's employer requirements is to encourage larger firms to maintain affordable and adequate coverage for their employees. The ACA coupled its private insurance provisions with the requirement that states expand their Medicaid programs to cover all nonelderly individuals with incomes up to 138% FPL. Those with higher incomes, up to 400% FPL, may be eligible to get subsidized coverage through an exchange. In June 2012, the U.S. Supreme Court in NFIB v. Sebelius found the Medicaid expansion to be unconstitutionally coercive and prohibited the federal government from enforcing it. The Court's decision made Medicaid expansion optional for states. In addition to expanding access to insurance coverage, the ACA contains hundreds of other provisions that address health care access, costs, and quality. They include new programs to test alternative ways of delivering and paying for health care. The law also includes new taxes and fees as well as adjustments to Medicare payments to hospitals and other health care providers. These provisions are designed to offset the federal spending on exchange subsidies and Medicaid expansion. ACA's Impact on Federal Spending Implementation of the ACA is affecting both mandatory and discretionary spending. Mandatory spending —also referred to as direct spending—is controlled through authorizing laws. It includes spending on entitlement programs such as Medicare and Social Security. Authorizing laws may provide permanent or temporary appropriations or other forms of budget authority for such spending. When the authorizing law contains no appropriations, mandatory programs may be funded through the annual appropriations process. This is sometimes referred to as "appropriated mandatory" or "appropriated entitlement" spending. Discretionary spending is both controlled and funded through the annual appropriations process. It typically covers the routine costs of running federal agencies and offices, including wages and salaries. Federal spending on ACA implementation can be grouped into three categories: (1) mandatory spending on expanding insurance coverage, (2) mandatory spending on other programs, and (3) discretionary spending. Each of these categories is briefly discussed below. Mandatory Spending on Expanding Insurance Coverage This category accounts for most of the federal spending under the ACA. It includes the exchange subsidies (i.e., premium tax credits and cost-sharing subsidies), the federal government's share of the costs of Medicaid expansion, and tax credits for small employers. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) projected that this and other ACA mandatory spending (discussed in the second category, below) would be more than offset by (1) revenues from the ACA's new taxes and fees, and (2) savings from the law's adjustments to Medicare provider payments that are projected to slow the rate of growth of Medicare spending. Mandatory Spending on Other Programs The ACA authorized new Medicare and Medicaid spending. For example, it phased out the Medicare prescription drug benefit "donut hole" through a combination of subsidies and manufacturer discounts, and it increased Medicare payments for primary care services and medical education. The ACA also included numerous appropriations that are providing billions of dollars of mandatory funding to support grant programs and other activities authorized by the law. For example, the law funded temporary insurance programs for targeted groups prior to the exchanges becoming operational, and it provided funding for grants to states to plan and establish health insurance exchanges. The ACA included a permanent appropriation, available for 10-year periods, for the Center for Medicare & Medicaid Innovation (CMMI), within the Centers for Medicare & Medicaid Services (CMS), to test and implement innovative health care payment and service delivery models. In addition, the ACA created four special funds and appropriated amounts to each one. First, the Community Health Center Fund (CHCF) provided almost $11 billion over five years (FY2011-FY2015) for the federal health centers program and the National Health Service Corps. Second, the Patient-Centered Outcomes Research Trust Fund (PCORTF) is supporting patient-centered comparative clinical effectiveness research through FY2019 with a mix of appropriations, fees on health plans, and transfers from the Medicare trust funds. Third, the Prevention and Public Health Fund (PPHF), for which the ACA provided a permanent annual appropriation, is supporting prevention, wellness, and other public health-related programs and activities. Finally, the Health Insurance Reform Implementation Fund (HIRIF), for which the ACA appropriated $1 billion, helped pay for the initial administrative costs of implementing the law. Discretionary Spending The ACA is affecting discretionary spending in two ways. First, the law created numerous new discretionary grant programs and provided each of them with an authorization of appropriations. To date, however, few of these programs have received discretionary funding through annual appropriations acts, though several of them have been supported with mandatory funds from the PPHF. Second, the two agencies primarily responsible for implementing the ACA's provisions to expand insurance coverage—CMS's Center for Consumer Information and Insurance Oversight (CCIIO) and the Internal Revenue Service (IRS)—are incurring significant costs in connection with administering and enforcing the law. Both agencies requested increases in funding in each of their past five budget submissions (i.e., FY2013-FY2017) to help pay for ACA implementation. But congressional appropriators have not provided either agency with any additional discretionary funds. CMS instead has relied on funding from other sources to support the federal health insurance exchange (Healthcare.gov) and other ACA implementation activities. Those sources include discretionary fund transfers from other accounts, amounts from the Nonrecurring Expenses Fund (NEF), ACA mandatory funds (i.e., HIRIF, PPHF), and, more recently, user fees assessed on health insurers that participate in the federal exchange. ACA Provisions in Enacted Appropriations Acts The House Appropriations Committee has added numerous ACA-related provisions to annual appropriations acts since the Republicans regained control of the House at the beginning of the 112 th Congress. Most of these provisions were included in the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) Appropriations Act, which funds CMS. A few were incorporated in the Financial Services and General Government (Financial Services) Appropriations Act, which funds the IRS. Appropriations bills drafted by the Senate Appropriations Committee remained largely free of ACA-related provisions during the 112 th and 113 th Congresses, while the Senate remained under Democratic control, with one key exception. Each year, the Senate LHHS appropriations bill included instructions on the allocation of PPHF funding. Disagreement between the Republican-controlled House and the Democrat-led Senate during the 113 th Congress on whether to include ACA provisions in the FY2014 continuing resolution (CR) shut down programs and activities across the federal government in October 2013; see text box. With Republicans in control of both chambers in the 114 th Congress, House and Senate appropriators were able to coordinate their efforts to include ACA-related provisions in appropriations bills. The House and Senate FY2016 and FY2017 LHHS appropriations bills included several overlapping ACA provisions and reporting requirements. The appropriations committees have used a number of legislative options available to them through the appropriations process in an effort to defund, delay, or otherwise address implementation of the ACA. These options are briefly summarized below. Administrative Spending Levels The appropriators have denied CMS and the IRS new funding to cover the administrative costs of ACA implementation. CMS has requested substantial increases in funding for its Program Management account in each of the past five budgets (i.e., FY2013-FY2017). Those new funds were to help support operation of the federally facilitated exchange and other ACA-related activities. Congress, however, did not provide any additional discretionary funds for CMS in the enacted LHHS appropriations acts for FY2013-FY2017. Similarly, the IRS requested additional discretionary funds in each of the last five budgets to support administration and enforcement of the ACA's tax provisions, including the premium tax credits and the individual mandate penalties. Again, Congress has not given the IRS the extra funds it requested. Limitation Provisions House appropriators repeatedly have added limitations (often referred to as riders) to the LHHS and Financial Services appropriations bills. Limitation provisions within appropriations measures are provisions that restrict the use of funds provided by the bill. They do this either by capping the amount of funding that may be used for a particular purpose or by prohibiting the use of any funds for a specific purpose. For example, House appropriators on multiple occasions have added language prohibiting an agency from using any of the funds for ACA implementation activities. Limitation provisions also may be used to restrict the availability of funds for transfer. During the FY2011-FY2015 appropriations cycles the ACA limitation provisions added by House appropriators were removed during negotiations with the Senate. The House FY2016 and FY2017 LHHS appropriations bills included limitations that would have prohibited HHS (and the Labor Department) from using any discretionary funding to enforce the ACA's market reforms, operate the federal exchange, or administer other ACA programs. Also, they would have banned the use of other funding made available by the appropriations act to implement the ACA. For example, CMS would have been prohibited from funding the Medicaid expansion, and prohibited from collecting user fees from health insurers to help cover the costs of operating the federal exchange. None of these limitation provisions were included in the final enacted versions of the FY2016 and FY2017 LHHS appropriations acts. Legislative Provisions House appropriators have incorporated ACA-related legislative language in the LHHS appropriations bills. Unlike limitations, legislative provisions have the effect of making new law or changing existing law. As an example, appropriators have included language to rescind (i.e., cancel) certain mandatory funding provided by the ACA. The enacted FY2016 LHHS appropriations act included a temporary moratorium on the ACA's medical device tax and the annual fee on health insurance providers, as well as a two-year delay of the Cadillac tax (i.e., the ACA's excise tax on high-cost employer-sponsored health plans). House rules prohibit legislative provisions in appropriations acts, while the rules of the Senate allow exceptions under some circumstances. However, special rules in the House (approved by the Rules Committee) and unanimous consent agreements in the Senate can be used to set aside each chamber's rules, including those that relate to legislating in appropriations measures. Reporting and Other Administrative Requirements Appropriators have added to recent LHHS appropriations acts several reporting and other administrative requirements regarding implementation of the ACA. These include instructing the HHS Secretary to establish a website with information on the allocation of PPHF funds and to provide an accounting of administrative spending on ACA implementation. Table 1 summarizes the ACA-related legislative and other provisions that were incorporated in the enacted LHHS and Financial Services appropriations acts for each of FY2011-FY2017. For each fiscal year, the table also provides a brief overview of any legislative action taken by the House and Senate Appropriations Committees on their respective versions of the two appropriations bills prior to the two chambers reaching agreement on the final version of the legislation. This discussion lists all the ACA language added to the bills by the committees. As already noted, none of the ACA limitations added by the House appropriators were included in the enacted LHHS and Financial Services appropriations acts.

Congress is deeply divided over implementation of the Affordable Care Act (ACA), the health reform law enacted in March 2010. Since the ACA's enactment, lawmakers opposed to specific provisions in the ACA or the entire law have repeatedly debated its implementation and considered bills to repeal, defund, delay, or otherwise amend the law. In addition to considering ACA repeal or amendment in authorizing legislation, some lawmakers have used the annual appropriations process in an effort to eliminate funding for the ACA's implementation and address other aspects of the law. ACA-related provisions have been included in enacted appropriations acts each year since the ACA became law. In October 2013, disagreement between the Republican-led House and Democratic-controlled Senate over the inclusion of ACA language in a temporary spending bill for the new fiscal year (i.e., FY2014) resulted in a partial shutdown of government operations that lasted 16 days. The House Appropriations Committee has added numerous ACA-related provisions to annual appropriations acts since the Republicans regained control of the House in 2011. Most of these provisions were included in the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) Appropriations Act, which funds the Centers for Medicare & Medicaid Services (CMS). A few provisions were incorporated in the Financial Services and General Government (Financial Services) Appropriations Act, which funds the Internal Revenue Service (IRS). By comparison, the LHHS and Financial Services appropriations bills drafted by the Senate Appropriations Committee were largely free of any ACA-related provisions while the committee remained under Democratic control through 2014. Congressional appropriators have used a number of legislative options available to them through the appropriations process in an effort to defund, delay, or otherwise address implementation of the ACA. First, they have denied CMS and the IRS any new funding to cover the administrative costs of ACA implementation. Second, House appropriators repeatedly have added limitations (often referred to as riders) to the LHHS and Financial Services appropriations bills to prohibit CMS and the IRS from using discretionary funds provided in the bills for ACA implementation activities. To date, the ACA limitation provisions added by House appropriators have been removed during negotiations with the Senate. None of them have been included in any of the enacted appropriations acts. Third, congressional appropriators have incorporated ACA-related legislative language in the LHHS appropriations bills. For example, appropriators have included language to rescind (i.e., cancel) certain mandatory funding provided by the ACA and delay (or place a temporary moratorium on) certain taxes and fees established by the ACA. Finally, the appropriators have added to recent LHHS appropriations acts several reporting and other administrative requirements regarding implementation of the ACA. These include instructing the HHS Secretary to establish a website with information on the allocation of funding from the Prevention and Public Health Fund and to provide an accounting of administrative spending on ACA implementation.

Introduction In 2008 and 2009, collapsing world credit markets and a slowing global economy combined to create the weakest market in decades for production and sale of motor vehicles in the United States and other industrial countries. The declines in production and sales were serious business challenges for all automakers, and rippled through the large and interconnected motor vehicle industry supply chain, touching suppliers, auto dealers, and the communities where auto-making is a major industry. Old Chrysler and Old GM were in especially precarious positions. As the supply of credit tightened, they lost the ability to finance their operations through private capital markets and sought federal financial assistance in 2008. During the recession, both of these U.S. automakers and two auto financing companies, Chrysler Financial and GMAC, received federal financial assistance from the Bush and Obama Administrations. Alone among the world's major automakers, Old Chrysler and Old GM filed for bankruptcy and, with oversight from the Obama Administration as well as the bankruptcy court, restructured their operations in an attempt to become more competitive companies. Both bankruptcies took place in the summer of 2009. Reasoning that Chrysler was not financially strong enough to be an independent company, the Obama Administration reached an agreement with Fiat to take over the management of New Chrysler in a bankruptcy reorganization; Fiat also received a 20% equity ownership stake in the new company. The U.S. government's assistance to Chrysler ultimately resulted in New Chrysler owing the government several billions of dollars in loans and the government having an initial 9.9% ownership stake in New Chrysler. In May 2011, the loans directly owed by New Chrysler were repaid; in July 2011, Fiat purchased the U.S. government's remaining interests in the company, thereby ending direct government involvement with New Chrysler. The TARP assistance for Chrysler, however, was not fully recouped due to losses in the bankruptcy process and because the ultimate value of the government's ownership stake in Chrysler was less than the amount of outstanding TARP assistance. This report describes the progress that New Chrysler has made since it was created from the sale of the Old Chrysler assets in July 2009 and the path of the divestment of the federal government's stake in Chrysler. Government Assistance to the U.S. Motor Vehicle Industry The initial U.S. government loans to assist the U.S. motor vehicle and motor vehicle financing industry were made by the Bush Administration in December 2008 and January 2009. At that time, $24.8 billion in assistance was provided to the four companies, the first of what would eventually total nearly $80 billion in assistance through the Troubled Asset Relief Program (TARP). TARP was authorized by the Emergency Economic Stabilization Act (EESA), enacted in the fall of 2008 to address the ongoing financial crisis. This statute specifically authorized the Secretary of the Treasury to purchase troubled assets from "financial firms," the definition of which did not mention manufacturing companies. According to the U.S. Treasury Department, The overriding objective of EESA was to restore liquidity and stability to the financial system of the United States in a manner which maximizes overall returns to the taxpayers. Consistent with the statutory requirement, Treasury's four portfolio management guiding principles for the TARP are: (i) protect taxpayer investments and maximize overall investment returns within competing constraints; (ii) promote stability for and prevent disruption of financial markets and the economy; (iii) bolster market confidence to increase private capital investment; and (iv) dispose of investments as soon as practicable, in a timely and orderly manner that minimizes financial market and economic impact. The authorities within TARP were very broad, and when Congress did not pass specific auto industry loan legislation, the Bush Administration turned to TARP for funding, arguing that to not provide any assistance to Old Chrysler (and Old GM) would make the recession much worse. The Obama Administration took office and built on this precedent. In 2009, both Chrysler and GM received additional TARP loans, which kept them functioning as they went through a major restructuring prompted by the Obama Administration's Auto Task Force. GMAC/Ally Financial received additional capital infusions, enabling the company to survive both the economic downturn in the auto market as well as large losses on the company's mortgage operations. Chrysler Financial, in contrast, required no additional aid and relatively quickly repaid the TARP loan it received. The assistance for the auto industry was not without controversy, and questions were raised about the legal basis for the assistance and the manner in which it was carried out. Table 1 summarizes the TARP assistance given to the U.S. motor vehicle and motor vehicle financing industry. Chrysler: Two-Time Recipient of Federal Aid Since 1980, when it first received federal assistance, Chrysler has had four different ownership structures, as shown in the Appendix . During this time, its share of the U.S. passenger car market fell by half while its share of the light truck market has generally grown ( Table 2 ). In the late 1970s, Old Chrysler was losing market share as successive oil price shocks raised the price of gasoline and many Americans began deserting large American cars for small, more fuel-efficient German and Japanese imports. More stringent federal safety, fuel efficiency, and pollution standards required a level of capital investment that Old Chrysler did not possess. As the smallest of the Detroit 3, and without stronger financial resources, Old Chrysler faced possible bankruptcy. In December 1979, to avoid the loss of a large American manufacturer, Congress approved a $1.5 billion federal loan guarantee proposed by the Carter Administration. The loan was repaid and the warrants received by the federal government as part of the assistance were sold at auction for $311 million. After it received the federal loan guarantee, Old Chrysler revamped its operations and developed several new vehicle lines, including the minivan. Old Chrysler's fortunes changed in the 1990s as the economy expanded and as the auto industry was becoming more globalized and integrated. In 1998, Old Chrysler and Daimler announced a merger of their operations, an event that was heralded by some as emblematic of the global restructuring of the auto industry. Others questioned whether the different German and American corporate cultures could be effectively meshed. Although Daimler improved efficiencies and quality, invested $10 billion in new facilities, and helped Chrysler develop 34 new models, the so-called "marriage of equals" did not work out. As time went on it became apparent that it had de facto become a takeover of Old Chrysler by Daimler with an unclear vision and pathway to integration of the German and American companies. The Chairman of the Board of DaimlerChrysler said in a 2007 speech that the companies would split because (1) synergies between the two companies were limited and (2) price pressures on Old Chrysler in the U.S. market were adversely affecting Daimler's overall profitability and share prices. Others said Daimler lost interest because of growing losses at Old Chrysler and its rising health care costs. While Daimler had paid $37 billion for Old Chrysler in 1998, it sold 80% of it for $7.4 billion in 2007 to Cerberus Capital Management, a private equity investment company. Old Chrysler was not the only auto industry investment by Cerberus. In addition to the manufacturing operations, it also bought Chrysler Financial, the automaker's financing arm, and 51% of GMAC, Old GM's financing arm. Cerberus management had an optimistic outlook, with the Cerberus Chairman, John Snow, observing that such private equity investments had a unique role in strengthening U.S. manufacturing: Fundamentally, we view Cerberus's role as helping Chrysler achieve its full potential. Private ownership offers many advantages in that regard. As a private company, Chrysler will be able to implement a plan to build longer-term value, to make strategic investments and to focus all of its energies on improving the company's performance—all without fear of short term negative market reaction from quarterly public company reports and the pressures to meet analyst targets. Had the U.S. economy not suffered a financial crisis and recession—with auto sales starting to fall in 2007 and accelerating their decline into 2009—Cerberus might have strengthened Old Chrysler as it planned. Despite its ownership by a private equity company, Old Chrysler was in precarious financial straights similar to Old GM. In testimony in the Senate, Old Chrysler Chairman and CEO Robert Nardelli explained the reasons the company sought federal aid in December 2008: We are here because of the financial crisis that started in 2007 and accelerated at the end of the second quarter of 2008. As consumer confidence fell and credit markets remained frozen, the lowest U.S. auto sales in more than 20 years put tremendous pressure on our cash position. U.S. industry sales fell from 17 million a year in 2007, to a monthly annualized rate of 10.5 million last month—a 6.5 million unit decline. What does that mean for Chrysler? At 10 percent market share, it translates to a loss of 650,000 vehicles, or roughly $16 billion in lost revenue opportunity. With such a huge hit to our sales and revenue base, Chrysler requires the loan to continue the restructuring and fund our product renaissance. Chrysler's Restructuring Through Bankruptcy When it made the initial TARP loans to Chrysler, the Bush Administration required Old Chrysler to submit a viability plan in February 2009 as a precondition for further federal assistance. Old Chrysler's viability plan forecast restructuring the company through plant closings, labor concessions, operational changes, dealership closings and other measures. President Obama rejected this viability plan at the end of March 2009, saying it did not go far enough, giving the company one month (until May 1) to devise a more thorough restructuring plan and obtain the support of major stakeholders, including labor unions, dealers, creditors, suppliers, and bondholders. During April 2009, Old Chrysler worked with its stakeholders to devise a restructuring plan that would meet the requirements of the Auto Task Force and avert bankruptcy. While the company reached tentative agreements with most stakeholders, a group of creditors would not agree to the proposal. Some larger banks, such as JP Morgan, agreed to write down their debt by more than two-thirds; however, a few mutual funds and hedge funds holding about 30% of the debt balked. Old Chrysler could only avoid bankruptcy if all of its creditors approved the settlement, so the disagreement prompted a filing in bankruptcy court on April 30. Old Chrysler became the first major U.S. auto company to seek bankruptcy protection since Studebaker in 1933. Old Chrysler reached agreement with most of its stakeholders prior to filing for bankruptcy, thereby helping to speed the bankruptcy court decisions, which were completed in just 42 days. Many of the liabilities of Old Chrysler were initially subsumed by a special entity known as Old Carco, and they remain in bankruptcy. Most of Old Chrysler's assets were sold during the court proceedings to New Chrysler, now officially known as Chrysler Group LLC. The government provided New Chrysler with a final TARP installment to assist in the transformation to a new, smaller automaker. Post-Bankruptcy Chrysler New Chrysler began operations on June 1, 2009. Old Chrysler's departing Chairman and CEO Robert Nardelli summarized the gains that came from the bankruptcy proceedings: Through the hard work and foresight of many Chrysler stakeholders, Chrysler Group will soon begin operations with significant strategic advantages, such as a wage and benefit structure for active and retired employees that is competitive with those of transplant manufacturers; a reduction of debt and interest expense; the disposition of idle assets; a rationalized and more efficient dealer network; and sound agreements with our suppliers. While this has been an extremely difficult chapter in Chrysler's history for all involved, the new Company and its customers, employees and suppliers can now begin on a fresh page. The largest equity owner in New Chrysler in 2009 was the United Auto Workers' health care retirement trust, known as a VEBA (Voluntary Employee Beneficiary Association). The union's VEBA trust was accorded a large piece of Chrysler because Old Chrysler's retiree healthcare liability of $8 billion could not be met with a cash contribution and was instead converted into an equity stake. New Chrysler's other major stakeholder was Fiat, which became a partner to manage New Chrysler, help it finance its operations, and develop a new stream of competitive vehicles, including small, fuel-efficient passenger cars, such as those Fiat builds in Europe. As part of this agreement, Fiat was given a 20% equity stake without making a direct financial contribution. These ownership stakes and others are shown in Figure 1 . The bankruptcy court decision outlined steps that Fiat could take to raise its equity stake in New Chrysler by meeting three performance benchmarks, including production at a U.S. plant of both a new fuel efficient engine and a new vehicle with fuel efficiency of at least 40 miles per gallon. Fiat took additional steps in 2011 to buy additional equity in New Chrysler. In April 2011, it exercised an option to purchase an additional 16% stake for $1.3 billion. In June 2011, it announced that it would pay the U.S. Treasury $500 million to buy back the government's 6% equity interest. This transaction was completed on July 21, 2011. When combined with the performance benchmark events described above and the sale of the Canadian equity interest, these cumulative steps have given Fiat a 58.5% equity stake in New Chrysler, with the remaining equity held by the UAW VEBA. Fiat's share could rise to more than 70% if it exercises the rights it holds to purchase some of the UAW VEBA Trust stake. Fiat purchased these rights from the U.S. Treasury for $60 million. A chronology of Chrysler's ownership since bankruptcy is shown in the Appendix . Assessing the Cost of TARP Assistance for Chrysler The federal government provided $10.9 billion in financial support for Chrysler in 2008 and 2009, as detailed in Table 3 . TARP assistance for Chrysler, like most of the TARP assistance, was initially provided through financial instruments that were expected to be repaid or repurchased by the recipients. In the bankruptcy process, however, some of the loans to Old Chrysler remained with the bankrupt company and the loan to New Chrysler included common equity in the new company in return. Common equity is not expected to be repaid by the company, but represents an ownership stake in the company. Similar conversions of TARP assistance into common equity were also undertaken for a small number of other TARP recipients, including GM, GMAC/Ally Financial, AIG, and Citigroup. In general, government holding of common equity means that whether the government recoups its assistance depends on the price it receives when the government sells this equity. If the government's common equity stake ends up being sold for less than the amount of the government's assistance, the company involved has no legal responsibility to compensate the government for the difference. If the value of the government's equity stake is sufficiently high, however, the government may end up making a greater gain on the assistance than if the company directly repaid the assistance. As specified by the TARP statute, any proceeds from equity sales "shall be paid into the general fund of the Treasury for reduction of the public debt." In the case of New Chrysler, the agreement for sale to Fiat of the U.S. government's remaining interests in the company resulted in a $560 million payment to the Treasury, compared to $1.8 billion in TARP assistance outstanding. Even including other gains, such as $1.1 billion in interest payments received, the government recouped less money from the TARP assistance for Chrysler than the loans given to Chrysler. Exactly how large a loss might be attributed to the Chrysler assistance, however, depends on what accounting method is used. One straightforward way to calculate gains or losses for TARP assistance is to simply compare the amount of assistance provided by the government to the funds returned to the government in nominal amounts. In the case of Chrysler, TARP provided $10.9 billion in loans to support the company. In return for this $10.9 billion, the government is received a total of approximately $9.6 billion: $5.5 billion in loan repayments; $1.9 billion in recoupment from the bankruptcy process of Old Chrysler; $1.66 billion in interest and other fees; and $560 million paid by Fiat for the U.S. government's New Chrysler common equity and rights. Compared to the original $10.9 billion TARP loans, this method arrives at an approximate $1.3 billion gap between the funds loaned and the funds recouped. This $1.3 billion figure, however, does not fully include a number of other cost factors that one might include, such as the cost to the government to borrow the funds which it then provided to Chrysler, a premium to compensate the government for the riskiness of the loans, and the cost to the government in managing the assistance given. The budgetary scores produced by the Congressional Budget Office (CBO) and the Office of Management of Budget (OMB) take many of these additional factors into account. The TARP statute required that TARP assistance be scored for government budget purposes in a similar manner to loans and loan guarantees under the Federal Credit Reform Act. Specifically, the expected present value of actions under TARP is to be estimated using market, risk-adjusted interest rates and reflected on the federal budget at that time. The estimates produced according to these formulas, however, have only been reported in aggregate figures. For example, CBO estimated in March 2012 that the budget cost of the assistance for the entire auto industry would be $19 billion, and the Treasury in coordination with OMB estimated lifetime cost as of May 31, 2012, to be $25 billion. Neither of these, however, reports separately the individual gains or losses on Chrysler, GM, and GMAC/Ally Financial. Appendix. Chrysler Ownership Structure

The recent recession and accompanying credit crisis posed severe challenges for all automakers, but especially for General Motors and Chrysler. Executives of both companies testified before congressional committees in the fall of 2008 requesting federal bridge loans. Legislation that would have provided such financial assistance passed the House of Representatives but did not pass the Senate. In lieu of that assistance, the Bush Administration turned to the Troubled Asset Relief Program (TARP), a $700 billion program that was enacted in October 2008 to shore up the financial system and prevent spillover to the broader economy. The Bush Administration used TARP to provide both automakers and two auto financing companies with nearly $25 billion in loans, and told the automakers to submit viability plans if they were to seek additional aid. Chrysler submitted such a plan in February 2009, outlining how it planned to restructure its operations, including a strategic alliance with Fiat. Some questions were raised as to whether Chrysler could survive as a free-standing company, even with government assistance, because of its relatively small size. The Obama Administration rejected Chrysler's initial viability plan as insufficient and gave the company 30 days to develop a new plan in an effort to avert bankruptcy. Working with the Administration's Auto Task Force, Chrysler developed a restructuring plan that included a revised labor agreement, cost reductions from dealers and suppliers, reductions in creditor claims, and limitations on executive compensation. Despite agreement with most stakeholders, all creditors did not agree to the restructuring, prompting Chrysler to file for bankruptcy in April 2009. With much of the restructuring plan in place, however, the bankruptcy court was able to quickly approve the proposals, including a creditor agreement. Many of the assets of Old Chrysler were sold to a new legal entity, Chrysler Group LLC, whose largest equity owner was the United Auto Workers' retiree medical trust fund, owning 67.7%. Fiat took a management role in the new company and a 20% equity stake, which was deemed central to the survival of New Chrysler. Under new Fiat management, New Chrysler revamped its fleet of automobiles and light trucks, and has been profitable in 2011 and 2012. Its commercial and financial success accelerated its plans for repaying federal assistance. In May 2011, New Chrysler repaid a $5.9 billion debt to the U.S. government that was not fully due until 2017. On July 21, 2011, Fiat purchased the U.S. government's common equity interests and options in New Chrysler for $560 million. In addition, the ownership of New Chrysler significantly changed as Fiat met a series of performance benchmarks that allowed it to raise its equity stake to 58.5% at the end of 2011. Of the $10.9 billion that was loaned to Chrysler through TARP, not all of it has been, or will be, recouped by the U.S. Treasury. Following the transaction that closed on July 21, 2011, the U.S. government has no remaining financial interest in New Chrysler. While $9.6 billion of the assistance given to the company has been recouped, an approximate $1.3 billion shortfall remains. New Chrysler has no legal responsibility to make up this shortfall.

Overview On an undisclosed date in 2010, Burma (Myanmar) is to hold its first national parliamentary elections since the ill-fated vote in 1990. Depending on the manner in which the election is held and the outcome of the vote, Burma's prospects for a more democratic government may be at stake. The current ruling military junta—the State Development and Peace Council (SPDC)—is promoting the 2010 election as the fifth step in what it calls a seven-step roadmap to "disciplined democracy." Burma's leading opposition groups are highly skeptical of the SPDC and the 2010 elections, concerned that the SPDC will use a new constitution promulgated in 2008 and legal restrictions placed on participation in the 2010 elections to maintain its stranglehold on power. Burma's 2010 elections might also pose a challenge to the Obama Administration's policy towards Burma. In September 2009, the U.S. State Department announced a new policy towards Burma that continued the existing political and economic sanctions but added a willingness to engage in high-level discussions with representatives of the SPDC. Previous U.S. administrations had generally refused to participate in high-level discussions with the SPDC. Burma's two most recent experiences with nationwide plebiscites do not augur well for the democratization of Burma. In May 1990, the military junta—then known as the State Law and Order Restoration Council (SLORC)—refused to relinquish power when Burma's leading opposition party, the National League for Democracy (NLD), won 392 of the 485 seats in a parliamentary election. In May 2008, the SPDC held a referendum on a new constitution despite the widespread devastation caused by Cyclone Nargis only a few days before the vote. Five days after the referendum, the SPDC announced that over 98% of the eligible voters had cast votes, and that over 92% had voted in favor of the adoption of the constitution—results that were widely viewed as fraudulent. For the 111 th Congress, the 2010 elections may be a strong indicator of the potential for political change in Burma. If, despite political restrictions, the SPDC conducts comparatively free and fair elections with official outcomes that appear to represent the views of the public, there may be calls from the Obama Administration and some sources for Congress to scale back the sanctions. However, if the SPDC manipulates the elections to prevent full participation and/or releases biased or inaccurate results, Congress may choose to increase the political and economic pressure on Burma's ruling military junta. The Road to the 2010 Elections The path that has led Burma to the 2010 elections can be traced back to August 30, 2003, when Burma's prime minister, General Khin Nyunt, announced the SPDC's seven-step roadmap to democracy (see text box). Between 2004 and 2008, the SPDC progressed through the first three steps of the roadmap, despite significant opposition from various political organizations within Burma and around the world. The adjourned National Convention reconvened in May 2004, after an eight-year break precipitated by an NLD walkout in response to an SPDC crackdown on its political opponents. Despite a continued NLD boycott, the National Convention in September 2007 completed the second step of the roadmap—a draft of the process for transforming Burma into a "disciplined democracy." The SPDC then appointed in October 2007 a special commission to draft the text of a proposed new constitution, based on the work of the National Assembly. In February 2008, the SPDC announced that the drafting of the new constitution was completed. Much of the opposition to the National Convention, its drafting of a new constitution, and the SPDC's "roadmap to democracy," stems from the military's response to the 1990 parliamentary elections. The 1990 Parliamentary Elections On May 27, 1990, Burma held national elections to select a new parliament as the first step to return the country to civilian rule. After World War II, the former British colony enjoyed a brief period of civilian rule, which was ended by a military coup d'etat in 1958. For most of the next 30 years, Burma lived under military rule. In the summer of 1988, the people of Burma arose in opposition to the ruling military government, in what is sometimes called the "8888 Uprising." The name refers to the tragic events of August 8, 1988, when soldiers opened fire on the civilian protesters, killing an unknown number of people, and started a brutal crackdown on opposition groups and their leaders. On September 18, 1988, the 19-member State Law and Order Restoration Council (SLORC) assumed power. While their crackdown continued, SLORC announced it did not wish to remain in power for long, and promised to hold multiparty democratic general elections. The date for elections was set for May 27, 1990. Despite continued suppression and harassment of opposition parties and their candidates, the national vote was held as scheduled. In a surprise to virtually everyone, the leading opposition party, the National League for Democracy, and its leader, Aung San Suu Kyi, won a landslide victory. Official results of the 1990 elections had the NLD winning 392 of the 485 contested seats in the new parliament. SLORC's party, the National Unity Party (NUP), won 10 seats. Two other opposition parties—the ethnic-based Shan Nationalities League for Democracy and the Arakan League for Democracy—won 23 and 11 seats, respectively. Following the election, Aung San Suu Kyi and other opposition leaders pressed SLORC to accept the popular will and transfer power to the new parliament. SLORC responded by arresting many of the opposition leaders—many of whom had won a seat in the elections—and imposing ever more restraints of civil liberties. The Constitutional Referendum of 2008 On February 9, 2008, the SPDC announced a national referendum on its draft constitution was to be held in May 2008. On the same day, the SPDC also declared, "In accordance with the forthcoming State Constitution, the multi-party democracy [sic] general elections will be held in 2010." On February 26, 2008, the SPDC released a new law governing "the approval of the draft constitution." The law barred the following people from voting: members of religious orders; people of unsound mind; persons in prison or convicted of a crime; people illegally abroad; and foreigners. The law also allowed the postponement or dissolution of a vote "if [a] free and fair referendum may not be held stably due to natural disaster or situation affecting the security, or any other disaster." The SPDC began providing copies of the 194-page draft constitution to the public on April 9, 2008, at a cost of 1,000 kyat ($1.50) and announced the date for the referendum—May 10, 2008. On May 2, 2008, Cyclone Nargis, a category 3 cyclone, caused widespread damage across much of southern and central Burma. Initial reports estimated the death toll at 351 people, but that number quickly rose to over 22,500, with 41,000 people reported as missing. Official Burmese figures were later revised to 84,537 dead and 53,836 missing. Despite the widespread destruction caused by Cyclone Nargis, the SPDC decided to not invoke the natural disaster provisions of the referendum law. On May 6, 2008, the SPDC announced that the vote on the proposed constitution would proceed as planned in most of Burma, but that the vote would be delayed until May 24, 2008, for most of the townships around Rangoon and in seven of the townships in the Irrawaddy region. The SPDC's decision to proceed with the referendum was met with strenuous objection by Burma's leading opposition groups, as well as by the United States and several other nations. There are conflicting accounts about the conduct and outcome of the referendum. The SPDC reported a heavy turnout on both dates, with few voting irregularities. Opposition groups say the turnout was comparatively light, with many reported cases of voting irregularities, such as pre-marked ballots, voter intimidation, and other techniques to influence the outcome of the referendum. On May 29, 2008, the SPDC issued Announcement No. 7/2008, reporting that 98.12% of the 27,288,827 eligible voters had cast votes, and that 92.48% had voted in favor of the adoption of the constitution. On the basis of these official results, the SPDC declared that the new constitution had been ratified. Key Features of the 2008 Constitution17 The 2008 constitution is a 213-page, detailed document. It establishes the Republic of the Union of Myanmar as a perpetual union of seven states and seven regions under "a genuine, disciplined multi-party democratic system." Although "the Sovereign power of the Union is derived from the citizens," the constitution also stipulates that one of its objectives is "enabling the Defence Services to be able to participate in the national political leadership role of the State." The 2008 constitution creates three equal branches of the State—the legislative, executive, and judicial branches—under a parliamentary system. The legislative branch is empowered to consider and approve legislation. It is headed by a national parliament ( Pyidaungsu Hluttaw ) with two chambers—the Union Assembly ( Pyithu Hluttaw ), with a maximum of 440 members selected by districts based on population, and the National Assembly ( Amyotha Hluttaw ), with a maximum of 224 members selected by the regions or states. Members of the Pyidaungsu Hluttaw serve terms of five years. Each chamber is to select a speaker from amongst its members. The constitution also creates Regional and State Hluttaws . In each of the Hluttaws , a quarter of the seats are to be appointed by the commander-in-chief of Burma's Defence Services. Burma's president is the head of the executive branch. The president's two main powers are to enforce the law and to promulgate ordinances, subject to the approval of the national parliament. The president can also designate ministries, enter into treaties, and take military action (including declaring war or making peace), subject to the assent of the national parliament. The constitution also provides for two vice presidents. The president and two vice presidents are selected by the parliament as a whole after each chamber of the parliament separately nominates one candidate, and the members of the national parliament appointed by the commander-in-chief of Burma's Defence Services nominate a third candidate. The terms of office for the president and vice presidents are five years; they are limited to two terms in office. Within the executive branch, the constitution also establishes the "National Defence and Security Council" (NDSC), consisting of the president; the two vice presidents; the speakers of each chamber of the national parliament; the commander-in-chief and deputy commander-in-chief of the Defence Services; and the ministers of border affairs, defence, foreign affairs, and home affairs. According to the constitution, the four ministers on the NDSC must be active military personnel. Chapter XI of the constitution gives the president the authority, after coordinating with the NDSC, to declare a state of emergency in all or part of Burma, and transfer all legislative, executive, and judicial authority to the commander-in-chief of Defence Services. Burma's judicial branch is to consist of a Supreme Court, High Courts for each of the 14 states or regions, and lower level courts. Justices of the Supreme Court are nominated by the president and approved by the parliament as a whole . Burma's constitution provides for a separate Constitutional Tribunal of the Union to adjudicate cases interpreting the constitution or determining the constitutionality of laws passed by the parliament . The 2008 constitution sets a number of conditions on persons holding public office in all three branches of the government. These include age requirements, natural citizenship for any person and both of her/his parents, and minimum residency requirements. It also bars a person who has dual citizenship, or has a close relative who is a foreign national from holding public office, effectively preventing opposition leader Aung San Suu Kyi from running for office because she was married to a British citizen and has two sons who are British nationals. The constitution has additional disqualification conditions for serving in parliament, including serving a prison term; having committed certain types of offenses; being of unsound mind; insolvency; membership in a religious order; and being a civil servant (with an exception for Defence Services personnel). Under the 2008 constitution, national legislation is to be considered by both chambers of the parliament separately. If and when a common version of a bill is approved by both chambers, it is sent to the president for approval. The president can either approve the bill or return it to the parliament with comments for reconsideration. If the parliament approves the bill a second time, with or without incorporating the president's comments, it becomes law. Chapter VIII lists the rights and duties of the citizens of Burma. It provides for and protects a wide variety of human and civil rights, with an occasional qualification. For example, the freedom of religion can be limited in cases where laws are passed "for the purpose of public welfare or reform." Another provision of the constitution forbids "the abuse of religion for political purposes." The constitution also allows the suspension of certain civil liberties at times of war, foreign invasion, or insurrection. Chapter IX of the constitution contains provisions governing elections. Suffrage is provided to all Burmese citizens 18 years old or older, regardless of ethnicity with a few notable exceptions. People who are members of religious orders, serving prison sentences, declared of unsound mind, insolvent or otherwise declared ineligible based on election laws are disenfranchised. Chapter IX also establishes the Union Election Commission, which is responsible for conducting, supervising, and determining the results of parliamentary ( hluttaw ) elections. The constitution includes a separate chapter (Chapter X) regarding political parties. In particular, the constitution requires political parties to register with the government and abide by the constitution and laws of the country. It also prohibits political parties from receiving direct and indirect "assistance from a foreign government, a religious association, other association or a person from a foreign country." To amend the major provisions of the constitution requires the approval of over 75% of the members of the parliament as a whole, which effectively gives the military veto power over constitutional amendments. The 2010 Elections The date on which the 2010 parliamentary elections are to be held has not yet been announced by the SPDC. The military junta released five laws on March 9, 2010, that will govern the conduct of the 2010 election. They are (1) a law establishing the Union Election Commission; (2) a law setting the conditions for registering political parties to participate in the election; (3) a law concerning the election of the members of the Pyithu Hluttaw ; (4) a law concerning the election of the members of the Amyotha Hluttaw ; and (5) a law concerning the election of members of the state or regional Hluttaws . The new election laws have been sharply criticized by Burma's leading opposition groups. They also generally received a cool reception by the international community. The Election Laws and Regulations19 The 2010 election laws are comparatively similar to those issued before the 1990 election, with some modifications to reflect provisions in the 2008 constitution. Most of the controversy surrounding Burma's new election laws has focused on certain provisions in the law on political parties and the Union Election Commission. The three laws concerning the election of members of the various hlu ttaws , however, do contain provisions that have implications for the possibility of holding free and fair elections in Burma. The Political Parties Registration Law The Political Parties Registration Law requires that all political parties with 15 or more members register with the Union Election Commission. The party's registration must include the party's official name, flag, seal, constitution and regulations, party program and ideology, and detailed identification information about the party leadership. In its registration application, the political party must promise to safeguard and maintain the integrity of Burma, its constitution and its laws, as well as the "peace and tranquility" of the nation. If a previously existing political party fails to register with the Union Election Commission within 60 days of the promulgation of the law—or, by May 7, 2010—the political party will be considered illegal and ineligible to participate in the 2010 election. No specific application deadline has been set for new political parties. Political parties must also contest in at least three constituencies in the general election for the hluttaws . The law prohibits political parties from "directly or indirectly using money, buildings, vehicles and property owned by the State," as well as "directly or indirectly the support of money, land, housing, buildings, vehicles, property, so forth" from governments, religious organizations or other organizations of foreign countries. In addition, political parties cannot "abuse religion for political purposes." The law also sets conditions on who can be a member of a political party. A person must be a Burmese citizen at least 18 years old to join a political party. A person can only join one political party. Among the more controversial conditions set on party membership are the following: members of religious orders are prohibited; civil servants are prohibited; persons serving prison terms are prohibited; and persons with foreign citizenship are prohibited. Political parties that intentionally conceal prohibited party members may be deregistered by the Union Election Commission. The Union Election Commission also has the power to audit the financial records of political parties. Union Election Commission Law As required by the constitution, the law creates the Union Election Commission, and gives it the authority to supervise the hluttaw elections and Burma's political parties. The Union Election Commission has the power to create subcommissions, delineate constituencies, compile voting lists, certify election results, and form Election Courts to hear electoral disputes. The decisions of the Union Election Commission are final, and cannot be appealed to Burma's judicial courts. A member of the Union Election Commission must be at least 50 years old; be determined to have a "good reputation among the people" by the SPDC; possess dignity and integrity; be "well-experienced," and be "loyal to the State and its citizens." Commission members cannot be a member of a political party, hold any office, or draw a "salary, allowances, or supplements." The Hluttaw Election Laws The other three laws released on March 9, 2010—the Amyotha Hluttaw Election Law, the Pyithu Hluttaw Election Law, and the Region Hluttaw or State Hluttaw Election Law—confirm the number of seats for each type of hluttaw , establish qualifications for eligible voters, set criteria for candidates, and specify other provisions related to the conduct of the elections. The Amyotha Hluttaw Election Law stipulates that there will be 12 representatives from each region or state, and 56 members appointed by the commander-in-chief of the Defense Services. The Pyithu Hluttaw Election Law provides for 330 seats which are to be elected based on Burma's townships, and 110 to be selected by the commander-in-chief of the Defense Services. The size of the Region or State Hluttaws is determined by a process that includes at least two representatives from each township, members elected based on Burma's recognized "national races," and members appointed by commander-in-chief of the Defense Services. To vote in the parliamentary elections, a person must be a Burmese citizen at least 18 years old and listed on the constituency's electoral role. Foreigners or naturalized citizens of other countries; members of religious orders; and people serving prison terms, insolvent, or "adjudged to be of unsound mind" are not entitled to vote. Each hluttaw law sets a minimum age for representatives. For the Amyotha Hluttaw , representatives must be 30 years old or older. For the Pyithu Hluttaw , and the Region or State Hluttaws , the minimum age is 25. All Hluttaw representatives must have been residing in Burma for a minimum of at least 10 continuous years prior to the election. Residency exemptions are provided for individuals residing overseas in an official capacity for the government. In addition, both of the candidate's parents must have been Burmese citizens at the time of their birth. The Election Commission Three days after releasing the five election laws, the SPDC announced the 17 members of the Union Election Commission. According to the opposition newspaper, the Irrawaddy , "The majority of the chosen members are retired government officials who served under the ruling junta and took retirement in recent years." Several of the members of the Union Election Council—including its Chairman Thein Soe—are or have been on the European Union's sanction list of Burmese officials who are not allowed access into the European Union and/or whose assets are frozen. One of the election commission members—Aung Myint—appears on the U.S. Treasury's "Special Designated Nationals" list. The Response in Burma The initial response in Burma to the five election laws and the list of appointees to the Union Election Commission was mostly negative. In the weeks since the laws' release, several leading political parties—including the National League for Democracy (NLD)—have decided not to participate in the election. However, there have been a number of political parties that have submitted the required registration materials, including some ethnic-based parties. Burmese Comments on the Election Laws Burmese criticism has largely focused on various provisions that effectively barred or inhibited the participation of leading opposition figures, such as Aung San Suu Kyi. Opposition leaders who are serving prison sentences (such as Aung San Suu Kyi) cannot run for office, vote in the elections, or be members of political parties. People who have lived overseas any time during the last 10 years cannot run for office, effectively eliminating the participation of Burma's leaders-in-exile. Burma's politically active Buddhist monks and nuns—key organizers of the protests of 2007 —are not allowed to join a political party, vote in the elections, or run for office. Comments also pointed to a perceived bias in the Political Parties Registration Law against opposition parties. Political parties that violate restrictions—such as the restriction on party members or the prohibition on foreign financial support—may be declared illegal and prohibited from participating in the elections. In addition, the cost of registering a political party—300,000 kyat or about $300—plus 500,000 kyat ($500) per candidate, may inhibit the participation of Burma's poor. The election laws are also viewed as favoring the military. In addition to setting aside at least 25% of the seats in every hluttaw for appointees by the commander-in-chief of the Defence Services, military personnel are the only government employees allowed to form political parties, vote, or run for office, increasing the likelihood that the military will constitute more than 25% of the hluttaws . There has also been criticism of the Union Election Commission Law and the people appointed to the commission. To some, the membership of the commission and the lack of appeal to the commission's decisions effectively turn the Union Election Commission into an instrument that the SPDC will likely use to influence the election results. Political Party Registration The Political Party Registration Law requires all existing political parties that wish to participate in the 2010 elections to submit registration materials to the Union Election Commission (UEC) within 60 days. Since the law was promulgated, several political parties or groups have announced that they do not intend to register, while a number have submitted their registration materials (see Table 1 , below). The NLD's central executive committee unanimously voted against participating in the 2010 elections on March 29, 2010. The decision came a week after NLD leader Aung San Suu Kyi stated that she "would not even think of registering under these unjust laws." In the weeks prior to Suu Kyi's statement, there were reported disagreements among the NLD leadership about participation in the election. NLD Chairman Aung Shwe and NLD spokesperson Khin Maung Swe reportedly supported registering the party, but NLD leader Win Tin, who was released from Insein Prison on September 23, 2008, after 19 years in jail, openly opposed registering the party. On April 29, 2010, Aung San Suu Kyi and the NLD filed an appeal to Burma's Supreme Court to annul the provisions in the Political Party Registration Law that would require the NLD to reregister as a political party to participate in the 2010 elections. The Supreme Court announced its decision not to hear the case on May 6, 2010. The decision of the NLD not to register may have a far-reaching impact on the credibility of the 2010 elections. Political parties or groups have apparently been influenced by the NLD's decision and have subsequently stated they will not participate in the election. The Mon National Democratic Front, for example, voted not to register for the election the day after the NLD made its decision. Two weeks after the NLD's decision, only one of the top five parties to win seats in the 1990 elections—the pro-junta National Unity Party—had indicated it would participate in the 2010 election, while three of the top five parties—the NLD, the Arakan League for Democracy and the Mon National Democratic Front—had decided not to participate. Given that these three parties won over 84% of the seats in the 1990 election, their decision not to participate has created a possibly large void in representing the political views of a substantial segment of the Burmese electorate. There are also signs that the NLD decision has spawned a campaign to boycott the election. It has been reported that clandestine organizations led by Buddhist monks and university students are urging people to boycott the 2010 election in the hopes of preventing the attainment of a 51% voter turnout for the results to be official. Members of the NLD have also been circulating materials reminding voters that they have the right to not vote in the 2010 election. During the campaign for the constitutional referendum, there was a difference of opinion among the opposition groups on whether people should refuse to vote or vote against the constitution. On April 29, 2010, the Union Solidarity and Development Party (USDP) submitted its application to the UEC, listing among its members 27 ex-military officers, including Prime Minister General Thein Sein. It is unclear if the officers' resignations from the military are sufficient to comply with the provisions of the Political Party Registration Law, or if they also must resign from their ministerial positions. On May 12, 2010, UEC Chairman Thein Soe stated that "ministers are political posts, not state service personnel," and as such, the USDP's formation is in compliance with the law. If successful in their application to form a political party, this move increases the chances of the military controlling more than 25% of the seats in the parliament. During the daily press briefing on May 4, 2010, Assistant Secretary of State Philip J. Crowley indicated that while the United States would generally support military officers to "take off their uniform and pursue politics and government as civilians," it will wait to see what actions Burma will take to determine "whether this represents just wolves changing to sheep's clothing." After a political party has submitted its registration application, the UEC reviews the submitted materials and determines if the party will be allowed to register as a political party. If approved, the political party has 90 days from the submission of its application to demonstrate that it has the minimum necessary members—1,000 if contesting at the national level and 500 if contesting at the regional or state level—to remain registered as a political party. The UEC has begun the process of reviewing the applications, and has announced its determination on many of the applications. The reviews of some of the ethnic-based political parties (such as the Kachin State Progressive Party) have taken more time than other parties, raising doubts about the fairness of the UEC's decisions. It has been suggested that the UEC is intentionally slowing down the approval of the applications from selected political parties to hinder their ability to comply with the minimum membership requirement. The preceding table (see Table 1 ) provides a status report for Burma's political parties as of June 2, 2010. The International Response The international response to the five election laws has varied from sharp criticism to mild expressions of disappointment. An official statement by U.N. Secretary-General Ban Ki-moon indicated that a preliminary assessment of the laws "suggests that they do not measure up to the international community's expectations of what is needed for an inclusive political process." The statement also reiterated the Secretary-General's call for "fair, transparent and credible elections in which all citizens of Myanmar, including Daw Aung San Suu Kyi, can freely participate." The day after the election laws were released, U.S. Assistant Secretary of State Philip J. Crowley referred to the Political Parties Registration Law as "a step in the wrong direction." He also stated that the State Department was "deeply disappointed" that the law excluded political participation by Burma's more than 2,000 political prisoners, including Aung San Suu Kyi, as well as the law's apparent prohibition of Aung San Suu Kyi continuing to be a member of the NLD, if it registers as a political party. Crowley concluded by saying the law "makes a mockery of the democratic process and ensures that the upcoming elections will be devoid of credibility." Several other foreign leaders have expressed dissatisfaction or disappointment with the Burmese election laws. Britain's Prime Minister [author name scrubbed] said of the election laws, "Sadly, the Burmese regime has squandered the opportunity for national reconciliation." Australia's Foreign Minister Stephen Smith told reporters, "I don't believe that any election without the National League for Democracy can be a full, free and fair election." The Philippines' Foreign Secretary Alberto Romulo stated that the actions of the SPDC were "contrary to the roadmap to democracy that they have pledged to ASEAN and to the world." Japan's Foreign Minister Katsuya Okada has indicated that Japan may cancel its plan to expand economic aid to Burma unless Aung San Suu Kyi and other opposition figures are permitted to participate in the 2010 elections. Some nations have been more restrained in their comments about Burma's election laws. Indonesia's Foreign Minister Marty Natalegawa traveled to Burma in late March to discuss the 2010 elections with Burma's Foreign Minister Nyan Win. Following their meetings, Natalegawa stated "We are trying very hard to ascertain as to what extent this sets [sic] of laws are consistent or inadvertently impede the holding of a multi-party election, an inclusive one and the likes." Singapore's Foreign Ministry issued a similar statement, expressing its hope that "it is not too late for all parties to reach a compromise." On March 24, 2010, the U.N. Security Council held a closed-door meeting on the Burmese elections. It has been reported that Britain and China clashed over the appropriateness of the body to weigh in on the issue. The following day, the informal Group of Friends of Burma met and agreed that Burma's military junta should release all political prisoners (including Aung San Suu Kyi) and allow them to participate in the 2010 elections. The Association of Southeast Asian Nations (ASEAN) released a statement following its April 9, 2010, leaders meeting, stating, "We underscored the importance of national reconciliation in Myanmar and the holding of the general election in a free, fair, and inclusive manner, thus contributing to Myanmar's stability and development." The SPDC's Response Burma's ruling military junta has used its state-run newspaper, The New Light of Myanmar , to rebut some of the criticisms leveled at its election laws, generally by pointing to similarities in other nation's election laws. On March 27 and 28, 2010, the newspaper ran a two-part article written by "A Lawman" enumerating a response to "widespread criticism." Regarding the powers of the Union Election Commission to oversee the political parties, the article points out that Indonesia grants its election commission similar powers. On the disenfranchisement of people serving prison terms, the article notes that in some countries, people are not allowed to vote for five or six years after their release from prison. It also recalls that Burma's 1947 constitution also had a provision prohibiting people from serving in the parliament for five years after their release from prison. As to members of religious orders, the SPDC has pointed out that past Burmese constitutions and election laws contained similar prohibitions on their participation in elections. In his address at Burma's 65 th Anniversary Armed Forces Day Parade, Senior General Than Shwe, SPDC chairman and commander-in-chief of Defence Services, told the audience that "preparations are being made to be ready in every aspect for a gentle transition to democracy and market-oriented economic system." He went on to warn that "the improper practice of democracy often leads to anarchic phenomena." Because Burma's democratic transition was only in its initial stages, Than Shwe asked that Burma's political parties "show restraint at a time when the democratization process has yet to reach maturity." The SPDC has also rejected calls to allow international election observers to be present during the upcoming election. UEC Chairman Thein Soe told reporters on May 12, 2010, "The nation has a lot of experience with elections. We do not need election watchdogs to come here." The Obama Administration's Burma Policy In September 2009, the Obama Administration announced a change in U.S. policy towards Burma after seven months of review, discussion, and consultation. The new element to the Obama policy is the willingness to engage in direct dialogue with the SPDC on how to promote democracy and human rights in Burma, and greater cooperation on international security issues, such as nuclear nonproliferation and counternarcotics efforts. Outside of the new willingness to engage in direct dialogue, the Obama policy is mostly a continuation of the policies of the two preceding administrations with the same goals—supporting "a unified, peaceful, prosperous, and democratic Burma that respects the human rights of its citizens." In order to achieve these goals, the Obama Administration will continue to press Burma to release all its political prisoners, end all its conflicts with ethnic minorities, cease its human rights violations, and initiate "a credible internal political dialogue with the democratic opposition and ethnic minority leaders on elements of reconciliation and reform." The existing U.S. sanctions on Burma—as stipulated in section 570 of the Omnibus Consolidated Appropriations Act, 1997; Burmese Freedom and Democracy Act of 2003; the Tom Lantos Block Burmese JADE Act of 2008; and a series of executive orders —will remain in place "until we see concrete progress towards reform." The Obama Administration also reserves the right to implement or recommend additional, targeted sanctions if warranted by circumstances inside Burma. The Obama policy will continue the past practice of cooperating with the international community to foster the desired changes inside Burma, including an intensified effort to engage with ASEAN, China, and India. Since its announcement of a new Burma policy, the Obama Administration has held several direct discussions with SPDC officials, including the first ASEAN-U.S. leaders meeting in Singapore on November 15, 2009, which both President Obama and Burma's Prime Minister General Thein Sein attended. A few days prior to the ASEAN-U.S. leaders meeting, U.S. Assistant Secretary of State for East Asia and the Pacific Kurt Campbell and Deputy Assistant Secretary of State Scot Marciel traveled to Burma to meet with Burma's Prime Minister Thein Sein—the highest level U.S. delegation to visit Burma in 14 years. Campbell and Marciel also met with Aung San Suu Kyi and leaders of other opposition parties and ethnic minorities. Assistant Secretary of State Campbell also visited Burma on May 9-10, 2010, and had meetings with SPDC officials, NLD leaders (including Aung San Suu Kyi), and leaders from various ethnic minority groups. Since the adoption of the new Burma policy, the SPDC has taken a series of steps contrary to the stated U.S. goals in Burma, including the promulgation of the five election laws. When asked during the State Department's daily press briefing on March 10, 2010, for signs of progress in Burma that have come out of the new policy, Assistant Secretary Philip J. Crowley stated that "so far, those results are lacking." After Crowley's comment, the SPDC decided to release and return U.S. citizen Kyaw Zaw Lwin (aka Nyi Nyi Aung). On February 10, 2010, a Burmese court convicted Kyaw on what the U.S. government considered "politically motivated charges," and sentenced him to three years in jail. Kyaw was released from Insein Prison on March 18, 2010, and returned to the United States. Despite the apparent lack of progress towards achieving U.S. goals in Burma, Crowley informed the press in March 2010, "We are going to continue to have discussions with Burma, and I'm sure that in a variety of different fora others will have the same kind of discussion. I doubt that we're the only ones who are disappointed with the direction that they're taking at this point." Assistant Secretary Campbell reportedly said on April 14, 2010, "We do think we have been able to pass some consequential messages but overall, I would say that we are going to need to see some steps on the part of the leadership in (Burma) to sustain this process going forward." Following his May 2010 trip to Burma, Assistant Secretary Campbell stated that the Obama Administration was "profoundly disappointed by the response of the Burmese leadership." Congressional Concerns There are also signs of disappointment in the Burmese government's behavior among some Members of Congress. Nine Senators sent a letter to President Obama on March 26, 2010, urging the imposition of additional economic sanctions on the SPDC in light of the "a set of profoundly troubling election laws." The letter specifically asks the President to fulfill four provisions of the Tom Lantos Block Burmese JADE Act of 2008 ( P.L. 110-286 ): (1) the appointment of a special representative and policy coordinator for Burma; (2) the imposition of additional banking sanctions; (3) the submission by the Secretary of the Treasury to certain congressional committees of a report "containing a list of all countries and foreign banking institutions that hold assets on behalf of senior Burmese officials"; and (4) the submission by the Secretary of State to certain congressional committees of a report on countries, companies, and other entities that provide military or intelligence aid to the SPDC. Both of the reports mentioned in the letter were due no later than 180 days after the enactment of the law, and annually thereafter. Also, following the release of Burma's election laws, Senator Mitch McConnell issued a press release stating: The edict issued by Burma's State Peace and Development Council (SPDC) guarantees a profoundly undemocratic election by a profoundly undemocratic regime. If initial reports are accurate, it is no surprise that the law is a complete farce. By prohibiting Aung San Suu Kyi, political prisoners and Buddhist monks from participation, the junta makes clear that the only purpose of the upcoming election is simply to keep the SPDC in power. Congressional disappointment with recent SPDC actions is not limited to the election laws. For example, following the release of Kyaw Zaw Lwin, Senator John Kerry released the following statement: Sadly, while he is coming home, Burma's junta continues to hold its grip on 2,200 political prisoners.... In concert with our friends and partners in East Asia and around the world, the United States must redouble its efforts to persuade the junta to open discussions with the opposition and ethnic groups, to conduct genuinely free and fair elections, and to honor the aspirations of the Burmese people for a peaceful transition to democratic rule. Some in Congress discern other points of progress in Burma over recent months. For example, Senator Jim Webb had a different interpretation of Kyaw Zaw Lwin's release and recent events in Burma, stating "Since my visit to Burma last August, the military government has made several substantive gestures that should be appropriately considered by the U.S. Department of State as opportunities to increase our engagement with Burma." Steps Taken The 111 th Congress has already taken steps to help achieve U.S. goals in Burma. Title III of the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) bans debt restructuring assistance to Burma until the Secretary of the Treasury "determines and notifies the Committees on Appropriations that a democratically elected government has taken office." Section 7071 of the law also requires the Secretary of Treasury to instruct the U.S. representative to all international financial institutions to which the United States is a member to "oppose and vote against the extension by such institution of any loan or financial or technical assistance or any other utilization of funds of the respective bank to and for Burma." In addition, the law provides "no less than $36,500,000" to support democracy and humanitarian programs in Burma, and that any new programs supported by these funds "shall only support activities that are consistent with the principles and goals of the National League for Democracy in Burma." In July 2009, the 111 th Congress passed H.J.Res. 56 ( P.L. 111-42 ) renewing the Burmese Freedom and Democracy Act of 2003 ( P.L. 108-61 ) through 2012 and extending the trade sanctions for another year. Also, the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ) provided $10,000,000 for humanitarian assistance for individuals and communities impacted by Cyclone Nargis. In addition, on May 21, 2009, the Senate passed S.Res. 160 condemning and deploring the "show trial" of Aung San Suu Kyi, calling for the release of all political prisoners, and pressing the SPDC to "establish, with the full and unfettered participation of the National League for Democracy and ethnic minorities, a genuine roadmap for the peaceful transition to civilian, democratic rule." On May 7, 2010, the Senate passed by unanimous consent S.Res. 480 that, among other things, called upon "the Secretary of State to assess the effectiveness of the policy of engagement with the military regime in Burma in furthering United States interests." Pending Resolutions Three other resolutions have been introduced in the 111 th Congress pertaining to Burma, and are awaiting possible action. H.Res. 898 , introduced on November 6, 2009, extends the list of actions to be taken to promote democracy in Burma, adding such items as full implementation of the JADE Act of 2008, a U.N. resolution imposing multilateral sanctions and complete arms embargo of Burma, and a call for the Administration to support a U.N. Security Council Commission of Inquiry to investigate the Burmese regime's war crimes, crimes against humanity, and system of impunity. S.Res. 311 , introduced on November 13, 2009, calls for the Administration to initiate negotiations for a free trade agreement with ASEAN, but stipulates any pending bilateral issues between the United States and Burma, including economic sanctions, investment prohibition, travel restrictions or otherwise, should not deter the United States from engaging with other ASEAN nations regarding a potential free trade agreement, nor should the United States encourage trade with Burma, absent significant reforms within that country. S.J.Res. 29 was introduced on May 5, 2010. It would renew the import restrictions contained in the Burmese Freedom and Democracy Act of 2003. According to Senator McConnell, one of the resolution's co-sponsors, renewing the sanctions was timely and important because, over the past year, the SPDC had given no clear indication that it intends to reform, but instead is "to stand up a new sham constitution and to legitimize itself in the eyes of the world through a sham election." Possible Additional Congressional Actions on Burma If the 111 th Congress were to take additional actions regarding Burma, there are several options available. However, prior to taking any action, Members would have to decide whether applying more or less pressure on the SPDC is more likely to advance the achievement of U.S. goals in Burma. As indicated, there are differences of opinion in the 111 th Congress on the current situation in Burma, and whether circumstances warrant the application of more or less pressure on the ruling military junta. There are also differing opinions in the international community on whether recent events indicate progress or regress in Burma's transition to democratic civilian rule. The views of other nations may be an important factor in the effectiveness of possible additional actions taken by Congress. One possible action would be to hold hearings on the situation in Burma. The House Committee on Foreign Affairs held a hearing on Burma on October 21, 2009; the Senate Committee on Foreign Relations held a hearing on Burma on September 30, 2009. New hearings on topics such as the upcoming Burmese elections may be useful in deciding if additional congressional action is warranted. A second possible course of action would be to press the Obama Administration to fully enforce the provisions of the Burmese Freedom and Democracy Act of 2003 and the Tom Lantos Block Burmese JADE Act of 2008. In addition to the four provisions mentioned in the Senators' March 2010 letter to President Obama, there are other provisions in the two laws that have not been fully implemented. For example, section 6 of the Burmese Freedom and Democracy Act of 2003 requires the Secretary of State to post on the Department of State's website the names of past and present SPDC and USDA leaders whose entry into the United States is banned under the law. Similarly, section 5(d) of the Tom Lantos Block Burmese JADE Act of 2008 requires the President to submit to the "appropriate congressional committees" a list of sanctioned Burmese officials as defined by the provisions of the act. As of the writing of this report, neither list has been supplied as required. A third possible course of action would be to enact new sanctions on Burma, if the 111 th Congress determines that increasing pressure on the SPDC is warranted. There are a wide range of options for additional sanctions, some of which have been mentioned or alluded to in existing legislation. Some examples are a ban on the import of products containing timber or lumber from Burma; prohibiting "United States persons" from entering into economic-financial transactions, paying taxes, or performing "any contract" with Burmese government institutions or individuals under U.S. sanctions; requiring all U.S. entities to divest their investments and cease operations in Burma; and restricting the provision of transactional services to foreign financial institutions that hold assets on behalf of senior Burmese officials. A fourth possible course of action, if the 111 th Congress determines that decreasing pressure on the SPDC is warranted, would be to remove or reduce some of the existing sanctions on Burma. It should be noted that the laws governing many of the existing sanctions contain provisions allowing for a presidential waiver if the President determines that doing so is in national interest of the United States. Appendix. Map of Burma (Myanmar) The United States officially refers to the country as Burma, and recognizes Rangoon as its capital. The SPDC officially renamed their country, "the Union of Myanmar," in 1989 and relocated the capital to Nay Pyi Taw in 2005.

On an undisclosed date in 2010, Burma plans to hold its first parliamentary elections in 20 years. The elections are to be held under a new constitution, supposedly approved in a national referendum held in 2008 in the immediate aftermath of the widespread destruction caused by Cyclone Nargis. The official results of the constitutional referendum are widely seen as fraudulent, but despite significant domestic and international opposition, Burma's ruling military junta—the State Peace and Development Council (SPDC)—has insisted on conducting the polls as part of what it calls a path to "disciplined democracy." On March 9, 2010, the SPDC released five new laws for the pending parliamentary elections. Three of the laws are about the three main types of parliaments stipulated in the constitution—the two houses of the national parliament (Pyidaungsu Hluttaw) and the Regional or State parliaments. The fourth law—the Political Parties Registration Law—sets conditions for the registration and operation of political parties in Burma; the fifth law establishes a Union Election Commission to supervise the parliamentary elections and political parties. The new laws were quickly subjected to sharp criticism, both domestically and overseas. In particular, the law on political parties was widely denounced for placing unreasonable restrictions on the participation of many opposition political leaders and Burma's Buddhist monks and nuns. U.S. Assistant Secretary of State Philip J. Crowley said the Political Parties Registration Law "makes a mockery of the democratic process and ensures that the upcoming elections will be devoid of credibility." There have also been objections to the terms of the Union Election Commission Law and the 17 people subsequently appointed to the commission by the SPDC. In late September 2009, the Obama Administration adopted a new policy on Burma. The policy keeps most of the elements of the Burma policies of the last two administrations in place, but adds a willingness to engage in direct dialogue with the SPDC on how to promote democracy and human rights in Burma, and greater cooperation on international security issues, such as counternarcotics efforts and nuclear nonproliferation. The Obama Administration accepts that little progress has been made during the seven months that the new policy has been in effect, but has indicated that it will remain in place for now. There are signs of concern among Members of Congress about the dearth of progress in Burma towards democracy and greater respect for human rights. Nine Senators sent a letter to President Obama on March 26, 2010, urging the imposition of additional economic sanctions on the SPDC in light of "a set of profoundly troubling election laws." However, another Senator perceives "several substantive gestures" on the part of the SPDC, and suggests it is time to increase engagement with the Burmese government. The 111th Congress has already taken action with respect to Burma, such as renewing the Burmese Freedom and Democracy Act of 2003. If it were to determine that additional actions should be taken, there are several alternatives available. Among those alternatives are holding hearings or seminars on the political situation in Burma, pushing the Obama Administration to implement existing sanctions on Burma more vigorously, and adding or removing existing sanctions. This report will be updated as circumstances warrant.

Introduction Broad efforts are underway to expand the use of renewable energy technologies to increase domestic energy production, improve U.S. energy security, create new industries and new jobs, and reduce greenhouse gas emissions. According to the U.S. Energy Information Administration, renewable energy technologies provided 3.6% of U.S. electricity generation in 2009. Of the 144 million megawatt hours of electricity generated from renewable sources, wind provided 51.4%, wood and wood-derived fuels provided 24.8%, other forms of biomass provided 12.8%, geothermal accounted for 10.4%, and solar thermal/photovoltaic provided 0.6%. Although U.S. renewable electricity markets have grown in size and scope in recent years, the cost of renewable electricity generation continues to be typically higher than conventional generation sources (e.g., coal, natural gas, existing nuclear). Federal tax policy has served to reduce this cost gap by providing various tax incentives for renewable energy. Tax incentives, historically, have promoted investment in renewable electricity generation by rewarding either electricity production or investment in renewable generation capacity. In recent years, the size of tax benefits available for renewable energy investors has sometimes exceeded the investor's tax liability. Investors may carry unused tax credits forward to offset future tax liability, or, alternatively, partner with a third-party tax-equity investor capable of providing cash in exchange for tax benefits. In February of 2009, Congress passed new legislation that provides renewable energy projects with an alternative option for realizing the value of federal tax benefits: a grant in lieu of tax credits (Section 1603 of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 )). Commonly known as "Section 1603," this program affords the project the opportunity to receive a one-time cash grant instead of tax credits, thereby reducing the need for third-party tax-equity investors. One key motivation for creating the Section 1603 grant program was the perceived lack of tax equity capacity available for renewable electricity generation projects following the financial crisis in 2007. The Section 1603 grant program was initially enacted on a temporary basis, and was scheduled to expire at the end of 2010. Congress extended the program for one year, through 2011, in the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). This report provides a comprehensive overview of the Section 1603 grant program. The first part of this report focuses on how different renewable energy market sectors have responded since the grant option was made available. Understanding how different renewable energy markets have responded to the grant option may provide some insight regarding the potential implications for the renewable energy market of letting the Section 1603 grant program expire as scheduled at the end of 2011. The Section 1603 grant program was established in response to weak tax-equity markets. This report provides a detailed overview of tax-equity markets during the recent financial crisis, as well as information on the current status of tax-equity markets. Since weak tax-equity markets were a motivating factor in adopting the Section 1603 grant program in 2009, understanding trends in tax-equity markets may help Congress evaluate whether the policy motivations that led to the adoption of the Section 1603 grant program under ARRA remain relevant. An economic perspective may also prove useful in evaluating a possible extension of the Section 1603 grant program. Oftentimes, subsidies that encourage the use of renewable energy resources are not the most economically efficient means of achieving a policy objective. Compared to direct tax incentives, however, the Section 1603 grant program may be an improvement in terms of economic efficiency. The final sections of this report provide various policy options related to the Section 1603 grant program. As noted above, absent congressional action, the Section 1603 grant program is scheduled to expire at the end of 2011. One option is to further extend the Section 1603 grant program. As another option, existing tax incentives could be modified to provide some of the added benefits associated with the Section 1603 grant program. Background: Section 1603 Grants in Lieu of Tax Credits Section 1603 of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) provides grants for investments in certain energy production property in lieu of tax credits available under Sections 45 and 48 of the Internal Revenue Code (IRC). Table 1 summarizes the available incentives by eligible technologies. Prior to ARRA, investments in renewable energy technologies were generally eligible for the production tax credit (PTC (IRC §45)) or investment tax credit (ITC (IRC §48)), depending on technology type. ARRA modified the incentives available for renewable energy investments in two ways: (1) PTC-eligible property was given the option to claim the ITC at the ITC rate, and (2) all eligible energy properties were allowed to elect to receive a one-time cash grant in lieu of tax credits. The Section 1603 grant program provides payments equal to 10% or 30% of the eligible cost basis for specified energy projects. Under ARRA, projects placed in service during the 2009 or 2010 tax years, or those that met certain start-of-construction requirements before the end of 2010, were eligible for the grant option. The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) extended the placed-in-service and construction start dates through the end of 2011. Qualifying projects placed in service, as well as those that meet start-of-construction requirements during 2011, and that are placed in service by the deadline noted in Table 1 , may elect to receive a Section 1603 grant. Renewable Energy Tax Incentives: Pre-2009 As was noted above, before 2009, the ITC and PTC were the predominant tax incentives for renewable energy. The technology receiving the most federal subsidization under the ITC is solar (PV, solar thermal, etc.) electricity, where qualified investments are eligible for a 30% tax credit. Table 1 summarizes the ITC rates available for other technologies as well as the ITC placed-in-service deadlines. The PTC provides a per kilowatt-hour tax credit for renewable energy produced at qualified facilities. Generally, the PTC is available for 10 years following an eligible facility's being placed-in-service. Table 1 summarizes the current PTC rates for various eligible technologies as well as the placed-in-service deadlines. The PTC has been the primary incentive for wind since its adoption in 1992. Since 1992, the PTC has been allowed to lapse a number of times. Historically, these lapses have been followed by a short-term extension of the incentive, allowing the program to again lapse in a few years. Annual installations in wind capacity are much lower in years where the PTC has been allowed to lapse, suggesting that the credit plays an important role in wind deployment. Investments in renewable energy also benefit from favorable depreciation schedules. Under the Modified Accelerated Cost Recovery System (MACRS), a number of renewable energy technologies are classified as five-year property, including solar and wind. Generally, taxpayers are required to capitalize investments in capital assets, and deduct through depreciation allowances the cost of the investment over the useful life of the property. Shorter depreciation schedules, which allow investments to be depreciated quickly, are favored by investors as they allow costs to be recovered more quickly. Bonus depreciation has also been used to encourage investment in renewables. The Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ) provided a 50% first-year bonus depreciation for eligible renewable energy investments. This provision was extended through 2009 under ARRA. Bonus depreciation for renewables expired at the beginning of 2010, before being retroactively extended through the end of the year under the Small Business Jobs Act of 2010 ( P.L. 111-240 ). The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) further expanded and extended bonus depreciation provisions. Under P.L. 111-312 , qualifying renewable energy property placed in service between September 8, 2010, and January 1, 2012, qualifies for 100% bonus depreciation (i.e., the property may be expensed). Qualified property placed in service in 2012 qualifies for 50% bonus depreciation. Creation of Section 1603 was motivated by challenging economic conditions and reduced availability of tax equity, which is the primary vehicle for renewable energy projects to monetize tax incentives. Section 1603 grants allow renewable energy project developers to immediately recover up to 30% of eligible project capital cost expenditures. This serves to, in some cases, reduce the financial risk for projects and provide an alternative tax credit monetization pathway. Renewable Energy Market Response to Section 1603 Participation in the Section 1603 grant program includes several renewable energy technologies. As of October 24, 2011, grant awards had been made to 3,801 recipients with a total grant award value of $9.2 billion. Recipients that installed solar electricity projects have received the largest number of grant awards, while wind projects have captured most of the grant dollars (see Figure 1 ). "Other" projects awarded grants include all other ITC- and PTC-eligible property. Market response and impact, along with motivations to apply for a Section 1603 cash grant, differ among the technology types. The following analysis evaluates these parameters for the wind, solar, and other technologies that have elected a cash grant in lieu of tax credits. Wind Wind projects have received, by far, the most value (in terms of dollars) from the Section 1603 grant program. Approximately $7.2 billion in grants have been awarded to 205 recipients. In 2009, the first year the cash grant was in effect, a record 10 Gigawatts (GW) of wind capacity was installed in the United States (see Figure 2 ). However, it is questionable what portion of 2009 installations were enabled by the 1603 cash grant. Since large wind projects can take 9 to 12 months or more to complete, many projects that became operational in the first three quarters of 2009 would have likely been completed without the Section 1603 cash grant. Despite these difficulties, researchers have attempted to quantify the impact of the Section 1603 grant program on the industry. According to one estimate, as much as 2.4 GW of 2009 wind installations were directly enabled by the Section 1603 cash grant program. Wind capacity additions in 2010 were approximately 5 GW, roughly half the 2009 level. Wind installations in the first three quarters of 2011 totaled 3.7 GW, nearly double the amount during the same period in 2010. Furthermore, many industry projections estimate that CY2011 large wind installations will be approximately 7 GW, a roughly 38% increase from 2010 levels. Given the volatility experienced in the wind industry since cash grant incentives were made available, critics of the Section 1603 cash grant may argue that the program had marginal positive impacts on the wind industry. Interpreting such industry statistics should be done cautiously, however, since the Section 1603 cash grant is only one of several factors that influence annual wind capacity additions. Other factors may include: General economic conditions (electricity demand): Electricity demand is directly correlated to economic conditions, and new generation requirements decrease during periods of economic slow down. AWEA attributes the 2010 wind installation downturn, in part, to "sluggishness in the economy." According to EIA data, in the first eight months of 2010 U.S. electricity demand had rebounded to 2008 levels following a drop of approximately 4.7% in 2009. An assessment of the potential lag effect of energy demand reductions, and therefore renewable energy procurement, is beyond the scope of this report. Transmission access and availability: Access to transmission capacity is a critical parameter for wholesale energy projects, as it provides a mechanism for matching the producer with consumers. Many high-quality wind sites in the upper midwestern United States are limited by the availability of transmission infrastructure to deliver wind-derived energy to demand centers. Natural gas prices: Purchasers of wholesale power commonly use the cost of natural gas electricity generation as a benchmark for procuring renewable electricity. For example, the California Public Utilities Commission (CPUC) has used a "Market Price Referent," or MPR, as a benchmark for assessing above-market costs of renewable electricity generation, and the MPR "can serve to contain the total cost" of renewable energy procurement programs. California's MPR is based on a 500MW Combined Cycle Gas Turbine electric generating facility and includes natural gas price projections. With natural gas prices at relatively low levels, the proxy for renewable energy procurement is low as well, and this condition makes it difficult for project developers to establish Power Purchase Agreements (PPAs) with utility customers that result in an economically viable project. Renewable energy projects in Virginia, Kentucky, and other states reportedly have been rejected due to lower fossil energy generation costs. Policy clarity: The American Recovery and Reinvestment Act (ARRA) became law in February 2009 and Treasury guidance for the program was released in July of 2009. Industry participants might argue that financing decisions and commitments were at a near standstill during this period since the financial community was not able to clearly understand the impacts of the Section 1603 cash grant program until details of the program were available. This time lag between policy announcement and policy definition could be a possible contributor to the decline of wind installations in 2010. A complete analysis of the Section 1603 grant program requires evaluating the value of pre-2009 tax incentives relative to the benefits of receiving a Section 1603 grant. As discussed above, prior to 2009, the primary tax incentives for investments in wind energy were the PTC and accelerated depreciation. With a PTC, projects with higher capacity factors (percent of generating time per year) would receive the most value from PTC incentives. Furthermore, accelerated depreciation allows a project to maximize depreciation losses in the first five years of operation, and this serves to reduce taxable income, and therefore improve project cash flow, during this five-year time period. Wind and other renewable energy projects, especially in the early years of operation, often do not have taxable income sufficient to maximize the value of the PTC and accelerated depreciation deductions. Therefore some wind projects, prior to Section 1603 availability, would essentially monetize the PTC and depreciation tax benefits, at a discount, through a tax equity investor (a definition and description of tax equity is provided in this report under the section heading " Section 1603 and the Renewable Energy Tax Equity Market ") and use the cash proceeds to cover capital and installation costs. With the availability of Section 1603 cash grants, wind projects can now choose between the PTC, ITC, or cash grant. PTC values are based on the total amount of electrical generation (kilowatt hours) and cash grant values are based on the total amount of eligible installed costs. In order to assess the relative value, to a wind project, of both financial incentives, a present value model was created to provide comparative estimates for each incentive type. This model provides an illustration of the potential benefits associated with a Section 1603 grant for a hypothetical project. For a specific project, a cash flow model would be the ideal method for estimating these incentive values. However, since all projects have unique financial parameters, this present value methodology was used to provide reasonable and relative numbers for a comparative assessment. Absolute numbers for incentive values will vary based on specific project assumptions. The following table illustrates a hypothetical 50MW wind project, finance assumptions, and calculated values for PTC, ITC, and accelerated depreciation (i.e., MACRS) incentives. Based on the analysis above, the total value of federal tax incentives (PTC/ITC plus accelerated depreciation), after being discounted based on an assumed tax equity investor required return, is equal to 29% to 32% of the project's total capital cost under both incentive structures. Literature sources cite examples of projects being subsidized by as much as 65% of total project capital costs, although details supporting these estimates are not provided in the references. It is important to understand that the above example is for a specific wind project with pre-defined parameters, is provided as a representative example of calculating federal incentive values, and results will vary based on unique project attributes (i.e., the value of the PTC incentive totally dependent on the project capacity factor). Project capacity factor and installed cost are two primary considerations when evaluating the PTC versus the ITC/Section 1603 cash grant options. Generally, higher capacity factors tend to result in the PTC being the most valuable option, since PTC incentives are based on the amount of annual kilowatt hours produced. However, project capital costs can change the value assessment outcome, since higher capital costs will result in the ITC/Section 1603 cash grant providing more value. The following figure provides a sensitivity analysis for wind projects based on project capacity factor (%) and installed cost ($/watt) metrics. With the availability of Section 1603 cash grants, wind project developers now have a choice when selecting available federal incentives to support project finance requirements. Depending on the capacity factor and installed cost for a particular project, project developers can quickly determine which incentive structure offers the most value based on these two project parameters. Depending on the capital cost and capacity factor for a specific project, the developer will likely choose the incentive approach that yields the most value. However, the choice of incentives is predicated on the availability of tax equity investors to monetize the PTC tax benefits for wind projects. One possible effect of the ITC/1603 cash grant option is the development of "marginal" (i.e., low capacity factor) project sites that would not be economically feasible under a PTC incentive structure. Solar Electricity The solar electricity marketplace (photovoltaic, solar thermal, etc.) has experienced consistent upward trajectory since 2005 (see Figure 5 ) and 2010 was a record year for the industry, with new installed capacity of 887 Megawatts (MW). Calendar year 2011 is expected to be another record year for the industry with forecasts predicting approximately 1,700 MW of new installations. It should be noted, however, that the solar electricity market is currently much smaller than the wind market. While year-on-year growth for solar has been substantial, projected 2011 solar capacity installations, in terms of megawatts, are approximately 24% of 2011 wind installations. Solar electricity projects have received the largest number of Section 1603 cash grant awards. The Department of the Treasury has awarded grants to 3,053 recipients that represent more than 19,000 individual solar projects. The majority of these projects consist of small installations as evidenced by the distribution of grant award values (see Figure 6 ). Compared to the wind marketplace, solar electricity projects are impacted by the Section 1603 cash grant program in different ways. Unlike wind, solar electricity projects do not have a production tax credit (PTC) option to consider when evaluating federal incentive options (solar electricity projects are, however, eligible for MACRS accelerated depreciation). Instead, solar electricity projects can choose either (1) a 30% investment tax credit (ITC), or (2) a Section 1603 cash grant in lieu of the ITC equal to 30% of eligible project capital costs. Option 1 (30% ITC) can sometimes be challenging for solar electricity projects to use, because it requires each project to self-shelter the ITC, using 100% of the tax credit to offset tax liability. Investment tax credits have the most value if they are used to offset income in the current year. If a taxpayer cannot claim the full value of tax credits in the current years, taxpayers are able to carry forward unused tax credits for up to 20 years. The ITC also has a one year carryback period. For many business entities, especially small businesses with limited revenue and income, having a taxable income base large enough to take full advantage of the tax credit and accelerated depreciation benefits can be difficult. Based on the number of small grant awards issued to date, Section 1603 cash grants appear to have reduced this difficulty by encouraging thousands of small solar electricity project installations. Prior to the availability of Section 1603 cash grants, solar electricity projects that did not have an adequate tax liability to effectively use available tax credits could make arrangements for ITC and MACRS accelerated depreciation monetization with a tax equity investor. Solar electricity projects could, in effect, monetize their ITC and depreciation incentives through a tax equity investor (a definition and description of tax equity is provided in this report under the section heading " Section 1603 and the Renewable Energy Tax Equity Market ") at a discount and receive cash proceeds towards project capital and installation costs. The ability of individual small solar projects to monetize tax incentives is questionable, though, as the amount of due diligence required for a tax equity investor to structure a transaction may negate the tax benefits offered by small projects. With the availability of the Section 1603 cash grant, solar electricity projects can choose (1) the conventional ITC option by either monetizing the ITC and accelerated deprecation or self-sheltering the tax benefits, or (2) projects can elect to receive a 30% Section 1603 cash grant while still benefitting from accelerated depreciation (MACRS depreciation deductions can be either self-absorbed or third party monetized). It is also important to point out that Section 1603 cash grants are typically received within 60 days of filing an application. While the "value" of the 30% ITC and the Section 1603 cash grant, in theory, should be equal, in practice the cash grant will likely be perceived as being more valuable than the ITC for the following reasons: No transaction costs: Realization of investment tax credits may require the project to monetize incentives at a discount to a tax equity investor and also demands personnel time and professional fees to complete the investment transaction. Section 1603 cash grants only require an application to be filed with the U.S. Department of the Treasury with payments typically received within 60 days. No competition for tax equity: A limited number of tax equity investors are available in the marketplace and projects that decide to monetize the ITC must compete with other projects for tax equity investment deals. Time value of money: Section 1603 cash grants are paid to projects within 60 days after application submission, while the ITC is claimed when tax returns are filed. For projects unable to fully claim tax credits in the first year, tax credits are carried forward to offset future tax liability. While the timing difference for the two options may not differ dramatically, the cash grant does provide a higher degree of certainty, with regards to cash flow, and flexibility to the project owner. Taxable income risk: Projects that elect the ITC have risk exposure associated with the adequacy of taxable income to absorb the full value of ITC incentives. A cash grant eliminates this risk. An emerging segment of the U.S. solar photovoltaic (PV) market includes what is known as "Utility Scale" projects, which are typically multi-megawatt, centralized, grid-connected solar generation facilities. Approximately 214 MW-dc (Megawatts – direct current) of operating utility-scale PV projects exist in the U.S. today, while more than 5,362 MW of utility-scale solar projects are under contract (meaning they have a signed power purchase agreement, or PPA, with a third-party to purchase the electricity generated) and an additional 10,000 Megawatts have been announced (see Figure 7 ). While it is unlikely that all contracted and announced projects will be constructed (some of these projects may encounter permitting, transmission access, financing, and other hurdles that could prevent their development), this analysis illustrates the maximum value of cash grants that might be awarded to utility-scale PV projects, assuming that all projects are eligible for, and elect, a Section 1603 cash grant. Additional solar technologies, including CSP (Concentrating Solar Power) and CPV (Concentrating Photovoltaic), may also pursue Section 1603 cash grants. "Other" Technologies A third category of Section 1603 cash grant awards is "other" technologies, which includes all eligible renewable technologies except wind and solar electricity. This category represents approximately 8% of total grant award dollars with an aggregate value of approximately $703 million. The figure below provides a breakdown of grant value received by the "other" technologies (see Figure 8 ). The number of projects that have received awards in the "other technologies" category is relatively small compared to wind and solar electricity. Possible reasons for this may include (1) the financial community has a certain comfort level with wind and solar electricity project deals and may be wrestling with how best to structure project finance for "other" technologies; (2) securing attractive off-take agreements (i.e., Power Purchase Agreements) may be challenging for this set of technologies; (3) technology maturity and performance risks for some of the "other" technologies; (4) for some of the "other" technologies, longer development timelines introduce a degree of financial risk during the development phase of the project; and since tax equity, bridge loans, and project debt are typically committed during the latter stages of development/construction, some projects may not have the financial capability to fund longer development timelines. The "other" technologies grant award category is dominated by four technology types: (1) Geothermal electricity; (2) Biomass (open loop, cellulosic); (3) Solar thermal; and (4) Small wind. Since the "other" technologies represent a relatively small portion of total grant awards, a rigorous assessment of each technology was not conducted in preparation of this report. However, the following discussion provides a condensed analysis of geothermal electricity, biomass, solar thermal, and small wind projects that have received Section 1603 cash grants. Geothermal Electricity Within the "other" technologies category, geothermal electricity projects have received 38% of grant award values representing approximately $261 million. Six geothermal projects have received Section 1603 cash grants to date, although five of these projects account for 99.9% of the $269 million of grant awards. The five largest geothermal electricity projects were installed in three states: Nevada (3), Utah (1), and California (1). Installed nameplate capacity for each of these projects ranges from 18MW to 100MW. Geothermal energy properties qualify for PTC, ITC, or cash grant incentives. Selection of the optimal incentive for geothermal energy property may be similar to the process described above for wind energy property. Biomass (Open-Loop, Cellulosic)35 To date, cellulosic biomass electricity generation projects have received approximately $133 million of Section 1603 cash grant awards. Fifteen cellulosic biomass electricity projects, in eleven different states, have received awards to date. Biomass may include "a large range of feedstocks … from woody and herbaceous biomass to agricultural residues." Much like wind, biomass energy properties have the option of choosing PTC, ITC, or cash grant incentives. Therefore, selection of the best incentive for a particular project may be similar to the process described above for wind energy property. Solar Thermal Solar thermal projects typically capture heat from the sun to generate electricity, heat or cool structures, or heat water (except for swimming pools). As of October 24, 2011, more than 175 grants have been awarded to recipients for solar thermal projects. The total value of grants for thee projects is approximately $130 million. However, roughly 95% ($124 million) of this grant award value is represented by one large solar thermal electricity generation project in Florida. Small Wind Small wind facilities are distinguished from other wind projects based on the size of the turbine used to produce energy. Specifically, small wind projects include turbines with a nameplate capacity that does not exceed 100 kW. Small wind Section 1603 cash grant awards include 81 projects with a total grant award value of $48 million. Most of the small wind project awards received range in value between $30,000 and $100,000. Small wind incentive options, which include either an ITC or a cash grant, are similar to those available to solar electricity energy property. The above discussion about solar electricity may provide some insight into why small wind energy properties are motivated to elect the cash grant option. Section 1603 and the Renewable Energy Tax Equity Market The Section 1603 cash grant program was created as an alternative mechanism for renewable energy projects to realize federal tax incentives. Specifically, the program was created to address the limited availability of tax equity investor funds resulting from challenging U.S. economic conditions. U.S. Department of the Treasury guidance for the Section 1603 program states that "the Section 1603 program will temporarily fill the gap created by the diminished investor demand for tax credits." In order to better understand the mechanics and function of tax equity investors, the following is a brief overview and analysis of the tax equity marketplace to include an assessment of available tax equity to support development of renewable energy projects. Analyzing the tax equity market is challenging since there is no official barometer or tracking mechanism available to assess the history and status of the tax equity marketplace. A survey of multiple industry sources, including statements from tax equity market participants and experts, was used to assess the history and current state of the U.S. renewable energy tax equity market. What is "Tax Equity"? Tax equity is a hybrid (debt/equity) type of investment that has a preferred position, over the project sponsor, for the project cash flows and tax benefits. For a renewable energy project, tax equity is a form of investment that allows the investor to use tax benefits such as losses created by accelerated depreciation and production/investment tax credits that would otherwise not be effectively used by the project itself (taxable income for renewable energy projects is typically not large enough to absorb these tax incentives). In essence, a renewable energy project can monetize (monetization is simply the conversion of future tax benefits into cash), at a discount, its federal tax incentives (PTC, ITC and accelerated depreciation) through an investor for cash that can be used to pay for a portion of project capital and installation costs. Much like traditional equity, "tax equity" takes risk on the project performing and operating as expected, but like debt "tax equity" has preferential financial treatment, with regards to cash flows, and typically requires a moderate rate of return (less than traditional equity; equal to or greater than debt rates). Who are Renewable Energy Tax Equity Investors? To date, most renewable energy tax equity investments have been made by banks, financial companies, investment banks, and insurance companies. These entities either have a taxable base large enough to realize the value of federal tax incentives for renewable energy projects or they aggregate a group of clients/third parties that can capture the incentive value. Specific firms with activity in the tax equity marketplace include JPMorgan, GE Capital, Wells Fargo, Morgan Stanley, and Credit Suisse, among others. These institutions are motivated to provide financing to renewable energy projects, since tax equity investments provide an opportunity to realize an attractive financial return on investment, partially by reducing total tax liabilities as well as through cash generated from the projects. Risks associated with these returns include subpar operational performance of the projects (especially wind, which is incented to maximize electricity production) and an inability of the investment entity to absorb tax incentives over several years (typically 5 to 10 years). Renewable Energy Tax Equity Market Analysis Since there are no official sources or statistics for tax equity, performing a comprehensive analysis of the renewable energy tax equity market, its size, and how it has changed, in light of recent economic conditions, is difficult. However, a disparate set of information and third-party analysis of the tax equity market was aggregated and compared to provide some insight and analysis into this relatively obscure project finance investment type. Table 2 provides a summary of the renewable energy tax equity marketplace based on three different industry sources. Table 2 provides an overview of the renewable energy tax-equity marketplace and changes observed since 2007. Some key takeaways from this tax equity market analysis include: Calendar year 2007 experienced the largest amount of renewable energy tax equity investment. An estimated $6.1 billion of "tax equity" went to various projects with approximately $5 billion dedicated to wind. In 2008, both the total volume of deals and the number of tax equity investors declined. Poor economic conditions are one possible explanation for this decline. Tax equity yields (the financial return to the tax equity investor) have fluctuated between 7.5% and 10% since 2007 and appear to have settled in the 8%-8.5% range. This fluctuation may be related to the volatility in the number of tax equity investors during the period (2007-2010). The number of tax equity investors and the amount of tax equity continued to decline in 2009. While some may argue that this is evidence of inadequate tax equity, others may argue that since Treasury guidance for the Section 1603 program was not released until August of 2009, the financial community was waiting until Treasury guidance was available before making any funding commitments. One additional observation in the above summary chart is that the tax equity market appears to be recovering from its 2009 lows. Data for 2010 renewable energy tax equity market activity indicate that the number of investors is near record levels and transaction dollar volumes are increasing. On the other hand, comments from industry experts in the literature indicate that some tax equity investors currently (2010) in the market "could not have done a production tax credit or investment tax deal in 2007 and could not do one today." In other words, according to this industry expert, the Section 1603 grant program has enabled participation by some tax equity investors that otherwise would not have made investments in renewable energy projects. According to industry expert commentary in the literature, Section 1603 cash grants allow tax equity investors to quickly recover a large portion of their investment, which in turn reduces the risk profile for tax equity investments. This in turn reduces the required tax capacity for the investor and the investment recovery horizon is reduced from 10 years (typical under the traditional tax incentive structure) to 5 years or less (typical for cash grant tax equity deals). In essence, availability of Section 1603 cash grants has changed the nature of tax equity investment deals and has also resulted in the emergence of new financial structures for renewable energy projects. Renewable energy investors now have multiple options to consider when financing projects. One alternative approach for evaluating the tax equity marketplace at a macro level is an assessment of all U.S. corporate profits. Figure 9 shows corporate profits from 2001 to 2009. This figure represents total corporate profits (not profitability for firms that typically make renewable energy investments) and it provides a general sense of profitability trends in the United States since 2001. Since corporate profits are an indicator of taxable income, this macro-level information provides some degree of insight into tax credit capacity trends. This data set illustrates that domestic U.S. corporate profitability has decreased from a recent peak in 2006. With regards to renewable energy tax equity investments, a specific analysis of the profitability of firms that typically make renewable energy tax equity investments may provide a more detailed estimate of tax equity capacity for these types of projects. Nevertheless, this macro view of corporate profitability does provide an indication of profitability, and therefore tax equity capacity, trends in the United States. One could argue that total domestic corporate profits represent a theoretical maximum limit for tax equity investments. However, a more realistic practical limit will likely be much lower since some companies may not have the capability, expertise, or comfort level needed to make investments in renewable energy projects. Impacts of the 1603 Grant Program The following sections provide additional analysis of the impacts of the Section 1603 grant program. The Section 1603 grant program has been popular with the renewable energy sector. Proponents of the program suggest that the added incentive is necessary to continue to promote renewable energy. The Section 1603 grant program, however, results in revenue losses that are greater than the revenue losses associated with the previously available tax incentives. Given the country's large budget deficits, there may be questions of whether further extensions of this program are worth the budgetary cost. Economic Considerations of Section 1603 Implementation From an economic perspective, energy tax provisions can be evaluated by asking two questions. First, does the provision address an energy market failure? Second, if the provision successfully addresses an energy market failure, is the provision the most economically efficient solution. The Section 1603 grants do address a perceived failure in energy markets, specifically use of fossil energy resources, which may have environmental and potentially energy security effects. As is often the case with energy tax incentives, however, the grants may not be the most economically efficient tool available for addressing this market failure. A number of potential market failures may be used to rationalize government intervention in energy markets. For example, in the electricity production market, externalities may lead to a market failure. Electricity produced from fossil energy sources may have unpriced negative environmental consequences not taken into account when energy production and consumption choices are made. If externalities are present, markets fail to establish energy prices equal to the social marginal cost of supply. The result is a system where cost and/or price signals are inaccurate, such that the socially optimal level of output, or allocative efficiency, is not achieved. Economic theory suggests that a tax be imposed on activities associated with external costs, while activities associated with external benefits be subsidized—in order to equate the social and private marginal costs. These taxes and/or subsidies would, theoretically, result in a more efficient allocation of resources. Oftentimes in energy markets, instead of taxing the activity generating the negative externality, policymakers have instead chosen to subsidize the non-polluting alternative. The Section 1603 grants are an example of such a subsidy. Section 1603 grants reduce the price of investment in renewable energy, encouraging development of additional renewable capacity. Subsidizing the alternative activity, rather than taxing the polluting activity directly, is an economically inefficient policy option. Subsidies that encourage the use of alternative or renewable energy sources, as opposed to a direct tax on polluting energy sources, are economically inefficient for two reasons. First, subsidies reduce the average cost of energy. As the average cost of energy falls, the quantity demanded of energy increases, countering energy conservation initiatives. Second, paying for subsidies requires the government to raise funds elsewhere. If these funds are raised through a distortionary tax, such as a tax on labor, such subsidies are economically inefficient. This concern is not unique to the Section 1603 grant program, as it also applies to the use of the PTC and ITC to promote investment in renewable energy. Section 1603 grants may also be economically inefficient to the extent there are inframarginal beneficiaries. Inframarginal beneficiaries are projects that would have been installed without a grant, but receive a grant nonetheless. The other type of recipients, marginal beneficiaries, are projects that were able to be installed only because the grant was available. The grant provides a windfall benefit to inframarginal beneficiaries, without resulting in additional installations of renewable energy generation capacity. The most cost-efficient tax incentives are those that have large marginal impacts. In other words, cost-efficient programs are those that lead to greater participation in the subsidized behavior, without simply rewarding those already engaged in the subsidized behavior. Again, this concern is not unique to the Section 1603 grant, as it applies to energy tax incentives broadly. The analysis presented in the " Wind " section above highlights how the additional incentive provided by the Section 1603 grant option might attract additional installations. As tax equity markets recover, increasing projects' ability to move forward without the grant, the number of inframarginal beneficiaries may increase, thereby decreasing the overall economic efficiency of the program. Compared to tax incentives, the Section 1603 grants, or grants generally, may be a more efficient subsidy. From the perspective of the federal government, the efficiency of a subsidy can be evaluated based on funding flowing toward the subsidized activity relative to federal revenue losses. Since many recipients of renewable energy tax incentives turn to tax-equity markets to monetize such credits at a discount, it may be more efficient for the government to provide grants directly rather than use the tax code as a vehicle for subsidization. Further, this would eliminate the need for tax-equity markets broadly, potentially leveling the playing field for smaller projects with less access to tax equity. Policymakers may be less inclined to use a direct grant approach, relative to a tax incentive or grant tied to a tax incentive option, as direct grants involve government outlays and may be subject to greater budget scrutiny and the annual appropriations process. Cost of Section 1603 to the Federal Government49 There are various ways to evaluate the cost of the Section 1603 grant program. It is important to remember that the Section 1603 grant program is sequentially related to the PTC and ITC. First, PTC eligible taxpayers may elect to receive an ITC instead of the PTC. Next, taxpayers can request a grant from the Treasury in lieu of the ITC. The option to claim the ITC in lieu of the PTC is expected to increase revenue losses associated with the ITC. As ITC-revenue losses increase, revenue losses associated with the PTC may decrease as fewer PTC claims are made in the out years. Further, since the ITC is awarded at the time of investment, while the PTC is awarded for production over a 10-year period, shifting to the ITC will shift revenue losses forward as expenditures are made in the near term. Finally, as renewable energy taxpayers elect to receive a direct payment from the Treasury in lieu of tax credits, the Section 1603 grant program will result in federal outlays. Table 3 presents the Joint Committee on Taxation's estimated revenue effects under ARRA. When the Section 1603 Grant program was established, the JCT estimated that the program would result in 10-year revenue losses of $218 million as taxpayers shifted from the PTC to the ITC, 10-year revenue losses of $158 million as grants were paid out, and $153 million in 10-year revenue gains due to reduced ITC and PTC claims in the future. As is noted below, subsequent JCT revenue scores suggest that the Section 1603 grant program is more expensive than was initially anticipated. The Department of Treasury's estimated outlays associated with Section 1603 are reported in the President's FY2011 and FY2012 Budgets (see Table 4 ). The Treasury estimates that the Section 1603 grant program will result in outlays of $20.0 billion through 2016. As of September 20, 2011, $4.0 billion had been paid out in Section 1603 grants in the current year. Total payouts under the Section 1603 grant program, as of September 20, 2011, were $9.2 billion. Given the structure of the Treasury grant program, it is expected that the actual cost of the program will be less than the outlays under the program. Since the grant is designed to replace tax credits, the cost of the grant will be (at least partially) offset by reduced future tax expenditures. In other words, projects receiving a grant in lieu of the PTC receive funds from the government when the project is placed in service. However, since that project will not be claiming the PTC in the out years, paying the grant up front reduces PTC payouts in the future. Tax expenditure estimates prepared by both the JCT and Treasury, however, do not indicate decreased PTC revenue losses in the future. PTC revenue losses increase over time as the credit is adjusted for inflation and the amount of PTC-eligible production increases. That the PTC does not increase in the out years suggests that the dampening effect of the Section 1603 grant on PTC revenue losses do not exceed these other factors. After having some experience with the Section 1603 grant program, the JCT revised the program's estimated tax expenditures. The one-year extension of the Section 1603 Grant program enacted under P.L. 111-312 is associated with nearly $3 billion in federal revenue loss (see Table 5 ). The cost of the extension alone exceeds the estimated annual revenue losses associated with the PTC and ITC. For FY2010, the tax expenditure estimate for the PTC was $1.4 billion with the ITC costing less than $50 million. Job Creation from Section 1603 The potential for job creation has become a key factor in evaluating renewable energy investment incentives and programs. Despite being an issue of importance, quantifying and measuring green job creation and growth has been difficult. First, the term "green jobs" is not precisely defined. Second, authoritative data compiling jobs in the green economy do not exist. Nonetheless, some estimates have been made regarding the jobs impact of the Section 1603 grant program. While estimates have been made, this is not to say that such estimates have successfully overcome the challenges associated with estimating "green job" creation. Thus, it is recommended that any job creation estimate be viewed with skepticism. Focusing on the wind sector, Bolinger et al. (2010) provide an early estimate of job creation under the Section 1603 grant program. Counting only jobs resulting from projects that would not have been viable without the grant, Bolinger et al. estimate that the Section 1603 grant was responsible for generating 51,600 short-term jobs and 3,860 long-term jobs in the wind industry through March 1, 2010. The American Wind Energy Association (AWEA) claimed that failing to extend the Section 1603 grant for one year, through 2011, would have put 15,000 wind energy jobs in jeopardy. The Solar Energy Industries Association claims that the Section 1603 induced approximately 8,500 jobs in the solar industry through November 22, 2010. Of these, an estimated 2,600 were installation or construction jobs, approximately 5,800 were in solar manufacturing, while approximately 60 jobs were related to operations and maintenance. To put these figures in perspective, it is helpful to compare estimates of job creation due to the Section 1603 grant provision to estimated job creation under ARRA broadly. The Congressional Budget Office (CBO) has released a series of reports analyzing the job creation and economic stimulus effects of ARRA. The most recent report, covering the second quarter of 2011, estimates that ARRA stimulus funds increased the number of people employed by 1.0 to 2.9 million, lowering the unemployment rate by 0.5 to 1.6 percentage points. Potential Policy Options Related to Section 1603 When the Section 1603 grants were enacted under ARRA, the temporary grant program established a construction start deadline of December 31, 2010. The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) provided a one-year extension, allowing projects placed in service during 2011 as well as those under construction by the end of the year to qualify for the grant option. The grant option remains popular with renewables investors, and is likely to remain popular through 2011. Given the financial benefits associated with the grant option, the renewable energy sector is likely to request an extension beyond 2011. In evaluating whether the grant should be further extended, Congress may want to consider a number of factors. First, if Congress decides that subsidizing investment in renewables remains a policy objective, policymakers might evaluate whether the grant is the most economically efficient mechanism for providing subsidization. Second, Congress may want to consider the policy rationale going forward. The grant was initially enacted to address weakness in the tax equity market. As the tax equity market recovers, should the grant program be retained? In practice, the grant program may have increased the use of renewable energy, addressing carbon mitigation and greenhouse-gas reduction policies. A question for Congress is whether these benefits, and the benefits associated with increased investments in renewable energy and potential job creation and economic stimulus, are worth the budgetary cost and overall contribution to federal deficits. There are a number of options available to Congress regarding the Section 1603 grant program. The current construction start deadline of December 31, 2011, means that, without action, the grants effectively expire at the end of the year. Alternatively, Congress may choose to extend the grants. Extending the grant program could involve extending the construction start date, extending the placed-in-service deadline, or other modifications. Finally, there have been a number of benefits associated with the Section 1603 grants in lieu of tax credits that could be achieved through modifications to the existing PTC and ITC. These potential policy options are discussed in greater detail below. Allow the Section 1603 Grant Program to Expire Absent congressional action, projects beginning construction after December 31, 2011, will not be able to receive the Section 1603 grants in lieu of tax credits. These projects will, however, continue to be eligible for the renewable energy PTC or ITC (the expiration date of these incentives varies by technology). The Section 1603 grant in lieu of tax credit program was established to address limited tax-equity availability following the financial crisis. Since the goal of the program was to prevent a decline in installed renewable energy capacity for projects that typically would have relied on tax equity, if tax-equity markets have recovered the grants may no longer serve their initial purpose. While the status of tax-equity markets is one consideration, there are other factors that policymakers may want to consider. It has been noted that the Section 1603 grants in lieu of tax credits have provided a number of benefits to renewable energy projects. Benefits from the grant, such as full AMT exemption, relief from PTC "haircuts," and the exemption from passive credit limitations, in some cases may be worth more than the face value of the grant relative to the PTC (discussed in greater detail below). Further, these benefits are available to all renewable energy projects, not just those who would have sought to establish a tax-equity relationship to monetize tax credits in the absence of the 1603 grant program. These benefits, among others, are discussed in greater detail below in the context of possible modifications to the PTC and ITC that would result in benefits similar to those afforded by the grant. Extend the Section 1603 Grant Program One option for Congress would be to again extend the Section 1603 grant program on a temporary basis. Temporary extensions are attractive for budgetary reasons, and allow for policy flexibility in the future. Temporary extensions, however, may not be attractive from the industry perspective as potential renewable energy project investors and developers face uncertainty with respect to future financing options. Several issues arise in considering an extension of the Section 1603 grant program. One important issue is the placed-in-service deadline for wind to qualify for the PTC. Under current law, PTC-qualifying wind facilities must be placed in service by the end of 2012. For other PTC-eligible technologies, the placed-in-service deadline is the end of 2013 (see Table 1 ). Given the current status of the PTC, extending the Section 1603 grant option beyond 2012 would decouple the PTC placed-in-service deadline from that of the grant. If the PTC is no longer available for wind, any grant that continues to be available would no longer be "in lieu" of tax credits. Historically, PTC expirations have been associated with subsequent declines in installed wind capacity. The importance of long-term incentives for the renewable energy industry was recognized by Congress when enacting ARRA. Under ARRA, the PTC was extended for three years (previous extensions tended to be for one or two years). Thus, as the current Section 1603 grant deadline is only one year shy of the placed-in-service deadline for wind, Congress may wish to consider a more holistic reevaluation of existing tax incentives for renewables, rather than focusing specifically on the Section 1603 grant provision. Modify Existing Tax Incentives to Enhance Benefits Changes to the PTC and ITC Certain features of the Section 1603 grant have provided a number of indirect benefits for renewable energy projects and investors. These indirect benefits are summarized in the shaded text-box below. The first option Congress may want to consider is modifying existing tax incentives to allow for some of the indirect benefits that are afforded by the Section 1603 grant. While a full discussion of the potential effects associated with these policy changes is beyond the scope of this report, some key points are noted below. Generally, there are more limitations on the PTC than there are on ITC-eligible investments or entities claiming the Section 1603 grant in lieu of tax credits. First, PTC projects cannot use the PTC to offset tax liability under the AMT after the first four years of production. Second, the value of the PTC may be reduced for projects receiving grants or other federally subsidized financing. Finally, PTC-eligible projects must be owner-operated, and must sell their electricity to an unrelated party. Relaxing these restrictions associated with the PTC would increase the value of the credit for some taxpayers while increasing the types of taxpayers and entities that would qualify for the PTC. Allow PTC-Property to Claim the ITC A second option would be to allow PTC-eligible properties to continue to claim the ITC. If the grant program construction deadline of December 31, 2011, is not extended, certain facilities, primarily wind, open- and closed-loop biomass, and geothermal energy facilities, will no longer be eligible for the Section 1603 grant in lieu. Wind facilities will still be able to claim the ITC through 2012, and other technologies may elect to claim the ITC through 2013. Allowing these types of projects to receive the ITC in lieu of the PTC beyond the current expiration would overcome some of the PTC limitations discussed above. There are potential drawbacks, however, associated with allowing current PTC-eligible projects to continue to qualify for the ITC. Investment tax incentives for wind and certain other renewable energy facilities were introduced in the late 1970s. The initial renewable ITC was allowed to expire in the 1980s, but was later replaced with a PTC in 1992. Congress elected to adopt a renewable energy PTC rather than an ITC for two reasons. First, by tying tax credits to production, rather than the cost of capital, the tax incentives were designed to reward the most efficient operations. Second, there were concerns that the ITC for wind of the early 1980s served as a tax shelter, with investors installing inoperable renewable energy equipment generating tax credits to offset income produced from other sources. Allowing PTC eligible projects to be eligible for the ITC creates incentives for investment, rather than performance, and may raise issues similar to those addressed by Congress in the 1990s when choosing to adopt a PTC rather than an ITC. Investors in renewable energy projects that are not involved in day-to-day operations are generally considered, for tax purposes, to be passive investors. Tax credits or losses of passive investors can only be used to offset other passive income. Renewable energy projects that generate losses in early years of operations may be less attractive to investors because of these passive credit and passive loss rules. The Section 1603 grant was not subject to passive income rules. Investors were able to receive the benefits from the grant immediately, while tax credits oftentimes are carried forward to a number of years until investors generate enough passive income to claim credits earned through passive investments in full. Exempting renewable energy investors from passive loss rules may increase the attractiveness of renewable energy ventures to investors. Doing so, however, may increase the likelihood that investors would use renewable energy investments as a means to reduce taxable income. Passive loss limitations were adopted in 1986 in an effort to reduce the use of tax shelters. Alternatives to Enhance Access to Tax Equity A third option could be to enhance access to tax-equity markets by adopting policies that would facilitate the trading or selling or tax credits. Selling tax credits or trading credits for equity is common practice for developers of Low Income Housing Tax Credit (LIHTC) eligible projects. Developers eligible for the LIHTC have three options: (1) self-shelter (that is, claim the credits themselves); (2) sell the credit directly to an investor; or (3) sell the credit to a syndicator who combines credits across a number of projects. The ability to sell tax credits also allows tax-exempt entities to benefit from investing in tax-credit eligible projects. There are a number of challenges, however, that would likely arise should Congress consider modifying energy tax credits to function like the LIHTC. First, for example, the size of the market for energy tax credits is smaller than that of the LIHTC. Over the 2010 to 2014 budget window, estimated tax expenditures for low-income housing credits are $28.5 billion. Tax expenditures on the renewable energy PTC and ITC are estimated to total $8.7 billion between 2010 and 2014. Second, the LIHTC is a permanent feature of the tax code, while the PTC and ITC are currently temporary. Thus, given uncertainty surrounding PTC and ITC extensions, syndicators may choose to avoid energy tax credits. Concluding Remarks Given the approaching expiration of the PTC for wind, a proposed extension of the Section 1603 grant program may be evaluated jointly with a PTC modification. At the end of 2011, Congress may be asked to evaluate whether the benefits associated with the Section 1603 grant program outweigh the budgetary costs and take appropriate legislative action. This report highlighted the benefit to the renewable energy sector of the Section 1603 grant program, specifically the additional subsidy provided by the grant relative to previously available tax incentives. The added subsidy may lead to additional investments in renewable energy generation capacity, and help to enhance the national renewable energy portfolio. As also noted in this report, however, the added subsidy has added budgetary costs. Additionally, this report assesses how the renewable energy market responded and performed since the Section 1603 grant program became law in February 2009. As noted in the analysis, motivations and incentives to use the grant program differ among the technologies that qualify for Section 1603 grants. In some cases, some renewable energy sub-sectors have actually experienced market size declines. This observation highlights the complexity of renewable energy markets and indicates that other factors, outside of the Section 1603 cash grant program, can influence market growth. If renewable energy expansion is a key policy objective, Congress may want to consider policies that holistically address these other factors in addition to the availability of tax-based incentives. Furthermore, the Section 1603 grant program was motivated by difficult economic conditions that resulted in less tax equity investment capacity available for renewable energy projects to realize the value of ITC and PTC incentives. As the economy recovers, Congress might want to assess if Section 1603 is needed to serve its original purpose or if the cash grant options provides the renewable energy sector with additional benefits that stimulate continued market growth. Finally, this report analyzed the Section 1603 grant program from an economic perspective. Section 1603 grants may be a more economically efficient mechanism than tax credits for delivering benefits to the renewable energy sector. However, subsidies to the renewable energy sector, whether grants or tax credits, are less economically efficient than pricing polluting energy alternatives. Like other tax incentives for renewable energy, there are inefficiencies associated with the Section 1603 grant program to the extent there are inframarginal beneficiaries. Again, a question before Congress is whether the benefits associated with the Section 1603 grant option are worth the budgetary and potential economic costs.

Congress created the Section 1603 grant program as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). This program, administered by the U.S. Department of the Treasury, provides cash grant incentives for renewable energy projects. Initially, the Section 1603 grant program was scheduled to expire at the end of 2010. A one-year extension was enacted as part of the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) at an estimated cost of $3 billion. Absent congressional action, the Section 1603 grant program will expire at the end of 2011. As of December 6, 2010, grants totaling approximately $5.6 billion had been awarded to 1,495 entities, since Section 1603 became law in February 2009. Wind has received approximately 84% of the grant award value, while solar electric represents approximately 75% of entities that have received grant awards. "Other" technologies (qualifying energy property not represented by wind or solar electricity) have also received grant awards, although the value and number of awards represented by this category is relatively small compared to wind and solar electricity. Prior to the availability of Section 1603 grants, qualifying renewable energy projects were federally supported primarily through the production tax credit (PTC) or investment tax credit (ITC). It has been common industry practice for renewable energy developers to partner with tax-equity investors, where the tax-equity investors offer cash in exchange for project ownership, project cash flows, tax credits, and depreciation benefits. The Section 1603 grant program was motivated by difficult economic conditions and the perceived lack of tax-equity capacity to support renewable energy projects. Analysis of the tax equity marketplace reveals fluctuations in the dollar volume, number of participants, and required rates of return between 2007 and 2010. Market response, since Section 1603 was established, has been mixed. The solar industry had a record year of installations in 2010 (887 Megawatts) and is forecasting another record year in 2011 (approximately 1,700 Megawatts). In 2010, the wind industry experienced a 50% decline compared to 2009 (approximately 5 Gigawatts installed in 2010 compared to 10 Gigwatts installed in 2009). Wind industry forecasts for 2011 are approximately 7,000 Megawatts. It is important to note, however, that many factors influence annual renewable energy installations, the cash grant being just one. If Congress considers additional extensions to or modifications of the Section 1603 grant program, economic and cost factors may also be taken into account. Grants, as opposed to tax credit, may be a more efficient mechanism for delivering public funds to the renewable energy sector. As is the case with most tax or subsidy programs, however, there are concerns that grants may be going to projects that would have moved forward without added federal incentives. Finally, this report presents various policy options Congress may want to consider regarding the Section 1603 grant and related tax credits for renewable energy. The first option presented is to allow the grant program to expire. Even if the grant program were to expire, tax incentives would remain available. A second option is to extend the Section 1603 grant program. An extension of the grant program may be considered alongside an extension of the PTC for wind, which is set to expire at the end of 2012. A modification to the ITC and PTC, which could potentially enhance the benefits associated with the existing tax incentives, is presented as a third option.

Introduction After several years of rapid growth in defense budgets, measures to reduce federal budget deficits have led to projections of a substantial decline in military spending over the next decade. As a result of limits on discretionary spending in the Budget Control Act of 2011 ( P.L. 112-25 ), the Department of Defense (DOD) is considering how to absorb a reduction of about $490 billion in planned programs through FY2021. Senior defense officials have said that such reductions can be managed, but they also warn that that trade-offs among defense programs will require a strategically grounded re-assessment of priorities, and deeper cuts would weaken critical capabilities. A common theme is, unless reductions are managed prudently, budget cuts of the magnitude required, let alone larger cuts, would risk creating a hollow force As former Secretary of Defense Robert Gates put it: I am determined that we not repeat the mistakes of the past, where the budget targets were met mostly by taking a percentage off the top of everything, the simplest and most politically expedient approach both inside the Pentagon and outside of it. That kind of "salami-slicing" approach preserves overhead and maintains force structure on paper, but results in a hollowing-out of the force from a lack of proper training, maintenance and equipment—and manpower. That's what happened in the 1970s—a disastrous period for our military—and to a lesser extent during the late 1990s. Significance for Congress The Administration has invoked the specter of a hollow force to describe what could happen to the U.S. Armed Forces if significant cuts to the defense budget are enacted. While some Members and staff might be familiar with the hollow force and its causes, newer Members and staff might not have a similar understanding of the conditions that led to the hollow force in the past and what actions were taken to improve the situation. Given the Administration's plan to reduce troop strength in response to budgetary limitations and a new strategic direction, Congress—in its oversight, authorization, and appropriations role—will likely encounter Administration officials who claim that the U.S. military faces the prospect of once again becoming a hollow force As Congress will play a major role in shaping the Armed Forces both in terms of size, capabilities, and how it is equipped and trained, a nuanced understanding of how the military once became "hollow" could provide a useful context for current and anticipated legislative action. Background Origins of the Hollow Force Recent warnings about the need to avoid creating a hollow force evoke two periods in history in which the term was commonly used to characterize the state of the U.S. military—post-Vietnam and the 1990s. Matters of concern, though, differed considerably in those periods. At the end of the 1970s, the gravest concerns had to do with the quality of personnel. It was widely perceived that U.S. military conventional warfighting capabilities that had declined as the Vietnam War came to a close did not appear to be recovering adequately, particularly as the military services struggled to adapt to the All-Volunteer Force (AVF) instituted in 1973. Concerns about the quality of the volunteer force in general were compounded by apparent shortfalls in filling military units with personnel properly trained and experienced to handle their duties. In the early 1990s, in the aftermath of the end of the Cold War, U.S. military forces were regarded as highly capable, but the worry was that steep cuts in the budget might rapidly erode hard-won gains in personnel quality and also in the quality of training and operations. Unless pay and benefits, training, equipment, and personnel support efforts were sustained, in this view, short-term military readiness would suffer, forces would lose the edge they had achieved after years of intense effort, and capabilities would be increasingly difficult to restore in the future. By the mid-to-late 1990s, warnings about the hollow force took a couple of different turns. Initially, a persistent complaint was that repeated commitments to contingency operations abroad put a strain on personnel and disrupted preparations for major conflicts. New concerns about recruiting and retention also began to emerge. By the end of the 1990s, the main issue had changed to funding for major weapons programs. With defense spending limited by ongoing battles over budget deficits, DOD elected to protect readiness-related funds for operations, but at the expense of extending a "procurement holiday" in which relatively little money was available to finance new weapons platforms. Investments for future capabilities, in this view, were sacrificed to protect the appearance of high levels of readiness in the short term. The following discussion provides a context for the current discussion of hollow forces by offering more detailed information on budget trends and other matters that relate to hollow forces when it was first discussed with regard to personnel matters in the 1970s, and as it has been redefined periodically since then. Post-Vietnam Most military experts agree that the U.S. military was in poor shape after the end of the Vietnam War. The end of the draft in 1973 initially compounded the problems of the U.S. Armed Forces. The early years of the all-volunteer force witnessed a significant drop in education levels and test scores among recruits, widespread recruitment scandals, and increases in bad discharges and peacetime desertions. One study noted that "because the military of this era was not viewed as an attractive career option, none of the Services had much luck in accessing quality recruits." Service in the U.S. Armed Forces during this period was not particularly attractive for a variety of reasons. Military base pay increased by 61% in nominal terms (not adjusted for inflation) between 1969 and 1973, in the run-up to the AVF. But salaries did not keep up with high levels of inflation during the remainder of the 1970s and fell progressively further and further behind the cost of living. By 1980, base pay had declined by almost 20% in real terms (adjusted for inflation) since the end of FY1972 (see Figure 1 ). "Catch up" pay raises of 11.7% in 1980 and 14.3% in 1981 narrowed the gap, but were not enough to close it, in part because high levels of inflation continued in those years. Post-inflation declines in take-home pay in the 1970s may also have aggravated some widely perceived problems in the structure of pay raises initially provided to implement the AVF. The initial AVF pay raises were disproportionately skewed toward inducing enlistment and keeping junior service members in the military. Non-commissioned officers, with many more years of service, were given smaller increases, and by 1973 made only about 30% more in pay than a newly enlisted member. In part, the structure of pay raises reflected the premise that incentives to remain in the force were very strong for personnel with more than 10 years or so of service time because of the prospect of full retirement benefits after reaching 20 years of service. Beyond that, benefits for military families, such as housing and moving allowances, also lost value, both relative to inflation and in proportion to base pay, making it relatively more difficult for service members with families to make ends meet at a time when a larger share of the force was getting older and having families. By 1979, the salaries of very junior enlisted had dropped so low that the income of an E-4 with a small family was below the U.S. government's official poverty level. Also in 1979, Army commissaries reportedly accepted almost $10 million in food stamps from service members, which drew a great deal of media and political attention. As pay and benefits eroded over the course of the 1970s, a growing shortage of qualified recruits was directly reflected in assessments of unit readiness. By 1979, the Army fell 15,000 short of its recruitment goal and the Navy was short 20,000 petty officers. Soldier quality was also of concern. In 1980, only 50% of those recruited had graduated from high school. Statistics for drug use, crime, and unauthorized absences—while not as high as during the Vietnam War—were considered unacceptable by defense officials. The Army signed up so many poor-quality soldiers during the late 1970s that 40% of new recruits were separated from the Army for disciplinary reasons or unsuitability prior to the completion of their first enlistment. Throughout the force, serious shortages in qualified soldiers became a pervasive problem affecting unit readiness ratings. By 1979, 6 of 10 Army divisions stationed in the United States were assessed as "not combat-ready." In Europe, one of the four U.S. divisions facing the Warsaw Pact, presumably the highest priority units in the Army, was also rated "not combat-ready." The Commander of the U.S. Army in Europe, General Fredrick Kroesen, publically complained that the U.S. Army in Europe had become "obsolescent." Some describe the readiness posture in the Reserve components—which constituted the nation's strategic reserve—as even more dire than the Active component. Reserve forces suffered from the same personnel shortages as did their active duty counterparts, but equipment and training deficiencies were even more pronounced. In terms of equipment, shortages were widespread and the Reserves often had to make do with "hand me down" equipment from the Active component—equipment that was not always in the best of condition. Training time for Reserve forces was also considered inadequate in relation to their assigned wartime missions. While personnel issues were at the heart of concerns about the hollow force, shortages of critical equipment, equipment repair, and availability of repair parts were also recurring apprehensions. Some officials also complained about declines in operational training. It is generally difficult to show a strict correlation between funding for operation and maintenance, however, and commonly used measures of military readiness. By the late 1970s, some important readiness measures showed a considerable decline. The total funding available for operation and maintenance relative to the size of the force, however, did not decline after the Vietnam War, but continued to grow at a very consistent rate above inflation. DOD tracking of Operation and Maintenance funding has varied so much over the years, however, that it is not possible without thoroughly reviewing and reorganizing DOD budget data at a very detailed level to follow trends in consistent categories over time. A lack of funding for weapons procurement was a final factor that added to perceptions of a hollow force in the 1970s, though it was not the main issue in initial assessments of the problem. The generation of weapons employed during the Vietnam War largely reflected technology developed in the 1950s that was widely seen as obsolete by the end of the war. A new generation of weapons was under development, ranging from the M-1 tank and the Apache attack helicopter to the F-15 fighter and Aegis radar-equipped cruisers and destroyers. By the end of the 1970s, many of these new systems had completed development and were ready to be procured, but budgets fell far short of the levels needed to achieve production rates that would replace aging equipment, even for a substantially smaller force. For the military services, the lack of funding for more modern weapons became a steadily more important concern. In 1978, the service chiefs jointly urged a substantial increase in the defense budget, in large part to finance planned weapons programs. Subsequently, the growth in defense spending that began in the late 1970s and that accelerated in the early 1980s was devoted largely to weapons acquisition. As Figure 2 shows, procurement funding from the 1950s through the 1990s varied disproportionately compared to overall budget trends. When budgets increased, procurement funding climbed more steeply. When budgets declined, procurement funding fell more precipitously. A concern for the future expressed by some is that procurement and research, development, test, and evaluation (RDT&E) accounts may once again be reduced disproportionately as funding declines. Other Factors Contributing to the Hollow Force of the 1970s16 The difficulties that the services encountered in managing the transition to the All-Volunteer Force were the initial focus of the hollow force argument, but they were certainly not the sole concern. A 1996 study by the Center for Naval Analysis (CNA) suggests seven possible causes of the post-Vietnam hollow force: low public support for the military; pressure to cut defense spending; difficulties in maintaining an all-volunteer force (i.e., failure to attract and retain high-quality recruits); declining pay; poor morale; delays in fielding modern armaments and equipment; and inadequate attention to maintenance of existing equipment. Budget Priorities as a Contributing Factor The Congressional Budget Office (CBO) suggested that other factors—notably overall priorities within the defense budget—also contributed to the hollow force: Between 1969 and 1975, public disillusionment with the nation's role in Vietnam encouraged rapid reductions in defense spending. Expenditures on national defense, adjusted for inflation, fell by 31 percent. Limited budgets, together with rising oil prices and increased personnel costs resulting from the elimination of the draft, meant that the acquisition of modern weapons by the military, which had been delayed by the Vietnam War, was delayed still further. Thus, when the defense budget did start to rise slowly between 1976 and 1981, DOD emphasized the procurement of new weapon systems. In the eyes of some critics, the decision to emphasize modernization over readiness was an error in judgment that left existing units unable to operate. Yet the underlying problem may have been an imbalance between defense resources and national security commitments that made it impossible for DOD to buy both readiness and modernization. CBO's assessment suggests, aside from the aforementioned social conditions, that leadership decisions on procurement of new weapons versus readiness also played a role in the creation of the hollow force. Budget figures bear this out, at least to a degree. Between FY1976 and FY1981, O&M funding increased by 30% after adjusting for inflation, while procurement plus R&D funding grew by 43%. General Meyer and the "Hollow Army" General Edward C. Meyer, Chief of Staff of the Army (1979-1983), is credited with introducing the term "hollow Army" during a May 29, 1980, House Armed Services Committee hearing. General Meyer noted during this hearing that Right now, as I have said before, we have a hollow Army. Our forward-deployed forces are at full strength in Europe, in Panama, and in Korea. Our tactical forces in the United States are some 17,000 under strength, Therefore, anywhere you go in the United States, except for the 82d Airborne Division, which is also filled up, you will find companies and platoons which have been zeroed out. While many units were indeed "zeroed out," it should be noted that defense officials also had the option to reduce the number of Army divisions and keep them at 100% strength. In this regard, some suggest that DOD and the Army itself also bear a degree of culpability in creating General Meyer's hollow divisions. One explanation as to why the Army chose to maintain its divisions and associated headquarters and supporting units but reduce their strength was that the Army had a strategic requirement to provide adequate numbers of units to address potential contingencies. The Army maintained two Corps and a number of divisions in Europe to counter the Warsaw Pact, forces in Korea to counter potential North Korean aggression, and forces in Panama to ensure the sovereignty of the Panama Canal. It also was required to address potential Arab-Israeli and Iranian security challenges. War plans of this era also reinforced the need for specific numbers and types of formations, as they tended to focus more on unit-to-unit ratios to achieve victory as opposed to apportioning capabilities of the services against potential threat scenarios. According to CBO, "soon after his [General Meyer's] testimony, the term hollow force was being widely used to characterize not only the shortages of experienced personnel but also the shortages of training, weapons, and equipment that undermined military readiness during the mid and late 1970s." Subsequently, a number of anecdotal press accounts from 1980 served to focus greater attention on the issue of hollow forces. In one case, the commander of the USS Canisteo , a fleet oiler, was unable to deploy because of a lack of experienced personnel in the engine room, and a U.S. Air Force fighter wing failed a mobilization test because only 23 of the 66 assigned F-15 fighters were mission capable. Fixing the Hollow Force in the 1980s Four basic factors have been credited with the reversal of the Army's decline in the 1980s: congressional support for higher military spending, training reorganization, doctrinal emphasis, and improved personnel policies. In 1980 and 1981, Congress began what was described as a "rapid infusion of monies" into the services. As noted earlier, servicemember salaries were increased by 25% between 1981 and 1982, which, even if eroded by inflation, gave personnel a strong reason to think that things were changing. Other, more targeted improvements in compensation—such as the Montgomery G.I. Bill ( P.L. 98-525 )—reinforced the message, as did overall changes in the quality of military combat planning, training, and weapons investments. Research had shown, for example, that money for college was the primary reason for enlisting among the most high-scoring soldiers on Armed Forces intelligence tests. In the 1980s, Congress reinstated the GI Bill and initiated college funds, which helped close the personnel quality gap. Army Major General Maxwell Thurman was given the task of reforming Army recruiting practices and how the Army trained. During this period, the Army developed and institutionalized Air Land Battle Doctrine, which helped to focus training and the procurement of new weapons systems and, as a by-product, led to a more efficient use of resources. Finally, the Army focused on enhancing unit cohesion, and the practice of stripping personnel from some units to fill out deploying units was diminished. The other services embarked on similar efforts to improve personnel quality, training, and readiness during the decade of the 1980s. Fully assessing the results of all of these initiatives is far beyond the scope of this short report—effects would not likely be felt for several years, readiness measures are often problematic, and the value of large investments in new weapons programs and other equipment is often difficult to assess in any case. To the extent concerns about the hollow force at the end of the 1970s had to do with the quality of enlistments, however, revisions in military pay and benefits appear to have entailed dramatic improvements over a very short period of time. Table 1 , drawn from a May 1984 DOD report that compiled measures of improvements in U.S. warfighting capabilities between 1980 and 1984, shows substantial progress in recruit quality as measured by performance on the Armed Forces Qualification Test, which measures cognitive ability. The percentage of enlisted recruits in the top two AFQT categories improved from below the national average to considerably above it. Perhaps most importantly, the proportion of recruits in the lowest permissible qualification category, Category IV, declined from 31% in FY1980 to 8% by FY1983. The Hollow Force Debates of the 1990s The rehabilitated U.S. military demonstrated that it was no longer a hollow force by virtue of its performance in the 1991 Gulf War. But even as U.S. forces were beginning to deploy to the Persian Gulf in the fall of 1990, Congress approved a new budget agreement that reflected plans for a substantial decline in defense spending over the next three to five years, continuing cuts that began in the FY1986 budget. Meanwhile, General Colin Powell, as Chairman of the Joint Chiefs, was beginning to lay out the premises of the "Base Force," a revised defense plan that entailed substantial cuts in the size of the force based largely on the premise that the Soviet threat had diminished and that strategic warning of a renewal of the threat would extend for some years. The disintegration of the Soviet Union in 1991 and the desire for a "peace dividend" subsequently led to still further budget reductions. In 1993, the incoming Clinton Administration announced plans to trim $60 billion over the five years through FY1997 from the outgoing Administration's defense plan, with most of the savings due to a reduction in active duty end-strength from about 1.6 million planned for the Base Force to about 1.4 million. DOD's 1993 "Bottom-Up Review" provided a new basis for force planning with a requirement that forces be prepared to prevail in two overlapping "Major Regional Contingencies," each on the model of Operation Desert Storm. Critics of the Bottom-Up Review argued both that planned force levels were not adequate to carry out the strategy and that projected budgets were not sufficient to sustain planned force levels. A central theme in the budget debate—articulated very forcefully by Senator McCain, among others—was that earlier budget cuts had already led to a decline in military readiness and that additional reductions would resurrect the hollow force of the 1970s. In May 1993, Senator McCain asked the service chiefs to respond to a series of questions about the readiness status of their services, and he summarized his analysis of their responses in a series of speeches on the Senate floor beginning on June 30. The speeches, along with the service chief's responses to Senator McCain, were later collected in a report entitled Going Hollow: The Warnings of Our Chiefs of Staff . In his assessment of the chiefs' views, Senator McCain did not argue that readiness had yet declined to levels of the late 1970s, and he found no one factor that was clearly undermining readiness across all of the services. Rather, he cited concerns about trends in several areas, including, among other matters, preserving a high operational tempo at the expense of equipment overhauls and depot maintenance, keeping personnel deployed for excessive periods, and strains on major combat equipment; increasing depot maintenance backlogs; underfunding of personnel pay and benefits, inadequate end-strength, and excessive turbulence in personnel deployments; underfunding of weapons modernization, including upgrades of current systems and purchases of munitions; and funding peacekeeping and humanitarian operations at the expense of readiness. Senator McCain also emphasized the importance of measuring readiness in terms of real-world requirements. By some standards, he pointed out, even the performance of U.S. forces in the Persian Gulf War raised concerns, particularly about the ability to respond rapidly enough to an unanticipated challenge— Time and again, we have learned that our readiness measures are unrealistic or fail to anticipate real-world demands of … The Gulf War, for example, demonstrated all of these problems. In spite of the highest readiness funding in our history, we were not ready to fight when we deployed. We took months to adjust the organization, training, and support structures of our active combat forces, we experienced major problems with some aspects of the call up and training of our reserves, and we literally had to make thousands of modifications to our combat equipment, munitions, support equipment, and battle management and communications systems. Without the months Saddam Hussein gave us, these readiness problems might well have cost us thousands of lives. Few future opponents are likely to give us the most precious gift of modern war: time. Other senior Members of Congress echoed some of Senator McCain's concerns. As early as March 1993, Representative John Murtha, chairman of the House Defense Appropriations Subcommittee, warned that the cost of overseas operations would weaken the force. "If President Clinton does not back off the nation's costly overseas deployments," he said, "and find some hardware program to cut, the U.S. military will become a 'hollow force' beginning in FY 95." Members of the House Armed Services Committee also became concerned that the Army was using funds needed to sustain readiness instead to finance deployments, and the committee established two panels to further investigate the hollow force issue. In response to concerns about readiness, in June 1993, then-Secretary of Defense Les Aspin established a readiness task force, chaired by General Meyer, to review the readiness status of forces and to recommend measures to help sustain readiness. The task force, operating under the auspices of the Defense Science Board, issued an interim report in February 1994 and a final report in June. The task force found that the current readiness of the force was "acceptable in most measurable areas," but it also proposed measures to avoid what it characterized as "legitimate concerns" that "continuing force reductions, strategy changes, and budget reductions could cause serious readiness degradations." Among the measures the task force recommended were "Measurement systems to improve tracking of the effect of funding allocations on readiness." The task force noted, for example, that unit commanders had the flexibility to allocate operation and maintenance funds between expenditures that might be less important for short-term readiness, such as facility maintenance, and expenditures more directly related to readiness, such as training days. The panel urged more detailed and timely tracking of directly readiness-related funding. Development of a system for funding contingency operations that "does not divert, delay or disrupt the flow of funds needed to maintain readiness of forces not engaged in such operations." "Increased emphasis on Joint and Combined readiness and requirements, including development of joint mission essential task lists." Through the rest of the Clinton Administration, budget trends—and particularly annual adjustments in budgets—reflected a considerable degree of sensitivity about readiness. Early in the Administration, budget projections showed operation and maintenance accounts leveling off, after adjusting for inflation, in the later years of Future Years Defense Plans (FYDPs). Because operating costs have perennially grown at a fairly rapid pace above inflation, however, under a flat budget, funding would fall increasingly short of levels required to sustain readiness. A case can also be made that projections of O&M funding inherited from the previous Administration may have fallen short of levels needed to meet readiness goals, which compounded potential insufficiencies. DOD's response was to add funds to O&M accounts as each annual budget was adjusted before being sent to Congress. The plus ups in O&M accounts, in turn, came mainly at the expense of weapons procurement, and the subsequent cuts in planned procurement amounts soon became a major issue. For several years, DOD set a target of $60 billion a year for procurement, which was pushed further and further into the future—procurement funding was frozen at just under $45 billion in each year from FY1994 to FY1998. In effect, growing O&M costs led DOD to extend what was characterized as a "procurement holiday" year by year through most of the decade. Through the 1990s, along with the "procurement holiday," the effect of repeated deployments of forces in military operations abroad became a focus of concerns about readiness. The U.S. military intervention in Haiti in 1994, military operations in Bosnia and Kosovo from 1995 through 1998, and the maintenance of no-fly zones in Iraq from 1993 on, along with a number of humanitarian operations, were seen as a strain on the force, particularly because even relatively small, long-duration operations required a relatively large rotation base to sustain deployments. In addition, because—as a matter of long-standing policy—many Army units were not fully manned in peacetime, contingency operations created a disproportionate amount of turbulence in the force, as personnel were reassigned to fill out deploying units. By the late 1990s, the Army was reportedly being mobilized for contingency operations 15 times as frequently as in the past decade. When President George W. Bush took office, Army leadership suggested that its smaller force could not sustain these deployments indefinitely. Many service leaders were especially worried about the effect of repeated deployments on retention. In the end, however, concerns about readiness that were widely expressed at the beginning of the 1990s did not materialize. Although recruitment and retention of quality personnel did not meet service targets, the services were able to overcome these shortfalls, and O&M funding levels remained consistent with long-term trends, though at the expense of weapons procurement. And once budget deficits declined, increases in military pay and benefits became a high priority. A significant Clinton Administration initiative was to increase housing allowances substantially, which boosted take-home pay dollar-for-dollar since this benefit was not taxed. Ongoing operations abroad continued to put some strains on the force, though less so over time as deployments to the Balkans were regularized and assigned increasingly to reserve units. The use of the term hollow force to describe the effects of the defense budget decline of the 1990s does not appear apt, and certainly not if it is taken to reflect a parallel with the personnel and other readiness-related shortfalls of the 1970s. Instead, the decline in budgets in the 1990s was reflected mainly in amounts available for weapons modernization. Procurement declined to a low point of about half the peak in the mid-1980s and began to turn up substantially only when budgets began to climb in FY1998 and accelerated after FY2000. Current References to Hollow Forces Return to a Hollow Force? As the U.S. government debates significant defense budget cuts as a means of reducing the nation's deficit and a new post Iraq and Afghanistan strategic shift to the Asia-Pacific region, some officials are invoking the specter of a new hollow force. On the occasion of taking the oath of office for Secretary of Defense on July 1, 2011, Leon Panetta noted: Even as the United States addresses fiscal challenges at home, there will be no hollow force on my watch. That will require us all to be disciplined in how we manage taxpayer resources. During an October 27, 2011, hearing before the House Armed Services Committee Subcommittee on Readiness, a number of references to an impending hollow force were made by senior DOD leadership: General Peter W. Chiarelli, Vice Chief of Staff of the Army: In a press report on the hearing, General Chiarelli was quoted as saying "Asked the representatives to remember that the services have fought a 10-year war, with an all-volunteer force … that force is amazingly resilient, but at the same time, it is strained," he said. "Its equipment is strained, soldiers are strained, families are strained. But they've been absolutely amazing over these 10 years at war." Chiarelli said he understands budget cuts and corresponding force reductions have to be made. "However, we must make them responsibly so that we do not end up with either a hollowed out force … or an unbalanced force." General Joseph Dunford, Assistant Commandant of the Marine Corps: In a press report on the hearing, General Dunford was quoted as saying, "As Defense Secretary [Leon] Panetta refines the strategy, the commandant is going to use what we learned during the force-structure review effort to make recommendations.... With regard to balance, we don't want to make cuts in a manner that would create a hollow force ." It has been suggested that the use of a hollow force has instead "become a convenient turn of phrase that tends to cut off all rational debate about national defense priorities." Some senior military officers reportedly dispute the notion of a return to a hollow force: Marine Corps Lieutenant General Richard Mills, recently returned from commanding forces in Afghanistan . "'I know we are going to look at some reduction in numbers. I've gone through this a couple of times in my career. Each time the military has had to tighten its belt, we continued to function very well.' Mills said he is not overly concerned that the Marine Corps will not have adequate resources to do its job. 'I say that from experience,' said Mills. 'I can remember times when it was tough to get fuel for vehicles to go to the field to train, so you walked; when it was tough to get ammunition to shoot for training, but you made do.'" Chairman of the Joint Chiefs of Staff General Martin Dempsey reportedly "told a 2011 gathering of defense contractors that he expects some budget pains, but he is still certain that the Army will have proper resources to be dominant in the future, I've been trying to convince people to stop wringing their hands at this point about money. Inside the Beltway, contractors and lawmakers are fretting about the fate of the Abrams tank or the Bradley vehicle production lines. But rather than obsess over line items in the budget, Army leaders should start thinking about how to reshape the Army for post-Iraq and Afghanistan world." Potential Issues for Congress Is It a Fair Comparison? To ask whether projected budget trends are likely to lead to anything comparable to the hollow force of the 1970s—or, alternatively, the "procurement holiday" of the 1990s—is to raise those eras as a cautionary note about budget cuts. But is it an appropriate comparison? As previously noted, as many as seven possible causes have been cited for the hollow force of the late 1970s. If these seven causes are examined for contemporary relevance, five of the seven causes would be non-applicable. Most analysts would likely agree public support for the military is at a high point. For example, a May 2010 national telephone survey conducted by Rasmussen Reports, LLC found that 74% of Americans surveyed had a favorable opinion of the U.S. military. In terms of recruiting and retention , CRS Report RL32965, Recruiting and Retention: An Overview of FY2009 and FY2010 Results for Active and Reserve Component Enlisted Personnel , notes in an overview of FY2010 results: All the Active Components achieved their recruit quantity goals while recruit quality generally increased over the previous year, in some cases markedly. Virtually all new recruits had high school diplomas, and nearly three-quarters scored above average on the Armed Forces Qualification Test. Retention remained strong for all the services, with the Army and Navy exceeding their goals by substantial margins. The Air Force missed its goal for first term ("Zone A") personnel by 7%, and was slightly short of its goal for career ("Zone C") personnel. All of the Reserve Components except the Army National Guard met or exceeded their recruit quantity goals. The National Guard shortfall was due to an intentional effort to cut back recruiting in order to lower its strength, which had gone beyond its authorized end-strength. Recruit quality continued to improve for nearly all the Reserve Components. All of the Reserve Components finished the year under their attrition ceilings, and almost all showed lower attrition (better retention) than in FY2009. It can be argued that a smaller military and a smaller budget could instead result in the military being even more selective in terms of recruiting and retaining service members, thereby improving the overall quality of the force. The issue of declining pay also does not appear to be a relevant factor in the potential return to a hollow force. CRS Report RL33446, Military Pay and Benefits: Key Questions and Answers , notes that In the nearly 10 years since the terrorist attacks of September 11, 2001, basic pay has increased nominally by nearly 35% (figure not adjusted for inflation). This figure does not include other increases in allowances, bonuses, or incentives. The cumulative effect is that most analysts now agree that the average annual cost per servicemember exceeds $100,000. When increased housing allowances, subsistence allowances, and enlistment and reenlistment bonuses are added, total cash take-home pay has increased even more. And when increases in retirement benefits, due to Tricare for Life medical benefits and concurrent receipt of military retired pay and veterans disability benefits, are considered, military compensation has grown by more than 55% above inflation since FY1998. There have recently been calls to reduce military compensation as a part of deficit reduction measures. Congress might want to consider carefully how such changes would affect the quality of the force on the assumption that the economy recovers, and private employment prospects for potential military-age recruits improve, making the military a less attractive employment option. Reports suggest that the morale of U.S. troops is declining to some degree, based on surveys conducted in the summer of 2010. This trend is largely attributed to repeated deployments to combat zones, which have significantly exacerbated stress and anxiety. It might be expected that as large-scale deployments to Iraq and Afghanistan are phased out, the underlying factors that contribute to lowered morale could improve, making reported poor morale less of a consideration. Congress has placed a great deal of emphasis on a funding reset for the services, which is intended to repair equipment that has been used in Iraq and Afghanistan and extend its overall useful life. While the services have suggested that future budget cuts might endanger reset, it should be noted that the services have a great deal of discretion on how operation and maintenance (O&M) funds are allocated and therefore have great influence on how the reset of equipment is conducted. Moreover, the August 2011 deficit agreement, reflected in the Budget Control Act of 2011, P.L. 112-25 , does not establish limits on funding for Overseas Contingency Operations, which has been the primary source of reset expenditures. Some have also warned that large-scale budget cuts would mean that the United States would have to abandon modernization and thereby put the United States at a military disadvantage. One recent report by the Stimson Center suggests, however, that over the past decade, the military services took advantage of increased procurement funding to modernize their forces more substantially than DOD officials have sometimes implied. The Army was credited with upgrading both M-1 Abrams and M-2 Bradley fleets to the most state-of-the-art versions, as well as upgrading the majority of its support vehicles and its small arms inventory. The Air Force fielded next-generation systems such as the F-22 fighter and C-17 transport, and also acquired new capabilities, including a variety of multi-role, unmanned aircraft. The Navy used its procurement funds to advance its shipbuilding plans, which were recognized as underfunded, as well as to modernize its aircraft fleet. Even if modernization funds become more limited in future defense budgets, overall budget data suggest the services would enter this period after having invested in modernized forces about as substantially as in the weapons-driven buildup of the 1980s. CRS has calculated that when recent amounts for weapons modernization are compared to amounts in the mid-1980s, the total inflation-adjusted dollar value of relatively modern equipment available to forces today (i.e., equipment purchased within the past 10 years) appears relatively robust. Figure 3 shows the prior 10 years of investments per active duty troop from FY1975 to FY2016. Given these conditions, it can be argued that the use of the term hollow force is inappropriate under present circumstances. Most of the conditions that existed in the 1970s do not exist today. It also is unlikely that even in the case of drastically reduced military funding and a smaller military, recruit quality would decline, pay and benefits would be drastically cut, or U.S. public support for the military would significantly decline. In this context, perhaps a more appropriate analogy would be to the mid-1990s, when defense officials were concerned about "over-extending a smaller but capable military." But over-extension might also prove to be relatively limited. Many defense and foreign policy experts believe that in the wake of Iraq and Afghanistan, the United States will be less inclined to deploy military forces in great numbers to deal with threats, relying instead on other instruments of U.S. national power to address these situations. Some believe that recent limited U.S. involvement in NATO's operations against Libya and the decision to send 100 U.S. military personnel to Uganda to support regional efforts against the Lord's Resistance Army might be the future model for more measured U.S. military responses to security challenges. Others note that the United States has yet to correctly predict future security challenges and it would be imprudent to rule out the possibility of having to deploy large numbers of U.S. forces in the future for an extended duration to respond to a crisis or conflict. An informed discussion may be best served by military leaders avoiding reference to a hollow force and adopting a more measured approach to inform Congress and other decision makers about their concerns for the future state of the U.S. military. The current and, quite likely, the expected future cultural and economic conditions facing the U.S. military appear to bear little resemblance to those of the hollow force of the post-Vietnam era. While significant additional cuts to the U.S. defense budget could undoubtedly have a major impact on force structure and weapons programs, senior military leadership plays a significant role in determining how resources are allocated, and avoiding a return to the genuinely hollow forces of the post-Vietnam era may be expected to remain an overarching priority.

Senior Department of Defense (DOD) leaders have invoked the specter of a "hollow force" to describe what could happen to the U.S. Armed Forces if significant cuts to the defense budget are enacted. While some Members and staff might be familiar with the hollow force and its causes, newer Members and staff might not have a similar understanding of the conditions that led to the hollow force and what actions were taken to improve the condition of the U.S. Armed Forces. After several years of rapid growth in defense budgets, measures to reduce federal budget deficits have led to projections of a substantial decline in military spending over the next decade. As a result of limits on discretionary spending in the Budget Control Act of 2011, DOD is considering how to absorb a reduction of $450 billion to $500 billion in planned programs through FY2021. Senior defense officials have said that such reductions can be managed, but they also warn that that trade-offs among defense programs will require a reassessment of priorities, and that deeper cuts would weaken critical capabilities. A common theme is that, unless reductions are managed prudently, budget cuts of the magnitude required, let alone larger cuts, would risk creating a hollow force The term hollow force refers to military forces that appear mission-ready but, upon examination, suffer from shortages of personnel and equipment and from deficiencies in training. Historically, there were two periods—post-Vietnam and again in the 1990s—when the term hollow force was used to describe the U.S. Armed Forces. In the case of post-Vietnam, a variety of socioeconomic factors as well as funding decisions played a large role in the overall decline in readiness, particularly the decision to develop new weapon systems rather than funding other requirements. The 1990s hollow force, however, did not suffer from the socioeconomic problems that characterized the post-Vietnam force. Instead, the military of the early and mid-1990s was being deployed on a frequent basis for a variety of contingency operations and was viewed by some as being "overcommitted" relative to its size and resources. This overcommitment was further exacerbated by recruiting and retention concerns and a lack of funds to finance new weapon systems due to DOD decisions to emphasize readiness-related funding. A number of current defense officials have warned about the return to a hollow force if the DOD budget is cut significantly. Other senior officers instead suggest that in the aftermath of two wars, a reduction in the defense budget and the force is not unprecedented and the services will be able to make the necessary adjustments to ensure readiness. Therefore, the question arises if it is fair to suggest that the military could become a hollow force if DOD funding was drastically reduced and if force structure and weapon systems programs were cut. Some believe this is a mischaracterization, as it is considered unlikely the quality of the force will decline, that pay and benefits will be cut to the point that service in the military becomes unattractive, and public support for the military will erode—all factors that lead to General Meyer's description of the post-Vietnam Army as a hollow force It is also noted that DOD has a great deal of discretion on how its funds are spent and how units are organized, manned, equipped, and trained, which is also a factor that contributes to readiness of the force. As Congress will play a major role in shaping the Armed Forces in terms of size, capabilities, and how it is equipped and trained, a nuanced understanding of how the military once became "hollow" could provide a useful context for current and anticipated legislative action.

Introduction The use of financial derivatives by American industry began in agriculture in the 19 th century. Later, they were widely used in foreign exchange transactions, as well as in the bond markets. Their use in energy markets began in a modest way with the introduction of a heating oil futures contract in 1978 at the New York Mercantile Exchange (NYMEX). The NYMEX has since become the dominant market for traded energy derivatives in the United States. This initial contract expanded over the next fifteen years to include contracts on unleaded gasoline, sweet crude oil, propane, natural gas, and sour crude oil. In 1986, the first option contract, on crude oil futures contracts, appeared. This was followed by a host of other contracts on a variety of energy products as well as margins between products, and over time, which are called spreads. Use of these contracts expanded rapidly and they have become an important part of the financial and physical sides of the energy business. In 2004, the NYMEX traded and cleared approximately 169 million contracts on all commodities, a record, which was then surpassed in 2005, when over 204 million contracts were traded and cleared. Paralleling the growth of traded energy derivatives was the development of over-the-counter (OTC) derivative contracts. These contracts were originally arranged through an intermediary, generally a financial institution. The two parties to the agreement both had an interest in protecting themselves against future price movements as well as shifting risk, but needed more flexibility in the contract terms than standardized contracts on the NYMEX could provide. OTC contracts today are largely written on foreign exchange, interest rates, and equities, although commodity based contracts have also grown in importance. The Bank for International Settlements estimates that at the end of 2005 the notional value of outstanding OTC contracts worldwide was $284 trillion. Of this total, $3.6 trillion were commodity based. By 1993, problems related to the general use of financial derivatives began to surface. Derivatives were implicated in cases that resulted in huge financial losses. Orange County, California, lost $1.7 billion trading derivatives and went bankrupt. That same year, Metallgesellschaft lost over $1 billion in energy trading in the United States. The year 1998 brought the crisis at Long Term Capital Management, a leveraged hedge fund, that required intervention by the Federal Reserve Bank of New York, which arranged a rescue operation by major financial institutions. In 2001, Enron Corp., a company known for its promotion and use of derivatives through its trading arm, Enron Online, went bankrupt amidst major financial scandal. As a result of this association with bankruptcy and financial scandal over the past decade, questions have arisen as to whether derivative contracts are a legitimate requirement for functioning energy markets and companies, or are merely a dangerous financial game where the stakes are high and the potential for financial ruin very real. Are the potential effects on the physical energy supply, the financial condition of energy companies, the financial markets, and the economy as a whole significant enough to warrant a public policy response, and, if so, what factors might be important in developing appropriate policy? This report provides a systematic guide to understanding the use of financial derivative contracts in the energy industry, focusing specifically on the petroleum and natural gas sectors. Risk Management There was little need for the use of derivatives in risk management in the energy industry before 1973. The domestic price of oil was stabilized through production restrictions and the international price of oil was managed by the large international oil companies. In this environment, price volatility, which could upset operational plans as well as profit forecasts, was not of major concern. Short run price volatility became a factor in the U.S. oil market following the first oil price shock of 1973/74. By 1981, when oil price regulation ended in the United States, the effects of oil price volatility were of major concern to producers as well as consumers of energy. Figure 1 demonstrates the volatile nature of oil prices as they reacted to OPEC actions as well as changing economic and political circumstances. As the figure shows, in relatively short periods of time the price of oil could rise more than two-fold, only to decline by almost two-thirds later on. This volatility in oil prices naturally spilled over into the product markets for gasoline, heating oil, jet fuel, and other refined products, directly affecting consumers and firms. Price volatility, on the scale represented in Figure 1 , gives rise to risk. Risk is defined as a situation in which a variable, in this case the price of oil, is likely to take on a value differing from that which was expected. Economists, and other analysts use a statistical tool, the standard deviation, to measure risk. The standard deviation measures the spread of possible outcomes around the average, or expected, value of the variable in question. Larger values of the standard deviation imply more risk. Risk management encompasses a range of activities designed to re-allocate risk to other parties more willing to bear it, and to mitigate the effects of remaining risk exposure. Although managing price risk has become a major consideration for energy companies, this doesn't necessarily require the use of financial derivatives. Several alternatives to derivative based strategies exist that might accomplish similar results. Vertical integration, the incorporation of the various stages of the production process, from exploration and production to final retail distribution, into one entity, allows the firm to control price risk. Vertically integrated firms are able to manage how a change in the price of a primary factor of production is incorporated into the cost structure of the firm. This strategy, to be fully implemented, requires the firm to own its oil or gas reserve base, an increasingly unlikely circumstance. Also, although the oil industry is characterized by integrated firms, it is also characterized by firms that operate in only one, or a limited number, of sectors of the industry. Even if the capital were available to form more vertically integrated firms, the most likely way this would be achieved in the oil industry would be through mergers and acquisitions, which have the potential of reducing competition. Price risk may also be managed through inventory control. If firms maintain substantial stocks of natural gas or oil in inventory, it is possible to use these stocks to effectively smooth out price movements. Draw down in periods of high market prices could be compensated by spot market purchases when the price is low. The problem here is cost. Storing oil and natural gas is expensive, making this strategy unattractive if cheaper alternatives are available. Long term contracting at fixed prices might also reduce the firm's exposure to price volatility. However, this strategy creates risks of its own. If the agreed upon contract price turns out to be higher than the actual market price in the future, the buyer of the product might find itself at a competitive disadvantage. For example, if a refinery agreed to purchase crude oil at $70 per barrel from an oil trader, and the price of crude oil then fell substantially, the refinery might not be able to produce competitively priced gasoline and might be forced to close or might possibly default on the contract. Similarly, if the price of oil turned out to be above $70 per barrel, the seller of the oil would have an incentive, at least in theory, to default on the contract and sell the oil on the higher value spot market leaving the refiner exposed to the higher price. The long term contract, which was designed to reduce price risk, accomplishes that goal by increasing default risk. To mitigate default risk, parties to the contract might diversify their purchases, buy insurance, require collateral, or only deal with well established firms. Managing price risk has become a necessity in the oil and natural gas industries to maintain profitability and to avoid being at a competitive disadvantage. A recent report by the Energy Information Administration (EIA) studied financial derivative use in the marketing, producing and refining sectors of the oil and natural gas industries. The study used company data and Securities and Exchange Commission filings and determined that virtually all of the largest energy firms use derivatives to hedge risk. However, the value of contracts held by companies varied widely. Since volatile energy prices may well continue in the future, firms are likely to undertake a strategy to protect themselves from price volatility. The chosen strategy must be cost effective, flexible, and reliable. Financial derivative based strategies fit these requirements for many firms in the energy industries. Derivative Basics Derivatives are financial contracts whose value is based on another, underlying asset. For example, owning a futures contract on 1000 barrels of light, sweet, crude oil dated July 2007, at a price of $60, obligates the owner of that contract to purchase oil at that time, at those terms. In what sense does the futures contract have value? If, near the settlement date in July 2007, light, sweet crude is selling for $70 per barrel on the spot market, holding a legally enforceable right to buy the oil at $60 per barrel creates a value of $10 per barrel for the owner of the futures contract. Conversely, if oil is available on the spot market for $50 per barrel on the July 2007 settlement date, the futures contract is a liability for the contract holder in that it requires the oil buyer to pay $10 more for oil than the spot market price. In practice, very few futures contracts traded on markets like the NYMEX are ever settled through physical delivery of the product. The NYMEX contracts allow for cash settlement. Physical purchases can then be made on the spot market at then current market prices. While cash settlement expands the spectrum of participants in the market and is more efficient than physical delivery for most contract holders, it can create the perception that the motivation and focus of the contracts are a purely financial bet on the future price of oil rather than a business strategy designed to reduce risk. An important distinction between derivatives is whether they are traded on an organized exchange like the NYMEX or whether they are traded on the OTC market. Energy derivatives traded on the NYMEX are standardized contracts for a fixed amount of underlying product, delivered at a specified date, with a specified price, at a particular location. For example, the light, sweet crude oil futures contract discussed above is for 1000 barrels of West Texas Intermediate, on one of a set of pre-specified dates, for delivery at Cushing, OK. The "same" oil delivered at a different location at a different time might well have a different value. The specificity of traded NYMEX contracts stimulates the need for OTC derivatives by creating basis risk. Basis risk arises from the fact that a physical good's location, delivery time, quality, and other product characteristics might cause its price to differ from a similar good with different characteristics. The implication of basis risk is that it is not generally possible to establish a perfect hedge using only exchange traded futures. In contrast to NYMEX traded contracts, OTC contracts are custom designed to reflect the specific needs of the contracting parties. These contracts are typically one-on-one arrangements, traditionally with a financial institution acting as a fee-earning middleman, broker and manager. During the 1990s, a number of energy trading companies, of which Enron was perhaps the best known, became active participants in the OTC derivative market. Not only did these trading firms broker contracts, they also expanded their role to become the counterparty to the contracts. Since the terms and specifications of the contracts can literally be anything the parties agree upon, the degree and scope of risk faced by the counterparty trading firms is increased substantially. The ability to customize contracts to provide a unique risk management profile brings distinct advantages which must be balanced against the disadvantages of OTC contracts. Derivatives traded on the NYMEX have a high degree of liquidity, while OTC contracts generally are less liquid. A party on either side of a NYMEX contract can cancel its position at any time by buying, or selling, a contract that is opposite its original contract. For example, if a firm had purchased a futures contract on 1000 barrels of crude oil, it could sell a contract with identical terms which would effectively cancel the firm's obligation. From the point of view of the exchange, the firm would have netted out its position, having bought and sold contracts obligating it to 1000 barrels of oil, leaving it, in effect, out of the market. This type of transaction can be undertaken at any time because all contracts are standardized and have the central clearinghouse, which is owned by the market, as counterparty to the contracts. If the contract were OTC, the only way the contract could be terminated or modified would be through mutual negotiation and agreement between the principals. A firm that chose to abrogate an OTC contract it found financially disadvantageous would likely face a more complicated procedure, possibly including penalties to the counterparty, who would suffer damages, as well as dealer fees. Financial performance of an exchange traded derivative is guaranteed, while the holder of an OTC contract is exposed to default risk. Exchanges guarantee performance by rigorously evaluating the credit worthiness of traders on the market. Additionally, margin accounts, which act as deposits, or reserves, against losses are marked to market on a daily basis. Marking to market is a cash flow system which calculates the gains or losses of every derivative contract position on a daily basis. The contract holder's margin accounts are then debited or credited to maintain minimal levels of margin equity in the derivative position. This process assures traders that every contract has sufficient capital backing to guarantee performance. As a final safeguard, the exchange itself guarantees the financial performance of the contracts traded on its market. In the OTC case, there is no equivalent to the marking to market process which can allow losses, backed by little collateral, to accumulate. If the terms of an OTC contract are such that one of the principals to the agreement is suffering large losses, that party might not be able to meet the terms of the agreement, raising the possibility of default. The costs of default can be substantial and are very real since OTC contracts are legally enforceable contracts. Trades on organized exchanges are anonymously, cost efficiently, and competitively implemented with instantaneous price transparency. This is helpful to traders who might want to put a business strategy in place cheaply, quickly, and without revealing their strategy to other market participants. OTC contracts are, in effect, the opposite. Since they are one-on-one arrangements, the principals to the agreement are closely related to one another. The contract may require substantial fees paid to the manager or broker, and, since they are privately negotiated, they are not the result of a competitive process, although more than one dealer may compete to set up the transaction. Set against these limitations is the important benefit of flexibility. A market traded derivative contract can, at best, implement only a portion of the firm's risk management strategy. For example, a California firm interested in purchasing natural gas might try to hedge its price risk by purchasing NYMEX futures contracts. However, the reference price for these contracts is at Henry Hub in Louisiana. The price of natural gas in California is different than the price at Henry Hub, and therefore, the firm can only cover a portion of the price risk it faces. Through the use of OTC derivatives, the firm may be able to eliminate basis risk and more effectively hedge the effects of price risk. In more extreme cases, the firm may have a strategy which is incompatible with exchange traded derivatives, leaving only a choice between doing nothing or entering into OTC contracts. Derivative Contract Types The most basic type of derivative contract is a forward contract. In a forward contract the terms are very similar to a cash-and-carry agreement, except that delivery and transfer of ownership of the underlying commodity is in the future. If an oil refiner enters into a forward contract for crude oil delivery, the refinery avoids price risk by locking in a price now, or avoids storage costs if current purchase and storage are an option. The refiner faces the potential of default risk if the price of oil changes substantially, tempting the contract's counterparty not to perform. Also, in these arrangements the credit worthiness of both parties is critical to performance of the contract. Finally, the liquidity of these contracts is low because they are one-on-one relationships that can only be changed by mutual consent. A futures contract is similar in intent to a forward contract, but has some important differences. A futures contract has standard terms and is traded on organized exchanges. It specifies trades of a particular quantity of the underlying commodity at a particular price, at a particular time. For example, NYMEX natural gas futures contracts are for gas equivalent to 10,000 million British thermal units, at Henry Hub, LA, for any one of seventy two consecutive months into the future, at a dollars and cents price for 10,000 million British thermal units of gas equivalent. Although the contract can be settled at expiration in the physical commodity, it is more normally settled in cash through the exchange. An options contract gives the owner the right, but not the obligation, to buy or sell quantities of the underlying asset at a fixed price known as the strike price. The two basic options are calls and puts. A call gives the owner the right to buy the underlying asset at the contract terms, while a put gives the owner the right to sell the underlying asset at the contract terms. For example, on the NYMEX, a call option on crude oil gives the owner the right to buy oil futures contracts at a fixed price, while the owner of a put has the right to sell oil futures contracts at a fixed price. An options contract will only be exercised if it is in the financial interest of the owner, and is allowed to expire if it is not. As a result, option based strategies allow the owner to participate in favorable outcomes while minimizing the effect of negative outcomes. Offsetting this favorable result, options based strategies are more expensive to implement than futures based strategies. Not only are options available on futures contracts directly linked to the underlying physical commodity, but they are also available on critical spreads, or differences, that affect profit. A crack spread option protects against an expansion or contraction in the difference between prices. A user of refined products might want protection against price increases when refinery margins grow, even if the price of crude oil is constant. A calendar spread option is used to lock in profits over time. For example, a storage facility can lock in a profit on the storage of natural gas by using a calendar spread. A swap contract allows the two parties to the agreement to exchange streams of returns derived from underlying assets. Ownership rights, if any, remain intact and the physical asset is not exchanged. Settlement payments are made in cash at pre-determined points during the life of the agreement to balance out differences in the value of the swapped return streams. For example, a refiner and an oil producer might agree to a five year agreement which has scheduled, periodic payments over its life. The payment, which might either be paid out, or received, by the firm, is equal to the difference between a negotiated fixed price and the currently prevailing spot price for a given amount of oil. If the spot price is above the fixed price, the producer pays the refiner; if the spot price is below the fixed price, the refiner pays the producer the difference. The intent is to insure that both parties to the agreement have predictable, stable costs and revenues, respectively. Swaps represent some of the most common examples of OTC contracts. In many strategies, options are put together in combination to achieve the risk management goals of the company. The simple building blocks of calls, puts, and future contracts combined with positions in the underlying assets can achieve a wide variety of final outcomes. Many of these outcomes are desirable and perform well in controlling risk and stabilizing profit. However, it is also possible to use the same tools to conceal debt, inflate profit, and render the financial reports of the company opaque. Workings of Derivative Contracts This section will illustrate in more detail how derivative contracts manage price risk and at what cost. The first example is concerned with natural gas transactions. A variety of participants in the natural gas markets might find it useful to use derivative contracts. Marketers can use futures contracts to offer their suppliers and customers futures-based pricing arrangements. They can use options contracts to provide price floors for natural gas sellers, price ceilings for buyers, and combinations thereof, without their customers' direct participation in the market. Producers can use options to establish a floor selling price for their future production while staying in position to reap the benefits of favorable price movements. Pipelines, to the extent that they remain merchant sellers of gas in competition with producers, might find it necessary to provide their customers with futures and options based pricing to remain competitive. Local distribution companies can use options to hedge storage costs as well as providing a ceiling on consumer costs. End users can purchase derivatives to lock in prices for their future requirements. They can actively manage their gas purchase costs whether they feel future market conditions will yield rising, stable, or falling prices. Consider a manufacturer who uses natural gas in a production process and is concerned about a weather induced price spike during the winter months. The firm also believes that the underlying demand and supply fundamentals are strong so that it is very unlikely that the price of natural gas will fall from its current value. What can the firm do to protect itself from rising gas prices? Several strategies are available. First, the firm might buy futures contracts on natural gas. In this case, if the price of natural gas does rise in the winter there would be a corresponding rise in the value of the futures contract. At the expiration of the futures contract, the firm could buy the required natural gas on the spot market using the profits made on the futures contract to offset the higher spot market price. In this way, the manufacturer would have successfully hedged his needs for natural gas against price risk. Of course, if the price of gas actually declines, the manufacturer will lose on the futures contract. The amount lost is equal to the difference between the gas price specified in the futures contract and the market price. However, the manufacturer gains an equivalent value by purchasing gas at the lower spot market price. On a net basis, this leaves the manufacturer purchasing gas at the futures contract price, exactly as in the first part of the example. If the manufacturer's forecast about the unlikely nature of a price decline is less certain, then a different strategy might be appropriate. The firm might wish to protect itself from a dramatic price increase, but at the same time be able to participate in the benefits of possible price reductions. Purchase of a call option might be a way to achieve both objectives, but at a cost. The numbers used in the following example are for illustration only. Suppose natural gas futures contracts for three months in the future are currently at $5.20 per million British thermal units. The firm might consider an at-the-money call option which might sell at 15 cents per million British thermal units. If the price of gas fell significantly, the firm would let the option expire and purchase the gas on the spot market at the then current price. The 15 cents the firm paid for the option would be added to the spot price of the gas to get the true total cost of the gas purchased by the firm. If the price of gas instead goes up, the firm could exercise its option contract and buy the gas for $5.20, plus the 15 cents paid for the option. If the firm feels that the premium of 15 cents for the call is too much to add to the cost of the gas and still remain competitive, it might purchase an out-of-the-money call. An out-of-the-money call has a strike price which is higher than the current market price and, hence, offers less upward price protection, but at a lower cost. The firm might decide to buy a $5.45 call for 7 cents. With this strategy the firm has purchased an insurance policy against a severe price increase, while leaving open the possibility of participating in price declines. By buying the out-of-the-money call, the firm reduces the cost of this insurance from 15 cents to 7 cents. However, the reduction in cost is accompanied by greater upward price exposure ($5.45 strike price compared to $5.20 strike price). Had the firm not hedged, the net purchase cost of gas would vary with the market price on a cent per cent basis. Had the firm purchased the at-the-money call, the purchase price would be higher by the cost of the call up to the strike price. At a futures price of $5.35 (strike price plus the 15 cent price of the call) the firm would break even. At prices above $5.35 the firm would be cent for cent better off as a result of the hedge. If the firm had purchased the out-of-the-money call at prices up to $5.52 (strike price plus the 7 cent price of the call) the firm pays more than if there had been no hedge. However, compared to the at-the-money call the firm is better off at prices below $5.28. The breakeven point between the two alternative strike prices is the lower strike price plus the difference in prices of the calls, in this case $5.20 plus 8 cents or $5.28. If the firm believes that prices are likely to be below $5.28, but still wants protection against sharply higher prices, the likely choice is the $5.45 call. The two examples described above, as well as more complicated variants of them, have several characteristics in common. First, the strategies were carried out using market traded contracts. The value of these contracts are transparent due to the real time availability of prices on the market. Their value to the firm is well understood and can be disclosed on all appropriate financial statements of the firm. If the firm chose to close out its derivative positions for any reason, that could be easily accomplished at predictable cost because of the depth and liquidity of the market. Second, the focus of the strategies was on the underlying natural gas. While the transactions were financial, the motivation for making them was to protect and facilitate the underlying energy business. Purchasing the same derivative contracts with no gas holdings, or business interest in the physical gas market, is far more speculative. Third, even though these transactions were clearly hedges designed to reduce the firms exposure to price risk, it is likely that speculators were part of the transactions. A speculator could have been the purchaser, or seller of a contract opposite almost any of the transactions discussed. In fact, without a counterparty taking an "opposite", speculative, view of how market forces would affect price, it is not clear that a liquid market for derivatives could function effectively. As the focus of the derivative trader shifts from managing the underlying business assets to managing the financial assets themselves, problems can emerge. Consider the case of a natural gas company which has just signed a prepaid forward contract to supply natural gas one year in the future. The firm received $1 million as a pre-payment for delivery. Next, the same company signs a cash-settlement forward contract with another firm to purchase an equal amount of gas for delivery in one year for a price of $1.06 million. Each of these transactions, as well as both taken together, could be legitimate hedging transactions. However, add in that the counterparty to both forward contracts is the same company. In this case, the gas obligations effectively cancel each other out and we are left with what effectively is a $1 million loan at an interest rate of 6% for one year. This liability can easily be obscured on the company's financial statements, concealing the increased leverage of the firm. Financial engineering of this type, as well as managing earnings and other deceptive practices, may serve to mislead investors and create inefficiencies in capital markets. Although relatively simple derivative transactions were used in all of the examples considered, the motivation and outcomes of the transactions were quite different. Each of the derivative instruments used was business oriented, in the sense that it could have been part of a normal hedging activity, and yet the last example shows that hedging may have little to do with the underlying motivation for the transaction. Also, the time frame can be important. The de facto loan arrangement of the last example might not have been attractive, or even feasible, if the forward contracts had been for a significantly shorter time than one year. What these examples show is that the derivative contract itself is neither inherently a hedge or speculative, it is merely a tool that helps a firm, or other trader, achieve its business objectives. Policy Issues How valuable is the use of derivatives to the energy industries, the financial markets, even the U.S. economy as a whole? This question has been answered for the traded derivative sector. When Congress established the Commodity Futures Trading Commission (CFTC), it recognized the importance to the nation of orderly, fair, market determined prices on the futures exchanges. As a result, the organized markets, including the NYMEX, self regulate with oversight by the Commission. The question really is addressed to the OTC transactions some associate with the Enron, Long-Term Capital Management, etc. type of financial debacles. Is there a case for regulating these contracts at the national level? While the lack of any dis-aggregated OTC data makes empirical statements impossible, the factors that might enter into a determination can be evaluated. One factor in determining the value of derivative transactions is the extent to which they can be expected to reduce the price volatility of the underlying energy commodity market. First, note that the very existence of derivatives is predicated on the fact that there is significant price volatility in the underlying market. If the price were regulated, or the underlying demand and supply fundamentals were predictable and slow moving, there would be little likelihood of derivative contracts being written. As a result, if derivative contracts significantly reduced underlying volatility, they would set in motion forces that would lead to their own irrelevance. Given the growth in OTC derivatives, there seems to be little evidence of a decline in use of these contracts. According to the Bank for International Settlements, by June of 2006 the notional value of OTC contracts stood at $370 trillion, a growth of 24% over year-end 2005. Commodity based contracts accounted for only 1.6% of the total, but grew by almost 17% over the period. Interest rate swaps accounted for the vast majority of the contracts (56%). Second, as Figure 1 showed, there is little evidence that key energy prices have become more stable during the last decade as they continue to be driven by exogenous, geo-political events. Economists have long theorized on the effects of speculation on market prices. Their conclusions are mixed. Writers from Adam Smith through Milton Friedman suggest that speculative activities tend to reduce price volatility because speculators can be expected to buy low and sell high, providing a kind of "automatic stabilizer" effect to the market. Other writers, notably William Baumol, take the position that speculative activities tend to increase price movements. This occurs because speculators tend to buy as prices are increasing and high and sell as prices have already begun to fall, or are low. This behavior can make price volatility even greater by reinforcing the underlying price dynamic. In either case, it is clear that the availability of derivative trading makes carrying out speculative strategies cheaper and more feasible. Because they are highly leveraged instruments, they make the potential payoffs higher, creating greater incentive to speculate. Efficient capital markets allow firms to raise capital for investment and technological improvement that leads to economic growth. The strength and integrity of these markets also attract capital from around the world. Damage to these markets would have major implications for the domestic and international economies. Could problems in the derivative markets precipitate more general damage to the U.S. capital markets? More specifically, could problems in the energy related OTC trading sector damage the reputation of U.S. capital markets? The logical chain for such an event might start with the failure of a large firm active in derivative trading and perhaps other financial transactions. The result then might be a melt-down of the derivative markets spreading to equity and debt markets. Some point out that the problem with this logic is that it has already happened with only isolated effects on U.S. financial markets. The failures of Enron, Long-Term Capital Management, Barings, PLC, the losses sustained by Metallgesellschaft and Orange County have not paralyzed the U.S. financial system. However, the collapse of Enron's trading operations did put a chill on OTC energy trading and led to calls for a variety of specific reforms which are discussed later in this report. While the integrity, safety, liquidity and efficiency of U.S. markets attract capital, so does their ability to innovate and embrace strategies that offer new profiles of risk and return. These factors might ultimately represent a trade-off. While protecting against this broad risk to the market system, called systemic risk, is valuable, if it comes at the expense of reducing the ability of individuals to take on, or transfer, financial risk for an appropriate rate of return, this too might damage the functioning of the financial markets. The use of derivatives might have the effect of reducing the cost of capital for firms, enhancing their real capital investment, and increasing their value. This result might occur because using derivatives to hedge risk reduces the riskiness of the firm's cash flow stream. Again, economists' views on this issue are mixed. Traditional theory took the position that any reduction in risk the firm faced would enhance the value of the firm. In 1958, Franco Modigliani and Merton Miller changed traditional perceptions by demonstrating that any change in the financial capital structure of the firm, (in their case specifically, the mixture of equity and debt financing) in an economic setting with no imperfections, would have no effect on the value of the firm. Later writers have demonstrated that if any of a variety of market imperfections exist, then the value of the firm may very well be affected by the choice of financial structure. This line of reasoning usually posits that although the firm's actions, e.g. implementing a program of futures contracts, do reduce risk, these actions come at a cost. Either the payment to achieve the reduction in risk is just equal in value to the risk reduction, in which case the value of the firm is unchanged, or the owners of the firm could achieve the same risk and return profile through lower cost personal transactions, making them unwilling to admit an increase in the value of the firm due to managerial action. The limited empirical information available suggests that the use of derivatives is extensive. The EIA's analysis of Securities and Exchange Commission 10K filings for 2002 showed that the use of derivatives was virtually universal among firms included in the study, but the value of derivative holdings varied widely. From this study it also appeared that firms on the marketing level used derivatives far more than producers or refiners, perhaps because producers can control production and refiners have storage and inventory management capabilities. It also appeared that vertically integrated oil companies found less need for derivative use, which again fits in with the earlier explanations of how firms might carry out risk management. Although there is little direct evidence that the use of derivatives increases the value of the firm, the near universality of use by energy firms, as shown by the EIA, suggests that a wide spectrum of energy managers see value in using derivatives to manage risk. If these firms are efficiently managed, it would be unlikely that they would consistently engage in inefficient activities. Although little in the way of theory or empirical evidence exists to tie derivatives to either beneficial or injurious market effects, the very size of both the traded market and OTC contracts suggests the possibility of important consequences should problems occur. The openness and innovation in the market suggests that while great success might be registered, large errors might also be made. Also, the critical nature of the underlying commodities suggests the potential for major disruption of both the consumer and producer sectors of the economy if a derivative related financial crisis led to disruption in the physical markets. Derivatives and Commodity Prices Since the value of a derivative contract is based on the value of the underlying commodity, when the price of the commodity varies the result is a variation in the price of the derivative. The increasing importance of derivative trading has raised the question of whether price variability that has its origins in the derivative market can affect commodity market prices? While it is generally accepted that price variability in the underlying commodity is a requirement for a successful derivative contract market to exist, does the existence of derivative trading and its practice cause price variability in the underlying commodity, independent of market fundamentals? The futures market is made up of two primary groups of traders; dealers and merchants who have an interest in buying and selling the underlying commodity, and financial investors, sometimes identified as speculators, who trade contracts to obtain financial gains and do not have an interest in buying and selling the underlying commodity. In principle, the market activities of speculators in establishing either a long or a short position, could change the price of futures contracts, and hence the reported price of the underlying commodity. However, since the speculator can neither deliver, nor accept delivery of the commodity, they must resolve their position on the futures market by purchasing a position opposite their original one. If establishing the first part of their futures position raised (lowered) the market price, the resolution of that position in the second part of the transaction would then lower (raise) the market price to an approximately equal amount. In recent years, a number of studies has attempted to clarify the relationship between derivative and commodity prices as well as the effect of financial traders on market prices. For the most part the studies have investigated the behavior of contracts traded on the NYMEX and similar exchanges. The OTC market has been the subject of less research because, unlike the organized exchanges which accumulate data for regulatory agencies and public use, the OTC has no data reporting requirement. EIA Study The EIA study assesses the relationship between natural gas futures and spot market prices over three consecutive winter heating seasons running from 2002 through 2005. Economic theory suggests that futures prices should be related to spot prices, and tend to equalize with spot prices as the expiration of the futures contract approaches. This theory was subjected to empirical analysis in the EIA study. The findings of the EIA study resulted in mixed support for the theory. It was reported in the study that the prices observed for futures contracts can vary over time. This result is not inconsistent with theory, as fundamental factors that affect expected spot prices may also vary. The study also reported that the difference between futures prices and realized spot prices do not diminish over time in all cases. In some cases, the futures price was a good predictor of spot prices, but in many cases it was not. It was also determined that prices for futures contracts showed a systematic bias, but that price patterns did not evolve in a predictable way, making futures contract prices an unreliable predictor of future spot prices. NYMEX Study The NYMEX accumulates trading data as part of its self-regulatory process, in addition to its oversight by the CFTC. In 2005, the NYMEX published a study investigating the behavior of hedge fund participation in energy trading. The report was undertaken by NYMEX staff, to address concerns that hedge funds (large, leveraged investment funds that are largely unregulated) were exercising undue influence on energy futures prices. The data used in the study was from an internal reporting system that NYMEX uses for market surveillance for the period January through November 2004. The NYMEX found that hedge funds accounted for trading volumes of 2.69% in crude oil and 9.05% in natural gas. When considered in terms of open interest, the number of unliquidated contracts held, the hedge funds constituted 13.4% in the crude oil market and 20.4% in natural gas. According to the NYMEX study, these values suggest that the hedge funds are not disproportionately active traders, tending to hold a larger number of contracts, lending stability to the market. The study also reports that hedge funds held their positions longer, on average, than other groups of traders, suggesting that hedge funds are a non-disruptive source of liquidity on the market rather than a source of price volatility. Specifically with respect to price volatility, the study found that changes in hedge fund positions, in both the crude oil and natural gas markets, tended to reduce price volatility, lending a stabilizing factor to the market. U.S. CFTC Study Researchers at the CFTC studied whether managed money traders (hedge funds) exerted a disproportionate and destabilizing influence on the workings of derivative markets. The CFTC study was based on data that was reported to the Commission in the course of its regulatory responsibilities. Although it is likely the data set is similar to that used in the NYMEX study, the two data sets are independent. CFTC researchers used advanced econometric techniques, including Vector Autoregressive Models and Innovation Accounting, and Directed Acyclic Graphs to analyze their data set. The study found that in the natural gas market, dealers and merchants, the participants whose interest in the market was commercial, tended to influence prices, while the activities of managed money traders had no effect on price changes. The study concluded that managed money traders provided liquidity to the market and aided the price discovery process and did not contribute to price volatility through their market activities. Similar results were found to hold in the crude oil market. The study also concluded that information regarding price changes tended to flow from the commercial sector of the market to the managed money traders, suggesting that the speculator sector tended to react to, rather than generate, price changes. Cooper Study Mark N. Cooper undertook a study of energy based derivative trading for the Attorneys General Natural Gas Working Group of the states of Illinois, Iowa, Missouri, and Wisconsin. The Cooper study differs from the NYMEX and CFTC studies because it is limited to the natural gas market, does not use econometric analysis of a recognized data base, relies on anecdotal evidence, and is focused on the over the counter market. Cooper approaches his research trying to determine why a damaging price spiral occurred in natural gas markets and the role of speculative activity in causing those price increases. Cooper's point of departure for the study is that a description of the natural gas market as being characterized by increasing demand, constrained supply, and efficient price signals that balance demand and supply is a half-truth. He sees the market as inefficient, vulnerable to abuse and volatility, and yet relatively unregulated. Cooper finds that a correlation exists between increases in the trading of derivatives and both the volatility and level of natural gas prices. In a graph relating the wellhead price of natural gas to time, he identifies the natural gas price spike of 2001 as being associated with Enron entering the trading market and the fall in prices in 2002 to be associated with Enron's exit from the market. Cooper identifies the peak natural gas prices of 2003-2006 as related to investment bankers entry in the OTC market to replace Enron, and the increase in hedge fund activity. While there does appear to be a coincidence between the events Cooper describes and natural gas prices, his analysis does not establish a correlation in a statistical sense, or causality. His analysis fails to control for other factors, both fundamental and institutional, that might have contributed to the price spikes in the years in question. Specific Reform Proposals In the wake of the Enron bankruptcy, legislative proposals to increase the regulation of OTC energy contracts began to be introduced. In the 107 th Congress, proposed legislation concerning OTC trading was considered. Senator Dianne Feinstein proposed derivatives legislation, ( S. 1951 ), in the Senate, while, independently, Representative Peter DeFazio introduced a bill, ( H.R. 4038 ), in the House of Representatives. The 108 th Congress rejected amendments ( S.Amdt. 876 to S. 14 and S.Amdt. 2083 to S. 2673 ) to increase the regulatory reach of the CFTC and the Federal Energy Regulatory Commission, as well as proposals for more data reporting and transparency in OTC transactions, although issues of trade manipulation were also addressed. Legislation introduced in the 109 th Congress focused on data reporting and the transparency of OTC trades. H.R. 1638 and S. 509 were directed at bringing natural gas transactions under CFTC control and increasing the civil and criminal penalties for market manipulation. H.R. 4473 would have provided the CFTC with authority to expand its data collection and monitoring activities from natural gas traders. In principle, an OTC contract is between two parties who interact one-on-one because of differing needs, perhaps with a financial institution managing the terms of the agreement. After the Enron bankruptcy, the market appeared to be evolving into a dealer driven market where the dealers were "energy trading" firms. These companies generally had experience in the physical energy market, either because they began their businesses in the field, or because they were set up by energy companies specifically to trade energy derivatives. Energy trading firms served as a counterparty to firms who want to set up an OTC contract. They then hedged the risk that they took on by purchasing market traded derivative contracts with an offsetting risk profile. As a result, they were heavily leveraged relative to their capital base. Both parties in the OTC transaction are then subject to each others' substantial credit risk. One suggestion that was discussed to address the OTC market proposes that energy trading firms be more related to the core, physical side of the energy market. The theory is that the asset positions and cash flows from the physical side of the business can act as a stabilizing factor for the OTC side of the business. Additionally, if the company's business focus is on the physical market it might be less likely to make the purely speculative financial bets that are possible with highly leveraged derivative positions. Critics contend that firms have moved away from the physical side of the business and into energy trading because that is where they perceive the greater return to be. As a result, requiring firms to participate more heavily in the physical business would require them to participate in what they see as a less profitable activity. In any case, if the cash flow from the physical energy business is small relative to the credit risk positions from the derivative contract business, little reduction in credit risk would be attained. More recently, major financial institutions, especially investment banks, such as Goldman Sachs, Morgan Stanley and Merrill Lynch, have become the major market makers in OTC energy transactions. This was the case early in the development of the market, to the extent that the major investment banks became known as the "Wall Street Refiners," and appears to be the case again. The important issue for market makers, and financial markets as a whole, is the degree of capitalization of the counterparty and the degree of counterparty risk. OTC market participation and the structures and roles of the participating firms ultimately depend on profit incentives. Regulations that alter the least cost, profit maximizing choices of firms might make the OTC contract less desirable, but perhaps safer. Another reform proposal that has made progress is to establish a clearing house along the lines of the NYMEX and other derivative markets. In fact, the NYMEX is actively offering clearinghouse services for OTC derivative transactions. Some of the potential benefits of establishing a clearing house are important. Counterparty credit and performance risk would be substantially reduced. This is significant because the aversion to credit and performance risk is considered a major factor in reducing activity on OTC transactions. Participant operating capital needed to secure positions might be reduced as the diversification and netting of the clearing house might require lower aggregate capital due to risk spreading. Confidence in OTC transactions has been low, and slow to recover since the collapse of Enron. It is conceivable that the use of a clearing house could restore a part of the faith in the market that has been lost. Whether liquidity would be increased as the result of a clearing house is an open question. Although a centralized location would enhance knowledge concerning buying and selling opportunities, the customized nature and specific risk profiles of the contracts would remain. It is likely that the use of a clearing house could provide a higher degree of price transparency which might contribute to enhanced liquidity. Given the fragile nature of confidence in OTC contracts after the Enron bankruptcy, and the concern with credit and performance risk, some suggested that the answer might lie in structured derivative product companies. These companies were generally subsidiaries of major financial corporations which were specially structured to act as derivative intermediaries while maintaining triple-A credit ratings. The companies accomplished this by the way they managed both market and credit risk. Market risk, in the case of energy derivatives, generally price risk, was cancelled through a set of mirror transactions, collateralized hedges, with the derivative product companies' parent or affiliated company. Credit risk was minimized at a level consistent with a triple-A rating by earmarking capital. This typically resulted in derivative product companies having higher capital costs than other derivative trading companies even though capital costs are explicitly minimized. Finally, these companies usually had a well defined, transparent workout structure in place for situations in which other preventative measures fail to protect against risk, and contracts associated with the derivative product company must be liquidated. Derivative product companies worked well in interest rate and currency derivative markets in the 1990s, but never really dominated the market. The higher costs of these firms negated a good part of the rationale for engaging in OTC transactions. The problem for derivative product companies has been that market participants have not appeared to be willing to pay for the specific benefits they can provide. If market participants value the reduced default and credit risk derivative product companies offer at least as highly as the extra cost they impose, then the approach might be workable. The proposals discussed above all touch on the issue of price transparency. It is worth emphasizing the importance of price transparency in the context of documenting and reporting transactions and derivative holdings. Companies have used derivatives to carry out illegal and deceptive financial strategies. Even though the root problem was the desire to engage in illegal or deceptive activities, it is still true that derivative contracts were the vehicle by which some of these activities were carried out. Many observers agree that anti-fraud and anti-manipulation safeguards would be more effective if pricing and documentation of transactions were more transparent. Also, the complex, largely unobservable, web of transactions created through derivative trading can be opaque to regulators as well as investors and might contribute to unrecognized systemic risk. Some organized form of reporting OTC contracts has been suggested as a way to address this issue. The trade-off is that one of the goals of OTC derivative trading is just this opaqueness. In a market with relatively few large firms, revealing what one believes to be the direction of the market or one's own strategy to competitors might have significant costs. Additionally, if one's strategy is explicitly reacted to by competitors, actual events in the market might be affected. In summary, the OTC energy derivative market is a young market that is still in the process of finding its place in the larger energy markets. That it serves a need in the energy industry is not in doubt; its growth and dollar value attest to that. It is also clear that it has been misused for illegal and deceptive purposes. Finding the balance between safeguarding participants' interests without unduly damaging the business purposes the market was designed to meet is the challenge facing reform proposals. Conclusion Deregulation and the increased volatility of oil demand and supply fundamentals were factors in establishing the need for an energy derivatives market in the 1980s. Those factors continue to influence the market today, and have accounted for the growth of both organized exchange and over-the-counter trading. By adopting hedging strategies, commercial energy firms have been able to reallocate price risk and operate their businesses more efficiently. Since groups of commercial traders, on each side of the market have relatively the same exposure to price risk, they need another group with opposite interests, who are willing to accept risk transfers from the commercial sector. These groups are known as speculators and are composed of financial traders representing hedge funds, investment banks, and others. While the organized exchanges are regulated by the CFTC, the OTC market remains opaque and unregulated. Legislative proposals have focused on increasing transparency through data reporting and mitigating manipulative practices. Increasing the visibility of OTC transactions would yield benefits, but might so disrupt the market that it could not serve its designed purpose. This result might create incentives for energy industry traders to develop other mechanisms to accomplish the goals currently attained in the OTC market. Market manipulation tends to distort the working of the market and rarely evokes public support. Energy derivative markets provide benefits to both energy firms and consumers in providing a more efficient market. Regulation and oversight that reduces market distortions and enhances efficiency is likely to provide additional gains for the market, although over regulation can distort the purpose of the derivative markets.

Risk management is important in the energy industries because of the volatility of oil and natural gas prices. Price volatility can reduce the profit of business strategies and hurt consumers. The use of financial derivatives, both traded and over-the-counter, has developed as a low cost method of hedging price risk. However, the use of derivatives has also been linked to major financial scandals and bankruptcies. Risk management strategies can be undertaken without the use of derivatives. Vertical integration of the production process, inventory control, and long-term, fixed price contracts can all compensate for the effects of price volatility. Whether one of these choices, or a derivative strategy, is chosen depends on the cost and flexibility of each alternative. Derivative use has expanded rapidly both in value and volume. Exchange traded and over-the-counter derivatives have different characteristics with respect to their liquidity, safety, transparency and flexibility. The benefits and costs of using either instrument depend on the circumstances and goals of the firm setting up the strategy. A wide variety of derivative contracts exists, including forwards, futures, options and swaps which can be put together to achieve a wide variety of objectives. Although exchange traded derivatives are self regulated with oversight by the Commodity Futures Trading Commission, over-the-counter derivatives are largely unregulated. Whether these transactions should be regulated might depend on their effect on commodity price volatility, their effect on the stability and integrity of U.S. capital markets, their ability to reduce the cost of capital, enhancing domestic real investment and the value of more open disclosure and price transparency. Congress considered proposed derivative legislation in the 107th Congress. Senator Dianne Feinstein introduced legislation in the Senate, while Representative Peter DeFazio independently introduced a bill in the House. In the 108th Congress, Representative DeFazio again introduced a derivative regulation bill (H.R. 1109) and the 109th Congress considered H.R. 1638 and S. 509. In the time since the collapse of Enron, many specific proposals to reform the derivative markets have appeared. These include tying derivative trading more closely to the underlying business interests of the market traders, establishing a clearinghouse to manage transactions, establishing structured derivative trading companies and enhancing reporting and documentation requirements. Each proposal has its strengths, but each could also reduce the effectiveness of the derivative industry in managing risk. This report will be updated as events warrant.

Overview On September 15, 2008, Robert Mugabe, president of Zimbabwe for more than two decades, and opposition leader Morgan Tsvangirai signed a power-sharing arrangement to resolve a political standoff stemming from flawed elections earlier in the year. The Global Political Agreement (GPA) laid the foundations for a transitional government and outlined a time frame for the drafting and adoption of a new constitution. As part of the deal, which was not implemented until February 2009 under pressure from regional powers and the international community, Tsvangirai became prime minister of a new coalition government. Cabinet positions have been divided among the parties. Many observers remain skeptical that the parties will be able to work together to implement the remaining political reforms deemed necessary by international donors. The coalition government has faced considerable challenges in prioritizing development needs, attracting donor funding, and making the reforms necessary for the country's economic recovery. For further discussion of the coalition government and other current events, please see CRS Report RL34509, Zimbabwe: The Transitional Government and Implications for U.S. Policy , by Lauren Ploch. Background After years of economic sanctions by the international community and a decades-long civil war that resulted in more than 30,000 dead, the white minority rule government of Southern Rhodesia concluded a series of agreements with the black majority in 1979 that resulted in the establishment of the government of the Republic of Zimbabwe. Among the greatest challenges facing the new government was the demand by the majority for greater equity in land distribution. At independence, the white minority, who composed less than 5% of the population, owned the vast majority of arable land. Many observers at that time considered the country's white-owned commercial farms crucial to the country's economy, although there was a general recognition that land reform was necessary. Britain initially funded a "willing buyer, willing seller" program to redistribute commercial farmland, offering to compensate amenable white farmers. Dissatisfaction with the pace of land reform grew and led in the 1990s to spontaneous and often violent farm invasions. At the same time, the country's labor movement and a segment of its urban middle class were becoming increasingly critical of the government's economic performance. Facing rising political and economic challenges, the government of Zimbabwe began to implement aggressive land expropriation policies, leading Britain and other donors to begin withdrawing financial support for resettlement. In 2000, the government held a referendum to approve changes to the constitution that would allow land seizures without compensation, a responsibility that in its view lay with Britain. The referendum was rejected by 55% of voters and was seen as a victory for a new opposition party, the Movement for Democratic Change (MDC). Within days of the vote war veterans and ruling party supporters moved onto an estimated 1,000 white-owned farms, and, months later, the president invoked emergency powers to take land without compensation. During this time there were numerous attacks against white farmers and their employees, as well as against supporters of the MDC; more than 30 people were killed. From 2000 onward, the country's problems deepened. Substantial political violence and human rights violations have accompanied elections. The broad scale of such abuses in the wake of the 2008 elections brought international condemnation, but little consensus on how best to stop the violence. Reports of government-orchestrated human rights abuses continued for months afterward. Zimbabwe's political difficulties were accompanied by a sharp decline in living standards, with more than 80% of the population living on less than $1 per day by 2009. Once touted as a potential "breadbasket of Africa," a significant portion of Zimbabwe's population became periodically dependent on food aid. An estimated 13.7% of adults are infected by the HIV/AIDS virus, and life expectancy fell from an estimated 56 years in 1990 to 44 in 2008. Foreign Policy magazine ranked Zimbabwe second in its index of failed states, behind Somalia, in 2009. Its ranking "improved" to that of fourth in the 2010 index and sixth in 2011, but the classification suggests considerable room for progress. Observers are concerned that the difficulties confronting Zimbabwe have affected neighboring countries and deterred investors from the country and the wider region. Political Situation Zimbabwe has been ruled since independence by the Zimbabwe African National Union - Patriotic Front (ZANU-PF), which has come under increasing scrutiny from human rights activists, both at home and abroad, in the past decade. Although ZANU-PF now technically shares power in the coalition government, the party still controls the presidency and key security ministries. Critics have cited high levels of corruption, political violence, and strictly enforced laws restricting basic freedoms. The party contends that its detractors have engaged in a "propaganda war" backed by Britain and the United States, using democracy and human rights as a cover to push for regime change. Many domestic and international observers have judged elections since 2000 to be "far from free and fair." The country's main opposition party, the MDC, split over tactical issues in 2005; Morgan Tsvangirai's faction remains dominant. ZANU-PF has also suffered internal competition, and some observers suggest that opposition to President Mugabe's continued rule has grown within the party. Internal ZANU-PF Struggles In view of President Mugabe's advanced age, the issue of presidential succession continues to be a matter of intense interest to observers. Some analysts have expressed concern that Zimbabwe could experience a violent succession struggle or a possible military coup in the event of his death. Under the constitution, the president may designate one of his two vice presidents to serve as acting president until the next election should he leave office, but Mugabe has never done so. One of the vice presidential posts was vacant prior to ZANU-PF's 2004 party conference, setting off a power struggle that transformed the political scene by revealing internal party divisions. Mugabe, who will turn 90 in 2014, appears to be in no rush to relinquish his post, although some rumors suggest his health is deteriorating. Prior to the 2004 party conference, Emmerson Mnangagwa, then speaker of the parliament and a political veteran long touted as Mugabe's heir, campaigned actively for the position of ZANU-PF's second vice president. His selection to that position would likely have assured his appointment as vice president of the country, but Mnangagwa was caught off guard when Mugabe decided that the country should have a woman in the post. Mugabe's choice for the position, Joice Mujuru, was inevitably elected by the party to serve as Zimbabwe's second vice president, alongside Vice President Joseph Msika. Mujuru, a veteran of the liberation war and a women's movement leader, had been serving as Minister of Water Resources and Infrastructure. According to reports, neither the Mnangagwa nor Mujuru camps initially supported Mugabe's proposal in 2007 to extend his term, which was set to expire after the 2008 elections, to 2010. Once a strong Mugabe ally, retired General Solomon "Rex" Mujuru, Joice's husband, was vocal in his disapproval and is rumored to have been pivotal in blocking the proposal at the national conference. Some have suggested that Mujuru covertly backed another ZANU-PF official, Simba Makoni, over his wife as a potential successor to Mugabe. Makoni, a technocrat, was considered by some to be a compromise candidate, untainted by the corruption scandals that have plagued others. Mugabe's own choice for a successor is unknown. Mnangagwa appears to have reconciled with Mugabe, leading the party's 2008 election efforts and taking a central role in guiding the country's security forces. He leads the Ministry of Defense in the transitional government. The outcome of any succession struggle within ZANU-PF may be affected by the country's ethnic and clan divisions. Mugabe and other key party officials are from the Zezuru clan of the Shona people, who are dominant in a wide area around the capital, Harare. Solomon Mujuru, who like his wife is Zezuru, was a close advisor to Mugabe and was once regarded as a king-maker. His death in August 2011 in a house fire has been viewed with suspicion by many in Zimbabwe. Emmerson Mnangagwa is seen as a representative of the large Karanga clan, which reportedly feels that its turn to control the reins of power has come. Mnangagwa's viability as a presidential contender has been hampered by accusations that he led the purge of alleged regime opponents in provinces of Matabeleland in the 1980s, which is believed to have resulted in the deaths of 20,000 Ndebele civilians. The events of the 1980s help to explain why Zimbabwe's second-largest city, Bulawayo, has long been regarded as a center of opposition to the government, although Mugabe has sought to gain support by elevating Ndebele to party and government posts. Vice President Joseph Msika died in August 2009 at age 86. According to some reports, Mnangagwa lobbied, but failed, in the following months to have Joice Mujuru replaced as vice president with a candidate of his own as the party reconsidered its leadership slate. In December 2009, delegates at ZANU-PF's party congress re-elected Mujuru as vice president and chose then-party national chairman John Nkomo to replace Msika. Both Msika and Nkomo are Ndebele. The Movement for Democratic Change (MDC) The MDC party emerged out of the Zimbabwe labor movement. As poverty deepened in Zimbabwe in the late 1990s, and allegations of corruption against regime leaders became more frequent, the Zimbabwe Congress of Trade Unions (ZCTU) organized a number of strikes and protests. In September 1999, the MDC was formed on this trade union base with support from many in Zimbabwe's churches and in urban areas. In February 2000, MDC members elected the ZCTU secretary general, Morgan Tsvangirai, born in 1952, as MDC president. The MDC proved formidable in the 2000 referendum and in the 2000 parliamentary election; some contend their success may have prompted a range of repressive actions against the party and its supporters. Among the retaliatory measures alleged, several leaders of the MDC, including Tsvangirai himself, were arrested and charged with treason two weeks before the MDC leader first ran against Mugabe, in the 2002 presidential elections. Division in the Opposition In late 2004, the MDC became increasingly divided in its strategy to challenge ZANU-PF dominance. MDC officials initially decided that the party would not participate in the 2005 parliamentary race unless the government took steps to assure free and fair elections. Several members argued that this would deprive the MDC of any influence in parliament and hand control of parliament to Mugabe on a "silver platter." Tsvangirai supported a boycott, arguing that the elections should be postponed until substantial reforms could be implemented. The party ultimately participated "under protest," but did not do as well as in previous polls. As the subsequent 2005 Senate elections approached, the MDC was again divided on whether to participate. Supported by some civil society groups who suggested the elections were "meaningless" and "a waste of time and resources," Tsvangirai argued that participating would legitimize previous "rigged" elections, and vowed instead to lead the opposition through mass action. He was opposed by a group led by the MDC's secretary-general, Welshman Ncube and MDC vice president Gibson Sibanda. In October, the party's national council voted 33-31 to participate in the election, but Tsvangirai overruled the vote and, reportedly in violation of the MDC constitution, expelled 26 senior officials from the party. Only the Ncube faction fielded candidates in the Senate race; they gained only seven seats. Both factions held party conferences in 2006; Tsvangirai was confirmed the leader of one faction, while Ncube ceded control of the "pro-senate" faction to Arthur Mutambara, a noted student leader in the 1980s. The factions attacked each other in the press, and there were allegations that the Tsvangirai faction was behind a violent assault on Member of Parliament (MP) Trudy Stevenson and several other Mutambara supporters. Stevenson identified the youths who attacked her as known followers of Tsvangirai, who denied the charges and denounced the beatings. Opposition Defiance Against a Ban on Protests and Rallies In February 2007, the Zimbabwe government announced a three-month ban on political rallies and public demonstrations in Harare "due to the volatile situation in the country." The MDC appealed to the High Court to lift the ban, which coincided with an increase in public activity by the opposition and civic groups. On February 18, despite a High Court decision allowing Morgan Tsvangirai to launch his presidential campaign at a rally in Harare, police reportedly used batons and water cannons to break up the event. A rally planned by the Mutambara faction in Bulawayo was similarly dispersed, and numerous opposition supporters were arrested. The ban was announced three days later, and police subsequently arrested several hundred civic activists. On March 11, 2007, police broke up a prayer meeting attended by both Tsvangirai and Mutambara, arresting an estimated 50 members of the opposition and civil society, including both MDC leaders. Police shot and killed one opposition supporter after MDC youth reportedly began throwing stones at police. The following day, police arrested an estimated 240 opposition supporters during a demonstration protesting the March 11 crackdown. Media and human rights reports suggest that Tsvangirai was severely beaten while in custody, and he appeared in court days later showing signs of head trauma. Other opposition and civic leaders also reportedly sustained injuries after their arrest. The protestors were released into the custody of their lawyers on March 14 after prosecutors reportedly failed to appear at their court hearing. The Zimbabwean government contended that the MDC incited violence and was responsible for attacks on several civilian targets and a Harare police station. The March 2007 incident spurred international media attention and drew considerable criticism from many world leaders. U.S. Secretary of State Condoleezza Rice issued a strong statement, saying, "The world community again has been shown that the regime of Robert Mugabe is ruthless and repressive and creates only suffering for the people of Zimbabwe." U.N. Secretary-General Ban Ki-moon also condemned the "reported beating of those leaders in police custody" and criticized the ban, noting that "such actions violate the basic democratic right of citizens to engage in peaceful assembly." Several of Zimbabwe's neighbors, including South Africa and Zambia, issued statements of concern regarding the incident, and Ghanaian President John Kufuor, then chairman of the AU, called the event "very embarrassing." Restrictions on Political Freedoms Legislative actions by Zimbabwe's parliament, led by ZANU-PF until the 2008 elections, contributed to concerns about human rights in Zimbabwe. Laws that critics contend have been used to quiet dissent and influence political developments include the following: The Access to Information and Protection of Privacy Act (AIPPA). This 2002 act requires that all media services be licensed, and that all journalists, including foreign correspondents, be officially accredited. The government, citing AIPPA, closed The Daily News , at the time the only remaining independent daily, in 2003 (it began printing again in March 2011). The Media Institute of Southern Africa (MISA) has called AIPPA "one of the most effective legal instruments of state control over the media and civil society communication anywhere in the world." ZANU-PF counters that AIPPA encourages responsible journalism. The African Commission on Human and People's Rights (ACHPR) ruled in 2009 that two sections of AIPPA should be repealed. The Public Order and Security Act (POSA), the Criminal Law (Codification and Reform) Act ("Criminal Law Code"), and the Miscellaneous Offences Act (MOA). POSA, also enacted in 2002, prohibits statements deemed to be "abusive, indecent, obscene, or false" about the president or considered to "undermin(e) public confidence" in the security forces, and prohibits false statements prejudicial to the state. The measure has been used in the arrest of thousands of political opponents and to break up public meetings and rallies. Zimbabweans overheard criticizing the president in public have also been jailed. The MOA criminalized "conduct likely to cause a breach of the peace," and was often used with POSA against activists. Police and "persons assisting the police" may use "all necessary force" to stop unlawful gatherings. In 2006 many offences under POSA and MOA were transferred to a new Criminal Law Code. The Private Voluntary Organizations (PVO) Act. Critics suggest that the government has used the 2002 PVO Act to limit the activities of domestic NGOs, who are required to register with the government. A "probe team" of intelligence officers has wide powers to investigate groups and demand documents related to activities and funding. The ACHPR has recommended that it be repealed. In 2005, ZANU-PF won over two-thirds of the seats in the House of Assembly, giving it the power to amend the constitution. The parliament then passed several controversial constitutional amendments which some analysts contend breach international human rights standards. The 2005 Constitution of Zimbabwe Amendment Act (No.17) allowed the government to limit the right to freedom of movement when it is in "the public interest" or in "the economic interests of the State" and restricts the right to leave Zimbabwe. Journalists, MDC officials, and union leaders had their passports revoked under the act, with the government charging that they planned to lobby abroad for sanctions or military intervention against the country. The act also prevents land owners from challenging the acquisition of agricultural land by the state. It paved the way for passage of Gazetted Land Act in late 2006, making it illegal for former farm owners to occupy nationalized land and allowing the government to evict farmers and resettle the land without compensation. The 2005 constitutional amendment also revived the upper house of parliament. The MDC, prior to taking a majority in the House of Assembly in the 2008 elections, had limited success in preventing ZANU-PF from passing other legislation that it contended would restrict freedoms. An Interception of Communications Bill, which would allow the government to monitor all Internet, email, and telephone communications for threats to national security, was initially stalled by the Parliamentary Legal Committee (chaired by an MDC MP), but was later revised and approved in June 2007. Critics suggest that the revisions were cosmetic. Negotiations led by South Africa between Zimbabwe's political parties prior to the 2008 elections resulted in amendments to both AIPPA and POSA. Critics suggest the amendments did not fully address human rights concerns and have not been adequately implemented. The Media Institute of Southern Africa dismissed the AIPPA changes as "dwelling … on inconsequential issues which will not advance basic freedoms." Numerous MDC rallies were blocked prior to the 2008 runoff, despite court orders allowing the events. Political space for civil society has widened since the formation of the coalition government, but police continued to use POSA on occasion to arrest civil society leaders. In December 2010, the MDC majority in the House passed legislation to amend POSA; to date, the ZANU-PF Senate has not approved the bill. Political Violence Human rights groups have documented numerous accounts of political violence in Zimbabwe in the past decade. In 2006, Freedom House declared that "Zimbabwe's descent into the ranks of the world's most repressive states continued unabated." In 2007, the State Department reported that Zimbabwe's government has "engaged in the pervasive and systematic abuse of human rights, which increased significantly during the year" and contended that "state-sanctioned use of excessive force increased, and security forces tortured members of the opposition, student leaders, and civil society activists." Amnesty International was similarly critical. The State Department's most recent human rights report, issued in April 2011, suggests that abuses continue, in spite of the transitional government's formation: Security forces, the police, and ZANU-PF-dominated elements of the government continued to commit numerous, serious human rights abuses. ZANU-PF's dominant control and manipulation of the political process through trumped-up charges, arbitrary arrest, intimidation, and corruption effectively negated the right of citizens to change their government. There were no politically motivated killings by government agents during the year, however, security forces continued to torture, beat, and abuses non ZANU-PF political activists and party members, student leaders, and civil society activists with impunity. Projections of an early election in 2011 also led to an increase in the number of cases of harassment and intimidation... Security forces continued to refuse to document cases of political violence committed by ZANU-PF loyalists against members of other political parties... Security forces, which regularly acted with impunity, arbitrarily arrested and detained activists not associated with ZANU-PF, members of civil society, labor leaders, journalists, demonstrators, and religious leaders; lengthy pretrial detention was a problem. Executive influence and interference in the judiciary continued... The government continued to use repressive laws to suppress freedom of speech, press, assembly, association, and movement... High-ranking government officials made numerous public threats of violence against demonstrators and political activists not associated with ZANU-PF.... President Mugabe has, on occasion, publicly condoned police and military brutality against Zimbabwean citizens. In 2006, during Heroes' Day, a holiday honoring war veterans, Mugabe warned that his security forces would "pull the trigger" against protesters. A month later, in an incident caught on video, Zimbabwean police conducted a particularly violent crackdown against leaders of the Zimbabwe Congress of Trade Unions (ZCTU), who had planned a civic protest to highlight the impact of inflation on the country's citizenry. Mugabe sanctioned the police action, saying, "Some people are now crying foul that they were assaulted, yes you get a beating … when the police say move, move, if you don't move, you invite the police to use force." Mugabe received international attention for his statement; the U.N. Country Team in Zimbabwe announced "a profound sense of dismay" over comments that "might be interpreted as condoning the use of force and torture to deal with peaceful demonstrations by its citizens." The U.N. Special Rapporteur on Torture repeatedly requested an invitation from Zimbabwe to investigate, and the Harare magistrate who heard the case against the ZCTU leaders ordered an independent investigation into the allegations of police brutality. The Rapporteur received an invitation from Prime Minister Tsvangirai to visit Zimbabwe, but was blocked from entering the country when he tried to visit in October 2009. Human rights activists suggest that acts of political violence, such as abductions and beatings of opposition supporters, became "more systematic and widespread" after the events of March 2007. Despite provisions in the Electoral Laws Amendment Act banning such acts and assurances by security officials that the government would take a "zero tolerance" approach to violence, reports of attacks on opposition supporters further rose dramatically after the March 2008 elections. The State Department's annual human rights report on Zimbabwe states that over 289 died from injuries sustained during violence targeting the opposition in 2008, and that, according to one non-governmental organization, as many as 22,000 victims have sought treatment for political violence sustained that year. The State Department reports that, as of the most recent publication of its report, in April 2011, there had been no prosecutions or convictions related to any of the politically related killings that occurred in 2008. Human rights reports suggest party youth militia and so-called war veterans have been the most common perpetrators of political violence, but that the police have also played a significant role. The Geneva-based International Commission of Jurists, which investigated the 2007 detention and beating of lawyers, expressed shock at the role of police in the attacks and at the "cavalier response of Zimbabwean authorities." The State Department has documented multiple reports of police using excessive force and cruel, inhuman or degrading treatment against those in custody. Developments Surrounding the 2008 Elections South African Mediation International criticism of the political situation in Zimbabwe grew after the March 2007 opposition arrests, even among former allies on the continent. In one of the most critical statements from African leaders, Zambia's President Levy Mwanawasa compared the country to "a sinking Titanic whose passengers are jumping out to save their lives." In South Africa, a senior Foreign Ministry official told their parliament, "the South African government wishes to express its concern, disappointment, and disapproval of the measures undertaken by the security forces in dealing with the political protests," blaming the current situation on an "absence of open political dialogue." SADC leaders convened an emergency summit on March 28, 2007. Given the strong statements made by some southern African leaders, many observers expected the SADC heads of state to increase pressure on Mugabe to make reforms. Reports suggest that in private the leaders may have been tough on the Zimbabwean president, who was in attendance, but their public response was deemed disappointing by human rights activists and critics of the regime. During the summit, the SADC leaders resolved to promote dialogue within the country, at the same time suggesting that Western countries should drop their sanctions against the Mugabe government and that Britain should provide funding to assist in land reform efforts. South African President Thabo Mbeki was appointed to mediate between the Zimbabwean government and the opposition. Mbeki, who opposed calls for regime change, pushed instead for elections, saying "you might question whether these elections are genuinely free and fair ... but we have to get the Zimbabweans talking so we do have elections that are free and fair." Talks between the Mugabe Administration and the MDC factions began in Pretoria in June 2007. According to human rights activists and the U.S. Department of State, political violence against opposition leaders and supporters continued in spite of the negotiations. The Mugabe Administration accused the opposition of being responsible for a series of bombings targeting shops, trains, and police stations, although some observers suggest the attacks were an attempt to frame the opposition. Harassment of university students by police also reportedly increased. In November 2007, 22 members of the National Constitutional Assembly, a pro-democracy civil society organization, reportedly sustained severe beatings during a peaceful protest set to coincide with a visit by President Mbeki to Harare. Although the South African negotiations resulted in several agreements between the parties, leading to the amendment of some laws seen to restrict press freedom and political activity, the talks were abandoned after Mugabe announced that elections would be held on March 29, 2008. Despite Mbeki's report to SADC leaders that his mediation had achieved "commendable achievements," Tsvangirai announced in February 2008 that "nothing has changed ... changes in the law, negotiated by President Mbeki, have not changed the behavior of the dictatorship." Election Preparations Civil society activists reported significant pre-election irregularities prior to the March 2008 elections. Critics charged that the Zimbabwe Election Commission lacked independence, and that it was further crippled by limited administrative capacity and budget shortages. Reports from domestic groups suggest that the registration process was, at best, inconsistent, and there is no indication that the ZEC addressed alleged inaccuracies in the voters' roll from previous elections. The 2008 elections were Zimbabwe's first attempt at holding "harmonized" elections for all levels of government (local, National Assembly, Senate, and presidential) simultaneously. In addition to the logistical challenges this posed, civic groups argued that the complexity of a four-ballot election required a nationwide voter education campaign. They claim that the ZEC's education efforts were inadequate and that independent NGOs were barred from engaging in voter education programs of their own. The Zimbabwe Election Support Network (ZESN), a domestic observer group composed of 38 NGOs, alleges that the ruling party redrew constituencies to ensure its continued hold on power. In its pre-election report, ZESN argued that there were not enough polling stations designated for urban areas, where the MDC is believed to have its strongest support. ZESN's report also suggested that, as in past elections, the ruling party manipulated state resources for campaign purposes. And despite amendments to POSA and AIPPA, advocacy groups argue that the police selectively interpreted the laws and significantly limited the MDC's ability to campaign. Sections of POSA which prohibit false statements "prejudicial" to the state and criminalize statements construed as engendering hostility toward the president remained in effect. Alleged Vote Buying In addition to the allegedly partisan administration of the elections, many observers contend that the government used public resources to buy votes. In the weeks preceding the polls, President Mugabe announced significant salary increases for the military and civil servants and signed into law the Indigenization and Economic Empowerment Bill, requiring foreign-owned firms to transfer 51% of their shares to domestic investors. His administration also reportedly distributed vehicles and agricultural equipment worth millions of U.S. dollars to ZANU-PF supporters. At the same time, in a country where almost half the population was considered by the World Food Program at that time to be malnourished, domestic groups reported numerous incidents of opposition supporters being denied access to state food supplies. NGOs operating in Zimbabwe reported that the ban on their distribution of food and other humanitarian aid prior to the runoff continued until August, despite claims by the government that it had been lifted. Pre-Election Violence According to domestic human rights groups, the year prior the 2008 elections was marked by a significant increase in incidents of politically motivated violence from previous years. The government routinely deployed riot police to break up demonstrations, meetings and rallies, despite changes to the laws regulating freedom of assembly. In January 2008, police allegedly tear-gassed and assaulted protestors in Harare after a local magistrate overruled a police order banning their march. In February, members of the Progressive Teachers Union of Zimbabwe reported being abducted and beaten by ZANU-PF supporters; according to their accounts several members of the police and intelligence service were present during the attacks. According to reports, the perpetrators were not arrested, but the union leaders were charged with violating a law that prohibits the distribution of pamphlets in public areas. Several of the country's security service chiefs, including the heads of the army and the police, publicly announced that they would not recognize an electoral victory by anyone other that Mugabe. In speeches and statements to the press, they and other public officials, including the president himself, referred to opposition leaders as traitors or puppets of the West. In October 2007, the International Bar Association issued a report accusing Zimbabwe's police of being "blatantly partisan" and suggesting that the force's failure to guarantee equal protection of the law "is a major obstacle to democracy in Zimbabwe and a considerable impediment to free and fair elections." As part of the 2008 electoral reforms, police were banned from the polling stations to allay fears of intimidation. However, just over a week before the elections President Mugabe issued a decree allowing police into polling stations, purportedly to help disabled voters. Election Monitoring The government of Zimbabwe reportedly invited election observers from over 40 countries and regional organizations, including the Southern African Development Community (SADC) and the African Union (AU), but barred observers from countries considered to be critical of its policies. CNN and other Western media organizations and journalists were reportedly denied permission to cover the elections. The AU observer mission, led by former President of Sierra Leone Tejan Kabbah, issued a preliminary statement after the elections suggesting that the vote was generally free and fair and expressed the will of the people. He urged all parties to accept the results. The SADC mission found the elections to be "a credible expression of the will of the people" but noted concerns regarding opposition access to the media, inflammatory statements by senior security officials, the presence of police officers at polling stations, and the delay in the publication of the voters' roll. Two members of the delegation, both from South Africa's largest opposition party, refused to sign the report, calling the elections "chaotic" and "deeply flawed." Other observer groups differed with the SADC findings. The delegations of the World Council of Churches and the African Council of Churches found the elections to be "skewed in favor of the incumbent who openly utilized state resources to his advantage" and reported media bias, "violence, intimidation and outright confrontation," and the use of food as a "political tool." Press Restrictions Two international journalists, one a Pulitzer Prize-winning American correspondent for the New York Times , were arrested in April 2008. After several days in jail, they were released on bail but blocked from leaving the country. They were later acquitted. Several other journalists, both domestic and foreign, were arrested after the elections. The director of the ZESN was detained by police in April and questioned about possible ties to the Washington-based National Democratic Institute, which monitors elections worldwide. The editor of The Standard , the only remaining independent newspaper, was arrested for printing an editorial by opposition leader Arthur Mutambara entitled, "A Shameful Betrayal of National Independence." He was later released, but charged with publishing statements prejudicial to the state. Mutambara was arrested weeks later. March 2008 Election Results Parliament The MDC, which split into two factions in 2005 (known as MDC-T and MDC-M for their respective leaders, Morgan Tsvangirai and Arthur Mutambara), remained divided for the March elections, and this division likely cost the party several parliamentary seats. The ZEC, widely criticized for its delayed release of the electoral results, announced the National Assembly results four days after the election. The MDC factions won a majority in the 220-seat National Assembly with 109 seats, over ZANU-PF's 97. Three weeks after the elections, the electoral commission conducted a recount of 23 races, an overwhelming majority of which were won by the opposition. The original results were upheld. On April 6, the ZEC announced that the ruling party had retained its majority in the Senate, where over one-third of the 93 members are appointed by the president. Of the 60 seats directly elected, ZANU-PF won 30, MDC-Tsvangirai 24, and MDC-Mutambara 6. Several senior ruling party members lost their parliamentary seats, including the Ministers of Justice, Agriculture, Mines, Energy, and Transport; several senior MDC-M parliamentarians, including Mutambara, lost to MDC-T candidates. The Presidency The MDC's decision to contest the election while still divided may also have cost the party a clear victory in the initial presidential race. In February 2008, then-ZANU-PF senior member Simba Makoni announced his intention to run against President Mugabe in the upcoming elections. He was subsequently expelled from the party and ran as an independent, although he was rumored to have been supported by several senior ruling party officials. MDC faction leader Arthur Mutambara, who had planned to run against Mugabe and Tsvangirai, withdrew as a presidential candidate and expressed his support for Makoni. It is unclear how many supporters of his faction voted for Makoni instead of Tsvangirai. The main MDC faction claimed victory for Tsvangirai days after the election with over 50% of the votes cast, basing its claim on tallies of poll results posted outside the polling stations and constituency centers immediately following the elections. Some have differed with the MDC count, suggesting that while Tsvangirai almost certainly received more votes than Mugabe, he may not have achieved the necessary 50% to avoid a runoff. ZESN reported that results were not posted in three constituency tabulation centers despite a legal requirement to do so. The results of the presidential race were not officially announced until five weeks after the elections. The opposition called for a nationwide strike on April 14 to protest the delayed release of results, asking supporters to stay home rather than to demonstrate publicly. Dozens of opposition supporters, including a newly elected member of parliament, were reportedly arrested that day for allegedly trying to incite violence or for obstructing the freedom of movement. According to reports, the strike was unsuccessful. With over 90% unemployment, some analysts suggest many Zimbabweans could not afford to miss a day's wages; other Zimbabweans said they had not heard of the strike. On the evening of May 2, the ZEC declared that Tsvangirai had received 47.9% of the votes, while Mugabe received 43.2% and Makoni 8.3%. Some in the international community questioned whether the government's delay in releasing the presidential results should be considered a political coup. The MDC had appealed unsuccessfully to the courts to have the results released earlier, but the electoral commission claimed that it could not do so until a "process of verification of the presidential ballots" was complete. Runoff Elections Called Although the opposition accused the government of manipulating the presidential results and initially objected to participating in a runoff, Morgan Tsvangirai agreed to stand against President Mugabe in a second round of voting. ZESN also questioned the validity of the presidential results, saying, "ZESN cannot substantiate ZEC figures as the network is not aware of the chain of custody of the ballot materials during the aforementioned period" and claiming that the delayed announcement of the presidential results undermined the impartiality of the ZEC. These concerns were echoed by the United States and others. Having waited for over a month to hear the final results from the first round of elections, Zimbabweans faced another significant delay before the second round. While the electoral law requires the government to hold a runoff within 21 days of announcing the initial results, the ZEC declared that the runoff would not be held until June 27, three months after the first round. Some analysts questioned whether the government could afford another election, estimated to cost up to $60 million. According to official Reserve Bank figures, government borrowing in the first three months of 2008 was 43% above the projected budget deficit for the year. The MDC initially called for the immediate deployment of election observers from outside Africa (in addition to the SADC and AU observers) as well as the deployment of regional peacekeepers during the runoff. The party later modified its demands, saying that an increased SADC and AU observer presence would be sufficient, if combined with an immediate repeal of restrictions on the MDC's ability to campaign and an end to political violence. The opposition remained largely unable to hold public rallies, which were banned by police in the capital in mid-April. Tsvangirai, who left the country a week after the elections amidst MDC concerns about his safety, returned on May 25. Given statements by government officials accusing him of treason, many believed he would not be allowed to campaign freely inside the country. The MDC leader had already been tried, and acquitted, for treason in 2004. Based on interviews with high-ranking Zimbabwean officials, the International Crisis Group issued a report warning that a Tsvangirai victory in the runoff could trigger a military coup. June 2008 Runoff Election During the weeks following the announcement of the presidential results, reports of political violence increased dramatically. Critics contend that the violence was a government-orchestrated attempt to punish opposition supporters and ensure a Mugabe victory in the runoff. According to media reports, security forces and militias manned roadblocks and detention centers across the country, despite the increased presence of over 500 SADC and AU monitors. The Washington Post reported on the government's alleged campaign of violence against the opposition, and suggested that ZANU-PF's inner circle was divided on the effort, which reportedly targeted mid-level MDC organizers and ordinary citizens for severe beatings or death. President Mugabe was quoted saying, "We shed a lot of blood for this country. We are not going to give up our country for a mere X on a ballot. How can a ballpoint pen fight with a gun?" Tsvangirai was detained by police several times during the runoff campaign, and on two occasions sought refuge in the Dutch Embassy. The MDC's Secretary General, Tendai Biti, was arrested in June 2008 upon return from South Africa and was charged with treason. After two weeks in jail, he was released on bail. On June 13, former U.N. Secretary-General Kofi Annan joined over 40 African leaders and former heads of state, including the group known as the Elders, in a letter calling on the government to stop the violence, postpone the runoff, and ensure conditions for free and fair elections. On June 22, less than a week before the runoff, ZANU-PF supporters, armed with sticks, iron bars, and rocks, blocked an MDC rally in Harare. Citing the high number of attacks against MDC supporters and the lack of a level playing field, Tsvangirai withdrew from the race the following day. Despite public comments from African observer missions and a presidential statement from the U.N. Security Council arguing that conditions for a free and fair election did not exist due the high level of violence, the government held the runoff as scheduled. Mugabe was declared the winner with over 85% of the vote and inaugurated on June 29, 2008. SADC fielded over 400 observers for the second round poll. In a preliminary report, the observers found the pre-election environment marred by "politically motivated violence resulting in loss of life, damage to property, and serious injuries sustained and hindering political activities." They also noted the "disruption of campaigning of the opposition party and the regrettable inaction of the law enforcement agencies," and cited harassment of their observers. The SADC mission found that the pre-election period did not conform to SADC Principles and Guidelines Governing Democratic Elections, damaging the credibility of the electoral process. Ultimately, the delegation reported that runoff "did not represent the will of the people of Zimbabwe." The observer delegation from the Pan-African Parliament (PAP) was similarly critical of the runoff, saying, "political tolerance in Zimbabwe has deteriorated to the lowest ebb in recent history." The delegation reported witnessing roadblocks and "male-dominated groups [that] intercepted voters and gave them pieces of paper on which they were required to write the serial number of their ballots" at many polling stations. The PAP's report questioned the impartiality of the ZEC, and found that "the current atmosphere prevailing in the country did not give rise to the conduct of free, fair and credible elections." The African Union team echoed the SADC and PAP findings, declaring that process fell short of accepted AU standards. Post-Election Violence As noted above, although observers suggest that the March 29 election day was largely peaceful, reports of politically motivated violence subsequently increased to a level not seen in two decades, according to advocacy groups. In May, the Zimbabwe Association of Doctors for Human Rights reported that its doctors had treated hundreds of victims with injuries consistent with assault and torture since the elections, and that "the violence is now on such a scale that it is impossible to properly document all cases." In total, almost 300 people died as a result of the political violence in 2008, according to the State Department. U.S. Ambassador James McGee implicated the ruling party in orchestrating the attacks. ZANU-PF and the Zimbabwean military have denied involvement with the violence, although the army; police; intelligence service; "war veterans;" and Zimbabwe's National Youth Service, also known as the "Green Bombers," were all implicated. One week after the elections, self-styled war veteran leader Jabuli Sibanda warned, "It has come to our realization that the elections were used as another war front to prepare for the re-invasion of our country.... As freedom fighters, we feel compelled to repel the invasion," echoing a frequent Mugabe refrain that an opposition victory would be tantamount to the British reinstating colonial rule. The state-owned Herald newspaper, contributed to fears of a white takeover in the wake of the election, reporting, "an increasing number of white former commercial farmers are reportedly threatening resettled black farmers throughout the country with eviction from their farms or face the wrath of an anticipated 'incoming MDC government.'" These pronouncements coincided with farm invasions throughout the country, and by April 16, the Commercial Farmers Union reported that over 100 of the estimated remaining 400 white farmers had been forced off their lands. Since independence, ZANU-PF had employed terminology associated with military-style campaigns for government programs ranging from the implementation of price controls, known as Operation Reduce Prices, to the demolition of informal urban settlements, or Operation Murambatsvina (translated as "Clean Out the Filth"). Reports suggest that the post-election round of violence had its own campaign name, Operation Mavhoterapapi ("Who did you vote for?"). Critics note the government's historic use of violent tactics against political opponents, pointing to the infamous Operation Gukurahundi ("The rain that washes away the chaff"), the violent "pacification" campaign by a North Korean-trained military unit, the 5 th Brigade, in the 1980s against alleged dissidents and supporters of ZANU-PF's political rival, the Zimbabwe African People's Union (ZAPU). Gukurahundi , sometimes referred to as the Matabeleland Massacres, resulted in the deaths of over 10,000 civilians, mostly from the Ndebele ethnic group in the southwest. That 5 th Brigade was led by then-Lt. Col. Perence Shiri, now commander of the Air Force. Other officials involved in the campaign were elevated to senior government posts, including former Defense Minister Sydney Sekeremayi (now Minister of State for National Security) and Emerson Mnangagwa. Mnangagwa, then Minister of State Security in charge of intelligence, once reportedly warned that the government would burn down "all the villages infested with dissidents." He is rumored to lead the Joint Operations Command (JOC), a secretive group of security chiefs and top commanders that some allege controls the government. Zimbabwe's rural areas appear to have been the hardest hit by the post-election violence; the U.S. Embassy in Harare documented thousands who fled the countryside for urban areas in the months after the March elections. Most Harare medical clinics were at full capacity during the height of the violence, according to the U.S. Agency for International Development (USAID). Zimbabwe's largest farmers' union reported that militias displaced over 40,000 farm workers, and there were widespread reports of burned homes, granaries, and livestock. Human Rights Watch detailed the "re-education" and torture of more than 70 MDC supporters, seven of whom reportedly died from their injuries, in Mashonaland province on May 5. Amnesty International reported that victims were often denied medical access and that humanitarian organizations have been targeted by militias for providing assistance. The United Nations' resident representative in Zimbabwe declared, "there is an emerging pattern of political violence inflicted mainly, but not exclusively, on suspected followers of the MDC." The level of violence was confirmed by a SADC mission, "we have seen it, there are people in hospital who said they have been tortured, you have seen pictures, you have seen pictures of houses that have been destroyed." Some who fled to the cities faced further intimidation. Police repeatedly raided the offices of both the MDC and ZESN. Hundreds were arrested in the MDC raids, many of whom had reportedly already suffered attacks in their rural homes and fled to the MDC offices for refuge. In these raids, the police, allegedly looking for subversive documents, took computers and documents. On May 9, police arrested the leaders of the Zimbabwe Congress of Trade Unions (ZCTU) based on speeches made at a worker's day rally. The head of the Progressive Teacher's Union was also arrested. On May 5, more than 50 people were beaten by riot police during a protest against the ongoing violence in Bulawayo; 11 members of a women's advocacy group were arrested. Some Zimbabwean officials, including the police chief, accused the MDC of rigging and inciting violence. More than ten newly elected MDC legislators were arrested in the wake of the March elections. Over 100 election officers were arrested on charges of committing fraud and abusing public office in favor of the MDC. Independent reports suggest that teachers, who held many of the election officer positions, were specifically targeted by government supporters. The Power Sharing Agreement and the New Coalition Government On September 15, after several weeks of negotiations overseen by Thabo Mbeki, Mugabe and Tsvangirai signed the Global Political Agreement (GPA). The text of the agreement left oversight of the police undetermined, and debate over which party would control the force delayed the agreement's implementation for over four months. Amid concern that the parties would abandon compromises made in the GPA, SADC renewed pressure for the agreement to be implemented in January 2009. Tsvangirai agreed to join a coalition government on January 31, and, after Zimbabwe's parliament amended the constitution to allow its creation, Tsvangirai and new MDC ministers were sworn in as members of the new government in early February 2009. Other Humanitarian Issues Operation Murambatsvina In May 2005, the government of Zimbabwe initiated Operation Murambatsvina (variously translated as "Restore Order" or "Clean Out the Filth"), a massive demolition program aimed at destroying allegedly illegal urban structures, such as informal housing and markets. By early July 2005, an estimated 700,000 urban Zimbabweans had been rendered homeless or unemployed by the operation, and an estimated 2.1 million (in total, almost 20% of the population) were indirectly affected by the demolitions. These are considered "low-end estimates;" some reports suggest the number affected was much higher. According to some sources, 70% of the country's urban population lost shelter, while approximately 76% lost their source of income. Security forces reportedly arrested forty thousand for allegedly illegal activities and told those whose homes were destroyed to "return to their rural origins," although many had no rural home to which they could return. Operation Murambatsvina had a severe impact on the nation's economy and on the livelihood of its citizens. For many, this was not the first time they had been forcibly removed from their homes. As a result of the 2000 land reform program, an estimated 400,000 black laborers on commercial farms lost their livelihoods and/or homes, and many fled to urban areas to find work. Political violence surrounding the 2002 elections forced others from their homes, reportedly displacing more than 100,000. In 2004, under a new phase of land resettlement, an estimated 500,000 who settled on farms during the 2000 invasions were evicted. Many of the displaced inhabited the urban "slums" prior to the demolitions, making their living from trading on the black market. Given the collapse of the formal economy, 40% of the labor force was estimated to be informally employed prior to Murambatsvina , while 44% worked in the communal sector (including the agriculture industry), and 16% worked in the formal sector. Of those living in towns and cities, an estimated 70% were involved in informal trading prior to the demolitions. Political Motivations? The government described Murambatsvina as a program designed to restore the capital city to its former image as "the Sunshine City," ridding the country's urban areas of illegal structures that foster criminal activity and stemming the black market trade in foreign currency. Launched shortly after the disputed 2005 parliamentary elections, many contend the demolitions were a political move aimed either at preventing mass protests over the growing economic crisis or at punishing the reputed urban support base of the MDC. The Harare Commission that initiated the campaign was established in order to contravene the authority of the elected city council, of which the MDC held the majority. The mayor of Harare, an MDC politician who was elected by 80% of the vote, was fired in April 2004, along with 19 MDC-allied city councilors, after having been arrested in 2003 under POSA for holding a public meeting without prior state approval. A high court ruling challenged the legality of the Harare Commission, which was appointed by the Minister of Local Government, finding that the commission did not have the authority to fire the mayor. A new election was supposed to be held within 90 days, according to law, but when no election occurred, the commission was reappointed. The remaining MDC councilors resigned in protest. With the exception of Harare, the local authorities of the other areas (many of which were MDC-controlled) affected by Murambatsvina reported that they were not informed of the demolitions prior to the event. The implications of this breakdown in governance are reflected in findings of the United Nations, which noted that Murambatsvina "was implemented in a highly polarized political climate characterized by mistrust, fear and a lack of dialogue between Government and local authorities, and between the former and civil society." The International Response International reaction to Murambatsvina was highly critical. U.N. Secretary-General Kofi Annan named Tanzanian Anna Tibaijuka, Executive Director of UN-HABITAT, as the U.N. Special Envoy on Human Settlements Issues in Zimbabwe to investigate the humanitarian impact of the demolitions. Following a fact-finding trip, she issued a comprehensive report, which concluded: Operation Restore Order, while purporting to target illegal dwellings and structures and to clamp down on alleged illicit activities, was carried out in an indiscriminate and unjustified manner, with indifference to human suffering and, in repeated cases, with disregard to several provisions of national and international legal frameworks. The report also described police preventing civil society and humanitarian organizations from assisting those affected by the demolitions, and suggested that the groups were operating in a "climate of fear" and practicing "'self-censorship' to avoid being closed down or evicted." The Chairman of the African Union sent his own envoy, but he was prevented from conducting an assessment (see " International Perspectives ," below). The presentation of the U.N. envoy's report to the U.N. Security Council stirred controversy as China, Algeria, Benin, and Russia objected to debate on the report. The majority of Security Council members voted to allow its discussion, albeit in a closed session. Secretary-General Annan also issued a strong statement condemning Murambatsvina , calling on the government of Zimbabwe to stop the evictions and allow unimpeded access for humanitarian assistance: "Operation Murambatsvina" has done a catastrophic injustice to as many as 700,000 of Zimbabwe's poorest citizens, through indiscriminate actions, carried out with disquieting indifference to human suffering. I call on the Government to stop these forced evictions and demolitions immediately, and to ensure that those who orchestrated this ill-advised policy are held fully accountable for their actions ... the Government must recognize the virtual state of emergency that now exists, allow unhindered access for humanitarian operations, and create conditions for sustainable relief and reconstruction. Continued Evictions and Operation Garikai Many observers suggest the Zimbabwean government did little to respond to U.N. Envoy Tibaijuka's recommendations. Reports indicate that forced evictions continued, despite government declarations to the contrary. As was the case during the initial evictions, several thousand of those made homeless were taken, in some cases reportedly against their will, to police-run "transit camps" in late 2006. Conditions in these camps were described as dire, often lacking shelter, water, or basic latrine facilities. In keeping with the U.N. report findings, Amnesty International alleged that the government repeatedly prohibited aid agencies, including the United Nations, from providing temporary shelters, such as tents, for the displaced. Secretary-General Annan expressed his concern in October 2005 over the government's rejection of U.N. assistance to "tens of thousands," noting "there is no clear evidence that subsequent Government efforts have significantly benefitted these groups." The United Nations was subsequently permitted to erect approximately 2,300 shelters, a fraction of their target of 40,000. In response to international criticism of Murambatsvina , the government announced a new housing scheme, Operation Garikai , in June 2005. Under Garakai , also known as "Hlalani Kuhle" (Live Well), new housing for those rendered homeless was to be built with public funds. The ambitious reconstruction program would allegedly create tens of thousands of new homes, but given the shortage of building materials and the government's budgetary problems, it is highly unlikely the original target of 5,275 homes was met. Reports suggest that few houses were actually completed, and, instead of going to victims of Murambatsvina , the newly built houses were more likely to be occupied by soldiers, police, and members of the ruling party. The government denied these allegations. Amnesty International and a domestic group, the Coalition Against Forced Evictions, issued a May 2010 report on the progress of the government's re-housing scheme. The report argued that, five years after Murambatsvina , many victims continued to live in plastic shacks without basic essential services. The groups have been critical of the transitional government's response. According to 2010 Housing Ministry estimates, as many as 500,000 were still on the waiting list for housing in Harare alone, with the national backlog in urban areas possibly over 1 million. Violations of Domestic and International Law In the wake of Murambatsvina , human rights organizations raised questions about how Zimbabwe and the international community should respond to what some have termed "crimes against humanity," as defined by Article 7 of the Rome Statute of the International Criminal Court (ICC), and whether there was a "responsibility to protect" those affected by the campaign or subsequent government actions. Among the Murambatsvina report recommendations, the U.N. envoy suggested: Although a case for crime against humanity under Article 7 of the Rome Statute might be difficult to sustain, the Government of Zimbabwe clearly caused large sections of its population serious suffering that must now be redressed with the assistance of the United Nations and the international community. The international community should encourage the Government to prosecute all those who orchestrated this catastrophe and those who may have caused criminal negligence leading to alleged deaths, if so confirmed by an independent internal inquiry/inquest. The international community should then continue to be engaged with human rights concerns in Zimbabwe in consensus building political forums such as the UN Commission on Human Rights, or its successor, the African Union Peer Review Mechanism, and in the Southern African Development Community. The report provided legal analysis of Murambatsvina through international, regional, and national frameworks, ultimately finding that "The Government of Zimbabwe is collectively responsible for what has happened" during Murambatsvina , but that "it appears there was no collective decision-making with respect to both the conception and implementation. Evidence suggests it was based on improper advice by a few architects of the operation." One media source, however, quoted Zimbabwe's State Security Minister saying, "All the decisions to do with the operation emanated from the [party] politburo and were sent through me to the government." Several groups, including the International Bar Association (IBA), have called for President Mugabe's government to be brought before the ICC, not only for violations related to the demolitions, but also for its alleged support of political violence against its critics. Responding to President Mugabe's comments supporting the beating of trade union leaders in 2006, the Executive Director of the IBA made the following statement: Mugabe's statements add to the weight of evidence that torture and other serious violations of international law are sanctioned at the highest level in Zimbabwe. This underscores the urgent need for international and regional action to hold the Zimbabwean Government to account ... the torture of the trade union activists is not an isolated incident, but part of a dangerous and illegal system of repression which constitutes crimes against humanity in international law. Decisive action is required by both the United Nations and the African Union to end impunity and violence in Zimbabwe. In May 2008, the IBA Executive Director reiterated his call for an ICC investigation of President Mugabe for crimes against humanity. The government of Zimbabwe has yet to prosecute those who might be responsible for crimes related to Murambatsvina or the subsequent evictions. The victims, in most cases, lack the financial resources to seek redress in court, although human rights lawyers have represented groups of victims on several occasions. In one case, in November 2005, residents of a Harare suburb were given a temporary stay of eviction by the High Court, but police ignored the order and forcibly moved the group to a transit camp. Four cases involving Zimbabwe, two involving land reform cases and two related to evictions under Murambatsvina, are pending before the African Commission on Human and People's Rights. SADC's regional tribunal, established to ensure that SADC member states adhere to the SADC treaty and protocols, protect the rights of citizens, and provide for the rule of law, ruled against the Zimbabwe government in several cases between 2008 and 2010, finding, for example, that the government had undermined the rule of law by refusing to compensate nine victims of state-sponsored violence and torture as had been ordered by the Zimbabwean High Court. Zimbabwe's Justice Minister claims the tribunal has no jurisdiction over Zimbabwe, and the government refused to enforce the judgments. In August 2010, SADC heads of state ordered a review of the tribunal's role and mandate, effectively suspending its operations. Civic activists have argued that the inability of the Zimbabwe's judicial system to protect its citizens or their property in such cases, or to provide due process to those seeking remedy or compensation, suggests a fundamental breakdown in the rule of law. Food Insecurity Several Southern African countries have suffered from chronic food insecurity in the past decade, stemming from a combination of weather-related and man-made factors, including prolonged drought, floods, poor economic performance, and the impact of HIV/AIDS. Zimbabwe was particularly hard hit. Experts have attributed this primarily to severe crop failure, but some suggest Murambatsvina and other government policies also significantly limited the population's ability to feed itself, particularly in urban areas. Aid organizations estimated that some seven million Zimbabweans, almost three-quarters of the country's population, required food assistance between late 2008 and early 2009. That figure has declined significantly in the last two years – an estimated 3.5 required food aid in 2009/2010, and 1.7 million are estimated to require food aid in 2011. USAID reports that food production has slightly increased, but attributes the continued need to a number of factors, including localized food insecurity, limited access to currency, and displacement due to localized political violence. Drought is in part to blame for the country's food shortages, but many analysts have argued that disruptions to the farming sector resulting from Mugabe's land seizure program resulted in reduced food production. Others suggest while the fast-track land reform program did result in a major restructuring of the country's agricultural sector, not all of the effects have been negative. Nearly all of the country's white-owned 4,500 commercial farms have now been taken over; less than 300 white-owned commercial farms remain in operation. From independence to 1999, roughly three million hectares of commercial farmland were transferred under a land reform program largely funded by the British, and a further eight million hectares were subsequently re-allocated after 2000. The government's land redistribution program has reportedly been plagued by inefficiencies, and critics suggest large portions of redistributed land are not actively farmed. Thousands of experienced farm workers were reportedly forced to flee seized commercial farms, and many of those who received farmland had no previous agricultural expertise. Farming inputs have been in short supply for those without start-up assets. Operation Taguta In late 2005, the Zimbabwe government established Operation Taguta (or "Eat Well"), a move seen by many as an acknowledgment that farm resettlement policies had failed to meet the country's agricultural production needs. With food distribution already under the control of the Grain Marketing Board, then reportedly led by military officers, the government established a command agriculture system, in which the military would be responsible for not only the distribution, but also the production of food. Under Taguta , there were numerous reports of the illegal seizure of farm equipment, destruction of the cash crops small-scale farmers grow to sell at market to support their families, and even army brutality against farmers. Some critics of the government suggest Operation Taguta was used by the government as an excuse to deploy military forces throughout the country to control the population. A Zimbabwe journalist was jailed in March 2009 for reporting on allegations of corruption within the Grain Marketing Board. Its power has been reduced under the coalition government. Food as a Political Weapon? The ZANU-PF government's stance on food aid led many observers to suspect that it used food as a political weapon, a charge the government denied. Despite international donor agency assessments suggesting the need for food assistance, President Mugabe confounded observers in the mid-2000s by repeatedly declaring the country was running a maize surplus and would not need food aid. In 2004, the government stopped a U.N. food needs assessment and later halted general food aid distribution by donors (targeted food aid to vulnerable groups continued), despite independent estimates that suggested 4.8 million would require assistance. In March 2005, the government finally acknowledged serious food shortages, but delayed signing an agreement to allow the World Food Program and its implementing partners to provide assistance until December of that year. Reports suggested that the government maintained tight control of food distributions, before banning the distribution of aid by NGOs prior to the 2008 runoff. The government accused aid agencies of using food to turn Zimbabweans away from ZANU-PF. Critics accused the government of distributing food only in areas where people would agree to vote for ZANU-PF. During past elections, civil rights groups and the opposition reported instances of ZANU-PF holding campaign rallies in conjunction with government food distributions. In some areas, officials distributing food required recipients to show a party card—MDC supporters were reportedly turned away. Two 2005 court rulings supported these claims, finding that ZANU-PF candidates politicized distributions and used violence against the MDC. HIV/AIDS In the midst of its political and economic crises, Zimbabwe has been ravaged by HIV/AIDS. The country's HIV prevalence rate is among the world's highest. The United Nations estimates that Zimbabwe has one of the highest percentages globally of children who have been orphaned by AIDS. The epidemic has caused a severe strain on the country's healthcare system; reports suggest that majority of hospital admissions are AIDS-related, leaving few beds or resources for other patients. To compound this problem, the economic crisis has resulted in the exodus of many of the country's medical professionals. The AIDS epidemic is having a crippling effect on the economy—the inability of infected agricultural workers to adequately contribute to food production further hamstrings the struggling industry. Although its infection rate remains high, Zimbabwe is one of several countries in Sub-Saharan Africa in which HIV prevalence rates have declined, after reportedly peaking at 36% in the mid-1990s. Changes in sexual behavior and prevention programs have been credited, but mortality among diagnosed cases during the peak of the epidemic also contributed to the decline. Zimbabwe's government has claimed significant resolve to fight the disease. The country was the first to introduce a tax to finance HIV/AIDS programs (3% on taxable income). President Mugabe committed Zimbabwe to universal access to antiretroviral therapy (ART) by 2010, but access remains relatively low, with less than half of those requiring treatment on ART in 2010. Cholera and the Healthcare System Collapse From August 2008 to June 2009, over 98,500 suspected cases of cholera, including almost 4,300 deaths, were reported, according to the U.N. World Health Organization (WHO). Neighboring countries reported confirmed cases in border areas. Cholera, an acute diarrheal infection, is spread by contaminated food and water. In Zimbabwe, the reported case fatality rate (CFR) reached almost 6% at its peak in January 2009, much higher than the normal 1% CFR rate for cholera cases globally. Following significant international intervention, the country's CFR has since decreased substantially. Cholera remains a localized problem, however, from January through May 2011, there were almost 880 cases reported, but only 38 deaths. Many health experts attribute the severity of Zimbabwe's 2008/2009 cholera outbreak to the collapse of the country's healthcare, water, and sanitation systems. According to reports, water treatment and delivery had dramatically declined in the late 2000s, and the decline of many other basic social services, such as trash collection, posed significant health risks. Public healthcare providers lacked basic medications, supplies and functioning medical equipment, and, by 2008, many public hospitals and clinics had closed due to understaffing as health workers migrated to neighboring countries in search of work. Despite subsequent water infrastructure improvements, an estimated one-third of rural Zimbabweans still lacked access to clean drinking water in 2011. The Economy The turmoil in Zimbabwe in the past decade led to a severe economic contraction, a sharp drop in living standards for the rural and urban poor, and a massive exodus of Zimbabweans in search of work. According to the Solidarity Peace Trust, founded by clergy from Zimbabwe and South Africa, well over three million Zimbabweans were living outside the country by 2004. The Trust calculated that this amounted to 25%-30% of the total population, or 60%-70% of productive adults. Many more are believed to have fled Zimbabwe since then. Some who left the country because of economic hardship have faced difficult conditions in their new host countries. Many in Zimbabwe still reportedly rely on remittances from family abroad. The IMF and the World Bank Dubbed "the world's fastest shrinking economy" by 2008, Zimbabwe's Gross Domestic Product (GDP) declined over 50% in the ten-year period from 1998. World Bank and International Monetary Fund (IMF) lending was suspended in 2000 due to nonpayment of arrears, and foreign currency for essential imports has periodically been in short supply. Zimbabweans have faced steep rises in the prices of food and non-food items in recent years. The transitional government's adoption in 2009 of multiple currencies, including the U.S. dollar, stabilized prices, but the cost of living remains high. In December 2003, Mugabe selected Gideon Gono, credited with turning around a troubled commercial bank, as governor of the Reserve Bank of Zimbabwe (RBZ). Critics maintain that his measures to fight corruption and discover illegally held foreign exchange were used to damage government opponents and further the interests of ZANU-PF, and international assessments of Zimbabwe's economic prospects remained bleak. Ignoring the advice of the IMF, the government refused to devalue the official exchange rate. Instead, in June 2006, Gono devalued the Zimbabwe dollar, removing three zeros in an effort to mitigate inflation. Under "Operation Sunrise," the government printed new "rebased" currency, known as "little heroes," in an effort to combat corruption and money laundering, according to the government. Zimbabweans were given only 21 days to exchange their old currency. Individuals were restricted from exchanging more than Z$100 million (USD$1000) of the old notes without clearance from tax authorities (companies were allowed to exchange Z$5 billion). Police arrested thousands at roadblocks for holding currency over the individual limit and seized a reported $40 million. Analysts suggest the devaluation did little to reverse the foreign exchange rate shortages. Gono devalued the currency again in early 2009, removing 12 zeros from the Zimbabwe dollar. In late September 2008, Zimbabwe began officially trading in foreign currency in an effort to lower prices, and in February 2009, under the direction of Finance Minister Tendai Biti of the MDC, the government began issuing civil servant salaries in vouchers good for $100 U.S. dollars. Biti and Prime Minister Tsvangirai pledged to pay salaries in foreign currency in an effort to get Zimbabweans to return to work. Zimbabwe officials continue to report that without a significant influx of foreign currency, salaries will remain low. Most salaries have risen slightly since early 2009, but remain extremely low in comparison to the cost of living or by regional standards. Zimbabwe is currently restricted from borrowing from the IMF, to which the country still owes $134 million. The government paid $120 million in 2005 and $9 million in 2006 to settle other outstanding arrears with the Fund and to avoid compulsory withdrawal from the IMF. Mugabe has dubbed the IMF a "political instrument" and "monster" for regime change. Zimbabwe also owes an estimated $807 million to the World Bank, $510 million to the African Development Bank, and $239 to the European Investment Bank, among others; in total the country's external debt is estimated at $8.8 billion, including payment arrears of $5.9 billion (80% of GDP at the end of 2010). In response to the September 2008 power sharing agreement, the IMF's Managing Director encouraged the Zimbabwe government discuss policy reforms with the Fund and to "take steps to show clear commitment to a new policy direction." Following a consultation visit to the country in March 2009, the IMF noted positive steps toward fiscal discipline and offered to provide further policy advice, but warned that IMF funding would not be renewed until Zimbabwe begins to repay its debts and establishes "a track record of sound policy implementation [and] donor support." The IMF again noted progress after March 2010 and 2011 visits, but has suggested that the country remains in debt distress and that the economy will not recover without debt relief. The World Bank has pledged technical assistance to the coalition government, but like the IMF has predicated major support on Zimbabwe's payment of its arrears. Attempts to Revive Agriculture Industry In addition to the ZANU-PF government's attempts to revive its flagging agriculture industry through the introduction of a command agriculture system (see " Food Insecurity ", above), the government introduced long-term leases in an effort to provide security of tenure for farmers willing to cultivate land nationalized in the 2005 constitutional amendment. One of the unintended side effects of the 2000 land reform strategy, which resulted in the abolition of land tenure, was that farmers were unable to use their land as collateral to obtain bank loans to invest in their farms. As a result, few commercial farmers were able to find the capital to maintain productivity. The government began to distribute 99-year leases in November 2006. Among the initial recipients were 19 white farmers, shocking many given Mugabe's declaration in July 2005 that his land reform program would be complete only when there was "not a single white on the farms." Some banks have reportedly been reluctant to accept these leases as collateral, given that the government reserves the right to cancel a lease if it deems the farm unproductive. Zimbabwe continues to suffer from electricity shortages, and its internal power generation capacity is reportedly capable of meeting only half of the country's demand. Periodic electricity shortages, caused by supply cuts from Mozambique, South Africa, and Zambia, compounded Zimbabwe's economic woes in recent years, periodically cutting the production capacity of the manufacturing and mining sectors by as much 50%. The MDC Minister for Energy and Power Development asserted in 2009 that country's power infrastructure is in disrepair and up to $1 billion will be needed to fix the crumbling energy sector. The Mining Industry Zimbabwe's mining industry has brought much-needed income into the country, accounting for almost half the country's total foreign currency revenues in recent years. Zimbabwe has the world's second-largest reserves of platinum, behind South Africa. In 2006, the government announced plans to take a 51% share of all foreign-owned mines for local black investors; 25% of that share would be acquired at no cost to the government, and mines that refused to part with their shares would be expropriated. After industry officials cautioned that the plan would deter foreign investment, the proposal was modified, allowing firms that invested in community projects to keep their majority share. Parliament voted to approve similar plans to take a majority share in all foreign-owned businesses in 2007; the legislation became law in March 2008. The government insisted that it would not expropriate foreign-owned companies and that the law would not be applied to every company, but rather "on the basis of capital and employment levels." A ZANU-PF controlled-ministry has introduced subsequent indigenization regulations related to the mining sector that are the subject of ongoing debate within the transitional government; critics argue the law further deters much-needed foreign investment. The coalition government has sought to encourage investment in the mining sector, despite uncertainty regarding the indigenization regulations. Under the previous administration, gold miners were required to sell their product to the Reserve Bank of Zimbabwe. As the bank's foreign currency reserves dwindled, it reportedly ceased to pay miners for the gold, and many of the country's gold mines closed. The coalition government now allows the mines to market their own gold and accept payment in foreign currency. It has also cut the tax on gold export revenues. Illegal Mining The Zimbabwe government has taken various steps in recent years to crackdown on illegal mining, although some suggest that members of ZANU-PF may be complicit. Police arrested an estimated 20,000 illegal miners in 2006, including several hundred reportedly legal small-scale miners, confiscating gold, diamonds, emeralds, and gold ore. According to reports, most of the miners were released after paying fines. Security forces have been accused of serious human rights abuses related to some illegal mining crackdowns. As a result of the collapse of the formal economy, many of the country's unemployed have resorted to illegal mining, selling their goods on the black market. "Blood Diamonds"? The World Diamond Council (WDC), a diamond industry organization that aims to prevent the trade of conflict diamonds, raised initial concerns in December 2008 that rough diamonds from Zimbabwe were being exported illegally, rather than through the Kimberly Process (KP), an international government certification scheme designed to prevent the "blood diamond" trade. According to civil society reports, Zimbabwean soldiers in the Marange diamond fields have forced villagers to labor in the mines and then smuggled the stones from the country. Rough stones from Zimbabwe have reportedly been confiscated in India and Dubai. The European Union pressed for an investigation into Zimbabwe's compliance with its Kimberly obligations in early 2009, and a high level KP delegation visited Zimbabwe in March to express the group's concern with reports of violence and smuggling from the Marange area. The KP Secretariat refrained from suspending Zimbabwe from the certification scheme, however. During a KP Plenary meeting in November 2009, the body called for stringent export controls on diamonds from Marange. The Zimbabwe government reported later that month that security forces had begun withdrawing from the area, and a judge ordered that the Reserve Bank of Zimbabwe hold all diamonds from the area until legal claims regarding the Marange mines are resolved. Some argue that "Zimbabwe poses a serious crisis of credibility for the KP" The U.S. government and others called for Zimbabwe to be suspended from the Process if the controls recommended at the KP Plenary were not implemented. In June 2011, the KP Chair, held by Mathieu Yamba of the DRC, announced that exports from Marange could resume. The United States and other Western governments, along with several human rights and industry groups, have protested the move, arguing that KP decisions are supposed to be based on consensus. The Kimberly Process had previously investigated allegations that "blood diamonds" from the Democratic Republic of Congo (DRC) were being smuggled along with rough stones from Zimbabwe into South Africa for export. The Mugabe government dismissed those claims as a Western attempt to promote regime change. Zimbabwe has been previously linked to conflict diamonds; senior officials were named in a 2003 U.N. report for profiting from illicit trade during Zimbabwe's military operations in the DRC. "Look East" Policy Blaming the United States, the United Kingdom, and other Western governments for the country's economic crisis, President Mugabe sought to engender investment and trade opportunities with Asia, particularly China. Dubbed the "Look East" policy, Mugabe's efforts were criticized by his own party as insufficient to address the economy's slide. In December 2006, the Parliamentary Portfolio Committee on Budget, Finance, and Economic Development, chaired by a ZANU-PF MP, accused the central bank governor of exacerbating inflation with "quasi-fiscal activities" and warned the administration that "the Far East destinations be viewed as a market in its infancy and that the traditional market of the West should not be neglected as the nation moves toward regularizing relations with the international community." China has reportedly provided a number of sizable loans to the transitional government to support Zimbabwe's economic recovery in return for mining concessions. The Military and the Economy Critics contend that President Mugabe has bought the continued loyalty of the country's security forces through patronage and bribery. Some observers suggest that loyalty of the security forces may have come at a heavy cost to the economy. Observers continue to speculate on how the government has paid for its military purchases from China, including a reported $240 million in fighter jets. In addition to allegations of land and housing handouts to security personnel, critics of the government highlight a significant number of current and former military officers who have been appointed to senior civilian government positions. Mugabe previously placed current or former military officers in control of the Ministries of Energy and Industry, the Zimbabwe Revenue Authority, the electoral commission, the state railway, the Grain Marketing Board, and the parks authority, and several have served in the Senate and ambassadorial posts abroad. Several of these individuals still hold senior offices in the government. As the economy contracted in the mid 2000s, signs emerged that the government might be running out of funds to maintain its security forces. During a parliamentary hearing in 2007, the Defense Minister reportedly suggested that soldiers were dissatisfied with their low salaries and that the forces were running out of food and might have to suspend training if new funds were not released. Later that month, Zimbabwean intelligence officials reportedly uncovered a coup plot led by several senior military officials. Unconfirmed reports suggest that as many as 400 members of the army, air force, and police may have been involved in the plan, which allegedly aimed to remove Mugabe and to install Emmerson Mnangagwa as president. Mnangagwa denied any knowledge of the plot. Other sources suggest Vice President Joice Mujuru and her husband were behind the coup attempt and used Mnangagwa's name to discredit him. Neither Mnangagwa nor the Mujurus were officially accused of involvement, although some reports suggest Solomon Mujuru may have been placed under house arrest for a limited time. In late 2008, soldiers looted Harare stores after they were unable to access their paychecks. Like other civil servants, the military and police now receive regular salary payments under the transitional government. International Perspectives The international community has been divided on how to respond to Zimbabwe's economic and political crises. In general, Western nations and institutions have expressed opposition to Robert Mugabe's methods of rule, and have pursued policies intended to pressure the Zimbabwe government for reforms. Mugabe has enjoyed greater support in Africa, where he has been viewed as an elder statesman and a leader of the anti-colonial struggle, and among the Non-Aligned nations generally. This has changed to an extent in recent years, however, with some African leaders concluding that the Zimbabwe situation has been damaging to regional interests and that political and economic reforms are needed. Nevertheless, African countries supported Zimbabwe in its successful bid to chair the United Nations Commission on Sustainable Development in 2007, allegedly to show African solidarity against Western opposition. AU member states were unable to come to a conclusion on how to address Zimbabwe's political situation at the 2008 AU Summit in Egypt, despite election observer reports from the AU, SADC, and the Pan-African Parliament finding that the June runoff was not free or fair. The African Union subsequently deferred to SADC's mediation role on Zimbabwe. The international donor community has generally expressed support for the new coalition government, but has predicated significant assistance on improvement in the following areas: the release of all political prisoners; the end of farm disruptions; the cessation of politically motivated violence; the establishment of a credible and transparent Reserve Bank team; an end to harassment and intimidation of the media; and a commitment of all stakeholders to holding credible elections in a timely manner. U.S. Policy The United States government has been critical of Robert Mugabe and ZANU-PF for their poor human rights record and lack of respect for the rule of law, but has expressed cautious support for the transitional government. Key elements of U.S. policy toward Zimbabwe have included targeted sanctions against high-ranking ZANU-PF members and their affiliates, support for South Africa to spearhead an African effort to restore democracy, and assistance intended to help the country's poor and strengthen civil society. Former Secretary of State Condoleezza Rice told Congress during her 2005 confirmation hearing that Zimbabwe was one of six "outposts of tyranny" worldwide and that the United States stood with the oppressed people there. These remarks provoked an angry personal response from Mugabe. Prior to the formation of the unity government, Secretary of State Hillary Rodham Clinton told the Senate in January 2009 that "the suffering inflicted on the Zimbabwean people by the illegitimate government of Robert Mugabe is appalling." Under her leadership, the State Department has welcomed the transitional government but warned, "we will not consider providing additional development assistance or even easing sanctions until we see effective governance." Sanctions The Mugabe administration has routinely blamed its economic crisis on sanctions from the west. The United States does not currently have trade sanctions against Zimbabwe, with the exception of a ban on transfers of defense items and services to the country. The U.S. government has, however, frozen government-to-government aid. Zimbabwe is not eligible for trade benefits under the African Growth and Opportunity Act (AGOA) because of its poor record of economic management and human rights abuses. The White House has annually renewed U.S. sanctions against ZANU-PF leaders. The sanctions are intended to punish those responsible for Zimbabwe's difficulties without harming the Zimbabwe population at large. The initial sanctions, imposed in 2003, ban travel to the United States by "senior members of the government of Robert Mugabe and others ... who formulate, implement, or benefit from policies that undermine or injure Zimbabwe's democratic institutions or impede the transition to a multi-party democracy." Persons who benefit financially from business dealings with such individuals are also banned, as are the spouses of people in either group. In 2003, President Bush issued an executive order freezing assets held in the United States by more than 70 high-ranking Zimbabwe officials and Mugabe's wife, Grace. Nine companies and commercial farms were added in 2004, and the list has been further expanded since then. The executive order also allows the Secretary of the Treasury, in consultation with the Secretary of State, to go beyond previous authority and block the property of additional persons who "have engaged in actions or policies to undermine Zimbabwe's democratic processes or institutions," their immediate family members, and any persons assisting them. President Obama most recently renewed the sanctions in March 2011, stating, While some advances have been made in Zimbabwe, particularly on economic stabilization, since the signing of the power-sharing agreement, the absence of progress on the most fundamental reforms needed to ensure rule of law and democratic governance leaves Zimbabweans vulnerable to ongoing repression and presents a continuing threat to peace and security in the region and the foreign policy of the United States. Politically motivated violence and intimidation, and the undermining of the power-sharing agreement by elements of the Zimbabwe African National Union-Patriotic Front party, continue to be of grave concern. Congressional Response Congress expressed its opposition to Robert Mugabe's policies in the Zimbabwe Democracy and Economic Recovery Act of 2001 ( P.L. 107-99 ), which criticized "economic mismanagement" and "undemocratic practices" in Zimbabwe. This legislation called for consultations with allies on economic sanctions and a travel ban. In the 109 th Congress, the House of Representatives passed H.Res. 409 in December 2005, condemning Operation Murambatsvina , which it termed a "humanitarian disaster that has compounded the country's humanitarian food and economic crises." The resolution also called on the United Nations and African regional bodies to investigate the impact of the demolitions and requested that the Administration use its influence to advocate further action by the IMF against the Zimbabwe government. Senator Russ Feingold introduced S.Amdt. 1254 , providing $4 million for democracy and governance activities in Zimbabwe, which was included in the final version of the FY2006 foreign operations appropriations bill ( P.L. 109-102 ). The 110 th Congress was also active on Zimbabwe. In April 2007, the House of Representatives passed H.Con.Res. 100 , sponsored by Representative Tom Lantos, condemning the Zimbabwe government's recent actions against opposition and civil society activists. In June 2007, the Senate passed parallel legislation, S.Con.Res. 25 , introduced by then-Senator Barack Obama. Former Senator Hillary Rodham Clinton introduced S. 1500 , the Support for Democracy and Human Rights in Zimbabwe Act of 2007, which would have authorized up to $10 million to support democracy and human rights programs in the country. Several Members of Congress issued statements highly critical of the Mugabe Administration surrounding the 2008 elections and the related political violence. Some wrote letters to Bush Administration officials or African leaders. On April 25, the Senate passed S.Res. 533 , introduced by Senator John Kerry, calling for the immediate release of the presidential results, an end to the political violence and intimidation, and a peaceful transition to democratic rule. The resolution also supported calls for an international arms embargo and other targeted sanctions against the Mugabe regime, and encouraged the creation of a comprehensive political and economic recovery package in the event a democratic government is installed. The House passed H.Res. 1230 , sponsored by Representative Donald Payne and all the House Members of the Congressional Black Caucus, among others, condemning the violence and calling for a peaceful resolution to the political crisis. H.Res. 1270 , sponsored by Representative Ileana Ros-Lehtinen, was also passed, calling for an international arms embargo, urging the United Nations to deploy a special envoy to Zimbabwe, and encouraging the parties to discuss the creation of a government of national unity. Prior to the June runoff, Representative Adam Schiff introduced legislation calling on the Zimbabwe government to postpone the election. Representative Tom Tancredo also introduced legislation, H.Con.Res. 387 , calling for the United States to sever diplomatic ties with Zimbabwe. The 111 th Congress monitored the progress of the transitional government and commenced a review existing U.S. policy toward Zimbabwe. In March 2009, Representative Ros-Lehtinen introduced H.Res. 238 , declaring the economic and humanitarian crisis in Zimbabwe to be a threat to international security. Seven months after the new government's formation, the Senate Foreign Relations Africa Subcommittee held a hearing, Exploring U.S. Policy Options Toward Zimbabwe's Transition . Following that hearing, Subcommittee Chairman Russ Feingold called the transition a "great opportunity ... to help advance real reform and recovery," noting that while the transition remains incomplete and abuses in Zimbabwe continue, "we need to seize this opportunity and look for ways that we can proactively engage and help strengthen the hands of reformers in Zimbabwe's transitional government." In May 2010, Senator Feingold, Senator John Kerry, and Senator Johnny Isakson introduced S. 3297 , the Zimbabwe Transition to Democracy and Economic Recovery Act of 2010. According to Senator Feingold, S. 3297 aimed to "update U.S. policy and to provide the necessary direction and flexibility for the United States to proactively push for democracy and economic recovery in Zimbabwe." Also in support of "democratic and economic recovery," Representative Payne introduced H.R. 5971 , the Zimbabwe Renewal Act of 2010 in July 2010, which, among other items, would have authorized debt forgiveness for Zimbabwe by U.S. government agencies. Other legislation on Zimbabwe during the 111 th Congress included S. 3722 , the Zimbabwe Sanctions Repeal Act of 2010, introduced by Senator James Inhofe, which would have repealed ZDERA. U.S. Support for African Diplomacy During President Bush's visit to South Africa in 2003, he praised the work of Thabo Mbeki as the "point man" in seeking a Zimbabwe solution. The statement suggested to some that the United States was stepping back from a lead role on the Zimbabwe issue and would accede to Mbeki's "quiet diplomacy" (see " South Africa " section, below) as the best means of achieving reform in Zimbabwe. Mbeki reportedly assured President Bush at that time that he would be able to bring about talks between ZANU-PF and the MDC, which did not occur until 2007. In 2004, former U.S. Assistant Secretary of State for Africa Jendayi Frazer, who was Ambassador to South Africa at the time, called for the formation of a "coalition of the willing" to deal with Zimbabwe. Frazer reiterated South Africa's position of leverage, and insisted more needed to be done by African states to return Zimbabwe to democracy. The Obama Administration has expressed support for South African President Jacob Zuma's role as the SADC facilitator on Zimbabwe issues. U.S. Assistance The United States remains the leader in humanitarian relief aid to the Zimbabwean people, supplying an estimated $1 billion in assistance since 2002. In FY2008, U.S. assistance included $271 million in food aid and $22 million in other humanitarian assistance, as well as over $22 million in health programs and over $10 million for democracy and governance support. During President Obama's June 2009 meeting with Tsvangirai, President Obama pledged $73 million in new governance, education, and health assistance to Zimbabwe; in total, the U.S. government obligated over $292 million in foreign aid in FY2009. The U.S. government provided over $7.3 million in FY2009 specifically to address the cholera outbreak, in addition to $8.6 million for other water and sanitation programs. U.S. assistance to Zimbabwe in FY2010 totaled over $168 million, including almost $80 million in humanitarian aid. The Obama Administration has requested almost $110 million in non-humanitarian aid funding for Zimbabwe for FY2012, including over $70 million for health programs, $21 million for governance programs, and over $16 million for economic growth initiatives. The Administration maintains that the provision of non-humanitarian assistance directly to the government remains predicated on progress toward political reforms, although the U.S. government is providing some technical assistance to reform-minded ministries and to parliament. Zimbabwe is not among the countries eligible to participate in the Millennium Challenge Account program, nor is it a focus country for the President's Emergency Plan for AIDS Relief. USAID has supported local democracy advocates in Zimbabwe through a variety of programs aimed at ensuring media freedom and strengthening civil society and the legislative process. USAID partners were reportedly instrumental in documenting the demolitions and human rights violations during Operation Murambatsvina and recent bouts of political violence, and USAID continues to prioritize protecting human rights defenders. Legal restrictions have limited the ability of journalists and independent newspapers to provide alternative source for news, and the Zimbabwean government has controlled all domestic radio and television broadcasting stations until recently. Reforms made under the coalition government have laid the foundation for independent media to operate, but reports suggest that restrictions on free speech remain. USAID has provided funding for Voice of America to broadcast Studio 7, a daily program on shortwave and AM radio. Studio 7, along with UK-based Shortwave (SW) Radio Africa and the Dutch-funded Voice of the People (VOP) have had their broadcasts periodically interrupted by the ZANU-PF government using Chinese jamming equipment. The U.S. State Department lifted its warning for Americans traveling to Zimbabwe in 2009, although it suggests that the situation in the country is "unpredictable and could deteriorate quickly without warning" and has warned that Americans have been detained for expressing their views about the political regime in Zimbabwe or President Mugabe. In 2006, a delegation of the U.S. Coalition of Black Trade Unionists (CBTU), led by AFL-CIO Vice President William Lucy, was expelled from the country. Then-U.S. Ambassador Christopher Dell said, Clearly, the Zimbabwe government's decision not to honor the delegation's visas is the result of the events of 13 September, when security forces brutally suppressed planned peaceful demonstrations by the Zimbabwe Congress of Trade Unions.... This transparent attempt to deflect international attention from the vicious beatings is itself an example of the Zimbabwean government's repression and of its fear of the truth.... There is increasing acknowledgment that a man who was regarded as a liberator of his people is an oppressor. Other International Perspectives United Kingdom In 2002, in conjunction with the United States and the European Union, the British Parliament imposed targeted sanctions on leading members and affiliates of the ZANU-PF regime, as well an arms embargo and an asset freeze. The UK has imposed travel bans on over 100 members of the ZANU-PF and close affiliates of the party. Britain continues to provide humanitarian aid in Zimbabwe. Concurrently, the UK has maintained its willingness to release funds to Zimbabwe to pay for parts of an orderly land redistribution program if Mugabe retires and the rule of law is returned. It is unclear whether Britain will concede to release such funds while President Mugabe is still in office. He was extremely hostile toward former British Prime Minister Tony Blair, a persistent critic. Speaking at his 81 st birthday celebration, Mugabe said the upcoming election would "kill once and for all the machinations of that man in Number 10 Downing Street, who for some reason thinks he has the divine power to rule Zimbabwe and Britain.... On March 31, we must dig a grave not just six feet but 12 feet and bury Mr. Blair and the Union Jack." Prime Minister [author name scrubbed] maintained his predecessor's position, boycotting the December 2007 EU-Africa Summit to protest Mugabe's attendance. In an April 2008 speech to the House of Commons, Brown called for an international arms embargo against Zimbabwe, accusing the government of rigging the March elections and calling the political situation "completely unacceptable." Britain's Queen Elizabeth stripped Mugabe of an honorable Knighthood he received in 1994. Mugabe allies do not appear to view Prime Minister David Cameron with the same hostility they viewed his predecessors. European Union The European Union was among the first to take action against Mugabe's government in the early 2000s. The EU imposed targeted sanctions on 19 members of Zimbabwe's elite and their spouses after pulling the EU election observer team out of Zimbabwe in February 2002. These "light" sanctions were later expanded and have been renewed yearly. Several individuals were removed from the list in 2010 and another 35 were removed in 2011. Current EU sanctions include a travel ban on over 160 members and beneficiaries of the ZANU-PF, an arms embargo, and an asset freeze. Mugabe defied the travel ban in 2005 to attend the funeral of Pope John Paul II. The EU has continued to provide humanitarian and limited development assistance. Commonwealth The Commonwealth of Nations sent a team of observers to the March 2002 presidential election in Zimbabwe, and the group found "that the conditions in Zimbabwe did not adequately allow for the free expression of the will of the electors." Consequently, a special committee appointed to monitor and respond to the vote, consisting of Australia, South Africa and Nigeria, determined that Zimbabwe would be suspended from the Commonwealth for one year. The suspension was the first public action against Mugabe by a body that included influential African countries. In December 2003, the Commonwealth, including 19 other African members, voted to suspend Zimbabwe indefinitely. On this occasion, the decision was strongly criticized by President Thabo Mbeki, who had by then committed to his policy of quiet diplomacy, and by other governments in southern Africa. Mugabe responded by withdrawing Zimbabwe from the Commonwealth and ruling out any further discussions or a possible return. Some speculated, as a result, that the Commonwealth's action had backfired by placing Zimbabwe fully outside the bounds of its influence. Others argued that indefinite suspension by a body including many African members had important symbolic value in Africa and worldwide. China and Iran While many Western governments moved to isolate the ZANU-PF government in the last decade, China and Iran strengthened ties and deepened their involvement in Zimbabwe's economy. China, which became active on the continent in the 1950s and 1960s to gain global influence, now looks to Africa for natural resources to meet the needs of its growing population. A longtime ally of ZANU-PF, which it backed during the liberation struggle, China is reported to be Zimbabwe's second-largest trading partner, after South Africa, and its largest investor. Many observers see Zimbabwe's platinum concessions as a major draw for Beijing, and Chinese firms are playing roles in the cell phone industry, as well as in television, radio, and power generation. China holds controlling interest in the country's electricity generator. Some critics worry China's investment in Zimbabwe has come without the "strings attached" that Western governments might require, such as commitments to human rights, accountability, and anti-corruption. Arms agreements between China and Zimbabwe have attracted considerable attention in recent years, as most Western governments continue to enforce an arms embargo against the country. Zimbabwe's reported $240 million purchase of 12 Chinese fighter jets drew questions from analysts as to why a country that faces no immediate external threat from its neighbors would need such an air force. Reports indicate that Zimbabwe also ordered riot gear, water cannons, armored vehicles, and AK-47 rifles from China. How impoverished Zimbabwe could pay for arms from China is a subject of much speculation; Defense Ministry officials have admitted to being in arrears for the 2005 arms purchases. Some observers suspect that the acquisitions are covered in some way by China's growing economic role in Zimbabwe. In the face of Western condemnation and isolation, Zimbabwe also found an ally in Iran. During a 2006 visit to Tehran, President Mugabe reportedly secured commitments from Iran for direct aid and Iranian assistance to its energy, agriculture, and mining industries. Reports indicate that Iran or one of the Gulf countries may also be provide technical assistance to Zimbabwe to revive the country's only oil refinery, built 40 years ago to process Iranian crude. Most of Zimbabwe's fuel comes by road from South Africa. In addition to investment and economic assistance, Zimbabwe's Asian partners have occasionally offered President Mugabe diplomatic support. A Chinese official visiting in 2004 said that his government "appreciates the reasons for the land issue" and was opposed to any interference by foreign governments. China played a lead role in trying to quiet U.N. efforts to condemn Zimbabwe for Murambatsvina , and has vetoed proposed sanctions against the Mugabe Administration by the Security Council. China continues to press Western governments to lift their sanctions on Zimbabwe. Iranian President Mahmoud Ahmadinejad has expressed similar support, once saying "We believe Zimbabweans have every right to defend their sovereignty and land. We are happy that Zimbabwe has once again taken control over its resources and we support the land redistribution programme.... We strongly condemn the bullying tactics of a number of (Western) governments against Zimbabwe." Nigeria Although an observer team from Nigeria, a significant player in African politics, endorsed the 2002 presidential election in Zimbabwe, Nigeria's former president, Olusegun Obasanjo, attempted to mediate the country's crisis. He was reportedly concerned about the consequences of the Zimbabwe situation for the credibility of the New Partnership for Africa's Development (NEPAD). NEPAD was an AU initiative aimed at demonstrating Africa's capabilities for resolving its own problems in exchange for increased aid, trade, and investment. Obasanjo supported Zimbabwe's suspension from the Commonwealth, and in 2004, he held a long discussion with Tsvangirai and an MDC delegation in the Nigerian capital. The former Nigerian leader then took the Zimbabwe visitors on a personal tour of his farm—an unusual privilege. After the 2005 elections, Obasanjo met again with Tsvangirai, and the government-owned Herald newspaper accused the Nigerian president of funding the MDC. Obasanjo's successor, Umaru Yar'Adua, expressed his own concern with the situation in Zimbabwe, telling journalists at a German-African summit in October 2007 that developments in the country were "not in conformity with the rule of law." After an August 2011 meeting with Prime Minister Tsvangirai, current Nigerian President Goodluck Jonathan gave assurances that Nigeria would support the efforts of SADC and the AU to achieve peaceful and credible elections in Zimbabwe. South Africa Former President Thabo Mbeki's "quiet diplomacy" toward Zimbabwe drew criticism from some for its slow pace, although many credit Mbeki with playing a critical role in the 2008 power sharing agreement. Some analysts suggest that his reluctance to openly confront or condemn President Mugabe be viewed through the historical lens of the liberation struggles of Southern Africa. Mugabe lent aid and shelter to the African National Congress (ANC), now the ruling party in South Africa, during its long struggle against white minority rule, creating a bond of gratitude. Mugabe has enjoyed considerable popularity around Africa and in South Africa itself, not least because of his moves to seize lands owned by comparatively wealthy white farmers. Nonetheless, many have been dissatisfied that South Africa, a regional heavyweight both politically and economically, and which has extensive control over Zimbabwe's transport links to the outside world, as well as over its electricity supplies, has not played a more proactive role in resolving Zimbabwe's outstanding political disputes. As Zimbabwe's largest trading partner, many consider South Africa in a position to exert substantial leverage. At the same time, South Africa must weigh the unintended effects of such leverage—state collapse across its northern border, for example, could produce a sharp increase in illegal migration and have a substantial impact on South Africa. In May 2008, as economic collapse and election violence in Zimbabwe pushed rising numbers to migrate south, Zimbabwean and other African immigrants became targets of xenophobic violence throughout South Africa. At least 60 were killed. Through his policy of engagement, former President Mbeki repeatedly brought the Zimbabwean government and the MDC together to discuss Zimbabwe's future. Mbeki's offer of economic incentives and an exit strategy for Mugabe in exchange for negotiations with the opposition and a commitment to free and fair elections were unsuccessful. In 2005, as the IMF threatened to expel Zimbabwe from the Fund for debt payment arrears, the country requested a loan from South Africa for fuel, food, and electricity, as well as to address the IMF payments. Amid rumors that the South African government would make any loan conditional on economic and political reforms, the negotiations stalled and Mugabe found another source from which to repay the IMF dues. In early 2006 speech, Mugabe warned Mbeki that he should "keep away" from interference in Zimbabwe's affairs. Mbeki's Zimbabwe policies drew criticism from within his country; former President Nelson Mandela, Nobel laureate Archbishop Desmond Tutu, former opposition leader Tony Leon, and even the ANC's ally, the Congress of South African Trade Unions (COSATU), were vocal detractors. COSATU, South Africa's powerful labor confederation, strongly opposed the quiet diplomacy policy. A certain sympathy on the part of COSATU toward the MDC may be inevitable, since the MDC has its roots in the union movement. COSATU delegations have been forcibly expelled from Zimbabwe twice, first in 2004 and more recently in late 2006, when COSATU members traveled to Harare to express their support for the ZCTU after the incidents of police violence. One COSATU leader remarked, "we are not quiet diplomats," and "we will not keep mum when freedom does not lead to respect for workers and human rights." When the Mbeki government issued a terse initial statement following the March 2007 arrest of MDC and civil society activists, COSATU criticized the government for a "disgraceful" response, "in the face of such massive attacks on democracy and human rights, especially coming from those who owed so much to international solidarity when South Africans were fighting for democracy and human rights against the apartheid regime." Defenders of Mbeki's approach argued that he was the only leader with the influence and prestige needed to sway Mugabe. Some observers expressed hope for Mbeki's mediation role when the president and Morgan Tsvangirai met in October 2004, after Tsvangirai's acquittal. Tsvangirai, who had been critical of quiet diplomacy in the past, said after the meeting that he welcomed President Mbeki's efforts to mediate. But Mbeki stunned the MDC and many supporters of democracy in Zimbabwe in March 2005, when he told a press conference that he had "no reason to think that anyone in Zimbabwe will militate in a way so that the elections will not be free and fair." He insisted that "there will be a free and fair election in Zimbabwe" and that "things like access to the public media, things like violence-free election have been addressed." Earlier, he had termed Secretary Rice's description of Zimbabwe as an outpost of tyranny as "an exaggeration." These remarks left critics questioning the substance behind Mbeki's diplomacy. The future of South Africa's policy toward Zimbabwe is now in the hands of Mbeki's successor. Mbeki, who resigned in late September 2008, was temporarily succeeded by ANC Deputy President Kgalema Motlanthe. Former Deputy President Jacob Zuma, who was elected as president of the ANC in December 2007, became South Africa's fourth post-apartheid president in early May 2009. Zuma has previously referred to the Zimbabwean president as "a monster," and although he did not immediately call for Mbeki to step down as mediator after the 2008 elections, he did encourage African leaders to "assist" Mbeki, "given the gravity of the situation." President Zuma himself assumed the role of SADC facilitator on the Zimbabwe situation in December 2009. South Africa's opposition parties have encouraged strong action on Zimbabwe. The African Union The African Union (AU) and its predecessor, the Organization of African Unity (OAU), have been supportive of Mugabe in the past. In 2002, an OAU observer team labeled Mugabe's election victory legitimate, free, and fair. In 2004, when the AU allowed a report critical of the Mugabe government to be circulated at its annual summit, some believed the regional body might be indicating a change in its approach. The 114-page report, prepared by a delegation from the African Commission for Human and People's Rights (ACHPR) that visited Zimbabwe in 2002, reportedly criticized the Zimbabwe government for police abuses, press censorship, and compromising the judiciary. The AU tabled the report at the summit, however, and declared it would keep its contents secret until Zimbabwe has had a chance to respond in detail. According to some media reports, the Zimbabwean government used procedural regulations and technicalities to prevent its release. The ACHPR passed a resolution in 2005 calling on the "government of Zimbabwe to respect the fundamental rights and freedoms of expression" and to allow a second fact-finding mission to enter the country. The ACHPR resolution was hailed by human rights advocates, who suggested, "This will exert a lot of pressure on Zimbabwe - this is the first time such a significant body, so close to African heads of state, observes and condemns such defiance of human rights compliance." But like the previous report, the second mission's findings were rejected by the AU's Council of Ministers because of "irregularities and procedural flaws." Some observers and international human rights organizations such as the International Press Institute (IPI), suggest that the AU's repeated rejection of ACHPR resolutions on Zimbabwe tarnished the integrity of the body. As one AU official warned, "If we continue to throw out every human rights report that comes before us, people out there will stop taking us seriously." IPI also suggests that refusal of the AU to act on the ACHPR resolutions or to condemn human rights abuses in Zimbabwe damages the credibility of the African Peer Review Mechanism (APRM) initiative, a vital part of NEPAD. Some suggest that criticism from the AU would have little effect on Zimbabwe, unless it is accompanied by more substantial policy changes. President Mugabe has routinely ignored his detractors and has frequently denied those who might be critical of the regime access to the country. In 2005, AU Commission Chairman Alpha Konare sent Tom Nyanduga, Special Rapporteur on Refugees, Internally Displaced Persons, and Asylum Seekers in Africa, as his envoy to investigate Operation Murambatsvina . The Zimbabwean government prevented Nyanduga from conducting his assessment and deported him, accusing the envoy of "western collusion and agenda adoption." In November 2008, the government reportedly rejected the visa applications of several members of the Elders, a group of senior world leaders, including Kofi Annan and former U.S. President Jimmy Carter. SADC Many of the 14 members of the Southern African Development Community (SADC) are linked to Zimbabwe by a common historical experience, as well as cultural and economic ties, and the organization was seen as disinclined to publicly criticize the actions of President Mugabe or his government until recently. At a 2004 summit in Mauritius, SADC approved new electoral principles and guidelines for all its member nations. Analysts were hopeful that these rules might motivate meaningful democratic reforms in Zimbabwe, particularly since they laid out detailed guidelines for SADC observer missions. The signatory countries, including Zimbabwe, are pledged to allow SADC observers freedom of movement and access. As noted above, the SADC observer delegation's favorable report for Zimbabwe's 2005 elections was considered by critics of the Mugabe administration to be disappointing. Although Mugabe's neighboring leaders have not publicly singled him out for criticism, with the exception of Botswana, they have been increasingly concerned with the impact of Zimbabwe's crisis on their own countries. Southern African leaders blamed Zimbabwe and Swaziland for undermining economic growth in the region at a SADC Summit in Lesotho in 2006. Botswana has spoken out in the past on regional problems attributed to Mugabe's policies, including the burden placed on the country by Zimbabwe's refugees. In March 2007, following the arrest of Tsvangirai and other opposition members, Tanzanian President Jakaya Kikwete traveled to Harare to discuss the incident, and after the SADC summit, President Mbeki was nominated as mediator. SADC's election observer mission to the June 2008 runoff found that the election "did not represent the will of the people of Zimbabwe," and called for dialogue among all political stakeholders toward a negotiated solution. Botswana refused to recognize Mugabe as president after the June 2008 runoff. Pressure from SADC does appear to have brought the Zimbabwe parties to join together in the transitional government, but it remains unclear to what extent they might be willing to enforce the deal if the parties continue to struggle to work together. In March 2011, the SADC "Troika," a trio of regional leaders representing the SADC Organ on Politics, Defense and Security, which is charged with coordinating efforts to promote peace and stability in the region, met in Livingstone, Zambia, to discuss, among other items, the Zimbabwe situation. President Jacob Zuma, in his role as mediator, briefed his counterparts on the latest developments, including a recent appeal by Prime Minister Tsvangirai for greater intervention to resolve outstanding political disputes and facilitate a path to credible elections. In his opening remarks at that meeting, Zambian President Rupiah Banda warned that the recent uprisings in North Africa were a warning of what could happen if the will of the people is not respected, a comment many observers considered to be a veiled warning regarding Zimbabwe. In the SADC Troika's official statement, referred to as the "Livingstone Communiqué," the Troika noted disappointment with "insufficient progress" in the implementation of the GPA and noted a "resurgence of violence, arrests, and intimidation" in Zimbabwe. The communiqué called for an end to the violence and harassment and called for SADC to "assist" Zimbabwe to prepare guidelines for peaceful, free and fair elections. President Mugabe and members of his party have expressed displeasure with the Troika's findings. In a June 2011 SADC Summit in Sandton, South Africa, President Zuma issued a new report on Zimbabwe, reiterating the findings referenced in the Livingstone Communiqué and calling for an immediate end to the violence, harassment, and other actions that contradict the GPA. At the Summit, the SADC heads of state confirmed a decision to expected to appoint three officials from the region to support Zimbabwe's mechanism for monitoring the implementation of the political agreement. ZANU-PF has opposed the concept, arguing that it impinges on national sovereignty. The MDC continues to press for SADC to take a more forceful position on security sector reforms and other efforts to prevent the type of violence that surrounded the 2008 polls. The Obama Administration has been supportive of SADC efforts on Zimbabwe under President Zuma's leadership, but continues to differ with SADC on the issue of lifting sanctions against Mugabe and senior ZANU-PF officials. Prospects for the Future Despite hopes that the transitional government would bring change to Zimbabwe, life for many of the country's people remains a daily struggle. The rate of unemployment and the cost of living remain high, and salaries for those with jobs are far below regional standards. The controversial issues of property rights and land reform have yet to be seriously addressed by the government. Prospects for Zimbabwe's youngest generation remain poor.. Many teachers have returned to work since 2008, but salaries remain low and enticing the thousands who have left the country to return will be a major challenge. Many families still struggle to afford basic food items, not to mention medicines or doctors. Analysts have cited a number of reasons for Zimbabwe's economic problems in the past decade, including recurrent drought, difficulties encountered in implementing economic reforms, and industrial competition from comparatively cheap South African imports. At the same time, analysts place considerable responsibility for Zimbabwe's problems on the policies adopted and actions taken by the government since 1997. Zimbabwe is at a critical juncture. Prior to the power sharing agreement, the government took some fiscal measures to reverse the economic downturn, but hyperinflation continued, and the measures were largely ineffective. The MDC controls the Ministry of Finance under the transitional government, but Zimbabwe is in debt distress and it remains unclear how effective the MDC's economic policies will be without major donor financing for its recovery plans, estimated to require up to $8 billion. Many donor governments and institutions have been reluctant to release significant funds until they can determine whether the transitional government's establishment will result in changes to the policies that brought about sanctions in the first place. The MDC and ZANU-PF, long-standing political foes, must now demonstrate their willingness to work together to put the country's economy on the path toward recovery.

Zimbabwe's prospects appeared promising in 1980, as it gained independence after a long liberation war. However, rising inflation and unemployment bred discontent in the 1990s and led in 1999 to the formation of the opposition Movement for Democratic Change (MDC). The MDC surprised many with its initial success, campaigning against a 2000 referendum that would have legalized the president's continued rule, made government officials immune from prosecution, and allowed the uncompensated seizure of white-owned land for redistribution to black farmers. The referendum failed, and the MDC won nearly half the seats in the 2000 parliamentary election. President Robert Mugabe's ruling party subsequently took numerous actions to bolster its power that were deemed undemocratic by many in the international community. President Mugabe's government was seen as increasingly autocratic and repressive by its critics, and its human rights record was poor. The government suppressed freedom of speech and assembly, and many contend that the ruling party restricted access to food, already scarce, in opposition areas. The MDC, divided over how to respond, split into two factions in 2005, hampering its ability to challenge the ruling party. Reports of political violence rose sharply after Zimbabwe's March 2008 elections, when, for the first time since independence, Mugabe's party lost its majority in the National Assembly. Mugabe's re-election as president in the June runoff was viewed as illegitimate by the United States and the United Nations Secretary-General, among others. In September 2008, after several weeks of negotiations, Mugabe and MDC leader Morgan Tsvangirai signed a power-sharing arrangement aimed at resolving the political standoff. As part of the deal, Tsvangirai became prime minister of a new coalition government in February 2009, and cabinet positions were divided among the parties. Zimbabwe's economic output had decreased dramatically in the decade prior to the signing of the power-sharing agreement in 2008. At that time, many considered the economy to be in a state of collapse, with official inflation having risen above 200,000,000%. Although the economy has since stabilized, unemployment remains over 90%. An adult HIV prevalence rate of almost 14% has contributed to a sharp drop in life expectancy, and a nationwide cholera outbreak from late 2008 through early 2009 resulted in almost 100,000 infections and over 4,300 deaths. The number of Zimbabweans requiring food aid has declined significantly since 2008, but chronic malnutrition rates remain high and localized food insecurity persists. The deterioration of economic and humanitarian conditions over the past decade led many to emigrate to neighboring countries, which has created a substantial burden on the region. Zimbabwe appears to be making a gradual shift from humanitarian crisis toward recovery, but much of the population remains highly vulnerable. Political uncertainty continues to threaten the country's economic outlook. Robert Mugabe has historically enjoyed considerable popularity in Africa as a former liberation leader, but some African leaders have viewed his policies as increasingly damaging to the continent and have urged democratic reforms in recent years. Following controversial elections in 2000 and citing abuses of human rights and the rule of law, the United States and some other former allies of the government became vocal critics. The United States has enforced targeted sanctions against top Zimbabwe officials and associates since 2002. This report provides background on events leading up to and surrounding the country's most recent elections, in March and June 2008. For further discussion of Zimbabwe's power sharing agreement, its transitional government, and other more recent developments, please see CRS Report RL34509, Zimbabwe: The Transitional Government and Implications for U.S. Policy, by Lauren Ploch.

Overview Côte d'Ivoire, a West African country of 21.5 million people that is nearly as large as New Mexico and is the world's leading cocoa producer, is emerging from a severe political-military crisis. It grew out of a disputed November 28, 2010 presidential runoff election between former president Laurent Gbagbo ( baag-boh ) and his opponent, former Prime Minister Alassane Ouattara ( wah-tah-rah ), who both claimed electoral victory and formed opposing governments. Their rivalry erupted into a full-scale civil military conflict between their armed supporters in early March 2011, after three months of growing political volatility and violence. After the election, the United States, together with most governments around the world, endorsed Ouattara as the legally elected president and pressed for Gbagbo to cede the presidency to him, in accordance with United Nations (U.N.)-certified run-off results announced by the Ivoirian Independent Electoral Commission. Key multilateral institutions that pushed for this end included the Economic Community of West African States (ECOWAS), the African Union (AU), and the U.N. Security Council. A range of multilateral and bilateral measures were also pursued in order to pressure Gbagbo to step down and to restrict his government's access to financial resources and operational funding. These included sovereign credit restrictions and a range of multilateral and bilateral targeted sanctions, such as asset freezes and travel-related, among other sanctions. Recent Developments1 Capture of Gbagbo The armed conflict reached a critical turning point on April 11, after days of heavy combat in Abidjan, when troops fighting to oust Gbagbo in favor of Ouattara seized the presidential compound in the commercial capital, Abidjan, and took Gbagbo and his family into custody. Gbagbo and about 120 other detainees were initially brought to the Golf Hotel in Abidjan, where the Ouattara government has been based since the election under the protection of U.N. Operation in Côte d'Ivoire (UNOCI) troops. Gbagbo was transferred on April 13 to Korhogo, a northern town, where he is under house arrest. Simone Gbagbo, one of his two wives, was reportedly held at the Golf Hotel until April 22, when she was transferred and placed under house arrest in Odienne, a northwestern town. About 30 members of Gbagbo's former cabinet and his party and family remain under house arrest and UNOCI protection, most at a Gbagbo seaside family residence near Abidjan. About 70 of the 120 initial detainees were released in mid-April. Gbagbo's capture by pro-Ouattara forces—fighting as the Republican Forces of Côte d'Ivoire (FRCI) but known until mid-March as the Forces Nouvelles (FN, or New Forces), a rebel force that controlled the country's north after launching an anti-Gbagbo rebellion in 2002 —was coordinated with French and UNOCI peacekeepers. Just prior to Gbagbo's arrest, these forces, using small mounted artillery, helicopter gunships, and armored vehicles, had attacked the compound in a bid to neutralize heavy weapons reportedly being used by Gbagbo's forces. Similar operations, premised on a need to protect civilians, U.N. personnel, and foreign diplomats against attacks by pro-Gbagbo forces, had in preceding days targeted other pro-Gbagbo military bases and operating locations in Abidjan used by these forces. Such actions had long been sanctioned by the U.N. Security Council, which reiterated its authorization in Resolution 1975, passed on March 30. Gbagbo's detention followed days of heavy combat in Abidjan and unsuccessful international attempts to negotiate his surrender and to arrange a cease-fire with his government's military leadership, as well as several failed FRCI attempts to take the compound. The fighting in Abidjan was preceded by several weeks of increasing combat across southern Côte d'Ivoire, in which the FRCI predominated. On March 30, after seizing a swath of western borderlands and series of western and eastern towns, the FRCI employed a pincer movement to take control of the political capital, Yamoussoukro, in the center of the country. FRCI elements then swept south toward Abidjan and the key southwestern cocoa exporting port of San Pedro, which they seized on March 31. On the same day, they entered Abidjan, joining a smaller allied force already present in the city. A week and a half of fierce urban combat, which resulted in numerous civilian casualties, as well as attacks on foreign diplomats, then ensued in Abidjan. Combat also continued in other parts of the country. The FRCI campaign appeared to encounter little resistance, due to desertions, top military leadership defections, and an apparent frequent unwillingness to fight by some nominally pro-Gbagbo regular military forces; strategic withdrawals by pro-Gbagbo forces; and looting and lack of command and control among pro-Gbagbo militias. Post-Gbagbo Military Situation As of April 14, FRCI troops were patrolling the streets of Abidjan, in some cases with gendarmes formerly loyal to Gbagbo and in requisitioned civilian vehicles, as were French and U.N. troops. Limited fighting reportedly erupted on April 16 and recurred in subsequent days as a result of efforts by FRCI forces to force the surrender and disarmament of remnant pro-Gbagbo forces in the large, generally pro-Gbagbo Yopougon section of Abidjan. During the operations, FRCI forces reportedly engaged in looting, despite warnings against such actions by Ouattara. The threat to the reestablishment of order and security that such behavior posed was frankly acknowledged by the deputy FRCI commander, Issiaka "Wattao" Ouattara, who in an April 18 interview stated that FRCI patrols would need to be conducted jointly with French or UNOCI forces in order to prevent FRCI looting and a degradation of the security environment. In the final weeks of April and early May, negotiations were undertaken with pro-Gbagbo fighters in the large Yopougon area of Abidjan, viewed as a pro-Gbagbo stronghold, resulting in the surrender of about 50 fighters in late April. Periodic, often intense combat between the FRCI and die-hard pro-Gbagbo fighters, reportedly including Liberian mercenaries, however, simultaneously continued in Yopougon. Such combat, in some cases involving heavy weapons, had resulted in dozens of casualties by May 3. Death of Coulibaly A second source of continuing insecurity and repeated armed clashes were intra-FRCI tensions over looting and long-standing factional rivalries, which spurred fighting in San Pedro and in Abidjan about a week and a half after Gbagbo's capture. During combat between the FRCI and Gbagbo's forces in early April, such rivalries had also reportedly spurred fighting between FN elements from the north and members of the "Invisible Commandos," a group of Abidjan-based fighters led by a dissident, one-time FN commander, Ibrahim "IB" Coulibaly. As violence grew during the post-electoral crisis, the Invisible Commandos had acted as a neighborhood self-defense force, protecting areas heavily populated by northerners and immigrants against attacks by pro-Gbagbo state security forces and militias. They later took offensive action, carrying out attacks in and attempting to seize control of other neighborhoods prior to the FRCI's entry into Abidjan. While overtly anti-Gbagbo, Coulibaly and his support base were viewed as representing an armed element and a potentially emergent political interest group that—based on the key role that they had played fighting pro-Gbagbo forces and in facilitating Ouattara's accession to power—might demand political power and patronage within the new Ouattara government, or otherwise challenge Ouattara's political mandate. In mid-April, Coulibaly had begun to take on the apparent role of a local political patron, repeatedly receiving groups of neighborhood residents and supplicants who thanked him for protecting the neighborhood. In mid-April, however, Coulibaly dismissed alleged differences between himself and other former FN FRCI elements and other pro-Ouattara militias. He stated in an interview that he viewed Ouattara as a father figure and was loyal to his government, but implied that he continued to have sharp differences with Soro. The political and security threat posed by Coulibaly prompted Ouattara—asserting his role as the national military commander-in-chief—to order Coulibaly and all other militia leaders to voluntarily disarm their groups or face forcible disarmament. He also ordered all FRCI combat units to their barracks. Coulibaly reportedly agreed to disarm, but also continued to seek a meeting with Ouattara. He failed to attend several meetings on disarming, however, including an April 24 meeting with Soro. In response, the Defense Minister ordered Invisible Commando forces to desert Coulibaly and formally join the FRCI. Two days later, Coulibaly and his entourage were attacked by pro-Soro FRCI elements while on the way to a putative meeting with Ouattara, and on April 27, the FRCI launched an intensive attack on Invisible Commando positions, despite claims by Coulibaly's deputy that the group was in the process of voluntarily disarming. These claims were contradicted by a UNOCI unit sent to escort Coulibaly to a disarmament meeting with the government. During the fighting, Coulibaly died, either as a result of combat or by his own hand, after a demand that he surrender; accounts from FRCI and Invisible Commando sources regarding the cause of his death conflict. While the fighting that led to his death indicated that the security situation remained precarious, his passing removed from the political scene a potential spoiler and source of continuing instability. Post-Gbagbo Transition On April 21, Peace and Security Council (PSC) of the African Union (AU) reinstated Côte d'Ivoire's membership in the organization, which had been suspended due to the Gbagbo government's failure to heed the internationally recognized electoral outcome or comply with AU decisions regarding efforts to resolve the crisis. On April 27, 2011, President Ouattara announced that he would be formally inaugurated as president on May 21, 2011. He also said that he would soon nominate an inclusive government that would include ministers from Gbagbo's FPI political party, on the condition that the FPI recognize his election. This, he said had not yet occurred, apparently referring to comments by FPI leaders recognizing the de facto nature of his presidency, but questioning its legal legitimacy. The cabinet will reportedly include 32-36 cabinet posts, and nominees for were being negotiated between the Ouattara administration and the Gbagbo camp. The establishment of such a unity government was one of the key recommendations of a high-level AU panel, which Ouattara had largely agreed to implement, with some qualifications, including a requirement that the FPI recognize his election. On April 28, in a move aimed at bolstering stability and the consolidation of peace in Côte d'Ivoire, the U.N. Security Council enacted Resolution 1980, renewing for one year an arms embargo and a ban on the import of rough diamonds from Côte d'Ivoire, along with targeted financial and travel restrictions on eight persons, albeit with some qualifications and provision for a review. A key exception to the arms embargo would be technical training and assistance in support of Ivorian Security Sector Reform efforts, under U.N.-monitored conditions. The resolution also urged that disarmament efforts be prioritized, and reaffirmed UNOCI's role in collecting and interdicting illicit arms, called for regional security coordination efforts, and stressed that it would closely monitor efforts to violate the sanctions it had imposed. Security16 Following Gbagbo's detention, President Ouattara called for social order and calm, and said that his immediate priority would be the maintenance of security. He also warned against efforts to seek vengeance or to engage in reprisal attacks in response to developments during the crisis, calling instead for such grievances to be resolved through processes of reconciliation and forgiveness. He stated that his government would give itself up to two-months to achieve the "total pacification" of the country, initially by halting the activities of militiamen and mercenaries who, along with youth militias, he called on to disarm. A second major emphasis, he said, would be the collection and destruction of arms, primarily through voluntary relinquishment but also under the threat of criminal prosecution or coercive means, if necessary. These activities, he said, would be aided by France's Force Licorne , a U.N.-mandated bilateral security force, and UNOCI peacekeepers, a strategy that appeared designed to forestall accusations of his forces might use such operations to target Gbagbo supporters with abuse. Some Gbagbo forces had begun surrendering arms as of April 13, and state television broadcast a statement by Gbagbo, after his capture, calling for that end. Gbagbo later renewed this request during a meeting with a delegation of elder statespersons in early May. A similar appeal was made by the leader of Gbagbo's Ivoirian Popular Front (FPI) political party on April 16 and, days later, by the leader of a militantly pro-Gbagbo student group, the Federation of Students and Scholars of Ivory Coast. Despite continuing looting and limited combat, gas stations and public transport began to function again in some areas of the capital, commercial activity was picking up, and piped water and electricity supplies that had been cut due to fighting had been restored in most areas of the city by April 13. Five previously Gbagbo-allied generals who defected and publicly swore allegiance to Ouattara were joined in doing so by additional security service leaders, including that of the CECOS special forces internal security unit, which had been implicated in attacks on Ouattara supporters. Humanitarian Situation Humanitarian conditions remain poor but are slowly stabilizing as fighting has abated. As of late March, the crisis had caused the displacement of 800,000 to 1.1 million people. As of late-April, an estimated 850,000 persons remained internally displaced (150,000 in western Côte d'Ivoire and up to 700,000 in Abidjan). More than 165,778 Ivoirians and other nationals remained as refugees in neighboring Liberia, there were an estimated 17,675 in others nearby countries, according to U.N. estimates. On April 8, U.N. agencies issued a revised cross-agency Regional Emergency Humanitarian Action Plan (EHAP) for Côte d'Ivoire and neighboring countries. The plan expanded their donor appeal for Côte d'Ivoire from $32.7 million to $160.4 million, which was funded at 20% as of April 29. In addition, U.N. agencies had issued a separate $146.5 million appeal for humanitarian responses in Liberia, which was funded at 41% as of April 29. $26 million in non-EHAP humanitarian aid was also provided by donors to Côte d'Ivoire and more than $25 million of such aid was provided to Liberia. In addition to conventional refugee and internally displaced person (IDP) aid, such as food, shelter, transport, and health, education, and protection services, the U.N. Food and Agriculture Organization was providing seeds, tools and fertilizer kits to an estimated 12,000 Ivoirian and Liberian farming households affected by Ivoirian population displacements. As of late-April, $34.48 million worth of U.S. assistance was being provided to help address emergency humanitarian needs generated by the Ivoirian crisis. The bulk of this assistance was being channeled through U.N. and other major international humanitarian relief, migration, and refugee agencies, with a smaller portion going to nongovernmental organizations (NGOs) in Liberia. About $5.48 million was being provided by the Office of U.S. Foreign Disaster Assistance (OFDA) of the U.S. Agency for International Development (USAID), with about $3.48 million supporting aid in Liberia and $2 million in Côte d'Ivoire. USAID's Office of Food for Peace (FFP) was providing $16.4 million in food aid for both refugees and host communities, $4.7 million of which in Côte d'Ivoire and $11.7 million in Liberia. The State Department's Population, Refugees, and Migration Bureau (PRM) was providing $12.6 million worth of aid for refugees, of which $9.4 million was allocated to programs in Liberia and $3.2 million supported programs in Côte d'Ivoire and neighboring countries other than Liberia. U.S. Statements and Responses Obama Administration officials welcomed Gbagbo's capture, along with some Members. On April 11, the White House issued a statement welcoming "the decisive turn of events in Côte d'Ivoire," in which "former President Laurent Gbagbo's illegitimate claim to power has finally come to an end." This it called "a victory for the democratic will of the Ivoirian people," who it said now "have the chance to begin to reclaim their country, solidify their democracy, and rebuild a vibrant economy." On the same day, Secretary of State Hillary Rodham Clinton stated that Gbagbo's capture "sends a strong signal to dictators and tyrants throughout the region and around the world: They may not disregard the voice of their own people in free and fair elections, and there will be consequences for those who cling to power." President Obama and Secretary Clinton also commended the actions of France, the U.N., other governments, and international entities, such as ECOWAS, in helping to resolve the crisis. On April 12, President Obama called Ouattara to reiterate the White House message and congratulate him on assuming elected presidential power. He reportedly offered U.S. support for Ouattara's "efforts to unite Côte d'Ivoire, restart the economy, restore security, and reform the security forces." On April 13, the House Subcommittee on Africa, Global Health, and Human Rights of the Foreign Affairs Committee held an oversight hearing on Côte d'Ivoire entitled, "Crisis in Côte d'Ivoire: Implications for the Country and Region." The committee also used its meeting to consider and hold a markup session on H.Res. 85 ("Supporting the democratic aspirations of the Ivoirian people and calling on the United States to apply intense diplomatic pressure and provide humanitarian support in response to the political crisis in Cote d'Ivoire"). During the hearing an amendment in the nature of a substitute offered by Representative Payne was accepted. The subcommittee did not consider another Côte d'Ivoire-related bill, H.Res. 212 , ("Expressing the sense of the House of Representatives that the United States should not intervene in the civil war in the Ivory Coast"), introduced by Representative Timothy V. Johnson on April 7, 2011. The sole witness at the hearing, William Fitzgerald, Deputy Assistant Secretary in the State Department's Bureau of African Affairs, commented on current developments in Côte d'Ivoire, laid out the basic principles of U.S. policy toward the country, and responded to Members' questions on various aspects of the crisis and prospective U.S. contributions to its continuing resolution. State Department officials are reportedly undertaking a review and procedural work necessary to remove U.S. restrictions on non-humanitarian bilateral assistance that have been in place since 1999. They are also finalizing a policy paper focusing on prospective U.S. policy toward the Ouattara government that reportedly includes proposed disarmament, demobilization and reintegration (DDR) and security sector reform (SSR) programs and responds to post-conflict humanitarian and transitional development needs. In addition, several U.S. teams are reportedly undertaking field assessments The policy paper will reportedly not be finalized until FY2011 country-level allocations are finalized following the enactment of P.L. 112-10 , the Department of Defense and Full-Year Continuing Appropriations Act, 2011. Human Rights Situation Gbagbo's capture spurred a rapid decrease in the scale of combat and associated casualties and human rights abuses, but sporadic fighting continued in subsequent weeks, primarily in a few areas of Abidjan. It was portrayed by the FRCI as focusing on mopping-up operations aimed at defeating diehard pro-Gbagbo fighters, notably hardcore youth militants who had reportedly been given small arms by the regime. It was criticized, however, by the human rights group as providing cover for a brutal campaign of reprisals, including extrajudicial killings, both in Abidjan and elsewhere, notably in the west. While the earlier nationwide FRCI military campaign encountered ineffective organized military opposition outside of Abidjan, it reportedly resulted in numerous civilian deaths, human rights abuses, and population displacements, as had prior violence perpetrated by both FRCI and pro-Gbagbo forces. Such abuses and killings had occurred during post-election Gbagbo administration operations to suppress political protests, during raids on opposition strongholds by state security forces, and as a result of attacks on civilians by pro-Gbagbo security forces and militia and by pro-Ouattara neighborhood-based self defense militias, notably in Abidjan. Increasingly, as the violence grew, presumed ethnicity was used by parties to the conflict as an indicator of putative political affiliation, and as the basis for attacks on civilian individuals and communities by militant supporters of the two presidential claimants. Election-related clashes also spurred inter-communal violence with varied roots in political, ethnic, religious and land rivalry, particularly in the far west. Such developments had drawn repeated and vocal criticism and statements of concern from international human rights observers and governments, as well as warnings that a number of the parties to the conflict had committed war crimes and other violations of international human rights law. The aggregate number of post-electoral deaths due to political violence is unknown, but may total several thousand, according to some estimates. Such violence, which escalated sharply as the crisis continued, had resulted in at least 462 deaths by March 25, and likely many more. Fighting in late March and early April killed many additional persons, notably in the far west, including several hundred in the town of in Duekoue alone, the vast majority allegedly killed by pro-Ouattara forces, which reportedly included Liberian mercenaries. Many corpses of victims of fighting in Abidjan lay uncollected on city streets for several days after Gbagbo's capture. Post-Crisis Stabilization Priorities Post-War Economic Recovery Apart from maintaining security, key immediate priorities of the Ouattara government are efforts to resume cocoa exports and banking operations, and to jump-start a program of post-conflict economic development, infrastructure rehabilitation, and economic reunification of the long-divided country. Infrastructure and public services in many parts of the country, notably the north, suffered from lack of state investment and neglect during Côte d'Ivoire's decade of conflict and political stalemate, and are likely to require substantial new investment. The U.N. Secretary General's Special Representative in Ivory Coast, Young-jin Choi, however, has asserted that the economy will recover quickly because there was little damage to infrastructure, especially in Abidjan and other large cities. He stated that Destruction was really minimum. […] The airport is intact. It is operating now. The seaport is intact and ready to operate. The sanctions are lifted. Bridges were never broken or damaged. All the roads are there. Electricity, no damage at all. Water, no damage at all to the supply. Donor Role The government of Ouattara, a PhD economist and former International Monetary Fund (IMF) and regional central bank official, has received substantial pledges of international post-war economic transition assistance. France is offering assistance, worth about $578 million, consisting of a €350 million loan in support of budgetary aid, focused civil servant salary payments and funding of emergency social expenditures, notably in Abidjan, and a €50 million bridging loan to help pay off debt to the World Bank and AfDB to enable them to provide new lending. The European Commission (EC) of the European Union (EU) has offered a €180 million ($260 million) grant-based "recovery package" to support basic social spending, including for health, water, and sanitation, and agriculture, and to clear Ivoirian debt arrears to the European Investment Bank. The package is aimed at supporting immediate humanitarian and other needs and long term Ivoirian-EU development cooperation. The World Bank and the African Development Bank (AfDB) did not announce specific aid amounts, but in press remarks, the World Bank President Robert B. Zoellick stated that "if the security situation allows," the Bank "can within the next couple of weeks reactivate some World Bank programs worth about $100 million." He said that thee would likely focus on "emergency infrastructure, water services, trash pickup, making sure that schools and clinics function," as well as "targeted assistance to victims of sexual violence." Zoellick was also slated to meet with the Ivoirian Finance Minister, Charles Koffi Diby, the week of April 11. Donor governments are reportedly considering a write-off of $3 billion of a reported $14 billion in sovereign debt. Exports and Trade To reinitiate cocoa exports, on April 13, Ouattara announced that he had signed a decree the day before vouching that the port of Abidjan was under his government's control and naming an interim port manager, laying the groundwork to rapidly recommence cocoa exports. On April 15, he lifted a nearly three-month ban on cocoa and coffee exports imposed to cut off Gbagbo administration access to export earnings. The port of Abidjan reopened on April 18, and was expected to load several ships with cocoa exports in the following days. These moves came after the EU, at Ouattara's request, lifted sanctions on certain formerly Gbagbo-controlled entities, including the ports of Abidjan and San Pedro and parastatals involved in oil refining and cocoa and coffee trade. A reported 450,000 tonnes of cocoa held back from export under the former ban were expected to be shipped soon, although a possible hitch was an exporters' request to pay taxes on them by check after shipment, as opposed to cash at the time of export, in order to quickly clear warehoused stocks quickly by avoiding procedural delays sometimes associated with such payments. Still, clearance of the stocks, which were projected to grow during the mid-crop harvest (May-August) due to favorable weather, was expected to take months. On April 17, French forces also turned over to FRCI control of Abidjan's airport, which they had secured during the fighting that preceded Gbagbo's arrest. Financial Sector The national Ivoirian branch of the Central Bank of West African States (BCEAO), the regional central bank, opened on April 26, and was slated to begin to inject cash liquidity into the banking system within days. During the prior week, the Ouattara administration had reportedly sought to airlift into the country supplies of the regional West African Communauté Financière de l'Afrique (CFA) franc , which is used as the Ivoirian national currency. Several key private banks that had suspended operations in February, including Societe Generale, BNP Paribas, and Citibank, reportedly resumed operations in Cote d'Ivoire in late April, and two regional banks, Bank Atlantique and United Bank for Africa, were slated to reopen in May. A 25% reported rise in late March/early April in the price of $2.3 billion in Ivoirian international bonds due in 2032—on which the Gbagbo government defaulted in January—may, along with a decline in global cocoa prices, signal market optimism in Ouattara and the prospect of a resumption of foreign investment. The bond price rallied again in early May after the Ivorian finance minister publicly declared the Ouattara government's intention to make up missed coupon payments. Transitional Justice and Human Rights Inquiries In addition to ensuring state and public security and jump-starting the economy, an immediate key Ouattara government priority is to put in place mechanisms and processes to ensure transitional justice. Ouattara called for judicial accountability for violations of human rights law, as well as other alleged crimes, and pledged to establish a process of transitional justice in the form of a Truth and Reconciliation Commission (TRC), as a high-level AU panel had recommended. The TRC, he said, would document massacres, crimes, and other human rights violations by all parties arising from the crisis, including those committed by pro-Ouattara forces, along with abuses during the 1990s. On May 1, Ouattara, during a meeting with a delegation group of foreign elder statesmen, stated that he planned to name Charles Konan Banny, a former Ivoirian prime minister (2005-2007), as the head of what Ouattara said would be a Commission for Truth, Reconciliation, and Dialogue. Ouattara stated that he had "added the word dialogue" to the more common "TRC" nomenclature because "that is part of our customs," and has said that the proposed entity would draw from the experience of South Africa's TRC. Despite his focus on reconciliation and unity, and after stating that "reconciliation cannot happen without justice," Ouattara also announced that Gbagbo and one of his two wives, Simone, would be subjected to a judicial investigation by the minister of justice and face unspecified charges "at a 'national level and an international level'," along with unspecified supporters. On April 16, the Justice Minister stated that such probes would focus on "crimes of blood," arms purchase, or embezzlement by former Gbagbo regime leaders. On April 27, the government reaffirmed that it was carrying out an unspecified criminal probe against Gbagbo, his wife Simone, and 100 other close associates over alleged human rights abuses and other crimes. According to the Justice and Human Rights minister, the prospective plaintiffs were slated to be questioned during the first week of May. The Ouattara government also offered some assurances over this process, in the wake of reports that Gbagbo's wife, Simone, and his son were reportedly beaten shortly after their capture, during which Gbagbo's interior minister was fatally shot. Ouattara pledged that the physical integrity and safety of Gbagbo and his first wife, Simone, would be guaranteed, that their rights would be respected, and that they would be accorded dignified treatment. Ouattara also said that he had requested that the International Criminal Court (ICC) investigate alleged crimes arising from the crisis. An April 6 ICC Office of the Prosecutor (OTP) statement indicated that such activities were under way prior to Ouattara's request. It said that the OTP "has been conducting a preliminary examination in Ivory Coast" and was collecting "information on alleged crimes committed there by different parties to the conflict." On May 2, the ICC prosecutor stated that he would soon request that ICC judges authorize a formal investigation into alleged post-electoral crimes against humanity and war crimes, but stated that he would likely await the findings of a separate U.N. Human Rights Council probe prior to opening his own formal investigation. The Human Rights Council human rights violations investigation is being undertaken by a three-member Commission of Inquiry appointed on April 12 by the council's president. The U.N. Office for the High Commissioner on Human Rights (OHCHR) was also investigating recent events, notably killings in western Cote d'Ivoire. In addition to human rights abuses, abuses of civic freedoms and efforts to ensure them are likely to garner considerable attention during anticipated reconciliation processes. During the post-electoral crisis, political protests were often violently suppressed, as described elsewhere in this report, and there were severe restrictions on press freedoms. Such actions generally targeted pro-Ouattara supporters but pro-Gbagbo press outlets also faced increasing coercion by pro-Ouattara elements (see textbox entitled "Control of Information"). Under the Ouattara government, there have also been numerous reports of retaliation by pro-Ouattara supporters, notably targeting members of Gbagbo's FPI political party, the headquarters of which was ransacked during recent fighting. Several pro-Gbagbo news outlets have also faced de facto limitations and engaged in security-related self-censorship. Four newspapers presenting a pro-Gbagbo perspective were reportedly not being published as of late April, and the printing presses and facilities of some had been destroyed. Journalists and publishers of such outlets have also reported being targeted by coercive threats from armed men, despite a publicly stated commitment by Ouattara government officials to ensure respect for press freedoms. Military Reform A longer term challenge necessary for ensuring long-term peace will be disarmament, demobilization and reintegration (DDR), both of regular forces and irregular militia, and military and police-focused security sector reform (SSR). In mid-March, Ouattara decreed the establishment of the FRCI, a new military incorporating the former Forces Nouvelles and the national military formerly loyal to Gbagbo. Integrating the two forces is likely to prove challenging, as had been the case with respect to similar efforts pursued under the 2007 Ouagadougou Political Agreement (OPA), as discussed in Appendix 1 of this report. Some of the same issues that challenged DDR and SSR processes under the OPA—for instance, determining the selection, number, and rank of candidates who will be accorded officer status or be retired from service—are likely to pose continuing difficulties. Rivalries between FN and allied elements and those who opposed Ouattara may also cause controversy. Such rivalries may be heightened by reported current government efforts to recruit new soldiers and police, notably from among youth militia who supported Ouattara during the civil conflict. This action may be seen as counter-intuitive, given that key DDR-related challenges under the OPA had pertained to the need to demobilize troops, rather than to recruit new ones. The move is likely motivated, in part, by the Ouattara administration's desire to ensure that national security forces are loyal, but may prompt charges of ethnic favoritism during a period when the government is also trying to promote national and ethno-regional unification. Inordinate military political influence by former FN FRCI elements is another difficulty that may face the government. Ouattara may be viewed by former FN commanders as beholden to them, given that while they provided much of the military muscle that ultimately allowed him to take power, Ouattara had maintained a distanced, ambiguous stance vis-à-vis the FN prior to mid-March 2011. Ouattara's selection of Prime Minister Guillaume Soro may alleviate or mediate claims that the FN may make on Ouattara, particularly in the wake of the death of Ibrahim "IB" Coulibaly (see above), who had been viewed as the most notable possible military spoiler. Governance Reform A final important short-to medium term challenge for Ouattara is the need to rebuild state legitimacy and operational capacity, including through the conduct of long-delayed legislative elections; the appointment of ethno-regionally diverse incumbents to fill numerous government posts; the reunification of the national territory and the extension of state authority throughout the north; and the centralization of the treasury. These objectives, which were part of the peace and national unification process required under the 2007 Ouagadougou Political Agreement, were attempted, with very modest results, by the Gbagbo administration, as discussed in Appendix 1 of this report. The overriding post-crisis objective, national political unification, is likely to remain a key challenge for an extended period. Ouattara will also have to counter perceptions among many Gbagbo supporters that he came to power as a result of French neo-colonial influence and related a multilateral imperialist plan. While such perceptions are, in large part, an artifact of a constant barrage of a vitriolic, highly partisan, often conspiracy-laced media barrage from state and pro-Gbagbo media outlets during the post-electoral crisis—and despite claims to the contrary by French and UNOCI officials, whose mandates in Côte d'Ivoire were repeatedly endorsed by the U.N. Security Council—they nevertheless present a potent, potentially highly divisive political problem. Background and Implications for the United States45 Côte d'Ivoire's late 2010 presidential election was conducted under the terms of the 2007 Ouagadougou Political Agreement (OPA), the most recent in a series of partially implemented peace agreements aimed at reunifying Côte d'Ivoire, which remained largely divided between a government-controlled southern region and a rebel-controlled zone in the north during a long political stalemate that followed the outbreak of a civil war in 2002. The war, along with the political events that contributed to and followed it, is discussed in Appendix B . The post-electoral crisis and conflict directly threatened long-standing U.S. and international efforts to support a transition to peace, political stability, and democratic governance in Côte d'Ivoire, which are prerequisites for long-term socioeconomic development in Côte d'Ivoire, another key U.S. bilateral objective. While the crisis did not directly affect vital U.S. national interests, the country remained an important economic hub in the region, and the effects of a sustained armed conflict would likely have had far-reaching negative economic and humanitarian impacts in West Africa. Also indirectly at stake were broad, long-term U.S. efforts to ensure regional political stability, peace, democratic and accountable governance, state capacity-building, and economic growth in West Africa—along with several billion dollars worth of investments that the United States has made in the sub-region to achieve these goals. The United States has supported the peace process in Côte d'Ivoire since 2002, both politically and financially, with funding appropriated by Congress. It aided in the 2003 deployment of the former Economic Community of West African States (ECOWAS) Mission in Côte d'Ivoire (ECOMICI), a military intervention force. It also contributed 22% of the cost of a 2003-2004 U.N. military monitoring and political mission, the U.N. Mission in Côte d'Ivoire (MINUCI), and continues to fund about 27% of the cost of the ongoing U.N. Operation in Côte d'Ivoire (UNOCI), a multi-faceted peacekeeping mission that succeeded MINUCI. Post-Electoral Crisis On November 28, 2010, a presidential election runoff vote was held between the incumbent president, Laurent Gbagbo, and former Prime Minister Alassane Dramane Ouattara, the two candidates who had garnered the most votes, 38% and 32%, respectively, in a generally peaceful but long-delayed first-round presidential poll held on October 31, 2010. Both candidates claimed to have won the runoff vote and separately inaugurated themselves as president and appointed cabinets, forming rival governments. Both claimed to exercise national executive authority over state institutions and took steps to consolidate their control. Competing Electoral Victory Claims Ouattara, popularly known by his initials, ADO (pronounced ahh-doh by Ivoirians), based his victory claim on the U.N.-certified runoff results announced by Côte d'Ivoire's Independent Electoral Commission (IEC). These showed that he won the election with 54.1% of votes cast, primarily by a predominantly Muslim, northern electorate, augmented by portions of the ethnic Akan-centered political base of the candidate who took third-place in the first round, Henri Konan Bédié, a former head of state. The results showed Gbagbo winning 45.9% of votes, mostly drawn from the south, notably including Krou ethnic group areas in the south-center and west, some central-east Akan areas, and southeastern Lagoon ethnic group areas. Most of the international community, including the United States, endorsed the IEC poll results as accurate and authoritative, and demanded that Gbagbo to accept them and cede the presidency to Ouattara. Gbagbo, however, appealed the IEC decision to Côte d'Ivoire's Constitutional Council—stacked with members mostly nominated by Gbagbo or his close ally, Mamadou Koulibaly, the President of the National Assembly—which reviewed and annulled it. Citing voting irregularities, electoral violence, and a failure by the IEC to formally announce poll results within a legally mandated three-day period, the Council nullified poll results in seven northern departments and proclaimed Gbagbo president. It ruled that he had received 51.5% of votes, against 48.6% for Ouattara. The Council's decision allocated 2.05 million votes to Gbagbo (52,518 more votes than he had garnered during the first round), while it awarded Ouattara 1.94 million votes (544,492 fewer votes than he had won during the first round). Gbagbo, citing the Constitutional Council's constitutionally authorized decision, asserted that he was the legally elected president and has rejected international calls to step down. His victory claim was widely rejected internationally, however, because the Special Representative of the U.N. Secretary-General's (SRSG) for Côte d'Ivoire, Choi Young-Jin—based on an independent tally process carried out entirely separately but in parallel to that undertaken by the IEC—"certified the outcome of the second round of the presidential election, as announced by the … IEC, confirming Mr. Ouattara as the winner." SRSG Choi concluded that, based on his certification, which was "conducted without regard to the methods used and result proclaimed by either the IEC or the Constitutional Council … the Ivorian people have chosen Mr. Alassane Ouattara with an irrefutable margin as the winner over Mr. Laurent Gbagbo." Gbagbo's claim was also rejected because Choi, after closely examining the Constitutional Council's proclamation negating the IEC decision "certified that … [it] was not based on facts." The decision of the Constitutional Council was widely viewed internationally and by the Ivorian opposition as having been motivated by partisan bias. The council's decision was preceded by what appears to have been a coordinated effort by Gbagbo supporters to discredit selected runoff poll results before they were announced by the IEC—once it had become clear, based on partial preliminary poll results, that Gbagbo would likely not win the poll—and to disrupt or extend past the three-day deadline IEC validation of the results, creating a rationale for the council's review and rejection of the IEC's determination. On December 1, a Gbagbo-nominated IEC member, Damana Adia Pickass, seized and tore up the provisional IEC results on live television just as the IEC spokesman, Bamba Yacouba, was about to publicly announce them. The incident disrupted the workings of the IEC and reportedly caused it to miss its legal deadline for announcing the results, creating the basis for council review. The council's decision was also viewed skeptically because it resulted in the statistically highly unlikely annulment of the 597,010 votes, a number equivalent to 10.4% of all registered voters or 13% of all votes cast during the runoff. Furthermore, all of the annulled districts were located in major population zones of in northern Côte d'Ivoire, which was considered an Ouattara electoral stronghold and was largely controlled by the northern rebel Forces Nouvelles . Some observers also contend that under Article 64 of the national electoral code, the council had the authority to cancel the entire election, but not part of it, and to order new elections in the case of a cancellation. The president of the council, however, has contended that electoral precedent gave the council the authority to order a partial cancellation; he cited as the basis of such authority the partial cancellation of 1995 presidential election results. He has also contended that new elections were not necessary because only 13% of votes were affected—even though the cancellation of these votes had the material effect of reversing the election's outcome—and asserted that a new election would only have been required if 30%-40% of votes had been dismissed. Appendix A , "Background on the Election," discusses the first and second round polls and the lengthy, highly contested peace and pre-election processes that preceded it. International Recognition of Ouattara Resisted by Gbagbo SRSG Choi's certification of the IEC-announced runoff results and the build-up of international pressure on Gbagbo to stand down infuriated President Gbagbo and his political supporters and ratcheted up political tension and violence (see " Political Tension and Violence ," below.) The Gbagbo government asserted that the international community's rejection of the Constitutional Council's decision and its efforts to force him to concede the presidency infringe on Ivorian national sovereignty and the constitutional rule of law—even though the Gbagbo government, among other signatories of the 2007 and prior peace agreements, had agreed to the United Nations' electoral certification mandate. The Gbagbo government accused UNOCI of collaborating with the rebel FN and on December 18 demanded that UNOCI peacekeepers—along with a French force that supports UNOCI—immediately leave the country. On December 20, the U.N. Security Council (UNSC) rejected the demand by extending the mandate UNOCI until June 30, 2011, and authorizing a temporary plus-up of its size. A U.N. spokesman was quoted as stating that Gbagbo's call was irrelevant and without effect because he was not recognized by the United Nations, African regional organizations, or most governments as the duly elected leader of Côte d'Ivoire. Ouattara supports a continuing UNOCI role. On March 10, after Ouattara had departed Côte d'Ivoire in a U.N. aircraft to attend an African Union meeting in Ethiopia, Gbagbo ordered a ban on flights by U.N. and French military aircraft. The order was rejected as illegitimate by the United Nations and had no practical effect. The Gbagbo government and its supporters took an uncompromising stance with regard to what they saw as Gbagbo's legally binding, incontrovertible electoral win. They pursued diverse efforts to ensure that he remains president. These efforts included attempts to ensure support among civil servants and the military by asserting control over various revenue and credit streams to ensure salary payments; attempts to eject UNOCI and impede its operations; violent raids on opposition strongholds; and pursuit of an international public relations campaign to promote the Gbagbo case. The public relations campaign included a grassroots media outreach effort by Gbagbo supporters, who distributed government and pro-Gbagbo press articles and blogs, in some cases promoting vitriolic rumors and conspiracy theories. The latter included various alleged French and/or foreign mercenary-backed plans to oust Gbagbo, in some cases with putative U.S. assistance, and allegations of military collusion between the FN and UNOCI. Coverage of such alleged collusion reportedly featured prominently and frequently on state TV and other pro-Gbagbo media, part of what the U.N. High Commissioner for Human Rights described as "an intensive and systematic campaign" by state-owned radio-television (RTI) to promote "xenophobic messages inciting hatred and violence [and ... ] religious and ethnic division between the north and the south" and "intolerance and hatred against the UN, the AU, ECOWAS, the facilitator of the Ivorian dialogue, as well as non-LMP leaders and supporters [i.e., persons who do not support Gbagbo ]." The Gbagbo camp's information campaign also employed the use of official Ivorian government websites and foreign lobbyists to make the government's case. In the United States, a short-lived, soon-abandoned effort by Lanny J. Davis, a Washington lobbyist and former special counsel to former President William J. Clinton, garnered substantial attention. To counter the Gbagbo side's efforts and promote its views on various issues, the Ouattara government hired two U.S. firms to represent its views and interests in the United States. It also reportedly established a television station that broadcasts from the Golf Hotel in Abidjan, where the Ouattara government was based and resides under the protection of a reported 800 UNOCI troops. Gbagbo also pursued a series of alternative actions that might have allowed him to remain a key government leader if he was forced to cede the presidency. He suggested that he might be willing to entertain a negotiated solution to the crisis and called for Ouattara and himself to "sit down and discuss" a way out of the crisis with him. A key Gbagbo ally suggested that a potential outcome of such negotiations might include a power-sharing deal, such as the formation of a government of national unity (GNU), although ECOWAS and other international interlocutors—including the United States—rejected such an outcome. The Ouattara camp rejected the possibility of a GNU until January 10, when the Ivoirian ambassador to the United Nations, an Ouattara appointee, stated that Ouattara would be willing to form a unity government that would include members of Gbagbo's Ivorian Popular Front (FPI) party, if Gbagbo agreed to step down and recognize Ouattara as the legitimately elected leader of Côte d'Ivoire. Gbagbo also invited renewed international mediation to negotiate a resolution of the crisis (see " Regional Diplomacy ," below). On December 21, he addressed the Ivorian nation on TV and stated that he was "ready—respecting the constitution, Ivorian laws and the rules that we freely set for ourselves—to welcome a committee of evaluation on the post-election crisis in Ivory Coast." He stated that such an assessment should be led by the African Union, with the participation of the United Nations, EU, ECOWAS, the Arab League, United States, Russia, China, and "Ivoirians of goodwill." The United States, along with most major governments and international organizations, rejected Gbagbo's proposal, asserting that such an evaluation "has already been done," by the IEC and through the U.N. certification process. In discussions with a visiting ECOWAS heads of state in late December, Gbagbo also reportedly demanded a vote recount and, were he to depart his post, a grant of amnesty for any criminal charges that he might face as a result of post-electoral human rights abuses associated with his control over state institutions and security forces and his refusal to cede the presidency. Political Tension and Violence The contested election outcome heightened political tension and sparked political violence, including numerous killings in Côte d'Ivoire, and put the self-proclaimed Gbagbo government at odds with the U.N. Security Council, regional organizations, and key donor governments involved in monitoring, vetting, or helping to administer the electoral process. President Gbagbo and his administration were the targets of intense and wide-ranging diplomatic, political, financial, and threatened military international pressure aimed at forcing Gbagbo to concede the election and had state power over to Ouattara (see " International Reactions ," below) According to UNOCI, the security situation in the weeks after the runoff were "very tense and unpredictable;" as a result, the United Nations temporarily relocated its non-essential staff to Gambia on December 6, 2010. In December, there were limited armed clashes between security forces that support each camp—which reportedly include the bulk of the national military and police forces, in the case of Gbagbo, and the military wing of the rebel FN in the case of Ouattara. The outer perimeter of the U.S. embassy in Abidjan was slightly damaged by "an errant rocket-propelled grenade" during one armed exchange. There were also a spate of extrajudicial killings, other human rights abuses by state security forces during operations to suppress public demonstrations by Ouattara supporters, as well as attacks on and abductions of Ouattara and Gbagbo partisans by groups of unidentified armed men, described as "death squads." Casualties and Rising Threat Level As of March 24, 2011, U.N. estimates had confirmed at least 462 post-electoral political killings by supporters of both presidential claimants, and killings, rapes, and abductions were all increasing. The United Nations attributed most of these deaths to "extra-judicial killings committed by elements of the security forces loyal to Laurent Gbagbo." Most were related to post-elections and related political tension, although some were related to communal clashes over issues that, while not directly tied to the electoral outcome and having unrelated proximate causes, were likely aggravated by unresolved political issues, such as contended land or residency rights. The U.N. High Commissioner for Human Rights, Navi Pillay, also documented continuing reports of abductions, illegal detention and attacks against civilians. All of these developments were described in a report by Pillay on the human rights situation in Côte d'Ivoire through January 31, 2011. On March 3, state security forces killed seven unarmed female protesters; six died on-site and one at a hospital after the shootings. Video of the fatal protest was distributed on the Internet. Part of a follow-up protest was fired on by state security forces, resulting in four fatalities, and a smaller, related rally was broken up by pro-Gbagbo youth militants "armed with machetes and firing automatic weapons into the air." President Obama and other top U.S. officials condemned the shootings and called for the perpetrators of this and other violence to be held to account for their actions. Similarly, France called for a U.N. inquiry into the ongoing political violence in Côte d'Ivoire. In late March, a residential area in Abidjan was shelled, resulting in between 25 and 30 deaths. The total number of fatalities and abuses resulting from post-electoral violence was likely higher than the total documented by the United Nations; additional killings, detentions, and abuses were reported prior to the period covered by the U.N. assessment, and later continued. In addition, the national military reportedly did not release numbers of its own casualties or civilians killed by its members. Reporting by non-governmental human rights monitoring groups, such as Human Rights Watch (HRW) and Amnesty International (AI), mirrors U.N. findings regarding a post-electoral rise in human rights abuses. HRW and AI, in particular, drew attention to a rise in apparently politically motivated use of rape as a means of intimidation. In mid-March 2011, HRW stated that The three-month campaign of organized violence by security forces under the control of Laurent Gbagbo and militias that support him gives every indication of amounting to crimes against humanity. [ ... ] The killing of civilians by pro-Ouattara forces, at times with apparent ethnic or political motivation, also risks becoming crimes against humanity should they become widespread or systematic. There were also reports of mass graves. UNOCI attempted to investigate reports of three such graves, one in Abidjan, one in the south-central town of Gagnoa, near Gbagbo's place of origin, and one in the town of Daloa, but was prevented from accessing the sites by state security forces, some in mufti. This, the U.N. High Commissioner for Human Rights, Navi Pillay, stated, was a "clear violation of international human rights and humanitarian law." The rise in tension and violence prompted a number of international diplomatic missions to evacuate personnel and, in some cases, private citizens, from Côte d'Ivoire. Several governments advised their citizens not to travel to the country and to depart it if they were there. Citing "the deteriorating political and security situation ... and growing anti-western sentiment" the State Department warned U.S. citizens to avoid travel to Côte d'Ivoire, and on December 20, 2010, ordered the departure of all non-emergency embassy personnel and family members. It also prompted large numbers of Ivoirian citizens and residents to flee to neighboring countries, primarily Liberia, as refugees, or to become internally displaced within Côte d'Ivoire. See " Humanitarian Effects and Responses ," below. Violence Escalates and the Threat of War Rises Extensive recent fighting in the west, Abidjan, and in a growing number of other areas starting in March signaled that a new Ivoirian civil war was under way. A growing number of indicators had previously signaled that such an outcome was a distinct possibility, and possibly "imminent." An early indicator of such a possibility was the substantiation by the United Nations of reports that in the immediate post-electoral period, pro-Gbagbo troops were assisted by mercenaries from Liberia, and possibly from other countries. This was viewed as worrying because of Liberia's history of severe wartime human rights abuses and because such irregular forces might be difficult to prosecute, for varying reasons, if they were accused of crimes. Another indicator was a reportedly sharp rise in militia recruitment by pro-Gbagbo and pro- Forces Nouvelles elements and the formation of a new pro-Gbagbo militia called the Force de Résistance et de Libération de la Côte d'Ivoire (FRLCI). In February 2011, the United Nations had reported that a nominally demobilized militia known as the Compagnie des Scorpions Guetteurs and as the Front de Libération du Grand Centre (i.e., Company of Scorpion Spotters/Watchmen or Liberation Front of the Great Center, one of a number of former pro-Gbagbo militias) has been reactivated with a mission of undertaking infiltration and reconnaissance of Forces Nouvelles areas prior to an multi-pronged attack. According to the United Nations, some pro-Gbagbo youth groups and militias were being armed. Such actions were reportedly coordinated by high-ranking state officials and pro-Gbagbo militia, youth group, and political party leaders. Such groups, including an ultra-nationalist, frequently xenophobic pro-Gbagbo youth group known as the Young Patriots, were reportedly coordinated with state security forces, in particular to identify and target putative opposition-affiliated "individuals to be arrested, abducted or assassinated and their residences." Young Patriots, "often armed with machetes, clubs or guns," reportedly "set up roadblocks all over the main city in Abidjan after a call by [Young Patriot] leader Blé Goudé to hunt pro-Ouattara rebels and obstruct U.N. staff, whom he accuses of backing them." Police and other state security forces, in league with youth gangs, also reportedly looted the homes and property of multiple Ouattara government officials on March 6. Pro-Ouattara youth groups reportedly carried out similar actions, and militant supporters of both presidential claimants were, in some cases, carrying out attacks on individuals and communities based on their targets' presumed ethnicity and putative political affiliation. There were also reports and visual media evidence documenting live burnings of beaten victims, among other atrocities. Foreigners also became an increasing target of pro-Gbagbo supporters angered by international rejection of Gbagbo's claimed election and financial pressure on the Gbagbo administration, state media propaganda alleging that UNOCI and various foreign governments were collaborating with the FN, and related factors. On March 1, Young Patriots reportedly "rampaged through the business district of Abidjan ... pillaging shops owned by foreigners." United Nations staff were also reportedly "attacked and robbed by pro-Gbagbo gangs" in the week prior to the rampage. Fighting in Abidjan was frequent. It was reportedly first initiated by state security forces loyal to Gbagbo, which launched repeated raids on putative opposition strongholds in Abidjan in late 2010 and early 2011. These raids, which reportedly were associated with numerous extralegal detentions and extrajudicial killings, appear to be spurring retaliatory violence. On February 23, 2011, a security force element conducting a such raid was ambushed by counter-assailants using small arms, resulting in the deaths of between 20 and 30 members of the raiding team and an extended firefight. The assailants were not identified, but were reported to be members of a Forces Nouvelles -affiliated fighting cell that calls itself the Movement for the Liberation of the Peoples of Abobo-Anyama (MLP-2A). The militia's name referred to the densely populated northern neighborhoods of Abobo and Anyama, where about 1.5 million residents, many northerners and foreign migrant workers, live. A similar armed anti-Gbagbo element, dubbed the "Invisible Commando," was also reportedly active. Some prior raids were resisted by residents of the area, but the February 23 clash signaled a significant escalation in violence and the most lethal clash up until that date in Abidjan between state security forces and armed elements opposing them, assisted by local youths and some defectors form the national military. By early March, a large area of Abobo known as PK-18 was now under the control of FN-linked elements that observers viewed as supportive of Ouattara, but which may have been loyal to a former FN commander, Ibrahim "IB" Coulibaly. The February clashes appeared to spur a rise in such confrontations; multiple gun fights between Gbagbo and Ouattara forces reportedly occurred during the last week of February 2011, and the fighting spread to other areas of the city on March 2. On March 7, pro-Ouattara fighters in control of Abobo reportedly attacked a village "populated by the largely pro-Gbagbo Ebrie tribe" that is located within the Abobo area under their control, killing three persons and wounding 30. On March 14, following a weekend attack by pro-Gbagbo forces on Abobo aimed at expelling pro-Ouattara forces from the neighborhood, gun battles erupted for several hours in Abidjan neighborhoods south of Abobo, near the central business district and in other generally pro-Gbagbo areas, including near the home of the national army chief of staff, Phillipe Mangou. The ongoing clashes in Abidjan and elsewhere prompted Mangou to state on March 15 that pro-Gbagbo forces were prepared to go to war. Another key sign that rising conflict was burgeoning into a large-scale armed civil conflict was the February 25 seizure from a pro-Gbagbo militia, the Front for the Liberation of the Great West (FLGO), of several villages in western Côte d'Ivoire by FN elements. About a week later, the FN also seized additional nearby territory in the western Montagnes region and the town of Toulépleu in the neighboring Moyen-Cavally region, to the south of Montagnes, and in mid-March took control of the town of Doké 20 miles to the east. Possession of this territory—provided that the FN can hold it—would give the FN control over much of the Ivoirian border with Nimba county in neighboring Liberia, where both pro-Gbagbo and Ouattara armed elements reportedly recruited ex-combatants from the Liberian civil war. In early March, the U.N. High Commissioner for Refugees (UNHCR) also reported that there was "heavy fighting ... in and around Duékoué on the road to Man." By late March, fighting in the west had expanded toward the center and east of the country. There were reports that FN forces had taken control of two key towns, Duekoue, in the west, and the central town of Daloa, and seized two smaller towns in the east near the Ghanaian border. Such fighting has prompted multiple humanitarian agencies to temporarily withdraw their workers from the west. An additional possible harbinger of resurgence of military conflict were reports of possible violations of a long-standing U.N. prohibition on the export of arms and other military materiel, notably attack helicopters, to Côte d'Ivoire; see "Possible Violations of the U.N. Arms Embargo: Recent Developments" text box, below. In late March, UNOCI reported that pro-Gbagbo state security forces "were repairing an MI-24 attack helicopter"—possibly an aircraft that had been damaged by France in 2004—and preparing multiple rocket launchers. The assertion followed reports that heavy weapons were increasingly being used within Abidjan. The prospect of renewed armed conflict had earlier been spurred by repeated calls by Ouattara aides for Gbagbo to be removed from office by force, and by a December 24 threat by ECOWAS to undertake such an action. While the regional body later deferred military intervention, pending further negotiation, as of mid-January 2011, the proposal remained the focus of active military planning (see section entitled " Threat of Military Intervention to Oust Gbagbo "). Similarly, while Ouattara has repeatedly called for a peaceful resolution of the crisis, notwithstanding the statements of his aides, in March 2010, an FN spokesman stated that the rebel movement saw "no other option but force" to make Gbagbo leave power. Threats to International Mandates and Accountability The increasing tension and a rise in anti-UNOCI sentiment, which took the form of public demonstrations spurred by pro-Gbagbo media and party militants, resulted in multiple physical attacks on UNOCI peacekeepers and has hindered their movement. In several cases, such actions were aimed at interfering with UNOCI protection of the Ouattara government, which was based in the Golf Hotel in Abidjan. On February 28, 2011, pro-Gbagbo youth reportedly abducted two UNOCI peacekeepers, who were then detained at a state Republican Guard base for several hours before being released. Such actions prompted U.N. Secretary-General (UNSG) Ban Ki-moon to warn that any attack on UN forces will be an attack on the international community and those responsible for these actions will be held accountable. Any continued actions obstructing and constricting UN operations are similarly unacceptable. UNOCI will fulfill its mandate and will continue to monitor and document any human rights violations, incitement to hatred and violence, or attacks on UN peacekeepers. There will be consequences for those who have perpetrated or orchestrated any such actions or do so in the future. The threat also prompted the UNSC to increase the size of UNOCI in early 2011 (see text box entitled "UNOCI," above). In late December, the U.N. High Commissioner for Human Rights, Navi Pillay, stating that "no longer can heads of State, and other actors ... commit atrocious violations and get away with it," wrote to Gbagbo "reminding him of his duty under international law to refrain from committing, ordering, inciting, instigating or standing by in tacit approval of rights violations." Similar letters were sent to the heads of key Ivorian security services. The International Criminal Court (ICC) Prosecutor was reportedly monitoring violence against civilians and against UNOCI peacekeepers, as well as speech advocating or resulting in mass violence, and has threatened to prosecute those who, under international law, abet or cause violence. He specifically cited Charles Blé Goudé as an example of a person whose public speech might, if warranted, potentially be prosecuted. Blé Goudé, Gbagbo's Minister of Youth, is a leader of some of Gbagbo's most militant supporters. In response to the rising danger faced by UNOCI peacekeepers, including a threat by Blé Goudé to attack the Golf Hotel, Ban—reiterating a December 17 statement—warned that "UNOCI is authorized to use all necessary means to protect" its personnel, Ouattara government officials, and other civilians at the hotel. He said an attack on it "could provoke widespread violence that could reignite civil war." U.N. and foreign government officials subsequently and repeatedly made similar statements. Humanitarian Effects and Responses As of early March 2011, rising violence in Abidjan had prompted as many as some 250,000 urban residents, primarily of the Abobo and surrounding neighborhoods of Abidjan, to flee elsewhere for safety, primarily in and around the metropolitan area. More than 60,000 persons had also been internally displaced in western Côte d'Ivoire due to fighting between the FN and pro-Gbagbo fighters. As of late March 2011, as a result of fighting in western Côte d'Ivoire, nearly 102,000 Ivoirian refugees had fled into neighboring Liberia, where they were formally registered with U.N. agencies, and more were arriving daily. There were also over 4,888 refugees in other nearby countries, including over 2,500 in Guinea, and the number of internally displaced persons (IDPs) was estimated at between 700,000 and 1 million by U.N. agencies. The conflict was also having negative humanitarian effects in other parts of the country. In early March, electrical power to northern Côte d'Ivoire was reportedly cut for about a week as part of state military operations targeting FN-held areas—although a Gbagbo spokesperson also attributed the cuts to the financial embargo on the country. The stoppage cut off electrically pumped piped water flows, and reportedly crippled hospital operations and forced residents to use water from unsafe sources. In other parts of the country, social workers, such as teachers and health workers, were absent from work after not receiving their salaries, food and other consumer goods' prices were spiking due to economic disruptions, and medical drug distribution was severely hampered. Refugee numbers in Liberia grew rapidly, but a small portion were believed to fluctuate in response to conditions in Côte d'Ivoire; household heads, for instance, sometimes return temporarily to tend to property or farms. During some periods, the rapid inflow of refugees caused the UNHCR to suspend individual registration and temporarily adopt a rapid emergency registration system. An anticipated continuing large inflow of refugees prompted the UNHCR to contingently plan to address the emergency needs of 250,000 refugees and to identify additional potential camps and host communities where this population could stay. Such refugee and IDP inflows severely strained local communities' supplies of food and water. Key challenges included protection, "registration and documentation of a very mobile population next to porous borders" in an insecure, widely dispersed, inaccessible rural zone; and the need to address "vulnerabilities in an environment already characterized by limited access to basic services for local populations." Notwithstanding these challenges, the UNHCR and the World Food Program (WFP), together with Liberian authorities and a variety of nongovernmental organizations (NGOs), were channeling refugees to camps and providing water, sanitation, and emergency food and shelter to them. The UNHCR also attempted to ensure that a humanitarian corridor be established to enable civilians to reach safer place and to allow humanitarian agency access to affected populations. The United States was continuing to channel aid toward these emergency humanitarian needs. U.S. Humanitarian Assistance U.S. assistance for refugees and communities hosting refugee populations generated by the Ivoirian crisis or facing resource constraints due to refugee influxes is being provided collaboratively by the State Department and the U.S. Agency for International Development (USAID). The State Department's Population, Refugees, and Migration Bureau (PRM) is providing refugee aid in Liberia, Côte d'Ivoire, and in other countries in the region, while USAID's Office of U.S. Foreign Disaster Assistance (OFDA) and USAID's country mission, USAID/Liberia, are assisting host and other affected communities in Liberia. OFDA was expected to provide additional assistance in Côte d'Ivoire in response to a mid-March complex emergency disaster declaration. USAID's Office of Food for Peace (FFP) is providing food aid for both refugees and host communities, which are typically poor, in both Liberia and Côte d'Ivoire. The overall value of recent, current, or planned U.S. emergency humanitarian responses to the Ivoirian crisis totaled about $33.73 million as of mid-April. Much of this aid was expected to be channeled through U.N. or other international humanitarian organizations, significantly boosting funding for the overall humanitarian response. On January 4, 2011, following a late 2010 field assessment of the impact of Ivoirian refugees inflows on local Liberian host communities, the U.S. ambassador to Liberia issued a complex emergency disaster declaration. This action enabled the Office of U.S. Foreign Disaster Assistance (OFDA) of the U.S. Agency for International Development (USAID) to provide aid these communities, worth an initial $100,000. In mid-March, OFDA was reviewing proposals from several NGOs focused on possible increases in assistance for Liberian host communities impacted by the refugee influx. OFDA has separately provided additional assistance to UNICEF in support of emergency services for host communities. OFDA was expected to provide additional assistance in Côte d'Ivoire, pending a field-based needs assessment, in response to the March 13 declaration of a complex disaster emergency by the U.S. ambassador in Abidjan. On March 7, 2011, President Obama authorized PRM to provide $12.6 million in FY2011 Emergency Refugee and Migration Assistance (ERMA) to address "unexpected and urgent refugee and migration needs ... related to humanitarian needs resulting from the recent unrest in Côte d'Ivoire." This PRM-administered ERMA assistance was allocated to support refugee assistance in Liberia and in Côte d'Ivoire and neighboring countries other than Liberia. FFP has provided additional assistance in Liberia in support of WFP emergency operations (EMOPs) in support of refugees and targeted segments of host communities, and in early March had provisionally approved an additional $7.5 million in such aid in Liberia. At that time, it had also provisionally approved $4.5 million for a WFP EMOP in Côte d'Ivoire focused on support for IDP and host community needs. USAID/Liberia has scaled up existing health programs in communities affected by Ivoirian refugee inflows, primarily to address respiratory and digestive illness treatment and the provision of water, sanitation, and hygiene (WASH) services. International Reactions Much of the international community—with at least one exception and some qualifications among African governments—rejected Gbagbo's claim of electoral victory and endorsed Ouattara as the legally elected president of Côte d'Ivoire. In response to Gbagbo's refusal to cede the presidency to his rival, the international community pursued a range of coordinated and bilateral efforts aimed at forcing him to abide by the results of the election. These included diplomatic isolation and non-recognition of the Gbagbo government; personal travel and financial sanctions against members of the regime; constriction of credit and access to state financial assets; and the threat of military action to enforce the electoral outcome. In late March there were calls for the imposition of expanded U.N. and European Union sanctions targeting the Gbagbo regime. International Multilateral and Bilateral Responses On December 7, 2010, the regional body ECOWAS, endorsing the IEC-announced poll results as certified SRSG Choi, recognized Ouattara as President-elect of Côte d'Ivoire and called on Gbagbo to abide by the results "and to yield power without delay," and suspended Côte d'Ivoire's participation in the organization "until further notice." On December 9, the AU Commission (AUC) Peace and Security Council (PSC)—which typically defer to sub-regional bodies' decisions regarding events in their jurisdictions—endorsed the December 7 ECOWAS decision on Côte d'Ivoire and suspended the participation of the country "in all AU activities, until such a time [as] the democratically elected President effectively assumes State power." The UNSC, in turn, endorsed the decisions of ECOWAS and the AU. On December 8, a day after a UNSC meeting in which the council heard the report of SRSG Choi on the election, the UNSC released a press statement on Côte d'Ivoire in which council members, "in view of" the ECOWAS endorsement of "Ouattara as President-elect," called on "all stakeholders to respect the outcome of the election." Following a December 18 statement by a U.N. Peacekeeping Operations Department spokesman denying Gbagbo's status as president and the U.N. Security Council's implicit recognition his status two days later, on December 23, the 192 member states of the United Nations officially recognized Ouattara as the legal president. Acting through a consensus vote, the U.N. General Assembly accepted Ouattara's election by formally recognizing a team of diplomats sent by Ouattara to be the country's official representatives. The new Ivorian U.N. ambassador is Youssouf Bamba, a veteran diplomat, who officially took up his post on December 29. Several governments that recognized Ouattara's election also bilaterally dropped recognition of the Gbagbo government; Ouattara has written to at least 20 governments requesting such an action. In late December, as pro-Ouattara protesters occupied the Ivorian embassy in Paris, the French government stated that it had "taken note" of Ouattara's dismissal of the Gbagbo-designated ambassador to France, and pledged to recognize an envoy named by Ouattara. The French government also reportedly "grounded a plane belonging to Gbagbo at an airport in France in response to a request by" Ouattara. Canada, the United Kingdom (UK), Belgium, and several other EU countries also announced that they would only accept ambassadors named by Ouattara. The Gbagbo government attempted to retaliate against some governments that dropped recognition of his government and rejected his envoys by doing the same in return. It declared the British, Canadian, and French ambassadors persona non-grata and asked them to leave the country. Canada and France responded by saying the request was without merit as Canada does not recognize Gbagbo as president, while the UK ambassador was not immediately affected, as he is regionally based, in Accra, Ghana. Regional Diplomacy The AU and ECOWAS each held several high-level meetings to address the crisis and dispatched multiple diplomatic delegations to Côte d'Ivoire in order to diffuse tensions and convince Gbagbo to respect the results of the election and cede the presidency. The most recent AU effort to end the crisis was undertaken by a heads of state panel, dubbed the "Panel of Five," advised by a team of technical experts led by AU Peace and Security Commissioner Ramtane Lamamra. The panel was viewed as holding a charge that would test the credibility of the AU vis-à-vis the Ivoirian crisis and the strength of its dedication to democratic principles, given that prior regional mediation efforts to resolve the crisis and to ensure Ouattara's effective assumption of executive powers, in accordance with AU and ECOWAS endorsements of his election, had produced few tangible results. AU High-Level Panel The AU high-level panel, appointed by the AU PSC in late January 2011, was made up of the presidents of South Africa, Chad, Mauritania, Tanzania, Burkina Faso, and Chad, along with AUC chairman Jean Ping and ECOWAS Commission president Victor Gbeho. In early February the panel deployed its technical team to Abidjan to consult with the opposed parties and, after conferring in Mauritania, met with the parties in Abidjan on February 21, a day on which at least six persons were reported killed in a state security force raid on opposition residential areas. One panel member, Burkinabe President Blaise Compaoré, the former OPA facilitator, did not join the panel during its trip to Abidjan due a threat of attack on his person by the Young Patriots, who view him as partial toward Ouattara. On February 28, the PSC extended the panel's mandate until the end of March, requesting that it "formulate ... a comprehensive political solution ... to submit to the Ivorian parties." In early March, Ping traveled to Abidjan on behalf of the panel to consult with the two presidential claimants and invited them, along with Paul Yao N'Dre, the head of the Ivoirian Constitutional Council, to a March 10 AU PSC meeting, at which the panel presented its conflict resolution findings and recommendations. Ouattara attended the meeting, held in Ethiopia, but Gbagbo did not; instead, he sent two delegates, the leader of his FPI political party, Pascal Affi N'Guessan, and his foreign minister, Alcide Djedje. N'Dre did not attend. The AU high-level panel's report, presented to the PSC at the meeting, reviewed the election, the pre-electoral process and political environment, and the post-electoral crisis, and laid out a range of recommendations for resolving it. The panel reaffirmed Ouattara's election win and recommended that Gbagbo step down; called on the Constitutional Council to swear in Ouattara as president; recommended that a national unity government be formed; and called for the establishment of a national peace and reconciliation process based on the Ouagadougou Political Agreement. It also found that what it termed the partisan composition and "dysfunction" of the IEC and the Constitutional Council had provided the basis for the contended electoral outcome. It reserved particular criticism, however, for the Constitutional Council; it sharply questioned the procedures by which the council had reached its determinations on the outcome of the election and the basis of the legal authority under which it had acted. The panel called especially "disturbing" the council's decision to cancel nearly 600,000 votes, or what it said was 13% of the total, "just enough to reverse the results," while simultaneously arguing that this action was not likely to affect the fairness of the poll. The panel also observed that former President Gbagbo had held office for a decade, a period corresponding to the maximum term that he could have served had he been constitutionally elected to two successive terms of five years—and had thus enjoyed a lengthy opportunity to promote peace and reconciliation, an outcome that the panel's report stressed not been achieved. AU Panel Recommendations: Prospects and Significance Efforts to implement the high-level panel's recommendations and to generate an outcome that would have been satisfactory to both sides were viewed as likely to face great difficulties because of the intransigence of the two parties. The Gbagbo camp strongly and repeatedly rejected the panel's recommendations, asserting that they were unacceptable because they were not in accordance with the Constitutional Council's ruling in favor of Gbagbo's election. In light of Gbagbo's posture and other indications that the two sides remained entrenched and unwilling to compromise, some press analyses on March 11 concluded that the panel's efforts had failed. Such analyses may have been premature, since the panel's recommendations had not been formally adopted, but they accurately underlined the poor prospects for implementation—and appeared prescient when on March 27, Ouattara rejected the appointment of José Brito, a former Cape Verde foreign affairs minister as the AU High Representative for Côte d'Ivoire. Brito was appointed to implement the panel's recommendations, but Ouattara asserted that Brito was not suitable because he was not a former head of state and because he had alleged personal and political ties to Gbagbo. An additional complicating factor was Ouattara's selective interpretation of what the panel had called for. He accepted the need or a cross-party government "in a framework of reconciliation ... because I want peace," but rejected the notion that it would, at its core, be a power-sharing government with Gbagbo or his close allies. He instead emphasized that he would remain firmly in control of the unity government called for by the panel and implementation of the provisions that it calls for, stating: I will form which will include members of other parties that I will select…. It is different to say that it is a National Unity Government as if ministers will be opposed to me, that is not the case.... I will take the best people in Côte d'Ivoire to run a disaster situation [in which] ... the economy is completely down and the social indicators are worse than we have seen since independence. So I want to have a strong team, a team of competent people from all parties and from the civil society but I will select them…. Gbagbo will have an honorable exit and thereafter when he comes to see me we'll discuss that. Ouattara also did not appear to overtly endorse or address the panel's other recommendations, regarding further implementation of the Ouagadougou Political Agreement, establishment of a TRC, passage of an amnesty, and related measures. Notwithstanding these challenges, the panel was seen as having achieved a notable success by having prominently advocated a single, cohesive AU approach toward resolving the crisis. This outcome was seen as important in light of multiple press reports suggesting that splits regarding the appropriate conflict resolution strategy had emerged among AU member states, potentially threatening largely unified international efforts to resolve the crisis and providing implicit support for Gbagbo's position. South African President Jacob Zuma's agreement to join his fellow panelists in making their recommendations was especially noteworthy in this respect, since South Africa's prior stance had been viewed as a possible obstacle to that end. The Zuma government had issued equivocal statements on the crisis. It variously endorsed ECOWAS's findings in favor of Ouattara's election but also questioned the validity of the election outcome and called for an undefined mediated outcome, and had taken other actions that that some analysts interpreted as unilateral actions to address the crisis. Other indications of discord among AU member states included Gambia's recognition of the legality of Gbagbo's election and its opposition to a possible ECOWAS military intervention and Ugandan President Yoweri Museveni's call for an investigation of the poll process and rejection of the validity of international recognition of Ouattara and rejection of Gbagbo's claimed win. Some press reports also implied that statements of support for a negotiated end to the crisis and in opposition to regional military intervention in Côte d'Ivoire by Angola, traditionally seen as a strong Gbagbo ally, signaled Angola's backing for Gbagbo. Angola, however, did not overtly backed Gbagbo; its government did not recognize an official Ivoirian election winner, and it reportedly refused a February request from the Gbagbo administration for funding assistance. The positions of Angola and South Africa suggested that a claim by Gbagbo's minister of foreign affairs, Alcide Djedje, that Angola, Uganda, South Africa, Democratic Republic of Congo, Gambia, Equatorial Guinea, and Ghana support Gbagbo's continued tenure, was overblown or lacked credibility in several instances. Threat of Military Intervention to Oust Gbagbo Meeting on December 24, ECOWAS heads of state—after determining that Gbagbo had not heeded their December 7 demand that he cede the presidency—decided to "make an ultimate gesture to Mr. Gbagbo by urging him to make a peaceful exit." They dispatched a delegation made up of the presidents from Sierra Leone, Cape Verde, and Benin to deliver an ultimatum reiterating the ECOWAS's demand and offer to escort him into exile abroad. "In the event that Mr. Gbagbo fails to heed this immutable demand," they further decided, ECOWAS "would be left with no alternative but to take other measures, including the use of legitimate force, to achieve the goals of the Ivorian people." The delegation met with Gbagbo and Ouattara on December 28, but Gbagbo did not meet the ECOWAS demand for him to step down. He reportedly demanded a vote recount and an amnesty, were he to cede the presidency. After the delegation departed Côte d'Ivoire, ECOWAS leaders decided to defer immediate military intervention in favor of further negotiation, but regional military leaders met to plan and coordinate a possible deployment, as the heads of state had mandated. The same delegation, joined by Kenyan Prime Minister Raila Odinga, the designated AU mediator, and ECOWAS President Gbeho, met with Ouattara and Gbagbo on January 3, and again demanded that Gbagbo cede power; emphasized that power-sharing deal was not feasible; and offered to provide amnesty to Gbagbo if he stepped down. No apparent headway resulted. The talks were described by an anonymous diplomat as "failure No. 2," although Gbagbo "agreed to negotiate a peaceful end to the crisis without any preconditions" and pledged that he would lift a blockade of the hotel where the Ouattara government was housed under armed UNOCI and FN protection. As of late January, he had fulfilled neither pledge. Prior to the departure of the second delegation, a Nigerian defense spokesman, speaking on December 31, stated that ECOWAS military chiefs from several member countries had "prepared plans to 'forcefully take over power' from" Gbagbo using a grouping of troops called the ECOWAS standby force, said to consist of 6,500 troops, if diplomatic efforts to pressure him to cede the presidency fail. A further logistics meeting was held in mid-January 2011 in Mali to "finalize when troops would be deployed and how long they could remain in the country." The chiefs of staff were also slated to travel to Bouaké, in north-central Côte d'Ivoire, a possible intervention staging point. Ghana, however, later declined to participate in a potential intervention, citing an overburden of international peacekeeping deployments in other regions, a preference for "quiet diplomacy," and the presence of an estimated 600,000 or so Ghanaians in Côte d'Ivoire. Nigeria was also thought to have domestic security concerns of its own that might preclude it from contributing forces. On December 31, the United Kingdom announced that it would politically support use of force by ECOWAS in the UNSC, but did not offer or commit any troops for such a purpose. The UK has also prepared military contingency plans with the French, but the objective of such plans, which may pertain to evacuations of foreign citizens, has not been described publicly. It was not clear how an ECOWAS intervention would operate, particularly in relation to the UNOCI and French forces that were already present on the ground. The Ouattara camp called for a special forces commando operation to rapidly remove Gbagbo quickly, which it asserted could be done "without much damage" because "Gbagbo's location can be quickly identified by a team of elite troops because he 'is essentially at his residence or at the presidential palace'." The possible danger to civilian lives resulting from such an operation could have been substantial, however, given the large population that supported Gbagbo's election, the militancy of a core of Gbagbo's support base and the presence of a large, highly ethnically and regionally mixed civilian population in Abidjan. Key Gbagbo supporters stated that they would respond in kind to any attempt to attempt to oust Gbagbo by force of arms, and that such an attempt would spark a war. A further effort to drive home ECOWAS's demand to Gbagbo was delivered by Nigeria's former military head and President Olusegun Obasanjo on January 8. His presence, given his reputation as a forceful, uncompromising interlocutor, was interpreted as underlining the putative seriousness of ECOWAS's threat. An Ouattara aide was quoted as stating that "In diplomacy you can say things very nicely. Or you can say it by being mean. He is here to say it in the mean way." Despite such perceptions, no breakthroughs were reported as a result of Obasanjo's trip. U.N. Sanctions On October 15, 2010, the UNSC adopted Resolution 1946, renewing an arms embargo on Côte d'Ivoire, targeted financial assets freeze and travel restrictions first authorized under UNSC Resolution 1572 of November 15, 2004, and a ban on the import of rough diamonds from Côte d'Ivoire, first authorized under UNSC Resolution 1643 of December 15, 2005. On January 6, 2011, USUN Permanent Representative Rice stated that, following the imposition of targeted U.S. and EU sanctions on Gbagbo and associates of his regime, "to the extent that [ ... the political situation] remains stalled, I think we are obliged to look at whether it [the U.N. sanctions regime] needs to be augmented and invigorated." In late March 2011, France and Nigeria, backed by ECOWAS, proposed expanded U.N. travel and asset freeze sanctions targeting members of the Gbagbo administration and imposing a ban on heavy weapons in Abidjan. European Union Sanctions On October 29, 2010, in accordance with the UNSC Resolution 1946, the EU renewed an arms embargo on Côte d'Ivoire, targeted financial assets freeze and travel restrictions, and ban on the import of rough diamonds from Côte d'Ivoire. On December 22, 2010, the Council of the European Union adopted a decision imposing a visa ban "on former president Laurent Gbagbo and 18 other individuals." On December 31, it extended the ban on an additional 59 "persons who are obstructing the peace process in Côte d'Ivoire and are jeopardising the proper outcome of the electoral process." On January 14, amending its October 29, 2010, decision, the EU Council imposed an asset freeze on "85 individuals that refuse to place themselves under the authority of the democratically elected president, as well as of 11 entities that are supporting the illegitimate administration of Laurent Gbagbo" and also imposed a visa ban on the 85 individuals. The entities targeted reportedly include Côte d'Ivoire's two main ports, which play a key role in enabling the export of cocoa, a key source of revenue for the Gbagbo government, and the order prevents them from new financial dealings EU-registered vessels. The sanctions could shut down the national oil refinery, which may be unable to buy crude to supply its operations. In late March 2011, the EU was reportedly considering imposing new financial and potentially other types of sanctions on the Gbagbo administration. Constriction of Gbagbo Administration Access to Finance Several multilateral financial institutions, in light of growing international recognition of the Ouattara presidency, took steps to halt the flow of credit and official assistance to the Gbagbo regime, in part to remove his ability to maintain the loyalty of the military and civil service by paying their salaries. On December 6, the African Development Bank (AfDB) and the World Bank jointly stated that that they "support the efforts being made by the African Union and the international partners to bring this crisis ... to a quick and peaceful resolution." On December 22, 2010, the World Bank reported that it had "currently stopped lending and disbursing funds to the Ivory Coast" and closed its office in Côte d'Ivoire. The statement also said that both the World Bank and the AfDB "have supported ECOWAS and the African Union in sending the message to President Gbagbo that he lost the elections and he needs to step down." As of January 10, the AfDB had not issued any further public statements on the Ivorian crisis since issuing the joint statement with the World Bank, but U.S. Treasury officials who liaise with the World Bank and AfDB reported to CRS that the AfDB "has stopped processing new operations or disbursing funds on existing projects." As of January 10, 2011, the International Monetary Fund (IMF) had not publicly issued any post-electoral notices pertaining to decisions on whether it was currently working with either the self-asserted Gbagbo or Ouattara government, or regarding any change in the status of its relations with Côte d'Ivoire, as the IMF had not formally polled its members regarding these issues, which is the procedure through which it makes such determinations. However, a U.S. Treasury official informed CRS that as of the same date, the IMF was engaging with neither government. On December 23, the West African Economic and Monetary Union (UEMOA), the supervisory body of the Central Bank of West African States (BCEAO), a regional central bank, recognized Ouattara as the legitimately elected president of Côte d'Ivoire, and gave him authority over UEMOA-related activities and BCEAO transactions. UEMOA member countries use a common currency, the West African Communauté Financière de l'Afrique (CFA) franc . The CFA is backed by the BCEAO, pegged to the Euro and is supported indirectly by the French treasury. The effect of this action was unclear; on December 23, the Associated Press reported that several banks in downtown Abidjan posted notices in their windows saying that they would not be cashing civil servant paychecks because they hadn't received a guarantee from the government that they would be reimbursed. Lines of impatient civil servants formed outside the banks, but just after noon the notices were removed and one by one people started receiving their money. Despite such pressure, in January and February 2011,Gbagbo officials had reported that they had access to funding sources, reportedly including customs, tax, cocoa, and oil revenues, to pay government salaries, but were reportedly strongly pressuring banks, commodity traders, and other businesses to ensure funding flows in the form of credit and other payments, to the Gbagbo government. According to the United States ambassador to Côte d'Ivoire, Phillip Carter, Gbagbo has been extorting local businesses to pay in advance their taxes, to pay things forward – contracts forward, putting increasing pressure on a variety of companies that are involved in natural resources, be it coffee, cocoa, petroleum, timber, whatever, to pay forward. They're resisting. In mid-January 2011, the Ouattara camp complained that, despite the BCEAO's recognition of Ouattara as the legitimate president, the bank was continuing to channel cash to the Gbagbo government, as some news reports had previously suggested. Such charges were denied by the BCEAO. The Ouattara camp has been attempting to cut funding to Gbagbo in several ways. On January 10, the Ouattara government issued a list of 16 Ivorian treasury, banking, and cocoa officials it wanted sanctioned for backing Gbagbo. The head of BCEAO, Philippe-Henry Dacoury-Tabley, a reported Gbagbo ally, resigned on January 22 after being accused of not cooperating with Ouattara. In late January, in retaliation for UEMOA's action, the Gbagbo administration seized BCEAO's local offices and assets. On February 9, the Gbagbo administration seized the Bourse Regionale des Valeurs Mobilieres , a West African regional stock exchange, and in mid-February 2011 it ceased operations in Abidjan, along with several major foreign banks. They suspended operations in Côte d'Ivoire due to security fears and pressure by the Gbagbo administration on them to continue to service its credit needs. These developments contributed to a further paralysis of the increasingly cash-strapped banking sector. Affected banks included Standard Chartered Plc, Citigroup Inc., BNP Paribas SA and Societe Generale SA. In the wake of these banks' officers' departure from the country, the Gbagbo administration seized the banks' local holdings, although it was not clear what assets, apart from office space and other tangible property, the government might be able to liquidate. The Gbagbo government has also partially nationalized the cocoa and coffee sectors and possibly gold mining operations, and may seize cocoa stocks that remain unexported due to firms' compliance with EU sanctions. By early March 2011, the financial pressures on the Gbagbo government appeared to be gradually reducing its ability to finance its operations. In late January 2011, it was reportedly able to successfully make its second monthly post-election state salary disbursement, but was reportedly only able to make 62% of February salary payments by early March. On December 31, Côte d'Ivoire technically defaulted on a sovereign bond repayment, reportedly because the Ouattara government claimed that the state lacks funds to make the payment and because the Gbagbo government did not make payment. The debt at issue was a $29 million initial "coupon" payment on an outstanding $2.3 billion Eurobond issue. However, the issue gives Côte d'Ivoire a 30-day grace period, preventing it from falling into sovereign debt default status until February 1, and on January 11, the Gbagbo government pledged to make the coupon payment by February 1. Further access to international bond markets for either a Gbagbo or an Ouattara government, however, may prove difficult because the national debt was reportedly twice previously restructured due to past defaults. In the face of the BCEAO move, pro-Gbagbo activists advocated that Côte d'Ivoire drop as its currency the CFA, and adopt a new national currency, reportedly dubbed the MIR, the French acronym for "Ivorian currency of the resistance." In part, the move would be a symbolic strike at France, which the Gbagbo regime and its supporters accused of various acts of sabotage aimed at ousting Gbagbo from power. The CFA is the currency of UEMOA countries, which is backed by the BCEAO, pegged to the Euro, and supported indirectly by the French treasury. One observer proposed a further measure to prevent the Gbagbo regime from seeking further alternative sources of credit on the private market. Todd Moss of the Center for Global Development, a former State Department African affairs official, suggested that the African Union, publicly backed by major donor governments, issue a "declaration of non-transferability" regarding new loans to the Gbagbo regime. Such a declaration would assert that such loans "would be considered illegitimate and invalid" and thus not subject to repayment by the Ouattara government. U.S. Diplomatic and Policy Responses Prior to Gbagbo Arrest U.S. Stance On December 3, 2010, President Obama publicly congratulated Ouattara on his electoral victory, and stated that the IEC, "credible and accredited observers, and the United Nations all confirmed this result and attested to its credibility." He urged "all parties, including incumbent President Laurent Gbagbo, to acknowledge and respect … the will of the electorate." He also said that the "international community will hold those who act to thwart the democratic process … accountable for their actions." His statement mirrored a similar one delivered a day earlier by a National Security Council (NSC) spokesman. On December 23 Secretary of State Hillary Rodham Clinton stated that "President Alassane Dramane Ouattara is the legitimately elected and internationally recognized leader of Côte d'Ivoire." A variety of other top U.S. officials made similar statements. President Obama and other top U.S. officials also condemned the use of deadly force against unarmed protesters. On March 9, 2011, President Obama, mirroring a March 4 statement by Secretary of State Clinton, said he was "appalled by the indiscriminate killing of unarmed civilians during peaceful rallies, many of them women" by "security forces loyal to former President Laurent Gbagbo." He said that the United States remains deeply concerned about escalating violence, including the deepening humanitarian and economic crisis and its impact in Côte d'Ivoire and neighboring countries. All armed parties in Côte d'Ivoire must make every effort to protect civilians from being targeted, harmed, or killed. The United States reiterates its commitment to work with the international community to ensure that perpetrators of such atrocities be identified and held individually accountable for their actions. Notwithstanding U.S. recognition of Ouattara's election, the United States continued to view the self-declared Gbagbo government as legally responsible for any actions that it may take in exercising executive authority over state institutions. Such actions were thought to include the issuance of command and control directives to elements of the state security forces, some of which reportedly committed post-election human rights abuses, or the inappropriately partisan, private, or extralegal use or abuse of fiscal or other state resources. The United States, however, formally accepted the credentials of a new Ivoirian ambassador to the United States, Daouda Diabate. Diabate, appointed by President Ouattara, arrived to take up his post in early February 2011. The United States had previously recognized President Ouattara's recall of Gbagbo's designated ambassador to the United States, Yao Charles Koffi, and recognized as his interim replacement as charge d'affaires of the Côte d'Ivoire embassy in the United States, Kouame Christophe Kouakou, the former Deputy Chief of Mission under Koffi. From the U.S. perspective, Koffi's status as ambassador was formally terminated on December 30, although efforts to achieve this end began in mid-December, when Ouattara made his recall. Presidential and Other High-Level Efforts to Pressure Gbagbo to Step Down The United States attempted to directly communicate with Gbagbo to urge him to abide by the results of the election and cede power to Ouattara, with little success. President Obama reportedly tried to telephone Gbagbo twice in December, the first time prior to Gbagbo's self-inauguration and the second about ten days later, but his calls were refused. After the first call, on December 5 he reportedly sent a letter to Gbagbo outlining the U.S. position regarding Ouattara's election. In the letter, reportedly sent on or about December 10, he invited Gbagbo to the White House "for discussions ... on ways to advance democracy and development in Côte d'Ivoire and West Africa" should Gbagbo cede power. Gbagbo reportedly received but did not respond to the letter, which also stated that President Obama "would support efforts to isolate Gbagbo and hold him to account if he refused to step down." A second, "more detailed" letter was sent to Gbagbo sent by Secretary of State Clinton, reportedly suggested that "Gbagbo could move to the United States or receive a position in an international or regional institution if he left peacefully." These efforts were part of a U.S.-supported international strategy to provide Gbagbo with a "soft landing," a euphemism for voluntary exile under international pressure. "Similar inducements" to those outlined in President Obama and Secretary Clinton's letters were reportedly proffered by France and other African countries. A letter from Nigerian President Goodluck Jonathan, acting for ECOWAS, that was given to Gbagbo on December 17 reportedly contained an offer of asylum by an unnamed African country. The effort was portrayed by U.S. officials not as an outright offer to Gbagbo of asylum in the United States, but as a proffer of assistance to help arrange exile, with the condition—a measure meant to pressure him to accept the proposal—that if Gbagbo were to agree to step down, he would have had to do so rapidly. The effort was also qualified by a second condition designed to motivate Gbagbo to help prevent any further human rights abuses. Any potential additional abuses by forces under his control, or other acts for which Gbagbo might be held accountable under international justice mechanisms, might lead to the offer being withdrawn. The proposal gave Gbagbo a "window of opportunity" to act in accordance with international demands, but a finite one defined by events on the ground. No publicly stated decision was been announced on whether the United States—which provides limited security sector assistance to ECOWAS, in part focused on its stand-by force, and funds a military advisor who is based at ECOWAS's military headquarters—would support an ECOWAS military intervention in Côte d'Ivoire. However, an ECOWAS delegation that was sent to the United States to consult with U.S. and U.N. officials, reportedly including with respect to possible external support for an ECOWAS military intervention, met with the U.S. National Security Advisor, Tom Donilon on January 26. A White House statement on the meeting did not address the issue of possible U.S. military support for ECOWAS. It stated that "Mr. Donilon expressed strong support for the efforts of ECOWAS to facilitate a peaceful transition of power in Côte d'Ivoire," and that he and the delegation "reaffirmed their shared commitment to see" Ouattara take "his rightful role as President of Côte d'Ivoire, and their shared resolve to see former President Laurent Gbagbo cede power." Participants also "discussed the importance of maintaining international unity on this point" and agreed to continue to closely coordinate their responses to the crisis. U.S. Visa Restrictions On December 21, in order to pressure Gbagbo to cede power, the United States imposed travel restrictions on members of Laurent Gbagbo's regime and "other individuals who support policies or actions that undermine the democratic process and reconciliation efforts in Côte d'Ivoire." The restrictions reportedly target affected persons by revoking "existing visas to the United States and prohibit new visa applications from being accepted." The list of affected persons was not made public, and it is unclear whether Gbagbo himself was on the list, in part in light of President Obama's invitation to him, or whether his cabinet members were affected. According to the State Department website America.gov, a State Department spokesman was quoted as stating that "there are dozens of individuals being targeted and the list 'will go up' to potentially include Gbagbo's Cabinet ministers and others who are continuing to help him remain in power." U.S. Targeted Financial Sanctions On January 6, 2011, acting under Executive Order 13396 (EO 13396), the U.S. Treasury Department imposed targeted financial sanctions on Gbagbo; his wife, Simone Gbagbo; and senior Gbagbo associates and advisers Desire Tagro, Pascal Affi N'Guessan, and Alcide Ilahiri Djedje. The sanctions prohibit U.S. persons "from conducting financial or commercial transactions with the designated individuals" and freeze "any assets of the designees within U.S. jurisdiction." They were imposed because of Gbagbo's "refusal to accept the CEI's [IEC] election results ... and relinquish his authority," aided by the other designees "directly or indirectly" were "determined to constitute a threat to the peace and national reconciliation process in Côte d'Ivoire," which EO 13396 seeks to deter. The intention of the move was to isolate Gbagbo "and his inner circle from the world's financial system and underscore the desire of the international community that he step down." Congressional Responses Prior to April 2011, there were few other public congressional responses to the Ivoirian crisis, apart from the introduction of a resolution by Representative Donald M. Payne. The resolution, H.Res. 85 , ("Supporting the democratic aspirations of the Ivoirian people and calling on the United States to apply intense diplomatic pressure and provide humanitarian support in response to the political crisis in Côte d'Ivoire") was introduced on February 10, 2011. As of April 19, 2011, it had 49 co-sponsors. On April 7, 2011, Representative Timothy V. Johnson introduced H.Res. 212 ("Expressing the sense of the House of Representatives that the United States should not intervene in the civil war in the Ivory Coast'), and on April 13, 2011 HFAC held a hearing on Côte d'Ivoire entitled "Crisis in Cote d'Ivoire: Implications for the Country and Region." Also in April, Senator Inhofe, one of the only Members of Congress to take a strong stand on behalf of Gbagbo's electoral claims and in opposition to accusations that Gbagbo ordered or abetted human rights abuses, made several statements in support of Gbagbo. He also criticized the Obama Administration's response to the Ivoirian crisis, and stated that the French military mission and UNOCI were biased in favor of Ouattara. He called their military actions "war-making," as opposed to "peacekeeping," among other critical characterizations. On December 7, Representative Donald M. Payne, the 111 th Congress chairman of the Subcommittee on Africa and Global Health of the House Foreign Affairs Committee (HFAC), called on Gbagbo, "in the manner befitting of a statesman, to peacefully transfer power to President-elect Ouattara." He also expressed deep concern "over the reports of the deadly attack against the opposition headquarters committed by paramilitary forces, and of violent outbursts between supporters of the ruling Ivorian Popular Front (FPI) and the opposition Rally of the Republicans (RDR)." He urged Gbagbo "to immediately rein in his security forces and all paramilitary groups to prevent further bloodshed and suffering at the hands of the Ivorian people," and stated that "it is absolutely critical at this juncture that the rule of law, suspension of violence, and the will of the people be upheld to prevent a major crisis." On March 3, 2011, in a guest column for AllAfrica.com, Representative Payne strongly criticized Gbagbo's effort to stay in power. He wrote that the Gbagbo "regime and its supporters are waging a continuing campaign of terror against a large numbers of Ivorians, United Nations peacekeepers, and foreign businesses and residents in the country." He concluded that "Gbagbo is clearly willing to push his country and its neighbors into a state of political anarchy and economic disarray in order to maintain his grasp on political power." On December 21, Senator Kerry stated that he welcomed "the State Department's announcement of travel sanctions against members of Laurent Gbagbo's administration in Côte d'Ivoire for their refusal to recognize the results of the legitimate, democratic election on November 28." He also stated that, in the wake of "violent attacks against civilians and supporters" of Ouattara, "it is vital that all parties involved in the present standoff respect human rights, maintain a constructive dialogue, restore telecommunications networks to allow the free flow of information, and abide by the standards of international law." Then-U.S. House Foreign Affairs Committee Chairman Howard Berman issued a similar statement praising the U.S. and international sanctions on the government of Gbagbo, who his statement said "personifies the kind of dictator that has crippled many African countries over several decades." It continued by stating that "now, as in many other countries the people have spoken. The dictator must go." It also asserted that what it called Gbagbo's "political thuggery will not go unchallenged by the responsible nations of the world." U.S. Relations, Assistance, and Elections Support U.S.-Ivoirian relations were traditionally cordial, but became strained after the 1999 ouster of former president Henri Konan Bédié in 1999 in a military coup by the late General Robert Guéï, and remained so during President Gbagbo's tenure. The United States recognized Gbagbo as the de facto leader of Côte d'Ivoire, but viewed the 2000 election that brought him to power as operationally "flawed" and "marred by significant violence and irregularities," and as illegitimate because it was organized by a government that came to power by undemocratic means. Since the ouster of Bédié, Côte d'Ivoire has been subject to a restriction on bilateral aid that prohibits the use of foreign operations funds—with some exceptions for selected non-governmental organization, human welfare, and humanitarian needs programs—to a country whose democratically elected head of government is deposed by a military coup d'état. The United States also imposed personal sanctions on selected persons viewed as threatening the peace process in Côte d'Ivoire (see previous discussion of U.S. visa restrictions and financial sanctions). U.S. bilateral engagement was also reduced as a result of the 2002 conflict by the suspension and later closure of a country Peace Corps program in 2002 and 2003. After the northern rebellion in October 2002, 133 Peace Corps volunteers were evacuated by U.S. and French forces, and the program was suspended. The country office closed in May 2003. The United States repeatedly pressed the parties to the Ivorian conflict to durably and comprehensively resolve their conflict, and has attempted to foster a transition to peace and democracy by diplomatically and otherwise supporting implementation of the OPA and prior peace accords. The United States provided about $9 million in assistance to help ECOMICI deploy in 2003 and financially and politically supports the UNOCI mission ($81 million, FY2009 actual; $128.6 million, FY2010 enacted; and $135 million, FY2011 request. It has also funded limited election support activities (see text box). The United States is providing emergency assistance to respond to the humanitarian impact of the post-election crisis; these efforts are discussed in the "Humanitarian Effects and Responses" section, above. In addition to this aid, Côte d'Ivoire has received limited U.S. food aid and substantial HIV/AIDS and health-related assistance in recent years ($107 million in FY2009 and an estimated $133 million in FY2010, with $133 million requested in FY2011). Another policy concern is trafficking in persons. The State Department reports that Côte d'Ivoire is a source, transit, and destination country for women and children trafficked for forced labor and commercial sexual exploitation. There are several U.S. anti-trafficking programs in place. According to the State Department's FY2011 foreign operations Congressional Budget Justification —which was issued prior to the crisis—if Côte d'Ivoire's political situation is resolved "to such an extent that U.S. assistance can help restore stability and promote good governance," the Administration of President Barack Obama would seek to promote credible and peaceful elections [e.g., parliamentary or local ones], support a deep and broad nationwide reconciliation process, restore the rule of law and combat impunity, raise public awareness of the costs of corruption, expose Ivoirian youth to nontraditional ideas of civil society, help young political leaders develop new approaches and adopt better political platforms, fight trafficking in persons, stem the HIV/AIDS epidemic, and increase economic productivity. In addition to $133.3 million in Global Health and Child Survival (GHCS) funding mentioned above, the FY2011 State Department budget request envisions the provision of $4.2 million in Economic Support Fund (ESF) assistance for conflict mitigation and reconciliation, good governance, political competition and consensus-building and civil society support, along with $40,000 in International Military Education and Training aid. Outlook The capture of Gbagbo by pro-Ouattara FRCI military forces appears to have nearly ended the military conflict spurred by the post-electoral crisis. As of mid-April, FRCI forces were attempting to defeat and force the surrender of a small number of die-hard armed Gbagbo supporters, but the Gbagbo regime otherwise appeared to have ended. Many leading figures in Gbagbo's administration were also in FRCI custody, and the Ouattara government was investigating many of them for human rights abuses and killings, arms purchases, or embezzlement and other financial crimes. Prospects for the further resolution of the crisis and the factors that underlay it are unclear, but the Ouattara government has garnered substantial pledges of international political and financial support for its efforts to achieve these ends. Key objectives include the imposition of Transitional Justice and accountability for Human Rights crimes during and prior to the electoral crisis; post-war economic recovery, notably focusing on the resumption of cocoa exports; and military and police and governance reform. Success in these efforts will require that the Ouattara government build its legitimacy in the eyes of the entire Ivoirian population, including those portions of the electorate that voted for Gbagbo, some elements of which may remain aggrieved and attempt to obstruct the political process. A lengthy, complex, and possibly politically volatile series of attempts to achieve national reconciliation and unity are likely, as are efforts to address root causes of the conflict through land, constitutional, and governance reform, as well as the conduct of legislative elections. While Ouattara appears to be taking some of the actions recommended by the high-level AU mediation panel in mid-March, it is not clear how closely he will adhere to the full range of these proposals, or to what extent the Ouagadougou Political Agreement (OPA) remains in effect. If the crisis is resolved, Côte d'Ivoire is well-positioned to undertake a successful economic recovery, and to reemerge as a regional economic hub. While the economy has suffered from some degree of lack of investment due to the uncertain political situation, the cocoa economy has performed well and the country has a fairly well developed infrastructure by regional standards. An end to the crisis would also likely boost international political and investment confidence in West Africa as a whole . Appendix A. Background on the Election The Long-Stymied Peace Process The 2010 presidential election was the main political objective of a peace process aimed at reunifying Côte d'Ivoire under a series of political-military agreements reached between 2003 and March 2007, when the most recent accord, the Ouagadougou Political Agreement (OPA) was signed. The OPA incorporated key provisions of the main preceding agreements but superseded them. The election was originally slated to be held as constitutionally prescribed, in a manner that would allow a timely transition to a new elected government at the end of President Gbagbo's initial five-year term on October 30, 2005. It was delayed at least six times, however, in some cases with the explicit concurrence of the international facilitators of the various peace agreements, and in some cases in spite of their demands, political threats, and other efforts intended to expedite fulfillment of the agreements. These delays enabled Gbagbo to maintain his incumbency for five years after the termination of his electoral mandate and—according to some analysts—to significantly influence the politics of the peace process in a manner that allowed him and his key allies to consolidate state power, access to resources, and shape the electoral institutional framework to work in their favor. Key accord implementation challenges pertained to the sequence and manner in which disarmament, citizen and voter identification, voter registration, other electoral administration tasks, and various accord-prescribed legal reforms would take place; and differences over the scope of presidential authority. Controversy over these and other issues regularly prompted episodes of political volatility, mass political protests that were, at times, violent, and underpinned electoral process delays which, in turn, spurred the successive series of accords. The root causes underlying the conflict include contention over land; internal and regional migration; the nature of national identity; qualifications for citizenship; and the extent of foreign influence over Ivorian political processes; security force abuses; issues of socioeconomic welfare (e.g., power cuts and uneven access to social services); and other aggravating factors, such as corruption and crime. Pre-Electoral Processes: Progress and Challenges Notwithstanding such challenges, the conduct of the October 31, 2010, first round election was made possible because substantial headway was made in 2009 and 2010 toward completing OPA-required election preparation tasks, despite a number of potentially catastrophic challenges to their execution, and far less progress in attaining key non-electoral but politically critical provisions of the OPA. Failure to complete the latter—primarily disarmament, demobilization and reintegration of ex-combatants and militia members; security sector reform; and the nationwide restoration of state authority, all of which remained incomplete by polling day, notwithstanding much progress—could well have once again prevented the elections from occurring (see text box). Identification According to U.N. reporting, in 2009 the government and the FN, substantially aided by UNOCI, made substantial progress in completing the processes of pre-electoral citizen identification and voter registration processes. Over 6.59 million persons were legally identified and 6.38 million registered as voters, but 2.7 million of this number had to have their identification for voting purposes confirmed. Citizen identification was a prerequisite of elections and was conducted concurrently with voter registration, but was a separate objective under the OPA. The lack of identification papers for millions of Ivoirian and foreign residents in Côte d'Ivoire was a key issue underpinning the conflict and the years of subsequent political impasse. Lack of proof of national identity was common due to factors such as historical discrimination; lack of administrative capacity; lack of access of Ivorian-born, second generation immigrants to legal identification rights and processes; and destruction and poor administration of civil registers during and after the conflict. Persons eligible for inclusion on the voter roll included those entered on the 2000 election voter list and any other Ivoirian citizen 18 years or older who could present proof of birth, although according to the Carter Center, "in practice, these distinctions were not applied and individuals seeking to be on the voter list did not have to demonstrate proof of nationality." This situation created the basis for disputation of the validity of entries on the voter roll, and complicated the voter registration process, turning what was initially planned as a six-week exercise into a two-year process. Peace Process Again Imperiled: Voter Vetting and Electoral Disputes Voter list vetting in November 2009 by the Independent Electoral Commission (IEC) validated a provisional voter list that included some 5.28 million registrations (dubbed the "white list"), but left an additional 1.03 million unconfirmed (the "grey list"). Challenges were later made to almost half of these, and while all but 33,476 were validated, the status of the other half remained unclear. Delays in these processes and later registration appeals, however, forced a postponement of national elections, which had been scheduled for November 29, 2009. Notwithstanding the delay, based on voter registration progress, the validation by the Constitutional Council on November 19 of 14 of 20 aspirant presidential candidates, and an amendment to the remaining electoral timeline established under the OPA , elections were forecast to be held by late February or early March 2010. On February 11, 2010, however, Prime Minister Soro ordered an indefinite suspension of the national voter registration contestation process following "tensions created by the process of validating the provisional voter list." This process had sown fears in some areas that courts, at the direction of the FPI-led government, would purge opposition voters from the voter rolls. This controversy arose after the then-IEC chairman, Robert Mambé, a PDCI member, reportedly erroneously distributed 429,030 voter names to local IEC offices during what he asserted was an internal IEC voter vetting exercise. Gbagbo's supporters claimed that the names at issue were primarily of persons of northern descent. After an Interior Ministry investigation, the Gbagbo government accused Mambé of fraudulently trying to rig the voter list on behalf of the opposition, and demanded that he resign. The opposition came to Mambé's defense and accused the government of trying to further delay elections and extend the president's term. Mambé rejected the claims of Gbagbo's supporters and called for an independent UNOCI probe into the affair. The situation was further inflamed when on February 11 President Gbagbo unilaterally dissolved the government, dismissed the Independent Electoral Commission (IEC), and called on Soro to quickly appoint a new government and propose "a new credible electoral commission." Gbagbo's actions followed weeks of growing dispute between the presidency and the IEC over the Mambé controversy and Mambé's refusal to resign, and invalidated the prior election schedule, raising questions about when the long delayed presidential election would occur. The IEC dissolution was strongly opposed by the opposition camp, which labeled it "undemocratic and unconstitutional" and tantamount to a coup d'état. In subsequent weeks, demonstrations broke out in multiple Ivoirian cities. Some were violent, resulting in around 12 fatalities. After a mediation visit by the OPA Facilitator, President Blaise Compaoré of Burkina Faso, a new IEC was appointed on February 25, and an opposition member was later chosen as its chairman. Opposition parties then agreed to join a new government, and political tensions eased. Processes leading up to the production of a final electoral list (which Gbagbo supporters later repeatedly asserted needed to be "disinfected" to remove northern names, with which they claimed it was "infested"), to be followed by the production and distribution of identity and voters' cards, began in March. On March 17, at a U.N. Security Council meeting following renewed opposition demands for an election, the Ivoirian delegate stated that the 429,030 voters at issue in the Mambé controversy had to be stricken from the voter list, which he said would then have to be audited over a one-two month period. In addition, citing a series of attacks on state and FPI facilities in FN-controlled areas, he stated that a free vote could not be held in a "bisected territory" beset by an "atmosphere of intimidation," and insisted that full national reunification and complete disarmament of the FN rebels take place prior to elections. This stance prompted the opposition to accuse the government of again attempting to delay voting. In early May there were renewed tensions after the opposition, rejecting alleged interruptions to the electoral process and to prolonged electoral list vetting appeals procedures, called for an expedited election and announced a protest march. It was later postponed, however, due to fears that it would spur violence. 2010: Electoral Processes Progress Apace In May 2010, work toward finalization of the voter rolls, based on a late April agreement between parties to the OPA, began anew with a resumption of the appeals process of "grey list" entries. It was undertaken by 415 local electoral commissions and completed in June, and resulted in the addition of 496,738 persons to the "white list," creating a 5.78 million person voter roll. This list, in turn, was subjected to a further appeals process involving the public display of voter sheets in early August, which resulted in 30,293 requests for the removal of provisional voters from the roll, and local court hearings on these petitions subsequently commenced. These hearings were controversial, in light of allegations that elements of Gbagbo's FPI had requested the removal of large numbers of names from the rolls, and sparked clashes among party militants in some areas, as well as the suspension of some court proceedings due to disputes over hearing procedures. This process, which resulted in the deletion of 1,273 entries and the addition of 7,418 new ones, ended in late August. A separate verification process focusing on 1.79 million "white list" entries, ran to the parallel public court-based appeals process between June and early August. It resulted in the temporary removal from the provisional voters list of 55,000 persons "for whom no civil registry records could be found" or whose voter identification data did not match the civil registry. It was decided that their cases would be adjudicated after the election. After consultations between the main political parties, a final voters list of 5.73 million persons was announced, and on September 9 President Gbagbo ordered by decree that national identity cards to be issued to the listed persons. In accordance with the OPA and U.N. Security Council Resolution 1826 July 2008, among others, SRSG Choi certified the final voters list. Positive momentum toward finalizing the voter rolls was accompanied by progress in setting out an election timeline. On August 5, Prime Minister Soro announced that, as proposed by the IEC, a first round of presidential elections would be held on October 31, 2010, and a presidential decree was signed enacting the date in law. In late August, the IEC announced a schedule for completing outstanding elections preparation tasks, and attention turned to completing them. Key tasks included: the distribution of 11,658,719 identity and voters cards; the establishment of the electoral map of 10,179 polling sites and 20,073 polling stations; the identification, recruitment and training of 66,000 polling staff; the coordination of electoral observers; the transportation of the electoral material; the establishment of a results tally centre; and the provision of security for the election. The two month timeline for accomplishing these tasks was tight and—given Côte d'Ivoire's lengthy history of technical and political delays regarding accomplishment of election administration tasks—the potential risk of further electoral delays or operational failures, especially in remote areas, was high. In general, however, the remaining electoral process progressed smoothly, with the exception of one significant controversy. On October 21, the IEC announced plans to manually tabulate polling station results, rather than do so electronically, as previously planned, after some IEC members and opposition candidates asserted that the electronic tabulation contractor, SILS Technology, might be biased due to the close ties of a company official to Gbagbo's FPI party. After consultations between Choi, the representative of the OPA Facilitator, and the IEC spurred by worries that manual tabulation would likely delay vote counting past the legally required three-day deadline, the IEC agreed to implement the original electronic tabulation plan. However, this process was subjected to oversight by a committee of experts. Final preparations for poll day—which were the responsibility of the IEC but, as with significant portions of earlier tasks, were substantially carried out by UNOCI—were not completed until just prior to polling. The joint distribution of voter and national identity cards by the IEC and the National Identification Office (ONI) began on October 6. These materials were transported by UNOCI to individual polling stations. By October 19, 83% of voter cards had been distributed in the commercial capital, Abidjan, but only 40% had been distributed in other areas of the country. Distribution of ballot boxes and other polling materials took place between October 8 and 11 October, and sensitive electoral materials—ballot papers, indelible ink, and electoral documents—began on October 23. A two-day training of the 66,000 polling station workers took place in the final four days prior to the vote; most poll workers received their training less than 48 hours prior to the start of polling. According to the Carter Center, limited voter education outreach posters and similar information tools were produced by the IEC, but in practice, voter education was largely delegated by the IEC to "external actors including civil society, political parties, and the international community," and on polling day, little information on voting procedures was reportedly available to voters. During the run-up to polling, UNOCI's public service radio station, covering 75% the national territory, broadcast "continuous information on the electoral process in five national languages" and gave "equal broadcast time to all candidates for campaign statements." The limited scope of voter education, and the distribution of public education appears to have been reflected in national variations in the incidence of invalid balloting, which ranged from 2.34% in Abidjan to much higher levels in the remote, social services-poor north, such as 8.58% in the northeastern Zanzan region. Election Security Election security—given the importance of the poll to the peace process and threats by militia and other elements to disrupt the electoral process—was a key challenge. The OPA had provided for the creation of an entity known as the Integrated Command Centre (ICC), to be comprised of 8,000 mixed gendarmerie brigades and police units made up of jointly deployed government and FN force members. Under the OPA, the ICC was to be responsible for providing security during the elections. ICC units had few resources and limited operational capacities, however, and only slightly more than 1,000 men, about two-thirds from the government side and about a third from the FN, had been assigned to the ICC by prior to the election. In addition, the FN elements were not receiving salaries, unlike their government counterparts, creating morale problems. While responsibility for elections security formally remained a responsibility of national authorities—and while the FN and the government deployed an additional 5,300 police and gendarmes to the ICC at the last minute, on October 30 (2,500 and 2,800, respectively)—in light of the ICC's limited capacity, UNOCI played a major role in providing security for the elections process. UNOCI's efforts were aided by the U.N.-sanctioned French Operation Licorne military force. To help ensure a secure election, on September 29, the UNSC passed Resolution 1942, authorizing a six-month, 500-person plus-up of UNOCI's military and police strength, bringing the total force size from 8,650 to 9,150. Election Campaign The two-week official electoral campaign, which was extensively preceded by technically prohibited informal campaigning, began on October 15. The leading contenders, Gbagbo, Ouattara, and Henri Konan Bédié, a former head of state, campaigned nationwide, while the remaining 11 lesser candidates focused their campaigns in their political base areas. The campaign was generally peaceful, with some limited exceptions involving "isolated acts of violence, provocation and vandalism, including tearing down campaign posters" and clashes between party militants in several towns. Political tensions also arose as a result of a sometimes provocative media environment and as a result of heated rhetoric by party supporters. UNOCI reported that while access to state media remained uneven, and that "some opposition candidates ... denounced alleged unequal media coverage of the candidates by State-controlled media, candidates' access to State media significantly improved during the official electoral campaign, in comparison to the preceding period." The ruling FPI also reportedly claimed that it lacked access to FN-controlled media in the northern part of the country, notably to the FN-controlled television station TV Notre Patrie. A regional think tank reported that "it is clear that prior to the campaigning period some candidates particularly the incumbent, used their advantageous positions in using public media to reach supporters." Several high-level foreign delegations toured the country during the campaign period to monitor the campaign and urge Ivoirians to conduct a peaceful election. Political parties generally appeared to observe a political party code of good conduct that 40 parties had signed in 2008. Prior to the first round, members of the Houphouëtist Rally for Democracy and Peace (RHDP) coalition, which includes the Bédié's Democratic Party of Côte d'Ivoire (PDCI) and Ouattara's Rally of the Republicans (RDR) and two other parties, mutually pledged to jointly support whichever of their two leading candidates eventually stood against Gbagbo in the event of a run-off vote. The First and Second Round Polls First Round Voting during the first round vote on October 31—which featured a historically high 83.7% voter participation rate, with 4.84 million voters out of 5.78 million registered going to the polls—was generally peaceful. Polling was observed by a 14-member civil society observer group, the Civil Society Coalition for Peace and Democratic Development in Côte d'Ivoire (COSOPCI) and some affiliated organizations, such as the Convention of Civil Society of Côte d'Ivoire (CSCI). It was also monitored by international observers, including the Carter Center and the European Union. Polling generally proceeded smoothly, in part due to the use of a single ballot and a scheme in which each polling station served a maximum of 400 voters, although it was reportedly marred, in some cases by technical failures. The vote tallying process reportedly took place transparently and in accordance with applicable regulations. It proceeded slowly in some instances, however, due to lack of transportation, some failures of the electronic tabulation transmission system, and the refusal of some polling staff to transmit official results prior to receiving stipend payments. There were a very limited, statistically insignificant number of tallying irregularities reported, and in some instances, observers were illicitly barred from monitoring vote counting . Results The three top vote-earning candidates were: Gbagbo, of the Ivorian Popular Front (FPI), running as the candidate of the Presidential Majority (LMP) coalition, who won, 756,504 votes, or a 38.04% vote share; Ouattara, of the Rally of the Republicans (RDR), who won 1,481,091 votes, or a 32.07% share; and Bédié, of the Democratic Party of Côte d'Ivoire (PDCI), who garnered 1,165,532 votes, or a 25.24% share. The next highest vote-earner was Mabri Toikeusse Albert, of the Union for Democracy and Peace in Côte d'Ivoire (UDPCI), who won 2.57% of votes cast. No other candidate won more than a 0.37% vote share. Since no candidate won an absolute majority of votes cast (i.e. over 50% of votes, as required by the Ivoirian electoral code), a second round was required. The IEC released initial partial results on November 2, and on November 3, Bédié's PDCI party asserted that there had been irregularities and non-transparency in tallying, resulting in inaccurate results. It called for the IEC to stop issuing provisional results and requested a vote recount. On November 4, IEC released complete provisional results. The PDCI's demand of a recount, underpinned by protest demonstrations by PDCI supporters, was joined by the UDPCI party on November 4 and on November 6 by the RHDP coalition, which alleged that "serious irregularities" had occurred during the first round. The Constitutional Council reportedly claimed, counter to the assertions of opposition applicants, that no appeals were filed within the legal time frame. It effectively dismissed all allegations of irregularities by certifying the IEC's announced provisional results. After having assessed the entire first round election process, SRSG Choi certified the Constitutional Council-vetted first round results on November 12. Second Round The Constitutional Council initially scheduled the runoff vote for November 21, counter to standing IEC plans for it to be held on November 28, but on November 9, Prime Minister Soro announced that the cabinet had decided that due to technical and logistical challenges, the second round would be held as originally planned by the IEC. President Gbagbo fixed the date in law by decree. On November 10, the IEC scheduled the second round electoral campaign between November 20 and 26. On November 7, Bédié called for his supporters to vote for Ouattara in the second round, as per the RHDP coalition's pre-electoral agreement, and on November 10, Ouattara publicly promised to form a union government with Bédié if he won the runoff. In a later debate he also pledged to appoint FPI ministers. In the second round, Gbagbo, running as the candidate of the Presidential Majority (LMP) coalition, ran against Ouattara, who ran as the candidate of the RHDP. The Carter Center reported that, as in the first round campaign, technically prohibited informal campaigning occurred prior to the official campaign period. The campaign also featured, for the first time ever in Côte d'Ivoire, a live debate that was broadcast nationally on November 25. The debate, a two hour and fifteen minute forum, was wide-ranging and substantive. Both candidates used the occasion to appeal for a peaceful democratic election and use of non-violence to achieve political ends. The first half focused primarily on differences between the two candidates' views of the Ivoirian conflict, the stalled peace process, and the election of 2000, in which Gbagbo came to power. The latter portion highlighted policy differences between the two rivals and their respective policy agendas, focusing on such issues as deficiencies in the judicial system and state structure, military reform, and economic and social services policy. Notably, Ouattara pledged to establish a truth and reconciliation commission if elected. Despite the substantive tone of the debate and the two candidates' appeals for peace and national reconciliation, the Carter Center reported that the runoff poll took place against the background of a tense and often negative campaign. Long-standing disputes about national identity issues and land ownership were … inflamed by negative political rhetoric and fueled by a partisan media. Sporadic incidents of violence, including several deaths, occurred in the days preceding the election and on election day itself. It also stated that "the run-off climate quickly degenerated with widespread communication strategies based essentially on negative portrayals of the opposing camp and the use of politically affiliated newspapers to spread rumors." Clashes between opposed youth party militants occurred in several places in the days leading up the poll, and at least seven people were reported killed in political violence in Abidjan on the day before the vote, while at least two were killed in northern Côte d'Ivoire on polling day. According to SRSG Choi, during the second round, state-controlled media, as in the first round, provided "unbalanced" coverage before and after the official electoral campaign, but "generally guaranteed equal access to the two presidential candidates" during the campaign. He also noted that "major political parties['] ... newspapers... enjoyed complete freedom of press before, during and after the election." In light of the rising tension associated with the runoff vote, the government and the FN deployed 4,000 troops to join the integrated command center prior to the vote. Plans called for an additional 1,500 government soldiers to be deployed to FN-controlled areas, to be accompanied by 500 FN soldiers, while 1,500 FN troops would deploy to government-held areas and be joined by 500 government troops. President Gbagbo also imposed a curfew after 11 PM on the day of the poll to ensure the security of ballot box returns and freedom of movement for the security forces. The Carter Center and other vote-monitoring groups reported that substantial improvements in poll worker training and administration were made in support of the runoff poll, and that logistics in support of the polling improved compared to those provided during the first round. The Carter Center also reported that while "voting and counting operations were largely well-conducted by polling station officials," many of the same deficiencies relating to the supply and distribution of election materials that occurred during the first poll were reiterated during the runoff. The Carter mission also reported that an IEC order that tabulation results be publicly displayed at local precincts was applied in only about half of the locations it monitored. According to the United Nations, voting reportedly generally proceeded peacefully and transparently, was "generally conducted in a democratic climate;" featured a voter turnout of 81.1%—nearly as high as that during the first round. There reportedly were, however, "some incidents, which were at times violent;" "isolated disruptions," including electoral violence; and irregularities in a small minority of polling places. The Carter Center, like the European Union (EU) observation mission, also reported witnessing acts of "potential voter intimidation in some five percent of the polling stations visited a higher level than was reported for the first round, and perhaps a reflection of the hardened tactics of the run-off campaign." Similarly, its findings stated that it had received but not witnessed "serious election day irregularities occurred after the close of polling stations [reported to include] ... cases of efforts to obstruct the physical transfer of ballot boxes and results, the destruction of election materials, and the theft of ballot boxes." A Contested Runoff On the runoff polling day, the Gbagbo and Ouattara camps accused one other of orchestrating electoral irregularities, voter intimidation, or actions aimed at blocking voters from accessing polls. Some complaints of this nature were confirmed by European Union election observers. This outcome was not surprising, even though the vast majority of polling had occurred without problems. The possibility that the election would be controversial had long been predicted by analysts, given the longstanding difficulties encountered in conducting a poll, the use of the slogan "we win or we win" by Gbagbo supporters, and pre-election statements by supporters of Gbagbo and Ouattara that they would never accept a win by their rival. Many observers believed that Gbagbo would not have agreed to allow voting to occur unless he felt assured of a win, for example, on the basis that he felt that the opposition would not remain united during a runoff vote; because he believed that electoral institutions and legal process were structured in his favor; and a belief the international community, in a desire for an end to the Ivoirian crisis, might accept some flaws in the polling process. If this analysis is correct, the current crisis suggests that he miscalculated regarding multiple factors: strong electoral opposition to his continued incumbency; the strength of international support for the OPA and the role of U.N. certification vis-à-vis Ivoirian legal processes (i.e., the role of the Constitutional Council); and the unwillingness of the international community—to date—to alter the election outcome through a negotiated resolution to the crisis, despite the threat of political violence. An early indication that the vote would, in fact, be legally contested emerged the day after polling, when Gbagbo's campaign manager announced plans to contest the results in at least three heavily pro-Ouattara districts in the north. On December 1, the Gbagbo campaign formally filed five applications for the annulment of the second round of balloting in eight northern departments "because of serious irregularities in the integrity of the poll." These related primarily to allegations of the absence of LMP representatives at the polls, including through acts of kidnapping or physical obstruction; ballot stuffing; transport of ballot tally sheets by unauthorized persons; establishment of impediments to voting; a lack of voting booths and of guaranteed secret suffrage; and the misattribution of unearned or fictitious votes to Ouattara. The Constitutional Council then reviewed the results and on December 3 overturned the findings of the IEC, as discussed above, and proclaimed Gbagbo winner of the election. Appendix B. Background to the Crisis Historical Background As discussed in the body of this report (see text box "Côte d'Ivoire: Country Overview"), in the mid-1980s, demands for increased democratization, periodic social unrest, and political tensions emerged. Long-term cocoa price and production declines, growing national debt, austerity measures, and pressures on land, in particular new tree cropping land for cocoa, which contributed to a gradual economic decline in Côte d'Ivoire, helped foster these political dynamics. While economic decline underpinned these tensions, social competition increasingly began to be expressed through ethnic, regional, and religious identity. The large, mostly Muslim populations of immigrant workers and northern Ivoirians resident in the south faced increasing resistance by southern ethnic groups and the state to their full participation in national civic life and rights to citizenship. These developments set the stage for subsequent political developments and contributed to the 2002 rebellion and the years of political impasse that followed. Bédié Administration Houphouët, who died in December 1993, was immediately succeeded by the president of parliament, Henri Konan Bédié. He declared himself president, in accordance with provisions in the 1990 constitution, even though then-Prime Minister Alassane Dramane Ouattara—a former World Bank economist who had held his post since it was created in 1990—was widely seen as Houphouët's designated successor. Ouattara initially contested Bédié's succession claim, but resigned as prime minister after the French government accepted the claim and left the country, taking up a position as Deputy Managing Director of the International Monetary Fund. He remained a key political figure, however. In mid-1994 Ouattara supporters—predominantly northern Muslims, intellectuals, and young professionals, and defectors from the reformist wing of the ruling Democratic Party of Côte d'Ivoire (PDCI)—formed a new political party, the Republican Rally (RDR) that became a vehicle for Ouattara's later return to Ivoirian electoral politics in 1995. Employing his influence over Houphouët's PDCI, Bédié began to consolidate his own power base, in part by replacing Ouattara allies with loyalists, and by assuming the PDCI chairmanship in1994. Bédié emphasized the close linkages and sources of continuity between his government and the system he had inherited from Houphouët, but many observers saw him as a considerably less effective leader than Houphouët. Bédié also ushered in a transformation of Ivoirian politics that helped spur the later division of the country. Increasingly, Bédié was accused by critics of blaming immigrants for many of the country's problems, and of fueling public anti-immigrant sentiments. He used these divisions to rally political support, making use of a nationalist ideology known as Ivoirité . It defined southerners as "authentic" Ivoirians, in opposition to "circumstantial" ones, that is, northerners and immigrants, and helped initiate the later evolution of ultra-nationalist, xenophobic political views among some in the south. It also helped fuel increasingly volatile national politics encompassing electoral competition; military, student, and labor unrest; conflict over land and residency rights; and periodic mass protests, some violent, over economic and other issues. The 1995 Election, Candidate Eligibility, and the Nationality Issue The Bédié government again increased its power after presidential elections in October 1995, which were held under a controversial electoral law passed by the PDCI-dominated parliament just prior to the elections, prompting several mass demonstrations calling for electoral transparency. Bédié won 95% of the vote, but the electoral process and outcome was vocally protested by opposition parties, on the grounds that the electoral law had been specifically engineered to exclude Ouattara. The electoral law barred persons lacking "pure" Ivoirian parentage and those who had resided abroad during the previous five years from standing as electoral candidates. Ouattara was disqualified from standing in the poll because he had resided in the United States while working for the IMF from December 1993, and was of alleged mixed Burkinabe-Ivoirian descent. The opposition FPI presidential candidate Laurent Gbagbo, for his part, withdrew from the race, alleging that the electoral process was subject to extensive state manipulation. Despite continuing ire over the presidential election, the political environment became less volatile after peaceful legislative elections in November that drew cross-party participation. The PDCI won a decisive victory, taking 149 of the 175 seats; the remaining ones were split between the FPI (9) and the RDR (14). The vote showed distinct ethno-regional divisions in voting patterns, with the RDR gaining and the PDCI losing support in the north, while Gbagbo's FPI predominated in the central-west region and the PDCI in urban areas and in central and western parts of the country. Bédié continued to pursue efforts to consolidate his power. In January 1996, the cabinet was shuffled; military General Robert Guéï, who had previously been relieved of his military command post after being appointed Minister of Employment and Civil Service in October 1995, was made Minister of Sports. In May 1996, following news reports that there had been a coup attempt planned by restive soldiers in mid-1995, the army leadership was shaken up. Guéï was demoted to a minor administrative post because the planned coup was attributed to elements under his former command. The latter part of Bédié's tenure was beset by accusations of human rights abuses associated with security force crackdowns on the opposition; student protests; economic pressures; and accusations of corruption by domestic critics and donor governments. In 1998, the National Assembly passed a series of constitutional changes viewed as highly favorable to the incumbent. They increased executive control of elections, extended the presidential term of office, and codified in the constitution nationalities laws defining political candidacy requirements. Candidates were required to be Ivoirian by birth, parentage, and to have lived continuously in Côte d'Ivoire for ten years prior to running. Military Coup of December 1999 Pressures on the Bédié government came to a head when disgruntled soldiers mutinied over pay and living conditions, commandeering public buildings and firing into the air. The government quickly promised to meet their demands, but the mutineers then altered their position, demanding that General Robert Guéï be awarded his former Chief of Staff post, from which he had been removed by Bédié after refusing to crack down on protesters. Guéï, who had a history of strained relations with Bédié, had served as former Chief of Staff from 1990 until 1995 and had founded a rapid commando intervention force that was reportedly at the center of the mutiny, then stepped in as a "spokesman" for the soldiers on the second day of the mutiny, December 24. He announced that the mutineers would establish a National Committee of Public Salvation (CNSP), and that the parliament, government, the Constitutional Council and the Supreme Court were dissolved. Guéï promised to maintain respect for democracy, eradicate government corruption, re-appropriate funds seized in corrupt dealings, rewrite the Constitution, and hold transparent elections within a year. Bédié, who at first sought refuge in the French embassy, fled to France after a sojourn in Togo. After negotiations, all major political parties, including Bédié's PDCI, agreed top support the "transitional" CNSP junta, which was established in early 2000. It established a 27-member Consultative Commission on Constitutional and Electoral Matters, composed of representatives of the main political parties, civil society and labor organizations, and religious institutions. This entity drafted proposals for a new constitution and electoral code, which it presented in March 2000 in anticipation of a later referendum on these proposals. Guéï's Leadership As junta leader, Guéï was initially seen as a pro-Ouattara, partly due to Bédié's opposition to Ouattara. Many Ivoirians nursed hopes that the Guéï's administration would bridge the growing ethno-regional divisions in the country and usher in a rapid transition to transparent constitutional civilian rule. Guéï's hoped-for collegial and consensual leadership, however, developed into a governing style based on top-down commands and a public rhetoric focused on discipline and order. Personal political ambition also came to define his leadership. He made public statements replete with grandiose patriotic rhetoric and flattering self-representations, casting himself as the redeemer of common citizens' aspirations against the machinations of corrupt politicians, leading some to label him a narcissist. His leadership increasingly came to be seen as motivated by the goal of eliminating perceived rivals in the military, weakening the RDR and the potential for a strong Ouattara candidacy, and getting himself elected into office. In April 2000 he created a political party, the Rassemblement pour le Consensus National (Rally for National Consensus) that was expected to support his candidacy. The Guéï government began a program to issue national identity cards to citizens and resident permits to foreigners, as a prerequisite for voter registration ahead of elections. The issue was considered sensitive because it was seen as providing a potential means for the state to exclude native-born Ivoirians of northern origins and the Ivoirian-born children of immigrants from participating in the political process. It also would enable officials to formally differentiate between Ivoirians and non-Ivoirians, a point of controversy because ID checks of persons of perceived northern origins and foreign West African economic migrants were reportedly often used to threaten such persons with deportation, refusal of employment, residence, or land rights. The rule of law also suffered in other ways. In response to public protests against rising crime, the military undertook to arrest criminals directly, especially targeting organized gangs in Abidjan. The use of military forces to enforce civilian criminal law, however, reportedly prompted some members of the military to themselves engage in acts of banditry and highway robbery. Extortion and harassment reportedly became common at military roadblocks. Military indiscipline was not limited to soldiers' public conduct. In March 2000, soldiers mutinied over salary demands; officers were taken hostage and one base commander was killed. In July, troops mutinied over non-payment of $9,000 allotments that they claimed they had been promised by Guéï after the coup of the previous December. Soldiers looted, stole vehicles and weapons, and paralyzed commerce and public services in Abidjan and the secondary cities of Bouaké and Korhogo. The uprising was violently crushed by the gendarmerie following imposition of a curfew and after the negotiation of a far lower allotment payment. Only a fraction of the promised payment was subsequently made, due to government insolvency, and over 50 of hundreds of mutineers were court marshaled. Urban infrastructure damage due to the rebellion was extensive. Key Political Developments in 2000 In July 2000, constitutional changes were approved by an 87% margin in a referendum that featured a 57% voter participation rate. While northerners voted strongly (68%) against the changes, a widespread boycott of the vote in the north meant that voter turnout in that region was low. The provisions required that both parents of presidential candidates be Ivoirian-born citizens; previously only one parent had been required to be of Ivoirian birth. Also in July, an RDR party event was halted by security forces and an RDR demonstration in support of French statements cautioning against the exclusion of candidates was broken up. As the year proceeded, harassment of Muslims and northerners by security officials reportedly increased. In August, Guéï launched a failed bid to become the PDCI presidential candidate, and he later announced plans to run as a "people's candidate." Later in August, RDR supporters and their opponents clashed after security forces halted an RDR demonstration, and elections slated for September were postponed until October. As the election drew nearer, public security deteriorated. Harassment of immigrants by security forces reportedly increased. In September, the High Council of Imams (CSI) and National Islamic Council (CNI) warned that unfair restrictions on electoral eligibility would result in social unrest. They also condemned official harassment of northerners and Muslims, and later called for a boycott of the election, after Ouattara was excluded. During pre-poll voter registration, nationality documentation restrictions prevented many northerners from registering as new voters. On September 18, an attack on Guéï's residence was suppressed. The attack, a putative attempted putsch and assassination by members of the military and his own presidential guard, was suspected by some observers to be have been mounted by Guéï himself as a pretext to purge the military of perceived opponents and undercut political opposition to his candidacy. After the incident, a state of emergency was declared and political meetings were banned, and a number of predominantly northern soldiers were arrested; some were reportedly summarily executed, while others reportedly were tortured. In October, the Supreme Court, headed by Tia Kone, a former personal legal advisor to Guéï, declared 14 of 19 prospective presidential candidates ineligible to run, including six PDCI candidates. Included among them was Bédié and the PDCI's official presidential nominee, Emile Bombet, due to embezzlement allegations in both cases, and Ouattara. Only Guéï and the FPI's Gbagbo, along with three minor candidates, were allowed to run. Guéï opponents claimed that the Supreme Court should also have banned Guéï's candidacy because military law required him to resign from the military six months prior to the election. Guéï had not met that requirement, and when a newspaper reporter raised the question in an article, the reporter was beaten by the presidential guard. A similar legal question was raised in relation to the candidacy of Gbagbo, whose status as a state employee may have made him technically ineligible to run. October 2000 Election After further electoral controversies, including a suspension of U.S. and European Union (EU) election aid and a call by the RDR and PDCI for an election boycott, polling was held on October 22. Extensive violence, which revealed how deep-seated ethno-regional and religious divisions had become, followed the poll. On October 23, the FPI, claiming that the election had been rigged by Guéï and that Gbagbo had won, initiated large street protests, which were joined by elements of the security forces. In the face of Gbagbo's claim to victory, Ouattara and the RDR demanded that the election be re-run. This demand prompted clashes between FPI and RDR supporters, resulting in hundreds of deaths and thousands of injuries. Gbagbo's victory was ratified days later by the Supreme Court, which awarded him 53% of the vote. The clashes quickly took on an ethnic and religious tone; Muslim neighborhoods, seen as hotbeds of RDR support, were attacked by FPI supporters, and several mosques were damaged or destroyed, as was a church in retaliation. Many members of the security forces joined in these attacks, and were later accused of human rights abuses after 57 bodies were later discovered in Yopougon, an area outside Abidjan. All of the victims, later identified as northern Muslims, had been shot at close range. At least 18 bodies were also pulled from the lagoon surrounding Abidjan soon after the FPI-RDR clashes. Some of these victims were reported to have been Gbagbo supporters fired upon by members of the presidential guard as they marched on the presidential compound. Some were reportedly forced to jump off bridges, where many drowned. Less extensive incidents of election unrest also occurred in several secondary cities. Gbagbo Government Takes Power The new government faced a number of immediate tasks that required Gbagbo to rapidly transition from being an opposition leader whose legitimacy derived from his position as an outsider and popular street activist to becoming a national leader capable of integrating the diverse and conflicting interests of a divided nation. First, the government had to launch a credible investigation into responsibility for the deaths during the elections—especially the cases of summary mass execution. Its other most important immediate task was to hold a free and fair legislative election, and to prove that the FPI was not a minority party, as its detractors claimed, while the former ruling party, the PDCI, was under pressure to demonstrate that it remained a viable party. The legislative election was held with decidedly mixed success, primarily related to Ouattara's disqualification as a parliamentary candidate by the Supreme Court, on the basis that his nationality certificate was technically invalid. Ouattara's RDR boycotted the polls, rejecting what it called the Gbagbo's "sham reconciliation process," and mounted protests. The RDR's actions had a significant effect. In Abidjan, large and violent RDR protests were held. In the north, prefectures and constabulary stations were attacked, and the vote was widely boycotted. Ouattara's disqualification prompted international concern over the poll's validity, and major international organizations and donor governments did not deploy election monitoring missions. Despite such obstacles, voting went smoothly nationwide, except in the north, where elections could be held in only four of 32 electoral districts, due to attacks on election equipment and the subjection of election officials to intimidation. In the south, by contrast, voting was peaceful but the turnout rate was low, at about 34%. A by-election was held in the north in January 2001. While calls by the RDR for another boycott resulted in very high abstention rate (about 87%), the poll went forward peacefully, in part due to close supervision and heavy security, despite being held in a tense atmosphere one week after an attempted coup. Despite rising political tensions and social cleavages, in 2001 and 2002 there were signs that Côte d'Ivoire was beginning to make limited progress toward national reconciliation and political compromise. In late 2001, a National Reconciliation Forum, in which all of the major parties, constituencies, and key leaders participated, was organized by the government. It focused on barriers toward national unity, governance, civil-military relations, immigration, and ethno-regional and religious divisions. September 2002 Rebellion Guarded optimism by many over the country's prospects was undermined on September 19, 2002, when a military rebellion quickly turned into an attempted coup d'état against the government while Gbagbo was on an official visit to Italy. The rebels, made up of units of aggrieved soldiers, predominantly of northern ethnic origins, were opposed by loyalist units, predominantly southern in their ethnic makeup. Although a military takeover of the key government institutions and facilities was prevented by loyalist forces, the insurrection rapidly broadened an existing national fissure between north and south. During the initial uprising, Guéï was killed under unclear circumstances. After clashes with loyalists near the commercial capital, Abidjan, and elsewhere, the rebel units gradually withdrew to the central city of Bouaké and from there rapidly took control of over half of the country. They then formed a political organization called the Patriotic Movement of Côte d'Ivoire (MPCI, after the French), and began to articulate a political agenda and lay out demands, and reportedly appointed provincial governors. The MPCI took control of local administration in northern rebel-held territory, and civil and commercial life reportedly resumed a relatively routine character after being disrupted by population shifts and displacements. The provision of social services, however, sharply declined under rebel administration, and never recovered fully. Periodic, sometimes fierce fighting ensued, as the government unsuccessfully attempted to retake towns along the north-south dividing line. The MPCI also allied itself with two small rebel groups in western Côte d'Ivoire. The groups, which reportedly included many Liberians and Sierra Leonean combatants, announced their existence in November 2002 by seizing several towns in the west. In late 2002, early 2003, and periodically since, the west has been the scene of armed clashes over territory; communal violence related to immigrants' land and residency rights; and criminal armed violence. International peacekeepers also clashed with the western rebels in the first several years after the rebellion. Peace Mediation The country remained divided and often tense in the years after the uprising, but military conflict generally subsided after 2002, with some notable exceptions (e.g., periodic but localized armed conflict in the west; occasional ceasefire line provocations; and a brief resumption of warfare in late 2004). International conflict mediation efforts, notably by ECOWAS, began soon after the rebellion, but made little progress until early 2003, when a French-brokered peace accord, the Linas-Marcoussis Accord (LMA), was signed. It allowed Gbagbo to remain in power, but provided for the creation of an interim government of national reconciliation (GNR) under a "consensus" prime minister. The LMA charged the GNR with preparing for presidential elections in 2005 and reforming the armed forces with external aid to ensure ethnic and regional balance in the military. It required the disarming of all armed forces, the expulsion of foreign mercenaries, and the creation of an international LMA monitoring group. An LMA annex set out a roadmap for resolving key issues underlying the crisis. It called for reform of electoral candidacy and citizenship eligibility rules, the electoral system, and land tenure and press laws; creation of a human rights abuse panel; and freedom of movement and post-war economic recovery planning. No War, No Peace The LMA was immediately opposed—vocally and with violence, including assaults on French-owned businesses and homes—by partisans of Gbagbo's FPI party and elements of the military and government. They asserted that it ceded too much power and made too many other concessions to the rebels. Gbagbo, under pressure to repudiate the LMA, indicated that he had signed it reluctantly under intense foreign pressure. These and later remarks hindered implementation of the LMA, which was later amended by a series of internationally mediated accords, though its basic provisions remained a keystone of most of these later agreements. From early 2003 through early 2007, the two sides endeavored to implement the provisions of the LMA and subsequent peace agreements by pursuing a range of political and legal reform processes and reaching various agreements to achieve military and militia disarmament and demobilization. Focal issues included the sequence and manner in which disarmament, voter registration, citizen identification, and elections would take place; the content of proposed laws aimed at implementing the key provisions of the LMA and other agreements, and the manner in which they would be enacted; and differences over the scope and exercise of presidential authority. These efforts were overseen and sometimes led by two consensus prime ministers. The first was Seydou Diarra, appointed in 2003 after the LMA was signed. Charles Konan Banny succeeded Diarra in December 2005 after a crisis over delayed national elections and an internationally endorsed, non-electoral extension of Gbagbo's tenure in office for a year. During this period, notably under Banny's tenure, talks and other cooperative efforts between the opposed parties sometimes resulted in significant progress toward the key goals set forth in the various peace accords. Such progress was, however, often interspersed with and undercut by political backtracking and obstructionism by one or both parties, political gridlock, and frequent accusations by one or both sides charging their opponent with undermining progress toward peace, often spurred by incendiary political rhetoric and partisan journalism. Similarly, mediation efforts by external governments or U.N. officials, while sometimes nominally successful, were often criticized by one or both sides as being biased. Armed conflict briefly flared on several occasions, most notably in November 2004, when a government attempt to attack the north was repulsed by French and U.N. troops. This effort included an air attack on a French base (see text box "France's Military Presence in Côte d'Ivoire" in body of report). Mass protests, sometimes including violent mob actions, subsequently periodically punctuated the conflict. The political division of the country also led to breakdowns in law and order, frequent impunity for security officials accused of human rights abuses and other crimes, and a rise in corruption. Due to the weak rule of law, local officials on both sides of the conflict reportedly gained access to and at times diverted official revenues. Such funding sources have taken the form of official taxes and fees and illicit, extortion-based payments, from such sources as domestic and international trade in goods, travelers, state-controlled firms; agricultural commodity sales, notably in the key cocoa sector; and illicit diamond exports. Access to such revenue streams was long seen as undermining political support for a quick resolution of the conflict. International Peacekeeping Role The international community supported the LMA and later subsidiary agreements, notably through resolutions by the U.N. Security Council. The council first endorsed the LMA in early 2003, when it authorized two peacekeeping force deployments, one French and one by the Economic Community of West African States (ECOWAS), dubbed ECOMICI. They were charged with helping to implement the LMA and a May 2003 ceasefire accord; resolving the conflict; guaranteeing their own security and freedom of movement; and protecting civilians. In May 2003, after fighting in the west, the Security Council created a U.N. Mission in Côte d'Ivoire (MINUCI), a political and military monitoring mission. In early 2004, the Security Council authorized the U.N. Operation in Côte d'Ivoire (UNOCI), which took over MINUCI's mandate and incorporated the ECOMICI forces in April 2004; see textbox entitled "UNOCI" for more information on the mission. Peace Process of 2007 A new peace accord, the Ouagadougou Agreement, was signed in March 2007 after opposition party-backed talks mediated by Burkina Faso's president between President Gbagbo and FN leader Guillaume Soro. The accord was preceded in 2006 by halting progress toward citizen identification; voter registration; disarmament; and some other elements of the peace process, but also by marked tension over these processes and between President Gbagbo and Prime Minister Banny in the wake of an imported toxic waste dumping scandal. Such tension also arose over the two leaders' conflicting claims regarding their peace process implementation decision-making powers, notably after the U.N. Security Council passed Resolution 1721, which recognized Banny's broad power to implement the peace process, but did not, according to Gbagbo's interpretation, reduce Gbagbo's constitutional authorities. The 2007 accord superseded but incorporated all earlier agreements. Under its provisions, FN leader Guillaume Soro became foreign minister. The accord also renewed and amended processes for conducting citizen identification, voter registration, elections (but mandated no election deadline), and provided for the formation of a new transitional government; laid out procedures for disarmament and a merging of the FN and the government military-security structures; created a youth civic service, a political party code of conduct, and an accord monitoring organ made up of the leaders of the top political parties; re-established state structures and authority nation-wide; and requested the lifting of U.N. sanctions and a reduced role for international peacekeepers, who were to be gradually replaced in certain areas by the newly merged security forces. While many of the accord's provisions were fulfilled, most notably the conduct of the 2010 presidential election, many key elements remain significantly unimplemented. International reaction to the accord was generally positive but cautionary. While welcome as an Ivorian solution to an Ivorian conflict, it gave substantial leeway to presidential authority, which was viewed as potentially leading to contention over accord implementation, especially since it reduced the international political and military role in the peace process, provided no sanctions for implementation failures, and empowered only the four leading political parties. Appendix C. Acronym Table

Côte d'Ivoire is emerging from a severe political-military crisis that followed a disputed November 28, 2010, presidential runoff election between former president Laurent Gbagbo and his, former Prime Minister Alassane Ouattara. Both claimed electoral victory and formed opposing governments. Their rivalry spurred a full-scale civil military conflict in early March 2011, after months of growing political violence. Armed conflict largely ended days after Gbagbo's arrest by pro-Ouattara forces, aided by United Nations (U.N.) and French peacekeepers, but limited residual fighting was continuing to occur as of April 20. The election was designed to cap an often forestalled peace process defined by the 2007 Ouagadougou Political Agreement, the most recent in a series of partially implemented peace accords aimed at reunifying the country, which was divided between a government-controlled southern region and a rebel-controlled northern zone after a brief civil war in 2002. Ouattara based his victory claim on the U.N.-certified runoff results announced by the Ivoirian Independent Electoral Commission (IEC). These indicated that he had won the election with a 54.1% vote share, against 45.9% for Gbagbo. The international community, including the United States, endorsed the IEC-announced poll results as legitimate and demanded that Gbagbo cede the presidency to Ouattara. Gbagbo, rejecting the IEC decision, appealed it to the Ivoirian Constitutional Council, which reviewed and annulled it and proclaimed Gbagbo president, with 51.5% of votes against 48.6% for Ouattara. Gbagbo therefore claimed to have been duly elected and refused to hand power over to Ouattara. The electoral standoff caused a sharp rise in political tension and violence, deaths and human rights abuses, and spurred attacks on U.N. peacekeepers. The international community used diplomatic and financial efforts, sanctions, and a military intervention threat to pressure Gbagbo to step aside. The crisis directly threatened long-standing U.S. and international efforts to support a transition to peace, political stability, and democratic governance in Côte d'Ivoire, among other U.S. goals. Indirectly at stake were broad, long-term U.S. efforts and billions of dollars of foreign aid to ensure regional stability, peace, democratic and accountable governance, and economic growth in West Africa. The United States supported the Ivoirian peace process diplomatically and financially, with funding appropriated by Congress. It supports the ongoing U.N. Operation in Côte d'Ivoire (UNOCI) and helped fund a UNOCI predecessor; and helped a regional military intervention force deploy in 2003. The 112th Congress may be asked to consider additional funding for UNOCI, post-conflict recovery efforts, or for additional emergency humanitarian aid, in addition to $33.73 million worth of such assistance provided as of mid-April. Côte d'Ivoire-related bills introduced in the 112th Congress include H.Res. 85 (Payne), expressing congressional support for such ends, and H.Res. 212 (Timothy V. Johnson), calling for the United States not to intervene militarily in Côte d'Ivoire in the absence of congressional approval. Top U.S officials also attempted to directly pressure Gbagbo to step down. An existing U.S. ban on bilateral non-humanitarian aid was augmented with visa restrictions and financial sanctions targeting the Gbagbo regime. As of early 2011, regional mediation had produced few results. A post-conflict transition process is now under way. Key emphases include security and public order; economic recovery; transitional justice and accountability for human rights abuses; and national political reconciliation and reunification. Continued political volatility is likely, both due to the divisions that widened during the post-electoral crisis, and pending resolution of the varied root causes of the crisis. The Overview and Recent Developments sections discuss Gbagbo's capture and ensuing events; prior developments are addressed in the balance of the report.

Overview Senegal has remained relatively stable but poor since gaining independence from France in 1960. It is an electoral democracy and among the few countries in Africa never to have experienced a coup d'état. Senegal is also diplomatically influential, particularly among Francophone African states, and its relatively well trained and disciplined military is active in international peacekeeping operations. The population is 94% Muslim, and indigenous religious leaders are socially and economically influential. While ethnic and religious divisions exist, they play less of a role in Senegalese politics than in much of West Africa. Infrastructure investments, reforms, and donor assistance have provided the conditions for economic growth in recent years, but wealth creation has been concentrated in the capital, Dakar, and among political and economic elites. President Macky Sall faces challenges in responding to high public expectations that he will alleviate poverty, improve government transparency and accountability, and bring a definitive end to a long-running, low-level separatist conflict in the southern Casamance region. A worsening regional security outlook also preoccupies Senegal's leaders, particularly given terrorist, separatist, and criminal activity in neighboring Mali. Terrorist networks active in West Africa, including Al Qaeda in the Islamic Maghreb (AQIM), have not successfully carried out attacks within Senegal to-date, but Senegal is potentially vulnerable to violent extremist infiltration and recruitment. Senegal has provided troops to a United Nations (U.N.)-authorized African-led regional military intervention force, which has received U.S. logistical support and is expected to transition into a U.N.-conducted stabilization operation starting July 1. Senegalese troops face an uncertain threat environment in Mali; their experience in Casamance and U.N. peacekeeping has not necessarily prepared them for desert warfare or for potentially sophisticated terrorist attacks. Successive U.S. Administrations have viewed Senegal as an anchor of regional stability and a partner in combating transnational security threats such as terrorism, narcotics trafficking, and maritime piracy. President Obama has cultivated ties with President Sall, inviting him to a meeting at the White House in March 2013 and planning to visit Senegal on an upcoming trip to Africa. In both cases, the Administration has emphasized Senegal's democratic track-record. Congress has played a role in shaping U.S. policy toward Senegal through its authorization and appropriation of foreign assistance, and via its oversight of executive branch policies and strategies. Bilateral aid administered by the State Department and U.S. Agency for International Development (USAID), totaling $109.6 million in FY2012, is focused on health, food security, democratic governance, economic growth, rural development, conflict resolution in Casamance, and military professionalism. In addition, a five-year, $540 million Millennium Challenge Corporation (MCC) compact, signed in 2009, is funding infrastructure and agricultural projects in the northern Senegal River valley and in Casamance. The Administration has also provided emergency humanitarian aid since 2011 as part of efforts to address a regional food security crisis in the Sahel. Recent congressional interest has arisen over issues such as Senegal's democracy and governance trajectory; the country's role in confronting regional security threats; and the management of bilateral development assistance, including support for Senegal's socioeconomic development and oversight of Senegal's MCC compact given past concerns over corruption. Background Senegal's first post-independence leader, Léopold Senghor, was a poet and politician celebrated as one of post-colonial Africa's most important intellectuals. Although a self-described socialist and pan-Africanist, Senghor cultivated close ties with the West—in particular, France—and resisted the Eastern Bloc influence at times prevalent in the region. Senghor presided over a de-facto one-party state through his ruling Socialist Party (PS) until 1981, when he stepped down and was succeeded by the PS's Abdou Diouf. Diouf continued Senghor's pro-Western policies and oversaw Senegal's gradual political liberalization. Still, elections under Diouf were marred by alleged fraud, repression of anti-government activism, and in some cases violence. In 2000, long-time opposition leader Abdoulaye Wade (pronounced "wahd") won presidential elections widely seen as free and fair. Wade's victory and Diouf's peaceful transfer of power to Wade's Senegalese Democratic Party (PDS) were hailed as a landmark for democracy in Senegal and the region, which had seen few democratic transitions between civilian leaders. During Wade's second term (2007-2012), however, Senegalese and international observers raised concerns over apparent democratic backsliding, amid Wade's increasing efforts to concentrate power and growing concerns over high-level corruption and nepotism. In the 2012 presidential election, Wade failed in his effort to win a third term in office, losing to one-time ally Sall. Wade's third-term candidacy had been extremely controversial within Senegal, provoking protests in Dakar and sparking concerns over potential political instability. In the end, the election results and Wade's concession were hailed as a victory for democracy in an often troubled region. President Sall, 51, is one of Africa's few heads of state to hail from a post-independence generation. A geological engineer by profession, Sall rose to national prominence as a senior official in Wade's Senegalese Democratic Party (PDS). Reputed to be a Wade protégé, Sall served as Prime Minister (2004-2007) and Speaker of the National Assembly (2007-2008). He also ran the state petroleum company, the Société des pétroles du Sénégal (Petrosen) and headed the Ministry of Mines, Energy and Water. He was ousted from his position as Speaker of the Assembly after a public falling-out with Wade; the dispute reportedly stemmed from Sall's attempt to question Wade's unpopular son, Karim, over corruption allegations. Sall founded a new party, the Alliance for the Republic (APR), and emerged as the opposition front-runner in the vote held on February 26, 2012. Wade failed to win a majority, forcing a run-off against Sall a month later. All 12 other candidates then endorsed Sall, who won with 65.8% of the run-off vote. Politics and Governance Senegal is a multiparty democracy whose political system endows the presidency with significant authorities. The president appoints the prime minister and can dismiss him at will, and also appoints the justices of the country's highest appeals court and Constitutional Council. Since 2000, elections have been widely viewed as free, fair, and well managed. Turnout in presidential polls is generally above 50%, although it has been lower in recent legislative elections. Analysts attribute Senegal's strong electoral system to a number of factors, including a relatively free environment for the media and public debate; an active and independent civil society; and relatively transparent electoral institutions and processes, among others. Still, European Union (EU) election observers have recommended that Senegal make changes to its campaign finance regulations to ensure greater transparency, among other suggested reforms. The relative political strength of the parliament under Sall has yet to be demonstrated. Sall's coalition—"United in Hope"—gained control of the Assembly after winning 119 out of 150 seats in legislative elections held in July 2012. A Sall ally, former Prime Minister Moustapha Niasse, was elected speaker of the Assembly. Wade's PDS won 12 seats, down from 131 won by the PDS-led coalition in 2007 legislative elections, which were boycotted by most of the opposition. After a 2010 law required women to make up 50% of candidates on party lists, 64 women were elected to the National Assembly (i.e., 43% of seats) in 2012. President Sall has taken steps to reverse some actions undertaken by his predecessor that further concentrated power in the hands of the president. While these reforms have the potential to improve governance, they also resemble reforms initially undertaken in the early 2000s by Wade, who gradually reversed them later. With legislative backing, Sall abolished an upper legislative chamber, the Senate, in which 65 of 100 members were appointed by the president. The Senate, which Wade had reinstituted after earlier doing away with a similar body, was widely viewed as a tool of political patronage, and as a way to dilute the influence of the directly-elected National Assembly. Sall has also pledged to support a constitutional amendment reducing the presidential term to five years (Wade extended the term to seven years after first shortening it to five), and has promised—as Wade initially did—to serve no more than two terms in office, as per constitutional term limits. Sall has also reduced the number of cabinet ministers and shuttered a number of state agencies that had reportedly been used, under Wade, as tools of patronage and corruption. Another key Sall initiative has been a far-reaching campaign to investigate and prosecute alleged high-level corruption under his predecessor. Several former senior officials have been detained and questioned, and some have reportedly been charged—including former President Wade's son, Karim, who held a number of cabinet portfolios with broad authority over state procurement. Karim Wade was arrested in April 2013 pending trial; he has denied allegations that he embezzled up to $1.4 billion. Many Senegalese reportedly view the anti-corruption investigations favorably, and the World Bank has offered support through its Stolen Asset Recovery Initiative. However, Wade supporters have portrayed the investigations as a witch-hunt designed to sideline political opponents. It is unclear how far Sall can pursue allegations of corruption under his predecessor without implicating himself or close allies, most of whom served in senior positions under Wade. More broadly, it is uncertain whether Sall's governance initiatives can ultimately respond to public expectations of better employment opportunities and a lower cost of living. State service delivery continues to face challenges, despite improvements over the past decade in the provision of health services and primary education. Senegal has been particularly praised for its HIV/AIDS programs, which were initiated in the mid-1980s—long before most—and have contributed to a relatively low rate of infection (less than 1% of the adult population). Senegal's anti-malaria program has also received plaudits. Still, many rural areas and some urban neighborhoods remain underserved by roads, electricity, sanitation, and drinking water. Gaps in service provision in Casamance have provided one basis for ongoing conflict there. Security Issues Al Qaeda in the Islamic Maghreb (AQIM), a regional criminal and terrorist network, and several affiliated groups are active in neighboring Mali and elsewhere. They have not successfully carried out attacks in Senegal to date, but Senegal is potentially vulnerable to infiltration due to porous borders and the largely informal nature of the financial system. Despite Senegal's history of religious tolerance, the country's underemployed youth and others may also be susceptible to radicalization and extremist recruitment. AQIM and other extremists have also threatened to carry out attacks in countries, like Senegal, that have deployed troops to Mali as part of regional stabilization efforts. The large number of Western residents and offices based in Dakar, along with its airport, a regional hub for commercial flights, are potential soft targets for terrorist attacks. According to the State Department, Senegal has "played an active role in countering terrorist financing," and has sought to monitor arms trafficking in line with regional initiatives. Senegal's primary internal security concern is unrest in the southern Casamance region, the location of a three-decade, low-level separatist insurgency. Casamance is cut off from much of Senegal by The Gambia, a separate country, and is ethnically and religiously distinct. While the conflict remains locally contained, it has hurt the local economy in Casamance, which is ordinarily a tourism destination, and caused population displacements in rural areas. Active and ex-combatants reportedly also engage in banditry and organized crime, including trafficking in arms, narcotics, and timber. A landmark peace agreement was signed in 2004, but violence surged anew in 2009 and subsequent years. The main rebel organization, the Movement of Democratic Forces of Casamance (MFDC), has been increasingly fragmented in the wake of the death of its longtime leader, Father Augustin Diamacoune Senghor, in 2007. The U.N. Office of Drugs and Crime (UNODC), in 2009, assessed the value of illicit trafficking through Senegal at more than eight times GDP, expressing particular concern over cocaine trafficking and its impact on regional stability. Cocaine reportedly enters Senegal en route to Europe from South America via neighboring Guinea-Bissau and Guinea, or directly by air; Senegal's international airport reportedly serves as a hub for individual couriers departing the region. Subsequent UNODC analyses have also pointed to methamphetamine and heroin trafficking through Senegal and neighboring states. Though Senegal's law enforcement agencies are relatively effective compared to many in the region, they may lack the capacity to effectively prevent or prosecute money laundering linked to organized crime, including drug trafficking. The drug trade appears to leverage regional smuggling networks also used to ferry duty-free cigarettes, counterfeit pharmaceuticals, small arms, and illegal migrants. Human Rights Senegal's record on human rights and press freedom is one of the best in the region, but some problems continue to be documented. The State Department's 2012 human rights report stated that "the most significant human rights problems included reports of physical abuse and torture [by the security forces]; limits on freedoms of speech, press, and assembly; and corruption." Other "major human rights problems" were reported to include poor treatment of detainees and prisoners, "questionable investigative detention" and long pretrial detention, a lack of judicial independence, violence and harassment against women, female genital mutilation/cutting, child abuse and child marriage, child labor, infanticide, violence and discrimination against lesbian, gay, bisexual, and transgender (LGBT) persons, discrimination against people with HIV/AIDS, and trafficking in persons. The report also referenced killings and criminal activities by Casamance-based rebels. Other State Department reporting states that Senegal is a source, transit, and destination country for children and women who are subjected to forced labor, forced begging, and sex trafficking. Human Rights Watch has reported separately on police abuses against gay men and men perceived as gay, and on the reportedly widespread abuse and economic exploitation of children at Senegalese Quranic schools, where young boys, often separated from their impoverished rural families, receive religious instruction but are forced to beg. Rights groups have criticized the government for delays in prosecuting former Chadian President Hissène Habré, who lives in Senegal, for crimes committed under his leadership in Chad (1982-1990). In July 2006, the African Union (AU) directed Senegal to prosecute Habré after Belgium issued an international arrest warrant charging him with crimes against humanity, war crimes, and torture. Then-President Wade initially agreed to a prosecution, and the Senegalese legislature amended the constitution and passed legislation aimed at removing any legal obstacles. However, the prosecution stalled, partly due to Senegalese claims of insufficient donor funding. Progress toward a trial has since been made under President Sall, after the International Court of Justice ruled that Senegal must either try Habré or else extradite him to Belgium. A special AU/Senegalese judicial chamber has been created and a full investigation is now ongoing. The Economy Senegal is a predominantly agrarian country with few natural resources and limited arable land. Key foreign exchange earners include fishing, peanuts, phosphates, tourism, and remittances from Senegalese workers abroad. Senegal also receives significant foreign aid, with official development aid equivalent to over 7% of GDP in 2011. State investments in infrastructure, reforms, and donor assistance have provided the conditions for decent economic growth in recent years, estimated at 3.5% in 2012. Yet such rates may be insufficient to substantially alleviate poverty. Obstacles to private sector development include bureaucratic burdens, corruption, rigid labor laws, chronic electricity shortages, a lack of transparency in public contracting, shortfalls in judicial independence and efficiency, and opaque land titling procedures. Socioeconomic conditions remain poor; Senegal ranks 154 out of 186 countries on the 2012 U.N. Human Development Index. The country experiences chronic food insecurity, and relies on imports for 70% of its food supply—reportedly the highest rate in Sub-Saharan Africa. Senegal suffered from a regional food security crisis in 2011 and 2012 that devastated countries throughout West Africa's Sahel region. Although relatively good subsequent harvests led Senegal to be removed from the list of countries designated in U.S. government "disaster declarations" in FY2013, some Senegalese reportedly continue to experience food insecurity. Discontent over socioeconomic conditions has contributed to a high rate of emigration, often in unsafe conditions. Foreign Relations Senegal has long benefited from close partnerships with Western donors, who provide development assistance and military cooperation. Ties with former colonial power France are particularly strong. Former President Wade simultaneously pursued non-traditional sources of economic support, notably from the Middle East and China, in an apparent bid to emphasize independence to a domestic audience, maximize aid flows, and hedge against Western aid conditionality. Senegal is also a longtime and active member of the Organization of the Islamic Conference (OIC). Despite previously warming relations with Iran, Senegal cut diplomatic ties in February 2011, stating that a military investigation showed an Iranian arms shipment seized in Nigeria had been destined for Casamance rebels based in The Gambia. Senegal cultivates a position of regional diplomatic leadership and has generally refrained from direct involvement in neighboring conflicts, aside from conflict resolution efforts. As of May 2013, nearly 1,500 Senegalese personnel were serving in U.N.-mandated peacekeeping missions, notably in Darfur, Sudan; Côte d'Ivoire; the Democratic Republic of Congo; and Haiti. Senegal has also provided troops to the U.N.-authorized regional stabilization operation in Mali, known as the African-led International Support Mission in Mali (AFISMA), which is expected to transition into a U.N.-conducted operation. Still, tensions occasionally arise with neighboring Guinea-Bissau and The Gambia over those countries' alleged links to Casamance rebels and over a long-running border dispute with Guinea-Bissau. In 2011, relations with Guinea were strained when Guinean President Alpha Condé accused Senegal of hosting an armed plot against him. (Senegal denied the allegation.) In 1989, communal unrest along the border with Mauritania sparked riots and vigilante reprisals in both countries, resulting in large-scale, ethnically-based forced expulsions from Mauritania into Senegal. The two countries pursued a rapprochement in the mid-2000s, and then-President Wade brokered a 2009 political agreement in Mauritania that paved the way for elections following a military coup. U.S. Relations The State Department characterizes Senegal as "a strong U.S. ally as a regional, diplomatic, and economic partner." The U.S. Embassy in Dakar is the third largest in Africa, and the United States is among Senegal's top donors—possibly the largest bilateral donor if MCC disbursements are factored in. Security and judicial cooperation appear set to increase; for example, the Justice Department's Drug Enforcement Agency (DEA) is establishing an office in Senegal—the sixth such office in Africa. In 2012, the State Department appointed Ambassador Jim Bullington (Ret.) as a special envoy to support Sall's efforts to advance the peace process in Casamance. Presidents Bill Clinton and George W. Bush both visited Senegal during their tenures, and former President Wade met President Bush at the White House in June 2001. President Obama congratulated President Sall on his electoral victory in March 2012, and then-Secretary of State Hillary Clinton hailed Senegal for its "peaceful, democratic election," thanking Wade for his "leadership and dedicated service to the Senegalese people." The Obama Administration has expressed strong support for President Sall's leadership. Sall was one of four African leaders to meet with President Obama at the White House in March 2013, in a gathering that emphasized "shared democratic values and shared interests," and Senegal is one of three African countries scheduled to be visited by President Obama during his second trip to the continent, slated for late June 2013. During a visit to Senegal in 2012, then-Secretary of State Hillary Clinton stated: We welcome President Sall's focus on transparency and accountability in government and on independence for the judiciary. We believe his plans to boost agricultural production and reform land ownership rules will be very important. We also wish to help him fulfill his pledge to resolve the long-running conflict in the south. And we are committed to help in every way with the prosecution of former President Habré of Chad. U.S. officials criticized political trends under former President Wade, and the State Department's FY2013 aid budget request for Senegal, issued in February 2012, referred to "the gradual erosion of governance and transparency." The Obama Administration publicly criticized Wade's third-term presidential candidacy in the weeks leading up to the vote. Administration officials reportedly also privately petitioned Wade to step down, as did some Members of Congress. Wade objected to what he termed foreign interference, but did step down after losing the election. Senegal is eligible for trade benefits under the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-200 ), although its exports to the United States are minimal. U.S. imports from Senegal totaled $17 million in 2012, and U.S. exports to Senegal totaled $150 million. Senegal hosted the fourth annual AGOA Forum in 2005. A bilateral investment treaty entered into force in 1990. U.S. direct investment in Senegal is estimated at $50 million; French companies are the largest foreign investors. U.S. Foreign Assistance U.S. bilateral foreign assistance administered by the State Department and USAID has increased significantly in recent years, from under $60 million in FY2008 to $109.6 million in FY2012 ( Table 1 ), in addition to a five-year MCC compact worth $540 million. These trends reflect sizable allocations for agricultural development and health assistance; Senegal is a focus country for the Obama Administration's Feed the Future initiative and the President's Malaria Initiative (PMI). Other key aims of U.S. bilateral aid include democratic governance; economic growth; rural development; countering violent extremism; and military effectiveness. Bilateral aid may be set to decrease; the Administration proposed $89.8 million in bilateral aid for FY2013, and has requested $89.2 million for FY2014, through its annual Congressional Budget Justification. Congress has shaped the level and balance of U.S. aid to Senegal. The conference report accompanying the FY2012 Consolidated Appropriations Act ( P.L. 112-74 ) recommended "not less than" $50 million in Development Assistance funding for Senegal. (In the end, $50 million in FY2012 funding was allocated from that foreign assistance account; however, the Administration has requested less for FY2013 and FY2014.) The report also noted conferees' concern that former Chadian president Hissène Habré "has not been extradited for prosecution for crimes against humanity," and directed the Secretary of State to submit a report on "steps taken by the Government of Senegal to assist in bringing Habré to justice" (see "Human Rights," above). U.S. security assistance has focused on military professionalization, counterterrorism, maritime security, and peacekeeping training. Thousands of Senegalese peacekeepers have received training through the State Department's Africa Contingency Operations Training and Assistance (ACOTA) program, and the United States has provided logistical support to regional troops, such as Senegal's, that have deployed to Mali. U.S. Africa Command (AFRICOM) has also recently provided counter-narcotics assistance to Senegal's Navy. Senegal is one of 10 participant states in the Trans-Sahara Counter-Terrorism Partnership (TSCTP), a multi-year, interagency program aimed at countering terrorism in North and West Africa by strengthening regional security capabilities and coordination, and discrediting extremist ideology. Through Operation Enduring Freedom-Trans Sahara (OEF-TS), which supports TSCTP, the Department of Defense (DOD) conducts multinational and bilateral exercises with the Senegalese armed forces. Senegal has received several DOD "Section 1206" security assistance packages, including through two multi-country counterterrorism programs and three regional maritime security programs. Senegal also participates in a DOD State Partnership Program with the National Guard of Vermont. In September 2009, the MCC approved a five-year, $540 million compact aimed at encouraging economic growth through improvements in infrastructure and agricultural production. The compact, which entered into force in September 2010, focuses on road rehabilitation and promoting agricultural development in two geographic regions that are considered to hold potential for commercial agriculture, the Senegal River Valley in the north and the Casamance region. During former President Wade's tenure, some Members of Congress expressed concerns over Senegal's MCC compact in light of perceived democratic backsliding and rising corruption. Such concerns appear to have lessened under President Sall and the pace of disbursements has reportedly been smoother over the past year; MCC officials have praised Sall's "strong personal support for the success of the Senegal-MCC compact." In addition to the State Department, USAID, the MCC, and DOD, other agencies that fund and implement assistance programs in Senegal include the Department of Agriculture and the Centers for Disease Control and Prevention (CDC). Senegal also hosts some 270 Peace Corps volunteers, the largest contingent in Africa. Senegal further benefits from multilateral assistance administered by the international financial institutions, such as the World Bank, the IMF, and the African Development Bank (AfDB), which receive substantial financial support from the United States. In 2004, Senegal qualified for $850 million in sovereign debt relief under the IMF- and World Bank-supported Highly Indebted Poor Countries (HIPC) initiative. Outlook Senegal's 2012 presidential election was widely viewed as a key test of its reputation as a stable democracy. Many Senegalese saw the vote as a potential watershed for the country's political future, in which Senegal would either further its democratic consolidation or potentially experience a flawed election that could damage its international image. To the delight of many Senegalese and international observers, the conduct of the elections—and incumbent President Wade's eventual loss to Macky Sall—appeared to prove that, despite widespread concerns over the erosion of democratic institutions in recent years, the system retained the potential for fairness. Yet the extent to which Sall will (or even can) address Senegal's deeper governance shortfalls and widespread economic hardships remains to be seen. Despite economic growth over the past decade, political instability, corruption, insecurity in Casamance, and the potentially distortive effects of transnational drug trafficking could pose barriers to socioeconomic development and security. Events in the turbulent surrounding region—and particularly the political and security crisis in neighboring Mali—may also impact Senegal's trajectory.

Successive U.S. Administrations have viewed Senegal as a democratic leader in Africa, an anchor of regional stability, and a partner in addressing development challenges and combating transnational security threats. Senegalese President Macky Sall met with President Barack Obama at the White House in March 2013, and President Obama is expected to visit Senegal in late June. A small, arid nation on West Africa's Atlantic coast, Senegal has struggled with widespread poverty and a long-running, low-level separatist insurgency in its southern Casamance region. Still, the country's democratic continuity and military professionalism have stood in stark contrast to near-state collapse in neighboring Mali (previously also considered a democracy), and to unrest and instability elsewhere in the region. This regional turbulence presents security, political, and economic challenges to Senegal's leadership and population. President Sall was voted into office in early 2012 in an election widely seen as free and fair, defeating incumbent President Abdoulaye Wade, who had been in office since 2000. Wade's decision to run for what would have been a third term in office was extremely controversial within Senegal, provoking protests and sparking concerns over potential instability. Such concerns prompted officials in the Obama Administration and some Members of Congress to appeal to Wade to withdraw his candidacy. Wade pursued his campaign nonetheless, and criticized what he described as Western interference. In the end, Sall's electoral victory, and Wade's peaceful concession, renewed many Senegalese and international observers' faith in the strength of Senegal's democratic institutions. Since his election, President Sall has focused on reforming Senegal's bloated civilian administration, pursuing investigations into corrupt practices under his predecessor, and making a renewed push for peace in Casamance. While these initiatives appear to be popular, Sall faces stark challenges, including public expectations that he will deliver rapid economic dividends to Senegal's largely impoverished population. It is also unclear how far Sall can pursue allegations of corruption under his predecessor without implicating himself or close allies, as he and others served in senior positions under former President Wade. Congress plays a role in shaping U.S. policy toward Senegal through its authorization and appropriation of foreign assistance, and through its oversight of executive branch policies and programs. In addition to bilateral aid totaling $109.6 million in FY2012, Senegal is the beneficiary of a five-year, $540 million Millennium Challenge Corporation (MCC) Compact signed in 2009. Some Members of Congress objected to the decision to award Senegal an MCC compact in light of concerns, at the time, over corruption and political trends under then-President Wade. In the conference report accompanying P.L. 112-74, the FY2012 Consolidated Appropriations Act, appropriators directed the Administration to allocate at least $50 million in development aid to Senegal, while also expressing concern over Senegal's failure to bring to justice former Chadian president Hissène Habré, who lives in Senegal and has been accused of crimes against humanity. Some progress has since been made toward a possible trial for Habré.

Introduction This report is intended to provide Members and congressional staff with the background needed to understand the debate over proposed strategies to redesign the global nuclear fuel cycle. It begins with a look at the motivating factors underlying the resurgent interest in nuclear power in some parts of the world, the nuclear power industry's current state of affairs, and the interdependence of the various stages of the nuclear fuel cycle. After languishing for several decades, nuclear power in the United States appears poised for new growth, with license applications announced for up to 30 new commercial reactors. Two new U.S. uranium enrichment plants are currently under development in anticipation of an increased demand for nuclear fuel, and two others have been proposed. However, no U.S. facilities are currently planned for reprocessing spent nuclear fuel—the separation of uranium and plutonium to make new fuel. Other countries provide commercial reprocessing services and, with several notable exceptions, have kept their commercial and weapons fuel cycles separate. Renewed interest in expanding the role of nuclear power in meeting world energy demand, particularly in countries considering their first nuclear power plants, has also led to increased concerns about limiting the spread of nuclear weapons-relevant technology. Most of this concern focuses on the nuclear fuel cycle, which includes facilities that can be used to make fuel for nuclear reactors or materials for weapons. Concerns about the nuclear fuel cycle have been increased by several high-profile cases of subversion of ostensibly commercial uranium enrichment and reprocessing technologies for military purposes. In 2003 and 2004, it became evident that Pakistani nuclear scientist A.Q. Khan had sold sensitive technology and equipment related to uranium enrichment to states such as Libya, Iran, and North Korea. Leaders of the international nuclear nonproliferation regime have suggested ways of reining in the diffusion of such inherently dual-use technology, primarily through the creation of incentives not to enrich uranium or separate plutonium. Because a major justification for building enrichment or reprocessing facilities as part of a nuclear power program is to ensure fuel supplies for a nation's nuclear power plants, proposals to discourage these facilities in new states have focused on alternative ways to guarantee supplies of nuclear fuel. Most of the proposals are not new, but rather variations of those developed 30 or more years ago. In the 1970s, efforts to limit or manage the spread of nuclear fuel cycle technologies for nonproliferation reasons foundered for technical and political reasons, but many states were nevertheless deterred from enrichment and reprocessing simply by the high technical and financial costs of developing sensitive nuclear technologies, as well as by a slump in the nuclear market. Several developments may now make efforts to limit access to the nuclear fuel cycle more feasible and timely: a growing concern about the spread of enrichment technology (specifically via the A.Q. Khan black market network, as well as Iran's enrichment program); a growing consensus that the world must seek alternatives to polluting fossil fuels; and optimism about new nuclear technologies that may offer more proliferation-resistant systems. Central to the debate is developing proposals attractive enough to compel states to forgo what they see as their inalienable right to develop nuclear technology for peaceful purposes. At the same time, there is debate on how to improve the International Atomic Energy Agency (IAEA) safeguards system and its means of detecting diversion of nuclear material to a weapons program in the face of a worldwide nuclear power expansion. Renewed Interest in Nuclear Power Expansion2 Commercializing nuclear power has proved far more challenging than supporters of the technology had first envisioned. After the first wave of commercial reactor orders in the 1960s and 1970s, world nuclear capacity reached about 200 gigawatts during the 1980s, but as confidence in nuclear power safety declined after accidents at Three Mile Island and Chernobyl, the rate of further capacity additions fell more than 75% during the following decade. Today, nuclear power plants have a total capacity of about 372 gigawatts—providing about 14% of the world's electricity generation. Though a significant amount, it is far less than was generally projected 50 years ago. High construction and operating costs, safety problems and accidents, and controversy over nuclear waste disposal slowed the worldwide growth of nuclear power. With uranium once considered a scarce resource, reprocessing and fast breeder technology was developed as a means of capturing the large amounts of potential energy remaining in spent nuclear fuel after it had been discharged from a reactor. In the 1980s, as the economics of advanced nuclear technology became questionable with declining fossil fuel prices and increased uranium supplies, national programs to develop fast breeder reactors came nearly to a standstill. Moreover, the plutonium fuel produced by breeder reactors drew strong opposition over its potential use in nuclear weapons. In the past few years, the original promises of nuclear power attracted renewed interest around the world and led to predictions of a "nuclear renaissance." The March 2011 accident at Japan's Fukushima Dai-ichi nuclear plant has prompted some countries, notably Japan, to reverse their nuclear expansion plans, but others, such as China, have continued building new reactors. Therefore, while safety is clearly a major concern, several other key considerations are also driving current nuclear energy policy. Volatile prices for oil and natural gas are a fundamental factor in national energy policymaking. Average world prices for a barrel of oil rose from below $10 at the beginning of 1999 to above $130 in mid-2008. They then declined to around $50 in early 2009 and rose to around $100 through mid-2012. U.S. natural gas prices have been similarly volatile, although falling sharply in 2012 with increased production from shale formations. To reduce their vulnerability to oil and gas price swings, national governments are searching for alternative energy sources, often including nuclear power. However, only 21% of the world's electricity generation is fueled by natural gas and 5% by oil, so nuclear power's ability to directly substitute for oil and gas is limited, at least in the near term. For nuclear power to have a significant impact on oil demand, long-term changes in energy-use patterns would have to take place, particularly in the transportation sector. One possibility is that nuclear power plants could be used to produce hydrogen, which could provide energy for fuel-cell vehicles. The U.S. Department of Energy has been developing processes that could produce hydrogen in a high-temperature reactor, an effort that has continued under the Obama Administration. Another possibility is the commercialization of all-electric or plug-in hybrid vehicles that could be recharged with nuclear-generated electricity. But even if such technologies were to be successfully developed, it would take many years for the new vehicles and, in the case of hydrogen, fuel delivery infrastructure to have a significant energy impact. Government policies aside, volatile oil and gas prices are having a significant effect on projections of nuclear power's economic viability. In the United States, natural gas has been the overwhelming fuel of choice for new electrical generation capacity since the early 1990s, although coal-fired plants still generate about 40% of U.S. and world electricity. Because fuel costs constitute a relatively small percentage of nuclear power costs, higher natural gas prices could make new nuclear power plants economically competitive, despite higher uranium prices. Growing worldwide concern about greenhouse gas emissions, particularly carbon dioxide from fossil fuels, has renewed attention to nuclear power's lack of direct CO 2 emissions. President Obama's 2011 State of the Union address explicitly included nuclear power as part of the nation's "clean energy" strategy. Policies to reduce greenhouse gas (GHG) emissions may also indirectly encourage nuclear power expansion by increasing the cost of electricity from new fossil-fuel-fired power plants above that of nuclear power plants. Some support for using nuclear power to reduce GHG emissions has emerged in academic and think-tank circles. As stated by the Massachusetts Institute of Technology in its major study The Future of Nuclear Power : "Our position is that the prospect of global climate change from greenhouse gas emissions and the adverse consequences that flow from these emissions is the principal justification for government support of the nuclear energy option." But environmental groups generally contend that the nuclear accident, waste, and weapons proliferation risks posed by nuclear power outweigh any GHG benefits. The large construction expenditures required by commercial reactors, they contend, would yield greater GHG reductions if used for energy efficiency and renewable generation. Finally, they note that nuclear power, while not directly emitting greenhouse gases, produces indirect emissions through the nuclear fuel cycle and during plant construction. Another key factor behind the renewed interest in nuclear power is improved performance of existing reactors. U.S. commercial reactors have generated electricity at an average of around 90% of their total capacity for the past decade, after averaging around 75% in the mid-1990s and around 60% in the mid-1980s. Worldwide performance has seen similar improvement. The improved operation of nuclear power plants has helped drive down the cost of nuclear-generated electricity. Average U.S. reactor operations and maintenance costs (including fuel but excluding capital costs) dropped steadily from a high of about 3.5 cents/kilowatt-hour (kwh) in 1987 to below 2 cents/kwh in 2001 (in 2001 dollars). U.S. nuclear plant operating costs in 2011 averaged about 2.2 cents/kwh in current dollars. Nuclear interest has been further increased in the United States by incentives in the Energy Policy Act of 2005 ( P.L. 109-58 ). The law provides a nuclear energy production tax credit for up to 6,000 megawatts of new nuclear capacity, compensation for regulatory delays for the first six new reactors, and federal loan guarantees for nuclear power and other advanced energy technologies. Under certain baseline assumptions, the tax credits and loan guarantees could determine whether new U.S. nuclear plants would be economically viable. U.S. electric utilities and other companies during the past five years have announced plans to submit license applications to the Nuclear Regulatory Commission (NRC) for about 30 new commercial reactors. NRC has issued "early site permits"—which resolve site-related issues for possible future reactor construction—at locations in Illinois, Mississippi, Virginia, and Georgia. The Tennessee Valley Authority in 2007 restarted construction of its long-delayed Watts Bar 2 reactor, which had been ordered in 1970. NRC in early 2012 issued combined construction and operating licenses for four new reactors in Georgia and South Carolina, allowing full construction to proceed. The status of the other planned new U.S. reactors appears to be more tentative, however. (For details on U.S. nuclear construction plans, see CRS Report RL33558, Nuclear Energy Policy , by [author name scrubbed].) New reactors are on order elsewhere in the world, and several non-nuclear countries have announced that they are considering the nuclear option. As Figure 2 shows, the vast majority of reactors currently under construction are in Asia, with only a handful in the rest of the world, primarily Russia. Despite the recent positive developments for nuclear power, much uncertainty still remains about its prospects. Construction costs for new nuclear power plants—which were probably the dominant factor in halting the first round of nuclear expansion—continue to loom as a potential insurmountable obstacle to renewed nuclear power growth. Average U.S. nuclear plant construction costs more than doubled from 1971 to 1978, according to the Office of Technology Assessment, and nearly doubled again by the mid-1980s, not including interest accrued during construction. Including interest, many U.S. nuclear plants proved to be grossly uneconomic, often with capital costs totaling more than $3,000 per kilowatt of capacity in 2000 dollars, and relying on the utility regulatory system to recover their costs. Major reactor vendors, such as General Electric and Westinghouse, have contended that new designs and construction methods will cut costs of future reactors considerably. However, the Energy Information Administration (EIA) estimates that new U.S. nuclear plants would cost $5,300 per kilowatt, excluding interest, making them potentially more expensive than the previous generation of reactors. EIA's estimates of the capital costs of several major competing power generation technologies, particularly coal and wind, have also risen sharply. Many other important factors in the future of nuclear power are similarly uncertain. Prices of competing fuels, especially natural gas, have been volatile in the recent past. If fossil fuel prices become depressed for a sustained period, as in the late 1980s through the 1990s, support for nuclear power as an alternative energy source could again be undermined. Disposal of high-level nuclear waste, which reprocessing or recycling is intended to address, will continue to generate controversy as governments attempt to develop permanent underground repositories—none of which are yet operating. As noted above, the Fukushima Dai-ichi accident has clearly dimmed overall public support for nuclear power around the world, as did the earlier accidents at Three Mile Island and Chernobyl. New reactor designs are intended to be less vulnerable to the loss of backup power that crippled the Fukushima plant. But whether such safety features will significantly mitigate the concerns raised by the Fukushima accident remains to be seen. Worldwide Nuclear Power Status Operating commercial nuclear reactors around the world currently total 433, which have an installed electric generating capacity of 372 gigawatts. About 83% of world nuclear capacity is in member nations of the Organization for Economic Cooperation and Development (OECD), while slightly more than 13% is in Russia and other former nations of the Soviet bloc. The remainder, less than 5%, is in developing countries such as China and India. Nuclear power supplied 21.5% of electricity generated in OECD countries and 4.7% in non-OECD countries in 2009. Unlike the United States, where only one long-deferred reactor is currently under construction, much of the rest of the world has continued building nuclear plants, although at a modest pace. Since 1996, about 50 commercial reactors have started up, an average of about 4 per year. About 40 reactors were permanently closed during that period, although many of them were smaller than the newly started reactors. Current reactor construction is dominated by Asia, as shown by Figure 2 . Of the 65 reactors now under construction around the world, 44 are in Asia (excluding the Middle East), while 14 are in Europe (including 10 in Russia), 6 in the Americas, and 1 in the Middle East (United Arab Emirates). Planned or proposed nuclear power plants show a similar trend. Of the 483 planned or proposed reactors in Figure 2 , nearly 60% (281) are in Asia, while 116 are in Europe, 44 in the Americas, and 36 in the Middle East. South Africa has proposed up to six new reactors. The renewed worldwide interest in nuclear power has led to a possible expansion of the technology to currently non-nuclear nations. Ten of the countries that are currently building or formally planning reactor projects—Belarus, Egypt, Indonesia, Jordan, Kazakhstan, Poland, Thailand, Turkey, the United Arab Emirates, and Vietnam—have never operated nuclear power plants. Several other non-nuclear power countries have proposed building power reactors, including Bangladesh, Chile, Israel, Malaysia, North Korea, and Saudi Arabia. Iran started full operation of its first nuclear power plant in 2012. The International Atomic Energy Agency recently reported that the Fukushima Daiichi disaster had caused some developing countries to adopt a more cautious approach toward nuclear power, but the agency found that "interest continued among countries considering or planning for nuclear power introduction." Fourteen non-nuclear power countries in 2012 were "considering a nuclear programme to meet identified energy needs with a strong indication of intention to proceed," according to IAEA, unchanged from 2008 and 2010. Three had actually ordered new reactors, up from zero in 2008 and two in 2010, but six were in "active preparation for a possible nuclear power programme with no final decision," down from seven in 2008 and 2010. Nuclear Fuel Services Market The possible upsurge in worldwide nuclear power plant construction has focused new attention on nuclear fuel production. Although the shutdown of nearly all Japanese nuclear power plants in the wake of the Fukushima disaster has weakened nuclear fuel demand, at least in the near term, chronic worldwide overcapacity in all phases of the nuclear fuel cycle appears to be ending, evidenced by higher prices for uranium and enrichment services in recent years. The expected long-term trend toward tightening supplies has sparked plans for new fuel cycle facilities around the world and also renewed concerns about controls over the spread of nuclear fuel technology. The nuclear fuel cycle begins with mining uranium ore and upgrading it to yellowcake. Because naturally occurring uranium lacks sufficient fissile 235 U to make fuel for commercial light-water reactors, the concentration of 235 U must be increased in a uranium enrichment plant several times above its natural level of 0.7%. A nuclear power plant operator or utility typically purchases yellowcake and contracts for its conversion to uranium hexafluoride, then enrichment, and finally fabrication into fuel assemblies ( Figure 1 ). Commercial enrichment services are available in the United States, Europe, Russia, and Japan. Fuel fabrication services are even more widely available. While waiting for conversion, the yellowcake remains a fungible commodity that can be consigned by the reactor operator to any conversion plant and the product sent to any enrichment plant (within trade restrictions between countries). The various stages of the nuclear fuel cycle are described below. Yellowcake Conventionally mined uranium ore (from open-pit and underground mines) is milled, then acid-leached to extract uranium oxide. The extract is then filtered, dried, and packaged as uranium yellowcake for shipment to a conversion plant. In-situ leaching avoids the mechanical mining steps by directly injecting solvents into the ore body through wells drilled from the surface. The dissolved uranium is pumped to the surface, where the uranium oxide is similarly processed into yellowcake for shipment. The largest U.S. uranium reserves are located in Arizona, Colorado, New Mexico, Texas, Utah, and Wyoming, while several other states have smaller amounts. According to the Energy Information Administration (EIA), 5 underground mines and 5 in-situ mines were operating in the United States in 2011, compared with a total of 8 the previous year and 18 in 2009. Total U.S. uranium production employment in 2011 was estimated at 1,191 person-years. EIA reports 55 million pounds of U 3 O 8 were purchased for U.S. nuclear power reactors in 2011, of which 9% was U.S. origin. The balance was made up in part by imported natural uranium and enriched uranium, including downblended highly enriched uranium (HEU), as discussed further below. A typical 1,000 MW light water reactor fuel load may require converting and enriching nearly 800,000 lb. of uranium "yellowcake" (U 3 O 8 ). Approximately 64,400 metric tons (142 million lb.) of yellowcake was produced worldwide in 2011. That production was estimated to meet about 85% of worldwide demand for U 3 O 8 for power generation. Most of the difference between annual production and demand is covered by sales from former military uranium stockpiles. The World Nuclear Association projects that demand for uranium could begin to exceed supply by about 2023, depending on the level of downblended weapons HEU, recycled uranium and plutonium, and other stockpiles, as well as production from new mines. Unlike gold or oil commodities, uranium yellowcake had not been offered through a formal market exchange until quite recently. Uranium price indicators had been developed by a small number of private business organizations, such as the World Nuclear Fuel Market (WNFM), TradeTech, and the Ux Consulting Company (UxC), that independently monitor uranium market activities, including offers, bids, and transactions. The price indicators are owned by and proprietary to the businesses that developed them. NAC International (now a USEC Inc. subsidiary) established the WNFM to provide uranium price information in 1974. The WNFM membership comprises 93 companies representing 20 countries. UxC and TradeTech maintain long- and short-term price indexes, which may be referenced by "market price" sales contracts; that is, sales contracts with pricing provisions that call for the future uranium delivery price to be equal to the market price at or around the time of delivery. In April 2007, the New York Mercantile Exchange (NYMEX) announced that it had partnered with the UxC to provide financially settled on- and off-exchange traded uranium futures contracts. A NYMEX uranium futures contract's final settlement price is based on the UxC pricing index for yellowcake. Uranium futures contracts are available for trading on Chicago Mercantile Exchange Globex, and for clearing on NYMEX ClearPort. The size of each contract is 250 lb., and prices are quoted in U.S. currency. The final settlement price is the spot month-end price published by UxC. A standard contract for trading physical uranium is currently under development. Uranium is typically mined outside the countries that use it. More than 70% of the world's production in 2011 came from Kazakhstan, Canada, Australia, and Niger (of which only Canada uses nuclear power), while more than half of the world's commercial reactors are in the United States, France, and Japan. But security of uranium supply, while always an underlying policy concern, has rarely been a real problem, because production vastly outstripped demand during the first three decades of the commercial nuclear power era—until about the mid-1980s. As a result, a huge overhang of military and civilian stockpiles of uranium helped maintain a worldwide buyers' market. Since the mid-1980s, however, world nuclear fuel requirements continued to rise while uranium exploration and production fell. By 2000, as U.S. spot-market prices hit bottom (at about $7 per pound), the western world's nuclear fuel requirements were twice the level of production. At that point, commercial stockpiles had been drawn down enough to begin putting pressure on U.S. spot prices, which rose slightly through 2003 and then dramatically (above $75 per pound) in 2007. Since then, prices have fluctuated and were about $50 per pound in late 2012. The spot price represents about 20% of the market but provides an indicator of future contracts, which usually run three to seven years. Despite low worldwide exploration expenditures since the mid-1980s caused by oversupply and low prices, estimated uranium resources have trended upward over the long term. According to the OECD Nuclear Energy Agency (NEA), "new uranium resources can be readily identified" whenever prices rise due to tightening supply. "Regardless of the role that nuclear energy ultimately plays in meeting rising electricity demand, the uranium resource base described in this document is more than adequate to meet projected requirements. Meeting even high-case requirements to 2035 would consume less than half of the identified resources described in this volume," according to NEA. Conversion In the conversion process, the yellowcake is purified, chemically reacted with hydrofluoric acid in various processes to form uranium hexafluoride (UF 6 ) gas, and then transferred into cylinders, where it cools and condenses to a solid. Uranium hexafluoride contains two isotopes of uranium—heavier 238 U and lighter, fissionable 235 U, which makes up ~0.7% of uranium by weight. The annual U.S. demand for yellowcake conversion is approximately 22,000 metric tons uranium (MTU). After conversion, the uranium hexafluoride is ready for enrichment. Five major commercial conversion companies operate worldwide—in the United States, Canada, China, France, the United Kingdom, and Russia ( Table 2 ). ConverDyn in Metropolis, IL, the only conversion plant operating in the United States, has an annual capacity of 15,000 MTU. Enrichment For use as fuel in light water reactors, uranium must be enriched in the isotope 235 U above its natural concentration of about 0.7%. By heating UF 6 to turn it into a gas, the enrichment process can take advantage of the slight difference in atomic mass between 235 U and 238 U. The typical enrichment process increases the 235 U concentration to 3%-5%, requiring about 10 lb. of uranium U 3 O 8 to produce 1 lb. of enriched uranium hexafluoride (UF 6 ) product. About 90% of the world's existing commercial reactors (all except heavy water reactors and some gas-cooled reactors) require enriched uranium fuel. Major enrichment plants are located in the United States, Russia, France, Great Britain, Germany, and the Netherlands, plus smaller plants in a few other countries (see Table 2 ). Thirty-one countries currently operate commercial nuclear power plants. Most countries, therefore, rely on enrichment services outside their borders. An enrichment plant to serve a country with only a few reactors would appear economically nonviable, given that a single large enrichment plant can supply up to 25% of the world market (currently estimated at 45,000 metric tons of separative work units, or SWUs). Commercial uranium enrichment employs either gaseous diffusion or high speed centrifuges. In gaseous diffusion, a thin, semiporous barrier holds back more of the heavier 238 U than the lighter 235 U. A series of cascading diffusers successively increases the 235 U concentration. Centrifuge enrichment spins the uranium hexafluoride gas at ultra-high speeds to separate the lighter 235 U. A series of cascading centrifuges successively enriches the gas in 235 U. Final enrichment will vary depending on the requirements of a specific reactor, normally up to about 5%. Gaseous diffusion technology was first developed in the United States and later adopted by France and Britain. It is much more energy-intensive than the newer centrifuge enrichment process and has been largely phased out. The Georges Besse 1 gaseous diffusion plant in France shut down permanently in mid-2012. The only other major diffusion plant that is still operating, located in Paducah, KY, is scheduled to close in mid-2013. Uranium enrichment services are sold in kilograms (kg) or metric tons (1,000 kg) separative work units (SWU), which is a measure of the amount of work needed (in the thermodynamic sense) to enhance the 235 U concentration. The number of SWUs required to produce fuel depends on several factors: the quantity of fuel required, level of enrichment required, the initial enrichment of the feed (0.711% in the case of natural uranium), and the "tails assay," which is the 235 U concentration remaining in the depleted processing stream. For example, to produce 1 kg of uranium enriched to 3% 235 U, at a tails assay of 0.2% 235 U, 4.3 kg-SWU are used to process 5.5 kg of natural uranium. The price of yellowcake is an important factor in enrichment demand. Under high price conditions, it may be economically preferable to expend more SWUs enriching a lesser quantity of yellowcake, thus leaving a lower tails assay. Nuclear plant operators can buy uranium yellowcake and have it converted and enriched, or buy low-enriched uranium (LEU). Commercial enrichment services are offered by a number of international sources ( Table 3 ), with worldwide annual capacity of 57,350 metric tons SWU. In 2011, U.S. nuclear plant operators contracted in nine countries to provide 14,829 metric tons SWU, of which 16% was provided in the United States. The U.S. DOE and its predecessor agencies had operated gaseous diffusion enrichment plants in Oak Ridge, TN, Paducah, KY, and Portsmouth, OH, to produce high-enriched uranium used in the nuclear weapons program. The plants later produced low-enriched uranium for commercial nuclear power around the world, although production at the Oak Ridge K-25 enrichment site ceased in 1985. The Energy Policy Act of 1992 established the United States Enrichment Corporation (USEC) as a government-owned corporation to take over DOE's uranium enrichment services business. The corporation was privatized as USEC Inc. in 1998. In 2001, USEC ceased uranium enrichment operations in Portsmouth and consolidated operations in Paducah. In 2004, USEC announced plans to build the American Centrifuge Plant on the site of the Portsmouth gaseous diffusion plant. The new gas centrifuge enrichment plant is to have 11,500 centrifuges with an annual capacity of 3,800 metric tons SWU. Construction of the plant was suspended in August 2009, with restart dependent on DOE approval of a loan guarantee. DOE has been funding a demonstration program to prove the technical adequacy of the USEC centrifuge technology, which will be a prerequisite for the loan guarantee. The Continuing Appropriations Resolution for FY2013 ( P.L. 112-175 ) included $100 million to continue funding the demonstration program. Under the 1993 U.S.-Russian Federation Megatons to Megawatts program, highly enriched uranium from dismantled Russian nuclear warheads is converted into low-enriched uranium fuel for use in commercial U.S. nuclear power plants. The HEU Agreement, as it is known, provides for the purchase through 2013 of 500 metric tons highly enriched uranium downblended to commercial grade low-enriched uranium (delivered as UF 6 ). USEC fulfills about half its enrichment supply contracts with Russian HEU that has been blended down into LEU, which totaled 858 metric tons in 2010. Urenco, a joint Dutch, German, and British enrichment consortium, was set up in the 1970s following the signing of the Treaty of Almelo. Urenco operates enrichment plants in Germany, the Netherlands, and the United Kingdom to supply customers in Europe, North America, and East Asia. Its U.S. affiliate, Louisiana Energy Services (LES), began startup operations at its newly constructed Urenco USA gas centrifuge enrichment plant in New Mexico on June 11, 2010. The New Mexico facility is expected to produce 3,000 metric tons SWUs annually when it reaches full operational capacity in 2013—meeting approximately 25% of the current U.S. demand. Urenco estimates that it provides around 25% of the world market share in enrichment services. Areva began starting up a gas centrifuge plant, Georges Besse II, on December 14, 2010, on the Tricastin nuclear site in France. Georges Besse II, which replaces the Georges Besse I gaseous diffusion plant at the same site, is to reach full capacity of 7,500 metric tons SWU by 2016. Areva applied to NRC at the end of 2008 for a license to build and operate a similar gas centrifuge enrichment plant in Idaho, and NRC issued a final environmental impact statement for the facility in February 2011. A more advanced technology, laser enrichment, is being pursued by a consortium of GE and Hitachi called Global Laser Enrichment. NRC issued a license to construct and operate a commercial-scale laser enrichment plant in Wilmington, NC, on September 25, 2012, although the company has not decided whether to move forward with the project. It would have a capacity of up to 6,000 metric tons SWU. However, concerns have been raised that laser enrichment technology could prove especially efficient in producing weapons-grade uranium and thus pose a proliferation risk. Fuel Fabrication Like enrichment, fuel fabrication is a specialized service rather than a commodity transaction. Strict quality control is necessary at all stages of the fabrication process to prevent fuel failure and leakage during reactor operations. The first step after uranium enrichment is the conversion of low-enriched uranium hexafluoride (UF 6 ) to uranium dioxide (UO 2 ), which usually takes place at a fuel fabrication plant but may also be done at a separate conversion plant. At the fabrication plant, the UO 2 powder is then mixed for uniformity, blended with other ingredients as specified, compacted, granulated, and pressed into cylindrical pellets. The pellets are sintered (heated at high temperature) to a precise level of density. The pellets are ground to the correct size and loaded into zirconium alloy tubes about 12-15 feet long and half an inch in diameter to make nuclear fuel rods. The fuel rods are then attached together in arrays to form fuel assemblies. Most western-design reactors use assemblies with square arrays, with the number of rods in each assembly ranging from fewer than 100 to as many as 300. Fuel assembly arrays can also be circular, hexagonal, or triangular and also vary in numerous other design parameters as required by specific reactor designs. As described by one expert, "Nuclear fuel assemblies are highly engineered products, made especially to each customer's individual specifications. These are determined by the physical characteristics of the reactor, by the reactor operating and fuel cycle management strategy of the utility as well as national, or even regional, licensing requirements." Fuel fabrication services for light water reactors (LWRs) are offered by about a dozen suppliers operating in 14 countries at about 20 facilities. In 2011, the World Nuclear Association estimated that annual worldwide LWR fuel fabrication capacity stood at about 13,000 metric tons (of total uranium content), exceeding demand of 7,000 tons by 85%. The oversupply has existed for many years, although demand is projected to rise to 9,500 tons by 2020. Three LWR fuel fabrication facilities are located in the United States: Areva Inc. in Richland, WA; Global Nuclear Fuel in Wilmington, NC; and Westinghouse Electric in Columbia, SC. Several facilities also provide fuel for other types of reactors. Final Stages of the Fuel Cycle The final stages of the nuclear fuel cycle take place after nuclear fuel assemblies have been loaded into a reactor. In the reactor, the uranium 235 ( 235 U) splits, or fissions, releasing energy and neutrons and creating fission products (highly radioactive fragments of 235 U nuclei). The neutrons may cause other 235 U nuclei to fission, creating a nuclear chain reaction. Some neutrons are also absorbed by 238 U nuclei to eventually create plutonium 239 ( 239 Pu), which itself may then fission. After several years in the reactor, fuel assemblies will build up too many neutron-absorbing fission products and become too depleted in fissile 235 U to efficiently sustain a nuclear chain reaction. At that point, the assemblies are considered spent nuclear fuel and removed from the reactor. Spent fuel typically contains about 1% 235 U, 1% plutonium, 4% fission products and other radioactive waste, and the remainder 238 U. What to do with spent fuel has proved highly contentious. One option is direct disposal in a deep geologic repository to isolate spent fuel for the hundreds of thousands of years that it may remain hazardous. Another option is to reprocess the spent fuel to separate the uranium and plutonium for use in new fuel. Supporters of reprocessing, or recycling, contend that it could greatly reduce the volume and longevity of nuclear waste while vastly expanding the amount of energy extracted from the world's uranium resources. Opponents contend that commercial use of separated plutonium—a key material in nuclear weapons as well as reactor fuel—increases the worldwide risk of nuclear weapons proliferation. Commercial-scale spent fuel reprocessing is currently conducted in France, Britain, and Russia. The 239 Pu they produce is blended with uranium to make mixed-oxide (MOX) fuel, in which the 239 Pu largely substitutes for 235 U. Two French reprocessing plants at La Hague can each reprocess up to 850 metric tons of spent fuel per year, while Britain's THORP facility at Sellafield has a capacity of 900 metric tons per year. Russia has a 400-ton plant at Ozersk, and Japan is building an 800-ton plant at Rokkasho to succeed a 90-ton demonstration facility at Tokai Mura. Britain and France also have older plants to reprocess gas-cooled reactor fuel, and India has four plants with a total annual capacity of 330 tons. About 200 metric tons of MOX fuel is used annually, about 2% of new nuclear fuel, equivalent to about 2,000 metric tons of mined uranium. However, the benefits of reprocessing spent fuel to make MOX fuel for today's nuclear power plants are modest. Existing commercial light water reactors use ordinary water to slow down, or "moderate," the neutrons released by the fission process. The relatively slow (thermal) neutrons are highly efficient in causing fission in certain isotopes of heavy elements, such as 235 U and 239 Pu. Therefore, relatively low quantities of those isotopes are needed in nuclear fuel to sustain a nuclear chain reaction, allowing the use of low-enriched uranium. The downside is that thermal neutrons cannot efficiently induce fission in more than a few specific isotopes. In today's commercial reactors, therefore, the buildup of non-fissile plutonium and other isotopes sharply limits the number of reprocessing cycles before the recycled fuel can no longer sustain a nuclear chain reaction and must be stored or disposed of. In contrast, "fast" neutrons, which have not been moderated, are less effective in inducing fission than thermal neutrons but can induce fission in all actinides, including all plutonium isotopes. Therefore, nuclear fuel for a fast reactor must have a higher proportion of fissionable isotopes than a thermal reactor to sustain a chain reaction, but a larger number of different isotopes can constitute that fissionable proportion. A fast reactor's ability to fission all actinides (actinium and heavier elements) makes it theoretically possible to repeatedly separate those materials from spent fuel and feed them back into the reactor until they are entirely fissioned. Fast reactors are also ideal for "breeding" the maximum amount of 239 Pu from 238 U, eventually converting virtually all of natural uranium to useable nuclear fuel. Current reprocessing programs are generally viewed by their proponents as interim steps toward a commercial nuclear fuel cycle based on fast reactors. However, critics point out that fast reactor technology has proven difficult to commercialize. Waste Disposal and Energy Security Reprocessing of spent fuel from fast breeder reactors has long been the ultimate goal of nuclear power supporters. As noted above, fast reactors (operated either as breeders or non-breeders) can largely eliminate plutonium from nuclear waste and greatly extend uranium supplies. But opponents contend that such potential benefits are not worth the costs and nonproliferation risks. Removing uranium from spent nuclear fuel through reprocessing would eliminate most of the volume of radioactive material requiring disposal in a deep geologic repository. In addition, the removal of plutonium and conversion to shorter-lived fission products would eliminate most of the long-term (post-1,000 years) radioactivity in nuclear waste. But the waste resulting from reprocessing would have nearly the same short-term radioactivity and heat as the original spent fuel, because the reprocessing waste consists primarily of fission products, which generate most of the near-term radioactivity and heat in spent fuel. Because heat is the main limiting factor on repository capacity, conventional reprocessing would not provide major disposal benefits in the near term. To address that problem, various proposals have been made to further separate the primary heat-generating fission products—cesium 137 and strontium 90—from high-level waste for separate storage and decay over several hundred years. Such a process could greatly increase repository capacity, although it would require an alternative secure storage system for the cesium and strontium for hundreds of years. Energy security has been a primary driving force behind the development of nuclear energy, particularly in countries such as France and Japan that have few natural energy resources. Recent cutoffs in oil and gas around the world have underscored the instability of oil and gas supply, which could be mitigated by nuclear energy. For example, in 2006, a natural gas price dispute between Russia and Ukraine resulted in a temporary cutoff of natural gas to Western and Central Europe; in 2007, price disputes between Russia and Azerbaijan and Belarus caused a temporary cutoff in oil to Russia from Azerbaijan and in oil from Russia to Germany, Poland, and Slovakia. Moreover, temporary production shutdowns in the Gulf of Mexico and the Trans-Alaskan pipeline, instability in Nigeria, and nationalization of oil and gas fields in Bolivia in 2006 all raised concerns about oil and gas supplies and worldwide price volatility. Relative to gas and oil, the ability to stockpile uranium is widely seen as offering greater assurances of weathering potential cutoffs. However, nuclear electricity in most cases is not directly substitutable for oil's most common use, as transportation fuel. Worldwide uranium resources are generally considered to be sufficient for at least several decades. Uranium supply is highly diversified, with uranium mining spread across the globe, while uranium conversion, enrichment, and fuel fabrication are more concentrated in a handful of countries. But because most reactors around the world rely at least partly on foreign sources of uranium and nuclear fuel services, nuclear reactors nearly everywhere face some level of supply vulnerability. To mitigate such concern, countries such as China, India, and Japan are seeking to secure long-term uranium contracts to support nuclear expansion goals. Efforts are underway to establish an international nuclear fuel bank to provide greater certainty in fuel supplies, as discussed in the next section. Ultimately, only the development of breeder reactors, reprocessing, and plutonium fuel fabrication could provide complete nuclear energy independence for most countries. This remains the long-term goal of resource-poor France and Japan (which is reevaluating its program in the wake of Fukushima), and Russia as well, although their research and development programs have faced numerous obstacles and schedule slowdowns. Proposals on the Fuel Cycle Proposals addressing access to the full nuclear fuel cycle have ranged from seeking a formal commitment to forswear enrichment and reprocessing technology, to a de facto approach in which a state does not operate fuel cycle facilities but makes no explicit commitment to give them up, to no restrictions at all. Current proposals generally aim to persuade countries not to develop their own fuel production capabilities by providing economically attractive alternatives that allay concerns about politically motivated interruption to fuel supply. Most proposals focus on this front-end problem, dealing with fuel supply and production issues. Ultimately, these proposals are aimed at preventing an increase in the number of states that would be capable of producing weapons-usable nuclear material. The main proposals under discussion are outlined here in categories—those addressing the full fuel cycle, those addressing the "front-end" or assurance of fuel supply issues (including fuel banks and multilateral enrichment services), and those focusing on the "back-end" or waste disposal solutions. Comprehensive Proposals El Baradei Proposal (2003) IAEA Director General Mohamed El Baradei in 2003 proposed a three-pronged approach to limiting the processing of weapon-usable material (separated plutonium and high-enriched uranium) in civilian nuclear fuel cycles. First, he would place all enrichment and reprocessing facilities under multinational control. Second, he would develop new nuclear technologies that would not produce weapons-usable fissile material—in other words, "the holy grail" of a proliferation-resistant fuel cycle. In his October 2003 article in the Economist where he laid out these ideas, El Baradei maintained, "This is not a futuristic dream; much of the technology for proliferation-resistant nuclear-energy systems has already been developed or is actively being researched." Third, El Baradei proposed considering "multinational approaches to the management and disposal of spent fuel and radioactive waste." El Baradei did not place any nonproliferation requirements on participation, but instead suggested that the system "should be inclusive; nuclear-weapon states, non-nuclear-weapon states, and those outside the current non-proliferation regime should all have a seat at the table." Further, he noted that a future system should achieve full parity among all states under a new security structure that does not depend on nuclear weapons or nuclear deterrence. IAEA Experts Group/INFCIRC/640 In February 2005, an Expert Group commissioned by IAEA Director General El Baradei to explore these ideas presented a report, "Multilateral Approaches to the Nuclear Fuel Cycle." The Expert Group studied several possible approaches to securing the operation of proliferation-sensitive nuclear fuel cycle activities (uranium enrichment, reprocessing and spent fuel disposal, and storage of spent fuel) and analyzed the incentives and disincentives for states to participate. The report reviewed relevant past and present experience. The Group's suggested approaches included the following: Reinforce existing market mechanisms by providing additional supply guarantees by suppliers and/or the IAEA (fuel bank). Convert existing facilities to multinational facilities. Create co-managed, jointly owned facilities. The Group concluded that "in reality, countries will enter into multilateral arrangements according to the economic and political incentives and disincentives offered by these arrangements." The report noted that no legal framework existed for requiring states to join supply assurance arrangements. In September 2006, the IAEA sponsored a conference entitled "New Framework for the Utilization of Nuclear Energy in the 21 st Century: Assurances of Supply and Non-Proliferation," which addressed proposals to provide fuel assurances. The IAEA presented a report on fuel assurance options at the June 2007 Board of Governors meeting analyzing the various proposals put forth to date. A potential framework for nuclear supply assurances could have three stages: (1) existing market arrangements; (2) back-up commitments by suppliers in case of a politically motivated interruption of supply if nonproliferation criteria are met; (3) a physical LEU material reserve. The report emphasizes that participation in these arrangements should be voluntary, that progress on this question will be incremental and that many options should be explored to give consumer states sufficient choices to meet their needs. President Bush's 2004 Proposal In a speech at the National Defense University on February 11, 2004, President Bush said the world needed to "close a loophole" in the NPT that allows states to legally acquire the technology to produce nuclear material which could be used for a clandestine weapons program. To remedy this, he proposed that the 40 members of the Nuclear Suppliers Group (NSG) should "refuse to sell enrichment and reprocessing equipment and technologies to any state that does not already possess full-scale, functioning enrichment and reprocessing plants." President Bush also called on the world's leading nuclear fuel services exporters to "ensure that states have reliable access at reasonable cost to fuel for civilian reactors, so long as those states renounce enrichment and reprocessing." President Bush's 2004 proposal was the only one that calls for countries to explicitly "renounce" pursuit of enrichment or reprocessing technologies in exchange for reliable access to nuclear fuel, and proved controversial. Many non-nuclear-weapon states saw this as an attempt to limit their access to the peaceful use of nuclear energy provided for under Article IV of the NPT. Russia's "Global Nuclear Power Infrastructure" In January 2006, Russian President Vladimir Putin proposed the Global Nuclear Power Infrastructure initiative that would include four kinds of cooperation: creation of international uranium-enrichment centers (IUECs), international centers for reprocessing and storing spent nuclear fuel, international centers for training and certifying nuclear power plant staff, and an international research effort on proliferation-resistant nuclear energy technology. The international fuel cycle centers would be under joint ownership and co-management. They would be commercial joint ventures (that is, no state financing), with advisory boards consisting of government, industry, and IAEA professionals. The IAEA would not have a vote on these boards, but would play an advisory role, while also certifying the fuel provision commitments. Recipient countries under Putin's proposal would receive fuel cycle services, but access to sensitive technology would stay in the hands of the supplier state. Russia has offered a similar arrangement to Iran—to jointly enrich uranium on Russian territory. Iran has not yet accepted this offer, but it is still part of ongoing negotiations with Iran over its nuclear program. Russia made the return of spent fuel from the Bushehr nuclear plant in Iran a condition of supply, so that no plutonium can be extracted from the spent fuel. To date, progress has been made is establishing the IUEC and in establishing an LEU reserve at Angarsk (see below). Russia has established a center of excellence for nuclear personnel at Obninsk, and participates in joint research efforts on fast reactors such as the International Project on Innovative Nuclear Reactors and Fuel Cycles (INPRO). Assurance of Fuel Supply: Supplier Guarantees The following proposals focus on back-up fuel supply assurances designed to complement, but not impact or supplant, the commercial uranium market. Six Country Concept In May 2006, six governments—France, Germany, the Netherlands, Russia, the United Kingdom, and the United States—proposed a "Concept for a Multilateral Mechanism for Reliable Access to Nuclear Fuel" (referred to here as the Six Country Concept). This proposal reportedly developed from a U.S. initiative following President Bush's 2004 proposal. It would not require states to forgo enrichment and reprocessing, but participation would be limited to those states that did not currently have enrichment and reprocessing capabilities. The Six Country Concept calls for a multi-tiered backup mechanism to ensure the supply of low enriched uranium (LEU) for nuclear fuel. The proposal would work as follows: (1) A commercial supply relationship is interrupted for reasons other than nonproliferation; (2) The recipient or supplier state can approach the IAEA to request backup supply; (3) The IAEA would rule out commercial or technical reasons for interruption (to avoid a market disruption) and assess whether the recipient meets the following qualifications: it must have a comprehensive safeguards agreement and Additional Protocol in force; it must adhere to international nuclear safety and physical protection standards; and it is not pursuing sensitive fuel cycle activities (which are not defined); (4) The IAEA would facilitate new arrangements with alternative suppliers. Two mechanisms were proposed to create multiple tiers of assurances: including a standard backup provision in commercial contracts, and establishing reserves of LEU (not necessarily held by the IAEA, but possibly with rights regarding the use of the reserves). The Six Country Concept addressed several future options, all of which are longer-term in nature. They include providing reliable access to existing reprocessing capabilities for spent fuel management; multilateral cooperation in fresh fuel fabrication and spent fuel management; international enrichment centers; and new fuel cycle technology development that could incorporate fuel supply assurances. World Nuclear Association In May 2006, the private-sector World Nuclear Association (WNA) Working Group on Security of the International Nuclear Fuel Cycle outlined proposals for assuring front-end and back-end nuclear fuel supplies. Like the Six Country Concept, the WNA proposal envisions a system of supply assurances that starts first with normal market procedures attempting to reestablish nuclear fuel supply after interruptions. Also similar to the Six Country proposal, a pre-established network of suppliers could be triggered through the IAEA if supply were interrupted for political reasons. If that network then failed, stocks held by national governments could be used. The first tier of assurances, therefore, is through commercial suppliers. The second level of supply commitment would use a "standard backup supply clause" in enrichment contracts, supported by governments and the IAEA. "To ensure that no single enricher is unfairly burdened with the responsibility of providing backup supply, the other (remaining) enrichers would then supply the contracted enrichment in equal shares under terms agreed between the IAEA and the enrichers," according to the proposal. For fuel fabrication, a backup supply system would be more complicated, according to the WNA report. "Because fuel design is specific to each reactor design, an effective mechanism would require stockpiling of different fuel types/designs. The cost of such a mechanism could thus be substantial," according to the report. However, WNA noted that unlike uranium enrichment technology, uranium fuel fabrication is not of proliferation concern. The WNA report also noted the need for back-end nuclear fuel cycle supply assurances, to prevent a future scenario in which reprocessing technologies spread as nuclear power programs expand. The report recommends that a clear option to reprocess spent fuel at affordable prices be offered to states that do not have indigenous reprocessing programs. Such assurances would be part of a longer-term approach. Japan's IAEA Standby Arrangements System Japan presented a "complementary proposal" to the Six Country Concept at the IAEA in September 2006. Japan's concerns with the Six Country Concept centered on the implication that it would deny the right for states to use nuclear technology for commercial purposes and because it assured the supply only of LEU, rather than all front-end nuclear fuel cycle services. Japan proposed instead to create an "IAEA Standby Arrangements System" that would act as an early warning system to prevent a break in supply to recipients. With a list of supply capacities from each state updated annually and a virtual bank of front-end fuel cycle services (from natural uranium to fuel fabrication), the IAEA would facilitate supply to recipient states before supply was completely stopped. States determined by the IAEA Board of Governors to be in good non-proliferation standing by the IAEA could participate. UK "Nuclear Fuel Assurance (NFA)" The United Kingdom has proposed a political assurance of non-interference in the delivery of commercial nuclear contracts, called a nuclear fuel assurance (NFA). This concept incorporates an earlier proposal that would creates "enrichment bonds" to give advance assurance of export approvals for nuclear fuel to recipient states. As the UK Prime Minister's report, Road to 2010, summarized the NFA: "The UK's Nuclear Fuel Assurance is complementary to other proposals put forward and provides a guarantee that export licences for nuclear fuel enrichment services would only be withheld in the event of non-compliance with non-proliferation obligations." The NFA would be a government-to-government agreement between supplier state or states and the recipient state, with the IAEA as co-signatory. The supplier government would guarantee that, subject to the IAEA's determination that the recipient was in good nonproliferation standing, national enrichment providers will be given the necessary export approvals to supply the recipient states. It is a transparent legal mechanism designed to give further credible assurance of supply with a "prior consent to export" arrangement. The IAEA would make the final decision on whether conditions had been met to allow the export of LEU. A model agreement to be used as a standard for an NFA could be adopted by the Board of Governors under the proposal. Assurance of Fuel Supply: Fuel Reserves A fuel reserve is meant to appeal to countries concerned about a possible cut-off in their nuclear fuel supply for reasons unrelated to nonproliferation, such as a non-commercial or political dispute with the supplier country. Two fuel banks have been approved by the IAEA Board of Governors. The IAEA Board approved terms for a Russian-operated "fuel reserve" in November 2009. The Board approved terms for an IAEA owned and managed fuel bank in December 2010. Additionally, the United States has declared that it would downblend excess military HEU to LEU and hold it in reserve as part of the Six Country Concept, under the Department of Energy's American Assured Fuel Supply program. These three proposals are discussed below. U.S. LEU Fuel Reserve, the "American Assured Fuel Supply" (AFS) In 2005, then-Secretary of Energy Samuel Bodman announced that 17.4 metric tons of U.S. surplus highly enriched uranium would be downblended to low-enriched uranium to be used as a U.S. fuel reserve. The goal of the U.S. reserve is to supply fuel in the event of a disruption unrelated to proliferation. Secretary Bodman described the U.S. reserve as supporting the "twin goals of expanding the use of nuclear power and curbing nuclear proliferation," and said its purpose was to "help countries to pursue nuclear power confidently, without the burden of producing their own fuel, while curbing the spread of sensitive technology." The material designated for the U.S. reserve would be kept under national control, and not be part of the IAEA fuel bank. DOE's Federal Register notice published in August 2011 noted that the AFS is intended to complement the international nuclear fuel bank. The reserve will be available to both domestic and foreign nuclear power plants "after all other market options are exhausted." Recipients must "meet certain nonproliferation criteria." Stringent U.S. requirements on U.S.-origin material, pursuant to the 1954 Atomic Energy Act (as amended), include safeguards in perpetuity, prior consent for enrichment and reprocessing, and the right of return should a non-nuclear-weapon state detonate a nuclear explosive device. Foreign recipients facing a supply disruption would obtain AFS fuel through their U.S. supplier with appropriate licenses. The Federal Register notice further specifies that the price of the LEU would be established "at the time of delivery using commercially acceptable market indices." DOE's Fissile Material Disposition program manages this initiative, formerly called "Reliable Fuel Supply." WesDyne International, LLC, and Nuclear Fuel Services, Inc., were awarded a contract in 2007 to downblend and store the material. Nuclear Fuel Services began downblending in December 2009 at its facility in Erwin, TN, and is expected to complete the work by the end of 2012. The 17.4 MT of HEU will produce about 290 MT of low enriched uranium. According to an NNSA press release, WesDyne will sell a "small fraction" of the resulting low enriched uranium on the market over a three- to four-year period to cover the project's costs. Of the 290 MT, approximately 230 MT will make up the reserve, enough for approximately six reactor core reloads for an average 1,000 MW reactor. In addition to the downblending of 17.4 MT of HEU, an additional 12.1 MT is to be downblended to approximately 220 MT of LEU "to provide assurance of fuel supply to utilities participating in the MOX program for the disposition of surplus weapons plutonium." This tranche is expected to be downblended by the end of 2012. LEU from both of the above HEU disposition programs will be stored until needed at Westinghouse's Columbia Fuel Fabrication Facility in Columbia, SC. IAEA LEU Fuel Bank The IAEA Board of Governors approved an IAEA-owned and managed LEU fuel bank on December 3, 2010. The reserve would consist of "enough LEU to meet the fuel fabrication needs of one full core of a 1,000 MW(e) pressurized water reactor, or three annual reloads of fuel." In order to access LEU from the bank, the Director General must determine that the country has met the following conditions: the state experiencing interruption in supply is unable to acquire the fuel through the commercial market or other means; there are no outstanding safeguards implementation or diversion issues in the requesting state; and a comprehensive safeguards agreement is in place in the requesting country. Additional nonproliferation conditions are placed on the fuel once it is transferred. The recipient country is to pay the IAEA at the current market rate prior to transfer of the LEU. The government of Kazakhstan informed the IAEA in May 2009 (INCIRC/753) and in January 2010 (INFCIRC/782) that it would be willing to host the fuel bank on its territory. The location for the reserve has not yet been finalized, and an agreement between the host government and the IAEA would need to be concluded. The IAEA fuel bank began with monetary pledges by donors. In September 2006, former Senator Sam Nunn, co-chairman of the Nuclear Threat Initiative (NTI), announced NTI's pledge of $50 million as seed money to create a low-enriched uranium stockpile owned and managed by the IAEA. NTI believes that the establishment of such an LEU reserve would assure an international supply of nuclear fuel on a non-discriminatory, non-political basis to recipient states. Provision of the NTI money was contingent on the IAEA taking the necessary preparatory actions to establish the reserve and on contribution of an additional $100 million or an equivalent value of LEU by one or more IAEA Member States. The latter condition was met in March 2009. The U.S. Congress approved $50 million for an international fuel bank in December 2007 (see below). Norway pledged $5 million to the fuel bank in February 2008. The United Arab Emirates announced a contribution of $10 million on August 1, 2008. The European Union pledged 25 million euros in December 2008, and Kuwait pledged $10 million in March 2009. No policy conditions were set by donor countries—policy questions were meant to be solved by the IAEA and member states. Kazakhstan proposed in May 2009 that it host the fuel bank. The IAEA secretariat drew up draft plans for the fuel bank, which were first presented to the Board of Governors at its June 2009 meeting along with a proposal for a Russian-hosted bank and the German-proposed multilateral enrichment project. At that time, some developing countries reportedly rejected the director general's proposal to negotiate details and approve these arrangements at the September 2009 Board meeting. Opponents and skeptics cited concerns that their legal rights under the NPT to develop fuel cycle facilities would be infringed upon if such facilities were established. Proponents counter that these arrangements would be optional, and are meant to give countries alternatives to developing their own fuel cycle capabilities. Congressional Approval The National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) authorized $50 million to be appropriated to the Department of Energy for the "International Atomic Energy Agency Nuclear Fuel Bank." The report supports the establishment of a fuel bank and notes that "additional work will be required in order to provide appropriate guidance to the executive branch regarding criteria for access by foreign countries to any fuel bank established at the IAEA with materials or funds provided by the United States." Both the House ( H.R. 2641 ) and Senate ( S. 1751 ) Energy and Water Appropriations bills for FY2008 recommended funding for an international nuclear fuel bank under the IAEA, and proposed making available $100 million and $50 million respectively. The Consolidated Appropriations Act for FY2008, which became P.L. 110-161 on December 26, 2007, provided that $50 million should be available until expended for "the contribution of the United States to create a low-enriched uranium stockpile for an International Nuclear Fuel Bank supply of nuclear fuel for peaceful means under the International Atomic Energy Agency." On August 4, 2008, the U.S. Secretary of Energy issued an official letter to the IAEA donating "nearly 50 million" to the international nuclear fuel bank. This reflects a congressionally mandated rescission that was applied proportionally across the Department of Energy's budget. The IAEA received the U.S. government contribution, which was held in a suspense account until the Board of Governors approved the LEU bank. Russian LEU Fuel Reserve, Angarsk The IAEA Board of Governors in November 2009 authorized the director general to sign an agreement with Russia establishing an LEU fuel reserve at Angarsk (GOV/2009/81). The IAEA Director General attended the opening of the reserve in December 2010. The fuel is to be available to a country facing a disruption of supply "unrelated to technical or commercial reasons." The reserve consists of about 120 MT of LEU in the form of UF 6 with an enrichment level ranging from 2% to 4.95% and would be under IAEA safeguards. The Russian government covers the cost of safeguards and all operating costs. The Russian plan envisions that countries facing a fuel supply cut-off would apply to the IAEA to access the fuel reserve. The director general would assess whether the country meets the criteria for access. To qualify, the potential recipient state would have to be a non-nuclear-weapon state member of the IAEA with a safeguards agreement in effect. To release the material, the IAEA would have to confirm that all nuclear material was accounted for in the state, there was no indication of diversion of material, and no safeguards issues were under review by the Board of Governors. If the criteria were met, the director general would ask Russia to release fuel to that country. The recipient country would pay market rates for the uranium. A country would not have to waive its right to develop its own fuel cycle capabilities in order to access the fuel reserve. Assurance of Supply: Enrichment Services Proposals to assure supply and prevent the spread of enrichment technology have also included the creation of commercially based multinational uranium enrichment centers. The Russian Federation has made progress in establishing an International Uranium Enrichment Center (IUEC) at Angarsk. Germany has proposed an internationally owned and operated Multilateral Enrichment Sanctuary Program. Some point out that URENCO, a joint German, Dutch, and British consortium, has demonstrated a multilateral commercial model for uranium enrichment since the 1970s. Some countries are concerned that giving support for multilateral-owned facilities would undermine their rights to nuclear technology for peaceful purposes under the NPT, and view the only solution to energy security as being an independent fuel cycle. However, as this may not be economically viable for most countries, multilateral solutions continue to be attractive. International Uranium Enrichment Center (IUEC), Angarsk, Russia Russia has established the International Uranium Enrichment Center (IUEC) at Angarsk (approximately 3,000 miles east of Moscow). The Angarsk IUEC began operation on September 5, 2007. Kazakhstan was the first partner; Armenia and Ukraine have since joined. As part of an open joint-stock company, IUEC participants would receive dividends from IUEC profits. Shareholders include Rosatom at 70% of stock, Kazatomprom at 10%, Ukraine's State Concern Nuclear Fuel at 10%, and Armenian NPP at 10%. To join the Angarsk IUEC, countries must agree that the material be used for "nuclear energy production." The IUEC is "chiefly oriented to States not developing uranium enrichment capabilities on their territory." Russia now includes the IUEC on its list of Russian facilities that could be placed under IAEA safeguards. Germany's Multilateral Enrichment Sanctuary Project (MESP) Germany proposed in May 2007 that a new enrichment facility be built and placed under IAEA ownership in an extraterritorial area. An independent management board or consortium would finance and run the plant on a commercial basis, but the IAEA would decide whether to supply enriched fuel according to nonproliferation criteria. Germany argues that this approach is advantageous since it does not prohibit uranium enrichment, but does provide a commercially viable, politically neutral option for fuel supply and could create competition on the world market by creating a new fuel service provider. With an economically viable option on neutral ground, it will be harder for states to justify starting their own enrichment program for commercial reasons. A proposal was presented to the IAEA Board of Governors in June 2009, and a draft MESP agreement (INFCIRC/765) submitted to the IAEA in July 2009. This concept has not yet been approved by the Board of Governors. Back-End Fuel Cycle Proposals Multilateral proposals for the end of the fuel cycle are less developed at this stage. On-site storage of spent fuel is most common, and some countries reprocess their spent fuel rods into mixed-oxide fuel. Multilateral solutions to the back-end issues are also motivated by the idea of preventing the further spread of reprocessing technology, which could be used for the separation of plutonium for weapons purposes. As with the debate over uranium enrichment technology, while reprocessing technology currently may be too expensive or technologically out of reach for many states, countries are hesitant to agree to multilateral approaches that may be interpreted as giving up their right to develop this technology for peaceful purposes. There are no multilateral reprocessing facilities now proposed. Another proposal has been the establishment of an international spent fuel repository, perhaps in Russia. While Russian law allows for the import of waste, the government of Russia has not yet proposed such a facility, partly due to potential public opposition. States also cooperate on joint research ventures on advanced and fast reactors such as the Generation IV International Forum (GIF) or IAEA's INPRO. A major U.S.-led initiative, the International Framework for Nuclear Energy Cooperation (IFNEC)—formerly the Global Nuclear Energy Partnership (GNEP)—is intended to foster international collaboration on developing a proliferation-resistant closed fuel cycle, as discussed below. International Framework for Nuclear Energy Cooperation (IFNEC) The International Framework for Nuclear Energy Cooperation was initiated in February 2006 by the George W. Bush Administration as the Global Nuclear Energy Partnership (GNEP). Its major purposes were to develop "proliferation resistant" reprocessing technology and to encourage the concentration of reprocessing capacity in a limited number of advanced countries that would agree to provide reprocessing services to any country without such capability. Representatives of 16 countries signed GNEP's two-page Statement of Principles on September 16, 2007, to launch the organization. GNEP's domestic activities largely consisted of DOE's Advanced Fuel Cycle Initiative (AFCI), a program that began in 2003 to develop and demonstrate spent fuel reprocessing/recycling technology. However, the Obama Administration rejected AFCI's goal of commercializing advanced reprocessing technology as rapidly as possible. Instead, the program was refocused on fundamental research and development, with similar funding levels, and renamed Fuel Cycle Research and Development. The international GNEP organization, now with 31 participating countries, changed its name to IFNEC in June 2010 and replaced the original Statement of Principles with a one-paragraph mission statement: The International Framework for Nuclear Energy Cooperation provides a forum for cooperation among participating states to explore mutually beneficial approaches to ensure the use of nuclear energy for peaceful purposes proceeds in a manner that is efficient and meets the highest standards of safety, security and non-proliferation. Participating states would not give up any rights and voluntarily engage to share the effort and gain the benefits of economical, peaceful nuclear energy. According to IFNEC's website, the new mission statement is intended to give the organization "a broader scope with wider international participation to more effectively explore the most important issues underlying the use and expansion of nuclear energy worldwide." The international component of GNEP as originally envisioned was a consortium of nations with advanced nuclear technology that would provide fuel services and reactors to countries that "refrain" from fuel cycle activities, such as enrichment and reprocessing. It was essentially a fuel leasing approach, wherein the supplier would take responsibility for the final disposition of the spent fuel. This could mean taking back the spent fuel, but might also mean, according to DOE, that the supplier "would retain the responsibility to ensure that the material is secured, safeguarded and disposed of in a manner that meets shared nonproliferation policies." GNEP foresaw a system whereby supplier states would take back spent fuel, although public opposition to similar proposals in the past has been extremely strong. Some type of "cradle to grave" nuclear fuel management system is still an implicit element of IFNEC, although it is not specifically mentioned in the mission statement. Skeptics of GNEP had questioned whether the reprocessing technology being developed under AFCI would have been a net gain for nonproliferation efforts, since the United States does not reprocess or re-use plutonium now. In their view, the "proliferation-resistance" of technologies under consideration must be assessed against the major alternative: disposal of sealed, intact fuel rods in a geologic repository. At the direction of the White House, Energy Secretary Steven Chu established the Blue Ribbon Commission on America's Nuclear Future on January 29, 2010, to recommend a new national strategy for managing spent nuclear fuel and high-level waste, including an examination of reprocessing and recycling options. The Blue Ribbon Commission issued its final report on January 26, 2012, supporting efforts to develop "spent fuel 'take-away' arrangements," as well as a research, development, and demonstration program on advanced reactor and fuel cycle technologies. Much of the research under AFCI had focused on a separations technology called UREX+, in which uranium and other elements are chemically removed from dissolved spent fuel, leaving a mixture of plutonium and other highly radioactive elements. Proponents believe UREX+ is proliferation-resistant, because further purification would be required to make the plutonium useable for weapons and because its high radioactivity would make it difficult to divert or work with. In contrast, conventional reprocessing using the PUREX process can produce weapons-useable plutonium that can be processed in unshielded gloveboxes. However, critics see the potential nonproliferation benefits of UREX+ over PUREX as minimal. Richard Garwin suggested in testimony to Congress in 2006 that UREX+ fuel fails the proliferation-resistance test. Since it contains 90% plutonium, it could be far more attractive to divert than current spent fuel, which contains 1% plutonium. In other words, a terrorist would have to reprocess only 11 kg of UREX+ fuel to obtain roughly 10 kg of plutonium, in contrast to reprocessing 1,000 kg of highly radioactive spent fuel to get the same amount from light water reactor spent fuel. Under the Obama Administration, the Fuel Cycle Research and Development program is no longer focusing on UREX processes but is instead conducting long-term research that could support a broad range of technology options, according to the DOE FY2011 budget justification. Another nonproliferation-related concern about GNEP was how its implementation would have affected global stockpiles of separated plutonium. Frank Von Hippel pointed to costly plutonium recycling programs in the United Kingdom, Russia, and Japan, where separated plutonium stocks have accumulated to 320 tons, enough for more than 30,000 nuclear warheads. In Von Hippel's view, GNEP would have exchanged the safer on-site spent fuel storage at reactors for central storage of separated transuranics and high-level waste, cost many times more, and increased the global plutonium stockpile. A separate set of questions focused on how effective GNEP would have been in achieving its goals. By offering incentives for the back end of the fuel cycle, GNEP was designed to attract states to participate in the fuel supply assurances part of the framework. However, back-end fuel cycle assurances would require significant changes in policies and laws, as well as efforts to commercialize new technologies. Further, it is far from clear that all suppliers would be able to offer the full range of fuel cycle assurances, raising the question of the relative competitiveness of suppliers. Critics did not necessarily argue that the overall vision of GNEP was misplaced, but were generally skeptical that its vision could be achieved, particularly in the timeframe proposed. GNEP itself marked a departure from a U.S. policy of not encouraging the use of plutonium in civil nuclear fuel cycles. Supporters suggested that the U.S. policy developed in the late 1970s did not envision a recycling process that would not separate pure plutonium, and therefore questioned the underlying assumptions of that longstanding policy. Critics of GNEP have suggested that even though many nations did not agree with the United States in the 1970s on the dangers of having stockpiles of separated plutonium, the message that the United States conveyed was that reprocessing was unnecessary to reap the benefits of nuclear power and that GNEP conveyed the opposite message. Moreover, some critics pointed to the accumulation since the 1970s of separated plutonium as a particular threat, given the potential for terrorist interest in acquiring nuclear material. An October 2007 study published by the National Research Council recommended that research and development activities for new reprocessing plants continue, but be scaled back, with more time and peer review before commercial plants are built. It strongly criticized DOE's timeline for the program, saying that "achieving GNEP's goals are too early in development to justify DOE's accelerated schedule for construction of commercial facilities that would use these technologies." Congress also expressed significant concerns about GNEP, particularly over the Bush Administration's ambitious schedule for developing fuel cycle demonstration facilities by FY2020. Under the original GNEP concept, it proved difficult for the United States and others to define which states were suppliers of fuel cycle services and which would be recipients. Informally, U.S. policy currently recognizes 10 states as having enrichment capability—the five nuclear weapon states (United States, United Kingdom, France, China, Russia) plus Japan, Argentina, Brazil, the Netherlands, and Germany. While Argentina has a plant (Pilcaniyeu) under safeguards, this plant has never operated commercially and it is doubtful that it will be cost-effective, since it uses outdated gaseous diffusion technology. Brazil's centrifuge enrichment plant at Resende is still in the early stages of commissioning and won't produce at a commercial scale for several years. States such as Australia, Canada, South Africa, and Ukraine have stated they might consider developing enrichment capability for export in the future. South Korea has also indicated that it would like to build an enrichment plant for its growing nuclear fleet and potentially for fuel exports. On the reprocessing side, South Korea has expressed interest in becoming a GNEP/IFNEC supplier state through development of a pyroprocessing technique that does not separate plutonium from uranium. In the past, the United States, for proliferation reasons, has rejected requests from South Korea to reprocess U.S.-origin spent fuel. Supply-Side Approaches Nuclear Suppliers Group Members of the Nuclear Suppliers Group (NSG), a voluntary group of countries that coordinates nuclear exports and has developed guidelines for such exports, have, since the 1970s, adhered to an informal restriction on transferring enrichment, reprocessing, and heavy water technology to states outside the NSG, which currently has 46 members. These policies are voluntary, but resulted in no contractual transfers of enrichment or reprocessing technology to new states. Following revelations about a covert procurement network for nuclear technology run by former Pakistani nuclear official Abdul Qadeer Khan, some NSG countries sought to tighten these restrictions. NSG member states began in 2004 to negotiate a list of criteria that recipient states would first need to meet before they could receive enrichment or reprocessing technology. In June 2011, after years of debate, the NSG came to a decision on amending Sections 6 and 7 of Part 1 of the Guidelines. The revised guidelines still urge restraint, and add a list of nonproliferation-related criteria for potential recipients. These criteria require a potential recipient to be an NPT state-party in good standing; to have a comprehensive safeguards agreement in force; to have no current breaches of safeguards obligations; to have a bilateral agreement with the supplier that contains nonproliferation assurances; to commit to international standards of physical protection and safety; and to implement effective export controls and adhere to the NSG guidelines. In addition, the amended guidelines require a recipient state to have brought into force an Additional Protocol to its IAEA safeguards agreement or, "pending this," to implement "appropriate safeguards agreements in cooperation with the IAEA, including a regional accounting and control arrangement for nuclear materials, as approved by the IAEA Board of Governors." As in the previous version of the guidelines, special provisions are made for transfer of enrichment facilities, equipment, and technology. Suppliers of enrichment plants should also seek agreement from the recipient state that the enrichment facility will not be used to produce greater than 20% enriched uranium. If an enrichment facility was based on a technology that has been demonstrated on a "significant scale" before December 31, 2008, then the supplier should build the plant to prevent the recipient state from replicating the technology transferred (so-called black box transfer). It also specifies that safety and regulatory information should be shared "to the extent necessary without divulging enabling technology." In negotiations over these revisions, the NSG was also considering the addition of more subjective criteria such as general conditions of stability and security, potential negative impact on the stability and security of the recipient state and the region, and whether there is a credible and coherent rationale for pursuing enrichment and reprocessing capability for civil nuclear power purposes. These proved controversial for a number of states. The June 2011 decision decided to revise the guidelines in this way: "also taking into account at their national discretion, any relevant factors as may be applicable." Negotiations over the revisions had been contentious. Little public information is available about NSG discussions, but press reports said that Turkey raised objections during the 2010 NSG plenary meeting to several criteria, including the "black box" requirement and subjective criteria concerning regional stability. In the past, Argentina, Brazil, and South Africa had raised objections to the Additional Protocol as a condition of supply; the provision allowing a "regional accounting and control arrangement" to substitute for an Additional Protocol appears, in effect, to exempt Argentina and Brazil from the Additional Protocol requirement. In general, developing countries are wary of what they characterize as additional obstacles to their ability to access nuclear technology for peaceful purposes. Some analysts question whether fuel assurance proposals or commercial arrangements would have addressed this issue more effectively without being as contentious as a change in NSG rules. It can also be noted that besides South Korea, no state that does not currently hold the technology is actively seeking to acquire enrichment or reprocessing capability. Additionally, new enrichment plants built in the past few years—by Russia in China, by Urenco and Areva in the United States—have already been based on a "black box" model. Group of Eight Nations (G-8) The Group of Eight (G-8) Nations has been the forum where joint policy statements have been made on this issue in recent years. From 2004 to 2007, the Group of Eight (G-8) Nations announced a year-long suspension of any such transfers at their annual summit meetings. The 2008 Summit declaration stated: We agree that transfers of enrichment equipment, facilities and technology to any additional state in the next year will be subject to conditions that, at a minimum, do not permit or enable replication of the facilities; and where technically feasible reprocessing transfers to any additional state will be subject to those same conditions. Since in 2009 there still had been no agreement on the transfer criteria in the NSG, the G-8 countries said that they would implement this policy on a national basis. The 2010 G-8 Summit statement reaffirmed this commitment: To reduce the proliferation risks associated with the spread of enrichment and reprocessing facilities, equipment and technology, we welcome the progress that continues to be made by the Nuclear Suppliers Group (NSG) on mechanisms to strengthen controls on transfers of such enrichment and reprocessing items and technology. While noting that the NSG has not yet reached consensus on this issue, we agree that the NSG discussions have yielded useful and constructive proposals contained in the NSG's "clean text" developed at the 20 November 2008 Consultative Group meeting. Pending completion of work in the NSG, we agree to implement this text on a national basis in the next year. We urge the NSG to accelerate its work and swiftly reach consensus this year to allow for global implementation of a strengthened mechanism on transfers of enrichment and reprocessing facilities, equipment, and technology. Comparison of Proposals Table 4 provides a comparison of the major proposals currently in circulation to restrict sensitive nuclear fuel technology development. The table is based on one created by Chaim Braun presented at the September 2006 IAEA conference on nuclear fuel supply assurances. Prospects for Implementing Fuel Assurance Mechanisms Proposals to provide an international and institutional framework for peaceful nuclear activities have abounded since the 1940s, but few have been implemented. The U.S.-sponsored Baruch Plan introduced at the United Nations in 1946 recommended establishing an international agency with managerial control or ownership of all atomic energy activities. The International Atomic Energy Agency, established in 1957, emerged as a paler version of what was suggested in the Baruch Plan, but still retains authorities in its statute to store fissile material. Concern about proliferation led to a flurry of proposals in the 1970s and 1980s as the United States and others convened groups to study the issues. One idea studied in the mid-1970s was regional nuclear fuel cycle centers, focused on reprocessing technologies. Several factors contributed to its lack of success, despite support by the U.S. Congress: low uranium prices (making plutonium recovery relatively unattractive), a slump in the nuclear industry in the late 1970s and early 1980s, and U.S. opposition to reprocessing from the late 1970s. Member states of the IAEA also convened the International Fuel Cycle Evaluation (INFCE) project, which involved 60 countries and international organizations. INFCE working group reports suggested establishing a multi-tiered assurance of supply mechanism similar to the one proposed by the Six Country Concept in 2006. States also studied international plutonium storage in the late 1970s and early 1980s, but could not agree on how to define excess material or the requirements for releasing materials. As in the past, the success of current proposals may depend on whether nuclear energy is truly revived not just in the United States, but globally. That revival will likely depend on significant support for nuclear energy in the form of policy, price supports, and incentives. Factors that may help improve the position of nuclear energy against alternative sources of electricity include higher prices for other sources (natural gas and coal through a carbon tax or other restrictions), improved reactor designs to reduce capital costs, regulatory improvements, and waste disposal solutions. The willingness of fuel recipient states to participate in international enrichment centers rather than develop indigenous enrichment capabilities, and confidence in fuel supply assurance mechanisms such as an international fuel bank, will largely determine the success of the overall policy goal—to prevent further spread of enrichment and reprocessing technologies. So far, proposals addressing this challenge have originated in the supplier states, with many recipient states continuing to voice concern that their right to peaceful nuclear energy technology under the NPT is in jeopardy. Increasingly, however, participation is being presented as a market-based decision by countries to refrain, at least for the present, from developing their own fuel enrichment programs. Another factor that will shape the success of these proposals is the possible addition of other incentives. Simply making nuclear energy cost-effective may not induce countries to forgo indigenous enrichment and reprocessing. Such decisions may require other incentives, perhaps even outside the nuclear realm, to make them palatable. The experience of Iran may be instructive here. Russia's offer to provide assured enrichment services on Russian soil has gone nowhere; instead, other, broader trade incentives may be necessary. While the case of Iran may illustrate the extreme end of the spectrum, in terms of a country determined to develop a capability for a weapons program, non-nuclear-weapon states will clearly take notice of how a solution develops for Iran. Issues for Congress Congress would have a considerable role in at least four areas of oversight related to fuel cycle proposals. The first is providing funding and oversight of U.S. domestic programs related to expanding nuclear energy in the United States. Key among these programs are nuclear research and development programs and federal incentives for building new commercial reactors. The second area is policy direction and/or funding for international measures to assure supply. What guarantees should the United States insist upon in exchange for helping provide fuel assurances? Although the Six Country Concept contains an option for a fuel bank, it would not require participants to forswear enrichment and reprocessing. A third set of policy issues may arise in the context of development of the International Framework for Nuclear Energy Cooperation. Observers may question what the nonproliferation benefits of this program are, how it overlaps with other programs such as those under the IAEA, and what the United States aims to achieve through IFNEC. The new mission statement emphasizes that members do not give up any rights under the NPT to the peaceful use of nuclear energy. Policymakers may explore whether the newly envisioned program goes far enough in encouraging states to refrain from enrichment and reprocessing, a key goal of the original international GNEP. Some observers believe that further restrictions on non-nuclear-weapon states party to the NPT are untenable in the absence of substantial disarmament commitments by nuclear weapon states. In particular, a January 4, 2007, Wall Street Journal op-ed by George Shultz, Bill Perry, Henry Kissinger, and Sam Nunn, entitled "A World Free of Nuclear Weapons," noted that non-nuclear-weapon states have grown increasingly skeptical of the sincerity of nuclear weapon states in this regard. Some observers have asserted that non-nuclear-weapon states will not tolerate limits on NPT Article IV rights (right to pursue peaceful uses of nuclear energy) without progress under Article VI of the NPT (disarmament). Amending the NPT is seen by most observers as unattainable. President Obama called for the eventual elimination of nuclear weapons in a speech in the Czech Republic on April 5, 2009. The IAEA experts group report, INFCIRC/640, did point to the political usefulness of achieving a ban on producing fissile material for nuclear weapons (known as fissile material production cutoff treaty, or FMCT) to provide more balance between the obligations of nuclear and non-nuclear-weapon states. Obama Administration officials have indicated that they will pursue negotiations on a fissile material cut-off treaty that includes verification provisions. Ultimately, any such treaty would require Senate advice and consent to ratification. A fourth area in which Congress plays a key role is with the approval of nuclear cooperation agreements. In some cases, the United States may seek additional reassurances regarding fuel cycle facilities during negotiations of civilian nuclear cooperation agreements. This was a topic of controversy during the approval process for the civilian nuclear cooperation agreement with India in September 2008. A civilian cooperation agreement with the United Arab Emirates was preceded by a signed a memorandum of understanding with the United States saying it would forgo "domestic enrichment and reprocessing capabilities in favor of long-term commitments of the secure external supply of nuclear fuel." In addition, the nuclear cooperation agreement's text itself states that the United States can end nuclear cooperation with the UAE if it acquires enrichment or reprocessing facilities. Some Members of Congress introduced legislation ( H.R. 1280 ) in the 112 th Congress that would amend the Atomic Energy Act to require this commitment in all nuclear cooperation agreements.

After several decades of widespread stagnation, nuclear power has attracted renewed interest in recent years. New license applications for 30 reactors have been announced in the United States, and another 548 are under construction, planned, or proposed around the world. In the United States, interest appears driven, in part, by tax credits, loan guarantees, and other incentives in the 2005 Energy Policy Act, as well as by concerns about carbon emissions from competing fossil fuel technologies. A major concern about the global expansion of nuclear power is the potential spread of nuclear fuel cycle technology—particularly uranium enrichment and spent fuel reprocessing—that could be used for nuclear weapons. Despite 30 years of effort to limit access to uranium enrichment, several undeterred states pursued clandestine nuclear programs, the A.Q. Khan black market network's sales to Iran and North Korea representing the most egregious examples. However, concern over the spread of enrichment and reprocessing technologies may be offset by support for nuclear power as a cleaner and more secure alternative to fossil fuels. The Obama Administration has expressed optimism that advanced nuclear technologies being developed by the Department of Energy may offer proliferation resistance. The Administration has also pursued international incentives and agreements intended to minimize the spread of fuel cycle facilities. Proposals offering countries access to nuclear power and thus the fuel cycle have ranged from requesting formal commitments by these countries to forswear sensitive enrichment and reprocessing technology, to a de facto approach in which states would not operate fuel cycle facilities but make no explicit commitments, to no restrictions at all. Countries joining the U.S.-led Global Nuclear Energy Partnership (GNEP), now the International Framework for Nuclear Energy Cooperation (IFNEC), signed a statement of principles that represented a shift in U.S. policy by not requiring participants to forgo domestic fuel cycle programs. Whether developing states will find existing proposals attractive enough to forgo what they see as their "inalienable" right to develop nuclear technology for peaceful purposes remains to be seen. GNEP was transformed into IFNEC under the Obama Administration and has continued as an international fuel cycle forum, but the Bush Administration's plans for constructing nuclear fuel reprocessing and recycling facilities in the United States have been halted. Instead, the Obama Administration is supporting fundamental research on a variety of potential waste management technologies. Other ideas addressing the potential global expansion of nuclear fuel cycle facilities include placing all enrichment and reprocessing facilities under multinational control, developing new nuclear technologies that would not produce weapons-usable fissile material, and developing a multinational waste management system. Various systems of international fuel supply guarantees, multilateral uranium enrichment centers, and nuclear fuel reserves have also been proposed. Congress will have a considerable role in at least four areas of oversight related to fuel cycle proposals. The first is providing funding and oversight of U.S. domestic programs related to expanding nuclear energy in the United States. The second area is policy direction and/or funding for international measures to assure supply. A third set of policy issues may arise in the context of U.S. participation in IFNEC or related initiatives. A fourth area in which Congress plays a key role is in the approval of nuclear cooperation agreements. Significant interest in these issues is expected to continue in the 112th Congress.

Introduction There is a broad-based consensus that the U.S. immigration system is broken. This consensus erodes, however, as soon as the options to reform the U.S. immigration system are debated. Substantial efforts to comprehensively reform immigration law failed in the 109 th and 110 th Congresses, prompting some to characterize the issue as a "zero-sum game" or a "third rail." The number of foreign-born people residing in the United States is at the highest level in U.S. history and has reached a proportion of the U.S. population—12.5%—not seen since the early 20 th century. Of the 38 million foreign-born residents in the United States, approximately 16.4 million are naturalized citizens. The remaining 21.6 million foreign-born residents are noncitizens. An estimated 12.5 million foreign-born residents of the United States in 2009 were legal permanent residents. According to the latest estimates by the Department of Homeland Security (DHS), about 10.8 million of the 21.6 million noncitizens were unauthorized aliens living in the United States in January 2010, down from a peak of 11.8 million in January 2007. Some observers and policy experts maintain that the presence of millions of unauthorized residents is evidence of inadequacies in the legal immigration system as well as failures of immigration control policies and practices. Whether and how the 112 th Congress will address immigration reform in the midst of historically high levels of unemployment and budgetary constrictions is difficult to project. Current circumstances may sharpen the social and business cleavages as well as narrow the range of options. Nonetheless, selected immigration issues are likely to be a major concern for the 112 th Congress, even if legislative action on such contentious issues appears daunting. Border and Visa Security The Department of State (DOS) and the Department of Homeland Security (DHS) each play key roles in administering the law and policies on the admission of aliens. Although DOS's Consular Affairs is responsible for issuing visas, U.S. Citizenship and Immigration Services (USCIS) in DHS approves immigrant petitions, Immigration and Customs Enforcement (ICE) in DHS operates the Visa Security Program (VSP) in selected embassies abroad, and Customs and Border Protection (CBP) in DHS inspects all people who enter the United States. Visa Security All foreign nationals seeking visas must undergo admissibility reviews performed by DOS consular officers abroad. These reviews are intended to ensure that they are not ineligible for visas or admission to the United States under the grounds for inadmissibility spelled out in the Immigration and Nationality Act (INA) Section 212. These criteria include health-related grounds; criminal history; security and terrorist concerns; public charge (e.g., indigence); illegal entrants; and aliens previously removed. While sweeping changes to the grounds for inadmissibility are unlikely, incremental revisions may arise. The provision that makes an alien who is unlawfully present in the United States for longer than 180 days inadmissible for 3 or 10 years, for example, might be waived as part of a legislative package that includes legalization provisions. Tightening up the grounds for inadmissibility, conversely, might be part of the legislative agenda among those who support more restrictive immigration reform policies. Some have expressed the view that DOS retains too much power over visa issuances and warn that consular officers are too concerned about facilitating tourism and trade to scrutinize visa applicants thoroughly. Some argue that the principal responsibility should be in the VSP, which assigns special agents with expertise in immigration law and counterterrorism to diplomatic posts overseas to perform visa security activities and which does not have competing priorities of diplomatic relations and reciprocity with foreign governments. Border Control Border security involves securing the many means by which people and goods enter the country. Operationally, this means controlling the official ports of entry through which legitimate travelers and commerce enter the country, and patrolling the nation's land and maritime borders to interdict illegal entries. In recent years, Congress has enacted a series of provisions and increased funding aimed at strengthening immigration-related border security. The strategy is to achieve a balance of an effective border protection with an efficient flow of approved people. At ports of entry (POEs), the lynchpin for border control is the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) system, which captures the fingerprints, photographs, and other biometric identifiers of many foreign nationals entering the United States and links these elements with other relevant databases. However, its entry functions are not fully deployed during primary inspection at land POEs, and as a result, less than one-quarter of nonimmigrant admissions to the United States are recorded in US-VISIT. Since the exit component also has not been implemented, DHS has no easy way to identify those individuals who have overstayed their visas. Between the POEs, resources for the U.S. Border Patrol and the types of fencing are perennial issues. After $1 billion in appropriations from FY2006-FY2010, DHS cancelled the Secure Border Initiative Network (SBInet), the "virtual fence" of cameras, radar and communications devices, reportedly due to cost overruns, technical problems, and delays. Along the international land border, the main oversight issue will continue to be what the appropriate mix of technology, infrastructure, and personnel should be to detect and interdict illegal entries. Whether additional statutory provisions are needed to further control the border remains a question. Legal Immigration The scope of legal immigration includes permanent admissions (e.g., employment-based, family-based immigrants) and temporary admissions (e.g., guest workers, foreign students). There are some foreign nationals admitted temporarily in a conditional status who may be on a path to permanent residence. The challenge inherent in reforming the system of legal immigration is balancing the hopes of employers to increase the supply of legally present foreign workers, the longings of families to re-unite and live together, and a widely shared wish among the various stakeholders to improve the policies governing legal immigration into the country. Permanent Residence Four major principles underlie current U.S. policy on permanent immigration: the reunification of families, the admission of immigrants with needed skills, the protection of refugees, and the diversity of admissions by country of origin. The INA specifies a complex set of numerical limits and preference categories that give priorities for permanent immigration reflecting these principles. Legal permanent residents (LPRs) are foreign nationals who live lawfully and permanently in the United States. The INA provides for a permanent annual worldwide level of 675,000 LPRs, but this level is flexible and certain categories of LPRs, most notably immediate relatives of U.S. citizens, are permitted to exceed the limits. During FY2010, a total of 1.0 million aliens became LPRs in the United States. Of this total, 66.3% entered on the basis of family ties. Immediate relatives of U.S. citizens made up the single largest group of immigrants—476,414—in FY2010. Other major categories in FY2010 were employment-based LPRs (including spouses and children) and refugees/asylees adjusting to LPR status—14.2% and 13.1%, respectively. Many LPRs are adjusting status from within the United States rather than receiving visas issued abroad by Consular Affairs. Various constituencies and interests are advocating a significant reallocation from the family-based to the employment-based visa categories or a substantial increase in legal immigration to meet a growing demand from families and employers in the United States for visas. Family-Sponsored Immigrants At the end of FY2010, the U.S. Department of State National Visa Center reported that it had 4.7 million approved family-based petitions waiting for a visa to become available. Proponents of family-based migration point to the significant backlogs in family-based immigration due to the sheer volume of aliens eligible to immigrate to the United States and maintain that any proposal to increase immigration levels should also include the option of family-based backlog reduction. Citizens and LPRs often wait years for their relatives' petitions to be processed and visa numbers to become available. Against these competing priorities for increased immigration, some offer options to scale back immigration levels, with options that include limiting family-based LPRs to the immediate relatives. Employment-Based Immigrants The INA allocates 140,000 visas annually for employment-based immigrants. Even as U.S. unemployment levels remain high, employers assert that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for increasing employment-based immigration has been dampened by high unemployment levels, proponents argue it is an essential ingredient for economic growth. Against these competing priorities for increased immigration are those who offer options to scale back immigration levels, with options that include confining employment-based LPRs to exceptional, extraordinary, or outstanding persons. Diversity Visa Lottery The diversity lottery makes 50,000 visas available annually to natives of countries from which immigrant admissions were lower than a total of 50,000 over the preceding five years. The INA limits each country to 7%, or 3,850, of the total. To be eligible for a diversity visa, the alien must have a high school education or the equivalent, or the necessary qualifications in an occupation which requires at least two years of training or experience. Some argue that the diversity lottery should be eliminated and its visas used for backlog reduction in other visa categories. Supporters of the diversity visa, however, argue that the diversity visa provides "new seed" immigrants for an immigration system weighted disproportionately to family-based immigrants from a handful of countries. Critics of the diversity lottery warn that it is vulnerable to fraud and misuse, and potentially an avenue for terrorists, citing the difficulties of performing background checks in many of the countries eligible for the diversity lottery. Supporters respond that background checks for criminal and national security matters are performed on all prospective immigrants seeking to come to the United States, including those winning diversity visas. Temporary Admissions The INA provides for the temporary admission of various categories of foreign nationals, who are known as nonimmigrants. Nonimmigrants are admitted for a temporary period of time and a specific purpose. They include a wide range of visitors, including tourists, students, and temporary workers. There is agreement that temporary migration is important to the U.S. economy and cultural life. There is also agreement that temporary migration should be managed more effectively. While revisions to temporary migration do not stoke the same intensity of debate that reform of permanent immigration or mechanisms for legalization do, they do provoke some controversies and concerns. Pathways for Sciences, Technology, Engineering, and Math (STEM) Students As the United States seeks to rise out of an economic recession, attention is again focused on recruitment of the "best and the brightest" people to the United States. Once a debate limited to the professional specialty worker (H-1B) visas that are temporary, the global competition for foreign workers with advanced degrees and high-level skills has broadened the debate to encompass more sweeping revisions to legal immigration policies. Some promote amending the INA to create expedited pathways for foreign students earning degrees at U.S. universities in the fields of the sciences, technology, engineering, or math (STEM) to become LPRs. Those opposing such expedited pathways for foreign students assert that there is no compelling evidence of a labor shortage in these professional areas that cannot be met by newly graduating U.S. students and by retraining the existing U.S. workforce. They argue that the education of U.S. students and training of U.S. workers should be prioritized. Visitors and Nonresident Admissions CBP inspectors tallied 163 million temporary admissions of foreign nationals to the United States during 2009. Mexican nationals with border crossing cards and Canadian nationals traveling for business or tourist purposes accounted for the vast majority of admissions to the United States, with approximately 126.8 million entries in FY2009. The remaining categories and countries of the world contributed 36.2 million admissions in FY2009. Since many types of visas allow people to depart and re-enter the United States, the CBP data record multiple admissions during the same year. In 2009, the United States had a positive $21.9 billion trade surplus in travel and tourism spending, because foreign visitors spent more in the United States than U.S. tourists spent abroad. Supporters of robust tourism, international education, and cultural exchange programs maintain that they foster democratic principles and spread American values across the globe. Some express concern, however, that the user fees paid by foreign nationals on temporary visas do not cover the costs of maintaining the aging infrastructure at ports of entry (POEs), nor do they cover the costs for managing the flow of 163 million annual admissions to the United States. There is considerable pressure to provide rapid processing of nonimmigrant visas and temporary admissions, leading others to warn that national security may be put at risk when there is a high volume of temporary admissions with a corresponding increase in resources at the POEs. Temporary Workers and Other Resident Nonimmigrants Not all nonimmigrant visas are for brief visits, and some lengths of stay are sufficiently long for a person to establish a residence. The term "resident nonimmigrant" refers to those foreign nationals admitted on nonimmigrant visas whose classes of admission are associated with stays long enough to establish a residence (e.g., diplomats, students, and workers). In 2010, the DHS Office of Immigration Statistics (OIS) estimated the average daily population of resident nonimmigrants in the United States to have been 1.8 million in 2008. Of the 1.8 million nonimmigrants, 50.8% (0.93 million) were temporary workers and their families. The temporary foreign worker categories usually spark the liveliest debates. Those opposing increases in foreign workers assert that such expansions—particularly during a period of high unemployment—would have a deleterious effect on salaries, compensation, and working conditions of U.S. workers. Others question whether the United States should continue to issue foreign worker visas (particularly temporary visas) during sustained high unemployment. Conversely, some employers argue that they will not be able to stay in business without expedient access to the contingent workers, some of whom are temporary foreign workers who meet the need for a specialized, seasonal, intermittent, or peak-load workforce that is able to adapt with the market forces. Documents and Verification Efforts to improve the security of immigration documents initially emphasized developing documents that were tamper-resistant and difficult to counterfeit. The objectives were to impede document fraud and unauthorized employment. Since the terrorist attacks of September 11, 2001, the policy priorities have centered on document integrity and personal identification, with a sharp focus on intercepting terrorist travel and other security risks. In recent years, Congress has enacted several specific laws aimed directly at closing perceived loopholes of citizenship self-attestation and identity document integrity. In the 112 th Congress, the issues of how best to verify legal status for employment or to obtain entitlements are likely to arise. Document Integrity Immigration documents issued to foreign nationals include biometric identifiers. In designing these documents, document integrity as well as personal identification have been a priority. The official document issued to LPRs is the permanent resident card, commonly called a "green card" because it had been printed on green stock. Now it is a plastic card that is similar in size to a credit card. For over a dozen years, the card has incorporated security features, including digital images, holograms, micro-printing, and an optical memory stripe. USCIS also issues an employment authorization document (EAD) that incorporates security features, including digital images, holograms, and micro-printing. All nonimmigrant visas issued by the United States include biometric identifiers (e.g., finger scans) in addition to photographs. While most foreign nationals entering the United States have biometric documents, a long-standing issue remains the number and location of scanners that are able to read these biometric documents. Employment Eligibility Verification All employers are required to participate in a paper-based employment eligibility verification system in which they examine documents presented by every new hire to verify the person's identity and work eligibility. Employers must retain these employment eligibility verification (I-9) forms. Many observers have maintained that availability of fraudulent documents limited the effectiveness of the I-9 approach to employment verification. E-Verify Employers may opt to participate in an electronic employment eligibility verification program, known as E-Verify, which checks the new hires' employment authorization through Social Security Administration and, if necessary, DHS databases. As of late January 2011, it had more than 240,000 registered employers, representing more than 830,000 hiring sites. Critics of E-Verify have long complained that the system is not sufficiently accurate and results in discrimination. DHS reports that in FY2010, 98.3% of employees were automatically confirmed as work-authorized and an additional 0.3% were confirmed after an initial mismatch. In its 2009 evaluation of E-Verify, the research firm Westat estimated that about half (54%) of the unauthorized aliens processed through the system are erroneously found to be work-authorized. Westat attributed these errors mainly to identity fraud. Status Verification for Federal Benefits As an alternative to relying on the inspection of documents to determine immigrant eligibility for federal benefits, the Systematic Alien Verification for Entitlements (SAVE) system provides federal, state, and local government agencies access to data on immigration status that are necessary to determine noncitizen eligibility for public benefits. USCIS does not determine benefit eligibility; rather, SAVE enables the specific program administrators to ensure that only those noncitizens and naturalized citizens who meet their program's eligibility rules actually receive public benefits. According to USCIS, SAVE draws on the Verification Information System (VIS) database, which is a nationally accessible database of selected immigration and naturalization status information that contains over 60 million records. Congress's concern with determining immigrant eligibility for federal benefits largely centers on SAVE's inability to detect identity fraud when someone uses the legal documents of another person. Interior Immigration Enforcement Reassessing immigration control policies and agencies and considering options for more effective enforcement of the INA are integral immigration issues. Immigration control encompasses an array of enforcement tools, policies, and practices to prevent and investigate violations of immigration laws. The spectrum of enforcement issues includes apprehending unauthorized aliens; worksite enforcement; investigating immigration fraud; identifying criminal aliens; and the detention and removal of foreign nationals. The involvement of states and localities in matters relating to immigration enforcement is also likely to arise in the 112 th Congress. Investigations Immigration enforcement activities include investigating aliens who violate the INA and other related laws. These activities primarily focus on the range of immigration-related probes that are national security priorities. Additionally, the main categories of non-terrorism immigration-related crimes that are investigation priorities are suspected criminal acts—notably suspected fraudulent activities (i.e., possessing or manufacturing fraudulent immigration documents) and suspected smuggling and trafficking of aliens as well as worksite enforcement of illegal employment. Worksite Enforcement For over two decades it has been unlawful for an employer to knowingly hire, recruit or refer for a fee, or continue to employ an alien who is not authorized to be so employed. The large number of unauthorized aliens in the United States, the majority of whom are in the labor force, leads many to criticize the adequacy of the current worksite enforcement measures. During the George W. Bush Administration, Immigration and Customs Enforcement (ICE) conducted highly visible worksite raids that led to the arrest and removal of thousands of unauthorized workers, which sparked praise among some and alarm among others. Today, ICE worksite enforcement is focused on employers, with the stated purpose of criminally investigating and prosecuting employers who exploit their workers and knowingly hire unauthorized workers. In addition to the tension over whom ICE should be targeting, there are concerns that more stringent worksite enforcement may inadvertently foster discrimination. Alien Smuggling The INA prohibits the smuggling of aliens across the U.S. border and the transport and harboring of aliens within the United States. Thus, the statute covers a broad spectrum of activities that may subject U.S. citizens as well as foreign nationals to criminal liability if they provide assistance to an alien who is unlawfully present within the United States. Many contend that the smuggling of aliens into the United States constitutes a significant risk to national security and public safety. Some further warn that terrorists may use existing smuggling routes, methods, and organizations to enter undetected. In addition to generating billions of dollars in revenues for criminal enterprises, alien smuggling can lead to collateral crimes including kidnapping, homicide, high speed flight, identity theft, and the manufacturing and distribution of fraudulent documents. Past efforts to tighten laws on alien smuggling, however, sparked opposition from religious and humanitarian groups who asserted that the forms of relief and assistance that they may provide to aliens might be deemed as the facilitation of alien smuggling. Document Fraud Immigration-related document fraud includes the counterfeiting, sale, and use of identity documents (e.g., birth certificates or Social Security cards), as well as employment authorizations, passports, or visas. The INA has civil enforcement provisions for individuals and entities proven to have engaged in immigration document fraud. In addition, the U.S. Criminal Code makes it a criminal offense for a person to knowingly produce, use, or facilitate the production or use of fraudulent immigration documents. More generally, the U.S. Criminal Code criminalizes the knowing commission of fraud in connection with a wide range of identification documents. The integrity of the documents issued for immigration purposes, the capacity to curb immigration fraud, and the distinctions between identity theft and immigration fraud are among the central elements of the document fraud issue. Criminal Aliens A criminal alien, put simply, is a foreign national convicted of certain criminal offenses; however, whether that conviction triggers deportation is a key factor. Criminal offenses in the context of immigration law cover violations of federal, state, or, in some cases, foreign criminal law. Most crimes affecting immigration status fall under a broad category of crimes defined in the INA, notably those involving moral turpitude or aggravated felonies. Some violations of the INA are not defined as crimes, such as being an unauthorized alien in the United States. There has been bipartisan agreement for over a decade to dedicate a portion of immigration enforcement resources to the location and removal of criminal aliens. One initiative aimed at criminal aliens—the Secure Communities Program—has stirred controversy. It enables the fingerprints of all those arrested and booked by local law enforcement to be run through DHS immigration records, as well as Federal Bureau of Investigation (FBI) criminal history records. Proponents of Secure Communities maintain it improves public safety by using information-sharing capability to quickly and accurately identify deportable aliens who are arrested for a crime and booked into local law enforcement custody. Opponents of Secure Communities warn that it fosters distrust of police officers in immigrant communities, incentivizes racial profiling, and increases costs for local jails. Detaining and Removing Foreign Nationals Detention The INA requires that certain categories of aliens must be detained (i.e., the aliens must be detained during removal proceedings, and, if ordered removed, until their removal is effectuated). Other foreign nationals who are not subject to mandatory detention nonetheless may be detained, paroled, or released on bond. The majority of detained aliens have committed a crime while in the United States, have served their criminal sentence, and are detained while undergoing removal proceedings. Citing the sheer number of aliens subject to mandatory detention, some critics question the fairness of the law, especially the requirement that asylum seekers lacking documentation are subject to mandatory detention. Others, however, point out that aliens who are not detained often disappear in the United States rather than face deportation. At the crux of this issue are two questions: who should be detained and what is the appropriate amount of detention resources necessary to sustain the population? Removal A foreign national is removable if (1) the alien has not been admitted to the United States and is inadmissible under INA Section 212, as discussed earlier, or (2) the alien has been admitted to the United States and is deportable under INA Section 237. The efficacy of alien removal proceedings hinges on an expeditious and respected immigration court system. According to a number of observers, while the system has witnessed a large increase in its caseload, it has not received a commensurate increase in resources. Advocates of increasing resources to immigration courts believe that funding more judges, law clerks, and the like would reduce detention times of apprehended aliens and generally result in cost savings and improved quality for judicial hearings. Other observers, however, contend that the problems related to immigration caseloads lie less in the funding shortages and more in the quality of immigration judges. Although some administrative efforts have been made to address these concerns, the 112 th Congress may consider legislative action as well. State and Local Enforcement While the federal government exercises preeminent authority in the field of immigration, there has been long-standing debate regarding the scope and propriety of state and local efforts to deter the presence of unlawfully present aliens within their jurisdictions. Supporters of such measures argue that federal enforcement of immigration law has not adequately deterred the migration of unauthorized aliens, and that state action is both necessary and appropriate to combat the negative effects of unlawful migration. Opponents argue, among other things, that state and local involvement in immigration enforcement could be expensive and disruptive to federal enforcement efforts, could result in civil rights violations, and could undermine community policing by discouraging cooperation with state and local law enforcement. The 112 th Congress may weigh three aspects of this issue. The first question centers on the ability of states and localities to adopt legislation aimed at deterring unauthorized aliens who are in their jurisdictions. The second question focuses on the role of state and local police in directly enforcing federal immigration law and if such enforcement interferes with or disrupts federal immigration policies and objectives. Traditionally, the prevailing view has been that state and local police are permitted, to the extent allowed under state and local law, to enforce the criminal violations of federal immigration law. By contrast, the enforcement of the civil provisions, including the apprehension of deportable aliens, was viewed as a federal responsibility, with state and local police playing, at most, a supporting role. The third question addresses the effectiveness and propriety of existing cooperative initiatives (i.e., INA Section 287(g) agreements) between the federal government and states and localities regarding immigration enforcement. These agreements enable specially trained state or local officers to perform specific functions relative to the investigation, apprehension, or detention of aliens. Integration, Status, and Benefits The degree to which foreign nationals should be accorded certain rights and privileges as a result of their presence in the United States, along with the duties owed by such aliens given their legal status, sparks debate. Any immigration legislation—whether it expands, alters, or retracts migration levels—will likely prompt a debate over potential trade-offs and impacts on alien rights and responsibilities. All persons in the United States, whether U.S. nationals or foreign nationals, are accorded certain rights under the U.S. Constitution. However, foreign nationals do not enjoy the same degree of constitutional protections as U.S. citizens. Citizenship Birthright Citizenship Children born in the United States to parents who are unlawfully present in the United States are U.S. citizens, consistent with the British common law principle known as jus soli . This principle is codified in the Citizenship Clause of the Fourteenth Amendment of the U.S. Constitution and by Section 301(a) of the INA, which provides that a person who is born in the United States, subject to its jurisdiction, is a citizen of the United States regardless of the race, ethnicity, or immigration status of the parents. The question of whether the Citizenship Clause encompasses children born to unauthorized aliens (i.e., are they subject to its jurisdiction?) arises in this debate. Some proponents of immigration reform have advocated either constitutional or statutory amendments to limit automatic citizenship upon birth in the United States. These proposals would not permit children born in the United States to parents who are unlawfully present to become U.S. citizens. Some of these proposals would also deny automatic citizenship to children born to foreign nationals who are present in the United States legally, but temporarily (i.e., those on nonimmigrant visas). Supporters of the Citizenship Clause of the Fourteenth Amendment, however, maintain that the principles it embodies—notably citizenship to all persons born in the United States and subject to its jurisdiction regardless of race, ethnicity, or alienage of the parents—should not be altered. Integration and Naturalization Central elements of immigrant integration in the United States include knowledge of the language, history, and government of the United States as well as participation in the labor market and involvement in community institutions. The naturalization provisions in the INA provide the opportunity to all LPRs to become U.S. citizens. To naturalize, they must have continuously resided in the United States for five years (three years in the case of spouses of U.S. citizens); show that they have good moral character; demonstrate the ability to read, write, speak, and understand English; and pass an examination on U.S. government and history. Whether the responsibility to integrate rests solely on the immigrant, or whether the government and other institutions (e.g., schools, religious groups, labor unions, employers, or voluntary agencies) share the responsibilities, are issues of debate. Legalization Foreign nationals residing in the United States without legal authorization (i.e., unauthorized aliens) pose an especially thorny issue. Proposals to enable unauthorized aliens to legalize their status generally would require unauthorized aliens to meet specified conditions and terms as well as pay penalty fees to legalize their status. Examples of conditions include documenting physical presence in the United States over a specified period; demonstrating employment for specified periods; showing payment of income taxes; or leaving the United States to obtain a legal status. Using a point system that credits aliens with equities in the United States (e.g., work history, tax records, and family ties) would be another possible option. Other potential avenues for legalization would be guest worker visas tailored for unauthorized aliens in the United States or a legalization program that would replace guest worker visas. Advocates for legalization maintain that unauthorized residents are working, paying taxes, and contributing to the community. Some also point out that legalization would provide employers with a substantially increased legal workforce without importing additional foreign workers. They argue that beneficiaries of legalization must demonstrate that they are integrating in the United States to be eligible. Opponents maintain that legalization rewards illegal actions at the expense of potential immigrants who are waiting to come legally. They further argue that it would serve as a magnet for future flows of unauthorized migrants. Instead, they support more rigorous enforcement of immigration control laws on illegal presence, unauthorized employment, detention, and removal as the most appropriate policy responses to the issue of unauthorized aliens. DREAM Act In addition to the legalization options mentioned above, there are more narrowly drawn proposals (commonly referred to as the Development, Relief, and Education for Alien Minors Act, or the DREAM Act) that would enable some unauthorized alien students to become LPRs. In most cases, these bills have proposed to repeal a 1996 provision that discourages states and localities from providing certain postsecondary education benefits to unauthorized aliens. The DREAM Act would also enable unauthorized alien students to adjust to LPR status in the United States if they meet specified conditions. Supporters point out that these unauthorized alien students were brought, as children, to the United States by their parents, and should not be held responsible for their parents' violation of immigration law. The broader arguments against legalization are also used by opponents of the DREAM Act: it would reward unlawful behavior and serve as a magnet for future violations. Noncitizen Eligibility for Benefits Federal laws place comprehensive restrictions on noncitizens' access to means-tested public assistance, with exceptions for LPRs with a substantial U.S. work history and other narrowly classified groups. Aliens in the United States without authorization (i.e., illegally present) are ineligible for federal public benefits, except for specified emergency services. There is, however, a widely held perception that many unauthorized migrants obtain federal benefits—despite legal restrictions and verification procedures. Families with mixed-immigration status members (i.e., families with unauthorized migrants and their U.S. citizen children) are another factor that arises in the debate on benefit receipt. Other components of the issue involve foreign nationals who have temporary employment authorizations and social security numbers, but who are not LPRs. Although it does not address the legality of an alien's immigration status, the Internal Revenue Code makes clear that "resident aliens" are generally taxed in the same manner as U.S. citizens. Those who are temporary legal residents or "quasi-legal" migrants pose a particular dilemma to some because they are permitted to work and have likely paid into the system that finances a particular benefit, such as social security or a tax refund, for which they may not be eligible. 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. These issues come to the intersection of major policy areas: immigration, health, welfare, and income security policies. Noncitizen eligibility issues arise in the context of specific legislation on access to health care, tax liabilities and refunds, educational opportunities, and means-tested federal assistance. Some assert that noncitizen eligibility should be further restricted, perhaps based upon work history or narrower categories of LPRs. Others would extend benefits to certain vulnerable populations, such as pregnant women. Some maintain that current law is sufficient; instead, they emphasize that sponsorship rules should be enforced and that verification systems should be expanded. There may be unintended consequences of ramped up verification—most notably when tightening up the identification requirements to stymie false claims of citizenship results in denying benefits to U.S. citizens—which add complexity to the debate. Refugees and Other Humanitarian Populations The United States grants refugee status to aliens overseas, and grants asylum to aliens in the United States, who are unwilling or unable to return to their home countries due to persecution or a well-founded fear of persecution based on one of five characteristics (race, religion, nationality, membership in a particular social group, or political opinion) and who meet other criteria. An overriding issue in U.S. refugee and asylum policy is how to adapt policies forged during the Cold War to a changing world and the war on terrorism. Some argue that current law does not offer adequate protections for people fleeing persecution and other abuses occurring around the world. Others assert that forms of humanitarian relief intended to provide protection in extraordinary cases are being misused as alternative pathways for immigration. Refugee Admissions The Bureau of Population, Refugees and Migration in DOS handles overseas processing of refugees, and USCIS in DHS makes final determinations about eligibility for admission. In the post-September 11 world, there is particular concern that potential terrorists—especially aliens from trouble spots in the Mideast, northern Africa, and south Asia—could try to gain legal entry into the United States as refugees or asylees. More generally, some regard as a key challenge for refugee and asylum policy the increasing difficulty in differentiating the persecuted from the persecutors in light of the religious, ethnic, and political violence in various countries around the world. The efficacy of refugee resettlement programs in the United States is a related concern. Asylum Policy Foreign nationals present in the United States may apply for asylum with the USCIS after arrival into the country, or may seek asylum before a Department of Justice's Executive Office for Immigration Review (EOIR) immigration judge during removal proceedings. Aliens arriving at a U.S. port who lack proper immigration documents or who engage in fraud or misrepresentation are placed in expedited removal; however, if they express a fear of persecution, they receive a "credible fear" hearing with an USCIS asylum officer and—if found credible—are referred to an EOIR immigration judge for a hearing. Asylum issues that may arise in the 112 th Congress include the one-year time limit on filing asylum cases, the mandatory detention of asylum seekers who lack proper documents, and the thresholds for establishing religious persecution. Other Humanitarian Relief While refugee status and asylum are permanent forms of relief, the United States also offers temporary humanitarian relief in certain circumstances. Temporary, or nonimmigrant, visas, known as "T" and "U" visas, may be granted to aliens who are victims of a severe form of trafficking in persons or who have suffered substantial physical or mental abuse due to having been victims of criminal activity, respectively, and who assist in investigations or persecutions. Current debate surrounding the T visa epitomizes the debate over U.S. humanitarian policies generally, with some questioning whether the application process may make it difficult for victims to obtain T status and others expressing concern about the possibility of aliens' falsely claiming that they qualify for T status in order to remain in the country. Revisions to the U visa may arise in the broader context of domestic violence legislation. When civil unrest, violence, or natural disasters erupt in spots around the world, concerns arise over the safety of foreign nationals from these troubled places who are in the United States. Provisions exist in the INA to offer temporary protected status (TPS) or relief from removal under specified circumstances. A foreign national who is granted TPS receives a registration document and an employment authorization document for the duration of TPS. The United States currently provides TPS or deferred enforced departure (DED) to over 300,000 foreign nationals from a total of seven countries: El Salvador, Haiti, Honduras, Liberia, Nicaragua, Somalia, and Sudan. Under the INA, the executive branch grants TPS or relief from removal; however, Congress has also provided TPS legislatively. As a consequence, legislation may emerge when the Administration is perceived as slow to grant TPS after a humanitarian crisis or opts not to grant TPS to foreign nationals whom some Members of Congress think warrant temporary protections.

There is a broad-based consensus that the U.S. immigration system is broken. This consensus erodes, however, as soon as the options to reform the U.S. immigration system are debated. Substantial efforts to comprehensively reform immigration law failed in the 109th and 110th Congresses. Whether and how the 112th Congress will address immigration reform in the midst of historically high levels of unemployment and budgetary constrictions is difficult to project. The number of foreign-born people residing in the United States is at the highest level in U.S. history and has reached a proportion of the U.S. population—12.5%—not seen since the early 20th century. Of the 38 million foreign-born residents in the United States, approximately 16.4 million are naturalized citizens. The remaining 21.6 million foreign-born residents are noncitizens. According to the latest estimates by the Department of Homeland Security (DHS), about 10.8 million of the 21.6 million noncitizens were unauthorized aliens living in the United States in January 2010, down from a peak of 11.8 million in January 2007. Some observers and policy experts maintain that the presence of millions of unauthorized residents is evidence of inadequacies in the legal immigration system as well as failures of immigration control policies and practices. This report synthesizes immigration issues as a multi-tiered debate. It breaks down the U.S. immigration law and policy into key elements: border control and visa security; legal immigration; documentation and verification; interior immigration enforcement; integration, status, and benefits; and refugees and other humanitarian populations. It delineates the debate in the 112th Congress for a range of issues, including border security, criminal aliens, worksite enforcement, employment eligibility verification, permanent admissions, temporary workers, legalization, noncitizen eligibility for federal benefits, birthright citizenship, and the role of state and local law enforcement in enforcing immigration laws. Current circumstances may sharpen the social and business cleavages as well as narrow the range of options. Nonetheless, selected immigration issues are likely to be a major concern for the 112th Congress, even if legislative action on such contentious issues appears daunting. For a discussion of legislative action on immigration issues, see CRS Report R42036, Immigration Legislation and Issues in the 112th Congress.

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

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

Most Recent Developments Continuing Appropriations Resolution (CR) Further Extended in the 112th Congress (P.L. 112-4 and P.L. 112-6); Full-Year Continuing Appropriations Measures Considered (H.R. 1 and S.Amdt. 149) P.L. 111-242 , the initial Continuing Appropriations Act, 2011, was amended twice more in March 2011 to provide more time for Congress to resolve differences on final federal funding for FY2011. Interim funding was provided by P.L. 112-4 ( H.J.Res. 44 ) through March 18, 2011 (two weeks), and by P.L. 112-6 ( H.J.Res. 48 ) through April 8, 2011 (three weeks). In contrast to the four CRs enacted in 2010, which largely continued funding at FY2010 rates of operations, the two CRs enacted in March 2011 cut overall discretionary budget authority for FY2011 by selectively terminating or reducing funding for some programs and some earmarks. The two-week CR, P.L. 112-4 , reduced FY2011 annualized funding by $4 billion overall compared to FY2010 levels, and the three-week CR, P.L. 112-6 , cut another $6 billion from the annualized total. Within those totals, discretionary programs funded in the Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) appropriations act were reduced by approximately $1.5 billion and $1.0 billion, respectively, according to the Congressional Budget Office (CBO). All of the program reductions enacted in the two CRs (a total of $10 billion) were originally proposed in H.R. 1 , discussed below. Full-year appropriations proposals for FY2011 have also been considered by the 112 th Congress. Prior to enactment of P.L. 112-4 , the House passed H.R. 1 on February 19, 2011. The bill would have provided regular FY2011 appropriations for the Department of Defense and continuing appropriations for the rest of the government, with specified reductions below FY2010 levels for many domestic discretionary programs. CBO estimated at the time that the bill would have reduced overall non-emergency discretionary budget authority by $61.5 billion from FY2010 levels; the L-HHS-ED share of the reduction was estimated at $25.5 billion. On March 9, 2011, the Senate rejected both H.R. 1 and a substitute amendment ( S.Amdt. 149 ) offered by Senator Inouye. According to CBO, the funding reductions proposed in the Senate amendment were $8.7 billion below FY2010 levels overall and $0.5 billion below FY2010 levels for L-HHS-ED agencies. On April 1, 2011, the House passed H.R. 1255 , which would enact H.R. 1 if the Senate fails to pass FY2011 appropriations. In addition to appropriations, H.R. 1 as passed by the House also included a number of potentially controversial policy riders, many of which are matters of debate in ongoing budget negotiations. They are often in the form of "limitation amendments" that prohibit the use of funding in the bill for certain activities. Examples of such provisions affecting L-HHS-ED funding include several that prohibit spending to implement, in whole or in part, the March 2010 health care reform laws ( P.L. 111-148 , P.L. 111-152 ); a prohibition on funding the Planned Parenthood Federation of America, Inc., or any of its affiliates; and a ban on funding Department of Education forthcoming rules on federal student aid to for-profit colleges. For further analysis from CRS on funding under the various proposals for FY2011 appropriations, see the following: CRS Report R41703, FY2011 Appropriations: A Side-by-Side Comparison of Key Proposals ; CRS Report R41657, Proposed FY2011 Appropriations for the Departments of Education and Labor Under H.R. 1 and Related Bills ; and CRS Report R41737, Public Health Service (PHS) Agencies: Overview and Funding, FY2010-FY2012 . Additional reports related to Labor-HHS-ED appropriations are listed on the CRS Issues in Focus page at http://crs.gov/ pages/ subissue.aspx? cliid= 2347& parentid= 73& preview= False . FY2011 Interim CRs Enacted (P.L. 111-242) and Extended (P.L. 111-290, P.L. 111-317, and P.L. 111-322) in the 111th Congress On September 30, 2010, the President signed into law H.R. 3081 , the Continuing Appropriations Act, 2011 ( P.L. 111-242 ), which provided temporary funding at the FY2010 rate of operations for most government agencies for the period October 1 through December 3, 2010, unless regular FY2011 appropriations measures were enacted sooner. The law was amended on December 4 ( P.L. 111-290 ), December 18 ( P.L. 111-317 ), and December 22, 2010 ( P.L. 111-322 ), to extend the expiration date of the CR and provide for some special funding situations (known as "anomalies") for certain programs. P.L. 111-322 extended funding through March 4, 2011. Under the FY2011 continuing resolution, the funding level for most activities is provided at a rate of operations like that provided in FY2010 appropriations acts and under the same conditions and authority. Only the most limited funding actions are authorized in order to provide for the continuation of projects and activities. New initiatives are prohibited. For programs with high spend-out rates that normally would occur early in the fiscal year, special restrictions prohibit spending levels that would impinge on final FY2011 funding decisions. For entitlements and other mandatory activities, spending is allowed that would maintain existing program levels under current law, including additional funding, if needed, to continue benefits for eligible beneficiaries. Senate Bill S. 3686 Reported On August 2, 2010, the Senate Committee on Appropriations reported S. 3686 ( S.Rept. 111-243 ), its proposal for FY2011 L-HHS-ED appropriations. The committee recommended $171.1 billion in discretionary L-HHS-ED funds. House Subcommittee Markup Held The House L-HHS-ED Appropriations Subcommittee held a markup session on July 15, 2010, and approved a draft bill, but the full committee did not take further action. The subcommittee published only a summary table showing some of the discretionary program levels approved at the markup. President's Budget Submitted On February 1, 2010, President Obama submitted his FY2011 budget to Congress. Modified by some later adjustments, the request included $171.7 billion in discretionary funds for programs covered in the L-HHS-ED appropriations bill. Table 1 summarizes the legislative status of FY2011 L-HHS-ED appropriations. Note on Most Recent Data At present, only the Summary and the Most Recent Developments sections of this report have been updated to reflect the 112 th Congress's activities on continuing resolutions and full-year appropriations proposals. The balance of the report discusses the President's request and the Senate Appropriations Committee bill from the 111 th Congress. In this report, unless stated otherwise, data on FY2010 appropriations and FY2011 proposals are based on the August 24, 2010, table from the Senate Committee on Appropriations (see the table at the back of S.Rept. 111-243 ). Funding amounts are rounded to the nearest million. The dollar changes and percent changes discussed in the text are based on unrounded amounts. The data for FY2010 appropriations primarily reflect enactment of P.L. 111-117 , the Consolidated Appropriations Act, 2010, on December 16, 2009. Some FY2010 amounts were subsequently affected by transfers or adjustments for comparability. The data for FY2010 do not reflect enactment of several laws providing supplemental appropriations, or in a few cases, rescissions of previously appropriated funds. These include the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 , enacted February 17, 2009), which provided supplemental FY2009 appropriations that carried over to FY2010; the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148 , as amended by P.L. 111-152 , both enacted in March 2010); the Supplemental Appropriations Act, 2010 ( P.L. 111-212 , July 29, 2010); and an unnamed law funding education jobs and Medicaid ( P.L. 111-226 , August 10, 2010). The data for FY2011 reflect the President's budget request as of July 2010 and the Senate committee recommendations on S. 3686 . Amounts for the Department of Education request, however, were revised after the Senate committee table was published, and reflect information available on the ED website at http://www2.ed.gov/ about/ overview/ budget/ tables.html? src= ct . The revision was not presented as an official budget amendment. In most cases, data represent net funding for specific programs and activities, and take into account current and forward funding and advance appropriations; however, all data are subject to additional budgetary scorekeeping. Except where noted, data refer only to those programs within the purview of L-HHS-ED appropriations, and not to all programs within the jurisdiction of the relevant departments and agencies. Funding from other appropriations bills, and entitlements funded outside of the annual appropriations process, are excluded. Overview This report describes the highlights of President Obama's proposals for FY2011 appropriations for L-HHS-ED programs, as submitted to Congress on February 1, 2010, and the congressional response to those proposals. Discussions focus primarily on discretionary programs. The report does not follow specific funding issues related to mandatory L-HHS-ED programs—such as Medicare or Social Security—nor does it follow any authorizing legislation related to the President's budget initiatives. For a glossary of budget terms and relevant websites, see the Appendix , "Terminology and Web Resources." The L-HHS-ED bill typically is one of the more controversial of the regular appropriations bills because of the size of its funding total and the scope of its programs, as well as various related issues, such as restrictions on the use of federal funds for abortion and for research on human embryos and stem cells. This bill provides discretionary and mandatory funds to three federal departments and 14 related agencies, including the Social Security Administration (SSA). Discretionary funding represents less than one-quarter of the total in the bill. Among the various appropriations bills, L-HHS-ED is the largest single source of discretionary funds for domestic (non-defense) federal programs (the Department of Defense bill is the largest source of discretionary funds among all federal programs). This section presents several overview tables on funding in the bill, particularly discretionary funding, and discusses related issues such as 302(b) allocations and advance appropriations. Later sections provide details on individual L-HHS-ED departments and agencies. Discretionary and Mandatory Funding: Program Level Appropriations and Current Year Appropriations Table 2 summarizes the L-HHS-ED appropriations enacted for FY2010 and proposed for FY2011, including both discretionary and mandatory appropriations. The table shows various aggregate measures of L-HHS-ED appropriations, including the discretionary program level, current year level, and advance appropriations, as well as scorekeeping adjustments. Program level discretionary appropriations reflect the total discretionary appropriations in a given bill, regardless of the year in which they will be spent, and therefore include advance funding for future years. Unless otherwise specified, appropriations levels in this report refer to program level amounts . Current year discretionary appropriations represent discretionary appropriations in a given bill for the current year, plus discretionary appropriations for the current year that were enacted in prior years—for example, FY2011 appropriations that were enacted in the FY2010 act. As the annual congressional appropriations process unfolds, current year discretionary appropriations, including scorekeeping adjustments (see below), are measured against the 302(b) allocation ceilings (discussed later in this report). Note that media reports and comments from the Administration about appropriations activities typically cite figures representing the current year discretionary totals rather than the program levels in the bill. Advance appropriations are funds that will not become available until after the fiscal year for which the appropriations are enacted (for example, funds for certain education programs like Special Education State Grants that were included in the FY2010 act that could not be spent before FY2011 at the earliest). Scorekeeping adjustments are made to account for special funding situations, as monitored by the Congressional Budget Office (CBO). Because appropriations may consist of mixtures of budget authority enacted in various years, both of the summary measures mentioned above are frequently used: program level appropriations and current year appropriations. How are these measures related? For an "operational definition," program level funding equals (a) current year, plus (b) advances for future years, minus (c) advances from prior years, and minus (d) scorekeeping adjustments. Table 2 shows each of these amounts for discretionary funding, along with funding levels for mandatory programs, and the grand total for L-HHS-ED. Discretionary Funding Trends, FY2002-FY2010 The L-HHS-ED appropriations bills include both mandatory and discretionary funds; however, the appropriations committees fully control only the discretionary funds. Mandatory funding levels for programs included in the annual appropriations bills are modified through changes in the authorizing legislation. Typically, these changes are accomplished through authorizing committees by means of reconciliation legislation, and not through appropriations committees in annual appropriations bills. Table 3 shows the trend in discretionary budget authority enacted in the regular (not including supplementals) L-HHS-ED appropriations for FY2002 through FY2010. During these years, L-HHS-ED discretionary funds have grown by 30% from $127.2 billion in FY2002 to $164.9 billion in FY2010, an increase of $37.7 billion. Discretionary Appropriations by Bill Title, FY2010-FY2011 The annual L-HHS-ED appropriations act typically includes five titles. The first three provide appropriations and program direction for the Department of Labor (Title I), the Department of Health and Human Services (Title II), and the Department of Education (Title III). Each of the three titles includes some sections of "General Provisions" for the department; they provide specific program directions, modifications, or restrictions that the appropriators wish to convey in bill language, not just in report language. Title IV covers funding for 14 related agencies, the largest of which is the Social Security Administration. Title V contains general provisions with broader policy application than those in the department titles. Occasionally, the act has one or more additional titles, which may be legislative (authorizing) language rather than appropriations provisions. Table 4 summarizes by title the program level discretionary spending that was provided for FY2010 and proposed for FY2011 L-HHS-ED appropriations and compares the program level totals with the current year discretionary totals. 302(a) and 302(b) Allocation Ceilings The House and Senate Appropriations Committees and their 12 parallel subcommittees are not free to fund their bills at whatever levels they might wish. Instead, the maximum budget authority for annual appropriations acts is determined under procedures laid out by the Congressional Budget Act of 1974, as amended. First, through the annual concurrent resolution on the budget, Congress establishes the 302(a) allocations —the maximum spending totals for a given fiscal year that are allowed for the two appropriations committees and various authorizing committees. For further information, see CRS Report RS20144, Allocations and Subdivisions in the Congressional Budget Process , by [author name scrubbed]; and CRS Report R40472, The Budget Resolution and Spending Legislation , by Megan Suzanne Lynch. Second, the House and Senate Committees on Appropriations separately subdivide their 302(a) allocations and establish the 302(b) allocations —the maximum discretionary budget authority available to each of the 12 subcommittees for each annual appropriations bill. The total of these allocations must not exceed the 302(a) discretionary total. This process creates the basis for enforcing discretionary budget discipline, since any appropriations bill reported with a total above the ceiling is subject to a point of order. The 302(b) allocations can and often do get adjusted during the year as the various appropriations bills progress toward final enactment. Table 5 shows the 302(b) discretionary allocations for the FY2011 L-HHS-ED appropriations determined by the House and Senate Committees on Appropriations, together with the comparable amount for the FY2010 appropriations. Both the 302(a) and 302(b) allocations regularly become contested issues in their own right. Advance Appropriations Advance appropriations occur when funds enacted in one fiscal year are not available for obligation until a subsequent fiscal year. For example, P.L. 111-117 , which enacted FY2010 L-HHS-ED appropriations, provided $445 million for the Corporation for Public Broadcasting (CPB) for use in FY2012. Advance appropriations may be used to meet several objectives. These might include the provision of long-term budget information to recipients, such as state and local educational systems, to enable better planning of future program activities and personnel levels. The more contentious aspect of advance appropriations, however, involves how they are counted in budget ceilings. Advance appropriations avoid the 302(a) and 302(b) allocation ceilings for the current year, but must be counted in the year in which they first become available for obligation. This procedure uses up ahead of time part of what will be counted against the allocation ceiling in future years. For FY2002, President George W. Bush's budget proposed eliminating advance appropriations for federal discretionary programs, including those for L-HHS-ED programs. Congress rejected that idea, and the proposal has not been repeated. For more information, see CRS Report RS20441, Advance Appropriations, Forward Funding, and Advance Funding , by [author name scrubbed]. Department of Labor Discretionary appropriations for the Department of Labor (DOL) for FY2010 were $13,534 million. For FY2011, the Obama Administration requested $13,972 million, $438 million (3.2%) more than the amount provided for FY2010. The Senate Appropriations Committee would provide DOL with $13,907 million in discretionary funding for FY2011, a 2.8% increase over the amount provided for FY2010. See Table 6 . Mandatory DOL programs were funded at $3.1 billion for FY2010 and consist of Federal Unemployment Benefits and Allowances ($1,818 million), the Black Lung Disability Trust Fund ($663 million), Special Benefits for Disabled Coal Miners ($214 million), benefits under the Federal Employees' Compensation Program and the Longshore and Harbor Workers' Compensation Program ($187 million), Advances to the Unemployment Insurance and Other Trust Funds ($120 million), and administrative expenses for the Energy Employees Occupational Illness Compensation Fund ($52 million). Highlights The following are some highlights for DOL of President Obama's FY2011 budget request and the amounts recommended by the Senate Appropriations Committee. See Table 7 for details. All comparisons of funding levels with FY2010 appropriations are based on FY2010 regular appropriations only. Funding amounts in Table 7 are rounded to the nearest million. The dollar changes and percent changes discussed in the text are based on unrounded amounts. The President requested $3,581 million to administer the Unemployment Compensation program, an increase of $324 million (10.0%) above the $3,257 million provided for FY2010. The Senate Appropriations Committee agreed to the President's request. The President requested a $101 million (10.9%) increase for youth training activities and a $45 million (5.3%) increase for adult training activities. The President's request would increase funding for youth training from $924 million for FY2010 to $1,025 million for FY2011. The request would increase funding for adult training from $862 million for FY2010 to $907 million for FY2011. The Senate Appropriations Committee would provide $30 million less than the President's request for youth training and $10 million less than the request for adult training. The Administration requested $600 million for the Community Service Employment for Older Americans Program, $225 million (27.3%) less than the $825 million provided for FY2010. The Senate Appropriations Committee agreed to the President's request for a reduction in funding. The Administration requested a $120 million (6.6%) increase in benefits and training under the Trade Adjustment Assistance (TAA) program. The request would increase funding from the $1,818 million provided for FY2010 to $1,938 million for FY2011. (See Federal Unemployment Benefits and Allowances in Table 7 .) The Senate Appropriations Committee agreed to the President's request for an increase in funding. The Administration requested an additional $17 million (7.3%) for the Wage and Hour Division (WHD). The request would increase funding for WHD to $244 million in FY2011. The Senate Appropriations Committee agreed to the President's request. The request includes $14 million (2.6%) more for the Occupational Safety and Health Administration (OSHA). For FY2011, the Administration would provide OSHA with $573 million. The Senate Appropriations Committee would increase funding for OSHA by $1 million more than the President's request. The Administration requested a $22 million (24.1%) increase for the Bureau of International Labor Affairs (ILAB). The request would increase funding for ILAB to $115 million for FY2011. The Senate Appropriations Committee would increase funding for ILAB to $117 million, $2 million more than the President's request. The budget request includes $50 million for a new State Paid Leave Fund. The fund would provide grants to states to establish paid leave programs. These programs would offer benefits to workers after the birth or adoption of a child and to workers who must take time off from work to care for a child, spouse, or parent who is ill. The Senate Appropriations Committee would provide $10 million for the fund. In FY2010, the Career Pathways Innovation Fund (part of Training and Employment Services) replaced the Community-Based Job Training Grants program. The fund received $125 million for FY2010. The Administration did not request any money for this fund for FY2011. Instead, the Administration supported legislation to create the American Graduation Initiative, which would provide support for community colleges. The Senate Appropriations Committee agreed to eliminate appropriations for the Career Pathways Innovation Fund, and noted that significant funding for similar purposes was provided in the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152 ). In FY2009, ARRA provided an additional $4.8 billion for DOL programs. Some of these funds could be obligated in FY2011. DOL program-specific plans for spending the money and other DOL reports are available at http://www.dol.gov/ recovery . DOL budget materials may be found at http://www.dol.gov/ dol/ aboutdol/ main.htm#budget . Detailed Appropriations Table Table 7 shows the appropriations details for offices and major programs of DOL. Department of Health and Human Services FY2010 discretionary appropriations for the Department of Health and Human Services (HHS) were $72,998 million. For FY2011, the Obama Administration requested $74,699 million, $1,701 million (2.3%) more than the FY2010 amount, as shown in Table 8 . As reported by the Senate Appropriations Committee, S. 3686 included $75,005 million in discretionary funding, $306 million above the request and an increase of $2,007 million (2.7%) over FY2010. Mandatory HHS programs included in the L-HHS-ED act were funded at $537.3 billion in FY2010, and consist primarily of Medicaid Grants to States ($307.8 billion), Payments to Health Care Trust Funds ($214.6 billion, including Medicare Part B and Part D), Foster Care and Adoption Assistance State Payments ($7.4 billion), Family Support Payments to States ($4.9 billion), and the Social Services Block Grant ($1.7 billion). Note that some other large mandatory HHS programs are not funded through the L-HHS-ED act. The Children's Health Insurance Program (CHIP) and the Temporary Assistance for Needy Families (TANF) program receive their funding directly in authorizing statutes, while Medicare Part A is funded primarily through payroll taxes. Highlights The following are some highlights for HHS of President Obama's FY2011 budget request and the amounts recommended by the Senate Appropriations Committee. See Table 9 for details. All comparisons of funding levels with FY2010 appropriations are based on regular appropriations only; they do not include ARRA funding obligated in FY2010. In addition, supplemental funds provided to a number of HHS programs by the Patient Protection and Affordable Care Act are not reflected in this report. The Senate committee, however, in explaining some of its funding decisions, made reference to PPACA appropriations available to certain programs. Funding amounts in Table 9 are rounded to the nearest million. The dollar changes and percent changes discussed in the text are based on unrounded amounts. A unique budget feature for some of the agencies and programs in HHS is funding received through the Public Health Service (PHS) Evaluation Set-Aside program, also known as the Evaluation Tap. The tap provides more than a dozen HHS programs with funding beyond their regular appropriations (or in a few cases, the tap provides their entire funding). The tap is authorized in section 241 of the PHS Act (42 U.S.C. § 238j), which allows the Secretary of HHS to redistribute a portion of eligible PHS agency appropriations for program evaluation purposes across HHS. In the annual L-HHS-ED act, Congress specifies the maximum percentage for the set-aside (currently 2.5% of eligible appropriations), and also allocates a portion of the available money for transfer to specific programs, as shown in Table 9 . The funding amounts from the tap are labeled "non-add" in the table since they are not counted in the totals of appropriated funds. They do figure, however, in the calculation of a program's or agency's "program level" funding amount, which reflects funding available from a number of possible sources, not just the annual appropriated amount. In some cases, an apparent change in the level of proposed appropriations for a program simply reflects a shifting of the share of funding supplied by appropriated funds versus funds made available through the tap; the "program level" of funding may not change greatly in such cases. Health Resources and Services Administration (HRSA) Health Centers programs. The President requested an additional $295 million (13.5%) for community health centers and other health centers programs, which would increase funding to $2,480 million. The Senate committee recommended $2,185 million, the same as the FY2010 level, and noted that an additional $1 billion had been appropriated for FY2011 for health centers in PPACA. HRSA Workforce Training programs. The President requested an increase of $27 million (19%) for the National Health Service Corps (NHSC), no increase for nursing workforce programs, and a $7 million (2.7%) increase for Title VII health professions programs. The Senate committee recommended level funding for NHSC at $141 million, noting that PPACA had provided $290 million for FY2011. The committee increased funding for nursing programs by $48 million (20%) from $244 million in FY2010 to $292 million for FY2011, and increased Title VII programs by $104 million (41%) from $253 million to $357 million. HRSA Health Care-Related Facilities and Activities. In FY2010, this account supported $337 million in non-competitive grants for construction and renovation (including equipment) at a variety of facilities, as well as related activities. The President requested $100 million for grants to help develop medical schools in health professional shortage areas. The Senate committee recommended $156 million for a list of specific projects. Centers for Disease Control and Prevention (CDC). For the FY2011 CDC appropriation, the President requested a $131 million (2.0%) decrease, while the Senate committee recommended a $130 million (2.0%) increase, from $6,453 million to $6,583 million. The committee's increase, however, was more than offset in program-level terms by its recommended $214 million decrease in the funding CDC would receive for certain programs through the PHS Evaluation Tap, discussed above. The request and the committee also differed in the amount they planned to use in funding available from a June 2009 supplemental appropriation for pandemic influenza ( P.L. 111-32 ). At the program level, the request and the committee would provide CDC with increases of 1.3% and 2.1%, respectively, over the FY2010 level. In describing total funding available for CDC programs, the committee also recommended that $663 million be transferred to CDC from the FY2011 appropriation of $750 million that was provided to the Prevention and Public Health Fund created by PPACA. Program-level funding for CDC's National Institute for Occupational Safety and Health (NIOSH) would increase by about 22% in both the request and the Senate committee recommendation, largely to provide a $79 million increase for the World Trade Center program. The committee shifted $70 million of the funds to come from the appropriation instead of from the evaluation tap. National Institutes of Health (NIH). The President requested a $1.0 billion increase (3.2%) for NIH, which was funded at $31.0 billion in FY2010. The Senate committee recommended the same level as the request, $32.0 billion. The committee noted that NIH faces a "funding cliff" in FY2011 (a steep drop in funding compared to FY2010) following the large amount of stimulus funding received through ARRA. About $5.7 billion of ARRA money was obligated in FY2010 in addition to regular appropriations. The committee indicated that the $1 billion, 3.2% proposed increase for FY2011 would match the estimated inflation rate for biomedical research. Within the $1 billion increase, the committee included $50 million to create the Cures Acceleration Network (CAN) authorized in PPACA. Its statutory language requires that NIH use only specifically appropriated funds to support the CAN. Substance Abuse and Mental Health Services Administration (SAMHSA). The President and the Senate committee substantially agreed on giving SAMHSA an increase of just over 3%, boosting the appropriation from $3.4 billion to $3.5 billion. A 10% increase of about $20 million was included for Substance Abuse Prevention activities. Agency for Healthcare Research and Quality (AHRQ). AHRQ is funded entirely through the PHS evaluation tap, receiving $397 million in FY2010. The President requested an overall increase of $214 million (54%) to $611 million, which included an increase of $252 million (67%) for patient-centered health research, also called comparative effectiveness research (CER). The Senate committee kept total AHRQ funding at $397 million, with $35 million designated for CER. The committee noted that PPACA created the Patient Centered Outcomes Research Institute to manage CER, and stated that it did not want to duplicate that effort. Centers for Medicare and Medicaid Services (CMS). The CMS Health Care Fraud and Abuse Control Initiative, first funded in FY2009, was proposed for a $250 million increase (80%), from $311 million to $561 million. The Senate committee agreed to that amount. The President also requested a $131 million increase (3.8%) for CMS Program Management, from $3.5 billion in FY2010 to $3.6 billion. The Senate committee recommended an increase of $104 million, $27 million less than the request. Administration for Children and Families (ACF). The President requested a decrease of $1.8 billion (35%) in discretionary funding for the Low-Income Home Energy Assistance Program (LIHEAP), which was funded at $5.1 billion in FY2010. A legislative proposal was offered with the budget request that would provide additional mandatory funding if energy prices increased significantly. The Senate committee agreed with the $3.3 billion discretionary funding request, noting that it assumed enactment of the trigger that would provide an estimated $2.0 billion in additional mandatory funding in FY2011, for a total program level of $5.3 billion. ACF Refugee and Entrant Assistance programs. The President requested $878 million for refugee programs, an additional $147 million (20%) above the FY2010 level of $731 million. The Senate committee recommended an increase of $104 million (14%) to $835 million. ACF Child Care and Development Block Grant (CCDBG). The President requested $2,927 million for CCDBG, an additional $800 million (38%) above the FY2010 level of $2,127 million. The Senate committee recommended an increase of $1.0 billion (47%) to $3,127 million to maintain the level of funding provided in ARRA. ACF Head Start program. The Senate committee agreed with the President's request to increase funding for Head Start by $990 million (14%), from $7,234 million in FY2010 to $8,224 million. Administration on Aging (AoA). The President requested $1,625 million for AoA aging services programs, an additional $109 million (7.2%) above the FY2010 level of $1,516 million. The Senate committee recommended an increase of $143 million (9.5%) to $1,659 million. Increases were recommended for various caregiver programs, senior nutrition services, and Lifespan Respite Care, among others. Funding for Aging and Disability Resource Centers was reduced by $10 million, the amount of a mandatory appropriation to AoA provided by PPACA. Within the Office of the HHS Secretary, the Public Health and Social Services Emergency Fund (PHSSEF) supports a number of preparedness, response, and related public health security functions. Total appropriations for the PHSSEF account, which were $1,346 million in FY2010, were decreased in the President's request by $136 million (10%) to $1,211 million. The Senate committee substantially agreed, recommending a total of $1,197 million in discretionary funding, $14 million less than the request. In addition, both the President and the committee planned to use $330 million in available balances from FY2009 funding for pandemic influenza. Within the PHSSEF, Biomedical Advanced Research and Development was proposed for a $136 million (40%) increase from $340 million in FY2010 to $476 million. The Senate committee agreed with the request. Funding for this activity is transferred from the Project BioShield Special Reserve Fund. The funds were originally appropriated as multi-year money to the Department of Homeland Security in FY2004, to remain available until FY2013; in FY2010, the remaining balances were transferred to HHS. Also within the PHSSEF, discretionary funding for pandemic influenza preparedness was $341 million in FY2010. For FY2011, the President requested and the Senate committee concurred in decreasing the amount by $275 million, to $66 million. HHS also plans to use $330 million from supplemental FY2009 funds for pandemic influenza contingencies, available until expended, that were provided in P.L. 111-32 in June 2009. L-HHS-ED acts from FY1998 through FY2009 barred federal funding for needle and syringe exchange programs set up to prevent blood-borne infections in intravenous drug users. The FY2010 appropriations act replaced the ban with a prohibition on funding such programs in any location that local public health or law enforcement agencies determine to be inappropriate (§505 of P.L. 111-117 , Division D). That language is retained in S. 3686 . ARRA provided HHS with an additional $21.9 billion in discretionary funding for FY2009, most of which was obligated by the end of FY2010. Some ARRA funds could be obligated in FY2011, and many programs will continue to outlay ARRA funds for the next several years. HHS program-specific plans for spending the money and other HHS Recovery Act reports are available at http://www.hhs.gov/ recovery/ reports/ index.html . HHS budget materials may be found at http://www.hhs.gov/ asrt/ ob/ docbudget/ . Abortion: Funding Restrictions Annual L-HHS-ED appropriations regularly contain restrictions that limit—for one year at a time—the circumstances under which federal funds can be used to pay for abortions. Restrictions on appropriated funds, popularly referred to as the "Hyde Amendments," generally apply to all L-HHS-ED funds. Medicaid is the largest program affected. As evidence of the perennial volatility of this issue, these provisions have been subject to periodic revision during the annual consideration of L-HHS-ED appropriations. From FY1977 to FY1993, abortions could be funded only when the life of the mother was endangered. The 103 rd Congress modified the provisions to permit federal funding of abortions in cases of rape or incest. The FY1998 L-HHS-ED appropriations, P.L. 105-78 , extended the Hyde provisions to prohibit the use of federal funds to buy managed care packages that include abortion coverage, except in the cases of rape, incest, or life endangerment. The FY1999 L-HHS-ED appropriations, P.L. 105-277 , continued the FY1998 Hyde Amendments with two added provisions: (1) a clarification to ensure that the restrictions apply to all trust fund programs (namely, Medicare), and (2) an assurance that Medicare + Choice plans (now Medicare Advantage) cannot require the provision of abortion services. No changes were made from FY2000 through FY2004. The FY2005 L-HHS-ED appropriations, P.L. 108-447 , added a restriction, popularly referred to as the "Weldon Amendment," that prevents federal programs or state or local governments that receive L-HHS-ED funds from discriminating against health care entities that do not provide or pay for abortions or abortion services. The FY2006 through FY2010 L-HHS-ED appropriations retained the Weldon amendment language and the Hyde restrictions. The current provisions can be found in §507 and §508 of P.L. 111-117 , Division D. For additional information, please see CRS Report RL33467, Abortion: Judicial History and Legislative Response , by [author name scrubbed]. Research on Human Embryos and Human Embryonic Stem Cells: Funding Restrictions In 1996, Congress prohibited NIH from using appropriated funds to create human embryos for research purposes or for research in which human embryos are destroyed ( P.L. 104-99 , §128). Since FY1997, annual appropriations acts have extended the prohibition to all L-HHS-ED funds, with NIH as the agency primarily affected. The restriction, popularly referred to as the "Dickey Amendment," has not changed significantly since it was first enacted. The current provision is found in §509 of P.L. 111-117 , Division D. It is retained in S. 3686 . In 2001, specific restrictions on federal funding for human embryonic stem cell research were put in place by executive order by President George W. Bush; they were subsequently removed by President Obama in 2009. Currently, guidelines developed by NIH in 2009 govern the conduct of human embryonic stem cell research and the approval of human embryonic stem cell lines that are eligible for use in research supported by federal funds. A pending court case challenges this use of federal funds, citing the Dickey Amendment language. For additional information, please see CRS Report RL33554, Stem Cell Research: Ethical and Legal Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed], and CRS Report RL33540, Stem Cell Research: Science, Federal Research Funding, and Regulatory Oversight , by [author name scrubbed] and [author name scrubbed]. Detailed Appropriations Table Table 9 shows the appropriations details for offices and major programs of HHS. Department of Education For FY2011, the Obama Administration requested $67,840 million in discretionary funding, $3,563 million (5.5%) more than the FY2010 amount, as shown in Table 10 . The Senate Appropriations Committee recommended $67,032 million in discretionary funding, $2,755 million (4.3%) more than the FY2010 amount. A single mandatory ED program is included in the L-HHS-ED bill, the Vocational Rehabilitation State Grants program. It was provided funding of $3,085 million in FY2010. Both the President's budget and the Senate Committee on Appropriations recommended level funding for the program for FY2011. Highlights The President's original budget request, issued in February 2010, was based on the assumption that the Elementary and Secondary Education Act (ESEA) would be authorized prior to, or in concert with, enactment of FY2011 appropriations legislation. The original budget proposed significant restructuring of the ESEA and would have consolidated many separate authorities into larger programs as part of a reauthorization. However, as ESEA reauthorization has not occurred, a revised budget request based on the current ESEA, reflecting current account and program structures, was subsequently made available by ED. This report reflects the revised budget based on existing law (the current ESEA). However, in order to facilitate comparison of the President's budget with the Senate Appropriations Committee's FY2011 recommendations and with the FY2010 funding level, the Pell grant program is treated as discretionary, although the President's budget proposes converting it to a mandatory program in FY2011. Both the President's FY2011 budget request and the Senate Appropriations Committee's recommendations for FY2011 would increase funding for several programs, and would eliminate several existing programs. Funding amounts in Table 11 are rounded to the nearest million. The dollar changes and percent changes discussed in the text are based on unrounded amounts. The Senate Committee on Appropriations recommended $14,942 million in discretionary funding for ESEA Title I-A Education Grants for the Disadvantaged, an increase of $450 million (3.1%) over FY2010 funding. The President's budget would level fund the program in FY2011. The Senate Committee on Appropriations recommended $300 million in discretionary funding for a new Early Learning Challenge Fund program. No discretionary funding was requested for this program in the President's FY2011 budget. The President's budget proposed funding of $900 million for School Improvement Grants in FY2011, $354 million (64.9%) above FY2010 funding. The Senate Committee on Appropriations recommended funding of $625 million for School Improvement Grants for FY2011, an increase of $79 million (14.5%) above FY2010 funding. The Senate Committee on Appropriations recommended expanding the mission of the 21 st Century Community Learning Centers program, and would provide funding of $1,266 million, an increase of $100 million (8.6%) over FY2010 funding. The President's budget would maintain funding for the program at FY2010 levels. The President's budget recommended FY2011 funding for two programs initiated by American Recovery and Reinvestment Act funding (P.L. 111-5) in FY2009; it would fund Race to the Top at $1,350 million, and Investing in Innovation at $500 million. Neither program received any regular FY2010 appropriations. The Senate Committee on Appropriations would fund Race to the Top at $675 million in FY2011, and it would fund Investing in Innovation at $250 million. The President's budget proposed funding of $800 million for the Teacher Incentive Fund in FY2011, $400 million (100%) above FY2010 funding. The Senate Committee on Appropriations recommended level funding for the program in FY2011. The President's budget proposed increasing funding for the Promise Neighborhoods Initiative to $210 million in FY2011, an increase of $200 million (2,000%) above FY2010 funding. The Senate Committee on Appropriations proposed funding Promise Neighborhoods at $20 million in FY2011, a $10 million increase (100%) above FY2010 funding. The President's budget proposed funding of $11,755 million for the Individuals with Disabilities Education Act (IDEA), Part B Grants to States, an increase of $250 million (2.2%) over FY2010 funding. The Senate Committee on Appropriations recommended funding of $11,925 million for IDEA Part B Grants to States, an increase of $420 million (3.7%) over FY2010 funding. Detailed Appropriations Table Table 11 shows the appropriations details for major programs of ED. Related Agencies Discretionary appropriations for Related Agencies for FY2010 were $14,077 million. For FY2011, the Obama Administration requested $15,232 million, which is $1,156 million (8.2%) more than the FY2010 amount. The Senate Appropriations Committee would provide $15,195 million for Related Agencies for FY2011, which is a 7.9% increase above the amount provided for FY2010. See Table 12 . Mandatory programs for Related Agencies included in the L-HHS-ED bill were funded at $47.3 billion for FY2010, virtually all of it for the Supplemental Security Income (SSI) program. Highlights The following are some highlights for Related Agencies of President Obama's FY2011 budget request and the amounts recommended by the Senate Appropriations Committee. See Table 13 for details. All comparisons of funding levels with FY2010 appropriations are based on FY2010 regular appropriations only. Funding amounts in Table 13 are rounded to the nearest million. The dollar changes and percent changes discussed in the text are based on unrounded amounts. The Administration requested $12,378 million for administrative expenses for the Social Security Administration (SSA). The request is $932 million (8.1%) more than the amount Congress provided for FY2010. The Senate Appropriations Committee agreed to the Administration's request. The President requested $1,416 million for the Corporation for National Community Service (CNCS). The request is $266 million (23.1%) more than the amount provided for FY2010. The request includes an additional $148 million (from $537 million to $685 million) for National Community Service Programs and $97 million more (from $197 million to $294 million) for the National Service Trust. The Senate Appropriations Committee provided $1,366 million more for the CNCS, or $50 million less than the amount requested by the President. The President's budget includes a request for $50,138 million for Supplemental Security Income (SSI) benefits. The request is $2,838 million (6.0%) more than the amount provided for FY2010. The Senate Appropriations Committee agreed to the President's request. The Senate Appropriations Committee would provide $3 million for the National Health Care Workforce Commission, which was created by the Patient Protection Affordable Care Act (PPACA, P.L. 111-148). In FY2009, the ARRA provided an additional $1.2 billion in discretionary funding for Related Agencies. Some of this money could be obligated in FY2011. Both SSA and CCNS have developed implementation plans for spending the money. The plans and other reports are available at http://www.ssa.gov/ recovery and http://www.nationalservice.gov/ about/ recovery/ index.asp . Detailed Appropriations Table Table 13 shows the appropriations details for offices and major programs of the L-HHS-ED Related Agencies. Appendix. Terminology and Web Resources The following items include some of the key budget terms used in this report; they are based on CRS Report 98-720, Manual on the Federal Budget Process , by [author name scrubbed] and Allen Schick (pdf). The websites provide general information on the federal budget and appropriations. Advance appropriation is budget authority that will become available in a fiscal year beyond the fiscal year for which the appropriations act is enacted; scorekeeping counts the entire amount in the fiscal year it first becomes available for obligation. Appropriation is budget authority that permits federal agencies to incur obligations and to make payments out of the Treasury for specified purposes. Appropriations represent the amounts that agencies may obligate during the period of time specified in the law. Annual appropriations are provided in appropriations acts; most permanent appropriations are provided in substantive law. Major types of appropriations are regular, supplemental, and continuing. Budget authority is legal authority to incur financial obligations that normally result in the outlay of federal government funds. Major types of budget authority are appropriations, borrowing authority, and contract authority. Budget authority also includes the subsidy cost to the federal government of direct loans and loan guarantees, estimated on a net present value basis. Budget resolution is a concurrent resolution passed by both chambers of Congress, but not requiring the signature of the President, setting forth the congressional budget for at least five fiscal years. It includes various budget totals and functional allocations. Discretionary spending is budget authority provided in annual appropriations acts, other than appropriated entitlements. Entitlement authority is the authority to make payments to persons, businesses, or governments that meet the eligibility criteria established by law; as such, it represents a legally binding obligation on the part of the federal government. Entitlement authority may be funded by either annual or permanent appropriations acts. Forward funding is budget authority that becomes available after the beginning of the fiscal year for which the appropriation is enacted and remains available into the next fiscal year; the entire amount is counted or scored in the fiscal year in which it first becomes available. Mandatory (direct) spending is budget authority provided in laws other than annual appropriations acts, including appropriated entitlements. Rescission is the cancellation of budget authority previously enacted. Scorekeeping is a set of procedures for tracking and reporting on the status of congressional budgetary actions. Supplemental appropriation is budget authority provided in an appropriations act that provides funds that are in addition to regular appropriations. Websites General information on budget and appropriations may be found at these websites. Specific L-HHS-ED agency sites are listed in relevant sections of this report. House Committees http://appropriations.house.gov/ http://democrats.appropriations.house.gov http://budget.house.gov/ http://democrats.budget.house.gov/ Senate Committees http://appropriations.senate.gov/ http://budget.senate.gov/ democratic/ http://budget.senate.gov/ republican/ Congressional Budget Office (CBO) http://www.cbo.gov/ Congressional Research Service (CRS) http://www.crs.gov/ Pages/ clis.aspx? cliid= 73 Government Accountability Office (GAO) http://www.gao.gov/ Government Printing Office (GPO) http://www.gpoaccess.gov/ usbudget/ Office of Management and Budget (OMB) http://www.whitehouse.gov/ omb/ budget/ Overview/ Statements of Administration Policy (SAPs): http://www.whitehouse.gov/ omb/ 111/ legislative_sap_date/

This report tracks FY2011 appropriations for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED). This legislation provides discretionary funds for three major federal departments and 14 related agencies. The report summarizes L-HHS-ED discretionary funding issues but not authorization or entitlement issues. President Obama requested $172 billion in discretionary L-HHS-ED funds for FY2011, compared to $165 billion provided in the FY2010 Consolidated Appropriations Act (P.L. 111-117, Division D). The House L-HHS-ED Appropriations Subcommittee held a markup session in July 2010, but the full committee did not report a bill. In August 2010, the Senate Committee on Appropriations reported S. 3686 (S.Rept. 111-243), its FY2011 L-HHS-ED proposal, recommending $171 billion in discretionary funds. A continuing appropriations resolution, P.L. 111-242 as amended, provides temporary funding for the government until April 8, 2011, at the FY2010 rate of operations for most programs. However, P.L. 112-4 and P.L. 112-6 reduced funding for some L-HHS-ED programs by a total of about $2.5 billion. The House passed a full-year government funding bill, H.R. 1, on February 19, 2011, which would have reduced L-HHS-ED funding by about $25 billion and included several controversial policy riders. On March 9, the Senate rejected both H.R. 1 and a substitute amendment that would have cut L-HHS-ED funds by about $0.5 billion. Department of Labor (DOL). The Administration requested $14.0 billion in discretionary funding for DOL for FY2011, compared to $13.5 billion provided for FY2010. The request included increases for Unemployment Compensation, youth training, and adult training. The Senate Appropriations Committee approved $13.9 billion. H.R. 1 and the Senate amendment would have provided $8.6 billion and $13.2 billion, respectively. Department of Health and Human Services (HHS). The Administration requested $74.7 billion in discretionary funding for HHS for FY2011, compared to $73.0 billion provided for FY2010. The request included increases for Health Centers, National Institutes of Health, Health Care Fraud and Abuse Control, Child Care and Development Block Grant, and Head Start. The Senate Appropriations Committee approved $75.0 billion. H.R. 1 and the Senate amendment would have provided $64.7 billion and $72.9 billion, respectively. Department of Education (ED). The Administration requested $67.8 billion in discretionary funding for ED for FY2011, compared to $64.3 billion provided for FY2010. The request included two programs previously funded by the American Recovery and Reinvestment Act (P.L. 111-5), and would increase funding for several additional programs in FY2011. The Senate Appropriations Committee approved $67.0 billion. H.R. 1 and the Senate amendment would have provided $59.4 billion and $70.1 billion, respectively. Related Agencies. The Administration requested $15.2 billion in discretionary funding for Related Agencies for FY2011, compared to $14.1 billion provided for FY2010. The Senate Appropriations Committee approved $15.2 billion. H.R. 1 and the Senate amendment would have provided $12.3 billion and $14.4 billion, respectively. Note that at present, only the Summary and the Most Recent Developments sections of this report have been updated to reflect the 112th Congress's activities on continuing resolutions and full-year appropriations proposals. Links to other recent CRS reports are provided. The balance of this report discusses the President's request and the Senate Appropriations Committee bill.

Introduction The U.S. Constitution provides Congress with powers over the Armed Forces, including the power "to make Rules for the Government and Regulation of the land and naval Forces." As such, Congress has oversight of Department of Defense (DOD) policies and programs. Congressional efforts to address military sexual assault intensified in 2004 in response to rising public concern about the rate and number of assaults and perceptions of an inadequate response by the military to support the victims and to hold perpetrators accountable. In February of 2004, the Senate Armed Services Committee Subcommittee on Personnel held a hearing on Policies and Programs for Preventing and Responding to Incidents of Sexual Assault in the Armed Services. In his opening statement, the ranking member, Senator E. Benjamin Nelson, stated, We're greatly alarmed at reports of sexual assaults on our service women and the apparent failure of the military systems to respond appropriately to the needs of the victims. Women who choose to serve their Nation in military service should not have to fear sexual attacks by their fellow servicemembers. When they are victims of such an attack, they absolutely must have effective victim intervention services readily available to them, and they should not fear being punished for minor offenses when they report the attack, or being re-victimized through the investigative process. In the same year, Congress enacted law requiring the Secretary of Defense to develop a comprehensive policy on the prevention of sexual assaults involving servicemembers and to begin annual reporting on statistics and metrics related to sex-related violence in the military. Since 2004, Congress has enacted over 100 provisions intended to address various aspects of the problem as part of the National Defense Authorization Act (NDAA). The potential threat of sexual violence against military servicemembers has been part of the debates over whether women should be allowed to serve in the military and in certain combat roles, and whether they should be required to register for the selective service and be subject to a military draft. In these debates, a frequently cited concern has been the possibility that women could be captured, exposing them to potential sexual violence from enemy forces. However, the threat of sexual assault does not only come from enemy forces, nor is it only a threat for women in the military. In the 1990s, several military sexual misconduct incidents (e.g., the Navy's 1991 Tailhook Conference, and the Army's Aberdeen Proving Ground scandal) garnered congressional attention. These events highlighted the internal threat of assault perpetrated by one servicemember on another. In 2003, a sexual assault scandal at the Air Force Academy again brought public attention to sexual assault in a training environment and called into question senior military leaders' efforts to establish an appropriate culture for prevention of and response to sexual assault. Shortly thereafter, allegations of sexual assaults by servicemembers on fellow servicemembers deployed to combat theaters in Iraq and Kuwait raised concerns that the prevalence of sexual violence in theater could have a negative effect on the morale and effectiveness of deployed units. More recently, statistics have shown that in absolute numbers, more men than women in the military report experiences with unwanted sexual contact. This has raised the profile of male sexual assault and DOD policies and programs to support male victims. Finally, the exposure of sexist comments and nonconsensual sharing of sexually explicit/intimate images among the Marines United social media group led many in Congress to question the impact of service culture on sexism and sexual violence. Sexual violence is not a problem confined to the military. Actual prevalence in the civilian sector is difficult to estimate as many experts believe sexual assault is an underreported crime. Some national surveys suggest that up to 19.3% of women and 1.7% of men in the United States have been victims of sexual assault at some point in their lives. There is a continued national dialogue with regard to sexual violence at universities, and other government and private organizations. Congress also has shown an interest in addressing society-wide issues through broad legal reforms. Nevertheless, there are particular aspects of military service (e.g., the possibility of remote assignments, the command structure, and the unique justice system) that may require different policy solutions than those that might apply in the civilian workplace. Sexual assault can have both deleterious physical and psychological effects on the victim. This is particularly true if the alleged victim and perpetrator are in the same unit. According to a psychologist specializing in military sexual assault, "When you are raped by a stranger, you don't have to deal with that in day-to-day life. [In the military, the victim] deals with the rape and the impact on her community and also the ongoing influence of the offender on her life outside of that specific assault." When an assault occurs in or around the workplace it can negatively affect the working environment and organizational functioning. In the military context, when the ability of a unit to work together effectively is impaired, it can ultimately impact mission success. Survey data from 2016 indicates that among those servicemembers who experienced sexual assault in the previous year, 73% of the incidents occurred at a military location. What is Military Sexual Assault? Major criminal sexual violence offenses in the military are defined in in the Uniform Code of Military Justice (UCMJ), Chapter 47, Title 10 United States Code. Since 2006, Congress has made substantial changes to the UCMJ articles regarding these offenses. DOD policies further define sexual assault as intentional sexual contact characterized by the use of force, threats, intimidation, or abuse of authority or when the victim does not or cannot consent. While some of DOD's sexual violence policies and programs may apply to DOD civilians and military dependents, this report will focus primarily on sexual assaults involving uniformed servicemembers as alleged victims or perpetrators. This includes active component members, cadets and midshipmen, and Reserve Component members who are involved in an incident while performing active service or inactive duty training. Intimate partner and child sexual assaults involving military family members are typically handled by the DOD Family Advocacy Program. The Department of Veterans Affairs handles health care needs for former servicemembers with trauma related to military sexual assault, often termed Military Sexual Trauma (MST), therefore veterans programs are beyond the scope of this report. Also not discussed in this report are policies and programs specific to the U.S. Coast Guard (while operating under the Department of Homeland Security), although much of the statute that applies to DOD servicemembers also applies to uniformed members of the Coast Guard and the Coast Guard Academy. Finally, this report does not address sexual assault at the Merchant Marine Academy, which falls under the Department of Transportation. Because sexual harassment can be associated with community risk factors for sexual assault, congressional efforts to combat sexual harassment in the military form part of this analysis. However, within DOD the process for handling sexual harassment complaints is separate and distinct from sexual assault allegation processes. Sexual harassment is considered a form of sex discrimination and falls under DOD military equal opportunity policies. DOD's Office of Diversity Management and Equal Opportunity oversees these issues. A Framework for Congressional Oversight Given the extensive legislative and policy reform in this arena, CRS offers this framework for analysis and oversight. This framework may help congressional staff understand the legislative and policy landscape, link proposed policy solutions with potential impact metrics, and identify possible gaps that remain unaddressed. Congressional oversight and action on military sexual assault can be organized into four main categories. DOD management and accountability. Prevention. Victim protection and support. Military justice and investigations. DOD management and accountability pertains to organization, monitoring, and evaluation of DOD's efforts in sexual assault prevention and response. Prevention efforts are aimed at "reducing the number of sexual assaults involving members of the Armed Forces, whether members are the victim, alleged assailant, or both." Victim protection and support focuses on DOD's response once an alleged assault has occurred, including actions to protect and support the victim. Finally, m ilitary justice and investigations addresses holding perpetrators accountable through military investigative and judicial processes. DOD Management and Accountability Subject to the direction of the President, the Secretary of Defense has "authority, direction, and control over the Department of Defense." This authority allows the Secretary to develop military personnel policies and programs. Congress, under its authority to regulate the armed forces, has taken considerable interest over the past 15 years in the effectiveness of DOD's sexual assault prevention and response initiatives, and in the disposition of military sexual assault investigations. Congress has raised questions about accountability and organization, which can generally be summarized as: Is DOD organized to manage and oversee sexual assault prevention and response programming effectively? Are appropriate policies and procedures in place and are they adequately communicated to the military departments? Do sufficient, rigorous, and objective data-collection processes and metrics exist to measure the extent of the problem and to evaluate DOD progress in addressing the issue? DOD Organization, Policy, and Planning On February 5, 2004, following allegations of sexual assault from servicemembers deployed to Iraq and Kuwait, the Secretary of Defense directed the establishment of the Care for Victims of Sexual Assault Task Force. This Task Force's report was released in April 2004. At this time, military departments and services had primarily managed sexual assault regulations and programs. One of the main findings from this report was that definitions, policies, and processes for sexual assault prevention and reporting across services were inconsistent and incomplete. This led the Task Force to recommend a single defense-wide point of accountability. In response to this recommendation, DOD established the Joint Task Force for Sexual Assault Prevention and Response in October 2004. This Joint Task Force took responsibility for developing a new DOD-wide sexual assault policy as directed by Congress in the FY2005 NDAA ( P.L. 108-375 §577). It delivered the new policy on January 1, 2005. At that same time, the Joint Task Force transitioned into the permanent structure that is now the Sexual Assault Prevention and Response Office (SAPRO) under the Office of the Secretary of Defense. The FY2005 NDAA also included a provision that established the Defense Task Force on Sexual Assault in the Military Services (SAMS) that renamed, expanded the scope, and extended the timelines of the existing Task Force on Sexual Harassment and Violence at the Military Service Academies. SAPRO Structure, Functions and Roles The SAMS Task Force's December 2009 report made 30 recommendations for enhancing DOD SAPR programs and policies. In the area of SAPRO functions and structure, the task force noted the need for better coordination among stakeholders and improvement in staff experience levels. As such, the task force recommended revising the SAPRO structure to reflect the expertise necessary to lead and oversee its primary missions of prevention, response, training, and accountability; appointing a SAPRO director at the general or flag officer level, active duty military personnel from each Service, and an experienced judge advocate; and establishing a Victim Advocate position whose responsibilities and authority include direct communication with victims. Following this report, Subtitle A of the FY2011 NDAA formalized the role and functions of the SAPR office and programs. Section 1611 of the act provided statutory requirements and roles for the inspector general, SAPRO staff, and the director. Operating under the oversight of an Advisory Working Group the statutory duties of the SAPRO Director are to (1) oversee implementation of the comprehensive policy for the Department of Defense sexual assault prevention and response program; (2) serve as the single point of authority, accountability, and oversight for the sexual assault prevention and response program; and (3) provide oversight to ensure that the military departments comply with the sexual assault prevention and response program. In particular, this provision required DOD to assign at least one officer from each of the Services (Army, Navy, Marine Corps, and Air Force) to the SAPRO office, and required those assigned officers to be in the grade of O-4 (Lieutenant Commander or Major) or above. The law also required at least one of the four officers assigned to be in the grade of O-6 (Captain or Colonel) or above. The FY2012 NDAA further required that the SAPRO director be a general or flag officer (GFO) or equivalent civilian employee. Strategic Planning and Evaluation The SAMS Task Force 2009 report also recommended that DOD create a comprehensive sexual assault prevention strategy to aid in standardization and coordination across the Services. Subsequent provisions in the FY2011 NDAA ( P.L. 111-383 ) required DOD to develop and implement a plan to evaluate sexual assault prevention and response programs and establish standards to assess progress on strategic goals. In May 2013, DOD released its first Sexual Assault Prevention and Response (SAPR) strategic plan including five distinct lines of effort: Prevention: deliver consistent and effective methods and programs. Investigation: achieve high competence in the investigation of sexual assault. Accountability: achieve high competence in holding offenders appropriately accountable. Victim Assistance and Advocacy: deliver consistent and effective victim support, response, and reporting options. Assessment: effectively standardize, measure, analyze, assess, and report program progress. DOD updated the strategic plan in January 2015 and again on December 1, 2016, for 2017-2021. Assessment: DOD Metrics and Non-Metrics In 2014, in collaboration with subject matter experts, researchers and policy-makers, DOD developed a series of measurable metrics and non-metrics to "help illustrate and assess DOD progress in sexual assault prevention and response" (see Table 1 ). Metrics are included in DOD's data gathering and reporting as discussed in the next section. DOD leaders and Congress may use metrics to support oversight and to gauge whether outcomes are being met. For example, metrics such as "estimated prevalence versus reporting" may help Congress to assess whether reforms to support and protect victims of sexual assault are increasing the percentage of individuals willing to make reports and initiate investigative processes. Non-metrics differ from metrics in that they are intended to be descriptive in nature only. These items address the military justice process. Any effort by military commanders to direct aspects or outcomes of the judicial process may constitute unlawful command influence in the military justice system. For example, if a military commander were observed trying to reduce the "time interval from report of sexual assault to nonjudicial punishment outcome" (non-metric 4), it could be perceived as pressuring investigators to forgo a thorough investigation in the interest of speed. These non-metrics may still be useful for congressional oversight, as they can indicate potential issues or trends within the military justice system. DOD Plan of Action for Male Sexual Assault In 2015, in response to growing concerns about the prevalence and low reporting rates for male victims of sexual assault in the military, Congress, in the FY2016 NDAA, also required DOD to develop a plan to prevent and respond to cases of male sexual assault. DOD's plan, released in August 2016, outlined four key objectives: Develop a unified communications plan tailored to men across the DOD. Improve servicemember understanding of sexual assault against men. Ensure existing support services meet the needs of males who experience sexual assault. Develop metrics to assess prevention and response efforts pertaining to males who experience sexual assault. In addition, DOD has put together a working group to oversee progress toward these objectives and intends to reevaluate outreach, response, and prevention efforts within three years of completion of the plan's objectives. Data Collection, Management, and Reporting The availability and quality of sexual assault data are fundamental elements of accountability. DOD has provided annual reports to Congress related to sexual assault in the military since calendar year 2004—the statutory requirement for reporting was added in FY2011. In 2009, the SAMS Task Force report noted a lack of precision and reliability in annually reported data. In addition, the task force highlighted inconsistencies in terminology use among the services that could potentially affect data integration. As a result of these findings, the task force recommended several improvements to DOD's annual reporting processes. Congress has amended and expanded the statutory requirements for various elements of this report over the past decade in response to the 2009 Task Force recommendations and other information needs. For example, the FY2013 NDAA required reporting of additional case synopsis details (i.e., alcohol involvement, existence of moral waivers for offenders, etc.) and FY2015 NDAA required an analysis of the disposition of sexual assault offenses. DOD, Congress and other stakeholders use information from this annual report to analyze trends, evaluate SAPR program effectiveness, and develop evidence-based approaches to improve prevention and response. However, gathering data and measuring sexual assault prevalence and trends is challenging for a number of reasons. For one, sexual assault is widely considered to be the most underreported type of violent crime in the United States. According to the U.S. Department of Justice (DOJ), Bureau of Justice Statistics' National Criminal Victimization Survey (NCVS), an estimated 34% of rapes and other sexual assaults were reported to police in 2014. This compares to robberies, of which roughly 61% were reported to the police, or domestic violence incidents, of which roughly 56% were reported. There are various reasons for underreporting, including personal embarrassment or shame, lack of trust in the criminal justice system, or fear of reprisals or stigmatization. Some researchers have cautioned against comparisons of military sexual assault statistics with civilian data, noting that, "rates of sexual assault are likely to be sensitive to the age distribution in the population, the gender balance, education levels, the proportions that are married, duty hours, sleeping accommodations, alcohol availability, and many other sexual assault risk factors that differ between the active-duty population and various candidate comparison groups." In addition, data collection, comparisons, and analysis of trends are difficult when different organizations use inconsistent terminology or metrics. For example, until 2013, the Federal Bureau of Investigation (FBI) defined forcible rape as "the carnal knowledge of a female forcibly against her will." This definition excluded male victims and other sexual offenses that are criminal in most jurisdictions. In 2016, the Government Accountability Office (GAO) released a report that highlighted the difficulties and lack of standardization across federal agencies in defining and collecting data on sexual assault. The review included four federal agencies—DOD, Department of Education, Department of Health and Human Services, and Department of Justice. According to the GAO report, these agencies, [M]anage at least 10 efforts to collect data on sexual violence, which differ in target population, terminology, measurements, and methodology. […]These data collection efforts use 23 different terms to describe sexual violence. DOD definitions related to sexual assault have varied over time as has the methodology for DOD's data collection. To address the issue of consistency in definitions, Section 577 of the FY2005 NDAA required DOD to develop a uniform definition of sexual assault that applies to all the Armed Forces. Changes to the UCMJ in 2012 also affected categorization of incidents, creating a challenge for comparisons of incident indicators over time. DOD uses various tools to collect, record, and manage sexual assault data. These tools include surveys, focus groups, and the Defense Sexual Assault Incident Database (DSAID) (see below). While some surveys are used to estimate prevalence of reported and unreported incidence of sexual violence and harassment, DSAID is used for recording actual reported incidents. As discussed above, sexual violence is often under-reported, so there are likely to be disparities between prevalence estimates and DSAID incident data. Defense Sexual Assault Incident Database (DSAID) Congressional actions in 2004 and subsequent legislation required DOD to enhance the collection and management of reported sexual assault incident data. In particular, Section 583 of the FY2007 NDAA required the Secretary of Defense to [I]mplement a centralized, case-level database for the collection and maintenance of information regarding sexual assaults involving a member of the Armed Forces; including, nature of the assault, the victim, the offender, and the outcome of legal proceedings in connection with the assault. The provision required that this database be used to create the sexual assault-related congressional reports mandated in previous and subsequent NDAAs. The resulting database, known as the Defense Sexual Assault Incident Database (DSAID) has been in place since 2012 and was fully implemented in October 2013. It is the primary mechanism for tracking reported incidents, the associated circumstances, and the disposition of cases. DSAID has three primary functions: (1) to serve as a case management system for the maintenance of data on sexual assault cases and to track support for victims in each case; (2) to facilitate program administration and management for SAPR programs; and (3) to develop congressional reports, respond to ad hoc queries, and assist in trend analysis. The Defense Assault Incident Database Form is used to collect sexual assault incident data. This form is typically completed by a SAPR responder. The victim may choose to submit a restricted report, in which case no personally identifiable information for the victim or subject is captured on the report. If a victim selects to submit an unrestricted report, the form will include personally identifiable information, but other document privacy controls still apply. See Table 7 for selected aggregate incident data from FY2013 to FY2017. In 2016 the GAO conducted a separate review of DSAID to examine the extent to which the database has met the mandated requirements. According to a 2017 GAO report, DOD has plans to spend $8.5 million over fiscal years 2017 and 2018 to improve DSAID, for a total expenditure of approximately $31.5 million on implementing and maintaining the database since its initial development. DOD Surveys and Focus Groups DOD uses a variety of surveys and focus groups to collect data on the prevalence of and attitudes toward sexual violence and to provide feedback from servicemembers on the effectiveness of DOD prevention and response programs. These data are used for program assessment metrics and non-metrics. The Department has recently introduced additional surveys specifically for victims of sexual assault to better understand their experiences with sexual assault support programs and the military investigative and judicial processes. Workplace and Gender Relations Survey The NDAA for FY1997 ( P.L. 104-201 ) first required DOD to include gender in mandated servicemember surveys on issues of harassment and discrimination in the military. In the FY2013 NDAA, Congress added assault to the survey requirements and mandated surveys of active duty and reserve component servicemembers every two years in alternating years beginning in 2014. DOD's Office of People Analytics (OPA) currently administers the Workplace and Gender Relations Survey (WGR) to measure the past-year prevalence of sexual assault, sexual harassment and gender discrimination. This survey is administered to random samples of active duty and reserve component members and used to assess the prevalence of self-reported "gender-based harassment, assault, and discrimination". There are some limitations to this survey. As noted by the Adult Sexual Crimes Panel in its 2014 report, […] this survey is not meant to—and does not—accurately reflect the number of sexual assault incidents that occur in a given year, nor can it be used to extrapolate crime victimization data. For example, the definition of unwanted sexual contact used in the survey covers a wide range of conduct that may not rise to the level of a crime. In particular, the survey measures "unwanted sexual conduct" and does not use the same definitions of sexual assault as those in the UCMJ. The reason for this approach is that it is assumed that the average servicemember completing the survey may not be familiar with the more technical UCMJ terms, and thus might not be able to accurately categorize the offense that they experienced. In 2014, a congressionally mandated panel, the Response Systems to Adult Sexual Assault Crimes Panel, recommended that DOD update its sexual assault survey language and metrics to align better with the UCMJ Article 120 definitions of rape and sexual assault. In response, DOD contracted with the RAND Corporation to review the survey methodology for the WGR and to conduct an independent assessment of sexual assault, sexual harassment, and gender discrimination in the military. RAND fielded two surveys; the first used the same questions as in the previous WGR survey. The second, the RAND Military Workplace Survey (RMWS) used a newly constructed crime victimization measure with more explicitly and anatomically defined terms. In particular, the new definitions removed the terms sex or sexual when describing an act, as the act does not need to be associated with sexual gratification to qualify as a crime under the UCMJ, but instead might be designed to humiliate or debase the person that is assaulted. RAND found that under the new survey methodology, the estimated number of self-reported assaults was higher than in previous surveys particularly in those classified as penetrative s exual assaults . The survey also pointed to a notably large difference from previous surveys in the number of assaults men reported. One of the clear findings from this survey was that men were more likely to describe a sexual assault as "hazing." To be measured as a sexual assault in the survey data, three requirements must be met. The member must indicate experiencing the following UCMJ-based actions by the perpetrator: At least one sexual assault behavior (i.e., rape, sexual assault, aggravated sexual contact, abusive sexual contact, forcible sodomy, or attempts to commit these offenses) At least one intent behaviors (i.e., sexual gratification, abuse, or humiliation), and At least one coercive mechanism (e.g., threats, use of force, inability to consent). Selected results from the FY2016 survey by service are shown in Figure 2 . In 2016, estimated prevalence rates across the active-duty population in DOD were 4.3% for women and 0.6% for men. These estimated prevalence rates were slightly lower than reported prevalence rates in 2014 (4.9% and 0.9% respectively). To address findings from related civilian studies that showed higher rates of sexual assault in populations that identify as lesbian, gay, bisexual, and transgender (LGBT), DOD incorporated additional questions on sexual orientation in the 2016 WGRA survey. DOD's findings were consistent with civilian literature, indicating that LGBT members are statistically more likely to experience sexual assault than members who do not identify as LGBT (see Table 3 ). Service Academy Gender Relations Survey and Focus Groups Section 532 of the FY2007 NDAA, required the military departments to conduct annual assessments of the effectiveness of service academy policies, training, and procedures with respect to sexual harassment and sexual violence involving academy personnel. This law requires surveys be conducted in odd-numbered years. The military departments conduct focus groups at the academies in even-numbered years to supplement the annual assessment requirements. Focus Groups on Sexual Assault Prevention and Response Starting in 2015, DOD began including focus groups for active duty servicemembers in its assessment cycle. Like the service academy focus groups, the servicemember focus groups are conducted in alternate years to the WGRA survey to "provide deeper insights into the dynamics behind survey results and help better understand potential emerging trends." In the 2015 focus groups, 459 active duty members across the four services participated. Survivor Experience Survey The Survivor Experience Survey (SES) began in 2014 in response to a Secretary of Defense directive. DMDC's Survey Design, Analysis and Operations Branch, designed this survey in coordination with SAPRO experts. The survey gathers information related to a sexual assault survivor's awareness of, and experience with, DOD's reporting process and support services, including sexual assault response coordinators (SARCs), victims' advocates (VAs), and medical and mental health services. This survey was the first survey of survivors to be conducted across the active and reserve components. To maintain anonymity, the SES was distributed primarily through the SARCs, VAs, and legal counsels to all sexual assault survivors who had made an unrestricted or restricted report of sexual assault at least 30 days prior. The survey continues to be administered on a rolling basis. Military Investigation and Justice Experience Survey The Military Investigation and Justice Survey (MIJES) is an anonymous survey first administered by DOD between August 31 and December 4, 2015. The purpose of this survey is to "provide the sexual assault victim/survivor the opportunity to assess and provide feedback on their experiences with SAPR victim assistance, the military health system, the military justice process, and other areas of support." The MIJES is focused only on those military servicemembers who made a formal (unrestricted) report of sexual assault and had the case closed during a specified time period. The survey excludes those victims whose alleged assailant was not a military member. QuickCompass of Sexual Assault Prevention and Response-Related Responders The QuickCompass of Sexual Assault Prevention and Response-Related Responders (QSAPR) survey is an evaluation tool administered by DMDC to provide insights on the effectiveness of DOD's sexual assault responder programs. The 2015 QSAPR was administered to all certified Sexual Assault Response Coordinators (SARCs) and Victim Advocates (VA). This is the third survey to be administered to the responder population with previous surveys in 2009 and 2012. The survey is intended to capture the experiences and perspectives of sexual assault responders. DOD uses the results of this survey to identify additional resource needs for responder programs, assess the degree of SAPR policy implementation across the services, and complement other surveys in understanding issues that "may discourage reporting or negatively affect perceptions of the SAPR program." Prevention DOD uses the U.S. Centers for Disease Control and Prevention (CDC) terminology to define prevention and prevention strategies as they apply to sexual violence. This section of the report mainly discusses primary prevention of sexual assault, characterized by the CDC as, population-based and/or environmental and system-level strategies, policies, and actions that prevent sexual violence from initially occurring. Such prevention efforts work to modify and/or entirely eliminate the events, conditions, situations, or exposure to influences (risk factors) that result in the initiation of sexual violence and associated injuries, disabilities, and deaths. The CDC has identified four types of risk factors that are correlated with higher incidence of sexual assault, (1) individual risk factors (e.g., general aggressiveness and acceptance of violence, alcohol/drug use); (2) relationship risk factors (e.g., association with sexually aggressive, hypermasculine , and delinquent peers); (3) community risk factors (e.g., general tolerance of sexual violence, lack of institutional support); and (4) societal risk factors (e.g., weak gender-equity laws/policies). A full list of these risk factors is displayed in the Appendix in Table A-2 . Military leaders have repeatedly stated a "zero tolerance" philosophy toward military sexual assault. Nevertheless, DOD's prevention strategy acknowledges that the potential for assault exists, "Individuals within the DoD come from a wide variety of backgrounds and their past experiences shape their attitudes and behavior in response to life events. Individuals may express themselves in different ways, and for some, violence may be a choice." DOD's prevention actions in this regard have been focused on reducing risk factors for sexual assault. Questions of congressional concern include: Are military leaders adequately trained for, committed to, and held accountable for developing an organizational culture that reduces risk factors for sexual assault? Are sexual assault prevention training programs in the military timely, effective, and appropriate for the target audiences? Does DOD have the appropriate authorities and are they taking adequate actions to screen out or deter potential perpetrators? Organizational Culture and Leadership Organizational culture is commonly defined as, "a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems." The military's organizational culture varies both across the services (Army, Navy, Marine Corps, and Air Force) and within the services by occupational specialty (e.g., infantry, aviation, logistics). At the unit level, the organizational culture depends to a large degree on the "command climate" established by unit leadership. As such, while many of the policy changes to improve organizational culture are often initiated at a DOD-wide level, implementation of change is typically the responsibility of commanders at the unit level. These commanders may face unique community risk factors for sexual violence. For example, as stated by an Army representative: Primary prevention is looking at what are the risks. And that differs based on the installation, unit makeup, the gender makeup, what types of units they are, and other factors. We need to understand […] the things that contribute to an environment for sexual harassment and sexual assault, […] and help those sexual assault response coordinators and victim advocates work with their commanders to understand what is the environment there, and then what they can do specifically to address those issues, to reduce incidence of sexual harassment and sexual assault." Identifying and Mitigating Community Risk Factors for Assault Among active duty servicemembers who reported experiencing a sexual assault in 2016, 73% of all men and women reported that assault occurred at a military location, while 12% of women and 18% of men indicated that the assault occurred "while at an official military function." Research suggests that workplace culture is important in sexual assault prevention. While not all military assaults happen in the workplace, attitudes that are fostered in the workplace can influence servicemembers' off-duty actions. The connection between actions and circumstances leading to sexual violence are sometimes called the continuum of harm. DOD defines the continuum of harm as "inappropriate actions, such as sexist jokes, hazing, cyber bullying, that are used before or after the assault and or support an environment which tolerates these actions." By using existing data collected through the WGRA survey to identify the circumstances and leading indicators of sexual assaults, military commanders can take action to reduce community risk factors along this continuum and create a culture of early intervention (for selected indicators see Figure 3 ). Sexual Harassment and Sexism Studies have found strong positive correlations between the incidence of sexual assault within units and an environment permissive to sexism and sexual harassment. For example, a 2003 military study found that women reporting sexually hostile work environments had approximately six-fold greater odds of rape. The same study found that officers allowing or initiating sexually demeaning comments or gestures toward female soldiers was associated with a three-to-four-fold increase in likelihood of rape. In 2016, DOD reported that 8.1% of active duty members indicated experiencing a sexually hostile work environment in 2016, with women experiencing a sexually hostile work environment at over three times the rate as men (see Figure 4 ). The prevalence of sexual harassment in the military is estimated through survey responses and data on formal complaints. Results from the WGR surveys suggest that servicemembers experience a higher rate of sexual harassment than is actually reported. According to SAPRO data, in FY2016, there were a total of 601 formal complaints of sexual harassment across the active and reserve component; however, estimated prevalence rates would indicate that approximately 8% (over 100,000) servicemembers experienced sexual harassment. Previous reports suggest that a majority of individuals choose not to submit formal complaints with the belief that the incident "was not sufficiently serious to report or that the incident would not be taken seriously if reported." In 2010, in response to GAO questions about command climate and sexual harassment, a majority of servicemembers (75%) believed that their immediate supervisor made "honest and reasonable" efforts to stop sexual harassment. However, GAO also reported that 41% of servicemembers indicated that people in their workgroup would be able to get away with sexual harassment to some extent, even if it were reported. In addition 16.6% of women and 24% of males surveyed did not believe, or were unsure of whether their direct supervisor created a climate that discourages sexual harassment from occurring. Congress and DOD have taken actions to improve monitoring of sexual harassment. Section 579 of FY2013 NDAA ( P.L. 112-239 ) required the Secretary of Defense to develop a comprehensive policy to prevent and respond to sexual harassment in the armed forces and to develop a plan to collect information and data regarding substantiated incidents of sexual harassment involving members of the armed forces. Congress has also sought to encourage commanders' visibility of unacceptable behavior at an early stage by requiring commanders to include documentation of substantiated sexual harassment incidents in a servicemember's performance evaluation. Stalking DOD survey results from FY2014 indicated that approximately 9% of both male and female servicemembers who had experienced a sexual assault also experienced stalking prior to assault. Stalking or "grooming" behaviors are often associated with sexual harassment and sexual violence. Stalking is defined as a pattern of repeated and unwanted attention, harassment, contact, or any other course of conduct directed at a specific person that would cause a reasonable person to feel fear. Outside of the military, both federal and state laws prohibit stalking. Those who violate federal stalking laws may be subject to certain criminal penalties. States' civil and criminal stalking laws vary. Stalking activities often include repeated nonconsensual communication (e.g., texts, phone calls), frequently following an individual, or making threats against someone or that person's family or friends. More recently, social media and technology tools have been used for stalking activities. Some examples of these are video-voyeurism—installing video cameras to give the stalker access to someone's private activities—posting threatening or private information about someone in public forums, or using spyware or GPS tracking systems to monitor someone without consent. In the FY2006 NDAA ( P.L. 109-163 ), Congress added stalking to the punitive articles in the Uniform Code of Military Justice (UCMJ) to "enhance the ability of the Department of Defense to prosecute offenses relating to sexual assault." A servicemember guilty of stalking is one, (1) who wrongfully engages in a course of conduct directed at a specific person that would cause a reasonable person to fear death or bodily harm, including sexual assault, to himself or herself or a member of his or her immediate family; (2) who has knowledge, or should have knowledge, that the specific person will be placed in reasonable fear of death or bodily harm, including sexual assault, to himself or herself or a member of his or her immediate family; and (3) whose acts induce reasonable fear in the specific person of death or bodily harm, including sexual assault, to himself or herself or to a member of his or her immediate family. Hazing Survey data also point to an association between hazing and sexual assault. For example, in recent surveys, 34.2% of male victims and 5.7% of female described a sexual assault they experienced as "hazing." In 2015, DOD defined hazing as any conduct through which a military member or members, or a Department of Defense civilian employee or employees, without a proper military or other governmental purpose but with a nexus to military service or Department of Defense civilian employment, physically or psychologically injure or create a risk of physical or psychological injury to one or more military members, Department of Defense civilians, or any other persons for the purpose of: initiation into, admission into, affiliation with, change in status or position within, or as a condition for continued membership in any military or Department of Defense civilian organization. Hazing is prohibited by DOD policy and by law. Hazing has been associated with various military initiation rituals or ceremonies, for example the awarding of "blood wings" for completion of the Army's Air Assault School or elements of Navy's traditional "crossing the line" ceremony. While some argue that these are relatively harmless and fun traditions that help to build unit camaraderie, others argue that the rituals can quickly devolve into situations in which individuals may sustain physical and psychological injuries. A 2015 GAO report on male servicemember sexual assault found that in a group of 122 surveyed, 20% had heard of initiation-type activities that could be construed as sexual assault, and six of the respondents were able to provide first-hand accounts. Moreover, the GAO noted that two of the victim advocates they had interviewed at different installations believed that some commanders chose not to address hazing-type incidents that could have been sexual assault. Recently, Congress has taken measures to address hazing in the military. A provision in the FY2013 NDAA required service secretaries to report to the Armed Services Committees on hazing in their respective services to include any recommended changes to the UCMJ. The Senate report to accompany the bill noted, The committee believes that preventing and responding to incidents of hazing is a leadership issue and that the service secretaries, assisted by their service chiefs, should be looked to for policies and procedures that will appropriately respond to hazing incidents. The FY2015 NDAA included a provision requiring a GAO report on hazing in the armed services. In February 2016, the GAO released its report, noting that although DOD and the Coast Guard have policies in place to address hazing, there is a lack of regular oversight and monitoring of policy implementation. To address some of these shortfalls, Congress included a provision in the FY2017 NDAA that required DOD to establish a hazing database, improve training, and submit annual reports on hazing to the Armed Services Committees. Alcohol Use The CDC indicates alcohol use is an individual risk factor for potential perpetrators and is correlated with risk of victimization. For example, one study found that those who consume more than five drinks in one episode on a regular basis are at higher risk for falling victim to assault and aggressive behavior. It is important to note that alcohol use raises the risk of an assault occurring, but is not considered a defense for perpetrators of sexual assault under the UCMJ. Consumption of alcohol can impair an individual's ability to consent to sexual activities and can impair witness and bystander judgement in recognizing nonconsensual activities. In some instances alcohol may also be used as a weapon by sexual predators to reduce a victim's resistance or to fully incapacitate a victim. Data suggest that military servicemembers might be more prone to binge drinking than civilian counterparts, putting this demographic at higher risk. For example, survey data from 2008 found that 26% of active duty personnel aged 18 to 25 reported heavy alcohol use compared with 16% of civilians in the same age cohort. In 2014, nearly half of all military women and one-fourth of all military men who reported experiencing a sexual assault indicated that alcohol consumption (by the perpetrator, victim, or both) was involved in the incident. In addition, military service-reported sexual assault case synopses and assessments from FY2015 indicate that across DOD, alcohol use was associated with 43% of reported incidents of sexual assault. DOD and the services encourage commanders to address alcohol use as part of their prevention strategies. For example the Navy's Sexual Assault Prevention and Response Commander's Guide suggests setting the example for responsible alcohol consumption, deglamorizing alcohol use, and developing liberty policies and strategies that limit opportunities for servicemembers to abuse alcohol. Military commanders are also encouraged to create an environment where bystanders can recognize risky situations and are empowered to intervene. The Director of SAPRO described this type of intervention in a 2009 hearing before the House Armed Services Committee: So what we are trying to do is to teach young people if they see predator-type behavior to intervene. Because we do know there are predators that will use alcohol as a weapon to reduce a woman's defenses in order in order to complete a sexual assault. So one of the things we were trying to do is to make young people aware if somebody is mixing really strong drinks for a young girl, stop it, intervene. Or if they walk out together and it just doesn't look like a good idea, they should take care of each other and maybe say we need to go in this direction. Let's not go home with him tonight or walk out with him tonight. Other interventions by commanders include reducing the hours of alcohol sales on military installations, increasing prices, or limiting purchase quantities. Some commands have instituted other policies such as limiting the amount of alcohol that individuals can have in the barracks or banning alcohol use for deployed units in certain areas. The Army and Air Force have also reported efforts to fund additional research on the role of alcohol use in sexual assault cases and on potential interventions to reduce alcohol abuse. Command Climate and Commander Accountability Congress has taken some actions to hold military leadership accountable for their command climate. Section 572 of the NDAA for FY2013 required the commander of each military command to conduct a climate assessment for the purposes of preventing and responding to sexual assaults within 120 days of assuming command and at least annually thereafter. DOD uses the Defense Equal Opportunity Climate Survey (DEOCS) as a survey tool to measure factors associated with sexual harassment and sexual assault prevention and response, as well as other factors affecting organizational effectiveness and equal opportunity. The DEOCS may be administered to uniformed personnel and civilian employees of any DOD agency and is anonymous. The DEOCS is used at the unit level to establish a baseline assessment of the command climate. Subsequent surveys track progress relative to the baseline. The FY2014 NDAA imposed additional requirements on the command climate assessment by requiring the following: Dissemination of assessment results to the next higher level in the chain of command; Inclusion of evidence of compliance with command climate assessment in commanders' performance evaluations; and Departmental tracking of compliance with required assessments. Another provision in the FY2014 NDAA expressed a sense of Congress that (1) commanding officers in the Armed Forces are responsible for establishing a command climate in which sexual assault allegations are properly managed and fairly evaluated and in which a victim can report criminal activity, including sexual assault, without fear of retaliation, including ostracism and group pressure from other members of the command; (2) the failure of commanding officers to maintain such a command climate is an appropriate basis for relief from their command positions; and (3) senior officers should evaluate subordinate commanding officers on their performance in establishing a command climate as described in paragraph (1) during the regular periodic counseling and performance appraisal process prescribed by the Armed Force concerned for inclusion in the systems of records maintained and used for assignment and promotion selection boards. Education and Training Sexual assault education and training are key components of DOD's prevention activities. According to SAPRO, education and training efforts are "designed to improve knowledge, impart a skill, and/or influence attitudes and behaviors of a target population." Oversight questions regarding military sexual assault training include the following: Is it tailored to the roles and responsibilities of the audience (commanding officers, first responders, new recruits, etc.)? Does the delivery and content meet the same standards across military departments? Is it designed based on best practices for effective training? Standardized Training Requirements and Target Audiences The 2009 report of the congressionally mandated Defense Task Force on Sexual Assault in the Military Services (SAMS) noted deficiencies in the curricula, design, and leadership involvement in SAPR training. The task force recommended tailoring training courses to better address the training needs of new recruits, responders, leadership, and peers. Subsequent congressional actions and DOD policy changes have addressed many of the task force's concerns. In Section 585 of the FY2012 NDAA, Congress required DOD to develop sexual assault prevention training curricula for specific audiences and new modules for inclusion in each level of professional military education (PME) to better tailor the training for "new responsibilities and leadership requirements" as members are promoted. This provision also required that DOD consult experts in the development of the curricula and that training be consistently implemented across military departments. In fulfillment of the FY2012 NDAA requirements, DOD developed tailored SAPR training core competencies and learning objectives for specific audiences and coupled these with recommended adult learning strategies. In the FY2013 NDAA, Congress enacted additional training requirements for new or prospective commanders at all levels of command and for new active and reserve component recruits during initial entry training. Further congressional action in the following year expanded certain sexual assault prevention training requirements to service academy cadets and midshipmen within 14 days after initial arrival and annually thereafter. In addition, Section 540 of the FY2016 NDAA required regular SAPR training for Reserve Officers' Training Corps (ROTC) instructors and administrators. Commanders are responsible for ensuring that training is complete in accordance with all requirements. The 2009 report of the congressionally mandated Defense Task Force on Sexual Assault in the Military Services found that many servicemembers felt that leadership involvement in training is important both to reinforce the commander's zero tolerance stance and to clear up any misconceptions with regard to reporting processes and outcomes. In addition, the services have processes in place to monitor and report on the status of completing mandated SAPR training. Core Elements of Training Section 1733 of the FY2014 NDAA ( P.L. 113-66 ) required DOD to review and report on the adequacy of SAPR training and education provided to members of the Armed Forces. This provision also required the department to identify "common core elements" to be included in training or education programs. Current DOD policy requires all secretaries of the military departments and the Chief of the National Guard Bureau to submit a copy of their respective SAPR training elements through SAPRO to ensure consistency and compliance with standards. For new commanders, statutory training requirements related to prevention include (1) Fostering a command climate that does not tolerate sexual assault. (2) Fostering a command climate in which persons assigned to the command are encouraged to intervene to prevent potential incidents of sexual assault. (3) Fostering a command climate that encourages victims of sexual assault to report any incident of sexual assault. (4) Understanding the needs of, and the resources available to, the victim after an incident of sexual assault. (5) Use of military criminal investigative organizations for the investigation of alleged incidents of sexual assault. (6) Available disciplinary options, including court-martial, non-judicial punishment, administrative action, and deferral of discipline for collateral misconduct, as appropriate. DOD incorporated specialized leadership sexual assault prevention training for all military services and components as part of its 2015 strategic plan. Other selected elements included in annual training, new accession training, and professional military education, and, are below: Definitions of sexual assault and sexual harassment. Tips on how to recognize sexual assault. Strategies for bystander intervention. Penalties for offenders. Rape myths (see box below). Definitions of reprisal. Available resources for those who have been assaulted. Information on the impact of sexual assault on victims, units, and operational readiness. Pre-deployment sexual assault prevention training also includes instruction on the local history, culture, and religious practices of foreign countries and coalition partners that may be encountered on deployment. Evaluating Training Effectiveness There is very little literature that evaluates the quality or effectiveness of military sexual assault training programs. A 2015 analysis of Air Force training programs found that military training has adopted many of the generally accepted best practices (see "Principles of Effective Prevention Programs" box below), particularly in terms of tailoring the message to the Air Force cultural context and clearly communicating relevant information. The authors also noted that the Air Force improved the program between 2005 and 2014. The study, however, also found that a lack of program evaluation processes limited the ability to judge the effectiveness of training programs and modifications to those programs. Entry Screening Some academic literature suggests that those with a history of coerciveness or assault are at high risk of committing future assaults. Although few studies have been done in the military context, a study of Navy recruits based on survey data found that men who reported behavior that met the criteria for a completed sexual assault prior to their military service were over ten times more likely to commit or attempt to commit sexual assault in their first year of service than men who did not commit sexual assault prior to joining the military. DOD acknowledges there may be some servicemembers that may be at risk of "sexually coercive behavior." One of the goals of training is to help those individuals who may have coercive tendencies to identify appropriate behavior, recognize consequences of their actions, and dissuade them from committing sexual violence. For a smaller subset of individuals, training may not be sufficient to bring about behavioral change, and other approaches may be necessary to remove potential perpetrators from the applicant pool. Section 504 of Title 10 United States Code which has been in effect since 1968, prohibits any person who is "who is insane, intoxicated, or a deserter from an armed force, or who has been convicted of a felony," from enlisting in any armed force. However, the statute authorizes the Secretary of Defense to authorize exceptions in certain meritorious cases. This exercise of authority has historically been referred to as a moral waiver but may also be referred to as a conduct or character waiver . As military end-strength was increased to respond to conflicts in Iraq and Afghanistan, the number of moral waivers authorized for new recruits also grew—particularly in the Army and Marine Corps. According to data provided by DOD in response to a FOIA request, approximately 18% (127,524) of new enlistees were granted a moral waiver between 2003 and 2007. Over half of these waivers were for traffic or drug offenses, while serious non-traffic misdemeanors (e.g., assault and petty larceny) accounted for 35%, and those with felony convictions accounted for approximately 3% of the waivers across all military services. These statistics raised concerns that, by enlisting those with a history of criminal activity, the military was unnecessarily putting the safety of other servicemembers at risk. Nevertheless, a 2009 report by the Defense Task Force on Sexual Assault in the Military Services found "no evidence of significantly increased disciplinary problems because of the use of waivers." In 2013, Congress enacted a provision in the FY2013 NDAA that amended 10 U.S.C. §504 to prohibit the Secretary of Defense from issuing a moral waiver for commissioning or enlistment in the armed forces of any individual who had been convicted of a felony offense of rape, sexual abuse, sexual assault, forcible sodomy, incest, or any other sexual offense. In the following year's NDAA, Congress enacted a new statute (10 U.S.C. §657) to prohibit the commissioning or enlistment of individuals who have been convicted of felony offenses of rape or sexual assault, forcible sodomy, incest, or of an attempt to commit these offenses. Victim Protection, Advocacy and Support Services A third area of congressional focus is the provision of protection, advocacy and support services for victims of sexual assault— those currently serving and those who have been discharged or retired from military service. Although this analysis does not include congressional actions with relation to veteran services for victims of military sexual assault, it does include provisions associated with military discharges and the correction of discharge paperwork. While this section focuses on DOD services to victims of sexual assault, servicemembers may also be eligible for Department of Justice-funded programs in their respective states of residence. Congressional actions to protect and support victims of sexual assault fall under four main categories. Ensuring victim privacy and safety; Ensuring accessible and adequate medical and mental health services; Developing legal assistance programs for victims; and Protecting victims from retaliation or other adverse actions. Victim Privacy and Safety The 2004 DOD task force found that military victims of sexual assault were often reluctant to report the incident. One of the main reasons cited was a perceived lack of confidentiality. Victims also cited concerns about the impartiality of the command's response and the potential for retaliatory actions. Following this review, DOD implemented a number of policies and strategies to help improve confidentiality of reporting and to provide victims with a safe environment for seeking care and legal assistance. At the same time, Congress initiated a series of legislative requirements to strengthen victim support and protection. Restricted vs. Unrestricted Reporting In 2005, DOD instituted a restricted reporting option for sexual assault victims. This is intended to help victims receive needed support services while maintaining a certain level of privacy. When a victim chooses to make a restricted report, he or she discloses the incident to specified officials and may then gain confidential access to medical health, mental health, and victim advocacy services. Incident data is then reported by the official to SAPRO for inclusion in DOD sexual assault statistics. However, the individual's commander and law enforcement agents are not notified, nor is an official investigation initiated. Either initially or after making a restricted report, victims may choose to make an unrestricted report of a sexual assault incident. When an unrestricted report is made, the servicemember's commanding officer is notified and a Military Criminal Investigative Office begins a formal investigation. Processes following a restricted or unrestricted report are shown in Figure 5 . DOD has deemed restricted reporting "critical" to the SAPR program. In addition, the availability of a restricted reporting option has generally garnered positive feedback from victims, health practitioners, and advocates. As stated by a rape victim advocate in a 2009 hearing of the House Armed Services Committee on Victim Support and Advocacy, You heard earlier folks were talking about an increase in a number of reports, whether restricted or unrestricted is a good thing. […]We think that is a good thing. When those numbers are going up, those are fundamentally a positive move. Because it means that, number one, those folks are getting services. Number two, it means that there is an atmosphere and environment in which people believe that they can come forward, that they are safe in doing so. And so if restricted reporting enhances that, we are absolutely all for it. Some of the challenges that DOD has faced with protecting the victim's right to pursue the restricted reporting option include state mandatory reporting laws and other jurisdictional challenges. The FY2016 NDAA included a provision (Section 536) preempting state laws that require an individual who is a victim of sexual assault to disclose personally identifiable information except in cases when reporting "is necessary to prevent or mitigate a serious and imminent threat to the health or safety of an individual." Expedited Transfers and Military Protective Orders In order to protect the safety and well-being of sexual assault victims, Congress has enacted a statute to encourage the development of policies and guidance for use of humanitarian transfers and military protective orders. Currently, when a victim makes a restricted report , he or she cannot receive a military protective order against the assailant or seek expedited transfer to a different unit or base. If the victim initiates an unrestricted report or changes his or her restricted report to an unrestricted report, he or she may then request an expedited transfer or military protective order (MPO). Expedited Transfers In 2004, Congress noted that DOD did not have standard policies or protocols for removal or transfer of an alleged victim from a unit when the alleged attacker was part of the same unit or the victim's chain of command. The issue of transfers for victims of sexual assault was again raised by Representative Jane Harman in a 2010 hearing as a possible way to protect victims from retaliation and encourage victim reporting. In the FY2011 NDAA, Congress added a provision that required the Secretary concerned to provide timely consideration of an application for permanent change of station or change of duty assignment by a victim of sexual assault or related offense. DOD implemented this "expedited transfer" policy in February 2012 with the stated purpose to, […] address situations where a victim feels safe, but uncomfortable. An example of where a victim feels uncomfortable is where a victim may be experiencing ostracism and retaliation. The intent behind the Expedited Transfer policy is to assist in the victim's recovery by moving the victim to a new location, where no one knows of the sexual assault. Under DOD policies, temporary or permanent transfers may be authorized to a new duty location on the same installation, or a different installation. The servicemember's transfer may include the member's dependents and military spouse for transfers to a different installation. If a servicemember's request for transfer is disapproved by the commanding officer, the individual has the right to have the request reviewed by a general or flag officer in their chain of command (or the civilian equivalent). Although some advocacy groups have argued that the expedited transfer option is a positive support measure for victims, they have also raised concerns about the implementation, citing cases of delays and denials. In addition, some of the same groups have raised concerns that the transfer might actually be perceived as punishing the victim verse the alleged perpetrator. In a 2013 Senate Armed Services Committee hearing, a witness from the organization Protect Our Defenders described this problem, We find while it is a good thing at times, expedited transfer requests, some victims say, yes, I was offered an expedited transfer, but to a job less than what I have now. Why am I being punished for being protected and trying to be sent off base? I am now being asked to make sandwiches for the pilots when once I was on another track in a successful career. Why do I have to leave? Why can't he leave? In response to this concern, Congress sought to clarify the military commander's ability to transfer the alleged perpetrator to another unit following an unrestricted report of a sex-related offense. The authority for DOD to establish guidelines for these transfers was enacted in the FY2014 NDAA and codified in 10 U.S.C. §674. Commanders may also take other actions to remove an accused military offender from his or her position, to place him or her in pre-trial confinement, or to issue a military protective order. The total number of requested and approved expedited transfers for victims has been growing since FY2012 (see Table 5 ). Military Protective Order A military protective order (MPO) is typically issued by a commanding officer, and informs the accused servicemember that contact or communication is prohibited with the protected person or members of the protected person's family/household. A victim of sexual assault may also receive a civilian protection order (CPO) from local authorities. By statute, a CPO has full force and effect on military installations within the jurisdiction of the court that issues the order. However, MPOs are not enforceable by civilian law authorities. Therefore, a victim of sexual assault – particularly a reservist or dual status technician - may work in a civilian office with his or attacker where the MPO cannot be enforced. Congressional concerns about this lapse of protection have led to legislation to encourage coordination between military and civilian authorities. To encourage such coordination, a provision in the FY2009 NDAA required DOD to notify appropriate civilian authorities when a military commander issues an MPO. The installation commander may also develop a memorandum of understanding with local police to detain an individual who may have violated an MPO until military police can respond. Since FY2010, Congress has required DOD to track, for each sexual assault case, whether a military protective order was issued (involving either the victim or alleged perpetrator) and whether any military protective orders were violated. Victim Medical Care While serving, military members are eligible to receive a broad range of medical and mental health services through TRICARE, the military health system. This includes services immediately following a sexual assault and longer-term services as needed. Those who retire from the military may continue to receive military health services if enrolled. Those who are discharged from the military before retirement eligibility may be eligible to receive health care services from the VA. Questions that Congress has raised about medical care for victims of sexual assault include: Do military medical professionals have the appropriate training and resources to respond to the health needs of different victim populations? Do the types of military medical and mental health services provided to victims reflect evidence-based best practices for victim treatment and rehabilitation? Are appropriate medical services broadly available and accessible to victims of assault, particularly when the assault occurs in a deployed or operational setting? According to DOD's 2014 Survivor Experience Survey, 49% of respondents indicated that they had interacted with a medical provider and 71% indicated that they had spoken with a mental health provider following a sexual assault incident. In some cases, caregivers at a military or civilian medical facility might be the first point of contact for a victim of military sexual assault. Medical staff will provide the victim with urgent medical assistance and may, with the victim's permission, administer a sexual assault forensic examination (SAFE). When Congress reauthorized the Violence Against Women Act in 2005, provisions were added to ensure that victims could not be charged for medical forensic exams, commonly referred to as "rape kits." In 2006, Congress authorized TRICARE coverage for forensic examinations following a sexual assault or domestic violence. The evidence from the SAFE is required to be saved for five years in case of an investigation. Beyond the response to these short-term needs, victims of sexual assault often require longer-term care for associated physical and psychological effects. These may include sexually transmitted diseases, anxiety, depression, and Post-Traumatic Stress Disorder (PTSD). The after-effects of the incident might also be associated with negative behavioral changes in the victim, such as increased drug or alcohol use, poor work performance, or other disciplinary issues. The FY2011 NDAA required DOD to establish "comprehensive and consistent protocols for providing and documenting medical care to a member of the Armed Forces or covered beneficiary who is a victim of a sexual assault, including protocols with respect to the appropriate screening, prevention, and mitigation of diseases." This provision noted that gender should be considered in these protocols. The FY2012 NDAA required a review of women-specific health services in DOD including the availability of services for female victims of sexual assault or abuse. The resulting GAO report found some availability and standardization issues. In particular, GAO noted challenges across the services in providing comprehensive and consistent medical and health services in deployed environments. It recommended improved guidance for care providers. DOD's current regulations include instructions for combatant commanders to: (a) Require that victims of sexual assault in deployed locations within their area of responsibility are transported to an appropriate evaluation site, evaluated, treated for injuries (if any), and offered SAPR VA assistance and a SAFE as quickly as possible. (b) Require that U.S. theater hospital facilities (Level 3, NATO role 3)…have appropriate capability to provide experienced and trained SARC and SAPR VA services, SAFE providers, and those victims of sexual assault, regardless of reporting status, are medically evacuated to such facilities as soon as possible (within operational needs) of making a report, consistent with operational needs. Concerns about male victims of sexual assault prompted the House in 2012 to call for a review of DOD's policies and protocols for the provision of medical and mental health care for male servicemembers. The resulting GAO report found that DOD's health affairs office, "has not systematically evaluated, using various available sources of information, the extent to which either male or female victims of sexual assault have any gender-specific needs or whether the department's current care is sufficiently developed to ensure that such needs are met."  In response to the GAO's report and recommendations, DOD highlighted some ongoing efforts to provide gender-specific treatment; for example, male-only therapy groups, and enhanced medical staff training on responding to and treating male victims. To address concerns about the availability of trained forensic examiners, in 2013, as part of the FY2014 NDAA, Congress required that at least one full-time sexual assault forensic examiner be assigned to each military medical treatment facility (MTF) that operates a 24-hour emergency room. In addition, the law, as amended, requires that the secretary of the military department concerned make a sexual assault forensic examiner available to patients at other facilities when needed. Recent survey data from DOD suggests that there are generally high levels of satisfaction with military medical and mental health care for sexual assault survivors. The 2014 Survivor Experience Survey reported over 75% of the respondents who received care at MTFs indicated that they were satisfied with the medical and mental health services they received, while 8% reported that they were dissatisfied. In addition, a majority of the respondents treated at MTFs had positive and professional experiences with their medical or mental health provider. Helpline Support In 2011, DOD launched the "Safe Helpline," a 24/7 helpline accessible worldwide, to provide confidential crisis support and information for the DOD community. The helpline provides "live, one-on-one, specialized support and information" intended for adult servicemembers in the Active and Reserve Components as well as Coast Guard members. It offers a number of different ways to interact with Helpline staff including phone, text, a moderated online chat group (Safe HelpRoom) for sexual assault survivors, and an app for creating a personalized self-care plan. SAPRO oversees the operation of the helpline through a contract with the Rape, Abuse & Incest National Network (RAINN). Staff members serving the DOD community are trained in military-specific policies and procedures such as restricted and unrestricted reporting processes, and are able to connect victims with appropriate military resources and victim advocates. During FY2011, the first year in which the Helpline operated, the Defense Human Resources Activity (DHRA) obligated $780,000 for associated services. In the following year—during which the Safe Helpline app was developed—this figure rose to $2.8 million. In recent fiscal years, DHRA has obligated approximately $4 million to operate the Helpline each fiscal year. Survivor Experience Survey results from 2014 indicated that 54% of the respondents—individuals who had experienced a sexual assault—were aware of the DOD Safe Helpline prior to the assault. In addition, 49% were aware of an installation 24-hour helpline, and 33% were aware of a local civilian 24-hour helpline. In 2016, overall usage of the helpline increased by 67% following expanded DOD outreach efforts. Roughly half of those who reported an assault on the Helpline in 2016 reported that they had not yet disclosed the event to a military authority, and men were more likely than women to make their first disclosure on the Helpline. Legal Assistance and Victim Advocacy One of the most extensive efforts undertaken to strengthen support for sexual assault victims is the enhancement of legal assistance and victim advocate services. Pursuing accountability for perpetrators through the criminal justice service can be challenging and time-consuming for victims of sexual assault, who often have to repeat their story several times and must navigate unfamiliar legal processes while dealing with the physical and emotional after-effects of the assault. In 2005, DOD initiated a victim care response system that created the support roles of sexual assault response coordinator (SARC) and sexual assault prevention and response victim advocates (SAPR-VA). While there was broad agreement that this new program provided valuable victim support, concerns remained that it was unevenly implemented with lower levels of support available for deployed units, victims were unaware of their rights to support, SARC/SAPR-VA training was not fully standardized, and challenges remained in soliciting volunteers to act in these roles as a collateral duty. In the FY2011 NDAA, Congress enacted provisions that entitled members of the armed services and dependents who are victims of sexual assault to (1) legal assistance by a military or civilian special victims' counsel (SVC)—sometimes called victims' legal counsel (VLC) , (2) assistance provided by a SARC, and (3) assistance provided by a SAPR-VA. Under this legislation, a victim must be notified of the right to receive (or decline) these services whether he or she has made a restricted or unrestricted report. The law also requires a minimum of one full-time SARC and one full-time SAPR-VA to be assigned to each brigade or equivalent level in the armed forces. A 2015 survey of SARCs and SAPR-VAs found that the average number of military personnel served by a SARC is 4,109 and the average for a SAPR-VA is 1,409. There is broad variability between the services with more Army SARCs and VAs per servicemember than the other services. Victim Assistance Standards The FY2012 NDAA (Section 584) requires standardized training for SARCs and victim advocates across DOD to help improve the quality of services received by sexual assault victims. In response, DOD established the Department of Defense Sexual Assault Advocate Certification Program (D-SAACP).The National Organization for Victim Assistance Incorporated manages this certification program for DOD with an annual obligation of approximately $1 million. In 2013, the Department also established the Victim Assistance Leadership Council. This council "advises the Secretary of Defense on policies and practices across four programs: sexual assault prevention and response, family advocacy, victim-witness assistance, and sexual harassment." The roles of this council include promoting efficiencies, coordinating victim assistance policies and assessing the implementation of victim assistance standards (including competency, ethical, and foundational standards). Enhancing SVC Training, Services, and Eligibility for Support The Judicial Proceedings Panel (JPP) reviewed special victims counsel programs in 2014. In the panel's February 2015 report they expressed concerns about the following: Statutory requirements linking SVC services to entitlement for legal assistance services, potentially excluding some reserve component servicemembers from SVC program eligibility; Lack of standardized reporting structures across the services—with particular concern about the independence of the SVC structure in the Army; Lack of uniform quality standards for SVC training; Geographic availability of face-to-face SVC services; and Lack of standardized metrics for evaluating the operation of the SVC program. In response to some of these concerns, Congress enacted a number of changes to the SVC program through the FY2015 and FY2016 NDAAs. In the FY2015 NDAA Congress expanded eligibility for SVC services to certain reserve component members who might otherwise not be eligible for legal assistance. In the following year, Congress authorized access for certain DOD civilians. The FY2016 NDAA also required DOD to establish standardized training time and baseline training requirements for SVCs, as well as other SVC program enhancements. These include (A) guiding principles for the Special Victims' Counsel program, to include ensuring that— (i) Special Victims' Counsel are assigned to locations that maximize the opportunity for face-to-face communication between counsel and clients; and (ii) effective means of communication are available to permit counsel and client interactions when face-to face communication is not feasible; (B) performance measures and standards to measure the effectiveness of the Special Victims' Counsel program and client satisfaction with the program; and (C) processes by which the Secretaries of the military departments and the Secretary of the Department in which the Coast Guard is operating will evaluate and monitor the Special Victims' Counsel program using such guiding principles and performance measures and standards. Section 533 of the FY2016 NDAA also expanded the role of SVC to provide legal consultation and assistance to victims with complaints against the government, Freedom of Information Act requests and correspondence with Congress. Retaliation Retaliation is sometimes used as an umbrella term to refer to a range of illegal, impermissible, or hostile actions taken against someone as a result of their having made or being suspected of having made a protected communication, including a crime report. Experts have reported that retaliation can have negative psychological impacts on sexual assault victims and that a lack of social support leads to a higher likelihood of developing post-traumatic stress disorder (PTSD). The threat, or perceived threat, of retaliation may also influence victims' willingness to make an unrestricted report of an incident and thus a reduced ability to hold perpetrators accountable. There is some evidence that this may be a factor in the willingness of servicemembers to report an incident. The 2014 Military Workplace Study found that among servicemembers who experienced but did not report a sexual assault, 32% were concerned about retaliation by the perpetrator, 28% were concerned about retaliation by their peers or coworkers, and 23% were concerned about retaliation by a supervisor or someone in their chain of command. DOD has expressed awareness of the potential for retaliation to undermine organizational trust, as stated in the Department's prevention and response strategy, Retaliation not only harms the lives and careers of victims, bystanders/witnesses, and first responders but also undermines military readiness and weakens the culture of dignity and respect. Without question, retaliation has no place in the Armed Forces. Statutory restrictions on retaliatory actions for protected servicemember communications, sometimes called whistleblower protection , were enacted in the 1988 Military Whistleblower Protection Act and codified in 10 U.S.C. §1034. Given the reported prevalence and negative impacts associated with retaliation, Congress has taken actions in recent years to: clarify and expand the definitions of retaliation, enhance whistleblower protections for sexual assault victims and bystanders/witnesses, and enhance oversight of the investigation and reporting processes for alleged retaliatory actions. Definitions of Retaliation Section 1709 of the FY2014 NDAA required DOD to prescribe regulations prohibiting retaliation against an alleged victim or other member of the Armed Forces who reports a criminal offense. The law also specified that the DOD regulations must make retaliation an offense punishable under Article 92 of the UCMJ, "Failure to Obey Order or Regulation." The provision required the Secretary of Defense's definition of retaliation punishable under Article 92 to include, at a minimum: (A) taking or threatening to take an adverse personnel action, or withholding or threatening to withhold a favorable personnel action, with respect to a member of the Armed Forces because the member reported a criminal offense; and (B) ostracism and such of acts of maltreatment, as designated by the Secretary of Defense, committed by peers of a member of the Armed Forces or by other persons because the member reported a criminal offense. In 2015, the Secretary of Defense directed the development of a "DoD-wide comprehensive strategy to prevent retaliation against military members who report or intervene on behalf of victims of sexual assault and other crimes." DOD's strategy currently adheres to three types of retaliation that are defined in law and policy: reprisal, ostracism, and cruelty, oppression and maltreatment (see Table 6 ). Reprisal, sometimes called professional retaliation, is currently defined in statute (10 U.S.C. §1034) as taking or threatening to take an unfavorable personnel action, or withholding or threatening to withhold a favorable personnel action, for making or preparing to make a protected communication or being perceived as making or preparing to make a protected communication. Examples of reprisal include: promotion interference, transfer or reassignment, poor performance evaluations, disciplinary action, or making or threatening to make significant changes in duties or responsibilities that are inconsistent with the military member's grade. A 2012 GAO report found that the most common forms of reprisal for all military whistleblower cases (not only sexual assault-related cases) were assignment or reassignment (50%), a poor performance evaluation (46%), or some sort of disciplinary action (42%). Ostracism is sometimes referred to as social retaliation and involves exclusion of an individual from social acceptance, friendship or privileges with the intent to discourage the reporting of a criminal offense or the due administration of justice. Unlike reprisal, ostracism is not only confined to acts taken by the chain of command, but could include acts by peers or other colleagues. Ostracism is defined in military department-level regulations and may include bullying (in person or through social media), exclusion from group activities, or denying the privilege of friendship. Current definitions of ostracism vary between the military departments; however, most define it as "the exclusion, from social acceptance, privilege or friendship with the intent to discourage reporting of a criminal offense or otherwise discourage the due administration of justice." According to DOD, the intent requirement in the definition is included as to not violate First Amendment rights to freedom of association. There may be some challenges to identifying and proving ostracism, since commanders and NCOs may have limited information about the cases while the cases are under investigation. Maltreatment is also defined in military department-level regulations as a form of social retaliation that includes treatment by peers or other persons that, when viewed objectively under all the circumstances, is abusive or otherwise unnecessary for any lawful purpose, that is done with the intent to discourage reporting of a criminal offense or otherwise discourage the due administration of justice, and that results in physical or mental harm or suffering, or reasonably could have caused, physical or mental harm or suffering. A 2016 report on retaliation by the Judicial Proceedings Panel (JPP) found this definition of maltreatment problematic because it was not consistent with other law and regulations prohibiting similar misconduct (e.g., hazing, and Article 93 of the UCMJ which specifically defines these concepts). The JPP recommended that the military departments revise their definitions of maltreatment. The JPP's recommended definition would include "behaviors that are cruel, abusive, humiliating, oppressive, demeaning, or harmful." Other forms of retaliation may by punishable under the UCMJ, and these are typically considered to be criminal retribution. This may include actions like cruelty or maltreatment (Article 93), assault (Article 128), stalking (Article 130), or obstruction of justice (Article 131b) (see Table 6 ). The JPP noted in its 2016 report that these UCMJ articles give commanders adequate tools for addressing social retaliation, and recommended that Congress not add a separate UCMJ offense for retaliation. Investigative Authority for Retaliation Victims of sexual assault may seek assistance to report retaliation in a variety of ways, including hotlines, victim advocates, counselors, and military commanders outside of their chain of command. The investigative authority for reprisal (professional retaliation) cases is the Department of Defense Inspector General (DODIG). The military services typically lead other forms of retaliation investigations, and these are conducted by military criminal investigative organizations (MCIOs), law enforcement, or commanders at the unit level. In the FY2014 NDAA Congress enhanced protections for military whistleblowers and also added a requirement for IG retaliation investigations to include those "making a protected communication regarding violations of law or regulation that prohibit rape, sexual assault, or other sexual misconduct." The law requires the investigating IG to be outside the immediate chain of command and/or at least one organizational level higher than both the member submitting the reprisal allegation, and the individual or individuals alleged to have taken the retaliatory action. Oversight entities, however, continued to raise concerns about the quality and independence of DODIG investigative processes with regard to reprisal cases. A 2015 GAO review of DODIG management of whistleblower complaints found that "DODIG did not have a process for documenting whether investigations were independent and were conducted by someone outside the military service chain of command." In addition, the report noted substantial delays in the average length of DODIG and service IG whistleblower reprisal investigations, failure to regularly notify servicemembers about the investigation delays, and lack of standardization in definitions and reporting between DOD and service IGs. Congress again expanded whistleblower protections in the FY2017 NDAA and included provisions to address issues raised in the GAO report. In particular, prohibited personnel actions against whistleblowers were expanded to include (i) The threat to take any unfavorable action. (ii) The withholding, or threat to withhold, any favorable action. (iii) The making of, or threat to make, a significant change in the duties or responsibilities of a member of the armed forces not commensurate with the member's grade. (iv) The failure of a superior to respond to any retaliatory action or harassment (of which the superior had actual knowledge) taken by one or more subordinates against a member. (v) The conducting of a retaliatory investigation of a member. The amendments also required uniform conduct and training standards for DODIG investigators, and required DODIG to provide periodic updates on the investigation status to member who made the allegation, the Secretary of Defense and the Secretary of the department concerned. Measuring the Extent of Retaliation Existing information on retaliation in DOD is mainly derived from self-reported perceptions from victims of sexual assault. DOD surveys and focus groups conducted between 2012 and 2014 revealed that roughly two-thirds of female members who reported a sexual assault perceived some sort of retaliation either by peers, coworkers or their chain of command. However, estimates from these surveys are considered imprecise due to terms that were inconsistent with terminology in law. Methodology changes in the 2016 WGRA allowed for more precise data. The 2016 survey data suggested that while approximately half of those reporting sexual assault perceived some form of retaliation, less than one-third perceived retaliation that met definitional criteria (see Figure 6 ). The data reported in Figure 6 are estimates based on survey data. Until recently, DOD has not had centralized, systematic processes in place for monitoring and reporting actual instances of retaliation against sexual assault victims. The first major effort by DOD to collect data on the nature and disposition of retaliation cases began in March 2015 when the Undersecretary of Defense for Personnel and Readiness issued a data-call to each of the services for "alleged retaliation case synopses" from unrestricted reports of sexual assault during the time between the beginning of FY2014 and February 2015. The required data included the following. Whether a report is professional (reprisal) or social (ostracism) retaliation. A narrative of the allegation. The authority that received the complaint (e.g., IG, MCIO, chain of command). Whether the retaliator(s) were in the reporter's chain of command, peer, coworker, or other. Whether the alleged retaliation was actionable. Whether the alleged retaliator was also the alleged perpetrator of the crime. The gender of the retaliator and victim. The retaliation report outcome. In May of 2015, the Judicial Proceedings Panel (JPP) requested similar data from the services. At that time, DOD's SAPRO office reported to the JPP that steps were needed to modernize DSAID to support collection and management of retaliation data. A 2016 report by the Judicial Proceedings Panel stated that although the Services were unable to provide this information, the Army, Air Force, and Marine Corps have independently taken steps to track retaliation data. Military Justice and Investigations Uniformed members of the military services who allegedly commit sexual assault crimes are subject to prosecution under the military justice system. The military justice system is embodied in a code of military criminal laws called the Uniform Code of Military Justice (UCMJ) which the President implements through the Manual for Courts-Martial (MCM). The purpose of this system is to "promote justice, to assist commanders in maintaining good order and discipline, to promote efficiency and effectiveness within the military establishment, and thereby to strengthen the national security of the United States." Prosecution of sexual assault offenders through the military justice system typically has a dual purpose: (1) to apply just punishment for illegal acts, and (2) to deter future offenders. Under the military justice system, members of the Armed Forces are subject to different rules, orders, proceedings, and consequences than their civilian counterparts. Much of the sexual assault legislation that Congress has proposed and/or has been enacted over the past decade has been directed at reforming the military's relevant investigative and judicial processes. The following sections summarize selected issues that have been on the forefront of congressional interest since 2004. Investigation The investigation and disposition of military sexual assault cases is complicated by questions of jurisdiction between civilian law enforcement agencies and military law enforcement organizations on installations. In some instances, cases are entirely under Federal jurisdiction and handled only by military authorities; in others, coordination with civilian authorities is required. Some cases fall outside DOD's jurisdiction. In reported sex-related offenses that fall within the military's jurisdiction, Military Criminal Investigative Organizations (MCIOs) lead the investigations. Congressional concerns in the area of investigation include the following questions. Are investigations being initiated in a responsive manner upon notification of an unrestricted report? Are the alleged victim's rights being protected in the investigative process? Are MCIOs properly trained and do they adhere to prescribed policies and procedures? Are investigations conducted in a fair, comprehensive, timely, and transparent manner? In the FY2014 NDAA, Congress included provisions that require commanding officers to immediately refer reports of sex-related offenses involving members of their command to MCIO investigators. This provision also stipulated that commanders shall not conduct internal, command-directed investigations on sexual assault allegations, and shall not delay contacting the MCIO while attempting to assess the credibility of the report. An additional provision in the FY2014 NDAA requires commanders to provide an incident report within eight days of an unrestricted report of sexual assault. MCIO investigators are required to adhere to several processes specific to cases involving allegations of sexual assault, among them ensuring a SARC is notified, avoiding disclosure of individuals' sexual orientation unless necessary for an investigation, ensuring that investigation reports are retained for a period of 50 years, and making data available for use in the Defense Sexual Assault Incident Database. Some Members of Congress, advocacy organizations, and the news media have raised concerns that the military uses flawed processes to conduct some sexual assault investigations. The DOD Inspector General (DODIG) has investigated individual claims and has also conducted broader evaluations of investigative processes. In a March 2015 report, DODIG found that 99% of the MCIO investigations opened on or after January 1, 2012, and completed in 2013, met existing investigative standards or had minor deficiencies. This was an improvement over a 2013 DODIG evaluation that found significant deficiencies in 11% of cases completed in 2010. Disposition of Cases Once the MCIO has completed an investigation, he or she will share a report documenting the evidentiary finding with the servicing military lawyer, known as a staff judge advocate (SJA). The SJA will review the report and recommend appropriate legal or other action to the disposition authority. The disposition authority is typically a military commander in the accused's chain of command and may also be in the victim's chain of command. Section 574 of the FY2005 NDAA (P.L. 108-375) included a provision that prohibited interference with the SJA's ability to provide independent legal advice to commanders. In some cases, the investigation will determine that the commander lacks legal authority to prosecute a crime, for example, when the subject of the investigation is unknown, has died or deserted, or is a civilian or foreign national. If DOD has jurisdiction, the investigation may not yield sufficient evidence to substantiate a sexual assault charge, or command action may be precluded due to, for example, refusal of the victim to participate or expiration of the statute of limitations. The military commander has the authority to review results of an investigation and decide on the disposition of the case—whether to submit the case for court-martial proceedings, to dismiss the charge without further action, or to undertake other actions, such as nonjudicial punishment (also known as NJP or an " Article 15 "), administrative discharge, or other adverse administration actions. If the commander determines that there is sufficient evidence to support a finding of probable cause, he or she may prefer court-martial charges and forward those charges to a convening authority. The FY2014 NDAA included a provision that requires an Article 32 (pre-trial) hearing before proceeding to a general court-martial (unless waived by the accused). By statute, the purpose of this hearing is limited to (A) Determining whether there is probable cause to believe an offense has been committed and the accused committed the offense. (B) Determining whether the convening authority has court-martial jurisdiction over the offense and the accused. (C) Considering the form of charges. (D) Recommending the disposition that should be made of the case. In cases that proceed to court-martial, the case may proceed to a completed trial, charges may be dismissed, or the perpetrator may be discharged or resign in lieu of court-martial. Figure 7 shows the dispositions and outcomes of sexual assault allegations for FY2016. These data indicate that a court-martial was initiated for 59% of sexual assault cases that were deemed to have sufficient evidence to support a sexual assault charge. Of those cases that went to trial, 33% were convicted on any charge. Commander's Discretion The commander's authority to decide on punitive or administrative actions to take based on the result of an investigation is often termed "commander's discretion" and has been one of the more frequently debated aspects of military sexual assault investigations. Some of the questions raised by Congress in recent years include: Does the commanding officer/disposition authority have the requisite information, experience and objectivity to make disposition decisions? Are appropriate procedures in place to ensure that the disposition decision is transparent and based on sound legal advice? In certain cases, the commanding officer supervises both the victim and the accused, a situation that could lead to unfair bias or the perception of unfair bias in favor of one or the other that would affect the commander's disposition decision. The FY2014 NDAA, includes a provision to help address this last concern by modifying Rule 36 of the Manual for Courts-Martial to strike the character and military service of the accused from the matters a commander should consider in deciding how to dispose of an offense. In past years, Congress questioned whether the discretion afforded to commanders was too broad and if commanders have the right qualifications to make these decisions. Some in the military and the academic community argue that the commander's authority in this matter supports his or her ability to maintain good order and discipline. They further argue that individuals assigned to command positions are fully qualified, carefully screened and have many years of experience. Still others in the legal community contend that modifying commander disposition authority solely for sex-related cases would create separate legal processes that could be "wasteful, confusing, and potentially counter-productive." Congress has raised concerns that commanders may be more inclined to use their authority to dispose of cases through non-judicial punishment or administrative action, or to discharge the alleged offender rather than to hold him or her accountable for more serious penalties through the court-martial process. On the other hand, some have argued that the political focus and high visibility of military sexual assault cases encourages commanders to pursue courts-martial and prosecutions when not warranted by the evidence. Some in the legal community have pointed to cases where involvement by commanders in the judicial process has resulted in unlawful command influence (UCI), generally defined as "the improper use, or perception of use, of a superior authority to interfere with the court-martial process." This can compromise an accused servicemember's presumption of innocence, right to fair investigation and disposition, and access to witnesses or evidence. As noted in Judicial Proceedings Panel discussions, It is very difficult for a commander to be very strong in his message or her message about how she feels or he feels about sexual assault. We saw General Amos come out, go around to a number of Marine Corps bases, and talk strongly about how we need to support victims, how we need to hold people accountable. As a result of the General showing the leadership that you would expect him to show, we are now having cases thrown out by the appellate courts because of unlawful command influence. SAPRO has noted that legislative change over the past few years has "sharply constrained" military commanders' discretion over cases. Indeed, several pieces of legislation have curbed commanders' discretion or shift decisionmaking power to a higher-level authority. Since June 28, 2012, DOD policy has required that all unrestricted reports of adult sexual assault offenses must be reviewed by a special court-martial convening authority (SPCMCA) for the initial disposition decision. The SPCMCA is a senior military commander (typically in the grade of O-6—colonel or Navy captain), and generally has at least 20 years of experience. In the FY2014 NDAA Congress enacted several provisions that limited commander discretion. This bill also expressed the sense of Congress that sexual assault offenses, "should be disposed of by court-martial, rather than by non-judicial punishment or administrative action," and that that commanders should be "exceedingly sparing" in discharging alleged offenders in lieu of court-martial. The bill (Section 1744) also required secretaries of the military departments to review decisions not to refer charges for trial by court-martial in cases in which a sex-related offense has been alleged by a victim. In 2014, a congressionally mandated panel was tasked with conducting a review and assessment of the systems used to investigate, prosecute, and adjudicate crimes involving adult sexual assault and related offenses. Upon reviewing the commander's authority in sexual assault cases, as well as the practices of allied militaries and available civilian statistics, the Response Systems to Adult Sexual Assault Crimes Panel cautioned against further limitations of convening authorities under the UCMJ, stating, The evidence does not support a conclusion that removing convening authority from senior commanders will reduce the incidence of sexual assault, increase reporting of sexual assaults, or improve the quality of investigations and prosecutions of sexual assault cases in the Armed Forces. In addition, proposals for systemic changes to the military justice system should be considered carefully in the context of the many changes that have recently been made to the form and function of the military justice system. The numerous and substantive changes recently enacted require time to be implemented and then assessed prior to enacting additional reforms. In addition, the panel also recommended repealing Section 1744 of the FY2014 NDAA which required Secretary-level review of decisions not to refer charges to court martial suggesting that this requirement "may cause undue pressure on convening authorities and their legal advisors to refer cases to trial in situations where referral does not serve the interests of victims or justice." In response to this recommendation, Congress amended this requirement in the FY2015 NDAA to require review by the Secretary if requested by the chief prosecutor. Judicial Processes Between 2012 and 2015, much of the congressional action related to sexual assault has focused on judicial processes, especially in increased protections and rights for victims in the court-martial proceedings. Some of the areas of reform have been: Increasing requirements for retention of evidence and records; Eliminating statute of limitations for certain offenses; Minimum sentences for sex-related offenders; and Other changes to the Military Rules of Evidence related to admissibility and privileged communications. Some within DOD and outside legal professionals have been concerned about the magnitude of change to the military justice system and the complexity of implementing these changes. In its FY2014 assessment of the military judicial system and its treatment of sexual assault cases, SAPRO noted that legal and regulatory changes over the course of the previous three years had so greatly altered the trial process for sexual assault crimes that "virtually every portion of the military justice system" had seen modifications. In its 2015 initial report, the Judicial Proceedings Panel (JPP) noted that "the numerous and substantial changes in sexual assault laws have created a confusing landscape for victims and practitioners at all levels of military judicial proceedings." Oversight of these issues continues to be supported by congressionally mandated panels and advisory committees. Judicial Proceedings Panel In 2012, Congress directed the establishment of the Judicial Proceedings Panel (JPP) to "conduct an independent review and assessment of judicial proceedings conducted under the Uniform Code of Military Justice involving adult sexual assault and related offences." The panel's scope of work more specifically included evaluating trends in the, Type, consistency, and appropriateness of punishments rendered for sexual assault offenses; Training and experience levels of military defense and trail counsel; and Development, utilization and effectiveness of special victims capabilities. In 2016 the JPP provided the results of analysis of 1,761 judicial cases, spanning the time period of FY2012-FY2014 and involving at least one count of a sexual assault offense. The JPP's statistical analysis of sexual assault conviction rates measured the relationship between the likelihood of conviction and various other factors (such as the gender of the victim, the rank of accused, and the fiscal year of the proceedings). The JPP found that in general, "the likelihood of conviction for any charge was not affected by the military service of the accused, the rank of the accused, or the status of the victim." The termination date for this panel is September 30, 2017. Defense Advisory Committee on Investigation, Prosecution, and Defense of Sexual Assault in the Armed Forces (DAC-IPAD) Section 546 of the FY2015 NDAA called for the establishment of a 20-member Defense Advisory Committee on Investigation, Prosecution, and Defense of Sexual Assault in the Armed Forces. This panel was originally to be established upon termination of the JPP; however, the FY2016 NDAA (Section 537) required its establishment within 90 days of enactment. The committee was established on February 18, 2016. The duties of this committee, are to (1) "advise the Secretary of Defense on the investigation, prosecution, and defense of allegations of rape, forcible sodomy, sexual assault, and other sexual misconduct involving members of the Armed Forces", and (2) "review, on an ongoing basis, cases involving allegations of sexual misconduct." The committee is also required by law to submit annual reports to the Secretary of Defense and the Armed Services Committees of the House and Senate not later than March 30 th of every year. Congressional Outlook and Considerations Members of Congress may question if the reforms in this space have had any impact on the problem of sexual assault in the military. As discussed at the beginning of this report, Congress's desired outcomes for DOD's SAPR program are (1) continued preparedness, effectiveness and good order of military units, and (2) health and well-being of military servicemembers. However, given the vast number of legal and policy changes in the military's approach to sexual assault over a relatively short period of time, evaluating the impact of these changes can be challenging. Are Sexual Assault Rates Increasing or Decreasing? As Congress and others attempt to verify whether sexual assault rates are increasing or decreasing, some may look at the rates of actual reported incidents ( Table 7 ) to identify trends. Some caution should be taken in this approach for several reasons. First, it is only in the past few years that DOD has begun collecting and reporting detailed incident data in a systematic, consistent, and comparable way across the Armed Forces. This makes it challenging to validate any conclusions about the effects of recent reform efforts compared to past performance. Second, as previously discussed, it is assumed that a significant number of sexual assault incidents that occur are not reported. Therefore, analysis of self-reported anonymous survey data is considered to be a more accurate indicator of the actual rate of sexual assault in the military. It should be noted, however, that changes in survey methodology limit the ability to observe trends over a longer period of time since prevalence rates from the FY2014 and FY2016 surveys are not directly comparable to prevalence data from previous years. Some of the reforms that have been implemented (e.g., improving command culture and training, provisions for restricted reporting) are intended, in part, to encourage those who have been assaulted to make an incident report. Therefore, incident rates need to be viewed in the context of estimated prevalence rates from survey data (see Figure 2 ). If the rate of reported incidents increases in the short term, it could indicate negative or positive change. On one hand, it could mean that there are more sexual assaults occurring. However, given that estimated prevalence rates are higher than reported incident rates, it could mean that unreported incident rates are actually the same or lower. This might be an indication not that more crime is occurring, but instead more individuals who have experienced assault feel comfortable about reporting. For example, in FY2013, DOD reported 627 incidents involving male victims (see Table 7 ). The number of reported incidents for FY2014 and FY2015 were 921 and 821 respectively. However, the estimated prevalence of male sexual assault in 2014 was about 10,500 members. In the long run, Congress might look for both estimated prevalence and incident rates to decrease. However, in the short term, convergence of incident reporting and prevalence estimates might also be an indicator of positive change in command climate, confidence in the system, and/or victim awareness of his or her reporting processes and rights. Are Prevention Activities Effective? It is nearly impossible to determine how many sexual assaults may have not happened due to reforms that are intended to improve prevention programs. In addition, it would be difficult to attribute any reduction in assault rates directly to such programs. Nevertheless, Members of Congress and their staff can monitor some indicators to determine whether prevention activities are being implemented in a manner consistent with best practices. DOD reports that it has implemented a standardized sexual assault training curriculum in accordance with statutory requirements. There is some evidence to suggest that the services' training curricula and delivery generally complies with best practices in adult learning. In addition, across the services, 2016 data indicate that 95% or more of men and women received training on topics related to sexual assault within the previous 12 months. In addition, feedback from servicemembers on effectiveness and relevancy of the training was overwhelmingly positive. While data on implementation suggests that training programs are generally reaching the targeted audiences, there is less data and evidence-based research on training program outcomes. Congress may continue monitoring servicemember awareness, participation, learning, and satisfaction with existing training and future programs. There may also be an opportunity to compare the implementation of prevention programs and share best practices among the services within DOD and also across other federal, state, or civilian programs (e.g., colleges and universities). For example, the services have all adopted active bystander training, but each service and the National Guard Bureau have adopted slightly different training programs. Survey data from 2016 suggests that Navy women and men were generally more likely than those from the other services to cite bystander training as influencing their decision to intervene in a situation that was believed to be sexual assault. Additionally, Congress could direct funding to support additional research on effective sexual violence prevention programs. Many in DOD and Congress have recognized the importance of organizational culture and prevention of risk factors along a continuum of harm (including, for example, sexual harassment and sexism, hazing, stalking, and alcohol use). Analysis of 2016 survey data indicates that when servicemembers perceive that their command climate is more supportive, or where they can speak more openly about sexual harassment issues, they are more willing to act to prevent sexual harassment. This suggests that policies and programs to encourage open dialog and trust in leadership may support positive cultural changes. Congress may continue to monitor DOD programs and progress for other associated risk factors. For example, some of the services indicated in 2015 that they are funding research on the role of alcohol in sexual assault cases with a view for developing additional interventions. As potential interventions are applied, it would be expected that the number of reported incidents associated with alcohol use or other risk factors would decline. Are Victim Support Services Satisfactory? A large portion of the congressional reforms over the past decade have focused on ensuring that military victims of sexual violence have access to adequate and confidential support services immediately following the incident, throughout the investigative and judicial process, and in the longer term along the path to recovery. Servicemember confidence and satisfaction with these services may encourage victims to report sexual violence, to gain access to additional mental health services, and to engage with the investigative and/or judicial process to bring perpetrators to justice. DOD has noted positive trends in the rate of restricted reports converted to unrestricted reports and the rate of conversion. DOD considers these positive indicators of the robustness of the support structure in place and servicemember trust in the reporting system. The percent of conversions was stable at 15% between FY2007 and FY2013, but rose to 20% in FY2014 and has consistently been above 20% since (see Table 8 ). In 2016, over 73% of servicemembers who made unrestricted reports of sexual assault reported being satisfied with their interactions with the SARCs, SAPR VAs, and SVCs during the military judicial process. In addition, 83% of victims felt that SVCs kept them adequately informed them about the status or progress of their case during the judicial process, while less than 50% reported that their unit commander/director or enlisted advisor/supervisor kept them informed. These figures are roughly equal to prior year (2015) metrics and suggest that victims perceive value in continuing or enhancing the SVC programs. An area for congressional oversight remains the training, professionalization, and standardization of victim support functions across the services and geographical locations. Appendix. Abbreviations

Article I, Section 8 of the U.S. Constitution gives Congress the power to raise and support armies; provide and maintain a navy and make rules for the governance of those forces. Under this authority, Congress determines military criminal law applicable to members of the Armed Forces. Congress has determined that sexual assault is a criminal act under the Uniform Code of Military Justice (UCMJ). As such, Congress has an interest in overseeing the implementation and enforcement of these laws in order to provide for the health, welfare, and good order of the Armed Forces. Prevention and response to sexual violence in the military is not a new concern, nor is sexual violence a problem confined to the military. While prevalence is difficult to estimate, some surveys suggest that up to 19.3% of women and 1.7% of men in the United States have been a victim of sexual assault at some point in their lives. There is a continued national dialogue with regard to sexual violence at universities and other government and private organizations. Sexual assault can have both deleterious physical and psychological effects on the victim and, when an assault occurs in or around the workplace, it can harm the working environment and function of the organization. In the military context, when an assault occurs it impairs the unit's ability to work effectively; it can have an impact on cohesion, stability, and ultimately, mission success. Thus, concern about sexual assault in the military stems from complementary imperatives: protecting the individual health and welfare of military servicemembers, and ensuring preparedness and effectiveness of military units. Congressional efforts to address military sexual assault, pursuant to its Constitutional authority, have intensified over the past two decades in response to rising public concern about incident rates and perceptions of a lack of adequate response by the military to support the victims and hold perpetrators accountable. Since 2004, Congress has enacted over 100 provisions intended to address some aspect of the problem as part of the annual National Defense Authorization Act (NDAA). In addition, DOD has devoted significant resources to the issue in terms of funds, personnel, and training time. Given the scope and complexity of this issue, it is helpful to apply a framework for analysis and oversight. This report provides such a framework to help congressional staff understand the legislative and policy landscape, link proposed policy solutions with potential impact metrics, and identify possible gaps that remain unaddressed. Congressional oversight and action on military sexual assault can be organized into four main categories: (1) Department of Defense (DOD) management and accountability, (2) prevention, (3) victim protection and support, and (4) military justice and investigations. The first category deals with actions to improve management, monitoring, and evaluation of DOD's efforts in sexual assault prevention and response. The second category includes efforts to reduce the number of sexual assaults through screening, training, and organizational culture. The third category focuses on DOD's response once an alleged assault has occurred, including actions to protect and support the victim. Finally, the last category addresses bringing perpetrators to justice through military investigative and judicial processes.

Overview A series of elections in Lebanon, Iran, Afghanistan, and Iraq may be critical in determining the future direction and success of U.S. policy toward the Middle East. In 2009, as the Obama Administration and Members of the 111 th Congress face the challenges of withdrawing from Iraq, stabilizing Afghanistan, and containing Iran's regional ambitions, election outcomes and new governments could lead to changing regional dynamics that may complicate or advance U.S. interests. For several years, the United States and others have supported efforts to strengthen Lebanese sovereignty by supporting its central government and military; however, should Hezbollah, a U.S.-designated Foreign Terrorist Organization (FTO) and its allies gain a majority of seats in the June parliamentary elections, many question whether current U.S. support to Lebanon would continue at current levels. Most observers view the election in Lebanon as both a test of democratic reform and an indicator of Iran's strategic influence in the region. On the other hand, in the Iranian election, a victory for reformist candidate Mir Hossein Musavi may bode well for U.S. efforts to engage with Iran and lower U.S.-Iranian tensions. It may also increase the chances of success for a comprehensive Middle East peace, as a more moderate Iranian leadership could refrain from meddling in Israeli-Syrian and Israeli-Palestinian negotiations should they occur. In Iraq and Afghanistan, the election process is seen as at least as important as the outcomes. In fact, some analysts have argued that the absence of violence, fraud, and disputes over the elections or the elections results is more important for U.S. objectives than the winning or losing of any one candidate or party. In Afghanistan, most analysts agree that the selection by Hamid Karzai of Muhammad Fahim as his candidate for vice president improves the chances that Karzai will win in August, which could result in the continuation of the status quo in Afghanistan. In Iraq, where Nuri al-Maliki's success is less certain and where a series of elections and referenda on controversial issues including the status of Kirkuk are yet to be scheduled, violent or delayed elections could cause a re-evaluation of the planned U.S. troop withdrawals or represent a setback for U.S. efforts to promote reconciliation among Iraq's factions. Lebanon The outcome of the Lebanese parliamentary elections, scheduled for June 7, 2009, may be critical in determining the future direction of U.S. policy toward Lebanon. The Lebanese are to elect 128 deputies—from 26 districts and 11 politically recognized religious sects—to Lebanon's unicameral legislature. Lebanon's electoral system is a mix of quotas based on religious confession (religious denomination) and pluralistic winner-take-all districts. For the first time, polls are to be held on the same day in all electoral districts, a result of a new electoral law passed in late September 2008. Lebanese government officials hope that this change will prevent the outcomes from one district from affecting voting patterns in the rest of the country. The new election law is based on smaller electoral districts than in past elections, when districts were subject to gerrymandering under Syrian occupation. In 2005, following Syrian withdrawal, there were 17 large districts and 17 uncontested seats. In 2009, there is only one uncontested seat. Of the 26 smaller districts, there are 12 districts in which all candidates are affiliated with the same religious confession. Most analysts agree that the new election law will make the election both more competitive and more sectarian. This election law is only stipulated to be used for the June 2009 elections. The new parliament will be responsible for crafting a new election law for future elections. Major Candidates and Possible Outcomes The March 14 coalition, a largely Sunni bloc that holds a slim majority in parliament (68 of 127 seats), is struggling to reinvent itself in the wake of changing regional dynamics. The coalition, which gained control of Lebanon's government on a pro-independence, anti-Syrian platform after the assassination of former Prime Minister Rafiq Hariri in 2005, is hoping to maintain its slim majority after the June elections. The opposition coalition, which includes the March 8 bloc, led by Hezbollah and Amal (Lebanon's largest Shia party), together with the Reform and Change bloc led by Maronite Christian Michel Aoun's Free Patriotic Movement (FPM), holds 56 seats in the parliament. The narrow margins in parliament and sectarian tensions fueled 18 months of political stalemate from 2006 to 2008—marked by targeted assassinations, a general strike, and a siege of Beirut by Hezbollah—as each group fought for political influence that matched its perceived popular support. The outcome was a May 2008 agreement, brokered in Doha, Qatar, that granted the opposition minority a blocking one-third plus one of cabinet seats, which serves as an effective veto over government decisions. Political violence, including sectarian fighting and targeted assassinations, is common in Lebanon, and could preclude the possibility of elections at any time. However, since each side perceives that the projected outcome of the pending election is very close, and perhaps even that it holds a slight advantage, prospects for stability in the weeks leading up to the election appear good. Political identity tends to fall along sectarian lines, particularly among Sunnis and Shias. Given this reality, the election, most observers agree, will likely be decided by Christian voters in a few key battleground districts, including the district of Metn near Mount Lebanon. Christian and Armenian voters in Metn supported Michel Aoun's FPM in 2005, giving it enough seats in parliament to, together with March 8, constitute a significant minority bloc. Some observers have argued that the changing international and U.S. position on Syria has undermined the March 14 coalition, which won in 2005 based, at least in part, on its overtly anti-Syrian rhetoric. March 8 might be taking advantage of this trend by appearing more in tune with international opinion on Syria than the March 14 parties. March 14 success depends largely on the coalition's ability to make inroads in the Christian community. As a large minority, the Christian community has long struggled for political power in Lebanon. Current divisions in the Christian population stem largely from the absence of a prominent Christian figure—one that parallels Saad Hariri or Hassan Nasrallah in the Sunni and Shiite communities. In 2005, Christians overwhelmingly supported Michel Aoun, whose history of opposing Syria garnered support in the wake of the assassination of Rafiq Hariri. However, his alliance with Hezbollah in the March 8 coalition somewhat diminished his popularity in 2006 (during the Israel-Hezbollah war) and again in 2008 (when Hezbollah besieged Beirut). Other Christian party leaders, like Samir Geagea of the Lebanese Forces (LF) or Amin Gemayel of the Kataeb party, have not been able to rally popular support as effectively as Michel Aoun, perhaps in part because of the perception that the LF and Kataeb are relatively minor players in the March 14 coalition, subordinate to Saad Hariri's leadership. Michel Aoun, on the other hand, plays a more visible role in the March 8 coalition and has been received in a number of foreign capitals, most notably in Damascus in December 2008. Many argue that his visibility is appealing to Christians who see him as their best chance for political influence and international recognition. Despite the efforts of both March 8 and March 14 to court Christian voters, many analysts have speculated that March 8 and its allies hold a slight advantage at this stage of the campaign. March 8 has taken advantage of changing regional dynamics to reinvent itself as the party of nationalism and Lebanese independence, pointing to U.S. and Saudi support for the March 14 camp as proof that March 14 represents a future under foreign tutelage. Increased U.S. engagement with Syria and the normalization of relations between Syria and Lebanon, marked by the exchange of ambassadors and the opening of embassies, have left March 14 searching for a new message. Regardless, the election will likely result in a slim majority (5-7 seats) for the winning camp, and only a few possible governance scenarios after the election. They are: March 14 Victory If the March 14 coalition wins a majority of seats in the parliament, however slim, then the new government would likely look much like the existing government in which March 14 holds key ministries like defense and the office of Prime Minister, but governs by consensus with the other parties and coalitions in the parliament. Key members of the March 8 coalition have indicated their willingness to form a unity government if March 14 were to win only a narrow majority in the parliament after the elections. For example, Naim Qassam, Hezbollah's number two and the author of Hezbollah's election strategy, has stated that "if the opposition wins, Hezbollah wishes to form a national unity government," since neither side is capable of governing alone. Qassim added that the government would be a partnership, not a majority, likely implying that March 8 would demand that it maintain a blocking minority in the cabinet and may even push for further influence, such as more prominent cabinet positions. March 8 Victory If March 8 takes the majority of parliament seats, then prospects for the next government are less clear. March 8 leaders have publicly stated that they would offer March 14 the option of a unity government, but Saad Hariri, leader of the Future Movement party, has said that his party will not participate in any government in which March 8 is the majority. While some analysts are skeptical that Hariri would follow through with this threat after the elections, others argue that March 14 might seek to strip the government of legitimacy and financial resources by not participating. March 8 would be forced to govern without representation for most of the Sunni population and without the financial support that March 14 enjoys from patrons like Saudi Arabia. If March 14 does join the government, then it would likely demand certain concessions from March 8, like a blocking third of cabinet seats and the position of Prime Minister (which is reserved for a Sunni Muslim, but who could come from an independent Sunni party outside of the March 14 coalition). No Majority A number of independent parties and candidates are running in contested districts, making it possible that neither March 8 nor March 14 will win a majority of cabinet seats. While the outcome in such a scenario is uncertain, it could mean a breakdown of the current March 14-March 8 dichotomy. New alliances could emerge as March 8 and March 14 parties work with the independents to form a government. On the other hand, a parliament without a majority could result in protracted political stalemate that leaves Lebanon without a government and increases the chances of sectarian violence. Implications for U.S. Policy Current U.S. policy in Lebanon focuses on strengthening democratic institutions in an independent Lebanon, and on promoting the control of the government, police, and military over the entire territory of the state. To advance these goals, the United States has provided over $1 billion in economic and military assistance to Lebanon since 2005, including $1.7 million in support of this election. If Syria's allies secure a parliamentary majority, continued U.S. support for Lebanon's economy, civil society, and armed forces could be significantly reduced or ended completely. In his testimony to the House Foreign Affairs Committee, Subcommittee on the Middle East and South Asia on March 24, 2009, then-Acting Assistant Secretary of State for Near Eastern Affairs Jeffrey Feltman stated that decisions about the shape and composition of Lebanon's next government can and should be made by the Lebanese themselves, for Lebanon, free from outside interference. Feltman added that he anticipated that the shape of the United States' assistance programs to Lebanon will be evaluated in the context of Lebanon's parliamentary elections results. At issue is the role of Hezbollah, a U.S. State Department-designated Foreign Terrorist Organization (FTO), in the government. In the current government, Hezbollah is a member of the opposition and holds one cabinet seat: the Minister of Labor. If the March 8 coalition, which includes Hezbollah, wins a majority of parliament seats in the June election, Hezbollah's role in the cabinet could expand. The Lebanese constitution grants to the Council of Ministers (the cabinet) authority over the civil, military, and security operations of the government as well as extensive control over the government's policies and personnel. A strong showing for March 8 on election day could lead to the formation of a cabinet that includes more members of Hezbollah, thereby expanding the organization's control and influence. Since the cabinet has authority over the armed forces, the United States might be reluctant to continue to support a military over which Hezbollah and its political allies might have influence. Since the Doha Agreement, the government and representatives from Hezbollah have been engaged in a dialogue to determine a national defense strategy that deals with the issue of Hezbollah's weapons. While no official resolution has been articulated, recent reports suggest that intelligence sharing between the Internal Security Forces and Hezbollah does take place, at least in some cases. Most analysts agree that a March 8 victory would be a setback for U.S. policy in the Middle East and for Arab states which have worked to counter the influence and reach of Iran and Syria in the region. Hezbollah and the March 8 coalition are aware of this possibility and appear to be looking for a solution. Hezbollah is only fielding 10 candidates (all 10 in districts where a win appears all but certain) in this election. Currently, 14 members of Hezbollah hold parliament seats. Some argue that Hezbollah is intentionally limiting its numbers in the government in the event that March 8 wins a majority of seats in parliament. Limited official participation by Hezbollah may improve the chances that March 14 would join a unity government, thereby improving the chances that international support from the United States, Saudi Arabia, and Europe will continue after the election. These analysts also argue that Hezbollah recognizes that international support for the government shields the organization from international pressure to disarm and perhaps decreases the likelihood of an Israeli attack. Others argue that Hezbollah is trading seats for influence, and that fewer seats does not mean that Hezbollah would have less influence in the March 8 coalition or in a unity government. Some analysts have warned that if the United States were to halt aid to Lebanon if March 8 wins the elections, then it would send the message that the United States only supports democratic institutions and processes when it likes the results. The U.S. State Department has repeatedly expressed its commitment to promoting a democratic, independent Lebanon. Critics of U.S. policy say that the United States supports the March 14 coalition, not democracy in Lebanon. Reducing U.S. assistance could reinforce this perception among the Lebanese. Iran On June 12, 2009, Iran is to hold presidential elections. The president is directly elected in a nationwide vote, but is subordinate to a "Supreme Leader," who is selected by an elected "Assembly of Experts" that decides on succession and major constitutional revisions. Presidential candidate eligibility is determined by the 12-person "Council of Guardians," an appointed body that also ensures that legislation adheres to Islamic principles. Candidates completed their registration from May 5–10, 2009, and Council of Guardians is scheduled to decide on the final candidate field by May 20. In past elections, several hundred persons offered themselves as candidates, including some women. This year, 450 registered. However, the Council's screening process has tended to narrow the field to about 8 to 10 candidates, all men, although most presidential elections have offered voters a relatively wide choice of candidates in terms of views and experience. If no candidate achieves at least 50% of the vote on June 12, a runoff between the top two vote-getters would be held about three weeks later. There has not been a history of election-related violence in Iran, either on election day or at other times. Major Candidates and Possible Outcomes The incumbent is Mahmoud Ahmadinejad, a non-cleric elected in a two-round contest in 2005, who derives support from conservative factions and has opposed any compromise with the international community that would curb Iran's right to enrich uranium. In recent months, the number and profile of potential conservative as well as reformist (those who advocate more social freedoms) candidates have fluctuated, and there were reports that members of both major camps were trying to unify around a rival to Ahmadinejad. The election contest began to take shape on February 8, 2009, when Mohammad Khatemi, the reformist President who governed Iran from 1997-2005, announced he would run again. He declared his candidacy even though many reformists feared that his running again would begin a potentially wrenching and divisive political battle between conservatives and reformists. However, on March 18, 2009, Khatemi withdrew from the race when another reformist, Mir Hossein Musavi, said he would run. Musavi had served as Prime Minister from 1981 to 1989, the period including the 1980-88 Iran-Iraq war, but has been out of politics since his prime ministerial post was abolished in a constitutional revision in 1989. Khatemi said in a withdrawal statement that he did not want to divide the reformist vote. Musavi shares much of Khatemi's policy outlook on domestic reforms and social freedoms, and also seeks to avoid confrontation with the international community. However, Musavi is viewed as less confrontational to conservatives than Khatemi. Another reformist, Mehdi Karrubi, who ran in 2005, also has registered to run. Musavi, the most prominent reformist candidate, benefits from having been out of politics since 1989, because he is untainted by recent allegations of corruption or by crackdowns on civil society groups. Musavi is an advocate of strong state intervention in the economy, building on his terms as Prime Minister when he successfully managed the state rationing program during the privations of the Iran-Iraq war. In an interview on April 13, 2009 with the Financial Times , Musavi also stated that Iran needs "better relations with the world" than has been the case under Ahmadinejad's presidency, an apparent reference to the fact that Ahmadinejad's defiance on nuclear issues has led to a series of U.N. Security Council Resolutions imposing sanctions on Iran. Ahmadinejad might also have rivals emerging in the conservative camp. The conservative camp split into "pro-Ahmadinejad" and "anti-Ahmadinejad" camps in the March 2008 Majles (parliament) elections. One conservative, former Revolutionary Guard Commander-in-Chief Mohsen Rezai, has registered to run. The outcome of the June 2009 election is difficult to foresee. In urban areas, Ahmadinejad has been greatly weakened by the perception that his defiance on the nuclear issue has caused Iran to become isolated internationally. Musavi benefits from contrast with that position. Students have conducted several high-profile anti-Ahmadinejad protests in recent years, most recently in late February 2009 when authorities tried to rebury the bodies of some killed in the Iran-Iraq war on the campus of Amir Kabir University of Technology. However, Ahmadinejad continues to exhibit support among lower classes and rural voters, which could potentially carry him to re-election. He has raised wages and lowered interest rates for poorer borrowers, cancelled some debts of farmers, and has increased social welfare payments and subsidies. Some believe these moves have fed inflation, but rural Iranians see him as attentive to their economic plight. In addition, Ahmadinejad could benefit from the consistent support for his government expressed by the Supreme Leader, Ayatollah Ali Khamene'i. It is believed that Khamene'i's tacit backing helped Ahmadinejad to his unexpected victory in the 2005 presidential election and that Khamene'i might assist him again in 2009. Karrubi, on the reformist side, and Rezai, on the conservative side, will likely siphon votes from the main candidates similar to their ideologies. However, few observers expect either to emerge as frontrunners in the election. Implications for U.S. Policy The Obama Administration is officially neutral in the contest. However, virtually all observers believe that the Administration perceives that Ahmadinejad's defeat would benefit U.S. interests by enhancing the potential for Iran to meet international demands to curb its nuclear program. In the Financial Times interview mentioned above, Musavi ruled out suspending the enrichment of uranium, but it is widely believed that he might be more amenable to accepting international community incentives to curb that program—or to avoiding further penalties by continuing enrichment at current levels—than is Ahmadinejad. There also is a view in the Administration that a Musavi presidency would proceed more cautiously on support for Shiite Islamist and other Islamist movements, such as Hezbollah, Hamas, Iraqi Shiite militias, and dissident movements in the Gulf states. This increases the prospects for a lessening of tensions between Iran and its neighbors and other countries in the region. On the other hand, some argue that Iran's foreign policy is a product of consensus in Iran's leadership and that Iran's policy under a Musavi presidency would differ little from that observed under Ahmadinejad. Afghanistan On August 20, 2009, Afghanistan is scheduled to hold presidential and provincial elections. Almost every decision about the upcoming election has been contested, leading some observers to forecast a possible "failed election," in which the outcome is not universally accepted. The election comes within a backdrop of deteriorating security in many parts of Afghanistan and growing disillusionment within and outside Afghanistan with incumbent President Hamid Karzai, particularly over the issue of official corruption and governmental inability to deliver basic services. The President, who runs on a ticket with two vice presidents, serves a five year term. Afghanistan has 34 provinces, and the elected provincial councils provide an advisory and consultative counterweight to the governors of each province, who are appointed by the President. Each provincial council will also select two representatives each to the 102-seat upper house of the National Assembly. The remaining 34 seats in the upper house are appointed by the President. The election date has been a particularly controversial issue that encapsulates Karzai's differences with political rivals, particularly those among non-Pashtun ethnic minorities. On February 3, 2009, Afghanistan's Independent Election Commission (IEC) set August 20, 2009 as the election date—a change from the April 21 date mandated by one section of the Constitution (Article 61). The change was intended to allow at least 30 days before President Hamid Karzai's term expires on May 22, 2009. The IEC decision on the latter date cited another article of the Constitution (Article 33) mandating universal accessibility to the voting—and saying that the April 21 date was precluded by difficulties in registering voters, printing ballots, training staff, making the public aware of the elections, and the dependence on international donations to fund the elections, in addition to security questions. This decision caused the ethnic minority-dominated "United Front" faction—which has substantial strength in the elected lower house of the National Assembly and has blamed Karzai for trying to monopolize Pashtun control of the government—to say it would not "recognize" Karzai's presidency after May 22. In response to the UF criticism, Karzai said in late February 2009 that he would run for re-election no matter when the IEC sets the election—even if the body moved the election to the April 21, 2009 date. To reinforce that assertion, on February 28, 2009, Karzai issued a presidential decree directing the IEC to set the elections in accordance with all provisions of the constitution. However, observers say Karzai's decree was largely political because it was widely recognized that authorities would not be ready to hold elections by the earlier date. As expected, the IEC reaffirmed on March 4, 2009 that the election must be held on August 20, 2009. Karzai's maneuvers and the official decision did not stop the UF from insisting that Karzai step down on May 22 and allow the elections to be run by a caretaker government. Karzai argued that the Constitution does not provide for any transfer of power other than in case of election or death of a President. The Afghan Supreme Court backed that decision on March 28, 2009. The Obama Administration publicly backed both the IEC and the Supreme Court rulings. Despite the dispute between Karzai and his opponents, enthusiasm among the public appears to be high, and there was much pre-election maneuvering in advance of the deadline for candidates registration (May 8, 2009). Voter registration (updating of 2005 voter rolls) began in October 2008 and was completed by March 2009. However, there were reports of some registration fraud, with some voters registering on behalf of women who do not, by custom, show up at registration sites. Women are legally permitted to register and vote, but they must do so in person. Security was also a concern during the registration process. U.S./NATO military operations in some areas, including in Helmand in January 2009, were conducted to secure registration centers. Still, registration percentages in restive areas were lower than in more secure areas. The elections are expected to cost about $200 million; on March 31, 2009, at a U.N.-led conference in the Netherlands, the United States committed $40 million of that amount. Major Candidates and Possible Outcomes Candidates had from April 24 and May 8, 2009 to declare their candidacies. A wide range of challengers filed, as did Karzai. Challengers include both Pashtuns and members of the minority-dominated UF. The conventional wisdom among observers is that the two-round election virtually assures victory by an ethnic Pashtun. In election-related political jockeying, Karzai succeeded in recruiting a UF supporter as one of his vice presidential running mates. Former Defense Minister Muhammad Fahim, a key United Front (UF) member, has agreed to be his main running mate. Ethnic Hazara leader Karim Khalili is running again with Karzai in the second vice presidential slot. Anti-Karzai Pashtuns did not succeed in coalescing around one challenger. Karzai critic Ashraf Ghani registered to run. He does not have strong figures from other major ethnicities on his ticket. Another strong Pashtun candidate is the 48-year-old deputy speaker of the lower house of parliament Mirwais Yasini. The UF is split because of Fahim's alliance with Karzai in the election. Burhanuddin Rabbani (president from 1992 to 1996), the elder statesman of the UF bloc, insisted that an ethnic Tajik (the ethnic core of the UF) head the UF ticket. Two top contenders to head the slate were former Foreign Minister Dr. Abdullah Abdullah and Ahmad Zia Massoud (currently one of Karzai's vice presidents), the brother of assassinated mujahedin commander Ahmad Shah Massoud, killed by Al Qaeda two days before the September 11 attacks on the United States. The UF chose Abdullah at the top of the ticket, and he registered, although his running mates are a little known Hazara eye surgeon and a little-known Pashtun, Homayun Asefi. Some believe these running mates represent the type of technocratic and apolitical leadership that Afghanistan needs. Some observers say that Karzai's main Pashtun opponents—particularly Ghani—spend most of their time outside Afghanistan, and are basing their election strategies on creating the impression that the Obama Administration prefers that Karzai not be re-elected. It is not certain, even if this impression took hold, that Afghan voters would cast their ballots on this basis. Other contenders include Ramazan Bashardost (also a Hazara), running on an avowed "anti-corruption" platform based on his public role as a whistle-blower against specific alleged government abuses. Others are Abdul Salam Rocketi, a former Taliban commander now in the lower house of parliament, and Shahnawaz Tanai, famous for attempting a coup against Communist leader Najibullah in April 1990 when Tanai was defense minister. Implications for U.S. Policy The outcome of a successful election—whether in one round or after a runoff—would not likely alter U.S. policy in Afghanistan significantly. The United States has worked with Karzai for almost eight years, and many of the other main contenders are also well known to the United States, as former members of the Karzai government. There are not dramatically different approaches to governing among these candidates, although presumably Abdullah's ticket might emphasize government efficiency over politics. However, a victory by a non-Pashtun might significantly increase dissension because the Pashtuns believe it is their longstanding right to govern Afghanistan and they would not easily accept victory by a non-Pashtun. A presidential win by a non-Pashtun could cause some Pashtun tribal leaders to withhold or reduce their cooperation with U.S. and partner forces, and could cause efforts to recruit Pashtuns to the Afghan security forces to falter. The scenarios more likely to cause harm to U.S. interests would be a "failed election"—an election that is marred by substantial violence or widespread fraud to the point where the election is not completed on election day, or which produces endless political infighting over the outcome. A drawn-out election dispute could create a power vacuum that would interfere with increased U.S. efforts to build governance in Afghanistan that were announced by President Obama on March 27, 2009. On the other hand, there is a traditional Afghan dispute resolution mechanism that would likely be available. This mechanism is the loya jirga , a special national gathering usually composed of about 1,000 notables from around Afghanistan and which has been used in many instances to make or endorse major decisions. If it is determined that the election cannot be held, perhaps due to security conditions, on August 20, a loya jirga is provided for in the constitution to select the next president. A loya jirga also is likely to be held if the election is held on August 20 but no outcome is widely accepted. A president selected in a loya jirga might, according to some, suffer from a relative lack of legitimacy as compared with a national election, particularly because Pashtun delegates tend to dominate such meetings and would be almost certain to select a Pashtun as president. In addition, many Afghans might assert that a loya jirga provides opportunity for the United States and other outside powers to exert influence on the choices made at such a meeting. Iraq Iraq is scheduled to hold national elections on January 30, 2010, upon the expiration of the term of the existing Council of Representatives. While the specifics of the contest are not yet clear, the results of the provincial elections, held on January 31, 2009, might be instructive when looking ahead to the national elections. The national elections will determine the next four-year government to follow the current government headed by Prime Minister Nuri al-Maliki. Major Candidates and Outcomes Some primary features of the provincial elections appear to be tied to the results for the two main Shiite parties, whose fates differed dramatically. In the mostly Shiite southern provinces, the Islamic Supreme Council of Iraq (ISCI, Shahid Mihrab list) and Maliki's Da'wa "State of Law Coalition" offered competing lists. Maliki's post-election political position apparently was enhanced by the strong showing of his list. With 28 out of 57 seats, the Maliki slate is in effective control, by itself, of the Baghdad provincial council (displacing ISCI). Da'wa also emerged very strong in most of the Shiite provinces of the south, including Basra, where it won an outright majority (20 out of 35 seats). The Fadhila (Islamic Virtue) party previously dominated the Basra provincial council and administration, a platform from which it launched a move by filing a petition, under the 2006 regions law, to form a new region consisting only of Basra province. This effort did not attract the needed 10% of provincial residents' signatures to trigger a referendum by the time of the provincial elections. It is likely that Fadhila's relatively poor showing and the broader trend of support for strong central government will derail the Basra region movement for the near future. The apparent big loser in the provincial elections was ISCI, which had been favored because it is well organized and well-funded. ISCI favors more power for the provinces and less for the central government; centralization is Maliki's preferred power structure. ISCI did not win in Najaf province, which it previously dominated and which, because of Najaf's revered status in Shiism, is considered a center of political gravity in southern Iraq. It won seven seats there, the same number won by the Maliki slate. ISCI won only 3 seats on the Baghdad province council, down from the 28 it held previously, and only five in Basra. Some observers believe that the poor showing for ISCI was a product not only of its call for devolving power out of Baghdad, but also because of its perceived close ties to Iran, which some Iraqis believe is exercising undue influence on Iraqi politics. Implications for U.S. Policy The provincial elections did, to a large extent, further U.S. goals to bring Sunni Muslims ever further into the political structure. Sunnis boycotted the January 2005 provincial elections and had been poorly represented in some mixed provinces, such as Diyala and Nineveh. It was also hoped that the elections would help incorporate the tribal leaders ("Awakening Councils") who recruited the Sons of Iraq fighters into the political structure. These Sunni tribalists offered election slates and showed strength at the expense of the established Sunni parties, particularly the Iraqi Islamic Party (IIP). The main "Iraq Awakening" tribal slate came in first in Anbar Province. The established, mostly urban Sunni parties, led by the IIP, had been struggling in 2008 as the broader Accord Front (Tawafuq) fragmented. In the provincial elections, one of the Accord Front's component parties—the National Dialogue Council—ran on slates that competed with the IIP in several provinces. U.S. officials saw the elections as a key opportunity to move Moqtada al-Sadr's faction firmly away from armed conflict against the mainstream Shiite parties. Sadr announced in October 2008 that he would not field a separate list in the provincial elections but support Sadrists on other lists. Sadr's faction, represented mainly in the "Independent Liberals Trend" list, filed candidates in several provinces, mostly in the south. The slate fared well enough in several southern provinces to be a potential coalition partner, and, through deal making, has gained senior positions in a few southern provinces. The failure of Sadrists to win control of any councils could reflect voter disillusionment with parties that continue to field militias—which many Iraqis blame for much of the violence that has plagued Iraq since the fall of Saddam Hussein. Despite these relatively positive results, other concerns about the prospects for reconciliation in Iraq linger. In particular, the status of Iraqi Kurds is still unresolved, and there are potential upcoming elections for the Kurdistan Regional Government (KRG) that may call attention to concerns about the future status of the Kurdish regions. Prospects for Upcoming Elections The post-election efforts to form provincial administrations demonstrated that Maliki still needs to strike bargains with rival factions, including Sadr, ISCI, and even the Sunni list of Saleh al-Mutlaq (National Dialogue Front) that contains many ex-Baathists. These concessions indicate that while Maliki and his allies may be frontrunners, the outcome of the national election, scheduled for January 30, 2010, is uncertain. Some view Maliki as somewhat weaker than expected because he was unable to block the selection of Ayad al-Samarrai, a Sunni critic of Maliki, as new Assembly speaker on April 20, 2009. Some Sunnis may try to become Iraq's President in the next government, sensing that the Kurds are now a weakening part of the central government. President Jalal Talabani, a Kurd, said in March 2009 that he will not continue as president, in part because of widely publicized health problems that have required occasional treatment outside Iraq. Other less sweeping elections also are planned for 2009. Set for July 25, 2009, are elections for the Kurdistan National Assembly, which are to elect a president of the KRG. There is also a planned referendum by June 30, 2009 on the U.S.-Iraq status of forces agreement, although some believe it might not be held if there is no popular agitation to do so. By July 31, 2009, district and sub-district elections are to take place. Several other possible elections in Iraq are as yet unscheduled. For example, there are to be provincial elections in the three Kurdish-controlled provinces and the disputed province of Kirkuk, subsequent to a settlement of the Kirkuk dispute. Under the election law that set the provincial elections, a parliamentary committee was to make recommendations on resolving this dispute by March 31, 2009. That deadline was not met. The U.N. Assistance Mission—Iraq (UNAMI) also is continuing its efforts to forge a grand settlement of Kirkuk and other disputed territories, and UNAMI submitted a report to Iraqi leaders in late April. Depending on political outcomes, there could be further elections. Among them would be a referendum on any agreed settlement on Kirkuk and a vote on amendments to Iraq's 2005 constitution. More so than who prevails in the upcoming elections in Iraq, most say, the U.S. interest is that they are held peacefully, with maximal participation from the diverse spectrum of Iraqi factions. Political competition through the ballot box could be one factor that could insure that the planned draw-down of U.S. troops from Iraq—now set to be completed by the end of 2011—continues without major interruption.

The strategic influence of Iran in the Middle East, the stability of Iraq, and the ongoing war in Afghanistan are at the forefront of U.S. policy and Congressional interest in the region. The Obama Administration and many Members of the 111th Congress are making decisions about the U.S. approach to the Middle East at a time when the consequences of recent decisions and events may constrain U.S. options. In 2009, key elections in Lebanon, Iran, Afghanistan, and Iraq could reshape regional dynamics and either complicate or advance U.S. policy goals in the Middle East. This report provides an overview of the election contests in Lebanon, Iran, Afghanistan, and Iraq, including possible outcomes and implications for U.S. policy. It will be updated periodically to reflect major developments. For more information, see CRS Report R40054, Lebanon: Background and U.S. Relations, by [author name scrubbed], CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by [author name scrubbed], CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy, by [author name scrubbed], and CRS Report RS21968, Iraq: Politics, Elections, and Benchmarks, by [author name scrubbed].

Insider Trading The provisions of the new law expressly affirm that there exists no exemption for Members of Congress, congressional employees, or for other federal officers or employees from the "insider trading" prohibitions in federal securities law and regulation. It should be emphasized that there never was any exemption or exception from the "insider trading" provisions of securities law for Members of Congress, congressional staff, or for other federal employees, and such persons were subject to the insider trading restrictions in the same manner as members of the general public. However, certain media reports and allegations created the public impression that Members of Congress and staff were actually exempt or had "excepted themselves" from the insider trading provisions. This legislation addressed that perception. In addition to affirming that the insider trading restrictions of securities law and regulation apply to Members of Congress and to other federal officials, the STOCK Act further affirms expressly that each officer and employee of the legislative branch, each executive branch official, and each judicial officer and employee owes a duty of trust and confidence to the United States and the citizens of the United States with respect to material, nonpublic information derived from such person's public employment. The STOCK Act directs the ethics entities in the House and Senate—the House Ethics Committee and the Senate Select Committee on Ethics—to issue interpretations of chamber rules "clarifying" that Members and staff are prohibited from using nonpublic information derived from their positions "as a means for making a private profit." Although such explicit regulations already exist in the executive branch, the legislation directs that the Office of Government Ethics issue such interpretive guidance, and that the Judicial Conference of the United States issue such guidance to federal judges and to judicial employees. From the inclusiveness of the language of the legislation, and from previous guidance, it would appear that the restrictions on the use of nonpublic, material information extends not only to trading directly by the Member of Congress or by staff on such information, but would extend also to passing on such material, nonpublic information to another so that such other person may make a private profit for himself or herself, or for the public official. Commodity Exchange Act The STOCK Act expressly includes Members and employees of Congress within those employees or agents of the federal government, including all executive branch and judicial branch officers and employees, who are prohibited from using nonpublic information, imparting such nonpublic information, or stealing or converting nonpublic information to purchase or sell commodities, commodities futures, or options, for personal gain. Initial Public Offerings (IPOs) The STOCK Act amends the Securities Exchange Act of 1934 to provide that all officers or employees of the federal government who are required to file annual public financial disclosure reports under the Ethics in Government Act are prohibited from purchasing securities that are the subject of an "initial public offering ... in any manner other than is available to members of the public generally." Public Financial Disclosure Reports Under existing and pre-STOCK Act law, Members of Congress and certain employees of the legislative branch (including those paid at a rate of pay exceeding 120% of the base salary of a GS-15), as well as executive branch officials who occupy "a position classified above GS-15," or, if not on the General Schedule are in a position compensated at a "rate of basic pay ... equal to or greater than 120 percent of the minimum rate of basic pay payable for GS-15," are generally subject to the public financial disclosure provisions of the Ethics in Government Act of 1978, as amended. Those employees compensated at the rate of pay described above are required to file detailed public financial disclosure statements by May 15 of the following year if the individual works for the government for more than 60 days in the calendar year. These disclosure reports have been available to the public for viewing at the office of the agency ethics officer, or a copy may be furnished to those requesting a copy. Elimination of Mortgage Exemption for Personal Residences of Certain Officials Under existing law in the Ethics in Government Act, one of the "liabilities" of over $10,000 that did not have to be disclosed on an annual personal financial disclosure report was the mortgage on officers' or employees' personal residences. By removing the exemption for such disclosure from reports made by the President, the Vice President, Members of Congress, and nominees and incumbents in positions which are appointed by the President and confirmed by the Senate (other than Foreign Service officials below the rank of ambassador, military personnel at or below grade 0-6, or special government employees), the STOCK Act now requires disclosure of information about the mortgages on such officials' own personal residences. Prompt Public Reporting of Financial Transactions The Ethics in Government Act of 1978 has, since its enactment, required the annual public reporting of all "transactions" in income-producing property of over $1,000 in value for covered executive and legislative branch officers and employees. This requirement applies generally to the purchase or sale of such assets as stocks, bonds, commodity futures, or other securities, as well as the purchase or sale of real property which is income producing (such as rental property). The STOCK Act requires, as of July 3, 2012, the public reporting of covered transactions exceeding $1,000 in many of these income-producing assets to be made within 30 days of receiving notice of the transaction, but not later than 45 days after the transaction, from all federal officers and employees in the legislative and executive branches who are required to file public financial disclosure reports under the Ethics in Government Act of 1978, as amended. This requirement for more prompt public reporting of financial transactions will not apply to a widely held investment fund, such as mutual funds, if the fund is publicly traded, the assets are widely diversified, and the reporting individual neither exercises nor is allowed to exercise control over the financial interests of the fund. Furthermore, the periodic transaction reports generally apply only to transactions in securities, and do not apply to transactions in things such as real property. Such transactions in income producing real property, or in such holdings as mutual funds, must still, however, be reported on the annual financial disclosure reports of the official. In clarifications adopted as an amendment to the STOCK Act in August of 2012, it is now clear that reporting individuals who are required to file periodic transaction reports must file such reports with respect to covered transactions by the official's spouse or dependent children, except in very limited and unusual circumstances. Although the requirement for Internet posting of the periodic financial transaction forms filed by most federal officials will be rescinded in legislation recently passed by Congress, the underlying requirement to report such transactions to the proper, relevant ethics office within 30 days of receiving notice of the transaction, but not later than 45 days after the transaction, remains in force and continues to be required by all covered officials—that is, for all public filers—in the legislative and executive branches of government. Internet Posting of Disclosure Reports; Electronic Reporting The STOCK Act as originally adopted had required the posting on the respective official websites of the House and Senate the annual financial disclosure reports, as well as the new prompt reporting disclosures of financial transactions, made in 2012 by Members, officers of the House or Senate, candidates to Congress, and employees of the entire legislative branch who are required to file public financial disclosure reports under the Ethics in Government Act. Similarly, the public disclosure reports made in 2012 by officers and employees of the entire executive branch under the Ethics in Government Act (including the periodic transactions reports) had been required under the original provisions of the STOCK Act to be posted on the official websites of the respective executive branch agencies. In subsequent reporting years, these reports were to be posted on the publicly accessible websites no later than 30 days after filing. With regard to such Internet postings of the detailed financial information of nearly 30,000 federal employees in the executive and legislative branches of government, concerns were expressed by federal employees, officials, and employee associations over increasing the opportunities and potential for identity theft, the increased prevalence of "data mining" on the Internet for malicious purposes, and concerns over the safety of federal workers and their families, particularly those who serve abroad. Additionally, a group of federal executive employees filed suit against the provision in the United States District Court for the Southern District of Maryland. In that case, on March 27, 2013, the court denied in part the government's motion to dismiss the suit, and strongly indicated its view that forced publication of employees' financial reports on the Internet, in light of new technologies and communications, might violate a constitutional "right to informational privacy" of federal employees. Although the Supreme Court and courts in other federal circuits have not necessarily recognized an expanded personal "privacy" right under the Constitution to this extent, the District Court in Maryland indicated that such interests were protected under precedents in the Fourth Circuit. In response to such concerns and judicial actions, Congress had delayed the implementation of the requirement for Internet posting of personal financial data for most federal officials until the potential impact of these new Internet disclosures may be studied by the National Academy of Public Administration [NAPA]. Issuing their study on March 28, 2013, the NAPA, in a detailed report, concluded that "the online posting requirement does little to help detect conflicts of interest and insider trading, but that it can harm federal missions and individual employees." The panel thus recommended that "the online posting requirement be indefinitely suspended while continuing the implementation of all the other provisions of the STOCK Act." Under the latest amendments to the STOCK Act passed by Congress, the disclosure reports and periodic transactions reports for high level officials—the President, Vice President, Members of Congress, candidates to Congress, and Presidential appointed and Senate confirmed officials on the Executive Schedule I (cabinet level) and Executive Schedule II—continue to be required to be posted on the Internet. However, for all other officers and employees in the legislative and executive branches of government who must file public reports with their agencies, these reports will no longer be required to be posted on the Internet. By January 1, 2014, the Clerk of the House and Secretary of the Senate, as well as the appropriate entities in the executive branch of government, are instructed to develop and implement an electronic filing system for the financial disclosure reports required to be filed under the Ethics in Government Act for Members of and candidates for Congress, the President, the Vice President, and presidentially appointed and Senate confirmed officials on Levels I and II of the Executive Schedule. The system is to allow the public to search these reports on the Internet and, with a login, to be able to download the reports. The system for the executive branch is to be maintained on the official website of the Office of Government Ethics. In the legislative branch, the reports filed by Members of Congress are to be kept for a period of six years after the date the person is no longer a Member; and other reports filed by legislative officers and employees are to be retained for a period of six years after receipt. Pensions of Members of Congress Under current law, if convicted of certain offenses relating to corruption in public office while serving as a Member, a Member of Congress forfeits all of his or her creditable service as a Member for federal pension purposes. This bill expands that provision so that a Member of Congress would lose the credit for service as a Member for pension purposes if convicted of one of the numerous corruption offenses not only during time served as a Member of Congress, but also if convicted of any of such offenses while the President, the Vice President, or as an elected official of a state or local government. The STOCK Act also adds numerous other federal criminal laws for which a final felony conviction would result in losing creditable service as a Member of Congress for federal pension purposes. Such other criminal offenses include conflicts of interest (18 U.S.C. §203); conspiracy to make false claims (18 U.S.C. §286); making false claims to the government (18 U.S.C. §287); vote buying (18 U.S.C. §597); illegal solicitation of political contributions from federal employees (18 U.S.C. §602); soliciting political contributions in a federal building or office (18 U.S.C. §607); theft, conversion, or embezzlement of government funds or property (18 U.S.C. §641); false statements to the government (18 U.S.C. §1001); obstruction of proceedings before government agencies (18 U.S.C. §1505); attempt to evade or defeat paying taxes (26 U.S.C. §7201), among other offenses. Other Provisions Influencing Private Employment Decisions Section 18 of the Stock Act amends 18 U.S.C. Section 227 to include officers and employees of the executive branch of government in the prohibition on wrongfully attempting to influence private employment decisions based on partisan political affiliations. Negotiations for Post-Government Employment The STOCK Act now requires any individual who must file a public financial disclosure report under the Ethics in Government Act to report all negotiations or agreements for future private employment within three days after commencement of such negotiations or agreement to the employee's supervising ethics office, and then to recuse himself or herself when there is a conflict of interest or an appearance of a conflict of interest "with respect to the subject matter of the statement." These provisions do not appear to supersede, but appear to add to, the existing criminal conflict of interest provision in 18 U.S.C. Section 208. With respect to all executive branch employees, 18 U.S.C. Section 208 requires recusal of such executive branch officer and employee from any particular governmental matter when that matter may affect the financial interests of "any person or organization with whom he [the employee] is negotiating or has any arrangement concerning prospective employment." Additionally, there are detailed executive branch regulations on negotiating and seeking private employment, at 5 C.F.R. Section 2635, Subpart F, Sections 2635.601 - 2635.606. Bonuses to Fannie Mae and Freddie Mac Executives The STOCK Act prohibits the receipt of bonuses by "senior executives" at the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation during any period of conservatorship for those entities after the passage of this act. Study on Political Intelligence The STOCK Act had required a report to be made by the Comptroller General of the Government Accountability Office, in consultation with the Congressional Research Service, within one year concerning the role of "political intelligence" in the financial markets, including the extent that such information sold is considered nonpublic; the legal and ethical issues in the sale of political intelligence; benefits from imposing reporting and registration requirements on those who engage in political intelligence; and legal and practical issues in imposing such reporting and registration requirements. The Government Accountability Office has released this report discussing potential issues in the implementation of such registration requirements, the difficulties of measuring the impact of a particular piece of "political intelligence" on financial markets, the practical issues in attempting to determine the public or non-public nature of particular disclosures, and discussing the costs versus the benefits of a registration scheme for political intelligence firms similar to the registration of lobbyists and lobbying firms.

The STOCK Act (Stop Trading on Congressional Knowledge Act of 2012) was signed into law on April 4, 2012. It affirms and makes explicit the fact that there is no exemption from the "insider trading" laws and regulations for Members of Congress, congressional employees, or any federal officials. The law also expressly affirms that all federal officials have a "duty" of trust and confidentiality with respect to nonpublic, material information which they may receive in the course of their official duties, and a duty not to use such information to make a private profit. The STOCK Act, as part of the law's regulation of securities transactions by public officials, now requires expedited, periodic public disclosure of covered "financial transactions" by all officials in the executive and legislative branches of the federal government who are covered by the public reporting provisions of the Ethics in Government Act of 1978, as amended. The act thus works to require not only annual public reporting of such transactions (which reporting has been required since 1978), but also now requires public reporting within 30 days of receipt of a notice of a covered financial transaction (but in no event more than 45 days after such transaction). These periodic reports are filed with reference to any financial transactions of $1,000 or more in securities, but are not required for transactions in mutual funds or income-producing real property. The act as originally adopted had required all public financial disclosure statements filed under the Ethics in Government Act in the legislative and executive branches to eventually be made in electronic form, and to be posted on the Internet where they may be publicly searched, sorted, and, if a log-in protocol is followed, downloaded from official government websites. Because of safety concerns, privacy threats, and the possibility of malicious use of such data, federal executives and employees complained about the Internet posting of their detailed financial information, and filed suit to stop the requirement to post such information on the Internet. Congress responded by amending the Stock Act to delay the Internet posting requirements of the public personal financial disclosure reports until a study could be made on the potential impact of having such personal financial information available on the Internet. Legislation (S. 716, 113th Congress) was signed into law on April 15, 2013 (P.L. 113-7, 127 Stat. 438) which permanently rescinds the requirement for Internet posting for most covered employees in the legislative and executive branches of the United States Government. However, the requirement for Internet posting of the financial disclosure reports and all financial information filed by Members of Congress, the President and Vice President, candidates for Congress, and federal officials appointed by the President and confirmed by the Senate in positions on the Executive Schedule at Levels I (cabinet level) and II, remains in effect, and such information and reports are still required to be posted on the Internet.

The Davis-Bacon Act of 1931 (As Amended) Early in the 20 th century, it was not at all clear that the federal government had the authority to regulate wages and conditions of work in the private sector. When Congress attempted to deal legislatively with hours of work, child labor or minimum wages, its enactments were often found by the courts to be in violation of its constitutional authority. Only after 1937 when the U.S. Supreme Court sustained a Washington state labor standards statute ( West Coast Hotel v. Parrish (300 U.S. 379)) did Congress assume a more confident affirmative role in regulation of the workplace. Origins of the Act If government found its role in the private sector somewhat circumscribed by the courts, it was on was on firmer constitutional ground in prescribing labor standards for its own direct employees. Thus, public employees, both federal and those in state and local government, were often protected by mandated minimum wage and overtime pay standards. But, while their own employees were protected, some public agencies sought to circumvent these requirements (and to expand their purchasing power) by "contracting out" for construction, goods and services. This caused some reformers to protest that the various units of government ought to provide a better example of fairness for private sector employers. In 1891, Kansas adopted a law requiring that "not less than the current rate of per diem wages in the locality where the work is performed shall be paid to laborers, workmen, mechanics, and other persons so employed by or on behalf of the state of Kansas" or of other local jurisdictions. Through the next several decades, other states followed suit, enacting a variety of labor-protective statutes covering workers in contract production. Federal contracting practice, into the 1930s, required that "the lowest responsible bid" be accepted. In this instance, responsibility referred to a reasonable expectation that a project could be completed in a timely fashion without regard for the wages paid to workers or the conditions under which they worked. This "made the government an unwilling collaborator with unscrupulous firms that sought to get government business by cutting wages." In the construction field, it was alleged that migratory contractors from low-wage sections of the country would bid for federal work and, because they paid wage rates lower than those prevailing in the locality of a proposed project (and employed nonresident workers), they enjoyed a competitive advantage over "fair" local contractors. In 1927, Representative Robert L. Bacon (R-NY) introduced legislation to require that locally prevailing wage standards be met in federal construction work. Although hearings were conducted, the legislation was not brought to the floor. Similar legislation was introduced in 1928 and again in 1930. Finally, in March 1931, at the urging of the Hoover Administration, the Bacon Act (co-sponsored by Senator James Davis (R-PA), formerly Secretary of Labor in the Harding, Coolidge and Hoover Administrations) was passed and signed by President Herbert Hoover. A Gradual Process of Evolution7 Almost immediately after its adoption, certain deficiencies in the Davis-Bacon Act became apparent. Both industry and organized labor, while voicing different concerns, appealed to the Congress and to the White House for revision of the statute. Early Modification While mandating under Davis-Bacon that not less than the locally prevailing wage be paid, Congress had not established a regular system though which such wage rate determinations might be made. Thus, contractors, when bidding on a public project, had to commit themselves to pay whatever wage could be agreed upon or, in the event of a dispute, whatever wage the Secretary of Labor might later decide was prevailing. Thus, industry sought amendment of the act to provide for predetermination of wage rates. Organized labor was concerned that enforcement procedures under the act were inadequate. Pointing to the $5,000 threshold for triggering the statute, it noted that certain employers might fragment contracts in order to escape the act's requirements. Besides, the unions suggested, many contracts for painting and decorating fell below the threshold and thus, workers in those fields would not be covered at all. It was alleged that some employers paid the locally prevailing rate to their employees as the act required, but would then demand, under the table, a "kick-back" of a portion of that wage. Some estimated that as much as 25% of the legitimate wage costs for federal projects was being returned to employers through kick-back arrangements. Executive Order No. 5778 (1932) Under pressure both from labor and employers, Congress commenced oversight hearings on the recently adopted statute in January 1932; but, just as the hearings began, President Hoover issued Executive Order No. 5778, generally strengthening the enforcement and administration of the act. Since the Hoover reforms, a fine tuning of implementation of the statute, had been achieved through administrative action and, thus, could be reversed at will by a later President, Congress pressed forward with legislative action. But, when the legislation reached the President's desk in July 1932, Mr. Hoover vetoed the bill, his Labor Secretary, William Doak, observing that the measure "would be impracticable of administration" and "would stretch a new bureaucracy across the country." The Copeland "Anti-Kickback" Act (1934) Congressional hearings on public contracting issues continued through the next several years. With support from the Roosevelt Administration, legislation authored by Senator Royal Copeland (D-NY) was called up in the Senate (April 26, 1934) and, after a brief statement by the Senator, passed. The House proceeded in a similar fashion, acting without debate. On June 13, 1934, President Franklin Roosevelt signed the measure. The Copeland "anti-kickback" Act provided a fine and/or imprisonment for anyone who induces any person engaged in federal or federally financed construction "to give up any part of the compensation to which he is entitled under his contract of employment." The act authorized the administering agencies to "make reasonable regulations" for its enforcement, but specifically required that "each contractor and subcontractor shall furnish weekly a sworn affidavit with respect to the wages paid each employee during the preceding week." The Davis-Bacon Amendments of 1935 By the spring of 1935, Senator David Walsh (D-MA) had drawn up general Davis-Bacon amendments, designed to address perceived administrative problems. The Davis-Bacon amendments of 1935 reduced the threshold for coverage from $5,000 to $2,000. They provided coverage for all federal contract construction of whatever character to which the United States and the District of Columbia might be a party: "construction, alteration, and/or repair, including painting and decorating, of public buildings or public works." Henceforth, bids for contracts covered by Davis-Bacon were to state "the minimum wages to be paid various classes of laborers and mechanics," thus establishing a requirement of predetermination of the wage rates. The Comptroller General was directed to prepare a list of contractors who had "disregarded their obligations to employees and subcontractors" with such violators of the Davis-Bacon/Copeland provisions to suffer potential debarment from further federal contracts for a period of up to three years. Other administrative provisions were also included. A Period of Growing Contentiousness For a period of about 20 years following adoption of the 1935 Davis-Bacon Act amendments, the act appears to have attracted little attention. Then, in the mid-1950s, Congress began, increasingly, to add Davis-Bacon provisions to program statutes, triggering debate over both the substance and application of the act. Defense construction and the new space program brought the act into renewed prominence during the early 1960s and, since that time, it has remained more-or-less continuously a focus of congressional interest. The Roosevelt Subcommittee (1962-1964) In 1962, a Special Subcommittee of the House Committee on Education and Labor was assigned the task of general oversight of Davis-Bacon Act—by this point, three decades old—and the related contract labor standards statutes. Chaired by Representative James Roosevelt (D-CA), the Subcommittee conducted the most extensive review of the act since the mid-1930s. In addition to general operation of the statute, the Roosevelt Subcommittee focused specifically upon the following areas: (a) how Davis-Bacon wage rate determinations are made and the extent to which they are an accurate reflection of wage rates that actually prevail, locally, in the area of construction; (b) whether a system of review of Davis-Bacon wage rate determinations and related decisions of the Department of Labor might be needed; and (c) "any other constructive proposals" for the improvement of the act and of its administration. The work of the Subcommittee resulted in enactment of the 1964 "fringe benefit" amendment to the act which expanded the prevailing rate concept from the cash wage alone to both cash and fringe benefits—or the value of the latter. Further, indirectly, it may have encouraged the Secretary of Labor, Willard Wirtz, to create within the Department in 1964 the Wage Appeals Board to hear Davis-Bacon cases. But, there were no broad changes in the act comparable to those of 1935. The Subcommittee, however, exposed what appears to have been a jurisdictional clash between the General Accounting Office (recently renamed Government Accountability Office) (GAO) and the Department of Labor (DOL) with respect to Davis-Bacon. Spokespersons for GAO, testifying before the Subcommittee, were openly critical of the Department's administration of the act. In the wake of the hearings, there followed, between 1962 and 1971, a series of eight separate GAO reports that urged reform of the administration of the act and that seemed to argue that Davis-Bacon might be ill-advised as public policy. How seriously GAO's perspectives were taken is not entirely clear, but Congress continued to support the act and to extend its provisions as various construction-related measures were adopted. The Nixon Suspension of Davis-Bacon (1971) The authors of the Davis-Bacon, in 1931, had included a provision which allows the President, "[i]n the event of a national emergency," to suspend the act. The concept of "national emergency" was not defined nor were the conditions under which a suspension might occur. In 1934, President Franklin Roosevelt had suspended the act for three weeks , apparently for purposes of administrative convenience related to operation of the various New Deal enactments of that period. The Nixon suspension of Davis-Bacon (1971) occurred within the context of the President's campaign to bring inflation under control. In 1970, President Richard Nixon was engaged in an effort to curb inflationary pressures—notably within the construction industry. He had conferred both with industry and trade union officials urging moderation in wage/price matters but, apparently, without entire success. In that context, on February 23, 1971, President Nixon suspended the Davis-Bacon Act and suspended, as well, the Davis-Bacon provisions that had been incorporated by Congress in the various federal program statutes. His action raised a number of issues, some of them legal, and gave the Davis-Bacon Act renewed visibility. A month later, on March 29, 1971, the President restored the act, unchanged, but also established a tripartite Construction Industry Stabilization Committee as part of his wage/price control apparatus. Administrative Clashes Over Davis-Bacon Through the 1970s, administrative conflict over Davis-Bacon (and efforts to reform or to repeal the act) grew more intense. With the diverse character of federal programs (in construction, goods and services), a need arose for better operational coordination of various statutes and regulations, among them the federal contract labor standards statutes. In reorganization plans set forth in 1947 and 1950, the Truman Administration had attempted to establish, clearly, responsibility for administration of the Davis-Bacon Act; but that initiative notwithstanding, interagency disputes with respect to Davis-Bacon (and the related Walsh-Healey and McNamara-O'Hara Acts) appear to have continued. During the Ford and Carter Administrations, these interagency disputes continued intermittently, involving the Department of Labor, the several contracting agencies, the Office of Management and Budget, and GAO. Further, interest groups, journalists and political pundits lined up on each side of these conflicts—and, ultimately, these matters, essentially administrative, became the focus of congressional hearings. In turn, the hearings generated further public comment and reaction both from defenders and from critics of the act. The 1979 GAO Report Amid interagency squabbles and industry criticism of the act, a new report appeared from the General Accounting Office. The 1979 GAO report was titled simply, The Davis-Bacon Act Should Be Repealed . Immediately controversial, the report reviewed GAO's longstanding criticism of the DOL's administration of the act. Through the summer of 1979, the report and the issues it raised became the focus of three congressional hearings—though no legislated revision of the act was passed. Perhaps as important as legislation, however, the GAO report (with the hearings record) provided a body of material from which critics of the act would draw through the next decade and beyond. Influenced in part by the GAO report and by the attention that it had focused upon Davis-Bacon issues, the DOL (late in the Carter Administration) proposed certain changes in the administration of the act. But, in practical terms, these proposals came too late. Published on January 16, 1981, they would have taken effect on February 14, 1981—by which point a new Presidential administration had assumed control. The proposals for reform of the Davis-Bacon Act, issued by the Carter Administration, were promptly withdrawn by President Reagan. Administrative Reform Under President Reagan Building from the foundation laid down by the Carter Administration, the Reagan Labor Department proposed a new body of Davis-Bacon reforms in August 1981, calling for public comment. Final regulations were issued in May 1982 to take effect in July of that year. Labor Secretary Raymond Donovan affirmed that "the final rule should be very well received by contractor groups." He also acknowledged that "labor may react unfavorably." He was right on both counts. Trade union leaders were "shocked and angered" and viewed the regulations as a "back door attempt to nullify the law." Industry sources, noting that they had been "working for years to abolish or amend the Davis-Bacon law and the regulations that implement it" termed the Reagan regulations "a major improvement." Essentially, the Reagan regulations simplified the wage rate determination procedures, weakened or streamlined (depending upon one's perspective) the reporting requirements of the Copeland "anti-kickback" Act, and would have allowed increased flexibility in the employment of "helpers" (persons not necessarily possessing craft training) on Davis-Bacon projects. Litigation extended into the Bush Administration. At large, the courts acceded to the Secretary of Labor's discretion in wage rate determination. However, the Department was instructed to restructure its Copeland Act proposals and those dealing with the use of helpers. That process has not yet resulted in final regulatory change. Meanwhile, some have argued that the Reagan reforms, like those instituted by President Hoover 50 years earlier, are vulnerable to further change, administratively, and therefore ought to be codified in statute. The Bush Suspension of Davis-Bacon (1992 1993) Davis-Bacon critics had, through the years and for a variety of reasons, urged that the act be suspended by Presidential decree—as the President has the authority to do within the context of a "national emergency." During the winter and spring of 1992, that action was urged upon George Bush but, by early summer, the issue had faded from public view. Then, on October 14, 1992, President Bush suspended Davis-Bacon as applied in parts of the states of Florida, Louisiana and Hawaii. The three states had been battered by hurricanes and President Bush declared the resulting destruction an emergency for purposes of suspending Davis-Bacon. The suspension, he affirmed, could create "as many as five to eleven thousand new jobs in the construction industry in these states" and he noted further that payment of the locally prevailing wage in the storm-damaged areas would "increase the costs" of rebuilding. Critics argued that the suspension was not justified. The suspension was open-ended—to remain in effect until President Bush or his successor restored the act. On March 6, 1993, President William Clinton did restore the statute to its full force. Because of the difficulty of collecting relevant data, it would have been necessary to have had a plan for such collection in place at the time of the 1992-1993 suspension. Since this apparently was not done, there is no available comprehensive assessment of the impact, if any, of the suspension. Developments During the Clinton Administration With President Clinton in the White House, the future of Davis-Bacon seemed, to some, secure. But, in the wake of the 1994 election, things changed. On January 4, 1995, Senator Nancy Kassebaum (R-KS), new chair of the Committee on Labor and Human Resources, introduced S. 141 , an uncomplicated proposal that would have repealed both Davis-Bacon and the Copeland Act. In the House, Representative Cass Ballenger (R-NC) proposed a similar bill ( H.R. 500 ). But, as a potential repeal movement was mounted, an opposition gradually came into play. Senator Mark Hatfield (R-OR) proposed legislation to revise and to strengthen the act ( S. 1183 ). Companion legislation was introduced in the House: H.R. 2472 by Representative Curt Weldon (R-PA). Although both bills died at the close of the 104 th Congress (as did S. 141 and H.R. 500 ), momentum had disappeared. No sustained effort toward repeal or modification of the statutes was made during the later Clinton Administration—though the Davis-Bacon Act remained a source of concern as program legislation was introduced. However, there were those who were convinced that repeal was in the best interest of the country. A New Suspension under George W. Bush (2005 ff.) Hurricane Katrina struck the Gulf Coast with great force in late August 2005. Various Members of Congress suggested that a suspension of Davis-Bacon "will avoid costly delays that [will] impede clean-up and reconstruction efforts." It was charged that Davis-Bacon "regulations effectively discriminate against" employment of "non-union and lower-skilled workers" and "can even raise total construction costs by up to 38%." "Faced with the massive rebuilding challenges ahead," a letter to the President stated, "we respectively urge you to make a presidential proclamation to suspend Davis-Bacon until our country is once again whole." On September 8, 2005, stating that wage rates imposed by Davis-Bacon "increase the cost to the Federal Government of providing Federal assistance" to the Gulf Coast region, President George W. Bush suspended the Davis-Bacon Act as it relates to specific segments of the country : that is, to portions of Florida, Alabama, Mississippi, and Louisiana. He specified both the act and "the provisions of all other acts providing for the payment of wages, which provisions are dependent upon determinations by the Secretary of Labor" under the Davis-Bacon rules, would be suspended. The suspension would continue "until otherwise provided." However, the Davis-Bacon Act would remain in effect throughout the remainder of the nation. On October 26, the White House announced that the suspension of the act would be lifted as of November 8, 2005. But, the Washington Post stated, reinstatement of Davis-Bacon "will not apply retroactively." Getting to Know the Davis-Bacon Act, Pro and Con Through the years, arguments for and against Davis-Bacon have become largely fixed—as have the counter-arguments of defenders and critics. The logic and many of the assumptions that these arguments contain have been questioned at length. In the evolving debate, few contentions about the act have gone (or are likely to go) unchallenged. Arguments Generally Critical of Davis-Bacon Some critics of Davis-Bacon argue, among other things, that the act has an inflationary impact (unnecessarily increasing the cost of federal construction) and that it hampers competition—especially with respect to small and minority-owned businesses unfamiliar with federal contracting procedures. They contend that it impedes efficient utilization of manpower, limiting the use of "helpers" or general utility workers. Some argue, were Davis-Bacon restrictions absent, that contractors would employ more minority and women workers because they can hire them more cheaply and, by fragmenting the tasks to be performed, use them as substitutes for more broadly skilled workers. Implicit, here, is the assumption that if employers are forced by Davis-Bacon to pay not less than the locally prevailing wage in a craft, they will hire more broadly skilled, highly trained, or experienced workers. Besides, critics note, Congress has provided a general minimum wage floor with enactment of the Fair Labor Standards Act (1938). They argue that a "super minimum wage" for federal construction work is both unnecessary and unjust. They assert that labor costs for federal construction could be reduced (with savings for the taxpayer) if actual local market wages were paid rather than administratively determined locally prevailing wages (often the union rate, some argue). In addition, they urge simplification of the Copeland Act reporting requirements and of the compliance and wage rate determination process. Arguments Generally Supportive of Davis-Bacon Supporters of Davis-Bacon hold that the act prevents cutthroat competition from "fly-by-night" firms that undercut local wages and working conditions and compete "unfairly" with local contractors: that the act helps stabilize the local construction industry, an advantage to workers and employers alike. The act, they suggest, may tend to assure the consuming agency of higher quality work since employers who are required to pay at least the locally prevailing wage are likely to hire more competent and productive workers—resulting in better workmanship, less waste, reduced need for supervision, and fewer mistakes requiring corrective action. This may lead to fewer cost overruns and more timely completion of public construction and, in the long-term, lower rehabilitation and repair needs down the line. Thus, some argue, the Davis-Bacon Act could actually save the taxpayer money on public construction. Supporters of the act also argue that Davis-Bacon deters contractors from fragmenting construction tasks to utilize low-wage (and often low-skill) "helpers" or pick-up crews. They believe this could result in a trade-off of long-term social benefits for short-term profits. Some argue that without Davis-Bacon (and in the absence of a collective bargaining agreement), contractors would be unlikely to provide training, whether formally through a certified program or through informal investment in human capital (improving the skills of their regular employees). Advocates also contend that repeal or weakening of the act may adversely affect apprenticeship programs in the construction industry to the disadvantage of minority and women workers who are entering the building trades in growing numbers. If "helpers" are substituted for skilled craft workers, it would likely be minorities (and, to a lesser extent, women) who would be laid off or forced into lower-wage jobs, some assert. How Good is the Information We Have Concerning the Effects of the Davis-Bacon Act? The Davis-Bacon Act, among labor laws, is widely known but it may not be well known . The Davis-Bacon literature, if one takes into account agency reports and congressional hearings, is extensive. These public documents have provided a basis both for popular and scholarly consideration of the act. Perhaps the most frequently asked question concerning the Davis-Bacon Act is: Would we save money if the Davis-Bacon Act were repealed or modified to narrow its scope? The short answer is: No one really knows. Conversely, might Davis-Bacon result in savings to the federal government in its purchases of construction? That, too, would seem to be an open question. Another question frequently asked by those, both in industry and in the workforce, who may have to deal with the Davis-Bacon Act is: Is this particular project covered? And further: If so, why? If not, why not? To whom is assigned the judgment for making such determinations? Such questions might be answered were there a scholarly, institutional history of the act and of its place within the broader field of public contracting policy. If such a study exists, it does not appear to be generally available. The General Nature of Davis-Bacon Research There have been numerous hearings through the years since the Davis-Bacon legislation was first considered. They have tended to focus on policy issues or have served as a forum for airing complaints. Less time has been devoted to examination of economic impact or to its assessment. The Davis-Bacon literature is extensive and diverse. Generally, it falls into three categories: public materials (i.e., agency reports and analyses); journalistic pieces; and academic studies. The latter are also diverse: work commissioned by interest groups (which may be scholarly, nonetheless), articles that merge journalism with scholarship, and putatively independent academic work. Given the number of projects covered by the act, it is nearly impossible for an independent scholar to review its administration and to assess its impact. First . There is the scope of the task: thousands of projects throughout the United States, administered by different agencies and involving hundreds of contractors. Second . There is the problem of availability of basic documentation. How much information has actually been preserved? Are the reports, required under the Copeland Act, factual and complete? Access to data presents a third problem. Assuming that the data are available, securing such documentation (and access to administrative personnel) may be problematic. If one assumes that documentation exists, that the independent analyst is granted access to it, that all of the parties are cooperative, and that the means, financial and other, are available for such an undertaking, the analyst is left with a fourth complication. He is comparing something that did happen with something that in fact, for whatever reasons, did not happen . In the absence of a Davis-Bacon requirement, would the contract have gone to the same contractor? If so (or if not), would it have been managed in the same way? Did the contracting agency monitor the project carefully—and was such monitoring comparable with that for non Davis-Bacon projects? Did the act have any impact upon the wages actually paid or upon workforce utilization? Without Davis-Bacon, would different workers have been employed? These same questions confront a public agency in its efforts to investigate Davis-Bacon impact: the availability of the data, the willingness of the various parties to cooperate in an investigation, and the speculative character of the comparison between what did happen, what did not happen, and what might or might not have happened under different circumstances. For a public agency, the task is no less massive than for a private scholar. And, in the public sector, there may be other constraints. How much funding and staff time should be devoted to an investigation of Davis-Bacon impact? What political or policy concerns may come into play? Significant Gaps There appear to be significant gaps in our knowledge of the act and of its administration despite oversight by Congress, extensive study by public and private agencies, and the work of individual scholars. Further, few studies of the act, whether public or private, have escaped criticism on the grounds of flawed methodology or inadequate sample size. Some Agency Studies Federal agency reports provide primary documentation concerning the Davis-Bacon Act. But often the various agencies have disagreed about assessment methodologies—sometimes, as in the 1970s, vigorously. The General Accounting Office, as might be expected, has conducted extensive oversight of the act. During 1962 to 1971 alone, GAO issued eight reports, increasingly critical both of the statute and of its administration by the Department of Labor. In 1979, as noted above, it published an extensive analysis titled simply, Davis-Bacon Should Be Repealed . The 1979 GAO report was immediately controversial—and frequently cited. Labor Secretary Ray Marshall severely attacked the report, maintaining that it had "little credibility." Subsequently, the report and the issues it raised were a focus of review by three separate congressional committees during which both its methodology and findings were questioned. The Congressional Budget Office (CBO) is frequently cited with respect to Davis-Bacon impact. In a 1983 report, Modifying the Davis-Bacon Act: Implications for the Labor Market and the Federal Budget , CBO attempted to set a dollar figure for any increased cost of federal construction sparked by Davis-Bacon requirements. Cautiously, CBO noted "a number of problems in [the] available data and method" and noted that "data on these effects are highly inconclusive." CBO does not appear to have conducted independent research for its 1983 report, relying upon the existing literature which estimated a range of impact "from $75 million to $1 billion a year." A decade later, in his May 4, 1993, testimony before the House Subcommittee on Labor Standards, CBO Director Robert D. Reischauer noted: "Let me at this point mention a caveat about CBO's estimates, and this is that they are based on relatively old information. They are derived from a 1983 report that CBO issued that weighed the evidence from all of the studies that were available at that time. Unfortunately," he added, "little has been written about the impact of the Davis-Bacon Act since 1983, and so we have had no reason to adjust our estimates." Both the 1979 GAO report and the 1983 CBO report (which still provide a basis for many Davis-Bacon impact estimates) are now dated. The Reagan Administration regulations governing administration of the act, issued in the early 1980s, were proffered as a means through which to render implementation more efficient and to eliminate unnecessary costs. Parts of these reforms have been given effect, gradually, through the past decade. Thus, whatever the merit of GAO's findings in 1979 and the CBO's analysis in 1983, they may no longer be valid. New research, taking into account the effect of the Reagan reforms, may be needed. Views from the Private Sector The first question to ask when assessing Davis-Bacon literature is: What is the date of the data upon which it is based? If the data are from the pre-Reagan era (as most are), then the resultant studies may be of little use for current economic or policy analysis—the rules for implementation of the act having been changed during that period and, thus, presumably, the cost impact of the statute. For many years, virtually the only major study of the statute was Armand Thieblot's 1975 monograph, The Davis-Bacon Act . Funded in part by the U.S. Chamber of Commerce and published by The Wharton School of the University of Pennsylvania, it is strongly critical of the act. Thieblot concluded that the act "makes little sense under conditions of prosperity and expansion and provides far too few benefits to offset its immense costs." Thieblot's work was updated in 1986—but appears to rely upon pre-Reagan data. What is Thieblot's impact assessment for Davis-Bacon? He notes, broadening the range used by CBO, that "Davis-Bacon impact estimates have been presented during the past 10 years ranging from less than $50 million to more than $2 billion." While he suggests "there is no direct way to measure the Davis-Bacon impact," still, for his own part, he asserts: Davis-Bacon "costs more to operate than the whole federal judiciary establishment, and perhaps more to run than the entire legislative branch of government." The basis for this assertion, however, is unclear. Since 1980, Steven Allen has produced a number of studies that deal, directly or indirectly, with Davis-Bacon. In an essay with David Reich, Prevailing Wage Laws Are Not Inflationary , they argue that "there is strong evidence to suggest that there are significant productivity differences between low-wage and high-wage workers." Allen and Reich state: "Paying at least the locally prevailing wage rate will make it possible to attract better trained and more highly skilled construction workers able to complete the job quickly and efficiently." Focusing upon state experience, they conclude that "once all the relevant variables are taken into consideration, there is no evidence whatsoever of any correlation between the level of construction costs and the presence or absence of a state 'little Davis-Bacon Act.'" The essay was prepared for the Center to Protect Workers' Rights, chaired by Robert Georgine, President of the Building and Construction Trades Department, AFL-CIO. Allen has developed this theme in subsequent academic work and is often cited. A 1982 study, Effect of the Davis-Bacon Act on Construction Costs in Non-Metropolitan Areas of the United States , was prepared by Martha N. Fraundorf (with others) of Oregon State University. Fraundorf suggests that the cost estimates for Davis-Bacon offered by GAO, Thieblot, and certain others are based on "an erroneous procedure" and she chides GAO for working from a sample even the agency recognized was "really too small for extrapolation." But, the Oregon team, funded by the American Farm Bureau Federation (a critic of Davis-Bacon), was forced to scale back its own work because of difficulties it encountered in securing adequate data. Fraundorf and her colleagues began with an assumption: "While it is fairly clear that the law results in higher wages, it does not follow that the law therefore raises overall costs." To determine the latter, they attempted an empirical study of total costs. But, they found this to be complex. First, they looked only at rural non-residential construction—which, they conceded, might differ from urban work. Second, they could not disaggregate Davis-Bacon costs from other federal requirements (i.e., "affirmative action, or different standards for quality and safety.") Third, they were not able to access varying "alternative method[s] of construction." Within those parameters, they compared federal with non-federal construction, concluding: "While the exact size of the impact is still uncertain, our results show that it is likely to be between 26% and 38%." Frequently cited in the Davis-Bacon literature is the work of economists Robert Goldfarb and John Morrall. Begun as public research for the U.S. Council on Wage and Price Stability (COWPS) during the mid-1970s, the work of Goldfarb and Morrall was further developed in a series of private academic articles. At COWPS, they found themselves working with data provided by DOL which they viewed as not entirely satisfactory for their purposes. In their COWPS analysis (1976), they identified the deficiencies they found in the data they were using and spoke of "some rough order of magnitude" of "possible cost savings" from changes in the administration of Davis-Bacon. But, they cautioned by way of conclusion: "... the data are somewhat ambiguous and perhaps unreliable." In a private academic article (1978), Goldfarb and Morrall seem to have been somewhat less cautious suggesting that, with administrative changes with respect to Davis-Bacon, "an overall savings in the hundreds of millions is possible." And, they point out, various administrative changes "might well encourage an expansion of the nonunion sector, which might in turn have cost-lowering effects in the long run." Their work sparked some criticism which, in yet another article (1981), they attempted to refute. Critiques, in the abstract, are difficult to evaluate and, even more so, critiques of critiques; and, by the early 1980s, the literature was beset by argument and counter argument, often focusing (as Goldfarb and Morrall had done themselves in 1976) upon the inadequacies of the data. Seeming to share the approach of Thieblot (and, like Thieblot, basing their work on pre-Reagan data), Goldfarb and Morrall acknowledge the data problems but reject the notion "that this invalidates the usefulness of cost calculations." They affirm, rather, that even "rough estimates of possible magnitudes of effects based on imperfect data are very useful background information for helping inform policy decisions." During the early 1980s, a private sector body working under the auspices of the Reagan Administration reviewed the operation of the federal government and recommended ways in which to effect efficiency and reduce costs. The Grace Commission, as it was popularly known, examined the operation of the Davis-Bacon Act (among other statutes and programs). Its review of Davis-Bacon, frequently cited at the time, was based on prior studies rather than original research. Thus, it was subject to all of the strengths and weaknesses of the earlier research upon which it relied. In 1985, Chairman J. Peter Grace reviewed the work of the commission in testimony before the Senate Committee on Governmental Affairs. Evidencing some exasperation with quibbles over impact estimates in general, he urged that policymakers should set aside the dispute about "how accurate the numbers are" and get on with the business of reform. "No one can ever tell what something will save until one does it," he affirmed. While many may share Grace's frustration, others may argue that numbers do matter and that reasonable precision is important—especially when cost-savings projections become a central rationale in public policy formation. During recent years, Peter Philips, professor of economics at the University of Utah, with others, has produced a number of analyses of the impact of state "little Davis-Bacon" acts—or, of the implications of the repeal of such statutes. Speaking generally, these studies appear to have found a certain utility in prevailing wage legislation: i.e., that prevailing wage statutes may (and, likely do) have positive economic impacts for the community apart from any advantage to workers. Further, these studies seem to suggest that allegations of negative impact (for example, unjustifiably inflating the cost of public construction—or increasing such costs at all) may be overstated. Bibliography Through the years, the Davis-Bacon Act has attracted considerable attention from economists, attorneys, policy analysts, journalists and others. The result is a moderately extensive bibliography of materials readily available to the public. Its quality, as noted above, varies from one item to another. Most of the entries in this bibliography deal specifically with Davis-Bacon. There are, however, a number that focus upon issues related tangentially (but importantly) to questions that have been raised about the application of the act. For example, an extensive literature has been developed dealing with the impact of trade unions upon productivity, a central factor in estimating the cost impact of the act. A representative sample of these studies has been included in the listing. Also included are a number of entries bearing upon the nature of the construction industry and upon legal issues associated with administration of the Davis-Bacon Act and with its impact. This bibliography is selective. While primarily of published materials, it also includes, in a few instances, materials that have not been published but which have been widely circulated through the years and/or which have had an impact upon the Davis-Bacon debate. Because its focus is primarily upon analytical or policy literature, a listing of congressional hearings and reports has not been included, though these have been cited in the footnotes of the covering essay as appropriate. Also omitted (with select exceptions) are studies produced by the Department of Labor and the several legislative branch agencies such as the General Accounting Office and the Congressional Budget Office. There has been, through the years, a significant reportage concerning the Davis-Bacon Act in the industry and trade union press: sometimes brief editorial comment; on other occasions, publication of testimony presented before a committee of the Congress or an analysis of legislation. For the most part, these industry and trade union materials have not been included, though this latter policy has not been followed uniformly. Finally, there are a number of manuals—how to administer the act, how to conduct wage surveys, how to comply with the provisions of the statute—that have been prepared by an agency or one of the interest groups. These, too, have been omitted from the listing here. For the most part, items listed in the bibliography are available from the general collection of the Library of Congress and, frequently, are also available from university collections and public libraries. Addison, John T. "Are Unions Good for Productivity?" Journal of Labor Research, Spring 1982: pp. 125−138. ——. Chilton, John B. "Can We Identify Union Productivity Effects?" Industrial Relations , Winter 1993: pp. 124−132. ——. Hirsch, Barry T. The Economic Analysis of Unions: New Approaches and Evidence . Boston: Allen & Unwin, 1986. [See Chapter 9, "Unions and Politics," pp. 268-295.] Alario, Linda E. "Project Agreements and Government Procurement," Industrial and Labor Relations Review , October 1996: pp. 17-30. Allen, Steven G. "Can Union Labor Ever Cost Less?" The Quarterly Journal of Economics , May 1987: pp. 347−373. ——. "Declining Unionization in Construction: The Facts and the Reasons." Industrial and Labor Relations Review, April 1988: pp. 343−359. ——. "Declining Unionization in Construction: Fresh Facts and New Reasons." Workplace Topics, June 1994: pp. 45-60. ——. Developments in Collective Bargaining in Construction in the 1980s and 1990s. Cambridge: National Bureau of Economic Research, Working Paper no. 4674, March 1994. 40 pp. ——. "Further Evidence on Union Efficiency in Construction." Industrial Relations, Spring 1988: pp. 232−240. ——. Human Resource Policies and Union-Nonunion Productivity Differences. Cambridge, National Bureau of Economic Research, Working Paper no. 2744, October 1988. 39 pp. ——. "Much Ado about Davis-Bacon: A Critical Review and New Evidence." Journal of Law and Economics, October 1983: pp. 707-736. ——. "Productivity Levels and Productivity Change under Unionism." Industrial Relations , Winter 1988: pp. 94−112. ——. "Union Work Rules and Efficiency in the Building Trades." Journal of Labor Economics, April 1986: pp. 212−242. ——. Unionization and Productivity in Office Building and School Construction. Cambridge, National Bureau of Economic Research, Working Paper no. 1139, June 1983. 46 pp. ——. "Unionization and Productivity in Office Building and School Construction." Industrial and Labor Relations Review , January 1986: pp. 187−201. ——. Unionized Construction Workers Are More Productive. Washington, Center to Protect Workers' Rights, November 1979. 25 pp. ——. Unions and Efficiency in Private Sector Construction: Further Evidence. Cambridge, National Bureau of Economic Research, Working Paper no. 2254. May 1987. 23 pp. ——. "Unit Costs, Legal Shocks, and Unionization in Construction." Journal of Labor Research , Summer 1995: pp. 367-377. [See also Herbert R. Northrup, "Doublebreasted Operations and the Decline of Construction Unionism," Journal of Labor Research , Summer 1995, pp. 379-385.] ——. "Why Construction Industry Productivity Is Declining." Review of Economics and Statistics , November 1985: pp. 661−669. ——. Reich, David. Prevailing Wage Laws Are Not Inflationary: a Case Study of Public School Construction Costs . Washington: Center to Protect Workers' Rights, December 1980. 24 pp. Barrow, Clyde W. "Unions and Community Mobilization: The 1988 Massachusetts Prevailing Wage Campaign." Labor Studies Journal, Winter 1989: pp. 18−39. Barry, Patrick. "Congress's Deconstruction Theory." Washington Monthly , January 1990: pp. 10−14, 16. Beard, Edward P. "Straight Talk about Davis-Bacon: an Interview with Representative Edward P. Beard, D-RI." Builders , V. 1, April 9, 1979: pp. 1−4. Belman, Dale. Prevailing Wage Laws, Unions, and Minority Employment in Construction, pp. 101-119, in Philips, Azari-rad, and Prus (2005), the Economics of Prevailing Wage Laws, Cited Separately. ——. Voos, Paula B. "Prevailing Wage Laws in Construction: The Costs of Repeal to Wisconsin," The Institute for Wisconsin ' s Future , October 1995, 20 pp. Berg, John T., and Erickson, Ralph C. "An Evaluation of the Impact of the Davis-Bacon Act." Government Union Review , Summer 1985: pp. 1−32. Bernstein, David. "Bring Jim Crow to an End by Repealing the Davis-Bacon Act." USA Today [Magazine], July 1993: pp. 14−16. ——. "Clinton Should Scrap Davis-Bacon." Human Events , March 6, 1993: p. 11. ——. The Davis-Bacon Act: Let's Bring Jim Crow to an End. The Cato Institute, Briefing Paper No. 17, January 18, 1993. 15 p. [See Also, the Davis-Bacon Act: A Response to the Cato Institute's Attack. Washington: Building and Construction Trades Department, AFL-CIO, 1993. 26 pp.] ——. "The Davis-Bacon Act: Vestige of Jim Crow." National Black Law Journal , Fall 1994: pp. 276-297. ——. "Exclusionary Rule: Something's Not Kosher about Davis-Bacon." Reason , August/September 1991: pp. 32−35. ——. "It's Time to Reform New York's Prevailing Wage Law." Empire Foundation for Public Policy Research, September 1993. [Published in Updated Form in the George Mason University Civil Rights Law Journal , Spring 1997.] ——. Only One Place of Redress: African-Americans, Labor Regulations, and the Courts from Reconstruction to the New Deal. Durham: Duke University Press, 2001, 191 pp. ——. "The Shameful, Wasteful History of New York's Prevailing Wage Law." George Mason University Civil Rights Law Journal , Spring 1997: pp. 1-23. ——. "The Supreme Court and 'Civil Rights,' 1886-1908." The Yale Law Journal , December 1990: pp. 725-744. ——. "Roots of the 'Underclass:' The Decline of Laissez-faire Jurisprudence and the Rise of Racist Labor Legislation." The American University Law Review , Fall 1993: pp. 85-138. Bilginsoy, Cihan. "The Hazards of Training: Attrition and Retention in Construction Industry Apprenticeship Programs." Industrial and Labor Relations Review , October 2003: pp. 54-67. ——. "Wage Regulation and Training: the Impact of State Prevailing Wage Laws on Apprenticeship," pp. 149-168, in Philips, Azari-rad, and Prus (2005), The Economics of Prevailing Wage Laws, Cited Separately. Bolick, Clint. "The Revolt Against the Davis-Bacon Act." The American Enterprise , January/February 1997: pp. 78-79. ——. "Transformation: the Promise and Politics of Empowerment." Oakland: Ics [Institute for Contemporary Studies] Press . pp. 83-93. Bullock, Scott, and Frantz, John. "Removing Barriers to Opportunity: A Constitutional Challenge to The Davis-Bacon Act," Washington: Institute for Justice, undated for post 1993. 9 pp. http://www.ij.org/economic_liberty/davis_bacon /backgrounder.html . Bourdon, Clinton C. "Union-non-union Struggle Sharpens," Engineering News Record , September 11, 1980, p. 205. ——. Levitt, Raymond E. "Cost Impacts of Prevailing Wage Laws in Construction." Journal of the Construction Division , American Society of Civil Engineers, December 1979: pp. 281−288. ——. Levitt, Raymond E. "The Impact of the Davis-Bacon Act." Union and Open-Shop Construction. Lexington, Massachusetts: Lexington Books, 1980. pp. 91−103. ——. Solomon, Arthur P. The Inflationary Effects of the Davis-Bacon Act: A Summary and Analysis of the Research Literature. Report Prepared for the U.S. Department of Housing and Urban Development, July 2, 1979. 37 pp. (Mimeographed) Brazier, Nona. "The Devils of Davis-Bacon." Common Sense , Fall 1994: pp. 24-34. Brown, Charles, and James Medoff. "Trade Unions in the Production Process." Journal of Political Economy , June 1978: pp. 355−378. Brown, William W. "The Challenges of a Changing Workforce." Constructor , April 1992: pp. 23-26. Brozen, Yale. The Davis-Bacon Act: How to Load the Dice Against Yourself. Manuscript, in Mimeograph Form, in the files of the Congressional Research Service, 1971. 9 pp. ——. The Law That Boomeranged. Nation ' s Business , April 1974: pp. 70−73. Buchsbaum, Peter A., and Mark Erlich. "The Debate over Union Wage Requirements for Subsidized Housing." Shelter Force , March/April 1993: pp. 12−14. Burck, Gilbert. "A Time of Reckoning for the Building Unions." Fortune , June 4, 1979: pp. 82-85, 88, 93-94, and 96. ——. "The Building Trades Versus the People." Fortune , October 1970: pp. 94−97 and 159−160. Caruso, Lawrence R. "An Analysis of the Litigation Regarding the Regulations Implementing the Davis-Bacon Act." Federal Bar News & Journal , March 1984: pp. 117−122. Chin, Felix. The Davis-Bacon Act: A Selected Bibliography. Monticello, Ill., Vance Bibliographies, 1981. 22 pp. Clark, Kim B. "The Impact of Unionization on Productivity: A Case Study." Industrial and Labor Relations Review , July 1980: pp. 451−469. Clark, Mike. "The Effects of Prevailing Wage Laws: A Comparison of Individual Workers' Wages Earned on and off Prevailing Wage Construction Projects," Journal of Labor Research , Fall 2005, pp. 725-737. "Conspiracy To Destroy Davis-Bacon: A Laborer Journal Special Report," The Laborer, April 1975, pp. 4-5. Cox, Louis A. The Davis-Bacon Act and Defense Construction: Problems of Statutory Coverage. In Stein, Manual, Ed., Proceedings of the Fifteenth Annual New York University Conference on Labor, June 11−13, 1962. New York: Matthew Bender & Company, Inc., 1962: pp. 151−174. "Davis-Bacon Reform Blasted," Engineering News Record , January 24, 1980, p. 75. "Davis-Bacon 'Reform' Under Fire," Engineering News Record , April 17, 1980, p. 198. Delury, Bernard E. "Davis-Bacon: an Insider's Viewpoint." The International Operating Engineer , December 1975: pp. 10-11. Derthick, Martha, and Quirk, Paul J. "The Politics of Deregulation." Washington: The Brookings Institution, 1985. pp. 219−224. Dillon, Roger. Potential Economic Impact: Proposals of the Department of Industrial Relations to Alter Methodology Relating to Prevailing Wages. Sacramento: California Senate Office of Research. Stock Number 862-s, May 1996. 28 pp. Donahue, Charles. "The Davis-Bacon Act and the Walsh-healey Public Contracts Act: a Comparison of Coverage and Minimum Wage Provisions." Law and Contemporary Problems , Spring 1964: pp. 488−513. Douglas, Davison M. "Contract Rights and Civil Rights." Michigan Law Review , May 2002, pp. 1541-1563. Dunn, Sarah, Quigley, John M., and Rosenthal, Larry A. The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing (Working Paper no. W03-003). Institute of Business and Economic Research, University of California, Berkeley, September 2003. 47 pp. [See, also, Dunn, Quigley, and Rosenthal, "The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing," Industrial and Labor Relations Review, October 2005, pp. 141-157.] Easterbrook, Greg. "How Big Labor Brings Home the Bacon." The Washington Monthly , February 1991: pp. 40−47. Eberly, Don. "Labor as a Property Right: Guaranteeing Economic Opportunity." Lincoln Review , Spring 1983: pp. 31−47. Elisburg, Donald. "Wage Protection under the Davis-Bacon Act." Labor Law Journal , June 1977: pp. 323−328. Erlick, Mark. Labor at the Ballot Box: The Massachusetts Prevailing Wage Campaign of 1988. Philadelphia: Temple University Press, 1990. 219 pp. ——. "Labor Rises up to Show the Way." The Nation , December 26, 1988: pp. 716−718. ——. "Who Will Build the Future?" Labor Research Review , Fall 1988: pp. 1-19. ——. Grabelsky, Jeff. "Standing at a Crossroads: The Building Trades in the Twenty-First Century," Labor History , November 2005, pp. 421-445. Fine, Janice. "Organizing for Prevailing Wage in Florida." Labor Research Review , Fall 1988: pp. 71-79. Fine, Sidney. "Without Blare of Trumpets"—Walter Drew, the National Erector's Association, and the Open Shop Movement, 1903-57. Ann Arbor: The University of Michigan Press, 1995. 384 pp. Foster, Howard G. "Industrial Relations in Construction, 1970−1977." Industrial Relations , February 1978: pp. 1−17. ——. Manpower in Homebuilding: A Preliminary Analysis. Philadelphia: The Wharton School, University of Pennsylvania, 1974. 179 pp. ——. "The Labor Market in Nonunion Construction." Industrial and Labor Relations Review , July 1973: pp. 1071-1085. ——. Northrup, Herbert. Open Shop Construction. Philadelphia: The Wharton School, University of Pennsylvania, 1975. 394 pp. ——. Strauss, George. "Labor Problems in Construction: A Review." Industrial Relations , October 1972: pp. 289−313. Fowler, George. "Davis-Bacon Needs a Decent Burial." Nation ' s Business , March 1979: pp. 57-58, 60. Foxvog, Donald R. "Industry's United Position: On Missile Base Sites, 'Construction Work by Construction Men.'" The Constructor , July 1960: pp. 45-46, 49-51. Franklin, William S. "A Comparison of Formally and Informally Trained Journeymen in Construction." Industrial and Labor Relations Review , July 1973: pp. 1086−1094. Fraundorf, Martha Norby, with Farrell, John P., and Mason, Robert. Effect of the Davis-Bacon Act on Construction Costs in Non-Metropolitan Areas of the United States. Corvallis: The Oregon State University, January 1982. 41 pp. ——. "The Effect of the Davis-Bacon Act on Construction Costs in Rural Areas." The Review of Economics and Statistics , February 1984: pp. 142−146. Freeman, Richard B., and Medoff, James L. "The Two Faces of Unionism." The Public Interest , Fall 1979: pp. 69−93. Funk, William G. "The Paperwork Reduction Act: Paperwork Reduction Meets Administrative Law." Harvard Journal on Legislation , Winter 1987: pp. 1-116. Gallaway, Lowell, and Vedder, Richard. Cracked Foundation: Repealing the Davis-Bacon Act. St. Louis: Washington University Center for the Study of American Business. Policy study number 127, November 1995. 28 pp. ——. "Labor Laws: Then and Now." Journal of Labor Research , Spring 1996: pp. 253-275. ——. Out of Work: Unemployment and Government in Twentieth-Century America . New York: Holmes & Meier, 1993, 336 pp. ——. "Prevailing Wages as Perceived by the Kentucky Legislative Research Commission." Government Union Review , September 2002: pp. 1-10. ——. "Why Johnny Can't Work: the Causes of Unemployment." Policy Review , Fall 1992: pp. 24-30. Gamrat, Frank. "Prevailing Wages: Costly to State and Local Taxpayers." Government Union Review , May 2002: pp. 1-19. Goldfarb, Robert S. "A Davis-Bacon Musicale: Symphony Orchestras as Migrant Labor." Journal of Labor Research , Fall 1984: pp. 427−433. ——. Metzger, Michael R. "Do Davis-Bacon Minimum Wages Raise Product Quality?" Journal of Labor Research , Summer 1983: pp. 265−272. ——. Morrall, John F. An Analysis of Certain Aspects of the Administration of the Davis-Bacon Act . Washington: The Council on Wage and Price Stability, 1976. 14 pp. (Mimeographed) ——. Morrall, John F. "Cost Implications of Changing Davis-Bacon Administration." Policy Analysis , Fall 1978: pp. 439−453. ——. Morrall, John F. "The Davis-Bacon Act: An Appraisal of Recent Studies." Industrial and Labor Relations Review , January 1981: pp. 191−206. Goldfinger, Nathaniel. "The Myth of Housing Costs." American Federationist , December 1969: pp. 1-6. Gould, John P. Davis-Bacon Act: the Economics of Prevailing Wage Laws . Washington: The American Enterprise Institute, November 1971. 44 pp. ——. The Labor Component in the Cost of Housing in the Seventies: Working Papers, I . Washington: U.S. Govt. Print. Off., 1976. pp. 588-597. ——. Bittlingmayer, George. The Economics of the Davis-Bacon Act: An Analysis of Prevailing Wage Laws . Washington: The American Enterprise Institute, 1980. 89 pp. Gramm, Phil. "The Inapplicability of the Davis-Bacon Act to Military Construction Projects." Labor Law Journal , July 1985: pp. 387-389. Gujarati, D. N. "The Economics of the Davis-Bacon Act." Journal of Business , July 1967: pp. 303−316. Haber, William. Industrial Relations in the Building Industry . Cambridge: Harvard University Press, 1930. 578 pp. ——. Levinson, Harold. Labor Relations and Productivity in the Building Trades. Ann Arbor: University of Michigan, 1956. 260 pp. Hartman, Paul T., and Franke, Walter H. "The Changing Bargaining Structure in Construction: Wide-area and Multicraft Bargaining." Industrial and Labor Relations Review , January 1980: pp. 170−184. Hermanson, Beth. "Pennsylvania's Prevailing Wage Act: an Appropriate Target for Erisa Preemption." Dickinson Law Review , Summer 1996: pp. 919-962. Hill, Norman. "Minorities, Women and the Davis-Bacon Act: the Most Vulnerable." National Journal , September 19, 1981: pp. 1700-1701. Hintze, Arthur. "A Davis-Bacon Primer." Constructor , June 1975: pp. 15−16, 33. ——. "Can Davis-Bacon Decisions Be Reviewed?" 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The Davis-Bacon Act of 1931, as amended, requires that contractors engaging in certain federal contract construction pay workers on such projects not less than the locally prevailing wage for comparable work. In addition, such contractors are required to file payroll reports and to meet other administrative and labor standards requirements. Enacted at the urging of the Hoover Administration, the statute was modified in 1934 with adoption of the Copeland ("anti-kickback") Act and in 1935 through general amendments dealing with administration and implementation: among them, establishment of a $2,000 coverage threshold (the threshold had been $5,000 in the original enactment), a requirement that the prevailing wage rate be determined prior to submission of bids, and extension of coverage both to public buildings and public works including painting and decorating. In 1964, the concept of "prevailing wage" was expanded to include a fringe benefit component. The statute has also been the subject of technical amendments through the years, and Davis-Bacon provisions have been added to more than 50 federal program statutes. The act contains a provision allowing for its suspension by the President of the United States during a "national emergency." It has been suspended on three occasions: in 1934 by President Roosevelt, in 1971 by President Nixon, and in 1992 by President Bush. In each instance, the suspension was brief and the act was subsequently restored to its full strength. While there is a relatively extensive literature (both popular and scholarly) concerning the act, there also appear to be significant gaps in our knowledge of the statute and its impact. Some have questioned the adequacy of the data upon which analysis of Davis-Bacon impact rests. During the Reagan Administration, changes were instituted in the manner in which the act was implemented and these, in turn, have produced a need for further, more current, data for analytical purposes. Included, here, is a select bibliography of published materials dealing with the Davis-Bacon Act and immediately related issues. The list includes popular and scholarly sources but does not, for the most part, include an inventory of congressional documents, agency reports or publications of interest groups. Most of the documentation cited here will be available from the collections of the Library of Congress or from major public or university library collections. In some cases, privately published materials are available through the Internet. This bibliographic report will be updated periodically.

Introduction In the first few months of 2005, two leading data brokers, LexisNexis and ChoicePoint, announced that unauthorized individuals had breached their security measures and obtained personal information (e.g., Social Security numbers, addresses) about hundreds of thousands of individuals. These companies and others like them—so-called "data brokers"—operate largely free from federal and state regulation. The recent scandals have led to calls for tighter regulation of the data brokerage industry, creating the need for more complete information on the types of businesses that make up this industry, and the types of services they provide. This report provides an overview of the industry and specific case studies of ChoicePoint and LexisNexis. The Data Brokerage Industry Personal information for background checks is of course essential for employers and criminal investigators. Businesses that have been able to use the Internet to quickly provide such information have grown tremendously over the past several years, as the events of September 11, 2001, and the subsequent war on terror have put a premium on accurate identification of individuals in both the public and private sectors. "Data brokers"—companies like ChoicePoint, LexisNexis, Axciom, Experian, US Search, and Information Search—have prospered by fulfilling this need. Law enforcement, in particular, has found data brokers useful, as these private companies maintain and organize personal information on individuals in a manner that may not be legally available to government actors. The Privacy Act, for example, requires federal agencies to limit the amount of information on American citizens that these agencies maintain and disseminate. The Act establishes the principle that the government should "collect information to the greatest extent practicable directly from the subject individual when the information may result in adverse determinations about an individual's rights, benefits, and privileges under Federal programs." Most data brokers sell data that they collect from public records (e.g., driver's license records, vehicle registration records, criminal records, voter registration records, property records, occupational licensing records) or from warranty cards, credit applications, etc. In addition, data brokers purchase so-called "credit headers" from credit reporting agencies. Information on a credit header generally includes a person's name, Social Security number, address, phone numbers, and birth date. While the release of certain information, such as data associated with a credit report, is subject to federal law, data brokers are largely free from state and federal regulation. Generally, companies or government agencies purchase from data brokers information about an individual—including his or her Social Security number. The vast majority of these transactions are conducted via the Internet, rather than person-to-person. Of course, the anonymity of most data brokerage transactions has opened the door for criminals to pose as legitimate businesses and obtain vital information about an individual—usually a Social Security number—and steal his or her identity. It has been reported in the past, for example, that identity thieves—using stolen credit card numbers—have obtained information about victims and transferred funds from the victims' accounts, written phony checks against those accounts, etc. As the following case studies show, the danger of identity theft remains, despite the implementation of tighter safeguards by data brokers. Case Studies: ChoicePoint and LexisNexis While the growth of companies that gather and sell information has tracked the rise of personal computers since the early 1980's, two events led to the exponential growth of data brokerage firms since 2000: (1) The explosion of the Internet throughout the 1990's; and (2) the development by Florida-based programmer John Asher of parallel programming software allowing a researcher to use bits of information about an individual (e.g., name, Social Security number) to search several databases simultaneously and find more information about that person within seconds. Asher built two companies on this technology, and later sold the companies to ChoicePoint and LexisNexis, who have used the technology to become two of the most successful data brokers in the world. ChoicePoint One of the largest and most profitable data brokers in the United States is Georgia-based ChoicePoint. ChoicePoint sells data to a wide variety of entities, from insurers to law enforcement. Originally formed as a spin-off of credit reporting agency Equifax in 1997, ChoicePoint has grown to dominate the data brokerage market by purchasing a number of smaller, more specialized data brokers and operating several subsidiaries in various states. ChoicePoint's total annual revenue has grown in this time period from $585 million in 2000 to over $1 billion in 2006. The products ChoicePoint offers reflect the sophistication in the data brokerage industry that demand and competition have created. ChoicePoint not only groups personal information together according to what type of background check is being conducted (e.g., pre-employment screenings) but also "Soundex" searches that allow customers to search for personal information based on how names sound, rather than how they are spelled. In addition, ChoicePoint allows law enforcement to link suspects to former addresses, neighbors, etc. As mentioned above, the data brokerage industry has grown increasingly close to law enforcement and counterterrorism agencies in the last few years, and ChoicePoint's relationship with law enforcement and counterterrorism agencies is indicative of this fact. ChoicePoint has multi-million dollar contracts with the Departments of Homeland Security and Justice, and the company maintains federal agency-specific websites to facilitate searches by officers from those agencies. Up until recently, ChoicePoint guarded access to its information by requiring customers to provide business records on file with government agencies, copies of drivers' licenses, and other information identifying customers as legitimate businesses. Unfortunately, at least one criminal ring began creating sham businesses and identities in order to get around these requirements, and a Los Angeles-based sting operation in 2004 uncovered evidence leading authorities to conclude that the ring had accessed ChoicePoint's information on roughly 145,000 people. As the scandal unfolded, ChoicePoint drew heated criticism for refusing to notify many of those whose personal information had been accessed. At first, ChoicePoint only notified victims residing in California, as that is the only state with a law requiring such notification when personal information is compromised. Only after a public outcry did ChoicePoint agree to notify victims outside of California. The Federal Trade Commission (FTC) brought a compliant for civil penalties, permanent injunction, and other equitable relief alleging that ChoicePoint did not have reasonable procedures to screen prospective subscribers, and turned over consumers' sensitive personal information to subscribers whose applications raised "red flags." The FTC also alleged that ChoicePoint approved as customers individuals who lied about their credentials and used commercial mail drops as business addresses. In addition, according to the FTC, ChoicePoint applicants reportedly used fax machines at public commercial locations to send multiple applications for separate companies. The FTC charged that ChoicePoint violated the Fair Credit Reporting Act (FCRA) by furnishing consumer reports to subscribers who did not have a permissible purpose to obtain them, and by failing to maintain reasonable procedures to verify both their identities and how they intended to use the information. The agency also charged that ChoicePoint violated the Federal Trade Commission Act by making false and misleading statements about its privacy policies. In 2006, ChoicePoint agreed to pay $10 million in civil penalties and $5 million in consumer redress to settle Federal Trade Commission charges that its security and record-handling procedures violated consumers' privacy rights and federal laws. The settlement requires ChoicePoint to implement new procedures to ensure that it provides consumer reports only to legitimate businesses for lawful purposes, to establish and maintain a comprehensive information security program, and to obtain audits by an independent third-party security professional until 2026. LexisNexis LexisNexis has been one of the leading information research engines for over two decades. In August, 2004, LexisNexis' parent company, London-based Reed Elsevier, purchased data broker Seisint (an Asher creation) for $775 million and made it a unit of LexisNexis. Among other things, Seisint provides data for Matrix, a crime and terrorism database that, until recently, was funded by the federal government. Very soon after the ChoicePoint scandal, LexisNexis reported that unauthorized individuals had accessed the personal information of about 32,000 customers of the company's data brokerage unit by entering in the passwords of legitimate customers. A few weeks later, that estimate had risen to over 300,000. These individuals somehow acquired passwords of paying customers of Seisint's "Acurint" service, which generally charges $4.50 for packaged information about an individual. Using the legitimate passwords, the hackers were able to access personal information ranging from social security numbers to home addresses to drivers' licenses numbers. Conclusion As the market for personal information has grown—particularly in light of the war on terror—so too has grown the data brokerage industry. The ChoicePoint and LexisNexis scandals, however, have spurred debate over the security of personal information collected and sold by data brokers.

Disclosures of breaches of the customer databases of LexisNexis and ChoicePoint have raised interest in the business and regulation of data brokers, companies that collect personal information from public and private records and sell this information to public and private sector entities. The growth of this industry has generally tracked the increase in government and private sector use of personal information. The vast amount of personal information that data brokers collect and the improper access to such data, however, have spurred concern as to the dangers of identity theft. Identity theft is reportedly the fastest growing crime in America. This report provides an overview of the data brokerage industry and more specific background on LexisNexis and ChoicePoint.

Background Derivatives are financial instruments that come in several different forms, including futures , options , and swaps . A derivative is a contract that derives its value from some underlying asset at a designated point in time. The derivative may be tied to a physical commodity, a stock index, an interest rate, or some other asset. Derivatives' prices fluctuate as the underlying assets' rates or expected future prices change, and neither a buyer nor a seller of a derivative need necessarily own the underlying asset. Many firms use derivatives to manage risk. For example, a firm can protect itself against potential increases in the price of a commodity that it uses by entering into a derivative contract that will gain value if the price of the commodity rises. A notable instance of this type of hedging strategy was a derivatives position taken by Southwest Airlines that allowed it to buy jet fuel at a low, price in 2008 even as energy prices reached record highs. When used to hedge risk, derivatives can protect businesses (and sometimes their customers) from unfavorable price shocks. Others use derivatives to seek profits by betting on which way prices will move. Such speculation adds liquidity to the market—speculators assume risks that hedgers wish to avoid. Some observers believe that the growth of speculative derivatives trading has increased the risks of market instability and volatility, whereas others argue that such speculation adds liquidity and that more liquid derivatives markets are more efficient and more stable. Although derivatives trading has its origins in agriculture, today most derivatives are linked to financial variables, such as interest rates, foreign exchange rates, stock prices, and the creditworthiness of bond issuers, as shown in Figure 1 . The market is measured in hundreds of trillions of dollars, and billions of contracts are traded annually. Growth in derivatives markets was explosive between 2000 and the advent of the 2008 financial crisis, with some retrenchment after 2008. From 2000 until the end of 2008, the volume of derivatives contracts traded on exchanges, such as futures exchanges, and the notional value of total contracts traded in the over-the-counter (OTC) market grew by 475% and 522%, respectively. Following the 2008 financial crisis, the total notional value of OTC derivatives globally fell by about 13% between June 2008 and December 2008 but then crept upward again. Over the longer term, total global notional values outstanding for OTC derivatives have fallen from $684 trillion as of June 2008 to $553 trillion as of June 30, 2015, and to further to $493 trillion as of December 30, 2015. The drop has been stimulated partly by the movement of derivatives trading to exchanges rather than OTC since the crisis. Trading derivatives on exchanges is also associated with "trade compression"—a process that allows economically redundant derivative trades to be terminated early without changing each participant's net position. Trade compression and greater use of clearinghouses has contributed to the gradual drop in notional value. Of the total, 78% of global swaps consisted of interest-rate swaps as of Dec. 30, 2015, illustrating the predominance of financial instruments over agricultural ones. The financial crisis led to intense debate about whether the rapid growth in derivatives markets had contributed to structural instability in the U.S. and global financial systems. The reasons for the crisis are still the subject of wide debate, but most observers believe a major factor behind the severe market turmoil was derivatives exposures, which could not be readily quantified and exacerbated panic and uncertainty about the true financial condition of other market participants, contributing to the freezing of credit markets. Such debates led, in 2010, to the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ), which required that risk exposures of major financial institutions be backed by capital, minimizing the shock to the financial system should such firms fail. Dodd-Frank also aimed to ensure that large derivatives bets by financial firms would be collateralized by having those firms post margin, or cash, into accounts to pay for potential losses from derivatives. Whether Dodd-Frank has been effective in lowering structural risks to the U.S. and global financial systems remains a subject of debate. In addition, some argue that Dodd-Frank has imposed costs that affect the competitiveness of U.S. financial institutions. This report discusses some of these debates as they relate to selected legislative proposals in the 114 th Congress affecting the regulation of derivatives. Market Structure and Regulation Prior to passage of the Dodd-Frank Act, futures and options were traded on regulated exchanges, whereas swaps were traded OTC. A futures contract is an agreement to buy or sell a commodity or asset at a predetermined price at a future date. An option is a contract that gives the holder the option, but not the obligation, to buy or sell an asset or commodity at a future date at a predetermined price. Swaps are generally agreements between two parties to exchange different cash flows over a set period of time. Although swaps, futures, and options operate differently, they generally are somewhat fungible in the sense that similar investment outcomes can be achieved by employing any one of them. Prior to Dodd-Frank, swaps (also called OTC derivatives) were largely unregulated, whereas futures and options were regulated by the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC). The regulatory landscape since Dodd-Frank is broadly illustrated in Figure 2 , below. Futures contracts have long been traded on exchanges regulated by the CFTC, and stock options have been traded on exchanges under the SEC. SEC and CFTC regulation of exchanges is generally similar: federal law requires both securities and commodity exchanges to make and enforce rules to ensure fair and orderly trading and to protect public investors from fraud. Many classes of market professionals, as well as the exchanges themselves, are required to register with a federal agency or a self-regulatory organization. Data on price and trading volumes must be publicly available on exchanges. The regulators may amend exchange rules and must approve all rule changes. Both the SEC and the CFTC have their own enforcement powers and staff. Exchanges are centralized markets where buying and selling interests come together. Traders who want to buy, or take a long position ( longs )—who benefit if prices of the commodity or asset rise—interact with those who want to sell, or go short ( shorts ). Shorts benefit when prices of the commodity or asset fall. Deals between those on the short and long sides of trades are made and prices are reported throughout the day. In the OTC market, however, contracts are made bilaterally, typically between a dealer and an end user. Prior to Dodd-Frank, the OTC market generally had no requirement that the price, the terms, or even the existence of the contract had to be disclosed to a regulator or to the public. Figure 3 shows the differences between exchange-traded and OTC derivatives. Derivatives can be volatile contracts characterized by a high degree of leverage, which can result in big gains and losses among traders. The exchanges have dealt with the issue of credit risk through a third-party clearinghouse. But the credit risk remains: How does the clearinghouse ensure that it can meet its obligations? Clearinghouses depend on a system of margin, or collateral. Before the trade, both the long and short traders deposit an initial margin payment with the clearinghouse to cover potential losses. Then, at the end of each trading day, all contracts are repriced, or marked to market , and those who have lost money (because prices moved against them) must post additional margin (called variation or maintenance margin ) to cover those losses before the next trading session. This process is known as a margin call : traders must make good on their losses immediately or their brokers may close out the traders' positions when trading opens the next day. The effect of the margin system is that no one can build up a large paper loss that could damage the clearinghouse in case of default. It is certainly possible to lose large amounts of money trading on the futures exchanges, but only on a pay-as-you-go basis. Procedurally, the trade is made on the exchange floor (or electronic network) and then is sent to the clearinghouse, which guarantees payment. The process is shown in Figure 3 , above. The OTC market, as shown on the right side of Figure 3 , includes a network of dealers rather than a centralized exchange. Firms that act as dealers stand ready to take either long or short positions, and they make money on the volume of trading by charging a spread, or fee, on each trade. The dealer absorbs the credit risk of customer default, and the customer faces the risk of dealer default. The OTC market has been dominated by fewer than a dozen firms—institutions such as JPMorgan Chase, Goldman Sachs, Citigroup, and their foreign counterparts. In the OTC market, prior to the Dodd-Frank Act, some but not all contracts required collateral or margin. The International Swaps and Derivatives Association, a trade group, published best practice standards for use of collateral, but compliance was voluntary. Since the Dodd-Frank Act, regulators have required the posting of margin for OTC derivatives that are not cleared by a clearinghouse. Derivatives in the Financial Crisis Little consensus exists about the relative importance of the numerous factors that have been put forward as causes of the 2008 financial crisis, including the role of derivatives. However, derivatives clearly played some role in transmitting financial shocks from firm to firm and from market to market. Several aspects of derivative finance may be implicated: Complexity. At the peak of the housing boom, home mortgage loans were packaged, repackaged, and repackaged again into highly complex securities, many of which incorporated derivatives to increase yield or to obtain AAA bond ratings. As mortgage losses began to grow, no one could be sure what the real value of these securities was. As a result, the true financial condition of banks and other holders of these securities became uncertain and interbank lending slowed, creating the conditions for panic. Opacity. In addition to the complexity of structured financial instruments, the nature of derivatives markets is to create a web of risk exposures among a wide range of markets and firms. Fears about insolvency in individual financial institutions were amplified by the knowledge that those firms might owe billions to derivatives counterparties—default of a single derivatives dealer had the potential to trigger cascading losses throughout the banking system. But no information about the extent or distribution of such potential losses was available, especially where unregulated OTC derivatives were involved. Leverage. In the post-2000 low-interest-rate environment, many market participants sought to boost investment returns through the use of leverage—supplementing their own capital with debt or derivatives. Because all derivatives trading is done on margin, a relatively small initial investment may generate a large return (or loss). Thus, the losses in U.S. mortgage lending were magnified into much greater losses throughout the global financial system. Excessive Speculation. The above factors combined to produce catastrophic losses at a number of systemically important firms that had amassed large speculative derivatives positions. A good example is insurance giant American International Group (AIG), which sold billions of dollars in credit-default swaps and had to be rescued by the government, thus preventing massive losses to AIG's counterparties that could have exacerbated the downward global financial spiral. The Financial Crisis Inquiry Commission concluded that derivatives contributed to the 2008 financial crisis in three major ways. First, credit-default swaps were instrumental in fueling the securitization of mortgages and mortgage-backed securities and in the subsequent housing bubble. Second, credit-default swaps were essential in creating synthetic collateralized debt obligations (CDOs), or financial instruments that served as bets on the performance of real mortgage-backed securities. The CDOs amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities and helped to spread the losses throughout the financial system. Third, once the housing boom ended, derivatives were at the center of the crisis due to (1) concerns that losses associated with derivatives would trigger cascading losses throughout the global financial system and (2) the lack of transparency concerning the overall size of the derivatives market and the extent of derivatives transactions between systemically important financial institutions, which directly added to uncertainty and panic in global financial markets. The AIG case illustrates two aspects of OTC markets that were central to derivatives reform. First, in a market with mandatory clearing and margin, in which AIG would have been required to post initial margin to cover potential losses, there was a stronger possibility that AIG would have run out of money long before the size of its derivatives position grew so massive. Second, because most OTC contracts were not reported to regulators prior to 2010, the Federal Reserve and the Treasury lacked information in the crisis about which institutions were exposed to AIG and the size of those exposures. Uncertainty among market participants about the size and distribution of potential derivatives losses flowing from the failure of a major dealer was a factor that exacerbated the "freezing" of credit markets during the peak of the crisis. One basic theme of derivatives reform proposals in the run-up to the Dodd-Frank Act was to change the OTC market to act more like the exchange-traded futures market—in particular, to have bilateral OTC swaps cleared by a third-party clearing organization. Clearing was expected to reduce counterparty risk and increase transparency. At the same time, borrowing costs can be associated with a clearing regime that requires participants to post margin. Firms that use derivatives to hedge business risks often take positions that move in the opposite direction from the underlying market. Such commercial businesses argued that the costs of posting margin would prevent them from hedging. Nonfinancial commercial firms were ultimately exempted from the clearing and exchange-trading requirements in the Dodd-Frank Act. However, the question of which firms should be required to clear their derivatives, thereby tying up cash for any margin, remains an issue addressed in some of the legislation in the 114 th Congress. Dodd-Frank Reforms The Dodd-Frank Act derivatives reforms were broadly aimed at bringing the swaps market under a regulatory regime more closely resembling that of the futures markets. Dodd-Frank added five broad requirements for swaps, with certain exceptions. First, most swaps are required to be cleared through a clearinghouse, which involves posting margin to cover any potential losses as they accumulate. Second, these swaps also are required to be traded on an exchange or an exchange-like electronic platform called a swap execution facility (SEF), with the goal of promoting pre-trade and post-trade price transparency. However, swaps in which one counterparty is a nonfinancial firm (e.g., a farmer, energy company, or airline) are not subject to these clearing and exchange-trading requirements. Third, all swaps must be reported to a database called a swap data repository (SDR) to give regulators a clearer picture of the market. Fourth, financial firms that trade swaps heavily must register with the CFTC or the SEC (the latter if the firms trade swaps related to securities) as swap dealer s or major swap participant s (MSPs), so as to promote more regulatory oversight of major market players. Fifth, swaps that remain uncleared, or OTC, are subject to margin and capital requirements set by the regulators to prevent large uncollateralized exposures from accumulating. Clearing and Trading Requirements The Dodd-Frank Act requires that most derivatives contracts formerly traded exclusively in the OTC market be cleared and traded on exchanges. Traders in these products now are required to post margin to cover potential losses as they accumulate on a daily basis. However, the act does not require all derivatives contracts to be traded in this way. The Dodd-Frank Act presumes that some derivatives contracts will still be traded in the OTC market, but it grants regulators broader powers to obtain information about these derivatives and to impose margin and capital requirements on them. The CFTC and the SEC have been working to issue regulations that implement these provisions. Clearing Requirement Title VII of the Dodd-Frank Act creates largely parallel clearing and exchange-trading requirements for swaps and security-based swaps, as those terms are defined by Title VII and further clarified by the CFTC and the SEC in a joint rulemaking. Section 723 creates the clearing and exchange-trading requirements for swaps, over which the CFTC has jurisdiction. Section 763 creates largely parallel requirements for security-based swaps, over which the SEC has authority. Currently, about 75% of swap transactions in the United States are cleared through derivatives clearinghouses, with most of the cleared transactions being interest-rate and credit-default swaps. That figure is up from about 15% of all swaps in 2007. If a swap or security-based swap is subject to the clearing requirement, the Dodd-Frank Act makes it unlawful for parties to enter into that swap or security-based swap unless the transaction has been submitted for clearing. A swap or security-based swap may become subject to the clearing requirement in two ways. First, the agency of jurisdiction is required to engage in an ongoing review of the products under its jurisdiction to determine whether a particular swap, security-based swap, group, or class of such contracts should be subject to the clearing requirement. Second, a swap or security-based swap may become subject to the clearing requirement upon submission to the CFTC or the SEC. Following submission to the agencies, the CFTC and the SEC have 90 days to determine whether the swaps or security-based swaps are subject to the clearing requirement, unless the submitting organization agrees to an extension. When making that determination, the agencies must consider the following: (I) The existence of significant outstanding notional exposures, trading liquidity, and adequate pricing data. (II) The availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the contract on terms consistent with material terms and trading conventions on which the contract is then traded. (III) The effect on the mitigation of systemic risk.... (IV) The effect on competition, including appropriate fees and charges.... (V) The existence of reasonable legal certainty in the event of the insolvency of the relevant derivatives clearing organization or 1 or more of its clearing members with regard to the treatment of customer and swap counterparty positions, funds, and property. In the process of making these determinations, the agencies also are required to allow the public to comment on whether the clearing requirement should apply. With certain exceptions—for example, if one of the counterparties qualifies for the end-user exception (see " End-User Exception ," below)—counterparties to swaps and security-based swaps that are required to be cleared must execute the transactions either on exchanges or on specialized execution facilities. Exchange-Trading Requirement With certain exceptions, swaps and security-based swaps that are required to be cleared also must be executed on a regulated exchange or on a trading platform defined in the act as either a swap execution facility (SEF) or a security-based swap execution facility (SBSEF). Such facilities must permit multiple market participants to trade by accepting bids or offers made by multiple participants in the facility. As of the end of the first quarter of 2015, 54.5% of all interest-rate and credit-related swaps were traded on SEFs, globally, in terms of gross notional value—a figure that has increased since the passage of Dodd-Frank. The goal of the trading requirement is "to promote pre-trade price transparency in the swaps market." Because the old OTC market was notably opaque, with complete price information available only to dealers, swaps customers were limited in their ability to shop for the best price or rate. The expectation is that as price information becomes more widely available, competition will produce narrower spreads by lowering prices. SEFs and SBSEFs must comply with a number of core principles set out in the act. Although these principles are somewhat less prescriptive than the regulation of exchanges in which public customers are allowed to trade, the new trading facilities have regulatory and administrative responsibilities far beyond what applied to OTC trading desks in the past. Among other things, SEFs and SBSEFs must establish and enforce rules to prevent trading abuses and to provide impartial access to the trading facility; ensure that swap contracts are not readily susceptible to manipulation; monitor trading to prevent manipulation, price distortion, and disruptions in the underlying cash market; set position limits; maintain adequate financial and managerial resources, including safeguards against operational risk; maintain an audit trail of all transactions; publish timely data on prices and trading volume; adopt emergency rules governing liquidation or transfer of trading positions as well as trading halts; and employ a chief compliance officer, who will submit an annual report to regulators. During consideration of Dodd-Frank, a central issue of debate was the extent to which existing OTC derivatives trading platforms and mechanisms could be accommodated under the new regulatory regime. Before Dodd-Frank, OTC trading practices ranged from individual telephone negotiations to electronic systems accessible to multiple participants. One concern was that if SEFs were too much like exchanges, the existing futures and securities exchanges would monopolize trading. However, if the SEF definition were too vague or general, the OTC market might remain opaque. The bill reported by the Senate Banking, Housing, and Urban Affairs Committee defined an SEF as "an electronic trading system with pre-trade and post-trade transparency." The explicit reference to "pre-trade" transparency does not appear in the final legislation, in part because of concerns that such a requirement was not compatible with the business models of a number of intermediaries, such as interdealer swap brokers providing anonymous execution services. As is the case with the clearing requirement, Dodd-Frank provides exceptions to the exchange-trading mandate. If no exchange, SEF, or SBSEF makes a swap available for trading, the contract may be traded OTC. A swap that meets the end-user clearing exception likewise is exempt from the exchange-trading requirement. SEFs will provide pre-trade price transparency—the ability for all market participants to see quoted prices before transacting—for (1) trades that must be cleared, (2) all swaps that are made available for trading on an SEF, and (3) trades that are below the size of a block trade. Pre-trade transparency requirements will not apply to block trades, end-user trades, or contracts that are not available for trading on an SEF. End-User Exception Sections 723 and 763 of the Dodd-Frank Act provide exceptions to the clearing requirement for swaps and security-based swaps when one of the counterparties to the transaction (1) is not a financial entity; (2) is using the transaction to hedge or mitigate its own commercial risk; and (3) notifies the relevant agency "how it generally meets its financial obligations associated with entering into non-cleared swaps." This provision has been widely referred to as the end-user exception because it applies only to transactions in which at least one counterparty is "not a financial entity." A financial entity for the purposes of this section is defined as a swap dealer, security-based swap dealer, an MSP, major security-based swap participant, commodity pool, private fund, employee benefit plan, or person predominantly engaged in activities that are in the business of banking or are financial in nature. To illustrate, a prime example of an entity that would not be a financial entity but that may engage in swaps trading as a necessary part of its business would be an airline that regularly trades in fuel derivatives to offset potential volatility in the market for jet fuel. Under the Dodd-Frank Act, eligible counterparties also may use an affiliate ("including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person") to engage in swaps or security-based swaps under the condition that the affiliate "act on behalf of the person [qualifying for the exception] and as an agent, uses the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity." Financial entities wholly controlled by the end user and whose primary business is hedging the commercial risk of the end user also may qualify for the end-user exception. Finally, the act allows regulators to exclude depository institutions, farm credit institutions, and credit unions with $10 billion or less in assets from the definition of financial entity, allowing small financial entities (e.g., small banks) to qualify for the end-user exception as well. To qualify for the exception from the clearing requirement, it is not enough to be a nonfinancial entity (or, in some circumstances, a financial entity that nonetheless qualifies for the exception). The swaps engaged in by the entity must be for the purpose of hedging or mitigating commercial risk. According to the CFTC's final rule defining the end-user exception, an entity will be engaging in a swap to hedge or mitigate its own commercial risk under the following circumstances: First, the swap must meet one of the following three criteria. It must (1) be economically appropriate to the reduction of risks conducted by the company; (2) qualify as a bona fide hedge for purposes of being exempt from position limits under the Commodity Exchange Act (CEA; P.L. 74-675); or (3) qualify for hedging treatment under Financial Accounting Standards Board Accounting Standards Codification Topic 815, Derivatives and Hedging (formerly known as Statement No. 133) or Governmental Accounting Standards Board Statement 53, Accounting and Financial Reporting for Derivative Instruments. Second, the swap must not be used either for "a purpose that is in the nature of speculation, investing or trading" or "to hedge or mitigate the risk of another swap or security-based swap position, unless that other position itself is used to hedge or mitigate commercial risk." Major Swap Participant and Swap Dealer Definitions A basic theme in Dodd-Frank is that systemically important financial institutions should maintain capital cushions above and beyond what specific regulations require to compensate for the risk that their failure would pose to the financial system and the economy. In addition to the margin requirements that apply to individual derivatives contracts, major participants in derivatives markets became subject to prudential regulation in Title VII. Two categories of regulated market participants are enumerated: swap dealers and MSPs (together with their security-based swap equivalents). Because the OTC dealer market is highly concentrated, the proposal that swap dealers be subject to additional prudential regulation was not controversial. Only a few dozen of the largest financial institutions were presumed to be affected. The question of how many firms should be included in the definition of MSP, however, was contentious. How many non-dealer and nonbank firms should become subject to prudential regulation? On May 23, 2012, the CFTC and SEC released a joint final rule further defining the terms swap dealer and major swap participant . The final rule defined what constitutes a "substantial" position in swaps, for the purposes of being an MSP. The regulators proposed a two-pronged test for a substantial position. First, c urrent exposure , or the current mark-to-market value of a swaps or security-based swaps position, minus the value of collateral posted against the position, constitutes a substantial position if the net uncollateralized exposure exceeds $1 billion or $3 billion for interest- or currency-rate swaps. The second test also involves a calculation, this time relating to future exposure . This figure is calculated by discounting current notional exposure by a risk factor, by the existence of netting agreements, and according to whether the position is cleared or subject to daily margining. A future exposure is substantial if it exceeds $2 billion or $6 billion for interest- or currency-rate swaps. These quantitative tests for substantial position are meant to set a threshold "materially below" the level at which a swaps trader's default could pose a threat to the financial system. In the joint final rule, the CFTC and SEC's definition of a swap dealer closely followed the Dodd-Frank definition of a swap dealer. The final rule defines a swap dealer as any person (a person, in this case, can be an entity) who holds himself out as a dealer in swaps; makes a market in swaps; regularly enters into swaps with counterparties as an ordinary course of business for his own account; or engages in activity causing himself to be commonly known as a dealer or market maker in swaps. The rule also excludes certain swaps used to hedge or mitigate risk, if the risks arise from a potential change in the value of assets a person owns or produces or services the person provides. In addition, it excludes swaps entered into between majority-owned affiliates. At the same time, the rule includes a de minimis exception. For a person to be regarded as a swap dealer, the aggregate gross notional amount of the swaps the person entered into during the prior 12 months in connection with swap dealing activities must exceed $8 billion during a phase-in period. The phase-in period would last two and a half years from the time data start being reported to swap data repositories (SDRs). After that time, the CFTC would undertake a study of the swaps markets and may reduce this de minimis amount to $3 billion or may propose a new rule for a different de minimis threshold. On November 18, 2015, the CFTC published a preliminary study on the swap dealer de minimis threshold, which laid out a number of policy considerations—including reducing systemic risk, providing protections for trading counterparties, and other issues—and asked for additional public input, without making a direct recommendation regarding the final amount of the threshold. In a June 9, 2016 speech, CFTC Chair Massad noted that the CFTC was examining the issue and had not yet decided whether to take any action on the threshold amount. Reporting of Swaps and Security-Based Swaps The Dodd-Frank Act requires all swaps to be reported. Swaps must be reported to registered SDRs or to the CFTC. Security-based swaps must be reported to registered security-based SDRs or to the SEC. Whereas, in the fall of 2008, virtually no swaps transactions were reported, currently all swaps transactions, whether they are cleared through a clearinghouse or remain uncleared, are reported to SDRs. The CFTC continues to work on standardizing its swap reporting forms and improving its system of effectively analyzing and utilizing the data it now collects. Section 727 of Dodd-Frank outlines the public availability of swap transaction data. The CFTC is required to promulgate rules regarding the public availability of such data. Swaps that are subject to the clearing requirement—and swaps that are not subject to the clearing requirement but nonetheless are cleared at registered derivatives clearing organizations—must have real-time reporting for such transactions. Real-time reporting means reporting data relating to a swap transaction, including price and volume, as soon as technologically practicable after the swap transaction has been executed. For swaps that are not cleared and are reported pursuant to subsection (h)(6) (requiring reporting prior to the implementation of the clearing requirement), real-time reporting is required in a manner that does not disclose the business transactions and market positions of any person. For swaps that are determined to be subject to the clearing requirement under subsection (h)(2) (outlining the two ways in which swaps may become subject to this requirement; see " Clearing Requirement ," above) but are not cleared, real-time public reporting is required as well. The act has no parallel requirement for security-based swaps, presumably because the national securities exchanges upon which these transactions will be executed already provide comparable reporting. The act also creates reporting obligations for uncleared swaps and security-based swaps (including swaps and security-based swaps that qualify for the end-user exception). Swaps entered into prior to enactment of the act will be subject to reporting and recordkeeping requirements for uncleared swaps and security-based swaps. The purpose of these requirements, presumably, was to give the relevant commissions access to a more complete picture of the derivatives market, even for swaps not required to be cleared. The SEC proposed its rule on reporting requirements for security-based swaps, which was published on December 2, 2010. The SEC issued a final rule on February 11, 2015. Regulation SBSR (for security-based swap reporting) would require security-based SDRs to register with the SEC as securities information processors, an existing category of regulated entity. The data that the repositories receive would fall into two categories: one to be made public and the other to remain nonpublic. Information to be disclosed to the public would include the following: information on the asset class and the underlying security; the price and notional amount of the security-based swap; the time of execution; and the effective and expiration dates of the security-based swap. Nonpublic information—to be available to the SEC—would include the following: the identity of the swap counterparty, the broker, and the trading desk; any up-front payments; the title of the master agreement (if any); a description of the valuation methods to be used; and which counterparty will report the contract to the SDR. Some market participants expressed concerns that real-time reporting (required by the statute but left to the regulators to define) would be unduly burdensome for large or illiquid trades, where reporting might result in the disclosure of market-sensitive information about holders of large positions and their trading intentions. The SEC, however, proposed a narrow definition of real-time —"as soon as technologically practicable after the time at which the ... transaction has been executed." The real-time reporting requirement is qualified in only a few circumstances. In the case of contracts that are not required to be cleared and are not cleared, public reporting for such transactions shall not disclose the business transactions or market positions of any person. In addition, the SEC proposal does not address block trades directly, but it notes that the SEC intends to propose a rule for the reporting of block trades at a later date, after considering comments. On April 3, 2012, the CFTC issued a final rule describing reporting, recordkeeping, and daily trading records obligations for swap dealers and MSPs. The CFTC's final rule followed a proposed rule released on December 23, 2010. The final rule calls for electronic reporting to an SDR of swap data from each of two important stages of the existence of a swap: the creation of the swap and the continuation of the swap over its existence until its final termination or expiration. The purpose of this requirement appears to be to create an electronic audit trail of all stages of the swap. The final rule requires swap dealers and MSPs to maintain records of all activities related to their business, regardless of whether they also have a prudential, or banking, regulator with separate recordkeeping requirements. Legislation in the 114th Congress The two legislative provisions enacted in the 114 th Congress as part of larger legislation (in one case, a transportation bill, and in the other case, an omnibus appropriations bill) made fairly circumscribed changes to swaps regulation. The other legislation introduced in the 114 th Congress would, to varying degrees, make broader changes on an array of issues. A number of the provisions discussed below were included in a CFTC reauthorization bill, H.R. 2289 , which passed the House on June 9, 2015, and was subsequently referred to the Senate Committee on Agriculture, Nutrition, and Forestry. The Senate Committee on Agriculture, Nutrition, and Forestry marked up and ordered to be reported a CFTC reauthorization bill, S. 2917, on April 14, 2016. S. 2917 was reported to the Senate without written report on May 10, 2016, and placed on the Senate legislative calendar under general orders on that day. S. 2917 shares certain provisions with H.R. 2289, and several sections of S.2917 are also discussed below. The CFTC reauthorization process has historically been used as a vehicle to make additional changes to the Commodity Exchange Act. While authorization of appropriations for the CFTC typically lasts five years, the CFTC reauthorization process has often stretched beyond the expiration date of the previous authorization. The previous CFTC authorization expired on September 30, 2013. This report first analyzes the two provisions enacted in the 114 th Congress and then turns to analysis of other legislation that has at least been reported by committee if not considered on the floor of either the House or the Senate. Swap Data Repository Indemnifications (P.L. 114-94/H.R. 22; H.R. 1847) A provision in the Fixing America's Surface Transportation (FAST) Act, signed into law as P.L. 114-94 on December 4, 2015, removed a requirement added in the Dodd-Frank Act's Title VII that foreign regulators indemnify a U.S.-based swap data repository (SDR) and the CFTC for any expenses arising from litigation related to a request for market data. Indemnification generally refers to compensating someone for harm or loss. The provision instead required the SDR and the CFTC, prior to sharing information, to receive written agreements from the foreign regulator promising to abide by confidentiality requirements with respect to the data. The provision does the same for security-based swap data repositories (SBSDRs) and for the SEC's information sharing on security-based swaps with foreign regulators. In an effort to improve transparency in the opaque swaps market, Title VII of Dodd-Frank required all swaps to be reported to SDRs and all security-based swaps to be reported to SBSDRs. Dodd-Frank included provisions requiring foreign regulators to indemnify U.S.-based SDRs, and the CFTC, for expenses arising from litigation related to requests for swaps transactions data. It included a similar indemnification provision for SBSDRs and the SEC. The original purpose of this Dodd-Frank provision appeared to be to encourage foreign regulators to more closely protect any shared information related to swaps by making it potentially more costly for them should any information be leaked. In subsequent years after Dodd-Frank's passage, however, regulators testified that the indemnification requirement was creating barriers to information sharing with foreign regulators. At a February 12, 2015, House Agriculture Committee hearing, CFTC Chair Timothy Massad, questioned about this indemnification provision, noted that "if the legislation did remove this provision, this indemnification requirement, then it would facilitate the sharing of information ... across borders. Again, that would just make it easier for regulators to work together." Officials from the SEC also have testified that they recommend removing this provision, which they view as a barrier to information sharing. In the 114 th Congress, H.R. 1847 , which is substantially similar to the provision in P.L. 114-94 repealing the indemnification provision, passed the House on July 14, 2015, on a voice vote. Substantially the same provision also was included in Section 302 of H.R. 2289 , the CFTC reauthorization bill, which passed the House on June 9, 2015. In House floor debate over H.R. 1847 , proponents of the bill stated that the concept of indemnification did not exist in some foreign jurisdictions, making it impossible for some foreign regulators to agree to these requirements before sharing information and thus hindering the sharing of market information between U.S. and foreign regulators. The provision in H.R. 2289 , as in H.R. 1847 , would repeal the indemnification requirement but maintain the existing requirement that confidentiality agreements be signed prior to information sharing. Centralized Treasury Units Exemption (P.L. 114-113; H.R. 1317) The House of Representatives on November 16, 2015, passed H.R. 1317 , a bill to allow certain corporate affiliates to use an existing exception from the derivatives regulatory requirements in the Dodd-Frank Act. The bill would provide a more narrowly tailored exception than a number of predecessor bills on a similar topic from the 112 th , 113 th , and 114 th Congresses. A provision identical to H.R. 1317 was included in the Consolidated Appropriations Act 2016 ( P.L. 114-113 , Division O, Title VII, §705), which passed the House and Senate and was signed into law by President Obama on December 18, 2015. Background: Derivatives Trading and Centralized Treasury Units Dodd-Frank's Title VII required many swaps to be traded on exchange-like facilities and to be cleared by a clearinghouse, as futures long have been. Clearinghouses monitor trades and require margin, or cash, to be posted by traders as potential losses accumulate. Posting margin incurs costs for market participants. Dodd-Frank's Section 723 created an exception to these clearing and exchange-trading requirements for swaps traded by nonfinancial commercial companies, known as end users, partly to avoid imposing the cost of posting margin on them. Examples of end users include airlines, oil companies, and agriculture companies, which use derivatives to hedge against commodity price fluctuations. (See " End-User Exception ," above.) A major issue addressed in H.R. 1317 and Section 705 of P.L. 114-113 is the CFTC's treatment of such end users' derivatives trading affiliates—known as centralized treasury units (CTUs)—and whether CTUs also should be able to use this clearing exception. A 2013 CFTC no-action letter defined CTUs as entities that perform certain limited financial functions on behalf of the larger conglomerate, such as hedging activities, cash management, credit administration, or other financial risk management. In a 2012 final rule, the CFTC found that CTUs operating as separate legal entities and whose primary function is financial would be precluded from the end-user exception, but CTUs housed within nonfinancial corporations, and through which the nonfinancial company enters into the swaps in its own name, could be eligible for the end-user exception. This decision gave rise to what some have called the principal-agent issue, meaning the CTU could use the exception only if it were not structured as a separate legal entity—or if it were not trading swaps as a principal but merely as an agent of the conglomerate. Because a number of CTUs reportedly are structured as separate legal entities, however, questions regarding the proper application of the end-user exception to treasury affiliates continued to arise. In a 2014 "no-action" letter, the CFTC attempted to address these questions. The CFTC indicated that it would not bring enforcement actions for CTUs meeting a number of conditions, including that the CTU neither was affiliated with nor was itself a swap dealer or a major swap participant (MSP). The CFTC also required that the affiliate's "ultimate parent" was not a financial entity (and defined ultimate parent as the topmost, direct or indirect, majority owner of the entity). Some industry participants were not satisfied by the no-action letter, however, expressing concerns that, among other things, a statutory change was needed. They noted that CTUs would still technically be in violation of the statute, with the no-action letter only assuring forbearance from enforcement of that statute. Analysis of H.R. 1317 H.R. 1317 shares broad similarities with the 2014 CFTC no-action letter. H.R. 1317 does not use the phrase centralized treasury unit , but it excepts affiliates of end users from the clearing and trading requirements as if they were end users themselves, subject to a number of conditions. These conditions are presumably aimed at ensuring that only entities such as CTUs would be excepted, rather than other financial affiliates that might trade derivatives for speculative purposes. Under H.R. 1317 , the affiliate must meet a number of criteria to qualify for the end-user exception. The affiliate must be directly and wholly owned by a nonfinancial entity or its affiliate that qualifies for the end-user exception itself and enter into the swap to hedge or mitigate the commercial risk of the nonfinancial entity, and the commercial risk that the affiliate is hedging or mitigating must have been transferred to the affiliate. In addition, the affiliate cannot be indirectly majority-owned by a financial entity; be ultimately owned by a parent company that is a financial entity; provide any services, financial or otherwise, to any affiliate that is a nonbank financial company supervised by the Federal Reserve; be any one of a long list of different types of financial firms, including a hedge fund, bank or bank holding company, swap dealer, MSP (or its securities equivalents), insurance company, pension fund, credit union, commodity pool operator, or several other enumerated financial entities; or be affiliated with a swap dealer or MSP. H.R. 1317 does not restrict the location of the CTU (i.e., domestic or foreign). Proponents of H.R. 1317 stated that CTUs permit efficient aggregation of the risk of a corporate entity and provide for a single point of contact between the company and financial counterparties. They further contended that because most CTUs act as principals to the trade, a statutory change was needed to permit these CTUs to engage in swaps as principals, not only as agents, on behalf of a conglomerate. Past critics of widening the exemption for affiliates of end users focused on whether the actual wording of bills created broader exemptions permitting more than just CTUs to be exempt from clearing and trading requirements. If such an exemption were too broad, they argued, then firms might use affiliates to circumvent these requirements. One public interest group, Americans for Financial Reform, said it would not oppose the version of H.R. 1317 that passed the House on November 16, 2015, but objected to previous versions. H.R. 1317 was passed by a voice vote. CFTC Reauthorization (H.R. 2289; S. 2917) The Commodity Exchange Act (CEA), the statute governing futures and swaps markets, which the CFTC administers, contains a sunset provision. This provision means Congress must periodically reauthorize appropriations to carry out the CEA. However, if an explicit authorization of appropriations for a program or activity is present—as in the CEA—and it expires, the underlying authority in the statute to administer such a program or to engage in such an activity does not. In other words, the CFTC continues functioning and administering the CEA even if its authorization has expired—which has been the case since the most recent CFTC reauthorization expired on September 30, 2013. It has not been uncommon for Congress to pass CFTC reauthorization bills several years after the prior authorization expired. The 114 th Congress is considering a new CFTC reauthorization bill. Historically, the reauthorization process often has been one of the principal vehicles for modifying the CFTC's regulatory authority and evaluating the efficacy of its regulatory programs. Congress has used the reauthorization process in the past as a vehicle to consider a wide range of issues related to the regulation of derivatives trading. The current CFTC reauthorization process is the first since the Dodd-Frank Act's passage brought the more than $400 trillion U.S. swaps market under regulatory oversight. For some in Congress, it may be an opportunity to reexamine provisions of Dodd-Frank they feel may have created excessive regulatory burdens or industry costs. Others have been critical of any perceived weakening of derivatives oversight introduced in the wake of the financial crisis. Still others may be using the current CFTC reauthorization process to try to make changes to futures regulation that industry, advocacy groups, or regulators themselves have long sought. In the 114 th Congress, the House passed H.R. 2289 , the Commodity End-User Relief Act, on June 9, 2015, by a vote of 246 to 171. Among other changes to the CEA, H.R. 2289 as passed would reauthorize appropriations for the CFTC. The bill was referred to the Senate Committee on Agriculture, Nutrition, and Forestry on June 10, 2015. The Obama Administration threatened to veto H.R. 2289 , stating that the bill "undermines the efficient functioning of the CFTC by imposing a number of organizational and procedural changes and would undercut efforts taken by the CFTC over the last year to address end-user concerns." On April 14, 2016, the Senate Committee on Agriculture, Nutrition, and Forestry marked up and ordered to be reported a CFTC reauthorization bill, S. 2917 . On May 10, 2016, S. 2917 was reported to the Senate without written report and placed on the Senate legislative calendar under general orders. Among its other changes, H.R. 2289 as passed, and S. 2917 , would amend the short "Authorization of Appropriations" section in the CEA (7 U.S.C. §16(d)). The section currently authorizes the appropriation of "such sums as are necessary to carry out" the chapter of the CEA "through 2013," and H.R. 2289 as passed, and S. 2917 , would both amend it to read "through 2019." Cost-Benefit Analysis (H.R. 2289) The CFTC already is required to conduct cost-benefit analysis in its rulemakings, but H.R. 2289 as passed by the House includes a provision in its Section 202 expanding the number of factors for the CFTC to consider in cost-benefit analysis. This provision also includes a requirement for quantitative as well as qualitative analysis—an apparent change from current practice. The bill ordered to be reported by the Senate Agriculture Committee, S. 2917 , does not have a similar provision on cost-benefit analysis. Existing CFTC Requirements for Cost-Benefit Analysis The CFTC and other independent regulatory agencies (such as the SEC) are not subject to the general requirements that apply to other government agencies to conduct cost-benefit analysis under Executive Order (E.O.) 12866. For the CFTC, Section 15(a) of the CEA requires that "before promulgating a regulation under this chapter or issuing an order (except as provided in paragraph (3)), the Commission shall consider the costs and benefits of the action of the Commission." In addition, the costs and benefits of the proposed Commission action shall be evaluated in light of: (A) considerations of protection of market participants and the public; (B) considerations of the efficiency, competitiveness, and financial integrity of futures markets; (C) considerations of price discovery; (D) considerations of sound risk management practices; and (E) other public interest considerations. The CFTC also may have additional required considerations when issuing a particular rule. Section 15(a) of the CEA applies more broadly than E.O. 12866, which applies only to rules deemed to reach a certain "significance" threshold. CEA Section 15(a), by contrast, applies to all rules issued by the CFTC. In practice, the CFTC relies on guidance provided by the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA) when considering costs and benefits under Section 15(a) of the CEA, although it is not required to do so. This practice is documented in a May 2012 memorandum of understanding (MOU) between OIRA and CFTC regarding implementation of the Dodd-Frank Act. OIRA has issued a variety of documents to assist agencies in conducting their cost-benefit analyses, including OMB Circular A-4 and accompanying guidance documents. Thus, although the CFTC is not subject to the E.O. 12866's requirements, the CFTC's analyses conducted pursuant to the CEA likely share some similarities with analyses that are completed pursuant to the executive order. Cost-Benefit Provisions in H.R. 2289 Section 202 of H.R. 2289 as passed would expand the CEA's current 5 cost-benefit analysis provisions listed above to 12 considerations. Some of the considerations are similar to requirements to which other agencies are subject under E.O. 12866, and some are currently in Section 15(a) of the CEA. H.R. 2289 as passed includes the following 12 factors: (A) considerations of protection of market participants and the public; (B) considerations of the efficiency, competitiveness, and financial integrity of futures and swaps markets; (C) considerations of the impact on market liquidity in the futures and swaps markets; (D) considerations of price discovery; (E) considerations of sound risk-management practices; (F) available alternatives to direct regulation; (G) the degree and nature of the risks posed by various activities within the scope of its jurisdiction; (H) the costs of complying with the proposed regulation or order by all regulated entities, including a methodology for quantifying the costs (recognizing that some costs are difficult to quantify); (I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other federal regulations or orders; (J) the cost to the Commission of implementing the proposed regulation or order by the Commission staff, including a methodology for quantifying the costs; (K) whether, in choosing among alternative regulatory approaches, those approaches maximize net benefits (including potential economic and other benefits, distributive impacts, and equity); and (L) other public interest considerations. Arguably, at least some of these considerations, such as liquidity and market efficiency, incorporate the existing statutory mission of the CFTC. In addition, Section 202 would add a requirement that the CFTC conduct quantitative as well as qualitative assessments of costs and benefits. The requirement for quantitative cost-benefit analysis appears to mark a change from previous practice. It also raises the question of how to accurately quantify benefits involving economic externalities . In economics, an externality refers to a consequence of an economic activity that is experienced by unrelated third parties; it can be either positive or negative. Pollution is often used as an example of a negative externality, in which the effects may be widely dissipated and hard to quantify. Risks to the financial system could be another example of a negative externality. Quantifications of such externalities may involve judgments or estimates as to the value of intangible or speculative benefits that might be experienced differently by individuals, such as the value of financial stability or, in the case of pollution, the value of avoiding certain diseases. In the realm of financial regulation, benefits are often widely dissipated (for instance, prospective investors broadly benefit from fuller and more accurate corporate disclosures and related investor protections) and are sometimes speculative (e.g., trying to measure the benefit of avoiding potential financial fraud). This, according to critics, can make benefits harder to reliably quantify. Costs of compliance, meanwhile, may be more easily measurable (e.g., through payment hours for accountants, lawyers, and staff). How Valuable Is Cost-Benefit Analysis? Proponents of cost-benefit analysis argue that it can force agencies to focus on and clarify the benefits of their proposed rulemakings and to better weigh the costs they will impose against those benefits. According to this line of reasoning, by putting cost-benefit requirements in statute, such as those in the CEA and those proposed in H.R. 2289 as passed, Congress can have some influence over the considerations and outcomes in agency rulemakings. By contrast, some administrative law scholars have argued that the increased use of cost-benefit analysis has "ossified" the rulemaking process, slowing down the process or causing agencies to issue guidance documents rather than regulations, thereby avoiding rulemaking requirements altogether. Some academics argue that, particularly for financial rulemakings, costs can be easier to quantify than widely dispersed potential benefits (such as "a safer financial system" or "better investor disclosure") and that this discrepancy may lead to an overstatement of costs relative to benefits. Finally, critics argue that the practice opens the agency's rules to court challenges by industry groups on the grounds of inadequate cost-benefit analysis, tying up agency resources and at times leading to the invalidation of regulations. Trading by Affiliates: Amendment to the End-User Exception95 (H.R. 37; S. 876; H.R. 2289) As discussed, Section 723 of Dodd-Frank states that the clearing and exchange-trading requirements shall not apply to the swap if one of the counterparties to the swap is "not a financial entity" and is using the swap to hedge or mitigate commercial risk. This exception is commonly referred to as the end-user exception. The exception applies to affiliates of nonfinancial entities when those affiliates are using the swap to hedge or mitigate the commercial risk of the nonfinancial entity. (See " End-User Exception ," above.) Section 301 of H.R. 2289 as passed by the House would expand the end-user exception by amending the definition of financial entities ineligible to use the exception and by expanding the types of activities in which eligible affiliates may engage while using the exception. H.R. 2289 , H.R. 37 , and S. 876 , which bear general similarities, would create a broader exemption for affiliates than would H.R. 1317 , which would apply to a narrower category of affiliates often called centralized treasury units (CTUs; see " Centralized Treasury Units Exemption (P.L. 114-113; H.R. 1317) ," above). S. 2917 does not contain a provision involving trading by affiliates. Who Is an Eligible Affiliate? The Dodd-Frank Act currently allows affiliates of end users to use the exception only "if the affiliate, acting on behalf of the person and as an agent, uses the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity." Without further definition, the term affiliated companies can loosely refer to companies that are related to each other in some way, including foreign affiliates. However, the Dodd-Frank Act does provide that an affiliate cannot use the exception if the affiliate is a swap dealer; security-based swap dealer; MSP; major security-based swap participant; hedge fund; commodity pool; or bank holding company with more than $50 billion in consolidated assets. Key questions for policymakers in deciding whether to extend any exception for affiliates include the following: How widely should the exception be extended? Would risks be posed to the financial system or to parent companies if the exception from derivatives clearing and exchange-trading requirements were extended to nonfinancial affiliates of financial companies? And under what circumstances should the exception be extended to financial affiliates of nonfinancial companies to minimize such risks? The CFTC, in its 2012 final rule on the end-user exception, addressed some of the questions involved in deciding which entities to exclude from the end-user exception as financial entities. Among other restrictions, the CFTC found that treasury units that operated as separate legal entities and whose primary function was financial in nature would be precluded from the end-user exception, but treasury units housed within a nonfinancial corporation, and in which the nonfinancial company enters into the swaps in its own name, could be eligible to use the exception. The CFTC also noted that some commenters had argued that the end-user exception "should be narrowly tailored to businesses that produce, refine, process, market, or consume underlying commodities and to counterparties transacting with nonfinancial counterparties" and that a number of form letters had argued that extending the end-user exception to certain financial entities could increase systemic financial risks from derivatives trading. In a November 26, 2014, no-action letter, the CFTC indicated that it would not bring enforcement actions against certain treasury affiliates that met a number of conditions. The CFTC defined an eligible treasury affiliate —which would qualify for the enforcement forbearance—as an entity meeting each of six conditions. The conditions include, among other things, that the affiliate is neither affiliated with nor is itself a swap dealer or an MSP. The CFTC also requires that the affiliate's ultimate parent is not a financial entity (and defines ultimate parent as the topmost, direct or indirect, majority owner of the entity). Some industry participants were not satisfied by the no-action letter, however. Treasury affiliates that relied on the no-action letter for swaps that they neither clear nor execute on an exchange were technically in violation of the Dodd-Frank Act's clearing requirement as interpreted by the CFTC. The CFTC's no-action letter, although it assures those that qualify under the letter that they will not face an enforcement action for violating the clearing and exchange-trading requirements, does not actually change the statute. Consequently, proponents of the language in H.R. 2289 's Section 301 have argued that a statutory amendment was necessary to provide clarity and certainty to end users that use treasury affiliates to hedge their commercial risk. Sections 301 and 306 of H.R. 2289 appear to attempt to address those concerns, but they may expand the exception beyond those entities covered by the CFTC's no-action letter. Broader Issues At issue for Congress in deciding whether to expand the existing exception is whether derivatives trading between affiliates within the same umbrella organization could pose substantial risk of losses, to either the affiliate or the parent, or spread losses outside the organization. Various questions for policymakers to consider include the following: Might one affiliate have an incentive to gain through a swaps trade at another affiliate's expense? What repercussions could this have within the conglomerate? What would be the best way to control risks of excessive losses by a single affiliate from such trades? Is any proposed legislative exemption tailored narrowly enough to meet concerns from regulators that large swaps market players might funnel swaps through an affiliate to avoid U.S. derivatives requirements? Would a legislative provision allow overseas affiliates to use this exception and, if so, what would be the cross-border regulatory implications? Proponents of the provision in H.R. 2289 argue that it would prevent the redundant regulation of inter-affiliate transactions and prevent capital from being tied up unnecessarily, such as through the duplicative posting of margin for derivatives trades. The expansion of the exception, they argue, would allow businesses that centralize their hedging activities to reduce costs, simplify financial dealings, and reduce their counterparty credit risk. Proponents contend that the provision would allow affiliates within a corporate entity to trade swaps under the end-user exception to the clearing and exchange-trading requirements both within and outside the umbrella organization. Opponents of the provision in H.R. 2289 argue that it would allow financial firms with commercial business affiliates to "take advantage of exemptions from key Dodd-Frank risk controls that were meant to apply only to commercial end users." Opponents of widening the exception as it applies to affiliates from the Dodd-Frank requirements also have stated that "the potential for affiliates to cause massive losses to their parent companies cannot be denied." They cite examples such as the derivatives losses incurred by AIG's overseas affiliate in London and by JPMorgan's so-called London Whale trading losses in its London affiliate. They argue that any expansions of the exception should be restricted to 100%-owned subsidiaries of a parent company and be subject to strict risk-management controls. Analysis Section 301 of H.R. 2289 as passed by the House seemingly would expand the hedging activities in which affiliates of nonfinancial entities could engage while being able to use the end-user exception. Under current statutory language, affiliates may use the end-user exception "only if the affiliate, acting on behalf of the [non-financial entity] and as an agent, uses the swap to hedge or mitigate the commercial risk of the person or other affiliate." Section 301 would expand that language by allowing affiliates to engage in more hedging activities while using the exception. Specifically, Section 301 would permit an affiliate to use the end-user exception only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity, provided that if the hedge or mitigation of such commercial risk is addressed by entering into a swap with a swap dealer or major swap participant, an appropriate credit support measure or other mechanism must be utilized. Removing the requirement that the affiliate act on behalf of the nonfinancial entity and as an agent could permit the affiliate to act in its own capacity as an independent entity while hedging the commercial risk of the nonfinancial entity. As noted above, affiliates of end users cannot use the end-user exception if they are swap dealers, security-based swap dealers, MSPs, major security-based swap participants, hedge funds, commodity pool operators, or large bank holding companies with more than $50 billion in assets. This portion of the statute appears to prevent large bank holding companies, swap dealers, MSPs, hedge funds, and commodity pool operators affiliated with a nonfinancial firm from using the end-user exception even if H.R. 2289 became law. However, barring further action from the regulators, this part of the statute would not appear to prevent affiliated financial firms with less than $50 billion in assets, or that did not otherwise fall into these categories, from using this end-user exception from the derivatives requirements. Section 301 apparently would not restrict with whom the affiliate may trade. It states only that the affiliate of the nonfinancial firm or end user may qualify for the end-user exception itself "only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity." H.R. 2289 as passed by the House does not specify that such trades must occur within an umbrella organization. The hypothetical scenario in Figure 4 illustrates the issues: If a nonfinancial firm, such as an energy or metals business, had an affiliate that was a financial firm, could that financial firm engage in swaps trading with an unaffiliated large financial firm and still use the end-user exception under Section 301? Although no restriction appears in Section 301 to prevent this scenario so long as the financial affiliate engaged in the swap "to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity," the prohibition on certain affiliates in Section 723 of Dodd-Frank would appear to preclude affiliates that were large banks with more than $50 billion in assets—or were swap dealers, MSPs, hedge funds, or commodity pool operators—from using the end-user exception as an affiliate, even if H.R. 2289 is enacted. Financial firms with fewer assets (and that are not swap dealers, MSPs, hedge funds, or commodity pool operators), however, apparently would not be prohibited from using the exception, so long as the standard for hedging or mitigating the commercial risk of the nonfinancial affiliate was met. Which Companies Are Financial Entities? (H.R. 2289) Section 306 of H.R. 2289 as passed by the House would modify the definition of a financial entity, potentially enabling a wider range of companies to claim the end-user exception to the clearing requirement in the Dodd-Frank Act. As discussed above, the end-user exception is limited to a company that "is not a financial entity," as the term financial entity is defined by H.R. 2289 . Section 306 of H.R. 2289 would potentially allow certain nonbank financial entities to use the end-user exception even when trading on behalf of another financial entity, so long as neither entity has a prudential regulator. Section 306 would exclude from the definition of financial entity one "who is not supervised by a prudential regulator, and is not described in any of subclauses (I) through (VII) ... and is a commercial market participant, or enters into swaps, contracts for future delivery, and other derivatives on behalf of, or to hedge or mitigate the commercial risk of, whether directly or in the aggregate, affiliates that are not so supervised or described." Section 306 would define a commercial market participant as "any producer, processor, merchant, or commercial user of an exempt or agricultural commodity, or the products or byproducts of such a commodity." Under this language, entities that are not supervised by a prudential regulator and are not swap dealers, MSPs, hedge funds, large banks, or other enumerated financial entities that enter into swaps to hedge the commercial risk of other affiliates that also are not supervised by a prudential regulator and are not among the types of entities listed in subclauses I-VII of the Commodity Exchange Act (Section 2(h)(7)(C)) are not considered financial entities for the purposes of qualifying for the end-user exception. If these entities are not financial entities, then they may use the end-user exception in their own right and need not meet the affiliate requirements of Section 723 of the Dodd-Frank Act, as it would be amended by Section 301 of H.R. 2289 . To use the clearing and exchange-trading exceptions, these entities would only need to use the swaps to hedge or mitigate commercial risk of other qualifying nonfinancial entities and to notify the CFTC in accordance with agency regulations. H.R. 2289 would create a broader, statutory exception from the Dodd-Frank clearing and exchange-trading requirements. It potentially would allow certain nonbank financial entities that do not have banking regulators to be eligible for the exception if these entities could show that they were "commercial market participants" or that they met the requirements for trading on behalf of other non-prudentially supervised affiliates. The bill leaves to the CFTC to further clarify who would be a commercial market participant and to determine which types of nonbank financial firms would qualify for the end-user exception. S. 2917 takes a different approach to modifying the definition of a financial entity. This approach is discussed below. Who Is "Predominantly Engaged" in Financial Activities? (S. 2917) Section 206 of S. 2917 addresses the question of what it means, for the purposes of the Commodity Exchange Act section discussed above to be "predominantly engaged" in financial activities. This question is relevant for determining the scope of the end-user exception to the clearing requirement set out in the Dodd-Frank Act. Unlike H.R. 2289 , S. 2917 does not delete any of the eight prongs in Section 2(h)(7)(C) of the Commodity Exchange Act, which controls which entities are considered financial entities. Instead, S. 2917 adds a requirement at the end of Section 2(h)(7)(C) directing the CFTC to issue a new rule defining the term predominantly engaged in financial activities. S. 2917 also requires that, in its new rule, the CFTC must not consider an entity to be predominantly engaged in financial activities if the consolidated revenue derived from such activities constitutes less than 85% of the entity's total consolidated revenue. In addition, S. 2917 adds a requirement that, for the purpose of the new CFTC rule, all revenue that results from "transactions used to hedge or mitigate commercial risk shall be excluded" from the 85% threshold calculation. Changes to Definition of Bona Fide Hedging (H.R. 2289; S. 2917) Section 313 of H.R. 2289 as passed by the House and Section 306 of S. 2917 would make changes to the definition of bona fide hedging in the CEA. Language in the two bills on this topic is substantially the same. The concept of bona fide hedging refers to transactions that in some way genuinely offset commercial risks. The CFTC relies on its established rules and guidance on what constitutes a bona fide hedge to help determine which types of swaps count toward the requirement to register as a swap dealer or MSP. The agency also uses the concept to determine which derivatives count toward limits on position size, referred to as position limits , and, similarly, which transactions count toward large trader reporting . Large trader reporting requirements refer to a system the CFTC uses to monitor how large any one trading party's position size is. The broad purpose of this system is to ensure that no one entity wields excessive market power. The CFTC has the discretion to raise or lower the large trader reporting levels in specific markets to strike a balance between collecting sufficient information to oversee the markets and minimizing the reporting burden on market participants. Similarly, a position limit broadly refers to the maximum position in any one type of future, option, or swap for one commodity that may be held or controlled by one person. The current definition of a bona fide hedge in the CEA specifies, among other factors, that (2) For the purposes of implementation of subsection (a)(2) for contracts of sale for future delivery or options on the contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as a transaction or position that— (A) (i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel; (ii) is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise; and... Among other changes, H.R. 2289 's Section 313 and S. 2917 would change (A)(ii) above so as to read: (ii) is economically appropriate to the reduction or management of current or anticipated risks in the conduct and management of a commercial enterprise; and... [emphasis added]. This change could potentially broaden the bona fide hedging definition so as to allow anticipated, as well as current, risks. In addition, it could potentially allow trades that were needed not only to reduce risks but also simply to manage risks. This change could potentially enable many more types of trades to be permitted under this bona fide hedging definition, in which case more swap trades potentially would not count toward the registration requirements or restrictions on position size. Global Cross-Border Swaps (H.R. 2289) The topic of cross-border swaps broadly relates to the question of to what degree Congress intended, and the Dodd-Frank Act authorized, the CFTC to regulate swaps that may extend beyond U.S. borders or be transacted between U.S. and non-U.S. persons. Because the swaps market is international in nature, with considerable cross-border trading, this question is material. Section 722(d) of the Dodd-Frank Act stated that swaps reforms shall not apply to activities outside the United States unless the activities have "a direct and significant connection with activities in, or effect on, commerce of the United States." This mandate left much discretion to the CFTC as to how to interpret it. Former CFTC chair Gary Gensler, under whom the CFTC first issued rules and interpretations implementing Section 722, stated, "Failing to bring swaps market reform to transactions with overseas branches and overseas affiliates guaranteed by U.S. entities would mean American jobs and markets would likely move offshore, but, particularly in times of crisis, risk would come crashing back to our economy." Gensler and others have noted that derivatives trading by overseas affiliates of U.S. financial conglomerates can and has resulted in significant losses to U.S.-based entities. They cite examples such as AIG's London-based Financial Products Group, which sold credit-default swap derivatives related to mortgage-backed securities that incurred losses during the financial crisis, or the more recent J.P. Morgan London Whale derivatives trading losses of roughly $6 billion. By contrast, industry participants have warned that if CFTC rules are too burdensome or out of sync with other countries' rules—putting in place requirements that other jurisdictions lacked—then "swap business will migrate, in the short term, away from U.S. financial institutions to other jurisdictions that are putting in place similar regulatory reform initiatives but are not as far advanced in doing so as the United States." These industry participants have warned that, once gone, such business would be unlikely to return to U.S. companies. Past CFTC Action The CFTC issued proposed guidance on the cross-border application of Title VII of Dodd-Frank. In it, the agency sought to clarify who would count as a U.S. person for the purposes of meeting the requirements of Dodd-Frank, such as the clearing requirement for swaps, among other questions. Subsequently, on December 21, 2012, the agency issued a temporary exemption, extending the deadline for meeting all the requirements for cross-border swaps, while it continued to work with foreign regulators to create a more uniform system of requirements. Then, on May 1, 2013, the SEC proposed a rule and interpretive guidance on cross-border security-based swaps—swaps related to a security, such as an equity—which the SEC regulates. The SEC's proposed rule has been widely interpreted as taking a narrower approach to defining who is a U.S. person than did the CFTC—and thus restricting the reach of Dodd-Frank requirements on security-based swaps to fewer overseas transactions or entities. The CFTC issued its final guidance on July 26, 2013, setting out the scope of the term U.S. person , the general framework for determining which entities had to register as swap dealers and MSPs, and which swaps involving non-U.S. persons who were guaranteed by U.S. persons were subject to U.S. requirements. On November 14, 2013, the CFTC issued a staff advisory aimed at determining when to apply U.S. derivatives requirements to trades that were booked in an offshore affiliate but in which the non-U.S. affiliate used U.S. personnel to arrange, negotiate, or execute the swap. The CFTC continues to issue rules aimed at clarifying how to apply Dodd-Frank derivatives requirements to cross-border trades. Other issues that have arisen more recently include the need for U.S. and foreign regulators to recognize one another's derivatives clearinghouses, trading exchanges, and data repositories for reporting trades as "equivalent," so that one trade spanning multiple jurisdictions need only be cleared, traded, and reported one time. This issue has proven challenging, as, among other things, the European Union has thus far not granted such an equivalence determination to U.S. clearinghouses and trading facilities. H.R. 2289 on Cross-Border Swaps Section 314 of H.R. 2289 as passed by the House bears some similarities to H.R. 1256 in the 113 th Congress. H.R. 2289 drops the earlier bill's requirement that the CFTC and SEC must jointly issue a cross-border rule. However, similarly to H.R. 1256 , the current bill would mandate that, starting 18 months from its enactment, the swaps regulatory requirements of the eight largest foreign swaps markets must be considered comparable to those of the United States—unless the CFTC issues a rule or order finding that any of those foreign jurisdictions' requirements are not comparable to or as comprehensive as those of the United States. However, listing those eight largest jurisdictions is not entirely straightforward. For one thing, selecting the jurisdictions would depend on how regulators treated the member countries of the European Union for purposes of the statute. For another, the total notional value of swaps traded in a jurisdiction fluctuates over time, so how the 12-month period was drawn likely would impact the results. Further, regulators would have to determine where a swap is traded—that is, in whose jurisdiction it would fall—when a large portion of the market is considered cross-border in nature. This problem is essentially the same one U.S. regulators are already facing in deciding when a swap qualifies as a U.S. transaction. Under H.R. 2289 , absent a CFTC determination of noncomparability, "a non-United States person or a transaction between two non-United States persons [would] be exempt from United States swaps requirements" as long as the transaction was in compliance with the regulations of any of the eight permitted foreign jurisdictions. Effectively, the bill would substitute as a default, for trades that involved a non-U.S. person, the swaps requirements of the eight largest foreign swaps markets (which would encompass most of the world of swaps trading, particularly if countries in the European Union were treated as one swaps jurisdiction) for U.S. requirements—unless the CFTC found a foreign jurisdiction to be lacking. One question that presumably would be left to the CFTC to determine in a rulemaking would be how widely to apply this provision to "a non-United States person or a transaction between two non-United States persons," were the bill enacted. For instance, would the provision potentially encompass any swap in which a non-U.S. person was at least one counterparty? If so, the provision could apply to a large majority of swaps, the bulk of which appear to be transacted in some way between a U.S. and non-U.S. person. It would presumably be left to the regulator to interpret and clarify the provision's application. A definition of a U.S. person in Section 314 includes, among other factors, "any other person as the Commission may further define to more effectively carry out the purposes of this section"—thereby apparently giving the CFTC some leeway. However, Section 314 also specifies that, in developing its cross-border rules, the CFTC "shall not take into account, for the purposes of determining the applicability of United States swaps requirements, the location of personnel that arrange, negotiate, or execute swaps." This requirement drew some criticism in congressional debate over the bill. The provision would appear to overturn CFTC Advisory 13-69, which has drawn much industry opposition. The advisory was aimed at resolving questions regarding the precise conditions in which swaps between U.S. and non-U.S. persons would be subject to Dodd-Frank requirements. The advisory, which technically represented the opinion of only one division of the CFTC, held that the Dodd-Frank requirements would apply to a swap between a non-U.S. swap dealer—even if it were an affiliate of a U.S. swap dealer—and a non-U.S. person, as long as the foreign swap dealer used "personnel or agents located in the U.S. to arrange, negotiate, or execute such swap." The advisory proved controversial and drew strong industry opposition. The CFTC has delayed its actual implementation several times. Presumably, H.R. 2289 would overturn it. Residual Interest (S. 1560, H.R. 2289; S. 2917) The term residual interest generally refers to capital from a futures commission merchant (FCM) committed to temporarily make up the difference for insufficient margin in a customer's account. Senate bills, S. 1560 , S. 2917 (in Section 104) and H.R. 2289 's Section 104 would all essentially codify the deadline for FCMs to deposit any capital to cover residual interest as no earlier than 6:00 p.m. on the following business day. This move is broadly in line with the CFTC's March 17, 2015, final rule on residual interest. The CFTC's Regulation 1.22 sets the deadline for posting residual interest. That deadline then affects when customers are required to post their collateral to cover insufficient margin amounts. Regulation 1.22 provided that the deadline, which is currently set for 6:00 p.m. on the following day, would automatically become earlier in a couple of years, without further CFTC action. The CFTC's final rule on March 17, 2015, amended Regulation 1.22 so that the FCM's deadline to post residual interest would not become earlier than 6:00 p.m. the following day without an affirmative CFTC action or rulemaking that included an opportunity for public comment. CFTC Chair Massad noted in a statement on this rule that an earlier deadline could help to ensure that FCMs always held sufficient margin and did not use one customer's margin to support another customer. But such a practice also could impose costs on customers who must deliver margin sooner. The March 17, 2015, final rule included a plan for the CFTC to conduct a study of how well the current rule and deadline function, the practicability of changing the deadline, and the costs and benefits of any change.

Derivatives are financial instruments that come in several different forms, including futures, options, and swaps. A derivative is a contract that derives its value from some underlying asset at a designated point in time. The derivative may be tied to a physical commodity, a stock index, an interest rate, or some other asset. Derivatives played a role in the 2008 financial crisis in a variety of ways. The unmonitored buildup of derivatives positions in the largely unregulated "over-the-counter" (OTC) market led many major financial institutions into large financial losses. Possibly the best-known example of such losses was the insurance giant American International Group (AIG), whose massive losses from selling credit-default swaps ultimately contributed to the need for government assistance. OTC derivatives, prior to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203), were traded bilaterally rather than cleared through a clearinghouse, and no reporting trail existed, which created uncertainty during the crisis over the web of exposures to large derivatives losses. The Dodd-Frank Act aimed to address these policy concerns by bringing the swaps market into a regulatory framework based on that of the futures markets, which had long been regulated by the Commodity Futures Trading Commission (CFTC). Security-based swaps tied to equities or narrow-based credit indexes were placed under the jurisdiction of the Securities and Exchange Commission (SEC) within a similar framework. Broadly, Dodd-Frank included five major reforms. It required the 1. clearing of certain swaps through a clearinghouse, entailing the posting of margin, or cash, to cover accumulating losses; 2. trading of certain swaps on an exchange or swap execution facility (an electronic trading platform), with the aim of increasing price transparency; 3. reporting of all swaps transactions to a swaps data repository (SDR) to create an audit trail and more market data for regulators; 4. registration of swap dealers and major swap participants, subjecting them to regulatory oversight; and 5. establishment of margin and capital requirements by regulators for swaps that remain uncleared. Parallel provisions were enacted for security-based swaps under the SEC. In the 114th Congress, several bills have been introduced, and two have been enacted as part of other legislation, impacting various aspects of swaps regulation largely stemming from Dodd-Frank. One of the provisions, originally in H.R. 1847 but enacted in P.L. 114-94/H.R. 22, removed a requirement added in Dodd-Frank that foreign regulators indemnify a U.S.-based SDR and the CFTC for any expenses arising from litigation related to a request for market data (with a parallel SEC provision). The other provision, originally in H.R. 1317 but enacted in P.L. 114-113/H.R. 2029, created an exception for certain corporate affiliates of nonfinancial companies, dubbed "centralized treasury units," to the clearing and exchange-trading requirements. The House has passed legislation, H.R. 2289, that would reauthorize appropriations to carry out the Commodity Exchange Act (CEA; 7 U.S.C. §§1 et seq.)—a process that historically has recurred every five years. The Senate Committee on Agriculture, Nutrition and Forestry marked up and ordered to be reported S. 2917 which would also reauthorize such appropriations, as well as making other changes to the CEA. S. 2917 and H.R. 2289 would each modify the definition of who is a financial entity—relevant for determining who must clear their swaps—but the bills do so in different ways. H.R. 2289 and S. 2917 would—in substantially identical ways—broaden the definition of bona fide hedging to allow anticipated, as well as current, risks to be hedged, likely increasing the number of swaps qualifying as hedges for position limits, registration requirements, and other purposes. H.R. 2289, S. 2917 and S. 1560 also contain provisions to codify the deadline for brokers to deposit residual interest (capital from a futures broker that temporarily makes up the difference for insufficient margin in a customer's account) as no earlier than 6:00 p.m. on the following business day. H.R. 2289 (but not S. 2917) includes measures that would increase required cost-benefit analysis by the CFTC in rulemakings. H.R. 2289 (but not S. 2917) would mandate that, starting 18 months from enactment, the swaps regulatory requirements of the eight largest foreign swaps markets must be considered comparable to those of the United States—unless the CFTC were to issue a rule finding that any of those foreign jurisdictions' requirements were not comparable to U.S. requirements.

Introduction On January 10, 2013, the Consumer Financial Protection Bureau (CFPB) released a final rule implementing the Ability-to-Repay (ATR) requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ). The final rule is effective January 10, 2014, one year after it was issued. Section 1411 of the Dodd-Frank Act states that, no creditor may make a residential mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan, according to its terms, and all applicable taxes, insurance (including mortgage guarantee insurance), and assessments. As discussed later in this report, lenders can comply with the statute in different ways, one of which is by originating "qualified mortgages," certain mortgages that meet criteria laid out in the ATR rule. A qualified mortgage (QM) provides additional legal protections for a lender that the other options do not afford. Some observers and mortgage market participants have expressed concerns that, because of the additional legal protection, some lenders will only originate mortgages that receive QM status. The scope of the QM definition, therefore, could affect who can qualify for a mortgage. This report summarizes the ATR rule and analyzes the potential effects it may have on the mortgage market. The next section provides background information on the perceived problems in the mortgage market that motivated the ATR requirement. Background on the ATR Rule When a potential borrower applies for a mortgage, a lender underwrites or evaluates the borrower to determine whether a loan should be extended and on what terms. The underwriting process typically involves the lender examining a borrower's income, assets, credit history, and other factors that may affect a lender's ability to recover the amount loaned. Some studies found that underwriting criteria loosened in the mid-2000s while house prices were rising. In particular, some lenders accepted loan applications with little or no documentation to support what was in the applications. Rather than relying on a borrower's verified income or assets to decide whether to extend a loan, some lenders relied on the underlying value of the house to justify offering a mortgage, a process known as collateral-dependent lending. In a mortgage, the borrower pledges the house as collateral; if the borrower is unable to repay the mortgage, the lender can sell the house to recover some or all of the amount of the mortgage debt outstanding. When house prices started to fall and the economy weakened in 2007, foreclosure rates increased significantly, especially for loans with little or no documentation of borrower income or assets. In response to increasing foreclosure rates, the Federal Reserve Board issued a rule in 2008 that prohibited lenders from originating a "higher-priced mortgage" without assessing the borrower's ability to repay the loan and verifying the borrower's income and assets. A first-lien mortgage was deemed to be higher-priced if the annual percentage rate exceeded 1.5 percentage points above the average prime offer rate, which is an estimate of the market mortgage rate based on a survey of rates. When issuing the rule, the Federal Reserve noted that the "rule's definition of 'higher-priced mortgage loans' will capture virtually all loans in the subprime market, but generally exclude loans in the prime market." The Federal Reserve's 2008 ability-to-repay rule enhanced the prior approaches to consumer protection that generally emphasized disclosure to borrowers. The ATR requirements in the Dodd-Frank Act are similar to the Federal Reserve's 2008 rule but expand the ATR requirements to a broader portion of the mortgage market, not just higher-priced mortgages. The Federal Reserve issued the proposed rule implementing the Dodd-Frank Act's ATR requirements in 2011 before the authority to issue the final rule was transferred to the CFPB. In issuing the final rule, the CFPB stated, "a primary goal of the statute was to prevent a repeat of the deterioration of lending standards that contributed to the financial crisis." The next section will explain the CFPB's January 2013 final rule. Description of Final Rule10 Prior to offering a borrower a mortgage that is subject to the rule, the ATR rule will require a lender to determine, based on documented and verified information, that the borrower has the ability to repay the loan. Failure to comply could result in a lender having to pay damages to a borrower who brings a lawsuit and claims that the lender did not follow the ATR rule. The final rule provides six methods for lenders to comply: (1) the General ATR Option, (2) the Standard Qualified Mortgage, (3) the Temporary Agency/GSE QM Option, (4) Balloon Mortgages in Rural or Underserved Areas, (5) the Temporary Small Creditor Balloon-Payment QM, and (6) the Small Creditor QM. The different compliance options afford lenders different levels of protection in the event that a borrower brings a lawsuit against a lender. In addition, lenders may be exempt from the ATR rule in certain instances. The compliance options and exemptions are described below. Compliance Options General ATR Option Lenders can satisfy the ATR rule through the General ATR Option. The General ATR Option requires lenders to consider at least eight criteria: 1. current or reasonably expected income or assets; 2. current employment status; 3. the monthly payment on the covered transaction; 4. the monthly payment on any simultaneous loan; 5. the monthly payment for mortgage-related obligations (e.g., taxes and insurance); 6. current debt obligations, alimony, and child support; 7. the monthly debt-to-income ratio or residual income; and 8. credit history. Unlike the qualified mortgage compliance options described in the next sections, the General ATR Option does not have restrictions on mortgage product features. Lenders, in most cases, must verify the eight criteria using reasonably reliable third-party records, such as a borrower's tax return, to verify income. The requirement that lenders verify the criteria using third-party records "effectively prohibit(s) no documentation and limited documentation loans that were common in the later years of the housing bubble." If a borrower sues a lender claiming the lender did not verify the borrower's ability to repay, the "borrower will bear the burden of proof for establishing a violation." Unlike the qualified mortgage option described below, mortgages that comply with the rule through the General ATR Option will not provide the lender with a "presumption of compliance" in the event an action is brought against it. Consequently, lenders could be exposed to additional legal risk if they originate non-qualified mortgages. Standard Qualified Mortgage Rather than complying through the General ATR Option described above, a lender could also comply by originating a "qualified mortgage." A qualified mortgage must satisfy certain underwriting and product-feature requirements. For underwriting requirements, the borrower's total debt-to-income (DTI) ratio cannot be greater than 43%. In addition, the borrower's monthly payment must "be calculated based on the highest payment that will apply in the first five years of the loan." With regard to product-feature restrictions, a QM cannot have A lender that originates a QM is entitled to a "presumption of compliance" with the ATR requirement, but the type of presumption of compliance and the amount of legal protection the lender receives depends on the mortgage interest rate. The CFPB will publish the average prime offer rate (APOR), an estimate of the market mortgage rate based on a survey of rates. A QM with an annual percentage rate (APR) less than 1.5 percentage points above the APOR for a first lien or less than 3.5 percentage points above the APOR for a subordinate lien qualifies for a safe harbor , a conclusive presumption of compliance with the ATR requirement. Mortgages that qualify for a safe harbor are referred to by the CFPB as prime mortgages. Mortgages above the thresholds that otherwise meet the QM requirements are deemed to be "higher-priced covered transactions" and qualify for a rebuttable presumption of compliance. The CFPB refers to QMs receiving a rebuttable presumption as subprime loans. Safe Harbor A safe harbor QM has a conclusive presumption of compliance. If a borrower with a prime mortgage sues a lender, the court would need to find that the mortgage is not actually a QM because it fails to meet the necessary underwriting or product feature requirements for the borrower to win his case. "If a court finds that the loan met the QM requirements and was not higher-priced, the consumer would lose this claim." Some lenders may choose to have a larger percentage of their mortgages be prime mortgages to take advantage of the safe harbor. Rebuttable Presumption If a borrower has a mortgage that is higher-priced, the borrower could rebut the presumption that the lender complied with the ATR rule. Similar to the safe harbor QM, a borrower could win his case if the court finds that the mortgage was not actually a QM. In addition, if the mortgage is otherwise a QM (meets the other underwriting and product feature requirements), the subprime borrower could win his case if the court finds that "the creditor did not make a reasonable and good faith determination of the consumer's repayment ability at the time of consummation." The borrower could win if, for example, the mortgage payment and other recurring payments that the borrower must make and that the creditor was aware of (such as alimony or child support payments) did not leave the borrower with sufficient residual income or assets to meet living expenses. The CFPB "determined that the bifurcated approach in which only higher-priced covered transactions provide the consumer with the opportunity to rebut the presumption of compliance best balances the concerns of costs, certainty, and consumer protection." Temporary Agency/GSE QM Option The CFPB is concerned that lenders may initially only originate mortgages that meet the QM standards because "of the fragile state of the mortgage market as a result of the recent mortgage crisis." The CFPB final rule, therefore, establishes a Temporary Agency/GSE QM Option for loans eligible to be purchased by Fannie Mae and Freddie Mac or to be insured by the government through the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA), or the Rural Housing Service (RHS). In addition to being eligible to be purchased or insured by those entities, a mortgage must also satisfy product-feature requirements, such as the limitation on points and fees, to receive the temporary QM status. The Temporary Agency/GSE QM option provides lenders with the same bifurcated compliance protection as the Standard QM option: a prime borrower affords a lender a safe harbor and a subprime borrower affords a lender a rebuttable presumption of compliance. The different treatment of the DTI ratio between the Standard QM Option and the Temporary Agency/GSE QM Option, some argue, could have a significant effect on credit availability. The GSEs and agencies purchase mortgages that have DTI ratios above the standard option's 43% cut-off. Mortgages ineligible for the standard option, therefore, could still receive QM status through the temporary option because of the less restrictive underwriting criteria used by the GSEs and agencies. The Temporary Agency/GSE QM option is not permanent. The temporary option for loans eligible to be purchased by Fannie Mae and Freddie Mac will expire when Fannie Mae and Freddie Mac are removed from conservatorship (or receivership, should the entities be placed into receivership). The temporary QM option for loans insured by the government will expire on the date that each agency's own QM rule for mortgages that it insures becomes effective (if each agency decides to issue its own QM rule). The temporary QM option would also expire if none of those events occurs within seven years after the CFPB's rule becomes effective (January 2021). Balloon Mortgages in Rural or Underserved Areas The QM product-feature requirements described in the " Standard Qualified Mortgage " section state that a QM cannot have a balloon payment. The CFPB final rule, however, establishes an additional category of qualified mortgages for mortgages with balloon payments that are originated by small creditors in rural or underserved areas. The CFPB estimates that "approximately 10 percent of the U.S. population lives in areas that" the CFPB defines as rural or underserved and that 2,707 lenders "will be able to originate balloon qualified mortgages as a result of the provision." To qualify for the balloon mortgage QM, the mortgage must meet certain lender-specific and loan-specific requirements. The lender-specific criteria require a lender to have less than or equal to $2 billion in assets; originate 500 or fewer mortgages in the previous year; make more than half of their covered transactions in counties that are rural or underserved; and hold the mortgage for at least three years before selling it in order for the mortgage to retain its QM status. In addition, the loan must meet the QM requirement that a lender verify a borrower's income, assets, and debt obligations; have a term of between 5 years and 30 years; have a fixed interest rate; satisfy the QM requirement that the lender determine that the borrower can afford all scheduled payments besides the balloon payment given the borrower's income and assets; not be subject to a forward commitment (an agreement to sell the loan) at the time the loan is consummated; and not have negative amortization. A balloon QM provides the lender the same protection as the general QM depending on whether the mortgage is a higher-priced loan. Higher-priced mortgages afford a rebuttable presumption and non-higher-priced mortgages provide the lender with a safe harbor. For small lenders, however, the threshold for safe harbor QM is increased to 3.5 percentage points above APOR rather than 1.5 percentage points. Balloon mortgages are used by some lenders as a means of reducing the risk to which they are exposed. In the 2011 ATR proposed rule, the Federal Reserve Board (the Board) stated, Based on outreach, it appears that some community banks make short-term balloon loans as a means of hedging against interest rate risk, and that the community banks typically hold these loans in portfolio. The Board believes Congress enacted this [category of QM] to ensure access to credit in rural and underserved areas where consumers may be able to obtain credit only from such community banks offering these balloon-payment loans. Balloon mortgages help lenders hedge interest rate risk by passing some of the risk on to the borrower. Interest rate risk for a lender is the risk that short-term interest rates could rise, narrowing or eliminating the spread between the short-term rate at which a lender funds the mortgage and the long-term rate that the lender earns on the mortgage. The wider the spread between the short-term and long-term rates, the more the lenders can profit. When the balloon payment on a balloon mortgage is due, the mortgage typically resets , adjusting to the market rate at a certain point (often five or seven years after origination), or the borrower refinances the mortgage at the current market rate. In both a rate reset and a refinance, some risk associated with an increase in mortgage rates is assumed by the borrower. Although balloon mortgages may help lenders hedge their risks, some view the large balloon payment as potentially harmful or abusive to borrowers because borrowers may be unable to refinance when the balloon payment is due or may face much higher payments after refinancing. For example, the CFPB notes that "unscrupulous lenders may seek to take advantage of consumers faced with the necessity of making a balloon payment by offering loans on predatory terms." To address these concerns, the final rule requires lenders to keep the balloon mortgage on their books for three years (or sell it before then under limited circumstances). This requirement could help better align the incentives of borrowers and lenders—lenders would not want to originate mortgages that borrowers would be unable to repay if the lenders were holding the mortgages and would bear some of the loss if the borrower defaults. The Temporary Small Creditor Balloon-Payment QM The CFPB established a two-year transition period for small lenders that do not operate predominantly in rural or underserved areas. During the transition period, small lenders may offer balloon mortgages that would receive qualified mortgage status so long as the mortgages are retained in the lender's portfolio and satisfy the requirements listed in the previous section. In the transition period, the CFPB "intends to study whether the definitions of 'rural' or 'underserved' should be adjusted and to work with small creditors to transition to other types of products, such as adjustable-rate mortgages, that satisfy other qualified mortgage definitions." The Small Creditor QM The QM underwriting requirements described in the " Standard Qualified Mortgage " section state that the borrower's DTI cannot exceed 43% in order to receive QM status. The CFPB established an additional category of QM for some mortgages in which the borrower's DTI is greater than 43% and the loans are "originated and held in portfolio for at least three years (subject to certain limited exceptions) by small creditors, even if they do not operate predominantly in rural or underserved areas." As is the case with small lenders making balloon mortgages, the threshold for safe harbor QM is increased to 3.5 percentage points above APOR rather than 1.5 percentage points. Summary of Compliance Options Table 1 summarizes the compliance options described above. Exemptions Streamlined Refinance of a Non-Standard Mortgage A lender is exempt from the requirement to verify the borrower's repayment ability if the lender is refinancing the borrower out of a non-standard mortgage and into a standard mortgage . A non-standard mortgage is a mortgage that (1) has an adjustable interest rate "with an introductory fixed interest rate for a period of one year or longer" (often referred to as a teaser rate); (2) is an interest-only mortgage; or (3) is a negative amortization mortgage. A standard mortgage is defined as a mortgage that, among other things, does not include a balloon payment, has limited points and fees, does not exceed 40 years, and has a fixed rate for at least the first 5 years. To be eligible for the exemption, the originator of the standard mortgage must be the "holder of the existing nonstandard mortgage or the servicer acting on behalf of the current holder." In addition, the standard mortgage's monthly payments must be less than the payments for the non-standard mortgage. The final rule lists additional criteria that must be met. The exemption would allow for borrowers to receive a streamlined refinance from the holder of their mortgage without requiring full documentation. Although "low or no doc" loans have proven to be more risky, in this case the holder of the mortgage already bears the credit risk—the risk of the borrower defaulting. Refinancing into a new mortgage with a lower monthly payment could potentially reduce the borrower's likelihood of default and therefore lower the risk faced by the mortgage holder. Certain Creditors and Lending Programs The CFPB exempted certain creditors and lending programs from having to comply with the ATR rule. Generally, the exempted creditors have received certifications or designations to be a part of government programs that assist low-income and underserved communities, while the exempted programs have a similar mission. Among the exempted lenders and programs are: Community Development Financial Institutions (CDFIs), which are lenders approved by the Department of the Treasury that "provide financial products and services, such as mortgage financing for homebuyers and not-for-profit developers, underwriting and risk capital for community facilities; technical assistance; and commercial loans and investments to small, start-up, or expanding businesses"; Community Housing Development Organizations (CDHOs), which are private, non-profit organizations certified by the Department of Housing and Urban Development (HUD) through its HOME Program to assist with the provision of affordable housing for low and moderate income consumers; Downpayment Assistance through Secondary Financing Providers (DAPs), which are non-profit organizations approved by HUD to help borrowers finance their downpayments; Certain nonprofits "that extend credit no more than 200 times annually, provide credit only to low-to-moderate income consumers, and follow their own written procedures to determine that consumers have a reasonable ability to repay their loan"; Housing Finance Agencies (HFAs), which are "state-chartered authorities established to help meet the affordable housing needs of the residents of their states"; and certain programs authorized by the Emergency Economic Stabilization Act (EESA) to assist homeowners, such as the Hardest Hit Fund program. The exemptions attempt to increase the credit available for low- and moderate-income borrowers, though some argued that all creditors should be required to follow the ATR rule. Possible Cost to Lenders The final rule states that "a consumer who brings a timely action against a creditor for a violation of TILA section 129C(a) (the ability-to-repay requirements) may be able to recover special statutory damages" if the violation is material. The statute of limitations generally is three years from when the ATR rule was violated. However, if a lender attempts to foreclose on the borrower, the borrower may assert a violation of the ATR rule "as a matter of defense by recoupment or setoff" and there "is no time limit on the use of this defense." As part of its analysis, the CFPB estimated the potential magnitude of damages that a borrower could be awarded if the borrower has a non-qualified mortgage. For a borrower that wins its case during the first three years after the loan is made outside the foreclosure context, the CFPB estimates that the average borrower would be awarded approximately $29,200 while the average estimated award for a borrower suing after three years in the foreclosure context would be roughly $51,250. In addition, the CFPB estimates the lenders' legal expenses to be approximately $25,500, excluding the borrower's award in a successful case. The CFPB believes that the costs for non-qualified mortgages serve as a reasonable "upper bound for the costs of" QMs. Economic theory predicts that lenders could pass some of the expected costs on to borrowers in the form of higher borrowing costs. Prepayment Penalties The final rule also implements the Dodd-Frank Act's prohibition on certain prepayment penalties. A prepayment penalty is assessed against a borrower for paying all or part of a mortgage's principal before it is due. The final rule only permits a prepayment penalty on "a fixed-rate mortgage that is a qualified mortgage and not a higher-priced mortgage" and only for the first three years of the loan. The final rule also limits the size of the prepayment penalty that can be imposed on eligible mortgages. Effect on Credit Availability Some observers and mortgage market participants have expressed concerns that lenders will only originate mortgages that satisfy the safe harbor QM requirements even though there are alternative methods of complying with the ATR rule. The scope of the QM definition, therefore, could restrict who can qualify for a mortgage. This is an example of the general tradeoff between consumer protection and credit availability. Attempts to ensure that the only borrowers who receive mortgages are those who can repay the mortgage may result in some borrowers being excluded who could actually have repaid their loan. As part of its analysis of the final rule, the CFPB estimated the fraction of the mortgage market at various points in time that would satisfy the ATR rule and receive the different types of QM status. This section reviews the CFPB's results and compares them to estimates by other researchers. CFPB Estimates The CFPB estimated the fraction of the 1997-2003 mortgage market that would have been in compliance with the ATR rule. The CFPB looked at the 1997-2003 period because, though it "may not be perfectly representative of an 'average' market," those "years span almost a full business cycle." The CFPB also analyzed the mortgage market as of 2011. Underwriting conditions change over time so analyzing different time periods may yield different results. The CFPB analysis concluded that approximately 70% of mortgages originated between 1997 and 2003 would have received QM status even without including the temporary QM alternative for GSE and government-insured loans. Of the 70%, the CFPB determined that most would have been safe harbor QM and "perhaps one to four percent[age] points of these loans would have been qualified mortgages subject to the rebuttable presumption." An additional 22% would have satisfied the ATR rule through the general ATR option (though not receive QM status) and the final 8% would not have complied with the final rule. The CFPB notes that, because of data limitations, it may have overestimated the percentage of mortgages that would have received QM status because it did not have data on the mortgages' points and fees. Some of the 70%, therefore, may not have qualified because of the 3% cap on points and fees. The CFPB may also have underestimated the number receiving QM status because it did not include those mortgages that would have qualified for rural balloon qualified mortgages. Using data from 2011, the CFPB estimated that "76 percent of mortgages would have been qualified mortgages inside the safe harbor, 2 percent of mortgages would have been qualified mortgages with a rebuttable presumption, and 22 percent of mortgages would have been subject to the ability-to-repay requirements." This implies that close to 100% of the 2011 mortgage market would have been in compliance with the rule. As with the 1997-2003 period, the CFPB's estimate excludes the temporary QM option for GSE and government-insured loans. Also as before, the CFPB's estimates may be an overestimate due to the lack of data on points and fees and an underestimate due to the exclusion of the rural QM option. The CFPB analysis found that an additional 18% of mortgages as of the end of 2011 would qualify for the temporary QM option. These mortgages may not qualify for the standard QM option because their debt-to-income ratio exceeds 43% but they are still eligible to be purchased by the GSEs or insured by a government agency. Including the temporary extensions, "over 95 percent of the market [would have been] granted qualified mortgage status." According to analysis by the Congressional Budget Office (CBO), most of the newly originated mortgages in each fiscal year since 2008 would have been eligible for the Temporary Agency/GSE QM option (the sum of FHA, VA, RHS, Fannie Mae, and Freddie Mac). CBO estimates that at least half of all newly originated mortgages would be eligible for the temporary option until approximately FY2019. The CFPB expects its final rule to both reduce future foreclosure rates and have a minimal effect on access to credit. "Based on the experience of loans originated during the 1997-2003 period, the Bureau estimates that roughly four percent of qualified mortgages loans will ever be 60 days delinquent and less than one percent are expected to result in foreclosure." The CFPB also concludes that "the final rule will not lead to a significant reduction in consumers' access to consumer financial products and services, namely mortgage credit." If credit is restricted for some borrowers, the CFPB expects borrowers who would not have the ability to repay the loan to be those primarily affected. The CFPB also notes that the requirement that creditors use verified and documented information to assess a borrower's ability to repay "may have a disproportionate impact on access to credit for consumers with atypical financial characteristics, such as income streams that are inconsistent over time or particularly difficult to document." The CFPB's analysis, however, presumes that lenders will continue to offer loans to borrowers that would not receive safe harbor QM status and that the mortgage market in the future will continue to be similar to the 2011 and 1997-2003 mortgage markets that they studied. Alternative Estimates CoreLogic CoreLogic, a provider of data and analysis on the mortgage market, analyzed 2.2 million mortgages originated in 2010 to determine how many would have received QM status. CoreLogic expects the final rule to have a minor short-term impact on credit availability because most new mortgages are guaranteed by the GSEs or a government agency and are eligible for the Temporary Agency/GSE QM option. However, when "the exclusion expires ... it is estimated that only 52 percent of originations will meet the eligibility requirements of the QM rule." Jumbo loans may be most affected in the short term by the QM rule. Jumbo loans, loans that are above the GSEs' conforming loan limits, are ineligible to be purchased by the GSEs and, therefore, cannot qualify for the temporary QM option. CoreLogic estimates that "more than 62 percent of total jumbo originations would meet the eligibility requirements of the QM rule." Jumbo loans, according to CoreLogic's estimates, make up 10% of the mortgage market. CoreLogic's analysis faces some of the same potential limitations as the CFPB's estimates. CoreLogic also did not include the points and fees cap in its analysis and did not discuss the rural QM option. CoreLogic may also misestimate the number of loans that may receive QM status in the future because it uses the 2010 mortgage market as the basis of its forecast. CoreLogic estimates that, of the 48% of mortgages that do not qualify for a safe harbor, 16 percentage points are due to insufficient documentation. However, CoreLogic notes that the "reason [the] low- or no-documentation share is so high is due to the high number of refinances in the current environment." CoreLogic's analysis does not attempt to account for potential changes in stakeholders' behavior as borrowers and lenders attempt to ensure that they comply with the ATR rule. Some of the households that refinanced in 2010 with low or no documentation may have been able to provide full documentation but chose not to because this was not required by their lender or may have fallen under the refinancing exemption. Amherst Securities Amherst Securities, a broker-dealer specializing in mortgage-related investments, studied the effect that the QM definition would have on jumbo loans if the rule had been in effect in 2012. Because jumbo loans are ineligible for the Temporary Agency/GSE QM option, they are among the types of loans that may be most affected by the final rule. Amherst used data from jumbo loan securitizations that were completed in 2012. The study found that 24% of the 4,020 loans in the dataset would not receive QM status. Approximately 10 percentage points in the sample would not have received QM status because they are above the 43% debt-to-income ratio. The remaining 14 percentage points had other characteristics that did not comply with the QM requirements, such as interest-only payments or certain prepayment penalties. Amherst argues that the 14 percentage points of loans with interest-only or prepayment penalties "could have been QM with minor adjustments." Additional Selected Issues In addition to affecting who may receive a mortgage, the ATR rule may have other effects on the mortgage market. Some potential issues are described below. GSEs The ATR rule may also affect the GSEs. In its report, CoreLogic argues that the "irony of the [Temporary Agency/GSE QM option] is that it reinforces the role that the GSE's play in the market, making it harder to enact GSE reform." Offering QM status to loans that meet the GSEs' underwriting standards, some argue, reinforces the dominant role that the GSEs play in the market. Others argue that the final rule may reduce some of the uncertainty that has prevented private capital from entering the mortgage market and partially displacing the GSEs. Prior to the release of the final rule, some argued that the regulatory uncertainty about what would be included in the final rule may have been one of the factors that discouraged private capital from entering the housing finance system. An analysis of the final rule by Deloitte argues that the "rule may remove many of the uncertainties to the private-label securitization market and mortgage-backed securities." While other factors may prevent private capital from returning, finalizing the ATR rule may reduce one potential barrier. In response to the final rule and as part of its effort to reduce the GSEs' role in the housing finance system, the regulator and conservator of the GSEs, the Federal Housing Finance Agency (FHFA), announced that "it is directing Fannie Mae and Freddie Mac to limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or temporary qualified mortgage definition, and loans that are exempt from the 'ability to repay' requirements." To receive Temporary Agency/GSE QM status, a mortgage must be eligible to be purchased by the GSEs or insured by the federal government and the mortgage must also satisfy certain product-feature requirements. FHFA's announcement, essentially, aligns the GSEs' standards with the standards for the Temporary Agency/GSE QM Option listed in Table 1 , especially for the first three rows. The GSEs, therefore, will not purchase loans subject to the ATR rule if the mortgage is an interest-only loan, is negative amortizing, has points and fees above the caps, or has a term longer than 30 years. The GSEs will continue to purchase some mortgages that have DTI ratios above 43%. Rural Areas Similar to the Federal Reserve's 2011 proposed rule, the CFPB based its definition of "rural" for " Balloon Mortgages in Rural or Underserved Areas " off of the USDA's Urban Influence Codes (UICs). UICs are a way of classifying counties into 1 of 12 categories "depending on the size of the largest city and town in the county." The Federal Reserve proposed a relatively restrictive definition of rural that would have included 4 of the 12 UICs and resulted in 2.3% of the U.S. population (based on the 2000 census) deemed to be in a rural area. The CFPB's final rule uses a broader definition of rural that includes additional UIC categories and results in 9.7% of the population included in rural areas. It is unclear for what fraction of the 9.7% of the population in rural areas a rural lender is the only source for an affordable mortgage option. Since the release of the final rule, some have called for the CFPB to use a more expansive definition of rural. The Conference of State Bank Supervisors (CSBS), for example, suggests that the CFPB not use a "nationwide rural classification system" but a "petition process whereby interested parties can petition the CFPB to make a determination that a specified and bounded area be considered rural." H.R. 2672 , the CFPB Rural Designation Petition and Correction Act, would establish a process by which individuals could petition the CFPB for counties that were not designated as rural by the CFPB to receive the designation. H.R. 2672 would also establish evaluation criteria and an evaluation process for the CFPB to follow in assessing the petitions. Others would prefer the CFPB use the USDA's Rural Housing Loan program's definition of rural which does not make classification decisions at the county level but subdivides counties into rural and non-rural areas. The Rural Housing Loan definition would result in 37% of the population classified as in a rural area with an average of 10 lenders per area. The CFPB, however, believes "that a wholesale adoption of the Rural Housing Loan definitions would therefore expand the definition of rural beyond the intent of the ... balloon-payment qualified mortgage exemptions ... by incorporating areas in which there is robust access to credit." As mentioned previously, the CFPB has stated that it intends to study the definition of rural that it has chosen and has established a two year transition period for small lenders who do not operate in rural or underserved areas. Relationship to Other Rules The Ability-to-Repay rule is one of several mortgage market rules required by the Dodd-Frank Act that were released by the CFPB in January 2013. Other rules, such as the Risk Retention and Qualified Residential Mortgage rule and the rules related to the capital treatment of mortgage-related assets held by banks under Basel III, are expected to be finalized by other agencies in the near future. While some stakeholders may take issue with a particular rule, others raise concerns about the potential aggregate effect (in terms of the effect on credit availability and in the compliance burden) that the new rules will have on the mortgage market and whether regulators are factoring these costs in to their rulemakings. For its part, the CFPB notes that it "is coordinating carefully the Title XIV Rulemakings" (Title XIV refers to Title XIV of the Dodd-Frank Act which required the rules). It is unclear, however, to what extend other regulators will take the CFPB's rulemakings into account when issuing their rules. Cap on Points and Fees To receive QM status, a loan must not have points and fees above the points-and-fees caps. For loans above $100,000, the cap is 3% of the total loan amount. For loans less than $100,000, there are different caps with each cap becoming higher as the loan total decreases so that loans less than $12,500 can have points and fees up to 8%. The points and fees calculation includes, among other things, the compensation paid to the loan originator, some real estate-related fees paid to affiliates of the lender (e.g., for property appraisals), premiums for some types of insurance (such as credit property insurance), and prepayment penalties. Points and fees are one way that lenders can earn a return on their loan, with the other being through the interest rate. Capping the points and fees may incentivize lenders to earn more through the interest rate rather than through upfront payments. The CFPB states that the cap on points and fees may make lenders "take more care in originating a loan when more of the return derives from performance over time (interest payments) rather [than] from upfront payments (points and fees). As such, this provision [the cap on points and fees] may offer lenders more incentive to underwrite these loans carefully." Lenders hoping to receive safe harbor status for a mortgage, however, may be limited in their ability to adjust the interest rate to account for the cap on points and fees due to the 1.5 percentage point rate threshold between safe harbor and rebuttable presumption. Some argue that the caps are either too low or include too many types of fees, causing some loans to not qualify for QM status that otherwise would. H.R. 1077 , the Consumer Mortgage Choice Act, removes some items from the calculation of points and fees. In so doing, the bill would make it easier for mortgages to satisfy the cap on points and fees and, therefore, potentially receive QM status. For example, the bill would exclude insurance paid in escrow from the definition of points and fees (escrow for future payment of taxes is already excluded). The bill would also exclude fees paid to affiliates of the lender, such as for title insurance (the fees to third parties unaffiliated with the lender are already excluded), and exclude compensation paid by a lender to its employee from the definition of points and fees.

On January 10, 2013, the Consumer Financial Protection Bureau (CFPB) released a final rule implementing the Ability-to-Repay (ATR) requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The rule is effective January 10, 2014. The ATR rule will require a lender to 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. Failure to make such a determination could result in a lender having to pay damages to a borrower who brings a lawsuit claiming that the lender did not follow the ATR rule. The final rule provides multiple ways for a lender to comply, one of which is by originating a Qualified Mortgage (QM). To receive QM status, a loan must meet certain underwriting and product-feature requirements. For example, in most cases a QM cannot have a balloon payment (a large payment that is typically due at the end of the loan). If a loan is a QM, then the lender receives a presumption of compliance for legal purposes. The type of presumption of compliance that a QM receives depends on the rate of the loan. If the loan is a higher-priced mortgage (the mortgage's rate exceeds the average rate for a prime mortgage by more than 1.5 percentage points for a purchase), then the lender receives a rebuttable presumption of compliance. It is presumed that the lender complied, but the borrower could win his case if, for example, the court finds that the lender should have known that the borrower did not have sufficient residual income after paying his mortgage and other obligations to afford his living expenses. If the QM is not a higher-priced mortgage, then the lender receives a safe harbor. So long as the mortgage meets the QM standards, the lender is considered to have complied with the ATR rule. Some are concerned that, at least in the short term, only mortgages meeting the QM standards will be originated because of the legal protections they afford, even though there are other means of complying with the ATR rule. The definition of QM, therefore, could determine who would receive a mortgage in the future. To increase access to credit, the CFPB also included a temporary QM option for loans eligible to be purchased by Fannie Mae and Freddie Mac or to be insured by the government through the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA), or the Rural Housing Service (RHS). According to the final rule, the temporary option would last for, at most, seven years from when the rule goes into effect in January 2014. The CFPB's analysis of the mortgage market as of the end of 2011 concluded that, excluding the temporary option, approximately 76% of mortgages would have received safe harbor QM status. An additional 2% would have been qualified mortgages with a rebuttable presumption, and 22% would have satisfied the ATR rule through other compliance options. Including the temporary option, the CFPB estimates that more than 95% of the mortgage market as of the end of 2011 would have received QM status. Underwriting standards and access to credit are considered to have been tighter in 2011 than before the housing crisis, however. In addition to concerns about credit availability, experts have raised other potential issues with the final rule. Some ask how the temporary QM option might affect the government's role in the housing market, while others raise concerns about the final rule's impact on rural and community banks. The ATR rule is one of several mortgage market rules released by regulators; some worry about how the rules, in aggregate, will affect the mortgage market.

Introduction Oil is a dominant source of energy in the United States, accounting for approximately 37% of total energy consum ption in 2016. Its use is widespread, providing fuel for the transportation, industrial, and residential sectors. Vast quantities of oil continuously enter the country via vessel or pipeline. Vast quantities continually move throughout the country to various destinations. With such widespread use and nonstop movement, it is inevitable that some number of spills will occur. This report provides background information regarding oil spills and identifies the legal authorities and processes for oil spill prevention, response, liability, and compensation. The first section highlights background issues, including oil spill statistics and potential environmental impacts. The second section discusses the legal and regulatory framework that governs oil spill prevention and response. Background Oil spills occur from a wide variety of sources. Some sources release relatively minor amounts per individual release but, in aggregate, contribute a significant annual volume (e.g., recreational vessels). Other sources, such oil tankers or offshore oil wells, release oil on a less frequent basis but have the potential to release a significant volume in one incident. These variances in frequency and volume of oil releases create different environmental impacts as well as different challenges for responders and policymakers. Major oil well blowouts are relatively uncommon but have accounted for the largest unintentional oil spills in world history. In 1979, the IXTOC I oil well blowout released an estimated 140 million gallons in Mexican Gulf Coast waters. By comparison, the largest oil tanker spill in world history—the Atlantic Empress off the coast of Tobago in 1979—was estimated at approximately 84 million gallons. Over the past few decades, two major U.S. oil spills have had lasting repercussions that transcended local environmental and economic effects: 1. 2010 Deepwater Horizon oil spill: On April 20, 2010, an explosion occurred at the Deepwater Horizon drilling platform in the Gulf of Mexico, resulting in 11 fatalities. The platform had been attached to the Macondo oil well approximately 5,000 feet below sea level. Two days later the platform sank into the Gulf, and responders discovered that the well was releasing oil at a significant rate. According to estimates, the well released more than 100 million gallons of oil before it was contained 86 days later. 2. 1989 Exxon Valdez oil spill: On March 24, 1989, the Exxon Valdez oil tanker ran aground on Bligh Reef in Prince William Sound, Alaska, releasing approximately 11 million gallons of crude oil. Cleanup efforts lasted for six months in 1989 until the U.S. Coast Guard suspended operations due to weather and climatic conditions. Cleanup efforts resumed during the warmer months of 1990 and 1991. The Exxon Valdez spill produced extensive consequences beyond Alaska. According to the National Academies, the Exxon Valdez disaster caused "fundamental changes in the way the U.S. public thought about oil, the oil industry, and the transport of petroleum products by tankers. ... 'Big oil' was suddenly seen as a necessary evil, something to be feared and mistrusted." Oil Spill Data: Recent Trends No single agency or organization collects oil spill data from all of the major sources for all locations. Although the National Response Center collects and provides details about a wide spectrum of incidents, the spill volume data are often initial, unverified estimates, and drawing lessons from these data may be difficult. A national assessment of oil spill volume and frequency necessitates data collection from several sources, including the U.S. Coast Guard and the Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA). Combining the data from these sources may be problematic, because (1) some incidents may be included in both sources of data; and (2) the data collection processes and scopes may vary. Therefore, data from these sources are presented separately below. Coast Guard Data The Coast Guard has maintained an Oil Spill Compendium with spill data for various sources within its jurisdiction for responding to oil spills. Pursuant to the National Contingency Plan (discussed below), the Coast Guard's oil spill response jurisdiction is the "coastal zone," defined in regulations to include all United States waters subject to the tide, United States waters of the Great Lakes, specified ports and harbors on inland rivers, waters of the contiguous zone, other waters of the high seas subject to the NCP, and the land surface or land substrata, ground waters, and ambient air proximal to those waters. Figure 1 illustrates the number of oil spill incidents and spill volume between 2002 and 2016 from data provided by the Coast Guard. The spill data include incidents from vessels, facilities, and pipelines. The 2010 Deepwater Horizon oil spill is not included in the figure, because the magnitude of its spill volume—more than 100 million gallons—makes it difficult to compare to annual spill volumes. The figure does include an estimate of oil released on the surface (approximately 400,000 gallons) from the Deepwater Horizon mobile offshore drilling unit. The figure indicates that the number of incidents has decreased over time. Except for several large incidents in 2005 and 2006 (and the Deepwater Horizon incident in 2010), the volume of spilled oil has remained relatively consistent. In 2005, approximately 8 million gallons of oil were released from Louisiana facilities damaged during Hurricane Katrina; in 2006, approximately 2 million gallons spilled from a refinery in Louisiana. Figure 2 compares the volume of spills over a longer time period from the same selected sources identified in Figure 1 . As Figure 2 illustrates, the annual oil spill volumes from all sources—particularly tankers and barges—declined dramatically in the 1990s compared to previous decades. This historical decline is likely related, at least in part, to the Oil Pollution Act of 1990 (OPA), which was enacted after the 1989 Exxon Valdez oil spill. The 1990 act (discussed below) made comprehensive changes to U.S. oil pollution law by expanding federal response authority and increasing spill liability. The high costs associated with the Exxon Valdez spill, and the threat of broad liability imposed by OPA (in some scenarios, unlimited liability), were likely significant drivers for the spill volume decline seen in the 1990s. PHMSA Data PHMSA collects oil spill data for pipelines and rail transportation—two modes of oil transportation that have received attention in recent years. Figure 3 illustrates the number of oil incidents and spill volume by mode of transportation between 2002 and 2016. The pipeline and rail data illustrated in the figure include incidents that involve spills as small as one gallon. As the figure indicates, pipeline incidents increased between 2011 and 2014 but have decreased since then. Spill volumes have fluctuated over time depending on the number and size of major spills in particular years. For example, in 2016, three pipeline incidents resulted in spills of over 300,000 gallons. In 2015, only two spills resulted in releases of over 100,000 gallons. Spills from rail transportation increased dramatically between 2009 and 2014 largely due to the increased transportation of crude oil by rail. In 2015 and 2016, the number of incidents by rail decreased as crude by rail transportation decreased. As with pipeline spill volume, the annual spill volumes from rail transportation are a function of the number and size of major spills. For example, the increased rail volume in 2013 is the result of two major incidents of over 450,000 gallons. The increased rail volume in 2015 is the result of three major incidents of over 100,000 gallons. The increase in rail incidents, including several large spills which occurred between 2010 and 2014, generated considerable interest from policymakers. At the time, some cited the increase in the debate over the Keystone XL pipeline. One of the issues raised was crude oil spill frequency and volume by mode of transportation. The two figures below provide a comparison between pipeline and rail transportation in this context. In contrast to previous figures in this report, the spill data in these figures include only crude oil incidents. The reason for this difference is because the volume data (i.e., million gallons transported) from the Energy Information Administration includes only crude oil. Figure 4 illustrates the number of oil spill incidents per barrel of oil transported. The figure indicates that incidents from rail (per gallon transported) exceeded pipeline incidents each year except 2016. Note that many of these incidents involved relatively small volumes of spilled oil. Figure 5 compares the volume of oil spilled per volume of oil transported by mode of transportation. The figure indicates that in four of the last seven years the volume of oil spilled by pipeline rail (per gallon transported) exceeded that of rail transport. However, in the three years in which rail transport volume exceeded pipeline volume (per volume transported), the differences between rail and pipeline volumes were more substantial. As discussed above, these differences are due to a small number of relatively large spills from rail that occurred in those years. Impacts of Oil Spills in Aquatic Environments The impacts of an oil spill depend on the size of the spill, the rate of the spill, the type of oil spilled, and the location of the spill. Depending on timing and location, even a relatively minor spill can cause significant harm to individual organisms and entire populations. Oil spills can cause impacts over a range of time scales, from days to years, or even decades for certain spills. Impacts are typically divided into acute (short-term) and chronic (long-term) effects. Both types are part of a complicated and often controversial equation that is addressed after an oil spill: ecosystem recovery. Acute Impacts Depending on the toxicity and concentration of the spill, acute exposure to oil spills can kill various organisms and cause the following debilitating (but not necessarily lethal) effects: reduced reproduction, altered development, impaired feeding mechanisms, and decreased defense from disease. Birds, marine mammals, bottom-dwelling and intertidal species, and organisms in their developmental stages (e.g., fish eggs and larvae) are particularly vulnerable to oil spills. In addition to the impacts to individual organisms, oil spills can lead to a disruption of the structure and function of the ecosystem. Certain habitats—such as coral reefs, mangrove swamps, and salt marshes—are especially vulnerable, because the physical structure of the habitats depends upon living organisms. These potential acute effects to individual organisms and marine ecosystems have been "unambiguously established" by laboratory studies and well-studied spills. Chronic Impacts Long-term, chronic exposure typically occurs from continuous oil releases—leaking pipelines, offshore production discharges, and non-point sources (e.g., urban runoff). Although spills are normally associated with acute impacts, some oil spills have also demonstrated chronic exposure and effects. There is increasing evidence that chronic, low-level exposures to oil contaminants can significantly affect the survival and reproductive success of marine birds and mammals. However, because of the complexity of factors, including a longer time period and presence of other pollutants, determining the precise effects on species and ecosystems due to chronic oil exposure in a particular locale is difficult for scientists. As a result, studies involving chronic effects are often met with debate and some controversy. Ecosystem Recovery Interested parties may have differing opinions as to what constitutes ecosystem recovery. At one end of the spectrum, local groups may demand that an ecosystem be returned to pre-spill conditions. NOAA regulations (15 C.F.R. §990.30) state that recovery "means the return of injured natural resources and services to baseline"—in other words, a return to conditions as they would have been had the spill not occurred. Baseline conditions may not equate with pre-spill conditions. Multiple variables affect local species and ecosystem services. For example, one species at a spill site could have been on the decline at the time of an incident, because of changing water temperatures. These types of trends are considered during the restoration evaluative process (discussed below). Restoration leaves room for site-specific interpretation, which, in the case of the Exxon Valdez spill and cleanup, continues to generate considerable argument. Economic Costs of Oil Spills The economic costs that can result from an oil spill can be broken into three categories: cleanup expenses, natural resource damages, and the various economic losses incurred by the affected community or individuals. Cleanup Costs The cleanup costs of an oil spill can vary greatly and are influenced by a mix of factors: location characteristics, oil type, and oil volume. Location Location is generally considered the most important factor because it involves multiple variables. Areas with less water movement, such as marshlands, will generally cost more to clean up than open water. Some spill locations may have relatively robust populations of indigenous micro-organisms that help degrade the oil naturally. Tourist destinations or sensitive habitats, such as coral reefs, will likely require more stringent cleanup standards, thus increasing the costs. The political and social culture at the spill site plays a part as well. A spill in a high-profile area may receive special attention. Major oil spills, especially ones that affect shoreline ecosystems, are often met with extensive media coverage, placing pressure on parties to take action. Coupled with this pressure, authorities (federal, state, or local) at these locations may require extensive oil spill response requirements, which can influence cleanup cost. For instance, spill costs in the United States are considerably higher than in other parts of the world. Oil Type The more persistent and viscous oil types, such as heavy crude oil (e.g., crude oil derived from oil sands) and intermediates known as bunker fuels, are more expensive to clean up. Gasoline and other lighter refined products may require only minimal cleanup action. Generally, these materials will evaporate or disperse relatively quickly, leaving only a small volume of petroleum product in the environment. Oil Volume Compared with other factors, spill volume is less important. A major spill away from shore will likely cost considerably less than a minor spill in a sensitive location. Certainly, the amount of oil spilled affects cleanup costs, because, all things being equal, a larger spill will require a larger and more expensive cleanup effort. However, the relationship between cleanup costs and spill volume is not linear. Cleaning up a smaller spill is likely to cost more than a larger spill on a per-gallon basis. Natural Resources Damages This category of costs relates to the environmental impacts caused by an oil spill. Pursuant to OPA, the party responsible for an oil spill is liable for any loss of natural resources (e.g., fish, animals, plants, and their habitats) and the services provided by the resource (e.g., drinking water, recreation). When a spill occurs, natural resource trustees conduct a natural resource damage assessment to determine the extent of the harm. Trustees may include officials from federal agencies designated by the President, state agencies designated by the relevant governor, and representatives from tribal and foreign governments. The various trustees assess damages to natural resources under their respective jurisdictions. If multiple trustees are involved, they must select a lead administrative trustee (LAT), who coordinates trustee activities and serves as a liaison between oil spill responders. The LAT need not be from a federal agency; however, only a federal LAT can submit a request to the Oil Spill Liability Trust Fund for the initial assessment funding. The Oil Pollution Act (OPA) of 1990 states that the measure of natural resource damages includes the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of the damaged natural resources; the diminution in value of those natural resources pending restoration; and the reasonable cost of assessing those damages. Pursuant to OPA, NOAA developed regulations pertaining to natural resource damage assessments in 1996. Natural resource damages may include both losses of direct use and passive uses. Direct use value may derive from recreational (e.g., boating), commercial (e.g., fishing), or cultural or historical uses of the resource. In contrast, a passive-use value may derive from preserving the resource for its own sake or for enjoyment by future generations. The damages are compensatory, not punitive. Collected damages cannot be placed into the general Treasury revenues of the federal or state government, but must be used to restore or replace lost resources. NOAA's regulations focus on the costs of primary restoration—returning the resource to its baseline condition—and compensatory restoration—addressing interim losses of resources and their services. Other Economic Costs Oil spills can generate costs other than response expenses or damages to natural resources. An oil spill can disrupt business activity near the spill, particularly businesses and individuals that count on the resources and reputation of the local environment. For example, the local fishing and tourist industry may be affected. In some cases, a well-publicized oil spill can weaken local or regional industries near the spill site, regardless of the actual threat to human health created by the spill. Local infrastructure and services can be disrupted by an oil spill. Port and harbor operations may be interrupted, altering the flow of trade goods. Power plants that use cooling water systems may need to temporarily cease operations. For example, the Salem Nuclear Plant—the second-largest nuclear plant in the United States—was forced to halt activity due to a substantial oil spill (more than 250,000 gallons) in the Delaware River in November 2004. Oil Spill Governance When the Exxon Valdez ran aground in March 1989, there were multiple federal statutes, state statutes, and international conventions that dealt with oil discharges. The spill highlighted the inadequacies of the existing coverage and generated public outrage. Following the spill, Members of Congress faced great pressure to address these issues. (See the Appendix for further information concerning these issues.) The end result was the Oil Pollution Act of 1990 (OPA) —the first comprehensive law to specifically address oil pollution to waterways and coastlines of the United States. The governing framework for oil spills in the United States remains a combination of federal, state, and international authorities. Within this framework, several federal agencies have the authority to implement oil spill regulations. The framework and primary federal funding process used to respond to oil spills are described below. Oil Pollution Act of 1990 With the enactment of OPA on August 18, 1990, Congress consolidated the existing federal oil spill laws under one program ( Appendix ). The 1990 law expanded the existing liability provisions within the Clean Water Act (CWA) and created new free-standing requirements regarding oil spill prevention and response. Key OPA provisions are discussed below. Spill Response Authority When responding to a spill, many considered the lines of responsibility under the pre-OPA regime to be unclear, with too much reliance on spillers to perform proper cleanup. OPA strengthened and clarified the federal government's role in oil spill response and cleanup. OPA Section 4201 amended Section 311(c) of the CWA to provide the President (delegated to the U.S. Coast Guard or EPA) with authority to perform cleanup immediately using federal resources, monitor the response efforts of the spiller, or direct the spiller's cleanup activities. The revised response authorities addressed concerns "that precious time would be lost while waiting for the spiller to marshall its cleanup forces." The federal government—specifically the On-Scene Coordinator (OSC) for spills in the Coast Guard's jurisdiction—determines the level of cleanup required. Although the federal government must consult with designated trustees of natural resources and the governor of the state affected by the spill, the decision that cleanup is completed and can be ended rests with the federal government. States may require further work, but without the support of federal funding. National Contingency Plan The first National Oil and Hazardous Substances Pollution Contingency Plan (NCP) was administratively prepared in 1968 after observing the British government's response to a 37-million-gallon oil tanker spill ( Torrey Canyon ) off the coast of England. The NCP contains the federal government's procedures for responding to oil spills and hazardous substance releases. OPA expanded the role and breadth of the NCP. The 1990 law established a multi-layered planning and response system to improve preparedness and response to spills in marine environments. Among other things, the act also required the President to establish procedures and standards (as part of the NCP) for responding to worst-case oil spill scenarios. For further details on the NCP, see CRS Report R43251, Oil and Chemical Spills: Federal Emergency Response Framework , by [author name scrubbed] and [author name scrubbed]. Tank Vessel and Facility Response Plans As a component of the enhanced NCP, OPA amended the CWA to require that U.S. tank vessels, offshore facilities, and certain onshore facilities prepare and submit oil spill response plans to the relevant federal agency. In general, vessels and facilities are prohibited from handling, storing, or transporting oil if they do not have a plan approved by (or submitted to) the appropriate agency (discussed below). The plans should, among other things, identify how the owner or operator of a vessel or facility would respond to a worst-case scenario spill. Congress did not intend for every vessel to have onboard all the personnel and equipment needed to respond to a worst-case spill, but vessels must have a plan and procedures to call upon—typically through a contractual relationship—the necessary equipment and personnel for responding to a worst-case spill. In 2004, Congress enacted an amendment requiring non-tank vessels (i.e., ships carrying oil for their own fuel use) over 400 gross tons to prepare and submit a vessel response plan. Congress reasoned that many non-tank vessels have as much oil onboard as small tank vessels, thus presenting a comparable risk from an oil spill. Moreover, the international standards for oil spill prevention apply to tanker and non-tanker vessels alike. Thus, the 2004 amendment brought the U.S. law more in line with international provisions. Double-Hull Design for Vessels The issue of double hulls received considerable debate for many years prior to OPA, and it was one of the stumbling blocks for unified oil spill legislation. Proponents maintained that double-hull construction provides extra protection if a vessel becomes damaged. However, opponents argued that a double-hulled vessel might cause stability problems if an accident occurred, thus negating the benefits. Stakeholders also highlighted the impacts that a double-hull requirement would entail for the shipping industry (e.g., cost and time of retrofitting, ship availability). The OPA requirements for double hulls reflected some of these concerns. The act required new vessels carrying oil and operating in U.S. waters to have double hulls. However, OPA provided certain exceptions, depending on the size of the vessel (e.g., less than 5,000 gross tons) and its particular use (e.g., lightering). For older vessels, OPA established a staggered retrofitting schedule, based on vessel age and size. As of January 2010, single-hull vessels (with several exceptions, some of which expired in 2015) cannot operate in U.S. waters. Liability Issues58 OPA unified the liability provisions of existing oil spill statutes, creating a freestanding liability regime. Section 1002 states that responsible parties are liable for any discharge of oil (or threat of discharge) from a vessel or facility to navigable waters, adjoining shorelines, or the exclusive economic zone of the United States (i.e., 200 nautical miles beyond the shore). Regarding the oil spill statutes prior to OPA, Congress recognized that "there is no comprehensive legislation in place that promptly and adequately compensates those who suffer other types of economic loss as a result of an oil pollution incident." OPA broadened the scope of damages (i.e., costs) for which an oil spiller would be liable. Under OPA, a responsible party is liable for all cleanup costs incurred, not only by a government entity, but also by a private party. In addition to cleanup costs, OPA significantly increased the range of liable damages to include the following: injury to natural resources, loss of personal property (and resultant economic losses), loss of subsistence use of natural resources, lost revenues resulting from destruction of property or natural resource injury, lost profits and earning capacity resulting from property injury or natural resource injury, and costs of providing extra public services during or after spill response. OPA provided limited defenses from liability: act of God, act of war, and act or omission of certain third parties. These defenses are similar to those of the Superfund statute, established in 1980 for releases of hazardous substances (which does not include oil). Except for certain behavior, including acts of gross negligence or willful misconduct, OPA set liability limits (or caps) for cleanup costs and other damages. OPA requires the President to issue regulations to adjust the liability limits at least every three years to take into account impacts of inflation over time. The statute directs the President to use the consumer price index (CPI) to account for these impacts. Administrations subsequent to the enactment of OPA in 1990 did not adjust the liability limits until Congress amended OPA in 2006: The Coast Guard and Maritime Transportation Act of 2006 adjusted the liability limits for vessels in statute. Subsequent limits were adjusted through agency rulemakings. For purposes of liability limits, OPA divides potential sources of oil spills into four general categories. The liability limits differ by category, and in some cases, the scope of liability varies. The categories and their scopes of liability are: Tank vessels: Liability limit includes both removal costs and natural resource and economic damages. The limit is based on vessel size measured in gross tonnage. All other vessels: Liability limit includes both removal costs and natural resource and economic damages. The limit is based on vessel size measured in gross tonnage. The limits are lower than those for tank vessels. Offshore facilities (not including deepwater ports): Liability limit applies only to damages (natural resource and economic damages). L iability for removal costs is not limited . Onshore facilities and deepwater ports: Liability limit includes both removal costs and natural resource and economic damages. Table 1 identifies the liability limit for each of the oil spill source categories listed above as enacted in OPA. The table includes adjustments made in the Coast Guard and Maritime Transportation Act of 2006, which modified only the limits for vessels, and subsequent adjustments made through agency regulations. The Oil Spill Liability Trust Fund Prior to OPA, federal funding for oil spill response was generally considered inadequate, and damages recovery was difficult for private parties. To help address these issues, Congress supplemented OPA's expanded range of covered damages with the Oil Spill Liability Trust Fund (OSLTF). Pursuant to Executive Order (EO) 12777, the Coast Guard created the National Pollution Funds Center (NPFC) to manage the trust fund in 1991. The fund may be used for several purposes: prompt payment of costs for responding to and removing oil spills; payment of the costs incurred by the federal and state trustees of natural resources for assessing the injuries to natural resources caused by an oil spill, and developing and implementing the plans to restore or replace the injured natural resources; payment of parties' claims for uncompensated removal costs, and for uncompensated damages (e.g., financial losses of fishermen, hotels, and beachfront businesses); payment for the net loss of government revenue, and for increased public services by a state or its political subdivisions; and payment of federal administrative and operational costs, including research and development, and $25 million per year for the Coast Guard's operating expenses. Although Congress created the OSLTF in 1986, Congress did not authorize its use or provide its funding until after the Exxon Valdez incident. In 1990, OPA provided the statutory authorization necessary to put the fund in motion. Through OPA, Congress transferred balances from other federal liability funds into the OSLTF. In complementary legislation, Congress imposed a 5-cent-per-barrel tax on the oil industry to support the fund. Collection of this fee ceased on December 31, 1994, due to a sunset provision in the law. However, in April 2006, the tax resumed as required by the Energy Policy Act of 2005 ( P.L. 109-58 ). In addition, the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ) increased the tax rate to 8 cents through 2016. In 2017, the rate increased to 9 cents. The tax is scheduled to terminate at the end of 2017. Figure 6 illustrates the receipts, expenditures, and end-of-year balances for the OSLTF. At the end of FY2017, the projected balance is $5.4 billion. Financial Responsibility To preserve the trust fund and ensure that responsible parties can be held accountable for oil spill cleanup and damages, OPA requires that vessels and offshore facilities maintain evidence of financial responsibility (e.g., insurance). The Coast Guard's National Pollution Funds Center (NPFC) implements the financial responsibility provisions for vessels; the Bureau of Ocean Energy Management implements this requirement for offshore facilities. The current levels of financial responsibility are related to the current liability limits for various sources (e.g., vessels, offshore facilities) of potential oil spills. The liability limits differ by potential source. In the case of vessels, whose liability limits are a single dollar amount encompassing both removal costs and other damages, the financial responsibility levels are directly tied to the corresponding liability caps. Current law requires responsible parties for vessels to demonstrate the "maximum amount of liability to which the responsible party could be subjected under [the liability limits in OPA Section 1004; 33 U.S.C. 2704]." Because the structure of offshore facility liability limit is different than vessels, the corresponding financial responsibility limit provisions differ. Responsible parties for offshore facilities in federal waters must demonstrate $35 million financial responsibility, unless the President determines a greater amount (not to exceed $150 million) is justified (33 U.S.C. 2716(c)). The federal regulations that are authored by this statutory provision (30 C.F.R. Part 254) base the financial responsibility amount—between $35 million and $150 million—on a facility's worst-case discharge volume (as defined in 30 C.F.R. §253.14). For example, a facility with a worst-case discharge volume over 105,000 barrels —the highest level of worst-case discharge listed in the regulations—must maintain $150 million in financial responsibility. Other Federal Laws Although OPA is the primary domestic legislation for oil spills, other federal laws contain provisions that relate to oil spills. Many of these provisions were in place before OPA. The following list is not all-inclusive, but it highlights the main requirements authorized by laws other than OPA. Clean Water Act The Clean Water Act (CWA) was the primary federal statute governing oil spills prior to OPA and many provisions continue to apply. A key provision is found in Section 311(b)(3), which prohibits the discharge of oil or hazardous substances into U.S. navigable waters. In addition, the CWA contains various penalty provisions for noncompliance, including violations of the discharge prohibition of Section 311(b). Pursuant to statutory requirements in the CWA, the EPA crafted regulations for spill prevention control and countermeasure (SPCC) plans in 1973. SPCC plans address the "procedures, methods, and equipment and other requirements for equipment to prevent discharges." The EPA's SPCC plans apply only to non-transportation, onshore facilities that exceed a certain oil storage capacity and that, in the event of a spill, can be reasonably expected, because of their location, to produce an oil discharge that would reach navigable waters or adjoining shorelines of the United States. Unlike other oil spill preparedness provisions, SPCC plans focus more on prevention than on response activities, requiring, for example, secondary containment (e.g., dikes, berms) for oil-storage equipment. The agency offered several regulatory amendments after the 1973 rulemaking. Following the passage of the Oil Pollution Act of 1990 (OPA), the agency proposed substantial changes and clarifications that were not made final until July 2002. For reasons beyond the scope of this report, EPA extended the 2002 rule's compliance date on multiple occasions and made further amendments to the 2002 rule. For most types of facilities subject to SPCC requirements, the deadline for complying with the changes made in 2002 was November 10, 2011. However, a subsequent EPA rulemaking extended this compliance date for farms to May 10, 2013. Notwithstanding these recent deadlines, the 2002 final rule and subsequent revisions did not alter the requirement for owners or operators of facilities, including farms, to maintain and continue implementing their SPCC plans in accordance with the SPCC regulations that have been in effect since 1974. Outer Continental Shelf Lands Act The primary federal law governing oil development and operations in waters in federal jurisdiction is the Outer Continental Shelf Lands Act (OCSLA) of 1953 and its subsequent amendments (43 U.S.C. §§1331-1356). The OCSLA provided the foundation for regulations (30 C.F.R. Parts 250 and 550) that are implemented by the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE). Sections of these regulations address oil spill prevention and response issues by requiring that various equipment and procedures be in place at offshore facilities. Pipeline Statutes The U.S. pipeline network is extensive: The Pipeline and Hazardous Materials Safety Administration estimates that there are more than 160,000 miles of hazardous liquid pipelines in the United States. Moreover, U.S. inland pipelines are concentrated in coastal areas, particularly in the Gulf states, and these pipelines may have an impact on coastal waters if spills reach waterways that empty into coastal waters. Several laws govern oil pipelines. The Hazardous Liquid Pipeline Act of 1979 ( P.L. 96-129 ) granted authority to the Department of Transportation (DOT) to regulate various issues regarding oil spills from pipelines. On December 29, 2006, the President signed the Pipeline Safety Improvement Act of 2006 ( P.L. 109-468 ) to improve pipeline safety and security practices, and to reauthorize the federal Office of Pipeline Safety. The Office of Pipeline Safety (OPS), which is part of the DOT, implements provisions concerning pipeline design, construction, operation and maintenance, and spill response planning. Vessel Statutes Several federal laws directly or indirectly deal with oil pollution from vessels. Laws concerning navigation reduce the possibilities of vessel collision or hull breach by objects in the waterways. Other laws call for particular vessel design standards. For example, the Ports and Waterways Safety Act of 1972, amended by the Port and Tanker Safety Act of 1978, called for specific construction and equipment design requirements for oil tankers. (As noted, OPA subsequently amended this statute in 1990 to establish a phased-in schedule for double-hulled tankers.) Congress enacted the 1970s legislation to coincide with international initiatives. In fact, many of the federal laws concerning vessel standards and pollution control procedures were written to implement international conventions. These are discussed below. Federal Agencies' Responsibilities The United States shares jurisdiction over its coastal waters with the coastal states. The 1953 Submerged Lands Act (SLA) gave coastal states jurisdiction over the submerged lands, waters, and natural resources (e.g., oil deposits) located, in most cases, within 3 nautical miles off the coastline. The waters, seabed, and natural resources beyond the states' waters are exclusively federal, and extend to the edge of the exclusive economic zone (200 nautical miles from shore). However, the federal government maintains the authority to regulate commerce, navigation, national defense, power production, and international affairs within state waters. The oil spill legal framework involves implementation by multiple federal agencies. Agency responsibilities can be divided into two categories: (1) oil spill response and cleanup and (2) oil spill prevention/preparedness. Response As mentioned above, the National Oil and Hazardous Substances Pollution Contingency Plan (NCP) contains the federal government's framework and operative requirements for responding to an oil spill (and releases of hazardous substances). Although first developed through administrative processes in 1968, subsequent laws have amended the NCP, including the Clean Water Act in 1972; the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) in 1980; and the Oil Pollution Act (OPA) in 1990. Oil spill response actions required under the regulations of the NCP are binding and enforceable, per these enforcement authorities. The NCP establishes the National Response System (NRS), a multi-tiered and coordinated national response strategy for addressing oil spills and releases of hazardous substances. The NCP provisions specific to oil spill response are codified in 40 C.F.R. Part 300, Subpart D. Key components of the NRS include the following: National Response Team (NRT): composed of representatives from the federal departments and agencies assigned roles in responding to oil spills. The U.S. Coast Guard chairs the NRT when a response is being mounted to a spill in a coastal region. Regional Response Teams (RRTs): composed of regional representatives of each NRT member agency, state governments, and local governments. The Coast Guard leads the relevant RRT during responses to oil spills in coastal waters. Area Committees (ACs): composed of qualified personnel from federal, state, and local agencies. The primary function of each AC is to prepare an Area Contingency Plan (ACP) for its designated area. On-Scene Coordinator (OSC): who directs the response efforts and coordinates all other efforts at the scene. Oil spill response authority is determined by the location of the spill: the Coast Guard has response authority in the coastal zone, and the EPA covers the inland zone. The OSC has the ultimate authority to ensure that an oil spill is effectively removed and actions are taken to prevent further discharge from the source. The OSC is broadly empowered to direct and coordinate all response and recovery activities of federal, state, local, and private entities (including the responsible party), and will draw on resources available through the appropriate ACPs and RRTs. Although the OSC must consult with designated trustees of natural resources and the governor of the state affected by the spill, the OSC has the authority and responsibility to determine when removal (i.e., cleanup) is complete. Other agencies, particularly those on the NRT and relevant RRT, may play a role in response activities. As the chair of the NRT (and vice-chair during oil spills in the coastal zone), EPA may provide response support. For example, during the Deepwater Horizon spill response, EPA conducted air and water sampling and provided environmental monitoring support, particularly regarding the use of dispersants. In addition, NOAA provides scientific analysis and consultation during oil spill response activities. Assistance can include oil spill tracking, cleanup alternatives, and knowledge of at-risk natural resources. Moreover, NOAA experts begin to collect data to assess natural resource damages during response operations. Prevention and Preparedness Regarding oil spill prevention and preparedness duties, jurisdiction is determined by the potential sources (e.g., vessels, facilities, pipelines) of oil spills. A series of executive orders (EOs), coupled with memoranda of understanding (MOU), have established the various agency responsibilities. Table 2 identifies the agencies responsible for implementing prevention and preparedness regulations for the potential sources of oil spills. Prevention responsibilities include, among other things, assessing whether facilities or vessels have the necessary equipment in place. As discussed above, vessels may be required to have double hulls; facilities may need secondary containment. Preparedness duties involve oversight tasks, such as evaluating facility and vessel response plans. Preparedness responsibilities also include developing and maintaining contingency plans at various levels: area, regional, and national. Personnel training is a vital component of sustaining readiness. NOAA oil spill experts help train responders in government service and private business. In addition, OPA requires agencies to conduct internal examinations to test preparedness. As part of this requirement, the Coast Guard conducts Spills of National Significance (SONS) exercises to analyze the Coast Guard's ability to respond to a major oil spill. International Conventions The relationship between international and domestic law can be complex. For example, a "self-executing" agreement taking the form of a treaty, signed by the Executive and ratified with the advice and consent of the Senate, stands on equal footing with federal statute. On the other hand, if an international agreement is not self-executing, implementing legislation may be necessary for the agreement's provisions to be given domestic legal effect, including to provide U.S. agencies with the domestic legal authority necessary to carry out functions contemplated under the agreement. Several federal laws governing oil spills were fashioned to implement obligations contained in international agreements. International conventions have played an important role in developing consistent standards for oil-carrying vessels from different nations. A primary player in this regard is the International Maritime Organization (IMO), a body of the United Nations, which sets international maritime vessel safety and marine pollution standards. The Coast Guard represents the United States at IMO meetings. Multiple international conventions concern vessels and their impact on the marine environment. Described below are two selected conventions that contain provisions that are particularly relevant to oil pollution in coastal waters. MARPOL 73/78 The IMO implements the 1973 International Convention for the Prevention of Pollution from Ships, as modified by the Protocol of 1978 (MARPOL 73/78). Vessels whose nations are signatories to MARPOL are subject to its requirements, regardless of where they sail, and member nations are responsible for the vessels registered under their flag. MARPOL 73/78 includes six annexes, each covering a different pollution type. Annex I (Prevention of Pollution by Oil) entered into force in 1983 and established requirements for controlling oil discharges to sea. Annex I requires vessels to have equipment that minimizes oil discharge, such as oil-water separators, and shipboard oil pollution emergency plans (SOPEPs). Although the SOPEP applicability is similar to that of the vessel response plan (VRP) required by OPA, the purpose of the SOPEP is somewhat different. A SOPEP is intended to provide guidance to the vessel's officers regarding proper onboard emergency procedures when an oil spill occurs, whereas the VRP is more focused on responding to the spill itself. The United States implements Annex I through the Act to Prevent Pollution from Ships (APPS). APPS applies to all U.S.-flagged ships, irrespective of location, and to all foreign-flagged vessels in U.S. waters or at ports under U.S. jurisdiction. The Coast Guard issues and enforces regulations necessary to carry out the APPS provisions. The Coast Guard inspection program is a key component of its oil spill prevention effort. Intervention Convention The 1967 Torrey Canyon spill off the coast of Great Britain was one of the first major spills to receive worldwide attention. The incident raised many questions regarding oil spill response, particularly when dealing with vessels from other nations. For example, the incident prompted debate over responses allowable if a nation's waters and environment are threatened by a spill from another nation's vessel. The 1969 International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties (the Intervention Convention) sought to address these issues. To implement this convention in the United States, Congress passed the Intervention on the High Seas Act of 1974. Under this act, if the Coast Guard determines there to be a "grave and imminent danger to the coastline or related interests of the United States from pollution or threat of pollution of the sea by convention oil [i.e., as defined in the convention]," the Coast Guard can take action to "prevent, mitigate, or eliminate that danger." State Laws As mentioned above, multiple states had oil spill liability laws before the passage of OPA in 1990. During the 15 years prior to OPA's passage, the issue of whether or not to preempt state liability laws was perhaps the primary obstacle to enacting unified oil spill legislation. Proponents of preemption argued that differing state laws—particularly the various levels of liability—frustrate the shipping industry and were contrary to the goal of comprehensive federal legislation. Preemption opponents maintained that states should be allowed (as with most other federal environmental statutes) to set stiffer standards regarding liability, compensation, and cleanup. In the aftermath of the Exxon Valdez spill, the scales tipped to the side of anti-preemption. According to OPA Section 1018 (referred to as a "savings clause"), the act will not preempt any state from imposing "additional liability or requirements" with respect to the discharge of oil or related response activity (e.g., cleanup standards). A 2003 study identified 16 states that impose unlimited liability for oil spills. There was some concern that the language of OPA's savings clause would allow states to regulate matters typically reserved for the federal government, such as oil tanker construction. To address this issue, the conference report stated that the savings clause would not disturb a 1978 Supreme Court decision that dealt with the intersection of federal and state authority to regulate the shipping industry. In that case, the Court determined that a Washington State law was preempted. The state law had attempted to govern oil tanker design, size, and movement in Puget Sound. Regardless of the clarification in the conference report, the line between federal and state jurisdiction (i.e., the extent of federal preemption) continues to be tested. In 2000, the Supreme Court struck down (as preempted) a Washington State rule calling for various personnel requirements, such as training, on oil tankers. Similarly, in March 2010, a federal district court in Massachusetts ruled against a state law—finding it preempted—that would affect tanker design, personnel qualifications, and navigation. Appendix. Federal Authorities Before and After the Exxon Valdez Spill The following list highlights the primary federal authorities that were in effect when the Exxon Valdez spill occurred in 1989: Clean Water Act (1972): The Clean Water Act (CWA) represented the broadest authority for addressing oil spills at the time of the Exxon Valdez spill. Section 311 of the CWA established requirements for oil spill reporting, response, and liability. The act also created a fund (311 Fund), maintained by federal appropriations, that could be used for cleanup and natural resource restoration. Deepwater Port Act (1974): This statute addressed oil spills and liability issues at deepwater oil ports. The act also set up the Deepwater Port Fund to provide for prompt cleanup and to compensate damages above liability limits. The fund was financed by a per-gallon tax on oil transferred at a deepwater port. Trans-Alaska Pipeline Authorization Act (1973): This act covered oil spills and liability relating to the Trans-Alaska Pipeline System (TAPS). Although the pipeline is constructed over land, spills from it could reach coastal waters via inland rivers. The act created a trust fund, financed through a lessee fee, that could be used to respond to spills and damages from the pipeline. Outer Continental Shelf Lands Act Amendments (1978): This act established an oil spill liability structure and rules for oil extraction facilities in federal offshore waters. With this legislation, Congress created the Offshore Pollution Fund, financed by a per-gallon fee on produced oil, that could be used for oil spill cleanup and damages. National Oil and Hazardous Substances Pollution Contingency Plan (NCP): The first NCP was administratively prepared in 1968 after observing the British government's response to a 37-million-gallon oil tanker spill ( Torrey Canyon ) off the coast of England. The NCP contains the federal government's procedures for responding to oil spills and hazardous substance releases. After the Exxon Valdez spill, many observers described the above legal collection as an ineffective patchwork. Arguably, each law had perceived shortcomings (discussed below in the context of post- Exxon Valdez legislation), and none provided comprehensive oil spill coverage. For more than 15 years prior to the Exxon Valdez incident, Congress made attempts to enact a unified oil pollution law. Several contentious issues produced deadlocks, hindering the passage of legislation. One of the central points of debate, state preemption, dealt with whether a federal oil spill law should limit a state's ability to impose stricter requirements, particularly unlimited liability. Other liability questions also generated debate. For example, if an oil spill occurred, should the owner of the cargo (i.e., oil) be held liable, as was the ship owner/operator? Another point of contention was whether oil-carrying vessels should be required to have double hulls. Although proponents argued that a second hull would help prevent oil spills, the shipping industry raised concern that implementing such a mandate would disrupt oil transportation and potentially affect the national economy. A final issue involved the interaction between domestic legislation (federal and state) and international measures. Some were concerned that if the United States became a party to certain international agreements under consideration in the 1980s, the international standards would preempt federal and state laws, especially those establishing liability limits. Proponents argued that these concerns were overstated and stressed that joining the international agreements was especially important for the United States because of the international nature of oil transportation and associated pollution.

Oil is a primary source of energy in the United States. Domestic oil production has increased in recent years, and vast quantities of oil continually enter the country via vessel or pipeline, moving throughout the country to various destinations. With such widespread use and nonstop movement, it is inevitable that some number of spills will occur. Oil spills have raised environmental concerns for decades. Several major U.S. oil spills have had lasting repercussions that transcended local environmental and economic effects: the1969 well blowout off the coast of Santa Barbara, California; the 1989 Exxon Valdez oil spill in Prince William Sound, Alaska; and the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. More recent spills in various locations from other sources, including pipelines and rail transportation, have garnered attention from policymakers. The impacts of an oil spill depend on the size of the spill, the rate of the spill, the type of oil spilled, and the location of the spill. Depending on timing and location, even a relatively minor spill can cause significant harm to individual organisms and entire populations. Oil spills can cause impacts over a range of time scales, from days to years, or even decades for certain spills. Over the past two decades, the annual number and volume of oil spills have shown declines—in some cases, dramatic declines. However, this trend was altered dramatically by the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. The incident led to a significant release of oil: According to estimates, the well released more than 100 million gallons of oil before it was contained on July 15, 2010 (86 days later). Scientists continue to study the fate and impact of the spill. The governing framework for oil spills in the United States remains a combination of federal, state, and international authorities. Within this framework, several federal agencies have the authority to implement oil spill regulations. Agency responsibilities can be divided into two categories: (1) oil spill response and cleanup and (2) oil spill prevention/preparedness. Oil spill response authority is determined by the location of the spill: the U.S. Coast Guard has response authority in the U.S. coastal zone, and the Environmental Protection Agency (EPA) covers the inland zone. The Clean Water Act, as amended by the Oil Pollution Act (OPA) in 1990, provides the federal authority to perform cleanup immediately using federal resources, monitor the response efforts of the spiller, or direct the spiller's cleanup activities. The lead federal responder (either from Coast Guard or EPA) determines the level of cleanup required. Federal responders have immediate access to funds in the Oil Spill Liability Trust Fund to support cleanup activities. The trust fund is primarily financed by a per-barrel tax on domestic crude oil and imported petroleum products. The fund's balance is estimated to reach $5.4 billion at the end of FY2017. Parties responsible for an oil spill may be liable for cleanup costs, natural resource damages, and specific economic damages, including personal property damage and lost profits or earning capacity. OPA provided (1) limited defenses from liability—act of God, act of war, and act or omission of certain third parties—and (2) conditional liability limits (or caps) for cleanup costs and other damages. Jurisdiction over oil spill prevention and preparedness duties is determined by the potential sources (e.g., vessels, facilities, pipelines) of oil spills. A series of executive orders, coupled with memoranda of understanding, have established the various agency responsibilities. For example, EPA oversees onshore facilities, the Coast Guard oversees vessels, the Department of Transportation oversees pipelines and rail transportation, and the Department of the Interior's Bureau of Ocean Energy Management oversees offshore facilities (e.g., oil platforms).

Introduction The federal procurement process (i.e., the process whereby agencies obtain goods and services from the private sector) requires funding. Contractors are generally paid using appropriated funds, and agency personnel—who are generally also paid with appropriated funds—are responsible for entering and administering contracts on the agency's behalf. The use of appropriated funds to finance contract performance and/or administration means that federal contracts may be affected by actual or potential funding gaps or shortfalls, such as could arise from a failure to raise the debt limit, budget cuts, or sequestration, all of which have been topics of wide-spread congressional and public interest during recent years. While these occurrences are distinct in their causes and their effects upon federal procurement, as Table 1 illustrates, all prompt similar questions about what the government must or may do when confronted by a lack of funds, and how contractors could be affected by potential government actions. This report provides an overview of the various options that the government has, pursuant to contract law or otherwise, when confronted with actual or potential funding gaps, funding shortfalls, or budget cuts. It begins by considering the legal principles underlying the government's generally broad rights not to incur new obligations (e.g., by canceling solicitations or declining to exercise options). The report then addresses the contractual and other rights that the government may exercise under existing contracts (e.g., changing certain terms of the contract or altering the performance period). Overall, these rights are comparatively well established. However, as the report concludes, the effects of the exercise of these rights upon contractors and, particularly, upon federal spending on procurement contracts are less clear and generally would depend upon the facts and circumstances of individual cases. The report does not address changes in contract policy that could also occur in response to funding shortfalls, nor does it address the effects that exercising certain of the rights noted here might have upon agency programs. General Principles In thinking about the government's contractual and other legal rights in this area, it helps to keep in mind the ways in which government contracts are—and are not—like other contracts. In many ways, federal procurement contracts are like other contracts between private parties, notwithstanding the fact that certain terms of these contracts are required by law. Like other contracting parties, the government generally has a duty to perform largely as specified in the contract, absent modification, excuse, or discharge of its obligations. Also like other contracts, government contracts are construed in light of the parties' intent, and the parties' intent could potentially be found to be contrary to the literal meaning of the contract. For example, a contract that purports to be a fixed-price contract (i.e., a contract whereby the contractor agrees to supply certain goods or services to the government at a predetermined price) could be found to be a cost-reimbursement contract (i.e., a contract that provides for the government to pay the contractor, at a minimum, allowable costs incurred in performing the contract up to a total cost specified in the contract) because other terms of the contract indicate that this was the parties' intent. Similarly, as with other contracts, certain implied duties, such as the duty of good faith and fair dealing, will be read into federal procurement contracts even when they are not express terms of the contract. Such duties could potentially become important where changes to existing contractual obligations, like those discussed below, are involved because one of the implied duties that contracting parties generally have is mitigating the damages they incur due to the other party's conduct. In addition, like other contracting parties, the government and/or government contractors could potentially waive certain terms of the contract, or their failure to perform could be excused. Certain standard terms of federal procurement contracts, discussed below, do permit the government to take certain actions that could potentially give rise to liability for breach under the common law of contracts. For example, the various changes clauses—allowing the government to unilaterally change certain terms of the contract —run contrary to the general rule that modifications to a contract must be bilateral. However, to the degree that these rights arise from terms of the contract, private parties could, and sometimes do, enter contracts granting themselves such rights. Perhaps the best example of this is the clause allowing the government to terminate the contract for its convenience, which the Federal Acquisition Regulation (FAR) requires to be included in all federal procurement contracts. Termination for convenience clauses are also used in contracts between private parties to give the parties some flexibility as to the quantity of goods or services delivered under the contract, as well as limit the scope of potential liability under the contract. Such clauses are necessary, particularly in private contracts, to avoid the operation of the general rule that a buyer who informs a seller that he does not intend to purchase certain goods or services provided for in a contract has anticipatorily repudiated, or breached, the contract and is liable for damages, potentially including anticipatory profits and consequential damages. Anticipatory profits are profits that the non-breaching contractor would reasonably have realized had the contract been performed. Consequential damages are damages that, while not a direct result of the breach, are a consequence of it. There are, however, several ways in which government contracts differ from other contracts precisely because the government is the sovereign. One way is that certain standard contract terms, such as the clause allowing the government to terminate the contract for its convenience, will be read into contracts from which they are lacking. The grounds upon which this is done, and potentially also the types of clauses that will be read in, have arguably shifted over time. The most recently articulated grounds for doing so are that (1) the clause represents a "deeply ingrained strand of public procurement policy," and (2) federal regulations can "fairly be read" as permitting the clause to be read into the contract because they require agencies to incorporate the clause in their contracts. However, courts had previously held that termination for convenience clauses, in particular, should be read into government contracts because the government should be given broad latitude to act in the "public interest. " Another way in which government contracts differ from other contracts is that, in certain cases, the government could avoid liability for conduct that would otherwise give rise to liability for breach because it acted in its sovereign capacity when it took the action. For example, in one recent case, the U.S. Court of Appeals for the Federal Circuit found that the government was not liable for damages incurred by a contractor after the government blocked the contractor's access to a construction site on a military base for 41 days following the terrorist attacks of September 11, 2001. According to the court, the government took this action in its capacity as a sovereign, and the action was not "specifically targeted at appropriating the benefits of a government contract." Prospective Obligations The government's rights are broadest where prospective contracts, or prospective obligations (i.e., definite commitments to spend appropriated funds) under existing contracts, are concerned. The Supreme Court has held that, "[l]ike private individuals and businesses, the Government enjoys the unrestricted power to produce its own supplies, to determine those with whom it will deal, and to fix the terms and conditions upon which it will make needed purchases." This generally means that the government may cancel a solicitation, decline to exercise an option under a contract, and not allot additional funding to cost-reimbursement contracts, even if the contractor has expended costs in preparing a bid or offer in response to the solicitation, or otherwise relied upon the expectation that the government would exercise the option, or allot additional funding. The contractor's ability to recover when the government opts not to incur new obligations is generally limited, although it is broader when the government does not allot additional funds to incrementally funded cost-reimbursement contracts than in other cases. The Anti-Deficiency Act generally bars agencies from incurring new obligations during funding gaps by prohibiting the obligation of funds in excess or advance of appropriations. Agencies would generally not be similarly barred from incurring new obligations when the debt limit is not increased, or spending is cut, but they may voluntarily limit such obligations in order to reduce spending. Canceling a Solicitation Even if the government has already issued a solicitation (i.e., a request for interested persons to submit bids or offers to the government ), it generally has broad discretion to cancel the solicitation at any stage in the procurement process prior to award of the contract. The Federal Acquisition Regulation (FAR) expressly authorizes cancellation of solicitations in certain circumstances, although these circumstances differ depending upon the method of source selection (i.e., sealed bidding, negotiated procurement ) and the timing of cancellation, in the case of procurements conducted using sealed bidding. Pursuant to the FAR, agencies arguably have the broadest discretion in canceling solicitations in negotiated procurements, where cancellation will generally be upheld so long as there was a "reasonable basis" for it. However, even in the case of cancellations after bid opening in sealed-bidding procurements, where agencies have the least discretion, they arguably retain considerable discretion. While a "cogent and compelling reason" is required for cancellation after bid opening, judicial and other tribunals have found that the determination of whether a sufficiently compelling reason for cancellation exists is "primarily within the discretion of the administrative agency and will not be disturbed absent proof that the decision was clearly arbitrary, capricious, or not supported by substantial evidence." In practice, this means that agencies will generally prevail so long as they can articulate reasonable, supportable grounds for the cancellation. Such grounds can include changes in agency mission or operations, lack of funds, or deciding to perform the work in-house, any or all of which could occur in response to funding shortfalls or budget cuts. In contrast, a showing of bad faith or fraud on the part of the agency (e.g., canceling a solicitation to avoid an award to a specific offeror ) could result in a cancellation determination being found unreasonable and, thus, improper. When cancellation is found to have been improper, the contractor could potentially recover its bid preparation and proposal costs (although not its protest costs). However, proving that cancellation was pretextual, in particular, can be difficult because public officials are presumed to act in good faith, and "[p]laintiffs must do more than assert what amounts to mere naked charges of arbitrary and capricious action." The fact that contractors may have incurred costs in responding to the solicitation does not, in itself, entitle them to any recovery in the event that the solicitation is canceled. Declining to Exercise an Option46 An option is a "unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract." The FAR generally authorizes agencies to incorporate options in contracts whenever it is "in the Government's interest" to do so, and it provides several option clauses that could be used in agency contracts. While these clauses differ depending upon the nature of the option being exercised (e.g., to increase quantity, extend services, or extend the term of the contract), they all provide that the government may, by exercising the option within certain time frames prescribed in the contract, increase the quantity of goods or services purchased under the terms specified in the contract. Because the decision to exercise an option rests solely with the government, the contractor is not entitled to recover any lost profits if the government decides not to exercise an option. This is true regardless of whether (1) the government decides to perform the work in-house; (2) the contractor's bid was based on the assumption that all of the maximum option quantity would be ordered; or (3) the government allegedly gave notice of its intent to exercise the option. One board of contract appeals (i.e., an administrative tribunal established to hear disputes between contractors and the government ) has suggested that a contractor might be entitled to some recovery if it can show that the government's decision not to exercise the option was made in bad faith, but few, if any, contractors appear to have prevailed in challenging the government's declining to exercise an option under this theory. Not Allotting Additional Funds to Cost-Reimbursement Contracts Cost-reimbursement contracts are contracts that provide for the government to pay the contractor, at minimum, any allowable, reasonable, and allocable costs incurred in performing the contract, up to a total cost specified in the contract. While the government is generally obligated to pay the contractor's costs up to the total specified in the contract, absent modification or termination of the contract, limitation of cost/limitation of funds clauses included in cost-reimbursement contracts expressly provide that the government is generally not obligated to pay costs in excess of this amount, although the contractor is not obligated to continue performance unless the government provides additional funds. Specifically, these clauses state that Except as required by other provisions of this contract, specifically citing and stated to be an exception to this clause— (1) The Government is not obligated to reimburse the Contractor for costs incurred in excess of (i) the estimated cost specified in the [contract] or, (ii) if this is a cost-sharing contract, the estimated cost to the Government specified in the [contract]; and (2) The Contractor is not obligated to continue performance under this contract … or otherwise incur costs in excess of the estimated cost specified in the Schedule, until the Contracting Officer (i) notifies the Contractor in writing that the estimated cost has been increased and (ii) provides a revised estimated total cost of performing this contract. The contractor is generally not entitled to have additional funds allotted to the contract unless it could not reasonably have known that its costs had exceeded the amount established in the contract. This is true even if the contractor and the agency anticipated increasing the amount of funds allotted, or the contractor's incurred costs exceed those originally anticipated. However, a contractor under an incrementally funded cost-reimbursement contract, subject to the limitation of funds clause, could potentially recover termination costs, discussed below, pursuant to the contract, if additional funds are not allotted. Termination is also possible with fully funded cost-reimbursement contracts. However, the limitation of cost clause distinguishes between termination and additional funds not being allotted to the contract, and provides for the equitable distribution of "all property produced or purchased under the contract" as the recovery in either case. Existing Obligations under Contract The existence of a contract between two parties (including the government) generally serves to constrain their options in so far as they are obligated to perform and/or pay as called for in the contract, absent modifications to the contract or special circumstances. While this general rule would seem to suggest that the government's options to reduce procurement spending are significantly more circumscribed with existing obligations under contracts than with prospective obligations, the government has broad contractual and inherent rights that give it some flexibility in responding to funding gaps, funding shortfalls, and budget cuts (e.g., by reducing the scope of the contract when there are budget cuts, or delaying performance in anticipation of a potential funding gap). In some cases, these rights reflect the type of contract used. For example, because indefinite-quantity contracts obligate the government to purchase only a minimum quantity of goods or services from the contractor, while allowing it to purchase more, the government could generally forgo purchases in excess of the minimum without incurring liability to the contractor. In other cases, the contract expressly or impliedly includes terms allowing the government to (1) change the scope of the contract, including the quantity of goods or services purchased under it, (2) delay or accelerate performance of a contract, or (3) terminate a contract, all without incurring liability for breach. Limiting Orders Under Indefinite-Quantity Contracts65 Certain federal procurement contracts are known as indefinite-quantity contracts because they obligate the government to obtain an "indefinite quantity, within stated limits, of supplies or services [from the contractor] during a fixed period." Such contracts must provide for a minimum quantity of orders, which the contractor is assured of receiving, and they may provide for a maximum quantity of orders, orders in excess of which the contractor is generally not obligated to fulfill. However, contractors are not entitled to any orders in excess of the minimum quantity, even if the parties contemplated that the contract would result in additional orders, or the contractor incurs costs due to the lack of orders. This inherent flexibility as to quantity built into indefinite-quantity contracts could make such contracts promising vehicles for responding to funding shortfalls and budget cuts, in particular. Provided that the contractor has obtained the minimum quantity of orders required under the contract, the agency would generally face no liability for failure to place additional orders with the contractor, per se, although it could be found to have violated the Federal Acquisition Streamlining Act (FASA) if the contract is a multiple-award contract, and the agency continues placing awards under the contract without giving the contractor a "fair opportunity to be considered" for such orders. A multiple-award contract is one awarded by a federal agency to multiple vendors, each of whom is eligible to receive orders under the contract or blanket purchase agreements placed against it. As amended, FASA generally requires agencies to provide contractors with a "fair opportunity to be considered" when they issue task or delivery orders valued in excess of $3,000, and specifies what constitutes a "fair opportunity to be considered" for orders valued in excess of $5.5 million. Thus, an agency arguably could not cease considering one specific vendor under a multiple award contract in the placement of orders on the grounds that it needs to cut spending, and has already ordered the minimum quantity from the vendor. Rather, the agency would need to partially terminate the contract. Changes in Scope Unlike indefinite-quantity contracts, other contracts generally obligate the federal government to purchase a fixed quantity of goods or services from the contractor (e.g., so many computers, so many hours of labor). Such contracts also specify the nature of the products or services to be provided (e.g., wedges composed of molded acrylonitrile butadiene styrene and light blue in color), as well as various other aspects of performance (e.g., time, place, and method of delivery). The general rule is that, absent special circumstances, parties are bound by the terms of their contracts, and one party cannot unilaterally decide that it will purchase fewer goods or services than were contracted for, or otherwise reduce the scope of the contract. Instead, the parties must bilaterally modify the contract. Such bilateral modifications have historically been the government's preferred method of modifying the terms of its contracts. However, changes clauses, discussed below, generally included in government contracts would permit the government to make certain unilateral modifications to a contract, either by reducing or increasing its scope. While reductions in scope might be the most likely response to funding shortfalls or spending cuts, in particular, the government could also potentially increase the scope of certain contracts in order to compensate for reductions under other contracts, or for other reasons. The contractual basis for the government's right to make such changes is generally the same so long as the changes are within the scope of the contract. However, because major reductions are treated differently from other changes to the nature of the work, reductions and increases are discussed separately below. In either case, the government may need to compensate the contractor for the changed work, although the basis for and extent of such compensation could vary. Reductions in Scope Federal procurement contracts generally include changes clauses, which would permit the government to make certain reductions in the scope of the contract (e.g., purchase fewer goods or services than contracted for). Different versions of the changes clause are used in different types (e.g., fixed price ) and kinds (e.g. construction) of contracts. However, all variants of the changes clause provide that "[t]he Contracting Officer may, at any time, by written order, … make changes within the general scope of this contract" to certain terms of the contract, such as the contract specifications, the method or manner of performing the work, any government-furnished property or services to be used in performing the contract, the method of shipping or packing, the place of delivery, the time of performance, for services, and the place of performance, for services. In some cases, the changes clause applies only to changes to specifically enumerated terms of the contract, while in other cases, it is drafted so as to apply to terms of the same general type as those enumerated. However, "specifications" are included in every case, and this term has been construed broadly to encompass changes in quantity, as well as in certain other aspects of the work to be performed (e.g., product features). Changes are "within the general scope of the contract" when the parties should have "fairly and reasonably" contemplated them at the time when they entered the contract. Reductions that would not have been fairly and reasonably contemplated by the parties are generally treated not as changes, but as partial terminations for convenience, as discussed below. In determining whether particular reductions in scope would have been fairly and reasonably contemplated by the parties at the time of contracting, the focus is largely upon the magnitude of the work deleted as compared to the total work. For example, deletion of a requirement that the contractor remove brick veneer from two walls of a building was found to be within the scope of the contract where the deletion involved only 400 square feet of the 1,600 square feet of bricks whose removal and replacement the parties had contracted for. The same was true of the deletion of 47 of the 48 hours of instructional services that a contractor was to provide as part of a contract for extensive repairs and improvements to a federal facility. In contrast, deletion of more than 73% of unit-priced electrical and telephone outlets from a contract for mechanical, electrical, and plumbing work at a federal facility was found to be beyond the scope of the changes clause, as was deletion of approximately 50% of the work on a contract for cleaning, inspecting, and coating the roofs of family housing units. As these examples suggest, while there is no "bright-line test" for determining when a change is within the scope of the contract, the greater the magnitude of the change, in comparison to the total work called for, the more likely it is that the change will be found to be beyond the scope of the contract. Likewise, deletions that go to the "heart" of the contractual bargain are more likely to be found to be beyond the contract's scope than are deletions of work that was arguably peripheral. When reductions are within the scope of the changes clause, the government may be entitled to a downward adjustment in the contract price. All variants of the changes clause expressly contemplate such equitable adjustments by providing that [i]f any such change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, the Contracting Officer shall make an equitable adjustment in the contract price, the delivery schedule, or both, and shall modify the contract. Pursuant to this clause, the amount of any downward adjustment is measured by the net cost savings to the contractor. If the contractor saved costs because of the deletion, the deleted work is priced at the amount it would have cost the contractor to perform the deleted work. However, if the contractor realized no cost savings from the change, there will be no price reduction, and if the deleted work increased the contractor's costs, the contractor could be entitled to an upward equitable adjustment, as discussed below. This is true even if the contract price included greater costs than were necessary for performance of the changed work, since the purpose of an equitable adjustment is to maintain the basic profit or loss position of the parties before the change occurred. The fact that reductions in scope could potentially result in no reduction to the overall contract price (e.g., by increasing the costs of the work that is not terminated) could potentially complicate the government's efforts to respond to funding shortfalls by reductions under the changes clause. Because reductions in quantity or other aspects of the contract's scope would not necessarily result in reductions in overall contract price on all contracts, the government would arguably need to ascertain the effects of particular reductions upon contractors' costs under individual contracts. Increases in Scope103 While reductions in scope may be the most likely response to funding shortfalls and budget cuts, increases in quantity could also be possible under certain contracts. The various changes clauses, discussed above, would generally accommodate such increases in scope, including quantity, so long as the work done in compliance with the change is "essentially the same work as the parties bargained for." In determining whether the work, as changed, is essentially the same work that the parties bargained for, the focus is primarily upon the nature of the work, and not the magnitude of the change (or the number of change orders). For example, changes requiring the contractor to use different and, in some cases, more expensive materials in building a hospital were found to be within the scope of a contract to construct a hospital because the completed hospital: was in the same location, looked the same, had the same number of rooms and floors and the same facilities as the one shown on the original plans and specifications. Apart from the substitution of materials, it differed not at all from the building that had been contemplated when the contract was awarded. Similarly, "extensive" changes to the details of a building, requiring over 50% additional performance time, were found to be within the scope of the contract because the resultant building was not substantially different from that contracted for. In contrast, a change requiring the contractor to provide a worldwide telecommunications system was found to be outside the scope of a contract to provide a telecommunications system in the Washington, DC, area. A change requiring the contractor to redesign part of a building was similarly found to be outside the scope of a contract calling for construction work. Increases in scope that fundamentally change the nature of what the parties contracted for, as in the latter two cases, are known as cardinal changes and constitute breaches of contract. Much as the government may be entitled to a reduction in price when work is deleted, the contractor may be entitled to additional compensation when work is added. The basis for such compensation, however, depends upon whether the changes were within or beyond the scope of the changes clause. Where the work is within the scope of the changes clause, the contractor could potentially be entitled to an equitable adjustment if the change caused an increase in the cost of performing any part of the work under the contract. An equitable adjustment is a fair adjustment intended to cover the contractor's costs, as well as profit on the work performed. The amount of recovery is based upon the "difference between what it would have reasonably cost to perform the work as originally required and what it reasonably cost to perform the work as changed." If there was no increase in cost, then the contractor is not entitled to an upward adjustment, although it may be entitled to additional time to perform, as discussed below. If there is an increase in cost, the contractor could be entitled to an upward adjustment, although there are two potentially significant limitations upon the amount recoverable. First, the contractor is only entitled to those costs that a reasonable contractor in the contractor's situation would have incurred. It cannot simply assert that these were the costs it incurred, and therefore is entitled to, unless it can be established that it behaved reasonably—given its situation—in incurring these costs. Further, costs must generally be allowable (i.e., permissible) under the Cost Accounting Standards (CAS) in order to be recoverable. The CAS are a series of accounting standards originally issued by the Cost Accounting Standards Board to promote "uniformity and consistency" in "estimating, accumulating, and reporting costs in connection with the pricing, administration, and settlement" of certain federal contracts and subcontracts. The CAS generally only apply to cost-reimbursement contracts (i.e., contracts that provide for the government to pay the contractor, at a minimum, allowable costs incurred in performing the contract up to a total cost specified in the contract). However, the FAR requires that "applicable subparts" of the FAR pertaining to the CAS be used in pricing fixed-price contracts, subcontracts, and modifications to contracts "whenever … a fixed-price contract clause requires the determination or negotiation of costs." When the changes are cardinal changes and the contractor does not accept the changes, the contractor could potentially recover damages for breach. In theory, this could mean (1) expectancy damages , or damages designed to give the injured party the benefit of the bargain; (2) reliance damages , or damages designed to compensate injured parties for their damages in performing the contract, or in anticipation of performance; or (3) restitutionary damages , or damages based on the amount of benefit conferred by the non-breaching party upon the breaching party. In practice, parties and courts generally do not explicitly identify claims for damages as belonging to one of these three types, at least not when addressing cardinal changes to government contracts, and contractors' actual recovery often resembles that under an equitable adjustment or termination settlement. For example, in one case where the government, among other things, doubled the length of the levee that the contractor was to construct, the court found that the contractor was entitled to recover damages in an amount equivalent to the costs of performing certain work required by the changes. In another case, the court found that the contractor was entitled to recover "damages as if the contract had been terminated for the government's convenience" where the government improperly terminated a contractor for default after it refused to perform as required by an order that constituted a cardinal change. However, in other cases, courts have awarded, or recognized an entitlement to, damages more like those typically awarded in breach of contract suits. Such awards have included anticipatory profits; "monetary damages not to exceed the cost of the contract;" and (3) direct losses due to the change, coupled with anticipated profits and overhead. The possibility that the contractor could recover anticipatory profits in the event of a cardinal change suggests that the government would need to exercise some caution in determining which contracts to add work to, or otherwise modify, in response to spending cuts or other budgetary issues. Contracts with arguably broader scopes might be the preferred vehicles for any such changes because there would be less likelihood that these changes would be beyond the contract's scope, and contractors are only entitled to an equitable adjustment when the changes are within the contract's scope. While contractors receiving equitable adjustments are entitled to profit, it is profit only on the work performed; it does not include anticipatory profit. Consequential damages are also excluded from equitable adjustments, but have seldom been recovered in suits against the government for breach in any case. It should also be noted that certain contracts include terms that could obligate the contractor to perform even if the government breaches the contract by a cardinal change or otherwise. Such contracts include a variant of the disputes clause which provides that [t]he Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under or relating to the contract , and comply with any decision of the Contracting Officer. This clause avoids the operation of the general rule that the non-breaching party need not continue performance when the other party breaches the contract. However, contractors whose contracts are modified by changes within the scope of the contract must generally continue performance pending a formal change order, in the case of constructive changes (i.e., changes that are not ordered pursuant to the procedures established in the contract), or agreement upon the amount of any equitable adjustment. Failure to do so could result in their being terminated for default, as discussed below, or subjected to other sanctions under the contract (e.g., liquidated damages, excess costs of reprocurement). Alterations in Performance Period Alterations in the performance period (i.e., postponing performance or requiring performance more quickly than is required or permitted under the contract) is also possible in response to funding shortfalls and budget cuts. Because partial or complete performance of the contract's requirements by the contractor is often a precondition to payment, altering the time frame for performance could, in some cases, help the government control when funds are paid out. This could be helpful in the event that the debt limit were not increased, for example. Similarly, delaying or accelerating performance that would otherwise be scheduled to begin during a possible funding gap could also help avoid damages potentially incurred by any delays in accessing government facilities or property that a shutdown might cause. On their face, such alterations in performance period might seem to fall within the scope of the changes clause, discussed above, because the performance schedule is part of the specifications, and specifications are included in all variants of the changes clause. Some alterations in performance period are, in fact, so treated, although generally only if the delay or acceleration is linked to a change in the work performed. Otherwise, "pure delays" are handled under a number of other, more specific, clauses which could permit the contractor to recover certain costs arising from the delay and/or additional time to perform, free from sanctions for late performance. Postponing Performance There are three standard contract clauses addressing the compensability of government-caused delays in contractor performance that could potentially appear in government contracts. These clauses differ in the types of contracts in which they are used and in their specific provisions as to the recoverability of particular costs. One of these clauses—the suspension of work clause—applies only to construction contracts, and authorizes the contracting officer to order the contractor to suspend, delay, or interrupt "all or any part of the work of this contract for the period of time that the Contracting Officer determines appropriate for the convenience of the Government." The clause further provides that the contractor is entitled to an adjustment for any increase in the cost of performing the contract if performance of "all or any part of the work" is suspended, delayed, or interrupted for an "unreasonable period of time" by (1) an act of the contracting officer in the administration of this contract, or (2) the contracting officer's failure to act within the time specified in this contract (or within a reasonable time, if a time is not specified in the contract). Adjustments pursuant to this clause generally cover costs incurred due to the suspension, although the contractor has a duty to mitigate its damages. Allowance for profit, however, is expressly excluded from adjustments pursuant to the suspension of work clause. The clause also does not make any provision for the contractor to receive an adjustment in schedule as a result of the government-ordered delays, which means that contractors would generally need to seek such an extension under one of the "excusable delay" provisions, discussed below. In addition, the clause expressly provides that it does not apply to any suspensions, delays or interruptions for which an equitable adjustment is "provided for or excluded under any other term or condition of the contract." When contracts other than construction contracts are involved, two different clauses could apply, depending upon whether the delay is ordered (i.e., made pursuant to the notice procedures required under the contract) or constructive (i.e., not made pursuant to such procedures). The stop-work order clause permits the contracting officer "stop all, or any part, of the work called for by this contract for a period of 90 days after the order is delivered to the Contractor, and for any further period to which the parties may agree." This clause applies only to ordered delays, in part because it requires that any such "order[s] shall be specifically identified as … stop-work order[s] issued under this clause." The delay need not be "unreasonable," as with the suspension of work clause. After 90 days (or any extension of time agreed to by the parties), the stop-work order shall be canceled, or the work covered by the order shall be terminated for default or convenience, as discussed below. If the work is resumed, the contractor is entitled to an equitable adjustment in contract price and/or delivery schedule to cover the costs allocable to the work covered by the order during the period of work stoppage. Equitable adjustments include allowance for profit, unlike adjustments under the suspension of work clause. Also unlike the suspension of work clause, the stop-work order clause does not expressly exclude delays for which equitable or other adjustments are provided or excluded under other terms of the contract. The government delay of work clause, in contrast, applies to constructive delays under contracts for goods and services (other than construction). It provides that, if the performance of "all or any part of the work of this contract" is delayed or interrupted due to (1) an act of the contracting officer that is not expressly or impliedly authorized by the contract, or (2) the failure of the contracting officer to act with the time specified by the contract (or within a reasonable time, if no time is specified), the contractor is entitled to an "adjustment" to the contract price, the delivery or performance date, and/or "any other contractual term or condition affected by the delay or interruption." Because this is an "adjustment," and not an "equitable adjustment," no allowance is made for profit. The clause also expressly provides that it does not apply to any delays "for which an adjustment is provided or excluded under any other term or condition of this contract." Depending upon the circumstances, these three clauses could potentially allow contractors to recover certain costs associated with government-caused delays, such as might result from funding gaps or shortfalls. However, the use of such clauses is optional in certain contracts, unlike with the variants of the changes clauses, discussed above, which are generally required. While one board of contract appeals (i.e., an administrative tribunal established to hear disputes between contractors and the government ) has found that, in the absence of a clause giving government the right to order a suspension of work, the government has the inherent right to do so, the general rule appears to be that in the absence of a contract clause dealing with the suspension of work, the contractor is generally not entitled to compensation for delays unless they are the fault of the government. When the delay is compensable, the contractor can generally recover those costs that resulted from the lack of productivity during the period of delay, including the costs of performing otherwise unnecessary work, altering the sequence of its operations, using inefficient methods of performance, working in later time periods, etc. However, it is important to note that the contractor is required, whether as an express or implied term of the contract, to mitigate its damages in the event of delay. This means that the contractor may need to seek alternate work, give workers other things to do, etc., in order to recover its costs. If it fails to do so, the amount of its recovery could be reduced. In addition, the government could potentially avoid liability for certain costs because it acted in its sovereign capacity. For example, in Contractors Northwest, Inc. , the Department of Agriculture Board of Contract Appeals denied the contractor's claim for damages allegedly resulting from a 39-day suspension of work due to a fire on the grounds that the government acted in a sovereign capacity when it suspended work. While the government may be unlikely to act in a sovereign capacity when it orders a delay due to budget issues, it is possible that budget issues could prompt changes in government programs or operations that could constructively delay work, in which case the "sovereign acts doctrine" could potentially be relevant. However, even in situations where the contractor is not entitled to compensation for a government-caused delay, it could potentially be entitled to additional time to perform its obligations under the contract. Federal procurement contracts can include a number of "excusable delay" provisions that allow the contractor to avoid the potentially severe consequences for late performance provided for in the contract (e.g., termination for default) when their performance is delayed due to certain causes specified in the contract. "[A]cts of the Government in either its sovereign or contractual capacity" are invariably among the causes listed. While such clauses may have limited applicability in the case of delays ordered for budgetary reasons, they could potentially come into play if contractors' performance is constructively delayed due to budget-related changes in government operations, for example. Acceleration of Performance While postponing performance is one possible response to funding shortfalls and budget cuts, another possible response is accelerating or speeding up performance, so as to complete it before a possible funding gap occurs, for example. Actual acceleration occurs when an agency expressly requires a contractor to complete some or all of the work sooner than required under the contract. Constructive acceleration , in contrast, occurs when an agency effectively requires a contractor to speed up work to meet the current contract schedule in the face of excusable delays. Acceleration is generally treated as a change under the changes clause. Some changes clauses address this explicitly. In other cases, courts and boards of contract appeals have found that the performance schedule is part of the contract's specifications, which are included in all variants of changes clause. The contractor could potentially also recover under the suspension of work clause if costs were incurred in mitigation of a government-caused delay, but the work was not changed. Termination and Cancellation of the Contract In addition to changing or delaying performance under the contract, the government could also terminate or cancel the contract in response to funding shortfalls or budget cuts. Terminations can be of two types—based on the contractor's default, or for the government's convenience—depending upon the circumstances, and some commentators have suggested that the government may be more assertive in exercising its right to terminate on both grounds in light of sequestration. Government contracts grant the government the right to terminate its contracts for either default or convenience, but the government has also been found to have an inherent right to terminate contracts for its convenience, regardless of whether the contract provides for this right. But for these contractual and/or inherent rights, the government could potentially be found liable for breach, even if the termination were based on the contractor's default (i.e., breach). While the common law of contracts does permit a party to cease performance when the other party anticipatorily repudiates or materially breaches the contract, that party does so at the risk of being incorrect as to whether repudiation or a material breach occurred. However, the government avoids the operation of this principle by providing, as a term of its contracts, that any termination for default found to be improper will be converted into a termination for convenience. Recovery in the event of a termination for convenience is generally less than that for breach. Termination differs from cancellation primarily in that cancellation occurs between years on a multi-year contract, whereas termination can occur at any time on multi-year or other contracts. Terminations for Default A termination for default occurs when the government exercises its contractual right to terminate a contract, in whole or in part, due to the contractor's failure to perform its obligations. It does not automatically occur when the contractor is in default; rather, the contracting officer must affirmatively determine that the contract should be terminated for default, and that it is in the government's interest to do so. For a fixed-price contract, the FAR lists factors that the contracting officer must consider, including the contractor's specific failure and any excuses for it, as well as the urgency of the need for the supplies or services and the time it would take to get them from someone else. If a termination for default is found to be improper for any reason, it will generally be treated as a constructive termination for convenience, which would allow the contractor to recover under the termination for convenience clause, as discussed below. When the termination for default is proper, the contractor is generally entitled to some recovery, although the basis and amount of the potential recovery differ depending upon the type of the contract. For example, the standard default clauses for fixed-price contracts generally provide that the amount the contractor may recover is the contract price for completed supplies or work, as well as certain other costs (e.g., for materials and protection or preservation of property). The clauses generally allow the government to charge the contractor with the excess costs of any reprocurement, or to recover common law damages. In contrast, the standard default clause for a cost-reimbursement contract permits the contractor to recover allowable costs plus any fee. The allowed fee will generally be proportionate to the portion of the contract that was actually completed. Furthermore, in the event of a partial termination, the standard clause requires the contracting officer and contractor to agree to any equitable adjustment for the fee for the continued (i.e., non-terminated) part of the contract. Terminations for Convenience Under the standard termination for convenience clauses, the government has the unilateral right to terminate contracts when it is in its interest to do so. The government has broad discretion to terminate a contract for convenience, although it may not do so in bad faith or abuse of discretion. As with terminations for default, the contractor is generally entitled to some recovery, although the basis and extent of recovery differ depending upon the type of contract, as discussed below. As a rule, however, contractors recover more in the event of terminations for convenience than in terminations for default. Under the standard long-form termination for convenience clause for fixed price contracts, the contractor is entitled to recover its allowable costs, as well as a reasonable profit. The FAR provides that standard cost principles are to be used when determining the allowability of settlement costs, subject to the general principle that the purpose of a termination settlement is to "fairly compensate" the contractor (i.e., the principles will not be strictly applied). In the event of a partial termination, the standard clause provides that the contractor may file a claim for an equitable adjustment of the prices under the contract's continued portions (i.e., "reprice" the non-terminated part of the contract), out of recognition that a partial termination could increase the costs to the contractor of performing the remaining parts of the contract. The standard clause does not allow the contractor to recover anticipatory profits. Furthermore, a contractor is generally not allowed to recover any profit if the contract would have been performed at a loss. Rather, the government may adjust the termination settlement to account for the loss, thus reducing the contractor's recovery. Similarly, the standard termination clauses for cost-reimbursement contracts generally provide that the contractor may recover allowable costs plus a fee, if any. In the event of a partial termination, the termination contracting officer is required to "limit the settlement to an adjustment of the fee, if any, and with the concurrence of the contracting office, to a reduction in the estimated cost." Cancellation of Multi-Year Contracts While the prototypical federal contract is for one year (potentially extended to five years through the exercise of options ), certain contracts are multi-year contracts in that their term extends for more than one year without the government having to establish and exercise an option for each program year after the first. Because authority to contract is distinct from the availability of appropriations, and appropriations are generally annual, multi-year contracts contain clauses that generally authorize the government to cancel the contract if "funds are not available for contract performance for any subsequent program year," or if the contracting officer "fails to notify the Contractor that funds are available for performance of the succeeding program year requirement." The government generally has broad discretion as to the use of any available funds. However, multi-year contracts are viewed as "single, indivisible entities," and the government could be found to have partially terminated the contract for convenience, as discussed above, if it awards a new contract for goods or services similar to those provided for in a multi-year contract that was canceled for lack of funds. The rationale for this is that the "contract binds the Government to purchase the entire multi-year procurement quantity and to fund successive Program Years. This obligation is mandatory unless there is an appropriate and justified cancellation or the bona fide unavailability of funds." When the government does properly exercise its right to cancel a multi-year contract, the contractor is generally paid a "cancellation charge." This charge covers: (1) costs (i) incurred by the Contractor and/or subcontractor, (ii) reasonably necessary for performance of the contract, and (iii) that would have been amortized over the entire multiyear contract period but, because of the cancellation, are not so amortized, and (2) a reasonable profit or fee on the costs. This charge generally cannot exceed the "cancellation ceiling" specified in the contract. The cancellation ceiling represents the maximum amount that the contractor may recover (although the contractor will not necessarily recover this amount). The ceiling is lowered each year to exclude amounts allocable to items included in the prior year's program requirements. Concluding Observations The contractual and other rights that the government could exercise in modifying procurement spending in light of funding gaps, funding shortfalls, or budget cuts are arguably well-established. Determining what the exercise of these rights might mean for federal contractors and, particularly, federal spending on procurement contracts is, in contrast, less clear for multiple reasons. First, individual contracts could contain specific terms that are contrary to the standard terms discussed here, and that would generally be found to prevail over the standard terms. For example, while the suspension of work clause, discussed above, would generally not allow contractors to recover costs resulting from the impact of a government-caused delay upon the vendor's other contracts, some contracts have expressly allowed for such costs. Second, there is incredible variation in the types, terms, and performance of individual contracts, and in how particular government actions might affect the contractors' costs and/or schedule. Two contractors performing apparently identical functions for an agency could potentially be doing so under fundamentally different contracts, and the same agency action (e.g., reductions in scope, issuance of a stop-work order) could have profoundly different effects upon them depending upon how they planned to perform, where they are in the course of performance, and other aspects of their business operations (e.g., availability and desirability of other work). Relatedly, the government often has multiple ways, pursuant to its contracts, to get to the same outcome (e.g., a reduction in the quantity of goods or services to be supplied under the contract). Depending upon the circumstances, it could potentially be more beneficial to treat such a reduction as a partial termination for convenience or as a change, and the government has some discretion in determining how to proceed, provided the change is "minor." Finally, government contracts are subject to interpretation by various courts and boards of contract appeals, which have had differing opinions on various questions, such as whether contingent costs may be recovered as part of an adjustment. In short, individual contractors could be more or less affected by individual government actions in this area, depending upon the terms of their contract, the course of performance, the nature of the government action, and the tribunal hearing their case, among other things. The government's spending upon procurement contracts could similarly be more or less affected, depending upon how it exercises its rights. For example, reductions in scope effectuated pursuant to the changes clause might or might not lead to savings, depending upon the effects that the reductions have upon contractor costs. If reductions could be targeted to contracts where contractors' costs would decrease due to the reduction, the government could potentially realize savings through reductions. If, however, the reductions were not so targeted, the government might save nothing, or even incur higher costs on particular work.

When confronted with actual or potential funding gaps, funding shortfalls, or budget cuts, the federal government has a number of options as to prospective and existing procurement contracts. Many of these options arise from contract law and, in particular, certain standard clauses included in federal procurement contracts. Among other things, these clauses may allow the government to (1) unilaterally change certain terms of the contract, such as the specifications or the method and manner of performing the work; (2) delay, suspend, or "stop work" on the contract; and (3) terminate the contract for the government's convenience. However, courts have also found that the government has certain rights because it is the government, regardless of whether the contract provides for these rights. Such rights are commonly described as "inherent rights," and include the right to terminate the contract for convenience and, according to one tribunal, the right to suspend work. The government's rights are broadest where prospective contracts are concerned. Prospective contractors generally do not have a right to a government contract, and the government, like private persons, is generally free to determine whether to enter a contract to procure goods or services. This is true even if the agency has issued a solicitation for a proposed procurement, and prospective contractors have expended time and money in responding to that solicitation. Agencies have broad discretion in canceling solicitations prior to contract award, and contractors must generally show that cancellation was in bad faith or otherwise unreasonable in order to recover the costs of preparing bids or proposals for canceled solicitations. The exercise of an option is, similarly, a unilateral right of the government. The extent of the government's rights where existing contracts are concerned depends upon the type of contract (e.g., indefinite-quantity), the nature of the goods or services being procured (e.g., construction), and the facts and circumstances of the case. For example, the terms of indefinite-quantity contracts would generally permit the government to cease ordering goods or services from the contractor once the guaranteed minimum has been ordered. Various changes clauses would similarly permit the government to make certain unilateral reductions, or increases, in the work to be performed under the contract, including the quantity of goods and services provided. Other clauses provide for suspension or delay of work by the government, or permit the government to order the contractor to stop work. In addition, the government may terminate all or part of a contract for its convenience, as well as cancel multi-year contracts. When the government exercises these rights, the contractor could potentially be entitled to an equitable or other adjustment, other compensation, or an extension of time in which to perform. The nature of such recourse varies significantly, however, and in some cases, the government could potentially avoid liability for actions that delayed or increased the costs of the contractor's performance because it acted in its sovereign capacity. Recent events have prompted significant congressional and public interest in how the government may go about reducing spending on procurement contracts. The prospect of a funding gap and government shutdown in April 2011 was followed by the enactment of legislation (P.L. 112-25) that called for mandatory cuts in federal spending, effective January 2, 2013, if legislation cutting the deficit was not enacted by January 15, 2012. Such legislation was not enacted, and although the mandatory cuts were briefly delayed, sequestration took effect on March 1, 2013. It remains in effect as of this writing. There have also been debates in each of the calendar years 2011, 2012, and 2013 over whether to raise the debt limit.

Introduction The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) to help ease the financial burden that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for dollar of the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only reduce a taxpayer's income tax liability to zero, while a refundable tax credit can exceed a taxpayer's income tax liability, providing a cash payment primarily to low-income taxpayers who owe little or no income tax. Over the past 20 years, legislative changes have significantly changed the credit, transforming it from a generally nonrefundable credit available only to the middle and upper-middle class, to a refundable credit that more low-income families are eligible to claim. This report provides an overview of the credit under current law and also provides some summary data on these benefits. For a complete legislative history of the credit, see CRS Report R45124, The Child Tax Credit: Legislative History , by [author name scrubbed]. Current Law The child tax credit allows taxpayers to reduce their federal income tax liability (the income taxes owed before tax credits are applied) by up to $2,000 per qualifying child. If the value of the credit exceeds the amount of tax a family owes, the family may be eligible to receive a full or partial refund of the difference. The refundable portion of the credit is sometimes referred to as the additional child tax credit or ACTC. The total amount of their refund is calculated as 15% (the refundability rate) of earnings that exceed $2,500 (the refundability threshold), up to the maximum amount of the refundable portion of the credit ($1,400 per child). The credit phases out for higher-income taxpayers. The child tax credit can offset a taxpayer's Alternative Minimum Tax (AMT) liability. Currently, the maximum credit per child, refundability threshold, and phaseout thresholds are not indexed for inflation. From 2018 to 2025, the maximum amount of the ACTC is indexed for inflation. Table 1 provides an overview of key provisions of the child tax credit under current law and how they will change, as scheduled under P.L. 115-97 . Detailed Overview of Current Credit Each of the key parameters of the child tax credit as in effect from 2018-2025 is described in more detail below. The legislative changes made to the child tax credit by P.L. 115-97 have significantly expanded the child tax credit, especially for upper-income taxpayers, as illustrated in Figure 1 . Maximum Credit per Child Eligible families can claim a child tax credit and reduce their federal income tax liability by up to $2,000 per qualifying child. The maximum credit a family can receive is equal to the number of qualifying children a taxpayer has, multiplied by $2,000. For example, a family with two qualifying children may be eligible for a $4,000 credit. Families may receive the child tax credit as a reduction in tax liability (the nonrefundable portion of the credit), a refundable credit (the amount of the credit in excess of tax liability), or a combination of both. The refundable portion of the credit—the ACTC—is discussed in the subsequent section. Beginning in 2026, the maximum amount of the credit is scheduled to revert to $1,000 per qualifying child. Maximum Additional Child Tax Credit (ACTC) per Child, the Refundability Threshold and Refundability Rate For taxpayers with little or no federal income tax liability, they will be eligible for little if any of the nonrefundable portion of the child tax credit. Instead, they may be eligible to receive the child tax credit as a refundable credit. The refundable portion of the child tax credit is often referred to as the additional child tax credit or ACTC. The amount of the refundable child tax credit is generally calculated using the "earned income formula" up to the maximum ACTC amount of $1,400 per qualifying child. Under the earned income formula, a taxpayer may claim an ACTC equal to 15% of the family's earned income in excess of $2,500, up to the maximum ACTC amount (i.e., up to $1,400 multiplied by the number of qualifying children). The $2,500 amount is referred to as the refundability threshold; the 15% is referred to as the refundability rate. If a taxpayer's earnings are below the refundability threshold, they are ineligible for the ACTC. For every dollar of earnings above this amount, the value of the taxpayer's ACTC increases by 15 cents, up to the maximum amount of the credit ($1,400 per qualifying child). For purposes of calculating the ACTC, earned income is defined as wages, tips, and other compensation included in gross income. It also includes net self-employment income (self-employment income after deduction of one-half of Social Security payroll taxes paid by a self-employed individual). Beginning in 2026, the refundability threshold is scheduled to increase to $3,000 and the maximum ACTC per child (the amount that exceeds income tax liability) is scheduled to decrease to $1,000 per child. The Phaseout Threshold and Phaseout Rate The child tax credit phases out for higher-income families. The $2,000-per-child value of the credit falls by a certain amount as a family's income rises. Specifically, for every $1,000 of modified adjusted gross income (MAGI) above a threshold amount, the credit falls by $50—or effectively by 5% of MAGI above the threshold. The threshold amount depends on a taxpayer's filing status, and equals $200,000 for single parents and married taxpayers filing separate returns, and $400,000 for married taxpayers filing joint returns. The actual income level at which the credit is entirely phased out (i.e., equals zero) depends on the number of qualifying children a taxpayer has. Generally, it takes $40,000 of MAGI above the phaseout threshold to completely phase out $2,000 of credit. For example, the credit will completely phase out for a married couple with two children if their MAGI exceeds $480,000 (see Figure 1 ). Definition of a Qualifying Child In order to claim the child tax credit, a taxpayer's child must be considered "a qualifying child" and meet several requirements which may differ from eligibility requirements for other child-related tax benefits: 1. The child must be under 17 years of age during the entire year for which the taxpayer claims the credit (for example, if the child was 16.5 years on December 31, 2017, the taxpayer could claim the credit on their 2017 federal income tax return). 2. The child must be eligible to be claimed as a dependent on the taxpayer's return. 3. The child must be the taxpayer's son, daughter, grandson, granddaughter, stepson, stepdaughter, niece, nephew, or an eligible foster child of the taxpayer. 4. The child must live at the same principal residence as the taxpayer for more than half the year for which the taxpayer wishes to claim the credit. 5. The child cannot provide more than half of their own support during the tax year. 6. The child must be a U.S. citizen or national. If they are not a U.S. citizen or national, they must be a resident of the United States. The age and citizenship requirements for a qualifying child for the child tax credit differ from the definition of qualifying child used for other tax benefits and can cause confusion among taxpayers. For example, a taxpayer's 18-year-old child may meet all the requirements for a qualifying child for the EITC, but will be too old to be eligible for the child tax credit. ID Requirements to Claim the Child Tax Credit The statute requires that taxpayers who intend to claim the child tax credit provide a valid taxpayer identification number (TIN) for each qualifying child on their federal income tax return. Under a temporary change in effect from 2018 through the end of 2025, the child's TIN must be a work-authorized Social Security number (SSN). The SSN must be issued before the due date of the tax return. Failure to provide the child's SSN may result in the taxpayer being denied the credit (both the nonrefundable and refundable portions of the credit). Absent any legislative changes, beginning in 2026, a valid TIN for qualifying children will include individual taxpayer identification numbers (ITINs) and Social Security numbers (SSNs). ITINs are issued by the Internal Revenue Service (IRS) to noncitizens who do not have and are not eligible to receive SSNs. ITINs are supplied solely so that noncitizens are able to comply with federal tax law, and do not affect immigration status. In addition, in order to claim the child tax credit in a given tax year, the taxpayer must also provide their own taxpayer identification number that must be issued before the due date of the tax return. This is a permanent ID requirement that is not scheduled to expire. Disallowance of the Credit Due to Fraud or Reckless Disregard of the Rules A tax filer is barred from claiming the child tax credit for a period of 10 years after the IRS makes a final determination to reduce or disallow a tax filer's child tax credit because that individual made a fraudulent child tax credit claim. A tax filer is barred from claiming the child tax credit for a period of two years after the IRS determines that the individual made a child tax credit claim "due to reckless and intentional disregard of [the] rules" of the child tax credit, but that disregard was not found to be due to fraud. Data on the Child Tax Credit Estimates from the Internal Revenue Service (IRS) and Tax Policy Center highlight several key aspects of the child tax credit: The total dollar amount of the child tax credit has grown over time: Data from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment. These estimates do not include the impact of recent legislative changes made by P.L. 115-97 , which, all else being equal, will expand the total cost of this tax benefit. In 2018, the majority of the tax benefit will go to taxpayers with income between $75,000 and $500,000 : The Tax Policy Center (TPC) estimates that the majority of child tax credit dollars in 2018 will go to taxpayers with more than $75,000 of income, with nearly one-third of the benefit going to taxpayers with income between $100,000 and $200,000. In comparison, a relatively small share will go to very-low-income or very-high-income taxpayers. In 2018, over 90% of taxpayers with children and income between $30,000 and $500,000 will receive the child tax credit. The Tax Policy Center (TPC) estimates that across most income groups, the vast majority of taxpayers with children will receive the child tax credit in 2018. About half of the lowest-income taxpayers will receive the credit and no taxpayers with children and income over $1 million will receive the credit. In 2018, taxpayers with income between $100,000 and $200,000 will on average receive the largest credit. The Tax Policy Center (TPC) estimates that taxpayers with children and income between $100,000 and $200,000 will on average receive a credit of over $3,000 in 2018. Taxpayers with children with income under $20,000 will receive on average a credit of less than $1,000, while the wealthiest taxpayers with children will receive on average a credit of $10. Total Child Tax Credit Dollars, 1998-2015 IRS estimates of the amount of total child tax credit dollars (inflation adjusted to 2015 dollars) received by taxpayers indicate that this tax benefit has more than doubled in size since enactment, from aggregate receipt of $22 billion in 1998 to approximately $54 billion in 2015, as illustrated in Figure 2 . A significant component in the growth of the child tax credit has been the growth in the refundable portion of the credit, which now comprises approximately half of child tax credit dollars received by taxpayers. (For an overview of the legislative changes that have influenced the expansion of both the refundable and nonrefundable portions of the credit, see CRS Report R45124, The Child Tax Credit: Legislative History , by [author name scrubbed].) The most recent IRS data available are for the 2015 tax year (i.e., 2015 income tax returns filed in 2016), and hence do not include the impact of the legislative changes made to the credit by P.L. 115-97 . As previously discussed, these legislative changes are currently scheduled to be in effect from 2018 through the end of 2025. The Joint Committee on Taxation has estimated that the modification to the child tax credit formula will cost an estimated $573.4 billion between 2018 and 2026, or on average $64 billion a year. (These estimates include the budgetary cost of the $500 nonrefundable credit for non-child tax-credit-eligible dependents.) JCT also estimates that the new SSN requirement will save $29.8 billion between 2018 and 2026, or on average $3 billion per year. Total Child Tax Credit Dollars by Income Level The Tax Policy Center (TPC) estimated the distribution of aggregate child tax credit by income level for 2018 under current law (i.e., including the changes made by P.L. 115-97 ). These estimates include the $500 credit for non-child tax-credit-eligible dependents. TPC estimates that nearly one-third of all child tax credit dollars (31%) will go to taxpayers with income between $100,000 and $200,000, as illustrated in Figure 3 . Slightly more than one-quarter of all child tax credit dollars (26.5%) will go to taxpayers with income under $50,000. Lower-income taxpayers will generally receive a credit of $1,400 or less per child, depending on their earnings. In contrast, higher-income taxpayers with sufficient income tax liability will receive a credit of $2,000 per child. For example, a single parent with two children and $15,000 of income will be eligible for a $1,875 credit (received entirely as the refundable child credit or ACTC), less than the maximum ACTC for two children of $2,800 (2x $1,400) and less than the maximum credit for two children of $4,000 (2 x $2,000). The highest-income taxpayers will not receive a credit due to the credit phaseout. Share of Taxpayers with Children Receiving the Child Tax Credit TPC estimated the share of all taxpayers and taxpayers with children that would receive the child tax credit in 2018. The estimates indicate that among taxpayers with children, almost all taxpayers will receive the child tax credit. More than 90% of taxpayers with children and income between $40,000 and $500,000 will receive the child tax credit. In contrast, about half (51%) of taxpayers with children and income under $10,000 will receive the child tax credit in 2018, and less than one-fifth (18%) of taxpayers with income between $500,000 and $1 million will receive the credit, as illustrated in Figure 4 . Fewer low-income families with children will benefit from the child tax credit since taxpayers with income under $2,500 (the refundability threshold) will not be eligible for the refundable portion of the credit. In contrast, due to the phaseout of the credit at higher income levels, virtually no taxpayers with income over $1 million will be eligible to claim it. Average Child Tax Credit Amount TPC estimated the average child tax credit amount by income level for all taxpayers and taxpayers with children in 2018. Their estimates indicate that taxpayers with children and income between $100,000 and $200,000 will receive the largest credit on average—an estimated $3,100. Taxpayers with income under $20,000 will receive on average a credit of less than $1,000, while the wealthiest taxpayers with children (income over $1 million) will on average receive a credit of $10. Lower-income taxpayers are eligible to receive a credit of up to $1,400 per child, although they may receive less depending on their earned income. In contrast, higher-income taxpayers, with sufficient income tax liability, will be eligible for up to a $2,000 credit per child. The highest-income taxpayers will be ineligible for the credit due to the phaseout.

This report provides an overview of the child tax credit under current law, including temporary changes made by the 2017 tax revision (P.L. 115-97). When calculating the total amount of federal income taxes owed, eligible taxpayers can reduce their federal income tax liability by the amount of the child tax credit. Currently, eligible families that claim the child tax credit can subtract up to $2,000 per qualifying child from their federal income tax liability. The maximum amount of credit a family can receive is equal to the number of qualifying children in a family multiplied by $2,000. If a family's tax liability is less than the value of their child tax credit, they may be eligible for a refundable credit calculated using the earned income formula. Under this formula, a family is eligible for a refund equal to 15% of their earnings in excess of $2,500, up to the maximum amount of the refundable portion of the credit. The maximum amount of the refundable portion of the credit is $1,400 per qualifying child. The credit phases out for single parents with income over $200,000 and married couples with income over $400,000. Many of these parameters are scheduled to expire at the end of 2025 under P.L. 115-97. The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 (P.L. 105-34) to help ease the financial burden that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for dollar of the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only reduce a taxpayer's income tax liability to zero, while a refundable tax credit can exceed a taxpayer's income tax liability, providing a cash payment to low-income taxpayers who owe little or no income tax. Since it was first enacted, the child tax credit has undergone significant changes. Most recently at the end of 2017, Congress expanded the credit, especially for middle- and upper-income taxpayers, by doubling the credit amount and more than tripling the income level at which the credit begins to phase out. Additional, although comparatively more modest, changes were made to the refundable portion of the credit as well, including increasing the refundable credit amount from $1,000 to $1,400 per child and lowering the refundability threshold from $3,000 to $2,500. These changes are scheduled to be in effect from 2018 through the end of 2025. Estimates from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment from approximately $22 billion to $54 billion. These estimates do not include the impact of recent legislative changes made by P.L. 115-97, which will, all else being equal, expand the total cost of this tax benefit. The Tax Policy Center (TPC) estimated the distribution of the child tax credit by income level for 2018 under current law (including the changes made by P.L. 115-97) and found that the majority of child tax credit dollars will go to taxpayers with more than $75,000 of income, with nearly one-third of the benefit going to taxpayers with income between $100,000 and $200,000. In comparison, a relatively small share will go to very-low-income or very-high-income taxpayers. TPC also estimated that the vast majority of taxpayers with children will receive the child tax credit. About half of the lowest-income taxpayers will receive the credit and no taxpayers with children and income over $1 million will receive the credit. Finally, TPC estimated that taxpayers with income between $100,000 and $200,000 will on average receive the largest credit of over $3,000. Taxpayers with children and income under $20,000 will receive on average a credit of less than $1,000, while the wealthiest taxpayers with children will receive on average a credit of $10.

Prohibiting Mental Health Factors Under the Gun Control Act of 1968 Under the Gun Control Act of 1968 (GCA) , as amended, certain categories of persons are prohibited from possessing, shipping, transporting, and receiving firearms and ammunition. These nine categories of persons who are prohibited 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 adjudicated 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 9. persons who have been convicted of a misdemeanor domestic violence offense. Of these categories, only the fourth is primarily concerned with mental health issues. The sections below provide a more detailed discussion of the scope of this category's two sub-components: adjudication as a mental defective and commitment to a mental institution. Adjudication as a Mental Defective As noted above, the GCA prohibits individuals "adjudicated as a mental defective" from possessing, receiving, transferring, or transporting a firearm. The term, not defined in statute, has been interpreted in federal regulation as (a) A determination by a court, board, commission, or other lawful authority that a person, as a result of marked subnormal intelligence, or mental illness, incompetency, condition, or disease: (1) Is a danger to himself or to others; or (2) Lacks the capacity to manage his own affairs. (b) The term shall include—(1) a finding of insanity by a court in a criminal case, and (2) those persons found incompetent to stand trial or found not guilty by lack of mental responsibility [under the Uniform Code of Military Justice]. It is important to note that despite references to "mental illness" in the definition, neither a diagnosis of a mental illness nor treatment for a mental illness appears, by itself, to qualify a person as "adjudicated as a mental defective." Thus, while a health care provider may provide to a third party (i.e., a court, board, commission, or other lawful authority) an assessment of an individual's mental health for purposes of adjudication, the provision of mental health treatment alone is not considered a determination for purposes of being considered "adjudicated as a mental defective," nor is treatment necessary for the determination. Rather, an individual's "adjudication as a mental defective" relies upon a determination or decision by "a court, board, commission, or other lawful authority." Physicians and other health care providers generally do not fall within this list of authorized decision-makers, with the exception of certain instances under state law where a health care provider may be authorized by statute to admit a patient to involuntary psychiatric treatment. A health care provider, under these circumstances, could potentially be considered an "other lawful authority," who makes a determination which falls within the federal statute criminalizing firearms possession by an individual who is "adjudicated as a mental defective" or "committed to a mental institution." See discussion below at " Emergency Admission or Hospitalization ." Whether the definition of "adjudicated as a mental defective" includes individuals who have been assigned fiduciaries to manage monetary benefits received from a federal agency is subject to interpretation, as illustrated by the different policies of the Department of Veterans Affairs (VA) and the Social Security Administration (SSA). In particular, the definition includes those who are determined "as a result of … condition … [to] lack[] the capacity to manage his own affairs." Accordingly, VA policy requires that an individual who receives VA monetary benefits and who "lacks the mental capacity to manage his or her own financial affairs regarding disbursement of funds without limitation, and is either rated incompetent by VA or adjudged to be under legal disability by a court of competent jurisdiction" be assigned a fiduciary (who manages the money disbursed by VA) and be reported to NICS. In contrast, SSA does not appear to have a comparable policy for representative payees (i.e., individuals who have been assigned a fiduciary to manage their SSA monetary benefits). In a letter to the Vice President, the National Council on Disability (NCD) urges him to avoid any proposal to link the Social Security Administration's database of representative payees with the FBI's National Instant Criminal Background Check System (NICS). Whatever merits such a proposal might seem to present, such benefits are outweighed by the inaccurate and discriminatory inference that would result: equating the need for assistance in managing one's finances with a presumption of incapacity in other areas of life.... NCD recommends you ensure that the selection of a representative payee continues to have no implication on other areas of rights beyond financial decision-making. Commitment to a Mental Institution The term "committed to a mental institution" is defined through regulation as A formal commitment of a person to a mental institution by a court, board, commission, or other lawful authority. The term includes a commitment to a mental institution involuntarily. The term includes commitment for mental defectiveness or mental illness. It also includes commitments for other reasons, such as for drug use. The term does not include a person in a mental institution for observation or a voluntary admission to a mental institution. The use of the term "institution" suggests that the definition of "committed to a mental institution" may apply only to inpatient settings. The question of whether the definition applies to outpatient commitment was raised following the Virginia Tech shooting in 2007 (see textbox). In either case, the definition explicitly excludes "voluntary admission," and so would not apply to individuals voluntarily seeking treatment for mental illness in any setting. As discussed below, DOJ has proposed a rule that would amend this term to clarify that both inpatient and outpatient commitments are covered. Emergency Admission or Hospitalization As noted above, state law may authorize a health care provider to admit a patient to involuntary psychiatric treatment, particularly in emergency situations for a brief duration. In these limited instances, it is possible that a health care provider would be considered an "other lawful authority," and the patient receiving involuntary psychiatric treatment would fall within the definition of "committed to a mental institution" for purposes of the GCA. For example, in United States v. Waters , the U.S. Court of Appeals for the Second Circuit held that the involuntary hospitalization of an alleged mentally ill individual pursuant to New York state law met the definition of an "involuntary commitment" for purposes of the GCA, even though the hospitalization was ordered by the director of a hospital upon the certification of two physicians. However, at least one federal court has held that the Supreme Court's recent recognition of an individual right to possess a firearm in District of Columbia v. Heller , suggests that some emergency hospitalization or commitment procedures should not be included within the meaning of "involuntary commitment" for purposes of the GCA. In United States v. Rehlander , the U.S. Court of Appeals for the First Circuit (First Circuit) considered a Maine law which provides authority for the brief, but involuntary, detention of individuals in mental institutions on the basis of a medical provider's examination and certification that the individual is mentally ill and poses a likelihood of serious harm. In pre- Heller cases, the First Circuit had held that this emergency hospitalization under Maine law qualified as "involuntary commitment" under the GCA. However, because the procedures under state law were ex parte and did not have additional procedural safeguards, the court held that construing the emergency hospitalization procedures to qualify as "involuntary commitment" under the GCA post- Heller would risk depriving individuals of their right to bear arms without sufficient due process. Therefore, the appellate court overturned its earlier decisions and held that such emergency hospitalizations were not "involuntary commitments." DOJ Proposal to Amend "Adjudicated as a Mental Defective" and "Committed to a Mental Institution" On January 7, 2014, DOJ issued a notice of its proposed rule to amend the definitions of "adjudicated as a mental defective" and "committed to a mental institution." The term "adjudicated as a mental defective" is currently composed of two subsections. The proposed amendment primarily makes changes to the second subsection, which currently provides that the term includes (1) a finding of insanity by a court in a criminal case, and (2) a finding of incompetency to stand trial or a finding of not guilty by lack of mental responsibility pursuant to the Uniform Code of Military Justice. The proposed rule would amend this part to clarify that the term applies to all courts, not only the military judicial system, that determine an individual to be not guilty by reason of insanity in a criminal case, or guilty but mentally ill, or incompetent to stand trial in a criminal case. Furthermore, the proposed rule adds a third subsection, which would clarify that the term "adjudicated as a mental defective" does not include any person adjudicated but who has subsequently received relief from disability pursuant to federal law (18 U.S.C. §925(c)) or under a state program authorized by federal law. In addition, the term would not include any person who is adjudicated by a federal agency if the adjudication meets certain conditions. These include if (1) the record has been set aside or the individual has been released from treatment; (2) the person has been found by the court or board to no longer suffer from the condition that was the basis of the adjudication or commitment; or (3) the adjudication or commitment is based solely on a medical finding of disability, without opportunity to be heard by a court or board. The second term, "committed to a mental institution," currently covers formal commitments, including those which are involuntary, of a person to a mental institution for mental defectiveness or illness by a court, board, commission, or other lawful authority. It also currently includes commitments for other reasons, including drug use, but does not include a person who is in a mental institution either voluntarily or only for observation. DOJ's proposed rule would maintain the existing definition but amend it to reflect that such commitments include "an involuntary commitment to a mental institution for inpatient or outpatient treatment." The term would continue to exclude those who are in a mental institution solely for observation or evaluation, as well as those who have voluntarily admitted themselves. The proposed rule clarifies that the term also excludes persons undergoing voluntary outpatient treatment. In its notice, DOJ explains that "temporary admission for observation" would not be included under the term unless it "turns into a qualifying commitment as a result of formal commitment by a court, board, commission or other lawful authority." This explanation and the proposed minor changes to the definition would seem to strongly suggest that emergency hospitalizations, as discussed above, are to be excluded. However, the proposed rule does not appear to include explicit language that could provide more guidance to the states or the courts regarding the types of involuntary commitments made by physicians, who are acting as an "other lawful authority," that would be included under the term. Lastly, in its notice, DOJ commented that it is seeking comment on whether it should include commitments or adjudications that occurred when the person was under the age of 18. The National Instant Criminal Background Check System (NICS) Under the Brady Handgun Violence Prevention Act of 1993 (Brady Act), the Attorney General was required to establish a computerized system to facilitate background checks on individuals seeking to acquire firearms from federally licensed firearms dealers. The National Instant Criminal Background Check System (NICS) was activated in 1998 and is administered by the Federal Bureau of Investigation (FBI). Through NICS, federal firearms licensees submit background checks on prospective transferees to the FBI, which queries other databases—including the National Crime Information Center (NCIC), the Interstate Identification Index (III), and the NICS index—to determine if the transferees are disqualified from receiving firearms. According to the FBI, records in the NICS Index are voluntarily provided by local, state, tribal, and federal agencies, and it "contains [disqualifying records] that may not be available in the NCIC or the III of persons prohibited from receiving firearms under federal or state law." The Brady Act also authorized the Attorney General to "secure directly from any [federal] department or agency of the United States" information on persons for whom receipt of a firearm would violate federal or state law. The act does not mandate that federal agencies disclose these records, rather it mandates that "upon request of the Attorney General, the head of such department or agency shall furnish such information to the system." With respect to states, which are not required to submit records to NICS, the Brady Act provided grants to "improv[e] State record systems and the sharing ... of the records ... required by the Attorney General under [the Brady Act]." However, it did not mandate that states turn over any specific records, even upon request. NICS Improvement Amendments Act of 2007 (NIAA) In 2007, Congress passed the NICS Improvement Amendments Act (NIAA), which authorizes the Attorney General to make additional grants to states to improve electronic access to records as well as to incentivize states to turn over records of persons who would be prohibited from possessing or receiving firearms under 18 U.S.C. §922(g) or (n), with an emphasis on providing accurate records relating to those who are prohibited under (g)(4) ("adjudicated as a mental defective") or (g)(9) (" convicted in any court of a misdemeanor crime of domestic violence " ) . Moreover, it mandates that the Department of Homeland Security make available to the Attorney General any records that are related to being a prohibited possessor under federal law. Federal Agencies and NIAA For federal agencies, NIAA clarifies the standard for adjudication and commitments related to mental health. It provides that no department may provide any such record if (1) the record has been set aside or the individual has been released from treatment; (2) the person has been found by the court or board to no longer suffer from the condition that was the basis of the adjudication or commitment; or (3) the adjudication or commitment is based solely on a medical finding of disability, without opportunity to be heard by a court or board. It also requires agencies that do make such determinations to establish a program that permits a person to apply for relief from the disabilities imposed under §922(g)(4). In January 2013, President Obama issued a memorandum directing all federal agencies to coordinate with the Attorney General in order to provide to NICS any relevant records, including criminal histories and information related to persons prohibited from possessing firearms for mental health reasons. One year later, the White House announced that since 2013 federal agencies have made over 1.2 million additional records available to NICS. States and NIAA With respect to states, NIAA allows a state to be eligible for a two year waiver of the matching requirement in the National Criminal History Improvements Grant program, established under the Brady Act, if the state provides at least 90% of the records relevant to determining whether a person is disqualified from possessing a firearm under federal or applicable state law. To be eligible for such a waiver, other requirements include providing updates to NICS regarding any record that should be modified or removed from the system, and more detailed information regarding those who are convicted of a misdemeanor crime of domestic violence or adjudicated as a mental defective under federal law. NIAA also provides the Attorney General discretion to award additional grants for purposes of assisting states with upgrading information identification technologies for firearms disability determinations as long as they have implemented a relief from disabilities program that meets certain requirements. This grant program is known as the NICS Act Record Improvement Program (NARIP). If a state has received a waiver or an additional grant under NIAA, the act imposes penalties for non-compliance. The act mandates reductions in Department of Justice Byrne Justice Assistance Grant funds and permits the Attorney General to make discretionary reduction of these funds if a state does not comply with eligibility requirements of NIAA. State Reporting of Prohibiting Mental Health Records to NICS In 2012, five years after the NIAA was enacted, the Government Accountability Office (GAO) released a report that examined states' progress in reporting mental health records to the NICS databases. The "mental health records" reported to NICS include only individual identifiers and no actual medical information. However, as discussed in more detail below, the preparation and submission of such records by health departments and health care facilities involves the use of patient information and thus is subject to federal and, in many instances, state health privacy laws. GAO found that the total number of mental health records that states made available to NICS databases increased approximately nine-fold from about 126,000 to 1.2 million between 2004 and 2011. However, this increase largely reflected the efforts of 12 states. According to GAO, almost half of all states increased the number of mental health records they reported by fewer than 100 over the same time period. Both DOJ and state officials told GAO that a variety of technological, coordination, and legal (i.e., privacy) challenges limit the states' ability to report mental health records. Technological challenges include updating aging computer systems and integrating existing record systems. Several states reported using their NARIP grant funding to automate the collection and transmission of records. DOJ officials further emphasized that the technological challenges are particularly salient for mental health records because these records originate from numerous sources within the state—such as courts, private hospitals, and state offices of mental health—and are not typically captured by any single state agency. For example, records that involve involuntary commitments to a mental institution typically originate in entities located throughout a state and outside the scope of law enforcement, and therefore a state may lack processes to automatically make these records available to the FBI. The fact that mental health records often originate in hospitals and health departments, which are typically not connected to law enforcement agencies that make the majority of records available to NICS, presents challenges in getting all the relevant entities to collaborate. As an example, GAO cited an April 2012 report by the state of Illinois, Office of the Auditor General, which found that for 2010, approximately 114,000 mental health records were maintained in nursing homes, private hospitals, state mental health facilities, and circuit courts. However, only about 5,000 records were reported to NICS because of a lack of coordination and other challenges. Citing privacy concerns, officials in three of the six states reviewed by GAO reported that the absence of explicit statutory authority to share mental health records was an impediment to NICS reporting. In a November 2011 report on NICS reporting, Mayors Against Illegal Guns (MAIG) drew conclusions that are broadly similar to those of GAO. MAIG interviewed officials in all 50 states and the District of Columbia and found that state reporting of mental health records to NICS is impeded by a complex set of obstacles including technological and logistical problems, privacy concerns, insufficient funding, and a lack of leadership. The MAIG report noted that even among states with strong reporting programs, there is considerable variation in the number and type of mental health records submitted to NICS. It found that states that have significantly improved their reporting in the past few years share a number of common attributes including the ability to commit funding to their efforts and effective political leadership. MAIG also found a strong association between reporting levels and enactment of state laws that require or authorize agencies to report their records. According to MAIG, nine of the 10 states that had the greatest increase in records submitted to NICS between September 2010 and October 2011 have laws or policies requiring or permitting sharing mental health records with NICS. Impact of the HIPAA Privacy Rule on NICS Reporting Officials in approximately half of the states told MAIG that state health privacy laws as well as the Privacy Rule promulgated by the Department of Health and Human Services (HHS) under the Health Insurance Portability and Accountability Act (HIPAA) were potential obstacles to NICS reporting. In some states, officials cited privacy concerns as the primary impediment to reporting. HIPAA Privacy Rule Overview The HIPAA Privacy Rule established a set of federal standards to help safeguard the privacy of personal health information. Those standards include certain individual privacy rights, such as the right of access to one's health information and the right to request corrections, as well as limitations on the use or disclosure of personal health information. The rule applies to (1) health plans; (2) health care clearinghouses; and (3) health care providers who transmit health information electronically in connection with one of the HIPAA-covered financial or administrative transactions. These persons and organizations are collectively referred to as covered entities. The Privacy Rule covers protected health information (PHI) in any form that is created or received by a covered entity. PHI is defined as individually identifiable information that relates to the past, present, or future physical or mental health of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual. In the broadest sense, the Privacy Rule prohibits a covered entity from using or disclosing PHI except as expressly permitted or required by the rule. As briefly outlined below, the rule describes a range of circumstances under which it is permissible to use or disclose PHI. In all such instances covered entities can choose whether to use or disclose PHI based on their professional ethics and best judgment. The rule specifies only two circumstances when a covered entity is required to disclose PHI. A covered entity must disclose PHI to (1) the individual who is the subject of the information (i.e., patient right of access), and (2) HHS officials investigating potential violations of the rule. For a discussion on the proposed modification to the HIPAA Privacy Rule, see " HHS Proposal to Amend HIPAA Privacy Rule ." Generally, covered entities may use or disclose PHI for the purposes of treatment, payment, and other routine health care operations with few restrictions. Under other specific circumstances (e.g., disclosures to family members and friends), the rule requires covered entities to give the individual the opportunity to object to the disclosure (i.e., opt out). Importantly, the rule also permits the use or disclosure of PHI for several specified "national priority purposes" that are not directly connected to the treatment of the individual. These uses and disclosures are permitted by the rule in recognition of the important uses made of health information outside of the health care context. They include the following uses and disclosures: Required by law. Covered entities may use or disclose PHI to the extent that such use or disclosure is required by (federal or state) law and the disclosure complies with and is limited to the relevant requirements of such law. Law enforcement purposes. Covered entities may disclose PHI to law enforcement officials for certain specified law enforcement purposes. Averting a serious threat to health or safety. Consistent with applicable law and standards of ethical conduct, a health care provider may use or disclose PHI if the provider in good faith believes the use or disclosure is necessary to prevent or lessen a serious and imminent threat to the health or safety of a person or the public. Specialized government functions. Covered entities may use or disclose PHI for several specified essential government functions. For all uses or disclosures of PHI that are not otherwise permitted or required by the rule, covered entities must obtain a patient's written authorization. As discussed above, prohibiting mental health records under the GCA are typically generated by the courts that adjudicate persons as mentally defective, and by the courts and health care providers that involuntarily commit individuals to mental health facilities. While courts are not covered entities and are not subject to the HIPAA Privacy Rule, health care providers such as hospitals and state health departments are covered by the Privacy Rule and, therefore, may not use or disclose PHI for the purpose of NICS reporting without express permission under the rule. As described below, it is necessary to look to the states to determine whether such permission exists. Interaction of HIPAA Privacy Rule and State Privacy Laws Although the HIPAA Privacy Rule provides a federal floor with respect to the uses and disclosures of PHI, the overall scope of the Privacy Rule may be modulated by state law. If a state requires covered entities to disclose prohibiting mental health records to NICS, the HIPAA Privacy Rule does not prohibit that disclosure. Therefore, the Privacy Rule is most relevant as a potential obstacle where prohibiting mental health records are held by covered entities in a state that does not require disclosure of such records to NICS. This would be the case even if the state expressly allowed, but did not explicitly require, disclosure of prohibiting mental health records to NICS because merely permissive state laws are insufficient to exempt disclosure from the HIPAA Privacy Rule. As discussed below, HHS has proposed amendments to the HIPAA Privacy Rule that would permit disclosure to NICS where a state has a permissive disclosure law. It should also be noted that both types of entities—courts and health care providers—may also be subject to state health privacy laws that may be more protective of individually identifiable health information than the HIPAA Privacy Rule and other state-level requirements and policies. State laws that are more protective of privacy include those that prohibit or restrict a use or disclosure that would otherwise be permitted under the Privacy Rule, and those that provide individuals with greater access to their own health information. This final section of the report provides a basic overview of the different types of state privacy laws that may impact the sharing of prohibiting mental health records with NICS. Figure 1 summarizes state laws, as of January 1, 2013, that address the reporting of mental health records for use in firearm purchaser background checks. Twenty-three states have NICS reporting mandates. These laws require courts and, in some instances, mental health facilities to report (1) to NICS directly, or (2) to a state agency that in turn reports to NICS. As noted above, the HIPAA Privacy Rule would not bar the mandated disclosures in these states. Note that in one of the states—Delaware—reporting by mental health facilities takes the place of court reporting (see Figure 1 ). Seven states have laws that authorize, but do not require, reporting to NICS. In these states that do not mandate reporting, HIPAA-covered entities do not appear to have permission under the Privacy Rule to use or disclose PHI for the purpose of preparing and reporting mental health records to NICS. Absent a state reporting mandate, it is not clear that there are any other provisions in the Privacy Rule that provide such permission. None of the three other national priority purposes in the Privacy Rule discussed earlier (under "HIPAA Privacy Rule Overview") address reporting to federal databases for the purposes of future background checks. The disclosure of PHI for law enforcement purposes has to be (1) as required by law; (2) pursuant to various specified judicial and administrative processes and procedures such as court orders, subpoenas, and summonses; or (3) in response to one of several other specified law enforcement activities. The Privacy Rule's provisions authorizing the use or disclosure of PHI for various specialized government functions list a number of specific activities, none of which includes reporting information to the NICS databases. Finally, the rule's provisions that permit the use and disclosure of PHI to avert a serious threat to health or safety focus on two types of situations, neither of which appears to include NICS reporting. The first permits the disclosure of PHI to a person or persons reasonably able to prevent or lessen a serious and imminent threat to the health or safety of a person or the public. The second concerns alerting law enforcement authorities about an individual involved in a violent crime or who has escaped from prison or lawful custody. An additional eight states collect mental health records pursuant to state law, but these laws do not address NICS reporting. Again, without a NICS reporting mandate, HIPAA-covered entities do not appear to have permission under the Privacy Rule to use PHI for the purpose of reporting mental health records to the federal databases. These states include California, which despite the absence of a NICS reporting mandate, has one of the best NICS reporting rates for mental health records. In part this is because of a state law that requires mental health facilities to report mental health records to the California Department of Justice (DOJ). That requirement effectively removes HIPAA as an impediment to such reporting by HIPAA-covered entities. While state law is silent on DOJ reporting to NICS, California has developed a reporting infrastructure and entered into an agreement with the federal government to report mental health records to NICS. Finally, 13 states are without laws requiring or authorizing the collection or reporting of mental health records for use in firearm purchaser background checks, either at the state or federal level. Once again, HIPAA-covered entities in these states that are in possession of disqualifying mental health records appear to lack the authority under the Privacy Rule to report such information to NICS. While a detailed examination of state-level activities is beyond the scope of this report, it should be emphasized that many states collect and use mental health records (and other relevant information) pursuant to state law or policies for their own background checks of firearm purchases. Some states are "Point-Of-Contact" (POC) states, meaning that the state agency is responsible for electronically accessing NICS and for implementing and maintaining their own Brady NICS program. Often times a POC state will run the background check against the state's own records, some of which may not be in NICS. In some instances, background checks conducted by POCs may be more stringent than non-POC states because they have access to more access to disqualifying records. In addition, these states could be more thorough in their background checks because statutory prohibitions on firearm possession in these states sometimes exceed the federal prohibitions under the Brady Act. However, unlike the nationwide NICS background checks, state-level checks do not capture prohibited individuals who cross state lines to purchase long guns. HHS Proposal to Amend HIPAA Privacy Rule On January 7, 2014, HHS's Office for Civil Rights (OCR), which administers and enforces the Privacy Rule, issued a proposed rule that would modify the HIPAA Privacy Rule "to expressly permit certain HIPAA covered entities to disclose" to NICS the identities of certain individuals who are subject to the mental health disqualification under the GCA. Relying on its authority under HIPAA, which provides HHS with discretion to modify the privacy standards as appropriate but not more than once a year, HHS proposes to add a new, narrowly tailored provision to the Privacy Rule that would expressly " permit [not require] certain covered entities to disclose the minimum necessary demographic and other information for NICS reporting purposes, which would not include clinical, diagnostic, or other mental health information" (emphasis added). The modification is meant to "produce clarity regarding the Privacy Rule and help make it as simple as possible for States to report the identities of such individuals to the NICS." It would not affect the currently existing permitted uses and disclosures of PHI under the Privacy Rule, as discussed above. The rule would allow only HIPAA-covered entities to report individuals who are prohibited under the federal mental health prohibitor (18 U.S.C. §922(g)(4)) and not for other disqualifying factors under the GCA. In other words, a covered entity would not be permitted to disclose identifying information to NICS for an individual who is prohibited from possessing a firearm under 18 U.S.C. §922(g)(3)—that is, an unlawful user of, or a person who is addicted to, any controlled substance—except to the extent that such drug use is connected to being "committed to a mental institution." HHS also notes that states may have a broader mental health prohibition related to firearms, and that information related to these state prohibitors may not be reported to NICS. HHS also seeks comment from states related to the scope of the proposed rule on whether HIPAA is currently perceived as a barrier to reporting to NICS about individuals who are subject to state law firearm prohibitions and whether the final rule should address this aspect. HHS explains, however, that broadening the scope to also encompass state law mental health prohibitors could increase the likelihood that more treating providers would be permitted to report information to NICS. As currently drafted, the new provision primarily aims to cover HIPAA-covered entities performing the relevant commitment, adjudicatory, or repository functions, and not those performing solely treatment functions. Other areas where HHS seeks public comment for purposes of the final rule include whether there are states in which a type of entity not described in the proposed paragraph is responsible for NICS reporting and is one that needs to be able to receive NICS data from HIPAA-covered entities; whether, and in what circumstances, HIPAA-covered entities or other entities such as courts currently report to a records repository or directly to NICS information that is not listed in the proposed rule; what types of additional data elements—such as Social Security number, place of birth, state of residence, physical description—that HHS may permit disclosure of for purposes of reporting to NICS; and the types of additional guidance that OCR and/or NICS could issue that would be helpful for understanding the proposed rule. Should the proposed amendments to the HIPAA Privacy Rule become final, there may be a gradual increase in the number of records shared with NICS by covered entities. It should be noted, however, that states may still lack the infrastructure, capital, or political support to establish a system that allows records to be shared with NICS or an appropriate repository that shares with NICS. Conclusion During the past few years, questions have arisen with respect to the efficacy of the federal background check that is required for certain firearm transfers. Of particular congressional focus is whether enough records of individuals who are prohibited by federal law from firearm possession because they have been "adjudicated as a mental defective" are being shared with NICS, the system through which background checks are generally conducted. In particular, the question has become whether the HIPAA Privacy Rule or state privacy laws are an obstacle to the population of NICS with prohibiting mental health records. Although the HIPAA Privacy Rule currently allows disclosure of information where state law expressly requires disclosure of records to NICS, some state officials have reported that they view state health privacy laws and the HIPAA Privacy Rule as potential obstacles to NICS reporting. In response to these concerns, HHS proposed a rule that would modify the HIPAA Privacy Rule "to expressly permit [but not require] certain HIPAA covered entities to disclose" to NICS the identities of individuals who are subject to the mental health disqualification under federal firearms law. Interestingly, HHS seeks comments from states on whether its proposed rule should also permit HIPAA-covered entities to share records with NICS regarding individuals who are prohibited from firearm possession due to mental health reasons under state firearms laws, the coverage of which may be broader than the federal mental health prohibitor. Another question long unaddressed and unclear to states is whether the term "committed to a mental institution" includes individuals who are ordered by a court, board, or other lawful authority to receive outpatient treatment. To clarify this, DOJ also has proposed a rule that would clarify that the term includes both mandatory inpatient and outpatient commitments. Due to the perceived barriers under the HIPAA Privacy Rule, as well as uncertainties in the relevant federal definitions, states have been reluctant to share relevant mental health records with NICS. With clarifications in these areas under way, states could ultimately turn over more relevant records to NICS, though some may still be hindered by deficiencies in their technological capacity to share such records with NICS.

Questions about the scope and efficacy of the background checks required during certain firearm purchases have gained prominence following recent mass shootings. These background checks are intended to identify whether potential purchasers are prohibited from purchasing or possessing firearms due to one or more "prohibiting factors," such as a prior felony conviction or a prior involuntary commitment for mental health reasons. Operationally, such background checks primarily use information contained within the National Instant Criminal Background Check System (NICS) and a particular focus of the debate in Congress has been whether federal privacy standards promulgated under the Health Insurance Portability and Accountability Act (i.e., the HIPAA Privacy Rule) or state privacy laws are an obstacle to the submission of mental health records to NICS. Under the Gun Control Act of 1968 (GCA), as amended, persons adjudicated to be mentally defective or who have been committed to a mental institution are prohibited from possessing, shipping, transporting, and receiving firearms and ammunition. Neither a diagnosis of a mental illness nor treatment for a mental illness is sufficient to qualify a person as "adjudicated as a mental defective." Rather, an individual's "adjudication as a mental defective" relies upon a determination or decision by a court, board, commission, or other lawful authority. The definition of "committed to a mental institution" may apply only to inpatient settings. At least one federal court has held that the Supreme Court's recent recognition of an individual right to possess a firearm suggests that some emergency hospitalization or commitment procedures, that may not have as many procedural safeguards as formal commitment, should not be included within the meaning of "involuntary commitment" for purposes of the GCA. In 2007, Congress passed the NICS Improvement Amendments Act (NIAA), which authorizes the Attorney General to make additional grants to states to improve electronic access to records as well as to incentivize states to turn over records of persons who would be prohibited from possessing or receiving firearms. In 2012, the Government Accountability Office (GAO) reported that a variety of technological, coordination, and legal (i.e., privacy) challenges limit the states' ability to report mental health records to NICS. The HIPAA Privacy Rule, which applies to most health care providers, regulates the use or disclosure of protected health information, and it has been perceived as a potential obstacle to sharing information with NICS, especially in states that do not expressly require disclosure of such records to NICS. Moreover, courts and health care providers that generate such prohibiting mental health records may also be subject to state health privacy laws that may be more restrictive than the HIPAA Privacy Rule. In February 2013, the Department of Health and Human Services (HHS) announced its intention to amend the HIPAA Privacy Rule to remove any potential impediments to state reporting of some mental health records to NICS, and on January 7, 2014, HHS issued its proposed rule that would modify the HIPAA Privacy Rule. The Department of Justice (DOJ) also issued a proposed rule that would clarify the terms "adjudicated as a mental defective" and "committed to a mental institution."

Introduction During the past two decades, Members of Congress have demonstrated an interest in U.S. participation in the United Nations Educational, Scientific, and Cultural Organization (UNESCO) Convention Concerning the Protection of the World Cultural and Natural Heritage (popularly known as the World Heritage Convention). Under the Convention, which entered into force in 1973, countries agree to protect and preserve natural and cultural sites of exceptional ecological, scientific, or cultural importance through the World Heritage List and the List of World Heritage in Danger (Danger List). Each country that ratifies or accedes to the Convention agrees to protect listed sites within its borders and refrain from actions that might harm such sites in other countries. The World Heritage List includes 936 natural and cultural sites in 153 countries. Thirty-five sites from 28 countries are on the Danger List. As of July 12, 2011, 187 countries are parties to the Convention. The United States led the development of the Convention and was the first country to ratify it in 1973. Currently, 21 U.S. sites are included on the World Heritage List, including Yellowstone National Park, Grand Canyon National Park, and the Statue of Liberty. In July 2010, Papahānaumokuākea in Hawaii became the most recent U.S. addition to the list. Everglades National Park is the only U.S. site on the Danger List. (It was on the list from 1993 to 2007, when it was removed by the Bush Administration. In 2009, the Obama Administration requested that it again be added to the list.) Congressional perspectives on the Convention have varied. Some Members of Congress have supported the Convention, while others have expressed concern that UNESCO designation of World Heritage sites in the United States infringes on national sovereignty. Ultimately, however, U.S. participation in the Convention does not give the United Nations authority over U.S. World Heritage sites or related land-management decisions. Moreover, some Members have suggested that Congress should have a greater role in nominating U.S. sites for inclusion on the List. This report discusses the UNESCO World Heritage Convention and its mechanisms, including the World Heritage Committee and Fund. It outlines U.S. participation in the Convention, in particular the role of U.S. agencies, U.S. financial contributions, and technical assistance to World Heritage sites outside of the United States. It also addresses criteria and procedures for adding and removing sites from the World Heritage Lists. The report also addresses issues that the 112 th Congress may wish to take into account when considering U.S. participation in and funding of the Convention, including the possible impact of the Convention on U.S. sovereignty; the role of Congress in nominating U.S. sites; and the implications of including U.S. sites on the World Heritage Lists. The World Heritage Convention The World Heritage Convention was adopted by the General Conference of the United Nations Educational, Scientific, and Cultural Organization (UNESCO) on November 16, 1972. It established a World Heritage List that identifies cultural and natural heritage sites of "outstanding universal value." The Convention's purpose is to identify and help protect worldwide sites of such exceptional ecological, scientific, or cultural importance that their preservation is a global responsibility. The Convention also created a List of World Heritage in Danger, which is composed of sites on the World Heritage List that face significant natural or man-made risk and dangers. A site must be on the World Heritage List to be considered for inclusion on the Danger List. Countries that are party to the Convention agree to protect listed sites and monuments within their borders and refrain from actions that might harm such sites in other countries. The Convention recognizes the sovereignty of individual countries, stating that the responsibility for protecting and conserving World Heritage sites belongs primarily to the country where the site is located. States Parties to the Convention (hereinafter referred to as "parties") agree to help provide such protection through the World Heritage Committee and Fund. World Heritage Committee The World Heritage Committee, which is comprised of 21 members elected by the parties to the Convention for six-year terms, oversees implementation of the World Heritage Convention. Its primary responsibility is selecting the sites nominated by parties to be included on the World Heritage List. The Committee also monitors the sites and may make recommendations to improve the management of a site or place a site on the Danger List. In extreme circumstances, it can remove a property from the World Heritage List if it determines that a country is not fulfilling its obligations to protect and preserve the site. Committee decisions are made by a two-thirds majority of Committee members present and voting. Generally, however, Committee decisions are made by consensus—particularly those that add sites to the World Heritage List or Danger List. The Committee has three intergovernmental and non-governmental advisory bodies to provide advice during its deliberations. They include (1) the International Union for Conservation of Nature (IUCN); (2) the International Council on Monuments and Sites (ICOMOS); and (3) the International Centre for the Study of the Preservation and Restoration of Cultural Property (ICCROM). Some Committee members have advocated improving the Committee's operations under an ever-growing work load by focusing on monitoring conditions at existing sites rather than adding new sites. Nevertheless, new sites are added regularly. The UNESCO World Heritage Centre is the Convention Secretariat, and plays no role in decisions of the Committee. Current members of the Committee are Australia , Bahrain , Barbados , Brazil , Cambodia , China , Egypt , Estonia , Ethiopia , France , Iraq , Jordan , Mali , Mexico , Nigeria , Russia , South Africa , Sweden , Switzerland , Thailand , and the United Arab Emirates . World Heritage Fund The World Heritage Committee administers the World Heritage Fund (the Fund), which provides technical and financial assistance to countries requesting it. Such assistance can include the provision of experts, technicians, skilled labor, equipment, and training, as well as emergency assistance. World Heritage technical assistance must be requested by a member country in an agreement with the Committee, which sets conditions for assistance. The majority of the Fund's income comes from required member country contributions amounting to about 1% of that member's UNESCO dues. The Fund also receives voluntary contributions from governments (including the United States), foundations, individuals, and national and international promotional activities. Total funding is usually about $4 million each year. In recent years, requests have largely exceeded available funds, and the Committee has had to allocate funds according to the urgency of the request with priority given to the most threatened properties. U.S. Participation The United States generally supports the World Heritage Convention. It led the creation of the Convention and ratified it in 1973. It has also served multiple terms on the World Heritage Committee, with its most recent term ending in October 2009. Twenty-one U.S. sites are included on the World Heritage List. The most recent site, Papahānaumokuākea in Hawaii, was added in July 2010. Everglades National Park is the only U.S. site included on the Danger List. Preparations are currently underway to nominate new U.S. World Heritage Sites for likely submission to the World Heritage Committee in late 2012 or early 2013. Obama Administration The Obama Administration has stated the importance of preserving World Heritage Sites around the globe and advocated continued U.S. participation in the World Heritage Committee. On June 24, 2009, Secretary of the Interior Ken Salazar announced that the Administration was taking steps to include Everglades National Park on the Danger List. (The Bush Administration had removed the site from the List in 2007, arguing that the United States had made considerable progress in conserving the park.) When announcing the decision, Salazar stated, "The Everglades was hastily removed from the list in 2007 at the request of the previous Administration without adequate consultations with the National Park Service, the state of Florida and other stakeholders." On July 30, 2010, the World Heritage Committee inscribed the park on the Danger List. Bush Administration The Bush Administration supported U.S. participation in the World Heritage Convention. In 2005, the Administration ran for a seat on the World Heritage Committee, and in January 2008 it submitted a "Tentative List" of potential U.S. nominations to the World Heritage List. This Tentative List of 14 new U.S. sites represented the first revision of the U.S. nomination list since the original list was developed in 1982. At the same time, the Administration expressed concern with the growing number of World Heritage List inscriptions, particularly from regions already well-represented on the List. It argued that given the limited resources of the World Heritage Fund, parties to the Convention should focus on protecting and conserving existing sites rather than adding new ones. The Administration expressed concern that the Danger List has been seen by many, if not most, parties as a negative designation rather than a mechanism to rally global support for threatened sites. It also contended that the World Heritage Centre and Committee staff are stretched by an increasing workload and no commensurate increases in financial resources. Agency Roles and U.S. Nominations The National Historic Preservation Act Amendment of 1980 ( P.L. 96-515 ) charges the Department of the Interior with coordinating and directing U.S. activities under the World Heritage Convention, in cooperation with the Departments of State, Commerce, and Agriculture; the Smithsonian Institution; and the Advisory Council on Historic Preservation. The National Park Service administers the U.S. World Heritage program, processing U.S. nominations and handling other daily program operations. It administers sites with funds appropriated by Congress, except for several sites that are owned by states, private foundations, the Commonwealth of Puerto Rico, or Native American tribes. To be nominated as a U.S. site, property owners must engage in an extensive application process through the National Park Service. The Assistant Secretary for Fish and Wildlife and Parks, who is the designated executive official responsible for the U.S. program, periodically considers applications and nominates properties on behalf of the United States. The Assistant Secretary may nominate only non-federal property for inclusion on the list if the property owner agrees to the nomination in writing. The Assistant Secretary is required to notify the House Committee on Natural Resources and the Senate Committee on Energy and National Resources of U.S. selections prior to nominating the sites. U.S. Contributions U.S. contributions to the World Heritage Convention are provided through both U.S. assessed contributions to UNESCO and U.S. voluntary contributions to the World Heritage Fund. The U.S. rate of assessment for the UNESCO regular budget is 22%, resulting in an assessed contribution of approximately $80,915,000 for FY2010. The World Heritage Fund is financed by compulsory contributions of States Parties to the Convention as well as voluntary contributions. The compulsory contributions are set at a uniform rate that cannot be in excess of 1% of the States Parties assessed contributions to the regular budget. In FY2010, the United States was assessed an estimated $700,000 to the Fund. It pays this assessment through voluntary contributions to the World Heritage Fund through the UNESCO International Contributions for Scientific, Education and Cultural Activities (ICSECA) of the International Organizations and Programs (IO&P) account. In the past decade, U.S. contributions to the Convention have ranged from a low of $428,604 in FY2000 to a high of $700,000 from FY2008 through FY2010. (See Table 1 .) ICSECA includes funding for a number of UNESCO activities and programs, including the World Heritage Convention, the Intergovernmental Oceanographic Commission (IOC), and others. Though the United States withdrew from UNESCO from 1984 to 2003, it continued to provide financial assistance to the Convention through annual voluntary contributions. In 2000, however, due to concerns over U.S. sovereignty and the limited role of Congress in nominating U.S. World Heritage sites, Congress passed foreign operations appropriations legislation that prohibited funding to the World Heritage Fund for FY2001. Technical Assistance and Other Related Programs The National Park Service works independently and with other agencies to provide technical assistance to countries that have ratified or acceded to the World Heritage Convention. The Park Service also maintains bilateral relationships with counterpart agencies in other countries that allow them to provide in-country training and assistance at non-U.S. World Heritage sites. Additionally, it supports a sister park program where World Heritage sites in the United States and other countries are paired so that staff can exchange information on site management issues. In 2009, the Park Service launched the U.S. World Heritage Fellows program, which offers training opportunities to qualified candidates from developing countries aiming to learn from U.S. experiences in managing and protecting World Heritage sites. Other U.S. government agencies and programs provide support to the UNESCO World Heritage sites outside of the United States. The U.S. Agency for International Development (USAID) has provided technical assistance to sites in a number of countries, including Bulgaria, Macedonia, and Mali. Moreover, the Ambassador's Fund for Cultural Preservation, which was established by Congress in 2001, provides direct grant support to cultural heritage preservation projects in developing countries, including World Heritage sites. The United States and the List of World Heritage in Danger Everglades National Park is the only U.S. site currently included on the List of World Heritage in Danger (Danger List). It was first added to the Danger List in December 1993 because of the severe effects of Hurricane Andrew combined with other issues, such as excess nutrient pollution from agricultural activities, urban growth, and alteration of natural water flows. As previously discussed, at the request of the Bush Administration the World Heritage Committee removed the Everglades from the Danger List in June 2007 due to U.S. progress in rehabilitating the site. In 2009, the Obama Administration requested that the park be added to the Danger List. It was inscribed on July 30, 2010, because of concerns that the park's "aquatic ecosystem continues to deteriorate." One other U.S. World Heritage site—Yellowstone National Park—had previously been on the Danger List. In June 1995, the Department of the Interior notified the World Heritage Committee that Yellowstone National Park was in danger and requested an on-site visit. In December 1995, a team organized by the World Heritage Committee visited the park and decided to add it to the Danger List. When explaining its decision, the Committee cited several threats—including plans for a gold mine approximately one mile from the park, and the introduction of non-native fish into Yellowstone Lake. The Committee removed Yellowstone from the Danger List in July 2003, recognizing U.S. progress in addressing the issues that led to its inclusion on the List. Congress and the World Heritage Convention In 1973, the Senate provided advice and consent to ratification of the World Heritage Convention, and until the mid-1990s, Members of Congress from both parties generally supported U.S. participation in the Convention. In 1995, when Yellowstone National Park was added to the World Heritage List in Danger, some Members expressed concern that UNESCO designation of World Heritage sites on U.S. land would infringe on national sovereignty. Some Members also maintained that Congress did not have enough of an influence on which U.S. sites were nominated to the World Heritage List. Consequently, from the 104 th to 107 th Congresses, Members of the House and Senate introduced variations of a bill entitled the American Land Sovereignty Protection Act (Land Sovereignty Act), which sought to amend the National Historic Preservation Act Amendments of 1980 ( P.L. 96-515 ), to give Congress a larger say in which U.S. sites are nominated for the World Heritage List. The House of Representatives passed variations of the Land Sovereignty Act in the 104 th , 105 th , and 106 th Congresses. In 2000, due to similar concerns regarding U.S. sovereignty and the role of Congress in nominating U.S. sites to the World Heritage List, Congress included Section 580 in the Foreign Operations, Export Financing, and Related Appropriations Act, 2001, which stated that none of the funds appropriated or made available by the Act may be provided for the UNESCO World Heritage Fund ( P.L. 106-429 ). No related bills were introduced in the 109 th through 111 th Congresses. Members of Congress have also expressed support for the objectives of the World Heritage Convention. In some cases, they have sought to include sites in their states or districts on the World Heritage List or the Danger List. Some have also demonstrated support for the Convention by introducing legislation. During the 112 th Congress, for instance, Senator John Kerry introduced S.Res. 126 , which supports the mission of the World Heritage Convention and commends UNESCO and its role in preserving and celebrating natural and cultural sites worldwide. Policy Issues for Congress Members of the 112 th Congress may take the following issues into account when considering current or future U.S. World Heritage sites and U.S. participation in and funding of the World Heritage Convention and its mechanisms. Impact on U.S. Sovereignty Opponents of the World Heritage Convention have argued that U.S. participation in the Convention may allow UNESCO to influence the management of U.S. parks and monuments. Ultimately, however, U.S. participation in the Convention does not give UNESCO or the United Nations authority over U.S. World Heritage sites or related land-management decisions. In testimony before Congress, officials from the Departments of State and Interior stated that under the terms of the World Heritage Convention, site management and sovereignty remain with the country where the site is located. They emphasized that the Convention, including the World Heritage Committee, has no role or authority beyond listing or de-listing sites and offering technical advice and assistance to parties. In addition, supporters have emphasized that parties to the Convention voluntarily nominate sites for inclusion on the Heritage Lists and agree to develop laws and procedures to protect the sites using their own domestic laws. They also maintain that many U.S. World Heritage sites already receive protection under U.S. law as national monuments or parks. Supporters of the Convention point to the text of the World Heritage Convention, which recognizes the sovereignty of states where World Heritage sites are located "without prejudice to property rights provided by national legislation." The Convention also states that countries where sites reside are responsible for identifying, protecting, and conserving the site. Role of the Legislative Branch in Selecting U.S. World Heritage Sites In the past, some Members of Congress have expressed concern with what they view as the limited role of Congress in nominating U.S. World Heritage Sites. Under the authority of P.L. 96-515 , the National Historic Preservation Act Amendments of 1980, Congress is involved in the nomination process only to the extent that the Assistant Secretary for Fish and Wildlife and Parks is required to notify the House Committee on Natural Resources and the Senate Committee on Energy and National Resources regarding which sites he or she plans to nominate for the List. Some Members of Congress have expressed concern that the executive branch could guide domestic land use policies—including the designation of World Heritage sites—without consulting Congress. In particular, some suggest that federal agencies could take into account the rules of the World Heritage program when making land-use decisions, even if UNESCO has no control of U.S. World Heritage sites. Implications for Inclusion on the World Heritage List Supporters of U.S. participation in the World Heritage Convention emphasize that there are a number of benefits to being included on the World Heritage List. They maintain that a site's inclusion on the List increases international knowledge, interest, and awareness of the property. In 1993, for example, the World Heritage Committee supported the United States in protecting the Glacier Bay National Park and Preserve by publicizing U.S. concerns about a Canadian pit mine opening near the Bay, reminding Canada of its obligation under the Convention. Similarly, in 2000, Mexico dropped plans to develop a salt plant on the shore of a gray whale breeding ground in a protected area designated as a World Heritage site in Mexico. Supporters also suggest that publicity from a site's World Heritage listings may lead to increased tourism, which is often beneficial to economies surrounding the site. Moreover, some emphasize that international organizations, national governments and foundations often give priority to World Heritage sites when distributing technical and financial assistance. The National Park Service maintains that such assistance is particularly significant given the relatively limited amounts of funding distributed each year by the World Heritage Committee through the World Heritage Fund (approximately $4 million). Finally, supporters emphasize that a World Heritage listing facilitates an exchange of information that benefits individual sites, particularly those that are lesser known or in countries that do not have the information or financial resources to maintain them. Opponents of the World Heritage Convention often cite concerns regarding the impact of World Heritage designation on private property located next to the sites. In particular, some are troubled by the World Heritage Committee guidelines that allow for buffer zones around sites. Opponents suggest that establishing buffer zones in accordance with the Convention may have an impact on the use of privately owned land near World Heritage sites. Furthermore, some opponents argue that environmental advocacy groups, or in some cases the federal government, may use the World Heritage Convention to influence public, and sometimes private, land management. Opponents, for example, took issue with the Clinton Administration's efforts to add Yellowstone National Park to the Danger List. They argued that the Administration was advocating Yellowstone's inclusion on the Danger List to bring international attention to the opening of a gold mine on nearby private and U.S. Forest Service land, possibly placing additional pressure on the company to not develop the mine. Procedures and Criteria for Adding and Removing Sites from the World Heritage Lists The procedures for adding and removing sites from the World Heritage List and the Danger List are outlined in the "Operational Guidelines for the Implementation of the World Heritage Convention," developed by the World Heritage Committee. The guidelines are the main working tool for the Committee and are revised periodically to reflect the Committee's ongoing experience and evolving situations. They were last updated in January 2008. World Heritage List Adding Sites to the List In order for a site to be added to the World Heritage List, parties must complete a nomination document that identifies and describes the site, provides justification for its addition to the list, and highlights conservation and other factors affecting the site. The Convention's advisory bodies evaluate whether a site meets the criteria for the list and make recommendations to the Committee. The recommendations fall into three categories: (1) properties (sites) that are recommended for inscription without reservation, (2) properties that are not recommended for inscription, and (3) nominations that are recommended for referral or deferral. To be selected, sites must meet one or more of a set of criteria demonstrating "outstanding universal value." Sites meeting such criteria might be a masterpiece of human creative genius; represent an outstanding example of a type of building, architecture or technological ensemble, or landscape that illustrates significant stages in human history; or contain superlative natural phenomena or areas of exceptional beauty. The Committee also takes into consideration the integrity and/or authenticity of the site and adequate site protection and management. (See Appendix A for the full list of criteria for outstanding universal value.) The Committee considers the recommendations of the advisory bodies and decides whether a site should be inscribed on the World Heritage List. The Committee may refer a proposed site back to the party for additional information or defer the nomination until additional in-depth study or assessment is completed or the party submits a substantial revision. Removing Sites from the List The Committee may delete a property from the World Heritage List if it determines that the property has deteriorated to the extent that it has lost the characteristics that led to its inclusion on the list. It may also be removed from the list if the Committee determines that the party did not take the measures necessary to protect the site from threats and dangers within the agreed-to time frame. If these conditions apply, the party on whose territory the site is situated is required to inform the World Heritage Convention Secretariat. Other parties may also inform the Secretariat if they believe a site should be deleted from the list. In such cases, the Secretariat will verify the source and contents of the information and consult with the concerned party. Once a site has been recommended for deletion by a party, the Secretariat will invite the relevant advisory bodies to comment on the information received. The Committee will then consider all the available information, and can vote to remove a site from the list by a two-thirds majority of members present and voting. A site cannot be removed from the list unless the concerned party has been consulted. Since the Convention was established, only two sites have been deleted from the World Heritage List. In 2007, the Arabian Oryx Sanctuary in Oman was delisted after the size of the sanctuary was reduced by 90%. In June 2009, the Dresden Elbe Valley in Germany was delisted because a four-lane bridge was built in the middle of the site. Both countries concurred with the removals. List of World Heritage in Danger Sites on the World Heritage List that are considered to be seriously endangered may be placed on the Danger List. These are sites that are in particular danger for which "major operations are necessary and ... assistance has been requested.... " Two-thirds of Committee members present and voting are required to add or remove a site from the Danger List, though generally such decisions are made by consensus. Adding Sites to the Danger List The World Heritage Committee is responsible for adding and removing sites to the Danger List. The Committee may add sites to the Danger List when it determines that the property is threatened by serious and specific danger, major operations are necessary for the conservation of the property, and assistance under the Convention has been requested for the property. Article 11(4) of the Convention states that sites "threatened by serious and specific dangers" should be placed on the list. Examples of such dangers include the threat of disappearance caused by accelerated deterioration; large-scale public or private projects or rapid urban or tourist development projects; destruction caused by changes in the use or ownership of the land; major alterations due to unknown causes; the outbreak or the threat of an armed conflict; and serious fires, earthquakes, landslides, volcanic eruptions; and other similar circumstances. (See Appendix B for a full list of criteria for inclusion on the Danger List.) The criteria for determining whether a site should be placed on the Danger List are divided into two types of danger: "ascertained dangers" that are permanent and proven dangers, and "potential dangers" that could have "deleterious effects on its [the site's] inherent characteristics." The criteria for cultural sites and natural sites are different. Cultural sites under consideration for the Danger List must meet at least one of several ascertained or potential danger criteria, including serious deterioration of materials; significant loss of historical authenticity; lack of conservation policy; outbreak of threat or armed conflict; and gradual changes due to geological, climatic, or other environmental factors. Natural sites under consideration must meet at least one of ascertained or potential danger criteria, wich include (1) a serious decline in the population of the species of outstanding universal value for which the property was legally established to protect, (2) human encroachment on boundaries or in upstream areas which threaten the integrity of the property, or (3) planned resettlement or development projects within the property or so situated that the impacts threaten the property. When considering a site for the Danger List, the Committee should consult with the concerned party to develop a program of corrective measures that includes analysis of the present condition of the site, threats to the property, and the feasibility of implementing corrective measures. In some instances, the Committee will send a group of observers and/or advisors from its advisory bodies to visit the site, evaluate the nature of the threats, and propose recommendations. Upon receiving and considering all relevant information, the Committee determines whether the site should be added to the Danger List. Once a site is added, the Committee will define the program of corrective action to be undertaken. Some parties maintain that the consent of the relevant party must be attained before a site may be placed on the Danger List. In the past, the United States has both supported and opposed this point of view. Removing Sites from the Danger List Generally, sites are removed from the Danger List because the World Heritage Committee feels that the conditions of the site have improved to the point where the site is no longer in imminent danger. However, the Committee may also remove a property from the Danger List when it determines (1) "the property has deteriorated to the extent that it has lost those characteristics which determined its inclusion in the World Heritage List" and (2) "the intrinsic qualities of a World Heritage site were already threatened at the time of its nomination by action of man and where the necessary corrective measures as outlined by the party at the time, have not been taken within the time proposed." To date, no site has been removed from the Danger List for these reasons. If such a removal were to occur, however, the party on whose property the site is located would inform the Convention Secretariat if (1) the site has seriously deteriorated or (2) the necessary corrective measures have not been taken within the time proposed. Other parties and organizations may also recommend a site be removed from the list. In these cases, the Secretariat will determine the validity and source of the information and consult with the concerned party. The Secretariat forwards all relevant information to the Committee advisory bodies, who make recommendations to the Committee. The Committee then votes on whether a site should be removed from the Danger List. Appendix A. Criteria for Outstanding Universal Value Source: "Operational Guidelines for the Implementation of the World Heritage Convention," January 2008, pp. 20-21. "The [World Heritage] Committee considers a property as having outstanding universal value if the property meets one or more of the following criteria. Nominated properties shall therefore: i) represent a masterpiece of human creative genius; ii) exhibit an important interchange of human values, over a span of time or within a cultural area of the world, on developments in architecture or technology, monumental arts, town-planning or landscape design; iii) bear a unique or at least exceptional testimony to a cultural tradition or toa civilization which is living or which has disappeared; iv) be an outstanding example of a type of building, architectural or technological ensemble or landscape which illustrates (a) significant stage(s) in human history; v) be an outstanding example of a traditional human settlement, land-use, or sea-use which is representative of a culture (or cultures), or human interaction with the environment especially when it has become vulnerable under the impact of irreversible change; vi) be directly or tangibly associated with events or living traditions, with ideas, or with beliefs, with artistic and literary works of outstanding universal significance. (The Committee considers that this criterion should preferably be used in conjunction with other criteria); vii) to contain superlative natural phenomena or areas of exceptional natural beauty and aesthetic importance; viii) to be outstanding examples representing major stages of earth's history, including the record of life, significant on-going geological processes in the development of landforms, or significant geomorphic or physiographic features; ix) to be outstanding examples representing significant on-going ecological and biological processes in the evolution and development of terrestrial, fresh water, coastal and marine ecosystems and communities of plants and animals; and x) to contain the most important and significant natural habitats for in-situ conservation of biological diversity, including those containing threatened species of outstanding universal value from the point of view of science or conservation." Appendix B. Criteria for Inclusion on the List of World Heritage in Danger Source: "Operational Guidelines for the Implementation of the World Heritage Convention," January 2008, pp. 48-49. "Criteria for Cultural Sites—List of World Heritage in Danger Ascertained danger: i) serious deterioration of materials; ii) serious deterioration of structure and/or ornamental features; iii) serious deterioration of architecture or town-planning coherence; iv) serious deterioration of urban or rural space, or the natural environment; v) significant loss of historical authenticity; vi) important loss of cultural significance; or Potential danger: i) modification of juridical status of the property diminishing the degree of its protection; ii) lack of conservation policy; iii) threatening effects of regional planning projects; iv) threatening effects of town planning; v) outbreak of threat or armed conflict; vi) gradual changes due to geological, climatic, or other environmental factors." "Criteria for Natural Sites—List of World Heritage in Danger Ascertained danger: i) A serious decline in the population of the endangered species or the other species of outstanding universal value for which the property was legally established to protect, either by natural factors such as disease or by man-made factors such as poaching; ii) Severe deterioration of the natural beauty or scientific value of the property, as by human settlement, construction of reservoirs which flood important parts of the property, industrial and agricultural development including use of pesticides and fertilizers, major public works, mining, pollution, logging, firewood collection, etc.; iii) Human encroachment on boundaries or in upstream areas which threaten the integrity of the property; or Potential danger: i) a modification of the legal protective status of the area; ii) planned resettlement or development projects within the property or so situated that the impacts threaten the property; iii) outbreak or threat of armed conflict; iv) the management plan or management system is lacking or inadequate, or not fully implemented."

The United Nations Educational, Scientific, and Cultural Organization (UNESCO) Convention Concerning the Protection of the World Cultural and Natural Heritage (the World Heritage Convention) identifies and helps protect international sites of such exceptional ecological, scientific, or cultural importance that their preservation is considered a global responsibility. Under the Convention, which entered into force in 1975, participating countries nominate sites to be included on the World Heritage List and the List of World Heritage in Danger (Danger List). Countries that are party to the Convention agree to protect listed sites within their borders and refrain from actions that might harm such sites in other countries. Currently, the World Heritage List is composed of 936 natural and cultural sites in 153 countries, and the Danger List includes 35 sites from 28 countries. One hundred and eighty-seven countries, including the United States, are party to the Convention. The Obama Administration has requested and provided voluntary contributions to the World Heritage Fund and generally supports U.S. participation in the Convention. The Department of the Interior National Park Service administers the U.S. World Heritage program, processing U.S. nominations and handling other daily program operations. It administers sites with funds appropriated by Congress, except for several sites that are owned by states, private foundations, the Commonwealth of Puerto Rico, or Native American tribes. Twenty-one sites in the United States are currently included on the World Heritage List, including the Statue of Liberty and Yellowstone National Park. In July 2010, Papahānaumokuākea in Hawaii became the latest U.S. site to be added to the list. Secretary of the Interior Ken Salazar announced in June 2009 that the Obama Administration was taking steps to include Everglades National Park on the Danger List. The site was inscribed in July 2010. (The George W. Bush Administration had removed the site from the Danger List in 2007, maintaining that the United States had made considerable progress in conserving the park.) Members of Congress have generally supported the World Heritage Convention. The Senate unanimously provided advice and consent to ratification of the Convention in 1973, and some Members have supported the inclusion of sites on the World Heritage List or Danger List. In the mid-1990s, some Members expressed concern that designating U.S. lands and monuments as World Heritage sites would infringe on national sovereignty. Ultimately, however, U.S. participation in the Convention does not give UNESCO or the United Nations authority over U.S. World Heritage sites or related land-management decisions. In addition, some Members have expressed concern with what they view as the limited role of Congress in nominating U.S. World Heritage Sites. Under current law, Congress is involved in the nomination of U.S. sites only to the extent that the Assistant Secretary for Fish and Wildlife and Parks is required to notify the House Committee on Natural Resources and the Senate Committee on Energy and National Resources regarding which sites he or she plans to nominate for inclusion on the World Heritage List. This report provides background information on the World Heritage Convention, outlines U.S. participation and funding, and highlights criteria for adding and removing sites from the World Heritage Lists. It discusses possible issues for the 112th Congress, including the Convention's possible impact on U.S. sovereignty, the role of the legislative branch in designating sites, and the potential implications for a site's inclusion on the Lists. The report will be updated as events warrant.

Background Firefighting activities are traditionally the responsibility of states and local communities. As such, funding for firefighters is provided mostly by state and local governments. During the 1990s, shortfalls in state and local budgets, coupled with increased responsibilities (i.e., counterterrorism) of local fire departments, led many in the fire community to call for additional financial support from the federal government. While federally funded training programs existed (and continue to exist) through USFA's National Fire Academy, and while federal money has been available to first responders for counterterrorism training and equipment through the Department of Justice, there did not exist a dedicated program, exclusively for firefighters, which provided federal money directly to local fire departments to help address a wide variety of equipment, training, and other firefighter-related needs. Authorizations: The FIRE Act and the SAFER Act During the 106 th Congress, many in the fire community asserted that local fire departments require and deserve greater support from the federal government. In response, H.R. 1168 , the Firefighter Investment and Response Enhancement (FIRE) Act, was introduced on March 17, 1999, by Representative Pascrell. The bill authorized the Director of the Federal Emergency Management Agency (FEMA) "to make grants to fire departments for the purpose of protecting the public and firefighting personnel against fire and fire-related hazards." In the Senate, the FIRE Act was introduced by Senator Dodd ( S. 1941 ) and Senator Campbell ( S. 1899 ). Ultimately, FIRE Act language was agreed to in the Senate by unanimous consent as an amendment offered by Senator Dodd to the FY2001 National Defense Authorization Act ( P.L. 106-398 , signed into law on October 30, 2000). Title XVII of P.L. 106-398 amended the Federal Fire Prevention and Control Act ( P.L. 93-498 ) to establish a new office in FEMA to administer grants to fire departments and fire prevention organizations for a variety of purposes, including hiring and training personnel, prevention programs, equipment and facilities, and public education. The law stipulated that volunteer departments receive a proportion of the total grant funding that is not less than the proportion of the U.S. population that those departments protect. Meanwhile, FEMA was directed to conduct an 18-month study (in conjunction with the National Fire Protection Association) on the need for federal assistance to state and local communities to fund firefighting and emergency response activities. The study, entitled, A Needs Assessment of the U.S. Fire Service , was released in January 2003 and found that many fire departments—particularly volunteer companies in rural communities—report shortfalls in facilities, equipment, and training of personnel. For firefighter assistance, P.L. 106-398 authorized $100 million for FY2001 and $300 million for FY2002. However, in the wake of the September 11, 2001 terrorist attack on the World Trade Center and the Pentagon, the Senate amended the FY2002 Department of Defense Authorization Act ( S. 1438 ) to include language providing increased authorization levels for the Assistance to Firefighters Program. An additional increase was inserted during the House-Senate conference on the defense authorization bill, authorizing the program at $900 million per year through FY2004, and expanding the scope of the grants to include equipment and training to help firefighters respond to a terrorist attack or an attack using weapons of mass destruction. The bill was signed into law ( P.L. 107-107 ) on December 28, 2001. With the authorization of the fire grant program expiring on September 30, 2004, the 108 th Congress took up fire act reauthorization legislation. On April 1, 2004, Representative Boehlert introduced H.R. 4107 —the Assistance to Firefighters Grant Reauthorization Act of 2004. H.R. 4107 sought to extend the authorization through FY2007. The USFA Administrator was specifically designated as the entity who shall administer the program. Additionally, H.R. 4107 sought to increase the current award caps for grant recipients, while reducing required cost-sharing nonfederal matches. Of perhaps greatest controversy was a provision which would prohibit grant recipients from discriminating against or prohibiting firefighters from engaging in volunteer firefighting activities in other jurisdictions during off-duty hours. The House Committee on Science held a hearing on H.R. 4107 on May 12, 2004. On May 11, 2004, the Senate version of the fire grant reauthorization was introduced by Senator Dodd. S. 2411 , the Assistance to Firefighters Act of 2004, sought to authorize the fire grant program through FY2010 and designate the Secretary of the Department of Homeland Security as the program's administering authority. The Senate Committee on Commerce, Science and Transportation held a hearing on S. 2411 on July 8, 2004. Unlike the House bill, S. 2411 did not contain a provision on volunteer firefighter discrimination. On June 17, 2004, the text of S. 2411 was adopted as an amendment (offered by Senator Dodd) to the FY2005 National Defense Authorization Act ( S. 2400 , Division D, Sections 4001-4013). On June 23, 2004, S. 2400 was passed by the Senate and incorporated into the House Defense Authorization bill ( H.R. 4200 ). On October 9, 2004, the House and Senate approved the Conference Agreement on H.R. 4200 ( H.Rept. 108-767 ). Title XXXVI of H.R. 4200 (Assistance to Firefighters Grant Program Reauthorization Act of 2004) reauthorized the fire grant program at $900 million for FY2005, $950 million for FY2006, and $1 billion for each of the fiscal years 2007 through 2009. Award caps were raised, nonfederal matching requirements were lowered, eligibility was extended to include nonaffiliated emergency medical services (i.e. ambulance services not affiliated with fire departments), and the scope of grants was expanded to include firefighter safety R&D. H.R. 4200 did not contain the provision on volunteer firefighter discrimination. The reauthorization legislation designated the USFA Administrator as the administering authority of the fire grant program. H.R. 4200 was signed into law ( P.L. 108-375 ) on October 28, 2004. Section 3603 of P.L. 108-375 directed USFA, in conjunction with the National Fire Protection Association, to assess the needs and capacity of fire departments and to measure the impact of the fire grant program in meeting the needs of the fire service. In October 2006, the USFA released two studies addressing these issues. A related issue is the role of the federal government in assisting fire departments to hire personnel. In the 108 th Congress, Congress enacted the Staffing for Adequate Fire and Emergency Response Firefighters (SAFER) Act as Section 1057 of the FY2004 National Defense Authorization Act ( P.L. 108-136 ). The SAFER Act authorizes federal grants of over $1 billion per year through 2010 directly to fire departments for the hiring of firefighters and recruitment and retention of volunteer firefighters. Appropriations From FY2001 through FY2003, the Assistance to Firefighters Grant (AFG) Program (as part of USFA/FEMA) received its primary appropriation through the VA-HUD-Independent Agencies Appropriation Act. In FY2004, the Assistance to Firefighters Program began to receive its annual appropriation through the House and Senate Appropriations Subcommittees on Homeland Security. The program received an appropriation of $100 million in FY2001 (its initial year), $360 million in FY2002, $745 million in FY2003, $746 million in FY2004, $650 million in FY2005, $539 million in FY2006, $547 million in FY2007, and $560 million in FY2008. Table 1 shows recent appropriated funding for firefighter assistance. FY2008 The Administration proposed $300 million for fire grants in FY2008, a 45% cut from the FY2007 level. No funding was proposed for SAFER grants. The total request for firefighter assistance was 55% below the FY2007 level for fire and SAFER grants combined. The FY2008 budget proposal would have eliminated grants for wellness/fitness activities and modifications to facilities for firefighter safety. The budget justification requested funding for "applications that enhance the most critical capabilities of local response to fire-related hazards in the event of a terrorist attack or major disaster." The budget justification also stated that the requested level of funding is "an appropriate level of funding given the availability of significant amounts of funding for first responder preparedness missions from other Department of Homeland Security (DHS) grant programs which are better coordinated with state and local homeland security strategies and, unlike AFG, are allocated on the basis of risk." The Consolidated Appropriations Act of 2008 ( P.L. 110-161 ) provided $560 million for fire grants and $190 million for SAFER grants, a total of $750 million for firefighter assistance in FY2008. As stated in the Joint Explanatory Statement accompanying P.L. 110-161 , $3 million was made available for foam firefighter equipment used in remote areas, to be competitively awarded. GAO was directed to review the application and award process for fire and SAFER grants, and FEMA was directed to peer review all grant applications that meet criteria established by FEMA and the fire service. FY2009 The Administration proposed $300 million for fire grants in FY2009, a 46% cut from the FY2008 level of $560 million. No funding was proposed for SAFER grants. The total request for firefighter assistance was 60% below the FY2008 level for fire and SAFER grants combined. According to the budget justification, "the Administration believes that $287 million is an appropriate level of funding given the availability of significant amounts of funding for first responder preparedness missions from other DHS grant programs which are coordinated with state and local homeland security strategies and, unlike AFG, are allocated on the basis of risk." Priority will be given to applications that enhance capabilities needed for terrorism response and other major incidents. Funding will only be available for critical response equipment, training, and personal protective gear, and will not be available for wellness/fitness activities or modifications to facilities for firefighter safety. On June 19, 2008, the Senate Appropriations Committee approved the FY2009 appropriations bill for the Department of Homeland Security ( S. 3181 ; S.Rept. 110-396 ). The bill would provide $750 million for firefighter assistance, including $560 million for fire grants and $190 million for SAFER grants. This is the same funding level approved for FY2008. The Committee directed DHS to continue the present practice of funding applications according to local priorities and those established by the U.S. Fire Administration, and further directed DHS to continue direct funding to fire departments and the peer review process. Additionally, $3 million was made available for foam firefighter equipment used in remote areas. On June 24, 2008, the House Appropriations Committee approved its version of the FY2009 appropriations for the Department of Homeland Security. The Committee would provide $800 million for firefighter assistance, consisting of $570 million for fire grants and $230 million for SAFER grants. The Committee directed FEMA to continue granting funds directly to local fire departments and to include the U.S. Fire Administration during the grant administration process, while also maintaining an all-hazards focus and not limiting the list of eligible activities. The Committee would continue the requirement that FEMA peer review grant applications that meet criteria established by FEMA and the fire service, rank order applications according to peer review, fund applications according to their rank order, and provide official notification detailing why applications do not meet the criteria for review. The Committee also directed FEMA to encourage regional applications. Issues A primary issue in the 110 th Congress is how appropriations for fire grants should compare with the authorized levels of $1 billion for those years. The Administration's budget proposals have typically recommended significant cuts for fire grants, as well as zero funding for SAFER grants. Opponents of the cuts have argued that the reduced levels are inadequate to meet the needs of fire departments, while the Administration has cited the availability of other risk-based DHS first responder grant programs, and has argued that reduced levels for AFG are sufficient to enhance critical capabilities in the event of a terrorist attack or major disaster. Aside from budget issues, an ongoing issue has been the focus of the fire grant program. Administration budget proposals have sought to shift the priority of the fire grant program to terrorism preparedness. Firefighting groups have questioned this proposed shift, arguing that the original purpose of the Fire Act (enhancing basic firefighting needs) should not be compromised or diluted. Similarly, in recent years, the House and Senate Appropriations Committees have directed the AFG program to maintain a broad all-hazards focus. S. 608 , the Risk-Based Homeland Security Grants Act of 2007, would direct DHS to conduct a study analyzing the distribution of fire grant awards and the level of unmet firefighting equipment needs in each state. A related issue is the role of the U.S. Fire Administration in the administration of the fire grant program. At its inception, the program was administered by the USFA/FEMA and focused on enhancing the basic needs of fire departments across the nation. In the FY2004 budget request, as part of its effort to consolidate terrorism preparedness grants under a single entity, the Administration proposed to relocate the fire grant program within the Office for Domestic Preparedness (ODP), whose mission was to provide state and local governments with assistance to improve their readiness for terrorism incidents. The FY2004 DHS Appropriations Act ( P.L. 108-90 ) acceded to the Administration's request, and relocated the fire grants to ODP. The Conferees directed that DHS shall "continue current administrative practices in a manner identical to the current fiscal year, including a peer review process of applications, granting funds directly to local fire departments, and the inclusion of the United States Fire Administration during grant administration." On January 26, 2004, then-DHS Secretary Ridge informed Congress of his intention to consolidate ODP, including the Assistance to Firefighters Program, into the Office of State and Local Government Coordination Preparedness (OSLGCP). The FY2005 Homeland Security appropriations act ( P.L. 108-334 ) placed the fire grant program within OSLGCP. However, the Assistance to Firefighters Grant Program Reauthorization Act of 2004 ( P.L. 108-375 ) designated administration of the fire grant program to USFA. According to the FY2006 budget request, the fire grant program would be administered by the OSLGCP "in cooperation with the USFA." On July 13, 2005, DHS Secretary Michael Chertoff announced a restructuring of DHS, effective October 1, 2005. Under the restructuring plan, the fire grants (as well as the SAFER grants) were to be administered by the Office of Grants and Training in the new DHS Directorate for Preparedness. However, legislation considered in the 109 th Congress sought to restructure FEMA within DHS, with the result that fire and SAFER grant programs would be transferred back to FEMA. Ultimately, Title VI of the Conference Agreement on the DHS appropriations bill ( P.L. 109-295 ; H.Rept. 109-699 ), the Post Katrina Emergency Management Reform Act of 2006, transferred most of the existing Preparedness Directorate (including fire and SAFER grants and the USFA) back to an enhanced FEMA.

The Assistance to Firefighters Grant (AFG) Program, also known as the FIRE Act grant program, was established by Title XVII of the FY2001 National Defense Authorization Act (P.L. 106-398). The program provides federal grants directly to local fire departments and unaffiliated Emergency Medical Services (EMS) organizations to help address a variety of equipment, training, and other firefighter-related and EMS needs. A related program is the Staffing for Adequate Fire and Emergency Response Firefighters (SAFER) program, which provides grants for hiring, recruiting, and retaining firefighters. The Administration proposed $300 million for fire grants in FY2009, a 46% cut from the FY2008 level of $560 million. No funding was proposed for SAFER grants. The Senate Appropriations Committee approved $750 million for firefighter assistance in FY2009 ($560 million for fire grants and $190 million for SAFER grants), while the House Appropriations Committee approved $800 million for firefighter assistance ($570 million for fire grants and $230 million for SAFER grants). This report will be updated as events warrant.

Introduction The central issue addressed by this report is how much Congress should consider appropriating for the continued sustainment and modernization of the B-52, B-1, and B-2 bombers over the remainder of their service lives. Many military experts note the advanced age of the United States' long-range bomber fleet. The B-52H Stratofortress, B-1B Lancer, and B-2A Spirit are now about 50, 28, and 20 years old respectively. In fact, Air Force Global Strike Command declared 2012 the "Year of the B-52" in honor of the 50 th anniversary of the last delivery of a B-52 and the 60 th anniversary of the first test flight of the YB-52. The B-1B celebrated its 25 th anniversary in 2010. The last B-2 delivery was in 1997. Although the Department of Defense and the Air Force are committed to the development and fielding of a new Long-Range Strike-Bomber (LRS-B), flight-testing of the new bomber will likely not start until the mid-2020s. Initial development of the B-2 began in the early 1980s and the first aircraft was delivered on December 17, 1993. If the B-2 experience is the norm, potential delivery of the first operational LRS-B may be expected sometime in the 2030 timeframe. With this in mind, can the U.S. Air Force's B-52Hs, B-1Bs, and B-2As physically last and continue to be credible weapon systems until the LRS-B is fielded? More importantly, does the nation's "legacy" bomber force possess the capabilities required to meet national security strategy objectives, especially in the face of potential adversaries possessing advanced, 21 st century anti-access/area-denial (A2/AD) weapon systems? The U.S. Air Force and aerospace industry's answer is "yes," provided sufficient sustainment and modernization funding is available over the remaining lifespan of these weapon systems. Without sufficient sustainment and modernization funding, many analysts argue the U.S. bomber fleet will quickly become a decrepit force ill-suited to the potential challenges posed by 21 st century adversaries. The average age of the bomber force is 33. Because of the physical wear-and-tear placed on these aircraft from the demands of military flight—compounded by 11 years of continuous combat—aging airframe structures need reinforcement, engines need to be replaced, and computer and electronic components need upgrading. Even if corrosion, metal fatigue, and parts obsolescence do not take their toll on the fleet, military analysts point out that potential adversaries are acquiring advanced, A2/AD weapon systems that would make it harder for the bombers to reach their targets, thus relegating them to a "standoff" weapons employment role. But even "standoff" weapons have their limits, especially against deeply buried and/or hardened targets found in places like North Korea and Iran. Consequently, most experts agree all three bombers are in need of upgrades to their systems in order to counter A2/AD-equipped adversaries and require constant operational research and testing to evaluate and incorporate new and modern weapons into their arsenal. This report addresses potential congressional oversight and appropriations concerns for the sustainment and modernization of the U.S. Air Force's bomber force. It does not address Air Force efforts to develop and acquire the proposed LRS-B. Congressional interest in this subject stems from Congress's authority to approve, reject, or modify Air Force funding requests for bomber sustainment and modernization, as well as their oversight of the nation's long-range strike requirements and capabilities. In addition, sustainment, modernization, and size of the bomber force have been perennial legislative topics since the early 1990s. As the Air Force progresses through development and acquisition of the LRS-B and begins the gradual phase-out of 50-year-old bombers, it is anticipated that Congress will continue dealing with bomber sustainment and modernization legislation. Congress's decisions on appropriations for the bomber force could impact the nation's long-range strike capabilities and have additional consequences for the U.S. aerospace industry. A key issue for Congress is whether to continue providing sustainment and modernization funding for the Air Force's B-52H, B-1B, and B-2A bombers, and if so, at what levels. Pertinent to the discussion is the potential for a shortfall in the nation's long-range strike capabilities if Congress or the Air Force chooses to minimize funding for sustainment and upgrades that would keep these weapon systems viable against A2/AD-equipped adversaries. Also, given Air Force plans to keep the B-52 and B-1 flying well beyond 2030, Congress may consider whether current bomber sustainment and modernization plans will meet the nation's long-range strike requirements until the LRS-B is operational. Additionally, Congress may also consider whether the planned 80-100 LRS-Bs will adequately replace the capabilities lost as the legacy bombers start retiring from service in the 2030s. Congress's oversight and decisions on these issues could also have implications for any potential future base realignment and closure (BRAC) decisions as well as impact the U.S. aircraft manufacturing industrial base. Ultimately, the priority the Air Force places on bomber sustainment and modernization, and any decisions considered by Congress, could have potential consequences for future national defense strategies and on U.S. long-range strike capabilities. Background United States' Military Strategy Shift: Do the Bombers' Capabilities Meet Strategic Requirements? The Obama Administration's 2012 shift in national security and defense strategy towards the Asia-Pacific region has significant implications for America's legacy bomber force. Stemming from the growing economic importance of the Asia-Pacific region, China's growing military capabilities and its increasing assertiveness of claims to disputed maritime territories, U.S. concerns with freedom of navigation and the ability to project power in the region, and the end of U.S. military operations in Iraq and Afghanistan, President Obama directed the Department of Defense (DOD) to raise the Asia-Pacific region's priority in U.S. military planning. Many analysts agree this rebalance has placed renewed emphasis on U.S. naval forces due to the maritime character of the Pacific theater of operations. However, budgetary pressures and potential defense cuts may reduce long-term naval procurement plans and planned naval force levels in the Pacific region. Consequently, just as B-17 and B-29 bombers demonstrated the value of long-range airpower projection in the Pacific Theater during World War II, the U.S. Air Force may be planning on the current fleet of B-52s, B-1s, and B-2s to provide an essential complement to U.S. naval forces in the vast geographical expanses of the Asia-Pacific. In addition to the Asia-Pacific, the Administration's new defense strategy also calls for retaining emphasis on the Middle East while ensuring U.S. defense commitments to European allies. This aspect of the new strategy may prove the most challenging from a resource perspective as the DOD is forced to implement automatic spending cuts laid out in the Budget Control Act (BCA) of 2011 ( P.L. 112-25 / S. 365 of August 2, 2011). The BCA necessitates $55 billion a year in defense cuts over the nine years from FY2013 to FY2021. Specifically for the bomber force, Air Force leaders have said that such cuts would result in an 18% reduction in both bomber flying hours and in bomber sustainment and modernization efforts, resulting in aircraft availability and mission capable rates falling below standards. Some military analysts, consequently, are skeptical as to whether U.S. force levels will be sufficient to meet multiple, competing priorities in both the Asia-Pacific and the Middle East, all the while reassuring U.S. commitments in Europe. However, some historical examples suggest the current bomber force is capable of balancing national security priorities among competing geographical regions. Since 2003, B-52s, B-1s, and B-2s have maintained a continuous bomber presence in the Pacific with regularly scheduled rotations to Andersen Air Force Base, Guam, while simultaneously participating in continuous combat operations in the Middle East and Afghanistan. An example of this is the March 2003 deployment of B-52s and B-1s to Guam (in response to North Korean nuclear weapons activities) while additional B-52s, B-1s, and B-2s participated in the opening phases of Operation Iraqi Freedom and flew combat sorties in Afghanistan. Essentially, this dual deployment of bombers to two geographical regions demonstrated the United States and the bomber force's ability to fight wars in the Middle East and Afghanistan while retaining the capability to respond to potential crises in the Asia-Pacific. Potential Strategic Influence of Bombers on the Administration's Strategy Shift The Administration's strategic guidance identifies three priorities for which the USAF bomber force could have significant strategic influence. These include reaffirming U.S. commitment to the security and prosperity of allies in the Asia-Pacific region; ensuring access to the global commons which facilitate world-wide economic opportunities and guarantee U.S. power projection capabilities; and ensuring a quick, military response capability to any hostilities from potential adversaries in the region. According to former Secretary of State Hillary Clinton, the U.S. commitment to what she termed "forward-deployed" diplomacy would include the strengthening of bilateral security alliances with U.S. allies in the Asia-Pacific and necessitate the forging of a broad-based military presence. Forward based bombers, whether deployed on a continuous basis or periodically as part of training exercises, could play a significant role in reaffirming U.S. commitments to allies in the Asia-Pacific region. Primarily through regular rotational deployments (such as the continuous bomber presence rotation at Andersen AFB, Guam) and participation in bilateral and multilateral training exercises, the visible presence of U.S. bombers abroad could potentially reinforce the U.S. commitment to deterrence (conventional and nuclear) against any potential adversary in the region and could provide an economical and effective way to increase U.S. influence there. Freedom of navigation and access to the South China Sea is considered by many analysts vital to the economy of every nation in North America and East Asia. More than half of the world's shipping passes through the South China Sea every year (approximately 70,000 ships carrying $5.3 trillion worth of goods). Of that, $1.2 trillion worth is trade that directly affects the United States. In addition, over 80% of crude oil supplies to Japan, South Korea, and Taiwan flow through the South China Sea—making these countries especially dependent on South China Sea shipping routes. Any attempt to restrict universal access to this maritime common could impact the security, political stability, and economic prosperity of the United States and its allies in the region and potentially inhibit U.S. power projection capabilities by restricting the U.S. Navy's ability to patrol and operate in the South China Sea and the Malacca Straits. Long-range bombers, conducting maritime reconnaissance and capable of anti-shipping operations, could actively and passively maintain situational awareness of the vast Asia-Pacific maritime region and possibly keep in check any potential adversary looking to threaten the United States and its allies' access to the Asia-Pacific's commons. Finally, the legacy bomber force is one option than can produce a quick, military response to hostile actions taken by potential adversaries in the region. Unconstrained by the need for a forward operating location within theater, the capability of bombers to reach anywhere in the Asia-Pacific, in a relatively short period of time and with a wide array of weapons, could provide national leaders a viable option for responding to encroachments on U.S. interests in the region and for honoring defense and security commitments to U.S. allies. Bomber Expectations: Employment in DOD's Strategic Guidance Bomber Contribution to Critical Missions The Administration's new strategic guidance emphasizes the military's need to recalibrate its capabilities and make selective investments to succeed in a number of missions critical to achieving national security objectives. Any argument for or against any level of funding for bomber modernization could include an assessment and cost/benefit analysis of those upgrades and their contribution to accomplishing the expected missions of U.S. forces as defined in the DOD's strategic guidance, Sustaining U.S. Global Leadership: Priorities for 21 st Century Defense . These missions include the following: Counter terrorism and irregular warfare; deter and defeat aggression; project power despite anti-access/area denial challenges; counter weapons of mass destruction; operate effectively in cyberspace and space; maintain a safe, secure, and effective nuclear deterrent; provide a stabilizing presence; and, conduct stability and counterinsurgency operations. All three of the nation's bombers have made, and are expected to continue making, significant contributions to all of the critical missions set forth in DOD's strategic guidance. Looking as far back as 1962 (coinciding with the last B-52 delivery), numerous examples describe one or more of the current bombers accomplishing these missions (see Table 1 ). However, with the rising prevalence of 21 st century A2/AD capabilities in several potential adversary countries, even the U.S. Air Force assesses that modern threat capabilities are outpacing the 20 th century capabilities and abilities of the B-52, B-1 and, in some circumstances, even the B-2, to accomplish these missions. Without funding for critical modernization and sustainment efforts, all three bombers run the risk of becoming ineffective in the face of A2/AD equipped adversaries. Forward Deployed Diplomacy: Continuous Bomber Presence and Worldwide Power Projection With the conclusion of U.S. military involvement in Iraq and U.S. forces drawing down in Afghanistan, DOD has announced it intends to shift military capacity from the Middle East to the Asia-Pacific region as part of the Obama Administration's rebalancing strategy. On multiple occasions, Deputy Secretary of Defense Ashton Carter has stated DOD's intent to begin rotating B-1 bombers (which have been the only bomber participating in Operation Enduring Freedom since May 2006) into the Asia-Pacific region to augment B-52s already on continuous rotation there. This continuous rotation—referred to by the DOD as the Continuous Bomber Presence (CBP)—is based at Andersen Air Force Base, Guam, and represents a major investment in ensuring U.S. security commitments in the Pacific. Capable of reaching anywhere in the U.S. Pacific Command's (USPACOM's) area of responsibility with weapons ranging from conventional to nuclear-tipped cruise missiles, the CBP is one way of reassuring allies of the U.S. commitment to their defense and deterring potential adversaries in the region, including possibly China. The CBP can potentially send the signal that no naval vessel can patrol the South China Sea and Pacific without coming under the reach of land-based bombers. According to former Pacific Air Forces commander General Gary L. North, "Chinese military writings talk a lot about how to extend their power to the second island chain … the 1,800 mile [factor], which would enable them to prevent other nations' ability to have freedom of movement at that great range." Invoking the lessons learned from the Pacific Theater of World War II, the CBP, and long-range airpower projection in general, could be seen as an essential complement in dealing with potential adversary naval forces. Air Force Global Strike Command recently announced B-2s will begin regular worldwide training deployments to each of the regional U.S. combatant commands' areas of responsibility starting in 2013. According to 8 th Air Force Commander Major General Stephen Wilson, B-2s will rotate to forward operating locations all over the world in small numbers for a few weeks at a time, a set number of times a year beginning with a short Pacific deployment in 2013. The plan calls for B-2 deployments to all the geographic combatant commands including those in Central and South America, Southwest Asia, and Europe in addition to the Asia-Pacific. These worldwide training deployments are an exercise in power projection and meant to demonstrate U.S. commitments to allies in multiple regions of the world while providing a visible deterrent to any potential U.S. adversary. Military analysts point out that engaging in this type of "forward deployed diplomacy" with the bomber force has the potential to influence the Asia-Pacific region beyond the near-term concern of a rising China. Give the efforts by numerous Asian-Pacific states seeking to increase their diplomatic, economic, and strategic influence in the region, the potential exists for a number of regional players to acquire advanced military capabilities that could influence long-term U.S. interests and/or threaten U.S. access to the region in the future. For example, North Korea's continuing efforts to develop an intercontinental ballistic missile capability, along with its nuclear weapons program, represent a potential direct threat to the United States and threaten to undermine regional security. South Korea, in an effort to offset its strategic vulnerabilities, has undergone a vigorous procurement and acquisition of state-of-the-art weaponry and has invested over $25 billion a year since 2006 on indigenous research and development programs for its local defense industries. Japan, after years of watching its international influence eroded by a slow-motion economic decline, is attempting to raise its relevance in the region by offering military aid to regional neighbors and by stepping up training and engagement activities by its own armed forces in an effort to build regional alliances and shore up other countries' defenses. India, who until the recent global economic downturn possessed the second-fastest-growing economy in the world, became the largest weapons importer in the world in March 2011. It is anticipated that India will spend up to $80 billion on military modernization by 2015, and it is considered by many analysts to be on the verge of attaining military superpower status. Indonesia, supported by its military leadership and a $16.7 billion budget, is moving forward with a three-year plan to strengthen and modernize its military arsenal to include $2.5 billion for 10 light frigates, $2 billion for four submarines, and $6 billion for the addition of Russian Sukhoi and U.S. F-16 fighters. Taiwan, who is falling rapidly behind the unprecedented Chinese military buildup over the past decade, conducted tests of a new "carrier killer" anti-ship missile in late 2012. Thought to be an advanced version of the Hsiung Feng III anti-ship missile, such a weapon could pose a significant challenge to any naval vessel operating in the Taiwan Straits if developed in sufficient numbers. The point being, there is no doubt that with the enormous amount of economic, military, and political power concentrated in the Asia-Pacific region, the proliferation of A2/AD weapon systems could impact the future of U.S. influence and capacity in the region, regardless of who possesses such capabilities. CBP rotations and regular B-2 deployments stand to play a long-term role in the United States' ability to influence and project military power in the Asia-Pacific, provided bomber sustainment and modernization efforts keep pace with current and evolving A2/AD military capabilities that are becoming prevalent in the region. However, with such emphasis being placed on military modernization by many of the major states in the region, it is hard to predict what the strategic and military landscape of the Asia-Pacific will look like in 20 or 30 years. Such a time frame could potentially see the B-52, B-1, and B-2 still in service; if so, they will be expected to be effective weapon systems if employed. Meeting the Anti-Access/Area Denial (A2/AD) Challenge A major challenge in meeting the goals of the Administration's new strategy is the rising prevalence of 21 st century anti-access/area denial (A2/AD) threats. Anti-access refers to those adversary actions and capabilities, usually employed from long ranges, designed to prevent an opposing force entry to an operational area by restricting its access to the global commons (sea, air, space, and cyberspace). Area denial refers to those adversary actions and capabilities, usually of shorter range, designed not to keep an opposing force out, but to limit its freedom of action within an operational area. Although not a new concept, A2/AD is a rising concern due to the proliferation of technology that places precise, long-range weapons in the hands of potential foes. Such weapons include ballistic and cruise missiles, integrated air defense systems, anti-ship missiles, submarines, guided rockets, missiles and artillery, 4 th - and 5 th -generation combat aircraft, and space and cyber warfare capabilities. Many of these A2/AD threats are specifically designed to challenge the U.S. military's power projection capabilities and potentially threaten U.S. access to key areas of strategic interest both in the Asia-Pacific and the Middle East. The U.S. military addresses the A2/AD challenge in its Joint Operational Access Concept (JOAC). Although not enemy- or region-specific, JOAC describes how joint forces will operate in response to the emerging A2/AD threat. Its central idea hinges on the joint forces' ability to leverage cross-domain synergy—the complementary employment of military capabilities across the sea, air, land, space, and cyberspace domains that enhances the effectiveness of military operations and compensates for any known weaknesses in U.S. capabilities. The Air Force and Navy have embraced cross-domain synergy and have codified their approach to the A2/AD challenge in their Air-Sea Battle Concept (ASBC). ASBC seeks to achieve interoperability between air and naval forces that can execute networked, integrated attacks, in-depth, to disrupt, destroy, and defeat an adversary's A2/AD capabilities. ASBC and the idea of cross-domain synergy as an answer to the A2/AD challenge have very real implications for the modernization and operational employment of the bomber force; primarily, modernization and sustainment efforts should equip the bomber force with the capabilities necessary to operate in the extreme-, high-, and low-risk denied regions of the 21 st century A2/AD environment. Bomber Employment in an A2/AD Environment One of the objectives of an A2/AD adversary is to establish what the military terms extreme-risk geographic zones in order to deny any advantage to U.S. forces operating in them. In extreme-risk zones, only the most capable, low-signature (stealthy) forces maintain the ability to survive and operate effectively using self-defense systems, maneuver and, in some cases, additional support to do so. Due to its stealth and self-defense capabilities, the B-2 is the most capable bomber able to operate in the extreme-risk zone. In high-risk zones, the majority of U.S. high-signature (non-stealthy) forces require significant defense support. For the bombers, this means their defensive countermeasures and maneuvers will be effective if assisted by mutually supporting forces, but on their own, they may be operationally ineffective and limited. The U.S. bombers most capable of operating in the high-risk zone are the B-2 (because of its stealth and self-defense capabilities) and the B-1 given its speed, maneuverability, low-altitude flying capability, and electronic self-defense capabilities. In the low-risk zone—usually found at extended ranges from the adversary's borders—all U.S. forces can generally operate freely, although the adversary can potentially still pose a threat. The B-1 and B-52 are quite capable of operating in low-risk zones and would most likely employ their arsenal of long-range, standoff cruise missiles (the B-2 does not carry long-range stand-off cruise missiles). In the overall Air-Sea Battle Concept, higher-signature forces—such as the B-1 and B-52—would be teamed with low-signature forces as required—such as the stealthy F-22 fighter—in order to enhance the effectiveness and compensate for the vulnerabilities of each platform. Nevertheless, the challenge is that the Air Force's legacy bombers could have increasing difficulty operating in A2/AD environments without more modern systems and weapons capabilities. Nuclear Deterrent Operations Under DOD's strategic guidance, maintaining a safe, secure, and effective nuclear deterrent remains a primary mission for U.S. Armed Forces. Its guidance is coherent with and builds on the 2010 Quadrennial Defense Review (QDR) which states, "Until such time as the Administration's goal of a world free of nuclear weapons is achieved, nuclear capabilities will be maintained as a core mission of the Department of Defense." Relevant to the bomber force, the 2010 Nuclear Posture Review (NPR) reaffirmed the enduring contributions and viability of the nuclear strike capabilities of the B-52 and the B-2 in accomplishing the nuclear deterrent mission (the B-1 is no longer nuclear capable). Proponents argue three principal reasons for retaining and modernizing nuclear-capable, or, more accurately, dual-capable B-52 and B-2 bombers. First, an air-delivered nuclear capability provides a rapid and direct hedge against technical challenges with the other legs of the nuclear triad as well as geopolitical uncertainties. Second, nuclear-capable bombers are important to extended deterrence of potential attacks on U.S. allies and partners. Unlike intercontinental ballistic missiles (ICBMs) and submarine launched ballistic missiles (SLBMs), heavy bombers can be visibly forward deployed, thereby signaling U.S. resolve and commitment in a crisis. Finally, not only is the LRS-B not anticipated to start flight testing until the mid-2020s, it is also yet to be determined if it will initially be nuclear capable once it does. Former Chief of Staff of the Air Force General Norton Schwartz testified before Congress in November 2011 that the new LRS-B will be built with nuclear capability but will operate as a conventional strike aircraft initially. He stressed that although the aircraft will be designed and built with all the hardware for both nuclear and conventional missions from the outset, "Deferring the new aircraft's nuclear certification until the B-52 and B-2 start to retire would help the service manage costs." However, in response to General Schwartz's testimony, language in the 2013 Defense Authorization Act ( P.L. 112-239 ) stipulates the next-generation LRS-B will be "capable of carrying strategic nuclear weapons as of the date on which such aircraft achieves initial operating capability" and will be "certified to use such weapons by not later than two years after such date." If the nation wishes to maintain an air-delivered nuclear capability, as stated in the 2010 QDR and NPR, it is unclear whether the B-52 and B-2 will be the only air-delivery option in the U.S. nuclear arsenal until the 2030s or whether the LRS-B can be expected to start filling that role in the late 2020s. New Strategic Arms Reduction Treaty: Impact on Bombers In accordance with the New Strategic Arms Reduction Treaty (NST) signed in April 2010, the United States and Russia plan on reducing and limiting ICBMs and ICBM launchers, SLBMs and SLBM launchers, heavy bombers, ICBM warheads, SLBM warheads, and heavy bomber nuclear armaments. Seven years after entry into force of the treaty and thereafter, the aggregate numbers, as counted in accordance with Article II section one of the treaty, will not exceed 700 for deployed ICBMs, deployed SLBMs, and deployed heavy bombers. Also, the total numbers will not exceed 800 for deployed and non-deployed ICBM launchers, deployed and non-deployed SLBM launchers, and deployed and non-deployed heavy bombers. The United States retains the right to determine for itself the composition and structure of its strategic offensive arms. Consequently, the February 2011 entry-into-force of the New START drives the United States to convert a number of nuclear-capable B-52 bombers to a conventional-only role. Although a final force structure decision has not been made to reflect the requirements of New START, Air Force Global Strike Command (AFGSC) recommended a preferred course of action in the FY13 Program Objective Memorandum (POM) and funded through the future years defense program (FYDP). The New START drives no change to the configuration of B-2 force numbers. In her statement before the Senate Foreign Relations Committee, Ms. Madelyn Creedon, Assistant Secretary of Defense for Global Strategic Affairs, provided testimony on the need for bomber sustainment and modernization in the context of implementing the New Start Treaty: The United States will maintain two nuclear capable B-52H strategic bomber wings and one B-2A wing. Both bombers, however, are aging and sustainment and modernization funding will have to be provided to ensure they remain operationally effective through the remainder of their service lives. Funding has been allocated to upgrade these platforms; for example, to provide the B-2A with survivable communications, a more modern flight control system, and a new radar. The B-52 will also need various upgrades including for its bomb bay and survivable communications. These modernization and sustainment programs are needed to maintain the effectiveness of the current bomber force until the introduction of a new long-range bomber. Existing U.S. Bomber Force The Air Force's existing bomber fleet includes 76 B-52H bombers, 63 supersonic B-1B bombers, and 20 B-2 stealth bombers. Table 2 summarizes the three types of aircraft. Additional information on the existing bomber force is presented in Appendix A . B-52H Stratofortress42 The B-52 is currently the USAF's only nuclear bomber capable of employing long-range standoff weapons. It serves both as a nuclear and conventional bomber. It first entered operational service on June 29, 1955. The B-52's original service life expectancy was approximately 5,000 hours or approximately 20 years depending on severity of the flying environment. Of the 744 various model B-52s built, 76 B-52H models remain in service today. The B-52H first entered service on May 9, 1961, with operational aircraft currently stationed at Barksdale AFB, Louisiana, and Minot AFB, North Dakota. The B-52's life expectancy has been extended beyond original expectations through numerous modernization efforts. It is now projected to be sustainable into 2040 based on projected average flying hours and severity of the flying environment. The B-52H program's challenge is to continue sustainment activities and maintain combat effectiveness against the nation's adversaries until the platform is retired, and to approach modernization efforts effectively by recognizing capability gaps, prioritizing valid requirements, and investing in material solutions that meet platform and war fighter needs. As plans for sustainment, modernization, and recapitalization move forward, some argue the B-52 enterprise should be prepared to make required programmatic and operational adjustments in step with changes in platform mission taskings and operational plans. The B-52's strengths lie in its diverse capabilities, precision, large payload, and long range; however, if these capabilities remain static, mission effectiveness is likely to erode in the face of 21 st century A2/AD threats. Current B-52 Sustainment and Modernization Efforts43 The following is a list of B-52 sustainment and modernization initiatives in the program of record (POR) that are either just being completed or are currently in progress. Additional information on each effort, as well as information on short-term and long-term sustainment and modernization efforts, can be found in the B-52's Master Plan summarized in Appendix B . Combat network communications technology (CONECT) Military-standard-1760 modernization B-52 trainer upgrades Arms control activities under the New START Mode S/5 identification friend or foe (IFF) Low cost modifications B-52 anti-skid replacement B-52 modernization research development test and evaluation efforts 1760 internal weapons bay upgrade (IWBU) Table 3 is the FY2013 budget submission for B-52 procurement and B-52 research, development, test, and evaluation programs derived from Air Force budget justification books. It summarizes prior-year and estimated future-year expenditures for B-52 sustainment and modernization programs. B-1B Lancer44 The B-1B Lancer was developed by Rockwell International, now Boeing Defense and Space Group, and became operational in 1986. The B-1B was originally designed to serve as a low-altitude Cold War supersonic bomber. Its low radar cross-section, variable-geometry wings, avionics, and afterburning engines made it less vulnerable than the B-52 to enemy surface-to-air missiles and fighter aircraft. However, following the end of the Cold War, the Air Force ended the B-1's nuclear mission in 1992 and began the aircraft's transition to conventional-only weapons capability. The Conventional Mission Upgrade Program (CMUP) transformed the B-1B into a conventional-only bomber capable of employing the latest in conventional weapons to include Global Positioning System (GPS)-guided Joint Directed Attack Munitions (JDAM) and long-range standoff Joint Air-to-Surface Stand-off Missiles (JASSM). The B-1B has the largest internal payload of any current bomber. However, many of the systems on the B-1 are original equipment and suffer from diminishing manufacturing sources and material shortfalls that impact reliability, availability, and maintainability. One hundred B-1Bs were initially built, of which 63 remain in service. The fleet operates from Dyess AFB, Texas (35 aircraft), and Ellsworth AFB, South Dakota (28 aircraft). It possesses diverse capabilities: large precision payload, range, speed, and endurance; however, if these capabilities remain static, mission effectiveness may erode in the face of 21 st century A2/AD threats. The B-1B is expected to be in service until 2040. Current B-1 Sustainment and Modernization Efforts45 The following is a list of B-1 sustainment and modernization initiatives currently in the program of record (POR) that are either just completing or are currently in progress. Additional information on each effort, as well as information on short-term and long-term sustainment and modernization efforts, can be found in the B-1's Strategic Action and Investment Plan (SAIP) summarized in Appendix C . Fully integrated data link Simulator digital control loading Central integrated test system Inertial navigation system replacement Radar improvement upgrade Visual situation display upgrade Self-contained attitude indicator Gyro stabilization system replacement (GSSR) B-1 training support Digital communications B-1 Link 16 cryptographic materials Laptop controlled targeting pod Low cost mods Miscellaneous B-1 modernization research, development, test, and evaluation efforts Table 4 is the FY2013 budget submission for B-1 procurement and B-1 research, development, test ,and evaluation programs derived from Air Force budget justification books. It summarizes prior-year and estimated future-year expenditures for B-1 sustainment and modernization programs. B-2A Spirit46 The B-2A is the only long-range, penetrating low observable (LO) bomber operated by the U.S. Air Force. It serves as both a conventional and nuclear bomber. The aircraft entered service in December 1993 and is based solely at Whiteman AFB, Missouri. It achieved initial operational capability (IOC) in April 1997 and achieved full operational capability (FOC) on December 17, 2003. A total procurement of 132 B-2s was envisioned. However, following the Cold War, the number was reduced to 75, and then to 20. Congress added one more by providing funding to convert one of the test vehicles into a combat aircraft, for a total of 21, but a B-2 was lost in a crash during takeoff at Andersen AFB, Guam, in February 2008, reducing the total number to 20. Its payload weight is more limited than those of the B-1 or B-52. Originally fielded in Block 10 configuration, the current fleet is Block 30. Each block upgrade improved stealth characteristics, expanded weapons employment options, and improved offensive and defensive avionics. Its preeminent capabilities are precision, range, and stealth. The B-2 currently experiences parts obsolescence and diminishing manufacturing sources. The B-2 is also impacted by aging support and test equipment. For the first time since the B-2 aircraft became fully operational capable, the weapon system's survivability is in question in the face of advancing 21 st century A2/AD threats. The B-2A's projected service-life goal is 2058. Current B-2 Sustainment and Modernization Efforts48 The following is a list of B-2 sustainment and modernization initiatives currently in the program of record (POR) that are either just completing or are currently in progress. Additional information on each effort, as well as information on short-term and long-term sustainment and modernization efforts, can be found in the B-2's Master Plan summarized in Appendix D . Extremely high frequency satellite communications (EHF SATCOM) and computer upgrade program Massive ordnance penetrator integration Low observable signature and supportability modifications (LOSSM) diagnostics B-2 trainer system upgrade Link-16/center instrument display/in-flight re-planner (CID/IFR) Radar modernization program (RMP) Low observable signature and supportability modifications (LOSSM) program structures/materials Defensive management system modernization (DMS-M) Stores management operational flight program (SMOFP) re-host and mixed carriage modification Common very-low frequency receiver (CVR Increment 1) Low-cost engine modifications Low-cost modifications B-2 modernization research, development, test, and evaluation efforts Baseline B-2 support Table 5 is the FY2013 budget submission for B-2 procurement and B-2 research, development, test, and evaluation programs derived from Air Force budget justification books. It summarizes prior-year and estimated future-year expenditures for B-2 sustainment and modernization programs. Issues for Congress Potential for Inducing a Shortfall in Long-Range Strike Capabilities As the bomber force continues to age and shrink, and development of the LRS-B continues, a potential oversight issue for Congress is whether failure to sustain and modernize the Air Force's legacy bomber fleet will induce a shortfall in the nation's long-range strike capabilities. Consistent with prior administrations, the Obama Administration's strategic guidance requires a long-range, deep strike capability that is effective in the face of A2/AD threats and is not constrained by the lack of overseas basing. In addition, under the New START treaty, nuclear-capable heavy bombers could continue to make up one-third of the U.S. nuclear triad along with ICBMs and SLBMs. With only 20 B-2s, the recent retirement of three B-1s, and the conversion of a yet-to-be-determined number of B-52s to conventional-only roles, the potential exists for the total number of bombers to fall below the level necessary to fulfill long-range strike requirements. Currently, the DOD and the Air Force plan on a bomber force of approximately 156 aircraft out to at least 2022 (see Table 6 , below). However, with $487 billion of defense cuts over the next 10 years as a result of the Budget Control Act of 2011, the potential for additional budget constraints, and changing defense strategies, these numbers are subject to change. Furthermore, the potential for shortfall in long-range strike capabilities does not simply lie in the sheer number of legacy bombers in service. The more pressing oversight issue is the "capability" of the legacy bomber force. That is, can the legacy bomber force meet the national security challenges posed by the growing number of potential A2/AD-equipped adversaries? The ability of the current bomber force to bridge a potential long-range strike capabilities gap may depend upon the feasibility and cost effectiveness of sustainment and modernization programs that will make these weapon systems viable in the 21 st century A2/AD environment while extending their service lives until the LRS-B becomes operational in the late 2020s. Many analysts argue that the Navy's nuclear-powered aircraft carrier is another, highly flexible alternative to the bomber and is capable of filling the nation's long-range strike needs. Indeed, the aircraft carrier's ability to dominate the seas and launch its aircraft without the need for a forward airbase is without question a valuable strategic asset. However, the relatively limited amount of fuel carried by naval fighters limits their ability to penetrate deeply into enemy territory without assistance from Air Force tankers. Without tanker support, the strategic reach of naval fighters is limited to the coastal areas of any potential adversary. Furthermore, compared to a bomber, the weapons load out capability of carrier-based aircraft is limited thus potentially requiring multiple aircraft in order to service a single target. Finally, there is also a potential concern over the carrier's survivability and ability to operate in an A2/AD environment. The primary goal of an adversary employing an anti-access strategy is to deny an outside country the ability to project power into a region. One way of doing this is with anti-ship weapons. Weapons systems such as submarines, China's version of the SS-N-22, SS-N-27, and DF-21D, and Iranian small-boat swarm tactics are all potential threats that could push a carrier task force even further out to sea, thus potentially increasing the range at which naval aviation must travel. Although most analysts will agree the aircraft carrier is an essential element in U.S. long-range strike capabilities, carrier aviation may be seen as complementary to and not taking the place of the much more powerful and flexible long-range bomber. While both capabilities are long-range, they are not necessarily fungible in their military utility. Will Current Air Force Bomber Sustainment and Modernization Plans Get Us to the LRS-B? Another possible oversight issue for Congress will be the feasibility and affordability of Air Force bomber sustainment and modernization programs and whether those programs bridge any potential capabilities gap until the LRS-B becomes operational. Congress requested such oversight information in the FY2011 National Defense Authorization Act ( P.L. 111-383 ), specifically requesting a report discussing "the cost, schedule, and performance of all planned efforts to modernize and keep viable the existing B-1, B-2, and B-52 bomber fleets and a discussion of the forecasted service-life and all sustainment challenges that the Secretary of the Air Force may confront in keeping those platforms viable until the anticipated retirement of such aircraft." This report was submitted to Congress in September 2011. The information in this report is also contained in Air Force Global Strike Command's (AFGSC's) and Air Combat Command's (ACC's) master plan documents for the B-52 and B-2 (AFGSC) and the B-1 (ACC). Updated on an annual basis, these master plans outline each command's plans, programs, requirements, and strategic vision for each platform to meet national security objectives. The plans also identify timeframes, outline capability needs, and describe the force and technologies needed for continued system effectiveness and viability while providing guidance on long-range sustainment, modernization, and recapitalization needs. The 2012 updates to these plans take into consideration President Obama's Asia-Pacific rebalance and DOD strategic direction. Primarily, the plans state that without sufficient sustainment and modernization funding, each weapon system's survivability is at risk in the face of 21 st century A2/AD threats. Appendices B thru D provide summaries of each bomber's sustainment and modernization master plans. To Fund or Not to Fund: What Are DOD and Air Force Priorities? The DOD is challenged with reducing defense spending by $487 billion over the next 10 years, notwithstanding the possibility of further cuts through possible sequestration. At the same time, the DOD's priorities require continued modernization of aging capabilities to address the proliferation of modern A2/AD threats in that the DOD and Air Force plan on the B-52, B-,1 and B-2 to operate well into the 2030s, especially in the global strike and nuclear deterrent roles. According to DOD's Annual Aviation Inventory and Funding Plan for FY2013-FY2042: The enduring need for long-range attack capabilities will be met by a combination of current and future aircraft and weapons systems. The current fleet of Air Force bombers continues to be modernized so that it can retain long range strike capabilities through the 2030s. The FY12 PB (Presidential Budget) initiated development of the Long-Range Strike-Bomber (LRS-B), a key component of the LRS Family of Systems.... The current goal is to achieve an initial capability in the mid-2020s, and to hold down the unit cost to ensure sufficient production (80 to 100 aircraft) and a sustainable bomber inventory over the long term. Meanwhile, the Department will invest in upgrades to the B-2 bomber to enhance its effectiveness and survivability as well as modernize the B-52 fleet with new visual displays and increased weapons storage capacity. The Air Force also continues to modernize the B-1 and address sustainability issues to ensure the overall health and continued viability of the B-1 fleet. The Air Force's 2012 Posture Statement presented to the House Armed Services Committee suggests funding legacy bomber modernization is a priority given the rise of A2/AD threats. The Air Force's ability to conduct global strike—to hold any target on the globe at risk—will be of growing importance in the coming decade. Our conventional strike forces [bombers] compose a significant portion of the Nation's deterrent capability, providing national leaders with a range of crisis response and escalation control options. Our [U.S. Air Force] nuclear deterrent forces provide two-thirds of the Nation's nuclear triad competently forming the foundation of global stability and underwriting our national security and that of our allies. However, increasingly sophisticated air defenses and long-range missile threats require a focused modernization effort exemplified by the long-range strike family of systems. The posture statement goes on to emphasize that, within the Air Force core functions of Global Precision Attack and Nuclear Deterrence Operations: We [the U.S. Air Force] are modernizing conventional bombers to sustain capability while investing in the Long-Range Strike Family of systems. The bomber fleet was retained at its current size because we recognized the importance of long range strike in the current and future security environments. The Air Force is enhancing long range strike capabilities by upgrading the B-2 fleet with an improved Defensive Management System (DMS) and a new survivable communications system, and is increasing conventional precision guided weapon capacity within the B-52 fleet. We are investing $191.4 million in modernizing the B-1 to prevent obsolescence and diminishing manufacturing sources issues and to help sustain the B-1 to its approximate 2040 service life. According to the U.S. Air Force's FY2013 Budget Overview: The Air Force will continue bomber modernization and sustainment efforts, to include the B-2 Defensive Management systems program, the B-2 Very Low Frequency/Low Frequency communications program, and the B-52 1760 Internal Weapons Bay Upgrades. With the February 2011 entry-into-force of the New Strategic Arms Reduction Treaty ... the FY 2013 Budget Request funds compliance activity and force reduction options to meet the central limits of the treaty. These include ... the conversion of some B-52Hs from nuclear-capable to conventional-only capability. In addition to the development of LRS-B (Long-Range Strike-Bomber), the Air Force will continue to modernize the B-1B to ensure the fleet remains viable until recapitalization can be accomplished. The FY2013 Budget Request includes the continuation of the B-1 Integrated Battle Station contract which concurrently procures and installs Vertical situation display Upgrade (VSDU), Central Integrated Test System (CITS), and Fully Integrated Data Link (FIDL). VSDU and CITS each address obsolescence and diminishing manufacturing sources for the B-1 fleet. FIDL provides both the electronic backbone for VSDU and CITS, as well as a capability enhancement of line-of-sight/beyond line-of-sight Link 16 communications. In addition, the FY2013 Budget Request includes upgrades to flight and maintenance training devices to ensure continued sustainability and common configuration with the aircraft fleet. These initiatives will help bridge the gap until the next generation long-range strike aircraft is operational. As Legacy Bombers Phase Out, Are 80-100 LRS-Bs Sufficient? As the legacy bomber force begins phasing out of service (planned for some time in the mid-2020s thru the 2040s), Congress may want to reevaluate Air Force acquisition plans for the LRS-B to ensure a sufficient backfill of U.S. long-range strike capabilities that meet the requirements of national security objectives. The Air Force and Congress may consider how to balance modernization and sustainment efforts for all three legacy bombers with their gradual phase-out while ensuring a sufficient number of LRS-Bs are produced to minimize the effects of any potential long-range strike capability gap during the transition. Directly tied to this phase-out/phase-in process will be a final determination by Congress as to the final number of LRS-Bs ultimately produced. Current Air Force plans call for 80-100 LRS-Bs. However, since the 1970s, the number of new combat aircraft actually produced in a given program has rarely come close to the number of aircraft originally planned. In the original 1969 stated requirement, the Air Force planned a production run of 250 B-1A bombers as a replacement for the "then aging" B-52. However, the program was canceled by President Jimmy Carter in 1977; political support for the B-1A waned due to reduced military spending following the Vietnam War and problems within the B-1A program itself. After being revived by President Reagan in 1981, the eventual 100 B-1Bs that were built were the result of an Air Force proposal that split the original 250 B-1As envisioned between 100 B-1Bs and 132 B-2 stealth bombers. Thus, the original 1981 B-2 contract proposed to acquire as many as 132 B-2s. That number was subsequently trimmed to 75 after the end of the Cold War and ultimately only 21 B-2s were built after the program was cancelled in 1991. In fighter aircraft, the Air Force originally sought to acquire 381 F-22 Advanced Tactical Fighters in 2006. However, the resulting high cost of the aircraft ($150 million in FY2009 dollars), a U.S. ban on exports, and the ongoing development of the potentially cheaper and more versatile F-35 resulted in only 195 aircraft built (8 test aircraft and 187 combat aircraft). Currently, the Air Force plans on acquiring 1,763 of the new F-35 Lightning II Joint Strike Fighter. It is yet to be determined if that number will withstand the effects of reductions in defense spending. Acquisition of anything less than the planned 80-100 LRS-Bs can be expected to drive corresponding modernization and sustainment decisions for the legacy bomber fleet, resulting in further life-extension programs and possibly impacting U.S. long-range strike capabilities, especially in the face of A2/AD equipped adversaries. If Legacy Bombers are Modernized, Can the Air Force Further Delay Development of the LRS-B? Another oversight issue for Congress will be whether development of the LRS-B can be further delayed given sufficient levels of funding for legacy bomber sustainment and modernization. Assuming the Air Force makes an effort to keep the B-52 and B-1 operational through 2040 and the B-2 through 2058, it is fair to ask whether the Air Force can further delay development of the LRS-B. All three of the legacy bombers receive meticulous care, with every aspect of their existence recorded and tracked to ensure long-term health and safety of flight. Based on this meticulous care, as well as ongoing structural fatigue testing and computer modeling, the Air Force insists all three bombers will meet their extended service life goals. However, whether the Air Force can further delay development of the LRS-B is not simply a matter of the legacy bombers' air worthiness. With enough funding and continued life extension programs, all three bombers could theoretically fly beyond the Air Force's target dates. Analysts suggest that the real determinant of whether the development of the LRS-B can be further delayed is the legacy bombers' anticipated combat capability over the next 10 to 25 years of operations. As potential adversaries acquire better and advanced A2/AD defenses, the legacy bombers' ability to get close enough to targets to employ weapons will likely continue to deteriorate. Already, against today's toughest air defenses, the B-52 and B-1 are largely relegated to standoff roles; only the B-2 is expected to get through. In the years to come, the Air Force anticipates the B-2's ability to penetrate will also decline, even though the Air Force plans to upgrade all three bombers with new systems and weapons. According to Air Force Lieutenant General Christopher D. Miller, deputy chief of staff for strategic plans and programs, the current fleet is "increasingly at risk to modernizing air defenses. We need to start now to replace the aging B-52, and B-1 bomber inventories." When asked whether the steady advance in A2/AD capabilities around the world means the Air Force must have the LRS-B ready for service by a specific deadline, Lieutenant General Miller stated, "I think that decision has been given to us ... Now is the time to get started." As declining defense budgets are anticipated for the foreseeable future, Congress will have to remain cognizant of the actual capabilities realized by funding specific legacy bomber sustainment and modernization efforts with the Air Force's stated requirement to fund and begin LRS-B development now. Modernization of Bomber-Launched Weapons Another oversight issue for Congress is the modernization, sustainment, and development of the weapons employed by the legacy bombers—weapons that directly impact their ability to operate in the A2/AD threat environment. As the non-stealthy B-52 and B-1 are likely to operate in the permissive (low-threat) and contested (high-risk) A2/AD employment zones, both platforms will increasingly depend on long-range standoff weapons in order to survive and be effective. Specifically for the B-52, Congress may consider continued appropriations for the conventional and nuclear capable AGM-86B/C Air Launched Cruise Missile (ALCM) service life extension program (SLEP) and development of a new Advanced Cruise Missile. In her statement before the Senate Foreign Relations Committee in June 2012, Madelyn Creedon, Assistant Secretary of Defense for Global Strategic Affairs, testified, Because the growth of modern air defenses is putting even the bomber stand-off missions increasingly at risk, DoD is carrying out an analysis of alternatives (AOA), for a follow-on Air Launched Cruise Missile (ALCM). The final report for the AOA for the new system, the Long-Range Standoff (LRSO) missile, is due in late 2012. The existing ALCM weapon system will be sustained until the LRSO can be fielded during the 2020s. The AGM-86B/C ALCM started its second SLEP in FY2012 that is intended to extend its service life to 2030. An initial SLEP will be finalized in FY2013 and includes a service life extension of the W80 nuclear warhead. A total of 129 missiles are currently funded for modification with a number being converted into conventional missiles. Congress and the Air Force have also dedicated $887.6 million from FY2011 to FY2016 to the development of a new Advanced Cruise Missile that will ultimately replace the AGM-86 family of ALCMs. In FY2012, Air Force research and development funds were transferred from the AGM-86 to "Nuclear Modernization" to identify viable concepts and solutions to replace the AGM-86. For both the B-52 and the B-1, the acquisition, test and evaluation, and fielding of the Miniature Air Launched Decoy (MALD) and MALD-J (jammer) would enhance the ability of these aircraft to operate in contested (high-risk) and highly contested (extreme-risk) A2/AD employment zones. MALD and MALD-J are designed to present a realistic decoy representing penetrating fighter, attack, and bomber aircraft to enemy integrated air defense systems (IADS). MALD-J incorporates a jammer while retaining the decoy capabilities. The B-52 is the initial demonstration platform for this program and is currently undergoing initial operational test and evaluation with initial operational capability scheduled for early 2013. The B-1 community is exploring further integration of MALD and MALD-J on the B-1. For all three legacy bombers, continued acquisition of the AGM-158A Joint Air-Surface Standoff Missile (JASSM) and the AGM-158B JASSM-ER (extended range) and the development of the Long-Range Anti-Ship Missile (LRASM) is considered by some analysts essential to their effectiveness in future A2/AD environments. The JASSM provides a long-range, conventional air-to-surface, autonomous, precision guided, standoff cruise missile able to attack a variety of fixed or re-locatable targets. The Air Force plans on procuring 4,900 missiles (2,400 baseline versions and 2,500 ER) with an estimated program cost of $6.1 billion beyond FY2017. In addition to the JASSM, the Defense Advanced Research Projects Agency (DARPA), in partnership with Lockheed Martin, is developing the LRASM. It stems from a 2008 urgent operational needs statement from the U.S. Pacific Fleet requesting weapons technology to defeat heavily defended ship targets. LRASM includes a datalink to provide updates as the missile approaches the target area and an anti-radiation homing capability to detect and identify emissions from threats to help guide the missile to the target. This long-range, anti-ship capability dovetails with the U.S. rebalance to the Asia-Pacific region and may prove invaluable in any maritime conflict as potential adversaries continue to equip their naval vessels with highly advanced weapon systems. LRASM is based on the AGM-158B JASSM and has an unclassified range of 500 nautical miles. Lockheed Martin and the Air Force are planning to test-fire three LRASM missiles in 2013 from the B-1B. Potential Implications of Bomber Modernization on Air Force Basing and any Future Base Realignment and Closures (BRAC) Another potential oversight issue is the potential implications of reduced bomber sustainment and modernization, and subsequent diminishing numbers of airframes, on any future rounds of base realignment and closure (BRAC) efforts. Although the DOD included two rounds of BRAC in its 2013 budget proposal, Congress did not authorize any closures or realignments. However, as the DOD continues to look for ways to divest itself of assets in an effort to meet budgetary challenges, BRAC continues to be a subject of speculation, possibly as early as 2015. The legacy bomber force is not getting bigger. The original 744 B-52s built were stationed at approximately 21 bases across the United States during the height of the Cold War. There are now 76 B-52Hs in service stationed at two bases, Barksdale AFB, Louisiana, and Minot AFB, North Dakota. The original 100 B-1s built in the 1980s were stationed at six bases from 1986 until 2001. Now, there are 63 B-1s stationed at two bases, Dyess AFB, Texas, and Ellsworth AFB, South Dakota. All four of these bases have excess capacity with the potential to accommodate the entire B-52 fleet at either Barksdale or Minot and the entire B-1 fleet at Dyess or Ellsworth. If the current trend of retiring airframes to pay for sustainment and modernization efforts continues (as was done with the B-1 when 27 aircraft in 2001-2002 and three aircraft in 2012 were retired in order to use the savings to pay for sustainment and upgrades), the total fleet size of both bombers may suggest consolidation at one base simply from a cost feasibility perspective. Ellsworth AFB in South Dakota survived the 2005 BRAC when the federal base-closing commission voted to keep the base open, despite Pentagon recommendations to close the base and consolidate the B-1 fleet at Dyess AFB in Texas. Ellsworth employs some 4,000 people and has an estimated economic impact of $278 million on the local community. Although no BRAC actions were taken for Minot AFB and Barksdale AFB in 2005, Air Force BRAC planners initially proposed retiring Minot's 150 Minuteman III intercontinental ballistic missiles and realigning the base. Ultimately, planners decided this idea would not work and the Air Force's top BRAC committee, the Base Closure Executive Group, rejected the idea. As far as the B-2 is concerned, all 20 are stationed at Whiteman AFB, Missouri. There has been no public discussion of potential basing for the LRS-B, if and when it finally hits the flight line in the mid-to-late 2020s. Industrial Base Concerns Associated with Bomber Sustainment Another oversight issue is the ability of the nation's industrial base to sustain the legacy bomber force. A potential problem with sustaining a fleet of bombers with an average age of 33 years is that the industrial base that developed and produced these aircraft may no longer possess the capability to manufacture and supply parts in necessary quantities—if at all—to affordably keep these aircraft flying. Especially in the case of the B-52 and B-1, many of the original parts designed and produced in the 1950s (for the B-52) and the 1970s (for the B-1) are simply not produced anymore. Both airframes struggle with diminishing manufacturing sources and material shortages in an effort to replace and repair aircraft parts and equipment that the original manufactures do not make anymore. As the nation's current budget deficit debate shifts from taxes towards spending cuts and the debt limit, commentators note the potential for deep defense cuts may drive the defense industry to streamline and consolidate operations, potentially exit prior production lines, and undergo internal restructuring in an effort to maintain their existing profit margins. Consequently, a question to be answered is whether the defense industrial base will even be capable of meeting the sustainment requirements of America's legacy bomber force out to 2040 and to what extent Congress should consider this issue when evaluating proposed defense cuts. Historical Appropriations for Bomber Sustainment and Modernization, FY2002-2012 Figure 7 depicts historical authorizations and appropriations for B-52H, B-1B, and B-2 sustainment and modernization. Dollar amounts include funds authorized/appropriated in the "Procurement" and "Research, Development, Test and Evaluation" sections as well as any funds authorized/appropriated for sustainment and modernization efforts directly tied to "Overseas Contingency Operations" provided for in National Defense Authorization and Appropriations acts from FY2002 to FY2013. Figure 8 is a side-by-side graphical comparison of historical appropriations for all three bombers. Figure 9 is an overlay of historical appropriations for all three bombers and their average yearly mission capable rate. Mission capable rate is defined as the percentage of aircraft in each of the bomber fleet components that are capable of performing its intended wartime mission. Legislative Activity FY2011-FY2013 The follow is a brief summary of legislative actions involving U.S. Air Force bomber sustainment and modernization from fiscal years 2011 through 2013. It also highlights Congress's interest in the potential threat posed by countries seeking to implement anti-access/area denial capabilities and strategies. The complete legislative language for each of these efforts can be found in Appendix E . FY2011 National Defense Authorization Act (P.L. 111-383) Section 1056 of P.L. 111-383 directed the Secretary of the Air Force to submit to congressional defense committees a report concerning bomber modernization, sustainment, and recapitalization efforts in support of the National Defense Strategy. In the report, the Air Force was to discuss the cost, schedule, and performance of all planned efforts to modernize and keep viable the existing B–1, B–2, and B–52 bomber fleets. Congress also requested the forecasted service-life and all sustainment challenges that the Secretary of the Air Force may confront in keeping those platforms viable until the anticipated retirement of all three aircraft. As previously discussed, this report was submitted to Congress in September 2011 and contains similar information as that found in the Air Force Global Strike Command's (AFGSC's) and Air Combat Command's (ACC's) master plan documents for the B-52 and B-2 (AFGSC) and the B-1 (ACC) presented in Appendixes B through D . Under Section 1238 of P.L. 111-383 , Congress requested an additional report on United States' efforts to defend against threats posed by the Anti-Access and Area-Denial capabilities of certain nations-states. This report was requested in response to DOD's 2010 Quadrennial Defense Review that concluded ''[a]nti-access strategies seek to deny outside countries the ability to project power into a region, thereby allowing aggression or other destabilizing actions to be conducted by the anti-access powers. Without dominant capabilities to project power, the integrity of United States alliances and security partnerships could be called into question, reducing United States security and influence and increasing the possibility of conflict." Congress also requested an assessment by the Secretary of Defenses on the United States' efforts to defend against any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile nation-states. These reports were submitted to the House and Senate Armed Services Committees in April 2011. FY2012 Department of Defense Appropriations (H.Rept. 112-331) In the DOD's FY2012 budget request, the Air Force proposed the retirement of six B-1 bombers with the intent of putting the money saved by retiring these aircraft towards modernization and sustainment efforts for the remaining 60 B-1 aircraft. In response to this proposal, the House Appropriations Committee made the following recommendation in their conference report to accompany H.R. 2055 . The fiscal year 2012 budget request includes a proposal to retire six B–1 bomber aircraft. The conferees understand that the B– 1 fleet continues to operate almost constantly over Afghanistan in support of troops on the ground and that the B–1 is a critical component of the Nation's long-range strike capabilities. The Air Force proposed to reinvest less than 40 percent of the savings from aircraft retirements in the B–1 modernization program across the Future Years Defense Program. The conferees are concerned that premature retirement of six B–1 aircraft could negatively impact long-range strike capabilities. Therefore, the conferees direct the Secretary of the Air Force to reinvest a larger portion of savings realized from B–1 aircraft retirements, to the extent authorized by law, in the sustainment and modernization of the B–1 fleet. FY2012 National Defense Authorization Act (P.L. 112-81) Further responding to the Air Force's proposal to retire six B-1s, Section 132 in P.L. 112-81 sought to clarify the Air Force's plan by restricting FY2012 funds for the retirement of any B-1 aircraft until the Secretary of the Air Force submitted a plan to congressional defense committees detailing the following: Identification of each B–1 bomber aircraft that will be retired and the disposition plan for such aircraft; an estimate of the savings that will result from the proposed retirement of B–1 bomber aircraft in each calendar year through calendar year 2022; an estimate of the amount of the savings that will be reinvested in the modernization of B–1 bomber aircraft still in service in each calendar year through calendar year 2022; a modernization plan for sustaining the remaining B–1 bomber aircraft through at least calendar year 2022; and, an estimate of the amount of funding required to fully fund the modernization plan for each calendar year through calendar year 2022. Language in Section 132 also went on to specify that if retirement of six B-1s was justified, after subsequently retiring those aircraft, the Secretary of the Air Force will maintain in a common capability configuration no less than 36 combat-coded B–1 aircraft out to September 30, 2013. After that date, no less than 35 combat-coded aircraft until September 30, 2014, then 34 until September 30, 2015, and finally 33 combat-coded aircraft until September 30, 2016. Section 134 of P.L. 112-81 made available certain FY2011 funds for research and development relating to the B-2 bomber. Specifically, $20 million was made available for FY2012 for research, development, test and evaluation of a conventional weapons mixed load capability for the B–2. In addition, Section 135 made available $15 million of FY2011 funds for research, development, test and evaluation of alternative options for the B-2's extremely high frequency terminal Increment 1 program of record. FY2013 Department of Defense Appropriations (S.Rept. 112-196: To accompany H.R. 5856) Note: as of this writing, this legislation has not been passed into law. The FY2013 budget request did not include funds under Aircraft Procurement for the B-52 CONECT program of record due to the Air Force's decision to terminate the program. Instead, it included $34,700,000 for research, development, test and evaluation for a restructured and descoped B–52 CONECT program. The committee, however, directed that no funds may be obligated or expended for the B–52 CONECT program of record post-milestone C acquisition activities or for a restructured B–52 CONECT program until 30 days after the congressional defense committees have been briefed on the Air Force's proposed way ahead. The committee also addressed the Air Force's decision to terminate the B-52 Strategic Radar Replacement [SR2] program. The B-52's existing APQ-166 radar was produced in the 1960s, has a 20 to 30 hour mean-time between failure rate, has limited in capabilities, and is costly to operate and maintain. Although the Air Force conducted a lengthy analysis of alternatives in 2011 and ultimately terminated the program, the committee encouraged the Secretary of the Air Force to reconsider this decision. FY2013 Department of Defense Authorizations (P.L. 112-239) The subject of retiring B-1 aircraft was addressed again in P.L. 112-239 . Section 142 amended Section 8062 of title 10, United States Code, by adding at the end a new subsection stating, "Beginning October 1, 2011, the Secretary of the Air Force may not retire more than six B–1 aircraft" and "shall maintain in a common capability configuration not less than 36 B–1 aircraft as combat-coded aircraft." Section 211 addressed concerns over the nuclear certification requirements of the Air Force's proposed Next-Generation Bomber by directing the Secretary of the Air Force to ensure the next-generation long-range strike bomber is capable of carrying nuclear weapons as of the date on which the aircraft achieves initial operating capability (IOC) and is also certified to use such weapons no later than two years after IOC. Conclusion In the wake of fiscal constraints levied by the Budget Control Act of 2011 ( P.L. 112-25 / S. 365 ) and the implementation of sequestration on March 1, 2013, Congress and the Air Force will be faced with difficult decisions regarding fiscal appropriations for bomber sustainment and modernization. The impacts of these fiscal measures on bomber appropriations can already be seen with implementation of the FY2013 defense budget. From FY2002 through FY2012, the sustainment and modernization appropriations for the B-52, B-1, and B-2 averaged $160.15 million, $219.77 million, and $451.2 million per year respectively. For the FY2013 budget, appropriations for the B-52 were $63 million, down 61% from the prior 11-year average and the lowest amount appropriated since FY2002. FY2013 appropriations for the B-1 were $167 million, down 24% from the prior 11-year average and also the lowest amount appropriated since FY2002. The B-2 was the only bomber not affected by the budget cuts in FY2013 with $447 million appropriated, a drop of only 1% from the prior 11-year average. Meanwhile, potential foes and long-time allies in the Asia-Pacific are undergoing major (in some cases unprecedented) expansions of their defense capabilities in order to secure or expand their diplomatic, economic, and strategic influence in the region. The result is an increase in the proliferation of advanced 21 st century weapon systems and a trend of countries adopting A2/AD strategies to secure their national interests. Nevertheless, time and time again, the United States turns to its long-range bomber force as means of flexing its deterrent muscle, as it did most recently in response to renewed threats of war by North Korean leader Kim Jong Un. In March and April of 2013, the United States sent B-52s and B-2s on short-notice deployments for exercises with South Korean forces and for shows-of-force over the Korean peninsula as a visible signal to Kim Jong Un that such threats by the North's regime will not go unchecked. However, as potential A2/AD equipped adversaries throughout the world become more prevalent and more capable, the question remains: will the Air Force's legacy bomber force keep pace with sustainment and modernization efforts in order to remain a credible response to such adversaries, or will they become increasingly irrelevant because the nation cannot afford them? In large part, decisions by Congress will determine just how much longer the B-52, B-1, and B-2 will remain relevant, and ultimately, will likely determine the future of the nation's long-range strike capabilities. Appendix A. Existing Bomber Force This appendix presents additional information on the U.S. Air Force's existing fleet of B-52H, B-1B, and B-2 bombers. 52H Stratofortress Mission The B-52H is a long-range, heavy bomber that can perform a variety of missions. The bomber is capable of flying at high subsonic speeds at altitudes up to 50,000 feet (15,166.6 meters). It can carry nuclear or precision guided conventional ordnance with worldwide precision navigation capability. Features In a conventional conflict, the B-52H can perform strategic attack, close-air support, air interdiction, offensive counter-air, and maritime operations. During Desert Storm, B-52s delivered 40% of all the weapons dropped by coalition forces. It is also capable of ocean surveillance, and can assist the U.S. Navy in anti-ship and mine-laying operations. Two B-52Hs, in two hours, can monitor 140,000 square miles (364,000 square kilometers) of ocean surface. All B-52Hs can be equipped with two electro-optical viewing sensors, a forward-looking infrared camera, and an advanced targeting pod, to augment targeting, battle assessment, and flight safety. Pilots wear night vision goggles, or NVGs, to enhance their vision during night operations. Night vision goggles provide greater safety during night operations by increasing the pilot's ability to visually clear terrain, avoid enemy radar, and see other aircraft in a lights-out environment. Starting in 1989, on-going modifications incorporate the global positioning system, heavy stores adapter beams for carrying 2,000 pound munitions, and a full array of advance weapons currently under development. The use of aerial refueling gives the B-52H a range limited only by crew endurance. It has an unrefueled combat range in excess of 8,800 miles (14,080 kilometers). Background The B-52H is capable of dropping or launching a wide array of weapons. This includes gravity bombs, cluster bombs, precision guided missiles, and joint direct attack munitions. Updated with modern technology the B-52H will be capable of delivering the full complement of joint developed weapons. Current engineering analyses show the B-52H's life span to extend beyond the year 2040. The B-52A first flew in 1954, and the B model entered service in 1955. A total of 744 B-52s were built with the last, a B-52H, delivered in October 1962. The first of 102 B-52Hs was delivered to Strategic Air Command in May 1961. The H model can carry up to 20 air launched cruise missiles. In addition, it can carry the conventional cruise missile that was launched in several contingencies during the 1990s, starting with Operation Desert Storm and culminating with Operation Iraqi Freedom. In Operations Desert Storm and Allied Force, B-52s struck wide-area troop concentrations, fixed installations and bunkers, and decimated the morale of Iraq's Republican Guard. On September 2 and 3, 1996, two B-52H's struck Baghdad power stations and communications facilities with 13 AGM-86C conventional air launched cruise missiles, or CALCMs, as part of Operation Desert Strike. At the time, this mission was the longest distance flown for a combat mission, involving a 34-hour, 16,000 statute mile, round trip from Barksdale Air Force Base, LA. In 2001, the B-52H contributed to Operation Enduring Freedom by loitering high above the battlefield and providing close air support through the use of precision guided munitions. The B-52H also played a role in Operation Iraqi Freedom. On March 21, 2003, B-52Hs launched approximately 100 CALCMs during a night mission. Only the H model is still in the Air Force inventory and is assigned to the 5 th Bomb Wing at Minot AFB, ND, and the 2 nd Bomb Wing at Barksdale AFB, LA, which fall under Air Force Global Strike Command. The aircraft is also assigned to the Air Force Reserve Command's 307 th Bomb Wing at Barksdale. General Characteristics Primary Function: Heavy bomber Contractor: Boeing Military Airplane Co. Power plant: Eight Pratt & Whitney engines TF33-P-3/103 turbofan Thrust: Each engine up to 17,000 pounds Wingspan: 185 feet (56.4 meters) Length: 159 feet, 4 inches (48.5 meters) Height: 40 feet, 8 inches (12.4 meters) Weight: Approximately 185,000 pounds (83,250 kilograms) Maximum Takeoff Weight: 488,000 pounds (219,600 kilograms) Fuel Capacity: 312,197 pounds (141,610 kilograms) Payload: 70,000 pounds (31,500 kilograms) Speed: 650 miles per hour (Mach 0.86) Range: 8,800 miles (7,652 nautical miles) Ceiling: 50,000 feet (15,151.5 meters) Armament: Approximately 70,000 pounds (31,500 kilograms) mixed ordnance—bombs, mines, and missiles. (Modified to carry air-launched cruise missiles) Crew: Five (aircraft commander, pilot, radar navigator, navigator, and electronic warfare officer) Unit Cost: $53.4 million (FY1998 constant dollars) Initial operating capability: April 1952 Inventory: Active force, 76; ANG, 0; Reserve, 9 B-1B Lancer Mission Carrying the largest payload of both guided and unguided weapons in the Air Force inventory, the multi-mission B-1 can rapidly deliver massive quantities of precision and non-precision weapons. Features The B-1B's blended wing and body configuration, variable-geometry wings, and turbofan afterburning engines combine to provide long range, maneuverability, and high speed while enhancing survivability. Forward wing settings are used for takeoff, landings, air refueling, and in some high-altitude weapons employment scenarios. Aft wing sweep settings—the main combat configuration—are typically used during high subsonic and supersonic flight, enhancing the B-1B's maneuverability in the low- and high-altitude regimes. The B-1B's speed and handling characteristics, large payload, radar targeting system, long loiter time, and survivability allow it to integrate with almost any joint/composite strike force. The B-1B is a multi-mission weapon system. Its synthetic aperture radar is capable of tracking, targeting, and engaging moving vehicles as well as self-targeting and terrain-following modes. In addition, an extremely accurate Global Positioning System-aided Inertial Navigation System enables aircrews to navigate without the aid of ground-based navigation aids as well as engage targets with a high level of precision. Combat Track II data link radios provide a secure, beyond-line-of-sight reach back connectivity for command and control and in-flight re-tasking/re-targeting. In a time sensitive targeting environment, the aircrew can use targeting data from the Combined Air Operations Center over Combat Track II to strike emerging targets. The B-1B's onboard self-protection electronic jamming equipment, radar warning receiver, expendable countermeasures, and a towed decoy system complement its low-radar cross-section to form an integrated defense system that supports penetration of hostile airspace. The electronic countermeasures system detects and identifies adversary threat radars and then applies the appropriate jamming technique either automatically or through operator inputs. Current B-1B sustainment and modernization efforts build on this foundation. Radar sustainability and capability upgrades will provide a more reliable system and may be upgraded in the future to include an ultra-high-resolution capability and automatic target recognition. The addition of a fully integrated data link, or FIDL, will add Link-16 line-of-sight data link communications capability. FIDL combined with associated cockpit upgrades will provide the crew with a much more flexible, integrated cockpit. Several obsolete and hard to maintain electronic systems are also being replaced to improve aircraft reliability. Background The B-1A was initially developed in the 1970s as a replacement for the B-52. Four prototypes of this long-range, high speed (Mach 2.2) strategic bomber were developed and tested in the mid-1970s, but the program was canceled in 1977 before going into production. Flight testing continued through 1981. The B-1B is an improved variant initiated by the Reagan Administration in 1981. Major changes included the addition of additional structure to increase payload by 74,000 pounds, an improved radar, and reduction of the aircraft's radar cross section (RCS) by an order of magnitude. The engine inlets were extensively modified as part of this RCS reduction, necessitating a reduction in maximum speed to Mach 1.2. The first production B-1B flew in October 1984, and the first aircraft was delivered to Dyess Air Force Base, Texas, in June 1985. Initial operational capability was achieved on October 1, 1986. The final B-1B was delivered May 2, 1988. The B-1B was first used in combat in support of operations against Iraq during Operation Desert Fox in December 1998. In 1999, six B-1Bs were used in Operation Allied Force, delivering more than 20% of the total ordnance while flying less than 2% of the combat sorties. During the first six months of Operation Enduring Freedom, eight B-1Bs dropped nearly 40% of the total tonnage delivered by coalition air forces. This included nearly 3,900 Joint Direct Attack Munitions (JDAMs), or 67% of the total. In Operation Iraqi Freedom, the aircraft flew less than 1% of the combat missions while delivering 43% of the JDAMs used. The B-1 continues to be deployed today, flying missions daily in support of continuing operations. General Characteristics Primary Function: Long-range, multi-role, heavy bomber Contractor: Boeing, North America (formerly Rockwell International, North American Aircraft); Offensive avionics, Boeing Military Airplane; defensive avionics, EDO Corporation Power plant: Four General Electric F101-GE-102 turbofan engine with afterburner Thrust: 30,000-plus pounds with afterburner, per engine Wingspan: 137 feet (41.8 meters) extended forward, 79 feet (24.1 meters) swept aft Length: 146 feet (44.5 meters) Height: 34 feet (10.4 meters) Weight: approximately 190,000 pounds (86,183 kilograms) Maximum Takeoff Weight: 477,000 pounds (216,634 kilograms) Fuel Capacity: 265,274 pounds (120,326 kilograms) Payload: 75,000 pounds ( 34,019 kilograms) Speed: 900-plus mph (Mach 1.2 at sea level) Range: Intercontinental Ceiling: More than 30,000 feet (9,144 meters) Armament: 84 500-pound Mk-82 or 24 2,000-pound Mk-84 general purpose bombs; up to 84 500-pound Mk-62 or 8 2,000-pound Mk-65 Quick Strike naval mines; 30 cluster munitions (CBU-87, -89, -97) or 30 Wind-Corrected Munitions Dispensers (CBU-103, -104, -105); up to 24 2,000-pound GBU-31 or 15 500-pound GBU-38 Joint Direct Attack Munitions; up to 24 AGM-158A Joint Air-to-Surface Standoff Missiles; GBU-54 Laser Joint Direct Attack Munition Crew: Four (aircraft commander, copilot, and two weapon systems officers) Unit Cost: $283.1 million (fiscal 98 constant dollars) Initial operating capability: October 1986 Inventory: Active force, 63 (test, 2); ANG, 0; Reserve, 0 B-2 Spirit Mission The B-2 Spirit is a multi-role bomber capable of delivering both conventional and nuclear munitions. Features Along with the B-52H and the B-1B, the B-2 provides the penetrating flexibility and effectiveness inherent in manned bombers. Its low-observable, or "stealth," characteristics give it the ability to penetrate an enemy's most sophisticated defenses and threaten its most valued, and heavily defended, targets. The blending of low-observable technologies with high aerodynamic efficiency and large payload gives the B-2 important advantages over existing bombers. Its low observability provides it greater freedom of action at high altitudes, thus increasing its range and providing a better field of view for the aircraft's sensors. Its unrefueled range is approximately 6,000 nautical miles (9,600 kilometers). The B-2's low observability is derived from a combination of reduced infrared, acoustic, electromagnetic, visual, and radar signatures. These signatures make it difficult for sophisticated defensive systems to detect, track, and engage the B-2. Many aspects of the low observability process remain classified; however, the B-2's composite materials, special coatings, and flying-wing design all contribute to its "stealthiness." The B-2 has a crew of two pilots: an aircraft commander in the left seat and a mission commander in the right. Background The first B-2 was publicly displayed on November 22, 1988, when it was rolled out of its hangar at Air Force Plant 42, Palmdale, CA. Its first flight was July 17, 1989. The B-2 Combined Test Force, Air Force Flight Test Center, Edwards Air Force Base, CA, is responsible for flight testing, engineering, manufacturing, and development of the B-2. Whiteman AFB, MO, is the only operational base for the B-2. The first aircraft, Spirit of Missouri, was delivered December 17, 1993. Depot maintenance responsibility for the B-2 is performed by Air Force contractor support and is managed at the Oklahoma City Air Logistics Center at Tinker AFB, OK. In Operation Allied Force, the B-2 was responsible for destroying 33% of all Serbian targets in the first eight weeks, by flying nonstop to Kosovo from its home base in Missouri and back. In support of Operation Enduring Freedom, the B-2 flew one of its longest missions to date from Whiteman to Afghanistan and back. The B-2 completed its first-ever combat deployment in support of Operation Iraqi Freedom, flying 22 sorties from a forward operating location as well as 27 sorties from Whiteman AFB and releasing more than 1.5 million pounds of munitions. The aircraft received full operational capability status in December 2003. On February 1, 2009, the Air Force's newest command, Air Force Global Strike Command, assumed responsibility for the B-2 from Air Combat Command. The prime contractor, responsible for overall system design and integration, is Northrop Grumman Integrated Systems Sector. Boeing Military Airplanes Co., Hughes Radar Systems Group, General Electric Aircraft Engine Group, and Vought Aircraft Industries, Inc., are key members of the aircraft contractor team. General Characteristics Primary function: Multi-role heavy bomber Contractor: Northrop Grumman Corp. and Contractor Team: Boeing Military Airplanes Co., Hughes Radar Systems Group, General Electric Aircraft Engine Group, and Vought Aircraft Industries, Inc. Power Plant: Four General Electric F118-GE-100 engines Thrust: 17,300 pounds each engine Wingspan: 172 feet (52.12 meters) Length: 69 feet (20.9 meters) Height: 17 feet (5.1 meters Weight: 160,000 pounds (72,575 kilograms) Maximum Takeoff Weight: 336,500 pounds (152,634 kilograms) Fuel Capacity: 167,000 pounds (75750 kilograms) Payload: 40,000 pounds (18,144 kilograms) Speed: High subsonic Range: Intercontinental Ceiling: 50,000 feet (15,240 meters) Armament: Conventional or nuclear weapons Crew: Two pilots Unit cost: Approximately $1.157 billion (fiscal 98 constant dollars) Initial operating capability: April 1997 Inventory: Active force: 20 (1 test); ANG: 0; Reserve: 0 Appendix B. Plans for B-52H Bomber Sustainment and Modernization B-52H Master Plan and Requirements The B-5 H 2 Bomber Master Plan outlines Air Force Global Strike Command's (AFGSC's) plans, programs, requirements, and strategic vision for the B-52 platform to meet the nation's airborne strategic nuclear deterrence and global precision attack mission objectives. Near-term modernization and sustainment efforts are identified for the time period 2012 to 2018. Far-term modernization and sustainment efforts are identified as those required in the 2019 to 2032 time period. AFGSC Director of Plans, Programs and Requirements (HQ AFGSC A5/8) is responsible for producing and updating the master plan. Assumptions The B-52H Bomber Master Plan is based on the following assumptions: The B-52H will conduct its assigned nuclear mission through 2040. The B-52H will continue to conduct its assigned conventional mission through 2040. The B-52H fleet size will consist of not more than 76 airframes through 2040. Conversion of a required number of B-52Hs to a conventional-only role by 2018 for New START compliance. The current B-52H service life goal is 2040. There will be no change to current B-52H basing. Unfunded risks and issues require prioritization and validation through the resource allocation and POM (program objectives memorandum) process. The nuclear enterprise will continue to be a top priority for the Air Force and the primary mission of Air Force Global Strike Command. Current B-52H Sustainment and Modernization Efforts The following is a summary of B-52H sustainment and modernization initiatives currently in the program of record (POR) that are either just being completed or are currently in progress. (Asterisks denote sustainment and modernization efforts that could be considered essential to the B-52H's ability to operate in A2/AD threat environments.) * Combat Network Communications Technology (CONECT): The B-52 CONECT acquisition program supports nuclear and conventional operations by upgrading the B-52 fleet with tactical datalink and voice communications capability along with improved threat and situational awareness to support participation in network centric operations. * Military-Standard-1760 Modernization: Improves the B-52's conventional warfare capability with additional MIL-STD-1760 smart weapons and improved weapons carriage and fully integrates advanced targeting pods with the B-52's offensive avionics system. B-52 Trainer Upgrades: Includes modernization upgrades to B-52 training devices to support aircrew and maintenance training with the latest B-52 capabilities. Upgrades and modernizations under this program ensure weapons system trainers (simulators) are current with ongoing B-52 modifications. Arms Control: Arms control activities under the New START create the need to modify a number of B-52s to a conventional only role by removing the aircraft's nuclear Code Enable Switch and associated equipment. This effort requires a complete design to remove the equipment from the aircraft and install metal plates prohibiting reinstallation of removed equipment to comply with treaty protocols. * Mode S/5 Identification Friend or Foe (IFF): The Mode S/5 program replaces the B-52's aging APX-64 IFF transponder with a modern APX-119 transponder. Mode S/5 IFF is required for flight by the Federal Aviation Administration (FAA), International Civil Aviation Organization (ICAO), and the DOD. Low Cost Modifications: Miscellaneous, low-cost modernization efforts that stem from the operation and maintenance of a 50-plus-year-old aircraft, such as parts obsolescence, diminishing manufacturing resources, and emerging requirements to add or maintain the existing B-52 capabilities. B-52 Anti-Skid Replacement: The B-52 anti-skid system is used to maintain control of the aircraft during landing and taxi operations by preventing aircraft skidding. This modification replaces the current anti-skid system with an updated system that resolves obsolescence issues. If not upgraded, the unsupportability of the current anti-skid system is projected to affect aircraft availability starting in 2015. * B-52 Modernization Research Development Test and Evaluation Efforts: B-52 modernization RDT&E efforts is a comprehensive program to ensure the B-52's ability to perform current and future wartime missions. It includes upgrades to data links, navigation, sensors, weapons, and electronic warfare and training capabilities. * 1760 Internal Weapons Bay Upgrade (IWBU): The 1760 IWBU modification allows the B-52 to carry J-series weapons such as the Joint Direct Attack Munitions (JDAM), Joint Air-to-Surface Standoff Missile (JASSM), JASSM-ER (extended range), and Miniature Air Launched Decoy (MALD) weapons in the B-52's internal weapons bay. Future B-52H Sustainment and Modernization Requirements While the current B-52H weapon system is capable of meeting today's strategic deterrence and conventional taskings, it may require continued sustainment and modernization efforts to remain airworthy and viable against 21 st century A2/AD threats. For the B-52H to continue meeting mission requirements, Air Force Global Strike Command recommends considering the following modernization and sustainment efforts for future appropriations consideration. These efforts are organized into five broad categories: airframe, avionics, communications systems, weapons interfaces, and supporting infrastructure. A detailed explanation of each category's specific recommendations can be found in the B-52H's Master Plan. Airframe: The airframe is comprised of structural components, engines, flight controls, and miscellaneous mechanical systems. Several B-52 airframe subsystems such as the existing B-52 analog Yaw Electronic Control Unit/Pitch Electronic Control Unit and the Anti-Skid Control Unit within the Anti-Skid System are becoming unsupportable due to parts obsolescence, lack of test equipment, specialized tools, troubleshooting guides, and experienced repair personnel. Continued full funding for these programs could mitigate these problems. Avionics Systems: Avionics systems are comprised of defensive systems, offensive systems, and navigation systems. Several avionics subsystems are suffering from obsolescence and supportability issues. For example, the current radar antenna was never upgraded, uses 1950s technology and is projected to become unsupportable in the near future. In addition, the Electronic Warfare (EW) suite is experiencing parts obsolescence, diminishing manufacturing sources, and ineffectiveness against the technologically advancing A2/AD threats. Communications Systems: Communications systems are comprised of cryptographic, tactical, emergency, and survivable subsystems. The biggest near-term communications concern involves the family of advanced beyond line-of-sight terminals. Delays in the program are putting the Extremely High-Frequency (EHF) program at risk by not meeting U.S. Strategic Command's (USSTRATCOM) need dates based on projected Military Strategic and Tactical Relay Satellite (MILSTAR) Ultra High Frequency Satellite Communications (UHF SATCOM) end-of-life projections. Further delays will impact the B-52's ability to receive Emergency Action Messages (EAMs) and Report-Backs in support of USSTRATCOM's nuclear command and control requirements. Longer-term communications concerns involve the integration of an advanced tactical datalink and an advanced secure, broadband, beyond line-of-sight datalink for continuous, survivable command and control coordination, and improved reception of weapons retargeting data and mission updates. Weapons Interfaces: Weapons interfaces are systems designed to support, carry, communicate with and/or launch weapons from the B-52. Near-term needs include the integration of an Advanced Targeting Pod, on-going Military-Standard-1760 internal weapons bay upgrades, integrated weapons interface unit (IWIU) integration on external weapons pylons, and a GPS interface unit/programmable keyboard upgrade to the offensive avionics system. Supporting Infrastructure: B-52 supporting infrastructure includes trainers, simulators, test equipment, aircraft ground equipment, and weapon system testing that support the B-52 platform. Appendix C. Plans for B-1 Bomber Sustainment and Modernization B-1 Strategic Action and Investment Plan (SAIP) Similar to the B-52H and B-2's Master Plans, the B-1 sustainment and modernization plan is captured in the B-1 Strategic Action and Investment Plan (SAIP) . B-1 requirements are managed by Air Combat Command's (ACC's) B-1 Aircraft Branch (ACC/A8A1) within the ACC/A8A Combat Aircraft Division. In 2011, the B-1 Aircraft Branch contracted with the consulting firm of Whitney, Bradley & Brown, Inc. to research, study, and develop a cost optimized and time phased B-1 sustainment and modernization plan. The resulting B-1 SAIP provides detailed analysis and recommendations for the period 2014 to 2025 and presents optimum B-1 portfolios of sustainment and modernization efforts for the FY14, FY16, and FY18 Programs Objective Memorandum (POM). The results of this effort produced three sustainment and modernization plans designed to maximize the benefit to be received from three, assumed funding levels dependent on Air Force requested and congressionally provided appropriations. Appropriation of $179 million per year (out to 2022) should complete existing sustainment and modernization programs and fund only those sustainment programs needed to maintain existing B-1 capabilities. The B-1 SAIP concludes that $179 million represents the minimum feasible B-1 modernization and sustainment funding level. The B-1 SAIP concluded that appropriations of $250 million per year (out to 2022) is the minimum recommended funding level for B-1 sustainment and modernization. At this level, several high benefit capabilities could be funded, which would reduce Air Force ownership costs and potentially increase the B-1's operational effectiveness. Appropriations of $400 million per year is the highest considered funding profile recommended by the B-1 SAIP and would be sufficient to fund most of the recommended B-1 sustainment and modernization efforts out to 2022. The B-1 SAIP concludes that the Air Force should request at least $250 million per year for B-1 sustainment and modernization. Appropriations at this level and above are anticipated to provide near-term solutions to weapon system capability gaps and shortfalls while ensuring the B-1 is capable of supporting national security objectives. Assumptions The B-1 Bomber Strategic Action and Investment Plan (SAIP) is based on the following assumptions: There will be a continued requirement to strike fleeting or time sensitive targets. The overall force structure within the Air Force will continue to be reduced, emphasizing the need for availability of existing platforms such as the B-1. B-1 force structure will remain steady over the SAIP timeline. B-1s may be employed from the continental United States or applicable forward-deployed locations, as warranted by the scenario and theater requirements. Budget pressures dictate that B-1 aircraft be sustained in the most affordable manner possible. Reductions in manpower will continue to highlight the need for efficiencies. Irregular Warfare operations will continue throughout the service life of the B-1. Current B-1 Sustainment and Modernization Efforts The following is a summary of the major B-1 sustainment and modernization initiatives that are currently in the program of record (POR) that are either just completing or are currently in progress. The costs of these PORs were factored into the SAIP's sustainment and modernization funding analysis and are reflected in the three assumed funding levels. (Asterisks denote sustainment and modernization efforts that could be considered essential to the B-1's ability to operate in A2/AD threat environments.) * Fully Integrated Data Link: FIDL will provide the B-1 with Link-16 line-of-sight (LOS) and Joint Range Extension (JRE) beyond-line-of-sight (BLOS) data link capability and supports machine-to-machine transfer of targeting data to the B-1's weapons control computers. Simulator Digital Control Loading: Simulator digital control loading is a modification to the B-1's Weapon System Trainer(s) (WSTs) that will replace the existing hydraulically-operated control loading system with a digital control loading system. Control loading provides force feedback for the pilot's flight control stick and pedals; the WST flight stations are unusable without a working control loading system. The existing system faces obsolescence and diminishing manufacturing sources (DMS) issues, with some critical parts having no spares. Central Integrated Test System: CITS is the B-1's fault diagnostic and fault isolation system. The current CITS processor is at maximum memory/throughput, thus inhibiting fault detection and isolation for current systems and future B-1 upgrades. This modification provides a new processor, upgraded displays, and new software that will enhance diagnostic capabilities, improve aircraft turnaround time, and reduce maintenance costs. This program will also alleviate the current diminishing manufacturing source issue with this system. * Inertial Navigation System Replacement: Provides for the replacement of a line replaceable unit (LRU) in the B-1's inertial navigation system. The B-1 INS provides autonomous capability to navigate globally, without the aid of ground-based and global positioning system navigation aids, as well as engage ground targets with a high level of precision. The current INS system is plagued with severe diminishing manufacturing source issues. * Radar Improvement Upgrade: The B-1B Radar Reliability and Maintainability Improvement Program (RMIP) consists of the replacement of two high-failure-rate radar Line Replaceable Units (LRUs) and the supporting software conversion of legacy radar modes. The Radar RMIP is intended to provide B-1B combat forces with an updated offensive radar system that should improve mission capable (MC) rates and eliminate issues with diminishing manufacturing sources (DMS). * Visual Situation Display Upgrade: The Vertical Situation Display Upgrade (VSDU) is a safety-critical program that replaces the B-1's pilot and co-pilot primary flight displays and associated flight instruments. The current VSDs are monochrome cathode ray tube displays and "steam gauge" primary flight instruments which are experiencing severe diminishing manufacturing source issues with the potential to ground the aircraft. Spares are no longer procurable due to obsolescence. VSDU installs two 8" x 6" color displays at the pilot and co-pilot stations to provide primary flight information and backups to meet flight safety standards. Self-Contained Attitude Indicator: The SCAI is a backup to the B-1's primary flight instruments and provides pilots with indications of aircraft attitude, airspeed, Mach, altitude and vertical velocity. This development effort will replace the current obsolete legacy SCAI with a more reliable and supportable off-the-shelf display. Gyro Stabilization System Replacement (GSSR) : This program is procuring and installing line replaceable units (LRUs) in the B-1's GSS, which is part of the aircraft's navigation system. This modification provides for replacement of the high maintenance/high cost/high failure rate GSS LRUs with high reliability LRUs. B-1 Training Support: This effort modifies and replaces computer components in the B-1 aircraft Maintenance Training Devices (MTDs). These MTDs are currently running on computer systems from the late 1990s and are using nearly 100% of the computer resources available to them. As such, no excess computer capacity exists to support current updates, including current B-1 modification efforts. This modification will update the hardware with modern Commercial Off-The-Shelf (COTS) computer systems and will re-host the software on the new hardware, allowing these MTDs to accept new upgrades and remain concurrent with B-1 upgrades. * Digital Communications: The digital communications upgrade provides for replacement of a currently installed Ultra High Frequency (UHF) Satellite Communications (SATCOM) beyond line of sight datalink radio system with a Demand Assigned Multiple Access (DAMA) compliant, UHF SATCOM radio. The current system, a temporary modification, was installed in 2002 to support combat operations in Southwest Asia. The current system is not DAMA compliant, which severely limits accessibility to SATCOM channels. In addition, the current system utilizes a system unique datalink, which is not interoperable with standard, joint UHF SATCOM systems. * B-1 Link 16 Cryptographic Materials: Assistant Secretary of Defense for Command, Control and Communications (ASD/C3I) directed implementation of the DOD Cryptographic Modernization Initiative (CMI) on 23 February 2001. CJCS Notice 6510/NSA 3-9 directs the modernization of all cryptography in military systems in the US, NATO and Coalition nations. To prevent information compromise, the National Security Agency mandate requires Link 16 cryptographic systems to be upgraded. * Laptop Controlled Targeting Pod: LCTP provides advanced targeting pod control, display, and information to all B-1 crewmembers. It allows aircrew to derive precision coordinates for GPS guided weapons, guide laser-guided weapons, and allows aircrew to conduct inflight re-planning of long-range standoff weapons. This effort permanently installs three rack mounted computers and removes temporary targeting pod laptops. Low Cost Mods: These modifications are low cost B-1 upgrades that address safety, reliability, maintainability, and/or improved system performance issues on the aircraft, support equipment, and simulators/trainers. These funds are required for mission essential B-1 low cost modifications to ensure readiness and B-1 operational requirements. * Miscellaneous B-1 Modernization Research, Development, Test and Evaluation Efforts: This program provides RDT&E funding for the B-1 modernization program. The modernization program addresses potential aircraft obsolescent issues due to diminishing manufacturing sources (DMS) and provides new and improved capabilities to the B-1 weapon system that require significant hardware and software development and testing. Future B-1 Sustainment and Modernization Requirements Optimal $250M /Year B-1 Modernization and Sustainment Funding Scenario Figure C-1 depicts the $250 million/year funding scenario for current programs of record (POR) and the recommended future B-1 modernization and sustainment requirements. $250 million/year is the minimum funding level recommended by the B-1 SAIP where 32, high-benefit capabilities could be funded that could reduce Air Force ownership costs and potentially increase the B-1's operational effectiveness. Authors of the B-1 SAIP believe the 32, high-benefit capabilities represent the optimal combination of future modernization and sustainment needs that could provide the highest benefit at the $250 million/year funding level and is a point of departure when considering other funding levels and future requirements. A detailed description of each of the 32 capabilities can be found in the B-1 SAIP. Appendix D. Plans for B-2 Sustainment and Modernization B-2 Master Plan and Requirements The B-2 Bomber Master Plan outlines Air Force Global Strike Command's (AFGSC's) plans, programs, requirements, and strategic vision for the B-2 platform to meet the nation's airborne strategic nuclear deterrence and global precision attack mission needs. Near-term modernization and sustainment efforts are identified for the time period 2012 to 2018. Far-term modernization and sustainment efforts are identified as those required in the 2019 to 2032 time period. AFGSC Director of Plans, Programs and Requirements (HQ AFGSC A5/8) is responsible for producing and updating the master plan. Assumptions The B-2 Bomber Master Plan is based on the following assumptions: The B-2 will continue to conduct currently assigned nuclear and conventional missions well into the 2050s. The B-2 fleet size will remain at 20 aircraft through 2058. The B-2 planned end-of-life will remain 2058. There will be no change to current B-2 basing. Unfunded risks and issues require prioritization and validation through the resource allocation and program objective memorandum (POM) process. The B-2 will continue to be required to penetrate and employ weapons in highly defended anti-access/area denial environments well into 2050. The B-2 will continue to be a primary component in the USAF Long Range Strike (LRS) family of systems. The B-2 will incorporate all new, applicable air-to-ground weapons including the new cruise missile and the ability to employ weapons to defeat and destroy hardened and deeply buried targets. The B-52 will incorporate beyond-line-of-sight (BLOS) connectivity for conventional, as well as nuclear taskings [survivable, assured nuclear command and control]. Air Force Global Strike Command and Air Combat Command will continue to work cooperatively on B-2 requirements in accordance with applicable Memoranda of Agreement. Current B-2 Sustainment and Modernization Efforts The following is a summary of B-2 sustainment and modernization initiatives currently in the program of record (POR) that are either just completing or are currently in progress. (Asterisks denote sustainment and modernization efforts that could be considered essential to the B-2's ability to operate in A2/AD threat environments.) * Extremely High Frequency Satellite Communications (EHF SATCOM) and Computer Upgrade Program: The aging Ultra High Frequency (UHF) Military Satellite Communications system is being phased out and replaced by the Advanced Extremely High Frequency (AEHF) Satellite Communications (SATCOM) system. The B-2 Extremely High Frequency (EHF) SATCOM program supports the replacement of the B-2's UHF Terminal Set with an EHF SATCOM system that will be compatible with the legacy MILSTAR I/II satellite constellation and the future AEHF satellite constellation. * Massive Ordnance Penetrator Integration: The B-2 is the only anti-access penetrating platform capable of delivering the Massive Ordnance Penetrator (MOP) against hardened, deeply buried targets. Integration of the 30,000 lb class MOP provides the ability to hold additional hardened, deeply buried targets at risk beyond those achievable with current munitions. The MOP integration program will design, develop, integrate, and test hardware and software required for carriage, jettison, and release of MOP from the B-2. * Low Observable Signature and Supportability Mod ifications (LOSSM) Diagnostics: LOSSM diagnostics equipment projects help reduce low observable (LO) maintenance, increase aircraft availability and improves the combat ready LO signature for the B-2 fleet. B-2 Trainer System Upgrade: Trainer system upgrades keep the B-2 family of trainers current with aircraft system updates while countering equipment obsolescence issues. Enhancements are provided to the B-2 family of trainers to include the Weapon System Trainers, Mission Trainer, Cockpit Procedures Trainers, Computerized Maintenance Training System, Weapon System Training Aids, Weapons Load Trainer, Crew Escape System Maintenance Trainer, Flight Control System Trainer, instructor-operator station, and Training System Support Center. * Link-16/Center Instrument Display/In-Flight Replanner (CID/IFR) : Link-16 CID/IFR allows the B-2 access to theater tactical data links, improving on-board situational awareness while greatly enhancing the ability of theater commanders to coordinate the B-2 with other assets. The Center Instrument Display Digital Video Recorder provides the ability to record video signals from the display to the existing recorders in the cockpit. This capability allows mission playback, operational assessments and de-briefs, and provides aircrew training. Radar Modernization Program (RMP): Completed in the third quarter FY12, this program brought all operational and flight test B-2 aircraft radars into frequency compliance. * Low Observable Signature and Supportability Modifications (LOSSM) Program Structures/Materials : This program implements a mix of over 20 improvements to the B-2's low observable (LO) support equipment, structures, and materials designed to slow signature degradation and to improve LO supportability. LOSSM projects decrease low observable (LO) maintenance, increase aircraft availability, and maintain and improve the combat-ready LO signature for the B-2 fleet. * Defensive Management System Modernization (DMS-M): The DMS-M program addresses capability gaps, obsolescence, and supportability issues associated with the B2's legacy DMS system. DMS-M will upgrade the B-2's self-defense capabilities against improved, 21 st century A2/AD enemy air defenses. DMS-M is the #1 priority modification program in the B-2 program office and will resolve the #1obsolescence issue in the B-2 fleet. * Stores Management Operational Flight Program (SM OF P) Re-host and Mixed Carriage Modification: This program will re-host the B-2's stores management operational flight software onto a larger, more capable processor, enabling the B-2 to carry a mixed weapons carriage with a Rotary Launcher Assembly (RLA) in one weapons bay and a Smart Bomb Rack Assembly (SBRA) in the other weapons bay. * Common Very Low Frequency Receiver (CVR Increment 1): This program provides the B-2 with a survivable, beyond-line-of-sight communication path for receipt of Emergency Action Messages (EAMs) to support United States Strategic Command's (USSTRATCOM) nuclear command and control requirements. Low Cost Engine Modifications: B-2 engine improvements include the F118 engine service life extension program, the extended mission oil tank upgrade, and stage one and three engine fan blade improvements that will reduce engine changes and increase aircraft availability. Low Cost Modifications: These modifications are low cost B-2 upgrades that address safety, reliability, maintainability, and/or improved system performance issues on the B-2 aircraft, support equipment, and simulators/trainers. These funds are required for mission essential B-2 low cost modifications to ensure readiness and B-2 operational requirements. * B-2 Modernization Research, Development, Test and Evaluation efforts: To ensure the B-2 fleet can accomplish its nuclear and conventional mission in highly defended and anti-access environments, periodic modernization efforts must be undertaken to upgrade combat capability as well as improve the viability, supportability, and survivability of the weapon system. RDT&E funding ensures recent and ongoing investments in necessary avionics, structures, communications, and weapons upgrades keep the B-2 viable in the immediate future. Baseline Support: Baseline Support maintains the B-2 unique flight test aircraft, as well as obtains, modifies, and operates a flying test bed, developmental hardware/software and test equipment, to support developmental systems integration and flight test. Future B-2 Sustainment and Modernization Requirements While the current B-2 weapons system is capable of meeting today's strategic deterrence and conventional taskings, it may require continued sustainment and modernization efforts to remain airworthy and viable against 21 st century anti-access/areal denial (A2/AD) threats. Consequently, the B-2 will require continued system review and testing, adaptation to emerging technologies and threats, and attention to facilities and ground support equipment in order for the weapon system to remain viable out to the 2050s. The following is a brief summary of Air Force Global Strike Command's recommendations to support the B-2 from 2012 through 2032. The recommendations are designed to address sustainment challenges while ensuring future modernization and acquisition efforts remain integrated and synchronized to meet the B-2's operational requirements. The guidance is organized into three broad categories: airframe, communications systems, and supporting infrastructure. A detailed explanation of each category's specific recommendations can be found in the B-2's Master Plan. Airframe: The airframe category is comprised of avionics, low-observable, weapons interfaces, flight controls, engines, and miscellaneous mechanical subsystems. Many issues within these systems currently affect viability, availability, and turnaround time of the B-2 weapon system. For example, low-observable maintenance continues to be problematic due to high repair costs, labor-intensive procedures, supportability issues, and degradation of aircraft radar signature. The 1980s era Defensive Management System technology suffers from obsolescence and supportability issues and requires modernization. Mixed weapons carriage flexibility is constrained due to system limitations such as computer processing, memory and throughput. These issues should continue to be addressed as they reduce the B-2's flexibility to deliver desired effects, its ability to penetrate A2/AD threats, and ultimately, its combat survivability. Communications System: The communications system category is comprised of cryptographic, tactical, emergency and survivable communications subsystems. The cryptographic system requires modernization due to obsolescence and decertification issues leading to security and sustainment concerns. Currently, the aircraft's primary beyond-line-of-sight (BLOS) communications capability is provided via the UHF Military Strategic and Tactical Relay Satellite (MILSTAR) system, which has already exceeded its design life and is nearing life expected end-of-life. Supporting Infrastructure: The supporting infrastructure category includes—but is not limited to—depot , trainers, simulators, test equipment, aerospace ground equipment (AGE), flight testing, and software that support the B-2 weapon system. Test and support equipment are aging and beginning to suffer from design life, supportability, and parts obsolescence issues. Appendix E. Legislative Activity FY2011-FY2013 FY2011 National Defense Authorization Act ( P.L. 111-383 ) TITLE 1 - Procurement Subtitle C - Joint and Multiservice Matters SEC. 126. INTEGRATION OF SOLID STATE LASER SYSTEMS INTO CERTAIN AIRCRAFT . (a) ANALYSIS OF FEASIBILITY REQUIRED.—The Secretary of Defense shall conduct an analysis of the feasibility of integrating solid state laser systems into the aircraft platforms specified in subsection (b) for purposes of permitting such aircraft to accomplish their missions, including to provide close air support. (b) AIRCRAFT—The aircraft platforms specified in this subsection shall include, at a minimum, the following: (1) The C–130 aircraft. (2) The B–1 bomber aircraft. (3) The F–35 fighter aircraft. (c) SCOPE OF ANALYSIS.—The analysis required by subsection (a) shall include a determination of the following: (1) The estimated cost per unit of each laser system analyzed. (2) The estimated cost of operation and maintenance of each aircraft platform specified in subsection (b) in connection with each laser system analyzed, noting that the fidelity of such analysis may not be uniform for all aircraft platforms. TITLE X - General Provisions Subtitle F - Studies and Reports SEC. 1056 . REQUIRED REPORTS CONCERNING BOMBER MODERNIZATION, SUSTAINMENT, AND RECAPITALIZATION EFFORTS IN SUPPORT OF THE NATIONAL DEFENSE STRATEGY. (a) AIR FORCE REPORT.— (1) REPORT REQUIRED.—Not later than 360 days after the date of the enactment of this Act, the Secretary of the Air Force shall submit to the congressional defense committees a report that includes— (A) a discussion of the cost, schedule, and performance of all planned efforts to modernize and keep viable the existing B–1, B–2, and B–52 bomber fleets and a discussion of the forecasted service-life and all sustainment challenges that the Secretary of the Air Force may confront in keeping those platforms viable until the anticipated retirement of such aircraft; (B) a discussion, presented in a comparison and contrast type format, of the scope of the 2007 Next-Generation Long Range Strike Analysis of Alternatives guidance and subsequent Analysis of Alternatives report tasked by the Under Secretary of Defense for Acquisition, Technology, and Logistics in the September 11, 2006, Acquisition Decision Memorandum, as compared to the scope and directed guidance of the year 2010 Long Range Strike Study effort currently being conducted by the Under Secretary of Defense for Policy and the Office of the Secretary of Defense's Cost Assessment and Program Evaluation Office; and (C) a discussion of the preliminary costs, any development, testing, fielding and operational employment challenges, capability gaps, limitations, and shortfalls of the Secretary of Defense's plan to field a long-range, penetrating, survivable, persistent and enduring ''family of systems'' as compared to the preliminary costs, any development, testing, fielding, and operational employment of a singular platform that encompasses all the required aforementioned characteristics. (2) PREPARATION OF REPORT.—The report under paragraph (1) shall be prepared by a federally funded research and development center selected by the Secretary of the Air Force and submitted to the Secretary for submittal by the Secretary in accordance with that paragraph. (b) COST ANALYSIS AND PROGRAM EVALUATION REPORT.—Not later than 180 days after the date of the enactment of this Act, the Director of the Cost Analysis and Program Evaluation of the Office of the Secretary of Defense shall submit to the congressional defense committees a report that includes— (1) the assumptions and estimated life-cycle costs of the Department's long-range, penetrating, survivable, persistent, and enduring ''family of systems'' platforms; and (2) the assumptions and estimated life-cycle costs of the Next Generation Platform program, as planned, prior to the cancellation of the program on April 6, 2009. TITLE XII - Matters Relating to Foreign Nations Subtitle C - Reports and Other Matters SEC. 1238 . REPORT ON UNITED STATES EFFORTS TO DEFEND AGAINST THREATS POSED BY THE ANTI-ACCESS AND AREA-DENIAL CAPABILITIES OF CERTAIN NATION-STATES. (a) FINDING.—Congress finds that the 2010 report on the Department of Defense Quadrennial Defense Review concludes that ''[a]nti-access strategies seek to deny outside countries the ability to project power into a region, thereby allowing aggression or other destabilizing actions to be conducted by the anti-access power. Without dominant capabilities to project power, the integrity of United States alliances and security partnerships could be called into question, reducing United States security and influence and increasing the possibility of conflict''. (b) SENSE OF CONGRESS.—It is the sense of Congress that, in light of the finding in subsection (a), the Secretary of Defense should ensure that the United States has the appropriate authorities, capabilities, and force structure to defend against any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries. (c) REPORT.—Not later than April 1, 2011, the Secretary of Defense shall submit to the Committees on Armed Services of the Senate and the House of Representatives a report on United States efforts to defend against any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile nation-states. (d) ELEMENTS.—The report required under subsection (c) shall include the following: (1) An assessment of any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries, including an identification of the foreign countries with such capabilities, the nature of such capabilities, and the possible advances in such capabilities over the next 10 years. (2) A description of any efforts by the Department of Defense to address the potential future threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries. (3) A description of the authorities, capabilities, and force structure that the United States may require over the next 10 years to address the threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries. (e) FORM.—The report required under subsection (c) shall be submitted in unclassified form, but may contain a classified annex if necessary. (f) DEFINITIONS.—In this section— (1) the term ''anti-access'', with respect to capabilities, means any action that has the effect of slowing the deployment of friendly forces into a theater, preventing such forces from operating from certain locations within that theater, or causing such forces to operate from distances farther from the locus of conflict than such forces would normally prefer; and (2) the term ''area-denial'', with respect to capabilities, means operations aimed to prevent freedom of action of friendly forces in the more narrow confines of the area under a potentially hostile nation-state's direct control, including actions by an adversary in the air, on land, and on and under the sea to contest and prevent joint operations within a defended battlespace. FY2012 Department of Defense Appropriations ( H.Rept. 112-331 to Accompany H.R. 2055 ) Retirement of B-1 Aircraft The fiscal year 2012 budget request includes a proposal to retire six B–1 bomber aircraft. The conferees understand that the B– 1 fleet continues to operate almost constantly over Afghanistan in support of troops on the ground and that the B–1 is a critical component of the Nation's long-range strike capabilities. The Air Force proposed to reinvest less than 40 percent of the savings from aircraft retirements in the B–1 modernization program across the Future Years Defense Program. The conferees are concerned that premature retirement of six B–1 aircraft could negatively impact long-range strike capabilities. Therefore, the conferees direct the Secretary of the Air Force to reinvest a larger portion of savings realized from B–1 aircraft retirements, to the extent authorized by law, in the sustainment and modernization of the B–1 fleet. FY2012 National Defense Authorization Act ( P.L. 112-81 ) TITLE I – Procurement Subtitle D – Air Force Programs SEC. 132 . LIMITATIONS ON USE OF FUNDS TO RETIRE B–1 BOMBER AIRCRAFT. (a) IN GENERAL.—None of the funds authorized to be appropriated by this Act for fiscal year 2012 for the Department of Defense may be obligated or expended to retire any B–1 bomber aircraft on or before the date on which the Secretary of the Air Force submits to the congressional defense committees the plan described in subsection (b). (b) PLAN DESCRIBED.—The plan described in this subsection is a plan for retiring B–1 bomber aircraft that includes the following: (1) An identification of each B–1 bomber aircraft that will be retired and the disposition plan for such aircraft. (2) An estimate of the savings that will result from the proposed retirement of B–1 bomber aircraft in each calendar year through calendar year 2022. (3) An estimate of the amount of the savings described in paragraph (2) that will be reinvested in the modernization of B–1 bomber aircraft still in service in each calendar year through calendar year 2022. (4) A modernization plan for sustaining the remaining B–1 bomber aircraft through at least calendar year 2022. (5) An estimate of the amount of funding required to fully fund the modernization plan described in paragraph (4) for each calendar year through calendar year 2022. (c) POST-PLAN B–1 RETIREMENT.— (1) IN GENERAL.—During the period described by paragraph (4), the Secretary of the Air Force shall maintain in a common capability configuration not less than 36 B–1 aircraft as combat coded aircraft. (2) FY 2014 AND THEREAFTER.—After the period described in paragraph (4), the Secretary shall maintain not less than— (A) 35 B–1 aircraft as combat-coded aircraft in a common capability configuration until September 30, 2014; (B) 34 such aircraft as combat-coded aircraft in a common capability configuration until September 30, 2015; and (C) 33 such aircraft as combat-coded aircraft in a common capability configuration until September 30, 2016. (3) TOTAL AMOUNT OF RETIRED B–1 AIRCRAFT.—The Secretary may not retire more than a total of six B–1 aircraft, including the B–1 aircraft retired in accordance with this subsection. (4) PERIOD DESCRIBED.—The period described in this paragraph is the period beginning on the date on which the plan described in subsection (b) is submitted to the congressional defense committees and ending on September 30, 2013. (5) COMBAT-CODED AIRCRAFT DEFINED.—In this subsection, the term ''combat-coded aircraft'' means aircraft assigned to meet the primary aircraft authorization to a unit for the performance of its wartime mission. SEC. 134 . AVAILABILITY OF FISCAL YEAR 2011 FUNDS FOR RESEARCH AND DEVELOPMENT RELATING TO THE B–2 BOMBER AIRCRAFT . Of the unobligated balance of amounts appropriated for fiscal year 2011 for the Air Force and available for procurement of B–2 bomber aircraft modifications, post-production support, and other charges, $20,000,000 may be available for fiscal year 2012 for research, development, test, and evaluation with respect to a conventional mixed load capability for the B–2 bomber aircraft. SEC. 135 . AVAILABILITY OF FISCAL YEAR 2011 FUNDS TO SUPPORT ALTERNATIVE OPTIONS FOR EXTREMELY HIGH FREQUENCY TERMINAL INCREMENT 1 PROGRAM OF RECORD. (a) IN GENERAL.—Of the unobligated balance of amounts appropriated for fiscal year 2011 for the Air Force and available for procurement of B–2 bomber aircraft modifications, post-production support, and other charges, $15,000,000 may be available to support alternative options for the extremely high frequency terminal Increment 1 program of record. (b) PLAN TO SECURE PROTECTED COMMUNICATIONS.—Not later than 90 days after the date of the enactment of this Act, the Secretary of the Air Force shall submit to the congressional defense committees a plan to provide an extremely high frequency terminal for secure protected communications for the B–2 bomber aircraft and other aircraft. TITLE II – Research, Development, Test, and Evaluation Subtitle B – Program Requirements, Restrictions, and Limitations SEC. 216. LIMITATION ON USE OF FUNDS FOR INCREMENT 2 OF B–2 BOMBER AIRCRAFT EXTREMELY HIGH FREQUENCY SATELLITE COMMUNICATIONS PROGRAM. Of the funds authorized to be appropriated by section 201 for research, development, test, and evaluation for the Air Force as specified in the funding table in section 4201 and available for Increment 2 of the B–2 bomber aircraft extremely high frequency satellite communications program, not more than 40 percent may be obligated or expended until the date that is 15 days after the date on which the Secretary of the Air Force submits to the congressional defense committees the following: (1) The certification of the Secretary that— (A) the United States Government will own the data rights to any extremely high frequency active electronically steered array antenna developed for use as part of a system to support extremely high frequency protected satellite communications for the B–2 bomber aircraft; and, (B) the use of an extremely high frequency active electronically steered array antenna is the most cost effective and lowest risk option available to support extremely high frequency satellite Communications for the B–2 bomber aircraft. (2) A detailed plan setting forth the projected cost and schedule for research, development, and testing on the extremely high frequency active electronically steered array antenna. FY2013 Department of Defense Appropriations ( S.Rept. 112-196 : To accompany H.R. 5856 ) Note: as of this writing, this legislation has not been passed into law. Committee Initiatives: B–52 Combat Network Communications Technology [CONECT]. —The fiscal year 2013 budget request includes no funds in Aircraft Procurement, Air Force for the B–52 CONECT program of record due to the Air Force's decision to terminate the program, and $34,700,000 in Research, Development, Test and Evaluation, Air Force for a restructured, descoped B–52 CONECT program. The Committee understands that the Air Force is reviewing its decision to terminate the program of record in light of potential requirements of the Global Strike Command. The Committee further understands that should the Air Force reverse its decision to terminate B–52 CONECT during the fiscal year 2014 budget process, prior year funds would be available to reinstate the program following approval by the congressional defense committees. The Committee directs that no funds for B–52 CONECT program of record post-milestone C activities or a B–52 CONECT restructured program may be obligated or expended until 30 days after the congressional defense committees have been briefed on the Air Force's proposed way ahead, to include certification of full funding of the proposed program. Committee Recommended Adjustments: B–52 Strategic Radar Replacement [SR2].—The Committee is aware the Air Force conducted a lengthy analysis of alternatives in 2011 to address a Strategic Radar Replacement [SR2] for the B–52H. The existing APQ–166 radar was produced in the 1960s, has a 20 to 30 hour mean-time between failure rate, and capability limitations. The Committee understands that the current APQ–166 radar is costly to operate and maintain. Therefore, the Committee encourages the Secretary of the Air Force to reconsider the decision to terminate the SR2 program. FY2013 Department of Defense Authorizations ( P.L. 112-239 ) TITLE I – Procurement Subtitle D – Air Force Programs SEC. 142. RETIREMENT OF B–1 BOMBER AIRCRAFT. (a) IN GENERAL.—Section 8062 of title 10, United States Code, is amended by adding at the end the following new subsection: (h)(1) Beginning October 1, 2011, the Secretary of the Air Force may not retire more than six B–1 aircraft. (2) The Secretary shall maintain in a common capability configuration not less than 36 B–1 aircraft as combat-coded aircraft. (3) In this subsection, the term 'combat-coded aircraft' means aircraft assigned to meet the primary aircraft authorization to a unit for the performance of its wartime mission.''. (b) CONFORMING AMENDMENT.—Section 132 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112–81; 125 Stat. 1320) is amended by striking subsection (c). In regards to the nuclear certification requirements of the Next-Generation Bomber, SEC. 211. states; The Secretary of the Air Force shall ensure that the next-generation long-range strike bomber is— capable of carrying strategic nuclear weapons as of the date on which such aircraft achieves initial operating capability; and certified to use such weapons by not later than two years after such date. TITLE II – Research, Development, Test, and Evaluation Subtitle B – Program Requirements, Restrictions, and Limitations SEC. 211. NEXT-GENERATION LONG-RANGE STRIKE BOMBER AIRCRAFT NUCLEAR CERTIFICATION REQUIREMENT. The Secretary of the Air Force shall ensure that the next generation long-range strike bomber is— (1) capable of carrying strategic nuclear weapons as of the date on which such aircraft achieves initial operating capability; and (2) certified to use such weapons by not later than two years after such date.

The United States' existing long-range bomber fleet of B-52s, B-1s, and B-2s are at a critical point in their operational life span. With the average age of each airframe being 50, 28, and 20 years old, respectively, military analysts are beginning to question just how long these aircraft can physically last and continue to be credible weapon systems. As potential adversaries acquire 21st century defense systems designed to prevent U.S. access to the global commons (sea, air, space, and cyberspace) and to limit U.S. forces' freedom of action within an operational area, the ability of these Cold War era bombers to get close enough to targets to be effective will continue to deteriorate. Although the Air Force is committed to the development and acquisition of its proposed Long-Range Strike-Bomber (LRS-B), it is anticipated that flight-testing of the new bomber will not start until the mid-2020s, with initial operational capability near 2030. With this timeline in mind, the Air Force has extended the operational lives of the B-52 and B-1 out to 2040 and the B-2 out to 2058. Air Force and aerospace industry experts insist that with sufficient funding for sustainment and modernization over their expected lifespans, all three of the existing bombers can physically last and continue to remain credible weapon systems. However, appropriations decisions made by Congress based on required military capabilities to meet national security objectives will ultimately determine how long the B-52, B-1, and B-2 will remain in service. The central issue for Congress is how much funding should be appropriated for the continued sustainment and modernization of the B-52, B-1, and B-2 bombers over the remainder of their service lives. Interest in this subject stems from Congress's authority to approve, reject, or modify Air Force funding requests for bomber sustainment and modernization as well as its oversight of the nation's long-range strike requirements and capabilities. In addition, sustainment, modernization, and size of the bomber force have been perennial legislative topics since the early 1990s. As the Air Force progresses through development and acquisition of the LRS-B and begins the gradual phase-out of 50-year-old bombers, it is anticipated Congress will continue dealing with bomber sustainment and modernization legislation. Congress's decisions on appropriations for the bomber force could affect the nation's long-range strike capabilities and have unintended consequences on U.S. national security as well as the U.S. aerospace industry. The context through which Congress will make these decisions includes U.S. national security and defense strategies and the expectation of the role the B-52, B-1, and B-2 will play in executing those strategies. Some of the many global and strategic variables that could become central in Congress's decision making on the bomber force include the following: the Obama Administration's 2012 rebalance in national security strategy toward the Asia-Pacific region and the military implications applicable to the bomber force; the expected contribution of bombers in accomplishing the critical missions of U.S. forces as outlined in the Department of Defense's strategic guidance, Sustaining U.S. Global Leadership: Priorities for the 21st Century Defense; the effectiveness and sustainability of the Air Force's continuous bomber presence operation—based in the Pacific at Anderson Air Force Base, Guam—and corresponding displays of worldwide power projection missions by all three bombers; the anti-access/area denial (A2/AD) challenge presented by potential adversaries and the developments related to bombers' employment in an A2/AD threat environment; and the bombers' role in nuclear deterrent operations and the impact of the New Strategic Arms Reduction Treaty on the B-52 and B-2. The starting point for Congress's debate on bomber modernization and sustainment is the existing Air Force bomber force, which includes 76 B-52H Stratofortress bombers capable of both conventional and nuclear operations and capable of employing long-range standoff weapons. The B-52H first entered service on May 9, 1961. 63 B-1B Lancer bombers capable of supersonic and low-level flight, conventional only operations, and employing long-range standoff weapons. The B-1B became operational in 1986. 20 B-2A Spirit, low observable (stealth) bombers capable of both conventional and nuclear operations. The B-2A entered service in December 1993 and became fully operational capable (FOC) on December 17, 2003. Potential congressional oversight and appropriations concerns for the sustainment and modernization of the U.S. Air Force's bomber force may include the following: the potential for a shortfall in the nation's long-range strike capabilities as development of the Air Force's proposed LRS-B continues; the feasibility and affordability of Air Force bomber sustainment and modernization plans and whether those plans bridge any potential long-range strike capabilities gap until the LRS-B becomes operational; the amount of money Congress and the nation should continue spending on 28- and 50-year-old bombers; the sufficiency of acquisition plans for the 80 to 100 LRS-Bs to backfill U.S. long-range strike requirements as the legacy bomber force ages out of service; the possibility of further delaying development and acquisition of the proposed LRS-B given sufficient levels of funding for sustainment and modernization of the current bomber force; the modernization, sustainment, and development of the weapons employed by the bomber force that affect the bombers' effectiveness and ability to operate in advanced, 21st century A2/AD threat environment; the potential implications of reduced bomber sustainment and modernization, and subsequent diminishing numbers of airframes, on any future rounds of base realignment and closure efforts; and the ability of the nation's industrial base to sustain an aging bomber force.

Section 212(f) of the INA The provisions currently in Section 212(f)—which have been part of the INA since its enactment in 1952 —state, in relevant part, that Whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate. Legislative history materials from the time of the INA's enactment suggest that these provisions were seen to grant the President broad authority to bar or impose conditions upon the entry of aliens, and Presidents over the years have relied upon Section 212(f) to suspend or restrict the entry of various groups of aliens, often (although not always) in conjunction with the imposition of financial sanctions upon them. Among those so excluded have been aliens whose actions "threaten the peace, security, or stability of Libya"; officials of the North Korean government or the Workers' Party of North Korea; aliens who have participated in "serious human rights violations"; and others noted in Table 1 below. Neither the text of Section 212(f) nor the case law to date suggests any firm legal constraints upon the President's exercise of his authority under Section 212(f), as is explained below. However, future executive actions under INA § 212(f) could potentially be seen to raise legal issues that have not been prompted by the Executive's prior exercise of this authority. Statutory Language and Executive Branch Interpretations On its face, Section 212(f) would appear to give the President broad authority to preclude or otherwise restrict the entry into the United States of individual aliens or classes of aliens who are outside the United States and lack recognized ties to the country. The central statutory constraint imposed on Section 212(f)'s exclusionary power is that the President must have found that the entry of any aliens or class of aliens would be "detrimental to the interests of the United States" in order to exclude the alien or class of aliens. The statute does not address (1) what factors should be considered in determining whether aliens' entry is "detrimental" to U.S. interests; (2) when and how proclamations suspending or restricting entry should be issued; (3) what factors are to be considered in determining whether particular restrictions are "appropriate"; or (4) how long any restrictions should last. There also do not appear to be any regulations addressing the exercise of presidential authority under Section 212(f). The Department of State's Foreign Affairs Manual (FAM) seemingly provides the only publicly available executive branch guidance on the President's Section 212(f) authority. In relevant part, the FAM notes that Section 212(f) proclamations "typically" grant the Secretary of State authority to identify individuals covered by the proclamation and to waive its application for foreign policy or other national interests. The FAM also notes that such proclamations may bar entry based on either affiliation or "objectionable" conduct. In addition, it provides that Section 212(f) may reach persons who are inadmissible under other provisions of law, in which case, the "statutory inadmissibilities are to be considered prior to determining whether a Presidential Proclamation applies." However, the FAM is generally not seen as having the force of law to bind the executive branch. Thus, the Executive would not need to engage in notice-and-comment rulemaking in order to alter particular practices contained in the FAM that have historically been associated with exercises of Section 212(f) authority (e.g., not relying on a 212(f) proclamation to bar the admission of aliens who are inadmissible on other grounds). Judicial Constructions of Section 212(f) The limited case law addressing exercises of presidential authority under Section 212(f) also supports the view that this provision of the INA confers broad authority to suspend or restrict the entry of aliens. Key among these cases is the Supreme Court's 1993 decision in Sale v. Haitian Centers Council, Inc. , which held that the U.S. practice of interdicting persons fleeing Haiti outside U.S. territorial waters and returning them to their home country without allowing them to raise claims for asylum and withholding of removal did not violate either the INA or the United Nations Convention Relating to the Status of Refugees. The U.S. practice had been established by Executive Order 12807, which was issued, in part, under the authority of Section 212(f) of the INA and "suspend[ed] the entry of aliens coming by sea to the United States without necessary documentation." Although the Sale Court was primarily concerned with whether the INA and UN Convention provisions regarding withholding of removal applied extraterritorially, it is arguably important for understanding the scope of the President's Section 212(f) authority. In particular, the Sale decision arguably helped clarify the relationship between exercises of the authority granted by Section 212(f) and those granted by other provisions of the INA, as well as the meaning of entry for purposes of Section 212(f). In particular, the Court rejected the view of the U.S. Court of Appeals for the Second Circuit ("Second Circuit") that interdiction was prohibited because of the INA's prohibition upon the then-Attorney General returning an alien to a country where he or she would be persecuted. The Second Circuit had reached this conclusion by noting that the Attorney General was the President's "agent" in matters of immigration. Therefore, it found that INA's prohibition on the Attorney General returning aliens to countries where the alien's life or freedom would be threatened because of the alien's race, religion, nationality, political opinion, or membership in a particular social group should be imputed to the rest of the executive branch. The Supreme Court disagreed, however, holding that the interdiction program created by the President did not "usurp[] authority that Congress has delegated to, or implicate[] responsibilities that it has imposed on, the Attorney General alone." The Court reached this conclusion, in part, because it viewed the INA as restricting only the then-Attorney General's immigration-related responsibilities under the act. It did not view the INA as restricting the President's actions in geographic areas outside of where Congress had authorized the Attorney General to act in the immigration context (i.e., outside the United States). The upshot of this reasoning was that the Court declined to find that the interdiction program implemented under the authority of Section 212(f) ran afoul of statutory or treaty-based restrictions. The Sale decision also helped define what is meant by the term entry as that term is used in Section 212(f). At the time when Sale was decided, the INA explicitly defined entry to encompass "any coming of an alien into the United States, from any foreign port or place or from an outlying possession, whether voluntarily or otherwise ." Therefore, consistent with this definition, the Court distinguished between (1) aliens who are "on our shores seeking admission" or "on the threshold of initial entry," and (2) aliens who are within the United States after entry, regardless of the legality of that entry. While the statutory definition of entry that the Court relied upon was deleted from the INA as part of the amendments made by the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 ( P.L. 104-208 ), the Sale Court's construction of entry has persisted in discussions of Section 212(f) and in other contexts. Lower court decisions provide some further discussion of exercises of 212(f) authority that would seem to be consistent with Sale . The most recent of these, an unpublished 2003 decision by the Second Circuit in Sesay v. Immigration and Naturalization Service [INS] , granted deference to the Board of Immigration Appeals' (BIA's) determination that the alien petitioner was ineligible for asylum because a grant of asylum necessarily requires entry, and the petitioner's entry was barred by Presidential Proclamation 7062. Previously, in its 1992 decision in Haitian Refugee Center, Inc. v. Baker , the U.S. Court of Appeals for the Eleventh Circuit had noted various precedents characterizing the power to exclude aliens from the country as an "inherent executive power" when opining that Section 212(f) "clearly grants the President broad discretionary authority to control the entry of aliens into the United States." A lower court, the U.S. District Court for the Northern District of California, similarly emphasized the breadth of the executive's power over entry in conjunction with its discussion of Section 212(f) in its 1996 decision in Encuentro del Canto Popular v. Christopher , stating, The exclusion of aliens is a fundamental act of sovereignty. The right to do so stems not alone from legislative power but is inherent in the executive power to control the foreign affairs of the nation. When Congress prescribes a procedure concerning the admissibility of aliens, it is not dealing alone with a legislative power. It is implementing an inherent executive power. Collectively, Sale and these other decisions suggest that Section 212(f) gives the Executive significant power to bar or impose conditions upon the entry of aliens "on our shores seeking admission" or "on the threshold of initial entry." None of these decisions note any limitations upon the President's power under Section 212(f). This silence could, however, be seen, in part, to reflect the arguably limited nature of the Executive's use of its Section 212(f) authority to date. As Table 1 below illustrates, prior exercises of presidential authority under Section 212(f) have differed in terms of which and how many aliens are subject to exclusion. In no case to date, though, has the Executive purported to take certain types of action, such as barring all aliens from entering the United States for an extended period of time or explicitly distinguishing between categories of aliens based on their religion. Any such restrictions could potentially be seen to raise legal issues that were not raised by prior exclusions. For example, if the Executive were to seek to bar the entry of all aliens, as immigrants or nonimmigrants, for an extended time, questions could be raised about whether the President's action was consistent with Congress's intent in enacting statutes which prescribe criteria for the issuance of family- and employment-based immigrant and nonimmigrant visas and authorize the issuance of certain numbers of such visas each year. Similarly, if the President were to purport to exclude aliens based on their religion, an argument could potentially be made that this action is in tension with U.S. treaty obligations or the First Amendment. (Distinctions between aliens based on nationality, in contrast, have historically been viewed as a routine feature of immigration legislation and subjected to deferential "rational basis" review by the courts when challenged on constitutional grounds. ) Other Provisions of the INA Beyond Section 212(f), other provisions of the INA can also be seen to authorize the Executive to restrict aliens' entry to the United States. Most notably, Section 214(a)(1) prescribes that the "admission of any alien to the United States as a nonimmigrant shall be for such time and under such conditions as [the Executive] may by regulations prescribe." (Nonimmigrants are aliens admitted to the United States for a specific period of time and purpose pursuant to one of the "lettered" visas set forth in Section 101(a)(15) of the INA. ) Section 215(a)(1) similarly provides that "it shall be unlawful for any alien" to enter or depart the United States "except under such reasonable rules, regulations, and orders, and subject to such limitations and exceptions as the President may prescribe." In the past, the Executive has relied upon Section 215(a)(1), in particular, to exclude certain aliens. For example, President Carter cited to Section 215(a) when authorizing the revocation of immigrant and nonimmigrant visas issued to Iranians during the Iran Hostage Crisis. The current Section 215(a) was enacted as part of the INA in 1952. However, similar language appeared in earlier immigration-related statutes. Both the earlier language and the initial version of Section 215(a) granted the President the power to impose additional restrictions upon aliens' entry into and departure from the United States during times of war and, in some cases, "national emergency." The President's exclusion of certain aliens under this authority was upheld in several court cases, the most notable of which was arguably the Supreme Court's 1950 decision in United States ex rel. Knauff v. Shaughnessy . There, the Court rejected a challenge to the exclusion of a German "war bride" under regulations promulgated pursuant to Presidential Proclamation 2523, which was itself issued under the authority of a predecessor of Section 215(a). In so doing, the Court rejected the excluded bride's argument that both the regulations and the underlying statute constituted an impermissible delegation of legislative power, reasoning that "[t]he exclusion of aliens is a fundamental act of sovereignty. The right to do so stems not from legislative power but is inherent in the executive power to control the foreign affairs of the nation." Therefore, in the Court's view, Congress could not have run afoul of the non-delegation doctrine by authorizing the President to exercise this power "for the best interests of the country" during wartime because the President already possessed such authority. The Knauff Court similarly rejected the argument that the regulations in question were not "reasonable," as required by the statutory authority under which they were issued—which in relevant part, made it unlawful for an alien to enter the United States "except under such reasonable rules ... as the President may prescribe." The Court did so because it viewed the regulations excluding aliens whose entry was "deemed prejudicial to the public interest" as "reasonable in the circumstances of the period for which they were authorized, namely, the national emergency of World War II." The statutory language regarding war and national emergency—which arguably factored into the Court's decision in Knauff —was deleted from Section 215(a) in 1978. However, it seems unlikely that this deletion would serve as a basis for overruling the Knauff Court's conclusions about whether the power in question was impermissibly delegated to the Executive, or about what constitutes a "reasonable" regulation for purposes of Section 215(a). Knauff's statements about the inherent power of nations to exclude aliens outside the United States with no recognized ties to the country would also generally seem to remain good law.

The Immigration and Nationality Act (INA) provides that individual aliens outside the United States are "inadmissible"—or barred from admission to the country—on health, criminal, security, and other grounds set forth in the INA. However, the INA also grants the Executive several broader authorities that could be used to exclude certain individual aliens or classes of aliens for reasons that are not specifically prescribed in the INA. Section 212(f) of the INA is arguably the broadest and best known of these authorities. It provides, in relevant part, that Whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation, and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate. Over the years, Presidents have relied upon Section 212(f) to suspend or otherwise restrict the entry of individual aliens and classes of aliens, often (although not always) in conjunction with the imposition of financial sanctions upon these aliens. Among those so excluded have been aliens whose actions "threaten the peace, security, or stability of Libya"; officials of the North Korean government; and aliens responsible for "serious human rights violations." Neither the text of Section 212(f) nor the case law to date suggests any firm legal limits upon the President's exercise of his authority to exclude aliens under this provision. The central statutory constraint imposed on Section 212(f)'s exclusionary power is that the President must have found that the entry of any alien or class of aliens would be "detrimental to the interests of the United States." The statute does not address (1) what factors should be considered in determining whether aliens' entry is "detrimental" to U.S. interests; (2) when and how proclamations suspending or restricting entry should be issued; (3) what factors are to be considered in determining whether particular restrictions are "appropriate"; or (4) how long any restrictions should last. The limited case law addressing exercises of presidential authority under Section 212(f) also supports the view that this provision confers broad authority to bar or impose conditions upon the entry of aliens. Key among these cases is the Supreme Court's 1993 decision in Sale v. Haitian Centers Council, Inc., which held that the U.S. practice of interdicting persons fleeing Haiti outside U.S. territorial waters and returning them to their home country without allowing them to raise claims for asylum or withholding of removal did not violate the INA or the United Nations Convention Relating to the Status of Refugees. The U.S. practice had been established by Executive Order 12807, which was issued, in part, under the authority of Section 212(f) and "suspend[ed] the entry of aliens coming by sea to the United States without necessary documentation." However, depending on their scope, future executive actions under Section 212(f) could potentially be seen to raise legal issues that have not been prompted by the Executive's prior exercises of this authority. Beyond Section 212(f), other provisions of the INA can also be seen to authorize the Executive to restrict aliens' entry to the United States. Most notably, Section 214(a)(1) prescribes that the "admission of any alien to the United States as a nonimmigrant shall be for such time and under such conditions as [the Executive] may by regulations prescribe." Section 215(a)(1) similarly provides that "it shall be unlawful for any alien" to enter or depart the United States "except under such reasonable rules, regulations, and orders, and subject to such limitations and exceptions as the President may prescribe." For example, President Carter cited Section 215(a)—rather than Section 212(f)—when authorizing the revocation of immigrant and nonimmigrant visas issued to Iranian citizens during the Iran Hostage Crisis.

Introduction In 2007, the Supreme Court rendered one of its most important environmental decisions. The case, Massachusetts v. EPA , was a challenge to the denial by the Environmental Protection Agency (EPA) of a petition asking it to take two actions—(a) find under the Clean Air Act (CAA) that greenhouse gases (GHGs) emitted from new motor vehicles "cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare," through their climate change effects, then (b) issue standards for those GHG emissions. EPA's petition denial was based in part on its claim that it lacked authority to regulate GHGs. To the contrary, said the Supreme Court by 5-4, GHGs constitute "air pollutants" under the CAA, hence EPA does indeed have the authority to regulate GHG emissions. The Court gave EPA three options: (a) determine that GHG emissions from new motor vehicles "cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare," then promulgate standards limiting those emissions; (b) determine that such GHG emissions do not cause or contribute to such endangerment; or (c) explain adequately why the agency cannot or will not make a determination under either (a) or (b). EPA chose option (a)—that is, to make a positive "endangerment finding" for GHG emissions from new motor vehicles. That finding was made in December 2009, and under CAA section 202 required EPA to promulgate standards for new motor vehicle emissions to address the endangerment. That action, or rather actions, the agency also has taken, beginning in May 2010. In EPA's view, the 2010 motor vehicle standards, in turn, triggered CAA duties for stationary sources (factories, power plants) of GHG emissions as well. More specifically, the agency adopted regulations under which major new stationary sources and major modifications of existing stationary sources, when proposed for Prevention of Significant Deterioration (PSD) areas, must undergo "new source review" based on their expected CO 2 emissions. If subject to PSD new source review, the CAA required those sources to install "best available control technology" (BACT) to control GHG emissions. Reading the CAA literally, EPA believed, new source review and BACT would be required for any major new source or modification that emitted or increased CO 2 emissions by the same low threshold amount applied by the CAA to non-GHG emissions. And the BACT requirement, EPA argued further, triggered CAA Title V operating permitting requirements—again, on a literal reading of the CAA, with the same low threshold as for non-GHG emissions. Given the huge amount of CO 2 emitted by even some small stationary sources, this literal reading of the CAA brought a correspondingly huge number of sources under the act's new source review, BACT, and Title V permitting requirements. In an effort to shrink this large number to administratively practical levels, EPA construed the act to allow a phase-in of the statutory thresholds through a so-called "tailoring rule." In 2014, the Supreme Court in Utility Air Regulatory Group v. EPA rejected EPA's argument that regulation of motor vehicle GHG emissions necessarily triggers PSD new source review of the same emissions from stationary sources. As the Court saw it, PSD new source review and BACT cannot be triggered solely by a source's GHG emissions. On the other hand, EPA's application of CO 2 BACT to "anyway" sources—sources subject to new source review based on their non-GHG emissions—was seen by the Court as a reasonable reading of the CAA. In a related holding, Utility Air Regulatory Group voided EPA's tailoring rule as an impermissible rewriting of the CAA's emission thresholds. This report is a chronology of the major climate change-related actions taken by federal agencies, principally EPA, in the wake of Massachusetts v. EPA . It does not include executive orders and presidential proclamations. Most of the listed actions trace directly or indirectly back to the Massachusetts decision. In contrast, a few were included solely because of their relevance to climate change and their occurrence post- Massachusetts . That is, they were not legally compelled by Massachusett s v. EPA or EPA actions in compliance therewith. More analytical treatment of the listed agency actions may be found in other CRS reports. Please note— Dates used are those of Federal Register publication wherever a Federal Register citation is given. In most instances , however, the agency action was signed and publicly announced weeks (or more) earlier. Once an agency promulgates a final rule, the report's entry for the proposed rule has been deleted. A rule is not deleted for any other reason, such as subsequent invalidation by the courts or withdrawal by the proposing agency—developments noted in footnotes that usually follow the boldface heading. 2008 Mar ch 6: EPA denies California's request for waiver of CAA preemption . 73 Fed. Reg. 12156. The CAA preempts state controls on new motor vehicle emissions, but offers California, and California alone, the opportunity to request a waiver of CAA preemption. EPA must grant the preemption waiver if certain conditions are met. The importance of this "California waiver" is magnified by the fact that once EPA grants the waiver, states that adopt motor vehicle emission standards identical to California's also partake of the preemption waiver for the same vehicles. In the present case, California sought a waiver of CAA preemption for its GHG emissions limits for 2009 and later model year motor vehicles. EPA denied the waiver on finding that the state did not need those emission limits to meet "compelling and extraordinary conditions," as required by the CAA. (See "July 8, 2009" for EPA's reversal of this denial.) July 30: EPA issues advance notice of proposed rulemaking regarding GHG emissions from new motor vehicles. 73 Fed. Reg. 44354. This document sets out EPA's view of the legal implications were EPA to make a positive endangerment finding for GHGs from new motor vehicles—as discussed in the introduction of this report, "option (a)" offered by the Supreme Court. It is purely an informational document, prepared after the George W. Bush Administration decided in late 2007 not to issue an endangerment finding for new motor vehicle GHG emissions, but rather to leave that decision to the next Administration. Dec ember 31 : EPA Administrator publishes interpretive memo randum ("Johnson memorandum"). 73 Fed. Reg. 80300. EPA Administrator Stephen Johnson issued this memorandum, titled "EPA's Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program." The memorandum narrowly interprets the CAA phrase "pollutant subject to regulation under this act" to include only pollutants regulated by actual, not potential future , emission limits under the CAA or its regulations. At the time, much hung on this distinction between actual, and potential future, emission limits. In PSD areas of the country, the CAA requires only pollutants "subject to regulation under [the CAA]" to be controlled by potentially expensive BACT—when emitted by new major emitting facilities or major modifications of existing facilities. Since there were no "actual" GHG regulations under the CAA when the Johnson memorandum was issued, this meant that for the near term at least, new major emitting facilities and major modifications of existing facilities proposed for PSD areas did not have to install BACT for GHG emissions. 2009 July 8: EPA grants California's request for waiver of CAA preemption. 74 Fed. Reg. 32744. This rule reversed EPA's prior denial of California's request for a preemption waiver (see "March 6, 2008"). As noted, its effect is to allow California's GHG emissions limits for 2009 and later model year motor vehicles to go into effect, and to allow the identical emission standards for the same vehicles promulgated by other states to do likewise. Such "other states" now number 13, plus the District of Columbia. Oct ober 30: EPA finalizes mandatory GHG monitoring rule . 74 Fed. Reg. 56260. This rule, known as the Greenhouse Gas Reporting Rule, was required by the FY2008 Consolidated Appropriations Act, which instructed EPA to develop a rule "to require mandatory reporting of GHG emissions above appropriate thresholds in all sectors of the economy"—using EPA's existing CAA authority. The rule was to take effect January 1, 2010, with the first monitoring reports due in 2011. This report does not list EPA's many amendments and expansions of the Greenhouse Gas Reporting Rule. See, for example, recent amendments including an alternative verification approach plus final confidentiality determinations for the newly added data elements, at 79 Fed. Reg. 63750 (October 24, 2014). To stay abreast, the reader is referred to http://www.epa.gov/ghgreporting/reporters/notices/index.html . Dec ember 15: EPA finalizes endangerment finding for GHG emissions from new motor vehicles . 74 Fed. Reg. 66496. This endangerment finding, under CAA section 202(a), was option (a) offered EPA by Massachusetts v. EPA , as noted in the report's introduction. Parsing the language of section 202(a), EPA actually concluded that two component endangerment findings were required. Based on the "air pollution that may reasonably be anticipated to endanger ... ," phrase, the first finding was that six GHGs otherwise present in the atmosphere are reasonably likely to endanger both public health and welfare through their climate change impacts. Based on the "cause, or contribute to" phrase, the second finding was that the four GHGs emitted by new motor vehicles in the United States contribute to the endangering air pollution otherwise present in the atmosphere. The compound endangerment finding has no effect on outside parties in itself ; its importance is that it triggers a duty under section 202(a) for EPA to promulgate emission standards for new motor vehicles. (See "May 7, 2010" and later dates for those standards.) 2010 Feb ruary 8: S ecurities and Exchange Commission issues guidance regarding corporate disclosure related to climate change . 75 Fed. Reg. 6290. This interpretive release provides guidance to public companies as to how existing Commission disclosure requirements apply to climate change matters. Feb ruary 18: C ouncil on Environmental Quality issues draft guidance under National Environmental Policy Act (NEPA ) . This guidance memorandum from the Council is titled "Draft NEPA Guidance on Consideration of the Effects of Climate Change and Greenhouse Gas Emissions." It sets out ways in which federal agencies can improve their consideration of GHG effects in their evaluation of proposals for federal actions under NEPA, including in environmental impact statements. April 2 : EPA finalizes its reconsideration of Johnson memo randum . 75 Fed. Reg. 17004. After taking comments on how to interpret "subject to regulation" in the CAA, EPA decided to continue with the interpretation in the Johnson memorandum (see "December 31, 2008"). In a refinement, however, EPA stated that "subject to regulation" does not apply to a newly regulated pollutant (like GHGs) until a regulatory requirement to control emissions of that pollutant not only is promulgated, but also takes effect . For GHGs, that "regulatory requirement" is the new GHG emission standards for light-duty motor vehicles, noted immediately below. Since these standards did not take effect until January 2, 2011, PSD and Title V permitting requirements also did not go into effect until then—or later under EPA's tailoring rule finalized June 3, 2010. May 7: EPA and NHTSA jointly finalize rule s setting GHG emission standards and fuel economy standards for 2012-2016 model year light-duty vehicles. 75 Fed. Reg. 25323. The EPA emission standards were mandated under the CAA once the agency finalized its "endangerment finding" for new motor vehicles (see "December 15, 2009"). Regarding NHTSA, the Energy Policy and Conservation Act, as amended in 2007, requires that agency to prescribe separate fuel economy standards for passenger and non-passenger automobiles beginning with model year 2011, to achieve a combined fuel economy average for model year 2020 of at least 35 miles per gallon. EPA and NHTSA acted jointly because motor vehicle GHG emissions are directly linked to fuel consumption. In order to provide a consistent set of standards for auto manufacturers to meet, the White House brokered an agreement under which EPA would develop GHG emissions standards under the CAA that would be compatible with fuel economy standards developed by NHTSA. The EPA and NHTSA standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016, and purport to represent a harmonized and consistent national program. (California has announced its commitment to support the national program: on April 1, 2010, it revised its GHG standards for model years 2012-2016 such that compliance with the federal GHG standards will be deemed compliant with California's GHG standards.) Both EPA and NHTSA standards become more stringent each year, culminating in an EPA fuel economy equivalent of 35.5 miles per gallon (mpg) and an NHTSA fuel economy (CAFE) standard of 34.1 mpg, in model year 2016—each standard an industry fleetwide average. Various factors explain the 35.5/34.1 difference. June 3: EPA finalize s "tailoring rule." 75 Fed. Reg. 31514. This rule was to relieve the overwhelming permitting burdens EPA asserted would, in the absence of the rule, fall on PSD and Title V permitting authorities on January 2, 2011, when EPA's light-duty vehicle rule for GHGs (see immediately above) takes effect. The tailoring rule began, on January 2, 2011, with GHG emissions thresholds for PSD new source review and Title V that are much higher than those in the CAA (EPA hoped to phase in the statute's low statutory thresholds after many years). Indeed, the thresholds in the final tailoring rule are higher than those in the proposed rule. For example, beginning January 2, 2011, PSD requirements will apply to projects that increase net GHG emissions by at least 75,000 tons per year CO 2 equivalent, but only if the project also significantly increases emissions of at least one non-GHG pollutant. And no source emitting less than 50,000 tons per year CO 2 equivalent will be subject to PSD new source review or Title V permitting before April 30, 2016. August 13 : EPA denies petitions to reconsider its endangerment finding for GHGs from new motor vehicles. 75 Fed. Reg. 49556. After reviewing the 10 petitions, the agency concluded that its December 15, 2009, endangerment finding (above) remains well-supported. Several petitions argued that emails disclosed in late 2009, many from the Climate Research Center at the University of East Anglia in England, suggested bias among climate-change scientists, warranting a new look at the evidence for climate change and its causes. November 1 0 : EPA issues "PSD and Title V Permitting Guidance for Greenhouse Gases . " Full text at http://epa.gov/regulations/guidance/byoffice-oar.html . EPA issued this guidance to assist permit writers and permit applicants in addressing the Clean Air Act's PSD and Title V permitting requirements for GHGs, which took effect on January 2, 2011, for certain new major stationary sources and major modifications of stationary sources. Particularly important is the guidance's discussion of the process EPA recommends for determining BACT for GHGs from such sources. December 1 3: EPA finalizes PSD new source review "SIP call . " 75 Fed. Reg. 77698. This final rule asserted a finding that the EPA-approved SIPs of 13 states were substantially inadequate to meet CAA requirements because they did not apply PSD requirements in their SIPs to GHG-emitting sources. Owing to this finding, the rule issued a SIP call for each of the 13 states to revise its SIP as necessary to correct such inadequacies, with deadlines ranging from December 22, 2010, to December 1, 2011. Note: if the state fails to correct its SIP by the deadline, the CAA requires EPA to promulgate a federal implementation plan for the state. December 2 1 : EPA enters into settlements agreeing to issue new source performance standards for GHG emissions from "electric generating units" (power plants) and petroleum refineries . Available at http://www.epa.gov/airquality/pdfs/boilerghgsettlement.pdf (power plants) and http://www.epa.gov/airquality/pdfs/refineryghgsettlement.pdf (petroleum refineries). The two settled lawsuits were petitions for review of EPA amendments to its existing new source performance standards (NSPSs) for, respectively, electric generating units and petroleum refineries. On each occasion, petitioners objected, EPA had declined to introduce NSPSs for GHG emissions. In the settlements, EPA agreed to (a) propose by July 26, 2011, NSPSs for GHG emissions from new/modified electric generating units and guidelines for existing electric generating units, then promulgate final NSPSs and guidelines by May 26, 2012, and (b) propose by December 10, 2011, NSPSs for GHG emissions from new/modified petroleum refineries and guidelines for existing petroleum refineries, then promulgate final NSPSs and guidelines by November 10, 2012. As to electric generating units, see "January 8, 2014" for proposal of GHG NSPSs, "June 18, 2014" for proposal of emission guidelines for existing sources, and "June 18, 2014" for proposal of performance standards for modified and reconstructed sources. EPA has made no proposal as yet for petroleum refineries. December 30: EPA finalizes rule to narrow previous approval of state Title V permitting programs that apply to GHG-emitting stationary sources . 75 Fed. Reg. 82254. This rule is a companion to that immediately below. It narrowed EPA's previous approval of state Title V operating permit programs so that only stationary sources that exceed the GHG thresholds established in the "tailoring rule" (see "June 3, 2010") are covered as major sources by the federally approved Title V programs in the affected states. By thus raising the GHG emissions thresholds that apply Title V permitting to major sources in the affected states, this rule aimed to reduce the number of stationary sources that will be required to have Title V permits, and thereby reduce Title V permitting burdens for state permitting agencies and sources in the affected states. December 30: EPA finalizes rule to narrow previous approval of SIP PSD programs that apply to GHG-emitting stationary sources . 75 Fed. Reg. 82536. This rule is a companion to that immediately above. It narrowed EPA's previous approval of SIP PSD programs that apply to GHG-emitting stationary sources, by withdrawing approval of those programs to the extent they apply PSD to GHG-emitting sources below the thresholds in the "tailoring rule" (see "June 3, 2010"). By thus raising the thresholds in 24 states above the statutory threshold, this rule aimed to reduce the number of new stationary sources, or major modifications of existing sources, that will be required to have PSD permits, and thereby reduce PSD permitting burdens for state permitting agencies and sources in the affected states. 2011 July 20 : EPA finalizes rule defer ring application of PSD and Title V permitting requirements to CO 2 emissions from bioenergy and other biogenic stationary sources . 76 Fed. Reg. 43490. Such CO 2 emissions are generated by combustion or decomposition of biologically based material—as at solid waste landfills, manure management operations, and electric utilities burning biomass fuels. The deferral, to allow EPA more time to examine how to account for such emissions, was for three years. During this period, biogenic emissions were not required to be counted for determining whether a source is subject to PSD and Title V permitting. The deferral applied only to CO 2 emissions and did not affect non-GHG pollutants or other GHGs emitted from the combustion of biomass fuel. September 15 : EPA and NHTSA jointly finalize rules setting GHG emission standards and fuel economy standards for 201 4 and later model year medium- and heavy-duty vehicles . 76 Fed. Reg. 57106. These rules, weighing in at 958 pages (including preamble), respond to a presidential memorandum of May 21, 2010, as well as the CAA. EPA's emission standards and NHTSA's fuel economy standards apply to three categories of heavy-duty vehicles: combination tractors, heavy-duty pickup trucks and vans, and vocational vehicles. The rules include separate standards for the engines that power combination tractors and vocational vehicles. Certain rules are exclusive to EPA, such as EPA's hydrofluorocarbon standards to control leakage from air conditioning systems in combination tractors, and pickup trucks and vans. EPA's emission standards began with model year 2014. NHTSA's fuel economy standards are voluntary in model years 2014 and 2015, becoming mandatory for most vehicle categories in model year 2016. 2012 April 13: EPA proposes performance standards for CO 2 emissions from new fossil fuel-fired electric generating units. 77 Fed. Reg. 22392. The proposed rule, pursuant to CAA section 111(b), would require new fossil fuel-fired electric generating units (power plants) of greater than 25 megawatt capacity to meet an output-based standard of 1,000 pounds of CO 2 per megawatt-hour—a standard based, according to EPA, on the performance of widely used natural gas combined cycle technology. EPA had committed to issuing this proposed rule by July 26, 2011, in a litigation settlement, noted under "December 21, 2010." October 15: EPA finalizes rule setting GHG emission standards for 2017-2025 model year light-duty vehicles ; NHTSA finalizes rule setting fuel economy standards for 2017-2021 model year light-duty vehicles and offers "best estimate" of fuel economy standards for 2022-2025 model year light-duty vehicles . 77 Fed. Reg. 62624 (minor correction on October 18, 2012, at 77 Fed. Reg. 64051). These rules respond to a presidential memorandum of May 21, 2010, as well as to the CAA. The standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles and build on the model year 2012-2016 light-duty vehicle standards (see "May 7, 2010"). EPA's emission standards will be more stringent each year from 2017 to 2025, achieving, as an industry fleetwide average, the equivalent of 54.5 miles per gallon (mpg) in model year 2025—if the emission reductions are achieved solely through improvements in fuel efficiency. The first phase of NHTSA's CAFE standards, for model years 2017-2021, is projected to require, on an average industry fleetwide basis, a range from 40.3 to 41.0 mpg in model year 2021. The second-phase standards, for model years 2022-2025, are not final, due to a statutory requirement that NHTSA set CAFE standards not more than five model years at a time. NHTSA projects that these standards could require, on an average industry fleetwide basis, from 48.7-49.7 mpg in model year 2025. See entry under May 7, 2010, for statutory and historical background. 2013 May 30 : Office of Management and Budget issues Technical Update of the Social Cost of Carbon for Regulatory Impact Ana lysis Under Executive Order No. 12866. The "social cost of carbon" estimates in this interagency "technical support document" are to facilitate federal agency incorporation of the social benefits of reducing CO 2 emissions into cost-benefit analyses of proposed regulatory actions. Under Executive Order 12866, federal agencies are required to assess the costs and benefits of proposed regulations. The social cost of carbon estimates in this current version of the technical support document are based on updated versions of the assessment models and are higher than those used in the 2010 technical support document. June 25: President Obama issues Power Sector Carbon Pollution Standards memorandum setting deadlines for EPA issuance of standards . 78 Fed. Reg. 39535 (July 1, 2013). The memorandum directs EPA to issue a revised version of its 2012 proposed new source performance standards for GHG emissions from fossil fuel-fired power plants. The revised proposed rule was due by September 20, 2013, to be followed by issuance of a final rule "in a timely fashion." (The proposed rule was indeed announced by the deadline; see below under "January 8, 2014.") The memorandum also directs EPA to issue standards, regulations, or guidelines, as appropriate, for carbon emissions from existing power plants: a proposed rule by June 1, 2014, a final rule by June 1, 2015, and a requirement that states submit implementation plans by June 30, 2016. 2014 January 8: EPA withdraws April 13, 2012, propose d performance standards for CO 2 emissions from new fossil fuel-fired electric generating units and proposes revised standards. 79 Fed. Reg. 1352 (withdrawal of 2012 proposal); 79 Fed. Reg. 1430 (proposed revised standards). This withdrawal and reproposal, under CAA section 111(b), was announced on September 20, 2013, the deadline in the President's June 25, 2013, memorandum (above), but took 3½ months to appear in the Federal Register . The revised proposal establishes separate new source standards of performance for fossil fuel-fired electric steam generating units (EGUs) and integrated gasification combined cycle (IGCC) units on the one hand, and for natural gas-fired stationary combustion engines on the other—reflecting EPA's separate determinations of the "best system of emission reduction ... adequately demonstrated," the emissions standard mandated by the CAA. For EGUs and IGCC units, the standards are based on partial use of carbon capture and storage as the best system of emission reduction; for natural gas-fired stationary combustion engines, they are based on natural gas combined cycle technology. June 18: EPA proposes emission guidelines for CO 2 emissions from existing fossil fuel-fired electric generating units . 79 Fed. Reg. 34830. This proposed rule, under CAA section 111(d), would complement the above CO 2 controls on new fossil fuel-fired power plants. While few new plants are anticipated in the foreseeable future, the June 18 proposal would apply to the far larger universe of existing fossil fuel-fired power plants. The program would have two elements. First, EPA proposes different CO 2 emission reduction goals for each state, calculated by EPA based on four "building blocks" (efficiency improvements at power plants, greater energy efficiency in other sectors, and enhancing the use of low-emitting and renewable power sources) and weighing each in light of the state's fuel mix, electricity market, and other factors. The second element requires states to develop state plans to reach EPA's goals. In these plans, states can impose whatever mix of the foregoing building blocks (or other measures) they choose, as long as the EPA goal for the state is reached by 2030. Full responsibility for CO 2 reductions need not rest with fossil fuel-fired power plants; as noted, state plans can include "outside the fenceline" measures such as energy efficiency programs and renewable portfolio standards. June 18: EPA proposes performance standards for CO 2 emissions from modified and reconstructed fossil fuel-fired electric genera ting units. 79 Fed. Reg. 34960. This proposal was issued under CAA section 111(b), which mandates performance standards for "new" sources in an EPA-listed source category. Section 111(b) applies because it defines "new" sources to include "modified" sources," while EPA regulations extend performance standards for new sources to "reconstructed" sources. The proposal provides for the covered sources EPA's determination of the "best system of emission reduction ... adequately demonstrated"—the operative phrase in the section 111(b) definition of a performance standard. For example, EPA proposes that the "best system of emission reduction ..." for modified fossil fuel-fired boilers and IGCC units is "each unit's own best potential performance based on a combination of best operating practices and equipment upgrades"—that is, a unit-specific emission standard. EPA proposes generally that modified and reconstructed sources subject to a section 111(d) plan (see previous entry for June 18, 2014) at the time of modification or reconstruction will remain subject to the 111(d) plan. July 17: EPA proposes revised performance standards for emissions from new municipal solid waste landfills and an advance notice of proposed rulemaking regarding emissions from existing municipal solid waste landfills. 79 Fed. Reg. 41796 (proposed revised standard); 79 Fed. Reg. 41772 (advance notice). Landfill emissions are typically composed of 50% methane, whose potency as a contributor to climate change is 25 times greater than CO 2 , with the remainder almost entirely CO 2 . The actions here aim at reducing methane emissions directly or indirectly. August 7: Council on Environmental Quality denies petition requesting it to amend its NEPA regulations and issue guidance. A 2008 petition requested CEQ to amend its NEPA regulations to require explicitly that climate change be addressed in NEPA documents, and issue guidance clarifying how federal agencies could best integrate climate analyses into their NEPA processes. As reasons for denying the petition, CEQ said that revising the regulations is unnecessary "because they already encompass consideration of climate effects" and that it is currently considering how to proceed in light of comments received on its draft guidance (see "February 18, 2010"). November 4: EPA proposes emission guidelines for CO 2 emissions from existing fossil fuel-fired electric generating units in Indian country and U.S. territories. 79 Fed. Reg. 65482. This proposed rulemaking supplements the agency's June 18, 2014 proposed guidelines. EPA also requests comment on authorizing jurisdictions (including states, territories, and areas of Indian country) without existing fossil fuel-fired EGUs subject to the June 18-proposed emission guidelines to partner with jurisdictions having such EGUs. November 13: EPA issues notice providing additional information on translating emission-rate-based state CO 2 reduction goals to mass-based equivalents . 79 Fed. Reg. 67406. This notice supplements EPA-proposed guidelines on June 18, 2014 and November 4, 2014. December 24 : Council on Environmental Quality issues revised draft guidance . 79 Fed. Reg. 77802. See "August 7, 2014" for background. As asserted in the revised draft guidance, its purpose is "to provide Federal agencies direction on when and how to consider the effects of greenhouse gas (GHG) emissions and climate change in their evaluation of all proposed Federal actions in accordance with [NEPA and CEQ regulations]." Such consideration should include both the effects of the proposed action on climate change, and the effects of climate change on the environmental effects of the proposed action. The projected quantity of GHG emissions from the proposed project need not be disclosed if less than 25,000 tons of CO 2 equivalent annually, unless quantification below that level is easily accomplished. 2015 March 31: Department of State submits to the Secretariat of the United Nations Framework Convention on Climate Change the United States' intended contribution to achieving the Convention's objective. Article II of the Convention calls for stabilizing GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with world climate. Toward this end, the United States asserts in this submission that it intends to reduce aggregate GHG emissions by 26%-28% below its 2005 level achieve by 2025, and to make best efforts to reduce its emissions by 28%. Appendix. Table of Acronyms

In 2007, the Supreme Court rendered one of its most important environmental decisions. In Massachusetts v. EPA, the Court held 5-4 that greenhouse gases (GHGs), widely viewed as contributing to climate change, constitute "air pollutants" as that phrase is used in the Clean Air Act (CAA). As a result, said the Court, the U.S. Environmental Protection Agency (EPA) had improperly denied a petition seeking CAA regulation of GHG emissions from new motor vehicles by citing, among other reasons, the agency's lack of authority over such emissions. This report offers a chronology of major federal agency actions, mainly by EPA, that involve GHGs or climate change and that occurred after Massachusetts v. EPA. Most of the listed actions trace directly or indirectly back to the decision. Examples include EPA's "endangerment finding" for GHG emissions from new motor vehicles; the resulting EPA standards (issued on multiple occasions) for GHG emissions from new motor vehicles; EPA's proposal of performance standards (again on separate occasions) for CO2 emissions from new, and modified or reconstructed, fossil fuel-fired power plants; and EPA's proposal of emission guidelines for CO2 emissions from existing fossil fuel-fired power plants. Several listed EPA actions, taken on the agency's view that regulation of GHG emissions from new motor vehicles triggers new source review of GHG stationary sources, are now either void or will have to be limited slightly in scope, owing to the 2014 decision of the Supreme Court in Utility Air Regulatory Group v. EPA. A few agency actions were included in the report solely because of their relevance to climate change and their post-Massachusetts occurrence—that is, they were not legally compelled by Massachusetts v. EPA or EPA actions tracing back to that decision. Examples include EPA's responses to California's request for a waiver of CAA preemption allowing that state to set its own limits for GHG emissions from new motor vehicles; OMB's "social cost of carbon" dollar amount to be used in agency cost-benefit analyses; the Council on Environmental Quality's draft guidance on how climate change is to be considered in environmental impact statements; and EPA's monitoring rule for GHG emissions. More analytical treatment of the government actions in this report may be found in other CRS reports listed in footnote 16 herein.

Background During the Obama Administration, the United States considered two mega-regional free trade agreements that its participants argued were comprehensive and high-standard: the Trans-Pacific Partnership (TPP) among the United States and 11 other countries, and the U.S.-European Transatlantic Trade and Investment Partnership (T-TIP). The 12 TPP countries signed the agreement in February 2016, but the agreement required ratification by each country before it could enter into force. In the United States, this required implementing legislation by Congress. The agreements aimed to reduce and eliminate barriers to trade, enhance trade rules and disciplines, and develop closer economic and strategic ties among the negotiating parties. Upon taking office, however, President Trump withdrew the United States from the TPP and halted further negotiations on the T-TIP. The remaining 11 partners to the TPP concluded, without U.S. participation, a revised TPP, now identified as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Trump Administration is also attempting to revise the two largest existing U.S. FTAs, through the ongoing renegotiation of the North American Free Trade Agreement (NAFTA), and modification talks regarding the U.S.-South Korea (KORUS) FTA. President Trump has addressed trade broadly and trade agreements more directly through an assertive trade enforcement agenda and vocal skepticism of past U.S. trade agreements and the potential benefits of trade. For the Trump Administration, the U.S. trade deficit often serves as a proxy for evaluating the success or failure of U.S. trade policy and is viewed as the source of a number of ills afflicting the U.S. economy, including the rate of unemployment, slow gains in wages, and income inequality. The Trump Administration also has characterized U.S. trade agreements as unfair and detrimental to the economy, a viewpoint that is not shared by U.S. trading partners, established economic analysis, and various business and consumer groups. For some observers, the growing globalization of the economy raises concerns that the cost of U.S. leadership in the global arena is outstripping the benefits of U.S. global engagement. Others argue that the United States needs to renegotiate its role and require others to share more of the costs. Trade agreement negotiations have sparked a debate over the impact of FTAs on the U.S. economy and on U.S. trade with its FTA partners, particularly the impact of FTAs on bilateral trade balances. At times, data on U.S. trade with FTA partner countries are provided by various groups in different formats, which present various conclusions about U.S. trade balances with FTA partners. This report presents U.S. trade data with its FTA partners in different ways in order to demonstrate the effect these differences have on conclusions about U.S. trade balances. It also provides some basic information on the nature of U.S. bilateral trade with its 20 FTA partner countries. In particular, the data indicate U.S. total trade balances, trade balances with all FTA partners, and trade balances with the 17 FTA partners with agreements signed after 2000, which excludes Israel, Canada, and Mexico. Between 1985 and 2011, the United States entered into 14 FTAs with 20 countries. The countries and the year in which the agreement received congressional approval are listed in Table 1 . The U.S. Census Bureau is the official source for data on U.S. import and export statistics for goods and services. In this memorandum, U.S. merchandise trade data are represented by Census Bureau data on U.S. total merchandise exports and U.S. total merchandise imports. Data on services for recent years reflect expanded data on services for countries with which the United States has negotiated an FTA. The merchandise trade data reported by the Census Bureau are comparable to the types of data that are reported by other countries. U.S. merchandise trade, or trade in goods, with FTA partner countries represents nearly 70% of all U.S. exports in goods and services, and more than 80% of all U.S. imports of goods and services. As indicated in Figure 1 , the United States consistently has experienced a deficit in its merchandise goods trade account since at least 1980. U.S. merchandise exports and imports, and global trade generally, dropped sharply in 2009 as a result of the global financial crisis, which limited the amount of funds that were available for trade financing, and the economic recession that negatively affected consumer spending and business investment. Global trade also slowed in both volume and value terms after 2010. Since 2012, trade volumes have recovered, reflecting an increase in global and major area GDP, while trade values reflect volatility in commodity prices and exchange rates, as indicated in Figure 2 . In part, the slowdown likely reflects legacy issues associated with the 2008-2009 global financial crisis and recession. The value of trade has varied, likely due to the drop and subsequent rise in commodity and oil prices, especially since 2014, reflecting changes in the direction of China's economic policies, among other factors. The slowdown and subsequent increase in trade volumes likely reflects the progressive increase in economic growth since 2012 in both developed and developing economies. U.S. Trade with FTA Partner Countries As Table 2 indicates, the United States experienced an overall merchandise trade deficit in 2016 of $734.3 billion and a surplus in services trade of $247.7 billion, for a combined total of -$486.6 billion. During the same year, the United States ran a merchandise trade deficit of -$71.3 billion with the 20 FTA partner countries and a services surplus of $68.9 billion, or a goods and services deficit of -$2.5 billion. The share of the U.S. trade deficit with FTA partners, however, has fallen by nearly half over the 2007-2017 period, from 18% to about 10% of the total U.S. merchandise trade deficit, as indicated in Figure 3 . In trade with the European Union in 2016, the United States ran a goods deficit of -$146 billion and a services surplus of $54.8 billion, or a combined goods and services deficit of -$91.5 billion, as indicated in Figure 4 . With proposed TPP countries, the United States experienced a deficit in goods trade in 2016 of -$172 billion, mostly with Japan, Mexico, and Vietnam, and a services surplus of $75 billion, or a combined total of -$97 billion. In 2016, the 20 FTA partner countries accounted for $677 billion in U.S. goods exports, or 47% of total U.S. goods exports, and $749 billion in goods imports, or 34% of total U.S. goods imports. U.S. merchandise trade data with FTA partners has been expressed in various ways, including the total for all 20 FTA partners, and various subgroups of these 20 partners, as indicated in Table 2 , which lists FTA partners in the order in which the trade agreement was implemented. For instance, U.S. trade with FTA partners has been expressed by some as trade with only 17 of the FTA partners, or trade with those countries that implemented an FTA after 2000, thereby excluding U.S. trade with Israel, Canada, and Mexico. The data indicate that in 2016, the United States had an overall merchandise trade deficit with Israel, Canada, and Mexico of -$83 billion and a services surplus of $30 billion. The United States also ran a merchandise trade surplus of $12 billion and a services surplus of $38.8 billion with the other 17 FTA partners, or a combined goods and services surplus of $51 billion. U.S. FTA partners as a group accounted for 9.7% of the total U.S. merchandise trade deficit, although, as indicated, the largest share of that deficit is in trade with Israel, Canada, and Mexico. U.S. trade surpluses and deficits with the other 17 FTA partners are small relative to total U.S. trade. The U.S. trade surplus with the 17 FTA partners, excluding Israel, Canada, and Mexico, is a relatively recent phenomenon, as indicated in Table 3 , which shows U.S. trade balances with all 20 FTA partners and subgroups of the FTA partners from 2003 to 2017 listed in the order in which the FTA was implemented. Over the 2002-2016 period, the U.S. merchandise trade deficit with all 20 FTA partners fell by about half as a share of the total U.S. merchandise trade deficit: from 20.7% of the total merchandise trade deficit in 2002 to 9.7% in 2016. Trade deficits with Canada and Mexico have generally declined in recent years, despite the fact that oil imports from Canada and Mexico have remained steady or increased slightly, even as U.S. production of shale oil has increased. Census Bureau trade data also indicate that of the 20 FTA partner countries, the U.S. deficit in trade in crude oil and products is the largest with Canada, in part reflecting the close trade relationship between Canada and the United States and the U.S. trade deficit with Canada in petroleum trade. As indicated in Table 4 , Canada accounted for $48 billion of the $80 billion U.S. trade deficit in oil and petroleum products in 2015 and Mexico accounted for $1.2 billion of the energy trade deficit. Canada also accounted for 60% of the U.S. crude oil trade deficit in 2015, up from 20% in 2008. The sharp decline in the U.S. oil trade deficit largely reflects the sharp drop in petroleum prices in 2014 and 2015 The United States International Trade Commission (ITC) is tasked by Congress to provide the official U.S. government assessment of the economic effects of U.S. trade agreements. In June 2016, the ITC published a congressionally mandated report on the estimated economic effects of U.S. FTAs. The ITC's analysis considered industry-specific agreements and bilateral, regional, and multilateral agreements. The commission's economic analysis, as indicated in Table 5 , indicates that in 2012 U.S. bilateral and regional trade agreements increased U.S. aggregate trade by about 3% and U.S. real GDP and U.S. employment by less than 1%, $32.2 billion and 159,300 fulltime equivalent employees, respectively, and increased bilateral trade with partner countries by 26.3%. The ITC's analysis also indicated that agreements that focus on specific industries have had larger impacts on trade in their targeted industries than do bilateral agreements that cover many sectors. The ITC also estimated that FTAs provided gains to consumers through lower prices to the extent that the lower-priced items were present in consumers' budgets; greater product variety; increased receipts for intellectual property; and a positive effect, on average, on U.S. bilateral merchandise trade balances with partner countries. Bilateral Trade Balances In most cases, economists question the usefulness of using bilateral trade balances as indicators of trade relations, of the effectiveness of a trade agreement, or of the costs and benefits of a trade agreement. In general terms, viewing trade balances in isolation or as a measure of a trade agreement represents an approach that is fundamentally different from general economic arguments concerning the costs and benefits of trade and trade agreements. Economists generally argue that from the perspective of a large open economy with liberalized capital flows and floating exchange rates, such as the United States, broad macroeconomic forces, particularly domestic saving and investment levels, determine the overall trade deficit or surplus. They argue that, with floating exchange rates (most developed economies have floating exchange rates, while many smaller developing economies do not have fully floating currencies) and highly liberalized flows of capital across national borders, domestic macroeconomic forces determine the demand for and supply of capital that, in turn, drive cross-border capital flows, which are a major factor in determining the international exchange value of the dollar and, therefore, the overall U.S. trade balance. Factors external to the U.S. economy often are particularly important in determining the value of the dollar, which serves as the international reserve currency. While many of the economic arguments can be arcane at times, economists generally contend that from this overall economic perspective both consumers and producers benefit as a result of liberalized trade and that the gains for the economy as a whole outweigh the costs, irrespective of the bilateral trade deficit or surplus. Most economists argue that the economy as a whole operates more efficiently as a result of competition through international trade and that consumers throughout the economy experience a wider variety of goods and services at varying levels of quality and price than would be possible in an economy closed to international trade. They also contend that trade may have a long-term positive dynamic effect on an economy that enhances both production and employment. In addition, U.S. trade agreements comprise a broad range of issues that may affect trade and commercial relations over the long run between the negotiating parties, particularly for developing and emerging economies. At the same time, bilateral trade balances are influenced by a seemingly innumerable list of economic activities at the micro level, or at the level of the individual firm or consumer, that are as diverse as the trading partners themselves. These activities can include, but are not limited to, the overall level of economic development; the abundance of raw materials; relative rates of economic growth; rates of technological change; changes in productivity; differences in rates of inflation; changes in commodity prices (especially the price of oil); and changes in exchange rates. Most economists also recognize that a broad range of activities can affect national economies and trade balances overall to a greater degree than even the most robust bilateral or international trade agreement. Generally, it is very difficult to unravel the complicated linkages that exist within the economy in order to derive cause and effect relationships, that is, attempting to link a specific trade agreement with movements in bilateral trade balances. For instance, movements in international exchange rates, such as the decline in the value of the peso in late 1994, followed by a financial crisis in Mexico and severe economic recession, had a major impact on U.S.-Mexico trade that arguably was greater than anything that could have been anticipated by the completion of NAFTA. More recently, the appreciation of the dollar relative to most other currencies is expected to reduce U.S. exports overall, if the appreciation is sustained, but it would also reduce the costs of U.S. imports, which would tend to lower the overall U.S. merchandise trade deficit—at least in the short run. In addition, large changes in the price of crude oil, similar to that which occurred in 2009, are expected to lower the overall U.S. trade deficit, given the significant role that crude oil plays in U.S. imports. Also, global trade has been affected by such macroeconomic events as the 2008-2009 financial crisis and associated economic recession in the United States and elsewhere, which caused global trade to decline by 30% in 2009 from the previous year. (For additional information, see Appendix A .) On a bilateral basis, trade balances are shaped by a host of factors, as indicated above. Indeed, U.S. FTA partners display a great deal of variation in their economies, ranging from Canada, which is a highly developed open economy that is within close proximity to the United States, to small, Central American developing economies that are different in structure from the U.S. economy and are at some physical distance from the United States. In addition, many U.S. FTA partners represent economies that are substantially smaller than the U.S. economy and often are limited in what they produce. As a result, U.S. trade with these countries often is concentrated in a small number of items and often is comprised of trade in raw materials and intermediate processed goods, as indicated in Appendix B . In most of the countries that have an FTA with the United States, the top 10 export and import commodities account for significant shares of total bilateral trade: more than 90% in some cases. In some cases, bilateral trade is reliant on trade in raw materials and agricultural commodities; in other cases, bilateral trade is based on trade in energy items, particularly U.S. trade with Canada and Mexico. Such differences in the underlying structure of trade with particular trading partners, however, complicate efforts to compare the performance of one trade agreement with another and to derive cause and effect relationships between the implementation of an FTA and bilateral trade balances. Another factor that can affect bilateral trade relations and trade balances is the composition of trade relationships, which are distinct from one country to another. While trade agreements determine the rules by which nations conduct trade and provide incentives to consumers in the form of lower tariff rates and firms in the form of lower trade barriers, behavioral characteristics of consumers and firms determine how those incentives affect bilateral trade. Economists often attempt to estimate the impact of a trade agreement on bilateral trade based on estimates of the strength of the responsiveness by consumers and firms to the incentives provided by the agreement. The responsiveness of consumers and firms to the incentives associated with trade agreements seems to vary by different types of goods, or by major end-use categories. Consumer purchases of luxury goods, for instance, are highly responsive to changes in prices and consumers' incomes, while consumer consumption of agricultural products is less responsive. The U.S. Census Bureau provides summary information concerning U.S. trade by grouping U.S. merchandise trade into six major end-use categories, including (1) foods, feeds, and beverages; (2) industrial supplies, including petroleum; (3) capital goods, or machinery and equipment that are used in manufacturing of other items; (4) automotive vehicles and parts; (5) consumer goods; and (6) other goods. As indicated in Figure 5 , trade in food and agricultural commodities, industrial supplies (including petroleum products), capital goods and other goods are greater as a share of U.S. exports than of U.S. imports, but U.S. imports of automotive vehicles and parts and consumer goods are a greater share of U.S. imports compared with U.S. exports. The structural composition of U.S. trade, or the role of the six categories listed above as shares of U.S. trade, plays a role in shaping bilateral trade relationships. This structural composition of U.S. trade also has important implications for the persistence of the annual U.S. merchandise trade deficit, despite significant changes in the global growth in merchandise trade, major multinational trade liberalization, and the various FTAs the United States has implemented. This subject is of continuing interest to academic economists, who have focused on the way U.S. trade flows respond to changes in national incomes and in prices, specified by economists as the price and income elasticity of trade. Trade elasticities measure how much a country's imports or exports will change in response to changes in national incomes or the relative price of imported goods and services to domestically produced ones. While economists have developed varied estimates of the elasticities, depending on the particular study, one result common among the various studies covering different time periods and using different econometric methods is that U.S. demand for foreign imports is estimated to be more sensitive to changes in income and prices than is foreign demand for U.S. exports. The estimated price and income elasticities in Table 6 indicate that for every 1% increase in U.S. GDP, U.S. consumers increase their purchases of imports by 2.11%. Similarly, for every 1% increase in GDP among U.S. trading partners, the consumers in those countries would increase their consumption of U.S. goods by 1.86%. While this difference seemingly is not large, the difference in size between the U.S. economy and the economies of other countries, especially those of developing economies, can magnify the differences in responsiveness to the growth in national GDP. The disparity in responsiveness likely stems from the relatively larger share that consumer consumption plays in the U.S. economy. This also implies that with constant prices and similar rates of economic growth in both the United States and among its trading partners, the U.S. merchandise trade deficit would be expected to worsen over time, in part due to the way the various components of U.S. trade are affected differently by changes in incomes and prices. One notable difference is in the U.S. and foreign demand for services. Since U.S. demand for imported services is less sensitive to changes in income compared with foreign demand for U.S. services exports, the U.S. surplus in services would be expected to increase over time, assuming constant prices and similar rates of economic growth between the United States and its trading partners. Global Value Chains In addition, the proliferation of global value chains, or complex cross-border production networks in which goods and services can cross national borders multiple times through various stages of production, is blurring the distinction between the domestic content value of exports and imports and raising questions about how accurately bilateral trade balances reflect actual trade relationships. Additionally, most economists argue that both exports and imports benefit the economy, because nations export in order to import those goods and services they either do not produce, or cannot produce as efficiently as another country. As a result, trade allows the economy to specialize in producing those goods and services in which it has an international competitive advantage, thereby maximizing the total amount of goods and services that are available to its citizens. Current trade data treat exports and imports as though the full value of an export was produced domestically and the full value of an import was produced abroad. However, the rapid growth of global value chains and intra-industry trade (importing and exporting goods in the same industry) has significantly increased the amount of trade in intermediate goods in ways that can blur the distinction between domestic and foreign firms and goods. For instance, foreign value added accounts for about 28% of the content on average of global exports, as indicated in Figure 6 , but this share can vary considerably by country and industry. Foreign value added in the exports of developed countries accounts for about 31% of the content of exports and about 11% of U.S. exports. This value for developed countries likely is inflated due to the highly integrated economies within the EU, which accounts for 70% of the exports from EU countries. In developing countries, the highest foreign value added shares in exports occurs in countries in East and South-East Asia and in Central America, where processing industries account for large shares of exports. As a result of the growth in value chains, traditional methods of measuring trade may obscure the actual sources of goods and services and the allocation of resources that are used in producing those goods and services. Trade in intermediate goods also means that imports may be essential for exports. As a result, countries that impose trade measures that restrict imports may negatively affect their own exports. This complex process of cross-border production and trade in intermediate goods also uses a broad range of services that has greatly expanded and redefined the role that services play in international trade and increased the number of jobs in the economy that are tied directly and indirectly to international trade in ways that are not captured fully by traditional trade data. Issues for Congress In discussing proposed FTAs, both advocates and opponents of such agreements often focus on the U.S. merchandise trade balance with existing FTA partners as one way of measuring the success of such agreements. Economists generally argue, however, that due to the nature of recent FTAs, bilateral trade balances serve as incomplete measures of the comprehensive nature of the trade and economic relationships that often exist between the United States and its FTA partners. For instance, recent trade agreements include trade in services, provisions for investment, and trade facilitation, among other areas that are not reflected in bilateral merchandise trade balances. Instead of focusing exclusively on merchandise trade balances as a key measure of a bilateral trade relationship, most economists argue that liberalized trade creates a broad set of costs and benefits for the economy. They argue that, over the long run, the benefits will outweigh the costs, or that the net effect on the economy is positive, regardless of the overall U.S. trade balance or a bilateral trade balance. According to this approach, the economy as a whole tends to operate more efficiently as a result of competition through international trade, and consumers throughout the economy experience a wider variety of goods and services at varying levels of quality and price than would be possible in an economy closed to international trade. Economists generally also contend that international trade may have a long-term positive dynamic effect on an economy that enhances both production and employment. In addition, trade agreements of the type currently being negotiated by the United States comprise a broad range of issues that could have significant economic effects on trade and commercial relations over the long run between the negotiating parties, particularly for developing and emerging economies. Economists and others also acknowledge that the negative effects of international trade and trade agreements, particularly potential job losses and lower wages, often are distributed disproportionately with the effects falling more heavily on some workers and on some firms. As a consequence, governments often have implemented programs to provide benefits to those negatively affected by trade agreements to ease their transition to other economic activities. Most economists also argue that bilateral merchandise trade balances do not serve well as a basis for comparing the relative merits of particular FTAs, because each bilateral trade relationship is unique to the particular trading partners and is subject to a great number of factors. These unique bilateral trade relationships reflect underlying fundamentals that shape the composition of the particular trade relationship. As a consequence of the underlying composition of bilateral trade relationships, bilateral trade and trade balances respond differently to trade liberalization, which makes it difficult to compare the U.S. experience with individual FTA partners. Furthermore, the growth of global value chains and inter-industry trade are blurring the distinction between exports and imports and fundamentally changing the meaning of bilateral trade balances. Cross-border trade in intermediate goods not only has increased as a share of total trade in the economy, but it has expanded the role of services in international trade in ways that are not fully credited in bilateral trade data. As a consequence of the growth in global value chains, exports and imports are growing less distinct: policies that affect a nation's imports ultimately affect its exports and vice versa. Trade in intermediate goods also means that imports are essential inputs into the production of exports. As a result, countries that impose trade measures that restrict imports invariably negatively affect their own exports. This loss of distinction between exports and imports as strictly domestic or foreign activities further complicates efforts to distinguish between exports and imports on a bilateral basis. Congress has considered, and may again consider, two mega-regional free trade agreements that its participants argue are comprehensive and high-standard: the concluded Trans-Pacific Partnership (TPP) among the United States and 11 other countries, and the U.S.-European Transatlantic Trade and Investment Partnership (T-TIP). Since the two agreements could have potentially economy-wide effects, Congress may choose to examine the current methods that are used to collect data on U.S. exports and imports and the potential costs and benefits of improving the data to have them more fully reflect the resource costs they may imply for the economy. Congress may also choose to examine the state of data collection and analysis on workers and industries and the states where they are located in order to determine those that may be the most vulnerable to economic dislocations as one way of anticipating the costs and benefits of the proposed agreements to the economy as a whole. Congress may also choose to examine the role that global value chains are playing in the economy and the impact they are having on the nation's ability to assess the impact of exports and imports on the allocation of resources in the economy. Appendix A. U.S.-NAFTA Trade NAFTA is often cited as an example of a trade agreement that performed differently than some had anticipated, because the United States continued to experience a merchandise trade deficit with the two NAFTA partners. For some, however, the agreement is seen as an example of the impact that broad economic events can have on trading partners in ways that that are not anticipated at the time an FTA is negotiated, but can outweigh the impact of the agreement. In particular, China's accession to the WTO in 2001 affected U.S. trade relations and those of its NAFTA partners in a number of ways. China's accession to the WTO reduced China's barriers to trade and investment, which tended to increase trade between the United States and China and boosted U.S. investment in China. As a result of the increased amount of U.S. trade with China, U.S. trade with other countries, including Canada and Mexico, were affected. In particular, U.S. imports from China of computer equipment, apparel, and semiconductors reduced imports of such items from other countries. These various events played out differently with U.S. trade partners, as indicated in Figures A-1 and A-2 , which show the average share of U.S. imports and exports with Canada, Mexico, and China in five-year periods from 1989 to 2017. In 1989, total U.S. imports were $473 billion, with Canada, Mexico, and China accounting for $88 billion, $27 billion, and $12 billion, respectively. In terms of shares, these three countries accounted for 18.6%, 5.7%, and 2.5%, respectively, of total U.S. imports. By 2000, total U.S. imports had grown to $1.2 trillion, with imports from Canada ($231 billion), Mexico ($136 billion), and China ($100 billion) accounting for shares of 19%, 11.5%, and 8.2%, respectively. During the period 1990-2000, Canada's share of total U.S. imports rose slightly, while shares of imports from Mexico doubled and shares of imports from China nearly quadrupled. Between 2000 and 2017, however, Canada's share of total U.S. imports fell to account for 12.8%, while Mexico's share rose slightly to 13.4%, and China's share more than doubled to account for 21.4% of total U.S. imports. The data reflect the average share of U.S. imports over five-year periods, except for the data for 1990, which reflect the share in 1990, and the share in 2017, which reflects the average share over the two-year 2016-2017 period. The data indicate that Canada's share of U.S. imports grew little under the NAFTA agreement (implemented in 1994) until 2000, after which that share has fallen, while imports from Mexico experienced their greatest average rate of growth as a share of U.S. imports between 1995 and 2000. On the other hand, imports from China grew steadily as a share of U.S. total imports over the entire period, but they grew at a faster rate after China was admitted into the WTO in 2001. A similar trend holds for shares of U.S. exports, with the share of U.S. exports with Canada declining after 2000, while the share of U.S. exports with China experiencing a steady increase in total U.S. exports. The share of U.S. exports going to Mexico dipped during the period just before and during the 2008-2009 recession, but rebounded as a modest pace after 2010. As previously indicated, bilateral trade balances are influenced by a broad range of factors. As a result, it is very difficult to unravel the complicated linkages that exist within the economy in order to derive cause and effect relationships between a trade agreement and the impact that agreement might have on bilateral trade balances. Appendix B. U.S. Trade with FTA Partner Countries, Top 10 Export and Import Commodities, 2014 This Appendix presents 2014 data on the top 10 U.S. export and import commodities by value and share of total bilateral exports and imports, respectively, for the 20 countries with which the United States currently has an FTA.

During the Obama Administration, the United States negotiated two mega-regional free trade agreements that its participants argued were comprehensive and high-standard: the Trans-Pacific Partnership (TPP) among the United States and 11 other countries, and the U.S.-European Transatlantic Trade and Investment Partnership (T-TIP). The 12 TPP countries signed the agreement in February 2016, but the agreement required ratification by each country before it could enter into force. In the United States, this required implementing legislation by Congress. Upon taking office, President Trump withdrew the United States from the TPP and halted further negotiations on the T-TIP, but may reengage in the TPP under different terms. The remaining 11 partners to the TPP concluded, without U.S. participation, a revised TPP, now identified as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Trump Administration is also attempting to revise the two largest existing U.S. FTAs, through the ongoing renegotiation of the North American Free Trade Agreement (NAFTA), and modification talks regarding the U.S.-South Korea (KORUS) FTA. President Trump has addressed trade broadly and trade agreements more directly through an assertive trade enforcement agenda and vocal skepticism of past U.S. trade agreements and the potential benefits of trade. The Trump Administration has characterized U.S. trade agreements as unfair and detrimental to the economy, a viewpoint that is not shared by U.S. trading partners, established economic analysis, and various business and consumer groups. For some observers, the growing globalization of the economy raises concerns that the cost of U.S. leadership in the global arena is outstripping the benefits of U.S. global engagement. Others argue that the United States needs to renegotiate its role and require others to share more of the costs. The Trump Administration's approach does not rule out the possibility that some countries are not fully abiding by international trade agreements and rules. Such actions may distort market performance and erode public support for the international trade system. Discussions of FTAs often focus on trade balances, particularly U.S. bilateral merchandise trade balances with its FTA partner countries, as one way of measuring the success of the agreements. Although bilateral merchandise trade balances can provide a quick snapshot of the U.S. trade relationship with a particular country, most economists argue that such balances serve as incomplete measures of the comprehensive nature of the trade and economic relationship between the United States and its FTA partners. Indeed, current trade agreements include trade in services, provisions for investment, and trade facilitation, among others that are not reflected in bilateral merchandise trade balances. This report presents data on U.S. merchandise (goods) trade with its Free Trade Agreement (FTA) partner countries. The data are presented to show bilateral trade balances for individual FTA partners and groups of countries representing such major agreements as the North America Free Trade Agreement (NAFTA) and the Central American Free Trade Agreement and Dominican Republic (CAFTA-DR) relative to total U.S. trade balances. This report also discusses the issues involved in using bilateral merchandise trade balances as a standard for measuring the economic effects of a particular FTA.

Introduction: Why is Ukraine Important? More than a dozen years after achieving independence, Ukraine continues to undergo a difficulttransition to democracy and a free market economy. It is also undergoing a related search for itsidentity, as either an independent, central European state or as a close partner of Russia, with whichmost of Ukraine has close linguistic, cultural, religious and historic ties. The possibilities forUkraine's long-term future run a spectrum from participating in a prosperous, democratic, freemarket Europe, to being part of a poor, semi-authoritarian, corrupt post-Soviet region. Since the collapse of the Soviet Union in 1991, many Western analysts have viewed a stable, independent and sovereign Ukraine as a key element in European security. They point to Ukraine'ssize (about the same land area as France), its population of nearly 50 million people, its naturalresources, and strategic position on the Black Sea between Russia and Central Europe. They focuson the positive influence that a stable and prosperous Ukraine could play as a neighbor to NATO andthe European Union. Some hope that Ukraine could one day join one or both of these organizations. Ukraine could also play an important role as a regional leader among former Soviet countries seekingto retain their sovereignty and independence. Those who are concerned about Russia's motives and goals in the region see an independent Ukraine as a guarantee against the revival of Russian power that could threaten the security ofcentral Europe. Conversely, analysts worry that a weak or unstable Ukraine could fall under Russiandomination or become a focus of tension between Russia and the West. The removal of nuclearweapons from Ukraine, which was completed in 1996, improved Ukraine's relations with the Westand diminished Western fears about the impact of possible instability in Ukraine. However, concernsremain about the possible proliferation of weapons technologies and spillover effects of crime, illegalimmigration and other problems. Political Situation in Ukraine Ukraine's political system may be described as a mixture of democracy, authoritarianism, andoligarchy. Independent Ukraine has held three parliamentary elections and two presidential elections.In 1996, the country adopted a new, more democratic Constitution, replacing one from the Sovietera. After the 1994 presidential vote, power changed hands peacefully from incumbent LeonidKravchuk to Leonid Kuchma. Kuchma was reelected in 1999, in an elected that internationalobservers viewed as less than free and fair. A variety of views are expressed in Ukraine'sparliament, the Supreme Rada. A few independent media voices exist in Ukraine, often providinga highly critical perspective of those in power, although these have faced harassment and persecution by government authorities. Broadcast media are under the control of supporters ofPresident Kuchma. The country's regional diversity has had an important impact on the country's political scene. There are cultural, religious, linguistic and historical differences between western Ukraine and theeastern and southern regions of the country. However, in contrast to other parts of the former SovietUnion, there has been no significant ethnic tension or violence in Ukraine. In general, westernUkrainians are more nationally conscious than those in other regions. Western Ukraine played acatalytic role in the drive for Ukrainian independence in the early 1990s, although it has becomepolitically marginalized, as leaders from eastern and southern Ukraine, where most of Ukraine'sindustry is concentrated, have gained power. People in eastern and southern Ukraine, subjected tocenturies of Russification, tend to look more skeptically on Ukrainian nationhood or are indifferentto it. People in these regions are more likely to support economic and/or political union with Russia. Like other countries of the former Soviet Union, Ukraine's democratic development remains deeply flawed. President Kuchma's powers under the constitution are formidable and give himsignificant authority over the government, as well as the legislative and judicial branches. PresidentKuchma rules through a large presidential administration and a network of presidential appointeesreaching down to the local level. He also controls the interior ministry, intelligence agencies andthe tax authorities. He has used these as weapons to harass political opponents and independentmedia. Associated with Kuchma are prominent businessmen, often dubbed "oligarchs," who receivelucrative concessions from the state in return for providing political and financial support toKuchma. Some oligarchs are linked to organized crime figures. Ukraine's current Prime MinisterViktor Yanukovych is a representative of the powerful Donetsk oligarchic "clan." ViktorMedvedchuk, a leader of a Kiev-based oligarchic group, heads the presidential administration. Boththese groups, and a third oligarchic center based in Dnipropetrovsk, hold other key posts in thegovernment, parliament and other institutions. Kuchma has tried to balance these oligarchic groupsagainst each other in order to preserve his own power. Current Issues Despite government efforts to use their control of the media and administrative resources to bolster their supporters, parliamentary elections in March 2002 resulted in a victory for Our Ukraine,an opposition pro-reform bloc led by former Prime Minister Viktor Yushchenko. Our Ukraine wonthe largest share of the vote but fell short of a majority. It currently holds about one-quarter of theseats in the parliament. The Communist Party suffered a heavy defeat, partly due to alleged fraud bylocal officials in the Donetsk region, where the Communists had traditionally done well. Kuchmawas able to cobble together a shaky parliamentary majority of pro-oligarch factions. Part of hissuccess was due to efforts to coopt some members of parliament (including Our Ukraine) by usingmaterial incentives and threats. Nevertheless, the pro-government bloc is riven with conflicts dueto the competing interests of the oligarchs, who strongly mistrust each other. According to recent public opinion polls, Kuchma has extremely low public support, with popularity ratings in the single digits. In addition to public dissatisfaction with living standards andwidespread government corruption, Kuchma's public image has been tarnished by scandal. InNovember 2000, an audio tape produced by a former Kuchma bodyguard purportedly capturedKuchma's orders to top officials to neutralize independent journalist Georhiy Gongadze, whoseheadless, mutilated body had been found by police. The bodyguard who produced the tapes claims that they show that Kuchma is at the center of a vast criminal enterprise involving the oligarchs, thepolice and security services. (1) Ukraine's current political scene is dominated by the question of who will succeed Kuchma as President, or if the political system should be changed to make that point moot. Kuchma isconstitutionally barred from running for a third term as President after his current one expires inOctober 2004. Kuchma and the oligarchic groups are reportedly concerned that they may not uniteon a viable candidate to defeat Yushchenko in the 2004 vote, who remains Ukraine's most popularpolitical figure. The current leadership fears that the Western-oriented Yushchenko could move toclean up corruption if he is elected, which could expose Kuchma and other current leaders tocriminal prosecution. Even if Yushchenko and other opposition leaders guaranteed that they wouldnot prosecute Kuchma and others, in exchange for allowing free and fair elections, Kuchma and hissupporters may not trust them, given that the new leadership would be supported by new would-beoligarchs bent on seizing property held by the old regime's supporters. In order to avoid a possible Yushchenko victory, Kuchma and his powerful chief of staff Viktor Medvedchuk (head of the anti-reform, Kiev-based political clan) have put forward a political reformplan. This proposal to amend Ukraine's constitution - which was adopted in first reading inDecember 2003 - would reduce the powers of the presidency; provide for a presidential election fora shortened term from 2004 to 2006 (when new parliamentary elections are scheduled); and call forthe election of a new president in 2006 by the parliament, not the public. This plan may have beendesigned to hamper Yushchenko from being elected in 2004 to a full term as president with thepost's current extensive powers. In February 2004, the parliament approved an amendment to the bill, dropping the election of president by the parliament. The amendment thereby removed the most objectionable part of the bill,to some observers. However, the revised bill may still serve the purposes of the ruling elite, in thatthe future president, perhaps Yushchenko, will still have weakened powers and the government(including Prime Minister Yanukovych) will be strengthened. It remains unclear whether oligarchic groups can secure the necessary two-thirds majority in the parliament to adopt the revised bill. The Communists and Socialists, whose support is vital tofinal passage, condition their continued support on having the parliament elected entirely byproportional representation, a proposal not favored by some in the pro-presidential camp, who couldlose ground under such a system to groups with stronger party organizations, such as the Socialistsand Communists. Until recently, it was believed that Kuchma was constitutionally barred from running for a third5-year term as President after his current one expires. Kuchma himself has said repeatedly that heis not interested in a third term. On December 30, 2003, the ruling elite further hedged its bets bysecuring a Constitutional Court ruling that would permit Kuchma to run for a third term. However,since the decision, Kuchma has repeated that he will retire from politics at the end of his currentterm. Economic Reform Ukraine's efforts at economic reform have been marked by modest successes and periods ofinertia. Ukraine has generally pursued responsible monetary and fiscal policies since 1994, withoccasional but significant lapses. Macroeconomic stability permitted Ukraine to successfullyintroduce a new currency, the hryvnya, in 1996. However, this "stability" was in part achieved inpart by huge arrears in payments of wages and pensions. Enterprise tax arrears and tax exemptionsfor politically powerful sectors have had a negative impact on Ukraine's budget. Living standardsfor most of the population have declined. In 1999, real wages were half of their 1990 level. RealGDP fell by about 60% from 1991 to 1999. In addition to this mixed record in macroeconomic stabilization, Ukraine has achieved only limited results in restructuring its economy. Privatization of most small firms was completed bythe end of 1997. However, Ukraine needs to make greater progress in such areas as agriculturalreform, energy sector reform (including privatization of the coal industry), restructuring of thebanking sector, and improving public administration (including deregulation, reducing the size ofthe government bureaucracy and fighting corruption). Privatization of agriculture has progressedsince a December 1999 decree by President Kuchma abolishing collective farms, but has not yet ledto a substantial impact on the sector's productivity. The country, once the Soviet Union's"breadbasket," is famed for the fertile black soil that covers its key agricultural regions. Ukraine's economic reforms received a boost from the election of Viktor Yushchenko as Prime Minister in April 2000. As head of Ukraine's central bank in mid-1990s, Yushchenko was creditedwith keeping inflation in Ukraine at moderate levels and successfully launching the hryvnya. He isconsidered by many to be Ukraine's leading reformer and among its most Western-oriented politicalfigures. Yushchenko attempted to implement an ambitious reform program, including cuts ingovernment spending, tax reform, accelerated privatization of industry, rapid privatization of land,and reductions in the size of the government bureaucracy. The government also attempted to maketaxation and government spending more transparent and to increase cash payments to the stateinstead of barter. These moves were aimed in part at choking off sources of corruption. Ukraineregistered GDP growth in 2000, for the first time since independence. Real wages also showedmodest growth. Yushchenko's government was toppled in a vote of no-confidence by the parliament in April 2001, with the tacit support of President Kuchma. Nevertheless, Ukraine's economic rebound hascontinued, fueled in large part by economic expansion in Russia. Gross Domestic Product grew by9.1% in 2001, 4.8% in 2002 and 8.5% in 2003. (2) Thegovernment has pursued effectivemacroeconomic policies. Inflation was 8.3% and Ukraine ran a state budget surplus in 2003. Salaries rose by 22.8% in nominal terms in 2003. However, living standards for most Ukrainiansremain low. The average monthly salary in 2003 was less that $100 per month. (3) The governmentof Prime Minister Yanukovych has scored several legislative successes, including the adoption ofanti-money laundering legislation, pension reforms and some tax reforms. Nevertheless, the vestedinterests of the oligarchs, who tend to favor the status quo, stand in the way of more sweepingeconomic reforms. The impending presidential succession may also limit reform efforts this year. (4) Ukraine's Foreign Policy Ukraine's foreign policy has been successful in some respects. Ukraine has established goodrelations with the United States, other Western countries and leading organizations such as NATOand the European Union. It has also built excellent ties with its neighbors, including NATO andfuture EU members Poland, Hungary and the Czech Republic. Ukraine formed a loose associationwith Georgia, Uzbekistan, Azerbaijan and Moldova (dubbed GUUAM), all former Soviet stateswanting to preserve their independence. In its potentially most troublesome relationship, Ukrainehas avoided major crises with Russia, and has secured at least nominal recognition of Ukraine'ssovereignty. On the other hand, critics note a certain "hollowness" to Ukraine's foreign policy. Ukraine's foreign policy moves often lack the political, economic and military underpinnings that are neededto improve the stability, security and prosperity of Ukraine in concrete and durable ways. PresidentKuchma describes Ukraine's foreign policy as having a "multivector" approach. Observers note thatthis strategy involves balancing pro-Western and pro-Russian moves, depending on the directionfrom which the regime is feeling the greatest pressure at a particular time. However, these effortsare not usually translated into binding long-term commitments. Ukrainian political leaders andoligarchs feel that they can not afford to alienate Moscow, with which they have close economic andother links, but nevertheless need to keep lines of communication open with the West to avoidbecoming wholly dependent on Russia. Scandals in the past few years (such as the murder of Gongadze and the alleged sale of sophisticated air defense equipment to Iraq) as well as Ukraine's overall lack of progress indemocratization and market reform have lowered Ukraine's international standing, at least amongWestern countries. It should be noted that Ukraine's foreign policy reflects not just the politicalstrategies of one man, but a lack of consensus among Ukrainian elites on the country's identity andits geopolitical orientation. This lack of consensus reflects political, regional and social cleavageswithin Ukrainian elites and society. Ukraine's Future Between Russia and the West Analysts have expressed concerns about some aspects of Ukraine's relationship with Russia. Observers have noted that under Russian President Vladimir Putin, Russian policy toward Ukrainehas become more pragmatic than during the Yeltsin era. Instead of sweeping if vague promises ofpartnership, Russia has increasingly focused on concrete concerns such as repayment of Ukrainianenergy debts to Russia and bilateral trade frictions. Some analysts are concerned that Kuchma hassought support from Putin in exchange for greater Russian political and economic influence inUkraine. Another potential cause for concern, according to some experts, is a surge in Russian investment in Ukraine. In recent years, Russian firms, flush with cash as a result of high oil prices,have bought key industrial firms in Ukraine. While Russian investment in Ukraine could be highlybeneficial to Ukraine's economy, some fear that Russia could come to dominate Ukraine politicallyand economically if the Russian presence is overwhelming. Ukraine's future may also be affectedby the domestic political and economic climate in Russia. Russia's improving economic situationhas benefitted Ukraine, due to the close links between the two countries. However, Russia'sapparent drift toward a less democratic political system could have a negative impact on Ukraine byencouraging authoritarian tendencies there. The Russian government and Gazprom, the partly state-owned natural gas giant, have pressed Ukraine to hand over control of the Ukrainian pipeline system to Gazprom in payment for Ukraine'senergy debts to Russia. U.S. policymakers have expressed concern about an October 2002 agreementbetween Kuchma and Putin, which foresees the creation of a Russian-Ukrainian consortium tocontrol the Ukrainian natural gas pipeline system, the largest in the world. The consortium is a50-50 split, which could give Russia a veto on key issues. However, a final agreement on the issuehas not been reached, due to continued Ukrainian reluctance to give Russia such a large measure ofcontrol over a vital sector of its economy. Ukraine is trying to reduce its dependence on Russia oil by completing an oil terminal at its port city of Odesa and constructing a pipeline from the terminal to Brody, Poland. Ukraine and itspartners in GUUAM have explored options for a supply route from gas and oil fields in Azerbaijanand Central Asia to Ukraine and Western Europe that would bypass Russia. After discussions onthe issue between Prime Minister Viktor Yanukovych and Vice President Dick Cheney, Ukrainianofficials opened talks with with ChevronTexaco on using Odesa-Brody to transport Caspian oil toEurope. In August 2003, the state-owned Russian oil pipeline company Transneft cut off oil shipments to Odesa, claiming that it lacked oil to supply to port. Transneft has used the same tactic to pressureLatvia to sell part of its Ventspils oil terminal to Transneft. Some observers believe that the movewas meant to signal Russian displeasure about the Odesa-Brody project. Russia and Russian oil firmTNK (which has been bought by British Petroleum) are pressuring Ukraine to reverse the flow ofthe Odesa-Brody pipeline in order to export Russian crude oil from Odesa. A border dispute between Russia and Ukraine has increased tensions between the two countries. In October 2003, Russia began construction of a dike to link Russia's Taman Peninsula to the tinyisland of Tuzla, which lies in the Kerch Strait between the Black Sea and the Sea of Azov. Ukrainestrongly protested the construction of the dike toward Tuzla, which it views as its territory. Russiaresponded by questioning Ukraine's claim to the island. After a buildup of Ukrainian forces in thearea to defend Ukraine's claim to Tuzla, Moscow and Kiev agreed to negotiate over the issue in awider economic and territorial context, including on the use of the Sea of Azov and the Kerch Straitby both parties. The attitudes of Ukraine's oligarchs may be an important factor in determining Ukraine's position between Russia and the West. At present, Ukraine's oligarchs have not assumed a highforeign policy profile, even on issues one might believe would be of interest to them, such as WorldTrade Organization membership. Rather than developing a coherent foreign policy approach, theyhave instead made ad hoc decisions aimed at consolidating their internal economic and politicalpositions within Ukraine. They have generally been reluctant to take steps to alienate Moscow,given their close economic ties with Russia. Ukrainian oligarchs are wary about letting their Russiancounterparts gain too much power in Ukraine, fearing that the richer and more powerful Russianscould dominate them. (5) Another important issue will be the impact of European Union and NATO enlargement. EU enlargement into Central Europe to include Poland, Hungary and the Czech Republic may helpstimulate Ukraine's economy, but may have negative psychological consequences, as well aspractical ones, such as visa restrictions for Ukrainian migrant workers and reductions in Ukrainianexports to the new EU states. Ukrainians may feel increasingly excluded from Europe. This isespecially true given that EU officials say they do not believe that Ukraine should become acandidate for EU membership in the near future, given its slow progress on political and economicreform. EU officials claim that Ukraine's economy will be enhanced in the long run by EUenlargement. NATO enlargement, and Ukraine's aspirations to join NATO could lead to increasedRussian pressure on Ukraine to distance itself from the Alliance, particularly if conservative forcesgain more power in Moscow. Advocates of enlargement say that Ukraine's security will beenhanced by bringing closer to Ukraine's borders the zone of security that NATO represents. U.S. Policy On the eve of Ukraine's independence and in the early post-independence period,U.S.-Ukrainian relations were difficult. In 1991, President Bush urged Ukraine to remain within theSoviet Union, warning of "suicidal nationalism." Nevertheless, the United States recognizedUkraine's independence after the collapse of the Soviet Union. In the early post-independenceperiod, U.S.-Ukrainian ties were troubled by Ukraine's reluctance to permit nuclear weapons on itssoil to be withdrawn without guarantees of its security. A turning point was reached in January1994, when the United States, Russia, and Ukraine signed a Trilateral Statement that committedUkraine to transfer nuclear weapons on its territory in exchange for Russian fuel for its nuclearpower plants and security assurances that the United States and Russia would respect Ukraine'ssovereignty and territorial integrity. While Ukraine's reluctance to give up nuclear weapons on itsterritory irritated U.S. policymakers, it may have also helped to form the current U.S. policyconsensus that a strong, multi-faceted relationship with a stable, democratic, prosperous andsovereign Ukraine, integrated with Europe and the wider world, is key to Europe's stability, a vitalU.S. interest. U.S.-Ukrainian relations suffered serious setbacks from late 2000 until early 2003. U.S. officials repeatedly expressed concern about political pressure on the media and the harassment ofjournalists. The United States called on the Ukrainian government to conduct a credible investigationof the Gongadze affair. In 2001, the United States granted political asylum to Mykola Melnychenko,the ex-bodyguard who had produced the tapes allegedly implicating Kuchma in the murder ofGongadze. However, perhaps the lowest point in U.S.-Ukrainian relations was reached in late 2002. In September 2002, the Administration announced that it had authenticated a conversation taped byMelychenko in July 2000, in which Kuchma gave approval for the sale of four Kolchuga earlywarning radar systems to Iraq, a sale banned by a U.N. Security Council arms embargo. (6) ANovember 2002 U.S. and British fact-finding mission to Kiev issued a report saying that Kiev had been evasive in its response to the group. The investigators said they could not rule out the sale ofthe systems, but had no clear proof they had taken place, either. There have been no public reportsof U.S. forces finding Kolchugas in Iraq after the defeat of Saddam's army in 2003. In the wake of the Kolchuga incident, the Administration conducted a review of its Ukraine policy. In early 2003, it concluded that, despite recent setbacks, the United States continues to havean interest in Ukraine's development as a modern, democratic state integrated into Euro-Atlanticinstitutions and that the United States must continue to be engaged with Ukraine in a wide varietyof areas. (7) U.S.-Ukrainian ties have improvedsubstantially as a result of the war in Iraq. TheAdministration listed Ukraine as a member of the coalition to disarm Saddam Hussein. Before thewar, Ukraine deployed a 200-man nuclear, biological, and chemical weapons defense battalion tohelp Kuwait to defend against a possible attack. In August 2003, Ukraine deployed 1,650 troops toparticipate in a Polish-led peacekeeping division in south-central Iraq. A Ukrainian officercommands one of the brigades in the force, while Spain and Poland lead the two others. The United States is also cooperating with Kiev to promote closer ties between Ukraine and NATO. In May 2002, Ukraine announced for the first time that it was seeking NATO membership. Despite the fallout from the Kolchuga affair, Ukraine and NATO agreed on a NATO-Ukraine ActionPlan at the November 2002 NATO summit in Prague. The plan, which appears to be modeled onNATO's Membership Action Plan program, but does not commit NATO to supporting Ukraine asa candidate for membership, includes a series of commitments by Ukraine to meet objectives inpolitical, economic, and military reforms. U.S. officials have said that, if Ukraine takes real stridestoward reform, and meets the qualifications for NATO membership, it should have the opportunityto join the Alliance. Most analysts estimate that NATO will not embark on another round ofenlargement until 2007, at the earliest. Nevertheless, the woeful state of Ukraine's armed forces willrequire rapid moves toward reforms to meet even this hypothetical deadline. The United States is also trying to help Ukraine prepare for World Trade Organization membership. Progress on this issue has been slowed by resistance from members of parliament fromrural areas and by some oligarchs, who fear foreign competition. Another stumbling block to WTOmembership for Ukraine is its failure to respect intellectual property rights of U.S. firms. The OECD's Financial Action Task Force (FATF) imposed sanctions on Ukraine in early 2003 for not doing enough to stop money laundering. The sanctions were lifted in February 2003, afterUkraine passed an anti-money laundering law. In February 2004, Ukraine was removed from theFATF's "blacklist" of non-cooperating countries, reflecting an evaluation that Ukraine isimplementing its money laundering legislation effectively. U.S. Aid to Ukraine Foreign aid has been an important tool of U.S. policy toward Ukraine. This assistance has gone to support efforts to build democracy, civil society, and the rule of law in Ukraine, and to promoteeconomic reform and the development of small and medium-sized businesses. U.S. aid has also beenspent to destroy nuclear weapons on Ukrainian territory and help Ukraine prevent the proliferationof technology that could be used in creating weapons of mass destruction. The United States hasprovided humanitarian and other assistance to help Ukraine deal with the consequences of theChernobyl nuclear accident and promote nuclear safety. The United States has provided securityassistance to help Ukraine participate in joint exercises under NATO's Partnership for Peaceprogram. The United States provided funding for Ukraine's participation in KFOR, the NATO-ledpeacekeeping force in Kosovo, in a joint unit with Polish troops. It is also providing assistance forUkrainian forces in Iraq. U.S. aid to Ukraine has been substantially reduced in recent years. In its FY2005 foreign aid request, the Administration proposed $79.5 million in Freedom Support Act assistance for politicaland economic reform in Ukraine. In FY2003, the United States provided $138.7 in FSA aid and anestimated $92.6 million in FY2004. (8) TheAdministration has proposed $6.5 million in ForeignMilitary Financing (FMF) aid for Ukraine in FY2005, up from an estimated $3 million in FY2 004. The Administration has justified the reduction in FSA funding by asserting Ukraine's successes inreform permitted the reduction. It said it was developing a multi-year strategy leading to Ukraine's"graduation" from U.S. foreign aid. Other analysts have noted that funding to Ukraine may havebeen rendered vulnerable by other, more pressing needs, such as funding the reconstruction of Iraqand assisting U.S. allies in the fight against terrorism, including FSA recipients in Central Asia andthe Caucasus region. U.S. aid to Ukraine has had notable successes, particularly in the security sphere and with regard to nuclear safety. Specific achievements include the complete withdrawal of nuclear weaponsfrom Ukraine and the destruction of associated infrastructure remaining in the country; cooperationin heading off the transfer of nuclear and ballistic missile technologies to rogue regimes; andUkraine's closure of the Chernobyl nuclear plant in 2000. Achievements in political and economicreform have been significant, but less clear-cut. U.S. aid has helped to support independent mediain Ukraine and build a nascent civil society and small business sector. However, U.S. policymakershave often been frustrated by Ukraine's slowness to reform some areas of its economy and fightcorruption. Particularly since President Kuchma's re-election campaign in 1999, U.S. officials havealso expressed concern about Ukraine's democratic development, including the government'streatment of independent media and NGOs. This situation appears to have worsened as the October2004 elections has approached. Congressional Role Ukraine has enjoyed strong across-the-board support in Congress since independence. In theearly 1990's, Congress pushed the Bush and Clinton Administrations for more aid and acomprehensive relationship with Ukraine, as opposed to a near-exclusive concern with nuclearweapons issues. Congress has often underlined its support by specifically earmarking funds forUkraine. At times in the past decade, Ukraine was the third largest recipient of U.S. aid, after Israeland Egypt. Congress has focused particular attention on issues with a humanitarian dimension, suchas providing aid to Ukraine to help it deal with the consequences of the Chernobyl nuclear disaster,HIV/AIDS and other public health issues, and assisting efforts to fight trafficking in women, aserious problem in Ukraine. This support has been due to a number of factors. One is Ukraine's perceived strategic importance in U.S. interests in Europe. Also, at least initially, Ukraine's foreign policy was perceivedas generally pro-Western in Congress, and the U.S.-Ukrainian relationship did not have the obstaclesthat the U.S. relationship with Russia has had, such as the war in Chechnya and proliferationconcerns with Iraq, Iran and other countries. Another important factor in Congressional interest inUkraine is the role of Ukrainian-Americans. While not large in number when compared with otherethnic groups that influence U.S. foreign policy, many Ukrainian-Americans live in states in theMidwest and Northeast that often play a key role in national elections. In addition, theUkrainian-American community has been active in lobbying Congress, and there are severalMembers of Ukrainian ancestry. There is also a Congressional Ukrainian Caucus, an informalorganization that promotes awareness of Ukrainian issues. However, Congressional attitudes toward Ukraine have also been marked by disappointment. Concerns have focused on the relatively slow progress in economic reform and rampant corruption. Members of Congress have increasingly expressed concern about the state of democracy in Ukraine,especially since the Gongadze murder, as well as other crimes allegedly detailed on the audio tapesfrom Kuchma's office, including corruption and manipulating the 1999 presidential election. Theseproblems are of course not unique to Ukraine; they are seen in many countries in the region. Afterseveral American businessmen charged that they were cheated by their Ukrainian partners, Congressadded certification provisions to U.S. aid to Ukraine in FY1997, FY1998 and FY1999. Theprovisions called for part of U.S. aid for Ukraine to be withheld until the Secretary of State certifiedthat there had been progress in resolving these issues. The Secretary of State made the requiredcertifications, but criticized the pace of reform in Ukraine. The certification process was dropped in1999 as potentially counterproductive, and as progress was made on individual cases. In FY2000, FY2001 and FY2002, Congress switched to "soft" earmarks for Ukraine, which specify that the Administration "should" provide a specified amount to Ukraine, but do not formallyrequire it. The FY2002 bill ( P.L. 107-115 ) required a report by the State Department to theAppropriations committees on the progress made by Ukrainian authorities in investigating andbringing to justice those responsible for the murder of Ukranian journalists. In the FY2003 bill ( P.L. 108-7 ), Congress did not earmark an overall figure for Ukraine, and said that of the funds expended for Ukraine, $20 million "should" be made available for nuclearsafety and $1.5 million for mine safety. The bill also contained a provision stating that no fundscould be made available for Ukraine until the Secretary of State certified that Ukraine had notfacilitated or engaged in arms deliveries to Iraq since September 30, 2000. However, this aid cutoffwould exclude aid for fighting infectious diseases, nuclear safety, stopping trafficking in persons,and denuclearization assistance. The FY2 004 omnibus appropriations bill ( P.L. 108-199 ) does notcontain an earmark for total aid to Ukraine, although it does contain a subearmark of $19 million fornuclear reactor safety initiatives and $1.5 million for a mine safety program. Policy Issues Ukraine's current problems raise important issues for U.S. policy. One issue is balancingUkraine's usefulness to the United States in Iraq with less desirable aspects of its behavior in otherareas, including whether the United States should overlook the possible involvement of PresidentKuchma and other high-ranking officials in the Kolchuga affair, now that Ukraine is cooperatingwith U.S. policy on Iraq. Another concern is whether the warming trend in U.S.-Ukrainian ties willserve to bolster the legitimacy of the Kuchma regime and create the perception among regimesupporters that the United States is turning a blind eye to the undemocratic actions of the regime. This is a particularly important issue given the fact that the Ukrainian political elite is currentlyengaged in a struggle to determine who will succeed Kuchma when his term expires this year. U.S.policymakers could influence the process by making clear that efforts to keep Kuchma in power byunconstitutional means would lead him to be viewed as an illegitimate leader by Western countries. A related issue is how to deal with the Ukrainian opposition. Should the United States take an active role in helping the fractious opposition to achieve unity in time for the presidential elections? Should the United States support Yushchenko as the leader of the opposition? Such moves couldhave a negative impact on relations with Kuchma and the government. They could discreditopposition leaders among some Ukrainian voters. Some analysts believe that the United Statesshould avoid becoming directly involved in the political conflicts in Ukraine and instead stress itssupport for the rule of law and a free and fair electoral process. There is also the issue of whether the United States should reach out to selected oligarchs. While many of them have engaged in questionable activities, they also represent an important powercenter in the country, perhaps far more important than many pro-reform groups. Some of them mayalso have an interest in developing the rule of law in order to safeguard their property, whichcurrently can be placed in jeopardy with a reversal of their political fortunes. U.S. policymakerscould try to convince them to encourage a smooth transition of power to a more democraticpost-Kuchma future. Although these questions are significant, many experts stress that Ukraine's problems do notstem from the personal failings of one or another leader, and conversely that Ukraine's success doesnot hinge on the fate of a particular reformer. Ukraine's problems, they underline, are morefundamental. These analysts call on the United States to focus on helping to build the political,economic and social infrastructure that will provide a foundation for democracy, rule of law andeconomic reform in the medium and long-term. They advocate emphasis on aid to independentmedia, "think-tanks" and other non-governmental organizations, and small business. They say moreof this aid should take the form of direct grants rather than technical assistance. (9) Many also call foran expansion of exchange programs between Ukraine and the United States to introduce emergingleaders in Ukraine to the U.S. example. However, U.S. policymakers may face increasing difficultiesin achieving these goals, given the substantial decreases in aid to Ukraine planned for FY2005 andsubsequent years. Another problem U.S. policymakers face is how to shore up Ukraine's sovereignty and independence and promote closer ties with the West. Perhaps the biggest obstacles to this goal areeconomic. Ukraine's sovereignty would be bolstered if the United States and other Westerncountries could help Ukraine deal with such issues as Ukraine's energy dependency on Russia. Solutions could include new pipelines from the Caspian Sea region to diversify Ukraine's sourcesof energy supplies, upgrading Ukraine's current pipeline system and reform of the energy sector, andrestructuring of Ukrainian industries to make them more energy efficient. To achieve these goals, Ukraine needs balanced investment, both from the West and Russia. But while Russian firms are adept at fishing in the murky waters of Ukraine's political and economicsystem, Western firms demand transparency, and have been reluctant to invest in Ukraine. The U.S.government can only play a limited role in encouraging private investment, except by continuing topush for transparency in Ukraine and by helping U.S. firms learn of opportunities that emerge if thesituation improves. The United States is also trying to help Ukraine prepare for World TradeOrganization membership. Progress on this issue has been slowed by resistance from members ofparliament from rural areas and by some oligarchs, who fear foreign competition. Ukraine's announced desire to join NATO and its deployment of forces to Iraq also open up increased possibilities of cooperation in the security sphere. The United States and other NATO countries can offer much to Ukraine's military, including aid to promote military reform in Ukraine.Such aid could help not only Ukraine's military solve its real problems, including low livingstandards and the impact of downsizing the officer corps, but could also raise its prestige inUkrainian society.

Since the collapse of the Soviet Union in 1991, many Western analysts have viewed a stable, independent and sovereign Ukraine as a key element in European security, pointing to its size,strategic location and economic potential. Those who are concerned about Russia's motives andgoals in the region see an independent Ukraine as a guarantee against the revival of a Russian empirethat would threaten the security of central Europe. Conversely, analysts worry that a weak or unstableUkraine could fall under Russian domination or become a focus of conflict between Russia and theWest. The spillover effects of crime, illegal immigration and other problems from an unstableUkraine could hurt other countries in the region. Ukraine continues to undergo a difficult transitionfrom communism to democracy and a free market economy. It is also undergoing a related searchfor its international identity, whether as an independent central European state or as a state closelyaligned with Russia, with which most of Ukraine has close linguistic, cultural and historic ties. A series of recent events have clouded Ukraine's relationship with the United States. In November 2000, an audio tape produced by a former bodyguard of Ukrainian President LeonidKuchma purportedly captured Kuchma's orders to top officials to neutralize independent journalistGeorgiy Gongadze, whose headless, mutilated body had been found by police. In September 2002,the United States authenticated another tape which implicated Kuchma in the possible sale ofsophisticated anti-aircraft radars to Iraq. These incidents led to a deterioration of U.S.-Ukrainianties. However, relations improved in 2003, when Ukraine deployed 1650 troops to Iraq as part ofa Polish-led peacekeeping force. However, despite recent setbacks, there is a consensus among U.S. policymakers that a strong, multi-faceted relationship with a stable, democratic, prosperous and sovereign Ukraine, integratedwith Europe and the wider world, is key to Europe's stability, a vital U.S. interest. The United Stateshas tried to bolster Ukraine with political support and over $3 billion in U.S. aid from FY 1992 toFY 2001, although aid has declined in recent years. U.S. policy has had notable successes,particularly in the areas of security policy and nuclear safety. Achievements since Ukraine'sindependence in political and economic reform have been significant, but U.S. policymakers haveoften been frustrated by Ukraine's slowness to reform and fight corruption. Congressional supporthas remained consistent despite Ukraine's troubles. Ukraine's current problems raise important issues for U.S. policy. One problem is how to deal with President Kuchma and the opposition to his rule. More broadly, the United States must decidehow to better support the building of the political, economic and social infrastructure that willprovide a foundation for democracy, rule of law and a market economy in the long term. Anotherproblem U.S. policymakers face is how to support Ukraine's sovereignty and independence andpromote closer ties with the West. Efforts could include helping reduce Ukraine's energydependency on Russia, and promoting greater security ties with the United States and NATO, in theface of possible Russian pressure against such a relationship.

Background and Purpose The Worker Adjustment and Retraining Notification (WARN) Act requires qualified employers that intend to carry out plant closings or mass layoffs to provide 60 days' advance notice to affected employees, states, and localities. There are several purposes to the WARN Act. Notices provide workers with time to seek alternative employment, arrange for retraining, and otherwise adjust to the prospect of employment loss. The act also provides notice to state dislocated worker units so that services can be provided promptly to the affected employees and to local governments so they can adjust to upcoming changes in their local labor market. Although "retraining" appears in its title, the WARN Act does not authorize or fund training activities. Workers affected by layoffs covered by the WARN Act may be eligible for training services under the dislocated worker provisions of the Workforce Investment Act (WIA) or, if their job loss is attributable to foreign competition, Trade Adjustment Assistance for Workers (TAA). Legislative History Legislation related to the notification of workers prior to mass layoffs and plant closings was first introduced at the federal level in 1973. The issue proved to be contentious and more than a decade elapsed before Congress enacted the WARN Act ( P.L. 100-379 ) in 1988 without President Ronald Reagan's signature. The law became effective in February 1989. Except for some small changes to align the WARN Act with terminology changes elsewhere in law, the WARN Act has not been amended. Most recent proposals related to the WARN Act have proposed expanding the law's breadth or otherwise increasing employer responsibilities. The most recent amendment to the act to come up for a vote was in the 110 th Congress, when the House passed H.R. 3920 , the Trade and Globalization Assistance Act of 2007. Among other labor provisions, the bill would have increased the notice period under the WARN Act from 60 to 90 days and required employers to inform the Secretary of Labor of their intended layoffs. Provisions of the WARN Act The WARN Act requires covered employers to provide 60 calendar days' notice prior to qualified employment losses affecting 50 or more employees. The act is at Title 29, Chapter 23 of the U.S. Code (29 U.S.C. 2101-2109). Covered Employers To be subject to the WARN Act, employers must have at least 100 employees (excluding part-time employees) or 100 or more employees who work for at least a total of 4,000 hours per week (exclusive of overtime). Persons who are temporarily laid off or are on leave but have a reasonable expectation of being recalled are also covered and counted toward the employer-size threshold. The statute and regulations offer guidance on defining employers and determining if subsidiaries and independent contractors are separate from a parent company. Federal, state, local, and federally recognized tribal governments are not subject to the WARN Act. However, public and quasi-public entities that engage in business and that function independently of those governments are covered if they meet the employer-size threshold. Covered Events Broadly speaking, there are three types of events that require notification under the WARN Act. Each of these events is limited to a single site of employment; employment losses by a single employer across multiple sites are not aggregated. Events that trigger the requirements of the WARN Act are a plant closing resulting in employment losses that affect at least 50 employees; a mass layoff that affects at least 50 employees where the employment loss consists of at least 33% of employment at the site; or a mass layoff with an employment loss of 500 or more at a single site of employment, regardless of its proportion of total employment at the site or if the employment loss is part of a plant closing. For the purposes of the WARN Act, employment loss is defined as the involuntary separation of a worker exceeding six months or a reduction in hours worked of at least 50% during each month for a six-month period. Any employment losses during a 30-day period are considered a single event for the purposes of the WARN Act. Employment losses affecting part-time workers are not counted when determining if an event meets WARN Act thresholds. There are also circumstances in which the WARN Act can be applied retroactively: If an employer announces layoffs that are for less than six months but otherwise meet the WARN Act criteria and then subsequently extends the layoffs past six months, the employer may be subject to WARN Act notification responsibilities. Unless the employer can establish that the layoff extension was due to circumstances that were unforeseeable at the time of the original layoff, the case is treated as if notice was required for the original layoff. If an employer engages in a series of layoffs that are below WARN Act levels, they may be aggregated for up to 90 days unless the employer can establish that each layoff was due to distinct, unrelated events. In the case of smaller layoffs adding up to a WARN-required level, each employee must receive notice 60 days prior to his or her date of termination. Covered Employees Employees covered by the statute include hourly and salaried employees, managers, and supervisors on the employer's payroll. The law does not apply to an employer's business partners, contract employees who have an employment relationship with and are paid by another employer, and self-employed individuals. Part-Time Employees Part-time employees are defined as employees who work, on average, fewer than 20 hours per week or who have been employed fewer than 6 of the 12 months preceding the date on which notice is required. Part-time employees under the WARN Act thus include recently hired employees working full-time hours as well as seasonal (part-year) workers. Although part-time employees are not counted toward the threshold for determining employer coverage under the law, they nonetheless are due advance notice from covered employers. Temporary Employees Temporary employees and other employees associated with projects of limited duration are not entitled to notice under the WARN Act so long as the employees were hired with the understanding that their employment was limited in duration. Regulations state that an understanding of temporary employment can be established by "reference to employment contracts, collective bargaining agreements, or employment practices of an industry or locality, but the burden of proof will lie with the employer." Notification Requirements Written notice of WARN events must be provided to each affected employee 60 calendar days prior to layoff. If the affected employees are covered by a collective bargaining agreement, notification can instead be issued through the employees' bargaining representative. In addition to the affected employees or their representative, an employer must notify the state entity responsible for carrying out rapid response activities and the chief elected official of the local government within which the layoffs are to occur. The required content of the notifications varies somewhat depending on whether they are being issued to employees, union representatives, or government entities. All notifications must include (1) a description of the planned action and a statement as to whether the planned action is expected to be permanent or temporary, (2) the expected date or dates when the layoffs will commence, and (3) the name and telephone number of a company official to contact for more information. Bumping Rights In some cases, company policy or a collective bargaining agreement may permit bumping rights . Typically, bumping rights allow a more senior employee whose job is eliminated to replace (bump) a less senior worker whose job was not eliminated. Under bumping rights, it is possible that the worker who is ultimately laid off is not the worker whose job was eliminated. In cases where a workplace has bumping rights but workers are not covered by a collective bargaining agreement, the employer must attempt to identify the worker who will ultimately be terminated subsequent to bumping and provide him or her with notice. If the employer is not able to reasonably identify the worker who will ultimately be laid off, notice can be issued to the incumbent worker whose job is being eliminated. In cases where bumping rights exist, the affected employees are covered by a collective bargaining agreement, and notice is issued to an employee representative rather than the employees themselves, it is not necessary for the employer to identify the ultimate bumpees. Instead, the employer's notice to the employee representative must identify the specific positions that will be eliminated. In these cases, the workers' representative is responsible for identifying and notifying the ultimate bumpee. Enforcement and Penalties The U.S. Department of Labor does not have any investigative or enforcement authority under the law. It is authorized to write regulations and provide assistance in understanding them. The WARN Act is enforced through the federal court system. Employees, their representatives, or units of local government can bring civil actions in district court against employers thought to have violated the WARN Act. A court does not have the authority to stop a plant closing or mass layoff. Employers who violate the WARN Act are liable for back pay and benefits (e.g., the cost of medical expenses that would have been covered had the employment loss not occurred) to each aggrieved employee. The penalty is calculated for each working day that notice was not provided up to a maximum of 60 days. In other words, the 60-day liability is reduced for each day that notice was provided. Maximum liability may be less than 60 days for those employees who had worked for the employer for fewer than 120 days. In addition to payments to workers, employers found to be in violation of the WARN Act may also be subject to a $500 civil fine for each day fewer than 60 that they provided notice to affected employees. An employer can avoid the civil penalty entirely if each aggrieved employee is paid the full amount for which the employer is liable within three weeks from the date of the plant closing or mass layoff. Exceptions that Allow for a Notice Period of Less Than 60 Days The statutory language of the WARN Act specifies three exceptions in which employers may provide less than 60 days' notice to employees and jurisdictions affected by an employment loss: The faltering company exception : Employers can provide reduced notice for plant closings, but not for mass layoffs, if they had been seeking financing or business for their faltering enterprises, thought they had a realistic chance of obtaining funds or new business sufficient to allow the facilities to remain open, and believed in good faith that giving notice would have prevented them from getting the capital or business necessary to continue their operations. The unforeseeable business circumstances exception : Employers can provide reduced notice if they could not reasonably foresee the business circumstances that caused the plant closings or mass layoffs. Circumstances that occurred without warning and that were outside the employer's control could include (1) a major client terminating a large contract with the employer, (2) a strike at a supplier of key parts to the employer, or (3) the swift onset of a deep economic downturn or a non-natural disaster (e.g., a terrorist attack). The natural disaster exception : Employers may also provide reduced notice if the layoff is due to a natural disaster such as a flood, earthquake, drought, or storm. If a plant closing or mass layoff is indirectly due to natural disasters, the exception would not apply; however, the unforeseen business circumstances exception might. Other Special Circumstances The WARN Act also addresses several special circumstances and the responsibilities of the affected parties in each circumstance. Transfers or Reassignments If a closing or layoff takes place due to the relocation or consolidation of all or part of an employer's business, the plant closing or mass layoff is not considered an employment loss if before the action, the employer offers to transfer an employee to another site within reasonable commuting distance and no more than a six-month break in employment occurs (regardless of whether the employee accepts or rejects the offer); or the employee accepts a transfer to another site—regardless of distance—with no more than a six-month break in employment, within 30 days of the employer's offer or of the closing/layoff, whichever is later. Strikes and Lockouts Plant closings or mass layoffs that are the result of a strike or lockout are exempt from the notice requirement unless employers lock out employees to evade compliance with the act. "Economic strikers" whom employers permanently replace do not count toward the employee-size thresholds necessary to trigger the notice requirement. Non-striking employees who experience an employment loss directly or indirectly associated with a strike and employees who are not members of the bargaining unit involved in the contract negotiations that prompted a lockout are entitled to advance notice. Sale of a Business The sale of all or part of a business does not in itself produce an employment loss because individuals who were employees of the seller through the sale's effective date are thereafter considered employees of the buyer. If a covered plant closing or mass layoff takes place up to and including the effective date of the sale, it is the responsibility of the seller to provide notice. If the seller knows the buyer has definite plans to initiate a covered plant closing or mass layoff within 60 days of the purchase, the seller may give notice to affected employees as an agent of the buyer if so empowered by the buyer. If not, the buyer becomes responsible for providing the requisite advance notice. Notification of Layoffs in Cases Where Notice is Not Required by the WARN Act In addition to establishing criteria and notification procedures for applicable layoffs and plant closures, the WARN Act also encourages procedures for layoffs that may not require formal notification: It is the sense of Congress that an employer who is not required to comply with the notice requirements of section 2102 of this title should, to the extent possible, provide notice to its employees about a proposal to close a plant or permanently reduce its workforce. Regulations have reiterated and expanded upon this sentiment: Notice in ambiguous situations . It is civically desirable and it would appear to be good business practice for an employer to provide advance notice to its workers or unions, local government and the State when terminating a significant number of employees. In practical terms, there are some questions and ambiguities of interpretation inherent in the application of WARN to business practices in the market economy that cannot be addressed in these regulations. It is therefore prudent for employers to weigh the desirability of advance notice against the possibility of expensive and time-consuming litigation to resolve disputes where notice has not been given. The Department encourages employers to give notice in all circumstances. Neither statute nor regulations discourage or state a penalty associated with notices that are not followed by an applicable mass layoff or plant closure. Regulations, however, prohibit employers from regularly issuing WARN Act notices so as to perpetually be in compliance with the law in the event of a mass layoff or plant closure. Data on WARN Act Notifications and Compliance Since the WARN Act does not require firms to notify the federal government prior to layoffs or plant closings, there is no central data source for information on WARN Act notifications. As such, it is not possible to easily identify how many WARN Act notifications were issued in a particular timeframe, nor is there a simple procedure for identifying how many notifications were followed by an applicable mass layoff or plant closing. In 2003, the Government Accountability Office (GAO; then the General Accounting Office) released a report in which it obtained information on WARN notices from state dislocated worker units and then matched them to mass layoff and plant closure data from the Bureau of Labor Statistics. The report found that of the 5,349 WARN notices issued, only 717 (13%) could be matched to a specific mass layoff or plant closing. The report also identified 1,257 additional events that appeared to require notification under the WARN Act in which it could not find a corresponding layoff notice filed with the state.

Enacted by the 100th Congress, the Worker Adjustment and Retraining Notification (WARN) Act requires qualified employers that intend to carry out plant closings or mass layoffs to provide 60 days' notice to affected employees, states, and localities. The purpose of the notice to workers is to allow them to seek alternative employment, arrange for retraining, and otherwise adjust to employment loss. The purpose of notifying states and localities is to allow them to promptly provide services to the dislocated workers and otherwise prepare for changes in the local labor market. The WARN Act applies to employers with at least 100 or more employees (excluding part-time employees). Federal, state, and local government employers are not subject to the act. Broadly speaking, there are three types of events that require notification under the WARN Act. Each of these events is limited to a single site of employment; employment losses by a single employer across multiple sites are not aggregated. Events that trigger the requirements of the WARN Act are a plant closing resulting in employment losses of at least 50 employees; a mass layoff of at least 50 employees where the employment loss consists of at least 33% of employment at the site; or a mass layoff with an employment loss of 500 or more at a single site of employment, regardless of its proportion of total employment at the site or if the employment loss is part of a plant closing. For the purposes of the WARN Act, an employment loss is defined as an involuntary termination, layoff exceeding six months, or a reduction in hours worked exceeding 50% for each of six consecutive months. In addition to the three events described above, an employer may also be subject to the WARN Act if it engages in several layoffs during a 90-day period that, in aggregate, meet the criteria of an applicable event. Short-term layoffs that are later extended to six months or more may also trigger WARN Act requirements. The act and accompanying regulations also specify situations in which an otherwise covered employer may be exempt from WARN Act requirements. Generally, these exceptions relate to layoffs that are triggered by unanticipated situations such as unforeseeable business circumstances or natural disasters. The WARN Act is enforced through the federal court system. While the Department of Labor is permitted to establish regulations related to the act and offer non-binding guidance to employers and workers, all penalties and settlements are administered through the courts.

Introduction The Trade Facilitation Agreement (TFA), finalized in December 2013, is the newest international trade agreement to enter into force at the World Trade Organization (WTO), after two-thirds of WTO member countries ratified the multilateral agreement as of February 22, 2017. The TFA is important to Congress because it may affect U.S. trade flows, the U.S. economy, and international capacity building efforts. This report discusses the TFA, its background and current status, potential impact on U.S. trade agreement provisions, plans for implementation, and relevant policy options for Congress to consider. The TFA does not require further congressional approval because U.S. compliance with the agreement's commitments does not require changes to U.S. law. The TFA aims to reduce trade costs by streamlining, modernizing, and speeding up the customs processes for cross border trade. Eliminating or reducing inefficiencies at the border may facilitate trade by lowering costs for importers (and possibly consumers), as well as exporters. By increasing transparency, instilling good governance practices, and simplifying processes at the border, the potential for corruption is also reduced. Furthermore, decreasing trade barriers at the border enables connectivity and may increase a country's foreign direct investment (FDI) inflows. Thus, improving trade flows benefits both exporting and importing countries and can be seen as a shared interest across all WTO members. Improved trade flows require effective implementation of the TFA by all WTO members. While the TFA mandatory provisions are subject to WTO Dispute Settlement for enforcement, the agreement contains the Special and Differential Treatment provisions to provide additional implementation time and technical assistance and capacity building assistance for developing and least-developed countries. The United States is already in compliance with most measures represented in the TFA, and thus does not have to change its current practices to comply with the TFA provisions. Background WTO and the TFA The World Trade Organization (WTO) was established on January 1, 1995, following the ratification of the Uruguay Round Agreements and today includes 164 member countries. It succeeded the General Agreement on Tariffs and Trade (GATT), which was created in 1947 as a part of the post-WWII effort to build a stable, open, and predictable international economic framework. The Doha Development Agenda (Doha Round) of multilateral trade negotiations, launched in 2001, was impeded by differences among developed and developing countries on key trade issues in agriculture, goods, and services. The WTO's 2015 Ministerial Declaration acknowledged the division over the future of the Doha Round, and did not reaffirm its continuation. As part of the Doha Round, WTO members launched negotiations on trade facilitation in July 2004. While most other aspects of the Doha Round were suspended, WTO members agreed to conclude the TFA as a stand-alone agreement in December 2013 at the Bali Ministerial Conference. Hence, the TFA became the first new multilateral trade agreement concluded since the establishment of the World Trade Organization in 1995. The TFA builds on earlier related provisions in the GATT and further expedites the movement, release, and clearance of goods, including goods in transit. Entry into Force On November 27, 2014, WTO members agreed to consider the TFA and triggered the process for amending the WTO Agreement. The TFA entered into force on February 22, 2017, when two-thirds of the WTO members had ratified it domestically by depositing an "instrument of acceptance" at the WTO to formally accept the agreement. If three-quarters of the WTO members agree, then any member which has not accepted it within a specified time may elect to withdraw from the WTO or accept the obligations of the Amendment. Congress supported the TFA as part of its U.S. trade negotiating objectives in the 2015 Trade Promotion Authority ( P.L. 114-26 ). Adoption of the TFA did not require further congressional activity because U.S. compliance with the agreement's commitments did not require changes to U.S. law. The United States formally accepted it on January 23, 2015, the third WTO member to do so. Core Provisions The TFA has three sections. The first section is the heart of the agreement, containing the provisions—of which many, but not all, are binding and enforceable. The text further clarifies relevant articles of the GATT and includes provisions for customs cooperation. Mandatory articles include requiring members to publish information, including certain items online; issue advance rulings in a reasonable amount of time; and provide for appeals or reviews, if requested. Some TFA articles encourage, rather than oblige, members to do certain things, including provisions that advise members to provide information without charging fees; to take into consideration voluntary disclosure of breaches as a mitigating factor when assessing penalties; to measure and publish average release time of goods; and to use international standards for developing authorized operator schemes and as the basis for import and export formalities and processes. See Table 1 for a summary of the provisions. The second section provides for special and differential treatment for developing country members and least-developed country (LDC) members, allowing them more time and assistance to implement the agreement. The third section of the agreement contains the institutional arrangements for administering the TFA. For example, it establishes the Committee on Trade Facilitation, which comprises all members. Addressing Trade Barriers Part of the U.S. International Trade Commission's (ITC's) statutory function is to examine the potential impact of trade deals on the U.S. economy for Congress and the White House. According to the ITC, "the most direct effects [of trade agreements] are the removal of barriers to cross-border trade in goods and services and the facilitation of cross-border investment." To that end, the TFA aims to address multiple trade barriers U.S. exporters confront. These include the lack of transparency on process and documentation requirements for exporting to a given country, which could also create opportunities for corruption. For example, according to an ITC report, "lack of clear information concerning duties and taxes on goods imported into the EU is also problematic for U.S. s mall and medium-sized enterprises ( SMEs)." In business, delays at the border caused by extensive paperwork requirements, inefficient transport or processes, and lack of coordination between various border authorities within or between countries can be costly for U.S. firms. The U.S. Trade Representative (USTR) annual 2016 National Trade Estimate Report describes several trade barriers across the globe that the TFA aims to address. Some examples follow. In Brazil, "specific information related to non-automatic import license requirements and explanations for rejections of non-automatic import license applications are lacking. The lack of transparency surrounding these procedures creates additional burdens for U.S. exporters.... U.S. companies continue to complain of burdensome documentation requirements for the import of certain types of goods that apply even if imports are on a temporary basis." In the European Union (EU), "not only are the Customs Code Committee (CCC) and other EU-level institutions ineffective tools for achieving the uniform administration and application of EU customs law, but the EU also lacks tribunals or procedures for the prompt review and EU-wide correction of administrative actions relating to customs matters.... Thus, obtaining corrections with EU-wide effect for administrative actions relating to customs matters is a cumbersome and frequently time-consuming process." In Indonesia, "customs relies on a schedule of reference prices to assess duties on some imports rather than using actual transactions as required by the WTO Agreement on Customs Valuation. Indonesia's Director General of Customs and Excise makes a valuation assessment based on the perceived risk status of the importer and the average price of a same or similar product imported during the previous 90 days." "Clearing goods through Algerian customs is the single most frequently reported problem facing foreign companies operating in Algeria. Delays can take weeks or months, and in many cases are not accompanied by official explanations." Potential Economic Impact Modernizing customs and border processes can have benefits for both international businesses and exporters as well as domestic customers and government agencies . ( See South Korea case study in Text Box . ) Exporters and shippers can save time and money; importing agencies can become more efficient , thereby sav ing money ( while also collecting fees and taxes faster ) ; and end customers can receive goods faster at lower costs if the seller passes along the related savings. In this way, customs and border reform efforts are of benefit to both importing and exporting countries, improving their terms of trade , transparency, and good governance. U.S. companies, from very small businesses to large multinational firms, face trade barriers that the TFA may alleviate. E-commerce platforms allow SMEs to easily reach a global customer base, but many may be hesitant to serve foreign markets because of the complexity of global shipping and delivery. Compared with larger companies, SMEs have fewer resources to deal with the regulatory hurdles of international shipments , and trade costs represent a larger proportional burden for them . R eforms to reduce these costs could therefore boost SME willingness to participat e in international trade. For example, if each country post s customs information online, SMEs c ould more easily understand export and import processes and requirements. If TFA implementation efforts were to also establish a standardized international format or template for posting required information , it c ould further reduce the burden on buyers and sellers trying to export to multiple countries. Reform efforts also help large multi national firms exporting large volumes or managing complex global va lue chains (GVCs) that rely on predictable, constant flow s of imports and exports . For example, the use of automation and risk management required by the TFA will allow firms to submit information in advance so that an entire shipment is not delayed upon arrival at the border while officials determine what to inspect. For express delivery firms, in particular, a shipment's smooth and rapid border crossing is crucial for providing good customer service to their customers. According to the WTO's 2015 annual report, trade costs in developing countries are equivalent to applying a 219% ad valorem tariff on international trade, while in developed countries the tariff equivalent is 134%. However, full implementation of the TFA provisions has the potential to "reduce trade costs of manufactured goods by 18% and of agricultural goods by 10.4%." Similarly, the Organization for Economic Co-operation and Development (OECD) finds that TFA implementation could lower trade costs 12.5%-17.5% globally. Furthermore, the OECD Trade Facilitation Indicators (TFIs) show relatively higher results when countries' implementation goes beyond the TFA's mandatory provisions to include the non-mandatory, suggested practices. While all reform efforts related to the TFA are estimated to have positive impacts, the OECD sees the largest potential gains from improving trade formalities, such as simplifying documentation, streamlining border procedures, and automating the border processes. (See Table 1 for a summary of TFA Section 1 provisions.) TFA implementation could potentially have multiple positive outcomes, including improved customs clearance processes for exports and imports; improved predictability and management of GVCs; minimized loss of perishable goods due to reduced wait and processing times; increased SME exports due to lower trade costs; increased inflows of foreign direct investment (FDI) for small countries; improved and faster collection of taxes, fees, and duties; and decreased corruption at borders due to increased automation and transparency. According to WTO estimates, export gains from full implementation of the TFA could range from $750 billion to over $3.6 trillion dollars per year. Looking at 2015-2030, the WTO estimates it could increase world export growth by 2.7% a year and world GDP growth by over .05% a year. Trade Facilitation in U.S. FTAs Existing and proposed U.S. free trade agreements (FTAs) include trade facilitation commitments. Provisions are usually addressed in a specific customs administration chapter. For example, the recent U.S. FTA with South Korea (KORUS) and the proposed Trans-Pacific Partnership (TPP) FTA, from which the United States withdrew on January 30, 2017, each have a chapter titled "Customs Administration and Trade Facilitation." Customs and trade facilitation provisions have evolved in U.S. FTAs, with a focus first on customs administration and then expanding to incorporate broader enforceable trade facilitation provisions. Since 2004, the United States has included provisions specific to expedited shipments, eventually mandating that partners have dedicated channels for express shipments. Some U.S. FTAs include a specific de minimis provision, but observers have noticed its absence from the recent proposed TPP. Figure 1 reflects the diversity of customs administration and trade facilitation provisions across U.S. FTAs. The WTO TFA and U.S. FTAs share common features. Like the TFA, U.S. FTAs encourage the use of international standards, cooperation, and transparency. In general, the TFA is more prescriptive and provides more detailed discussion to provide greater clarity on the obligations. The TFA contains a stronger emphasis on transparency, internal coordination, and procedures, perhaps reflecting a lowest common denominator to suit all WTO parties across all levels of development. Compared with U.S. FTAs, the TFA is more likely to endeavor or encourage best practices rather than obligate parties, such as for formalities and documentation requirements. The TPP was the most recent free trade agreement that the United States negotiated and serves as an example of the most extensive and enforceable WTO "plus" commitments on trade facilitation. On January 23, 2017, President Trump directed the USTR to withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP) agreement; the acting USTR gave notification to that effect on January 30. Compared with recent U.S. FTAs, the TPP text contained similar but expanded provisions. As a stand-alone agreement, the TFA contains more detailed provisions that may provide guidance to developing and least-developed countries with limited customs administration experience. For example, the TFA article on publication and availability of information specifies the information that needs to be published, and the article on customs cooperation spells out the information to be included in a written request between members. The TPP, on the other hand, simply stated: "Each Party shall make publicly available, including online, its customs laws, regulations, and general administrative procedures and guidelines, to the extent possible in the English language." The emphasis on English, as opposed to "one of the official languages of the WTO," as is included in TFA, reflects the strong influence of the United States in the TPP negotiation. In general, the TPP included more precise and enforceable terms than the TFA. For example, the TPP provided specific timelines (e.g., 150 days for issuing an advance ruling, 48 hours for release of goods, etc.) while the TFA provisions use phrases such as a "reasonable, time-bound manner" and "as rapidly as possible." Both agreements refer to risk management, with TPP requiring use of such a system for assessing and targeting while TFA requires risk management "to the extent possible." Both agreements encourage the use of international standards, with the TPP endorsing recommendations from the World Customs Organization (WCO) and Asia Pacific Economic Cooperation (APEC) forum. However, while the TPP did not mention de minimis , the TFA encourages members to establish such a provision for expedited goods (Article 7.8.2.d). The TFA also includes provisions related to the movement of goods under customs control within a single territory and freedom of transit for transshipments. Finally, TFA Section II contains articles on special and differential treatment for developing and least-developed countries, something not in TPP (see below). U.S. Trade Facilitation Measures The United States is already in compliance with most measures represented in the TFA, and thus does not have to change its current practices to comply with the TFA provisions. U.S. customs administration processes are often viewed as examples of good implementation from which other countries can learn. In rankings of trade facilitation measures such as those outlined in the TFA, the United States scores relatively high in terms of availability of customs information, advance rulings, appeal procedures, documentation, automation, and other factors. U.S. customs procedures are based on a "shared responsibility" approach, in which U.S. Customs and Border Protection (CBP) is responsible for informing importers and exporters of their rights and responsibilities under customs laws and regulations, and traders must be aware of those legal obligations and make their own customs duty and valuation determinations through the process of "informed compliance." Importers and exporters are legally responsible for their shipments and must exercise "reasonable care" to comply with customs laws and regulations. If importers have questions about country of origin, classification, or valuation of merchandise, they may apply to CBP for a binding customs ruling prior to importation. U.S. Trade Priorities In the United States, as in all countries, there is an inherent tension between efforts to promote efficient trade flows and trade enforcement (including consumer protection and duty collection). Of particular concern to U.S. officials following the attacks of September 11, 2001, is import security, or preventing the entry of chemical, biological, radiological, and nuclear (CBRN) weapons. Several instruments used by CBP seek to balance these overarching objectives, and are aimed at knowing who is importing and what types of goods are being imported. Many of these programs rely on CBP partnerships with the trade community, including importers, carriers, consolidators, customs brokers, and manufacturers, and enhance import security and enforcement activities while providing enhanced benefits in trade facilitation. The largest "trusted trader" program implemented by CBP is the Customs-Trade Partnership against Terrorism (C-TPAT), a voluntary public-private partnership program through which the agency works in close cooperation with trade community to secure their supply chains. C-TPAT members are considered to be of low risk, and enjoy a number of benefits, including a reduced number of CBP examinations, shorter wait times, and access to special expedited lanes for customs clearance at the border. TFA and U.S. Automation Efforts Overseeing U.S. imports and exports is a multi-agency process involving CBP and 47 other participating government agencies (PGAs) with a direct role in the trade process. Past processes were largely paper-based, requiring importers and exporters to submit the same data through multiple electronic systems and to multiple agencies at multiple times. CBP efforts to replace its legacy automated systems with the public-facing Automated Commercial Environment (ACE) and the partner agency-facing International Trade Data System (ITDS) faced multiple cost overruns and took longer than expected. Despite these issues, the United States, when compared to its trading partners, has scored relatively high marks in online availability of customs information and ease of use of its automated systems. Single Window TFA Article 10.4 encourages members to establish and maintain a single window, which the agreement describes as "enabling traders to submit documentation and/or data requirements for importation, exportation, or transit of goods through a single entry point to the participating authorities or agencies." This TFA provision is in line with congressional negotiating objectives, and was also a priority for the Obama Administration. On February 19, 2014, President Obama signed an executive order directing that U.S. agencies with a role in international trade must complete development of an electronic "single window" through which "businesses will transmit data required by participating agencies for the importation and exportation of cargo." The order further required that all participating agencies have "capabilities, agreements, and other requirements in place" by December 31, 2016. The Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 , §106) provided additional funding to "complete the development and implementation" of ACE, and required CBP to submit a report detailing its progress on ACE, ITDS and other customs modernization systems to the House Committee on Ways and Means and the Senate Finance Committee, also by December 31, 2016. A follow-up report is due by September 31, 2017. The legislation also required a Government Accountability Office (GAO) report on the deployment of ACE by December 31, 2017. Section 107 of the act further required that each agency use the ITDS as its primary means of receiving import and export information and documents. Status of ACE and ITDS CBP had planned to deploy post-release capabilities including notices of liquidation of goods, statements, duty drawback, and protests in ACE by January 14, 2017, but postponed the deployment with no new target date. On December 12, 2016, CBP published a final rule stating that, by January 14, 2017, CBP official notices of liquidation, suspension of liquidation, and extension of liquidation be posted on the CBP website rather than mailed or posted in customhouses or stations. CBP stated that electronic notification of liquidation activities would be posted as planned. Agencies' integration into the system is varied, as CBP must conduct pilot testing of each agency's capabilities to receive data and documents through the ITDS. In December 2016, then-CBP Commissioner Gil Kerlikowske announced that as part of the single window effort, CBP's partner agencies have automated more than 300 paper forms. TFA Implementation, Monitoring, and Enforcement A key issue with the TFA is effective implementation by all WTO members. Trade agreement implementation is not always smooth. For example, there have been ongoing issues with South Korea's implementation of KORUS provisions on express delivery shipment inspection and delays. The World Customs Organization (WCO) is working with the WTO on implementation of the TFA. It has released implementation guidance for each Section I article of the agreement. The guidance not only explains the provisions but provides tools, examples of member implementation that can be considered best practices, and quantitative indicators a country could use. For example, the WCO highlights U.S. Customs Mutual Assistance Agreements (CMAAs) as a member implementation of Article 12. Different sets of indicators by various international organizations exist to measure levels of trade facilitation and could be used to monitor TFA implementation and impact (see Text Box). Monitoring and publicizing metrics could help overcome some of the challenges related to implementation, such as lack of coordination or political will. The OECD maintains Trade Facilitation Indicators (TFIs) that align with policy areas covered by specific TFA provisions. The TFIs measure the status of implementation, and are useful indicators of TFA implementation. For example, the TFIs measure information availability (Article 1), internal and external border agency cooperation (Article 8), and formality documentation and automation (Articles 7 and 10). The World Bank's Logistics Performance Index (LPI) focuses on logistics and measures the efficiency of international supply chains, an outcome of TFA implementation. The LPI index ranks countries based on six dimensions (customs; infrastructure; ease of arranging shipments; quality of logistics services; tracking and tracing; and timeliness). The top annual performers in the LPI 2010-2016 for each level of development were Germany, South Africa, India, and Uganda. The World Bank Doing Business report is another possible mechanism for measuring implementation of the TFA. The 2017 report shows that overall reform efforts are gaining momentum, with 137 economies studied adopting reforms to make it easier to start and operate SMEs. The "trading across borders" indicators show increased use of a customs single window, supporting TFA implementation, but also highlight variations among countries. Digitalization efforts show benefits including higher revenue yields, faster processes, and lower corruption. One concern with trade agreements is how to ensure commitments are effectively and fully implemented and, when necessary, use enforcement mechanisms through dispute settlement provisions. Section III of the TFA is titled "Institutional Arrangements and Final Provisions." The first provision establishes a Committee on Trade Facilitation to meet at least annually for members to consult on matters related to the agreement. In addition to sharing experiences, the TFA encourages members to use the meetings to identify issues related to implementation, facilitate discussions, and aim to reach a mutually satisfactory solution. This process could be similar to the specific trade concerns members raise in other WTO committee meetings. The TFA also requires each member to establish a National Committee on Trade Facilitation for domestic coordination and implementation of the agreement. The committee will maintain close contact with other international organizations dealing with trade facilitation, such as the WCO or the World Bank, and may draw from their expertise. Assistance for Implementation Special and Differential Treatment (SDT) Provisions Many of the WTO developing and LDC members voiced concern about the time and costs related to TFA implementation. Implementing the various commitments could mean multiple types of costs including (1) diagnostic, (2) regulatory, (3) institutional, (4) training, (5) equipment and infrastructure, (6) awareness-raising, (7) political, and (8) operational. To help alleviate their concerns, and promote implementation, the TFA is the first WTO agreement in which members determine their own implementation schedules and in which progress in implementation is explicitly linked to technical and financial capacity. Section II of the TFA contains the Special and Differential Treatment (SDT) provisions that allow developing countries and LDCs to determine implementation timelines for each provision and to identify those provisions for which they require technical assistance and capacity building support. To benefit from SDT, the country must categorize each provision into one of three categories. 1. Implementation when TFA enters into force (one year after for LDCs), 2. Implementation after a transition period; or 3. Implementation after a transition period that requires assistance and support. The member must submit a notification to the WTO for each category and define any transition periods, in accordance with specific timelines outlined in the Agreement. For two years after entry into force, developing countries are not subject to dispute settlement for Category A provisions, and notifications under Categories B and C provide a country with a longer transition time before being subject to the dispute settlement provisions. Developing countries must notify Category B and C provisions at the time of entry into force and are given a year to set the transition periods and provide an implementation date for Category B items. A year after entry into force these countries must also specify the assistance needed for Category C provisions. Least-developed countries are given longer time periods for notification of implementation dates (Category B) and to submit requests for assistance (Category C). Article 17 of the agreement provides timelines and requirements for notification of any delays. China (considered a developing country with respect to the WTO) accepted the TFA and notified all provisions as Category A except for provisions related to the establishment and publication of average release times; single window; temporary admission of goods and inward and outward processing; and customs cooperation. Similarly, Brazil's narrow list of excepted provisions from Category A included publishing the time period for issuing an advance ruling or providing the good's tariff classification with such a ruling; pre-arrival processing; the types of additional trade facilitation measures for authorized operators; and allowing for the advance filing and processing of documentation for goods in transit. India submitted a more extensive list of Category B provisions for which it commits to a five-year implementation time frame. India's Category B provisions included many of the transparency and publication provisions; establishment of an enquiry point to answer questions, a risk management system, and a single window; and cooperation with other border agencies of other members. Technical Assistance and Capacity Building The United States has considerable experience in and has numerous programs that assist other countries in trade capacity building efforts related to customs administration. For example, a U.S. Agency for International Development (USAID) program on Trade and Accession Facilitation for Afghanistan (TAFA) aimed to boost trade in that nation. More broadly, CBP works with other federal agencies including USAID and the Department of Defense to provide training and technical assistance to other countries to improve execution of their border operations. Through the APEC Committee on Trade and Investment, the United States works with its partners to promote trade facilitation and provide capacity building. The TFA requires that donor members, including the United States, provide the needed support to developing and LDC members. Each donor member is required to provide specified information on the assistance and capacity building given over the past year and committed to for the upcoming year. These members must also submit contact information for the agencies providing the aid and regularly update all information. In the 114 th Congress, Senator Bob Corker introduced a bill ( S. 2201 ) that would instruct the executive branch to ensure coordination of U.S. capacity building efforts. The bill aims to create a whole-of-government strategy as part of the U.S. effort to achieve the ambitious goals of the TFA. It would establish an interagency coordinating committee, chaired by the Secretary of State and informed by a newly created trade capacity advisory committee comprised of public and non-public organizations, to develop a biennial strategic plan for trade capacity building efforts to be submitted to Congress. Along with other TFA donor members, by promoting harmonized practices and sharing implementation experiences, from documentation templates and website formats to processes for collecting customs or coordinating domestic agencies, the United States can help advance effective implementation of the TFA. The WTO International Forum for National Trade Facilitation Committees, launched in January 2017, provides a forum for such "dialogue and collaboration." In addition, there are two international collaborations dedicated to supporting TFA implementation. Trade Facilitation Agreement Facility In July 2014, the WTO launched the Trade Facilitation Agreement Facility (TFAF) to provide implementation assistance. Aid will include helping members prepare their SDT notifications, provide technical assistance and capacity building, and support LDC members to access assistance from other organizations. The TFAF will also offer two types of limited grants for project preparation and implementation related to Category C commitments. The United States, through USAID, is a donor member as are other developed countries, international, regional, transport, and assistance organizations. In FY2012, U.S. government agencies provided nearly $1 billion for overall trade capacity building activities in more than 120 countries, customs territories, and regional groupings, with USAID being the largest contributor, with $418 million dedicated to trade capacity building. Global Alliance for Trade Facilitation The Global Alliance for Trade Facilitation (GATF) is a public-private partnership that aims to bring together businesses and governments to help accelerate TFA reform implementation. Housed at the World Economic Forum, the GATF secretariat is located in Geneva, Switzerland. The alliance plans to support local efforts in 12-15 countries, while engaging with other international bodies at a global level to promote dialogues, workshops, and best practices. To start, the GATF will conduct pilot projects in Colombia, Ghana, Kenya, and Vietnam. U.S. companies such as Federal Express and UPS participate in GATF activities. The GATF In-Country Programs committee, for example, is chaired by UPS. Issues for Congress No congressional approval is needed for the United States to implement the TFA because it requires no change in U.S. law. However, as implementation of the TFA may affect U.S. businesses, the U.S. economy, and international capacity building efforts, Congress could Conduct oversight of effective and efficient country implementation, as well as the U.S. single window, by CBP. Conduct oversight of U.S. involvement in TFA capacity building through the TFAF and GATF to ensure that U.S. funds are being spent effectively to achieve desired results. Instruct the executive branch to ensure coordination of U.S. capacity building efforts. Examine the benefits of a future expansion of the TFA to raise the level of commitments, for example by adopting clearer de minimus levels for expedited customs processing.

The Trade Facilitation Agreement (TFA), finalized in December 2013, is the newest international trade agreement in the World Trade Organization (WTO), having entered into force on February 22, 2017, when two-thirds of WTO members, including the United States, ratified the multilateral agreement. Congress has an interest in the TFA since it may affect U.S. trade flows, the U.S. economy, and international capacity building efforts. Trade facilitation measures aim to simplify and streamline international trade procedures to allow the easier flow of trade across borders and thereby reduce the costs of trade. There is no precise definition of trade facilitation, even in the WTO agreements. Trade facilitation can be defined narrowly as improving administrative procedures at the border or more broadly to also encompass behind-the-border measures and regulations. The TFA aims to address multiple trade barriers confronted by exporters and importers, whether small and medium-sized enterprises engaged in e-commerce or large multinational firms managing complex global supply chains. These barriers include the lack of transparency on process and documentation requirements for exporting to a given country. According to WTO estimates, global export gains from full implementation of the TFA could range from $750 billion to more than $3.6 trillion dollars per year. The Organization for Economic Co-operation and Development (OECD) finds that TFA implementation could lower trade costs as much as 12.5%-17.5% globally. Different sets of indicators and indices by various international organizations exist to measure levels of trade facilitation and could be used to monitor TFA effects. The TFA has three sections. The first section is the heart of the agreement, containing the provisions, of which many, but not all, are binding and enforceable. The second section provides for special and differential treatment for developing country members and least-developed country members, allowing them more time and assistance to implement the agreement. The TFA is the first WTO agreement in which members determine their own implementation schedules and in which progress in implementation is explicitly linked to technical and financial capacity. The TFA requires that "donor members," including the United States, provide the needed capacity building and support to developing and least-developed members. Finally, the third section of the agreement contains the institutional arrangements for administering the TFA. Existing and proposed U.S. free trade agreements (FTAs) include trade facilitation commitments. While the WTO TFA and U.S. FTAs share common features, there are also differences. U.S. FTAs generally include more enforceable provisions and specific time frames, and do not include special and differential treatment for developing country participants. U.S. implementation of the TFA does not require changes from current processes, including planned efforts to update U.S. systems. In the United States, the U.S. Customs and Border Protection (CBP) seeks to balance its overarching objectives of promoting efficient trade flows with enforcing trade laws designed to protect consumers from dangerous and unlawful imports, and collecting customs duties. The CBP uses several instruments to collect information aimed at knowing who is importing and what types of goods are being imported, including the Customs-Trade Partnership against Terrorism (C-TPAT), the Automated Commercial Environment (ACE), and the International Trade Data System (ITDS). This report provides an overview of the TFA, its provisions, and the United States' implementation and role in capacity building, and provides options for Congress to consider in relation to the TFA.

Introduction Every four years, the two major political parties, and some third parties, select their presidential nominees at conventions. These conventions are run by and for parties, without a formal role for the federal government. Until recently, voluntary taxpayer designations provided certain financial support to convention committees that chose to accept public money. Congress appropriates separate federal funding for the securing of the convention venues. A variety of policy issues surrounds convention financing. Before public funding for convention operations was eliminated, some observers questioned why federal funds subsidized conventions, considering the availability of substantial private resources and that they are party, rather than governmental, events. Others contended that private funds, particularly so-called "soft money," which falls outside the scope of federal campaign finance law, had become too pervasive in conventions and that tighter restrictions were needed. These divergent views on the use of public funds to support party conventions also appear in other contexts in the debate surrounding campaign finance policy. Two taxpayer-supported revenue sources were available to conventions until recently: (1) presidential public campaign funds and (2) security funds. Approximately $136.5 million from those sources went toward the 2012 Democratic and Republican national conventions. No third parties received convention funds for the 2012 election cycle. Of that $136.5 million total, the 2012 Democratic and Republican conventions received a total of approximately $36.5 million from the Presidential Election Campaign Fund (which generally excludes security costs). Although convention financing has been eliminated, Congress has chosen to continue appropriating separate security funds. Before proceeding, it is important to note the distinction between presidential public funds and security funds. Presidential public funds and security funds came from separate revenue sources. They were allocated differently, were used for different purposes, and were subject to different points of debate. Although both presidential public funds and security funds support (or supported) conventions, Congress may reassess them separately. Because public funding for convention operations has now been eliminated, this report provides a historical overview of how PECF convention funding functioned and describes private funding sources that remain available. For historical discussion of policy debates that preceded the decision to repeal PECF convention funds, see archived CRS Report RL34630, Federal Funding of Presidential Nominating Conventions: Overview and Policy Options , by [author name scrubbed] and [author name scrubbed]. For discussion of increased private fundraising limits for political parties, including for party conventions, see CRS Report R43825, Increased Campaign Contribution Limits in the FY2015 Omnibus Appropriations Law: Frequently Asked Questions , by [author name scrubbed]. Convention Financing: An Overview Federal Funds Through the 2012 presidential election cycle, two sources of federal funds supported different aspects of presidential nominating conventions. First, funds for convention operations came from the Presidential Election Campaign Fund (PECF), which provides financial assistance to publicly financed presidential campaigns. Second, funds were appropriated by Congress to the Department of Justice (DOJ) for security costs incurred by state and local governments hosting the conventions. Although PECF convention funding was repealed in 2014 via P.L. 113-94 , Congress has chosen to continue appropriating separate security funds. PECF Funds Congress made no appropriations for PECF funds (including amounts used to support conventions). Rather, amounts in the PECF were and are determined by "checkoff" designations on individuals' federal income tax returns. Although the convention-financing aspect of the checkoff has been eliminated, the checkoff question remains on tax forms and designations still support separate benefits for publicly financed presidential candidates. Individuals may choose to designate $3 of their tax liability to the PECF. Married couples filing jointly may designate a total of $6 to the fund. Federal law permitted the two major parties' conventions to receive grants of approximately $18.2 million each for the 2012 election cycle (an inflation-adjusted base amount of $4 million each). These grants were awarded to the relevant party's convention committee. Qualifying convention committees were not obligated to accept PECF funds, but doing so was standard practice. Third parties were eligible for limited public convention funds, but they rarely qualified. DOJ Funds The second source of federal convention funds, which was unaffected by P.L. 113-94 , comes through the Office of Justice Programs (OJP), within Department of Justice (DOJ). This OJP funding, specifically the Edward Byrne Memorial Justice Assistance Grant program has only been available in FY2004, FY2008, FY2012, and FY2016, arguably as a result of the September 11, 2001, terrorist attacks. In 2004, Congress appropriated $100 million, through DOJ, for the Democratic and Republican presidential nominating conventions in Boston and New York City. In 2008, Congress appropriated $100 million for the Democratic and Republican presidential nominating convention security in Denver and Minneapolis-St. Paul. In 2012, $100 million was administered through OJP's Edward Byrne Memorial State and Local Law Enforcement Assistance Programs for convention security in Charlotte and Tampa. DOJ used most of this funding to reimburse state and local law enforcement entities for overtime costs associated with convention security. In 2016, Congress has appropriated $100 million, administered like past election years through OJP, for state and local law enforcement activities associated with the conventions to be held in Cleveland, OH, and Philadelphia, PA. Even though DOJ administers the convention security funding, DOJ is not responsible for security at the 2016 presidential nominating conventions. Rather, the U.S. Secret Service (USSS) is responsible for planning, coordinating, and implementing security operations at conventions. Congress authorized the USSS—when directed by the President—to be the lead federal agency for convention security in P.L. 106-544 (the Presidential Threat Protection Act of 2000) because the conventions are designated as National Special Security Events (NSSE). In addition to presidential nominating conventions, NSSEs include such events as presidential inaugurations, major international summits held in the United States, and some major sporting events. Recent Federal Convention Funding As Table 1 shows, the federal government provided a total of approximately $136.5 million—combining PECF grants and security expenditures—to support the 2012 Democratic and Republican conventions. Each convention was allocated approximately $68.2 million. No third parties qualified for any federal funding in 2012. A third party most recently received PECF funds in 2000. That year, the Reform Party reportedly qualified for $2.5 million in federal funds. Congress has never appropriated funds for a third party's convention security. It should be noted that in 2016 there is $100 million for security. Conditions on PECF Funds In exchange for receiving public funds, a party's convention committee was required to agree not to raise or spend additional funds. Certain exceptions were permitted for legal or accounting fees. Among other requirements, convention committees receiving public funds filed disclosure reports with the FEC, agreed to provide the commission with any requested documents, and submitted to an audit of their PECF spending. Federal law placed relatively few restrictions on how PECF convention funds were spent, as long as purchases were lawful and used to "defray expenses incurred with respect to a presidential nominating convention." FEC regulations provided additional guidance on permissible and prohibited spending. Per FEC regulations, permissible PECF convention expenses included items such as "preparing, maintaining, and dismantling" the convention site; personnel and staff expenses (including bonuses); convention operations and planning; security; transportation; certain entertainment; administrative items (e.g., office supplies); gifts for convention staff or volunteers (limited to $150 per person or $20,000 total); production of candidate biographical films; or investment of PECF funds if the profits were to be used to defray convention costs. It is important to note, however, that although federal regulations permitted the types of spending described above, individual convention committees did not necessarily choose to fund all of those activities. Convention committees were prohibited from spending PECF funds on items including candidate or delegate participation in the convention, except in limited circumstances; any item that would violate federal or state laws; penalties resulting from enforcement of federal election law; or replacing lost or stolen items, except in limited circumstances. Conditions on Security Funds There were no conditions on security funds per se; however, convention security funding could only be used for costs associated with specifically identified presidential nominating conventions. In 2016, the Democratic convention in Philadelphia and the Republican convention in Cleveland are the only ones authorized to receive federal security funding. The $100 million Congress appropriated for the FY2016 presidential nominating conventions is, reportedly, primarily to reimburse states and localities for law enforcement costs associated with their participation in securing the convention sites. In 2004, 2008, and 2012, the main security costs that state and local law enforcement entities incurred involved overtime payments. This overtime of state and local law enforcement personnel might be the result of their participation in not only securing the convention venue, but participating in such activities as advance planning, conducting liaison for venue and air space security, training, and establishing and maintaining communications. Reportedly, GOP convention organizers have security concerns for the Cleveland convention and Cleveland law enforcement entities are purchasing riot gear. There are other security costs incurred by the federal government associated with the conventions that are not part of the $100 million appropriated in FY2016. Some of these additional security costs include the USSS protection of the major presidential candidates (whether at the convention or at other campaign locations) and the use of other federal government personnel which assist in securing the convention sites, such as Federal Protective Service law enforcement officers. Other federal security costs include the securing of the convention venue through the positioning of fencing and barricades, as well as the pre-positioning of federal law enforcement K-9 units and other teams such as the U.S. Department of Homeland Security's (DHS's) Domestic Emergency Support Teams, and Urban Search and Rescue Teams. Remaining Types of Convention Funding Following the 2014 repeal of public convention funding, it appears that two sources of private funds will fund convention operations beginning with the 2016 cycle. First, convention committees may engage in traditional, private fundraising subject to the Federal Election Campaign Act's (FECA's) limitations and reporting requirements. Second, state and local entities, particularly "host committees," may raise funds outside of FECA's requirements. In addition, security funding could be affected by nonfederal funds. This section contains additional detail on each type of funding. Private Fundraising for Convention Committees Now that PECF funds have been eliminated, convention committees must raise private funds, similar to other federal political committees (e.g., candidate committees or political action committees). Two recent policy developments may affect private convention funding, as noted below. In October 2014, the Federal Election Commission (FEC) issued an advisory opinion (AO), responding to a joint request from the Democratic National Committee and Republican National Committee seeking permission for convention committees to raise private funds in light of P.L. 113-94 . The FEC determined that the national parties could each establish a separate political committee for convention fundraising and that those committees enjoyed separate contribution limits from the national parties themselves. In December 2014, Congress enacted, and the President signed, H.R. 83 , the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ). The law tripled individual and political action committee (PAC) limits for contributions to national party committees and permitted those committees to establish new accounts, with separate contribution limits, to support party conventions. Overall, it appears that, at minimum, an individual could give $100,200 (triple the base $33,400 limit) to support convention committees in 2015-2016. Multicandidate PACs could contribute at least $97,200 to conventions. As a practical matter, contribution amounts could be shaped by fundraising practices or future advisory opinions or regulation. Additional discussion appears in another CRS report. Convention-Related Activities for State and Local Entities Nonfederal funds are a major source of money associated with the political (as opposed to security) side of presidential nominating conventions. Nonfederal funds are generally not subject to the limits on contribution sources and amounts found in federal campaign finance law, although some FEC reporting requirements apply. In addition to the private fundraising in which convention committees participate, local host committees may solicit and spend private contributions for activities related to the convention. Permissible expenses include, for example "use of an auditorium or convention center," promoting the convention city, and hosting receptions or tours for attendees. As a practical matter, the regulation of federal versus nonfederal funds rests on how FECA and the FEC have treated each source. FECA is largely silent on campaign finance aspects of nonfederal funds, and the FEC has determined that nonfederal funds do not explicitly support the conventions per se, even if they support events associated with those conventions. In particular, a 2003 FEC rulemaking reaffirmed the commission's long-held view that donations of funds to host committees are, as a matter of law, distinct from other donations by prohibited sources [defined in FECA] in that they are motivated by a desire to promote the convention city and hence are not subject to the absolute ban on corporate contributions in 2 U.S.C. 441b [a FECA provision]. This conclusion is buttressed by the fact that frequently members of the opposite political party have played prominent and active roles in convention host committees. State or local governments, or coalitions of those governments, may also provide financial assistance to conventions through entities known as "municipal funds." The FEC has also permitted corporations and labor unions, which may not provide direct financial support to federal campaigns, to make certain contributions of goods or services to host committees and municipal funds. In addition, "commercial vendors" may provide goods or services to convention committees "at reduced or discounted rates, or at no charge" in certain circumstances. Security Operations As noted above, Congress has previously appropriated separate security funding for conventions. Even though the primary use of the $100 million of federal funds previously appropriated through DOJ's security grants was to offset the security costs incurred by state and local governments, additional funds were likely needed. Additionally, nonfederal funding (state and local government funding) may have been used to secure the conventions. Any nonfederal funding was based on the costs to state and local law enforcement entities that work with the USSS and other federal law enforcement agencies during the convention. Additionally, unlike the funding used by party convention committees, any nonfederal funds used for convention security came from state and local governments, not PECF designations. Recent Legislative Activity Repeal of PECF Convention Funding The 113 th Congress and President Obama eliminated the convention-funding portion of the PECF in April 2014. Specifically, P.L. 113-94 ( H.R. 2019 ) terminated convention funding and directed that PECF amounts reserved for conventions be transferred to an unrelated health research account, the "10-Year Pediatric Research Initiative Fund." Debate on the public financing portion of the legislation (as opposed to the health research component, which is beyond the scope of this report) was relatively limited. During the 113 th Congress and previously, however, those opposed to continuing convention financing typically argued that private host-committee receipts demonstrated the viability of private support, making convention financing an unnecessary taxpayer-funded subsidy for political parties. Proponents of convention financing countered that, particularly in the 1970s, conventions had a history of questionable fundraising and that eliminating public funding raised the prospects for real or apparent corruption. The House passed H.R. 2019 (295-103) on December 11, 2013.The Senate passed the bill by unanimous consent on March 11, 2014, and President Obama signed it on April 3, 2014. Also during the 113 th Congress, the Committee on House Administration also reported two other related bills ( H.R. 94 ; H.R. 95 ). H.R. 94 would have eliminated convention financing; H.R. 95 would have eliminated the entire public financing program. Other bills that would have eliminated convention financing included H.R. 260 , H.R. 1724 , H.R. 2857 , and S. 118 . Another bill, H.R. 270 , would have eliminated convention financing but revamped other parts of the presidential public financing program. Efforts to repeal convention financing had begun years earlier. In the 112 th Congress, both chambers passed separate bills to eliminate PECF convention funding, but none became law. In the Senate, an amendment (containing text from S. 3257 ) to the 2012 Agriculture Reform, Food and Jobs Act, S. 3240 , would have eliminated PECF convention funding. The amendment and the underlying bill passed the Senate on June 21, 2012. Separately, S. 194 proposed to eliminate the entire public financing program. The House passed (239-160) H.R. 359 on January 26, 2011. On December 1, 2011, the House passed (235-190) H.R. 3463 . That bill's public financing provisions were virtually identical to H.R. 359 . H.R. 3463 also would have eliminated the Election Assistance Commission (EAC), a topic that is unrelated to public financing of presidential campaigns and conventions. Another bill, H.R. 5912 , would have eliminated only convention financing. Other legislation would have maintained the public financing program for candidates but would have altered convention financing. These bills include H.R. 414 and S. 3312 . Both would have eliminated convention funding. In the 111 th Congress, H.R. 2992 proposed to eliminate PECF convention funding. Two other 111 th bills, H.R. 6061 and S. 3681 , although bolstering other elements of the public financing program, also would have eliminated convention funding. None of these measures appeared to affect separate security funding discussed in this report. Four bills introduced in the 110 th Congress would have affected PECF convention financing. Only one of those bills ( H.R. 72 ) was principally concerned with convention funding. Others emphasized broader presidential public financing issues. None of these measures became law. The 114 th Congress appropriated $100 million for convention security in FY2012 ( P.L. 114-113 ). The convention security appropriations are to be divided between the two convention sites in Philadelphia and Cleveland at $50 million apiece. Conclusion Public money funded convention operations through the PECF from 1976 through 2012. The 2014 elimination of convention financing means that, barring a change in the status quo, the 2016 conventions will be the first in more than a generation financed entirely with private funds. This report has provided historical background in the event Congress chooses to reconsider public financing. The role of the federal government in funding convention security is a fairly new development since the terrorist attacks of September 11, 2001. As federal, state, and local governments further refine their homeland security activities generally, and specifically convention security operations, Congress may consider different options for how the federal government provides funding for state and local costs incurred in securing convention venues.

During the 113th Congress, legislation (H.R. 2019) became law (P.L. 113-94) eliminating Presidential Election Campaign Fund (PECF) funding for convention operations. The 2012 Democratic and Republican convention committees each received grants, financed with public funds, of approximately $18.2 million (for a total of approximately $36.5 million, as rounded). Barring a change in the status quo, the 2016 presidential nominating conventions will, therefore, be the first since the 1976 election cycle not supported with public funds. Changes in PECF funding for convention operations do not affect separately appropriated security funds. The 114th Congress enacted one law (P.L. 114-113) in FY2016 that affected convention security funding with the appropriation of $100 million for the Democratic and Republican nominating conventions (each was allocated $50 million). This security funding will not be provided to party convention committees but to the state and local law enforcement entities assisting in securing the convention sites. Because public funding for convention operations has now been eliminated, this report provides a historical overview of how PECF convention funding functioned and describes private funding sources that remain available. This report will be updated if public financing for nominating conventions again becomes a major legislative issue. For historical discussion of policy debates that preceded the decision to repeal PECF convention funds, see archived CRS Report RL34630, Federal Funding of Presidential Nominating Conventions: Overview and Policy Options, by [author name scrubbed] and [author name scrubbed]. For discussion of increased private fundraising limits for political parties, including for party conventions, see CRS Report R43825, Increased Campaign Contribution Limits in the FY2015 Omnibus Appropriations Law: Frequently Asked Questions, by [author name scrubbed].

A Brief Overview of the Issues Related to Prison Population Growth The Government Accountability Office (GAO) reported that BOP faces several challenges resulting from the increasing number of inmates placed under its supervision. According to GAO, BOP reported increased use of double and triple bunking, which brings together for longer periods of time inmates with a higher risk of violence and more potential victims; waiting lists for education and drug treatment programs, which can pose a threat to institutional security by increasing inmate idleness and may decrease recidivism-reducing benefits these programs can provide; limited meaningful work opportunities, which can also contribute to inmate idleness; crowded visiting rooms, which can make it difficult for inmates to visit with their families; and increased inmate-to-staff ratios, which can compromise institutional safety by increasing staff overtime and stress while reducing staff-inmate communication. GAO also noted that the growing federal prison population is taxing BOP's infrastructure, which was designed to manage a smaller prison population. BOP is also facing increasing maintenance costs as older facilities age. The burgeoning prison population has contributed to mounting operational expenditures for the federal prison system. BOP's appropriations increased more than $7.1 billion from FY1980 ($330 million) to FY2016 ($7.479 billion). BOP's expanding budget is starting to consume a larger share of the Department of Justice's (DOJ) overall annual appropriations, meaning that funding for the federal prison system might start to crowd out funding for other DOJ initiatives. In FY1980 appropriations for BOP accounted for 15% of the total amount appropriated for DOJ; in FY2016 it was 26%. Select Policy Options The growth in the federal prison population over the past three decades has resulted in an increasingly expensive federal prison system that is overcrowded and aging and where facilities might not be staffed at an optimal level. Congress could choose to address the mounting number of federal inmates either in the context of existing correctional policies or by changing the current policies. Continuing or Expanding Current Correctional Policies Under the umbrella of continuing existing policies, Congress could consider addressing issues related to the burgeoning federal prison population by (1) expanding the capacity of the federal prison system, (2) continuing to invest in rehabilitative programming, (3) placing more inmates in private correctional facilities, or some combination of the three. Expanding the Capacity of the Federal Prison System Arguably one of the most straightforward approaches for managing the steadily increasing number of federal inmates is to expand the capacity of the federal prison system. Congress could choose to mitigate some issues related to federal prison population growth by appropriating more funding so BOP could expand prison capacity to alleviate overcrowding, update and properly maintain existing facilities, and hire additional staff. While a large-scale expansion of the federal prison system might help reduce overcrowding, it takes several years for a prison to be built and be ready to accept inmates. If Congress chooses to appropriate funding for an expansion of BOP's infrastructure, it could be several years before overcrowding is reduced. There may be some concern that Congress might invest a significant amount of funding in expanding BOP's capacity and then the prison population will drop. The number of federal inmates has decreased in each of the past two fiscal years (see Table A-1 ). Even so, the federal prison system is still operating at 23% over capacity. Should Congress choose to invest in a wide-scale expansion of prison capacity, and the prison population decreases in the future, the surplus bedspace could allow BOP to close some of its older facilities. Expanding prison capacity would generally require more maintenance and need higher staff-to-inmate ratios to safely operate. Critics contend that expanding the capacity of the federal prison system does not address the growth of the federal prison population since the early 1980s. Also, this policy option would not resolve the issue of the rising cost of the federal prison system; in fact, it could exacerbate it. However, alternatives that would reduce the federal prison population would most likely involve prosecuting fewer people in federal courts, providing ways for inmates to be released before they served a significant portion of their sentences, putting more inmates into diversionary programs, or placing more offenders on some form of community supervision. If Congress does not seek to take any of these steps, a large-scale expansion of the federal prison system might be the sole way to manage the effects of an increasing prison population. Some may argue that in order to protect public safety Congress should appropriate the funding necessary to expand the federal prison system rather than adopt policy changes that would reduce the prison population through early releases, alternatives to incarceration, or fewer prosecutions. Investing in Rehabilitative Programs A review of the literature on rehabilitative programs (e.g., academic and vocational education, cognitive-behavioral programs, and both community- and prison-based drug treatment) suggests that there are enough scientifically sound evaluations to conclude that these programs are effective at reducing recidivism, which could potentially help stem growth in the federal prison population in the future. BOP offers a variety of rehabilitation programs such as academic and vocational education, work programs through the Federal Prison Industries (FPI), substance abuse treatment, and cognitive-behavioral programs that focus on promoting pro-social behavior. One possible option for reducing the federal prison population would be to ensure that BOP has adequate resources to provide rehabilitative services to inmates. At a time when some policymakers are considering reducing discretionary funding for federal agencies, there might be some effort to restrain the growth of BOP's appropriations, including for rehabilitative services. BOP has to administer the federal prison system within the funds appropriated for it by Congress. If BOP does not have sufficient resources, it might not be able to provide rehabilitative programming to all inmates who need it. It could be argued that in order to reduce the growing cost of operating the federal prison system, BOP should reduce funding for rehabilitative programming and invest solely in providing for the subsistence of inmates and maintaining a level of staffing that is adequate to ensure that federal prisons are secure. However, reducing programming opportunities might result in more inmate idleness, which might in turn result in more inmate misconduct. Moreover, BOP is authorized to reduce an inmate's sentence by up to one year for successfully completing a residential substance abuse treatment program; therefore, reducing programming opportunities could hamper one of the few avenues BOP has for releasing inmates early. It is also possible that BOP might be able to realize some long-term cost savings by successfully rehabilitating inmates. For example, research by the Washington State Institute for Public Policy (WSIPP) suggests that effective rehabilitation programs can result in cost savings. As policymakers consider the appropriate level of funding for BOP in light of concerns about the federal deficit and potential freezes or reductions in non-defense discretionary spending, they may consider whether it is prudent to increase resources for BOP's rehabilitative programs in the near term in order to realize potential long-term benefits. The size of the effect that decreased recidivism among federal offenders would have on BOP's budget would depend on how many new inmates BOP incarcerates. If new commitments exceed the number of inmates released who do not return to prison, then the demand for prisons, personnel, and inmate programs and services would continue to grow, although possibly at a slower rate. If the number of new commitments is less than the number of inmates released who do not return to prison, then the demand for prisons, personnel, and inmate programs and services would decrease. However, even if the growth of the federal prison population slows, the demand for increased BOP appropriations may continue. Placing More Inmates in Private Prisons BOP has placed an increasing share of federal inmates in contract facilities as a way of managing the growth in the federal prison population. Congress might also consider whether more federal inmates should be housed in private facilities as a means of reducing crowding in federal prisons and potentially reducing the cost of operating the federal prison system. The number of inmates under BOP's jurisdiction held in contract facilities has generally increased since the early 1980s. However, the growth in the number of inmates held in contract facilities is mostly the result of more inmates being placed in Residential Reentry Centers (RRCs) at the end of their sentences. Most BOP inmates held in private correctional facilities are low security, non-citizen offenders. The debate about whether to house inmates in privately operated correctional facilities has been framed by two overarching questions: (1) can private facilities incarcerate inmates at a lower cost and (2) can private facilities provide services that are equal or superior to the services provided in public institutions? BOP attempted to answer these questions, with two evaluations of the Taft Correctional Institution (TCI), which was operated as a private facility as a part of a demonstration project. One evaluation of TCI and three similar BOP facilities was conducted by Abt Associates, Inc, while another was conducted by BOP's Office of Research. Both the Abt and BOP evaluations found that TCI was cheaper to operate on a per diem basis than the three comparable BOP facilities, but the two evaluations offer different conclusions as to how much was saved by operating TCI as a private institution. The two primary reasons for the different conclusions are economies of scale realized by TCI and differences in how per diem rates were calculated. Both analyses found that TCI had an assault rate that was lower than what would have been expected based on the composition of its inmate populations, but so did two of the other three BOP-operated facilities in the study (the other BOP-operated facility had an assault rate that was similar to what would have been expected). However, random drug testing showed that inmates in TCI were more likely to use drugs than inmates in other BOP facilities. TCI also had two escapes from inside the facility's secure perimeter over a roughly four-year period. In comparison, BOP had three escapes from a secure prison during the same time period, even though BOP was operating over 100 facilities at the time. Research that reviewed the results of state and local efforts to privatize correctional systems generally found that it is questionable whether privatization can deliver lower costs and whether services provided by private prisons are comparable to services provided by public prisons. One of the first studies to quantitatively summarize the results of several evaluations of prison privatization efforts found that regardless of whether the prison was privately or publicly operated, the economies of scale, the prison's age, and the prison's security level were the most significant determinants of the daily per diem cost. The researchers concluded that "[a]lthough specific privatization policy alternatives may result in modest cost savings ... relinquishing the responsibility of managing prisons to the private sphere is unlikely to alleviate much of the financial burden on state correctional budgets." Their conclusions are echoed by a review of the literature on privatization. In this analysis, the researchers concluded "that prison privatization provides neither a clear advantage nor disadvantage compared with publicly managed prisons. Neither cost savings nor improvements in quality of confinement are guaranteed through privatization." However, even though both studies limited their analyses to the most methodologically sound evaluations, these evaluations are still limited to the same issues described above, namely, what costs are considered when the evaluators calculated whether privatization could lower correctional costs. Placing more inmates in private facilities could help alleviate overcrowding in federal prisons without the need to invest in a large-scale expansion of federal prison bedspace. Expanding capacity through contracting for additional bedspace rather than building new prisons could give Congress the flexibility to reduce capacity if the federal prison population decreased in the future. However, research suggests that moving federal prisoners into private prisons might not help to control the rising costs of the federal prison system. Also, medium and high security facilities are the most crowded, and BOP is less inclined to place medium and high security inmates in private facilities. Congress might also consider whether it wants to place a greater portion of the federal prison population in the custody of private operators when BOP has less direct oversight over the day-to-day operations of private facilities. Changing Existing Correctional and Sentencing Policies to Reduce the Prison Population Policymakers might also consider whether they want to revise some of the changes that have been made to federal criminal justice policy over the past three decades. A confluence of these changes has resulted in an increasing number of offenders being sent to federal prisons. Should Congress decide to change federal criminal justice policy to try to reduce the number of inmates held in federal prisons, policymakers might start by considering which offenders are incarcerated and the length of their sentences. Changes to Mandatory Minimum Penalties The U.S. Sentencing Commission (USSC) concluded that, in part, mandatory minimum penalties have contributed to the growing federal prison population. It might be argued that some or all mandatory minimum penalties should be repealed as a way to manage the growth of the federal prison population. Allowing defendants to be sentenced using the federal sentencing guidelines could allow for more individualized sentencing, thereby allowing the court to mete out punishment using an array of variables that reflect a more nuanced analysis of a defendant's culpability. Opponents of widespread use of mandatory minimum penalties contend that they are a blunt instrument with which to determine a proper sentence. The USSC reported that "certain mandatory minimum provisions apply too broadly, are set too high, or both, to warrant the prescribed minimum penalty for the full range of offenders who could be prosecuted under the particular criminal statute." Also, to the extent that mandatory minimum penalties have contributed to sentence inflation as a result of the USSC incorporating them into the federal sentencing guidelines, repealing some mandatory minimum penalties might reduce the amount of time inmates serve in federal prison. Proponents of the continued use of mandatory minimum penalties contend that after the Supreme Court's ruling in United States v. Booker and its progeny (e.g., Gall v. United States and Kimbrough v. United States ), which rendered the sentencing guidelines effectively advisory, Congress has a responsibility to set minimum penalties for some offenses as a way to limit judicial discretion, thereby preventing unwanted sentencing disparities. It has been argued that mandatory minimum penalties promote uniformity and fairness for defendants, transparent and predictable outcomes, and a higher level of truth and integrity in sentencing. Also, should Congress choose to repeal some or all mandatory minimum penalties, policymakers would relinquish their ability to control the amount of time inmates serve for certain offenses. Even if Congress chooses not to repeal any mandatory minimum sentences, policymakers could review current mandatory minimum penalties to ensure that they are (1) not excessively severe, (2) narrowly tailored to apply only to those offenders who warrant such punishment, and (3) applied consistently. Alternatives to Incarceration During the 1980s many states instituted a series of alternatives to incarceration as a way to respond to an increasing number of convicted offenders and wide-scale prison overcrowding. Prior to this, sentencing options were limited to incarceration or probation. However, there was growing sentiment that while some crimes were too severe to be punished by placing the offender on probation, they were not severe enough to warrant incarceration. Therefore, states started to develop a series of alternative sentences that fell somewhere between probation and incarceration. These alternatives included house arrest, electronic monitoring, intensive supervision, boot camps, split sentences, day reporting centers, fines, and community service. These programs provide graduated sanctions that might be more appropriate than either probation or incarceration, and provide a higher level of offender restraint and accountability than traditional probation. Some also provide higher levels of treatment or services for problems such as substance abuse, low education levels, and unemployment. A majority of the evaluations of intensive supervision and electronic monitoring programs found that there was no significant difference in recidivism rates between offenders sentenced to alternatives to incarceration and offenders in control groups. This means that increasing surveillance and control of offenders' activities does not decrease their criminal activities. Ironically, while these programs were created as a means of reducing the number of incarcerated individuals, the increased surveillance might increase the probability that violations of the terms of probation will be detected, which could increase the number of inmates as probationers are often incarcerated for technical violations. One shortcoming of the research is that since most intensive supervision programs increase the probability of detection, there is no way to tell if the underlying level of criminality changed between the treatment and control groups; that is, the increased probability of detection might mean that offenders in the control group are simply more likely to be caught when they commit crimes, even though offenders in the control group commit crimes at the same, or even higher, rate. Also, the research tended to focus on whether the restraining aspects of the program could reduce recidivism. Some evaluations found that inmates who received treatment while participating in an intensive supervision program were less likely to be arrested. Placing More Inmates on Probation Congress could consider whether there are alternative ways to properly manage offenders convicted of committing relatively minor crimes without sending them to prison. One policy option Congress could consider is amending penalties for some offenses to allow more defendants to be placed on probation rather than being sentenced to a period of incarceration. However, the Booker decision that rendered the federal sentencing guidelines advisory might influence any debate Congress would have over who would be placed on probation. The sentencing guidelines placed substantial restrictions on when courts could sentence defendants to probation. Under Section 5B1.1 of the sentencing guidelines, defendants can only be placed on probation if their sentence under the guidelines is equal to or less than 15 months. Nonetheless, after the Supreme Court's ruling in Booker , federal judges are not required to impose a sentence within the range calculated under the sentencing guidelines. Therefore, judges can impose probation for offenders unless (1) the defendant has been convicted of a class A or B felony, (2) probation is statutorily precluded as a sentencing option, or (3) the defendant is sentenced to a term of imprisonment for the same or different offense that is not a petty offense. Data show that the risk of recidivism for probationers is the highest during the first year after being placed on probation. It has been argued that surveillance and services should be front-loaded (i.e., more intensive at the beginning of a term of probation) to try to mitigate recidivism and other negative consequences that might occur during the first year that an offender is serving on probation. A common argument from advocates of decreasing the use of incarceration is that it is cheaper to supervise an offender in the community than it is to incarcerate that individual. The Administrative Office of the U.S. Courts reports that the average annual cost of probation supervision was $3,909 per probationer in FY2014. In comparison, the average annual cost of incarceration for FY2014 was $30,621 per inmate. However, some of the lower cost of probation relative to incarceration might be the result of fewer and lower-risk offenders being placed on probation. It is possible that the annual cost of probation would increase if Congress expanded the number of people placed on probation and implemented some of the changes discussed below. Should Congress choose to expand probation as a sentencing option for more offenses, research suggests that probation programs that use a validated risk assessment tool to sort offenders into high- and low-risk groups and focus resources and supervision on higher-risk offenders might be more effective at reducing recidivism. Research also suggests that probation programs that offer a mix of evidence-based treatment that is delivered to offenders who are the most likely to benefit from it along with surveillance are more effective at reducing recidivism than surveillance-only probation. As one expert noted, "'[t]reatment' alone is not enough, nor is 'surveillance' by itself adequate. Programs that can increase offender-to-officer contact and [emphasis original] provide treatment have reduced recidivism." Researchers have found that participants in probation programs that subject probationers with substance abuse issues to frequent random drug testing and that require probationers who violate the terms of their probation to serve intermediate sanctions, such as a short stay in jail, are less likely to recidivate than those who were on regular probation. Another option Congress might consider is allowing probationers who strictly adhere to their conditions of probation to be released from probation early. Research has shown that an earned discharge strategy can reduce recidivism. Expanding the Use of Residential Reentry Centers Congress could also consider extending BOP's authority to place inmates with short sentences who are deemed to be low security risks directly into Residential Reentry Centers (RRCs, i.e., halfway houses). However, a New York Times ( Times ) investigation of halfway houses in New Jersey found cases of inmates committing new crimes after escaping and instances of lax security because counselors were either poorly trained, outnumbered, or feared for their safety; inmate-on-inmate violence; and questionably delivered rehabilitative services. Further, a DOJ Office of the Inspector General (OIG) audit of RRCs raised questions about RRCs' adherence to contract requirements for supervising inmates. The Times report suggests that several of the problems experienced in the halfway houses that were the subject of its investigation resulted from the New Jersey Department of Corrections and local sheriffs' departments using halfway houses as a means of reducing prison and jail overcrowding, which resulted in inmates with violent histories and/or who were convicted for violent offenses being placed in halfway houses. These inmates were then supervised by employees with little training, who were not correctional officers and who, in some instances, feared the inmates because they were substantially outnumbered. This suggests that if Congress wanted to use RRCs as a way of reducing overcrowding in federal prisons that placement in RRCs would be best if limited to low-level, non-violent offenders. The Times article includes accounts from staff who reported fearing for their safety while patrolling the halfway houses at night because of lax security and high inmate-to-staff ratios. This might mean that should RRCs be used as a way to reduce the number of inmates held in federal prisons, BOP would need to ensure that RRCs have properly trained and adequate staff and that the RRCs have satisfactory security measures in place. The findings from the OIG audit suggest that BOP might need to increase its oversight of the RRCs it contracts with. This could mean that BOP would need additional staff and an increase in its travel budget so BOP staff could make more frequent visits to RRCs. If policymakers were concerned about whether RRCs are a valid alternative to placing some offenders in federal prison, Congress could choose to provide funding for a program that would allow the federal government to contract with local jails to provide short-term bedspace. One possible example is the Cooperative Agreement Program (CAP) whereby the U.S. Marshals Service (USMS) provided capital investment funding to local jails in exchange for guaranteed bedspace for federal detainees. While the CAP was limited to securing bedspace for people in the custody of the USMS (i.e., people who have not yet been convicted of a crime), it is possible that such a program could be expanded to allow the federal government to expand local jail capacity in order to secure bedspace for some lower-level federal inmates who are serving short sentences. It is likely that jails would be more secure than RRCs. In addition, jails are staffed by correctional officers, who might be better prepared to supervise federal inmates. Congress could also consider whether to require courts to place certain offenders in RRCs for violating the terms of their supervised release rather than returning them to prison. As mentioned, BOP might not save a significant amount of money by placing a greater number of inmates in RRCs, but by placing more of these short-term inmates in RRCs BOP would have additional bedspace. In addition, BOP would not have to invest time and money into re-processing the offender through the prison system. This is not to suggest that all inmates who have their supervised release revoked would be suitable for RRC placement. Indeed, inmates who are arrested and/or convicted for serious offenses would most likely need to be placed in a secure facility. However, offenders who have their supervised release revoked for technical violations (e.g., repeatedly failing drug tests) might be suitable for placement in a less secure environment that still allows for monitoring of their actions. All of the alternatives to incarceration discussed above place the offender in the community, which means there is some level of risk that the offender could commit new offenses, because even though the offender would be supervised, the level of supervision would most likely provide a lower level of control over the individual's actions than would be provided by correctional officers in a secure environment. Early Release Measures One possible way to reduce the growth of the federal prison population would be to expand the early release measures for federal inmates. There are several options Congress could consider if policymakers wanted to expand early release options for federal inmates, including (1) reinstating parole, (2) expanding good time credits, and (3) expanding the conditions under which courts could reduce sentences pursuant to 18 U.S.C. Section 3582(c)(1)(A). Reinstating Parole One option Congress might consider is whether to reinstate parole in the federal system. Inmates sentenced for an offense in a federal court committed after November 1, 1987, are not eligible to be released on parole. Parole is one way correctional authorities can release inmates who are deemed to be at a low risk for recidivism and place them in community supervision for the remainder of their sentences. Should Congress consider reinstating parole for federal inmates, there are several salient issues that policymakers might think about. First, how would a parole system work within the current determinate sentencing structure used in federal courts? Traditionally, discretionary parole has been combined with an indeterminate sentencing structure (i.e., a system whereby the court could impose a sentence for a crime within a range prescribed in law). Indeterminate sentences allow the court to tailor sentences to each defendant, but this gives rise to concerns about whether some sentences are arbitrary and unfair. For example, two defendants convicted for similar crimes might receive different sentences depending on which judge happens to be presiding over their cases. When combined with a parole board's discretion over when, if ever, someone would be granted parole, two defendants convicted of similar crimes could end up serving significantly different amounts of time in prison. Congress sought to limit the discretion of the federal judiciary and the executive branch when it eliminated parole and replaced indeterminate sentencing with the sentencing guidelines. Parole might not be irreconcilable with a determinate sentencing structure. Courts could continue to use sentencing guidelines as a guidepost for determining a defendant's sentence and each inmate could then be eligible for parole after serving a certain portion of his or her sentence. However, should Congress allow federal inmates to be eligible for parole, it would grant the executive branch, through the U.S. Parole Commission (hereinafter, "commission"), some measure of control over determining how much time an inmate serves in prison. Congress might choose to limit some of the commission's discretion by setting a higher threshold for determining what portion of an inmate's sentence must be served before he or she is eligible to be placed on parole. Should Congress choose to reinstate parole for federal inmates, another key question would be whether eligibility would be made retroactive to inmates who were sentenced for federal crimes after November 1, 1987. Making eligibility for parole retroactive could potentially reduce the federal prison population in a shorter amount of time than it would if only newly convicted inmates were eligible for parole consideration. However, it would appear likely that the commission and the U.S. Probation and Pretrial Services office would need increased resources in order to properly manage what would likely be a significant increase in their caseloads. There might be some concern about whether allowing federal inmates to be released on parole would pose a threat to public safety. Concerns about recidivism are not unfounded. Research published by the Bureau of Justice Statistics found that approximately three-quarters (76.6%) of inmates released in 2005 were rearrested within five years and approximately half (55.4%) were convicted for a new crime. Concerns about offenders committing new crimes while on parole have led some jurisdictions to implement intensive supervision programs where parolees are subject to more rigorous conditions of release and more frequent contacts with a parole officer. While intensive supervision programs might in theory reduce the likelihood that parolees commit new offenses while in the community, the body of research on intensive supervision programs suggests that these programs do not reduce recidivism. Depending on how recidivism is defined, intensive supervision programs may actually increase "recidivism" because they are more likely to detect technical violations of the conditions of release. This can create a paradox for policymakers: parole might be considered as a means of reducing the prison population, but it might actually increase the number of inmates in prisons as more return to prison for violating the conditions of parole. Should Congress choose to reinstate parole, policymakers might consider evidence-based measures so that parole helps as many inmates successfully transition back into the community as possible. The options Congress could consider are similar to those outlined above for successful probation programs, namely using a validated risk assessment tool to sort parolees into high- and low-risk groups; ensuring that parolees with a demonstrated need for rehabilitative programming have access to evidence-based, appropriately delivered programs; requiring parolees who violate their conditions of release to serve intermediate sanctions rather than returning them to prison; and allowing parolees who strictly adhere to the conditions of their parole to be released early. Also, like probationers, data indicate that parolees are at the highest risk for recidivism during their first year of parole. This suggests that in order to decrease the risk of recidivism services should be more intensive during the parolee's first year on release. Some research suggests that intensive supervision programs can reduce recidivism when they are combined with treatment and rehabilitative programming. Expanding Good Time Credits Another potential policy option Congress could consider as a means to slow the growth of, or possibly reduce, the federal prison population is to expand BOP's authority to grant good time credit to inmates. Congress abolished parole for federal inmates in the 1980s, which means that inmates cannot be released before serving their entire sentence, minus any good time credit, even if the inmate's risk of recidivism is low. Under current law, BOP can grant up to 54 days of good time credit per year to inmates serving a sentence of more than one year, assuming the inmate has demonstrated "exemplary compliance with institutional disciplinary regulations" and is making satisfactory progress on completing a GED (assuming the inmate does not have a GED or a high school diploma). In addition to the amount of good time credit an inmate can earn, BOP is allowed to reduce a non-violent inmate's sentence by up to one year if the inmate participates in residential substance abuse treatment. It has been argued that teaming good time credit with a program that places inmates with objectively assessed needs and risks in evidence-based programs to address those needs and risks can reduce recidivism and cut prison costs. Congress could consider allowing BOP to award good time credit for inmates who have a need for and successfully complete rehabilitative programs other than residential drug abuse treatment. However, expanding good time credit for participation in rehabilitative programming would likely require Congress, at least in the short term, to expand funding for rehabilitative programs and inmate skills and needs assessments. While expanding current good time credit policies might help reduce prison overcrowding, there might be some concern that BOP would effectively be reducing inmates' sentences without the sentencing court's approval. Additional good time credit would also allow inmates to be released before serving a significant (85%) portion of their sentence, a key rationale for why parole was eliminated in the first place. In addition, some may feel that regardless of an inmate's efforts to rehabilitate himself or herself or the risk he or she would pose to society when released, the inmate was sent to prison as a punishment for a crime, hence the inmate should serve his or her full sentence. Sentence Reduction In addition to allowing BOP to grant more good time credit to inmates, Congress could also consider whether to amend the conditions under which courts can reduce an inmate's sentence. Under current law (18 U.S.C. §3582(c)(1)(A)), BOP can petition the court to reduce an inmate's sentence if the court finds that "extraordinary and compelling reasons warrant such a reduction"; or the inmate is at least 70 years of age, has served at least 30 years of his or her sentence, and a determination has been made by the Director of BOP that the inmate is not a danger to the safety of any other person or the community. Congress required the USSC, when issuing a policy statement regarding sentence modification under 18 U.S.C. Section 3582(c)(1)(A), to "describe what should be considered extraordinary and compelling reasons for sentence reduction, including the criteria to be applied and a list of specific examples." Under Section 1B1.13 of the U.S. Sentencing Guidelines, the USSC deemed the following circumstances to be "extraordinary and compelling reasons" for a sentence reduction: The inmate is suffering from a terminal illness. The inmate is suffering from a permanent physical or medical condition, or is experiencing deteriorating physical or mental health because of the aging process, that substantially diminishes the ability of the defendant to provide self-care within the environment of a correctional facility and for which conventional treatment promises no substantial improvement. The death or incapacitation of the inmate's only family member capable of caring for the inmate's minor child or minor children. As determined by the Director of BOP, there exists in the inmate's case an extraordinary and compelling reason other than, or in combination with, the reasons described above. Pursuant to 28 U.S.C. Section 944(t), rehabilitation of an inmate is not, by itself, an extraordinary and compelling reason for granting a sentence reduction. If the court grants a sentence reduction under 18 U.S.C. Section 3582(c)(1)(A), the court is also allowed to impose a term of probation or supervised release, with or without conditions, for a period up to the amount of time that was remaining on the inmate's sentence. One of the critiques of this program is that it relies on BOP to petition the court for a review of an inmate's sentence. One commentator argues that BOP narrowly interprets when inmates should be allowed to apply for a sentence reduction, effectively limiting applications to cases where the inmate is terminally ill and near death. The policy statement governing the program states that consideration for a sentence reduction under 18 U.S.C. Section 3582(c)(1)(A) is limited to "particularly extraordinary or compelling circumstances which could not reasonably have been foreseen by the court at the time of sentencing." In August 2013, BOP revised its compassionate release policy statement to broaden the circumstances under which it will consider a sentence reduction request to include the following: terminal and non-terminal (e.g., the inmate has a serious physical or mental impairment) medical circumstances; circumstances for elderly inmates; circumstances in which there has been the death or incapacitation of the family member caregiver of an inmate's child; and circumstances in which the spouse or registered partner of an inmate has become incapacitated. Before submitting a compassionate release request to the court, BOP will consider whether an inmate's release would pose a danger to the safety of anyone in the community. Notwithstanding the changes BOP recently made to its compassionate release policy, Congress could consider modifications to the requirements for sentence reduction under 18 U.S.C. Section 3582(c)(1)(A) to allow more inmates to have their sentences reduced. For example, Congress could debate allowing courts to consider rehabilitation—either as an extraordinary and compelling reason on its own, or in consort with other reasons—when making determinations about sentence reductions. Expanding the authority of courts to grant a sentence reduction could allow inmates deemed to be a low threat to public safety to be placed in the community earlier, thereby freeing up bedspace in federal prisons. An inmate granted a sentence reduction could still be required to serve a term of supervised release, which would allow federal probation officers to monitor the inmate after he or she is released, a possible advantage over allowing inmates to be released early by increasing good conduct time. However, it is likely that the judicial branch would require additional resources in order to process more applications for sentence reductions under the program and properly monitor inmates whose sentences were reduced but who were placed on supervised release. Also, there might be a question as to whether this would turn the courts into de facto parole boards. Congress eliminated parole in the federal system, in part, over concerns that inmates were incarcerated for less than an appropriate amount of time and disparities in decisions over who received parole. Under this possible system, inmates could be released before serving a majority of their sentences, but Congress could address this concern by not allowing inmates to be eligible for a sentence reduction until they have served a certain portion of their entire sentence. A potentially more difficult issue for Congress to address is how judges would make decisions if granted broader authority to reduce sentences under the program. It is possible that an inmate's opportunity to receive a sentence reduction would depend on which judge ruled on the inmate's petition. This concern mirrors some of the concerns that existed about how much sway parole boards held over who was granted parole. Congress could also consider amending the requirements under 18 U.S.C. Section 3582(c)(1)(A) so that inmates could be released before turning 70. Research indicates that most offenders "age-out" of crime; that is, the older offenders get, the less likely they are to commit new crimes. It appears likely that more elderly inmates could safely be released from confinement and placed on home confinement for the remainder of their sentences. However, while elderly inmates might pose a reduced threat to public safety, there is likely to be some sentiment that any offender, regardless of age and safety risk, should serve his or her entire sentence. Modifying the "Safety Valve" Provision There are other amendments to the criminal code Congress could consider if policymakers wanted to potentially reduce the size of the federal prison population. For example, Congress could consider expanding the "safety valve" provision under 18 U.S.C. Section 3553(f). The safety valve provision allows judges to impose a sentence without regard to the mandatory minimum sentences for certain drug offenses if the following conditions are met: The defendant does not have more than one criminal history point, as determined under the sentencing guidelines. The defendant did not use violence or credible threats of violence or possess a firearm or other dangerous weapon (or induce another participant to do so) in connection with the offense. The offense did not result in death or serious bodily injury to any person. The defendant was not an organizer, leader, manager, or supervisor of others in the offense, as determined by the sentencing guidelines, and was not engaged in a continuing criminal enterprise. No later than the time of the sentencing hearing, the defendant has truthfully provided to the government all information and evidence the defendant has concerning the offense or offenses that were part of the same course of conduct or of a common scheme or plan, but the fact that the defendant has no relevant or useful or other information to provide or that the government is already aware of the information shall not preclude a determination by the court that the defendant has not complied with the requirements of the provision. Currently, the safety valve provision cannot be applied to defendants facing a mandatory minimum sentence for an offense that is not drug-related. The safety valve provision was enacted after Congress became concerned that the mandatory minimum sentencing provisions could result in equally severe penalties for both the more and the less culpable offenders. Congress could consider expanding the provision so that it would apply to defendants facing mandatory minimum sentences for offenses other than drug crimes. This option would allow Congress to retain mandatory minimum penalties that can still be applied to more serious offenders while allowing judges to sentence less serious offenders to shorter periods of incarceration. One idea put forth is to amend current law so that judges could apply the safety valve in instances where the recommended sentencing guideline range is below the mandatory minimum penalty and where the defendant's offense did not result in death or serious bodily injury to anyone and the defendant has provided the government with all information and evidence available to the defendant. Under the proposal, the defendant could not be sentenced to less than the minimum of the sentencing range calculated under the sentencing guidelines. Many of the conditions placed on the current safety valve provision would remain (e.g., not using violence or possessing a weapon and not being an organizer or leader in the offense), but rather than being a bar from being eligible for the safety valve, they would be factors for the court to consider when deciding whether to sentence a defendant below the mandatory minimum penalty. Judges would be required to state for the record why they chose to impose a sentence below the mandatory minimum penalty, and those decisions would be subject to appellate review. However, as noted, the USSC has incorporated many mandatory minimum sentences into the sentencing guidelines. Therefore, in some instances the guideline sentence might be equal to or exceed the mandatory minimum penalty, which would render the proposed safety valve provision moot. One possible solution to this conundrum would be to allow the USSC to give consideration to mandatory minimum penalties when formulating the sentencing guidelines, but not requiring the USSC to make the guidelines consistent with mandatory minimum penalties. Repealing Federal Criminal Statutes for Some Offenses One of the highlighted reasons for the growth in the federal prison population was the "federalization" of offenses that were traditionally under the sole jurisdiction of state authorities. Policymakers could consider revising the U.S. Code so that federal law enforcement focuses on crimes where states do not have jurisdiction over the offenses or where the federal government is best suited to investigate and prosecute the offenders (e.g., the offense involves multiple individuals acting together to commit crimes across several states). Some crimes will remain federal offenses. For example, the federal government is responsible for prosecuting individuals who commit immigration-related offenses because immigration laws are solely the jurisdiction of the federal government. However, over the years the federal government has become more involved in investigating, prosecuting, and incarcerating people who commit drug offenses and offenses where a convicted felon is found to be in possession of a firearm. In many instances, states have criminal penalties for individuals who commit these types of crimes. For example, in his testimony before the House Subcommittee on Crime, Terrorism, and Homeland Security at a hearing on the unintended consequences of mandatory minimum penalties, one expert argued [f]ederal drug cases should focus exclusively on the international organizations that use their profits from the manufacture and distribution of cocaine, opium and heroin, methamphetamine, and cannabis to finance assassinations, terrorism, wholesale corruption and bribery, organized crime generally, and the destabilization of our allies…Every state in the U.S. has a great capacity to investigate, prosecute and punish the high-level local drug traffickers that operate within their jurisdiction. State and local police and prosecutors outnumber federal agents and prosecutors. State prisons far exceed the capacity of federal prisons…Almost none of the crack [cocaine] dealers that proliferate in countless U.S. neighborhoods warrant federal prosecution. There are neighborhood criminals and their crimes are state crimes. If a state's law does not adequately punish a crack [cocaine] dealer, that is the state's problem. Inadequate state laws do not warrant wasting very scarce, powerful federal resources even on serious neighborhood criminals [emphasis original]. Scaling back the scope of the federal criminal code could help reduce the size of the federal prison population in the future by reducing the number of people prosecuted and sentenced to incarceration in federal courts. However, this policy option could increase the burden on state criminal justice systems since they would be responsible for prosecuting and incarcerating offenders who are no longer tried in federal courts. By year-end 2014, according to the BJS, 19 state correctional systems were at or above their highest capacity, and another 18 state correctional systems were between 90% and 99% of their highest capacity. Since nearly three-quarters of states have prison systems that are operating at 90% of capacity or higher, it would appear that if the federal government chooses not to prosecute some offenses, thereby leaving states with the responsibility to do so, it would require states to either expand their prison capacities or possibly decline to prosecute some offenses. Also, it is possible that an expansion of state correctional systems could have a significant effect on state finances. The Vera Institute of Justice reported that state correctional spending has nearly quadrupled over the past two decades, which makes it the fasting-growing budget item after Medicaid. Since states typically cannot run a budget deficit, any expansion in correctional expenditures would have to be paid for with cuts to other state services, increased taxes, or issuing bonds. Appendix. Select BOP Data

Since the early 1980s, there has been a historically unprecedented increase in the federal prison population. The total number of inmates under the Bureau of Prisons' (BOP) jurisdiction increased from approximately 25,000 in FY1980 to over 205,000 in FY2015. Between FY1980 and FY2013, the federal prison population increased, on average, by approximately 5,900 inmates annually. However, the number of inmates in the federal prison system has decreased from FY2013 to FY2015. Some of the growth is attributable to changes in federal criminal justice policy during the previous three decades. These changes include increases in the number of federal offenses subject to mandatory minimum sentences, changes to the federal criminal code that have made more crimes federal offenses, and the elimination of parole. The growth in the federal prison population can be a detriment to BOP's ability to safely operate their facilities and maintain the federal prison infrastructure. The Government Accountability Office (GAO) reports that the growing number of federal inmates has resulted in an increased use of double and triple bunking, waiting lists for education and drug treatment programs, limited meaningful work opportunities, and increased inmate-to-staff ratios. These factors can contribute to increased inmate misconduct, which negatively affects the safety and security of inmates and staff. The burgeoning prison population has contributed to mounting operational expenditures for the federal prison system. BOP's appropriations increased more than $7.1 billion from FY1980 ($330 million) to FY2016 ($7.479 billion). As a result, BOP's expanding budget is starting to consume a larger share of the Department of Justice's overall annual appropriation. Should Congress choose to consider policy options to address the issues resulting from the growth in the federal prison population, policymakers could choose options such as increasing the capacity of the federal prison system by building more prisons; investing in rehabilitative programming (e.g., substance abuse treatment or educational programs) as a way of keeping inmates constructively occupied and potentially reducing recidivism after inmates are released; or placing more inmates in private prisons. Policymakers might also consider whether they want to revise some of the policy changes over the past three decades that have contributed to the steadily increasing number of offenders being incarcerated. For example, Congress could consider options such as (1) modifying mandatory minimum penalties, (2) expanding the use of Residential Reentry Centers, (3) placing more offenders on probation, (4) reinstating parole for federal inmates, (5) expanding the amount of good time credit an inmate can earn, and (6) repealing federal criminal statutes for some offenses. Congress is currently considering legislation (e.g., S. 2123, H.R. 3713) that would put into effect some of the policy options discussed in this report, including expanding the "safety valve" for some low-level offenders, allowing inmates to earn additional good time credit as a part of a risk and needs assessment system, and reducing mandatory minimum penalties for some offenses.

Introduction The attacks of September 11, 2001, heightened interest in port and maritime security. Much of this interest has focused on cargo container ships because of concern that terrorists could use containers to transport weapons into the United States, yet only a small fraction of the millions of cargo containers entering the country each year is inspected. Some fear that a container-borne atomic bomb detonated in a U.S. port could wreak economic as well as physical havoc. Robert Bonner, former head of Customs and Border Protection (CBP) in the Department of Homeland Security (DHS), has argued that such an attack would lead to a halt to container traffic worldwide for some time, bringing the world economy to its knees. Stephen Flynn, a retired Coast Guard commander and an expert on maritime security at the Council on Foreign Relations, holds a similar view. While container ships accounted for 30.4% of vessel calls to U.S. ports in 2005, other ships carried crude oil (12.9%), dry bulk cargo (18.7%), and vehicles (6.0%), among other things. These ships merit attention as well because terrorists will look for the weak link. The 9/11 Commission stressed the importance of a balanced approach to maritime security. To this end, this report focuses on the threat of a terrorist nuclear attack using oil tanker ships. This threat is of particular interest because the Middle East is the chief source of anti-U.S. terrorism. Background Oil Shipments from the Middle East Crude oil and other petroleum products account for almost all export earnings of many Middle Eastern nations. In turn, 28.8% of net U.S. crude oil imports in September 2006 came from the Middle East. Crude oil from the Middle East went to 30 U.S. ports in 2003. Those handling the most oil were Blaine, WA; El Segundo, Long Beach, Los Angeles, and Richmond, CA; Corpus Christi, Freeport, Galveston, Houston, Port Arthur, and Texas City, TX; Baton Rouge, Gramercy, Lake Charles, Morgan City, and New Orleans, LA; Pascagoula, MS; Mobile, AL; Wilmington, DE; and Paulsboro, NJ. Crude oil from the Middle East is typically shipped to the United States in supertankers—Very Large Crude Carriers (VLCCs) and Ultra Large Crude Carriers (ULCCs). Their size is measured in deadweight tons (DWT), the weight of the stores, fuel, and cargo they can carry. One DWT is 2,240 lb. While definitions vary slightly, VLCCs can carry about 200,000 to 300,000 DWT and ULCCs can carry more than 300,000 DWT. Crude oil accounts for almost all of the deadweight tonnage of such ships. A representative ULCC was 60 meters wide and 350 meters long, and had a draft (depth below the waterline) of 22 meters. They are the largest ships ever built. The interior of a tanker is divided into multiple storage tanks. Both the Coast Guard and the Navy stated that they do not have responsibility for, or authority over, security of foreign-flagged vessels at foreign ports. Nor do other American forces. Security of foreign ports rests with foreign governments. Staging a Terrorist Nuclear Attack Using Tankers The simplest type of atomic bomb, and by far the easiest to fabricate, is a gun-assembly bomb, in which one mass of uranium highly enriched in the fissile isotope 235 (highly enriched uranium, or HEU) is shot down a tube into another mass of HEU, forming a critical mass and causing a nuclear explosion. The Hiroshima bomb was of this type; its designers had such confidence in the design that it was not tested before use. This bomb had an explosive yield of 15 kilotons (equivalent to 15,000 tons of TNT). Excluding the bomb's outer casing, fins, and fuses, this device was 6 feet long and about 6 inches in diameter, and weighed about 1,000 pounds. Some items loaded onto large cargo ships are of similar or greater size and weight. It might be possible to make a lighter gun-assembly bomb. To stage a nuclear attack using a tanker, terrorists would need to acquire a nuclear device and smuggle it (or key components) onto a ship. Their ability to accomplish this latter task would likely depend on their ability to circumvent local security; on the reliability of security personnel in oil-exporting countries such as Saudi Arabia, Kuwait, and Algeria; and on the reliability of the ship's officers and crew. Terrorists might seek to place a nuclear device inside one of a tanker's oil tanks, which would require sealing and cushioning the bomb and possibly attaching it to the tank wall; or in a dry space on the ship; or in a blister attached to the ship underwater. Remotely detonating a bomb inside an oil tank or underwater might be difficult: it might not be possible to attach wires leading out to dry spaces, or to send an electromagnetic signal (e.g., a cell phone call) through water or oil to the bomb. Detonating the bomb with a timer would run the risk of the ship not being at the target at the specified time. Overcoming these challenges might be within the ability of a terrorist group resourceful enough to acquire an atomic bomb. Terrorists might also smuggle a bomb onto a ship at sea, as discussed later. Potential Targets Terrorists could be expected to select as their target a port that handled a large volume of oil and other goods and that had a densely-populated area that tankers passed on their way through a harbor to an unloading terminal. Various cities worldwide meet these criteria. If terrorists sought major economic damage while minimizing loss of life, they might target the Louisiana Offshore Oil Port, or LOOP, the only U.S. deepwater oil port that can handle fully loaded supertankers. LOOP, 18 miles off the Louisiana coast, handles about 10% of U.S. crude oil imports. The Panama Canal might be another potential economic target. Detecting an Atomic Bomb in a Tanker Some means of detecting atomic bombs in a tanker would fail, especially for a bomb inside an oil tank. Gamma rays, essentially high-energy x-rays, are used to create x-ray-type pictures of the contents of cargo containers, but a tanker's huge mass of oil and steel would prevent gamma rays from traveling the width of a tanker. Neutrons may be used to detect fissile material; neutrons of the appropriate energy level cause such material to fission, producing neutrons and gamma rays that can be detected. The hydrogen atoms of crude oil, however, would block neutrons from penetrating. Other candidate techniques include chemical sampling of oil for traces of extraneous material, and preparing an acoustic profile of a ship when known to be "clean" to compare with a profile taken as the ship nears port. The vast amount of oil in a supertanker works against the former technique; the complex configuration of tanks on a tanker works against the latter. A more remote possibility, muon detection, might work if daunting technical challenges could be overcome. Securing Tankers The difficulty of detecting a bomb aboard a tanker underscores the importance of keeping bombs off tankers. Securing tankers at loading terminals would likely involve a security perimeter (including underwater), and measures to ensure personnel reliability. Items brought on a ship would have to be screened. A National Nuclear Security Administration program, "Second Line of Defense," screens people and baggage for fissile material; similar technology might help secure tankers. Securing tankers in port might not be sufficient if terrorists could smuggle a bomb onto a ship at sea. It may be possible to improve security by using surveillance aircraft or satellites. Security may be a greater issue as tankers slow to navigate straits or approach port. Several issues arise: (1) Would shippers let crew spend time to upgrade security beyond current levels? VLCCs have small crews, perhaps 25 to 40 people, who may have no time for added tasks. (2) If intelligence data indicated a plot to board a tanker at sea to place a bomb, could a warning be passed without compromising U.S. intelligence capabilities? (3) This scenario would require the connivance of the entire crew, or silencing those who opposed the plot. Screening for personnel reliability may be the only defense against this prospect. Potential Oversight Questions and Options For Congress Oversight Questions Possible oversight questions include the following: How does the Administration view the potential for terrorists to use a tanker for a nuclear attack? To what extent has the Administration considered this threat in planning for port and maritime security? If considered a serious threat, what measures is the Administration implementing to respond to it? When will they be in place? How much funding is programmed for them over the next few years? Which areas of detection technology may merit development? Which executive branch office has overall responsibility for examining or addressing this potential threat? What other executive offices have responsibilities in this area? Is there adequate coordination among them? Potential Options Congress might consider options such as the following to further explore the threat discussed in this report. Clarify federal responsibility for tanker security by requiring a lead federal agency for tanker security and making more explicit the responsibilities of various federal agencies involved in tanker security. Create a Tanker Security Initiative (TSI) analogous to the Container Security Initiative for improving containerized cargo security. TSI might set security standards for tankers that transport oil to U.S. ports, and for the ports where they load. Tankers not meeting the standards, or that come from ports not meeting the standards, could be denied entry to U.S. ports. Establishing such a regime would undoubtedly require negotiations with other countries. (See " Legislative Activities ," below.) Ensure that tankers are a focus of maritime domain awareness, which refers to surveillance and communication systems that would permit U.S. officials to have a comprehensive understanding at any given moment of the location and identity of ships at sea. Assure sufficient U.S. intelligence assets are focused on the threat and possible indications of preparations for such an attack. Terrorists seeking to acquire or build a bomb and smuggle it onto a tanker would need to go through certain steps. Similarly, a terrorist bomb placed inside a tank of crude oil might have certain signatures, such as a way to detonate the bomb. The Intelligence Community could analyze such steps and signatures, and be alert to signs of the most critical ones. Determine whether funding is adequate for technologies that hold some prospect of detecting an atomic bomb aboard a tanker. Keep oil tankers away from U.S. ports by promoting the construction of more offshore ports like LOOP. Improve international cooperation. Existing international agreements and organizations that might focus on tanker security include agreements for countering narcotics, crime, and piracy; the International Maritime Organization, shipping associations, and Interpol; and the International Ship and Port Facility Security Code. These efforts could supplement the Proliferation Security Initiative (PSI), a multilateral effort for interdicting ships at sea that are suspected of carrying weapons of mass destruction. Ships available for PSI missions might respond to indications of tanker security problems at sea. The United States could pursue increased bilateral cooperation with oil-exporting states and countries under whose flags tankers are registered. Potential measures include improved perimeter security at oil-loading terminals and more rigorous background screening and training of port workers and tanker crew members. Should Congress conclude that proactive steps should be taken in this area, the issues of who should pay and how funds should be collected would arise. Costs could be covered by general revenues. Alternatives would be to charge a fee on ships landing oil in the United States or to impose a tax on crude oil or petroleum products consumed in the United States. Congress may also wish to consider whether the issues discussed here might apply to other types of ships, such as those for carrying cars or dry bulk goods. Legislative Activities On January 24, 2005, S. 12 , Targeting Terrorists More Effectively Act of 2005, was introduced and was referred to the Senate Committee on Foreign Relations. Section 325 provides for a Tanker Security Initiative under which "[t]he Secretary of Homeland Security shall establish a Tanker Security Initiative to promulgate and enforce standards and carry out activities to ensure that tanker vessels that transport oil, natural gas, or other materials are not used by terrorists or as carriers of weapons of mass destruction." As part of this initiative, the Secretary may develop standards to prevent terrorists from placing weapons of mass destruction on tankers, develop detection equipment and inspection procedures, conduct R&D on sensors to detect a nuclear device on a tanker, and aid foreign countries in carrying out provisions of this initiative. The legislation would also require the Secretary to submit a report to Congress on terrorism risks posed by tankers, means of combating this risk, and a proposed budget to carry out this initiative. This legislation was not reported from committee. Should the 110 th Congress undertake further consideration of the potential tanker/nuclear threat, issues that may garner attention include: (1) How might port security grant programs enhance tanker security? (2) Could imaging or radiation-detection systems available now, or deployable in the near future, significantly augment tanker security against this threat? (3) If so, is it worth the money to deploy them now, or would it be preferable to wait until more advanced systems were available? (4) If not, does the current R&D investment strategy consider tanker security, and what detection programs might be developed to do so? These questions might be raised as Congress oversees implementation of the SAFE Port Act, P.L. 109-347 .

While much attention has been focused on threats to maritime security posed by cargo container ships, terrorists could also attempt to use oil tankers to stage an attack. If they were able to place an atomic bomb in a tanker and detonate it in a U.S. port, they would cause massive destruction and might halt crude oil shipments worldwide for some time. Detecting a bomb in a tanker would be difficult. Congress may consider various options to address this threat. S. 12 , Targeting Terrorists More Effectively Act of 2005, included a Tanker Security Initiative (sec. 325). This report will be updated as needed.