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Recent Key Developments On January 31, 2008, the House Committee on Foreign Affairs announced that a markup hearing would be held on February 7, 2008 which would consider a House bill entitled The Global HIV/AIDS, Tuberculosis and Malaria Reauthorization Act of 2008, for which no text or bill number was immediately available. On January 25, 2008, the White House announced that President Bush and Mrs. Bush would travel to five African countries from February 15-21, 2008, in part to enable the President "to review firsthand the significant progress since his last visit in 2003 in efforts to [...] fight HIV/AIDS, malaria, and other treatable diseases, as a result of the United States robust programs in these areas." President Bush had first stated his intention to visit Africa in 2008 during a November 2007 speech marking World AIDS Day, 2007. In the speech, he also called on the Congress to support his May 2007 call to double U.S. international funding for AIDS, to $30 billion over five years, starting in 2009. International AIDS issues are further covered in CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria Spending: FY2004-FY2008 , by [author name scrubbed]; CRS Report RL34192, PEPFAR: Policy Issues from FY2004 through FY2008 , by [author name scrubbed]; CRS Report RL33396, The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Progress Report and Issues for Congress , by [author name scrubbed]; and CRS Report RL31712, The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Background , by [author name scrubbed]. Characteristics of the African Epidemic2 Overview Sub-Saharan Africa ("Africa" hereafter) has been far more severely affected by HIV/AIDS than any other world region. In December 2007, the Joint United Nations (U.N.) Program on HIV/AIDS (UNAIDS) released an update on the global AIDS epidemic. It reported that in 2007, there were between 20.9 million and 24.3 million HIV-positive adults and children in Africa, including 1.7 million newly infected during the year. Africa has nearly 12% of the world's population but about 68% of the global total of infected persons. In 2007, about 1.6 million adults and children were estimated to have died of AIDS, comprising about 76% of global AIDS deaths in 2007, down from a 2006 estimate of about 2.1 million deaths, when African AIDS deaths made up about 72% of global AIDS deaths. Aggregate estimates of deaths caused by AIDS suggest that many as 30 million Africans may have died of AIDS since 1982, at the start of the epidemic, including those who perished in 2007. UNAIDS has projected that between 2000 and 2020, 55 million Africans will likely have lost their lives to AIDS, which is the primary cause of death in Africa. It causes more deaths than malaria in African adults, and kills many times more people than Africa's armed conflicts. Prevalence Multiple health survey data show that the countries with the highest HIV/AIDS prevalence or infection rates globally are in Africa. The adult rate of infection in Africa in late 2005 was 6.1%, compared with 1% worldwide, but had dropped to 5% by 2007, compared to .8% worldwide. National prevalence rates for individual African countries are shown in Table 1 . The relative accuracy of such estimates may vary; see "Note," Table 1 . Prevalence Trends UNAIDS has reported that Africa's adult HIV infection rate, or prevalence, has begun to stabilize or decline moderately in recent years, having peaked around year 2000, as both the total adult and infected populations have increased. Stabilization means that numbers dying approximate the numbers of newly infected, and that net infections are thus halted or nearly curbed. HIV has become endemic in many countries; at a minimum, it will affect several future generations. There have been declines in Kenya, Zimbabwe, and urban areas in some countries. Prevalence had been increasing in southern Africa in recent years, apart from Zimbabwe and Angola. The 2007 UNAIDS update, however, found that apart from Mozambique—where prevalence was increasing—the epidemic had "reached" or was "approaching a plateau." It found that in Zimbabwe there was a "significant decline" in national prevalence rates, and that adult prevalence in East Africa was stable or beginning to decline. In West and Central Africa, adult prevalence was either generally stable or there were prevalence declines, as in Côte d'Ivoire, Mali, Benin, and parts of Burkina Faso. Recent prevalence declines are attributable to a combination of deaths of infected persons; declines in new infections due to behavioral change and increased access to testing; the scaling up of access to drug therapy; and, in some cases, improved social services and access to better nutrition. Highest Rates Southern Africa, where nine countries have adult infection rates above 10% ( Table 1 ) , is the most severely affected region. However, populous Nigeria in West Africa, with an estimated 3.9% adult infection rate (end-2005), had an estimated 2.9 million infected people, the largest number in Africa apart from South Africa. There, between 5.5 million and 6.1 million [UNAIDS average and South African government estimates] are infected—the largest such population in the world. Transmission Since the 1980s, HIV in Africa has been viewed by many researchers as being spread primarily by heterosexual contact, though some believe that the role of unsafe medical practices in the spread of HIV may have been underestimated. Both sexual and medical HIV transmission prevention are components of the President's Emergency Plan for AIDS Relief (PEPFAR). Women There were roughly 13.73 million women HIV-positive women in Africa in 2007, up from about 13.2 million HIV-positive women in Africa in 2005. They comprised about 59% of infected adults in Africa and about 76% of HIV-positive females globally in late 2005; women comprised a slightly higher proportion of all AIDS infections in Africa, 61%, by 2007. Young women are notably at risk. In 2005, about 4.3% of African women aged 15 to 24 were HIV-positive, compared with 1.5% of young men. Figures for these groups had dropped from 6.9% for women and 2.2% for men in 2004. Children Africa's AIDS epidemic has a proportionally much greater effect on children in Africa than in other world regions. According to UNAIDS, over 600,000 African infants become infected yearly with HIV through mother-to-child transmission (see "Maternal Transmission," below), during pregnancy, at birth, or through breast-feeding. Most die before the age of two. Nonetheless, roughly 2.24 million African children under age 15 were living with AIDS in 2007, down slightly from an estimated 2.3 million in late 2005. Nearly 90% of HIV-positive children worldwide live in Africa. Less than 10% of these African children receive basic support services. An estimated 12 million children less than 17 years of age, slightly less than 10% of all African children, are believed to have lost one or both parents to AIDS in recent years. Orphans The number of orphans in Africa is large but appears to be decreasing slightly. There were an estimated 11.4 million orphans due to AIDS in Africa in 2007. In late 2005, according to UNAIDS, there were about 12 million AIDS orphans (children 17 and under who had lost one or both parents to HIV) in Africa, up from about 10.2 million in late 2003, when AIDS orphans comprised in the range of 28% of all orphans in the region. The apparent decrease raises the possibility that a 2004 U.N. study that projected that by 2010 their number would rise to 18.4 million, or 36.8% of all orphans on the continent, may have underestimated the impact of factors leading to a slight decline in HIV prevalence trends. Because of AIDS-related social stigma, HIV-positive orphans are at high risk for malnourishment, abuse, and denial of education. UNICEF has recommended that the capacity of families and communities to protect and care for orphans be strengthened, that social and state protection services be provided for orphans and vulnerable children (OVCs), and that public education about HIV-affected children HIV-affected be increased. In October 2005, Human Rights Watch alleged in a report that African governments have largely not addressed the myriad barriers to education faced by AIDS-affected OVCs. P.L. 108 - 25 included sense of Congress language recommending that 10% of U.S. HIV/AIDS international assistance should fund services for orphans and vulnerable children. The Assistance for Orphans and Other Vulnerable Children in Developing Countries Act of 2005 ( P.L. 109 - 95 ) became law in November 2005. It authorizes U.S. assistance for basic care for orphans and vulnerable children in developing countries, including aid for community-based care, school food programs, education and employment training, psycho-social support, protection of inheritance rights, and AIDS care. Explaining the African Epidemic AIDS experts attribute Africa's AIDS epidemic to a variety of economic and social factors, but place primary blame on the region's poverty, which has deprived Africa of effective systems of health information, health education, and health care. As a result, Africans suffer from high rates of untreated sexually-transmitted infections other than AIDS, increasing their susceptibility to HIV. African health systems often have limited capabilities for AIDS prevention work, and HIV counseling and testing are difficult for many Africans to obtain. Until very recently, AIDS treatment was generally available only to elites. Poverty forces large numbers of African men to migrate long distances in search of work, and while away from home they may have multiple sex partners, increasing their risk of infection. Some of these partners may be women who engage in commercial or "transactional" sex because of poverty, which makes them highly vulnerable to infection. Migrant workers may carry the infection back to their wives when they return home. Long-distance truck and public transport drivers are also seen as key agents in the spread of HIV. Women and girls are disproportionately affected by AIDS in Africa. According to UNAIDS officials and publications, among other sources, contraction of HIV by girls from older men is a significant factor contributing to higher rates of infection among young women than in young men. While older men are more likely than young men to be HIV-positive, girls in impoverished contexts often view relationships with older men as vital opportunities for achieving financial, material, and social security. According to surveys, in many African countries, large numbers of young women lack comprehensive knowledge of HIV transmission. Many believe that female infection rates would be lower if women's rights were more widely respected in Africa, and if women exercised more political and socio-economic power. Human Rights Watch (HRW) and other organizations have reported that domestic violence targeting women in some African countries has made these women more vulnerable to HIV infection, in part by depriving them of the power to negotiate condom use. For this reason, some policy advocates see a need for greater support for fidelity campaigns primarily aimed at African men. Women also lack or have weak property rights in many African countries, making their homes or property vulnerable to seizure by relatives when women suffer the loss of their spouses due to AIDS. Social and Economic Consequences AIDS is having severe negative social and economic consequences in Africa, and these effects are expected to continue for many years, as suggested by a January 2000 Central Intelligence Agency National Intelligence Estimate on the infectious disease threats: At least some of the hardest-hit countries, initially in Africa and later in other regions, will face a demographic catastrophe as HIV/AIDS and associated diseases reduce human life expectancy dramatically and kill up to a quarter of their populations over the period of this Estimate. This will further impoverish the poor, and often the middle class, and produce a huge and impoverished orphan cohort unable to cope and vulnerable to exploitation and radicalization (CIA, The Global Infectious Disease Threat and Its Implications for the United States, http://www.cia.gov/ ). The estimate predicted that AIDS would generate increased political instability and slow democratic development. The World Bank ( Intensifying Action Against HIV/AIDS in Africa , September 1999 ) has reached similar conclusions with respect to Africa's economic future: The illness and impending death of up to 25% of all adults in some countries will have an enormous impact on national productivity and earnings. Labor productivity is likely to drop, the benefits of education will be lost, and resources that would have been used for investments will be used for health care, orphan care, and funerals. Savings rates will decline, and the loss of human capital will affect production and the quality of life for years to come. In the most severely affected countries, sharp drops in life expectancy are occurring, reversing major gains achieved in recent decades. According to UNAIDS, average life expectancy in Africa is now 47 years due to AIDS, whereas it would have been 62 years in its absence. A March 2004 U.S. Census Bureau report predicted absolute population declines by 2010 in South Africa, Botswana, and three other African countries due to AIDS. Rural Livelihoods Studies show that AIDS has devastating effects on rural families. The father is often the first to fall ill, and when this occurs, farm tools and animals may be sold to pay for his care, frequently leading to rapid impoverishment of often already poor families. Should the mother also become ill, children may be forced to shoulder responsibility for the full time care of their parents, farmsteads, and often of themselves, despite their frequently limited knowledge about how to carry out farm and domestic work. Many also become orphans. In 2001, the U.N. Food and Agriculture Organization reported that AIDS had killed about 7 million agricultural workers in 25 hard-hit countries in Africa and would likely cause 16 million more to die by 2020. In 10 of the most affected countries, labor force losses of between 10% to 26% were forecast. (FAO, HIV/AIDS, Food Security, and Rural Livelihoods , 2001). Some experts attribute serious food shortages in southern Africa in 2002 and 2003 to AIDS-related production losses. In February 2003, in separate testimony before the Senate Foreign Relations Committee and the House International Relations Committee, World Food Program (WFP) Executive Director James Morris said that AIDS was a central cause of the famine. In June 2004, Morris said that southern Africa was in a "death spiral" due to the effects of the AIDS pandemic, including the loss of human capacity and the devastation of rural areas, with resulting negative consequences for food security (WFP press release). The FAO supports many programs to alleviate the diverse threats that AIDS poses to agricultural production and food security. Workforce Depletion AIDS is blamed, in part, for increasing shortages of skilled workers and teachers in several countries and is claiming many African lives at middle and upper levels of public and private sector management. Although unemployment is generally high in Africa, trained personnel are not readily replaced. Dr. Peter Piot, UNAIDS Executive Director, told a June 2, 2005, special U.N. General Assembly meeting on AIDS that by 2006, 11 African countries will have lost 10% of their workforce to the disease. A May 2002 World Bank study, Education and HIV/AIDS: A Window of Hope, reported that over 30% of teachers were HIV positive in parts of Malawi and Uganda, 20% in Zambia, and 12% in South Africa. Reports from diverse sources have since continued to mirror such findings. Security AIDS may have serious security consequences for much of Africa, since HIV infection rates in many militaries are reportedly high. Domestic political stability could also be threatened in African countries if the security forces become unable to perform their duties due to AIDS. Peacekeeping is also at risk, because African soldiers are expected to play an important peacekeeping role in Africa in the years ahead. The infection rate in South Africa has been estimated at 23%, with higher rates reported for units based in heavily infected KwaZulu-Natal province. Some Southern African militaries, however, are pursuing efforts to treat and counter an increase in AIDS infections. Responses to the AIDS Epidemic Donor governments, non-governmental organizations (NGOs) working in Africa, and African governments have responded to the AIDS epidemic primarily by attempting to reduce the number of new HIV infections through prevention programs, and to some degree, by trying to ameliorate the damage done by AIDS to families, societies, and economies. A third response, treatment of AIDS sufferers with antiretroviral drugs (ARVs) that can result in long-term survival, is increasing rapidly in some African contexts, as treatment and drug distribution efforts expand, but ARVs remain inaccessible to the vast majority of those in need of them in Africa (See below, "AIDS Treatment Issues"). Anti-AIDS programs and projects typically provide information on how HIV is spread and on how it can be avoided through the media, posters, lectures, and skits. Some success has been claimed for these efforts in persuading youth to delay the age of "sexual debut" and to remain faithful to a single partner. The Bush Administration advocates an expansion of prevention programs focusing on abstinence until marriage and marital faithfulness as effective means of slowing the spread of HIV, although some critics maintain that this may be unrealistic in social environments characterized by poverty and lack of education. Some also question whether such approaches can benefit poor married women in Africa, who have little power to refuse the sexual demands of their husbands, whether infected or not—or, in some cases, to control their extra-marital activities. They are also often unable to refuse spousal decisions to take more than one wife, given that polygamous marriage is common and deeply embedded in many African societies. In January 2006, First Lady Laura Bush defended abstinence approaches, saying that she had "always been a little bit irritated by criticism of abstinence, because abstinence is absolutely, 100 percent effective in fighting a sexually transmittable disease." She added that "In many countries where girls feel obligated to comply with the wishes of men, girls need to know that abstinence is a choice." Donor-sponsored voluntary counseling and testing (VCT) programs, where available, enable African men and women to learn their HIV status. In Botswana, HIV tests are now offered as a routine part of medical visits, and many experts are urging that this be done continent-wide. AIDS awareness programs are found in many African schools and, increasingly, in the workplace, where employers are recognizing their interest in reducing infection rates among their employees. Many projects seek to make condoms readily available and to provide instruction in condom use. Several projects have had success in reducing mother-to-child transmission by administering the anti-HIV drug AZT or Nevirapine, before and during birth, and during infant nursing. Nevirapine, however, has been the subject of controversy. In December 2004, the Associated Press reported that important reporting flaws, including non-disclosure of bad drug reactions, had been found in a study of Nevirapine conducted in Uganda under U.S. National Institutes of Health (NIH) sponsorship. The allegations sparked criticism in Africa, including from the South Africa's ruling Africa National Congress, which in December 2004 charged that top U.S. officials had "entered into a conspiracy with a pharmaceutical company to tell lies and promote the sales of Nevirapine in Africa..." In response, NIH asserted in a statement that "single-dose Nevirapine is a safe and effective drug for preventing mother to infant transmission of HIV." It termed as "absolutely false" any implication of thousands of adverse reactions in the Uganda study. AIDS activists and others worried that the controversy would discourage use of the drug, often the only available means of preventing mother to child transmission (MTCT) of HIV. A later National Academies' Institute of Medicine assessment found that the Uganda study was valid and that Nevirapine should continue to be used for MTCT. Church groups and humanitarian organizations have helped Africa deal with the consequences of AIDS by setting up care and education programs for orphans. Public-private partnerships have also become an important vehicle for responding to the African AIDS pandemic. The Bill and Melinda Gates Foundation has been a major supporter of AIDS vaccine research and diverse AIDS programs pursued in cooperation with African governments and donors. The Rockefeller Foundation, working with UNAIDS and others, has sponsored programs to improve AIDS care in Africa, and both Bristol-Myers Squibb and Merck and Company, together with the Gates Foundation and the Harvard AIDS Institute, have undertaken programs with the Botswana government aimed at improving the country's health infrastructure and providing AIDS treatment to all who need it. In Uganda, Pfizer and the Pfizer Foundation fund Uganda's AIDS Support Organization and the Infectious Diseases Institute. It has trained 250 AIDS specialists annually, many slated to work in rural areas. In January 2006, the Swiss drug firm Roche said it plans to help African firms produce generic versions of its World Health Organization (WHO)-endorsed ARV, Saquinavir, under its Technology Transfer Initiative. The Global Fund to Fight AIDS, Tuberculosis, and Malaria, created in January 2002, commits about 60% of its grant funds to Africa, and about 60% of its grants worldwide go toward fighting AIDS. UNAIDS maintains that significant AIDS funding gaps remain. According to one study, $14.9 billion was needed in 2006 to fight HIV/AIDS in low- and middle-income countries globally in 2006, whereas $8.9 billion was likely to be provided. The funding gap is projected to rise in future years, according to a June 2005 UNAIDS report. Leadership Reaction in South Africa and Elsewhere Many observers believe that the spread of AIDS in Africa could have been slowed if African leaders had been more engaged and outspoken at earlier stages of the epidemic. President Thabo Mbeki of South Africa has come in for particular criticism on this score. In April 2000, he wrote to then-President Clinton and other heads of state defending dissident scientists who maintain that AIDS is not caused by the HIV virus. In March 2001, Mbeki rejected appeals that the national assembly declare the AIDS pandemic a national emergency. Under mounting domestic and international pressure, the South African government seemed to modify its position significantly when the government announced after an April 2002 cabinet meeting that it would triple the national AIDS budget. When an ARV drug treatment program had not been launched by March 2003, however, the South African Treatment Action Campaign (TAC) launched a civil disobedience campaign. In August 2003, the South African cabinet instructed the health ministry to develop a plan to provide antiretroviral therapy nationwide, but by March 2004, TAC was threatening a lawsuit unless the program was actually begun. Finally, in April 2004, the government began offering treatment at five hospitals in populous, highly urban Gauteng province. In its 2006 National Budget Review, the government reported that 112,000 patients were "enrolled" for ARV therapy by December 2005 but did not specify the number in publicly funded programs. Estimates of total numbers in treatment and proportions under public and private care vary widely. In February 2005, TAC estimated that about 38% of 70,000 patients under ARV therapy were in public programs; the remainder were receiving private care. Another activist group, the International Treatment Preparedness Coalition, reported in November 2005 that of 150,000 persons receiving treatment in August 2005, 50%-53% were in public programs. In May 2006, UNAIDS reported that about 190,000 South Africans were receiving ARV treatment, but that nearly 1 million, or more than 80% of those in need of ARV therapy, were not receiving it in 2005. The delays in South Africa's response to the pandemic have been costly, many experts believe. South African Health Department data have shown HIV infection rates continuing to rise, though according to UNAIDS figures, rates were similar between 2003 and 2005, though they rose among pregnant women. About 29.5% of pregnant women in South Africa were found to be HIV positive in 2004, up from 27.9% in 2003 and 26.5% in 2002. The Health Department estimates that there were 5.6 million HIV-positive South Africans in 2004. A September 2004 report by the Bureau of Market Research at the University of South Africa predicted that AIDS-related deaths would exceed 500,000 yearly from 2007 to 2011. A lower rate of growth in infections reportedly may be under way; a November 2005 South African Human Sciences Research Council data release stated that South Africa's AIDS epidemic may be "leveling off." Some critics of the government have accused government leaders of being "AIDS denialists" and of curtailing the rate of scaling up access to ARVs because of some officials' reported doubts about ARV use. South Africa's Health Minister Manto Tshabalala Msimang has reportedly repeatedly questioned the effectiveness of ARV drugs and has asserted that healthy diets and special foods, such as raw garlic and lemon peel, can offer protection from the disease ( Mail and Guardian Online , May 5, 2005). Former President Nelson Mandela, seeking to combat the stigma associated with AIDS, announced in January 2005, that his son, Makgatho, had died of AIDS. In the rest of Africa, many heads of state, including the presidents of Uganda, Botswana, Nigeria, and several other countries, are taking major roles in fighting the epidemic. Several regional AIDS initiatives have been launched. For example, in August 2003, the Southern African Development Community (SADC) agreed to an AIDS strategic framework, including the creation of a regional fund to fight the disease. The New Partnership for Africa's Development (NEPAD), in partnership with the African Union, UNAIDS, and other multinational entities, has formulated a range of strategies for countering AIDS, though the products of these efforts appear to be limited at present. Uganda's president, Yoweri Museveni, has long been recognized for leading a successful prevention campaign against AIDS in Uganda, where the ABC (Abstinence, Be Faithful, or Use Condoms) transmission prevention program has won wide praise. A Senate Foreign Relations Africa Subcommittee hearing in May 2003, focused on "Fighting AIDS in Uganda: What Went Right." Dr. Anne Peterson, Assistant Administrator for Global Health at the U.S. Agency for International Development (USAID), testified that the "Uganda success story is about prevention." She said that successes had been recorded in promoting abstinence and faithfulness to partners, while increased condom use in recent years had also contributed to prevalence declines. Sophia Mukasa Monico, a member of the Global Health Council and a former AIDS worker in Uganda, testified that all three program elements are necessary for prevention to work but noted that the Ugandan epidemic was still "raging"and that much work to counter it remained to be done. In February 2005, Johns Hopkins and Columbia University researchers released a study of Rakai District, Uganda reporting that a local HIV prevalence decline was due to condom use and the deaths of infected people. Abstinence and monogamy appeared not to be increasing. Some saw this as evidence that sexual behavior change programs were less important than expected. Others argued that behavior had likely changed substantially prior to the study. In July 2005, First Lady Laura Bush, speaking in South Africa during a trip to Africa that included visits with AIDS patients and orphans, said that the Uganda-developed ABC model was "successful" and added that "ABC stands for Abstinence, Be faithful, and correct and consistent use of Condoms." Conflicting reports appeared in late summer 2005 regarding a shortage of condoms in Uganda for preventing HIV. Some AIDS activists and others blamed the alleged shortage on an emphasis on abstinence in U.S.-funded AIDS prevention programs and a change in policy by Ugandan government officials, who denied a shortage existed. A U.S. official attributed the problem to a shipment of defective condoms. AIDS Antiretroviral Treatment Issues Access by the poor to antiretroviral drugs (ARVs) has been perhaps the most contentious issue surrounding the response to Africa's AIDS epidemic. ARVs are used in a treatment regime generally dubbed Antiretroviral Therapy (ART). Three or more ARVs are often used in combination to halt the genetic replication of the HIV virus at different stages in its life cycle; this treatment regime is known as Highly Active ART (HAART). ART can enable AIDS victims to live relatively normal lives and permit long-term survival rather than early death. ARVs have proven highly effective in developed countries, including the United States, where AIDS, the eighth-ranked cause of death in 1996, was no longer among the top 15 causes by 1998, according to the U.S. Health and Human Services Department. The high cost of ARVs has proved a key obstacle to large scaling-up of access to ART in Africa, where most patients are poor and lack health insurance. Once estimated at between $10,000 and $15,000 per person per year, ART costs have dropped dramatically in recent years. In May 2000, five major pharmaceutical companies agreed to negotiate sharp reductions in the price of AIDS drugs sold in Africa. UNAIDS launched a program in cooperation with pharmaceutical firms to boost treatment access. In June 2001, it reported that 10 African countries had reached agreement with drug makers that would significantly reduce prices in exchange for health infrastructure improvements to assure that ARVs are administered safely. Initiatives to expand ARV availability continued, and treatment became a major focus of Global Fund and the President's Emergency Plan for AIDS Relief (PEPFAR) programs (see below). In December 2003, the WHO formally launched its "3 by 5" campaign to treat 3 million AIDS patients in poor countries by 2005, with resources from the Global Fund and donors. Leaders of the G8, concluding their summit in Scotland in July 2005, promised "a package for HIV prevention, treatment, and care," with the goal of providing "universal access to treatment for all those who need it by 2010." In October 2003, former President Bill Clinton announced that his Clinton Foundation HIV/AIDS Initiative (CHAI) had organized a program to provide generic three-drug ARV treatment in Africa and the Caribbean for about $.38 per day per AIDS patient using drugs manufactured in India and South Africa with backing from private donors and some donor governments, among other sources. In April 2004, the Clinton Foundation announced an agreement with UNICEF, the World Bank, and the Global Fund to expand the program to more than 100 developing countries. In April 2005, CHAI announced a pediatric AIDS program intended to put 10,000 HIV-positive children on ARV therapy in at least 10 countries in 2005, doubling the number of children in treatment. On January 12, 2006, former President Bill Clinton announced that CHAI had negotiated new agreements to lower prices of WHO-evaluated HIV tests by 50% and those of two antiretroviral drugs by 30%. These will be made available to the CHAI Procurement Consortium, a group of countries eligible to make purchases under CHAI agreements. It includes 50 developing countries. CHAI also helps countries to implement large-scale, integrated care, treatment, and prevention programs. Partner governments take the lead; CHAI provides technical aid, mobilizes human and financial resources, and promotes sharing of best practices. As a result of ARV scaling up efforts, UNAIDS reported in May 2006 an estimated 810,000 or about 17% of a total of about 4.7 million Africans in need of ART (72% of those in need worldwide) were receiving it by late 2005. This number was up from about 500,000 in June 2005 and up from about 150,000 a year earlier. Despite such successes, UNAIDS and WHO had reported in December 2005 that progress in expanding treatment and care in Africa was uneven across the region and within countries. In general, according to a report by UNAIDS in December 2005, there was "extensive unmet need" in most of Africa. By late 2005, UNAIDS reported, coverage levels of 45% or greater had been achieved in countries such as Botswana, Senegal, Uganda, and Namibia. In slightly under a third of African countries, coverage rates ranged between 10% and 31%, while in 18 countries, rates were below 10%. About 23.5% of all those receiving ART resided in South Africa. ART access in rural areas, where the majority of the population in many African countries—and the bulk of AIDS patients—live, is generally much poorer than in urban areas. Whether African countries are ready to "absorb" (effectively use) sharp increases in treatment funding has been another issue. AIDS activists believe that millions of Africans could quickly be given access to AIDS drugs. Others maintain that African supply channels cannot make the drugs consistently available to millions of patients and that regular monitoring of patients by medical personnel is not possible in much of Africa. Monitoring is necessary, they maintain, to deal with side effects and to adjust medications if drug resistance emerges. Many fear that if the drugs are taken irregularly, resistant HIV strains will emerge that could cause untreatable infections globally. It has been reported, however, that many African patients follow their AIDS therapy regimens equally or more consistently than many American patients. The creation of once-daily combined ARV tablets is widely seen as a likely way to facilitate access to and adherence to ARV therapy, notably in impoverished settings. In January 2006, the multinational drug firms Gilead and Bristol-Myers Squibb announced that they had jointly developed such a tablet for certain drugs. For some, the correct response to weaknesses in Africa's basic health care systems is to devote resources to strengthening those systems. News reports indicate that scaling up of treatment is often stymied by African government administrative inefficiencies and by donor limitations on what their funds may be used to purchase. Botswana's President Festus Mogae told a November 2003 meeting, held in Washington by the Center for Strategic and International Studies, that the widely-praised treatment program in his country is being hampered by a "brain drain" of health personnel. African physicians, nurses, and technicians are often hired by foreign governments, international organizations, and non-governmental organizations outside of Africa, or migrate to developed countries to take advantage of generally better job opportunities in such countries. The health minister of Mozambique, which has launched a pilot ARV drug treatment program, said in May 2004 that the country was unable to launch a nationwide program because of serious shortages of staff and equipment. WHO and other organizations have reported that Africa has the lowest ratio of health workers to population of any region. WHO reported that in 2005, there were 2.3 health workers (of all kinds) per 1,000 persons on average across Africa. It also reported that 36 of 46 (78%) African countries surveyed had critical shortages of doctors, nurses and midwives, and would have to increase such professionals by 139% in order to adequately meet current needs. AIDS activists have urged that African governments issue "compulsory licenses" to allow the manufacture or importation of inexpensive copies of patented AIDS drugs ("generic drugs"). In November 2001, a ministerial-level meeting of the World Trade Organization (WTO) in Doha, Qatar, approved a declaration stating that the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) should be implemented in a manner supportive of promoting access to medicines for all. The declaration affirmed the right of countries to issue compulsory licenses and gave the least-developed countries until 2016 to implement TRIPS. The question of whether countries manufacturing generic drugs, such as India or Thailand, should be permitted to export to poor countries was left for further negotiation through a committee known as the Council for TRIPS. Although the Doha declaration drew broad praise, some AIDS activists criticized it for not permitting imports of generics. Some in the pharmaceutical industry, on the other hand, expressed concern that the declaration was too permissive and might reduce profits that, they argued, fund medical research. Others, however, maintained that the declaration would have little practical impact; in their view, poverty, rather than patents, is the key obstacle to drug access in Africa. In August 2003, the WTO reached agreement on a plan to allow poor countries to import generic copies of essential drugs, but the debate over access to ARVs in Africa seems likely to continue. This agreement was ratified in December 2005 at the Hong Kong WTO ministerial meeting. In March 2005, India's parliament passed patent legislation expected to sharply raise prices in Africa and elsewhere for Indian-manufactured generic copies of newly discovered AIDS medications. Cheap generic copies of existing drugs can still be sold, although sellers will have to pay licensing fees to patent holders. Effectiveness of the Response The response to AIDS in Africa has had some successes, most notably in Uganda, where the rate of infection among pregnant women in urban areas fell from 29.5% in 1992 to 5% in 2001 (UNAIDS, AIDS Epidemic Update, December 2002) . In most African countries, prevalence rates in 2005 were roughly similar to those in 2003, with only marginal increases or decreases. UNAIDS findings have indicated that sexual behavior patterns among young urbanites in some other countries may be changing in ways that combat the spread of HIV, although increases among populations continue in many African cities. Despite some success stories, however, the number of infected people in Africa continues to grow, in part due to general population increases. The estimated number of HIV-positive persons in Africa increased from 21.6 million in 2003 to 22.5 million in 2007. Experts contend that there are multiple social barriers to a more effective AIDS response in Africa, such as cultural norms that make it difficult for many government, religious, and community leaders to acknowledge or discuss sexual matters, including sex practices, prostitution, and the use of condoms. However, experts continue to advocate AIDS awareness and public education and outreach efforts as essential components of the response to the epidemic. Indeed, there is strong support for an intensification of such efforts, as well as adaptations to make them more effective. The lives of HIV patients could be significantly prolonged and improved, some maintain, if more were done to identify and treat the opportunistic infections, notably tuberculosis (TB), that often accompany AIDS. Millions of Africans suffer dual HIV-TB infections, and their combined effects dramatically shorten life. TB can be cured by multi-month, combined drug treatments, even in HIV-infected patients. However, according to the WHO, Africans often delay seeking treatment for TB or do not complete their drug regimens, contributing to high death rates among those with dual infections. UNAIDS and the WHO have recommended that Africans infected with HIV be treated with an antibiotic/sulfa drug combination known as cotrimoxazole in order to prevent opportunistic infections. Studies indicate that the drug could reduce AIDS death rates at a cost of between $8 and $17 per year per patient. The Pfizer Corporation donates the anti-fungal Diflucan (fluconazole), used to treat AIDS-related opportunistic infections (such as cryptococcal meningitis, a dangerous brain inflammation) to patients in 18 African countries through the Pfizer Diflucan Partnership Program (DPP). DPP is a public-private effort in collaboration with health ministries, local clinics, and non-governmental organizations. Further information on the response to AIDS in Africa and elsewhere may be found at the following websites. Centers for Disease Control (CDC): http://www.cdc.gov/nchstp/od/nchstp.html Global Fund to Fight AIDS, Tuberculosis & Malaria: http://www.theglobalfund.org/en International AIDS Vaccine Initiative: http://www.iavi.org International Association of Physicians in AIDS Care: http://www.iapac.org Kaiser Network: http://www.kaisernetwork.org ; click "HIV Daily Reports" UNAIDS: http://www.unaids.org/en/default.asp USAID: http://www.usaid.gov/our_work/global_health/aids/index.html World Bank: http://www.worldbank.org ; click "Topics >> AIDS" U.S. Policy U.S. concern over AIDS in Africa began to mount during the 1980s, as the severity of the epidemic became apparent. In 1987, Congress earmarked FY1988 funds for fighting AIDS worldwide, and House appropriators noted that in Africa, AIDS had the potential for "undermining all development efforts" to date (H.Rept. 100-283). In subsequent years, Congress supported AIDS spending at or above levels requested by the executive branch, either through earmarks or report language. Nevertheless, a widely discussed July 2000 Washington Post article called into question the adequacy and timeliness of the early U.S. response to the HIV/AIDS threat in Africa (Barton Gellman, "The Global Response to AIDS in Africa: World Shunned Signs of Coming Plague," Washington Post, July 5, 2000). Clinton Administration As the severity of the epidemic continued to deepen, many of those concerned for Africa's future, both inside and outside government, came to feel that more should be done. In July 1999, the Clinton Administration proposed $100 million in additional spending for a global LIFE (Leadership and Investment in Fighting an Epidemic) AIDS initiative, with a heavy focus on Africa. Funds approved during the FY2000 appropriations process supported most of this initiative, and funded the engagement of the Department of Health and Human Services (HHS), the Departments of Labor (DoL), and the Department of Defense (DoD), in addition to USAID, in the global fight against HIV/AIDS. On June 27, 2000, the Peace Corps announced that all volunteers serving in Africa would be trained as AIDS educators. USAID asserted in 2001 that its support of multilateral efforts and direct sponsorship of regional and bilateral programs had made it the global leader in the international response to AIDS since 1986, when it initiated AIDS prevention programs in developing countries (USAID, Leading the Way: USAID Responds to HIV/AIDS, September 2001). USAID had sponsored AIDS education programs; trained AIDS educators, counselors, and clinicians; supported condom distribution; and sponsored AIDS research. USAID claimed several successes in Africa. These included helping to reduce HIV prevalence among young Ugandans; preventing an outbreak of the epidemic in Senegal; reducing the frequency of sexually transmitted infections in several African countries; sharply increasing condom availability in Kenya and elsewhere; assisting children orphaned by AIDS; and sponsoring the development of useful new technologies, including the female condom. Bush Administration Combating the AIDS pandemic in Africa has been an important Bush Administration foreign assistance program goal. In May 2001, President Bush made the "founding pledge" of $200 million to the Global Fund, and in June 2002, he announced a $500 million International Mother and Child HIV Prevention Initiative to support efforts to prevent mother-to-child AIDS transmission. Eight African countries were named as beneficiaries. In his January 2003 State of the Union address, President Bush announced the launching of the President's Emergency Plan for AIDS Relief (PEPFAR), pledging $15 billion for fiscal years 2004 through 2008, including $10 billion in "new money," that is, spending in addition to then current levels. In July 2003, President Bush made AIDS a special focus during a five-day trip to Africa. On July 8, in Senegal, the President told Africans, "we will join with you in turning the tide against AIDS in Africa." On July 10, speaking in Botswana, the President said that, "this is the deadliest enemy Africa has ever faced, and you will not face this epidemic alone." In September 2003, then Secretary of State Colin Powell told a U.N. General Assembly special session on AIDS that the epidemic was "more devastating than any terrorist attack" and that the United States would "remain at the forefront" of efforts to combat the epidemic. PEPFAR was authorized by P.L. 108 - 25 , the United States Leadership Against Global HIV/AIDS, Tuberculosis, and Malaria Act of 2003, signed into law by President Bush on May 27, 2003. Its implementation has resulted in major spending increases for HIV/AIDS prevention, care, and treatment in 15 "focus countries," 12 in Africa (Botswana, Cote d'Ivoire, Ethiopia, Kenya, Mozambique, Namibia, Nigeria, Rwanda, South Africa, Tanzania, Uganda, and Zambia). PEPFAR funds are provided through the Global HIV/AIDS Initiative (GHAI), headquartered at the State Department. The GHAI is headed by a U.S. Global AIDS Coordinator, who coordinates GHAI programs in focus countries and other international AIDS programs implemented by USAID and other agencies. Permanent incumbents in the Global AIDS Coordinator position are nominated by the President and confirmed by the Senate. The first Global AIDS Coordinator was Randall Tobias, the former Administrator of USAID and the Director of U.S. Foreign Assistance. Ambassador Mark Dybul is now the U.S. Global AIDS Coordinator. In February 2004, the State Department issued a report http://www.state.gov/s/gac/rl/or/c11652.htm which provided details on how PEPFAR would be implemented, and proposed to use initial PEPFAR funds to support several "public-private partnership" treatment programs. PEPFAR aims to prevent 7 million new infections globally, provide ARV drugs for 2 million infected people, and provide care for 10 million infected people, including orphans. The Administration has submitted to Congress two subsequent annual PEPFAR reports that describe the status of PEPFAR program policy and program administration, as well as a number of other related reports. The Office of the Global AIDS Coordinator (OGAC) at the State Department administers the bulk of U.S. AIDS assistance to Africa. PEPFAR was enacted, in part, to simplify the international AIDS budget, enhance transparency, and stress the President's interest in fighting AIDS and his backing for what the State Department reports is "the largest commitment ever by a single nation for an international health initiative." Prior to PEPFAR, the principal channels for HIV/AIDS assistance to Africa were USAID and the Global AIDS Program (GAP) of the Centers for Disease Control (CDC) in the Health and Human Services Department. Most USAID spending on AIDS in Africa is through the Child Survival and Health Programs Fund. Limited amounts are provided through other accounts, such as multi-functional Economic Support Fund, Peace Corps, and Migration and Refugee Assistance. The Department of Defense (DoD) has undertaken an HIV/AIDS Prevention Program, primarily with African armed forces and administered by the Naval Health Research Center in San Diego. It also focuses on education and creation of policy responses. As in other recent years, the Administration did not request funding for the program in FY2007. In FY2006, Congress continued to support it by appropriating $5.5 million (of which $3.2 million went to Africa). Foreign Military Financing (FMF) funds are also used to support this initiative. A Department of Labor (DOL) program in the past supported AIDS education in the workplace in several African countries, but was not funded in FY2006. Funds for these DOL efforts were not requested in FY2007. Additional U.S. funds reach Africa indirectly through the AIDS programs of the United Nations (U.N.), the World Bank, and the Global Fund. The scale of the response to the pandemic in Africa by the United States and other donors remains a subject of intense debate. The U.N. Special Envoy for HIV/AIDS in Africa, Stephen Lewis, has been a persistent critic, telling a September 2003 conference on AIDS in Africa that he was "enraged by the behavior of the rich powers" with respect to the epidemic. Many activist groups have made similar critiques. The singer Bono said he had a "good old row" with President Bush in a September 2003 meeting on the level of U.S. funding for fighting the international AIDS epidemic. Nonetheless, as noted above, others have argued that Africa's ability to absorb increased AIDS funding is limited and that health infrastructure will have to be expanded before new funds can be spent effectively. Many AIDS activists and others have praised the President's initiatives, notably the large levels of funding with which they have been supported. During the initial stages of its implementation, however, some critics maintained that PEPFAR was starting too slowly. Some have also characterized the program as too strongly unilateral and would like the United States to act in closer cooperation with other countries and donors, especially the Global Fund. Some have questioned whether PEPFAR will do enough to directly strengthen African health care institutions and capabilities for coping with AIDS over the long term, or whether the funds will go primarily to U.S.-based organizations. Some also urged increased appropriations, as some have continued to do. U.N. Secretary General Kofi Annan, during an interview at the July 2004 international AIDS conference in Bangkok, urged U.S. contributions of $1 billion annually for the Global Fund. Then-U.S. Global AIDS Coordinator Randall Tobias responded by stating that "It's not going to happen." Annan asked the United States to show the same leadership in the AIDS struggle that it had shown in the war on terrorism. Then-U.S. State Department spokesman Richard Boucher rejected the implied criticism, saying that the Bush Administration had taken the AIDS crisis very seriously and that the $15 billion pledged to fight the epidemic over five years was an "enormous and significant amount." More recently, some healthcare advocates have criticized what they see as a programmatic over-emphasis on efforts to promote the use of abstinence in the prevention of HIV, as opposed to the distribution and promotion of condoms for this purpose. Critics have charged that funding for PEPFAR abstinence programs, notably in Africa, has increasingly replaced other HIV prevention measures and that the United States is today sending fewer condoms abroad than in 1990 (Center for Health and Gender Equity, Prevention Funding Under [PEPFAR] : Law, Policy and Interpretation , December 2005). Some have cited as evidence for this contention, an April 2006 Government Accountability Office (GAO) report entitled Global Health: Spending Requirement Presents Challenges for Allocating Prevention Funding under the President ' s Emergency Plan for AIDS Relief . The GAO found that guidance requiring that 33% of PEPFAR HIV prevention funds be spent on abstinence and faithfulness-focused programs had, in some cases, led to decreases in funding for certain other types of HIV prevention efforts. It also suggested that the guidance contained ambiguities that had created uncertainties among some country field teams about how to implement PEPFAR programs. In March 2005, the Department of State released Engendering Bold Leadership: The President ' s Emergency Plan for AIDS Relief , the first annual report to Congress on the initiative. In an introductory letter to the report, Randall Tobias called PEPFAR "coordinated, accountable, and powerful." The report stated that 152,000 African patients were receiving AIDS treatment due to PEPFAR and that 119 million had been reached with mass media campaigns promoting abstinence and faithfulness, while 71 million had been reached with messages promoting other prevention measures, including the use of condoms. The President's second annual report to Congress stated that while 115.23 million condoms had been shipped to Focus Countries in 2001, 198.4 million had been shipped in 2005—a 72% increase. Treatment The Financial Times reported in April 2004 that the United States was withholding support from a program intended to treat 140,000 AIDS patients in Kenya with antiretrovirals because it would rely on a generic three-drug Fixed Dose Combination (FDC) pill. Many favor approval of FDCs, including copies of drugs made by different companies, on grounds that they are simpler to prescribe and need to be taken just once or twice a day. U.S. officials had expressed concerns that further study was needed to assure that their widespread or improper distribution did not contribute to the emergence of resistant HIV strains. The issue was submitted to a panel of experts instructed to report by mid-May 2004. Several Members of Congress later wrote to President Bush asking that the United States join an international consensus that generics are safe and essential for AIDS treatment. In May 2004, then-Health and Human Services Secretary Tommy Thompson announced that the U.S. Food and Drug Administration (FDA) was instituting an expedited process that could lead to the approval of the use of FDCs in PEPFAR-funded programs. Many hailed the news as a step forward in making cheaper and more reliable antiretroviral therapy available in Africa, but critics said it placed an unnecessary hurdle in the way of distributing such pills. They maintained that the United States should have relied on the approval process of the World Health Organization, which had already cleared such pills. By June 2005, the FDA had reportedly cleared seven generic antiretrovirals manufactured in South Africa and India. However, the Boston Globe reported on June 20 that four African countries, Nigeria, Uganda, Ethiopia, and Tanzania, were refusing to accept generic FDA-approved drugs for use in U.S.-funded treatment programs. Instead, the countries sought approval of the drugs by WHO. U.S. Assistance Under the President's FY2008 budget request, the 12 focus countries in Africa would receive $3.421 billion under the GHAI account. Table 5 reports available information on recent U.S. spending levels on AIDS programs in Africa. Legislative Action, 2000-2004 The Global AIDS and Tuberculosis Relief Act of 2000 ( P.L. 106 - 264 ), enacted in August 2000, authorized funding for FY2001 and FY2002 for a comprehensive, coordinated, worldwide HIV/AIDS effort under USAID. In the 107 th Congress, several bills were introduced with international or Africa-related AIDS-related provisions. A major international AIDS authorization bill, H.R. 2069 , passed both chambers during the 107 th Congress but did not go to conference. In May 2003, Congress approved and President Bush signed into law H.R. 1298 / P.L. 108 - 25 , the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003. It authorized th establishment of PEPFAR and the allocation of $3 billion per year for the program from FY2004 through FY2008 (a total of $15 billion), and created the office of the Global AIDS Coordinator at the State Department. Appropriations measures have supported a variety of programs helping Africa fight the pandemic. Legislation in the 109th Congress P.L. 109 - 95 (formerly H.R. 1409 , Lee), the Assistance for Orphans and Other Vulnerable Children in Developing Countries Act of 2005, was signed into law in November 2005. P.L. 109 - 102 (formerly H.R. 3057 , Kolbe), the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006 and P.L. 109 - 149 (formerly H.R. 3010 , Regula), the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2006, provided the bulk of U.S. international AIDS funding in FY2006. Bills introduced in the 109 th Congress, with provisions related to the African AIDS pandemic, included the following: H.R. 155 (Millender-McDonald), Mother to Child Plus Appropriations Act for Fiscal Year 2005; H.R. 164 (Millender-McDonald), International Pediatric HIV/AIDS Network Act of 2005; H.R. 2601 (Smith), Foreign Relations Authorization Act, Fiscal Years 2006 and 2007; S. 600 (Lugar), Foreign Affairs Authorization Act, Fiscal Years 2006 and 2007; S. 850 (Frist), Global Health Corps Act of 2005; and S. 2125 (Obama), Democratic Republic of the Congo Relief, Security, and Democracy Promotion Act of 2005. Legislation in the 110th Congress Apart from appropriations legislation that would fund global HIV/AIDS assistance programs, legislation introduced in the 110 th Congress that focus on AIDS in Africa include: S. 805 (Durbin) and H.R. 3812 (Lee), both entitled African Health Capacity Investment Act of 2007, would have authorized the President to provide assistance, including through international or nongovernmental organizations, for programs to improve human health care capacity in sub-Saharan Africa. They would direct the President to develop and transmit to Congress a strategy for coordinating, implementing, and monitoring assistance programs for human health care capacity in sub-Saharan Africa. H.R. 1713 (Lee) and S. 2415 (Clinton), both entitled Protection Against Transmission of HIV for Women and Youth Act of 2007. The bills would have directed the President to: (1) formulate and submit to the appropriate congressional committees, and make available to the public, a comprehensive and culturally appropriate global HIV prevention strategy that addresses the HIV vulnerability of married and unmarried women and girls and seeks to reduce the factors that lead to gender disparities in HIV infection rates; (2) ensure that the United States coordinates its overall HIV/AIDS policy and programs with foreign governments, international organizations, other donor countries, and indigenous organizations; and (3) provide clear guidance to U.S. field missions. S.Con.Res. 31 (Feingold), entitled A concurrent resolution expressing support for advancing vital United States interests through increased engagement in health programs that alleviate disease and reduce premature death in developing nations, especially through programs that combat high levels of infectious disease improve children's and women's health, decrease malnutrition, reduce unintended pregnancies, fight the spread of HIV/AIDS, encourage healthy behaviors, and strengthen health care capacity. During the first session of the 110 th Congress, the Senate Foreign Relations Committee held the following two hearings on HIV/AIDS: Perspectives on the next Phase of the Global Fight Against Aids, Tuberculosis, and Malaria, December 13, 2007; and The Next Phase of the Global Fight Against HIV/AIDS, October 24, 2007. During the first session of the 110 th Congress, the Subcommittee on Africa and Global Health of the House Committee on Foreign Affairs held the following hearing on HIV/AIDS: The President's Emergency Plan for AIDS Relief: Is It Fulfilling the Nutrition and Food Security Needs of People Living with HIV/AIDS?, October 9, 2007. Placeholder here as well

Sub-Saharan Africa ("Africa" hereafter) has been more severely affected by AIDS than any other world region. In 2007, the United Nations reports, there were about 22.5 million HIV-positive persons in Africa, which has nearly 12% of the world's population but about 68% of the global total of infected persons. The adult rate of infection in Africa in late 2005 was 6.1%, compared with 1% worldwide, but had dropped to 5% by 2007, compared to .8% worldwide. Nine southern African countries have infection rates above 10%. In 2007, 35% of all people living globally with HIV lived in Southern Africa, where 32% of all global new HIV infections and AIDS deaths occurred. About 90% of infected children globally live in Africa, where about 61% of infected adults are women. As many as 30 million Africans may have died of AIDS since 1982, including 1.6 million who died in 2007, accounting for about 76% of global AIDS deaths in 2007. AIDS has surpassed malaria as the leading cause of death in Africa. It kills many more Africans than does war. Experts attribute the severity of Africa's AIDS epidemic to poverty, lack of female empowerment, high rates of male worker migration, and other factors. Many national health systems are ill-equipped for prevention, diagnosis, and treatment. AIDS causes severe socioeconomic consequences, e.g., declines in economic productivity due to sharp drops in life expectancy and the loss of skilled workers. It also devastates family structures. There are about 11.4 million African AIDS orphans, many of whom lack access to adequate nutrition and social services. Private organizations and the governments of donor and African nations have responded by supporting diverse efforts to prevent and reduce the rate of new infections and by trying to abate damage done by AIDS to families, societies, and economies. The adequacy of this response is much debated. An estimated 1.3 million Africa AIDS patients receiving antiretroviral (ARV) drug treatment in late-2005, up from 150,000 in mid-2004. An estimated 4.8 million Africans needed such therapy in late 2005. U.S. and other initiatives are reportedly sharply expanding access to treatment. Advocates see this goal as an affordable means of reducing the impact of the pandemic. Skeptics question whether drug access can continue to be rapidly scaled up in the absence of costly general health infrastructure improvements. U.S. concern over AIDS in Africa grew in the 1980s, as the epidemic's severity became apparent. Congress has steadily increased funding for global AIDS programs. P.L. 108-25, signed into law on May 27, 2003, authorized $15 billion over five years for international AIDS programs under the President's Emergency Plan for AIDS Relief (PEPFAR). Twelve of 15 PEPFAR "focus countries" are in Africa. Under the FY2008 budget request, these 12 countries would receive $3.421 billion under the State Department's Global HIV/AIDS Initiative. Many activists have praised the extent of such aid, but some urge that more funding or different programs be provided. Congress is likely to re-authorize PEPFAR, which expires after FY2008, or create a successor program. Other bills in the 110th Congress that focus on AIDS in Africa include S. 805 (Durbin), H.R. 3812 (Lee), H.R. 1713 (Lee), S. 2415 (Clinton), and S.Con.Res. 31 Global AIDS appropriations are discussed in other CRS reports cited within this report, which will be updated periodically.

Introduction Congressional awareness of issues associated with locally owned and operated levees is increasing, largely because of the nationwide remapping of floodplains by the Federal Emergency Management Agency (FEMA) and efforts to reauthorize the FEMA's National Flood Insurance Program (NFIP) which expires on September 30, 2011. Floodplain remapping can result in owners of mortgaged structures located in areas protected by levees being required to purchase flood insurance if the levees cannot satisfy FEMA's levee accreditation requirements. Many communities and levee owners struggle with the expense and effort of data collection, repairs, and improvements needed to obtain levee accreditation and have approached Congress for assistance. Multiple federal agencies have roles in levee accreditation and federal levee assistance. Most notably, FEMA coordinates updates to Flood Insurance Rate Maps (FIRM) and issues levee accreditations that waive the mandatory purchase requirement for homeowners who reside in areas protected by levees. In certain limited situations discussed later in this report, the U.S. Army Corps of Engineers (Corps) may certify the data submitted to FEMA for accreditation purposes. However, existing federal actions to assist locally operated levees are limited, particularly in the scope of eligible activities. Limitations stem from constraints on federal funding and from levee operation, maintenance, and improvements generally being the responsibility of the levee owner. Levees are structures, either earthen embankments or concrete and steel floodwalls, built along rivers, or other bodies of water, to prevent water from flooding bordering land. Levees are located throughout the country and are found in approximately 22% of U.S. counties, where almost half of the U.S. population resides. Nationally, average economic damage from floods in leveed areas ranges between $5 billion and $10 billion annually. The full extent and specific conditions of the nation's levees are unknown, but the National Committee on Levee Safety, which was created by Congress, estimates that more than 100,000 miles of levees may exist. The federal government through the Corps built less than 15,000 miles of these levees. The Corps operates roughly 2,100 miles of the 15,000 it constructed. That is, local levee owners operate and maintain the estimated 85,000 miles of locally constructed levees and almost 13,000 miles of Corps constructed levees. One estimate puts the five-year level of investment for new construction or maintenance needed for the nation's existing levees at $50 billion. Congress has considered in recent years whether and how to change the current division of levee responsibilities and their costs, and whether to modify existing levee-related federal programs. Some stakeholders seek to expand flood hazard mitigation activities eligible for federal funds to include levees, while others are concerned that the federal government might assume more of the costs and liability for levee investments that they consider a local responsibility. Another aspect of the debate is whether to change FEMA's risk assessment, remapping, and timelines for obtaining levee accreditation. These changes are raised in the context of climate change and a broader rethinking of flood risk management and control structures (like levees) following Hurricane Katrina and recent floods. This report covers the federal role in locally operated levees. It does not address federally owned and operated levees, which are less common and are concentrated in a few areas of the United States (e.g., along the Mississippi River). The report first discusses the role of levees in flood risk reduction, the shared responsibilities for levees in the United States, and the role of three agencies: FEMA, the Corps, and the Natural Resources Conservation Service (NRCS) of the U.S. Department of Agriculture (USDA). Next, it discusses federal assistance for levees starting with their study and construction, then levee-related flood fighting and levee repair, rehabilitation, and inspection. It also describes the debate about whether levees investments have a role in federal flood mitigation programs. Corps, FEMA, and NRCS activities and authorities are compared. Finally, the report outlines policy options for locally operated levees that might be considered by the 112 th Congress. Legislative proposals in the 111 th Congress are discussed in an Appendix . Flood Risk Reduction and Levees in a Federal System In the United States, flood-related roles and responsibilities are distributed within a regulatory framework designed to permit the responsible development of the nation's floodplains. Local governments generally are responsible for land use and zoning decisions that shape floodplain and coastal development, but the federal and state governments also influence decisions on managing flood risk. State and local governments make decisions that allow or prohibit development in flood-prone areas. Local, private, and sometimes state entities construct, operate, and maintain most levees and have initial flood-fighting responsibilities. Agencies of the federal government operate flood control dams, offer crop insurance, support hazard mitigation, and provide emergency response and disaster aid for recovery from floods. The federal government constructs some of the nation's levees, but most often does in partnership with local project sponsors who are responsible for operation and maintenance. No federal program specifically regulates the design, placement, construction, or maintenance of nonfederal levees. While federal and state agencies often have their own policies and criteria for levee design, construction, and maintenance, there are no national engineering standards or policies for levee design or level-of-protection standards for different floodplain uses. Many levees protecting today's communities and agricultural investments originally were constructed more than 50 years ago by local interests reclaiming land for agriculture and other uses. Rather than each landowner building separate levees, landowners often consolidated their resources by forming a levee district. As a consequence of this history, many of today's physical constructions and configurations, as well as institutional arrangements for flood protection, have roots distinct from their current use as flood protection for development. For the most part, municipalities serving concentrated urban populations have assumed flood control responsibilities, while special levee districts remain active in rural and agricultural areas. Prior to the Lower Mississippi River Flood of 1927, the federal role in flood control was limited. In addition to authorizing the Corps to design and construct significant flood control projects along the Mississippi River (and on the Sacramento River (CA)), the Flood Control Act of 1928 reiterated the sense of Congress, at the insistence of President Coolidge, that there should be local contribution toward flood control works. The act also provided that the federal government generally could not be held liable for flood damage. From 1928 to 1936, there was considerable debate about the need for national planning for flood control and a national water resources program, and the proper roles of Congress and the Executive Branch in this planning and selection of construction projects. The Flood Control Act of 1936 (49 Stat. 1570) declared some flood control a "proper" federal activity: It is hereby recognized that destructive floods upon the rivers of the United States, upsetting orderly processes and causing loss of life and property, including the erosion of lands and impairing and obstructing navigation, highways, railroads, and other channels of commerce between the States, constitute a menace to national welfare; that it is the sense of Congress that flood control on navigational waters or their tributaries is a proper activity of the Federal Government in cooperation with States, their political sub-divisions and localities thereof; that investigations and improvements of rivers and other waterways, including watersheds thereof, for flood-control purposes are in the interest of the general welfare; that the Federal Government should improve or participate in the improvement of navigable waters or their tributaries including watersheds thereof, for flood-control purposes if the benefits to whomsoever they may accrue are in excess of the estimated costs, and if the lives and social security of people are otherwise adversely affected. Since 1936, Congress has authorized the Corps to construct hundreds of miles of levees. Today the federal role in flood risk management goes beyond assisting with the construction of dams and levees. For instance, some federal actions attempt to modify individual and community behavior to reduce flood vulnerability; the NFIP and FEMA's hazard mitigation programs are examples. Congress established the NFIP with the 1968 passage of the National Flood Insurance Act. Prior to the program's establishment the federal government relied on a "levee-only" policy that permitted unrestricted development of the floodplains along with an emphasis on structural flood control systems. Making federally subsidized flood insurance available to property owners signaled a shift in federal policy towards a flood control strategy that was less dependent on structural measures. The new policy had the intended consequence of regulating the development of flood-prone areas. The NFIP's multi-pronged regulatory system consists of flood risk assessment and mapping, flood insurance, and land use and building construction measures that restricted development in vulnerable areas. The NFIP allows for residential construction in known floodplains, with the proviso that construction must follow building code regulations that include flood-proofing requirements. FEMA's hazard mitigation programs fund mitigation activities such as elevating properties, acquiring properties and converting them to open space, retrofitting buildings, and implementing limited flood control systems. Divided Federal Responsibilities Federal agencies play various roles in planning, construction, maintenance and operation, repair and rehabilitation of levees and related flood insurance and mapping. Three agencies are authorized to provide federal assistance for locally owned or maintained levees—FEMA, Corps, and NRCS. FEMA has responsibility for NFIP flood risk assessment, mapping, and levee accreditation. The Corps performs some levee construction and damage repair and has the largest federal appropriations for these activities. NRCS provides some funds for repair of damaged levees through its Small Watershed Program. The levee-related roles of the three agencies are discussed below and in Table 1 . Federal Emergency Management Agency FEMA is responsible for flood risk assessment and mapping, flood insurance, and federal hazard mitigation. Much of the congressional attention concerning locally operated levees derives from concerns about insurance expenses under the NFIP. FEMA uses FIRMs to delineate flood risk zones and the applicable insurance premiums to be charged for properties covered by federally backed mortgages. FEMA is updating the nation's inventory of FIRMs and requiring verification, through accreditation, that all levees currently depicted on FIRMs meet design, operation, and maintenance standards for protection against the 1%-annual-chance flood. FEMA activities have generated a number of questions. Some communities and stakeholders have raised questions about the development and accuracy of the updated FIRMs. Some levee owners have questioned the costs and documentation requirements associated with levee accreditation. Questions concerning liability in the event of a levee failure have been raised, most notably by representatives of engineering firms. FEMA also operates various flood hazard mitigation grant programs that assist in removing repetitively flooded structures from floodplains, and conducts other activities to reduce flood impacts. Policy discussions surrounding these programs have questioned to what extent levee work should be eligible for FEMA mitigation funds. While some communities and levee owners want levee work to be funded by these programs, FEMA argues that funding levee projects would duplicate other federal programs and that appropriate provisions have not been made to address levee liability. Under FEMA regulations, hazard mitigation funds cannot replace project or program funding available under other federal authorities, unless there exists an extraordinary threat to lives, public health or safety, or improved property. This provides FEMA officials with discretion to determine whether other federal programs are more appropriate to fund levee projects. Because certain levee activities receive funding from the Corps or NRCS, FEMA has determined that these agencies have the primary authority for the repair of flood control works such as levees. As a result, FEMA hazard mitigation assistance grants have not been used for levee projects for at least the last decade. While FEMA officials cite program duplication as justification for denying levee projects mitigation funding, it can be argued that FEMA has not consistently applied the same standard regarding duplication of authorities. That is, FEMA officials have allowed Hazard Mitigation Grant Program (HMGP) funds to be used for disaster housing projects that were eligible for funding under the Community Development Block Grant (CDBG) program, administered by the Department of Housing and Urban Development (HUD). In fact, in some instances CDBG funds were used to augment HMGP-funded projects. Army Corps of Engineers The U.S. Army Corps of Engineers is responsible for much of the federal construction of flood control and storm protection infrastructure. At the direction of Congress, the Corps is authorized to participate in the cost-shared planning and construction of flood damage reduction projects, such as levees and floodwalls to reduce damages from riverine and coastal flood hazards. Appropriations for these Corps construction projects have not kept pace with authorizations, and there is a significant backlog of congressionally authorized studies and construction projects. Interest in expanding Corps levee responsibilities raises questions about how to prioritize the federal funds Congress appropriates for the Corps, given the competing demand for its water resources projects. As shown in Table 1 , the Corps has a limited role in the regular operation, maintenance, and improvement of locally operated levees. After construction, levees built by the Corps generally are turned over to a local entity for operation, maintenance, repair, and rehabilitation. Congress has authorized the agency to fight flooding at locally operated levees during emergencies in order to protect life and improved property (i.e., not levees protecting agricultural lands). The Corps can repair damage caused by a natural event at a levee that participates in the Corps' Rehabilitation and Inspection Program (RIP, also known as the P.L. 84-99 program). The Corps currently has no general authority, responsibility, or funding to assist local levee owners in assembling their NFIP levee accreditation packages, unless the levee is part of an ongoing Corps study or project. However, expanding the Corps' role in NFIP data certification and post-construction improvements of locally operated levees is being discussed as part of the policy debate on how to manage flood risk and promote risk reduction nationally. Natural Resources Conservation Service NRCS also funds levee projects, but on a smaller scale than the Corps. Most of these levees protect agricultural areas and typically do not provide a level of protection that can withstand large-scale flood events. Therefore, the NRCS role is often not raised in the context of the NFIP remapping and levee accreditation debates. NRCS programs, however, are part of the discussion regarding federal assistance for levees because FEMA often points to these programs as a rationale for denying levee projects under its hazard mitigation programs. Levee Liability Issues Liability risk for levee services (e.g., design, construction, maintenance, inspection, and data certification) may limit interest among public and private entities in providing such services and participating in levee projects. For public entities, this concern stems in part from the uncertainty related to the implications of Paterno v. State of California, which held the State of California liable for a levee it did not build, but operated as part of a state-sponsored levee system . Anecdotal evidence suggests that some engineering firms have declined to perform levee work because of liability concerns; however, other anecdotal information suggests that levee owners generally have found a firm or some other means to perform the needed work (e.g., city engineers signing NFIP levee data certifications). The additional cost to levee owners from efforts of private engineering firms to cover their potential liability for the levee services is unknown. To some extent, federal agency liability for federally funded levee projects has been addressed through congressional action. One source of the federal government's immunity is the exception under the Federal Tort Claims Act for actions that constitute a discretionary function. A second source of immunity for the federal government is the Flood Control Act of 1928, which prevents the government from being sued for damages resulting from federally supported damage reduction projects or from floodwaters. However, as discussed in the later section " Policy Options for Assisting Locally Operated Levees ," some questions remain as to whether the immunity applies to all federal actions and agencies. National Flood Insurance Program FEMA's NFIP plays a significant role in federal levee policy and promotes interaction between FEMA and the Corps on levee accreditation. As discussed earlier, the 1968 National Flood Insurance Act established the NFIP. Federal flood insurance currently is available in participating communities to help individuals and small businesses recover from flood damage. FEMA officials point out that the NFIP has realized significant savings both to itself and to property owners by reducing the cost of disaster relief. The basic requirement of the flood management program (and access to federal flood insurance) is that communities adopt and enforce minimum land use and building code regulations to prevent new development from increasing the flood risk and to protect new and existing buildings. Property owners obtaining loans from federally regulated lending institutions, or receiving federal assistance for acquisition or construction in special flood hazard areas (SFHAs) in communities that participate in the NFIP, are required to purchase flood insurance for their outstanding mortgage balance, up to a maximum of $250,000 in coverage for single-family homes. The mandatory purchase requirement applies only to certain properties in floodplains. Levees that protect a community from a 1%-annual-chance flood can reduce the NFIP mandatory purchase requirement. Levees in NFIP Flood Risk Assessment and Mapping FEMA is required to identify special flood, mudslide or flood-related erosion hazards within the community, establish appropriate risk zone determinations, and reflect these determinations accurately on FIRMs. Flood maps generally delineate both high-risk zones and low-to-moderate risk zones (with a less than 1%-annual-chance of flooding). Flood maps have many uses, including local land-use planning, emergency preparedness and response, and natural resource management. Lending institutions and insurance companies also use FIRMs to calculate flood insurance rates and determine who is required to comply with mandatory purchase requirements. Therefore, how a levee is depicted on the FIRM has multiple consequences. In 2003, at the urging of Congress and in collaboration with state and local partners, FEMA launched a five-year public awareness and map modernization program (Map Mod) to convert existing paper FIRMs into more accurate digital flood insurance rate maps (DFIRMs). As part of the Map Mod, FEMA initiated a nationwide flood insurance study (FIS) to update flood-hazard data used to identify the flood hazard risk in "levee-impacted" areas (i.e., areas protected by levees) on DFIRMs. According to FEMA, the primary goals of the FIS and DFIRMs are to: incorporate available flood hazard information; convert the base flood elevation data from the National Geodetic Vertical Datum of 1929 to the North American Vertical Datum of 1988; and upgrade the FIRMs to a geographic information system (GIS) database format. As part of FEMA's Map Mod, FEMA also implemented a policy requiring verification that all levees currently depicted on FIRMs meet design, operation, and maintenance standards for protection against the 1%-annual-chance flood. FEMA reviews compliance with design, operation, and maintenance standards during the levee accreditation process. This process has increased congressional interest in federal assistance for compiling the accreditation package materials and for investments in levee improvements to meet FEMA's accreditation requirements. FEMA Levee Accreditation As of November 2010, FEMA has accredited approximately 4,800 levees (which includes both locally and federally operated levees). It is unclear what percentage of levees this represents since it is unknown how many levees exist nationwide. FEMA reviews levees for accreditation at the request of the entity that owns and operates the levee. The levee accreditation applications are reviewed as they are submitted. The regulatory requirements for accrediting levees as providing base flood protection are found in Title 44 of the Code of Federal Regulations , Section 65.10. On August 22, 2005, FEMA issued Procedure Memorandum No. 34 to clarify that while FEMA accredits the levees, it is the community or levee system owner's responsibility to provide data and documentation to show that a levee system meets the requirements of 44 C.F.R. § 65.10. A levee accreditation allows development in the "levee-impacted" area to be exempt from the NFIP mandatory purchase requirements and land use restrictions. Technical Criteria for Levee Accreditation In its process for deciding whether to accredit a levee, FEMA does not conduct a detailed physical levee inspection to determine whether, and how, the levee will perform in a flood. Rather, officials from FEMA's regional office typically meet with county and local community officials to put together a levee accreditation plan outlining a process and timeline to submit a certification of the levee data to FEMA. The certified levee data must document that: the levee is designed to withstand forces from the 1%-annual-chance flood based on its height, stability, foundation stability, and embankment protection; the levee has adequate freeboard (e.g., the levee height is at least three feet above design flood state); all closure devices function properly; operation and maintenance plans are adequate and in place; and interior drainage systems (pumps and canals) are functioning. FEMA's accreditation is not a levee performance guarantee. It is only a statement that data and documentation submitted to the agency comply with FEMA guidelines. If a levee that was previously accredited is found to no longer comply with FEMA standards, it is de-accredited. Costs of Obtaining Levee Accreditation Owners of locally operated levees are responsible for the costs associated with seeking and maintaining FEMA's levee accreditation. The costs of obtaining accreditation include producing the information necessary to certify that the levee provides protection from the 1%-annual-chance flood event, and making improvements to the levee to enhance its functioning so that it meets FEMA's accreditation requirements. Data on how much levee owners are investing in levee improvements and in data certification in order to obtain FEMA accreditation are not available. Some levee owners have expressed concerns about the costs and process for obtaining accreditation. The effectiveness and efficient functioning of FEMA's levee accreditation process have not been the subject of an independent assessment to date. Without an assessment, and its supporting data, it is difficult to identify whether, and how, the accreditation process could be improved. Data Certification FEMA requires that a professional engineer certify that a levee complies with all requirements established in 44 C.F.R. § 65.10(b) before it can appear on a FIRM; this process is known as levee data certification. The levee data certification package is used by FEMA as the basis of its determination for whether or not to accredit a levee. In 2005, FEMA increased the information requirements needed to accredit a levee. FEMA now requires more data on the structural integrity of the levee and the hydrology and hydraulics to which the levee is exposed than in the past. As a result, local owners of some levees that previously were accredited by FEMA are having trouble obtaining and paying for reaccreditation. In many cases, they face a lack of readily available data on their levees' construction, materials, and structural integrity and confront assessments that indicate a lower level of protection than previously thought. To complete the levee data certification, a professional engineer must sign a statement that the levee is designed in accordance with sound engineering practices to provide protection from the 1%-annual-chance event. Defining what constitutes sound engineering practices is complicated by the absence of a national levee model design for engineers to turn to as the professional standard for levee design parameters. Some engineering firms and their insurers have been concerned about liability if a firm certifies levee data and the levee later fails. Proposals for addressing this concern include providing immunity for the firms and clarifying that the professional engineer is certifying that the data comply with FEMA's requirements, rather than attesting to the levee's safety. Whether a federal agency certifying levee data would be immune from similar liability concerns is unclear and may be an issue if Congress considers increased Corps participation in data certification. Prior to the 2005 increased information requirements, FEMA accepted the Corps' inspection of levees that participated in the Corps' Rehabilitation and Inspection Program (RIP) as sufficient for the data certification for levee accreditation. Since 2005, Corps RIP inspections are insufficient to meet the current FEMA data certification requirements. The purpose of RIP inspections is to assess compliance with the requirements of RIP ─ that the levee owner is performing the maintenance required for RIP participation. The RIP inspections do not evaluate a levee's level of protection and structural integrity as required by FEMA for levee accreditation. In August 2010, the Corps released new guidance on how the agency will conduct the NFIP levee data certifications (which it calls levee system evaluations) that it has the authority to perform (see box "Limited Corps Role in Levee Data Certification"). The Corps process complies with the FEMA NFIP requirements under 44 C.F.R. § 65.10(b), but uses a different approach. The Corps approach is more focused on an evaluation of flood risk with the levee in place, while the 44 C.F.R. § 65.10(b) requirements are more focused on the level of protection provided by the levee. Provisionally Accredited Levees As discussed above, levee classifications on DFIRMs are determined by the FEMA levee accreditation process. The process of collecting and submitting data that document compliance with the criteria set forth in 44 C.F.R. § 65.10 may be time-consuming and expensive for communities. FEMA can offer to accredit levees provisionally while the accreditation documentation is collected and reviewed. Provisionally accredited levees (PALs) are shown on the DFIRMs as providing protection from the 1%-annual-chance event. As discussed above, the DFIRMs are used to determine flood insurance rates and purchase requirements. As shown in Table 2 , there are 295 PALs, which represent over 14% of all levees for which FEMA accreditation has been sought since mid-2006. Once a levee is provisionally accredited, the community has 24 months to submit documentation showing compliance with 44 C.F.R. § 65.10. If a community fails to produce documentation, the levee is de-accredited. As shown in Table 2 , as of November 2009, there were 687 levees that were provisionally accredited but for which documentation of compliance could not be produced within the required 24 months. FEMA has established guidelines for notifying communities that a PAL will be de-accredited. Prior to the expiration of the PAL designation, FEMA notifies the levee system owners, the community, and other stakeholders such as congressional offices of the possible de-accreditation. Once the 24-month period expires, the PAL designation is removed, the levee system is de-accredited, and FEMA initiates a mapping project in the impacted areas. From this point, the mapping phase takes roughly 18 months; if the levee owner submits information sufficient to obtain accreditation during this period, the levee may be accredited before the updated map goes into effect. A significant portion of the recent interest in federal levee assistance has come from PAL owners struggling to assemble their accreditation packages and make levee improvements to meet FEMA's requirements. Similarly, owners of levees that have been de-accredited have shown strong interest in federal assistance for levee improvements. Levee Study and Construction The Corps is the primary federal agency involved in the study and construction of levees. The NRCS provides limited assistance for small-scale levees. FEMA has had little involvement in levee planning and construction. Corps Flood Damage Reduction Projects As previously noted, the Corps, at the direction of Congress, is authorized to participate in the cost-shared planning and construction of flood damage reduction projects, such as building levees and floodwalls to reduce damages from riverine and coastal flood hazards. Corps involvement is predicated on the project being in the national interest, which is determined by the likelihood of widespread general benefits of the investment, a shortfall in the local ability to solve the water resources problem, and precedent and law. The standard process for Corps participation in a levee project requires two separate congressional authorizations—one for investigation and one for project construction—as well as annual appropriations. The investigation phase starts with Congress authorizing a study; if it is funded, the Corps then conducts an initial reconnaissance study followed by a more detailed feasibility study, which informs the congressional decision about whether to authorize the project for construction. The feasibility study analyzes whether it is in the national interest for the Corps to participate in the project and identifies the federally preferred alternative, if any. Since the mid-1980s, local project sponsors (often local governments or special levee and drainage districts) generally share construction cost of federal flood control projects and are fully responsible for their operation and maintenance. The cost-sharing for construction is 65% federal and 35% nonfederal for most flood control projects. The construction cost of these projects can range from a few million dollars to more than a billion dollars. The authorized cost is generally included as part of the enacted legislative language providing congressional authorization for project construction. NRCS Assistance for Small-Scale Levees NRCS has authority under two programs—the Watershed and Flood Prevention Operations Program (often referred to as the Small Watershed Program) and the Emergency Watershed Protection (EWP) program—to conduct small-scale levee work on private land. It is called the Small Watershed Program because no project may exceed 250,000 acres, and no structure may exceed more than 12,500 acre-feet of floodwater detention capacity, or 25,000 acre-feet of total capacity. The Small Watershed Program authorizes NRCS to provide technical and financial assistance to state and local organizations to plan and install measures to prevent erosion, sedimentation, and flood damage and to conserve, develop, and utilize land and water resources. While projects can include levees, they are on a much smaller scale compared with other federal projects. Operation, maintenance, and rehabilitation of every levee built under the Small Watershed Program is the responsibility of the local project sponsor upon completion. The Small Watershed Rehabilitation Program, also administered by NRCS, is authorized to rehabilitate only dams, not levees, built under the Small Watershed Program. Levee Related Flood Fighting The Corps and FEMA have several programs that authorize the agencies to assist with flood fighting in response to an imminent or occurring flood event. These flood fighting actions can include assisting with existing levees that are locally operated (e.g., temporary reinforcement measures) or the construction of temporary levees to manage floodwaters. Corps Flood Emergency Response Activities In P.L. 84-99 (33 U.S.C. § 701n), Congress gave the Corps emergency response authority that allows the agency to fight floods and other natural disasters. The law authorizes disaster preparedness, advance measures, emergency operations (disaster response and post-flood response), rehabilitation of flood control works threatened or destroyed by floods, protection or repair of federally authorized shore protection works threatened or destroyed by coastal storms, emergency dredging, and flood-related rescue operations. These activities are limited to actions to save lives and protect improved property (i.e., public facilities and services, and residential or commercial developments), and appropriations for flood related programs vary (see Table 3 ). FEMA's Public Assistance Program When a disaster occurs and a state is granted federal disaster assistance under the Stafford Act, funding under the Public Assistance program may be available to reimburse communities for flood-fighting activities and emergency repairs made to eligible levees. FEMA averages about $1.3 billion in PA program obligations per year. Although seven categories of projects are eligible for PA funding, most levee projects are funded under the Debris Removal and Water Control Facilities categories. Under the statutory provisions of the Stafford Act, the PA program does not have a funding cap, which means that all eligible projects receive federal funding for at least 75% of the project cost. Regulations establish eligible levee projects under the PA program. Eligible PA projects may include: emergency and permanent repairs to restore the levee to its pre-disaster condition; removal of debris in a flood control work; placement and removal of flood-fighting measures if such activity is necessary to eliminate a public health and safety threat; and dewatering of areas behind the levee if there is a threat to public safety or structures. Ineligible levee activities under the PA program include: repair of levees that are in the Corps' Rehabilitation and Inspection Program or have a pending RIP application deemed eligible; repair of eligible levees under NRCS programs; dewatering of areas behind levees for the purpose of drying land; repair of secondary levees riverward of a primary levee, unless protecting human life; and increasing the height of a levee. Generally, PA program funds are limited to restoring a structure to its pre-disaster condition; projects to construct new levees or enhance existing levees are not eligible. In some instances, locally operated levee projects are deemed ineligible because of potential funding from other federal sources. In order to prevent duplication of programs, FEMA utilizes a decision tree for PA levee project requests, as shown in Figure 1 . Discretion to determine levee project eligibility for PA lies with the FEMA Administrator. Disagreement occasionally arises between FEMA officials and state officials, especially regarding the need to restore a levee to its pre-disaster condition. The Stafford Act states that federal disaster assistance, administered by FEMA, is available to restore a structure to its pre-disaster condition. It can be argued that, in some cases, the most cost-effective use of federal funds would be to enhance the level of flood protection of a levee that is already undergoing repair after a disaster, rather than just restoring it to the pre-disaster level of protection. Levee Repair, Rehabilitation, and Inspection FEMA, the Corps, and NRCS have programs that can fund disaster related emergency levee repairs. While some of the flood fighting activities discussed above may overlap with disaster related repairs, such as the FEMA Public Assistance program, most activities covered by repair and rehabilitation assistance discussed below do not occur during a flood event. Rather, repair and rehabilitation activities are undertaken after the peak of a flood event has occurred and the extent of damage from the flood event can be determined. Corps Rehabilitation and Inspection Program Through its Rehabilitation and Inspection Program, the Corps provides for rehabilitation of damaged flood control works and federally constructed hurricane or shore protection projects and related inspections. To be eligible for rehabilitation assistance, the levee must be in active status at the time of the damage by wind, wave, or water action of an other than ordinary nature. The following types of levees are eligible for inclusion in RIP: non-federally or federally constructed, locally maintained levees and floodwalls; and federally authorized and constructed hurricane and shore protective structures. Eligibility is also limited to locally constructed and maintained levees must provide a minimum of a 10-year level of flood protection with two feet of freeboard to an urban area, or a minimum of a five-year level of protection with one foot of freeboard to an agricultural area. Local levee owners request that the Corps consider their levee to be included in the RIP. To keep an active RIP status, the levee owner is required to maintain the levee properly; the sufficiency of the maintenance is determined during an annual or semi-annual inspection by the Corps, and the levee owner making taking actions to address any identified deficiencies. Approximately 2,000 projects, representing 14,000 miles of levees, participate in RIP—2,250 miles of locally constructed and operated levees; 9,650 miles of Corps-constructed, locally operated levees; and 2,100 miles of Corps operated levees. The Corps issued in January 2009 a policy for the temporary extension of RIP to locally operated levees with deficient conditions if the owner is undertaking system-wide improvements. For locally constructed projects, the cost to repair the damage is paid 80% by the Corps and 20% by the levee owner; for federally constructed projects, the repair cost is entirely a federal responsibility (except for the costs of obtaining the sand or other material used in the repair). For damage to be repaired, the repair must have a favorable benefit-cost ratio. Rehabilitation assistance is limited to repair or restoration of the project to its pre-disaster level of protection; no betterments or levee setbacks are allowed. Local sponsors are required to assume any rehabilitation cost of damage to an active project that is attributable to deficient maintenance. For larger floods or natural disasters resulting in the need for significant RIP-funded repairs, Congress has often used supplemental appropriations to fund eligible repairs. For smaller RIP repairs, the Corps often attempts to fund repairs within its existing funding; at times, some eligible repairs have been delayed due to limitations on the availability of funds. A common issue that arises under RIP (as well as for FEMA mitigation programs discussed later) is interest in not only repairing levees but also improving them. Congress expressly restricted RIP funds to repair. The program is not designed to evaluate the federal interest in investments to further reduce the flood risk at a location. If federal participation is sought to increase protection, the typical route would be to pursue a study by the Corps to initiate a separate flood damage reduction project. NRCS Emergency Repair Assistance NRCS also has authority, under the Emergency Watershed Program, to conduct emergency levee work (among other activities) to relieve imminent hazards to life and property in the event of a natural disaster. Similar to the Small Watershed Program, EWP may work only on small levees within watersheds of 400 or fewer square miles. Emergency repairs to projects designed and constructed by either the Corps or NRCS may only be made by the respective agency (i.e., NRCS cannot repair a structure built by the Corps or vice versa). For nonfederal structures, however, the division of responsibility is based on a 1986 memorandum of agreement between the Corps and NRCS. Under the agreement, the Corps is responsible for repair of flood damage to projects installed for the purpose of controlling floodwaters in watersheds larger than 400 square miles. NRCS, on the other hand, is responsible for flood damage to projects built for the purpose of flood prevention in small watersheds (400 or fewer square miles). If damage is caused by a natural disaster other than a flood (e.g., fire, tornado, or earthquake) and assistance from the Corps (under P.L. 84-99) is not authorized, such assistance becomes an NRCS responsibility. Levees that qualify for EWP assistance must have a local project sponsor and benefit more than one person or interest. This restriction usually precludes assistance to many of the nonfederal levees near cropland. Flood Hazard Mitigation Activities that save lives and reduce damage to property are generally considered flood mitigation activities. FEMA hazard mitigation grant programs provides funding for flood mitigation activities. Hazard mitigation can reduce federal costs by decreasing the level of damage from future disasters. Since 1989, Congress has appropriated over $135.6 billion for FEMA disaster assistance programs. As shown in Table 4 and discussed in further detail below, over $8.9 billion has been made available for hazard mitigation in the last five years. Certain flood damage reduction projects are eligible under FEMA's Hazard Mitigation Grant Program (HMGP) and Pre-Disaster Mitigation grant program (PDM). There is debate regarding the extent to which FEMA hazard mitigation assistance programs can be used for levee construction and betterment, if at all. FEMA hazard mitigation assistance programs cannot duplicate the activities of other federal agencies or be part of a larger flood control system. It is thus critical to understand the extent to which FEMA and Corps programs (and to a lesser extent NRCS programs) may or may not fund similar flood reduction projects. FEMA's Hazard Mitigation Grant Program58 The purpose of the HMGP is to reduce loss of life and property damage in future disasters. The HMGP provides grants for long-term hazard mitigation projects after a major disaster declaration. A major disaster declaration is issued by the President under the authority of the Stafford Act. Once a presidential declaration has been made, hazard mitigation assistance is available and project applications can be submitted. The maximum federal cost share for hazard mitigation projects is 75%. The amount of HMGP assistance available to a state is based on a percentage of total federal disaster grants made for that declaration, with total contributions not to exceed 15% of the aggregate amount of the grants. Long-term mitigation projects may include elevating properties, acquiring properties and converting them to open space, retrofitting buildings, and constructing floodwall systems to protect critical facilities. Levee repair, maintenance, and enhancement projects could possibly be considered mitigation activities and might potentially be considered eligible under the HMGP. While statutory language does not expressly prohibit funding for certain types of levees, such projects have historically not been funded under hazard mitigation assistance except when there is an immediate risk to public safety. It may be argued that failure to fund levees to enable them to maintain FEMA accreditation does create an "immediate risk to public safety." Under this view, FEMA acknowledges the public safety risk when it designates a levee for de-accreditation due to a lack of compliance with levee standards. One possible explanation for denial of levee projects relates to the risk of duplication of programs discussed earlier in this report. Another reason may be the low prioritization of levee projects under HMGP as effective flood mitigation measures. According to the Association of State Floodplain Managers, levees should be used as a mitigation activity of last resort, because they provide limited flood protection. Since communities can undertake several other flood mitigation measures, competition for flood mitigation funding may preclude funding of levee projects. Other mitigation projects that would likely receive higher prioritization than levee projects include elevation of properties, retrofitting existing structures, and stormwater management. One of the most effective flood mitigation activities is to buy out homes and businesses in a floodplain and convert the land to open space. Property acquisition and relocation projects are eligible under the HMGP and would most likely be funded before levee projects because removing a structure from the floodplain is more effective in reducing flood damages. FEMA's Pre-Disaster Mitigation Grant Program65 The Pre-Disaster Mitigation (PDM) program funds structural and nonstructural mitigation projects prior to a disaster occurring in a community. Eligible projects are similar to those funded under the HMGP: property acquisition and relocation, structural elevation, and other, non-flood related mitigation. There is a 25% state/local cost-share requirement for PDM grants. Because of the costly nature of levee projects, the cost-share provision may make the PDM program a less viable option than HMGP for communities considering such projects, assuming the other barriers to using HMGP, such as duplication of programs, can be overcome. As shown in Table 5 , the PDM state/local cost-share is still lower than the Corps' Flood and Coastal Storm Damage Reduction Studies and Construction program. Comparison of FEMA, Corps, and NRCS Levee Programs and Authorities Table 5 summarizes information on the Corps, FEMA, and NRCS programs previously described; it presents an overview of the federal programs that are most often discussed as potential sources of funds for locally operated levees. The table clarifies that the Corps is the main federal partner in the construction of locally operated levees. What it does not show is that, as previously discussed, the process for obtaining this federal construction assistance is a lengthy multi-step process, and there is significant competition for available federal funds among congressionally authorized projects. Table 5 shows that there are no general federal authorities for assistance with the regular operation and maintenance of locally operated levees. It further shows that there are multiple possible authorities for federal assistance for levees damaged by natural events and that each authority has its own cost share; which of these authorities is appropriate depends on the type of event (e.g., declared disaster) and the type of levee (e.g., small). Policy Options for Assisting Locally Operated Levees As previously noted, Congress is debating whether and how to change the current division of levee responsibilities and their costs. Some stakeholders seek expansion of activities eligible for federal assistance, while others are concerned with the federal government assuming more of the cost and liability for levee investments that they consider a local responsibility. This section discusses some of the options available for congressional consideration. These include, but are not limited to, maintaining the status quo, adopting the recommendations of the congressionally established National Committee on Levee Safety, creating a new grant program, supplementing existing grant programs, or reducing the federal role in levee funding. Maintain the Status Quo As discussed in this report, there is debate about whether existing federal programs align with the appropriate federal role and whether such programs adequately address locally operated levee needs. One driver prompting the maintenance of the status quo is that most of the alternatives being discussed likely would increase federal responsibility, might increase federal liability concerns, and would require additional federal funding to implement. Implement Recommendations of the National Committee on Levee Safety In § 9003 of the Water Resource Development Act of 2007 ( P.L. 110-114 ), Congress created a National Committee on Levee Safety (NCLS) to study and make recommendations for a national levee safety program. The NCLS is comprised of sixteen members, each with expertise in some aspect of levee safety. One member is from the Corps, one from FEMA, eight from state levee safety agencies, two from the private sector, two from local/regional governments, and two from Indian tribes. In 2009, the NCLS completed a draft report, including 20 recommendations embracing three main concepts: the need for national leadership through a National Levee Safety Commission that would advise on national technical standards, risk communication, and coordination of environmental and safety concerns, the creation of a levee safety program in all states with responsibilities for oversight and regulation, and the need for an alignment of federal agency programs. Legislation is needed to implement 12 of the 20 recommendations fully and nationally. The report remains in draft form; that is, it has not been formally transmitted from the Administration to Congress. The House Transportation and Infrastructure Committee, Subcommittee on Water Resources and the Environment, received testimony on the recommendations in May 2009. The NCLS contends that states, not the federal government, should have primary authority for implementation of a national levee safety program. Ten states keep a list of levees within their borders, and 23 states have an agency with some levee safety responsibilities. The recommendation is to create a new commission that will establish a national levee safety standard for use by state programs. The NCLS draft proposes, among other investments: a new levee safety grant program to assist states in achieving strong levee safety programs, at $113 million annually in federal appropriations; a National Levee Rehabilitation, Improvement, and Flood Mitigation Fund to address both structural and nonstructural levee rehabilitation needs, at $600 million annually in federal appropriations; and authority for the Corps to perform a one-time inspection of all locally operated levees (not only federally constructed levees or those participating in RIP) to support the development of the National Levee Database, at $125 million annually for the next five years. The cost to implement the full suite of recommendations in the report for the first five years would amount to $1.238 billion annually—$878 million in federal funds and $360 million in nonfederal funds according to the draft report. Most of the federal funding would be directed toward new federal activities—that is, activities that the federal government generally does not currently fund. Elements of the legislation discussed in the next section of this report and Appendix may run counter to the NCLS recommendations. There has not been uniform acceptance of the draft recommendations; for instance, some view implementation of the recommendations as creating an unfunded mandate for levee safety that falls too heavily on the states and levee owners. Others are concerned about the creation of a new bureaucratic entity. Create a New Program Another option is to create a new grant program that would provide targeted funding to assist with aspects of locally operated levees that are not addressed by current programs (see Table 5 ). The new grant program would be distinct from the new levee safety program recommended by the NCLS because the project eligibility could be more extensive. Creating any new program requires many policy decisions to define such criteria as eligible activities, prioritization of activities, funding sources, nonfederal cost shares, the party responsible for performing the work, and the form of assistance (e.g., loan or grant). An additional consideration is where to house the program; Congress may consider the advantages and disadvantages of selecting various agencies to administer the new program. Supplement Appropriations for Existing Programs Congress could expand existing programs, either by expanding their authorization or by increasing appropriations. For example, FEMA arguably has the authority to fund locally operated levee repair and rehabilitation projects when there is no risk of duplicating benefits or activities of other federal agencies. Where program duplication is unclear, a memorandum of understanding with appropriate agencies would assist the agency personnel in making eligibility determinations. However, as discussed in this report, funding is limited under existing programs. Congress may consider supplementing existing FEMA or Corps programs to provide additional funding for locally operated levee projects. Reduce the Federal Role Congress may assess whether the current federal role in locally operated levees is justified, in particular whether the current federal role provides incentives for floodplain use consistent with the national interest. Current federal programs are often rooted in historical concerns about public safety and reducing property damage. Local governments are traditionally responsible for activities such as land use and zoning, which influence flood risk. States also influence floodplain development decisions in an oversight role. It could be argued that if local and state governments choose to allow development in a floodplain, the cost of leveraging the flood risk to structures through structural flood control projects such as levees should fall exclusively on the local and state governments. Congress may consider reducing the federal role in locally operated levees by reducing appropriations for programs that fund such levees. Legislative Developments in the 112th Congress The 112 th Congress has expressed interest in the mapping methodology used by FEMA in updating the FIRMs. On February 3, 2011, 27 U.S. Senators sent a letter to FEMA Administrator Craig Fugate requesting that FEMA discontinue its "without levee" analysis for determining FIRMs for areas where existing levees have not obtained FEMA accreditation if the community in the affected area objects. Members of Congress also have introduced legislation to address issues with updates to FIRMs and the impact of new maps on the purchase requirements for the NFIP. In addition to the legislation discussed below, efforts to address the challenges facing locally owned levees may be pursued through efforts to reauthorize the NFIP. Addressing local levee issues in a reauthorization or other bill raises a budgetary consideration. Increases in the authorizations or appropriations in federal assistance for locally owned levees would increase the demands on federal fiscal resources. Congress, the Administration, and the public are carefully scrutinizing actions that would expand federal activities given the current federal fiscal climate. Legislation on NFIP Mapping and Flood Insurance H.R. 764, Fair Treatment of Existing Levees Act of 2011 H.R. 764 would prohibit the FEMA Administrator from assuming that an existing levee or flood control structure does not exist (i.e., the use of a "without levee analysis") when determining the FIRM for an area if it results in the area having a new flood hazard designation. The bill would provide an exception to the prohibition if no affected community has notified FEMA within 90 days of enactment of this act of objections to the hazard modeling processes, and provided that the affected communities have provided sufficient notification to affected residents prior to the implementation of the provision. H.R. 898, To Suspend Flood Insurance Rate Map Updates in Geographic Areas in Which Certain Levees Are Being Repaired H.R. 898 would prohibit the FEMA Administrator from updating the floodplain designation or flood risk zone for areas behind levees determined by the Corps to have a design deficiency and where the responsible entities have implemented a plan that meets certain criteria to repair the levee. In addition, state and local governments with jurisdiction over the area must have implemented a surveillance and operations plan, an evacuation plan, and an outreach and communication plan, except where the flood protection system provides protection from the 1% annual chance flood or where the FEMA administrator has suspended the updates to the floodplain areas or flood risk areas for seven consecutive years. Concluding Remarks While considering NFIP reauthorization, which expires September 30, 2011, and during other legislative deliberations, Congress may decide whether, and if so how, to address locally operated levees having difficulty obtaining and maintaining FEMA accreditation, and whether to change the current federal assistance provided to locally operated levees. Congressional action may clarify federal authorities for activities assisting locally operated levee and may reduce the risk of duplication of programs. Although levee issues have become a more prominent subject of congressional interest in recent years, consensus on how federal policy, programs, and funding should evolve remains elusive. Appendix. Levee Legislation Considered in the 111th Congress Legislation on Levee Accreditation Two bills related to levee accreditation were introduced in the 111 th Congress. In a March 2010 letter to the FEMA Administrator and the Assistant Secretary of the Army for Civil Works, 16 Senators in the 111 th Congress requested a meeting to discuss levee accreditation and flood mapping processes. Also during the 111 th Congress, roughly 40 Members were part of the Congressional Levee Caucus; the Caucus chair announced levee certification as its chief priority. H.R. 4935 , PAL Extension Referred to the House Committee on Financial Services, H.R. 4935 would have provided the FEMA regional office directors with the authority to grant a PAL extension not to exceed 24 months for communities making a "good faith effort" to comply with the FEMA levee accreditation requirements. The good faith effort would include documentation that a community has adequate funding for levee rehabilitation and has retained a private contractor or appropriate federal agency to verify the certification of the levee. S. 3109 , Rural Community Flood Protection Act of 2010 Referred to the Senate Committee on Environment and Public Works, S. 3109 would have authorized the Corps to perform NFIP data certification as part of the agency's civil works program rather than as a reimbursable activity. The certification would be cost-shared, with a 65% federal and 35% local split, except that nonfederal interests representing fewer than 10,000 people and volunteer levee operators would have no local cost-share. The bill would not have authorized a specific level of appropriations. Data on the average costs of data certification are not currently available. The bill also would have addressed levee owners' concerns about the financial burden of obtaining data certification by authorizing the Corps to perform at full or partial federal expense work that under the NFIP is considered the levee owners' responsibility. Under the provisions of the bill, the federal government would assume all of the cost associated with levees protecting smaller communities and run by volunteers; most likely, these would be in rural areas. It is unclear how many such levees exist, since few rural levees provide protection from a 100-year flood. Furthermore, it is unclear whether such rural levees represent the greatest risk to life and property and therefore should receive a greater share of federal investment. The greater federal cost share in the bill for rural levees appeared to be based on a perception of a lower ability among these levee owners to pay for data certification, rather than on a greater federal stake in these levees. Legislation on NFIP Mapping and Flood Insurance S. 3285 , Suspension of Flood Map Modernization Updates Referred to the Senate Committee on Banking, Housing, and Urban Affairs, S. 3285 would have required that the FEMA Administrator suspend any map updates under Map Mod for seven years for counties with a flood protection structure built or maintained by the Corps. The proposed legislation would not have suspended map updates for counties protected by locally operated levees. H.R. 3415 and S. 3051 , Suspension of Flood Insurance Rate Maps in Areas Where Certain Levees Are Being Repaired H.R. 3415 and S. 3051 are identical bills that would have suspended flood insurance rate map updates for up to seven consecutive years in communities that contain levees with a design deficiency, if the community has a repair plan that was developed by the Corps or a licensed professional engineer, was approved by FEMA or the Corps, is based on reasonably current design data, and includes an adequate financing mechanism for implementing the plan. The repair plan must also ensure that once the repairs are completed, the levee would provide protection from a 100-year flood. H.R. 3415 was referred to the House Committee on Financial Services, and S. 3051 was referred to the Senate Committee on Banking, Housing, and Urban Affairs. Legislation on FEMA's Hazard Mitigation Programs H.R. 1746 ( P.L. 111-351 ) and H.R. 3377 , Authorizations for the Pre-Disaster Mitigation Grant Program Passed by the House and the Senate in December 2010, H.R. 1746 ( P.L. 111-351 ) reauthorized the PDM program for three fiscal years beginning in FY2011, with authorization for $180 million in fiscal year 2011, $200 million for fiscal year 2012, and $200 million in FY2013. The legislation increased the minimum award amount for each state by providing the lesser of $575,000 or 1% of total program appropriations, with a maximum per state award not to exceed 15% of the fiscal year appropriation. The enacted legislation also included a prohibition on congressionally directed spending for the PDM program. While H.R. 3377 would have authorized an annual appropriation of $250 million for three years, beginning in FY2010, the bill did not receive further consideration because H.R. 1746 was passed by both the House and the Senate. The PDM program is a potential source of funding to address the levee issues presented in this report. Appropriations for PDM have fluctuated significantly since initial program authorization, ranging from $150 million for FY2003 and FY2004 to $50 million in FY2006.

Locally operated levees and the federal programs that assist and accredit them are receiving increasing congressional attention. Congressional authorization of the National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA), expires on September 30, 2011. The pending reauthorization has increased congressional awareness of the link between the condition of locally operated levees, FEMA's Flood Insurance Rate Maps (FIRMs) and levee accreditation (which determine which NFIP requirements and premiums apply in an area), and programs providing federal disaster assistance for these levees. Congress is considering whether and how to change current programs, federal funding, and the existing division of levee responsibilities. Options are complicated by the desire to promote state, local, and individual decisions and investments that reduce flood risk; concerns about the local costs associated with NFIP purchase and levee accreditation requirements; and consideration of whether to expand federal responsibilities and potential liability. Even though similar issues also exist for some of the federally operated levees, this report focuses on locally operated levees since these dominate the national levee portfolio. Approximately 22% of U.S. counties across the country, representing almost half of the U.S. population, contain levees. Economic damage from floods in leveed areas ranges between $5 billion and $10 billion annually. Levees play an important role in protecting property against flood damage. More than 100,000 miles of levees may exist, with the federal government operating roughly 2,100 miles. One estimate puts the five-year level of investment needed for new construction or maintenance of the nation's levees at $50 billion. FEMA is updating FIRMs and deciding whether to accredit levees which will determine whether they appear on those maps. There is some debate regarding the extent to which FEMA should assist with levees investment through its hazard mitigation programs. FEMA often cites overlap with activities of the U.S. Army Corps of Engineers (Corps) and the Natural Resources Conservation Services (NRCS) in the U.S. Department of Agriculture as justification for not funding levee activities. The Corps is the main federal partner for construction of locally operated levees. Pursuant to congressional authorizations, the Corps participates in cost-shared planning and construction of levees. No general federal authorities exist for the Corps to assist with the regular operation and maintenance of locally operated levees; that is, local levee owners are responsible for operation, maintenance, and improvement. However, there are multiple authorities enacted by Congress for flood fighting, flood mitigation, and levee repair of damages caused by natural events. Since 2005, the Corps has had limited involvement in the data collected and certified to inform FEMA accreditation of locally operated levees. The Corps has limited authority to assist local levee owners in obtaining NFIP levee accreditation. Policymakers in recent years have considered whether to expand the Corps' role in NFIP data certification and post-construction improvements for locally operated levees. NRCS has limited authority to assist in the construction of smaller levees and to repair small, mostly rural levees damaged by a natural event. Congressional options for assisting with levees include, but are not limited to, maintaining the status quo, adopting the recommendations of the National Committee on Levee Safety (such as federal support to develop new state levee safety programs), modifying federal programs, or creating new federal programs.

Background In a 5-to-4 ruling, the Supreme Court in Citizens United v. F ederal Election Commission (F EC ) lifted certain restrictions on corporate independent expenditures. The decision invalidated two provisions of the Federal Election Campaign Act (FECA), codified at 2 U.S.C. § 441b. It struck down the long-standing prohibition on corporations using their general treasury funds to make independent expenditures, and Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA), which amended FECA, prohibiting corporations from using their general treasury funds for "electioneering communications." The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. In so doing, the Court overruled its earlier holdings in Austin v. Michigan Chamber of Commerce, finding that the allegedly distorting effect of corporate expenditures provided no basis for allowing the government to limit corporate independent expenditures. It also overruled the portion of its decision in McConnell v. FEC, upholding the facial validity of Section 203 of BCRA, finding that the McConnell Court relied on Austin. The Court, however, upheld the disclaimer and disclosure requirements in Sections 201 and 311 of BCRA as applied to a movie regarding a presidential candidate that was produced by Citizens United, a tax-exempt corporation, and the broadcast advertisements it planned to run promoting the movie. According to the Court, while they may burden the ability to speak, disclaimer and disclosure requirements "impose no ceiling on campaign-related activities." It does not appear that the Court's ruling in Citizens United affects the validity of Title I of BCRA, which generally bans the raising of soft, unregulated money by national parties and federal candidates or officials, and restricts soft money spending by state parties for "federal election activities." For a legal analysis of the Supreme Court's ruling, see CRS Report R41045, The Constitutionality of Regulating Corporate Expenditures: A Brief Analysis of the Supreme Court Ruling in Citizens United v. FEC , by [author name scrubbed]. Impact of Citizens United on Current Federal Campaign Finance Law In brief, before the Court's ruling, corporations and labor unions were prohibited from using their general treasury funds to make expenditures for communications expressly advocating election or defeat of a clearly identified federal candidate. In addition, corporations and unions were prohibited from using general treasury funds to finance electioneering communications, which FECA defines as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. However, corporations and labor unions were permitted to use political action committees (PACs), financed with regulated contributions from certain employees, shareholders, or members, to make independent expenditures for express advocacy communications and to fund electioneering communications within the restricted time periods. As a result of the Court's ruling, it appears that federal campaign finance law does not restrict corporate or, most likely, labor union use of general treasury funds to make independent expenditures for any communication expressly advocating election or defeat of a candidate. In addition, the law now also permits corporate and union treasury funding of electioneering communications. However, the law prohibiting contributions to candidates, political parties, and political action committees (PACs) from corporate and labor union general treasuries still applies. Legislation and Proposals in Response to Citizens United In response to the Supreme Court's ruling in Citizens United v. FEC , various proposals have been discussed and legislation has been introduced. This report provides an analysis of the constitutional and legal issues raised by several proposals, organized by regulatory topic: increasing disclaimer requirements, increasing disclosure for tax-exempt organizations, requiring shareholder notification and approval, restricting U.S. subsidiaries of foreign corporations, restricting political expenditures by government contractors and grantees, taxing corporate independent expenditures, and providing public financing for congressional campaigns. The report also discusses amending the Constitution. This report does not describe specific legislation. For a comprehensive discussion of legislation that has been introduced and an analysis of policy options, see CRS Report R41054, Campaign Finance Policy After Citizens United v. Federal Election Commission: Issues and Options for Congress , by [author name scrubbed]. Increased Disclaimer Requirements19 Some legislation and proposals that have been discussed in response to the Supreme Court's ruling in Citizens United v. FEC would increase disclaimer requirements for political communications paid for by corporations. The term "disclaimer" typically refers to sponsor identification that is included in the content of the advertisement. For example, such proposals may require advertisements to include a statement by the president or chief executive officer of the corporation, identifying such individual by name and position, and indicating that the corporation that he or she heads paid for the ad and approved its contents. In addition, such proposals may require inclusion of an image of the individual making the statement. Currently, the Federal Election Campaign Act (FECA) requires that any public political advertising financed by a political committee include various disclaimers. Of particular relevance, it also requires that corporations and labor unions include disclaimers in any communication expressly advocating the election or defeat of a clearly identified candidate, any solicitation of contributions, or any other public political advertising, including electioneering communications, that are financed by corporations and labor unions. FECA defines "electioneering communication" as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. For communications financed by corporations and labor unions, FECA requires the disclaimer to clearly state the name and permanent street address, telephone number, or website address of the person who paid for the communication and state that the communication was not authorized by any candidate or candidate committee. In radio and television advertisements, corporations and labor unions are required to include in a clearly spoken manner, the following audio statement: "________ is responsible for the content of this advertising," with the blank to be filled in with the name of the entity paying for the ad. In addition, in television advertisements, the statement is required to be conveyed by an unobscured, full-screen view of a representative of the entity paying for the ad, in a voice-over, and shall also appear in a clearly readable manner with a reasonable degree of color contrast for a period of at least four seconds. This requirement is often referred to as "stand by your ad." FECA does not require disclosure for advertising that does not expressly advocate election or defeat of a clearly identified candidate, and that does not meet the criteria of an "electioneering communication." In McConnell v. FEC , by a vote of 8 to 1, the Supreme Court upheld the facial validity of the disclaimer requirement in Section 311 of BCRA. Specifically, the Court found that it "bears a sufficient relationship to the important governmental interest of 'shedding the light of publicity' on campaign financing." Similarly, in Citizen s United v. FEC , by a vote of 8 to 1, the Court upheld the disclaimer requirement in Section 311 as applied to a movie that Citizens United produced regarding a presidential candidate and the broadcast advertisements it planned to run promoting the movie. According to the Court, while they may burden the ability to speak, disclaimer and disclosure requirements "impose no ceiling on campaign-related activities," and "do not prevent anyone from speaking." According to the Court, the disclaimer requirements in Section 311 of BCRA "provid[e] the electorate with information," and "insure that the voters are fully informed" about who is speaking. Moreover, they facilitate the ability of a listener or viewer to "evaluate the arguments to which they are being subjected." At a minimum, the Court announced, disclaimers make clear that an advertisement is not financed by a candidate or a political party. As a result, it appears likely that enactment of increased disclaimer requirements for corporate-financed political advertisements would survive facial challenges to their constitutionality. However, if a disclaimer requirement was so burdensome that it impeded the ability of a corporation to speak—for example, a requirement that a disclaimer comprise an unreasonable amount of time—a court might conclude that it is a violation of a corporation's free speech rights under Citizens United . Disclosure of Donors to § 501(c) Organizations32 Some have proposed requiring the identities of certain donors to § 501(c) organizations be publicly disclosed, either through traditional disclosure mechanisms or the disclaimer provisions discussed above. The organizations described in IRC § 501(c) have federal tax-exempt status. They include § 501(c)(4) social welfare organizations, § 501(c)(5) labor unions, and § 501(c)(6) trade associations. Under current law, FECA requires the public disclosure of certain donors to entities, including § 501(c) organizations, that make independent expenditures and electioneering communications. In general, the identification of donors to such entities is subject to disclosure if their donations exceed a threshold amount and are made to further the entity's campaign activity. In certain situations, the identity of any donor whose contribution exceeds the threshold amount may be subject to disclosure, regardless of whether it was made to further the activity. The organization may avoid disclosing these donors by establishing a separate account to pay for the activities, which will result in only the donors to that account being publicly disclosed. Some might argue that compelled donor disclosure chills the organization's and donors' First Amendment rights. In Citizens United , the Court upheld disclosure requirements as applied to the movie that Citizens United produced and the broadcast advertisements it planned to run promoting the movie. The Court explained that while they may burden the ability to speak, the requirements "impose no ceiling on campaign-related activities," and "do not prevent anyone from speaking." At the same time, such requirements would be unconstitutional as applied to an organization if there is a reasonable probability that its donors would be subject to threats, harassment, or reprisals. As mentioned, some have suggested mandating the public disclosure of certain donors to § 501(c) organizations beyond that required by current law. Additionally, some have proposed expanding FECA's disclaimer requirements so that large donors to § 501(c) organizations would be named in the organization's political advertisements. Some of these proposals would differ from the existing provisions described above in that they would require public disclosure of certain donors regardless of the purpose for which the money was donated or used, without providing a mechanism by which the organization could limit such disclosure to only those donors whose contributions were intended to be used for political purposes. Some have raised the possibility that there might be constitutional limitations on the ability of Congress to require disclosure of donors who have not necessarily donated specifically for political activity, particularly if there is no mechanism by which such disclosure could be limited. In other words, some might argue that the differences between the proposals and existing law could be constitutionally significant. How a court would analyze such an argument might be uncertain. It seems any requirement would be subject to "exacting scrutiny, which requires a substantial relation between the disclosure requirement and a sufficiently important governmental interest." Here, some might argue, for example, that the relationship between (1) the compelled disclosure of donors who gave money for reasons not necessarily related to campaign activity and (2) the government's interest to provide information to the electorate or avoid corruption or the appearance of corruption is insufficient to withstand judicial scrutiny. Proponents of such an argument might point to the fact that § 501(c) organizations engage in a panoply of activities outside the election context and campaign activity cannot, by law, be their primary activity. Thus, donors who make non-earmarked contributions are supporting the entirety of the organization's activities, and some might question whether the government can require the public disclosure of their identities simply because the organization happens to engage in limited amounts of campaign activity. Such an argument might be extended to the disclaimer proposals as well. On the other hand, it is unclear whether this argument has constitutional merit. As discussed above, the Court has generally looked favorably on disclosure and disclaimer requirements, and there may be other factors that support the constitutionality of the proposals. For example, while the § 501(c) organizations we are concerned with here are limited in the amount of campaign activity they may participate in, they are permitted to engage in an unlimited amount of lobbying. Thus, a court might look at the full spectrum of the organization's activities when determining whether a donor disclosure requirement is sufficiently related to the government's informational interest. A court might also consider the extent to which the requirement furthers donor protection interests (i.e., whether donors' interests are presumably aligned with the organization's activities or donors are on notice that their donations might be disclosed). Additionally, particular proposals might contain limitations or protections that could be important to a court's analysis. Shareholder Notification and Approval45 There is congressional interest in amending federal securities laws to require a corporation to provide notice to shareholders of corporate political spending and/or to require that shareholders authorize corporate political spending. For example, a very general description of such a bill is a proposal requiring that no publicly traded company which must file annual and other reports with the Securities and Exchange Commission may make any political expenditure in excess of a certain amount in a fiscal year without first obtaining the authorization of a majority of the shareholders. Congress does not appear to have enacted legislation which provides shareholders with voting authority concerning specific corporate expenditures. These matters have traditionally been left for individual corporations to handle. Most decisions involving corporate expenditures are made by corporate executives and boards of directors. Under the business judgment rule, if there is a reasonable basis that a corporate transaction was made in good faith, management will typically be immunized from liability. Arguably, the business judgment rule applies to decisions of management concerning corporate political expenditures. However, this tradition of leaving corporate expenditure decisions to corporate executives does not mean that Congress is without constitutional authority to enact legislation requiring shareholder approval of corporate political expenditures. The Constitution's Commerce Clause may arguably provide Congress with authority to enact legislation of the type in question. No case specifically on point may be cited as precedent for upholding such legislation, but courts have cited the Commerce Clause as providing Congress with constitutional authority to enact various kinds of broad legislation concerning corporations. For example, several cases were brought challenging the constitutionality of the Securities Act of 1933 and the Securities Exchange Act of 1934. The cases upheld the constitutionality of these major federal securities laws on the basis of Congress's power under the Commerce Clause. Although these cases are approximately 70 years old, their holdings arguably remain within the philosophy of later interpretations by courts of the Commerce Clause. The Securities Act of 1933 ... does not attempt to regulate or prohibit the sale of securities in intrastate commerce. It merely provides as a condition precedent to the use of the mails and the facilities of interstate commerce that the issuer file a registration statement containing a true and complete statement of the information required by Section 7 of the Act, 15 U.S.C.A. § 77g, in order to protect the public against imposition and fraud in the sale of securities through the use of the mails or the facilities of interstate commerce.... It is well settled that Congress may enact reasonable regulations to prevent the mails and the facilities of interstate commerce from being used as instruments of fraud and imposition. The type of legislation described above would not prohibit corporate spending on political advertising; rather, it would require that shareholders give their approval of the spending. It may be argued that shareholders, as owners of a corporation, have virtually an inherent right, though perhaps not necessarily the expertise, to direct spending by executives and boards of directors and that legislation of the type in question would affirm this right. Legislation requiring voting by shareholders on proposed corporate political advertising could arguably be drafted in such a way as to act as a kind of impediment to the corporation's free speech as set out in Citizens United . For example, if a proposal required that a corporation submit to shareholder vote each specific expenditure for political advertising and that the vote must occur within an unreasonable period of time, a court might conclude that the legislation is a violation of the corporation's free speech rights as described by Citizens United . The practicalities of when to require these votes and the enforcement of this kind of legislation may need to be carefully considered in order not to run afoul of corporate freedom of speech rights defined by the Supreme Court in Citizens United . Restrictions on Foreign-Owned Corporations53 The Supreme Court in Citizens United struck down an attempt to limit First Amendment rights to political speech based on the speaker's "form" as a corporation. However, its doing so does not necessarily mean that the ability to make campaign expenditures, or otherwise engage in political speech, cannot be restricted based upon the speaker's foreign status. Certain federal laws already categorize some corporations incorporated within the United States as "foreign" because of circumstances related to their ownership and control and impose significant restrictions upon them. Congress could explore similar legislation in response to the Citizens United decision. Because of the lack of direct precedent, it is unclear how far Congress could go in this regard. Foreign Corporations vs. Foreign-Owned Corporations under Election Law The corporations that are the targets of proposed legislation are incorporated within the United States but are owned, to some degree, by foreign governments, corporations, or individuals, or can otherwise be characterized as under "substantial foreign influence." They are not foreign corporations in the sense that they are incorporated under the laws of another country. Such foreign corporations are among the "foreign nationals" currently prohibited from making campaign contributions or expenditures under 2 U.S.C. § 441e(a). The constitutionality of this prohibition was not at issue in Citizens United and has apparently never been challenged. In contrast, U.S. corporations with some degree of foreign ownership or control were prohibited from directly making campaign expenditures under 2 U.S.C. § 441b prior to Citizens United because of their status as corporations, not because of their foreign ties. They could, however, form political action committees (PACs) to make such expenditures. There were statutory and regulatory limitations upon the involvement of foreign nationals in these PACs, but these limitations were based on the alienage of the foreign nationals, not of the corporations. Redefining "Foreign Nationals" to Include Foreign-Owned Corporations Many proposed bills would amend the existing definition of "foreign national" to include corporations with some degree of foreign ownership or control. Such proposals could arguably be characterized as contrary to the prevailing legal theory of the corporation, the "natural person theory," which views corporations as separate persons possessed of personalities and interests distinct from those of their shareholders. However, there are instances where courts or statutes effectively rely on alternate theories of the corporation, or otherwise look beyond the corporate form to its shareholders. For example, federal statutes currently classify some U.S. corporations as "foreign" because they have a certain percentage of foreign ownership. There is no constitutional provision that expressly permits Congress to enact such statutes, which generally regulate foreign investment in the United States. However, these statutes are commonly justified by other federal powers mentioned in the Constitution, including federal powers over immigration and naturalization; federal power to regulate interstate and foreign commerce; and the power to provide for the national defense. These provisions, or similar ones limiting the involvement of foreigners in the federal government, could also be cited in support of legislation restricting the political speech of foreign-owned or -controlled corporations. In fact, there are already two instances within election law where parent corporations and their subsidiaries are treated as a single entity. There does not appear to be any bright-line rule as to what percentage of foreign ownership suffices for categorizing a corporation as "foreign" for statutory purposes. Rather, courts would consider any percentages along with the other provisions of the statute when examining the relationship between any challenged restrictions and the alleged government interests. Federal laws that distinguish on the basis of alienage and do not affect fundamental rights, discussed below, will generally be upheld so long as they are not "'wholly irrational' means of effectuating a legitimate government interest." In one of the few cases directly on point, Moving Phones Partnership, L.P. v. Federal Communications Commission , the U.S. Court of Appeals for the District of Columbia Circuit upheld Section 310(b) of the Communications Act and its implementing regulations against an equal protection challenge brought by several partnerships whose applications for authorization to construct and operate cellular systems were denied because they were more than 20% foreign-owned. The plaintiffs conceded that concerns about national security constituted a legitimate reason for discriminating against aliens in broadcasting, and the court found that limiting foreign ownership to no more than 20% was not a "wholly irrational" means of effectuating that interest. Preventing foreign influence on U.S. elections has apparently never been recognized as a legitimate state interest in the same way that national security was recognized in Moving Phones and other cases. However, it seems plausible that a court would treat it as such given that determining who can participate in the political process is arguably an inherent aspect of sovereignty; there are other restrictions on non-citizens' involvement in the political process (i.e., lobbying and contributions); and certain provisions of the Constitution have been read as indicating the Framers' concerns about foreign involvement in U.S. politics. First Amendment Rights Because foreigners located abroad generally lack First Amendment rights, it seems possible that some restrictions upon campaign expenditures or other political speech by foreign-owned corporations could be upheld. Also, the United States has a strong sovereign and constitutional interest in limiting political participation to members of its polity. The nature of these restrictions may, however, depend upon corporate structure and related considerations, as courts attempt to reconcile the corporation's "foreignness" with the general corporate rights to political speech recognized in Citizens United . Some commentators have suggested that the Court's intention, in finding that an outright ban on corporate expenditures could not be justified as a protection against foreign influence, "is clear: it does not want to license too broad a ban on all corporate independent expenditures when there is no reason to think that foreign nationals exercise control over the decision making." Such commentators are probably correct in suggesting that restrictions targeting small percentages of ownership, without the possibility of control, are more suspect than restrictions targeting wholly owned subsidiaries of foreign governments. Beyond the identity of the foreign owners and the degree of ownership, other considerations could include whether foreign ownership is unitary or dispersed (i.e., does a single foreign owner own the entire interest, or are there multiple owners?); whether ownership is direct or indirect; and what, beyond ownership, suffices for control. Certain restrictions upon the political speech of foreign-owned or -controlled corporations could also potentially be challenged on First Amendment grounds by U.S. citizens. Courts have recognized that some restrictions on the speech of foreigners can abridge First Amendment rights of U.S. citizens by, for example, denying them use of funds to finance this speech. In Mendelsohn v. Meese , a U.S. district court upheld a challenged statute that prevented two U.S. citizens from using funds from the Palestine Liberation Organization (PLO) to finance their speaking throughout the U.S. on behalf of the PLO after applying the more lenient standard of review applied to content-neutral speech. Similarly lenient review may be unlikely here, however, in part because the majority in Citizens United noted that "[s]peech restrictions based on the identity of the speaker are all too often simply a means to control content." This could potentially be a problem with restrictions on corporations with small percentages of foreign ownership because the speech of the U.S. majority owners would be affected by these restrictions. Vagueness Certain proposed restrictions could potentially be challenged on the grounds that they are vague. Due process under the Fifth Amendment requires that criminal statutes "give adequate guidance to those who would be law-abiding, to advise defendants of the nature of the offense with which they are charged, or to guide courts in trying those who are accused." Statutes that fail to do this will be held "void for vagueness." Vagueness is of particular concern with governmental restrictions on speech and has been used to void statutes involving loyalty oaths, obscenity and indecency, and restrictions on public demonstrations. Some commentators have expressed concerns that difficulties in determining corporate ownership, particularly in the case of corporations whose stock is publicly traded, could raise vagueness issues because corporations might not know whether they had the requisite percentage of foreign ownership. Similar concerns could also arise because corporate ownership can shift over time, or because of difficulties in determining what, beyond ownership, constitutes control or influence. Such concerns may be particularly apposite given that the majority in Citizens United suggested that complicated regulations of speech can serve to unconstitutionally chill speech. Conditioning Government Contracts or Grants on Forgoing Right to Political Speech95 Efforts by the federal government to restrict private, nongovernmental entities from using their own (non-federal) resources to engage in independent political advocacy or other political communications as a condition to receiving, or because the entity receives, some federal funding by way of grants or contracts would raise significant First Amendment concerns. Congress may certainly limit, regulate, or condition the use of the funds it appropriates, and there are now under federal law and regulation several prohibitions and multiple restrictions on the use by private recipients of federal funds or federal subsidies for political or advocacy purposes. When the government goes beyond restrictions and conditions on the use of the funds it appropriates, however, (or goes beyond attempts to control or "define" the content of a government program ), and seeks to institute a direct suppression of independent political advocacy by private entities as a condition to receive (or as a consequence of receiving) federal funds, then such legislation must be examined under the heightened scrutiny of First Amendment principles. The Supreme Court has noted that restrictions on otherwise constitutionally protected activities could not be "justified simply because" persons were receiving federal funds, nor was "a lesser degree of judicial scrutiny ... required simply because Government funds were involved." "Unconstitutional Conditions" on the Receipt of Federal Funds The Supreme Court has in the past ruled "that the government may not deny a benefit to a person because he exercises a constitutional right." The principle has thus developed in a line of cases that the government may not condition the receipt of a public benefit upon the requirement of relinquishing one's protected First Amendment rights. Although it is true that a private organization may simply choose to forgo participating in political or public policy advocacy to be eligible to receive a grant or a contract, and although no one has a "right" to participate in or receive funding, the Supreme Court under the so-called "unconstitutional conditions" cases has in the past established the principle that the receipt of a federal benefit may not be conditioned upon abdicating one's constitutional rights, particularly one's First Amendment freedom of speech: For at least a quarter-century, this Court has made clear that even though a person has no "right" to a valuable governmental benefit and even though the government may deny him the benefit for any number of reasons, there are some reasons upon which the government may not rely. It may not deny a benefit to a person on a basis that infringes his constitutionally protected interests—especially, his interest in freedom of speech. For if the Government could deny a benefit to a person because of his constitutionally protected speech or associations, his exercise of those freedoms would in effect be penalized and inhibited. This would allow the government to "produce a result which [it] could not command directly." Speiser v. Randall, 357 U.S. 513, 526. Such interference with constitutional rights is impermissible. In 1996 the Court recognized "the right of independent contractors not to be terminated for exercising their First Amendment rights." This principle, noted the Court, expressly applied to and derived from judicial decisions negating attempts to condition the receipt of government contract funds on the abdication of one's First Amendment rights of speech and advocacy. The Supreme Court under this line of cases invalidated a federal law which would have placed an advocacy restriction on any recipient of particular grants from a federally funded program (public broadcasting) in Federal Communications Commission v. League of Women Voters of California . Although broadcast stations might be required to follow certain fairness guidelines, the Court found that such broadcasters, merely because they receive some federal funding through the Corporation for Public Broadcasting, could not be prohibited from providing their own expression and opinions on matters of public interest, as the ban was not narrowly tailored to sufficiently address the government's asserted justifications for such restrictions on speech. In Citizens United , one of the arguments for maintaining the statutory restriction on independent corporate campaign expenditures was that the corporation had been granted by law certain benefits and privileges, and as a condition to receive such government-granted benefits, the corporations could be denied their First Amendment right to engage in political expression in making independent campaign expenditures. The Supreme Court, however, summarily dismissed such notion that government benefits could be given in this situation on the condition of forfeiting or forgoing First Amendment privileges: [T]he Austin majority undertook to distinguish wealthy individuals from corporations on the ground that "[s]tate law grants corporations special advantages—such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets." 494 U.S. at 658-659. This does not suffice, however, to allow laws prohibiting speech. "It is rudimentary that the State cannot exact as the price of those special advantages the forfeiture of First Amendment rights." It is therefore questionable under this line of cases whether general or broad-based restrictions on independent expenditures for political speech and advocacy of all private individuals, firms, associations, or corporations could be instituted as a "condition" to receiving a federal grant or a federal contract. It is noted that under current federal law, a government contractor is prohibited from making a campaign "contribution." Under the theory that campaign contributions to candidates have a significant potential for quid pro quo corruption, the Supreme Court, in overturning the corporate campaign independent "expenditure" prohibition, left intact the limitation on such corporate campaign "contributions." Campaign contributions to candidates or parties (and their potential for corrupting influences) have been clearly distinguished by the Supreme Court from independent campaign "expenditures." Such independent expenditures in campaigns are afforded greater First Amendment protection as speech, and are apparently not subject to the same considerations of potential corruption or corrupting influence because of the absence of pre-arrangement or coordination with the candidate or the candidate's campaign: The Buckley Court recognized a "sufficiently important" government interest in "the prevention of corruption and the appearance of corruption." Id. , at 25; see id ., at 26. This followed from the Court's concern that large contributions could be given "to secure a political quid pro quo ." Ibid . The Buckley Court explained that the potential for quid pro quo corruption distinguished direct contributions to candidates from independent expenditures. The Court emphasized that "the independent expenditure ceiling ... fails to serve any substantial governmental interest in stemming the reality or appearance of corruption in the electoral process," id ., at 47-48, because "[t]he absence of prearrangement and coordination ... alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate," id ., at 47. The Court then concluded in Citizens United: Limits on independent expenditures ... have a chilling effect extending well beyond the Government's interest in preventing quid pro quo corruption. The anticorruption interest is not sufficient to displace the speech here in question. * * * For the reasons explained above, we now conclude that independent expenditures , including those made by corporations, do not give rise to corruption or the appearance of corruption. The same considerations in allowing an exception to First Amendment principles in prohibiting contractor "contributions" to candidates, therefore, may not necessarily be present to justify a similar government restriction on contractor "expenditures" for independent political speech. Government Program Restrictions and "Government Speech" It is obvious that Congress may and does institute various conditions and requirements on the receipt of federal funds. Although the cases discussed above were found to constitute an "unconstitutional condition" on the receipt of federal funds by private parties, the Supreme Court has permitted the government to require a restriction on the use of a recipient's own funds for certain speech within a particular program when that program is even partially funded with federal funds. In Rust v. Sullivan , the Court explained that in prohibiting abortion counseling by private entities within certain federally supported programs the government did not place a "condition on the recipient of the subsidy," but rather placed the restrictions on the "particular program or service" which "merely require that the grantee keep such activities separate and distinct from the" publicly funded activities. Chief Justice Rehnquist, writing for the Court, distinguished this situation from the "unconstitutional conditions" cases: In contrast, our "unconstitutional conditions" cases involve situations in which the Government has placed a condition on the recipient of the subsidy rather than on a particular program or service, thus effectively prohibiting the recipient from engaging in the protected conduct outside the scope of the federally funded program. More recently, the Supreme Court has noted that when the government funds activities it may limit, restrict, and fashion the speech of those speaking on its behalf either as "government speech," or when the government uses "private speakers to transmit specific information pertaining to its own programs." The Court explained that "[w]hen the government disburses public funds to private entities to convey a governmental message , it may take legitimate and appropriate steps to ensure that its message is neither garbled nor distorted by the grantee." This "exception" to the First Amendment for "government speech," or for certain private speech within the parameters of some government programs, would not, in any event, extend to all activities and programs of individuals or private entities which receive government funds. In Legal Services Corporation v. Velazquez , the Court overturned a restriction on the Legal Services Corporation's grantees "lobbying" for changes in welfare legislation as part of legal representation of indigent clients. The Court found that even though the legal services program was government funded, and thus the speech that the government wished to limit by statute was, in fact, within the confines of that program (as in Rust ), the activity and speech involved, that is, lobbying the legislature on behalf of a client, could not be considered "government speech," and thus was not subject to regulation under the "government speech" doctrine. Along a somewhat similar line as the "government speech" concept may be situations where private organizations serve as what might be described as surrogates or stand-ins for government agencies, to perform "governmental functions" of administering and disbursing public funds. In some of these instances federal law has treated these private organizations, for purposes of restrictions on the partisan political activities of their employees, as "state or local" governmental agencies under the provisions of the Hatch Act. If a contract or a grant were thus given to perform what might be considered "governmental functions," or to have private parties serve as surrogates for government officials in administering or managing certain public programs, then arguments could be made that the government could then limit political speech or activities of such private participants in the program under the "government speech" guidelines, or under a similar rationale as the Hatch Act, to protect the fair administration of government programs. The Supreme Court in Citizens United noted that there is "a narrow class of speech restrictions" which may be permissible, such as in the Hatch Act (citing the Letter Carriers case, 413 U.S. 548 (1973)), "based on an interest in allowing governmental entities to perform their functions." Such rationale, however, would not appear to be strong in the case of private contractors who are merely providing goods or selling products to the government. Governmental Interest Promoted by the Legislation; Least Restrictive Means of Accomplishing Objective When a provision of law limits or interferes with First Amendment rights, the Supreme Court will engage in what it terms "strict scrutiny" to examine the law and its purposes to determine, initially, if there are significant, "overriding," or "compelling" governmental interests in the restriction that outweigh the impositions on First Amendment rights. If there are such governmental interests in the suppression of speech, the Court will then examine whether the restriction is sufficiently tailored to promote those interests asserted as the law's justification. There are several governmental interests which might arguably be promoted by a prohibition on "independent expenditures" by government contractors or grantees, and such interests would need to be analyzed under the Supreme Court's standards. The interests of the prevention of corruption of the electoral process and undue influences on candidates and officeholders, for example, have been found to be important governmental interests which may justify, in some cases, certain limitations or burdens on First Amendment activities. Even while such interests have been found to be significant, however, the Court has struck down restrictions on advocacy and political activities which were not narrowly tailored to meet the objective of preventing such undue influence or the appearance of corruption. In relation to the interest of preventing "corruption," the Supreme Court has found that although such governmental interest is compelling, that interest is not necessarily advanced by restricting "independent expenditures" by private entities in political campaigns. In Buckley v. Valeo , the Supreme Court found "that the governmental interest in preventing corruption and the appearance of corruption [was] inadequate to justify [the ban] on independent expenditures." Similarly, the Court found in Citizens United that a prohibition on "independent expenditures" does not advance in a sufficient manner the interest of preventing corruption: "[W]e now conclude that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption." For this reason, it would seem that legislation which would restrict all private parties (or merely all corporations) receiving federal contracts or grants from engaging in independent political expenditures with their own non-governmental resources, may not necessarily advance the interest in the prevention of "corruption" of candidates or officeholders. As noted by the Supreme Court in Citizens United , the absence of any pre-arrangement or coordination with the candidate in the making of an "independent expenditure" by a private entity mitigates against a corrupting influence or quid pro quo agreement, and thus does not necessarily reach the concerns in so-called "pay to play" corruption schemes. A governmental interest in attempting to "balance" competing voices in public policy or campaign debate, by limiting expression of one group over another, was found by the Supreme Court not to be a compelling interest to justify suppression of speech. The Supreme Court thus rejected the so-called "antidistortion" rationale that would attempt to limit the influence of monied interests over less well-funded persons or groups in a political campaign. If the governmental purpose is not to prevent corruption of candidates or governmental processes, then such interest may be to protect government funds and programs. In such case the interests may be two-fold: one would be to prevent the use and diversion of federal government funds for private political or public policy advocacy activities which are not authorized by Congress; and the second would be to prevent the federal government "subsidizing" political advocacy activities of private parties by providing such private parties with federal dollars for other purposes. Clearly the federal government need not "pay for," nor directly "subsidize," the political advocacy or lobbying of private entities. To that end, current federal provisions already expressly bar the use of contract or grant funds by private recipients for political or lobbying purposes, or the paying for or "charging off" of expenses for political advocacy or lobbying to any government contract or grant; and provide criminal penalties for the diversion of government funds to non-authorized purposes. Such limitations are less restrictive means of providing assurances concerning the proper use of government funds than a ban on all political speech by private recipients with their own resources. If the interest of the government is merely to avoid a direct subsidy for private political activities out of public monies, then a restriction in any proposed legislation which barred all privately funded advocacy by grant or contract recipients might arguably, in the first instance, be considered "over-inclusive" because it reaches activities, speech, and conduct paid for completely with private , non-federal monies, as well as privately funded activities wholly outside of the realm of the federal program. As such, the restriction may arguably be found, with respect to otherwise protected First Amendment speech and conduct, to be unnecessarily over-broad and burdensome on such First Amendment rights. A further interest of the government forwarded by legislation might also arguably be to prevent an "indirect" subsidy for groups which engage in political advocacy by providing such groups with federal funds for other non-advocacy activities, goods, or services which the government desires. The argument in such case would be that money is "fungible," and thus grants and contracts for proper public purposes to private groups "frees up" other non-federal money which the private contractor or grantee may then use for any purposes, including campaign or public policy advocacy activities. The Supreme Court, however, in another context, has found that a grant for one purpose is not a subsidy of the other, non-federally funded activities, and expressly rejected the "fungibility" of funds argument as a justification to prohibit federal funding of an organization engaging in First Amendment activities. Other Government Interests or Narrower Tailoring Sufficient to Justify Restrictions Involving Government Contractors131 While conditioning the political speech of all government contractors upon their forgoing their rights to political speech seems likely to raise significant First Amendment issues, as discussed in prior sections, it is possible that the government could assert hitherto unrecognized interests in such conditions, especially if any restrictions targeted specific categories of contractors. Alleged government interests in preventing contractors from using the "wealth" generated by their dealings with the government to influence the political process, or in avoiding the appearance of corruption created when "contractors endorse their friends in power," may be insufficient to support conditions affecting all government contractors in the aftermath of Citizens United . The majority in Citizens United found such interests were insufficient to justify a ban on campaign expenditures and electioneering by all corporations, a conclusion which it reached after considering the various "types" of corporations affected by such prohibitions. Commentators have alleged other interests that the government could potentially assert in targeting government contracts, such as safeguarding the integrity of the procurement process and protecting contractors from being required to "pay for play." However, no court appears to have recognized these interests as compelling governmental interests justifying restrictions on First Amendment rights, and courts may find that such interests are insufficient to justify across-the-board restrictions given the wide variety of "types" of government contractors and means by which they into enter contracts with the government. Such alleged interests might more plausibly be asserted with narrower restrictions targeting specific types of contractors. For example, the appearance of quid pro quo corruption of the sort that the majority in Citizens United recognized as sufficient to uphold limitations on campaign contributions is arguably stronger with contracts that are "earmarked" for certain entities as part of the congressional appropriations process than with other contracts. Contractors performing "functions approaching inherently governmental," "critical functions," or "mission essential functions," could perhaps be similarly targeted on an analogy to the Hatch Act, which bars federal employees from express endorsements , although any such legislation could raise constitutional concerns about vagueness given recent disputes over whether particular functions qualify as such . "Personal service contracts," or contracts that, by their express terms or as administered, make contractor personnel appear to be government employees, could perhaps also be targeted based on this analogy. Government contractors that are foreign governments, corporations, or individuals are prohibited from making campaign contributions or expenditures under a separate statute whose constitutionality has apparently never been challenged. Taxation of Corporate Campaign-Related Expenditures145 Some have proposed that Congress enact an excise tax on the corporate campaign-related expenditures permitted under Citizens United . As discussed below, there are several existing taxes that apply to tax-exempt organizations, including those that are incorporated. For purposes of this discussion, it is assumed that any proposed tax would apply to both for-profit and non-profit corporations, and, in the case of incorporated tax-exempt organizations, be in addition to the existing taxes. It is also assumed that the expenditures would be non-deductible under IRC § 162(e) as a trade or business expense. Congress has broad powers to tax under the Constitution. In general, tax distinctions and classifications are constitutionally permissible so long as "they bear a rational relation to a legitimate governmental purpose." The rational basis standard is a low level of review by a court. In the tax context in particular, courts typically show great deference in recognition of "the large area of discretion which is needed by a legislature in formulating sound tax policies." At the same time, not all exercises of Congress's taxing power receive such deference. Sometimes, tax provisions are subject to higher levels of scrutiny. For example, tax provisions based on the content of speech are, like non-tax provisions, subject to strict scrutiny. A provision subject to this highest level of scrutiny must be necessary to serve a compelling government interest and be narrowly drawn to achieve that end. This is a heavy burden for the government to meet. The decision by Congress to impose a tax on certain corporate expenditures would typically appear to be within its broad taxing powers and subject to minimal review by a court. It could, nonetheless, be argued that a more rigorous analysis should apply when, as here, the tax is related to the exercise of a constitutional right. Any analysis of whether Congress could enact an excise tax on corporate political expenditures is severely limited by the fact that it does not appear there is case law analyzing the constitutionality of a similar tax. Even so, it appears an excise tax could potentially raise significant constitutional concerns since, depending on the particulars of a specific proposal, it could be characterized as a penalty on protected speech. The Supreme Court has upheld provisions that provide disfavorable tax treatment to a taxpayer's campaign activities under the rationale that there is no requirement for the federal government to subsidize the constitutional rights of taxpayers. In Cammarano v. United States , the Court upheld the validity of a tax regulation that disallowed a business deduction for lobbying expenditures. The taxpayers had been denied a deduction for amounts paid to a professional organization to lobby against a state initiative that would have had dire consequences for their business. They argued the disallowance violated the First Amendment, relying on a previous case, Speiser v. Randall . In Speiser , the Court had struck down a state property tax exemption that required taxpayers take a loyalty oath on the grounds that the state's tax administration procedures did not afford adequate due process. In striking down the provision that was clearly "aimed at the suppression of dangerous ideas," the Court emphasized its chilling effect on the proscribed speech and equated it to a fine for engaging in that type of speech. In Cammarano , the Court rejected the claim that Speiser was controlling, reasoning that the nondiscriminatory disallowance of a deduction for lobbying expenditures was different because, unlike the provision in Speiser , it was not intended to suppress dangerous ideas. Instead, the Court explained, the taxpayers "are not being denied a tax deduction because they engage in constitutionally protected activities, but are simply being required to pay for those activities entirely out of their own pockets, as everyone else engaging in similar activities is required to do under" the tax laws. The Court further explained that the disallowance "express[ed] a determination by Congress that since purchased publicity can influence the fate of legislation which will affect, directly or indirectly, all in the community, everyone in the community should stand on the same footing as regards its purchase so far as the Treasury of the United States is concerned." In a subsequent case, Regan v. Taxation With Representation of Washington , the Court addressed a similar issue in upholding the federal law that limits the lobbying of § 501(c)(3) organizations to "no substantial part" of their activities. The Court rejected the argument that the limitation infringed on the organization's First Amendment rights. Rather, the Court, noting it had held in Cammarano that the First Amendment does not require the federal government to subsidize lobbying, explained that "Congress has merely refused to pay for the lobbying out of public moneys" and stated that it "again reject[s] the notion that First Amendment rights are somehow not fully realized unless they are subsidized by the State." An excise tax on corporate campaign expenditures would not, in general, appear to be supported by the non-subsidization rationale discussed in Cammarano . Instead, depending on the specifics of the proposal, a court might find the tax to be a restriction on speech, perhaps comparably onerous to the prohibition struck down in Citizens United , which would then place a heavy burden on the government to justify the provision. It is not possible to say how a court would analyze a proposal; however, characteristics that might affect the analysis could include the rate of tax (e.g., a high rate might look more like a restriction or de facto prohibition); the scope of taxpayers subject to the tax (e.g., a court might look less favorably at a tax limited to certain taxpayers); the scope of activities subject to tax (e.g., a generally applicable tax might be less scrutinized than one that applies only to campaign expenditures); and the purpose of the tax (e.g., a court might look differently at a tax enacted as part of a campaign finance regulatory regime than one with other regulatory or traditional revenue raising purposes). Proponents of an excise tax on corporate campaign expenditures might point to the existence of several taxes that apply to tax-exempt organizations making political expenditures for support of the idea that Congress could enact such a tax; for example: IRC § 527(f) imposes a tax on § 501(c) organizations that make expenditures for influencing elections or similar activities. The tax is imposed at the highest corporate rate on the lesser of the expenditures or the organization's net investment income. IRC § 4955 imposes a tax on § 501(c)(3) organizations making campaign expenditures. These organizations are prohibited under the tax laws from making these types of expenditures. The tax equals 10% of the expenditures, with an additional 100% tax imposed if the expenditures are not corrected in a timely manner. IRC § 4945 imposes a similar tax on the political expenditures of private foundations, although it covers a broader range of activities, some of which fall outside the § 501(c)(3) campaign intervention prohibition. Private foundations are § 501(c)(3) organizations that receive contributions from limited sources. Due to fear of abuse, they are subject to stricter regulation than other § 501(c)(3) organizations. IRC § 6033 imposes a proxy tax on tax-exempt organizations that fail or choose not to notify their members of the non-deductible portion of dues used for political purposes. IRC §§ 4911 and 4912 impose a tax on § 501(c)(3) organizations that have lobbying expenditures exceeding certain limits. It could be argued that the § 527(f) tax and § 6033 proxy tax are similar to a corporate campaign expenditure tax in that all three would tax the political expenditures of entities which are otherwise permitted to engage in the activities. The other taxes might be characterized as penalty taxes, and thus could support an argument that an excise tax would be permissible even if it had some penalizing features. However, as discussed below, there are characteristics of the existing taxes that might undermine an attempt to draw support from them for an excise tax on corporate campaign expenditures. It could be argued that the § 527(f) tax and § 6033 proxy tax could be upheld, in at least some contexts, under the non-subsidization rationale expressed in Cammarano . While they may look like taxes imposed on entities engaging in protected speech, it might be more appropriate in certain situations to characterize them as the mechanism to avoid federal subsidization of political activities. This is because the effect of both is that the organizations are not exempt from federal income tax on otherwise exempt income to the extent funds are used for certain political activities. Thus, the two taxes are arguably the functional equivalents of a disallowed deduction under § 162(e), although this comparison might not support the taxes in all circumstances. Such an argument would not appear to apply to the proposal to tax corporate campaign expenditures. The taxes imposed under §§ 4955, 4945, 4911, and 4912 could be characterized as penalty taxes on § 501(c)(3) organizations for engaging in campaign and lobbying speech, thus suggesting that the subsidization rationale cannot fully justify their imposition. The taxes imposed under §§ 4955, 4911, and 4912 are imposed on activities that § 501(c)(3) organizations are restricted under the tax laws from engaging in. Assuming these limitations are constitutional, the taxes may be an appropriate mechanism for enforcing them. If the limitations were found to be unconstitutional, then that might call into question the constitutionality of the taxes as well. The § 4945 tax is different in that it also applies to certain expenditures that are otherwise permitted under the tax laws. Thus, to the extent the § 4945 tax is imposed on such activities, it might be characterized as penalizing behavior that is otherwise lawful, and therefore might be compared to a proposal to tax corporate campaign expenditures. However, the two circumstances might be distinguished. Private foundations are heavily regulated due to fear of abuse, and thus the § 4945 tax could be seen as a part of an overall regulatory scheme, separate from campaign finance. Whether a comparable rationale would exist for a proposal to tax corporate campaign expenditures would appear to depend on the specific proposal and its context. Finally, one could point to the fact that the existing taxes apply to tax-exempt organizations, thus perhaps permitting the argument that any burden on their speech could be avoided by restructuring their activities. It seems difficult to fully extend a similar rationale to a tax on corporate campaign expenditures. Public Financing For Congressional Campaigns167 Proposals to enact public financing for congressional candidate campaigns have been introduced in the 111 th Congress. Public financing programs are generally voluntary and traditionally offer grants or matching funds in exchange for candidates agreeing to limit spending. It appears that legislation establishing such public financing programs, requiring compliance with spending limits, would pass constitutional muster on the condition that they are voluntary. In the 1976 landmark case of Buckley v. Valeo , the Supreme Court held that spending limitations violate the First Amendment because they impose direct, substantial restraints on the quantity of political speech. The Court found that expenditure limitations fail to serve any substantial government interest in stemming the reality of corruption or the appearance thereof, and that they heavily burden political expression. Reaffirming Buckley, in Citizens United v. FEC, the Court reiterated this determination finding that truly independent expenditures, with no prearrangement and coordination with a candidate, not only lessen the value of the expenditure to the candidate, but also mitigate any danger that expenditures will be made as a quid pro quo for improper commitments from the candidate. As a result, spending limits may only be imposed if they are voluntary. In Buckley, the Supreme Court upheld the constitutionality of the voluntary public financing program for presidential elections. The Court concluded that presidential public financing was within the constitutional powers of Congress to reform the electoral process, and that public financing provisions did not violate any First Amendment rights by abridging, restricting, or censoring speech, expression, and association, but rather encouraged public discussion and participation in the electoral process. According to the Court: Congress may engage in public financing of election campaigns and may condition acceptance of public funds on an agreement by the candidate to abide by specified expenditure limitations. Just as a candidate may voluntarily limit the size of the contributions he chooses to accept, he may decide to forgo private fundraising and accept public funding. Although public financing proposals contain an incentive for compliance with spending limits—the receipt of public monies or other benefits—it does not appear that such incentives jeopardize the voluntary nature of the spending limitation. That is, a candidate could legally choose not to comply with the spending limits by opting not to accept the public benefits. Therefore, it appears that a proposal establishing a voluntary public finance program for congressional candidates, requiring compliance with spending limits, would likely be upheld as constitutional. Constitutional Amendment174 In Citizens United v. FEC , the Supreme Court invalidated two provisions of the Federal Election Campaign Act (FECA), codified at 2 U.S.C. § 441b, finding that they were unconstitutional under the First Amendment. It struck down the long-standing prohibition on corporations using their general treasury funds to make independent expenditures, and Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA), which amended FECA, prohibiting corporations from using their general treasury funds for "electioneering communications." BCRA defines "electioneering communication" as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. As a result of the Court's decision being one of constitutional interpretation—not statutory interpretation—amending the Constitution is an option for overturning the ruling directly . In order to restore FECA provisions that were in effect prior to the Court's ruling, it appears that a proposal to amend the Constitution would need to allow, at a minimum, enactment of legislation that prohibits corporations and labor unions from using their general treasury funds to make expenditures for communications that expressly advocate election or defeat of a clearly identified federal candidate and for electioneering communications. In the 111 th Congress, proposals have been introduced that would amend the Constitution. In accordance with Article V of the Constitution, such joint resolutions would require approval by two-thirds of each House, would become effective upon ratification by the legislatures of three-fourths of the states, and specify that approval is required within seven years from the date of submission. Proposals to amend the Constitution vary. Some would provide Congress with the expansive power to regulate the raising and spending of money in federal elections, including setting limits on expenditures made in support of or opposition to federal candidates. Such an amendment to the Constitution would not only appear to allow Congress to enact legislation restricting corporate and labor union expenditures, but also limiting independent expenditures by candidates, political parties, political action committees (PACs), and individuals. In contrast, other proposals take a more direct approach and would expressly prohibit corporations and labor unions from using general treasury funds for advertisements in connection with a federal office campaign, regardless of whether the advertisement expressly advocates the election or defeat of a clearly identified federal candidate. In addition, as Citizens United appears to invalidate state laws that restrict corporate expenditures—in addition to the federal statute—some proposals to amend the Constitution would also provide states with the power to enact laws regulating corporate expenditures in connection with state elections.

In Citizens United v. FEC, the Supreme Court invalidated two provisions of the Federal Election Campaign Act (FECA), finding that they were unconstitutional under the First Amendment. The decision struck down the long-standing prohibition on corporations using their general treasury funds to make independent expenditures, and Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA), prohibiting corporations from using their general treasury funds for "electioneering communications." BCRA defines "electioneering communication" as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. The Court, however, upheld the disclaimer and disclosure requirements in Sections 201 and 311 of BCRA as applied to a movie regarding a presidential candidate that was produced by Citizens United, a tax-exempt corporation, and the broadcast advertisements it planned to run promoting the movie. As a result of the Court's ruling, federal campaign finance law no longer restricts corporate or, most likely, labor union use of general treasury funds to make independent expenditures for any communication expressly advocating election or defeat of a candidate. In addition, the law now also permits corporate and union treasury funding of electioneering communications. However, the law prohibiting contributions to candidates, political parties, and political action committees (PACs) from corporate and labor union general treasuries still applies. In response to the Supreme Court's ruling, various proposals have been discussed and legislation has been introduced in the 111th Congress, including for example H.Con.Res. 13, H.J.Res. 13, H.J.Res. 68, H.J.Res. 74, H.R. 158, H.R. 1095, H.R. 1826, H.R. 2038, H.R. 2056, H.R. 3574, H.R. 3859, H.R. 4431, H.R. 4432, H.R. 4433, H.R. 4434, H.R. 4435, H.R. 4487, H.R. 4510, H.R. 4511, H.R. 4517, H.R. 4522, H.R. 4523, H.R. 4527, H.R. 4537, H.R. 4540, H.R. 4550, H.R. 4583, H.R. 4617, H.R. 4630, H.R. 4644, H.R. 5175, S.J.Res. 28, S. 133, S. 752, S. 2954, S. 2959, S. 3004, and S. 3628. This report provides an analysis of the constitutional and legal issues raised by several proposals, organized by regulatory topic: increasing disclaimer requirements, increasing disclosure for tax-exempt organizations, requiring shareholder notification and approval, restricting U.S. subsidiaries of foreign corporations, restricting political expenditures by government contractors and grantees, taxing corporate independent expenditures, and providing public financing for congressional campaigns. The report also addresses amending the Constitution. For a comprehensive discussion of legislation that has been introduced and an analysis of policy options, see CRS Report R41054, Campaign Finance Policy After Citizens United v. Federal Election Commission: Issues and Options for Congress, by [author name scrubbed]. For a legal analysis of the Supreme Court's ruling, see CRS Report R41045, The Constitutionality of Regulating Corporate Expenditures: A Brief Analysis of the Supreme Court Ruling in Citizens United v. FEC, by [author name scrubbed].

Congressional Context The Planned Parenthood Federation of America (PPFA) and its affiliated health centers (called Planned Parenthood Affiliated Health Centers or PPAHCs) have been topics of debate within the 114 th and 115 th Congresses. Legislation in both the 114 th and 115 th Congresses has proposed federal funding bans that would range from one year to permanent. These discussions have raised questions about the services that PPAHCs provide and the availability of alternative facilities to provide similar services to disadvantaged populations. In the 115 th Congress, House Speaker Paul D. Ryan and Vice President Michael R. Pence informed the press that legislation to repeal and replace the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 , as amended) includes language that would ban federal funding that is made available to PPFA and PPAHCs. The resulting bill, H.R. 1628 , the American Health Care Act of 2017 (AHCA), includes a one-year funding prohibition. The bill passed the House on May 4, 2017, and is currently under consideration in the Senate.  AHCA's proposed funding moratorium would primarily apply to federal funds that PPFA receives from providing care to beneficiaries enrolled in Medicaid, a federal-state health program. It is not clear how a ban would affect the overall operations of PPFA, because federal funding is only one source of PPFA's revenue. In addition, PPFA does not receive a direct appropriation. The Congressional Budget Office (CBO) has published costs estimates on the impact of defunding PPFA in AHCA and as part of efforts to repeal the ACA in the 114 th Congress. This report summarizes these costs estimates. Both the current and older estimate are discussed because the CBO's discussion of the effects of PPFA defunding on access to care, undertaken to evaluate proposals in the 114 th Congress, may still be instructive. The earlier proposal is also discussed because the ACA repeal bill in the 114 th Congress made explicit references to redirecting PPFA funds to federally qualified health centers (FQHCs), entities that receive federal grants to provide health care to underserved populations. Among other requirements, they must provide reproductive health services and must accept Medicaid. In particular, H.R. 3762 —the ACA repeal bill that passed both the House and Senate in the 114 th Congress—proposed that "All funds that are no longer available to Planned Parenthood Federation of America, Inc. and its affiliates and clinics pursuant to this Act will continue to be made available to other eligible entities to provide women's health care services." H.R. 3134 , which passed the House in the 114 th Congress, would have defunded PPFA and would have reallocated federal funds to FQHCs. Those bills drew on CBO's estimate of the savings that the PPFA one-year ban would have created and then appropriated the same amount ($235 million) to FQHCs. The AHCA would appropriate an additional $422 million to FQHCs for FY2017. The language in H.R. 1628 does not explicitly link this new funding to the PPFA ban, but congressional leaders have made this link in their discussions of the bill. For example, Speaker Ryan noted that the bill would end funding for PPFA and send that money to community health centers. Similarly, Representative Kevin Brady, chairman of the House Committee on Ways and Means, also stated that the bill would defund PPFA and redirect funds to community health centers. The CBO score for AHCA estimates that a one-year ban would reduce direct spending by $156 million over the 10-year period of 2017-2026. FQHCs are one of many types of health care facilities that could provide care to Medicaid beneficiaries, but they may be particularly relevant for several reasons. First, federal law requires that all state Medicaid programs cover services provided at FQHCs for eligible beneficiaries. Second, FQHCs receive federal grants that require them to provide family planning (among other services) to Medicaid beneficiaries. As a result of Medicaid program requirements and the federal grants that FQHCs receive, the federal government may have leverage over FQHCs to direct their services, which it may not have over other types of providers, such as physicians in private practice. Consequently, recent legislation has focused on FQHCs as an alternative to PPAHCs. If Medicaid reimbursements were no longer available to PPAHCs, Medicaid beneficiaries would have several potential options. They could remain at the PPAHC and pay for services themselves or receive services paid for with nonfederal (e.g., state or donated PPFA) funds, receive services at another (non-FQHC) provider, obtain services at an FQHC, or no longer receive services. Various factors may affect which of these options Medicaid beneficiaries would pursue. Access to health care varies by location, as health systems and options vary considerably across states and localities. In some areas, one facility may be as accessible as another and may provide (or may be able to begin to provide) the same set of services. In other areas, this may not occur because, for example, only one provider exists, either in general or for a particular service type. Moreover, facilities located in the same geographic area may not be equally accessible for patients, as one facility may be located near public transportation routes while another may not. Even in areas where one facility could provide the same services as another, these facilities may be challenged to do so in the short term because they may need to hire additional providers, acquire medical equipment, or construct additional exam rooms to be able to expand services. Constraints in providing services in the short term may include factors that affect patient access to care. PPAHCs provide a narrow range of services to a more targeted population (i.e., family planning and related services to individuals of reproductive age), whereas FQHCs provide primary care, dental, and behavioral health services to individuals of all ages. As part of that mission, FQHC services do overlap with those provided by PPAHCs, but these services are not the focus of most FQHCs, whereas they are the focus of all PPAHCs. In addition, nearly all FQHCs have provider vacancies, which makes providing care to their current patient base challenging and may strain FQHCs' ability to absorb new patients. Given these issues, it is possible that a sudden influx of former PPAHC patients could strain FQHCs. Patient awareness and preferences are also relevant factors. For access to be maintained, patients need to be aware that provider alternatives exist that will meet their needs. Medicaid beneficiaries are not required to seek services at a particular provider, although some may be enrolled in managed care plans that may limit access to particular providers. Even in cases where Medicaid beneficiaries are enrolled in managed care, they have a choice of where to seek family planning services as identified in their state's managed care contract. Given this, Medicaid beneficiaries who seek care at PPAHCs do so because PPAHCs are accessible and meet their needs or because there are not alternate accessible providers (e.g., because these providers will not accept Medicaid). PPAHCs, by specializing in family planning services, may be well-suited to meet their patients' needs as compared to a more generalized provider. For example, researchers have found that some patients prefer to use specialized family planning clinics, including PPAHCs, for family planning services, for a number of reasons, including that patients can receive longer-term contraceptive supplies. Organization of This Report This report focuses on services that can be provided with federal funding, because recent policy debates discuss removing federal funding from PPFA while attempting to maintain the services that the federal government would otherwise have paid PPFA to provide. Given this focus, this report contains only a limited discussion of abortion services because federal funds are generally not available to pay for abortions, except in cases of rape, incest, or endangerment of the mother's life. For one health facility to begin to provide services to patients that had previously been seen at a different facility, one could argue that the receiving facility should provide similar services, serve a similar population, and be located in a similar geographic area. This report is organized around these three dimensions and presents national-level data for both PPAHCs and FQHCs. The report makes a number of comparisons using national-level data; although national-level data are the best data available, health care varies by locality and national data obscure local variation. In some cases, the national data available for PPAHCs and FQHCs vary; FQHCs are required to report a number of data elements because they receive federal grants for their overall operations. In contrast, PPAHCs may be required to report certain services they provide as a condition of receiving a particular type of grant, but do not have similar overall reporting requirements. As such, comparisons in this report are limited by the data available. These comparisons are also limited because the reporting years for PPFA and FQHCs differ. Specifically, FQHCs report data on calendar years or based on the federal fiscal year (October 1-September 30). PPFA's annual reports include data that cover different time periods. Their revenue data cover the PPFA fiscal year—July 1 through June 30—while service data are presented in calendar year or the federal fiscal year. The report then discusses CBO cost estimates for AHCA and for legislation considered in the 114 th Congress that would have enacted a one-year ban on federal Medicaid funds being provided to PPFA and PPAHCs. As noted, the cost estimates in the 114 th Congress provide additional analyses on the effects of a PPFA ban on Medicaid beneficiaries that may be useful for evaluating AHCA and other efforts to restrict funding to PPFA in the 115 th Congress. Finally, the report concludes with a discussion of some published research that examines the effects of state funding restrictions to PPAHCs on women's health. Comparison of PPAHCs and FQHCs In comparing PPAHCs and FQHCs, it is important to understand that they are not equivalent entities. Both are outpatient clinics, but they vary in size and the scope of services offered. There are fewer PPAHCs and a central body (the PPFA affiliate) decides where to locate facilities. In addition, these facilities are more coordinated with each other than are FQHCs. A patient who receives services at one PPAHC can expect similar services, organization, and standards followed at a different PPAHC. In contrast, FQHCs are more numerous, but are generally independent from one another and have no central governing body. FQHCs also receive federal grants for their operations and must be located in a medically underserved area (or serve a medically underserved population) as a condition of receiving those grants. PPAHCs do not receive federal grants for general facility support and do not have location requirements. Both entities may receive reimbursements from federal health programs for providing services to enrolled beneficiaries. Both facility types report that Medicaid is their largest source of federal revenue. In addition, both PPAHCs and FQHCs may compete and receive grants from federal grant programs for which they are eligible. PPAHCs and FQHCs have different goals and orientations. PPAHCs focus on providing family planning and related services to individuals of reproductive age (15-44 years), whereas FQHCs' focus is to provide more comprehensive services to individuals throughout an individual's lifespan. Although there is some overlap, their focus is different. Information about both facility types is provided below, using the most recent and consistent data available. Planned Parenthood Affiliated Health Centers (PPAHCs) PPFA is the umbrella organization supporting 59 independent affiliates that operate 661 health centers across the United States (called PPAHCs), according to their 2014-2015 annual report. Affiliates generally oversee PPAHCs in a geographic area ranging from parts of states to several states. Although consistent data are not available in each year, it appears that the number of affiliates and facilities has declined since 2009-2010, when PPFA reported having 88 affiliates (a 32% decline) and 840 health centers (a 22% decline). PPFA, as a result of its internal policies, provides discounted services to individuals who cannot afford to pay; it also helps patients enroll in federal and state programs (e.g., Medicaid) when patients meet the program's eligibility criteria. PPAHCs that receive federal funds from the Title X Family Planning Program must also provide discounted contraception services. Federal Qualified Health Centers (FQHCs)25 FQHCs are outpatient facilities that focus on primary care and receive federal grants—authorized under the Public Health Service Act (PHSA) Section 330—for general support of their facilities. Section 330 grants are administered by the Health Resources and Services Administration (HRSA), an agency within the Department of Health and Human Services (HHS). These grants are awarded competitively with some preference given to sites in rural areas. In addition to supporting operations, Section 330 grants can be used to expand services and, in limited cases, to construct facilities. Most FQHCs are independently operated, although some may be affiliated and some FQHCs operate multiple sites. As of March 6, 2017, there were 10,560 FQHC delivery sites. The number of FQHC delivery sites has increased by 32% since 2009. Part of this increase is due to the creation of a multi-billion-dollar Community Health Center Fund in the Affordable Care Act (ACA). The ACA's investment in FQHCs was an attempt to provide access to care for those who gained insurance coverage under the ACA. FQHCs have served as a provider for those who gained insurance (including those who became eligible for Medicaid), but in some cases researchers have found that FQHCs have longer wait times for new appointments for Medicaid patients than do other types of facilities. Community health centers are the most common type of FQHC because they provide care to a generally underserved population. Section 330 grants also support three other FQHC types: (1) health centers for the homeless; (2) health centers for residents of public housing; and (3) migrant health centers, each of which serve a more targeted population than do community health centers. No PPAHCs currently receive Section 330 grants. As a condition of receiving a Section 330 grant, FQHCs are required to provide services to the entire population of their designated service area, regardless of an individual's ability to pay. To do so, health centers establish a discounted fee schedule (i.e., sliding-scale fees), which is then further discounted or waived based on a patient's ability to pay, as determined by the patient's income relative to the federal poverty level and the patient's family size. FQHCs are also required to coordinate with state Medicaid programs to provide care to Medicaid beneficiaries. Section 330 grantees are designated as FQHCs for purposes of the Medicare and Medicaid programs. This designation entitles them to receive higher reimbursement rates for providing services to Medicare and Medicaid beneficiaries. Specifically, FQHCs receive higher payment rates than physicians' offices or other outpatient facilities without that designation (e.g., PPAHCs) for providing the same services. The FQHC payment designation was created because FQHCs provide additional supportive services that are generally not reimbursed by insurance. The higher payment rates are also intended to minimize the use of Section 330 grant funds to subsidize Medicare and Medicaid patients receiving services at FQHCs. Revenue Sources PPFA Revenue Sources PPFA is a not-for-profit organization that receives nonfederal and federal funds for its operations. It receives grants (federal and nonfederal), donations, patient fees, and reimbursements including those received for providing services to patients enrolled in government health care programs (e.g., Medicaid). Federal funds are only available when PPFA provides services that are covered by the applicable federal program. Federal funds are generally not available to pay for abortions, except in cases of rape, incest, or endangerment of a mother's life. For their fiscal year that ended June 30, 2015 (referred to as 2014-2015 data in this report), PPFA and its affiliates reported total revenue of $1.29 billion. The largest source ($553.7 million, or 43%) was from government reimbursements received from government programs for health services provided (e.g., Medicaid) and grants (e.g., the Title X Family Planning Program). This category included funds from federal, state, and local governments. For example, it includes both state and federal shares of Medicaid reimbursements for covered services provided to Medicaid beneficiaries. See Table 1 . According to the Government Accountability Office (GAO) and CBO, Medicaid reimbursements for providing services to covered beneficiaries are the largest source of government revenue for PPFA. In a study of 2012 revenue, GAO found that PPFA affiliates reported $400.56 million in Medicaid reimbursements (including both federal and state dollars). In a 2015 cost estimate, CBO estimated that PPFA received $390 million in annual federal and state Medicaid reimbursements, making these reimbursements the largest source of federal support for PPFA. PPFA also receives funds from government grant programs, either as a direct grantee or through a state or another organization. The largest source of federal grant support, according to GAO's analysis of FY2012 data, was the Family Planning Program under Title X of the Public Health Service Act, with PPFA affiliates spending $64.35 million in Title X funding in FY2012 (see text box). Title X grantee data from August 2016 indicate that 15 PPFA affiliates are among the current Title X grantees. PPAHCs also receive Title X funds indirectly through contracts with other grantees (i.e., state agencies); more than 350 PPAHCs are included in the database of Title X sites. The Guttmacher Institute found that in 2010, PPAHCs made up 13% of Title X clinics, but served 37% of Title X clients. In addition to Medicaid reimbursements and Title X Family Planning Program grants, GAO found, in FY2012, that PPFA affiliates expended funds from other HHS programs, as well as programs administered by the Department of Housing and Urban Development, the Department of Justice, and the Department of Agriculture. PPFA received some of these funds directly from federal agencies, and some indirectly as sub-awards passed through state agencies or other federal grantees. It should be noted that GAO's data are from FY2012. Data are not available to assess whether the programs that provided funding to PPFA affiliates in FY2012 are currently providing funds to PPFA affiliates. For example, a number of the federal programs that had provided funds to PPFA in FY2012 are competitive grant programs. A competitive grant that was active in FY2012 may have ended subsequently, a PPFA affiliate may have chosen not to apply for a particular program, or a PPFA affiliate may not have competed successfully for funds. Furthermore, a number of programs from which PPFA affiliates received funds in FY2012 were block grants to states (e.g., Maternal and Child Health Services Block Grant). A state may choose not to contract with PPFA for a particular service, choosing to use a different entity to provide that service. Conversely, PPFA affiliates may have successfully competed for grant programs active since FY2012 or may have begun to contract with states when they previously have not done so. Data are not available on the extent to which such situations have occurred since FY2012. FQHC Revenue Sources FQHCs receive both federal and nonfederal funds. Available data on FQHC revenue are aggregate program-level data; the revenue sources of any individual FQHC may vary. FQHCs generally receive two types of federal funds—reimbursements and grants. For FY2016, FQHCs had total revenue of $23.4 billion (see Table 2 ). The largest source of revenue (42.2%) was reimbursements from Medicaid, which provided roughly twice the support provided by Section 330 grants (21.7%). Medicaid reimbursements may be particularly important because FQHCs receive higher payments rates than do other outpatient provider types by being designated as an FQHC. FQHCs also receive grants from other government programs. For example, Title X grantee data from August 2016 indicate that there is one FQHC among the current Title X grantees. FQHCs also receive Title X funding through state agencies (or other entities) that serve as the primary program grantee. In 2010, researchers found that FQHCs administer 38% of Title X clinics and serve 16% of overall Title X clients. This percentage may have changed given that fewer FQHCs are direct Title X grantees in more recent years and the number of FQHCs receiving funds from a state grantee may have changed. State grantee data are not available to assess whether such changes have occurred. GAO also examined federal funding made available to FQHCs. According to GAO, in FY2012, FQHCs received federal grants from programs administered by the Departments of Agriculture, Commerce, Defense, Education, Energy, Housing and Urban Development, and Interior, and by the Environmental Protection Agency and the National Science Foundation. GAO also found that, in addition to the HRSA grants that FQHCs receive to operate facilities, they also receive grants, cooperative agreements, and contracts from programs administered by other HHS agencies. Health Care and Medical Services PPAHCs and FQHCs both provide outpatient and preventive services. However, their service focus differs: PPAHCs focus on family planning services, and FQHCs focus on general primary care. There are many more FQHCs than there are PPAHCs; thus FQHCs provide far more services in a given year than do PPAHCs. However, despite the fact that there are nearly 15 times the number of FQHCs than there are PPAHCs, FQHCs in total provide fewer contraceptive services than do PPAHCs. Specifically, PPAHCs provided 2.9 million contraceptive services in 2014-2015 while FQHCs provided 1.3 million of these services in calendar year 2015. In addition, each individual FQHC provides far fewer contraceptive services than does the typical PPAHC. In an analysis that CBO requested, the Guttmacher Institute examined 2010 data and found that the average FQHC saw 330 contraceptive clients per year; in contrast, the average PPAHC saw 2,950 contraceptive clients per year. The data discussed below are aggregate data; as such, individual facilities may provide different services. Comparisons of these data may be limited because PPAHCs and FQHCs define services differently and FQHCs do not report all services provided. Specifically, PPFA defines a service as "a discrete clinical interaction, such as the administration of a physical exam or STI test or the provision of a birth control method." FQHCs, in contrast, only require their facilities to report providing selected services and derive their data based on diagnoses included in patient records. Thus FQHC data undercount total services provided. These data also represent total services provided and do not indicate who received or who paid for these services (e.g., these data do not indicate the number and type of services that Medicaid beneficiaries received at either of these facility types). Finally, these data show services regardless of whether they were paid for with federal funds. Services Provided by PPAHCs PPAHCs provide a range of contraceptive services and nearly all PPAHCs stocked common contraceptive methods. When compared to other provider types, 99% of PPAHCs provided at least 10 reversible contraceptive methods on site as compared to 71%-81% of other provider types. In recent years, medical guidance has shifted to recommending long-acting reversible contraceptives called LARCs (e.g., IUDs) to women who do not want to become pregnant within two years. Researchers have found that LARCs are "20 times more effective than oral contraceptive pills." Nearly all PPAHCs (96%-98%) both stocked LARCs and were able to provide patients with same-day insertion. In contrast, researchers found that 75% of public-funded clinics that offered family planning services were able to offer any requested LARC method on-site. PPFA data on services provided are not available consistently over time. In addition, PPFA data do not specify the type of contraceptive method provided, which could affect the number of visits needed. For example, more women opting for LARCs in more recent years should decrease the need for subsequent patient visits. Given these data constraints, it is difficult to compare how services provided have changed. However, for some comparison, Table 3 shows services reported in PPFA's annual reports for 2009-2010 (i.e., calendar year 2010) and 2014-2015 (i.e., FY2014). In 2009-2010, PPFA provided an estimated 11.0 million services; in contrast, in 2014-2015, PPFA provided an estimated 9.4 million services. The data in Table 3 represent those services provided overall by PPAHCs; some facilities may not provide all of these services (e.g., some facilities do not provide abortion services), and some facilities may have a different distribution of services provided. Table 3 shows that the percentage of services related to testing or treating sexually transmitted infections/sexually transmitted diseases (STI/STD) has increased. Services related to STI/STD are the most common service provided at PPAHCs in both time periods. The share of contraceptive services compared to all services remained relatively stable comparing the two time periods. The percentage of services classified as cancer screenings declined from the 2009-2010 report to what was reported in the 2014-2015 annual report. In the intervening years, expert recommendations for cancer screenings changed; it is possible that this change could explain the decline, but PPFA data are not specific enough to determine this. In both years, abortion services comprised 3% of PPFA services. This translates to 323,999 abortions in 2014-2015 and 329,445 abortions in 2009-2010. For context, a national study of abortion providers found that 926,200 abortions were performed in 2014. As noted above, the data on services represent all services provided by PPAHCs and are not differentiated by payer. Federal funds may only be used to pay for abortions in cases of rape, incest, or endangerment of a mother's life. Services Provided by FQHCs FQHCs, as a condition of receiving a HRSA grant, are required to provide primary, preventive, and emergency health services. Primary health services are those provided by physicians or physician extenders (physicians' assistants, nurse clinicians, and nurse practitioners) to diagnose, treat, or refer patients. Primary health services include relevant diagnostic laboratory and radiology services. Preventive health services include well-child care, prenatal and postpartum care, immunization, voluntary family planning, health education, and preventive dental care. Emergency health services refer to the requirement that health centers have defined arrangements with outside providers for emergent cases that the center is not equipped to treat and for after-hours care. FQHCs can provide additional services; however, these services must be in addition to, and not in lieu of, the required services. In addition to these three types of services (primary, preventive, and emergency), health centers must provide diabetes self-management training for patients with diabetes or renal disease. FQHCs are required to report the provisions of certain services to HRSA for the agency to evaluate the program's effectiveness. The services reports are generally related to primary and preventive care including cancer screenings. Because only subsets of services are reported, there are limited data on the total number of services that FQHCs provide. However, the number of these selected primary and preventive care services has increased over time. In 2015, FQHCs provided 20.6 million medical services, based on the subset of medical services that FQHCs report. This was an increase from the 16.2 million selected medical services provided in 2009. This increase primarily occurred because of the program's ACA funding expansion. Of the selected services reported, some are similar to those provided at PPAHCs; these services are reported in Table 4 . In 2015, services provided related to reproductive health (i.e., STD/STI treatment and prevention, contraception, and cancer screening and prevention) were about one-third (6.9 million) of the selected medical services provided at FQHCs. As mentioned above, FQHCs provide voluntary family planning services as part of their required services. In cases when an FQHC receives a Title X Family Planning Program grant (either directly or through the primary grantee), the facility is subject to the Title X program's confidentiality policies—including policies related to forgoing billing for services to maintain confidentiality. FQHCs that do not receive these grants are not required to maintain similar confidentiality policies. Some recent research suggests that not all FQHCs provide comprehensive family planning services and that this is more likely the case at smaller FQHCs. Surveys have found variation in how frequently FQHCs provide specific contraceptive methods. For example, one study found that 36% of FQHCs offered on-site contraceptive implants. Another study found that 37% offered on-site refills of oral contraception. Other research focusing on LARCs found variation in their availability. They found that slightly more than half of FQHCs provided IUDs, but more than more than 90% provided three-month injectables. Comparisons of Services Provided by PPAHCs and FQHCs The relative scope of services provided by PPAHCs and FQHCs differs. Even in categories where services are comparable, there are some key differences worth noting. FQHCs provide more limited contraception services, particularly in terms of methods available. In 2015, more than two-thirds of FQHCs (71%) provided access to at least 10 reversible contraceptive methods compared to 99% of PPAHCs. This may be particularly important because recent research suggests that providing access to a comprehensive mix of contraceptive methods, and counseling patients on the differences between various options, reduced rates of unintended pregnancy, unintended births, and abortions. Researchers have also examined services at FQHCs and PPAHCs and found differences in how they deliver the same services. FQHCs tend to provide shorter-term prescriptions for oral contraceptives than do PPAHCs. Although both FQHCs and PPAHCs that receive Title X funding are more likely to offer a range of contraceptives than do those that do not receive Title X funding, PPAHCs overall (i.e., regardless of Title X funding status) are more likely to provide LARC on-site than any other type of clinic; 98% compared to a range of 69% to 77%. PPAHCs are also more likely to provide LARC insertion as a same-day service; 98% of PPAHCs surveyed in 2010 were able to offer same-day insertions compared to 87% of FQHCs that were able to do so. A survey of clinics in 2015 found that 98% of PPAHCs offer any LARC method compared to 69% of FQHCs, and that the overall percentage of clinics stocking any LARC had increased from 66% in 2010 to 75% in 2015. Differences related to offering LARCS (at all or a particular type) may be important to Medicaid patients because, in 2016, the Centers for Medicare & Medicaid Services (CMS)—the agency that administers the Medicaid program—released policy guidance to state Medicaid programs that included ways to improve access to LARCs for Medicaid beneficiaries. In addition, FQHCs, unless they also receive Title X grants, may have less developed confidentiality policies than do PPAHCs or other types of Title X family planning clinics. In particular, FQHCs are required to seek outside reimbursements, so they may not forgo billing in order to maintain confidentiality, like many Title X clinics do. Regarding cancer screening, FQHCs provide more radiological services, including mammograms, than do PPAHCs. This may reflect the age of the patients served, as routine mammograms are not recommended for younger women, the dominant population served by PPAHCs. Also, facilities offering mammography must meet certain requirements under the Mammography Quality Standards Act (MQSA). Often it is not cost effective or feasible for smaller clinics, such as PPAHCs, to meet these requirements. These clinics instead refer their patients to other providers for mammography. Another difference is that some PPAHCs provide abortion services and do so in instances where government funds would not be available for reimbursement; FQHCs generally do not provide abortion services. Abortion services would be outside of the scope of the health center grant and would have to be approved by an individual FQHC's governing board. In addition, these services cannot be supported with the health center's grant so would have to be financially self-sustaining. Given that many health center patients have limited ability to pay for services and that there are limited sources of reimbursement for abortions, it is likely that few health centers are performing abortions. Population Served by PPAHCs and FQHCs In 2013, PPAHCs reported seeing 2.7 million patients. Of those, 78% had incomes at or below 150% of the federal poverty level, and approximately 60% were either enrolled in Medicaid or were accessing services through the Title X Family Planning Program, which provides free or discounted family planning services. PPAHCs also serve a diverse population. In 2014, approximately one-quarter (23%) of the population served was Latino and 15% was African American. Although PPAHCs are primarily thought of as women's health providers, they have increased the number of men served, primarily for STI/STD related services, in recent years, although no specific numbers are available. PPFA facilities serve some adolescents; however, PPFA reports that 84% of the patients seen in 2014 were 20 years old or older. The data available on the FQHC service population are more extensive than those available for PPAHCs. Overall, FQHCs have increased the number of patients seen in each year since 2009. The total number of patients increased from 2009 to 2015, growing from 18.9 million patients seen in 2009 to 24.3 million in 2015. Like PPFA, FQHCs report serving a low-income population; for example, more than half of all patients served report having incomes below 100% of the federal poverty level. In addition, nearly half of FQHC patients are enrolled in Medicaid or the State Children's Health Insurance Program (CHIP). The FQHC service population is also diverse. Over half of all patients served are nonwhite (see Table 5 ). FQHCs serve the population throughout their lifespan; for example, approximately one-third of patients are children. This contrasts to PPAHCs, which focus on providing services for patients of reproductive ages (i.e., ages 15-44). Locations of PPAHCs and FQHCs PPFA affiliates are independent organizations and may choose the location of their facilities. PPFA reports that the majority of PPAHCs are located in health professional shortage areas (HPSAs), medically underserved areas (MUAs), or rural areas (see text box). Unlike PPAHCs, FQHCs have location requirements. Specifically, they are required to be located in MUAs or serve a medically underserved population, which are automatically designated as HPSAs (see text box). Like PPAHCs, FQHCs can be located in either urban or rural areas. As noted earlier there are far fewer PPAHCs (661) than FQHCs (10,560). However, there is some overlap in the location of PPAHCs and FQHCs. Table 6 shows that 352 counties had both a PPAHC and an FQHC in 2016. It also shows that nearly two-thirds (61.6%) of U.S. counties have an FQHC, while only 8.7% have a PPAHC. Approximately half of all U.S counties have an FQHC, but not a PPAHC, and approximately one-third of U.S. counties have neither facility type. As discussed, FQHCs must be located in shortage areas or serve a shortage population; this location requirement may explain why some counties do not have an FQHC. Table 6 presents data on the number of counties that have either a PPAHC or an FQHC, or both facility types. Figure 1 and Figure 2 below present the location of PPAHCs and FQHCs on separate maps; a third map ( Figure 3 ) presents both facilities together. These maps present only a portion of the health services available in any particular area; as such, they are not sufficient to infer meaningful information about the local health care system. For example, they do not include hospitals, other inpatient facilities, or physician offices. Nor do these maps include all federally supported health services in a particular area; for example, the maps do not include facilities funded by the Department of Defense, the Department of Veterans Affairs, or the Indian Health Service. Notably, these maps also do not include Title X clinic sites, which provide family planning and other services that overlap with PPAHCs and FQHCs. Figure 1 presents a map of PPAHCs. These appear to be more common in the Northeast and on the West Coast. The second map presents the location of FQHCs, which are widely distributed throughout the United States (see Figure 2 ). The final map presents both FQHCs and PPAHCs, illustrating that these facilities are often, but not always, located in similar locations. The map also shows that some areas have neither facility type (see Figure 3 ). Comparisons of Locations of PPAHCs and FQHCs As noted, PPAHCs are a less numerous facility type than are FQHCs; as such, there are areas where the loss of access to a PPAHC for Medicaid beneficiaries may have less of an impact because there is currently no PPAHC in that location. Conversely, the map also shows that there are areas where there are both PPAHCs and FQHCs; this may indicate that FQHCs could provide care to PPAHC patients, but the maps do not show whether these facilities are as accessible at a local level to patients. The maps also show that there are areas where there are PPAHCs with no nearby FQHC; patients in these areas may be more affected by a reduction in services or the loss of the ability to use Medicaid at a PPAHC. As noted, these maps do not show other health care facilities in an area that may be able to absorb additional patients. The maps also do not indicate whether a similarly located facility is as accessible to patients. For example, one facility may be located near public transportation, while another facility may not be. As such, being located in the same area may not be sufficient to serve as an alternate provider to patients. CBO Cost Estimates of PPFA-Related Legislation Considered in the 114th Congress The potential effects of imposing a ban on federal funding to PPFA are uncertain. This section discusses the findings of a series of cost estimates undertaken by the CBO that examined the effects of a short- or long-term prohibition on federal funds going to PPFA. CBO stated that it did not have the basis to evaluate the effects of a ban on federal funding on the operations of PPFA or any individual PPAHC; instead, it focused its estimates on the costs to the federal government and access to care. CBO also noted that its estimates were highly uncertain and focused primarily on Medicaid, because CBO assumed that discretionary grants—such as those awarded through the Title X Family Planning Program—could be reallocated to other providers. In its estimate of the AHCA, CBO estimated that the funding prohibition would reduce direct federal spending by $178 million in FY2017 and $234 million over the 2017-2026 time period. CBO noted that these savings were partially offset by increased spending primarily for births that would be paid for by Medicaid because some women who were using PPAHCs for family planning services would lose access to care, forgo services, and become pregnant. CBO estimated that this prohibition would result in several thousand additional births, which would increase Medicaid spending by $21 million in FY2017 and $77 million over the 2017-2026 time period. Overall, CBO estimates that the net savings generated by the PPFA ban would be $156 million. CBO also estimated that, as a result of the PPFA funding prohibition, 15% of people who use Medicaid at PPAHCs would lose access to care. In analyses of bans considered in the 114 th Congress, CBO provided more comprehensive analyses of the effects of a PPFA ban on access to care for women covered by Medicaid. These estimates focused on where Medicaid patients would receive the services they would have otherwise received at PPAHCs. CBO expected that some Medicaid beneficiaries who had received services at a PPAHC would obtain services at another facility that accepts Medicaid reimbursement, which would mean little change in Medicaid spending. However, this assumption may be more uncertain if a large percentage of these patients switched to FQHCs because the FQHC payment rate is higher than the rate paid for services provided at PPAHCs, so it is possible that redirecting care to FQHCs could increase Medicaid costs. However, CBO's estimates did not address how likely this scenario was. CBO also noted that while it expected that some patients would find alternate providers, not all would be able to do so, because alternate providers are not available in some areas. Specifically, CBO estimated that between 5% and 25% of the 2.6 million people served by PPFA would be unable to access care in the first year of a funding prohibition (i.e., 2016). CBO noted that alternate providers might begin to serve these areas eventually, but that this process could take time. As such, CBO estimates that by 2020, 2% of those who lost access would not have found an alternate provider. To derive its cost estimates, CBO used a midrange estimate. It assumed that 15% of Medicaid beneficiaries served by PPFA would lose access to care in the first year. Given that some people would forgo services, CBO estimates that there would be some immediate declines in the use of Medicaid services, which would result in cost savings. CBO estimated that $235 million would be the midrange estimate of the 10-year cost savings associated with a 1-year ban on federal funds to PPFA. CBO noted that their estimates were uncertain, in part, because some of the services forgone at PPFA may be for contraception. CBO also estimated that the reduced use of contraceptive services would lead to additional births and could lead to increased federal spending over a longer term both because of the costs associated with births and because some of the children may qualify for Medicaid or other federal programs. Specifically, CBO predicts that the additional costs would be $20 million in the first year and $60 million over a 10-year period. The $235 million that CBO estimates a one-year ban would save is estimated net of these increased costs. As discussed above, the AHCA estimate was more explicit in that it stated that it would expect that the number of births in the Medicaid program would increase by several thousand. This most recent estimate also noted that Medicaid pays for 45% of all births and that it is likely that some of the children themselves would qualify for other federal programs. In reviewing other legislation introduced in the 114 th Congress ( H.R. 3134 ), CBO also estimated the costs associated with a permanent ban to PPFA and found that because of declines in access to care, primarily family planning care, a permanent ban would increase spending by $130 million over a 10-year period (2016-2025). Most of the increased Medicaid spending would be for increased births that would be paid by the Medicaid program, as CBO estimates that, in the first few years of a permanent ban, the number of births would increase by several thousand per year. CBO's estimates also discussed the provisions that would redirect funds to FQHCs and noted that it did not expect that the additional funds appropriated to FQHCs would be sufficient to mitigate the predicted loss of access that would occur under the ban. CBO estimates that this would be the case because HHS would not be able to award funds to FQHCs in time to prevent immediate disruptions in access. In addition, CBO states that the legislation that would reallocate funds to FQHCs may not be specific enough to avert access disruptions. CBO states that these funds could be used generally by FQHCs for primary care or preventive services. As such, these funds may not be used to increase family planning services or other women's health services that may have otherwise been provided to Medicaid beneficiaries at PPAHCs. State Restrictions on PPFA Funding Federal restrictions on funds to PPFA are currently pending, but some states also have made it difficult for PPFA to participate in state programs or have excluded PPFA and PPAHCs from receiving funds from state programs. In 2013, Texas excluded PPFA (and other abortion providers) from its family planning program (the Texas Women's Health Program). This exclusion followed a 2011 funding reduction of two-thirds of program funding available and a change in the program's funding preference toward comprehensive health care facilities over those that provide more limited family planning related services. Several studies evaluated the effects of the program changes on women's health and access to care. A 2016 study published in the New England Journal of Medicine examined Medicaid claims data for women of reproductive age and found that the number of LARC claims decreased by 35.5% and Medicaid spending for childbirth services increased by 27.1%. In addition, they found differences in the rate of women receiving follow-up shots for injectable contraception in counties that did and did not have a PPAHC. In particular, women who lived in a county that had a PPAHC affiliate that was no longer eligible for Medicaid reimbursement were less likely to receive an on-time follow-up contraceptive injection (a difference of 22.9% in the county comparisons). Another study by the National Center for Health Statistics (NCHS) of the Centers for Disease Control and Prevention (CDC) found that the U.S. maternal mortality rate overall increased from 2000 to 2014 and that the maternal mortality rate in the United States was higher than previously reported because of underreporting of maternal deaths. Their study examined the rates of California and Texas separately and found that while California's rate decreased over the time period, Texas had a sudden increase in its rate between 2011 and 2012, when its rate doubled. The authors note that this increase occurred several years after Texas had revised its methods of reporting maternal death and that Texas had not made any reporting changes during the period when the increase occurred. The authors suggest that the sudden increase could be due to the changes in the Texas Women's Health Program, but note that available data are not sufficient to definitely determine causality. Despite this, the authors state that the changes that occurred were not due to reporting changes and that there were no other conditions such as a natural disaster or adverse economic conditions that could otherwise explain the large increase. Researchers from the Texas Department of State Health Services and the Texas Maternal Mortality and Morbidity Task Force dispute the NCHS author's attribution of the mortality increase to the Texas Women's Health Program policy changes. They agree that there was an increase in 2011 to 2012, but dispute that it doubled. Instead, they argue that the data used to categorize whether a woman was pregnant or had recently given birth at the time of her death are unreliable and that the magnitude of the increase observed varies depending on which method is used to make the determination of pregnancy or recent pregnancy. As another example, Wisconsin, in 2011, excluded PPAHCs from receiving Title X funding and state Maternal Child Health Block Grant funds. The state legislation that enacted this exclusion also prohibited state laboratories from reading cancer screening tests that were performed at excluded providers (i.e., at PPAHCs). As a result of the funding loss and the lab restrictions, researchers found that several clinics in Wisconsin and in neighboring Minnesota closed. Researchers have examined the impact of these program changes on the receipt of preventive screenings and found that as the distance to a provider increased, low-income women were less likely to have preventive screenings such as mammograms. Declines in receipt of mammograms were more common among women who had lower levels of education. The authors of this study examined both Texas and Wisconsin and found somewhat stronger results for Texas because there were fewer nearby non-PPAHC providers to care for the patients who could no longer use PPAHCs. A number of states have also sought to terminate PPFA and PPAHC participation in their state's Medicaid programs. As of the date of this publication, these terminations have not occurred, and therefore no data exist to evaluate the potential effects. States have also considered restricting PPFA from participating in family planning programs administered using state funds received from the Federal Title X program. A regulation was released in 2016 and became effective on January 18, 2017, that says states may not exclude providers from Title X for reasons other than their ability to provide Title X services. In 2017, the House and Senate passed H.J.Res. 43 , a bill to nullify this regulation. The President signed this measure into law on April 13, 2017. This report may be updated if changes occur. Appendix. Acronyms Used in this Report

Recent debates about federal funding for the Planned Parenthood Federation of America (PPFA) and its affiliated health centers (PPAHCs) have raised questions about the services that PPAHCs provide and the availability of alternative facilities to provide similar services to disadvantaged populations. This report provides background information and data that may be useful for policymakers evaluating these recent debates. Although a number of other facility types could potentially provide similar services as PPAHCs, this report focuses on federally qualified health centers (FQHCs)—a term used interchangeably with health centers or community health centers—because these facilities have been the focus of recent policy discussions, including the American Health Care Act of 2017 (H.R. 1628, AHCA) in the 115th Congress. This report provides information on three central dimensions of health care. For one health facility to begin to provide services to patients that had previously been seen at a different facility, one could argue that the receiving facility should provide similar services, serve a similar population, and be located in a similar geographic area. This report provides national-level data on these three dimensions. Some selected findings include the following: Services: Both PPAHCs and FQHCs provide family planning services; however, PPAHCs focus on providing family planning and related services, whereas FQHCs focus on providing more comprehensive primary care, dental, and behavioral health services. There are more than 15 times the number of FQHCs than there are PPAHCs; thus FQHCs provide far more services in a given year than do PPAHCs. However, despite providing more services overall, FQHCs in total provide less than half the number of contraceptive services than do PPAHCs. Specifically, in its 2014-2015 report (which covered federal FY2014), PPFA reported that its PPAHCs provided 2.9 million contraceptive services while FQHCs reported providing 1.4 million of these services in calendar year 2015. In addition, each individual FQHC provides far fewer contraceptive services than does the typical PPAHC. Populations: Both PPAHCs and FQHCs serve a diverse, but disadvantaged population. PPAHCs focus their services on individuals of reproductive age, whereas FQHCs provide services to individuals throughout their lifetime. FQHCs served 24.2 million people in 2015, as compared to 2.5 million served by PPAHCs. Approximately one-third (31%) of FQHC patients were children in 2015 and 8% were age 65 years and over. Locations: PPFA affiliates choose the location of their facilities. PPFA reports that the majority of PPAHCs are located in health professional shortage areas (HPSAs), medically underserved areas (MUAs), or rural areas. In contrast, FQHCs are required to be located in MUAs or to serve a medically underserved population; these areas are also automatically designated as HPSAs. There is some overlap in the location of PPAHCs and FQHCs, as 352 counties have both a PPAHC and an FQHC. Facility locations may be particularly important to evaluations of access because the availability of health services varies considerably across states and localities. In some areas, one facility may be as accessible as another and may provide (or may be able to begin to provide) the same set of services. In other areas, this may not occur because, for example, only one provider exists, either in general or for a particular service type. Moreover, facilities located in the same geographic area may not be equally accessible for patients, as one facility may be located near public transportation routes while another may not. Although this report presents maps of the locations of PPAHCs and FQHCs, these maps are not sufficient to infer meaningful information about the availability of health services in specific localities.

Introduction The increasing Department of Defense (DOD) emphasis on expanding U.S. partnerships and building partnership capacity with foreign military and other security forces has refocused congressional attention on two long-standing human rights provisions affecting U.S. security assistance policy. Sponsored in the late 1990s by Senator Patrick Leahy (D-VT), and often referred to as the "Leahy amendments" or the "Leahy laws," one is Section 620M of the Foreign Assistance Act of 1961, as amended (FAA, P.L. 87-195, made permanent law by its codification at 22 U.S.C. 2378d) and the other is a recurring provision in annual defense appropriations. FAA Section 620M prohibits the furnishing of assistance authorized by the FAA and the Arms Export Control Act, as amended (AECA, P.L. 90-629), to any foreign security force unit that is credibly believed to have committed a gross violation of human rights. The other provision, inserted annually in DOD appropriations legislation, for years prohibited the use of DOD funds to support any training program (as defined by DOD) involving members of a unit of foreign security or police force if the unit had committed a gross violation of human rights. For FY2014, the prohibition has been expanded to also include "equipment, or other assistance." As two of the many laws that Congress has enacted in recent decades to promote respect for human rights, which has become widely recognized as a core U.S. national interest, the Leahy laws have been the subject of long-standing debate. Policy makers, practitioners, and advocacy groups continue to deliberate overarching questions regarding their utility and desirability, as well as specific questions regarding their appropriate scope and problems in implementation. For many, the Leahy laws are important U.S. foreign policy tools not only because of their potential to promote human rights but because they may help safeguard the U.S. image abroad by distancing the United States from corrupt or brutal security forces. Some, however, raise concerns that these laws limit the Administration's flexibility to balance competing national interests and may constrain the United States' ability to respond to national security needs. Central to this debate are overarching questions that are difficult to answer given the lack of systematic study of Leahy law results. Have these laws indeed been effective in promoting human rights? To what extent have these laws impeded or advanced other key U.S. objectives, such as countering terrorism, preventing violence, or stabilizing territory? Do the laws lead other nations to choose competitors for foreign influence as the source of military materiel and training? Will the United States be able to control down-range effects as it outsources military training through third-party nations? Competing perceptions of these overarching issues underlie perspectives on specific proposals for congressional action. In the 113 th Congress, an illustration of the enduring debate surrounding the Leahy laws is deliberation on a provision in the Senate Appropriations Committee (SAC) version of the FY2014 DOD Appropriations bill (Section 8057 of S. 1429 ), a modified version of which is now contained in the Consolidated Appropriations Act, 2014 (Division C, Section 8057, P.L. 113-76 , signed into law January 17). This provision expanded the scope of the DOD Leahy law by extending the FY2013 (and prior fiscal year) prohibition on training to all DOD assistance. Further action in the 113 th Congress may occur during consideration of FY2015 foreign aid appropriations, which may include proposals to fund implementation of the laws. This report provides background on the Leahy laws, including a brief history of their legislative development; an overview guide to the standards and processes used to "vet"—that is, review and clear—foreign military and other security forces for gross violations of human rights; and a brief review of salient issues regarding the provisions of the laws and their implementation. Two of these issues concern debate over the consistency of the language of the two laws: whether the scope of the DOD provision should be expanded or altered to bring it closer to the FAA version, and whether the FAA and DOD "remediation standards" (the conditions for clearing units found guilty of a gross violations of human rights in order to provide aid) should be made consistent. Two others concern debate over implementation: whether the resources to conduct vetting are adequate, and whether implementation practices and procedures should be standardized. Several text boxes provide information on security assistance subject to the Leahy laws, the types of acts defined as gross violations of human rights, the language of the FAA and DOD Leahy laws and key differences between them, a discussion of the "credible information" standard for denying assistance, and a case study on Colombia. A concluding section offers further observations for Congress. Legislative Background Since Congress first enacted the two "Leahy laws" in the late 1990s, these laws have been regarded as a key element of U.S. human rights policy. Beginning in the 1970s, Congress passed many conditions on U.S. assistance to foreign governments seeking to promote respect for human rights. Most were—and continue to be—attached to legislation for an individual country or region. A major precursor to the Leahy laws was the broad legislative provision passed in 1974, known as "Section 502B," which prohibits security assistance to any country found to engage in a "consistent pattern of gross violations of internationally recognized human rights." This legislation provides the basis for the standard definition of human rights used for U.S. government purposes, including for Leahy law vetting, but has been rarely if ever invoked. In 1997, Congress enacted a condition on counternarcotics (CN) assistance similar to the current Leahy laws, prohibiting the use of FY1998 State Department CN appropriations for foreign security forces where there was credible evidence that a unit had committed gross violations of human rights. In 1998, Congress passed the first of what are now known as the Leahy laws, extending the scope of the CN condition to all assistance provided by foreign operations appropriations. The expanded provision was thereafter included in annual foreign operations appropriations acts until 2008, when that condition was codified in permanent law first as FAA Section 620J, now FAA Section 620M (22 U.S.C. 2378d), applying to all assistance authorized by the FAA and AECA, unless exempted by a notwithstanding provision. In 1998, for FY1999, Congress placed a similar condition in the DOD appropriations bill. This condition prohibited the use of DOD funds to train units of foreign military and other security forces if there was credible information that a member of a unit had committed a gross violation of human rights. (Unlike the FAA version, the DOD Leahy law, as contained in DOD FY2013 and prior DOD appropriations, pertained only to training, but not to any other form of assistance and activities—such as equipment, support services, grants, loans and cash transfers, and exercises—that might be provided under a variety of DOD authorities.) DOD defines military training of foreign personnel as the "instruction of foreign security force personnel that may result in the improvement of their capabilities." This condition has been retained in all subsequent DOD appropriations legislation, with two changes. In 2000, the reference to a "member" of a unit was deleted, and in 2013 the words "or police" were added. In 2011, Congress amended the FAA provision (and renumbered it as Section 620M of the FAA) with three word changes to align it more closely with the DOD language. First, the requirement invoking "gross violations" of human rights was changed from the plural to the singular "a gross violation" of human rights. Second, Congress modified the standard to resume aid to require that the government take "effective steps" (rather than "effective measures") to bring responsible members of the foreign security unit to justice. Finally, the standard of proof was changed from "credible evidence" to "credible information," a term that expresses Congress's intent that the standard not require a level of substantiation that would be admissible in a U.S. court. Congress also added seven procedural requirements to the provision. In January 2014, Congress expanded the scope of the DOD provision, making it equivalent in scope to the FAA provision. The Consolidated Appropriations Act, 2014 (P.L. 113-76), contains a provision extending the FY2013 (and earlier) prohibition on any support for training where a gross violation of human rights occurred to "any training, equipment, or other assistance for the members of a unit of a foreign security force if the Secretary of Defense has credible information that the unit has committed a gross violation of human rights." An exception is made for disaster and humanitarian assistance. Depending on the legal interpretation, this provision applies to many of the DOD programs and activities conducted with foreign military and other security forces under a wide variety of DOD authorities. These may include counternarcotics, coalition, and logistics support and assistance, including equipment; services such as transportation and logistics, maintenance and operation of equipment; and grants and loans to procure goods and services in support of security forces, as well as cash transfers of funds. They may also include some types of military-to-military contacts, including advising and mentoring. Not all military activities with foreign forces would necessarily constitute assistance, however. As contained in P.L. 113-76 , the expanded provision would not apply to DOD-funded foreign disaster assistance and other humanitarian assistance, where the ultimate beneficiaries are foreign populations but where U.S. military personnel often work with or support foreign military or other security forces in delivering assistance. Comparison of Current Laws The FAA and DOD appropriations Leahy laws both prohibit assistance to foreign military and other security units credibly believed to be involved in a gross violation of human rights. After the FY2014 change, three differences remain. First, in the FAA language, the prohibition does not apply if the Secretary of State "determines and reports" to specified congressional committees "that the government of such country is taking effective steps to bring the responsible members of the security forces unit to justice." The DOD appropriations language states that the prohibition applies "unless all necessary corrective steps have been taken." These provisions establish the basis for "remediating" units, making them eligible for assistance, but neither remediation standard is defined. Second, the DOD version provides for a waiver by the Secretary of Defense in consultation with the Secretary of State in extraordinary circumstances; the FAA contains no corresponding provision. Third, the FAA legislation includes a "duty to inform" provision requiring the Secretary of State to promptly inform a foreign government of the basis for withholding assistance and to help that government, to the extent practicable, take effective measures to bring the responsible members of the security forces to justice. (See Table 1 , below, which summarizes these key differences.) Leahy Vetting in Practice22 The State Department and U.S. embassies worldwide have developed a system that seeks to ensure that no applicable State Department assistance or DOD-funded training is provided to units or individuals in foreign security forces who have committed any gross violations of human rights. This procedure, designed to comply with the Leahy laws, is known as "vetting" or "Leahy vetting." Primarily a State Department responsibility with input from other agencies, Leahy vetting is a multi-step process that involves staff at U.S. embassies abroad; the State Department Bureau for Democracy, Human Rights, and Labor (DRL) in Washington, DC, which is the lead State Department bureau for vetting; State Department regional bureaus; and other government agencies as required. The State Department policy provides for two separate processes, one for training and one for equipment and other non-training assistance. For DOD and State Department-funded training (and in some cases the provision of equipment related to training), the process has evolved from a "cable-based" system when the State Department began to vet foreign security forces in 1997 to a computerized process through the International Vetting and Security Tracking (INVEST) system. Gradually put in place between April 2010 and February 2011, INVEST is the current official system for Leahy vetting for training. At some posts INVEST is also used for equipment provided in conjunction with training, but this is not mandatory. For State Department-funded equipment and other non-training assistance, the State Department generally approves potential recipients through a memorandum and clearance process generated by the Bureau of Political-Military Affairs at the time funding is allocated to beneficiary countries. (The GAO recommended in November 2011 that the State Department vet individuals and units receiving equipment through the INVEST system, but the State Department has not developed such a policy. In some cases, however, equipment and non-training assistance is vetted through INVEST even though this is not mandatory.) Under the INVEST system, the State Department to date has vetted approximately 400,000 "candidates" for training, a figure that includes both individuals and units. Since its adoption, INVEST has averaged about 130,000 discrete new vettings a year, and the pace seems to be increasing. In FY2012, the State Department reported vetting nearly 165,000 individuals and units. According to some vetters, the 2011 amendments to the FAA Leahy law requiring that, in the case of individual training candidates, the candidate's unit as well as the individual candidate be vetted each time the candidate is named as a potential recipient of assistance have increased their work load. In some embassies, however, vetters had already interpreted the vetting requirements to cover both individuals and their units. The Vetting Process Leahy vetting is a multi-stage process that begins in U.S. embassies abroad and concludes with action at State Department headquarters in Washington, D.C. Vetting procedures generally utilize a dedicated online tracking system for vetting candidates—both units and individuals—for training and the exchange of memoranda for other forms of assistance. U.S. Embassy Procedures U.S. embassy staff initiates each vetting request. (For a diagram of the process see Figure 1 , below.) The State Department recommends that each embassy have its own Standard Operating Procedures (SOPs) that define country-specific requirements for initiating and completing vetting requests such as the lead time needed for turning around a request. Representatives of relevant U.S. departments and agencies at U.S. embassies submit vetting requests to staff conducting the vetting. The subjects of these vetting requests typically are members of the country's military or civilian police, but they may also include prison guards, armed game wardens, and coast guards, as well as customs, border, and tax enforcement personnel. Civilian government officials, including those representing foreign defense ministries, are typically not required to be vetted. Exceptions to this general rule do exist. For example, the DOD Regional Counterterrorism Fellowship Program (CTFP) vets all participants as a matter of policy. As part of the vetting process under INVEST, individuals proposed for receiving U.S. assistance as part of a single event, equipment issuance, or training are grouped together in a "batch." Input of the initial data is just one of the functions that are completed at the embassy. Once a batch of candidates has been identified, embassy personnel check their names as well their units against a variety of sources for derogatory information. (See the textbox below regarding the standard for judging derogatory information to be credible enough to disqualify candidates for U.S. assistance.) Sources include local and U.S. government databases and reports, as well as a range of civil society and non-governmental organizations (NGOs). The vetting at the embassy stage is completed with one of four determinations: to approve, reject, or suspend candidates, or to request further guidance from State Department headquarters. Once the suspended or rejected cases are removed from an INVEST batch, the remaining candidates are sent on to State Department headquarters for further vetting. Headquarters Level In Washington, DRL and the State Department regional bureaus further vet approved individuals in the batch. DRL and the relevant regional bureau work independently, although the two offices stay in communication as the vetting process proceeds. If the regional bureau and the DRL vetters agree that no derogatory information was found, then the individual is deemed approved and the embassy vetting staff is notified of the positive determination. One exception to this process involves vetting candidates from "Fast Track" countries, determined by the State Department to be functional democracies without a record of human rights abuse. Candidates from Fast Track countries are vetted only at the embassy and not in Washington. Additional Review and Conclusion If further review is deemed required, DRL convenes a "broader team of State Department representatives" who may request further information from the relevant embassy to evaluate the credibility of derogatory information. Until the team reaches consensus, the assistance or training is kept on hold. Except for Fast Track countries, Leahy vetting is complete when the final determination is recorded in INVEST. Vetting Results and Their Use By and large, most vettings filed through the INVEST system conclude with an approval. Vettings recently have ended in denial around 1% or less of the time, and a suspension about 9% of the time, according to figures provided in news reports. CQ Weekly reports that training was withheld "for a variety of reasons, including the possibility that there was credible information that the person or unit involved had committed a gross violation of human rights," and for administrative difficulties. In some cases, training was suspended if derogatory information other than a human rights violation was found, as candidates may be excluded for other undesirable behavior. In the many cases where training was suspended for administrative reasons, it was subsequently rescheduled once the problem was resolved, according to that source. In general, vetting results are used to determine who will receive U.S. assistance or training. They also form the basis for reporting to foreign governments under the FAA "duty-to-inform" provision when members and units of their security forces fail vetting and assistance is denied. According to some U.S. policy makers, even though only the FAA contains the "duty-to-inform" requirement, in practice the provision should extend also to DOD-funded cases. The logic of this requirement is to garner cooperation with the law, encourage improved compliance by host governments with human rights standards, and make clear that U.S. assistance will not be provided to human rights violators. In addition, the FAA provides that the State Department should offer assistance to a foreign "host" government to investigate and prosecute suspected human rights violators who have been identified through the vetting process. Vetting Personnel The number of embassy staff involved in Leahy vetting may differ based on work flows, request volumes, funding levels, and other conditions that vary across U.S. embassies. Some embassy operations are quite limited, according to embassy inspection reports by the State Department's Office of the Inspector General (OIG). Some advocates for strengthening implementation of the Leahy law conditions maintain that some vetting operations are underfunded and this has resulted in "thin" to nonexistent efforts at some embassies. Vetting Funding In recent years, Congress has supported Leahy vetting operations through a directed allocation of funds to DRL in the Diplomacy and Consular Programs (D&CP) account. In FY2008, for example, DRL received $2.65 million in appropriations for Leahy vetting. Much of this funding was used to develop and establish the INVEST system, an online tool to track and process vetting requests. Subsequently, Congress directed DRL to allocate approximately $2 million for Leahy vetting, which the State Department has made a regular practice. (The joint explanatory statement to the Consolidated Appropriations bill for FY2014 [ H.R. 3547 , Division K] states that State Department Diplomatic and Consular Affairs funding in the bill contains $2.75 million to implement the FAA Leahy law.) According to State Department officials, the $2 million in recent years has supported several regional bureau vetting positions, and a few contract positions to carry out vetting and support running the INVEST system. The number of completed vettings has become a performance indicator for the DRL bureau. In its annual congressional budget justification, the DRL bureau reports completed vettings and sets targets for the future. In the field, vetting-related activities, including personnel costs, are typically funded out of embassy administrative budgets. The State Department generally gives the embassies wide latitude in staffing and financing their operations. There does not appear to be formal guidance on how U.S. embassies should allocate resources and funds for Leahy vetting. As a result, each embassy plans and budgets for Leahy vetting operations differently. Some embassies, for example, receive assistance from the State Department's International Narcotics and Law Enforcement (INL) bureau, through its International Narcotics Control and Law Enforcement (INCLE) account. U.S. Embassy Mexico City, which conducts the second-largest number of vettings worldwide, reportedly draws funds from the Mérida Initiative, a multi-year counternarcotics and anticrime assistance program that is funded largely through the State Department's Foreign Military Financing (FMF) and INCLE accounts. Some embassies with large volumes of vetting requests have one or more full-time positions dedicated to the vetting process. Many embassies, however, are very lightly staffed and the data entry into the INVEST system is frequently a part-time duty. Increased workloads resulting from the 2011 amendments to the Leahy law in the FAA have raised concerns at some embassies, among them those that are small and understaffed or those with the heaviest Leahy vetting demands. In the absence of dedicated Leahy vetting funding, such embassies maintain they have inadequate staff to handle the increased demand on their operations. Vetting System Improvement Initiatives The State Department and DOD are discussing ways to improve the vetting process by increasing DOD participation. (After DOD personnel in each embassy's security assistance organization forward nominees for security assistance to embassy Leahy vetters, DOD generally has no further role in the Leahy vetting process.) One step would be to improve the lines of communication between the State Department and DOD, and creating greater communication within DOD, when the INVEST system identifies potential human rights violations or other obstacles to approving assistance. A related step would be to lengthen the timeline between the embassy's submission of a vetting request to State Department headquarters and the conclusion of the vetting process. This change would allow time for DOD headquarters officials to coordinate a response with the geographic Combatant Commands that might avert the suspension of activities for non-substantive reasons. A third step would be to improve training on how to conduct vetting. DOD is also looking into updating its own guidance on Leahy vetting as last articulated in the DOD 2004 Joint Staff policy message. DRL recently broadened its outreach to human rights organizations, increasing dialogue through meetings and developing an Internet-based "portal." DRL has received Leahy-relevant information from NGOs through face-to-face meetings and email, and encouraged U.S.-based NGOs to communicate with the relevant country desk officers in DRL and NGOs outside the United States to communicate with the designated human rights officer in each U.S. embassy. The portal is an online website designed to facilitate the anonymous and confidential reporting of accusations and evidence of human rights abuses. The State Department hopes the portal, scheduled to go online in early 2014, will encourage human rights and other NGOs to post credible information about violations of human rights without fear they are further endangering victims. The portal will augment the current processes by which NGOs can report information through written correspondence, meetings, or briefings with State Department personnel. (Additionally, all written communication to the State Department and embassies is reviewed by desk officers.) Some practitioners and analysts warn that an anonymous reporting system has to be carefully designed or it has the potential to be manipulated or "gamed" by those who might seek to discredit units and block their receipt of U.S. assistance by submitting false reports. Issues for Congress The Leahy laws raise many potential policy questions. At the broadest level, questions remain about the extent to which the promotion of human rights abroad and the pursuit of other U.S. national security objectives are mutually reinforcing and the circumstances in which they might diverge. More narrowly, some in Congress question whether the Leahy laws should be further modified and how implementation of those laws might be improved. The following discussion first addresses questions of law: specifically, should the FAA and DOD remediation standards and other remaining differences be made consistent, and should implementation practices be standardized? It then discusses questions of implementation, specifically resource availability and standardization. It concludes with a discussion of the possible challenges presented by Congress's recent expansion of the scope of the DOD law. Should the FAA and DOD Leahy Laws Be Made Consistent? Over time, Congress has aligned the State Department and DOD Leahy language for greater consistency, most recently by extending the scope of the DOD law in the Consolidated Appropriations Act, 2014. Three differences remain —the difference in remediation standards between the laws, DOD the waiver provision, and the FAA requirement to report the reasons for the denial of assistance to the foreign government. Policymakers and those in the human rights and international security communities debate whether U.S. interests are best served by maintaining, modifying, or eliminating these differences. Some view these differences as inconsistencies that undermine U.S. policy goals related to the promotion of human rights; others view them as providing the United States with flexibility to balance potentially competing interests, or to respond to an emerging threat or disaster in a timely manner. The following explores these perspectives. Should the FAA and DOD Remediation Standards Be the Same? The differing FAA and DOD language on remediation standards—the criteria that a foreign government must meet before aid can be provided or resumed to units that have been denied funding due to human rights abuses—leaves much open to interpretation. Questions have been raised as to whether these remediation standards are appropriate, given that few if any units appear to have been cleared for aid after they have been denied assistance. The "taint" remains even years later after membership in a unit may have substantially or even entirely changed. Questions are also raised about the degree to which these standards actually differ in practice, given that the State Department makes the decision to deny assistance, and whether they should be aligned. If FAA or AECA assistance is withheld, a foreign government must "take effective steps to bring responsible members of the security forces unit to justice" before assistance can be provided to that unit. Congressional intent regarding the FAA language was expressed in the conference report on the original (1998) legislation, where the conferees stated that "effective steps" required the government to "carry out a credible investigation and that the individuals involved face appropriate disciplinary action or impartial prosecution in accordance with local law." This was echoed in the conference report for subsequent legislation. It is similar to State Department guidance which, according to GAO, states that effective steps "means that the foreign government must carry out a credible investigation and take steps so that individuals who are credibly alleged to have committed gross violations of human rights face impartial prosecution or appropriate disciplinary action." The DOD remediation provision requires that "all necessary corrective steps" be taken before aid can be resumed. There has been no statement of intent in documents accompanying annual DOD appropriations measures. In 1999, Senator Leahy wrote to then Secretary of Defense William Cohen that the FAA and DOD standards were intended to be the same. Secretary Cohen differed, and since then DOD has held that, in the words of the 2013 GAO report, necessary corrective steps "could include removing the identified violator or violators from the unit to be trained, providing human rights training and law-of-war training, or some other combination of steps." Despite this position, according to DOD officials, DOD has never proceeded with DOD-funded training to an otherwise ineligible unit on the basis that "all necessary corrective steps" have been taken by a foreign government. In practice, according to State and DOD officials, the same remediation standards have been applied to potential recipients of DOD and State Department assistance. Some Members would favor incorporating that practice into law as a means of increasing the consistency of U.S. human rights policy and the message sent to foreign governments. Standardization of remediation steps is necessary, they affirm, because the purpose of DOD and FAA Leahy provisions is the same—to promote human rights and protect the U.S. government against the stigma of supporting human rights violators. In addition to expanding the scope of the DOD Leahy law, the SAC version of the FY2014 DOD appropriations bill, S. 1429 , would have made the DOD language on remediation the same as that of the FAA. This provision was not retained in action on the final DOD appropriations measure included in the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ). On the other hand, given that few, if any, units have been cleared once aid has been denied, some practitioners argue that the State Department standard may set too high a bar and may be perceived as unattainable by a host government. In addition, some analysts argue that the FAA's standard for remediation—punishing all members of a unit for the transgressions of some members of a unit—is inequitable. Some critics view the remediation measures set forth by DOD—removing individuals who have committed abuses from units rather than making all in the unit guilty of their transgressions—as a more realistic standard. In addition, some perceive as an internal contradiction of the Leahy laws that they block even human rights training to "tainted" units whose members, they argue, would potentially most benefit from such training. Some point to the Senate floor colloquy between Senators Graham and Leahy in 1997, regarding the Leahy human rights provision affecting counternarcotics assistance, as evidence that the legislative intent was not meant to permanently bar assistance to "tainted" units after offending individuals were removed, although others caveat that the meaning of the colloquy would depend on the circumstances of the removal. In contrast, those who believe that holding a unit responsible is an appropriate standard point out that it often is difficult to ascertain actions of individuals, and that sanctioning the entire unit may be the only way of ascertaining that U.S. assistance is not provided to human rights violators. In addition, holding units responsible for the actions of their members may serve as a means to promote a "self-cleansing" mechanism, where individuals who feel they are being unfairly denied training will cooperate with or put pressure on authorities to cleanse the unit, promoting an ethos among members of a unit that does not tolerate human rights abuse. Should Other Differences Be Aligned? In addition to the differences in remediation standards, discussed above, two other differences between the FAA and the DOD Leahy provisions remain: the DOD waiver and the FAA "duty to inform. Neither has a corresponding provision in the other legislation. To some analysts, the DOD waiver seems dispensable, given its historic lack of use. According to DOD officials, the waiver has never been exercised. Others would argue the waiver provides DOD with needed flexibility to act in urgent circumstances where important U.S. security interests are at stake; alternatively, notwithstanding language might be added to authorities that are used in such circumstances. The FAA "duty to inform" requirement for the Secretary of State to "promptly inform the foreign government of the basis" for withholding aid is a precursor to assisting the government in bringing responsible members of the security forces to justice. Some who view this provision as central to promoting reform among foreign security forces would include it in the DOD law. What Level of Resources Are Adequate to Conduct Vetting? The level of funding available to implement Leahy vetting is determined by Congress (through appropriations measures) and by the State Department (through its internal allocation of resources and personnel positions at embassies). Financial and personnel resources can directly affect the Leahy vetting process. Resource-related questions concerning Leahy implementation include the following and are discussed below. Are Leahy vetting operations adequately funded? Do vetting activities at State Department headquarters and U.S. embassies worldwide receive enough technological support to be successful, and if not, where are the biggest resource deficits? Are those who conduct the vetting adequately trained, and is there sufficient oversight by State Department headquarters of vetting operations at the embassies? The recent expansion of the scope of the DOD Leahy law to cover all DOD assistance, not just training, may present extensive challenges for the current vetting system. Some practitioners have voiced concern that the number of additional vettings required each year could overload the State Department's arguably already overstretched vetting system. Funding Some advocates for strengthening implementation of the Leahy conditions maintain that some vetting operations are underfunded. Indeed, some practitioners consider the vetting requirements an "unfunded mandate" placed on the State Department and its embassies by Congress. Several advocates who promote more vigorous enforcement of the Leahy conditions suggest that leadership from State Department's DRL bureau has improved headquarters vetting operations and they commend DRL for strengthening its outreach to in-country and international human rights organizations. Nevertheless, the quality and capacity of U.S. embassies abroad to carry out Leahy vetting requirements remain mixed; some advocates suggest that this is in part due to the lack of consistent and dedicated funding for vetting operations at post. Some have proposed that vetting be paid for with a dedicated funding source that is proportional to the size of U.S. security assistance expenditures on a global basis. In the 113 th Congress, a variation of this idea was put forth by the Senate Appropriations Committee in its version of the FY2014 Department of State and Foreign Operations appropriations measure ( S. 1372 , S.Rept. 113-81 ) to fund DRL to carry out the amended FAA prohibition, Section 620M. Acknowledging "the technological challenges and staff time involved in the vetting process" in its report, the Committee would provide not less than 0.1% of funds appropriated in the FMF account "for assistance for the security forces of foreign countries" to fund DRL to carry out Section 620M. This would amount to over $5 million in FY2014, depending on the final level of appropriation for FMF, which would be a significant increase over the roughly $2 million that DRL has received for Leahy vetting in recent appropriations. Neither the House version of the FY2014 Department of State and Foreign Operations appropriations bill ( H.R. 2855 , H.Rept. 113-185 ), nor the Consolidated Appropriations Act, FY2014 ( P.L. 113-76 ) makes reference to funding for Leahy vetting. Technology Another resource challenge for carrying out the Leahy conditions concerns developing adequate databases and applying technology to better implement vetting. Some observers maintain that information about the Leahy vetting requirements provided on embassy websites remains limited. One potential consequence of this limitation is that local NGOs that might report alleged human rights abuse are unaware of U.S. requirements and their opportunities to assist the vetting process. Some advocates maintain that many embassy databases are inadequate, and that many do not take advantage of technological tools to gather data and documentation about human rights abuses. Such tools could include those that compile and analyze video images and aerial photography, and that have audio capabilities to facilitate voice and facial recognition of alleged abusers. Training and Oversight Concern about the adequacy of resources extends to whether personnel and time are made available to train and oversee those at U.S. embassies who conduct the vetting. The State Department provides training at its Foreign Service Institute and DOD provides training through the Defense Institute for Security Assistance Management (DISAM). In its September 2013 report, GAO found that the State Department offers training to human rights vetting personnel by various means. These include two web-based training courses; modules in Foreign Service Institute (FSI) courses; a specially developed briefing that provides an overview of State and DOD Leahy laws and explains State's policies and processes (now available online through http://www.humanrights.gov ); and other outreach efforts. Vetting personnel also receive on-the-job training. At the time, GAO found that the web-based courses were out-of-date, lacking changes mandated in the 2011 law, but DRL officials report that the courses were subsequently updated and are now available to everyone in the State Department through the FSI online learning website. DOD personnel assigned to work on security assistance at U.S. embassies and at the geographic combatant commands receive an instructional module on human rights training at DISAM that includes instruction on Leahy vetting. DISAM statistics indicate, however, that while most military personnel destined for security assistance organization posts at U.S. embassies take the three-week training course, some 15% do not. Should Implementation Practices and Procedures Be Standardized? Although there are not many studies of how the Leahy laws are implemented worldwide, a few reports point to an inconsistent application of the laws. For example, a September 2013 non-government publication on trends in security assistance in Latin America and the Caribbean found that the Leahy provisions have been "applied with varying degrees of rigor by U.S. embassies around the world." This report noted, for example, that "while the U.S. Embassy in Colombia had [in 2012] a substantial system in place, the U.S. Embassy in Honduras's system was far less developed." Recently, GAO has identified other implementation inconsistencies across countries. In its September 2013 report, GAO found after examining implementation practices in eight countries that the Standard Operating Procedure (SOP) guides of those embassies "contained inconsistent information on how to address" the part of the duty-to-inform requirement that directs State to inform foreign governments when funds are withheld because of human rights violations. GAO's three recommendations were for the State Department to (1) "provide clarifying guidance for implementing the duty-to-inform requirement of the State Leahy law" added in December 2011; (2) ensure that all U.S. embassies have human rights vetting standard operating procedures that address the requirements in the Leahy law;" and (3) update the web-based training for personnel who conduct human rights vetting to reflect December 2011 changes. According to GAO, State agreed with all three of its recommendations, but said that the steps State planned regarding the need for standard operating procedures "do not directly address our recommendation." The GAO recommended that the State Department take further steps to implement its recommendations on SOP guides. To many analysts, standardizing practices and procedures seems a self-evident means to ensure a more rigorous compliance with the Leahy laws. However, others might argue that given the divergent circumstances under which the laws are applied from country to country—including levels and types of training and equipment provided, whether a country's human rights practices are a matter of concern, and whether the United States regards other matters as more pressing than human rights practices in a given country—a certain degree of flexibility in the application of the laws may be desirable. What Challenges May the Expanded DOD Scope Present? The recent expansion of the scope of the DOD Leahy law in the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), to include not only training but also DOD "equipment and other assistance" is a step toward institutionalizing human rights promotion in U.S. law, according to some analysts. From this perspective, the lack of consistency in scope between the DOD and FAA Leahy laws muddled the intended message regarding the importance of U.S. human rights policy, a problem intensified by the perception that DOD is increasingly providing security assistance and directing security assistance programs under an expanding array of DOD authorities. Nevertheless, the expansion of scope of the DOD prohibition presents the State Department and DOD with a number of challenges. These challenges include the following: Defining what constitutes DOD "assistance" as intended by the law may be one challenge. DOD conducts a wide range of activities that it categorizes as "security cooperation" with no agreement which among them constitute "assistance." The FY2014 expansion in scope seems to require a specific definition of assistance for the purposes of the DOD Leahy law. Determining whether additional resources are needed to implement Leahy vetting may be another challenge. A lack of resources may hinder the United States' ability to thoroughly vet prospective participants in a timely manner and may result in a failure to disqualify ineligible participants or lead to withholding aid from eligible participants. Determining whether DOD vetting will be conducted through a system compatible with the State Department's current two-track system using the INVEST database and memos, or a new, unique DOD-specific system. Whatever the choice, DOD and the State Department may find it necessary to proactively collect information on foreign military units and individuals who may be potential recipients of DOD assistance to expedite the vetting process. Implementing the broadened scope of DOD Leahy vetting may present possible diplomatic challenges. Some practitioners already note that explaining to foreign military and political leaders why U.S. assistance is being withheld can be difficult and disrupt other aspects of a bilateral relationship. Some express concern that the new scope of the DOD Leahy law, even without the express "duty to inform" found in the FAA law, may further complicate diplomatic and military-to-military relations. In some cases, some analysts suggest that the new DOD provision may put at risk U.S. efforts to advance bilateral relations or to achieve other national security priorities. Conclusion More than a decade after the passage of the Leahy laws, their implementation remains a work in progress, and overarching questions on their utility and desirability persist. Congress continues to deliberate whether and how to strengthen their application, as represented by recent debate over expanding the scope of the DOD law through the omnibus FY2014 appropriations bill ( P.L. 113-76 ), and by proposals to increase available resources, such as the one contained in the Senate Appropriations Committee version of State Department and foreign operations appropriations bill ( S. 1372 ) but not in P.L. 113-76 . Many may judge that an expansion of the scope of the DOD law, which may require extensive additional vetting, could also require substantial new resources. Given that foreign aid appropriations have declined in recent years, an important issue for consideration of FY2015 foreign operations appropriations may be whether existing Leahy vetting requirements receive sufficient funds to be carried out effectively. In hearings and other consideration of the FY2015 budget, Congress may wish to question the quality and effectiveness of Leahy law vetting, and request information about current State Department and DOD efforts to improve procedures, practices, and standards. Congress may wish to be informed of new technologies and methodologies that may require additional resources but could improve data collection as well as the monitoring and assessment of the activities of foreign units. A related question is whether and how to establish metrics or compile standardized narratives; although such measures could involve extra costs, they might provide greater insight to the Leahy laws' utility in advancing foreign policy goals and national security interests. Evolving global conditions and circumstances may warrant ongoing consideration of when and how the Leahy law provisions should be applied. One national security trend raising questions about the utility of the Leahy provisions is the "outsourcing" of U.S. military training—with the United States funding other military forces to train third parties. And, as the United States faces competition in the international security arena in developing relationships with foreign militaries, Congress may wish to stay apprised of whether the Leahy laws are a significant factor leading some foreign militaries to choose other countries as providers of military training and equipment. In addressing the overarching issues of utility and desirability, Congress may wish to question the Obama Administration about the laws' effectiveness. Some questions may target potential indicators of success. For example: Where has the application of the Leahy laws resulted in the United States withholding assistance from units and individuals credibly believed to have committed gross violations of human rights? How have the human rights practices of partner nation security forces improved as a result of the application of the Leahy laws? Do foreign governments and populations view the United States more favorably as a result of the Leahy laws? Other questions may target possible instances of negative effects: Where has application of the Leahy vetting process precluded or significantly delayed a U.S. engagement that in retrospect would have been important for U.S. national security? To what extent might such engagement have been possible if different standards or procedures were in place? Congress may wish to address such questions to the State Department and DOD in hearings, or request that they be examined in the context of the Obama Administration's ongoing review mandated by its April 5, 2013, Presidential Policy Decision (PPD) 23, U.S. Security Assistance Policy , which identifies promoting universal values, including respect for human rights, as a goal.

Congressional interest in the laws and processes involved in conditioning U.S. assistance to foreign security forces on human rights grounds has grown in recent years, especially as U.S. Administrations have increased emphasis on expanding U.S. partnerships and building partnership capacity with foreign military and other security forces. Congress has played an especially prominent role in initiating, amending, supporting with resources, and overseeing implementation of long-standing laws on human rights provisions affecting U.S. security assistance. First sponsored in the late 1990s by Senator Patrick Leahy (D-VT), the "Leahy laws" (sometimes referred to as the "Leahy amendments") are currently manifest in two places. One is Section 620M of the Foreign Assistance Act of 1961 (FAA), as amended, which prohibits the furnishing of assistance authorized by the FAA and the Arms Export Control Act to any foreign security force unit where there is credible information that the unit has committed a gross violation of human rights. The second is a recurring provision in annual defense appropriations, newly expanded by the FY2014 Department of Defense (DOD) appropriations bill as contained in the Consolidated Appropriations Act, 2014 (P.L. 113-76), to align its scope with that of the FAA provision. (Prior DOD appropriations measures had applied the prohibition to support for any training program, as defined by DOD, but not to other forms of DOD assistance.) As they currently stand, the FAA and DOD provisions are similar but not identical. Over the years, they have been subject to changes to more closely align their language, most recently with the expansion of scope enacted in the FY2014 DOD appropriations law. Nevertheless, some differences remain. Implementation of Leahy vetting involves a complex process in the State Department and U.S. embassies overseas that determines which foreign security individuals and units are eligible to receive U.S. assistance or training. Beginning in 2010, the State Department has utilized a computerized system called the International Vetting and Security Tracking (INVEST) system, which has facilitated a major increase in the number of individuals and units vetted (some 160,000 in FY2012). Congress supports Leahy vetting operations through a directed allocation of funds in State Department appropriations. The Leahy laws touch upon many issues of interest to Congress. These range from current vetting practices and implementation (involving human rights standards, relations and policy objectives with specific countries, remediation mechanisms, and inter-office and inter-agency coordination, among other issues), to legislative efforts to increase alignment between the Foreign Assistance Act and DOD restrictions, to levels and forms of resources dedicated to conduct vetting. More broadly, overarching policy questions persist about the utility and desirability of applying the Leahy laws, and whether there is sometimes a conflict between promoting respect for human rights and furthering other national interests.

Most Recent Developments H.R. 2691 , the FY2004 Interior and Related AgenciesAppropriations Act, was enacted into law on November 10, 2003 ( P.L. 108-108 ). The conference report had passed the House narrowly (216-205) on October 30,2003, and was approved by the Senate (87-2) on November 3, 2003. On January 23, 2004, the President signed H.R. 2673 , the Consolidated Appropriations Act of 2004 ( P.L. 108-199 ). This act contains anacross-the-board cut of 0.59% for Interior and related agencies, as well as most otherFY2004 appropriations laws. The FY2004 enacted numbers in this report reflect thiscut. Introduction The annual Interior and related agencies appropriations bill includes funding foragencies and programs in four separate federal departments, as well as numeroussmaller agencies and bureaus. The bill includes funding for the Interior Department,except for the Bureau of Reclamation (funded by Energy and Water DevelopmentAppropriations laws), and funds for some agencies or programs in three otherdepartments -- Agriculture, Energy, and Health and Human Services. Title I of thebill includes agencies within the Department of the Interior which manage land andother natural resource or regulatory programs, the Bureau of Indian Affairs, andinsular areas. Title II of the bill includes the Forest Service of the Department ofAgriculture; several activities within the Department of Energy, including researchand development programs, the Naval Petroleum and Oil Shale Reserves, and theStrategic Petroleum Reserve; and the Indian Health Service in the Department ofHealth and Human Services. In addition, Title II includes a variety of relatedagencies, such as the Smithsonian Institution, National Gallery of Art, John F.Kennedy Center for the Performing Arts, the National Endowment for the Arts, theNational Endowment for the Humanities, and the Holocaust Memorial Council. In this report, the term "appropriations" generally represents total funds available, including regular annual and supplemental appropriations, as well asrescissions, transfers, and deferrals, but excludes permanent budget authorities. Increases and decreases generally are calculated on comparisons between the fundinglevels appropriated for FY2003 and requested by the President or recommended byCongress for FY2004. FY2003 Regular and Supplemental Appropriations For FY2003, Congress enacted ( P.L.108-7 ) which appropriated $18.96 billion for Interior and related agencies, plus $825.0 million for wildland fire fighting effortsin FY2002, for a total of $19.79 billion. Congress subsequently enacted P.L. 108-83 containing an additional $324.0 million in FY2003 emergency funding, consistingof: $5.0 million for the Fish and Wildlife Service for Resource Management, $36.0million for the Bureau of Land Management for wildland firefighting, and $283.0million for the Forest Service for wildland firefighting. With the emergency funding,the FY2003 total was $20.11 billion. On July 7, 2003, the Administration requested emergency FY2003 supplemental funding that included $289.0 million for firefighting efforts. The request consistedof $253.0 million for the Forest Service, and $36.0 million for the Bureau of LandManagement (BLM) for fighting fires on lands of the Department of the Interior(DOI). The President stated that the monies were needed to ensure sufficient fundingfor the 2003 fire season, as large portions of the West are at risk of catastrophic firethis summer. The money was intended for fire suppression and emergencyrehabilitation activities. The President stated that with the supplemental money,funding for wildland fire suppression would be at the 10-year average. On July 11, 2003, the Senate passed H.R. 2657 containing the requested level ($289.0 million) of supplemental funding for wildfires. The Senatealso adopted an amendment adding another $25.0 million to remove dead trees inforests devastated by insects, which could exacerbate fire threats. On July 21, 2003,the House Committee on Appropriations ordered reported a draft measure containing$319.0 million in FY2003 supplemental funds for fire fighting, reflecting a $30.0million increase over the President's request. However, the House passed H.R. 2859 on July 25, 2003, without supplemental funds for wildlandfire fighting. On July 31 the Senate passed the bill without amendment, clearing itfor action by the President. The law ( P.L.108-69 ) did not contain supplemental fundsfor wildland fire fighting. Congress subsequently included FY2003 emergency supplemental funding for wildfire fighting in the FY2004 Legislative Branch Appropriations Act. As enacted, P.L. 108-83 contained $319.0 million for wildland firefighting efforts in FY2003,comprised of $36.0 million for the Bureau of Land Management and $283.0 millionfor the Forest Service, plus $5.0 million for Resource Management of the Fish andWildlife Service. The Senate-passed version of the FY2004 Interior and related agencies appropriations bill, H.R. 2691 , contained an additional $400.0 millionin emergency funding for wildfire fighting, comprised of $75.0 million for the BLMand $325.0 million for the Forest Service. The President subsequently submitted a$400.0 million supplemental request for fire funding, consisting of $99.0 million forBLM and $301.0 million for the Forest Service. While the House-passed bill did notcontain emergency monies, the House conferees were instructed to support the Senatefunding level in conference. The FY2004 law contained $98.4 million in emergencyfunding for BLM firefighting efforts, and $299.2 million for the Forest Service, fora total of $397.6 million in emergency funds. The money was appropriated to replacefunds borrowed from other accounts for wildland fire fighting. FY2004 Budget and Appropriations President Bush's FY2004 budget for Interior and related agencies totaled $19.89 billion. On July 10, 2003, the House Committee on Appropriations reported a bill( H.R. 2691 , H.Rept. 108-195 ) for Interior and related agenciescontaining a total of $19.60 billion for FY2004. On the same date, the SenateCommittee on Appropriations reported a companion bill ( S. 1391 , S.Rept. 108-89 ) containing $19.61 billion for FY2004. On July 17, 2003, the House passed H.R. 2691 (268-152) containing a total of $19.60 billion for Interior and related agencies for FY2004. OnSeptember 23, 2003, the Senate passed its version with $19.61 billion, plus $400.0million in emergency funding for wildland fire management to repay transfers fromother accounts for fire fighting efforts in FY2003, for a bill total of $20.01 billion. With the additional fire funds, the Senate total was $411.2 million more than passedby the House and $121.3 million more than requested by the Administration. However, the Senate-passed level for FY2004 was $99.2 million less than the totalappropriated for FY2003, including the emergency supplemental in P.L.108-83 . Following passage of the bill, the Senate appointed conferees on H.R. 2691 on September 23, 2003. The House subsequently appointedits conferees on October 1. Before appointing its conferees, the House agreed to amotion to instruct its conferees to support the additional $400.0 million inemergency firefighting funds included in the Senate-passed version of the bill. OnOctober 27, 2003, a brief formal conference committee meeting was held. Aconference report ( H.Rept. 108-330 ) was filed on October 28, 2003, and narrowlypassed the House (216-205) on October 30 and was approved by the Senate (87-2)on November 3. The narrow passage in the House has been attributed to theinclusion in the bill of a provision that led to a stay -- a temporary suspension -- ofa court decision requiring an exhaustive, expensive accounting of Indian trust landsand trust asset transactions since 1887. The President signed H.R. 2691 into law on November 10, 2003, as P.L. 108-108 . From the start of FY2004 on October 1, 2003 until the enactmentof the bill, Interior and related agencies were funded under the provisions of acontinuing resolution. The FY2004 Interior and Related Agencies Appropriations Act contained $20.01 billion for FY2004, which reflected an across-the-board cut in the law of0.646%. This figure, and figures throughout this report, reflect an additionalacross-the-board cut of 0.59%, which was included in the ConsolidatedAppropriations Act of 2004 ( P.L. 108-199 ). This across-the-board cut also appliesto most other FY2004 appropriations laws. The FY2004 enacted level was slightly less than enacted for FY2003 (less than 1% lower). See Table 21 below for a comparison of FY2003-FY2004 InteriorAppropriations. The FY2004 level was essentially the same as the amount approvedby the Senate (less than 1% higher), and higher than the House-passed total (2%higher) and the President's request (less than 1% higher). The appropriate levels offunding for wildland firefighting and land acquisition were among the major issuesdebated. The FY2004 law contained $2.76 billion for wildland fire fighting by theForest Service and the Department of the Interior, approximately 13% less than thetotal enacted for FY2003. This figure includes an additional $49.7 million providedfor Forest Service wildland firefighting ion P.L.108-199 . (For further information,see "Bureau of Land Management" and "Forest Service" sections below.) For landacquisition (and state assistance) by the four major federal land managementagencies, the FY2004 law contained $263.4 million, 36% less than enacted forFY2003. (For further information, see "The Land and Water Conservation Fund(LWCF)" and "Conservation Spending Category" sections below.) Many controversial issues arose during consideration of the FY2004 Interior andrelated agencies appropriations bill, and were addressed by conferees. The FY2004law (1) continued the automatic renewal of expiring grazing permits and leases forFY2004 -- FY2008 (see "Bureau of Land Management" section below); (2)extended the Recreational Fee Demonstration Program (see "National Park Service"section below); (3) modified procedures for seeking judicial review of timber salesin Alaska, primarily in the Tongass National Forest (see "Forest Service" sectionbelow); (4) capped funds for competitive sourcing efforts of agencies and requireddocumentation on the initiative (see the "Competitive Sourcing of Government Jobs"section below); and (5) led to a stay of a court decision requiring an accounting ofIndian trust funds and trust asset transactions since 1887 (see Litigation in the"Office of Special Trustee for American Indians" section below ). The FY2004 law dropped language barring funds from being used (1) to implement changes to BLM regulations on Recordable Disclaimers of Interest inLand, (see "Bureau of Land Management" section below) (2) for the Klamath FisheryManagement Council (see "Klamath River Basin" section below), and (3) for OuterContinental Shelf leasing activities in the North Aleutian Basin planning area, whichincludes Bristol Bay, Alaska (see "Minerals Management Service" section below). Table 1 below contains information on congressional consideration of the FY2004 Interior appropriations bill. Table 1. Status of Department of the Interior and Related Agencies Appropriations, FY2004 Major Funding Trends During the ten-year period from FY1994 to FY2003, Interior and related agencies appropriations increased by 50% in current dollars, from $13.39 billion to$20.11 billion including supplemental funds for FY2003. The change in constantFY2003 dollars is an increase of 21%. Most of the growth occurred during the latteryears. For instance, during the five-year period from FY1994 to FY1998,appropriations increased by 3% in current dollars, from $13.39 billion to $13.79billion, but decreased by 7% in constant dollars. By contrast, during the most recentfive years, from FY1999 to FY2003, funding increased by 41% in current dollars,from $14.30 billion to $20.11 billion, or 27% in constant dollars. See Table 2 below. The single biggest increase during the decade occurred from FY2000 to FY2001,when the total appropriation rose 27% in current dollars, from $14.91 billion to$18.89 billion, or 23% in constant dollars. Much of the increase was provided toland management agencies for land conservation and wildland fire management. See Table 22 below for a budgetary history of each agency, bureau, and program fromFY2000 to FY2003. Table 2. Interior and Related Agencies Appropriations, FY1999 to FY2003 (budget authority inbillions of current dollars) Note: These figures exclude permanent budget authorities, and generally do notreflect scorekeeping adjustments. However, they reflect rescissions. Title I: Department of the Interior Bureau of Land Management The Bureau of Land Management (BLM) manages 261.5 million acres of public land for diverse, and, at times, conflicting uses, such as energy and mineralsdevelopment, livestock grazing, recreation, and preservation. The agency also isresponsible for about 700 million acres of federal subsurface mineral resourcesthroughout the nation, and supervises the mineral operations on an estimated 56million acres of Indian Trust lands. Another key BLM function is wildland firemanagement on about 370 million acres of DOI, other federal, and certainnon-federal land. The FY2004 appropriations law contained $1.79 billion for the BLM, less ($84.7 million, or 5%) than the FY2003 level ($1.88 billion). The enacted level isroughly the same as that passed by the Senate and requested by the Administration,while significantly higher than the House-passed amount. See Table 3 below. Management of Lands and Resources. For Management of Lands and Resources, the FY2004law provided $839.8 million, a $19.5 million (2%) increase over FY2003, when$820.3 million was appropriated. The enacted level was also an increase over thePresident's request and the House-passed level but a decrease from the Senate-passedamount. This line item funds an array of BLM land programs, including protection,recreational use, improvement, development, disposal, and general BLMadministration. Some of the increase for FY2004 is targeted for realty and ownership management as well as recreation management. For realty and ownershipmanagement, the FY2004 law provided $93.2 million, a $4.6 million (5%) increaseover FY2003 ($88.6 million). While the Administration and House had sought toreduce funds for this program ($80.9 million), the Senate had sought more funds($101.9 million) primarily to expedite the processing of native allotment applicationsand land selections under the Alaska Statehood Act. For managing recreation onBLM lands, the FY2004 law contained $66.4 million, a $6.5 million (11%) increaseover FY2003 ($59.8 million). The Administration, House, and Senate had soughtincreases. The House Appropriations Committee charged the BLM to report onefforts to develop a unified strategy for recreation management, asserted that BLMand the Forest Service should take measures to provide adequate public access forrecreation, and directed the agencies to submit a strategy for developing recreationalaccess plans for individual forests and public land units. The FY2004 appropriation law provided $80.3 million for transportation and facilities maintenance, which funds annual and deferred maintenance andinfrastructure improvement. This was a reduction ($2.4 million, or 3%) fromFY2003 ($82.8 million). The Administration, House, and Senate had sought toreduce funding. Energy and Minerals. The FY2004 appropriations law provided $110.0 million for the energy and minerals program,including Alaska minerals, an increase over FY2003 and the President's request. Both the House and Senate had recommended increases over FY2003, withprocessing of energy permits a focus. The House sought an increase to address thebacklog in processing permits for development of coalbed methane. In reportlanguage, the Senate Committee on Appropriations expressed concern with thebacklog in processing oil and gas permits, and suggested that the BLM Directorestablish a pilot program in 5 states to eliminate the backlog and create a bestpractices program for permitting on federal lands. In the joint explanatory statement,the conferees modified the Senate report language to make the pilot programoptional, on the grounds that BLM has made progress in addressing the backlog ofoil and gas permits. The FY2004 law continued to bar funds included in the bill from being used for energy leasing activities within the boundaries of national monuments, as they wereon January 20, 2001, except where allowed by the presidential proclamations thatcreated the monuments. The law also continued the moratorium on accepting andprocessing applications for patents for mining and mill site claims on federal lands. However, applications meeting certain requirements that were filed on or beforeSeptember 30, 1994, would be allowed to proceed, and third party contractors wouldbe authorized to process the mineral examinations on those applications. Disclaimers of Interest. The FY2004 law did not include House-passed language with regard to disclaimers of interest,whereby the United States declares that it has no property interest in a parcel of land. A House floor amendment had originally sought to prohibit funds in the bill frombeing used to implement revised DOI regulations on disclaimers, which allow states,state political subdivisions, and others to apply for disclaimers regardless of whetherthey are the property owners of record. The House instead adopted a revisionlimiting the application of the amendment to certain lands -- national monuments,wilderness and wilderness study areas, park units, and national wildlife refuges. Opponents of the new regulation feared that it will be used to confirm "RS2477"highway rights of way, despite provisions of law barring new rules pertaining torecognition or validity of such rights of way unless authorized by Congress. Supporters welcomed the new regulations as a way to resolve ownership of property,including private property interests, thus allowing the potential for development. Grazing and Wild Horses and Burros Issues. The FY2004 law kept Senate language to continuethe automatic renewal of grazing permits and leases that expire, are transferred, orwaived during FY2004-FY2008 and that were issued by the Secretary of the Interioror the Secretary of Agriculture. The automatic renewal would continue until thepermit renewal process is completed under applicable laws and regulations, includingany necessary environmental analyses. The terms and conditions in expiring permitsor leases would continue under the new permit or lease until the renewal process iscompleted. The Secretaries are to report annually on the extent to which they arecompleting required analyses before permits expire, and biennially onrecommendations for ensuring the timely completion of permit renewals. Thelanguage also accorded the Secretaries discretion to determine the priority and timingfor completing the environmental analysis of grazing allotments. The House bill hada similar provision, but was limited to permits and leases expiring in FY2004. In its report, the Senate Committee on Appropriations expressed "frustration" with the "escalating problems" in the Wild Horse and Burro Program. TheCommittee asked BLM to provide the results of a program audit and to prepare a costanalysis of alternatives to adoption for reducing animals on the range. Wildland Fire Management. For Wildland Fire Management for FY2004, the FY2004 appropriations law contained$783.6 million, a significant reduction ($91.6 million, or 10%) from the FY2003enacted level ($875.2 million). The major difference is with regard to the amount offunds provided to replace money borrowed from other accounts for fire fightingduring the previous fiscal year. During FY2003, $189.0 million was appropriated tothe BLM to repay advances from other accounts for fire fighting during the prioryear, (1) whereas the FY2004 law contained $98.4million for this purpose. TheFY2004 law provided a substantial increase over the House-passed amount ($698.7million), a slight increase over the Senate-passed level ($773.7 million), and a slightdecrease from the Administration's request ($797.7 million). The wildland fire fundsappropriated to BLM are used for fire fighting on all Interior Department lands. Interior appropriations laws also provide funds for wildland fire management to theForest Service (Department of Agriculture) for fire programs primarily on its lands. A focus of both departments is the National Fire Plan, developed after the 2000 fireseason, which emphasizes reducing hazardous fuels which can contribute tocatastrophic fires, among other provisions. (For more information, see the "ForestService" section below.) In earlier action, the House Appropriations Committee expressed concern that funding may not achieve the level of readiness needed for public safety, and directedDOI to analyze readiness levels. The Senate Committee on Appropriations citeddeteriorating forest health as an underlying cause of wildland fire and encouragedBLM to implement Stewardship Contracting as quickly as possible and to report onits progress. Both the House and Senate had supported the President's request of$186.2 million for hazardous fuels reduction, including the wildland-urban interface. Payments in Lieu of Taxes Program (PILT). The PILT program compensates local governments forfederal land within their jurisdictions because federally-owned land is not taxed. ThePILT program has been controversial because in recent years appropriations havebeen substantially less than authorized amounts. For FY2004, the Administrationproposed to shift the program from the BLM budget to Departmental Managementin DOI because PILT payments are made for lands of the Fish and Wildlife Service,National Park Service, and Forest Service, and certain other federal lands, in additionto BLM lands. The FY2004 law reflected the move to Departmental Management,and funded the program at $224.7 million, an increase over the President's request($200.0 million) and FY2003 ($218.6 million). This level would fund the programat approximately 65-70% of the level authorized in the complex PILT formula. Inproposing a reduction, the Administration expressed an intent to examine the PILTdistribution formula to determine if changes would achieve a distribution ofpayments to local governments that would, in their view, be more equitable. Land Acquisition. For LandAcquisition, the FY2004 law appropriated $18.4 million, most of which wasearmarked for 12 acquisitions. This is a $14.9 million (45%) reduction from FY2003($33.2 million). The Administration, House, and Senate, had sought to reducefunding for land acquisition, with the House seeking the largest cut. In its report, theHouse Appropriations Committee had expressed concern about "the unfocuseddirection" in the land acquisition program of the agencies, and had directed theSecretaries of DOI and Agriculture to develop a plan outlining the acreage goals andconservation objectives of federal land acquisition ( H.Rept. 108-195 , p. 10). Itsought alternatives to fee title land purchases, such as land exchanges and purchaseof conservation easements, which often are less expensive approaches. Money forland acquisition is appropriated from the Land and Water Conservation Fund. (Formore information, see the "Land and Water Conservation Fund (LWCF)" sectionbelow.) Table 3. Appropriations for BLM, FY2003-FY2004 ($ in millions) Notes: a Funds for the PILT program are not reflected in column totals becausetheprogram has been transferred out of BLM to DOI Departmental Management. b The figures of "0" are a result of an appropriation matched by offsetting fees. c Includes $189.0 million to replace monies borrowed from other accounts inFY2002 for fire fighting and a $36.0 million supplemental appropriation. d Includes $99.0 million in supplemental emergency funds to replace moniesborrowed from other accounts in FY2003 for fire fighting. e Includes $75.0 million to replace monies borrowed from other accounts in FY2003for fire fighting. f Includes $98.4 million to replace monies borrowed from otheraccounts in FY2003 for fire fighting. For further information on the Department of the Interior , see its website at http://www.doi.gov . For further information on the Bureau of Land Management , see its website at http://www.blm.gov/nhp/index.htm . CRS Report RS21402 . Federal Lands, "Disclaimers of Interest," and RS2477 , by [author name scrubbed]. CRS Report RS21634. Grazing Regulations and Policies: Consideration of Changes by the Bureau of Land Management , by [author name scrubbed]. CRS Issue Brief IB89130. Mining on Federal Lands , by [author name scrubbed]. CRS Report RS20902 . National Monument Issues , by [author name scrubbed]. CRS Report RL31392 . PILT (Payments in Lieu of Taxes): Somewhat Simplified , by [author name scrubbed]. CRS Issue Brief IB10076. Public (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. Fish and Wildlife Service For FY2004, the Administration requested $1.29 billion for the Fish and Wildlife Service (FWS), a 3% increase over FY2003. The House approved $1.30billion, and the Senate, $1.34 billion. The conference approved $1.31 billion, a 5%increase, and this funding level was enacted into law for FY2004. By far the largest portion of the FWS annual appropriation is for the Resources Management account. The President's FY2004 request was $941.5 million. TheFY2003 appropriation was $911.5 million plus a $5.0 million emergencysupplemental appropriation. The House approved $959.9 million, while the Senate'sfigure was $942.2 million. Counting subsequent recisions, the FY2004 level was$956.5 million, a 4% increase. Included in Resources Management are theEndangered Species Program, the Refuge System, and Law Enforcement, amongother things. Endangered Species Funding. Funding for the Endangered Species program is one of the perennially controversialportions of the FWS budget. For FY2004, the Administration proposed to reduce theprogram from $131.8 million to $128.7 million. See Table 4 below. The Houseapproved $134.5 million, and the Senate approved $135.2 million. The finalappropriations was $137.0 million, a 4% increase, and this level was enacted intolaw. A number of related programs also benefit conservation of species that are listed, or proposed for listing, under the Endangered Species Act. The CooperativeEndangered Species Conservation Fund (for grants to states and territories) wouldincrease from $80.5 million to $86.6 million under the President's request. Congressenacted $81.6 million, a 1% increase. The Landowner Incentive Program wouldincrease from a minus $260,000 (due to a net decrease resulting from a $40.0 millionrescission of FY2002 funds in the FY2003 law) to $40.0 million under thePresident's proposal. The House and Senate initially approved $40.0 million, but the FY2004 enacted level was $29.6 million. Stewardship Grants would increase froma minus $65,000 (due to a rescission of $10.0 million in FY2002 funds in the FY2003law) to $10.0 million under the President's proposal, which was likewise approvedby the House and Senate. (2) The FY2004 enacted levelwas $7.4 million. Under the President's request, overall FY2004 funding for the endangered species program and related programs would increase from FY2003 by $53.4 million(25%), largely due to increases in related programs rather than in the endangeredspecies program itself. However, this increase primarily reflects the FY2003rescission of prior year funding. The conference approved $255.6 million, an overallincrease of 21% -- less than either body approved separately and less than thePresident's request for this package of programs. This level was enacted into law. Table 4. Funding for Endangered SpeciesPrograms, FY2003-FY2004 ($ in thousands) National Wildlife Refuge System and LawEnforcement. On March 14, 2003, the nation observed thecentennial of the creation by President Theodore Roosevelt of the first NationalWildlife Refuge on Pelican Island in Florida. Accordingly, Congress appropriatedfunding in FY2003 for various renovations, improvements, and activities to celebratethe event; it included all of this funding under operations and maintenance for theNational Wildlife Refuge System (NWRS). For operations and maintenance, thePresident proposed a decrease of 9% for FY2004 while the House approved anincrease of 8%, and the Senate supported a 5% increase. The final FY2004 level was$391.5 million, a 7% increase. For infrastructure improvements in the system, theAdministration requested $53.4 million but the House, the Senate, and the conferencerejected the proposal. Spending for the NWRS is under the "Refuges and Wildlife" budget activity, which includes programs which are not directly tied to the NWRS: recovery of theSalton Sea (in California), management of migratory birds throughout the countryand in cooperation with other nations, and law enforcement operations around thecountry. These programs are not included here, but are contained in tables inAppropriations Committee reports. See Table 5 below. Table 5. Funding for National Wildlife Refuge System, FY2003-FY2004 ($ in millions) Note: Funds for the YCC contained in brackets are included in the total foroperations and maintenance. The President proposed $52.7 million for Law Enforcement -- up $1.1 million from FY2003 ($51.6 million). The House approved a larger increase, to $54.4million. The Senate-passed bill contained $53.4 million, and the final FY2004 levelwas $53.7 million. Land Acquisition. For FY2004, the Administration proposed $40.7 million, a 44% decrease from the FY2003 levelof $72.9 million. The FY2004 level was $43.1 million, a 41% cut. The bulk of thisprogram has been for acquisition of federal refuge land, but a portion is used forclosely related functions such as acquisition management, land exchanges, andemergency acquisitions. In FY2003, 24% of Land Acquisition funding was allocatedto these related functions; the FY2004 request would have allocated 39% to them. These related functions constituted 31% of the enacted appropriation; the remainderwas for direct land acquisition. (For more information, see the "Land and WaterConservation Fund (LWCF)" section below.) Wildlife Refuge Fund. The National Wildlife Refuge Fund (also called the Refuge Revenue Sharing Fund)compensates counties for the presence of the non-taxable federal lands of the NWRS. A portion of the fund is supported by the permanent appropriation of receipts fromvarious activities carried out on the NWRS. However, these receipts are notsufficient for full funding of authorized amounts. Congress generally makes up someof the difference in annual appropriations. The Administration requested $14.4million for FY2004, up slightly from FY2003, and the FY2004 enacted level was$14.2 million. When combined with the estimated receipts, this appropriation levelwould cover 49% of the authorized full payment. Multinational Species Conservation Fund (MSCF). The MSCF has generated considerable constituent interestdespite the small size of the program. It benefits Asian and African elephants, tigers,the six species of rhinoceroses, and great apes. The President's budget againproposes to move funding for the Neotropical Migratory Bird Conservation Fund(NMBCF) into the MSCF. For FY2004, the President proposed $7.0 million for theMSCF (including the proposed addition of the NMBCF within this program). Congress rejected the proposed transfer in FY2002, FY2003, and FY2004. TheFY2004 enacted level for the MSCF represents a 16% increase over the previousyear. See Table 6 below. Table 6. Funding for Multinational Species Conservation Fund and Migratory Bird Fund, FY2003-FY2004 ($ in thousands) Note: a This program was first authorized inFY2002, and is not part of the MSCF,although the transfer was proposed in the President's budgets for FY2002, FY2003,and FY2004. Because Congress has rejected the transfer three times, the program isnot included in the column totals. State and Tribal Wildlife Grants. The State and Tribal Wildlife Grants program helps fund efforts to conserve species(including non-game species) of concern to states and tribes. The program wascreated in the FY2001 Interior appropriations law ( P.L. 106-291 ) and further detailedin subsequent Interior appropriations bills. It lacks any other authorizing statute. Funds may be used to develop conservation plans as well as support specific practicalconservation projects. As of FY2002, a portion of the funding is set aside forcompetitive grants to tribal governments or tribal wildlife agencies. The remainingstate portion is for matching grants to states. A state's allocation is determined ona formula basis. The President proposed a 7% decrease, but the enacted level was$69.1 million, a 7% increase. See Table 7 below. Table 7. Appropriations for State and Tribal Wildlife Grants, FY2003-FY2004 ($ in millions) Notes: The House proposed that FWS be limited to 3% of the total appropriation foruse in administrative expenses. That figure is indicated here. NA indicates that there was no specific amount allocated to Administration of this program in the Senate bill, or in the conference agreement. However, the conferenceagreement required that the administrative costs be deducted from the state, ratherthan the tribal allocation. For further information on the Fish and Wildlife Service , see its website at http://www.fws.gov/ . CRS Issue Brief IB10072. Endangered Species: Difficult Choices , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21157 . Multinational Species Conservation Fund , by [author name scrubbed] and [author name scrubbed]. National Park Service The National Park Service (NPS) is responsible for the National Park System, currently comprising 388 separate and diverse units with more than 84 million acres. The NPS protects, interprets, and administers the park system's diversity of naturaland historic areas representing the cultural identity of the American people. The parksystem uses some 20 types of designations, including national park, to classify sites,and visits to these areas total close to 280 million annually. The NPS also supportsland conservation outside the park system. The FY2004 enacted level is $2.26 billion for the NPS. This is $19.2 million above the FY2003 enacted level ($2.24 billion), but $103.3 million below thePresident's request ($2.36 billion). The Senate-passed bill contained $2.32 billionand the House-passed bill provided $2.24 billion. See Table 8 below. Some amendments affecting the NPS were rejected on the floor. The House narrowly defeated (on a tie vote) an amendment that sought generally to prohibit useof funding to manage recreational snowmobile use in Yellowstone and Grand TetonNational Parks, and the John D. Rockefeller, Jr., Memorial Parkway which linksthem. The amendment would have resulted in the phase-out of snowmobile use inthese park units, as provided for in a controversial Clinton Administration rule. (Formore information, see CRS Issue Brief IB10093, National Park Management andRecreation , coordinated by [author name scrubbed].) The House also rejected anamendment to ban the use of funds to kill bison straying from Yellowstone NationalPark. The FY2004 appropriations law contained language not directly tied to specific funding accounts. It modified House language on the Administration's competitivesourcing initiative by capping study expenditures by agencies, and establishedrigorous reporting requirements. (For more information, see the "CompetitiveSourcing of Government Jobs" section below.) The law retained Senate language tolimit displays of commercial sponsorship on the National Mall. It also replaced aHouse provision calling for a study of a controversial land exchange proposalinvolving Great Smoky Mountains National Park and the Eastern Band of CherokeeIndians with the text of H.R. 1409 , that accomplishes the exchangedespite NPS concerns of unequal values. Further, the law retained the Senaterecommendation designating Congaree Swamp National Monument (SC) asCongaree National Park. Operation of the National ParkSystem. The park operations line item accounts for roughlytwo-thirds of the total NPS budget. It covers resource protection, visitors' services,facility operations, facility maintenance, and park support programs. For FY2004,the law provided $1.61 billion for NPS operations. This was $22.3 million below theAdministration's request, and $45.3 million more than the FY2003 level. The reportof the House Committee on Appropriations contained strong language regarding the"erosion" of NPS operating funds by the absorption of unbudgeted costs associatedwith management initiatives, including competitive sourcing, financial managementreform, and other activities. The Committee urged the Administration to submitmore realistic FY2005 budget justifications that factor in the true costs of fixed costincreases and management initiatives. Further, park advocacy groups estimate thatthe national parks operate, on average, with two-thirds of needed funding. Table 8. Appropriations for NPS, FY2003-FY2004 ($ in millions) Note: a Figures reflect a rescission of contract authority. Construction and Maintenance. The construction line item funds the construction, rehabilitation, and replacement ofpark facilities. The FY2004 law provided $329.9 million for NPS Construction, $2.6million more than the Administration's request ($327.3 million) and $4.2 millionmore than the FY2003 appropriation ($325.7 million). The Senate-passed billapproved $342.1 million and the House had allowed $303.2 million. The FY2004law provided $559.2 million for FY2004 for facility operation and maintenance (anactivity funded within the Operation of the National Park System line item), $10.5million less than the Administration requested ($569.7 million) and $39.2 millionmore the FY2003 appropriation ($520.0 million). The House had approved $569.2million and the Senate had provided $567.3 million. Combined, the Administration requested $897.0 million for construction and facility operation and maintenance, an increase of $51.3 million from FY2003($845.7 million). Of this total, the Administration stated that $705.8 million isapplicable to construction and annual and deferred maintenance projects in FY2004,implying that $191.2 million is for facility operations. The House approved asimilarly-combined total of $872.4 million, while the Senate approved $909.4million. The FY2004 law included a combined total of $889.1 million, or $43.4million above the FY2003 amount. (3) How to reducethe maintenance backlog for theNPS, estimated at $5.4 billion according to DOI, has been controversial and a stated priority of the Administration and some Members of Congress. (For information onthe maintenance backlog, see CRS Issue Brief IB10093, National Park Managementand Recreation , coordinated by [author name scrubbed].) United States Park Police (USPP). This line item supports the programs of the U.S. Park Police who operate primarilyin urban park areas. The USPP also provides investigative, forensic, and otherservices to support law-enforcement trained rangers working in park unitssystem-wide. For FY2004, the law provided $77.9 million for the USPP, the sameas for FY2003. The conference agreement was critical of USPP's failure toimplement recommendations made in a 2001 report by the National Academy ofPublic Administration to address problems of budget accountability, managementissues, and overtime. Administration priorities for FY2004 focus on border parksecurity problems. National Recreation and Preservation. This line item funds park recreation and resourceprotection programs, as well as programs connected with local community efforts topreserve natural and cultural resources. The FY2004 request of $47.9 million wassignificantly less than FY2003 funding ($61.3 million). The House-passed billallowed $54.9 million, including $13.9 million for heritage partnerships and $6.5million for statutory and contractual aid. The Senate-passed bill provided $60.2million, with $13.6 million for heritage partnerships and $9.9 million for statutoryand contractual aid. The FY2004 law contained $61.8 million, with $14.3 millionfor heritage areas and $12.8 million for statutory and contractual aid. The FY2004 law established the Blue Ridge National Heritage Area (NC) and funded the area with $0.5 million. It also directed the NPS to conduct a heritage areastudy for Muscle Shoals, AL, using available funds. Study legislation was approvedby the 107th Congress ( P.L. 107-348 ), but no funds had been appropriated. Urban Park and Recreation Recovery (UPARR). This matching grant program, long popular withCongress, was designed to help low-income inner city neighborhoods rehabilitateexisting recreational facilities. Funding for new program grants was problematicuntil the Conservation Spending Category (CSC) was created in the FY2001 InteriorAppropriations Act, with $30.0 million for UPARR. The President did not requestfunds for UPARR in FY2002, but Congress funded the program at $30.0 million. Nofunding was requested for FY2003. Although the House approved $30.0 million andthe Senate supported $10.0 million, the conferees ultimately provided only $298,000for program administrative costs in FY2003. For FY2004, the Administration,House, and Senate agreed on $305,000 to administer previously awarded grants, butnot to provide money for a new round of grants. The FY2004 law provided $301,000for program administration. Land Acquisition and State Assistance. The FY2004 law provided a total of $135.6 million,with $41.8 million for federal land acquisition and $93.8 million for state assistance. The total was $103.0 million less than the Administration's request ($238.6 million)and $35.7 million less than the FY2003 enacted level ($171.3 million). TheHouse-passed bill contained $131.2 million, and the Senate $158.5 million. Thefederal program provides funds to acquire lands, or interests in lands, for inclusionwithin the National Park System, while the state assistance program is for park landacquisition and recreation planning and development by the states. State-sideappropriated funds are allocated to states through a formula, with the statesdetermining their internal spending priorities. Recreational Fee Demonstration Program (Fee Demo). Under this trial program, the four major federal landmanagement agencies are authorized to retain and spend receipts from entrance anduser fees. The receipts are available without further appropriation for projects at thecollecting sites that reduce the backlog of deferred maintenance and enhance visitorexperience. A portion of fee receipts is distributed to other agency sites. The NPSestimates Fee Demo receipts of $141.9 million for FY2004. The FY2004 law extended Fee Demo for 15 months -- through December 2005 for fee collection, and 1 year -- through FY2008, for fee expenditures. While theSenate-passed bill did not have a Fee Demo provision, the House-passed bill wouldhave extended Fee Demo for two years. The extension is to give the authorizingcommittees more time to consider the controversial issue of a permanent program. A House amendment to limit the extension of the fee demo program to national parkunits was defeated. (For more information, see CRS Issue Brief IB10093, NationalPark Management and Recreation , coordinated by [author name scrubbed].) For further information on the National Park Service , see its website at http://www.nps.gov/ . CRS Issue Brief IB10093. National Park Management and Recreation , by [author name scrubbed], coordinator. Historic Preservation. TheHistoric Preservation Fund (HPF), administered by the NPS, provides grants-in-aidto states (primarily through State Historic Preservation Offices), certified localgovernments, and territories and the Federated States of Micronesia for activitiesspecified in the National Historic Preservation Act. These activities includeprotection of cultural resources and restoration of historic districts, sites, buildings,and objects significant in American history and culture. Preservation grants arenormally funded on a 60% federal- 40% state matching share basis. In addition, theHistoric Preservation Fund provides funding for cultural heritage projects for Indiantribes, Alaska Natives, and Native Hawaiians. The FY2004 appropriations law provided $73.6 million for the Historic Preservation Fund, $6.6 million above the budget request, $2.6 million above theHouse-passed bill, and $2.2 million below the Senate-passed measure. The FY2004appropriation included $0.5 million for the National Trust for Historic Preservation;$34.6 million for grants-in-aid to states and territories; $3.0 million for Indian tribes;$32.6 million for Save America's Treasures, former President Clinton's Millenniuminitiative; and $3.0 million for the restoration of buildings on campuses ofHistorically Black Colleges and Universities (HBCUs). See Table 9 below. A major issue is whether historic preservation programs should be funded byprivate money rather than the federal government. Congress eliminated permanentand annual federal funding for the National Trust for Historic Preservation, but hasprovided specific appropriations for Millennium projects under Save America'sTreasures. Save America's Treasures grants are given to preserve nationallysignificant intellectual and cultural artifacts and historic structures includingmonuments, historic sites, artifacts, collections, artwork, documents, manuscripts,photographs, maps, journals, film and sound recordings. Due to concerns that theSave America's Treasures program did not reflect geographic diversity,appropriations law now requires that project recommendations be subject to approvalby the Appropriations Committees prior to distribution of funds. The FY2004 lawprovided $32.6 million for Save America's Treasures, $2.8 million more than enactedfor FY2003. In the past, the Historic Preservation Fund account has included the preservation and restoration of historic buildings and structures on Historically Black Colleges andUniversities (HBCU) campuses. Funds in Section 507 of P.L. 104-333 (TheOmnibus Parks and Public Lands Management Act of 1996) were earmarked forpreservation projects for HBCU buildings, particularly those listed in the NationalRegister of Historic Places that required immediate repairs. An appropriation inFY2001 of $7.2 million represented the unused authorization remaining from P.L.104-333 . There was no funding for HBCU's under HPF for FY2002 or FY2003. ForFY2004, both the House-passed bill and the Senate-passed bill restored funding, withcompetitive grants administered by the National Park Service. The FY2004 lawprovided $3.0 million for the HBCU program for FY2004. There is no longer permanent federal funding for the National Trust for Historic Preservation, previously funded as part of the Historic Preservation Fund Account. The National Trust was chartered by Congress in 1949 to "protect and preserve"historic American sites significant to our cultural heritage. It is technically a privatenon-profit corporation, but it received federal funding until FY1998. Since that time,the National Trust generally has not received direct federal funding in keeping withCongress' plan to make it self-supporting. However, the FY2004 appropriations lawprovided $0.5 million for the National Trust's endowment fund for the care andmaintenance of the most endangered historic places. Table 9. Appropriations for the Historic Preservation Fund, FY2003-FY2004 ($ in thousands) Notes: a The term "grants in aid to States and Territories" is used in conjunctionwith the budget and refers to the same program as Grants in aid to State HistoricPreservation Offices. b Funding for the Historic Preservation Fund in the 2004 budget has its majorcomponents listed under the "conservation spending category." For further information on Historic Preservation , see its website at http://www2.cr.nps.gov/ . CRS Report 96-123. Historic Preservation: Background and Funding, by [author name scrubbed]. U.S. Geological Survey The U.S. Geological Survey (USGS) is the nation's primary science agency in providing earth and biological science information related to natural hazards; certainaspects of the environment; and energy, mineral, water, and biological sciences. Inaddition, it is the federal government's principal civilian mapping agency and aprimary source of data on the quality of the nation's water resources. The traditional presentation of the budget for the USGS is in the line item Surveys, Investigations, and Research , with six activities falling under that heading:The National Mapping Program; Geologic Hazards, Resources, and Processes; WaterResources Investigations; Biological Research; Science Support; and Facilities. TheFY2004 Interior appropriations law provided $938.0 million for the USGS, whichis $42.5 million above the Administration's request of $895.5 million and $18.7million above the FY2003 appropriation of $919.3 million. The Senate-passedversion of the bill contained $928.9 million and the House-passed version approved $935.7 million. See Table 10 below. The FY2004 law provided increases in funding over the Administration's request for five of the six activities conducted by the USGS, but funded ScienceSupport at $0.7 million less than the request of $91.5 million. Compared to theFY2003 enacted level, all programs except for the National Mapping Program showan increase in appropriations. National Mapping Program. The National Mapping Program aims to provide access to high quality geospatial data andinformation to the public. The FY2004 law provided $129.8 million for thisprogram, an increase of $9.3 million over the Administration's request of $120.5million and a decrease of $3.4 million from the FY2003 enacted level of $133.2million. Sub-programs within the National Mapping Program were funded at levelslower than FY2003 enacted levels. The FY2004 law contained $80.8 million for theCooperative Topographic Mapping Program, $33.7 million for the Land RemoteSensing Program, and $15.2 million for geographic analysis and monitoring. The conference report discussed the significance of the Landsat 7 Satellite Program and made recommendations for improving the program. Landsat 7 is asatellite that takes remotely sensed images of the Earth's land surface andsurrounding coastal areas primarily for environmental monitoring. Conferencemanagers stated that the USGS should secure data purchase agreements with otherfederal agencies and others in the user community to establish a stable fundingsource. Managers also recommended that the USGS consult with users of mediumresolution data to determine if degraded data can be used. Degraded data isacknowledged by the managers as a problem of the Landsat 7 Program. Conference managers stated their support for improving the management of collected data at the EROS Data Center, specifically the initiatives to convertarchived remote sensing data to a modern disk-based storage system, and implementing remote mirroring technology. Remote mirroring technology utilizesmirror sites, which are exact copies of an existing site that are made to reduce theload on the source site and speed up access for users in locations geographically faraway from the server. Geologic Hazards, Resources, and Processes. This heading covers programs in three budgetsub-activities: Hazard Assessments, Landscape and Coastal Assessments, andResource Assessments. For Geologic Hazards, Resources, and Processes activities,the FY2004 appropriations law contained $234.2 million for FY2004 -- an increaseof $12.6 million above the Administration's request of $221.6 million and $1.0million above the FY2003 enacted level of $233.2 million. The FY2004 law provided funding for assessment programs that is similar to FY2003 enacted levels. For geologic hazards and assessments, $75.3 million wasincluded; for geologic landscape and coastal assessments, $78.4 million; and forgeologic resource assessments, $80.5 million. The FY2004 law included $16.0 million for conducting inquiries into how economic conditions are affecting mining and materials processing industries. In theconference report, there are increases of $1.7 million over House-recommendedlevels for volcanic monitoring, as well as increases of $0.3 million for the NationalCooperative Geological Mapping program and $1.5 million for the Minerals at Riskprogram in Alaska. The Administration requested a decrease of $13.4 million foraggregate and industrial mineral studies, minerals research and assessment activities,and the Alaska Minerals-At-Risk program. Both the House- and Senate-passed billsprovided support for the USGS mineral resources program, and in their respectivereports noted the relevance of mineral resource and assessment research for nationalsecurity and infrastructure development as well as for assisting the U.S. mineralindustry. Water Resources Investigations. For the Water Resources Investigations heading, the FY2004 law appropriated$215.7 million, which is $15.6 million over the Administration's request of $200.1million and $8.6 million above the FY2003 enacted level of $207.2 million. The FY2004 law provided $64.0 million for cooperation with states or municipalities for water resource investigations. Most programs within the WaterResources Investigations heading received greater funding than enacted levels inFY2003. The Ground Water Resources Program was provided $6.0 million forFY2004; the National Water Quality Assessment Program, $63.3 million; the ToxicSubstances and Hydrology, $14.9 million; Hydrological Research and Development,$17.1 million; the National Streamflow Information Program, $14.2 million; andHydrological Networks and Analysis, $29.9 million. The FY2004 law also provided$6.4 million for Water Resources Research Institutes. As was the case with the BushAdministration's FY2002 and FY2003 budget requests, the FY2004 request soughtto discontinue USGS support for Water Resources Research Institutes based on thefinding that most institutes have been successful in leveraging sufficient funding forprogram activities from non-USGS sources. Congress also restored funding for theInstitutes in FY2002 and FY2003. Biological Research. ForFY2004, the law appropriated $174.5 million, $5.6 million above theAdministration's request of $168.9 million and $4.7 million above the FY2003enacted level of $169.8 million. The law further stated that no funds provided forbiological research can be used to conduct new surveys on private land unless thesurveys are specifically authorized by the property owner in writing. Funding forFY2004 increased for biological research and monitoring programs ($135.1 millionfor FY2004) and biological information management and delivery ($24.7 million forFY2004). The conference report identified a decrease of $1.0 million below the House-passed level for invasive species research and $0.6 million for chronic wastingdisease research. Chronic wasting disease is a progressively degenerative andultimately fatal disease in deer and elk. Proposed funding will be used to conductstudies to determine the transmission of the disease among deer and elk populations. Science Support and Facilities. Science Support focuses on those costs associated with modernizing theinfrastructure for management and dissemination of scientific information. ForFY2004, the law provided $90.8 million for Science Support, which is $0.7 millionless than the Administration's request of $91.5 million, and $5.6 million over theFY2003 enacted level of $85.2 million. Facilities focuses on the costs for maintenance and repair of facilities. The FY2004 law provided $93.0 million for the Facilities budget, nearly the same as theAdministration's request, ($0.4 million above), and $2.2 million over the FY2003enacted level of $90.8 million. The conference managers stated that they are awarethat the facilities budget may not be sufficient for rent and operations of somefacilities. The managers attributed this deficiency, in part, to insufficient funds beingtransferred to facilities in previous years. The managers directed the USGS toresolve this issue by developing a funding strategy for their facilities by March 2004. The conference managers added $3.0 million to the USGS budget for FY2004 to counter streamlining reductions in the Administration's request. They directed theUSGS to spread these funds to program areas on a pro-rata basis. Table 10. Appropriations for theU.S. Geological Survey, FY2003-FY2004 ($ in millions) For further information on the U.S. Geological Survey , see its website at http://www.usgs.gov/ . Minerals Management Service The Minerals Management Service (MMS) administers two programs: the Offshore Minerals Management (OMM) Program and the Minerals RevenueManagement (MRM) Program, formerly known as the Royalty ManagementProgram. OMM administers competitive leasing on outer continental shelf lands andoversees production of offshore oil, gas, and other minerals. MRM collects anddisburses bonuses, rents, and royalties paid on federal onshore and Outer ContinentalShelf (OCS) leases and Indian mineral leases. MMS anticipates collecting about $5.8billion in revenues in FY2004 from offshore and onshore federal leases. Revenuesfrom onshore leases are distributed to states in which they were collected, the GeneralFund of the U.S. Treasury, and designated programs. Revenues from the offshoreleases are allocated among the coastal states, Land and Water Conservation Fund, theHistoric Preservation Fund, and the U.S. Treasury. Budget and Appropriations. TheFY2004 law funded MMS programs at $270.5 million, including $7.0 million for oilspill research and $263.5 million for the Royalty and Offshore Minerals Managementprogram. Funding for the Royalty and Offshore Minerals Management program isfurther broken down as follows: $139.3 million for OMM, $79.7 million for MRM,and $44.5 million for administrative activities. Of the total for MMS, $100.2 millioncame from offsetting collections that MMS has been retaining from OCS receiptssince 1994 while $170.3 million is derived from direct appropriations. The Administration's proposed budget for MMS for FY2004 was $271.5 million. This proposal included $7.1 million for oil spill research, and $264.4million for Royalty and Offshore Minerals Management. Of the total budget, $171.3million would have derived from appropriations, and $100.2 million from offsettingcollections. The House supported the Administration's request. The Senateapproved slightly more for MMS -- $273.3 million -- comprised of $7.1 million inoil spill research and $266.2 million for Royalty and Offshore Minerals Management. Of the total budget, $173.1 million would have derived from appropriations and$100.2 million would come from offsetting collections. The MMS mineral leasing revenue estimates are higher for FY2004 than in FY2003. Current revenue estimates for these years are $5.8 billion and $5.1 billionrespectively. Price fluctuation is the most significant factor in the revenue swings. Over the past decade, royalties from natural gas production have accounted for40%-45% of annual MMS receipts, while oil royalties accounted for not more than25%. Oil and Gas Leasing Offshore. Issues not directly tied to specific funding accounts were considered during theFY2004 appropriations process. The FY2004 appropriations law continued themoratorium on preleasing and leasing activities in the Eastern Gulf of Mexico exceptfor Lease Sale 181 off the Florida coast. Sales in the Eastern GOM have beenespecially controversial. Industry groups contend that the sales are too limited, givenwhat they say is an enormous resource potential, while environmental groups andsome state officials argue that the risks to the environment and local economies aretoo great. The FY2004 law continued leasing moratoria in other areas, including theAtlantic and Pacific Coasts and parts of Alaska. However, in a controversial development, the law omitted language that would have prohibited funding for preleasing and leasing activity in the North AleutianBasin Planning Area, currently under a leasing moratorium. There is some interestin eventually opening the area to oil and gas development as an offset to thedepressed fishing industry in the Bristol Bay area. Environmentalists, among others,oppose this effort. The North Aleutian Basin Planning Area, containing Bristol Bay,is not in the MMS current 5-year (2002-2007) leasing plan. Under the OuterContinental Shelf Lands Act of 1953 (OCSLA, 43 U.S.C. 1331), the Secretary of theInterior submits 5-year leasing programs that specify the time, location, and size oflease sales to be held during that period. Controversy over MMS oil and gas leases in offshore California has drawncongressional interest. Under the Coastal Zone Management Act of 1972 (16 U.S.C.1451), development of federal offshore leases must be consistent with state coastalzone management plans. In 1999, MMS extended 36 out of the 40 leases at issue inoffshore California by granting lease suspensions, but the State of Californiacontended that it should have first reviewed the suspensions for consistency with thestate's coastal zone management plan. In June 2001 the U.S. Court for the NorthernDistrict of California agreed with the State of California and struck down the MMSsuspensions. The Bush Administration appealed this decision January 9, 2002, to the U.S. Ninth Circuit Court of Appeals, after the state rejected a more limited leasedevelopment plan that involved 20 leases using existing drilling platforms. However,on December 2, 2002, a three-judge panel of the Ninth Circuit upheld the DistrictCourt decision. The Department of the Interior did not appeal this decision and iscurrently working with lessees to resolve the issue. A breach-of-contract lawsuit hasbeen filed against MMS by nine oil companies seeking $1.2 billion in compensationfor their undeveloped leases. In a related effort, House-Senate conferees on the energy bill ( H.R. 6 ) considered but did not include language calling for a comprehensive inventory ofOCS oil and natural gas resources. The House had agreed to a non-binding motionto instruct conferees to remove the OCS inventory language from conferenceconsideration, among other changes. Supporters of the inventory contended that itis important for enhancing domestic oil and gas supply and reducing foreign imports. Opponents argued that it could lead to the removal of the leasing moratoria currentlyin place for much of the U.S. coastline. For further information on the Minerals Management Service , see its website at http://www.mms.gov . Office of Surface Mining Reclamation and Enforcement The Surface Mining Control and Reclamation Act of 1977 (SMCRA, P.L. 95-87 ) established the Office of Surface Mining Reclamation and Enforcement(OSM) to ensure that land mined for coal would be returned to a condition capableof supporting its pre-mining land use. SMCRA also established an Abandoned MineLands (AML) fund, with fees levied on coal production, to reclaim abandoned sitesthat pose serious health or safety hazards. Congress's intention was that individualstates and Indian tribes would develop their own regulatory programs incorporatingminimum standards established by law and regulations. OSM is required to maintainoversight of state regulatory programs. In some instances states have no approvedprogram, and in these instances OSM directs reclamation in the state. Congress provided OSM $295.2 million in the FY2003 appropriations law. The Administration's request for FY2004 was $281.2 million. The House and Senate bothapproved higher levels -- $301.2 million and $297.6 million respectively. TheFY2004 law included $296.0 million. For the AML Fund, which is one of the two primary components of OSM, the Administration requested $174.5 million for FY2004, marginally higher than theAdministration requested for FY2003, but a reduction of $16.0 million from the$190.5 million approved for FY2003 by Congress. The FY2004 law provided a totalof $190.6 million. In earlier action, the full House had accepted the AppropriationsCommittee's recommendation of $194.5 million for the AML Fund, $20.0 millionabove the Administration request, and $4.0 million more than the level enacted byCongress for FY2003. In approving this level, the House Appropriations Committeenoted "the great amount of reclamation work that remains to be done..." ( H.Rept.108-195 , p. 64). The Senate Committee on Appropriations and the full Senate hadsupported a boost over the Administration's request for the AML fund, increasing itby $16.4 million to $190.9 million. The other component of the OSM budget is for Regulation and Technology programs. For Regulation and Technology, the Administration requested $106.7million. Included in the FY2004 request was $10.0 million in funding for theAppalachian Clean Streams Initiative (ACSI), the same level as in FY2002-2003, and$10.0 million for the Small Operators Assistance Program (SOAP). The requestedlevel was approved by both bodies ($106.7 million), while the enacted level wasslightly lower -- $105.4 million. Grants to the states from annual AML appropriations are based on states' current and historic coal production. "Minimum program states" are states withsignificant AML problems, but with insufficient levels of current coal production togenerate significant fees to the AML fund. The minimum funding level for each ofthese states was increased to $2.0 million in 1992. However, over the objection ofthese states, Congress has appropriated $1.5 million to minimum program statessince FY1996. The FY2003 appropriations provided $1.5 million to minimumprogram states and the FY2004 law proposed no change. In general, several states have been pressing in recent years for increases in the AML appropriations. The unappropriated balance of AML collections in the fundis expected to approach $1.75 billion by the end of FY2004. For further information on the Office of Surface Mining Reclamation and Enforcement , see its website at http://www.osmre.gov/osm.htm . Bureau of Indian Affairs The Bureau of Indian Affairs (BIA) provides a variety of services to federally- recognized American Indian and Alaska Native tribes and their members, andhistorically has been the lead agency in federal dealings with tribes. Programsprovided or funded through the BIA include government operations, courts, lawenforcement, fire protection, social programs, education, roads, economicdevelopment, employment assistance, housing repair, dams, Indian rights protection,implementation of land and water settlements, management of trust assets (real estateand natural resources), and partial gaming oversight. BIA's FY2003 direct appropriations were $2.26 billion. For FY2004, the House approved $2.31 billion, an increase of $52.1 million over FY2003 and $16.6 millionover the Administration's request. The Senate approved $2.32 billion, which was$63.2 million over FY2003 and $27.7 million more than the request. The FY2004law contained $2.30 billion for BIA, $43.6 million more than FY2003 and $8.1million over the request. Table 11 below presents figures for FY2003 and FY2004for the BIA and its major budget components; selected BIA programs are shown initalics. Key issues for the BIA, discussed below, include the reorganization of theBureau, especially its trust asset management functions, and problems in the BIAschool system. Table 11. Appropriations for the Bureau of Indian Affairs, FY2003-FY2004 ($ in thousands) BIA Reorganization. In April 2003, Secretary of the Interior Norton initiated a reorganization of the BIA, the officeof Assistant Secretary -- Indian Affairs (AS-IA), and the Office of Special Trusteefor American Indians (OST) in the Office of the Interior Secretary (see "Office ofSpecial Trustee" section below). The reorganization, announced in December 2002,arises from issues and events related to trust funds and trust assets management, andis integrally related to the reform and improvement of trust management. Historically, the BIA has been responsible for managing Indian tribes' and individuals' trust funds and trust assets. Trust assets include trust lands and thelands' surface and subsurface economic resources (e.g., timber, grazing lands, orminerals), and cover about 45 million acres of tribal trust land and 10 million acresof individual Indian trust land. Trust assets management includes real estate services,processing of transactions (e.g., sales and leases), surveys, appraisals, probatefunctions, land title records activities, and other functions. The BIA had, however,historically mismanaged Indian trust funds and trust assets, especially in the areas ofaccounting and retention of records. This led to a trust reform act in 1994 and anextensive court case in 1996 (see "Office of Special Trustee" section below). The1994 act created the OST, assigning it responsibility for oversight of trustmanagement reform. Trust fund management was transferred to the OST from theBIA in 1996, but the BIA still manages trust assets. Unsuccessful efforts at trust management reform in the 1990s led DOI to contract with a management-consultant firm. The firm's recommendations includedboth improvements in trust management and reorganization of the DOI agenciescarrying out trust management and improvement. Events in the court case helpedpush DOI to act on these recommendations. The current reorganization of BIA, AS-IA, and OST chiefly involves trust management structures and functions. Under the plan, the BIA's trust operations atregional and agency levels are being split off from other BIA services. The OST willhave trust officers at BIA regional and agency offices overseeing trust managementand providing information to Indian trust beneficiaries. The BIA, OST, and AS-IA, together with the Office of Historical Trust Accounting in the Secretary's office, are also implementing a trust managementimprovement project, announced in March 2003, which includes improvements intrust asset systems, policies, and procedures, historical accounting for trust accounts,reduction of backlogs, and maintenance of the improved system. Many Indian tribes and tribal organizations, and the plaintiffs in the court case, have been critical of the new reorganization. While DOI carried out numerousconsultation meetings with tribes through much of 2002, they did not reachagreement before DOI announced the reorganization. Tribes argue that thereorganization is premature, because new trust procedures and policies are still beingdeveloped, and that it insufficiently defines new OST duties. Congress has thus far supported the BIA/OST reorganization. The House Appropriations Committee's report for FY2004 urged DOI to implement thereorganization as quickly as possible, and the Senate defeated a proposed amendmentto stop BIA/OST reorganization (by transferring $79.3 million from OST to theIndian Health Service). The Senate did add a provision to the FY2004 appropriationsbill excluding from reorganization certain tribes that have been operating trustmanagement reform pilot projects with their regional BIA offices. The FY2004 lawretained this Senate provision. BIA School System. The BIA funds 185 elementary and secondary schools and peripheral dormitories, with over2,000 structures, educating about 48,000 students in 23 states. Tribes and tribalorganizations, under self-determination contracts and other grants, operate 120 ofthese institutions; the BIA operates the remainder. BIA-funded schools' keyproblems are low student achievement and, especially, a high level of inadequateschool facilities. Some observers feel tribal operation of schools will improve student achievement. The Bush Administration suggested language in the FY2003 Interiorappropriations bill encouraging privatization, but the Appropriations Committeesdisagreed and urged additional funding and consultation with tribes. In the FY2004bill, the House and Senate approved a provision creating a $3 million fund to paytribal school boards' start-up administrative costs to encourage tribal boards to takeover operation of current BIA-operated schools. The FY2004 law retained thisprovision. Many BIA school facilities are old and dilapidated, with health and safety deficiencies. BIA education construction covers both construction of new schoolfacilities to replace facilities that cannot be repaired, and improvement and repair ofexisting facilities. Schools are replaced or repaired according to priority lists. TheBIA estimates the current backlog in education facility repairs at $942 million, butthis figures changes as new repair needs appear each year. Table 11 above showsFY2003 and FY2004 education construction appropriations. Because constructionappropriations are not reducing the need fast enough, Indian tribes have urgedCongress to explore additional sources of construction financing. In the FY2001-FY2004 Interior appropriations acts, Congress has authorized a demonstration program that allows tribes to help fund construction of BIA-funded,tribally-controlled schools. The FY2004 Act added provisions allowingnon-BIA-funded schools to participate in the demonstration project, although firstpriority for grants would be assigned to BIA-funded schools and only grantees' thatwere already BIA-funded would be eligible for BIA school-operations funding. TheFY2004 law also enacts a controversial land exchange between the Eastern CherokeeTribe of North Carolina and the Great Smoky Mountains National Park, to allow thetribe to build several replacement schools. For further information on education programs of the Bureau of Indian Affairs , see its website at http://www.oiep.bia.edu . The main BIA website at http://www.doi.gov/bureau-indian-affairs.html is offline because of a court orderin the trust funds litigation (see "Office of Special Trustee" section below). CRS Report RS21670. Major Indian Issues in the 108th Congress , by [author name scrubbed]. CRS Report 97-851(pdf) . Federal Indian Law: Background and Current Issues , by [author name scrubbed]. Departmental Offices National Indian Gaming Commission. The National Indian Gaming Commission (NIGC)was established by the Indian Gaming Regulatory Act (IGRA) of 1988 ( P.L. 100-497 ,as amended) to oversee Indian tribal regulation of tribal bingo and other "Class II"operations, as well as aspects of "Class III" gaming (e.g., casinos and racing). Thechief issue for NIGC is whether its funding is adequate for its regulatoryresponsibilities. The NIGC is authorized to receive annual appropriations of $2 million, but its budget authority consists chiefly of annual fees assessed on tribes' Class II and IIIoperations. IGRA currently caps NIGC fees at $8 million per year. The NIGC inrecent years has requested additional funding because it has experienced increaseddemand for its oversight resources, especially audits and field investigations. Congress, in the FY2003 appropriations act, increased the NIGC's fee ceiling to $12million, but only for FY2004. In the FY2004 budget, the Administration proposedlanguage amending IGRA to create an adjustable, formula-based ceiling for feesinstead of the current fixed ceiling. The Administration argued that a formula-basedfee ceiling would allow NIGC funding to grow as the Indian gaming industry grew.Gaming tribes did not support the increased fee ceiling or the proposed amendmentof IGRA's fee ceiling, arguing that NIGC's budget should first be reviewed in thecontext of extensive tribal and state expenditures on regulation of Indian gaming, andthat changes in NIGC's fees should be developed in consultation with tribes. TheFY2004 act did not include the Administration's proposed language, but did extendthe temporary $12-million fee ceiling through FY2005. During FY1999-FY2003, all NIGC activities were funded from fees, with no direct appropriations. For FY2004, the Administration, House, Senate, and enactedbill provided no direct appropriations for the NIGC. The FY2004 conference report expressed concern about several existing tribes who are trying to establish gaming operations in states or areas where they haveeither no reservations or no traditional connection. It directed the NIGC and theInterior Department to implement fully existing statutes and regulations coveringsuch situations. Office of Special Trustee for American Indians. The Office of Special Trustee for American Indians, in theSecretary of the Interior's office, was authorized by Title III of the American IndianTrust Fund Management Reform Act of 1994 ( P.L. 103-412 ). The Office of SpecialTrustee (OST) generally oversees the reform of Interior Department management ofIndian trust assets, the direct management of Indian trust funds, establishment of anadequate trust fund management system, and support of departmentclaims-settlement activities related to the trust funds. Indian trust funds formerlywere managed by the BIA, but in 1996, at Congress' direction and as authorized by P.L. 103-412 , the Secretary of the Interior transferred trust fund management fromthe BIA to the OST. (See "Bureau of Indian Affairs" section above.) Indian trust funds managed by the OST comprise two sets of funds: (1) tribal funds owned by about 290 tribes in approximately 1,400 accounts, with a total assetvalue of about $2.8 billion; and (2) individual Indians' funds, known as IndividualIndian Money (IIM) accounts, in about 230,000 accounts with a current total assetvalue of about $400 million. (Figures are from the OST FY2004 budgetjustifications.) The funds include monies received both from claims awards, land orwater rights settlements, and other one-time payments, and from income fromnon-monetary trust assets (e.g., land, timber, minerals), as well as investment income. FY2003 funding for the OST was $148.3 million, which included $140.4 million for federal trust programs -- trust funds management, trust systemsimprovements, settlement and litigation support, and historical trust accounting -- and $7.9 million for the Indian land consolidation pilot project. The purpose of theland consolidation project is to purchase and consolidate fractionated ownerships ofallotted Indian trust lands, thereby reducing the costs of managing tens of thousandsof IIM accounts representing tiny fractional interests. For FY2004, theAdministration proposed transferring the land consolidation project from OST toBIA, but neither the House, Senate, nor enacted bill included this transfer. The House approved a FY2004 funding level of $240.6 million for the OST, an increase of $92.3 million (62%) over FY2003 but $55.0 million (-19%) less than theAdministration proposal. Included in the House FY2004 bill were $219.6 million forfederal trust programs (up $79.3 million, or 56%, over FY2003 but $55.0 million, or 20%, less than the Administration proposal) and $21.0 million for the Indian landconsolidation pilot project (up $13.0 million, or 163%, over FY2003 and the sameas the Administration's proposal). The Senate approved $242.6 million for the OST;the amount approved for federal trust programs was identical to that approved by theHouse, but the Senate approved $2.0 million more for the land consolidation projectthan did the House. The Senate Appropriations Committee report urged the DOI todirect land consolidation funds to reservations that already try to reduce landfractionation. The FY2004 law provided $209.0 million for the OST, $60.7 million (41%) over FY2003 but $86.6 million (-29%) less than the request. Included were $187.3million for federal trust programs and $21.7 million for land consolidation. Table12 below presents figures for FY2003 and FY2004 for the OST; the HistoricalAccounting program is shown in italics. Key issues for the OST are its current reorganization, an historical accounting for tribal and IIM accounts, and litigation involving tribal and IIM accounts. Table 12. Appropriations for the Office of Special Trustee for American Indians, FY2003-FY2004 ($ inthousands) Reorganization. Both OST and BIA have recently begun a reorganization (see "Bureau of Indian Affairs" section above),one aspect of which is the creation of OST field operations. OST will have fiduciarytrust officers and administrators at the level of BIA agency and regional offices. Many Indian tribes disagree with parts of the reorganization and have asked Congressto put it on hold so that OST and BIA can conduct further consultation with thetribes. About $15.1 million of the proposed FY2004 increase was to fund the newfield operations. The House, Senate, and enacted bill approved the proposed amountfor reorganization. The House Appropriations Committee report encouraged theInterior Department to implement the reorganization. The Senate did not explicitlyendorse or oppose the OST/BIA reorganization, but defeated a proposed amendmentto stop reorganization by transferring $79.3 million from OST to the Indian HealthService. Historical Accounting. The historical accounting seeks to assign correct balances to all tribal and IIM accounts, especiallybecause of litigation. Because of the long historical period to be covered (someaccounts may date from the 19th century), the large number of IIM accounts, and thelarge number of missing account documents, an historical accounting based on actualaccount transactions is expected to require large and time-consuming projects. TheInterior Department has proposed an extensive, five-year, $335-million project toreconcile IIM accounts. Most of the appropriations increase that the Administrationproposed for the OST for FY2004 was for historical accounting, which would havegone from $17.5 million in FY2003 to $130 million in FY2004. Of this $112.5million increase for historical accounting, $82.5 million would have been for IIMaccounts and $30 million for tribal accounts. The House and Senate reduced totalhistorical accounting funds to $75 million, or $55 million less than theAdministration proposal. The conference report, as enacted, reduced historicalaccounting funds even further, to $44.4 million, to be used only for necessary,short-term historical accounting activities. This reduction was in tandem with acontroversial provision discussed under "Litigation" below. Litigation. An IIM trust funds class-action lawsuit ( Cobell v. Norton ) was filed in 1996, in the federal district courtfor the District of Columbia, against the federal government by IIM account holders. (4) Many OST activities are related to the Cobell case, including litigation-supportactivities, but the most significant issue for appropriations concerns the method bywhich the historical accounting will be conducted to estimate IIM accounts' properbalances. The DOI's proposed method was estimated by the Department to cost $335million over five years and produce a relatively low total owed to IIM accounts; theplaintiffs' method, whose procedural cost is uncertain, was estimated to produce afigure of $176 billion owed to IIM accounts. In 2003 the court conducted a lengthy trial to decide which historical accounting method to use in estimating the IIM accounts' proper balances. Previously, in thefirst phase of the Cobell case, in 1999 the court had found that DOI and the TreasuryDepartment had breached trust duties regarding the necessary document retention anddata gathering needed for an accounting, and regarding the business systems andstaffing to fix trust management. The lawsuit's final phase will determine theamount of money owed to the plaintiffs, based on the historical accounting methodchosen. Congress has for several years been concerned about the current and potential costs of the Cobell lawsuit, although it has defeated appropriations language directingsettlement of the case. The Appropriations Committees have expressed concern thatthe IIM lawsuit was jeopardizing DOI trust reform implementation and have requiredreports from DOI on the costs and benefits of historical accounting methods,including statistical sampling. Congress also, in the FY2003 Interior appropriationsact, required a summary for Congress of a full historical accounting performed forfive of the plaintiffs, capped the compensation of two court-appointed officialsmonitoring trust reform, and authorized the Interior Secretary to help employees payfor legal costs related to the IIM suit. The summary of the historical accounting for the five plaintiffs, which was based on a methodology closer to that proposed by DOI, was transmitted to Congressin 2003. According to the House Committee, it indicated a very low error rate in theaccounts' transactions. In its initial reduction of the amount for FY2004 historicalaccounting, the Senate Appropriations Committee noted that the funding should beadequate for a statistical sampling model (part of DOI's proposed methodology) andthat the reduction was not an endorsement of the plaintiffs' accounting model. ForFY2004, Congress retained the provisions capping the court officials' compensationand assisting federal employees in paying legal bills related to the IIM litigation. The court's decision on historical accounting was delivered on September 25, 2003. The court rejected both the plaintiffs' and DOI's proposed historicalaccounting plans and instead ordered DOI to account for all trust fund and assettransactions since 1887, without using statistical sampling. The Interior Departmentestimated that the court's choice for historical accounting would cost $6-12 billion. The FY2004 Interior appropriations conference report added a controversial new provision aimed at the court's September 25 decision. The provision directed thatno statute or trust law principle should be construed to require the InteriorDepartment to conduct the historical accounting until either Congress has delineatedthe department's specific historical accounting obligations or December 31, 2004,whichever is earlier. The conferees asserted in the conference committee report thatthe court-ordered historical accounting is too expensive, beyond the intent of the1994 Act, and likely to be appealed, and that Congress needs time to resolve thehistorical accounting question or settle the suit. Opponents in the House and Senateargued that the provision is of doubtful constitutionality, since it directs courts'interpretation of law and effectively suspends a court order in an ongoing case, andfurther is unjust to the plaintiffs and might undermine the Interior Department'sincentives to negotiate a settlement. The FY2004 conference report with this provision passed both the Senate and, narrowly, the House, and was enacted on November 10, 2003. Based on thisprovision, the DOI on the same day appealed the court's September 25 order. OnNovember 12, 2003, the U.S. Court of Appeals for the District of Columbiatemporarily stayed the September 25 order. For further information on the Office of Special Trustee for American Indians , see its website at http://www.ost.doi.gov/ . CRS Report RS21670. Major Indian Issues in the 108th Congress , by [author name scrubbed]. Insular Affairs. The Office of Insular Affairs (OIA) provides financial assistance to the U.S. territories (Guam,American Samoa, the U.S. Virgin Islands, and the Commonwealth of the NorthernMariana Islands) as well as three former insular areas (Republic of the MarshallIslands (RMI), Federated States of Micronesia (FSM), and Palau), manages relationsbetween these jurisdictions and the federal government, and attempts to build thefiscal and government capacity of units of local government. Funding for the OIAconsists of two parts: (1) permanent and indefinite appropriations and (2)discretionary and current mandatory funding subject to the appropriations process. OIA funding for FY2004 is set at $366 million. This constitutes a reduction of 5% from the President's request ($387 million) and roughly 5% more than theamount approved for FY2003 ($350 million). Permanent and indefinite appropriations historically constitute roughly 70% to 80% of the OIA budget and consist of two parts. For FY2004 they total $284million, as follows: $162 million to three freely associated states (RMI, FSM, and Palau) formerly included in the Trust Territory of the Pacific Islands under conditionsset forth in the respective Compacts of Free Association; (5) and, $122 million in fiscal assistance to the U.S. Virgin Islands for estimated rum excise and income tax collections, and to Guam for income taxcollections. Discretionary and current mandatory funds that require annual appropriations constitute the remaining balance (roughly 20% to 30%) of the OIA budget. Twoaccounts -- Assistance to Territories (AT) and the Compact of Free Association(CFA) -- comprise discretionary and current mandatory funding. As enacted,discretionary funding for FY2004 was set at $82.1 million, with AT funded at $75.7million and CFA at $6.4 million. This constituted a 15% decrease from the amountappropriated for such payments in FY2003 ($96.8 million). The FY2004 requestwould have reduced AT funding to $71.3 million and CFA assistance to $16.1million, for a total of $87.5 million. Little debate has occurred in recent years on funding for the territories and the OIA. In general, Congress continues to monitor economic development and fiscalmanagement by government officials in the insular areas. For further information on Insular Affairs, see its website at http://www.doi.gov/oia/index.html . Title II: Related Agencies and Programs Department of Agriculture: Forest Service The FY2004 law contained a Forest Service (FS) budget of $4.54 billion,including $348.9 million in FS emergency funding. The total is $120.8 million (3%)more than the Senate-passed budget of $4.42 billion (including $325.0 millionemergency borrowing repayment); $362.8 million (9%) more than the House-passedbudget of $4.18 billion, and $180.9 million (4%) more than requested by theAdministration (including a $301.0 million emergency borrowing repayment). A significant amendment to FS management was debated on the Senate floor. The Senate-reported bill modified procedures for seeking judicial review of timbersales in FS Region 10 (Alaska, primarily the Tongass National Forest). A Senateamendment to strike the language was defeated. The section shortens timeframes forfiling suits related to these timber sales. The FY2004 law retained this provision. Two significant amendments to FS management were defeated on the House floor. The Udall (of New Mexico) amendment would have prohibited funding tofinalize or implement the National Forest System planning regulations proposed onDecember 6, 2002, by the Bush Administration. An Inslee amendment would haveprohibited funding to propose, finalize, or implement changes to the Protection ofRoadless Areas rule finalized on January 12, 2001, by the Clinton Administration. Forest Fires and Forest Health. Fire funding and fire protection programs were among the most controversial issuesconfronted during consideration of the FY2003 Interior appropriations bill. In fact, inthe 2nd Session of the 107th Congress, the Senate did not pass an Interior appropriationsbill largely due to disputes about fire funding and a new program for wildfireprotection. The ongoing discussion, including during consideration of the FY2004Interior appropriations bill, includes questions about funding levels and locations forvarious fire protection treatments, such as thinning and prescribed burning to reducefuel loads and clearing around structures to protect them during fires. Another focusis whether, and to what extent, environmental analysis, public involvement, andchallenges to decisions hinder fuel reduction activities. National Fire Plan. The FY2004 funding debate continued the increased attention in recent years to wildfires and thedamage they cause. The severe fire seasons in the summers of 2000 and 2002prompted substantial debates and proposals related to fire control and fire protection. The 2000 fire season led the Clinton Administration to propose a new program, calledthe National Fire Plan, which applied to BLM lands as well as to Forest Service lands,with $1.8 billion to supplement the $1.1 billion requested before the fire season began. The National Fire Plan comprises the Forest Service wildland fire program and firefighting on DOI lands; the DOI wildland fire monies are appropriated to the BLM. Congress enacted much of the proposal for FY2001, adding money to the FY2001request for wildfire operations, fuel reduction, burned area restoration, firepreparedness, and programs to assist local communities. Total appropriations for theFY2001 National Fire Plan, covering BLM and FS fire funds, were $2.86 billion. Thehigher wildfire funding level has generally been continued. (For historical backgroundand descriptions of funded activities, see CRS Report RS21544, Wildfire ProtectionFunding , by [author name scrubbed].) FY2004 Appropriations. The FY2004 law contained National Fire Plan funding (for the FS and BLM) of $2.76 billion,including emergency borrowing repayment. This is $138.5 million more than theSenate-passed level, $456.9 million more than the House-passed level, and $139.8million more than the amount requested. The Senate had included emergencyborrowing repayment authority of $400.0 million ($325.0 million for the FS and $75.0million for the BLM) in title IV of the bill. The President subsequently asked for a$400.0 million emergency appropriation to repay borrowed monies for fire fighting,split $99.0 million for BLM and $301.0 million for the FS. The FY2004 law containedthe same total for emergency contingency funding ($400.0 million), but with anacross-the-board cut, for $299.2 million for the FS and $98.4 million for the BLM. Inaddition, the FY2004 Consolidated Appropriations Act ( P.L. 108-199 ) included $49.7million in FS emergency funding for fuel reduction and state fire assistance. See Table13 below. Table 13. Federal Wildland Fire Management Appropriations, FY2000-FY2004 ($ in millions) Notes: a Emergency supplemental and contingent appropriations are included inagency totals. b Includes supplemental of $636.0 million for the FS and $189.0 million for the BLM($825.0 million total) in P.L. 108-7 and of $283.0 million for the FS and $36.0 millionfor the BLM ($319.0 million total) in P.L.108-83 . c Includes supplemental of $49.7 million for the FS in P.L. 108-199 in the WildlandFire Management and State and Private forestry line items. The FS and BLM wildland fire line items include funds for fire suppression (fighting fires), preparedness (equipment, training, baseline personnel, prevention, anddetection), and other operations (rehabilitation, fuel treatment, research, and state andprivate assistance). The FY2004 budget request as well as the House, Senate, andenacted levels for suppression were significantly higher than the enacted FY2003appropriations, but they included significantly less emergency wildfire funds. See Table 13 above. The FY2004 law reduced BLM wildfire funding (including emergency borrowing repayment) to $783.6 million, $14.1 million (2%) below the request, $84.9 million(12%) above the House-passed level, and $9.9 million (1%) above the Senate-passedlevel. Much of the difference is the result of varying levels of emergency funding. TheFY2004 law nearly matched the requested and Senate-passed levels for BLM firesuppression and other fire operations, reducing the amounts by $2.4 million and $2.7million, respectively. It reduced the amount for fire preparedness by $8.4 million (3%),to $274.3 million. The House had shifted $25.0 million from fire suppression to firepreparedness ($20.0 million) and other fire operations ($5.0 million). The FY2004 law provided FS wildfire funding of $2.00 billion, including $348.9 million in emergency funding. This is $128.6 million (7%) more than theSenate-passed level, $372.1 million (23%) more than the House-passed level, and$153.9 million (8%) more than the request. Much of the difference from the requestand House level is emergency funding. The FY2004 law increased FS fire suppressionnearly to the requested level, substantially above the House and Senate levels. Itreduced FS fire preparedness from the House and Senate levels, but the level is $61.9million (10%) above the request. For other FS fire operations, the FY2004 lawprovided $354.2 million, $25.5 million (8%) more than the Senate-passed level and$52.4 million (13%) less than the House-passed level. In the House Appropriations Committee, an amendment was offered to add $550 million for FY2003 fire suppression, as the fire season was again expected to be severe,and not all FY2002 borrowed funds had been repaid even with the $825.0 million insupplemental firefighting funds enacted in P.L. 108-7 , the FY2003 omnibusappropriations act. The amendment was withdrawn on promises that the fundingshortfall would be made up later. On July 7, 2003, the Administration requestedemergency supplemental funding of $289.0 million for FY2003 FS and BLMfirefighting efforts. On July 11, the Senate passed a bill ( H.R. 2657 ,Legislative Branch Appropriations) containing the supplemental funding, with anamendment adding another $25.0 million to remove dead trees in forests devastated byinsects that could exacerbate wildfire threats. The FY2004 legislative branchappropriations conference report, containing $319.0 million in supplemental FY2003firefighting funds for the FS and BLM ($30.0 million more than requested), wasenacted as P.L.108-83 , and these funds are included in Table 13 above. This is inaddition to the $397.6 million of emergency borrowing repayment included in theFY2004 Interior appropriations law, and the $49.7 million (split equally between statefire assistance and hazardous fuel reduction) in P.L. 108-199 . State and Private Forestry. While funding for wildfires has been the center of debate, many changes have been proposedin State and Private Forestry (S&PF) -- programs that provide financial and technicalassistance to states and to private forest owners. For FY2004, Congress provided$329.2 million of total S&PF funding. This is $33.8 million (11%) more than theSenate, $38.4 million (13%) more than the House, and $13.4 million (4%) more thanrequested. Of the total, the conference agreement directed that $64.5 million comefrom the Land and Water Conservation Fund; this is $20.2 million less from the Landand Water Conservation Fund (LWCF) than had been directed by the Senate, while theHouse had provided no direction on S&PF spending from LWCF. Levels differ significantly within S&PF funding. For forest health management (insect and disease control on federal and cooperative (nonfederal) lands), the FY2004law contained $98.6 million, $16.5 million (20%) more than the Senate and the request,and $4.4 million (4%) less than the House-passed level of $103.0 million. The House,Senate, and enacted bills rejected the request for a new $12.0 million Emerging Pestand Pathogens Fund to rapidly address invasive species problems, but the Senate andthe FY2004 law allowed $2.0 million to be used for emerging problems. In addition,the FY2004 law provided $24.7 million for forest health management in other wildfireoperations appropriations, more than double the Senate-passed and requested level of$11.9 million, and nearly matching the House-passed level of $25.0 million. For FY2004, Congress provided $63.3 million for S&PF cooperative fire assistance to states and to volunteer fire departments, including $24.9 million inemergency supplemental funding in P.L. 108-199 . The total is $32.7 million (107%)above the Senate, $22.2 million (54%) more than the House, and $32.8 million (108%)above the request. In addition, the FY2004 Interior act included $59.2 million incooperative fire assistance in other wildfire operations appropriations, $3.2 million(6%) more than the Senate, $0.1 million (0.2%) less than the House, and $4.5 million(8%) more than the Administration requested. The FY2004 law contained $161.4 million for cooperative forestry programs, $15.3 million (9%) less than the Senate, $20.8 million (15%) more than the House, and$36.9 million (19%) less than the request. Major differences pertain to the forestlegacy and economic action programs. For the forest legacy program (for purchasingtitle or easements for lands threatened with conversion to nonforest uses, such as forresidences), the FY2004 law appropriated $64.1 million, $20.6 million (24%) less thanthe Senate level of $84.7 million; $18.6 million (41%) more than the House level of$45.6 million; and $26.7 million (29%) less than the Administration's request of $90.8million. The law also retained the S&PF Economic Action Program (EAP, includingrural community assistance and wood recycling, and the Pacific Northwest economicassistance) at $25.6 million, $1.6 million (7%) more than the Senate and $8.2 million(47%) more than the House-passed level. The Administration had proposedterminating the EAP. The law did not include any EAP funding in other wildfireoperations appropriations; the House had included $6.0 million in other wildfireoperations appropriations for the EAP, whereas the Senate included $5.0 million inother wildfire operations funding to implement the Community Forest Restoration Act(title VI of P.L. 106-393 ). Infrastructure. The FY2004 law retained separate funding for Infrastructure Improvement (to reduce the agency'sbacklog of deferred maintenance, estimated at $6.5 billion as of October 2002) at $31.6million. The Senate had passed $25.0 million, while the House had passed $47.0million. The Administration had proposed terminating this funding and replacing itwith increased capital improvement and maintenance funds for roads and trails of$23.1 million (8%) from FY2003. Land Acquisition. The FY2004 law appropriated $66.4 million for Land Acquisition, $10.1 million (13%) less than theSenate level of $76.4 million, $37.1 million (127%) more than the House level of $29.3million, and $22.2 million (50%) more than the $44.1 million requested. Most of thedifference is in land purchases (rather than in acquisition management), with the lawproviding $51.3 million for purchases compared to $60.1 million passed by the Senate,$14.4 million passed by the House, and $27.8 million requested for land purchases. The FY2003 appropriation for land acquisition was $132.9 million, with $118.0million for land purchases. Other Accounts. The FY2004 law provided $266.4 million for FS Research, $0.2 million more than the Senate, $0.8million less than the House, and $14.2 million (6%) more than the Administration'srequest. It also included $1.37 billion for the National Forest System (NFS), $4.9million (0.3%) less than the Senate, $28.9 million (2%) less than the House, and $3.7million (0.3%) less than the request. As requested, and as passed by the House and theSenate, the law included an FS administrative provision allowing the agency to transferup to $15 million to Interior (for the FWS) or Commerce (for NOAA Fisheries) toexpedite consultations under the Endangered Species Act. For information on the Department of Agriculture, see its website at http://www.usda.gov/ . For further information on the U.S. Forest Service , see its website at http://www.fs.fed.us/ . CRS Report RL30755 . Forest Fire/Wildfire Protection , by [author name scrubbed]. CRS Report RL30647 . The National Forest System Roadless Areas Initiative, by [author name scrubbed]. CRS Issue Brief IB10076. Public (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. CRS Report RS21544. Wildfire Protection Funding , by [author name scrubbed]. CRS Issue Brief IB10124. Wildfire Protection Legislation in the 108th Congress , by[author name scrubbed] Department of Energy Fossil Energy Research, Development, and Demonstration. The FY2004 law funded fossil fuel research anddevelopment programs at $672.8 million, about 30% more than the President's request,10% higher than the House-passed level, and 13% higher than the Senate figure. Themajor differences in funding levels include the $169.9 million for the Clean CoalPower Initiative, ($39.9 million over the Administration's request and House- andSenate-passed funding level of $130.0 million) and the $8.9 million allocated for theFutureGen R&D project of the Department of Energy (DOE). The FutureGen projectis a 10-year, $1 billion Bush Administration initiative designed to establish thefeasibility of producing electricity and hydrogen from a coal-fired plant yielding noemissions. The FY2004 law also deferred spending $97.0 million (as in the Senateversion) from the previously appropriated Clean Coal Technology (CCT) account butrescinded an additional $88.0 million from CCT not contained in the Administration'srequest or in the House or Senate versions of the bill. The FY2004 law providedincreases to the Administration's request and the Senate- and House-passed bills inFuels and Power Systems, Natural Gas, and Petroleum Technology. The lawestablished a separate account of $988,000 for the U.S./China Energy andEnvironmental Center, previously funded out of the Clean Coal Technology account. The Bush Administration's FY2004 budget request of $514.3 million for fossil energy research and development was less than the appropriated amount for FY2003($620.8 million) and higher than the FY2003 request ($489.3 million). The Houseapproved fossil fuel programs at $609.3 million. The Senate approved a total of $593.5million for fossil energy. A key difference between the House and Senate versions wasthat the House-passed bill provided funds for the administration of the clean coalprogram as did the FY2004 law. The Administration requested $130.0 million for the Clean Coal Power Initiative (CCPI) for FY2004 as part of a $2 billion, 10-year commitment. The program isdesigned for "funding advanced research and development and a limited number ofjoint government-industry-funded demonstrations of new technologies that can enhancethe reliability and environmental performance of coal-fired power generators,"according to DOE. The CCPI is along the lines of the Clean Coal Technology Program(CCTP), which has completed most of its projects and has been subject to rescissionsand deferrals since the mid-1990s. The CCTP eventually will be phased out. In theSenate-passed bill, up to $9.0 million of previously appropriated CCTP would havebeen used for research supporting the FutureGen project and the production ofelectricity and hydrogen from coal. The conferees supported funding this projectseparately at $8.9 million under the Fossil Energy R&D account, and that level wasenacted. The Administration's proposal would have cut research and development (R&D) on natural gas by 44% to $26.5 million, and R&D on petroleum by two-thirds to $15.0million. The FY2004 law supported natural gas funding at $43.0 million andpetroleum technology programs at $35.1 million. In a statement in the House Committee's report, the Committee disagreed with the Administration's approach to fossil energy R&D for FY2004. The Committeeconsidered the Administrations approach unbalanced, with too heavy a focus on a fewmajor initiatives and not enough emphasis on long-term R&D on traditional sourcesof energy, particularly oil and natural gas technologies ( H.Rept. 108-195 , p. 12-13.). The Administration's request would have phased out funding for the fuels program, including R&D on ultra-clean fuels technology, reducing the funding to $5.0million for FY2004 from $31.2 million in FY2003. However, the House supported$30.6 million for the Fuels Program in FY2004 while the Senate supported $24.9million. The FY2004 law provided $31.2 million. Funding levels for Sequestration R&D, which would test new and advanced methods for greenhouse gas capture, separation, and reuse, would have increased underthe FY2004 Administration's request by $22.1 million to $62.0 million. However, theHouse approved essentially flat funding for FY2004 -- $40.8 million -- as comparedwith $39.9 million for FY2003, as did the Senate -- $39.8 million. The FY2004 lawfunded the program at $40.3 million. For further information on the Department of Energy (DOE), see its website at http://www.energy.gov/engine/content.do?BT_CODE=DOEHOME . For further information on Fossil Energy, see its website at http://www.fe.doe.gov/ . Strategic Petroleum Reserve. The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and ConservationAct ( P.L. 94-163 ) in late 1975, consists of caverns formed out of naturally occurringsalt domes in Louisiana and Texas in which more than 600 million barrels of crude oilare stored. The purpose of the SPR is to provide an emergency source of crude oilwhich may be tapped in the event of a presidential finding that an interruption in oilsupply, or an interruption threatening adverse economic effects, warrants a drawdownfrom the Reserve. Volatility in oil prices since the spring of 1999 prompted calls fromtime-to-time for drawdown of the Reserve, but both the Clinton and BushAdministrations did not think circumstances warranted it. In mid-November 2001, President Bush ordered that the SPR be filled to capacity (700 million barrels) using royalty-in-kind (RIK) oil. This is oil turned over to thefederal government as payment for production from federal leases. Acquiring oil forthe SPR by RIK avoids the necessity for Congress to make outlays to finance directpurchase of oil; however, it also means a loss of revenues to the Treasury in so far asthe royalties are paid in wet barrels rather than in cash. Deliveries of RIK oil began inthe spring of 2002. The fill rate has varied depending upon geopolitical and marketconditions. Deliveries scheduled for late 2002 and the first months of 2003 weredelayed due to tightness in world oil markets. With the end of the military phase of thewar with Iraq, deliveries of RIK oil to the SPR ramped up during the spring andexceeded 200,000 barrels per day during the summer. The Administration is currentlyfilling the SPR at a rate of about 100,000 barrels per day. The costs of transportingRIK oil to SPR sites are now borne by the contractors, so no new money wasrecommended for the SPR Petroleum Account for FY2004. The FY2004 budget request for the SPR, $180.1 million, was approved by the House on July 17, 2003. The SPR budget included $159.0 million for storage facilitiesdevelopment and operations, $16.1 million for management of the SPR sites, and $5.0million for the Northeast Home Heating Oil Reserve (NHOR). The full Senateprovided $178.1 million, a decrease of $2.0 million from the request, with storagefacilities development and operations bearing the entire reduction. The FY2004 lawprovided $175.9 million, including $155.0 million for storage facilities developmentand operations. It also included $15.9 million for management of the SPR sites, and$4.9 million for the NHOR. The FY2004 law did not include Senate language that would have required the Energy Department to develop procedures to assure that the SPR is filled consistentwith the objective of minimizing acquisition costs -- including revenue foregone whenthe oil is acquired under the RIK program -- and consistent with maximizing domesticsupply. The language, agreed to on the floor, stemmed from a study that suggested thatthe Administration's acquisition schedule diverted oil from markets at inopportunetimes, exacerbating crude price increases. (6) The NHOR, established by the Clinton Administration, houses 2 million barrels of home heating oil in above-ground facilities in Connecticut, New Jersey, and RhodeIsland. Savings in the cost of leasing these facilities has reduced the cost ofmaintaining the NHOR. The House, Senate, and FY2004 law contained $5.0 million,adjusted to $4.9 million. The FY2004 law did not include Senate language that wouldhave required the Secretary of Energy to deliver a report to Congress by December 1,2003, that would have set out assumptions and specify scenarios for use of the NHORand make recommendations for alternative formulae to authorize a drawdown. TheHouse Appropriations Committee had made a comparable recommendation. Theprovision reflected that some in Congress were not satisfied with the formula currentlyin place that permits drawdown of the NHOR. The FY2003 appropriation provided a total of $179.6 million for the SPR. This consisted of $157.8 million for storage facilities development and operations; $13.9million for management; $1.9 million in new money for the SPR Petroleum Account,reflecting a level of $7.0 million for transportation of RIK oil, less a $5.0 millionrescission of unobligated prior-year funds; and $6.0 million for the Northeast HomeHeating Oil Reserve. The FY2003 law also reauthorized the SPR through FY2008. Conference report language on comprehensive energy legislation ( H.R. 6 ) would require that the SPR be filled to its current capacity ofroughly 700 million barrels as soon as practicable, and would authorize $1.5 billion forexpansion of the SPR to 1 billion barrels. H.R. 6 also would permanentlyauthorize the Reserve. The conference report passed the House but became stalled inthe Senate in November 2003. The outcome for comprehensive energy legislation isunclear. For further information on the Strategic Petroleum Reserve , see its website at http://fossil.energy.gov/programs/reserves/spr/ . CRS Issue Brief IB87050, The Strategic Petroleum Reserve , by [author name scrubbed]. Naval Petroleum Reserves. The National Defense Authorization Act for FY1996 ( P.L. 104-106 ) authorized sale of thefederal interest in the oil field at Elk Hills, CA (NPR-1). On February 5, 1998,Occidental Petroleum Corporation took title to the site and wired $3.65 billion to theU.S. Treasury. P.L. 104-106 also transferred most of two Naval Oil Shale Reserves(NOSR) to DOI; the balance of the second was transferred to DOI in the spring of1999. On January 14, 2000, the Department of Energy (DOE) returned theundeveloped NOSR-2 to the Ute Indian Tribe; the FY2001 National DefenseAuthorization ( P.L. 106-398 ) provided for the transfer. The U.S. retains a 9% royaltyinterest in NOSR-2, with any proceeds to be applied to the costs of remediating auranium mill tailings site near Moab, Utah. This leaves in the Naval Petroleum Reserves program two small oil fields in California and Wyoming, which will generate estimated revenue to the government ofroughly $6.9 million during FY2003. The request to maintain the Naval PetroleumReserves (NPR) for FY2004 was $16.5 million, of which $5.6 million was forenvironmental remediation at NOSR-3, transferred to the Department of the Interiorin 1999. Under terms of the transfer, DOE remained responsible for remediation. TheFY2004 request ($16.5 million) was a decrease of $1.2 million from the FY2003appropriation ($17.7 million). The House approved the Appropriations Committee'sboost of the NPR budget to $20.5 million, adding $4.0 million to restore funding forthe Rocky Mountain Oilfield Testing Center (RMOTC). The Senate Appropriations Committee -- and subsequently the full Senate -- set funding for the NPR at $17.9 million. The Committee agreed with the House thatfunding should be maintained for the RMOTC, adding $3.0 million for operation of theCenter, and $728,000 for program direction. However, the Committee approved only$500,000 for restoration activities, a reduction of $2.3 million from the level requestedby the Administration. The final FY2004 appropriation was slightly less than $18.0million, decreasing the funds intended for restoration activities by about $2.5 millionfrom the House-passed level. In settlement of a long-standing dispute between California and the federal government over the state's claim to Elk Hills as "school lands," the CaliforniaTeachers' Retirement Fund is to receive 9% of the Elk Hills sale proceeds after thecosts of sale have been deducted. The agreement between DOE and Californiaprovided for five annual payments of $36.0 million beginning in FY1999, with thebalance due to be paid in equal installments in FY2004 and FY2005. The FY2003budget request included an advance appropriation of $36.0 million for the Elk HillsSchool Lands Fund, to be paid at the start of FY2004. This was enacted in the FY2003appropriations law. The FY2004 budget request sought an appropriation of $36.0 million, pending the completion of divestment activities and calculation of the remaining balance owedto the California Teachers' Retirement Fund. The House agreed to the AppropriationsCommittee's recommendation to make the $36.0 million request an advanceappropriation that will be payable on October 1, 2004 instead of October 1, 2003. TheSenate and FY2004 law concurred as well. The FY2004 law maintained $36.0 millionplus an advance appropriation for FY2005 of $36.0 million for a total of $72.0 million. For further information on Naval Petroleum and Oil Shale Reserves , see its website at http://fossil.energy.gov/programs/reserves/npr/ . Energy Conservation. The FY2004 budget request stressed that the Administration's energy efficiency programs canimprove economic growth, energy security, and the environment. The requestpresented, and Table 14 below shows, a new budget structure that reflects the recentreorganization of DOE's Office of Energy Efficiency and Renewable Energy (EERE). The Administration proposed to decrease conservation funding under EERE from$891.8 million in FY2003 to $875.8 million in FY2004. The main Administrationinitiatives are: (1) FreedomCAR and Hydrogen Fuels, reflected in a $22.4 million, or41%, increase for Fuel Cell Technologies to help reduce foreign oil dependence,improve electric power infrastructure security and reliability, and curb greenhouse gasemissions; (2) the National Climate Change Technology Initiative (NCCTI), whichwould receive $9.5 million to promote competitive project solicitations to reducegreenhouse gas emissions; and (3) the Weatherization grants program, which wouldincrease by $64.7 million, or 29%, to reduce energy bills and improve energyaffordability for low-income families. Table 14. Appropriations for DOE Energy Conservation, FY2003-FY2004 ($ in millions) Note: a Using EERE's new account structure for FY2004, the House AppropriationsCommittee's report's narrative and budget table included $5.0 million for the EnergyEfficiency Science Initiative as part of the FY2004 total for Program Management. Incontrast, using EERE's old account structure for FY2003, the report's budget tableshows FY2003 funding for the Energy Efficiency Science Initiative in its own accountline, separate from the Program Management account line. To offset these increases, the FY2004 request proposed several decreases. Compared to the FY2003 appropriation, the FY2004 request would have cut overallfunding by $16.0 million, or 2%, not accounting for inflation. R&D funding wouldhave declined from $623.5 million to $548.8 million, a drop of $74.7 million, or 12%. The House approved $879.5 million for DOE energy conservation funding in FY2004. Compared to the Administration's request, this would have been an increaseof $3.7 million, or 0.4%. However, compared to the FY2003 appropriation, this wouldhave been a decrease of $12.3 million, or 1%, excluding inflation. In House flooraction, an amendment added $15.0 million for Weatherization grants with anunspecified $15.0 million offsetting cut in energy conservation. The House Appropriations Committee report ( H.Rept. 108-195 , p. 12) stated that DOE "needs to do a better job measuring potential program success and discontinuingprograms that do not yield expected results." Further, it asserted that incrementaltechnology improvements are key to short-term and mid-term energy efficiencyimprovements and related emission reductions. In particular, the Committee stated thatit restored many DOE-proposed energy conservation reductions because "it would befiscally irresponsible to discontinue research in which we have made major investmentswithout bringing that research to a logical conclusion." Among other agreements, the Committee concluded that ( H.Rept. 108-195 , p. 122-123): (1) several positions will be eliminated, based on the EERE reorganization,(2) the National Academy of Public Administration's recommendations as to its reviewof the reorganization should be implemented as soon as possible after delivery, (3) theFY2005 budget justification document should include a program specific table withgreater detail about sub-activities, (4) the State Technologies AdvancementCollaborative should be continued and supplemented with other program funds, (5)EERE cooperative programs should be closely coordinated with certain fossil energyprograms, (6) the National Climate Change Technology Initiative should be moreclearly defined, and (7) the National Academy of Sciences program review shouldbecome a continuing annual review. The Senate approved $861.6 million for FY2004 DOE energy conservation funding. Compared to the Administration's request, this would have been a decreaseof $14.1 million, or 1.6%, excluding inflation. However, compared to the FY2003appropriation, this would have been a decrease of $30.1 million, or 3.4%, excludinginflation. This difference included a cut of $35.9 million for R&D and an increase of$5.8 million for grants. The Senate approved a provision that would define electricthermal storage technology as a weatherization measure. The Senate also approved aprovision that would incorporate "neighborhood electric vehicle" (one that is bothlow-speed and has zero emissions) into the definition of alternative-fueled vehicles,making it eligible for certain incentives. The Interior Appropriations conference approved $883.2 million for DOE energy conservation funding. However, the Consolidated Appropriations Act of FY2004 ( P.L.108-199 ) included an across-the-board rescission of 0.59%. Thus, a total of $878.0million was enacted for FY2004. Compared to the Administration's request, this is anincrease of $2.2 million, or 0.3%. However, compared to the FY2003 appropriation,this is a decrease of $13.8 million, or 1.5%. The FY2004 level included a cut of $16.6million for R&D and an increase of $2.9 million for grants. The conference managers agreed on many directives, special provisions, and clarifications for energy conservation. The two provisions recommended by the Senatewere not included in the FY2004 law. However, the conference report noted that theSecretary of DOE has the authority to add measures, such as electric thermal storagetechnology, to the list of eligible weatherization measures. Seven of the key provisionsin the conference agreement follow: (1) support for the Climate Change TechnologyInitiative (CCTI) should proceed, but only with funding from existing programs; (2) with increased funding provided above the request for non-petroleum-fuels, DOE shalldesign/engineer at least two additional natural gas vehicle infrastructure platforms formedium duty trucks, develop liquefied natural gas (LNG) vehicles, and conductresearch on fueling stations that could dispense compressed natural gas, liquefiednatural gas, and compressed hydrogen; (3) $7.75 million is provided for the NextGeneration Lighting Initiative; (4) the DOE Secretary is empowered to considermaking electrochemical storage technology eligible for weatherization grants, asproposed in the Senate bill; (5) no funding is provided in FY2004 for the EnergyEfficiency Science Initiative; (6) funds provided by the Interior bill shall not be usedto support programs funded by the Energy and Water bill; and (7) a concertedtechnology transfer effort should be applied to new conservation technologiesdeveloped at national laboratories. For further information on energy conservation , see the DOE website at http://www.eere.energy.gov/ . Department of Health and Human Services: Indian Health Service The Indian Health Service (IHS) carries out the federal responsibility of assuring comprehensive medical and environmental health services for approximately 1.5 millionto 1.7 million American Indians and Alaska Natives (AI/AN) who belong to 562federally recognized tribes located in 35 states. Health care is provided through asystem of federal, tribal, and urban Indian operated programs and facilities. IHSprovides direct health care services through 36 hospitals, 59 health centers, 2 schoolhealth centers, 49 health stations, and 5 residential treatment centers. Tribes and tribalgroups, under IHS contracts and compacts, operate another 13 hospitals, 172 healthcenters, 3 school health centers, 260 health stations, including 176 Alaska Native villageclinics, and 28 residential treatment centers. IHS, tribes, and tribal groups also operate9 regional youth substance abuse treatment centers and more than 2,252 units ofresidential quarters for staff working in the clinics. IHS funding is separated into two Indian health budget categories: services and facilities. The FY2004 law contained total IHS appropriations of $2.92 billion forFY2004, which is $72.1 million (3%) over the FY2003 appropriation of $2.85 billion. The House had recommended $2.95 billion and the Senate had recommended $2.94billion. See Table 15 below. Of the total IHS appropriations enacted for FY2004, 87%would be used for health services, and 13% for the health facilities program. The Senate considered three amendments affecting IHS funding. First, an amendment to give IHS an additional $292 million for FY2004 fell on a point of orderthat it violated provisions of the Budget Act. Senator Daschle used a recently-published study to support a claim that additional funding was needed to combat unmethealth needs and to show that the U.S. Government in 2003 spent $1,914 per capita onmedical care for American Indian and Alaska Natives while spending $3,803(approximately twice as much) on medical care for federal prisoners. (7) Second, theSenate also rejected an amendment that sought to strike funding for the reorganizationplan for the BIA and OST and transfer the funds to the IHS. However, the Senate agreed to a third amendment that sought to ensure that IHS funds are not redirected to programs and projects that have not been fully justified in theAdministration's budget request and supported by the House and Senate AppropriationsCommittees. The FY2004 law modified this provision to prohibit the use of funds forassessments or charges by the Department of Health and Human Services (HHS) thatare not specifically identified in the budget request and the agreement, or approved bythe House and Senate Appropriations Committees through the reprogramming process. The provision also restricted reductions in IHS personnel, as in recent years. IHS services are funded not only through congressional appropriations, but also from money reimbursed from private health insurance and federal programs such asMedicare, Medicaid, and the State Children's Health Insurance Program. Both theHouse and Senate estimated that IHS will collect $567.6 million in reimbursements inFY2004, a $117.6 million or 26% increase over the estimated amount of $450.0 millionfor FY2003. The IHS health services budget has several subcategories: clinical services, preventive health services, and other services. Clinical services include basic primarycare for inpatient and outpatient services at IHS hospitals and clinics. The FY2004 lawcontained a total of $2.02 billion for clinical services, which was $51.1 million (3%)over the FY2003 level of $1.97 billion. The law provided all programs within clinicalservices with increases over FY2003, but only funding for hospital and health clinicprograms increased over the President's request. Specifically, $1.25 billion (62%)would go to support programs for hospitals and clinics; this was an increase of $37.8million (3%) over FY2003 and $55.2 million (5%) over the Administration's request. Dental health received $104.5 million; mental health received $53.3 million, andsubstance abuse treatment received $138.3 million. For contract health services, whichare services purchased from local and community health care providers when IHScannot provide medical care and specific services through its own system, the FY2004law contained $479.1 million. This was a $14.0 million reduction (3%) from thePresident's request. For preventive health services, the FY2004 law contained $106.9 million, an increase of $4.3 million (4%) over the FY2003 appropriation of $102.6 million. Itprovided all programs within preventive health services with increases over FY2003,but with flat or decreased funding relative to the President's request. The law contained$42.6 million for public health nursing, $11.8 million for health education in schoolsand communities, $1.6 million for immunizations, and $51.0 million for the communityhealth representatives (CHR) program. The CHR program, which is triballyadministered, supports tribal community members who work to prevent illness anddisease in their communities. For other health-related activities, the FY2004 law contained a total of $398.5 million, adecrease of $1.0 million (less than 1%) from FY2003 and $8.5 million (2%)from the President's request. The law provided $31.6 million to support health-relatedactivities in off-reservation urban health projects, $30.8 million for scholarships tohealth care professionals, $2.4 million for costs associated with providing tribalmanagement grants to tribes, $60.7 million for IHS administration and managementcosts for programs it operates directly, $5.7 million for self-governance, and $267.4million for contract support costs. The law did not contain increases requested by theAdministration for scholarships, self-governance, or contract support costs. Contractsupport costs are awarded to tribes for administering programs under contracts orcompacts authorized under the Indian Self-Determination Act ( P.L. 93-638 , asamended). They include costs for expenses tribes incur for financial management,accounting, training, and program start-up. Most tribes and tribal organizations areparticipating in new and expanded self-determination contracts and self-governingcompacts. The IHS's facilities category includes money for the construction, maintenance, and improvement of both health and sanitation facilities. The FY2004 law contained$391.4 million, a 5% increase over the FY2003 appropriation of $373.7 million. Table 15. Appropriations for IHS, FY2003-FY2004 ($ in millions) For further information on the Indian Health Service, see its website at http://www.ihs.gov/ . Office of Navajo and Hopi Indian Relocation The Office of Navajo and Hopi Indian Relocation (ONHIR) and its predecessor were created pursuant to a 1974 act ( P.L. 93-531 , as amended) that was the end resultof a lengthy dispute between the Hopi and Navajo tribes involving lands originallyset aside by the federal government for a reservation in 1882. Pursuant to the 1974act, the lands were partitioned between the two tribes. Members of one tribe livingon land partitioned to the other tribe were to be relocated and provided new homes,and bonuses, at federal expense. Relocation is to be voluntary. Congress has beenconcerned, at times, about the speed of the relocation process and about avoidingforced relocations or evictions. ONHIR's chief activities consist of housing acquisition and construction, land acquisition, infrastructure construction, post-move family support, and certificationof families' eligibility for relocation benefits. For FY2003, ONHIR received appropriations of $14.4 million. For FY2004, the Administration, the House, and the Senate all recommended $13.5 million, adecrease of $865,000, or 6%. The FY2004 law provided $13.4 million. Relocation began in 1977 and is not yet complete. ONHIR has a backlog of relocatees who are approved for replacement homes but have not yet received them. Most families subject to relocation are Navajo -- an estimated 3,477 Navajo familiesresided on land partitioned to the Hopi, while 27 Hopi families were on Navajopartitioned land. While a large majority of the Navajo families have been relocatedto replacement homes, the House Appropriations Committee estimated in 2003 that190 Navajo families still have yet to complete relocation. Most of these remainingNavajo families are not currently living on Hopi partitioned land, but a majority havenot begun the process of acquiring replacement housing. All but one of the 27 Hopifamilies had completed relocation by the end of FY2002, according to ONHIR. ONHIR estimated in its strategic plan that it would complete relocation moves by theend of FY2006 and post-move assistance by the end of FY2008, but the scheduledepended on infrastructure needs and relocatees' decisions. Congressionalcommittees have in the past expressed impatience with the speed of relocation butat present have not criticized the current pace. Many Navajo families have resisted relocation for years, while the Hopi Tribe has insisted on their relocation. About 16 of the 190 remaining Navajo families arestill on Hopi partitioned land, according to the House Committee, and some of themrefuse to relocate. In 1996 Congress approved "accommodation agreements," with75-year leases, for Navajo families who wished to remain on Hopi partitioned land( P.L. 104-301 ), as a means of compromise between the Navajo families and the HopiTribe. Most Navajo families then on Hopi partitioned land signed the agreements,but resistant Navajo families remain. A long-standing proviso in ONHIR appropriations language, retained in the FY2004 act, prohibits ONHIR from evicting any Navajo family from Hopipartitioned lands unless a replacement home were provided. This language appearsto prevent ONHIR from forcibly relocating Navajo families in the near future,because of ONHIR's backlog of approved relocatees awaiting replacement homes. As the backlog is reduced, however, forced eviction may become an issue, if anyNavajo families refuse relocation and if the Hopi Tribe were to exercise a right under P.L. 104-301 to begin legal action against the United States for failure to give theHopi "quiet possession" of all Hopi partitioned lands. Smithsonian Institution The Smithsonian Institution (SI) is a museum, education, and research complex of 16 museums and galleries, the National Zoo, and research facilities throughout theUnited States and around the world. Nine of its museums and galleries are locatedon the Mall between the U.S. Capitol and the Washington Monument. The SI isresponsible for over 400 buildings with approximately 8 million square feet of space. It is estimated to be 70% federally funded, and also is supported by various types oftrust funds. A federal commitment to fund the Institution had been established bylegislation in 1846. Appropriations. The FY2004 law provided a total of $596.3 million for the Smithsonian Institution, $12.6 millionabove the House-passed level ($583.7 million) and $18.3 million above theSenate-passed bill ($577.9 million). The enacted level is an increase over theFY2004 Administration budget ($566.5 million) and the FY2003 appropriation($544.9 million.) The increase above the FY2003 appropriation is primarily foroperations of, and transportation of collections to, the new National Museum of theAmerican Indian; for renovation at the National Zoo; other revitalization ofdeteriorating SI buildings; and SI security. For the Smithsonian Institution's Salariesand Expenses, the FY2004 law provided $488.7 million -- an increase of $12.1million above the FY2004 request and $42.6 million above the FY2003appropriation. See Table 16 below. Facilities Capital. For FY2004, a new account title, "Facilities Capital" was used; it is comprised of revitalization,construction, and facilities planning and design. The FY2004 law provided $107.6million for "Facilities Capital," with $89.6 million for "revitalization." Therevitalization program is to address advanced deterioration in SI buildings, help withroutine maintenance and repair in Smithsonian Institution facilities, and make criticalrepairs. National Museum of the American Indian(NMAI). The FY2004 law did not specify new construction moneyfor the museum. However, under Smithsonian Institution's Salaries and Expenses,it provided approximately $38.1 million for operations of the NMAI to help supportthe Museum's opening. The NMAI had been controversial. Opponents ofconstructing a new museum argued that the current Smithsonian Institution museumsneeded renovation, repair, and maintenance more than the public needed anothermuseum on the Mall. Proponents argued that there had been too long a delay inproviding a museum in Washington to house the Indian collection. Based on a newestimate of $219.3 million for construction of the Indian museum, the SmithsonianInstitution indicated that some of its trust funds could be used to cover opening costs. The groundbreaking ceremony for the NMAI took place September 28, 1999 and theprojected opening is September of 2004. Smithsonian Institution Center for Materials Research and Education (SCMRE). The direction of SI's researchpriorities is of concern to Congress. A recent controversy involved the proposedclosing of the Smithsonian Institution Center for Materials Research and Education(SCMRE), which the Smithsonian Institution decided to retain. The FY2002 InteriorAppropriations law had provided that an independent "blue ribbon" ScienceCommission would be established and meet before any final decision about closingthe SCMRE. The Commission's report of January, 2003 noted that science programsof the Smithsonian Institution have eroded over time due to a "long-term trend indeclining support for mandatory annual salary increases." The FY2004 law providedessentially level funding for the SCMRE ($3.5 million). Trust Funds. In addition to federal appropriations, the Smithsonian Institution receives trust funds to expand itsprograms. The SI trust fund includes general trust funds, contributions from privatesources, and government grants and contracts from other agencies. General trustfunds include investment income and revenue from "business ventures" such as theSmithsonian magazine, and retail shops. There are also trust funds that are privatedonor-designated funds that specify and direct the purpose of funds. Finally,government grants and contracts are provided by various government agencies forprojects specific to the Smithsonian Institution, and they were projected to be $87.0million for FY2003. Tracking of the Smithsonian Institution's Trust fund expenditures has been of concern to the Congress. In FY2003, the Senate Committee on Appropriationsrecommended instituting a plan, that the Smithsonian Institution has now developed,to track trust fund budget proposals and expenditures. According to the InspectorGeneral of the Smithsonian Institution, there was a discrepancy between what theBoard of Regents approved and actual expenditures. This matter has been resolved. Table 16. Smithsonian Institution Appropriations, FY2003-FY2004 ($ in thousands) For further information on the Smithsonian Institution , see its website at http://www.si.edu/ . National Endowment for the Arts and National Endowment for the Humanities One of the primary vehicles for federal support for the arts and the humanities is the National Foundation on the Arts and the Humanities, composed of the NationalEndowment for the Arts (NEA), the National Endowment for the Humanities (NEH),and the Institute of Museum Services (IMS), now constituted as the Institute ofMuseum and Library Services (IMLS) with an Office of Museum Services (OMS). The authorizing act, the National Foundation on the Arts and the Humanities Act,was last reauthorized in 1990 and expired at the end of FY1993, but NEA and NEHhave since been operating on temporary authority through appropriations law. The104th Congress established the Institute of Museum and Library Services and createdthe Office of Museum Services ( P.L. 104-208 ). Among the questions Congress continually considers is whether funding for the arts and humanities is an appropriate federal role and responsibility. Some opponentsof federal arts funding argue that NEA and NEH should be abolished altogether. Other opponents argue that culture can and does flourish on its own through privatesupport. Proponents of federal support for arts and humanities contend that thefederal government has a long tradition of support for culture and that abolishingNEA and NEH could curtail or eliminate programs that have national significanceand purpose (such as national touring theater and dance companies.) Somerepresentatives of the private sector say that they are unable to make up the gap thatwould be left by the loss of federal funds for the arts. NEA. For FY2004, Congress enacted $121.0 million for NEA. See Table 17 below. NEA's direct grant programcurrently supports approximately 1,600 grants. State arts agencies are now receivingover 40% of grant funds, with 1,000 communities participating nationwide,particularly from under-represented areas. The NEA total included $21.7 million forthe Challenge America Arts fund, a program of matching grants for arts education,outreach and community arts activities for rural and under-served areas. The NEAis required to submit a detailed report to the House and Senate AppropriationsCommittees describing the use of funds for the Challenge America program. Although there appears to be an increase in congressional support for the NEA, debate often recurs on previous questionable NEA grants when appropriations areconsidered. (8) Congress continues to restate thelanguage of NEA reforms inappropriations laws. The FY2004 appropriations law retained language on fundingpriorities and restrictions on grants, including that no grant may be used generally forseasonal support to a group, and no grants may be for individuals except for literaturefellowships, National Heritage fellowships, or American Jazz Master fellowships. NEH. The NEH generally supports grants for humanities education, research, preservation and publichumanities programs; the creation of regional humanities centers; and developmentof humanities programs under the jurisdiction of the 56 state humanities councils. NEH also supports a Challenge Grant program to stimulate and match privatedonations in support of humanities institutions. The FY2004 appropriations lawprovided $135.3 million for NEH, including $119.4 million for Grants andAdministration and $15.9 million for Matching Grants. The enacted level is anincrease of $10.4 million (8%) above the FY2003 appropriation ($124.9 million) and$16.7 million (11%) below the Administration's request ($152.0 million). TheAdministration sought a 22% increase for NEH above the FY2003 appropriation,primarily to provide for a new program entitled the "We the People initiative." TheFY2004 law provided $9.9 million for the "We the People Initiative grants." Thesegrants will include model curriculum projects for schools to improve course offeringsin the humanities -- American history, culture, and civics. Office of Museum Services. The Office of Museum Services provides grants in aid to museums in the form ofleadership grants, museum conservation, conservation project support, museumassessment, and General Operating Support (GOS) to help over 400 museumsannually to improve the quality of their services to the public. Effective withFY2003, the appropriation for the Office of Museum Services (OMS) was movedfrom the Interior and related agencies appropriations bill to the appropriations bill forthe Departments of Labor, Health and Human Services, and Education, and relatedagencies. For FY2004, IMLS would receive $262.2 million, comprised of $31.4million for OMS, $198.2 million for Library services, and $32.6 million for specifiedprojects ( P.L. 108-199 ). For further information, see CRS Report RL31803 , Appropriations for FY2004: Labor, Health and Human Services, and Education , by[author name scrubbed]. Table 17. Arts and Humanities Funding,FY2003-FY2004 ($ in thousands) Notes: a Beginning with FY2003, the Office of Museum Services as part of IMLSis included in the appropriations bill for the Departments of Labor-HHS-Ed andRelated Agencies. b The total for NEA grants and administration includes the Challenge Americaprogram. For further information on the National Endowment for the Arts , see its websiteat http://arts.endow.gov/ . For further information on the National Endowment for the Humanities , see its website at http://www.neh.gov/ . For further information on the Institute of Museum Services , see its website at http://www.imls.gov/ . CRS Report RS20287 . Arts and Humanities: Background on Funding , by[author name scrubbed]. Cross-Cutting Topics The Land and Water Conservation Fund (LWCF) The four principal land management agencies -- Bureau of Land Management, Fish and Wildlife Service, National Park Service, and Forest Service -- drawprimarily on the LWCF to acquire lands. The presentations about each of thoseagencies earlier in this report identify funding levels for their land acquisitionactivities. The LWCF also funds acquisition and recreational development by stateand local governments through a state grant program administered by the NPS. Inrecent years, Congress also has appropriated money from the LWCF to fund somerelated activities that do not involve land acquisition. Appropriations for federalacquisitions generally are earmarked to specific management units, such as aNational Wildlife Refuge, while the state grant program rarely is earmarked. Fundsmay not be spent without an appropriation. The LWCF is authorized at $900 millionannually through FY2015. Through FY2004, the total amount that potentially could have been appropriated from the LWCF since its inception was $27.2 billion. Actual appropriations havebeen $13.6 billion. In recent years, until FY2003, appropriators provided generallyincreasing amounts from the Fund for federal land acquisition and the state grantprogram. The total had more than quadrupled, rising from a low of $138 million inFY1996 to $573 million in FY2002. However, the FY2003 appropriation was $410million, a decrease of $163 million from FY2002. Further, the FY2004 total of $263million is a decrease of $147 million from FY2003. This amount is less than boththe Administration request and the Senate-passed amount, but more than then theHouse-passed amount, as shown in Table 18 below. This table shows thecomponents of LWCF appropriations for FY2001 through FY2004. Table 18. LWCF Funding for Federal Land Acquisition and State Grants, FY2001-FY2004 ($ in millions) Source: Data for FY2001compiled by the Department of the Interior Budget Office; data forFY2002 from Interior Appropriations Conference Report ( H.Rept. 107-234 ); data for FY2003 andFY2004 from Appropriations Committees' documents. Note: In some recent years, Congress has appropriated LWCF Funds to federal agencies forpurposes other than land acquisition and stateside grants. These funds for other purposes are notincluded in this table. This process started when Congress provided $72 million for other purposesin the FY1998 Interior appropriations law. In FY1999, no funding was appropriated for otherpurposes. Since then, funding for other purposes has included $15 million in FY2000, $456 millionin FY2001, $135 million in FY2002, and $197 million in FY2003. The FY2004 budget requestincludes $554 million for other conservation programs, and the FY2004 law provided about $221million. Reductions of the magnitude that occurred in FY2003 and again in FY2004were last seen in the early and mid 1990s as part of efforts to address the federalbudget deficit. This time, the federal budget deficit is becoming important, and otherpriorities have become more pressing in the wake of the many components of the waron terrorism. The lower FY2003 and FY2004 appropriation requests of $532 millionand $348 million, respectively, for land acquisition contrasted with the Bushadministration request for full funding for FY2002. In the FY2003 legislativeprocess, the decline continued chronologically with each step; the House approvedless funding ($528 million) than the Administration requested, then the Senateapproved less funding ($464 million) than the House, and the conference committeeagreed to a total of $410 million, which was $118 million less than the House-passedtotal and $54 million less than the Senate-passed total. The FY2004 appropriationdid not follow this progression, although the end result is a large reduction from thepreceding year. Not only did the total decline in FY2003 and again in FY2004, buteach of the five component accounts also declined. In FY2004, the Administration requested the largest amount in the program's history -- $554 million -- for purposes other than land acquisition and statesidegrants. The programs and amounts are listed in appendix E of the FY2004 InteriorBudget in Brief . In recent years, Congress has appropriated funds for other programs,as identified in the note following Table 18 above. For FY2004, the Presidentsought to fund specific programs using the LWCF including: Forest Service's ForestStewardship Program ($65.6 million), Forest Legacy Program ($90.8 million), andUrban and Community Forestry Program ($37.9 million); the Department of theInterior's interagency Cooperative Conservation Initiative ($113.2 million); and Fishand Wildlife Service's State and Tribal Wildlife Grants ($60.0 million), LandownerIncentive Grants ($40.0 million), Stewardship Grants ($10.0 million), CooperativeEndangered Species Grants ($86.6 million), and North American WetlandsConservation Fund Grants ($49.6 million). Both the full House and Senate agreed with this approach for FY2004 for funding other programs, but provided less total funding and funding for fewerprograms from the LWCF. The House provided a total of $260 million and theSenate provided $175 million, while the FY2004 law provided about $221 million. More specifically, the FY2004 law provided $29.6 million for Landowner IncentiveGrants, $7.4 million for Stewardship Grants, $49.4 million for CooperativeEndangered Species Grants, $69.1 million for State and Tribal Wildlife Grants, and$64.2 million for State and Private Forestry Programs, as well as small amounts totwo other programs. For FY2004, the Administration again sought funding for the Cooperative Conservation Initiative to promote conservation through partnerships that matchBLM, NPS, and FWS funds with local contributions. In FY2003, the BushAdministration had first proposed this Initiative, and sought $100 million. Half thistotal was to come from the state grant program portion of the LWCF, and theremainder would have come from the operating accounts of the three DOI landmanagement agencies. Congress appropriated $14.9 million to this Initiative forFY2003. In contrast to the FY2003 request, the entire FY2004 request of $113.2million was to come from the LWCF. Neither the House nor Senate bills for FY2004funded this Initiative, and no funds were included in the FY2004 law. Conservation Spending Category Congress created the Conservation Spending Category (CSC), as an amendment to the Balanced Budget and Emergency Deficit Control Act of 1985, in the FY2001Interior appropriations law. The CSC, which is also being called the ConservationTrust Fund by some, combines funding for more than 2 dozen resource protectionprograms including the LWCF. It also includes some coastal and marine programsfunded through Commerce appropriations. This action was in response to both theClinton Administration request for substantial funding increases in these programsunder its Lands Legacy Initiative, and congressional interest in increasingconservation funding through legislation known as the Conservation andReinvestment Act (CARA), which passed the House in the 106th Congress. The CSC law authorized that total spending under the category would grow each year by $160 million, from $1.6 billion in FY2001 (of which $1.2 billion would bethrough the Interior appropriations laws and the remainder through the Commerceappropriations laws) to $2.4 billion in FY2006. All funding each year is subject tothe appropriations process. How programs are categorized matters -- theAdministration and the Appropriations Committees disagree on whether all orportions of funding for some programs, such as the Cooperative ConservationInitiative, should be credited to the CSC. The appropriations history through FY2004is as follows. The FY2001 laws exceeded the target of $1.6 billion by appropriating a total of $1.68 billion; $1.20 billion for Interior appropriationsprograms and $0.48 billion for Commerce appropriations programs (provided in TitleIX of P.L. 106-522 ). Totals for Interior and Commerce funding were both increasesfrom the preceding year of $566 and $160 million,respectively. The FY2002 request totaled $1.54 billion for this group of programs, and Congress appropriated $1.75 billion, thus almost reaching the targetof $1.76 billion. The appropriation for the Interior portion was $1.32 billion,reaching the authorized target amount. The FY2003 request totaled $1.67 billion for this group of programs, a decrease from FY2002 funding, and below the target of $1.92 billion. Congress appropriated a total of $1.51 billion. For the Interior portion, Congressprovided $1.03 billion, less than the authorized target of $1.44billion. The Administration's FY2004 request totaled $1.33 billion, according to estimates compiled by Interior and Commerce Appropriations subcommittee staffs. This amount was below the target of $2.08 billion. For the Interior portion, therequest was $1.00 billion, and the target was $1.56 billion. The Administration hadan alternative estimate that increased the total FY2004 request to $1.22 billion forInterior programs, but it was based on some different assumptions about whichprograms to include. For FY2004, none of the bills or accompanying committee reports identified funding levels for the CSC, with one exception. The House AppropriationsCommittee report included "additional views" by Representatives Obey and Dicksin which they inserted a table to document, by program, the difference between the$1.56 billion target and their estimate of the total funding for CSC programs of $991million. During floor consideration, Representative Obey offered an amendment tofund this difference by rescinding 3.21% of the tax cut for taxpayers with adjustedgross incomes in excess of $1 million. The amendment was rejected on a point oforder raised by both Resource Committee Chair Pombo and Interior Appropriationssubcommittee Chair Taylor against including authorizing legislation in anappropriations bill. For further information on the CSC, see Table 19 below. The table has not been updated for FY2004 since the chambers and the conference committee did notaddress the CSC in bill or report language. Table 19. Conservation Spending Category: Interior Appropriations,FY2001-FY2004 ($ in millions) a b Source: House Appropriations Committee. Notes: a The Balanced Budget and Emergency Deficit Control Act of 1985(2 U.S.C. 901(c)) as amendedestablished 3 discretionary spending categories. Title VIII of P.L. 106-291 established a fourth category ofdiscretionary spending -- for "conservation." That law also identified the specific activities that would beincluded within the "conservation spending category." The category essentially includes those activities,identified by Congress, in particular budget accounts (or portions thereof) providing appropriations topreserve and protect lands, habitat, wildlife, and other natural resources; to provide recreationalopportunities; and for other purposes. This table presents the current and proposed distribution of theseconservation funds. Dashes indicate that the funding is understood to be zero, either because nothing wasprovided or sought, or because the account did not exist. Further, several programs in this category havenot received separate funding under conservation spending for FY2001-FY2003 or as proposed in theFY2004 budget will not receive separate funding. They include Competitive Grants for Indian Tribes, FWS Neotropical Migratory Birds, FS Stewardship Incentive and FS Stewardship, DepartmentalManagement (BIA Water Settlement), and National Wildlife Refuge fund, FWS. In FY2003, the House, Senate, and appropriations law ( P.L. 108-7 ) did not contain calculations of funding for the CSC. The joint explanatory statement of the conference report on the enacted measure stated thatno funds in the law are derived from the CSC, but that most of the programs previously funded under thatcategory are continued in FY2003. The table has not been updated for FY2004 since neither of the chambers nor the conference committee included a tabulation of funding in bill or report language. b Subtotals and totals may not add due to rounding. c $50.0 million of this total is part of a new Cooperative Conservation Initiative, and the remaining$150.0million would be distributed to states using an allocation formula developed by the Administration for thetraditional land acquisition and site development activities of states. d Departmental Management /BIA Water Settlement is not listed because it was a one-time requestinFY2003 for $3.0 million. The FY2003 request for $3.0 million is not included in the total. e For FY2001, an additional $50.0 million was appropriated for formula grants which wereauthorized inTitle IX of the FY2001 Commerce appropriations law. Further, the FY2002 enacted amount does not reflecta proposed rescission of $25.0 million. f The FY2004 appropriations history indicates that the rescission in FY2002 was not adopted, i.e.that theIncentive Grant programs and Stewardship grants programs were sustained in FY2002. g The State and other conservation programs subgroup also includes the FWS Migratory Bird Fundand theFWS Multinational Species fund. The FY2003 funding for these was $3.0 million for migratory birds and$4.8 million for multinational species, and the FY2004 request was $0 and $7.0 million respectively. h Funds for FS, Forest Stewardship were not considered part of the CSC in FY2001 and FY2002so the tabledoes not reflect funds for this program. It was proposed to be funded in the FY2003 request at $49.5 million,but did not receive funding. i The FY2003 appropriations and FY2004 request is a total for BLM, FWS, and NPS. j The final total includes $7.8 million derived from the FWS Migratory Bird Fund ($3.0 million) and FWSMultinational species fund($4.8 million) k The FY2004 request of $7 million for the FWS Multinational Species Fund is reflected in theFY04 requestfinal total for the CSC. CRS Report RL30444(pdf) . Conservation and Reinvestment Act (CARA) (H.R. 701) and a Related Initiative in the 106th Congress, by Jeffrey Zinn and M.Lynne Corn. CRS Report RS20471. The Conservation Spending Category: Funding for Natural Resource Protection , by Jeffrey Zinn. CRS Report RS21503. Land and Water Conservation Fund: Current Status and Issues , by Jeffrey Zinn. Everglades Restoration The alterations of the natural flow of water by a series of canals, levees, and pumping stations, combined with agricultural and urban development, are thoughtto be the leading causes of environmental deterioration in the South Floridaecosystem. In 1996, Congress authorized the U.S. Army Corps of Engineers (Corps)to create a comprehensive plan to restore, protect, and preserve the entire SouthFlorida ecosystem, which includes the Everglades (P.L 104-303). A portion of thisplan, the Comprehensive Everglades Restoration Plan (CERP), completed in 1999,provides for federal involvement in the restoration of the ecosystem. Congressauthorized the Corps to implement CERP in Title IV of the Water ResourcesDevelopment Act of 2000 (WRDA 2000, P.L. 106-541 ). While restoration activitiesin the South Florida ecosystem are conducted under several federal laws, WRDA2000 is considered the seminal law for Everglades restoration. Based on CERP and other previously authorized restoration projects, the federal government, along with state, local, and tribal entities, is currently engagedin a collaborative effort to restore the South Florida ecosystem. The principalobjective of CERP is to redirect and store "excess" freshwater currently beingdischarged to the ocean via canals, and use it to restore the natural hydrologicalfunctions of the South Florida ecosystem. CERP seeks to deliver sufficient water tothe natural system without impinging on the water needs of agricultural and urbanareas. The federal government is responsible for half the cost of implementingCERP, and the other half is borne by the State of Florida, and to a lesser extent, localtribes and other stakeholders. CERP consists of 68 projects that are expected to beimplemented over approximately 36 years, with an estimated total cost of $7.8billion; the total federal share is estimated at $3.9 billion. (9) Overview of Appropriations. Appropriations for restoration projects in the South Florida ecosystem have beenprovided as part of several annual appropriations bills. The Department of theInterior and Related Agencies Appropriations laws have provided funds to severalDOI agencies for restoration projects. Specifically, DOI conducts CERP andnon-CERP activities in Southern Florida through the National Park Service, Fish andWildlife Service, U.S. Geological Survey, and Bureau of Indian Affairs. Appropriations for other restoration projects in the South Florida ecosystem have been provided to the Corps (Energy and Water Development Appropriations),National Oceanic and Atmospheric Administration (NOAA) (Departments ofCommerce, Justice, and State, the Judiciary, and Related Agencies Appropriations),U.S. Environmental Protection Agency (EPA) (VA, HUD, and Related AgenciesAppropriations), and U.S. Department of Agriculture (U.S. Department ofAgriculture and Related Agencies Appropriations). (For other Everglades funding,see CRS Report RL31807 , Appropriations for FY2004: Energy and WaterDevelopment , coordinated by Carl Behrens and [author name scrubbed]). From FY1993 to FY2003, federal appropriations for projects and services related to the restoration of the South Florida ecosystem have exceeded $1.9 billiondollars, and state funding has topped $3.6 billion. (10) The average annual federal costfor restoration activities in Southern Florida in the next 10 years is expected to beapproximately $286 million/year. (11) For FY2004,the Administration requested$311.0 million for restoration efforts in the Everglades, $46.9 million above theFY2003 enacted level of $264.1 million. (12) Ofthis total, $48.0 million was requestedfor the implementation of CERP. FY2004 Appropriations to DOI. With regard to DOI for FY2004, $69.1 million was appropriated for CERP andnon-CERP activities related to restoration in the South Florida ecosystem. This was$43.2 million below the requested level of $112.3 million. Of the total appropriated,the NPS was appropriated $44.3 million for construction and research activities, $42.0 million below the request for $86.4 million. The FWS received $16.3 millionfor refuges, ecological services, and other activitie, an increase of $3.4 million overits request for $12.9 million. The USGS received $7.8 million for research, planning,and the Critical Ecosystem Studies Initiative, a decrease of $0.8 million from itsrequest of $8.6 million. Lastly, the BIA received $0.5 million for water projects onSeminole and Miccosukee Tribal lands, $0.1 million over its request of $0.4 million. For conducting activities authorized by CERP, DOI received $8.8 million. See Table20 below. Table 20. Appropriations for Everglades Restoration in the DOI Budget,FY2003-FY2004 ($ in thousands) Source: South Florida Ecosystem Task Force, FY2004 Cross-Cut Budget at: http://www.sfrestore.org/documents/cc2004/index%2004.htm , accessed July 2, 2003. Notes: N/A indicates that information is not available. a This includes total funding for park operations in Everglades National Park, Dry TortugasNational Park,Biscayne National Park, and Big Cypress National Preserve. b These funds were recommended by the House Appropriations Committee to be transferred fromunobligated balances from last year (FY2003). The largest difference between the requested amount of funding for the DOI for restoration in South Florida and the appropriated amount was $40 million requestedfor the acquisition of mineral rights in the Big Cypress Preserve. The CollierResources Company has mineral rights and has reached an agreement in principle tosell them to the DOI. (13) Forty million dollarswould cover a portion of the cost of themineral rights, estimated at $120 million. Appropriators, however, did not includethis funding in the FY2004 appropriations because the agreement had not beenauthorized and a recent DOI inquiry has been initiated. (14) The FY2004 law: 1) exempted funds appropriated for the implementation of the Everglades National Park Protection and Expansion Act of 1989 ( P.L. 101-229 ), and2) funds appropriated to Florida for acquiring lands for Everglades restoration froma prohibition on using DOI appropriations for filing declarations of takings orcondemnations without the approval of the Appropriations Committees. Arestoration project authorized by P.L. 101-229 , the Modified Water DeliveriesProject, is expected to use condemnation if required land is owned by unwillingsellers. Transfer of Funds. The FY2004 law contained provisions that directed the funds to be transferred among restorationactivities in the Everglades. The Secretary of the Interior was authorized to use prioryear unobligated funds for acquiring lands in the Everglades watershed to transfer$5.0 million to the FWS for monitoring water quality, eradicating invasive plants,and bolstering the recovery of endangered species. Further, the Secretary of theInterior was authorized to transfer necessary funds (from the same accounts) to theU.S. Army Corps of Engineers to implement additional water quality improvementtechnologies for portions of the Everglades ecosystem that affect the LNWR. Thisassistance is expected to help the state of Florida meet its water quality standards. The Secretary also was authorized to use any remaining funds from the accountsdescribed above to fund Everglades restoration activities on DOI lands, subject to theapproval of a reprogramming request by the House and Senate Committees onAppropriations. These provisions may have originated from the House Committeereport for FY2004, which stated that the State of Florida may not view the acquisitionof land for the implementation of CERP as its highest priority. Concerns Over Phosphorus Mitigation in the Everglades. Several concerns regarding restoration efforts in theEverglades were presented in the House Committee report on Interior appropriations. One concern was over a Florida State Law (Chapter 2003-12, enacted on May 20,2003) that amended the Everglades Forever Act of 1994 (Florida Statutes �373.4592)by authorizing a new plan to mitigate phosphorus pollution in the Everglades. Phosphorus is one of the primary water pollutants in the Everglades and a primarycause for ecosystem alteration in the Everglades. Some critics argue that this newlaw extends previously established phosphorus mitigation deadlines for theEverglades, and may compromise efforts to restore the Everglades, as well asjeopardize federal appropriations for CERP. Proponents of the law argue that thenew plan represents a realistic strategy for curbing phosphorus. A subsequent lawof the Florida State Legislature (May 27, 2003, S 00054-A) attempted to addresssome of these concerns. Some Members of Congress reacted to these new lawsunfavorably and wrote letters expressing their disapproval. (15) Their concerns alsowere reflected in conditions that were included in the FY2004 Interior appropriationsconference agreement. Specifically, several provisions that condition funds for restoration based on the achievement of water quality standards were included in the FY2004 law. Funds forthe Modified Water Deliveries Project will be provided unless administrators of fourfederal departments/agencies (Secretary of the Interior, Secretary of the Army,Administrator of the EPA, and the Attorney General) jointly file a report annuallyuntil 2006 indicating that water entering the A.R.M. Loxahatchee National WildlifeRefuge and Everglades National Park meet state water quality standards, and theHouse and Senate Committees on Appropriations respond in writing disapprovingthe further expenditure of funds. Similar conditions also are present in the House-and Senate-passed versions of the Energy and Water Development Appropriations. For a review of this issue, and a side-by-side comparison of the FY2004 Interiorappropriations language and the Energy and Water Appropriations bills, see CRS Report RL32131 , Phosphorus Mitigation in the Everglades , by Pervaze Sheikh andBarbara Johnson. For further information on Everglades Restoration , see the website of the South Florida Ecosystem Restoration Program at http://www.sfrestore.org and the websiteof the Corps of Engineers at http://www.evergladesplan.org/ . CRS Report RL31621(pdf) . Florida Everglades Restoration: Background on Implementation and Early Lessons , by [author name scrubbed]. CRS Report RS21331(pdf) . Everglades Restoration: Modified Water Deliveries Project , by [author name scrubbed]. CRS Report RS20702 . South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed] and PervazeA. Sheikh. CRS Report RL32131 . Phosphorus Mitigation in the Everglades , by [author name scrubbed] and [author name scrubbed]. Other Issues Competitive Sourcing of GovernmentJobs. The Bush Administration is considering privatizing numerousand diverse government jobs, under its "competitive sourcing" initiative firstoutlined in 2001. The goal is to save money through competition betweengovernment and private businesses in areas where private businesses might providebetter commercial services, for instance, law enforcement and maintenance. Underthe "outsourcing" plan, as it is commonly known, agencies are to submit some oftheir jobs to competition with the private sector. The plan has been controversial,with concerns as to whether it would save the government money and whether theprivate sector could provide the same quality of service in certain areas. Thecompetitive sourcing initiative was considered during the Interior appropriationsprocess as well during the appropriations process for other departments and agencies,and also is being examined by authorizing committees. For agencies funded by the Interior appropriations bill, concern has centered on the National Park Service and the Forest Service. According to one Park Servicesource, more than 11,000 of the Park Service's 19,000 jobs were judged to be not"inherently governmental" and are therefore being considered under the initiative,with 1,708 possibly outsourced. (16) The ForestService was reported to be consideringa plan that would allow the private sector to compete for more than a quarter of itsapproximately 40,000 jobs. (17) The House and Senate Appropriations Committees expressed concern that the agencies are spending significant sums on outsourcing, although the Administrationdid not request or receive funds for this purpose. In particular, there was concern thatthe Forest Service was reprogramming money without approval. In its report, theHouse Committee on Appropriations expressed concern about the "massive scale,seemingly arbitrary targets, and considerable costs associated with this initiative"( H.Rept. 108-195 , p.9). The House and Senate included language on outsourcing in their Interior appropriations bills. The House-passed bill sought to bar agencies from using fundsin the bill to begin new outsourcing studies. The President threatened to veto the billif this language was included. The Senate rejected a floor amendment that, like theHouse-passed language, would have prohibited funds in the bill from being used toinitiate competitive sourcing studies. Instead, the Senate adopted an amendment torequire the Secretary of the Interior to report annually to Congress on outsourcing. Among other issues, the reports were to address the numbers of outsourcingcompetitions announced and completed; the costs, savings, and improvements inservices that result from contracting out; and the number of federal employeesimpacted by outsourcing. The final language enacted for FY2004 outlined spending limits for outsourcing studies of agencies during FY2004. Specifically, it limited Forest Service spendingon outsourcing studies to no more than $5.0 million. DOI was capped at $2.5 millionand DOE was limited to $0.5 million unless Congress approves the reprogrammingof additional funds under revised reprogramming guidelines printed in the jointexplanatory statement of the conference report. For outsourcing studies involvingmore than 10 federal employees, a contracted function must be less costly to thegovernment by 10% or $10.0 million, whichever is lower. The FY2004 law also required the DOI agencies and DOE programs funded by the bill, as well as the Forest Service, to report annually to Congress on theiroutsourcing activities. As had been recommended by the Senate, the reports are tocontain detailed information including the numbers of outsourcing competitionsannounced and completed; the costs, savings, and improvements in services thatresult from contracting out; and the number of federal employees impacted byoutsourcing. For FY2004, the agencies are to submit a detailed competitive sourcingproposal to the House and Senate Appropriations Committees within 60 days ofenactment of the bill. Beginning in FY2005, the agencies are required to specify intheir annual budget requests the level of funding requested for outsourcing studies. In adopting the outsourcing language, conferees expressed support for the"underlying principle" of the Administration's outsourcing initiative, but concern thatthe effort was being conducted too fast for its costs and implications to be understoodand "in violation" of guidelines on reprogramming funds. Klamath River Basin. TheFY2004 law did not contain a provision prohibiting Interior Department funding ofthe Klamath Fishery Management Council. Such a provision had been included inthe House Committee reported and House-passed bills, but no similar provision wasincluded by the Senate. In addition, a House floor amendment to prohibit farmersfrom planting certain crops on new leases in two Klamath Basin national wildliferefuges was defeated. The House provisions sparked considerable controversyamong interested parties. They relate to an on-going conflict in the Klamath RiverBasin over water allocations for farmers in the Klamath River Project area in theUpper Basin and water needed to avoid harm to three federally listed fish species. The Bureau of Reclamation (Department of the Interior) is currently operating theKlamath Project under a one-year operations plan announced in April 2003 while itcontinues to work on completing a 10-year operations plan. The FWS and NationalOceanic and Atmospheric Administration (NOAA) Fisheries completed consultationon a 2002 10-year plan on May 31, 2002; however, the Bureau rejected the FWS andNational Marine Fisheries Service (NMFS)/NOAA Fisheries biological opinions onits 10-year operating plan and stated that it would comply for the immediate futurebut also requested new consultation. Controversies continue over science and dataused to support the agencies' decisions, and recent court decisions have sought toaddress such concerns. For more information on the Klamath controversy, see CRSIssue Brief 10072, Endangered Species: Difficult Choices , by [author name scrubbed], M.Lynne Corn, and [author name scrubbed], and CRS Report RL31098(pdf) , Klamath River BasinIssues: An Overview of Water Use Conflicts , coordinated by [author name scrubbed]. "Bear Baiting". On July 17, 2003,the House rejected an amendment to restrict the use of funds by the Forest Serviceor BLM to administer any action related to bear baiting, except to prevent thepractice. No other action was taken on the issue in the remainder of the FY2004appropriations process. Bear baiting is a hunting practice involving the intentionalfeeding of bears for the purpose of enticing bears to a particular area to be hunted. A significant factor cited by opponents of the amendment was the generalpre-eminence of states in controlling wildlife within their boundaries, andpreservation of their major role in wildlife management on federal lands. Certainprocedural questions relating to hearings on H.R. 1472 , a bill related toending bear baiting on federal lands, also were raised by Members who objected tothe hearing process. Amendment proponents argued that the practice is cruel andunsportsmanlike, and that banning bear baiting appeared to have little effect on bearpopulations in states that had disallowed it. Table 21. Department of the Interior and Related AgenciesAppropriations,FY2003-FY2004 ($ in thousands) Source: House Appropriations Committee and Congressional Record . Notes: a Departmental Offices includes Insular Affairs, the Office of theSpecial Trustee for American Indians, andthe Payments in Lieu of Taxes Program (PILT). b Figures do not reflect scorekeeping adjustments. c FY2003 enacted figures include an across-the-board cut of 0.65% in the FY2003 consolidatedappropriations law( P.L. 108-7 ). The total includes $825.0 million for wildland fire emergencies, consisting of $189.0 million for BLMand $636.0 million for the Forest Service. These funds are to repay amounts transferred from other accounts forfire fighting in FY2002. The total appropriation for FY2003 includes an FY2003 Supplemental appropriation ( P.L.108-83 ) adding $36.0 million for BLM, $5.0 million for FWS, and $283.0 million for FS. d Figures reflect an across-the-board cut of 0.646% in the FY2004 Interior and Related AgenciesAppropriationslaw ( P.L.108-108 ) and a 0.59% across-the-board cut in the Consolidated Appropriations Act for FY2004 ( P.L.108-199 ). Table 22. Historical Appropriations Data, from FY2000 toFY2003 ($ in thousands) Notes: a Departmental Offices includes Insular Affairs and Office of the Special Trustee forAmerican Indians for all years, and the Payments in Lieu of Taxes Program (PILT) for FY2003. ForFY2000-FY2002, PILT monies are contained in the BLM appropriation. b Beginning in FY2003, the Office of Museum Services as part of the IMLS is included in theappropriations bill for the Departments of Labor-HHS-Education and Related Agencies. c Funding ($17.0 million) for Challenge America Arts Fund is included in the total figure for theNational Endowment for the Arts. d Figures in this column reflect an across-the-boar cut of 0.65% in the FY2003 consolidatedappropriations law ( P.L. 108-7 ). The total also includes $825.0 million for wildland fireemergencies, consisting of $189.0 million for BLM and $636.0 million for the Forest Service. Thesefunds are to repay amounts transferred from other accounts for fire fighting in FY2002. The totalappropriation for FY2003 includes an FY2003 Emergency Supplemental Appropriation ( P.L.108-83 )adding $36.0 million for BLM, $5.0 million for FWS, and $283.0 million for FS. For Additional Reading Title I: Department of the Interior CRS Report RL30444(pdf) . Conservation and Reinvestment Act (CARA) (H.R. 701) and a Related Initiative in the 106th Congress, by Jeffrey Zinn and M.Lynne Corn. CRS Issue Brief IB10072. Endangered Species: Difficult Choices , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21331(pdf) . Everglades Restoration: Modified Water Deliveries Project , by [author name scrubbed]. CRS Report 97-851(pdf) . Federal Indian Law: Background and Current Issues , by [author name scrubbed]. CRS Report RS21402 . Federal Lands, "Disclaimers of Interest," and RS2477 , by [author name scrubbed]. CRS Report RL31621(pdf) . Florida Everglades Restoration: Background on Implementation and Early Lessons , by [author name scrubbed]. CRS Report 96-123. Historic Preservation: Background and Funding , by [author name scrubbed]. CRS Report RS21503. Land and Water Conservation Fund: Current Status and Issues , by Jeffrey Zinn. CRS Issue Brief IB89130. Mining on Federal Lands , by [author name scrubbed]. CRS Report RS21157 . Multinational Species Conservation Fund , by [author name scrubbed] and [author name scrubbed]. CRS Report RS20902 . National Monument Issues , by [author name scrubbed]. CRS Issue Brief IB10093. National Park Management and Recreation , by [author name scrubbed], coordinator. CRS Report RL31392 . PILT (Payments in Lieu of Taxes): Somewhat Simplified , by [author name scrubbed]. CRS Report RS20702 . South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed]. Land Management Agencies Generally CRS Report RS20471. The Conservation Spending Category: Funding for Natural Resource Protection , by Jeffrey Zinn. CRS Report RS20002(pdf) . Federal Land and Resource Management: A Primer , by [author name scrubbed]. CRS Report RL32393 . Federal Land Management Agencies: Background on Land and Resources Management , by [author name scrubbed], Coordinator, M. LynneCorn, [author name scrubbed], [author name scrubbed], David Whiteman, and Kori Calvert. CRS Report RL30335(pdf) . Federal Land Management Agencies' Permanently Appropriated Accounts, by [author name scrubbed], [author name scrubbed], and Carol HardyVincent. CRS Report RL30126. Federal Land Ownership: Constitutional Authority; the History of Acquisition, Disposal, and Retention; and Current Acquisition andDisposal Authorities , by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB10076. Public (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. CRS Report RL32131 . Phosphorus Mitigation in the Everglades , by [author name scrubbed] and [author name scrubbed]. Title II: Related Agencies CRS Report RS20287 . Arts and Humanities: Background on Funding , by [author name scrubbed]. CRS Issue Brief IB10020. Energy Efficiency: Budget, Oil Conservation, and Electricity Conservation Issues , by [author name scrubbed]. CRS Report RS20822(pdf) . Forest Ecosystem Health: An Overview , by [author name scrubbed]. CRS Report RS21442 . Hydrogen and Fuel Cell Vehicle R&D: FreedomCAR and the President's Hydrogen Fuel Initiative , by [author name scrubbed]. CRS Report RL30647 . The National Forest System Roadless Areas Initiative, by [author name scrubbed]. CRS Report RS20852(pdf) . The Partnership for a New Generation of Vehicles: Status and Issues , by [author name scrubbed]. CRS Report RS20985 . Stewardship Contracting for the National Forests , by [author name scrubbed]. CRS Issue Brief IB87050. The Strategic Petroleum Reserve , by [author name scrubbed]. CRS Report RL31679. Wildfire Protection: Legislation in the 107th Congress and Issues in the 108th Congress , by [author name scrubbed]. Selected Websites Information regarding the budget, supporting documents, and relateddepartments, agencies and programs is available at the following web or gopher sites. House Committee on Appropriations . http://www.house.gov/appropriations Senate Committee on Appropriations . http://appropriations.senate.gov/ CRS Appropriations Products Guide . http://www.crs.gov/products/appropriations/apppage.shtml Congressional Budget Office . http://www.cbo.gov/ General Accounting Office . http://www.gao.gov House Republican Conference . http://www.gop.gov/ Office of Management and Budget . http://www.whitehouse.gov/omb/ Title I: Department of the Interior Department of the Interior (DOI) . http://www.doi.gov/ Bureau of Land Management (BLM) . http://www.blm.gov/nhp/index.htm Fish and Wildlife Service (FWS) . http://www.fws.gov/ Historic Preservation . http://www2.cr.nps.gov/ Insular Affairs . http://www.doi.gov/oia/index.html Minerals Management Service (MMS) . http://www.mms.gov/ National Park Service (NPS) . http://www.nps.gov/ Office of Surface Mining Reclamation and Enforcement (OSM) . http://www.osmre.gov/osm.htm Office of Special Trustee for American Indians . http://www.ost.doi.gov/ U.S. Geological Survey (USGS) . http://www.usgs.gov/ Title II: Related Agencies Departments. Agriculture, Department of (USDA). http://www.usda.gov/ Department of Agriculture: U.S. Forest Service . http://www.fs.fed.us/ Energy, Department of (DOE) . http://www.energy.gov/engine/content.do?BT_CODE=DOEHOME Energy Budget. http://www.mbe.doe.gov/budget/03budget/ Energy Conservation Programs . http://www.eere.energy.gov/ Fossil Energy. http://www.fe.doe.gov/ Naval Petroleum Reserves . http://fossil.energy.gov/programs/reserves/npr/ Strategic Petroleum Reserve . http://fossil.energy.gov/programs/reserves/spr/ Health and Human Services, Department of (HHS) . http://www.dhhs.gov/ Indian Health Service (IHS) . http://www.ihs.gov/ Agencies. Advisory Council on Historic Preservation . http://www.achp.gov Institute of American Indian and Alaska Native Culture and Arts Development . http://www.iaiancad.org/ Institute of Museum Services . http://www.imls.gov/ John F. Kennedy Center for the Performing Arts . http://Kennedy-Center.org/ National Capital Planning Commission . http://www.ncpc.gov National Endowment for the Arts . http://arts.endow.gov/ National Endowment for the Humanities . http://www.neh.gov/ National Gallery of Art . http://www.nga.gov/ Smithsonian Institution . http://www.si.edu/ U.S. Holocaust Memorial Council and U.S. Holocaust Memorial Museum . http://www.ushmm.org/ Woodrow Wilson International Center for Scholars . http://wwics.si.edu/

The Interior and related agencies appropriations bill includes funds for the Department of the Interior (DOI), except for the Bureau of Reclamation, and for some agencies or programs withinthree other departments -- Agriculture, Energy, and Health and Human Services. It also fundsnumerous smaller related agencies. President Bush's FY2004 budget for Interior and related agencies totaled $19.89 billion, $220.5million (1%) less than enacted for FY2003 ($20.11 billion). On July 17, 2003, the House passed H.R. 2691 (268-152) containing a total of $19.60 billion for Interior and relatedagencies for FY2004. On September 23, 2003, the Senate passed its version of H.R. 2691 with a total of $20.01 billion. A conference report was filed on October 28, 2003, and agreedto by the House (216-205) on October 30 and approved by the Senate (87-2) on November 3, 2003. The bill was signed into law on November 10, 2003 ( P.L. 108-108 ). The final FY2004 appropriation provided $20.01 billion for the Department of Interior andRelated agencies, which reflected two across-the-board cuts: a 0.646% cut in the Interiorappropriations statute ( P.L.108-108 ), and a 0.59% cut in the Consolidated Appropriations Act of2004 ( P.L. 108-199 ). The FY2004 enacted level is slightly less than enacted for FY2003 (less than 1% lower). It is essentially the same as the amount approved by the Senate (less than 1% higher), and higher thanthe House-passed total (2% higher) and the President's request (less than 1% higher). Theappropriate levels of funding for wildland firefighting and land acquisition were among the majorissues debated. The FY2004 law contained $2.76 billion for wildland fire fighting by the ForestService and the Department of the Interior, approximately 13% less than the total enacted forFY2003. For land acquisition (and state assistance) by the four major federal land managementagencies, the law contained $263.4 million, 36% less than enacted for FY2003. Many controversial issues arose during consideration of the FY2004 Interior and relatedagencies appropriations bill, and were addressed by conferees. The FY2004 law (1) continued theautomatic renewal of expiring grazing permits and leases for FY2004 -- FY2008; (2) extended theRecreational Fee Demonstration Program; (3) modified procedures for seeking judicial review oftimber sales in Alaska, primarily in the Tongass National Forest; (4) capped funds for competitivesourcing efforts of agencies and required documentation on the initiative; and (5) led to a stay of acourt decision requiring an accounting of Indian trust funds and trust asset transactions since 1887. The law dropped language barring funds from being used (1) to implement changes to regulationsof the Bureau of Land Management on Recordable Disclaimers of Interest in Land, (2) for theKlamath Fishery Management Council, and (3) for Outer Continental Shelf leasing activities in theNorth Aleutian Basin planning area, which includes Bristol Bay, Alaska. Key Policy Staff a Division abbreviations: DSP = Domestic Social Policy; G&F = Government and Finance; RSI =Resources, Science, and Industry.

Introduction Section 100121 of P.L. 112-141 , the Moving Ahead for Progress in the 21 st Century Act (MAP-21, enacted July 6, 2012) provides the authority for a new phased retirement option for certain employees covered by the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS), the retirement plans that cover most of the civilian federal workforce. Under phased retirement, an eligible federal employee may work a reduced-hour schedule and simultaneously receive a prorated federal retirement benefit (or annuity ) under CSRS or FERS. For eligible federal employees, phased retirement is a voluntary option that requires approval from their employing federal agencies. Employees participating in phased retirement generally must also engage in mentoring activities (except for U.S. Postal Service employees). According to the Office of Personnel Management (OPM), which administers phased retirement, "The main purpose of phased retirement is to enhance the mentoring and training of the employees who will be filling the positions or taking on the duties of more experienced retiring employees." Background Phased retirement allows certain federal employees who are otherwise eligible for retirement under CSRS or FERS to work a reduced schedule while receiving a reduced salary as well as a prorated percentage of their retirement benefits. Before P.L. 112-141 , federal law generally prohibited the concurrent receipt of a federal salary and a federal pension (i.e., dual compensation ). Prior to the enactment of phased retirement, the situation of dual compensation arose in the context of current federal retirees who returned to work in federal service (i.e., reemployed annuitants ). Over the past several decades, Congress has provided authority for waivers in some circumstances to the general reduction in pay usually required for dual compensation. These waivers accomplish several policy goals, including hiring for highly skilled or difficult-to-fill positions. Dual Compensation Individuals receiving retirement benefits under CSRS or FERS may be reemployed by the federal government in some situations. These individuals may not simultaneously collect a federal civil service retirement benefit and a salary for current employment with the federal government in most circumstances. Reemployed annuitants generally have their federal salaries reduced by the amount of their CSRS or FERS retirement benefits while they are reemployed. Dual Compensation Waivers Before 1990, there were no exceptions to the prohibition on concurrent receipt of a federal salary and a federal retirement annuity. Since 1990, several types of waiver authority have been provided to allow certain reemployed annuitants to receive their full salaries and full CSRS or FERS retirement benefits. First, the Federal Employees Pay Comparability Act of 1990 ( P.L. 101-509 ) delegated authority to the Director of OPM to waive the prohibition on dual compensation in certain exceptional circumstances and allow a reemployed annuitant to receive both a federal salary and a federal retirement annuity concurrently. Under the 1990 law, the head of an executive branch agency may request that OPM temporarily waive the prohibition on dual compensation on a case-by-case basis for employees in positions for which there is exceptional difficulty in recruiting or retaining qualified employees. If a federal annuitant is reemployed under a waiver that allows concurrent receipt of a federal annuity and a federal salary, he or she accrues no new retirement benefits under CSRS or FERS. Second, the National Defense Authorization Act for Fiscal Year 2004 ( P.L. 108-136 ) delegated to the Secretary of Defense authority to hire federal annuitants without reducing their salaries by the amount of their annuities. The approval of the Director of OPM is not required. Under this law, a federal annuitant hired by the Department of Defense is entitled to receive both a federal annuity and the full salary for the position into which he or she is hired. The reemployed annuitant does not accrue additional CSRS or FERS retirement benefits during the period of reemployment. Finally, the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 ) allowed the head of a federal agency to appoint an individual who is receiving an annuity under CSRS or FERS to a temporary, part-time position in civilian federal employment without the offset to salary otherwise required by law. Employment under this authority is limited to 520 hours of service performed in the 6 months after the date on which the annuity begins; 1,040 hours of service performed in any 12-month period; and 3,120 hours of service performed over the individual's lifetime. The total number of individuals appointed by the head of an agency under this authority may not exceed 2.5% of the total number of full-time employees of the agency. If the total number of appointments exceeds 1% of the number of an agency's full-time employees, the agency must submit to Congress a report explaining why the number of appointments exceeds this threshold. The waiver authority granted under P.L. 111-84 is scheduled to expire on October 27, 2014. Except for cases in which a dual compensation waiver has been granted by the Director of OPM, the Secretary of Defense, or an agency head, a reemployed annuitant's retirement annuity continues during the period of reemployment, and his or her pay is reduced by the amount of the annuity. Reemployed annuitants earn additional retirement benefits while reemployed, unless hired under a waiver granting simultaneous receipt of salary and pension. If the period of reemployment lasts one year or more, the individual is eligible for a supplemental annuity when he or she retires. If the period of reemployment lasts five years or more, the individual can elect a redetermined annuity. Phased Retirement Authority Section 100121 of P.L. 112-141 created a phased retirement authority under 5 U.S.C. §8336a (CSRS) and 5 U.S.C. §8412a (FERS). Phased retirement provides a new personnel option for certain retirement-eligible federal employees covered by CSRS or FERS to work a reduced schedule while receiving a reduced salary as well as a reduced percentage of their CSRS or FERS retirement benefits. Phased retirees, except for phased retirees employed at the U.S. Postal Service, are subject to a requirement that they spend at least 20% of their reduced work hours engaged in mentoring activities. Unlike existing waivers for dual compensation in the situation of reemployed annuitants, phased retirement is designed as a human resources instrument to allow eligible employees to reduce their work hours before they separate from federal service and make up for the reduced salary through receipt of prorated retirement benefits. Phased retirement also provides agencies with another tool to transfer knowledge to newer employees through mentoring. As explained in OPM's final rule for phased retirement, published on August 8, 2014: Phased retirement is designed to assist agencies with knowledge management and continuity of operations in the short term.... Phased retirement is simply another tool to enable agencies to manage their workforce, promote best practices, and encourage experienced employees to spend some time mentoring the next generation of experts. Reduced Work Schedule for Phased Retirement The statutory language for the phased retirement authority sets out a 50% reduced work schedule for participants. Therefore, if an individual's full-time schedule is generally 40 hours per week and 80 hours per pay period, then the reduced work schedule under phased retirement would be generally 20 hours per week and 40 hours per pay period. As a result of the 50% reduced work schedule, individuals receive 50% of their previous salaries when they enter phased retirement. The authorizing law also provides OPM with the authority to offer additional working percentage options for phased retirees of anywhere between 20% and 80%. Under current regulation, however, only the 50% reduced work schedule will be available initially to phased retirees. OPM justifies the present, limited structure of phased retirement work schedules as a consequence of the complexity of implementing this new human resources option. While an employee is in phased retirement, the reduced work schedule may not be changed. Other Restrictions Related to Phased Retirement Retirement-eligible employees may not make more than one phased retirement election during their lifetimes. Phased retirees may not be employed in more than one position at a time; although they may transfer positions within or across agencies only if the transfer does not result in a change in the reduced work hours. Phased retirement may be either open-ended in status or subject to a time limit that is mutually agreed upon by the employing agency and the eligible employee. Agencies have discretion with regard to whether to establish time limits for phased retirement. Phased retirees may submit an application for full retirement at any time. Phased retirees may also request to return to regular employment, which their employing agency must approve. (If the agency does not approve this request, the employee may continue as a phased retiree or enter full retirement.) Agency Approval for Phased Retirement Entry into phased retirement is voluntary for an eligible employee. Phased retirement is not an entitlement; it requires the mutual agreement of the eligible employee and the employee's agency. Federal agencies have the discretion to determine whether to implement phased retirement. Under the implementing regulations, agencies may begin accepting applications from employees for phased retirement beginning November 6, 2014. Eligible employees must secure written approval from the employing agency to enter into phased retirement. Agencies must have written criteria in place that will be used to approve or deny applications for phased retirement. OPM has stated that agency's written criteria may include, but should not be limited to, the following: "Criteria that will be considered when approving requests; Designation of officials with authority to approve requests; Use of time limits as a condition of approval of requests; Positions or geographic locations that may be included or excluded; and Process for handling multiple requests when the agency is unable to approve all requests received." Although agencies have discretion over whether to implement phased retirement and how to structure the written criteria for approval of phased retirement applications, some aspects of the implementation of phased retirement may be subject to collective bargaining arrangements at agencies. Eligibility Requirements for Phased Retirement Not all current federal employees may be eligible to apply for phased retirement. Federal law and regulation set out several types of requirements for participation in phased retirement related to employment status, retirement eligibility, and mentoring. Employment Requirement Only employees covered by CSRS or FERS are eligible for phased retirement. To be eligible for phased retirement, an individual must have been employed on a full-time basis for at least the three-year period prior to entering phased retirement. Excluded Categories of Federal Employees Phased retirement is not available to certain categories of federal employees. In general, these categories of employees are either subject to a mandatory retirement age (e.g., federal law enforcement personnel) or statutorily prohibited from the reduced work schedule. The categories of federal employees excluded from phased retirement include federal law enforcement officers and related positions; federal firefighters; air traffic controllers; nuclear waste handlers; and employees not authorized to work a part-time schedule. Retirement Eligibility Requirement Phased retirement is an option for individuals at the end of their careers who are transitioning into retirement. Therefore, individuals must meet certain age and service requirements related to retirement to be eligible for phased retirement. These retirement eligibility requirements differ between CSRS and FERS employees. To qualify for phased retirement, CSRS employees must have completed at least 30 years of service and be at least 55 years old; or have completed at least 20 years of service and be at least 60 years old. To qualify for phased retirement, FERS employees must have completed at least 30 years of service and be at least the minimum retirement age, which is between the ages of 55 years and57 years (depending on an individual's date of birth); or have completed at least 20 years of service and be at least 60 years old. Mentoring Requirement31 The phased retirement authority includes a requirement that at least 20% of hours worked by a phased retiree must be spent on mentoring, as defined by the employing agency. U.S. Postal Service employees are exempt from this requirement. Federal regulation specifies only that, "mentoring need not be limited to mentoring of any employee who is expected to assume the phased retiree's duties when the phased retiree fully retires." Agencies may waive the mentoring requirement for phased retirement "in the event of an emergency or other unusual circumstances (including active duty in the military forces), that, in the authorized agency official's discretion, would make it impracticable for a phased retiree to fulfill the mentoring requirement." Consequences of Phased Retirement for Federal Employee Benefits Currently, phased retirees are authorized to work 50% of their previous work schedules and receive 50% of their previous federal salaries. In general, a phased retiree is classified as a part-time employee. For the purposes of employee benefits, phased retirees are considered to be working in their previous positions with reduced work schedules. In some circumstances, this reduced work schedule means that phased retirees receive the same employee benefits as they did previously in a full-time position. In other circumstances, the employee benefits of phased retirees are either different or prorated based on their reduced work schedules. Retirement Annuities Under CSRS and FERS While in phased retirement status, individuals receive a phased retirement annuity, which is calculated based on their previous CSRS or FERS service. When phased retirees enter full retirement status, their benefits are recalculated as a composite annuity that incorporates their service while in phased retirement status. Phased Retirement Annuity The phased retirement annuity that an individual receives while in phased retirement status is calculated by multiplying the amount of the CSRS or FERS annuity to which that individual would have been entitled at the time of entrance into phased retirement if he or she had entered full retirement based on years of service to date, expressed using the formula (high-three pay × benefit accrual rate × years of service); and 50% (i.e., 100% minus the reduced work schedule percentage [50%], which equals 50%). For example, the phased retirement annuity of an individual covered by FERS with 20 years of service and a high-three pay measure of $80,000 who enters phased retirement at the age of 62 would be calculated as ($80,000 × 0.011 × 20) × 0.50 = $8,800 per year This phased retirement annuity would be paid in addition to a reduced work schedule salary of $40,000 ($80,000 × 0.50). Additionally, phased retirement annuities are adjusted for inflation; they receive automatic cost-of-living adjustments (COLAs) in the same manner as other CSRS or FERS annuities. To receive credit for military service under CSRS or FERS, any deposits must be made by the eligible individual prior to entering phased retirement status. Finally, phased retirement annuities are not subject to any reduction for the provision of survivor annuities and cannot be the basis for any survivor annuity payments. Composite Annuity When phased retirees enter full retirement, their CSRS or FERS annuities are recalculated as a composite annuity. This composite annuity is calculated by adding the amount of the phased retirement annuity at the time of full retirement, including any COLAs; and the product of 1. the amount of the CSRS or FERS annuity to which an individual would have been entitled to if he or she had worked as a full-time employee until the date of full retirement, expressed using the formula (high-three pay × benefit accrual rate × years of service); and 2. 50% (i.e., 100% minus the reduced work schedule percentage [50%]). The composite annuity calculation includes the crediting of any unused sick leave as well as any reductions for the provision of a CSRS or FERS survivor annuity. For example, the composite annuity of an individual covered by FERS with 20 years of service and a high-three pay measure of $80,000 who entered phased retirement at the age of 62 and was a phased retiree for 1 year with no salary increases, with a COLA to his or her phased retirement annuity of 1%, with the equivalent of 1 year of unused sick leave, and without a survivor annuity reduction would be calculated as ([($80,000 × 20 × 0.011) × 0.50] × 1.01) + ([$80,000 × 22 × 0.011] × 0.50) = $18,568 per year Other CSRS and FERS Issues While in phased retirement status, individuals make the required CSRS or FERS employee contributions based on part-time salary. No FERS annuity supplement is payable to phased retirees. In some circumstances, the FERS annuity supplement may be paid after a phased retiree fully retires and begins receiving a composite annuity. Thrift Savings Plan53 Phased retirees continue to be eligible to participate in the Thrift Savings Plan (TSP). They are eligible to make employee contributions and subject to the same restrictions regarding loans and withdrawals as other employees. Phased retirees are not considered retirees for the purposes of making withdrawals from their TSP accounts. All types of TSP contributions—including employee contributions, agency automatic contributions (for FERS phased retirees) and agency matching contributions (for FERS phased retirees)—for phased retirees will be based on pay and not on any portion of the phased retirement annuity payment. Federal Employees Health Benefits Program54 Phased retirees are considered to be working full time for the purposes of the Federal Employees Health Benefit Program (FEHBP). Consequently, FEHBP coverage continues into phased retirement status. FEHBP premiums also remain the same in phased retirement, as they continue to be based on full-time employment. Employees and employing agencies pay the same amount as they did prior to phased retirement status. Additionally, federal service during phased retirement is creditable toward the five years of service required to continue FEHBP as an annuitant. Federal Employees' Group Life Insurance58 For the purposes of coverage under the Federal Employees' Group Life Insurance (FEGLI), phased retirees are also considered to be working full time. FEGLI premiums continue to be based on full-time employment for phased retirees. Additionally, phased retirees receive FEGLI benefit coverage amounts as if they were full-time employees. Annual Leave and Sick Leave61 Phased retirees accrue leave in the same way as part-time employees; both annual leave and sick leave accrual are prorated during phased retirement. Because they are required to have more than 15 years of service, phased retirees will accrue 1 hour of annual leave for every 10 hours in pay status and 1 hour of sick leave for every 20 hours in pay status. Working a 50% reduced work schedule, a phased retiree who works 40 hours per pay period would accrue 4 hours of annual leave and 2 hours of sick leave per pay period. A phased retiree does not receive a lump-sum payment for annual leave when entering phased retirement. Instead, this lump-sum payment is made in full when the phased retiree moves into full retirement status. Consequently, an employee's annual leave balance is maintained upon entering phased retirement status. Unused sick leave is not included in the computation of the phased retirement annuity. Therefore, the balance of an individual's sick leave is maintained upon entering phased retirement status. Sick leave accrued before and during phased retirement is then included in part of the composite annuity calculation when phased retirees enter full retirement status.

On July 6, 2012, P.L. 112-141, the Moving Ahead for Progress in the 21st Century Act (MAP-21), was signed into law. Section 100121 of P.L. 112-141 provides authority for a new phased retirement option for certain federal employees. Phased retirement allows eligible, full-time employees covered by the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS) to move to a part-time work schedule while simultaneously receiving partial retirement benefits. Employees participating in phased retirement, with the exception of U.S. Postal Service employees, must spend at least 20% of their work hours engaged in mentoring activities. Phased retirement is not an entitlement; eligible federal employees must apply and receive approval from their employing agencies to enter phased retirement. Under the implementing regulations adopted by the Office of Personnel Management (OPM) on August 8, 2014, phased retirement will initially be structured as a 50% work schedule, with the participating employee receiving 50% of his or her federal salary and about 50% of his or her federal pension benefit (also referred to as an annuity). Employing federal agencies may accept applications from employees for this new phased retirement option beginning November 6, 2014. This report provides background on dual compensation (i.e., concurrent receipt of both a federal salary and a federal pension); an overview of the phased retirement authority under P.L. 112-141; a summary of eligibility requirements for employee participation in phased retirement; and an explanation of the consequences of phased retirement status for employee benefits.

Introduction Founded in 1961, the Peace Corps sends American volunteers to serve at the grassroots level in villages and towns across the globe to meet its three-point legislative mandate of promoting world peace and friendship by improving the lives of those they serve, helping others understand American culture, and sharing their experience with Americans back home. To date, more than 230,000 Peace Corps volunteers have served in 141 countries. As of the end of September 2017, 7,376 volunteers were serving in 65 nations. Jody Olsen is the current Director of the Peace Corps. In 2018, the 115 th Congress may consider the President's FY2019 funding request for the Peace Corps, changes to the Peace Corps authorization legislation, and related issues. This report will be updated as events warrant. Congressional Actions FY2019 Appropriations On February 12, the Trump Administration issued its FY2019 budget request, including $396.2 million for the Peace Corps, a 3% cut from the FY2018 level. Congress has yet to enact a full FY2019 Peace Corps budget, and the agency is currently being funded at the FY2018 level through a continuing resolution that expires on December 7, 2018 ( P.L. 115-245 , Division C). Both the House and Senate committee-approved funding bills ( H.R. 6385 and S. 3108 ) for FY2019 would maintain Peace Corps funding at or above the FY2018 level. FY2018 Appropriations On May 23, 2017, the Trump Administration issued its FY2018 budget request, including $398.2 million for the Peace Corps, a cut of $11.8 million (-2.9%) from FY2017 enacted levels. According to the Administration, the request level would support a level of roughly 7,470 volunteers. Of the request, $15 million would potentially be used to support the relocation of the Peace Corps headquarters office. On July 19, 2017, the House Committee on Appropriations approved its version of the FY2018 State, Foreign Operations and Related Programs (SFOPS) appropriations ( H.R. 3362 ), providing $398.2 million for the Peace Corps, matching the Administration request. On September 7, 2017, the Senate Committee on Appropriations reported its version of the FY2018 SFOPS appropriations ( S. 1780 ), providing $410 million for the Peace Corps. On March 23, 2018, the Consolidated Appropriations, 2018 ( P.L. 115-141 ), was signed into law, providing $410 million for the Peace Corps, the same level as in FY2017, 3% above the Administration request of $398.2 million. Authorization Legislation Despite repeated efforts during the past decade, Congress has not enacted a new Peace Corps funding authorization. The last such Peace Corps authorization ( P.L. 106-30 ), approved in 1999, covered the years FY2000 to FY2003. Appropriations bills, however, routinely waive the requirement of authorization of appropriations for foreign aid programs, as the Consolidated Appropriations Act, 2017 (§7022), did in the case of FY2017 unauthorized foreign aid program appropriations, including those for Peace Corps. The last time both House and Senate took action to authorize funding levels for the Peace Corps was in 2011. Neither bill, S. 1426 or H.R. 2583 , saw floor action. Sam Farr and Nick Castle Peace Corps Reform Act of 2018 . Legislation was introduced in both the House and Senate in the 115 th Congress to address a range of issues, most regarding volunteer health and safety. S. 2286 (the Nick Castle Peace Corps Reform Act of 2018), approved by the Senate March 13, 2018, and sent to the House Foreign Affairs Committee for further consideration, sought to improve volunteer health care by mandating implementation of inspector general recommendations and calling for a review of health care performance and delivery, among other requirements. Additional provisions would expand exceptions to the five-year rule for certain specialized fields, require consultation with Congress prior to opening or closing country programs, allow independent inspector general review of volunteer deaths, and ensure disclosure of crimes and risks to volunteers to Peace Corps applicants. A House bill, H.R. 2259 (the Sam Farr Peace Corps Enhancement Act), aimed to increase compensation benefits to disabled volunteers, inform applicants of crime and other risks, and mandate a report on volunteer access to health care benefits, among other items. The two bills were combined into the Sam Farr and Nick Castle Peace Corps Reform Act of 2018 ( H.R. 2259 ), which was approved by the House on July 10, 2018, and the Senate on September 24, 2018, and was signed into law on October 9, 2018 ( P.L. 115-256 ). Peace Corps Policy and Administration Peace Corps 2009-2016 The two Peace Corps directors who served during the Obama Administration undertook a wide range of reforms addressing operational concerns. Many of these reforms were drawn from the 64 recommendations made in a comprehensive assessment of agency operations and procedures conducted by the Peace Corps in response to a 2009 congressional directive. As a result of the comprehensive assessment, the Peace Corps took steps to rationalize its selection of host countries by establishing clear criteria for entry and a formal annual portfolio review of all countries in which it operates. It introduced a new monitoring and evaluation policy, including agency-wide standard indicators to allow reporting on common results across projects and countries. To strengthen volunteer medical care, Peace Corps hired new Regional Medical Officers and established a Health Quality Improvement Council. To increase staff effectiveness, the agency instituted a reorganization of country desk positions, a results-oriented performance appraisal program, and a revision of tour lengths to five years from the original 30 months. Of the many other reforms, several are particularly noteworthy Volunteer composition: generalists. The Peace Corps is a volunteer force composed largely of generalists. For much of its history, more than 80% of volunteers have been recent college graduates under the age of 30. While some have argued that the Peace Corps should alter its composition to meet the increasing needs of developing countries for educated specialists, the assessment team decided, with some exceptions noted below, to accept demographic reality and the constraints of career paths in the United States that would likely limit the number of older specialists available to it. In lieu of a specialist volunteer force, the assessment team suggested that Peace Corps focus more on doing what volunteers do best, what communities most want, and what volunteers can best be trained to do. It recommended Peace Corps take steps to improve the quality of the available volunteer force and its potential impact by adopting a so-called Focus in/Train up strategy in which a more narrow scope of work assignments is defined and technical training is strengthened in those areas. Up to 2010, volunteers worked in 50 different technical programs from which as many as 211 different project plans had been developed for each of which volunteers in that project had to be trained. Since the report was issued, Peace Corps has reduced the number by at least 24%. Further, the Peace Corps increased preservice training by about one week in FY2011 compared to FY2009. Volunteer composition: specialists. Both to meet needs of countries that might require greater expertise and experience and to best attract and utilize those volunteer applicants that possess a higher level of skills than the norm, the assessment team recommended use of the Peace Corps Response Program as an exception to the agency emphasis on generalists. The Peace Corps more than doubled the size of the Response Program and opened it to highly qualified individuals without previous Peace Corps experience. It has maintained the program's flexible time commitments (i.e., less than the usual 27 months for regular volunteers) and is using it in both regular Peace Corps countries as well as in countries where there is no standard Peace Corps presence. The Peace Corps established a Global Health Services Partnership under the Response Program to recruit physicians and nurses as adjunct faculty in medical and schools in developing countries—the first such volunteers were posted to Malawi, Tanzania, and Uganda in July 2013. Volunteer recruitment. As part of the strategy's support for efforts to better meet developing country volunteer needs and attract the best volunteer candidates, the agency has sought to improve its recruitment and placement process and strengthen diversity outreach. A new online application platform was launched in 2012, and a new medical review management system was established to facilitate medical clearance. A new, simpler application form was introduced in 2014 that has greatly increased the number of applications (see below). "Third goal." In line with the assessment, the Peace Corps has sought to more fully and effectively address the so-called "third goal," the mandate that Peace Corps volunteers "help promote a better understanding of other peoples on the part of Americans" (Peace Corps Act, P.L. 87-293, §2). This objective has always received less attention and funding (less than 0.4% of the FY2017 budget) than the other two goals of assisting development and promoting understanding of Americans to the people served, both aspects which focus on the agency's work abroad. "Third goal" activities include efforts by volunteers and former volunteers, sometimes forming country member groups, to convey their experiences through blogs, public talks, community service in the United States, and charitable fundraising. Most prominent among agency-sponsored activities is the Paul D. Coverdell World Wise Schools program, which connects volunteers with school classrooms throughout the United States. Although funding remains small, the agency established an Office of Third Goal and Returned Volunteer Services that has encouraged greater participation by volunteers and former volunteers. Annually, hundreds of returned volunteers speak at schools in their communities, and the number of schools participating in third goal activities rose by nearly 200% between FY2009 and FY2013. Partnerships . During the Obama Administration, Peace Corps made efforts to build new partnerships with international organizations, U.S. government agencies, and others. In September 2012, for example, the Peace Corps established its first global partnership with a corporation, Mondelez (formerly Kraft Foods), to support agriculture and community development. As it has continued to do with the George W. Bush-era PEPFAR (President's Emergency Plan for AIDS Relief) and President's Malaria initiatives, the Peace Corps plays a significant role implementing at the village level Obama presidential foreign assistance initiatives, including the Feed the Future food security initiative and the Let Girls Learn initiative, which seeks to expand access to education for girls internationally. It established a new Peace Corps Let Girls Learn Fund to help support volunteer activities in this sphere. Strategic Plan: FY2018-FY2022 The Peace Corps Strategic Plan for the period FY2018 to FY2022 poses six strategic and management objectives meant to further the agency's three long-standing legislative goals. Each objective is associated with performance goals and identified measures of progress in achieving them, the results of which are to be published in the years to come. The objective of promoting sustainable change in the communities in which volunteers work is measured by the percentage of projects with documented gains in community-based development outcomes. Underlying that indicator are efforts made in recent years to describe and document expected volunteer contributions to host community development goals. Another indicator of sustainable change performance will be the result of annual impact studies, an innovation launched in 2008 and used to develop best practices for agency programs. Other objectives are to enhance volunteer effectiveness (indicators include improved language learning, an improved site management system, and strengthened project planning); to optimize volunteer resilience (indicators include increasing volunteer capacity to manage adjustment challenges and efforts to establish realistic expectations of service); to build leaders for tomorrow (measured in part by the number of opportunities for returned volunteers to engage in continued service); to improve agency services; and to proactively address agency risks through evidence-based decisionmaking (risks including safety and security of volunteers, risks to IT infrastructure, and emergency preparedness and response). Issues Budget and Expansion In 1985, Congress made it the policy of the United States to maintain, "consistent with programmatic and fiscal considerations," a Peace Corps volunteer level of at least 10,000 individuals. Such numbers had not been reached since the 1960s, and, although the objective has been reiterated by three Presidents since 1985—Clinton (1998), George W. Bush (2002), and Obama (2010)—Congress has not provided the necessary funding. Although there appears to be broad support for the agency, when considering proposed funding increases, Congress has had to weigh whether sufficient funds were available vis-à-vis other foreign aid priorities to warrant appropriating the amounts sought for the Peace Corps. Despite a 2002 expansion initiative by President Bush to double its size to about 14,000 volunteers within five years, the Peace Corps saw only a 16% increase in volunteer numbers between 2002 and 2009. In early 2010, the Obama Administration proposed a more modest objective of a 9,400-volunteer force by 2012 and 11,000 by 2016. Annual incremental funding increases and a significant congressional bump-up in FY2010 funding helped lead to an FY2010 volunteer level of 8,655, a 13% increase from the previous year and the highest level since 1970. At end of September 2011, volunteer numbers reached 9,095. Between FY2011 and FY2014, however, Peace Corps appropriations retreated and the volunteer level dropped to 6,818, a 25% decline ( Table 1 ). The FY2016 budget marked the first significant rise in the Peace Corps budget since FY2011—an 8% increase—which brought the volunteer level to 7,213. The Peace Corps FY2014 to FY2018 strategic plan called for a 10,000 volunteer level by FY2018; the FY2018 to FY2022 plan does not mention a specific volunteer level goal. Volunteers, Programming, and Support A continual concern for Congress over the years has been Peace Corps management, including how the Peace Corps addresses the makeup of the volunteer force, programming of volunteer project assignments, and support of volunteers in implementing those projects. This concern was particularly acute in the context of expansion efforts, as it was used as an argument by Congress for not meeting the George W. Bush Administration's funding requests that would enable doubling the size of the agency. Congress responded similarly to Obama Administration expansion plans. The 2009 House Appropriations Committee report on the FY2010 State, Foreign Operations appropriations ( H.Rept. 111-187 ) asked the Peace Corps to review its management practices in order to accommodate larger numbers of volunteers, and the Senate's Peace Corps Improvement and Expansion Act of 2009 ( S. 1382 ) similarly aimed to ensure that the Peace Corps was prepared to deal with the whole range of management issues such an expansion would entail. As noted above, the FY2010 Consolidated Appropriations Act ( P.L. 111-117 , Division F) required the Peace Corps to submit a report assessing its operational model and proposing a strategy for reform (i.e., the comprehensive assessment, which the Peace Corps largely implemented between 2010 and 2014). The Volunteer Force The volunteer force is considered the core of the Peace Corps. Aspects of its composition have been a focus of interest in Congress over the years. In FY2017, 63% of volunteers were women, 29% were minorities, 98% were single, and the average age was 28. Volunteers who were 50 years of age or older made up 6% of the force . Volunteers come from every state; on a per capita basis (number of volunteers per 100,000 residents), the top providers of volunteers in FY2017 were the District of Columbia, Vermont, Montana, Oregon, Rhode Island, Virginia, Maryland, Washington, Maine, Colorado, and Minnesota. Countries of Service The countries with the highest number of volunteers currently are Ukraine, Zambia, Senegal, Mozambique, Tanzania, Paraguay, Morocco, and Panama. As might be expected from an agency focused in part on development, a large portion of the volunteer force serves in sub-Saharan Africa (46% in FY2017). Another 22% of volunteers work in Latin America/Caribbean, 16% in Asia and Pacific, 13% in Europe, and 3% in North Africa (see Figure 1 ). Political instability and safety concerns preclude a volunteer presence in the Middle East. In recent years, a Peace Corps program was launched in Burma. In 2016, Peace Corps announced the still-pending opening of a program in Vietnam. Programs The Peace Corps maintains two types of volunteer programs. About 96% of volunteers serve in the traditional 27-month program, including three months of language, skill, and cultural training. Most of these volunteers are recent college graduates with a "generalist" background. In 1996, Peace Corps introduced the Peace Corps Response Program (formerly Crisis Corps), which draws on "returned" (i.e., former) volunteers (RPCVs) and, since 2012, those with specialist professional backgrounds who have never been volunteers, for short-term (three-month to one-year) emergency, humanitarian, and development assignments at the community level with nongovernmental relief and development organizations. To date, more than 2,500 Peace Corps Response volunteers have served in 70 countries, including post-tsunami Thailand and Sri Lanka and post-earthquake Haiti. At the end of FY2017, there were 259 Peace Corps Response volunteers in 30 countries. A subset of Peace Corps Response is the Global Health Services Partnership, launched in 2013. The partnership provides doctors and nurses as adjunct faculty in medical schools in developing countries. Volunteers currently serve one-year terms of service in Liberia, Malawi, Swaziland, Tanzania, and Uganda. Peace Corps volunteers work in a range of program sectors. In FY2017, 41% worked in education, 20% in health, 11% on programs focused on youth, 8% on environmental programs, 8% in community economic development, 8% in agriculture, and 4% were in Peace Corps Response (see Figure 2 ). Peace Corps volunteers have played and continue to play a significant role in implementing presidential aid initiatives at the village level. Health workers facilitate the efforts of President George W. Bush's President's Emergency Plan for AIDS Relief and his President's Malaria Initiative; agriculture volunteers have assisted President Obama's Feed the Future food security initiative; and education and youth workers are active in the Let Girls Learn initiative, which seeks to expand access to education for girls internationally. Most volunteers (85% in 2010) are recent college graduates with little professional experience. The Peace Corps, while adept at recruiting generalists and providing them with sufficient training to carry out useful assignments, has not emphasized the provision of highly skilled professionals, such as doctors, agronomists, or engineers, which, some argue, more accurately reflects the current needs of developing countries and which the agency might be under greater pressure to supply if it intends to expand volunteer numbers. Weighed against this view is the belief that the Peace Corps is an agency of public diplomacy as much as it is a development organization, and personal interaction and demonstration of U.S. values is as important as providing specialized technical expertise. The 2010 assessment team recommended that the Peace Corps accept the demographic features that have long characterized the volunteer force and, while embracing the use of generalists, seek to strengthen their capabilities through better training and more focused sector activities. At the same time, the team recommended continued efforts to utilize experienced and skilled volunteers through innovative approaches. In particular, it suggested that the Peace Corps Response Program be used as a platform for new, more flexible, programs that may accommodate different types of volunteers. The new Global Health Services Partnership providing doctors and nurses is one result. Whatever the skill sets and demographic characteristics sought by the agency, it is the recruitment of volunteers with appropriate skills and willingness to live in unfamiliar and sometimes uncomfortable conditions that is essential to the overall mission of the Peace Corps. A substantial spike in applicants and those expressing interest in applying since September 11, 2001, made it easier for the Peace Corps to meet its recruitment goals. In FY2009, 15,386 applied to be volunteers, compared with 8,897 in FY2001. However, application volume declined to 10,131 in FY2013. Following a significant change in the application process in 2014—introduction of a shorter form and applicant ability to choose their country and sector of service—the number of applications for the two-year volunteer program rose to a 22-year record high of 17,336 (in FY2014). The number was 20,935 in FY2017. Programming and Support The Peace Corps was criticized in the past for providing inadequate programming and support of volunteers. A 1990 Government Accountability Office (GAO) investigation noted that some volunteers had little or nothing to do or had spent six or more months developing their own assignments, without benefit of site visits by Peace Corps staff. The GAO attributed the programming problem to a failure of planning, evaluation, and monitoring systems. Since then, the Peace Corps has addressed these weaknesses with systematic approaches to project development, annual project reviews, and increased opportunities for site visits and volunteer feedback. While most volunteers do rate their overall experience highly, volunteer anecdotal accounts suggest some degree of poor programming and staff support still occur. The 2017 volunteer survey found that only 68% of volunteers felt they had enough to do at their work site, and 22% were dissatisfied with support received from Peace Corps staff in site selection and preparation. Recurrent problems identified in Inspector General country program evaluations are ineffective volunteer training, poor site development practices, inadequately implemented safety and security procedures, and limited coordination with country ministries and project partners. One sign of volunteer dissatisfaction is the cohort resignation rate—19% of those who entered service in FY2014 resigned prior to completing their term, a two-percentage-point bump up from the previous year but a significant decrease from the FY2005 cohort level of 27.6%. The 2010 assessment report discussed but did not thoroughly explore causes of volunteer dissatisfaction and resignation, noting that 97 recommendations to reduce it had been made in previous studies since 1969, many of which had been adopted. It also did not address questions regarding the quality of volunteer assignments. However, the report did offer possible avenues that might help correct these concerns, such as improving volunteer and staff training, developing initiatives to better utilize skilled and experienced volunteers, encouraging third-year extensions, and strengthening program evaluation and oversight. The agency has adopted reforms in all these areas. More recently, the Peace Corps has identified the top five drivers of volunteer satisfaction with site selection and preparation as (1) community members were prepared for the volunteer's arrival, (2) work is meaningful, (3) work matches the volunteer's skills, (4) sufficient work is available, and (5) work relates to community needs. As the agency has become more data-driven, it is trying to quantify these points and measure progress toward achieving them. Safety and Security The safety and security of volunteers has long been a prime concern of the Peace Corps. Because of where they live and work, Peace Corps volunteers appear to many Americans to be especially vulnerable to crime. The threat of anti-American terrorism in the years following the terrorist attacks on September 11, 2001, has increased that perception. Fears were further raised in 2003 when the Dayton (Ohio) Daily News ran a series of reports suggesting that the Peace Corps was failing in its obligation to provide adequate security; a congressional hearing was held and legislation was approved by the House ( H.R. 4060 , June 2004) that sought to address this concern. In January 2010, the issue of safety and security received renewed public attention due to two reports on the ABC television newsmagazine 20/20 , one concerning the 2009 murder of volunteer Kate Puzey in Benin and the other addressing the rape of volunteers. The stories catalogued incidents illustrating failure of some Peace Corps staff to maintain whistleblower confidentiality, inaction in response to volunteer reports of threatening behavior, a lack of compassion for victims of crime, a tendency to blame the victim, and insensitivity to the parents of a crime victim. Following the 20/20 reports and a House hearing on the subject held on May 11, 2011, more rape victims came forward with stories further suggesting disregard for the victims and a possible institutional failure to offer adequate support. While expressing support for the Peace Corps mission, First Response Action, an organization representing volunteer victims, sought stronger actions to reduce assault incidents and better address the needs of victims where assaults occur. In 2011, several pieces of legislation were introduced in the House and Senate that sought to answer this call. On November 21, 2011, the Kate Puzey Peace Corps Volunteer Protection Act of 2011 was signed into law ( P.L. 112-57 ). Peace Corps Inspector General Report The concerns generated by the 20/20 reports and victims' accusations followed on the heels of a Peace Corps IG report on volunteer safety and security released in April 2010. While noting that the Peace Corps had made significant changes in its safety and security program since 2002 and "maintained a much larger safety and security workforce than comparable international nongovernmental organizations," the IG "identified multiple areas where Peace Corps needed to improve," mostly including a lack of effective processes, standardized training, and skilled personnel to manage and implement discrete aspects of its safety and security programs. Perhaps most troubling, the IG found numerous instances between FY2004 and FY2009 of reoccurring evaluation findings, such as posts not thoroughly completing housing/site inspections, volunteers engaged in unsafe behaviors, various cities where volunteers were in locations considered unsafe, and inadequate emergency action plans, suggesting problems in safety and security program compliance over the long term. The IG report made 28 recommendations. Among these were that the Peace Corps Director should establish clear lines of authority to ensure that the Office of Safety and Security can manage the safety and security program; that the Director adequately track Safety and Security Office recommendations to make sure they are being met; that the chief compliance officer establish a process to identify reoccurring problems and take steps to address them; that the role, number, and salaries for Safety and Security Coordinators be reviewed to ensure agency needs are met; that the Office of Safety and Security develop and implement a training program for Officers and Coordinators based on needed skills; that the Office of Safety and Security develop a comprehensive plan that includes the agency's safety and security strategy, risks, and policies to mitigate those risks; that volunteers be provided with a consolidated handbook on the basic principles of volunteer safety during the recruitment and staging process and be required to sign a code of conduct on basic security principles before departure; and that a formal agreement be reached with the Department of State's Bureau of Diplomatic Security clarifying roles of each agency. As of July 2012, the Peace Corps had implemented all 28 of the IG's recommendations. The Peace Corps' Response to the 20/20 Stories and Victims' Charges Following the television programs, the Peace Corps Director issued statements noting that the programs did not accurately reflect Peace Corps policy and practice regarding the safety and security of volunteers. The Peace Corps immediately issued a formal Commitment to Sexual Assault Victims , which included, among other things, promises to treat victims of sexual assault with dignity and respect, to take appropriate steps to provide for their safety, to support volunteers in their recovery, and to work closely with them in decisions regarding continuation of service. The Director of the Peace Corps also offered apologies to the family and friends of the murder victim if the agency could have been more compassionate. In addition to noting its ongoing efforts to improve on its safety record and better serve volunteers, the Peace Corps pointed out that volunteers themselves in their annual survey had regularly reported feeling "usually safe" or "very safe" where they live and where they work; the 2010 survey showed that 87% and 92% of respondents felt "usually safe" or "very safe," respectively, where they lived and where they worked. The Peace Corps asserted that its operating procedures in response to sexual assault and training offered to volunteers had resulted in "a significant decline in the incidence of rape and major sexual assault among Volunteers over the past 14 years." According to the Peace Corps, between 1997 and 2009 there was a 27% decline in the incidence of rape and attempted rape and a 34% decline in the incidence of major sexual assault. A statement issued by the Peace Corps claimed that there were procedures in place "to respond quickly and compassionately to Volunteers." Further, the Peace Corps had taken a number of steps to improve its procedures in the months following the 20/20 reports. These are discussed below. Processes to Address Safety and Security The Peace Corps has always had in place various procedures and processes to address the issues of volunteer safety and security, but such efforts have been particularly pronounced in the past decade. Following a 2002 Government Accountability Office (GAO) finding that "Peace Corps efforts to ensure effective implementation of its safety and security policies have produced varying results," the Peace Corps launched numerous initiatives—including establishment of a stand-alone Safety and Security Office to direct and oversee all security programs, deployment of U.S. direct hire field-based safety and security officers and local hire safety and security personnel, and appointment at headquarters of regional desk officers and a chief compliance officer to monitor compliance with new security rules and procedures. Nonetheless, GAO reported on March 24, 2004, that some "unevenness" in compliance with procedures mandated by headquarters likely remained. Peace Corps has taken additional steps to improve safety and security, most notably, in 2008, establishing a Sexual Assault Working Group to examine risk factors, analyze training, and adopt best practices to reduce risk and address victims' needs. In late 2010, the agency approved establishment of a victim's advocate position in response to suggestions from returned volunteers. The advocate supports volunteer victims of crime, from the crime through post-Peace Corps service, including helping them sort through the red tape to receive postservice health benefits. In February 2011, the Office of Safety and Security issued a document on Guidelines for Responding to Rape and Major Sexual Assault that captures the policies and procedures in place to assist and respond to volunteer rape or major sexual assault. Peace Corps staff are expected to serve as advocates for the volunteer and ensure "that what happens next is in the Volunteer's best interest." This includes ensuring a safe environment and emotional stability, providing medical care and counseling, and helping preserve a volunteer's right to prosecute. Between April and November 2012, over 350 staff abroad were trained on these protocols. Many of these efforts were strengthened or added to as a result of the 2011 Kate Puzey Volunteer Protection Act discussed below. In two November 2013 reports on the status of implementation of aspects of the Kate Puzey Act—specifically sexual assault training and the agency's sexual assault policy—the Peace Corps IG found that "many elements of the Peace Corps' sexual assault policy are in place, but full compliance with the Kate Puzey Act remains a work in progress." Sexual assault training conforming to existing best practices was being provided to all 27-month volunteers. Returning to the issue in a November 2016 evaluation report, the Peace Corps IG found that, "compared to our ... evaluation in 2013, the Peace Corps markedly improved how it supported Volunteers who had reported a sexual assault." In its October 2015 report, the Peace Corps Sexual Assault Advisory Council, made up of 19 outside experts on the subject and RPCVs, lauded the agency's commitment to Kate Puzey Act mandates. In 2017, the volunteer survey showed 93% and 96%, respectively, felt "safe," or "very safe" where they live and where they work. 2011 Legislation on Safety and Security Both House and Senate authorizing committees responded to the safety and security issue by holding hearings in 2011 and by introducing several pieces of legislation amending the Peace Corps Act, most notably S. 1280 , the Kate Puzey Peace Corps Volunteer Protection Act of 2011, signed into law on November 21, 2011, as P.L. 112-57 . The Kate Puzey Act specifies that volunteers receive sexual assault risk reduction and response training, including training tailored to the country of service covering safety plans in the event of an assault, medical treatments available, medevac procedures, and information on the legal process for pressing charges. Peace Corps applicants are to be provided with a historical analysis of crimes and risks in the proposed country of service. Trainees will be provided with contact information of the Inspector General for purposes of reporting violations of the sexual assault protocol and of the victims advocate. The bill requires that sexual assault protocols and guidelines be developed by the Peace Corps director and training be provided to staff regarding implementation of the protocol. Volunteers can request removal from a site, which would then be evaluated for its safety. Sexual response teams are established to respond to reports of sexual assault by volunteers. Alternative reporting systems are established that allow volunteer anonymity. A victims advocate position is established to assist sexually assaulted volunteers and facilitate access to available services. A Sexual Assault Advisory Council is established, composed of returned volunteers and experts on sexual assault, to review training and policy to ensure they conform to best practices. An annual survey is to be conducted regarding the effectiveness of Peace Corps programs and safety. A process is established to allow reports of incidents while protecting the confidentiality of volunteers. It is required that the Peace Corps and State Department Bureau of Diplomatic Security agree to a memorandum of understanding on the duties and obligations of each with respect to protection of Peace Corps volunteers and staff. And, a report on safety and security is to be submitted annually to Congress. The Sam Farr and Nick Castle Peace Corps Reform Act of 2018 requires detailed review and reporting related to the death of any volunteer, additional disclosures about crime and security risks to potential volunteers, and new documentation requirements related to sexual assault and harassment of volunteers. Instability, Terrorism, and Evacuations The Peace Corps has been particularly concerned in recent years with threats of terrorism and civil strife and has responded by upgrading communications, testing emergency action plans, and other security measures. The Peace Corps addresses these larger security concerns, including natural disasters or civil unrest, through country-specific Emergency Action Plans (EAP) that are to be in place in each Peace Corps country. The plan, to be tested and revised annually, defines roles and responsibilities for staff and volunteers, explains standard policies and procedures, and lists emergency contact information for every volunteer in country. Evacuations and closure of missions to ensure the well-being of volunteers have constrained the growth of the Peace Corps. Since 2000, volunteers have been evacuated from at least 17 countries. Most often, evacuations were due to cases of political instability and civil unrest. In April 2012, volunteers were withdrawn from Mali and the program suspended in response to the political and security crisis in that country. It reopened in 2014, but was temporarily suspended again in November 2015 and officially suspended in January 2016. Niger has been similarly suspended since January 2011. Start-up of a new Peace Corps program in Tunisia was delayed due to the attack on the U.S. Embassy in that country in September 2012 and ongoing political and security uncertainties; the program was suspended in 2013. In 2014, programs were suspended in Kenya and Ukraine due to security concerns and in Guinea, Liberia, and Sierra Leone due to the Ebola outbreak. Peace Corps Response volunteers are currently serving in Liberia, and volunteers returned to Ukraine in May 2015, Guinea in January 2016, and Sierra Leone on March 2016. In February 2015, Peace Corps announced a suspension of its Jordan program due to the "current regional environment." Crime is another factor in agency evacuation decisions. The Peace Corps suspended its 117-volunteer program in Kazakhstan in mid-November 2011 "based on a number of operational considerations," according to an agency press release. Volunteer reports suggest that rapes and terrorist attacks may be the specific cause. Due to concerns regarding the prevalence of drug and organized crime-related violence in Central America, the Peace Corps announced in December 2011 that it would send no new volunteers to Honduras, Guatemala, and El Salvador while it conducted a review of its operations and the security environment in those locations. In the case of Honduras, serving volunteers were withdrawn on administrative leave and completed service while the review was ongoing. The review was completed in February 2012, and the program in Honduras was formally suspended in September 2012 and closed in FY2014. Peace Corps resumed sending new volunteers to Guatemala and El Salvador in 2013 at reduced levels. To address safety concerns in Guatemala and El Salvador, volunteer operations were consolidated in safer geographical areas, alternative volunteer transportation was devised, and training and support was enhanced. However, in January 2016, the El Salvador program was suspended due to an increase in violence in that country. Most recently, the program in Burkina Faso was suspended in September 2017 for security concerns, and volunteers in Nicaragua were evacuated in April 2018 for safety concerns. Despite the appeal of using Peace Corps volunteers to convey U.S. culture and values directly to the grassroots of Islamic countries, many of these countries of U.S. foreign policy interest might be considered unsafe for Americans over the foreseeable future. Nonetheless, it should be noted that, according to the Peace Corps, in FY2016, about 16% of all volunteers served in countries with Muslim populations of over 40%. In FY2010, the Peace Corps launched a program in Indonesia, the most populous Muslim country in the world. In general, the Peace Corps has argued that the close interpersonal relationship between volunteers and members of their host country community helps to make them safe. Volunteer Access to Abortion While the annual Peace Corps appropriations language since 1979 has prohibited funds from being used to pay for abortions, the Obama Administration's budget requests for FY2014 and succeeding years proposed language that would allow health insurance coverage for volunteers in cases of rape, incest, and when the mother's life is endangered. Opponents of the proposal argued that its adoption would be an expansion of abortion services by the federal government. The argument made for paying for abortions under the restricted circumstances is that private insurance offered to federal employees, including those administering the Peace Corps program, covers abortions in the case of rape, incest, and when the mother's life is endangered. Volunteers, however, are considered federal employees only for certain very narrowly defined purposes such as legal liability, baggage transport, and check cashing eligibility. Abortions therefore can be excluded from volunteer health care, although all other care—primary care, hospitalization, medical evacuation, all prescriptions including birth control, and dental care needs—is provided directly by the Peace Corps either through its Medical Officer or insurance. Authorization legislation reflecting the Obama Administration's 2013 proposal that would have amended the Peace Corps Act to apply the same abortion restrictions to volunteer health care insurance as currently apply to federal employee health plans was introduced in both House and Senate in the 113 th Congress— S. 813 (Lautenberg), H.R. 4578 (Lowey), and S. 2291 (Shaheen). No similar authorization was introduced in the 114 th or 115 th Congresses. The Consolidated and Further Continuing Appropriations Act, 2015 ( H.R. 83 , P.L. 113-235 , Division J), contained a provision that would allow exceptions to the prohibition on funding abortions in the case of rape, incest, or endangerment to the life of the mother. However, as appropriations language, the provision applied only to FY2015 funding. The provision has been repeated in the years since then, including the FY2018 Consolidated Appropriations Act ( P.L. 115-141 , Division K). Volunteer Health Care Periodically, concerns have been raised regarding the quality of health care provided to volunteers during service as well as health care benefits offered to RPCVs who have illnesses connected to their service. The Peace Corps provides serving volunteers with comprehensive health care—routine care provided by a medical officer at each post and emergency care provided as deemed advisable, including medical evacuation to the United States. The agency has taken a number of steps in recent years to improve the quality of this care—providing direct communication between volunteers and medical professionals at headquarters, improving the supervision and hiring of medical officers, initiating electronic medical records, and strengthening malaria prevention and treatment efforts, among other moves. The 2017 Volunteer Survey found 71% of volunteers satisfied or very satisfied with medical support provided by the Peace Corps. One concern of serving volunteers has been the use of mefloquine, an antimalarial medication that may incur serious side effects. In March 2015, a former volunteer sued the Peace Corps for providing the drug without appropriate warnings. The Peace Corps disputes this point and further notes that its policy is to monitor closely for tolerance and to offer changes in medication if requested. RPCVs with maladies attributable to their Peace Corps service have long complained of inadequate support from Peace Corps and considerable frustration trying to obtain the health services for which they are eligible. Former volunteers with volunteer-related health problems are supposed to file claims under the Federal Employees' Compensation Act (FECA) and work with the Department of Labor (DOL) Office of Workers' Compensation Programs (OWCP) to have those claims adjudicated. The Peace Corps itself is responsible for reimbursing DOL. The length and complexity of the established process, compounded by OWCP's perceived lack of understanding of volunteer service and the types of illnesses characteristic of work in developing nations, are particular concerns of affected RPCVs. To address these concerns, the Peace Corps in recent years has hired staff to assist volunteers with their claims and attempted to strengthen communication with DOL and shorten the claims process. In November 2015, a Healthcare Task Force, established by the Peace Corps, offered a proposed set of actions based on 28 recommendations previously made by GAO, Peace Corps, and nongovernment interest groups. Among other steps, the Task Force suggested that the Peace Corps seek legislation to raise the ceiling on disability compensation, improve explanation of postservice health benefits to volunteers and RPCVs, and provide greater assistance to volunteers on postservice options regarding accessibility to insurance under the Affordable Care Act. The Sam Farr and Nick Castle Peace Corps Reform Act of 2018, which became law in October 2018, requires the Peace Corps to consult with experts at the Centers for Disease Control and Prevention about recommended malaria prophylaxis and authorizes the Peace Corps to provide medical benefits to returned volunteers who are injured during their service for 120 days after termination of service. The Five-Year Rule The five-year rule is an issue long discussed in the Peace Corps community and periodically addressed by Congress. It is the subject of a 2012 report by the agency's Office of the Inspector General (OIG) that suggests Congress may again have a role to play. And it is repeatedly noted as a cause of excessive personnel turnover in the OIG's annual statement of management and performance challenges. The five-year rule, which became law in August 1965 in an amendment to Section 7(a) of the Peace Corps Act (P.L. 87-293, as amended), limits most Peace Corps staff to five years' employment. The same amendment allows a one-year extension if personally approved by the Director. A subsequent amendment in 1985 permits 15% of U.S. direct hires a further extension of two and a half years, meaning that these individuals could be employed for a total of eight and a half years. In addition, staff can only leave the Peace Corps and be rehired after an amount of time equal to their preceding term of service has passed, in effect limiting a route around the rule. The five-year rule does not apply to personal service contractors or foreign nationals. Direct hire staff involved in the safety of volunteers, including the new victims advocate position, and the Inspector General and OIG staff are also exempt as a result of congressional action in the FY2004 appropriations ( P.L. 108-199 ) and the 2011 Kate Puzey Volunteer Protection Act, respectively. Implementation of the five-year rule is seen to have had both positive and negative effects on the performance of the Peace Corps. Positive aspects are to a large extent those associated with the original arguments in favor of the rule's adoption; they continue to have force. Negative aspects following adoption of the rule have driven the addition of limited extensions and exemptions to its application. But they continue to cause concern. Positive features of the five-year rule possibly include that it creates a workforce generally perceived as vibrant, youthful, and energetic; because of high turnover, permits the hiring of more returned Peace Corps volunteers (53% of all direct hires between 2000 and 2010 were RPCVs and 78% of overseas leadership posts), whose recent experience in the field provides high-quality policy input; generates a flow of staff departing for other international agencies that increases the influence of the Peace Corps on foreign policy, a benefit originally suggested by Sargent Shriver; facilitates removal of poorly performing staff; provides a performance incentive for currently serving volunteers who might in the future want to obtain employment in the agency; and creates possible cost savings from not accruing long-term salary and benefit obligations. Negative features of the five-year rule largely derive from the higher turnover and short tenure of staff. Instead of a turnover of 20% each year, implied by the five-year rule, the actual rate is much higher—25% to 33% each year since 2004 according to the OIG, quadruple that of the rest of the federal government. The average length of service is three years. These figures suggest that individuals are looking outside of the Peace Corps for more stable employment long before their term expires. The possible resulting negative impact includes poor institutional memory; frequent staffing vacancies; no long-term career incentives to encourage high performance; insufficient time for constantly departing staff to identify, develop, test, and implement innovative ideas; disincentive for management to invest in training and professional development; diminished management capacity, the rule being noted as a factor in multiple previous OIG and GAO reports focusing on volunteer support, contract, and financial management; and high staff recruitment costs—costs strictly attributable to five-year rule turnover estimated by the OIG to be between $12.6 million and $15.5 million in the period 2005 through 2009. The 2012 OIG evaluation made five broad recommendations to the Peace Corps, including that the Director should carry out unspecified reforms, including legislative remedies, to reduce the rate of turnover and increase length of employment, and identify which core functions suffer from turnover and develop processes to retain those personnel. Since OIG report publication, the Peace Corps has taken steps to mitigate the negative impacts of the five-year rule. It is offering five-year employment to new employees instead of the former two-and-a-half year term. It is trying to fully utilize existing legislative authority to provide an additional two and a half years on top of the five-year term for up to 15% of its staff—in 2010, only 10% of staff benefitted; now more than 14% benefit. It is also planning on utilizing authority that allows an unlimited number of staff to continue for a year after their five-year term under "special circumstances." At the same time, the agency is also working to identify the causes of employee early resignation and the specific functions and positions where staff turnover is most harmful in order to best address the problem. According to the Peace Corps, legislative remedies may be sought if these and other efforts are insufficient. Regardless of these actions, as of July 2017, OIG recommendations on this issue remained open and not fully addressed by the Peace Corps. The Sam Farr and Nick Castle Peace Corps Reform Act of 2018, enacted in October 2018, includes a section allowing the Director of the Peace Corps to designate certain positions as critical management or management support positions for which five-year appointment are extendable or renewable.

Founded in 1961, the Peace Corps has sought to meet its legislative mandate of promoting world peace and friendship by sending American volunteers to serve at the grassroots level in villages and towns in all corners of the globe. As of the end of September 2017, about 7,376 volunteers were serving in 65 nations. In 2018, the 115th Congress has considered and may again consider several issues related to the Peace Corps, including the President's annual funding request for the Peace Corps and changes to the Peace Corps authorization legislation. The Sam Farr and Nick Castle Peace Corps Reform Act of 2018, P.L. 115-256, signed into law on October 9, 2018, includes provisions to improve volunteer medical care, both at post and after service; extend the allowable period of service for certain Peace Corps positions; establish the frequency, scope, and reporting requirements for impact surveys of volunteers; and improve advocacy for volunteers who are the victims of crimes, among other things. Current issues include the extent to which there is available funding for Peace Corps expansion, whether volunteers are able to function in a safe and secure environment, volunteer access to abortion, and other issues.

The Confirmation Process The Constitution of the United States provides for the appointment of a Justice to the Supreme Court in Article II, Section 2. This section states that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... Judges of the [S]upreme Court." The practices involved in following this constitutional mandate have varied over the years, but they have always involved the sharing of the appointment power between the President and the Senate. Nominations that failed to be confirmed by the Senate have been disposed of in a variety of ways, including withdrawal by the President, inaction in the committee, inaction in the Senate, postponement, tabling, rejection on the Senate floor, and filibuster on the Senate floor. Table 1 provides a summary of the unsuccessful nominations by final disposition. Summary of Unsuccessful Nominations The 36 Supreme Court nominations not confirmed by the Senate represent 31 individuals. Six of these 31 were later re-nominated and confirmed for positions on the Court. Of the other 25 nominees, four were nominated and failed confirmation more than once. Table 2 provides summary information concerning unsuccessful nominations. The first of the six nominees who were not confirmed only to be later re-nominated and confirmed was William Paterson, nominated by President George Washington. Washington withdrew the nomination on the day following its submission. He noted that Paterson "was a member of the Senate when the law creating that office was passed, and that the time for which he was elected [had] not yet expired." For this reason, President Washington felt that the nomination was in violation of the Constitution. President Washington re-nominated Paterson at the beginning of the following Congress a few days later, and Paterson was immediately confirmed. In this case, the failure of the first nomination was due to what might be considered formalities, rather than opposition to the nomination itself. The last of these six nominations, that of John G. Roberts, Jr., to be an Associate Justice, might be similarly categorized. On July 29, 2005, President George W. Bush nominated Roberts to replace retiring Associate Justice Sandra Day O'Connor. Subsequently, on September 3, Chief Justice William H. Rehnquist died. On September 6, President Bush withdrew Roberts's nomination to be Associate Justice and nominated him to be Chief Justice. The Senate confirmed this nomination on September 29, 2005. All of the other unsuccessful nominations faced opposition in the Senate. The other four nominees who were later re-nominated and confirmed were Roger B. Taney, nominated twice by President Andrew Jackson; Stanley Matthews, nominated first by President Rutherford B. Hayes and later by President James A. Garfield; Pierce Butler, nominated twice by President Warren G. Harding; and John Marshall Harlan II, nominated twice by President Dwight D. Eisenhower. Taney's first nomination, to Associate Justice, was postponed indefinitely by the Senate. During the next Congress, he was nominated and confirmed as Chief Justice, and he went on to author the Dred Scott decision. Matthews's first nomination was never reported out of committee, but in the following Congress, under a new President, he was re-nominated and confirmed by a one-vote margin. Butler was first nominated to the high court during the third session of the 67 th Congress. Confirmation was blocked during that session, but Butler was re-nominated and confirmed during the fourth session. Harlan was initially nominated to be an Associate Justice late in the 83 rd Congress, and this nomination remained in committee at the time of adjournment. His second nomination, at the beginning of the following Congress, was confirmed a few months later. Four individuals were the subjects of more than one unsuccessful nomination. The first three, John C. Spencer, Reuben H. Walworth, and Edward King, were nominees of President John Tyler. President Tyler had the opportunity to fill two vacancies on the high court. He made nine nominations of five men in the space of the last 15 months of his presidency. Eight of these nominations were not confirmed, giving President Tyler the highest tally of unconfirmed Supreme Court nominations. President Tyler nominated Spencer for the first vacancy. After the Senate rejected Spencer, Walworth was put forward for the position, and the Senate tabled this nomination. On June 17, 1844, the last day of the congressional session, President Tyler withdrew the tabled Walworth nomination and re-nominated Spencer. Unable to gain unanimous consent for the Spencer nomination to be acted upon, Tyler then withdrew Spencer's name on the same day and re-nominated Walworth. By this time, the nomination (June 5, 1844) of King for the second vacancy had also been tabled. Tyler went on to re-nominate Walworth and King at the beginning of the following congressional session. After these two nominations were once again tabled, they were both withdrawn. The nomination of John M. Read, which followed, was reported out of committee but never acted upon by the full Senate. Samuel Nelson was President Tyler's fifth nominee, and he was confirmed. The fourth individual subject to multiple unconfirmed nominations was William B. Hornblower, who was nominated in successive sessions of Congress by President Grover Cleveland. His first nomination was never reported out of committee; the second nomination was reported out and rejected. One of the unsuccessful nominees had previously been Associate Justice, had left the Court, and this time was being nominated for Chief Justice. Another was a sitting Associate Justice nominated for elevation to the Chief Justice position. The first of these was also the first nomination in which the Senate voted not to confirm. John Rutledge had previously served as one of the first Associate Justices from 1789 to 1791. In addition, he served as Chief Justice in 1795 under a recess appointment by President Washington. When the President nominated him later that year to succeed John Jay as permanent Chief Justice, however, the Senate asserted its constitutional power and voted against confirmation. The second such nominee, Justice Abe Fortas, was a sitting Associate Justice at the time of his nomination by President Lyndon B. Johnson to be Chief Justice in 1968. The nomination was favorably reported out of committee but filibustered on the floor of the Senate until the President withdrew the nomination. One unsuccessful nomination coincided with a legislative initiative to decrease the size of the Court. On April 16, 1866, President Andrew Johnson nominated Henry Stanbery to replace John Catron, who had died the previous May. By the time Stanbery was nominated, however, the House of Representatives had passed a bill decreasing the number of justices in the Supreme Court. The act, as signed into law on July 23, 1866, called for a decrease in the number of Associate Justices from nine to six through the process of attrition. At the time the bill was initiated and also at the time its final version was signed, only one position on the Court, that to which Stanbery was nominated, was vacant. Eight Associate Justice positions remained on the bench until the death of James M. Wayne in July 1867. Seven Associate Justice positions remained until a law was passed in April 1869 to increase the number to eight. Several scholars have suggested that, by reducing the number of Associate Justice positions, the Republican Congress was trying to thwart the ability of Democratic President Johnson to shape the Supreme Court, although the record of House and Senate debate is silent as to each chamber's intention in this regard. The law increasing the Associate Justice positions to eight was passed within two months of the beginning of the Administration of President Ulysses S. Grant. Factors Behind Unsuccessful Nominations There have often been multiple reasons behind the failure of the Senate to confirm a nomination. The official Senate records, particularly those prior to the 20 th century, have usually been silent on the issues involved. Scholars have used other records in an effort to shed more light on the factors underlying unsuccessful Supreme Court nominations. This scholarship consists of analysis and interpretation of these records, and it provides a general understanding of the reasons that more than one in five nominations has failed to be confirmed by the Senate. One widely cited scholar in the area of the Supreme Court appointments process and history, Henry J. Abraham, has developed categories of unsuccessful nominations: Among the more prominent reasons have been: (1) opposition to the nominating president, not necessarily the nominee; (2) the nominee's involvement with one or more contentious issues of public policy or, simply, opposition to the nominee's perceived jurisprudential or sociopolitical philosophy (i.e., politics); (3) opposition to the record of the incumbent Court, which, rightly or wrongly, the nominee presumably supported; (4) senatorial courtesy (closely linked to the consultative nominating process); (5) a nominee's perceived political unreliability on the part of the party in power; (6) the evident lack of qualification or limited ability of the nominee; (7) concerted, sustained opposition by interest or pressure groups; and (8) fear that the nominee would dramatically alter the Court's jurisprudential lineup. The sections below discuss the nominations with respect to these categories based on the preponderance of scholarly evidence. Many of the nominations fall into multiple categories. Two nominations that were not confirmed by the Senate—the first nomination of William Paterson and the nomination of John G. Roberts to be Associate Justice—do not appear to fall into any of the following categories. As discussed above, in both cases the nomination was withdrawn as a formality and the nominee was then renominated and confirmed. Opposition to the President Opposition to the nominating President played a role in at least 16 of the 36 nominations that were not confirmed. Many of the 16 were put forward by a President in the last year of his presidency—seven occurred after a successor President had been elected, but before the transfer of power to the new administration. Each of these "lame duck" nominations transpired under 19 th century Presidents when the post-election period lasted from early November until early March. Four one-term Presidents made nominations of this kind. President John Quincy Adams nominated John J. Crittenden in December 1828, after losing the election to Andrew Jackson. President Tyler's third nomination of Walworth, second nomination of King, and only nomination of Read all came after Tyler had lost to James Polk. President Millard Fillmore nominated George E. Badger and William C. Micou after Franklin Pierce had been elected to replace him. Finally, President James Buchanan forwarded the name of Jeremiah S. Black to the Senate less than a month before Abraham Lincoln's inauguration. Other nominations where opposition to the President was a major factor include the remaining unsuccessful Tyler nominations, Fillmore's nomination of Edward A. Bradford, and Andrew Johnson's nomination of Henry Stanbery. President Lyndon B. Johnson's two unsuccessful nominations (Fortas and Thornberry) occurred during the last seven months of his presidency, when, having announced he was not seeking re-election, he was considered by some to be a lame duck even before the election of his successor. Nineteen Senators issued a statement indicating that, on this basis, they would oppose any nomination by President Johnson. The committee report accompanying the nomination of Abe Fortas to be Chief Justice, however, suggests that the opposition to Justice Fortas was based, to a considerable extent, on concern about money received by Fortas for delivering university lectures while an Associate Justice, Fortas's close relationship and advisory role with President Johnson while an Associate Justice, and his judicial philosophy. President Rutherford B. Hayes nominated Stanley Matthews in late January 1881, about six weeks before the transfer of power to the Garfield administration. In this case, however, the opposition seems to have centered on the nominee and his views, as discussed below, rather than on the nominating President. Opposition to the Nominee's Views President Washington's nomination of John Rutledge to Chief Justice, in 1795, was the first unsuccessful nomination to fail based on the nominee's political views. Shortly after his nomination, Rutledge made a strong speech denouncing the controversial and newly ratified Jay Treaty between the United States and Great Britain. The Senate, which was dominated by Federalists and had ratified the treaty, rejected the Rutledge nomination. Of the 14 who voted for rejection, 13 were Federalists, putting them in the position of rejecting a nomination by a President from their own party. Alexander Wolcott's nomination to the Court 15 years later, by President James Madison, was the next to be rejected by the Senate. Wolcott's strong enforcement of the controversial embargo and non-intercourse acts while a U.S. collector of customs cost him support in the press and the Senate. His qualifications for the position were also questioned. Andrew Jackson's first nomination of Roger B. Taney in 1835 was the third nomination for which the lack of success is often attributed to the nominee's views. In this case, there was also opposition to the nominating President's policies. Prior to the nomination, President Jackson had given a recess appointment to Taney to be Secretary of the Treasury. In that capacity, Taney had, under Jackson's direction, removed the government's deposits from the United States Bank. Jackson's Whig opponents in the Senate were incensed by this move, and this led first to the rejection of Taney as permanent Secretary of the Treasury and then to the failure of his first nomination to the Court. President James Polk's nomination of George W. Woodward in 1845 was rejected when six Democrats, led by a Senator from the nominee's home state of Pennsylvania, joined with the Whigs to oppose it. Woodward's nativist views have been cited as the principal reason for the failure of his nomination. Ebenezer R. Hoar served as President Ulysses S. Grant's Attorney General prior to his nomination to be Associate Justice in 1869. In that capacity, Hoar had alienated Senators by recommending to Grant nominees for circuit judge without regard for the Senators' preferences. In addition, the majority of the Senate disliked "his active labors on behalf of a merit civil service system for the federal government ... and his opposition to Andrew Johnson's impeachment." Despite praise for Hoar's nomination in the press, the Senate rejected it. Stanley Matthews was nominated first by President Rutherford B. Hayes in 1881, in the last weeks of Hayes's presidency. The Senate opposed the nomination because of Matthews's close ties to railroad and financial interests, and the Judiciary Committee postponed the nomination. Although Matthews was subsequently re-nominated by President James Garfield and confirmed, concerns about him persisted, and the Senate vote, at 24-23, was the closest for any successful nominee. Pierce Butler's first nomination, by President Warren G. Harding in 1922, was reported favorably by the Judiciary Committee but blocked from consideration on the Senate floor, in part because of alleged pro-corporation bias and his previous advocacy for railroad interests in cases that were to be coming before the Court. During the succeeding session, Butler was re-nominated and confirmed, with 61 Senators in favor and eight opposed. John J. Parker, nominated by President Herbert Hoover in 1930, was opposed by the National Association for the Advancement of Colored People (NAACP) and organized labor based on his previous statements and writings. The NAACP testified in opposition to Parker's racial views at his confirmation hearing. Their testimony was based on a statement Parker had made in the course of an unsuccessful campaign for governor of North Carolina in 1920, in which he opposed the participation of African-Americans in politics. In addition, Parker's record on labor issues, as chief judge of the U.S. Fourth Circuit Court of Appeals, was criticized by labor at the hearing. The American Federation of Labor (AFL), representing several labor groups, objected in particular to an opinion, authored by Parker, that affirmed a lower court opinion in support of "yellow dog" contracts, in which employees agreed not to join a union as a condition of employment. President Dwight D. Eisenhower first nominated John Marshall Harlan II to be an Associate Justice in late 1954, but that nomination was never reported from committee. Among the objections to his nomination was the perception by some Senators that Harlan was "'ultra-liberal,' hostile to the South, [and] dedicated to reforming the Constitution by 'judicial fiat.'" Eisenhower re-nominated Harlan at the beginning of the next Congress, in early 1955, and he was then confirmed. As noted previously, President Lyndon B. Johnson's nomination of Justice Abe Fortas in 1968 for elevation to Chief Justice failed for several reasons, including his judicial philosophy. Although the Committee on the Judiciary reported the nomination favorably, several committee members strongly dissented in the committee's printed report. One Senator wrote that Fortas's "judicial philosophy disqualifies him for this high office." Another criticized Fortas as part of the majority on the Supreme Court led by Chief Justice Earl Warren (the Warren Court) making an "extremist effort ... to set itself up as a super-legislature." A third Senator also found Fortas lacking on the "broader question of the nominee's judicial philosophy which includes his willingness to subject himself to the restraint inherent in the judicial process." Yet another Senator objected to "positions taken by Justice Fortas since he went on the Supreme Court as Associate Justice [which had] reflected a view to the Constitution insufficiently rooted to the Constitution as it is written." Opposition to Fortas was also based on money he received for delivering university lectures while an Associate Justice and his close relationship and advisory role with President Johnson while an Associate Justice. President Richard M. Nixon's nomination of Clement F. Haynsworth, Jr. in 1969 also failed partly on the basis of his perceived views. Like the Fortas nomination, the Haynsworth nomination was reported favorably by the Committee on the Judiciary. In this case, the dissenting views in the committee's written report focused on perceived ethical lapses on the part of Judge Haynsworth. In addition, a joint statement by five Senators referred to "doubts about his record on the appellate bench," and one Senator opposed the nomination on the basis of the judge's record on civil rights issues. Furthermore, Haynsworth drew criticism from labor and minority groups on the basis of his record. One historian has suggested that because of the recent rejection of Fortas on the basis of ethical questions, the ethical questions concerning Haynsworth played the largest role in his rejection. President Nixon's nomination of G. Harrold Carswell in 1970 was also opposed partly on the basis of his perceived views. The Committee on the Judiciary reported the nomination favorably with several dissenting views. One statement, issued jointly by four Senators, opposed the nomination in part because his "decisions and his courtroom demeanor [had] been openly hostile to the black, the poor, and the unpopular." A more persistent theme in the dissent, however, was a perceived lack of competence and qualification for the position. Robert H. Bork, nominated by President Reagan in 1987, was also rejected on the basis of his views. Much has been written about this nomination, and it remains controversial. The Committee on the Judiciary reported the nomination unfavorably after 12 days of hearings. Although the written report raised some concerns about the nominee's evaluation by the American Bar Association and academic and legal communities and his role in the firing of Special Prosecutor Archibald Cox during the Nixon administration, the bulk of the report detailed concerns about and opposition to his publicly stated positions and judicial philosophy. Opposition to the Incumbent Court The rejection by the Senate of a Supreme Court nominee on the basis of opposition to the incumbent Court is closely related to opposition on the basis of the nominee's views. In this case, the views and record of the incumbent Court majority are opposed, whereas the nominee is presumed to support the Court's views. In the case of Abe Fortas's nomination for Chief Justice, for example, the opposition of many Senators to the Warren Court has been cited as an influential factor. Fortas had been an Associate Justice for almost three years at the time of his nomination, and some opposition hinged on his positions while on the Court, as discussed above. In addition, however, his elevation was opposed because of his affiliation with the Warren Court and its wider reputation. This opposition to the Warren Court in the context of the Fortas nomination is reflected in the individual views of a Senator in the committee report. In addition, during the confirmation hearings, another Senator pointedly brought up a Warren Court opinion with which he disagreed, Mallory v. United States , although, as he acknowledged, the case had preceded Fortas's appointment as Associate Justice by eight years. Senatorial Courtesy At least seven Supreme Court nominations have failed to be confirmed partly on the basis of deference to the objections of the nominees' home-state Senators. New York's Senators objected to the nominations of Reuben H. Walworth by President Tyler. President Polk's nomination of George W. Woodward of Pennsylvania was rejected, in part, due to the objection of one of the Senators from that state. The last failed Supreme Court nominations that were attributed, in part, to senatorial courtesy came before the Senate in 1893-1894, when opposition by New York's Senators was instrumental in the failure of the nominations of William Hornblower and Wheeler H. Peckham, both also of New York. No unsuccessful Supreme Court nomination since that time has been attributed to senatorial courtesy. Allegations of Political Unreliability One unsuccessful nominee was opposed in the Senate in part because of the perception that he was a "political chameleon." One of President Grant's nominees for Chief Justice, Caleb Cushing, "had been, in turn, a regular Whig, a Tyler Whig, a Democrat, a[n Andrew] Johnson Constitutional Conservative, and finally a Republican." The failure of his nomination has also been attributed to his advanced age (74) and a letter of introduction of a friend Cushing wrote to Confederate President Jefferson Davis in 1861. Perceived Lack of Qualification or Ability As noted previously, President Madison's nomination of Alexander Wolcott and President Nixon's nomination of G. Harrold Carswell were opposed in part because of their perceived lack of qualification and ability. President Grant's nomination of George H. Williams faced similar opposition. Williams also suffered from allegations of ethical misconduct. Interest Group Opposition Interest groups were involved in confirmation fights as far back as 1881, when the Grange mounted a campaign in opposition to the Matthews nomination. Interest groups testified in opposition to (and, in some cases, support of) many of the Supreme Court nominations that were not confirmed in the 20 th century, including Parker, Fortas, Thornberry, Haynsworth, Carswell, and Bork. The number of organized interest groups testifying at the confirmation hearings grew from two for the Parker nomination to more than 20 for the Bork nomination. Interest groups have been active in unsuccessful Supreme Court confirmation processes in a number of other ways, as well, including conducting research on nominees' positions, lobbying Senators, providing information to the media, conducting television ad campaigns, sending mailings, and organizing constituent letters and calls. Observers of the Supreme Court confirmation process have suggested that interest group opposition has not only grown, but has also been effective in preventing confirmations. The impact of interest group opposition relative to other factors is a matter of continuing study. Fear of Altering the Court In addition to the above-mentioned reasons for not confirming a nomination, the Senate may fear altering the jurisprudential philosophy of the Court. In this case, opposition would be not only to the perceived views of the nominee, but also to the impact the nominee could have on the Court's ideological balance. The best-documented case where this factor appears to have been influential was President Reagan's nomination of Robert H. Bork. Bork was nominated to replace Associate Justice Lewis F. Powell, Jr., who had been the swing voter on an often evenly divided bench. If confirmed, Bork was expected to tip the Court to the conservative side, and some of the opposition to his nomination came from those who opposed this change. Application of the Factors to the Miers Nomination Scholars have only begun to assess the unsuccessful nomination of Harriet E. Miers to be Associate Justice. Analysis of the factors contributing to the nomination's failure is therefore preliminary. Both Miers and President Bush cited the Senate requests for White House documents as the chief reason for the withdrawal of her nomination. Journalistic accounts of the Miers nomination, however, have suggested that a combination of factors led to the withdrawal. Many of the factors identified by Abraham seem to apply in the Miers case. Opposition to the nominee's perceived views, for one, appears to have played a role. For example, a position Miers took in a 1993 speech reportedly contributed to opposition to her nomination by at least one conservative interest group, and it raised concerns for some conservative Senators. In addition, some conservative observers expressed concern that Miers, a self-identified conservative, would be ideologically unreliable. Addressing concerns about Miers's views and ideological reliability was made more difficult for her supporters by the relatively sparse available record of her views on controversial constitutional issues. As a close legal advisor to President Bush, much of her most relevant writing in these areas would likely be found in White House documents, and these documents were not made publicly available because of their confidential nature. Three other factors identified by Abraham—perceived lack of qualifications, interest group opposition, and fear of altering the Court—also seemed to contribute to the nomination's failure. Some observers raised questions about Miers's qualifications for the position, and these concerns appear to have intensified as she met individually with Senators. Furthermore, her response to the questionnaire of the Senate Committee on the Judiciary was seen as inadequate by the chair and ranking member of that committee. Miers also faced interest group opposition, but this case was unusual because the opposition came predominantly from conservative groups that had previously been allied with the President who submitted the nomination. Finally, in a variation on Abraham's "fear of altering the Court" factor, it seemed that some conservatives feared that Miers, if confirmed, would not alter the Court, as they had long hoped an appointee of a Republican President would do. In addition to the factors identified by Abraham, another factor that may have played a part in the failure of this nomination was the close proximity of the nominee to the President. Miers's position in the Bush Administration, as Counsel to the President, raised questions for some about whether she would be able to rule fairly on presidential power issues that might come before the Court. In addition, many documents related to her work for the President, which might have shed light on her views and qualifications, were not made available by the White House, despite bipartisan requests. The Committee on the Judiciary and Unsuccessful Nominations Since 1816, the Senate has had a standing Committee on the Judiciary. Prior to that development, one of the three unsuccessful nominations was referred to a select committee. Between 1816 and 1868, 11 of the 16 unsuccessful nominations were referred to the Judiciary Committee. Since 1868, almost all Supreme Court nominations, including all that were ultimately not confirmed, have been automatically referred to the Judiciary Committee. Of the unsuccessful nominations that have been referred to the Judiciary Committee, seven were never reported or discharged. The first four, Henry Stanbery, Stanley Matthews, William Hornblower, and John Marshall Harlan II, are discussed above. The fifth was Homer Thornberry, nominated by President Lyndon B. Johnson to replace Justice Abe Fortas as Associate Justice when he was nominated for elevation to Chief Justice. When Fortas's nomination was withdrawn by the President, the open position for Thornberry was effectively eliminated, and his nomination was also withdrawn. At that time, the Thornberry nomination had not been reported by the Judiciary Committee. The sixth of these nominations was that of John G. Roberts to be Associate Justice. Before the Judiciary Committee acted on this nomination, Chief Justice William H. Rehnquist died, creating a vacancy. Roberts's nomination to be Associate Justice was withdrawn, shortly before hearings on the nomination were to begin, so that he could be nominated to be Chief Justice. The last of this group of seven nominations is that of Harriet E. Miers. Although the Judiciary Committee had scheduled hearings on her nomination to be Associate Justice, her nomination was withdrawn in the face of opposition before any formal committee action. Although their first nominations were never reported, second nominations of Matthews, Hornblower, and Harlan in subsequent sessions of Congress were reported to the full Senate, and Roberts's nomination to be Chief Justice during the same session of Congress was also reported to the full Senate. Only in the cases of Stanbery, Thornberry, and Miers did nominations that had been referred to committee fail to be reported out of committee on any occasion. The first two of these nominations were to fill Associate Justice vacancies that ceased to exist while the nominations were pending, and the last, as just mentioned, was withdrawn prior to any formal committee action. Additional Information on Nominations This report provides two additional tables of information concerning Supreme Court nominations. Table 3 shows, by President, the number of vacancies, number of nominations, and disposition of nominations. Table 4 provides detailed information on the course and fate of each of the 36 unsuccessful Supreme Court nominations. A variety of sources were used to develop this table, as identified in the table notes. Although most of these sources are widely available, some, particularly older committee records, are located at the National Archives and Records Administration. Among the official sources, the Journal of the Executive Proceedings of the Senate of the United States of America and committee records, where available, provided the most information. Where the Journal showed no evidence of a debate or vote on the floor of the Senate, the indices of other official sources were also checked for evidence of any other Senate activity related to the nomination. These sources included the Congressional Globe , Congressional Record, Annals of Congress , and Senate Journal . Where the table indicates that there was no debate or further Senate action, there is no known official record that provides additional information. A list of related literature follows Table 4 . Additional Resources CRS Products CRS Report RL31989. Supreme Court Appointment Process: Roles of the President, Judiciary Committee, and Senate , by [author name scrubbed]. CRS Report RL32821. The Chief Justice of the United States: Responsibilities of the Office and Process for Appointment , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33247, Supreme Court Nominations: Senate Floor Procedure and Practice, 1789-2011 , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33225, Supreme Court Nominations, 1789 to the Present: Actions by the Senate, the Judiciary Committee, and the President , by [author name scrubbed] and Maureen Bearden (pdf). Other Resources Abraham, Henry J. Justices, Presidents, and Senators: A History of the U.S. Supreme Court Appointments from Washington to Clinton , 4 th ed. (Lanham, MD: Rowman & Littlefield, 1999). Ginsburg, Ruth Bader. "Confirming Supreme Court Justices: Thoughts on the Second Opinion Rendered by the Senate." University of Illinois Law Review , vol. 1988, pp. 101-117. Greenburg, Jan Crawford. Supreme Conflict: The Inside Story of the Struggle for Control of the United States Supreme Court (New York: Penguin Press, 2007). Harris, Joseph P. The Advice and Consent of the Senate: A Study of the Confirmation of Appointments by the United States Senate (New York: Greenwood Press, 1968). Jacobstein, J. Myron, and Roy M. Mersky. The Rejected: Sketches of the 26 Men Nominated for the Supreme Court but Not Confirmed by the Senate (Milpitas, CA: Toucan Valley Publications, 1993). (Note: The authors do not include the Paterson nomination.) Maltese, John Anthony. The Selling of Supreme Court Nominees (Baltimore, MD: The Johns Hopkins University Press, 1995). Massaro, John. Supremely Political: The Role of Ideology and Presidential Management in Unsuccessful Supreme Court Nominations (Albany, NY: State University of New York Press, 1990). Massey, Calvin R. "Getting There: A Brief History of the Politics of Supreme Court Appointments." Hastings Constitutional Law Quarterly , vol. 19 (fall 1991), pp. 1-21. Sulfridge, Wayne. "Ideology as a Factor in Senate Consideration of Supreme Court Nominations." The Journal of Politics , vol. 42, no. 2 (May 1980), pp. 560-567. Thorpe, James A. "The Appearance of Supreme Court Nominees Before the Senate Judiciary Committee." In The First Branch of American Government: The United States Congress and Its Relations to the Executive and Judiciary, 1789-1989 , vol. 2, Joel Sibley, ed. (Brooklyn, NY: Carlson, 1991), pp. 515-546. Tulis, Jeffrey K. "The Appointment Power: Constitutional Abdication: The Senate, the President, and Appointments to the Supreme Court." Case Western Reserve Law Review , vol. 47 (summer 1997), pp. 1331-1357. Whittington, Keith E. "Presidents, Senates, and Failed Supreme Court Nominations." In The Supreme Court Review, 2006 , Dennis J. Hutchinson, David A. Strauss, and Geoffrey R. Stone, eds. (Chicago: University of Chicago Press, 2007), pp. 401-438.

Since 1789, Presidents have submitted 160 nominations to Supreme Court positions. Of these, 36 were not confirmed by the Senate. The 36 nominations represent 31 individuals whose names were sent forward to the Senate by Presidents (some individuals were nominated more than once). Of the 31 individuals who were not confirmed the first time they were nominated, however, six were later nominated again and confirmed. The Supreme Court nominations discussed here were not confirmed for a variety of reasons, including Senate opposition to the nominating President, nominee's views, or incumbent Court; senatorial courtesy; perceived political unreliability of the nominee; perceived lack of ability; interest group opposition; and fear of altering the balance of the Court. The Senate Committee on the Judiciary has played an important role in the confirmation process, particularly since 1868. All but the most recent of these nominations have been the subject of extensive legal, historical, and political science writing, a selected list of which is included in this report. This report will be updated as warranted by events.

Introduction Chemicals and the facilities that manufacture, store, distribute, and use them are essential to the U.S. economy. However, incidents occasioned by natural disasters (e.g., hurricanes, earthquakes, floods), unintentional events (e.g., fire, accidents), or security threats (e.g., terrorism) show that the handling and storage of chemicals are not without risk. Incidents such as the 2017 fire at the Arkema chemical plant in Crosby, TX, the 2013 explosion at the West Fertilizer Company in West, TX, and the 1984 release of methyl isocyanate at the Union Carbide plant in Bhopal, India, have motivated many in federal, state, and local governments to back efforts to reduce the risk of chemical accidents in the United States. Federal agencies implement a number of programs to help prevent chemical facility accidents, reduce risks of terrorist attacks on chemical facilities, protect chemical facility workers, collect and share relevant information with the public and decisionmakers, and prepare communities and local, tribal, and state first-responders to respond to potential large-scale accidents. State, local, and tribal authorities also have critical responsibilities in managing risks from chemical facility accidents through setting and enforcing requirements for zoning, siting, and emergency response and planning. This report reviews the U.S. Environmental Protection Agency's (EPA's) authorities regarding risk management, emergency planning, and release notification, among others, at chemical facilities. In doing so, it describes the statutory authorities—and makes note of some of the more prominent, subsequent regulations—as provided by the following: facility risk management planning requirements under Section 112(r)(7) of the Clean Air Act (CAA); emergency planning notification requirements under the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA); emergency release notification requirements under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA); duties of the Chemical Safety and Hazard Investigation Board, known as the Chemical Safety Board (CSB), under Section 112(r)(6) of the CAA; and toxic release inventory reporting requirements under EPCRA. This report does not address other federal agencies' authorities regarding safety, planning, and notification, such as the Department of Labor, Occupational Safety and Health Administration (OSHA) requirements covering occupational safety and health risks to workers, the Department of Homeland Security (DHS) requirements covering homeland security risks from security threats to facilities, or the Department of Transportation (DOT) requirements covering risks from the transportation of hazardous materials. Further, it does not address the federal response framework for releases of oil and chemicals into the environment. Facility Risk Management Planning Requirements In the CAA Amendments of 1990, P.L. 101-549 , Congress enacted Section 112(r)(1), also known as the General Duty Clause (GDC). It applies to any facility where extremely hazardous substances are present. GDC is a performance-based authority recognizing that owners and operators have a general duty and responsibility to prevent and mitigate the consequences of chemical accidents. Further, Section 112(r)(7) authorizes EPA to require the establishment of approved risk management planning requirements for stationary sources that manage certain types of toxic or flammable substances, if the quantity of the substance exceeds a threshold established in regulation for that substance. Section 112(r)(7)(B) requires EPA to promulgate regulations and guidance for the development of facility Risk Management Plans (RMPs) to prevent and detect accidental releases into the ambient air from these stationary sources. Facility owners and operators also must incorporate measures into their plans to respond to an accidental release of such substances, if such release were to occur. For these purposes, Section 112(r)(2)(A) defines an "accidental release" to be an "unanticipated emission of a regulated substance or other extremely hazardous substance into the ambient air from a stationary source." Pursuant to Section 112(r)(7)(B), the major elements of an RMP must include an assessment of the potential severity of the hazards if an accidental release into the ambient air were to occur (including off-site consequence analysis of worst-case scenarios); a facility-specific program to prevent accidental releases (including safety precautions and employee training); and a facility-specific response program to take actions that may be necessary to protect human health and the environment in the event of an accidental release (including procedures for notifying federal, state, and local agencies responsible for responding to an incident). Section 112(r)(7)(E) makes the operation of a stationary source subject to RMP requirements unlawful if the facility owner or operator does not prepare and implement an RMP in accordance with applicable regulatory requirements. Facility owners or operators must submit their RMPs to EPA, the Chemical Safety Board (CSB) established pursuant to Section 112(r)(6), and state and local emergency response officials. Section 114(c) also requires RMPs to be made available to the public, with the exception of certain confidential business or trade information that an RMP may contain. For facility security purposes, Section 112(r)(7)(H) also limits the public availability of off-site consequence analysis of worst case scenarios presented in an RMP. These plans must be revised and resubmitted to EPA every five years. In overseeing regulated facilities, EPA may also require facilities to revise their RMPs if necessary to ensure compliance with federal requirements. EPA has delegated RMP oversight responsibility to some states and localities. Where the RMP has been delegated to a state, the state may have additional requirements for the federally listed chemicals and/or additional listed chemicals. Revisions under the Obama Administration Under the Obama Administration, EPA revised the RMP requirements in response to Executive Order 13650, Improving Chemical Facility Safety and Security, issued by President Obama on August 1, 2013. EPA promulgated the final rule revisions on January 13, 2017, highlighting the fertilizer facility incident in 2013 in West, TX, among "catastrophic chemical facility incidents" that were the primary impetuses for Executive Order 13650. The revisions include additional analysis of safer technology and alternatives as part of the process hazard analysis for some sources; third-party audits and incident investigation root cause analysis for some sources; enhancements to the emergency preparedness requirements; and increased public availability of chemical hazard information to assist local emergency authorities in planning for and responding to accidents and to improve public awareness of chemical hazards at regulated sources. Revisions under the Trump Administration Under the Trump Administration, the EPA Administrator published a final rule on June 14, 2017, to delay the effective date of the RMP rule amendments for 20 months until February 19, 2019. The action was taken under CAA section 307(d)(7)(B). The rule states that the action "allows the Agency time to consider petitions for reconsideration of the Risk Management Program Amendments and take further regulatory action, as appropriate, which could include proposing and finalizing a rule to revise or rescind these amendments." EPA summarized stakeholders' submitted reasons to delay the effective date of the amendments as follows: lack of sufficient notice for comments or the addition of new provisions to the final rule that were not in the 2016 RMP proposed amendments, safety and security concerns related to implementation of the final rule, cost burden to regulated facilities and emergency response organizations, insufficient coordination with OSHA by EPA, and insufficient coordination with stakeholders or consideration of stakeholder comments. Emergency Planning Notification Requirements EPCRA was enacted in 1986 as Title III of the Superfund Amendments and Reauthorization Act of 1986 ( P.L. 99-499 ). EPCRA requires facilities to report the presence of hazardous chemicals or extremely hazardous substances to state and local emergency response officials, if the quantity present would exceed certain thresholds. This information is intended to assist state and local officials in developing their own emergency response plans in the event of an incident at a facility. The universe of facilities subject to reporting under EPCRA is larger than facilities subject to RMP requirements under the CAA, because EPCRA applies to a broader body of chemicals. Section 311 of EPCRA specifies the applicability of reporting requirements under that statute to hazardous chemicals that require the preparation of a material safety data sheet (MSDS) pursuant to the Occupational Safety and Health Act of 1970 (OSH Act). These hazardous chemicals encompass a broad array of substances commonly found in industrial, commercial, or other workplace settings. Considering this breadth, there is not a singular consolidated list. They are defined by certain characteristics and properties specified in federal regulations promulgated under the OSH Act. Certain uses of hazardous chemicals are excluded from reporting requirements, as outlined in Section 311(e) of EPCRA. Section 312 of EPCRA requires the owner or operator of a facility storing a hazardous chemical in a quantity equal to or exceeding 10,000 pounds to report the presence of the chemical to the State Emergency Response Commission (SERC), the appropriate Local Emergency Planning Committee (LEPC), and the local fire department with jurisdiction over the facility. States established SERCs and LEPCs pursuant to Section 301 of EPCRA. The general threshold of 10,000 pounds for the reporting of hazardous chemicals applies to "Tier I" reporting under which the facility owner or operator is required to report this information at its own initiative to the SERC, the appropriate LEPC, and the local fire department. There is a "zero" threshold (i.e., no minimum quantity) for "Tier II" reporting for which a SERC, LEPC, or local fire department may require additional information from the facility owner or operator about the presence of a hazardous chemical present at the facility. If a hazardous chemical also is designated under EPCRA as an extremely hazardous substance, the reporting threshold generally is 500 pounds, and may be less under separate reporting requirements. Section 302(a) of EPCRA directs EPA to determine which chemicals warrant designation as extremely hazardous substances and to establish separate reporting thresholds for them. In making these determinations, EPA must take into account the "toxicity, reactivity, volatility, dispersability, combustability, or flammability" of a substance. Section 302(c) of EPCRA requires the owner or operator of a facility storing an extremely hazardous substance exceeding the applicable threshold to report the presence of the substance to the SERC and the LEPC (but not the local fire department). Section 303(d) also requires facilities subject to the reporting of an extremely hazardous substance to designate a representative to serve on the LEPC. Section 324 of EPCRA requires information reported by facilities to SERCs, LEPCs, and local fire departments to be made available to the public, with the exception of facility information that may be subject to protection as confidential business or trade information. Section 322 of EPCRA specifies the types of confidential business or trade information that a facility owner or operator may choose to protect from public disclosure. For security purposes, a facility owner or operator also may opt not to publicly disclose the exact location of a specific chemical within a facility boundary. Emergency Release Notification Requirements Requirements to report releases of a hazardous substance into the environment are enumerated in both EPCRA and CERCLA. EPCRA requires reporting of certain releases to the SERC and the appropriate LEPC to make state and local officials aware of the release so as to inform emergency response actions that may be appropriate within their respective jurisdictions. CERCLA requires a facility to report certain releases to the National Response Center to inform decisions about federal involvement in responding to the incident to coordinate with state and local officials. Section 107 of CERCLA also establishes liability for response costs and natural resource damages. Similar to emergency planning notification requirements discussed above, whether the owner or operator of a facility would be required under EPCRA or CERCLA to report an actual release into the environment would depend primarily on the quantity of the release. Section 103 of CERCLA generally requires persons who release hazardous substances into the environment to notify the federal National Response Center of the incident as soon as the person has knowledge of the release, if the quantity of the release is equal to or exceeds the threshold for that substance. Section 102 directed EPA to designate specific chemicals as hazardous substances for the purpose of CERCLA and to establish thresholds for reporting releases into the environment. A list of designated hazardous substances and the reporting threshold (i.e., reportable quantity) for each substance is specified in federal regulation. In certain circumstances, a release may not be subject to reporting under CERCLA, even if the release otherwise would exceed the reportable quantity. Section 103 excludes federally permitted releases of hazardous substances from reporting requirements under the statute. Section 101(10) defines the term "federally permitted release" to include releases of hazardous substances authorized in permits issued under certain other federal environmental laws cited in that definition. Section 107(j) of CERCLA also exempts federally permitted releases from liability under the statute. Federally permitted releases are exempt from reporting requirements and liability under CERCLA based on the premise that permit requirements would address potential risks, and that the exemption may avoid potential conflicts between one federal law allowing a release and another imposing liability for the same action. Section 304 of EPCRA generally requires the owner or operator of a facility from which an extremely hazardous substance is released into the environment to report the release to the SERC and the appropriate LEPC, if the volume of the release is a reportable quantity. Parallel with CERCLA, Section 304 of EPCRA however federally permitted releases from these reporting requirements. Most extremely hazardous substances designated under EPCRA also are designated as hazardous substances under CERCLA, but some are not. Chemical Safety Board As amended in 1990, Section 112(r)(6) of the CAA authorized the establishment of the Chemical Safety and Hazard Investigation Board, often referred to as the Chemical Safety Board (CSB) for short. The principal mission of the CSB is to investigate (or cause to be investigated), determine and report to the public in writing the facts, conditions, and circumstances and the cause or probable cause of any accidental release resulting in a fatality, serious injury or substantial property damages. Based on the findings of its investigations, the CSB is authorized to recommend measures that may reduce the likelihood or consequences of accidental releases in the future, and to propose "corrective steps" to mitigate the safety risks of chemical production, processing, handling, and storage. The CSB is not a regulatory agency, however, and is not authorized to enforce or compel compliance with such recommendations or corrective steps. Other agencies with regulatory authority may develop enforceable requirements based on CSB recommendations, such as EPA for accidental release prevention requirements under Section 112(r)(7) of the CAA, or OSHA for worker protection requirements under the OSH Act. Toxic Release Inventory Reporting Requirements In addition to emergency planning and release notification requirements, Section 313 of EPCRA authorized EPA to establish and maintain a Toxic Release Inventory (TRI) of facilities that manufacture, import, process, or use certain types of toxic chemicals. These facilities are diverse in terms of their industrial and commercial operations. TRI does not necessarily identify actual releases into the environment that may present a particular level of risk to human health or the environment, nor does the TRI track facilities that have violated any particular environmental requirements under either federal or state law. The TRI only provides public disclosure of the locations of certain facilities at which toxic chemicals are present in various quantities, consistent with the "community right-to-know" objective of EPCRA. Section 313 requires the owner or operator of a facility to submit an annual report to EPA, and a state official designated by the governor of the state in which the facility is located, identifying the quantities of toxic chemicals manufactured, imported, processed, or otherwise used at that facility the previous year, if the quantity would exceed the threshold required for reporting. The specific chemicals subject to these reporting requirements are designated in federal regulations promulgated by EPA, pursuant to Section 313. Section 313(d) outlines the designation criteria, including chemical toxicity, potential adverse impacts on human health if exposure were to occur, and certain types of illnesses or health conditions that may be associated with potential exposure to the chemical. Section 313(f) establishes a general reporting threshold of 10,000 pounds for toxic chemicals used at a facility during a calendar year, and 25,000 pounds for toxic chemicals manufactured, imported, or processed at a facility during a calendar year.

Chemicals and the facilities that manufacture, store, distribute, and use them are essential to the U.S. economy. However, incidents occasioned by natural disasters, unintentional events, or security threats show that the handling and storage of chemicals are not without risk. Federal agencies implement a number of programs to help prevent chemical facility accidents, reduce risks of terrorist attacks on chemical facilities, protect chemical facility workers, collect and share relevant information with the public and decisionmakers, and prepare communities and local, tribal, and state first-responders to respond to potential large-scale accidents. This report reviews the U.S. Environmental Protection Agency's (EPA's) authorities regarding risk management, emergency planning, and release notification, among others, at chemical facilities. In doing so, it describes the statutory authorities—and makes note of some of the more prominent, subsequent regulations—as provided by the following: Facility risk management planning requirements under Section 112(r)(7) of the Clean Air Act (CAA). EPA's Risk Management Program (RMP) is aimed at reducing chemical risk at the local level. EPA regulations require owners and operators of a facility that manufactures, uses, stores, or otherwise handles certain listed flammable and toxic substances to develop a risk management program that includes hazard assessment (including an evaluation of worst-case and alternative accidental release scenarios), prevention mechanisms, and emergency response measures. Emergency planning notification requirements under the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA). The requirements are designed to promote emergency planning and preparedness at the state, local, and tribal levels. EPCRA helps ensure local communities and first responders have needed information on potential chemical hazards within their communities in order to develop community emergency response plans. Emergency release notification requirements under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). CERCLA obligates a facility to report certain releases of hazardous substances to the National Response Center to inform decisions about federal involvement in responding to the incident to coordinate with state and local officials. The requirements also establish liability for response costs and natural resource damages. Duties of the Chemical Safety and Hazard Investigation Board, known as the Chemical Safety Board (CSB), under Section 112(r)(6) of the CAA. The purpose of the CSB is to investigate accidents to determine the conditions and circumstances that led up to the event and to identify the cause or causes so that similar events might be prevented. Toxic release inventory reporting requirements. EPCRA authorizes EPA to establish and maintain a Toxic Release Inventory (TRI) of facilities that manufacture, import, process, or use certain types of toxic chemicals by providing public disclosure of the locations of such facilities.

Introduction Many analysts, policy makers, and politicians argue that the U.S. health care system would perform better if market or market-like institutions played a larger role. This view is based on the belief held by economists that markets generally work most efficiently when left alone, provided that certain conditions are met. These conditions essentially state that consumption or production by one person does not affect others, that no one has a privileged position in the market, and that property rights are well-defined. If those conditions are violated, however, markets may function inefficiently, which is what economists call "market failure." Government intervention may enhance economic efficiency, although in other cases government action may exacerbate market failure. The special characteristics of health care often lead to market failures. The extent of government activity vis-a-vis the health system is seen by many economists and health care analysts as a policy response to the inequalities and inefficiencies associated with such market failures. Health care professionals often view a market orientation as a threat to their traditions, ethics, and culture. A bottom-line mentality, they argue, cannot deliver the same high quality of care as the so-called traditional approach based on professional ethics and responsibilities. Critics such as Arnold Relman, editor emeritus of the New England Journal of Medicine , denounce the "medical-industrial complex" for its dedication to profitability rather than patient well-being. Nevertheless, health care institutions have always cared about their pecuniary interests as well as their patients. As one historian noted, "in many respects [hospitals] have behaved as businesses. But, ... hospitals have simultaneously carried symbolic and social significance as embodiments of American hopes and ideals." Even if some view market forces and the use of the price system to allocate health care services as an intrusion, consumers and providers of health care are strongly affected by economic incentives. Hospitals cut the average length of an inpatient stay sharply after Medicare switched from cost-based reimbursement to paying a flat diagnosis-related fee. Physicians increased the volume (i.e., number of patient visits) and intensity of patient care (i.e., number or complexity of services provided in an average visit) seen after reductions in Medicare Part B payments. Consumers use less health care when they must pay a larger share of the cost. These behavioral responses, although predicted by economic theory, do not necessarily enhance economic efficiency. The challenge for those who wish to expand the use of market incentives in health care is to design policies that align material incentives facing consumers and providers of health care so that changes in behavior enhance economic efficiency. Both friends and foes of the expanding role of markets have sometimes relied on crude ideas about what markets can or cannot accomplish. This report explains what well-grounded economic theory has to say about the limits and capabilities of the market in the health care sector. These limits and capabilities then outline what the government can or cannot do to improve the health care system's performance. The report provides an overview of efforts to expand the use of market or market-like institutions in health care and considers effects of these initiatives or proposals on the federal budget. Reforms that are designed to address sources of market failure have better chances of enhancing economic performance than those that are not. Nonetheless, improving the performance and efficiency of the health system presents significant policy and political challenges even to well-designed reforms. The U.S. Health Care System The U.S. health care system is a complex mixture of public and private providers of care, paid for by a mixture of public and private payers, staffed by dozens of health professions, working in clinics, hospitals, nursing homes, private offices, health maintenance organizations, work sites, and home settings, among other venues. This patchwork system provides patients with a broad set of alternatives; gives health professionals in general, and physicians in particular, a substantial degree of autonomy; and assigns separate, if often overlapping, responsibilities among various levels of government. The complexity of the U.S. health system, which gives it considerable flexibility, is also one of the principal causes of its inefficiencies. Dissatisfaction with the performance of the U.S. health care system has spurred wider interest in using market or market-like institutions to generate better results and lower costs. International Comparisons While the United States is a leader in areas of medical technology, outcomes for several key public health indicators, such as average longevity and infant mortality, are among the bottom quarter of the 30 advanced industrial countries that comprise the Organization for Economic Cooperation and Development (OECD). Comparisons of specific conditions or procedures find the U.S. health system does better in some areas and worse in others. An OECD study of ischemic heart care found that the United States used more intensive procedures and had lower mortality rates for older patients, but had higher mortality rates for younger (40-64) patients compared with other OECD countries. Another study used data from Australia, Canada, England, New Zealand, and the United States to compare quality. Twenty-one quality of care indicators were selected on the basis of comparability and importance. These researchers found that each country was best on at least one indicator and worst on at least one indicator. Among these five countries, the United States did worst on kidney transplant survival rates, second worst on liver transplants, and worst on incidence of Hepatitis B, but did best for breast cancer survival, incidence of measles, and the cervical cancer screening rate. The United States spends far more on health care by any measure than any other country in the world. National health expenditures per capita are expected to reach $7,498 in 2007. One of every six dollars spent in the United States is spent on health care, and by 2016, projections indicate that proportion will rise to one in five. According to the latest OECD figures, U.S. health care spending in 2004 was about a third higher than Switzerland, which had the second highest level of spending. This spending is not due to differences in the proportion of population aged 65 or older nor to higher direct costs of malpractice claims. While the United States spends more on health care than other countries, fewer health care resources per capita are available compared with many other advanced nations. The number of physicians per capita in the United States is about two-thirds of the OECD average, and the number of hospital beds per capita is lower than the OECD average, so greater availability of medical inputs cannot explain the spending difference between the United States and other OECD countries. Greater intensity and complexity of medical care in the United States may account for some of the difference. A 1996 McKinsey research project found that health care providers in the United States were more efficient, in the sense of producing more outputs for a given amount on inputs, than those in Germany and to some extent than those in the United Kingdom. Many analysts, however, emphasize other explanations for why medical care in the United States costs more than in other advanced countries. Prices of medical inputs and administrative costs are much higher in the United States than in other OECD countries. For example, average remuneration for medical specialists in the United States, as compared with per capita national income, is higher than for any other OECD country, while the number of specialists per capita in the United States is below the OECD average. A group of Harvard Medical School researchers estimated that administrative costs accounted for about a quarter of health care expenditures in 1999. Administrative costs in Canada and Europe appear to be much lower, although the extent of the difference is subject to controversy. Other factors that help explain differences in health costs between the United States and other countries include differences in payment systems, average national income, average population age as well as other factors. Health Care Costs and Public Spending Health care costs take up a large and growing part of the economy and of public budgets. Medicare, the largest health expenditure in the federal budget, will cost in total $428 billion in FY2007, according to CBO baseline projections, or 3.1% of gross domestic product (GDP), and the federal portion of Medicaid is expected to cost $193 billion, or 1.4% of GDP. Medicare Part A costs per beneficiary grew on average 4.66% a year between 1970 and 2005, and Part B costs grew on average 8.76% a year over the same period. One Congressional Budget Office (CBO) scenario anticipates that in 2050 Medicare spending will take up 8.6% of GDP, with Medicaid taking up another 4.0% of GDP, even aside from state contributions to Medicaid. Medicaid is one of the largest and fastest growing components of state spending budgets. In FY2004, Medicaid accounted for 22.3% of total state spending, which was slightly larger than the 21.4% spent on elementary and secondary education. The size and rapid growth of Medicaid spending led the National Governors' Association and the National Association of State Budget Officers to call the program "the dominant force in state spending." Governments in general and the federal government in particular are deeply involved in health care markets. Public spending in 2007 is expected to account for 47% of national health expenditures, up from 38% in 1970. Federal spending alone was expected to reach 34% of national health expenditures in 2007, up from 24% in 1970. Furthermore, federal involvement in health care extends well beyond spending. Health care markets are extensively regulated, and the federal tax code affects health care markets in important ways. In particular, the cost of the federal tax exemption for employer-paid health insurance premiums exceeds that of any federal health program other than Medicare and Medicaid. This exemption will decrease federal revenues by an estimated $100 billion in FY2007. The pace of health care costs and the expanding public role in health care have stoked interest in using market incentives to slow or limit costs and to improve quality of outcomes. The nature of health care, however, provides some inherent limits to the effectiveness of the market. Market Failure and Health Care Economists' belief in the efficiency of markets is based on the Invisible Hand Theorem, which states that market outcomes are efficient, so long as certain conditions hold. These conditions are: No externalities . An externality, or spillover effect, exists when one's consumption or production affects the ability of another to consume or produce. Public goods, defined as goods which more than a single person can enjoy at the same time, are a special type of externality. Symmetric information . Everyone knows the same things. No one has an informational advantage over others. No market power . No one acts as if he can influence prices through his actions. Voluntary trade . Property rights are well-defined and individuals can refuse trades that make them worse off. The Invisible Hand theorem takes the distribution of buying power as given. However, to the extent society cares about fairness or the evenness of distribution, it may wish to use taxes and transfers to alter the distribution of buying power. If transfers and taxes could be made without economic distortions, then society could move to another distribution of buying power, and the economy would run at full efficiency. In practice, however, all taxes and transfers will cause some economic distortions. Thus, society alters the distribution of buying power to a more "fair" allocation, but at some cost of economic efficiency. Externalities and Public Goods An epidemic is a classic example of an externality or spillover effect. Without some form of coordination, individuals will contribute inefficiently small amounts for the prevention of contagious diseases. Therefore, an efficient government can improve public well-being by imposing taxes and spending an appropriate amount on prevention and public health. Information gained through medical research is an example of a public good, because the same information can benefit many people simultaneously. Individual donations, however, would yield an inefficiently low level of support for medical research. Charging those who benefit from better medical technology or procedures can provide a partial solution; but, to the extent that some patients will be priced out of the market, economic inefficiencies will persist. What economists define as public goods are often financed by private individuals or groups. For example, privately supported basic research is an example of a privately funded public good. Many goods provided by governments are private goods, not public goods. Extending the benefits of police, fire, and municipal trash collection to more people generally requires a proportionate increase in resources, so such services would not be considered a public good by economists. Redistribution of resources to the poor, according to some economists, can also be considered a public good. In this view, each member of society would benefit by the knowledge that all other members were kept from falling below some minimum standard of living. However, the "warm glow" that each member might feel from redistribution that ensured that minimum standard often falls short of an intensity sufficient to induce opening of one's own pocketbook. Compulsory taxation provides a way to finance redistribution by sharing the cost among all taxpayers. Many people would derive some satisfaction from knowing that a health care system fulfilled the ethical norm that access to medical care was available regardless of ability to pay. Supporting such a system, as a practical matter, requires government intervention. Informational Advantages and Market Failure The lack of symmetric information, which occurs when some have informational advantages over others, is the source of many of the key problems in health care. When consumers know the quality and price of goods, they can search to find higher-quality and lower-priced goods. This puts pressure on firms to increase quality and reduce price. When consumers cannot see prices or quality, however, markets work less well. In general, when one party knows more than another party, market failure can occur. Economists distinguish among several different types of asymmetric information, which are considered as follows. The Principal-Agent Problem The principal-agent problem occurs when one person, the principal, must delegate some decision or activity to an agent, who has special knowledge. If the principal can directly assess outcomes and effort, then no problem exists. However, if the principal cannot observe how hard the agent works or if the principal is unable to tell the difference between incompetence and bad luck, then market failure can result. The interaction of a patient and a physician is an example of principal-agent relationship. The patient goes to a physician because the physician has special knowledge. The physician, however, faces different incentives that are not always aligned with the patient's best interests. For example, the physician may be paid more by ordering a test whose costs exceed its benefit. Or the physician may have a patient make additional visits, whose benefits fall short of their costs. Principal-agent problems can be mitigated in several ways. A physician's reputation can provide one solution to the principal-agent problem. If a good reputation brings benefits to a physician, and if patients occasionally get some information of whether a physician is acting in their best interests or not, then physicians will have an incentive to avoid actions which would damage their reputations. However, if patients rarely obtain information on whether a physician acts in their best interest, or if the penalty of losing a good reputation is too small, then the agents will have weak incentives to be faithful to their principal, and the principal will use physicians less often. Centralized tracking of physicians is another possible solution. Centralized mechanisms, such as licensure requirements, exist to certify that physicians have received appropriate training. The National Practitioner Data Bank (NPDB) contains information on malpractice claims and disciplinary actions against health care professionals. Governments, hospitals, health plans, and related organizations can access specific records, but individuals cannot. Some consumer groups have attempted to compile their own databases that would allow consumers to assess the quality of different physicians. So far, these databases are fragmentary and limited. Third-party monitoring can also give incentives for health care providers to maintain and improve quality. Accreditation or certification of health care providers gives consumers and payers a seal of approval for institutions that meet certain standards. The National Committee on Quality Assurance (NCQA) conducts research on managed care plans and performs accreditation audits, and the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) accredits hospitals and related institutions. Adverse Selection and Splintering of Risk Pools Adverse selection occurs when some personal characteristics which affect health care costs are hidden from others. Pricing of individual insurance contracts can only depend on characteristics that the insurer knows or can discover, and which can be verified by a third party, such as a court or an arbitrator. If sicker and healthier persons are indistinguishable, they will pay the same health insurance premiums. While insurers may not know each individual's characteristics, they will have information, based on claims history and other data, about the aggregate characteristics of various pools of persons seeking insurance. Furthermore, insurers understand that a carefully designed and marketed menu of insurance plans can induce individuals to separate themselves into different risk pools. For instance, a low-premium high-deductible plan is more likely to attract healthier individuals, and a high-premium low-deductible plan is more likely to attract individuals with greater health care needs. Thus, even if insurers cannot observe individual characteristics, they can still achieve some separation of high- and low-risk enrollees. Insurance companies in a competitive market face strong incentives to attract low-risk customers and avoid high-risk customers, which they can do through underwriting. Underwriting is the process of assessing levels of risk associated with different insurance contracts and setting terms, conditions, and prices for those contracts. Underwriting splinters the insured population into smaller and smaller risk groups, and reduces risk sharing across a broader population. For auto and property insurance this is standard. Adverse selection is less of a problem because insurers can predict risk using observable characteristics of drivers and their claims history. Pooling careful and careless drivers in effect compels careful drivers to subsidize careless drivers. This pooling would be inefficient if such implicit subsidies caused careless drivers to either drive more or drive less well, or if resulting increases in premiums caused careful drivers to buy less insurance. Underwriting by auto insurance companies raises no strong fairness issues to the extent that the risk of having auto insurance claims is linked to personal choices, including the choice of whether to drive or not. Health care is often viewed differently than other kinds of goods, and health insurance has always worked differently than other lines of insurance. Few would argue that anyone has a right to be a careless driver. On the other hand, differences in health costs are often presumed to stem from factors which are beyond the control of individuals. The idea that access to health care should be equal has had enormous influence on health policy. The need to use health care is typically viewed as a result of bad luck or genetics, rather than carelessness. To the extent that individual demand for health care is unaffected by insurance status, the costs of providing health care can be considered a fixed sum. In this case, the practice of medical underwriting, which consists of offering better prices and conditions to the healthy, rearranges the cost burden of health care but does not affect overall costs. That is, while an individual insurer earns higher profits by attracting a healthier risk pool via medical underwriting, total costs are not reduced. Because underwriting consumes real resources, administrative costs in a system with medical underwriting will be higher than when all risks are in one pool. Legal or administrative measures can require insurers to charge the same premiums to individuals with differing characteristics, which in the context of health insurance is called "community rating." In a competitive market, community rating may be unsustainable. If sicker and healthier persons face the same premiums, sicker persons face stronger incentives to enroll in insurance plans and to choose more generous health plans. Health plans that attract a higher proportion of sicker enrollees will have higher average costs. If health insurers are unwilling to sustain losses, higher average costs lead to higher premiums, which gives healthier individuals incentive to purchase less insurance relative to a situation in which adverse selection were absent. A mixed insurance pool may be stable, however, if the proportion of sicker people in a pool is small enough and if economies of scale make larger plans more efficient. If healthier persons remain in the same plans as sicker people, then in effect they subsidize sicker persons. If the proportion of sicker persons is sufficiently large, however, private insurance providers can earn a profit by introducing plans that attract a preponderance of healthier people. As healthier people leave the mixed insurance pools, average costs for remaining enrollees increase, leaving more people unable to afford health insurance. This dynamic is often termed a "death spiral." The ability to organize large pools of diverse individuals is a central advantage of employer-based health insurance, which has dominated the U.S. health care system for the past half century. Blue Cross/Blue Shield organizations once adhered to the "community rating" principle that spread risks across large, heterogenous pools. Community rating was vulnerable to for-profit insurers' pricing strategies that offered lower rates for firms with healthier employees, which cut Blue Cross's market share. Twelve states still require insurers to use community rating for certain markets. Some see the shift of market share from Blue Cross plans that used community rating to for-profit insurance plans, which offer lower premiums to healthier groups, as an example of a death spiral. Other researchers, however, contend the introduction of community rating need not result in a death spiral. Furthermore, the financial problems of some Blue Cross organizations may have had more to do with administrative problems than with adverse selection. The tax exemption for employer-provided health care was a major factor in the expansion of employee-based health insurance. While linking health insurance with employment has advantages of low administrative costs and broad pooling of risks, the tax exemption gives the largest subsidies to those with the most generous health plans, and for employees with a choice of plans, encourages the choice of more generous plans. Tying health insurance to employment, which the tax exemption encourages, can discourage employees from switching jobs, a problem know as "job lock." The President's Advisory Panel on Tax Reform recommended capping this tax exemption. Organizing government-sponsored risk pools is another way to ensure that the risks of incurring major health care costs are spread across a large population. In single-payer systems, such as Canada's, all eligible persons are in the same pool. Putting all Canadians in a single pool and the ban on private health insurance prevents any splintering of the health insurance market that could trigger a death spiral, and ensures that the health care costs of the sickest patients are borne by the whole population. A more limited approach is to set up risk pools, which allow those with serious medical problems to obtain health insurance. As of 2005, 33 U.S. states had set up risk pools that offer insurance to individuals denied insurance due to an existing medical condition. Despite subsidies from state and federal funds, risk-pool premiums are much more expensive than premiums paid by healthy individuals who have employer-provided insurance. In 2004, state subsidies totaled more than $0.5 billion, and premiums typically cost 125% to 150% of comparable individual market premiums. The number of enrollees in risk pools (about 180,000 in 2004) comprises only a small fraction of the pool of uninsured. Adjusting payments to plans and providers based on characteristics of enrollees, at least in theory, can provide incentives for private insurers to treat a pool of patients more efficiently rather than to focus on attracting a healthier pool of patients. If insurers were paid less for covering healthy patients and more for covering sicker patients, insurers would have a weaker incentive to attract the healthy and avoid the sick. For instance, Medicare Advantage sets rates for its HMO capitation program based on enrollee characteristics. So far, however, Medicare Advantage (MA) uses crude rules of thumb to set reimbursement adjustments, which do not appear to have changed incentives facing insurers in significant ways. Medicare administrators are currently exploring more sophisticated ways of reimbursing MA providers. Designing reimbursement schemes to change insurers' incentives is difficult for two reasons. First, health expenditures are highly skewed among the population: 5% of patients account for over 50% of health care costs. Thus to alter insurers' behavior, substantial pricing adjustments would be needed. Second, insurers are likely to have better information about health characteristics of enrollees and potential enrollees, as well as more sophisticated methods of analyzing those characteristics. To the extent that payment adjustments misprice risk, private insurers can profit by medical underwriting. Providing people with the opportunity to extend or renew their health insurance coverage can provide some protection against the effects of splintering risk pools. If insurance plans are subject to frequent renewal decisions that may depend on past claims history, then insurance becomes less of a shield against financial calamity and more of an installment plan. Congress and several states have enacted reforms intended to preserve enrollees' ability to renew coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA, P.L. 99-272 ) contains provisions which allow retirees, former employees, and dependents to pay no more than 102% of the full, normal premium to continue coverage. Terminated employees may generally obtain COBRA coverage for 18 months. In some circumstances beneficiaries can obtain COBRA benefits for longer periods. Because employers typically contribute a portion of the cost of premiums, obtaining insurance under COBRA almost always costs former employees much more than what current employees pay for health insurance. COBRA policies, however, cost less than individual health insurance plans, with the possible exception of younger and healthier persons. On average, employees pay 16% of premium costs for individual coverage and 27% for family coverage. The Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191 ), also known as the Kassebaum-Kennedy bill, restricted preexisting condition exclusions and limited insurers' ability to deny coverage to people who recently had group coverage. HIPAA also guaranteed eligible employees' ability to renew coverage and to carry over coverage when changing employers, a provision intended to reduce job lock. HIPAA, however, set no limits on premium increases, so insurers could discourage HIPAA-eligible persons from enrolling by setting premiums at high levels. Almost all state governments have enacted reforms to limit experience rating of small group health insurance, and 21 states limit experience rating for nongroup health insurance. Some states also require insurers to issue policies, and many more have extended COBRA and HIPAA provisions regarding continuation of health insurance coverage. Despite various federal and state measures intended to limit experience rating and expand health insurance coverage, many people, especially those with preexisting conditions, have trouble finding affordable health insurance. The health insurance trade association reported in 2002 that 71% of applicants were offered standard premiums and 12% were rejected. Moral Hazard Moral hazard occurs when a person's actions are unobservable, so that changes in behavior cannot be observed. In particular, moral hazard refers to changes in behavior that affect the risks being insured. For example, after a person obtains health insurance she may take less care to remain healthy or may visit her physician more often than necessary. Moral hazard in health insurance may be limited by non-insurable costs. For instance, going to the physician takes time, having procedures performed is painful, and neglecting one's health can cause problems which medical care cannot easily cure. Copayments and deductibles are standard methods to limit moral hazard. According to economic theory, insurance policies that divide risk-sharing between an insurer and the insured in an efficient way require individuals to pay for relatively small, regularly occurring expenses, such as eyeglasses and routine dental care and require insurers to pay a major part of large, unexpected expenses. The value of insurance is higher for rare or unusual expenses which would cause serious financial disruption for a household. Small and routine costs present lesser financial risks to policyholders, so the benefit of insuring such expenses is minor. Thus economic theory suggests that if consumers are informed and rational then insurance with "doughnut" provisions, which cover small- and high-cost claims, but which fail to cover claims over some intermediate range, is an inefficient means of sharing risks. The Medicare Part D drug coverage is one example of health insurance with a doughnut provision. On the other hand, the Medicare Catastrophic Coverage Act of 1988 ( P.L. 100-360 ), which introduced changes in the Medicare system arguably more in line with standard economic theory, was subsequently repealed in 1990 after vigorous protests by some Medicare beneficiaries. Empirical evidence shows that patients who do not pay copayments and deductibles receive more health care. The RAND Health Insurance Experiment, which randomly assigned families to insurance plans, found that free care encouraged health care use. Families that paid nothing for their health care were about 10% more likely to use medical care, and incurred about 25% more medical expenses than families with 25% copay plans. Families with 50% and 95% copay plans were less likely to use medical care and incurred fewer medical expenses. Health status for those receiving free care was little different than health status for those in copay plans, with two exceptions. First, low-income people with poor vision and free care had slightly improved vision compared with others. Second, low-income populations with free care had fewer problems with high blood pressure. Within that high-risk group, better control of high blood pressure appeared to lessen mortality risks. Another study, using data from the Medical Outcomes Study, found that older patients with chronic conditions who had zero or low copayments consumed more medical care than those with high copays. Requiring families to pay a portion of their health care costs, according to the usual theory of supply and demand, reduces demand for low-benefit care. To the extent that costs of some types of care exceed their benefits, excluding such items is a more efficient way to design insurance plans. Demand for health care items whose benefits greatly exceed their costs should be affected to a lesser degree, if patient behavior conformed to standard economic assumptions. There is mixed evidence, however, that higher copayments have different effects on low-benefit and high-benefit care. The RAND Health Insurance Experiment and the Medical Outcomes Study found that higher patient copays and deductibles reduced use of low-benefit items, but also reduced consumption of some high-benefit items as well. That suggests demand for health care responds to monetary incentives, but that patients often have difficulty in distinguishing high-benefit and low-benefit care, or that some portion of the patient pool responds to monetary incentives and another portion does not. In some instances, changes in what patients pay can induce reductions in low-benefit care without significantly affecting high-benefit care. For instance, a 1996 study found that requiring Kaiser-Permanente HMO enrollees to pay $25 to $35 for emergency room visits reduced overall emergency room visits by 15%, while the reduction in emergency room visits for conditions classed as "always an emergency" was small and statistically insignificant. The extraordinary cost of a major medical intervention presents a difficult dilemma to those who design cost-sharing provisions in health insurance plans. While few patients incur huge charges, that small percentage of cases accounts for a large proportion of total health care costs. On one hand, a health insurance plan has limited value if it does not prevent a health emergency from becoming a financial calamity. Forcing families to pay even a fraction of the costs of an expensive medical episode could strain the finances of most families, even to the point of bankruptcy. On the other hand, if insurance pays all, or nearly all, of the charges associated with a major health episode, then patients, their families, and their physicians have little incentive to control costs, even if the resulting benefits are minimal. One study found no correlation between spending on care for terminal patients and regional mortality rates, suggesting that either higher spending yields little or no benefit in mortality or that data aggregated by region are too crude to identify effects. Many plans have out-of-pocket limits that commit the insurer to pay all charges above a certain level, which provides families with substantial protection against financial calamity at the cost of eliminating monetary incentives to avoid items or procedures with only low or speculative benefits. In some cases, administrative and financial incentives may induce terminal patients to be treated in high-cost settings, even when patients have expressed a desire to be treated in a low-cost hospice or home setting. Imposing tighter controls on access to medical care by imposing gatekeeper requirements is another way to limit moral hazard. Most managed care plans require a primary care physician or insurance plan representative to approve hospital visits, procedures, and specialist visits. Managed care plans substantially increased their share of the health insurance market in the late 1980s and early 1990s, a development driven in part by the belief that managed health care and health maintenance plans could control costs. Some research suggested that cost growth moderated in markets where managed care plans had larger market shares. Other evidence suggests that managed care plans do not deliver lower costs. In the late 1990s, consumer dissatisfaction slowed or even reversed the expansion of managed care, although HMO and managed care plans avoided losing market share by loosening controls on access to care and by expanding into the Medicare population. Pressures on the Employer-Provided Health Insurance Employer-based health benefits, the bulwark of the American health insurance system, is increasingly under strain, threatening the health insurance system's ability to spread the financial risks associated with significant medical problems. The number of people covered by employer-provided health insurance has been dropping since 2000, as insurers have been willing to trade higher margins for lower enrollments. More people are buying individual health plans, but this increase is dwarfed by the decrease in group coverage. Many firms have sought to push a greater share of health cost increases onto employees and retirees, which has become a major source of labor-management conflict. Health benefits remain a standard feature of benefit packages for nearly all businesses with more than 200 employees and for firms that tend to employ high-wage employees. High-wage employees are more likely to fall within higher marginal tax brackets, and therefore gain more from the tax exemption of employer-provided health insurance than low-wage employees. For instance, a high-wage employee whose income puts her in the 35% marginal tax bracket saves 35¢ in taxes for every dollar shifted from post-tax compensation to health insurance paid in pre-tax dollars. A low-wage employee who pays no federal income tax gains no federal income tax advantage from shifting compensation to health benefits. Without some curtailment of the employer-provided health insurance tax exemption, medium and large businesses and firms that tend to hire high-wage individuals will continue to offer health benefits. Smaller businesses and firms that employ large numbers of low-wage workers, who gain less from tax exemptions, face a stronger temptation to drop or curtail health insurance benefits as health premiums rise. The percentage of small businesses that offer health benefits dropped from 69% in 2000 to 60% in 2005. Low-wage workers may be more willing to take the risk of going without health insurance in exchange for higher take-home pay, although low-wage individuals are more likely to have poor health status. For example, in 2005 fewer than half of Wal-Mart employees were in its health insurance plan. While some worked too few hours or had not worked long enough to be eligible, many others passed up coverage because of the high cost of benefits relative to their earnings. An internal 2005 Wal-Mart memorandum stated that significant proportion of workers (27%) obtained coverage for their children through public insurance programs such as Medicaid and State Children's Health Insurance Program (SCHIP), and that an additional 19% had children who were uninsured. Walmart employees and their children were less likely to have employer-provided insurance and more likely to be covered by public insurance than the national average for all workers, but were more likely to have employer-provided insurance and less likely to be covered by public insurance than the average retail worker. In April 2006, in the face of pressure from unions and several state legislatures, Wal-Mart announced changes in its benefits package intended to increase the attractiveness of its health insurance plan, which shortened waiting periods and expanded availability of health benefits. Public and private health insurance systems do not smoothly conjoin to offer low-income individuals and their families stable and predictable financial protection against medical costs. In addition, the interaction of public and private insurance programs can distort incentives for low-wage individuals and the firms that employ them. Although enrollments in Medicaid and SCHIP increased in the 1990s, in recent years some states have tightened eligibility standards while other states have expanded coverage. Many low-income families lose their eligibility for Medicaid when their incomes rise above state-specific earnings thresholds, which imposes a high implicit marginal tax rate on earnings of those families, serving as a deterrent to work. Some firms that tend to hire low-wage workers have trouble offering insurance plans as attractive to low-income families as public insurance programs supported by tax dollars. Firms that offer low-wage workers health benefits find that through the tax system they pay health insurance costs of their competitors' employees as well as their own. In addition, waiting periods for benefits and other eligibility hurdles impose barriers to insurance benefits and health care access for low-wage workers, who change jobs more frequently and are more subject to economic and social disruptions than workers with greater financial resources. Changing Incentives for Technological Innovation Most health economists and practicing physicians, according to one survey, believe that "the primary reason for the increase in the health sector's share of GDP over the past 30 years is technological change in medicine." In other sectors of the economy, most notably those involving computers and information technology, technological advances brought better and cheaper products. Asking why technology causes higher costs in health care but lower costs elsewhere is natural. Part of the answer lies in how incentives facing developers of new medical technologies interact with the structure of health care finance. The direction and pace of advances in medical technology depend on incentives facing engineers and researchers, which are affected by how health care is financed. Inventors and developers, if motivated by profits, must consider who will pay for new technologies and innovative products. The dominant role of insurers and governments in health care finance implies that converting breakthroughs in medical technology into financial success generally depends on private and public insurers' decisions about what their plans cover. Defining coverage limits of health insurance presents special challenges. While health insurance contracts in a given year specify what is and what is not covered in considerable detail, over time coverage limits evolve as medical practice patterns and medical technology progresses. As medical knowledge and technology advance, what was considered experimental medicine yesterday becomes standard today. The knowledge that what health insurance covers shifts over time has an important effect on incentives facing those working to develop new drugs, devices, and procedures. Because health insurance makes patients and physicians less sensitive to price, developers have stronger incentives to invent new treatments or technologies which do something new or better, rather than invent cheaper ways of doing existing things. Innovation in computer hardware technology is mainly focused on making cheaper computers that run faster. If firms and individuals had "computer insurance," computers might perform more esoteric tasks, but at a much higher price. One proposed strategy is to design health insurance plans that will pay an amount equivalent to the cost of an existing technology. If a patient wanted a newer and better technology, then the patient would have to pay out of her pocket. If the new technology's benefits warranted its higher costs, then presumably the patient would be willing to pay the extra amount. For example, an insurer could set reimbursement for pharmaceuticals aimed at a specific condition equal to the cost of an existing drug of known efficacy. If a drug company developed a more effective drug for that condition that was more expensive, then the patient would pay the difference. If the gain in efficacy was large compared to the increase in price the consumer would presumably be more willing to choose that drug. This reimbursement policy would provide developers of new medical technologies with a powerful incentive to make newer products better and cheaper. While fixing reimbursement levels for new pharmaceuticals at the level of existing approved drugs would give drug developers strong incentives to consider the costs and prices during the R&D process, it could also create pricing anomalies in the short run. For instance, a study based on data from the Clinical Antipsychotic Trials in Intervention Effectiveness (CATIE) found no significant differences in quality-of-life measures for second-generation drugs and a first-generation drug (perphenazine), even though newer drugs cost $300 to $600 more per month. Thus, for some patients, switching to an older antipsychotic could yield large cost savings. However, different patients with the same condition often respond differently to the same drug, and patients with schizophrenia often must try several different drugs to find one that is clinically effective and does not create serious side effects. Some patients will do better with a second-generation drug, while other patients with the same condition will do better with a first-generation drug. If reimbursement levels of second-generation drugs were set at the level of first-generation drugs, either some patients would pay substantially more (or someone would pay more on their behalf) for their treatment using a second-generation drug, or they would have to use a first-generation drug which, for them, works less well. Market Power Health care providers often have substantial market power. Shopping around for the most attractive health provider when sick or injured is difficult or impossible. Switching physicians or health plans is costly and inconvenient for patients, and changing health insurers is costly and time-consuming for businesses. Prices for individual health services are difficult to find. Drug and device manufacturers have legal monopoly powers due to patent protection. While major buyers, such as governments, have bargaining power which can allow them to buy at lower prices, individuals have little or no bargaining power. In other markets consumers can, in effect, hire a firm or organization to bargain on their behalf. A Wal-Mart shopper enjoys the benefits of the company's bargaining power with manufacturers. A union member enjoys the benefits of collective bargaining, such as better working conditions and higher pay. Similarly, a patient benefits from the bargaining power of his employer with his insurer, as well as from the insurer's bargaining power with health care providers. Likewise, a retiree can benefit from the government's bargaining power. Lower prices for health care in other OECD countries are, to a large extent, due to the willingness of governments to use their bargaining power with providers. If consumers have a wide choice of organizations or firms that can negotiate on their behalf, then competition will ensure that consumers will reap most of the benefits. If consumers cannot easily choose or switch among such organizations, however, then the middlemen will capture a larger portion of those bargaining benefits for themselves. Moreover, while the bargaining power of employers, insurers, and governments benefits consumers, as compared to a situation in which consumers face providers directly, bargaining interactions among employers, insurers, and providers create economic distortions which can reduce efficiency. Efficiency and Redistribution in Health Care Economists tend to separate questions of efficiency from questions of redistribution. If market failure occurs, market outcomes are inefficient in the sense that other outcomes exist that would make some people better off without making anyone else worse off. Even if markets are efficient, society may decide to redistribute resources, despite efficiency losses. Designing policy, according to mainstream view of public economics, is a matter of achieving a given set of distributional goals with minimal loss of efficiency. The concept of social insurance, which is embedded in the design of Social Security and much of federal health policy, provides a way to redefine the distinction between efficiency and redistribution. For instance, Social Security benefits resemble annuities offered by private insurers. A retiree who purchases an annuity pays for the right to receive regular payments until death. Annuities therefore, insure retirees against the risk of having their assets run out before they die, and allow retirees to reallocate income to match over time financial resources to needs. An actuarially fair annuity (i.e., one whose expected benefits match its cost for each category of risk) cannot be properly said to redistribute income, even though annuity holders who live longer receive more benefits than those who do not. Unlike private annuities, Social Security payments are determined by a progressive benefit schedule, so that retirees who had low wages receive more relative to the payroll taxes they paid than what retirees who had high wages receive. Thus, the progressive structure of Social Security benefits tends to transfer income from richer to poorer retirees, in a way that a private insurer would not. While this could be viewed as pure redistribution, the progressive structure of Social Security benefits can be seen as implicitly providing insurance against the risk of having low earnings. To the extent that this socially provided insurance reduces the riskiness of individuals' incomes over their lives, economic efficiency is enhanced. A broader interpretation of the social insurance concept would be that redistributional programs aimed at the poor, act as an insurance program that all members of society join before birth. Some part of regular taxes constitutes the premium for this social insurance, and individuals collect benefits if they suffer bad luck of some sort that makes them poor. Social insurance provides protection against some consequences of becoming poor, at the cost of higher taxes for others. The introduction of Medicare and Medicaid in 1965 reflected both social insurance and more purely distributional concerns. Medicare, which reduced the share of the elderly living in poverty, added medical benefits to the Social Security program. By including nearly all of the working population in Medicare, its original proponents sought to distinguish it from more redistributive "welfare" programs and emphasize its social insurance aspects. In contrast, while Medicaid also provides substantial social insurance benefits, its design continues to reflect its origin as a redistributive program. Medicaid stemmed from various poor-relief programs aimed at low-income groups and those impoverished by poor health, which were extended and consolidated in a multi-billion-dollar federal-state program. The Federal Budget and Market-Oriented Health Care Reform The rapid rise in health care costs is straining public budgets at all levels of government, and projected increases in health care costs promise to intensify pressures on public budgets. If health care costs continue to grow at past rates, cutbacks in other types of consumption will be inevitable. Even if health care costs moderate, a substantial portion of the gains from economic growth will be directed towards the health care system. Rising costs have stemmed in part from the introduction of medical advances, which have increased longevity and reduced morbidity. The increasing proportion of the elderly population is another cause of rising medical costs. Finally, third-party reimbursement, by shielding consumers from health care costs, makes consumers less sensitive to price signals. This, in turn, gives providers incentives to expand the supply of health care and to change practice patterns to a more complex and intensive style of medicine. Rising health care costs have cut into the growth of other types of consumption for most households. In the decades following World War II, productivity and incomes grew fast enough relative to health care costs to allow steady increases in health and non-health spending. In more recent decades, real incomes for most households grew more slowly while health costs continued to rise rapidly and cut into the growth of non-health expenditures. Since 1972, real incomes for the lower 99% of household grew on average only 1.2% per year to 2002. Over the same period real national health expenditures rose 4.9% a year. Had health care spending in the U.S. been held to 10% of GDP, a proportion similar that in Canada, France, Germany, and Switzerland, non-health consumption would have grown about 25% faster. To the extent that choices of rational consumers, or of rational voters and politicians, drive this expansion of the health care system, rising health costs are not necessarily a cause for concern. In all advanced industrial countries the fraction of the economy devoted to health care has been rising. If consumers prefer to buy more technologically advanced medical care rather than more advanced cars or refrigerators, then higher medical costs are a natural consequence of rising standards of living. A 2001 review of studies regarding medical technology for heart attacks, low-birthweight babies, depression, and cataracts indicated that increased benefits of better treatment options far outweigh costs. For breast cancer, according to that review, increased costs and benefits of new technologies were roughly of the same magnitude. Rising medical costs threaten to price a growing number of Americans out of the insurance market. In the past few decades, the number of uninsured has hovered around 40-46 million. Depending on the definitions used, tens of millions more are underinsured against the risk of having a health emergency become a financial catastrophe. As health care becomes more expensive, the logic of supply and demand suggests the pool of uninsured persons will grow. Two health economists projected that the number of uninsured persons will grow from 45 million in 2003 to 56 million by 2013, largely due to the continually rising costs of health care. Absent the political will to increase taxes significantly, rising federal health care expenditures will force major cuts in benefits or fundamental changes in the health delivery system. Economic theory suggests that addressing the root causes of market failure provides the best chance for enhancing system performance. The following discussion examines the potential of market-based solutions, which address sources of market failure noted above, to help transform the health care system in ways that would lead to better performance and lower costs. Improve Health Consumer Information Consumers shopping for cars have many sources of information on quality and price of various models. To the contrary, consumers shopping for health care have trouble finding basic information about quality and price. Certainly comparing health care alternatives, given their complexity, uncertainty, made-to-order nature, will be harder than comparing mass-produced goods. However, providing health care consumers with better information can stimulate competition, which in turn can deliver better performance and prices. Information on Pricing More transparent pricing of health care could help consumers make better decisions. However, transparent pricing is likely to be effective only when combined with other measures. Often, price information is of little value without accompanying information on quality. In addition, consumers will be sensitive to prices only if they share a non-trivial portion of their health care costs. However, the bulk of medical costs stem from a small proportion of high-cost episodes, often occurring in the last few days of life. Insured patients in those episodes are well above out-of-pocket limits, above which the insurance plan pays until some very high limit of coverage is reached. For this reason, insurance plans—not consumers—will be in the best position to put pressure on providers to lower prices and improve quality for the most expensive types of health care. That is, better price information for consumers can spur competition among providers of eyeglasses, teeth cleaning, and routine check-ups, but better price information is unlikely to sharpen competition among heart surgeons. Hospitals, in general, have been reluctant to provide a transparent set of prices for their services. In part, this is a consequence of their cost structure. Hospitals, for their part, must pay large fixed costs for items such as buildings, maintenance, equipment, and computer systems. At the same time, hospitals provide a perishable service: an empty hospital bed cannot be saved for tomorrow. Economic theory suggests that industries that have high fixed costs, and which sell perishable goods or services, face strong pressures to charge different customers different prices and compete in markets subject to unstable prices. In addition, many hospitals provide services, such as indigent care and graduate medical education, for which they may not be not wholly compensated. Such hospitals must find other ways to finance these services, which often involves cross-subsidies. In these conditions, a simple flat-rate price system may not be a viable strategy for hospitals. Therefore, imposing greater transparency of health care prices may require closer attention to cross-subsidies and uncompensated training and care. Information on Quality Health care consumers have access to little useful information about quality. In part this is due to the inherent complexity of medical care and the difficulty of defining and measuring quality. However, the development of large electronic databases has opened the possibility of creating quality indices based on sophisticated statistical methods. Large corporations, insurance companies, and government agencies have developed extensive databases which contain information reflecting the quality of health care. These data, aside from some limited exceptions, are unavailable to consumers. Medicare pays an average of more than $400 million per year to run 53 Quality Improvement Organizations (QIOs), which work with hospitals, physicians, nursing homes and other providers to improve quality of care. Research by academics and the Institute of Medicine has cast doubt on the efficacy of QIOs. Other research, however, suggests that interventions by QIOs are associated with quality improvements. Hospital professional organizations in 2002 created the Hospital Quality Alliance, which provides comparative data. For each hospital, 20 indicators measuring the proportion of patients who receive specific treatments recognized to constitute "best practice" in the areas of heart attacks, heart failure, pneumonia, and prevention of surgical infections are reported. For example, one item reports what percentage of heart attack victims received aspirin upon arrival at the hospital. Critics say this type of reporting focuses on what a hospital did , rather than what happened to patients. They note that if food critics operated according to similar principles, perhaps their reviews would report which restaurants remembered to include important ingredients of meals or how sophisticated the restaurant stoves were, while failing to report how meals tasted. Traditional approaches to quality monitoring in health care focused on "zero/one" indicators that provide no information on gradations of ability or competence. Physicians were licensed, and hospitals were accredited, and those who were not could not legally engage in medical care. Providers were certified for Medicare reimbursement. Such measures, however, only served to set lower bounds. The board certification of physicians is a partial exception, which provides consumers an opportunity to select physicians who have passed a more rigorous set of standards. Providing consumers with more useful data on outcomes can improve health care quality. Of course, outcome data must include risk adjustments, so that statistics reflect the fact that healthier patients will on average have better outcomes. For example, the United Network for Organ Sharing, established by Congress in 1984, collects data on all transplant operations in the United States. Risk-adjusted outcome data for each transplant center are available at http://www.unos.org. Public availability of risk-adjusted outcome data puts pressure on surgeons and transplant centers to improve performance. New York State has published risk-adjusted average mortality rates for cardiac surgery since 1991. After starting this program, the mortality rate among cardiac patients treated in top-performing hospitals or by top-performing surgeons was about half the mortality rate for patients treated by a hospital or surgeon rated in the bottom 25% of the rankings. A 2003 study, however, contended that publication of performance data gave providers incentives to avoid difficult cases, leading to worse health outcomes for sicker patients and higher resource usage. In the absence of effective quality-control programs, malpractice and the tort system act as a rough substitute for quality control. Expanding consumer access to useful medical outcome data would take pressure off the tort system. For instance, once New York State started publishing cardiac outcome data, surgeons with high reported risk-adjusted average mortality rates were more likely to retire or stop performing operations. Giving patients information that allows them to avoid surgeons with high mortality rates is preferable to having their estates sue. Make Extras Cost Extra One strategy for slowing the growth of health care is to make patients pay more when they choose health care which is more expensive to provide. For example, many employers tie their contribution to an employee's health insurance plan to the cost of the cheapest plan. Employees then face a choice of paying for the incremental cost of a more generous insurance plan out of their own pocket or spending that money on other things. However, some employees can pay for more generous insurance out of pre-tax income via premium conversion plans, so that the tax exemption for employer-provided health care still tilts those employees towards buying more health insurance. Limiting the income tax exemption for employer-provided health care at some fixed level would help ensure that those who benefit from more generous health plans pay for their added cost themselves. To the extent that consumers make rational decisions between health and non-health expenditures, the tax exemption creates an economic distortion that lowers allocational efficiency. Limiting this exemption would make employees with more generous health plans more sensitive to the cost of health insurance, which would put downward pressure on health care costs. As noted above, the President's Advisory Panel on Tax Reform called for capping this exemption for those reasons. The Weisbrod proposal, described above, which would tie reimbursement for new drugs to the level of an existing drug of recognized efficacy, is another application of the "make extras cost extra" principle. Providing drug developers with a strong incentive to find new drugs that would be cheaper but just as effective as currently available drugs could help constrain the growth of health care costs. In effect, some insurers have partially implemented this approach in their efforts to promote use of generic drugs by waiving copays or deductibles that would apply for non-generic drugs. Patients who want more expensive drugs, rather than cheaper generics, must pay some portion of the difference themselves. The same "pay more for extras" approach appears in various forms in several health care reform proposals. For example, this idea is central to the rationale for the favorable tax treatment of high-deductible insurance plans linked to health savings accounts (HSAs), which have been an important part of the President's health reform agenda. Those who choose these plans pay for routine expenses from HSAs, or beyond some point, out of pocket, but retain insurance protection against the financial risks connected to health care. Expand Use of Information Technology Many health analysts contend that more extensive use of information technology (IT) could improve quality and increase efficiency of medical care. The Veterans' Health Administration (VHA), which treats about 5 million patients per year, began an organizational transformation in 1995 that featured a centralized health information system. This system not only simplified record keeping, giving physicians instant access to records on all previous visits made by a patient, but also provided researchers and managers access to treatment and outcome data that provided hard evidence on clinical effectiveness. The VHA is now considered a leader in the application of IT to health care administration. Several studies have concluded that quality of care in the VHA exceeds that in comparable private health care providers. Centralized clinical IT systems can also allow payers to link physician reimbursement with measures of quality of care. The British National Health Service (NHS) initiated pay-for-performance contracts with family practitioners in 2004, which tied physician payments to 146 indicators of the quality of clinical care for 10 chronic diseases. In the first year of this program, almost 97% of U.K. physicians met quality targets. While analysis of these initial data cannot determine whether initial clinical quality targets were set too low or whether clinical quality improved, the information collected on quality indicators provides the NHS with a powerful tool to monitor the quality of patient care and to push for further improvements. The federal government has taken preliminary steps in the same direction. The federal government has funded demonstration projects that make extra payments to physicians and hospitals that report certain quality indicators. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( P.L. 108-173 ) cuts payments by 0.4% to hospitals which do not report on 10 quality indicators for acute myocardial infarction, congestive heart failure, and pneumonia. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) increased that penalty to 2% of payments and authorized the Department of Health and Human Services to modify the set of quality indicators. The Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) ties increases in physician reimbursement under Medicare Part B to reporting of quality measures selected by the Centers for Medicare and Medicaid Services' Physician Voluntary Reporting Program. At present, this program collects data on 16 quality measures. In future years, the Secretary of Health and Human Services may select other quality measures. While the data supplied by U.S. hospitals and physicians is much less detailed than information supplied by U.K. physicians participating in pay-for-performance programs, U.S. efforts to collect a basic set of quality indicators in a systematic way could underpin future efforts to link payments to quality of care. Concluding Thoughts Market competition has brought rapid technological change, higher quality, and lower prices to many parts of the economy, leading many to ask why broader application of market principles to the health care system could not reduce costs and improve performance. As many have noted, health care is not a standard commodity. Unless institutions and reforms are designed to reflect the unique characteristics of the health care market, failures will continue to be the norm. Certainly past experience indicates that patients, insurers, and providers all react to financial incentives. Unfortunately, designing incentives that align behavior of consumers and health care payers and providers is difficult because of the nature of medical care. Broadening financial protection against unexpected health care costs, enhancing access to routine and preventative care, constraining costs, and setting up economic incentives that induce efficient behavior among individuals and firms are all worthwhile goals. Designing policies with a reasonable expectation of reaching each of those goals is difficult. Information asymmetries between patients and physicians as well as between providers and payers stem from the unavoidable need for highly specialized roles. The specialized expertise of medical personnel gives patients access to sophisticated therapeutic measures, many of which could hardly have been imagined a generation ago. This specialization of expertise also necessitates an informational asymmetry that requires patients to depend on their physicians to guide them through the system. Thus, the principal-agent relationship lies at the heart of the health care experience. Similarly, because physicians see patient s while payers only see paper claims , physicians possess an important informational advantage over third-party payers. Expanded use of performance measurements and information technology has the potential to reduce these problems. The health insurance system's ability to spread risks across a broad pool of beneficiaries will continue to face challenges as insurers seek to avoid losses through medical underwriting and related practices. Extending coverage to individuals in poor health, from the point of view of an insurer, is more akin to providing a subsidy than insuring a risk. Insuring such individuals may require either subsidies or pricing schemes that induce private insurers to compete on grounds of efficiency of service rather than ability to avoid those with greater needs for health care. Alternatively, health insurance for those in poorer health could be guaranteed by policies that would create larger and broader pools, such as the Canadian single-payer system. Another alternative is the United Kingdom's two-tier system, in which all residents are enrolled in the National Health Service, but those who wish access to more convenient services may buy supplemental policies, such as provided by the British United Provident Association (BUPA). This system gives all U.K. residents access to a reasonable standard of care, although this may involve some level of inconvenience and waiting in some cases, and restricted access to some care regarded by health planning authorities as of low benefit. Those wishing to bypass such inconveniences can pay for access to more extensive and comfortable care. Some state governments have introduced other reform strategies. After July 2007, Massachusetts will require all residents to obtain health insurance. This approach parallels the typical automobile insurance system, which requires citizens to have insurance, but allows them to choose among many approved and regulated insurance providers. Low-income individuals will be eligible for subsidized access to insurance on a sliding scale. Governor Schwarzenegger has proposed a health insurance reform plan that also includes a requirement that all individuals obtain health insurance. Even if the design of health care policy requires balancing of goals that present conflicting requirements, policy innovations can deliver better results. Policies that harness market incentives and recognize the nature of health care can enhance efficiency and improve performance. Because asymmetric information is a cause of market failure, policies that provide better information to patients and payers may improve performance. Because market power often serves as a cause of market failure, policies that either reduce or counterbalance market power can help improve performance. Policies that either fail to reflect the nature of the health care or that fail to address causes of market failure are unlikely to lead to lasting improvements.

Health care spending is one of the most rapidly growing portions of the federal budget. Projections suggest if the rapid growth in health care costs is not curtailed, governments at all levels will face an uncomfortable choice between significant cuts in other spending priorities or major tax increases. This report examines the economic justification for government intervention and involvement in health care markets. Many analysts claim market-oriented policies, in certain instances, could lower costs and enhance efficiency in health care. This report discusses the Invisible Hand Theorem, which states that when certain assumptions hold, market outcomes will be efficient. These assumptions require that no one has an informational advantage over another, that no spillover effects exist in consumption or production, that no one exerts market power, and that no scale economies exist in production. Many characteristics of health care markets fail to satisfy the assumptions of the Invisible Hand Theorem. Moreover, fundamental characteristics of health care (such as informational asymmetries between patients and health care professionals and between payers and providers, as well as ethical and distributional concerns) complicate efforts to expand the use of market or market-like incentives in health care. Rising health care costs in part reflect the cost of technological advances, whose benefits exceed their costs, and the aging of the U.S. population. The growing role of third-party reimbursement over the past half century weakened incentives to minimize costs and thus has also led to higher health care costs. Many analysts have called for initiatives which would improve the functioning of health care markets, such as improving consumer information and allowing greater use of bargaining. These initiatives may help reduce or slow the growth of health care costs, but may also have unintended negative consequences. Greater use of market-like incentives can improve the efficiency of the health care system, but only if they take into account the special characteristics of health care.

Overview The U.S. Congress has a long history of engagement on U.S. policy toward Sudan—since the end of apartheid in South Africa, there is no country in Africa on which Congress has focused more sustained attention. This bipartisan focus has been driven in part by diverse advocacy groups and public awareness campaigns on issues in Sudan ranging from famine to modern-day slavery, religious persecution, genocide, and other violations of human rights and humanitarian law. Terrorism concerns have overlapped the policy debates. Prior to the secession of South Sudan, Sudan was Africa's largest nation by area, and the site of its longest running civil war. In 2011, after decades of fighting broadly described as a conflict between the "Arab" Muslim north and "African" Christian and animist south, the country split in two. Mistrust between Sudan and South Sudan lingers, and unresolved disputes still threaten the stability of the region. The north-south split did not resolve other simmering Sudanese conflicts, notably in Darfur, Blue Nile, and Southern Kordofan (see Figure 1 ). Overlapping struggles between security forces and armed groups, among ethnic groups, and between nomadic and farming communities have caused extensive displacement and human suffering. Across the country, social tensions, economic pressures, and political dissent pose ongoing challenges for the Islamist government that came to power through a coup in 1989. The secession of South Sudan was a major financial blow to Sudan, which lost 75% of its oil production, two-thirds of its export earnings, and half of its fiscal revenues. The country carries a heavy external debt burden of $45 billion (78% of GDP), much of it in arrears. Khartoum's internal military operations against restive regions continue to draw international condemnation and have prevented Sudan from improving relations with many Western countries, including the United States. U.S. sanctions limit Sudan's access to U.S. dollars and, alongside debt arrears, impede Sudan's access to international financial markets and institutions. After the United States levied heavy fines against the French bank BNP Paribas in 2014 for violating U.S. sanctions against Sudan and other countries, most foreign banks stopped transacting with Sudanese banks, tightening the foreign exchange market and adversely affecting its trade. The International Monetary Fund anticipates that the breakdown in relations with correspondent banks could have a "considerable negative impact on the economy." The ongoing cost of waging war on multiple fronts compounds Sudan's economic troubles and, combined with allegations of political repression, fuels domestic criticism of the government and sparks periodic public protests. Relations between Sudan and key Arab Gulf countries, which have been important sources of trade, investment, and project financing for Khartoum, had cooled in recent years amid some Arab countries' concerns over Sudan's ties to Iran and its perceived support for the Muslim Brotherhood in other countries. Khartoum has since taken several conspicuous steps to address concerns about its relationship with Iran, including by expelling Iran's cultural attaché in September 2014 and closing its cultural centers in the country. The extent of its security association with Iran, however, remains subject to speculation. Iranian warships make routine port visits, and the two countries have a long history of diplomatic and military ties. Iran has reportedly played a significant role in the development of Sudan's military industry (Sudan now ranks as the third largest weapons manufacturer on the continent, after Egypt and South Africa). The two countries also reportedly have been involved in weapons smuggling to Gaza, and Israel has reportedly conducted several air strikes in Sudan to disrupt the route. Periodic allegations of Sudanese support for Islamist militias in neighboring Libya may also have contributed to strains in Sudan's relations with some countries, including Egypt. Many observers speculate that Sudan's decision in March 2015 to join the Saudi-led regional military intervention in Yemen, against Houthi rebels reportedly backed by Iran, may be motivated in part by an effort to reinvigorate Arab confidence and investment in Sudan. Background After Sudan gained independence from Anglo-Egyptian rule in 1956, successive governments in Khartoum perpetuated development disparities between the north and south that were, in part, a legacy of colonial administration. Northern "Arab"-led regimes espousing Islamist ideals have dominated Sudan's political history since independence, often pursuing policies to press distant provinces to conform to the political and sometimes sectarian priorities of the center, Khartoum, rather than accommodating the country's diverse local customs and institutions. Instead of forging a common national identity, these policies have exacerbated Sudan's racial, cultural, and religious differences. Government efforts to Arabize and Islamize the countryside met with resistance from southerners and other marginalized groups, sparking two related insurgencies in the south (1955-1972 and 1983-2005). Groups in other regions have risen up periodically, citing local grievances. In the 1980s, for example, minority groups in the ethnically diverse central states of Southern Kordofan and Blue Nile joined the southern rebellion, the Sudan People's Liberation Movement/Army (SPLM/A). Revenues from Sudan's oil reserves, which were discovered in 1978 in southern Sudan, primarily benefitted the north, in particular state elites in Khartoum. Oil money also financed the government's countering of domestic insurgencies with force—first in the south, and then also in the west and east. These counter-insurgency campaigns did not discriminate between fighters and civilians, and the government repeatedly questioned the neutrality of international aid agencies and restricted access to affected populations. The rebel groups persisted, and among them the SPLA was the most successful in gaining ground against the more heavily armed Sudanese military. The SPLA faced internal divisions in the 1990s, largely along ethnic lines; Khartoum fueled these splits by arming breakaway factions. Along the north-south border, Khartoum also used its oil revenues to finance local Arab militias as a front line against the south. Sudan's north-south war took a heavy toll on both sides, and in 2005, the government and the SPLM signed the Comprehensive Peace Agreement (CPA). The CPA enshrined the south's right to self-determination after an "interim period" of more than six years, during which the SPLM and the ruling National Congress Party (NCP) formed a unity government. Despite the NCP's stated effort to "make unity attractive" to southern Sudanese during the interim period, southerners saw few, if any, benefits from remaining part of Sudan and voted overwhelmingly in a January 2011 referendum to secede. South Sudan achieved independence in July of that year. The CPA failed to resolve several contentious issues, and talks have continued on border disputes and related security issues, debts, and once-shared resources, such as oil. Sudan and South Sudan signed partial deals on security and economic cooperation in 2012, but the full deployment of a joint monitoring mission to ensure the demilitarization of the border has been repeatedly delayed and is limited to sporadic aerial surveillance. The proximity to the border of rebel activity in Sudan's "new south" (Southern Kordofan, Blue Nile, and the southern part of Darfur) and the unresolved status of contested areas such as the Abyei region complicates border demilitarization. The border region of Abyei, which was accorded special semi-autonomous status in the CPA, has repeatedly been a flashpoint for violence. The deployment of the U.N. Interim Force for Abyei (UNISFA) defused a violent standoff in 2011 between Sudan and South Sudan, but tensions among local communities still have the potential to destabilize the border and draw the two countries back into direct conflict. Under the CPA, Abyei residents were to vote in a 2011 referendum on whether the area should retain its special status in Sudan or join South Sudan. A dispute about voter eligibility has delayed the process. The Ngok Dinka, who have historically comprised a majority of the area's permanent residents, controversially held their own referendum in 2013, voting to secede from Sudan. Neither Sudan nor the international community has recognized the result. The final status of Abyei is likely to remain unresolved until Sudan and South Sudan negotiate a resolution, possibly as part of a broader deal on outstanding issues between the countries. The United Nations has pressed, unsuccessfully to date, for the establishment of a temporary local administration and police service to maintain order until a final settlement is reached. The armed forces of Sudan and South Sudan have engaged in minor clashes along the border sporadically since separation, most prominently in 2012 when the South Sudanese army briefly occupied the Sudanese oil town of Heglig, purportedly acting in self-defense after an attack on its territory. Sudan bombed one of South Sudan's oil fields in retaliation and further skirmishes ensued. South Sudan periodically accuses Sudan of conducting other air strikes inside its territory. Sudan alleges that South Sudan's ruling party, the SPLM (the former rebel movement), provides support and refuge for Sudanese rebel groups (the likely target of reported air strikes). South Sudan contends that Sudan has, at times, provided weapons and other support for South Sudanese rebel militia, including, most recently, the rebellion known as the SPLM-in Opposition (SPLM-iO), led by South Sudan's former vice president, Riek Machar. In the context of South Sudan's current conflict, there is concern that this alleged proxy support by both sides could spark a wider regional war. Given the mass displacement already caused by the conflicts in the two countries, direct hostilities between the two countries could have devastating humanitarian consequences. Current Conflicts in Sudan The CPA did not resolve Sudan's long-standing center-periphery tensions. Khartoum has continued to respond to the political demands of restive regions more often with force than reform. Its response to an uprising in Darfur in the early 2000s (discussed below) prompted the George W. Bush Administration to declare that Khartoum's "scorched earth policy" against the rebels and civilians constituted genocide. More than a decade later, widespread violence still plagues that region. The government's response to a rebellion launched in 2011 in Southern Kordofan and Blue Nile (often referred to as "the Two Areas") has also drawn international concern. More than two million people have been displaced in the context of that conflict. Unlike in Darfur, where relief agencies are able to operate in most areas, humanitarian access is extremely restricted in those states. As in Darfur, where the Sudanese government has been accused of war crimes and crimes against humanity, Khartoum has been accused of grave violations of human rights and international humanitarian law in the Two Areas. It finances local Arab militias, including the paramilitary Rapid Support Forces (RSF), which have been deployed, like the infamous Janjaweed in Darfur, in what the U.N. Panel of Experts on Sudan refers to as a "proxy war" against rebel groups. The RSF are widely criticized for indiscriminate and disproportionate attacks against civilians in insurgent areas. The government also continues aerial bombings in Darfur, in violation of U.N. Security Council resolution 1591 (2005), and in the Two Areas, and has been accused of targeting hospitals in Darfur and Southern Kordofan in the past year. According to the U.N. Panel of Experts, which the U.N. Security Council created to monitor an arms embargo in Darfur and a related sanctions regime, the government's strategy "appears to consist of (a) collective punishment of villages and communities from which the armed opposition groups are believed to come or operate; (b) induced or forced displacement of those communities; and (c) direct engagement, including aerial bombardment, of the groups when their location can be identified." The Panel's reporting, which is limited to Darfur, indicates that 3,324 Darfuri villages were destroyed in the five-month period from December 2013 to April 2014, coinciding with a Sudanese military operation led by the RSF known as "Operation Decisive Summer." Independent human rights groups also documented extensive damage to civilian areas in Southern Kordofan in the context of that operation. In December 2014, with the onset of the dry season, referred to in Sudan as "the fighting season," Sudan's defense minister announced the launching of new offensive operations against the rebels in both regions. Those operations, which President Omar al Bashir subsequently described as aiming to eliminate armed groups that do not heed the government's call for dialogue, are ongoing. Darfur In the early 2000s, as Khartoum and the SPLM were beginning to negotiate an end to their civil war, a new conflict was unfolding in the western region of Darfur. Underlying tensions between Darfuri groups over land, water, and grazing rights had driven low-level violence in this arid land for decades, and the central government had historically struggled to govern the region. For years, arms flows by both internal and external actors, including neighboring Libya and Chad, further fueled the violence. Described in 2004 by the State Department as "the worst humanitarian and human rights crisis in the world," what began as a conflict primarily between Arab and non-Arab ethnic groups, namely the Fur, Massalit, and Zaghawa, quickly deteriorated into a civil war characterized by "widespread and systematic" rape, torture, killings, forced displacement, and the looting and destruction of hundreds of villages. The crisis drew a massive humanitarian response in the mid-2000s, stemming the casualties, but continuing insecurity in the region has discouraged more than two million displaced persons from returning to their homes. In effect, the conflict created a large semi-urban population with few means of sustaining itself economically. Many of the displaced remain reliant on food aid to survive. Fighting in Darfur among ethnic communities, armed groups, and the military has escalated since early 2013, causing displacement on a scale not seen since the first years of the conflict. The 2011 Doha Document for Peace in Darfur (DDPD) has not stopped the violence. By many accounts, the lack of accountability for crimes perpetrated by local groups has generated a sense of impunity in the region. Khartoum's evolving use of local proxies to spur tensions between ethnic communities over land and political power has changed the dynamics of the conflict, and increasing inter-tribal conflicts and fissures within the various armed groups further complicate the path toward a peaceful settlement in the region. Some Arab groups that were previously aligned with the Bashir regime, for example, have recently accused Khartoum of exploiting the Arab tribes in Darfur and declared themselves in opposition to the government's actions. Access by peacekeepers and humanitarian organizations to affected communities in Darfur is limited by both insecurity and government restrictions. Violent criminality in the region has risen, and humanitarian workers have been abducted for ransom. Contestation over land and local natural resources has long been a factor of conflict in the region, and disputes over resources such as gold have fueled further clashes in recent years. Attacks by armed groups against civilians, peacekeepers, and relief workers remain a serious problem—more than 60 peacekeepers have been killed in Darfur since the mission began in 2007. The credibility of the African Union-U.N. Hybrid Operation in Darfur (UNAMID) has increasingly been questioned amid allegations that it has self-censored its reporting related to state-backed crimes against civilians and peacekeepers. In 2014, when a former UNAMID spokesperson revealed unpublished documents from the mission, a Foreign Policy correspondent wrote: UNAMID ... has been reluctant to cast blame on the Sudanese government ... without irrefutable firsthand proof collected by its personnel, an evidentiary standard that has been impossible to achieve. As a result, UNAMID public reporting has often minimized Sudan's violations or withheld strong circumstantial evidence of Khartoum's complicity in, or responsibility for, attacks in UNAMID's reports to the U.N. Security Council. Despite ongoing conflict and a humanitarian situation described by U.N. officials as "dire and very worrisome," UNAMID is under pressure from Sudan's government to develop an "exit strategy." President Bashir alleged in late 2014 that "UNAMID has become a security burden on the Sudanese army more than a supportive [sic] to its forces in the protection of civilians, and unable to protect themselves" and accuses the force of acting as "a protector to the rebels." While the government subsequently clarified that it did not intend for an immediate exit, negotiations on a strategy are underway. As part of an effort to streamline its personnel and recalibrate its activities toward identified strategic priorities, UNAMID will cut 1,260 of its 4,110 civilian positions in the next two years. Its authorized troop size is already down from almost 20,000 to just below 15,800. The mission is reducing its aviation fleet and has transferred 400 of its vehicles to West Africa for Ebola response. In November 2014, Sudan forced the closure of the mission's human rights office in Khartoum, which the government contends is outside UNAMID's mandate. The following month, Sudan expelled the top two officials from the U.N. Development Program (UNDP), including the U.N. Resident Humanitarian Coordinator. Compliance with the U.N. Sanctions Regime In 2005, the U.N. Security Council established an arms embargo on Darfur. Critics note that arms regularly flow between Darfur and the rest of the country and argue that the Security Council should widen the embargo to cover all of Sudan. In its January 2015 report, the Panel of Experts cites the government's "routine violations of the arms embargo" and identifies members of Sudan's security forces as the perpetrators of violations of international humanitarian law in attacks against civilians in North and South Darfur. The Panel argues that Sudan's lack of cooperation in implementing the U.N. assets freeze and travel ban for four designated individuals (among them a military commander) and its refusal to comply with the arms embargo renders the sanctions regime "in effect inoperative within Sudan." Following a February 2015 decision by the Security Council to extend the Panel's mandate, U.S. Ambassador to the United Nations Samantha Power remarked, "we are reminded that the sanctions regime is impotent when the Sudanese government systematically violates it, and the Council cannot agree to impose sanctions on those responsible for the violence and the abuses." Compliance with the International Criminal Court In 2005, the U.N. Security Council granted the International Criminal Court (ICC) jurisdiction over serious crimes committed in Darfur. The ICC did not have territorial jurisdiction in Sudan prior to the referral, as it is not a state party to the Rome Statute establishing the Court. Darfur was the first case the Council referred to the Court. Ten years later, the ICC has yet to commence a trial in the case. Five ICC arrest warrants remain outstanding, including one for the arrest of Sudan's defense minister and two for the arrest of President Bashir on accusations of war crimes, crimes against humanity, and genocide. Sudan has not cooperated with the Court, and in December 2014, the ICC Prosecutor announced that she was suspending the investigations, expressing frustration with inaction by the Security Council on the outstanding arrest warrants. The warrants remain active. In her statement to the Security Council, the Prosecutor suggested that some of those sought by the Court "continue to be implicated in atrocities committed against innocent civilians," and added that the situation in Darfur was "deteriorating," with the brutality of crimes becoming "more pronounced" (see below). In March 2015, the ICC requested that the Security Council take "necessary measures to enforce compliance" by Sudan with the arrest warrant for President Bashir, noting that while Sudan is not a state party to the ICC Rome Statute, it is obligated to cooperate based on its status as a U.N. member and on Security Council resolution 1593 (2005). In it, the Council determined that the government "shall" cooperate with the Court. According to the ICC, "if there is no follow up action" by the Security Council, "any referral by the Council to the ICC under Chapter VII of the UN Charter would never achieve its ultimate goal, namely, to put an end to impunity. Accordingly, any such referral would become futile." African countries have struggled with how to respond to a warrant against a sitting head of state. Most are states parties to the Rome Statute and thus bound to execute ICC warrants, but several have allowed Bashir to travel to their territories in recent years. In January 2015, the African Union's Assembly approved a resolution requesting that the Security Council withdraw its referral of the Sudan case to the ICC. Some African governments have threatened to withdraw their accession to the Rome Statute, but none have formally done so to date. Southern Kordofan and Blue Nile In 2011, with the international community focused on ensuring the peaceful separation of Sudan and South Sudan and Khartoum still struggling to contain multiple armed insurgencies in Darfur, rebellions in Southern Kordofan and Blue Nile opened a new southern front among Sudan's array of internal conflicts. The conflict in the Two Areas is driven by unresolved grievances against Khartoum that date back to the north-south war, when some groups in these areas joined the SPLM's rebellion against the government. The CPA provided for a process in which the two states might achieve greater autonomy within Sudan, but the process stalled and the conflict reignited in 2011. South Sudan's ruling party has denied any ties to the insurgency, although the rebels, known as the SPLM-North (SPLM-N) remain linked to the SPLM by their historic relationship. In addition to alleged support from South Sudan, the SPLM-N draws support from Darfur rebel groups like the Justice and Equality Movement (JEM). The SPLM-N and the three main Darfur rebel groups have formed a loose armed alliance known as the Sudan Revolutionary Front (SRF). While the Darfur groups operate independently of one another in Darfur, they have reportedly conducted several joint operations in Southern Kordofan with the SPLM-N. Khartoum has restricted aid agencies' access to rebel-held areas since the conflict began, and military bombings and state-backed militia attacks exacerbate the already grave humanitarian situation in these areas. According to the Small Arms Survey, which provides extensive reporting and analysis on Sudan's conflicts, the fighting and air strikes have pushed the remaining population away from their home areas into government-controlled urban centers or to neighboring countries as refugees. Local monitors further suggest that air strikes have increasingly targeted farms and food stocks, purportedly to "starv[e] the population to weaken its support for the rebellion." Unlike in Darfur, there is no U.N. sanctions regime focused on the conflict in the Two Areas, nor a U.N. Panel of Experts or U.N. peacekeeping operation. The Humanitarian Situation Sudan's conflicts continue to cause mass displacement and create widespread humanitarian needs. U.N. estimates suggest that more than 6.6 million Sudanese require humanitarian aid. Of that figure, 4.4 million are in Darfur (almost 60% of Darfur's total estimated population). More than 2.5 million people in Darfur are displaced internally—some 430,000 Darfuris were displaced in 2014 alone, and by U.N. estimates more than 140,000 people have been displaced in the first four months of 2015. Chad hosts 367,000 Darfur refugees. Another 1.75 million Sudanese have been internally displaced or severely affected by conflict in Southern Kordofan, Blue Nile, and Abyei. Ethiopia and South Sudan host more than 275,000 refugees from Southern Kordofan and Blue Nile, and more than 20,000 Abyei residents remain displaced in South Sudan. Relief agencies are also struggling to assist more than 140,000 South Sudanese refugees in Sudan who have fled conflict in their own country. Sudan hosts more than 100,000 refugees from Eritrea. Access by relief agencies to Sudan's conflict zones is at times constrained by government restrictions, fighting, and other forms of insecurity. Médecins Sans Frontières (MSF)-Belgium announced in late January 2015 that it was halting operations in Sudan in response to the government's "systematic" denial of access to people in conflict areas and other administrative blockages. Nine days prior, a hospital operated by MSF-France was bombed by the Sudanese military in Southern Kordofan, prompting MSF to withdraw from that state. Sudan previously expelled 13 international relief organizations in 2009 (some were subsequently allowed to return), and banned four aid groups from eastern Sudan in 2012. Political Challenges The NCP government is under pressure. It remains isolated internationally, with ICC arrest warrants against President Bashir and his defense minister that restrict official travel, Western sanctions against the regime, and limited access to international financing. The loss of South Sudan spurred criticism from some elements within the regime, and the failing economy and allegations of large-scale state corruption have led even some Islamists to question the ruling party's trajectory. Inflation and related economic troubles have fueled periodic protests in urban centers in recent years. Protestors have been killed by police on several occasions, notably in September 2013, when as many as 200 people were killed during a demonstration against a decision to end fuel subsidies. In late 2013, Ghazi Salahaddin Atabani, then head of the NCP's parliamentary caucus and a former top presidential advisor, was expelled from the party along with several other NCP "reformists" after criticizing the government's response to the fuel subsidy protests. He subsequently formed the Reform Now Party (RNP). The RNP and another party, the Popular National Congress (PNC), led by prominent Islamist and former regime ideologue Hassan al Turabi, represent growing Islamist opposition to the NCP. Turabi was a key architect of the National Islamic Front, the political organization behind the 1989 coup, which was later transformed into the NCP after an internal power struggle between Turabi and Bashir. Sudan's economic troubles may also constrain President Bashir's ability to distribute state resources to patronage networks, viewed by many analysts as an important source of political power. In January 2015, the NCP (which then controlled 90% of parliament) passed three controversial amendments to the current constitution, including one which enables Bashir to appoint and relieve state governors, who were elected in 2010 by popular vote. The move toward more centralized authority in the presidency is seen by some as an effort to reconsolidate control amid apparent fissures in the regime. Another constitutional amendment transformed the country's intelligence agency, long linked to the recruitment of proxy militias, into a regular armed force whose mission is to oversee internal and external national security. It also legitimized the agency's paramilitary Rapid Support Forces. The amendments have been widely criticized by both unarmed and armed opposition groups, which contend that the security services play an increasingly prominent role in government decision making. President Bashir has been in office since 1989. He was reelected to a new five year term in April 2015, and under the current interim constitution, adopted in 2005, it would be his last. The 2015 elections were controversial and were boycotted by the main opposition parties. Bashir won with more than 94% of the vote amid reportedly low voter turnout; NCP candidates won more than three-quarters of the seats in parliament. The United States and European governments publicly criticized the election environment as not conducive to allowing a free and fair vote, while African Union (AU) election observers described the voting as peaceful and reported that the results reflected the will of the voters. The AU monitors did note, however, limits on several basic political freedoms, reiterating findings from an AU pre-election assessment that described the overall political environment as "restrictive," with freedom of expression, association and assembly "generally not respected." That pre-election assessment had also raised concern that most of the political parties slated to contest the elections were reported to be created by the NCP to "give the semblance of competitive elections." The government's decision to hold elections in April was strongly opposed by both the main armed and unarmed opposition groups. More than a year prior, in January 2014, President Bashir had announced that, in preparation for the development of a new constitution, the government would commence a National Dialogue on conflict and political issues in the country. At the time, the move seemed to indicate official recognition of mounting public demands for reform, and the announcement was received with cautious optimism by some who have called for a more holistic approach to resolving the country's overlapping crises and political challenges. Many observers have expressed skepticism, however, that the NCP leadership will concede to significant political changes, and efforts to facilitate the participation of armed opposition groups in the process have been, to date, unsuccessful. The timing of elections, widely seen as an attempt by the Bashir government to bolster its legitimacy, in the midst of a rhetorical commitment to political change, appears to have undermined international support for the government-led dialogue process. Reports of increasing press censorship and the detention of political opponents in the past year raise additional questions about the regime's commitment to an inclusive political dialogue. Sudan's intelligence agency periodically confiscates the print runs of many of the country's daily newspapers, and harassment and intimidation of journalists reportedly remains a problem. One prominent political opposition leader, former Prime Minister Sadiq al Mahdi, who was briefly jailed in mid-2014, has been in exile since signing an August 2014 accord known as the Paris Declaration and a follow-on agreement known as the Sudan Call, under which his Umma party (the largest opposition party) pledged to collaborate politically with the SRF and other opposition groups. Al Mahdi's daughter Meriam, who is deputy head of the party, was briefly detained after the Paris meeting. In the Paris Declaration, the SRF declared its readiness to cease hostilities as a basis for a credible national dialogue. The government has described the subsequent document, the Sudan Call, as "treason." It outlines a "joint platform for the transformation of Sudan," pledging to "dismantle the one-party regime and replace it with a state founded on equal citizenship, through daily popular struggle, including popular uprising," and setting an agenda for political, economic, and social reforms. The agreements are significant in that they bring both armed and unarmed opposition voices together under a common set of political principles. Farouk Abu Issa, head of an alliance of unarmed opposition parties known as the National Consensus Forces, and Amin Mekki Madani, a prominent civil society activist, were imprisoned for months after signing the Sudan Call. They were released days before the April elections. Many opposition parties and civil society groups have indicated that they will boycott the National Dialogue until the government creates a more conducive environment for participation, including through the release of individuals they view as political prisoners and greater respect for press freedom. As noted above, the major opposition parties, along with several prominent Arab tribal elders, campaigned for a boycott of the April elections, contending that elections should not be held until the dialogue on the constitution is complete. Looking ahead, the prospects for the dialogue process are uncertain—just weeks after his release from prison in late April, Abu Issa called for the various opposition forces to build on the election boycott effort for a popular uprising against the regime. While the government remains publicly committed to holding a dialogue with unarmed opposition and civil society groups and has rhetorically welcomed the participation of armed groups in that process, it has rejected calls to combine peace negotiations with the SRF on Darfur and the Two Areas. Khartoum insists instead on negotiating separately with the Darfur groups and the SPLM-N. The African Union High-level Implementation Panel (AUHIP), under the leadership of former South African President Thabo Mbeki and with U.N. support, is charged by the AU with mediating between Khartoum and the various armed groups. The AUHIP, which, like the U.N. Security Council, maintains that Sudan's various conflicts require a political, rather than a military solution, has sought to coordinate the various peace processes with the aim of facilitating the eventual participation of all armed and unarmed groups in a national dialogue. In late 2014, the AUHIP convened its first talks between the government and the Darfur armed groups, in Ethiopia (Qatar had previously hosted most of the Darfur negotiations). Those talks, like AUHIP-hosted talks between the SPLM-N and the government in December, were inconclusive. The Sudanese government, meanwhile, seeks to maintain ownership of the National Dialogue process, and President Bashir has resisted proposals by Mbeki to meet under AUHIP auspices with the political parties who have suspended their involvement in the process. U.S. Policy and Foreign Assistance U.S.-Sudan relations have long been turbulent. Sudan was seen as a Cold War ally starting in the late 1970s, but after the 1989 coup that brought Bashir and the National Islamic Front to power, the United States downgraded diplomatic relations and cut off aid. The Clinton Administration designated Sudan as a state sponsor of terrorism in 1993, identifying Sudan as a "rogue state" and supporting neighboring Ethiopia, Eritrea, and Uganda as "frontline states" to contain Khartoum, and to provide support to the southern rebellion. In 1996, under Western pressure, Sudan expelled Osama bin Laden from the country. However, relations between Washington and Khartoum deteriorated further in August 1998, when, in response to the U.S. embassy bombings in East Africa, President Clinton ordered the bombing of a Khartoum pharmaceutical factory purportedly linked to bin Laden. U.S. policy shifted under President George W. Bush to focus on achieving reforms through increased diplomatic engagement. The U.S. Embassy in Khartoum, which had suspended operations in 1996, reopened in 2002. The United States has not appointed an ambassador to Sudan since 1997; a chargé d'affaires leads the U.S. embassy, and a special envoy directs policy in Washington. The United States maintains sanctions on Sudan through Executive Orders and congressionally-imposed legal restrictions. Initial sanctions were imposed in 1988, when economic and security assistance was frozen because of Sudan's debt payment arrears to the United States. Congress proposed additional limits on non-humanitarian aid in 1989 to protest government restrictions on aid access in southern Sudan, and by 1990 all non-humanitarian aid was suspended because of the coup. Some sanctions relate to Sudan's state sponsor of terrorism designation, others to abuses committed during the north-south war. Trade sanctions were imposed in 1997. Further sanctions relate specifically to the Darfur conflict, including a prohibition on U.S. transactions in the petroleum and petrochemicals sectors. Under Executive Orders 13067 (1997), 13400 (April 2006), and 13412 (October 2006), Sudanese government assets in the United States are frozen and U.S. transactions with the government or with designated persons involved in the Darfur conflict are prohibited. The FY2015 consolidated appropriations act ( P.L. 113-235 ) prohibits aid to the government or modification of loans held by Sudan. Khartoum seeks to improve its relationship with the United States, in part to boost its international standing and its efforts to reengage with multilateral financial institutions. (Of the roughly $45 billion Sudan owes in external sovereign debt, over $2 billion is owed to the United States.) Efforts to normalize relations appeared to have some momentum in 2011, when Sudan was the first country to officially recognize South Sudan. They have since been stymied by several factors, among them the ongoing conflicts in the Two Areas and Darfur. According to U.S. officials, "the fundamental issue we have in the relationship has to do with the way that the government has treated the people of Sudan, particularly those in the periphery." In Khartoum's view, the United States has repeatedly "moved the goalpost" on lifting sanctions. The Obama Administration contends that mistrust and miscommunication hinder efforts to improve the bilateral dialogue. To that end, in February 2015 the Administration invited one of President Bashir's top advisors, Ibrahim Ghandour, to Washington for discussions on how to advance "a more frequent and substantive exchange about our respective interest and concerns in the region, including ways to achieve sustainable peace in Sudan." President Obama's Special Envoy for Sudan and South Sudan, Ambassador Donald Booth, who was appointed in 2013, is expected to travel to Sudan for the first time in mid-2015. The U.S. Special Envoy has expressed support for the AU effort to facilitate a more cohesive mediation of Sudan's various peace talks and to link those talks to an inclusive national dialogue process. According to Ambassador Booth, "compartmentalized and regional approaches to peacemaking cannot address grievances and aspirations that are national in character ... dialogue should address fundamental issues of governance, inclusiveness, resource-sharing, identity, and social equality at a national level." He has described the conflicts in Darfur and the Two Areas as "symptoms of a common national ill," and referred to the 2011 establishment of the opposition SRF alliance as recognition by disparate groups of "the national nature of their struggle and of any sustainable solution." The Envoy has encouraged Sudan to engage in confidence-building measures to signal good faith as it lays the groundwork for the national dialogue. The Treasury Department's Office of Foreign Assets Control (OFAC) has issued two general licenses in the past year to authorize some activities otherwise prohibited by the Executive Orders cited above. These licenses allow certain academic and professional exchanges and authorize the transfer of certain software and services related to personal communications over the Internet. Sudan remains designated as a State Sponsor of Terrorism, although the State Department has described Sudan as "a generally cooperative counterterrorism partner" in its annual Country Reports on Terrorism in recent years. Per the last report, the Palestinian group Hamas, a U.S.-designated Foreign Terrorist Organization, continues to have a presence and raise funds in Sudan, and elements of Al Qaeda-inspired terrorist groups remain in the country. Sudan's reported role in Iranian arms smuggling to Gaza is another area of concern. In 2013, the State Department named three Sudanese nationals involved in the 2008 murder of two USAID employees in Khartoum as Specially Designated Global Terrorists, subject to sanctions under Executive Order 13224 (2001). The State Department has designated Sudan a Country of Particular Concern under the International Religious Freedom Act since 1999. A Christian woman, Meriam Ibrahim Ishaq, was sentenced to death for apostasy in May 2014, drawing international condemnation; her conviction was overturned by an appeals court in late June 2014. She subsequently settled in the United States with her family. Congressional Engagement on U.S. Policy Toward Sudan Congressional action has often influenced U.S. policy toward Sudan. In 1993, the same year that the Clinton Administration designated Sudan as a State Sponsor of Terrorism, the House of Representatives recognized the right of the southern Sudanese to self-determination. By 1999, some Members of Congress who were sympathetic to the cause of the southern insurgents initiated efforts to tighten sanctions. At the same time they pushed to authorize not only food aid but development assistance, including programs to build local administrative capacity, for areas outside of Khartoum's control—namely areas held by the SPLM. In 2002, Congress also appropriated nonlethal assistance for a coalition of armed and unarmed opposition forces (including the SPLM) to "strengthen its ability to protect civilians from attacks." At the same time, Congress expressed support for Bush Administration efforts to seek a negotiated settlement to end Sudan's north-south civil war. In 2003, conflict and human rights abuses in Darfur captured international attention and galvanized a campaign that led Congress and President Bush to accuse Khartoum of genocide and further tighten sanctions. Congress added Darfur to the areas outside government control eligible to receive U.S. foreign aid and required the President to develop a contingency plan for delivering relief aid to any areas where the government denied access. In 2006, after the north-south war had ended, Congress enacted additional economic and diplomatic sanctions against Khartoum to press for a resolution of the Darfur conflict. It also authorized assistance to implement the north-south agreement, including military aid to support the SPLA's transformation from a guerilla movement into a professional army. Congress later supported the efforts of U.S. state and local governments to divest any assets in companies that conduct certain business operations in Sudan, and required U.S. government contracts to meet similar standards. U.S. Assistance In the years prior to South Sudan's separation, Sudan ranked among the top destinations for U.S. foreign aid, with more than $1 billion allocated annually for humanitarian and development aid and peacekeeping support. Since South Sudan's independence, development aid for Sudan has been limited. The State Department and USAID requested $9.5 million for FY2015 to support civil society and conflict mitigation. The FY2016 request is for $9.1 million in nonemergency aid. Humanitarian aid totaled $260 million in FY2013, and roughly $413 million to date in combined FY2014 and FY2015 funding. The State Department's FY2016 request includes $366 million for assessed contributions to UNAMID and $92.5 million for UNISFA. It also includes a request for transfer authority to allocate funds for bilateral debt relief for Sudan under the Heavily Indebted Poor Countries (HIPC) Initiative, should Sudan meet the requirements to qualify. As noted above, P.L. 113-235 , the Consolidated Appropriations Act for FY2015, prohibits funding for modifying loans and loan guarantees held by the Sudanese government. Conclusion The United States has found itself pursuing multiple, and at times conflicting, aims in Sudan. Balancing these objectives has occasionally placed Congress and the Executive Branch at odds. Ending the human suffering and related human rights violations associated with Sudan's distinct but overlapping conflicts has been the overarching goal of U.S. policymakers for more than two decades. With finite attention and resources, however, U.S. policy toward Sudan has, at times, appeared to prioritize resolving one conflict at the expense of another. Negotiating humanitarian access to communities affected by the conflicts has required compromise, and that compromise has sometimes appeared to moderate calls for a more confrontational approach toward Bashir's regime. Similarly, U.S. pursuit of counterterrorism objectives in the broader region has led successive Administrations to seek dialogue and cooperation from Khartoum. Facilitating peaceful relations between Sudan and South Sudan has also complicated U.S. engagement with regard to ongoing conflicts in the two countries. Peace and stability in Sudan remains among the highest of U.S. foreign policy priorities in Africa, yet this goal remains elusive. Critics of Sudanese peace negotiations suggest that piecemeal approaches to Sudan's overlapping conflicts have prolonged the country's seemingly chronic instability. In recent years, the United States has increasingly called for a comprehensive agreement that promotes democratic reform and "lasting peace throughout all of Sudan." African Union mediators have expressed a similar sentiment since 2013, recommending that possible solutions for both the Darfur and Two Areas conflicts "be explored in the context of national democratization and constitutional reform in Sudan." Khartoum has long resisted efforts to combine discussions with various opponents to the regime, preferring to negotiate separately with the SPLM and the SPLM-N, the Darfur groups, and others. This approach has yielded some positive outcomes, but it has also resulted in partially implemented agreements that do not fully address regional grievances or resolve disputes that are fundamentally national issues. Government rhetoric about a national dialogue may hold some promise, but deteriorating security conditions in Darfur, ongoing conflict in the Two Areas, and continued violations of basic rights and freedoms across the country have not engendered trust among Khartoum's critics. The United States faces a complex range of policy options as it considers the way forward for engagement with Sudan. Members of Congress may debate whether they concur with the Administration's current approach or wish to guide U.S. policy in a different direction. Previous congressional action on Sudan may provide lessons and examples. Advocates and experts may have new ideas on the merits of various "carrots" and "sticks," or other policy options to promote peace and stability and discourage serious human rights abuses in the country. While annual aid appropriations measures continue to include provisions restricting U.S. aid to the government of Sudan, Congress has not passed standalone Sudan legislation since 2007 (prior to the outbreak of the conflict in the Two Areas). During the 113 th Congress, the House of Representatives considered, but did not pass, new punitive measures on Sudan under H.R. 1692 , the Sudan Peace, Security, and Accountability Act of 2013. The 114 th Congress may consider similar legislation, or explore other legislative or oversight efforts to influence the direction of U.S. engagement.

Congress has played an active role in U.S. policy toward Sudan for more than three decades. Efforts to support an end to the country's myriad conflicts and human rights abuses have dominated the agenda, as have counterterrorism concerns. When unified (1956-2011), Sudan was Africa's largest nation by area, bordering nine countries and stretching from the northern borders of Kenya and Uganda to the southern borders of Egypt and Libya. Strategically located along the Nile River and the Red Sea, Sudan was historically described as a crossroads between the Arab world and Africa. Domestic and international efforts to unite the country's ethnically, racially, religiously, and culturally diverse population under a common national identity fell short, however, and in 2011, after decades of civil war and a six-year transitional period, Sudan split in two. Mistrust between the two Sudans—Sudan and South Sudan—lingers, and unresolved disputes and related security issues still threaten to pull the two countries back to war. The north-south split did not resolve other simmering Sudanese conflicts, notably in Darfur, Blue Nile, and Southern Kordofan. Roughly 3.7 million people are displaced, internally or as refugees, by violence in these areas. Like the rest of the Sahel, Sudan is susceptible to drought and food insecurity, despite significant agricultural potential in some areas. Civilians in conflict zones are particularly vulnerable. Instability and government restrictions limit relief agencies' access to conflict-affected populations. Logistical challenges, particularly during seasonal rains, also constrain access to those who have fled to remote refugee camps in South Sudan. The internal conflict that unfolded in South Sudan in late 2013 further threatens access to those refugees, and has led more than 146,000 South Sudanese to flee into Sudan. Harassment of aid workers is a problem in both countries, further hindering aid responses. The peaceful separation of Sudan and South Sudan was seen by some as an opportunity to repair relations between Sudan's Islamist government and the United States. Those ties have long been strained over Khartoum's human rights violations and history of relations with terrorist groups. Among the arguments in favor of normalizing relations has been the notion that the United States, given robust sanctions already in place, has few additional unilateral "sticks" to apply. Advocates have argued that certain "carrots," such as easing sanctions or elevating the level of diplomatic engagement, might advance U.S. policy goals. Efforts by the Obama Administration to improve relations, given Sudan's reported counterterrorism cooperation and acceptance of South Sudan's separation, have been impeded by reports of ongoing abuses, including allegations that Sudan continues to commit war crimes against civilians. Diplomatic relations are also complicated by the fact that several Sudanese officials, notably President Omar al Bashir, stand accused of war crimes, crimes against humanity, and genocide at the International Criminal Court. In 2014, under domestic and international pressure to address calls for reform and to resolve ongoing conflicts, President Bashir announced a National Dialogue, under which the government would engage opposition and civil society groups on the development of a new constitution. The African Union, the United Nations, the Obama Administration and other international actors expressed cautious support for the initiative, although the extent of the government's commitment to major political reforms remains unclear, and efforts to facilitate the participation of armed opposition groups in the process have been, to date, unsuccessful. Major opposition parties boycotted elections held in April 2015; President Bashir was reelected with 94% of the vote. This report provides an overview of political, economic, and humanitarian conditions, examines conflict dynamics in the country, and outlines U.S. policy and congressional engagement.

Background The F-22A Raptor is the U.S. Air Force's, and according to many observers, the world's, most advanced manned combat aircraft. Developed principally to defeat Soviet aircraft in air-to-air combat, the F-22 exploits the latest developments in stealth technology to reduce detection by enemy radar, as well as thrust-vectoring engines for more maneuverability, and avionics that fuse and display information from on-board and off-board sensors in a single battlefield display. Current plans call for the U.S. purchase of 183 F-22s, with the last aircraft being procured with FY2009 funds. Air Force leaders say that they require 381 F-22s, but lack the funds to purchase 198 additional aircraft. The debate over the export of F-22s, though not new, has become more pointed as the end of procurement funding (FY2009), and the closure of the assembly line, nears. Whether to continue production of the F-22 is an issue that will confront the 111 th Congress early in its first session. The Department of Defense (DoD) is officially neutral on whether the F-22 should be exported, but senior leaders have suggested that they favor foreign sales of the F-22. However, since 1998, Congress has prohibited the use of appropriated funds to approve or license the sale of the F-22 to any foreign government. This provision, known as the "Obey Amendment," was debated in the 109 th Congress. The House Defense Appropriations Bill for FY2007 proposed to repeal the law, but export opponents in the House prevailed with the Senate in conference. Japan's Defense Policy For the United States, its alliance with Japan provides a platform for U.S. military readiness in Asia. About 53,000 U.S. troops are stationed in Japan and have the exclusive use of 89 facilities throughout the archipelago. Okinawa, hosting 37 of the facilities, is the major U.S. forward logistics base in the Asia-Pacific region. Echoing his predecessors, President Obama has labeled the U.S.-Japan alliance the "cornerstone of East Asian security." High-level U.S.-Japan bilateral initiatives since 2001 declared an expanded commitment to security cooperation by outlining major command changes and calling for greater interoperability between the two militaries. Several of the agreements have stalled, however, due to resistance to base realignment by local host governments and political gridlock in Tokyo. Japan faces a challenging regional context: both direct and potential security threats, as well as suspicion from other states that changes to Tokyo's defense policy indicate a return to its militarist past. North Korea poses a particularly acute and proximate threat to Japan, heightened by Pyongyang's ballistic missile and nuclear explosive device tests in 2006. Historical enmity and contemporary competition for influence with China makes Beijing's military modernization worrisome for Japanese defense planners. The Japanese Self Defense Forces (SDF, the official name for Japan's military) has detected periodic Chinese military activities in areas surrounding Japan's outlying islands, including submarine incursions close to Okinawa and a fleet of warships near a disputed gas field. Tokyo also faces difficult relations with South Korea because of Korean distrust based on the memory of Japan's 40-year annexation of the peninsula and some territorial disputes. Issues for Congress The executive branch proposes and Congress reviews arms sales on a case-by-case basis. The sale of F-22s to Japan raises both broad questions about the security environment in East Asia and questions that are specific to domestic interests. Factors that argue for a transfer include potential benefits to U.S. industry, contribution to the defense of allied countries, and promoting U.S. interoperability with those countries. Factors that argue against a particular arms transfer include the likelihood of technology proliferation and the potential for undermining regional stability. U.S. Industrial Base Exporting F-22s to Japan is one way to keep the F-22 production line running after U.S. Air Force procurement ends. Lockheed Martin, the F-22 prime contractor, estimates that it employs 3,351 F-22 workers at three plants (Marietta, GA; Fort Worth, TX; Palmdale, CA). Many others – perhaps as many as 25,000 – are also employed by major subcontractors Pratt & Whitney and Boeing, and by companies that produce F-22 parts and sub-components. Generally speaking, promoting employment in the aerospace sector is beneficial to the U.S. economy. However, some aerospace jobs are more important to promoting U.S. industrial competitiveness than others. At this stage of production, more F-22 employees are involved in aircraft assembly, which is relatively rote and unskilled compared to the design and engineering skills required earlier in the aircraft's development and initial production. Keeping the F-22 production line open by building aircraft for Japan would also help the prime contractor reduce per-aircraft costs, because labor and manufacturing processes become more efficient over time, and because sunk costs, such as R&D or capital investment, would be amortized over a larger number of aircraft. DoD and U.S. taxpayers would only benefit from reduced per-aircraft costs, however, if the Air Force were to purchase more F-22s after those produced for Japan, and in addition to the 183 aircraft currently planned. A final industrial base issue pertains to the F-35 Joint Strike Fighter (JSF). Although originally intended to be complementary aircraft, F-22 and JSF capabilities, development, and production have converged. Implicitly if not explicitly, these aircraft are competing for scarce procurement funds. Extension of F-22 production would likely bring these aircraft into even sharper competition. On the other hand, F-22 supporters argue, keeping the F-22 production line alive could serve as a useful hedge against any potential delay in JSF production. Technology Transfer Air Force leaders have consistently touted the F-22 as the world's most technologically advanced and capable fighter aircraft. Protecting U.S. intellectual property in these technologies and denying access to adversaries are high national security priorities. It is unclear whether the United States and Japan could agree on the capabilities to be offered in the export variant of the F-22. Japan would likely want an aircraft the same as, or similar to, that flown by the U.S. Air Force, and would also likely prefer to license or co-manufacture the aircraft, which gives them more opportunity to acquire engineering and design knowledge, and technology transfer. Presumably, DoD would desire to export a less capable aircraft, in part to protect key technologies, and would have a strong aversion to license or co-production. Japan has traditionally placed great value on developing industrial defense "autonomy," that is, indigenous weapons production, although this imperative has relaxed somewhat in recent years, in part to cooperate with the United States on missile defense. The potential for technology transfer touches upon both military and economic concerns. Unlike some countries, Japan does not have a track record of re-exporting technology that it acquires through import. However, an inadvertent leak of U.S. technology or knowledge could also be a threat. The leak of secret data associated with the Aegis weapon system by Japanese military personnel in 2002 is an example of this potential danger. Japan is a military ally, but also considered by some to be an economic rival. Many of the F-22 technologies or industrial processes could have commercial application. Some may be concerned that F-22 technology or knowledge could find their way into a myriad of Japanese products, to the competitive detriment of U.S. industry. A second proliferation issue relates to the effect an F-22 sale could have on other countries. Other countries in the region could perceive the F-22 as causing an imbalance of military power in favor of Japan, and inciting them to seek their own advanced aircraft or defensive systems. Once Japan sets the precedent of F-22 export, other countries might pressure U.S. policy makers to sell them F-22s. Israel, for example, has reportedly expressed interest in the F-22. Interoperability and Interdependence Bilateral agreements aim to expand the benefits of the alliance by increasing the interoperability of the U.S. and Japanese militaries, therefore multiplying their collective capability. Several joint facilities are planned, including an air operations coordination center at Yokota Air Base, to be operational by 2010. Japan's acquisition of the F-22 would boost interoperability because both militaries could use identical, state-of-the-art equipment. Because of the U.S. security guarantee to Japan, Japan's possession of the F-22s may allow the United States to rotate its own aircraft out of the region when necessary. Similarly, by fielding the F-22, Japan could make up for the deficit of 198 Raptors the U.S. Air Force says it needs but cannot afford. Despite these ambitions, however, achieving true interoperability is a difficult task. Constitutional, legal, and normative constraints limit SDF participation in many of the operations and training that traditionally integrate different national forces (see section below). Increasing the sophistication of bilateral training requires funding and facilities, currently under pressure because of SDF's budget requirements. Language barriers and differences in military doctrine also present challenges. In addition, localities affected by the noise of military bases, particularly those hosting aircraft, have been vocally opposed to many of the U.S. troop realignment proposals. Regional Security China and South Korea have voiced concern about Japan's intention to upgrade its military capabilities, largely grounded in suspicions that Japan will inch toward returning to its pre-1945 militarism. Some analysts caution that selling the F-22s to Japan could destabilize the region, possibly even sparking an arms race, and contribute to an image of Japan becoming America's proxy in the region. The sale could complicate the U.S. effort to manage its relationship with China. South Korea has already registered its unease at Japan acquiring F-22s, and at one point suggested that it may seek a deal to purchase the aircraft in order to match Japan's capabilities. Although the Lee Myung-bak government has made moves to strengthen U.S.-South Korean alliance, the Seoul-Washington relationship has been strained at times over the past several years, and some South Koreans chafe at indications that the United States prioritizes defense ties with Japan above those with Korea. Japanese defense officials have pointed to China's acquisition of increasingly sophisticated air capabilities to justify their request for the F-22s, asserting that China's modern air fleet will soon dwarf Japan's. Despite the relatively strong state of relations between Tokyo and Beijing, the two nations remain wary of each other's intentions. Although the risk of military confrontation is considered small, there is the potential that territorial disputes over outlying islands could escalate into armed clashes, or that conflict could break out in the Taiwan Strait between the United States and China, which could involve Japan. For this reason, some U.S. and Japanese commentators have supported the sale of F-22s to Japan as necessary to maintain the "Taiwan balance." Japanese Restraints Japan faces an array of legal and budgetary concerns about enhancing its military, raising questions about whether Tokyo could follow through on an F-22 sale. Article 9 of the Japanese constitution, drafted by American officials during the post-war occupation, outlaws war as a "sovereign right" of Japan and prohibits "the right of belligerency." Although Article 9 states that "land, sea, and air forces, as well as other war potential, will never be maintained," the Japanese SDF is in practice a well-funded and well-equipped military. Constitutional concerns do not appear to be significant for the purchase of the F-22, but provide a sense of the overall context and challenges to acquiring advanced weapons systems in a country with a strong pacifist sentiment. Under a self-imposed ban on exporting arms, Japan cannot in principle participate in joint development that requires it to export weapons parts and research data to other countries. This ban has been loosened to allow Japan to work on missile defense with the United States, but the issue remains contentious. Japan's aversion to military export led to Tokyo's decision not to participate in the international consortium to co-develop the F-35 Joint Strike Fighter. A second legal issue that could generate debate in Japan, and therefore affect the sale, is the question of whether the F-22 is an offensive weapon; under the current interpretation of the Japanese constitution, the SDF is only allowed to possess defensive capability. Military aircraft are almost inherently flexible weapon systems and can be difficult to classify as "offensive" or "defensive." They can be used in primarily defensive roles, such as defending indigenous airspace from attack, or to attack an adversary's homeland or air forces. When the F-22 program was threatened by congressional budget cuts, advocates argued that its offensive capabilities mandated its continuation. Consistent emphasis on the F-22s' ability to penetrate contested airspace and destroy enemy defenses could lead many to believe that the Raptor is primarily an offensive weapon. At $44 billion (2007), Japan's defense budget is among the largest in the world. However, Japanese leaders are under pressure to stem government spending, and many ministries face budget cuts as part of ongoing fiscal reform. Overall, Japan's defense budget has steadily if modestly declined over the past several years. Defense spending in Japan has traditionally been capped at 1% of GDP; most leaders are wary of surpassing that symbolic benchmark, although the cap is not a law. Tokyo's defense expenditures include ongoing host nation support for U.S. forces stationed in Japan (totaling $110 billion from 1978-2007) and an estimated $20 billion for the realignment of U.S. troops in the region. Based on these burdens, some analysts have voiced concerns that the SDF runs the risk of becoming a "hollow force" because of its insufficient procurement system. Budget pressure is likely to remain high in Japan due to the demographic reality of an aging and shrinking population with a shortage of workers. Potential Alternatives to the F-22 There appear to be at least four U.S. alternatives to the F-22 and several from Europe that Japan might consider. Each alternatives presents strengths and weaknesses in terms of operational capabilities, and also vis-a-vis the security, proliferation, and industrial base issues outlined in this report. F-35 Joint Strike Fighter (JSF) The JSF was designed from the beginning as a multinational aircraft. Technology transfer issues remain, but their resolution will likely be far easier than those presented by the F-22. While the JSF is not as fast or nimble as the F-22, its radar and avionics are more advanced. The JSF may be well suited to Japan's self-defense requirements while presenting a less offensive capability. F/A/18E/F Super Hornet The F/A-18/E/F Super Hornet is the most capable fighter aircraft flown by the U.S. Navy. It does not offer stealth technology like the F-22 or JSF, but is expected to be in the active inventory through at least 2020 and will retain its combat edge through upgrades and modifications. The Super Hornet's manufacturer, Boeing, recently signed its first export deal with Australia. F-15 Eagle The F-15 Eagle has been the U.S. Air Force's top fighter aircraft since it was fielded in the 1970s. Today, Japan operates 203 F-15 aircraft. By purchasing additional F-15 aircraft instead of importing a new type of fighter, Japan could potentially realize economies of scale savings in training, maintenance, and supplies by operating a larger fleet. The F-15 is not as capable as the F-22 or JSF, but if upgraded, and operated in conjunction with support aircraft—such as AWACS and electronic warfare aircraft—might be sufficiently capable to meet Japan's needs. Unmanned Combat Aerial Vehicles (UCAV) Another alternative would be to develop or import a UCAV. UAVs such as the USAF Predator are relatively well established weapons platforms, but limited compared to UAVs designed from the beginning as combat platforms. While advocates believe that UCAVs represent the future of combat aviation, true, dedicated combat UAVs have not yet been fielded. Pursuing UCAVs versus manned aircraft could be perceived as either avant garde or premature. European Options Japan could import an advanced combat aircraft from Sweden (the JAS Gripen ), Russia (Su-30 Flanker and MiG-29 Fulcrum series), or from a consortium of European countries (the Eurofighter Typhoon ). Japan has relied almost exclusively on U.S. military imports in the past, and many believe it unlikely that it would import from non-U.S. sources. Purchasing European aircraft, however, would allow Japan to establish a second source of technology, and thus some autonomy from the United States, and European governments would be expected to offer very attractive terms to penetrate the heretofore closed Japanese market.

Japan has expressed interest in purchasing the F-22A Raptor aircraft from the United States. Although the export of the plane is now prohibited by U.S. law, Congress has recently and may again consider repealing this ban. Arguments for the sale include potential benefits to U.S. industry, contribution to the defense of Japan and the region, and promotion of U.S. interoperability with the Japanese military. Arguments against the transfer include concerns about technology proliferation and the potential for undermining regional stability. This report will be updated as warranted.

Introduction Policymakers have several options when considering legislation that would result in reducing carbon dioxide (CO 2 ) emissions from the U.S. electricity sector. Some policy options might include a carbon tax or a carbon cap-and-trade approach. A federal clean energy standard (CES), such as that proposed in the Clean Energy Standard Act of 2012 ( S. 2146 ), is an alternative approach that requires certain utility companies to provide a prescribed amount of electricity from qualified clean energy sources based on a percentage of each utility company's annual electricity sales to consumers. Several CES policies have been proposed in the past, although none have become law. According to the Energy Information Administration (EIA), the electric power sector represents approximately 41% of U.S. energy-related CO 2 emissions. The remaining 59% of CO 2 emissions are from the transportation (33%) and buildings/infrastructure (26%) sectors. Unlike previous carbon reduction policy proposals, S. 2146 is focused only on CO 2 emission reductions in the U.S. electric power sector. The concept of a U.S. clean energy standard was proposed by President Barack Obama in his 2011 State of the Union address, and the White House subsequently published a proposed framework for a federal CES. In March of 2011, the Senate Energy and Natural Resources Committee (SENR) released a Clean Energy Standard white paper that solicited feedback on several CES policy design questions. On March 1, 2012, the Clean Energy Standard Act of 2012 ( S. 2146 ) was introduced in the Senate. This report provides a summary and analysis of the CES proposed in S. 2146 . S. 2146 proposes to amend Title VI of the Public Utility Regulatory Policies Act (PURPA) of 1978 (16 U.S.C. 2601 et seq.) by adding a new section, Section 610, titled "Federal Clean Energy Standard." According to the proposed bill, the stated purpose of the Federal Clean Energy Standard is: to create a market-oriented standard for electric energy generation that stimulates clean energy innovation and promotes a diverse set of low- and zero-carbon generation solutions in the United States at the lowest incremental cost to electric consumers. Policy Design Elements The Clean Energy Standard Act of 2012 includes a number of design elements that define the CES structure, methods of compliance, and other aspects. This report describes the proposed policy, based on the following general questions: (1) Who is required to comply? (2) What are the compliance requirements? (3) What types of electricity generation would qualify for the CES? and (4) What mechanisms are available as a means of CES compliance? Additional design elements are also briefly discussed. Entities Required to Comply Some utility companies that sell electricity to consumers in U.S. states, except Alaska and Hawaii, plus the District of Columbia and Puerto Rico, would be required to obtain a certain percentage of electricity sales from qualified clean energy generators. Whether or not a utility company is required to comply with the CES depends on the total amount of its annual electricity sales to consumers, in megawatthours (MWh). Beginning in 2015, S. 2146 requires utilities that sold 2 million MWh or more the previous calendar year to comply with the CES. The annual sales threshold for utility compliance declines by 100,000 MWh each year from 2015 to 2025, after which the level remains constant at 1 million MWh of annual electricity sales. This electricity sales threshold exempts the majority of utility companies from having to comply with the CES. According to EIA data, there are more than 3,500 utility companies operating in the contiguous 48 United States. Preliminary analysis based on 2010 electric utility sales data indicates that just over 300 utility companies would be required to comply with the CES starting in 2015 (see Figure 1 ). However, these 300 utility companies required to comply with the CES would represent approximately 81% of total national electricity sales. As the threshold sales level decreases from year 2015 to 2025, the number of utility companies required to comply gradually increases to nearly 500 in 2025 (see Figure 2 ), at which time approximately 87% of national electricity sales would be subject to CES requirements. Clean Energy Compliance Requirements Starting in 2015, S. 2146 would require non-exempt utilities, as described above, to obtain a percentage of their total electricity sales to consumers—less applicable deductions of certain hydropower and nuclear power electricity—from qualified clean energy generators. (Definitions for qualified clean energy are discussed and provided in the next section.) Clean energy includes electricity generated from facilities using renewables, nuclear, natural gas, and other specific energy sources, that were placed in service after 1991, plus other technologies described in the next section of this report. The standard requires a minimum of 24% clean energy by 2015. The percentage requirement increases an additional 3% each year until 2035, when 84% of electricity sold from non-exempt utilities must be sourced from clean energy generators (see Figure 3 ). Non-exempt utility companies can deduct their hydropower and nuclear power electricity generation, as long as the electricity is generated from facilities placed in service before 1992, from their applicable sales base. This deduction could potentially make it easier for certain utilities (especially those with large amounts of hydropower and nuclear power in their portfolio) to comply with the standard as a result of decreasing the total amount of qualified clean energy needed to meet annual CES compliance requirements (see example in Table 1 ). Table 1 provides an illustrative example of how the pre-1992 nuclear and hyropower deduction might affect the amount of qualified clean energy needed by three hypothetical utility companies in order to comply with the CES. In this example, three hypothetical utility companies with different generation fuel mixes, but the same amount of total electricity sales (2 million MWh annually), are compared. As Table 1 indicates, CES compliance requirements for different utilities can vary depending on the fuel sources used for generation. While the total retail sales for each utility might be the same, adjusting the applicable sales base by deducting nuclear and hydro electricity from facilities placed in service before 1992 results in varying amounts of qualified clean energy needed for compliance. Qualified Electricity Generation In order to comply with proposed CES requirements, electric utilities that sell electricity to consumers would need to generate or purchase electricity that is qualified as "clean energy." S. 2146 provides a four-part definition of the term "clean energy." 1. Electricity generation from facilities placed in service after 1991 that use the following energy sources: renewable energy, renewable biomass, natural gas, hydropower, nuclear power, or waste-to-energy. 2. Electricity generation from facilities placed in service after the date of enactment that use either combined heat and power or non-biomass energy sources that emit less than 0.82 metric tons of CO 2 per MWh. Additional information about qualified CHP is discussed below in the section titled " Combined Heat and Power ." 3. Electricity generation that results from efficiency or capacity additions made after 1991 to nuclear or hydropower facilities that were originally placed in service before 1992. 4. Electricity generation from facilities that capture and store CO 2 regardless of each facility's placed-in-service date. Regarding item 1 above, according to EIA, approximately 1.1 million megawatts (MW) of electricity generation capacity exists in the lower 48 United States. Roughly 400,000 MW of electric power capacity was installed during the years 1992 to 2010. Approximately 93% (nuclear, natural gas, and renewables) of this electric power capacity would qualify under the "clean energy" definition (see Figure 4 ). Most of this qualified "clean energy" capacity is natural gas facilities—although natural gas generation is only eligible for partial CES credits based on the amount of CO 2 emissions per MWh of electricity produced. This qualified clean energy generating capacity is distributed throughout the United States. Figure 5 shows the amount of qualified clean energy capacity located in each state. Clean Energy Standard Compliance Utility companies required to comply with the CES have two compliance options: (1) submit clean energy credits to the Secretary of Energy, and/or (2) make alternative compliance payments to the Secretary of Energy. Clean Energy Credits Clean Energy Credits would be issued by the Secretary of Energy to qualified electricity generation facilities owned by an electric utility. Generally, clean energy credits are issued based on the CO 2 emission intensity, as determined by the Secretary of Energy, of qualified electricity generation compared to the CO 2 emission intensity of a pulverized coal plant—which is estimated to be approximately 0.82 metric tons of CO 2 per MWh. Whether or not this CO 2 intensity metric is on a gross or net basis is not specified in the bill. Additional discussion about gross vs. net emission intensity is discussed in the section below titled " Potential Areas for Further Clarification ." The formula used to calculate the per-MWh CES credit amount for qualified electricity generators is as follows: CES Credit MWh = 1 – [(Metric Tons of CO 2 per MWh qualified generator )/0.82] For example, a qualified clean energy generator that uses a renewable energy source with a CO 2 emission intensity of 0 would receive 1 CES credit per MWh of electricity generation. However, a qualified generator that uses a fossil energy source with a CO 2 emission intensity of 0.41 would receive a partial, in this case 0.5, credit for each MWh of electricity generated. Once CES credits are issued, they can be (1) used to comply with annual CES requirements, (2) sold to other entities, or (3) held in reserve (also known as 'banking') and used for compliance in future years (i.e., CES credits do not expire). For qualified clean energy sold under contract—in effect on the date of enactment of the proposed bill—into the wholesale market, CES credits for the electricity generated would be issued to the purchaser of the electricity; unless the contractual terms for wholesale electricity transactions include other conditions regarding title to CES credits. The Secretary of Energy is required to establish a Federal Clean Energy Trading Program to facilitate, document, and track CES compliance. The Secretary of Energy also has the option of delegating the market function of CES credit trading to qualified entities. Alternative Compliance Payments Another CES compliance option for non-exempt utilities is making alternative compliance payments (ACP) instead of generating or purchasing CES credits. The ACP design element essentially places a cap on the cost of CES compliance. S. 2146 sets the initial ACP level at three cents ($0.03) per kilowatthour in 2015. The ACP increases 5% per year—adjusted for inflation (see Figure 6 ). All ACP collections, and any civil penalty payments (discussed further below), would be used for a State Energy Efficiency Funding Program, which would distribute 75% of all collections to states for energy efficiency initiatives. Distribution amounts to each state are proportional to the percentage of collections received from each respective state. Other Design Elements In addition to the major policy design parameters in the bill, S. 2146 includes several other design elements. Some of these additional design elements are briefly discussed below. Combined Heat and Power Combined Heat and Power (CHP) systems may qualify for meeting CES compliance requirements. Unlike other qualified generators that only produce electricity for consumption, CHP systems produce both electricity and heat for beneficial use. Owners of CHP systems, typically industrial operations, generally consume a certain portion of the CHP energy (electricity and heat) for on-site facility and business operations. S. 2146 requires CHP systems to have an overall energy efficiency of more than 50%, produce at least 20% of useful energy in the form of electricity, and produce at least 20% of useful energy in the form of thermal energy. The number of CES credits issued to CHP system owners is based on the amount of electricity generated by the CHP system, the relative CO 2 intensity of the electricity produced, the amount of electricity used for on-site operations, and the annual CES compliance requirement. Gross CES credits for CHP systems are calculated using the same CES credit formula discussed above; however, a certain portion of on-site electricity consumption—determined by the annual CES requirement—is deducted from the gross CES credit calculation. Additional CES credits may be issued to CHP system owners based on avoided greenhouse gas emissions that would result from eliminating the need for a dedicated on-site heat source. Biomass S. 2146 provides a specific definition for renewable biomass, which includes potential impacts associated with land use and management practices. The bill requires the Secretary of Energy to issue interim carbon intensity regulations for biomass and to commission a study by the National Academy of Sciences (NAS) to assess total lifecycle emissions from biomass-derived electricity. Based on the results of the NAS study, the Secretary of Energy is required to issue final carbon intensity regulations for qualified renewable biomass. A similar effort to quantify lifecycle emissions, including those from land use and management practices, for growing biofuel feedstock was led by the Environmental Protection Agency (EPA) in response to requirements in the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ). Much debate and controversy in the biofuel community resulted from the life cycle analysis, with some groups arguing that emissions were understated and some groups taking the position that emissions were overstated. Civil Penalties Non-exempt utilities that do not meet annual CES requirements would be required to pay civil penalties equal to twice the value of adjusted alternative compliance payments (discussed above) for the deficit amount of electricity needed to comply with annual requirements. Interaction with State Programs As of April 2012, 29 states plus the District of Columbia and Puerto Rico had established binding renewable portfolio standard (RPS) policies. Generally, RPSs are policies designed to encourage development of renewable electricity projects by requiring a certain percentage of electricity be generated from renewable sources. Each state RPS usually has some degree of unique design with regards to the amount of renewable electricity required, dates for compliance, carve-outs for certain technologies, and other aspects. The impact of a federal CES on state-level RPS policies could be a concern to some policy makers. S. 2146 states that the CES does not affect the authority of states to enforce renewable energy laws or regulations. The bill also indicates that no state laws or regulations can relieve a utility company from its federal CES compliance obligations. Other Energy Sources Integrating energy efficiency and thermal energy sources into a federal CES is a topic of interest to many groups. Technologies that reduce the total amount of electrical load through either efficiency or heat sources could contribute toward CO 2 emission reductions in the electric power sector. However, calculating the amount and qualification of CES credits for such technologies can be challenging. S. 2146 requires a report that evaluates these technologies and provides legislative recommendations about how they might be integrated into the CES policy framework. Natural Gas The bill also requires a report on natural gas conservation, with the goal of quantifying natural gas losses during production and transportation and recommending programs and policies to promote natural gas conservation. EIA Analysis of S. 2146 At the request of the Senate Committee on Energy and Natural Resources, EIA analyzed the potential impact of the Clean Energy Standard Act of 2012 on the U.S. electricity sector. Results from EIA's analysis indicate that the projected electricity generation fuel mix would change when compared to EIA's Annual Energy Outlook reference case projections (see Figure 7 ). Changes to the electric power fuel mix are projected to reduce electric sector CO 2 emissions in 2035 by 44% when compared to EIA's reference case scenario. As with any long-term forecast, models used to calculate such estimates are subject to certain economic, cost, technology, market, and other assumptions that can make the accuracy and reliability of long-range projections questionable. EIA's analysis compares two scenarios (Reference and S. 2146 ) with identical macro-level assumptions and adds policy parameters defined in the CES to the S. 2146 scenario. While this approach may not be able to accurately predict what will actually happen in 2035, it does provide some indication of potential changes to the electric power sector associated with the CES policy design. However, it is possible that changes to certain underlying assumptions could yield different results than those provided in the analysis of S. 2146 . Coal, nuclear, and non-hydro renewable energy sources would experience the most significant changes. In 2035, electricity generated from coal would decrease by 54%, nuclear power would increase by 62%, and non-hydro renewables would increase by 34% relative to reference case projections. Growth in non-hydro renewable sources of electricity is dominated by wind and wood/biomass; however, solar electricity is essentially the same as in EIA's reference case projections (see Figure 8 ). Natural gas generation is also expected to experience a relatively modest increase of 8% over 2035 reference case projections including natural gas-fired CHP generation, which would increase by 21% in 2035. EIA's analysis also indicates that S. 2146 results in essentially no carbon capture and sequestration (CCS) projects as a means of CES compliance. With regard to the potential impact on electricity prices, EIA projects that average U.S. electricity prices would increase, compared to EIA reference case projections, by approximately 4% in 2025 and 18% in 2035. EIA also notes that the provision in S. 2146 to exempt certain utility companies from CES compliance requirements could create some degree of regional price disparity between exempt and non-exempt utilities. Using one estimation approach, EIA indicates that by 2030 electricity prices from non-exempt utilities could be 3% to 30% higher than exempt utilities. Finally, EIA's analysis estimates that the use of alternative compliance payments as a means of CES compliance is minimal throughout the projection period. Potential Areas for Further Clarification S. 2146 includes a number of policy design elements that are integrated to create a structure for the Clean Energy Standard policy. The proposed CES raises some areas that Congress may decide to further clarify during future deliberations about the proposed bill. Is the carbon intensity metric (0.82 metric tons per MWh) on a gross or net basis? S. 2146 specifies a carbon intensity metric of 0.82 metric tons per MWh as the basis for calculating partial CES credits for fossil energy generators. However, the bill does not specify if this metric is on a gross or net basis. Table 2 compares the CO 2 emission intensity of subcritical and supercritical pulverized coal plants under certain operating conditions. Whether or not carbon intensity is on a gross or net basis could determine if certain plants qualify for partial CES credits and this determination could also affect the magnitude of partial credits issued to qualified natural gas generators. How do utilities that operate in multiple states calculate their aggregate retail sales for determining if they are required to comply with the CES? The clean energy requirement in S. 2146 indicates that non-exempt electric utilities that sell electricity to consumers "in a State," are required to comply with annual CES requirements. S. 2146 also indicates that the calculation of total electricity sold by a utility, for determining whether or not a utility is exempt from the CES requirement, should include electricity sold by all affiliates and associated companies. Utility companies that operate in multiple states may question whether they should aggregate company, affiliate, and associated company sales within each state or aggregate electricity sales from electric power operations in all states when calculating their total sales to determine if they are required to comply with the CES. Policy Question: How to Define Clean Energy? Should Congress choose to continue evaluating the possible implementation of a Clean Energy Standard for the U.S. electric power sector, future debate about the proposed policy may include various topics associated with defining "clean energy." S. 2146 defines clean energy based on carbon dioxide emissions at the point when electricity is generated. However, S. 2146 generally does not take into account potential emissions, waste, or other environmental impacts that might occur throughout the entire lifecycle of electricity generation from various energy sources. Some may argue that the entire lifecycle (energy extraction, transportation, land use, etc.) should be considered when defining clean energy, while others may argue that a CES focused on reducing electric power CO 2 emissions is a sound approach to reducing greenhouse gas emissions. Every energy source for electricity generation has benefits and drawbacks. Nuclear power can provide carbon-free, reliable, and baseload electricity, yet there are concerns with disposal of spent fuel and weapons proliferation. Natural gas generation emits roughly half the amount of CO 2 , compared to coal, per MWh of electricity generated; however, there are environmental concerns with natural gas extraction. Hydropower could be considered a carbon-free and renewable source of electricity, but there are fish, wildlife, and water quality concerns associated with hydropower development. Non-hydro renewable electricity, with possibly the exception of biomass, is generally considered to be the cleanest source of power generation; however, there are concerns with endangered species, animal habitat, land use, and other issues associated with renewable electricity development.

U.S. policymakers have considered and deliberated on several policy designs that could potentially reduce energy-related carbon emissions. In his 2011 State of the Union address, President Obama proposed the concept of a Clean Energy Standard (CES) that would result in 80% of U.S. electricity generation from clean energy sources by 2035. In March of 2012, the Clean Energy Standard Act of 2012 (S. 2146) was introduced in the Senate. The primary goal of S. 2146 is to reduce carbon dioxide (CO2) emissions from the U.S. electricity sector, which represents approximately 41% of total U.S. CO2 emissions. Generally, the approach used to achieve this goal is to require certain utility companies to source a portion of their electricity generation from qualified clean energy generators. Utilities located in either Alaska or Hawaii are exempted from CES requirements. Some utility companies that sell electricity directly to consumers (retail sales) would be required to comply with the CES. Determining which utilities have to comply is based on each utility company's total amount of annual retail sales. Starting in 2015, a utility company that sold more than 2 million megawatthours (MWh) of electricity to consumers would be required to comply. The retail sales level for compliance decreases by 100,000 MWh each year until 2025, where it remains constant at 1 million MWh. These thresholds represent a minority of electric utilities but a majority of U.S. electricity sales. Utilities required to comply with the CES would need to obtain a percentage of their electricity from qualified clean energy generators. In 2015 the minimum percentage is 24% and rises to 84% by 2035. The percentage is applied to a utility company's total retail sales; however, all electricity obtained from hydropower and nuclear power facilities placed in service before 1992 can be deducted from the sales base, potentially making compliance easier. The bill provides a four-part definition of electricity that would qualify as "clean energy": (1) electricity from renewable energy, biomass, natural gas, hydropower, nuclear power, or waste-to-energy facilities placed in service after 1991, (2) electricity from combined heat and power (CHP) systems or any non-biomass energy source that emits less than 0.82 metric tons of CO2 per MWh, (3) certain efficiency or capacity additions to nuclear or hydropower facilities that were placed in service before 1992, and (4) electricity from facilities that capture and store CO2. Utility companies can comply with the CES requirement by submitting clean energy credits, making alternative compliance payments (ACP), or a combination thereof. The ACP design element essentially caps the cost of CES compliance. ACP levels start at three cents per kilowatthour in 2015 and increase by 5% annually thereafter. Analysis by the Energy Information Administration (EIA) projects that enactment of S. 2146 could result in the following changes to the U.S. power sector in 2035, compared to EIA's reference case projections: (1) CO2 emissions from electric power facilities decline 44%, (2) electricity from coal decreases by 54%, (3) nuclear power and non-hydro renewable electricity increases by 62% and 34%, respectively, and (4) average electricity prices increase by 18%. EIA also notes that regional price disparity among exempt and non-exempt utilities could range between 3% and 30%. However, it should be noted that any projections over such a long time frame are difficult to accurately predict due to uncertainties associated with assumptions used to make such estimates.

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

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

Introduction Electricity is vital to the commerce and daily functioning of United States. The electrical grid of the United States consists of all the power plants generating electricity, together with the transmission and distribution lines and their associated transformers and substations which bring power to end-use customers. Electric power generation in the United States is currently dominated by the use of combustible fuels, such as coal and natural gas, or from biomass. These fuels are burned to produce steam in boilers which is used to turn turbine-generators which produce electricity. Nuclear power uses heat from the decay of radioactive elements to produce steam. However, electricity can also be generated directly by wind turbines, solar power, geothermal energy, and hydropower. Figure 1 illustrates the phases of the electric power production process. Electricity from large central station power plants is routed to a step-up transformer which raises the voltage so the power can be sent over high-voltage transmission lines to step-down transformers in substations which then transfer this energy at lower voltages via distribution lines to industrial, commercial, and residential users. Generally, electricity must be used as soon as it is produced because large amounts of electricity cannot be easily stored. Originally, the individual company systems were not linked, but with greater electricity demand came the necessity of sharing generation resources. This sharing of generation resources required an interconnection of separate company systems to enable power sales and transfers. These aggregated power systems form three major "interconnections"—the Eastern and Western interconnections, and the Electric Reliability Council of Texas which includes most of the state of Texas. Within these interconnections are reliability regions, and a number of balancing authorities which "integrate resource plans ahead of time, maintain load-interchange generation balance" within a balancing authority area, and "support interconnection frequency in real-time." The grid also connects the many publicly and privately owned electric utility and power companies in different states and regions of the United States (and in Canada and Mexico). Congress passed the Public Utility Regulatory Policies Act of 1978 ( P.L. 95-617 ) which allowed non-utility power producers into wholesale power markets (e.g., for the sale of electricity to entities other than the end-user of power). The passage of the Energy Policy Act of 1992 ( P.L. 102-486 ) served to further promote greater competition in the bulk power markets. As a result, in many parts of the United States, the electric power industry began to transition from highly regulated, local monopoly companies which generated, transmitted, and distributed electricity to end-use customers, to a business in which power generation is competitive while the industry's transmission and distribution functions are still highly regulated. While the federal government regulates the electric power transmission function and wholesale power markets, regulation of the distribution function of the electric power business is still largely carried out by state government agencies. Much of the infrastructure which serves the U.S. power grid is aging. The average age of power plants is now over 30 years; most of these facilities were originally designed to last 40 years. Electric transmission and distribution system components are similarly aging, with power transformers averaging over 40 years of age, and 70% of transmission lines being 25 years or older. As components of the system are retired, they are replaced with newer components often linked to communications or automated systems. With changes in federal law, regulatory changes, and the aging of the electric power infrastructure as drivers, the grid is changing from a largely patchwork system built to serve the needs of individual electric utility companies to essentially a national interconnected system capable of accommodating massive transfers of electrical energy between regions of the United States. The modernization of the grid to accommodate today's power flows, serve reliability needs, and meet future projected uses is leading to the incorporation of information processing capabilities for power system controls and operations monitoring. The "Smart Grid" is the name given to the evolving electric power network as new information technology systems and capabilities are incorporated. While these new components may add to the ability to control power flows and enhance the efficiency of grid operations, they also potentially increase the susceptibility of the grid to cyber (i.e., computer-related) attack since they are built around microprocessor devices whose basic functions are controlled by software programming and subject to manipulation over a network. The information processing attributes which make the smarter grid attractive are the very same attributes which can increase the vulnerability of the electric power system and its critical infrastructure to a potentially devastating cyber attack. The potential of the Smart Grid to revolutionize the ways power is generated and used is great, but so too are the potential risks if not sufficiently addressed. The Energy Independence and Security Act of 2007 (EISA) ( P.L. 110-140 ) defined the attributes of a Smart Grid and plans for its development. The potential for a major disruption or widespread damage to the nation's power system from a large scale cyberattack has increased focus on the cybersecurity of the Smart Grid. While a nation-state might have the resources and capability to create widescale disruption of the U.S. grid (to create economic disorder or as part of a physical attack), terrorists or hackers are less likely to have the sophistication or resources necessary to inflict damage on a national scale. But the possibility of collaboration between terrorists and hackers could increase the capability of these groups to launch network-based cyberattacks against critical U.S. infrastructure. Among the issues for Congress is whether the existing requirements of current law adequately assure the cybersecurity and reliable operation of the U.S. electricity grid today (and the Smart Grid of tomorrow). This report will look at issues key to these determinations, discussing the scope and point of application of regulations, and where the overall responsibility rests for the cybersecurity of the grid. Attributes of a Smart Grid The U.S. Department of Energy (DOE) summarized its view of the potential of the Smart Grid by the year 2030 as: … a fully automated power delivery network that monitors and controls every customer and node, ensuring a two-way flow of electricity and information between the power plant and the appliance, and all points in between. Its distributed intelligence, coupled with broadband communications and automated control systems, enables real-time market transactions and seamless interfaces among people, buildings, industrial plants, generation facilities, and the electric network. A "smarter" grid is gradually being introduced as upgrades to the systems and components of the power generation, transmission, and distribution infrastructure. Substation and distribution substations are being automated with superior switching capabilities to enhance current flows and control of the grid. Devices called "phasor measurement units" are also being added to substations to make time and location-specific measurements of transmission line voltage, current, and frequency (i.e., synchrophasor measurements made 30 times per second instead of data measured once every two to four seconds by current industrial control systems) providing better tools to improve power system reliability. DOE's strategic plan targets the deployment of 1,000 phasor measurement units by 2013. Advanced meters are being introduced in some utility markets which can offer customers the ability to leverage demand response regimes and technologies, and potentially benefit from the interactive features of the Smart Grid by shifting their energy use to off-peak hours. Expectations vary of what a Smart Grid could accomplish, and the estimated costs of a system rise with the increased scope and attributes of a system. Some see the Smart Grid as only an enhancement of today's existing transmission and distribution systems focused on improving the reliability and efficiency of the grid. Others see the Smart Grid of the future as an integrated system spanning the nation from coast to coast, able to seamlessly combine distributed resources and central power stations across the three major interconnections of the U.S. grid. Under such a vision, distributed and renewable energy resources could be efficiently integrated into the grid, with power from (for example) intermittent wind generation channeled by sensors and intelligent electronics from multiple widely dispersed sites to where power is needed anywhere on the grid. Figure 2 shows a possible configuration of a Smart Grid system illustrating components of an interconnected, two-way intelligent network, and distributed and central station sources of power. The efficiency and economy of all grid operations could conceivably be optimized by similarly harnessing all power generation to take advantage of a wide range of generation and storage resources across the United States. Defining Cybersecurity for the Smart Grid A prolonged disruption of energy from the grid was described in a report for the Presidential Commission on Critical Infrastructure as an event which would seriously affect every infrastructure, with the possibility of a cyberattack causing such damage considered as a possibility. The widespread and increasing use of Supervisory Control and Data Acquisition (SCADA) systems for control of energy systems provides increasing ability to cause serious damage and disruption by cyber means. The exponential growth of information system networks that interconnect the business, administrative, and operational systems contributes to system vulnerability. EISA gave the National Institute of Standards and Technology (NIST) the role of coordinating the development of a framework to enable the development of the Smart Grid in a safe and secure manner, and NIST issued its first guidelines for cybersecurity of the Smart Grid in 2010. Because cybersecurity threats were perceived as "diverse and evolving," NIST advocated a defense-in-depth strategy with multiple levels of security because no single security measure could counter all types of threats. The key to NIST's suggested approach is the determination of risk (i.e., the potential for an unwanted outcome resulting from internal or external factors, as determined from the likelihood of occurrence and the associated consequences) as quantified by the threat (e.g., event, actor or action with potential to do harm), the vulnerability (e.g., weakness in the system), and the consequences (e.g., physical impacts) to the system. Cybersecurity Vulnerabilities of the Smart Grid A smarter grid is largely the result of the modernization of the grid. Most sectors of business and industry have gone from the analog age of knobs and dials to the digital age of sensors and electronic displays in the recent past, and that process is now reaching into the nation's electric power infrastructure. Part of the delay has been due to the long-lived nature of the capital assets which make up the industry. The power plants and other expensive components of the grid can function for many productive years if maintenance of the systems is kept up. However, much of the delay in modernization has been due to cost concerns, as many electric utilities seek to manage expenses by delaying replacement of aging systems as long as possible. Several of the better-known vulnerabilities of a smarter grid are discussed in the following paragraphs. Control Systems Industrial control (IC) systems are particularly vulnerable to cyberattack because of their intelligence and communications capabilities. IC systems perform a number of functions in the electrical grid, ranging from microprocessor-based control systems which control the actuation and operation of one or more devices, to more sophisticated industrial IC systems which can manage entire industrial processes or automated systems. SCADA systems are a well-known application of remote IC used to monitor and control electric transmission system components. While cyber-intrusions into the U.S. grid have been reported in recent years, no impairment or other damage has been publicly reported as a result of the attacks. By exploiting loopholes in cybersecurity, cyberattackers could breach the privacy of customers power usage data and access large numbers of meters, perhaps sending deliberately misleading information to the grid. This could potentially overload systems or cause grid operators to respond to false readings. However, concerns exist as to the potential damage that could result in the future from malware left behind by such intrusions or doorways created in systems which could be exploited. The revelation of the complexities of the Stuxnet worm and the alleged targeting of the control systems of a nuclear power plant in Iran have raised additional concerns about the vulnerability of electric power systems worldwide. The Stuxnet worm reportedly affected the logical decision making functions of the control systems of one particular type of manufacturing facility. Theoretically, Stuxnet-like malware could be adapted to impair other types of process or control systems in malicious or unpredictable ways. Malware modified in such ways could overload and damage targeted equipment and systems in critical infrastructure. The Department of Homeland Security (DHS) conducted a simulated cyberattack on an electric generator control room and partially destroyed a large diesel-electric generator secured for the test as a demonstration of existing power system vulnerabilities. Connections Through Other Systems Utilities have routinely accessed control systems either wirelessly or by telephone lines for many years. In fact, telephone lines often used to access corporate systems may even provide access to utility control systems. A recent GAO report highlighted vulnerabilities at the Tennessee Valley Authority, a large federal utility in the United States. … the interconnections between TVA's control system networks and its corporate network increased the risk that security weaknesses, on the corporate network could affect control systems networks and we determined that the control systems were at increased risk of unauthorized modification or disruption by both internal and external threats. Communications and Internet Access Grid devices capable of two-way communications are considered to be potential points of unauthorized system access, and can represent a potential cybersecurity vulnerability. While security protocols may exist to prevent unauthorized entry, wireless networks can be monitored and potentially hacked by cybercriminals. Smart meters are another example of new applications in which the security of data has been mentioned as a concern. At the heart of smart meters are semiconductor chips which allow data about energy use to be sent wirelessly to the electric distribution company, and which potentially allows the meter to control the flow of power to customers. The security of the encrypted information in the communications protocol used by many of these devices has been questioned in the past, and questions have been raised about the effectiveness of efforts to patch identified flaws. The primary consideration in the choice of wireless protocol by semiconductor providers seems to be cost of the system, a criteria which is not always compatible with cybersecurity goals for secure communications. While the developing Smart Grid is likely to use today's internet and wireless communications systems for many years to come, security concerns and data usage requirements may move the system to dedicated communications and information channels serving uniquely Smart Grid uses. Potential access to SCADA systems via the Internet has often been cited as a key vulnerability for electric power systems. Hackers have used the Internet to launch denial of service, phishing, and various other forms of cyberattack. The effective recording, processing, and exchanging of data is becoming increasingly critical to the reliability of the power system, and deliberately introduced misinformation can be damaging. Internet-linked communications systems may be important to today's interconnected grid, but the Internet also provides a ready path to cyberattack from any corner of the world wide web. Combined Cyber- and Physical Attacks The vulnerability of key components of the grid to a physical attack has been long known, but a coordinated and sustained physical and/or cyberattack could be problematic. After a cyberattack, restored systems may be repaired and protected against known vulnerabilities, but a coordinated cyberattack over a short time period targeting different Smart Grid systems could slow recovery. The same would hold true for repeated physical attacks, or combined cyber- and physical attacks on key grid components. Under such circumstances, the resources of emergency programs in place to replace important grid systems and components (such as the Edison Electric Institute's "Spare Transformer Equipment Program" ) may not be adequate to provide enough replacement parts to fully restore reliable grid operations in a timely manner. Supply Chain The components of smarter grid devices present another potential vulnerability concern. Most of the smart meter, sensor, and other equipment makers are international companies who obtain their components from international sources. Taiwan, Singapore, China, and South Korea are among the largest overseas manufacturers of semiconductors and microprocessors for smart devices. The reliable operation of semiconductor and microprocessor-based devices is based on the low-level firmware controlling the device's basic functions. Firmware in the form of fixed machine-language binary code is found in almost all the electronic devices making up smarter grid products such as programmable controllers and programmable logic arrays. If a hacker or cybercriminal gained access to such devices (especially during the manufacturing process), a section of code could be covertly inserted in the device and activated in such a way as to impair its functioning in a reliable manner. Some might suggest random or statistically based testing of the firmware in smarter grid devices. But the impairment would not need to be placed in all such devices coming off an assembly line. If a large enough sample was impaired, the effect might be enough to cast doubt on the reliability of a whole class of such devices. Geomagnetic Impairment An electromagnetic pulse (EMP) is a large burst of electromagnetic radiation resulting from the detonation of a nuclear weapon or from other means. EMPs can cause voltage and current surges which can severely damage electrical equipment and systems. A high-altitude nuclear explosion could cause an EMP which could severely impair an electric power system not shielded from the effects of an EMP. However, deliberate, large-scale, man-made attacks are not the only potential threat which could take down a substantial portion of the electric grid. Radiation or charged particles ejected into space weather from solar flare eruptions could cause geomagnetic storms which could interfere with telecommunications networks or damage orbiting satellites. Periodically, these eruptions from the sun are powerful enough to disrupt the operations of electric power systems. Solar flares occur in cycles of almost 11 years. Occasionally, severe space weather results in a huge eruption of particles which can be particularly disruptive to electric power systems, and induce ground currents powerful enough to actually melt the copper windings of electric power transformers. The last major solar flare eruption in 1989 caused blackouts across the Canadian province of Quebec for nine hours. But even greater storms can occur perhaps every 100 or more years. The first major eruption of this size was observed in 1859. It destroyed much of the world's telegraph infrastructure of the time. Another event observed in 1921 demonstrates that although these events are rare, they are likely to occur again and could have tremendous societal and economic impacts for the United States: … the occurrence today of an event like the 1921 storm would result in large-scale blackouts affecting more than 130 million people and would expose more than 350 transformers to the risk of permanent damage. It could take weeks or months to replace most of the damaged transformers. Some of the larger units could take years to replace due to the fact there are no U.S. power transformer manufacturers, and a multi-year backlog exists for the larger units. Current Cybersecurity Policy for the Smart Grid A smarter grid is increasing reliance on automated systems to manage energy sources, power control devices, system information, and power flows. Automation will allow information from smarter processors and sensors to be processed at much faster rates, giving power system operators more accurate and timely information, and giving customers greater input into their own power use. But, the possibility that such systems could be highjacked in such a way as to bring down the grid regionally or even nationally, and cause long-term damage to critical systems and components, is giving Congress reason to consider the cybersecurity of the electric power infrastructure. The passage of the Homeland Security Act of 2002 ( P.L. 107-296 ) (HSA) established the Department of Homeland Security. HSA increased penalties for certain computer-based crimes, and in addition to improving on the earlier Computer Fraud and Abuse Act of 1986, made critical infrastructure protection a key mission of DHS. Federal efforts to enhance the cybersecurity of the electrical grid were reemphasized with the recognition of cybersecurity as a critical issue for electric utilities in developing the Smart Grid. The Energy Independence and Security Act (EISA) of 2007 ( P.L. 110-140 ) thus added requirements for "a reliable and secure electricity infrastructure" with regard to Smart Grid development. EISA directed NIST to develop a framework for protocols and standards for the Smart Grid to achieve "interoperability" of devices and systems. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided NIST with funds to proceed with this mandate. Status of Regulatory Implementation NIST issued a report, "NIST Framework and Roadmap for Smart Grid Interoperability Standards" (NIST SP 1108, January 2010), listing 75 existing standards which are likely to be applicable for an interoperable Smart Grid, and identified 15 high-priority gaps and harmonization issues. NIST also issued a "Smart Grid Cybersecurity Strategy and Requirements" report (NISTIR 7628, September 2010) assessing requirements to ensure the security and reliability of a modernized grid. This report also classified Smart Grid interfaces according to potential impacts that could result from compromise of these systems. The Federal Energy Regulatory Commission (FERC or the Commission) received primary responsibility for the reliability of the bulk power system from the Energy Policy Act of 2005 (EPACT05) ( P.L. 109-58 ). EPACT05 also gave FERC the authority to commission an "Electric Reliability Organization" (ERO) to establish and enforce reliability standards. FERC subsequently designated the North American Electric Reliability Corporation (NERC) as the ERO. Compliance with reliability standards for electric utilities thus changed from a voluntary, peer-driven undertaking to a mandatory function. While NERC is responsible for standards for the bulk power system in the United States, it is also seeking recognition by applicable governmental authorities in Canada and Mexico to establish and coordinate reliability standards for the bulk power systems of these respective countries. NERC is also responsible for standards for critical infrastructure protection (CIP) which focus on planning and procedures for the physical security of the grid. NERC has delegated much of the daily process of maintaining reliability of the grid to regional entities via delegation agreements which are subject to FERC approval. Compliance and enforcement with NERC standards is therefore largely a responsibility of these regional entities, which are mostly responsible for imposing penalties for violation of reliability standards. NERC's CIP standards essentially approach cybersecurity as an extension of reliability, and address nine areas including Sabotage Reporting , Critical Cyber Asset Identification , and Electronic Security Perimeters , and Recovery Plans for Critical Cyber Assets . These standards identify what utilities must do to protect "cyber assets" seen as critical to the reliability of the bulk power system. EISA directed FERC to work with NIST in developing Smart Grid interoperability standards, and required FERC to institute a formal rulemaking process to adopt interoperability (including cybersecurity) standards when FERC was satisfied that a consensus on defining the standards had been reached. NIST advised FERC in October 2010 that it had identified five "foundational" sets of standards which may allow FERC to go forward with instituting rulemaking proceedings to adopt standards to ensure Smart Grid functionality, interoperability, and cybersecurity. The standards would be updated as Smart Grid requirements and technologies evolve. FERC held a technical conference in January 2011 to determine if there was "sufficient consensus" that the five sets of standards proposed by NIST were adequate for standards and protocols to be adopted. The comments of conference participants showed that a consensus on the standards had not in fact been reached with several participants stating that they were unsure of what would constitute a consensus, and questioning whether such standards would then automatically become "mandatory and enforceable." FERC issued a supplemental notice in February 2011 (requesting all comments by April 2011) to aid the Commission's determination as to whether a consensus exists on the proposed NIST interoperability standards. Additional questions were asked in the notice to solicit opinions on related topics including the NIST process for determining the readiness of a standard with regards to interoperability and cybersecurity, whether making standards enforceable would achieve interoperability goals, how testing and certification of cybersecurity requirements could be incorporated into the standards process, and whether the Commission should consider different criteria for evaluating interoperability and functionality (and the extent to which cybersecurity is an element of each). Assessment of Cybersecurity Progress by Government Accountability Office Congress asked the U.S. Government Accountability Office (GAO) to assess progress by NIST and FERC on Smart Grid cybersecurity guidelines and standards. GAO issued a report with its findings in January 2011. GAO found that NIST has largely addressed "key cybersecurity elements" such as the cybersecurity risks of Smart Grid systems and had identified security controls essential to such systems. GAO also found that NIST had not addressed the risks of attacks on Smart Grid systems using both cyber- and physical means. GAO recommended that NIST finalize its plan and schedule for updating its cybersecurity guidelines to include these elements. GAO also pointed out that while EISA had given FERC authority to adopt Smart Grid standards, it did not give FERC specific enforcement authority over implementation of standards. GAO recognized that a regulatory divide exists between federal, state, and local entities on various aspects of Smart Grid interoperability and cybersecurity. As such, GAO states that such standards will remain voluntary unless regulators use other authorities to enforce standards compliance. GAO recommended that FERC develop a coordinated approach (with other regulatory jurisdictions) to monitor voluntary standards and address any gaps in compliance. FERC and NIST agreed with GAO's recommendations. However, FERC Chairman Wellinghoff stated that while a coordinated approach would be pursued, FERC may lack the authority to address any gaps in compliance, and that this being the case, Congress may want to consider the matter further. Furthermore, in addressing GAO's comments, the Chairman broached the question of whether other-than-voluntary compliance with Smart Grid standards by "relevant manufacturers and utilities" is what Congress intended in EISA. Meanwhile, NIST has communicated to FERC its own concerns that under the existing process, it could take years for the Commission to adopt rules on the many individual standards needed to achieve interoperability of the Smart Grid while recognizing that many "customized" upgrades to the grid continue to be installed. NIST suggested that in the absence of formal standards, FERC could request "interoperability roadmaps" from utilities to determine if they addressed interoperability based on the NIST framework in the utilities' grid modernization efforts. Assessment by DOE's Inspector General of FERC's Monitoring of Grid Cybersecurity The DOE Inspector General released an audit report in January 2011 of FERC's monitoring of grid cybersecurity, with regard to the Commission's responsibilities under EPACT05. The report found that CIP cybersecurity standards developed "did not include a number of security controls commonly recommended for government and industry systems," and criticized FERC's oversight of the process for developing these standards, citing a need for FERC to use its existing authority to ensure timely standards development to address emerging security threats. The report also said that FERC's implementation approach and schedule for CIP standards did not adequately consider risks to information systems, since FERC was focusing on documentation of controls rather than implementation of controls. FERC was advised to revise its focus to ensure that controls to address higher threat risks are given priority. The report noted that these problems existed, in part, because the Commission had "only limited authority" to ensure cybersecurity over the bulk electric system, and could not implement its own reliability standards or issue alerts. However, the report went on to conclude that even "when such authority did exist," FERC did not always act "to ensure that cybersecurity standards were adequate." FERC Chairman Wellinghoff mostly concurred with the report's recommendations while noting that "the current statutory framework is inadequate for addressing emerging cybersecurity threats through mandatory standards." The Chairman stated that FERC will make every effort "to approve CIP standards as soon as possible after they are developed by NERC." Policy Concerns Self-determination is a key part of the CIP reliability process. Utilities are allowed to self-identify what they see as "critical assets" under NERC regulations. While compliance with CIP standards became mandatory in 2010, FERC mandated modifications to the criteria defining critical assets for reliability purposes. Only "critical cyber-assets" (i.e., as essential to the reliable operation of critical assets) are subject to CIP standards. FERC directed NERC to revise the standards so that some oversight of the identification process for critical cyber-assets was provided, but any revision is again subject to stakeholder approval. Under current law, FERC cannot issue its own reliability standards. While reliability standards are mandatory, the ERO process for developing regulations is somewhat unusual in that the regulations are essentially being established by the entities who are being regulated. This can potentially be an issue when cost of compliance is a concern, and acceptable standards may conceivably result from the option with the lowest costs. While FERC ultimately has approval authority over the regulations NERC submits and can remand such regulations it judges as not satisfying requirements, any such revisions are ultimately subject to NERC stakeholder approval. NERC standards could therefore be seen as a minimum threshold for compliance, as some utilities may choose to go beyond what is minimally required. But since utility systems are interconnected in many ways, the system with the least protected network potentially provides the weakest point of access. Other Issues in Federal Smart Grid Cybersecurity Policy Legacy Systems Legacy devices and systems (such as many SCADA and substation automation systems) may represent as much of a vulnerability to cybersecurity as new Smart Grid components. They were not designed with cybersecurity in mind, and are often interconnected either via the Internet or by other, sometimes "unsecured" avenues. DOE describes the legacy system communications issue as follows: The legacy communication methods that now support grid operations also provide potential cyber attack paths. Many cyber vulnerabilities have been identified by cyber security assessments of SCADA systems. Power grid substation automation and security have also recently been evaluated. The level of automation in substations is increasing, which can lead to more cyber security issues. The cyber security issues identified during the assessments and evaluations need to be resolved, but the known issues should not be construed as a complete assessment of the current power grid security posture. Some legacy grid devices are being retrofitted with communications capabilities to allow them functionality in the smarter grid, or permit easier maintenance, potentially introducing grid vulnerabilities which may not have existed before. NIST has suggested the establishment of "Priority Actions Plans" to resolve interoperability issues between legacy equipment and Smart Grid systems as these are installed. FERC specifically rejected proposals by commenters for additional interoperability standards (at this time) addressing existing resources or equipment and cost-effective integration of legacy equipment, and interfaces between utilities. Replacement of these systems is recognized by FERC as a possible option for utilities to apply for recovery of the "stranded costs" of legacy systems replaced by Smart Grid investments. Leadership of Federal Authority for Smart Grid Cybersecurity The issue of which, or whether, a single federal agency should have ultimate authority over Smart Grid cybersecurity remains largely unresolved. DHS, DOE, and FERC have all either stated claims or been mentioned as candidates for overall leadership of the issue based upon implications to national security, energy policy and technology leadership, or industry understanding and organizational mission, but the current missions of these agencies is only the starting point for a discussion. Since Smart Grid devices are being installed beyond the federally regulated power grid, the system could potentially face intrusions from cyberattacks initiated on less-protected distribution systems. Leadership of Smart Grid and cybersecurity issues may require the ability to communicate issues and push solutions in forums beyond federal jurisdictions if the goal is to protect against cyber-threats to the grid for the entire United States. DHS's mission to protect national security against cyber-threats currently centers on "civilian government systems" and DHS works with industry to "secure critical infrastructure and information systems." DHS is focused on analyzing cyber-threats and reducing vulnerabilities, and distributing information on potential cyberattacks to ensure the safety of cybersystems. DHS will distribute warnings of cyber-threats to other federal agencies, state and local governments and to industry. DOE has the technical and research capabilities of the national laboratories to draw upon with regard to cybersecurity and the Smart Grid, as well as its own internal policy offices which deal with an array of electricity system issues. DOE has worked with electric utilities to understand the cyber-vulnerabilities of the grid, and has tasked the national laboratories with helping to develop technologies and software patches to identify problems and harden legacy control systems against potential cyber-intrusions. FERC is an independent, self-funded regulatory agency within DOE, with statutory authority over major aspects of the wholesale electric, natural gas, hydroelectric, and oil pipeline industries. As such, FERC's responsibility for the reliability of the grid and related ratemaking authority allow the Commission to discover issues and authorize utilities to recover the jurisdictional portion of costs related to grid critical infrastructure protection upgrades. FERC recognizes that EISA does not make Smart Grid standards mandatory, nor does EISA give it authority to make or enforce such standards. FERC has jurisdiction over the bulk power system, but this currently excludes authority over the nation's electric distribution systems where much of the smarter grid will be deployed. The Commission appears to view its reliability mandate under EISA as giving it the authority to adopt Smart Grid standards which will be applicable to all electric power facilities and devices with Smart Grid features, including those at the distribution level. FERC further ties cybersecurity to reliability by proposing a "harmonization" of each Smart Grid protocol and reliability standard developed. Cost Challenges of Maintaining a Cyber-Secure Smart Grid Cybersecurity threats present a constantly moving and growing need for mitigation activities. As new devices and systems are being developed for the Smart Grid, so too is the array of infrastructure elements which must potentially be protected. This is a key concern for utilities, as the resources which may have to be applied to cybersecurity concerns could likewise spiral upward in growth and costs. Utilities may understand how a smarter grid can enhance their efficiency and reliability, and the need for cybersecurity safeguards. Commercial and industrial customers may also see potential benefits in Smart Grid-enabled programs (such as demand response), and it is likely they will fund a significant portion of smarter grid improvements through rates. But at present very few consumers at the residential level seem to understand the potential of the Smart Grid, or have reason to believe it can do anything for them except increase rates. One recent study expects cybersecurity spending to represent approximately 15% of total Smart Grid capital investment between 2010 and 2015 (with total investment estimated to be $1.5 billion in North America). Smart Grid enhancements across the United States may vary by utility, state, region, and regulatory jurisdiction. Recovery of costs may present a major challenge especially to distribution utilities and state commissions charged with overseeing utility costs. When faced with such decisions, the perception of the potential risks to the utility's local system will likely bear on what costs the utility's ratepayers should pay. EISA requires states only to consider recovery of costs related to Smart Grid systems. FERC has jurisdiction over the bulk power grid, i.e., transmission and wholesale rates in interstate commerce. FERC cannot compel entities involved in distribution to comply with its regulations. Since distribution utilities are regulated by state or local public utility commissions, Smart Grid investments will likely require approval by these jurisdictions. The issue of whether Smart Grid standards for interoperability should be voluntary or mandatory for these jurisdictions remains unresolved. Privacy and Data Security The sharing of information in applications used by the smarter grid has raised questions on the safety of that information. Security of customer information in wireless applications, and how personal data characteristics (such as customer usage information) can be protected are issues often mentioned in discussions of the Smart Grid and cybersecurity. Encryption of data (with limited decryption for data checking), and aggregation of data at high levels to mask individual usership have been mentioned as ways to protect the identity of individual customers. Limiting the amount of data to just information needed for billing purposes has been suggested as a remedy to the potential for misuse of data. Real-time monitoring of these networks may alert system operators to suspicious activities. But even these methods might not be enough to guard against a sophisticated intruder if data security is taken for granted. The development of Smart Grid standards for electric utilities and their partners governing the collection and use of customer data may be a possible next step. If customers participate in demand-side management programs, then customer usage data can provide a wealth of information for a variety of programs for interruptible loads or time-of-use rates. But customer-specific data stored in home area networks (HANs), or customer-specific data communicated between the HAN and distribution utility (or load aggregator) must be secure to protect the privacy of information. The advent of electric vehicles may offer another potential payload of data on customer movement and habits, if data collected or stored is not restricted to electricity consumption for billing purposes. The National Regulatory Research Institute recommended in a recent report that public utility commissions should define the information which utilities will collect, determining with whom and for what purpose it should be shared, and assess the need for protecting the data. While allowing states to develop their own policies may be accomplished more quickly, the report also advocates for a national approach to Smart Grid privacy issues. DOE has worked with electric utilities and the Electric Power Research Institute (EPRI) to develop profiles for Smart Grid products to address concerns about data privacy. These profiles are meant to provide guidance on how to build cybersecurity into Smart Grid applications under development, so that they can be more securely integrated into the Smart Grid. Government-Industry Coordination on Threats In 2010, the Edison Electric Institute (EEI) issued its own "Principles for Cyber Security and Critical Infrastructure Protection" to discuss development of a framework for addressing cybersecurity threats. EEI, the trade association of U.S. shareholder-owned electric utilities, suggested a coordinated effort of government, industry, and suppliers of critical grid systems and components was necessary to protect the grid from cyberattacks as a "shared responsibility." EEI believes that the sharing of intelligence on evolving threats and a clear plan of action on imminent threats is key to this arrangement. EEI also expects that such a policy would help protect national security and the public welfare, and aid in the prioritization of assets which need enhanced security. EEI expects that such a partnership could "utilize all stakeholder's expertise," allowing owners and operators of critical infrastructure to propose mitigation strategies that will avoid significant adverse consequences to utility operation or assets. Other Collaborative Cybersecurity Initiatives There are a number of collaborative efforts involving private sector, academia, national laboratories, consumer groups, and others looking at cybersecurity and Smart Grid issues. Federal agencies are also working together to ensure communication and share resources on these issues, and helping to fund industry cybersecurity initiatives. Two of the major DOE-led initiatives are discussed below. DOE is home to the Federal Smart Grid Task Force (FSGTF) established under EISA to "ensure awareness, coordination, and integration of the diverse activities of DOE's Office of Electricity Delivery and Energy Reliability (OE) and elsewhere in the federal government related to Smart Grid technologies, practices, and services." FERC, the Department of Commerce, the Environmental Protection Agency, the Department of Agriculture, and the Department of Defense are also members of the FSGTF. DOE also funds (with OE leading DOE's participation) the "Trustworthy Cyber Infrastructure for the Power Grid" (TCIPG) initiative, working with DHS and industry. TCIPG is led by the academic sector as a public-private research partnership, supporting the development of resilient and secure Smart Grid systems, leveraging research previously funded by the National Science Foundation: TCIPG's research plan is focused on securing the low-level devices, communications, and data systems that make up the power grid, to ensure trustworthy operation during normal conditions, cyber-attacks, and/or power emergencies. At the device level, new key functionality is being designed in hardware in order to detect attacks and failures and to restore proper system operation. Likewise, virtual machine technology is being developed and adapted for advanced power meters in order to permit new power use scenarios while preserving privacy. At the protocol level, new techniques are being developed to detect, react to, and recover from cyber attacks that occur while preserving integrity, availability, and real-time requirements. Participating in TCIPG are the University of Illinois at Urbana-Champaign, Dartmouth College, Cornell University, the University of California at Davis, and Washington State University. Current TCIPG projects are focused on developing "trustworthy cyber infrastructure and technologies" for active demand management and wide-area monitoring and control, response to and managing cyber events, and risk/security assessments. Current Legislation Several bills introduced in the 112 th Congress addressing the cybersecurity of the Smart Grid are summarized below. Senate The Cyber Security and American Cyber Competitiveness Act of 2011 ( S. 21 ) would secure the United States against cyberattack and protect sensitive information and the identities of U.S. citizens and business. The bill focuses on the increasing dependence of the United States on information technology, and highlights a growing need for public awareness and preparedness of cyber-threats. The Cybersecurity and Internet Freedom Act of 2011 ( S. 413 ) is intended to enhance the "security and resiliency of the cyber and communications infrastructure" of the United States. Among its provisions, the bill would establish within DHS a National Center for Cybersecurity and Communications (NCCC) to protect the federal and national information infrastructure. The duties of the NCCC Director would include the identification and evaluation of cyber-risks to critical infrastructure (covered by the bill) on a continuous, sector-by-sector basis. The NCCC would also issue regulations establishing risk-based security performance requirements to secure covered critical infrastructure against cyber risks. Each owner or operator of covered critical infrastructure would be required to certify to the NCCC Director that approved security and emergency measures had been implemented. Civil penalties for non-compliance would be established by the bill. The President would be authorized by the bill to declare a national cyber-emergency, and would be required to notify owners and operators of critical infrastructure about the nature of a cyber-threat if a national cyber-emergency was declared. The Cyber Security Public Awareness Act of 2011 ( S. 813 ) is intended to promote the awareness of cybersecurity. Among its provisions, the bill requires a report from be DHS on technical options to enhance the security of information networks of entities which own or manage critical infrastructure. The bill also requires a report from the Secretary of Homeland Security in consultation with the Secretary of Defense and the National Intelligence Director concerning the threat posed by a cyberattack to disrupt the national electrical grid and its implications to national security, the options for quick recovery to provide for national security as well as for restoration of all electrical service in the United States, and the development of a plan to prevent disruption of the U.S. grid by a cyberattack. House The National Infrastructure Development Bank Act of 2011 ( H.R. 402 ) aims to facilitate infrastructure development. The bill identifies the nation's energy infrastructure as an area in need of modernization. Eligibility is extended to Smart Grid projects as energy infrastructure development. The Secure High-voltage Infrastructure for Electricity from Lethal Damage Act ( H.R. 668 ) seeks to protect the bulk power system and electric infrastructure critical to the defense and well-being of the United States from EMP threats (such as nuclear weapons), or natural geomagnetic disturbance (GMD) vulnerabilities (such as solar flares). The bill proposes to authorize FERC to order the ERO to take emergency measures to protect the reliability of the bulk power system upon identification of an imminent threat to grid security from an EMP attack or GMD event. FERC would be authorized to allow utilities to recover "substantial costs" incurred from compliance with such an emergency order. The bill would also authorize FERC to issue rules or orders to protect against such grid security vulnerabilities not covered by ERO reliability standards (and would rescind the FERC rule or order when a sufficient ERO reliability standard was in place). FERC would be required to direct the ERO to propose reliability standards to protect against "reasonably foreseeable" EMP or GMD events. The ERO would also be required to propose reliability standards (balancing risks and costs) to address availability of large transformers capable of restoring reliable grid operations after an EMP or GMD event, providing entities (either individually or jointly) which own such transformers to ensure their adequate availability in case such transformers are destroyed or disabled by such an EMP or GMD event. The President would be required to identify up to 100 electric infrastructure facilities critical in supplying power for the defense of the United States which would be subject to FERC rules and orders related to EMP or GMD events. Recovery of full incremental costs incurred in compliance with such FERC rules and orders would be allowed for owners of the identified defense critical electric facilities. White House Legislative Proposal on Cyberspace The Obama administration has launched its own comprehensive proposals for legislation on cybersecurity. Protection of critical infrastructure (including the electric grid, financial systems, and transportation networks) is among the main proposals. Other initiatives are suggested to better report cyber-breaches so that consumers are aware that their personal data may have been accessed by intruders, and "synchronized" penalties for cyber-crime with mandatory minimum punishments for cyber-intrusions into critical infrastructure. The Administration wants better preparedness and coordination between federal agencies, state governments, and industry in order to prevent cyberattacks against critical infrastructure. The proposals include development of cybersecurity standards and enhanced information sharing about cyber threats. The Administration also proposes legislative provisions for DHS to help industry, states, and local government to recover from a cyber-intrusion and fix the resulting damage, or provide advice on building a better network. DHS would also review cyber-protection strategies and requirements, making public its findings on readiness (while not revealing the specific nature of any deficiencies). Additional Comments Much of the federal efforts related to the cybersecurity of the smarter grid relate to efforts to stay ahead of cyber-threats. But such is the complexity of the cyber-threat universe (with defined threats, perceived weaknesses, and the possibility of continual upgrades of both hardware and software systems) that staying ahead of the threats could quickly evolve into a rapidly growing, never-ending cost center for utilities. While a key to cost control is in assessment of the likely risks, cost recovery for reliability under current federal law is based on mandatory compliance with CIP cybersecurity standards for reliability purposes. Cost recovery for Smart Grid expenditures or upgrades is voluntary under current law. Such discretionary treatment may possibly result in liability claims if damages result from an attack on Smart Grid systems. While the "Support Anti-Terrorism by Fostering Effective Technologies Act" of 2002 provides "risk management" and "litigation management" protection for qualified anti-terrorism technologies and others in the supply and distribution chain, such protections likely do not apply to electric utilities as adopters of Smart Grid technologies and devices. Current legislative and Administration proposals largely speak to a prioritization of critical infrastructure facilities, with consideration to how these relate to national security, and national economic recovery. However, recoverability from a cyberattack on the scale of something which might take down a significant portion of the grid will likely be very difficult. Maintaining a ready inventory of critical spare parts in close proximity to key installations would likely prove useful to quickening recovery efforts from some types of attack. The current Smart Grid cybersecurity discussions largely focuses on the security of central station power plants and transmission systems. However, the future Smart Grid may increasingly depend on renewable energy, fuel cells, and other distributed resources like energy storage as these technologies are increasingly integrated into the nation's energy framework. The development of the Smart Grid with distributed and renewable power generation resources may add a level of security to the grid, since these resources do not have the fuel requirements of fossil generation. Damage to the fossil fuel delivery networks would likely impair operation of central station generating plants, depending on how much of an inventory of fuel is stored on-site. This greater diversity of resource options would likely further enhance the Smart Grid's expected improvement in reliability due a greater diversity of resource options, joining together these newer elements with traditional power stations in the power grid of the future. But the characteristics that these elements bring to the system could be considered in the design of CIP standards and protocols. Although this report has focused on cybersecurity aspects of a smarter electrical grid, technologies being developed for use by the Smart Grid could also be used by natural gas pipeline, water supply, and telecommunications systems. Consideration could be given to applying similar control system device and system safeguards to these other vital utility systems. Consideration could be given to applying similar control system device and system safeguards to these other vital utility systems. The electricity grid is connected to (and largely dependent on) these other resource and communications providers as the vast majority of power production today needs water for steam generation or natural gas for fuel. Similarly, natural gas pipelines use many electrically powered compressors to maintain pipeline pressure and move gas through the system, and the nation's water systems is a notable consumer of electricity for distribution and supply purposes. These interdependent systems are also vulnerable to natural hazards such as earthquakes and tornadoes. The remote sensing and other technologies expected to be employed by the Smart Grid could also help mitigate the effects of regional natural disasters on critical infrastructure, as these are expected to be capable of detecting outages and optimizing power flows to minimize damage and enable a more complete recovery.

Electricity is vital to the commerce and daily functioning of United States. The modernization of the grid to accommodate today's uses is leading to the incorporation of information processing capabilities for power system controls and operations monitoring. The "Smart Grid" is the name given to the evolving electric power network as new information technology systems and capabilities are incorporated. While these new components may add to the ability to control power flows and enhance the efficiency of grid operations, they also potentially increase the susceptibility of the grid to cyber (i.e., computer-related) attack since they are built around microprocessor devices whose basic functions are controlled by software programming. The potential for a major disruption or widespread damage to the nation's power system from a large scale cyberattack has increased focus on the cybersecurity of the Smart Grid. Federal efforts to enhance the cybersecurity of the electrical grid were emphasized with the recognition of cybersecurity as a critical issue for electric utilities in developing the Smart Grid. The Federal Energy Regulatory Commission (FERC) received primary responsibility for the reliability of the bulk power system from the Energy Policy Act of 2005. FERC subsequently designated the North American Electric Reliability Corporation (NERC) as the "Electric Reliability Organization" (ERO) with the responsibility of establishing and enforcing reliability standards. Compliance with reliability standards for electric utilities thus changed from a voluntary, peer-driven undertaking to a mandatory function. The Energy Independence and Security Act of 2007 (EISA) later added requirements for "a reliable and secure electricity infrastructure" with regard to Smart Grid development. NERC is also responsible for standards for critical infrastructure protection (CIP) which focus on planning and procedures for the physical security of the grid. Self-determination is a key part of the CIP reliability process. Utilities are allowed to self-identify what they see as "critical assets" under NERC regulations. Only "critical cyber assets" (i.e., as essential to the reliable operation of critical assets) are subject to CIP standards. FERC has directed NERC to revise the standards so that some oversight of the identification process for critical cyber assets was provided, but any revision is again subject to stakeholder approval. While reliability standards are mandatory, the ERO process for developing regulations is somewhat unusual in that the regulations are essentially being established by the entities who are being regulated. This may potentially be a conflict of interest, especially when cost of compliance is a concern, and acceptable standards may conceivably result from the option with the lowest costs. Since utility systems are interconnected in many ways, the system with the least protected network potentially provides the weakest point of access. Cybersecurity threats represent a constantly moving and increasing target for mitigation activities and mitigation efforts could likewise spiral upward in costs. Recovery of costs may present a major challenge especially to distribution utilities and state commissions charged with overseeing utility costs. EISA only requires states to consider recovery of costs related to Smart Grid systems. FERC has jurisdiction over the bulk power grid, and cannot compel entities involved in distribution to comply with its regulations. Recoverability from a cyber attack on the scale of something which could take down a significant portion of the grid will likely be very difficult, but maintaining a ready inventory of critical spare parts in close proximity to key installations could quicken recovery efforts from some types of attack. The electricity grid is connected to (and largely dependent on) the natural gas pipeline, water supply, and telecommunications systems. Technologies being developed for use by the Smart Grid could also be used by these industries. Consideration could be given to applying similar control system device and system safeguards to these other critical utility systems.

Introduction In an effort to curb youth smoking, Section 907(a)(1)(A) of the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act) banned all flavorings in cigarettes except menthol. The ban took effect three months after the Tobacco Control Act became law. This ban was in response to the burgeoning market for cigarettes with flavors, like spice, fruit, and candy, that appealed to youth. Although menthol cigarettes also appeal to youth, they represent over a quarter of all the cigarettes smoked, meaning they have broad appeal among adults also. Rather than ban menthol cigarettes, therefore, Congress authorized the Food and Drug Administration (FDA) to "ban or modify the use of menthol in cigarettes based on scientific evidence." The FDA is studying the matter and has taken no action to date with respect to banning menthol in cigarettes. Clove cigarettes, which are banned by the Tobacco Control Act as non-menthol flavored cigarettes, are primarily imported from Indonesia, while menthol cigarettes are primarily produced domestically. The United States and Indonesia are Members of the World Trade Organization (WTO), a multilateral international economic organization created by the Marrakesh Protocol, which was signed in 1994. The Agreement Establishing the World Trade Organization (WTO Agreement) includes a number of agreements to which all WTO Members must agree. Among these agreements are the Agreement on Technical Barriers to Trade (TBT Agreement) and the General Agreement on Tariffs and Trade (GATT 1994). Article 2.1 of the TBT Agreement requires WTO Members to treat "like" imported products no less favorably than "like" domestic products with respect to domestic regulations that set forth product characteristics. Article 2.2 of the TBT Agreement provides that such regulations cannot be "more trade restrictive than necessary to fulfill a legitimate objective, taking account of the risks non-fulfillment would create." Indonesia brought a claim before the WTO, arguing, among other things, that imported clove cigarettes are like domestically produced menthol cigarettes; that the Tobacco Control Act treats clove cigarettes less favorably than menthol cigarettes in violation of Article 2.1; and that the Tobacco Control Act is more trade restrictive than necessary under Article 2.2. Indonesia also claimed that the ban, in taking effect after three months, violates Article 2.12 of the TBT Agreement, which requires a "reasonable interval" between a law's publication and its taking effect. The panel hearing Indonesia's claim agreed with Indonesia as to Articles 2.1 and 2.12, but rejected its argument with respect to Article 2.2. The United States appealed the panel's finding with respect to Articles 2.1 and 2.12 to the Appellate Body. Indonesia did not appeal the panel's finding with respect to Article 2.2. Although the Appellate Body disagreed with the panel's interpretation of certain terms, it upheld the panel's conclusion that the Tobacco Control Act violated Article 2.1 of the TBT Agreement, concluding that clove cigarettes are like menthol cigarettes and that clove cigarettes receive less favorable treatment under Section 907(a)(1)(A) than menthol cigarettes. In reaching this conclusion, the Appellate Body treated this as a case of de facto , not de jure , discrimination. It concluded that Article 2.1 should be interpreted in conjunction with Article III:4 of the GATT 1994 and that likeness under Article 2.1, therefore, is based on the competitive relationship of the products. The Appellate Panel stated also that detrimental impacts on like imported products are permissible provided they are due exclusively to legitimate regulatory distinctions. The Appellate Body rejected that the United States had a legitimate reason for banning clove cigarettes, while not banning menthol cigarettes. The United States had argued that because millions of adults smoke menthol cigarettes, a ban would result in the development of a black market for menthol cigarettes and the health care system being overwhelmed by the many people who satisfied their nicotine addiction by smoking menthol cigarettes. The Appellate Body focused on the purpose of the ban, which was to ban cigarettes with characterizing flavors that mask the harshness of cigarette smoke because such cigarettes appeal to youth smokers. However, the Appellate Body stated that menthol cigarettes share with clove cigarettes the very characteristic that justified the ban—they have a characterizing flavor that masks the harshness of tobacco smoke. Moreover, the Appellate Body questioned the likelihood of the development of a black market and the health care system being overwhelmed by menthol smokers in the event the United States were to ban menthol cigarettes, noting that regular cigarettes contain nicotine and would remain available. Therefore, the Appellate Body found that the decision to exempt menthol cigarettes from the ban on flavored cigarettes was not justified by a legitimate policy distinction. However, it reiterated that public health concerns, such as curbing youth smoking, are legitimate regulatory ends. As mentioned above, Indonesia claimed that the Tobacco Control Act was more trade restrictive than necessary in violation of Article 2.2, but the panel found that Indonesia failed to make its case. Indonesia did not appeal that conclusion. In particular, the panel found that the ban's purpose, to reduce youth smoking, was a legitimate regulatory end; that Indonesia failed to demonstrate that the ban would make no "material contribution" to the goal of reducing youth smoking; and that Indonesia had failed to establish that there were less trade restrictive measures that the United States could take that would achieve a comparable reduction in youth smoking. Accordingly, the panel concluded that Indonesia had failed to establish that the ban on clove cigarettes was more trade restrictive than necessary. Because Indonesia did not appeal that part of the decision, the panel's conclusion stands. Article 2.12 of the TBT Agreement requires a "reasonable interval" between publication of a technical regulation and its effective date. Indonesia complained that the Tobacco Control Act provided an interval between publication and effective date of three months while the term "reasonable interval" meant not less than six months. Indonesia based this claim on the fact that paragraph 5.2 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns (Doha Ministerial Decision) interpreted "reasonable interval" within Article 2.12 to mean not less than six months. Paragraph 5.2, Indonesia argued, was a legally binding interpretation under Article IX:2 of the WTO Agreement. Without finding that paragraph 5.2 was a legally binding interpretation under Article IX:2, the panel determined that it must "guide" the panel's interpretation of "reasonable interval." In the alternative, the panel found that paragraph 5.2 could be considered a subsequent agreement of the parties within Article 31(3) of the Vienna Convention on the Law of Treaties (Vienna Convention). Ultimately, it found that the Tobacco Control Act violated Article 2.12. The Appellate Body determined that paragraph 5.2 was not a legally binding interpretation under Article IX:2 of the WTO Agreement, but it was a subsequent agreement under Article 31(3) of the Vienna Convention. Therefore, the burden to present a prima facie case that the interval provided by the Tobacco Control Act is less than six month fell on Indonesia, as the complaining Member, and the burden to rebut this prima facie showing by demonstrating that the interval is reasonable fell on the United States, as the responding Member. Because the Appellate Body concluded that Indonesia presented a prima facie case which the United States failed to rebut, it held that the Tobacco Control Act violated Article 2.12 of the TBT Agreement. In response to the Appellate Body's decision, the United States suggested that it will likely maintain the ban on clove cigarettes and stated that it will act in a way that respects its obligations under the WTO Agreement. However, it appears that the United States has not yet settled on a course of action. Analysis "Like Products" and "Treatment no Less Favorable" Under Article 2.1 of the TBT Agreement Article 2.1 of the TBT Agreement requires Members to treat imported products that are like domestic products no less favorably than the domestic products with regard to technical regulations. The Appellate Body upheld the panel's conclusion that imported clove cigarettes are like domestically produced menthol cigarettes and that the Tobacco Control Act treats imported clove cigarettes less favorably than it treats domestic menthol cigarettes. This case presented one of the first opportunities for the Appellate Body to interpret what "likeness" and "treatment no less favourable" mean in Article 2.1. Analytical Framework The Appellate Body began its analysis by "consider[ing] Article 2.1 as a whole in its context and in light of the object and purpose of the TBT Agreement." The Appellate Body focused on the Preamble of the TBT, in particular, the second, fifth, and sixth recitals. The second recital states: " Desiring to further the objectives of GATT 1994." The Appellate Body interpreted this recital to mean that "the TBT Agreement expands on existing GATT disciplines and emphasizes that the two Agreements should be interpreted in a coherent and consistent manner." The fifth recital provides: " Desiring however to ensure that technical regulations and standards, … and procedures for assessment of conformity with technical regulations and standards do not create unnecessary obstacles to international trade." The Appellate Body observed that the fifth recital is "reflected in those TBT provisions that aim at reducing obstacles to international trade and that limit Members' right to regulate, for instance, by prohibiting discrimination against imported products (Article 2.1) or requiring that technical regulations be no more trade restrictive than necessary to fulfill a legitimate objective (Article 2.2)." However, the fifth recital is qualified by the sixth recital, which states: Recognizing that no country should be prevented from taking measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or disguised restriction on international trade, and are otherwise in accordance with the provisions of this Agreement. The Appellate Body read the sixth recital "to suggest that Members have a right to use technical regulations in pursuit of their legitimate objectives, provided that they do so in an even-handed manner and in a manner that is otherwise in accordance with the provisions of the TBT Agreement." Characterizing the preamble as balancing "on the one hand, the desire to avoid creating unnecessary obstacles to international trade and, on the other hand, the recognition of Members' right to regulate," the Appellate Body stated that the balance "is not, in principle, different from the balance set out in the GATT 1994, where obligations such as national treatment in Article III are qualified by the general exceptions provision of Article XX." Next, the Appellate Body noted that Article 2.1 applied to "technical regulations," which are defined as "[d]ocument[s] which lay[] down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory." The Appellate Body concluded that "in the case of technical regulations, the measure itself may provide elements that are relevant to the determination of whether products are like and whether less favourable treatment has been accorded to imported products." Finally, the Appellate Body noted the similarity of the language of the national treatment obligation of Article 2.1 and the language of Article III:4 of the GATT 1994. Noting that the two Articles share the same core terms—"like products" and "treatment no less favourable"—and the same scope of application, the Appellate Body determined that "in interpreting Article 2.1 of the TBT Agreement, a panel should focus on the text of Article 2.1, read in the context of the TBT Agreement, including its preamble, and also consider other contextual elements, such as Article III:4 of the GATT 1994." Therefore, the Appellate Body recognized the similarity of Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 for their core terms ("like products" and "less favourable treatment"), as well as their similarity in providing room for Members to regulate for domestic purposes. Relevance of Regulatory Purpose of the Technical Regulation to the Likeness Determination One of the issues before the Appellate Body was the extent to which the regulatory purpose of the technical regulation at issue should influence the likeness analysis. The panel wrote that the purpose of Section 907(a)(1)(A) of the Tobacco Control Act must inform the likeness analysis under Article 2.1 of the TBT Agreement: "the declared legitimate public health objective of Section 907(a)(1)(A), i.e. the reduction of youth smoking, must permeate and inform our likeness analysis." The Appellate Body rejected the panel's approach, concluding that the regulatory purpose of the measure at issue does not directly factor in the likeness analysis. It explained that "the concept of 'like products' serves to define the scope of products that should be compared to establish whether less favourable treatment is being accorded to imported products." The Appellate Body "consider[ed] that the determination of likeness under Article 2.1 of the TBT Agreement, as well as under Article III:4 of the GATT 1994, is a determination about the nature and extent of a competitive relationship between and among the products at issue." Regulatory concerns behind a technical regulation may nonetheless play a role in the likeness determination "[t]o the extent that they are relevant to the examination of certain 'likeness' criteria and are reflected in the products' competitive relationship." As explained below, however, regulatory concerns primarily relate to analyzing less favorable treatment. Like Products There are four traditional likeness criteria in GATT 1994 jurisprudence: physical characteristics; end-uses; consumer tastes and habits; and tariff classification. The United States only appealed the panel's findings that clove and menthol cigarettes are like products with respect to end-uses and consumer tastes and habits. End-Uses The panel determined that menthol cigarettes and clove cigarettes shared the same end-use: "to be smoked." The United States argued that there are two distinct end-uses: "satisfying an addiction to nicotine" and "creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke." The United States claimed menthol cigarettes are used primarily for satisfying an addiction, while clove cigarettes are used primarily for providing a pleasurable experience. The Appellate Body first distinguished end-uses from consumer tastes and habits. "[E]nd-uses describe the possible functions of a product, while consumer tastes and habits reflect the consumers' appreciation of these functions." In another case decided under Article III:4 of GATT 1994, "the Appellate Body described end-uses as the extent to which products are capable of performing the same, or similar, functions and consumer tastes and habits as the extent to which consumers are willing to use the products to perform these functions." The Appellate Body concluded: "that consumers smoke to satisfy an addiction or that they smoke for pleasure are relevant to the examination of both end-uses and consumer tastes and habits." The Appellate Body, therefore, agreed with the United States that the end uses being compared should be "to satisfy an addiction to nicotine" and "creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke." However, the Appellate Body found, based on the findings of the panel, that both menthol and clove cigarettes serve both end-uses. First, it concluded that because menthol and clove cigarettes contain characterizing flavors that mask the harshness of tobacco smoke, they are both "capable of performing a social/experimentation function and, thus, share the end-use of 'creating a pleasurable smoking experience associated with the taste of the cigarette and the aroma of the smoke.'" Because both kinds of cigarettes contain nicotine, they are both capable of performing the function of "satisfying an addiction to nicotine." "The fact that more 'addicts' smoke menthol than clove cigarettes does not mean that clove cigarettes cannot be smoked to 'satisfy an addiction to nicotine.… [W]hat matters in determining a product's end-use is that a product is capable of performing it, not that such end-use represents the principal or most common end-use of that product." Although the Appellate Body agreed with the United States that the panel should have considered the two specific end-uses proffered by the United States, it upheld the panel's finding of likeness with respect to end-uses because it concluded that both menthol and clove cigarettes could serve both end-uses of satisfying an addiction and creating a pleasurable experience. Consumer Tastes and Habits The panel below determined that the purpose of Section 907(a)(1)(A) should determine the consumers whose tastes and habits should be considered. Because the purpose of Section 907(a)(1)(A) was to curb smoking by youth, therefore, the panel considered potential and actual youth smokers and concluded that because both kinds of cigarettes have characterizing flavors, they both appeal to youth and are "similar for the purpose of starting to smoke." On appeal, the United States noted that Section 907(a)(1)(A) made a regulatory distinction between cigarettes, not only based on their appeal to youth, but also based on their appeal to adults. The panel, the United States argued, should have considered the tastes and habits of adult smokers also. The Appellate Body agreed with the United States that the panel should have considered adult smokers as well as youth smokers: "In an analysis of likeness based on products' competitive relationship, it is the market that defines the scope of consumers whose preferences are relevant." The proportion of youth and adults smoking different types of cigarettes may vary, but clove, menthol, and regular cigarettes are smoked by both young and adult smokers. To evaluate the degree of substitutability among these products, the Panel should have assessed the tastes and habits of all relevant consumers of the products at issue, not only of the main consumers of clove and menthol cigarettes, particularly where it is clear that an important proportion of menthol cigarette smokers are adult consumers. Although the Appellate Body agreed with the United States that the consumers whose tastes and habits should be considered included adult and youth smokers, it sustained the panel's conclusion that menthol and clove cigarettes were like for the criterion of consumer tastes and habits. The Appellate Body explained: In order to determine whether products are like under Article 2.1 of the TBT Agreement, it is not necessary to demonstrate that the products are substitutable for all consumers or that they actually compete in the entire market. Rather, if the products are highly substitutable for some consumers but not for others, this may also support a finding that the products are like. The Appellate Body noted, therefore, that substitutability did not have to exist throughout the market in order for products to be like. Rather it is enough that the products are substitutable within a segment of the market. [T]he mere fact that clove cigarettes are smoked disproportionately by youth, while menthol cigarettes are smoked more evenly by young and adult smokers does not necessarily affect the degree of substitutability between clove and menthol cigarettes. The Panel found that, from the perspective of young and potential young smokers, clove-flavoured cigarettes and menthol-flavoured cigarettes are similar for purposes of starting to smoke. We understand this as a finding that young and potential young smokers perceive clove and menthol cigarettes as sufficiently substitutable. This, in turn, is sufficient to support the Panel's finding that those products are like within the meaning of Article 2.1 of the TBT Agreement, even if the degree of substitutability is not the same for all adult smokers. Thus, even though the Appellate Body held that the panel should have considered adult and youth smokers, ultimately it only considered the substitutability of menthol and clove cigarettes among youth smokers. Therefore, the Appellate Body found that they were like products for the consumer tastes and habits criterion. Less Favorable Treatment The panel found that Section 907(a)(1)(A) treated imported clove cigarettes less favorably than it treated domestically produced menthol cigarettes because it banned clove cigarettes while exempting menthol cigarettes. The United States argued on appeal that the panel erred in focusing solely on clove and menthol cigarettes. Instead, the United States argued, the panel should have compared the treatment accorded to the group of imported from all Members to the treatment accorded the group of domestic like products." In addition, the United States complained that the panel considered only the products on the market when the ban went into effect and did not consider products that had been on the market previously. Finally, the United States claimed the panel erred in finding that the less favorable treatment accorded clove cigarettes was related to their origin. Analytical Framework Although the United States and Indonesia agreed that the test for less favorable treatment is whether the "technical regulation at issue modifies the conditions of competition in the relevant market to the detriment of imported products," they could not agree on the circumstances under which a detrimental impact on imported products constituted less favorable treatment. Indonesia argued that any detrimental impact constituted less favorable treatment, while the United States argued the detrimental impact will not constitute less favorable treatment if it is "explained by factors or circumstances unrelated to the foreign origin of the product." To settle this dispute, the Appellate Body began by considering the meaning of the term "technical regulation." A technical regulation is defined in Annex 1.1 [] as a "[d]ocument which lays down product characteristics or their related processes and production methods with which compliance is mandatory." As such, technical regulations are measures that, by their very nature, establish distinctions between products according to their characteristics or their related processes and production methods. This suggests, in our view, that Article 2.1 should not be read to mean that any distinction, in particular those that are based exclusively on particular product characteristics or their related processes and production methods, would per se accord less favorable treatment within the meaning of Article 2.1. Next, the Appellate Body considered Article 2.2 of the TBT Agreement: "Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfill a legitimate objective, taking account of the risks non-fulfillment would create." The Appellate Body stated, "The context provided by Article 2.2 suggests that 'obstacles to international trade' may be permitted insofar as they are not found to be 'unnecessary,' that is 'more trade-restrictive than necessary to fulfill a legitimate object.'" To the Appellate Body, this meant that "Article 2.1 does not operate to prohibit a priori any obstacle to international trade." Next, the Appellate Body considered the sixth recital of the TBT Agreement's preamble. The sixth recital explicitly provides that Members may take "measures necessary for, inter alia, the protection of human life or health, provided such measures 'are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination' or a 'disguised restriction on international trade' and are 'otherwise in accordance with the provisions of this Agreement.'" Looking again at the object and purpose of the TBT Agreement, the Appellate Body wrote that, given that the purpose of the TBT Agreement is to "strike a balance between, on the one hand, the objective of trade liberalization and, on the other hand, Members' right to regulate," "Article 2.1 should not be interpreted as prohibiting any detrimental impact on competitive opportunities for imports in cases where such detrimental impact on imports stems exclusively from legitimate regulatory distinctions." Article 2.1 of the TBT Agreement, therefore, prohibits de jure and de facto discrimination but allows detrimental impacts on imported products if those impacts arise exclusively from legitimate regulatory distinctions. The Appellate Body next outlined the jurisprudence concerning less favorable treatment developed under Article III:4 of GATT 1994, which it considered instructive in assessing the meaning of this concept. After reviewing a number of cases, the Appellate Body stated, "the 'treatment no less favourable' standard of Article III:4 of the GATT 1994 prohibits WTO members from modifying the conditions of competition in the marketplace to the detriment of the group of imported products vis-à-vis the group of domestic like products." The Appellate Body elaborated on how its standard should be applied when de facto discrimination is alleged: Accordingly, where the technical regulation at issue does not de jure discriminate against imports, the existence of a detrimental impact on competitive opportunities for the group of imported vis-à-vis the group of domestic like products is not dispositive of less favourable treatment under Article 2.1. Instead, a panel must further analyze whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction rather than reflecting discrimination against the group of imported products. In making this determination, a panel must carefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue, and, in particular, whether that technical regulation is even handed in order to determine whether it discriminates against the group of imported products. Therefore, the Appellate Body agreed with the United States that detrimental impact on a group of like imported goods is not sufficient to establish a violation of Article 2.1 of the TBT Agreement. If the detrimental impact stems exclusively from a legitimate regulatory distinction, it will be permitted. Product Scope of the "Treatment No Less Favorable" Comparison On appeal, the United States argued that the panel improperly limited the less favorable treatment analysis to one imported product (Indonesian clove cigarettes) and one domestic product (domestically produced menthol cigarettes). Instead, the United States argued, the panel should have included menthol cigarettes imported from all Members; and all domestic non-menthol flavored cigarettes. Had the panel done so, the United States implied, the panel would not have found that the Tobacco Control Act treated clove cigarettes less favorably than menthol cigarettes. The United States argued that the panel should not have limited its analysis to Indonesian clove cigarettes. Instead, it should have also considered menthol cigarettes imported from all Members. The Appellate Body disagreed because "the national treatment obligation of Article 2.1 calls for a comparison of treatment accorded to the group of like products imported from the Member alleging a violation of Article 2.1, and treatment accorded to the group of like domestic products." Because the vast majority of the cigarettes imported from Indonesia consist of clove cigarettes, the Appellate Body found that the panel did not err in finding that the group of like products imported from Indonesia consisted of clove cigarettes. The product scope of the less favorable treatment analysis, therefore, begins with the group of like products from the complaining Member. The United States argued also that the panel should have considered the treatment accorded non-menthol domestically produced flavored cigarettes. The Appellate Body noted that the United States did not challenge on appeal the panel's exclusion of non-menthol domestically produced flavored cigarettes from the determination of like products. Therefore, without a finding by the panel that non-menthol domestically produced flavored cigarettes are like clove cigarettes, the Appellate Body could not determine whether the panel erred in failing to include non-menthol domestically produced flavored cigarettes in its less favorable treatment comparison. However, the Appellate Body noted that the United States had confirmed that non-menthol domestically produced flavored cigarettes did not have "any sizeable market share in the United States." Therefore, the Appellate Body "considered it safe to assume" that inclusion of non-menthol domestically produced flavored cigarettes in the comparison would not have altered the panel's conclusion that the group of like domestic products consisted of menthol cigarettes. Temporal Scope of the "Treatment No Less Favorable" Comparison The United States argued that the panel erred to the extent it did not consider the effect of the Tobacco Control Act on non-menthol flavored domestic cigarettes based on its finding that at the time the ban on non-menthol flavored cigarettes went into effect, there were no non-menthol domestic flavored cigarettes on the market. The United States asserted the panel should have considered the effect of the Tobacco Control Act on domestically produced non-menthol flavored cigarettes before the ban went into effect. Specifically, the United States argued that "Article 2.1 … does not establish a rigid temporal limitation in relation to the evidence that a panel may consider in performing a less favourable treatment analysis." The Appellate Body agreed with the United States that nothing in Article 2.1 prohibits a panel from taking into account evidence pre-dating the establishment of a panel to the extent that such evidence informs the panel's assessment of the consistency of the measure at [the time the panel was established]. This is particularly so in the case of a de facto discrimination claim, where a panel must base its determination on the totality of facts and circumstances before it, including the design, architecture, revealing structure, operation, and application of the technical regulation at issue. However, the Appellate Body stated that the panel's statement that at the time of the ban, there were no non-menthol domestic flavored cigarettes was related to its consideration of the costs imposed by Section 907(a)(1)(A), not to its consideration of less favorable treatment. Legitimate Regulatory Distinction Although the United States acknowledged that Section 907(a)(1)(A) treats imported clove cigarettes differently from domestically produced menthol cigarettes to the detriment of clove cigarettes, it argued that the detrimental impact stems exclusively from a legitimate regulatory distinction. The United States argued the exemption for menthol cigarettes addressed two distinct objectives: first, avoiding the health care system becoming overwhelmed by the millions of smokers addicted to menthol cigarettes seeking treatment; and second, avoiding the development of a black market to supply the needs of menthol smokers. The panel rejected these as legitimate objectives because they amounted to the United States avoiding costs associated with banning all flavored cigarettes while imposing costs on the producers of clove cigarettes. Because the panel did not address the U.S. claim that its decision not to ban menthol cigarettes was based on legitimate public health considerations, the panel did not make any factual findings about those considerations. Although the Appellate Body did not agree with the panel's analysis based on costs, ultimately it upheld the panel's conclusion that Section 907(a)(1)(A) violated Article 2.1 of the TBT Agreement. First, the Appellate Body noted that the panel found that virtually all clove cigarettes imported into the United States in the three years prior to the ban came from Indonesia and that the vast majority of clove cigarettes consumed in the United States came from Indonesia. Moreover, the United States had confirmed that non-clove flavored cigarettes subject to Section 907(a)(1)(A)'s ban were on the market for a very short time and represented a relatively small market share. Finally, the Appellate Body pointed out that the record revealed that between 2000 to 2009, between 94.3% and 97.4% of all cigarettes sold in the United States were produced domestically and that menthol cigarettes accounted for 26%. In light of those facts, the Appellate Body concluded "the design, architecture, revealing structure, operation and application of Section 907(a)(1)(A) strongly suggest that the detrimental impact on competitive opportunities for clove cigarettes reflects discrimination against the group of like products imported from Indonesia." Second, the Appellate Body rejected the U.S. claim that the detrimental impact on clove cigarettes was based on legitimate public health considerations. The Appellate Body noted that the purpose of Section 907(a)(1)(A) was to curb youth smoking. However, the Appellate Body stated, menthol cigarettes share with clove cigarettes the characteristic that makes them appealing to youth smokers—a characterizing flavor that masks the harshness of tobacco smoke. Furthermore, the Appellate Body rejected the U.S. justification for not banning menthol cigarettes. The Appellate Body doubted that the health care system would be overwhelmed by menthol cigarette smokers or that a black market would develop because regular cigarettes, which contain nicotine and could therefore satisfy the addiction of menthol smokers, would still be on the market. The Appellate Body, therefore, upheld the panel's conclusion that by exempting menthol cigarettes from the ban on flavored cigarettes, Section 907(a)(1)(A) accords less favorable treatment to imported clove cigarettes than to domestically produced menthol cigarettes. "Reasonable Interval" Under Article 2.12 of the TBT Agreement Article 2.12 of the TBT Agreement requires Members to "allow a reasonable interval between the publication of technical regulations and their entry into force." The Tobacco Control Act gave three months notice before its ban went into effect. Indonesia argued before the panel that paragraph 5.2 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns (Doha Ministerial Decision) defined "reasonable interval" within Article 2.12 to mean not less than six months and that paragraph 5.2 constitutes "a legally binding interpretation pursuant to Article IX:2 of the WTO Agreement." Paragraph 5.2 provides that "reasonable interval" "shall be understood to mean" not less than six months. Article IX:2 of the WTO Agreement provides: The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of the Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members. Without deciding whether paragraph 5.2 of the Doha Ministerial Decision was a legally binding interpretation under Article IX:2, the panel stated that it "must be guided by [the Doha Ministerial Decision] in its interpretation of the phrase reasonable interval as [the Doha Ministerial Decision] was agreed to by all WTO Members meeting in the form of the Ministerial Conference, the highest ranking body of the WTO." Furthermore, the panel stated that paragraph 5.2 could be a "subsequent agreement of the parties" on the meaning of "reasonable interval" in Article 2.12 of the TBT Agreement within the meaning of Article 31(3)(a) of the Vienna Convention on the Law of Treaties (Vienna Convention). Article 31(3)(a) of the Vienna Convention provides: "There shall be taken into account, together with context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions." The panel ultimately concluded that Indonesia had established a prima facie case that Section 907(a)(1)(A) violated Article 2.12 and that the United States failed to rebut it. On appeal, the United States argued that the panel erred (1) in attributing "interpretive value" to paragraph 5.2 of the Doha Ministerial Decision and (2) in finding that Indonesia had established a prima facie case of inconsistency with Article 2.12 of the TBT that the United States failed to rebut. Paragraph 5.2 of the Doha Ministerial Decision as a Legally Binding Interpretation Adopted Under Article IX:2 of the WTO Agreement The Appellate Body began its analysis of the status of paragraph 5.2 of the Doha Ministerial Decision by noting that Article IX:2 of the WTO Agreement on legally binding interpretations has "clearly articulated and strict decision-making procedures." Specifically, it provides "(i) a decision by the Ministerial Conference or the General Council to adopt such interpretations shall be taken by a three-fourths majority of Members; and (ii) such interpretations shall be taken on the basis of a recommendation by the Council overseeing the functioning of the relevant Agreement." Because the United States only appealed the panel's decision based on the lack of a recommendation from the relevant Council, the Appellate Body limited its decision to that issue. It found "in the absence of evidence of the existence of a specific recommendation from the Council for Trade in Goods concerning the interpretation of Article 2.12 of the TBT Agreement, paragraph 5.2 of the Doha Ministerial Decision does not constitute a multilateral interpretation adopted pursuant to Article IX:2 of the WTO Agreement." Because the Council on Trade in Goods had not made a recommendation to the Ministerial Council, the Appellate Body concluded that paragraph 5.2 did not satisfy the requirements of Article IX:2 of the WTO Agreement. Paragraph 5.2 of the Doha Ministerial Decision as a Subsequent Agreement Within Article 31(3)(a) of the Vienna Convention Next, the Appellate Body considered whether, as the panel found, paragraph 5.2 could be considered a subsequent agreement of the parties within the meaning of Article 31(3)(a) of the Vienna Convention on the interpretation of "reasonable interval" in Article 2.12 of the TBT Agreement. The United States argued that "a decision by the Ministerial Conference that does not conform with the specific decision-making procedures established by Article IX:2 of the WTO Agreement cannot constitute a 'subsequent agreement between the parties' within the meaning of Article 31(3)(a) of the Vienna Convention." Distinguishing legally binding subsequent interpretations adopted under Article IX:2 of the WTO Agreement from subsequent agreements under Article 31(3)(a) of the Vienna Convention, the Appellate Body rejected the U.S. argument. The Appellate Body explained, "Multilateral interpretations under Article IX:2 of the WTO Agreement provide a means by which Members … may adopt binding interpretations that clarify WTO law for all Members." In contrast, Article 31(3)(a) of the Vienna Convention is a rule of treaty interpretation, pursuant to which a treaty interpreter uses a subsequent agreement between the parties on the interpretation of a treaty provision as an interpretive tool to determine the meaning of that treaty provision. Pursuant to Article 3.2 of the [Dispute Settlement Understanding (DSU)], panels and the Appellate Body are required to apply the customary rules of interpretation of public international law—including the rule embodied in Article 31(3)(a) of the Vienna Convention—to clarify the existing provisions of the covered agreements. Interpretations developed by panels and the Appellate Body in the course of a dispute settlement proceeding are binding only on the parties to a particular dispute. Article IX:2 of the WTO Agreement does not preclude panels and the Appellate Body from having recourse to a customary rule of interpretation of public international law that, pursuant to Article 3.2 of the DSU, they are required to apply. The Appellate Body proceeded to consider whether paragraph 5.2 of the Doha Ministerial Decision was such a subsequent agreement. It stated: "a decision adopted by Members may qualify as a 'subsequent agreement between the parties' regarding the interpretation of a covered agreement or the application of its provisions if (i) the decision is, in a temporal sense, adopted subsequent to the relevant covered agreement; and (ii) the terms and content of the decision express an agreement between Members on the interpretation of application of WTO law." As there was no doubt that paragraph 5.2 was adopted after Article 2.12 of the TBT Agreement, the only issue for the Appellate Body was whether paragraph 5.2 expressed an agreement among the Members on the meaning of "reasonable interval" within Article 2.12 of the TBT Agreement. The Appellate Body began its analysis by noting that in a previous WTO case, the Appellate Body observed that the International Law Commission (the "ILC") describes a subsequent agreement within the meaning of Article 31(3)(a) of the Vienna Convention as "a further authentic element of interpretation to be taken into account together with context." According to the Appellate Body, by referring to "authentic interpretation," the ILC reads Article 31(3)(a) as referring to agreements bearing specifically upon the interpretation of the treaty . The Appellate Body concluded that paragraph 5.2, in expressly addressing Article 2.12, "bears specifically" on the meaning of "reasonable interval" within Article 2.12 of the TBT Agreement. Next, it considered whether paragraph 5.2 was an agreement among the Members. Noting that Article 31(3)(a) of the Vienna Convention does not specify a form that a subsequent agreement must take, the Appellate Body stated that Article 5.2 "can be characterized as a 'subsequent agreement' … provided that it clearly expresses a common understanding, and an acceptance of that understanding among Members with regard to the meaning of the term 'reasonable interval.'" Because paragraph 5.2 of the Doha Ministerial Decision provides that "reasonable interval" in Article 2.12 of the TBT Agreement "shall be understood to mean" not less than six months, the Appellate Body concluded that paragraph 5.2 was a subsequent agreement on the meaning of "reasonable interval" within Article 31(3)(a) of the Vienna Convention. Therefore, "the terms of paragraph 5.2 of the Doha Ministerial Decision constitute an interpretive clarification to be taken into account in the interpretation of Article 2.12 of the TBT Agreement." Interpretation of Article 2.12 of the TBT Agreement In Light of Paragraph 5.2 of the Doha Ministerial Decision The Appellate Body began its interpretation of Article 2.12 of the TBT by noting that the reason for allowing a reasonable interval from publication of a technical regulation and its going into force is to allow producers in exporting Members to adapt to the rule. Therefore, Article 2.12, in conjunction with paragraph 5.2 of the Doha Ministerial Decision, establishes a rule that, normally, producers in exporting Members require a period of at least six months to adapt to the new technical regulation. Prima Facie Case That the United States Violated Article 2.12 of the TBT Agreement The panel put the burden on Indonesia to establish a prima facie case that the six-month period provided in Article 2.12 was reasonable and found that Indonesia had set forth a prima facie case which the United States failed to rebut. The United States made two arguments on appeal. First, the United States argued that in order to make a prima facie case, Indonesia needed to establish that the three month period allowed by the Tobacco Control Act was unreasonable, which it failed to do. Second, the United States argued that even if the panel was correct that "the elements of a prima facie case may be drawn exclusively from paragraph 5.2 of the Doha Ministerial Decision, the Panel erred in finding that Indonesia had succeeded in making such a case." The Appellate Body declared that a complaining Member establishes a prima facie case of inconsistency with Article 2.12 of the TBT Agreement when it shows that the importing Member allowed a period of less than six months from the time the technical regulation is published until its effective date. Then, the burden shifts to the importing member to rebut the prima facie case. In order to identify the elements of a rebuttal, the Appellate Body spelled out the exceptions to Article 2.12: First, Article 2.12 of the TBT Agreement excludes from the obligation to provide a "reasonable interval" between the publication and the entry into force of technical regulations "those urgent circumstances" referred to in Article 2.10 of the TBT Agreement. Thus, where "urgent problems of safety, health, environmental protection or national security" arise for a Member that is implementing a technical regulation, a period of six months or more cannot be considered to be a "reasonable interval" within the meaning of Article 2.12. Second, Article 2.12 expressly states that the rationale for providing a "reasonable interval" … is "to allow time for producers in exporting members, and particularly in developing country Members, to adapt their products or methods of production" to the requirements of the importing Member's technical regulation. If these producers can adapt their products or production methods to the requirements of an importing Member's technical regulation in less than six months, a period of six months or more cannot be considered to be a "reasonable interval"…. Third, paragraph 5.2 allows an importing Member to depart from the obligation to provide a "reasonable interval" of, "normally," not less than six months … if this interval would be "ineffective to fulfill the legitimate objectives pursued" by its technical regulation. Therefore, a period of "not less than six months" cannot be considered to be a "reasonable interval," within the meaning of Article 2.12, if this period would be ineffective to fulfill the legitimate objectives pursued by the technical regulation at issue. In order to rebut a prima facie case, therefore, the responding member must establish (i) that the "urgent circumstances" referred to in Article 2.10 of the TBT Agreement surrounded the adoption of the technical regulation at issue; (ii) that producers of the complaining Member could have adapted to the requirements of the technical regulation at issue within the shorter interval that it allowed; or (iii) that a period of "not less than" six months would be ineffective to fulfill the legitimate objectives of its technical regulation. Thus, the Appellate Body disagreed with the panel's allocation of the burden of proof, but ultimately agreed that Indonesia had set forth a prima facie case, which the United States failed to rebut. The U.S. Response At the April 24, 2012, meeting of the Dispute Settlement Body (DSB), the United States made a statement about the Appellate Body's decision. The United States explained that the Tobacco Control Act was aimed at "cigarettes that were smoked by a small fraction of the population and predominantly by young people." Although tobacco and menthol cigarettes, which are smoked by "tens of millions of addicted adults," pose a serious public health issue, those issues are different from the issue which the Tobacco Control Act was intended to address—youth smoking. The United States noted that the panel, in finding the Tobacco Control Act consistent with Article 2.2 of the TBT, concluded that the Tobacco Control Act serves the legitimate objective of reducing youth smoking by removing "trainer cigarettes" from the market and that it was not more trade restrictive than necessary. However, in light of those conclusions, the United States found it "very hard" to understand the Appellate Body's conclusion that the Tobacco Control Act breaches Article 2.1 of the TBT Agreement. In particular, the United States appreciated that the Appellate Body recognized that Members may make "legitimate regulatory distinctions between like products, even where there is a detriment to the competitive conditions for the group of like imported products compared to the group of like domestic products." However, the United States stated that the Appellate Body's findings and analysis on Article 2.1 are "problematic" because it fails to appreciate that, "from the perspective of public health regulation, there is a clear difference between a product, such as clove cigarettes, that is smoked in the United States experimentally by a small number of young people but relatively few adults, and a product such as menthol cigarettes, that is not only used by youth during initiation but also by tens of millions of addicted adults." Because the Appellate Body recognized that the panel failed to explain why it rejected the U.S. regulatory approach and, therefore, made no factual findings, the United States asserted, the Appellate Body should have overturned the panel's conclusion. Instead, the United States complained, the Appellate Body engaged in its own analysis and rejected the U.S. explanation without citing to any facts to support its view that the basis for the distinction was not legitimate. "The Appellate Body thus reached conclusions that were not, as they should be in any dispute, based on Panel findings or undisputed facts." By doing so, the United States stated, the Appellate Body in effect put itself in the position of regulator, weighing the risks and benefits from including menthol cigarettes in the ban. The United States asserted that the Appellate Body rejected the judgment of the U.S. regulators that menthol cigarettes should not be included in the ban and substituted its own judgment on the basis that "it is not clear" that the concerns of the U.S. regulators would materialize if menthol cigarettes were banned. "The result in this dispute should be of grave concern to any Member regulating for the benefit of public health as, without the benefit of analysis based in any factual findings, it was decided that a public health regulation must be applied to additional types of products, despite the potential harms of an extended ban." Finally, the United States expressed disappointment with the Appellate Body's determination that the Tobacco Control Act's interval of three months between publication and effective date was not "reasonable" and thus inconsistent with Article 2.12 of the TBT Agreement. First, the United States asserted, the Appellate Body's treatment of paragraph 5.2 of the Doha Ministerial Decision undermines its own finding that paragraph 5.2 was not a legally binding interpretation of "reasonable interval" under Article IX:2 of the WTO Agreement. "[B]y treating paragraph 5.2 of the Doha Decision as a 'subsequent agreement' that establishes the meaning of the covered agreements, the Appellate Body report effectively eliminates the safeguards that Members have included in Article IX:2 of the WTO Agreement." Second, the United States stated, by finding that a prima facie case under Article 2.12 of the TBT Agreement is establishing that the technical regulation allows less than six months between publication and effective date, the Appellate Body reversed the burden of proof for Article 2.12 claims. "[A]s members generally recognize, it must be the complaining party's burden to prove all the elements of its legal claim. This should include that the complaining Member's producers could not have adapted to the requirements within the interval actually allotted and that a period of not less than six months would be effective to fulfill the legitimate objective of the challenged measure." On May 24, 2012, the United States issued the following statement at the meeting of the DSB about how it intends to respond to the conclusions of the Appellate Body: [T]he United States wishes to state that it intends to implement the recommendations and rulings of the [Appellate Body] in a manner that protects public health and respects the obligations of the United States under the WTO Agreement. •    In this regard, the United States would emphasize the [panel's] finding that the U.S. measure reflects the overwhelming view of the scientific community that banning clove and other flavored cigarettes benefits the public health by reducing the likelihood that youth will enter into a lifetime of cigarette addiction. •    Accordingly, the [panel] found that a ban on clove cigarettes meets the requirements of Article 2.2 of the TBT Agreement and is thus no more trade restrictive than necessary to fulfill a legitimate public health objective. The United States will need a reasonable period of time in which to implement in this dispute. The United States and Indonesia agreed that 15 months—until July 24, 2013—was a reasonable period of time for the United States to comply with the Appellate Body decision. The statement that the United States will act in a manner that protects the public health, coupled with the highlighting of the panel's finding that Section 907(a)(1)(A) reflects the overwhelming view of the scientific community that banning clove and other flavored cigarettes benefits the public health, appears to suggest that the United States intends to maintain the ban on clove cigarettes. The United States also states that it will act in a way that respects its obligations under the WTO Agreement. It is unclear from this statement what the United States intends to do. Conclusion The Appellate Body determined that Section 907(a)(1)(A) of the Tobacco Control Act violates Article 2.1 of the TBT Agreement in that it bans clove cigarettes, which are predominantly imported from Indonesia, while allowing menthol cigarettes, which are predominantly produced domestically. The Appellate Body concluded that clove cigarettes and menthol cigarettes are like products: with respect to end-uses, they are both capable of satisfying a nicotine addiction and creating a pleasurable smoking experience; and, with respect to consumer tastes and habits, they compete with each other and are substitutable within the youth segment of the overall market. The Appellate Body also determined that Section 907(a)(1)(A) treats clove cigarettes less favorably than menthol cigarettes and that this less favorable treatment is not justified by a legitimate regulatory distinction. The United States had argued that because millions of adult smokers are addicted to menthol cigarettes, banning them would run the risk of menthol smokers overwhelming the health care system as they sought treatment for nicotine withdrawal and turning to a black market to obtain menthol cigarettes. However, the Appellate Body noted the addictive ingredient in cigarettes is nicotine and that regular cigarettes, which contain nicotine, would continue to be available. The Appellate Body also found that Section 901(a)(1)(A) violated Article 2.12 of the TBT Agreement because it did not provide a "reasonable interval" between its publication and its effective date. In arriving at this finding, it determined that paragraph 5.2 of the Doha Ministerial Decision is not a legally binding interpretation of "reasonable interval" under Article IX:2 of the WTO Agreement because it did not satisfy the procedural requirements of Article IX:2. The Appellate Body determined, however, that paragraph 5.2 of the Doha Ministerial Decision constituted a subsequent agreement on the meaning of "reasonable interval" within Article 31(3) of the Vienna Convention. It also determined that a complaining Member establishes a prima facie case by establishing that the technical regulation allows less than six months between publication and effective date. A responding Member rebuts a prima facie case by establishing that the time provided by the technical regulation is reasonable. The U.S. statement in response to the Appellate Body's decision seems to suggest that the United States intends to maintain the ban on clove cigarettes, while at the same time respecting its obligations under the WTO Agreement. It appears the United States has not yet decided how it intends to accomplish this goal. The United States and Indonesia agreed to a compliance date of July 24, 2013.

In 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act), which banned the sale of all flavored cigarettes, except menthol cigarettes, in Section 907(a)(1)(A). Indonesia, a major producer of clove cigarettes, challenged the Tobacco Control Act's ban on non-menthol flavored cigarettes before a World Trade Organization (WTO) panel, claiming, among other things, that it violated Articles 2.1 and 2.2 of the Agreement on Technical Barriers to Trade (TBT Agreement). Article 2.1 requires WTO members to ensure that domestic regulations setting forth product characteristics treat like imported products no less favorably than like domestic products. Article 2.2 requires that such regulations be no more trade restrictive than necessary to fulfill a legitimate objective. The panel hearing the dispute agreed with Indonesia on Article 2.1 but found for the United States on Article 2.2. The United States appealed the panel's finding on Article 2.1. On April 4, 2012, the Appellate Body issued a decision. Although the Appellate Body disagreed with certain legal standards applied by the panel, it ultimately upheld the panel's conclusion that menthol cigarettes and clove cigarettes are like products and that the Tobacco Control Act's ban of non-menthol flavored cigarettes treats imported clove cigarettes less favorably than domestic menthol cigarettes. The Appellate Body stated that this case involved de facto discrimination and drew on jurisprudence developed under Article III:4 of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which is similar to Article 2.1 of the TBT Agreement, to hold that "likeness in Article 2.1 [] is based on the competitive relationship between and among products." The Appellate Body accepted that domestic regulations may legitimately distinguish between products to serve a public health interest. However, it found that the differential treatment of menthol and clove cigarettes in the Tobacco Control Act did not stem from a legitimate regulatory distinction. The Appellate Body, therefore, found that Section 907(a)(1)(A) violated Article 2.1 of the TBT Agreement. The panel found that Section 907(a)(10)(A), in providing a period of three months before the ban took effect, violated Article 2.12 of the TBT Agreement, which requires a "reasonable interval" between publication of the law and its effective date. The United States appealed. The Appellate Body rejected Indonesia's argument that paragraph 5.2 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns, which interpreted "reasonable interval" within Article 2.12 to mean "a period of not less than six months," was a legally binding interpretation of Article 2.12 under Article IX:2 of the Agreement Establishing the World Trade Organization (WTO Agreement). However, the Appellate Body found that paragraph 5.2 was a "subsequent agreement" under Article 31(3) of the Vienna Convention on the Law of Treaties. The Appellate Body stated that under Article 2.12 the complaining Member must establish a prima facie case by demonstrating that the technical regulation provides an interval between publication and effective date of less than six months; then the burden shifts to the responding Member to demonstrate that the interval provided is reasonable. In response to the Appellate Body's decision, the United States has suggested that it will likely maintain the ban on clove cigarettes while fulfilling its obligations under the WTO Agreement. It appears the United States has not yet settled on how it will accomplish this. The United States and Indonesia agreed that the United States would comply with the Appellate Body decision by July 24, 2013.

Introduction to the PHS Agencies The Department of Health and Human Services (HHS) has designated 8 of its 11 operating divisions (agencies) as components of the U.S. Public Health Service (PHS). The PHS agencies are (1) the Agency for Healthcare Research and Quality (AHRQ), (2) the Agency for Toxic Substances and Disease Registry (ATSDR), (3) the Centers for Disease Control and Prevention (CDC), (4) the Food and Drug Administration (FDA), (5) the Health Resources and Services Administration (HRSA), (6) the Indian Health Service (IHS), (7) the National Institutes of Health (NIH), and (8) the Substance Abuse and Mental Health Services Administration (SAMHSA). While the PHS agencies all provide and support essential public health services, their specific missions vary. With the exception of FDA, the agencies have limited regulatory responsibilities. Two of them—NIH and AHRQ—are primarily research agencies. NIH conducts and supports basic, clinical, and translational medical research. AHRQ conducts and supports research on the quality and effectiveness of health care services and systems. Three of the agencies—IHS, HRSA, and SAMHSA—provide health care services or help support systems that deliver such services. IHS supports a health care delivery system for American Indians and Alaska Natives. Health services are provided directly by the IHS, as well as through tribally contracted and operated health programs, and through services purchased from private providers. HRSA funds programs and systems to improve access to health care among low-income populations, pregnant women and children, persons living with HIV/AIDS, rural and frontier populations, and others who are medically underserved. SAMHSA funds community-based mental health and substance abuse prevention and treatment services. CDC is a public health agency that develops and supports community-based and population-wide programs and systems to promote quality of life and prevent the leading causes of disease, injury, disability, and death. ATSDR, which is headed by the CDC director and included in the discussion of CDC in this report, is tasked with identifying potential public health effects from exposure to hazardous substances. Finally, FDA is primarily a regulatory agency, whose mission is to ensure the safety of foods, dietary supplements, and cosmetics, and the safety and effectiveness of drugs, vaccines, medical devices, and other health products. In 2009, Congress gave FDA the authority to regulate the manufacture, marketing, and distribution of tobacco products in order to protect public health. The programs and activities of five of the PHS agencies—AHRQ, CDC, HRSA, NIH, and SAMHSA—are mostly authorized under the Public Health Service Act (PHSA). While some of FDA's regulatory activities are also authorized under the PHSA, the agency and its programs derive most of their statutory authority from the Federal Food, Drug, and Cosmetic Act (FFDCA). HRSA's maternal and child health programs are authorized by the Social Security Act (SSA), and many of the IHS programs and services are authorized by the Indian Health Care Improvement Act. ATSDR was created by the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, the "Superfund" law). Sources of PHS Agency Funding The primary source of funding for each PHS agency is the discretionary budget authority it receives through the annual appropriations process. AHRQ, CDC, HRSA, NIH, and SAMHSA are funded by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) appropriations act. Funding for ATSDR and IHS is provided by the Department of the Interior, Environment, and Related Agencies (Interior/Environment) appropriations act. FDA gets its funding through the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies (Agriculture) appropriations act. Secretary's Transfer Authority The annual LHHS appropriations act gives the HHS Secretary limited authority to transfer funds from one budget account to another within the department. The Secretary may transfer up to 1% of the funds in any given account. However, a recipient account may not be increased by more than 3%. Congressional appropriators must be notified in advance of any transfer. The HHS Secretary used this transfer authority in FY2013 and again in FY2014 as part of a broader effort to provide the Centers for Medicare & Medicaid Services (CMS) with additional funding to implement the Affordable Care Act (ACA). In FY2013, for example, NIH was the primary source of transfers both to CMS for ACA implementation and to CDC and SAMHSA to help offset a loss of funding for those two agencies from the ACA's Prevention and Public Health Fund (PPHF, discussed below). A significant portion of the FY2013 PPHF funds that were originally allocated to CDC and SAMHSA were reallocated to CMS, also for ACA implementation. In FY2014, NIH was again the primary source of transfers to CMS to support ACA implementation. PHS Evaluation Set-Aside In addition to the transfer authority provided in the annual LHHS appropriations act, Section 241 of the PHSA authorizes the HHS Secretary, with the approval of congressional appropriators, to use a portion of the funds appropriated for programs authorized by the PHSA to evaluate their implementation and effectiveness. This long-standing budgeting authority is known as the Public Health Service Evaluation Set-Aside (set-aside), or PHS budget "tap." Under this authority the appropriations of numerous HHS programs are subject to an assessment. Although the PHSA limits the set-aside to no more than 1% of program appropriations, in recent years the annual LHHS appropriations act has specified a higher amount. The FY2016 LHHS appropriations act capped the set-aside at 2.5%, the same percentage that has been in place since FY2010. Following passage of the annual LHHS appropriations act, the HHS Budget Office calculates the assessment on each of the donor agencies and offices. These funds are then transferred to various recipient agencies and offices within the department for evaluation and other specified purposes, based on the amounts specified in the appropriations act. Table 1 shows the total assessments and transfers for FY2013, by HHS agency and office, and indicates whether the entity was a net donor or recipient of set-aside funds that year. These figures are broadly representative of the distribution of set-aside funds that occurred each fiscal year over a period of several years prior to FY2015, when the appropriators decided to make major changes to the allocation of such funds. NIH, whose annual discretionary appropriation exceeds that of all the other PHS agencies combined, is subject to the largest assessment of set-aside funds. NIH contributed almost $710 million (69%) of the $1.026 billion in set-aside funds in FY2013. However, the agency received $8 million in set-aside funding, making it a significant net donor of set-aside funds. Similarly, HRSA contributed more set-aside funds than it received in FY2013. On the other hand, AHRQ, CDC, and SAMHSA were net recipients of set-aside funding in FY2013. The Administration for Children and Families (ACF) and various offices within the Office of the Secretary (OS) also received set-aside funds. Table 1 also shows the set-aside assessments and transfers for the current fiscal year (i.e., FY2016). These figures reflect the significant changes that the appropriators first made in FY2015 by returning most of the set-aside funding to NIH and eliminating any transfers to AHRQ, CDC, and HRSA. As a result, NIH has gone from being by far the largest net donor of set-aside funds to a net recipient of such funding. Meanwhile, AHRQ and CDC have experienced a significant loss of set-aside funding and are now both net donors of these funds. The situation with AHRQ is of particular interest to many. From FY2003 through FY2014, AHRQ did not receive an annual discretionary appropriation. The agency was supported by set-aside funds and, in recent years, by amounts from other sources. In FY2015, however, AHRQ received a discretionary appropriation for the first time in more than a decade in lieu of receiving any set-aside funding. That continues to be the case in FY2016. Mandatory Funding, User Fees, and Collections Although the bulk of PHS agency funding is provided through annual discretionary appropriations, agencies also receive mandatory funding, user fees, and third-party collections. As discussed below, these additional sources of funding are a substantial component of the budget of several PHS agencies. Mandatory Appropriations The ACA included numerous appropriations that together provided billions of dollars in mandatory spending to support specified grant programs and activities within HHS. A few PHS agencies continue to receive these funds, which are itemized in the funding tables in this report. The ACA also established and funded three multibillion dollar trust funds to help support PHS agency programs and activities. First, the ACA provided a total of $11 billion in annual appropriations over the five-year period FY2011-FY2015 to the Community Health Center Fund (CHCF) . These funds help support the federal health centers program and the National Health Service Corps (NHSC), both of which are administered by HRSA. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) appropriated two more years of funding for the CHCF; a total of $3.910 billion for each of FY2016 and FY2017. A table summarizing each fiscal year's CHCF appropriation and the allocation of funds appears in Appendix A . Second, the Prevention and Public Health Fund (PPHF) , for which the ACA provided a permanent annual appropriation, is intended to support prevention, wellness, and other public health programs and activities. To date, CDC has received the majority of PPHF funds, while AHRQ, HRSA, and SAMHSA have received smaller amounts. The HHS Secretary transferred almost half of the FY2013 PPHF funds to CMS to support ACA implementation. A table showing the allocation of annual PPHF funding by agency since FY2010 is provided in Appendix B . Finally, the Patient-Centered Outcomes Research Trust Fund (PCORTF) is supporting comparative effectiveness research over a 10-year period (FY2010-FY2019) with a mix of appropriations—some of which are offset by revenue from a fee imposed on health insurance policies and self-insured health plans—and transfers from the Medicare Part A and Part B trust funds. A portion of the PCORTF is allocated for AHRQ. More information on the PCORTF, including the appropriation and transfer formulas, is provided in Appendix C . In addition to the ACA funding, HRSA, CDC, and IHS each receive mandatory funds from other sources. HRSA's Family-to-Family Health Information Centers Program has been funded by a series of mandatory appropriations since FY2007; CDC receives Medicaid funding to support the Vaccines for Children program; and both IHS and NIH receive mandatory funds for diabetes programs. These and other mandatory appropriations are itemized in the agency funding tables in this report. User Fees Several PHS agencies assess user fees on third parties to help fund their programs and activities. User fees collected by CDC, HRSA, and SAMHSA represent a very small portion of each agency's overall budget. In comparison, the industry user fees that FDA collects help finance a broad range of the agency's regulatory activities and account for a substantial and growing share of the agency's budget. In 1992, the Prescription Drug User Fee Act (PDUFA) established the first user fee program at FDA. Since PDUFA's enactment, Congress has created several other FDA user fee programs. These programs provide FDA with additional resources that allow it to hire more personnel and expedite the process of reviewing new product applications. Some user fees also pay for information technology infrastructure and postmarket surveillance of FDA-approved products. FDA's user fee programs now support the agency's regulation of prescription drugs, animal drugs, medical devices, tobacco products, and some foods, among other activities. The amount of user fees that FDA collects under these programs has increased steadily since PDUFA was enacted, both in absolute terms and as a share of FDA's overall budget. In FY2016, user fees account for 43% of the agency's funding. More discussion of user fees is provided in the FDA section of this report and in Appendix D . Collections IHS supplements its annual discretionary appropriation with third-party collections from public and private payers. Most of these funds come from Medicare and Medicaid, which reimburse IHS for services provided to American Indians and Alaska Natives enrolled in these programs at facilities operated by IHS and the tribes. IHS also collects reimbursements from private health insurers. IHS collections (and reimbursements) are reflected in Table 8 of this report. Recent Trends in PHS Agency Funding Congress has taken a number of recent steps through both the annual appropriations process and the enactment of deficit-reduction legislation to reduce the growth in federal spending. These actions, which are briefly discussed below, have had an impact on the level of discretionary funding for several PHS agencies since FY2010. Among the five PHS agencies that are funded through the LHHS appropriations act, AHRQ has witnessed a reduction in discretionary funding over the past six years. However, that reduction has been offset by the receipt of increasing amounts of mandatory funding. Discretionary funding for the other four agencies—CDC, HRSA, NIH, and SAMHSA—has fluctuated in recent years, dipping in FY2013 as a result of the sequestration of discretionary appropriations that fiscal year (see below). Both CDC and HRSA also have received increasing amounts of mandatory funding since FY2010, which has raised each agency's overall funding level. FDA and IHS, which receive their discretionary funding through the Agriculture and the Interior/Environment appropriations acts, respectively, have seen their appropriations increase since FY2010. Both agencies also have witnessed a steady increase in funding from other sources; user fees at FDA, and third-party collections at IHS. Impact of Budget Caps and Sequestration In April 2011, lawmakers agreed to cuts in discretionary spending for a broad range of agencies and programs as part of negotiations to complete the FY2011 appropriations process and avert a government shutdown. Four months later, as part of negotiations to raise the debt ceiling, Congress and the President then enacted the Budget Control Act of 2011 (BCA). The BCA established enforceable discretionary spending limits, or caps, for defense and nondefense spending for each of FY2012 through FY2021, and provided for further annual spending reductions equally divided between the categories of defense and nondefense spending beginning in FY2013. Within each spending category, those further reductions are allocated proportionately to discretionary spending and mandatory spending, subject to certain exemptions and special rules. All the spending summarized in this report falls within the nondefense category. Under the BCA, the spending reductions are achieved through two different methods: (1) sequestration (i.e., an across-the-board cancellation of budgetary resources), and (2) lowering the BCA-imposed discretionary spending caps. The Office of Management and Budget (OMB) is responsible for calculating the percentages and amounts by which mandatory and discretionary spending are required to be reduced each year, and for applying the relevant exemptions and special rules. Mandatory Spending The BCA requires the mandatory spending reductions to be executed each year through a sequestration of all nonexempt accounts. Generally, the ACA and other mandatory funding discussed in this report is fully sequestrable at the applicable percentage rate for nonexempt nondefense mandatory spending (see Table 2 ), with the following key exceptions. First, the funds for the CDC-administered Vaccines for Children program come from Medicaid, which is exempt from sequestration. Second, CDC funding for the Energy Employees Occupational Illness Compensation Program Act (EEOICPA) and the World Trade Center Health Program also are exempt from sequestration. Third, under the sequestration special rules, cuts in CHCF funding for community health centers and migrant health centers and the cuts in mandatory diabetes funding for IHS are capped at 2% (see Table 2 ). While all the nonexempt PHS programs with mandatory funding were sequestered in FY2013 and FY2014, several of them avoided sequestration in FY2015 and/or FY2016 because they had no budgetary resources in place at the time the sequester was ordered by the President. The Maternal, Infant, and Early Childhood Home Visiting program, administered by HRSA, is one example of a program for which this occurred. The ACA authorized the home visiting program and funded it through FY2014 (see Table 7 ). Pursuant to the BCA, the President ordered the FY2015 sequestration on March 10, 2014. Because Congress and the President had yet to enact legislation extending funding for the home visiting program, there were no FY2015 budgetary resources to sequester. Discretionary Spending Under the BCA, FY2013 discretionary spending was also reduced through sequestration. However, for each of the remaining fiscal years (i.e., FY2014 through FY2021), the annual reductions in discretionary spending required under the BCA are to be achieved by lowering the discretionary spending caps by the total dollar amount of the required reduction. This means that the cuts within the lowered spending cap may be apportioned through the annual appropriations decisionmaking, rather than via an across-the-board reduction through sequestration. FY2013 Sequestration In general, PHS agency discretionary appropriations in FY2013 were fully sequestrable at the applicable percentage rate for nonexempt nondefense discretionary spending (see Table 2 ). As a result, each agency saw a dip in its discretionary funding for FY2013. OMB determined that FDA user fees for FY2013 were fully sequestrable, but concluded that IHS's third-party collections in FY2013 were exempt from sequestration. FY2014-FY2017 Discretionary Spending Caps Table 3 shows the original nondefense discretionary (NDD) spending caps for FY2014-FY2017 established by the BCA. For each of those four fiscal years, the BCA required the caps to be lowered by approximately $37 billion to achieve the necessary reduction in NDD spending. However, the Bipartisan Budget Act of 2013 (BBA13) amended the BCA by establishing new levels for the FY2014 and FY2015 NDD spending caps, and eliminating the requirement for those caps to be reduced. While the BBA13 caps were set at a level that was lower than the original BCA caps (see Table 3 ), they were higher than the BCA-lowered caps that they replaced. The Bipartisan Budget Act of 2015 (BBA15) further amended the BCA by establishing new levels for the FY2014 and FY2015 NDD spending caps, and eliminating the requirement for those caps to be lowered. Once again, the BBA15 caps were set at a level that is below the original BCA caps for those two fiscal years (see Table 3 ), but is higher than the BCA-lowered caps that they replace. The revised NDD caps allowed an additional $26 billion for nondefense programs in FY2016 compared to the previous fiscal year. However, there is virtually no increase in NDD appropriations allowed by the FY2017 revised cap level. (The revised cap for FY2017 is only $40 million above the revised cap for FY2016.) Mandatory Funding Proposals for FY2017 The President's FY2017 budget includes a total of $2.940 billion in proposed new mandatory funding for the PHS agencies: $1.825 billion for NIH; $590 million for SAMHSA; $495 million for HRSA; and $30 million for CDC. These amounts, which are discussed later in this report, would be used to supplement—and in one case replace—discretionary funding for existing programs, or provide funding for new initiatives. It will be up to Congress to decide whether to pass legislation to provide these funds. The use of mandatory funding, including amounts provided by the ACA, has become an important component of PHS agency budgeting in recent years. Mandatory funds are not controlled by the annual appropriations process and do not count toward the discretionary spending caps. Report Roadmap The remainder of this report consists of seven sections, one for each PHS agency beginning with AHRQ. Each section includes an overview of the agency's statutory authority and principal activities, and a brief summary of recent trends in the agency's funding. This material is accompanied by a detailed funding table showing the agency's FY2015 and FY2016 funding levels and the FY2017 budget request. The amounts in the funding tables in this report are taken from the departmental and agency budget documents submitted to the appropriations committees, as well as agency operating plans. The funding tables show the post-sequestration amounts for the accounts that were subject to sequestration in FY2015 and FY2016. The amounts shown for the FY2017 request do not reflect sequestration. The funding tables are formatted in a similar, though not identical, manner. The formatting generally matches the way in which each agency's funding is presented in the congressional budget documents. Each table shows the funding for all the agency's budget accounts and, typically, for selected programs and activities within those accounts. These amounts are summed to give the agency's total, or program level , funding. At the bottom of the table any user fees, set-aside funds, ACA funds, and other nondiscretionary amounts are subtracted from the program level to give the agency's discretionary budget authority (i.e., annual discretionary appropriations). The tables for AHRQ, CDC, HRSA, and SAMHSA include non-add entries—italicized and in parentheses—to indicate the contribution of funding to specific accounts from sources other than the agency's discretionary appropriations. Almost all of the CDC accounts, for example, are funded with discretionary appropriations plus amounts from other sources (see Table 5 ). The use of a dash in the funding tables generally means "not applicable." Either the activity or program was not authorized or there was no mandatory funding provided for that fiscal year. In contrast, a zero usually indicates that congressional appropriators had chosen not to appropriate any discretionary funds that year or, in the case of the FY2017 budget request, that no discretionary funding was requested. It is important to keep in mind that the PHS agency funding tables that appear in budget documents and appropriations committee reports, as well as the tables in this report, show only the amount of evaluation set-aside funds received. They do not reflect the amount of funding assessed on agency accounts. As a result, the funding tables for the PHS agencies subject to an assessment give a somewhat distorted view of their available budgetary resources. This effect is particularly significant in the case of the three agencies—CDC, HRSA, and NIH—that are subject to a significant assessment under the evaluation set-aside authority (see Table 1 ). NIH, for example, is assessed approximately $700 million annually. While the funding table for NIH shows the transfer (i.e., receipt) of set-aside funds, which count toward the agency's overall program level funding, the amounts shown for each agency account have not been reduced to reflect the assessment. Thus, NIH appears to have about $700 million more than is in fact the case. This report is a new edition of an earlier product, which remains available: CRS Report R43304, Public Health Service Agencies: Overview and Funding (FY2010-FY2016) . Agency for Healthcare Research and Quality (AHRQ)30 Agency Overview AHRQ supports research designed to improve the quality of health care, increase the efficiency of its delivery, and broaden access to health services. Specific research efforts are aimed at reducing the costs of care, promoting patient safety, measuring the quality of health care, and improving health care services, organization, and financing. AHRQ is required to disseminate its research findings to health care providers, payers, and consumers, among others. In addition, the agency collects data on health care expenditures and utilization through the Medical Expenditure Panel Survey (MEPS) and the Healthcare Cost and Utilization Project (HCUP). AHRQ has evolved from a succession of agencies concerned with fostering health services research and health care technology assessment. The Omnibus Budget Reconciliation Act of 1989 ( P.L. 101-239 ) added a new PHSA Title IX and established the Agency for Health Care Policy and Research (AHCPR), a successor agency to the former National Center for Health Services Research and Health Care Technology Assessment (NCHSR). AHCPR was reauthorized in 1992 ( P.L. 102-410 ). On December 6, 1999, President Clinton signed the Healthcare Research and Quality Act of 1999 ( P.L. 106-129 ), which renamed AHCPR as the Agency for Healthcare Research and Quality (AHRQ) and reauthorized appropriations for its programs and activities through FY2005. Congress has yet to reauthorize the agency's funding. Despite the expired authorization of appropriations, AHRQ continues to get annual funding. The AHRQ budget is organized according to three program areas: (1) Healthcare Costs, Quality, and Outcomes (HCQO) Research; (2) MEPS; and (3) program support. HCQO research currently focuses on four priority areas, summarized in the text box below. From FY2003 through FY2014, AHRQ did not receive its own annual discretionary appropriation. Instead, the agency largely relied on the PHS evaluation set-aside to fund its activities and programs. In recent years AHRQ also has received mandatory funds from the PPHF and the PCORTF (see Appendix B and Appendix C ). In FY2015, AHRQ received its own discretionary appropriation for the first time in more than a decade in lieu of any set-aside funding. This trend continued in FY2016 with the agency receiving its own discretionary appropriation and no set-aside funds. Recent Trends in Agency Funding Since FY2010, AHRQ's budget has increased from $403 million to $428 million (+$25 million), with transfers from PCORTF growing from $8 million in FY2011 to $94 million in FY2016. Discretionary sources of funding shifted from set-aside transfers to the agency's own discretionary appropriation in both FY2015 and FY2016, and ACA mandatory funds have been a prominent and increasing source of funding for the agency since FY2010. AHRQ's program level had been increasing steadily between FY2011 and FY2015, with decreases in discretionary funding being more than offset by transfers of PCORTF funds. However, in FY2016, the total program level for the agency decreased for the first time since FY2011, despite an increasing PCORTF transfer (see Table 4 ). Centers for Disease Control and Prevention (CDC)33 Agency Overview CDC's mission is "to protect America from health, safety and security threats, both foreign and in the [United States]." CDC is organized into a number of centers, institutes, and offices, some focused on specific public health challenges (e.g., chronic disease prevention, injury prevention), and others focused on general public health capabilities (e.g., surveillance and laboratory services). In addition, the Agency for Toxic Substances and Disease Registry (ATSDR) is headed by the CDC Director and is discussed in this section. Many CDC activities are not specifically authorized but are based in broad, permanent authorities in the PHSA. Four CDC operating divisions are explicitly authorized. The National Institute for Occupational Safety and Health (NIOSH) was permanently authorized by the Occupational Safety and Health Act of 1970. The National Center on Birth Defects and Developmental Disabilities (NCBDDD) was established in PHSA Section 317C by the Children's Health Act of 2000. The National Center for Health Statistics (NCHS) was established in PHSA Section 306 by the Health Services Research, Health Statistics, and Medical Libraries Act of 1974. ATSDR was established by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA, the "Superfund" law). Authorizations of appropriations for NCBDDD, NCHS, and ATSDR have expired, but the programs continue to receive annual appropriations. CDC provides about $5 billion per year in grants to state, local, municipal, tribal, and foreign governments, and to academic and non-profit entities. It has few regulatory responsibilities. Recent Trends in Agency Funding Between FY2010 and FY2016, the total program level for CDC/ATSDR increased from $10.88 billion to $11.78 billion. During that time period, CDC/ATSDR budget authority decreased by 3% from $6.5 billion in FY2010 to $6.3 billion in FY2016. Table 5 presents funding levels for CDC programs for FY2015 through the FY2017 request. In addition to annual discretionary appropriations, program level amounts for recent years include funds from the following four mandatory appropriations: (1) the Vaccines for Children (VFC) program; (2) NIOSH activities to support the Energy Employees Occupational Illness Compensation Program Act (EEOICPA); (3) the World Trade Center Health Program (WTCHP); and (4) appropriations provided under ACA, principally through the PPHF. CDC receives a small amount of funds from authorized user fees, and may also receive funds through the PHS set-aside, supplemental appropriations, and other transfers. When considering funding trends for CDC/ATSDR, it is useful to consider mandatory and discretionary funds separately. For example, for FY2016, the CDC/ATSDR total operating budget, or program level, is $11.78 billion. Of this amount, $6.27 billion (53%) is composed of discretionary funds (i.e., budget authority) for CDC provided in the LHHS appropriations act; $5.42 billion (46%) is composed of mandatory funds for CDC and ATSDR programs, namely the VCF, EEOICPA, and WTCHP, and from the ACA (principally from the PPHF); $75 million (<1%) is discretionary funds for ATSDR provided in the Interior/Environment appropriations act; and $17 million (<1%) is from authorized user fees and other transfers. Many of CDC's PPHF-funded activities also receive discretionary appropriations. Exceptions include the Preventive Health and Health Services Block Grant, and the Lead Poisoning Prevention Program, which were funded solely through PPHF distributions for FY2016. For more discussion on the allocation of annual PPHF funding, see Appendix B . In December 2014 Congress provided $1.771 billion in FY2015 emergency supplemental appropriations to CDC for response to the Ebola outbreak. The funds, which are available through FY2019, are to be used for both domestic and international activities. CDC has not presented these funds within its general budget, and they are not presented in Table 5 . However, the table does include $30 million provided to CDC's Global Health Program from an earlier Ebola supplemental. Food and Drug Administration (FDA)48 Agency Overview FDA regulates the safety of human foods, dietary supplements, cosmetics, and animal foods; and the safety and effectiveness of human drugs, biological products (e.g., vaccines), medical devices, and animal drugs. It also regulates the manufacture of radiation-emitting products to protect the public from hazardous levels of radiation. In 2009, Congress gave FDA the authority to regulate the manufacture, marketing, and distribution of tobacco products in order to protect public health. Seven centers within FDA represent the broad program areas for which the agency has responsibility: the Center for Biologics Evaluation and Research (CBER), the Center for Devices and Radiological Health (CDRH), the Center for Drug Evaluation and Research (CDER), the Center for Food Safety and Applied Nutrition (CFSAN), the Center for Veterinary Medicine (CVM), the National Center for Toxicological Research (NCTR), and the Center for Tobacco Products (CTP). Several other offices have agency-wide responsibilities. The Federal Food, Drug, and Cosmetic Act (FFDCA) is the principal source of FDA's statutory authority. FDA is also responsible for administering certain provisions in other laws, most notably the PHSA. Although the FDA's authorizing committees in Congress are the committees with jurisdiction over public health issues—the Senate Committee on Health, Education, Labor, and Pensions, and the House Committee on Energy and Commerce—FDA's assignment within the appropriations committees reflects its origin as part of the Department of Agriculture. The Senate and House appropriations subcommittees on Agriculture, Rural Development, FDA, and Related Agencies have jurisdiction over FDA's budget, even though the agency has been part of various federal health agencies (HHS and its predecessors) since 1940. FDA's budget has two funding streams: annual appropriations (i.e., discretionary budget authority, or BA) and industry user fees. In FDA's annual appropriation, Congress sets both the total amount of appropriated funds and the amount of user fees that the agency is authorized to collect and obligate for that fiscal year. Appropriated funds are largely for the Salaries and Expenses account, with a smaller amount for the Buildings and Facilities account. The several different user fees, which account for 43% of FDA's total FY2016 program level, contribute only to the Salaries and Expenses account. The largest and oldest FDA user fee that is linked to a specific program was first authorized by the Prescription Drug User Fee Act (PDUFA, P.L. 102-571 ) in 1992. Appendix D presents the authorizing legislation for current FDA user fees, sorted by the dollar amount they contribute to the agency's FY2016 budget. After PDUFA, Congress added user fee authorities regarding medical devices, animal drugs, animal generic drugs, tobacco products, priority review, food reinspection, food recall, voluntary qualified food importer, generic drugs, biosimilars, and, most recently, outsourcing facilities (related to drug compounding) and some wholesale distributors and third-party logistics providers (related to pharmaceutical supply chain security). Each of the medical product fee authorities requires reauthorization every five years. Several indefinite authorities apply to fees for mammography inspection, color additive certification, export certification, and priority review vouchers. Recent Trends in Agency Funding Between FY2010 and FY2016, FDA's funding increased from $3.1 billion to $4.7 billion. Although discretionary appropriations increased by 16% over that time period, user fee revenue more than doubled. In FY2016, user fees account for 43% of FDA's total funding compared with 24% in FY2010. The President's FY2017 budget request was for a total program level of $4.826 billion, an increase of $81 million (+2%) from the FY2016 total program level of $4.745 billion (see Table 6 ). The FY2017 budget request includes $2.743 billion for budget authority, an increase of $15 million (+0.5%) compared to the FY2016 enacted level of $2.728 billion, and $2.084 billion for user fees, an increase of $66 million (+3%) compared to the FY2016 enacted level of $2.017 billion. In addition to the $2.084 billion in user fees from currently authorized programs, the President requested $202 million in as yet unauthorized fees to support export certification, food facility registration and inspection, food import, international courier, cosmetics, and food contact substance notification activities. With those proposed fees, the President's total user fee request was $2.286 billion, bringing the total program level request to $5.029 billion. The FY2017 request also included $75 million in new mandatory resources to support the Cancer Moonshot Initiative. Health Resources and Services Administration (HRSA)54 Agency Overview HRSA is the federal agency charged with improving access to health care for those who are uninsured, isolated, or medically vulnerable. The agency currently awards funding to more than 3,000 grantees, including community-based organizations; colleges and universities; hospitals; state, local, and tribal governments; and private entities to support health services projects, such as training health care workers or providing specific health services. HRSA also administers the health centers program, which provides grants to non-profit entities that provide primary care services to people who experience financial, geographic, cultural, or other barriers to health care. HRSA is organized into five bureaus (see text box below) and 10 offices. Some offices focus on specific populations or health care issues (e.g., Office of Women's Health, Office of Rural Health Policy), while others provide agency-wide support or technical assistance to HRSA's regional offices (e.g., Office of Planning, Analysis and Evaluation; Office of Regional Operations). As noted in the text box, the majority of HRSA's programs are authorized by the PHSA; others are authorized by the SSA. Additionally, Section 427(e) of the Federal Mine Safety and Health Amendments Act ( P.L. 95-164 ) authorizes the Black Lung Program, which supports clinics that provide services to retired coal miners and others. Recent Trends in Agency Funding HRSA funding increased from $8.1 billion in FY2010 to $10.8 billion in FY2016 despite a reduction in its discretionary appropriation during that time (see Table 7 ). Specifically, discretionary appropriations declined by about 17%, falling from $7.5 billion to $6.2 billion. Much of the decline in discretionary appropriations occurred because of the loss of discretionary appropriations for the National Health Service Corps (NHSC) and the elimination of the congressional earmark program that supported health care facility construction and renovation. The overall growth in HRSA's funding was primarily driven by increasing amounts from the CHCF, which more than offset the decline in discretionary funding. CHCF funding has partially supplanted (i.e., replaced) discretionary health center funding and has become the sole source of funding for the NHSC program, which has not received an annual discretionary appropriation since FY2011. With CHCF funding set to expire at the end of FY2015, Congress included two more years of CHCF funding in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA); see Table 7 and Appendix A . MACRA also extended funding for other HRSA programs that were established and initially funded by the ACA; notably, the Maternal, Infant, and Early Childhood Home Visiting Program and the Teaching Health Center Program. Indian Health Service (IHS)60 Agency Overview IHS provides health care for approximately 2.2 million eligible American Indians/Alaska Natives through a system of programs and facilities located on or near Indian reservations, and through contractors in certain urban areas. IHS provides services to members of 566 federally recognized tribes either directly or through facilities and programs operated by Indian Tribes or Tribal Organizations through self-determination contracts and self-governance compacts authorized in the Indian Self-Determination and Education Assistance Act (ISDEAA). The Snyder Act of 1921 provides general statutory authority for IHS. In addition, specific IHS programs are authorized by two acts: the Indian Sanitation Facilities Act of 1959 and the Indian Health Care Improvement Act (IHCIA). The Indian Sanitation Facilities Act authorizes the IHS to construct sanitation facilities for Indian communities and homes; and IHCIA authorizes programs such as urban health, health professions recruitment, and substance abuse and mental health treatment, and permits IHS to receive reimbursements from Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), the Department of Veterans Affairs (VA), and third-party insurers. As discussed earlier, IHS receives its appropriations through the Interior/Environment appropriations act. IHS funding is not subject to the PHS set-aside. Recent Trends in Agency Funding IHS's funding, which includes discretionary appropriations and collections from third-party payers of health care, increased between FY2010 and FY2016 from $5.1 billion to $6.2 billion (see Table 8 ). This increase was driven both by increased discretionary appropriations, which rose from $4.1 billion to $4.8 billion, and by increased collections, which rose from $891 million to $1.1 billion. Much of the funding increase was used to support clinical services. Discretionary appropriations, in particular, have increased funding for purchased/referred care, a subset of the clinical services budget line that applies to funds used to refer patients to an outside provider when the IHS cannot provide a service within its system. Funding allocated for contract support costs has also increased since FY2014. Contract support costs are funds that Indian Tribes and Tribal Organizations receive, in addition to operating funds, when they operate a facility or program under an ISDEAA contract or compact. According to the U.S. Supreme Court, these costs must be fully funded even if Congress does not appropriate sufficient funds to cover all tribes' contract support costs. According to IHS, beginning in FY2016, the amount allocated for contract support costs is sufficient for the contracts and compacts that IHS enters into. Given the ruling that stated that these are required costs, the President's Budget includes a proposal to reclassify contract support costs as a mandatory three-year appropriation. National Institutes of Health (NIH)66 Agency Overview NIH is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. Its activities cover a wide range of basic, clinical, and translational research, as well as research training and health information collection and dissemination. The agency is organized into 27 research institutes and centers, headed by the NIH Director. The Office of the Director (OD) sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The institutes and centers (collectively called ICs) focus on particular diseases, areas of human health and development, or aspects of research support. Each IC plans and manages its own research programs in coordination with the Office of the Director. The bulk of NIH's budget, about 81%, goes out to the extramural research community through grants, contracts, and other awards. The funding supports research performed by more than 30,000 individuals who work at more than 2,500 universities, hospitals, medical schools, and other research institutions around the country and abroad. A smaller proportion of the budget, about 11%, supports the intramural research programs of the ICs, funding research performed by NIH scientists and non-employee trainees in the NIH laboratories and Clinical Center. The remaining 6% funds various research management, support, and facilities' needs. NIH derives its statutory authority from the PHSA. Title III, Section 301 of the PHSA grants the HHS Secretary broad permanent authority to conduct and sponsor research. In addition, Title IV, "National Research Institutes," authorizes in greater detail various activities, functions, and responsibilities of the NIH Director and the institutes and centers. All of the ICs are covered by specific provisions in the PHSA, but they vary considerably in the amount of detail included in the statutory language. There are few time-and-dollar authorization levels specified for individual activities. Congress mandated a significant reorganization of IC responsibilities in the FY2012 Consolidated Appropriations Act ( P.L. 112-74 , Division F) by creating a new National Center for Advancing Translational Sciences (NCATS) and eliminating the National Center for Research Resources (NCRR). Activities relating to translational sciences from NCRR and many other ICs were consolidated in NCATS, and NCRR's other programs were moved to several other ICs and the OD. NIH gets almost its entire funding (99.5%) from annual discretionary appropriations. As shown in Table 9 , the annual LHHS appropriations act provides separate appropriations to 24 of the ICs, the OD, and the Buildings and Facilities account. One of the ICs (Environmental Health Sciences) also receives funding from the Interior/Environment appropriations act. In addition, NIH receives a mandatory annual appropriation ($150 million) for type 1 diabetes research. Recent Trends in Agency Funding Between FY1994 and FY1998, funding for NIH grew from $11.0 billion to $13.7 billion in nominal terms. Over the next five years, Congress doubled the NIH budget to $27.2 billion in FY2003. In each of these years, the agency received annual funding increases of 14% to 16%. Since FY2003, however, NIH funding has increased more gradually in nominal dollars. Funding peaked in FY2010 before declining in FY2011 through FY2013 with small increases in subsequent years. The NIH program level in FY2016 is $32.311 billion. For FY2017, the Obama Administration requests an NIH program level total of $33.136 billion, an increase of $825 million (2.6%) over FY2016. The FY2017 program level request includes $847 million in PHS set-aside funds and $1.825 billion in proposed new mandatory funding. The FY2017 request includes $755 million for the Vice President's Cancer Moonshot, of which $680 million is allocated for the National Cancer Institute, and $75 million would be transferred from NIH to FDA. Substance Abuse and Mental Health Services Administration (SAMHSA)68 Agency Overview SAMHSA is the lead federal agency for increasing access to behavioral health services. It supports community-based mental health and substance abuse treatment and prevention services through formula grants to the states and U.S. territories and through competitive grant programs that fund states, territories, tribal organizations, local communities, and private entities. SAMHSA also engages in a range of other activities, such as technical assistance, data collection, and workforce development. SAMHSA and most of its programs and activities are authorized under Title V of the PHSA, which organizes SAMHSA in three centers: Center for Substance Abuse Treatment (CSAT) Center for Substance Abuse Prevention (CSAP) Center for Mental Health Services (CMHS) Each center has general statutory authority, called Programs of Regional and National Significance (PRNS), under which it has established grant programs for states and communities to address their important substance abuse and mental health needs. PHSA Title V also authorizes a number of specific grant programs, referred to as categorical grants. SAMHSA's two largest grant programs are separately authorized under PHSA Title XIX, Part B. The Community Mental Health Services block grant falls within CMHS. The full amount of the Substance Abuse Prevention and Treatment block grant falls within CSAT, although no less than 20% of each state's block grant must be used for prevention. In addition to the three statutorily defined centers, SAMHSA's budget reflects a fourth category, "health surveillance and program support," for other activities such as collecting data, providing statistical and analytic support, raising public awareness, developing the behavioral health workforce, and maintaining the National Registry of Evidence-based Programs and Practices. The last comprehensive reauthorization of SAMHSA and its programs occurred in 2000 as part of the Children's Health Act, which also added "charitable choice" provisions allowing religious organizations to receive funding for substance abuse prevention and treatment services without altering their religious character. Since 2000, Congress has expanded some of SAMHSA's programs and activities without taking up comprehensive reauthorization. Although authorizations of appropriations for most of SAMHSA's grant programs expired at the end of FY2003, many of these programs continue to receive annual discretionary appropriations. Recent Trends in Agency Funding Over the past 10 years (FY2007–FY2016), SAMHSA's program-level funding has increased by 12%, from $3.3 billion to $3.7 billion. It has not, however, increased every year. For example, it decreased from FY2012 ($3.6 billion) to FY2013 ($3.4 billion) due to sequestration, then rebounded in FY2014 ($3.6 billion). Relative to FY2016, SAMHSA's FY2017 request would increase program-level funding by 16% (to $4.3 billion) while decreasing discretionary budget authority by 3% (to $3.5 billion); see Table 10 . It would make up the difference with increased PHS set-aside funds, increased PPHF transfers, and new mandatory funding proposed for FY2017 and FY2018. The proposed new mandatory funding would support three programs: (1) State Targeted Response Cooperative Agreements, which would aim to increase access to opioid addiction treatment by addressing the most commonly identified barriers to treatment; (2) Evidence-based Early Interventions, which would provide formula grants to states to support early interventions for individuals with serious mental illness; and (3) Cohort Monitoring and Evaluation of Medication-Assisted Treatment, which would evaluate addiction treatment outcomes with the goal of increasing effectiveness. Appendix A. Community Health Center Fund ACA Section 10503 established a Community Health Center Fund (CHCF) to provide supplemental funding for community and other health centers and the National Health Service Corps (NHSC). The law provided annual appropriations to the CHCF totaling $11 billion over the five-year period FY2011 through FY2015. Of that total, $9.5 billion was for health center operations and the remaining $1.5 billion was for the NHSC. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) appropriated two more years of funding to the CHCF. For both FY2016 and FY2017, MACRA provided $3.6 billion for health center operations and $310 million for the NHSC. CHCF funding has partially supplanted discretionary funding for the health center program and entirely replaced discretionary funding for the NHSC (see Table 7 ). Table A-1 shows the amounts appropriated to the CHCF for each fiscal year as well as the post-sequestration levels for FY2013-FY2015. As discussed earlier in this report, the FY2016 CHCF funding was not subject to sequestration. CHCF funds are awarded to the various types of health centers that are supported by the federal health center program. Those include community health centers and migrant health centers, as well as facilities that serve the homeless and residents of public housing. Sequestration of CHCF funding for community health centers and migrant health centers is capped at 2%, whereas CHCF funding for the other types of facilities (i.e., health centers for the homeless and for public housing residents) and for the NHSC is fully sequestrable at the applicable rate for nonexempt nondefense mandatory spending (see Table 2 ). Appendix B. Prevention and Public Health Fund (PPHF) ACA Section 4002 established the Prevention and Public Health Fund (PPHF), to be administered by the HHS Secretary, and provided it with a permanent annual appropriation . Under the ACA as originally enacted, PPHF's annual appropriation would increase from $500 million for FY2010 to $2 billion for FY2015 and each subsequent fiscal year. However, the Middle Class Tax Relief and Job Creation Act of 2012 amended the ACA by reducing the PPHF appropriation from FY2013 through FY2021 as part of a package of offsets to help cover the costs of the law. The PPHF annual appropriation is now $1 billion through FY2017, and thereafter will increase in increments to $2 billion for FY2022 and each subsequent fiscal year. The HHS Secretary is instructed to transfer amounts from the PPHF to agencies for prevention, wellness, and public health activities. The funds are available to the Secretary at the beginning of each fiscal year. The Administration's annual budget sets out the intended distribution and use of PPHF funds for that fiscal year. The Secretary determined the distribution of PPHF funds for FY2010 through FY2013. For FY2014 through FY2016, provisions in appropriations acts explicitly directed the distribution of PPHF funds, prohibiting the Secretary from making further transfers. As discussed earlier in the report, the PPHF appropriation is fully sequestrable at the applicable percentage rate for nonexempt nondefense mandatory spending (see Table 2 ). Sequestration is applied to the entire appropriation by the Secretary before funds are transferred to the agencies. The distribution of PPHF funds to HHS agencies for FY2010 through the FY2017 President's budget proposal is presented in Table B-1 . Further details regarding PPHF distributions to CDC and SAMHSA are provided in the respective agency budget tables in the body of this report. For FY2013, the Secretary transferred almost half of available PPHF funds to CMS for ACA implementation, as shown in Table B-1 . This transfer reduced the PPHF funds that had been initially allocated to CDC and other PHS agencies. Along with the sequestration of discretionary funding in FY2013, the loss of PPHF funds that year had a significant effect on CDC's budget. In determining the transfer of PPHF funds for FY2010 through FY2013, the Secretary funded a mix of pre-existing programs and activities, and programs and activities newly authorized under the ACA. In directing the distribution of FY2014, FY2015, and FY2016 PPHF funds, annual appropriations acts (and accompanying report language) in most cases funded pre-existing programs and activities. In some cases the PPHF contribution for FY2016 made up more than 50% of a program's total funding. Examples include CDC immunization grants to states (54%) and tobacco prevention activities (60%). The CDC Preventive Health and Health Services Block Grant and the lead poisoning prevention program received 100% of their FY2016 funding from the PPHF. Appendix C. Patient-Centered Outcomes Research Trust Fund ACA Section 6301(e) established the Patient-Centered Outcomes Research Trust Fund (PCORTF) to support comparative clinical effectiveness research at both HHS and the Patient-Centered Outcomes Research Institute (PCORI). The law provided annual funding to the PCORTF over the period FY2010-FY2019 from the following three sources: (1) annual appropriations; (2) fees on health insurance and self-insured plans; and (3) transfers from the Medicare Part A and Part B trust funds. Specifically, the ACA appropriated the following amounts to the PCORTF: (1) $10 million for FY2010; (2) $50 million for FY2011; and (3) $150 million for each of FY2012 through FY2019. In addition, for each of FY2013 through FY2019, the ACA appropriated an amount equivalent to the net revenues from a new fee that the law imposes on health insurance policies and self-insured plans. For policy/plan years ending during FY2013, the fee equals $1 multiplied by the number of covered lives. For policy/plan years ending during each subsequent fiscal year through FY2019, the fee equals $2 multiplied by the number of covered lives. Finally, transfers to PCORTF from the Medicare Part A and Part B trust funds are calculated by multiplying the average number of individuals entitled to benefits under Medicare Part A, or enrolled in Medicare Part B, by $1 (for FY2013) or by $2 (for each of FY2014 through FY2019). For each of FY2011 through FY2019, the ACA requires 80% of the PCORTF funds to be made available to PCORI, and the remaining 20% of funds to be transferred to the HHS Secretary for carrying out PHSA Section 937. Of the total amount transferred to HHS, 80% is to be distributed to AHRQ. Table C-1 shows the allocation of PCORTF funds through FY2017. Appendix D. FDA User Fee Authorizations

Within the Department of Health and Human Services (HHS), eight agencies are designated components of the U.S. Public Health Service (PHS). The PHS agencies are funded primarily with annual discretionary appropriations. They also receive significant amounts of funding from other sources including mandatory funds from the Affordable Care Act (ACA), user fees, and third-party reimbursements (collections). The Agency for Healthcare Research and Quality (AHRQ) funds research on improving the quality and delivery of health care. For several years prior to FY2015, AHRQ did not receive its own annual appropriation. Instead, it relied on redistributed ("set-aside") discretionary funds from other PHS agencies for most of its funding, with supplemental amounts from the ACA's mandatory Patient-Centered Outcomes Research Trust Fund (PCORTF). In FY2015 and FY2016, AHRQ received its own discretionary appropriation in lieu of set-aside funds, with the FY2016 level of $428 million below the FY2015 level of $443 million. The Centers for Disease Control and Prevention (CDC) is the federal government's lead public health agency. CDC obtains its funding from multiple sources besides discretionary appropriations. The agency's funding level has fluctuated in the past few years, with the FY2016 level of $11.8 billion above the FY2015 level of $11.2 billion. The Agency for Toxic Substances and Disease Registry (ATSDR) investigates the public health impact of exposure to hazardous substances. ATSDR is headed by the CDC director and included in the discussion of CDC in this report. The Food and Drug Administration (FDA) regulates drugs, medical devices, food, and tobacco products, among other consumer products. The agency is funded with annual discretionary appropriations and industry user fees. The FDA's funding level in FY2016 was $4.7 billion—above the FY2015 level of $4.5 billion—with user fees accounting for about 43% of FDA's total funding. The Health Resources and Services Administration (HRSA) funds programs and systems that provide health care services to the uninsured and medically underserved. HRSA, like CDC, relies on funding from several different sources. The agency's funding increased from $10.6 billion in FY2015 to $10.8 billion in FY2016. The Indian Health Service (IHS) supports a health care delivery system for Native Americans. IHS's funding, which includes discretionary appropriations and collections from third-party payers of health care, increased between FY2015 and FY2016 from $5.9 billion to $6.2 billion. Appropriations and collections both increased during that period. The National Institutes of Health (NIH) funds basic, clinical, and translational biomedical and behavioral research. NIH gets more than 99% of its funding from discretionary appropriations. Recent increases in NIH's annual appropriations have boosted its funding level to a new high of $32.3 billion in FY2016, compared to $30.3 billion in FY2015. The Substance Abuse and Mental Health Services Administration (SAMHSA) funds mental health and substance abuse prevention and treatment services. SAMHSA's funding, about 95% of which comes from discretionary appropriations, was approximately $3.6 billion in FY2015 and $3.7 billion in FY2016. This report is a new edition of an earlier product, which remains available: CRS Report R43304, Public Health Service Agencies: Overview and Funding (FY2010-FY2016). It will be updated with information on PHS agency funding for FY2017 once legislative action on appropriations for the new fiscal year is completed.

Introduction Quite commonly, reports on elementary and secondary school teachers begin with the rather obvious notion that the quality of instruction is critical to student learning. Decades of federal policymaking have been built on the premise that good pre-service preparation is an effective route to quality teaching and, ultimately, improved educational outcomes. Current policy continues this approach through provisions in Title II, Part A of the Higher Education Act of 1965 (HEA, P.L. 89-329, as amended). HEA Title II-A includes financial support and accountability provisions intended to improve programs that prepare teachers before they reach the classroom. Title II-A consists of two major components: (1) a competitive grant program that supports certain reforms in a small number of programs that prepare prospective teachers, and (2) reporting and accountability provisions that require states to track and report on the quality of all teacher preparation programs within their jurisdiction. The 115 th Congress has already taken steps to consider a reauthorization of the HEA. One comprehensive reauthorization bill, H.R. 4508 , which was ordered reported by the House Committee on Education and the Workforce on February 8, 2018, would repeal all provisions in Title II. Another comprehensive reauthorization bill introduced by the committee's ranking minority member ( H.R. 6543 ) would amend and extend Title II. The authorization of appropriations for Title II-A expired at the end of FY2011 and were extended for an additional fiscal year under the General Education Provisions Act. Along with many HEA programs whose authorizations have lapsed, Title II-A authorities have continued to be funded under a variety of appropriations legislation and continuing resolutions; most recently under P.L. 115-245 , which provides full-year FY2019 appropriations for the Department of Education (ED), among other agencies. Congressional action to reauthorize the HEA may continue going forward. This report provides a description of current programs and provisions in Title II-A and identifies a number of the key issues that may be part of the debate over the reauthorization of the HEA. The report begins with a discussion of the broader context within which this conversation might occur. Context Historically, pre-service teacher preparation in the United States has mainly occurred at institutions of higher education (IHEs). Thus, the federal effort in supporting such preparation has largely focused on traditional programs and schools of education housed in IHEs. The recent rise of alternative approaches to traditional teacher preparation programs has presented new challenges to long-standing federal policy in this area, particularly where accountability for program quality is concerned. Roots of Formal Teacher Training Since the early part of the 20 th century, most teachers in U.S. elementary and secondary schools have been prepared at programs operated by an IHE. Prior to that time, formal teacher training occurred in so-called normal schools , which trained high school graduates to become teachers. By the turn of the 20 th century, universities began to establish schools and colleges of education, in some cases through the incorporation of normal schools. Growth of teacher preparation programs and of schools of education at IHEs occurred with two associated developments: the professionalization of the teacher educator and the formalized split between the study of pedagogy and subject-matter disciplines. While English, science, and history departments stressed the importance of subject-area knowledge for teachers, the new leaders of the teaching profession in schools of education and teacher colleges stressed the importance of courses in pedagogy and passing related tests. In recent years, the split between training in the practice of teaching and acquisition of subject-matter expertise has widened with the rise of a lternative route s to teacher certification. These alternative approaches to traditional teacher preparation typically rely on candidate's a priori knowledge of the subject they will teach and focus mainly on training for classroom instruction and management. Current Landscape of Teacher Preparation Since enactment of the Higher Education Amendments of 1998 ( P.L. 105-244 ), HEA Section 205(d) has required the Secretary of Education to prepare an annual report for Congress and the public on the preparation of teachers in the United States. The Secretary's Tenth Annual Report is the most recent and contains data for the 2012-2013 academic year. Since publication of that report, select (and less comprehensive) data for subsequent years have been made available online. Providers, Programs, Participants, and Completers Data available online for the 2015-2016 academic year indicate that 2,106 teacher preparation providers offered 26,459 programs across the 50 states, the District of Columbia, and the U.S. territories and freely associated states. That year, these programs enrolled 441,439 teaching candidates and produced 159,598 program completers. The Secretary's Tenth Annual Report provides the most recent detailed national statistics on teacher preparation ( Table 1 ). In the 2012-2013 academic year, 2,171 teacher preparation providers offered 26,589 programs across the 50 states, the District of Columbia, and the U.S. territories and freely associated states. These programs enrolled 499,800 teaching candidates and produced 192,459 program completers. Among the 2,171 teacher preparation providers in the 2012-2013 academic year, 69% (1,497) were traditional providers, 22% (473) were alternative route providers based at IHEs, and 9% (201) were alternative route providers not based at IHEs. Among the 26,589 teacher preparation programs that year, 70% (18,514) were traditional teacher preparation programs, 20% (5,325) were alternative route teacher preparation programs based at IHEs, and 10% (2,750) were alternative route teacher preparation programs not based at IHEs. Among the 499,800 teacher candidates enrolled in the 2012-2013 academic year, more than 89% (447,116) were enrolled in traditional teacher preparation programs, more than 5% (25,135) were enrolled in alternative route teacher preparation programs based at IHEs, and nearly 6% (27,549) were enrolled in alternative route teacher preparation programs not based at IHEs. Five states prepared 35% of the 192,849 teacher preparation program completers in the 2012-2013 academic year, led by Texas (20,828 or 11%), New York (18,046 or 9%), California (11,080 or 6%), Pennsylvania (10,372 or 5%), and Illinois (8,534 or 4 %). Figure 1 displays the top 10 states for teacher preparation program completion by program type. New York led the nation in traditional teacher preparation program completion, accounting for 10% of all individuals who completed that type of program. Texas led the nation in completers of alternative routes, accounting for 16% of individuals completing an alternative route based at an IHE and 48% of those completing an alternative route not based at an IHE. Other Highlights from the Title II Reporting System The Secretary's Tenth Annual report reveals a number of interesting aspects of teacher preparation in the United States. Highlights include the following: The typical traditional preparation program requires 100 hours of supervised clinical experience and 600 hours of student teaching, while alternative route programs do not require such training. The two largest traditional teacher preparation programs enroll over 30,000 prospective teachers, and both are online programs: Grand Canyon University and the University of Phoenix. This is about 10 times the number of candidates who are enrolled at the next 10 largest programs combined. The large majority of enrollees in teacher preparation programs are white, non-Hispanic; such students comprise 74% of enrollees at traditional programs, 65% at alternative programs based at an IHE, and 59% at alternative programs not based at an IHE. Comparable figures for African-American enrollees are 18%, 16%, and 9%. The most common subject area of program completion in traditional programs is elementary education (42%), followed by special education (16%), early childhood education (13%), English/language arts (9%), and mathematics (7%). Alternative program completion follows a similar pattern. The national average scaled score was 14 percentage points above the average cut score : 74.4% versus 60.2%. Over 95% of candidates who took a state assessment passed the test. HEA Title II, Part A Title II-A of the HEA has two components: (1) a competitive grant program that provides funds to support the types of programs that Congress has identified as models to be replicated, and (2) reporting and accountability provisions that require the reporting of data on program characteristics, state standards for teacher licensing and certification, and information on the quality of teacher preparation. Teacher Quality Partnerships Title II-A of the HEA authorizes the Teacher Quality Partnership (TQP) program, which funds competitive grants to eligible partnerships involved in teacher preparation. According to the statute, the purpose of the TQP program is to improve the quality of prospective and new teachers by improving the preparation of prospective teachers and enhancing professional development activities for new teachers. The TQP program supports traditional pre-baccalaureate or fifth-year teacher preparation programs as well as teacher residency programs. In addition, it provides extra grant funding to support school leadership activities performed by TQP grantees. Each of these approaches is described in greater detail below. The TQP program has received annual appropriations in recent years of about $42 million, which supports grants to about two dozen partnerships. Among awarded TQP projects, roughly 30% are pre-baccalaureate/fifth year programs, 48% are residency programs, and 23% are of both types. Four teacher preparation programs were awarded a TQP grant in FY2016; 24 grants were awarded in FY2014, 12 were awarded in FY2010, and 28 were awarded in FY2009. No awards were made between FY2011 and FY2013. To be eligible for a TQP award, a partnership must include the following: a high-need local educational agency that includes either (1) a high-need school (or a consortium of high-need schools), or (2) a high-need early childhood education program; a partner institution of higher education; a school, department, or program of education within the partner institution; and a school or department of arts and sciences within the partner institution. TQP grantees are required to match 100% of their award amount with non-federal funds and coordinate their activities with other federally funded programs such as the Teacher Quality State Grants and the Teacher Incentive Fund (under Title II of the Elementary and Secondary Education Act). Pre-baccalaureate Preparation Grants are provided to implement a wide range of reforms in teacher preparation programs and, as applicable, preparation programs for early childhood educators. These reforms may include the following, among other things: implementing curriculum changes that improve and assess how well prospective teachers develop teaching skills; using teaching and learning research so that teachers implement research-based instructional practices and use data to improve classroom instruction; developing a high-quality and sustained pre-service clinical education program that includes high-quality mentoring or coaching; creating a high-quality induction program for new teachers; implementing initiatives that increase compensation for qualified early childhood educators who attain two-year and four-year degrees; developing and implementing high-quality professional development for teachers in partner high-need LEAs; developing effective mechanisms, which may include alternative routes to certification, to recruit qualified individuals into the teaching profession; and strengthening literacy instruction skills of prospective and new elementary and secondary school teachers. Teaching Residencies Grants are provided to develop and implement teacher residency programs that are based on models of successful teaching residencies and that serve as a mechanism to prepare teachers for success in high-need schools and academic subjects. Grant funds must be used to support programs that provide rigorous graduate-level course work to earn a master's degree while undertaking a guided teaching apprenticeship, learning opportunities alongside a trained and experienced mentor teacher, and clear criteria for selecting mentor teachers based on measures of teacher effectiveness. Programs must place graduates in targeted schools as a cohort in order to facilitate professional collaboration. Programs must also provide members of the cohort with a one-year living stipend or salary, which must be repaid by any recipient who fails to teach full time for at least three years in a high-need school and subject or area. School Leadership Grants are provided to develop and implement effective school leadership programs to prepare individuals for careers as superintendents, principals, early childhood education program directors, or other school leaders. Such programs must promote strong leadership skills and techniques so that school leaders are able to create a school climate conducive to professional development for teachers, understand the teaching and assessment skills needed to support successful classroom instruction, use data to evaluate teacher instruction and drive teacher and student learning, manage resources and time to improve academic achievement, engage and involve parents and other community stakeholders, and understand how students learn and develop in order to increase academic achievement. Grant funds must also be used to develop a yearlong clinical education program, a mentoring and induction program, and programs to recruit qualified individuals to become school leaders. Teacher Preparation Program Accountability In addition to authorizing the TQP program, Title II (Section 205) of the HEA also includes provisions meant to hold teacher preparation programs accountable. Under these provisions, states and IHEs that operate teacher preparation programs are required to report information on the performance of their programs. States must do so as a condition for receiving HEA funds. IHEs must do so if they enroll students receiving federal assistance under the HEA. IHEs must issue report cards to the state and to the general public. States must issue report cards to ED and to the general public. ED is required by the HEA to use state-reported information to issue an annual report on teacher qualifications and preparation in the United States. Much of the information presented in the "Context" section of this report was derived from the Title II reporting system authorized in Section 205. Section 207 of the HEA further requires states to establish criteria to evaluate teacher preparation programs, report the results of these evaluations for traditional and alternative route programs, and identify programs determined to be low-performing or at risk of being classified as low-performing. In 2014, the two most common criteria used by states to evaluate program quality were indicators of teaching skill (46 states) and pass rates on state credentialing assessments (41 states). Less commonly used criteria reported by states included improving student academic achievement (31 states), raising standards for entry into the teaching profession (29 states), increasing professional development opportunities (25 states), and increasing the percentage of highly qualified teachers (23 states). In 2014, 12 states and Puerto Rico reported teacher preparation programs that were low-performing or at-risk of low performance (at-risk). Of the 46 states and jurisdictions that did not identify any programs as low-performing or at-risk in 2014, 30 of those states and jurisdictions have never identified any programs as being low-performing or at-risk. A total of 45 programs were classified as low-performing or at-risk in 2014. Programs identified as low-performing or at-risk represented less than 3% of the total number of teacher preparation programs reported in 2014. Legislative Action On February 8, 2018, the House Committee on Education and the Workforce ordered reported the Promoting Real Opportunity, Success, and Prosperity through Education Reform Act ( H.R. 4508 ). Approved on a party-line vote, H.R. 4508 would make numerous amendments to the HEA, including the repeal of all current provisions in Title II. The ranking member of the committee introduced the Aim Higher Act ( H.R. 6543 ) on July 26, 2018. H.R. 6543 is also a comprehensive HEA reauthorization bill. It would retain and make amendments to current Title II provisions. These amendments include (1) changes to the TQP program (e.g., residencies would be for teachers or principals and grantees would be able to receive a second grant as long as the award's use does not mirror that of the first grant); (2) expansion of accountability provisions for institutions (e.g., report cards would have to be submitted by any preparation entity (not just IHEs) that receives any federal funds—not just HEA funds); (3) changes to accountability for states (e.g., criteria for designation of low-performing and at-risk programs would have to be developed with stakeholders); and (4) expansion of accountability for states (e.g., report cards would have to be submitted by states in order to receive funds under HEA and ESEA Title II; current law only refers to HEA funds). During the 115 th Congress, the Senate Committee on Health, Education, Labor and Pensions has held several hearings on HEA reauthorization, but has yet to introduce a bill that would amend Title II. On March 27, 2017, the President signed a resolution of congressional disapproval ( P.L. 115-14 ) nullifying regulations that had been issued in October 2016. The new regulations would have retained current reporting and accountability requirements and added three main elements: (1) clearer guidance on what constitutes a provider versus a program, (2) new post-program completion measures, and (3) additional penalties for poor performance. Reauthorization Issues Congress may continue to consider legislation that would reauthorize the HEA, including the provisions in Title II. Some of the issues that may receive consideration during this process include the following: the appropriate role for the federal government to play in supporting innovations and reforms for teacher preparation programs; the optimal mix of TQP authorized activities such as support for clinical practice, induction, mentoring, and pre-service assessment; and the extent to which current reporting and accountability provisions encourage program quality. Some argue that the current federal role in supporting teacher preparation is far too limited and that the current TQP program primarily amounts to supporting demonstration projects. This perspective asserts that a lot is known about what good teacher preparation looks like and that the federal role should be greatly expanded to support quality programs broadly. On the other hand, others argue that responsibility for teacher training should remain a state, local, and training institution endeavor and that the federal government should have no role in the support of standards for teacher preparation. In between these views, there is debate over the optimal mix of activities currently supported under the TQP program. Those who favor traditional routes to teaching would often like to see greater support for enhancements to those programs, including support for supervised clinical practice and assessments that must be passed prior to becoming a teacher. Those favoring alternative routes often want fewer restrictions on TQP partners (i.e., allowing nonprofit organizations to serve as primary, not just supplemental, partners) and want more emphasis placed in the TQP program on in-service supports such as induction and mentoring for teachers. Some argue for the expansion of federal policy around program quality and that current reporting and accountability provisions do not adequately hold teacher preparation programs to high standards. They cite as evidence the fact that less than 3% of programs have been identified as being low-performing and that three-fifths of the states have never identified a program in this manner. Some of those in favor of greater accountability want to see program evaluations based on outcome measures that are ultimately tied to student performance. On the other hand, others maintain that such accountability requirements should not be instituted at the federal level and that current reporting requirements already pose an unnecessary burden on state and local administrators.

Approximately 26,000 state-approved teacher preparation programs are in operation across the United States. Among these, about 70% are traditional teacher preparation programs—that is, they are contained within schools of education at institutions of higher education (IHEs). Of the remaining, alternative routes to teacher preparation, about two-thirds are based at an IHE and about one-third are operated independent of an IHE. The Higher Education Act of 1965 (HEA, P.L. 89-329, as amended), includes financial support and accountability provisions intended to improve the quality of teacher preparation programs. Specifically, Title II, Part A of the HEA consists of two major components: (1) a competitive grant program intended to support a select group of programs that prepare teachers, and (2) reporting and accountability provisions intended to track and improve the quality of all teacher preparation programs. Title II-A authorizes the Teacher Quality Partnership (TQP) program, which provides grants to about two dozen partnerships of teacher preparation programs and local educational agencies. The TQP receives annual appropriations of about $42 million. Title II-A also requires states (as a condition for receiving HEA funds) to report information on the performance of their teacher preparation programs and identify programs determined to be low-performing or at risk of low performance. This information is compiled by the Department of Education (ED), which annually issues a report on the quality of teacher preparation in the United States. The authorization of appropriations for Title II-A expired at the end of FY2011 and was extended for an additional fiscal year under the General Education Provisions Act. Along with many HEA programs whose authorizations have lapsed, Title II-A authorities were provided additional appropriations under a variety of appropriations legislation and continuing resolutions; most recently under P.L. 115-245, which provides full-year FY2019 appropriations for ED, among other agencies. The 115th Congress has considered legislation to reauthorize the HEA, including provisions in Title II, but has yet to do so. These efforts may resume in the 116th Congress. Some of the issues that may arise during this process that relate to Title II include consideration of the following: the appropriate role for the federal government to play in supporting innovations and reforms for teacher preparation programs; the optimal mix of TQP-authorized activities such as support for clinical practice, induction, mentoring, and pre-service assessment; and the extent to which current reporting and accountability provisions encourage program quality.

Most Recent Developments On January 22, the Senate passed H.R. 4986 , a revised version of H.R. 1585 , the FY2008 National Defense Authorization Act, thus clearing the bill for the President, who had vetoed the original version of the bill on December 28. The President vetoed the initial version because of one section which would allow victims of terrorist actions perpetrated by Saddam Hussein's regime to sue the current Iraqi government for damages in U.S. courts. The President said this provision would allow plaintiffs to tie up in lawsuits billions of dollars worth of Iraqi assets, thus hamstringing that country's efforts at economic reconstruction and political reconciliation. The revised defense bill, which would allow the President to exempt Iraq from the provision at issue, would authorize all but $215 million of the $696.4 billion that was the President's amended request for national defense-related funding in FY2008—the same amount as was authorized the vetoed bill. The only other differences between H.R. 1585 and H.R. 4986 were provisions added to the later bill that would make retroactive to January 1, 2008 a 3.5% pay raise for military personnel and the reauthorization of various bonuses, including enlistment and reenlistment bonuses. According to press reports, White House officials have said the President will sign the revised defense bill, H.R. 4986 . Lawsuits Against Terrorist States The section of H.R. 1585 to which the President objected is Section 1083, which would amend the Foreign Sovereign Immunities Act (28 U.S.C. 1602), the legislation that regulates the conditions under which foreign countries or their instrumentalities can be sued in U.S. courts. Section 1083 is based on a Senate floor amendment to H.R. 1585 sponsored by Senators Frank R. Lautenberg, Arlen Specter, and 20 others. Among the section's many provisions were one that would allow monetary claims against a foreign state for damages (including punitive damages), one that would nullify certain legal defenses currently available to a foreign government being sued, and one that would allow a claimant to freeze assets under U.S. jurisdiction of a state being sued, as soon as a suit was filed. The Administration contended that these provisions could result in billions of dollars in Iraqi funds being tied up by court proceedings, thus undermining efforts to rebuild Iraq and train Iraqi security forces. (For background on the issue, see CRS Report RS22094, Lawsuits Against State Supporters of Terrorism: An Overview , by [author name scrubbed], and CRS Report RL31258, Suits Against Terrorist States by Victims of Terrorism , by [author name scrubbed].) The revised version of the defense bill, H.R. 4986 , retained Section 1083 but added to it a provision that would allow the President to waive its application to Iraq, provided the waiver is in the national security interest and will "promote the reconstruction of, the consolidation of democracy in, and the relations of the United State with, Iraq," and provided that Iraq continues to be a reliable ally in combating international terrorism. Such a presidential waiver would expire 30 days after it is made, unless the President gives Congress written notice of the basis for the waiver. The revised Section 1083 also expresses the sense of Congress that the U.S. and Iraqi governments should negotiate compensation for meritorious claims based on terrorist acts by the Saddam Hussein regime against U.S. citizens or members of the U.S. armed forces if a presidential waiver under this section bars lawsuits for this purpose. Veto Impact on Military Pay and Bonuses Because the President signed the FY2008 Defense Appropriations Bill ( H.R. 3222 , P.L. 110-116 ) into law on December 26, the budget authority thus provided has been available for most ongoing Pentagon operations, notwithstanding the absence of a companion authorization bill. However, because legal authority for more than 20 enlistment and re-enlistment bonuses expired on January 1, 2008, the armed services have temporarily halted payments of those bonuses, pending enactment of authorizing legislation. New bonus agreements signed by the Army, Navy and Air Force on or after January 1, 2008 include an addendum which provides that, while the contracting service member will receive the bonus if and when it is legislatively authorized, payment is not guaranteed. The Marine Corps has suspended its use of bonuses altogether pending enactment of authorizing legislation, directing units to temporarily extend the current enlistments of Marines who intend to reenlist and who would be eligible for a reenlistment bonus. Also as a result of the delay in enacting a defense authorization bill, the basic pay of military personnel increased by 3% on January 1 rather than 3.5%, as was approved in the conference report on H.R. 1585 (and as has taken effect for civilian federal employees). The revised authorization bill, H.R. 4986 , would authorize the 3.5% pay raise and the various bonuses, retroactive to January 1. Pocket Veto or Regular2 House and Senate negotiators had filed the conference report on the initial version of the defense bill ( H.R. 1585 , H.Rept. 110-477 ) on December 6. The House adopted the conference report December 12 by a vote of 370-49. The Senate adopted it December 14 by a vote of 90-3, clearing the bill for the President. On December 28, Administration officials announced that the President would not sign the bill and that, since the House had adjourned, the bill thus would die as the result of a so-called "pocket veto." However, Democratic congressional leaders contended that Congress was not adjourned and, therefore, that the President could not invoke that procedure under the circumstances. The Constitution provides that, once a bill is passed by Congress and sent to the President, if he neither (a) signs the measure nor (b) vetoes it and returns it to Congress within 10 days (not counting Sundays), then the bill will become law without his signature, "unless the Congress by their adjournment prevent its return, in which case it shall not be a law" (Article I, Section 7, Clause 2). This last contingency was first referred to in 1812 as a "pocket veto." The practical significance of the issue is that, while Congress can try to override a regular veto with a two-thirds majority in each chamber (thus enacting the vetoed legislation over the President's objection), it has no recourse in the case of a pocket veto except to pass a new bill. For decades, a constitutional debate has been underway over whether the President can exercise the pocket veto after an adjournment between the two sessions of a Congress or only after the adjournment at the end of a two-year Congress. Congress has adopted various procedures to designate agents to whom the President could return a vetoed bill during an inter-session adjournment, thus appearing to provide an opportunity for Congress to try to override the veto. However, several recent presidents, including George W. Bush and William J. Clinton have argued that none of those devices block the use of a pocket veto during an adjournment within a two-year Congress. In the case of H.R. 1585 , a White House spokesman told reporters December 31 that the Administration regarded Congress as being in a state of adjournment and, thus, that the defense authorization bill would die by pocket veto at midnight that date. However, the President also returned the bill to the House accompanied by a "Memorandum of Disapproval," stating his reasons for withholding approval of the bill. This so-called "protective return" procedure—both invoking the pocket veto power and returning the bill to Congress—has been used by previous Administrations in similar circumstances. After the House reconvened in January, it committed the vetoed defense bill, H.R. 1585 , and the President's accompanying "Memorandum of Disapproval" to the House Armed Services Committee, thus upholding the constitutional position that the House did not acknowledge that the President's action was a pocket veto. On January 16, Armed Services Chairman Ike Skelton then introduced the new bill, H.R. 4986 , consisting of the text of the vetoed bill with the changes required to address the issues of Section 1983 and the need to make the pay raise and bonus authorities retroactive. On the same day, the revised bill was passed by the House 369-46 under suspension of the rules, a procedure requiring a two-thirds majority to pass the bill. The Senate passed the bill January 22 by a vote of 91-3, thus clearing the bill for the President. FY2008 Defense Funding Status On November 13, the President signed into law the conference report on the FY2008 Defense Appropriations bill ( H.R. 3222 , P.L. 110-114 ), which would provide $460.3 billion in new budget authority for activities of the Department of Defense. The House had approved the compromise version of the bill November 8 by a vote of 400-15 and the Senate adopted it by voice vote the same day. In general, the appropriations bill funds only DOD's base budget—its activities other than the conduct of ongoing military operations in Iraq and Afghanistan. The only exception to that rule is the conference report's inclusion of $11.6 billion to purchase Mine-Resistant, Ambush-Protected (MRAP) vehicles, which are designed to better protect their occupants against land-mines than conventional vehicles. The conference report also includes a continuing resolution that would allow federal agencies to continue operating, through December 14, 2007, even if their regular appropriations bills for FY2008 have not been enacted. Because none of the regular FY2008 appropriations bills had been enacted by October 1, when the new fiscal year began, a continuing resolution ( H.J.Res. 52 ), passed by the House September 26 by a vote of 404-14 and by the Senate September 27 by a vote of 94-1, provided for continued funding the government through November 16. Funding for DOD under that continuing resolution is based on the amount appropriated in the FY2007 DOD Appropriations Act ( P.L. 109-289 ), which funded both the DOD base budget and a so-called bridge fund of $70 billion to pay for war costs in the opening months of the fiscal year. H.J.Res. 52 also provided an additional $5.2 billion to purchase MRAP vehicles. Neither the House-passed nor the Senate-passed versions of H.R. 3222 addressed the President's request to fund ongoing military operations in Iraq and Afghanistan in FY2008, which will be dealt with in a separate bill. Budget amendments in July and October increased the President's initial request for $141.7 billion to cover war-fighting costs in FY2008 to $189.3 billion. On November 14, by a vote of 218-203, the House passed H.R. 4156 , a bill that would provide $50 billion to cover war costs pending congressional action early next year on the balance of the President's request. The bill also would require DOD to begin withdrawing U.S. forces from a combat role in Iraq and would set a non-binding goal of removing U.S. forces in that country from all but a few supporting roles by December 2008, for which reason the President said he would veto the bill . On November 16, the Senate rejected a motion to end debate on the H.R. 4156 by a vote of 53-45 (with 60 votes required to invoke cloture). Earlier the same day, the Senate rejected by a vote of 45-53 a cloture motion relating to a Republican-sponsored bill, S. 2340 , that would provide $70 billion for war costs with no limitations on U.S. deployments. House-Senate conferees also have agreed on a conference report to the FY2008 Military Construction and Veterans Affairs appropriations bill ( H.R. 2642 / S. 1645 ) that includes $21.4 billion for DOD military construction and family housing programs. However, the agreement on that bill was incorporated into the conference report on H.R. 3043 , the FY2008 Labor, HHS and Education appropriations bill. The House approved the combined conference report November 6 by a vote of 269-142, but the Senate rejected it November 7 on a point of order. (For full coverage, see CRS Report RL34038, Military Construction, Veterans Affairs, and Related Agencies: FY2008 Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].) Overview of Administration FY2008 Budget Request On February 5, 2007, the White House formally released to Congress its FY2008 federal budget request, which included $647.2 billion in new budget authority for national defense. In addition to $483.2 billion for the regular operations of the Department of Defense (DOD), the request includes $141.7 billion for continued military operations abroad, primarily to fund the campaigns in Iraq and Afghanistan, $17.4 billion for the nuclear weapons and other defense-related programs of the Department of Energy, and $5.2 billion for defense-related activities of other agencies. (Note: The total of $647.2 billion for national defense includes an adjustment of -$275 million for OMB scorekeeping. DOD figures for the base budget do not add to the formal request in OMB budget documents.) The requested "base" budget of $483.2 billion for DOD—excluding the cost of ongoing combat operations—is $46.8 billion higher than the agency's base budget for FY2007, an increase of 11% in nominal terms and, by DOD's reckoning, an increase in real purchasing power of 7.9%, taking into account the cost of inflation. In requesting an additional $141.7 billion to cover the anticipated cost for all of FY2008 of ongoing operations in Iraq and Afghanistan, the Administration has complied with Congress's insistence that it be given time to subject that funding to the regular oversight and legislative process. Nevertheless, since the Administration has requested that these funds be designated as "emergency" appropriations, they would be over and above restrictive caps on discretionary spending, even though the FY2008 combat operations funding request of $141.7 billion is 29% as large as the regular FY2008 DOD request. On July 31, the Administration increased its request for DOD war-fighting costs in FY2008 by $5.3 billion to procure MRAP vehicles. On October 22, the Administration increased its war-costs request by an additional $42.3 billion, bringing the total to $189.3 billion. Status of Legislation Congress began action on the annual defense authorization bill with the House Armed Services Committee approving its version of the bill ( H.R. 1585 ) in a session that began May 9, and with House passage on May 17. The Senate Armed Services Committee marked up its version, S. 567 , on May 24 and reported the measure as a clean bill ( S. 1547 ) on June 5. Facts and Figures: Congressional Action on the FY2008 Defense Budget Request The following tables provide a quick reference to congressional action on defense budget totals. Additional details will be added as congressional action on the FY2008 defense funding bills proceeds. Table 3 shows the Administration's FY2008 national defense budget request by budget sub-function and, for the Department of Defense, by appropriations title. The total for FY2007 also represents, in part, requested funding. It includes $93.4 billion in FY2007 supplemental appropriations that the Administration requested in February 2007. In May, however, Congress actually approved $99.4 billion for the Department of Defense, $6.0 billion more than the Administration had asked for. Table 4 shows the recommendations on defense budget authority and outlays in the House and Senate versions of the annual budget resolution, H.Con.Res. 99 and S.Con.Res. 21 . These amounts are not binding on the Armed Services or Appropriations committees. Table 5 shows congressional action on the FY2008 defense authorization bill by title. Technically, this table shows the budget authority implications of the provisions of the bill. For mandatory programs, the budget authority implication is the amount of budget authority projected to be required under standing law. The table also follows the common practice of the House and Senate Armed Services Committees, which is to show as the "budget authority implication" of the bill, the amounts expected to be available for programs within the national defense budget function not subject to authorization in the annual defense authorization bill. Except for some mandatory programs, the authorization bill does not provide funds but rather authorizes their appropriation. Appropriations bills may provide more than authorized, less than authorized, or the same as authorized, either in total or for specific programs. Appropriations bills may provide no funds for programs authorized and may provide funds for programs not authorized. In practice, defense appropriations bills often follow the amounts authorized, however. Table 6 shows congressional action on the FY2008 defense and military construction appropriations bills. The table does not show funding for defense-related activities of agencies other than the Defense Department, except for about $1.0 billion for the intelligence community. In particular, it does not include $17.4 billion requested for defense-related nuclear energy programs (nuclear weapons and warship propulsion) of the Energy Department. Table 7 shows House and Senate Appropriations Committee allocations of funds under Section 302(b) of the Congressional Budget Act, for defense and military construction/veterans affairs appropriations bills compared to allocations for other, non-defense bills. The "302(b)" allocations are a key part of the appropriations and budget process. A point of order holds against any bill that exceeds its 402(b) allocation. In recent years, appropriations have trimmed allocations for the defense appropriations bill, freeing up more money for non-defense appropriations. The effect on defense was mitigated by the available of emergency appropriations for defense. In effect, emergency appropriations for war costs have been used indirectly to finance higher non-defense appropriations. FY2008 Defense Budget Request and Outyear Plans: Questions of Affordability and Balance Several aspects of the Department's FY2008 budget request and its projected budgets through FY2013 raise questions about the affordability of DOD's plan as a whole and about the balance of spending among major elements of the defense budget. (1) DOD ' s funding plan for FY2008-FY2013, excluding the cost of military operations in Iraq and Afghanistan, projects that the department ' s base budget will increase in real purchasing power, after adjusting for inflation, by 8.0% between FY2007 and FY2008 and by another 3.5% in FY2009 before declining slightly over each of the following four years. But the tightening fiscal squeeze on the federal government may put strong downward pressure on the defense budget; and the unbudgeted funds needed for ongoing military operations abroad may compound the problem. The Office of Management and Budget (OMB), the Congressional Budget Office (CBO) and the Government Accountability Office (GAO) agree that the current mix of federal programs is fiscally unsustainable for the long term. The nation's aging population combined with rising health costs are driving an increase in spending for federal entitlement programs which, in turn, will fuel rising deficits compounded by a steadily increasing interest on the national debt. The upshot is that, if total federal outlays continue to account for about 20% of the GDP and federal revenues remain at about their current level, total federal spending on discretionary programs, in terms of real purchasing power, would have to be sharply reduced to meet the goal of a balanced federal budget by 2012 and then to cover the rising costs of Medicare, Medicaid and Social Security resulting partly from the retirement of baby boomers. To protect DOD from this fiscal vise, some have recommended that the defense budget (excluding the cost of ongoing operations in Iraq and Afghanistan) be sustained at 4% of GDP—a share of the national wealth that DOD last claimed in FY1994. But that proposal would have to overcome the thus far intractable political challenges of increasing federal revenues, reducing discretionary non-defense spending, and/or restraining the growth of entitlement costs. (2) Although the Administration has submitted a budget proposal to cover the cost of ongoing operations in Iraq and Afghanistan in FY2008 that is separate from its " base " budget request for the year, it may be difficult, as a practical matter, for Congress to subject the request for cost-of-war appropriations to the same oversight it applies to regular, annual defense spending requests. If the congressional defense committees mark up the FY2008 defense funding bills on their usual schedules, as the House and Senate Armed Services committees are doing with respect to the annual defense authorization bill, they will have had to review in less than four months both the President's $482 billion request for the base DOD budget and the additional $142 billion requested for operations in Iraq and Afghanistan. The burden may be compounded by the fact that the congressional defense committees may not have time-tested analytical tools with which to scrutinize the request for ongoing combat operations, as they do for reviewing the base budget. Moreover, for most of that four month period, Members of Congress, and the defense funding committees in particular, have been deeply preoccupied with debate over the Administration's FY2007 Emergency Supplemental Appropriations Bill ( H.R. 1591 ) to pay for combat operations in Iraq and Afghanistan, legislation that has become the vehicle for congressional efforts to reduce the involvement of U.S. troops in Iraq. In addition, since DOD does not include the forecast cost of ongoing operations in its projections of defense budget requests in future years, except for a $50 billion placeholder for FY2009 included in the FY2008 request, Congress has not been given a clear sense of how severely the federal government's overall fiscal squeeze may constrain future defense budgets. (3) DOD projects that its total budget will remain approximately constant, in real terms, from FY2009 through FY2013. But for years, most of the major components of the defense budget have shown a steady cost growth, in excess of the cost of inflation. Thus, the relatively flat defense budgets planned would have to accommodate other types of costs that also seem to be escalating almost uncontrollably, notably including (1) the rising cost of health care for personnel still on active service, retirees and their dependents, (2) operations and maintenance costs that have been increasing since the Korean War at an average of 2.5% per year above the cost of inflation, and (3) new weapons that are expected to dramatically enhance the effectiveness of U.S. forces, but which carry high price tags to begin with and then, all too often, substantially overrun their initial cost-estimates. (4) One of the most powerful drivers of DOD ' s internal cost squeeze, the steady increase in the cost of military personnel, would be compounded by the President ' s recommendation—in line with congressional proposals—to increase active-duty Army and Marine Corps end-strength. Between FY1999 and FY2005, the cost of active-duty military personnel, measured per-service-member, grew by 33% above inflation, largely because of congressional initiatives to increase pay and benefits. A large fraction of the increased cost is due to increases in retired pay and greatly expanded medical benefits for military retirees. This year, the Administration has proposed (and the congressional defense committees have urged for years) an increase in active-duty end-strength that would add 92,000 soldiers and Marines to the rolls, thus increasing the services' fixed costs by at least $12 billion annually (once the start-up costs of the policy have been absorbed). At the same time, the Navy and Air Force are cutting personnel levels to safeguard funds for weapons programs. The Air Force is cutting about 40,000 full-time equivalent positions and the Navy about 30,000. One issue is whether these cuts will be used, directly or indirectly, not to pay for Air Force and Navy weapons programs, but for Army and Marine Corps end-strength increases. (5) The Navy ' s ability to sustain a fleet of the current size within realistically foreseeable budgets may especially problematic. After years of criticism from Members of Congress who contended that the Navy was buying too few ships to replace vessels being retired, the service released in February a long-range shipbuilding plan that would fall just short of the Navy's current goal of maintaining a fleet of 313 ships. But the plan assumes that the Defense Department, which bought seven ships in FY2007 and is requesting the same number in FY2008, would buy between 11 and 13 ships in each of the following five years. The plan assumes that amount appropriated for new ship construction would rise from a requested $12.5 billion in FY2008 to $17.5 billion in FY2013 (in current-year dollars). Considering the fiscal demands likely to put downward pressure on future defense budgets, funding the Navy's plan may be challenging. But even if the Navy got the annual shipbuilding budgets it plans to request, it might not be able to buy all the ships it plans as quickly as it plans to do so, because of escalating costs and delays in some of the new types of ships slated to comprise the future fleet. In the past, Navy cost and schedule forecasts later proven to be overly optimistic have led to long-range shipbuilding plans that promised increases in shipbuilding budgets in the "out-years" that have not been realized. Unachievable shipbuilding plans may discourage the Navy and Congress from weighing potential tradeoffs between, on the one hand, construction of promising new designs and, on the other hand, building additional ships of types already in service and upgrading existing vessels. (6) The services ' plans to modernize their tactical air forces suffer from the type of excessive budgetary and technological optimism that also afflicts the shipbuilding plan. Roughly midway through a 40-year, $400 million effort to replace the post-Vietnam generation of Air Force, Navy and Marine Corps fighter planes with versions of the Air Force's F-22A, the Navy's F/A-18E/F, and the tri-service F-35 (or Joint Strike Fighter), the services' plans have been buffeted by escalating costs, slipping schedules and external budget pressures. In the case of the F-22A, this produced a current budget plan that will buy only 183 planes rather than the 381 the Air Force says it needs. Similarly, the Navy and Marine Corps have reduced the total number of F-35s they plan to buy from 1,089 to 680. Adjustments like this are easier to make with aircraft budgets that fund dozens of units annually costing tens of millions of dollars apiece than it is with shipbuilding budgets that fund a handful of units each year, many of which cost upwards of a billion dollars apiece. But while it may be easier for the services to deal with the consequences of optimistic tactical aircraft recapitalization plans than it is for the Navy to manage the shipbuilding program, there is a similar underlying problem. If the services' long-range plans assume budgets, costs, technical breakthroughs and production schedules that will not be realized, a service may delay and, ultimately, increase the cost of upgrades to planes already in service that will have to be kept combat-ready until the new craft are fielded: The military services accord new systems higher funding priority, and the legacy systems tend to get whatever funding is remaining after the new systems' budget needs are met. If new aircraft consume more of the investment dollars than planned, the buying power and budgets for legacy systems are further reduced to remain within DOD budget limits. However, as quantities of new systems have been cut and deliveries to the warfighter delayed, more legacy aircraft are required to stay in the inventory and for longer periods of time than planned, requiring more dollars to modernize and maintain aging aircraft. Issues in the FY2008 Global War on Terror Request13 For the seventh year of war operations since the 9/11 attacks, DOD originally requested $141.7 billion, 29% of the amount it is requesting for all routine DOD activity in FY2008. For the first time since the 9/11 attacks, the Administration has submitted a request for war funding for the full year to meet a new requirement levied in the FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 ). Since FY2003, Congress has funded war costs in two bills, typically a bridge fund included in the regular DOD Appropriations Act to cover the first part of the fiscal year and a supplemental enacted after the fiscal year has begun. On July 31, 2007, the Administration requested an additional $5.3 billion to purchase Mine Resistant Ambush Program vehicles (MRAPs), bringing the total to $147 billion for FY2008. On September 26, Secretary of Defense Robert Gates announced that the administration would be requesting an additional $42.3 billion. With those funds, the total request for FY2008 would be $189.3 billion, 14% above the FY2007 enacted level and 62% above the FY2006 enacted level. The Administration's original FY2008 Global War on Terror (GWOT) request of $141.7 billion is similar to its FY2007 funding request for FY2007 war costs with certain exceptions: funds are not included to support the higher troop levels announced by the president in January 2007 or to increase the size of the Army and Navy (included in the baseline) and lesser amounts are requested to train Afghan and Iraqi security force (see Table 8 ). In testimony, Secretary of Defense Gates characterized the FY2008 GWOT request as "a straightline projection for forces of 140,000 in Iraq" because funding for the surge is only included through September 30, 2007, the end of FY2007. In mid-September 2007, General Petraeus recommended and the President decided to extend the current troop increase of about 30,000 in Iraq for an additional four months in FY2008. On September 26, 2007, Secretary Gates announced that the Administration will be submitting a request for an additional $42 billion for war costs in FY2008, including about $6 billion for the extension of the troop surge. If troop levels were to fall further later in the year—as Secretary Gates recently suggested might occur—less funds might be needed. On September 26, 2007, the House passed H.J.Res. 52 , a continuing resolution to fund government operations temporarily until passage of the regular appropriations acts. That resolution includes funds for both DOD's baseline program and war costs, as well as the $5.3 billion requested for MRAPS in late July. Both the House and Senate are expected to pass a continuing resolution to fund FY2008 government operations before the end of the fiscal year on September 30, 2007. According to DOD, the original FY2008 war request includes $109.7 billion for Iraq and $26.0 billion for Afghanistan and other counter-terror operations. That request supports a total of 320,000 deployed personnel including 140,000 in Iraq and 20,000 in Afghanistan. DOD does not explain the difference between the 160,000 military personnel deployed in Iraq and in Afghanistan and the additional 160,000 deployed elsewhere supporting those missions. Additional FY2008 War Funding Request In testimony to the Senate Appropriations Committee, Secretary Gates announced some of the major elements that would be part of the Administration's new request had not yet been submitted. Table 8 below shows the additional amounts beyond the levels currently being considered by Congress. The main elements of the anticipated request reportedly will be $6.3 billion for operations (presumably to extend the surge for four months); $13.9 billion more for force protection including additional MRAPs; $8.9 billion more for reconstituting the force; $6.4 billion to enhance ground forces; $3.3 billion in emergency requests; $1.0 billion for military construction; $1.0 billion for training and equipping Iraq security forces; $.9 billion for military intelligence; and $.2 billion for coalition support and Commanders Emergency Response Program. Additional details are not currently available. At the Senate Appropriations Committee hearing on September 26, 2007, Senator Byrd stated that the committee expected DOD to submit detailed justification material for the new request. Congressional Action on Administration's War Requests Both the House and Senate include funds for DOD's war or Global War on Terror (GWOT) request in a separate title in their respective versions FY2008 authorization bills ( H.R. 1585 and S. 1547 ). The House passed its bill on May 17, 2007, and the Senate began consideration of the bill on July 9, 2007 , pulled the bill from the floor after several days of debate over Iraq amendments, and resumed consideration of the bill on September 17. House Appropriations Committee Chair Congressman Murtha has announced that the House will consider war funding in a separate bill. The timing of the FY2008 supplemental is unclear. The President has not formally submitted a request for the additional $42.3 billion that Secretary Gates announced in a Senate Appropriations Committee hearing on September 26, 2007. If H.J.Res. 52 , the continuing resolution passed by the House is enacted, then DOD's $5.3 billion request for 1,520 MRAPs would be funded. In its report on DOD's FY2008 Appropriation ( H.Rept. 110-279 ), the House Appropriations Committee deferred consideration of some $2.0 billion in DOD's baseline request to the GWOT bill on the grounds that these were war-related requests, a move that could increase the amount of emergency war funding. Authorizers Categorize "War" Funding Differently The House and Senate bills adopt different approaches to war funding. The House accepts DOD's designation of funds requested for GWOT and provides the full $141.7 billion requested while the Senate bill approves the full amount but transfers some $13.4 billion of the GWOT-requested funds to DOD's baseline program. Thus, the Senate-reported version—currently on hold after several days of floor consideration in July—provides $128.3 billion for GWOT, ostensibly a cut of some $13.4 billion to the GWOT request. In fact, however, almost all of the programs in DOD's GWOT request are included in the baseline program. The SASC report recommends the transfer from GWOT to the baseline program on the grounds that funds provided for military personnel, procurement, and military construction that are dedicated to "growing the force," and funds for weapon system upgrades that pre-date the Afghan and Iraq conflicts should both be considered part of DOD's baseline or regular program rather than valid war-related requirements. According to its report, the SASC transfers are intended to identify the full amount of funding for the expansion of the Army and Marine Corps that was originally justified by the Administration as a way to meet the need for more military personnel for the conflicts in Iraq and Afghanistan. Originally rationalized as a way to lengthen periods between deployments, it is now being proposed as a permanent long-term expansion of the Army and Marine Corps. The FY2008 GWOT request includes $4.1 billion for military personnel, $689 million in operating and maintenance costs, and $169 million for military construction to pay, equip and house an increase of 92,000 Army and Marine Corps troops by 2012. If the United States significantly decreases the number of troops in Iraq, it is not clear that the Army and Marine Corps would need to be larger unless additional large-scale deployments are anticipated for the future. The weapon system upgrades transferred by the Senate authorizers—for example, $515 million for upgrades to CH-47 Army helicopters, $1.4 billion for Bradley fighting vehicles, and $1.3 billion for Abrams tanks—are programs that were underway before 9/11 and could be considered part of the Army's ongoing modernization efforts. DOD also includes funds for these programs in its baseline request. DOD has argued that much of its war-related procurement request is for reconstitution or reset—the replacement of equipment that is expected to wear out sooner because of the stress of combat action. These replacements are typically upgraded versions rather than strictly replacements and hence contribute to modernization. At the same time as the SASC transfers GWOT funds to the baseline program, the Committee expresses some concern that growth in the size of the Army and Marine Corps may "come too late to impact the war in Iraq." Nevertheless, the SASC endorses the transfers to the base budget as a way to capture "integrated" costs and not obscure the "true cost that the actual end strength presents." Authorizers Shift Funds to Mine-Resistant Ambush Protected Vehicles The two authorizing bills largely endorse DOD's request with one major exception—both recommend an increase of $4.1 billion for Mine Resistant Ambush Protected Vehicles (MRAP), a troop transport vehicle considered to be more effective than uparmored HMMWVs in withstanding attacks from Improvised Explosive Devices (IEDs) and now deemed an urgent new war requirement. This increase would be offset by cuts to GWOT programs deemed of lower priority. On July 31, 2007—after the House and Senate authorizers reported—the Administration requested an additional $5.36 billion for MRAP—including testing and transportation as well as procurement costs—but did not propose any offsets from either DOD's baseline or GWOT requests. Although there appears to be widespread agreement that the MRAP is more effective against IED attacks, the vehicle is still undergoing operational testing and the first 100 vehicles produced failed testing. Testing is continuing on the original configuration and a second phase of testing is underway at Aberdeen Test Center for MRAP II that is to be capable of stopping explosively formed projectiles (EFPs), the newest threat in Iraq. About 200 vehicles are currently in theater. According to press reports, the services are planning a rapid expansion of production to meet a requirement estimated to be from 18,000 to 23,000 vehicles, enough to replace every uparmored HMMWV in theater. Several variants are being tested and as many as 20 contractors may compete for the large buy. Of the estimated requirement in theater, about 60% are slated for the Army and 30% for the Marine Corps. The Army and Marine Corps have not yet decided whether MRAPs are a long-term or temporary requirement. Administration Proposes More Funding for MRAP Vehicles On July 31, 2007, the Administration requested an additional $5.3 billion for the FY2008 Global War on Terror (GWOT) in order to purchase 1,520 Mine Resistant Ambush Protected (MRAP) vehicles and provide additional parts for other MRAPs already on order. According to the Administration, this would enable DOD to ramp up to the maximum feasible production rate and deliver about 8,000 vehicles in theater by May 2008. DOD is expected to request an additional $10 billion more for MRAPs. Currently, DOD has a total of about $4.3 billion in funding for MRAP vehicles and associated testing and support including some $3.2 billion in the FY2007 Supplemental (including $1.2 billion added by Congress) and a recently-approved $1.1 billion reprogramming of FY2007 funds. If the Administration's new request for FY2008 is approved, DOD would have a total of $10.2 billion for MRAP vehicles. DOD has not yet indicated the total number of MRAPs, presumably because the services have not yet decided the mix of the different variants undergoing testing to be purchased; current figures suggest that an individual MRAP would cost over $1 million apiece compared to about $350,000 for an uparmored HMMWV. Appropriations Action As passed by the House on August 5, 2007, the FY2008 DOD Appropriations Act, H.R. 3222 , does not address DOD's war request. House leaders plan to propose a separate bill at a later date. In their report, the House appropriators promises to address the following issues as part of its consideration of FY2008 war funding: Funding for additional C-17 transport aircraft (included in earlier supplementals but not considered a war cost by DOD); Funding for Mine Resistant Ambush Protected vehicles; Funding for additional Blackhawk MEDEVAC helicopters; Funding for the Global train and Equip Program, a new program to train foreign security forces facing insurgencies in countries other than Iraq or Afghanistan; Funding to enhance the readiness of stateside units in the strategic reserve that would be available for contingencies other than Iraq and Afghanistan; Shortfalls in funding for the Defense Health Program because of "efficiency" wedges included in DOD's request; Shortfalls in funding for Basic Allowance for Housing. The House appropriators did, however, defer some $2.0 billion in baseline requests to the war bill slated for September, characterizing some requests for ammunition, modifications and tactical vehicles as war rather than baseline requirements, a mirror image of Senate authorization action that transferred funds from DOD's war request to its baseline program. The actions by Senate authorizers and House appropriators underline one of the dilemmas in war funding that has continued for several years—how to distinguish between programs that are necessary because of war requirements and those that are dedicated to enhancing capabilities that DOD considers necessary to meet longer-term requirements, including potential future counter-insurgency struggles. One sign of this concern is the requirement by the HAC for a DOD report that outlines the assumptions underlying reset requirements to repair and replace war-worn equipment and explains "how recapitalization and upgrade requirements are related to war needs rather than ongoing modernization." Both the Senate authorizers and the HAC appropriators show concern about potential overlaps between war and baseline requirements, with the Senate authorizers concerned that DOD's definition of war costs is too broad and the House appropriators suggesting that DOD defined war requirements too narrowly. The HAC cut $2.0 billion from DOD's baseline request, arguing these items should be considered war-related. The items include: $180 million for special pay for language skills and hardship duty; $1.1 billion in procurement for heavy Army trucks and night vision devices, Marine Corps Unmanned Aerial Vehicles (UAV), upgrades to C-130 aircraft and war consumable, Hellfire missiles for Predator (armed) UAVs, Air Force ammunition and trucks; $500 million for the Global Train and Equip program, a program to equip and train foreign security forces other than Iraq or Afghanistan who face counter-insurgency threats; and $100 million for a "Rapid Acquisition Fund," intended to make it easier for DOD to procure urgently needed items. This $2.0 billion that the HAC proposes to transfer from DOD's baseline request to GWOT effectively frees up funding for other programs desired by the appropriators and makes it easier for DOD to cut $3.5 billion from the DOD request as is required by each appropriation committee to comply with the overall caps on discretionary spending set in S.Con.Res. 21 , the FY2008 Budget Resolution (see Table 4 ). Although DOD's GWOT request is also addressed in the budget resolution, the amount can be adjusted more easily than for DOD's baseline program. Other War-Related Provisions As part of its markup of the H.R. 3222 , the House appropriators include several general provisions related to war, several of which have been included in previous appropriations acts. These provisions include: a prohibition on spending any funds in the act to train foreign security forces who engage in gross violations of human rights (Sec. 8060); a requirement for separate budget justification materials for named operations costing more than $100 million (Sec. 8085); a requirement for written notification of the period of mobilization for all activated reservists (Sec. 8089); a provision prohibiting spending funds for permanent bases in Iraq or to control Iraqi oil resources (Sec. 8103); a 90% limitation on operation and maintenance obligations until DOD submits a report on contractor services; and a requirement that the cost of ongoing operations be included in the budget request; and a new requirement that DOD provide monthly reports of "boots on the ground," in Iraq and Afghanistan or military personnel deployed in-country. FY2008 GWOT Request In its original request, DOD's justification language and funding levels for the FY2008 GWOT request are almost identical to those included in its FY2007 Supplemental request in several categories such as military operations and reconstitution of war-worn equipment, citing the same force levels and the same examples. For example, DOD's request for $70.6 billion in FY2008 funds special pays, benefits, subsistence, the cost of activating reservists, and the cost of conducting operations and providing support for about 320,000 deployed military personnel serving in and around Iraq and Afghanistan assuming the same operating tempo as in FY2007. The original FY2008 GWOT request did not include the roughly $4 billion additional cost for the "plus-up" or increase of five Army brigades or about 30,000 troops announced by the president on January 10, 2007 completed in June 2007. The revised DOD request announced by Secretary Gates includes an additional $6.3 billion for operations, presumably to cover the costs of the retaining the additional five combat brigades in country in the first part of the year and then redeploying those forces home by July 2008. Should force levels decline later in the year—a decrease of 30,000 or five additional brigades was broached by Secretary Gates in mid-September and in testimony to the Senate Appropriations Committee—some of these additional funds might not be necessary. In July testimony, the Congressional Budget Office projected that a four-month surge as proposed by the President could cost about $10 billion between FY2007 and FY2010 and that a 12 month surge would cost about $22 billion. These estimates are substantially higher than DOD estimates because CBO assumed a greater number of support troops would be required than did DOD and CBO projected its cost estimates farther into the future. Congressional Action The House authorizers cut $881 million from DOD's $6 billion request for the Logistics Civil Augmentation Program, or LOGCAP, which provides base camp services on the grounds that a 14% increase was not justified given the fact that the FY2008 request is predicated on a straight-line projection from FY2007—without the temporary increase in military personnel this year. At the same time, the HASC added $401 million to the Military Personnel request to cover the cost of an additional 36,000 Army and 9,000 Marine Corps personnel suggesting that the committee expects the higher levels in FY2007 to persist. Reflecting readiness concerns, the HASC sets up a Defense Readiness Production Board whose mission is to identify critical readiness requirements. DOD is also given authority to use multiyear procurement contracts of up to $500 million authority for items deemed of critical readiness importance without statutory approval and even if DOD would not save money (Section 1701 to Section 1708, H.R. 1585 ). The bill also authorizes $1 billion for these purposes. The SASC transfers $4.1 billion from DOD's GWOT request in Title XV for higher Army and Marine Corps force levels adopted originally to meet OIF/OEF needs to the base budget, with the rationale that these increases or "over strength" are no longer appropriately considered temporary emergency expenses. The committee reduces the DOD O&M request from $72. 9 billion to $72.0 billion with the change reflecting a transfer of $712 million to the base budget to "grow the force." Broad Definition of Reconstitution or Reset As in FY2007, DOD is requesting $37.6 billion for reconstitution which appears to encompass a broader set of requirements than the standard definition of reset—the repair and replacement of war-worn equipment when troops and equipment are re-deployed or rotated. Within reconstitution, DOD includes not only equipment repair and replacement of battle losses and munitions, but also replacement of "stressed" equipment, upgrading of equipment with new models, additional modifications, and new or upgraded equipment as well an expansion of the supply inventory ($900 million) that assumes that currently high stock levels will need to be continued. Of the $37.6 billion reconstitution request, $8.9 billion is for equipment repair including $7.8 billion for the Army $1.3 billion for the Marine Corps, amounts similar to DOD's request in FY2007 and fairly similar to earlier DOD projections. The remaining $28.7 billion is for procurement. In a report to Congress in September 2006, DOD estimated that equipment replacement in FY2008 would be about $5.0 billion for the Army and about $500 million for the Marine Corps, levels substantially below the $21.1 billion for the Army and $7.2 billion for the Marine Corps requested for FY2008. This four-fold increase in Army and ten-fold increase in Marine Corps reconstitution requirements in FY2008 may reflect both an expanded definition of what constitutes war-related equipment replacement and a DOD decision to request more than one year's requirement in FY2008 as occurred in the FY2007 Supplemental where requirements were front loaded according to OMB Director, Rob Portman. With the exception of force protection equipment (much of which is funded in O&M), DOD appears to characterize all of its FY2008 war procurement request as reconstitution (see Table 9 ) including upgrades and replacement of current equipment that would normally considered part of peacetime modernization. With over $8 billion in war-related procurement funds from previous years still to be put on contract, Congress could choose to delay some of the items requested by DOD, as was the case in Congressional action on the FY2007 where some requests were deemed "premature" or not emergencies. The FY2008 war request may also reflect a response to the concerns of Service witnesses raised in testimony over the last year or two that Congress would need to appropriate funds for equipment replacement for two years after forces are withdrawn. In both FY2007 and FY2008, the services request includes replacement for various aircraft and helicopters—both battle losses and anticipated replacements for "stressed" aircraft. Under DOD's standard budget guidance, the services are only to request new major weapon systems for combat losses that have already been experienced unless they get specific approval for an exception, which appears to be the case for both the FY2007 and the FY2008 requests where the services have requested replacements for "stressed" aircraft rather than combat losses. In the case of the FY2008 request, particularly, DOD would not have information about combat losses. In response to congressional doubts, the administration withdrew its request for six new EA-18 electronic warfare aircraft and two JSF aircraft in the FY2007 Supplemental. Another issue is whether replacing older aircraft no longer in production with new aircraft just entering or scheduled to enter production is a legitimate emergency requirement since systems would not be available for several years. Under their expanded definition, DOD's request includes replacement of MH-53 and H-46 helicopters with the new V-22 tilt rotor aircraft, replacement of an F-16 with the new F-35 JSF, and replacement of older helicopters with the Armed Reconnaissance Helicopter, a troubled program not yet in production which the Army is considering terminating. In addition, the FY2008 request includes replacement of stressed aircraft with 17 new C-130Js, modification upgrades to C-130 aircraft, F-18 aircraft, AH-1W and CH-46 helicopters. Congressional Action With a few exceptions, the House authorizers supported the Administration's procurement request. The exceptions include the transfer of funds from various programs deemed lower priority to provide an additional $4.1 billion for the Mine Resistant Ambush program (see below) as well as cuts to the Air Force's F-35 and C130J aircraft requests and the Army's request for Armed Reconnaissance helicopters. On the other hand, the House added $2.4 billion for additional C-17 cargo aircraft that will keep the production line open, an issue raised in previous years. In its report, the SASC reduces GWOT funding for procurement from $36.0 billion to $28.3 billion including the following. $4.6 billion in transfers to the base budget; $1.9 billion in program cuts, primarily delays in troubled programs such as the V-22 (-$493 million), UH-1Y/Ah-1Z (-$123 million), and C-130J aircraft (-$468 million); and $4.7 billion in program adds, echoing House action by adding $4.1 billion for the Mine Resistant Ambush Program (MRAP), now a high priority because of its success in protecting soldiers against Improvised Explosive Devices (IEDs). The programmatic cuts also reflect committee questions about DOD's plan for rapid production buildups for these programs. The committee's transfer of procurement to the base budget may be designed to give greater visibility to the full spending on individual programs. Since most of DOD's FY2008 GWOT procurement request reflects anticipated replacement needs and upgrades rather than war losses, and with production lead times of two to three years, the committee may believe that the war-related connection for the requests are less clear. Force Protection Funding DOD's original FY2008 request includes about $11 billion in funding for force protection in both FY2007 and FY2008 primarily for body armor, armored vehicles, protecting operating bases and surveillance operations. The original FY2008 request is almost identical to FY2007 and includes: $3.5 billion to purchase an additional 320,000 body armor sets reaching a cumulative total of 1.7 million original and upgraded sets meeting 100% of total requirements as well as the new Advanced Combat helmet, earplugs, gloves and other protective gear; $7.0 billion for protection equipment and activities including munitions clearance, fire-retardant NOMEX uniforms, unmanned aerial vehicles, aircraft survivability modifications, route clearance vehicles; and funding for more uparmored HMMWVs ($1.3 billion), armored security ($301 million) and mine protection vehicles ($174 million); and $585 million for Mine-Resistant Ambush Protected Vehicles (MRAPs), a truck with a V-shaped hull which has proven effective against IEDs. There has been considerable controversy in Congress about whether DOD has provided adequate force protection in a timely fashion with Congress typically adding funds for more body armor, more uparmored HMWWVs, and other force protection gear. In the FY2007 Supplemental, Congress added $1.2 billion to DOD's request for the Mine Resistant Ambush Protected Vehicles (MRAP) providing a total of $3.0 billion. In response to this controversy, the Administration recently submitted an amended GWOT request for an additional $5.3 billion for MRAPS in order to ramp up production sooner (see discussion above). Congressional Action The House bill authorizes $4.6 billion for MRAPS, an increase of $4.1 billion over the request to be financed by taking funds from programs deemed lower priority such as a $1 billion transfer from Bridge to Future Networks, an upgraded command and communication support system that has experienced problems. In addition, the HASC requires DOD to submit reports every 30 days on MRAP requirements, contracting strategy, and other matters. Like the House, the SASC adds $4.1 billion to DOD's request for MRAP. At the same time, the committee raises concerns about the differences between the Army and Marine Corps MRAP strategies with the Army envisioning 1:7 replacements of MRAPS for uparmored HMMWVs and the Marine Corps 1:1 replacements. The SASC endorses most of DOD's force protection request and increases funding for night vision devices to meet an unfunded Army requirement. Questions Likely About Funding For Joint Improvised Explosive Device Defeat Fund In FY2008, DOD is requesting an additional $4.0 billion for the Joint Improvised Explosive Device Defeat Fund, similar to the FY2007 level, for a special new transfer account set up in recent years to coordinate research, production and training of ways to combat Improvised Explosive Devices (IEDs), the chief threat to U.S. forces. With the funding approved in the FY2007 Supplemental ( H.R. 2206 / P.L. 110-28 ), the Joint IED Defeat Fund would receive a total of $7.6 billion. If the FY2008 request is approved, the total would reach $12.1 billion, including both the $500 million in DOD's base budget and $4 billion in the GWOT request. Although Congress has been supportive of this area and endorsed DOD's request in the FY2007 Supplemental, both houses have raised concerns about the management practices of the Joint Improvised Explosive Device Defeat Organization (JIEDDO) including its financial practices, its lack of a spending plan, service requests that duplicate JIEDDO work, and its inability to provide specific information to Congress. In the original FY2007 Supplemental conference report, the conferees note that Congress "will be hard-pressed to fully fund future budget requests unless the JIEDDO improves its financial management practices and its responses" suggesting that the FY2008 request could be met with some skepticism. The FY2008 GWOT justification is almost identical to that for the FY2007 Supplemental. Congressional Action The House authorizers endorse DOD's request for an additional $4 billion for the Joint IED Defeat Fund included in the GWOT request. At the same time, the SASC also transfers $500 million funded in the base budget for that fund to Title XV classifying all JIEDD funds as war-related. In response to concerns raised by the GAO as well as the appropriators about the management of the funds, including duplication with service programs, lack of an overall strategy, and organizational structure, the SASC requires a management plan for the office from DOD within 60 days of enactment. The SASC also calls on the office to provide $50 million in funds and work with other DOD offices on blast injury research and treatment on medical responses to IEDs as well as requiring a report on these efforts by March 1, 2008. Oversight Concerns About Cost to Train and Equip Afghan and Iraqi Security Forces For training and equipping, the FY2008 GWOT request includes an additional $2.7 billion to expand Afghanistan's 31,000 man Army and 60,000 man police force and an additional $2.0 billion for more equipment and training for Iraq's 136,000 man Army and 192,000 man police force. Including the funds in the FY2007 Supplemental would bring the total to $19.2 billion for Iraq and $10.6 billion for Afghanistan. Although the FY2008 GWOT requests are considerably lower than the amounts requested for FY2007—$2 billion vs. $5.5 billion for Iraq and $2.7 billion vs. $7.4 billion for Afghanistan—Congress has voiced concerns about the progress and the total cost to complete this training. While the final version of the FY2007 supplemental dropped a House-proposal to set a 50% limit on obligations until various reports were submitted, OMB is required to submit report every 90 days on the use of funds and estimate of the total cost to train Iraq and Afghan Security forces within 120 days of enactment. The FY2007 Supplemental also requires that an independent organization assess the readiness and capability of Iraqi forces to bring "greater security to Iraq's 18 provinces in the next 12-18 months...." Congressional Action In the authorization act, the House endorses the funding request but requires various reports on progress in training Iraqi security forces within 90 days of enactment and every three months thereafter (Sec. 1225, Title XII) as well as requiring a report on progress toward security and stability in Afghanistan within 90 days of enactment (Sec. 1232, Title XII). Like the House, the SASC approves DOD's funding request but requires quarterly reports, prior congressional notification of transfers from the funds, and the concurrence of the Secretary of State for assistance provided from the Afghanistan Security Forces Fund or the Iraq Security Forces Fund. Coalition Support and Commanders Emergency Response Program In FY2008, DOD requests $1.7 billion for coalition support for U.S. allies like Pakistan and Jordan which conduct border counter-terror operations, and for the U.S. to provide lift to its allies. DOD also requests $1 billion for the Commanders Emergency Response Program (CERP) where individual commanders can fund small-scale development projects, in both cases funding levels similar to FY2007. While Congress has consistently supported the CERP program, it has voiced skepticism about the amounts requested for coalition support. In FY2007, for example, Congress has proposed cutting the Administration's request for $950 million to $500 million on the grounds that DOD has not defined the use of these funds for a new "Global train and equip" program authorized in FY2006. Congressional Action In H.R. 1585 , the House reauthorize CERP but do not set a funding limit on the program and do not address coalition support limits. Unlike the House, the SASC sets a $977 million cap for the Commanders' Emergency Response Program (CERP), DOD's request. The SASC also supports the $1.4 billion limit on coalition support to reimburse allies and a $400 million limit on "lift and sustain" funds to provide support services to nations supporting OIF and OEF operations as requested (see S. 1510 , Sec. 1532 and Sec. 1533). Military Construction Overseas and Permanent Basing Concerns For war-related military construction and family housing, DOD requests $908 million in FY2008 compared to $1.8 billion in FY2007. Although the funding level is lower than the previous year, the same concerns about permanent basing in Iraq continue to be voiced. Some of the FY2008 projects requested—such as building bypass roads, power plants and wastewater treatment plants in Iraq and providing relocatable barracks to replace temporary housing and constructing fuel storage facilities to replace temporary fuel bladders—have been rejected previously as either lacking sufficient justification. Although Congress approved most of the projects requested in the FY2007 supplemental, the FY2007 supplemental included a prohibition on obligating or expending any funds for permanent stationing of U.S. forces in Iraq. In the past, Congress has rejected projects similar to those requested in FY2008 as insufficiently justified or as implying some kind of permanency. Congressional Action In H.R. 1585 , the House reduces the FY2008 GWOT request for military construction by $212 million, rejecting utility projects such as power plants and wastewater collection facilities perceived as indicating a permanent presence. The House also extends the congressional prohibition on using funds for permanent basing in Iraq or to control Iraqi oil resources (Sec. 1222, H.R. 1585 ). The SASC approves all DOD's requests for projects in Iraq and Afghanistan but transfers $169 million requested for state-side projects to the base budget. Like the House, the SASC also extends the provision prohibiting the United States from establishing permanent bases in Iraq or taking control of Iraqi oil resources (Sec. 1531, S. 1547 ). In its appropriations bill, the House includes the same prohibition. Potential Issues in the FY2008 Base Budget Request Following is a brief summary of some of the other issues that may emerge during congressional action on the FY2008 defense authorization and appropriations bills, based on congressional action on the FY2007 funding bills and early debate surrounding the President's FY2008 budget request. Military Pay Raise. The budget request would give military personnel a 3% pay raise effective January 1, 2008, thus keeping pace with the average increase in private-sector wages as measured by the Department of Labor's Employment Cost Index (ECI). Some, contending that military pay increases have lagged civilian pay hikes by a cumulative total of 4% over the past two decades or so, have called for a 3.5% raise to close that so-called pay-gap. Defense Department officials deny any such pay-gap exists, maintaining that their proposed 3% increase would sustain their policy of keeping military pay at about the 70 th percentile of pay for civilians of comparable education and experience. Congress mandated military pay-raises of ECI plus ½% in FY2000-FY2006. But for FY2007, the Administration requested an increase of 2.2%, equivalent to ECI, and Congress ultimately approved it, rejecting a House-passed increase to 2.7%. Army and Marine Corps End-Strength Increases. The budget request includes $12.1 billion in the FY2008 base budget and an additional $4.9 billion in the FY2008 war-fighting budget toward the Administration's $112.3 billion plan to increase active-duty end-strength by 65,000 Army personnel and 27,000 Marines by 2013. Most of the additional personnel are slated for assignment to newly created combat brigades and regiments, which would expand the pool of units that could be rotated through overseas deployments, thus making it easier for the services to sustain overseas roughly the number of troops currently deployed in Iraq and Afghanistan. This recommendation marks a new departure for the Administration, which has resisted for several years calls by the congressional defense committees for such an increase in troop-strength. On the other hand, the proposal might be challenged by Members who wonder how the services, in a time of tightening budgets, will afford the roughly $13 billion annual cost of the additional troops. The proposal also might be opposed by Members skeptical of future extended deployments on the scale of the current missions in Iraq and Afghanistan. Tricare Fees and Co-pays. For the second year in a row, the Administration's budget proposes to increase fees, co-payments and deductibles charged retirees under the age of 65 by Tricare, the Defense Department's medical insurance program for active and retired service members and their dependents. The increases are intended to restrain the rapid increase in the annual cost of the Defense Health Program, which is projected to reach $64 billion by FY2015. The budget request also reduces the health program budget by $1.9 billion, the amount the higher fees are expected to generate. The administration contends that these one-time increases would compensate for the fact that the fees have not be adjusted since they were set in 1995. The Administration also is requesting a provision of law that would index future increases in Tricare fees to the average rate of increase in health care premiums nationwide. As was the case last year, the Administration proposal is vehemently opposed by organizations representing service members and retirees, which contend that the Defense Department has failed to adequately consider other cost-saving moves and that retiree medical care on favorable terms is appropriate, considering the unique burdens that have been borne by career soldiers and their dependents. Any future Tricare fee increases, some groups contend, should be indexed to increases in the Consumer Price Index (CPI) rather than to the much more rapid rise in health insurance premiums. Last year, Congress blocked the proposed fee increases for one year and established a study group to consider alternative solutions to the problem of rising defense health costs. That panel is slated to issue interim recommendations in May, 2007. National Guard Representation on the Joint Chiefs of Staff. A number of National Guard units have been stripped of equipment needed for other units deploying to Iraq, leaving the units at home ill-prepared either to train for their military mission or to execute their domestic emergency role as the agent of their state governor. Some Members of Congress and organizations that speak for the Guard contend that this situation reflects the regular forces' dismissive attitude toward Guard units, which should be counterbalanced by making the Chief of the National Guard Bureau a member of the Joint Chiefs of Staff, and elevating him to highest military rank—general (4 stars)—from his current rank of lieutenant general (3 stars). Congress has rejected these proposals before, but in March a congressionally chartered commission studying National Guard and reserve component issues endorsed the higher rank, while opposing the Joint Chiefs membership. National Guard Stryker Brigades. Governors, Members of Congress and National Guard officials from several states have called on Congress to equip additional Guard combat units with the Stryker armored combat vehicle, which currently equips five active-duty Army brigades and one National Guard brigade (based in Pennsylvania). Stryker brigades deployed in Iraq report the eight-wheeled armored cars to be rugged under fire and agile; and because they move on oversize tires rather than metal caterpillar tracks like the big M-1 tanks and Bradley troop carriers that equip some Guard units, Strykers would be more versatile in domestic disaster-response missions, since they could travel on streets and roads without tearing them up. Perhaps as important as the Stryker units' vehicular capability is the surveillance and information network that is part of a Stryker brigade. It cost about $1.2 billion to equip the Pennsylvania Guard unit as a Stryker brigade. Future Combat Systems. The FY2008 budget request contains $3.7 billion to continue development of the Army's Future Combat System (FCS), a $164 billion program to develop a new generation of networked combat vehicles and sensors that GAO and other critics repeatedly have cited as technologically risky. That critique may account for the fact that, last year, Congress cut $326 million from the Administration's $3.7 billion FY2007 request for the program. Ongoing operations in Iraq and Afghanistan also highlight the concern of some that FCS will be a more efficient way to fight the kind of armored warfare at which U.S. forces already excel while offering no clear advantage in fighting the sort of counter-insurgency operations that may be a major focus of U.S. ground operations for some time to come. Particularly because the FY2008 request includes the first installment of procurement money for FCS ($100 million), critics may try once again to slow the project's pace, at least for the more technologically exotic components not slated for deployment within the next five years. Nuclear Power for Warships. Congress may use the FY2008 bills to continue pressing the Navy to resume the construction of nuclear-powered surface warships. All U.S. subs commissioned since 1959 have had nuclear-powerplants because they give subs the extremely useful ability to remain submerged, and thus hard to detect, for weeks at a time. All aircraft carriers commissioned since 1967 also have been nuclear-powered ships. But because nuclear-powered surface ships cost significantly more to build and operate than oil-powered ships of comparable size, the Navy has built no nuclear-powered surface vessels since 1980, and has had none in commission since 1999. Proponents of nuclear power long have contended that this focus on construction costs has unwisely discounted the operational advantages of surface combatants that could steam at high speed for long distances, without having to worry about fuel consumption. In recent years, they have cited rising oil prices to argue that nuclear-powered ships may not be much more expensive to operate than oil-fueled vessels. In 2006, a Navy study mandated by the FY2006 defense authorization bill ( P.L. 109-163 , Section 130) concluded that nuclear power would add about $600 million to $700 million to the cost of a medium-sized warship, like the Navy's planned CG(X) cruiser, and that such a ship's operating cost would be only 0-10% higher than an oil-powered counterpart, provided crude oil costs $74.15 or more, per barrel (as it did a various times during 2006). Congress might add to the FY2008 bills provisions that would require certain kinds of warships to be nuclear-powered in the future. Alternatively, it might require the Navy to design both oil-powered and nuclear-powered versions of the CG(X), the first of which is slated for funding in the FY2011 budget. Littoral Combat Ships. Congress will closely scrutinize the Navy's most recent restructuring of its plan to bulk up the fleet with a large number of small, fast Littoral Combat Ships (LCS) intended to use modular packages of weapons and equipment to perform various missions. In FY2005-FY2007, Navy budgets funded six LCSs being built to two different designs by two contractors, Lockheed and Northrop Grumman. The Navy plans to select one of the two designs which would account for all the LCSs built beginning in FY2010. But in March 2007, responding to escalating costs in the first few LCS ships under construction, the Navy restructured the program, cancelling contracts for three of the ships already funded and reducing the number of LCS ships requested in the FY2008 budget from three to two. In the FY2008 defense bills, Congress might endorse the Navy's action, add funds for additional ships in FY2008, or take additional steps to ensure that LCS construction costs are under control before additional ships are funded. Virginia-Class Submarines. Members may try to accelerate the Navy's plan to begin in FY2012 stepping up the production rate of Virginia -class nuclear-powered attack submarines from one ship per year to two. Because of the scheduled retirement after 30 years of service of the large number of Los Angeles- class subs commissioned in the 1980 and 1990s, the Navy's sub fleet will fall short of the desired 48 ships (out of a total fleet of 313 Navy vessels) from 2020 until 2033. In addition to approving the Navy's FY2008 request for $1.8 billion to build a sub for which nuclear reactors and other components were funded in earlier years and $703 million for reactors and components that would be used in subs slated for funding in future budgets, Congress may add more so-called "long lead" funding for an additional sub for which most of the funding would come in FY2009 or FY2010. The Navy says it would need an additional $400 million down payment in FY2008 to make it feasible to fund an additional sub in FY2010. But Navy officials also argue that buying an additional sub before 2012 could throw future Navy budgets out of balance. F-35 (Joint Strike Fighter). Congress may reject the Administration's proposal to drop development of the General Electric F-136 jet engine being developed as a potential alternative to the Pratt & Whitney F-135 engine slated to power the F-35 Joint Strike Fighter. Congress has backed development of an alternate engine for the F-35 since 1996 and last year rejected the Administration's proposal to terminate the program, adding $340 million to the FY2007 defense funding bills to continue the alternate engine program. Defense Department officials, noting that they would save $1.8 billion by ending the alternate engine program, contend that because of improvements in the process of designing and developing jet engines, it would not be imprudent to rely on a single type of engine to power what likely will be the only U.S. fighter plane in production after about 2015. Many Members are skeptical of that argument, citing the poor reliability demonstrated in the late 1970s by the Pratt & Whitney F-100 engine that powered both the F-15 and F-16, a problem the caused Congress to mandate development of an alternative (GE-built) engine. Supporters of the dual engine approach also contend that competition between the two engine manufacturers produced significant savings in F-15 and F-16 engine costs, a claim disputed by some analyses. C-17 Production and C-5 Upgrades. There appears to be strong support in Congress for fielding a larger fleet of long-range cargo jets big enough to heavy Army combat gear than Defense Department plans would fund. As in past years, the result may be a combination of congressional actions that would (1) restrict the ability of the Air Force to retire older C-5A planes and (2) fund additional C-17 planes, beyond the 190 the Air Force plans to buy. In March 2006, the Defense Department's first "post 9/11" review of its long-range transportation needs concluded that the services' long-range airlift needs could be met, with acceptable risk, by the Air Force's plan to upgrade fleet of 109 C-5s (divided between "A" and newer "B" models) and to buy a total of 180 C-17s. Rejecting the department's analysis on several grounds, Congress barred retirement of any C-5s and added 10 C-17s to the FY2007 defense funding bills. The most conspicuous change in this issue since then has been the Administration's decision to enlarge the Army and Marine Corps, a move which, arguably, requires a larger airlift fleet. Air Force Tanker Procurement. The $315 million requested in FY2008 to develop a new mid-air refueling tanker to replace the Air Force KC-135s well into their fifth decade of service may become a vehicle for congressional action intended to bolster the position of either Boeing or the team of Northrop Grumman and Airbus, who are competing for the contract in a contest scheduled to be decided late in 2007. Immediately at issue is a contract for 179 refueling planes. But follow-on contracts may bring the number of planes ultimately purchased to 540. New Nuclear Warhead. Differences over the future role of nuclear weapons in U.S. national security planning may crystalize into a debate over the $119 million requested in the FY2008 national defense budget to continue development of a so-called Reliable Replacement Warhead (RRW), which is intended to replace warheads that were built in the 1970s and 1980s and have been kept in service longer than initially planned. That total includes $89 million for the National Nuclear Security Administration of the Department of Energy and $30 million for the Navy. The new warhead is intended to be easier to maintain than aging types now in service and to be deployable without breaking the moratorium on nuclear test explosions the U.S. government has observed since 1992. Supporters argue that RRW is needed because of concerns that maintenance of currently deployed warheads may prove increasingly difficult in the long term. On the other hand, critics of the RRW program contend that fielding new warheads of an untested type might build political pressure to resume testing eventually. Moreover, they contend, that the program to extend the service life of existing warheads without testing has proven successful for more than a decade and should become even more reliable because of advances in understanding of the physics of current weapons. Since the funds requested in FY2008 would allow the RRW program to cross a critical threshold, from design and cost analysis to the start of detailed development work, Members who want to rein in the program have a strong incentive to use the FY2008 funding bills to do it. Non-Nuclear Trident Missile Warhead. Months after Congress denied most of the $127 million requested in FY2007 to develop a non-nuclear warhead for the Trident long-range, submarine-launched ballistic missile, the administration has requested $175 million for the program in FY2008. The argument in favor of the program is that it would allow U.S. forces to quickly strike urgent or mobile targets anywhere in the world, even if no U.S. forces were located nearby. On the other hand, some skeptics of the program argue that the system would require precise, virtually real-time intelligence about targets that may not be available and that other countries—including some like Russia and China that are armed with long-range, nuclear-armed missiles—might misinterpret the launch of a conventionally-armed U.S. missile as an indication that they were under nuclear attack. Some Members may try to slow the program, as Congress did last year. Missile Defense Budget. If only because it is the largest acquisition program in the budget, the $8.9 billion requested in FY2008 for the Missile Defense Agency would draw close scrutiny because of the stringent budget limits within which the defense committees are working. But there also may be some efforts to cut that request that are rooted in the long-running debate that continues over how soon missile defense would be needed, and over the relative effectiveness of the many anti-missile systems under development. Efforts are likely to reduce funding for some of the more technologically challenging programs, such as the Airborne Laser (ABL), which has encountered several delays and for which the Administration has requested $549 million in FY2008. Another possible target for congressional cuts is the $300 million requested to begin work on a third anti-missile site in Eastern Europe. Touted by the Administration as a defense against a possible threat from Iran, the proposal to field anti-missile interceptors in Poland has been denounced by Russia. Revisiting BRAC . Because of well-publicized cases of inadequate care received by some Iraq War veterans at Walter Reed Army Medical Center, which is slated for realignment as one of the recommendations made by the 2005 Base Realignment and Closure (BRAC) Commission, and approved by President George W. Bush, critics of some other BRAC actions may be encouraged to try to slow or reverse those decisions. If successful, such efforts might unravel the entire base closure process, which was designed to prevent Members from politicking to save any one particular base from closure. Since 1989, the requirement that Congress and the President deal with each of the four sets of recommended closures as a package, on a "take it or leave it" basis, has highlighted the potential savings of the entire package of closures while preventing supporters of any one base from rounding up support for saving their site from closure on the grounds that, considered in isolation, closing it would save very little. But since the furor over Walter Reed has at least prompted some public calls for reconsidering that particular BRAC decision, critics of other closures may argue that changes in circumstance since 2005 require a re-look at other parts of the BRAC package. In addition, jurisdictions anticipating a large population influx as they acquire organizations formerly housed at installations being closed, may seek impact assistance to expand their transportation, utility, housing, and education infrastructures. Contract Oversight. Because of several recent cases in which high profile weapons acquisition programs have been hobbled by escalating costs and technical shortcomings, Members may want to review the management of individual programs and the evolution over the past decade or so of the Defense Department's acquisition management process with an eye toward using the FY2008 funding bills to strengthen the government's hand in dealing with industry. Secretary of the Navy Donald C. Winter and Chief of Naval Operations Adm. Michael G. Mullen have declared that the Navy intends to reclaim some of the authority over ship design it has ceded to industry and Members may look for ways to jump-start that effort as they deal with, for instance, the troubled Littoral Combat Ship (LCS) program. Similarly, Members intent on imposing congressional priorities on the Army's Future Combat System (FCS) may question the amount of managerial discretion the Army has vested in the Lead System Integrator: a private entity—in this case, a team of Boeing and SAID—hired to manage a large, complex program that consists of more than a dozen vehicles and sensors linked by a computer network. One rationale for the outsourcing to industry of management roles previously filled by Pentagon acquisition managers is that the Defense Department no longer has the in-house expertise needed to manage such complicated acquisitions. Some Members may want the Defense Department to come up with a long-term plan to restore enough in-house expertise to make the government a smarter customer. Bill-by-Bill Synopsis of Congressional Action to Date Congressional Budget Resolution Congress has completed, work on the annual congressional budget resolution, which includes recommended ceilings for FY2008 and the following four fiscal years on budget authority and outlays for national defense and other broad categories (or "functions") of the federal government. These functional ceilings are neither binding on the Appropriations committees nor do they formally constrain the authorizing committees in any way. But the budget resolution's ceiling on the so-called "050 function"—the budget accounts funding the military activities of DOD and the defense-related activities of the Department of Energy and other agencies—may indicate the general level of support in each chamber for the President's overall defense budget proposal. The House version of the budget resolution ( H.Con.Res. 99 ), adopted March 29, 2007, by a vote of 216-210 that broke basically along party lines, recommended for FY2008 a ceiling of $507 billion in budget authority for the 050 function and an additional allowance of $145 billion for "overseas deployments and other activities." Together, the two amounts add up to an overall ceiling on defense-related budget authority in FY2008 of $652 billion, essentially the amount the President requested. The House budget resolution also included non-binding policy recommendations that (1) opposed the Administration's request to increase retirees' medical fees and (2) called for a reduction in the administration's $9.8 billion budget request for missile defense. The Senate version of the budget resolution ( S.Con.Res. 21 ), adopted March 23 by a vote of 52-47 that basically followed party lines, recommended for FY2008 a ceiling on defense-related budget authority of $649 billion, slightly less than the total that was requested for both the regular FY2008 defense budget and the cost of operations in Iraq and Afghanistan. The conference report on the budget resolution ( S.Con.Res. 21 ) set budget authority ceilings of $507 billion for the 050 function and an additional $145 billion for overseas deployments in Iraq and Afghanistan. Appropriations designated as being necessary for overseas deployments in excess of $145 billion would be exempt from budget caps in the House. In the Senate, they would be subject to a point of order which could be waived by a supermajority of 60 votes. The conference report also accepted the House-passed provisions opposing the proposed increase in retirees' medical fees and calling for a reduction in the missile defense budget. Both chambers adopted the conference report on May 17, the House by a vote of 214-209 and the Senate by a vote of 52-40. FY2008 Defense Authorization: Highlights of the House Bill Operations in Iraq and Afghanistan Although the effort of some Members of Congress to force a withdrawal of U.S. troops from Iraq is one of the most contentious issues on the country's political agenda, the version of the FY2008 defense authorization bill passed May 17 by the House ( H.R. 1585 ) includes no provisions relating to any deadline for ending U.S. deployments in Iraq. However, the bill would require several reports on operations in Iraq and Afghanistan. The bill would require the top U.S. military commander in Iraq and the U.S. ambassador to provide Congress with a detailed assessment of the situation in that country covering various issues, including an assessment of Iraqi security forces and a review of trends in attacks by insurgents and Al Qaeda fighters on U.S. and allied forces. The bill also includes several provisions focused on operations in Afghanistan, including a requirement the Secretary of Defense send Congress a detailed plan for achieving sustained, long-term stability in that country. The bill also would require creation of a special inspector general to oversee U.S.-funded reconstruction efforts in Afghanistan, paralleling the office that has uncovered instances of waste and fraud in Iraqi reconstruction efforts. In addition, the bill would require the Government Accountability Office (GAO) to review the Joint Improvised Explosive Device Organization, created to coordinate efforts to neutralize roadside bombs and car bombs, which have been responsible for more U.S. troop fatalities in Iraq than any other factor. The bill also would cut from the military construction request $212 million for facilities such as powerplants and wastewater treatment plants which, the House Armed Services Committee said in its report on H.R. 1585 ( H.Rept. 110-146 ), implied an intention to continue U.S. deployments for a prolonged period. Other FY2008 Defense Budget Issues Some of the hundreds of changes the House made to the President's FY2008 defense request in H.R. 1585 reflect broader themes, some of which the House has struck in its action on earlier defense budget requests: The bill would fund the proposed expansion of the active-duty Army and Marine Corps and would compensate the troops more generously. After years of rejecting recommendations by many Members to increase the number of ground troops, the Administration has launched a plan to increase the permanent end-strength of the Army and Marine Corps by a total of 92,000 troops by 2012. H.R. 1585 would authorize the two services to accelerate the buildup, but would not require them to do so. In addition to funding that end-strength increase, the bill would increase military pay by 3.5%, instead of the 3.0% increase requested, and would bar for the second year in a row a proposed increase in medical care fees for retirees. It would mandate several actions intended to improve the quality of military medical care, particularly for service members in outpatient status. The bill incorporates the text of H.R. 1538 , the Wounded Warrior Assistance Act of 2007, passed by the House March 28, 2007, among the provisions of which are (1) requirements for more proactive management of outpatient service members, (2) requirements for regular inspections of housing facilities occupied by recovering service members and reports on other aspects of military medical care, and (3) a one-year ban on the privatization of jobs at any military medical facility. The bill would shore up current combat capabilities, in part with funds diverted from the budget request for technologically advanced weapons programs that promise increased military capability in the future. It would add funds to the requests for anti-missile systems designed to protect forces in the field from the sort of short-range and medium-range missiles deployed (or nearly deployed) by potential adversaries such as North Korea and Iran. At the same time, it would slice funding from the amounts requested for the Airborne Laser and for development of space-based anti-missile weapons, more innovative weapons intended for use against long-range missiles that those adversaries have not yet fielded. Similarly, it would cut several hundred million dollars from the request for the Army's Future Combat System program, targeting some of its more exotic elements, while adding funds to expand production of Stryker armored combat vehicles and Mine Resistant Ambush Protected (MRAP) troop carriers. It also would extend production of the C-17, long-range, wide-body cargo jet, adding funds for 10 more airplanes. The House bill would slow some acquisition programs to allow a more orderly process of setting their requirements and testing their effectiveness. For instance, the bill would require an operationally realistic test of the communications and sensor network that is essential to the Army's FCS program before the system goes into production. It also would defer production of a medium-range cargo plan, the Joint Cargo Aircraft, until the Pentagon completes a study of its requirement for aircraft of that type. In addition, the bill would slow development of a new troop carrier, slated to replace the High-Mobility, Multi-purpose, Wheeled Vehicle (HMMWV), until some of the technologies slated for use in the new vehicle are more mature. The bill also would slow some programs that might draw adverse international reactions. It would reduce funding for development of a new Reliable Replacement Warhead (RRW) and for construction of a new production facility for plutonium to be used in nuclear warheads, programs some have said would complicate U.S. efforts to bar the proliferation of nuclear weapons. It also would eliminate funding to deploy anti-missile interceptors in Europe, a plan to which Russia has objected. In addition, the bill would reduce funding for development of a non-nuclear warhead for Trident submarine-launched ballistic missiles, the launch of which—some critics warn—might be mistakenly interpreted as the launch of a nuclear attack. Some other highlights of H.R. 1585 include the following: Tricare Fee Freeze . As the FY2007 authorization bill did, this bill would bar for one year proposed increases in Tricare fees (including pharmacy fees). The House Armed Services Committee noted that a commission appointed to study alternative Tricare cost controls is not scheduled to complete its work until the end of the year. The bill also would authorize an increase in Tricare funding by $1.9 billion, the amount by which Pentagon officials reduced the Tricare budget request in anticipation of the higher fees. Health Care Improvements . The bill would create an initiative to improve care of service members suffering traumatic brain injury, which is a relatively frequent result of roadside bomb attacks on U.S. vehicles in Iraq. It also would allow the Navy to reduce its number of medical personnel by only 410, rather than the reduction of 900 the budget assumed. The bill also incorporates the provisions of H.R. 1538 , the Wounded Warrior Assistance Act of 2007, passed by the House March 28 which, among many other provisions, would do the following: mandate the assignment of case managers to outpatient service members and require regular reviews of their cases; create toll-free hotlines on which service members and their families can report deficiencies in military-support facilities; establish standardized training programs for Defense Department personnel engaged in evaluating wounded service members for possible discharge on grounds of disability; establish a separate fund to support the treatment of wounded or injured service members and their return to service or their transition to civilian life; mandate development of policies to reduce the likelihood that personnel in combat will experience post-traumatic stress disorder (PTSD) or other stress-related illnesses; require regular inspections of all living quarters occupied by service members recovering from wounds; and prohibit for one year any effort to convert jobs at a military medical facility from military to civilian positions. In addition, the bill would require a long-term longitudinal study of health and behavioral problems experienced by service members deployed in Iraq and Afghanistan. It also would require that the annual budget for Walter Reed Army Medical Center not be reduced below the level spent in FY2006 until replacement facilities are available to provide the same level of care provided at Walter Reed in that year. National Guard and Reserve Issues. The bill would elevate the chief of the National Guard Bureau, a position that currently carries with it the rank of lieutenant general, to the rank of general, and would designate that officer as an advisor to the Secretary of Defense and the Secretary of Homeland Security. However, the bill would not make the Guard Bureau chief a member of the Joint Chiefs of Staff, as some supporters of the National Guard have advocated. The bill also would authorize an addition of $1.1 billion to the $1.1 billion requested for equipment for the National Guard and reserve component forces, an increase intended to address equipment shortfalls. budget in order to fill Guard and reserve equipment shortages. The chief of the National Guard Bureau has estimated that, for the Guard alone, equipment shortfalls would cost $2 billion to fill. In addition, the bill would authorize the addition of $30 million to upgrade the engines on F-16s flown by National Guard squadrons. The bill also would require the Secretary of Defense to send Congress quarterly reports on the readiness of National Guard units to perform both their wartime mission and the domestic missions the would be called on in response to a natural disaster or domestic disturbance. It also would require the Army to submit to Congress a report on the desirability of equipping additional National Guard units with Stryker vehicles. Training. The bill would authorize an additional $250 million for training not covered by the budget request. The committee warned that the readiness of ground combat forces in particular was suffering because their training was focused heavily on the type of mission they would perform in Iraq and Afghanistan, rather than on the full spectrum of missions they might have to execute. Maintenance and Readiness . The bill would add to the budget request $165 million for additional major overhauls of ships, planes, vehicles and electronic equipment beyond what the budget would cover. It also would create a $1 billion Strategic Readiness Fund to allow the services to address equipment shortages that resulted in critical readiness shortfalls. To better focus attention on readiness problems, the bill would create a Defense Readiness Production Board to identify shortages of equipment or supplies anticipated to last for two years or longer. It also requires DOD to report the current readiness of ground forces and prioritize the steps that will be taken to improve the state of readiness. Special Forces Priorities. Several provisions of the bill reflect a concern by some Members that the services' special operations forces have been emphasizing "direct action" (efforts to kill or capture terrorists) at the expense of "indirect action" (training other countries' security forces and developing working relationships with them to help set conditions that inhibit the spread of terrorism). The bill would require the Special Operations Command to send Congress an annual report on its plan to meet its requirements for indirect action. It also would authorize additional funds for "irregular warfare support" research aimed at better understanding radical Islamist strategies and the cultures in which terrorists seek a foothold. Civilian Employees . The bill would change the rules governing so-called A-76 cost competitions to determine whether functions currently performed by federal employees should be contracted out to private companies. The House Armed Services Committee said that the changes, which would tend to advantage federal employees in such a contest, were needed to ensure a fair and balanced cost comparison. The bill also would require a recently created personnel system for civilian DOD employees to provide rights of collective bargaining and appeal rights which are provided by the civil service system. It also would impose limits on the new system's "pay for performance" compensation rules. Armored Troop Carriers. The bill would increase by $4.1 billion—to $4.6 billion—the amount authorized to equip Army, Marine Corps and Special Operations units with Mine Resistant Ambush Protected (MRAP) vehicles, shaped and armored to better protect troops from roadside bombs. It approved the requests for $2.3 billion to buy armored HMMWV vehicles and $1.1 billion for add-on armor to protect personnel in other vehicles from roadside bombs. Ground Combat Vehicles . The bill would cut $857 million from the $3.56 billion requested to continue developing the Army's Future Combat System (FCS), a networked set of ground vehicles, unmanned aircraft and sensors that would make up the next generation of ground combat equipment. FCS supporters contended that the cut would cripple the program; but proponents of the reduction contended that the cuts were aimed at more exotic components not slated to enter service for years, sparing elements of FCS that would be available sooner. The bill also approved the request for $4 billion to upgrade M-1 tanks and Bradley armored troops carriers currently in service. It would authorize $88 million of the $288 million requested for the Expeditionary Fighting Vehicle, a Marine Corps effort to develop a new amphibious combat vehicle, work on which has been suspended pending a DOD review. Communication Programs Slowed . The bill would cut $2.1 billion from the $2.6 billion requested for the Joint Network Node (JNN), an effort to develop for ground troops an internet-based mobile voice, video and data link that would be used pending development of a more ambitious communications network system designated Warfighter Information Network - Tactical (WIN-T). The House Armed Services Committee contended that JNN could not usefully absorb the amount requested. Moreover, the committee insisted that JNN, which had been launched as an interim system start managed under relatively informal procedures, begin to operate under the more demanding procedures applied to major systems purchases and that the procurement of future lots of the system by competed. The bill also would cut $102 million from the $222 million requested to develop the follow-on communication system, WIN-T. On the other hand, the bill authorized the $964 million requested to develop a satellite-based, long-range communications network linked by lasers. Combat Jets . The bill would authorize production 11 of the 12 F-35 tri-service fighters requested. It would use the $230 million thus saved from the $2.7 billion F-35 procurement request plus $250 million diverted from the $3.5 billion R&D request to continue development of an alternative jet engine, a project the budget would terminate. The bill also would authorize the amounts requested for 20 Air Force F-22 fighters ($3.2 billion, plus $744 million for R&D) and 18 EA-18Gs, which are electronic-jamming versions of the Navy's F/A-18E/F fighter ($1.3 billion, plus $273 million for R&D). It would authorize 33 of the 36 F/A-18E/Fs requested ($2.6 billion, a $182 million reduction from the request). Long-Range Cargo Jets. The bill would add to the budget $2.4 billion for 10 additional C-17 wide-body, long-range cargo jets. DOD's budget would have ended production of the planes, as would its FY2007 budget, which Congress also overrode to keep the C-17 production line running. In addition, the bill would repeal existing law that bars DOD from retiring any of its C-5 cargo jets. The bill would allow the Air Force to begin retiring older C-5s once the production of C-17s, plus remaining C-5s comprised a total long-range cargo fleet of 299 planes. Shipbuilding. The bill included a provision requiring that all new classes of cruisers, submarines and aircraft carriers be nuclear-powered, although the requirement could be waived in any case in which the Secretary of Defense determined it not to be in the national interest. The bill added to the budget request $1.7 billion for a San Antonio-class amphibious landing transport (in addition to the $1.4 billion requested for one of the ships), $400 million for a T-AKE class supply ship (in addition to the $456 million requested for one), and $588 million to buy the nuclear power plant and other components of an additional Virginia-class submarine, for which the bulk of the funds would have to be provided in a future budget (in addition to the $1.8 billion approved as requested for one sub and the $703 million requested for another set of long-leadtime sub components). The bill also authorized $711 million for two smaller warships, designated LCS, which is what the Navy wanted after it dropped from its FY2008 budget request funding for a third ship of the class because of escalating costs in construction of earlier ships of the type. The committee also directed the Navy to report on the underlying causes of the LCS cost-overruns and on steps that were being taken to prevent their recurrence. The bill also authorized the amounts requested to begin work on a nuclear-powered carrier ($2.7 billion), to complete two DDG-1000-class destroyers that were partly funded in the FY2007 budget and to buy components for use in future ships of this type ($2.8 billion), and to complete a helicopter carrier designed to support amphibious landings, some funds for which were provided in the FY2007 budget ($1.4 billion). Missile Defense . The bill would cut a total of $764 million from the $8.8 billion requested for the Missile Defense Agency. The largest cut in a single missile defense program was $250 million cut from the $548 million requested to continue development of an airborne laser (ABL). The bill also would cut $160 million from the $300 million requested to field in Eastern Europe a third cluster of anti-missile interceptor rockets. The cut would block construction of the planned launch silos in Poland. The bill also would authorize a total of $2.5 billion, slightly more than was requested, for Patriot and Aegis systems designed to protect U.S. forces and allies against short-range and medium-range missiles currently deployed by North Korea, Iran and many other countries. It would deny $10 million requested to begin development of space-based anti-missile interceptor missiles. Nuclear Weapons and Non-proliferation. The bill would cut $45 million from the $119 million requested to develop a new nuclear warhead—the Reliable Replacement Warhead (RRW)—to replace aging warheads current deployed. The House Armed Services Committee said it wanted to slow development of the new weapon pending a report on future U.S. nuclear weapons deployments, which the bill would create a blue-ribbon panel to prepare. The bill also would authorize $142 million of the $175 million requested to develop a non-nuclear warhead for the Trident submarine-launched missile. The committee wanted to defer production of the weapon pending study of how it would be used and how the risk could be minimized that launch of a conventionally-armed Trident would be misinterpreted as nuclear attack. Roles and Missions. The bill would require the Defense Department to review every four years the division of labor—the allocation of "roles and missions"—among the four armed services and other Pentagon agencies, identifying the "core competencies" of each service or agency. It also would make several changes in the Defense Department's long-range budget and weapons planning processes with the aim of ensuring that future weapons programs be given the go-ahead only if they met the requirements of an agreed-on mission and were to be used by an organization with the appropriate core competency to perform that mission. The bill also would direct the Secretary of Defense to decide whether or not to designate one of the armed services to manage all medium altitude and high altitude unmanned aerial vehicle (UAV) programs, for the sake of efficiency. Air Force officials have contended that their service should get that role, a move the other services have strongly opposed. Prospective Ban on Future Use of LSIs. The bill would prohibit the awarding of new contracts for any Lead System Integrator (LSI) on a major system, as of the start of FY2011. The bill would require the Secretary of Defense to send Congress by October 1, 2008, a plan to develop among government acquisition employees the skills needed to perform "inherently governmental functions" in managing major acquisition programs. Environmental Issues. The bill would require future periodic revisions of long-range national strategic plans to take account of the impact on U.S. interests of global climate change. The committee said that the strategic, social, political, and economic consequences of climate change could increase political instability in parts of the world. The bill also would require GAO to report on the extent to which the readiness of U.S. forces has improved as the result of several waivers from various environmental laws granted to the Defense Department. Defense Authorization: Highlights of House Floor Action House debate on H.R. 1585 , which began on May 16 and was concluded May 17, was governed by a rule ( H.Res. 403 ) that allowed consideration of 50 amendments covering a wide range of subjects. Iran Policy. The House rejected two amendments that would have restricted the use of funds authorized by the bill to plan or carry out military operations against Iran. An amendment by Representative Andrews of New Jersey that would have prohibited the use of funds authorized for the military operations in Iraq and Afghanistan to plan military operations in Iran was rejected by a vote of 202-216. An amendment by Representative DeFazio, rejected by a vote of 136-288, would have prohibited the use of funds authorized by the bill from being used for military action against Iraq unless (1) Congress specifically authorized such an attack or (2) there was a national emergency resulting from an Iranian attack on U.S. territory, forces or allies. Ballistic Missile Defense. The House also rejected (1) an amendment by Representative Tierney that would have cut an additional $1.1 billion from the $8.1 billion authorized for ballistic missile defense (rejected 127-299) and (2) an amendment by Representative Franks that would have added $764 million to the missile defense authorization (rejected 199-226). Immediately before it passed the bill, however, the House adopted by a vote of 394-30 a motion to recommit the bill to committee with instructions that it be amended to increase the missile defense authorization by $205 million for projects that would integrate U.S. and Israeli missile defense programs. A motion to "recommit with instructions" has the practical effect of an amendment. Guantanamo Detainees. An amendment by Representative Moran, requiring the Pentagon to report to Congress on the capacity of detention facilities at Guantanamo Bay, Cuba, and on the number and status of detainees at that facility, was adopted by a vote of 220-208. An amendment by Representative Holt requiring that the interrogation of detainees by military personnel be videotaped was rejected by a vote of 199-229. BRAC Consequences. An amendment by Representative Moran, specifically overriding the deadline set by the BRAC process for completing all job relocations resulting from the most recent round of base closures and realignments, would prohibit any movement of military or civilian personnel from leased office space in Arlington, Virginia to Fort Belvoir, Virginia until the secretary of the Army certifies to Congress that the necessary improvements have been made in the transportation infrastructure near the latter site. Following is a summary ( Table 10 ) of House action on selected amendments offered during floor action on H.R. 1585 . Administration Objections to the House Version of H.R. 1585 In a Statement of Administration Policy issued May 16, the Office of Management and Budget objected to several features of H.R. 1585 including the addition of funds for C-17 cargo planes and other systems not requested, the reduction in the amounts requested for the Army's FCS program and others systems, and the increase from 3% to 3.5% in the annual military pay increase. The Administration statement specifically warned that the President's senior advisers would recommend he veto the final version of the authorization bill if it included provisions in the House-passed bill that would restore some of the collective bargaining and grievance rights for DOD civilian employees that had been eliminated in a recently created personnel system. In the same terms, the statement warned of a veto if the final bill included provisions of H.R. 1585 that would tighten some existing restrictions and impose additional restrictions on the Defense Department's purchases from foreign companies. The statement, which was released before House passage of the bill, also warned of a veto if the House adopted amendments to the bill that would limit the Administration's options for dealing with Iran or with detainees at Guantanamo. It did not specifically say that a veto would be triggered by the amendments regarding Iran and Guantanamo that the House adopted. FY2008 Defense Authorization: Highlights of the Senate Armed Services Committee Bill The version of the FY2008 defense authorization bill reported June 5 by the Senate Armed Services Committee ( S. 1547 ) would trim $481.9 million from the President's budget, authorizing $648.3 billion. Unlike its House counterpart, however, the Senate committee shifted billions of dollars between those parts of the bill funding the Pentagon's "base budget"—its routine, peacetime expenses—and those parts funding current combat operations in Iraq and Afghanistan (namely, Titles XV and XXIX). Saying it wanted to clearly identify the cost of the war, the committee transferred from the cost-of-war sections of the bill to the base budget sections a total of $16 billion. Most of those funds are to cover procurement and military personnel activities associate with the planned expansion and modernization of the Army and Marine Corps over the next several years. On the other hand, the committee shifted from the base budget to Title XV nearly $4.7 billion to cover expenses it said should be attributed to the cost of war. That amount included $4 billion to accelerate production of MRAP vehicles intended to better protect troops against roadside bombs and $500 million (in addition to the $4 billion requested) for the Joint IED Defeat Organization (JIEDDO). The Senate committee's bill also would make $2.5 billion in cuts which, the panel said, would have no adverse impact on Pentagon operations. These reductions included the following. $1.6 billion based on the assumption that lower-than-anticipated inflation would result in lower-than budgeted costs; $682 million which, the committee said, agencies could offset with funds drawn from unobligated funds left over from prior appropriations; and $208 million intended to reduce the cash balances carried by the revolving funds that are used to operate several maintenance and other support activities. Operations in Iraq and Afghanistan Although the bill includes no provisions calling for the withdrawal of U.S. forces from Iraq, it would require reports on several aspects of the U.S. involvement in that region. One provision would expand the scope of a provision of the John Warner National Defense Authorization Act for Fiscal Year 2007 that requires the Pentagon to report to Congress the estimated cost of "resetting" Army units that have been deployed in Iraq of Afghanistan. The new provision would require that report to include the cost of resetting the additional units deployed in recent months as part of the troop "surge." Another provision of S. 1547 would require that the effect of the troop surge be factored into another report that was mandated by the FY2007 authorization bill, an analysis by the GAO of the impact of the deployments to Iraq and Afghanistan on the ability of the Army and Marine Corps to provide the forces needed to carry out the plans of regional commanders for other contingencies. S. 1547 would require that DOD report to Congress every six months on the strategy for achieving U.S. goals in Afghanistan. It also would require reports on (a) U.S. strategy for encouraging Pakistan to eliminate safe havens for violent Islamist extremists near its border with Afghanistan and (b) DOD's efforts to ensure that the governments of Iraq and neighboring states will protect Iraqi refugees as well as DOD's plans to promote protection of such refugees after a drawdown of U.S. troops. In addition, the bill would require the secretaries of State and Defense, in coordination with the Director of National Intelligence, to report on the threat posed to the United States by ungoverned areas as well as on the intelligence capabilities and skills needed to manage that threat, and what needs to be done to improve the two departments' capabilities for that purpose. Force Expansion and Pay Raise Like H.R. 1585 , the Senate Committee's bill supports the Administration's proposal to expand the active duty Army and Marine Corps by a total of 92,000 active-duty personnel (compared with their pre-9/11 end-strength) by 2012. The Senate committee bill also would authorize $12.3 billion in the DOD base budget requested to pay, train, and equip the additional troops brought into the services by the end of FY2008. But the Senate Armed Services Committee also expressed concern that the planned increase might be completed too late to ease the burden imposed on U.S. forces by deployments to Iraq and that by the time the additional combat units were ready to deploy, they might no longer be required. On the other hand, the committee warned, planned manpower reductions in the Navy and Air Force might go too far and too fast, with those services sacrificing needed personnel to free up funds for new weapons. Like the House bill, S. 1547 would compensate the troops more generously than the budget recommended, authorizing a military pay raise of 3.5% rather than the 3% raise the administration proposed, at an additional cost of $302 million. In its formal Statement of Administration Position on H.R. 1585 , the Office of Management and Budget (OMB) cited the House bill's authorization of a 3.5% pay raise as one of many features of that bill to which it objected. Tricare and Other Health Issues The Senate committee bill also rejected the Administration's proposal to increase Tricare medical insurance fees and copayments and pharmacy fees for military retirees. It would add $1.9 billion to the budget for the DOD health care system to compensate for the loss of revenue from higher fees, which the budget had assumed. The committee said the proposed fee hikes were premature, pending the report of a DOD Task Force on the Future of Military Health Care and a GAO audit of DOD health care costs and proposed cost-saving measures, both of which were mandated by the FY2007 defense authorization bill. The committee included in the bill a provision requiring that drugs sold through the Tricare retail pharmacy system be priced at federally discounted prices. The committee also directed the Secretary of Defense to reevaluate the Navy's plan to reduce its corps of medical professionals by more than 900 billets in 2008-2012, in light of the planned addition of 26,000 active-duty personnel to the Marine Corps. The committee expressed concern over the results of an Army study of the mental health of soldiers and Marines deployed in Iraq which found that soldiers deployed more than once experienced higher levels of stress, that lengthy deployments were associated with higher rates of mental illness and marital problems, that the suicide rate among soldiers who had been deployed to Iraq in 2003-06 was nearly half again as high as the Army-wide suicide rate, and that approximately 10% of soldiers and Marines interviewed reported mistreating non-combatants in Iraq or damaging their property needlessly. In its report on S. 1547 , the panel directed DOD to report what it was doing to address the Army study's findings. The committee also instructed the Secretary of Defense to assess the effectiveness of assigning mental health professionals to combat battalions, in hopes of reducing the stigma associated with seeking mental health services in the military. On June 14, after it had reported the authorization bill, the Senate Armed Services Committee reported the Dignified Treatment of Wounded Warriors Act ( S. 1606 ), intended to correct shortcomings in DOD's medical care for outpatients which had been spotlighted by news reports of problems at Walter Reed Army Medical Center. On July 12, the Senate adopted by a vote of 94-0 an amendment to the defense authorization bill that consisted of a modified version of the text of S. 1606 . In its report on S. 1547 , the Senate Armed Services Committee also directed the Joint Improvised Explosive Device Defeat Office (JIEDDO) to spend at least $50 million in FY2008 to fund research on the diagnosis and treatment of blast injuries. Ballistic Missile Defense Like the House bill, S. 1547 would reduce overall funding for ballistic missile defense and would reduce funds for more technologically advanced defenses against prospective long-range threats while adding funds for defenses against short-range and medium-range missiles currently deployed by some hostile countries and capable of striking U.S. forces and allies overseas. Within a total of $10.1 billion authorized for anti-missile defense (a reduction of $231 million from the request), the bill would add a total of $315 million to the amounts requested for systems several defenses against current missile threats, including the Army's Patriot PAC-3 and THAAD and the Navy's Aegis Standard Missile-3. The largest of several reductions that bill would make to the amounts requested for more technologically challenging systems was a cut of $200 million from the $548.8 million requested for the Airborne Laser. The bill also would deny $10 million requested as an initial step toward developing space-based anti-missile interceptors. The bill also would deny the $85 million of the $310 million requested to begin deployment of anti-missile interceptors in Poland and an associated radar in the Czech Republic. Calling the proposed deployment "premature," the committee included in the bill a provision requiring a federally funded research and development center (FFRDC) to assess the options for missile defense on Europe. (For a summary of actions taken on funding levels for principal missile defense programs, see Table A-4 in Appendix .) Another provision would bar deployment in Alaska of more anti-missile interceptors than the 40 already authorized until the secretary of Defense certifies to Congress that the anti-missile system has demonstrated in realistic flight tests that it has a high probability of being operationally effective. Other provisions would require that the Pentagon's director of Operational Test and Evaluation have the same access to test data for missile defenses as for other weapons and that the GAO continue to report to Congress annually on the missile defense system's progress toward meeting its cost, performance and schedule goals. FCS and Other Ground Combat Systems In contrast to H.R. 1585 , which would cut $867 million from the $3.7 billion requested for the Army's Future Combat Systems program, S. 1547 not only approved the request for FCS, but added to it $115 million. Most of the increase was earmarked to resume work on a armed and cargo-carrying robot vehicles that the Army had dropped from the project, a change the Senate Armed Services Committee criticized as being budget-driven. FCS, currently envisioned as a set of 14 types of manned and robotic ground vehicles, unmanned aircraft and sensors knit into an integrated fighting unit by a dense web of data links, embodies the thrust of the Army's plan to modernize its combat force. The wide divergence between the House and Senate bills over the FCS funding level for FY2008 apparently is rooted in a profound disagreement between the House and Senate Armed Services committees over the program's future. In its report on H.R. 1585 , the House panel said that the Army might not be able to afford FCS given the cost of enlarging the force, resetting combat units that have been fighting in Iraq and paying for other improvements launched in the context of the post-9/11 world—large costs that were not foreseen when the Army launched FCS in 1999. On the other hand, the Senate committee, in its report on S. 1547 , hailed FCS as the answer to the Army's need for lethal combat units that could quickly be transported to distant trouble spots, and warned against relying on "marginal modernization of the current force." The Senate committee's bill also would authorize the $1.4 billion requested to upgrade existing Bradley troop carriers and the $1.3 billion requested to upgrade M-1 tanks. It would add $775 million to the $1.4 billion requested to buy new Strykers—large wheeled fighting vehicles more lightly armored than Bradleys. In addition, the bill would cut $100 million from the $288 million requested to continue development of the Marine Corps' Expeditionary Fighting Vehicle, an amphibious troop carrier. The House bill cut $200 million from the request for the program, which DOD has suspended for review. Nuclear Weapons and Long-range Strike The Senate committee cut from the budget request some of the funds requested to develop the Reliable Replacement Warhead (RRW), a program to develop a family of nuclear warheads intended to be easier to maintain than those currently in service. The first version would equip the Trident II submarine-launched missile. In addition to the $88.8 million in the Energy Department budget specifically assigned to RRW, the Committee said that funding in other parts of the Energy budget for RRW-associated activities brought the total requested to support the program to $238.1 million. In addition, the Navy's budget request included $30 million to begin modifying Trident missiles and submarines to carry the new warhead. The Senate Committee bill authorized a total of $195 million in Energy Department funds and $15 million in Navy funds to continue work on RRW. But the Committee emphasized that this did not mark a commitment to acquire the new warhead and that the funds were to be used only for preliminary design work and cost estimation. A decision whether to proceed with the new warhead, the Committee said, should await a fundamental review of U.S. nuclear weapons policy and should be made only in the context of actions to reaffirm a U.S. commitment to nuclear nonproliferation. The bill would require the next presidential administration to conduct a nuclear posture review, which would be the first one since 2001. It also would express the sense of Congress that the United States should take several steps to assert its commitment to nonproliferation, including ratifying the Comprehensive Test Ban Treaty, which the Senate rejected on October 13, 1999. S. 1547 denied a total of $208 million requested for two efforts to develop long-range, non-nuclear weapons intended to quickly strike targets anywhere around the globe. One of the projects was an effort to develop a non-nuclear warhead for the Trident submarine-launched missile and the other was to develop a Common Aero Vehicle, a rocket-launched, unmanned, maneuverable space craft intended to carry a half-ton payload thousands of miles in 30 minutes. A launch of either of those weapons might easily be confused with the launch of a nuclear-armed missile, the committee said. As an alternative, the committee added to the budget the same amount it had cut from the two programs—$208 million—for a new program, Prompt Global Strike, to explore a wide range of non-nuclear options for carrying out that mission. But the committee insisted that any such weapon be distinctively different from existing U.S. nuclear weapons. Acquisition Reform The bill includes several provisions intended to reduce the risk of weapons acquisition programs running over budget or behind schedule. For example, one provision could potentially limit the use of multi-year contracts for weapons programs. Many Pentagon managers and defense industry officials argue that a multi-year contract yields a lower unit-price because the contractor can plan for a stable production run over several years. But critics say they are hard to oversee and make it difficult for DOD to put pressure on poorly performing contractors. S. 1547 would allow a multi-year acquisition contract only if it resulted in savings of 10% (in most cases) compared to the anticipated cost of purchasing the same number of items in a series of annual contracts. Another provision would require the manager of a major acquisition program to notify senior DOD officials of any changes in the program that call into question the rationale for those officials' prior certification that the program had reached "Milestone B" in the Pentagon's acquisition process. Milestone B certification is, in effect, the point at which DOD leaders authorize development of a specific product with the aim of purchasing it. The bill would designate DOD's senior civilian acquisition and budget officials as advisors to the Joint Requirements Oversight Council, a committee comprising the second ranking officers in each service under the chairmanship of the vice-chairman of the Joint Chiefs of Staff, which reviews the criteria set for major acquisitions. It also would require GAO to report to the Armed Services and Appropriations committees on any recommended changes in DOD's acquisition process. Other Provisions Other highlights of S. 1547 include the following. The bill would require a comprehensive review of the "space posture" of the United States for the period 2009-2019. The committee expressed concern that most military space capabilities are undergoing modernization simultaneously and that all of them are behind schedule and over budget. It would increase from lieutenant general to general the rank of the Chief of the National Guard Bureau, as recommended by a congressionally-chartered Commission on the National Guard and Reserves. It would require DOD to assess the risks of projected climate change to the department's facilities, capabilities and missions. It would require within 90 days of enactment a technical assessment by DOD's senior civilian technology and weapons testing officials of commercially available body armor. Press reports have highlighted claims by one manufacturer that his body armor, called Dragon Skin, is superior to the armor currently purchased by the Army. It would require the secretary of defense to contract with a non-profit, non-partisan organization to conduct a study of the process for interagency coordination among government agencies concerned with national security. Defense Authorization: Highlights of Senate Floor Action The Senate had the FY2008 defense authorization bill under consideration July 9-13 and July 16-18 when the legislation before it was H.R. 1585 , the version of the bill passed May 17 by the House. However, for all practical purposes, the legislative text the Senate was debating during that period was a not-yet-adopted amendment to the bill ( S.Amdt. 2011 ) which would substitute for the House-passed language of H.R. 1585 , the language of S. 1547 , the version of the defense authorization bill reported June 5 by the Senate Armed Services Committee. Although the Senate had not yet adopted the substitute amendment during this period, the other amendments it considered all were drafted as amendments to the substitute amendment (i.e., as amendments to the text of S. 1547 ). July Floor Debate Debate over the deployment of U.S. forces in Iraq dominated the early days of Senate action on H.R. 1585 . The context for the Senate's consideration of Iraq-related amendments to the bill was an administration report on the Iraqi government's progress toward 18 benchmarks of progress toward improved domestic security and political reconciliation in that country. The report, which was released by the White House on July 12 but had been the subject of widespread press coverage for some days before its publication, was the first of two mandated by the FY2007 supplemental funding bill ( H.R. 2206 / P.L. 110-28 ). The report concluded that the Iraqi government had made "satisfactory progress" toward eight of the 18 specified benchmarks, including constitutional reform, the creation of regional governments and the allocation of $10 billion for economic reconstruction, among others. But it also found that the Iraqi government had not made satisfactory progress toward eight other benchmarks, including several that are related to political reconciliation, such as liberalization of the "deBa'athification" process, enactment of legislation that would fairly distribute revenue from the country's petroleum resources, and disarmament of sectarian militias. The President and supporters of the Administration's Iraq policy said there were signs that the U.S. strategy in Iraq is succeeding and that, in any case, Congress should take no action prejudicial to the strategy until it receives the second report on Iraqi progress toward the benchmarks, due September 15. Also contributing to the context in which the Senate considered Iraq-related amendments to the defense bill was a CRS analysis which concluded that the Defense Department's monthly obligations to pay for operations in Iraq, Afghanistan and related areas had risen from an average of $8.7 billion in FY2006 to $12.0 billion in the first half of FY2007. During Senate debate on the authorization bill July 9-13, 16-18, the Senate agreed by unanimous consent that several controversial, Iraq-related amendments would require 60 votes for adoption—in effect anticipating that the amendments would not come to a vote without the 60 votes needed to win a cloture vote. However, on July 18, after the Senate rejected 52-47 a motion to invoke cloture on an amendment by Senators Levin and Reed that would have mandated the withdrawal of most U.S. troops from Iraq by April 30, 2008, Senator Reid sought unanimous consent for the Senate to take up the Levin-Reed proposal and other Iraq-related amendment with each to be the subject of an up-or-down vote to be decided by a simple majority. When that proposal was objected to, Senator Reid set aside the authorization bill. The Levin-Reed amendment would have required the President to begin withdrawing most U.S. forces from Iraq 120 days after enactment of the bill with most of the troops out of the country by April 30, 2008. U.S. troops would be allowed to remain in Iraq as a "limited presence" (of unspecified size) only to train Iraqi Security Forces, to protect U.S. personnel and installations, and to conduct targeted counterterrorism operations. Following are highlights of other Senate floor action on the Defense Authorization bill in July: Troop Deployment Duration Amendments The Senate considered several amendments that dealt with the fact that Army units are being deployed in Iraq for longer tours of duty (and are being sent back to Iraq after shorter periods at home) than the service's policy calls for. The Army's official policy is to deploy troops into an operational theater for no more than 12 months at a time and to allow time between deployments (called "dwell time") of at least two years for active-duty soldiers and five years for reserve and National Guard troops. But to sustain the number of personnel currently deployed in Iraq, Afghanistan and related theaters, the Army has had to deploy units for 15 months at a time and units are being returned to the combat areas so quickly that some units' dwell time is no longer than their previous deployment. On July 11, the Senate rejected three amendments bearing on the issue of deployment duration and dwell time. An amendment by Senator Webb that would have required that service members be allowed a dwell time of at least the same duration as their preceding deployment and reserve component units be allowed a dwell time at least three times as long as their deployment was withdrawn after a cloture motion failed on a vote of 56-41, with 60 votes required for approval. An amendment by Senator Hagel that would have required that Army troops (including reserve component personnel) be deployed for no more than 12 months at a time and that active-duty and reserve Marines deploy for no more than seven months at a time (which is the Marine Corps goal) was rejected by a vote of 52-45, the Senate having agreed that the amendment would require 60 votes for adoption. An amendment by Senator Graham, expressing the sense of Congress that Army personnel should be deployed for no more than 15 months at a time was rejected by a simple majority vote of 41-55. Improving Health Care for Wounded Warriors By a vote of 94-0, the Senate adopted an amendment by Senator Levin and others that incorporated a modified version of S. 1606 , the Dignified Treatment for Wounded Warriors Act," which the Senate Armed Services Committee had reported on June 18. The bill was the committee's response to press accounts of poor treatment of outpatients at Walter Reed Army Medical Center in Washington, D.C. Among the provisions of this amendment (which was modified, prior to its adoption, by the Senate's adoption of eight second-degree amendments), are these. The bill would require the secretaries of Defense and Veterans Affairs to develop a comprehensive policy on the care of service members transitioning from the DOD health care system to the VA and would establish an interagency office to implement a system of electronic medical records to be used by both departments. The bill would require various pilot projects to test alternative systems for rating the level of disability of wounded service members and veterans, which could replace the separate disability rating systems currently used by DOD and VA. In addition, the amendment provides that service members who are retired because of medical disability, and who receive a DOD disability rating of 50% or more, would be authorized to continue receiving the medical benefits available to active duty personnel for three years after the retired member leaves active duty. To develop improved methods for diagnosis, treatment and rehabilitation of service members with Traumatic Brain Injury or Post Traumatic Stress Disorder, the amendment would authorize $50 million. On July 25, the Senate passed as a freestanding bill, by unanimous consent, the Wounded Warrior amendment to the defense bill, as it had been amended on the Senate floor. The language of the Senate amendment was substituted for the text of H.R. 1538 , a House-passed bill that was similar in scope to S. 1606 , the freestanding Senate bill that had been the basis for the Senate's Wounded Warriors amendment. As passed by the Senate, H.R. 1538 also was amended to authorize a 3.5% military pay raise effective January 1, 2008, as would be authorized by the Senate version of the defense authorization bill. Other Amendments Acted on in July The Senate also adopted the following amendments to the defense authorization bill. An amendment by Senator Sessions declaring it to be U.S. policy to deploy, as soon as technologically possible, a defense against ballistic missiles launched from Iran was adopted by a vote of 90-5. An amendment by Senator Lieberman requiring a report on the Iranian government's support for attacks against coalition forces in Iraq was adopted by a vote of 97-0. An amendment by Senator Dorgan that would increase to $50 million the reward offered for the capture of Osama bin Laden was adopted by a vote of 87-1. An amendment by Senator Cornyn expressing the sense of the Senate that it is in the national security interests of the United States that Iraq not become a failed state and a haven for terrorists was adopted by a vote of 94-3. Iraq Debate Resumed in September The Senate resumed consideration of the FY2008 authorization bill on September 17, one week after General David Petraeus, the commander of U.S. forces in Iraq, and U.S. ambassador to Baghdad Ryan Crocker testified before the Armed Services and foreign affairs committees of the House and Senate on the situation in Iraq following the "surge" of some 30,000 additional U.S. troops in the spring. The thrust of their testimony was the increase in U.S. troops had improved security in some parts of the country. However, they acknowledged that there was little evidence so far of the political reconciliation that the increased security had been intended to foster. They warned that too hasty a withdrawal of U.S. troops would vitiate what progress had been achieved, and Petraeus told the committees he would recommend that size of the U.S. force be reduced to its "pre-surge" level by the summer of 2008. In a televised address on September 13, President Bush announced that he planned to accept General Petraeus's recommendation to gradually reduce the size of the U.S. force in Iraq. Democratic Party leaders in the Senate and House said they would try to accelerate the pace at which U.S. forces disengaged from combat in Iraq. However, during the week of September 17, the Senate rejected three Democratic-sponsored amendments that would have forced a more substantial withdrawal from Iraq than the President or General Petraeus had called for, each of which was considered under an agreement requiring 60 votes for adoption: An amendment by Senator Webb that would have required that service members be allowed a dwell time of at least the same duration as their preceding deployment and that reserve component units be allowed a dwell time at least three times as long as their preceding deployment was rejected September 19 by a vote of 56-44, with 60 votes required for adoption under the unanimous consent agreement governing the vote. This amendment differed from the Webb amendment that had been withdrawn July 11 in that it exempted special operations personnel from the deployment limits. An amendment by Senator Feingold requiring the President to begin, within 90 days of enactment, withdrawal from Iraq of all U.S. troops not required for four, specific missions (one of which was the conduct of targeted operations of limited duration against terrorists), was rejected September 20 by a vote of 28-70. An amendment by Senators Levin and Reed requiring that the withdrawal of troops, except those required for specific, limited missions, begin within 90 days of enactment and be completed within nine months of enactment was rejected September 21 by a vote of 477-47. The Senate also rejected September 19 by a vote of 55-45, under an agreement requiring 60 votes for adoption, an amendment by Senators McCain and Graham that would have expressed the sense of the Senate in non-binding support of the dwell time limitations that the Webb amendments would have made mandatory. The Senate did adopt on September 26, by a vote of 75-23, an amendment by Senator Biden expressing the sense of Congress that the United States should support a political settlement among Iraqi factions based on the provisions of the Iraqi Constitution that create a federal system of government. Petraeus Advertisement Amendments The Senate also voted on two amendments addressing the controversy sparked by a full-page advertisement in the September 10 issue of The New York Times , purchased by the anti-war advocacy group MoveOn.org, which charged General Petraeus with promoting a dishonestly positive view of the situation in Iraq in order to bolster political support for President Bush's policies. An amendment by Senator Cornyn condemning any attack on the integrity of General Petraeus or any other member of the armed forces and specifically repudiating the MoveOn.org ad was adopted September 20 by a vote of 72-25. Also on September 20, the Senate rejected an amendment by Senator Boxer that denounced any attack on the honor or patriotism of anyone who had served honorably in the armed forces, citing in particular the MoveOn.org advertisement and other advertisements in prior years that had attacked Senator Kerry and former Senator Max Cleland, was rejected by a vote of 51-46 because it was conducted under an agreement requiring 60 votes for adoption of the amendment. Habeas Corpus for Detainees On September 9, an amendment by Senators Leahy and Spector that would have restored to detainees the right of habeas corpus was withdrawn after a motion to invoke cloture failed by a vote of 56-43, short of the three-fifths majority of voting senators required by Senate rules. Federal Role in Prosecuting Hate Crimes On September 27, by a vote of 60-39, the Senate adopted a cloture petition to end debate on an amendment by Senators Kennedy and Smith incorporating the text of S. 1105 , the Mathew Shephard Law Enforcement Hate Crimes Prevention Act. The amendment would authorize federal agencies to assist states, localities and Indian tribes in the prosecution of hate crimes and it would include in that class crimes based on gender identity or sexual orientation. Subsequently, the amendment was adopted by voice vote. By a vote of 96-3 the Senate also adopted an amendment by Senator Hatch to require a comprehensive study of the incidence of hate crimes and to authorize grants to support states and local jurisdictions in prosecuting such crimes. Selected Other Amendments Acted on in September The Senate rejected on September 27, by a vote of 26-69, an amendment by Senator Coburn that would have barred the use of funds for the National Drug Intelligence Center in Johnstown, PA, except to close the facility and relocate some of its activities. The following amendments to H.R. 1585 are among the dozens that the Senate agreed to by unanimous consent after it resumed consideration of the bill in September: By Senators Kyl and Lieberman expressing the sense of the Senate that the Islamic Revolutionary Guards Corps should be designated as a terrorist group. By Senator Clinton requiring a report on the planning and implementation of U.S. policy toward Darfur. By Senator Coleman to increase from 2% to 3% the amount by which the reserve component forces can exceed their statutory end-strength limits. By Senator Inhofe repealing a provision of the American Service Members' Protection Act of 2002 (22 U.S.C. 7426) the limits the provision of U.S. military assistance to countries that are party to the International Criminal Court. By Senator Inhofe providing that members of the armed forces and veterans out of uniform may render the military salute to the flag. By Senator Clinton requiring the President to submit a detailed report on (1) the physical security of all nuclear weapons world-wide, the radioactive materials used to make nuclear weapons, and sites where either weapons or material are stored; (2) a plan to improve the level of security, with priority going to those sites at which the risk of theft or loss of weapons or material was greatest; and (3) an assessment of progress toward implementing that plan; By Senators Warner and Webb amending a provision of the authorization bill as reported by the Senate Armed Services Committee to provide that funds authorized by the bill could not be used to begin new military assistance projects with Thailand until 15 days after the Secretary of Defense notified the Armed Services and Appropriations committees of his intent to provide such aid. The Senate Armed Services Committee's version of the bill would have prohibited the provision of any military assistance to Thailand until the President certified to Congress that a democratically-elected government had taken office in that country, in place of the military junta that took power in September 2006. By Senators Cornyn and Dole specifying the subjects to be covered by a study of the interagency process for carrying out national security policy, for which study the bill would authorize the Pentagon to provide up to $3 million in matching funds. By Senator Menendez to require a DOD Inspector General to report on the physical security of DOD installations. By Senator Biden to require a report on certain facilities and resources needed to provide stability in Darfur. By Senator Schumer to authorize an additional $162.8 million for counter-drug operations, including reduction on poppy production in Afghanistan, with offsetting reductions in other authorizations. By Senators McCaskill and Collins to broaden the legal protections against reprisals for employees of DOD contractors who disclose information believed to demonstrate gross mismanagement, waste, or a violation of law relating to a DOD contract. By Senator Chambliss to require the Secretary of Defense to provide a plan for addressing gaps and projected gaps in DOD's acquisition work force because of current or projected shortages of employees with certain competencies. By Senator Bond to restrict the issuance of security clearances to persons who are drug addicts, mentally incompetent, or convicted felons. By Senator Boxer to require periodic reports on the readiness of National Guard units to respond to domestic emergencies. By Senator Kyl to require in a legislatively mandated annual report on Chinese military capability inclusion of information about China's capabilities for asymmetric warfare, including cyberwarfare. By Senator McCaskill to provide for periodic independent management review of DOD contracts for services. By Senator Boxer to require the implementation of the recommendations of the Department of Defense Task Force on Mental Health. By Senator Salazar to require a report on the necessity, costs, and benefits of expanding Army training operations at the Pinyon Canyon Maneuver Site near Ft. Carson, Colorado. By Senator Akaka to require a report on plans of the Secretary of the Army and the Secretary of Veterans Affairs to replace the monument at the Tomb of the Unknowns at Arlington National Cemetery and to bar replacement of the tomb until 180 days after Congress has received the report. By Senator Coburn to prohibit the use of congressional earmarks for awarding no-bid contracts and non-competitive grants. By Senator Webb, to establish a Commission on Wartime Contracting that would investigate the process of contracting for the reconstruction of Iraq and Afghanistan, the logistical support of U.S. and allied troops in those countries, and the conduct of intelligence and security operations in those countries. By Senator Cardin to require the Secretaries of State and Defense to prepare reports assessing U.S. capability to provide training and command guidance to an international humanitarian intervention force. By Senators Kennedy and McCain requiring the Navy to use a fixed-price contract in purchasing future Littoral Combat Ships (LCS) and limiting to $460 million the cost to the government of each of the two LCS ships authorized by this bill. By Senator Lautenberg to prohibit through FY2008 proposed increases in Tricare health system fees and pharmacy co-payments charged to certain military retirees. By Senator Biden to authorize an additional $23.6 billion to the purchase of 15,200 Mine-Resistance, Ambush Protected (MRAP) troop carriers. By Senator Kennedy to streamline the process for granting refugee status to Iraqi nationals who have assisted U.S. forces during military operations in Iraq. Defense Authorization: Final Senate Debate and Passage The Senate passed its version of the FY2008 defense authorization bill ( H.R. 1585 ) October 1, by a vote of 92-3, concluding a debate that occupied the Senate for two weeks in July and resumed September 17. The only Iraq-related amendment to the bill the Senate adopted was one by Senator Biden expressing the sense of Congress that the United States should support a political settlement in Iraq based on provisions of the Iraqi Constitution that provide for a federal system of government. That amendment was adopted September 26 by a vote of 75-23. Although the Senate considered several amendments that would have reduced or eliminated the role of U.S. combat troops in Iraq, none of the amendments to which the administration objected was adopted. Although some amendments gained the support of more than a majority of voting senators, all of those were considered under terms of unanimous consent agreements requiring 60 votes for adoption of the amendment. The version of the authorization bill that was before the Senate was the version reported June 5 by the Senate Armed Services Committee as S. 1547 . However, not until just before it passed the authorization bill on October 1 did the Senate adopt by unanimous consent the amendment that replaced the language of the House-passed version of the bill with the language of S. 1547 . In general, amendments to the authorization bill that the Senate debated were drafted as amendments to the not-yet-adopted substitute amendment. Among several amendments adopted by unanimous consent in the last week of Senate debate on H.R. 1585 were the following: An amendment by Senator Reed specifies that the $470 million the bill would add to the President's request for long-leadtime components for nuclear-powered attack submarines was intended to allow the procurement of two Virginia-class submarines in FY2010, instead of the one currently planned by the Administration. An amendment by Senator McCain requires the Air Force to conduct a pilot program testing the use of commercial fee-for-service aerial refueling for certain missions. An amendment by Senator Kennedy requires regular reports on (1) steps taken to mitigate the threat to U.S. troops of Explosively Formed Projectiles, (2) the production of Mine-Resistant, Ambush-Protected (MRAP) vehicles, and (3) the Army's long-range plan to modernize its fleet of tactical wheeled vehicles. An amendment by Senator Kennedy changes the rules governing competitions conducted pursuant to OMB Circular A-76 to determine whether a particular activity should be conducted by federal employees or by a private contractor. Conference Report on H.R. 1585 (FY2008 Defense Authorization Bill) By late November, conferees on the FY2008 defense authorization bill had reached agreement on a compromise version except for one provision, added on the Senate floor, that would broaden the definition in federal law of "hate crimes," to include crimes based on gender or sexual orientation. The conference on the defense bill was concluded after Senate conferees agreed to drop the hate crimes provision from the bill. On December 6, House and Senate negotiators filed the conference report on H.R. 1585 , the FY2008 National Defense Authorization Act ( H.Rept. 110-477 ), which would authorize all but $215 million of the $696.4 billion that was the President's amended request for national defense-related funding in FY2008, by the conferees calculations. The House adopted the conference report December 12 by a vote of 370-49. The Senate adopted it December 14 by a vote of 90-3, clearing the bill for the President. On December 28, Administration officials announced that the President would veto the bill because of the provision allowing the government of Iraq to be sued in U.S. courts for damages resulting from actions of the Iraqi regime of Saddam Hussein. Conference Report Highlights The conference report on H.R. 1585 would authorize a total of $696 billion in FY2008 spending, including $674.6 billion for DOD, which is about $215 million less than the President requested for the Pentagon. The balance of the total authorization includes $17.1 billion for national security-related activities of the Energy Department—about $194 million less than the President requested—and $4.9 billion for defense-related activities of other agencies. The total amount of DOD spending authorized by the bill includes $485.0 billion for the so-called "base budget"—Pentagon activities other than the conduct of ongoing military operations in Iraq and Afghanistan. The remaining $189.3 billion, to cover funding for ongoing combat operations and related expenses, amounts to $330,000 more than the President requested for those costs. Since authorization bills do not provide budget authority, the amount DOD actually has with which to cover wartime expenses will depend on whatever appropriations bills are enacted for that purpose. However, the treatment of two programs in the portion of the conference report dealing with war-related costs noteworthy: It authorizes $2.3 billion for eight additional C-17 cargo jets, which were not requested. It authorizes $4.6 billion, $380 million more than requested, for the Joint Improvised Explosive Device Defeat Organization, established within the Defense Department to counter the roadside bombs that are a major source of U.S. casualties in Iraq. The conference report also requires the Government Accountability Office (GAO) to assess the effectiveness of JIEDDO and its relationship with other DOD and intelligence agencies. The conference report also contained several policy provisions related to ongoing operations in Iraq and Afghanistan: It requires the secretary of Defense to report to the congressional defense committees on his plans for dealing with each detainee currently held at the U. S. Base at Guantanamo Bay, Cuba. It authorizes the secretary of Defense to make regulations governing the selection, training, equipment of conduct of private security guards in an area of combat operations. The provision would not apply to security contractors employed by intelligence agencies. The bill also would establish a commission to review contracts for logistics, reconstruction and security in Iraq and Afghanistan and would require inspectors general to audit those contracts. Following are other highlights of the conference report on H.R. 1585 : Military Pay and Benefits The bill authorizes a 3.5% pay raise for military personnel (effective January 1, 2008), instead of the 3.0% increase assumed in the President's budget request. The funds necessary to cover the increase were included in the defense appropriations conference report. In addition, for the second consecutive year, the bill would bar an administration proposal to increase the Tricare medical insurance fees and pharmacy co-pays charged certain military retirees. Health Care The bill would prohibit for five years the replacement of any military doctors, dentists and nurses with civilian medical personnel. It also would increase the amounts of various bonuses paid to recruit and retain certain medical professionals into the armed forces. The bill also would authorize appropriation for the Defense Health Program budget of $212 million the Administration had deducted from its budget request in anticipation that amount would be saved by efficiencies. All told, the bill authorizes $23.1 billion for the Defense Health Program, which is $539 million more than the President requested. 'Wounded Warrior' Provisions The bill includes several provisions intended to improve the quality of care for wounded service members, particularly (a) those suffering types of combat injuries that are more prevalent in Iraq and Afghanistan than in past wars and (b) those who are undergoing treatment in long-term outpatient status. It requires DOD and the Department of Veterans Affairs to streamline the process by which wounded veterans transition from DOD care to the VA medical system, for instance, by requiring the two departments to develop a fully compatible electronic health records system. The bill also requires DOD and VA to develop a comprehensive policy to manage the cases of injured service members in ways that facilitate their transition from medical treatment through recovery. The policy is to provide for the assignment to each wounded service member a set of case managers, each of whom is to serve as an advocate within the health care system for a limited number of patients. The bill also requires DOD to adopt certain features of the VA system for rating the level of disability of an injured service member, a classification that determines the amount of certain benefits. In addition, it requires the DOD to develop comprehensive plans for the diagnosis and treatment of Traumatic Brain Injury and Post-Traumatic Stress Disorder. Readiness Improvements The bill creates a Defense Materiel Readiness Board to advise the secretary of Defense and Congress about shortfalls in defense equipment and supplies that are expected to last two years or more. It would authorize creation of a $1 billion fund to redress these problems and also would allow the secretary to transfer up to $2 billion for that purpose. The bill requires DOD to report on the current readiness of U.S. ground forces and on the order of priority in which it plans actions to correct shortfalls. It also requires an annual report from DOD on the status of combat equipment and supplies prepositioned at sites overseas and aboard huge supply ships; and it requires quarterly reports on the readiness of each state's National Guard to perform its homeland security and disaster assistance missions. Roles and Missions Review The bill requires that the division of labor among the armed services and other DOD agencies—the allocation of "roles and missions" in Pentagon parlance—be reviewed in 2008, again in 2011 and at four-year intervals, thereafter. The purpose of the reviews would be to identify the "core competencies" of each service and agency, and to ensure each one relates to one of DOD's "core missions," (such as ground combat operations, space operations, mobility, expeditionary warfare, and the like). The bill requires that future budgets and acquisition plans be organized in terms of the core missions being served. It requires the Joint Resources Oversight Council (JROC)—comprising the second-ranking officer in each service and the vice-chairman of the Joint Chiefs of Staff—to review each service's statement of its weapons requirements to ensure that DOD's core missions are being served. Civilian Employees The bill requires that the National Security Personnel System(NSPS)—a new personnel system for civilian DOD employees which Congress authorized in the FY2004 defense authorization bill ( P.L. 108-136 )—grant covered employees rights of collective bargaining and appeal, which the new system would have limited. It also bars expansion of NSPS to cover federal blue-collar employees and prohibits its extension to employees of DOD laboratories before 2011. However, the bill allows the new DOD personnel system to incorporate the principle of "pay-for-performance" In general terms it provides that all DOD employees covered by NSPS will receive an annual pay raise at least 60% as large as they would have received under the personnel system in effect for the rest of the federal government. The remaining 40% of the payroll of each agency will serve as a "pay pool" from which funds will be drawn to give higher pay raises to high performing employees. The bill also makes several changes in the so-called A-76 process through which private contractors can bid to take over activities currently performed by federal employees. The changes affect elements of these public-private competitions which, advocates for federal employees contend, bias the process in favor of outsourcing the work. For example, the bill excludes health care and retirement costs from the comparison of public-sector and private-sector costs, to avoid giving contractors an incentive to scrimp on health care and retirement costs. National Guard and Reserve Issues The bill would raise the grade of the Chief of the National Guard Bureau, currently a lieutenant general, to general, the highest rank currently in use by the U.S. military. It also would require that either the commander or one of the deputy commanders of the Northern Command, which is responsible for defending U.S. territory, be a National Guard officer. Mirroring the companion FY2008 defense appropriation bill, the conference report on H.R. 1585 rejects an Air Force proposal for Centralized Asset Management (CAM) that would merge into a single appropriations account the operations and maintenance budgets for the active-duty Air Force, the Air Force Reserve and the Air National Guard. Shipbuilding In general, the authorization bill mirrored the decisions about the FY2008 shipbuilding budget that were embodied in the defense appropriations bill. It authorizes one Littoral Combat Ship (LCS) rather than the three requested, and adds to the request "long lead-time" funding to buy components to be used in five ships for which the bulk of the funding would have to be provided in future budgets. The additional long lead-time funding is for an LPD 17-class cargo ship to support amphibious landings, three T-AKE-class supply ships designed to replenish warships at sea, and a Virginia -class nuclear submarine. The conference report also includes a provision requiring that all new classes of major warships be designed with nuclear power, unless the Secretary of Defense notifies the congressional defense committees that doing so would be against the national interest. Long-Range Strike and Nuclear Weapons The bill eliminates all funds requested to develop a conventional explosive warhead for the Trident submarine-launched ballistic missile ($175.4 million) and for the Air Force's Common Aero Vehicle ($32.8 million), both of which were intended to enable U.S. forces to strike distant targets with precisely aimed, non-nuclear warheads. In their stead, the bill authorizes $100 million to develop a Prompt Global Strike capability. The bill also would authorize $81 million of the $129 million requested to develop a new nuclear warhead for long-range, ballistic missiles. It would allow the funds to be used only for design work on this so-called Reliable Replacement Warhead (RRW). It would establish a congressionally-appointed, bipartisan commission to weigh the future role in U.S. strategy of nuclear weapons and of non-nuclear alternatives. Contract Management Beginning in 2010, the bill would prohibit contracts that assign a private company the role of "Lead System Integrator" (LSI) to manage a Pentagon acquisition program, except in the case of a contract with a company already serving as an LSI. The bill also requires independent management reviews of contracts signed by the armed services that put a single contractor in the position of managing large service contracts, a practice the conferees said was analogous to the use of private contractors as LSIs in major acquisition contracts. In their report, the conferees expressed concern that the trend toward large, single service contracts might undermine competition by giving the managing contractor an unfair advantage in anticipating prospective government requirements. Amendments to the "Insurrection Act" The bill repeals a provision of the FY2007 National Defense Authorization Act ( P.L. 109-364 ) that had substantially amended Chapter 15 of Title 10 U.S. Code, known as the "Insurrection Act." In its original form, these provisions of law allowed the President to use the armed forces, including units of the National Guard, to suppress a rebellion, an insurrection, or domestic violence if state authorities are unable to do so. The 2006 amendments to the Insurrection Act, prompted by the experience of Hurricane Katrina, gave the President authority to use armed forces, including the National Guard, in response to natural disasters, terrorist attacks, or health emergencies if state and local agencies cannot ensure order. The House and Senate versions of H.R. 1585 included similar provisions repealing the 2006 amendments. Defense Appropriations: Highlights of the House Bill The FY2008 defense appropriations bill passed August 5 by the House would provide a total of $459.6 billion for the DOD base budget (excluding funds for military construction), a reduction of $3.55 billion from the corresponding portion of the President's budget request. That total includes $10.9 billion in mandatory funding to cover the anticipated future cost of providing post-retirement medical care for current service members under the Tricare-for-life program. Although the Appropriations Committee approved a smaller total amount than the President requested, it was able to include within its total several major initiatives, because it made cuts from the request totaling more than $9 billion which, the committee said, would not adversely affect Pentagon operations. The funds excluded from the bill include $2 billion worth of requests the House Appropriations Committee put off for consideration as part of a separate bill to fund war-fighting costs, to be marked up in September. Among the items deferred, which the Committee said were more appropriately part of DOD's FY2008 war request, are requests for night vision equipment, ammunition, trucks and equipment to protect cargo planes from anti-aircraft missiles, special pay for language proficiency and hardship duty and $500 million requested for a "global train and equip" program to train the security forces of foreign countries other than Iraq and Afghanistan. The Committee also made cuts in the President's request totaling nearly $7 billion which it described either as reflecting facts of life or as an incentive for the Pentagon to manage service contracts more aggressively, to reduce costs. Among the major reductions included in this total are: $1.6 billion cut from the Army's $28.9 billion request for operations and maintenance on grounds that the service managed its budget for FY2007 in ways that, according to the Committee, inflated its FY2008 budget request by that amount, without providing Congress any justification for the increase; $1.2 billion, a 5% reduction in the amount requested for service contracts, a savings the committee said could be achieved by more alert Pentagon oversight; $630 million in the Navy and Air Force training budgets for units that had been deployed in Iraq and Afghanistan; $510 million to reflect a Pentagon civilian payroll that was smaller than the budget assumed; $551 million trimmed from various budget accounts that had a track record of unspent funds at the end of a fiscal year; $300 million in the Marine Corps procurement budget that the Committee described as "excess to requirements;" $420 million to reduce the cash balance carried by the Army's revolving fund that is used to operate various maintenance and support activities. Force Expansion The Committee approved funds requested for the FY2008 portion of DOD's plan to add 92,000 active-duty personnel to the Army and Marine Corps by FY2012. The bill includes $1 billion to pay for adding to the force 7,000 soldiers, 5,000 Marines, and 1,300 National Guard personnel in FY2008. It also would provide $6.3 billion requested to buy equipment for the additional units that are being formed. However, the Committee warned the services to include in future budget requests only enough additional equipment for the additional troops funded in that year's budget. Tricare Fee Hikes Rejected The bill provides $22.1 billion for operating costs of the Defense Health Program, including $1.9 billion that the Administration wanted to cover by increased fees and co-payments charged to military retirees participating in the Tricare medical insurance program. Although the Administration requested approval of the proposed higher fees, its budget request for health program operations ($22.0 billion) did not assume that revenue would be forthcoming. So the action of the House, in appropriating funds to cover the entire cost of the program, rather than assuming that $1.9 billion of the costs would be covered by higher fees, does not constitute a congressional addition to the President's request. Other Quality of Life Initiatives The Committee's reductions to the President's request made room, within an overall spending total lower than the request, for several initiatives to improve the quality of life of the troops. To provide a military pay raise of 3.5%, rather than the 3% in the budget request, the bill would provide $2.2 billion, which is $310 million more than requested. It also would add $558 million to the amount requested for military family support programs, providing a total of $2.9 billion. The Committee's increase includes $439 million for family advocacy programs that assist service members and their families in the prevention and treatment of domestic violence and assists the families of severely wounded service members. The increase also includes $82 million (in addition to the $525 million requested) to increase the capacity of DOD's network of childcare centers and to extend their operating hours and an additional $38 million (in addition to the $1.6 billion requested) for DOD's network of schools for service members' dependents. The Committee said that, in the course of cutting its personnel budget to pay for new weapons, the Air Force had made too large a reduction in the budget for routine personnel transfers, thus risking a decline in the quality of life and the availability of professional development opportunities for career service members. Accordingly, the Committee added $364 million to the Air Force's so-called "permanent change of station (PCS)" account, offsetting the cost by cutting the same amount from the $744 million requested to continue development of the F-22 fighter. Facilities Improvements The bill would add $1.25 billion to the Army's budget request for maintenance and upgrade of facilities and the improvement of community services at dozens of bases in the United States and overseas. The committee said the additional work was required to support the Army's wide-ranging program to reorganize its combat units and to reposition some of them. The bill also would add $142 million to the $126 million requested to improve perimeter security at DOD facilities. Shipbuilding Increase The committee added $3.6 billion to the total of $14.4 billion requested for ships. That net increase included $1.7 billion for an LPD-17-class amphibious landing transport, in addition to the one ship of that class in the budget. The increase also included $1.4 billion to buy three supply and ammunition ships designed to replenish Navy warships in mid-ocean. (See Table A-6 ) The committee also added to the bill $588 million to buy a nuclear propulsion system to be used in a Virginia -class attack submarine funded in some future budget. The committee expressed the hope that this addition would help the Navy achieve its long-standing goal of buying two subs per year. The bill would provide, as requested, $1.8 billion for a submarine, $2.7 billion to continue work on a nuclear-powered aircraft carrier the cost of which is being spread across several years, and all but $30 million of the $1.8 billion requested to continue building the first two of a new class of destroyers, designated DDG-1000. The Committee's additions to the shipbuilding budget request were partly offset by funding only one of the three requested Littoral Combat Ships, a reduction of $571 million, and by providing $76 million of the $210 million requested in the Army's budget for a small, high-speed troop transport vessel. Selected Other Major Weapons Program Changes The Committee added to the budget request $1.1 billion to equip an eighth Army brigade with Stryker armored vehicles. That addition was partly offset by a cut of $228 million from the amount requested to buy a Stryker version equipped with a 105 mm. cannon. The committee said development and testing of that vehicle had been delayed (see Table A-5 ). The Committee also added $705 million to the $3.4 billion requested to continue development of the F-35 Joint Strike Fighter. The addition included $480 million to continue development of a alternative engine for the plane. The bill also would provide the $2.4 billion requested to buy 12 F-35s. (See Table A-7 , below.) The bill would add to the budget request $925 million for equipment for National Guard and reserve units. Among the significant reductions to the President's request made by the Committee are the following: $406 million cut from the $3.6 billion requested to continue work on the Future Combat System, the Army's plan to renovate its combat units with 14 types of digitally-linked sensors and manned and unmanned vehicles; $468 million for production of a new, armed scout helicopter; $175 million requested to develop a conventional high-explosive warhead for the Trident II, submarine-launched ballistic missile (a reduction partially offset by the Committee's addition to the bill of $100 million to develop a weapon that could strike distant targets quickly and precisely); $100 million of the $290 million requested to develop a helicopter to rescue downed pilots behind enemy lines (because the Pentagon's selection of a winning bidder for the contract is under legal challenge); $298 million from the $8.8 billion requested to develop ballistic missile defenses, of which $236 million was taken from the $2.52 billion requested to continue work on the "mid-course" anti-missile system, elements of which have been fielded in Alaska and California. Defense Appropriations: Highlights of House Floor Action Although some critics of the deployment of U.S. troops in Iraq had debated various potential floor amendments to H.R. 3222 , none of them were offered during House debate on the bill, which lasted just over two hours. The 395-13 vote by which the bill was passed came shortly after 1 a.m. on August 5 almost immediately following which the House adjourned until after Labor Day. Selected Floor Amendments Among the amendments to the FY2008 defense appropriations bill acted on by the House were the following: An amendment by Representative Franks that would have restored $97 million of the $286 million the bill cut from the "mid-course" anti-missile system, transferring that amount from other projects funded by the bill, was rejected 161-249. An amendment by Representative Sessions to drop a provision of the bill setting a time limit on cost-studies pursuant to OMB circular A-76 to determine whether an activity currently performed by federal employees should be considered for contracting out to private industry was rejected 148-259. An amendment by Representative Inslee barring the use of funds appropriated by the bill to implement a new personnel system for civilian Pentagon employees, the National Security Personnel System, was adopted by voice vote. An amendment by Representative Issa, barring the use of funds appropriated by the bill to disclose the total intelligence budget for a fiscal year, was adopted by voice vote. The House also rejected several amendments that would have prohibited the used of funds provided by the bill for specific projects not requested by the Administration. Defense Appropriations: Highlights of Senate Committee Action The version of H.R. 3222 , the FY2008 defense appropriations bill, approved September 12 by the Senate Appropriations Committee, provided $448.7 billion in discretionary budget authority, a reduction of $3.5 billion from the President's request for programs falling within the scope of this bill. The Committee deferred action on a separate funding bill to cover the cost of ongoing military operations in Iraq and Afghanistan. Personnel Increase and Pay Raise The Senate Committee's version of H.R. 3222 would support the President's plan to increase the active-duty end-strength of the Army and Marine Corps by a total of 92,000 troops by FY2012. The Committee bill would fund a 3.5% pay raise for military personnel and civilian Defense Department employees, effective January 1, 2008, instead of the 3% pay raise requested by the President. The bill would add a total of $489 million to various accounts to cover the additional cost. Tricare Fees and the Defense Health Program The $23.49 billion the Senate Committee's bill would provide for the Defense Health Program is $949 million more than was requested. The Committee added to the request $1.86 billion for operating expenses the budget assumed would be covered by an increase in the fees and pharmacy co-payments charged to some military retirees participating in the Tricare medical program. Congress has rejected those proposed increases. The bill also would provide $486 million Pentagon officials had cut from the health program's budget as an "efficiency wedge." In its report on the bill, the Committee said it "strongly encourages" DOD not to impose on the health program's FY2009 budget request a planned "efficiency wedge" of $785 million. To fund initiatives in the Senate-passed version of H.R. 1538 , the Dignified Treatment of Wounded Warriors Act, the Committee bill would add to the budget $73 million to improve treatment of Post-Traumatic Stress Disorder and Traumatic Brain Injury. Many of the initiatives created by H.R. 1538 would require mandatory funding that would not be included in the annual defense authorization bills but would have to be offset by reductions to other mandatory spending programs under the jurisdiction of the defense authorizing committees. Long-Range Strike and Nuclear Weapons The Committee bill cut from the request a total of $225 million requested for two programs that would develop long-range, non-nuclear weapons intended to quickly strike targets anywhere around the world. The amounts cut were: $175 million to develop a non-nuclear warhead for the Trident, submarine-launched ballistic missile; and $50 million for the so-called Falcon program being managed by the Defense Advanced Research Projects Agency. The Committee said the conventional Trident project had the disadvantage that the launch of a conventionally-armed missile might be mistaken by an adversary as a nuclear attack. Instead, the Committee added to the budget request $125 million to develop alternatives for rapid, precise non-nuclear attack on distant targets. The Committee also cut $15 million from the amount requested to equip Trident missiles with the first of a family of new nuclear warheads that are intended to be easier to maintain than those currently in service. This is consistent with action taken by the Senate Armed Services Committee in its version of the FY2008 defense authorization bill, a reduction that the Committee said was intended to slow the controversial program to develop a so-called Reliable Replacement Warhead. Shipbuilding Costs and the Littoral Combat Ship The Senate Committee bill would cut $451 million from the $14.3 billion requested for ships in the FY2008 budget. By contrast, the House-passed version of H.R. 3222 added nearly $3 billion (and four ships) to the request (see Table A-6 ). The Senate Committee endorsed the Navy's goal of maintaining a fleet of 313 ships. But it decried the chronic cost growth and delays in Navy shipbuilding programs, blaming those problems on poor management by the service. Whereas the House Appropriations Committee tried to ease the shipbuilding crunch by adding to the bill funds for four more ships than the President requested, the Senate Committee contended that any it would not be possible to build any more ships than currently were scheduled. The Senate Committee singled out for special criticism the Navy's management of its program to build Littoral Combat Ships (LCS), relatively small vessels that could be equipped for various missions using modular weapons systems. Of four LCSs funded in previous budgets, DOD has cancelled one. The FY2008 budget request includes $910 million for three additional ships. But, while endorsing the potential military value of the ships, the Senate Committee said the Navy would have to fundamentally change its acquisition strategy to address problems of cost increases, delays, and performance shortfalls. In addition to denying the requested $910 million, the Committee included in its bill a provision that would rescind $300 million appropriated in FY2007 for one of the three LCSs still under construction, thus cancelling a second of the four ships already funded. On the other hand, the Committee added to the request $81 million to complete construction of the two remaining ships of the four previously funded and an additional $75 million to buy components for use in an another LCS for which funding would be included in the FY2009 budget. In effect, the Committee endorsed the construction of small, low-cost surface combatants, but directed the Navy to restructure the entire program. Selected Other Weapons Programs The Senate Committee bill would fully fund the President's $3.56 billion request to continue development of the Army's Future Combat System (FCS), a networked set of ground vehicles, unmanned aircraft and sensors that would comprise the next generation of ground combat equipment. The House-passed version of H.R. 3222 would cut $434 million from the Army's request for FCS development funding. Some other highlights of the Senate Appropriations Committee's version of H.R. 3222 include the following: Citing uncertainty in the Air Force and DOD about the future of a program to replace the engines on early-model C-5 cargo planes, the bill would cut $25 million from the $191 million requested for the program in FY2008 and would rescind $40 million appropriated for the project in FY2007. Noting that the Air Force's F-22 fighter is just entering service and appears to far outstrip any other country's fighters, the Committee said Air Force plans to develop upgrades for the plane were premature. The Committee cut $132 million from the $744 million requested for additional development work on the F-22. The Committee approved the request for $2.4 billion to buy 12 F-35 Joint Strike Fighters, six apiece for the Navy and Air Force. It also added to the $3.5 billion requested to continue development of the plane $480 million to continue development of a General Electric jet engine as an alternative to the Pratt & Whitney engine selected to power the plane. The increase was partially offset by reductions totaling $283 million, leaving the Committee bill's total appropriation for F-35 development at $3.7 billion. The Committee approved $300 million of the $500 million requested for the so-called Global Train and Equip program which was authorized in FY2006 as a pilot program to allow the Defense Department to train and equip allied country's forces for counterterrorism missions. The Committee said that this mission should be funded through the State Department's budget. The bill would provide $242 million of the $468 million requested for the Armed Reconnaissance Helicopter (ARH) program, funding procurement of 16 of the new craft instead of the 26 in the budget. The new aircraft are intended to replace aging OH-58 choppers currently used for reconnaissance. The Committee said that the program's growing costs, slipping schedule and continued technical problems resulted from an overly ambitious production schedule. The bill also would add to the request $100 million to develop improvements for the OH-58. The House version of the appropriations bill would eliminate funding for the ARH. Citing technical problems in an Air Force program to replace the radar on B-2 stealth bombers, the Committee cut $111 million from the $271 million requested to modify the planes in FY2008 and rescinded $32 million of the funds appropriated for that purpose in FY2007. The cuts were partly offset by the Committee's addition of $38 million to the Air Force research and development budget to fix the problems with the program. The bombers' current radar must be replaced because it operates in a band of the electromagnetic spectrum that the increasingly is being used by the private sector. The bill would provide $120 million of the $500 million requested in the based defense appropriations bill for the Joint Improvised Explosive Device Defeat Organization (JIEDDO), enough to fund the agency through the first quarter of FY2008. The Committee said that DOD had not produced a requested report defining the relationship between JIEDDO—set up to coordinate efforts to defeat the roadside bombs that are a major source of U.S. casualties in Iraq—and other defense and intelligence agencies. Noting that the President has requested an additional $4 billion for JIEDDO in the FY2008 war-fighting budget which Congress will take up in separate legislation, the Committee told DOD to provide the congressional defense committees with a comprehensive and detailed strategic plan for the organization by September 30, 2007. Defense Appropriations: Highlights of Senate Floor Action The Senate passed by voice vote, October 4, its version of the FY2008 defense appropriations bill ( H.R. 3222 ), which had been reported September 12 by the Senate Appropriations Committee. As passed, the bill provided $460.3 billion in discretionary budget authority for DOD and an additional $3 billion for operations of other federal agencies to secure the U.S.-Mexican border. Iraq Deployment At the outset of the debate, Senator Inouye, Chairman of the Defense Appropriations Subcommittee, and Senator Stevens, ranking Republican on that panel, urged senators not to offer controversial amendments relating to the deployment of U.S. troops in Iraq, pointing out that the bill did not contain funding for that ongoing operation. However, Senator Feingold offered an amendment that would have prohibited the use of funds provided by the bill to deploy U.S. troops in Iraq after June 30, 2008. The prohibition would not apply to troops engaged in four missions: conducting operations against Al Qaeda and affiliated terrorist organizations, providing security for U.S. government personnel and installations, training members of the Iraqi Security Forces, and providing training and equipment to other U.S. forces to maintain or improve their safety. The amendment was rejected by a vote of 28-68. Border Security By a vote of 95-1, the Senate adopted an amendment by Senator Graham adding to the bill $3 billion for various steps to tighten security on the U.S. border with Mexico. According to Senator Graham, the funds had been included in the FY2008 Homeland Security Appropriations Bill ( H.R. 2638 ), but that bill faces a veto threat. By unanimous consent, the Senate also adopted an amendment by Senators Hutchison and Cornyn that would modify requirements for a fence along the U.S.-Mexican border established by the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996. The amendment would eliminate requirements for five stretches of fencing at specific locations required by the Secure Fence Act in the 109 th Congress and instead would require the Department of Homeland Security (DHS) to construct not less than 700 miles of reinforced fencing at the border. This new language would give DHS discretion as to where this fencing would be constructed, and would mandate that 370 miles of fencing be completed by December 31, 2008. The amendment would also require DHS to consult with the Secretary of the Interior, the Secretary of Agriculture, states, local governments, Indian tribes, and property owners along the border in order to minimize the potential impact that fencing may have on border communities and the environment; however, the amendment would not create any right of action for these entities concerning border fencing. The Senate also adopted by unanimous consent an amendment by Senator Sessions increasing by $794 million the budget authority provided by the bill with the additional funds intended to continue through FY2008 the deployment of National Guard troops to assist in security operations along the U.S.-Mexican border. Other Amendments By a vote of 53-41, the Senate tabled an amendment by Senator Boxer that would have prohibited the armed services from enlisting anyone convicted of specific felonies, including arson, hate crimes and sexual misconduct with a minor. There is a general prohibition on enlisting convicted felons, which the services have authority to waive on a case-by-case basis—an authority which the amendment would have eliminated for individuals convicted of the specified crimes. Among several other amendments agreed to by unanimous consent was one by Senators Reid and McConnell stipulating that it was not a prohibited gift under recently enacted ethics legislation for an airline to allow members of Congress to book multiple reservations to allow for the uncertainty of congressional schedules, although the general public are not allowed this convenience. Defense Appropriations: Conference Report The conference report on H.R. 3222 would provide $460.3 billion to cover the cost of all DOD activities in FY2008 except for military construction (which routinely is funded in separate legislation) and the cost of ongoing military operations in Iraq and Afghanistan. The conference report does, however, include $11.6 billion in emergency funding to accelerate the procurement of Mine-Resistant Ambush Protected (MRAP) vehicles, which are being rushed to U.S. units in Iraq and Afghanistan because they provide better protection for their occupants against land mines and roadside bombs compared with the protection afforded by conventional troop carriers. Excluding the added MRAP funds, H.R. 3222 would make a net reduction of $3.55 billion from the President's request for non-war costs falling within the scope of the bill. However, among the thousands of specific increases and decreases the bill would make to the President's request are a handful of large reductions, totaling $3.5 billion which, the conferees maintain, would have no adverse impact on DOD operations. These large reductions include: $1.35 billion to take account of changes in the economic assumptions on which the FY2008 request was based when it was being drafted during FY2006; $507 million to compel the Department to reduce its travel costs and persuade its contractors to operate more efficiently; $540 million rescinded from prior year appropriations and, thus, available to replace new budget authority that would have been provided by H.R. 3222 ; $500 million requested by the Navy and Air Force for training exercises by units that would be deployed in Iraq; $628 million to reduce the cash balances held by various revolving funds used to finance maintenance activities; In addition to funding the DOD base budget for FY2008, the conference report on H.R. 3222 also includes a short-term continuing resolution that will allow federal agencies to continue operating through December 14, 2007, even if their FY2008 appropriations bill has not been enacted. In general, the CR allows agencies to spend money at the same rate as if their FY2007 appropriation had simply been extended. However, it provides infusions of additional funds for three programs: $3 billion for the Department of Housing and Urban Development's "Road Home" program, intended to assist persons whose homes were damaged by Hurricanes Katrina and Rita; $2.9 billion for disaster relief efforts of the Federal Emergency Management Agency (FEMA); $500 million for the wildfire fighting efforts by the Forest Service and the Bureau of Land Management. War-Fighting Costs Excluded Pursuant to legislation requiring that funds for combat operations be included in the FY2008 DOD funding request, the President's budget submission to Congress in February 2007 included $141.7 billion for war-fighting costs, an amount increased by budget amendments in July and October to a total of $189.3 billion. Early in the year, however, Democratic leaders in the House and Senate said they would insist on dealing with the cost of the war in legislation separate from the regular DOD appropriations bill that would fund the Pentagon's "base" budget for FY2008. By October, when the House and Senate were moving toward a conference on H.R. 3222 , House Democratic leaders had taken the position that the cost-of-war appropriations bill would not be considered until early in 2008. From the start of combat operations in Afghanistan in 2001 through FY2007, the Administration had relied on supplemental appropriations requests to fund war costs. Congress had added to the regular defense appropriations bills for FY2006 and FY2007 so-called "bridge funds" to cover the cost of combat operations in the first several months of the fiscal year, eliminating any risk that a shortage of funds pending action on the supplemental funding bill might impede the combat effectiveness of troops in the field. The President and some Republican congressional leaders said the decision by Democratic leaders to defer action on the funding request for FY2008 war-fighting costs created a risk of causing just such a debilitating gap in funding for units in the field. But despite Republican objections, the conference report on H.R. 3222 included no bridge fund to sustain operations pending congressional action on a war-cost appropriations bill early next year. Personnel Costs and Medical Care The House and Senate versions of H.R. 3222 both approved the requested FY2008 increment of a multi-year plan to increase the active-duty strength of the Army and Marine Corps by a total of 63,000 soldiers and 29,000 Marines. Both versions also had funded a 3.5%t military pay raise to take effect January 1, 2008, rather than the 3.0% increase requested. The conference report adds to the President's request $309 million to pay for the larger pay hike. However, the companion defense authorization bill that would authorize a pay raise has not yet been enacted. In the absence of legislation authorizing the higher raise, either as a provision of the traditional defense authorization measure or as a rider on some other bill, under current law a smaller pay raise would go into effect on January 1, 2008. As requested, the conference report includes $10.9 billion to cover the future post-retirement medical care of current service members under the Tricare-for-life program. In addition, the conference report would add to the President's request for the Pentagon's health care program $1.9 billion to cover costs of Tricare service to current retirees that the administration had planned to cover by increasing the fees and co-payments charged participants in the program. It also would add to the request $379 million that the Administration had deducted from the cost of the armed services' health care programs as an "efficiency wedge" to encourage the services to reduce their medical costs. Finally, the conference agreement would add to the budget request $70 million to fund projects authorized under the "Wounded Warriors" legislation that has been passed by both the Senate and the House to improve the care of troops wounded in Iraq and Afghanistan, including particularly those suffering from Post-Traumatic Stress Disorder and Traumatic Brain Injury. Shipbuilding The conference report provided a total of $14.6 billion for ship construction, $242 million more than the President had requested. In addition to $13.6 billion provided for the Navy's shipbuilding and modification account, this total includes $756 million for supply ships designed to replenish combat vessels underway on the high seas (funded in the National Defense Sealift Fund) and $210 million for a small, high-speed troop transport being purchased by the Army (see Table A-6 ). In the reports accompanying their respective versions of the FY2008 Defense Appropriations Bill, the Appropriations committees of both the House and Senate warned that the Navy may not be able to reach its goal of having 313 ships in service because several types of ships currently under construction are significantly over budget and behind schedule. One reason for these chronic shortcomings, the conferees said, was the Navy's practice of beginning construction of the lead ship of a new class before the type's design is completed. They directed the Secretary of the Navy to certify to the House and Senate Armed Services and Appropriations committees—before the first ship of any class is built in any shipyard—that the requisite design and development work has been completed. Although the House version of H.R. 3222 had added to the bill $3.1 billion for four ships the Administration had not requested—a transport for amphibious landing forces and three supply ships—the conferees added to the budget request only $350 million for long-leadtime components that could be used in those four vessels. Both versions of the bill, as well as the conference report, also added funds to buy a nuclear power plant and other components for a Virginia-class submarine, items that could be used either to equip a second submarine in FY2009, in addition to the one currently slated for funding, or to remain available as spares. The conferees singled out as a "classic example" of poor Navy management the Littoral Combat Ship (LCS) program, intended to produce 55 relatively small but versatile warships that would comprise about 20% of the Navy's hoped-for 313-ship fleet. Although Congress has appropriated funds for six of the ships, only two are to be built with those funds because of cost increases and technical problems. Although the Navy's FY2008 budget requested $911 million for three additional LCSs, the conference report would provide $340 million for one ship. Ground Combat Vehicles The conference report would provide nearly $3.4 billion—$206 million less than was requested—to continue development of the Future Combat Systems (FCS) program, a digitally-networked fleet of manned and robotic ground and air vehicles slated to be the Army's next generation of combat equipment. The conferees also endorsed the Army's plan to "spin out" of FCS some new technologies that could enhance the performance of existing combat equipment. The conference report would provide the $100 million requested to begin that process (see Table A-5 ). The House bill had added to the budget request $1.1 billion to buy enough Stryker armored combat vehicles to equip an eighth brigade, in addition to the seven planned. The conferees agreed that the Army needs additional Stryker vehicles for many purposes, but recommended that the question of additional purchases be dealt with in the FY2008 war-cost appropriations bill, slated for consideration next year. To continue development of the Marine Corps's Expeditionary Fighting Vehicle, an amphibious armored troop carrier, the conference report provides $253.2 million, a reduction of $35 million from the request, which the conferees attributed to delays in the program. Long-Range Strike and Nuclear Weapons The conference report would cut from the request $175 million intended to equip Trident II submarine-launched long-range missiles with non-nuclear warheads that could quickly strike targets at great distances. Since Trident missiles heretofore have only carried nuclear warheads, critics had warned that, in a crisis, adversaries might interpret the launch of such a missile as a nuclear attack. Also dropped was $50 million requested for a project called Falcon that also was intended to develop a long-range, non-nuclear strike capability. To replace these two programs, the conference report created a $100 million fund to develop long-range, precisely-targetable, non-nuclear weapons. The conference report also reshuffled the funding requested to upgrade an existing long-range strike weapon—the B-2A stealth bomber. The bomber's main target-finding radar must be replaced because it operates at a frequency slated for commercial use. Because development of the new radar is running behind schedule, however, the conferees reduced the amount requested to buy the new system by $100 million, while adding $38 million to the radar R&D effort. The conference report also added to the budget request $10 million to adapt the B-2A to carry a newly developed conventional bomb weighing 30,000 pounds, which is intended for attacks on command posts and other targets buried deep underground. It also added $5.8 million to adapt the bomber to carry a new satellite-guided bomb so small that a B-2A could carry upwards of 200 of the weapons (see Table A-7 ). The conference report also eliminates $15 million that was requested to adapt Trident II missiles to carry a proposed new type of nuclear weapon, called the Reliable Replacement Warhead. Ballistic Missile Defense For all missile defense-related R&D and procurement, the conference report provides $9.9 billion, a reduction of $368 million from the request (see Table A-8 ). Two of the projects for which the conferees cut the funding request are controversial because, critics say, they could elicit undesirable responses from potential adversaries: The conference report cut $85 million from the $310 million requested to deploy in Europe an anti-missile battery similar to those deployed in Alaska and California. The Russian government has protested this plan to position 10 interceptor missiles in Poland and a radar in the Czech Republic, despite the insistence of the U.S. government that the system is intended to guard against long-range missiles that might be launched from Iran. It also denies the $10 million requested for the Space Test Bed, a precursor to developing space-based anti-missile interceptor missiles. Other Issues The conference report also included the following actions relating to the President's FY2008 DOD budget request: It adds to the budget $480 million to continue developing a jet engine developed by General Electric and Rolls Royce as a possible alternative to the Pratt & Whitney engine that currently powers the F-35 Joint Strike Fighter. It provides none of the $500 million requested for the Global Train and Equip program, under which DOD assists the military forces of foreign governments in developing counter-terrorist capabilities. It provides $120 million of the $500 million requested for the Joint Improvised Explosive Device Defeat Organization (JIEDDO), charged with countering the roadside bombs that are the chief source of U.S. casualties in Iraq. It adds to the budget $247 million for Operation Jump Start, the program under which National Guard personnel are assigned to secure U.S. borders. The conference report also directed the Pentagon to exercise more vigorous oversight of private contractors hired to provide services and added to the budget request $48 million to increase the number of DOD employees managing service contractors. It also directed the Secretary of Defense to develop within 90 days of the bill's enactment standards of medical and mental and moral fitness that would be applied to private contractor employees performing security functions on a DOD contract. For Additional Reading Overall Defense Budget CRS Report 98-756, Defense Authorization and Appropriations Bills: FY1970-FY2008 , by [author name scrubbed] (pdf) CRS Report MM70099, FY2008 Defense Budget: Issues for Congress - Seminar Slides , by [author name scrubbed] et al., February 12, 2007. CRS Report RL33405, Defense: FY2007 Authorization and Appropriations , by [author name scrubbed]. CRS Report RL33900, FY2007 Supplemental Appropriations for Defense, Foreign Affairs, and Other Purposes , coordinated by [author name scrubbed]. CRS Report RL33427, Military Construction, Military Quality of Life and Veterans Affairs: FY2007 Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Military Operations: Iraq, Afghanistan, and Elsewhere CRS Report RL33837, Congressional Authority to Limit U.S. Military Operations in Iraq , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33803, Congressional Restrictions on U.S. Military Operations in Vietnam, Cambodia, Laos, Somalia, and Kosovo: Funding and Non-Funding Approaches , by [author name scrubbed] et al. CRS Report RS20775, Congressional Use of Funding Cutoffs Since 1970 Involving U.S. Military Forces and Overseas Deployments , by [author name scrubbed]. CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 , by [author name scrubbed]. CRS Report RL33298, FY2006 Supplemental Appropriations: Iraq and Other International Activities; Additional Hurricane Katrina Relief , by [author name scrubbed] et al. CRS Report RL32170, Instances of Use of United States Armed Forces Abroad, 1798-2008 , by [author name scrubbed]. CRS Report RL33532, War Powers Resolution: Presidential Compliance , by [author name scrubbed]. U.S. Military Personnel and Compensation CRS Report RL33571, The FY2007 National Defense Authorization Act: Selected Military Personnel Policy Issues , by [author name scrubbed] et al. CRS Report RL33537, Military Medical Care: Questions and Answers , by [author name scrubbed]. CRS Report RL33446, Military Pay and Benefits: Key Questions and Answers , by [author name scrubbed]. CRS Report RL33449, Military Retirement, Concurrent Receipt, and Related Major Legislative Issues , by [author name scrubbed]. CRS Report RL31334, Operations Noble Eagle, Enduring Freedom, and Iraqi Freedom: Questions and Answers About U.S. Military Personnel, Compensation, and Force Structure , by [author name scrubbed]. Defense Policy Issues CRS Report RS22443, Border Security and Military Support: Legal Authorizations and Restrictions , by [author name scrubbed]. CRS Report RL33153, China Naval Modernization: Implications for U.S. Navy Capabilities—Background and Issues for Congress , by [author name scrubbed]. CRS Report RL31404, Defense Procurement: Full Funding Policy—Background, Issues, and Options for Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22149, Exemptions from Environmental Law for the Department of Defense (DOD) , by [author name scrubbed]. CRS Report RS21754, Military Forces: What Is the Appropriate Size for the United States? , by [author name scrubbed]. CRS Report RS22266, The Use of Federal Troops for Disaster Assistance: Legal Issues , by [author name scrubbed] and [author name scrubbed]. Defense Program Issues CRS Report RL32123, Airborne Laser (ABL): Issues for Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32888, The Army ' s Future Combat System (FCS): Background and Issues for Congress , by [author name scrubbed]. CRS Report RS22120, Ballistic Missile Defense: Historical Overview , by [author name scrubbed]. CRS Report RL32347, " Bunker Busters " : Robust Nuclear Earth Penetrator Issues, FY2005-FY2007 , by Jonathan Medalia. CRS Report RL33067, Conventional Warheads for Long-Range Ballistic Missiles: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL31673, F-22A Raptor , by [author name scrubbed]. CRS Report RL33240, Kinetic Energy Kill for Ballistic Missile Defense: A Status Overview , by [author name scrubbed]. CRS Report RS20851, Naval Transformation: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL32418, Navy Attack Submarine Procurement: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL32109, Navy DDG-1000 and DDG-51 Destroyer Programs: Background, Oversight Issues, and Options for Congress , by [author name scrubbed]. CRS Report RL33955, Navy Force Structure: Alternative Force Structure Studies of 2005 - Background for Congress , by [author name scrubbed]. CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by [author name scrubbed]. CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by [author name scrubbed]. CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background, Oversight Issues, and Options for Congress , by [author name scrubbed]. CRS Report RL32513, Navy-Marine Corps Amphibious and Maritime Prepositioning Ship Programs: Background and Oversight Issues for Congress , by [author name scrubbed]. CRS Report RL31957, Nonproliferation and Threat Reduction Assistance: U.S. Programs in the Former Soviet Union , by [author name scrubbed]. CRS Report RL32572, Nonstrategic Nuclear Weapons , by [author name scrubbed]. CRS Report RL32929, The Reliable Replacement Warhead Program: Background and Current Developments , by Jonathan Medalia. CRS Report RL33745, Sea-Based Ballistic Missile Defense—Background and Issues for Congress , by [author name scrubbed]. CRS Report RL33543, Tactical Aircraft Modernization: Issues for Congress , by [author name scrubbed]. CRS Report RL32476, U.S. Army ' s Modular Redesign: Issues for Congress , by [author name scrubbed]. CRS Report RL31623, U.S. Nuclear Weapons: Changes in Policy and Force Structure , by [author name scrubbed]. CRS Report RS21048, U.S. Special Operations Forces (SOF): Background and Issues for Congress , by [author name scrubbed]. CRS Report RL33640, U.S. Strategic Nuclear Forces: Background, Developments, and Issues , by [author name scrubbed]. Appendix. Funding Tables

The President's FY2008 federal budget request, released February 5, 2007, included $647.2 billion in new budget authority for national defense including $483.2 billion for the regular operations of the Department of Defense (DOD), $141.8 billion for military operations in Iraq and Afghanistan, $17.4 billion for the nuclear weapons and other defense-related programs of the Department of Energy, and $4.8 billion for defense-related activities of other agencies. On July 31, 2007, the President requested an additional $5.3 billion for war-fighting costs, and on October 22 he requested an additional $42.3 billion for that purpose, bringing his total request for FY2008 war costs to $189.3 billion and the total national defense request to $694.8 billion. The Congressional Budget Office (CBO) estimated the cost of the President's proposal as $696.4 billion. The House passed on May 17 its version of the defense authorization bill, H.R. 1585, approving $1.2 billion more than the President's then-pending request. The Senate passed its version of the bill October 1. The conference report on the bill, authorizing $696.4 billion—$21 million less than the request—was adopted by the House on December 12 and by the Senate on December 14. On December 28, the White House announced that the President would "pocket veto" the authorization bill—a procedure that would preclude efforts by Congress to override the veto. The President objected to a provision of the bill that would allow lawsuits in U.S. courts against the current Iraqi government for damages resulting from acts of the Saddam Hussein regime. On January 16, the House passed H.R. 4986, a version of H.R. 1585 that was modified to allow the President to waive application to Iraq of the provision that he had cited as grounds for his veto. The new version of the bill also would make retroactive to January 1, 2008 a 3.5% pay raise for military personnel and the renewal of authorization for several types of bonuses, including enlistment and re-enlistment bonuses. The Senate passed the bill January 22. Reportedly, the President is expected to sign the bill. The House passed its version of the FY2008 defense appropriations bill on August 5. The bill, H.R. 3222, provided $448.7 billion in discretionary budget authority for DOD's "base" budget, $3.6 billion less in discretionary budget authority than the $452.2 billion the President requested for operations within the scope of that legislation. The Senate version of H.R. 3222, passed by voice vote on October 4, 2007, provided $449.5 billion in discretionary DOD budget authority plus $3 billion to better protect U.S. borders. Each version of the bill also included $10.9 billion required by a permanent appropriation for military retirees' medical care. House-Senate conferees on H.R. 3222 concluded on November 6 a conference report that would appropriate $448.7 billion plus $11.6 billion to acquire MRAPs. The House and Senate each adopted the conference report on November 8. On November 13, the President signed the appropriations bill into law (P.L. 110-116). This report will be updated as events warrant.

Existing Obligations under the UNFCCC All Parties to the 1992 United Nations Framework Convention on Climate Change (UNFCCC), including the United States, have a host of common obligations under the treaty. These include to inventory, report, and control their human-related GHG emissions, including from land use; cooperate in preparing to adapt to climate change; seek to mobilize financial resources; and, through the Conference of the Parties (COP), assess and review the effective implementation of the Convention, including the commitments therein. As a framework convention, this treaty provides the structure for collaboration and evolution of efforts over decades, as well as the first qualitative step in that collaboration. The UNFCCC does not, however, include quantitative and enforceable objectives and commitments. The overall objective of the UNFCCC (as stated in Article 2 of the treaty) is to stabilize GHG concentrations in the atmosphere at a level that would prevent dangerous human-induced interference with the Earth's climate system. While further articulation of the purpose of an agreement is expected in the negotiations at the 21 st meeting of the Conference of the Parties (COP21) in Paris, most Parties understand the work of the COP to be identifying next steps to bring their GHG emission trajectories more closely in line with meeting the Article 2 objective of the UNFCCC. The Mandate for a December 2015 Agreement At COP17 in December 2011, Parties to the UNFCCC adopted the Durban Platform for Enhanced Action, which launched a new round of negotiations aimed at developing a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties … no later than 2015 in order to adopt this protocol, another legal instrument or an agreed outcome with legal force at the twenty-first session of the Conference of the Parties and for it to come into effect and be implemented from 2020. Since that time, the negotiations have proceeded under what is called Workstream 2 of the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP). Their efforts to date have produced the draft text of an agreement and a decision by the Conference of the Parties intended for adoption at COP21. In addition, more than 174 Parties to the UNFCCC—almost 90%—voluntarily submitted Intended Nationally Determine d Contributions (INDCs) prior to the Paris conference, with almost all containing pledges to limit or reduce their GHG emissions. Many specify policies and measures already enacted or planned to achieve their INDCs. Many also include intentions to adapt to expected climate change, and many seek assistance in the way of financing, technology cooperation, or support to build technical and governance capacities to meet their pledges. What Is Likely in an Expected Agreement and Decision If the Paris negotiations succeed in resolving the major disputes, they are likely to yield at least two agreements: an Agreement (hereinafter capitalized)—which many expect to be legally binding; and a Decision (hereinafter capitalized) by the COP that would adopt the Agreement under the UNFCCC and include provisions intended to "give effect to the Agreement." The Decision would lay out follow-up processes for the Parties, tasks for the Secretariat, and possibly include related provisions that could be legally binding under the Convention. The Decision may also identify issues not resolved at COP21 that should be decided by the Parties in 2016 and beyond. Most Parties have indicated an intention to negotiate a legally binding Agreement; however, their willingness to include specific provisions that legally bind them to substantive obligations is less clear. For example, the UNFCCC already contains many legally binding obligations for all Parties; however, the United States delegation may oppose an Agreement that would establish new substantive obligations on the United States, such as making the GHG emission reduction in the U.S. INDC legally binding. Likewise, there are a number of Parties currently treated as developing countries (because they are not listed in Annex I of the Convention) that have submitted INDCs conditional on receiving financial assistance to achieve their pledges. These countries oppose any provisions that would make such contributions legally binding under the Agreement without these conditions. Thus, even a legally binding Agreement is likely to include provisions that are exhortatory ("should"), not binding ("shall"). Very broad participation has already been achieved by the negotiating process. For example, while only a few Annex I Parties of the 1992 UNFCCC took on specific obligations to produce national plans to mitigate their GHG emissions (e.g., under the Kyoto Protocol), already a large majority of Parties to the UNFCCC have submitted INDCs in preparation for the COP21. Many, if not most, Parties may abide by their pledges even if they are not legally enforceable. China's chief negotiator stated on November 19 that "China will ensure that the INDC targets will be accomplished in whatever circumstances. The Chinese government and the Chinese people will abide by our promises." Others, such as Mexico, the European Union, and the United States have already enacted much of their programs into law—though the United States faces uncertainty while the Clean Power Plan, a major regulation to reduce emissions from power plants, is being challenged in litigation. While pledges to provide financial assistance to low-income countries had heretofore been restricted to the highest-income "developed country" Parties, the recent negotiations have sparked countries across the economic spectrum to announce their intentions to contribute to global climate finance. For example, China recently announced a pledge to provide $3.1 billion in new financing to developing countries. Further, countries such as Chile, Colombia, Indonesia, Mexico, Mongolia, and Peru have pledged financial contributions to the Green Climate Fund. Nonetheless, as discussed below, resolving how to embody "differentiation" in a new Agreement may be one of the most challenging issues in Paris. (See text box above.) The expected Agreement is likely to require all Parties to communicate Nationally Determined Contributions (or Commitments) (NDCs) that include self-differentiated pledges to mitigate their GHG emissions according to guidelines clearly defined by the COP meeting as the Parties to the Agreement (the CMA). Flexibility in the schedule and content of these communications may be extended to countries with the lowest capacity. A requirement to submit communications is not a foregone conclusion, however, as some developing country Parties continue to oppose such an obligation for themselves. Many observers expect the Agreement to include some exhortations or requirements for Parties to include progression , or at least not allow "backsliding," on the GHG mitigation in their NDCs. There may be exceptions, particularly for developing countries, in the event of natural disasters or other catastrophes that interrupt their efforts. Adaptation is very likely to take a higher profile in the Paris Agreement in comparison to past accords, and possibly will be a required component of NDCs. The most likely adaptation options are processes that enhance cooperation, including sharing of information and building of technical and governance capacities. The final texts may raise the priority of adaptation for available funds. Specification of amounts of financing, or scaling up levels of financing, seems unlikely, as it is likely to be particularly contentious within the overall financing debate (discussed below). The Agreement seems likely, at a minimum, to reiterate existing obligations (under the UNFCCC) for financing, technology cooperation, and capacity-building. It may recall the existing collective pledge to aim to mobilize $100 billion annually by 2020 to assist developing country Parties. Less likely options would set that amount as a floor for the post-2020 period, with other options implying mandatory increases in perpetuity from 2020. Calls for guidelines for (transparent) reporting and review of financing and other means to assist Parties to meet their obligations could make it into a final Agreement. Alternatively, they could be included in the Decision. Parties seeking to strengthen existing guidelines under the Convention to improve transparency of non-Annex I Parties' GHG mitigation policies and performance may need to trade them off with accepting greater transparency for financing. Any new guidelines for financial arrangements are likely, however, to include balance between reporting from donors and recipients. An Agreement would likely include review and resubmittal of NDCs through the life of the Agreement to provide durability over time. It is less certain that accord would be reached on a periodicity of every five years. Greater flexibility and assistance would likely be given to the Least Developed Country Parties (LDCs). A Global Stocktake would periodically—possibly every five years—review the performance of Parties in aggregate against the objective of the UNFCCC or a long-term goal (e.g., avoiding an increase of global mean temperature of 2 o C or 1.5 o C above the pre-industrial level) if set in the Agreement. It would presumably review the NDCs as well as the aggregate performance in terms of GHG emissions, adaptation, and assistance given or received (the "means of implementation" or MOI). Key Challenges to Adoption of an Agreement Parties to Watch There remain many strongly held differences in "must-have" positions among negotiating Parties. Some positions may be so critical to a Party that the Party would be willing to block a consensus to adopt an Agreement or Decision. Countries to watch in this regard include (but are not limited to) the United States, India, Saudi Arabia, South Africa, the African Group of countries, and/or the Group of 77 and China. Many views remain strenuously argued and diametrically opposed, as described below. France, as host of the talks, is determined to conclude a legally binding Agreement in Paris. Its determination may influence the European Union as well, potentially inducing compromise on their highest-priority positions. Issues on Which Resolution May Not Be Reached Divisions are so great and positions so strongly held on some issues that resolution may be elusive into the final hours of the Paris sessions, or beyond. The most difficult issues include whether the agreement perpetuates the UNFCCC's principle of differentiation among Parties as a bifurcation into "developed country Parties" and "developing country Parties," or permits a self-determined continuum that evolves through the Agreement. Placeholders to define "developed country Parties" and "developing country Parties" appear in the Definitions article of the draft as well; whether quantified pledges for GHG emission mitigation and/or financing are legally binding for all Parties, only developed country Parties, or no Parties; whether to further characterize, in the Agreement, the UNFCCC's objective as avoidance of a temperature goal (2 o C, 1.5 o C, or well below either), or to "decarbonize" economies, and whether the responsibilities to achieve any long-term goal might be allocated to Parties individually; whether financing heretofore pledged collectively by most of the highest-income Parties, to aim to mobilize $100 billion annually by 2020, should be included in the Agreement, quantified, required to continually increase over time, be prescribed by formula, or be limited to "developed country Parties" rather than all Parties "in a position to do so." Some propose a major break from the UNFCCC's commitment to support "agreed incremental costs" to help developing countries meet their substantive obligations, by adding options to meet all the country-specified needs of all developing countries. Some proposals would alter the terms of pledged financing to require it to come entirely, or in large part, from public funds (i.e., as opposed to private sector or alternative methods of financing); whether a transparency framework would apply only to developed country Parties or to all Parties, based on a criterion (e.g., regarding a Party's capacity), immediately or at a designated time in the future. Some Parties assert that international reviews violate national sovereignty, while others point out that those countries have already acceded to more rigorous reviews (for example, by the International Trade Organization or the International Monetary Fund); whether the Agreement will contain principles or provisions to address "loss and damage" beyond the existing processes of the Warsaw Mechanism. Parties that perceive themselves as vulnerable to climate change seek provisions to provide them with funds for "loss and damage" that they may suffer even with adaptation efforts. Some Parties may hold out for commitments to providing funds, such as a portion of the Green Climate Fund, and means to relocate populations displaced by climate change. More likely options would explore and support cooperation on risk management and risk transfer (i.e., through insurance); additional challenges including the provision for technology cooperation and transfer; support for sustainable development policies; methods to facilitate compliance; strategies to control international emissions (e.g., from international aviation and shipping); and the role that market-based mechanisms and the private sector would play in Parties meeting their NDCs. Challenging Issues Less Likely to Impede Agreement Technology cooperation or transfer: Existing processes to encourage technology development and diffusion are likely to continue, though some Parties have proposed options for developing countries to receive finances for research and development, or intellectual property rights, at no cost. Others oppose such proposals. Facilitating compliance with the Agreement: The Kyoto Protocol included stronger mechanisms to assess and encourage compliance with its binding GHG targets; the Agreement may include provisions that build on those hard-negotiated provisions. The most likely options in the draft include advice and assistance to Parties that need it, or preparations of "statements of concern," to less likely processes that could result in a "declaration of non-compliance" to requirements that a Party prepare a "compliance action plan." GHG emissions from international transport: The European Union and others requested reinsertion in the draft a proposal to address GHG emissions from international aviation and shipping. The proposal calls for a process, mandatory or exhortatory, to pursue "concrete measures" to limit or reduce these emissions. Currently, Parties are required to inventory and report these emissions, but the emissions were not included in the mitigation targets in the Kyoto Protocol. Rather, the International Civil Aviation Organization and the International Maritime Organization were tasked with addressing those emissions. Market- and non-market mechanisms: Most of the Annex I Parties seek to permit market-based mechanisms (emissions trading or pricing) as a means to help meet their GHG mitigation pledges. Other Parties oppose market-based mechanisms, but propose non-market approaches, the mechanism for sustainable development mentioned above, or other cooperative approaches. Some Parties expressed concern about some or all of these approaches because of concerns about reliable accounting and accountability for emission reductions. Relatively Uncontroversial Provisions Notwithstanding the disagreements above, a number of items appear agreed upon in the draft texts, including most of the legal and institutional arrangements. For example, the Agreement would establish the Conference of the Parties of the UNFCCC as its "supreme body." It will likely be referred to as the CMA when it is the Conference of the Parties meeting as the meeting of the Parties to the Agreement . The Secretariat, existing subsidiary bodies of the Convention, and additional legal and institutional provisions are largely resolved in the draft, though some are yet to be agreed upon—particularly whether there will be constraints placed on becoming a party to the Agreement or on voting rights, based on compliance with its provisions. Much of the information that must be provided by Parties in their NDCs is already agreed upon, with few exceptions, either in an existing decision of the COP or in unbracketed text in the Decision. Its placement in the Agreement or the Decision remains under discussion. There remains a placeholder in the draft regarding whether a Party may place reservations on its accession to the Agreement. This placeholder is conceivably a flexibility that could aid reaching accord on issues that may not be resolvable in the December timeframe. Withdrawal would be allowed, though the terms remain under discussion. Is Time Running Out? Many observers have noted the limited number of days until the official deadline for reaching agreement. Despite efforts to slim down the draft texts in the October 2015 negotiating COP21 session, the draft Agreement text grew from about 20 to more than 50 pages. Many textual options are unlikely to be resolved until late in the scheduled session, if at all. Even a number of provisions in the draft Agreement and Decision that may not be as controversial would still depend on resolution of more difficult disagreements. Assuming many controversies remain until late in the session, this leaves a few options for the Parties: (1) to slim down what is in the Agreement and possibly the Decision, (2) to extend the Paris sessions, and/or (3) to postpone many provisions to later meetings. If the objective is to stabilize GHG concentrations in the atmosphere, one may conclude that it will take much longer than December 2015 to judge the degree to which the Paris negotiations may lead to "success." Measuring Success; and If an Agreement Isn't Reached…. Many people's expectations before the 2009 COP in Copenhagen were raised to unrealistic heights. When the COP was unable to adopt a legally binding decision, many concluded that the Copenhagen meeting was a failure. Others who opposed international efforts to address climate change viewed Copenhagen's outcome as fortuitous. Others note advances arguably achieved in the Copenhagen Accord and its follow-up actions. Once again, the expectations of many to adopt a legally binding decision during the upcoming Paris talks have been raised. What may be the consequences if Parties are unable to adopt an Agreement at COP21? On the one hand, most of the largest emitters do not appear likely to roll back their GHG reduction intentions if there were no legally binding outcome in Paris. As noted earlier, China's chief negotiator stated in November 2015 that "China will, under any circumstances, fulfill its INDC pledge… Once we make a promise and set a target, we will carry it through no matter what challenges we face." Mexico and South Korea have set their programs into law for the most part, as have a number of other emerging economies. The absence of an agreement may not have an effect on other Parties' pledges, as observers have noted that some pledges do not go beyond business-as-usual trajectories. Russia's INDC is consistent with its economy-oriented efforts to improve energy and industrial efficiency and with its growing forests. Some analysts conclude that China may peak its emissions earlier than its target of 2030 because of its efforts to reform the economy; ensure energy security; and reduce pollution, traffic, and water demand. Others suggest a similar situation for India. On the other hand, some Parties, including the United States, have yet to put policies in place that will fully achieve their INDCs. Further, some Parties have indicated that they would condition achieving their INDCs on adequate international financing; the financing they anticipate may not be forthcoming without an Agreement, though an Agreement may not include all the financing they anticipate, either. Finances reportedly available to assist low-income Parties were $62 billion in 2014 under the non-binding 2010 Cancun pledge, though not (yet) the $100 billion pledged by 2020. Most of those funds are coming from philanthropic and other private sources, not dependent on public funds. The funds are well below what some say are needed and some Parties are proposing in the Paris negotiations. It is unclear whether reaching a binding agreement—or not—in Paris would substantially affect financial flows over time. Market-based and cooperative mechanisms may emerge in the context of quantified pledges made that further increase available financing. One impact, if no binding agreement were reached in Paris, might be on advocates of international accords as a vehicle to promote cooperative climate change policies and of treaties under the United Nations more generally. Disillusionment with the UNFCCC process may increase. This could shift efforts to other venues, including sub-national governments, bilateral agreements, and pressure on private companies. Such shifts may yield faster results, and likely more diverse and fragmented ones. Any assessment that Paris may "fail" is significantly premised on the idea that outcomes are driven by the international process, rather than by nations themselves determining their own policies and actions; or that the United Nations negotiations can drive governments to go beyond what domestic impetus and support provide. Numerous analyses, however, have argued that this is not the case. For example, the Kyoto Protocol may have extracted binding commitments from several countries that were beyond what could be achieved in domestic policies and politics. But those commitments were not accompanied in all cases with GHG emission reduction outcomes. A significant component of the arrangements in Paris is inclusion of civil society and non-state entities in the events. Associated events will highlight efforts of indigenous communities, youth, women, local governments, states, and provinces to address their GHG emissions and to adapt to climate change. Programs centered on private sector initiatives are also scheduled, and the French government is striving to compile and sustain a focal point for sharing information on their performance. The Agreement itself, for the first time, contains draft text explicitly acknowledging and inviting broad participation in achieving the objective of the UNFCCC. Many observers have noted the greater inclusiveness of the process. The Role of Congress in Approving a New Climate Agreement23 The UNFCCC is legally binding on the United States—the United States ratified the agreement and it entered into force in 1994. Although the UNFCCC does not require the United States to meet any specific GHG emission reduction targets, the subsidiary agreement, currently being negotiated, potentially could impose binding quantitative emission reductions on parties to that agreement. On the other hand, it is also possible that the new subsidiary agreement would not impose any new legal obligations on the United States, but merely provide for political support or aspirational goals. Whether the new subsidiary agreement would require congressional action depends on the nature and content of the agreement. If the agreement were to impose new legal obligations on the United States concerning emission reduction targets, then congressional action would likely be required for that agreement to have legal force in the United States. During Senate deliberations on the UNFCCC in 1992, George H.W. Bush Administration officials testified that, in the view of the Administration, the degree of congressional involvement in U.S. adoption of any future protocols to the UNFCCC would depend on the nature of those agreements. The Administration also declared that any future agreement containing specific GHG emission targets likely would need to take the form of a treaty and be submitted to the Senate for advice and consent to ratification, stating: [T]reatment of any given protocol would depend on its subject matter.... If a protocol [containing targets and timetables] were negotiated and adopted, and the United States wished to become a party, we would expect such a protocol to be submitted to the Senate.... We would expect amendments [to the Convention] to be submitted to the Senate [for its advice and consent]. However, should there be an amendment which we did not believe would require Senate advice and consent, we would consult with the Senate prior to such a determination. The George H.W. Bush Administration noted, as an example, that changes to the lists of parties included in Annex I and Annex II of the UNFCCC would likely not be submitted to the Senate: "Normally the Senate does not approve changes to the parties in the agreement." Correspondingly, the Senate Committee on Foreign Relations wrote in its report on the treaty: [A] decision by the Conference of the Parties to adopt targets and timetables would have to be submitted to the Senate for its advice and consent before the United States could deposit its instruments of ratification for such an agreement. The Committee notes further that a decision by the executive branch to reinterpret the Convention to apply legally binding targets and timetables for reducing emissions of greenhouse gases to the United States would alter the "shared understanding" of the Convention between the Senate and the executive branch and would therefore require the Senate's advice and consent. Currently, the UNFCCC does not require any specific (i.e., quantified and binding) reductions in GHG emissions. Therefore, it would appear that a new agreement that contains specific targets for GHG emission reduction would impose new obligations on the United States. The understanding of the Senate and the executive branch at the time of U.S. ratification of the UNFCCC, along with U.S. historical practice concerning the entering of major environmental agreements, supports the view that any new legally binding agreement requiring a quantified obligation of the United States to reduce GHG emissions would need to take the form of a treaty, ratified by the President with the advice and consent of the Senate. Parties to the UNFCCC could negotiate a subsidiary agreement that may not be legally binding. The United States regularly makes agreements with foreign entities that are not intended to be legally binding, either as a matter of international or domestic law. The executive branch has often entered into these agreements without seeking approval from Congress. While adherence to such arrangements might carry significant moral or political weight with their participants, these non-legal arrangements do not have the effect of modifying participants' existing legal obligations under domestic statutes and international legal agreements. The primary means Congress uses to exercise oversight authority over the making of non-legally binding agreements is through its appropriations power or via other statutory enactments, by which it may limit or condition actions the United States may take in furtherance of the arrangement. The United States' 2009 pledge to reduce GHG emissions to 17% below 2005 levels by 2020 as follow up to accordance with the Copenhagen Accord is not legally binding on the United States. The Obama Administration averred that it did not require congressional approval to make this non-legal pledge. Security at the Paris Venues A set of terrorist attacks in Paris on November 13, 2015, raised questions about the security of the planned Paris COP-related events. The government of France announced the negotiations will be held but, in a "difficult decision," it added The "Generations" venue will host throughout the Conference more than 300 events, discussions, and meetings. Public gatherings, in numerous events, are also anticipated throughout France. All the events will proceed, except school trips, at the conference site at Bourget. Officials stated that all programs in closed and secure spaces would continue. However, security measures will be strengthened. Related CRS Products CRS Insight IN10153, Climate Summit 2014: Warm-Up for 2015 , by [author name scrubbed]. CRS Report R41889, International Climate Change Financing: The Green Climate Fund (GCF) , by [author name scrubbed] CRS Report R41845, The Global Climate Change Initiative (GCCI): Budget Authority and Request, FY2010-FY2016 , by [author name scrubbed] CRS In Focus IF10239, President Obama Pledges Greenhouse Gas Reduction Targets as Contribution to 2015 Global Climate Change Deal , by [author name scrubbed] CRS In Focus IF10248, China's "Intended Nationally Determined Contribution" to Addressing Climate Change in 2020 and Beyond , by [author name scrubbed] CRS In Focus IF10296, New Climate Change Joint Announcement by China and the United States , by [author name scrubbed] CRS Report R44092, Greenhouse Gas Pledges by Parties to the United Nations Framework Convention on Climate Change , by [author name scrubbed] CRS Report R40001, A U.S.-Centric Chronology of the United Nations Framework Convention on Climate Change , by [author name scrubbed]

The Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) convenes for the 21st time (COP21) in Paris, France, from November 29 to December 11, 2015. The United States ratified the UNFCCC in 1992. Accordingly, the United States and the other 195 UNFCCC Parties already have legally binding but qualitative obligations under the treaty. COP21 intends to finalize an agreement under the UNFCCC to address climate change from 2020 on. A major focus is to lay out a path toward stabilizing greenhouse gas (GHG) concentrations in the atmosphere to avoid a 2o Celsius (3.6oF) increase in global temperature. The expected agreement would replace the Kyoto Protocol, to which the United States is not a Party. The Kyoto Protocol contains obligations for a limited set of the highest income countries to the year 2020. This report identifies critical issues regarding (1) the expected Paris Agreement and (2) a Decision that would give effect to the Agreement. The Congressional Research Service (CRS) draws on the draft negotiating texts, publicly available reports, and commentaries to suggest likely outcomes. These are not predictions. While many stakeholders are optimistic that agreement will be reached, the conclusions are far from certain. There are many issues under negotiation. The main issues include (with key terms italicized) the following: Which provisions will be legally binding, and on which Parties? Will responsibilities be differentiated among Parties with different circumstances and capacities? Will all Parties agree to modify the existing bifurcation into Annex I and developing country Parties? Is resolution possible if the Agreement does not ensure differentiated but efficacious participation of all Parties? Will a durable Agreement, intended to provide a multi-decade framework, include binding processes for all Parties to ensure progression toward the long-term UNFCCC objective? Might greater priority be given to adaptation to climate change, particularly with regard to financing and capacity-building? Will Parties find common ground on Means of Implementation (MOI), including assistance in financing, capacity building, and access to technologies? Will all Parties accept a common transparency framework with international reviews of national performance and consultations to address noncompliance? Would Parties with historically high contributions to current GHG concentrations agree to address loss and damage from climate change, or would Parties that feel most vulnerable to climate change accept an agreement without it? Will an agreement set long-term goals to avoid future temperature increases of 2o Celsius (3.6oF) or lower, or to impose deadlines to achieve decarbonization of economies? Legal form and force: A new agreement could be internationally legally binding but not add legally binding obligations for the United States. If it does not, a new agreement may constitute an executive agreement that may not require the advice and consent of the Senate under the Constitution. Some in Congress, however, suggest that an executive agreement could be an "end run" or violate the treaty clause of the Constitution. Financing: Financing beyond 2020 remains a crucial issue for the Paris deal. Some Parties seek to make financing pledges legally binding; scale up amounts on a timetable; restrict contributors to public funds from developed country Parties, and pay for loss and damage in developing countries. The United States and many current donor countries oppose proposals to pay for loss and damage. Worldwide Participation: Very broad participation has already been achieved by the negotiating process. While only a few Annex I Parties of the 1992 UNFCCC took on specific obligations to produce national plans to mitigate their GHG emissions, 174 Parties to the UNFCCC—almost 90%—voluntarily submitted Intended Nationally Determined Contributions (INDCs) prior to the Paris conference, almost all containing pledges to limit or reduce their GHG emissions.

A Brief Overview of the ACA The ACA has 10 titles ( Table 1 ), and each title has many provisions. The provisions in Titles I-VIII largely relate to how health care in the United States is financed, organized, and delivered. Title IX contains revenue provisions. Title X reauthorizes the Indian Health Care Improvement Act, establishes some new programs and requirements, and amends provisions included in the other nine titles of the ACA. A primary goal of the ACA was to increase access to affordable health care for the medically uninsured and underinsured. To that end, the law includes a complex set of interconnected provisions that address the private health insurance market and the Medicaid program. For instance, the law established financial subsidies for eligible individuals purchasing private insurance through health insurance exchanges and expanded eligibility for Medicaid. The costs to the federal government of expanding access to private insurance and Medicaid coverage were projected to be offset by increased taxes and revenues and by reduced spending on Medicare and other federal health programs. The ACA established several new taxes on firms in the health care sector and expanded existing taxes on individuals. The law includes many different provisions affecting the Medicare program, such as provisions concerning payment and program modifications to Medicare's fee-for-service program, the Medicare Advantage program, and the outpatient prescription drug program. In addition, the ACA contains hundreds of other provisions that address health care access, costs, and quality. The ACA includes provisions intended to increase the primary care and public health workforce, promote preventive services, and strengthen quality measurement, among other things. Other ACA provisions include programs to prevent elder abuse, neglect, and exploitation; a new regulatory pathway for licensing biological drugs shown to be biosimilar or interchangeable with a licensed biologic; and new nutrition labeling requirements for chain restaurant menus and vending machines. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) issued the first cost estimate of the ACA on March 20, 2010. They issued an updated estimate in February 2011. According to the February 2011 estimate, the ACA would reduce federal deficits by $210 billion over the 10-year period FY2012-FY2021, and the number of non-elderly uninsured individuals would be reduced by about 34 million in CY2021. CBO and JCT have not issued an updated cost estimate of the ACA in its entirety since February 2011; however, they have issued many other ACA-related cost estimates and analyses. The estimates have changed over time due to changes in the economy, the effects of enacted legislation, technical changes in the agencies' analyses (e.g., new survey and agency data on enrollment in health care programs), and the effects of administrative and judicial decisions (e.g., the 2012 U.S. Supreme Court decision effectively making state participation in the ACA Medicaid expansion voluntary). ACA Provisions in Enacted Laws Table 2 summarizes legislation amending the ACA that has been enacted since March 30, 2010. Each table entry identifies the Congress in which the law was enacted, provides the public law number and date of enactment, and offers a brief description of the change(s) made to the ACA. The laws are listed in reverse chronological order, beginning with the most recently enacted legislation and extending back to the first measure signed into law following enactment of the ACA and the accompanying package of amendments in the HCERA. During the 111 th Congress, a number of clarifications and technical adjustments to the ACA were enacted. In the 112 th -115 th Congresses, several more substantive ACA amendments were signed into law. For example, Title VIII of the ACA—the Community Living Assistance Services and Supports (CLASS) Act—which would have established a voluntary, long-term care insurance program to pay for community-based services and supports for individuals with functional limitations was repealed. Lawmakers also repealed a tax-filing provision (IRS Form 1099) that had been included in the ACA. In multiple separate legislative actions, lawmakers both appropriated funding for programs established under the ACA (e.g., the Community Health Center Fund) and rescinded funding for other programs established under the ACA (e.g., the Prevention and Public Health Fund). In compiling Table 2 , CRS made decisions about which laws—or which specific provisions in a particular law—to include. CRS elected to include only those provisions that made changes (including funding extensions or rescissions) to new programs and activities first authorized and funded by the ACA. CRS generally excluded provisions addressing established programs and activities that predate the ACA but were extended or amended in a non-substantive way by the law. For example, the ACA extended multiple existing Medicare and Medicaid program payments and activities that since have been further extended and/or modified by provisions in more recently enacted laws. The ACA also extended funding for a number of existing grant programs whose funding has been further extended by provisions in newer laws. None of these types of provisions are included in Table 2 . In addition to considering ACA repeal or amendment in authorizing legislation, lawmakers have used the annual appropriations process to eliminate or provide funding for ACA provisions and to modify provisions of the law. Table 2 includes provisions in appropriations legislation that have the effect of making new law or changing existing law. As an example, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), 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 ACA's excise tax on high-cost employer-sponsored health plans (often referred to as the Cadillac tax ). However, Table 2 does not include provisions in appropriations legislation that address administrative spending for covering the costs of ACA implementation (e.g., denial of agency requests for new funding to help support ACA implementation); limit or restrict the use of funds provided under a bill for a specific purpose (e.g., language prohibiting an agency from using any of the funds appropriated to the agency for ACA implementation activities); or establish reporting or other administrative requirements regarding implementation of the ACA (e.g., language instructing an agency to provide an accounting of administrative funding on ACA implementation). As noted, identifying legislation that modifies the ACA has become increasingly difficult over the years. As a result, Table 2 may not provide a comprehensive list of enacted legislation that has modified the ACA. ACA Provisions in House-Passed and Senate-Passed Bills The tables in this section list legislation that passed the House ( Table 3 ) or the Senate ( Table 4 ) in the 111 th -115 th Congresses that would have modified health care-related provisions of the ACA. None of the bills listed in Tables 3 or 4 became law (although provisions included in the bills may have been added to other legislation that became law). Generally, Tables 3 and 4 list only legislation that, if enacted, would have had a direct impact on the ACA and its implementation; measures that would not have had such an effect are not included. Thus, budget resolutions, which are binding only on certain procedural matters before Congress, are not included. The House-passed legislation included stand-alone bills as well as provisions in broader, often unrelated measures. Four of the House-passed bills listed in Table 3 would have repealed the ACA in its entirety: H.R. 596 in the 114 th Congress; H.R. 45 in the 113 th Congress; H.R. 6079 in the 112 th Congress; and H.R. 2 in the 112 th Congress. The other House-passed bills listed in Table 3 would have (1) repealed, restricted, or otherwise limited, specific provisions in the ACA; (2) eliminated appropriations provided by the ACA and rescinded all unobligated funds; (3) replaced the mandatory appropriations for one or more ACA programs with authorizations of (discretionary) appropriations and rescinded all unobligated funds; or (4) blocked or otherwise delayed implementation of specific ACA provisions. The Senate passed considerably fewer bills that would have modified the health care-related provisions of the ACA than did the House in the 111 th -115 th Congresses ( Table 4 ). None of the Senate-passed bills listed in Table 4 would have repealed the ACA in its entirety. Two of the three bills listed in Table 4 would have repealed or amended specific provisions in the ACA, and the third bill would have extended a program that was modified under the ACA. As noted elsewhere in this report, identifying bills that would modify the ACA has become increasingly difficult. As a result, Tables 3 and 4 may not provide comprehensive lists of House-passed and Senate-passed bills that would modify the ACA.

The Patient Protection and Affordable Care Act (ACA; P.L. 111-148) was signed into law on March 23, 2010. The law comprises numerous provisions in 10 titles. The provisions in Titles I-VIII largely relate to how health care in the United States is financed, organized, and delivered. Title IX contains revenue provisions. Title X reauthorizes the Indian Health Care Improvement Act, establishes some new programs and requirements, and amends provisions included in the other nine titles of the ACA. On March 30, 2010, the Health Care and Education Reconciliation Act (HCERA; P.L. 111-152) was signed into law, which included new provisions and amended several ACA provisions. Since enactment of the ACA and HCERA, lawmakers have repeatedly debated the laws' implementation and considered bills to repeal, defund, or otherwise amend them. This report summarizes legislative actions taken during the 111th-115th Congresses to modify the health care-related provisions of the ACA and HCERA. The first part of the report provides a brief overview of the laws' core provisions and their impact on federal spending and health insurance coverage as context for the other material presented in the report. The second part of the report includes Table 2, which summarizes laws enacted during the 111th-115th Congresses that modified ACA or HCERA provisions. The third part of the report lists bills passed in the House or the Senate during the 111th-115th Congresses that would have modified ACA or HCERA provisions, had they been enacted. Identifying legislation that modifies the ACA and HCERA has become increasingly difficult over the years. This is because of the vast number of ACA and HCERA provisions, their complexity, and the fact that these provisions are codified in many different parts of the U.S. Code. As a result, the legislation presented in this report's tables may not include all enacted legislation that modifies the ACA or HCERA, or all House- or Senate-passed legislation that would have modified the ACA or HCERA, had it been enacted. Due to the increasing complexity of tracking such legislation and concerns about the ability to do so authoritatively, the Congressional Research Service (CRS) does not intend to update this report.

Key GEPA Provisions GEPA includes numerous provisions that apply to applicable programs administered by ED, as well as provisions related to the powers and responsibilities of ED. While these provisions cover topics as varied as appropriations and evaluations to privacy and enforcement, several provisions are particularly worth noting, especially with respect to the development of new programs or the appropriation of funds for existing programs. These provisions are highlighted below. Extension of the period available for the obligation and expenditure of appropriation funds (Section 421). Automatic extension of the authorization of an applicable program for one additional fiscal year (Section 422). Prohibition on using funds for transportation of students or teachers to overcome a racial imbalance or to carry out a desegregation plan (Section 426). Prohibition on federal control of education (Section 438). Privacy provisions that require educational agencies that receive federal funds to provide parents with access to children's educational records and that prohibit such agencies from releasing such records without written consent (Section 444). General prohibition on the use of funds provided to ED or to an applicable program to support a national test unless it is explicitly authorized in statutory language (Section 447). Section-by-Section Overview of GEPA Provisions GEPA includes multiple sections, primarily organized under four parts: Part A—Functions of the Department of Education; Part B—Appropriations and Evaluations; Part C—General Requirements and Conditions Concerning the Operation and Administration of Education Programs: General Authority of the Secretary; and Part D—Enforcement. The act begins with a section that includes provisions related to the applicability of the GEPA provisions to education programs. A summary of each section of GEPA is provided below. The summary is not intended to be a comprehensive examination of GEPA, but rather an overview of the contents of this act. Short Title, Applicability, Definitions Section 400 states that, except as otherwise provided, GEPA applies to each applicable program of ED, but does not apply to any contract made by ED. The section defines several terms, including "applicable program," which is defined to include any program for which the Secretary of Education (hereafter referred to as the Secretary) or ED has administrative responsibility as provided by law or by delegation of authority pursuant to law. Section 400 also states that nothing in GEPA shall be construed to affect the applicability of statutes prohibiting discrimination, including Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Title V of the Rehabilitation Act of 1973, and the Age Discrimination Act of 1975. Part A—Functions of the Department of Education Part A of GEPA includes two sections. The first section addresses the general authority of the Secretary, while the second section includes provisions related to an education impact statement. Section 410. General Authority of the Secretary This section confers regulatory authority on the Secretary. Specifically, it authorizes the Secretary to "make, promulgate, issue, rescind, and amend rules and regulations" governing the operation of ED and governing the applicable programs administered by ED. Section 411. Education Impact Statement This section specifies that any regulation affecting an institution of higher education (IHE) shall only become effective if the regulation is published in the Federal Register with an educational impact assessment statement. The statement shall determine whether any information required to be provided under the regulation is already being collected or is available from another agency. Part B—Appropriations and Evaluations Part B is divided into two subparts. The first subpart addresses appropriations and includes Sections 420 through 423. The second subpart addresses the planning and evaluation of federal education activities and includes Sections 424 through 429. Section 420. Forward Funding4 In order to provide federal, state, and local officers "adequate notice" of the availability of federal funds for carrying out ongoing education activities and projects, appropriations under any applicable program may be included in the appropriations act for the fiscal year preceding the fiscal year during which such activities and projects shall be conducted (e.g., appropriated funds that are to be obligated during FY2011 may be appropriated in the FY2010 appropriations act). Further, in order to provide for the provision of funds in this manner, the appropriations act for a given year may contain separate appropriations for an applicable program for two consecutive years (e.g., the FY2010 appropriations act could contain an appropriation of funds that are to be obligated in FY2010 and an appropriation of funds that are to be obligated in FY2011). Section 421. Availability of Appropriations on Academic- or School-Year Basis; Additional Period for Obligation of Funds Appropriations for applicable programs for any fiscal year may be made available for obligation by the grantee on the basis of an academic or school year differing from such fiscal year, subject to regulations by the Secretary. In addition, unless specifically prohibited, any funds appropriated for an applicable program that are not obligated and expended by the recipient educational agencies and institutions before the end of the fiscal year shall remain available for obligation and expenditure for one additional fiscal year. Funds so carried over are to be obligated and expended in accordance with program requirements that are in effect for such succeeding fiscal year. If funds appropriated to carry out any applicable program are not obligated until after the institution of a judicial proceeding for release of such funds, then such released funds shall remain available for obligation and expenditure until the end of the fiscal year that begins after the termination of such judicial proceeding. Section 422. Contingent Extension of Programs If Congress, in the regular session that ends prior to the beginning of the terminal fiscal year of authorization of appropriations of an applicable program, does not pass legislation extending the program, the program is automatically extended for one additional fiscal year. The authorized level of appropriations for the program for this additional year shall be the same as that for the terminal year of the program. In addition, if the Secretary is required, in the terminal fiscal year of an applicable program, to carry out acts or determinations necessary for the continuation of the program, such acts or determinations must be made during the period of automatic program extension. The automatic extension of an applicable program for one year does not apply to the authorization of appropriations for a commission, council, or committee that is required by statute to terminate on a specific date. Section 423. Payments Payments under any applicable program may be made in installments, and in advance or by way of reimbursement, as determined by the Secretary. The payments may be adjusted to account for overpayments or underpayments. Section 424. Responsibility of States to Furnish Information Each state educational agency (SEA) is required to submit a report to the Secretary every two years that provides information with respect to the use of federal funds in the state for any applicable program for the two preceding fiscal years, as well as the use of federal funds for applicable programs administered by the state and provided to local educational agencies (LEAs). Each SEA is required to include specific information in its report, including a list for each applicable program of all grants made to and contracts entered into with LEAs and other agencies within the state during each fiscal year. The Secretary is required to provide the information contained in each report to the National Center for Education Statistics and to make the information available, at a reasonable cost, to any interested individual. Further, in each year in which reports are submitted by SEAs, the Secretary must submit to Congress a report summarizing the data provided by the states. Section 425. Biennial Evaluation Report Not later than March 31, 1995, and every two years after such date, the Secretary is required to submit an evaluation report to the House Committee on Education and Labor and the Senate Committee on Labor and Human Resources on the effectiveness of applicable programs in meeting their legislative intent and purposes during the two preceding fiscal years. The report must contain specific information such as program profiles, information on the progress being made toward program objectives, and significant program activities. Section 426. Prohibition Against Use of Appropriated Funds for Busing No funds appropriated for any applicable program may be used for the transportation of students or teachers (or the purchase of equipment for such transportation) to overcome a racial imbalance in any school or school system or to carry out a plan of racial desegregation, except for funds appropriated for the Impact Aid program authorized by Title VIII of the ESEA. Section 427. Equity for Students, Teachers, and Other Program Beneficiaries The Secretary must require all applicants for assistance under an applicable program to describe the steps the applicant will take to ensure equitable access to and equitable participation in the activities to be conducted using such funds. Specifically, applicants must address the special needs of program beneficiaries (e.g., students and teachers) in order to overcome barriers to equitable participation, including "barriers based on gender, race, color, national origin, disability, and age." Section 428. Coordination The National Assessment Governing Board (NAGB), the Advisory Council on Education Statistics, the National Education Goals Panel, and any other board established to "analyze, address, or approve education content or student performance standards and assessments" are required to coordinate their work to ensure that they do not duplicate one another's efforts in assisting states with education reform efforts. Section 429. Disclosure Requirements This section, which contains certain disclosure requirements, applies to "educational organizations" that provide programs for a fee and that recruit students through means such as commercial media, direct mailings, or referrals, but the section does not apply to LEAs, SEAs, elementary or secondary schools as defined by the ESEA, IHEs as defined by the Higher Education Act (HEA), or other specified educational entities. Under this section, covered educational organizations must meet certain disclosure requirements prior to enrolling a minor and accepting funds for the cost of a minor's participation in an educational program (as defined in Section 429) operated by the organization. The disclosure must be made in writing to the minor or the minor's parents and must address the method by which participants were solicited and selected for participation in the program, as well as the cost of the program and information regarding the distribution of any enrollment fee. Each educational organization must include a "verifiable statement" in all of its recruitment or enrollment materials that the organization does not discriminate against any individual with respect to employment; exclude any student from participation in an educational program; discriminate against any student in providing program benefits; or subject any student to discrimination based on race, disability, or residence in a low-income area. The provisions of this section, however, do not entitle a student to participate in an educational program or receive a benefit associated with a program or to receive a waiver of any fee charged for participation or benefit. The section also includes enforcement provisions to enable the Secretary to enforce the requirements of this section. Part C—General Requirements and Conditions Concerning the Operation and Administration of Education Programs Part C is divided into four subparts. The first subpart addresses the general authority of the Secretary and includes Sections 430 through 435. Subpart two focuses on administrative requirements and limitations and includes Sections 436 through 439. The third subpart focuses on the administration of education programs and projects by states and LEAs. It includes Sections 440 through 442. The final subpart addresses records, privacy, and limitations on withholding federal funds. It includes Sections 443 through 447. Section 430. Joint Funding of Programs The Secretary is authorized to enter into arrangements with other federal agencies to jointly carry out projects, to transfer to such agencies funds appropriated under any applicable program, and to receive and use funds from such agencies for joint projects. Any funds transferred or received to support joint projects must be used in accordance with the statutes authorizing the funds. The project shall use the administering agency's procedures to award and administer grants, unless the agencies involved in the project agree to use another agency's procedures. If the Secretary and heads of other agencies participating in the joint project determine that the joint funding is needed to address a special need consistent with the purposes and authorized activities of each of the programs that provides funding for the project, a single set of criteria and single application may be used to select grantees. The Secretary must notify the House Committee on Education and Labor and Senate Committee on Labor and Human Resources not later than 60 days after entering into a joint funding agreement with another agency. The Secretary is also permitted to develop the criteria for and require the submission of joint applications under two or more applicable programs that award competitive grants and may jointly review and approve such applications separately from other applications submitted under the individual programs, if the Secretary determines that joint awards are needed to address a special need that is consistent with the purposes and authorized activities of each of the programs. Applicants for a joint award must meet the eligibility criteria of each program. Section 431. Collection and Dissemination of Information The Secretary is required to prepare and disseminate information about applicable programs to states, LEAs, and institutions and to cooperate with other federal officials who administer education-related programs in disseminating information about said programs. The Secretary must also inform the public about federally supported education programs. In addition, the Secretary is required to collect data and information on applicable programs for the purpose of obtaining objective measures of the effectiveness of such programs in achieving their intended purposes. Section 432. Review of Applications This section establishes an appeals process to challenge certain SEA actions, including disapproval of an application, failure to provide funding in accordance with the law, an order to repay funds, or the termination of assistance. An applicant or recipient who is aggrieved by the final action of an SEA with respect to an applicable program under which aid is provided to or through the SEA may request a hearing within 30 days. The SEA must hold the hearing within 30 days of receiving such a request and issue a written ruling within 10 days after the hearing. If the SEA determines that the final action was contrary to federal law, state law, or the rules, regulations, and guidelines governing the applicable program, the final action must be rescinded. If the applicant or recipient is dissatisfied with the final SEA ruling, it may, within 20 days, appeal to the Secretary. On this appeal, findings of fact by the SEA will be considered final. The Secretary may also issue interim orders to SEAs that the Secretary deems "necessary and appropriate" pending resolution of the appeal or review. If the Secretary finds that the action of the SEA was contrary to federal law or the program rules, regulations, and guidelines, the Secretary shall order the SEA to modify its actions accordingly. Each SEA is required to make available to each applicant or recipient all records that the SEA has that pertain to the review or appeal of such applicant or recipient, including the records of other applicants. If an SEA fails or refuses to comply with any of the requirements of this section, the Secretary shall terminate assistance to the SEA under the applicable program or issue other orders the Secretary deems appropriate to gain compliance. Section 433. Technical Assistance The Commissioner is authorized, upon request, to provide advice, counsel, and technical assistance to SEAs, IHEs, and, with the approval of the appropriate SEA, elementary and secondary schools to determine benefits available to them; prepare applications and meet program requirements; enhance the quality, increase the depth, or broaden the scope of activities under applicable programs; and encourage the simplification of administrative procedures. In addition, the Commissioner shall permit LEAs to use organized and systemic approaches in determining cost allocation, collection, measurement, and reporting under any applicable program if such methods do not lessen the program's effectiveness and impact in achieving its intended effect, if they ensure adequate program evaluation, and if they are consistent with audit criteria prescribed by the Comptroller General of the United States. In awarding contracts and grants for the development of curricula or institutional materials, the Commissioner and the Director of the National Institute of Education shall encourage dissemination of these materials; permit applicants to include provisions for reasonable consultation fees or planning costs; and ensure that grants for publication and dissemination of materials are awarded competitively to those who assure that the materials will reach the target populations for which they were developed. Section 434. Parental Involvement and Dissemination Regulations promulgated by the Secretary for an applicable program shall encourage parental participation in the program whenever the Secretary determines that this participation would increase the effectiveness of the program. If the program for which such a determination is made provides payments to LEAs, the applications for such payments must do the following: set forth the policies and procedures to ensure that parents of the children to be served in the program will be consulted and involved in the planning, development, and operation of the program; be submitted with an assurance that such parents have had an opportunity to present their views of the application; and set forth policies and procedures for dissemination of the program plans and evaluations to such parents and the public. Section 435. Use of Funds Withheld If an LEA becomes ineligible for federal assistance under any applicable program due to a failure to comply with certain federal laws that prohibit discrimination in federally funded programs or activities on the basis of race, color, national origin, sex, disability, or age, the allotment or reallotment of funds under said program to that state shall be proportionately reduced. Any funds not allotted to a state because of the application of this provision may be used for the following purposes: (1) to increase the allotments or reallotments of LEAs in that state that are not ineligible to receive federal assistance as described above or to increase the allotments or reallotments of all states in accordance with the federal law governing the program; or (2) for grants to LEAs of that state for service training "in dealing with problems incident to desegregation" or for any other program administered by ED that is designed to enhance equity in education or redress discrimination on the basis of race, color, national origin, sex, age, or disability. Section 436. Applications The Secretary is authorized to provide that applications for assistance under an applicable program are effective for more than one fiscal year. To the extent practicable, the Secretary is required to establish uniform dates for the submission and approval of applications under all applicable programs. In addition, to the extent practicable, the Secretary is required to develop and require the use of common applications for grants to LEAs for each of the following three types of programs: formula grant programs administered by SEAs; competitive or discretionary grant programs administered by SEAs; and grant programs directly administered by the Secretary. For each of these three types of programs, the common application is required to be used as the single application for as many of such programs as possible. Section 437. Regulations For the purposes of this section, a regulation is defined as "any generally applicable rule, regulation, guideline, interpretation, or other requirement" that is prescribed by the Secretary or ED and that is legally binding with respect to an applicable program. Regulations must contain citations to the particular section of statutory law or other legal authority upon which relevant provisions are based, and all regulations must be uniformly applied and enforced in all 50 states. Although the Administrative Procedure Act, which establishes the process that agencies must follow when enacting regulations, contains an exemption for matters pertaining to public property, loans, grants, and benefits, GEPA specifies that this exemption shall apply only to regulations that govern the first grant competition under a new or substantially revised program or if the Secretary determines that the requirements of this subsection will cause "extreme hardship" to the program beneficiaries affected by the regulations. Within 60 days after the date of enactment of any act (or portion of an act) affecting the administration of any applicable program, the Secretary is required to submit to the House Committee on Education and Labor and Senate Committee on Labor and Human Resources a schedule of when the Secretary plans to promulgate final regulations that the Secretary determines are necessary to implement the act. All final regulations must be promulgated within 360 days after the date of enactment of such act. The Secretary is required to submit a copy of the final regulations to the Speaker of the House of the House of Representatives and the President pro tempore of the Senate concurrently with the publication of such regulations. Section 438. Prohibition Against Federal Control of Education This section 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." Additionally, no provision of any applicable program shall be construed to authorize the federal government to require "the assignment or transportation of students or teachers in order to overcome racial imbalance." Section 439. Labor Standards All laborers and mechanics employed in construction projects and minor remodeling projects assisted under any applicable program shall be paid at wage rates not less than those prevailing in the locality for similar work as determined by the Secretary of Labor in accordance with the Davis-Bacon Act, as amended. Section 440. State Agency Monitoring and Enforcement This section establishes a mechanism for monitoring local agencies' compliance with federal education laws. The Secretary may require states to submit a plan for monitoring such compliance with federal education program requirements for programs in which federal funds are made available to local agencies through or under the supervision of a state board or agency. The Secretary may require the state plan to provide for periodic visits by state personnel to programs administered by local agencies to assess their compliance with federal requirements and periodic audits of expenditures. In addition, the Secretary may require the state plan to provide that the state investigate and resolve all complaints received by the state or referred to the state by the Secretary with respect to program administration. In order to enforce federal requirements under an applicable program, a state may withhold approval of an application by an LEA for assistance under the program or suspend or withhold payments in whole or in part until the local agency complies with the relevant federal requirements. The withholding of payments may continue until the local agency no longer fails to substantially comply with the federal requirements. Section 441. Single State Application For all applicable programs under which federal funds are provided to LEAs through SEAs, a state shall submit a general application containing various assurances. The SEA has the option of submitting the application jointly for all programs covered by the application, or it may submit separately for each program or groups of programs. The general application must include the following assurances: each program will be administered in accordance with applicable statutes, regulations, program plans, and applications; control of funds and property acquired using program funds will be maintained and administered by the appropriate public or nonprofit private agencies; specified methods of administering each program will be adopted and used; the effectiveness of each program in meeting its statutory objectives will be evaluated at least once every three years, and the state will cooperate in carrying out any evaluation of each program conducted by the federal government; fiscal control and fund accounting procedures will be used to ensure proper disbursement of, and accounting for, federal funds; The state will make reports on the results of program evaluations as may be needed by the Secretary to perform his duties under each program, and each state will maintain records (as required in Section 443) and provide access to these records as the Secretary deems necessary to carry out his responsibilities; the state will provide opportunities for the participation in, planning for, and operation of each program by interested local agencies, institutions, organizations, and individuals, including consulting with relevant committees, local agencies, groups, and professionals in the development of program plans required by statute and publishing each proposed plan at least 60 days prior to the day on which the plan will be submitted to the Secretary or becomes effective (whichever occurs earlier), allowing at least 30 days for public comments on the plan; and none of the funds expended under any applicable program will be used to acquire equipment if such acquisition results in a direct financial benefit to any organization representing the interests of the purchasing entity or its employees. Such general application will be in effect for the entire duration of each program covered, unless there are substantial changes in relevant federal or state law or "other significant changes in the circumstances affecting an assurance in that application." Section 442. Single LEA Application As with state applications to the Secretary addressed by Section 441, LEAs are required to submit to state agencies a general application containing assurances required for all programs under which federal aid is administered through a state agency. The application is required to cover all such programs in which the LEA participates. Similar to the state applications, the LEA application must include the following assurances: each program will be administered in accordance with applicable statutes, regulations, program plans, and applications; control of funds and property acquired using program funds will be maintained and administered by the appropriate public agency; fiscal control and fund accounting procedures will be used to ensure proper disbursement of, and accounting for, federal funds; the LEA will make reports to the state agency or board and to the Secretary as may be needed for the state agency or board and the Secretary to perform their duties under each program, and each LEA will maintain records (as required in Section 443) and provide access to those records as the state board or agency Secretary deems necessary to carry out their responsibilities; the LEA will provide opportunities for the participation in, planning for, and operation of each program by teachers, parents, and other interested agencies, organizations, and individuals; applications, evaluations, plans, or reports related to each program will be made available to parents and the public; facilities constructed under any program will be consistent with overall state construction plans and standards and with the requirements of Section 504 of the Rehabilitation Act of 1973 in order to ensure that the facilities are accessible to and usable by individuals with disabilities; the LEA has adopted effective procedures for acquiring and disseminating information and research regarding the programs and for adopting, where appropriate, promising educational practices to teachers and administrators participating in each program; and none of the funds expended under any applicable program will be used to acquire equipment if such acquisition results in a direct financial benefit to any organization representing the interests of the purchasing entity or its employees. Such general application will be in effect for the entire duration of each program covered, unless there are substantial changes in relevant federal or state law or "other significant change [sic] in the circumstances affecting an assurance in that application." Section 443. Records This section imposes record-keeping requirements on recipients of federal education funds. Each recipient shall maintain records that fully disclose the amount and disposition of such funds, the total cost of the activity for which the funds are used, the share of that cost provided from other sources, and other records that contribute to an effective financial or programmatic audit. Records must be maintained for three years after the completion of the activity for which the funds are used. Any records maintained by the recipient that are related to, or pertinent to, the program shall be made accessible to the Secretary and the Comptroller General of the United States or their representatives for the purpose of audit examination. Section 444. Protection of the Rights and Privacy of Parents and Students This section establishes the Family Educational Rights and Privacy Act (FERPA). The act, sometimes referred to as the Buckley Amendment, guarantees parental access to student education records, while limiting the disclosure of those records to third parties. Specifically, educational agencies and institutions that receive federal funds must provide parents with access to the educational records of their children. Likewise, FERPA prohibits educational agencies or institutions that receive federal funds from having a policy or practice of releasing the education records of a student without the written consent of his parents, although consent is not required for the release of education records to certain individuals and organizations. For more information on the detailed privacy protections, requirements, and exceptions contained in FERPA, see CRS Report RS22341, The Family Educational Rights and Privacy Act (FERPA): A Legal Overview , by [author name scrubbed]. Section 445. Protection of Pupil Rights19 This section provides that instructional materials that are used as part of any applicable program must be available for inspection by the parents or guardians of the children. No student can be required, as part of any applicable program, to participate in a survey, analysis, or evaluation that reveals information concerning political affiliations or beliefs; mental or psychological problems; sex behavior or attitudes; illegal, anti-social, self-incriminating, or demeaning behavior; critical appraisals of family members; legally recognized privileged or analogous relationships (e.g., relationships with lawyers, physicians, and ministers); religious practices, affiliations, or beliefs; or income without the prior consent of the student (if the student is an adult or emancipated minor) or the prior written consent of the parent. Except as previously discussed, an LEA that receives funds under any applicable program is required to develop and adopt policies, in consultation with parents, regarding the following: the right of a parent to inspect a survey created by a third party prior to the distribution or administration of the survey, and procedures for granting a parent's request for inspection within a reasonable time period; arrangements to protect student privacy that are provided by the LEA in the event that a survey is distributed or administered that contains any of the previously discussed items requiring prior parent consent (or student consent, as appropriate); the right of a parent of a student to inspect any instructional material used as part of the educational curriculum for the student, and procedures for granting a parent's request for inspection within a reasonable time period; the administration of physical examinations or screenings that the school or LEA may administer; the collection, disclosure, or use of students' personal information that will be used for marketing or be sold (or provided to others for those purposes); and the right of a parent of a student to inspect any instrument used in the collection of the aforementioned personal information prior to the distribution or administration of the instrument, and procedures for granting a parent's request for inspection within a reasonable time period. The LEA is required to notify parents about the aforementioned policies at least annually and within a reasonable period of time following a substantive change to such policies. The LEA must allow parents (or students, if of an appropriate age) to opt the student out of any activities requiring notification (discussed below). The LEA is required to notify the parent of a student at least annually at the beginning of the school year of the dates during the school year when activities requiring notification are scheduled or expected to be scheduled. The following activities require notification: activities involving the collection, disclosure, or use of students' personal information that will be used for marketing or be sold (or provided to others for those purposes); the administration of any survey that reveals the aforementioned information (e.g., political affiliation, religious affiliation); and any nonemergency, invasive physical examination or screening that is required for students to attend school, is administered by the school and scheduled in advance, and is not necessary to protect the immediate health and safety of the student or other students. The requirement that a policy be developed related to the collection, disclosure, or use of students' personal information does not apply if the information is used for the exclusive purpose of developing, evaluating, or providing educational products or services for, or to, students or educational institutions, such as college or other postsecondary education or military recruitment; programs providing access to low-cost literacy products; curriculum and instructional materials used in elementary and secondary schools; tests and assessments used by elementary and secondary schools to provide "cognitive, evaluative, diagnostic, aptitude, or achievement" data about students and the subsequent analysis and public release of aggregated data; or student fundraisers for school-related or education-related activities. The provisions related to the development of policies are not intended to preempt applicable provisions of state law requiring parental notification and do not apply to any physical examination or screening that is permitted or required by state law. The rights provided to parents under this section transfer to a student when a student turns 18 years old or is considered an emancipated minor under state law. The Secretary is required to annually inform each SEA and each LEA of the agency's obligations under Section 444 and 445. Educational agencies and institutions are required to give parents and students notice of their rights under Section 445. An SEA or LEA may use funds provided under Title V-A of the ESEA to enhance parental involvement affecting the in-school privacy of students. The Secretary is authorized to take any action the Secretary deems necessary to enforce the provisions of this section, except that the Secretary may only terminate assistance provided under an applicable program if the Secretary determines there has been failure to comply with the requirements of Section 445 and compliance with the requirements cannot be obtained voluntarily. In addition, the Secretary is required to establish or designate an office and review board at ED to investigate, process, review, and adjudicate violations of the rights established under this section. Section 446. Limitation on Withholding Federal Funds The refusal of an SEA, LEA, IHE, community college, school, agency offering a preschool program, or other educational institution to provide personally identifiable data on students or their families to any federal entity or other third party on the grounds that it violates the right to privacy and confidentiality of students or their parents shall not constitute grounds for a suspension or termination of federal assistance. Such a refusal may not result in a denial of, refusal to consider, or delay in the consideration of funding for such a recipient in subsequent fiscal years. Similarly, no assistance to an LEA may be limited, deferred, or terminated by the Secretary on the grounds of noncompliance with Title VI of the Civil Rights Act of 1964 or any other nondiscrimination provision of federal law without due process of law, and it is unlawful for the Secretary to limit or defer any financial assistance on the basis of a failure to comply with any quotas on student admissions by an IHE or community college receiving federal financial assistance. Section 447. Prohibition on Federally Sponsored Testing 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 authoring 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). Part D—Enforcement Part D of GEPA contains 10 sections, all of which pertain to enforcement. Section 451. Office of Administrative Law Judges This section, which establishes an Office of Administrative Law Judges in ED, provides a mechanism for challenging agency actions. Specifically, the Secretary is required to establish such an office for the purpose of conducting hearings on the recovery of funds, withholding of funds, cease and desist orders, or other proceedings that may be designated by the Secretary. The judges shall be officers or employees of ED; must be appointed by the Secretary in accordance with the Administrative Procedure Act (APA); and must meet the requirements for administrative law judges set forth in the APA, which establishes uniform procedures that federal agencies must follow when engaging in rulemaking, adjudication, or other actions. In selecting judges, the Secretary is required to give "favorable consideration" to candidates with experience in SEAs or LEAs and their knowledge of the administration of federal education programs in these agencies. The Secretary is also required to designate one of the judges as the chief judge. The chief judge shall assign a judge to each case or class of cases, although no judge may preside over a case in which the judge has a conflict of interest with respect to the case. Each judge shall review and may require that "evidence be taken on the sufficiency of the preliminary departmental decision" as established in Section 452. The proceedings must be conducted according to rules established by the Secretary through regulation that conform with hearing rules under the APA. Likewise, costs and fees of parties are subject to the provisions of the APA. If the judge determines that discovery may produce relevant information with respect to the case, the judge may order a party to produce relevant documents, answer relevant written interrogatories, and have depositions taken. The discovery period is limited to 90 days but may be extended by the judge for good cause shown. If requested by any party, the judge may establish a schedule for the discovery process. The judge is authorized to issue subpoenas and apply to the appropriate U.S. court for enforcement of the subpoena. Meanwhile, the Secretary is required to establish a process for the voluntary mediation of disputes. All parties involved in mediation must agree to the mediation, and the mediator must be independent of the parties to the dispute. Mediation is limited to 120 days, although the mediator may grant extensions of this time period. Finally, the Secretary is required to employ, assign, or transfer sufficient professional personnel to ensure that all matters may be addressed in a timely manner. Section 452. Recovery of Funds This section establishes procedures that govern the recovery of funds from recipients. Whenever the Secretary determines that a recipient of a grant or cooperative agreement under an applicable program must return funds because the recipient has made an expenditure of funds that is not allowable or has otherwise failed to account properly for such funds, the Secretary shall give the recipient written notice of a preliminary departmental decision and notify the recipient of its right to have that decision reviewed and to request mediation. In a preliminary departmental decision, the Secretary bears the burden of establishing the prima facie case for the recovery of funds. The facts to serve as the basis of the preliminary departmental decision may come from an audit report, an investigative report, a monitoring report, or other evidence, and the amount of funds to be recovered must be determined on the basis of Section 453. The failure by a recipient to maintain records required by law, or to allow the Secretary access to such records, automatically constitutes a prima facie case. If a recipient receives written notice of a preliminary departmental decision and wants a review of that decision, the recipient must submit to the Office of Administrative Law Judges (hereafter referred to as the Office) an application for review not later than 60 days after receiving the notice. The application must be in the form and contain the information specified by the Office. If the Office determines that the Secretary has failed to establish a prima facie case for the recovery of funds, the Office must notify the Secretary as expeditiously as possible so that the Secretary can take appropriate action. If a preliminary departmental decision requests a recovery of funds from a state recipient, the state may not recover funds from an affected LEA unless that state recipient has transmitted a copy of the preliminary departmental decision to any affected subrecipient within 10 days of receiving such written notice and has consulted with each affected subrecipient to determine whether the state should seek review by the Office. In any proceeding before the Office, it is the recipient who bears the burden of demonstrating that it should not be required to return the amount of funds for which recovery is sought in a preliminary departmental decision. Hearings before the Office must occur within 90 days after receipt of a request for review of a preliminary departmental decision, although this requirement may be waived at the discretion of the judge for good cause. After the Office issues a decision, parties to the proceeding have 30 days to seek review by the Secretary. Although the Secretary may review a decision, he cannot alter the Office's findings of fact if those findings are supported by substantial evidence. However, the Secretary, for good cause, may remand the case to the Office to take further evidence, and the Office may subsequently make new or modified findings of fact and may modify its previous action accordingly. Such new or modified findings of fact shall likewise be conclusive if supported by substantial evidence. If a recipient submits a timely application for review of a preliminary departmental decision, the Secretary may not take any collection action until a decision of the Office upholding ED's preliminary decision in whole or in part becomes final agency action, which occurs 60 days after the recipient receives written notice of the Office's decision, with several exceptions. If the Secretary modifies or sets aside the decision, the decision of the Secretary becomes final agency action when the recipient receives written notice of the Secretary's action. Alternatively, the Secretary may remand the decision to the Office, in which case no final agency action has occurred. The Secretary must publish decisions that have become final agency action in the Federal Register or another appropriate publication within 60 days. The Secretary is also prohibited from taking collection action if a recipient seeks judicial review under Section 458 and that judicial review has not been completed. However, judicial review does not affect the authority of the Secretary to take any other adverse action against a recipient. The Secretary may collect from a recipient either the amount specified in a preliminary decision for which review was not sought or the amount sustained in a decision by the Office or the Secretary that becomes final agency action. However, the Secretary may compromise any preliminary departmental decision that does not exceed the amount agreed to be returned by more than $200,000, if the Secretary determines that the collection of any or all of the amount would not be practical or be in the public interest and that the practice which resulted in the preliminary departmental decision has been corrected and will not recur. The Secretary is required to publish in the Federal Register a notice of intention to compromise at least 45 days prior to doing so, and such notice must provide interested persons an opportunity to comment on any proposed action. Finally, recipients are not liable to return funds that were expended in an unauthorized manner more than five years before the recipient received written notice of a preliminary departmental decision, and no interest that arises during the administrative review process may be charged. Section 453. Measure of Recovery This section sets forth requirements that determine the amount of funds that may be recovered from recipients. If a recipient makes an unallowable expenditure or otherwise fails to account properly for funds, the recipient is required to return funds in an amount that is "proportionate to the extent of the harm its violation caused to an identifiable Federal interest associated with the program under which the recipient received the award." Identifiable federal interests include, but are not limited to serving only eligible beneficiaries; providing only authorized services or benefits; complying with expenditure requirements and conditions; preserving the integrity of planning, application, recordkeeping, and reporting requirements; and maintaining accountability for the use of funds. In addition, the amount of funds that may be recovered must be reduced by an amount that is "proportionate to the extent the mitigating circumstances caused the violation." Where mitigating circumstances warrant, a judge is authorized to determine that no recovery is justified. SEAs and LEAs bear the burden of demonstrating the existence of such mitigating circumstances, which are deemed to exist only when it would be unjust to compel the recovery of funds because the SEA or LEA: actually and reasonably relied upon erroneous written guidance provided by ED; made an expenditure or engaged in a practice after the SEA or LEA submitted a written request for guidance to ED with respect to the expenditure or practice at issue and ED failed to respond within 90 days; or actually and reasonably relied upon a judicial decree issued to the recipient. An SEA or LEA seeking to demonstrate the existence of mitigating circumstances must show the following: the written request for guidance accurately described the proposed expenditure or practice and included the facts necessary for a determination of its legality; the request contained a certification by the chief legal officer of the SEA that such officer had examined the proposed expenditure or practice and believed the proposed expenditure or practice was permissible under applicable state and federal law; and the SEA or LEA reasonably believed that the proposed expenditure or practice was permissible under applicable state and federal law. When ED's response to requests for guidance contain significant interpretations of applicable law or policy, ED must disseminate such responses to SEAs. The Secretary is also required to periodically review written requests for guidance to determine the need for new or supplementary regulatory or other guidance under applicable programs. Section 454. Remedies for Existing Violations This section establishes ED's broad enforcement powers, which are set forth in more detail in subsequent sections. 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. Regardless of whether the Secretary takes action under this section, the Secretary shall not be precluded from seeking a recovery of funds under Section 452. Section 455. Withholding 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 from a recipient further payments (including payments for administrative costs). Before withholding payments, the Secretary must notify the recipient in writing of the intent to withhold payments, of the factual and legal basis for the Secretary's belief that the recipient has failed to comply substantially with a legal requirement, and of an opportunity for a hearing to be held at least 30 days after the notification has been sent to the recipient. The hearing must be held before the Office of Administrative Law Judges and conducted in accordance with provisions in Section 451. Pending the outcome of the hearing and after the recipient has been given reasonable notice and an opportunity to show cause why the suspensions should not occur, the Secretary may suspend payments to the recipient, suspend the authority of the recipient to obligate federal funds, or both. If the decision of the judge is supported by substantial evidence, it shall be considered conclusive. The Secretary, however, for good cause shown, may remand the case to the Office to collect additional evidence. Based on the new evidence, the Office may make new or modified findings of fact and modify its previous action. These new or modified findings shall be considered conclusive if supported by substantial evidence. The decision of the Office in any hearing conducted under this section shall become final agency action 60 days after the recipient receives written notification of the decision unless the Secretary modifies or sets aside the decision (in which case the Secretary's action shall become final action when the recipient receives written notification of the action) or the Secretary remands the decision to the Office. Section 456. Cease and Desist Orders Rather than withholding funds, as provided under Section 455, the Secretary may issue a complaint that describes the factual and legal basis for the Secretary's belief that the recipient has failed to comply substantially with a legal requirement and may offer an opportunity for a hearing to be held at least 30 days after the complaint has been served. The recipient has the right to appear before the Office of Administrative Law Judges and show cause why an order to cease and desist from the violation of law charged in the complaint should not be issued. Following the hearing, if the Office is of the opinion that the recipient is in violation of any legal requirements as charged in the complaint, the Office must prepare a report stating its findings and issue an order requiring the recipient to cease and desist from the practice, policy, or procedure that led to the violation. The report and order become the final agency action when they are received by the recipient. The Secretary may enforce a final order that becomes final agency action by withholding any portion of the funds payable to the recipient under the applicable program or certify the facts to the Attorney General, who shall take measures to enforce the order. Section 457. Compliance Agreements If the Secretary believes that a recipient of funds has failed to comply substantially with a legal requirement, the Secretary may enter into a compliance agreement with the recipient. The goal of the agreement is to bring the recipient into full compliance as quickly as possible and is not to "excuse or remedy past violations" of legal requirements. Before entering into a compliance agreement, the Secretary is required to hold a hearing at which the recipient has the burden of making the case that full compliance cannot occur immediately. If the Secretary agrees, the Secretary is required to state this finding in writing and publish the findings and the compliance agreement in the Federal Register . The compliance agreement may not exceed three years from the date of the Secretary's written findings and must contain the terms and conditions with which the recipient will comply until full compliance is achieved. If the recipient fails to meet the terms of the compliance agreement, the Secretary may determine that the agreement is no longer in effect and take another action authorized by law. Section 458. Judicial Review This section clarifies that recipients who are aggrieved by certain agency actions are entitled to judicial review. Specifically, a recipient of funds under an applicable program that would be adversely affected by the recovery of funds, fund withholding, or a "cease and desist" order and any state entitled to receive funds under a program covered by a single state application (Section 441) whose application is denied by the Secretary may submit a petition for review of such action to the U.S. Court of Appeals (hereafter referred to as the Court) in the relevant jurisdiction. The Court shall consider the findings of fact by the Office of Administrative Law Judges to be conclusive, if supported by substantial evidence. For good cause shown, the Court may remand the case to the Office to take further evidence. Based on this evidence, the Office may make new or modified findings of fact and may modify its previous action. These new or modified findings of fact will also be considered to be conclusive, if supported by substantial evidence. The judgment of the court is reviewable by the U.S. Supreme Court. Section 459. Use of Recovered Funds When funds obligated under an applicable program are recovered by the Secretary because the recipient made a non-allowable expenditure of funds or failed to properly account for funds, up to 75% of the amount recovered may be returned to the affected recipient if the Secretary determines that the following conditions are met: the practices or procedures that led to the recovery of funds have been corrected and the recipient is compliant with all other requirements of the program, provided that the recipient was notified of any noncompliance with such requirements and given a reasonable amount of time to correct the noncompliance; the recipient has submitted a plan to the Secretary for the use of the returned funds under the requirements of the program and, to the extent possible, for the benefit of the population adversely affected by the earlier failure to comply with such requirements; and the use of the returned funds in accordance with the recipient's plan would serve the purposes of the program for which the funds were originally provided. Any payment made under this section shall be subject to terms and conditions that the Secretary considers necessary to accomplish the affected programs' purposes, including the submission of periodic reports on the use of funds and consultation by the recipient with representatives of the population that will benefit from the payment. The payments provided under this section shall remain available for expenditure for a period of time established by the Secretary, but not to exceed more than three fiscal years following the later of the fiscal year in which final agency action is taken if the parties filed a petition for a review of a decision to recover funds (Section 452) or, if a recipient files a petition for judicial review, the fiscal year in which final judicial action was taken under Section 458. The Secretary is required to publish a notice of intent to use recovered funds for the aforementioned purpose in the Federal Register at least 30 days before entering into such an arrangement. The notice must specify the terms and conditions under which the payments will be made, and a period of at least 30 days must be provided for public comment. Section 460. Definitions This section defines the terms "recipient" and "applicable program" for the purposes of Part D of GEPA. The term "recipient" is defined to mean a recipient of a grant or cooperative agreement under an applicable program. In contrast to the general definition of "applicable program," however, Part D defines the term to exclude programs authorized by the HEA and assistance programs provided under the Act of September 30, 1950 (P.L. 81-874), and the Act of September 23, 1950 (P.L. 81-815); both P.L. 81-874 and P.L. 81-815 have been repealed. As a result, although many of the Secretary's powers and responsibilities under GEPA are applicable to higher education programs, the Secretary's enforcement authority under GEPA does not extend to the HEA, which contains its own program-specific enforcement provisions. Issues This section discusses the practical application of several GEPA provisions and issues related to these provisions. Forward Funding and Advance Appropriations Most appropriations are available for obligation during the federal fiscal year of the appropriations bill. For example, most FY2010 appropriations will be available for obligation from October 1, 2009, through September 30, 2010. Several applicable programs have authorization or appropriations provisions that allow funding flexibility for program years that differ from the federal fiscal year. For example, many of the elementary and secondary education formula grant programs receive appropriations that become available for obligation to the states on July 1 of the same year as the appropriations, and remain available for 15 months through the end of the following fiscal year. That is, FY2010 appropriations for some programs will become available for obligation to the states on July 1, 2010, and will remain available until September 30, 2011. This budgetary procedure is popularly known as "forward" or "multi-year" funding, and is accomplished through funding provisions in the annual Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) appropriations bill. Forward funding in the case of elementary and secondary education programs was designed to allow additional time for school officials to develop budgets in advance of the beginning of the school year. For Pell Grants for undergraduates, however, aggregate program costs for individual students applying for postsecondary educational assistance cannot be known with certainty ahead of time. Appropriations from one fiscal year primarily support Pell Grants during the following academic year; that is, the FY2010 appropriations will be used primarily to support grants for the 2010-2011 academic year. Unlike funding for elementary and secondary education programs, however, the funds for Pell Grants remain available for obligation for two full fiscal years. An advance appropriation , as authorized by Section 421 of GEPA, occurs when the appropriation is provided for a fiscal year beyond the fiscal year for which the appropriation was enacted. For example, funds for obligation and expenditure in FY2011 are appropriated in the FY2010 L-HHS-ED act. In the case of FY2010 appropriations, funds normally would have become available October 1, 2009, under regular funding provisions, but may not become available for some programs until July 1, 2010, under the forward funding provisions discussed above. However, if the July 1, 2010, forward funding date for obligation was to be postponed by three months—until October 1, 2010—the appropriation would be reclassified as an advance appropriation since the funds would become available only in a subsequent fiscal year , FY2011. Like forward funding provisions, these advance appropriations are specified through provisions in the annual appropriations bill. At the appropriations level, there is no difference between forward funded and advance appropriations except for the period available for obligation. At the program or service level, relatively little is changed by the three-month delay in the availability of funds, since most expenditures for a standard school year occur after October 1. At the scorekeeping level, however, a significant technical difference occurs because forward funding is counted as part of the current fiscal year, and is therefore fully included in the current 302(b) allocation for discretionary appropriations. Under federal budget scorekeeping rules, an advance appropriation is not counted in the 302(b) allocation until the following year. In essence, a three-month change from forward funding to an advance appropriation for a given program allows a one-time shift from the current year to the next year in the scoring of discretionary appropriations. Thus, Congress is able to provide funding for education and other programs in the appropriations for one fiscal year without having it count against the total amount available for discretionary appropriations in that fiscal year. Extension of the Period of Availability of Appropriations Section 421 of GEPA extends the period of availability of appropriations by one fiscal year for applicable programs. In practice, this section extends the period of obligation and expenditure of funds for applicable programs from 12 or 15 months to 24 or 27 months, respectively, depending on whether the program is forward funded. For example, if funds were made available on July 1, 2010, these funds would generally be available for obligation and expenditure until September 30, 2011. However, GEPA would extend the period for obligation and expenditure of these funds until September 30, 2012. Thus, if funds are appropriated for FY2010, they would generally be available for obligation and expenditure through September 30, 2010. While this provision may be useful to SEAs and LEAs in program planning and budgeting, it may also have the effect of providing additional time for funds to be expended in situations where the goal is to have funds expended as quickly as possible. Under these circumstances, statutory language would need to include provisions to override Section 421 of GEPA. For example, while funds made available under the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) for existing education programs administered by ED were authorized for obligation and expenditure through FY2010, Section 421 of GEPA automatically extended the period of obligation and expenditure for these funds. If the intention of providing the funds was to have them be obligated and expended in the year in which they were appropriated (i.e., FY2009), statutory language would have needed to be included in ARRA to state that Section 421 of GEPA did not apply. Automatic Extension of Program Authorizations for One Year Section 422 of GEPA provides for the automatic extension of program authorizations for one year under the conditions specified in the section. In practice, this provision has been used to extend education programs authorized by major pieces of legislation, such as the Elementary and Secondary Education Act and Higher Education Act, by one year. GEPA, however, only provides for a one-year extension of program authorizations. If Congress does not act to reauthorize a program within the one-year extension period granted by GEPA, the program is technically no longer authorized. This does not mean, however, that a program that is no longer authorized may cease to operate. In practice, as long as a program continues to receive appropriations, the program is considered to be implicitly authorized. For example, all current ESEA program authorizations expired after FY2007. These authorizations were automatically extended, however, for one additional year under section 422 of GEPA. Thus, the authorization period for current ESEA programs was extended through September 30, 2008. Section 422 of GEPA also specifies that the amount authorized to be appropriated for a program during the extension shall be the amount that was authorized to be appropriated for the program during the terminal fiscal year of the program. Thus, in the case of the five ESEA programs with specific authorization levels for FY2007, those authorizations remained the same for FY2008. While current ESEA programs are no longer authorized under specific statutory provisions, they are considered to be implicitly authorized, as the programs have continued to receive appropriations. Prohibition on Federal Control of Education Section 438 of GEPA explicitly states that no provision included in an applicable program is intended to authorize the federal government to exercise control over curriculum, instructional programs, administration, or school personnel or in the selection of printed material, or in the assignment of transportation of students or teachers to overcome a racial imbalance. These prohibitions, which are designed to maintain state and local control over education, are particularly relevant to elementary and secondary education programs. While the federal government provides funding to support education at the state and local levels, this support cannot be conditioned on state educational agencies, local educational agencies, or schools adopting specific curricula or instructional programs. Thus, for example, the federal government can require recipients accepting funds under a program designed to improve the English language acquisition and proficiency of English language learners to implement instructional programs that meet these goals, but the federal government is prohibited from specifying which instructional programs or curricula must be used to meet these goals. FERPA Section 444 of GEPA, otherwise known as the Family Educational Rights and Privacy Act, contains privacy requirements regarding access to and release of educational records. In practice, most of the debate surrounding FERPA focuses on striking a balance between protecting student privacy while simultaneously allowing schools to release educational records under special circumstances. For example, FERPA does allow schools to release education records without consent in connection with an emergency if the records are necessary to protect the health or safety of the student or other persons. In the wake of the shootings at Virginia Tech in April 2007, there have been several attempts to clarify FERPA's health or safety exception. Indeed, under recent amendments to the HEA, the Secretary is required to provide guidance clarifying rules regarding disclosure when a "student poses a significant risk of harm to himself or herself or to others, including a significant risk of suicide, homicide, or assault." Such guidance must clarify that institutions that disclose such information in good faith are not liable for the disclosure. In addition, ED issued new regulations that contain similar clarifications regarding disclosure requirements in the event of a threat to health or safety. Meanwhile, because FERPA allows, but does not require, postsecondary institutions to disclose the final results of any disciplinary proceeding involving a crime of violence or a nonforcible sex offense, similar efforts to expand disclosure by requiring the release of such records have periodically been proposed. Indeed, recent amendments to the HEA essentially override FERPA's optional disclosure rule by requiring IHEs to disclose to the alleged victim of any crime of violence or a nonforcible sex offense the results of any disciplinary proceeding conducted by the institution against a student who is the alleged perpetrator of such a crime or offense. If the alleged victim is deceased as a result of such crime or offense, the next of kin of such victim shall be treated as the alleged victim for purposes of disclosure. Prohibition on the Use of Funds to Support a National Test Section 447 of GEPA contains a specific prohibition on the use of funds provided to ED or to an applicable program being used to develop, implement, administer, or distribute a federally sponsored national test in any subject, including reading or math, unless the test is specifically provided for in enacted authorizing legislation. 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 is not prohibited from providing federal funds to support or incentivize non-federally sponsored efforts to develop a national or common test. For example, the Secretary has already indicated that a portion of the competitive grant funds made available under Race to the Top, authorized by Section 14006 of the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ), will be used to support consortia of states working to develop new assessments linked to a set of common standards. The largest effort being conducted in this area currently is a project being led by the National Governors Association and the Council of Chief State School Officers to develop common standards and assessments in reading and math.

The General Education Provisions Act (GEPA) contains a broad array of statutory provisions that are applicable to the majority of federal education programs administered by the U.S. Department of Education (ED), as well as provisions related to the powers and responsibilities of ED. While these provisions cover topics as varied as appropriations and evaluations to privacy and enforcement, several provisions are particularly worth noting, especially with respect to the development of new programs or the appropriation of funds for existing programs. These provisions include an extension of the period available for the obligation and expenditure of appropriation funds; an automatic extension of the authorization of an applicable program for one additional fiscal year; a prohibition on using funds for transportation of students or teachers to overcome a racial imbalance or to carry out a desegregation plan; a prohibition on federal control of education; privacy provisions that require educational agencies that receive federal funds to provide parents with access to children's educational records and that prohibit such agencies from releasing such records without written consent; and a general prohibition on the use of funds provided to ED or to an applicable program to support a national test unless it is explicitly authorized in statutory language. The first part of this report highlights some of the key provisions contained in GEPA. This is followed by a section-by-section overview of the act. The report concludes with an analysis of some of the policy issues that have arisen in the past or that may arise in the future with respect to GEPA.

General Background Child nutrition programs and the Special Supplemental Nutrition Program forWomen, Infants, and Children (the WIC program) provide cash, commodity, and otherassistance (including nutrition services and food packages in the WIC program) under threemajor federal laws: the National School Lunch Act (originally enacted in 1946 and renamedthe Richard B. Russell National School Lunch in 1999), the Child Nutrition Act (originallyenacted in 1966), and Section 32 of the act of August 24, 1935 (7 U.S.C. 612c). (1) The AgricultureDepartment's Food and Nutrition Service (FNS) administers the programs at the federal level;most funding is included in the annual Agriculture Department appropriations laws; andcongressional jurisdiction is exercised by the Senate Agriculture, Nutrition, and ForestryCommittee, the House Education and the Workforce Committee, and, to a limited extent(relating to commodity assistance and Section 32), the House Agriculture Committee. The most recent major amendments to the laws affecting child nutrition and WICprograms were made in the 2004 Child Nutrition and WIC Reauthorization Act ( P.L.108-265 ; enacted June 30, 2004) and a number of laws enacted in the 106th and 107thCongresses -- most notably as part of larger measures not specifically targeted at childnutrition or WIC programs (e.g., P.L. 106-224 and P.L. 107-171 ). The next generalreauthorization of child nutrition and WIC authorities is scheduled for 2009. Child nutrition and WIC programs are operated by a variety of local public andprivate nonprofit providers, and the degree of direct state involvement varies by program andstate -- e.g., in the WIC program, state health agencies exercise substantial control; in theschool meal programs, local educational agencies (LEAs), and local "school food authorities"most often have the major role; in a very few instances, the federal government (FNS) takesthe place of state agencies (for example, where a state has chosen not to operate a specificprogram or where there is a state prohibition on aiding private schools). At the state level,education, health, social services, and agriculture departments all have roles; at a minimum,they are responsible for approving and overseeing local providers such as schools, summerprogram sponsors, and child care centers, as well as making sure they receive the federalsupport they are due. At the local level, program benefits are provided to more than 39million children and infants, and some 2 million lower-income pregnant and postpartumwomen, through just over 100,000 public and private schools and residential child careinstitutions, about 200,000 child care centers and family day care homes, approximately30,000 summer program sites, and, in the case of the WIC program, some 10,000 local healthcare clinics/sites operated by nearly 2,000 health agencies. All programs are available in the 50 states and the District of Columbia. Virtually alloperate in Puerto Rico, Guam, and the Virgin Islands, and there are no restrictions oneligibility related to citizenship or legal residence status. American Samoa gets assistancefor school lunch and WIC operations, and the Northern Marianas receive school lunchsupport. In addition, WIC-like benefits are available for overseas military personnel, andDefense Department overseas dependents' schools participate in the School Lunch andBreakfast programs. In the meal service programs like the School Lunch and School Breakfast programs,summer programs, and assistance for child care centers and day care homes, federal aid is inthe form of legislatively set subsidies paid for each meal/snack served that meets federalnutrition guidelines. Most subsidies are cash payments to schools and other providers, butabout 10% of the total value of assistance is in the form of federally donated foodcommodities. While all meals/snacks served are subsidized, those served free or at a reducedprice to lower-income children are supported at higher rates. All federal meal/snack subsidyrates are indexed annually for inflation, (2) as are the income standards of eligibility for free andreduced-price meals/snacks. (3) However, federal subsidies do not necessarily cover the fullcost of the meals and snacks offered by participating providers, and states and localitiescontribute significantly to cover program costs -- as do children's families (by paying chargesfor nonfree or reduced-price meals and snacks). Required nonfederal cost-sharing (matching)is relatively minimal -- states must expend at least an amount totaling just over $200 milliona year nationally in order to receive federal school lunch funds. Federal per-meal/snack childnutrition subsidies may cover local providers' administrative costs, but separate federalpayments for administrative expenses are limited to administrative expense grants to stateoversight agencies, a small set-aside of funds for state audits of child care sponsors, andspecial administrative payments to sponsors of summer programs and family day care homes. Under the WIC program, federal appropriations pay the cost of specifically tailored foodpackages and include specific amounts for related nutrition services and administration. The basic goals of the federal child nutrition programs are to improve children'snutrition, increase lower-income children's access to nutritious meals and snacks, and helpsupport the agricultural economy. Child nutrition programs are treated as entitlements: federal funding and commodity support is "guaranteed" to schools and other providers basedon the number of meals/snacks/half-pints of milk served, who is served (e.g., freemeals/snacks to poor children get higher subsidies), and legislatively set andinflation-indexed per-meal/snack subsidy rates. On the other hand, the WIC program is a discretionary grant program. WIC agencies serve as many applicants as possible with themoney available from federal grants (and, in some cases, voluntary state subsidies), but notnecessarily all eligible applicants. Extensive information about child nutrition programs and the WIC program may befound at the Agriculture Department's Food and Nutrition Service website: http://www.fns.usda.gov . This website provides information on all of the followingprograms -- for applicants/recipients, governments, researchers, program operators, and thoseinterested in child nutrition legislation, regulations, and guidelines -- as well as recent newsreleases, announcements, and regulatory action. Programs and Participation School Lunch Program Public and private nonprofit schools and residential child care institutions(RCCIs) -- including Defense Department overseas dependents' schools -- choosingto participate in the School Lunch program receive per-meal federal cash subsidiesand federally donated commodities for all lunches they serve to schoolchildren. While similar aid (primarily, federally donated commodities) for school meals wasprovided as early as the mid-1930s, the basic School Lunch program as it operatestoday dates to the enactment of the 1946 National School Lunch Act and majorchanges to the law in the early 1960s and early 1970s. Subsidized meals must meet federal nutrition standards based onRecommended Dietary Allowances (RDAs) and the Dietary Guidelines forAmericans and certain food safety requirements. Participating schools/RCCIs alsomust guarantee to offer free/reduced-price meals to lower-income children, adhere tofederally set administrative standards (under state oversight), and follow "BuyAmerican" rules. (4) However, there is only minimal federal regulationof foods offered separately from subsidized school meals -- "competitive foods" suchas a la carte items and food sold from vending machines. Cash subsidies are set by federal school lunch law (and indexed annually,each July, for inflation), and the amount of federal aid is not dependent on providers'costs. These cash subsidies (also called "reimbursement rates") differ depending onwhether the lunch is served free, at a reduced price (no more than 40 cents), or at"full price" ("paid" meals for which a participating school or RCCI may charge as itsees fit). Free lunch cash subsidies are paid for meals served to those who apply, andare judged eligible claiming annual family cash income below 130% of theinflation-indexed federal poverty guidelines -- e.g., $21,580 for a family of three or$26,000 for a four-person family in the 2006-2007 school year. Free lunch eligibilityalso is extended automatically to children who are "directly certified" eligible aspublic assistance (e.g., food stamp) recipients, migrant and homeless children, andthose served under federal runaway and homeless youth grant programs. For the2006-2007 school year, these basic free-lunch subsidies are $2.40 a lunch. Reduced-price lunch subsidies are paid for meals served to those who applywith family income between 130% and 185% of the inflation-indexed povertyguidelines -- e.g., between $21,580 and $30,710 for a family of three or between$26,000 and $37,000 for a four-person family in the 2006-2007 school year. For the2006-2007 school year, these basic reduced-price subsidies are $2.00 a lunch. Subsidies for full-price ("paid") lunches are paid for meals served to childrenwith family income above 185% of the poverty guidelines -- e.g., above $30,710 fora family of three or $37,000 for a four-person family in the 2006-2007 school year -- or whose families do not apply for free or reduced-price lunches. For the2006-2007 school year, these subsidies are 23 cents a lunch. All of the above rates are increased by a flat 2 cents a lunch for schools/RCCIswith very high (60%+) free and reduced-price participation (about half of all lunchesare subsidized with this added 2 cents). (5) On top of cash subsidies, schools/RCCIs are entitled to federal commodityassistance (also discussed later in this report) for any lunch served. Under this rule,schools/RCCIs are entitled to receive "entitlement" commodities (valued at aminimum of 16.75 cents a lunch in the 2006-2007 school year); this amount isinflation indexed annually (each July). Two special provisions are made with regardto fresh fruit and vegetables : (1) $50 million taken from the amount schools areentitled to in commodities is set aside and used to make available fresh fruit andvegetables through Department of Defense distribution systems (the "DOD Fresh"program), and (2) about 400 schools in 14 states and 3 Indian reservations receiveassistance to operate a program under which all students are offered free fresh fruitand vegetables. (6) In addition to the regular School Lunch program, schools/RCCIs may expandtheir program to cover snacks served to children through age 18 in after-schoolprograms (or other programs operating outside regular school schedules during theschool year) serving an "educational enrichment purpose." (7) Federalsubsidies are paid to schools operating these programs at the free snack rate offeredto child care centers, if the snacks are served free to children in lower-income areas. In other cases, subsidies vary by the child's family income. (See the later discussionof the Child and Adult Care Food program for the various federal subsidy rates forsnacks, as well as separate authority for child care organizations, including schools,to get subsidies for snacks and, in some cases, meals served free in after-schoolprograms.) Finally, the 2004 child nutrition reauthorization law ( P.L. 108-265 ) requireslocal educational agencies participating in school meal programs to establish local "school wellness" policies , as they determine appropriate. These policies are toinclude goals/policies for nutrition education, physical activity, nutrition guidelinesfor all foods available on campus during the school day, and a plan for measuringimplementation of the policy. In FY2005, well more than 90% of schools and RCCIs got School Lunchprogram subsidies -- some 95,000 schools enrolling 49.3 million children and 6,000RCCIs with almost 300,000 children. Average daily participation in the regular lunchprogram during the school year was about 29.6 million children (60% of enrollmentin participating schools/RCCIs). Children receiving free lunches averaged 14.5million a day (49% of participants, or 29% of enrollment); those paying forreduced-price lunches averaged 2.9 million a day (10% of participants, or 6% ofenrollment); and those buying full-price lunches averaged 12.2 million a day (41%of participants, or 25% of enrollment). (8) Average daily participation in the after-school snackcomponent of the School Lunch program reached some 1 million children in FY2005. School Breakfast Program(9) As with the School Lunch program, all breakfasts meeting federal nutritionstandards (and other rules applicable to the School Lunch program) are subsidized inparticipating public and private nonprofit schools and RCCIs, including DefenseDepartment overseas dependents' schools. Inflation-indexed subsidy rates set byfederal law vary depending on whether the breakfast is served free, at a reduced price(no more than 30 cents), or at full price. The School Breakfast program dates backto a two-year pilot project first established by the 1966 Child Nutrition Act and madepermanent in 1975. Income eligibility standards for free and reduced-price breakfasts are the sameas in the School Lunch program (see the earlier discussion), and, for the 2006-2007school year, basic cash subsidies are $1.31 per free breakfast , $1.01 per reduced-pricebreakfast , and 24 cents per full-price breakfast . (10) Special"severe need" rates (an extra 25 cents for each free or reduced-price breakfast,indexed annually) are paid to schools and RCCIs with relatively high (40%+) free andreduced-price participation, and the majority of breakfasts are subsidized at thishigher rate. With the exception of different subsidy rates and the lack of a specificentitlement to commodity support, the School Breakfast program operates very muchlike the School Lunch program, although in fewer schools and with a lower rate ofparticipation among enrolled children. As with the School Lunch program,participation in the School Breakfast program by schools and RCCIs is voluntary --although a number of states have enacted laws requiring some schools with lunchprograms to join the breakfast program. In FY2005, 80% of School Lunch program schools and virtually all RCCIs inthe lunch program also operated a breakfast program -- i.e., some 76,000 schoolsenrolling 40.8 million children and about 6,000 RCCIs enrolling almost 300,000children. Average daily participation in the breakfast program during the school yearwas 9.4 million schoolchildren (about 23% of enrollment). Children receiving freebreakfasts formed the bulk of participants, averaging 6.8 million a day (72% ofparticipants, or 17% of enrollment); those getting reduced-price breakfasts averaged900,000 a day (10% of participants, or 2% of enrollment); and those buying full-pricebreakfasts averaged 1.7 million a day (18% of participants, or 4% of enrollment). Child and Adult Care Food Program (CACFP)(11) The CACFP dates to 1968, when federal assistance for programs servingchildren outside of school ("special food service" programs) was first authorized. In1975, the summer food service and child care components were first formallyseparated as individual programs. Public, private nonprofit, and (under certain conditions) for-profit nonresidential child care centers -- typically serving 30-50 children or more --choosing to participate in the CACFP receive cash subsidies for each meal or snackthey serve (up to two meals and one snack, or two snacks and one meal per child aday, or three meals a day in emergency homeless shelters). Eligible centers alsoinclude after-school projects and Head Start centers, as well as recreational centers,centers caring for children with disabilities, and residential emergency homelessshelters. In order to qualify for subsidies, meals/snacks must meet federal nutritionstandards and be served to children age 12 or under (or migrant children age 15 orunder, or children with disabilities); in the case of emergency/homeless shelters, theage limit is 18. In addition, participating centers receive commodity assistance (seethe later discussion of commodity distribution) or cash-in-lieu of commodities; thisrepresents about 4% of the value of aid they get. Inflation-indexed federal cash subsidies to centers vary by the type of mealserved (breakfast, lunch/supper, snack). Similar to the school meal programs, thesesubsidies vary by whether they are served to (1) children with family income below130% of the federal poverty income guidelines (for those who would be eligible fora free school meal, see the School Lunch program discussion), (2) children withfamily income between 130% and 185% of the poverty guidelines (those who wouldbe eligible for a reduced-price school meal, see the School Lunch programdiscussion), or (3) children with family income above 185% of the poverty guidelines(those who would not be eligible for either a free or reduced-price school meal). (12) Subsidiesfor lunches (or suppers) and breakfasts are the same as those noted above for theSchool Lunch and Breakfast programs. For July 2006-June 2007, the subsidies forsnacks are 65 cents for "free" snacks, 32 cents for "reduced-price" snacks, and 6 centsfor all other snacks. However, unlike the school meal programs, while federal cashsubsidies differ according to the family income of individual children in a center,there is no requirement that free or reduced-price meals be served. Centers mayadjust their fees to account for the federal subsidies or charge (or not charge)separately for meals to account for the subsidies; but the CACFP itself does notregulate the fees they charge. The CACFP generally operates through child care centers that are public orprivate nonprofit entities. However, for-profit child care centers can participate in theCACFP if they meet certain conditions. They are qualified if they receive at leastsome payments derived from Title XX of the Social Security Act (the federal SocialServices Block Grant) for at least 25% of enrolled children. (13) In addition,under a pilot project that began operating in Iowa and Kentucky, a more liberal testcan be applied to for-profit centers: they may participate if at least 25% of enrolledchildren meet the family income requirements for free/reduced-price school meals;this pilot was expanded to Delaware in FY2002. Finally, under provisions of lawenacted in December 2000 ( P.L. 106-554 ), the more liberal Iowa/Kentucky/Delawarerule was made applicable nationwide . The nationwide authority granted in theDecember 2000 law originally covered FY2001 only. But a series of laws -- P.L.107-76 , P.L. 108-134 , and P.L. 108-211 -- extended it through June 30, 2004, and P.L. 108-265 made it permanent and nationally applicable . (14) As a result,there now are three potential methods by which for-profit centers can qualify: theoriginal Title XX rule, the "pooling" variation of that rule (see footnote 13), and, mostimportant, the (now permanent and nationwide) Iowa/Kentucky/Delaware rule. In addition to the regular CACFP, the law allows organizations that wouldnormally be eligible to participate in the regular CACFP as child care centers(including schools), and running after-school programs (or other similar programsoperated outside regular school schedules) serving an "educational enrichmentpurpose," to get federal CACFP subsidies for snacks served free in their programs tochildren ( through age 18 ) in lower-income areas -- at the free snack rate notedabove. (15) Moreover, in seven states -- Delaware, Illinois, Michigan, Missouri, Pennsylvania,New York, and Oregon -- the law allows federal subsidies to be offered for free meals, typically suppers, served in after-school programs (at the free lunch rate, $2.40a supper). Separately, the CACFP provides cash subsidies to family and group day carehomes , typically serving four to six children. This component operates verydifferently than the component for centers, although, like centers, subsidies for daycare homes are limited to two meals and one snack (or one meal and two snacks) perday per child. Day care homes receive cash subsidies that generally do not differ byindividual children's family income -- unlike the subsidy structure in programs forschools and child care centers, which differs according to the family income of thechild to whom the meal/snack is served. (16) Instead, there are two distinct sets of subsidy ratesthat generally depend on the location of the home or the provider's income. "Tier I"homes -- those located in lower-income areas or operated by lower-income providers -- receive higher cash subsidies; for July 2006-June 2007, all lunches/suppers aresubsidized at $1.97 each, all breakfasts are subsidized at $1.06, and all snacks aresubsidized at 58 cents. The majority of participating homes are in Tier I. On theother hand, "Tier II" homes -- those not located in lower-income areas or without alower-income provider -- receive much lower subsidies; for July 2006-June 2007, alllunches/suppers are subsidized at $1.19 each, all breakfasts at 39 cents, and all snacksat 16 cents. Tier II homes may seek the higher Tier I rates for individuallower-income children, and, similar to the program in centers, day care homesponsors may opt to have subsidies calculated according to the family incomedemographics of the children in the homes they sponsor -- if family incomedocumentation is obtained. (17) Day care homes participate under the aegis of public or private nonprofit"sponsoring organizations" that handle administrative tasks (e.g., overseeingcompliance with program requirements, making federal subsidy claims). Thesesponsors receive separate inflation-indexed monthly payments for theiradministrative/oversight costs, varying according to the number of homes the sponsoroversees; for July 2006-June 2007, these per-home payments ranged from $50 to $95a month. Centers may participate either directly as independent centers or through asponsoring organization; but center sponsors do not receive additional federaladministrative funds (although sponsors can assess centers for administration to alimited degree). Participating day care homes and centers generally must meet stateor local licensing or other state-set approval requirements (or certain alternate federalstandards if there are no state or local rules applying to them). Finally, the CACFP funds state costs connected with auditing sponsors andproviders. States are provided an annual amount equal to 1% of their CACFPsubsidies, and unused money can be reallocated among states that need it. In FY2005, some 47,000 centers/sites (with some 19,000 sponsors) with anaverage daily attendance of 2.1 million children participated -- 31% (660,000) of thechildren were in for-profit centers/sites; 5% (115,000) participated inoutside-of-school-hour centers/sites; and 26% (540,000) were served in Head Startcenters/sites. In addition, 153,000 day care home sites (with about 1,000 sponsors)received subsidies for an average daily attendance of 900,000 children. Summer Food Service Program(18) Local public and private nonprofit "service institutions" runningyouth/recreation programs, summer feeding projects, or camps can receive cashsubsidies and some federally donated food commodities for free food service tochildren aged 18 and younger (and older disabled children) during the summer. Participating service institutions (also called sponsors) often, but not of necessity, areentities that provide ongoing year-round service to the community, and includeschools, local government agencies, camps, colleges and universities in the NationalYouth Sports program, and (with some restrictions governing the number of sites andchildren served) private nonprofit organizations (e.g., churches). Summer programs date to 1968, when federal assistance for "special foodservice" programs serving children outside of school was first authorized. In 1975,the summer and child care food service components of the old special food serviceprogram were first formally separated as individual programs. Sponsors of three types of summer program sites can be approved: (1) "open"sites operating in lower-income areas where 50% or more of the children have familyincome below 185% of the federal poverty guidelines (i.e., more than half of thechildren are eligible for free or reduced-price school meals), (2) "enrolled" sites whereat least half of the children enrolled in a sponsor's program (e.g., a summer educationor recreation activity) are eligible for free or reduced-price school meals, and (3)summer camps. Summer meals/snacks are provided free to all children at open orenrolled sites and to lower-income children in camps. Summer sponsors get operating cost subsidies for all meals/snacks served free -- one meal and one snack, or two meals (three meals for children in programs formigrant children) per child per day. These subsidies cover documented food andfood service costs up to annually indexed (each January) per-meal/snackmaximums. (19) For the summer of 2006, the maximum operatingcost subsidy rates are $2.56 for each lunch/supper, $1.47 for breakfasts, and 59 centsfor snacks. Subsidies do not vary by individual children's family income, and mostsponsors receive the maximum allowable rates. Summer program sponsors alsoreceive significant payments for administrative costs (up to about 27 cents a meal)according to the number and type of meals/snacks served and the type of program(e.g., urban vs. rural sites, self-preparation vs. contracted vendor preparation), andstate agencies receive special administrative cost payments for oversight (see laterdiscussion of state administrative expenses) and health inspections (see below). Schools wishing to sponsor summer programs may effectively bypass most separateSummer Food Service program rules and, under a "seamless summer option," operatea summer program using School Lunch and School Breakfast program rules andsubsidy rates. In addition to subsidies to sponsors, states receive direct subsidies for healthand meal quality inspection costs related to summer programs -- an amount equal to1% of a state's summer program subsidies. In July 2005, nearly 3,800 sponsors operating some 30,000 sites providedsubsidized meals and snacks to an average daily attendance of just under 2 millionchildren. In addition, at least 1.6 million children received summer meals subsidizedthrough the School Lunch program (1.4 million of these children received free orreduced-price meals). Special Milk Program Under this program, schools and institutions like summer camps andresidential and non-residential child care facilities not otherwise participating in afederally subsidized meal service program, along with schools with split (part-day)sessions for kindergartners or pre-kindergartners where the children do not haveaccess to regular school meal programs, provide milk to all children at a reduced priceor free. Each half-pint served is federally subsidized at a different rate, depending onwhether it is served free (to those meeting criteria for free school lunches) or not --but the provision of free milk to needy children is up to the participating school andis not required. Half-pints are subsidized at 14.5 cents a half-pint for the 2006-2007school year, or at their net cost (typically 1-2 cents higher) if served free. Participating schools and other outlets must have a policy of lowering any pricescharged for milk they serve to the maximum extent possible, and of using their federalpayments to reduce the price of milk to children. Although similar assistance existedin prior years, this program dates to 1954-1955. In FY2005, almost 7,000 schools and other outlets served about 100 millionsubsidized half-pints (7% free) to roughly 500,000 children. Commodity Assistance(20) The Agriculture Department provides commodity support for School Lunchprogram schools, the CACFP, and the Summer Food Service program. Federaldonations of food commodities for child nutrition operations began in the mid-1930sto support the agricultural economy (most prominently, following the enactment ofSection 32 of the Agricultural Act of August 24, 1935). In 1974, a basic "entitlement"to commodity assistance was placed in child nutrition law. In addition to cash subsidies, schools (which receive the bulk of federallydonated commodities) and other providers are "entitled" to a specific dollar value ofcommodities based on the number of meals they serve. (21) Theinflation-indexed (each July) commodity entitlement is set at 16.75 cents a meal forthe 2006-2007 school year. The Department purchases these commodities and paysfor most processing costs to fulfill this guarantee, with the goals of meeting thepreferences of recipient agencies, supporting agricultural prices, and removingagricultural surpluses. Schools and other providers also receive "bonus" commodities donated fromfederal stocks acquired, at the Department's discretion, for agricultural supportreasons (e.g., surplus commodities and excess Commodity Credit Corporationholdings). These bonus commodities were valued at $120 million in FY2005. Finally, the value of commodity donations (both "entitlement" and "bonus")must equal at least 12% of the total cash and commodity assistance provided underthe School Lunch program. If this 12% requirement is not met, the AgricultureDepartment is required to purchase and distribute additional commodities to schools;because of the value of bonus commodity donations, this 12% requirement has nottriggered added commodity purchases/distributions in recent years. State Administrative Expenses Under authority in the Child Nutrition Act tracing back to 1966, states receivegrants to help cover general administrative and oversight/monitoring costs associatedwith child nutrition programs (including commodity distribution costs, but notincluding WIC program costs). The national amount each year is equal to 1.5% offederal cash payments for the School Lunch, School Breakfast, Special Milk, andChild and Adult Care Food programs. The majority of this money is allocated tostates based on their share of spending on the programs covered above; about 15% isallocated under a "discretionary" formula granting each state additional amounts forthe Child and Adult Care Food program, commodity distribution, and "coordinatedreview efforts" (see the later discussion of other child nutrition special projects andactivities for a description of coordinated review efforts). In addition, states receiveadministrative payments for their role in overseeing summer programs -- equal toapproximately 2.5% of their summer program aid. States are free to apportion theirvarious federal administrative expense payments among child nutrition initiatives(including the summer program) as they see fit. The WIC and WIC Farmers' Market Programs(22) The Special Supplemental Nutrition Program for Women, Infants, andChildren (the WIC program) provides nutritious foods and other support tolower-income pregnant, postpartum, and breastfeeding women, and to infants andchildren (up to age 5). (23) The program is operated through some 10,000local health care clinics/sites run by 2,000 local agencies and state health agencies(and more than 30 Indian tribal organizations participating as separate grantees treatedlike states). In addition, a special WIC-like extension run through the DefenseDepartment serves overseas military personnel. (24) The WICprogram originated as a two-year pilot project in 1972, and was established in law asa national program in 1975. Although the administering state and tribal WIC agencies have somediscretion in judging eligibility, recipients' household income generally can be nohigher than 185% of the federal poverty guidelines (the same standard used fordetermining eligibility for reduced-price school meals) -- e.g., $24,440 for a familyof two or $30,710 for a three-person family, until the next annual inflation adjustmentin July 2007 -- and all state agencies now use the 185% income test. In thealternative, applicants who are recipients of Medicaid, food stamp, or TemporaryAssistance for Needy Families (TANF) benefits may be judged automaticallyincome-eligible. However, just as important as meeting the income test, enrolleesalso must be judged at "nutritional risk" by health professionals in the health agenciesand clinics that administer the program -- e.g., based on clinical measurements,documented nutritionally related medical conditions, dietary deficiencies. Foods are provided ("prescribed") through vouchers/checks, listing thespecific foods and amounts appropriate to the recipient's status, that are redeemed atapproved retail outlets (or, much less commonly, supplied directly by theadministering agency itself). (25) The specific foods prescribed (e.g., juice, infantformula, cereal, eggs) are based on a set of federally established food packages thatdiffer by recipient type (e.g., infant, pregnant mother). However, WIC agencies haveconsiderable leeway in implementing the federally defined food packages. Theychoose which infant formulas (or other items like juices or cereals) are offered to meetthe federal food package requirements and how to respond to recipients' special needs. Participating retailers (more than 45,000 are approved) then redeem thevouchers/checks for cash through arrangements with their state WIC agency. Theprogram also provides financial support for state and local clinic Nutrition Servicesand Administrative (NSA) costs -- about 27% of total federal aid provided to statesand tribal organizations. These include costs associated with nutritional risk, health,and immunization assessments, nutrition and substance abuse education andcounseling, health care and immunization referrals, certain breastfeeding promotionand support costs, determining eligibility, and issuing and redeeming vouchers (ordirectly delivering food items or operating an EBT system). (26) In addition,about 1% of WIC spending goes for grants to improve infrastructure (e.g., computersystems), technical assistance, and special projects like breastfeeding peer counselorsand help with state management information systems. Annual federal appropriations are granted to state and Indian tribal WICagencies under a formula that reflects food and NSA caseload costs, inflation, and"need" (as evidenced by poverty indices) -- although small amounts are set aside anddistributed at the Agriculture Department's discretion for infrastructure development(like building and upgrading EBT and management information systems) and other(e.g., breastfeeding counselor) projects, and other funds have been used for smallspecial initiatives (e.g., immunization and health care outreach efforts). These annualnew appropriations are supplemented by unused money carried over from year to yearand reallocated among state and tribal grantees or retained by state WIC agencies foruse in the next year. Moreover, recent appropriations also have included a small ($125million) contingency fund. The direct support supplied by appropriations and funding carryovers is addedto by the effect (holding down food costs) of substantial rebates (discounts) frommanufacturers with which state agencies contract (through competitive bidding) to bethe sole source for a particular food item. This cost control strategy is used by allstate agencies for infant formula, and, in FY2005, the majority of them received 90%-97% discounts on the wholesale cost of infant formula. (27) Moreover,11 state agencies also have rebate contracts for juice and cereal. In FY2005, theestimated rebate savings was worth $1.6 billion. (28) As part ofthis cost containment effort, special limits are in place for approving retailers whoderive the majority of their revenue from WIC vouchers (so-called "WIC-only"stores); at present, no new WIC-only stores may be certified for participation, and theprices they may charge the WIC program are significantly constricted. Finally, a relatively small (in dollar terms) WIC farmers' market nutritionprogram operates, with significant non-federal matching funding (30% ofadministrative costs), in 38 states, the District of Columbia, Puerto Rico, Guam, andfour Indian tribal organizations. It is run by a variety of state agencies (typically, stateagriculture offices) coordinating with the regular WIC program and offers some 2.5million WIC participants special vouchers that are used to buy fresh produce throughabout 4,700 participating farmers' markets, roadside stands, and community supportedagriculture projects. The federal government pays the cost of the first $30 (perparticipant per year) of each farmers' market voucher, and shares administrative costswith the states and other political jurisdictions sponsoring the program. In FY2005, average monthly WIC participation was 8.0 million persons --1.97 million women, 2.05 million infants, and 4.0 million children. Averageper-person federal costs were $37.50 a month for food and $14.40 a month for NSAexpenses. Special Projects and Other Support Activities(29) Under the coordinated review effort (CRE) , the FNS, in cooperation withstate agencies, conducts periodic school compliance and accountability evaluationsto improve management and identify administrative, subsidy claim, and meal qualityproblems. This $5 million-a-year effort is the major ongoing initiative related tomaintaining the integrity of child nutrition programs (although, under the terms of themost recent child nutrition reauthorization law, P.L. 108-265 , new funding isavailable for additional administrative reviews of schools needing special oversight). The Agriculture Department's Economic Research Service (ERS) and the FNSconduct nutrition research, studies, surveys, and evaluations (typically totaling$6-$8 million a year for child nutrition and WIC activities); this work was formerlydone exclusively by the FNS. (30) A national Food Service Management Institute(FSMI) provides technical assistance, instruction, materials in nutrition and foodservice management (it is funded at $4 million a year). And an informationclearinghouse provides information to support community-sponsored food assistanceinitiatives (funding of about $250,000 a year). Special FNS projects -- "TeamNutrition" nutrition education projects, a food safety project, technical assistance toprogram operators, food service training grants, aid with electronic food serviceresource systems, "program integrity" initiatives -- are aimed at helping schools andother providers with nutrition education materials, assisting them to improve theirmeal service operations and the quality of meals, and ensuring federal support is spentcorrectly; they are typically funded at about $10-$20 million a year. In addition to the above-noted ongoing projects and activities, the 2004 ChildNutrition and WIC Reauthorization Act ( P.L. 108-265 ) added new, mostly one-time,"mandatory" spending to assist states and schools in improving administration oftheir school meal programs (especially determination of eligibility for free andreduced-price meals), gave money to the FNS to help local schools develop "wellnesspolicies " (outlined in the school lunch section of this report), and provided one-timefunding for specific pilot projects (related to expanding summer food service). It alsoextended, expanded, and provided new money (later increased) for a free fresh fruitand vegetable program in selected schools (discussed under the description of theSchool Lunch program). (31) Funding for Child Nutrition and WIC Programs Federal support for child nutrition and WIC programs is derived from fundingprovided out of (1) annual Agriculture Department appropriations, (2) permanentappropriations not included in the annual appropriations laws (e.g., money directlyappropriated for the Food Service Management Institute under its authorizing law andother spending mandated by law), (3) unused money available (carried over) fromprior years' appropriations, transferred from other Agriculture Departmentappropriations accounts, or recovered from states and operators, and (4) funds paidfor child nutrition initiatives from budget accounts separate from appropriations to thechild nutrition and WIC accounts (e.g., a large share of commodity assistance). Actual spending for most child nutrition programs -- but not WIC programs-- normally is dictated by the demand for federal dollars called for by the number and type of subsidized meals, snacks, or half-pints of milk served, not the fundingmade available (annually appropriated or otherwise); these programs are mandatory"entitlements." WIC (and WIC farmers' market) spending, on the other hand, is"discretionary" and dictated by the dollar amounts available from current andprior-year (carried-over or recovered unused) appropriations. State WIC agenciesserve as many persons as they can within their respective allocations of appropriatedfunds (supplemented by carryovers and recoveries), and not all eligibles may beserved if funds run short. Individual programs within the child nutrition budgetaccount (e.g., the School Lunch and Breakfast programs) do not receive specific("line-item") appropriations, and thus funding may be shifted among the various childnutrition programs as needed -- so long as total spending stays within the overallamount available from new appropriations and other sources. As a result, readily identifiable annual congressional appropriations --typically divided into two major accounts, a child nutrition account and a WICprogram account -- do not provide a clear or complete picture of total federal supportfor child nutrition and WIC programs in a given year. (32) Rather, spending figures -- normally higher than appropriations, shown in this report's secondtable (typically, obligations), give a much better overview than appropriationsamounts. Table 1 presents recent appropriations for the child nutrition and WICprogram accounts (FY2004-FY2006), the appropriations request for FY2007, theHouse-approved FY2007 appropriations bill ( H.R. 5384 ; H.Rept.109-463 ), and the Senate-reported FY2007 appropriations measure (H.R.5384; S.Rept. 109-266 ). Table 2 , on the other hand, shows, for the sameyears, spending figures (estimates for FY2006 and FY2007) for the various childnutrition programs and activities, the WIC program, and the WIC Farmers' Marketprogram. For additional detailed information about the FY2007 budget andappropriations, see CRS Report RL33412 , Agriculture and Related Agencies: FY2007Appropriations , coordinated by [author name scrubbed]. Table 1. Child Nutrition & WIC Appropriations: FY2004-FY2007 (in millions) Sources: Agriculture Department appropriations laws for FY2004-FY2006, annual Agriculture Department budgetdocuments, H.Rept. 109-463 , and S.Rept. 106-266 . Notes: WIC appropriations have been reduced to reflect directed rescissions in discretionary programs -- $27.3 million(FY2004), $42.2 million (FY2005), and $52.3 million (FY2006) -- and a $100 million transfer in FY2004. Not includedare mandatory appropriations made by laws outside the appropriations acts, funding available from other AgricultureDepartment accounts (e.g., some commodity support, a $120 million transfer from the Food Stamp budget account inFY2005), unused carryover or recovered funding from previous years, and money for the WIC farmers' market program inFY2005 and later years (about $20 million a year appropriated through another budget account). The House bill's childnutrition appropriation does not include a $300 million contingency fund proposed by the Administration and included inthe Senate bill; however, it (like the Senate bill and the Administration's request) does allow for $125 million in contingencyfunds for the WIC program. Added funds for a free fresh fruit and vegetable program in selected schools are not includedin the House bill amounts shown here (they are appropriated separately), but are included in the Senate child nutritionappropriation. Table 2. Child Nutrition & WIC Spending: FY2004-FY2007 (in millions) Sources: Agriculture Department budget documents, H.Rept. 109-463 , S.Rept.109-266 , and estimates from the Agriculture Department's Food and Nutrition Servicefor WIC spending under the House bill. Notes: Includes spending from all funding sources: regular appropriations, moneyfrom other budget accounts (e.g., Section 32 commodity support, a $120 millionFY2005 transfer from the Food Stamp account), permanent appropriations, andcarryovers of unused funding from previous fiscal years. Does not include spendingon child nutrition- and WIC-related research. a. Figures include cash assistance only, not the value of commodities or cash-in-lieuof commodities. b. Figures include (1) some $400 million in commodities purchased for and donatedto child nutrition programs (at no charge to the child nutrition account) tomeet commodity entitlements, (2) cash subsidies and commodity letters ofcredit provided in lieu of commodity entitlements (e.g., $94 million inFY2005), and (3) certain federal commodity donationadministrative/distribution/computer support spending (e.g., $9 million inFY2005). Not shown is the value of "bonus" commodities donated by theDepartment from excess federal commodity holdings (e.g., $120 million inFY2005). c. Unlike other numbers in this table, figures for the free fresh fruit and vegetableprogram in schools represent funding made available for each year, not actualspending, because of uncertainty about spending amounts. Actual spendingfigures are likely to be substantially lower than the amounts shown. The tableallocates to FY2004 $3 million of the $6 million provided by the 2002 farmbill ( P.L. 107-171 ) for FY2003 and FY2004. The $9 million shown forFY2005 is the amount mandated by the 2004 child nutrition reauthorizationlaw ( P.L. 108-265 ) for each year beginning with FY2005. The $15 millionshown for FY2006 includes the $9 million mandate from the child nutritionreauthorization law, plus $6 million appropriated by the FY2006appropriations measure. The Administration's request for FY2007 includesonly the $9 million mandated amount. The House $25 million figure is adiscretionary appropriation that assumes suspension of the $9-million-a-yearmandate. The Senate figure includes the $9 million mandatory fundingamount, plus a $9 million discretionary appropriation. d. Special projects and other activities include nutrition education efforts through"Team Nutrition," food safety education, several program integrity/technicalassistance initiatives undertaken by the Administration or directed by the 2004child nutrition reauthorization law, an information clearinghouse, programevaluations, a summer program pilot project, and funding for the FNS to helpschools establish "wellness policies." A large portion of the FY2006 amountreflects one-time spending directives in the 2004 child nutritionreauthorization law ( P.L. 108-265 ). e. The FY2007 Administration request for the WIC program is predicated onenactment of a recommendation to limit WIC Nutrition Services andAdministration (NSA) support to 25% of state grants (an estimated savingsof $152 million in FY2007). The House and Senate figures reject theproposed NSA limits. They also reflect major changes in assumptions as tofood costs, participation, and the availability of prior-year funds (as estimatedby the Food and Nutrition Service after passage of the House bill and beforereporting of the Senate bill). e. WIC farmers' market figures represent spending from amounts available from newannual appropriations, plus money recovered or carried over from prior years. They reflect a substantial amount of unused funding in FY2004 (later madeavailable and obligated in FY2005), and they assume significant, althoughshrinking, recoveries/carryovers (a decrease in unused money) in FY2005,FY2006, and FY2007. Annual appropriations were $22.9 million in FY2004,$19.8 million in FY2005, and $19.8 million in FY2006. A $19.8 millionappropriation is requested for FY2007. In effect, the drop in appropriationsbeginning with FY2005 does not show in spending totals until FY2006because unspent funds from earlier years were available. However, theFY2005 spending figure may be revised downward by as much as $2 millionwhen all unused money is recovered, and the FY2006 and FY2007 amountsmay be revised upward to the extent recoveries from FY2005 are madeavailable as grants. The FY2007 figure for the House and Senate bills reflects$200,000 added by these bills.

Federally supported child nutrition programs/initiatives and the Special SupplementalNutrition Program for Women, Infants, and Children (the WIC program) reach more than 39million children and 2 million lower-income pregnant/ postpartum women. In FY2006,spending on them is anticipated to be $18.4 billion, supported by new appropriations of alesser amount ($17.9 billion). The Administration's FY2007 budget request envisionsspending a total of $19.1 billion, with new appropriations of $18.8 billion. For FY2007, theHouse and Senate appropriations bills ( H.R. 5384 ) call for spending $19.2billion, supported by new appropriations of $18.6 billion in the House and $18.9 billion inthe Senate. Child Nutrition Programs. The School Lunch and School Breakfast programs provide cash subsidies for all meals they serve to schools choosing to participate; largersubsidies are granted for free and reduced-price meals offered to lower-income children. The Child and Adult Care Food program subsidizes meals/snacks served by child care centersand day care homes; federal subsidy rules differ significantly between those provided tocenters and those for day care homes. Schools and organizations operating programs forchildren also can receive subsidies for snacks (and, in some cases, meals) served in after-school and other outside-of-school settings . The Summer Food Service program subsidizes food service operations by public/private nonprofit sponsors volunteering tooperate projects during the summer; all meals/snacks they serve are free. The Special Milkprogram operates in schools and other venues without a lunch program and subsidizes allmilk served. All these subsidies are inflation-indexed and are paid only where themeals/snacks meet federal nutrition and other standards. In addition to cash aid, manyproviders receive food commodities from the Agriculture Department, at a set value per meal(and may receive "bonus" commodities from Department surplus stocks). Grants also aremade to help cover state administrative expenses . Other significant federalprograms/activities include a free fresh fruit and vegetable program in selected schools,money for a Food Service Management Institute, a small nutrition education initiative,activities to improve program integrity, meal quality, food service and safety, and support forlocal school "wellness policies." Separately, the WIC program provides nutrition services(e.g., nutrition education, breastfeeding support) and tailored food packages to lower-incomepregnant and postpartum women, infants, and children who are judged to be at nutritionalrisk. And a WIC farmers' market program offers vouchers to WIC recipients for the purchaseof fresh fruit and vegetables at farmers' markets. These are administered by the Agriculture Department's Food and Nutrition Serviceand state education, health, social service, and agriculture agencies. They actually areoperated, under state oversight, by over 300,000 local providers (such as schools, child carecenters, health clinics). Federal payments do not necessarily cover all program costs, andnonfederal support is significant (e.g., children's families' school meal payments, state/localcontributions). This report will be updated as warranted.

Introduction United Nations (U.N.) reform is an ongoing policy issue for the United States, and may continue to be an area of focus during the 114 th Congress. As the single largest financial contributor to the U.N. system, the U.S. government has an interest in ensuring the United Nations operates as efficiently and effectively as possible. Congress has the responsibility to appropriate U.S. funds to the United Nations and can impose conditions on payments. On several occasions, it has sought to link U.S. funding of the United Nations to specific reform benchmarks. Since the establishment of the United Nations in 1945, U.N. member states and past secretaries-general have repeatedly attempted to reform the organization. These reform efforts tend to be cyclical, with member states considering waves of new reform proposals every 5 to 10 years. The reform attempts are often initiated by a member state, groups of member states, and/or the current Secretary-General. They have generally focused on three areas of concern: (1) perceived inefficiencies and lack of accountability in the U.N. Secretariat; (2) duplication and redundancy of U.N. mandates, missions, and/or programs; and (3) evidence of fraud, waste, abuse, and/or mismanagement of U.N. resources. Proposed reforms often reflect the political, economic, and cultural climate of the time. In the 1950s and 1960s, member states focused on increasing membership on the U.N. Security Council and the U.N. Economic and Social Council (ECOSOC) to account for growing U.N. membership. In the 1970s, as the economic and political gap between developed and developing countries grew more pronounced, the General Assembly examined structural changes that would help the United Nations address "problems of international economic co-operation." Due in part to pressure from the United States, U.N. reform initiatives in the 1980s and early 1990s addressed financial and structural issues, with a particular focus on decision-making processes related to the U.N. regular budget, which funds core U.N. activities. Since the early 2000s, reform efforts have been driven by a combination of U.N. budgetary and financial challenges, controversy over mismanagement of the Iraq Oil-For-Food Program, perceived ineffectiveness of U.N. human rights mechanisms, and allegations of sexual abuse committed by U.N. staff and peacekeepers, among other issues. This report examines reform priorities from the perspective of several key actors, including Members of Congress, the Obama Administration, selected member states, the U.N. Secretary-General, and a cross-section of groups tasked with addressing U.N. reform during the past 10 to 15 years. It also discusses congressional actions related to U.N. reform and mechanisms for implementing reform, as well as possible challenges facing U.S. policymakers as they consider existing and future U.N. reform efforts. Selected Reform Efforts: 2005-Present In 2005, U.N. reform efforts gained momentum as heads of state and government met for a World Summit at U.N. Headquarters in New York. The Summit Outcome Document, which was adopted by consensus, laid the foundation for a series of reforms that included improving U.N. management structures; strengthening the Security Council (see text box ); enhancing U.N. system coordination and coherence; and creating a new Human Rights Council (see text box ). Since the World Summit, U.N. member states have worked toward implementing these reform initiatives with varied results. Some reforms are stalled or have not been addressed, while others are underway or completed. Selected reform activities include the following: The long-term impact of these and other recent activities remains to be seen. The overall success of these efforts—and any future reform efforts—depends on how effectively the United Nations and its member countries manage and follow through on the implementation of these reforms and how, if at all, they work to correct possible weak nesses or issues that may arise over time. Congress and U.N. Reform Generally, Congress supports the United Nations and its overall mission. It authorizes and appropriates U.S. funds to the organization each year and often uses U.N. mechanisms to further U.S. foreign policy objectives. Congress can also be critical of the United Nations—especially when some Members believe that it may not be running as effectively as it could be. In such instances, Congress may use a wide range of legislative tools to influence and direct U.S. policy at the United Nations. Placing financial conditions or limits on U.S. funding to the United Nations, described in more detail below, is a common congressional approach to U.N reform. Other tools may include considering "sense of the Congress" resolutions; holding hearings to investigate U.N. programs or oversee Administration policies; and considering U.S. nominations for U.N. posts. U.S. Funding as a Mechanism for U.N. Reform In the past, Congress has used its authority to limit U.S. funds to the United Nations as a mechanism for influencing U.N. policy. In some cases, Congress withheld a proportionate share of funding for U.N. programs and policies of which it did not approve. It has, for instance, withheld funds from regular budget programs, including the U.N. Special Unit on Palestinian Rights and the Preparatory Commission for the Law of the Sea. Currently, the only proportionate U.S. withholding from the regular budget is for some activities and programs related to the Palestine Liberation Organization (PLO) or entities associated with it. Since FY2012, the United States withheld funding from the U.N. Educational, Scientific, and Cultural Organization (UNESCO) due to member states' October 2011 decision to admit "Palestine" as a member (see text box ). The overall impact of withholding a proportionate share of assessed payments depends on the origin of the program's funding. If a program is funded by the U.N. regular budget and the United States withholds a proportionate share of its normal contributions, the cost of the program will most likely be covered by surplus regular budget funds. Some U.N. programs are funded from several budgets that may include the U.N. regular budget, specialized agency budgets, and separate conference and administrative budgets. Because of this, it may be more difficult for U.S. proportionate withholdings to have a significant impact because the program's funding comes from several sources. In such cases, a U.S. withholding would have little or no immediate impact on the program's operation or funding levels. If the United States withholds funds from a program funded primarily by member state contributions, however, the impact of the United States withholding or suspending contributions could be greater. In addition to withholding a proportionate share of U.S. funding, Congress may consider enacting legislation decreasing or increasing U.S. assessment levels or linking payment of U.S. arrears to policies it favors. In October 1993, for example, Congress directed that the U.S. payments of peacekeeping assessments be capped at 25% (lower than the assessment level set by the United Nations). Congress has also used this strategy to further its U.N. reform policies. Enacted legislation such as the Helms-Biden Agreement linked U.S. assessment levels and the payment of U.S. arrears to reform benchmarks (see Appendix A for more information on legislation). As noted in the previous text box , some current Members of Congress have proposed shifting U.S. funding from assessed to voluntary contributions. Perspectives on Linking U.S. Funding to U.N. Reform Opponents of linking U.S. funding to progress on U.N. reform are concerned that doing so may weaken U.S. influence at the United Nations, thereby undercutting the United States' ability to conduct diplomacy and make foreign policy decisions. Some argue that withholding U.S. assessed payments to the United Nations infringes on U.S. treaty obligations and alienates other U.N. member states. Opponents also note that withholding U.S. funds could have an impact on diplomatic relations outside of the U.N. system. Additionally, some contend that U.N. reform legislation proposals may be unrealistic because the scope and depth of reforms required by the legislation cannot be adequately achieved in the proposed time frames. Supporters of linking U.S. funding to specific reforms argue that the United States should use its position as the largest U.N. financial contributor to push for the implementation of policies that lead to comprehensive reform. They note that despite diplomatic and political pressures from many countries, the United Nations has been slow to implement substantive reform. Advocates also argue that some previously implemented reforms have proved to be ineffective. They believe that tying U.S. funding to U.N. reform may motivate countries to find common ground on divisive issues. They also emphasize that past legislation that threatened to cut off U.S. funding of the United Nations (such as the Kassebaum-Solomon amendment, described in Appendix A ) was effective, and led to substantive changes in U.N. operations and programs. Possible Instruments for Furthering U.S. Reform Policy Congress's influence over U.S. funding of the United Nations is a powerful tool for furthering U.S. reform policy at the United Nations. However, there may be other strategies for Congress to consider when advocating its reform agenda. These strategies have been widely used by many past and current Members of Congress and Administrations, and include, but are not limited to: Resolutions —Members of Congress may propose and/or enact simple or concurrent resolutions expressing an opinion, fact, or principle in one or both chambers of Congress. Some Members have used these resolutions to voice an opinion about U.S. policy in the United Nations/or the United Nations itself. Working with the U.N. Secretary-General —Some previous and current Members of Congress and Administrations have worked to earn the support of U.N. secretaries-general to help advocate their positions. Developing a relationship with the chief administrative officer of the United Nations can be valuable during some negotiations, when the Secretary-General can act as a bridge among member states that disagree on issues. U.S. citizens have also held key U.N. reform-related posts at the United Nations, which some Members of Congress believe may play a role in furthering U.S. reform policy interests. Collaborating with Other U.N. Member States —The United States may wish to continue to reach out to other U.N. member states to build consensus and form partnerships on reform policies, either within the framework of the United Nations or bilaterally. Observers have noted that U.S. support for certain U.N. reform initiatives can be a liability because some member states may view U.S. support as self-serving. In these cases, the United States may consider encouraging like-minded countries to advocate its reform agenda. Identifying Key Priorities —The United States may wish to focus on a small number of reform priorities and pursue them vigorously in both multilateral and bilateral fora. It may also consider compromising with other member states on U.N. reform issues that it has identified as lesser priorities. Many experts have emphasized that U.N. reform is an ongoing process rather than a singular event. With this in mind, the 114 th Congress may wish to continue monitoring the implementation and overall progress of ongoing reform initiatives. It may also consider future reforms proposed by member states and the Administration, as well as by Members of Congress or the Secretary-General. Administration Policies The United States generally supports the mission and mandate of the United Nations. It played a key role in establishing the United Nations in 1945, and serves as one of five permanent members of the Security Council. Some Administrations have been critical of the United Nations, however, and have advocated sweeping reform of the organization. Obama Administration Since President Obama took office, his Administration has focused on "re-engaging" with the United Nations. The Administration elevated the status of the U.S. Permanent Representative to the United Nations to a Cabinet-level position that reports directly to the President. It also paid a significant portion of U.S. arrears, and decided to run for a seat on the U.N. Human Rights Council. Many of the Administration's U.N. reform priorities focus on management issues—particularly those related to budget processes and transparency. In various statements and documents, the Administration has highlighted the following areas of priority: enforcing budget discipline by taking cost-saving measures such as eliminating vacant U.N. posts, freezing U.N. staff salaries, and exploring alternate budget practices; improving transparency and accountability by strengthening the effectiveness of U.N. bodies charged with evaluating performance and investigating abuses, including the Ethics Office, the Independent Audit Advisory Committee, the Board of Auditors, and the Office of Internal Oversight Services (OIOS); reforming human resources practices to create a more mobile and merit-based workforce by further streamlining U.N. staff contracting and conditions of service across the U.N. system; and overhauling day-to-day business practices such as upgrading information technology, and improving procurement procedures, accounting procedures, and budgeting processes. The Obama Administration has also implemented initiatives within the State Department aimed at evaluating and improving U.N. system transparency and effectiveness. It has continued to support the U.N. Transparency and Accountability Initiative (UNTAI), a Bush Administration program created by the U.S. Mission to the United Nations that tracks the adoption of management reforms by U.N. funds and programs. Additionally, in September 2010, then-Assistant Secretary for International Organization Affairs (IO) Esther Brimmer announced that the IO Bureau hired an advisor on effectiveness, whose role is to "systematically review the effectiveness of international organizations," including U.N. entities. The Administration has generally resisted legislation tying U.S. contributions to specific U.N. reforms due to concerns that it may interfere with the President's ability to conduct diplomacy. In an April 2011 statement before the House Foreign Affairs Committee, then-U.S. Permanent Representative to the United Nations Susan Rice remarked that failing to pay U.N. dues "undermines [U.S.] credibility and influence [in the United Nations]—not just on reform, but on a range of U.S. national security policies." George W. Bush Administration The George W. Bush Administration was an active participant in U.N. reform efforts. It identified several key priorities that it believed would help the United Nations improve its effectiveness, including (1) management, budget, and secretariat reform; (2) increased oversight and accountability; (3) review of all U.N. mandates and missions; and (4) fiscal discipline. Prior to and after the adoption of the 2005 World Summit Outcome Document, the Bush Administration attempted to work with like-minded countries and the U.N. Secretary-General to move a reform agenda forward. Some reform initiatives supported by President Bush, particularly management and oversight reforms, were not approved or considered by the General Assembly. Administration officials expressed dissatisfaction with the overall effectiveness of some previously implemented reforms, as well as the pace of reform efforts. Nevertheless, the Administration did not support mandatory withholding of U.S. payments to the United Nations. Reform Perspectives and Priorities A significant challenge for advocates of U.N. reform is finding common ground among the disparate definitions of reform held by various stakeholders. There is no common definition of U.N. reform and, as a result, there is often debate over the scope, appropriateness, and effectiveness of past and current reform initiatives. One method for determining how a stakeholder defines U.N. reform may be to identify policy priorities in the U.N. reform debate. In some cases, common objectives among stakeholders have translated into substantive reform policy, though shared goals do not always guarantee successful outcomes. The Secretary-General On December 14, 2006, Ban Ki-moon of South Korea took the oath of office to succeed outgoing U.N. Secretary-General Kofi Annan. He was appointed to a second five-year term on June 21, 2011, and since his first term has stated that U.N. reform is one of his top priorities. He maintains that progress needs to be made in three areas: (1) improving what and how the United Nations delivers on the ground, (2) doing more with what the United Nations has, and (3) increasing accountability. During his tenure, Ban's reform efforts have included restructuring the Department of Field Support and the Department of Disarmament Affairs; establishing a "Change Management Team" to address management issues and future reform efforts; and proposals to improve staff mobility. The extent and effectiveness of Ban's reform efforts remain to be seen. On the one hand, some experts and policymakers argue that Ban is not doing enough to press member states for comprehensive reform or to institute reforms in the Secretariat. On the other hand, some emphasize that like previous Secretaries-General, Ban's success in achieving reform is limited by the responsibilities of his office. Although the Secretary-General—as the "chief administrative officer" of the United Nations—can facilitate and advocate reform, the power to implement wide-ranging and comprehensive change lies primarily with U.N. member states. Many of these states are concerned that reform activities initiated by the Secretary-General may undermine their authority. For example, the Secretary-General's aforementioned Change Management Team, which was supported by the United States, has faced opposition from many developing countries due to such concerns. Developed and Developing Countries Past reform debates in the U.N. General Assembly and its committees have drawn attention to fundamental differences that exist among some member states, particularly developing countries (represented primarily by the Group of 77), and developed countries (particularly the United States, Japan, and members of the European Union). Developed countries, which account for the majority of assessed contributions to the U.N. regular budget, tend to focus on the United Nations' role in maintaining international peace and security and the overall efficiency of the organization. They would like the Secretary-General to have greater flexibility and authority to implement reforms, specifically those related to oversight and human resources. Generally, they make significantly larger financial contributions to the U.N. system than developing countries and therefore want to ensure that their funds are used in ways they perceive as most effective. Conversely, developing countries, which constitute the largest U.N. voting bloc, often focus on development-oriented policies. They generally object to reforms that would enhance the power of the Secretary-General and decrease the power of the General Assembly and its Fifth Committee (which addresses budget and administrative issues). In the past, some developing countries have expressed concern that reform initiatives might drain resources from development programs. They have also suggested that reforms proposed by the Secretary-General tend to be influenced by countries that are the largest financial contributors to the United Nations. Many observers are concerned that the aforementioned difference in reform philosophy has created deadlocks in the General Assembly and significantly delayed the implementation of management and budget reforms. Such differences were highlighted in December 2005 when a group of U.N. member states, led primarily by developed countries such as the United States and Japan, sought to link the U.N. budget to progress on management reforms. The countries placed a spending cap of $950 million (about six months of U.N. spending) on the two-year, $3.6 billion budget in hopes that the General Assembly would adopt a series of management and budget reform measures proposed by then-Secretary-General Annan. On May 8, 2006, the General Assembly's Fifth Committee bypassed the traditional practice of budget-by-consensus and voted on a resolution, supported by the G-77, which approved some reforms but delayed the consideration of several others. The developed nations that imposed the budget cap were disappointed with the outcome. They eventually lifted the budget cap in June 2006 because they were unwilling to cause a shutdown of the United Nations. U.N. Reform-Related Commissions, Task Forces, and Groups Since the United Nations was established in 1945, many commissions, panels, committees, and task forces (hereinafter referred to collectively as "groups") have been created to examine ways to improve the United Nations. These groups were established by a variety of stakeholders, including past secretaries-general, individual member states, groups of member states, non-governmental organizations, academic institutions, and others. The following sections address the findings of a cross-section of these groups during the past 15 years—the Volcker Commission, the U.S. Institute of Peace U.N. Reform Task Force, and then-Secretary-General Kofi Annan's 2005 report, In Larger Freedom: Toward Development, Security, and Human Rights for All. Though the circumstances and mandates for each group are different, they made similar recommendations for improving the United Nations. Notably, each group highlighted the need for enhanced internal oversight and Secretariat reform, including staff buyouts and enhanced financial disclosure requirements. The groups also emphasized the need for overall streamlining and consolidation of the U.N. system (see 0 for a side-by-side comparison of the recommendations). The Volcker Commission In April 2004, then-Secretary-General Annan, with the endorsement of the U.N. Security Council, appointed an independent high-level commission to inquire into corruption in the U.N.-led Iraq Oil-for-Food Program. The commission, led by former U.S. Federal Reserve Chairman Paul Volcker, concluded that the failures of the Oil-For-Food Program were evidence of a greater need for "fundamental and wide-ranging administrative reform" in the United Nations. The commission recommended establishing an Independent Oversight Board to review U.N. auditing, accounting, and budgeting activities; creating the position of Chief Operating Officer to oversee administrative matters such as personnel and planning practices; providing fair compensation to third parties involved in U.N. programs (while ensuring that the compensation does not lead to inappropriate profit); and expanding financial disclosure requirements to cover a variety of U.N. staff, including those working on procurement. U.S. Institute of Peace U.N. Reform Task Force In December 2004, Congress directed the U.S. Institute of Peace to create a bipartisan task force to examine ways to improve the United Nations so that it is better equipped to meet modern-day security and human rights challenges. Congress appropriated $1.5 million to the task force and required that it submit a report on its findings to the House Committee on Appropriations. The task force identified improving internal oversight as its single most important reform recommendation. It supported the creation of an independent oversight board to direct the budget and activities of the Office of Internal Oversight Services (OIOS). It also recommended several management reforms, including establishing the position of Chief Operating Officer, creating a U.N. Ethics Office, and enhancing whistle-blower protection. It supported broadening the U.N. staff financial disclosure policy, and recommended the review of all U.N. mandates five years or older, as well as the incorporation of sunset clauses into all new mandates. The task force supported incorporating results-based budgeting into the U.N. system, and a one-time buyout for all unwanted or unneeded staff. It recommended the creation of a new U.N. Human Rights Council to replace the discredited Commission on Human Rights, but was unable to come to consensus on Security Council reform. Secretary-General Annan's Report, In Larger Freedom On March 21, 2005, then-Secretary-General Annan released his report, In Larger Freedom , in response to the findings of the High-Level Panel on Threats, Challenges and Change. The report was presented to member states as a starting point for discussion at the 2005 U.N. World Summit, and included the following management reform recommendations: the review of all U.N. mandates over five years old; a one-time staff-buyout to ensure U.N. Secretariat staff meets current needs; the establishment of a Cabinet-style decision-making body in the Secretariat to improve management and policy activities; the review of all budget and human resource operations; and a comprehensive review of Office of Internal Oversight Services to examine ways to enhance its authority and effectiveness. In addition, Secretary-General Annan proposed a broad range of institutional and programmatic reforms, including modifying the composition of the U.N. Security Council so that it more adequately reflects current political realities, and replacing the Commission on Human Rights with a new Human Rights Council. Annan also recommended streamlining the General Assembly agenda and committee structure so that the Assembly can increase the speed of its decision-making and react more swiftly and efficiently to events as they occur. Mechanics of Implementing Reform Previous and current U.N. reform initiatives encompass an array of organizational issues that may require different processes for implementation. These reforms might be achieved by amending the U.N. Charter or through various non-Charter reforms. Charter amendment is a rarely used practice and has only occurred on three occasions. Non-Charter reforms are more common and comparatively easier to achieve. Amending the U.N. Charter Articles 108 and 109 of the U.N. Charter provide for potential changes to the document. Article 108 states that a proposed Charter amendment must be approved by two-thirds of the full General Assembly, and be ratified "according to the constitutional processes" of two-thirds of U.N. member states, including all permanent members of the Security Council. The Charter was first amended in 1963 to increase U.N. Security Council membership from 11 to 15 members, and to increase the Economic and Social Council (ECOSOC) membership from 18 to 27. It was last amended in 1973, when ECOSOC membership increased from 27 to 54. Examples of possible reform initiatives that might involve amending the U.N. Charter include, but are not limited to, increasing permanent and/or non-permanent Security Council membership; increasing membership on ECOSOC; and adding or removing a principal organ. Article 109 of the Charter allows for a convening of a General Conference of U.N. members with the purpose of "reviewing the present Charter." The date and place of the conference would be determined by a two-thirds vote in the General Assembly, and an affirmative vote from any nine Security Council members. Potential revisions to the Charter would be adopted at the conference by a two-thirds vote (with each country having one vote), and take effect when ratified by the governments of two-thirds of U.N. member states. A Charter review conference has never been held. Non-Charter Reform Process Since 1945, the General Assembly has authorized reforms of its own processes and procedures—as well as those of the Secretariat—without Charter amendment. The General Assembly has established various fora for discussing reform issues, including a Committee on the Charter of the United Nations and a Working Group on the Security Council. The General Assembly has also implemented reforms on its own by adopting proposals introduced by member states or the Secretary-General. The Secretary-General may also institute reform in his capacity as chief administrative officer, as well as make administrative decisions regarding the organization of some U.N. departments. Secretary-General Ban, for example, restructured the Departments of Field Support and Disarmament Affairs and established a Change Management Team to consider possible future reform efforts. Other non-Charter reforms have included the establishment of consensus-based budgeting in 1986; the creation of an Office of Strategic Planning in the Secretariat authorized by Secretary-General Annan in 1997; and the establishment of a Peacebuilding Commission by the Security Council and General Assembly in 2006. Looking Ahead: Possible Challenges to Reform Achieving meaningful and comprehensive U.N. reform is a significant and ongoing challenge for U.N. member states. The 114 th Congress may wish to take possible reform obstacles into account when considering legislation that exercises oversight or supports a reform agenda. National Self-Interest and Differing Reform Perspectives Each U.N. member state has its own political agenda and foreign policy goals, and may also have its own definition of U.N. reform. As a result, member states often hold differing views on when reform is necessary, how best to implement reform, and how to measure the success or failure of a given reform initiative. In some cases, failure to reach consensus can lead to significant delay, or failure, of certain reform initiatives. Some member states package their policy priorities as U.N. reform to further their own policy goals. This can cause distrust among member states as countries question whether reform proposals by other member states are based on self-interest or a genuine desire to improve the U.N. system. Competing Priorities Some observers cite the inability of U.N. member states or secretaries-general to effectively prioritize reform initiatives as an obstacle to U.N. reform. When Secretary-General Annan presented reform proposals in 2005, for example, he requested that they be adopted by the General Assembly not in increments, but as a package of reforms. Instead of considering a large series of reform proposals, some observers argue that member states should select only a few reform priorities and work toward their adoption and implementation. Others contend that the most efficient way to achieve reform may be for member states first to adopt reform initiatives they can agree to and then gradually work toward tackling the more divisive and complicated reform issues. Organizational Structure and Bureaucracy The United Nations is a highly complex and decentralized organization, and therefore may be slow to consider or implement potential reforms. Some argue that there is a "culture of inaction" in the United Nations, and that U.N. managers and staff are resistant to the implementation of new programs, changes to existing programs, and modifications to staffing and personnel policies. Many contend that prospective and agreed-to reforms lack clear plans for implementation, including deadlines and cost estimates. They stress that this overall lack of planning may affect the progress and ultimate success of reforms already implemented, as well as those reforms currently being considered by the General Assembly. Some also emphasize that without proper implementation plans and follow-up, U.N. member states may be unable to adequately gauge the overall effectiveness of reforms. Limited Resources Many observers note that a significant challenge for U.N. reform efforts may be the effective implementation of reforms within the current U.N. budget. Some reform initiatives are established by member states to operate "within existing resources." Many argue that the existing U.N. budget limits may not be able to support all of the reform initiatives currently being considered. Some member states, including the United States, however, contend that money saved from other reforms could create a funding source for further reforms and/or the creation of new U.N. programs or bodies. External Influences The complex relationships that exist among member states outside of the U.N. system may be another challenge affecting U.N. reform efforts. These relationships are entirely independent of the United Nations but can affect how countries work together within the U.N. framework to achieve reform objectives. Military conflict, religious and ethnic differences, political conflict, trade and economic issues, and geography can all potentially impact reform priorities and cooperation among U.N. member states. Appendix A. Selected Reform Legislation When considering U.N. reform issues, Congress may wish to explore the nature and effectiveness of past legislative approaches and the extent to which they may have influenced the adoption of reform measures at the United Nations. There is some evidence that legislation such as the Kassebaum-Solomon Amendment and the Helms-Biden Agreement may have led, either directly or indirectly, to substantive changes in U.N. policies. The following sections highlight selected reform legislation from 1986 to the present and note any subsequent changes to internal U.N. policy. Kassebaum-Solomon Amendment (1986-1987) In the mid-1980s, some Members of Congress expressed concern that U.S. influence over the U.N. budget was not proportionate to its rate of assessment. In 1986 Congress passed legislation, popularly known as the "Kassebaum-Solomon amendment," which required that the U.S. assessed contribution to the U.N. regular budget be reduced to 20% unless the United Nations gave major U.N. financial contributors a greater say in the budget process. Subsequently, in 1986 the General Assembly adopted a new budget and planning process that incorporated consensus-based budgeting as a decision-making mechanism, thus giving member states with higher assessment levels a potentially greater voice in the budget process. U.N. Office of Internal Oversight Services (1993) In the early 1990s, some Members of Congress and the Administration were concerned with the apparent lack of oversight and accountability within the U.N. system. In 1993, as part of the FY1994 State Department Appropriations Act, Congress directed that 10% of U.S. assessed contributions to the U.N. regular budget be withheld until the Secretary of State certified to Congress that "the United Nations has established an independent office with responsibilities and powers substantially similar to offices of Inspectors General Act of 1978." On July 29, 1994, the U.N. General Assembly established the Office of Internal Oversight Services (OIOS) which reports directly to the Secretary-General and provides "internal auditing, investigation, inspection, programme monitoring, evaluation and consulting services to all U.N. activities under the Secretary-General's authority." Helms-Biden Agreement (1999) In the late 1990s, Congress and the Administration negotiated and agreed to legislation that would further U.S. reform policy at the United Nations. The Helms-Biden bill authorized payment of some U.S. arrears if specific reform benchmarks were met and certified to Congress by the Secretary of State. Under the terms of Helms-Biden, the United States agreed to (1) pay $819 million in arrearages over fiscal years 1998, 1999, and 2000; and (2) forgive $107 million owed to the United States by the United Nations in peacekeeping costs if the United Nations applied the $107 million to U.S. peacekeeping arrears. For arrearage payments to occur, Congress required that the U.S. assessment for contributions to the U.N. regular budget be reduced from 25% to 22% and that the peacekeeping contribution be reduced from 30% to 25%. In December 2000, the U.N. General Assembly reduced the regular budget assessment level to from 25% to 22%, and the Peacekeeping share from approximately 30.4% to 28%. In subsequent years, the U.S. peacekeeping assessment continued to fall and is now close to 26.5%. Appendix B. Key U.N. Reform Recommendations and Proposals by Independent and U.N. Affiliated Groups Appendix C. Organizational Chart of the U.N. System

Since its establishment in 1945, the United Nations (U.N.) has undergone numerous reforms as international stakeholders seek ways to improve the efficiency and effectiveness of the U.N. system. During the past two decades, controversies such as corruption in the Iraq Oil-For-Food Program, allegations of sexual abuse by U.N. peacekeepers, and instances of waste, fraud, and abuse by U.N. staff have focused attention on the need for change and improvement of the United Nations. Many in the international community, including the United States, continue to promote substantive reforms. The 114th Congress may focus on U.N. reform as it considers appropriate levels of U.S. funding to the United Nations and monitors the progress and implementation of ongoing and previously approved reform measures. Generally, Congress has maintained a significant interest in the overall effectiveness of the United Nations. Some Members are particularly interested in U.N. Secretariat and management reform, with a focus on improving transparency and strengthening accountability and internal oversight. In the past, Congress has enacted legislation that links U.S. funding of the United Nations to specific U.N. reform benchmarks. Supporters of this strategy contend that the United Nations has been slow to implement reforms and that linking payment of U.S. assessments to progress on U.N. reform is the most effective way to motivate member states to efficiently pursue comprehensive reform. Opponents argue that tying U.S. funding to U.N. reform may negatively impact diplomatic relations and could hinder the United States' ability to conduct foreign policy. In September 2005, heads of U.N. member states met for the World Summit at U.N. Headquarters in New York to discuss strengthening the United Nations through institutional reform. The resulting Summit Outcome Document laid the groundwork for a series of reforms that included enhancing U.N. management structures; strengthening the U.N. Security Council; improving U.N. system coordination and coherence; and creating a new Human Rights Council. Since the Summit, U.N. member states have worked toward implementing these reforms with varied results. Some reforms, such as the creation of the Human Rights Council and improving system-wide coherence, are completed or ongoing. Others reforms, such as Security Council enlargement and changes to management structures and processes, have stalled or not been addressed. One of the key challenges facing reform advocates is finding common ground among the disparate definitions of reform held by various stakeholders. There is no single definition of U.N. reform, and consequently there is often debate over the scope, appropriateness, and effectiveness of past and current reform initiatives. U.N. member states disagree as to whether some proposed reforms are necessary, as well as how to most effectively implement reforms. Developed countries, for example, support delegating more power to the U.N. Secretary-General to implement management reforms, whereas developing countries fear that giving the Secretary-General more authority may undermine the power of the U.N. General Assembly and therefore the influence of individual countries. Generally, U.N. reform is achieved by amending the U.N. Charter or through various non-Charter reforms. Charter amendment, which requires approval by two-thirds of the General Assembly and ratification "according to the constitutional processes" of two-thirds of U.N. member states (including the five permanent Security Council members), is rarely used and has been practiced on only a few occasions. Non-Charter reforms—which include General Assembly action or initiatives by the U.N. Secretary-General—are more common and comparatively easier to achieve. This report will be updated as policy changes or congressional actions warrant.

NAFTA's Agriculture Provisions NAFTA's primary objectives were "to eliminate barriers to trade in, and facilitate the cross-border movement of goods and services" among the NAFTA countries. NAFTA's market access provisions were structured as three separate bilateral agreements. The first agreement, the Canada-United States Trade Agreement (CUSTA), took effect on January 1, 1989, and was later subsumed into NAFTA and included certain additional provisions. The second and third agreements are both under NAFTA—one between Mexico and the United States and another between Canada and Mexico. These latter agreements took effect on January 1, 1994. For agriculture, NAFTA (including CUSTA) eliminated tariffs and addressed other types of non-tariff barriers to trade, such as quotas, licenses, and other types of restrictions and standards. NAFTA's agricultural provisions are contained within the "Agriculture and Sanitary and Phytosanitary Measures" chapter (Chapter 7), but provisions in other chapters also apply. The text box provides a summary of NAFTA's provisions that address agricultural trade. Tariff and Quota Elimination For agriculture, certain restrictions on bilateral trade were eliminated immediately upon implementation, while other restrictions were phased out over either a period of 4-, 9-, or 14-years ( Table 1 ). Sensitive products, such as sugar, were given the longest phase-out period. Tariff elimination for agricultural products under CUSTA concluded on January 1, 1998. However, quotas for certain agricultural products in U.S.-Canada trade were not liberalized. This was carried over without change into NAFTA. In the World Trade Organization (WTO) Uruguay Round, all import quotas were converted to tariff-rate quotas (TRQs). Accordingly, within-quota trade occurs at the duty-free tariff treatment agreed to in CUSTA, but the over-quota trade occurs at the WTO bound tariff equivalent of the old quota, which is not liberalized. Under CUSTA, Canada excluded dairy, poultry, and eggs for tariff elimination. In return, the United States excluded dairy, sugar, cotton, tobacco, peanuts, and peanut butter. Because Canada was able to exclude dairy products, poultry, and poultry products (including eggs) from tariff elimination in NAFTA, Canada is able to maintain a supply management system for these sectors by limiting imports through restrictive TRQs. These products were also exempt from Canada-Mexico trade liberalization. Tariff elimination for agricultural products under NAFTA concluded on January 1, 2008. Most non-tariff trade barriers in U.S.-Mexico agricultural trade were converted to either tariffs or TRQs. Prior to NAFTA, Mexico's trade-weighted tariff on U.S. products averaged about 11%. Tariffs for some agricultural products were higher, such as Mexican tariffs for fruits and vegetables, which averaged about 20% before NAFTA. Also prior to NAFTA, certain agricultural products—wheat, tobacco, cheese, evaporated milk, grapes, corn, dry beans, poultry, barley/malt, animal fats, potatoes and eggs—were subject to Mexican import licensing requirements affecting a reported 25% of the value of U.S. agricultural exports. Mexico also applied certain "official import prices," an arbitrary customs valuation system that raised duty assessments. In the United States, import quality requirements administered by USDA have affected imports of some Mexican products such as tomatoes, onions, avocados, grapefruit, oranges, olives, and table grapes. U.S. agricultural imports subject to reduced TRQ under NAFTA include sugar, beef, dairy products, peanut butter and paste, cotton, apparel, and cotton (from Canada) and beef, apparel, fabric, and yarn (from Mexico). SPS Measures and Other Non-Tariff Barriers In addition to tariffs and quotas, NAFTA addressed SPS measures and other types of non-tariff barriers that may limit agricultural trade. NAFTA requires that SPS measures be scientifically based, nondiscriminatory, and transparent and minimally affect trade. SPS measures are laws, regulations, standards, and procedures that governments employ as "necessary to protect human, animal or plant life or health" from the risks associated with the spread of pests, diseases, or disease-carrying and causing organisms or from additives, toxins, or contaminants in food, beverages, or feedstuffs. For agricultural exporters, SPS regulations are often regarded as one of the greatest challenges in trade, often resulting in increased costs and product loss and also the potential to disrupt integrated supply chains. A related issue involves technical barriers to trade (TBT). TBTs cover both food and non-food traded products. TBTs in agriculture include SPS measures and other types of measures related to health and quality standards, testing, registration, certification requirements, and packaging and labeling regulations. For more background information, see text box . Although NAFTA entered into force before the WTO was established and the WTO's Agreement on Sanitary and Phytosanitary Measures ("SPS Agreement") was implemented, it contains a detailed SPS chapter and imposes specific disciplines on the development, adoption, and enforcement of SPS measures. Some consider NAFTA's SPS provisions as establishing the blueprint for the SPS Agreement. Similar to the SPS Agreement, NAFTA's SPS disciplines are designed to prevent the use of SPS measures as disguised trade restrictions. SPS measures should also be scientifically based and consistent with international and regional standards while at the same time explicitly recognizing each country's right to determine its appropriate level of protection (e.g., to protect consumers from unsafe products or to protect domestic crops and livestock from the introduction of foreign pests and diseases). NAFTA also established a Committee on Sanitary and Phytosanitary Measures to facilitate technical cooperation in the development, application, and enforcement involving SPS measures. The committee meets periodically to review and resolve SPS issues and also hosts a number of technical working groups to enhance regulatory cooperation and facilitate trade between the NAFTA countries. Working groups address, for example, national regulatory and scientific review capacity, as well as coordination and harmonization of pesticide standards among the NAFTA partner countries. USTR regularly reports on a range of ongoing trade concerns in its annual National Trade Estimate Report on Foreign Trade Barriers (NTE) report, which covers trade barriers affecting U.S. agricultural and non-food exports for the major U.S. trading partners. The most recent NTE report highlights certain outstanding issues involving SPS and U.S. trade with its NAFTA partners. Select trade disputes between the United States and its NAFTA partners are discussed later in " Addressing Outstanding Trade Disputes ." Formal Dispute Resolution Mechanism NAFTA created both formal and informal mechanisms to resolve trade disputes among partner countries. NAFTA's formal mechanism for resolving disputes covers the agreement's provisions for investment (Chapter 11) and services (Chapter 14), the antidumping (AD) and countervailing duty (CVD) determinations (Chapter 19), and the general interpretation and application of the agreement (Chapter 20). NAFTA's rules-based systems for resolving disputes is meant to strengthen trade relations by providing an orderly, legal framework that defines and protects the interests of all partner countries. Table 2 highlights selected examples of dispute resolution through NAFTA, encompassing AD and CVD actions, NAFTA arbitration panels, government and industry negotiations, and technical assistance involving SPS measures. Agricultural AD and CVD investigations and duty assessments under Chapter 19 provide a way for NAFTA countries to address trade disputes resulting from perceived unfair trade practices. It allows exporters and domestic producers a way to make their case and appeal the results of trade-remedy investigations before an independent and objective binational panel, and it provides an alternative option to judicial review of such decisions before domestic courts. AD duties may be imposed if imports are being sold at less than fair value and causing or threatening to cause injury to a domestic industry. CVD duties may be imposed on imported goods to offset subsidies provided to producers or exporters by the government of the exporting country, and they must also meet an injury test. Under NAFTA, each country may apply its own AD and CVD laws but must publish a notice of national investigations and inform others on how to provide input. Additional general dispute settlement is provided under NAFTA's Chapter 20. The NAFTA secretariat is responsible for the administration of the dispute settlement process under both Chapters 19 and 20. Previous disputes and decisions involving the NAFTA secretariat cover refined sugar, sugar beets, and HFCS; softwood lumber; wheat; apples; and beef, pork, and poultry products; among other products. Other types of disputes involving U.S. agricultural markets and Canada or Mexico have included trade concerns involving milk products, country-of-origin labeling (COOL) of meat products, and potatoes. Some of these trade disputes have been formerly addressed within the framework of the WTO outside NAFTA. Agricultural Trade Trends with NAFTA Partners Canada and Mexico are key U.S. agricultural trading partners. Since NAFTA was implemented, the value of U.S. agricultural trade with Canada and Mexico has increased sharply and now accounts for a large overall share of all U.S. agricultural exports and imports. Agricultural products presented here cover commodities as defined by USDA for the purposes of calculating U.S. agricultural exports, imports, and the agricultural trade balance. This definition includes raw and bulk agricultural commodities, nursery products, wine, and cotton fiber products. This definition excludes fish and seafood, distilled spirits and other beverages, and manufactured tobacco products (see text box ). Total Agricultural Trade Over the past 25 years since NAFTA was implemented, the value of U.S. agricultural trade with Canada and Mexico has increased dramatically. Exports rose from $8.7 billion in 1992 to $38.1 billion in 2016, while imports rose from $6.5 billion to $44.5 billion over the same period ( Table 3 ). This resulted in a $6.4 billion trade deficit for agricultural products in 2016, despite trends in previous years when there was a trade surplus ( Figure 1 ). For example, from 2007 to 2011, U.S. agricultural trade to its NAFTA partners consistently showed a trade surplus, averaging $2.4 billion per year. This compares to the past five years (2012-2016), when the U.S. trade deficit averaged $1.8 billion per year. In general, trade balances tend to be variable year-to-year depending on market and production conditions, commodity prices and currency exchange rates, and consumer demand, among many other factors. Adjusted for inflation, growth in the value of total U.S. agricultural exports and imports with its NAFTA partners have increased roughly threefold, growing at an average rate of about 5-6% annually ( Figure 2 , Figure 3 ). NAFTA countries are key U.S. agricultural trading partners. As a share of U.S. trade, Canada and Mexico are ranked second and third (after China) as leading export markets for U.S. agricultural products. In 2016, Canada and Mexico accounted for 28% the total value of U.S. agricultural exports and 39% of its imports. This compares to 1992 (pre-NAFTA), when Canada and Mexico accounted for 20% and 26% of U.S. agricultural export and import values, respectively. In 2016, leading traded agricultural products under NAFTA were meat and dairy products; grains and feed; fruits, tree nuts, and vegetables; oilseeds; and sugar and related products. Reports by USDA further highlight how U.S. agricultural exports to its NAFTA partners have increased as a share of the total value of U.S. trade, often triggering shifts in trade with other U.S. trading partners. As part of its 20-year retrospective analysis of the impacts of NAFTA on the U.S. agricultural sectors, USDA reports that U.S. agricultural exports to NAFTA countries comprised 20% of the total value of total agricultural exports in 1991-1993, rising to 28% in 2010-2012. Exports to China and Hong Kong rose even more sharply, from 3% to 18% over the same period. In contrast, U.S. agricultural exports to other U.S. FTA partners rose slightly, and exports to the rest of the world dropped from about 77% to 54% of the value of U.S. exports. USDA's analysis also indicates that U.S. agricultural imports are now also more widely supplied by its NAFTA partners: Canada and Mexico comprised 27% of the total value of U.S. agricultural imports in 1991-1993, rising to 36% in 2010-2012. According to USDA, the value of agricultural imports from China and Hong Kong rose slightly, from 2% to 4% of total value, while agricultural imports from other U.S. FTA partners and the rest of the world dropped from about 70% to 60%. Agricultural Trade with Canada In 2016, U.S. agricultural exports to Canada were valued at $20.2 billion ( Figure 4 ). Fish and seafood exports—while not included in the total for agricultural products—amounted to another $1.1 billion. Leading U.S. agricultural exports to Canada were (ranked in descending order based on value) grains and feed; animal products; fruits, vegetables, and related products; sugar/tropical products; other horticultural products; oilseeds; nuts; beverages (excluding fruit juice); and essential oils. In 2016, U.S. agricultural imports from Canada were valued at $21.6 billion ( Figure 5 ). Fish and seafood imports totaled another $3.2 billion. Leading U.S. agricultural imports from Canada were grains and feed; animal products; oilseeds; cocoa/sugar and related products; fruits, vegetables, and related products; other horticultural products; coffee; and beverages. Since NAFTA was implemented, the balance of agricultural trade between the United States and Canada has alternated between a trade surplus and a trade deficit ( Figure 6 ). Over the past five years (2012-2016), the U.S. trade deficit with Canada has averaged about $0.7 billion per year. Agricultural Trade with Mexico In 2016, U.S. agricultural exports to Mexico were valued at $17.8 billion ( Figure 8 ). Fish and seafood exports were negligible (less than $100 million). Leading U.S. agricultural exports to Mexico were (ranked in descending order based on value): animal products; grains and feed; oilseeds; sugar/tropical products; other horticultural products; fruits, nuts, and vegetables, and related products; cotton; seeds and nursery products. In 2016, U.S. agricultural imports from Mexico were valued at $23.0 billion ( Figure 9 ). Fish and seafood imports totaled another $0.6 billion. Leading U.S. agricultural imports from Mexico were fruits, vegetables, and related products; beverages; animal products; sugar/products; grains and feeds; nuts; cocoa/products; fruit juices; and coffee. The balance of agricultural trade between the United States and Mexico has alternated between a trade surplus and a trade deficit since NAFTA was implemented ( Figure 7 ). Over the past five years (2012-2016), taking into account alternating periods of trade surplus and deficit, the U.S. agricultural trade deficit with Mexico averaged $1.1 billion per year. The deficit has grown more sharply in recent years as overall U.S. agricultural imports from Mexico have continued to grow while U.S. exports to Mexico have receded. Prior to 2015, U.S.-Mexico agricultural trade consistently showed a U.S. trade surplus. Selected State-Level Trade Leading agricultural exporting states are California, Iowa, Illinois, Nebraska, Minnesota, Texas, Indiana, Kansas, North Dakota, and Washington ( Figure 10 ). USDA-reported export data by state are not available by country of destination and date back to 2000 only. Therefore, available state data from USDA are not entirely suitable for showing trends under NAFTA at the state level. Limited additional trade data are reported by some states. For example, the state of California compiles and reports official annual agricultural export data. These data are derived from port of export district data reported in the official U.S. trade data, published industry sources, and unpublished government and industry information. Comparable official state data are not available to examine U.S. or state-level agricultural imports. For California, available state-reported export data indicate that the state's agricultural exports have grown substantially over the past decade, totaling more than $20.7 billion in 2015—a more than threefold increase compared to the 1990s. Of total agricultural exports, NAFTA countries comprised the largest market for California's farm exports, accounting for 22% of California's agricultural exports. Leading exports to Canada were wine, lettuce, strawberries, table grapes, processed tomatoes, almonds, oranges, raspberries and blackberries, carrots, walnuts, peaches and nectarines, cauliflower, broccoli, spinach, pistachios, and dairy products. Leading exports to Mexico were dairy products, table grapes, processed tomatoes, almonds, peaches and nectarines, flowers and nursery plants, walnuts, pistachios, strawberries, rice, cotton, raisins, plums, oranges, lettuce, and kiwi fruit. Agricultural exports from California to Canada and Mexico comprise roughly 10% of total U.S. agricultural exports to NAFTA partners. Similar trade data are not readily available for other states. However, industry reports indicate that both Mexico and Canada are leading markets for Iowa's pork products and also grain products from some Northern Plains states. State-level data are not available to assess the estimated economic effects of NAFTA on key agricultural producing and exporting states. Studies exist for a few states, such as California, but much of this research is dated and is not comprehensive. Estimating NAFTA Effects Estimating the economic impact of NAFTA to the U.S. agriculture industry is not straightforward. It is difficult to isolate changes in U.S. agricultural trade and markets attributable to NAFTA's implementation from other factors that may have influenced trade over this period. Such non-NAFTA influences include changes in agricultural policies, advances in technology (including the Internet), and growing integration of the global economy. U.S. tariffs and trade protections for food and agricultural products were already minimal before NAFTA was implemented. Trade liberalization and expansion and increased foreign direct investment in the food and agricultural sectors had begun before NAFTA was implemented. In addition, available data are often incomplete and of limited use in generating accurate results from economic models. Such estimates may also provide an incomplete accounting of the total economic effects of trade agreements. Among the types of generally acknowledged benefits from trade are greater market access and a reduction in barriers to economic activities (e.g., tariff and other non-tariff trade barriers); lower consumer prices, more product variety, and year-round access for certain products. Higher product sales through exports contribute to economic growth, as do higher incomes in trading partner countries, which contribute to increased demand for higher-value agricultural products. Others point to the benefits of regional trade agreements, including market integration, competitive or complementary economic linkages, and geographical proximity. In general, NAFTA is considered to have benefitted U.S. agriculture. Some credit NAFTA with further facilitating trade by formalizing these changes and providing a more stable trade environment among the NAFTA partner countries. The U.S. Chamber of Commerce states: "NAFTA has been a bonanza for U.S. farmers and ranchers, helping U.S. agricultural exports to Canada and Mexico to increase by 350%," despite growth over the period in Mexico's agricultural production. USTR also claims that NAFTA has benefitted American farmers. Many U.S. food and agricultural industry groups claim that NAFTA has positively affected their markets. According to an industry coalition group, "NAFTA has been a windfall for U.S. farmers, ranchers and food processors." Since the agreement was implemented, trilateral agricultural trade among the member countries has risen sharply. Additionally, trade with Canada and Mexico comprise an ever-larger share of U.S. agricultural markets. Many attribute generally lower U.S. consumer prices and improved consumer choices and variety (e.g., imports of off-season produce and greater variety of food products) to NAFTA's elimination of tariffs and quota restrictions under the agreement. Others note that as Mexico's consumer incomes improve, U.S. agricultural exporters could benefit from increased market demand for some food products. Some claim that NAFTA has resulted in both benefits and losses, and that positive and negative impacts attributed to the agreement have been overstated or mixed. Economic impacts under NAFTA depend on what is produced and where it is produced. This is also true regarding the agreement's effects on employment and wages, as some workers and industries have faced disruptions due to loss of market share from increased competition, while others have gained from the new market opportunities that were created. Yet others claim that NAFTA has further contributed to consolidation in North America's agriculture, resulting in fewer small farms, particularly in Mexico. In the end, the extent to which NAFTA has benefitted the U.S. economy is not clear cut, since the gains could be partly attributable to Mexico's unilateral liberalization (which was happening at the same time as NAFTA) or to gains attributable to the U.S.-Canada FTA (CUSTA, which was already in effect before NAFTA was negotiated). Other factors have influenced regional agricultural trade, including changes in Mexico's agricultural policies and workforce, advances in technology (e.g., e-commerce, greenhouse production), disruption due to the peso devaluation in the 1990s and the economic downturns in 2001 and 2009, and competing buyers and sellers of agricultural commodities in countries outside of NAFTA. Other market developments that may have influenced North American trade since NAFTA's implementation include alternative product uses (e.g., corn used in ethanol production and corn byproducts, such as dried distiller grains) and other market substitution effects, changes in crop mix, mechanization, increases in labor efficiencies, and growing integration of the global economy. Improved Market Integration As part of its 20-year retrospective analysis of the impacts of NAFTA on the U.S. agricultural sectors, USDA concluded that "NAFTA has had a profound effect on many aspects of North American agriculture over the past two decades," contributing to increased market integration and cross-border investment and other "important changes in consumption and production." USDA's assessment is based on cross-border economic activity (primarily agricultural trade and intraregional foreign direct investment [FDI] ) as well as tariffs, quotas, and other barriers to trade and investment. According to USDA NAFTA has had a substantial impact on the integration of North America's agricultural markets.... Integration is visible in increased cross-border flows of goods, services, capital, and labor. Trade in goods consists of not only final consumer products but also intermediate inputs and raw materials, as firms reorganize their activities around regional markets for both inputs and outputs, spurred in part by greater foreign direct investment (FDI). In addition, decision-makers in both the government and the private sector continue to pursue a course of greater institutional and policy cooperation and coordination to encourage further market integration. Most agricultural sectors within NAFTA are associated with a high degree of market integration. A few sectors are associated with medium integration, including U.S. and Canada wheat markets and also markets adversely affected by the retaliatory tariffs applied by Mexico in conjunction with the U.S.-Mexico trucking dispute. Market integration is low in sectors that were exempted from NAFTA, such as between the U.S. and Canadian dairy, poultry, and egg product sectors. USDA's analysis provides additional examples of how NAFTA has advanced the integration of North America regional agriculture, broken down by selected commodity groupings—grains and oilseeds; livestock and animal products; fruits and vegetables; sugar and sweeteners; cotton, textiles, and apparel; and processed foods. And despite improved market integration, USDA's analysis indicates that prices are still not fully integrated in North American agriculture. USDA's analysis concludes that NAFTA has resulted in substantial levels of foreign investment in the processed food sectors but that NAFTA has only a small, positive net effect on U.S. agricultural employment. Regionalization of SPS standards—referring to increased vigilance to assess and eradicate plant and animal pests and diseases—is also attributed with facilitating trade in North American meat and produce markets. Participants at a 2001 workshop agreed that "Mexico and Canada had clearly benefited from NAFTA, that processors of higher valued products in all three countries were the greatest beneficiaries, and that small Mexican producers were the biggest losers." The greatest beneficiaries were said to be producers of feed grain and oilseeds and processors of high-value products, such as processed foods, produce, and horticultural products. Increased Foreign Direct Investment According to USDA, Mexico is the third-largest host country for U.S. direct investment in the global food and beverage industries and has also attracted FDI in production agriculture—much of it since NAFTA was implemented. Some, however, claim that Mexican restrictions on corporate farming, acreage limits, and land investment restrictions in coastal and border areas have been a constraint to U.S. investment in some sectors. The most recent available Commerce Department data indicate that U.S. direct investment in Mexico on a historical-cost basis (i.e., the stock of direct investment) was about $3.6 billion in the food industry in 2011, $4.2 billion in the beverage industry in 2010, and $375 million in crop and animal production combined in 2007. Since NAFTA, the U.S. direct investment position in the Mexican food and beverage industries has expanded greatly, "rising from a total for the two industries of about $2.3 billion in 1993 to about $8.7 billion in 2007, before declining to about $7.5 billion in 2010." Most U.S. investment has been in the beverage industry. Canada is also a major recipient of U.S. direct investment. In 2010, according to USDA, U.S. direct investment in Canada's food and beverage industries was $5.9 billion and $7.8 billion, respectively. USDA's retrospective analysis further highlights that NAFTA has resulted in substantial levels of foreign investment in the processed food sectors. U.S.-Mexico Competitive Conditions Researchers at the University of California (UC) highlight some of the common myths about the competitive farm conditions between the United States and Mexico based on an example involving fruit and vegetable production. Contrary to popular belief, Mexico does not necessarily have an advantage in agricultural production because of relatively lower wage rates and worker benefits for labor-intensive agricultural products (such as fruits and vegetables), labor abundance, or lower environmental and food safety standards. In reality, fruit and vegetable production places demands on capital, technology, management, research, marketing, and infrastructure. Mexico's principal advantage is seasonal (climatic advantage) rather than a cost advantage. Mexican farm labor is generally less well-trained and less efficient, offsetting some of its wage rate advantage. Some Mexican growing areas also experience labor shortages. In addition, Mexican growers often provide social services for workers, such as housing and schools, which raises production costs. Most Mexican producers who grow for export markets must also meet necessary product quality and safety standards and be third-party certified. Mexico also has a disadvantage in marketing and in the buyers' perception of its products, as well as in research and development (R&D) and infrastructure, compared to the United States. These same UC researchers further highlight some the competitive advantages of agricultural production in United States compared to Mexico. For example, the U.S. agricultural sectors continue to benefit from R&D from federal institutions—such as USDA and the land grant university system—and public sector investments in transportation and infrastructure of many types, including water storage and distribution. U.S. producers also benefit from extensive private sector research targeting specific crop needs, transparent and relatively responsive government support, and direct access to the U.S. domestic markets—still the world's largest consumer market. One of the more controversial aspects of NAFTA has been its effect on the agricultural sector in Mexico and the perception that the agreement has caused a higher amount of worker displacement in the agricultural sector than in other sectors of the economy. Some claim that Mexico has been impacted by transitory poverty created by economic adjustments and also social exclusion to the benefits of globalization. Although Mexico's farm exports rose sharply, rural poverty levels in Mexico remain the same as before the agreement, and the expected wage and income convergence between Mexico and the United States did not happen. Some have called for reform of NAFTA to address these and other perceived concerns in Mexico's farming community. Others dispute the role of trade in Mexico's rural poverty. While NAFTA likely contributed to changes to Mexico's agricultural sector, given increasing import competition from the United States, some changes are likely also attributable to Mexico's policy reforms to its agricultural sectors. Industry Reaction to Potential NAFTA Changes Many stakeholders in U.S. agricultural sectors have expressed opposition to the Trump Administration's decision to withdraw from TPP and threats to withdraw from NAFTA, citing benefits to the food and agricultural industries from trade and potential for disruptions in U.S. export markets given growing uncertainty in U.S. trade policy. However, some in Congress and within U.S. agriculture are cautiously supporting efforts to renegotiate or "modernize" some of NAFTA's provisions as they pertain to agriculture. Some recommend that many of the agricultural provisions agreed to in the TPP agreement could provide a possible model framework for a NAFTA renegotiation. Reaction to Threats of NAFTA Withdrawal In late April 2017, President Trump announced he was considering an executive order to set in motion the U.S. withdrawal from NAFTA. The response from the U.S. agriculture community was swift, with many U.S. agricultural groups expressing strong opposition to outright NAFTA withdrawal. Ultimately, President Trump decided not to withdraw from NAFTA at this time. This and other recent actions by the Administration have raised concerns in the U.S. agricultural community over the uncertainty of U.S. trade policy and the potential for disruptions in U.S. export markets. Media reports following the Administration's announcement highlight opposition to outright withdrawal from many in Congress. Some in Congress opposed the nomination of Robert Lighthizer for USTR, given concerns about the Administration's intentions regarding U.S. trade policy, including NAFTA. Several Members of Congress claim that NAFTA has had positive impacts on their states' agricultural sectors. Reactions from a number of U.S. agricultural leaders were starker. According to the National Pork Producers Council, NAFTA withdrawal could be "cataclysmic" and "financially devastating" to U.S. pork producers. The National Corn Growers Association said that "withdrawing from NAFTA would be disastrous for American agriculture" and disrupt trade with the sector's top trading partners. The American Soybean Association said withdrawing from NAFTA is a "terrible idea" and would hamper ongoing recovery in the sector. The U.S. Grains Council highlighted that withdrawal would have an "immediate effect on sales to Mexico." The National Association of Wheat Growers stated that Mexico is the "largest U.S. wheat buyer," accounting for more than 10% of wheat exports annually. Fruit and vegetable growers also did not support NAFTA withdrawal, citing the benefit of exports to Mexico. Many U.S. agricultural trade associations continue to express strong support for NAFTA. Following the threat of withdrawal and fear that Mexican buyers could seek alternative markets, the U.S. corn, soybean, dairy, pork, beef, and rice industries sent high-ranking representatives to Mexico to reassure buyers that the U.S. will remain a stable and reliable export market. The state of Nebraska also hosted a delegation of Mexican grain and food industry officials to shore up against possible threats to the U.S.-Mexico trading relationship. Various reports indicate that Mexico is looking to find alternative suppliers for some imported products, such as rice (which could be supplied by Vietnam and Thailand), corn and soybeans (Argentina and Brazil), and dairy products (New Zealand and Europe). Media reports also indicate that Mexico is not worried about finding alternative consumer markets for some of its exported products, such as avocados, which are now mostly sold to the United States. Reaction to Calls to "Modernize" NAFTA On May 23, 2017, USTR formally notified Congress of the Administration's intent to renegotiate NAFTA. Despite strong opposition to NAFTA withdrawal by many in Congress and much of the agricultural industry, some Members of Congress and farm interest groups are supporting NAFTA renegotiation. Many in Congress want the Trump Administration to pressure Canada to change its dairy pricing policies, which they contend discriminate against the United States, and to address this issue as part of a NAFTA renegotiation. House Ways and Means Committee Chairman Kevin Brady stated that "NAFTA contains many good provisions, but portions of it should be updated and improved." Others see renegotiation as an opportunity to address concerns regarding certain outstanding trade disputes. The state of Washington reportedly sees NAFTA renegotiation as an opportunity to address ongoing concerns regarding potatoes, milk, cheese, and wine. Others support NAFTA renegotiation if it "does no harm" to existing U.S. export markets. In response to congressional concerns that NAFTA's renegotiation could be "unsettling" to the U.S. agricultural community, the Administration has assured Congress that it will protect U.S. agricultural export advantages gained under NAFTA. Major food companies have also warned against drastic NAFTA changes and worry about unforeseen consequences of opening up the trade deal. An industry coalition of 130 agricultural groups and food companies support the Administration's efforts to modernize NAFTA "in ways that preserve and expand upon the gains achieved." The American Farm Bureau Federation claims that there are "compelling reasons to update and reform NAFTA from agriculture's perspective, including improvements to biotechnology, sanitary and phytosanitary measures, and geographic indicators." Others support proposals to "update and modernize" NAFTA. In addition to addressing Canada's dairy support and pricing policies, the dairy industry claims that "improvements are needed" to address SPS commitments and geographical indications (GIs). Potato growers support renegotiation to address outstanding concerns in U.S.-Mexico potato trade involving SPS measures, which they recommend be addressed similarly to how SPS was addressed in the TPP agreement. Others call for reforms of Canada's grain grading standards. Among groups that rely in part on agricultural product inputs, the U.S. textile, apparel, and footwear industry has also expressed strong support for NAFTA and urges that any renegotiation "do no harm" to the "successful supply chains" the industry now relies on. U.S. meat and livestock interests are divided over whether NAFTA renegotiation should bring country-of-origin labeling (COOL) for meat and pork products back into law: The National Cattlemen's Beef Association does not want to revive mandatory labeling, while the National Farmers Union sees an opportunity to do so. Many farm interest groups cite commitments agreed to under the TPP agreement as possible approaches in renegotiating NAFTA. Similarly, others cite provisions regarding agriculture discussed during the Transatlantic Trade and Investment Partnership (T-TIP) negotiation with the European Union (EU) over the past few years. Some Canadian officials are recommending that provisions in the trade negotiations between the EU and Canada in the EU-Canada Comprehensive Economic and Trade Agreement (CETA) be used as a blueprint for NAFTA. The Mexican government is in the process of setting its priorities, which include improving competitiveness in the NAFTA region. Other Mexican officials have indicated that although parts of NAFTA may need to be modernized, the agricultural provisions do not. Reportedly, a Mexican industry delegation urged the Trump Administration not to take Mexico for granted as a market for U.S. agricultural products. However, many in Congress and the U.S. agricultural sectors have expressed the need for caution when renegotiating NAFTA. In general, most agricultural groups worry about destabilizing current markets and the potential unpredictability of future talks. They also point out that there could be "enormous risks" to existing U.S. export markets if the negotiations were to fail. The National Association of State Departments of Agriculture supports "prudent" renegotiation that does not do away with the "significant gains and advantages" under NAFTA. Others wonder whether NAFTA renegotiation could backfire, leading to tougher requirements, such as rules of origin for goods made in North America or additional tariffs or quotas on imports to protect the viability of Canadian and Mexican domestic producers. The chief agriculture negotiator for USTR during the Obama Administration has cautioned the Trump Administration to take a more measured approach to any future NAFTA talks and warned that a failure to do so could backfire against the U.S. agriculture industry, it being an easy target for retaliation. Others note that renegotiation may be complicated by the complex nature of agricultural issues. Finally, a coalition of sugar exporting countries (except for Mexico) is urging the Administration to take action in its renegotiations to address concerns about Mexico's sugar shipments to the United States. Some in Congress, however, argue that the high-profile U.S.-Mexico sugar case is not about market access but shipments of subsidized, dumped Mexican sugar. On June 6, 2017, the United States and Mexico agreed in principle to amendments in the case, which could remove this contentious issue from any upcoming NAFTA talks. Reaction to Decision to Withdraw from TPP In January 2017, the Trump Administration formally withdrew the United States from the TPP agreement. All three NAFTA countries are signatories to TPP. Prior to withdrawal, a broad cross-section of agricultural groups and food and agribusiness interests had expressed support for implementing TPP, citing increased market access for U.S. farm and food products under the agreement and potential for expanded exports. As such, some in the U.S. agricultural sector have expressed disappointment at the decision to withdraw from TPP, citing, for example, the possibility under the agreement for California agriculture to reach key markets in the Pacific Rim. In Congress, some Members have expressed the desire to rejoin TPP. However, support for TPP within agriculture, while broad-based, was not universal. A number of groups representing agriculture and food industry interests opposed TPP, reflecting concerns about competition from imports, the lack of a strong enforcement mechanism against currency manipulation, and the potential offshoring of jobs in the food processing sector. The TPP agreement sought to liberalize agricultural trade through lower tariffs, expanded TRQs, and agreements over rules and procedures for reducing non-tariff barriers. As negotiated, TPP would have materially increased the overseas markets to which U.S. farm and food products would have preferential access. A 2016 ITC report concluded that TPP would provide significant benefits for U.S. agriculture. Regarding renegotiation of some of NAFTA's agricultural provisions, some stakeholders have recommended that many of the agricultural provisions agreed to in the TPP agreement could provide a possible framework for any future NAFTA renegotiation. Many U.S. trade groups also recommend that negotiators consider many of the types of agricultural commitments agreed to in the TPP agreement, which are viewed to have broadly improved upon existing agricultural provisions in U.S. FTAs. These changes address SPS and other non-tariff barriers to trade, among other issues. How some provisions in the TPP agreement could provide a general framework to renegotiate certain agricultural provisions is further discussed below in " Options for Renegotiating NAFTA ." Options for Renegotiating NAFTA The Administration's official notice to Congress does not cite specific negotiating objectives for U.S. agriculture. The Trump Administration's earlier draft notice sent to congressional leadership did outline certain objectives for U.S. agriculture and SPS measures. USTR's request for public comment on "matters relevant to the modernization" of NAFTA, however, does address certain agricultural issues, including SPS and other technical trade barriers. Among the types of potential gains hoped for by U.S. agricultural exporters from "modernizing" NAFTA are improving agricultural market access (e.g., liberalization of remaining dutiable agricultural products that were exempted from the agreement and may be subject to TRQs and high out-of-quota tariff rates). Other potential areas for modernization include amending, updating, or adding to NAFTA's SPS provisions (e.g., "going beyond" existing WTO rights and obligations regarding SPS measures and requiring additional SPS enforcement). Additionally, potential gains to U.S. producers could derive from addressing certain outstanding agricultural trade disputes between the United States and its NAFTA partners and also addressing concerns regarding GIs. A number of these issues were addressed in the TPP agreement and have been raised in the T-TIP negotiations. Many industry representatives and some other groups claim that a successful NAFTA renegotiation would incorporate many of the types of changes related to food and agriculture agreed to in the TPP agreement. Some farm interest groups, however, are pushing for additional changes that go beyond those in the TPP. For example, the U.S. Biotech Crops Alliance and the Biotechnology Innovation Organization (BIO) recommend that the U.S. enter a "mutual recognition agreement" with Canada and Mexico on "the safety determination of biotech crops intended for food, feed and for further processing" and "develop a consistent approach to managing low-level presence of products that have undergone a complete safety assessment and are approved for use" in other countries to further address how to treat agricultural shipments with trace amounts of unauthorized biotech traits. Improving Agricultural Market Access Under NAFTA, tariffs and quantitative restrictions were eliminated on most agricultural products, with the exception of some that may be subject to TRQs and high out-of-quota tariff rates—such as U.S. exports to Canada of dairy products, poultry, and eggs. Some products imported to the United States may also be subject to TRQs. According to USTR, imports of U.S. products above quota levels may be subject to tariffs as high as 245% for cheese and 298% for butter. Canada uses supply-management systems to regulate its dairy, chicken, turkey, and egg industries, which involves production quotas and producer marketing boards to regulate price and supply, as well as TRQs and high over-quota tariffs for imports. NAFTA did not exempt agricultural products from U.S.-Mexico trade liberalization. Renegotiating NAFTA could address trade liberalization of these additional products. USDA officials believe there are opportunities to expand U.S. exports of dairy, poultry, and eggs to Canada and Mexico and to even further expand U.S. agricultural exports overall. The Trump Administration has asked ITC to conduct an investigation into the probable economic effect of providing duty-free treatment for currently dutiable imports from Canada and Mexico, which will likely include these exempted agricultural products. In addition, ITC will assess the probable economic effects of eliminating tariffs for more than 380 "import sensitive agricultural products," most of which are currently under TRQs. Potential challenges remain in negotiating additional access of these exempted products, especially for milk and dairy products, given Canada's domestic subsidy and pricing policies. Major U.S. dairy market stakeholders—together with their counterparts in several dairy-exporting competitor countries—contend that these current policies violate Canada's commitments under NAFTA, the WTO, and also CETA, an FTA between the EU and Canada. Potential for Updating NAFTA's SPS Provisions Several agricultural groups have noted the potential benefits of renegotiation if NAFTA were to include updated provisions regarding SPS measures. As highlighted by congressional and industry leaders, the need to establish "sufficiently enforceable obligations that go beyond the WTO SPS chapter" are among the primary objectives involving agricultural trade. Both the TPP and T-TIP negotiations addressed concerns involving SPS and TBT issues in agricultural trade that "go beyond" commitments in the SPS and the TBT agreements—referred to as "SPS-Plus" and "TBT-Plus." SPS-Plus and TBT-Plus concepts are generally intended to amplify and enhance the rights and obligations of all WTO members under these two agreements. For further background, see discussion in text box . U.S. industry groups favorably regard SPS-Plus provisions. The concluded TPP agreement included commitments on SPS and TBT rules that many in the U.S. agricultural community say generally address U.S. concerns and should be regarded as a blueprint for any subsequent negotiations involving SPS issues in agricultural trade. As outlined by USTR, the TPP countries agreed to a series of changes that address specific concerns, including allowances for public comment on proposed SPS measures to inform decisionmaking and to ensure that exporters understand the rules they will need to follow, assurances that import programs be risk-based and that import checks are carried out without undue delay, improvements in information exchange related to equivalency or regionalization requests, promotion of "systems-based audits to assess the effectiveness of regulatory controls" of the exporting country, and establishment of a mechanism for consultations between governments. But support for SPS-Plus is not universal. Some groups claim that efforts to modify SPS rules are an attempt to dismantle food safety regulations that some food companies view as impediments to trade and production. Some further assert that the TPP's SPS chapter should not be a blueprint for FTAs. They contend that such changes would "further weaken and possibly conflict with global standards setting bodies on food and plant safety." An ITC analysis concluded that the TPP's SPS provisions "would likely benefit U.S. firms exporting food and agriculture products to all TPP members." ITC also reports that, despite some opposition to the agreement's SPS provisions, most comments from agricultural interests were supportive of the SPS provisions in TPP. Industry representatives also widely supported the cooperative technical consultation process and the ability to have recourse to dispute settlement under the dispute resolution chapter for SPS measures. Ensuring SPS Enforcement Many have been frustrated by ongoing and protracted disputes between the United States and its NAFTA partners regarding trade in some agricultural commodities. Disputes involving the application SPS and TBT measures, such as import licensing and certification requirements, also invoke trade concerns regarding the application of domestic subsidy programs, which were explicitly not addressed in the agreement. In addition to seeking greater transparency and more timely notifications than currently required by the WTO, other hoped-for improvements under SPS-Plus and TBT-Plus provisions are some form of "rapid response mechanism" (RRM) to improve the application of SPS and TBT measures. The ultimate goal is to adopt enforcement mechanisms or a dispute settlement process and to quickly resolve stoppages of agricultural products at the border. Many are also advocating for additional enforceability regarding SPS measures and mechanisms to more rapidly address disputes. Whereas SPS-Plus means trade agreements would contain SPS rules and disciplines for agricultural trade that go beyond the WTO, SPS enforceability would further ensure that provisions in these trade agreements would have their "own self-contained SPS enforcement mechanisms that would be much quicker than the WTO dispute settlement process." Under TPP, there was agreement "to improve information exchange related to equivalency or regionalization requests and to promote systems-based audits to assess the effectiveness of regulatory controls" of the exporting country. In addition, there was agreement "to establish a mechanism for consultations between governments" in an effort to "rapidly resolve SPS matters. Some, however, claim that RRM is an attempt to push potentially unsafe food into consumer markets. Addressing Outstanding Trade Disputes Some regard NAFTA renegotiations as a way to help resolve long-standing trade disputes between the partner countries for a range of sensitive agricultural products such as beef, pork, poultry, dairy, rice, and fruits and vegetables. Many have expressed the need to address ongoing concerns regarding milk and cheese, potatoes, and wine. Such disputes often involve the application of SPS and TBT measures but also the application of domestic agricultural subsidy programs in the partner countries that were explicitly not addressed in NAFTA. USTR regularly reports on a range of ongoing trade concerns in its annual National Trade Estimate Report on Foreign Trade Barriers (NTE) report, which covers trade barriers affecting both agricultural and non-food items between the United States and its trading partners, including Canada and Mexico. Reported outstanding trade disputes are those that are being addressed either through the WTO or NAFTA secretariat, while others may be addressed through other forms of dispute resolution, including government and industry negotiations or technical assistance. The 2017 NTE report highlights certain outstanding issues involving SPS and TBT issues between the United States and Mexico, among which are Mexico's risk assessment requirements affecting unpasteurized commercial milk exports from the United States; Mexico's pest quarantine of stone fruit (peach, nectarine, and apricot) growers in California, Georgia, South Carolina, and the Pacific Northwest; Mexico's pest quarantine requirements prohibiting the shipment of U.S. fresh potatoes beyond a 26-kilometer zone along the U.S.-Mexico border; and Mexico's administrative procedures and customs practices, including insufficient prior notification of procedural changes, inconsistent interpretation of regulatory requirements at different border posts, and uneven enforcement of Mexican standards and labeling rules. For Canada, the 2017 NTE report highlights a number of U.S. concerns over agricultural products, some of which have been notified to the WTO: Canada's restrictions on the sale, advertising, or importation of seed varieties that are not registered in the prescribed manner; Canada's cheese compositional standards that limit the amount of dry milk protein concentrate (MPC) that can be used in cheese making, restricting access of certain U.S. dairy products to the Canadian market; Canada's practice of supply management systems regulating its dairy, chicken, turkey, and egg industries involving production quotas, producer marketing boards to regulate price and supply, and TRQs; U.S. concerns involving Canada's concessions to the EU as part of its trade agreement involving GIs, which may restrict the sale of certain U.S. products to Canada; restrictions on U.S. grain exports due to Canadian statutory grades, which are reserved exclusively for grains grown in Canada; restrictions within Canadian provinces that restrict the sale of wine, beer, and spirits through province-run liquor control boards; and Canadian restrictions involving trade in softwood lumber. In addition, the United States has also brought other cases against Canada and Mexico within the WTO. Not listed here are any perceived trade barriers to Mexican or Canadian agricultural exports to the United States, according to authorities in those countries. The text box (below) further discusses two high-profile trade disputes between the United States and its NAFTA partners. Dispute Settlement Under NAFTA Unlike other U.S. FTAs, NAFTA contains a binational dispute settlement mechanism (Chapter 19) to review AD and CVD decisions of a domestic administrative body. Canada and Mexico sought this provision in NAFTA as a check on what they considered unfair AD/CVD decisions from U.S. administrative agencies. Under Chapter 19, a dispute settlement panel chosen from a trinational roster reviews any AD and CVD determinations that are not satisfactorily settled. Some have called for the elimination of Chapter 19. For example, Senator Ron Wyden, ranking Member of the Senate Finance Committee, has repeatedly indicated that NAFTA renegotiation should include the "elimination of Chapter 19 of the NAFTA, which enables Canada and Mexico to challenge the way that the U.S. addresses unfairly traded imports from those countries." This concern stems largely from the long-standing U.S.-Canada softwood lumber dispute regarding allegedly dumped and subsidized lumber from Canada. In these cases, the panels have often found fault with U.S. administrative decisions, which resulted in the reduction of AD/CVD rates. Some U.S. stakeholders view Chapter 19 as unlawful and express concerns about whether an extrajudicial body should be able to review U.S. AD and CVD decisions. Senator Wyden said he has received assurances from the Trump Administration that NAFTA renegotiation will consider concerns regarding Chapter 19 and also "look to improve on what was achieved in the TPP agreement." However, Canada and Mexico are expected to seek to retain the chapter. While FTA partners seek to resolve disputes without resorting to dispute settlement through consultation, mediation, and negotiation, U.S. FTAs, including NAFTA, contain a formal dispute settlement mechanism (Chapter 20). These mechanisms are rarely used, as a preponderance of cases are brought to WTO dispute settlement. Three cases have been decided under NAFTA dispute settlement. If NAFTA were renegotiated to contain provisions not in the WTO body of agreements, dispute settlement under NAFTA could be used with greater frequency. Some contend that TPP may provide a model for any reworking of NAFTA's dispute resolution provisions. TPP provided for dispute resolution and contained additional disciplines. These included transparency, cooperation and alternative mechanisms (such as consultation), formal consultations and panel review within specified time frames, composition of panels, functioning and integrity of panels, private rights of action, and panel reporting. TPP also addressed panel report implementation to maximize compliance to the agreed obligations. It also encouraged the use of alternative dispute resolution mechanisms with respect to private commercial disputes. Addressing Geographical Indications GIs are geographical names that act to protect the quality and reputation of a distinctive product originating in a certain region. The term is most often applied to wines, spirits, and agricultural products. Some food producers benefit from the use of GIs by giving certain foods recognition for their distinctiveness, differentiating them from other foods in the marketplace. In this manner, GIs can be commercially valuable. GIs may also be eligible for relief from acts of infringement or unfair competition. The use of GIs may also protect consumers from deceptive or misleading labels. Most examples of registered or established GIs cover certain food products from the EU, such as Parmigiano Reggiano cheese and Prosciutto di Parma ham from the Parma region of Italy, Roquefort cheese, Champagne from the region of the same name in France, and Irish Whiskey. Examples of GIs from the United States include Florida oranges, Idaho potatoes, Vidalia onions, Washington State apples, and Napa Valley Wines. The U.S. dairy industry is raising GIs as a potential NAFTA renegotiation issue because of protections afforded to registered products in third-country markets following a series of recently concluded trade agreements between the EU and countries such as Canada, South Korea, South Africa, and other countries that are, in many cases, also major trading partners with the United States. Specifically, provisions in these agreements may provide full protection of GIs and not defer to a country's independent assessment of generic status for key product names. For example, the EU-Canada CETA reportedly recognizes the GI status of up to 200 EU GIs for milk and dairy products. Similar types of GI protections are reportedly also in other FTAs between the EU and other countries, affecting a range of food products and wine. In addition to facing trade restrictions for U.S. products in the EU market, these protections may limit the future sale of U.S. exported products bearing such names to these third countries, regardless of whether the United States may have been exporting such products carrying a generic name for years. Mexico and Canada do not have GIs registered under the EU's GI program. However, each country could offer third-country protections to EU-registered GIs that could restrict U.S. exports of similar products to Mexico and Canada—as were recently negotiated in the EU-Canada CETA. GIs have been a contentious area of debate between the United States and EU in the T-TIP negotiation. Laws and regulations governing GIs differ markedly between the United States and EU, which further complicates this issue. The EU and Canada have completed negotiations on the EU-Canada CETA. The European Parliament approved CETA in February 2017, but Canada has not yet ratified it. Were the EU and Canada to fully implement CETA, the roughly 200 EU GIs for milk and dairy products recognized under the agreement could result in some U.S. dairy products being blocked from export to Canada. The EU and Mexico launched negotiations in May 2016 to modernize their existing Global Agreement, including rules on trade. Were the EU-Mexico trade agreement to include similar provisions to CETA regarding GIs for milk and dairy products, this could similarly block some U.S. dairy products from export to Mexico. GIs were also among the agricultural issues that have been addressed in the TPP agreement, resulting in additional commitments, and so could be considered as part of NAFTA renegotiation. The TPP agreement obligates members that provide for recognition of GIs to make this process available and transparent to interested parties within the TPP while also providing a process for canceling GI protection. Parties that recognize GIs also to adopt a procedure by which interested parties may object to the provision of a GI before it is officially recognized. Among the reasons the agreement lists for opposing a GI are (1) the GI is likely to cause confusion with a trademark that is recognized within the country, (2) a pre-existing application is pending, or (3) the GI is the customary term for the same item in the common language of a country. Concerning other international agreements involving TPP members that provide for the protection of GIs, the TPP agreement states that members are to make available to interested parties information concerning the GIs involved in other agreements and to allow them a reasonable opportunity to comment on, and to oppose, the prospective recognition of the GIs. These obligations would not apply to international agreements that were concluded, agreed in principle, or ratified or that had entered into force prior to the entry into force of the TPP agreement. GIs are an example of intellectual property rights (IPR), along with other types of intellectual property such as patents, copyrights, trademarks, and trade secrets. The use of GIs has become a contentious international trade issue, particularly for U.S. wine, cheese, and sausage makers. In general, some consider GIs to be protected intellectual property, while others consider them to be generic or semi-generic terms. GIs are included among other IPR issues in the current U.S. trade agenda. GIs are protected by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which sets binding minimum standards for IP protection that are enforceable by the WTO's dispute settlement procedure. Under TRIPS, WTO members must recognize and protect GIs as intellectual property. Next Steps Following the Administration's formal notification to Congress of its intent to renegotiate NAFTA in May 2017, and assuming a 90-day consultation period for Congress, NAFTA negotiations could begin as soon as mid-to-late August. Prior to that, the Administration would need to outline and submit its negotiating objectives to Congress by mid-to-late July. USTR is scheduled to conduct a public hearing on June 27, 2017, for which it has requested public comment on "matters relevant to the modernization" of NAFTA. It is seeking public input on a range of issues, including general and product-specific negotiating objectives, economic costs and benefits to U.S. producers and consumers of removing any remaining tariffs and non-tariff barriers, treatment of specific goods, customs and trade facilitation issues, trade remedy issues, and any unwarranted SPS measures and technical barriers to trade, among other issues. ITC's analysis—requested by the Administration—to assess the probable economic effects of eliminating U.S. tariffs for "import sensitive agricultural products" is also scheduled to be released around that time. The Administration's forthcoming negotiating objectives, USTR's review of submitted public comments and testimony at its June hearing, and ITC's forthcoming analysis could all help inform the renegotiation process.

The North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994, establishing a free trade area as part of a comprehensive economic and trade agreement among the United States, Canada, and Mexico. President Trump has repeatedly stated that he intends to either renegotiate or withdraw from NAFTA. In May 2017, the U.S. Trade Representative (USTR) formally notified Congress of the Administration's intent to renegotiate NAFTA. Reactions to the announcement have been mixed, with some industries supporting NAFTA "modernization" as a way to address a range of trade concerns, while others are urging the need to proceed more cautiously so as to not destabilize current U.S. export markets. Canada and Mexico are key U.S. agricultural trading partners. Since NAFTA was implemented, the value of U.S. agricultural trade with its NAFTA partners has increased sharply. Agricultural exports rose from $8.7 billion in 1992 to $38.1 billion in 2016, while imports rose from $6.5 billion to $44.5 billion. As a share of U.S. agricultural trade, Canada and Mexico rank second and third (after China) as leading U.S. export markets. Leading NAFTA-traded agricultural products were meat and dairy products; grains; fruits, tree nuts, and vegetables; oilseeds; and sweeteners. In general, NAFTA is considered to have benefitted the United States both economically and strategically in terms of North American relations. Many U.S. food and agricultural industry groups claim that NAFTA has been positive for their industries. As part of its 2015 retrospective analysis of the impacts of NAFTA, the U.S. Department of Agriculture (USDA) concluded in a 2015 report that "NAFTA has had a profound effect on many aspects of North American agriculture over the past two decades," contributing to increased market integration and cross-border investment and resulting in "important changes in consumption and production." Although NAFTA resulted in tariff elimination for most agricultural products and redefined import quotas for some commodities as tariff-rate quotas (TRQs), some products—such as U.S. exports to Canada of dairy and poultry products—are still subject to high above-quota tariffs. In addition to tariffs and quotas, NAFTA addressed sanitary and phytosanitary (SPS) measures and other types of non-tariff barriers that may limit agricultural trade. SPS regulations are often regarded by agricultural exporters as one of the greatest challenges in trade, often resulting in increased costs and product loss and disrupting integrated supply chains. The extent to which the terms of agricultural trade may be altered in a NAFTA renegotiation is unclear; however, what is clear is that U.S. agriculture has a large stake in NAFTA. Still, renegotiating NAFTA could provide an opportunity to "modernize" certain issues affecting U.S. agricultural exporters. Potential options could include the following: Improving market access. Liberalize remaining dutiable agricultural products that are still subject to TRQs and high out-of-quota tariff rates. Updating NAFTA's SPS provisions. Address SPS concerns in agricultural trade by "going beyond" existing World Trade Organization (WTO) rights and obligations and include additional rapid response mechanism and enforcement regarding SPS and other technical barriers to trade. Addressing other trade concerns. Address concerns raised in outstanding disputes between the United States and its NAFTA partners, as well as geographical indications (GIs) or place names that identify products based on their reputation or origin. A number of these types of trade concerns were addressed in recent U.S. trade negotiations under the Trans-Pacific Partnership (TPP) agreement, and some farm interest groups claim that the TPP could provide a blueprint for NAFTA renegotiations involving U.S. agricultural trade concerns.

Introduction The United States and the European Union (EU) share a large, dynamic, and mutually beneficial economic relationship. Not only are trade and investment ties between the two partners huge in absolute terms, but the relative importance of bilateral trade and investment flows for each partner has remained high and relatively constant over time, despite the rise of China and other Asian economies. The EU as a bloc is the United States' largest merchandise or goods trade partner of the United States. As shown in Table 1 , the EU accounted for 17.5% of U.S. merchandise trade in goods in 2010. Canada, the second-largest trading partner, accounted for 16.5% of total U.S. merchandise trade. The EU is also the largest purchaser of U.S. exports of services, accounting for $170.2 billion (or 31.0% of the total in U.S. services exports to the world) in 2010. The importance of the EU is even greater on the foreign direct investment side, where European companies accounted for $1.5 trillion, or 63%, of total foreign direct investment in the United States and U.S. companies accounted for $1.7 trillion, or about 50%, of total foreign investment in Europe in 2009. These investments account for 4 million workers on both sides of the Atlantic being directly employed by the respective affiliates of U.S. or European-based companies. The German company Siemens, for example, employs some 60,000 people in the United States, and General Electric employs some 70,000 workers in Europe. The U.S.-EU trade and investment relationship, what many call the transatlantic economy, is not only the largest in the world but also arguably the most important because of its sheer size. As shown in Table 2 , the flows of merchandise or goods trade, services trade, and income across the Atlantic manifest a very active, strong, and large economic relationship. In 2010 alone a total of $1,537.4 billion flowed between the United States and the EU, or an average of $4.2 billion per day. With a combined population slightly over 818 million or about 12% of the world's population, the two partners produce around 50% of the world's GDP. Combined with bilateral trade flows in goods and services that account for 40% of the world total, the magnitude of transatlantic economic transactions means that the two sides have significant influence and leadership responsibilities in the world economy. Agreement and cooperation between the two partners in the past has been critical to making the global trading system more open and efficient. The high degree of transatlantic economic interdependence, however, carries some downside risks, as demonstrated by the 2008 financial crisis, which started in the United States and was then transmitted to Europe. As the U.S. economy is now recovering from the deep recession, EU members Greece, Ireland, Portugal, and Spain are struggling to address sovereign debt crises which are slowing Europe's economic growth and recovery. With a significant stake in European economic growth, there is a concern that U.S. exports may be adversely affected at a time when the Obama Administration hopes to double U.S. exports by 2015. Given the magnitude of commercial interaction, trade disputes are not unexpected. Policymakers tend to maintain that the United States and the EU always have more in common than in dispute, and like to point out that trade disputes usually affect a small fraction (often estimated at 1%-2%) of trade in goods and services. Both sides have been working to resolve some of the biggest disputes for years. These include a dispute between the aerospace manufacturers Airbus and Boeing, and conflicts over bio-engineered food products and protection of geographical indicators. The Airbus-Boeing dispute involves allegations of unfair subsidization for both companies and is being adjudicated by the World Trade Organization dispute resolution process. The agricultural-based disputes are rooted in different approaches to regulation, as well as different social preferences. U.S.-EU trade and economic relations are also characterized by other forms of competition and rivalry. Each side aspires to lead in setting rules for global trade and investment, often in an effort intended to facilitate commercial success for its respective companies. Similarly, both economic powers often compete to secure bilateral and regional trade agreements to support jobs, markets, and foreign policy interests. Nowhere may this be more apparent than in the EU's rush to negotiate a free trade agreement with South Korea following the negotiation of the U.S.-South Korean FTA in 2007. While the U.S. and EU economies are very open to trade and investment flows from both sides, some barriers to trade and investment remain. Various studies, in fact, estimate that substantial economic gains in terms of jobs and faster growth could be attained if progress were made in reducing a range of remaining tariff barriers at the border and regulatory "behind the border" non-tariff barriers. Private stakeholders on both sides have urged policymakers to cooperate more closely to reduce remaining barriers to trade and to provide greater leadership for the world economy. Such actions, stakeholders argue, are a way to boost transatlantic economic growth and jobs. Cooperation is said to be particularly important given that global economic wealth and political power is shifting towards emerging economies such as China, India, and Brazil. While these developing countries are providing new sources of economic growth, they have different views on the future direction of the world economy. This could create a need for greater U.S.-EU cooperation in addressing global challenges that are important for job creation and growth for both sides. At the November 28, 2011, EU-United States Summit meeting, President Obama, European Commission President Barroso, and European Council President Von Rompuy directed the Transatlantic Economic Council (TEC) to establish a High Level Working Group on Jobs and Growth. Led by U.S. Trade Representative Ron Kirk and EU Trade Commissioner Karel De Gucht, the working group was asked to identify policies and measures to increase U.S.-EU trade and investment to support mutually beneficial job creation, economic growth, and international competitiveness. The working group will provide an interim report to leaders on the status of its work in June 2012. It will submit a report with findings, conclusions, and recommendations to the leaders by the end of 2012. The working group could recommend a number of possible initiatives, including enhanced regulatory cooperation, negotiation of a comprehensive free trade agreement, negotiation of a zero-tariff agreement, or negotiation of bilateral agreements liberalizing trade in services and investments. The 112 th Congress, in both its legislative and oversight roles, faces numerous issues that affect the U.S.-EU trade and economic relationship. A select group of these issues are identified and briefly described in this report. The issues are grouped into two categories: efforts to deepen U.S.-EU economic ties, particularly some that may be considered by the newly established U.S.-EU High Level Working Group on Jobs and Growth; and joint U.S.-EU efforts to strengthen the global economy. As these issues cut across trade, economic, regulatory, and foreign policy subject matters, a number of congressional committees may have legislative or oversight responsibilities in whole or in part. On the House side, these include the Committees on Agriculture, Energy and Commerce, Financial Services, Foreign Affairs, Judiciary, Transportation and Infrastructure, and Ways and Means. On the Senate side, these include the Committees on Agriculture, Banking, Commerce, Science, and Transportation, Energy and Natural Resources, Environment and Public Works, Finance, Foreign Relations, and Judiciary. Deepening Transatlantic Economic Ties Proposals for deepening transatlantic economic ties include the reduction of regulatory barriers, the negotiation of a zero tariff agreement, and movement towards a barrier-free investment environment. Each proposal holds the prospect of producing economic gains in terms of jobs and growth for both sides, but each also faces obstacles as freer trade creates winners and losers when it comes to jobs. A more comprehensive free trade agreement has also been proposed from time to time along with efforts to liberalize trade in selective services. Reducing Regulatory Barriers Since the mid-1990s, both U.S. and European multinational companies have consistently identified divergent regulatory frameworks for both goods and services as the most serious barriers to transatlantic commerce. Redundant standards, testing, and certification procedures are seen by these companies as far more costly and harmful than any trade barriers imposed at the border, such as tariffs or quotas. While the purpose of many regulations is to protect consumers and the environment, divergent domestic regulations and standards add to the cost of doing business on both sides of the Atlantic and serve as non-tariff barriers to trade in many different economic activities and sectors. By reducing gaps in regulatory policies and standards, the United States and EU hope to benefit thousands of companies engaged in transatlantic trade by reducing costs, streamlining time-to-market, and improving competitiveness vis-à-vis third countries. A 2009 study commissioned by the European Commission estimated that aligning and rationalizing these kinds of non-tariff barriers would bring its economy potential gains of $158 billion in annual GDP and increase exports to the United States by 2%. EU sectors that stand to benefit include motor vehicles, chemicals, pharmaceuticals, food, and electrical goods. The United States, it was estimated, stands to gain some $53 billion in annual GDP and a 6% increase in annual exports to the EU, with the primary beneficiaries being sectors such as electrical goods, chemicals, pharmaceuticals, financial services, and insurance. Many efforts have been made over the past 15 years to tackle and reduce these behind-the-border regulatory barriers, but with only limited success. Predicated on the notion that past initiatives failed to make significant progress in enhancing regulatory progress, the Transatlantic Economic Council (TEC) was established in April 2007 at the U.S.-EU Summit. Created as a new entity by German Chancellor Angela Merkel (then European Council President), European Commission President Manuel Barroso, and President George W. Bush, the TEC was designed to provide minister-level political guidance (headed on both sides by Cabinet/Ministerial-level appointees) to foster regulatory cooperation and to reduce or eliminate regulatory burdens to trade. The TEC also covers issues such as investment, innovation, intellectual property rights, secure trade, and financial markets. The ultimate aim of the TEC is to create an integrated transatlantic market. The Summit leaders also created an advisory group to the TEC and invited the U.S. Congress, along with the European Parliament, to accept a new, more substantive role in transatlantic regulatory cooperation by becoming part of the advisory group. In short, the TEC was designed to deal with some of the perceived shortcomings of previous transatlantic regulatory initiatives by providing high-level political leadership, more involvement of legislators and other stakeholders in the regulatory process, and a greater emphasis on results than process. In the first three years (2007-2009) of its now almost four-year history, the TEC was used primarily as a mechanism to try to resolve a number of long-standing bilateral trade disputes, most notably the EU's ban on imports of poultry that has been washed in chlorine. Efforts to harmonize regulations on a sector-by-sector basis also proved difficult due to political and bureaucratic resistance on both sides to revise existing laws and regulations. But in late 2010 the two sides agreed to focus future efforts substantially on aligning regulations and standards in emerging or new technologies, such as nanotechnology or electric cars, well before laws or regulations have been promulgated. Accordingly, at their fifth meeting, held in Washington on December 17, 2010, the TEC agreed to a work program focusing on sectors where regulatory cooperation can help avoid unintended trade barriers in the future. Among the highlights of this TEC meeting, the two sides agreed to develop a process for implementing compatible approaches for the regulation of new and innovative sectors. In this manner, it is hoped that trade disputes due to different regulations could be avoided. The meeting also provided new impetus for regulatory cooperation in specific sectors such as electronic health records, energy-saving products, and electric vehicles as a way of reducing costs and preempting unnecessary obstacles to exports. The TEC meeting also launched an Innovation Action Plan designed to strengthen joint efforts to promote innovation and the commercialization of emerging technologies. These work plans were touted by senior officials as more specific and time-bound than previous work plans. Whether the results will be more tangible and commercially significant remains to be seen. Part of the problem is that regulatory cooperation is difficult and technically demanding work, with wide differences between the two sides concerning approaches to regulation. Key differences bear on public preferences and tolerance for risk, attitudes towards transparency, and institutional capacities to undertake regulatory reforms. At its sixth and most recent meeting, held November 29, 2011, the TEC co-chairs established (at the direction of U.S. and EU leaders at the November 28, 2011, Summit) a joint High Level Working Group on Jobs and Growth. The working group will identify and assess options for strengthening the U.S.-EU trade and investment relationship, especially those that have highest potential to support jobs and growth. The TEC was also tasked by the leaders to foster regulatory cooperation in an effort to avoid new and unintended barriers to trade and investment, especially in key emerging technologies and innovative sectors. Negotiating a Zero-Tariff Agreement When U.S. and EU trade officials meet these days, it is more likely that they will be discussing product standards and regulations than tariff barriers imposed at the border. One reason this is the case is that successive rounds of multilateral trade liberalization have dramatically reduced tariffs on transatlantic trade in goods, including food, to very low levels. In the United States, the simple average tariff imposed on a most-favored-nation basis on imports of manufactured goods and agricultural products is around 4% and 9%, respectively. Comparable figures for the EU are 4% on manufactures and 18% on agricultural products. Despite these generally low average tariff levels, there is interest in the U.S. and EU business communities to eliminate all remaining tariffs imposed on U.S.-EU trade through a bilateral negotiation. Support for the proposal is based on a combination of factors, including the agreement's ability to (1) generate economic benefits for both sides, including reducing costs to companies that pay tariffs on trade with their foreign affiliates; (2) re-energize transatlantic economic ties; and (3) pressure recalcitrant countries in the Doha Round to undertake more concessions. One study estimated that there would be significant trade and welfare benefits for both sides from a full elimination of tariffs on U.S.-EU merchandise trade over time. In the aggregate, the study projects that total EU exports to the United States could increase by up to $69 billion in value, or 18%, while U.S. exports to the EU could rise by up to $53 billion, or 17%. In terms of increases in GDP, the EU economy could gain anywhere from $58 billion to $85 billion and the U.S. economy anywhere from $59 billion to $82 billion. These potential gains, according to the authors, are considerable in absolute terms and higher than in most preferential free trade agreements signed by the United States or EU, or agreements currently being negotiated. In the past, a major objection to a transatlantic zero-tariff agreement was that it could undermine the multilateral system because it was a preferential or discriminatory trade agreement between the two biggest trade blocs in the world. Critics maintained that such an agreement would likely be inconsistent with the WTO obligation that preferential agreements cover "substantially all trade." This is particularly due to strong opposition on both sides to include a number of agricultural sectors. As a result, critics traditionally argue that any preferential agreement struck by the world's biggest economies would send a signal to the rest of the world that the United States and EU had abdicated responsibility for leadership of the multilateral system and could spell the death knell of efforts to bring the Doha Round to a close. Supporters have countered that a zero-tariff agreement could cover "substantially all trade" in a WTO-consistent manner by exempting only a handful of sensitive agricultural products from tariff elimination on both sides and by providing long phase-out periods for tariff cuts on other sensitive agricultural items. Given the long stalemate in completing the Doha Round, supporters also view a U.S.-EU preferential agreement as creating new leverage for the United States and EU to use in an effort to influence emerging economies to make more constructive offers to conclude the Doha Round. They also point to past instances in which regional or bilateral agreements, such as NAFTA, may have served to spur multilateral trade liberalization. For the Obama Administration to enter into a tariff negotiation with the EU, Congress would have to extend the President's tariff-cutting authority. To date, no such proposals have been introduced in the 112 th Congress. Negotiating a Barrier-Free Investment Agreement Foreign investment has overtaken trade as the major component of U.S.-EU economic relations. While the two sides together account for around 40% of world trade in goods and services, they account for over 60% of the inward stock of foreign direct investment (FDI) and 75% of the outward stock of FDI. Moreover, Europe and the United States remain the most profitable regions of the world for each other's multinational corporations, accounting for about half of total global affiliate earnings. These high levels of cross-investment are facilitated by two of the most open and hospitable climates for foreign investment in the world. At the same time, pressures for investment protection have surfaced from time to time and some restrictions on foreign investment persist. European companies seeking to invest in the United States face two possible hurdles. The first are U.S. restrictions on foreign ownership in the shipping, energy, and communications sectors. The second relates to the review process the United States has established for examining foreign acquisitions, mergers, and takeovers from a national security perspective. While this inter-agency process, known as the Committee on Foreign Investment in the United States (CFIUS), has generally run smoothly, the EU has raised concerns about the legal and economic costs for firms to circumvent or undergo CFIUS review. The EU position with regard to investment restrictions is more complicated than in the United States. The EU requires national treatment for foreign investors in most sectors and, with few exceptions, EU law requires that any company established under the laws of one member state must receive national treatment in all member states, regardless of a company's ownership. While EU law does impose some restrictions on foreign investment, member states impose a range of different policies and practices on foreign investors that are far more restrictive. Prior to the adoption of the Lisbon Treaty in December 2009, the European Commission shared competence with member states on investment issues. Member states negotiated their own bilateral investment treaties (BITs) and generally retained responsibility for their own investment regimes, while the EU negotiated investment provisions in EU preferential trade agreements. Under Lisbon (Article 207), the competence for investment rests solely with the EU. However, foreign direct investment is not defined in the Treaty, leaving unclear the practical implications for EU efforts to negotiate investment agreements and set EU investment rules. If member states and the European Commission agree on a broad definition, the EU will have much greater authority on this issue and may be eager to enter into a major negotiation to demonstrate its new competence over investment policy. Calls for a U.S.-EU investment agreement that would create a barrier-free climate for bilateral investment and serve as a model for the rest of the world are not new. In the past, some have proposed that agreement could be modeled on the current bilateral investment treaties, with a dispute resolution process that would allow foreign investors and host governments to address their differences. The accord could also establish minimal standards for corporate governance and transparency designed to ensure that the host country has reasonable confidence in the identity and management of the investing company, as well as include new issues such as e-commerce, competition policy, and limits on the use of local (sub-federal) investment incentives. Once an accord was in place, foreign investors would be able to invest in all sectors of the economy, with exceptions only for national security. Any attempt to harmonize processes for considering national security exceptions would likely be very difficult. While the U.S. CFIUS process has been in place for many years, there is no similar overarching framework in Europe that allows for security considerations to be balanced against commercial interests in a systematic way. Arguably, a great diversity of attitudes towards foreign investment throughout Europe could make it difficult to develop an EU-wide approach. Cooperation to Strengthen the World Economy For much of the post-World War II era, the United States and Europe provided key leadership to the global economy. Given the heft of their combined economies, what was decided by the two powers was often adopted by the rest of the world. While the United States and the EU still today remain central to the global economy, other countries have grown in prominence. This redistribution of global economic power, in turn, arguably increases the need for the United States and EU to work together to promote their continued competitiveness, and to ensure that the rules of the global economy remain steeped in values and principles that both sides share. Such cooperation is already taking place on a wide range of issues including access to raw materials, intellectual property protection, and changes in global and financial market governance. This section highlights mutual challenges on completing the Doha Round, influencing China to operate its economy more in accord with market principles, and reducing global imbalances. Completing the Doha Round of Multilateral Trade Negotiations The United States and the EU have played a special role in creating the post-WWII global trade and finance framework of market-based rules and institutions. The relative openness of the world trading system has been greatly facilitated by multilateral negotiations and agreements undertaken under the auspices of the General Agreement on Tariffs and Trade (GATT) and now its successor organization, the World Trade Organization (WTO). Yet, the WTO Doha Development Round of multilateral trade negotiations, begun in November 2001, has entered its 11 th year, making it the longest-running multilateral negotiation in the postwar era. While the last multilateral trade negotiation, the Uruguay Round, took eight years to complete (1986 to 1994), many observers believe that a Doha agreement needs to be reached to boost global trade, create jobs, bolster economic confidence, and maintain the credibility of the multilateral process. The Doha negotiations have been characterized by persistent differences between developed and developing countries on major issues affecting agriculture, industrial tariffs and non-tariff barriers, and services. The United States and the EU, for the most part, have shared similar interests in encouraging developing countries, particularly the big emerging economies such as China, Brazil, and India, to open their markets further for services and manufactured goods, while retaining some measure of protection for their own agricultural sectors. Developing countries have sought the reduction of U.S. and EU agricultural tariffs and subsidies, non-reciprocal market access for manufacturing sectors, and protection for their services industries. Because U.S. and EU markets are already quite open, developing countries may not believe that they have much to gain by giving up protection of their markets for goods and services. Some developing countries also may fear that additional concessions may lead to greater competition from China rather than the United States or Europe. Despite a strong coincidence of interests, some distance between the U.S. and EU positions developed over a July 2008 draft agreement that was proposed in Geneva. EU trade officials viewed the draft as a possible basis for an agreement, but U.S. trade officials, backed by U.S. business and farm lobbies, argued that the concessions offered by the emerging economies were too minimal to form the basis for a deal. As a result, subsequent efforts have been made by the United States to persuade China, Brazil, and India to provide more trade and investment liberalization without much active assistance from EU negotiators. Given shared interests in opening emerging markets further to industrial goods and services, U.S. and some EU business interests have urged negotiators on both sides to work together to more actively press these other economies for concessions. EU negotiators have remained skeptical and somewhat reluctant to move in this direction perhaps out of concern that greater ambition would require further EU concessions on agriculture. It remains uncertain whether closer U.S.-EU cooperation and coordination in pushing developing countries to make additional concessions would be successful. However, if a more ambitious Doha agreement is not struck by the end of 2012, many observers believe that it could result in the first outright failure of a multilateral trade round in the postwar era. What impact this might have on the multilateral trading system and the WTO's credibility as a negotiating forum and as an arbitrator of trade disputes remains to be seen. But such an outcome could leave the United States and the EU with the challenge of developing other approaches for liberalizing trade on a multilateral basis and for strengthening the WTO as an institution. Dealing with China China presents major trade challenges and opportunities for both the United States and the EU. Three decades ago, China's trade with the United States and the EU was negligible. Today China is the EU's second-largest trade partner, after the United States, and its biggest source of imports. For the United States, China is currently the second-largest trading partner (after the EU), its third-largest export market, and its biggest supplier of imports. China's emergence as the world's second-largest economy and the world's biggest merchandise exporter has been facilitated greatly by the openness of markets in the United States and Europe. As shown in Table 3 , U.S. and EU trade deficits with China in recent years have been huge in absolute terms and they have also constituted a large share of each side's merchandise deficits with the world. In 2010, the trade deficit with China constituted 43% of the overall U.S. trade deficit. For the EU, its trade deficit with China is more than twice as large as its trade deficit with the world. At the same time, China's huge population and booming economy have made it a large, and one of the fastest growing markets for U.S. and EU exports and investment. China's trade surpluses and use of interventionist and trade-distorting economic policies has contributed to growing trade friction with the United States and EU over a number of issues, including China's refusal to allow its currency to appreciate to market levels, its relatively poor record on enforcing intellectual property rights, and its extensive use of industrial policies and discriminatory government procurement policies to subsidize and protect domestic Chinese firms at the expense of foreign companies. These interventionist policies, according to both the United States and European Chambers of Commerce, have become more discriminatory towards foreign companies over the past several years, making it more difficult to export to China and to do business in China on a non-discriminatory basis. U.S. and EU trade officials have utilized two main approaches for addressing problems posed by Chinese policies and barriers that skew the playing field for trade and investment. The first has been to seek Chinese concessions during high-level summitry via the U.S.-China Strategic and Economic Dialogue (S&ED) and the Joint Commission on Commerce and Trade (JCCT) and, in the case of the EU, the EU-China High-Level Economic and Trade Dialogue. The second has been to bring disputes to the World Trade Organization, which China joined in 2001, when it is deemed that China does not comply with its WTO obligations. Given the potential clout that China's two most important trading partners possess and the fact that the Chinese government does appear to respect economic strength, greater U.S.-EU cooperation arguably could increase the chances for successful outcomes through both dialogue and WTO litigation. Enhanced U.S.-EU consultation and agreement on common policy approaches to issues discussed in bilateral dialogues arguably could facilitate pragmatic solutions and more favorable results if China's leaders understood that there was a united front on issues of common U.S. and EU concerns. In the past, U.S. trade officials have often felt that their European counterparts have been less vocal in expressing concern and dissatisfaction with Chinese trade practices because they thought the United States would do the "heavy lifting" ( i.e., open the market) and they would then benefit from China's concessions. Understandably, given the very different experiences member states have in trading with China, the formulation of an EU-wide position is often difficult. From China's perspective, a fragmented, uncoordinated, and divided U.S.-EU approach may be preferable because it allows its policymakers to play one side off against the other, as it arguably did over the issue of currency manipulation at the 2010 G-20 meeting in Seoul. In the case of WTO litigation, it seems that both the United States and the EU are increasingly willing to pursue WTO cases against China when it appears they are winnable. Cases where the United States and the EU serve as co-complainants arguably can enhance the profile of the case, but also ensure that China remains engaged and committed to the WTO dispute resolution process. While China initially settled many WTO cases filed against it before a panel was formed, since 2006 it has exhibited a new willingness to accept the decisions of WTO panels, thus encouraging a continuation of this approach when there appear to be clear violations of China's WTO commitments. In the process, China arguably could become increasingly vested in the maintenance of WTO norms and rules because it wants to be viewed as playing by the rules. Closer U.S.-EU cooperation in providing China with similar messages via high-level summitry or in filing WTO complaints, however, may not address numerous other trade and industrial policies that disadvantage U.S. and European companies because they are too complex or fall outside the purview of WTO obligations, such as China's currency policy. In these cases, U.S. and European officials may still be able to cooperate on understanding and encouraging reformers in China to more actively support policies that will make China a more responsible stakeholder in the global trading system. Reducing Global Imbalances One of the underlying causes of the 2008 global recession was the presence of highly skewed trade imbalances driven by distorted global consumption and savings patterns. High savings countries like China and Germany produced more than they consumed and had to rely on export-led growth to keep their economies growing. As shown in Table 4 , these two countries, plus Japan and some of the oil-exporting countries, experienced large current account surpluses in both the amounts and relative to the size of their economies. These surpluses, in turn, were recycled back to the United States, a low savings and large current account deficit country. The recycled funds, in turn, allowed the United States to finance a high consumption level, particularly in housing, that proved unsustainable. Policies that correct the imbalances and provide for more balanced growth in the next decade are considered by many economists to be important for both global economic recovery and an avoidance of an outbreak of protectionism. According to this view, for large current account deficit countries like the United States, where domestic spending exceeds production, spending (both private and government) must decline and savings rise if the imbalances are to be significantly reduced. Because the U.S. adjustment involves going from the world's consumer and borrower of last resort to depending much more on export-led growth, large current account surplus countries like Germany and China will have to sustain their growth more by stimulating domestic demand and boosting imports and less by exports. This means that German and Chinese domestic spending will need to rise either through increases in consumption, investment, or government spending, or a combination of all three. At a November 2010 Summit in Seoul, leaders of the Group of 20 major economies (G-20) agreed to curb "persistently large imbalances" in trade that are deemed to pose serious risks to global economic growth and an open world trading system. While the group's communiqué reflected an emerging consensus that long-standing economic patterns—in particular the United States consuming too much and big trade surplus countries like China and Germany consuming too little—were no longer sustainable, agreement to monitor and address such imbalances in future meetings fell short of initial U.S. proposals to place quantitative limits on deficits and surpluses. China and Germany led the resistance to U.S. efforts to place limits on surplus countries. In the weeks prior to the summit, both countries countered U.S. proposals by criticizing the loosening of monetary policy (quantitative easing) by the Federal Reserve, arguably diverting U.S. pressure on them to reduce their surpluses. In the process, the G-20 Summit in Seoul revealed a new focus of conflict over the management of the global economy. While U.S.-China differences are the most prominent and long-standing, having centered on China's trade surpluses and its intervention in the foreign exchange market to keep the value of its currency from appreciating, the U.S.-German policy cleavage is newer and centered around macroeconomic policy disagreements. Reflecting perhaps a broader shift in European thinking, driven by German insistence on fiscal austerity, the new cleavage has the potential to challenge some of the underlying assumptions of the transatlantic economy and alter the international debate on global imbalances by positioning Germany and China against the United States on this particular issue. German policymakers reject the notion that the country's export surpluses need to be trimmed. German Finance Minister Wolfgang Schaeuble, for example, has argued that other countries, including the United States, should impose fiscal austerity and tighter monetary policy to right the global economy. Due in part to the spillover effects of the Eurozone crisis (sovereign debt problems of Greece, Ireland, Portugal, and Spain), Germany has also urged its Eurozone partners (16 other members of the EU that share a common currency, the euro) to undertake austere economic policies. Many German policymakers tend to believe that the Eurozone should be turned into a larger version of their nation—a zone where fiscal responsibility reigns and every country lives within its means. A Eurozone built on Germany's image, the argument goes, would be more prudent, responsible, and competitive. This view may be supported by many countries in northern Europe such as Austria and the Netherlands. A case can be made, in the midst of the Greek and Irish sovereign debt crises, that Eurozone members need to restore faith in the way they manage their public finances. However, if the current account surplus countries such as Germany and the Netherlands also pursue austere fiscal policies, the Eurozone may contribute little or nothing to global demand, thereby putting more pressure on the international trading system at a time when most countries around the world are trying to grow faster by exporting. One possible result of austere fiscal policies across the Eurozone, combined with the continuation of heavy German reliance on export-led growth, could be a weaker euro and slower growth across Europe. This, in turn, could lead to a big increase in Europe's trade and current account surplus with the rest of the world by several hundreds of billions of dollars. Coming on top of continuing Chinese and other Asian trading surpluses, European surpluses could help push U.S. trade deficits to record levels, risking an upsurge of protectionism. Outlook U.S.-EU trade and economic relations are healthy, complex, and mutually advantageous. Joint concerns about slow growth, job creation, and increased competition, however, have prompted a number of proposals for deepening transatlantic economic ties. Over the course of this year, a High Level Working Group on Jobs and Growth will assess a wide range of proposals to deepen economic ties, reduce remaining barriers to trade and investment, and to enhance regulatory cooperation. Whether any new, major policy initiative will be advanced by the working group to accelerate the integration of the two economies or to foster greater government-to-government cooperation in dealing with mutual global economic challenges remains to be seen. Much could depend on the views and measures supported by business, nongovernmental organizations, and other stakeholders on both sides of the Atlantic. Any bold undertaking may also require sustained high level political support. As U.S.-EU trade and economic interactions continue to play an important role in affecting growth and the creation of new jobs on both sides of the Atlantic, the 112 th Congress can be expected to monitor ongoing efforts to deepen transatlantic ties.

The 112th Congress, in both its legislative and oversight roles, confronts numerous issues that affect the trade and economic relationship between the United States and the European Union (EU). As U.S.-EU commercial interactions drive significant job creation on both sides of the Atlantic, Congress is monitoring ongoing efforts to deepen transatlantic ties that are already large, dynamic, and mutually beneficial. U.S. and European private stakeholders, concerned about slow growth, job creation, and increased competition from emerging economies, have urged Brussels and Washington to strengthen transatlantic trade and economic ties by reducing or eliminating remaining trade barriers and by cooperating more closely in addressing global economic challenges. A number of studies produced over the past several years have called for new bilateral trade, investment, and other economic arrangements to maximize economic opportunities available to stakeholders on both sides of the Atlantic. At the November 28, 2011, EU-U.S. Summit meeting, leaders from both sides directed the Transatlantic Economic Council (TEC) to establish a High Level Working Group on Jobs and Growth. The Working Group, which will be led by U.S. Trade Representative Ron Kirk and EU Trade Commissioner Karel de Gucht, was tasked with assessing options for strengthening the U.S.-EU trade and investment relationship, especially those that have the highest potential to support jobs and growth. The findings and recommendations of the group are due by the end of 2012. The working group will provide an interim update to leaders in June 2012. There are many options the Working Group could explore for greater liberalization of the transatlantic economic relationship. They range from a comprehensive and traditional free trade agreement to parallel but separate negotiations in areas such as elimination of tariffs on trade in goods, liberalization of services trade and foreign investment restrictions, and reduction of regulatory barriers. A select group of these issues, including enhanced bilateral cooperation on global issues, is discussed in this report. Despite generally low tariff levels on both sides, some in the U.S. and EU business communities support negotiating the elimination of all remaining tariffs imposed on U.S.-EU trade through a bilateral negotiation. Support for a zero-tariff agreement is based on a combination of factors, including the agreement's ability to generate economic benefits for both sides and the leverage such an agreement could create for pressuring emerging economies to make more concessions in the Doha Round of multilateral trade negotiations. Consideration of enhanced regulatory cooperation and one or more bilateral agreements addressing investment and services trade issues are also being touted by the business community. Greater collaboration and alignment of U.S. and EU approaches towards addressing global economic challenges, such as completing the Doha Round, dealing with China's trade barriers, and reducing global imbalances, remains a work in progress. Given shared interests in opening emerging markets further to industrial goods and services, business interests have urged U.S. and EU negotiators to work more closely together to press other countries for more concessions. EU negotiators in the past have remained reluctant to move in this direction perhaps out of concern that greater ambition would require further EU concessions on agriculture.

Introduction In recent years, there has been significant congressional interest in compensation of the federal workforce. The increased interest has been driven at least in part by the federal fiscal situation and in part by the state of the economy since the recession began in 2007. Issues related to the compensation of federal employees often center on the pay differential between federal workers and their private sector counterparts. For years, the annual President's Pay Agent (PPA) study, which is covered in greater detail later in this report, has shown a large wage penalty for federal workers compared to private sector workers in similar occupations. A spate of recent studies, which use a different analytical approach and data sources, has partially contradicted the findings of the PPA study by concluding that at least some federal workers enjoy a wage premium over comparable private sector workers. These studies and accompanying reporting on the comparison of compensation of federal workers to private sector workers provide an indication of the disparate findings, which makes it difficult to determine how compensation of federal employees actually compares to that of workers in the private sector. This report attempts to clarify why the recent studies have arrived at different conclusions and examines limitations of the approaches employed in the different studies. Based on the review of studies considered in this report, it appears there is no single study that addresses the question of compensation comparability using a widely agreed-upon methodology. That is not to say individual studies are not methodologically sound (some are), but rather that the questions asked and the assumptions made are not necessarily the same across studies, which at times arrive at vastly different conclusions. Any modeling of the relationship between the compensation of federal and private sector workers involves making assumptions, which in turn influence the results. Some assumptions are conceptual (e.g., should "job security" count as a "benefit?"), while others are empirical (e.g., what is the most appropriate model specification for the underlying data structure?). Finally, there are data limitations that prevent, or at least seriously curtail, researchers from specifying models as fully as possible. For example, there is not a dataset available at this time that allows an analyst to combine detailed characteristics of individual workers and detailed characteristics of jobs performed in the federal and private sectors. There have been several attempts in recent years to address the issue of compensation between the federal workforce and the private-sector workforce. In evaluating claims about federal pay, there appear to be two basic approaches to comparing compensation in the federal and private-sector workforces—the human capital approach and the jobs analysis approach. These two approaches are not mutually exclusive but may be difficult to combine given data limitations. In addition, the two approaches could even produce opposite results. Each approach is outlined below, followed by an examination of a few recent studies comparing federal and private sector compensation. The studies reviewed were chosen because they are official government studies (President's Pay Agent, Congressional Budget Office) or have received significant attention in policy debates. The Human Capital Approach The "human capital" approach attempts to account for (control) as many observable characteristics of individual workers as possible that are known to affect individual compensation. When workers with similar observable characteristics are compared, some of the residual differences in an outcome (e.g., earnings) may be attributed to that individual's sector of work and some of the differences may be unexplained, in part because certain individual characteristics cannot be quantified and modeled. Literature on human capital and wages has shown that various forms of human capital, such as educational attainment, job tenure, and credentialing, are positively associated with earnings. Other things being equal, higher levels of certain human capital are associated with higher individual earnings. Other individual characteristics, such as age, sex, and race, tend to affect earnings as well. Human capital approaches do not necessarily justify the impact of some characteristics on earnings but merely incorporate as many explanatory variables in a model as necessary to isolate the effect of the variable of interest, which is sector of employment in the case of federal compensation studies. Studies using a human capital model typically try to capture as many characteristics of individuals as possible to explain earnings. Because of the need to build models based on individual characteristics, data sources for human capital models are typically household surveys, such as the U.S. Census Bureau's Current Population Survey (CPS), which provides extensive self-reported demographic and economic data. The Congressional Budget Office (CBO) study reviewed in this report, as well as studies from the American Enterprise Institute (AEI) and the Heritage Foundation (Heritage), use the human capital approach to compare compensation of workers in the federal and private sectors. The Jobs Analysis Approach The "jobs analysis" approach focuses on comparing the compensation for similar jobs, based on the actual duties and responsibilities of jobs in different sectors. In this approach, an attempt is made to match comparable jobs in different sectors rather than comparable workers in those sectors. The pay differential is then typically attributed to the pay structures in the different sectors, with the assumption that pay should be equal for equal work, regardless of individual worker traits. Comparing occupation to occupation is an important control in studies of wage differentials. Ideally, a comparison would match federal jobs with jobs in the private sector having identical tasks, responsibilities, skill requirements, and levels of complexity. In practice, this level of job matching may be difficult to achieve, in large part because of data limitations. Available data often make it difficult to look beyond broad occupational categories. This can be a serious limitation, particularly when it comes to trying to gauge actual responsibilities and actual job tasks. Using broad occupational categories, such as "manager," for instance, may conceal a great degree of difference in job function. For example, a manager of a small retail store and a manager of a federal department with complex multibillion dollar programs might both have the occupational title of "manager" but have very different job functions, knowledge, and responsibilities. Even within a sector, similar differences may exist. In the private sector, the manager of an independent store has vastly different duties and complexities than a manager of a manufacturing plant, for example. In addition, there may be some occupations in the federal government that do not have any (or any obvious) counterparts in the private sector, such as jobs in the intelligence community. The President's Pay Agent (PPA) uses the jobs analysis approach in its annual study of pay differentials between federal and private sector workers. Despite the limitations of job matching spelled out above, the PPA arguably goes furthest in the studies under review in measuring actual tasks and responsibilities. Methodological Considerations Ideally, a compensation comparison study would control for every other factor but the one of interest so that any difference in compensation between two workers may be attributed entirely to the sector in which the workers were employed (federal or private). Given real world data limitations, it is not possible to construct a perfectly controlled study, but it is possible for many demographic controls to match individuals across sectors closely. In other words, there is always some degree of omitted variable bias in studies of this sort, such that not all characteristics (of individuals or jobs) may be measured. For example, it is possible to compare two single white males of the same age with bachelor's degrees working in the same city—one in the federal government and one in the private sector. Data limitations, however, may not allow researchers to compare those same individuals in terms of job tenure (consecutive uninterrupted years in same occupation), motivation, intelligence, aptitude, or other possible explanatory factors. In other words, not all of the observed pay differences are due to premia or penalties from working in a particular sector but might also be attributed to variables not included in the models that researchers construct. Omitted variable bias affects both human capital and jobs analysis studies. In addition to problems associated with omitted variables, even the observable characteristics of individuals or jobs may create error in the models as a result of inexact measurement. Even in relatively straightforward characteristics, such as industry classification, there may be some uncertainty in the data. There is evidence that some private-sector employees might misclassify themselves as federal employees in the March CPS. For example, a federal contractor who is employed by a private-sector firm might classify his sector of work as the federal government. This sort of measurement error also influences any study that compares two groups of workers (e.g., gender, race). As with omitted variable bias, measurement error may affect both human capital and jobs analysis studies. Summaries of Recent Studies The discussion above shows what the components of a study attempting to isolate the compensation effect of working for the federal government might include. If every factor that affected compensation could be measured and observed, then the premium or penalty of working in the federal government could be quantified. In reality, of course, it is not possible to observe, let alone measure, every factor affecting individual compensation. The differences between the human capital studies (CBO, American Enterprise Institute, Heritage Foundation) and the jobs analysis study (PPA) make it difficult to compare easily across studies. Table 1 below, however, shows the main features of the five studies summarized in this report. Greater detail is provided below on the CBO and PPA studies. As noted previously, to isolate the effect of sector—federal or private—on compensation, many other factors that influence compensation need to be considered (i.e., controlled for). The data in Table 2 show the different control variables in the compensation studies. Table 2 indicates the differences, and thus a large part of the reason for discrepant findings, between the human capital studies and the jobs analysis study. The human capital studies control, to varying degrees, for educational attainment, certain demographic characteristics, firm size, residency, and occupation. Importantly, however, data limitations do not allow a great degree of precision in controlling for occupation or job responsibilities in the human capital studies (see elaboration on this in " The Congressional Budget Office " review below). On the other hand, the PPA study, while not controlling for characteristics of individual workers, focuses in much greater detail than the human capital studies on the content of jobs. The list of control variables in Table 2 shows the numerous options that researchers have in designing a study to compare compensation across sectors and that different studies control to varying degrees for different variables. Controlling for educational attainment and experience are particularly important, given their impact on earnings. As CBO notes in its study, educational attainment "plays a particularly large role" in explaining compensation differences and the compensation differentials vary greatly by individuals' education levels. Workers with higher levels of education tend to earn more (both in the federal and private sectors) and federal workers have more educational attainment, on average, than private sector workers. Similarly, controlling for occupation and firm size are important in making comparisons between the federal and private sector workforce. There are many occupations in the federal government that have no, or limited, counterparts in the private sector, thus making it important to consider the types of jobs that workers in each sector are actually performing. Similarly, the federal government is not like most private sector firms—it is a large "employer." Nearly all federal workers are employed at entities with at least 1,000 employees, while only about 40% of private sector workers are employed in firms of that size. Because employees of large firms tend to earn more than workers at small firms, firm size is an important control variable. The Congressional Budget Office The Congressional Budget Office (CBO), in its analysis of the compensation of federal and private-sector employees, focuses on the question of how the federal government's compensation costs would differ "if the average cost of employing federal workers was the same as that of employing workers in the private sector with certain similar observable characteristics." To answer this question, CBO uses the so-called "human capital" approach to comparing wages and benefits. Unlike the other human capital studies reviewed in this report, CBO does not report pay differentials as "premia" or "penalties," as they note that the "data do not allow CBO to gauge the degree to which each of those factors affects differences in average wages between the sectors." Thus, consistent with CBO's interpretation, its findings are reported as differentials and not as premia. Methodology As discussed previously, the human capital approach uses an array of control variables to try to match individuals across different sectors in order to isolate any sector-specific effect of compensation. In the CBO study, controls are used for educational attainment, race, sex, age, marital status, immigration status, citizenship status, firm size, occupation, and geographic location. The controls are used so that the compensation of individuals with similar observable characteristics can be compared in the federal and private sectors. To the extent that all other factors are held constant (e.g., workers of the same age, experience, education, job type, etc.), the difference in compensation between the federal worker and private sector worker may be attributed to that sector, plus any error in the model. Demographic and wage data in the CBO study are from the Current Population Survey (CPS). The wage variable is calculated as an average hourly wage and includes salaries, tips, overtime pay, commissions, and bonuses. Data on benefits are imputed for each individual in the CPS sample based on the National Compensation Survey (NCS) and the Central Personnel Data File (CPDF). Benefits calculated in the study include the value of paid leave, retirement income (defined-benefit and defined-contribution plans), health insurance benefits, and legally required benefits (e.g., Social Security). As CBO notes, estimating benefits across sectors is much more difficult, and results in greater uncertainty, than estimating wage differences due to the different data sets and stronger assumptions required to estimate benefits. One of the more difficult factors to control for in the human capital models is the type of work two similar individuals are performing. Again, for example, if the data allowed a comparison between two single white males of the same age with bachelor's degrees working in the same city and performing the same job (i.e., the values of variables other than sector of employment being equal), then any compensation differential would be more likely attributable to the sector in which the individuals worked. Given the data source used in the CBO and other human capital studies, the CPS, it is not possible to compare narrowly delineated occupational groups. The CBO study uses 24 occupational categories at the two-digit level to control for type of work, which is likely as refined as possible given sample size concerns. Nonetheless, the level of aggregation for two-digit occupation codes conceals a diversity of occupations within those aggregated categories. For example, the occupation group "protective service occupations" includes lifeguards, private detectives, criminal investigators, and managers of police and detectives, among others. Likewise, the occupation group "transportation and material moving occupations" includes aircraft pilots, bus drivers, parking lot attendants, ship loaders, taxi drivers, and ship engineers, among others. Thus, it is possible that two individuals (one in the federal sector and one in the private sector) with similar demographic and educational characteristics who worked in the same broad occupational category might have widely divergent compensation, primarily due to the different sectors in which the individuals worked. However, it could also be due, to varying degrees, to different tasks, responsibilities, and complexities of the jobs within the broader occupational groupings. While controlling for education may partially offset the comparisons of workers within broad occupational categories (e.g., the educational and demographic profiles likely differ for aircraft pilots and parking lot attendants), there may still be some differences in compensation between similar federal and private sector workers that are concealed by the broad occupational comparisons. For example, the demographic and educational profile of workers in "protective service occupations" might be similar for several individuals, but the individual job tasks (e.g., border patrol agents versus security guards in residential shopping areas), might drive very different compensation levels. As such, CBO reports wage and benefit differences by five categories of educational attainment—high school or less, some college, bachelor's degree, master's degree, and professional or doctorate degree. This differentiation is important for explaining the compositional effects in the two workforces, which are not captured by analyses reporting aggregate differences or single differentials. Findings Table 3 presents the major findings of the CBO study. As the data show, the pay and benefit differential between federal and private sector workers varies by the educational attainment of the individual worker. Specifically, the CBO study finds a positive wage differential for federal workers with less than a bachelor's degree and a negative wage differential for workers with more than a bachelor's degree. For benefits, as with wages, the differential between federal and private sector workers varies by educational attainment, with a positive benefit differential for federal workers with a master's degree or less. When combining wages and benefits for total compensation, the largest differential for federal workers occurs for those with some college education or less (32% and 36%, respectively), while for workers with a professional degree or doctorate, there is a compensation differential of -18% compared to similarly educated private sector workers. For example, federal employees with a professional or doctorate degree earn an average of $73.20 per hour in wages and benefits, while private sector workers with a professional or doctorate degree earn an average of $89.60 per hour in wages and benefits. Thus, on average a federal employee with a professional or doctorate degree (and with other similar characteristics) makes $16.40 per hour, or 18%, less than a private sector employee with similar education and characteristics. The President's Pay Agent In the 1980s, there were concerns about the ability of the federal government to recruit and retain talented, high-skilled individuals. As a result, in-depth research around 1990 showed a pay gap between federal workers and comparable private sector workers and significant variation in the local cost of living that was not accounted for in the General Schedule. That research in part led to the passage of the Federal Employees Pay Comparability Act (FEPCA) of 1990 ( P.L. 101-509 ), which laid out a schedule to close the gap between federal and private sector pay over a number of years. The President's Pay Agent is mandated to (and still does) produce annually a single percentage expressing the difference in the average rate of pay for all General Schedule (GS) employees to the average non-federal rate of pay. Pay adjustments were supposed to be made through annual and locality pay changes according to the size of the pay discrepancies. The process for federal pay adjustment under FEPCA was put into place by Congress according to specific processes and formulas mandated by Congress. FEPCA has never been implemented as originally enacted. The annual pay adjustment was not made in 1994; in 1995, 1996, 1998, and 2010, reduced amounts of the annual adjustments were provided. For 1995 through 2010, reduced amounts of the locality payments were provided. In addition, there were no pay adjustments for 2011 and 2012. Although the annual adjustment and the locality payment are sometimes referred to as cost-of-living adjustments, neither is based on measures of the cost of living. Methodology As noted previously, the PPA conducts an annual study based on an analysis of comparable jobs rather than on human capital. The PPA does not control for the characteristics of individuals but rather attempts to control for the characteristics of jobs . The PPA uses data from the National Compensation Survey (NCS) and the Occupational Employment Statistics (OES) from the U.S. Bureau of Labor Statistics (BLS) to compare pay between General Schedule (GS) workers and non-federal workers for the same level of work within each of the locality pay areas. The scheduled rates of basic pay of workers at each grade in the GS system are compared to the base earnings of full-time non-federal workers performing jobs with similar characteristics. Unlike the other studies reviewed in this report, the PPA is the only study that provides a time series, rather than a single point-in-time estimate, because it is replicated every year. The methodology of the PPA is somewhat complex, given the scope of the study. The study employs an extensive crosswalk to match federal GS jobs with non-federal jobs in multiple localities. In addition, the PPA study uses sophisticated methods of weighting in order to account for the actual presence and allocation of federal work in the economy and uses modeling to provide data in cases in which there are not sufficient job matches from the actual NCS surveys. The core comparison method, however, is about matching job content in the federal and private sector workforce. Specifically, the PPA studies use "grade leveling" to assign federal grade equivalents to non-federal jobs. This leveling provides the means of comparison between sectors. The PPA grade leveling system is based on the General Schedule's Primary Standard for the Factor Evaluation System (FES), which consists of nine factors that guide position classification standards. The FES and the PPA use a variety of factors to classify positions by the content and responsibilities of the job, rather than characteristics of individuals holding those positions. The PPA consolidates the nine FES factors into four factors in constructing grade leveling: Knowledge. This factor uses the FES Factor "Knowledge Required by Position." Job Controls and Complexity. This factor combines four FES Factors—"Supervisory Controls," "Guidelines," "Complexity," and "Scope and Effect." Contacts. This factor combines two FES Factors—"Personal Contacts" and "Purpose of Contacts." Physical Environment. This factor combines two FES Factors—"Physical Demands" and "Work Environment." The PPA study, like the FES, assigns point values to each job based on factors. These point values are then converted to grade levels. Each factor provides a maximum number of points to the total, thus the calculation of a position's point total is weighted depending on how many points are available from each factor. The vast majority of the weight in assigning grades to jobs comes from the first two factors—"Knowledge" and "Job Controls and Complexity." Once jobs are grade leveled, across the federal and non-federal sectors, average salaries are computed for each grade-equivalent position by locality (e.g., the average salary of a GS-13 federal employee in Los Angeles is compared to the average salary of a non-federal worker in Los Angeles with a job equivalent to a GS-13). Then the salary differential is calculated for each grade in each locality. Finally, a single percentage expressing the GS rate of pay to the non-federal rate of pay is calculated. As with the human capital studies, the President's Pay Agent study (a "jobs analysis" approach) is subject to omitted variable bias and measurement error. In the case of the PPA, there are numerous judgments that must be made in the process of matching federal jobs to private sector jobs. The PPA does not simply match job titles but also attempts to measure and compare job content and responsibilities, both of which could be sources for measurement error. There is at least some evidence, for example, that the federal government hires workers with less education and tenure than workers in the private sector in the same level of occupational responsibility. In turn, one source of measurement error in a jobs analysis study such as the PPA is that less experienced, less skilled federal workers are compared with more experienced, more skilled workers in the private sector, which makes the pay gap seem a function of sector rather than the underlying worker characteristics. In addition, matching a federal job to the private sector for which there is no obvious counterpart requires judgment that could lead to additional measurement error. Findings The 2011 PPA study (which shows adjustments that would be required for calendar year 2013) reports a pay disparity of -26.3%. That is, across all occupations and localities, on average federal workers earned 26.3% less than non-federal workers performing similar work. This disparity ranged across the 34 localities, from -17.3% (Houston) to -36.9% (Washington, DC). The disparity in the "Rest of U.S." (i.e., all areas outside of the localities included in the PPA study) was -19%. While the other studies reviewed in this report attempt to calculate the value of benefits in comparing compensation, the PPA study does not calculate the value of benefits because it is not mandated by FEPCA to do so. Other Studies The CBO and PPA studies represent two approaches to comparing pay in the federal and non-federal sectors—the human capital approach and the jobs analysis approach. Three additional studies are briefly summarized in this section. Two of the studies take the human capital approach to comparing compensation and the third does not control for worker or job characteristics. The Heritage Foundation Prior to the release of the CBO study, the Heritage Foundation released a report comparing compensation of federal workers with non-federal workers. The Heritage study, like the CBO study, controls for several observable worker characteristics related to human capital in order to compare the pay and benefits of individuals in the two sectors. The main findings of the Heritage study are in Table 4 . The study uses a series of regression equations to estimate the premium that federal workers receive in different forms of compensation—pay, health insurance, retirement benefits—compared to workers in the non-federal sector. When using the most detailed controls, the author of the Heritage study reports a wage premium of 19% and a total compensation premium of 31% for federal workers compared to non-federal workers. There are at least two major methodological issues in the Heritage study that limit the strength of its findings. First, because the distribution of earnings in the federal and private sectors differ greatly (i.e., earnings dispersion in the federal sector is more compressed than in the private sector), certain statistical techniques are more appropriate than others for estimating compensation equations on the two samples (federal and private). The Heritage study used log-linearized models to compare the average wages in the federal and private sectors. Using such models, however, can lead to inaccurate estimates of average wages due to certain characteristics of the wage data, such as skewness and heteroscedasticity. In essence, the analytical technique used in the Heritage study generates much larger wage differential estimates than the technique used in the CBO study, which corrects for the different properties of wage distributions in the federal and private sectors. Second, the Heritage study excludes workers earning wages below $5 per hour and above $60 per hour. The exclusion of individuals earning more than $60 per hour is likely to affect the results of the study more so than the exclusion of lower-wage workers. By excluding workers earning more than $60 an hour, the pay of higher earners in the private sector is artificially compressed (i.e., it would suppress the mean earnings of private sector workers by truncating the distribution of earners) and appears more in line with federal pay than the actual distribution of earnings. The American Enterprise Institute As with the CBO and Heritage Foundation studies, the American Enterprise Institute adopted a human capital approach in comparing compensation of federal workers with non-federal workers. The main findings of the AEI study are in Table 5 . As does the Heritage study, the AEI study uses a series of regression equations to estimate the premium that federal workers receive in different forms of compensation—pay, health insurance, retirement benefits—compared to workers in the non-federal sector. When using the most detailed controls, the authors report an overall wage premium of 14% and a total compensation premium of 61% for federal workers vis-a-vis non-federal workers. This total compensation premium includes a benefits premium of 63% and a job security premium of 17%. Only wage premia are calculated by the education level of the individual worker. The declining wage premium as educational attainment increases is consistent with the findings of the CBO study, the only other study to examine wage premia by educational attainment. The AEI study, unlike the Heritage study, did not take the additional step of excluding observations with hourly earnings greater than $60; AEI's use of censored earnings (i.e., imputed value for earnings over $200,000) from the CPS, however, can affect the estimates because of the imputation method. Additionally, the AEI study uses only 10 occupational categories as controls, which is fewer than the CBO and Heritage studies and leaves wider occupational variation within groups. Finally, the AEI's estimate of a "job security" premium (i.e., the estimated value of lower likelihood of involuntary separation for federal workers compared to private sector workers) has been criticized by observers for not being consistent with the observable (or lack of observable) security premia in other sectors. The Cato Institute Unlike the other studies reviewed in this report, the Cato Institute compared the compensation of federal workers with non-federal workers using no control variables. The Cato study found that federal civilian workers earned an average annual wage of $83,679 in 2010, compared to an average annual wage for private sector workers of $51,986; federal civilian workers had average annual total compensation of $126,141 in 2010 compared to average annual total compensation of $62,757 for private sector workers; and federal workers have greater job security than private sector workers. Because it does not include controls either for worker or job characteristics, the Cato study provides little useable information on compensation differentials between similarly situated workers in the federal and private sectors. The more detailed studies from CBO, Heritage, and PPA have shown that the distribution of human capital (i.e., education and experience) differs across the two sectors and that the private sector contains many jobs (e.g., lower-wage service jobs) that are not present in the federal sector. A study at the level of aggregation of Cato's essentially compares two different sets of workers and jobs, which makes its conclusions less informative. Overall Considerations Comparative compensation studies pose a range of challenges and choices. As the review in this report has shown, there are multiple choices that researchers face even within the context of the two main frameworks of comparison—human capital models and jobs analysis models. For example, researchers may choose to include or exclude control variables, such as educational attainment or experience. In general, in a well-specified model, the more the researcher can (or chooses to) control for, the more the model might isolate the effect of employment sector on compensation. In addition to choices about modeling, data limitations play a role in determining the robustness of comparisons. For example, the human capital models rely on some version of the Current Population Survey, which by design does not allow detailed comparisons of actual job responsibilities and characteristics. On the other hand, the extensive occupational crosswalks used in the PPA do not, by design, include demographic characteristics of the individuals filling those jobs. No two studies reviewed are perfectly comparable, making it difficult to neatly summarize the findings across studies. Of the five studies under review, one reports an overall average wage penalty for federal workers (PPA), one reports neither an overall average wage premium nor a penalty for federal workers (CBO), and three (Heritage, AEI, and Cato) find overall average wage premia for federal workers compared to private sector workers. Only two of the studies—CBO and AEI—report earnings differentials by level of educational attainment, however. While the AEI report shows a clear wage premium across levels of educational attainment, the more methodologically rigorous CBO study finds a more nuanced outcome. That is, federal workers with less than a bachelor's degree have on average a wage premium compared to private sector counterparts, while federal workers with post-graduate educational attainment experience a wage penalty relative to private sector counterparts. Summarizing benefit differentials is more difficult than summarizing wage differentials because of the way different studies measure benefits and the assumptions required to make estimates. Unlike estimating wages, estimating benefits often requires integrating multiple data sources and making choices about what constitutes a "benefit." Despite the greater uncertainty associated with estimating benefits, the largest differentials occur in this component of compensation. Of the three studies that attempt to estimate benefit differentials, all three find benefit premia for federal workers compared to private sector workers. As with wage differentials, the CBO study finds a declining benefit premium as educational attainment rises. That is, the benefit premium declines from 72% for federal workers with a high school degree or less to 2% for federal workers with a professional degree or doctorate. The CBO study finds an average benefit differential of 48% for federal workers compared to private sector workers. The Heritage and AEI studies do not report benefit premium by level of educational attainment, but both report a benefit premium for federal workers (these two studies include different components in estimating "benefits," making a straightforward comparison difficult). Results from these studies provide useful information. It is hoped that a review of their approaches is helpful in explaining and facilitating evaluation of competing findings related to the compensation of the federal workforce. A few closing thoughts based upon this review are presented below: Arguably, there is no "average" employee in the federal or private sector. The range of worker and job characteristics is sufficiently broad across sectors that claims about "average" workers generally conceal much of the variation driving differences in compensation. For purposes of policy, the most informative studies show variation in compensation differentials by some control variables, particularly by some measure of human capital (e.g., education) or detailed occupation. Benefit comparisons are more difficult to model than wage comparisons. While estimates of wages are relatively straightforward (and available from the CPS and other data sources), data on benefits are less available and require assumptions on the part of researchers. For example, placing an average value on employer-subsidized health insurance requires assumptions about the coverage of the insurance, which may not be readily available. Likewise, placing a value on "job security" requires difficult-to-quantify assumptions about preferences of individual workers (e.g., risk aversion, job commitment). Benefit differentials tend to be the largest component of compensation differentials that are identified across the reviewed studies, and they are more difficult to interpret because they are measured in less precise ways than wages. The existence of a wage gap does not necessarily indicate a premium or penalty that is attributable to an observed and measureable characteristic, such as sector of employment. Rather, there are unobservable characteristics that can legitimately influence wages and that may drive differences between workers in different sectors. In the literature on the pay gap between men and women, for example, researchers have encountered difficulty measuring potential explanatory factors such as discrimination, level of investment in careers, and preferences for certain types of work. In all of the reviewed studies, findings are presented as federal compensation compared to private sector compensation, with the implicit or explicit assumption that federal pay should match private sector pay. The assumption that private sector pay is "correct" because it is determined by "market forces" is a conceptual assumption rather than an empirical reality. Benchmark comparisons are useful but the assumption underlying these studies is that compensation in the federal sector is either too high or too low compared to this benchmark. An alternative assumption, which is generally not present in the studies, might be that private sector pay may need to be altered to be in line with federal compensation in some instances. In fields such as finance and law, where private sector compensation can vastly exceed public sector compensation, the private sector benchmark may not consistently be the "right" figure in those areas. Additionally, there may be some types of work, involving specialized technical knowledge, where consistency of service and longer tenures are valued and perhaps worthy of a premium. Some federal occupations have no clear private benchmark. This reality makes it unclear what the finding of a compensation premium or penalty for such occupations compared to the private sector means. Similarly, in some occupational areas (e.g., intelligence, regulatory), the federal government is the major employer and must attract workers in a competitive environment; in these occupational areas, a private benchmark may not be informative. Across the board adjustments to compensation of federal employees may have unintended consequences. Findings in the CBO study, in particular, demonstrate the wide compensation differentials that exist across human capital characteristics. Adjustments that are made uniformly may narrow differences between some federal and private sector workers but widen differences for other workers. This could have the possible effect, for example, of making it more difficult to attract higher-skilled workers into the federal government if an across-the-board compensation adjustment caused higher-skilled, higher-paid workers to lose ground relative to their private sector counterparts.

Recently there has been significant congressional interest in compensation of the federal civilian workforce. The increased interest has been driven at least in part by budgetary pressure and in part by the state of the economy since the recession began in 2007. Issues related to the compensation of federal employees often center on the pay differential between federal workers and their private sector counterparts. For several years, the annual President's Pay Agent (PPA) study has shown a large wage penalty for federal workers compared to private sector workers in similar occupations. A few recent studies, however, which use a different analytical approach and data sources, have partially contradicted the findings of the PPA study by concluding that at least some federal workers enjoy a wage premium over comparable private sector workers. These disparate findings make it difficult to determine how compensation of federal employees compares to workers in the private sector. In evaluating claims about federal pay, there appear to be two basic approaches to comparing compensation in the federal and private-sector workforces—the human capital approach and the jobs analysis approach. The human capital approach attempts to account for as many observable characteristics of individual workers as possible (e.g., education, experience) that are known to affect individual compensation. The jobs analysis approach, on the other hand, focuses on matching comparable jobs in different sectors rather than workers with similar demographic characteristics in those sectors. These two approaches are not mutually exclusive but may be difficult to combine given data limitations. Each approach is outlined in this report, followed by an examination of a few recent studies comparing federal and private sector compensation. The studies reviewed were chosen because they are official government studies (President's Pay Agent, Congressional Budget Office) or have received significant attention in policy debates. Results from these studies, which at times arrive at vastly different conclusions, provide some useful information about evaluating competing claims related to the compensation of the federal workforce. In general, the more methodologically rigorous "human capital" studies show a pay premium for federal workers with lower levels of educational attainment and a pay penalty for federal workers with higher levels of educational attainment. The range of worker and job characteristics is sufficiently broad across sectors that claims about "average" workers conceal much of the variation driving differences in compensation. For purposes of policy, the most informative studies show variation in compensation differentials by some control variables. Of the five studies under review, one reports an overall average wage penalty for federal workers (PPA), one reports neither an overall average wage premium nor a penalty for federal workers, and three find overall average wage premia for federal workers compared to private sector workers. Only two of the studies—CBO and the American Enterprise Institute (AEI)—report earnings differentials by level of educational attainment, however. While the AEI report shows a clear wage premium across levels of educational attainment, the more methodologically rigorous CBO study finds a more nuanced outcome. That is, federal workers with less than a bachelor's degree have on average a wage premium compared to private sector counterparts, while federal workers with post-graduate educational attainment on average experience a wage penalty relative to private sector counterparts.

Introduction The National Telecommunications and Information Administration (NTIA) is a bureau in the U.S. Department of Commerce (DOC). The NTIA frequently works with other executive branch agencies to develop and present the Administration's position on key policy matters. It represents the executive branch in both domestic and international telecommunications and information policy activities. Policy areas in which the NTIA acts as the representative of the Administration include international negotiations regarding global agreements on the Internet and spectrum management, and domestic use of spectrum resources by federal agencies. In recent years, one of the responsibilities of the NTIA has been to oversee the transfer of some radio frequencies from the federal domain to the commercial domain. Many of these frequencies have subsequently been auctioned to the commercial sector and the proceeds paid into the U.S. Treasury. In 2013, the NTIA focused on "supporting the innovation economy of the future—one that produces new and better jobs and positions the United States to remain competitive in the 21 st century." Notable programs to contribute this goal included promoting the deployment of broadband infrastructure, advocating a multi-stakeholder approach to Internet policymaking, and supporting the push to make more spectrum available for wireless technologies. As part of President Obama's Wireless Initiative, the NTIA is charged with identifying electromagnetic spectrum that might be transferred from the federal sector to commercial wireless use. This spectrum might be auctioned as licenses for exclusive commercial use, made available for sharing between federal and commercial users, or repurposed in some other way that meets the stated goal of the Wireless Initiative to add 500 MHz of spectrum for wireless broadband. Congress also has required the NTIA to take actions to release spectrum from federal to commercial use and to ensure the efficient use of federal spectrum. The NTIA administers some grants programs created by Congress, including the Broadband Technology Opportunities Program (BTOP). BTOP grant programs are in the final stages of completion. As required by the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ), the NTIA is commencing a $135 million grant program to help states plan for participation in a new, nationwide public safety broadband network. To deploy the new network, the act established the First Responder Network Authority, or FirstNet, as an independent authority within the NTIA and assigned to the agency various responsibilities to support FirstNet. FirstNet is funded through the Public Safety Trust Fund, established by Congress to receive revenues from auctions of certain spectrum licenses. FirstNet has access to an advance of nearly $2 billion from the U.S. Treasury against expected proceeds of sales of spectrum licenses. Another $5 billion in funding is expected from the Public Safety Trust Fund as auction revenues are deposited in the account. Fiscal Year Appropriations and Budget Requests The President's budget request for the NTIA for FY2014 was $52.1 million for salaries and expenses. The Consolidated and Further Continuing Appropriations Act, 2013, provided $45.1 million for salaries and expenses for FY2013; no funding was appropriated for separate programs. In FY2010, the Public Telecommunications Facilities Program (PTFP) represented half of the NTIA's budget appropriations. In FY2011, the total enacted budget appropriations amount for the NTIA increased by 4% to $41.6 million; funding for the PTFP was transferred to administrative expenses and salaries. According to the NTIA, the initial increase of $21.6 million from FY2010 to FY2011 in funding for salaries and expenses was largely attributable to the costs of administration of a $4.7 billion program for broadband deployment, as required by the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). In FY2012 requests for funding to administer grant programs totaled $32.3 million, 70% of the fiscal year budget request. For FY2013, $25.8 million in funding was designated to administer the remaining broadband grant programs, primarily BTOP. The FY2014 request for broadband grant program oversight was for $24.7 million, roughly 40% of the total budget request. The NTIA also receives funding from sources such as fees charged to federal agencies for spectrum management services. Reimbursable funding for FY2014 is estimated at $37.5 million, of which spectrum management fees from federal agencies are projected to be $28.9 million; these fees were estimated at $28.7 million for FY2013. The balance is attributable to reimbursable projects in telecommunications technology research. The FY2014 budget request includes $7.5 million and staff increases of eight FTEs for a new program to develop a spectrum monitoring system and assess technologies for sharing radio frequency spectrum. The program would encompass pilot projects over a period of two years in ten major metropolitan areas. Both Congress and the Administration have required the NTIA to take new actions in identifying and releasing additional radio frequency spectrum for wireless broadband use. To meet these obligations, funding of $1.25 million and five FTEs are requested for the Office of Spectrum Management for Wireless Broadband Access, a new line item. Increases in staffing for some programs are offset in part by a reduction of four FTEs to administer broadband programs, and a reduction of 7 FTEs at the Institute of Telecommunication Sciences (ITS). Total FTEs for both directly funded and reimbursable programs is estimated at 309 FTEs, compared to 302 FTEs for FY2013 (under the Continuing Resolution) and 257 FTEs in FY2012. Programs The NTIA fulfills many responsibilities for different constituencies. As the agency responsible for managing spectrum used by federal agencies, the NTIA often works in consultation with the Federal Communications Commission (FCC) on matters concerning spectrum access, technology, and policy. The FCC regulates private sector, state, local, and tribal spectrum use. Because many spectrum issues are international in scope and negotiated through treaty-making, the NTIA and the FCC collaborate with the Department of State in representing American interests. The NTIA also participates in interagency efforts to develop Internet policy. The NTIA and the National Institute of Standards (NIST) have adjoining facilities on the Department of Commerce campus in Boulder, CO, where they collaborate on research projects with each other and with other federal agencies, such as the FCC. The NTIA worked with the Rural Utilities Service in coordinating grants made through BTOP. The NTIA collaborates with NIST, the FCC, and the Department of Homeland Security (DHS) in providing expertise and guidance to grant recipients using BTOP funds to build new wireless networks for broadband communications. As described by the NTIA, its policies and programs are administered through The Office of Spectrum Management (OSM), which formulates and establishes plans and policies that ensure the effective, efficient, and equitable use of the spectrum both nationally and internationally. Through the development of long range spectrum plans, the OSM works to address future federal government spectrum requirements, including public safety operations and the coordination and registration of federal government satellite networks. The OSM also handles the frequency assignment needs of the federal agencies and provides spectrum certification for new federal agency radio communication systems. The Office of Policy Analysis and Development (OPAD), which is the domestic policy division of the NTIA. OPAD supports the NTIA's role as principal adviser to the executive branch and the Secretary of Commerce on telecommunications and information policies by conducting research and analysis and preparing policy recommendations. The Office of International Affairs (OIA), which develops and implements policies to enhance U.S. companies' ability to compete globally in the information technology and communications (ICT) sectors. In consultation with other U.S. agencies and the U.S. private sector, OIA participates in international and regional fora to promote policies that open ICT markets and encourage competition. The Institute for Telecommunication Sciences (ITS), which is the research and engineering laboratory of the NTIA. ITS provides technical support to the NTIA in advancing telecommunications and information infrastructure development, enhancing domestic competition, improving U.S. telecommunications trade opportunities, and promoting more efficient and effective use of the radio spectrum. The Office of Telecommunications and Information Applications (OTIA), which administers grant programs that further the deployment and use of technology in America, and the advancement of other national priorities. In the past, the OTIA has awarded grants from the Public Telecommunications Facilities Program, which was terminated by Congress in FY2011. The program supported new construction for public broadcasting stations and other organizations. The Office of Public Safety Communications, which was created by the NTIA at the end of 2012 to administer some provisions of the Middle Class Tax Relief and Job Creation Act of 2012, Title VI, also known as the Spectrum Act. For budget purposes, the category of salaries and expenses is organized into four sub-activities: Domestic and International Policies; Spectrum Management; Telecommunication Sciences Research; and Broadband Programs. Termination of the Public Telecommunications Facilities Program Effective FY2011, Congress terminated grant funding for the Public Telecommunications Facilities Program (PTFP). In FY2010, the program received $20 million in funding to support broadcast and non-broadcast projects. Approximately half of the grant monies went to public radio and television stations to replace equipment. Another 25% of grant funds were awarded to bring radio and television services to unserved or underserved communities. Other awards included grants to 16 public television and radio stations to cover costs of converting from analog to digital broadcasting. These grants helped the Public Broadcasting Service to maintain and improve its critical rolein the current Emergency Alert system (EAS) and new initiatives for Wireless Emergency Alerts (also known as commercial mobile alerts). For example, the satellite communications network that supports EAS is operated by the National Public Radio, public television stations provide back-up for Wireless Emergency Alerts to mobile devices, and public television and radio stations provide emergency alerts and information to otherwise unserved communities. Spectrum Act The most recent legislative action to provide more spectrum for commercial services was included in provisions of Title VI of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). Title VI is generally referred to as the Spectrum Act, or the Public Safety and Spectrum Act. Public Safety The Spectrum Act has given the NTIA responsibilities support the First Responder Network Authority (FirstNet) in planning, building and managing a new, nationwide, broadband network for public safety communications. The NTIA is also be responsible for managing the Public Safety Trust Fund, created by the act, which remains in effect through FY2022. The NTIA has created an Office of Public Safety Communications to oversee the State and Local Implementation Fund grant process. The Office will manage service-level agreements for the agency to supply administrative, technical, staffing, and other resources, as requested, to FirstNet. FirstNet appears to be an autonomous organization, with broad powers to carry out its mandate, within the requirements established by the law. It has for example sole power to select the program's manager and its agents, consultants, and other experts subject to the requirement that they be chosen "in a fair, transparent, and objective manner." In managing proposals and contracts, it is to "take such other actions as may be necessary" to accomplish the network build-out. The NTIA, however, has possibly exceeded its designated role as a supporting agency by establishing its own set of requirements for the conduct of business at FirstNet, including powers for planning and hiring that Congress has specifically assigned to FirstNet. One current practice of providing funding for a few months at a time for operating costs may be hindering investments for forward planning, such as the establishment of regional centers for state outreach programs. The act also re-establishes the federal 9-1-1 Implementation Coordination Office (ICO) to plan for next-generation systems (NG 9-1-1) and to administer a grant program. ICO is to be jointly administered by the NTIA and the National Highway Traffic Safety Administration (NHTSA). ICO is to provide matching grants for improvements in the implementation of 911 emergency services, and other purposes, from a grant program authorized at $115 million. Based on the act's prioritized plan for funding programs with spectrum license auction revenue, the funds for the grant program will be made available only after $27.635 billion of available auction revenue has been applied to other purposes. ICO, in consultation with NHTSA and DHS, is to report on costs for requirements and specifications of NG 9-1-1 services, including an analysis of costs, and assessments and analyses of technical uses. Public Safety Trust Fund and FirstNet The NTIA is to assure that some of the auction revenues designated for the Public Safety Trust Fund are placed in the Network Construction Fund, which is to be established as an account in the Treasury. The fund is to be used by FirstNet for expenditures on construction, maintenance, and related expenses to build the nationwide network required in the act, and by the NTIA for grants to those states that qualify to build their own radio access network links to FirstNet. The NTIA is also to facilitate payments to states that participate in the deployment of the network. The FY2014 budget estimate shows that $1.908 billion is to be available in the Public Safety Trust Fund, of which $1.902 billion is to be obligated for purchases of goods and services from government accounts. For FY2014, $257 million is designated for the Network Construction Fund. The act established a State and Local Implementation Fund and required the NTIA, in consultation with FirstNet, to establish grant program requirements. Grants from this fund will be available to all 56 states and territories to support planning, consultation, data collection, education, and outreach activities. Expenditures by the NTIA from the State and Local Implementation Fund were reported at $300,000 for FY2012 for administrative costs. Disbursements for administrative costs and grants funding are estimated at $124,958,000 (base) for FY2013 and $9,700,000 for FY2014. Grants totaling over $116 million were awarded to 54 states and territories in FY2013. BTOP Grants and FirstNet Grants under the BTOP program included seven projects to develop broadband communications for public safety. After the passage of the Spectrum Act, the NTIA partly suspended funding to these projects in order to allow the FirstNet board of directors time to evaluate how the projects might be coordinated with plans for a nationwide network. Furthermore, FirstNet was assigned the sole, national license for public safety broadband; under the Spectrum Act separate lease agreements are required for spectrum access. In February 2013, the board agreed to move forward with negotiations on leasing agreements. Agreements have been reached with four of the BTOP grant recipients, making them eligible to receive the balance of their grants. Spectrum Reallocation The Spectrum Act updated existing and specified new procedures for spectrum to be reallocated from federal government to commercial use. Under the act, the NTIA is required to work with the FCC to identify specific bands for release to commercial use. The act also addressed how spectrum resources might be repurposed from federal to commercial use through auction or sharing, and how the cost of such reassignment would be defined and compensated, among other provisions. Although spectrum sharing to facilitate the transition from federal to commercial use is supported in the act's provisions, the NTIA has been required to give priority to reallocation options that assign spectrum for exclusive, non-federal uses through competitive bidding. The act has required the establishment of a Technical Panel within the NTIA to review transition plans that each federal agency must prepare in accordance with provisions in the act. The Technical Panel is required to have three members qualified as a radio engineer or technical expert. The Director of the Office of Management and Budget, the Assistant Secretary of Commerce for Communications and Information, and the Chairman of the FCC have been required to appoint one member each. A discussion and interpretation of provisions of the act as regards the technical panel and related procedural requirements such as dispute resolution have been published by the NTIA as part of the rulemaking process. Spectrum Policy The Administration and Congress have taken steps to increase the amount of radio frequency spectrum available for mobile services such as access to the Internet. The increasingly popular smart phones and tablets require greater spectrum capacity (broadband) than the services of earlier generations of cell phones. Proposals from policy makers to use federal spectrum to provide commercial mobile broadband services include Clearing federal users from designated frequencies for transfer to the commercial sector through a competitive bidding system. Sharing federal frequencies with specific commercial users. Improving the efficiency of federal spectrum use and management. Using emerging technologies for network management to allow multiple users to share spectrum as needed. The NTIA supports the Administration's policy goal of increasing spectrum capacity for mobile broadband by 500 MHz. To this purpose, the NTIA, with input from the Policy and Plans Steering Group (PPSG), has produced a 10-year plan and timetable that identifies bands of spectrum that might be available for commercial wireless broadband service. As part of its planning efforts, the NTIA prepared a "Fast Track Evaluation" of spectrum that might be made available in the near future. Specific recommendations were to make available 15 MHz of spectrum from frequencies between 1695 MHz and 1710 MHz, and 100 MHz of spectrum within bands from 3550 MHz to 3650 MHz. The fast track evaluation also recommended studying two 20 MHz bands to be identified within 4200-4400 MHz for possible repurposing, and placement for consideration of this proposal on the agenda of the World Radio Conference (WRC-2015) scheduled for 2015-2016. The World Radio Conference, held approximately every four years, is the primary forum for negotiating international treaties on spectrum use. Many decisions regarding the use of federal spectrum are made through the Interdepartmental Radio Access Committee, IRAC. IRAC membership comprises representatives of all branches of the U.S. military and a number of federal department agencies affected by spectrum management decisions. The NTIA is advised regarding broader spectrum policy issues by the Commerce Spectrum Advisory Committee (CSMAC), a Federal Advisory Committee. The committee was created in 2004 and is comprised of experts from outside the federal government. The Office of Management and Budget also influences agency spectrum management through budget planning and recommendations. Reallocating Federal Spectrum Working through the PPSG, the NTIA studied federal spectrum use by more than 20 agencies with over 3,100 separate frequency assignments in the 1755-1850 MHz band. After evaluating the multiple steps involved in transferring current uses and users to other frequency locations, the NTIA concluded that it would cost $18 billion to clear federal users from all 95 MHz of the band. Based on this assessment, the report included recommendations for seeking ways for federal and commercial users to share many of the frequencies, although some frequencies were identified to be cleared for auction to the private sector. At a hearing of the House Committee on Energy and Commerce, Subcommittee on Communications and Technology, the GAO provided testimony regarding its preliminary findings on spectrum sharing and followed up with a report. Both the hearing and the report indicated that spectrum sharing technology and policies were largely undeveloped. Some of the options to encourage sharing spectrum, as identified by the GAO, include considering spectrum usage fees to provide economic incentive for more efficient use and sharing; identifying more spectrum that could be made available for unlicensed use; encouraging research and development of technologies that can better enable sharing; and improving and expediting regulatory processes related to sharing. Given the challenges for implementing spectrum sharing policies, the GAO found that further study by the NTIA and the FCC was needed. In a letter to the FCC in July 2013, the Department of Defense (DOD) offered to release frequencies between 1755-1780 MHz, based on sharing spectrum throughout the band in order to control the cost of relocation. DOD would retain access to the 1780-1850 MHz band and the 2025-2110 MHz band for relocation purposes. DOD estimated that relocation of its users in the 1755-1850 MHz to clear spectrum would cost $12 billion if the bands were fully cleared. If frequencies in the 1755-1850 MHz band were shared, relocation costs would be $3.5 billion, according to DOD. The NTIA wrote to the FCC on November 25, endorsing, in general, the DOD proposal for releasing frequencies at 1755 -1850 MHz, as transmitted to the FCC. The NTIA assumptions for the estimates of the cost of relocating federal agencies from the 1755-1850 MHz band were challenged in a congressional hearing, leading to a request to the GAO to examine the process. In particular, the NTIA was criticized during the hearing by some committee members for not separately evaluating the 1755-1780 MHz band, which might be auctioned separately with another spectrum band already available for commercial use. GAO Cost Estimates for Spectrum Reallocation In a hearing before the Senate Committee on Armed Services, Subcommittee on Strategic Forces, the GAO presented preliminary findings on DOD estimates of reallocation costs from some radio frequencies. The GAO evaluated DOD relocation cost estimates for frequencies at 1755 MHz-1850 MHz and reported that the "preliminary cost estimate substantially or partially met GAO's identified best practices." In particular, the GAO noted the variable nature of a number of assumptions for costs and revenues, such as the characteristics of the spectrum to which services would be relocated, the availability of new technology, and market demand for spectrum. Internet Policy Working with other stakeholders the NTIA leads and participates in interagency efforts to develop Internet policy. In addition, the NTIA works with other governments and international organizations to discuss and reach consensus on relevant Internet policy issues. Along with the Executive Office of the President, the Office of the Secretary of Commerce, and department bureaus NIST and the International Trade Administration (ITA), the NTIA plays a role in the Internet Policy Task Force, created in 2010 by the Secretary of Commerce. One of the NTIA's functions on the Task Force is to assist in the establishment of a code of conduct on mobile application transparency. The NTIA is the lead executive branch agency on issues relating to the Domain Name System (DNS) and supports a multi-stakeholder approach to the coordination of the DNS to ensure the long-term viability of the Internet as a force for innovation and economic growth. Research The Institute for Telecommunication Sciences, located in Boulder, CO, is the research and engineering arm of the NTIA. ITS provides core telecommunications research and engineering services to promote enhanced domestic competition and new technology deployment; advanced telecommunications and information services; foreign trade opportunities for American telecommunication firms; and more efficient use of spectrum. Issues for the 113th Congress Principal activities for FY2014 as cited by the NTIA are Evaluate options for repurposing federal spectrum for commercial wireless broadband use. This includes new expenditures to develop a spectrum monitoring system. Oversee the activities of FirstNet. Lead the formation of domestic and international Internet policies such as for data privacy and the free flow of information globally. Monitor broadband grants awarded under the American Recovery and Reinvestment Act of 2009. Many of the NTIA's functions are performed in conjunction with other agencies. The NTIA's role as liaison may lead to overlapping responsibilities, leading to duplication of effort across departments and agencies. At the same time, rapid advances in communications technology have changed the mission of the NTIA in areas such as spectrum policy. As an example, policy makers may wish to consider if some of the NTIA's shared obligations might be effectively and efficiently transferred to its partners, allowing the NTIA to focus on communications policies that are considered by many to be key to future economic growth and development. As it reviews communications and spectrum policy, the 113 th Congress may also choose to consider if the current structure of the NTIA might be better aligned to its new responsibilities. For purposes of oversight, Congress may—for example—choose to examine the efficacy of the NTIA's spectrum management activities, and to evaluate the agency's compliance with the Spectrum Act ( P.L. 112-96 , Title VI). Oversight might cover requirements of the act regarding the transfer of spectrum from federal to commercial use and the act's provisions for public safety.

The National Telecommunications and Information Administration (NTIA), a bureau of the Department of Commerce, is the executive branch's principal advisory office on domestic and international telecommunications and information policies. Its mandate is to provide greater access for all Americans to telecommunications services, support U.S. efforts to open foreign markets, advise on international telecommunications negotiations, and fund research for new technologies and their applications. NTIA also manages the distribution of funds for several key grant programs. Its role in managing radio frequency spectrum allocated for federal use includes addressing policies for sharing, and monitoring and resolving questions regarding usage, including causes of interference. It is responsible for identifying federal spectrum that can be transferred to commercial use through the auction of spectrum licenses, conducted by the Federal Communications Commission. Many of the NTIA's responsibilities are shared with other agencies. With the passage of the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96), in February 2012, Congress has given the NTIA new responsibilities in spectrum management and the support of public safety initiatives. The 113th Congress may wish to review the NTIA's performance in meeting its obligations under the act. Policy makers may also wish to consider if some of the NTIA's shared obligations might be effectively and efficiently transferred to its partners, allowing the NTIA to focus on communications policies that are considered by many to be key to future economic growth and development. For purposes of oversight, Congress may—for example—choose to examine the efficacy of the NTIA's spectrum management activities, and to evaluate the agency's compliance with the Spectrum Act (P.L. 112-96, Title VI). Oversight might cover requirements of the act regarding the transfer of spectrum from federal to commercial use and the act's provisions for public safety. In particular, the NTIA may be impeding the progress of the First Responder Network Authority (FirstNet) by restricting access to funds appropriated by Congress in the Spectrum Act, as well as other actions that have delayed hiring and procurement.

Introduction NASA launched the Hubble Space Telescope in 1990 aboard the space shuttle Discovery . Unlike other NASA space telescopes, Hubble was designed to be serviced regularly by astronauts. That design proved fortuitous when it was discovered that Hubble had a defective mirror that produced blurry images. Astronauts on the first servicing mission in 1993 were able to install corrective optics, allowing years of scientific accomplishments and generating widespread scientific and public support. Additional servicing missions were conducted in 1997, 1999, and 2002 to replace aging hardware and install advanced scientific instruments. Two more shuttle missions to Hubble were scheduled: a final servicing mission in 2004 (known as SM-4) and a retrieval mission to bring the telescope back to Earth in 2010. Following the space shuttle Columbia accident in February 2003, however, then-NASA Administrator Sean O'Keefe decided not to proceed with either flight. Current NASA Administrator Michael Griffin revisited that decision once the shuttle returned to regular flight. A servicing mission is now scheduled for October 8, 2008. No retrieval mission is currently planned. Roughly the size of a school bus, Hubble was designed to make astronomical observations of the universe in the visible, ultraviolet, and near-infrared wavelength bands. Although ground-based telescopes can also make visible and infrared observations, Hubble's location above Earth's atmosphere enhances image clarity, enabling astronomers to look at fainter, more distant objects and further back in time. Hubble is operated for NASA by the Space Telescope Science Institute (STStcI) near Baltimore, MD. Websites maintained by STScI ( http://hubblesite.org/ ) and NASA ( http://hubble.nasa.gov ) provide information about the telescope and its discoveries. Hubble was designed to operate for 15 years, a milestone that was reached on April 25, 2005. NASA had planned to extend the operational period until 2010, at which time the space shuttle would bring Hubble back to Earth to prevent an uncontrolled reentry that could pose a debris risk to populated areas. Funding constraints, however, led some NASA officials to conclude that Hubble's operations should be brought to end earlier than 2010. The "funding wedge" created by ending the servicing missions would be used to build the new James Webb Space Telescope (JWST), which is being designed for infrared observations. The JWST mission was "replanned" in 2006 and is now scheduled for launch in 2013 rather than 2011. The debate over how long to continue to operate Hubble, including the linkage with funding for the JWST, was under way at the time of the Columbia accident. Servicing Missions to Hubble During servicing visits to Hubble, shuttle crews repair or replace aging equipment and install updated scientific instruments. Hubble has six gyroscopes for pointing the telescope, but two are now nonfunctional and one has degraded performance. Until August 2005, three were required to achieve the accuracy needed for scientific observations. New techniques now allow operation on just two gyroscopes, so that one is kept in reserve. Solar arrays generate electricity for the telescope; the energy is stored in batteries. Hubble has no propulsion system, relying instead on the space shuttle to boost its orbit so that it does not reenter Earth's atmosphere. The tasks for the SM-4 mission included replacing all the gyroscopes and batteries and a fine guidance sensor, emplacing new thermal protection blankets, boosting Hubble's orbit, and installing two new scientific instruments (the Cosmic Origins Spectrograph for ultraviolet observations of chemical composition, and the Wide Field Camera 3 for observations from ultraviolet through near-infrared). All these tasks are also included in the planned 2008 servicing mission. One of Hubble's current instruments, the Advanced Camera for Surveys, malfunctioned in January 2007 and lost most of its capabilities. It was installed in March 2002 and was designed for five years of operation. Astronauts on the 2008 servicing mission will attempt to repair this instrument, even though NASA's plans did not originally call for that because of the difficulty and because the Wide Field Camera 3 will be more capable (although it will have a somewhat smaller field of view). The mission will also attempt to repair another malfunctioning instrument, the Space Telescope Imaging Spectrograph. The Columbia Accident and the Decision to Cancel SM-4 On February 1, 2003, the space shuttle Columbia disintegrated as it returned to Earth following a 16-day scientific mission. All seven astronauts aboard perished. The shuttle system was immediately grounded. NASA established the Columbia Accident Investigation Board (CAIB) to determine the causes of the accident and recommend corrective actions. (For more on the Columbia accident, see CRS Report RS21408, NASA ' s Space Shuttle Program: The Columbia Tragedy, the Discovery Mission, and the Future of the Shuttle .) It was quickly apparent that SM-4 would be delayed. As the CAIB deliberated, NASA decided that the 2010 Hubble retrieval mission was too risky compared to the benefits. On January 16, 2004, Mr. O'Keefe informed workers at STScI and NASA's Goddard Space Flight Center (which built Hubble and oversees STScI) that he was canceling SM-4. According to the director of STScI, Dr. Steven Beckwith, Mr. O'Keefe cited several factors: the shuttle would not have the ISS as a safe haven; the changes required to meet the CAIB's recommendations regarding non-ISS related shuttle missions would not have application beyond the servicing mission, making their expense questionable; completing ISS construction by 2010 will require all the shuttle flights in that time period; Hubble's life would be extended for only a few years; and astronomers have other ground- and space-based telescopes they could use. Reaction to the Decision Two days before Mr. O'Keefe announced his decision, President Bush directed NASA to embark on a new exploration initiative, requiring a shift in program and funding priorities. (See CRS Report RS21720, Space Exploration: Issues Concerning the " Vision for Space Exploration " . ) Funding for the new initiative would come primarily from canceling, deferring, or delaying other NASA programs. Although Mr. O'Keefe stated that the Hubble decision was based primarily on shuttle safety concerns, the timing of his announcement led many commentators to conclude that it was linked to the priority shifts required by the President's initiative. While some media accounts praised the NASA Administrator for making a difficult decision, others called Hubble "the first victim" of the President's initiative and chided NASA for putting the new exploration goals ahead of the astronomical research performed with Hubble. Servicing Options Initial opposition to the cancellation of SM-4 focused on attempts to reverse Mr. O'Keefe's decision and proceed with a shuttle mission. The debate centered on comparing the risk of a mission to Hubble with the risk of a mission to the ISS. Shortly after the cancellation decision, NASA's then-Chief Scientist, Dr. John Grunsfeld, an astronaut who was a member of the 1999 and 2002 Hubble servicing crews, commented that if a shuttle mission to Hubble were mounted, it would be necessary to have a second shuttle ready to launch in case the first one encountered difficulties. NASA has had a backup shuttle available for each of the shuttle launches since the Columbia accident, but may not for all future missions if safety modifications continue to work well. Attention soon shifted to robotic servicing options, which dominated the public discussion of Hubble's future throughout most of 2004. At a Senate Appropriations VA-HUD-IA Subcommittee hearing on March 11, 2004, Mr. O'Keefe agreed with a request from Senator Mikulski to ask the National Research Council (NRC) to study options for extending Hubble's life, including both shuttle and robotic missions. In November 2004, Congress passed the FY2005 Consolidated Appropriations Act ( P.L. 108-447 ), which provided $291 million for a Hubble servicing mission. The conference report ( H.Rept. 108-792 ) stated that "a successful servicing mission to Hubble should be one of NASA's highest priorities." The report language did not specify whether the servicing mission should involve the space shuttle or a robotic mission. The final NRC report on servicing options, released on December 8, 2004, found it "unlikely that NASA will be able to extend the science life of [Hubble] through robotic servicing" and that the risk of a shuttle mission to Hubble is similar to the risk of a single shuttle mission to the ISS. The report recommended a shuttle servicing mission, and a robotic mission only for deorbiting the telescope at the end of its useful lifetime. The robotic servicing option was off the table. Shuttle Servicing Revisited Dr. Michael Griffin was sworn in as NASA Administrator, replacing Mr. O'Keefe, on April 14, 2005. At his Senate confirmation hearing on April 12, 2005, Dr. Griffin stated that he would revisit the question of whether to use the shuttle to service Hubble after the second successful post- Columbia shuttle flight, at which time NASA would be able to assess the risk factors associated with "essentially a new vehicle". The NASA Authorization Act of 2005 ( P.L. 109-155 ), enacted in December 2005, called for a shuttle servicing mission after the shuttle returned to flight successfully "unless such a mission would compromise astronaut safety." The second post- Columbia flight took place successfully in July 2006. In October 2006, NASA announced that a Hubble servicing mission will indeed take place. The launch is now scheduled for October 8, 2008, on space shuttle Atlantis . In October 2006, Administrator Griffin stated that the "cradle to grave" cost of the servicing mission will be $900 million: $500 million to keep the Hubble team together from 2004 through 2008; $200 million for the gyroscopes, batteries, and instruments that will be installed; $100 million for external tanks and solid-rocket boosters for the additional shuttle flight; and $100 million for shuttle launch processing. Hubble Operations After Servicing NASA expects that if the 2008 servicing mission is successful, Hubble will continue to operate until 2013, rather than being deorbited in 2010 as previously planned. According to one NASA official, "Hubble's most impressive accomplishments ... lie in its future." The cost of the additional years of operation, however, may affect funding and scheduling for other astronomy missions. For example, to offset the funding that Congress provided for Hubble in FY2005, NASA's May 2005 operating plan postponed two other astronomy missions and reduced funding for Mars exploration. Before the Columbia accident, the end of Hubble expenditures was expected to be a source of funding for the James Webb Space Telescope. According to NASA's FY2009 congressional budget justification, Hubble costs are expected to be $115 million in FY2011, $95 million in FY2012, and $94 million in FY2013, not including certain indirect costs. Deorbiting Hubble Plans for deorbiting Hubble remain uncertain. Before the Columbia accident, the space shuttle was to return Hubble to Earth at the end of its lifetime, but there is no longer any expectation of retrieval by the shuttle, whether or not the servicing mission in 2008 is successful. Hubble has no propulsion system of its own, however, so if it is not retrieved, a propulsion module would need to be attached to it to permit a controlled deorbit (that is, to ensure that any debris falls in an unpopulated area such as the Pacific Ocean). Analysis by NASA in 2005 indicated that Hubble is unlikely to make an uncontrolled reentry until at least 2020, rather than 2012 as previously believed, and the agency now considers the deorbiting issue to be "beyond the budget horizon." Boosting Hubble's orbit during the 2008 servicing mission will delay the date of reentry even further, but at some point, deorbiting will be necessary if an uncontrolled reentry is to be avoided.

The National Aeronautics and Space Administration (NASA) estimates that without a servicing mission to replace key components, the Hubble Space Telescope will cease scientific operations in 2008. In January 2004, then-NASA Administrator Sean O'Keefe announced that the space shuttle would no longer be used to service Hubble. He indicated that this decision was based primarily on safety concerns in the wake of the space shuttle Columbia accident in 2003. Many critics, however, saw it as the result of the new Vision for Space Exploration, announced by President Bush in January 2004, which focuses NASA's priorities on human and robotic exploration of the solar system. Hubble supporters sought to reverse the decision and proceed with a shuttle servicing mission. Michael Griffin, who became NASA Administrator in April 2005, stated that he would reassess whether to use the shuttle to service Hubble after there were two successful post-Columbia shuttle flights. The second post-Columbia flight took place successfully in July 2006. In October 2006, NASA approved a shuttle mission to service Hubble. That mission is now scheduled for October 8, 2008.

Most Recent Developments In early September 2005, another Navy report on the status of 1991 Gulf War Navy pilot Lt. Cdr. Michael Scott Speicher was completed. It reiterated conclusions reached in earlier studies that he could well have been captured; that there was no specific evidence of his death; and that some former members—they were not identified, if known—of the Saddam Hussein government of Iraq were knowledgeable about his fate. Accordingly, it recommended that Speicher's status be maintained as missing, rather than killed. Areas of Congressional Interest This report summarizes numbers of U.S. prisoners of war (POWs) and servicemembers missing in action (MIAs) lost during the Vietnam War (1961-1973) and the Korean War (1950-1953), compares these losses to other 20 th century American wars, and describes the POW/MIA investigation and policy process. It discusses reports asserting that some POWs from these wars were not returned to U.S. control when the wars ended, and that some of these individuals may still be alive. Further, it discusses Americans possibly captured by communist countries during Cold War incidents, or after being liberated from German POW camps at the end of World War II, and whether any such Americans could still be alive. It also summarizes POW/MIA matters and controversies related to post-Cold War U.S. military operations, particularly the 1991 Persian Gulf War; the ongoing Operation Enduring Freedom that began on October 7, 2001, when the United States began combat operations against the Taliban regime in Afghanistan; and Operation Iraqi Freedom that began on March 19, 2003. Finally, the report describes legislation and congressional oversight concerning the POW/MIA issue. For information on other aspects of U.S.-Vietnam relations and on the current controversy over the attempt by some American former POWs held by the Japanese during World War II to obtain compensation from Japanese corporations, see the " For Additional Reading " section at the end of this report. Definition of Terms The following terms are frequently encountered in analyses of the POW/MIA issue: POW (Prisoner Of War): Persons known to be, or to have been, held by the enemy as a live prisoner or last seen under enemy control. MIA (Missing In Action): Persons removed from control of U.S. forces due to enemy action, but not known to either be a prisoner of war or dead. KIA-BNR (Killed In Action-Body Not Recovered): Persons known to have been killed in action, but body or remains not recovered by U.S. forces, such as an aircraft exploding in midair or crashing or a body lost at sea. PFOD (Presumptive Finding Of Death): An administrative finding by the appropriate military service Secretary, after statutory review procedures, that there is no current evidence to indicate that a person previously listed as MIA or POW could still be alive. Unaccounted For : An all-inclusive term—not a legal status—used to indicate Americans initially listed as POW, MIA, KIA-BNR, or PFOD, but about whom no further information is yet known. Names are shifted, usually from the most uncertain status, MIA, to more certain categories, during and after hostilities based on new information, or, in the case of a PFOD, lack of any new information over time that indicates an individual is still living. U.S. POWs and MIAs in 20th Century Wars: Statistics Statistics on U.S. POWs and MIAs in Vietnam and past wars are often mutually irreconcilable. Tables 1, 2, and 3 , below, as with all such material, are not always compatible in detail, but they do provide some basis for comparison. Vietnam War POWs and MIAs North Vietnamese and Viet Cong (South Vietnamese Communist; termed the "National Liberation Front") authorities returned 591 POWs to U.S. control within the specified two-month period after the signing of the Vietnam War peace treaty on January 27, 1973. 67 U.S. civilians, not part of the official list of Americans unaccounted for, were trapped or stayed voluntarily after South Vietnam fell in April 1975. All were released by late 1976. Since 1976, some Americans have been imprisoned in Vietnam (almost all for civilian offenses) and eventually released. Most Americans now in Vietnamese prisons for criminal offenses (some of which would be characterized as "political" crimes by the Vietnamese authorities) are naturalized Americans of Vietnamese birth or ancestry. Since 1973, only one U.S. military member has returned alive from Vietnam. Marine Corps PFC Robert Garwood was listed as a POW by U.S. authorities—but never by the Vietnamese—in 1965 and returned voluntarily to the U.S. in 1979. He was convicted of collaboration with the enemy, but his light sentence included no prison term. After the return of the 591 POWs, 2,583 Americans were unaccounted for (not counting civilians trapped in Vietnam after the South fell, or who later visited Vietnam). Identified remains of 768 Americans have been returned from Vietnam (540), Laos (197), Cambodia (28), and China (3) since the war ended on January 27, 1973. Of the 1,815 still listed as unaccounted for as of August 5, 2005, the Department of Defense (DOD) is still actively seeking to account as fully as possible for the 1,148. DOD believes that, based on currently available information and its analysis, it will be unable to ever recover the remains of the other 667. Examples of the latter would include the 468 men lost over water, as stated in the note to Table 3 , which summarizes data on Americans currently unaccounted for in Southeast Asia. Another example would be those crewmen of aircraft that, at the time, were observed by both Vietnamese and Americans to have exploded without any sign of the crew ejecting; and similar situations. Vietnam POW/MIAs: U.S. Government Policy and Organization Since 1982, the official U.S. position regarding live Americans has been as follows: "Although we have thus far been unable to prove that Americans are still being held against their will, the information available to us precludes ruling out that possibility. Actions to investigate live-sighting reports receive and will continue to receive necessary priority and resources based on the assumption that at least some Americans are still held captive. Should any report prove true, we will take appropriate action to ensure the return of those involved." The Director of the DOD Prisoner of War/Missing Personnel Office (DPMO), who also serves as the Deputy Assistant Secretary of Defense for POW/Missing Personnel Affairs (DASD POW/MIA), provides overall direction and control of DOD POW/MIA matters, both for previous conflicts and the formulation of policies and procedures for future circumstances in which U.S. military personnel could become POWs or MIA. Field activities in Indochina and elsewhere around the world related to POW/MIA accounting is supervised by DOD's Joint POW/MIA Accounting Command (JPAC), headquartered in Hawaii. JPAC maintains POW/MIA files, conducts research and interviews in Indochina and elsewhere in Asia with refugees and others, and staffs U.S. POW/MIA operations in Indochina. JPAC's Central Identification Laboratory-Hawaii (CIL-HI) identifies returned remains from around the world. (JPAC was formerly called Joint Task Force—Full Accounting, or JTF-FA.) (Some identifications have little or no current foreign policy relevance. World War II-related recovery of remains, or researches, have taken place in Hungary, China, New Guinea, Betio Island in Tarawa atoll in the Pacific, and Libya.) POW/MIA information comes from refugees and other human contacts and assets, physical evidence (such as "dog tags" worn by U.S. military personnel, photographs, and aircraft debris), communications intelligence and aerial reconnaissance, and open sources. According to DOD, between April 1975 (the fall of South Vietnam) and August 5, 2005, 22,677 reports "possibly pertaining to Americans in Southeast Asia" have been acquired by the U.S. government, including 1,976 alleged first-hand sightings. Of the 1,976, fully 1,942 (98.28%) have, according to DPMO, been resolved. More specifically, 67.86% (1,341) correlate with persons since accounted for (i.e., returned live or known dead); another 28.14% (556) have been determined to be fabrications; and 2.28% (45) correlate to wartime (pre-mid-1975) sightings of Americans, either military or civilian. The remaining 34, or 1.72%, involve sightings of Americans in either a captive (31) or non-captive (3) environment, and "represent the focus of DPMO analytical and collection efforts." Of the 34, 24 were reported to have occurred prior to 1976; 4 between 1976 and 1995; and 6 during the period 1996-present. U.S.-Vietnamese Interaction on POW/MIA Issues: Recent Developments and Issues Since 1991, the U.S. has gained substantial access to aircraft crash sites, Vietnamese records, and Vietnamese civilians, and has established a substantial permanent presence of military and civilian personnel. For several years, the Vietnamese have allowed U.S. personnel some access to their government archives and permitted some interviews with senior Vietnamese military leaders from the war. This increased access, however, has not yet led to large numbers of Americans being removed en masse from the rolls of people who are unaccounted for; between 1991 and 2005, the total number has generally dropped by 30-35 cases per year. However, much information or material or information obtained in Vietnam does not assist in remains identification; upon close study it turns out to be redundant, already in U.S. hands, or pertaining to resolved cases. In addition, DPMO has stated that a "Vietnamese Government disinformation program has been associated with recent reporting on missing Americans. Those reports all pertain to the alleged recovery of remains and identifying data (i.e., dog tags) by Vietnamese citizens." [Cited in recent editions of the Vietnam-Era Unaccounted For Statistical Report of the DPMO , located at the DPMO website.] Some involved with the POW/MIA issue argue that Vietnamese cooperation on the POW/MIA issue has actually been spotty and uneven at best, arguing that the U.S. government has tended to equate activity with results and resource inputs with true outputs in terms of the fate of unaccounted-for Americans. They suggest that the true cost of all U.S. military and diplomatic activities associated with post-Vietnam War POW/MIA-related activities is much higher than stated DPMO budget outlays of approximately $15 million yearly, perhaps as much as $50-100 million yearly. They allege that Vietnam and North Korea charge extraordinarily high fees for providing support to DPMO/JPAC operations, such as logistical support, aviation costs, food and lodging, and the like, and that the services received are by no means as lavish as the bills presented indicate. U.S. Policy and the Remains Issue As noted above, DPMO believes of the 1,815 Americans listed as unaccounted for as of August 5, 2005, that 667 are definitely dead and that further investigation could result in no more evidence or remains being found. Such cases include those that resulted from aircraft explosions, drowning, or simple disappearance. Some believe that the Vietnamese have documentary evidence about the fate of at least some of them. Others argue that concerns over public reaction, more than disagreements on the part of American analysts that the individuals concerned really are dead, are holding up the decision to close these cases. The question may be as follows: if evidence other than remains is not conclusive, what use is it, if no remains are available? The number of cases listed for "No Further Pursuit" by DPMO does fluctuate, based on new evidence—cases hitherto thought unresolvable are made active by more information; those in which leads were being pursued can turn out to be apparently unresolvable. Congress and the POW/MIA Issue, 1993-2005 (FY1994-FY2006) 2005 (FY2006) Congressional Action No relevant matters concerning POW/MIA issues were in the FY2006 National Defense Authorization Act ( P.L. 109-163 ). On June 20, 2005, in House floor debate on the FY2006 Department of Defense (DOD) Appropriation Act ( H.R. 2863 , 109 th Congress; passed House June 20, 2005), a colloquy on POW/MIA matters took place between Representative Nathan Deal and Representative C.W. Bill Young, chairman of the House Defense Appropriations Subcommittee (see Congressional Record , June 20, 2005: H4767). At Mr. Deal's request, Mr. Young agreed that a report should be prepared about allegations that the Defense POW/Missing Personnel Office (DPMO) has recently been arbitrary, uncooperative, and hostile with POW/MIA organizations and families, and that this report should be published in the eventual conference report on the act. Mr. Deal was further concerned about "compliance with all applicable provisions of law," with particular reference to allegations about attempts to use military air transportation for MIA families to coerce them into supporting DPMO initiatives, and said that "this report must reflect a comprehensive study of DPMO's guidance and policy initiatives." The National League of Families of American Prisoners of War and Missing in Southeast Asia has stated these allegations in detail in its Newsletter/Review of 2004 , available online at http://www.pow-miafamilies.org/3-22-05%20Newsletter.pdf . 2004 (FY2005) Congressional Action The FY2005 NDAA, P.L. 108-375 , October 28, 2004; 118 Stat. 1811, included a provision (Sec. 582) which required DOD to maintain the number of military and civilian personnel in the DPMO at 46 and 69, respectively, and the FY2005 budget at $16.0 million, the levels of FY2003. It also required GAO to study the adequacy of DPMO funding and personnel levels in relation to the missions it has to perform. This provision appears to have been engendered by congressional concern over DOD efforts to decrease the resources allocated to the DPMO, both personnel and funding. This provision essentially incorporated the House version of the bill, with some minor changes; the Senate version included no similar provision. 2003 (FY2004) Congressional Action Section 588 of the FY2004 National Defense Authorization Act ( P.L. 108-136 , November 24, 2003; 117 Stat. 1392) expressed the sense of the Congress that the United States should aggressively pursue the case of MIAs, with particular reference to Speicher, and authorized a $1 million reward to individuals who provide information leading to the resolution of the Speicher case and others (see below, "A Persian Gulf War POW/MIA Case"). 2002 (FY2003) Congressional Action The FY2003 National Defense Authorization Act ( P.L. 107-314 , December 2, 2002; 116 Stat. 2458), included two provisions related to POW/MIA matters. Section 551 prohibited DOD from reducing personnel or budget levels of the DPMO (this appears to have resulted from planned reductions of at least 15% in the size of the DPMO staff as part of a general effort to reduce headquarters staffs). Section 583 required the Secretary of Defense to submit a comprehensive report on the Speicher case (see below, "A Persian Gulf War POW/MIA Case") to Congress within 60 days after the bill became law. 1993-2001 (FY1994-FY2002) Congressional Action From 1993 through 1997 (FY1994-FY1998 legislation), the annual defense authorization bill included POW/MIA-related sections with considerable policy significance and, frequently, political controversy. However, during 1998-2001 (FY1999-FY2002 legislation), Congress was less active on POW/MIA matters. None of the National Defense Authorization or Intelligence Authorization Acts of the latter period contained significant POW/MIA-related provisions or report language with broad policy implications. Vietnam POW/MIAs: Were Americans Left Behind? Are Any Still Alive? Those who believe Americans are still held, or were held after the war ended, feel that even if no specific report has thus far been proved, the numbers unaccounted for, and the cumulative mass of information about live Americans is compelling. Frequently, people holding this view suggest that throughout the 1970s, in the bitter and sour aftermath of the Vietnam War, there was a lack of will in the government, which reflected that of the country as a whole, to continue investigating the POW/MIA issue. They posit that this contributed to "a mindset to debunk" reports of live Americans, as well as a desire on the part of successive Administrations to wash their hands of the issue. Those who doubt Americans are still held, or were when the war ended, argue that despite numerous reports, exhaustive interrogations, and formidable technical means used by U.S. intelligence agencies, no report of an unaccounted-for live American (with the exception of Garwood) has been validated as to who, when, and where the individual is or was. They believe that much of the "evidence" cited relates to already accounted-for Americans, wishful thinking, or fabrication. Most U.S. government analysts have come to believe that it is extremely unlikely that the North Vietnamese kept U.S. prisoners after the end of the war, or transferred any to the USSR. They appear to acknowledge the repressive nature of totalitarian communist regimes—that the Vietnamese could have opted to keep some Americans. They just feel that their examination of the evidence indicates that they did not. Significantly, the progressively increasing penetration of Vietnam by a large American official presence, American business interests, and tens of thousands of American and European tourists, has failed to disclose any indications that American POWs were kept behind in the early 1970s, let alone are still being held. The "Coverup" Issue Some say the U.S. government has engaged in a "coverup" of evidence about live Americans still being held in Indochina; they attach greater credence to some sources than does the government, and suggest that the criteria set by the government for validating reports of live Americans are unreasonably, and perhaps deliberately, high. The government responds by stating that such assertions are based on data that is inaccurate or fraudulent. It also asserts that numerous investigations have cleared DIA of coverup charges and that the ability to maintain a coverup strains credulity in an era of press leaks and openness. Since 1982, it has been U.S. policy to provide intelligence to families of unaccounted-for Americans that pertains or may pertain to their missing men. Have Americans Remained in Indochina Voluntarily? Some Americans stayed in Indochina voluntarily, Garwood being the best known. Another defected to the Viet Cong in 1967 and was killed by the Khmer Rouge (Cambodian communists) in 1975 or 1976. Ideology, collaboration with the enemy and a fear of punishment upon return to the U.S., personal problems, a home, a local wife and children, "brainwashing" by captors, or a combination of these factors, all could have played a role in other Americans remaining in Indochina voluntarily. The Vietnamese have always left room for such by denying Americans are living in areas "under their control." In addition, the U.S. government policy cited above on live Americans is careful to refer to "Americans ... still being held against their will." Are the Vietnamese, Laotians, or Cambodians Still Holding the Remains of Dead Americans? There is a widely-held belief that for many years the Vietnamese had a collection of remains from which they released remains as they saw fit. The DPMO believes that this collection may have been exhausted by August 1990. Whether the Vietnamese hold other remains is not known. Some suggest the Vietnamese have not released remains that would indicate mistreatment of POWs and/or that some were alive when the war ended but died in Vietnamese custody thereafter (although such mistreatment is well known). The large number of Americans lost in or over Laos, the number of known discrepancy cases, and the few Americans returned who had been captured in Laos suggest that the Laotians know more about the fate of unaccounted-for Americans than they have yet stated. On the other hand, most Lao governments, communist or not, have exercised little control over large parts of their country, due to Vietnamese occupation and their own lack of resources. This suggests the Laotians may not have the ability to provide many answers about missing Americans, and such answers may be better found from the Vietnamese. Laos is, however, one area where searches of aircraft crash sites have resulted in the recent identification of some unaccounted-for Americans. Recently, for example in March 2005, a U.S. POW/MIA-related delegation held talks with Lao officials to discuss ways to improve U.S. access to information and aircraft crash sites related to U.S. Vietnam War POWs. Korean War POWs/MIAs Since the Korean War ended in 1953, there have been rumors Americans captured by the North Koreans or Chinese were, or still are, held against their will in North Korea, China, or Russia/the former USSR. It is generally accepted that the communist powers involved in the war withheld significant amounts of information on POW/MIA from the United States, probably with more withholding by North Korea and China than Russia. DPMO states that although there is no first-hand, direct evidence of Korean War POWs being transferred to the Soviet Union, the cumulative weight of circumstantial evidence is so compelling that they believe that at least small numbers of Americans were in fact so transferred. There are indications that some sightings of Caucasians by foreign nationals in North Korea may be of several American soldiers who defected to North Korea in the post-Korean War era. In addition, some U.S. POWs were not released by China until 1955, two years after the war ended. Two civilian CIA aircrew members shot down over North Korea during the war, in 1952, were imprisoned for 20 years and not released until 1972. Declassified U.S. documents indicate that the U.S. government maintained an intensive interest in live POWs from the Korean War throughout the 1950s. The end of the Korean War in 1953 was followed by intensely bitter relations between the U.S., the North Koreans, and the Chinese. This suggests that the two communist enemies of the United States during the Korean War, as well as a Stalinist Soviet Union, might be inclined to hold live Americans—perhaps more so than Vietnam in the 1970s. During the mid-1950s, the U.S. demanded the North Koreans and Chinese account for missing Americans. After 1955, due to the lack of response (except for the return of 1,868 remains in 1954), the issue abated, although the United States periodically raised the issue. In 1957, House Foreign Affairs Committee hearings on the Korean MIA issue aired frustrations similar to those raised since 1973 on Indochina MIAs. Although the issue of Korean MIAs began to get more attention in the early 1980s, concrete results of contact with the North Koreans were minimal until 1996. Between mid-1996 and mid-1997, negotiations took place in which United States and North Korea agreed on parameters for conducting field investigations and archival research for U.S. MIAs. Between 1996 and 2004, U.S. personnel completed 36 "joint field activities" (JFAs)—searches for American remains—in North Korea. These teams recovered 224 remains, of which 20 have been identified as those of Americans. Agreement was reached in late 2004 for five more JFAs to be conducted in 2005; the first took place between mid-April and mid-May 2005. However, on May 25, 2005, DOD suspended the operations of U.S. POW/MIA personnel operating in North Korea, citing heightened concerns about their safety in the context of rising tensions between the United States and North Korea. "The teams operate in North Korea under terms that effectively cut off their ability to communicate with anyone outside the country....The only message permitted is a daily situation report sent from a liaison officer in Pyongyang [the North Korean capital]. ... Although acceptable to U.S. commanders in the past, this restrictive condition would clearly hamper any effort by other U.S. forces to protect the recovery teams should an emergency arise. Such a consideration, [a U.S. military spokesman said] played a part in the decision to suspend the missions." The most recent identification of remains returned from North Korea took place on July 22, 2005, when DOD announced that the remains of a U.S. Army soldier MIA from the Korean War had been identified. The remains had first been returned to the United States from North Korea in 1993. There has been some controversy about the payments the U.S. has made to North Korea for POW/MIA-related search activity. Since 1993, DPMO has paid North Korea about $15 million for recovery operations; "as with joint recovery operations in Vietnam, Laos, and other countries, the payments are calculated by negotiating the compensation provided for the workers, materials, facilities, and equipment provided by" the North Koreans. Some have alleged that the sums are a form of disguised subsidy and provide little benefit, in terms of remains found, although it may be that the extremely austere conditions in North Korea make any sort of operations there difficult and expensive by American standards. For further information, see CRS Report RL31785, Foreign Assistance to North Korea , by [author name scrubbed]. POWs and MIAs from Cold War Incidents During the Cold War (1946-1991), some U.S. military aircraft were shot down by the USSR, Eastern European countries, China, and North Korea. Some of these aircraft were performing intelligence missions near or actually inside Soviet airspace; others were definitely in international airspace and/or were not involved in intelligence operations. While virtually all such aircraft losses were acknowledged at the time, often with considerable publicity, their intelligence functions were not. Between 1946 and 1977, according to a DOD list released in 1992, there were at least 38 such aircraft shootdowns and one involving a ship (the seizure of the U.S.S. Pueblo, by the North Koreans in early 1968). Of the 364 crewmembers, 187 were eventually returned to U.S. custody, the remains of 34 were recovered, 11 were known to be dead from eyewitness reports but remains were not recovered, and 132 were "not recovered, fate unknown." Throughout the late 1940s and early 1950s, intelligence (mostly apparently obtained from German and Japanese POWs from World War II, several hundred thousands of whom were not released by the Soviets until 1954-1955) provided considerable evidence that some crewmembers of these aircraft had been seen and spoken to in Soviet concentration camps. After the Cold War ended in 1989-1991, the United States began to receive substantial Russian cooperation about Soviet involvements in Cold War shootdowns. However, there is little doubt that the Russians have not released all available information, due to varying levels of obstructionism and the often-disorganized nature of government in post-Soviet Russia. A second type of "Cold War incident" involves kidnapping of U.S. personnel in or near Soviet-occupied territory in Europe after the end of World War II, by Soviet intelligence agents. Most, however, were defectors, or had wandered into Soviet-occupied areas for nonpolitical reasons (romantic entanglements, drunkenness, and the like). The full story of such kidnappings may well not have been told and may never be. There is no question that numerous West Germans were kidnapped by Soviet and East German intelligence agencies in the late 1940s and early and mid-1950s. Post-Cold War POW/MIAs The Iraq war that began on March 19, 2003, provides the most recent illustration that the POW/MIA issue is not merely one of historical interest. Congressional concerns over Americans unaccounted for during the Cold War have been an integral component of the discussion about how to account for Americans missing or captured since then. The largest conflicts since the Cold War began to end in 1989 were the two wars with, or in, Iraq. The Persian Gulf War of 1991 (Operations Desert Shield and Desert Storm) A total of 49 American military personnel were initially listed as missing in action during the Persian Gulf War. Of these, 23 were captured by the Iraqis and released after the war ended, the remains of 13 were recovered, and another 13 were eventually determined to be KIA-BNR. However, the status of one of the latter 13 was changed back to MIA in January 2001, based on evidence that he may have survived and been captured, as discussed below. The Speicher Case On January 10, 2001, the Navy changed the status of Lt. Cdr. Michael Scott Speicher from KIA to MIA. Speicher was the first U.S. pilot shot down during the Persian Gulf War, on the night of January 17, 1991. His body was never recovered. There is no doubt his aircraft was shot down and crashed in Iraq about 150 miles southwest of Baghdad. Issues include the lack of remains, resultant questions about whether he was in fact killed upon impact, and some evidence, from a variety of sources, that he was taken prisoner by the Iraqis when in relatively good physical condition. A joint DOD/CIA report prepared at the request of the Senate Select Committee on Intelligence, and first publicized in 2001, stated that " We assess that Iraq can account for LCDR Speicher but that Baghdad is concealing information about his fate. LCDR Speicher probably survived the loss of his aircraft, and if he survived, he almost certainly was captured by the Iraqis " (CRS italics). Significantly, the occupation of Iraq by U.S. and other coalition forces since March 2003, and extensive investigation of possible leads about Speicher, has not, so far, led to more substantive information about his fate, although some leads could not be pursued due to the security threat posed by the Iraqi insurgency. In early September 2005 another Navy report on Speicher's status was completed. It reiterated conclusions reached in earlier studies that he could well have been captured; that there was no specific evidence of his death; and that some former members—they were not identified, if known—of the Saddam Hussein government of Iraq were knowledgeable about his fate. Accordingly, it recommended that Speicher's status be maintained as missing, rather than killed, and U.S military and civilian agencies in Iraq, and the new Iraqi government, "increase the level of attention and effort inside Iraq" devoted to the case. The Ongoing Iraq War, 2003-Present: POW/MIA Matters On April 13, 2003, the seven remaining American POWs known to have been captured by the Iraqis since the war began on March 19, 2003, were recovered by U.S. troops. An eighth had already been rescued by U.S. special operations forces on April 1 (this was the widely reported case of Army PFC Jessica Lynch). A maximum of 21 U.S. military personnel were listed as POW or MIA during the initial stages of the war. On April 28, 2003, DOD announced that the remains of the last remaining American listed as MIA at that time had been positively identified. On April 9, 2004, one American soldier was captured by Iraqi insurgents. He was the first POW taken by the enemy in Iraq since the eight captured in the early part of the war were liberated by U.S. forces in April 2003. Although there were rumors in late June, 2004 that he had been killed, these reports were not confirmed and have since died down; U.S. officials say they have no reason to think he is not still a POW, and he is listed as such. It is not clear whether or not a U.S. Marine of Lebanese extraction—who was first declared missing from his unit in Iraq in June 2004, returned to U.S. custody a month later, and then gone absent without leave (AWOL) in January 2005—was ever a POW: that is, held against his will. World War II POWs and MIAs: Soviet Imprisonment of U.S. POWs Liberated from the Germans There are allegations that the USSR failed to repatriate up to 25,000 American POWs liberated from the Germans after World War II ended in Europe on May 8, 1945. This appears to have no foundation in fact and to result in large part from an apparent lack of rigor and care in analyzing the issue. Archival research in the United States and Russia, combined with interviews in Russia, appears to establish conclusively that virtually all such prisoners were returned. In addition, the large flow of information on Soviet concentration camps of the Stalin era, beginning in the early 1960s, both in writing and from emigre accounts, has provided no indication of mass imprisonment of Americans. Some U.S. citizens of German birth who served in the German armed forces or lived in Germany were taken prisoner by the Red Army as it advanced into Central Europe; in addition, the Soviet secret police singled out Americans with German, Russian, or Jewish names for special attention. Both figures are consonant with other knowledge of the arbitrary and brutal nature of the Stalinist USSR. Accounts of U.S. dealings with the USSR during and immediately after World War II on the POW issue are replete with accounts of Soviet obfuscation, truculence, and reluctant cooperation. The Joint U.S.-Russian Commission on POWs/MIAs investigating these issues has obtained a good deal of information. However, as was noted above in the section on Cold War shootdowns and similar incidents, there has been considerable hesitancy and obstruction of the Commission's work by Russian officials still sympathetic to the former Soviet regime. For Additional Reading Defense POW/Missing Personnel Office. Extensive statistical breakdowns, lists of individuals, and studies and analyses on POW/MIA matters from World War II to the present. http://www.dtic.mil/dpmo Nenninger, Timothy K. "United States Prisoners of War and the Red Army, 1944-45: Myths and Realities." The Journal of Military History , July 2002: 761-82. Sledge, Michael. Soldier Dead: How We Recover, Identify, Bury, and Honor Our Military Fallen . New York, Columbia University Press, 2005. 376 p. Swift, Earl. Where They Lay: Searching for America ' s Lost Soldiers. Boston, Houghton Mifflin Co., 2003. 307 p. U.S. Congress. Senate. Select Committee on POW/MIA Affairs. POW/MIA ' s. Report . January 13, 1993. Washington, U.S. Government Printing Office, 1993 (103 rd Congress, 1 st session. S.Rept. 103-1). 1223 p.

There has been a long-running controversy about the fate of certain U.S. prisoners of war (POWs) and servicemembers missing in action (MIAs) as a result of various U.S. military operations. While few people familiar with the issue feel that any Americans are still being held against their will in communist countries associated with the Cold War, more feel that some may have been so held in the past in the Soviet Union, China, North Korea, or North Vietnam. Similarly, few believe there has been a "conspiracy" to cover up the existence of live POWs, but many would maintain that there was, at least during the 1970s, U.S. government mismanagement of the issue. Normalization of relations with Vietnam exacerbated this longstanding debate. Normalization's supporters contend that Vietnamese cooperation on the POW/MIA issue has greatly increased. Opponents argue that cooperation has in fact been much less than supporters say, and that the Vietnamese can only be induced to cooperate by firmness rather than conciliation. Those who believe Americans are now held, or were after the war ended, feel that even if no specific report of live Americans has thus far met rigorous proofs, the mass of information about live Americans is compelling. Those who doubt live Americans are still held, or were after the war ended, argue that despite vast efforts, only one live American military prisoner remained in Indochina after the war (a defector who returned in 1979). The U.S. government indicates the possibility that Americans are still being held in Indochina cannot be ruled out. Some say Americans may have been kept by the Vietnamese after the war but killed later. Increased U.S. access to Vietnam has not yet led to a large reduction in the number of Americans still listed as unaccounted for, although this may be due to some U.S. policies as well as the level of Vietnamese cooperation. There is considerable evidence that prisoners from the end of World War II, the Korean War, and "Cold War shootdowns" of U.S. military aircraft may have been taken to the USSR and not returned. The evidence about POWs from Vietnam being taken to the Soviet Union is more questionable. There is evidence that Navy pilot Scott Speicher, shot down on the first night of the 1991 Persian Gulf War, and until recently listed as "killed in action" rather than "missing in action," was almost certainly captured by the Iraqis. Information about his fate has not yet been discovered by U.S. and coalition forces in Iraq. All American POWs captured by the Iraqis during the initial stage of the current war were returned to U.S. control; the remains of all others listed as MIA have been recovered. One U.S. Army soldier, captured by Iraqi insurgents, on April 9, 2004, is currently listed as a POW; there has been no word about his fate since his POW status was confirmed by DOD on April 23, 2004. This report replaces Issue Brief IB92101 of the same name. This report will be updated as needed.

Introduction As of December 23, 2011, Congress completed action on and the President signed into law all 12 of the regular appropriations bills for FY2012, which began on October 1, 2011. Regular appropriations bills were consolidated into two laws, P.L. 112-55 and P.L. 112-74 . In addition, Congress enacted supplemental FY2012 funding for disaster relief activities in P.L. 112-77 . This report, consisting primarily of a table showing proposed and enacted discretionary appropriations by bill title, is intended to allow for broad comparison between the House and Senate FY2012 proposals, the Administration's FY2012 request, and the FY2011 and FY2012 enacted appropriations. FY2012. For detailed information and CRS analysis specific to each individual appropriations bill, use the report links on the CRS Appropriations Status Table, at http://www.crs.gov/Pages/AppropriationsStatusTable.aspx?source=QuickLinks . FY2012 Appropriations Legislation Table 1 displays discretionary appropriations as provided in proposed and enacted FY2012 appropriations legislation, by bill title, together with the appropriations enacted for FY2011. In most cases, totals are provided for both new discretionary budget authority as well as budget authority net of rescissions of prior year funding. Footnotes attached to each section heading note the legislation the data in that section is drawn from. As noted above, the figures do not necessarily reflect all budget scoring adjustments and adjustments allowable under the Budget Control Act of 2011. Readers should be aware that the numbers in this table reflect, to a great extent, the appropriations conventions and assumptions of each individual subcommittee and that these conventions and assumptions are not always comparable across subcommittees. Security spending is listed only for proposals in which it was specifically designated, excluding most House proposals, which were drafted and saw committee action prior to enactment of the Budget Control Act of 2011 on August 2, 2011.

This report presents an overview of proposed and enacted FY2012 appropriations legislation. The report consists primarily of a table showing discretionary appropriations, by bill title, for each of the proposed and enacted appropriations bills, together with the comparable figures enacted for FY2011. The product is intended to allow for broad comparison between the House and Senate FY2012 proposals, the Administration's FY2012 request, and the FY2011 and FY2012 enacted appropriations. The figures do not necessarily reflect budget scorekeeping adjustments allowable under the Budget Control Act. With action now completed on FY2012 appropriations, there will be no further updates to this report.

Historical Background In 1973, Congress passed the first conscience clause law, commonly referred to as the Church Amendment, in response to the U.S. Supreme Court's decision in Roe v. Wade and a U.S. district court decision that enjoined a Catholic hospital from prohibiting a physician from performing a sterilization procedure at the facility. During consideration of the Church Amendment, Senator Frank Church explained the need for the conscience clause, stating, "It clears up any ambiguity in the present law by making it explicitly clear that it is not the intention of Congress to mandate religious hospitals to perform operations that are contrary to deeply held religious beliefs." The Church Amendment provides that individuals or entities that receive grants, contracts, loans, or loan guarantees under the Public Health Service Act (PHSA), the Community Mental Health Centers Act, or the Developmental Disabilities Services and Facilities Construction Act may not be required to perform abortions or sterilization procedures or make facilities or personnel available for the performance of such procedures if such performance "would be contrary to [the individual or entity's] religious beliefs or moral convictions." The Church Amendment also prohibits entities that receive federal funds under the specified statutes or under a biomedical or behavioral research program administered by the Department of Health and Human Services (HHS) from engaging in employment discrimination against doctors or other medical personnel who either perform abortions or sterilization procedures or who refuse to perform such services on moral or religious grounds. By 1978, five years after the Court's decision in Roe , virtually all of the states had enacted conscience clause legislation in one form or another. From 1978 to 1996, there was a lull in conscience clause activity, with one exception. When Congress enacted the Civil Rights Restoration Act in 1988, it adopted the Danforth Amendment, which mandates neutrality with respect to abortion. Specifically, the amendment clarifies that Title IX of the Education Amendments of 1972, which prohibits sex discrimination in federally funded education programs, may not be construed to prohibit or require any individual or entity to provide or pay for abortion-related services, nor may it be construed to permit the imposition of a penalty on any person who has sought or received abortion-related services. Nearly a decade after the Danforth Amendment, Congress passed additional conscience provisions in the Omnibus Consolidated Rescissions and Appropriations Act of 1996. Under the act, which added Section 245 to the PHSA, the federal government and state and local governments are prohibited from discriminating against health care entities that refuse to undergo abortion training, provide such training, perform abortions, or provide referrals for the relevant training or for abortions. Section 245 protects doctors, medical students, and health training programs from being denied federal financial assistance or a license or certification that they would otherwise receive but for their refusal to provide abortion services or training. One year after passing the 1996 omnibus legislation, Congress again revisited the abortion conscience clause issue when it approved the Balanced Budget Act of 1997. Concerned that managed care plans might seek to prevent doctors from informing patients about medical services not covered by their health plans, Congress amended the federal Medicare and Medicaid programs to prohibit managed care plans from restricting the ability of health care professionals to discuss the full range of treatment options with their patients. The legislation, however, simultaneously exempted managed care providers under these programs from the requirement to provide, reimburse for, or provide coverage of a counseling or referral service if the managed care plan objects to the service on moral or religious grounds. Thus, a Medicare and Medicaid managed care plan cannot prevent providers from providing abortion counseling or referral services, but it can refuse to pay providers for providing such information, although the plan must notify new and existing enrollees of such a policy if it does indeed have one. The effect of the 1997 legislation was to extend the coverage of conscience clause laws beyond the individuals who provide medical care to the companies that pay for such care under the Medicare and Medicaid programs. The law allows Medicare and Medicaid-funded health plans to refuse to provide counseling and referral for abortion-related services. Earlier conscience clause laws permitted providers to opt out only of the actual provision of such services. The 1997 legislation would appear to have a broader impact than the 1973 Church Amendment, both in terms of its effect on the entities that may refuse to provide abortion services and on the individuals who wish to access such services. In a similar vein, recent abortion bills introduced in Congress have proposed changes that would expand the scope of current conscience clause laws. This legislation is discussed in the next section. Recent Legislation and its Effect on Existing Law The Abortion Non-Discrimination Act (ANDA) has been introduced in every Congress since the 107 th Congress. In general, ANDA would amend the nondiscrimination provision in the PHSA to expand the definition of the term "health care entity" to include hospitals, provider-sponsored organizations, health maintenance organizations (HMOs), health insurance plans, or any other kind of health care facility, organization, or plan. Supporters of ANDA maintain that expanding the definition of "health care entity" is necessary because some state legislatures and courts have weakened existing conscience clause protections, which proponents view as critical to shielding religious hospitals and other medical providers that oppose abortion. Opponents contend, however, that ANDA would impose serious restrictions on a woman's access to abortion. Critics also argue that ANDA would allow providers to drop abortion coverage not only for moral or religious reasons, but also for financial reasons, such as the desire to save money by reducing coverage. Although ANDA has not been considered by recent Congresses, conscience clause provisions with similar language were inserted in the FY2005, FY2006, and FY2008 appropriations measures for the Departments of Labor, HHS, and Education. These provisions are commonly referred to as the Weldon Amendment because they were added to the FY2005 appropriations measure following the adoption of an amendment offered by Representative Dave Weldon. The language used in the appropriations measures has remained the same since 2004. The provisions state: None of the funds made available in this act may be made available to a Federal agency or program, or to a State or local government, if such agency, program, or government subjects any institutional or individual health care entity to discrimination on the basis that the health care entity does not provide, pay for, provide coverage of, or refer for abortions. The Weldon Amendment defines the term "health care entity" to include "an individual physician or other health care professional, a hospital, a provider-sponsored organization, a health maintenance organization, a health insurance plan, or any other kind of health care facility, organization, or plan." The Weldon Amendment prevents the federal government and state and local governments from enacting policies that require health care entities to provide or pay for certain abortion-related services. In addition, the Weldon Amendment increases both the number and type of health care providers and professionals who could refuse to provide abortion training or services without reprisals. For example, prior law protected only individual doctors or medical training programs that did not provide abortions or abortion training, and appeared to apply primarily in the medical education setting or to doctors in their individual practices. In contrast, the appropriations provisions allow large health insurance companies and HMOs to refuse to provide coverage or pay for abortions. Because an HMO's refusal to provide abortion-related services would affect a much larger number of patients than an individual doctor's refusal to provide such services, the Weldon Amendment has the potential of denying abortion-related services to a significantly expanded number of individuals. Although the Weldon Amendment language is similar to the proposed ANDA, it differs in two important respects. First, ANDA would deny all federal funds to entities that engage in abortion-related discrimination. The Weldon Amendment, however, denies only those funds available under the annual Labor, HHS, and Education appropriations measure. Second, the passage of ANDA would result in permanent legislation, while the Weldon Amendment language remains in effect for only the relevant fiscal years. Thus, although the Weldon Amendment expands prior law, it provides for smaller penalties and is temporary in nature. Conscience Rule On December 19, 2008, HHS issued a new rule to implement the Church Amendment, Section 245 of the PHSA, and the Weldon Amendment. The new rule provides definitions for some of the terms used in the conscience protection laws, establishes a written certification of compliance requirement for recipients of federal health care funds, and identifies HHS's Office of Civil Rights as the entity responsible for complaint handling and investigation. At the time the rule was issued, HHS maintained that it was necessary to educate the public and health care providers on the protections afforded by federal law. The agency noted that the new rule would "[foster] a more inclusive, tolerant environment in the health care industry than may currently exist." Opponents of the new rule, however, argued that the rule could jeopardize the health of individuals by making it more difficult to obtain health care services and information. They noted, for example, that the new rule could limit the availability of oral contraceptives. On March 10, 2009, HHS published a proposed rule in the Federal Register to rescind the December 19, 2008, final rule. HHS explained that the comments received during consideration of the rule "raised a number of questions that warrant further consideration." The agency stated further, It is important that the Department have the opportunity to review this regulation to ensure its consistency with current Administration policy. Accordingly, we believe it would benefit the Department to review this rule, accept further comments, and reevaluate the necessity for regulations implementing the statutory requirements. Thus, the Department is proposing to rescind the December 19, 2008 final rule, and we are soliciting public comment to aid our consideration of the many complex questions surrounding the issue and the need for regulation in this area. The comment period for the proposed rule ended on April 9, 2009. Since that date, HHS has not indicated whether the rule will be rescinded. Conscience Protection and Health Reform Legislation that attempts to reduce the number of uninsured individuals and restructure the private health insurance market has been passed by both the House of Representatives and the Senate. H.R. 3962 , the Affordable Health Care for America Act, and H.R. 3590 , the Patient Protection and Affordable Care Act, include provisions that address the coverage of abortion by health benefits plans that would be available through a health insurance exchange. In addition to addressing the coverage of abortions by plans in an exchange, the abortion provisions in both measures also provide conscience protection for specified entities. H.R. 3962 , the House-passed bill, would prohibit a federal agency or program, or state or local government that receives federal financial assistance under the measure from subjecting any individual or institutional health care entity to discrimination on the basis that the health care entity does not provide, pay for, provide coverage of, or refer for abortions. H.R. 3962 would also prohibit a federal agency or program, or state or local government that receives federal financial assistance under the bill from requiring any health plan created or regulated by the measure to subject any individual or institutional health care entity to discrimination on the basis that the health care entity does not provide, pay for, provide coverage of, or refer for abortions. In contrast, H.R. 3590 , the Senate-passed bill, would prohibit exchange plans from discriminating against any individual health care provider or health care facility because of its unwillingness to provide, pay for, provide coverage of, or refer for abortions. Neither measure would affect federal conscience protection and abortion-related antidiscrimination laws or Title VII of the Civil Rights Act of 1964.

Conscience clause laws allow medical providers to refuse to provide services to which they have religious or moral objections. In some cases, these laws are designed to excuse such providers from performing abortions. While substantive conscience clause legislation, such as the Abortion Non-Discrimination Act, has not been approved, appropriations bills that include conscience clause provisions have been passed. This report describes the history of conscience clauses as they relate to abortion law and provides a legal analysis of the effects of such laws. The report also discusses the issuance of a new rule to implement some of the existing conscience clause laws, and recent efforts to rescind that rule. Finally, the report reviews the conscience protection provisions of the House- and Senate-passed health reform measures, H.R. 3962 and H.R. 3590.

Introduction Schools have a mission of great importance to our nation—they are responsible for keeping our children safe while educating them and helping prepare them to be responsible and productive citizens. The December 14, 2012, shooting at Sandy Hook Elementary School in Newtown, CT, that claimed the lives of 20 children and 6 adults, has heightened congressional interest in school security. Policymakers have begun debating whether school security can be further enhanced, and if so, how best to accomplish that goal. A wide variety of proposals have been offered at the federal level, such as funding for expanded mental health services for students, funding for training on mental health awareness for school staff, funding to assist schools in improving school climate, funding for more school counselors, and funding for more school resource officers (SROs) or other armed security personnel. Wayne LaPierre, Executive Vice President and CEO of the National Rifle Association, has proposed putting an armed police officer in every school in the country as a way to prevent mass shootings. President Obama has proposed creating incentives for Community Oriented Policing Services (COPS) grants to be used to hire more SROs in the current year. In addition, he has requested $150 million in funding for a new Comprehensive School Safety Program. This new grant program would provide school districts and law enforcement agencies with funding to hire new SROs and school psychologists, among other things. This report focuses on one of these proposals—the renewed focus on providing federal funding for more SROs as a means to preventing school shootings. It examines the distribution of and current number of SROs, the potential sustainability of any increase in the number of SROs, and the effect that SROs may have on students and the academic setting. It also examines what available research studies suggest about the extent to which SROs may reduce school violence. These are issues Congress may consider while contemplating an expansion of SRO programs. Background on School Resource Officers Many people probably have a basic understanding of what an SRO is: a law enforcement officer who works in a school. However, some policymakers, before considering legislation to increase the number of SROs in schools across the country, are likely to have questions beyond "what are SROs?" Some of these questions might include the following: What role do SROs play in the school environment? Why have schools and law enforcement agencies started SRO programs? How many SROs are there around the country? Each of these questions is addressed in this section of the report. Subsequent sections discuss: the federal role in promoting SROs; research on the effectiveness of SROs; the Administration's proposals; and select issues for Congress. The Role of School Resource Officers Police agencies have traditionally provided services to schools, but it has only been over the past 20 years where the practice of assigning police officers to schools on a full-time basis has become more wide-spread. Criminal justice and education officials sought to expand school safety efforts—which included assigning law enforcement officers to patrol schools—in the wake of a series of high-profile school shootings in the 1990s. Expanding the presence of SROs in schools was also partly a response to rising juvenile crime rates during the 1980s and early 1990s. It has been argued that SROs are a new type of public servant; a hybrid educational, correctional, and law enforcement officer. While the duties of SROs can vary from one community to another, which makes it difficult to develop a single list of SRO responsibilities, their activities can be placed into three general categories: (1) safety expert and law enforcer, (2) problem solver and liaison to community resources, and (3) educator. SROs can act as safety experts and law enforcers by, assuming primary responsibility for handling calls for service from the school, making arrests, issuing citations on campus, taking actions against unauthorized persons on school property, and responding to off-campus criminal activities that involve students. SROs also serve as first responders in the event of critical incidents at the school. SROs can help to solve problems that are not necessarily crimes (e.g., bullying or disorderly behavior) but that can contribute to criminal incidents. Problem-solving activities conducted by SROs can include developing and expanding crime prevention efforts and community justice initiatives for students. SROs can also present courses on topics related to policing or responsible citizenship for students, faculty, and parents. There are two definitions of "school resource officer" in federal law and both definitions include some of the responsibilities outlined in the previous paragraph. Under the authorizing legislation for the Community Oriented Policing Services (COPS) program (42 U.S.C. §3796dd-8), a "school resource officer" is defined as a career law enforcement officer, with sworn authority, deployed in community-oriented policing, and assigned by the employing police department or agency to work in collaboration with schools and community-based organizations—(A) to address crime and disorder problems, gangs, and drug activities affecting or occurring in or around an elementary or secondary school; (B) to develop or expand crime prevention efforts for students; (C) to educate likely school-age victims in crime prevention and safety; (D) to develop or expand community justice initiatives for students; (E) to train students in conflict resolution, restorative justice, and crime awareness; (F) to assist in the identification of physical changes in the environment that may reduce crime in or around the school; and (G) to assist in developing school policy that addresses crime and to recommend procedural changes. Under the Safe and Drug Free Schools and Communities Act (20 U.S.C. §7161), a "school resource officer" is defined as a career law enforcement officer, with sworn authority, deployed in community oriented policing, and assigned by the employing police department to a local educational agency to work in collaboration with schools and community based organizations to—(A) educate students in crime and illegal drug use prevention and safety; (B) develop or expand community justice initiatives for students; and (C) train students in conflict resolution, restorative justice, and crime and illegal drug use awareness. The two definitions of an SRO share some similarities. Both define SROs as law enforcement officers who engage in community-oriented policing activities and who are assigned to work in collaboration with schools and community-based organizations. Both definitions also focus on developing community justice initiatives for students and training students in conflict resolution, restorative justice, and crime awareness. The definition of an SRO under the Safe and Drug Free Schools and Communities Act includes a focus on educating students in crime and illegal drug use prevention and safety, which is consistent with the purposes of the act. The definition of an SRO under the authorizing legislation for the COPS program focuses more on how SROs could address a school's crime problems through a more traditional law enforcement/security approach. As such, SROs under the COPS definition concentrate on addressing crime and disorder problems, gangs, and drug activities occurring in and around the school; assist in the identification of changes to the physical structure of the school or the area around the school that could help reduce crime; and assist in developing school policy that addresses crime. Reasons for Establishing SRO Programs A national survey of schools, and the law enforcement agencies that provided services to the schools that responded to the survey, found that school principals and law enforcement officials have different views about why schools do or do not have SROs. The results of the survey indicate that in very few cases was the level of violence in the school the key reason for starting an SRO program (approximately 4% of both school and law enforcement agencies cited this as the reason for starting the SRO program). About one-quarter of schools reported that national media attention about school violence was the primary reason for starting the SRO program, while about one-quarter of law enforcement agencies cited school disorder problems (e.g., rowdiness or vandalism) as the primary reason an SRO was assigned to a school. However, the most common response for both groups was "other." Respondents who marked "other" as their answer were asked to describe the reason why they started an SRO program. There were a variety of responses from both groups, including "received a grant to start the program," "part of community policing efforts," "part of a drug awareness program," or "improve school safety." Approximately 22% of schools reported that the primary reason they did not have an SRO was because they did not have adequate funds, while 43% of law enforcement agencies reported that inadequate funding was the primary reason why the schools they served did not have an SRO. On the other hand, two-thirds of schools reported that the primary reason they did not have an SRO was because there was no need for one. In comparison, 28% of law enforcement agencies reported that schools did not have an SRO because there was not a need for one. There was also disagreement over whether the school would benefit from having an SRO. A majority of schools (55%) reported that they did not think the school would benefit from having an SRO, while 71% of law enforcement agencies reported that schools would benefit from having an SRO. The survey data show a divide between educators and law enforcement officers regarding the potential benefits of SRO programs. The results of the survey might reflect the different philosophies of educators and law enforcement officers. Schools focus on educating children, and teachers and education administrators might be opposed to an SRO program if they believe that the presence of an SRO will disrupt the learning environment, portray the school as being unsafe, or upset students. On the other hand, law enforcement personnel are philosophically oriented towards public safety. Their initial response to a crime problem in schools might focus on increasing law enforcement's presence at the school as a means of deterring criminal behavior. How Many School Resource Officers are There Nationwide? Police have traditionally provided services to schools, but it has only been in the past 20 years that assigning officers to work in schools full-time has become widespread. Data available from the Bureau of Justice Statistics (BJS) and the National Center for Education Statistic (NCES) provide some insight into the total number of SROs and the type of schools that they serve, but the data are not collected and reported regularly. The BJS's Law Enforcement Management and Administrative Statistics (LEMAS) survey is conducted periodically every three or four years. The survey collects data on the number of SROs employed by various law enforcement agencies, but it does not collect data on the type of schools SROs serve. The most recent LEMAS data available are from the 2007 survey. The NCES's School Survey on Crime and Safety (SSCS) collects data on the locale, enrollment size, and level of schools that have SROs. The SSCS is administered every other school year, but the most recent SSCS data available on the distribution of SROs are from the 2007-2008 school year survey. LEMAS survey data show that the number of full-time law enforcement officers employed by local police departments or sheriff's offices who were assigned to work as SROs increased between 1997 (the first year data were collected) and 2003 before decreasing slightly in 2007. As shown in Figure 1 , there were approximately 6,700 more police officers or sheriff's deputies assigned to work as SROs in 2007 compared to 1997, but there were approximately 800 fewer SROs in 2007 compared to the peak in 2003. The data show that the number of sheriff's deputies assigned to work as SROs increased between 1997 and 2007, while the number of police officers working as SROs decreased between 2003 and 2007 after increasing in 2000 and 2003. Data from the LEMAS survey also show that the overall proportion of police departments and sheriff's offices that reported assigning officers or deputies to work as SROs decreased between 2000 and 2007, but trends in police departments' and sheriff's offices' use of SROs went in different directions. In 2007, as shown in Figure 2 , 38% of local law enforcement agencies reported using SROs, which was down from the peak of 44% in 2000. However, the proportion of sheriff's offices that reported using SROs was slightly higher in 2007 compared to 2000 (50% of sheriff's offices reported using SROs in 2007 compared to 48% in 2000). Data from the SSCS for the 2007-2008 school year show that a greater proportion of high schools, schools in cities, and schools with enrollments of 1,000 or more report the presence of SROs. NCES reports that 37% of high schools did not have an SRO present at least once a week during the 2007-2008 school year, compared to 45% of middle schools and 76% of elementary schools. Also, 59% of city schools did not have an SRO present at least once a week, compared to 65% of suburban schools, 57% of town schools, and 72% of rural schools. Finally, 26% of schools with enrollments of 1,000 or more students did not have an SRO present at least one day a week while 57% of schools with enrollments of 999-500 students, 73% of schools with enrollments of 499-300 students, and 84% of schools with enrollments of less than 300 students did not have an SRO present at least once a week. One limitation of the data is that they might not account for schools that had a less-frequent SRO presence. The SSCS principal questionnaire for the 2007-2008 school year asked "[d]uring the 2007–08 school year, did you have any security guards, security personnel, or sworn law enforcement officers present at your school at least once a week? [emphasis original]" Therefore, if the SRO was at the school every-other-week, that officer's presence would not be captured by the data. Federal Funding for School Resource Officers SRO programs have been encouraged by the federal government through grants provided to local jurisdictions. Two federal grant programs provided funding for the hiring and placement of law enforcement officers in schools across the country: the COPS in Schools (CIS) program and the State Formula Grants program through the Safe and Drug Free Schools and Communities Act. Funding for these programs ended, respectively, in FY2005 and FY2009. The COPS in Schools (CIS) Program The CIS program provided grants for hiring new, additional school resource officers to conduct community policing services in and around primary and secondary schools. Congress first provided funding for the COPS in Schools program in 1999 after the Columbine school shooting. Funding for the CIS program was set aside from appropriations for the COPS Hiring Program (CHP). Congress provided funding for this program from FY1999-FY2005. Appropriations for CIS peaked between FY2000 and FY2002, when Congress appropriated approximately $180 million each fiscal year for the program. The COPS Office reports that nearly 7,200 SRO positions were funded through CIS grants. Even though there has not been funding for the CIS program for several fiscal years, law enforcement agencies can use grants they receive under the CHP to hire SROs. Safe and Drug Free Schools and Communities Act (SDFSCA) The SDFSCA is the federal government's major initiative to prevent drug abuse and violence in and around elementary and secondary schools. The SDFSCA was initially enacted in 1994 ( P.L. 103-382 ) in response to concerns about increased school violence and drug use among school-aged youth. The SDFSCA was most recently reauthorized as part of the Elementary and Secondary Education Act (ESEA) in P.L. 107-110 , the No Child Left Behind Act of 2001. The SDFSCA program as authorized supports two major grant programs—one for State Formula Grants and one for National Programs. However, FY2009 was the last year that funding was provided for the State Formula Grant Program. Since FY2010, funding has only been provided for National Programs. The State Formula Grant Program distributed formula grants to states, and from states to all local educational agencies (LEAs), as required by law. LEAs could use their grants for a wide variety of authorized activities, including for the hiring and training of school resource officers. Research on the Effectiveness of School Resource Officers SROs engage in many activities that could contribute to school safety. A national survey of schools found that schools with SROs had significantly greater levels of law enforcement involvement compared to schools without assigned officers. Schools with SROs were more likely to report that school facilities and grounds were patrolled, safety and security inspections were conducted, student leads about crimes were investigated, arrests were made, and there were responses to crime reports from staff and students. In addition, schools with SROs were more likely to work with law enforcement to create an emergency plan agreement; develop a written plan to deal with shootings, large scale fights, hostages, and bomb threats; and conduct risk assessments of the security of school buildings or grounds. Schools with SROs were also more likely to have police officers involved in mentoring students and advising school staff. However, while the results of the survey show that SROs are undertaking actions that might contribute to safer schools, they do not indicate whether these actions reduce school violence. Despite the popularity of SRO programs, there are few available studies that have reliably evaluated their effectiveness. A more specific critique of the literature on SRO programs notes that to properly assess the effect of SRO programs it is necessary to collect data on reliable and objective outcome measures during a treatment period (i.e., a period in which SROs worked in schools) and a control period (i.e., a period in which no SROs were present). Data on the control period could be collected from comparable schools without SROs or from the same school before the SRO was assigned to the school. Data from both the treatment and control conditions should be collected over a long enough period of time that they generate a stable estimate of the outcome measures, and the outcome measure should not be influenced by the placement of the SRO in the school (e.g., using the SRO's incident reports). At the time this review of the literature was published (2011), no evaluations of SRO programs met this standard. One summary of the body of literature on the effectiveness of SRO programs notes that [s]tudies of SRO effectiveness that have measured actual safety outcomes have mixed results, some show an improvement in safety and a reduction in crime; others show no change. Typically, studies that report positive results from SRO programs rely on participants' perceptions of the effectiveness of the program rather than on objective evidence. Other studies fail to isolate incidents of crime and violence, so it is impossible to know whether the positive results stem from the presence of SROs or are the results of other factors. A study of 19 SRO programs sponsored by the National Institute of Justice did not draw any conclusions about their effectiveness because very few of the programs included in their study "conducted useful and valid assessments of their programs." More recent research has attempted to address some of the shortcomings of previous studies on the topic by using broader datasets and statistical techniques that control for possible confounding variables, but they still suffer from some limitations. For example, a study by Tillyer, Fisher, and Wilcox found that students in schools where police were present and/or involved in the school's daily decision making were no less likely than students in schools where the police were not present and/or involved in decision making to report that they were the victims of a serious violent offense, believe they were at risk for being victimized, or were afraid of being victimized. However, this study used data collected mostly from children in rural schools in Kentucky, which could raise questions about whether the results are generalizable to other locales. Another study by Jennings et al. found that the number of SROs in a school had a statistically significant negative effect on the number of reported serious violent crimes, but not on the number of reported violent crimes. Nonetheless, this study only used one year of data, which means that it is not possible to determine if reported crimes in high schools decreased after the school started an SRO program. A third study by Na and Gottfredson used a dataset that allowed the researchers to evaluate whether the reported number of offenses decreased after schools started SRO programs. The results of the analysis show that schools that added SROs did not have a lower number of reported serious violent, non-serious violent, or property crimes. However, schools that added SROs had a higher number of reported weapon and drug offenses. There are some limitations to this study, namely (1) the reported number of crimes might be influenced by the presence of an SRO; (2) the sample of schools included in the study is not representative of all schools in the United States (it over-represents secondary schools, large schools, and non-rural schools); and (3) the effects of adding SROs may be confounded with the installation of other security devices (e.g., metal detectors) or other security-related policies. The body of research on the effectiveness of SRO programs is noticeably limited, both in terms of the number of studies published and the methodological rigor of the studies conducted. The research that is available draws conflicting conclusions about whether SRO programs are effective at reducing school violence. In addition, the research does not address whether SRO programs deter school shootings, one of the key reasons for renewed congressional interest in these programs. There are logical reasons to believe that SROs might help prevent school shootings; to wit, that someone might not attack a school if he or she knows that there is an officer on-site, or SROs developing a relationship with the student body might facilitate reporting of threats made by other students. In addition, placing an officer in a school might facilitate a quicker response time by law enforcement if a school shooting occurs. However, none of the research on the effectiveness of SRO programs addresses this issue. Promising Practices for Successful SRO Programs A report published by the COPS Office notes that there is a lack of research on SRO programs, so it is not possible to identify a "one-size-fits-all" series of recommendations for implementing a maximally successful SRO program. The report, however, identifies several promising practices for a successful SRO program. First, it emphasizes that all schools should develop a comprehensive school safety plan based on a thorough analysis of the problem(s) the school is facing and resources should be deployed accordingly. The report also notes that while SROs might be an important component of an overall safety plan, they should not be the only component. In some instances, school safety plans might not require the deployment of an SRO. If the school decides to use an SRO, there should be clear goals for the program, SROs should engage in activities that directly relate to school safety goals and address identified needs, and data should be collected to determine whether the program is achieving its goals. Finally, the report notes that effective SROs engage in problem-solving policing rather than simply responding to incidents as they occur. The report notes that there are operational obstacles that can threaten the success of an SRO program, including a lack of resources for the officer such as time constraints or lack of training, or turnover and reassignment. These challenges can be addressed with a proper framework, but it can require in-depth discussion and negotiations between school administrators and the law enforcement agency. The report also stresses that schools and law enforcement agencies should be aware of any pitfalls before agreeing to establish an SRO program. There may be philosophical differences between school administrators and law enforcement agencies about the role of the SRO. Law enforcement agencies focus on public safety while schools focus on educating students. Establishing an operating protocol or memorandum of understanding (MOU), according to the report, is a critical element of an effective school-police partnership. The MOU should clearly state the roles and responsibilities of the actors involved in the program. Researchers who conducted an evaluation of 19 SRO programs note that "[w]hen SRO programs fail to define the SROs' roles and responsibilities in detail before—or even after—the officers take up the posts in the schools, problems are often rampant—and may last for months and even years." According to the report, selecting officers who are likely to succeed in a school environment—such as officers who can effectively work with students, parents, and school administrators, have an understanding of child development and psychology, and who have public speaking and teaching skills—and properly training those officers are identified as two important components of a successful SRO program. While it is possible to recruit officers with some of the skills necessary to be an effective SRO, it is nonetheless important to provide training so officers can hone skills they already have or develop new skills that can make them more effective SROs. It might also be important for SROs to receive training before or shortly after starting their assignment. The study of 19 SRO programs mentioned previously concluded that " any delay in training can be a serious problem [emphasis original] because SROs then have to learn their jobs by 'sinking or swimming.'" The Comprehensive School Safety Initiative The Administration requested $150 million in funding for a Comprehensive Schools Safety Program as a part of its FY2014 budget request for the COPS program. Congress appropriated $75 million for a Comprehensive School Safety Initiative under the State and Local Law Enforcement Assistance account in the Continuing Appropriations Act, 2014 (Division B, P.L. 113-76 ). Congress tasked the National Institute of Justice (NIJ) with developing and implementing the initiative. Congress required the NIJ to collaborate with key partners from law enforcement, mental health, and education disciplines to develop and publish a comprehensive strategy and model for school safety. Within the amount provided, $50 million is for pilot programs to improve school safety consistent with the school safety model published by the NIJ. Pilot program grants can be used to test and evaluate technologies and strategies to improve school safety; develop and update school safety assessments and plans; provide technical assistance or training; and support and assess other programs and technologies that are intended to enhance overall school safety efforts. Congress emphasized that funding for pilot programs should conform with each school's safety assessment and plans, and should "advance the goal of developing, testing and discerning best practices for school safety." The remaining $25 million is for research and evaluation into potential root causes of school violence. Funding under this portion of the initiative can also be used to "examine promising new approaches and technologies to determine the most effective measures for the improvement of school safety, such as the development of comprehensive school safety assessments; the development and implementation of appropriate training modules; effectiveness of surveillance cameras; or new ways of designing schools to improve survivability in the event of a mass shooting incident." While funding under the Comprehensive School Safety Initiative cannot be used for hiring SROs, Congress did appropriate $151 million under the Community Oriented Policing Services account for the COPS hiring program, under which, as mentioned previously, grant recipients can use their funding to hire SROs. Select Issues for Congress There are several issues Congress could consider should policymakers choose to debate whether to provide funding for SRO programs. Some of these issues might include the following: Do current trends in school violence warrant congressional efforts to expand SRO programs? Is it possible to sustain a significant expansion in SRO programs? What effect might an expansion of SRO programs have on the educational setting? Trends in School Violence An overarching issue is whether the current level of school violence warrants congressional efforts to expand the number of SROs in schools across the country. The recent shooting in Newtown, CT, has heightened the nation's focus on school shootings, but it has been reported that schools are generally safe places for both students and staff. Twelve out of a total of 78 public mass shootings between 1983 and 2012 that have been identified by CRS occurred in academic settings. Eight of these happened at primary or secondary education facilities. Four of the 12 public mass shootings in education settings involved high school or middle school students as assailants. Data show that homicides of children while at school, in general, are rare events. For the 2010-2011 school year, the most recent school year for which data are available, there were 31 school-associated violent deaths, of which 11 were homicides of children ages 5-18 while at school (see Figure 3 ). The number of school-associated violent deaths and homicides of children ages 5-18 while at school for the 2010-2011 school year was below the average number of school-associated violent deaths (45) and homicides of children at school (23) since the 1992-1993 school year. To put the number of reported at-school youth homicides in context, the number of youth homicides that occurred at school remained less than 2% of the total number of homicides of school aged children for each school year going back to the 1992-1993 school year. For example, there were a total of 1,595 homicides of children ages 5-18 during the 2008-2009 school year; of those, 17 (1.1%) occurred while the child was at school. School violence, however, goes beyond just school shootings. School violence can include sexual assaults, robberies, assaults, and threats of violence against children while they are at school. In a December 2012 report on violent crime against youth, the BJS reported that the rate of serious violent crime against youth ages 12 to 17 on school grounds decreased 62% between 1994 (17.4 per 1,000) and 2010 (6.6 per 1,000). Trends in simple assault victimizations for children ages 12-17 were similar to victimizations for serious violent crimes. Reported victimizations for simple assaults on school grounds decreased 81% between 1994 (70.3 per 1,000) and 2010 (13.2 per 1,000). Data published in the Indicators of School Crime and Safety report, show that schools are generally safe, but there are some schools with higher levels of violence and disorder than others. Approximately 74% of public schools reported one or more violent incidents and 16% reported one or more serious violent incidents during the 2009-2010 school year (see Table 1 ). It is estimated that there were 1.2 million violent incidents and 52,500 serious violent incidents during that school year. The rate of violent incidents was 25.0 per 1,000 students while the rate of serious violent incidents was 1.1 per 1,000 students. However, data also show that some schools—namely middle schools, city schools, and schools with a higher proportion of low-income students (defined as the proportion of students who are eligible for free or reduced-price lunch)—have higher rates of reported violent and serious violent incidents. The above data suggest a key question: have SROs contributed to the reduction in school violence? The National Association of School Resource Officers (NASRO) draws a link between decreasing school violence and the presence of SROs: Over the past two decades, America's public schools have become safer and safer. All indicators of school crime continue on the downward trend first reported when data collection began around 1992. In 2011, incidences of school-associated deaths, violence, nonfatal victimizations, and theft all continued their downward trend. This trend mirrors that of juvenile arrests in general, which fell nearly 50% between 1994 and 2009––17% between 2000 and 2009 alone. This period of time coincides with the expansion of School Resource Officer programs as part of a comprehensive, community-oriented strategy to address the range of real and perceived challenges to campus safety. Data suggest that the decline in violent victimizations experienced by children at school might, in part, be the result of an overall decline in crime against juveniles and not the result of more SROs working in schools. Data from the BJS show that between 1994 and 2010 there was a 77% decrease in the number of serious violent victimizations and an 83% decrease in simple assaults against youth ages 12 to 17 (see Figure 4 ). Data from the Office of Juvenile Justice and Delinquency Prevention (OJJDP) also show that the number of juvenile homicides is lower than the previous nadir in 1984. There were a reported 1,448 homicides of juveniles in 2010, down from the peak of 2,841 juvenile homicides in 1993 (see Figure 5 ). Sustainability of a School Resource Officer Expansion As previously noted, there have been proposals to increase the number of SROs as a way of preventing school shootings. Some policymakers might view a program that provides grants for hiring SROs, like the CIS program, as a way to expand the number of police officers assigned to schools across the country. Federal funding provided through the CIS program has been cited as contributing to the expansion of SRO programs. As previously discussed, in 2003 there were approximately 19,900 reported SROs, up from approximately 12,300 SROs in 1997. Between FY1999 and FY2002, the COPS Office, through the CIS program, had funded nearly 6,300 SRO positions. The LEMAS data do not indicate how each SRO position is funded, but a survey conducted by the National Association of School Resource Officers (NASRO) of attendees at their 2004 national conference found that 45% of respondents indicated that their SRO positions were currently or formerly supported by a CIS grant. The NASRO survey does not represent an unbiased national sample of SRO programs, and any results should therefore be interpreted with caution, but it is one of the few indicators of how many SRO positions were funded by CIS grants. The available data suggest that CIS funding probably supported a significant expansion of SRO programs across the country. The data also suggest that local law enforcement agencies have funded a majority of SRO positions, and they have continued to do so even after grants through the CIS program expired. Even a conservative estimate of the cost of placing an SRO in each school in the country shows that it could cost billions of dollars to accomplish that goal. This estimate is partly founded on assumptions based on 2007 data (the most recent available). Data from the NCES show that in the 2009-2010 school year there were 98,817 public schools in the United States. Data from the BJS show that there were a total of 19,088 SROs in 2007 (see Table A-1 and Table A-2 ). If it is assumed that the number of SROs did not decrease in subsequent years and it is further assumed that each SRO is assigned to work in only one school, it would mean that there would need to be an additional 79,729 SROs hired to place an SRO in each school in the United States. Data from the BJS show that in 2007 the average minimum salary for an entry-level police officer was $32,900 and for an entry-level sheriff's deputy it was $31,100, and the weighted average minimum salary for an entry-level law enforcement officer in 2007 was $32,412. Assuming that the average minimum salary for entry-level police officers and sheriff's deputies has not changed, it would cost about $2.6 billion to hire the additional 79,729 SROs needed to place an SRO in each school. However, this cost could be higher because, as previously discussed, the number of SROs declined between 2003 and 2007. In recent years, many law enforcement agencies faced significant budget constraints due to the recent recession, so it is possible that the number of SROs continued to decline as they were reassigned or laid-off. Also, it is possible that the salaries for entry-level police officers and sheriff's deputies have increased since 2007. On the other hand, the estimated cost could be lower if SROs were assigned to patrol more than one school in some school districts. If Congress acted to expand the number of SROs, it is likely that many of those officers would go to law enforcement agencies serving jurisdictions of fewer than 25,000 people. Data from the BJS show that nearly 88% of police departments and almost half of sheriff's offices serve jurisdictions of fewer than 25,000 people. However, a smaller proportion of police departments and sheriff's offices that serve populations of less than 25,000 reported using SROs in 2007 (see Table A-3 and Table A-4 ). Not surprisingly, data from the LEMAS show that law enforcement agencies serving smaller jurisdictions have smaller operating budgets. Concomitantly, smaller law enforcement agencies have, on average, fewer sworn officers. Policymakers might consider whether it would be financially sensible to provide federal funding to place an SRO in every school across the country, or to even substantially expand the number of SROs. Traditionally, COPS grants have provided "seed" money for local law enforcement agencies to hire new officers, but it is the responsibility of the recipient agency to retain the officer(s) after the grant expires. Since smaller law enforcement agencies tend to have smaller operating budgets and smaller sworn forces, retaining even one or two additional officers after a grant expires might pose a significant financial burden. If the law enforcement agency cannot retain the new SROs after the grant period ends, then the federal government has only supported a temporary expansion of SRO programs. The COPS Office has required law enforcement agencies that receive hiring grants to retain any officers hired with federal funds for at least one year after the grant period ends. While this might help promote the retention of federally-funded law enforcement officers, this requirement, if applied to any potential funding Congress might provide for hiring SROs, might limit who decides to apply for grants. The Effect of School Resource Officers on the Educational Setting An August 21, 201, story in the Washington Post highlighted several incidents of students in public schools in Texas being ticketed and required to appear in court for behavior that was traditionally dealt with by teachers and principals. This and similar stories might raise some concern among policymakers that a wide-scale expansion of SRO programs could contribute to what has been referred to as the "school-to-prison pipeline." One review of the literature on SROs asserts that the increased use of police officers in schools facilitates the formal processing of minor offenses and harsh responses to minor disciplinary situations. On December 12, 2012, the Senate Judiciary Subcommittee on the Constitution, Civil Rights and Human Rights, held a hearing titled "Ending the School-to-Prison Pipeline." In his opening statement Chairman Richard Durbin stated that For many young people, our schools are increasingly a gateway to the criminal justice system. This phenomenon is a consequence of a culture of zero tolerance that is widespread in our schools and is depriving many children of their fundamental right to an education. While recent interest in SROs programs has stemmed from proposals to use SROs as a way to prevent school shootings, it should be noted that SROs are more than armed sentries whose sole purpose is to stand guard and wait for an attack. SROs are sworn law enforcement officers who, among other things, patrol the school, investigate criminal complaints, and handle law violators. Therefore, while assigning an SRO to a school might serve as a deterrent to a potential school shooter, or provide a quicker law enforcement response in cases where a school shooting occurs, it will also establish a regular law enforcement presence in the school. There might be some concern that any potential deterrent effect generated by placing SROs in schools could be offset by either the monetary cost associated with a wide-scale expansion of SRO programs or the social costs that might arise by potentially having more children enter the criminal justice system for relatively minor offenses. Research on SROs and School Arrests A study conducted by Theriot used data from a school district in the southeastern United States to test the criminalization of student misconduct theory. Theriot's analysis produced mixed results. Middle and high schools with SROs had more arrests per 100 students than schools without SROs, but this relationship was no longer significant when the analysis controlled for school-level poverty. The results of the study indicated that students in schools with SROs were more likely than students in schools without SROs to be arrested for disorderly conduct, which lends credence to the idea that student misbehavior is being criminalized. The researcher also found that schools with SROs had lower arrest rates for assault and possessing a weapon on school grounds. The researcher opined that this suggests that SROs might serve as a deterrent. For example, students might be less likely to bring a weapon to school if an SRO is present because they fear they might be caught. Students might also be less likely to fight if they believe they will be arrested for assault. A critique of Theriot's study notes that the analysis did not collect data for a long enough period before SROs were assigned to some schools and the control group (i.e., the non-SRO schools) still had some contact with law enforcement. The study conducted by Na and Gottfredson, discussed previously, also included an analysis of whether schools that added SROs had a greater percentage of crimes reported to law enforcement and whether a greater proportion of students were subject to "harsh discipline" (i.e., the student was removed, transferred, or suspended for five or more days). The researchers found that schools that added SROs were more likely to report non-serious violent crimes (i.e., physical attack or fights without a weapon and threat of physical attack without a weapon) to the police than schools that did not add SROs. The reporting of other crime types and the reporting of crime overall, were not affected by the addition of SROs. The results of Na and Gottfredson's analysis mirror the finding of Theriot's study. Na and Gottfredson conclude that their findings are "consistent with our prediction that increased use of SROs facilitates the formal processing of minor offenses." However, their analysis also found that students at schools that added SROs were not any more likely than students at schools that did not add SROs to be subject to harsh discipline for committing any offense that was reported to the police. School Security Measures and School Disciplinary Policies The use of SROs in schools occurred in the context of increasing concern about security in schools and the concomitant adoption of more security measures in schools and the strengthening of school discipline policies. Although research on the efficacy of security measures in reducing school violence is limited, schools have been adopting more security measures over time. Between school year 1999-2000 and 2009-2010 there was an increase in the percentage of schools adopting the following security measures: restricting access to buildings during school hours (from 75% to 92%); using one or more security cameras to monitor the school (from 19% to 61%); and requiring faculty to wear badges or picture IDs (from 25% to 63%). During the same time period the percentage of students reporting the presence of security guards and/or assigned police officers at school increased from 54% to 68%. Following the adoption of the Gun Free Schools Act (GFSA) in 1994, some schools expanded on the GFSA's prohibition against guns in schools by adopting school-wide policies with strict disciplinary consequences for other rule violations. These so called "zero tolerance" policies vary from school to school, but are generally characterized by the application of specified, mandatory discipline procedures in response to rule violations. Like the hiring of SROs, these policies were intended to improve school security. The theory behind zero tolerance policies is that certain, severe punishments would deter violent behavior by students. However, data on the rising number of out-of-school suspensions that disproportionately impact minority students, as well as data indicating the potential negative effects of suspensions on students, have increased attention on these policies. Disparities in School Discipline The most recent U.S. Department of Education biennial Civil Rights Data Collection survey (CRDC) includes data indicating that some school disciplinary measures disproportionately affect minority students and students with disabilities. The CRDC data indicate that African American students were over 3½ times more likely to be suspended or expelled than white students. Additionally, students with disabilities were more than twice as likely as non-disabled students to receive one or more suspensions. Although African American students represented 18% of the students in the CRDC survey, 46% of these students were suspended more than once. In zero tolerance school districts that reported expulsions under that policy, Hispanic and African Americans comprised 56% of those expelled, although they comprised 45% of the total student population in these schools. Furthermore, the CRDC survey found that over 70% of students arrested at school or referred to law enforcement were African American or Hispanic. Efficacy of School Disciplinary Measures One of the main purposes of zero tolerance discipline policies was to serve as a deterrent to further school violence; however, existing empirical research has been too limited to validate the effectiveness of these disciplinary measures. A task force convened by the American Psychological Association to examine the evidence on the effectiveness of zero tolerance in schools found that it is problematic that despite 20 years of school implementation of zero tolerance policies, and nearly 15 years as federal policy, the research base on zero tolerance is in no way sufficient to evaluate the impact of zero tolerance policy and practices on student behavior or school climate. Concern about the effectiveness of school suspensions and their impact on students has led to a growing body of research on potentially more effective alternatives, particularly efforts to improve school climate. The Centers for Disease Control (CDC) defines a positive school climate as one that is "characterized by caring and supportive interpersonal relationships; opportunities to participate in school activities and decision-making; and shared positive norms, goals, and values." Available research suggests that one of the most important elements in a positive school climate is for students to have a feeling of school connectedness. School connectedness is defined as "the belief by students that adults and peers in the school care about their learning as well as about them as individuals." The National School Climate Center (the Center) has published numerous reports on school climate. A 2012 report from the Center cites research indicating that a positive school climate influences student motivation to learn, mitigates the effect of socioeconomic factors on academic success, and contributes to less aggression and violence, among other positive outcomes. Both social emotional learning and positive behavior management strategies have been identified by researchers as positive approaches to improving school climate. A program to improve school climate called School-wide Positive Behavioral Interventions and Supports (SWPBIS) is currently supported by the U.S. Department of Education through capacity-building information and technical assistance to schools, districts, and states who are implementing SWPBIS. SWPBIS is a three-tiered prevention-based approach to improving schoolwide disciplinary practices. According to the Center, SWPBIS is used in more than 9,000 schools across 40 states. SWPBIS has been linked to reductions in student suspensions and office discipline referrals. In addition, an interagency initiative titled "Safe Schools/Healthy Students" (SS/HS) focuses on a comprehensive approach to school violence. SS/HS is funded jointly by ED and the U.S. Department of Health and Human Services (HHS), Substance Abuse and Mental Health Services Administration (SAMHSA). The program is administered by ED, SAMHSA, and the U.S. Department of Justice (DOJ). The SS/HS initiative is a discretionary grant program that provides schools and communities with federal funding, via LEAs, to implement an enhanced, coordinated, comprehensive plan of activities, programs, and services that focus on healthy childhood development and the prevention of violence and alcohol and drug abuse. Grantees are required to establish partnerships with local law enforcement, public mental health, and juvenile justice agencies/entities. Concluding Thoughts The practice of placing SROs in schools has become more popular over the past two decades. As of 2007, there were more SROs working in schools across the country than there were in 1997, though the number of SROs was down from its peak in 2003. Data show that police departments and sheriff's offices have, by-and-large, sustained their SRO programs over the years, even as federal grants for hiring SROs have waned. The expansion of SRO programs coincided with a decrease in reported serious violent victimizations of students while at school and generally lower numbers of violent deaths and homicides at schools. The extent to which SRO programs contributed to the decrease is not known. Indeed, trends in at-school violence mirror a downward trend in overall violence against children and juvenile homicides. Yet schools are not free of violence and crime, and some schools—such as city schools, middle schools, and schools with a higher proportion of low income students—have higher rates of violent incidents. Policymakers might contemplate increasing the number of SRO programs across the country as a way to address the threat of mass shootings at or violence in schools. However, the body of research on the effectiveness of SRO programs is noticeably limited, and the research that is available draws conflicting conclusions about whether SRO programs are effective at reducing school violence. In addition, the body of research on the effectiveness of SROs does not address whether their presence in schools has deterred mass shootings. While a law enforcement presence at a school might facilitate actions, such as security planning or threat assessments, that might promote school safety, and the presence of an SRO might serve as a deterrent to a potential school shooter or provide for a quick response if a shooting occurs, some might be concerned that a regular law enforcement presence might have some unintended consequences for students. Research suggests that the presence of SROs might result in more children being involved in the criminal justice system for relatively minor offenses, and this, in turn, can result in other negative consequences, such as higher rates of suspension or a greater likelihood of dropping-out of school. The school shooting in Newtown, CT, might lead some policymakers to consider ways to provide funding to law enforcement agencies or school districts to establish or expand SRO programs. However, even a conservative estimate of the cost of placing an SRO in every school across the country shows that this proposal might be too expensive to be feasible. Also, these grants typically have been meant to provide "seed" money for the recipient agencies, and at some point local governments would be required to absorb the cost of a wide-scale expansion of SRO programs. The analysis presented in this report raises several even more specific issues policymakers might contemplate should Congress consider measures to promote placing more SROs in schools. Should the federal government provide grants for school safety that can only be used for hiring SROs, like the CIS program, or should grants be for a more comprehensive approach to school safety, like the Administration's proposed Comprehensive School Safety Program? Should the federal government collect annual data on the number of SROs, the type of schools they serve, and their roles in schools? If funding is available for hiring SROs, should there be a requirement that the officer(s) attend SRO training before being assigned to a school? Also, should applicants for potential SRO grants be required to submit a signed memorandum of understanding that outlines the responsibilities of the SRO? If there are concerns about the presence of SROs resulting in more children being arrested for minor offenses, should there be a limitation on what SROs can do while working at a school? If limitations are placed on the role of SROs, would placing an officer at a school represent the most effective use of the officer's time? Should funding for school safety programs be awarded to schools that have higher rates of reported violent incidents or should funding be distributed to law enforcement agencies or LEAs based upon a formula? If Congress adopts the Administration's proposal and provides funding for the Comprehensive School Safety Program, would requiring local jurisdictions to submit a comprehensive school safety plan prove to be too onerous a task for some jurisdictions, thereby limiting who would be able to apply for funding? On the other hand, might it provide an indication of which jurisdictions are the best suited for implementing comprehensive school safety programs? Should applicants for any potential funding for school safety programs be required to submit a plan for how they will continue funding the program after federal funding ends? Should priority be given to applicants who can continue to operate programs after the grant expires? If grants are awarded for hiring SROs, should grant recipients be required to submit data that could be used to analyze the effectiveness of SRO programs and their effect on the educational environment? For example, should grant recipients be required to submit data on reported crimes and arrests of students both before and after an SRO is assigned to the school? If so, what if the school district already has a working relationship with the local law enforcement agency and wants to use a grant to permanently assign an officer or officers to one or more schools? Would such a school district be prohibited from receiving a grant for hiring an SRO since it could not provide unbiased baseline data? Would school districts that could not provide baseline data be prohibited from applying for grants? Data on Police Departments and Sheriff's Offices Referenced in the Report This appendix provides tables for some of the data referenced in the body of the report. Table A-1 and Table A-2 provide data on the percent of police departments and sheriff's offices using SROs, the total number of officers and deputies who were assigned to work as SROs, and the average number of SROs by the size of the jurisdiction served.

Some policymakers have expressed renewed interest in school resource officers (SROs) as a result of the December 2012 mass shooting that occurred at Sandy Hook Elementary School in Newtown, CT. SROs are sworn law enforcement officers who are assigned to work in schools. For FY2014, the Administration requested $150 million in funding for a Comprehensive Schools Safety Program under the Community Oriented Policing Services (COPS) program. Congress appropriated $75 million for a Comprehensive School Safety Initiative. Congress required the National Institute of Justice (NIJ) to collaborate with key partners from law enforcement, mental health, and education disciplines to develop and publish a comprehensive strategy and model for school safety. Within the amount provided, $50 million is for pilot programs to improve school safety consistent with the school safety model published by the NIJ. The remaining $25 million is for research and evaluation into potential root causes of school violence. Data from the Bureau of Justice Statistics show that the number of full-time law enforcement officers employed by local police departments or sheriff's offices who were assigned to work as SROs increased between 1997 and 2003 before decreasing slightly in 2007 (the most recent year for which data are available). Data show that a greater proportion of high schools, schools in cities, and schools with enrollments of 1,000 or more report having SROs. Two federal grant programs promoted SRO programs: the COPS in Schools (CIS) program, which was funded until FY2005, and State Formula Grants under the Safe and Drug Free Schools and Communities Act (SDFSCA), which was funded until FY2009. The CIS program provided grants for hiring new, additional school resource officers to conduct community policing services in and around primary and secondary schools. Local educational agencies could use funds they received under the SDFSCA State Formula Grant program for, among other things, hiring and training school security personnel. The body of research on the effectiveness of SRO programs is limited, both in terms of the number of studies published and the methodological rigor of the studies conducted. The research that is available draws conflicting conclusions about whether SRO programs are effective at reducing school violence. Also, the research does not address whether SRO programs deter school shootings, one of the key reasons for renewed congressional interest in these programs. There are several questions Congress might consider in the context of grant funding specifically for SRO programs. Does the current level of school violence warrant congressional efforts to expand the number of SROs in schools across the country? Data suggest that schools are, generally speaking, safe places for children. During the 2010-2011 school year there were 11 reported homicides of children at school. The number of youth homicides that occurred at school remained less than 2% of the total number of homicides of school aged children for each school year going back to the 1992-1993 school year. In 2010, fewer children reported being the victim of a serious violent crime or a simple assault while at school compared to 1994. However, data also show that some schools—namely middle schools, city schools, and schools with a higher proportion of low-income students—have higher rates of reported violent incidents, and schools with a higher proportion of low-income students had higher rates of reported serious violent incidents. Is funding for a wide-scale expansion of SRO programs financially sustainable? If Congress expanded the number of SROs through additional federal funding, it is likely that many of those officers would go to law enforcement agencies serving jurisdictions of fewer than 25,000 people (data show that nearly 88% of police departments and almost half of sheriff's offices serve jurisdictions of fewer than 25,000 people). Traditionally, COPS grants have provided "seed" money for local law enforcement agencies to hire new officers, but it is the responsibility of the recipient agency to retain the officer(s) after the grant expires. Since smaller law enforcement agencies tend to have smaller operating budgets and smaller sworn forces, retaining even one or two additional officers after a grant expired might pose a significant financial burden. Would additional SROs result in more children being placed in the criminal justice system? Research in this area is limited to a small number of studies, but these suggest that children in schools with SROs might be more likely to be arrested for low-level offenses. On the other hand, some studies indicate that SROs can deter students from committing assaults on campus as well as bringing weapons to school. Schools with SROs may also be more likely to report non-serious violent crimes (i.e., physical attack or fights without a weapon and threat of physical attack without a weapon) to the police than schools lacking SROs.

Background The Railroad Retirement Act authorizes retirement, survivor, and disability benefits for railroad workers and their families. The Railroad Retirement Board (RRB), an independent federal agency, administers these benefits. Workers covered by the RRB include those employed by railroads engaged in interstate commerce and related subsidiaries, railroad associations, and railroad labor organizations. These benefits are earned by railroad workers and their families in lieu of Social Security. Railroad retirement benefits are divided into two tiers. Tier I benefits are generally computed using the Social Security benefit formula, on the basis of earnings covered by either the Railroad Retirement or Social Security programs. In some cases, RRB Tier I benefits can be higher than comparable Social Security benefits. For example, RRB beneficiaries may receive unreduced Tier I retirement benefits as early as aged 60 if they have at least 30 years of railroad service; Social Security beneficiaries may receive unreduced retirement benefits only when they reach their full retirement ages, currently rising from aged 65 to 67. RRB Tier II benefits are similar to private pension benefits and are based only on railroad work. The Tier I railroad retirement benefit that is equivalent to Social Security benefits is mainly finance by Tier I payroll taxes (typically the same rate as the 12.4% Social Security payroll tax) and Social Security's financial interchange transfers. Tier II benefits, Tier I benefits in excess of Social Security benefits, and supplemental annuities are mainly financed by Tier II payroll taxes (currently 13.1% on employers and 4.9% on employees) and transfers from the National Railroad Retirement Investment Trust (NRRIT; hereinafter, the Trust). History of the Trust Beginning in 2002, Tier II tax revenues in excess of obligatory benefits and associated administrative costs have been transferred from the Railroad Retirement Accounts to the Trust, which is invested in private stocks, bonds, and other investments. Prior to the Railroad Retirement and Survivors' Improvement Act of 2001 (RRSIA; P.L. 107-90 ), surplus railroad retirement assets could be invested only in U.S. government securities—just as the Social Security trust funds must be invested. The RRSIA established the Trust to manage and invest assets in the Railroad Retirement Account in much the same way that the assets of private-sector retirement plans are invested. The RRB also receives transfers from the Trust, as needed, to pay railroad retirement and survivor benefits. Assets in the Social Security Equivalent Benefits Account, which are used for RRB Tier I benefits that are equivalent to Social Security benefits, continue to be invested solely in U.S. government bonds, as required by law. Since February 2002 when railroad retirement funds were first invested through the Trust, a total of $21.3 billion has been transferred to the Trust from the RRB, and $21.1 billion in earnings have been transferred from the Trust to the RRB to pay railroad benefits and administrative expenses. From its inception to the end of FY2017, the Trust has earned a total of $26.3 billion. At the end of FY2017, the market value of the Trust's managed assets was $26.5 billion. Structure of the Trust Independence Congress structured the Trust to be independent and free of political interference. As such, the Trust is a tax-exempt entity independent of the RRB and is not part of the federal government. It has no responsibilities for administering RRB benefits. The Trust's trustees are required to act solely in the interest of the RRB and the railroad retirement system participants. The fiduciary rules governing the trustees are similar to those required by the law that governs the private pension system, the Employee Retirement Income Security Act (ERISA). The board of the Trust is made up of seven trustees who have expertise in managing financial investments and pension plans. Three of the trustees are selected by railroad labor unions, three by railroad management, and one by the other six trustees. Each trustee serve a three-year term. A professional staff handles the Trust's day-to-day operations. Independent investment managers invest the Trust's assets according to the investment guidelines established by the trustees. Each investment manager may control no more than 10% of the Trust's assets; must vote all proxies he or she holds in the Trust's portfolio in the sole interest of railroad retirement participants and beneficiaries; must certify each year that all proxies have been voted in the sole interest of railroad retirement participants and beneficiaries; and must record votes and provide them to the Trust upon request. Goals Congress designed the Trust to increase RRB funding. Investing railroad retirement funds in private markets was expected to yield higher average annual returns than investing solely in government securities. The higher returns were intended to pay for the enhanced benefits that were established in the RRSIA and to potentially reduce future tax rates for railroad employers and employees. Impact on Railroad Retirement Tier II Tax Rates Under the RRSIA, Tier II taxes on both employers and employees are automatically adjusted according to the average account benefits ratio. The average account benefits ratio (ABR) is the average of the 10 most recent annual ABRs. The ABR is the ratio of the combined fair market value of Railroad Retirement Account and Trust assets as of the close of the fiscal year to the total RRB benefits and administrative expenses paid from the Railroad Retirement Account and the Trust in that fiscal year. A higher average ABR will result in a lower Tier II tax rate and consequently lower future tax income, whereas a lower average ABR result in higher Tier II tax rates and income. Depending on the average ABR, Tier II taxes for employers can range between 8.2% and 22.1% and the Tier II tax rate for employees is capped at 4.9%. Since the Trust's inception, Tier II tax rates have been lowered twice and increased twice (see Figure 1 ). In 2005, the Tier II tax rate on employers was automatically lowered from 13.1% to 12.6% and the tax rate on employees was lowered from 4.9% to 4.4%. Tier II tax rates were lowered again in 2007 to 12.1% on employers and 3.9% on employees. In 2013, tax rates were raised to 12.6% and 4.4% on employers and employees, respectively, and in 2015, the rates were raised to their current levels of 13.1% on employers and 4.9% on employees. The maximum amount of earnings subject to Tier II taxes is $98,700 in 2019. Investment Guidelines The Trust's assets are invested in a diversified portfolio, both to minimize investment risk and avoid disproportionate influence over a particular industry or firm. The investment guidelines adopted by the trustees include target asset allocations developed by the Trust's investment staff in consultation with an independent investment advisory firm. Outside investment managers hired by the Trust invest the assets according to these guidelines. The resulting investment performance is monitored by the trustees and the Trust's Chief Investment Officer. The Trust's target asset allocations change over time to reflect current market expectation (see Figure 2 ). For example, over the past decade, the Trust has continued its effort in moving away from fixed income investment, with a decline from 35 % of total investments in FY2006 to 20% in FY2017. The target proportion of total investments in equity—domestic, international, and private equity—has been relatively stable between FY2006 and FY2017, ranging from 54% to 58%. The percentage of total investments in private equity increased from 5% in FY2006 to 10% in FY2008, and remained at this level thereafter. At the same time, fixed income was reduced and investments into real assets, cash, and absolute return assets were increased. The investment in real assets, including real estate and commodities, increased from 10% of total investments in FY2006 to 15% in FY2008 and then the proportion remained relatively stable. Cash and absolute return investments were adopted in FY2011, and they have accounted for around 10% of total investments since then. The current investment guidelines are shown in detail in Table 1 . Oversight The Trust is an independent nongovernmental entity, and it is not subject to the same oversight as federal agencies. The RRSIA outlines specific reporting requirements, including an annual management report to Congress. The report must include a statement of financial position, a statement of cash flows, a statement on internal accounting and administrative control systems, and any other information necessary to inform Congress about the operations and financial condition of the Trust. The financial statements must be audited by independent public accountants. A copy of the annual report and audit must be submitted to the President, the RRB, and the Director of the Office of Management and Budget (OMB). The RRB has the authority to bring a civil action to enforce provisions of the act. Over the past decade, the RRB Office of Inspector General (OIG) has expressed concerns about the effectiveness of the oversight of the Trust. In 2008, the OIG argued that the annual financial audit required "is not adequate to support the RRB's enforcement responsibility because such audits are not intended to provide information about all areas of risk that could indicate the need for enforcement action." The OIG noted that there are fewer safeguards protecting the Trust than there are for the retirement investments of federal government and private-sector workers. For example, there is no requirement for performance audits of the Trust, which would assess program effectiveness, economy and efficiency, internal control, and compliance with the law. In 2011, the OIG reiterated its concerns with the oversight of the Trust and stated, The lack of NRRIT investment fund management accountability, transparency, and stringent financial oversight can be precursors to fraud, waste and abuse. Within the Federal agency spectrum there is no comparable example where Federal program assets are completely outside the jurisdiction of a Federal agency's appointed Inspector General. However, the NRRIT fund which supports the Railroad Retirement program remains outside the purview of those appointed to protect the interests of the program's beneficiaries and the tax-paying public. In a recent report in FY2018, the OIG asserted that lack of access to the Trust's auditor continued to be a concern, This lack of cooperation and communication prevents OIG auditors from obtaining sufficient appropriate audit evidence regarding the RRB's financial statements….During fiscal year 2014, [OIG] recommended that an independent committee be established to identify a functional solution that would enable communication between OIG and NRRIT's auditors. Although RRB management did not concur with this recommendation, [OIG] will continue to cite this issue and the need for corrective action. Accounting in the Federal Budget As required in the RRSIA, Trust purchases and sales initially were treated as exchanges of assets of equal value, thus did not produce direct budgetary cost or income. The law did not prescribe the treatment of unrealized capital gains and losses on the Trust's investments. The Congressional Budget Office (CBO) and OMB agreed that any capital loss or gain resulting from changes in market prices would be recognized in the year in which the price change occurs, and interest payments and dividends would be recorded as offsetting receipts. As a result, income and capital gains reduce outlays and the deficit, and losses increase them. This reflects the change in real economic resources available to the government as the value of the Trust changes. As for future performance, both CBO and OMB use risk-adjusted rate of return assumptions—that is, they assume that the Trust's investments will earn the comparable Treasury bond rate. Performance of the Trust To date, the Trust's average annual performance slightly exceeds expectations expressed by the RRSIA's drafters, which had assumed that Trust investments would earn an average annual rate of return of 8.0%. From FY2003 to FY2017, the Trust's annual rates of return, net of fees, have averaged 8.3%. For the first half of the Trust's existence, its returns largely exceeded expectations. Prior to FY2008, the average rate of return on Trust investments was 14.7% and the average rate of return exceeded the expected rate of 8.0% through FY2010. The Trust then had negative rates of return in FY2008 (-19.1%) and FY2009 (-0.7%) but rebounded with an 11.2% rate of return in FY2010 followed by a slightly negative rate of return of -0.1% in FY2011. The FY2012 rate of return of 16.4% brought the average annual rate of return of the Trust above the expected level of 8.0% for the first time in two years (since FY2010). The rate of return was 13.4% in FY2017. Comparison to Benchmarks The Trust's annual rates of return have generally compared favorably to its benchmarks. A benchmark is a standard used for comparison when measuring investment performance, and the NRRIT strategic policy benchmark is based on a series of benchmarks corresponding to each of the major asset classes in the Trust. For example, the current benchmark for the Trust's investments in domestic equities is the Russell 3000 Index. As shown in Figure 3 , in the majority of years between FY2003 and FY2017, Trust performances exceeded its strategic policy benchmarks. In FY2006 and FY2007, the Trust's performances was roughly equal to its benchmarks, whereas in FY2008, FY2009, FY2011, and FY2016, the Trust's investments had lower returns than its strategic policy benchmarks. In FY2017, the Trust's rate of return of 13.4% (net of fees) exceeded the benchmark of 12.3%. Administrative Expenses The Trust's administrative expenses steadily increased through FY2011 as its investment portfolio diversified. However, as shown in Table 2 , beginning in FY2012, the Trust's administrative expense ratio decreased, mirroring a national trend of decreasing expense ratios for mutual and money market funds. The Trust's administrative expenses remain low compared with industry standards. In FY2017, the Trust's expense ratio was 31 basis points (expenses were 0.31% of average net assets). In comparison, in 2017, average expense ratios were 59 basis points for equity funds, 48 basis points for bond funds, 70 basis points for hybrid funds, and 25 basis points for money market funds.

The Railroad Retirement Board (RRB), an independent federal agency, administers retirement, survivor, disability, unemployment, and sickness insurance for railroad workers and their families. Railroad retirement payroll taxes include two tiers—Tier I and Tier II taxes. The Tier I tax finances the Tier I railroad retirement benefit that is equivalent to Social Security benefits and the Tier II tax finances the Tier II benefit, Tier I benefits in excess of Social Security benefits, and supplemental annuities. Since 2002, Tier II tax revenues in excess of obligatory RRB benefits and associated administrative costs have been invested in private stocks, bonds, and other investments. Prior to the Railroad Retirement and Survivors' Improvement Act of 2001 (RRSIA; P.L. 107-90), surplus railroad retirement assets could only be invested in U.S. government securities—just as the Social Security trust funds must be invested. The RRSIA established the National Railroad Retirement Investment Trust (NRRIT; hereinafter, the Trust) to manage and invest part of the RRB's assets in much the same way that the assets of private-sector and most state and local government pension plans are invested. The remainder of RRB's assets continues to be invested solely in U.S. government securities. Congress structured the Trust in an effort to ensure investment independence and limit political interference. It also aimed to increase railroad retirement system funding, add enhanced benefits, potentially reduce taxes, and protect system financing in case of market downturns. The Trust's assets are invested in a diversified portfolio, both to minimize investment risk and avoid disproportionate influence over an industry or firm. The Trust is a tax-exempt entity independent of the federal government, and it is not subject to the same oversight as federal agencies. However, the RRSIA requires an annual management report to Congress. From its inception in February 2002 to September 30, 2017, $21.3 billion has been transferred to the Trust from the RRB and $21.1 billion has been transferred from the Trust to pay railroad retirement benefits. At the end of FY2017, the net asset value of the Trust was $26.5 billion. The Trust's investments have generally followed the markets' recent performance. From FY2003 to FY2017, the Trust's annual returns averaged 8.3%, slightly higher than expectations of the bill's drafters, who assumed nominal annual returns of 8.0%. As the Trust's investment portfolio diversified over time, its administrative expenses steadily increased, to 36 basis points in FY2011, but fell to 31 basis points in FY2017, and remain low when compared with other mutual funds. The combined fair market value of Tier II taxes and Trust assets is designed to maintain four to six years' worth of RRB benefits and administrative expenses. To maintain this balance, the Railroad Retirement Tier II tax rates automatically adjust as needed. This tax adjustment does not require congressional action. The Railroad Retirement Tier II tax rates increased in 2013 and most recently in 2015.

Major Provisions of Even Start The Even Start Family Literacy program, authorized by ESEA Title I, Part B, provides education and related services jointly to disadvantaged parents and their young children. The purpose of the program is to integrate early childhood education, adult basic education, and parenting skills education into a "unified family literacy program" (ESEA Section 1201). An assumption underlying Even Start is that children whose parents have low literacy or basic education levels are more likely to be educationally successful if, in addition to receiving early childhood instruction themselves, their parents receive educational services plus instruction in how to help their children learn. Further, parents may be more motivated to participate in adult basic education programs if one of the purposes of such education is to support their children's educational development. While some other federal education programs—such as ESEA Title I, Part A programs—also provide services to both disadvantaged young children and their parents, Even Start is the only federal program specifically dedicated to this purpose. Under the Even Start legislation, the U.S. Department of Education (ED) is authorized to make grants to states for assistance to eligible entities—consisting of a local educational agency (LEA) in collaboration with a community based organization, institution of higher education, or other agency or nonprofit organization—for joint programs of education for children aged 0-7 years and their parents. In each participating family, at least one parent must be eligible to be served under the Adult Education Act (AEA)—i.e., not enrolled in school and not a high school graduate (or equivalent)—or, if a LEA provides the basic education component of the program, services may be provided to parents who are within the compulsory school age range for their state. Even Start program services must include adult literacy instruction, early childhood education, instruction to help parents support their child's education, recruitment, screening of parents, staff training, and home-based instruction. In addition, child care and transportation services may be provided, if these services are necessary and other funding sources are not available. Typically, Even Start programs do not directly provide all of these services, rather they establish networks of service providers, including Head Start programs and grantees under the AEA. Even Start programs must be coordinated with other programs with similar purposes, operate year-round, and be independently evaluated. Five percent of Even Start funds is reserved for programs serving migrant children plus the outlying areas and Indian tribes; and up to 3% is reserved for a national evaluation, technical assistance, and program improvement. Remaining appropriations provide Even Start grants to the states in proportion to ESEA Title I, Part A grants, with a state minimum of the greater of 0.5% of all grants, or $250,000. Up to 6% of state grants may be used for state administration and technical assistance. Local grants are made by state educational agencies (SEAs) based on recommendations by a review panel, consisting of an early childhood education specialist, an adult education specialist, and at least one additional member. Programs are to be in areas with high rates of poverty, illiteracy, unemployment, limited English proficiency, or disadvantaged children. Even Start grants are to be made for a period of up to four years, and may be renewed for up to four additional years. States receiving Even Start grants are required to develop "indicators of program quality," to be used to monitor and improve Even Start programs in the state, and to determine whether to continue funding local programs. P.L. 106-554 , Title XVI, requires states to submit to ED their quality indicators for Even Start programs to be eligible for continued funding under the program. The federal share is generally limited to 90% for the first year, declining to 50% for the fifth, sixth and seventh years, and 35% for subsequent years. The federal share limitation may be waived if an entity would not otherwise be able to participate. Funding for the Even Start program grew from $14,820,000 in FY1989, the program's initial year, to $225,094,720 for FY2005 (including the FY2005 across-the-board reduction). The program's funding was significantly reduced to $99,000,000 in FY2006. See Table 1 for the program's complete funding history. This decrease in funding is likely to continue in FY2007. For FY2007, the Administration has requested no funding, the House Committee on Appropriations has recommended $70 million in funding, and the Senate Committee on Appropriations has recommended no funding. Program Participants, Services, and Outcomes Participants Even Start has grown from 76 local programs serving approximately 2,500 families in 1989-1990 to 855 programs serving approximately 32,000 families in 2000-2001. The most recent available data (2000-2001) are based on program data for a period prior to changes required in the 2000 reauthorization of Even Start. These data indicate that Even Start programs tend to target families with children under age 5; 40% of participating children were 0-2 years old and 28% were 3-4 years old. The parents in the families served generally have low levels of education; for example in 2000-2001, 44% of parents had a 9 th grade or less level of education upon entering the program. Further, the income of participating families is typically quite low—84% of families had income below the federal poverty level. Only 23% of participating parents in 2000-2001 were employed. The share of participants who are Hispanic was 46% in 2000-2001, while 30% were white, 19% were African American, and the remaining 7% were Asian, Native American, Hawaiian, or Multi-Racial. The percentage of participants from non-English-language backgrounds is high—45% of new Even Start enrollees speak English as a second language. The top four reasons given by parents for enrolling in Even Start were a desire to improve their educational status (get a GED), their parenting skills, their ability to be a better teacher of their child, and their children's chance of future school success. Services Provided In most cases, Even Start programs do not directly provide all of the required services; rather they coordinate and integrate services provided by other agencies, especially early childhood education provided by Head Start or state preschool programs, or adult basic education provided by AEA grantees. The services most often provided directly by Even Start programs are early childhood education and parenting skills education. In addition to the core services that all Even Start programs must provide, the support services most often provided are child care, meals, transportation, and social services. The average federal budget for Even Start programs surveyed in 2000-2001 was $175,439. The average federal Even Start program expenditures per participating family was $4,708 in 2000-2001. The rates of actual participation in various Even Start activities by the families being served in 2000-2001 were 84% for adult education, 89% for parenting education and parent-child joint activities, and 95% for early childhood education; with 82% of families participating in all core services. Maintaining the intensity of services and rates of participation continue to be an issue—about half of the Even Start families who joined Even Start between 1997-1998 and 2000-2001 left the program within 10 months. In 2000-2001, 17% of families who left Even Start did so because they had completed their education goals under the program. The majority of participants who left did so because of job conflicts, relocation, motivational issues, and other concerns (such as poor health, homelessness, etc.). Evidence from the research literature has indicated that children who participate in intensive high-quality services score higher on literacy measures. And, evidence from national Even Start evaluations has indicated that families participate more when more intensive services are offered. As a consequence Even Start projects have increased the amount of early childhood education and adult education services offered. However, most Even Start parents do not use all the hours of services available for themselves and their children. For example, in 2000-2001, on average, children birth to two received 30% of the service hours made available. For children aged 3 and 4, 5, and school-aged, the averages were 37%, 44%, and 62%, respectively. Outcomes The most recent national Even Start evaluation, for 2000-2001, was based on two data sources—an experimental design study (EDS) that tracked 18 projects that agreed to randomly assign new families to Even start or a control group; and, the Even Start Performance Information Reporting System (ESPIRS) which tracks annual data from the universe of Even Start projects. Although families participating in the EDS were randomly assigned to control and Even Start groups, the 18 projects participating were not randomly selected. The EDS families were more likely than Even Start families as a whole to be Hispanic (75% versus 46%), and to be participating in Even Start projects in urban areas (83% versus 55%). The national evaluation collected data on 41 different outcome measures for the families participating in the EDS. The results indicated that the Even Start children and their parents did not perform better than the control group children and their parents. Even Start children and their parents made gains in literacy and other measures, but so did control group parents and children: The data show that children and parents in the control group made the same kinds of gains on literacy assessments, on parent reports of child literacy, on parent-child reading, on literacy resources at home, on family economic self-sufficiency, and so on, that were seen for Even Start families. The only area in which Even Start children did significantly better than control group children was in teacher reports of behavior problems for elementary school aged children. Legislation P.L. 107-110 (the No Child Left Behind Act of 2001), the Elementary and Secondary Education Act reauthorization legislation, which was signed into law on January 8, 2002, moved the William F. Goodling Even Start Family Literacy Programs from Title I Part B of the ESEA, to Subpart 3 of Title I Part B of the No Child Left Behind Act of 2001. The only change to the program was an amendment allowing states to use funds for state-level activities to improve the quality of family literacy services provided (in addition to other previously authorized uses). The Even Start program was reauthorized in the 106 th Congress in H.R. 4577 , the Departments of Labor, Health and Human Services, Education, and Related Agencies Appropriations Act for FY2001, signed into law as P.L. 106-554 . ESEA Title I, Part B was renamed the William F. Goodling Even Start Family Literacy Programs, and was reauthorized for five years beginning with an authorization of $250 million for FY2001. The reauthorizing language is largely the same as language contained in the Literacy Involves Families Together Act, H.R. 3222 (Goodling), which was passed by the full House on September 12, 2000. However, language in H.R. 3222 specifying that religious organizations should be treated the same as other nongovernmental organizations in the awarding of subgrants was not included in the final reauthorization language. In addition, the Inexpensive Book Distribution Program was not moved to the Even Start program in H.R. 4577 ; state grants for state administration and technical assistance were increased from 5% to 6% (grants for administration may not exceed half of the total); and states are required to submit to ED their quality indicators for Even Start programs to be eligible for continued funding under the program. The Literacy Involves Families Together Act, H.R. 3222 (Goodling), was introduced in the House on November 4, 1999 and referred to the House Committee on Education and the Workforce. H.R. 3222 was reported by the full Committee on February 29, 2000; it was passed by the full House on September 12, 2000. H.R. 3222 proposed authorizing $250 million in funding for Even Start for FY2001, and proposed to: Rename Section 1202, Part B: "The William F. Goodling Even Start Family Literacy Programs"; Require more stringent qualifications and standards for staff paid out of Even Start funds; Permit Even Start programs to serve children aged 8 or older if services are provided in collaboration with ESEA Title I, Part A programs; Authorize states to use a share of their grants to improve the quality of services provided by local grantees whose services have been of low quality, and to permit states to provide technical assistance to help local programs of demonstrated effectiveness to "access and leverage additional funds"; Require grantees to use instructional programs "based on scientifically based reading research" for children (including reading readiness activities for preschool children), and if possible, for adults; Would have added to the list of indicators of an area's need for a program: whether an area has a high percentage of parents who have been victims of domestic violence, or who are receiving assistance under a state program funded under Part A of Title IV of the Social Security Act; Reserve not more than 3% of funds appropriated for Even Start to provide technical assistance to, and to carry out an independent evaluation of, programs receiving Even Start assistance; Increase the amount of funds reserved for migrant programs, outlying areas and Indian tribes from 5% to 6%, if the amount appropriated for the program exceeds $200 million; Specify that no state shall award a subgrant for less than $52,500 in the ninth and subsequent years; Provide for a one-time coordination grant for each eligible state in the amount of: the lesser of $1 million or the amount the appropriation for Even Start exceeds the previous year's appropriation; Require Even Start programs to employ "continuing use of evaluation data for program improvement," and to provide information on how their plan "provides for rigorous and objective evaluation of progress toward" meeting the program's stated objectives; Reserve, in years in which the current year's appropriation for Even Start exceeds that of the previous year: "the lesser of $2 million or 50% of the increase in total Even Start appropriations each year" to be used by the National Institute for Literacy to conduct, through "an entity ... that has expertise in carrying out longitudinal studies of the development of literacy skills in children": scientifically based reading research on adult literacy and helping parents support the literacy development of their children; Move the Inexpensive Book Distribution Program from ESEA Title X, Part E, and add it as Title II under this act; with an authorization of $20 million; Amend the definition of an eligible entity to include "a religious organization." Specify that religious organizations shall be treated the same as other nongovernmental organizations in the awarding of subgrants, but an Even Start program may not subject a participant to "sectarian worship or instruction or proselytization." Provide that no services may be "provided by voucher or certificate" and, that "for purposes of any Federal, State or local law, receipt of financial assistance under this part of Section [1029(b)] shall constitute receipt of Federal financial assistance or aid." On January 19, 1999, the Educational Opportunities Act, S. 2 (Jeffords), was introduced in the Senate and referred to the Committee on Health, Education, Labor and Pensions. S. 2 was reported by the full Committee on April 12, 2000. This bill would have, among other things, authorized $500 million for Even Start for FY2001 and would have amended Even Start to: Permit Even Start programs to serve children aged 8 or older in collaboration with ESEA Title I, Part A programs; Authorize states to use a share of their grants to improve the quality of services provided by local grantees; Require the use of instructional methods "based on scientifically based reading research" for children and, if possible, for adults; Reserve up to 3% of funds for technical assistance and an independent evaluation; Increase the funds reserved for migrants outlying areas and Indians from 5% to 6%, if appropriations exceed $250 million; and Require Even Start programs to "use methods to ensure that participating families successfully complete the program;" and Require each state that wishes to receive an Even Start grant to submit a plan specifying indicators of program quality and the state's plan for ensuring each funded program fully implements Even Start requirements, describe how the state will conduct subgrant competitions, and describe how it will coordinate resources to improve statewide family literacy services.

The Even Start program provides education and related services jointly to parents lacking a high school diploma (or equivalent) and their young children. Even Start services include basic academic instruction and parenting skills training for the adults, and early childhood education for their children, along with necessary supplementary services such as child care or transportation. Generally, Even Start programs do not directly provide all of these services; rather, they establish networks of service providers, including Head Start programs and grantees under the Adult Education Act (AEA). Even Start is the only federal program specifically dedicated to providing services to both disadvantaged young children and their parents. The families served by Even Start programs are highly disadvantaged, with very low levels of education and income, and increasing proportions of them have limited English language skills. The Even Start program was reauthorized in the 106th Congress, in P.L. 106-554, the Departments of Labor, Health and Human Services, Education, and Related Agencies Appropriations Act for FY2001. ESEA Title I, Part B was renamed the William F. Goodling Even Start Family Literacy Programs and was reauthorized for five years beginning with an authorization of $250 million for FY2001. The reauthorizing language is largely the same as language contained in the Literacy Involves Families Together Act, H.R. 3222 (Goodling), which was passed by the full House on September 12, 2000. However, language in H.R. 3222 specifying that religious organizations should be treated the same as other nongovernmental organizations in the awarding of subgrants was not included in the final reauthorization language. P.L. 107-110 (the No Child Left Behind Act of 2001), the Elementary and Secondary Education Act reauthorization legislation, which was signed into law on January 8, 2002, moved the William F. Goodling Even Start Family Literacy Programs from Title I Part B of the ESEA to Subpart 3 of Title I Part B of the No Child Left Behind Act and extended the authorization period through FY2007. The only change to the program was an amendment allowing states to use funds for state-level activities to improve the quality of family literacy services provided (in addition to other previously authorized uses). The Even Start program's funding was reduced to $99 million for FY2006 (including the FY2006 across-the-board reduction). For FY2007, the Administration has requested no funding for the program, the House Committee on Appropriations has recommended $70 million in funding for the program, and the Senate Committee on Appropriations has recommended no funding for the program.

Overview of Multifamily and Commercial Finance Multifamily mortgages finance a significant share of the nation's housing stock. Multifamily housing includes traditional apartment buildings, subsidized housing, seniors housing, and student housing. Approximately 34% of households live in rental housing, and 41% of renters live in multifamily (five or more units) structures. Overall, 14% of households live in multifamily apartments. Rental property ownership varies with the number of units in the property. Individuals own a greater share of small- and medium-sized rental projects: approximately 83% of 2- to 4-unit rental properties and 49% of 5- to 49-unit rental properties are owned by individual investors. Partnerships and limited liability companies own 72% of 50 plus-unit projects. Since 2011, investment pools have increased their activity and have begun to own larger shares of single family rentals in select markets. Business investor purchases of single-family homes are relatively small, but have grown from approximately 1% of sales in 2004 to approximately 6.5% of 2012 sales. Multifamily and commercial mortgages are very similar, but both differ from a single-family, owner-occupied mortgage in many ways: The multifamily and commercial mortgage markets are much smaller than the single-family market. At the end of the third quarter of 2013, there were $908 billion of multifamily mortgages, $2,233 billion of commercial mortgages, and $9,864 billion of single-family mortgages. Individual multifamily and commercial mortgages are much larger than a typical single-family mortgage. Multifamily and commercial mortgages frequently are for millions of dollars while single-family mortgages typically are for hundreds of thousands of dollars. Many multifamily mortgages, especially large ones purchased by Fannie Mae and Freddie Mac, are non-recourse, which means in the event of foreclosure the borrower's liability is limited to the property; home mortgage recourse varies by state. Commercial mortgages are similar in these regards to multifamily mortgages, except that Fannie Mae and Freddie Mac cannot purchase commercial mortgages. Multifamily and commercial mortgages commonly have adjustable interest rates. Most single-family mortgages have fixed interest rates. Multifamily and commercial mortgages usually have prepayment penalties, but single-family mortgages do not. Multifamily and commercial mortgages are not structured to be paid off over the life of the mortgage, and are usually refinanced at the end of the mortgage. Single-family mortgages are paid off over the term of the mortgage, and are most commonly refinanced only when paid off early. Multifamily and commercial mortgages frequently have a life of 7-10 years, although FHA multifamily mortgages can have longer terms. Single-family mortgages are most commonly for 30 years. Multifamily and commercial mortgage applications are underwritten on the rent collected, not on owner incomes. Multifamily and commercial financing is likely to be customized based on the project, the borrower, and the lender. It can include various types of credit enhancements such as letters of credit, insurance, cash reserve accounts, sinking funds to finance major repairs, and over-collateralization. Single-family mortgages are much more standardized. Multifamily, commercial, and single-family underwriting share some characteristics: All use the loan-to-value ratio as one measure of risk to the lender. All use the ratio of the mortgage payments to income (owner in the case of owner-occupied, project in the case of multifamily) as a measure of ability to pay. Commercial and multifamily property is purchased as a business investment to earn a profit, whereas owner-occupied homes are purchased primarily for shelter. If the rate of profit on a project is greater than the cost of borrowing, profitability can be increased—at the cost of increased risk—by increasing leverage, that is, by borrowing more of the money required to finance the project. Financial analysis of a proposed investment weighs the expected profits against the risks. For example, a lender will seek a higher profit on riskier mortgages to compensate for the risk of a loss. When a specific potential borrower appears to present elevated risk levels, the lender either quotes a higher mortgage rate, adds terms and conditions to reduce the risk, or, in the extreme case, declines to make the loan. The risk to a lender can be reduced by requiring the commercial or multifamily borrower to contribute more money to the purchase (i.e., make a larger downpayment) or by requiring some sort of credit enhancement, such as a third-party guarantee. In some situations, credit risk can be reduced by making the loan for a shorter period of time. Balloon payments in commercial or multifamily mortgages occur because the borrower's payments do not fully amortize the loan. This allows the same amount of cash flow to support a larger mortgage and the real estate owner to purchase more property with the same assets. The balloon payments in commercial or multifamily mortgages are sometimes called "soft bullets" and "hard bullets." A soft bullet allows the borrower the option to extend the life of the mortgage, perhaps at a higher interest rate, but a hard bullet does not allow extension. Most the time the soft bullet option is not exercised and the mortgage is refinanced. The shorter term for multifamily and commercial mortgages coupled with prohibitions or financial penalties for prepayment provide both borrower and lender with greater cash flow certainty. Prepayments are a risk for lenders because borrowers tend to prepay when interest rates have declined, leaving the lender to replace the prepaid mortgage with a lower interest rate mortgage. In general, lenders prefer to make loans with contractual prohibitions on prepayments, expensive penalties for prepayments, or higher interest rates. A borrower generally prefers terms that allow prepayments without penalties and without a higher interest rate to compensate the lender. Most single-family mortgages can be prepaid without penalty, but multifamily and commercial mortgages commonly require a borrower wishing to remove the lien on property (the equivalent of prepaying the mortgage) to give the lender U.S. Treasury bonds to match the cash flow of the mortgage. (This is called defeasance.) This replaces the risky mortgage payments with riskless Treasury bonds paying the same interest rate; the borrower usually finds it more advantageous not to prepay. In addition, the shorter multifamily and commercial mortgage life reduces the incentive for the borrower to prepay because there is less time to reap the benefits of the lower interest rate. The shorter mortgage life provides an opportunity for the property owner to increase leverage when refinancing. The nonrecourse feature of most multifamily and commercial mortgages shifts some of the costs of foreclosure from the borrower to the lender. In the event of foreclosure, if the property is sold for less than the amount owed, the lender has no further remedy. If a loan is made with recourse, the borrower (corporate or individual) is responsible for the balance owed. Reserve accounts are often required for multifamily and commercial mortgages and are an expansion of the escrow requirements that single-family mortgages typically contain. A homeowner makes monthly payments for property taxes and property insurance into an escrow account. A commercial or multifamily reserve account may have these and also payments for major items such as a new roof or heating, ventilation, and air conditioning system. Sometimes these accounts are set based on the specific property, and sometimes a rule of thumb is employed using the property's rents or square footage. Current Concerns and Legislation As financial markets continue to recover from the December 2007-June 2009 recession, congressional interest has turned from concerns about the impact of losses in multifamily and commercial mortgages on financial stability to reforming the single-family and multifamily mortgage markets. One key issue under debate is the question of what the federal government's role should be in residential mortgage markets, including multifamily housing. Bills in both the House and Senate would wind down Fannie Mae and Freddie Mac, two congressionally chartered government-sponsored enterprises (GSEs), which were created to support the market for single-family and multifamily mortgages. By law, Fannie Mae and Freddie Mac are limited to purchasing existing single-family and multifamily mortgages that others have originated. They are prohibited from purchasing commercial mortgages and from extending mortgage credit directly to borrowers. In the House, H.R. 2767 , the Protecting American Taxpayers and Homeowners (PATH) Act of 2013, proposes to wind down Fannie Mae and Freddie Mac over a period of years. It would replace them with a National Mortgage Market Utility that would facilitate mortgage securitization, but would not provide a government guarantee. The act would also eliminate or delay the implementation of certain existing regulations that some believe are inhibiting recovery in the mortgage market. The bill makes no mention of the GSEs' multifamily lending. The PATH Act would make the Federal Housing Administration (FHA) an independent agency and take steps to improve its finances by reforming its single-family and multifamily mortgage insurance programs. In the Senate, S. 1217 , the Housing Finance Reform and Taxpayer Protection Act of 2013 (Corker-Warner), proposes to wind down Fannie Mae and Freddie Mac and to replace the Federal Housing Finance Agency (FHFA) with a new entity to be called the Federal Mortgage Insurance Corporation (FMIC). The FMIC would be an independent agency charged with supporting the mortgage market and providing reinsurance on eligible mortgage-backed securities (MBS). These MBS would have an explicit full-faith-and-credit federal government guarantee, and the FMIC would regulate aspects of the mortgage market related to these MBS. The FMIC would assume the GSEs' multifamily finance role. Securitization—packaging mortgages into negotiable securities—has spread the rewards and risks of holding mortgages internationally. Losses from single-family, multifamily, and commercial real estate are not confined to the United States. Trouble with overseas real estate can expose U.S. investors to losses, and vice versa. Risk to Government and Taxpayers During the recession, concerns about the elevated delinquency and foreclosure rates for mortgages in general led some to worry that mortgages for multifamily and commercial real estate could have caused difficulties for the nation's financial system. Notably, in January 2010, a large multifamily project in New York City (Stuyvesant Town and Peter Cooper Village) purchased for $5.4 billion defaulted on $4.4 billion in mortgages. The owners of Stuyvesant Town and Peter Cooper Village settled their debt by turning the properties over to the lenders. The risk to the government from all mortgages has decreased as the economy has recovered. The risk to the government from mortgage markets stems from two types of federal guarantees: explicit and implicit. The government has provided explicit full faith and credit guarantees to the FDIC, FHA, and others. FDIC-insured depositories—especially small banks—have significant exposure to multifamily and commercial mortgages. When an insured depository becomes insolvent, perhaps because of losses due to mortgage defaults, the FDIC liquidates the bank's assets and pays off insured depositors and other certain creditors. FDIC insurance is funded by assessments on insured deposits, which, at least theoretically, could prove to be inadequate. The FDIC could raise the assessments on banks to raise more funds, it could ask Congress for special appropriations, or it could go to Treasury for the necessary funds. FHA guarantees mortgages on multifamily housing, assisted-living facilities, nursing homes, and hospitals, as well as single-family homes. If property owners fail to make their payments, FHA is required to honor its guarantees to the lenders. If losses to FHA exceed the reserves accumulated from fees charged in earlier years, FHA could have to get funds from Treasury or ask Congress for additional funding. The federal government has implicitly backed Fannie Mae's and Freddie Mac's guarantees to purchasers of MBS. The congressional charters led investors to assume that the federal government would act if Fannie Mae or Freddie Mac were unable to honor the guarantees on their MBS. As part of the conservatorship agreements between Treasury and each of the GSEs, Treasury agreed to purchase senior preferred stock from the GSEs. Treasury has invested more than $187 billion in the two GSEs to keep them solvent. Although recent GSE profitability makes the need for future financial support appear to be unlikely, Treasury could be required to purchase additional preferred stock and would issue debt to purchase the stock. Current State of Mortgage Markets Recently, mortgage markets have improved. Delinquencies are decreasing, real estate prices are increasing, and the volume of mortgages outstanding is increasing. According to research by an economist at the Federal Reserve Bank of San Francisco, "The recovery of commercial property prices has been notable.... Valuation measures do not suggest that current prices are excessive." According to a report by the Mortgage Bankers Association, multifamily and commercial delinquency rates continued to decline in the third quarter of 2013. "Commercial and multifamily mortgage performance continues to reflect overall economic gains," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "Improvements in underlying property performance and property values, and the continued availability of multifamily and commercial mortgage financing, led to declines in delinquency rates for every major investor group." Prices of home, multifamily, and commercial property—especially foreclosed property—declined during the recession. As a result, loss severity increased during the recession. More recently, multifamily and commercial property values have increased, reducing loss severity. Figure 1 charts a measure of multifamily and commercial prices from January 2001 through September 2013. According to the data, average commercial and multifamily property prices were flat in 2001, increased until the end of 2007, and declined sharply in 2008 and 2009. Since 2010, commercial prices have recovered on average to 90% of their maximum, and multifamily prices have recovered to their maximum. As shown in Figure 2 , the volume of multifamily and commercial mortgages outstanding has generally increased since the first quarter of 2000. Multifamily volume decreased slightly between the fourth quarter of 2009 and the first quarter of 2012, but has increased since then. Except for intermittent increases, commercial mortgages outstanding declined between the first quarter of 2009 and the first quarter of 2013; it has increased in the second and third quarters of 2013. Who Holds Commercial and Multifamily Mortgages? At the end of the third quarter of 2013, multifamily and commercial real estate mortgages totaled $3,140.7 billion compared with $13,182.1 billion in total mortgages. Table 1 shows who holds multifamily and commercial mortgages. The largest holder of commercial mortgages and multifamily mortgages, providing 54.7% of commercial mortgages and 30.0% of multifamily mortgages, is U.S.-chartered depositories, which experienced severe financial distress during the recession. The GSEs hold 27.7% of outstanding multifamily mortgages and, together with government agencies, securitized an additional 15.3%. Thus, directly and indirectly, the GSEs and government agencies supported 44.5% of multifamily mortgages outstanding. Figure 3 is based on the multifamily data in Table 1 and illustrates the market shares of various multifamily mortgage investor classes. U.S.-chartered depository institutions (mainly banks and thrifts) are the largest investors with $272 billion, followed by the GSEs' holdings of $252 billion. In addition, the GSEs and Ginnie Mae (a government agency that is part of HUD), have issued $139 billion of multifamily MBS. Figure 4 is a graphic representation of the commercial mortgage data in Table 1 . There are no agency- and GSE-backed commercial mortgage pools, but asset-backed securities (ABS) represent 22% of outstanding commercial mortgages. At 55%, U.S.-chartered depositories are the largest sector holding commercial mortgages. Appendix A. Mortgage-Backed Securities Like single-family mortgages, multifamily and commercial mortgages are frequently pooled into mortgage-backed securities (MBS). MBS allow institutional lenders to supply mortgage money to borrowers throughout the nation, even if these lenders do not have the capability to issue or to service the mortgages. In theory, this allows for greater efficiencies through specialization and economies of scale. Some businesses specialize in originating multifamily and commercial mortgages, others in servicing the mortgages, and others, such as commercial banks, life insurance companies, savings institutions, MBS issuers, and government-sponsored enterprises (GSEs, i.e., Fannie Mae and Freddie Mac), in supplying the funds. Other businesses specialize in rating commercial MBS (CMBS). CMBS, like single-family mortgage-backed securities (commonly abbreviated as MBS), are typically created by sponsors that originate (or sometimes purchase) a mortgage and sell it to a trust that issues the CMBS. This creates a "bankruptcy remote" entity that should not be affected if the sponsor declares bankruptcy. CMBS, like MBS, can be divided into tranches or classes to better meet potential purchasers' preferences for risk, cash flow, diversification, etc. One typical CMBS prospectus sought to raise $3.3 billion divided into 12 tranches ranging in size from $13 million to $1.2 billion. The tranches had different expected lives, repayment of principal schedules, interest rates, and risk profiles. This CMBS was divided into three separate real estate mortgage investment conduits (REMICs), which are tax pass-throughs, meaning that the holders of the CMBS classes are taxed, but the REMIC is not taxed. Federal law and IRS regulations establish the rules that an MBS servicer must follow to be a REMIC. For example, to maintain their status as tax pass-throughs and to avoid being taxed, REMICs must be "passively" managed. Before the IRS issued Revenue Procedure 2009-45, an underlying mortgage could be modified only when "occasioned by default or a reasonably foreseeable default." IRS Revenue Procedure 2009-45 allows servicers to modify mortgages before default if, "[B]ased on all the facts and circumstances, the holder or servicer reasonably believes that there is a significant risk of default of the pre-modification loan upon maturity of the loan or at an earlier date" without jeopardizing the REMIC's tax status. In addition, the contract between the MBS servicer and the investors (called the pooling and servicing agreement or PSA) could prevent modifications that the Revenue Procedures allow. A typical PSA prevents the servicers from modifying the underlying loans in ways that change the payment of principal or interest, impair the security of the loan, or reduce any credit enhancements. Certain modifications are allowed if default is imminent, the modification could reduce losses on a mortgage, or the modification would not reduce credit enhancements. Appendix B. Underwriting Mortgages Underwriting is the process of reviewing and analyzing the risks and potential profitability of a loan application. Basically, underwriting a loan application estimates the ability and willingness of the potential borrower to repay the loan on schedule, and the likely value of the collateral in the event that the borrower does not repay the loan. The process of underwriting single-family mortgages considers an applicant's income, history of paying previous loans, and the likely value of the home in the event of foreclosure. Commercial and multifamily mortgage underwriting is similar, but differs with respect to the terms of the loan and the type of borrowers. Instead of considering the applicant's income, the income generated by the property is evaluated. The borrower's ability and willingness to repay the mortgage is considered. The likely value of the property in foreclosure is also considered. In addition, the terms of multifamily and commercial mortgages are much less standardized so the risks that the borrower will not make all required mortgage payments are reviewed. Single-family, multifamily, and commercial mortgages all require professional appraisals. A single-family appraisal usually is based on the sale of comparable homes in the area, but multifamily and commercial property is frequently unique, necessitating a different approach. Typically, a commercial or multifamily appraisal depends on an analysis of the market for similar property, the property's competitiveness within that market, and the property's ability to generate a cash flow to service the mortgage. Two ratios are widely used in underwriting multifamily and commercial mortgages: the debt service coverage ratio (DSCR) and the loan to value ratio (LTV). The DSCR is the annual net cash flow of the property divided by the annual principal and interest payments of the mortgage. For example, this cash flow might come from the rent paid by tenants. An application with a DSCR of more than 1.0 has more projected net cash flow than required for paying the mortgage. In some cases, such as acquisition, development, and construction (ADC) loans, a lender will accept a DSCR below 1.0 but require the borrower to place additional funds in a reserve account. Most multifamily and commercial mortgage underwriting considers mortgage terms, such as fixed or floating interest rates, when determining if a DSCR is adequate. The DSCR is somewhat analogous to the front-end ratio or ratio of housing expenses to income for single-family mortgages and measures the ability of a property to make its mortgage payments. The LTV is a measure of how much collateral would be available in the event of a default. A lower LTV reflects a smaller loan on a more valuable property and a greater chance of recovering the amount lent in the event of default. The maximum LTV on owner-occupied homes with mortgages insured by FHA is 96.5%, and "conforming" single-family mortgages with LTVs above 80% require credit enhancements such as borrower paid mortgage insurance. There are no comparable maximums for multifamily and commercial mortgages. In short, the DSCR is an indicator of the probability of default, and the LTV is a way to summarize the loss severity if a default occurs.

As the recovery from the recession of December 2007-June 2009 continues, congressional interest in multifamily and commercial mortgages has shifted from worries about the immediate impact of foreclosures to consideration of the future of mortgage finance. During the recession, losses on mortgages raised concerns about the risk to tax payers through Federal Deposit Insurance Corporation (FDIC) insurance, which is backed by the full faith and credit of the federal government. Significant parts of these losses occurred due to commercial loans at smaller insured depositories. The federal government has invested more than $187 billion in Fannie Mae and Freddie Mac, which guarantee single-family and multifamily mortgages. Although Fannie Mae and Freddie Mac do not have explicit full faith and credit backing from the federal government, they do have a legal agreement that would provide additional government funds, if needed. Congressional interest in mortgage reform, including multifamily mortgages, is reflected in several bills that have been introduced. In the House, only H.R. 2767, the Protecting American Taxpayers and Homeowners Act of 2013 (PATH Act), has been ordered to be reported by the Financial Services Committee. In the Senate, hearings have been held on S. 1217, commonly referred to as the Corker-Warner bill. Both would wind down Fannie Mae and Freddie Mac, which have been key sources of multifamily finance. (Fannie Mae and Freddie Mac are prohibited by their congressional charters from activities not directly related to single-family and multifamily mortgages and have not been involved in commercial lending.) The PATH Act makes no mention of multifamily housing finance. Corker-Warner would create a new entity, the Federal Mortgage Insurance Corporation (FMIC), which would take over Fannie Mae's and Freddie Mac's role in multifamily finance. The PATH Act would greatly reduce the government's role in the mortgage system whereas the Corker-Warner bill would reshape the government's role. This report is an overview of multifamily and commercial mortgage issues that may be of interest to Congress. It compares multifamily and commercial mortgages to the more familiar single-family mortgages. For an analysis of legislation, see CRS Report R43219, Selected Legislative Proposals to Reform the Housing Finance System, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

Bipartisan Campaign Reform Act of 2002 (P.L. 107-155): Summary andComparison with Previous Law*

The Bipartisan Campaign Reform Act of 2002 (BCRA) was enacted on March 27, 2002 as P.L. 107-155 . It passed the House on February 14, 2002, as H.R. 2356 (Shays-Meehan), bya 240-189 vote. Its companion measure, on which it was largely based, had initially been passed bythe Senate in 2001 as S. 27 (McCain-Feingold). On March 20, 2002, however, theSenate approved the House-passed H.R. 2356 by a 60-40 vote, thus avoiding aconference to reconcile differences between S. 27 and H.R. 2356 . A seriesof technical amendments to the bill was passed later that day by the House, in the form of H.Con.Res. 361 , which directed the Clerk of the House to make specified correctionsin the enrolled H.R. 2356 . The Senate approved the concurrent resolution on March22, thus clearing the measure for the President. The two primary features of P.L. 107-155 are restrictions on party soft money and issue advocacy. First, the new Act generally bans the raising of soft money by national parties and federalcandidates or officials and restricts soft money spending by state parties on what the Act defines as"federal election activities." The Act does, however, allow for some use of soft money under certainconditions for specified federal election activities by state and local parties. Second, the Act regulates issue advocacy by creating a new term in federal election law, "electioneering communication"-- political advertisements that "refer" to a clearly identified federalcandidate and are broadcast within 30 days of a primary or 60 days of a general election. Generally,the Act prohibits unions and certain corporations from spending treasury funds for such"electioneering communications." For those individuals and groups permitted to finance suchcommunications, it requires disclosure of disbursements of over $10,000 and the identity of donorsof $1,000 or more. The Act generally took effect on November 6, 2002, the day after the 2002 general elections. Certain provisions, however, had different effective dates, either to allow a transition period or, asin the case of increased contribution limits, to make the new rules coincide with the calendar year. On December 10, 2003, in McConnell v. FEC (No. 02-1674), the U.S. Supreme Court upheld the constitutionality of key provisions of BCRA. A 5-to-4 majority of the Court upheld mostportions of the law, including the key provisions relating to political party soft money andelectioneering communications. The Court, however, invalidated two provisions of the law: theprohibition of contributions by minors age 17 and under and the provision requiring political partiesto choose between coordinated and independent expenditures during the post-nomination,pre-election campaign period.

Background In an Earth Day speech, President Obama linked the importance of winning the technological race to develop clean energy sources with the economic problems associated with U.S. dependence on oil. The President said that the federal deficit, the trade deficit, as well as global warming, were all related to U.S. dependence on oil, especially imported oil. He also described a fickle attitude held by American consumers, who typically are outraged by high gasoline prices or shortages, while displaying apathy toward the issue of oil prices during periods of low prices. In a market economy, the government can alter the behavior of consumers and producers through tax and subsidy policies. If the government wants to discourage the consumption of a commodity, it can raise the cost of the good to consumers by levying taxes at various stages of the production process, or by levying a tax at the point of sale. Typically, the higher cost faced by the consumer will lead to reduced consumption. If the government chooses to encourage the development of a technology or a good, it can lower private costs through various types of subsidy, which may then benefit consumers in the form of lower prices. Given the President's position, as reflected in his Earth Day speech, his FY2010 budget proposal includes both subsidies for alternative energy sources and increased taxes on the oil industry. This report analyzes the likely economic effects that might occur if the President's proposed tax increases on the oil industry are enacted by Congress. During most of the 20 th century the oil industry received favorable tax treatment in comparison with other U.S. industries through tax provisions such as the percentage depletion allowance and the expensing of intangible drilling expenses. Favorable tax treatment helped to keep petroleum product costs low, and encouraged consumption. Low gasoline prices were a factor in both residential and business location decisions, holiday travel, and other aspects of American life. These decisions represent economic investments which might no longer be viable if the relative price of gasoline and oil increase. For example, when the price of gasoline rose to more than $4 per gallon, based on oil prices that rose to over $145 per barrel, during the second half of 2008, consumers shifted their spending away from sport utility vehicles and light trucks toward more fuel efficient vehicles, reducing the sales and profitability of the U.S. automobile industry, and accelerating the collapse of the industry. Shifting the energy consumption pattern from oil to alternative fuels is unlikely to occur without adjustment costs to consumers and U.S. industry. The Fiscal 2010 Budget Proposal Under the pressure of an economic recession that began at the end of 2007 and continues in 2009, a financial crisis which has required support of the banking system and financial markets, and the costs of new policy initiatives in healthcare, carbon emissions, and other areas, the level of projected federal deficit is a matter of concern. The desire to shift the nation away from oil, and to try to control the federal deficit, has led to a number of proposals to increase taxes on the oil industry. Many of these proposals represent the elimination of tax expenditures. Table 1 identifies the proposed tax changes for the oil industry, and the White House's estimates of the revenues, or in its terms, deficit reduction, generated to 2014, if enacted by Congress. Many of these measures have the effect of equalizing the treatment of the independent oil producers to that of the major oil companies. This equalization is accomplished through eliminating preferential tax treatment of the independent companies compared to that of the major oil companies. In some cases, for example, the expensing of intangible drilling expenses, the major oil companies have been excluded from the benefits of the tax provision while the benefit was still in effect for the independent oil producers. As shown in Table 1 , none of the proposed revenue changes are estimated to have a significant effect in 2010. Almost 80% of the total proposed tax changes would come from only three of the proposals. These three proposals are likely to increase total taxes on the oil industry: an excise tax on Gulf of Mexico oil and natural gas production, the rescinding of the manufacturing tax deduction for the oil industry, and the repeal of percentage depletion. Excise Tax on Gulf of Mexico Oil and Gas Oil and gas producers operating in federal waters in the Gulf of Mexico pay up to a 16.67% royalty on revenue from existing production. New production, defined as production after March 2008, is subject to an 18.75% royalty rate. However, a program to encourage deep water drilling allowed a zero royalty rate until a set level of production was attained. This production, which is currently not paying any royalty, is what would be subject to the new royalty provisions of the 2010 budget. The new rate is not, then, a new excise tax on Gulf production, but could be considered as the reversal of an earlier tax expenditure. Under normal economic circumstances, an excise tax on the production of a good is likely to reduce its production level and increase its price. However, the production of oil and natural gas might not be goods subject to normal economic circumstances. The price of oil is determined on a world market and over the past five years has generally been sufficiently high to cover even the costs of relatively high cost producers. During the period from 2004 through 2009, prices have at times reached record levels, resulting in record setting profits for the oil industry. Under these circumstances, it is unlikely that the excise tax, especially one that "leveled the playing field" between various Gulf producers, would result in higher consumer prices for petroleum products or curtail output because the independent oil producers are not likely to have the market power to pass the excise tax on to consumers. While it is likely true that the existing exclusion from royalty payments may have acted as an incentive for encouraging exploration and development, it does not necessarily follow that the incentive should be left in place to keep the wells producing. As long as producing wells are covering costs, it is likely that they will be kept in production with little or no reduction in output. It might also be argued that the imposition of the excise tax reduces the incentive to invest and expand domestic production in the affected exploration areas. However, this is unlikely to happen unless the companies have alternative investment opportunities available in other areas that offer lower government taxes and lower costs. A recent study by the Government Accountability Office found that the total government take in the U.S. was low compared to what oil companies must pay to other nations in production royalties and taxes. The implication is that even if effective repeal of the royalty exclusion through the imposition of an excise tax might be a disincentive to continued exploration and development, the oil companies might have a difficult time finding better alternatives, yielding little change in investment activity. Repeal Enhanced Oil Recovery Credit5 The enhanced oil recovery tax credit allows for a credit of 15% of allowable costs associated with the use of oil recovery technologies, including the injection of carbon dioxide to supplement natural well pressure, that enhance production of older wells. The credit is only available during periods of low oil prices, determined by yearly guidance with respect to what constitutes a low price. The credit has not been in effect over the past several years. Elimination of this credit would likely not have any effect on current oil supplies, unless the price of oil fell. Prices generally fall in a market characterized by excess supply. During periods of excess supply, it is unlikely that keeping older, high cost, low production rate wells producing is the optimal strategy, based on the likely inability of the price of oil to cover the costs associated with operating these wells. Repeal Expensing of Intangible Drilling Costs The expensing of intangible drilling costs has been part of the federal tax code since 1913. Intangible drilling costs generally include cost items that have no salvage value, but are necessary for the drilling of exploratory wells or the development of wells for production. The purpose of allowing current year expensing of these costs is to attract capital into what has historically been a highly risky investment. In recent years, however, the risk associated with finding oil has been reduced, but not eliminated, by technology, including three-dimensional seismic analysis and advanced horizontal drilling techniques. These advances make expensive "dry holes" less likely, and expand the physical range of exploration and production available from drilling rigs, reducing the cost of exploration of prospective oil fields. Currently, the full expensing of intangible drilling expense provision is only available to independent oil producers. According to White House estimates, elimination of this tax provision is expected to contribute more than $1.8 billion in deficit reduction over the period 2010 to 2014, and approximately $3 billion by 2019. The Independent Petroleum Association of America (IPAA) estimates that revoking the expensing of intangible drilling costs provision might reduce investment in U.S. oil development by about $3 billion in the future. The IPAA estimate of reduced oil development appears to be based on an assumed dollar for dollar decline in investment activity for every extra dollar of tax paid, with no empirical evidence to support this assumption. The actual decline in oil resource development as a result of eliminating this tax preference is likely to depend on the price of oil. If the price of oil settles in the $40 per barrel range that prevailed in December of 2008, the burden of additional tax expense could reduce drilling activity. The combination of low price and additional taxes might not justify the development of relatively high cost resources, especially in deep waters, as in the Gulf of Mexico. However, if the price of oil exceeds $100 per barrel, as prevailed during the summer of 2008, the additional tax expense is likely to have a smaller effect in reducing oil development activity. Repeal Deduction for Tertiary Injectants Tertiary injection expenses, including the injectant cost, can be deducted in the current tax year. Supporters of the current favorable treatment of these expenses point to the importance of tertiary recovery in maintaining the output of older wells, as well as the environmental advantages of injecting carbon dioxide, a primary tertiary injectant, into wells. Repeal of the deduction or less favorable tax treatment of the expenses would be likely to reduce output if the profit margin on oil were low. In a high oil price environment, the repeal is likely to have a smaller effect on production levels. Repeal Marginal Well Tax Credit The marginal well tax credit was implemented as the result of a recommendation by the National Petroleum Council in 1994 to keep low production oil and natural gas wells in production during periods of low prices for these fuels. This tax credit is designed to maximize U.S. production levels even when volatile energy markets result in low prices. It is believed that up to 20% of U.S. oil production, and 12% of natural gas production, is sourced from this category of well. The credit was enacted in 2004, but has not been necessary because market prices have been high enough since that time to justify production without the credit. The credit is not likely to be an important factor if prices remain high, or if the United States is successful in transitioning to alternative energy sources. The high cost wells that fall into the marginal well category are likely to be some of the first to be eliminated on economic efficiency grounds if enhanced use of alternative energy sources leads to a reduction in petroleum demand. Repeal Passive Loss Exception for Working Interests in Oil Properties Repeal of the passive loss exception for working interests in oil and natural gas properties is a relatively small item in terms of revenue contribution—$19 million from 2010 to 2014. The provision exempts working interests in gas and oil exploration and development from being categorized as "passive income (or loss)" with respect to the Tax Reform Act of 1986. This categorization permits the deduction of losses in oil and gas projects against other active income earned, which would not be permitted if the income (or loss) were considered to be passive. The current provision is believed to act as an incentive to induce investors to finance oil and gas projects, because losses incurred in oil exploration can be used as an offset against profits earned in other investment activities. Repeal Manufacturing Tax Deduction The most significant item in the proposed budget in terms of oil and natural gas industry tax liabilities is the repeal of the manufacturing tax deduction. As shown in Table 1 , the White House estimates that repeal of this deduction would contribute approximately $4.9 billion in tax revenue for the period 2010 to 2014. The total estimate might increase to $13 billion by 2019, according to the Administration. This provision was enacted in 2004 as part of the American Jobs Creation Act to encourage the expansion of American employment in manufacturing. The oil industry was categorized as a manufacturing industry, and hence, eligible for the deduction, which was to be phased in over several years, beginning at 3% in 2005 and rising to a maximum of 9% in 2010. The base of the tax is net income from domestic manufacturing activities, capped by a company payroll limitation. This tax deduction was intended to increase domestic employment in manufacturing at a time when there was concern that manufacturing jobs were migrating overseas. By allowing a percent deduction of net income, up to the payroll limitation, the effective cost of labor to the manufacturer was reduced. The reduction in net labor cost was intended to expand employment, increase output, and reduce prices, making domestic manufactured goods more competitive in the world market. Although the oil and natural gas industries are classified as manufacturing industries for national data reporting purposes, they differ from traditional factory manufacturing in a number of ways. Most importantly, the level of oil production is only indirectly related to the level of employment. This implies that if wage costs go down, due to the tax deduction, there is less chance that the industry will increase employment. Even if employment did increase, it would be expected to be of a minor magnitude due to the capital intensive nature of the industry. The Bureau of Labor Statistics reports that oil and natural gas extraction employed approximately 165,000 workers in 2009, of which fewer than 100,000 were classified as production workers. The period since 2004, while difficult for American manufacturing as a whole, has been one of record profit levels in the oil industry. The high price for oil prevailing since 2004 that has led to record profit levels, is the critical factor in oil investment. Oil exploration tends to increase when prices are expected to remain high, and decrease in times of falling prices. The variability in actual and expected oil prices is likely to be a more important factor in determining capital investment budgets in the oil industry than the elimination of a tax that is capped by a relatively low wage bill. Repeal Percentage Depletion Allowance Percentage depletion is the practice of deducting from an oil company's gross income a percentage value, in the current law 15%, which represents, for accounting and tax purposes, the total value of the oil deposit that was extracted in the tax year. Percentage depletion has a long history in the tax treatment of the oil industry, dating back to 1926. The purpose of the percentage depletion allowance is to provide an analog to depreciation for the oil industry, in effect, equating oil deposits to capital equipment in more traditional manufacturing industries. In its current form, the allowance is limited to American production, by independent producers, on the first 1,000 barrels per day of production, and is limited to 65% of the producer's net income. Percentage depletion was eliminated for the major oil companies in 1975. Although major oil companies' profits were likely affected by the tax change, their production of oil showed little variation. Production of oil within the United States remains attractive for companies because ownership of the oil is allowed in this country. In most areas of the world, ownership is vested in the national oil company, as a proxy for the state. The result is a lower share of revenues for companies producing outside the United States. The Administration projects that repeal of the percentage depletion allowance would yield approximately $2.9 billion in deficit reduction over the period 2010 to 2014, and more than $8 billion by 2019. Increase Geological and Geophysical Amortization Period Geological and geophysical expenses are necessarily incurred during the process of oil and natural gas resource development. The most favorable tax treatment of these costs is to allow them to be deducted in the year they are incurred. Requiring these costs to be amortized, or spread out, over several years is less favorable. The longer the amortization period, the less favorable the tax treatment, because a smaller amount is deducted in each year, and it requires several years to recover the entire cost. As a result, it is possible that the cost of capital may be increased, and the level of investment reduced. Currently, the major integrated oil companies amortize geological and geophysical costs over a period of seven years. In the Obama budget proposal, independent producers that benefit from a shorter amortization period would have their amortization period extended to seven years, equalizing treatment with the integrated oil companies. The extended amortization period for independent producers is projected by the Administration to contribute almost $1.2 billion in deficit reduction over the period 2010 to 2019. The IPAA estimates that independent producers would likely reduce exploration and development activities on a one-to-one dollar basis as a result of lengthening the amortization period. However, it seems unlikely that oil producers would reduce exploration investment to this extent if the spread of market price over full cost of exploration and development remains strong, as it generally has been in the period of high oil prices since 2004. Additionally, if prices decline to a level near the cost of exploration and development, investment is likely to be curtailed even with more favorable tax treatment of geological and geophysical expenses. If the industry were experiencing a time of stagnant oil prices that were near the cost of production, relatively small changes in tax expense might affect investment and production activities. However, in a time of high and volatile oil prices, small changes in tax expense are overshadowed by price variations. Conclusion On the one hand, the deficit reduction proposed items in Table 1 can be considered to be effective tax increases on the oil and natural gas industries that could have the effect of decreasing exploration, development, and production while increasing prices and increasing our foreign oil dependence. These same proposals, from an alternate point of view, can also be considered to be the elimination of tax preferences that have favored the oil and natural gas industries over other energy sources, and made oil and gas products artificially inexpensive, with consumer costs held below true cost of consumption, when the costs associated with climate change and energy dependence, among other effects, are included. Whichever view is adopted, the real effects of these proposals on oil production, consumption, and imports are likely to be small relative to both the federal deficit and the revenues of the oil industry.

President Obama, in an Earth Day speech, addressed the linkage between the problems he associated with U.S. reliance on imported oil and the importance of a future based more on alternative energy sources. These problems could be partially addressed by reducing what the Administration sees as favorable treatment of the oil and natural gas industries that were designed to increase production of petroleum products. The FY2010 budget proposal outlined a set of proposals, framed in terms of deficit reduction, or the elimination of tax expenditures, that would potentially increase the taxes of the oil and natural gas industries, especially the independent producers. These proposals included an excise tax on Gulf of Mexico oil and natural gas production to limit previously granted royalty relief, repeal of the enhanced oil recovery and marginal well tax credits, repeal of the expensing of intangible drilling costs and the deduction for tertiary injectants, repeal of passive loss exceptions for working interests in oil and natural gas properties, and the manufacturing tax deduction for oil and natural gas companies, and the increasing amortization periods for certain expenses and the repeal of the percentage depletion allowance for independent oil and natural gas producers. It was estimated that these changes would provide $12.7 billion categorized by the Administration as deficit reduction over the period 2010 to 2014. The changes, if enacted, also would reduce the tax advantage enjoyed by independent oil and natural gas producers over the major integrated oil companies. On what will likely be a small scale, the proposals also will make oil and natural gas more expensive for U.S. consumers, with the effect of reducing consumption of those fuels.

Background1 A stable, democratic, prosperous Pakistan actively working to counter Islamist militancy is considered vital to U.S. interests. The history of democracy in Pakistan is a troubled one marked by ongoing tripartite power struggles among presidents, prime ministers, and army chiefs. Military regimes have ruled Pakistan directly for 34 of the country's 60 years in existence, and most observers agree that Pakistan has no sustained history of effective constitutionalism or parliamentary democracy. The country has had five Constitutions, the most recent being ratified in 1973 (and significantly modified several times since). From the earliest days of independence, the country's armed forces have thought of themselves as "saviors of the nation," a perception that has received significant, though limited, public support. The military, usually acting in tandem with the president, has engaged in three outright seizures of power from civilian-led governments: by Gen. Ayub Khan in 1958, Gen. Zia-ul-Haq in 1977, and Gen. Pervez Musharraf in 1999. After 1970, five successive governments were voted into power, but not once was a government voted out of power—all five were removed by the army through explicit or implicit presidential orders. Of Pakistan's three most prominent Prime Ministers, Zulfikar Ali Bhutto was executed; his daughter Benazir Bhutto was exiled, then later assassinated; and Nawaz Sharif suffered seven years in exile under threat of life in prison before his 2007 return. Such long-standing political turmoil may partially explain why, in a 2004 public opinion survey, nearly two-thirds of Pakistanis were unable to provide a meaning for the term "democracy." A 2008 index of state weakness labeled Pakistan the world's 33 rd weakest country (between Zambia and Cambodia), based largely on low scores for political institutional effectiveness and legitimacy, and for the (in)ability of the government to provide citizens with physical security. Pakistan's New Political Setting6 2007 Political Crises The year 2007 saw Pakistan buffeted by numerous and serious political crises, culminating in the December 27 assassination of former Prime Minister and leading opposition figure Benazir Bhutto, who had returned to Pakistan from self-imposed exile in October. Bhutto's killing in an apparent gun and bomb attack (the circumstances remain controversial) has been called a national tragedy for Pakistan and did immense damage to already troubled efforts to democratize the country. Pakistan's security situation has deteriorated sharply: the federal government faces armed rebellions in two of the country's four provinces, as well as in the Federally Administered Tribal Areas (FATA; see map, Figure 1 ), and the country experienced at least 44 suicide bomb attacks in the latter half of 2007 that killed more than 700 people. In 2008, Pakistan has suffered an average of more than one suicide bomb attack every week. Pakistan faces considerable political uncertainty as the tenuous governance structure put in place by President Musharraf has come under strain. Musharraf himself was reelected to a second five-year presidential term in a controversial October 2007 vote by the country's electoral college. Under mounting domestic and international pressure, he finally resigned his military commission six weeks later. Yet popular opposition to military rule had been growing steadily with a series of political crises in 2007: a bungled attempt by Musharraf to dismiss the country's Chief Justice; Supreme Court rulings that damaged Musharraf's standing and credibility; constitutional questions about the legality of Musharraf's status as president; a return to Pakistan's political stage by two former Prime Ministers with considerable public support; and the pressures of repeatedly delayed parliamentary elections which eventually took place on February 18, 2008. On November 3, 2007, President Musharraf had launched a "second coup" by suspending the country's Constitution and assuming emergency powers in his role as both president and army chief. The move came as security circumstances deteriorated sharply across the country, but was widely viewed as an effort by Musharraf to maintain his own power. His government dismissed uncooperative Supreme Court justices, including the Chief Justice, and jailed thousands of opposition figures and lawyers who opposed the abrogation of rule of law. It also cracked down on independent media outlets, many of which temporarily were shut down. The emergency order was lifted on December 15, but independent analysts saw only mixed evidence that the lifting led to meaningful change, given especially the continued existence of media curbs and a stacked judiciary. On the day before he lifted the emergency order, Musharraf issued several decrees and made amendments to the Pakistani Constitution, some of which would ensure that his actions under emergency rule would not be challenged by any court. 2008 Parliamentary Elections8 Overview On February 18, 2008, Pakistan held elections to seat a new National Assembly and all four provincial assemblies. As noted above, independent analysts had predicted a process entailing rampant political-related violence and electoral rigging in favor of the recently incumbent, Musharraf-friendly Pakistan Muslim League-Q (PML-Q) faction. Despite weeks of bloodshed leading up to the polls, the day itself was surprisingly calm and turnout was slightly higher than for the 2002 election. Moreover, fears of large-scale rigging appear to have proven unfounded, as the PML-Q was swept from power in a considerable wave of support for Pakistan's two leading opposition parties, the PPP, now overseen by Benazir Bhutto's widower, Asif Zardari, and the PML-N of former Prime Minister Nawaz Sharif. (Neither of these figures ran for parliamentary seats and so neither currently is eligible to serve as Prime Minister, but this circumstance could change.) The two largely secular, moderate parties proceeded to form a ruling parliamentary coalition in Islamabad. Their leadership explicitly seeks to legislate sovereign powers back to the Parliament by restoring the 1973 Constitution (Musharraf had overseen amendments empowering the office of the president) and to reinstate Supreme Court and other judges who were dismissed in Musharraf's November 2007 emergency imposition. They also lead coalition governments in the two most populous of the country's four provinces. In the view of many outside observers, President Musharraf's efforts to keep himself in power have "reinforced his alliance with thoroughly illiberal forces" and have "alienated all the modern, secular and liberal forces in Pakistan." Nevertheless, Musharraf called the election a "milestone" that his government had "worked tirelessly" to make credible, and he vowed to work with the new Parliament to defeat terrorism, build effective democratic government, and create a foundation for economic growth. PPP leader Zardari called the occasion a vindication of his late wife's battle for the restoration of democracy in Pakistan and a new start for a country that had been "battered by dictatorship." Indeed, as a perceived referendum on President Musharraf's rule, the polls represented a widespread popular rejection of his policies. They also appeared to forward arguments that the Pakistani populace supports moderate political parties without explicitly religious manifestos. At the same time, the results were seen by many analysts as compounding difficulties for U.S. policy makers who may have placed too much faith in the person of Musharraf, an increasingly isolated figure whose already damaged status is now further weakened. Still, there is a widespread view that the exercise represents an important new chance for the development of democratic governance in Pakistan. Rising inflation and food and energy shortages have elicited considerable economic anxieties in Pakistan. Such concerns are believed to have played a key role in the anti-incumbency vote and are likely to weigh heavily on the new government. At the same time, Islamist extremism and militancy have been menaces to Pakistani society throughout the post-2001 period and particularly in 2007. In a sign that radicals might seek to test the new government, suicide bomb and other attacks on both security forces and civilian targets have been rampant since the elections, costing hundreds of lives. Election Preparations Pakistan's National Assembly ended its five-year term on November 15, 2007, marking the first time in the country's history that the body had completed a full term without interruption. President Musharraf appointed a caretaker Prime Minister and cabinet for the election period. Many analysts viewed the caretaker cabinet as being stacked with partisan Musharraf supporters that further damaged hopes for credible elections. There were numerous reports of government efforts to "pre-rig" the election. Pakistan's Chief Election Commissioner initially announced that polls would be held on January 8, 2007. About 13,500 candidates subsequently filed papers to vie for Pakistan's 272 elected National Assembly seats and 577 provincial assembly constituencies. The full National Assembly has 342 seats, with 60 reserved for women and another 10 reserved for non-Muslims. Amendments to the Pakistani Constitution and impeachment of the president require a two-thirds majority for passage. Opposition parties were placed in the difficult position of choosing whether to participate in elections that were considered likely to be manipulated by the incumbent government or to boycott the process in protest. Upon Benazir Bhutto's late December assassination and ensuing civil strife, the Election Commission chose to delay the polls until February 18, spurring a nationwide debate. PPP and PML-N leaders demanded the election be held as scheduled; the Bush Administration appeared to support their demands. Zardari's calculation likely was rooted in expectations of a significant sympathy vote for the PPP. The main opposition parties criticized the incumbent government and accused it of fearing a major loss, but nonetheless chose to participate in the polls. As Musharraf's political clout waned, the Musharraf-allied PML-Q party faced more daunting odds in convincing a skeptical electorate that it deserved another five years in power. In late January, Assistant Secretary for South and Central Asia Richard Boucher told a House panel that the fundamental U.S. goals with regard to Pakistan remained unchanged and included a desire to see "successful transition to democracy and civilian rule" and "the emergence of leaders through a credible election." While denying that the Administration was prepared to accept "a certain level of fraud," he expressed an expectation that some level would be seen: "On a scale from terrible to great, it'll be somewhere in the middle." More than $26 million in U.S. aid to Pakistan was devoted to democracy-related programs there in FY2007. Election Monitoring Despite anticipated election day violence, voter turnout was solid, averaging nearly 45% nationwide (ranging from a low of 25% in the FATA to more than 50% in the Federal Capital Territory). At least 25,000 Pakistani citizens were accredited by the Pakistan Election Commission to serve as domestic observers. Some 500 international observers—including 56 from the United States—were in the country on February 18, along with more than 500 more foreign journalists covering the election. Preliminary statements from European Union observers conceded that a level playing field had not been provided for the campaign but that, on election day itself, "voting on the whole was assessed as positive." The mission fielded by Democracy International—a nongovernmental group contracted by the State Department—also identified a "seriously flawed and difficult pre-election environment," but reached its own preliminary conclusion that the reasonably peaceful and smoothly conducted polls represented "a dramatic step forward for democracy in Pakistan." Pakistan's print media were cautiously optimistic about the mostly fair and violence-free elections. On the economic front, the process likely contributed to a steadying of the rupee's value and a 3% rise in the Karachi Stock Exchange's main index. Election Results Although President Musharraf had been reelected in a controversial indirect vote in October 2007 and was not on the ballot in 2008, the elections were almost universally viewed as a referendum on his rule. As shown in Table 2 , the PPP won a clear plurality of seats (121) in the National Assembly. While the Musharraf-allied PML-Q won substantially more total votes than did the PML-N of Nawaz Sharif, Pakistan's "first past the post" plurality electoral system allowed Sharif's party to win 91 National Assembly seats to only 54 for the incumbents. This outcome provides the country's two main secular opposition parties with a near two-thirds majority. They are joined in a new national ruling coalition by the secular Pashtun nationalist Awami National Party (ANP). The Sindhi regional Muttahida Quami Movement (MQM), which was part of the ruling bloc under PML-Q leadership, performed considerably better than in 2002 to win about 7% of the vote and 25 seats at the national level. These five top-performing parties now account for about 92% of all National Assembly seats. Table 3 shows the PPP won an outright majority in the provincial parliament of Sindh, the Bhuttos' ancestral homeland, and so can govern there without coalition partners. In the wealthy and densely populated Punjab province, Sharif's PML-N dominated the PML-Q in the incumbent party's heartland (despite winning fewer total votes) to take nearly half of the provincial assembly seats there. Sharif's brother Shabaz is expected to serve again as Chief Minister, overseeing a coalition with the PPP in the provincial assembly based in Lahore. Voters in the North West Frontier Province (NWFP) roundly rejected the previously incumbent Islamist coalition and awarded the ANP a resounding comeback after its virtual shutout in 2002. The PPP and ANP agreed to share power in the NWFP, with the Chief Minister and 12 of 21 cabinet ministers coming from the ANP. Only in sparsely populated Baluchistan did the PML-Q seem sufficiently strong to retain power. The membership of the new National Assembly is generally wealthier and more secular than its predecessors. The PPP's expected sympathy vote apparently did not materialize in any major way, but the party did win 31% of national votes cast, up from about 27% in 2002. It was, in fact, the PML-N of Nawaz Sharif that appeared to perform best in the key battleground region of southern Punjab, winning wholesale votes from disgruntled former PML-Q supporters. Despite a result seen by many as suboptimal from Washington's perspective, a senior Bush Administration official responded to the outcome with broad approval: The election outcome proves that moderate pro-democracy parties are the heart of Pakistan's political system and that religious-based politics have no hold over the voters. While not perfect, the elections reflected the will of the voters, who have embraced the results.... We supported Pakistan's elections and now we will support the Pakistani people as they choose their leaders. For some analysts, the relatively successful elections are an indication that Pakistan is shifting away from its traditional feudal-patronage political system. Musharraf's Status Immediately following their poll victory, the leaders of both major opposition parties issued calls for President Musharraf's resignation. Though he rejects such calls, Musharraf has expressed a willingness to work with the new Parliament, even as he recognizes the potential for a two-thirds opposition majority to reverse many of the changes made during his rule. This might in particular include parts of the 17 th Amendment to the Constitution, which grants presidential powers to dismiss the Prime Minister and dissolve Parliament. Such a super-majority could even move to impeach him. Table 2 shows that a PPP/PML-N/ANP combine could potentially collect two-thirds of the National Assembly vote, but it presently appears that a PPP-led government will not (in the near-term, at least) seek to remove Musharraf through impeachment. Even with such an intention, the opposition alliance is unlikely to corral sufficient votes in the Pakistani Senate, where the PML-Q had enjoyed a simple majority until several crossovers diluted its strength. Many analysts contend that Musharraf has sought to manipulate the transfer of power process through the creation of uncertainty and instability, and some continue to insist that Musharraf should follow "the logic of the people's verdict" and resign. New Civilian Government Coalition Building Negotiations on coalition building were settled on March 9, when PPP leader Zardari and PML-N leader Sharif issued a written declaration of their intention to share power at the center (along with the ANP) under a PPP Prime Minister and in the Punjab under a PML-N Chief Minister. In a major show of opposition unity, the accord notably vowed to seek restoration of deposed judges to office within 30 days of the new government's seating (see below). The leaders also promised to implement a May 2006 "Charter of Democracy" inked by Benazir Bhutto and Nawaz Sharif that would include removing the president's power to dissolve parliament, as well as his power to appoint military service chiefs. Many viewed the March 9 "Murree Declaration" as an historic rejection of military-bureaucratic rule in Islamabad and a victory over forces that sought to keep the opposition divided. The Islamist Jamiat Ulema-i-Islam faction headed by Fazl-ur-Rehman (JUI-F) will vote with the PPP-led coalition, which was bolstered when 11 parliamentarians elected as independents joined it (7 aligning with the PPP and four others taking up with the PML-N). Fahimda Mirza—a Sindhi businesswoman, PPP stalwart, and close associate of Zardari—is now Pakistan's first-ever female National Assembly Speaker. Benazir Bhutto's long-time party deputy and National Assembly member Makhdoom Amin Fahim initially had been dubbed the PPP's leading prime ministerial candidate. Fahim, who comes from a feudal Sindh background similar to that of Bhutto, was seen to have led the party competently in her absence, but does not possess national standing and support close to that enjoyed by Bhutto herself. During early March, intra-PPP discord arose over the party's prime ministerial candidate, with some party leaders reportedly unhappy with Fahim and seeking a leader from the Punjab province. Some reports also indicated that Sharif's PML-N had pushed for the nomination of a Punjabi Prime Minister, and the more vehemently anti-Musharraf Nawaz faction reportedly opposed Fahim's candidacy because of his frequent contacts with the unpopular Pakistani president. Government Formation and Outlook On March 22, PPP Co-Chair Asif Zardari announced the prime ministerial candidacy of Yousaf Raza Gillani, a party stalwart from the Punjab province. Gillani was Parliament Speaker during Benazir Bhutto's second government (1993-1996) and spent five years in prison (from 2001 to 2006) after being sentenced by an anti-corruption court created under President Musharraf. Musharraf's opponents say the court was established as a means of intimidating and coercing politicians to join the PML-Q, which Gillani had refused to do. On March 24, Gillani won 264 of 306 votes cast to become Pakistan's new Prime Minister. Of his 24 cabinet ministers, 11 are from the PPP and 9 from the PML-N. The junior coalition partners (ANP and JUI-F) hold three ministries and an independent candidate will oversee the remainder. Other important new federal ministers include: Foreign Minister Shah Mehmood Qureshi, who hails from a land-owning family in southern Punjabi city of Multan and has been a PPP lawmaker since 1985, serving as a Punjab provincial minister during the 1990s; Defense Minister Chaudhry Ahmed Mukhtar, an industrialist from the Gujrat region of Punjab, who served as federal commerce minister in Benazir Bhutto's second government (1993-1996) and who won his parliamentary seat in 2008 by defeating PML-Q leader Chaudhry Shujaat Hussein; and Finance Minister Ishaq Dar, a native of the Punjabi city of Lahore and central leader of PML-N party who served as federal commerce and later finance minister in Nawaz Sharif's second government (1996-1999). Asif Zardari has at times seemed to flirt with the idea of offering himself as the PPP's prime ministerial candidate, then later rule himself out for the job. Still, many analysts believe Zardari may be grooming himself for that office in the future. Until Benazir Bhutto's teenaged son and political heir Bilawal Bhutto Zardari completes studies at Oxford University, Zardari is to run the PPP. Zardari is a controversial figure in Pakistan: he spent at least eight years in prison (without conviction) on charges ranging from corruption to complicity in murder, and some of these cases still stand unresolved. In March 2008, courts dismissed seven pending corruption cases against Zardari. The Pakistani government later withdrew as party to a Swiss money laundering case against him, perhaps clearing the way for him to win a by-election and become eligible to serve as Prime Minister. Constitutional amendments overseen by President Musharraf in 2003 include a requirement that parliamentarians possess a college degree or its equivalent, which Zardari apparently does not. This represents another potential obstacle to his seating as prime minister. Nawaz Sharif himself may eventually prove to be the greatest benefactor of Pakistan's political upheaval. There is little doubt he would serve a third time as Prime Minister if given the opportunity. Some analysts speculate that Sharif is angling for early new elections in which his party might overtake the PPP nationally. Criminal convictions related to his overthrow by the army in 1999 stand in the way of his future candidacy. With his past links to Pakistan's Islamist parties—his party's 1990 poll win came only through alliance with Islamists and he later pressed for passage of a Shariat (Islamist law) bill—and his sometimes strident anti-Western rhetoric, Sharif is viewed warily by many in Washington. Potential Coalition Discord Never before in Pakistan's history have the country's two leading political parties come together to share power. While many observers praise the Murree Declaration as representing what could be a new conciliatory style of party politics, others note that the PPP and PML-N spent most of the 1990s as bitter enemies. The history of mutual party animosity in fact dates to 1972, when Benazir's father, then-Prime Minister Zulfikar Ali Bhutto, nationalized industries owned by Nawaz Sharif's father. Opposition to President Musharraf's continued power unites these parties at present, but with Musharraf likely to fan the flames of party competition—and with his possibly imminent departure from power removing the key unifying factor between them—many analysts are pessimistic that a PPP-PML-N accommodation can last. Several of Asif Zardari's post-election moves reportedly have alarmed some among his newfound political partners and spurred further doubt about the coalition's longevity. These include gestures toward the MQM party formerly allied with President Musharraf and historically a bitter rival of the PPP in Karachi. Also, the new defense minister, a PPP stalwart, issued statements laudatory of Musharraf, spurring some observers to wonder anew about the PPP's commitment to the anti-Musharraf agenda of its allies at the center. Moreover, intra-party rumblings in the PPP have triggered press reports of an impending split, potentially to be led by Sindh party leaders unhappy with the Punjabi-heavy nature of the new federal cabinet. Restoration of Deposed Judges As part of a six-week-long state of emergency launched by President Musharraf on November 3, 2007, seven Supreme Court justices, including the Chief Justice, and scores of High Court judges refused to take a new oath of office and were summarily dismissed. The Supreme Court was then reconstituted with justices appointed by Musharraf himself. The question of whether and how to restore the Chief Justice and other deposed senior judges remains a key divisive issue. Immediately upon taking office, the new Prime Minister ordered all remaining detained judges to be released. In declaring an intention to restore the pre-November 3 Supreme Court, the new civilian dispensation appeared to set itself on a collision course with Musharraf. Reseating that court would almost certainly lead to Musharraf's removal from office, as the justices had appeared close to finding his October reelection unconstitutional. Pakistan's recently retired Attorney General and longtime Musharraf ally, Malik Qayyum, rejected the new government's plan to reinstate the judges within 30 days, saying their dismissal was constitutional and that efforts to reverse it through executive order or parliamentary resolution would be futile. According to him, only an amendment to the Constitution can reverse President Musharraf's earlier actions. Many legal experts cast doubt on Qayyum's position, however, claiming that because Musharraf's emergency imposition was inherently unconstitutional (as ruled by the Supreme Court on November 3, 2007, just before its reconstitution), all actions taken under that authority are invalid. Some detractors of the new government's intentions call the effort a farce rooted in a desire for revenge, and they seek establishment of an independent judiciary without bringing back what critics have termed "a group of biased, politicized, and vengeful judges." The "lawyer's movement" that arose in response to Musharraf's March 2007 dismissal of Chief Justice Iftikhar Chaudhry (who was reseated in July) was a vital facet of the pro-rule of law, anti-Musharraf sentiment that spread in Pakistan during 2007. It has not faded away: lawyers continue to boycott many courts and the movement remains able to mobilize significant street protests, which Chaudhry continues to publicly support. Nawaz Sharif himself has accused the U.S. government of actively discouraging the restoration of the deposed judges. When asked during a Senate hearing about the status of Supreme Court justices and other judges dismissed under Musharraf's emergency proclamation, Deputy Secretary John Negroponte conceded that the U.S. government had "been silent on the subject." Aitzaz Ahsan, the lawyer who lead the successful effort to have former Chief Justice Chaudhry reseated earlier in 2007, has been at the forefront of the current effort to restore the pre-November 3 judiciary. His post-emergency detention attracted the attention of numerous U.S. Senators, who called for his immediate release. Ahsan has accused the U.S. government of callousness regarding Musharraf's crackdown on the Supreme Court. A Punjabi, he could represent a new power pole within the traditionally hierarchical PPP and is viewed by many as a potential future party leader. Even before the PPP's poll victory there were signs that Zardari would seek to ensure party unity by offering Ahsan deputy status. On March 2, Ahsan was released from four months of detention and was quickly back in the public eye calling for the judges' release and full restoration. President Musharraf reportedly sought to make a deal in which he would relinquish his powers to dissolve parliament if the opposition agreed to drop its efforts to restore the deposed judges. Although this deal was not consummated, it was taken by some as a sign of desperation from the Pakistani president, who finds himself increasingly without allies or influence. Musharraf may be willing to accept the judges' restoration provided the Parliament order it with a two-thirds majority. There have been indications that the PPP's central leader, Asif Zardari, may not stand by the coalition's agreement to restore the ousted judges. These include a "charge sheet" in which Zardari reportedly holds some of the deposed Superior Court justices responsible for his past imprisonment. Zardari may seek a judicial reforms package rather than the "restoration of personalities." Role of the Pakistani Military The army's role as a dominant political player in Pakistan may be changing. Following President Musharraf's November resignation as army chief, the new leadership has shown signs of distancing itself from both Musharraf and from direct involvement in the country's governance. The president's handpicked successor, Gen. Ashfaq Pervez Kayani, has issued orders barring officers from holding unauthorized meetings with civilian leaders; dictated that all active officers holding posts in civilian agencies resign from those positions; and announced that the military's only role in the election process would be maintenance of security. He has since called for a "harmonized relationship between various pillars of state, as provided in the Constitution." In late March, Gen. Kayani exerted further influence by making his first major new appointments, replacing two of the nine corps commanders appointed by Musharraf. The command and control structure for Pakistan's nuclear weapons arsenal reportedly will not change under the new government. The National Command Authority—created in 2000 and chaired by the president—will retain control through military channels. Many analysts see Kayani as motivated to improve the image of the military as an institution after a serious erosion of its status under Musharraf. His dictates and rhetoric have brought accolades from numerous commentators. Any moves by the army to interfere with Parliament's actions on the deposed judges or potential pressures to oust Musharraf quickly could, however, damage the non-partisan image built in recent months. Implications for U.S. Policy Pakistan's relatively credible 2008 polls allowed the Bush Administration to issue an April determination that a democratically elected government had been restored in Islamabad after a 101-month hiatus. This determination permanently removed coup-related aid sanctions that President Bush had been authorized to waive annually if such a waiver was seen to serve U.S. interests. Both before and after the elections, U.S. officials advocated for "moderate forces" within Pakistani politics to come together to sustain political and economic reforms, and to carry on the fight against religious extremism and terrorism. The catastrophic removal of Benazir Bhutto from Pakistan's political equation dealt a serious blow both to the cause of Pakistani democratization and to U.S. interests. Given the plummeting popularity and political influence of their key Pakistani ally, President Musharraf, over the course of 2007, Bush Administration officials were seen to have no "Plan B" and were left with few viable options beyond advocating a credible electoral process and awaiting the poll results. With those results showing a sweeping rejection of Musharraf's parliamentary allies, the Administration found its long-standing policy in some disarray and it now faces even greater pressures to work more closely with civilian and military leaders beyond the president. By some accounts, the U.S. government sought to influence the coalition-building process in Islamabad, in particular by pressuring the PPP to strike a deal with the remnants of the Musharraf-friendly PML-Q. Some observers suspect the Bush Administration remains wedded to a policy that would keep the embattled Musharraf in power despite his weakness and lack of public support. According to some reports, this tack may fuel interagency disputes in Washington, with some career diplomats arguing that the United States could damage its position by appearing to go against a clear popular mandate rejecting Musharraf. Upon completion of Pakistan's February 18 elections, the State Department lauded the "step toward the full restoration of democracy." When asked in February about coalition-forming negotiations and the outstanding issue of the ousted judiciary, a State Department spokesman summarized the U.S. view: Ultimately, what we want to see happen is the formation of a government that's going to be an effective partner for the United States, not only in confronting extremism but also in helping Pakistan achieve the broad-based goals for that country's political and economic development. In terms of the specifics of how that's done, of who winds up in a coalition, who winds up in which ministry, what happens in terms of judicial reform or in terms of judicial appointments, those are really matters for the Pakistanis themselves and for the new government to decide. At the same time, a statement by the White House spokeswoman expressed continued support for President Musharraf in the face of questions about post-election calls for his resignation: Well, the President does support President Musharraf for all of the work that he's done to help us in counterterrorism. And if you look at what we asked President Musharraf to do—which is to take off the uniform, to set free and fair elections, and to lift the emergency order—he did all of those things. And so now it will be up to the people of Pakistan to see what their new government will look like. But the President does certainly support him, and has continued to. By late March, however, when a new Parliament, Prime Minister, and federal cabinet were being seated, senior Bush Administration officials appeared to be recognizing the importance of a broader array of political figures in Islamabad and were vowing to work with all of them. Most Pakistanis express a keen sensitivity to signs of U.S. attempts to influence the post-election coalition-building negotiations, especially when such attempts were seen to run contrary to the expressed will of the Pakistani electorate. The continuation of perceived U.S. meddling in Pakistan's domestic politics has elicited widespread resentment among Pakistanis. Many analysts urge the U.S. government to respect Pakistani sovereignty and self-determination by allowing the Pakistanis to determine their own political arrangements without foreign interference. The Bush Administration's public statements reflect a willingness to do just this, at least at a rhetorical level. In what was taken to be a clear indication of shifting U.S. policy, visiting Deputy Secretary Negroponte—who had in late 2007 described the Pakistani president as an "indispensable ally" of the United States—offered little in the way of public defense for Musharraf and called his future status a matter to be determined by "the internal Pakistani political process." Considerable criticism had arisen in the Pakistani press over the timing of Negroponte's visit, with some commentators expressing anger that American officials were intruding before the new government's formation was complete. A Pakistani Foreign Ministry spokesman sought to clarify that the visit had been planned for some time and its concurrence with formation of the new government was merely coincidental. Secretary of State Condoleezza Rice echoed the claim, adding that she had hoped the timing of the Negroponte-Boucher visit would be taken as a "sign of respect" for Pakistan's democratic processes. Upon returning from a trip that included observing the Pakistani elections, Senate Foreign Relations Committee Chairman Senator Joe Biden concluded that Pakistan had "passed the most important test" by holding reasonably free and fair polls, and he again argued that the United States "should move from a Musharraf policy to a Pakistani policy." During a subsequent Senate Foreign Relations Committee hearing on Pakistan, Biden proposed tripling U.S. economic and development aid to $1.5 billion, adding an annual "democracy dividend" of $1 billion to reward Islamabad if the government there is able to continue a peaceful transition to democracy, and demanded transparency and accountability in continued military aid. Proposals to increase U.S. assistance to Pakistan may be gaining wider acceptance in Congress of late. After meeting with numerous Pakistani officials in Islamabad in late March, Deputy Secretary of State Negroponte said, [T]he U.S.-Pakistan partnership remains strong, and we envision a continued close, productive alliance that benefits both countries. The United States is committed to working with all of Pakistan's leaders on the full spectrum of bilateral issues, from fighting violent extremism to improving educational and economic opportunities.... In the months ahead, the United States looks forward to engaging Pakistan's new government on how best to promote economic growth and reduce poverty. The United States will continue to help the Pakistani people build a secure, prosperous, and free society. In 2008, and for the first time in more than eight years, the United States must deal with a new political dispensation in Islamabad that may agree on the need to combat religious extremism, but that may differ fundamentally on the methods by which to do so. In their first official meetings with the new government, visiting U.S. officials received a reported "dressing down," in particular from Nawaz Sharif, who declined to give Negroponte "a commitment" on fighting terrorism. President Bush telephoned new Pakistani Prime Minister Gillani on March 25, reportedly having a "good conversation" in which the two leaders agreed that U.S. and Pakistani interests are best served by continuing to fight terrorism and extremism. On this basis, the White House anticipates Pakistan's "continued cooperation." The leader of a late March U.S. congressional delegation to Islamabad reportedly came away with a clear sense that Pakistan's new leaders will continue to cooperate closely with the United States on counterterrorism. There are, however, ongoing concerns in Washington that the new Islamabad government will curtail militarized efforts to combat Islamist militants and instead seek negotiations with Pakistan's pro-Taliban forces. Prime Minster Gillani has identified terrorism and extremism as Pakistan's most urgent problems. He vows that combating terrorism, along with addressing poverty and unemployment, will be his government's top priority. Foreign Minister Qureshi has said the new government does not intend to negotiate with terrorists, but does believe in "political engagement." In a subsequent telephone conversation with Secretary of State Rice, Qureshi vowed that Pakistan would "continue its role in the international struggle against terrorism" and he emphasized a need to facilitate this effort through economic development in the FATA. The Islamists' electoral defeat is not necessarily a victory for U.S. interests in the region, as the ANP-led government in the North West Frontier Province could offer its own resistance to the kinds of militarized approaches to countering militancy reportedly favored by Washington. The ANP is expected to play a central role in planned negotiations with militant groups. While Prime Minister Gillani promises to open a dialogue with religious extremists who lay down their arms, the new NWFP Chief Minister, ANP figure Amir Haider Khan Hoti, asserts that the problem cannot be solved by speaking only to tribal elders, but at some point must include the militants themselves. Hoti has demanded that the United States end its suspected missile attacks on Pakistani territory and calls for military action against extremists only as a last resort. The ANP also asserts that the Pakistan army is not a party to the conflict in the tribal areas and so will not have a seat at any negotiation table.

A stable, democratic, prosperous Pakistan actively working to counter Islamist militancy is considered vital to U.S. interests. Pakistan is a key ally in U.S.-led counterterrorism efforts. The history of democracy in Pakistan is a troubled one marked by ongoing tripartite power struggles among presidents, prime ministers, and army chiefs. Military regimes have ruled Pakistan directly for 34 of the country's 60 years in existence, and most observers agree that Pakistan has no sustained history of effective constitutionalism or parliamentary democracy. In 1999, the democratically elected government of then-Prime Minister Nawaz Sharif was ousted in a bloodless coup led by then-Army Chief Gen. Pervez Musharraf, who later assumed the title of president. In 2002, Supreme Court-ordered parliamentary elections—identified as flawed by opposition parties and international observers—seated a new civilian government, but it remained weak, and Musharraf retained the position as army chief until his November 2007 retirement. In October 2007, Pakistan's Electoral College reelected Musharraf to a new five-year term in a controversial vote that many called unconstitutional. The Bush Administration urged restoration of full civilian rule in Islamabad and called for the February 2008 national polls to be free, fair, and transparent. U.S. criticism sharpened after President Musharraf's November 2007 suspension of the Constitution and imposition of emergency rule (nominally lifted six weeks later), and the December 2007 assassination of former Prime Minister and leading opposition figure Benazir Bhutto. To the surprise of nearly all observers, the February elections were relatively free of expected violence. The apparent absence of large-scale election-day rigging allowed opposition parties to decisively defeat Musharraf's allies in Parliament, where nearly all of the senior incumbents lost their seats. An opposition coalition took power in the National Assembly in late March. Parties opposed to Musharraf also took power in three of the country's four provincial assemblies. The result led to the Bush Administration's permanent lifting of coup-related sanctions on aid to Pakistan that had been in place for more than eight years. Political circumstances in Pakistan remain fluid, however, and the country's internal security and stability remain seriously threatened. Many observers urge a broad re-evaluation of U.S. policies toward Pakistan as developments create new centers of power in Islamabad. The Bush Administration has vigorously supported the government of President Musharraf, whose credibility and popularity decreased markedly in 2007. The powerful army's new chief, Gen. Ashfaq Pervez Kiyani, has shown signs of withdrawing the military from a direct role in governance. Moreover, Prime Minister Yousaf Raza Gillani may enjoy reinvigorated influence if anticipated reversions to the country's 1973 Constitution—which empowers Parliament over the presidency—come to pass. As the nature of U.S.-Pakistan relations shifts, potential differences over counterterrorism strategy and over the status of Pakistan's deposed judges may bedevil bilateral ties. This report reviews the results of Pakistan's February 2008 vote and discusses some of the implications for U.S. policy. See also CRS Report RL33498, Pakistan-U.S. Relations, and CRS Report RL34240, Pakistan's Political Crises. This report will not be updated.

Introduction National Security Letters (NSLs) are roughly comparable to administrative subpoenas. Intelligence agencies issue them for intelligence gathering purposes to telephone companies, Internet service providers, consumer credit reporting agencies, banks, and other financial institutions, directing the recipients to turn over certain customer records and similar information. The 111 th Congress saw a number of proposals to amend NSL authority. None were enacted, but S. 193 , introduced early in the 112 th Congress by Senator Leahy, would carry forward in large measure the provisions approved by the Senate Judiciary Committee in the 111 th . S. 193 would also have extended three USA PATRIOT Act-related amendments to the Foreign Intelligence Surveillance Act (FISA) then scheduled to expire earlier this year. The Senate Judiciary Committee reported out an amended version of S. 193 on April 6, 2011. Thereafter, Congress extended the FISA amendments separately. Senator Leahy then reintroduced the reported version of S. 193 as S. 1125 , stripped of the FISA extension provisions. Representative Conyers introduced companion legislation in the House ( H.R. 1805 ). Senator Paul offered several bills that address many of the same issues ( S. 1050 , S. 1070 , S. 1073 , S. 1075 ). S. 1125 and H.R. 1805 would repeal one of NSL's authorizing statutes, section 627 of the Fair Credit Reporting Act (15 U.S.C. 1681v); return the others, as of December 31, 2013, to their pre-USA PATRIOT Act form; amend the judicial review procedure to reflect judicial constructions; and adjust the audit and reporting requirements. S. 1073 would require the Attorney General to issue minimization procedures for NSLs. S. 1075 would permit issuance of a NSL only upon the order of a FISA court judge. S. 1050 and S. 1070 would combine the two proposals and require minimization procedures and FISA court orders for NSLs. Background Prior to the USA PATRIOT Act, the NSL statutes were four. One, 18 U.S.C. 2709, obligated communications providers to supply certain customer information upon the written request of the Director of the Federal Bureau of Investigation (FBI) or a senior FBI headquarters official. When customer identity, length of service, and toll records were sought, the letters had to certify (1) that the information was relevant to a foreign counterintelligence investigation and (2) that specific and articulable facts gave reason to believe the information pertained to a foreign power or its agents. When only customer identity and length of service records (but not toll records) were sought, the letters had to certify (1) again that the information was relevant to a foreign counterintelligence investigation, but (2) that specific and articulable facts gave reason to believe that the customer information pertained to use of the provider's facilities to communicate with foreign powers, their agents, or those engaged in international terrorism or criminal clandestine intelligence activities. In like manner a second statute, Section 1114(a)(5) of the Right to Financial Privacy Act, obligated financial institutions to provide the FBI with customers' financial records upon written certification of the FBI Director or his designee (1) that the records were sought for foreign counterintelligence purposes and (2) that specific and articulable facts gave reason to believe that the records were those of a foreign power or its agents. And so it was with a third, Section 626 of the Fair Credit Report Act, which obligated consumer credit reporting agencies to provide customer identification, and the names and addresses of financial institutions at which a designated consumer maintained accounts. Here too, the obligation was triggered by written certification of the FBI Director or his designee (1) that the information was necessary for a foreign counterintelligence investigation, and (2) that specific and articulable facts gave reason to believe that the consumer was either a foreign power, a foreign official, or the agent of a foreign power and was engaged in international terrorism or criminal clandestine intelligence activities. The fourth, Section 802 of the National Security Act, was a bit different. It reached a wider range of potential recipients at the demand of a large group of federal officials, but for a more limited purpose. It rested the obligation to provide consumer reports, together with financial information and records, upon consumer reporting agencies, financial agencies, and financial institutions, or holding companies. The requirement was triggered by the certification of senior officials of law enforcement and intelligence agencies, but confined to information pertaining to federal employees with access to classified information and being sought for clearance purposes and inquiries into past or potential security leaks. USA PATRIOT Act Section 505 of the USA PATRIOT Act altered the FBI's NSL authority under Section 2709, the Right to Financial Privacy Act, and the Fair Credit Reporting Act in several ways: it expanded issuing authority to include the heads of FBI field offices (special agents in charge (SACs)); it eliminated the requirement of specific and articulable facts demonstrating a nexus to a foreign power or its agents; it required instead that the information was sought for or relevant to various national security investigations; and it directed that no NSL related investigation of a "U.S. person" (American citizen or foreign resident alien) be predicated exclusively on First Amendment protected activities. The National Security Act NSL section remained unchanged, but Section 358(g) of the USA PATRIOT Act added a new Fair Credit Reporting Act NSL Section 627, 15 U.S.C. 1681v. The new section obligated consumer reporting agencies to provide consumer information and reports to a federal agency "authorized to conduct investigations of, or intelligence or counterintelligence activities or analysis related to, international terrorism." Senior federal agency officials were empowered to issue the NSL with a certification that the information was "necessary for the agency's conduct or such investigation, activity, or analysis." 2006 Amendments Several of the USA PATRIOT Act's intelligence gathering provisions were temporary and originally set to expire after five years. The NSL statutes were not among them, but Congress amended the statutes in the USA PATRIOT Improvement and Reauthorization Act of 2005 and the USA PATRIOT Act Additional Reauthorizing Amendments Act of 2006 nonetheless. The NSL statute amendments were driven both by sensitivity to an Administration desire for more explicit enforcement authority and by judicial developments which had raised questions as to the statutes' constitutional vitality as then written. The statutes then came with open-ended nondisclosure provisions which barred recipients from disclosing the fact or content of the NSL—ever or to anyone. Yet, they featured neither a penalty provision should the confidential requirement be breached nor in most cases an enforcement mechanism should an NSL obligation be ignored (the original Fair Credit Report Act statute alone had an explicit judicial enforcement component). The amendments: created a judicial enforcement mechanism and a judicial review procedure for both the requests and accompanying nondisclosure requirements; established specific penalties for failure to comply with the nondisclosure requirements; made it clear that the nondisclosure requirements did not preclude a recipient from consulting an attorney; provided a process to ease the nondisclosure requirement; expanded congressional oversight; and called for Inspector General's audits of use of NSL authority. IG Reports The First IG Report The Department of Justice Inspector General reports, one released in March of 2007, the second in March of 2008, and the third in January of 2010, were less than totally favorable. The first report noted that FBI use of NSLs had increased dramatically, expanding from 8,500 requests in 2000 to 47,000 in 2005, IG Report I at 120. During the three years under review, the percentage of NSLs used to investigate Americans ("U.S. persons") increased from 39% in 2003 to 53% in 2005. A substantial majority of the requests involved records relating to telephone or e-mail communications, Id. The report and the subsequent report a year later provided a glimpse at how the individual NSL statutes were used and why they were considered valuable. In case of the 18 U.S.C. 2709, the Electronic Communications Privacy Act (ECPA) NSL statute, the reports explained that: Through national security letters, an FBI field office obtained telephone toll billing records and subscriber information about an investigative subject in a counterterrorism case. The information obtained identified the various telephone numbers with which the subject had frequent contact. Analysis of the telephone records enabled the FBI to identify a group of individuals residing in the same vicinity as the subject. The FBI initiated investigations on these individuals to determine if there was a terrorist cell operating in the city. Headquarters and field personnel told us that the principal objective of the most frequently used type of NSL – ECPA NSLs seeking telephone toll billing records, electronic communication transactional records, or subscriber information (telephone and e-mail) – is to develop evidence to support applications for FISA orders. The Right to Financial Privacy Act (RFPA) NSL statute, 12 U.S.C. 3414(a)(5), also affords authorities access to a wide range of information (bank transaction records v. telephone transaction records) as demonstrated by the instances where it proved useful: The FBI conducted a multi-jurisdictional counterterrorism investigation of convenience store owners in the United States who allegedly sent funds to known Hawaladars (persons who use the Hawala money transfer system in lieu of or parallel to traditional banks) in the Middle East. The funds were transferred to suspected Al Qaeda affiliates. The possible violations committed by the subjects of these cases included money laundering, sale of untaxed cigarettes, check cashing fraud, illegal sale of pseudoephedrine (the precursor ingredient used to manufacture methamphetamine), unemployment insurance fraud, welfare fraud, immigration fraud, income tax violations, and sale of counterfeit merchandise. The FBI issued national security letters for the convenience store owners' bank account records. The records showed that two persons received millions of dollars from the subjects and that another subject had forwarded large sums of money to one of these individuals. The bank analysis identified sources and recipients of the money transfers and assisted in the collection of information on targets of the investigation overseas. The Fair Credit Reporting Act NSL statutes, 15 U.S.C. 1681u (FCRAu) and 1681v (FCRAv) can be even more illuminating: "The supervisor of a counterterrorism squad told us that the FCRA NSLs enable the FBI to see 'how their investigative subjects conduct their day-to-day activities, how they get their money, and whether they are engaged in white collar crime that could be relevant to their investigations.'" Overall, the report notes that the FBI used the information gleaned from NSLs for a variety of purposes, "to determine if further investigation is warranted; to generate leads for other field offices, Joint Terrorism Task Forces, or other federal agencies; and to corroborate information developed from other investigative techniques." Moreover, information supplied in response to NSLs provides the grist of FBI analytical intelligence reports and various FBI databases. The report was somewhat critical, however, of the FBI's initial performance: [W]e found that the FBI used NSLs in violation of applicable NSL statutes, Attorney General Guidelines, and internal FBI policies. In addition, we found that the FBI circumvented the requirements of the ECPA NSL statute when it issued at least 739 "exigent letters" to obtain telephone toll billing records and subscriber information from three telephone companies without first issuing NSLs. Moreover, in a few other instances, the FBI sought or obtained telephone toll billing records in the absence of a national security investigation, when it sought and obtained consumer full credit reports in a counterintelligence investigation, and when it sought and obtained financial records and telephone toll billing records without first issuing NSLs. Id . at 124. More specifically, the report found that: a "significant number of NSL-related possible violations were not being identified or reported" as required; the only FBI data collection system produced "inaccurate" results; the FBI issued over 700 exigent letters acquiring information in a manner that "circumvented the ECPA NSL statute and violated the Attorney General's Guidelines ... and internal FBI policy;" the FBI's Counterterrorism Division initiated over 300 NSLs in a manner that precluded effective review prior to approval; 60% of the individual files examined showed violations of FBI internal control policies; the FBI did not retain signed copies of the NSLs it issued; the FBI had not provided clear guidance on the application of the Attorney General's least-intrusive-feasible-investigative-technique standard in the case of NSLs; the precise interpretation of toll billing information as it appears in the ECPA NSL statute is unclear; SAC supervision of the attorneys responsible for review of the legal adequacy of proposed NSLs made some of the attorneys reluctant to question the adequacy of the underlying investigation previously approved by the SAC; there was no indication that the FBI's misuse of NSL authority constituted criminal conduct; personnel both at FBI headquarters and in the field considered NSL use indispensable; and information generated by NSLs was fed into a number of FBI systems. IG Report I at 121-24. Exigent Letters Prior to enactment of the Electronic Communications Privacy Act (ECPA), the Supreme Court held that customers had no Fourth Amendment protected privacy rights in the records the telephone company maintained relating to their telephone use. Where a recognized expectation of privacy exists for Fourth Amendment purposes, the Amendment's usual demands such as those of probable cause, particularity, and a warrant may be eased in the face of exigent circumstances. For example, the Fourth Amendment requirement that officers must knock and announce their purpose before forcibly entering a building to execute a warrant can be eased in the presence of certain exigent circumstances such as the threat of the destruction of evidence or danger to the officers. Satisfying Fourth Amendment requirements, however, does not necessarily satisfy statutory prohibitions. The ECPA prohibits communications service providers from supplying information concerning customer records unless one of the statutory exceptions applies. There are specific exceptions for disclosure upon receipt of a grand jury subpoena or an NSL. A service provider who knowingly or intentionally violates the prohibition is subject to civil liability, but there are no criminal penalties for the breach. The Inspector General found that contrary to assertions that "the FBI would obtain telephone records only after it served NSLs or grand jury subpoenas, the FBI obtained telephone bill records and subscriber information prior to serving NSLs or grand jury subpoenas" by using "exigent letters." The FBI responded that it had barred the use of exigent letters, but emphasized that the term "exigent letter" does not include emergency disclosures under the exception now found in 18 U.S.C. 2702(c)(4). Thus, the FBI might request that a service provider invoke that exception to the record disclosure bar "if the provider reasonably believes that an emergency involving immediate danger of death or serious physical injury to any person justifies disclosure of the information," 18 U.S.C. 2702(c)(4). Moreover, the Justice Department's Office of Legal Counsel subsequently advised the FBI in a classified memorandum that "under certain circumstances the ECPA does not prohibit electronic communications service providers from disclosing certain call detail records to the FBI on a voluntary basis without legal process or a qualifying emergency under Section 2702." The Second IG Report The second IG Report reviewed the FBI's use of national security letter authority during calendar year 2006 and the corrective measures taken following the issuance of the IG's first report. The second report concluded that: "the FBI's use of national security letters in 2006 continued the upward trend ... identified ... for the period covering 2003 through 2006; "the percentage of NSL requests generated from investigations of U.S. persons continued to increase significantly, from approximately 39% of all NSL requests issued in 2003 to approximately 57% of all NSL requests issued in 2006;" the FBI and DOJ are committed to correcting the problems identified in IG Report I and "have made significant progress in addressing the need to improve compliance in the FBI's use of NSLs;" [and] "it [was] too early to definitively state whether the new systems and controls developed by the FBI and the Department will eliminate fully the problems with NSLs that we identified," IG Report II at 8-9. The Third IG Report The third IG Report examined the FBI's use of exigent letters and other informal means of acquiring communication service providers' customer records in lieu of relying on NSL authority during the period from 2003 to 2007. The IG's Office discovered that "the FBI's use of exigent letters became so casual, routine, and unsupervised that employees of all three communications service providers sometimes generated exigent letters for FBI personnel to sign and return to them." Some of the informality was apparently the product of proximity. In order to facilitate cooperation, communications providers had assigned employees to FBI offices. In addition to a relaxed exigent letter process, the on-site feature gave rise to a practice of sneak peeks, that is, of providing the FBI with "a preview of the available information for a targeted phone number, without documentation of any justification for the request." "In fact, at times the service providers' employees simply invited FBI personnel to view the telephone records on their computer screens. One senior FBI counterterrorism official described the culture of casual requests for telephone records by observing, 'It [was] like having the ATM in your living room.'" Not surprisingly, the IG's review found widespread use by the FBI of exigent letters and other informal requests for telephone records. These other requests were made ... without first providing legal process or even exigent letters. The FBI also obtained telephone records through improper 'sneak peeks,' community of interest █████, and hot-number ████ Many of these practices violated FBI guidelines, Department policy, and the ECPA statute. In addition, we found that the FBI also made inaccurate statements to the FISA Court related to its use of exigent letters. Although critical of the FBI's initial response and recommending further steps to prevent reoccurrence, the IG's Report concluded that "the FBI took appropriate action to stop the use of exigent letters and to address the problems created by their use." Secrecy, Judicial Review, and the Second Circuit The current secrecy and judicial review provisions applicable to NSLs must be read in light of the Second Circuit's John Doe, Inc. v. Mukasey decision, 549 F.3d 861 (2d Cir. 2008). Under the NSL statutes, secrecy is not absolutely required. Instead, NSL recipients are bound to secrecy only upon the certification of the requesting agency that disclosure of the request or response may result in a danger to national security; may interfere with diplomatic relations or with a criminal, counterterrorism, or counterintelligence investigation; or may endanger the physical safety of an individual. A recipient may disclose the request to those necessary to comply with the request and to an attorney the recipient consults for related legal advice or assistance. In doing so, the recipient must advise them of the secrecy requirements. Aside from its attorney the recipient must also identify, at the requesting agency's election, those to whom it has disclosed the request. Judicial Review of NSLs Under the statute, 18 U.S.C. 3511, a recipient may petition the court to modify or extinguish any NSL secrecy requirement within a year of issuance. Thereafter, it may petition to have the veil of secrecy lifted, although it may resubmit a rejected request only once a year. Section 3511 provides that the court may modify or set aside the restriction if it finds "no reason to believe that disclosure may" endanger national security or personal safety or interfere with diplomatic relations or a criminal, counterterrorism, or counterintelligence investigation. The section, however, binds the court to the assertion of a senior executive branch official that such an adverse consequence is possible . In addition to authority to review and set aside NSL nondisclosure requirements, the federal courts also enjoy jurisdiction to review and enforce the underlying NSL requests. Under Section 3511, recipients may petition and be granted an order modifying or setting aside an NSL, if the court finds that compliance would be unreasonable, oppressive, or otherwise unlawful. The "unreasonable or oppressive" standard is used for grand jury and other subpoenas issued under the Federal Rules of Criminal Procedure. The Rules afford protection against undue burdens and protect privileged communications. Compliance with a particular NSL might be unduly burdensome in some situations, but the circumstances under which NSLs are used suggest few federally recognized privileges. The Rules also impose a relevancy requirement, but in the context of a grand jury investigation a motion to quash will be denied unless it can be shown that "there is no reasonable possibility that the category of materials the Government seeks will produce information relevant" to the investigation. The authority to modify or set aside an NSL that is "unlawful" affords the court an opportunity to determine whether the NSL in question complies with the statutory provisions under which it was issued. Section 3511 also vests the court with authority to enforce the NSL against a recalcitrant recipient. Failure to comply with the court's order thereafter is punishable as contempt of court. A breach of a confidentiality requirement committed knowingly and with the intent to obstruct an investigation or related judicial proceedings is punishable by imprisonment for not more than five years and/or a fine of not more than $250,000 (not more than $500,000 for an organization). The Second Circuit has concluded that the procedure can survive First Amendment scrutiny only if it involves the following: notice to NSL recipients that they may contest any secrecy order; expeditious government petition for judicial review of a secrecy order upon recipient request; government burden to establish the validity of its narrowly tailored secrecy order; no conclusive weight may be afforded governmental assertions; and recipients may apply or reapply annually for judicial review where the government's burden remains the same. On remand, the district upheld continuation of the nondisclosure order under the procedure suggested by the Second Circuit. Proposed Amendments Sunset and Repeal Three provisions governing foreign intelligence investigations sunset on June 1, 2015. The NSL provisions are not among them. None of the NSL statutes are scheduled to expire. S. 1125 and H.R. 1805 would change that. They would repeal Section 627 effective December 31, 2013, and on that date would return the others to their pre-USA PATRIOT Act form. They would establish a transition provision under which the law prior to December 31, 2013, would continue to apply with respect to investigations or offenses begun prior to that date. The USA PATRIOT Act expanded existing authority under 18 U.S.C. 2709, the Right to Financial Privacy Act, and the Fair Credit Reporting Act. It also created new NSL authority in the form of Section 627 of the Fair Credit Reporting Act (15 U.S.C. 1681v). It did not expand the reach of the National Security Act NSL statute. A return to the state of the law prior to enactment of the USA PATRIOT Act would have the effect of eliminating the amendments it made in the pre-existing NSL statutes as well as any subsequent amendments, and of repealing Section 627. In general terms for the three pre-existing NSL statutes, the USA PATRIOT Act: expanded issuing authority to include the heads of FBI field offices (special agents in charge (SACs)); eliminated the requirement of specific and articulable facts demonstrating a nexus to a foreign power or its agents; required instead that the information was sought for or relevant to various national security investigations; and directed that no NSL related investigation of a "U.S. person" (American citizen or foreign resident alien) be predicated exclusively on First Amendment protected activities. This means that: NSLs are more readily available to FBI field agents at a lower level of supervisory control; NSLs can be used to obtain information pertaining to individuals two, three, or more steps removed from the foreign power or agent of a foreign power that is the focus of the investigation; and NSL-related investigations may not be predicated solely on the basis of activities protected by the First Amendment. A return to the state of the law prior to the effective date of the USA PATRIOT Act would mean that NSLs would need to be approved by the FBI Director or a senior FBI headquarters official, and they would have to be based on specific and articulable facts giving reason to believe that the information sought pertains to a foreign power or agent of a foreign power. A witness at an earlier congressional hearing indicated that the "specific and articulable" facts standard grew out of the standards employed in counterintelligence investigations and did not always translate well in a counterterrorism context: My point is that the "specific and articulable facts" standard was particularly suited to the counterintelligence operations of the era in which it was created. A FBI counterintelligence investigation involved examining a linear connection between a foreign intelligence officer (about whom much was known) and his contacts (potential spies). The information known about the intelligence officer was specific in nature, and could be readily used to meet the NSL legal standards.... Unlike the traditional linear counterintelligence case, in which the foreign agent tried to recruit the domestic spy using infrequent and highly secure forms of communication, many counterterrorism cases involved complex networks generating a much larger volume of communication and financial transactions. In counter-terrorism cases, the starting point was often not a clearly identifiable agent of a foreign power (as in counterintelligence); indeed, the relevant "foreign power" was itself an imperfectly understood terrorist organization that might defy precise definition. As a consequence, counter-terrorism investigators often had a far more difficult time meeting the "specific and articulable facts" standard. The language precluding NSL-related investigations grounded exclusively on the exercise of First Amendment rights would also have disappeared. It is at best unclear, however, that the First Amendment unaided does not embody a comparable prohibition. Prior to the USA PATRIOT Act, the NSL statutes strictly prohibited recipients from disclosing the request to anyone, ever. Yet, they afforded recipients no explicit means to challenge or seek limited release from the nondisclosure requirement, even for such narrow purposes as consulting their attorneys for advice on their obligations to comply. On the other hand, they provided the FBI with no explicit remedy should recipients violate the nondisclosure requirement. In the USA PATRIOT Improvement and Reauthorization Act, Congress addressed the issue in three ways. First, it amended the federal obstruction of justice statute to outlaw unjustified disclosures. Second, it amended the NSL statutes to make it clear that a recipient remained free to seek the advice of counsel before complying. These amendments, unlike the obstruction of justice amendment, would disappear should the NSL statutes return to their earlier versions. Congress's third response, however, would mitigate impact of the disappearance. Third, Congress created a nonexpiring statutory section for review of NSLs, 18 U.S.C. 3511. By and large, Section 3511 governs judicial review of NSL nondisclosure requirements. When implemented as required by the Second Circuit's decision in John Doe, Inc. v. Mukasey , 549 F.3d 861 (2d Cir. 2008), and at the election of the recipient, the government has the burden of persuading the court of the validity of the gag order under the same standards as found in the expired portions of the NSL statutes. Although S. 1125 and H.R. 1805 would amend Section 3511, they each reinforce rather than erode the recipient protections of Section 3511 as discussed infra . Section 627, the NSL statute created in the USA PATRIOT Act, is arguably the most sweeping of the NSL statutes. It offers the most extensive array of information (all information pertaining to a consumer held by a consumer credit reporting agency) to the widest range of requesters (any federal agency "authorized to conduct investigations of, or intelligence or counterintelligence activities or analysis relating to, international terrorism"). Its repeal might be seen to facilitate oversight, since it would centralize authority to issue NSLs in the FBI (other than in the case of employee security investigations under the National Security Act). Moreover, the Justice Department IG reported that both the FBI and consumer reporting agencies had experienced difficulty distinguishing between authority under 1681u and 1681v. In contrast, the National Security Act NSL statute, left unamended by the USA PATRIOT Act, is arguably the least intrusive. It reaches only information pertaining to federal employees who have consented to their disclosure. The Minority Views in the Senate Judiciary Committee report objected to a return of the NSL statutes to their earlier versions: S. 193 rescinds these valuable tools by, starting in 2013, requiring the government to follow the cumbersome pre-PATRIOT Act NSL standard. Prior to the PATRIOT Act, not only did the requested records have to be relevant to an investigation, but the FBI also had to have specific and articulable facts giving reason to believe that the information requested pertained to a foreign power or an agent of a foreign power, such as a terrorist or spy. This pre-PATRIOT Act requirement kept the FBI from using NSLs to develop evidence at the early stages of an investigation, which is precisely when they are the most useful, and often prevented investigators from acquiring records that were relevant to an ongoing international terrorism or espionage investigation. It makes little sense to roll back the sensible NSL reforms that were made as part of the USA PATRIOT Act. Criminal investigators have long been able to use administrative or grand jury subpoenas to obtain records, so long as they are relevant to their investigation. Nondisclosure Each of the NSL statutes has a nondisclosure provision. They state that the issuing agency may prohibit recipients from disclosing the request—to anyone other than their attorney and those necessary to comply with the request, ever. In order to activate the authority, agency officials must certify that disclosure may endanger national security, endanger individual safety, or may interfere with diplomatic relations or with a criminal, counterintelligence, or counterterrorism investigation. The statutes declare that a federal district court may modify or set aside an NSL secrecy requirement on the petition of a recipient, if it concludes that there is no reason to believe that disclosure might result in any such danger or interference. If the petition for review is filed more than a year after issuance of the NSL, the agency must either terminate the gag order or recertify the need for its continuation. They make no explicit provision for disclosure to the party to whom the information pertains. The Second Circuit in John Doe, Inc. v. Mukasey held that these provisions only survive First Amendment scrutiny if the agency petitions for judicial review and convinces the court that the agency proposed order is narrowly crafted to meet to the statutorily identified adverse consequences of disclosure. S. 1125 and H.R. 1805 would modify the statutory provisions governing the issuance and judicial review of NSL nondisclosure orders. It would codify a procedure comparable in many respects to that which the Second Circuit identified as constitutionally acceptable. The agency issuing the NSL would have made the initial determination of whether to include a nondisclosure provision in the NSL and that determination would be subject to judicial review. It would leave unchanged the concerns a requesting official might rely upon in order to impose a nondisclosure order: reason to believe disclosure may endanger national security or individual safety or interfere with diplomatic relations or a criminal, counterterrorism, or counterintelligence investigation. The agency would have to notify the recipient of the right to judicial review and petition for review within 30 days of a recipient's request for judicial review. The agency's application for judicial approval or review would have to include a statement of facts giving reason to believe that disclosure might result in one of the statutory list of adverse consequences – endanger national security or individual safety or interfere with diplomatic relations or with a criminal, counterterrorism, or counterintelligence investigation. Should the court feel the agency had met its burden after giving agency certification "substantial weight," it would be required to issue a nondisclosure order. S. 1125 and H.R. 1805 would amend each of the NSL statutes to require agency certifying officials to place a written statement in the agency's records documenting the specific facts that support the belief that the information sought in the NSL is relevant to a qualified investigation. Minimization Requirements Minimization is one of the ways that legislation in the 112 th Congress differs from the legislation approved by the Senate Judiciary Committee in the previous Congress. S. 1125 and H.R. 1805 do not mention minimization. The change is apparently a response to intervening Justice Department action. Senator Paul's bills include specific NSL minimization proposals. "Minimization," in this context, refers to limitations on what information is acquired; how it is acquired; how it is maintained; who has access to it within the capturing agency and under what circumstances; to whom and under what circumstances it is disclosed beyond the capturing agency; how long it is preserved; and when and under what circumstances it is expunged. Minimization standards are drawn with an eye to the purposes for which information is acquired; the authority under which it is acquired; the legitimate interests which may be affected by its acquisition, use, or disclosure; and the governmental interests served by its acquisition, maintenance, use, and disclosure. Minimization standards ordinarily reinforce statutory and regulatory limitations that attend the use of possibly invasive means of acquiring information. For example, the Foreign Intelligence Surveillance Act (FISA) provides fairly rigorous statutory procedures that must be honored before electronic surveillance or physical searches may be authorized in a national security context. It also supplies statutory conditions under which information acquired using those techniques may be used, and both judicial and legislative oversight procedures. As an additional safeguard, it also calls for the creation and implementation of minimization procedures to protect private information relating to Americans consistent with the U.S. foreign intelligence interests. Section 119(f) of the USA PATRIOT Improvement and Reauthorization Act directed the Attorney General and the Director of National Intelligence to report to the congressional intelligence and judiciary committees on the feasibility of NSL minimization procedures "to ensure the protection of the constitutional rights of United States persons." The Inspector General's reports noted the need for minimization standards or their regulatory equivalent: In our first NSL report, the OIG noted the proviso in the Attorney General's NSI Guidelines that national security investigations should use the "least intrusive collection techniques feasible" to carry out the investigations. The OIG reported that we found no clear guidance on how Special Agents should reconcile the Attorney General guidelines' limitations with the expansive authority provided in the NSL statutes. Our concerns over the lack of formal guidance were magnified because of the volume of NSLs generated by the FBI each year and because the information collected is retained for long periods in databases available to many authorized law enforcement personnel. The Justice Department convened a working group to study and make recommendations concerning possible NSL minimization standards in response to its statutory obligation and the Inspector General's initial report. Attorney General Holder reported in a letter dated December 9, 2010, to Senator Leahy as Chair of the Senate Judiciary Committee, that the Attorney General had "approved Procedures for the Collection, Use and Storage of Information Derived from National Security Letters on October 1, 2010" and that, "[t]he FBI's current practice is consistent with the procedures and the FBI is working on formal policy to implement them. In addition DOJ and ODNI [Office of the Director of National Intelligence] will shortly complete work on a joint report to Congress on NSL 'minimization' as required by the PATRIOT Reauthorization Act of 2005." The Senate Judiciary Committee report noted that, in light of the Attorney General's action, S. 193 replaced a call for the promulgation of minimization standards with a section that would direct the "Attorney General to periodically review the procedures, taking the privacy rights and civil liberties of Americans into consideration." S. 1125 and H.R. 1805 adopt the same approach. Senator Paul's proposals would continue to call upon the Attorney General to promulgate minimization standards. His proposals, however, emphasize the need for standards that address when NSL-generated information should be disposed of, for example, "including procedures to ensure that information obtained that is outside the scope of such National Security Letter or request, is returned or destroyed." Reports and Audits Some of the NSL statutes provide for periodic reports to various congressional committees. In addition, the USA PATRIOT Improvement and Reauthorization Act instructed the Attorney General to prepare, in unclassified form, an annual report to Congress on the number of NSLs issued in the previous year. The same legislation directed the Inspector General of the Department of Justice to audit and report on the use of NSL authority for calendar years 2002 through 2006. S. 1125 and H.R. 1805 would expand each of these requirements. Existing law requires a public report of the number of times the Justice Department has used NSL requests for information concerning Americans. S. 1125 a n d H.R. 1805 would demand twice yearly reports to include the number of requests sought for information on those who not the subject of investigations. They would also call for audits by the Justice Department's Inspector General for the years 2007 through 2013, comparable to those which the IG conducted earlier. Text of NSL Statutes on October 25, 2001, and Now (emphasis added) 12 U.S.C. 3414(a)(5) (on October 25, 2001) * * * (a) .... (5)(A) Financial institutions, and officers, employees, and agents thereof, shall comply with a request for a customer's or entity's financial records made pursuant to this subsection by the Federal Bureau of Investigation when the Director of the Federal Bureau of Investigation (or the Director's designee) certifies in writing to the financial institution that such records are sought for foreign counter intelligence purposes and that there are specific and articulable facts giving reason to believe that the customer or entity whose records are sought is a foreign power or the agents of a foreign power as defined in section 1801 of title 50 . (B) The Federal Bureau of Investigation may disseminate information obtained pursuant to this paragraph only as provided in guidelines approved by the Attorney General for foreign intelligence collection and foreign counterintelligence investigations conducted by the Federal Bureau of Investigation, and, with respect to dissemination to an agency of the United States, only if such information is clearly relevant to the authorized responsibilities of such agency. (C) On a semiannual basis the Attorney General shall fully inform the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate concerning all requests made pursuant to this paragraph. (D) No financial institution, or officer, employee, or agent of such institution, shall disclose to any person that the Federal Bureau of Investigation has sought or obtained access to a customer's or entity's financial records under this paragraph. 12 U.S.C. 3414(a)(5) (now) * * * (a) ... (5)(A) Financial institutions, and officers, employees, and agents thereof, shall comply with a request for a customer's or entity's financial records made pursuant to this subsection by the Federal Bureau of Investigation when the Director of the Federal Bureau of Investigation (or the Director's designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge in a Bureau field office designated by the Director ) certifies in writing to the financial institution that such records are sought for foreign counter intelligence purposes to protect against international terrorism or clandestine intelligence activities, provided that such an investigation of a United States person is not conducted solely upon the basis of activities protected by the first amendment to the Constitution of the United States. (B) The Federal Bureau of Investigation may disseminate information obtained pursuant to this paragraph only as provided in guidelines approved by the Attorney General for foreign intelligence collection and foreign counterintelligence investigations conducted by the Federal Bureau of Investigation, and, with respect to dissemination to an agency of the United States, only if such information is clearly relevant to the authorized responsibilities of such agency. (C) On the dates provided in section 415b of Title 50, the Attorney General shall fully inform the congressional intelligence committees (as defined in section 401a of Title 50) concerning all requests made pursuant to this paragraph. (D) Prohibition of certain disclosure.— (i) If the Director of the Federal Bureau of Investigation, or his designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge in a Bureau field office designated by the Director, certifies that otherwise there may result a danger to the national security of the United States, interference with a criminal, counterterrorism, or counterintelligence investigation, interference with diplomatic relations, or danger to the life or physical safety of any person , no financial institution, or officer, employee, or agent of such institution, shall disclose to any person (other than those to whom such disclosure is necessary to comply with the request or an attorney to obtain legal advice or legal assistance with respect to the request) that the Federal Bureau of Investigation has sought or obtained access to a customer's or entity's financial records under subparagraph (A). (ii) The request shall notify the person or entity to whom the request is directed of the nondisclosure requirement under clause (i). (iii) Any recipient disclosing to those persons necessary to comply with the request or to an attorney to obtain legal advice or legal assistance with respect to the request shall inform such persons of any applicable nondisclosure requirement. Any person who receives a disclosure under this subsection shall be subject to the same prohibitions on disclosure under clause (i). (iv) At the request of the Director of the Federal Bureau of Investigation or the designee of the Director, any person making or intending to make a disclosure under this section shall identify to the Director or such designee the person to whom such disclosure will be made or to whom such disclosure was made prior to the request, except that nothing in this section shall require a person to inform the Director or such designee of the identity of an attorney to whom disclosure was made or will be made to obtain legal advice or legal assistance with respect to the request for financial records under subparagraph (A). 15 U.S.C. 1681u(a), (b)(on October 25, 2001) (a) Identity of financial institutions Notwithstanding section 1681b of this title or any other provision of this subchapter, a consumer reporting agency shall furnish to the Federal Bureau of Investigation the names and addresses of all financial institutions (as that term is defined in section 3401 of Title 12) at which a consumer maintains or has maintained an account, to the extent that information is in the files of the agency, when presented with a written request for that information, signed by the Director of the Federal Bureau of Investigation, or the Director's designee, which certifies compliance with this section. The Director or the Director's designee may make such a certification only if the Director or the Director's designee has determined in writing that— (1)such information is necessary for the conduct of an authorized foreign counterintelligence investigation; and (2) there are specific and articulable facts giving reason to believe that the consumer— (A) is a foreign power (as defined in section 1801 of title 50) or a person who is not a United States person (as defined in such section 1801 of title 50) and is an official of a foreign power; or (B) is an agent of a foreign power and is engaging or has engaged in an act of international terrorism (as that term is defined in section 1801(c) of title 50) or clandestine intelligence activities that involve or may involve a violation of criminal statutes of the United States. (b) Identifying information Notwithstanding the provisions of section 1681b of this title or any other provision of this subchapter, a consumer reporting agency shall furnish identifying information respecting a consumer, limited to name, address, former addresses, places of employment, or former places of employment, to the Federal Bureau of Investigation when presented with a written request, signed by the Director or the Director's designee, which certifies compliance with this subsection. The Director or the Director's designee may make such a certification only if the Director or the Director's designee has determined in writing that— (1) such information is necessary to the conduct of an authorized counterintelligence investigation; and (2) there is information giving reason to believe that the consumer has been, or is about to be, in contact with a foreign power or an agent of a foreign power (as defined in section 1801 of title 50). * * * 15 U.S.C. 1681u(a), (b)(now) (a) Identity of financial institutions Notwithstanding section 1681b of this title or any other provision of this subchapter, a consumer reporting agency shall furnish to the Federal Bureau of Investigation the names and addresses of all financial institutions (as that term is defined in section 3401 of Title 12) at which a consumer maintains or has maintained an account, to the extent that information is in the files of the agency, when presented with a written request for that information, signed by the Director of the Federal Bureau of Investigation, or the Director's designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge of a Bureau field office designated by the Director , which certifies compliance with this section. The Director or the Director's designee may make such a certification only if the Director or the Director's designee has determined in writing, that such information is sought for the conduct of an authorized investigation to protect against international terrorism or clandestine intelligence activities, provided that such an investigation of a United States person is not conducted solely upon the basis of activities protected by the first amendment to the Constitution of the United States. (b) Identifying information Notwithstanding the provisions of section 1681b of this title or any other provision of this subchapter, a consumer reporting agency shall furnish identifying information respecting a consumer, limited to name, address, former addresses, places of employment, or former places of employment, to the Federal Bureau of Investigation when presented with a written request, signed by the Director or the Director's designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge of a Bureau field office designated by the Director , which certifies compliance with this subsection. The Director or the Director's designee may make such a certification only if the Director or the Director's designee has determined in writing that such information is sought for the conduct of an authorized investigation to protect against international terrorism or clandestine intelligence activities, provided that such an investigation of a United States person is not conducted solely upon the basis of activities protected by the first amendment to the Constitution of the United States . * * * 18 U.S.C. 2709 (as of October 25, 2001) (a) Duty to provide.—A wire or electronic communication service provider shall comply with a request for subscriber information and toll billing records information, or electronic communication transactional records in its custody or possession made by the Director of the Federal Bureau of Investigation under subsection (b) of this section. (b) Required certification.—The Director of the Federal Bureau of Investigation, or his designee in a position not lower than Deputy Assistant Director, may— (1) request the name, address, length of service, and local and long distance toll billing records of a person or entity if the Director (or his designee in a position not lower than Deputy Assistant Director) certifies in writing to the wire or electronic communication service provider to which the request is made that— (A) the name, address, length of service, and toll billing records sought are relevant to an authorized investigation to foreign counterintelligence investigation; and ( B) there are specific and facts giving reason to believe that the person or entity to whom the information sought pertains is a foreign power or an agent of a foreign power as defined in section 101 of the Foreign intelligence Surveillance Act of 1978 (50 U.S.C. 1801 ); and (2) request the name, address, and length of service of a person or entity if the Director (or his designee in a position not lower than Deputy Assistant Director) certifies in writing to the wire or electronic communication service provider to which the request is made that— (A) the information sought is relevant to an authorized foreign counterintelligence investigation; and (B) There are specific and articulable facts giving reason to believe that communication facilities registered in the name of the person or entity have been used, through the services of such provider, in communications with— (i) an individual who is engaging or has engaged in international terrorism as defined in section 101(c) of the Foreign Intelligence Surveillance Act or clandestine intelligence activities that involve or may involve a violation of the criminal statutes of the United States; or (ii)a foreign power or agent of a foreign power under circumstances giving reason to believe that the communication concerned international terrorism as defined in section 101(c) of the Foreign Intelligence Surveillance Act or clandestine intelligence activities that involve or may involve a violation of the criminal statutes of the United States. (c) Prohibition of certain disclosure.—No wire or electronic communication service provider, or officer, employee, or agent thereof, shall disclose to any person that the Federal Bureau of Investigation has sought or obtained access to information or records under this section. (d) Dissemination by bureau.—The Federal Bureau of Investigation may disseminate information and records obtained under this section only as provided in guidelines approved by the Attorney General for foreign intelligence collection and foreign counterintelligence investigations conducted by the Federal Bureau of Investigation, and, with respect to dissemination to an agency of the United States, only if such information is clearly relevant to the authorized responsibilities of such agency. (e) Requirement that certain congressional bodies be informed.—On a semiannual basis the Director of the Federal Bureau of Investigation shall fully inform the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate, and the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate, concerning all requests made under subsection (b) of this section. 18 U.S.C. 2709 (now) (a) Duty to provide.—A wire or electronic communication service provider shall comply with a request for subscriber information and toll billing records information, or electronic communication transactional records in its custody or possession made by the Director of the Federal Bureau of Investigation under subsection (b) of this section. (b) Required certification.—The Director of the Federal Bureau of Investigation, or his designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge in a Bureau field office designated by the Director , may— (1) request the name, address, length of service, and local and long distance toll billing records of a person or entity if the Director (or his designee) certifies in writing to the wire or electronic communication service provider to which the request is made that the name, address, length of service, and toll billing records sought are relevant to an authorized investigation to protect against international terrorism or clandestine intelligence activities, provided that such an investigation of a United States person is not conducted solely on the basis of activities protected by the first amendment to the Constitution of the United States. ; and (2) request the name, address, and length of service of a person or entity if the Director (or his designee) certifies in writing to the wire or electronic communication service provider to which the request is made that the information sought is relevant to an authorized investigation to protect against international terrorism or clandestine intelligence activities, provided that such an investigation of a United States person is not conducted solely upon the basis of activities protected by the first amendment to the Constitution of the United States . (c) Prohibition of certain disclosure.— (1) If the Director of the Federal Bureau of Investigation, or his designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge in a Bureau field office designated by the Director, certifies that otherwise there may result a danger to the national security of the United States, interference with a criminal, counterterrorism, or counterintelligence investigation, interference with diplomatic relations, or danger to the life or physical safety of any person , no wire or electronic communications service provider, or officer, employee, or agent thereof, shall disclose to any person (other than those to whom such disclosure is necessary to comply with the request or an attorney to obtain legal advice or legal assistance with respect to the request) that the Federal Bureau of Investigation has sought or obtained access to information or records under this section. (2) The request shall notify the person or entity to whom the request is directed of the nondisclosure requirement under paragraph (1). (3) Any recipient disclosing to those persons necessary to comply with the request or to an attorney to obtain legal advice or legal assistance with respect to the request shall inform such person of any applicable nondisclosure requirement. Any person who receives a disclosure under this subsection shall be subject to the same prohibitions on disclosure under paragraph (1). (4) At the request of the Director of the Federal Bureau of Investigation or the designee of the Director, any person making or intending to make a disclosure under this section shall identify to the Director or such designee the person to whom such disclosure will be made or to whom such disclosure was made prior to the request, except that nothing in this section shall require a person to inform the Director or such designee of the identity of an attorney to whom disclosure was made or will be made to obtain legal advice or legal assistance with respect to the request under subsection (a). (d) Dissemination by bureau.—The Federal Bureau of Investigation may disseminate information and records obtained under this section only as provided in guidelines approved by the Attorney General for foreign intelligence collection and foreign counterintelligence investigations conducted by the Federal Bureau of Investigation, and, with respect to dissemination to an agency of the United States, only if such information is clearly relevant to the authorized responsibilities of such agency. (e) Requirement that certain congressional bodies be informed.—On a semiannual basis the Director of the Federal Bureau of Investigation shall fully inform the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate, and the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate, concerning all requests made under subsection (b) of this section. (f) Libraries.—A library (as that term is defined in section 213(1) of the Library Services and Technology Act (20 U.S.C. 9122(1)), the services of which include access to the Internet, books, journals, magazines, newspapers, or other similar forms of communication in print or digitally by patrons for their use, review, examination, or circulation, is not a wire or electronic communication service provider for purposes of this section, unless the library is providing the services defined in section 2510(15) ("electronic communication service") of this title. 15 U.S.C. 1681v (as of October 25, 2001) NONE. This section was created by the USA PATRIOT Act, effective October 26, 2001. 15 U.S.C. 1681v (now) (a) Disclosure Notwithstanding section 1681b of this title or any other provision of this subchapter, a consumer reporting agency shall furnish a consumer report of a consumer and all other information in a consumer's file to a government agency authorized to conduct investigations of, or intelligence or counterintelligence activities or analysis related to, international terrorism when presented with a written certification by such government agency that such information is necessary for the agency's conduct or such investigation, activity or analysis. (b) Form of certification The certification described in subsection (a) of this section shall be signed by a supervisory official designated by the head of a Federal agency or an officer of a Federal agency whose appointment to office is required to be made by the President, by and with the advice and consent of the Senate. (c) Confidentiality (1) If the head of a government agency authorized to conduct investigations of intelligence or counterintelligence activities or analysis related to international terrorism, or his designee, certifies that otherwise there may result a danger to the national security of the United States, interference with a criminal, counterterrorism, or counterintelligence investigation, interference with diplomatic relations, or danger to the life or physical safety of any person, no consumer reporting agency or officer, employee, or agent of such consumer reporting agency, shall disclose to any person (other than those to whom such disclosure is necessary to comply with the request or an attorney to obtain legal advice or legal assistance with respect to the request), or specify in any consumer report, that a government agency has sought or obtained access to information under subsection (a) of this section. (2) The request shall notify the person or entity to whom the request is directed of the nondisclosure requirement under paragraph (1). (3) Any recipient disclosing to those persons necessary to comply with the request or to any attorney to obtain legal advice or legal assistance with respect to the request shall inform such persons of any applicable nondisclosure requirement. Any person who receives a disclosure under this subsection shall be subject to the same prohibitions on disclosure under paragraph (1). (4) At the request of the authorized government agency, any person making or intending to make a disclosure under this section shall identify to the requesting official of the authorized government agency the person to whom such disclosure will be made or to whom such disclosure was made prior to the request, except that nothing in this section shall require a person to inform the requesting official of the identity of an attorney to whom disclosure was made or will be made to obtain legal advice or legal assistance with respect to the request for information under subsection (a) of this section. (d) Rule of construction Nothing in section 1681u of this title shall be construed to limit the authority of the Director of the Federal Bureau of Investigation under this section. (e) Safe harbor Notwithstanding any other provision of this subchapter, any consumer reporting agency or agent or employee thereof making disclosure of consumer reports or other information pursuant to this section in good-faith reliance upon a certification of a government agency pursuant to the provisions of this section shall not be liable to any person for such disclosure under this subchapter, the constitution of any State, or any law or regulation of any State or any political subdivision of any State. (f) Reports to Congress (1) On a semi-annual basis, the Attorney General shall fully inform the Committee on the Judiciary, the Committee on Financial Services, and the Permanent Select Committee on Intelligence of the House of Representatives and the Committee on the Judiciary, the Committee on Banking, Housing, and Urban Affairs, and the Select Committee on Intelligence of the Senate concerning all requests made pursuant to subsection (a) of this section. (2) In the case of the semiannual reports required to be submitted under paragraph (1) to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate, the submittal dates for such reports shall be as provided in section 415b of Title 50. 50 U.S.C. 436 (as of October 25, 2001) (a) Generally (1) Any authorized investigative agency may request from any financial agency, financial institution, or holding company, or from any consumer reporting agency, such financial records, other financial information, and consumer reports as may be necessary in order to conduct any authorized law enforcement investigation, counterintelligence inquiry, or security determination. Any authorized investigative agency may also request records maintained by any commercial entity within the United States pertaining to travel by an employee in the executive branch of Government outside the United States. (2) Requests may be made under this section where— (A) the records sought pertain to a person who is or was an employee in the executive branch of Government required by the President in an Executive order or regulation, as a condition of access to classified information, to provide consent, during a background investigation and for such time as access to the information is maintained, and for a period of not more than three years thereafter, permitting access to financial records, other financial information, consumer reports, and travel records; and (B)(i) there are reasonable grounds to believe, based on credible information, that the person is, or may be, disclosing classified information in an unauthorized manner to a foreign power or agent of a foreign power; (ii) information the employing agency deems credible indicates the person has incurred excessive indebtedness or has acquired a level of affluence which cannot be explained by other information known to the agency; or (iii) circumstances indicate the person had the capability and opportunity to disclose classified information which is known to have been lost or compromised to a foreign power or an agent of a foreign power. (3) Each such request— (A) shall be accompanied by a written certification signed by the department or agency head or deputy department or agency head concerned, or by a senior official designated for this purpose by the department or agency head concerned (whose rank shall be no lower than Assistant Secretary or Assistant Director), and shall certify that— (i) the person concerned is or was an employee within the meaning of paragraph (2)(A); (ii) the request is being made pursuant to an authorized inquiry or investigation and is authorized under this section; and (iii) the records or information to be reviewed are records or information which the employee has previously agreed to make available to the authorized investigative agency for review; (B) shall contain a copy of the agreement referred to in subparagraph (A)(iii); (C) shall identify specifically or by category the records or information to be reviewed; and (D) shall inform the recipient of the request of the prohibition described in subsection (b) of this section. (b) Disclosure of requests Notwithstanding any other provision of law, no governmental or private entity, or officer, employee, or agent of such entity, may disclose to any person that such entity has received or satisfied a request made by an authorized investigative agency under this section. * * * 50 U.S.C. 436 (now) (a) Generally (1) Any authorized investigative agency may request from any financial agency, financial institution, or holding company, or from any consumer reporting agency, such financial records, other financial information, and consumer reports as may be necessary in order to conduct any authorized law enforcement investigation, counterintelligence inquiry, or security determination. Any authorized investigative agency may also request records maintained by any commercial entity within the United States pertaining to travel by an employee in the executive branch of Government outside the United States. (2) Requests may be made under this section where— (A) the records sought pertain to a person who is or was an employee in the executive branch of Government required by the President in an Executive order or regulation, as a condition of access to classified information, to provide consent, during a background investigation and for such time as access to the information is maintained, and for a period of not more than three years thereafter, permitting access to financial records, other financial information, consumer reports, and travel records; and (B)(i) there are reasonable grounds to believe, based on credible information, that the person is, or may be, disclosing classified information in an unauthorized manner to a foreign power or agent of a foreign power; (ii) information the employing agency deems credible indicates the person has incurred excessive indebtedness or has acquired a level of affluence which cannot be explained by other information known to the agency; or (iii) circumstances indicate the person had the capability and opportunity to disclose classified information which is known to have been lost or compromised to a foreign power or an agent of a foreign power. (3) Each such request— (A) shall be accompanied by a written certification signed by the department or agency head or deputy department or agency head concerned, or by a senior official designated for this purpose by the department or agency head concerned (whose rank shall be no lower than Assistant Secretary or Assistant Director), and shall certify that— (i) the person concerned is or was an employee within the meaning of paragraph (2)(A); (ii) the request is being made pursuant to an authorized inquiry or investigation and is authorized under this section; and (iii) the records or information to be reviewed are records or information which the employee has previously agreed to make available to the authorized investigative agency for review; (B) shall contain a copy of the agreement referred to in subparagraph (A)(iii); (C) shall identify specifically or by category the records or information to be reviewed; and (D) shall inform the recipient of the request of the prohibition described in subsection (b) of this section. (b) Prohibition of certain disclosure (1) If an authorized investigative agency described in subsection (a) of this section certifies that otherwise there may result a danger to the national security of the United States, interference with a criminal, counterterrorism, or counterintelligence investigation, interference with diplomatic relations, or danger to the life or physical safety of any person , no governmental or private entity, or officer, employee, or agent of such entity, may disclose to any person (other than those to whom such disclosure is necessary to comply with the request or an attorney to obtain legal advice or legal assistance with respect to the request) that such entity has received or satisfied a request made by an authorized investigative agency under this section. (2) The request shall notify the person or entity to whom the request is directed of the nondisclosure requirement under paragraph (1). (3) Any recipient disclosing to those persons necessary to comply with the request or to an attorney to obtain legal advice or legal assistance with respect to the request shall inform such persons of any applicable nondisclosure requirement. Any person who receives a disclosure under this subsection shall be subject to the same prohibitions on disclosure under paragraph (1) . (4) At the request of the authorized investigative agency, any person making or intending to make a disclosure under this section shall identify to the requesting official of the authorized investigative agency the person to whom such disclosure will be made or to whom such disclosure was made prior to the request, except that nothing in this section shall require a person to inform the requesting official of the identity of an attorney to whom disclosure was made or will be made to obtain legal advice or legal assistance with respect to the request under subsection (a) of this section. * * *

National Security Letters (NSLs) are roughly comparable to administrative subpoenas. Various intelligence agencies use them to demand certain customer information from communications providers, financial institutions, and consumer credit reporting agencies under the Right to Financial Privacy Act, the Fair Credit Reporting Act, the National Security Act, and the Electronic Communications Privacy Act. The USA PATRIOT Act expanded NSL authority. Later reports of the Department of Justice's Inspector General indicated that (1) the FBI considered the expanded authority very useful; (2) after expansion the number of NSL requests increased dramatically; (3) the number of requests relating to Americans increased substantially; and (4) FBI use of NSL authority had sometimes failed to comply with statutory, Attorney General, or FBI policies. Originally, the NSL statutes authorized nondisclosure requirements prohibiting recipients from disclosing receipt or the content of an NSL to anyone, ever. They now permit judicial review of these secrecy provisions. As understood by the courts, recipients may request the issuing agency to seek and justify to the court the continued binding effect of any secrecy requirement. In conjunction with congressional consideration of three expiring USA PATRIOT Act-related amendments to the Foreign Intelligence Surveillance Act (FISA), the Senate Judiciary Committee recommended that the NSL statutes be returned to their USA PATRIOT Act form and that judicial construction of the nondisclosure provisions be codified, S.Rept. 112-13 to accompany S. 193. Thereafter, Congress extended the FISA provisions in separate legislation, P.L. 112-14 (S. 990). Senator Leahy (S. 1125) and Representative Conyers (H.R. 1805) have reintroduced the NSL proposals found in S. 193. Senator Paul has offered several proposals to require FISA court approval before an NSL could be executed as well as to require NSL minimization standards (S. 1050, S. 1070, S. 1073, and S. 1075). This report reprints the text of the five NSL statutes as they now appear and as they appeared prior to amendment by the USA PATRIOT Act (to which form they would be returned under S. 1125 and H.R. 1805). Related reports include CRS Report R40138, Amendments to the Foreign Intelligence Surveillance Act (FISA) Extended Until June 1, 2015, by [author name scrubbed], and CRS Report RL33320, National Security Letters in Foreign Intelligence Investigations: Legal Background and Recent Amendments, by [author name scrubbed].

Most Recent Developments Early in the morning on October 7, 2004, a conference agreement on the FY2005 defenseauthorization bill ( H.R. 4200 ) was announced. The House approved the conferencereport (by a vote of 359-14) on October 8, and the Senate approved it (by unanimous consent) onOctober 9. The President signed the bill into law ( P.L. 108-375 ) on October 28. On the key issues,conferees rejected a House provision to delay military base closures; authorized purchases, but notleasing, of Boeing KC-767 or other refueling aircraft; increased statutory caps on Army and MarineCorps active duty end-strength in FY2005 by 23,000; rejected a House provision that would limitpurchases of defense goods from nations that require offsets for purchases of U.S. weapons; andincreased benefits for 62-and-older survivors of military retirees. Earlier, on July 22, 2004, both theHouse (by a vote of 410-12) and the Senate (by a vote of 96-0) approved a conference agreement onthe FY2005 defense appropriations bill ( H.R. 4613 ). The President signed the bill intolaw on August 5, 2004 ( P.L. 108-287 ). The conference appropriations agreement provides $416.9billion in new budget authority, including $391.2 billion for regular Department of Defense programsand $28.2 billion in emergency funding, of which $25 billion is for operations in Iraq andAfghanistan. The $391.2 billion in regular defense appropriations is about $1.7 billion below theAdministration request. The energy and water appropriations bill, included in the consolidatedappropriations bill approved in November ( H.R. 4818 ), however, rescinded $300million of regular FY2005 defense appropriations. Overview: What the Defense Authorization and Appropriations Bills Cover Congress provides funding for national defense programs in several annual appropriationsmeasures, the largest of which is the defense appropriations bill. Congress also acts every year ona national defense authorization bill, which authorizes programs funded in several regularappropriations measures. The authorization bill addresses defense programs in almost precisely thesame level of detail as the defense-related appropriations, and congressional debate about majordefense policy and funding issues often occurs mainly in action on the authorization. Because the defense authorization and appropriations bills are so closely related, thisreport tracks congressional action on both measures. The annual defense appropriations bill provides funds for military activities of theDepartment of Defense (DOD), including pay and benefits of military personnel, operation andmaintenance of weapons and facilities, weapons procurement, and research and development, as wellas for other purposes. Most of the funding in the bill is for programs administered by theDepartment of Defense, though the bill also provides (1) relatively small, unclassified amounts forthe Central Intelligence Agency retirement fund and intelligence community management, (2)classified amounts for national foreign intelligence activities administered by the CIA and by otheragencies as well as by DOD, and (3) very small amounts for some other agencies. Several other appropriations bills also provide funds for national defense activities of DODand other agencies -- see Table A-2 in the Appendix for a list and for budget amounts. This reportdoes not generally track congressional action on defense-related programs in these otherappropriations bills, except for a discussion of action on some Department of Energy nuclearweapons programs in the energy and water appropriations bill. Status of Legislation Congress began action on annual defense authorization bills the week of May 3, 2004. TheHouse Armed Services Committee began subcommittee markup of its version of the FY2005national defense authorization ( H.R. 4200 ) on May 5, completed full committee markupon May 12, and reported the bill on May 13 ( H.Rept. 108-533 ). The House began floor action onthe bill on May 19 and approved it on May 20. The Senate Armed Services Committee completedfull committee markup of its version of the bill ( S. 2400 ) on May 7 and issued a reporton May 11 ( S.Rept. 108-284 ). Floor action on S. 2400 began in the Senate on May 17, andresumed on June 2 after the Memorial Day recess. Debate continued through June 23, when the billwas passed by a vote of 97-0. The Senate debated the bill for a total of four weeks. Action on the annual defense appropriations bills began on June 2, when the House DefenseAppropriations Subcommittee completed marking up its version of the bill. The full committeemarked up the bill on June 16 and reported H.R. 4613 on June 18 ( H.Rept. 108-553 ). The full House debated and passed the bill by a vote of 403-17 on June 22. The SenateAppropriations Committee marked up its version ( S. 2559 ) on June 22, and filed areport on the bill on June 24 ( S.Rept. 108-284 ). In floor action, the Senate took up the House-passedversion of H.R. 4613 on June 24, incorporated the reported version of S. 2559into H.R. 4613, considered amendments, and then passed H.R. 4613, asamended, by a vote of 98-0. A conference report was filed on July 20, 2004 ( H.Rept. 108-622 ) andapproved both in the House and in the Senate on July 22. The President signed the bill into law onAugust 5, 2004 ( P.L. 108-287 ). Earlier, the Senate passed its version of the FY2005 concurrent budget resolution( S.Con.Res. 95 ) on March 12, and the House passed its version( H.Con.Res. 393 ) on March 25. A conference agreement was filed on April 10 andapproved in the House on April 11 and "deemed" to be in effect on the House side on April 19, 2004( H.Res. 649 ). The Senate has not taken up the conference agreement, but theconference agreement on the defense appropriations bill included a provision deeming amountsapproved in the budget resolution for discretionary programs to be in effect in the Senate forsubsequent action on appropriations bills. Table 1a. Status of FY2005 Defense Appropriations, H.R.4613 Note: In floor action, the Senate substituted its version of the bill, S. 2559, into H.R. 4613. Table 1b. Status of FY2005 Defense Authorization: H.R.4200, S. 2400 Highlights of Final Conference Agreements Defense Authorization Conference Agreement The conference on the defense authorization bill had to resolve differencesbetween the House and the Senate on a number of major policy issues. What followsis a brief review of the issues, followed in each case by a summary of how theconference agreement of October 7 addresses them. For more extensive backgroundon these issues, see the "Issues for Congress" section below. Funding for operations in Iraq and Afghanistan. Theappropriations conference agreement provided $25 billion in emergency funding foroperations in Iraq and Afghanistan. The remaining issue for the authorizationconference is whether to add reporting requirements. The Senate version of theauthorization requires quite extensive additional reporting on operations in Iraq inparticular. Authorization conference outcome: Authorized $25 billion, asexpected, including $435 million for body armor, $572 million for up-armoredHumvees, and $100 million for bolt-on armor. Requires a number of reports,including quarterly accounting for operations conducted as part of the Global War onTerrorism, a report on the post-major combat operations phase of Operation IraqiFreedom, and a report on training for post-conflict operations. Oversight of prisoner abuse in Iraq and elsewhere. TheSenate-passed bill includes an amendment proposed by Senator Patrick Leahy thatstates it is U.S. policy not to abuse prisoners in its control and that requires theAdministration to produce a number of documents related to treatment of U.S.-heldprisoners. The House has rejected a number of proposals to require production ofsimilar documents. Conference outcome: Includes a sense of the Congress sectionregarding abuse of detainees, development of a policy to prevent abuse, and reportsto Congress on the policy. Army and Marine Corps end-strength. The Houseauthorization bill, as reported by the Armed Services Committee and passed on thefloor, increases Army end-strength by 10,000 and Marine Corps end-strength by3,000 in each of the next three years, for a total increase of 39,000. The bill alsoestablishes the new end-strength totals as statutory minimums. In floor action onJune 17, the Senate adopted an amendment by Senator Jack Reed to increase Armyend-strength by 20,000 in FY2005. The House and Senate appropriations billsprovide funds for the higher troop levels within the $25 billion provided for Iraq andAfghanistan. Conference outcome: Agreed to increase Army end-strength by20,000 and Marine end-strength by 3,000 in FY2005 and establishes the increasedtotals as minimums. Also authorizes, but does not require, additional increases of10,000 in the Army and 6,000 in the Marine Corps over the next four years, but doesnot yet establish them as minimums. Military base closures. The House approved a measure in theauthorization bill that would delay the next round of military base closures, nowplanned for 2005, until 2007, and that would require a number of reports in theinterim. By a vote of 49-47, the Senate rejected an amendment to its version of theauthorization that would have delayed domestic base closures until 2007. This issueis likely to be a major conference item because the Administration has threatened aveto if the final bill includes a delay in base closures. (1) Conferenceoutcome: Does not agree to the House proposal to delay base closures by two years. Requires approval of 7 of 9 commissioners to add a facility to the base closure listthat the White House will propose. Health care for reservists. In a key floor vote, the Senateapproved an amendment to the authorization bill by Senators Lindsey Graham andTom Daschle to provide health insurance through the military-run TRICAREprogram for all non-deployed reservists and their dependents, with the DefenseDepartment paying the employer share of the costs. Earlier, the Senate ArmedServices Committee had approved a more limited measure to establish a healthinsurance program for non-deployed reservists and their dependents, calledTRICARE Reserve Select. Under the program, employers could agree to pay part ofthe cost of the program, with reservists paying the remaining cost, or reservists couldsign up by paying the full cost. The House authorization includes neither provision. Instead, the House bill establishes a three-year demonstration program for providinghealth insurance through TRICARE for reservists without access toemployer-provided health insurance. The Senate bill also provides for a similartwo-year demonstration program. Conference outcome: Does not approve theSenate proposal to provide TRICARE for all non-deployed reservists. Instead, whoserve 90 consecutive days in active service or more and who agree to sign up for anadditional year or more of service in the reserves one year of access to TRICAREafter demobilization. Military Survivor Benefit Plan. The House authorizationincludes a measure that was adopted in markup to phase in increased benefits for62-and-older surviving dependents of military retirees to 55% of retired pay (nowprovided to younger survivors) over four years through 2008. The Senate approveda floor amendment to the authorization bill that increases benefits for 62-and-oldersurvivors from the current 35% of retired pay to 45% after September 2008 and to55% after September 2014. Conference outcome: As in the House, phases in full55% benefit level by 2008. KC-767A tanker acquisition. The House authorizationapproved a measure to require the Air Force to enter into a contract to acquire Boeing767 tanker aircraft. The Senate approved a floor amendment to the authorization billthat establishes quite strict requirements before any funds can be obligated for 767tanker acquisition. Conference outcome: Does not approve the House mandate toenter into a contract for 767s by next March. Repeals the lease-purchase programapproved last year. Instead, prohibits leasing and authorizes multi-year procurementof 100 new aerial refueling aircraft (which could be 767s or an alternative). Renewal of authorization for public-private partnerships toprovide military family housing. After this year, a statutory cap on funding formilitary housing privatization expires, and virtually all of the congressional defensecommittees called for extending it. Repealing the cap, however, would increasemandatory spending, so advocates struggled to find an offset for the extension -- aneffort to extend the program in House action on the military constructionappropriations bill was defeated on a point of order. Conference outcome: Theauthorization conference agreement repeals the funding cap, offset by savings fromrepealing the KC-767 lease-purchase plan, which CBO had scored as mandatoryspending. Limits on defense offset agreements and Buy Americanprovisions. The House authorization includes a measure that would prohibit theUnited States from purchasing foreign-made defense items unless the seller agreesto provide trade "offsets" equal, as a share of value, to the offsets the selling nationapplies to purchases from the United States. The provision may be waived if theSecretary of Defense certifies that a purchase is necessary to meet U.S. nationalsecurity objections. In contrast, the Senate adopted an amendment to theauthorization bill by Senator McCain ( S.Amdt. 3461 ) that would allowthe Secretary of Defense to exempt several allies from existing Buy Americanrequirements. Conference outcome: Rejects the House provision that would limitpurchases and substitutes a provision that would require the Secretary of Defense todevelop a comprehensive acquisition trade policy to ensure that U.S. firms are notdisadvantaged by foreign offsets. Limits on arms sales and technology transfers to China. TheHouse authorization includes one provision that would tighten restrictions on transferof technology with potential military utility to China by U.S. or by foreign firms andanother to expand the number of Chinese firms defined as "military companies" towhich sales are restricted. The Senate bill includes no similar provisions. Conference outcome: As in the House bill, would expand the number of Chinesefirms defined as "military companies." Disposition of nuclear waste at Department of Energy nuclearweapons production facilities. The Senate authorization includes a measure thatwould allow liquid waste stored at the Savannah River nuclear weapons productionplant to be redefined as low-level waste that could be stabilized and storedindefinitely on site. The Senate narrowly rejected a floor amendment to delete theprovision. The House bill does not address the issue. Conference outcome: Approves the Senate provision with some amendments, including requiring aNational Academy of Sciences study of alternatives for waste cleanup. Development of the Robust Nuclear Earth Penetrator andother new nuclear weapons. Both the House and the Senate rejected amendments tothe defense authorization bill to eliminate funds requested for RNEP and other newnuclear weapons development. The House-passed version of the FY2005 energy andwater appropriations bill ( H.R. 4614 ), however, eliminates the $36million requested for the programs in the Department of Energy budget. Conferenceoutcome: The conference agreement on the energy and water appropriations bill,included in the consolidated appropriations bill, H.R. 4818 , eliminatesfunds for RNEP and other new nuclear weapons R&D. Table 2. Side by Side Comparison of Key Provisions: Defense Authorization Defense Appropriations Conference Agreement The conference agreement on the FY2005 defense appropriations bill,approved in the House and Senate on July 22, 2004, and signed into law on August5, provides $25 billion for operations in Iraq and Afghanistan, and resolves a numberof major weapons issues. Highlights of the defense appropriations conference agreement include Funding for operations in Iraq and Afghanistan. Both theHouse- and Senate-passed versions of the defense appropriations bill included $25billion, as the Administration requested on May 12, to cover costs of ongoingmilitary operations in Iraq and Afghanistan through the first few months of FY2005. The main issue in Congress was how much flexibility to provide the DefenseDepartment in allocating the funds among budget accounts. The conferenceagreement provides $3.8 billion of the money in a flexible transfer account, called theIraq Freedom Fund, and the remainder in regular appropriations accounts. The levelof detail in which the funds are provided is quite narrow, as in the House-passedappropriations bill, and the Defense Department will have to seek advance approvalfrom the congressional defense committees to shift funds to other uses. (2) Of the $3.8billion in the Iraq Freedom Fund, $1.8 billion is for classified programs, so $2 billionis available for unforseen expenses. Repeal of FY2004 rescission. The FY2004 ConsolidatedAppropriations Act ( P.L. 108-199 ), enacted last January, rescinded $1.8 billion offunds in earlier defense appropriations bills. The conference agreement repeals therescission. The Congressional Budget Office scores this as a reappropriation offunds. So the total of emergency appropriations for the Defense Department in theFY2005 defense appropriations bill is $26.8 billion, with additional amounts forother agencies. Emergency funding for non-defense programs. The defense billincludes emergency funds for a number of other programs, including $685 millionfor State Department operations in Iraq,$95 million to respond to the humanitariancrisis in the Darfur region of Sudan and Chad, $400 million to fight wild fires in theWest, $50 million for security at the upcoming Democratic and Republican politicalconventions, and $26 million to make up a shortfall in Federal Judiciary defenderservices. Navy DD(X) and LCS ship construction. The Administrationrequested $221 million in R&D funding for the DD(X) destroyer program to beginconstruction of the first ship of the class and $107 million, also in R&D funds, tobegin construction of the first Littoral Combat Ship (LCS). The House authorizationcut money for ship construction from both programs, though it approved continueddevelopment funding. The Senate authorizers approved the requested constructionfunds for both programs and also added $99 million in design funds for the DD(X)to accelerate production of a second ship. The House Appropriations Committeeagreed with the House authorization in cutting money for DD(X) construction andadded $125 million for advance procurement for an additional DD-51 destroyer inplace of the DD(X). The House appropriators did not, however, agree to trim fundsfor the LCS and instead added $107 million (for a total of $214 million) to fully fundconstruction of the first ship. Like the Senate authorization, the SenateAppropriations Committee approved the requested construction funds for bothprograms and added $99 million for the DD(X), though it shifted the $221 millionrequested for DD(X) construction from R&D to the procurement accounts. Theappropriations conference agreement provides $221 million for DD(X) construction,but in procurement rather than in R&D. The agreement also provides $214 millionto fully fund construction of the first LCS in the R&D accounts. So the Houseauthorization cuts did not prevail in final congressional action onappropriations. F/A-22 fighter. The Senate Armed Services Committeetrimmed the request from 24 to 22 aircraft, saving $280 million. The Houseauthorization and the House and Senate appropriations bills, however, all supportedthe full 24 aircraft, $4.2 billion procurement request. The appropriations conferenceagreement trims $30 million from the request for assumed efficiencies, but supportsthe full 24 aircraft request. Army Future Combat System (FCS). The House authorizationtrimmed $245 million from the FCS program and imposed a requirement that theArmy more fully justify the program. The Senate provided the full $3.2 billionrequested. The House Appropriations Committee cut $324 million and eliminatedfunds for the non-line of sight launch system (NLOS-LS), while providing fullfunding for the non-line of sight cannon (NLOS-C). The Senate appropriations billprovided the full $3.2 billion requested and the committee report specificallyapproved funding for NLOS-LS. The appropriations conference agreement trimmed$268 million from the program, but included $58.2 million forNLOS-LS. Space programs. The House appropriators shifted $91 millionfrom the Evolved Expendable Launch Vehicle (EELV) program to the Space-BasedInfrared System-High (SBIRS-High) program, as the Air Force requested. Senateappropriators, however, cut $100 million from the EELV due to delays but did notadd anything to SBIRS-High. The appropriations conference agreement cuts $100million from the EELV and adds $91 million to SBIRS-High. The Houseappropriators cut $100 million from the $775 million requested for theTransformational Communications Satellite program, following the Houseauthorization, while the Senate appropriators cut $400 million. The appropriationsconference agreement cuts $300 million, which will require the Air Force tosubstantially restructure the program. The House appropriators essentially terminatedSpace-Based Radar development, leaving $75 million for a more basic technologydevelopment effort, while the Senate appropriators cut $100 million from the $327million requested. The appropriations conference agreement agrees with the House,effectively terminating the current Space-Based Radarprogram. Table 3. Side by Side Comparison of Key Provisions: Defense Appropriations Congressional Committee and Floor Action House Defense Authorization Markup The House marked up its version of the defense authorization bill on May 12.Some highlights of the committee-reported bill include the following. Military Personnel End-Strength, Pay, andBenefits. Increased statutory end-strength for the Army by 10,000 troopseach year from FY2005 through FY2007 and for the Marine Corps by 3,000 troopseach year through FY2007. Approved the requested pay raise of 3.5% for uniformedpersonnel. Approved a measure to increase annuities for age 62-and-oldersurvivors of military retirees from 35% of retired pay to 55% in increments throughFY2008. Eliminated a statutory limit on funding for military housingprivatization. Permanently increased the Family Separation Allowance from$100 to $250 per month and increased Imminent Danger Pay from $150 to $225 permonth. Also increased hardship duty pay, which may be provided to troops outsideof combat zones, from $300 to $750 per month. Established a program to replace lost income of reservistsmobilized for extended periods up to $3000 per month. Permanently extended to all hospitalized personnel a provisionin the FY2004 defense appropriations act ( P.L. 108-283 ) that eliminated arequirement that military personnel pay for meals while hospitalized forcombat-related injuries. Directed the Defense Department to establish a three-yeardemonstration program that would permit non-deployed reservists not eligible foremployer-sponsored health benefits to sign up for health insurance through themilitary-run TRICARE program. Required separate campaign medals for Operation EnduringFreedom in Afghanistan and Operation Iraqi Freedom. Directed the Secretary of Defense to submit proposed changesin the Uniform Code of Military Justice regarding sexual assaults. Also extended theterm of a task force on sexual assaults. Major Weapons Programs. Provided $10.0 billion for missile defense programs, $177million below the request, cut funding for kinetic interceptor development by $200million, and added $90 million for additional Patriot PAC-3 missiles. Required the Air Force to enter into a multi-year contract toacquire Boeing KC-767A tanker aircraft. Also required that a new contract benegotiated after June 1, 2004, and that an independent panel review the contractterms. Approved the requested shift of funds from Comanchehelicopter development to other Army aviation and relatedprograms. Approved $2.9 billion, as requested, for 42 F/A-18E/Faircraft. Approved $4.6 billion, as requested, for F-35 Joint StrikeFighter development. Added $100 million to begin development of a next-generationbomber. Added $118 million to procure 35 UH-60 Army helicopters,rather than the 27 requested. Added $150 million as an initial increment for construction ofa new LHD(R) amphibious ship. Provided about the requested amounts to procure three DDG-51destroyers, one Virginia-class attack submarine, one LPD-17 amphibious ship, andtwo T-AKE auxiliary ships. Approved funds for continued development of the DD(X)destroyer and the Littoral Combat Ship (LCS) but eliminated $221 million from theDD(X) program and $107 million from the LCS budget to begin constructing the firstof each class of ships. Adopted an amendment in the committee markup to prohibitleasing of support ships from foreign providers for more than one year. Other Key Actions. Added substantial funds for force protection and relatedprograms, including $705 million for up-armored Humvees, $332 million for add-onarmor for Humvees and trucks, $421 million for body armor, and $517 million forthe Army's Rapid Fielding Initiative. Also passed a separate measure, H.R. 4323 , to provide statutory authority to the Secretary of Defense toprocure equipment needed for combatant commands rapidly by waiving normalacquisition requirements. Approved a provision that would require the DefenseDepartment to submit several reports related to military basing requirements byMarch of 2006 and only then permit a new round of military base closures no soonerthan 2007. Approved a measure that would require that foreign countriesreceive no more in trade offsets as a percentage of the value of a contract forpurchasing U.S. military equipment than the percentage of domestic content requiredfor U.S.-purchased military equipment. Approved one provision to tighten restrictions on transfer oftechnology with potential military utility to China and another to expand the numberof Chinese firms defined as a "military company" to which sales arerestricted. Approved an amendment offered in committee mark-up tostrengthen requirements that Defense Department civilian employees be allowed tocompete for operations that otherwise would be outsourced. Provided $409 million, as requested, for the Cooperative ThreatReduction program. Approved funding as requested for Robust Nuclear EarthPenetrator R&D and for other research on new nuclearweapons. Included a provision requiring the Treasury Department, ratherthan the Defense Department, to make annual payments to the military retirementfund for the costs of providing TRICARE health insurance to over-65 militaryretirees beginning in FY2006. This is an effort to free up an additional $11-12 billionfor defense programs by shifting costs to the non-defense side of thebudget. House Defense Authorization Floor Action On Tuesday, May 18, the House Rules Committee met to consider proposedamendments to H.R. 4200 and to decide which to allow for debate onthe House floor. The committee reported a rule ( H.Res. 648 ) on May19, as debate on the bill was scheduled to begin. Several leading Democrats,including Representative Martin Frost, the ranking member of the Rules Committee,Representative Ike Skelton, the ranking member of the Armed Services Committee,and Representative John Spratt, the second ranking member of the Armed ServicesCommittee, opposed the rule because it did not make in order several proposedamendments. Amendments Not Made in Order. All of the senior Democrats who opposed the rule complained, in particular,that the rule did not make in order an amendment proposed by Representative Sprattto transfer $414.4 million from specified missile defense programs to providetargeted military pay raises, Marine Corp force protection measures, andimprovements to the Patriot PAC-3 missile defense system. Other amendments notmade in order by the rule included An amendment by Representative Loretta Sanchez to makepenalties for sexual abuse crimes under the Uniform Code of Military Justiceconsistent with penalties under the U.S. Code. An amendment by Representative Jane Harman to limit missiledefense funding to the FY2004 level, which is about $1.2 billion below the FY2005request, to require operational testing before missile defense systems are deployed,and to authorize $500 million for port security; An amendment by Representative John Tierney to requireoperational testing before deploying missile defense systems; An amendment by Representative Jim Cooper to authorize$67.7 billion in supplemental appropriations for military operations in Iraq andAfghanistan; and An amendment by Representative Ed Markey to delete $29.8million requested in the Department of Energy for a new facility to produceplutonium pits for nuclear weapons. An amendment by Representative Jim Matheson to requirecongressional authority for renewed nuclear testing. An amendment by Representative Adam Schiff to add $200million to Department of Energy non-proliferation programs. An amendment by Representative Norm Dicks also to requirethe Defense Department to follow a formal process in making new rules for civilianpersonnel in DOD, to consult unions about the rules, and to allow congressionalreview. An amendment by Representatives Jay Inslee and Chris VanHollen to provide specified civil service protections for civilian defenseemployees. An amendment by Representative Joel Hefley, to provide aright of appeal and some other protections to groups of as few as 10 federalemployees whose jobs are being studied for privatization. An amendment by Representative Tom Lantos to requirefederal agencies to make up lost wages of employees who are military reservistsmobilized for service, and to establish a cost-sharing plan with state and localgovernments to eliminate losses for state and local governmentemployees. An amendment by Representative Jose Serrano to providehealth screening for military personnel exposed to depleteduranium. Amendments Agreed To. Of the amendments made in order, selected amendments that the Houseagreed to include An amendment by Representative Virgil Goode to allowmilitary personnel to assist in border protection (231-191); An amendment by Representative Duncan Hunter expressingthe sense of Congress concerning the abuse of persons in custody in Iraq(416-4); An amendment by Representative Kendrick Meek to require theSecretary of Defense to identify mission-critical information that should betransmitted immediately from the field to senior Defense Department officials andto set up mechanisms to transmit such information; An amendment by Representative Alcee Hastings thatexpresses the sense of Congress that no funds available to any department or agencyof the United States government may be used to provide assistance for thereconstruction of Iraq unless the President certifies to Congress that the United Stateshas entered into an agreement with the Iraqi Governing Council or a transitionalgovernment in Iraq under which Iraq agrees that it will expend a significant portionof its revenues generated from oil production forreconstruction; An amendment by Representative Curt Weldon expressing thesense of Congress that the Secretary of Defense should assist the Iraqi governmentin destroying the Abu Ghraib prison and replacing it with a modern detention facility(308-114); An amendment by Representative Ike Skelton on behalf ofRepresentative Louise Slaughter and others, requiring the Secretary of Defense todevelop a comprehensive policy for the Department of Defense on the prevention ofand response to sexual assaults involving members of the Armed Forces andrequiring DOD to take related measures to address sexual assaults involvingmembers of the Armed Forces (410-0); An amendment by Representative Norm Dicks requiring the AirForce to enter into a contract to acquire KC-767 tanker aircraft by March 1, 2005 (inHunter en bloc amendment); An amendment by Representative Alcee Hastings to add $100million for Department of Energy cleanup (in Hunter en blocamendment); An amendment by Representative Donald Manzullo to requirethe job creation in the United States be a factor in determining contract awards (inHunter en bloc amendment); An amendment by Representative Curt Weldon to give ruralfirefighting agencies priority in acquiring excess defense property (in Hunter en blocamendment); An amendment by Representative Henry Brown to give stateand local health agencies priority in acquiring excess defense property (in Hunter enbloc amendment); A second amendment by Representative Henry Brown torequire the Secretary of Defense to consider establishing a joint medical care facilitywith the Veteran's Administration when requesting funds for health facilityconstruction (in Hunter en bloc amendment); An amendment by Representative Brian Baird requiring theDefense Department to study and issue a report to Congress on mental health servicesavailable to U.S. military personal deployed to combat theaters (in Hunter en blocamendment); An amendment by Representative Zach Wamp making changesto the Energy Employees Occupational Illness Compensation Program; and An amendment by Representative Jim Ryun requiring theSecretary of Defense to initiate senior officer official educational programs withTaiwan (290-132). Amendments and Motion to RecommitRejected. Of the amendments made in order under the rule, the House rejected An amendment by Representative Susan Davis to repeal theprohibition on servicewomen and female military dependents receiving abortions,even when paid for privately, at overseas military hospitals(202-221); An amendment by Representative Mark Kennedy to delete theprovision in the House committee bill that would delay military base closures until2007 (162-259); and An amendment by Representative Ellen Tauscher to reducefunds for the Robust Nuclear Earth Penetrator nuclear warhead and other new nuclearweapons R&D by $36.6 million, the total amount requested, and to transfer the fundsto intelligence programs and conventional weapons to defeat hardened and deeplyburied targets (204-214). The House also rejected by a vote of 202-224 a motion to recommit offeredby Representative Henry Waxman. The motion instructed the Armed ServicesCommittee to report back a bill including a sense of the Congress statement that theHouse should appoint a select committee to investigate the treatment of detaineesheld in connection with Operation Iraqi Freedom, Operation Enduring Freedom, orany other operation related to the Global War on Terrorism. Senate Defense Authorization Markup The Senate Armed Services Committee finished marking up its version of theFY2005 defense authorization bill ( S. 4200 ) on May 6. Some highlightsof the committee-reported version of the bill include Military Personnel End-Strength, Pay, andBenefits. Gave the Secretary of Defense authority to increase Armyactive duty end-strength by up to 30,000 through FY2009. The committee did not,however, increase permanent statutory end-strength. Approved the requested pay raise of 3.5% for uniformedpersonnel. Increased the Family Separation Allowance from $100 to $250per month and increased Imminent Danger Pay from $150 to $225 per month. Thesemeasures make permanent increases that Congress approved last year in the FY2003and FY2004 Iraq supplemental appropriations bills. Established a two-year demonstration program to allownon-deployed military reservists not eligible for employer-sponsored heath insuranceto sign up for health insurance through the military-run TRICARE program. Also established a new health insurance program, calledTRICARE Reserve Select, under which reservists and their dependents may sign upfor health insurance through TRICARE, with employees paying 28% of the cost, asin the federal civilian health program, if employers agree to cover the remainingcost, or 100% if employers do not cover part of the cost. Also made permanent a provision in the FY2004 Iraqsupplemental that temporarily gave reservists earlier eligibility for pre-deploymentmedical care. Added $400 million to the request for reserve medicalcare. Established a commission on the National Guard andReserves. Required separate campaign medals for Operation EnduringFreedom in Afghanistan and Operation Iraqi Freedom. Extended to all hospitalized personnel a provision in theFY2004 defense appropriations bill that eliminated a requirement that militarypersonnel pay for meals while hospitalized for combat-relatedinjuries. Directed the Secretary of Defense to establish a uniform policyon sexual assault. Major Weapons Programs. Approved $10.2 billion, approximately the amount requested,for missile defense programs, though the committee trimmed funds for kineticinterceptor development and added funds for ground-based mid-course defense andfor additional Patriot PAC-3 missiles. Added $35 million for cost overruns on the Space BasedInfrared System-High early warning satellite and $35 million for the AdvancedExtremely High Frequency communication satellite. Approved the requested shift of funds from Comanchehelicopter development to other Army aviation and relatedprograms. Approved the requested $905 million for Stryker mediumarmored vehicle procurement. Approved the requested $3.2 billion for Army Future CombatSystem development. Approved requested funds for three DDG-51 destroyers, oneVirginia-class submarine, one LPD-17 amphibious ship, and two T-AKE auxiliaryships. Added $150 million as the first increment of funding forprocurement of the first of the new LHA(R)-class of amphibious assaultships. Approved $1.5 billion, as requested, for DD(X) destroyerdevelopment, including $221 million in the R&D accounts for design and the startof production of the first ship of the class, and added $99.4 million to acceleratedesign of the second ship. Approved $1.5 billion, as requested for Littoral Combat Ship(LCS) development, including $107 million for design and the start of production ofthe first ship of the class. Authorized $2.9 billion for 42 Navy/Marine F/A-18E/F aircraft,as requested. Approved $3.6 billion for F-35 Joint Strike fighterdevelopment, adding $15 million for the short-takeoff variant. Approved $3.4 billion for 22 F/A-22 fighters, a reduction of$280 million and 2 aircraft from the request. Authorized $708 million, as requested, for the Joint UnmannedCombat Air vehicles program. Other Key Actions. Added substantial amounts for force protection and relatedmeasures, including $925 million for up-armored Humvees and add-on armor (theAdministration requested $163 million for 818 up-armored Humvees), $603 millionfor force protection gear and combat clothing, and $107 million for the Army RapidFielding Initiative (designed to deploy high priority items rapidly to the soldiers inthe field) and for Army and Marine individual equipment. Provided $11 billion, an increase of $445 million over therequest, for basic and applied research. Approved $409 million, as requested, for the CooperativeThreat Reduction program that finances programs to safeguard or eliminate weaponsin the former Soviet Union. Also allowed funding for a chemical demilitarizationplant in Russia about which there has been a longstanding disagreement between theHouse and Senate. Approved $1.3 billion, as requested, for Department of Energynon-proliferation programs. Approved requested funding for the Robust Nuclear EarthPenetrator and for other nuclear weapons R&D. Approved a potentially controversial legislative measureregarding handling of radioactive waste at the Savannah River nuclearplant. Agreed to an Administration request to increase a legislativecap on U.S. military personnel in Colombia from 400 to 800 and to increase the capon contractors from 400 to 600. Senate Defense Authorization Floor Action The Senate began floor action on S. 2400 on May 17, when itapproved an amendment by Senator Hutchison to authorized medical and dental carefor military academy cadets and midshipmen. Through the rest of that week, theSenate disposed of only a few more amendments, in part because members of theArmed Services Committee were involved in hearings on the Iraq prison abusescandal. The Senate resumed debate on June 2. The Senate continued floor debateon the bill the weeks of June 14 and June 21, picking up its pace, adopting 36amendments and rejecting 2, with 34 amendments pending as of June 23. On June22, a cloture motion was filed with a vote expected on June 24 about whether to cutoff debate. Late on June 23, however, the Senate passed the bill by 97 to 0. Amendments Agreed To. The Senate cleared a number of technical amendments that were agreed to byboth sides and also agreed to an amendment by Senators John Warner and TedStevens to authorize $25 billion for military operations in Iraq and Afghanistan.Selected substantive measures agreed to included amendments By Senator Pete Domenici, S.Amdt. 3192 , toaccelerate non-proliferation measures aimed at removing and safeguarding fissilematerials abroad (May 19, voice vote); By Senator Robert Byrd, S.Amdt. 3212 , to increasethe authorized size of the defense acquisition work force by 15% over the next threeyears (May 19, voice vote); By Senators Tom Daschle and Lindsey Graham, S.Amdt. 3258 , to allow all non-deployed reservists to receive healthinsurance for themselves and their dependents through the military TRICAREprogram, with the federal government paying the employer share of costs (June 2,70-25); By Senators John Warner, Carl Levin, and Ted Stevens, S.Amdt. 3260 , to authorize $25 billion in contingent emergency fundsfor operations in Iraq and Afghanistan ( June 2, 95-0); By Senator Ron Wyden, S.Amdt. 3305 , to requirethat federal employees, rather than contractor personnel, oversee acquisition contracts(June 14, unanimous consent); By Senator Christopher Dodd, S.Amdt. 3312 , toprovide reimbursements for protective, safety, or health equipment purchased by oron behalf of service members deployed in connection with Operation Noble Eagle,Operation Enduring Freedom, or Operation Iraqi Freedom (June 14,91-0); By Senators Edward Kennedy and Saxby Chambliss, S.Amdt. 3257 , to require public-private competitions and establish otherregulations governing outsourcing of Defense Department functions with more than10 civilian employees (June 14, unanimous consent); By Senators Susan Collins and Carl Levin, S.Amdt. 3224 , to provide civilian personnel with bid protest rights inoutsourcing competitions (June 14, unanimous consent); By Senator John Warner Amendment, S.Amdt. 3432 , to name the bill in honor of Ronald W. Reagan (June 14, unanimousconsent); By Senator Tom Harkin S.Amdt. 3316 , expressingthe sense of the Senate that Armed Forces Radio and Television Serviceprogramming should be balanced (June 14, unanimousconsent); By Senator Harry Reid, S.Amdt. 3307 , to requirethat any plan for compensation to individuals in military prisons in Iraq includeprovisions for compensation to former prisoners of war held by the regime ofSaddam Hussein (June 14, unanimous consent); By Senators Gordon Smith and Edward Kennedy, S.Amdt. 3183 , to provide Federal assistance to States and localjurisdictions to prosecute hate crimes, including crimes against gays (approved June15, 65-33); By Senator Richard Durbin, S.Amdt. 3386 , toaffirm that the United States may not engage in torture or cruel, inhuman, ordegrading treatment or punishment (approved June 16, voice vote); By Senators Jeff Sessions and Charles Schumer, S.Amdt. 3372 , to extend military extraterritorial jurisdiction to cover notonly personnel and contractor personnel of the Department of Defense, but alsopersonnel and contractor personnel of any federal agency or provisional authoritysupporting the mission of the Department of Defense overseas (approved June 16,unanimous consent); By Senator Patty Murray, S.Amdt. 3427 , tofacilitate the availability of child care for the children of members of the ArmedForces on active duty in connection with Operation Enduring Freedom or OperationIraqi Freedom (approved June 17, voice vote); By Senator John Warner, a second degree amendment, S.Amdt. 3453 , to require the Secretary of Defense to prescribe and applycriteria for operationally realistic testing of fieldable prototypes developed under theballistic missile defense program -- in adopting the Warner amendment the Senaterejected an to an amendment by Senator Jack Reed, S.Amdt. 3354 , torequire the Director of Operational Test and Evaluation to prescribe and overseeoperational tests (approved, June 17, 55-44); By Senator Jack Reed, S.Amdt. 3352 , to increaseArmy active duty end-strength for FY2005 by 20,000 to 502,400 (approved June 17,93-4); By Senator Tom Daschle, S.Amdt. 3202 , toprovide relief for mobilized military reservists from certain federal agricultural loanobligations (approved June 17, unanimous consent); By Senators John Ensign, Lindsey Graham, and SaxbyChambliss, S.Amdt. 3440 , to protect documents relating to the UnitedNations Oil for Food program with Iraq and to require a GAO report on the program(approved June 17, unanimous consent); By Senators Hilary Clinton and James Talent, S.Amdt. 3163 , to improve medical tracking and pre-deployment medicaltreatment of reservists (approved June 17, unanimousconsent); By Senator Diane Feinstein, S.Amdt. 3172 , to statethe sense of the Senate that perchlorate contamination is a health problem (approvedJune 17, unanimous consent); By Senator Christopher Bond, S.Amdt. 3245 , torequire two reports on operation of the Federal Voting Assistance Program and themilitary postal system together with certain actions to improve the military postalsystem (approved June 17, unanimous consent); By Senator Ben Campbell, S.Amdt. 3237 , toequalize procedures applied to Army personnel in Korea with procedures appliedelsewhere in awarding the Combat Infantryman Badge and the Combat MedicalBadge (approved June 17, unanimous consent); and By Senator Bill Nelson, S.Amdt. 3279 , to requirea report on any relationships between terrorist organizations based in Colombia andforeign governments and organizations (approved June 17, unanimousconsent); By Senators Durbin, Mikulski, Landrieu, Murray, Dayton, andCorzine, S.Amdt. 3196 , to ensure reservists who are federal employeeswill not lose pay if mobilized for active duty (approved June 18, unanimousconsent); By Senator Reid, S.Amdt. 3297 as modified, toeliminate the phase-in of concurrent receipt for those veterans with a disability ratingof 100% that Congress established last year (approved June 18, unanimousconsent); By Senator Warner, S.Amdt. 3458 as modified, toexpress sense of Congress to continue current policy that there be no media coverageof the return to the United States of remains of deceased service members (approvedJune 21, 52 to 38); By Senator Brownback, S.Amdt. 3464 , to increasepenalties tenfold for indecent language broadcast on television or radio (approvedJune 22, 99-1); (3) By Senator Dorgan, S.Amdt. 3235 , to repeal FCCregulations published in 2003 that generally loosened ownership restrictions fortelevision and radio media companies; amendment retains current 39% limit on thesize of the national audience that was adopted in P.L. 108-199 (FY2004 ConsolidatedAppropriations Act) (approved June 22); (4) By Senator Reid (for Hollings), S.Amdt. 3466 , toprotect children from violent programming (approved June22); By Senator Warner (for McCain), S.Amdt. 3461 ,to allow the Secretary of Defense to exempt from Buy American restrictions sevencountries who have "declaration of principles" agreements with the United Statesregarding reciprocal procurement of defense items (approved June 22,54-46); By Senator Levin (for Boxer), S.Amdt. 3367 , toexempt abortions of pregnancies due to rape or incest from the prohibition againstusing DOD funds (part of en bloc amendments approved on June22); By Senator Warner (for McCain), S.Amdt. 3319 ,to repeal several reporting requirements on identifying and assessing essential itemsin the defense industrial base that were adopted in last year's defense authorizationact (part of en bloc amendments approved on June 22); By Senator Warner (for McCain), S.Amdt. 3441 ,to prohibit acquisition of Air Force tanker refueling aircraft until 60 days aftercurrently required studies are completed and to require the Secretary of Defense tocertify that acquisition complies with all applicable laws, Office of Managementcirculars, and regulations (part of en bloc amendments approved on June22); By Senator James Inhofe, S.Amdt. 3198 , toincrease from $150 million to $250 million the amount of assistance the UnitedStates may provide to Iraqi and Afghan military and security forces (part of en blocamendments approved on June 22); By Senators Clinton, Leahy, and Kennedy, S.Amdt. 3204 , to require a Comptroller General report on closure ofDepartment of Defense dependent elementary and secondary schools and commissarystores. (part of en bloc amendments approved on June 22); By Senator Bond, S.Amdt. 3384 , as modified, toinclude certain former nuclear weapons workers in a group receiving benefits underthe Energy Employees Occupational Illness Compensation Program and to providefor disposal of excess stocks (agreed to on June 23); By Senator Warner (for McConnell), S.Amdt. 3472 , to require a report on the stabilization of Iraq , including efforts to enlist thesupport of other nations (approved by a vote of 71 to 27 on June23); By Senators Landrieu and Snowe, S.Amdt. 3315 as modified, to phase in increases in survivor benefits over 3½ years (agreed to onJune 23); By Senator Bingaman, S.Amdt. 3459 as modified,to require reports on detainment of foreign nationals held by DOD for more than 45(agreed to on June 23); By Senator Daschle, S.Amdt. 3468 to S.Amdt. 3409 , to assure funding increases for veterans health caresufficient to cover increases in population and inflation (agreed to on June 23 aftera motion to waive a point of order against S.Amdt. 3409 was rejected bya vote of 49-49); and By Senator Reid (for Leahy), S.Amdt. 3387 ,stating that it is U.S. policy that foreign prisoners be treated according to standardsthe United States would regard as legal if applied by an enemy against Americanprisoners, that U.S. officials are bound by laws against torture and abuse, and thatcases against prisoners at Guantanamo be pursued expeditiously and requiring thatthe Administration provide various information to Congress, including a schedule formilitary commissions at Guantanamo, all International Red Cross reports regardingtreatment of prisoners in current operations, and a report setting forth all approvedinterrogation techniques (motion to table failed June 23, 45-50, and amendment wassubsequently agreed to). Amendments Rejected. The most high-profile debate in the Senate's first week of action on theauthorization was about an amendment by Senators Trent Lott, Byron Dorgan, andothers to delay domestic military base closures by two years that the Senate narrowlyrejected. Another major debate concerned a provision in the bill to allow nuclearwaste at the Savannah River nuclear plant in South Carolina to be redefined aslow-level waste that could be stored indefinitely on site, but the Senate rejected anamendment by Senator Maria Cantwell to delete provisions backed by theDepartment of Energy from the bill. A key debate the week of June 14 was over aproposal by Senators Edward Kennedy and Diane Feinstein to eliminate funds for theRobust Nuclear Earth Penetrator nuclear warhead and other new nuclear weapons,which the Senate also rejected. Amendments rejected include An amendment by Senators Trent Lott, Byron Dorgan, OlympiaSnowe, Diane Feinstein, Thad Cochran, and Tom Daschle, S.Amdt. 3158 , to delay by at least two years the next round of domestic military base closures,to permit only bases abroad to be closed in 2005, and to provide that Congress mustrenew authority for base closures to occur in 2007 by approving a joint resolution tobe considered under expedited procedures (rejected May 18,47-49). An amendment by Senator Frank Lautenberg and others, S.Amdt. 3151 , to strengthen measures designed to prevent U.S.-basedcompanies from engaging in business with nations found to sponsor internationalterrorism (rejected May 19, 49-50); An amendment by Senators John Kyl and John Coryn, S.Amdt. 3191 , to raise funds for defense programs by imposing anexcise tax on lawyers fees exceeding $20,000 per hour in tobacco cases (rejectedMay 19, 39-62); An amendment by Senator Maria Cantwell, S.Amdt 3261 , to eliminate a provision in the committee version of thebill that would allow the Department of Energy to reclassify certain waste at theSavannah River, South Carolina, nuclear weapons production plant as low-levelwaste that can be stored indefinitely on-site (not agreed to June 3, 48-48); An amendment by Senators Edward Kennedy and DianeFeinstein, S.Amdt. 3263 , to prohibit the use of funds for new nuclearweapons development under the Stockpile Services Advanced Concepts Initiative orfor the Robust Nuclear Earth Penetrator (RNEP) (rejected June 15,42-55); By Senator Christopher Dodd, S.Amdt. 3313 , toprohibit the use of contractors to seek intelligence from military detainees and toestablish limitations on the transfer of custody of prisoners of the Department ofDefense (tabled June 16, 54-43); By Senator Patrick Leahy, S.Amdt. 3292 , to stiffenpenalties against profiteering and fraud in contracts for military operations support,post-war relief, or reconstruction (rejected June 16, 46-52); By Senator Barbara Boxer, S.Amdt. 3368 , to allowdeployment of the ground-based midcourse defense element of the national ballisticmissile defense system only after the mission-related capabilities of the system havebeen confirmed by operationally realistic testing (rejected June 17,42-57); By Senator Jack Reed, S.Amdt. 3354 , to requirethe Director of Operational Test and Evaluation to prescribe and oversee operationaltests of ballistic missile defense systems (rejected when the Senate agreed to theWarner 2nd degree substitute, June 17, 55-44); and By Senator Joseph Biden, S.Amdt. 3379 , toprovide funds for the security and stabilization of Iraq by suspending a portion of thereduction in the highest income tax rate for individual taxpayers (rejected June 17,44-53). By Senator Lautenberg. S.Amdt. 3291 , to requirethat the Secretary of the Defense develop a protocol to permit media coverage of thereturn of remains of service members who die overseas (rejected June 21, 39 to54); By Senator Levin, S.Amdt. 3338 , re-allocate fundsfrom Ground-based Midcourse interceptors in the missile defense program to nuclearnonproliferation activities in the Department of Energy's Global Threat ReductionInitiative program, and to anti-terrorism/force protection programs (rejected June 22,44 to 56); By Senator Dayton, S.Amdt. 3197 , to restorecurrent Buy American restrictions by deleting Sections 842 and 843 in the reportedversion of the bill that had allowed the Secretary of Defense to exempt some 21countries who had memorandums of understanding with the United States aboutdefense trade (rendered moot June 22 by passage of the Warner (McCain) S.Amdt. 3461 ); By Senator Levin (for Kennedy), S.Amdt. 3377 ,to require reports on the efforts of the President to stabilize Iraq and relieve theburden on members of the Armed Forces of the United States deployed in Iraq andthe Persian Gulf region (rejected June 23, 48-50); By Senator Reed, S.Amdt. 3353 , to limit theobligation and expenditure of funds for the Ground-Based Midcourse Defenseprogram pending the submission of a report on operational test and evaluation(rejected June 23, 45-53); By Senator Levin (for Byrd), S.Amdt. 3423 , toreduce authority provided in the committee bill for U.S. military personnel inColombia from 800 to 500 and for contractor personnel from 600 to 500 (rejectedJune 23, 40-58); By Senators Leahy and Corzine, S.Amdt. 3485 (to S.Amdt. 3387 ), to direct the Attorney General to submit to theCommittee on the Judiciary of the Senate all documents in the possession of theDepartment of Justice relating to the treatment and interrogation of individuals heldin the custody of the United States (rejected June 23, 46-50); By Senator Levin (for Corzine), S.Amdt. 3303 , toreduce the age for receipt of military retired pay for nonregular service from 60 to 55(rejected when a motion to waive a point of order that the measure violatedprovisions of the Budget Act by increasing mandatory spending was not upheld June23, 49-49); and By Senator Reid (for Daschle), S.Amdt. 3409 , toassure that funding is provided for veterans health care each fiscal year to coverincreases in population and inflation (rejected when a motion to waive a point oforder that the measure violated provisions of the Budget Act by increasing mandatoryspending was not upheld June 23, 49-48). House Defense Appropriations Markup The House Appropriations Committee marked up its version of the FY2005defense authorization bill on June 16 and reported H.R. 4613 on June18, 2004 ( H.Rept. 108-553 ). Some highlights of the committee-reported version ofthe bill include the following. Iraq and Afghanistan Costs. The committee provided $25 billion to cover part of the costsof operations and Afghanistan -- the committee would make the money available onenactment of the bill, so some of the funds could be used to cover costs in FY2004as well as FY2005. The committee did not agree to the Administration request toprovide all of the funds in a flexible account that would allow the Secretary ofDefense to transfer money to activities without prior congressional approval. Thecommittee also required quarterly reports on the use of thefunds. Military Personnel End-Strength, Pay, andBenefits. Provided funding for a military pay raise of 3.5% and forhousing allowances and other benefits as approved in the Houseauthorization. Within the $25 billion for Iraq and Afghanistan, included fundsfor Army and Marine Corps end-strength increases as approved in the Houseauthorization. Cut $499.7 million from military personnel accounts to reflectperennial underexecution of military personnel programs in prior years, as reportedby the General Accounting Office. Major Weapons Programs. Added $2.2 billion for what the committee describes as aninitiative to "recapitalize" Army and Marine Corps ground forces. The increasesincluded $950 million, doubling the amount requested, to procure Stryker armoredpersonnel carriers and associated equipment sufficient to stand-up an additionalStryker brigade, $350 million for other armored combat vehicles, $503 million forhelicopters, $390 million for trucks and other support vehicles, and $52 million forthe ammunition production base. Provided $9.7 billion for missile defense, $458 million belowthe request. The committee indicated overall support for the program, but said thatthe remaining funds provide a sufficient increase over last year's program. Thecommittee also rescinded $31.5 million due to termination of a joint satellite programwith Russia (called RAMOS) and $74.7 million due to restructuring of the AirborneLaser program. Cut the Army's request for $3.2 billion for Future CombatSystem development by $324 million, $79 million more than the Houseauthorization. Most of the reduction was in what the committee described asmanagement overhead, but the committee also cut $76 million from the non-line ofsight launch system (NLOS-LS), terminating the project. The committee continuedfull funding for the non-line of sight cannon (NLOS-C) program,however. Provided $165 million, $76 million more than requested, tofully fund construction of a Theater Support Vessel in Army R&Daccounts. Agreed with the House authorization in trimming $248 millionfrom the DD(X) R&D program, including funds to begin constructing the firstship. In place of DD(X) construction, the committee added $125million in advance procurement for one additional DDG-51 destroyer to be fullyfunded in the FY2006 or FY2007 budgets. Did not agree with the House authorization cut of $107 millionfor construction of the first Littoral Combat Ship. Instead, the committee added $107million to the program to fully fund the cost of building the first ship, though it cut$50 million for design of the second ship of the class, saying it wasredundant. Eliminated $44 million requested for R&D on the LHA(R)amphibious ship program and provided no funds for procurement, rejecting theaddition of $150 million for LHA(R) advance procurement recommended in theHouse and Senate authorization bills. Supported procurement of 24 F/A-22 fighters, asrequested. Provided $4.4 billion for F-35 Joint Strike Fighter R&Dfunding, a reduction of $240 million to reflect delays that are anticipated in view ofproblems in controlling aircraft weight. Also prohibited obligation of $1.4 billion ofthe funds until DOD reports to Congress on plans to adjust the program following anindependent review. Objected strongly to provisions in multi-year procurementcontracts the Air Force negotiated to purchase C-17 and C-130 aircraft, saying thatthey violate rules requiring full funding of the total cost of useable end-items ofequipment. (5) The committee revised requirements in the annualappropriations bill governing multi-year procurement and shifted $159 million fromC-17 upgrades to fully fund 15 aircraft, one more thanrequested. Provided $100 million in a "Tanker Replacement TransferFund" available to acquire KC-767 tanker aircraft whenever the status of the programwarrants acquisition. Added $91 million for the Space Based Infrared System-High(SBIRS-High) program, more than the $35 million the House and Senate authorizersadded. Agreed, with minor variations, to cuts the authorizers made in theTransformational Communications Satellite and the Evolved Expendable LaunchVehicle (EELV). In report language, the committee said that two contractors for theEELV may not be justified. Provided $75 million for the Space Based Radar program, $253million below the request, effectively terminating the program, with the remainingfunds to be used for alternative technologies and concepts. Added $50 million for new bomber development, half what theHouse authorization added. Other Key Actions. Added $900 million, close to amounts approved in prior years,for unrequested, earmarked medical R&D projects, including breast cancer andprostate cancer research. Added $500 million in operation and maintenance accounts toredress shortfalls identified by the military services in short-term, readiness-relatedareas. Cut operation and maintenance accounts by $415 million toreflect under-obligation of O&M funds in prior years, by $335 million for assumedefficiencies in administrative and related activities; by $86 million to eliminategrowth above inflation in requested funds for base operations support, by $92 millionfor overstated civilian pay requirements, by $177 million to reflect a slower rate thanestimated in converting jobs from uniformed positions to civilian ones, by $316million in working capital funds to reflect cash balances and purchases that will notbe necessary, by $967 million of excess cash balances in the transportation workingcapital fund, by $300 million for overstated requirements for outside contracts, by$100 million for unnecessary payments to contractors for taxes, and by $55 millionfor overestimated civilian separation incentives. Added $25 billion for operations in Iraq and Afghanistan. Thecommittee provided almost all of the funds in regular appropriations accounts exceptfor $2.978 billion in the Iraq Freedom Fund, a flexible transfer account. Of the$2.978 billion, however, $1.978 is available only for classified programs describedin an annex to the report, so only $1 billion is available as flexiblefunding. In a manager's amendment during the full committee markup,the committee added $685 million to the emergency funding for Iraq for StateDepartment operations and also added $95 million in emergency funds for faminerelief and refugee assistance in Sudan and Chad. House Defense Appropriations Floor Action On June 22, the House voted to pass H.R. 4613 , the FY2005DOD Appropriations Act by 403 to 17. Before the bill was passed, however,controversy erupted over H.Res. 683 , the rule to consider H.R. 4613 , which, as proposed by the Rules Committee, includedplaceholder language that would allow the conferees to raise the ceiling on thenational debt as part of the bill rather than requiring a separate vote ( H.Rept.108-559 ). The vote on the rule, H.Res. 683, was 220 to 196. (6) The House then adopted the Lewis en bloc amendment requiring severalreports from DOD, including one on reducing the dud rate of cluster munitions,another on contracts for security, translation, and interrogation services in Iraq,Afghanistan, or Guantanamo Bay, as well as requiring notification to theInternational Relations, Foreign Relations, and the defense committees beforeproviding assistance to Iraqi and Afghan military and security forces. The Houserejected an amendment by Congressman Inslee that would have prohibited the useof funds for implementing reforms of DOD's civilian personnel system. (7) Fiveamendments were withdrawn. Senate Defense Appropriations Markup Military Personnel End-Strength, Pay, andBenefits. Provided funding for a military pay raise of 3.5% and forhousing allowances and other benefits as approved in the Senateauthorization. Within the $25 billion for Iraq and Afghanistan, included fundsfor an increase in Army end-strength of 20,000 as approved in the Senateauthorization. Cut $375 million from military personnel accounts to reflectperennial underexecution of military personnel programs in prior years, as reportedby the General Accounting Office. Cut $93.8 million from military personnel accounts to reflectthe planned end of U.S. operations in Bosnia in December2004. Major Weapons Programs. Provided $865 million, out of the $25 billion in emergencyfunding added for Iraq and Afghanistan, for an Army "Rapid Response ForceProtection Initiative." The funds may be used for up-armored Humvees, bolt onarmor kits, armored cabs, or other related purposes. Also provided $240 million forMarine Corps vehicle hardening. Provided $10.2 billion, about the amount requested, for missiledefense programs. Added $80 million for the Israeli Arrow program. Agreed toterminate the U.S.-Russian RAMOS program, but allocated $5 million for afollow-on program. Added $163.5 million for Ground-Based Midcourse Defense. Cut $252 million, about half the amount requested, from the Ballistic MissileDefense System Interceptor program, a program to develop a very high acceleration,mobile booster and warhead for land- and sea-basing and to explore space-basedinterceptors. Provided the full $3.2 billion requested for Army FutureCombat System development. The committee specifically approved continuedfunding for the non-line of sight launch system (NLOS-LS), which the Housecommittee wants to terminate. Provided $905 million, as requested, for Stryker armoredvehicle procurement -- the House bill added $950 million. Approved $221 million for construction of the first DD(X)destroyer, but moved the money from R&D to procurement. The House committeeeliminated the funds. Also added $99 million for design of the second ship of theclass, following the Senate authorization. Provided $107 million in R&D, as requested, for constructionof the first prototype Littoral Combat Ship -- the House committee provided anadditional $107 million to fully fund construction. Added $175 million for LHD(R) advance procurement -- theHouse committee provided no funds, while both authorization bills approved $150million. Supported procurement of 24 F/A-22 fighters, asrequested. Provided full funding, as requested, for Navy and Air Forcedevelopment of the F-35 Joint Strike Fighter -- did not concur with House cuts dueto delays. Provided $110 million for tanker aircraft replacement, but didnot specify whether the funds were for KC-767s, in effect leaving the issue forauthorizers to decide. Provided $508 million for development of the Space-BasedInfrared System-High (SBIRS-High), but did not add $91 million, as the Air Forcehad requested and the House agreed. Provided $228 million for the Space-Based Radar program,$100 million below the request. The committee did not agree with House cuts thatwould effectively terminate the program. Provided $375 million for the Transformation CommunicationsSatellite, $400 million below the request. The House cut $100million. Provided $511 million for the Evolved Expendable LaunchVehicle, $100 million below the request due to launch delays. The House cut $91million. Provided $557 million for development of a replacementMarine One helicopter, $220 million below the request, as in theHouse. Other Key Actions. Added about $650 million for earmarked medical R&Dprograms, about half the amount in the House bill. Of this amount $200 million forcancer research, including peer-reviewed breast cancer, prostate cancer, and othercancer research, was provided in a single block, and the committee directed theDefense Department to allocate the funds. In the past, most such funds have beenearmarked for specific diseases. Also provided $50 million in a similar block forother peer-reviewed medical R&D programs. Cut $478.2 million from operation and maintenance accountsto reflect the planned end of U.S. operations in Bosnia in December2004. Provided $25 billion for operations in Iraq and Afghanistan. The committee provided most of the funds in regular appropriations accounts, subjectto normal procedures requiring congressional approval of transfers above certainthresholds. Provided $2.5 billion in the flexible Iraq FreedomFund. Senate Defense Appropriations Floor Action On June 24, the Senate took up the House-passed version of the FY2005defense appropriations bill ( H.R. 4613 ), substituted the terms of itscommittee-reported version of the bill ( S. 2559 ), acted on a number ofamendments, and then passed the amended version of H.R. 4613 by a voteof 98-0. Amendments Adopted. TheSenate adopted a number of amendments to add relatively small amounts for anumber of specific projects. In addition, the Senate approved amendments By Senator Mike DeWine ( S.Amdt. 3493 ) toprovide $95 million -- as was provided in the House-passed bill -- for humanitarianrelief activities in Sudan and Chad (the Senate did not, however, add $685 million,as the House did, for State Department operations in Iraq); and By Senator Robert Byrd ( S.Amdt. 3502 ),expressing the sense of the Senate that the Administration should request funds forongoing military operations, including operations in Iraq and Afghanistan, as part ofthe regular annual defense budget request rather than as supplemental appropriations(approved 89-9). Amendment Rejected. The Senatealso rejected one amendment By Senator Biden ( S.Amdt. 3520 ) to increase theamount provided for humanitarian relief in Sudan and Chad to $188 million (tabled,53-42). Issues for Congress One issue was paramount in congressional debate about the FY2005 defensebudget -- whether Congress should provide funding for operations in Iraq andAfghanistan before early 2005, when the Bush Administration initially said it plannedto request supplemental appropriations. In May, the Administration requested anadditional $25 billion for Iraq and Afghanistan, which Congress subsequentlyapproved in all versions of the annual defense authorization and appropriations bills. Congress did not, however, agreed to provide the Administration with the extensiveflexibility it wanted to allocate the money among accounts. A number of other issues were also on the agenda, including some that werepolitically contentious this year and some with significant long-term defense policyimplications. Among the key issues for Congress were To what extent budget deficits over the next few years mightconstrain defense spending; Whether Congress should require a substantial, temporaryincrease in active duty end-strength, particularly in the Army, to ease pressures on theforce caused by operations in Iraq and Afghanistan; Whether the planned deployment of a missile defense test bedwith a limited operational capability in September or October was scheduledprimarily for political rather than for sound technical reasons; To what extent major weapons programs in all of the servicesmay need to be reined in, both because of limits on overall defense spending andbecause of rapid cost growth in several big projects; How the Defense Department's change in longstandingregulations governing weapons acquisition procedures to permit what DOD calls"evolutionary acquisition" is affecting managerial controls and congressionaloversight over major weapons programs; Whether Congress should provide additional military personnelbenefits, including (1) access to DOD-provided health insurance for non-deployedmilitary reservists and their dependents and (2) increased military retiree survivorbenefits; Whether Congress should delay or restrict a new round of baseclosures planned in calendar year 2005; The status of Pentagon plans to redeploy U.S. military forcesstationed abroad and the implications for congressional oversight and defensebudgets; How the Army plans to manage and to finance a far-reachingreorganization of its combat forces to increase the number of deployable combatbrigades and to turn brigades, rather than divisions, into the major unit of action infuture operations; How the Defense Department is restructuring its civilianpersonnel system following Congress's approval last year of the Pentagon's requestfor broad authority to reform civil service pay and performancerules; Whether Congress should approve the Defense Department'srequest for changes in environmental laws and regulations governing military trainingin addition to changes Congress approved last year; Whether Department of Energy plans to investigate new nuclearweapons -- including low and variable yield weapons and earth penetration weapons-- are strategically sound and in line with authority Congress provided last year; Whether Congress should require the Defense Department tobegin acquiring Boeing KC-767 tanker aircraft; and Whether Congress should take steps to limit foreign militarysales offsets or to strengthen "Buy American" requirements. The following discussion provides brief background information on each of theseissues and discusses congressional action to date. Funding for Iraq and Afghanistan The Administration did not initially request funding for ongoing operationsin Iraq and Afghanistan in the regular FY2005 defense bills. Instead, officials saidthat they expected to request supplemental appropriations for overseas operationssome time early in calendar year 2005, possibly when the FY2006 budget request issubmitted at the beginning of February. After considerable debate in Congress,however, on May 12, 2004, the White House submitted an amendment to its FY2005request in which it asked for $25 billion to be appropriated into a reserve fund foroperations in Iraq and Afghanistan in early FY2005. (8) Two issues remained for Congress, however. One was whether Congressshould appropriate more than $25 billion, since costs in FY2005 are expected to totalat least twice as much. (9) Although there was considerable discussion aboutthe issue, and several amendments were proposed to add money, the House- andSenate-passed versions of the authorization and appropriations bills all provided $25billion. A second issue -- and, in the end, the key one -- was how much flexibilityCongress would agree to provide the Administration in allocating additional funds. The Administration's May 12 request would permit the Secretary of Defense, inconsultation with the Office of Management and Budget, to allocate the funds to anybudget account, requiring only that the Secretary notify Congress five days beforetransferring the funds. Many Members of Congress, including the leaders of theappropriations committees, said that they were not willing to provide so muchflexibility and intended to ensure that funds are available only for specified activities(for a full discussion, see CRS Report RL32422 , The Administration's FY2005Request for $25 Billion for Operations in Iraq and Afghanistan: Precedents andOptions for Congress , by [author name scrubbed] and [author name scrubbed]). The debate over funding for Iraq and Afghanistan began as soon as theAdministration presented its budget request, when some legislators complained thatthe Administration's failure to request money was intended to avoid a congressionaldebate about Iraq policy during the presidential election campaign, to obscure thewar's long-term costs, and to understate the size of projected federal budget deficits. The issue became particularly acute days later when Army Chief of Staff GeneralPeter Schoomaker was asked about it in a Senate Armed Services Committee hearingon February 10. Schoomaker said he was "concerned ... on how we bridge betweenthe end of this fiscal year and whenever we could get a supplemental in the next year.And I do not have an answer for exactly how we could do that." General MichaelHagee, the Commandant of the Marine Corps, echoed Schoomaker's concern. In response, the next day, February 11, DOD Comptroller Dov Zakheim helda press briefing to explain that Pentagon leaders were sure they could meet Army andMarine Corps requirements into next Spring by "cash flowing" regular FY2005appropriations. (10) In FY2003, Zakheim said, the DefenseDepartment was able to provide $26 billion for Iraq war costs before Congress couldapprove supplemental appropriations; the money, he said, was mainly operation andmaintenance funds that would otherwise not have been spent until the fourth quarterof the fiscal year. DOD and also the Office of Management and Budget (OMB), hesaid, were certain that they could manage FY2005 funding in a similar way. Zakheim also argued that it was appropriate to delay requesting funds for Iraqbecause of great uncertainty about costs, particularly following the planned transferof sovereignty to an interim Iraqi government on June 30. Subsequently, a number of related issues emerged. One issue is what precedents earlier wars provide. Last year,a CRS memo reported that the initial funding for most conflicts -- from World WarII, to Korea, to Vietnam, to the 1991 Persian Gulf War -- was generally providedthrough supplemental appropriations. (11) That memo did not, however, address fundingfor wars after the initial phases. On that question, the precedents are mixed. Whilethe Korean conflict was financed mainly with supplementals, World War II andVietnam were funded both with supplementals and with regular appropriations. (Fora review of methods used to fund operations since 1991, see CRS Report RL32141 , Funding for Military and Peacekeeping Operations: Recent History and Precedents ,by Jeff Chamberlin.) Vietnam therefore, is the most recent truly comparableexample. In that case, the Administration first asked for a $700 millionsupplemental for FY1965 in May of 1965; then for a $1.7 billion addition to theregular FY1966 defense appropriations bill, which was requested as a budgetamendment in the summer of 1965; and then, in January of 1966, as troop levels inSoutheast Asia were climbing, a supplemental of $12.3 billion for FY1966 andregular appropriations of $10.3 billion for FY1967, both requested when the FY1967budget was submitted. So, in the case of Vietnam, the Johnson Administration askedfor emergency supplementals when necessary, but also requested funds in regularappropriations bills as soon as those bills were on the congressional agenda, eventhough troop levels were in flux and the duration of the conflict could not beforeseen. As the defense bills were being marked up, there was also somediscussion in Congress about the adequacy of FY2004 funding for Iraq. In testimonybefore the House Armed Services Committee on April 21, 2004, General RichardMyers, the Chairman of the Joint Chiefs of Staff, said that the military services hadidentified a preliminary shortfall of about $4 billion through the end of the fiscalyear. He also said that the Defense Department was in the midst of a budget reviewwhich the service chiefs thought would be able to find enough money in, forexample, underexecuting acquisition programs, to cover the shortfall. General Myersreiterated that assessment in testimony before the Senate Defense AppropriationsSubcommittee on May 12, 2004. In its review of the issue, CRS found that FY2004shortfalls could be substantial but that funds to cover costs are also available, so thatthe Defense Department may, indeed, be able to get through FY2004 (see CRS Report RL32381(pdf) , Adequacy of the Army's FY2004 Funding for Operations in Iraq ,by [author name scrubbed]). More recently, the Government Accountability Office calculatedthat the Defense Department was as much as $12 billion short and would have to haltplanned training and make other substantial changes in plans to pay the bills(Government Accountability Office, Military Operations: Fiscal Year 2004 Costsfor the Global War on Terrorism Will Exceed Supplemental, Requiring DOD to ShiftFunds from Other Uses, GAO-04-915, July 21, 2004). In the end, Congress madethe $25 billion it provided in emergency funds available immediately on enactmentof the legislation, so funds were available in August, and the Administration tappedabout $2 billion for immediate costs. A final related issue is whether the Defense Department hasrequested enough money for everyday equipment for troops in Iraq and Afghanistan,including equipment for force protection -- that is, for items such as up-armoredHumvees, body armor, robots and other devices for coping with improvisedexplosive devices (IEDs), night vision goggles, and other equipment of immediatevalue to troops on the ground. Senator Jack Reed pointed to a Defense Departmentreprogramming request that would allocate $619 million for urgent Iraq needs. (12) And in theApril 21 House Armed Services Committee hearing with General Myers,Representative Curt Weldon cited a number of shortfalls in such equipment that theArmy identified in its annual unfunded priorities list. Congressional Action. In all fourversions of the annual defense bills, Congress agreed to provide $25 billion as aninitial down payment for costs of operations in Iraq and Afghanistan in FY2005. TheHouse, Senate, and conference versions of the defense appropriations make themoney available as soon as the bill is signed into law, which means that the moneycould be used not only for initial costs in FY2005, but also to cover any shortfalls inthe remainder of FY2004. The key issues to be resolved in the appropriations conference were how todivide up the money among Department of Defense appropriations accounts, howmuch to provide in a flexible transfer account that can be used to meet unanticipatedexpenses, how much "general transfer authority" to provide the Defense Departmentto move money between appropriations accounts (with advance congressionalapproval), and what reporting requirements to establish. The House version of the appropriations bills provided somewhat more detailthan the Senate bill in allocating the money among regular appropriations accountsand in specifying what weapons programs it approved, though the differences wererelatively minor. The House bill provided $2.978 billion in a flexible transferaccount, called the Iraq Freedom Fund. Of the $2.978 billion, however, $1.978billion was for classified programs described in an annex to the report, so only $1billion was available as flexible funding. The Senate bill technically provided all ofthe $25 billion in the Iraq Freedom Fund, but it also set detailed floors and/or ceilingson amounts that could be transferred from the fund into regular appropriationsaccounts, leaving $2.5 billion as flexible funding. The House bill also provided $3billion of general transfer authority for the entire FY2005 defense appropriations bill,including the $25 billion in emergency funds. The Senate bill provided $4 billion. Transfers of funds using general transfer authority are subject to detailedrequirements governing the reprogramming of funds and require advance approvalof the congressional defense committees. The House appropriations bill required a number of reports on operations inIraq and Afghanistan, including semiannual reports on the amounts spent by month,an assessment of progress, an assessment of the effects of operations on personnelrecruitment and retention, monthly costs of equipment repair, the amounts and typesof foreign support, and details of reserve mobilizations; a report by October 1, 2004,on projected costs from FY2006 through FY2011 or a certified statement by thePresident that a realistic projection of costs is not possible; quarterly reports onamounts used to provide transportation and other logistical support to allied nationsproviding forces in Iraq; and a list of all contracts for support of operations in Iraq,Afghanistan, and Guantanamo Bay. The Senate appropriations bill required five-day advance notification toCongress of any transfer of funds into regular appropriations accounts under theterms of the bill; quarterly reports on cumulative transfers; quarterly reports onlogistical and other support to allied nations; 15-day advance notification of supportfor the New Iraqi Army and the Afghan National Army; and quarterly reports on theuse of funds for the Commander's Emergency Response Program. The appropriations conference agreement provides most of the $25 billion inregular appropriations accounts, with report language further directing the allocationof procurement and some operating funds in some detail. This is closer to the Housethan to the Senate approach. The agreement also provides $3.8 billion in the flexibleIraq Freedom Fund, but $1.8 billion of that is for specific classified programs,leaving $2 billion in flexible funding. The conference bill also provides that $1.5billion of the $25 billion for Iraq and Afghanistan may be transferred among accountsprovided only that Congress is promptly notified of the transfer. TheIraq/Afghanistan title of the bill also increases FY2004 general transfer authority by$700 million, from $2.1 to $2.8 billion. And the overall bill provides $3.5 billion ofgeneral transfer authority -- a substantial increase from amounts provided in recentyears. The conference agreement requires a number of reports on operations in Iraqand Afghanistan, including semi-annual reports, due on April 30 and October 31 ofeach year, on amounts expended for military operations and reconstruction in Iraqand Afghanistan in the previous six months, progress in preventing attacks on U.S.personnel, effects of operations on military readiness, effects on personnelrecruitment and retention, costs for repair or equipment, types and extent of foreignsupport, and reserve mobilizations. Deficits and the Defense Budget Congressional debate about the FY2005 budget seems to mark a turning pointof sorts. After several years in which mounting budget deficits were apparently ofless interest in Congress than tax cuts, Medicare prescription drug coverage, andincreased benefits for military retirees, old-time deficit cutting religion appeared toundergo a bit of a revival. The Administration proposed a budget plan which it saidwill cut the federal budget in half by FY2009, though there is considerable debateabout whether it would actually accomplish that. In their versions of the FY2005budget resolution, both the House and the Senate imposed somewhat tighterrestrictions on total discretionary spending than the Administration, and the Senatevoted to reimpose procedural restrictions, known as "PAYGO" rules, both onincreases in mandatory programs and on reductions in revenues. Statutory PAYGOrules were first established by the Budget Enforcement Act of 1990, but expired afterFY2002. Battles over how to control federal deficits were fixtures of congressionalbudget debates from the time Congress approved the first Gramm-Rudman-Hollingsdeficit control act in November 1985 into the late 1990s. Congress passed revisedmeasures to limit deficits in 1987, 1990, 1993, and 1997. It was only after 1998 thatan economic boom, together with several rounds of tax increases and measures tolimit spending, led, though only temporarily, to budget surpluses. The deficit battles,as well as the end of the Cold War, were a major factor affecting defense spending. Adjusted for inflation, the defense budget declined in real terms for 14 straight years,from FY1986 through FY1999, and began to turn up again only in FY2000 as deficitpressures eased. The re-emergence of the deficit as an issue, therefore raises an obviousquestion: to what extent might ongoing efforts to control budget deficits eventuallylimit the amounts available for defense? This year, there was a serious debate inCongress about the total amount for defense for the first time in several years. In theSenate, Budget Committee Chairman Don Nickles proposed, and the full committeereported, a budget resolution that reduced the recommended total for national defenseby $6.9 billion below the Administration request. In the House, Budget CommitteeChairman Jim Nussle initially proposed a $2 billion cut in defense in an attempt tomake the point that everything -- even defense -- needed to be on the table to controllong-term spending. While Congress did not, in the end, support cuts in defense, thelong-term budget situation may raise the issue again in the future. Congressional Action. In theSenate, the Budget Committee reported version of the annual budget resolution( S.Con.Res. 95 ) recommended $415.2 billion for the national defensebudget function (function 050), $6.9 billion below the CBO reestimate of theAdministration request (see Table 4 ). In a floor vote on March 10, however, theSenate approved an amendment by Senator John Warner to restore the funds. In theHouse, Budget Committee Chairman Jim Nussle dropped his proposal to recommend$2 billion less for defense than the Administration requested. The House resolution( H.Con.Res. 393 ), as reported by the Budget Committee and as passedby the full House, recommended the requested level of funding for national defense,though $2.6 billion of the request was shown in a new budget function for HomelandSecurity. The conference agreement on the budget resolution provides $472.2 billionfor national defense in FY2005, including $50 billion for overseas contingencyoperations. The House approved the budget resolution on May 20, and also approveda measure "deeming" the totals in the budget resolution to have been agreed to forpurposes of subsequent House action on appropriations bills and other legislation. The Senate, however, never took up the budget resolution. This compelled theSenate to begin acting on FY2005 appropriations bills with the level of funding fortotal discretionary programs set at the level projected in the FY2004 budgetresolution, which was $814 billion in new budget authority. This was about $8billion below the level requested by the Administration and $7 billion below the levelapproved in the "deeming" resolution in the House. This caused some problems in the Senate, which came to a head in action onthe defense appropriations bill. As a way of coping with the $7 billion gap with theHouse, the Senate Appropriations Committee designated $7 billion in the regularFY2005 defense appropriations bill as "emergency" funds. The effect was to allowallocations of funds to other, non-defense appropriations bills to equal the total in theHouse. If House conferees had accepted this approach, it would have freed up $7billion for additional funding for non-defense bills within the $821 billion cap ondiscretionary funding. The House leadership objected. The solution was to includein the FY2005 defense appropriations bill a measure "deeming" a total of $821billion in discretionary budget authority to apply in the Senate as in the House. WithSenate passage of the defense appropriations conference report, that level is now ineffect. Ultimately, the defense appropriations conference agreement provided $391.2billion for regular Department of Defense programs, about $1.7 billion below theAdministration request. Table 4. Congressional Budget Resolution Targetfor the National Defense Budget Function (050) (millions of dollars) Sources: Congressional Budget Office; Senate Budget Committee, March 5, 2004; S.Con.Res. 95 as passed by the Senate; House Budget Committee reporton the FY2005 budget resolution, H.Rept. 108-441 ; Congressional Record , March25, 2004; H.Rept. 108-498 . Notes a. The CBO reestimate, the Blue Dog Coalition plan, and the Democratic Substituteall make projections through FY2014 -- figures beyond FY2009 are notshown here. b. The House-passed budget resolution excludes $2.6 billion of homelandsecurity-related funding from the national defense budget function (function050) in FY2005and instead provides it in a new "homeland security" budgetfunction (function 100). If the defense-related homeland security funds areadded to the National Defense Budget Function, the totals equal the CBOreestimate of the Administration request. In an attempt to ease constraints on defense spending, the House ArmedServices Committee included in its version of the defense authorization bill aprocedural measure to shift costs of future health insurance benefits for militarypersonnel when they retire from the Defense Department to the general Treasury andfrom discretionary funds subject to budgetary caps to the mandatory side of theledger. Under current law, the Defense Department is required to make annualcontributions to the military retirement fund sufficient to cover cost in the future ofproviding guaranteed medical care to 65-and-over military retirees (this is known asTRICARE for Life, and was established in the FY2001 national defenseauthorization act, P.L. 106-398 ). These contributions are considered part of the costof military personnel and are scored as discretionary funds requiring annualappropriations. The measure (Section 1541 of the House bill), which was approved withamendments in the conference agreement (Section 725 of the conference bill),requires the Treasury to make the contributions to the retirement trust fund insteadof the Defense Department beginning in the FY2006 budget. The effect would be toreduce DOD personnel costs by an average of about $12 billion a year over the nextfive years. A sense of Congress provision added in the conference agreement urgesthat this shift should not reduce the total discretionary funding requested for theDefense Department -- in effect, increasing defense spending by $12 billion a year. So far, the Office of Management and Budget has not agreed. In a December9, 2004 letter to the Chairmen of the House and Senate Budget Committees, OMBurged that the FY2006 budget resolution score the health insurance contributions tothe military retirement fund according to earlier precedents. Traditionally, OMB hassupported the principle, known as "accrual accounting," which holds that theactuarily determined costs of future benefits for current personnel should be includedin annual budgets of federal agencies in order to allocate the actual, full costs ofpersonnel to current programs. Active Duty End-Strength Even before the current conflict in Iraq began, there was some support inCongress for increasing the size of the active duty force, particularly in the Army, asa means of reducing strains on military personnel that some argued were aggravatedby frequent military operations abroad, such as peacekeeping operations in Bosniaand Kosovo. (13) In the House, Representative Ike Skelton, theranking Democrat on the House Armed Services Committee, argued for some yearsthat the Army needed about 40,000 more troops. (14) Now, the need to keep a substantial number of troops in Iraq for an as yetindeterminate period has made end-strength a critical issue. Currently, the DefenseDepartment has waived statutory caps on end-strength, and it is keeping about 30,000more personnel in the active duty force than before the war in Iraq. Costs of payingthese additional troops -- as well as temporarily mobilized reserve troops -- has beencovered with FY2003 and FY2004 supplemental appropriations. Army leaders havesaid that they want to keep as many as 30,000 additional troops in the service for thenext couple of years, not only to ease strains of overseas deployments, but also toallow some flexibility as the Army reorganizes its combat units (see below). So itappears likely that the Administration will want to keep some additional end-strengthfor some time, still paid for with supplemental appropriations -- Army officials saythe increases will be needed the end of FY2006. The Defense Department, however, has opposed congressional measures toincrease statutory end-strength and to establish end-strength minimums. It appearsthat the Defense Department wants flexibility to increase or reduce troop levelswithout a congressional mandate. But neither critics nor proponents of an increasein statutory end-strength have addressed why it would be better or worse than thepresent situation, in which DOD is keeping added end-strength by waiving thecurrent statutory caps. In response to past, pre-Iraq proposals to increase end-strength, SecretaryRumsfeld has argued that the services can increase the number of deployable troopswithout adding to overall end-strength by more efficiently managing the forces thatare available. One key efficiency measure is a plan to transfer as many as 10,000jobs now performed by uniformed personnel to civilians in FY2004 and another10,000 in FY2005. Reportedly, some Pentagon studies have found that as many as320,000 military jobs could be performed by civilians. (15) These prospects have not persuaded advocates in Congress that potentialproblems caused by the burden of rotating forces into Iraq are being adequatelyaddressed. Some Members of Congress have proposed increasing the Army'sstatutory end-strength by as many as 40,000 troops. And some have proposed, aswell, that some of the additional troops should be assigned to units speciallyorganized and trained for stability operations overseas. A part of the discussion of end-strength is the cost. The CongressionalBudget Office estimated that in 2002 the average active duty service-memberreceived a compensation package, including pay and non-cash benefits, of about$99,000 per year. (16) So, without including training and otheroperating costs of additional forces, a rough starting point for analysis is that eachadditional 10,000 active duty troops will add about $1 billion to the defense budget. These estimates are in line with Army projections, which are that it would cost $3.6billion a year to add 30,000 troops to the force. Presumably, these troops would beused to fill out existing units, not to add new ones, which would cost additionalmoney. Congressional Action. At the endof April, House Armed Services Committee Chairman Duncan Hunter announcedthat he would propose an increase in statutory end-strength for the Army and theMarine Corps in the committee markup of the FY2005 defense authorizationbill. (17) The bill as reported by the committee and passed by the House includes his proposalto increase statutory end-strength in the Army by 10,000 and in the Marine Corps by3,000 in each of the next three years, for a total increase of 39,000 troops. Thecommittee assumed that the costs of the increase in FY2005 will be paid for not outof regular funds but out of additional funding for Iraq -- in the $25 billioncontingency fund for the first part of the fiscal year and/or in later supplementalappropriations. In the Senate, Senators Reed, Akaka, Clinton, Nelson (FL), Hagel, McCain,Schumer, Landrieu, and Boxer, sponsored a bill, S. 2165 , to increaseArmy end-strength by 30,000. The Senate Armed Services Committee included ameasure in its version of the FY2005 authorization that would permit, but notrequire, the Secretary of Defense to increase total active duty end-strength by up to30,000 through FY2009. Finally, on June 17, by a vote of 93-4, the Senate adoptedan amendment by Senator Reed to increase FY2005 Army active duty end-strengthby 20,000. The end-strength issue was not resolved in the FY2005 defenseappropriations conference report. The bill provides funds for added end-strengthwithin the $25 billion provided for Iraq and Afghanistan, but it does not prejudgewhether an increase in the statutory end-strength will be agreed to in theauthorization conference. The defense authorization conference agreement increasesArmy end-strength by 20,000 and Marine end-strength by 3,000 in FY2005 andestablishes the increased totals as minimums. The conference bill also authorizesadditional increases of 10,000 in the Army and 6,000 in the Marine Corps over thenext four years, but it does not establish them as minimums. Missile Defense In December 2002, the White House announced a plan to deploy a what itreferred to as a "test bed" of ground-based missile defense interceptors -- 10 to bedeployed in Alaska and 10 in California -- intended to have a limited operationalcapability against long-range missile attacks against the United States beginning bythe end of September 2004. That deployment plan has been delayed by at least acouple of months and there have been some changes in the proposed program in theinterim. The main change is that only one type of missile booster will initially beavailable because a fire in a production plant delayed production of a second rocketengine. The Missile Defense Agency has been working on construction of missilesilos and support facilities and began placing interceptors in silos in Alaska in July,2004. An operational capability by was expected to be declared in early October, butit is now unclear when it will be announced. (18) The system that is being deployed will not be a full up operational missiledefense. It will rely on a ground-based missile tracking radar, called "Cobra Dane," that was built to monitor Soviet missile tests and that can track warheads launchedKorea or elsewhere in Asia. Cobra Dane does not look over the poles for warheadslaunched from the Middle East, however, nor can it be aimed to follow missiles orinterceptors in the U.S. Pacific Test Range far to the south. The radar also does nothave the degree of precision that is planned for the future. A more capableship-borne radar is still being developed. The interceptor warheads are also stillbeing tested against various kinds of increasingly complex targets, and the system hasnot demonstrated that it is a reliable operational weapon. The avowed primarypurpose of the test bed is to be just that -- a system to allow progressively moredemanding tests against progressively more realistic targets under progressively morerealistic operating conditions. Test intercepts cannot, however, be carried out fromthe 10 interceptor missiles being deployed at Fort Greeley, Alaska, however, becauseof range safety issues. The Pentagon's Director of Operational Testing, Tom Christie,has told Congress that he has advocated the deployment of some kind of test bedprecisely as a means of strengthening the rigor of the development process. (19) Although there has been little criticism of the decision to develop a missiledefense test bed, per se , the White House decision to declare a system operational inthe midst of a presidential election campaign was a matter of occasionally testydebate in Congress. (20) Some other issues have also emerged. A bigissue is cost -- one key question is whether the big increase in missile defensefunding over the past few years is justified or whether funds should be shifted toother priorities. A perennial issue has been whether the Missile Defense Agencyshould spend less on development of space-based systems that may betechnologically risky or more on Patriot missile batteries and other systems that maybe of more immediate value to troops in the field. Another set of issues has to do with management of the program. There havebeen repeated delays and substantial cost increases in the missile defense programitself and, particularly, in some related programs, including the Space-Based InfraredSystem (SBIRS)-High, run by the Air Force, the Space Surveillance and TrackingSystem (SSTS, formerly SBIRS-Low), run by the Missile Defense Agency, and theAirborne Laser (ABL) an Air Force-run, Missile Defense Agency-funded program. Missile defense programs may be a test of whether the Pentagon's "spiraldevelopment" acquisition strategy (see below), which is designed to accelerate thedevelopment process, may not also weaken managerial and cost controls. Congressional Action. Both theHouse and the Senate Armed Services Committees generally supported theAdministration request, though they made some small changes (see Table A-2 ,below, for details). The House committee reduced funds for Advanced Concepts by$50 million, for system core technologies by $30 million, for the ForwardDeployable Radar (to be deployed with the THAAD system) by $56 million, and forinterceptors, particularly for sea-based systems, by $75 million. The committeeadded $47 million for the Theater High Altitude Area Defense (THAAD) program,$30 million for mid-course defense, and $30 million for advanced technologies forTHAAD and the PAC-3. The committee also required a report on the status of theAirborne Laser, though it indicated overall support for the program. The Senate committee added $40 million to the ground-based mid-coursedefense program to reduce development risk and $90 million for 36 additional PAC-3missiles. For details of House and Senate committee action, see Table A-2 inAppendix A. Missile defense funding was not an issue on the House floor, however,because the Rules Committee refused to permit any missile defense-relatedamendments. Senior Democrats complained in particular that the Rules Committeedid not make in order an amendment by Representative John Spratt, the secondranking Democrat on the Armed Services Committee, to shift $414 million fromspecified missile defense programs to military pay and benefits and to forceprotection programs. The key issue in debate on the Senate floor was whether to require morestringent operational testing of missile defense systems. On June 17, the Senateadopted an amendment by Senator John Warner to require the Secretary of Defenseto prescribe and apply criteria for operationally realistic testing of fieldableprototypes developed under the ballistic missile defense program. By adopting theWarner amendment, the Senate rejected an amendment by Senator Jack Reed torequire the Director of Operational Test and Evaluation to prescribe and overseeoperational tests. Later, on June 22, by a vote of 44-56 the Senate rejected anamendment by Senator Carl Levin to reduce funds for missile defense by $515million and reallocate the money to Department of Energy counter-proliferation, toNORAD cruise missile detection programs, and to various Department of Defensehomeland defense programs. The House Appropriations Committee made somewhat deeper cuts in therequest for missile defense programs than either authorizing committee -- in all, thecommittee cut $457.9 million from the request, though the committee report notedthat the remaining total is $632.4 million above FY2004 funding. The committeemade cuts of $205 million in program elements containing funds for programs beingcoordinated by a "Ballistic Missile Defense National Team" of government,contractor, and federal research center personnel. The goal of the national teameffort is to integrate various elements of the overall missile defense program,including terminal defense and midcourse defense, into a single system. Thecommittee said that the Missile Defense Agency's budget justification material didnot provide a sufficient rationale for the amounts requested. In addition, thecommittee cut $25 million from advanced concepts developments, saying that currentsystems needed more testing, and $61.5 million from terminal defense programs,citing growth in management costs and delays in rocket motor production. Inaddition, the committee recommended rescinding $74 million of previouslyappropriated funds because of delays in the Airborne Laser program. In contrast, the Senate Appropriations Committee approved the full $10.2billion requested -- it actually increased the total by about $16 million -- though it didshift some funds among missile defense programs. The committee added $80 millionfor the Israeli Arrow program, added $163.5 million for Ground-Based MidcourseDefense, and cut $252 million, about half the amount requested, from the BallisticMissile Defense System Interceptor program, a program to develop a very highacceleration, mobile booster and warhead for land- and sea-basing and to explorespace-based interceptors. The appropriations conference report provides $10.0 billion for missiledefense, $176 million below the request, but $280 million above the House level. The agreement increased funds for ground-based missile defense and reduced fundsfor interceptor R&D. The agreement also made an unallocated, across-the-board cutof $180 million, allowing DOD to decide how to allocate the reduction. "Bow Waves" and "Train Wrecks": Cost Growth and Affordability ofMajor Weapons Programs A perennial issue in defense policy is whether future defense budgets will belarge enough to finance all of the weapon acquisition programs that are in thepipeline. There are a couple of variations on the theme. One issue is whether a "bow wave" of acquisition costs will growunsustainable at some point in the future. The term "bow wave" technically refersto the normal funding profile of a major program: funding is small in the early stagesof development, climbs during engineering development, peaks during full rateprocurement, and then declines again as production winds down. When severalweapons programs appear likely to grow in concert, then a large collective "bowwave" may appear to be looming in the future. A second issue is whether projected weapons procurement budgets are largeenough to replace aging weapons as they reach the ends of their nominal servicelives. A 1999 report by the Center for Strategic and International Studies (CSIS),entitled The Coming Defense Train Wreck , argued that projected procurementbudgets would fall as much as 50% a year short of the amount needed to maintain amodernized force. (21) That study evoked considerable controversy. Very large variations in projected total costs could arise from minor changes inassumed rates of cost growth from one generation of weapons to the next, inassumptions about possible extensions of nominal service lives with upgrades, andin assumptions about whether some elements of the force (such as strategic nuclearweapons) need to be updated at all. (22) Since 1999, the Congressional Budget Office has done a series of studies ofwhat it calls a "steady state" procurement rate (i.e., the rate at which weapons wouldhave to be replaced to maintain a modernized force of a given size) and also of thecumulative cost of the Pentagon's actual weapons plans. (23) CBO'sinitial "steady state" studies found a shortfall, but not of the magnitude CSISprojected. CBO's more recent studies of the affordability of the Administration planfind a potentially substantial "cost risk" if program costs grow above what theservices are now projecting. Cost growth in major weapons programs is nothing new; it has plaguedplanners at least since the early days of modern systems analysis studies of defensepolicy in the 1960s. (24) Despite efforts to fix it, however, the problemnow appears to be recurring among most of the Defense Department's current, mosthigh-profile weapons programs, including Air Force F/A-22 fighter: As a recent GAO report pointsout, (25) the development cost has grown from a 1986 Air Force estimate of $12.6 billion toa current estimate of $28.7 billion, the average unit procurement cost (not includingR&D) has grown from an estimated $69 million per aircraft to $153 million, andplanned procurement has declined from an initial goal of 750 aircraft to a current AirForce estimate of 276 to fit within a procurement cost cap (which GAO estimateswill permit only 218 aircraft at the most recent unit costestimates). Air Force/Navy F-35 Joint Strike Fighter: Between September30, 2003 and December 31, 2003, official DOD estimates of JSF costs, provided toCongress in quarterly Selected Acquisition Reports, grew by $45 billion, from$199.7 billion to $244.8 billion, a 23% increase. Space launch systems: Over the same period projected AirForce Evolved Expendable Launch Vehicle (EELV) program costs grew by $11.6billion, from $20.8 billion to $32.3 billion, a 56% increase. Missile defense: Over the same period, estimated costs of theoverall missile defense R&D program grew by $3.2 billion, from $62.9 billion to$66.1 billion, a 5% increase. Marine Corps V-22 tilt rotor aircraft: The total acquisition cost(R&D plus procurement) has grown from an estimated $32.4 million per aircraft in1986 to $104.9 million per aircraft currently, while the planned total procurement hasdeclined from 913 to 458 aircraft. (26) Prior year Navy shipbuilding: Congress appropriated $1.3billion for cost growth in Navy ships that are now under construction in FY2003 andanother $636 million in FY2004, and the Administration is requesting $484 millionfor shipbuilding cost growth in FY2005. Navy DD(X) destroyer and Littoral Combat Ship (LCS)acquisition: The Navy estimates that it will cost about $39 billion to acquire 24DD(X) destroyers and $14 billion to acquire about 56 LCS. Based on historicaltrends, however, CBO estimates a cost of about $53 billion for the DD(X)destroyers, (27) while the LCS design remains too uncertain foralternative cost estimates. Space-Based Infrared System-High (SBIRS-High),Spaced-Based Infrared System-Low (SBIRS-Low), and Airborne Laser (ABL)programs: The SBIRS-High, an Air Force-run program to develop a new missilelaunch detection and tracking satellite that would be tied into a national missiledefense, has more than doubled in cost since 1995 to over $8 billion, including a $2billion estimate increase in 2001, and it still appears to be experiencing delays andcost growth. Recently the Air Force confirmed reports that the cost will grow byanother $1 billion and that satellite launches will be delayed another two years. There have been similar, though less severe delays and cost growth in the MissileDefense Agency-run SBIRS-Low program to develop a low-earth-orbit missiletracking satellite. And the Air Force-run, Missile Defense Agency-funded AirborneLaser program has been delayed and has suffered enough cost growth that the AirForce has decided to use available R&D funds for one rather than twoaircraft. The Army Future Combat System (FCS): The FCS programremains at a very early stage of development, with several differing designalternatives still under consideration. Until recently, production was planned to beginin 2008 with an initial operational capability in 2010. In an April 2004 report,however, GAO found that 3/4 of the necessary technologies for the system wereimmature when the program started and that prototypes would not be available fortesting until shortly before production planned. (28) Mostrecently, the Army announced a major restructuring of the program which will delaymajor components for at least two years and increase total program costs by $25 to$30 billion. (29) Taken together, all of this suggests that the "cost risk" CBO has warned aboutis an imminent prospect, and that the affordability of current weapons modernizationplans is in some doubt. The issue for Congress, this year and perhaps more and morepressingly in the future, is what to do about it. One possibility is to increase defensespending, though budget deficits may make that problematic. Another is to terminateother programs in addition to the Comanche and, earlier, the Crusader -- SenatorJohn McCain recently mentioned the F-22. (30) A third isto restructure priorities within the defense budget to find more money for weapons,though demands to increase end-strength appear at odds with such a prospect. Congressional Action. Thecongressional defense committees made a number of changes in major weaponsprograms. Among the changes, a few stand out. The Senate Armed ServicesCommittee trimmed F/A-22 procurement from 24 to 22 aircraft saving $280 million. The rationale was that the program had been delayed in any case, so production willbe slower than the Air Force had planned. Critics of the decision argued thatproduction capabilities will ramp back up by 2007, when the money provided in theFY2005 budget would actually be spent. Neither appropriations committeesupported a cut, making the issue moot: the appropriations conference agreementprovides funds for 24 aircraft. The House Armed Services Committee trimmed funds for two high-profileNavy programs on the grounds that production is beginning faster than the maturityof planned technology and the stability of system design warrants. These programsare the Navy DD(X) destroyer and the Navy Littoral Combat Ship (LCS). TheFY2005 request includes funds in the R&D accounts to begin construction of the firstof each of the DD(X) and LCS ships. The committee said that production is not yetjustified, so it trimmed $221 million from the DD(X) and $107 million from theLCS. Opponents of the cuts have argued that reductions will delay ship construction,and that old ways of developing ships led to obsolete technology being deployed. The Senate Armed Services Committee provided requested funding for both DD(X)and LCS construction, and added $99 million for the DD(X) to accelerate design ofa second ship. The House Appropriations Committee followed the House authorizers on theDD(X), cutting $221 million, but it added $125 million in its place to begin buildingan additional DG-51 destroyer. The House appropriators did not agree to cut LCSconstruction, however, and instead added $107 million to fully fund the cost ofconstructing the first ship. The Senate Appropriations Committee provided the $221 million requestedfor DD(X) construction, but in Navy procurement funds rather than in R&D, andadded $99 million for second ship design, following the Senate authorization. TheSenate appropriators also provided requested funding for LCS construction. So thekey differences were between the appropriators. The House wanted to delay DD(X)production and instead build an additional DG-51, while the Senate supported theDD(X) and wanted to add $99 million. Both the House and the Senateappropriations supported LCS construction, and the House wanted to add $107million. The appropriations conference agreement ultimately did not support the cutsin either program that the House Armed Services Committee had imposed at thebeginning of the congressional process. The appropriations conference agreementprovides $221 million for DD(X) construction, but in procurement rather than inR&D, as the Senate proposed. The agreement also provides $214 million to fullyfund construction of the first LCS in the R&D accounts, as the House wanted. The House Armed Services Committee also trimmed $245 million from theArmy's Future Combat System development request, saying that the money was"excess to requirements." The committee included a provision, Section 211,requiring extensive reports on the status of the program and mandating that specificcriteria be met before proceeding with various stages of the development process. The House Appropriations Committee went further -- it cut $324 million andeliminated funds for non-line of sight launch system (NLOS-LS) development. Neither Senate committee reduced funds for FCS, so this became a major issue inconference. As the appropriations conference was concluding, there were reports,since officially confirmed by the Army, that the Army is proposing a two-year delayin the program. (31) The appropriations conference agreement trimmed $268 million from theprogram but included $58.2 million for NLOS-LS. The agreement also includes astatutory provision requiring the Army to field a version of the non-line-of-sightcannon by 2010, even if other elements of the FCS program are not deployed by then. Other major weapons issues in the appropriations conference negotiationsconcerned space systems. The House appropriators shifted $91 million from theEvolved Expendable Launch Vehicle (EELV) program to the Space-Based InfraredSystem-High (SBIRS-High) program, as the Air Force requested. Senateappropriators, however, cut $100 million from the EELV due to delays, but did notadd anything to SBIRS-High. The appropriations conference agreement cuts $100million from the EELV and adds $91 million to SBIRS-High. The House appropriators cut $100 million from the $775 million requestedfor the Transformational Communications Satellite program, following the Houseauthorization, while the Senate appropriators cut $400 million. The appropriationsconference report cut $300 million. And the House appropriators essentially terminated Space-Based Radardevelopment, leaving $75 million for research into alternatives. The Senateappropriators cut $100 million from the $327 million requested. The appropriationsconference report follows the House, essentially terminating the program. Evolutionary Acquisition and Spiral Development The Defense Department has formally adopted a new process for acquiringweapons, which it calls evolutionary acquisition with spiral development. The goalof the process is to accelerate the deployment of new technology to troops in the fieldby deploying what is technologically ready and then progressively improving it asnew technology matures. These goals appear to have pretty widespread support in Congress. Moreover, the new acquisition policies, which the Clinton Administration had alsobeen considering, appear in many ways closer to commercial practices that have oftenbeen successful. (32) But there has also been some concern that thenew procedures may weaken managerial controls and congressional oversight. (33) Someprograms, like the Littoral Combat Ship, have been started without the kind ofsystematic, formal analysis of alternatives that earlier regulations required. In othercases, GAO and others have warned that large investments are being made inprograms that still appear technologically immature, with potentially high risk ofdelays and cost growth and with a prospect that systems will not fully meetoperational requirements. (34) Military Personnel Benefits In recent years, Congress has repeatedly enhanced personnel benefits foruniformed personnel. Benefit increases have included "TRICARE for Life," whichguarantees full medical coverage to Medicare-eligible military retirees, repeal of a1986 law that reduced retirement benefits for new military enlistees, a phased in planto fully offset off-base housing costs, increased imminent danger pay and familyseparation allowances, and a one-year trial program to provide health insurance tonon-activated reservists not eligible for employer-provided insurance. A particularly big issue in the last couple of years has been whether to permitconcurrent receipt of military retired pay and veterans disability payments. In theFY2003 defense authorization, Congress approved a limited plan to permit retireeswith disabilities directly related to combat to receive both retired pay and disabilitybenefits without an offset. In the FY2004 defense authorization, Congresssupplemented that measure with a plan to phase in concurrent receipt for all retireeswith a service-connected disability of 50% or greater. Although veterans organizations still would like full concurrent receipt for allretirees with any degree of disability, that issue has not been a matter of much debatethis year. But two other personnel benefit issues were on the agenda this year. One issue was whether to provide medical insurance to non-deployedreservists. Congress had to decide whether to extend a provision in the FY2004 Iraqsupplemental appropriations bill ( P.L. 108-106 ) that permits reservists withoutemployer-provided health insurance to sign up for the DOD TRICARE program thatprovides health care to a military dependents, provided the reservists pay a share ofthe cost equivalent to what civilian federal employees pay for their health plan. Beyond that, Senators Daschle and Graham of South Carolina proposed a bill topermit all reservists, whether eligible for employer-provided health insurance or not,to sign up for TRICARE. A second issue was whether to increase benefits provided under the militarySurvivor Benefit Plan (SBP). Several Members of Congress have proposed measuresto revise longstanding rules that reduce benefits for surviving dependents of militaryretirees once the survivors reach age 62. The reduction was originally enacted to takeaccount of survivors becoming eligible for social security benefits. Veterans groupshave long argued that the reduction is out of date, unclear to participants, and unfairto survivors. (For a full discussion, see CRS Report RL31664 , The Military SurvivorBenefit Plan: A Description of Its Provisions , by David Burrelli; and CRS Report RL31663(pdf) , Military Benefits for Former Spouses: Legislation and Policy Issues , by David Burrelli.) Congressional Action. In thecommittee-reported and House-passed version of the FY2005 defense authorization,the House included a provision that would increase Survivor Benefit Plan (SBP)payments to over-62 dependents of deceased military retirees from 35% of retired payto 55% in increments by March 2008. On June 23, the Senate adopted anamendment to the authorization by Senators Mary Landrieu and Olympia Snowe, tophase in increased benefits over 10 years through 2014 -- the amendment wouldprovide 45% of retired pay after September 2008, and 55% after September 2014. A key issue in congressional action on the Survivor Benefit Plan -- and whichshaped the terms of the amendment the Senate adopted -- was how to pay for it. TheHouse version of the budget resolution included a provision, Section 303, thatestablished a "deficit-neutral" reserve fund for a measure that would increase SBPpayments. The measure provided that the chairman of the Budget Committee mayadjust totals in the budget resolution to accommodate an SBP increase if the ArmedServices Committee reports a bill that provides an increase offset by cuts in othermandatory programs. This was potentially a show-stopper. Because the Armed ServicesCommittees have jurisdiction only over a limited number of mandatory programs,mainly military retiree pay and benefits, it normally would be difficult for thecommittees to come up with offsets, though it may have been possible to offer a flooramendment that would tap other mandatory programs or increase revenues. TheDemocratic alternative budget, offered by Representative John Spratt, included aprovision that would have required the Armed Services Committee to report ameasure providing increased survivor benefits as part of a larger reconciliation billmaking other changes in mandatory programs and revenues, but the House rejectedthe Spratt alternative. On March 11, the Senate adopted a floor amendment to its version the budgetresolution by Senator Mary Landrieu to establish a reserve fund that would raiseaggregates in the budget resolution by $2.757 billion from FY2005-FY2009 to allowfor a measure, reported either by the Armed Services Committee or by theAppropriations Committee, that would eliminate the SBP over-62 Social Securityreduction. Senator Landrieu's amendment proposed offsetting the costs byeliminating tax benefits to individuals and corporations that avoid United Statestaxation by establishing a foreign domicile and by closing other tax loopholes and taxshelters. The conference agreement on the budget resolution includes the Houseprovision -- i.e., it would permit an increase in SBP payments only if offset by othercuts in mandatory spending. As it turns out, however, the House Armed ServicesCommittee (acting before the conference agreement on the budget resolution wascompleted) was able to fund a way around the potential impasse. The solution was a by-product of committee action on Boeing KC-767 tankeraircraft acquisition. Last year, the conference agreement on the FY2004 defenseauthorization ( P.L. 108-136 ) included a provision that authorized the Air Force toproceed with a program to lease 20 and then buy 80 aircraft. Because of the way theprovision was worded, the Congressional Budget Office (CBO) scored the measureas a mandatory program. In its version of the FY2005 authorization, the Housecommittee revised the KC-767 acquisition plan. It approved a multi-yearprocurement contract for the 80 aircraft to be procured, and it authorized money inAir Force RDT&E to develop needed aircraft modifications. CBO scores thisapproach for procuring 80 aircraft as a discretionary program, so it credited theArmed Services Committee with $14.3 billion in savings in mandatory programsfrom FY2006-FY2012. (35) These amounts were then available to offset theSBP increases (and, also, to offset an increase in mandatory spending due to thecommittee's extension of the military family housing privatization initiative). The Senate, however, did not have any such windfall of mandatory offsets inhand when it acted on survivor benefits. As a result, the Senate limited the cost ofthe program by providing the full 55% of retired pay only after the end of FY2014,since mandatory spending increases over a 10-year period, but not beyond that, aresubject to a point of order. The Senate also eliminated a provision in the originalLandrieu proposal that limited premium increases for retirees who sign up forsurvivor benefits, so the cost of the 45% increase that is phased in by 2008 may bepaid for by the beneficiaries. The issue for authorization conferees is whether toadopt the more limited benefits provided in the Senate proposal or figure out how tooffset costs of the House proposal if, as appears quite possible, there is no agreementto alter that KC- 767 acquisition plan as the House has proposed. In action on TRICARE for reservists, the House and Senate approved severalmeasures. Both the House and the Senate Armed Services Committeesapproved measures to establish demonstration projects that would allownon-deployed reservists and their dependents to sign up for health insurance throughthe TRICARE program. The Senate Armed Services Committee-reported version of thedefense authorization included a measure, called "TRICARE Reserve Select," toallow non-deployed reservists access to health insurance for them and theirdependents through the military-run TRICARE program, provided that the full costsare paid either through employer-employee cost sharing or if reservists cover the fullcost. On June 2, the Senate approved a floor amendment to theauthorization bill by Senators Tom Daschle and Lindsey Graham to allow allnon-deployed reservists to receive health insurance for themselves and theirdependents through the military TRICARE program, with the federal governmentpaying the employer share of costs. The issue for the authorization conference was whether to approve only somekind of demonstration program for providing health insurance for reservists, orwhether, instead, to adopt one of the Senate approaches -- either TRICARE ReserveSelect, which offers TRICARE if employers share costs or if reservists pay the fullcost, or the Daschle-Graham proposal for the federal government to pay the employershare. The appropriations conference report did not resolve any of these, or other,personnel benefits issues. The part of the bill providing $25 billion for Iraq andAfghanistan includes funds in the Defense Health Program to finance increases inTRICARE for reservists, including TRICARE for non-deployed reservists withoutaccess to employer-sponsored health insurance, for the next four months. But theappropriations conference did not address other benefits increases. The authorization conference agreement resolved both issues. The agreementincorporates the House measure on the Survivor Benefits Plan -- i.e., it phases in thefull 55% benefit by FY2008. The costs were offset by savings in mandatory budgetaccounts from changes in the KC-767 acquisition plan. On the issue of TRICARE for reservists, the authorization conferenceagreement is a compromise between the House and the Senate. The agreementprovides that reservists who are activated for duty and who subsequently reenlist areeligible for TRICARE benefits for one year for each 90 days of active duty service,provided they pay 28% of the cost of the benefit. The conference agreement did notestablish a demonstration program for a broader program, but instructed GAO tostudy DOD's preparations for carrying out a demonstration. Base Closures In the FY2003 defense authorization bill, Congress approved a new round ofmilitary base closures to be carried out in calendar year 2005. In February 2004, theDefense Department met one requirement of the law by issuing a statement of criteriato be used in deciding which bases to close. In addition, DOD has issued guidanceto the military services on how the process of identifying bases to recommend forclosure will be organized. Senior Pentagon officials have said that size of the basingstructure remains as much as 25% larger than is needed, implying that the 2005 baseclosure round could be quite large. In Congress, the 2005 base closure round has been a matter of extensivedebate. Last year, the House Armed Services Committee-reported version of theFY2004 defense authorization bill included a provision that would have restricted theextent of future base closures by requiring the Defense Department to maintain a basestructure large enough to absorb an increase in the size of the force plusredeployment of forces deployed abroad to the United States. Under a veto threatfrom the White House, that provision was removed from the bill in conference. This year, the issue was again on the agenda. Several Members of Congresscriticized the Defense Department's base closure criteria, mainly for not including thecumulative economic effect of prior base closures as a factor in deciding on newclosures. In the presidential campaign, Senator John Kerry said he would prefer todelay a new base closure round pending decisions on the size of the force and onoverseas deployments. (36) Congressional Action. TheHouse-passed version of the defense authorization bill included provisions thatwould delay the next scheduled round of military base closures from 2005 to 2007. The measure required a series of reports, due between January 1, 2006, and March15, 2006, before a new round may begin. The reports included studies on how thePentagon's Global Posture Review of overseas deployments may affect domesticbasing requirements (see below); how force transformation will affect basingrequirements; how changes in the reserve forces will affect basing requirements; andhow surge requirements will affect basing requirements. Although the committeeagreed to delay base closures, it rejected an amendment in the markup byRepresentative Gene Taylor to eliminate the next round entirely. In floor action, the full House rejected an amendment by Representative MarkKennedy to remove the base closure delay from the bill. The Senate, however,rejected an amendment by Senators Trent Lott, Byron Dorgan, and others, to delayadditional domestic base closures until 2007. So base closures were a major issuein House-Senate authorization conference negotiations. The Administrationthreatened to veto the authorization bill if it includes a measure delaying baseclosures, as in the House-passed bill. The authorization conference agreement doesnot agree to the House-passed delay. Overseas Troop Deployments After the Cold War ended, the United States reduced the number of troopsdeployed overseas, especially in Europe, but it did not relocate remaining troopsaway from old Cold War forward bases. In November 2003, the BushAdministration has announced that it was undertaking a Global Posture Review toreconsider where and how U.S. troops are deployed overseas. (37) Officialssubsequently undertook extensive discussions with allies, in Europe and elsewhere,about changes in the location of U.S. troops. On August 16, 2004, the Presidentannounced that 60,000-70,000 U.S. troops would be withdrawn from locationsoverseas to the United States. (38) U.S. forces in Germany will be reduced the most;a naval command now in England will be relocated to Italy; and the United Stateswill build a number of bare bones facilities in several countries that can be used asneeded to support troop deployments to different parts of the world. To date, the main interest in the issue in Congress has been fromsubcommittees overseeing military construction. A potential large-scaleredeployment of U.S. troops, however, also has profound implications for the overallglobal capabilities of U.S. forces, for regional alliances, and for foreign policy ingeneral. Army Transformation Early in the year, the new Chief of Staff of the Army, General PeterSchoomaker, announced some very far-reaching changes in the organization of theArmy and in Army personnel policies. These measures are designed to make theArmy more flexible to respond to small as well as large operational requirements,and to create a force that is easier to deploy rapidly abroad. One change is to increase the number of deployable combat brigades in theactive duty force from 33 to 43 by 2006 and perhaps to 48 after that. A relatedchange is to turn brigades rather than divisions into the basic, deployable "unit ofaction" in the Army. This means giving brigades the communications, commandstructures, transportation and engineering support elements, and other associatedunits to allow them to operate independently of divisions and, above the divisionlevel, corps. A third change is to revise the personnel system so that entire units arekept together for training and deployment; this is known as unit manning, and it isto replace the Army's longstanding individual replacement system. The Army's reorganization plan raises a number of issues for Congress. Oneis how much it will cost and how the Army will finance the reorganization. Thebiggest costs may be in equipping brigades to operate independently. Reportedly, theArmy has estimated that the plan could cost $20 billion through FY2011. (39) Anotherissue is how the plan will affect Army end-strength requirements. Army officialswant to add to the number of combat units within current end-strength. But this willrequire reassigning personnel from non-combat positions to the new brigades, andofficials have not said how many positions will be affected. (40) A thirdissue is how the plan will affect the relationship between active duty and reservecomponents. Currently, reserves are mobilized to fill out deploying active duty units. The effort to make active duty units more rapidly deployable, therefore, hasimportant implications for the role and structure of reserves. And, finally, the Armyhas failed in past efforts to use unit manning, in part because it affects howindividuals meet rotational requirements for promotion. Congress may be concernedabout how unit manning will affect the overall Army personnel system. DOD's Civilian and Uniformed Personnel Systems Last year, Congress agreed to an Administration request to give the Secretaryof Defense very broad authority to reorganize DOD's civilian personnel system. DOD is now beginning to implement changes. Some of the steps the department hastaken to date have led to disagreements with some employees and some unions -- particularly a measure that would move authority to bargain locally over certain workrules to the national level. So Congress was, in effect, tasked to exercise someoversight over how the new system is being implemented. In addition, last year,Congress considered, but ultimately did not act on amendments to the personnelproposals to ensure certain traditional civil service procedures. Similar measureswere proposed this year. Last year, the Defense Department also requested changes in several lawsgoverning assignment of senior officers, but Congress did not act on the request. This year, the Pentagon has again submitted legislative proposals giving the Secretaryof Defense more authority over senior officers. The proposals include allowing theSecretary to reassign three- and four-star generals and admirals to new positionswithin the same grade without Senate confirmation, allowing senior officers to serveup to age 72, allowing the Secretary greater flexibility to reassign officers betweenthe ranks one- to four-star generals and admirals, and a measure to eliminaterestrictions on the length of service of military service chiefs and of the chairman andvice chairman of the Joint Chiefs of Staff. Congressional Action. The Houseversion of the authorization bill included a measure allowing the President to extendthe terms of military service chiefs by up to two years in normal circumstances or byan additional period if the total term is not over eight years in time or war or nationalemergency. The House version also included measures to allow an increase in themilitary's mandatory retirement age for up to 10 senior officers and a measurerepealing a requirement that no more than 50% of flag officers may be above theone-star level. None of these provision were included in the Senate bill, and nonewere adopted in the conference agreement. Several civilian personnel management issues were debated in floor actionon the bills. On June 22, by a vote of 202-218, the House rejected an amendment tothe defense appropriations bill to prohibit the use of funds in the bill to implementchanges in civilian personnel management practices that Congress approved last year. The House approved a measure, however, setting conditions on the conversion ofwork to private contractors, including a requirement that, for an conversion involving10 or more employees, the conversion involves a full competition, savings exceed thelesser of 10% or $10 million, and that the contractor not receive an advantage due to health insurance costs. The appropriations conference accepted the House measure. On the authorization bill, the House approved a similar measure limitingoutsourcing, and also approved a measure permitting civilian employees to protestprivatization decisions. The Senate approved also approved a somewhat differentmeasure allowing employee protests. The authorization conference agreementincludes limits on privatization similar to those in the appropriations bill -- theagreement does not directly address health insurance costs, but requires a study of theimpact of health and other benefits in privatization competitions. The authorizationconference agreement also includes a provision allowing employee protests ofprivatization decisions under certain conditions. Easing Environmental Provisions Affecting Military Training For the past three years, the Defense Department has proposed a number oflegislative measures, under the rubric of the Readiness and Range PreservationInitiative, to ease the application of several environmental statutes to militarytraining. In the FY2003 defense authorization, Congress agreed to amend theMigratory Bird Treaty Act as it applies to accidental injuries to birds caused bymilitary aircraft. In the FY2004 defense authorization, Congress agreed to changesin the Marine Mammal Protection Act and in the Endangered Species Act. This year, the Administration proposed somewhat revised versions ofproposals it made in prior years to amend the Clean Air Act, the ComprehensiveEnvironmental Response, Compensation, and Liability Act (CERCLA) and theResource Conservation and Recovery Act (RCRA). As DOD explains theseprovisions, (41) they would Extend the allowable time to incorporate new military readinessactivities into a Clean Air Act State Implementation Plan when new units are movedto an installation; and Clarify regulation of munitions under ComprehensiveEnvironmental Response, Compensation, and Liability Act (CERCLA) and ResourceConservation and Recovery Act (RCRA) if and only if munitions are used on anoperational range and those munitions and their associated constituents remain there. Administration officials said that changes were made in these proposals toreflect particularly concerns expressed by state environmental enforcement agencies. But in response to the revised proposals, 39 states' attorneys general signed a jointletter criticizing the new measures. (42) Representative John Dingell, the RankingDemocrat on the House Energy and Commerce Committee, issued a press release andtwo fact sheets criticizing the Administration proposals. (43) Congressional Action. Congressdid not consider the Administration's environment proposals this year. Neither theHouse nor the Senate Armed Services Committees considered the proposals in actionon their versions of the defense authorization. In the House, ReadinessSubcommittee Chairman Joel Hefley said he had no plans to move a package, andHouse Energy and Commerce Committee Chairman Joe Barton said he did not intendto address the issues in time for House action on the defense authorization if atall. (44) Development of New Nuclear Weapons Last year, after extensive debate both in the House and in the Senate,Congress approved a measure in the FY2004 defense authorization bill that repealeda FY1994 provision that had limited research on and development of new, low-yieldnuclear weapons. In its place, Congress added a provision to prohibit engineeringdevelopment of new low-yield weapons without specific authorization by Congress( P.L. 108-136 , Section 3116). The FY2004 authorization also approved requestedfunding for R&D on new weapons, but the final appropriations bill imposed somelimitations. In the FY2004 energy and water development appropriations bill( H.R. 2754 , P.L. 108-137 ), Congress provided $6 million, as requested,for the Department of Energy's Advanced Concepts Initiative (ACI) to study newweapons, but it prohibited obligation of $4 million of that amount until DOE submitsa report on its plans. The bill also trimmed funding to study a Robust Nuclear EarthPenetrator (RNEP) warhead from the $15 million requested to $7.5 million. New nuclear weapons R&D was an issue in Congress again this year. Controversy developed, in particular, over proposed funding for the RNEP. TheAdministration requested FY2005 funding for the RNEP of $27.6 million, and itprojected total funding of $484.7 million over the five years from FY2005-FY2009. These amounts go far beyond the total of about $45 million that the Department ofEnergy said last year would be needed between FY2003 and FY2005 for feasibilitystudies. (For full discussions of these issues, see CRS Report RL32130 , NuclearWeapons Initiatives: Low-Yield R&D, Advanced Concepts, Earth Penetrators, TestReadiness , by Jonathan Medalia; CRS Report RL32347 , Robust Nuclear EarthPenetrator Budget Request and Plan, FY2005-FY2009 , by Jonathan Medalia; and CRS Report RL32347 , Robust Nuclear Earth Penetrator Budget Request and Plan,FY2005-FY2009 , by Jonathan Medalia.) The Administration also requested $9million for the ACI. Congressional Action. On April28, Senator Dianne Feinstein made a major speech on the Senate floor criticizingAdministration plans for development of new nuclear weapons, including the robustnuclear earth penetrator. (45) She said that she intended to propose anamendment to the defense authorization bill to apply the same restrictions todevelopment of the RNEP as to advanced systems -- i.e., she would require specificcongressional authorization for RNEP engineering and development. In House action on the defense authorization bill, the House rejected anamendment by Representative Ellen Tauscher to eliminate the $36.6 millionrequested for RNEP development and for the Advanced Concepts Initiative (ACI)and to transfer the funds to non-nuclear programs to defeat deeply buried andhardened targets. On June 15, the Senate rejected an amendment by SenatorFeinstein and Senator Ted Kennedy to eliminate funds for RNEP and the ACI. Theauthorization conference agreement does not limit RNEP or ACI funding. Notwithstanding the House and Senate votes on the defense authorization bill,however, the committee-reported and House-passed version of the Energy and WaterAppropriations bill ( H.R. 4614 ) eliminated funds both for the RNEP andfor the ACI. Moreover, in report language, the committee was very critical of theAdministration's plans for developing new nuclear weapons (see H.Rept. 108-554 ,pp. 114-115). The Senate never acted on its version of the energy and water bill. A conference agreement on the energy and water bill was included in theconsolidated appropriations bill ( H.R. 4818 ) that Congress approved inNovember. The agreement followed the House and eliminates funds for the RobustNuclear Earth Penetrator and the Advanced Concepts Initiative. Boeing KC-767 Tanker Aircraft Acquisition Last year, in the FY2004 defense authorization ( P.L. 108-136 ), Congressrejected an Air Force proposal to lease 100 Boeing 767 aircraft modified as refuelingtankers and instead approved a plan to lease 20 aircraft and purchase 80 more. Earlyin 2004, however, a report by the Defense Department's Inspector General and a laterstudy by the Defense Science Board both raised questions about the status of theprogram. The Defense Department then put a decision on whether to proceed withthe program on hold, pending the results of a formal Air Force Analysis ofAlternatives (AOA), which is not expected until the end of this year. Subsequently,the program was mired in scandal when a former senior Air Force acquisition officialoverseeing tanker negotiations pleaded guilty to illegally seeking employment withBoeing. Congress also investigated the proposal and Senator John McCain put a holdon approval of some Pentagon nominations because DOD has not provided somerequested documents. (46) Air Force Secretary Douglas Roche later warnedthat reopening the proposals might require reviewing proposals by other suppliers,including the European Aeronautic Defence and Space (EADS) company. Congressional Action. The HouseArmed Services Committee-reported version of the FY2005 defense authorizationincluded a provision that authorizes the Air Force to proceed with multi-yearprocurement of 80 KC-767 aircraft and another provision that required the Air Forceto enter into a contract with Boeing to acquire the aircraft. The multi-yearauthorization provision replaced (and repealed) an earlier authorization for multi-yearprocurement in the FY2004 defense authorization, but did not repeal an authorizationin that bill for the Air Force to lease 20 aircraft, which therefore would remain ineffect. The committee provision also required that a new contract for KC-767acquisition be signed after June 1, 2004, and be reviewed by an independent panelestablished to assess the terms of the contract and determine whether the Air Forcereceived full and fair value. On the floor, the House approved an amendment byRepresentative Norman Dicks (passed as part of a Hunter en bloc amendment) torequire that the contract be completed no later than March 1, 2005. Senator McCain, among others, continued to oppose the KC-767 acquisitionplan, at least until the mandated studies were completed. Last year, the SenateArmed Services Committee, on which Senator McCain serves, was the only one ofthe four congressional defense committees to turn down a Defense Departmentreprogramming request that would have allowed the Air Force to go ahead with itsinitial proposal to lease 100 aircraft. Instead, the committee proposed the modifiedlease 20-buy 80 plan that the House then agreed to in conference negotiations on theFY2004 authorization. On the Senate floor, Senator McCain proposed a number of767-related amendment to the defense authorization bill, all of which would setconditions before funds may be obligated for the program. On June 22, the Senateadopted a McCain amendment to prohibit acquisition of Air Force aerial refuelingaircraft until 60 days after currently required studies are completed and requiring theSecretary of Defense to certify that acquisition complies with all applicable laws,Office of Management circulars, and regulations. For their part, the appropriators left resolution of the KC-767 issue up to theauthorizers, though both the House and the Senate Appropriations Committeessupported the program in the past. The House Appropriations Committee provided$100 million for KC-767 acquisition in a transfer fund that could be used forprocurement, R&D, or leasing of the aircraft. The Senate Appropriations Committeeprovided $110 million in a fund available for tanker aircraft replacement, which,presumably, could be used for KC-767s or for some other program. Theappropriations conference report includes $100 million for a tanker replacementprogram. The authorization conference agreement repeals the lease provision in theFY2004 bill and approves multiyear procurement of a tanker replacement. So the AirForce may still decide to acquire KC-767 refueling aircraft at some time in the nextfew months, or it may decide to acquire some other system. Buy American Act, Trade Offsets, and Related Issues Last year, the House-passed authorization bill included provisions tostrengthen requirements that the Defense Department buy defense equipment andparts from American companies. The Senate opposed these measures, and the issueheld up final approval of the defense authorization bill for some time. Advocates ofmore stringent buy American provisions were not fully satisfied with the outcome,so the issue was expected to come up in some form again this year. A related issueis whether the Navy should be permitted to continue leasing some support ships fromforeign firms, or should, instead, be required to buy new ships from Americanshipyards. See above for discussions of congressional action on the issue. Congressional Action. The HouseArmed Services Committee did not directly seek to strengthen "Buy American"provisions it its version of the FY2005 defense authorization, but it addressed theissue indirectly in a provision regarding offsets for foreign military sales. U.S. salesof military equipment to foreign countries often include agreements to offset part orall of the value of the sale. Offsets may include allowing foreign suppliers to provideparts for the system, allowing foreign companies to perform assembly operations orother parts of production, or requiring U.S. purchases of equipment from foreignproviders. The House version of the authorization bill includes a measure that wouldprohibit the United States from purchasing foreign-made defense items unless theseller agrees to provide trade "offsets" equal, as a share of value, to the offsets theselling nation applies to purchases from the United States. The provision may bewaived if the Secretary of Defense certifies that a purchase is necessary to meet U.S.national security objections. In the Senate, the authorization bill, as reported by the Armed ServicesCommittee, included provisions allowing the Defense Department to waive domesticcontent requirements for purchases from foreign countries that have a reciprocal tradeagreement with the United States. On June 22, the Senate considered an amendmentby Senators Mark Dayton and Russ Feingold to eliminate those provisions. TheSenate rejected that proposal, however, when it adopted, by a vote of 54-46, asubstitute amendment proposed by Senator McCain to revise the language of theoriginal provision. The McCain amendment, included in the Senate-passed versionof the bill, allows the Defense Department to waive domestic content requirements for trade with any nation that has signed a "Declaration of Principles" agreement withthe United States regarding reciprocity in defense trade. On June 23, the Senate alsoagreed to an amendment by Senator Christopher Dodd to penalize contractors thatagree to offsets of more than 100% of the value of a contract for sales of defensegoods to foreign nations. The authorization conference agreement requires the Secretary of Defense todevelop a defense acquisition trade policy designed to eliminate any adverse impactof offset agreements in defense trade. Conferees dropped the Senate provisionallowing waivers of buy American laws. Legislation Concurrent Budget Resolution S.Con.Res. 95 (Nickles). An original concurrent resolutionsetting forth the congressional budget for the United States government for FY2005and including the appropriate budgetary levels for fiscal years 2006 through 2009. Reported by the Senate Budget Committee without written report, March 5, 2004. Measure laid before the Senate, March 8, 2004. Considered by the Senate, March10-12, 2004. Agreed to in the Senate with amendments (51-45), March 12, 2004. House struck all after the enacting clause and inserted the provisions of H.Con.Res. 393 , March 29, 2004. House requested a conference andappointed conferees, March 30, 2004. Senate disagreed to House amendment andappointed conferees, March 31, 2004. Conference report filed ( H.Rept. 108-498 ),May 19, 2004. House approved conference report (216-213), May 19, 2004. H.Con.Res. 393 (Nussle). A concurrent resolution establishingthe congressional budget for the United States government for FY2005 and settingforth appropriate budgetary levels for fiscal years 2004 and 2006 through 2009. Reported by the House Budget Committee ( H.Rept. 108-441 ), March 19, 2004. Considered by the House, March 24-25, 2004. Agreed to in the House (215-212),March 25, 2004. House inserted the provisions of H.Con.Res. 393 into S.Con.Res. 95 and agreed to S.Con.Res. 95, March 29, 2004. House requested a conference, March 30, 2004. Defense Authorization H.R. 4200 (Hunter). To authorize appropriations for FY2005for military activities of the Department of Defense, to prescribe military personnelstrengths for FY2005, and for other purposes. Marked up by the House ArmedServices Committee, May 12, 2004. Ordered to be reported by the House ArmedServices Committee ( H.Rept. 108-491 ), May 13, 2004. Considered by the House,May 19-20, 2004. Motion to recommit failed with instructions (202-224), May 20,2004. Agreed to by the House (391-34), May 20, 2004. Senate took up H.R.4200, struck all after the enacting clause and inserted the provisions of S. 2400 , and approved H.R. 4200, as amended, by unanimousconsent, June 23, 2004. Senate insisted on its amendments, requested a conference,and appointed conferees, June 24, 2004. Conference report filed ( H.Rept. 108-767 ),October 8, 2004. Conference report agreed to in the House (359-14) and in theSenate (unanimous consent), October 9, 2004. Signed into law by the President ( P.L.108-375 ), October 28, 2004. S. 2400 (Warner). An original bill to authorize appropriationsfor FY2005 for military activities of the Department of Defense, for militaryconstruction, and for defense activities of the Department of Energy, to prescribepersonnel strengths for such fiscal year for the Armed Services, and for otherpurposes. Marked up by the Senate Armed Services Committee, May 6-7, 2004. Reported by the Senate Armed Services Committee ( S.Rept. 108-260 ), May 11,2004. Considered in the Senate, May 17-21, June 2-4, 7, and 14-18, 21-23, 2004. Agreed to in the Senate, with amendments (97-0), June 23, 2004. Senateincorporated S. 2400 into H.R. 4200 and Senate adopted H.R.4200 as amendment by unanimous consent, June 23, 2004. Defense Appropriations H.R. 4613 (Lewis). Making appropriations for the Departmentof Defense for the fiscal year ending September 30, 2005, and for other purposes. Reported by the House Appropriations Committee, June 18, 2004 ( H.Rept. 108-553 ). Reported by the Rules Committee with amendment, H.Res. 683 on June21, 2004. Considered in the House, June 22, and passed by a vote of 403 to 17 onJune 22, 2004. Taken up and considered by the Senate; Senate struck all after theenacting clause and inserted the provisions of S. 2559 , as reported bythe Armed Services Committee; Senate considered amendments and adopted H.R.4613, as amended (98-0), June 24, 2004. Senate insisted on itsamendments, requested a conference, and appointed conferees, June 24, 2004. Housedisagreed to the Senate amendments, agreed to a conference, agreed to instructconferees by a voice vote, and appointed conferees, July 13, 2004. Conference reportfiled ( H.Rept. 108-622 ), July 20, 2004. Conference report agreed to in the Senate(96-0) and in the House (410-12), July 22, 2004. Signed into law by the President( P.L. 108-287 ), August 5, 2004. S. 2559 (Stevens). An original bill making appropriations forthe Department of Defense for the fiscal year ending September 30, 2005, and forother purposes. Ordered to be reported by the Senate Appropriations Committee,without written report, June 22, 2004. Senate incorporated S. 2559 into H.R. 4613 as an amendment and took up H.R. 4613, asamended, June 24, 2004. Report filed by the Senate Appropriations Committee( S.Rept. 108-284 ), June 24, 2004. For Additional Reading CRS Reports CRS Report RL32381(pdf) . Adequacy of the Army's FY2004 Funding for Operations inIraq . CRS Report RL32056 . The Air Force KC-767 Tanker Lease Proposal: Key IssuesFor Congress . CRS Report RS20859 . Air Force Transformation. CRS Report RS20787 . Army Transformation and Modernization: Overview andIssues for Congress. CRS Report RL31954 . Civil Service Reform: Analysis of the National DefenseAuthorization Act for FY2004. CRS Report RL31924 . Civil Service Reform: H.R. 1836, HomelandSecurity Act, and Current Law. CRS Report RL31187(pdf) . Combating Terrorism: 2001 Congressional Debate onEmergency Supplemental Allocations. CRS Report RS21327. Concurrent Receipt of Military Retirement and VA DisabilityBenefits: Budgetary Issues. CRS Report RS21644. Defense Funding by Mission For Iraq, Afghanistan, andHomeland Security: Issues and Implications. CRS Report RL30392. Defense Outsourcing: The OMB Circular A-76 Policy. CRS Issue Brief IB10062. Defense Research: DOD's Research, Development, Testand Evaluation Program. CRS Report RL32238 . Defense Transformation: Background and Oversight Issuesfor Congress. CRS Report RS21195 . Evolutionary Acquisition and Spiral Development in DODPrograms: Policy Issues for Congress. CRS Report RL32141 . Funding for Military and Peacekeeping Operations: RecentHistory and Precedents. CRS Report RL32090 . FY2004 Supplemental Appropriations for Iraq, Afghanistan,and the Global War on Terrorism: Military Operations & ReconstructionAssistance. CRS Report RL31946 . Iraq War: Defense Program Implications for Congress. CRS Report RL32216 . Military Base Closures: Implementing the 2005 Round. CRS Report RS21822 . Military Base Closures: DOD's 2005 Internal SelectionProcess. CRS Report RL30051 . Military Base Closures: Agreement on a 2005 Round. CRS Report RL31663(pdf) . Military Benefits for Former Spouses: Legislation andPolicy Issues. CRS Report RS21754 . Military Forces: What is the Appropriate Size for the UnitedStates? CRS Issue Brief IB85159. Military Retirement: Major Legislative Issues. CRS Report RS21148 . Military Space Programs: Issues Concerning DOD's SBIRSand STSS Programs. CRS Report RL31664 . The Military Survivor Benefit Plan: A Description of ItsProvisions. CRS Report RL31111 . Missile Defense: The Current Debate. CRS Report RS20851 . Naval Transformation: Background and Issues for Congress. CRS Report RL32130 . Nuclear Weapon Initiatives: Low-Yield R&D, AdvancedConcepts, Earth Penetrators, Test Readiness. CRS Report RL32347 . Robust Nuclear Earth Penetrator Budget Request and Plan,FY2005-FY2009. CRS Report RL31406 . Supplemental Appropriations for FY2002: CombatingTerrorism and Other Issues. CRS Report RL31829 . Supplemental Appropriations FY2003: Iraq Conflict,Afghanistan, Global War on Terrorism, and Homeland Security. CRS Issue Brief IB92115. Tactical Aircraft Modernization: Issues for Congress. Appendix A. Funding Tables Table A-1. Congressional Action on FY2005 DefenseAppropriations Bill by Title (budget authority in millions of dollars) Sources: H.Rept. 108-553 ; S.Rept. 108-284 , H.Rept. 108-622 , H.Rept. 108-792 . Table A-2. National Defense Budget FunctionRequest by Appropriations Bill, FY2002-FY2005 (current year dollars in millions) Source: Department of Defense, National Defense Budget Estimates for FY2005 ,March 2004. Table A-3. Congressional Action on Missile Defense Programs (amounts in millions ofdollars) Sources: Department of Defense, Procurement Programs (P-1), Fiscal Year 2005 , February 2004; Department of Defense, RDT&E Programs (R-1),Fiscal Year 2005 , February 2004; H.Rept. 108-491 ; S.Rept. 108-260 ; H.Rept. 108-553 ; S.Rept. 108-284 ; H.Rept. 108-767 . Note: Excludes $22.3 million requested for military construction. Table A-4. House and Senate Action on Major Weapons Acquisition Programs: Authorization (amounts in millions of dollars) Sources: H.Rept. 108-491 ; S.Rept. 108-260 . Table A-5. House and Senate Action on Major Weapons Acquisition Programs: Appropriations (amounts in millions of dollars) Source: H.Rept. 108-553 , S.Rept. 108-284 , H.Rept. 108-622 . Appendix B. Overview of the Administration Request On February 2, 2004, the Administration released its FY2005 federal budgetrequest. The request includes $423.1 billion in new budget authority for nationaldefense, of which $402.6 billion is for military activities of the Department ofDefense, $17.2 billion for atomic energy defense activities of the Department ofEnergy, and $3.2 billion for defense-related activities of other agencies. The requestdoes not include funding for ongoing military operations in Iraq, Afghanistan, andelsewhere, for which Administration officials have said they expect to submit asupplemental appropriations request early in calendar year 2005. Table B-1 shows the Administration projection of funding for the nationaldefense budget function from FY2005 through FY2009, including requested fundingfor Department of Defense military activities and for defense-related activities of theDepartment of Energy and other agencies. It also shows the Administration'sestimate of FY2004 funding. The FY2004 amounts are not directly comparable to figures for later years,because they include supplemental appropriations for operations in Iraq, Afghanistan,and elsewhere, while the Administration projections for FY2005 and beyond do not. Table B-2 shows Department of Defense funding for FY2004 with and withoutsupplemental appropriations compared to the FY2005 request. With one exception, the Administration's FY2005 defense request does notmark a dramatic departure from plans officials have presented to Congress over thepast couple of years. The exception is the Army's decision to terminate the Comanche helicopterprogram. Otherwise, the Administration's request mainly reflects ongoing trends inthe defense budget, including continued growth in operation and maintenance and in militarypersonnel costs; and continued growth in a few very large weapons programs,including the Air Force F-22 fighter, the multi-service F-35 Joint Strike Fighter(JSF), the Navy's DD(X) destroyer and Littoral Combat Ship (LCS) programs, theArmy's Future Combat System, and, largest of all, missiledefense. Table B-1. National Defense Budget Function,FY2004-FY2009, Administration Projection (budget authority in billions of dollars) Source: Office of Management and Budget, Historical Tables: Budget of the UnitedStates Government for FY2005 , Feb. 2004; Department of Defense, NationalDefense Budget Estimates for FY2005 , Mar. 2004. Table B-2. Department of Defense Budget,FY2004-FY2005, With and Without FY2004 SupplementalFunding (budget authority in billions of dollars) Sources: Department of Defense, Financial Summary Tables, FY2005 Budget ,February 2004. *Note: The FY2004 total shown for Operation and Maintenance (O&M) includes anoffsetting rescission of $3.5 billion. Without the rescission, the total for O&M, notincluding supplemental funding, is $131.7 billion, which is the total of programmaticfunding available to DOD, and which is most comparable to the $141.2 billionrequested for O&M in FY2005. The FY2004 figures shown include total offsettingrescissions of $6.1 billion. Comanche Termination On February 23, two weeks after the budget was released, the Armyannounced a decision to terminate development of the Comanche helicopter and toshift budget savings into other Army aviation programs. In all, the Army spent about$8 billion on the Comanche prior to FY2005 and estimated that its plan to acquire650 aircraft through FY2014 would cost an additional $29 billion. Halting theprogram will save about $1.2 billion in FY2005, $8.9 billion from FY2005-FY2009,and, according to Army officials, $14.6 billion from FY2005-FY2011, minustermination costs estimated at $450-$680 million. Army officials said they wouldreallocate all of these funds to other Army helicopter, missile, and unmanned aerialvehicle (UAV) programs. On March 3, 2004, the White House submitted a budgetamendment that shifts FY2005 Comanche funds to other Army programs. Continued Growth in Operation and Maintenance and in MilitaryPersonnel Costs As Table B-2 , above, shows, the Defense Department's FY2005 budget isabout $26 billion higher than the baseline FY2004 budget (i.e., excluding FY2004supplemental funding). Of that increase, $6.4 billion is for military personnel and$13.0 billion for operation and maintenance (O&M). The O&M increase is a bitoverstated because the FY2004 base reflects a $3.5 billion rescission in FY2003emergency supplemental funds. But even after adjusting for the FY2004 rescission,over 70% of the requested DOD increase between FY2004 and FY2005 is forpersonnel and O&M. Operation and Maintenance CostsTrends. For O&M, this is not a new story. As Figure B-1 shows,after adjusting for inflation and for changes in the size of the force, total operationand maintenance funding has grown at a very steady rate of just over 2.5% per yearabove inflation ever since the end of the Korean War. Many things explain the trend: (1) the steadily growing cost of operating and maintaining new generations of morecapable and sophisticated weapons; (2) efforts to improve the extent and quality ofmilitary training; (3) efforts to ensure that the quality of life in the military keeps upwith the quality of life in the civilian sector as the military has shifted to an allvolunteer, older, more commonly married, and more skilled force (this is reflected,among other things in growing health care costs and in expenditures to operatefacilities); and (4) modest but steady real growth in the compensation of DODcivilian personnel, most of whom are paid with O&M funds. The cost of maintainingaging equipment in recent years does not appear to be major factor. (47) Over the years, the Defense Department has perennially tried to slow thegrowth of O&M costs. Efficiency measures -- including base closures, outsourcing,business process reforms, and attempts in the acquisition process to improveweapons reliability -- may have had some effect, but not enough to slow thelong-term trend perceptibly. Experience during the Clinton Administration may bean object lesson. Pentagon officials often projected that O&M costs would level off. When they did not, more money had to be found to make up O&M shortfalls,sometimes at the expense of procurement accounts and at other times from increasesin the defense total. For its part, the Bush Administration has built into its budgetsan expectation that O&M costs will continue to rise. Figure B-1. Operation and Maintenance Budget Authority Per Active Duty Troop, FY1955-FY2009 Recent Rapid Growth in Military PersonnelCosts. Military personnel costs have also grown over time,particularly since the inception of the all volunteer force in 1973. Until FY2000, therate of growth was relatively modest. Beginning with the FY2000 defense bills,however, Congress, sometimes at the Pentagon's request and sometimes not, hasapproved a series of increases in military pay and benefits that have driven uppersonnel costs dramatically. These increases include Annual military pay raises pegged at 0.5% above the"employment cost index," a measure of pay rates in the civiliansector; "Pay table reform" which gave larger, often substantial, payraises to targeted mid-level personnel in an effort to ensure retention of skilledpeople; Repeal of a 1986 measure, known as "REDUX," that hadreduced retirement benefits for personnel entering the force after that time; A plan to reduce out-of-pocket housing costs for personnelliving off base by increasing housing allowances enough to eliminate differenceswith on-base housing; and Most expensive of all, in the FY2001 defense authorization, ameasure known as "TRICARE for Life" to provide full health care benefits toover-65 military retirees. Figure B-2 shows the trend in total military personnel funding, adjusting forinflation and for changes in the size of the force, indexed to 1973, the first year of theall-volunteer force. (48) By this measure, uniformed military personnelare 30% more expensive in FY2005 than in FY1999. While the rate of growth maylevel off over the next few years, annual pay raises and other changes in benefits startfrom a much higher base than just a few years ago, and very high personnel costs area fact of life in long-term military budget planning. Figure B-2. Military Personnel Budget Authority Per Active Duty Troop, FY1973-FY2009 Growth of Large Acquisition Programs Compared to the FY2000 defense budget -- the last full budget approvedwithout subsequent supplemental funding during the Clinton Administration -- theBush Administration's FY2005 request reflects a substantial increase in funding formajor weapons acquisition programs. Over the five year period, without adjustingfor inflation, weapons procurement is about 36% higher, and, strikingly, research,development, test, and evaluation (RDT&E) is 78% higher (see Table B-3 ). Although these increases are going to finance acquisition of a broad range ofweapons programs, a very large part of the growth is for just a few programs, manystill in the R&D stage. Table B-3 shows trends in funding for seven selected majorweapons acquisition programs from FY2000 through FY2005 (note that figures inthis table are not adjusted for inflation). These seven programs alone account for34% of the increase in the RDT&E title between FY2000 and FY2005 and 35% ofthe increase in weapons procurement. These and a few other large programs willcontinue to dominate the acquisition part of the defense budget for the next severalyears. Table B-3. Increases in Funding for SelectedAcquisition Programs, FY2000-FY2005 (budget authority in millions of current yeardollars) Sources: Department of Defense, Program Acquisition Costs by Major WeaponSystem , annual editions for FY2002-FY2005; Department of Defense, RDT&EProgram Descriptive Summaries , various years and service volumes; Department ofDefense, Procurement Programs (P-1) , various years. From a budgeting perspective, this is also nothing new. The growing cost ofmajor weapons programs also drove budgets higher in the past. Much of theincreased spending during the defense buildup of the first four years of the ReaganAdministration went to pay for procurement of weapons that began development inthe early 1970s as the war in Vietnam was winding down. Similarly, much of theincrease in the early years of the George W. Bush Administration is going to carryon weapons programs which were started some years ago. Almost all of theseprograms have experienced significant cost growth and schedule delays, which raisessome questions about the long-term affordability of current weapons plans (see belowfor a more extensive discussion). Appendix C: Defense Budget Trends Even without supplemental funding for Iraq and Afghanistan, the FY2005Bush Administration defense request represents a substantial increase from theamounts provided in the final years of the Clinton Administration. Table C-1 compares the FY2000 defense plan, which was the last full budget year of theprevious Administration with the FY2005 request. Adjusted for inflation, theoverall FY2005 request is about 23% higher, with the largest increases inprocurement, +28%, and, most strikingly, in R&D, +66%. This represents anaverage annual growth rate of 3.7% above inflation over the five-year period. Table C-1. Change in National Defense BudgetFunction by Appropriations Title, FY2000-FY2005 (budget authority in billions of constant FY2005dollars) Sources: CRS calculations based on amounts from the Office of Management andBudget and FY2005 base year deflators from the Department of Defense. Notes a. FY2005 amounts do not include anticipated supplemental appropriations for Iraqand Afghanistan. b. The FY2000 Military Personnel total is inflated to FY2005 prices usingDepartment of Defense "deflators," which count military pay raises asinflation. A calculation using different deflators, such as the Consumer PriceIndex, would show a different amount: see Figure 2 above. Though substantial, these increases are not as large those in the first five yearsof the Reagan Administration. Between FY1980 and FY1985, the defense budgetgrew by 48%, an average annual increase of 8.1%. Moreover, even when funding foroperations in Iraq and Afghanistan is included, military spending remains relativelylow as a percentage of GDP. The FY2004 budget, including costs of Iraq andAfghanistan is about 4% of GDP, substantially higher than in FY2000, but wellbelow what it was in the mid-1980s, when the Cold War was still going on (see Figure C-1). Figure C-1. National Defense Outlays % of GDP, FY1947-FY2009 Advocates of higher military spending sometimes point to the long-termdecline in defense as a share of the economy to argue that the nation can easily affordmore. One counter-argument, or at least part of a counter-argument, is that the trendin defense spending is part of a broader long-term trend in the federal budget, inwhich both defense and non-defense discretionary spending have declined whilemandatory programs have grown. As Figure C-2 shows, total federal spending hasbeen remarkably stable at about 20% of GDP over the past 40 years. So to increasedefense substantially as a share of the economy would require either an increase intotal federal spending as a share of GDP or offsetting reductions elsewhere. Figure C-2. Federal Outlays % of GDP, FY1962-FY2009 After FY2005, the Administration defense plan, again not includingwar-related supplementals, calls for fairly modest increases in the defense budgetaveraging a bit over 2% per year above inflation. Table C-2 shows the trend. Table C-2. Administration Projections for theNational Defense Budget Function, FY2005-FY2009 (budget authority in billions of current and constantFY2005 dollars) Source: CRS calculations using deflators from Department of Defense Comptroller.

Early on the morning on October 7, 2004, a conference agreement on the FY2005 defenseauthorization bill ( H.R. 4200 ) was announced. The House approved the conferenceagreement by a vote of 359-14 on October 8, and the Senate approved it by unanimous consent onOctober 9. The President signed the bill into law ( P.L. 108-375 ) on October 23. On the key issues,conferees rejected a House provision to delay military base closures; authorized purchases, but notleasing, of Boeing KC-767 or other refueling aircraft; increased statutory caps on Army and MarineCorps active duty end-strength in FY2005 by 23,000; rejected a House provision that would limitpurchases of defense goods from nations that require offsets for purchases of U.S. weapons; andincreased benefits for 62-and-older survivors of military retirees. Earlier, on July 22, 2004, both the House (by a vote of 410-12) and the Senate (by a vote of96-0) approved a conference agreement on the FY2005 defense appropriations bill( H.R. 4613 ). The President signed the bill into law ( P.L. 108-287 ) on August 5, 2004. The conference agreement provides $391.2 billion for regular Department of Defense programs,about $1.7 billion below the Administration request, $25 billion in emergency funds for operationsin Iraq and Afghanistan, $685 million for State Department operations in Iraq, $95 million forassistance to refugees in Sudan and Chad, $500 million for fire fighting, $50 million for security atthe party conventions, and $26 million for a federal judiciary shortfall. Later, the energy and waterappropriations bill, included in the consolidated appropriations bill ( H.R. 4818 ),rescinded $300 million in regular FY2005 defense appropriations. The appropriations conference agreement resolves what was, perhaps, the major defense issuein Congress this year: whether to provide additional funds for ongoing operations in Iraq andAfghanistan. On May 12, after considerable prodding from Congress, the Administration requested$25 billion to cover costs for the next few months. The key issue in Congress then became howmuch flexibility to grant the Defense Department in allocating the funds. None of the congressionaldefense committees agreed to the Administration request for full funding flexibility. The conferenceagreement on the appropriations bill provides $3.8 billion of the funds in a flexible transfer account,of which $1.8 billion is for classified programs, leaving $2 billion available for unforseen expenses. The remainder is provided in regular defense appropriations accounts subject to standard proceduresrequiring advance congressional approval if funds are shifted between accounts. The appropriationsconference report also resolves a number of major weapons issues. It makes substantial cuts in a fewhigh-profile weapons programs, including the Space-Based Radar and the TransformationalCommunications Satellite. It approves funding to begin construction of the Navy DD(X) destroyerand Littoral Combat Ship. One other major defense policy issue was resolved in action on the energy and waterappropriations bill. In floor votes on the defense authorization bill, both the House and the Senaterejected amendments to eliminate funds for the Robust Nuclear Earth Penetrator nuclear warheadand new low-yield nuclear weapons development. The conference agreement on the energy andwater appropriations bill, however, following the House, eliminates funds for both programs. Key Policy Staff

Most Recent Developments On February 7, 2000, President Clinton submitted the FY2001 budget request for appropriations for theDepartments ofCommerce, Justice, and State, the Judiciary and related agencies. The House Appropriations Committee approveditsversion of the bill on June 14, 2000 ( H.R. 4690 , H.Rept. 106-680 ). The bill was passed by the House on June26, 2000. The Senate Appropriations Committee reported its version of the bill on July 18, 2000 ( S.Rept 106-404 ). On October 27, 2000, Congress approved total funding of $40.0 billion, which was about $400 million above both thePresident's request and the total enacted for FY2000. The President signed the measure into law on December 21,2000( H.R. 5548 as contained in the conference report on H.R. 4942 ; P.L. 106-553 ). Introduction and Overview This report tracks legislative action by the second session of the 106th Congress on FY2001 appropriations fortheDepartments of Commerce, Justice, and State, the Judiciary, and other related agencies (often referred to as CJSappropriations). P.L. 106-113 ( H.R. 3421 , Division B of H.R. 3194 , Section 1000 (a))appropriated $39.6 billion for these agencies for FY2000. The President Clinton's FY2001 budget requested about $39.6 billion for these agencies, about the same level as that appropriated for FY2000. (1) On June 19, 2000, the HouseAppropriations Committee approved its version of the CJS appropriations bill ( H.R. 4690 , H.Rept.106-680 ).It recommended funding totaling $37.4 billion-$2.2 billion below the President's request and about $2.2 billionbelow theFY2000 appropriation. The House approved the bill on June 26 by a vote of 214-195, with 1 voting present. (2) It approvedthe same overall funding total recommended by the Appropriations Committee. The House, however, did makea fewrecommended funding changes (that differed from the Committee's recommendations) for certain individualagenciescovered by the bill. These are reflected in this report. On July 18, 2000, the Senate Appropriations Committee approved its version of the bill. It approved total funding of $36.7billion which is about $700 million below the House version and about $2.9 billion below both the President'srequest andthe actual FY2000 appropriation ( S.Rept. 106-404 ). ( The Senate, however, did not vote on its version of the bill. Instead,it approved the version approved by the Conference Committee which was agreed to on October 26, 2000.) On October 27, 2000, Congress approved total funding of $40.0 billion, which was about $400 million above bothPresident's request and the total enacted for FY2000. The finally enacted legislation ( H.R. 4690 ) wasincludedin the Conference Report approved by Congress in H.R. 5548 as contained in the conference report on H.R. 4942 ( H.Rept. 106-1005 : Making Appropriations for the Government of the District of ColumbiaandOther Activities Changeable in Whole or in Part Against Revenues of Said District for the Fiscal Year EndingSeptember30, 2001, and for Other Purposes ). (3) Subsequently, the District of Columbia appropriations portion of the measure wasseparated from the bill and approved by Congress ( H.R. 5663 ) on November 15. The President signed thismeasure into law on November 22, 2000. On December 21, President Clinton signed the remaining portion of H.R. 4942 contained in H.R. 5548 , the FY2001 CJS appropriations bill, into law on December 21, 2000 ( P.L. 106-553 ). (4) Continuing funding resolutions. With the expiration of Fiscal Year 2000 appropriations on September 30, 2000,Congress enacted a continuing funding resolution ( H.J.Res. 109 ) which extended FY2000 appropriationsthrough midnight October 6, 2000. This was followed by a second resolution ( H.J.Res. 110 ) which extendedFY2000 funding through October 14, 2000. A third resolution was approved by Congress ( H.J.Res. 111 ),which extended funding through October 20, 2000. A fourth resolution ( H.J.Res. 114 ) was approved toextend funding through Wednesday, Oct. 25, 2000. After October 25, Congress enacted eight one day continuingresolutions ( H.J.Res. 116 , H.J.Res. 117 , H.J.Res. 118 , H.J.Res. 119 ,120, H.J.Res. 121 , H.J.Res. 122 , and H.J.Res. 123 ). On November 3, Congressapproved H.J.Res. 84 which extended FY2000 funding through November 14, the date that both Houses ofCongress were scheduled to return from the election recess. This was followed by approval on November 14 ofa longerterm extension of funding ( H.J.Res. 125 ) through December 5, 2000. After returning on December 4,Congress approved a number of short term extensions to provide funding until the President signed the CJS billinto lawon December 21, 2000. Government-wide rescissions. It is important to note that the FY2001Consolidated Appropriations Act ( H.R. 4577 ; P.L. 106-554 ) contains a provision which mandates a 0.22percent government-wide rescission of discretionary budget authority for FY2001 for all government agencies(except forcertain defense activities), including those covered by the FY2001 CJS appropriations bill. The cuts are to beapplied on apro rata basis to each applicable program, project, and activity. The Director of the Office of Management andBudgetmust include a report on these reduction in the President's budget submission for FY2002. (5) Government Performance Results Act (GPRA) Requirements As part of the budget process, the Government Performance and Results Act (GPRA) enacted by Congress in 1993( P.L.103-62 ; 107 Stat 285) requires that agencies develop strategic plans that contain goals, objectives, andperformancemeasures for all major programs. The GPRA requirements apply to nearly all executive branch agencies, includingindependent regulatory commissions, but not the judicial branch. Brief descriptions of the latest versions of thestrategicplans of the major agencies covered by CJS appropriations are contained in the discussions of theFY2001 budget requestsof individual agencies included in this report. Brief Survey of Major Issues The more contentious issues that were considered in the House and Senate debate over CJS appropriations for FY2001 included: Changing the focus and levels of appropriations for DOJ's Office of Juvenile Justice and Delinquency Prevention (OJJDP). ( Neither the 104th nor the 105th Congress reauthorized theJuvenile Justice and DelinquencyPrevention Act of 1974, as amended.) Funding of DOJ's legal action against the tobacco industry. White House threatened veto of CJS appropriations act, unless the bill included immigration provisions related to 1) NACARA parity, 2) advancing the registry date, 3) late amnesty, and 4) reinstating sec.245(i). (6) Whether to lift a statutory ban on judges receiving honoraria. Other issues or concerns that received attention included the following. Department of Justice: Extending the 1994 Crime Act funding authorizations beyond FY2000 under the Violent Crime Reduction Trust Fund (VCRTF). Increasing funding for drug-related efforts, especially the Office of Justice Programs' Zero Tolerance Drug Supervision Program, the Offender Reentry Program and the Residential Substance Abuse Treatment program. Increasing funding for community policing initiatives and community crime prevention programs. Combating gun violence by hiring more federal, state, and local prosecutors to increase gun prosecutions, and reduce youth violence. Combating cybercrime. Reducing pending case loads in immigration-related claims, particularly naturalization cases. Determining the level of INS detention capacity necessary to comply with the statutory mandate that certain criminal aliens be detained until deported; Meeting the statutory mandate that the Border Patrol be increased by 1,000 agents in FY2000 and FY2001. Restructuring INS internally as proposed by the Administration or dismantling the agency by legislation. Department of Commerce: Progress made in the streamlining and downsizing of Department programs and operations. Funding needs of the Bureau of the Census in processing and releasing the 2000 decennial census results. Extent to which federal funds should be used to support industrial technology development programs at the National Institute of Standards and Technology (NIST), particularly the Advanced TechnologyProgram. Appropriateness of the Administration's proposal to increase funding for public broadcast facilities, planning, and construction at the National Telecommunications and Information Administration(NTIA). The completion of National Weather Service Modernization and the extent to which the National Oceanographic and Atmospheric Administration (NOAA) would implement a number of Presidential initiatives toprotectthe environment and foster research and development in the 21st century. The extent to which the National Oceanographic and Atmospheric Administration (NOAA) would implement a number of new ongoing Presidential initiatives to protect the environment and foster research anddevelopment in the 21st century. The extent to which foreign countries comply with trade agreements and U.S. trade laws. Department of State: Increased funding for embassy security overseas. The Judiciary: The adequacy of compensation paid to court-appointed defense attorneys in federal criminal cases. The growing costs of the Judiciary's Defender Services account. The funding and staff requirements for the district courts due to increases in criminal filings; The Judiciary's contention that federal judges and justices should receive a cost-of-living salary increase. Other Agencies: Adequacy of funding for the Legal Services Corporation. Adequacy of funding for the Equal Employment Opportunity Commission, given a rapidly growing workload of civil rights cases. Adequacy of funding for programs of the Small Business Administration (SBA). The merits of attaching a rider to the CJS appropriations bill scaling back the Federal Communications Commission's (FCC) low power FM radio regulations. Whether to bar the FCC from approving foreign government takeovers of U.S. telecommunications companies. This report provides background descriptions of the principal functions of the federal agencies covered by CJS appropriations and identifies and more extensively reviews the major legislative and policy issues that emergedduring thedebate on these appropriations. Status On February 7, 2000, President Clinton submitted the FY2001 budget request for appropriations for theDepartments ofCommerce, Justice, and State, the Judiciary and related agencies. The House approved the bill on June 26. Itapprovedthe same overall funding total recommended by the Appropriations Committee. The House, however, did makea fewfunding changes (that differ from the Committee's recommendations) for certain individual agencies covered by thebill. These are reflected in this report. The Senate Appropriations Committee passed its version of the bill on July 18,2000( S.Rept. 106-404 ). ( The Senate, however, did not vote on its version of the bill. Instead, it approved the versionapprovedby the Conference Committee which was agreed to on October 26, 2000.) On October 27, 2000, Congress approved total funding of $39.9 billion which was about $300 million above bothPresident's request and the total enacted for FY2000. H.R. 4690 was included in Conference Report approvedby Congress in H.R. 4942 ( H.Rept. 106-1005 : Making Appropriations for the Government of theDistrict ofColumbia and Other Activities Changeable in Whole or in Part Against Revenues of Said District for the Fiscal YearEnding September 30, 2001, and for Other Purposes ). Subsequently, the District of Columbia appropriationsportion ofthe measure was separated from the bill and approved by Congress ( H.R. 5663 ) on November 15. ThePresident signed this measure into law on November 22. On December 21, President Clinton signed the remaining portion of HR. 4942 contained in H.R. 5548 , theFY2001 CJS appropriations bill, into law on December 21, 2000 ( P.L. 106-553 ). (7) With the expiration of Fiscal Year 2000 appropriations on September 30,2000, Congress enacted a continuing fundingresolution ( H.J.Res. 109 ) which extended FY2000 appropriations through midnight October 6, 2000. Thiswas followed by a second resolution ( H.J.Res. 110 ) which extended FY2000 funding through October 14,2000. A third resolution was approved by Congress ( H.J.Res. 111 ), extending funding through October 20,2000. A fourth resolution ( H.J. Res. 114) was approved to extend funding through Wednesday, Oct. 25, 2000.AfterOctober 25, Congress enacted eight one day continuing resolutions (H. J. Res. 116. 117, 118, 119,120, 121,122,and123).On November 3, Congress approved H.J. Res. 84 which extended FY2000 funding through November 14, the datethatboth Houses of Congress were scheduled to return from the election recess. This was followed by approval onNovember14 of a longer term extension of funding(H.J. Res. 125) through December 5, 2000. After returning on December4,Congress approved a number of short term extensions to provide funding until the CJS bill was signed into lawby thePresident on December 21, 2000. The table below shows the key legislative steps necessary for the enactment of FY2001 CJS appropriations legislation. It is also important to note that the Consolidated Appropriations Act for FY2001 ( H.R. 4577 ; P.L.106-554 )also includes a provision that mandates a 0.22% government-wide rescission of discretionary budget authority forFY2001appropriations, including CJS appropriations. For more details see page 3 of this report. Table 1. Status of CJS Appropriations, FY2001 * The Senate did not vote on its version of the bill. Instead, it approved the version approved by the ConferenceCommittee which was agreed to on October 26, 2000. ** H.R. 4690 was included in Conference Report approved by Congress on October 27, 2000 ( H.R. 4942 ; H.Rept. 106-1005 : Making Appropriations for the Government of the District of ColumbiaandOther Activities Changeable in Whole or in Part Against Revenues of Said District for the Fiscal Year EndingSeptember30, 2001, and for Other Purposes ). The CJS appropriations bill contained in the Conference Report wasgiven a new billnumber: H.R. 5548 . Background The creation, legislative authority, and principal activities of the major agencies covered by the CJSappropriationslegislation for each fiscal year are described below. Brief descriptions of most of the related agencies covered bythelegislation are also included in this section. Department of Justice and Related Agencies Title I of the CJS legislation typically covers the appropriations for the Department of Justice and related agencies. Established by an Act of 1870 (28 U.S.C. 501) with the Attorney General at its head, the Department of Justice(DOJ)provides counsel for citizens and protects them through its efforts for effective law enforcement. It conducts all suitsin theSupreme Court in which the United States is concerned and represents the government in legal matters generally,providinglegal advice and opinions, upon request, to the President and the executive branch's department heads. The Department contains several divisions: Antitrust, Civil, Civil Rights, Criminal, Environmental and Natural Resources,and Tax. Major agencies within the Department of Justice include: Federal Bureau of Investigation (FBI) investigates violations of federal criminal law, protects theUnited States from hostile intelligence efforts, provides assistance to other federal, state and local law enforcementagencies, and has concurrent jurisdiction with Drug Enforcement Administration (DEA) over federal drugviolations. Drug Enforcement Administration (DEA) is the lead drug law enforcement agency at the federal level,coordinating its efforts with state, local, and other federal officials in drug enforcement activities, developing andmaintaining drug intelligence systems, regulating legitimate controlled substances activities, and undertakingcoordinationand intelligence-gathering activities with foreign government agencies. Immigration and Naturalization Service (INS) is responsible for administering laws relating to theadmission, exclusion, deportation, and naturalization of aliens, including the oversight of the process involving theadmission of aliens into the country and applications to become citizens, the prevention of illegal entry into theUnitedStates, and the investigation, apprehension, and removal of aliens who are in this country in violation of thelaw. Federal Prison System provides for the custody and care of the federal prison population, themaintenance of prison-related facilities, and the boarding of sentenced federal prisoners incarcerated in state andlocalinstitutions. Office of Justice Programs (OJP) carries out policy coordination and general management responsibilities for the Bureau of Justice Assistance, Bureau of Justice Statistics, National Institute of Justice, OfficeofJuvenile Justice and Delinquency Prevention, Community Oriented Policing Services (COPS), and the Office ofVictims ofCrime, including administering programs, awarding grants, and evaluating activities. United States Attorneys prosecute criminal offenses against the United States, represent thegovernment in civil actions in which the United States is concerned, and initiate proceedings for the collection offines,penalties, and forfeitures owed to the United States. United States Marshals Service is primarily responsible for the protection of the federal judiciary,protection of witnesses, execution of warrants and court orders, management of seized assets, and custody andtransportation of unsentenced prisoners. Interagency Law Enforcement consists of 13 regional task forces composed of federal agents workingin cooperation with state and local investigators and prosecutors to target and destroy major narcotic trafficking andmoneylaundering organizations. The total appropriation for the Department of Justice in FY2000 was $18.6 billion. (For more details on the funding ofindividual programs, see Table 1A in the Appendix.) Appropriators also considered funding for criminal justice programs under the Violent Crime Reduction Trust Fund(VCRTF), which was established in the Violent Crime Control and Law Enforcement Act of 1994 ( P.L. 103-322 ). TheVCRTF provides authorization for criminal justice spending over a 6-year period, from FY1995 through FY2000.TrustFund monies were to be derived in part from projected savings to be realized by eliminating over 250,000 federaljobs asrequired by the Federal Workforce Restructuring Act ( P.L. 103-226 ). Spending was provided in the annualappropriationsbills, extending indefinitely authorizations of appropriations not fully appropriated. Across-the-board sequestrationofspending from the VCRTF is required, if outlays exceed the outlay limits set for the Trust Fund. The fund authorized $30.2 billion in spending from FY1995 through FY2000. The Omnibus Consolidated and EmergencySupplemental Appropriations Act for FY1999 ( P.L. 105-277 ) provided a total of $5.5 billion for DOJ's anti-crimeinitiatives from the VCRTF. Legislation has been offered in the 106th Congress to extend the VCRTFbeyond FY2000. Department of Commerce Title II typically includes the appropriations for the Department of Commerce and related agencies. The Department wasestablished on March 4, 1913 (37 Stat.7365; 15 U.S.C. 1501). The origins of the Department of Commerce dateback to1903 with the establishment of the Department of Commerce and Labor (32 Stat. 825). In 1913, a separate theDepartmentof Commerce was designated (37 Stat. 7365; 15 U.S.C. 1501). Though the responsibilities of the Department arenumerous and quite varied, it has five basic missions: promoting the development of American business andincreasingforeign trade; improving the nation's technological competitiveness; fostering environmental stewardship andassessment;encouraging economic development; and compiling, analyzing, and disseminating statistical information on the U.S.economy. These missions are carried out by the following agencies of the Department: Economic Development Administration (EDA) provides grants for economic development projects ineconomically distressed communities and regions. Minority Business Development Agency (MBDA) seeks to promote private and public sectorinvestment in minority businesses. Bureau of the Census collects, compiles, and publishes a broad range of economic, demographic, andsocial data. Economic and Statistical Analysis Programs provide (1) timely information on the state of theeconomy through preparation, development, and interpretation of economic data; and (2) analytical support toDepartmentofficials in meeting their policy responsibilities. International Trade Administration (ITA) seeks to develop the export potential of U.S. firms and toimprove the trade performance of U.S. industry. Export Administration enforces U.S. export control laws consistent with national security, foreignpolicy, and short-supply objectives. National Oceanic and Atmospheric Administration (NOAA) provides scientific, technical, andmanagement expertise to (1) promote safe and efficient marine and air navigation; (2) assess the health of coastalandmarine resources; (3) monitor and predict the coastal, ocean, and global environments (including weatherforecasting); and(4) protect and manage the nation's coastal resources. Patent and Trademark Office examines and approves applications for patents for claimed inventionsand registration of trademarks. Technology Administration advocates integrated policies that seek to maximize the impact oftechnology on economic growth, conducts technology development and deployment programs, and disseminatestechnological information. National Institute of Standards and Technology (NIST) assists industry in developing technology toimprove product quality, modernize manufacturing processes, ensure product reliability, and facilitate rapidcommercialization of products based on new scientific discoveries. National Telecommunications and Information Administration (NTIA) advises the President ondomestic and international communications policy, manages the federal government's use of the radio frequencyspectrum,and performs research in telecommunications sciences. The total appropriation for the Department of Commerce in FY2000 was $8.6 billion. A very large share of the totalreflected a special appropriation, designated an emergency appropriation ($4.5 million), to fund final preparationsfor andimplementation of the year 2000 decennial census. (For more details on the funding of individual programs, seeTable1A in the Appendix.) The Judiciary Typically, Title III of a Commerce, Justice, State-Judiciary appropriations bill covers funding for the Judiciary. By statute(31 U.S.C. 1105 (b)) the judicial branch's budget is accorded protection from presidential alteration. Thus, whenthePresident transmits a proposed federal budget to Congress, the President must forward the judicial branch's proposedbudget to Congress unchanged. That process has been in operation since 1939. The total appropriation for theJudiciary inFY2000 was $3.96 billion. The Judiciary budget consists of more than 10 separate accounts. Two of these accounts fund the Supreme Court of theUnited States -- one covering the Court's salary and operational expenses and the other covering expenditures forthe careof its building and grounds. Traditionally, in a practice dating back to the 1920s, one or more of the Court's Justicesappearbefore either a House or Senate appropriations subcommittee to address the budget requirements of the SupremeCourt forthe upcoming fiscal year, focusing primarily on the Court's salary and operational expenses. Subsequent to theirtestimony,the Architect of the Capitol appears to request a funding amount for the Court's building and grounds account. (8) Althoughit is at the apex of the federal judicial system, the Supreme Court represents only a very small share of the Judiciary'soverall funding. The Consolidated Appropriations Act for FY2000 (PL. 106-113), for instance, provided a totalof $43.5million for the Supreme Court's two accounts, which was 1.1% of the Judiciary's overall appropriation of $ 3.96billion. The rest of the Judiciary's budget provides funding for the "lower" federal courts and for related judicial services. Amongthe lower court accounts, one dwarfs all others -- the Salaries and Expenses account for the U.S. Courts of AppealsandDistrict Courts. The account, however, covers not only the salaries of circuit and district judges (including judgesof theterritorial courts of the United States), but also those of retired justices and judges, judges of the U.S. Court ofFederalClaims, bankruptcy judges, magistrate judges, and all other officers and employees of the federal Judiciary notspecificallyprovided for by other accounts. Other accounts for the lower courts include Defender Services (for compensation and reimbursement of expenses ofattorneys appointed to represent criminal defendants), Fees of Jurors, the U.S. Court of International Trade, theAdministrative Office of the U.S. Courts, the Federal Judicial Center (charged with furthering the development ofimproved judicial administration), and the U.S. Sentencing Commission (an independent commission in the judicialbranch, which establishes sentencing policies and practices for the courts). The annual Judiciary budget request for the courts is presented to the House and Senate appropriations subcommittees afterbeing reviewed and cleared by the Judicial Conference, the federal court system's governing body. Thesepresentations,typically made by the chairman of the Conference's budget committee, are separate from subcommittee appearancesaJustice makes on behalf of the Supreme Court's budget request. The Judiciary budget does not appropriate funds for three "special courts" in the U.S. court system: the U.S. Court ofAppeals for the Armed Forces (funded in the Department of Defense appropriations bill), the U.S. Tax Court(funded in theTreasury, Postal Service appropriations bill), and the U.S. Court of Appeals for Veterans Claims (funded in theDepartment of Veteran Affairs and Housing and Urban Development appropriations bill). Construction of federalcourthouses is not funded within the Judiciary's budget. The usual legislative vehicle for funding federal courthouseconstruction is the Treasury, Postal Service appropriations bill. (For more details on individual appropriations forJudiciaryfunctions, see Table 1A in the Appendix.) Department of State and Related Agencies The State Department, established July 27, 1789 (1 Stat.28; 22 U.S.C. 2651), has a mission to advance and protect theworldwide interests of the United States and its citizens. Currently, the State Department represents the activitiesof 38 U.S.agencies operating at over 250 posts in 163 countries. As covered in Title IV, the State Department fundingcategoriesinclude Administration of Foreign Affairs, International Operations, International Commissions, and RelatedAppropriations. The total FY2000 State Department appropriation was $5.9 billion. Typically, more than half ofState'sbudget (about 70% in FY1999) is for Administration of Foreign Affairs, which consists of salaries and expenses,diplomatic security, diplomatic and consular programs, and security/maintenance of overseas buildings. The Foreign Relations Authorization within P.L. 105-277 provides for the consolidation of the foreign policy agencies. Asof the end of FY1999, the Arms Control and Disarmament Agency (ACDA) and the United States InformationAgency(USIA) were abolished and their budgets and functions were merged into the Department of State. International broadcasting, which had been a primary function of the USIA prior to 1999, will remain as an independentagency referred to as the Broadcasting Board of Governors (BBG). The BBG includes the Voice of America(VOA), RadioFree Europe/Radio Liberty (RFE/RL), Cuba Broadcasting, Radio Free Asia (RFA), Radio Free Iraq and Radio FreeIran. The BBG's FY2000 appropriation is $421.8 million with just under 2,700 positions. Other Related Agencies Title V covers several related agencies. FY2000 appropriations for these agencies were as follows: (9) Maritime Administration administers programs to aid in the development, promotion, and operationof the nation's merchant marine: $178.1 million. Small Business Administration provides financial assistance to small business and to victims ofphysical disasters: $ 847.0 million. Legal Services Corporation provides financial assistance to local, state, and national non-profitorganizations that provide free legal assistance to persons living in poverty: $305 million. Equal Employment Opportunity Commission (EEOC) enforces laws relating to race, sex, religion,national origin, age, or handicapped status: $282 million. Commission on Civil Rights collects and studies information on discrimination or denials of equalprotection of the laws because of race, color, religion, sex, age, handicap, and national origin: $8.9million. Federal Communications Commission (FCC) regulates interstate and foreign communications byradio, television, wire, satellite, and cable: $24.2 million. (10) Federal Maritime Commission (FMC) regulates the domestic offshore and international waterbornecommerce of the United States: $14.1 million. Federal Trade Commission (FTC) administers laws to prevent the free enterprise system from beingfettered by monopolies or restraints on trade and to protect consumers from unfair and deceptive trade practices:Noappropriation. (11) Securities and Exchange Commission (SEC) administers laws providing protection for investors andensuring that securities markets are fair and honest: No appropriation. (12) State Justice Institute is a private, non-profit corporation that makes grants and undertakes otheractivities designed to improve the administration of justice in the United States: $6.85 million. Office of the United States Trade Representative (USTR) is located in the Executive Office of thePresident and is responsible for developing and coordinating U.S. international trade and direct investment policies. TheUSTR is also the chief trade negotiator for the United States: $25.6 million. U.S. International Trade Commission is an independent, quasi-judicial agency that advises thePresident and the Congress on the impact of U.S. foreign economic policies on U.S. industries and is charged withimplementing various U.S. trade remedy laws. Its six commissioners are appointed by the President for 9-yearterms: $44.5million. The CJS appropriations also cover funding for several relatively small governmental functions, including several specialgovernment commissions. (For additional information on the funding of other related agencies covered by thismeasure,see: Budget of the United States Government, Fiscal Year 2001-Appendix (106th Cong.,2nd sess.) Major Legislative and Policy Issues The second session of the 106th Congress addressed a number of issues during the CJS appropriations processforFY2001. Major issues or concerns included: building more prisons; extending the 1994 Crime Act fundingauthorizationbeyond September 30, 2000; increasing funding for drug-related efforts among the Department of Justice (DOJ)agencies;increasing funding for community law enforcement; combating cybercrime; funding of DOJ's legal action againstthetobacco industry; changing the focus and levels of appropriations for DOJ's Office of Juvenile Justice andDelinquencyPrevention; providing funding for programs that would reduce gun and youth violence; reducing pending caseloadsinimmigration-related claims, particularly green card and naturalization applications; meeting the statutory mandatethat theBorder Patrol be increased by 1,000 agents in FY2001, and accounting for the shortfall in hiring in FY1999;determiningthe level of detention capacity necessary to comply with the statutory mandate that certain criminal aliens bedetained untildeported; and restructuring INS internally as proposed by the Administration or dismantling or restructuring theagency bylegislation; the downsizing of Commerce Department programs, processing and releasing the 2000 decennial censusresults, the use of federal funds to support industrial technology, implementing the modernization of the NationalWeatherService, and the monitoring of foreign compliance with trade agreements and U.S. trade laws; improving embassysecuritythrough a doubling of funding as well as a request for an advance appropriation to cover the period FY2002 toFY2005;whether to lift a statutory ban on judges receiving honoraria; whether to increase funding to compensatecourt-appointeddefense attorneys in federal criminal cases; how to contain the growing costs of the Judiciary's Defender Servicesaccount;and the merits of providing a cost-of-living pay increase for federal judges. Department of Justice Traditionally, state and local governments have primary responsibility for crime control. Especially within the last decade,a greater federal role has developed. Congress has enacted five major omnibus crime control bills since 1984,establishingnew penalties for crimes and providing increased federal assistance for law enforcement efforts by state and localgovernments. Federal justice-related expenditure is one of the few areas of discretionary spending that has increaseditsshare of total federal spending over the last two decades. FY2001 Budget Request. For FY2001, Congress approved (House Conference Report 106-1005) $21.1 billion in fundingfor DOJ. President Clinton's budget request for DOJ was $21.7 billion for FY2001 compared with the SenateAppropriations Committee's recommendation of $18.7 billion, and the House's $20.2 billion. DOJ received fundingof$18.65 billion in FY2000. DOJ's request for FY2001 was intended to address major concerns such as fighting crimeandgun and youth violence, building prisons, checking drug abuse, improving the department's information resourcesandimproving the border management of INS. On July 18, the Senate Appropriations Committee recommended $18.7 billion in funding for FY2001 for the Department ofJustice. The Senate Committee rejected by a tie vote, 14-14, Senator Ernest Hollings's amendment to spend $20.5millionto finance a federal lawsuit against tobacco companies to offset the federal government's expenses of treatingveterans andMedicare and Medicaid patients for smoking-related illnesses. The CJS bill, H.R. 4690 , passed by the House on June 26, provided $20.2 billion in funding for DOJ. On June23, Representative Henry A. Waxman offered an amendment to H.R. 4690 , the CJS Appropriations bill,whichwould allow the Veterans Administration to reimburse DOJ for its lawsuit against tobacco companies. The Housepassedthe amendment by a vote of 215 ayes to 183 noes. Congress provided $201.4 million for the Telecommunications Carrier Compliance Fund for FY2001. Under theTelecommunications Carrier Compliance Fund of the General Administration account, the Senate AppropriationsCommittee did not recommend additional funds for FY2001 for the Communications Assistance for LawEnforcement Act(CALEA). In January 2000, the Senate Committee denied a reprogramming request of DOJ for an additional $100millionin FY2000 for this account based on the source of funds the Department chose to use as an offset for these funds. Congressrecently passed a FY2000 supplemental appropriation, which upon enactment, will provide $183 million forCALEA. Thisamount exceeded DOJ's request for the program in FY2000 and FY2001. With enactment of the supplementalappropriation for FY 2000, a total of $301 million was appropriated for CALEA. For FY2001, the House approvedtheAppropriations Committee's recommendation of $278 million for the Telecommunications Carrier Compliance Fundtoreimburse equipment manufacturers and telecommunications carriers and providers of telecommunications supportservicefor implementing the Communications Assistance for Law enforcement Act of 1994. Of this amount, $141.3million wasfor national security purposes. The Senate Committee recommended $205 million for the NarrowbandCommunicationsaccount for FY2001 compared to $95.4 million that the House provided for this account. The Clinton administration requested a total of $240 million for the Telecommunications Carrier Compliance Fund, ofwhich $225 million is new funding to reimburse the telecommunications industry for costs associated withmodifying theirnetworks (Communications Assistance for Law Enforcement Act). Total funding was divided between DOJ andtheDepartment of Defense (DOD) as follows: $120 million for DOJ and $120 million for DOD. DOJ wouldimplement all ofthe funds. For its program to convert to narrowband radio communications, DOJ requested $205 million. In theFY2000appropriations cycle, this program was controversial as the Administration requested $86 million for narrowbandconversion, but received $10.6 million in direct funding and was directed to transfer $92.5 million for the programfromother departmental components. To address terrorism, the Senate Committee recommended $5 million for FY2001 for the counterterrorism fund comparedto the $10 million that the House provided and the $10 million that the President requested. The Senate Committeereported that there will be carryover balances available in FY 2001 of more than $36 million for this account. TheSenateCommittee expressed concern that DOJ was using funds in this account for any effort associated with counteringterrorisminstead of for extraordinary costs for providing support to counter, investigate or prosecute domestic or internationalterrorism. The President designated a National Coordinator for Security, Infrastructure Protection, andCounterterrorism toprovide leadership in preparing the nation for acts of terrorism by coordinating interagency terrorism policy issuesandreviewing ongoing terrorism-related activities. But, according to the Senate Committee, confusion at all levels ofgovernment remains over jurisdiction. To better coordinate and centralize the policy-making structure in addressingdomestic terrorism issues within the United States, the Senate Appropriations Committee recommended the creationof aDeputy Attorney General for Combating Domestic Terrorism.(DAG-CT) position within DOJ. The SenateCommitteerecommended an additional $23 million for this office. Funding to combat terrorism is also recommended underthe Officeof Justice Programs, Justice Assistance account. Congress approved $4.67 billion for FY2001 for the Office of Justice Programs (OJP). The Senate AppropriationsCommittee for FY2001 for OJP recommended $3.07 billion, while the House provided $4.08 billion. The Presidentrequested$3.74 billion for OJP compared with FY2000 funding of $4.08 billion. To address gun and youth violence,theAdministration requested $215.9 million, of which new funding of $150 million was to hire 1,000 local prosecutorsinjurisdictions designated by DOJ as High Gun Violence areas. For FY2001, Congress provided $418 million for the Justice Assistance account, including funding of $220.9 million forcounterterrorism programs. For the Justice Assistance account for FY2001, the Senate Committee recommended$426.4million, of which $25.5 million was for the Missing Children Program to combat crimes against children, including$6million for state and local law enforcement for continuation of specialized cyberunits and for units that investigateandprevent child sexual exploitation on the internet; $13.5 million for the National Center for Missing and ExploitedChildren,with $2 million of that amount for the operation of the CyberTipline (which collects leads from Internet ServiceProviderson incidences of child pornography and exploitation) and for Cyberspace training; and $3 million for the JimmyRyce LawEnforcement Training Center to train state and local law enforcement officials in investigating missing and exploitedchildren cases. Also, to address incidents of domestic terrorism, the Committee recommended $257.5 million fortheOffice for State and Local Domestic Preparedness Support, of which $35 million was for the National DomesticPreparedness Consortium, and $120 million was for equipment block grants to states and the District of Columbiafor thepurchase of specialized equipment needed to respond to terrorist incidents involving chemical, biological,radiological, andexplosive weapons of mass destruction. Congress provided funding of $1.03 billion for the Community Oriented Policing Services (COPS) including $100 million for community prosecutors, $130 million for crime identification technology, $17.5 million for the NationalInstitute ofJustice to develop school safety technologies, $30 million for state and local DNA laboratories to reduce states'DNAconvicted offender sample backlog, among other purposes; $535 million for public safety and community policinggrants,$180 million for school resource officers; $35 million for tribal law enforcement including equipment and training;$48.5million to combat the manufacture and distribution of methamphetamine and to improve policing initiatives in drug"hotspots;" and $30 million for an offender re-entry program. The Senate Committee recommended for FY2001, $812 million for COPS which was $523 million less than the Presidentrequested; the House provided $595 million for COPS. Of these funds, $423 million was for the following policehiringinitiatives: $180 million for school resource officers; $183 million in direct appropriations for the universal hiringprogram(UHP); $20 million from unobligated carryover balances from FY2000 to be used for UHP; and $40 million forIndianCountry. The Safe Schools Initiative received $20 million. For non-hiring initiatives, the Senate Committeerecommended: $100 million for the COPS technology program for development of technologies and automatedsystems toassist state and local law enforcement agencies in investigating, responding to, and preventing crime; $130 millionfor theCrime Identification Technology Program of which $20 million was for Safe Schools technology to fund NationalInstituteof Justice's development of new more effective safety technologies such as less obtrusive weapons detection andsurveillance equipment and information that allows communities quick access to information to identify potentiallyviolentyouth; $33 million for states to upgrade criminal history records, and $30 million for state and local units ofgovernmentcrime laboratories to develop or improve the capability to analyze DNA in a forensic laboratory and other forensicsciencecapabilities; $41.7 million for the COPS Methamphetamine/Drug 'Hot Spots' program to fight the manufacture,distribution, and use of methamphetamine, and for proper removal and disposal of hazardous materials atclandestine methlabs; and $15 million for the COPS Safe Schools Initiative/School Prevention Initiatives to provide grants topolicingagencies and schools to address violence in public schools and to allow the assignment of officers to work incollaborationwith schools and community-based organizations concerning crime, gangs, and drug activities. The House provided $595 million for the COPS program, including $130 million for crime identification technology, $41.7for manufacturing and trafficking in methamphetamine, and $389.5 million for public safety and communitypolicinggrants. The Administration sought to continue improving community law enforcement. It requested FY2001 funding of $1.3billion for the Community Oriented Policing Services (COPS) compared to FY2000 funding of $595 million. ForPublicSafety and Community Policing grants, funding requested was $225 million, which included $67.9 million to fundadditional officers and to stay on course to hire 150,000 officers by the end of 2005. Earmarks provided $45 millionforIndian country law enforcement, $25 million for the bullet-proof vest program, $20 million for school safetyproblem-solving partnerships, and $20 million for National Police scholarships, among other programs. Under the COPS account for FY2001, the Administration requested $350 million for the Crime Identification AssistanceProgram, an increase of $220 million over FY2000 funding to support crime-fighting technologies efforts. Thisincluded$70 million for upgrading criminal history, criminal justice and identification record systems, promotingcompatibilityamong systems at the federal, state, and local levels, and obtaining information for statistical and research programs. Another $50 million was used to improve forensic laboratories, of which $35 million was for grants to state, tribaland locallaboratories for improving their DNA and general forensic capabilities and $15 million in grants to state and locallaboratories to reduce their convicted offender DNA sample backlog. For FY2001, Congress approved $2.85 billion for state and local law enforcement assistance including $523 million forlocal law enforcement grants, $50 million for drug courts; $250 million for juvenile accountability incentive blockgrants;$63 million for state prison drug treatment; $686.5 million for violent offender incarceration and truth in sentencingincentive grants, of which $165 million is to be used for payments to states for incarceration of criminal aliens; $569million for Byrne grants ($69 million is for discretionary grants). Congress provided $288 million for violenceagainstwomen grants, of which $31.6 million is to be used for strengthening civil legal assistance programs for victims ofdomestic violence The Senate Committee for FY2001 recommended $400 million for local law enforcement grants, $123 million less than theHouse; the Administration did not request funding for this program. The Senate Committee recommended $40million fordrug courts and $63 million for state prison drug treatment, the same funding that the House provided, while thePresidentrequested $10 million more in funding for drug courts and $2 million more for state prison drug treatment. ForViolenceAgainst Women grants, the Senate Committee recommended $284.9 million compared to $283.8 provided by theHouseand $12 million less than the Administration requested. These funds were to be used to develop and implementeffectivearrest and prosecution policies for the prevention, identification, and response to violent crimes against women, tostrengthen programs that address stalking, and to provide victim services such as specialized domestic violence courtadvocates who obtain protection orders, among other purposes. In FY2000, drug courts received funding of $40million,state prison drug treatment, received $63 million, and VAWA received $284 million. For FY2001, the Senate Appropriations Committee recommended $452 million for the Byrne grant programs ($400 millionfor formula grants and $52 million for discretionary grants) compared to the House which provided $552 million,the sameamount appropriated in FY2000 ($500 million for formula grants and $52 million for discretionary grants). ThePresidentrequested $459.5 million for Byrne grants ($400 million for formula grants and $59.5 million for discretionarygrants). Congress approved $34 million for the Weed and Seed program for FY2001. The Senate Committee recommended $40million for the Weed and Seed program for FY2001 compared to $33.5 million that the House provided; thePresidentrequested $42 million for the program. Congress provided $1.36 billion for the Drug Enforcement Agency (DEA) in FY2001 for purchasing 1,358 passengermotor vehicles, of which 1,079 would be for replacement only, for police-type use without regard to the generalpurchaseprice limitation for the current fiscal year, for contracting for automated data processing and telecommunicationsequipment, for laboratory equipment, and for conducting drug education and training programs. The SenateAppropriationsCommittee recommended $1.35 billion for DEA for FY2001, to provide for drug education and training programsandtechnical equipment. For the Methamphetamine Initiative, the Senate Committee recommended $27.5 million fortheagency to target and investigate methamphetamine trafficking, production, and use and to clean-up hazardous wasteassociated with the manufacture of the drug. This compared with total FY2000 funding for DEA of $1.28 billion. Fundswere for purchasing 1,358 passenger motor vehicles of which 1,079 would be for replacement only, for police-typeusewithout regard to the general purchase price limitation for the current fiscal year. Also, the Senate Committeerecommended additional emergency spending for the Southwest Border Initiative for DOJ under Salaries andExpenses of$22.5 million for one plane, a helicopter, a forensic laboratory, equipment, and upgrades to and maintenance of theEl PasoIntelligence Center's Information System. On the other hand, the House provided $1.37 billion for DEA. PresidentClinton requested $1.37 billion for the agency. To support the enforcement of federal law and investigations, DEArequested $864 million. DEA requested $56 million for FY2001 for FIREBIRD, its primary office automationinfrastructure. FIREBIRD supports DEA's global operations and these funds were to allow its continued highqualityoperation. The President requested funding of $215 million, for drug prevention programs, including $171.39 million in new fundingfor programs designed to break the cycle of drug use and its consequences by providing support services for drugabusersto enable them to reenter the community. The Administration requested $75 million for FY2001 for OJP'S ZeroToleranceDrug Supervision program to provide discretionary grants to states, local governments, Indian tribes, and courtsto planand enforce comprehensive drug testing and treatment programs and graduated sanctions for persons within thecriminaljustice system. Of this amount, $60 million was for an Offender Reentry program that would combine surveillance,sanctions, and support services to provide more protection for communities that have high returns of inmates. Congress approved $4.3 billion for the Federal Prison System for FY2001, of which $835.6 million is for buildings andfacilities. For FY2001, the Senate Appropriations Committee recommended $4.30 billion for the Federal PrisonSystem, ofwhich $724 million would be for buildings and facilities compared to the House which provided $4.27 billion fortheFederal Prison System, including $836 million for buildings and facilities. The President's FY2001 budget requestfor theFederal Prison System was $5.71 billion compared to $3.67 billion enacted in FY2000. These funds were for theBureau ofPrisons to reduce overcrowding and to accommodate future prison needs, including the long-term housing needsofImmigration and Naturalization Service detainees. This request included $2 billion for FY2001 through FY2003forconstruction of prisons ($791 million in advance appropriations were requested for FY2002 and $535 million inFY2003for construction of 6 more prisons); $80.18 million to activate prison facilities and address the 54% overcrowdingin highsecurity prisons and provide needed detention bed space; and, $84.46 million to provide contract beds toaccommodate theneeds of short and long term non-U.S. citizen inmates, as well as the increase in other sentenced offender contractpopulation. Congress provided $3.3 billion for the Federal Bureau ofInvestigations (FBI) for FY2001, of which $438 million is forcounterterrorism investigations, counterintelligence and other national security purposes, and $50 million is forautomateddata processing and telecommunications equipment. FY2000 funding for the Federal Bureau of Investigations was$3.04billion. For FY2001, the Senate Appropriations Committee recommended $3.12 billion for the FBI, of which $222millionwas for Criminal Justice Services, including $72 million for the National Instant Criminal Background CheckSystem(NICS) and $43 million to construct or acquire buildings. The Senate Committee recommended additionalemergencyspending funding of $62.9 million for the United States Marshals Service under the Southwest Border Initiative,of which$5.3 million was for salaries and expenses, $5.6 million for construction, and $52 million for the Justice Prisonerand AlienTransportation System Fund. The House Committee, on the other hand, would have provided $3.23 billion for theFBI, ofwhich $68 million in direct appropriations was for NICS. President Clinton's FY2001 budget request for the FederalBureau of Investigations (FBI) was $3.28 billion. With the number and complexity of computer crime increasing,DOJrequested $37 million to create a permanent network of experts to prevent and prosecute computer crime. ByFY2001, theFBI expects cases involving computer forensic examination to more than double those in FY1999. DOJ requested$19million for its Technology Crimes Initiative of which $11.4 million was for its Computer Analysis and ResponseTeam tosupport 100 response team members who would be sent to help investigate computer related crimes and $7 millionwas tofurther law enforcement counter-encryption capabilities. In OJP, the House Committee recommended that theNationalWhite Collar Crime Center receive $8.75 million to expand training initiatives for state and local law enforcementandregulatory agencies to meet the rising incidences of computer crime by acting as a clearinghouse, providinginformation onfederal computer crime training and offering a "directory" of resources available in forensic computer science. The Immigration and Naturalization Service (INS) is the principal federal agency charged with administering theImmigration and Nationality Act (INA). From FY1993 to FY2000, Congress has increased the INS budget from$1.5 to$4.3 billion. During these years, INS staffing has increased from 18,000 to nearly 33,000 funded permanentpositions. ForFY2001, according to the CBO's revised scoring, the Administration has requested $4.85 billion in total fundingfor INS($3.31 billion in direct funding and $1.54 billion in fee receipts). (13) The FY2001 request also included four fee proposals:1) a "voluntary premium service fee" for businesses, 2) a renewed penalty fee under a permanent section 245(i)adjustmentof status program (14) , 3) an increase in the user feefor airport inspections, and 4) an end to the cruise ship user feeexemption. The FY2001 CJS appropriations act ( P.L. 106-553 ; H.R. 5548 ) provides INS with $4.8 billion ($3.26 billion indirect funding and $1.55 billion in offsetting receipts). This amount is more than triple the INS budget in FY1993. It isalso $530 million over last year's appropriation, and $40 million less than the Administration's request. It alsoincludesprogram increases of $101 million for border control and management and $121 million for interior enforcementand theremoval of deportable aliens. While it would authorize a new expedited service fee for employers petitioning forskilledH-1B visa nonimmigrant workers, it does not establish or raise user fees for inspections. Furthermore, the FY2001 CJS appropriations act includes a set of substantive immigration provisions known as the "LegalImmigration Family Equity Act" (LIFE act) (15) ,which were amended by language included in the FY2001 Labor-HHSappropriations act ( P.L. 106-554 ; H.R. 4577 ). These provisions provide for 1) the temporary reinstatementofsection 245(i) through April 30, 2001, 2) the opportunity for members of certain class action suits to reapply forlegalization under the 1986 Immigration Reform and Control Act, 3) the creation of a new nonimmigrant "V" visaprogramto allow spouses and minors of legal immigrants to enter the country temporarily with a work authorization untiltheirimmigrant visa becomes available, and 4) technical amendments to the Nicaraguan Adjustment and CentralAmericanRelief Act (NACARA) and the Haitian Refugee Immigration Fairness Act (HRIFA) that waive certain grounds ofadmissibility. These provisions, however, are not nearly as expansive as those originally sought by the WhiteHouse. (16) Nonetheless, these provisions, along with other enacted legislation that expands the H-1B program, are likely toincreaseINS adjudications workloads significantly. The House-passed bill, by contrast, included $4.67 billion for INS ($3.23 billion in direct funding and $1.44 billion inoffsetting receipts). This amount was $392 million over last year's appropriation, and $178 million less than theAdministration's request. While the House-passed bill included a provision to authorize an H-1B premium servicefee, itdid not include provisions to reinstate section 245(i), nor did it include provisions to establish/raise user fees forinspections. The Senate-reported CJS appropriations act, on the other hand, included $4.6 billion in FY2001funding forthe INS ($3.03 billion in direct funding and $1.53 billion in offsetting receipts). This amount was $275 million overlastyear's appropriation, and $295 less than the Administration's request. The Senate recommendation, however, alsoincluded$414 million in emergency funding for the Southwest border initiative, of which $322 million was earmarked forINS. TheSenate-reported bill would have reinstated section 245(i), but it was silent on the proposed H-1B premium servicefee andthe proposals to establish/raise user fees for inspections. The bill also included provisions to repeal sections 110and 641 ofthe Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (Division C; P.L. 104-208 ). Regarding section 110, this provision as originally enacted would have required the development of a system that wouldrecord the entry and exit of every alien arriving and departing from the United States. Many congressionaldelegationsfrom northern border states strongly opposed the implementation of section 110 at the northern land border, sinceit wouldhave represented a significant departure from the status quo. Canadians who enter the United States through landborderports were and are not required to present a passport, and are usually not required to obtain a visa. Similarly, U.S.citizenswho enter Canada through land border ports are not required to present a passport or visa in most cases. Somefeared that,if Section 110 were implemented at northern land border ports of entry, additional documents would be required. The Immigration and Naturalization Service Data Management Improvement Act of 2000 ( P.L. 106-215 ),enacted on June15, 2000, amended and rewrote section 110 to require the development of a system that would use available datato recordalien arrivals and departures, without establishing additional documentary requirements. The law was viewed bymany as acompromise; nevertheless, the Senate-reported bill would repeal section 110, as amended. The conference report,however,does not include the provision to repeal section 110. (For further information, see CRS Report RS 20627, Immigration:Integrated Entry and Exit Data System , by [author name scrubbed].) In addition, the Senate-reported measure would have repealed section 641 of P.L. 104-208 . This provision required INS toimplement a foreign student data collection reporting program by January 1, 1998. Academic administrators havelobbiedfor this provision's repeal, principally because it requires them to collect fees from foreign students for INS. Theconference report does not include a provision to repeal section 641, but this provision was significantly amendedby theHouse- and Senate-passed H.R. 3767 , a bill that makes the visa waiver pilot program permanent. This billwasrecently presented to the President for signature. Major INS budget-related issues for FY2000 and FY2001 have included: 1) reducing pending caseloads in immigration-related claims, particularly green card and naturalization applications; 2) meeting the statutory mandatethatthe Border Patrol be increased by 1,000 agents in FY2001, and accounting for the shortfall in hiring in FY1999; 3)determining the level of detention capacity necessary to comply with the statutory mandate that certain criminalaliens bedetained until deported; and 4) restructuring INS internally as proposed by the Administration or dismantling orrestructuring the agency by legislation. Large pending caseloads continue to plague INS despite increased funding. From FY1992 to FY2000, funding for theadjudications and nationality program increased from $137 to $496 million. In FY1999, INS processed more than1.2million naturalization applications; however, as of the end of the first quarter of FY2000, the pending caseload fornaturalization applications (Form N-400) was 1.3 million, and the pending caseload for green card applications(FormI-485) was more than 1 million. In addition, there was a pending caseload of more than 1.7 million for all otherapplications. For FY2001, the Administration requested $152 million to improve service, reduce pending caseloads, and prevent fraud. This funding would have been derived from several sources: 1) $25 million from the voluntary H-1B visa premiumservicefee (to be deposited into the examinations fee account); 2) another $55 million from the H-1B premium service fee;3)$37.5 million from section 245(i) fees; and 4) $34.8 million in a direct appropriation. While the Senate-reportedbill wouldhave reinstated section 245(i), the House Appropriations Committee strongly rejected the Administration's proposaltoreinstate provision. Conversely, the House accepted the H-1B premium service fee proposal, but the Senate-reportedbilldid not include such a provision. The House Committee also noted that over the past 3 years INS has been providedwith$463 million to reduce pending caseloads and improve the integrity of the naturalization process. Indeed, exceptfor thedetention and deportation program, the adjudications and nationality program's budget increased at a greater rate(262%)than any other INS program budget from FY1993 to FY2000. For FY2001, House report language earmarks anincrease of$87 million, including $44 million in a direct appropriation, to continue the backlog reduction. Conference reportlanguagestates that examination fee receipts will provide nearly $95 million in program increases for adjudications. Border control and security continue to be an ongoing issue for Congress. From FY1992 to FY2000, funding for theBorder Patrol has increased from $362 million to more than $1 billion. For FY1999, Congress provided INS with$97million to hire 1,000 additional agents. The agency, however, was unable to hire a full contingent of new agents,citing alack of qualified candidates due to a strong labor market and high washout rates at the Border Patrol Academy. Atthe endof FY1999, there were 8,274 Border Patrol agents who were on duty and deployed, as compared to 7,904 at the endof FY1998. For FY2000, Congress provided $50 million to hire an additional 1,000 agents. The Administration,meanwhile,only requested $52 million to hire 430 agents for FY2001, rather than the 1,000 agents mandated in the IllegalImmigrationReform and Immigrant Responsibility Act ( P.L. 104-208 ). Given hiring shortfalls in FY1999 and the current fiscal year, House report language included an earmark, matching theAdministration's FY2001 request, rather than funding 1,000 new agent positions. (17) As requested by the Administration,$20 million is earmarked for deployment of the integrated surveillance intelligence system, on both the southernandnorthern land borders. House report language also included an earmark of $22 million for border patrol information. TheSenate report language included an earmark of $93 million to hire an additional 1,000 Border Patrol agents inFY2001, tocontinue recruitment bonuses, and to provide for the journey level upgrade. It also included an earmark of $67million for26 new border patrol helicopters. The conference report language earmarks include the same amounts as in theHouse-passed bill. Ths conference agreement does not assume a journey level upgrade. Also, earmarked is $18million todeploy the integrated surveillance intelligence system and $16 million for additional equipment. In recent years, INS has come under intense criticism for failing to deport criminal aliens in an expeditious manner. FromFY1993 to FY2000, funding for the detention and deportation program increased from $193 to $879 million. INSofficialscontinue to report that the agency does not possess the detention capacity to fully comply with statutory mandatesset out inthe Antiterrorism and Effective Death Penalty Act ( P.L. 104-132 ) and the Illegal Immigration Reform andImmigrantResponsibility Act ( P.L. 104-208 ). To improve and expand detention facilities and increase efforts to identify andremovecriminal aliens, the Administration has requested $120 million in increased funding for FY2001, which wouldincrease thedetention and deportation budget to more than $1 billion. Nearly matching the Administration's request, Housereportlanguage included earmarks of $87 million to increase INS detention space to 19,702 beds (daily average), including120juvenile beds; $16 million for the Justice Prisoner Alien Transportation System; $8 million to enter criminal alienrecordsinto the National Criminal Information Center (NCIC); and $25 million for detention construction projects. Also,there isan earmark for an additional $5 million and 46 positions to expand the criminal alien apprehension program (CAAP)and$11 million and 100 positions to form 23 additional quick response teams that work with state and local lawenforcement toidentify and remove deportable aliens. Neither of these increases was requested by the Administration. Conferencereportlanguage parallels House earmarks, except that amounts for NCIC and CAAP, $4 and $3 million respectively, arelower. Also, an additional $1.5 million is earmarked for the Law Enforcement Support Center in Vermont. Regarding INS restructuring, FY2001 conference report language stresses, as did language in the FY2000 conferencereport, that "a lack of resources is no longer an acceptable response to INS's inability to adequately address itsmissionresponsibilities." On March 22, 2000, the House Judiciary Committee's Immigration and Claims Subcommitteeapproveda bill to split INS, establishing a bureau of immigration services and a bureau of immigration enforcement withintheDepartment of Justice ( H.R. 3918 ). Last year, the Senate Judiciary's Immigration Subcommittee held ahearing on another INS restructuring proposal ( S. 1563 ) on September 23, 1999, but in the last session theSenate did not addressed this issue. The Administration, meanwhile, moved forward with formulating plans torestructureINS internally. (See CRS Report RS20279, Immigration and Naturalization Service Reorganization andRelatedLegislative Proposals , and CRS Report RL30257, Proposals to Restructure the Immigration andNaturalization Service ,both by [author name scrubbed].) Congress provided additional funding in the amount of $30.4 million for FY2001 for the Department of Justice in theDepartment of Labor, Health and Human Services, and Education appropriations bill H.R. 4577 ( P.L.106-554 , December 21, 2000) (House Conference Report 106-1033, December 15, 2000). This funding included$500,000for salaries and expenses for the Federal Prison System. Under the Office of Justice Programs account, Congressprovidedfunding of $300,000 for Justice Assistance, $3.1 million for Community Oriented Policing Services, and $1 millionforJuvenile Justice programs. The General Provisions account receivedtotal funding of $25 million, which included $12million for the United States Attorneys, $9 million for the Strom Thurmond Boys and Girls Club National TrainingCenter,$500 thousand for Violations of Federal Trucking Laws, and $4 million for COPS technology. The Government Performance and Results Act (GPRA) requires the Department of Justice, along with other federalagencies, to prepare a 5-year strategic plan which contains a mission statement, a statement of long-range goals ineach ofthe Department's core functions and a description of information to be used to assess program performance. TheDOJsubmitted its Strategic Plan for 1997-2002 to Congress in September 1997. During the FY1999 budget process, theSenateAppropriations Committee commended the Assistant Attorney General for Administration for preparing DOJ'sFY1999performance plan, finding it timely, with objective, measurable performance goals. The committee found thestrength ofthe performance plan in its clear strategies for meeting performance goals. DOJ was urged to follow therecommendationsof the General Accounting Office (GAO) in preparing a plan for fiscal year 2000, because the committee'srecommendations for fiscal year 2000 would be based on the GAO model. The DOJ FY2000 Summary Performance Plan described what the Department of Justice plans to accomplish in FY2000,consistent with the long-term strategic goals, and complements the Department's budget request. It provided asummarystatement of themes and priorities of DOJ for seven core functional areas (investigation and prosecution of criminaloffenses, assistance to tribal, state, and local governments, legal representation, enforcement of federal laws, anddefense ofU.S. interests; immigration; detention and incarceration; protection of the federal judiciary and improvement of thejusticesystem; and management). It summarized and synthesized detailed performance plans of specific Justice componentorganizations such as the Federal Bureau of Investigation, the Drug Enforcement Administration, the United StatesAttorneys, the United States Marshals Service, and others. Department of Commerce In his FY2001 budget request to Congress, the President requested total funding for the Department of Commerce andrelated agencies (18) of $5.5 billion, about a $3.2billion decrease (or 36.7%) from the $8.7 billion appropriated by Congressfor FY2000. The much higher appropriation for FY2000 reflected primarily a large special appropriation to covertheexpenses of preparing for and implementing the 2000 decennial census. The amount requested for the Department for FY2001 was $5.4 billion, which was about $3.2 billion (or 37%) below the$8.6 billion appropriated for FY2000. Again, virtually all of this additional money for FY2000 to cover the costof the year2000 decennial census. All agencies within the Department, including the Bureau of the Census (excluding the costsof thedecennial census), would receive increases in funding from FY2000 levels under the President's FY2001 request. On June 14, 2000, the House Appropriation Committee approved a recommended level of funding for the Departmentwhich totaled $4.3 million, which was about $1.1 million below what the President requested. The full Houseessentiallyapproved the same level of funding on June 26. On July 18, 2000, the Senate Appropriations Committee recommended a funding total for the Department of about $4.8billion, which was about $600 million below the President's request and about $500 million above the amountapproved bythe House-passed bill. Congress approved about $5.2 billion for the Department, about $220 million below the President's request. The FY2001total approved for the Department and related agencies amounted to $5.3 billion, about $220 million below therequest. The major funding issues that were considered during congressional deliberations on the President's request forCommerceappropriations included: the progress made in the streamlining and downsizing the Department's programs and operations; the needs of the Bureau of the Census in processing and releasing the 2000 decennial census results; and the extent to which federal funds should be used to support industrial technology development programs at the National Institute of Standards and Technology (NIST), particularly the Advanced TechnologyProgram. the completion of National Weather Service Modernization and the extent to which the National Oceanographic and Atmospheric Administration (NOAA) would implement a number of Presidential initiatives toprotectthe environment and foster research and development in the 21st century. the extent to which foreign countries comply with trade agreements and U.S. trade laws. The President's FY2001 budget request for the Department called for $74.1 million for Departmental Management, which was about $22.6 million above the $51.5 million appropriated for FY2000. This total also included therequest forthe Inspector General's office, amounting to $22.7 million-- about $2.7 million above the $20.0 million appropriatedforFY2000. The House Appropriations Committee recommended a level of $52.4 million which is $900 thousandbelow theFY2000 appropriation and about $21.7 million below the amount requested by the Administration for FY2001. TheHouseapproved an amendment by Rep. English which decreased the Committee's recommendation for GeneralAdministration by$3 million to $28.4 million. This amount would be transferred to the office of the U.S. Trade Representative. Hence, thetotal for Departmental Management (formerly referred to as General Administration) would be reduced form theCommittee's figure of $52.4 million to $49.4 million. This total included $21 million for the office of InspectorGeneral,which was less than that requested by the President and appropriated for FY 2000. The Senate Appropriations Committee recommended total funding of $67.1 million, which is $7 million below thePresident's request, $15.6 million above the FY2000 appropriation, and $17.7 million above the amount approvedby theHouse. The total includes $19 million for the Office of the Inspector General, which is lower than the amountsrecommended bythe House and requested by the President It is also less than the amount appropriated for FY2000. Congress approved $56 million which is $18 million below the President's request, but $5.1 million above the FY2000appropriation. This total includes $20 million for the Office of the Inspector General, the same level appropriatedfor FY2000. To fund the Department's Economic and Statistical Analysis programs, the President requested $54.7 million, which wasabout $5.2 million above the total appropriated for FY2000--$49.5 million. The House Appropriations Committee recommended $49.5 million which is the same level appropriated for FY2000 and $5.2 million below the President'srequest. The full House approved the same amount. The House approved the Committee recommendation. The Senate Appropriations Committee recommended $54 million, about $.7 less than the President's request and $4.5million more than that approved in the House-passed bill and that appropriated in FY2000. Congress approved $53.7 million, about $4.2 million above the FY2000 appropriation and $1 million below the President'srequest. For the Bureau of the Census , the President requested a total of $719.2 million for FY2001, an amount about $4.0 billionlower than the almost $4.8 billion appropriated for FY2000. Most of this larger total for FY2000 reflected a specialappropriation, designated an emergency appropriation, to fund final preparations for and implementation of the year2000decennial census. (19) The FY2001 budget requestfor the decennial census was $421 million. The House AppropriationsCommittee recommended $670.9 million for the Bureau, which was $48.3 million below the Administration'srequest.For the decennial census in FY2001, the Committee recommended $ 392.9 million. The House approved theCommitteerecommendation. The Senate Appropriations Committee recommends $693.6 million for the Bureau, which was $25.6 million below thePresident's request and $22.7 million more than the House-approved amount. The Senate Committee recommended about$399.7 million for the decennial Census in FY2001, which was $3.2 million less than the amount approved by theHouse. For the Bureau in FY2001, the Conference Committee agreed to total spending of $733.6 million, instead of the $670.9million approved by the House as a direct appropriation, and the direct appropriation of $693.6 million approvedby theSenate. The conference agreement included $390.9 million for the decennial census in FY2001, of which $130.9millionwas a direct appropriation and $260 million was a carryover of prior year funds. The $390.9 million contrasted withtheHouse-passed direct appropriation of $392.9 million and the Senate-passed direct appropriation of $389.7 millionfor thedecennial census. In the area of international trade, the Congress approved $337.4 million for the International Trade Administration ($334.4 million in appropriations plus $3 million in fee collections). This amount was $17.7 million less than thePresident's request of $355.1 million ($352.1 million in appropriations plus $3 million in fee collections) but $25.9millionmore than the FY2000 level of $311.5 million ($308.5 million in direct appropriation plus $3 million from feecollections). The Senate Appropriations Committee had recommended $318.7 million (including $3 million from feecollections), andthe House had approved $321.4 million (including $3 million in fee collections). The Administration had askedforfunding of a trade compliance initiative, where additional staff would monitor trade compliance and market accessproblems facing U.S. exporters, with special attention to Asia, and would conduct verifications in antidumping andcountervailing duty cases. The FY2001 amount approved by Congress for the Bureau of Export Administration (BXA) was $64.9 million. Thisamount was $6.7 million less than what the President had requested ($71.6 million) but $10.9 million more thantheamount appropriated in FY2000 ($54.0 million). The Senate Committee had recommended $61.0 million, and theHousehad approved $53.8 million. The President had requested funds for additional inspections under the new ChemicalWeapons Convention (CWC) and for support of a joint counter-terrorism program with the U.S. Customs Service. Thefinal total approved for BXA in the conference report included $7.3 million for CWC enforcement, which was morethanwhat the President had requested for this purpose in FY2001 ($5.1 million) and much more than the amount fundedfor thispurpose in FY2000 ($1.9 million). The Economic Development Administration (EDA) has experienced a tumultuous appropriations history over the past fewyears. (20) Its funding level was sharply reduced bythe 104th Congress, then partially restored by the 105th. In the firstsession of the 106th Congress, appropriators placed EDA programs in jeopardy until the last possiblemoment. In the end, P.L. 106-113 reduced the agency's funding by $4 million compared to its FY1999 level. More specifically, forFY2000 theagency received a total adjusted appropriation of $387 million - $26.5 million for Salaries and Expenses (S&E)and $360.5million for Economic Development Assistance Programs (EDAP). For FY2001, the Administration requested $27.7 million for S&E and $409.3 million for EDAP, for a total appropriation of$436.9 million. The House bill, following the recommendation of the Appropriations Committee, provided $26.5millionfor S&E and $361.9 million for EDAP, for a total CJS appropriation of $388.4 million for FY2001, or $48.5million lessthan requested. This recommendation was the same level as the FY2000 appropriation. The Senate Appropriations Committee provided $31.5 million for S&E and $218 million for EDAP, for a totalrecommended appropriation of $249.5 million for FY2001, or $187.5 million less than requested and $138.9 lessthan thetotal approved by the House. This recommendation was also $138.9 million less than the level appropriated for FY2000. Congress approved $286.7 million for EDAP and $28 million for S&E, for a total FY2001 appropriation of $411.9 millionfor EDA. Of the amounts provided, $286.7 million is for Public Works and Economic Development, $49.6 millionis forEconomic Adjustment Assistance, $31.5 million is for Defense Conversion, $24 million is for Planning, $9.1million is forTechnical Assistance (including University Centers), $10.5 million is for Trade Adjustment Assistance, and $.5million isfor Research. The President requested $28.2 million for the Minority Business Development Agency (MBDA) , which was about $1million above the $27.3 million appropriated for FY2000. The House Appropriations Committee recommends thesameamount appropriated for FY2000. The House approved this amount. The Senate Appropriations Committeerecommendeda slightly lower level of $27.0 million. Congress approved $27.3 million. The Patent and Trademark Office (PTO) is fully funded by user fees collected from customers. The ConsolidatedAppropriations Act, P.L. 106-113 , provided the PTO with the authority to spend $871 million for FY2000 (althoughthereare no direct appropriations from the General Fund). Included in this figure were $755 million from current yearfees and$116 million in carryover fees. This was an increase of 11% over FY1999 (when funds were returned to theTreasury tobalance the budget). For FY2001, the President requested that the PTO be given budget authority to spend $1038.7 million; $783.8 millionderived from fees expected to be paid to the Office during FY2001, $229 million from FY2000 carry over fees, and$25.9million in fees originally collected in FY1999. The estimated total of patent and trademark charges to be collectedinFY2001 is $1151.5 million, of which $367.7 million can not be spent until FY2002. H.R. 4690 , as passed by the House, provided the Patent and Trademark Office with the authority to spend $904.9 million of which $650 million was to be derived from fees collected in FY2001 ($501.5 million less thantheestimated $1151.5 million) and $254.9 million from funds carried over since FY1999 and FY2000. The versionof this billreported to the Senate from the Committee on Appropriations would permit the PTO to spend $1038.7 million, thesame asthe President's budget request. Included in this was $783.8 million from FY2001 fees ($112.8 million less than theexpected collections) and $254.9 million from prior fiscal years. P.L. 106-553 approves the funding levels providedin theSenate bill report and recommended in the President's budget request. This represents a 19 percent increase abovetheFY2000 operating level for the PTO. Appropriation measures that limit the Patent and Trademark Office's use of the full amount of fees collected in the currentfiscal year remain an area of controversy. Opponents argue that since agency operations are supported by fees forservices,the total amount of the fees collected should be available to provide for those services in the year the expenses areincurred. They claim that the fees not used instead fund other, non-related programs. Proponents maintain that fees generatedin pastyears and made available in the current fiscal year make up any difference. The President requested $2.76 billion in budget authority for the National Oceanic and Atmospheric Administration(NOAA) for FY2001. This amount was $435 million greater than FY2000appropriations, an increase of 19%, and was12% greater than the $2.5 million requested by the President for FY2000. Of the FY2001 request total, nearly $1.9billion(68%) was slated for Operations Research and Facilities (ORF), and $635 million (22%) for Procurement,Acquisition, andConstruction (PAC). Other NOAA funding totaled $281 million (10%). The request included $160 million forPacificCoastal Salmon Recovery (PCSR), and related treaty implementation; $100 million for a newly proposed CoastalImpactAssessment Fund; and $10 million for a Fisheries Assistance Fund. NOAA requested new budget authority of $30millionthrough collection Navigation Services and Fisheries Management and Enforcement fees. The President requestedincreased funding for NOAA's part in Committee on Environment and Natural Resources (CENR) initiativesincludingNational Disaster Reduction ($110 million); Land Legacy ($265.8 million); South Florida Ecosystems RestorationInitiative ($1.6 million); Clean Water ($6.9 million); DOC Minority Serving Institutions ($17 million); and grantsunder theCoastal Zone Management Act ($92.7 million). New in the FY2001 request were a Climate Observation andServicesInitiative ($28 million) and America's Ocean Future Initiative (formerly "Ocean 2000" initiative). Funding for traditional line offices at NOAA was requested as follows: National Ocean Service (NOS) $517 million ($11million of that PAC), includes $100 million for Coastal Impact Assessment Fund; National Marine Fisheries Service(NMFS) $657 million ($22 million PAC), includes $160 million for Pacific Salmon Recovery and $10 million forFisheriesAssistance Fund; Oceanic and Atmospheric Research (OAR) $319 million ($11 million PAC), includes $32 millionforClimate Observation and Services and $59 million for Sea Grant; National Weather Service (NWS) $710 million($75million PAC); National Environmental Satellite Data and Information Service (NESDIS) $613 million ($505 millionPAC),includes funding for a new satellite operation facility in Suitland, MD; Program Support (PS) $87 million ($16millionPAC), includes $17 million for Minority Serving Institutions and $15.8 million for a Commerce AdministrativeManagement System; Facilities (FAC) $9 million ($3 million PAC); and Office of Marine and Aviation Operations(OMAO), formerly Fleet Planning and Maintenance and Aircraft Services under PS), $21 million ($200,000 PAC). On June 26, 2000, the House passed H.R. 4690 , approving funding levels recommended by the House Appropriations Committee on June 14, 2000 ( H.Rept. 106-680 ), with one amendment. This amounted to $2.23billiontotal for NOAA, which is about 5% less than that appropriated by Congress for FY2000, and about 19% less thanthePresident's request of $2.761 billion for FY2001. The House approved ORF funding at $1.607 billion, about $30millionless than the President's request. PAC funding was approved at $566 million for FY2001, with an amendment foradditional funding for NMFS, which was $1.2 million more than House Appropriations Committeerecommendations. Thebalance of other NOAA appropriations totaled $63.4 million. Major funding differences between final Houseapprovedlevels and the President's request include a $145 million reduction for NOS and a $50 million reduction for NMFS. Inaddition, the House approved $58 million of the $160 million requested for PCSR. Most NOAA programs werefunded at,or slightly below, FY2000 appropriations levels, with few exceptions. Some CENR initiatives were not fundedbecause thecommittee cited that many of these programs were not authorized. The House funded NOAA line offices as follows: NOS-$260.6 million; NMFS; $405.4 million; OAR-$264.6 million;NWS-$621.7 million; NESDIS-$106.6 million; PS-$58.1 million (includes aircraft services); FM&P-$7million; FAC-$11million; for an ORF Total $1,607 million. PAC was approved at $ 565 million but, the House did not approveadvancedappropriations for PAC of $6,417.5 million through FY2019. No funding was approved for GLOBE or ClimateObservations and Services (OAR), nor was the $100 million for Coastal State Grants to mitigate the impacts ofoffshoredrilling activities and other purposes, for which the House cited $1 billion of mandatory funding passed previouslyin H.R. 701 . The House did not approve an increase in NOAA budget authority of $30 million from collectionofproposed offsetting fees. On September 8, 2000, the Senate Appropriations Committee reported H.R. 4960 ( S.Rept. 106-404 ). The Committee approved a total of $2.687 billion for NOAA. This amount was 21% higher than House passed levelsfor H.R. 4690 , about 3% below the Clinton Administration's request, and about 15% greater than FY2000appropriations. Of this amount, $1,961 million in budget authority was approved for ORF, with $66.2 million ofthat to bederived from PDAF. This amount was 22% greater than the House approved levels, and 6% greater than thePresident'srequest for ORF for FY2001. PAC funding was approved at $669.5 million, which is 5% greater than levelsrequested bythe President, but 16% above House approved levels. Senate Appropriations Committee line totals for NOAA were as follows: $321.3 million for NOS, which is 23% greaterthan House levels and 21% less than the FY2001 request; $543.9 million for NMFS, which is 34% greater thanHouselevels and 20% greater than the request; $318.2 million for OAR, which is 20% greater than House levels and about5%greater than the request for FY2001; $632.5 million for NWS, 1.7% below the House and 0.7% less than theFY2001request; $112.1 million for NESDIS; $71.3 million for PS; $19 million for FM&P; $35.3 million for FAC. PAC wouldreceive $669.5 million which is about 5% greater than the President's request of $635 million for FY2001, but18.5%greater than House approved levels of $565 million. PCSR would be funded at $58 million, the same as Houseapprovedlevels. CZMF was approved at $3.2 million, $0.8 million below the House and President's request. Other fisheriessupporting accounts were approved at $1.5 million, slightly higher than House and President's request for FY2001. Nofunding was approved for GLOBE. The Senate Appropriations Committee concurred with the House and did notapprove$100 million for a coastal assessment fund or $30 million in new budget authority from proposed offsetting fees. However,the Committee did approve $14 million of the $32 million requested for Climate Observation and Services initiativeforocean observations. Sea Grant was funded $64.8 million and underwater research at $17 million, significantlyhigher thanthe President's request. Increases were also realized for aircraft services, fleet maintenance and planning, and $15millionwas included for construction of a new NOAA facility in Suitland, MD. With passage of the Interior Appropriations bill for FY2001 on October 11, 2000 ( P.L. 106-291 ), the Balanced Budget andEmergency Deficit Control Act of 1985 was amended to raise spending caps on certain Federal programs. In asection on Conservation Spending , subparagraphs xv-xvii , dealing with NOAA activities whichsupport coastal and Great Lakeconservation, and are directly tied to the President's Land Legacy initiative, funding caps were raised to allow theagency tospend an additional $420 million for a number of NOAA activities including Pacific Coastal Salmon Recovery,additionalfunding for Operations, Research and Facilities (ORF), CZMA, National Marine Sanctuaries, National EstuarineResearchReserves Systems, Coral Restoration programs, and Coastal Impact Assistance. Most of this funding had beenapproved bythe Senate Appropriations Committee in its version of H.R. 4690 , except for $420 million for coastal andocean activities. On October 25, 2000, Conferees on H.R. 4942 reported Appropriations for the District of Columbia for FY2001 ( H.Rept. 106-1005 ). Attached as Title II to this Act is Commerce, Justice, and State Appropriations forFY200,which became P.L. 106-533 on December 21, 2000. The conference agreement provided NOAA a total fundinglevel of$3,048 million for all NOAA programs. This is about 12% greater than the amount approved by the SenateAppropriationsCommittee; 27% greater than House approved levels; 30% greater than FY2000 appropriations of $2,343 million;and about 4.4% less than the President's request for FY2001 (if the $420 million for coastal and ocean activities isincluded. Operations Research and Facilities funding totaled some $1,869 million, $68 million of which would be derivedby transferfrom the Promote and Develop Fishery Products and Research Pertaining to American Fisheries (PDAF) and $3.2millionin offsets from the Coastal Zone Management Fund. Procurement, Acquisitions and Construction (PAC) is slatedtoreceive $683 million, including $7.5 million in previous FY deobligations. Other NOAA accounts include fundingof $74million for Pacific Coastal Salmon Recovery; $3.2 million for the Coastal Zone Management Act (ORF); and $1.43millionfor other fisheries financing programs. Conferrees also appropriated $420 million for "Coastal and Ocean Activities," which was authorized in Title VIII of H.R. 4578 , Land Conservation Preservation and Infrastructure Improvement, under the InteriorAppropriationsbill which became P.L. 106-291 . Some $150 million of this is for a Coastal Impact Assessment and another $135million isfor NOAA programs authorized under Title IX �903 of H.R. 4942 . The Conference committee approved funding for traditional NOAA budget lines as follows: NOS-$290.7 million;NMFS-$517.9 million; OAR-$323.2 million; NWS-$630.8 million; NESDIS-$125.2 million; PS-$81.3 million;FP&M-$11 million; and FAC-$11.2 million. Conferees reduced Senate approved funding levels for a numberof programsthat were authorized under �903 of the Act. These include the Pacific Coastal Salmon Recovery Program, CZMA,andadditional funding for some ORF programs, such as National Marine Sanctuaries, NERRS, Coral Restoration, andCoastalImpact Assistance. In most cases, final conference approved levels for NOAA are in between House and SenateAppropriations Committee approved totals, with obvious exceptions. For example, the conference committeeapproved$15 million for Minority Serving Institutions, boosting overall funding for the Program Support budget line. Theyalsoapproved the Senate Appropriations Committee funding level for the Stellar Sea Lion recovery program underNMFS. Furthermore, the conference committee approved $12.3 million for Climate Observations and Services (about halfof thePresident's request), approved $3 million for GLOBE, and close to or slightly more than the President's request forotherclimate change research activities. A $10 million increase was targeted for Marine Prediction research under OceansandGreat Lake Programs. Final Sea Grant and NURP approved funding remained close to Senate AppropriationCommitteelevels, which were substantially higher than the President's request. The committee also funded the Global DisasterInformation Network at $3 million, which was not funded by the House or Senate Appropriations Committee. National Weather Service funding levels remained consistent with the House except for some reductions in base fundingfor local forecast and warning to offset increased funding for NOAA weather radio transmitters. Other increaseswereprovided for NESDIS Data and Information Services and Ocean remote sensing. The Conference committee didnotapprove the Senate Appropriations request for $15 million for a new Suitland, MD facility under the NOAAFacilitiesaccount, but approved it instead under the PAC construction account. The FP&M line for FY2001 was reducedby the costof a new fishery research vessel that was approved instead under PAC. Funding for CAMS was increased $4million abovethe agency's request for a total of $19 million. The Pacific Coast Salmon Recovery account realized a $16 millionincrease under conference committee actions for a total of $74 million. In the conference report that accompanies H.R. 4577 , Making Omnibus Consolidated and EmergencySupplemental Appropriations for FY2001 ( H.Rept. 106-1033 , December 15, 2000), there was an additional$61.5 millionappropriated for NOAA. This funding includes $750,000 for ORF for a study by the National Academy of Sciencespursuant to Exploration of the Seas Act ( H.R. 2090 , sec. 4, September 6, 2000); and for other funding of $7.5million for Alaskan Salmon Disaster; $3 million for Hawaii Long Line fishery; and $50 million for Sea LionProtection. Taken together appropriations for H.R. 4942 (see above), NOAA's total budget authority for FY2001,amounts to $3,109 million. The National Institute of Standards and Technology (NIST) received an appropriation of $639.0 million in FY2000 afterthe rescission mandated in P.L. 106-113 . This was fundamentally the same support as the previous year, but 13%belowthe President's request. Funding included $282.1 million for the Scientific and Technical Research and Services(STRS)account (with $4.9 million for the Baldrige Quality Program); $246.8 million for Industrial Technology Services(ITS),including $142.6 million for the Advanced Technology Program (ATP) and $104.2 million for the ManufacturingExtension Partnership (MEP); and $106.9 million for construction. Continued financing of the Advanced Technology Program has been a major funding issue. ATP provides seed financing,matched by private sector investment, to businesses or consortia (including universities and governmentlaboratories) fordevelopment of generic technologies that have broad applications across industries. Opponents of the program citeit as aprime example of "corporate welfare," whereby the federal government invests in applied research activities that,theymaintain, should be conducted by the private sector. The Administration has defended ATP, arguing it assistsbusinesses(and small manufacturers) develop technologies that, while crucial to industrial competitiveness, would not or couldnot bedeveloped by the private sector alone. For FY2000, the appropriations bill passed by the Senate included a 15%increase infunding for ATP. However, H.R. 2670 , as passed by the House, contained no appropriation for ATP. Theaccompanying House Committee report stated that the program has not produced a body of evidence to overcomethosefundamental questions about whether the program should exist. While the Advanced Technology Program wasultimatelyfunded in the version of the bill that became law, the support provided, $142.6 million, reflected a 28% decreasefromFY1999. The original appropriations bill passed by the House, H.R. 4690 , did not include any ATP fundingfor FY2001. The President's FY2001 budget requested $713 million for NIST, 12% above FY2000. Included was $337.5 million forthe STRS account (with $5 million for the Quality Program). Support for ITS totaled $339.6 million of which$175.5million was for ATP (an increase of 23%) and $114.1 was for MEP (9.5% above FY2000). In addition, a newprogramunder ITS, the Institute for Information Infrastructure Protection (IIIP), would be funded at $50 million. This effortwouldsupport R&D designed to protect information and telecommunications infrastructures from attack or otherfailures. Theconstruction budget would be $35.9 million. H.R. 4690 , as passed by the House, provided funding for NIST at $422.9 million for FY2001, a decrease of34% from the previous year and 41% below the President's request. Most of the decrease in support was due to theabsence of funding for the Advanced Technology Program and a decrease in the construction budget as the buildingof thenew measurement laboratory progresses. Included in this figure was $292.1 million for the STRS account, $104.8millionfor the Manufacturing Extension Program under ITS, and $26 million for construction. The version of H.R. 4690 reported by the Senate Appropriations Committee would have made available $596.6 million for NIST. Included in this FY2001 funding was $305 million for STRS activities (an 8% increaseoverFY2000), $109.1 million for MEP (a 5% increase), $153.6 million for ATP (8% above the previous year), and $28.9million for construction. The decrease in support for construction reflects activities to complete building the newadvancedmeasurement laboratory. P.L. 106-553 provides $598.3 million for NIST in FY2001. The total includes $312.6 million for STRS, $105.1 million forMEP, $145.7 million for ATP, and $34.9 million for construction. The Office of the Undersecretary for Technology and the Office of Technology Policy (OTP) was funded at $7.9 millionin FY2000, a 21% decrease from the previous fiscal year. Part of the decline in support was due to the decision tocease theawarding of grants under the Experimental Program to Stimulate Competitive Technology (EPSCoT) and performanevaluation of the project. This activity is designed to strengthen the technological infrastructure in states that are"...traditionally under-represented in federal R&D funding." For FY2001, the President requested $8.7 millionfor OTP, 9.3%above the current funding levels. The original appropriations bill passed by the House, H.R. 4690 , wouldhaveprovided support at $7.9 million, the same as FY2000. The version reported by the Senate AppropriationsCommitteewould have funded OTP at $8.2 million, a 4% increase. P.L. 106-553 provides a funding level of $8.1 million forFY2001. The National Telecommunications and Information Administration (NTIA) provides guidelines and recommendationsfor domestic and global communications policy, manages the use of the electromagnetic spectrum for publicbroadcast, andawards grants to industry-public sector partnerships for research on new telecommunications applications anddevelopmentof information infrastructure. For the current fiscal year, the budget for NTIA includes funding for its operations, administration, salaries, and expenses; support for the Technology Opportunity Program (TOP), formerly called theTechnology Information Infrastructure Assistance Program; and continued development and construction of publicbroadcast facilities. In addition, for FY2001, the Clinton Administration requested that NTIA's budget includeprograms toaddress the perceived "digital divide" separating the Internet "haves" from the Internet "have nots." For FY2001, the Clinton Administration requested an overall budget for NTIA of $423 million, well above its FY2000funding of $52.9 million. While the House Appropriations committee recommended $57.4 million for NTIA inFY2001,the Senate Appropriations has recommended $76.9 million for NTIA's overall budget in FY2001. The Confereesapproveda total of $100.4 million for NTIA's overall FY2001 budget. Among the most significant increases within the NTIAbudget would come from the Administration's request for public broadcast facilities, planning, and construction. ForFY2001, the Clinton Administration requested $110.1 million for public broadcast facilities, planning, andconstruction,well above the $26.5 million appropriated for this program for FY2000. The House approved $31 million for thisNTIAactivity in FY2001, while the Senate Appropriations has approved $50 million for this program. The Confereesprovided$43.5 million. For NTIA salaries and expenses, the Clinton Administration recommended $20.3 million forFY2001, anincrease over FY2000 appropriations of $10.9 million; the House approved funding of $10.9 million for salariesandexpenses while the Senate Appropriations approved $11.4 million. FY2001. The Conferees approved the fundinglevelrecommended by the Senate. For the TOP, the Administration requested: $45.1 million for FY2001, an increasefrom theFY2000 appropriation of $15.5 million. The House and Senate Appropriations both approved $15.5 million forTOP inFY2001. The Conferees approved $45.5 million, which slightly exceeds the Administration request. The Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L. 103-62 ; 107 Stat 285) requiresthat agencies develop strategic plans that contain goals, objectives, and performance measures for all majorprograms. The strategic plan issued by the Department of Commerce in 1997 enunciated three strategic themes: Theme l. Build for the future and promote U.S. competitiveness in the global marketplace, by strengthening and safeguarding the nation's economic infrastructure. Theme 2. Keep America competitive with cutting edge science and technology and a world class information base. Theme 3. Provide effective management and stewardship of the nation's resources and assets to ensure sustainable economic opportunity. As stated by the Department: The Themes within the Commerce Strategic Plan help identify and capitalize on relationships among bureaus and on partnerships with other agencies and external groups. The Strategic Plansupportsthe concept that strong working relationships will serve to strengthen the effectiveness of the Department as a whole,aswell as demonstrate how individual bureaus logically and critically support the core mission of theDepartment. The Commerce Strategic Plan provides the framework for strengthening existing relationships among bureaus and with external partners. Success for Commerce programs in the changingtechnological world and global economy will depend increasingly on alliances with businesses and industry,universities,State and local governments, and international parties. In its Budget in Brief for FY2001, the Department stated that: With the publication of the first Annual Program Performance Report in March 2000, the Department will have completed the first full cycle of GPRA mandated activities involving theStrategicPlan, the Annual Performance Plan, and the Annual Performance Report. The revised Commerce Strategic Plan(FY2000-FY2005) will be submitted to Congress in September 2000, and it will replace the first Strategic Plan(FY1997-2002) thatwas issued in September 1997. Commerce Department Abolition Issue During the 104th, 105th, and 106th Congresses, several legislative proposals wereconsidered that called for the abolition of the Department of Commerce by eliminating certain departmentalfunctions andallowing others to operate as independent agencies or be transferred to other federal agencies. Those in Congresswho havefavored the abolition of the Department argued that it "is an unwieldy conglomeration of marginally relatedprograms,nearly all of which duplicate those performed elsewhere in the federal government." The Clinton Administration,on theother hand, has strongly opposed abolishing the Commerce Department, arguing that "it would result in the needlessshuffling of governmental functions while eliminating successful activities that clearly benefit the Americanpeople,"especially in areas that promote economic growth, increase the international competitiveness of U.S. firms in globalmarkets, and advance U.S. technology. None of these proposals passed 104th Congress. There continued to be some congressional interest in reorganizing or downsizing the Department in the 105th Congress,although interest in abolishing the Department was considerably less than in the 104th Congress. (21) A bill calling for abolition of the Department was introduced by Representatives Royce and Kasich and several other cosponsors( H.R. 2667 ) on October 9, 1997. This bill was referred to the House Committee on Commerce and two otherHouse Committees that have jurisdiction over certain functions of the Department. A very similar version of theproposalwas also introduced in the Senate by Senator Abraham and others on October 24, 1997 ( S. 1316 ). This wasreferred to the Senate Governmental Affairs Committee. No further action was taken on this issue. In the106th Congress,similar legislation was introduced by Representative Royce on July 1, 1999-- H.R. 2452 . The bill was referredto several committees: Commerce, Transportation and Infrastructure, Banking and Financial Services, InternationalRelations, Armed Services, Ways and Means, Government Reform, the Judiciary, Science, and Resources. Nofurtheraction was taken in the House. No similar legislation was introduced in the Senate. The Judiciary For FY2001, Congress approved $4.26 billion in total budget authority for the Judiciary, less a .22% (.0022) government-wide rescission. (22) This totalrepresented a 7.7% increase over FY2000 funding of $3.96 billion and was higher than both the $4.21 billion included in the earlier House-passed FY2001 CJS bill, H.R. 4690 , and the$4.24 billion in total funding for the Judiciary recommended by the Senate Appropriations Committee. During October 26, 2000 floor debate, the House CJS Subcommittee chairman, Representative Harold Rogers, underscoredthat the FY2001 House-Senate conference agreement: provided necessary funding to address the federal court system's "ever-increasing caseload"; authorized a cost-of-living pay increase for federal judges; and provided a new increase in the hourly rate paid to court-appointed "panel attorneys" who represent indigentdefendantsin federal criminal cases. (23) The Congress-passed agreement contained other noteworthy language affecting the Judiciary. One provisionauthorized tennew district judgeships (one each for Arizona, the Southern District of Florida, the Eastern District of Kentucky,Nevada,New Mexico, South Carolina, the Southern District of Texas, the Western District of Texas, the Eastern District ofVirginia, and the Eastern District of Wisconsin). Another provision brought the Supreme Court police into paritywith theretirement benefits provided to the United States Capitol police and other federal law enforcement agencies. Theconference agreement, however, did not include a controversial Senate provision relating to honoraria or outsideearninglimits for federal judges. For the Judiciary's largest account, Salaries and Expenses for the Courts of Appeals, District Courts and Other JudicialServices, (24) Congressapproved $3.36 billion, compared with $3.11 billion enacted for FY2000. The total enacted forFY2001 was the same amount as recommended by the Senate Appropriations Committee, and slightly more thantheappropriation of $3.33 billion passed earlier by the House. The Judiciary, in its official newsletter The Third Branch ,expressed appreciation for the level ultimately approved by Congress for this account, noting that it funded 1,559new courtsupport staff. (25) A significant increase in thisaccount was urgently needed, the Judiciary had maintained, largely becauseof increased workload in judicial districts on the nation's southwestern border. (26) As it had been in previous years, one of the more sensitive parts of the Judiciary's FY2001 budget was Defender Services . This account funds the operations of the federal public defender and community defender organizations, and thecompensation, reimbursement and expenses of "panel attorneys." The latter are private practice attorneys appointedby thecourts under the Criminal Justice Act to serve as defense counsel to indigent individuals accused of federal crimes. ForFY2001 Congress approved $435.0 million for Defender Services, instead of $420.4 million as provided in theHouse billand $416.4 million as recommended by the Senate Appropriations Committee. (The Judiciary had requested anappropriation of $440.4 million for Defender Services, a 14.3% increase over FY2000 budget authority of $385.1million.) A matter of increasing concern to the Judiciary in recent years has been the relatively low rate of pay panel attorneysreceive relative to compensation paid to private counsel by other government agencies. (27) In response to that concern,House-Senate conferees directed that a portion of the Judiciary's Defender Services funding for FY2001 be usedfor anincrease to $75 an hour for panel attorneys' in-court time and $55 an hour for their out-of-court time. (28) During consideration of the Judiciary's FY1999 and FY2000 budgets, congressional appropriators also had expressedconcerns about rising overall Defender Services costs. A particular concern both years had been the costs ofcompensatingattorneys who represent indigents in federal death penalty and death row appeal cases (often referred to as "capitalcases"). In its FY2001 budget submission to Congress, the Judiciary noted various ongoing initiatives on its part to containcosts forfederal capital habeas corpus cases. (29) TheJudiciary also said it was continuing to pursue implementation ofrecommendations included in its January 1998 report to Congress on controlling costs associated with the DefenderServices program. In its June 14, 2000 report on H.R. 4690 , the House Appropriations Committee noted that it had received areport regarding measures undertaken by the U.S. Court of Appeals for the Ninth Circuit to reduce costs for capitalhabeascorpus representations in the Circuit's District Courts, particularly the District Courts in California. Thosemeasures, theCommittee noted, appeared to be working, "as evidenced by the 40 percent reduction in the average annual cost perpetitioner in the Ninth Circuit." While commending the Ninth Circuit for its efforts to reduce costs, the Committeeobserved that the average cost per petitioner in California was still almost twice that of the national average. Accordingly,the Committee urged the Ninth Circuit to continue its cost-cutting efforts and to include results in its OptimalUtilization ofJudicial Resources Report. The House committee language subsequently was adopted by reference in the CJSFY2001appropriations conference report. Congress also approved a provision authorizing a cost-of-living increase in judges' and justices' salaries for FY2001 (30) and appropriating $8.8 million for this purpose. The provision cleared the way for judges and justices to receivea 2.7 %pay adjustment along with Members of Congress and Executive Schedule employees on January 1, 2001. Theadjustmentrate of 2.7% was based on a formula set by law involving the Employment Cost Index (ECI), while at the same timebeing limited by the General Schedule (GS) salary adjustment rate. (31) In early 2000, the Judiciary had requested funding for a cost-of-living increase in judges' and justices' salaries for FY2001consistent with the expected FY2001 salary increase for the federal government's General Schedule employees. TheJudiciary contended that this requested adjustment, and subsequent adjustments on an annual basis, were "essentialif thejudiciary is to maintain its high standards." (32) TheHouse, however, declined to include an appropriation for increasedjudicial salaries in FY2001 in the CJS bill that it passed, H.R. 4690 . (The House Appropriations Committee, in its report on H.R. 4690 , stated that it had "deferred without prejudice" the Judiciary's request for a payadjustment.) By contrast, the Senate Appropriations Committee approved a pay adjustment for the Judiciary, andit was theSenate committee recommendation which ultimately prevailed in conference. (33) House-Senate conferees dropped from the Judiciary's FY2001 appropriations title a provision approved by the SenateAppropriations Committee concerning honoraria received by justices and judges .Specifically, Section 305(a) in theGeneral Provisions of Title III of the Senate bill had provided that a statutory prohibition against Members ofCongress orGovernment officers or employees receiving honoraria shall not apply to "any individual while that individual isa justiceor judge of the United States." (34) At the same time,Section 305 authorized the Judicial Conference, if it so chose, to setits own honoraria limits for justices and lower federal court judges. (35) Section 305 also excluded honoraria received byjudges from the definition of "outside earned income" in 5 U.S.C. App. Sec 501(a), making judicial honoraria nolongersubject to the statutory curb, in effect since 1989, which has limited the "outside earned income" of judges (and ofofficersand employees in the legislative and executive branches) to 15% of a level II in the Executive Schedule. The most prominent supporter of lifting the ban on honoraria for judges was Chief Justice William H. Rehnquist, whodefended it as a means of improving compensation for lifetime federal judges. However, the Senate committeelanguageto lift the ban generated controversy, with various news media editorials and some Senators and House Membersspeakingout in opposition. Their criticisms included the view that allowing honoraria for judges could lessen publicconfidence injudges (particularly if they were perceived as accepting money from special interests), that it would raise anothercontroversial issue--of whether Congress should lift the ban (which also had been in place since 1989) on its ownMembers receiving honoraria, and that a more appropriate means of increasing judicial income, if called for, wouldbe byraising judges' salaries. Against this backdrop, Senate negotiators ultimately dropped the honoraria provision fromtheSenate's CJS-Judiciary bill Congress, as recommended by the Senate Appropriations Committee, approved $199.6 million for Court Security , theaccount which covers the expenses of security and protective services for the lower federal courts in courtroomsandadjacent areas. For FY2001, the Judiciary sought an appropriation of $215.4 million for this account, an 11.6%increaseover FY2000 funding of $193.0 million. (36) TheHouse, as recommended by its Appropriations Committee, had approved$198.3 million, $17.1 million less than the Judiciary's request but $5.2 million, or 2.7%, more than FY2000funding. Of all of its budget accounts, the Judiciary requested the largest proportional increase in funding for the United StatesSentencing Commission , which sets, reviews, and revises sentencing guidelines and policies forthe federal criminaljustice system. The Judiciary requested $10.6 million for the Commission in FY2001, a 24.7% increase over itsFY2000appropriation of $8.5 million. Throughout most of FY1999 and part of FY2000, all of the seats on theseven-memberSentencing Commission were vacant, and against this backdrop of disarray in the Commission, Congress decreaseditsFY2000 appropriation 10.4% below its FY1999 funding level of $9.5 million. The FY2001 request sought restoredfunding for the Commission at a full staffing level. In response, Congress, as recommended by the SenateAppropriationsCommittee, approved $9.9 million for the Commission in FY2001. The House had approved $9.6 million for thisaccount. Congress approved $37.6 million for Supreme Court's Salaries and Expenses account, $2.1 million over FY2000 funding.As passed earlier by the House and recommended by the Senate Appropriations Committee, Congress approved $7.5million for the Court's Building and Grounds account (less than the $8 million enacted for FY2000 but preciselywhat theArchitect of the Capitol estimated was required for FY2001). Congress, as noted earlier, also approved the creation of ten new U.S. district judgeships. In July 2000, the JudicialConference transmitted to Congress a request for six permanent and four temporary court of appeals judgeships and30permanent and 23 temporary district judgeships, citing the courts' growing workload. However, neither theHouse-passed FY2001 CJS bill, H.R. 4690 , nor the amended version of H.R. 4690 approved by the SenateAppropriations Committee, authorized or provided funding for any additional new judgeships. The decision tocreate theten judgeships was made later, in conference committee (37) As part of the budget process, the Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L.103-62 ; 107 Stat. 285) requires that agencies develop strategic plans that contain goals, objectives, and performancemeasures for all major programs. However, as noted earlier, the Judicial branch is not subject to the requirementsof thisAct. Department of State and Related Agencies The Administration's FY2001 budget request for the Department of State and international broadcasting totaled nearly $7billion, 10% above the FY2000 enacted level of $6.3 billion. The request was comparable to the FY1999 enactedlevelwhich had included the $1.56 billion emergency supplemental appropriation for overseas security and Y2Kcomputercompliance. The House Appropriation Committee recommended $6.55 million for State and internationalbroadcastingFY2001 budgets. The House-passed legislation set the Department of State and broadcasting total to $6.54 billion.TheSenate Appropriations Committee set a similar funding level-$6.56 billion-for both international broadcasting andtheDepartment of State. Congress approved total funding for State and international broadcasting at $7.1 billion, $97millionmore than the Administration had requested. Reorganization of the foreign policy agencies occurred throughout FY1999, with both the U.S. Information Agency (USIA)and the Arms Control and Disarmament Agency (ACDA) abolished, and their functions fully merged into theDepartmentof State as of October 1, 1999. The FY2001 State Department appropriation includes ACDA and USIA funds. International broadcasting remains an independent agency, referred to as the Broadcasting Board of Governors(BBG). The August 7, 1998 terrorist attacks on two U.S. embassies in Africa prompted the Administration and Congress to seekmore funding to protect U.S. personnel overseas. An immediate response was a $1.56 billion supplemental enactedby theend of that year. In November 1999, the Overseas Presence Advisory Panel reported its findings on embassysecurity needsand recommendations. Also in November 1999, Congress authorized ( P.L. 106-113 ) $900 million annually forFY2000through FY2004 for embassy security spending within the embassy security, construction andmaintenance account(ESCM), in addition to worldwide security funds in the diplomatic andconsular programs account . The final FY2000appropriation passed by Congress and signed by the President set the total for overseas security upgrades at $568million. The Department of State FY2001 request included more than $1 billion for worldwide security upgrades in the diplomatic& consular programs account ($410 million) and the embassysecurity, construction and maintenance account ($648million) with which the House concurred. In addition, the Administration sought advance appropriations totaling$3.35billion for anticipated embassy security needs; however, the House did not agree with providing funds for futureyears. Beyond security needs, the Administration requested $431.2 million for regular ESCM spending. The House fullCommittee recommended $417 million (about $10 million less than the FY2000 level for this account) and theHousepassed that amount. The Senate full Committee recommended the same-$417 million for ESCM, but offered muchless-$364 million-for worldwide security upgrades within the ESCM account. The Senate Committee also specified$272.7 million within the D&CP account for worldwide security upgrades. The conference report passed byCongress putthe ESCM funding at $417 million, in addition to $663 million for worldwide security upgrades. The combinedlevelequals the total of the two in the President's request. The President's FY2001 request of $4,711.2 million for State's administration of foreign affairs was nearly $700 millionabove the FY2000 enacted level. The FY2001 request included: $97 million for the capitalinvestment fund , an increaseof more than $20 million in the education and cultural exchanges account , and adoubling of funds in the emergencies inthe diplomatic and consular service account which pays for embassy evacuations andrewards regarding terrorist arrests. The House Appropriation Committee recommended slightly less-$4,654.9 million-for State's administration of foreignaffairs. The House reduced this amount by $10.5 million to $4,644.4 million,transferring out of the diplomatic andconsular programs account $10 million to Legal Services Corp. and $500,000 to theInternational Water and BoundaryCommission. The Senate Appropriations Committee recommended $4,465.9 million-$178 million less than theHouse-passed level. The reduction was largely because of the reduced level of funding for worldwide securityupgrades. The conference report set funding for State's administration of foreign affairs at $4,782.0 million, $71 million more thanthe President's request. The capital investment fund , which was established in 1994, provides for purchasing information technology and capitalequipment to ensure efficient management, coordination, operation, and utilization of State's resources. TheAdministration request for FY2001 was $97 million--$17 million above the FY2000 level. Noting the need forimprovedcommunication and information technology at the Department's headquarters in Washington and in its overseasposts,Congress authorized $150 million for this account for FY2001. The House full Committee, however, recommendedfunding of $79.7 million, just under the current-year level of $80 million. The House agreed with this amount. TheSenateCommittee, on the other hand, set their version of funding for the capital investment fund at $104 million-higherthan boththe Administration request and the House level. The final level Congress passed was exactly equal to the President'srequest of $97 million. The United States contributes in two ways to the United Nations and other international organizations: voluntary paymentsfunded in the Foreign Operations Appropriations bill and assessed contributions included in the Commerce, Justice,andState Appropriations measure. Assessed contributions are provided in two accounts, internationalpeacekeeping and contributions to international organizations (CIO) . Following a periodof dramatic growth in the number and costs ofU.N. peacekeeping missions during the early 1990s, a trend that peaked in FY1994 with a $1.1 billion appropriation,funding requirements have declined in recent years. The FY2000 enacted appropriation for CIO was $885 million,$500million for international peacekeeping, and $351 million for U.S. arrearage payments to the U.N. if certain reformcriteriaare met by the United Nations. Only $100 million of the appropriated arrearage payments have been releasedbecause of alack of U.N. reform. The President's FY2001 budget sought $946.1 million for CIO and $738.7 million for international peacekeeping, with thebulk of funds going for peacekeeping activities in Kosovo, East Timor, and Sierra Leone. The HouseAppropriationsCommittee recommended setting both accounts below the FY2000 level: CIO-$880.5 million; internationalpeacekeeping-$498.1 million. The House passed these amounts. The Senate Appropriations Committee recommendedCIO funding of $943.9 million-closer to the Administration request-and $500 million for internationalpeacekeeping-thesame as the FY2000 level and similar to the House level. Also, the Senate Committee recommended rescinding$217million of unobligated funds in the international organizations account. Congress passed $870.8 million for CIOand $846million for peacekeeping for FY2001. The total of the two accounts is $32 million greater than the President'sFY2001request. Education and cultural exchange programs (formerly funded within USIA) include programs such as the Fulbright,Muskie, and Humphrey academic exchanges, as well as the international visitor exchanges and Freedom SupportActprograms. As a result of the foreign policy reorganization, this account is within State's Bureau for PublicDiplomacy andInternational Exchanges. The FY2000 enacted level for this account was $205 million, plus $3.6 million withinasupplemental for education and cultural exchanges with Kosovo. In the FY2000 enacted budget, Congress did notspecifyan amount for the Fulbright Educational Exchange Program. The Administration requested $225 million for education and cultural exchanges for FY2001. The $20 million increasewas to meet wage and price increases, enhance the Fulbright Program, and fully implement the United States/ChinaHighSchool Exchange Initiative. The House agreed with the CJS subcommittee and the full House AppropriationsCommitteein splitting the difference between the current budget level and the President's request, setting the education and culturalexchange account at $213.8 million. The Senate Appropriations Committee recommended therequested $225 million tothe exchange account for FY2001. Congress passed $231.6 million for this account-$6 million more than theAdministration had requested. USIA's international broadcasting operations account, established after consolidation under the Broadcasting Board ofGovernors (BBG) in FY1995, includes Voice of America (VOA), Radio Free Europe/Radio Liberty (RFE/RL), CubaBroadcasting, and newer surrogate facilities: Radio Free Asia (RFA), Radio Free Iraq and Radio Free Iran. WhenUSIAintegrated into the Department of State at the end of FY1999, the BBG became an independent agency. ForFY2000,Congress appropriated $410.5 million for international broadcasting activities and $11.3 million for capitalimprovements. The Administration FY2001 request totaled $428.5 million for broadcasting (including $23.5 million for Cuba Broadcasting) and $19.8 million for capital improvements. The House Appropriations Committee recommended$419.8million for international broadcasting and $18.4 million for capital improvements. The House passed these amounts.Included in the international broadcasting funds were $131.2 million for VOA, $68 million for RFE/RL, $23.3million forRFA, and $22.8 million for Broadcasting to Cuba. The Senate full Committee recommended a total of $441.6million forinternational broadcasting-$31.1 million for capital improvements (including security upgrades), $388.4 million forbroadcasting operations, and $22.1 million for Cuba Broadcasting. The final level passed by Congress includes$451.6,similar to the Senate level and about $7 million below the President's request. The Government Performance and Results Act (GPRA) enacted in 1993 ( P.L. 103-62 ; 107 stat 285) required that agenciesdevelop strategic plans that contain goals, objectives, and performance measures for all major programs. Thesubsequentlypublished reports: U.S. Department of State FY1999-2000 Performance Plan released February 1,1999, and the UnitedStates Department of State Performance Report, Fiscal Year 1999 established target goals and measured howsuccessfulthe State Department was in attaining those goals. With most of the 27 specified goals, State was close to, orcompletelysuccessful in, meeting its stated goals. Other Related Agencies This section includes all other related agencies covered by the CJS appropriations bill whose FY2001 appropriations exceed $1.8 million. (38) Maritime Administration (MARAD). MARAD administers programsthat aid in the development, promotion, and operation of the nation's merchant marine (including programs thatbenefitvessel owners, shipyards, and ship crews). The Administration requested $185.1 million for MARAD for FY2001,$7million more than Congress appropriated to it in FY2000. The request consisted of $98.7 million for the MilitarySecurityProgram (MSP), $80.2 million for operating MARAD and training ship crews, $2.0 million for ship constructionmortgageguarantees ("Title XI Program"), and $4.2 million for administering that guarantee program. The MSP programreplacesthe ODS (Operating Differential Subsidy) program. Only a few ships remained in the ODS program at the end ofFY1999,and the last ship contract in the ODS expires in FY2002. The House Appropriations Committee recommended$198million for MARAD for FY2001, $20 million more than was appropriated in FY2000, and about $13 million abovetheAdministration's request. The recommendation consisted of $98.7 million for the Military Security Program (MSP),whichis $2.5 million more that Congress appropriated for FY2000, and about $84.8 million for operating MARAD andtrainingship crews. The Committee also recommended $10.6 million for ship construction mortgage guarantees ("Title XIProgram"). This amount is $8.6million above the Administration's request and $4.6 million above the FY2000amount. The House Committee's recommendation also included $3.8 million to administer the guarantee program, the sameamountprovided in FY2000 and a reduction of $384,000 below the Administration's request. The House passed billapproved theCommittee's recommendations. The Senate Committee on Appropriations recommended $203.3 million for the Maritime Administration, $25.2 millionmore than Congress appropriated to it in FY2000, $18.2 million more than the Administration requested and $5.3millionmore than the House's recommendation. The Senate also recommended a total of $24.4 for loan guarantees andadministration of the Title XI Program which is $16.6 million above the amount Congress appropriated in FY 2000,$18.2million more than the Administration's request and $10 million more than what the House recommended. The conference agreement included a total of $219.6 million for the Maritime Administration, $41.5 million more thanCongress appropriated it in FY 2000, $34.5 million more than the Administration requested and $21.7 million thantheHouse recommended and $16.3 million more than the Senate recommendation. The conference agreement included$98.7million for the Maritime Security Program as proposed by the Administration and in both the House bill andtheSenate reported amendment. The agreement included $86.9 for the Maritime Administration Operations andTrainingaccount instead of the $72 million that Congress appropriated it in FY 2000. The approved total for FY2001 ishigherthan the $80.2 as proposed by the Administration and in the Senate-reported amendment and the $84.8 as proposedin theHouse bill. Within this amount, $47.2 was for the operation and maintenance of the U.S. Merchant MarineAcademy. Theconference agreement provided $34 million in appropriations for the Maritime Guaranteed Loan Program, $24millionabove the amount appropriated in FY 2000, $27.8 million more than the Administration requested, more thandouble the$14.4 the House had proposed, and $9.6 million more than the Senate reported amendment. Census Monitoring Board. The Administration requested $4 millionfor the Census Monitoring Board for FY2001. This body is an eight-member bipartisan oversight board charged withobserving and monitoring all aspects of the preparation and implementation of the 2000 decennial census. (39) Congressapproved $3.5 million for the Board, as part of the overall appropriation for the Census Bureau for FY2000. TheHouseAppropriations Committee recommended, and the full House approved, $3.5 million for the Board in FY2001,again aspart of the Bureau's total appropriation. The Senate bill contained no explicit reference to the Board. Congressapprovedthe recommendation of the House Committee. The Small Business Administration (SBA). The SBA is an independentfederal agency created by the Small Business Act of 1953. While the agency administers a number of programsintended toassist small firms, arguably its three most important functions are: to guarantee -- via the 7(a) general business loanprogram -- business loans made by banks and other financial institutions; to make long-term, low-interest loans tovictimsof hurricanes, earthquakes, and other physical disasters; and, to serve as an advocate for small business within thefederalgovernment. (40) For FY2001, the Administration requested a total appropriation of $1,057.8 million -- a figure which included $50.5million in an emergency supplemental appropriation to support the agency's disaster loan program. This comparedto a$847 million CJS appropriation for SBA for FY2000. More specifically, the FY2001 request included $419 millionforSalaries & Expenses (S&E), an increase of $96.3 million over the FY2000 appropriation. The House CJS bill followed the recommendation of the Appropriations Committee. An amendment, however, added $4.5million for the Women's Business Centers program. The result: a total FY2001 appropriation for SBA of $860.7million,including $304.1 million for S&E. For its part, the Senate Appropriation Committee recommended a totalFY2001appropriation for SBA of $887.5 million, including $143.5 for S&E. (41) Congress approved a total FY2001 appropriation for SBA of $$859.5 million, including an appropriation of $331.6 millionfor the SBA's S&E account. The conference agreement did not split funding for non-credit business assistanceprogramsinto a separate account, as proposed in the budget request and the Senate-reported amendment, but rather includedfundingfor such programs under this account. In addition, the conference agreement includes $37 million for programs related to the New Markets Venture CapitalProgram subject to the authorization of that program, including $7 million for BusinessLINC and $30 million fortechnicalassistance. (42) Legal Services Corporation (LSC). This agency is a private, non-profit,federally funded corporation that provides grants to local offices that, in turn, provide legal assistance to low-incomepeoplein civil (non-criminal) cases. The LSC has been controversial since its inception in the early 1970s, and has beenoperatingwithout authorizing legislation since 1980. There have been ongoing debates over the adequacy of funding for theagency,and the extent to which certain types of activities are appropriate for federally funded legal aid attorneys toundertake. Inannual appropriations laws, Congress traditionally has included legislative provisions restricting the activities ofLSC-funded grantees, such as prohibiting representation in certain types of cases or conducting any lobbyingactivities. For FY2001, the Administration requested $340 million for the LSC. The proposal would continue all restrictions onLSC-funded activities currently in effect. The Administration has requested $340 million every year since FY1997,in aneffort to partially restore recent cutbacks in funding. The Administration's FY2001 request for LSC is $35 millionhigherthan the $305 million FY2000 appropriation for the program. Historically, the Corporation's highest level offunding was$400 million in FY1994 and FY1995. P.L. 106-113 , the omnibus appropriations bill for FY2000, provided $305millionfor LSC for FY2000. For FY2001, the House Appropriations Committee recommended a total of $141 million for the LSC. This amount is $164million lower than the FY2000 appropriation and $199 million lower than the Administration's request. TheCommitteerecommendation of $141 million for LSC includes $134.6 million for basic field programs, $5.3 million formanagementand administration, and about $1.1 million for the inspector general. On June 26, 2000, the House approved $275 million for the LSC. This amount is $30 million lower than the FY2000appropriation and $65 million lower than the Administration's request. The $275 million for LSC includes $265millionfor basic field programs and required independent audits, $7.9 million for management and administration, and $2.1million for the inspector general. For FY2001, the Senate Appropriations Committee recommended a total of $300 million for the LSC. This amount is $5million lower than the FY2000 appropriation, $40 million lower than the Administration's request, and $25 millionhigherthan LSC amount in the House-passed bill. The Committee recommendation of $300 million for LSC includes $289million for basic field programs, $8.9 million for management and administration, and about $2.1 million for theinspectorgeneral. The Conference Committee report on H.R. 4690 included $330 million for LSC for FY2001. This is $25 million higher than the FY2000 LSC appropriation and $10 million lower than the Administration' s request. TheConference Committee report recommendation of $330 million for LSC includes $310 million for basic fieldprograms andindependent audits, $10.8 million for management and administration, $2.2 million for the inspector general, and$7million for client self-help and information technology. Both the House and the Senate approved the ConferenceCommittee recommendation for LSC. Equal Employment Opportunity Commission (EEOC). TheCommission enforces laws banning employment discrimination based on race, color, religion, sex, national origin,orhandicapped status. The EEOC's workload has increased dramatically since the agency first was created under TitleVII ofthe Civil Rights Act of 1964. As new civil rights laws have been enacted and employees' increased awareness oftheirrights has grown, the agency's budget and staffing resources have not been able to keep pace with the substantialincreasein its case load. The Congress increased the agency's budget for FY1999, giving it $279 million, an increase of $37millionover the FY1998 appropriation. The additional funds have helped to speed resolution of a large backlog of casesandexpand the use of alternative dispute resolution techniques. The agency's budget for FY2000 was increasedminimally to$282 million. For FY2001, the President requested $322 million, an increase of $40 million to continue the agency's effort to lowercharge inventories by increasing collaboration between investigatory and legal staffs, reduce excess backlogs inhearingsand appeals, provide training and technical assistance to employers on how to comply with equal pay requirements,andfacilitate compliance with EEO laws in the private and public sectors. The House Appropriations Committeerecommended $290.9 million, or almost $9 million more than the enacted FY2000 amount, but $31 million less thanthePresident's request. The House approved the Committee's recommendation. The Senate Appropriations Committeerecommended $294.8 million, or $12.8 more than the enacted FY2000 amount, $27.2 million less than thePresident'srequest, and $3.9 million more than the House amount. The Congress approved a compromise of $303.86 millionbetweenthe House and Senate recommendations for FY2001 funding of the EEOC. Commission on Civil Rights. The Commission collects and studiesinformation on discrimination or denials of equal protection of the laws. It received an appropriation of $8.9 millionforFY2000. The President's request for FY2001 calls for an increase to $11 million. The House AppropriationsCommittee recommended the same level as that appropriated for FY2000-$8.9 million, and $2 million below the President'srequest The House approved the Committee's recommendation. The Senate Appropriations Committee approved the samelevelapproved by the House. The Congress approved $8.9 million. Federal Communications Commission (FCC). The FCC is anindependent agency charged with regulation of interstate and foreign communication by means of radio, television,wire,cable and satellite. For FY2001 Congress approved $230.0 million in total FCC funding, compared with $237.2millionboth requested by the Commission and recommended by the Senate Appropriations Committee, $207.9 million aspassedby the House, and $210.0 million enacted for FY2000. Congress provided that of the FCC's total FY2001resources,$200.2 million was to be derived from offsetting fee collections (as provided in the House bill and recommendedby SenateAppropriations Committee), resulting in a net direct appropriation of $29.9 million (instead of $7.8 million includedin theHouse bill and $37.0 million recommended by the Senate committee). The FY2001 appropriations bill as enacted also included a new provision requiring the FCC to take certain actionsregarding lower power FM radio regulations. The provision, taken from the Radio Broadcasting Preservation Actof 2000( S. 3020 ), significantly scaled back the LPFM program. The measure, it was estimated, would have theeffect of reducing the number of LPFM licenses that the FCC could issue, from about 300-400 (under the FCC'scurrentrules) down to about 70 licenses nationwide. The provision also required the FCC to conduct further field tests ofLPFMsignals to determine whether these limitations could be dropped without causing harmful interference to incumbentradiobroadcasters. (43) Initially, the ClintonAdministration had expressed its opposition to this provision but stopped short ofsaying it was grounds for a presidential veto. Congress also approved, as part of its FY2001 CJS legislation, the "Launching Our Communities Access to LocalTelevision Act." This measure, as finally enacted, was a new version of legislation that, earlier in the106th Congess, passed the House as H.R. 3615 and the Senate as S. 2097 . (No conference was held to reconcilethe differences between those bills.) The intent of the legislation is to ensure that consumers can obtain localbroadcasttelevision channels via satellite or other technologies. (44) This legislation created a $1.25 billion loan guarantee program toassist recipients build systems that would ensure that consumers in all television markets, large and small, canreceive localtelevision signals. Recipients will be selected by a four-person Board composed of the Secretaries of Treasury,Agriculture,and Commerce, and the Chairman of the Federal Reserve, or their designees. The Board is to take into accountfactors suchas whether a project would provide service to "nonserved" or "underserved" areas and whether it also would providehigh-speed Internet access. The program will be administered by the Rural Utilities Service in the U.S. DepartmentofAgriculture. (45) Congress declined to include in its final FY2001 CJS legislation a provision, approved earlier by the Senate AppropriationsCommittee, to restrict takeovers of U.S. telecommunications companies by foreign government-backed entities.Specifically, the Senate-reported measure would have prohibited the FCC from expending funds to grant alicense or operating authority "to a corporation of which more than 25 percent of the stock is directly or indirectlyowned orvoted by a foreign government or its representative." (46) In October 2000, however, press reports said the provision hadbeen dropped as part of efforts by House and Senate conferees on the CJS bill to resolve their differences. Also absent from the final CJS bill passed by Congress was an amendment, contained in House-passed H.R. 4690 , limiting funding for the FCC's Office of Media Relations to not more than $640,000. (47) Affecting the FCC in FY2001 will be Senate Appropriations Committee report language concerning a broadcast code of conduct for the content of programming (which House-Senate conferees incorporated byreference). Inits report, the Senate committee had expressed concern about the "declining standards of broadcast television andtheimpact this decline is having on American's children." The committee instructed the FCC to report to Congress byJune 1,2001, on issues associated with "resurrecting a broadcast industry code of conduct for content of programming"to "protectagainst the further erosion of broadcasting standards." House-Senate conferees also had noted, without endorsing, Senate Appropriations Committee report language on publicbroadcast stations' access to spectrum. In that report (on its version of the CJS appropriations bill, H.R. 4690 ), the Appropriations Committee had directed the FCC to reconsider a portion of a Commission report andorder(released in April 2000) affecting public broadcasters' access to spectrum, which, the committee said, requiredpublicbroadcasters to engage in the competitive bidding process against commercial broadcast stations when they applyforbroadcast spectrum not specifically reserved for noncommercial educational use. House-Senate conferees notedthat theFCC was examining this issue, which also was pending as a case before a U.S. circuit court of appeals. Theconferees saidthat their agreement reflected "the belief that this issue can be resolved through the administrative or judicialprocess, so nolegislative action is required at this time." (48) In keeping with the requirements of the Government Performance and Results Act, the FCC, as part of its FY2001 budgetrequest presented a strategic plan setting forth its overall mission and general and specific goals for a 5-year timeframe. (49) Federal Maritime Commission (FMC). The FMC regulates a large partof the waterborne foreign offshore commerce of the United States. The Administration requested $16.2 million fortheFMC for FY2001, $2 million more than Congress appropriated to it in FY2000. The House AppropriationsCommittee recommended $14.1 million, which was about the same level funded for FY2000 and $2.1 million less than thePresident'srequest. The House passed bill approved the Committee's request. The Senate Appropriations Committeerecommended$16.2 million for the FMC for FY2001, $2.2 million more than Congress appropriated to it in FY2000. TheSenate'srecommendation was equal to the Administrations request and $2.1 above the House's recommendation. Theconferenceagreement included $15.5 million for the salaries and expenses of the Federal Maritime commission which is lessthan the$16.2 that the Administration requested and Senate-reported amendment proposed but more than the $14.1 millionthat theHouse bill proposed. The Federal Trade Commission (FTC). The FTC, an independentagency, is responsible for enforcing a number of federal antitrust and consumer protection laws. Last fall, Congressapproved a total FY2000 appropriation for the agency of $125 million, a reduction of $8.4 million from the agency'sFY1999 figure. More specifically, the $125 million is comprised of $104 million in offsetting fee collections and$21million in prior-year collections; as a result, no net direct appropriations were required. For FY2001, the Administration requested an increase in its program level from $125 million to $164.6 million. TheFY2001 request included $7 million derived from estimated FY2000 carryover fee balances and an anticipated$157.6million from premerger filing fees under the Hart-Scott-Rodino Act; therefore, as was the case last year, for FY2001theFTC requested no net direct appropriation. The House Appropriations Committee recommended a CJSappropriation of$134.8 million for the agency for FY2001. That request included $13.7 million derived from estimated FY2000carryoverfee balances and an anticipated $121.1 million for premerger filing fees. The House bill mirrored the committee'srecommendation. The Senate Appropriations Committee recommended a program level for the agency for FY2001 of $159.5 million, to bederived exclusively from the collection of premerger filing fees. The conference agreement approved by Congress includes a total operating level of $147.2 million for the FTC forFY2001. The conference agreement assumed that, of the amount provided, $145.3 million will be derived from feescollected in FY2001 and $1.9 million will be derived from estimated unobligated fee collections available fromFY2000. These actions result in a final direct appropriation of $0. Securities and Exchange Commission (SEC). The SEC administers andenforces federal securities laws in order to protect investors and to maintain fair and orderly markets. In 1999,Congressapproved a total operating level of $367.8 million for the SEC for FY2000, an increase of $43.8 million overFY1999. Thefigure was comprised of $173.8 million in offsetting fee collections for FY2000 and $194 million in prior-year feecollections. The result: no direct appropriations were required for the agency for FY2000. For FY2001, the Administration requested a total operating level of $422.8 million for the SEC, an increase of $55 millionover FY2000. This figure would have been comprised of $282.8 million in offsetting fee collection for FY2001and $140million in prior-year collections. As was the case in 1999, no direct appropriations would be needed. The House Appropriations Committee recommended FY budget authority of $392.6 million, $30.2 million less than theAdministration's request. This figure would consist of $252.6 million in FY2001 offsetting fees and $140.0 millioninprior-year fees. No direct appropriations would be needed. The House approved the Appropriations Committee'srecommendation. The Senate Appropriations Committee recommended $489.7 million for the SEC, or $66.9 million more than theAdministration's request. The additional funds were earmarked to raise salaries of certain SEC employees to levelscomparable to those of federal bank examiners. (See S. 2107 , reported by the Senate Banking CommitteeonJuly 14, 2000.) The total would have consisted of $194.6 million in fees collected during FY2001, and $295 millionfromfees collected during FY1999. No direct appropriations would be needed. The Conference and the final legislation approved $422.8 million for the SEC in FY 2001, the amount of the administration's request. Of this, $127.8 million will come from fees collected during FY2001, while the remaining$295million will come from FY1999 fees. No direct appropriations will be needed. The State Justice Institute. The Institute is a private, non-profitcorporation that makes grants and conducts other activities to further the development of judicial administration inStatecourts throughout the United States. Under the terms of its enabling legislation, SJI is authorized to present itsrequestdirectly to Congress, apart from the President's budget. For FY2001, the President requested the same fundingamount forSJI as appropriated for FY2000--$6.85 million. The President's budget request stated that appropriations for SJI inFY2001 were "intended to provide for continuation of Institute operations at a reduced level." (50) For its part, however, theInstitute requested $15.0 million for FY2001, more than double its FY2000 funding amount. (51) Subsequently, the House,as recommended by its Appropriations Committee, approved an FY2001 appropriation of $4.5 million. For its part,theSenate Appropriations Committee approved total funding resources of $14.85 million for the Institute--consistingof $6.85 million in direct appropriations and $8.0 million to the Institute in the form of a transfer from the Judiciarytitle in H.R. 4690 , Title III. (52) Against thisbackdrop, Congress ultimately approved the $6.85 million amount for theSJI as requested by the President. (53) Office of the U.S. Trade Representative (USTR). The amount approvedby Congress included $29.5 million for appropriations for FY2001, which was only slightly less than the President'srequest of $29.6 million, but $3.9 million more than the FY2000 level of $25.6 million. The Senate AppropriationsCommittee had recommended $29.6 million, and the House had approved $29.4 million. The increased level isexpected toadd new employees for negotiations, monitoring, and enforcement of trade agreements. U.S. International Trade Commission (ITC). For FY2001, the Congressprovided $48.1 million, which was $1.0 million less than the level requested by the Administration ($49.1 million)and$3.6 million more than the FY2000 level ($44.5 million). The Senate Appropriations Committee had recommended$49.1million, and the House had approved $47.0 million. U.S. Commission on International Religious Freedom. The Presidentasked for $3 million for this body for FY2001. The Commission, established in Public Law 105-292, is anindependentagency charged with the annual and ongoing review and reporting of the facts and circumstances of violations ofreligiousfreedom. The appropriation for FY1999 was $3 million. No additional funds were appropriated for FY2000. TheHouseAppropriations Committee did not recommend additional funding for FY2001. The House took no further action. TheSenate version of the CJS bill makes no reference to this Commission. Congress provided no additional fundingfor FY2001. Compliance with GPRA Requirements As noted earlier in this report, the Government Performance and Results Act (GPRA) passed by Congress in1993 ( P.L.103-62 ) requires that agencies develop strategic plans that contain goals, objectives, and performance measures forallmajor programs. In its report on the FY1999 CJS appropriations bill ( S. 2260 ; S.Rept. 105-235 , pp. 5-6), theSenate Appropriations Committee made the following evaluation regarding agency compliance with GPRArequirements: The Committee has received a number of strategic plans from different organizations receiving appropriated funds within the bill. The Committee found weaknesses with the fiscal year1999performance plans of the Departments of Commerce and State and the Small Business Administration. TheCommittee wasespecially troubled by the lack of results-oriented, measurable goals in the performance plans. The Committee isalsoconcerned that the plans did not uniformly display clear linkages between performance goals and the programactivities inagencies' budget requests. Also, some plans did not sufficiently describe approaches to produce credibleperformanceinformation. The Committee considers the full and effective implementation of the Results Act to be a priority forallagencies under its jurisdiction. We recognize that implementation will be an interactive process, likely to involveseveralappropriations cycles. The Committee will consider agencies' progress in addressing weaknesses in strategic andannualperformance plans in tandem with their funding requests in light of their strategic goals. This effort will helpdeterminewhether any changes or realignments would facilitate a more accurate and informed presentation of budgetaryinformation.Agencies are encouraged to consult with the Committee as they consider such revisions prior to finalizing anyrequests. The plan prepared by the Department of Justice was given high marks by the committee. It stated that: "The plan wasreceived in a timely fashion and contained objective, measurable performance goals. The strength of theperformanceplans was its presentation of reasonably clear strategies for its intended performance goals." (54) In its report on its version of the CJS bill, the House Appropriations Committee in 1998 noted that "performance planshave generally been of mixed utility in considering the fiscal year budget request." The committee requested thateachagency consult with it early in the process of formulating the budget and performance plan for FY2000, to improvetheplan's usefulness to the committee when it examines the FY2000 request ( H.Rept. 105-636 , p. 8.). In its report ontheFY2000 CJS appropriations, the Senate Appropriations Committee stated that it had "...sent a memorandum to allorganizations subject to GPRA funded within this Act. It requested information about the agencies' experiencesresultingfrom the Act. The Committee reiterates that all responses be provided no latter than July 1, 1999." (55) Brief descriptions ofthe latest versions of the Strategic plans of the major agencies covered by CJS appropriations arecontained in thediscussions of the FY2000 budget requests of individual agencies included in this CRS report. In his budget forFY2001,President Clinton made the following observations regarding the GPRA process, stating that it: ...requires agencies to measure performance and results-not just funding levels-so that we can better track what taxpayers are getting for their dollars. Agencies are not only working todevelop anduse performance measures in program management but are also working to integrate this information into budgetandresource allocations, so that we can better determine the cost of achieving goals. The task is not simple. Theagencies mustdefine the specific goals, determining the proper level of resources, assess which programs are working, and fixthose thatare not. Progress will depend on GPRA becoming more than a paper exercise. Over the next year, OMB will workwith allagencies to better integrate planning and budgeting and systematically associate costs withprograms. A review of the final reports of the House and Senate Appropriations Committees on the FY2001 CJS appropriations bill( H. Rept. 106-680 and S. Rept. 106-404 )finds that neither Committee made any general comments regarding agencycompliance with GPRA requirements. Major Funding Trends The table below shows funding trends for the major agencies included in CJS appropriations over the periodFY1997-FY2001. As seen in the table below, funding increased, in current dollars, for the Department of Justice by$4,022 million ( or 27.5%); for the Department of Commerce by $5,009 million ( or 37.6%); (56) for the Judiciary by $906million (or 29.7%); and for the Department of State by $1,930 million (or 49%). (57) Table 2. Funding Trends for Departments of Commerce, Justice,and State, and theJudiciary (in millions of current dollars) Sources : Funding totals provided by Budget Offices of CJS and Judiciary agencies, and U.S.House of Representatives. Committee on Appropriations. Current Funding Status President Clinton's FY2001 budget requested about $39.6 billion for the agencies covered by the CJSappropriationsbill, about the same level as that appropriated for FY2000. On June 14, 2000, the House AppropriationsCommitteeapproved its version of the CJS appropriations bill ( H.R. 4690 , H.Rept. 106-680 ). It recommended fundingtotaling $37.4 billion-$2.2 billion below the President's request and about $2.2 billion below the FY2000appropriation. The House approved the bill on June 26 by a vote of 214-195, with 1 voting present. (58) It approved the same overallfunding total recommended by the Appropriations Committee. On July 18, 2000, the Senate Appropriations Committee approved its version of the bill. It approved total funding of $36.7billion which is about $700 million below the House version and about $2.9 billion below both the President'srequest andthe actual FY2000 appropriation ( S.Rept. 106-404 ). ( The Senate, however, did not vote on its version of the bill. Instead, it approved the version approved by the Conference Committee which was agreed to on October 26, 2000.) On October 27, 2000, Congress approved total funding of $40.0 billion which was about $400 million abovebothPresident's request and the total enacted for FY2000. H.R. 4690 was included in Conference Reportapproved by Congress in H.R. 4942 ( H.Rept. 106-1005 : Making Appropriations for the Governmentof theDistrict of Columbia and Other Activities Changeable in Whole or in Part Against Revenues of Said District for theFiscalYear Ending September 30, 2001, and for Other Purposes ). Subsequently, the District of Columbiaappropriationsportion of the measure was separated from the bill and approved by Congress ( H.R. 5663 ) on November 15. The President signed this measure into law on November 22. On December 21, President Clinton signed theremainingportion of H.R. 4942 contained in H.R. 5548 , the FY2001 CJS appropriations bill, into law onDecember 21, 2000 ( P.L. 106-553 ). On December 15, 2000, Congress approved additional funding of about $103millionfor CJS appropriations in the miscellaneous funding section of H.R. 4577 ( H.Rept. 106-1033 ). This bill wassigned into law by the President on December 21, 2000 ( P.L. 106-554 ). Agency totals affected by this additionalfundinghave been changed in this report to reflect this action. Continuing funding resolution. With the expiration of Fiscal Year 2000 appropriations on September 30,2000, Congressenacted a continuing funding resolution ( H.J.Res. 109 ; P.L. 106-225 ) which extended FY2000 appropriationsthrough midnight October 6, 2000. This was followed by a second resolution ( H.J.Res. 110 ) which extendedFY2000 funding through October 14, 2000. A third resolution was approved by Congress ( H.J.Res. 111 ), extending funding through October 20, 2000. A fourth resolution ( H.J. Res. 114) was approved to extend fundingthroughWednesday, Oct. 25, 2000. After October 25, Congress enacted eight one day continuing resolutions. OnNovember 3,Congress approved H.J.Res. 84 which extended FY2000 funding through November 14, the date that bothHouses of Congress were scheduled to return from the election recess. This was followed by approval onNovember 14 ofa longer term extension of funding(H.J. Res. 125) through December 5, 2000. After returning on December 4,Congressapproved a number of short term extensions to provide funding until the President signed the FY2001 CJS bill intolaw onDecember 21, 12000. Government-wide rescissions. It is important to note that the FY2001 Consolidated Appropriations Act( H.R. 4577 ; P.L. 106-554 ) contains a provision which mandates a 0.22 percent government-wide rescissionofdiscretionary budget authority for FY2001 for all government agencies (except for certain defense activities),includingthose covered by the FY2001 CJS appropriations bill. For further information, see page 3 of this report. Table 3 shows the FY2000 appropriations totals and the President's request for the major agencies covered by the FY2001CJS Appropriations bill. Similar information for other agencies covered by the bill, but not shown in this table, areincluded in the Appendix of this report. Table 3. Departments of Commerce, Justice, and State, and the JudiciaryAppropriations (in millions of dollars) ** H.R. 4690 is included in Conference Report approved by Congress on October 27, 2000 ( H.R. 4942 ; H.Rept. 106-1005 : Making Appropriations for the Government of the District of Columbia and OtherActivitiesChangeable in Whole or in Part Against Revenues of Said District for the Fiscal Year Ending September 30, 2001,and forOther Purposes ). Subsequently, the District of Columbia appropriations portion of the measure wasseparated from thebill and approved by Congress ( H.R. 5663 ) on November 15. The President signed this measure into law onNovember 22. On December 21, the President signed the remaining portion of H.R. 4942 contained in H.R. 5548 , the FY2001 CJS appropriations bill, into law on December 21, 2000 ( P.L. 106-553 ). Sources : U.S. House Committee on Appropriations; U.S. Senate Committee on Appropriations. Related Legislative Action Department of Justice and Related Agencies H.R. 12 (Delay) Limits the jurisdiction of the federal courts with respect to prison release orders. Introduced January 6, 1999;referred toCommittee on Judiciary. H.R. 357 (Conyers) Combats violence against women by providing for law enforcement and prosecution grants, for education andtraininggrants to promote appropriate responses to victims of violence, for a National Domestic Violence Hotline, forcounselingservices and for transitional compensation for victims of violence. Introduced January 19, 1999; referred toCommittee onJudiciary. H.R. 1501 (McCollum) Juvenile Justice Reform Act of 1999. Contains several drug-related provisions, including but not limited to,increasedmandatory minimum penalties for using a firearm to commit a violent crime or drug trafficking offense, usingminors todistribute drugs, selling drugs to minors, and engaging in drug trafficking near a school or other protected location. Includes reauthorization language for the Juvenile Justice and Delinquency Prevention Act of 1974, amended,throughFY2003; provides for the establishment of Juvenile Delinquency Block Grant Program to eligible states for variouspurposes including drug use reduction; and renews the Juvenile Accountability Block Grants, amended, to providegrantsfor various purposes including juvenile drug courts. Introduced April 21, 1999; referred to Committee on Judiciary. Passed House, amended, June 17. (Related bills: H.R. 988 , H.R. 2987 .) H.R. 3918 (Rogers) Immigration Reorganization and Improvement Act of 1999. This bill is identical to H.R. 2528 , asintroduced. It would dismantle INS and create two new bureaus at the Department of Justice, one for Immigration services, theotherfor enforcement. Introduced on March 14, 2000. Approved by the House Judiciary Committee's Immigration andClaimsSubcommittee on March 22, 2000. S. 5 (DeWine) Drug Free Century Act. Includes provisions to reduce the transportation and distribution of illegal drugs andstrengthendomestic demand reduction. Provides for international reduction of drugs by denying safe havens to internationalcriminals,promotion of global cooperation to fight international crime, money laundering deterrence, increased penalties byraisingmandatory minimum sentencing for powder cocaine offenses and drug offenses committed in the presence of achild.Authorizes additional funding for drug eradication and interdiction operations and confirms funding goals set bytheWestern Hemisphere Drug Elimination Act ( P.L. 105-277 , Title VIII). Contains provisions to protect children andteachersfrom drug-related school violence. Provides for drug education, prevention and treatment programs. IntroducedJanuary19, 1999; referred to Committee on Judiciary. S. 9 (Daschle) Safe Schools, Safe Streets, and Secure Borders Act. Addresses violent crime in schools, reforms the juvenilejusticesystem, combats gang violence, penalizes the sale and use of illegal drugs, enhances the rights of crime victims, andprovides assistance to law enforcement officers in their battle against street crime, international crime, and terrorism. Authorizes funding to hire or deploy 25,000 additional police officers, and for other crime and drug programs byextendingthe Violent Crime Reduction Trust Fund through FY2002. Permits federal prosecution of juveniles only when theAttorneyGeneral certifies that the state cannot or will not exercise jurisdiction, or when the juvenile is alleged to havecommitted aviolent, drug, or firearm offense. Contains provisions allowing prosecutors sole, nonreviewable authority toprosecute asadults 16- and 17-year-olds who are accused of committing the most serious violent and drug offenses. Enumeratesprevention programs to reduce juvenile crime and includes grants to youth organizations and 'Say No to Drugs'Community Centers. Increases penalties for selling drugs to children, for drug trafficking in or near schools, andor use of"club drugs." Encourages pharmacotherapy research to develop medications for the treatment of drug addiction, andfundsdrug courts, which subject eligible drug offenders to programs of intensive supervision. Contains provisions to fightdrugmoney laundering. Introduced January 19, 1999; referred to Committee on Judiciary. S. 254 (Hatch) Violent and Repeat Juvenile Offender Accountability and Rehabilitation Act. Contains various drug-relatedprovisions:increases the penalties for using minors to distribute controlled substances. Authorizes $1 billion for selected crimeanddrug programs by extending the Violence Crime Reduction Trust Fund through FY2001. Introduced January 20,1999;placed on Senate Legislative Calendar under General Orders; passed Senate with amendments, May 20,1999. Department of Commerce H.R. 1553 (Calvert) A bill to authorize appropriations for fiscal year 2000 and fiscal year 2001 for the National Weather Service,AtmosphericResearch, and National Environmental Satellite, Data and Information Service activities of the National OceanicandAtmospheric Administration, and for other purposes. Introduced April 26, 1999; referred to House Committee onScience. Reported by Committee, May 18, 1999 ( H.Rept. 106-146 ). Passed House by voice vote, May 19, 1999. H.R. 1744 (Morella) A bill to authorize appropriations for the National Institute of Standards and Technology for fiscal years 2000and 2001,and for other purposes. Introduced May 10, 1999; referred to the House Committee on Science. Mark-up sessionheld, May26, 1999. H.R. 1907 (Coble) Patent and Trademark Office Efficiency Act. Establishes the PTO as an independent agency under the policydirection ofthe Secretary of Commerce. Provides that all revenues collected by PTO will be for the exclusive use of the PTO. Introduced May 24, 1999; referred to House Committee on Judiciary. Ordered to be reported May 26, 1999. H.R. 2452 (Royce) A bill to dismantle the Department of Commerce. Introduced on July 1, 1999. Referred to the Committees onCommerce,Transportation and Infrastructure, Banking and Financial Services, International Relations, Armed Services, WaysandMeans, Government Reform, the Judiciary, Science, and Resources. The Judiciary H.R. 833 (Gekas) A bill to amend title 11 of the United States Code. Among many provisions of this bankruptcy reform bill,Section 128 (Bankruptcy Judgeship Act of 1999) creates 18 new temporary bankruptcy judgeships and extends temporarybankruptcyjudgeships in five districts. Referred to House Committee on Judiciary and in addition to Committee on BankingandFinancial Services, February 24, 1999; referred to Subcommittee on Commercial and Administrative Law, March11,1999. Subcommittee hearings held March 16, 17 and 19, 1999; subcommittee markup, March 25, 1999. Committeeconsideration and markup, April 21, 22, 27 and 28, 1999. Reported to House (Amended), April 29, 1999. Committee onBanking and Financial Services discharged, April 29, 1999. Passed House by roll call vote, 313-108, May 5, 1999. Received in Senate, May 6, 1999; read twice and placed on Senate Legislative Calendar under General Orders, May 12,1999. Measure laid before Senate by unanimous consent, all after Enacting Clause is struck with Senatesubstitutinglanguage of S. 625 as amended, and by 83-14 roll call vote measure is passed in lieu of S. 625 with an amendment, with Senate, insisting on its amendment, requesting a conference, February 2, 2000. H.R. 1752 (Coble) Federal Courts Improvement Act of 1999. Bill would effect various changes in federal court jurisdiction,authority ofjudicial officers, judicial financial administration, and judicial personnel administration. Referred to HouseCommittee onJudiciary, May 11, 1999; referred to Subcommittee on Courts and Intellectual Property, May 25, 1999. Subcommitteehearings held June 16, 1999; subcommittee markup, July 15, 1999. Committee consideration and markup, July 27,1999. Reported to House (Amended) and placed on Union Calendar, September 9, 1999. Considered in House undersuspensionof the rules, passed as amended by voice vote, May 22, 2000. Received in the Senate and referred to the Committeeon theJudiciary, May 23, 2000. See related bill, S. 2915 , Public Law 106-518, below. S. 159 (Moynihan) A bill to amend chapter 121 of title 28, United States Code, to increase fees paid to federal jurors, and for otherpurposes. Bill would increase fee federal jurors are paid for the first thirty days of a trial from $40 per day to $45 per day. Referredto Senate Committee on Judiciary, January 19, 1999; referred to Subcommittee on Oversight and Courts, March24, 1999. S. 253 (Murkowski) Federal Ninth Circuit Reorganization Act of 1999. Bill organizes U.S. Court of Appeals for Ninth Circuit intothreeregional divisions, as recommended by the Commission on Structural Alternatives for Federal Courts of Appeals. Referredto Senate Committee on Judiciary, January 19, 1999; referred to Subcommittee on Oversight and Courts, March 24,1999; Subcommittee hearings held July 16, 1999. S. 625 (Grassley) Companion bill to H.R. 833 , above, including among its provisions Section 1126, Bankruptcy JudgeshipActof 1999, which creates new temporary bankruptcy judgeships and extends temporary bankruptcy judgeships in fivedistricts. Referred to Senate Committee on the Judiciary, March 16, 1999. Committee consideration and markup,April 15and 22, 1999. Reported to Senate and placed on Senate Legislative Calendar under General Orders, May 11, 1999. Laidbefore Senate and cloture motion presented, September 16, 1999. Cloture not invoked in Senate by roll call vote,53-45,September 21, 1999. Measure laid before Senate by unanimous consent, November 5, 1999. Considered by Senate,November 5, 8, 9, 10, 16 and 17, 1999. Cloture motion presented in Senate, November 19, 1999. Cloture motionwithdrawn by unanimous consent in Senate, January 24, 2000. Considered by Senate, January 26 and 31, February1 and2, 2000. By 83-14 roll call vote, incorporated by Senate in H.R. 833 as an amendment, which in turn ispassedby Senate in lieu of S. 625 , February 2, 2000. S. 1564 (Cochran) Federal Courts Budget Protection Act. Bill would allow the Judiciary to submit its annual budget, includingbuildings,directly to Congress, without going through the Office of Management and Budget. Referred jointly to SenateCommitteeson Budget and Governmental Affairs, August 5, 1999. Reported by Committee on Governmental Affairs with anamendment in nature of a substitute, with written report No. 106-379, August 25, 2000. Discharged from SenateCommittee on the Budget (pursuant to order of August 4, 1977) and placed on Senate Legislative Calendar underGeneralOrders, September 27, 2000. S. 2915 (Grassley); P. L. 106-518 Federal Courts Improvement Act of 2000. To improve operation and administration of federal courts, bill,among otherthings, expands civil and criminal contempt authority of magistrate judges, establishes magistrate judge positionsin districtcourts of Guam and Northern Mariana Islands, allows senior judges to participate in circuit judicial councils,increasescertain bankruptcy fees, and authorizes court clerks, under specified conditions, to determine whether persons arequalified,unqualified, exempt or excused from jury service. Unlike related bill, H.R. 1752 , above, it does not containprovision to allow cameras in courtrooms with the consent of all parties. Referred to Senate Committee onJudiciary, July25, 2000. Ordered to be reported favorably, with an amendment in the nature of a substitute, September 28, 2000. Asamended, agreed to by Senate by Unanimous Consent, October 19, 2000. Received in House, October 23, 2000. PassedHouse without objection, October 25, 2000. House amendments to Senate bill agreed to by Senate by UnanimousConsent,October 27, 2000. Signed by President, becoming Public Law 106-518, November 13, 2000. Department of State S. 886 (Helms) A bill to authorize appropriations for the Department of State for fiscal years 2000 and 2001; to provide forenhancedsecurity at U.S. diplomatic facilities; to provide for certain arms control, nonproliferation, and other national securitymeasures; to provide for the reform of the United Nations; and for other purposes. Introduced April 21, 1999;originalmeasure ordered reported by Senate Foreign Relations Committee April 27, 1999. ( S.Rept. 106-43 ). H.R. 2415 (C. Smith) The American Security Act of 1999. Provides authorization for State Department and related agencies and forincreasesoverseas security. Introduced July 1, 1999. Passed by voice vote on July 21, 1999. H.R. 1211 (Smith, C.) A bill to authorize appropriations for the Department of State and related agencies for fiscal year 2000, and forotherpurposes. Introduced March 22, 1999; subcommittee marked-up and forwarded to full committee on March 23;Committee International Relations reported it out April 29, 1999. ( H.Rept. 106-122 ). For Additional Reading Department of Justice CRS Issue Briefs CRS Issue Brief IB90078. Crime Control: The Federal Response , by David Teasley. CRS Issue Brief IB95025. Drug Supply Control: Current Legislation , by David Teasley. CRS Issue Brief IB92061. Prisons: Policy Options for Congress , by [author name scrubbed]. CRS Issue Brief IB98049. Police and Law Enforcement: Selected Issues , by [author name scrubbed]. CRS Issue Brief IB10014. Gun Control, by William Krouse. CRS Reports CRS Report 97-265. Crime Control Assistance through the Byrne Programs , by Garrine Laney. CRS Report 98-622. Federal Crime Control Assistance to State and Local Governments: Department of Justice , bySuzanne Cavanagh and David Teasley CRS Report 98-95. Juvenile Justice Act Reauthorization: The Current Debate , by Suzanne Cavanagh and David Teasley. CRS Report 98-498. Federal Drug Control Budget: An Overview , by David Teasley. CRS Report 97-248. Prison Grant Programs , by [author name scrubbed]. CRS Report RS20183. Immigration and Naturalization Service's FY2000 Budget , by [author name scrubbed]. CRS Report RS20279. Immigration and Naturalization Service Reorganization and Related Legislative Proposals , by[author name scrubbed]. CRS Report RL30257. Proposals to Restructure the Immigration and Naturalization Service , by William Krouse. CRS Report RS20627, Immigration: Integrated Entry and Exit Data System, by [author name scrubbed]. CRS Report RS20618, Immigration and Naturalization Service's FY2001 Budget, by William Krouse Department of Commerce CRS Issue Briefs CRS Issue Brief IB95100. Economic Development Administration: Overview and Issues , by [author name scrubbed]. CRS Issue Brief IB95051. The National Information Infrastructure: The Federal Role , by [author name scrubbed]. CRS Issue Brief IB10018. Research and Development Funding: Fiscal Year 2000 , by [author name scrubbed]. CRS Reports CRS Report 95-36 . The Advanced Technology Program, by [author name scrubbed]. CRS Report RL30284. Census 2000: The Sampling Debate, by [author name scrubbed]. CRS Report RL30182. Census 2000: Sampling as an Appropriations Issue in the 105th and 106th Congresses, by JenniferD. Williams. CRS Report 96-537. Department of Commerce Science and Technology Programs: Impacts of Dismantling Proposals , by[author name scrubbed]. CRS Report 97-126. Federal R&D Funding Trends In Five Agencies: NSF, NASA, NIST, DOE (Civilian) and NOAA , by[author name scrubbed]. CRS Report 97-104 . Manufacturing Extension Partnership Program: An Overview , by [author name scrubbed]. CRS Report 95-30 . The National Institute of Standards and Technology: An Overview, by [author name scrubbed] and WendyH. Schacht. CRS Report 95-834. Proposals to Eliminate the U.S. Department of Commerce: An Issue Overview , by [author name scrubbed]. CRS Report RL30139(pdf) . The National Oceanic and Atmospheric Administration (NOAA): Budget Activities and Issues forthe 106th Congress , by Wayne Morrissey. The Judiciary CRS Reports CRS Report 98-510(pdf) . Judicial Nominations by President Clinton During the 103rd- 106th Congresses , by Denis StevenRutkus. CRS Report RS20278. Judicial Salaries: Current Situation , by [author name scrubbed]. CRS Report RS20554. The Ninth Circuit Court of Appeals: Should It Be Split into Two Circuits? , by [author name scrubbed]. Other Information U.S. Administrative Office of the United States Courts. "106th Congress Ends; A COLA for Judges, New Judgeships andJudiciary Funding in Final Bills," The Third Branch , vol. 32, December 2000, pp.1,2&9; also at http://www.uscourts.gov/ttb/dec00ttb/dec00.html ----- . "The [Chief Justice's] 1999 Year-End Report on the Federal Judiciary," The Third Branch , vol. 32, January 2000,pp. 1-8; also at http://www.uscourts.gov/ttb/jan00ttb/jan2000.html -----. [The Chief Justice's] 2000 Year-End Report on the Federal Judiciary," The Third Branch, vol. 33, January 2001, pp.1-8; also at http://www.uscourts.gov/ttb/jan01ttb/jan01.html U.S. Congress, House Committee on Appropriations, Subcommittee on the Departments of Commerce, Justice, and State,the Judiciary, and Related Agencies, Department of Commerce, Justice, and State, the Judiciary, and RelatedAgencies Appropriations for 2001 , hearings, part 3, 106th Cong., 2nd sess.(Washington: GPO, 2000), pp. 1505-1801 (Justification ofJudiciary budget estimate). Department of State CRS Reports CRS Report RL30591 . State Department and Related Agencies FY2001 Appropriations , by Susan Epstein. CRS Report RL30197(pdf) . State Department and Related Agencies FY2000 Appropriations , by Susan Epstein. CRS Report 98-624. State Department and Related Agencies FY1999 Appropriations , by Susan Epstein. CRS Report 98-771. Embassy Security: Background, Funding, and FY2000 Budget Request , by [author name scrubbed]. CRS Report RL30662 . Embassy Security: Background, Funding, and the FY2001 Budget , by [author name scrubbed]. Other Related Agencies CRS Reports CRS Report 95-178. Legal Services Corporation: Basic Facts and Current Status , by [author name scrubbed] and CarmenSolomon-Fears. CRS Report 96-649 . Small Business Administration: Overview and Issues , by [author name scrubbed]. Selected World Wide Web Sites House Committee on Appropriations http://www.house.gov/appropriations Senate Committee on Appropriations http://www.senate.gov/~appropriations/ CRS Appropriations Products Guide http://www.loc.gov/crs/products/apppage.html#la Congressional Budget Office http://www.cbo.gov General Accounting Office http://www.gao.gov Office of Management & Budget http://www.whitehouse.gov/OMB/ Appendix Table 1A. Appropriations Funding for Departments ofCommerce, Justice, and State,the Judiciary, and Related Agencies, FY2000 and FY2001 (in millions of dollars)* *Figures are for direct appropriations only; in some cases, agencies supplement these amount with offsetting feecollections, including collections carried over from previous years. These agencies include: Immigration andNaturalization Service, Patent and Trademark Office, Small Business Administration, Federal CommunicationsCommission, Federal Trade Commission, and the Securities and Exchange Commission. Information on such feesarecontained in the background and issues sections of this report. ** H.R. 4690 is included in Conference Report approved by Congress on October 27, 2000 ( H.R. 4942 ; H.Rept. 106-1005 : Making Appropriations for the Government of the District of Columbia and OtherActivitiesChangeable in Whole or in Part Against Revenues of Said District for the Fiscal Year Ending September 30, 2001,and forOther Purposes ). Subsequently, the District of Columbia appropriations portion of the measure wasseparated from thebill and approved by Congress ( H.R. 5663 ) on November 15. The President signed this measure into law onNovember 22. On December 21, the President signed the remaining portion of HR. 4942 contained in H.R. 5548 , the FY2001 CJS appropriations bill, into law on December 21, 2000 ( P.L. 106-553 ). On December 15, 2000,Congress approved additional funding of about $103 million for CJS appropriations in the miscellaneous fundingsectionof H.R. 4577 ( H.Rept. 106-1033 ). This bill was signed into law by the President on December 21, 2000 ( P.L.106-554 ). Agency totals affected by this additional funding have been changed in this table to reflect this action. Note: Details may not add to totals due to rounding. 1 Funds from the Violent Crime Reduction Programs (VCRTF) are provided as a subtotal inparentheses. These areincluded in the overall total for each federal agency. 2 The Patent and Trademark Office (PTO) is fully funded by user fees. The fees collected, but not obligated during thecurrent year, are available for obligation in the following fiscal year. 3 As of October 1, 1999 both USIA and ACDA were consolidated into the Department of State. International Broadcastingwill remain an independent agency. 4 In addition to appropriations, State has authority to spend certain collected fees from machine readable visas, expeditedexport fees, etc. For FY2000 this amount equals $404.7 million; the estimated amount for such fees for FY2000 in thePresident's FY2001 request is $76.2 million. 5 Appropriation of $3.5 million for FY2000 is contained in the appropriation for the Bureau of the Census. Theappropriation of $3.5 million for FY2001 is contained in the appropriation total for the Bureau of the Census in thefinalbill approved by Congress. 6 For FY2000, Congress approved $210 million in overall funding resources for the FCC, consisting of a directappropriation of $24.2 million and $185.8 million in offsetting regulatory fee collections. The President requested$237.2 million in overall FY2001 funding resources, consisting of a direct appropriation of $37.0 million and $200.1million inoffsetting fee collections. The House Appropriations Committee recommended $207.9 million in overall FY2001funding,consisting of a direct appropriation of $7.8 million and $200.1 million in offsetting fee collections. The SenateAppropriations Committee recommended $237.2 million in overall FY2001 funding, consisting of a directappropriationof $37.0 million and $200.1 million in offsetting fee collections. Ultimately, Congress approved $230.0 millionin overallFY2001 funding, consisting of a direct appropriation of $29.9 million and $200.1 million in offsetting feecollections. 7 The FTC is fully funded by the collection of premerger filing fees. 8 The SEC is fully funded by transaction fees and securities registration fees. 9 Under the terms of its enabling legislation, the State Justice Institute is authorized to present its budget request directly toCongress. For FY2001, the Institute requested $15.0 million--as distinguished from the President's request, whichcalledfor $6.9 million. 10 Other includes agencies receiving appropriations of less than $1.8 million in FY1999 and FY2000. These agenciesinclude Commission for the Preservation of American Heritage Abroad; Commission on Security and CooperationinEurope; Commission on Electronic Commerce; the Marine Mammal Commission, the Commission on Ocean Policy,andthe Congressional/Executive Commission on China. Sources: U. S. House of Representatives. Committee on Appropriation; U.S. Senate. Committee on Appropriations; Congressional Record, vol. 146, October 27,2000, pp. H11272-11281; and CongressionalRecord, vol. 146, December15, 2000, pp. H12466-12482.

This report tracks action by the 106th Congress on FY2001 appropriations for the Departments of Commerce, Justice, andState, the Judiciary, and other related agencies (often referred to as CJS appropriations). P.L. 106-113 appropriated $39.6 billion for these agencies for FY2000. President Clinton's FY2001 budget requested $39.6billion forthese agencies. On June 14, 2000, the House Appropriations Committee approved its version of the CJSappropriations bill( H.R. 4690 ) It recommended funding totaling $37.4 billion-$2.2 billion below the President's request and$2.2 billion below the FY2000 appropriation. The House-passed bill on June 26, approved the same overall fundingtotalrecommended by the Committee. On July 18, 2000, the Senate Appropriations Committee approved total fundingof $36.7billion-about $700 million below the House version and $2.9 billion below both the President's request and theactualFY2000 appropriation. On October 27, 2000, Congress approved total funding of $40.0 billion-about $400 millionaboveboth President's request and the total enacted for FY2000 ( H.R. 5548 ). The measure was signed into law bythe President on December 21, 2000 ( P.L. 106-553 ). The major CJS appropriations issues and concerns that received attention in both the Senate and the House include thefollowing. Department of Justice: building more prisons; extending the 1994 Crime Act fundingauthorization beyondSeptember 30, 2000; increasing funding for drug-related efforts among the Department of Justice (DOJ) agencies;increasing funding for community law enforcement; combating cybercrime; changing the focus and levels ofappropriationsfor DOJ's Office of Juvenile Justice and Delinquency Prevention; providing funding for programs that would reducegunand youth violence; funding of DOJ's legal action against the tobacco industry; reducing pending caseloads inimmigration-related claims, particularly green card and naturalization applications; meeting the statutory mandatethat theBorder Patrol be increased by 1,000 agents in FY2001, and accounting for the shortfall in hiring in FY1999;determiningthe level of detention capacity necessary to comply with the statutory mandate that certain criminal aliens bedetained untildeported; and restructuring INS internally as proposed by the Administration or dismantling or restructuring theagency bylegislation. Department of Commerce: the progress made in streamlining and downsizing Departmentprograms;implementation of the decennial census including followup operations; federal financial support of industrialtechnologydevelopment programs; monitoring foreign compliance with trade agreements and U.S. trade laws; andimplementing newWhite House environmental initiatives at the National Oceanic and Atmospheric Administration. Departmentof State: improving embassy security through a doubling of funding as well as a request for an advance appropriationto cover theperiod FY2002 to FY2005. The Judiciary : whether the salaries of judges and justices should receivea cost-of-livingincrease and whether a statutory ban on judges receiving honoraria should be lifted. Other Related Agencies: adequacy offunding levels for the Legal Services Corporation, Small Business Administration, and the Equal EmploymentOpportunity Commission. Key Policy Staff Division abbreviations: A = American Law; G&F = Government and Finance; RSI = Resources; Science, and IndustryDivision, DSP = Domestic Social Policy Division; FTD = Foreign Affairs, Defense, and Trade.

Background, Establishment, and Calculation Senators have long been provided with resources to support their official duties. For example, Senators have been reimbursed for trips to their states, as well as funds for staffing assistance and maintaining home state offices. The level and means of providing this assistance has changed over time. For many years, funding for different types of expenses was provided in separate appropriations accounts. The current consolidated SOPOEA system was established in 1987 and effective January 1, 1988. It followed efforts during the previous decade to move to a system of increased flexibility for Senators in directing their individual office operations. The report from the Senate Committee on Rules and Administration accompanying the bill establishing the SOPOEA ( S. 1574 ) stated that the move "would allow Members to set their own priorities and react accordingly." Periodically, legislation has been introduced to amend the SOPOEA. The legislation has sought to regulate, prohibit, authorize, reduce, or encourage the use of funds for a particular purpose or to alter the SOPOEA in response to other action; increase transparency; or govern the use of unexpended balances. With few exceptions, however, no further action has been taken on these bills, and revisions to the SOPOEA generally have been made through the appropriations acts or internal procedures. The annual reports issued by the Senate Appropriations Committee accompanying the legislative branch appropriations bill generally provide preliminary SOPOEA allocation information for the upcoming fiscal year in a table arranged by state. The reports also generally indicate the total amount of agency contributions anticipated by the request; any amounts provided to cover "additional expenses that may be incurred in the event of the death or resignation of a Senator"; and the number of individuals employed by this account. The legislative branch appropriations acts have also periodically adjusted limits on "the aggregate of gross compensation paid employees in the office of a Senator," which is based on population of the state. The SOPOEA allocation for each Senator is calculated based on three components: administrative and clerical assistance allowance . This allowance has been based on state population since 1940, with the current system dating to 1967. Today, 25 population categories exist, ranging from populations below 5 million to over 28 million. The preliminary figures in the FY2016 Senate report ( S.Rept. 114-64 ) show this allowance varies from $2,409,294 for a Senator representing a state with a population under 5 million to $3,829,063 for a Senator representing a state with a population of 28 million or more. legislative assistance allowance . This allowance was first authorized in 1975 and revised in 1977. It was designed to provide Senators with support for their committee assignments, and it was established after lengthy hearings and debates regarding the level and division of Senate staffing resources devoted to committee work. The allowance is calculated based on salaries for three employees at a set rate, and it is the same for all Senators. According to the FY2016 Senate report ( S.Rept. 114-64 ), the legislative assistance component of the SOPOEA is $477,874. official office expense allowance , which varies by state depending on the distance between Washington, DC, and the home state, the population of the state, and the official (franked) mail allocation. According to S.Rept. 114-64 , the FY2016 office expense allowance component ranges from $121,120 to $453,274. The three components result in a single SOPOEA authorization for each Senator that can be used to pay for any type of official expense. Each Senator can choose how much to allocate to various types of expenses (e.g., travel or personnel or supplies), although additional limits pertain to spending on franked mail. Each Senator may also determine the number, job title, location, and duties of staff within his or her office. The SOPOEA allocation formula results in varying levels depending on the state from which a Senator is elected. Both Senators from a state receive the same allocation. Figure 1 demonstrates the variation in authorization levels that has resulted from the SOPOEA allocation formula from FY1996 through FY2016. For FY2016, SOPOEA levels range from $3,008,288 to $4,760,211. The difference between the median level ($3,064,818) and the average ($3,263,940) for FY2016 demonstrates the cluster of similar allocation levels for many states, with a larger differential for some of the larger states. Overall funding for the SOPOEA, described below, has decreased or remained flat in recent years, and the FY2016 maximum, minimum, average, and median allocation levels all remain below the corresponding FY2010 allocation levels. SOPOEA Appropriations: History The SOPOEA for all Senators is funded in one line-item within the "Contingent Expenses of the Senate" account in the annual legislative branch appropriations bills. As seen in Figure 2 , this appropriations account has decreased in recent years, from a high of $422.0 million in FY2010 to $390.0 million in FY2014, a decrease of 7.6%, not adjusted for inflation. Appropriations acts for FY2015 ( P.L. 113-235 ) and FY2016 ( P.L. 114-113 ) continued the FY2014 level. This level represents the lowest funding since the $373.5 million provided in FY2008. Adjusted for inflation, the FY2016 level is approximately equivalent to the FY2004 funding level. The Senate has taken actions to reduce this account both directly—for example, the FY2011 Continuing Appropriations Act stated that "each Senator's official personnel and office expense allowance (including the allowance for administrative and clerical assistance, the salaries allowance for legislative assistance to Senators, as authorized by the Legislative Branch Appropriation Act, 1978 ( P.L. 95-94 ), and the office expense allowance for each Senator's office for each State) in effect immediately before the date of enactment of this section shall be reduced by 5 percent" —and more indirectly through broader appropriations actions that may have influenced the funding level for this account (i.e., continuing resolutions, across-the-board rescissions, and the FY2013 sequestration). The SOPOEA appropriations account includes agency contributions for benefits provided to employees paid by this account. As stated above, it does not include certain services provided to Senators from other accounts. This may include, for example, services or allowances provided by the Sergeant at Arms and Doorkeeper of the Senate, the Secretary of the Senate, or the Architect of the Capitol. In addition, the SOPOEA does not include salaries for Senators, which are provided separately through a permanent appropriation. Appropriations Acts: Administrative Provisions and Report Language Related to Unexpended Balances For many years, the Senate Appropriations Committee reports on the annual legislative branch appropriations bill have contained language stating that the prudence of Senators in SOPOEA spending has been factored into the recommended level for this account. For example, the FY2016 report states, The amount recommended by the Committee for the SOPOEA is less than would be required to cover all obligations that could be incurred under the authorized allowances for all Senators. The Committee is able to recommend an appropriation of a lesser amount than potentially necessary because Senators typically do not obligate funds up to the absolute ceiling of their respective allowances. The FY2016 Consolidated Appropriations Act contains a new administrative provision "requiring amounts remaining in Senators' official personnel and office expense account to be used for deficit reduction or to reduce the federal debt." A similar administrative provision was previously included in the Senate Appropriations Committee's reported version of the bill ( H.R. 2250 ). The SOPOEA in Practice: An Analysis of Spending in Selected Years Data Collection The analysis below demonstrates the use of the SOPOEA in four selected years (fiscal years 2007, 2008, 2011, and 2012). The information is derived from the Report of the Secretary of the Senate. Since late-arriving bills may be paid for up to two years following the end of the SOPOEA year, information for FY2012, for example, was collected from volumes covering FY2012, FY2013, and FY2014. To account for late-arriving bills, fiscal years were only included if data for the subsequent two years are complete. Due to data collection limitations, only selected years were examined, although this precludes an examination of the funding limitations in recent years. The data exclude Senators who were not in Congress for the entirety of the initial fiscal year. Categories of Spending SOPOEA spending is recorded in the Report of the Secretary of the Senate according to the following categories: net payroll expenses travel and transportation of persons rent, communications, and utilities printing and reproduction other contractual services supplies and materials acquisition of assets transportation of things This classification system is similar, but not identical, to that established by the Office of Management and Budget (OMB). Findings The tables and figure below examine spending in the aggregate by all Senators and then as a distribution using office-level data. Office-level data were examined since, as stated above, Senators are provided flexibility to operate their offices in the manner that best represents the states from which they are elected and aggregate Senate data may not be typical or representative of any individual Senator's office. The data show a relative consistency in the overall allocation of SOPOEA resources by category of spending both across Senators and over time. As seen in Figure 3 , the largest category of spending in all four years, accounting for 90% of total SOPOEA spending by Senators, is for personnel compensation (i.e., net payroll expense). Table 1 provides a distributional analysis at the office level. Expenditures for all of the categories utilized by the Senate were collected, although this table only examines the largest ones. As with the Senate-wide data depicted in Figure 3 , the office-level data indicate that personnel compensation is by far the largest category of expense for Senators' offices. Spending on personnel as a percentage of total office spending varied (from as low as 70% of all expenditures to more than 96%), but personnel costs comprised 90% of the average office's spending each year. Data on other categories of spending also demonstrate that, while some variation exists across offices and years, similar patterns have developed. Table 2 shows spending as a proportion of the total individual authorization. For example, approximately 10% of Senators spent between 80% and 85% of their allowance in FY2011. As discussed above, the data collection methodology precludes an examination of the most recent fiscal years, when the appropriations account has been flat or decreased.

The Senators' Official Personnel and Office Expense Account (SOPOEA) is available to assist Senators in their official duties. The allowance is provided on a fiscal year basis (i.e., October 1-September 30). Funding is provided in the annual legislative branch appropriations bills. Senators have a high degree of flexibility to use the SOPOEA to operate their offices in a way that supports their congressional duties and responsibilities, and individual office spending may be as varied as the states from which the Senators are elected. This appropriations account has decreased in recent years, from a high of $422.0 million in FY2010 to $390.0 million in FY2014, a decrease of 7.6%. The appropriation remained at the FY2014 level in the FY2015 and FY2016 appropriations acts. The SOPOEA for each Senator is calculated based on three variables—the administrative and clerical assistance allowance, the legislative assistance allowance, and the official office expense allowance. The formula results in a single, consolidated allowance for each Senator that can be used to pay for any type of approved official expense, subject to any regulations or limitations established by statute, Senate rules, the Senate Committee on Rules and Administration, and the Senate Ethics Committee. A preliminary list of SOPOEA levels shows a range in FY2016 of $3,008,288 to $4,760,211, depending on the state. The average allowance is $3,263,940. Pursuant to 2 U.S.C. §4108, Senate expenses are reported online biennially on a fiscal year basis in the Report of the Secretary of the Senate. This report provides a history of the SOPOEA and overview of recent developments, including funding levels. It also analyzes actual SOPOEA spending patterns in selected years (fiscal years 2007, 2008, 2011, and 2012). For a similar analysis of Member office budgets in the House of Representatives, see CRS Report R40962, Members' Representational Allowance: History and Usage, by [author name scrubbed].

The Significance of Services "Services" encompass an ever-widening range of economic activities. According to one definition, services are a diverse group of economic activities not directly associated with the manufacture of goods, mining or agriculture. They typically involve the provision of human value-added in the form of labor, advice, managerial skill, entertainment, training, intermediation, and the like. Services differ from manufactured goods in that they are intangible, cannot be stored and must be consumed at the point of production (trips to the doctor, enjoying a meal at the restaurant). However, rapid changes in technology are reducing even these restrictions on services (computer software that can be stored online, on disks, tape, etc.; accounting services that are provided via the internet). Illustrative examples of services include wholesale and retail trade; transportation and warehousing; information; banking and insurance; professional, scientific, and technical services; education; arts and entertainment; health care and social assistance; food and accommodation services; construction; communication; and public administration. Services are an increasingly significant sector of the U.S. economy.  In 2010, the service sector accounted for 83% of U.S. nonagricultural payroll jobs, for 65% of U.S. GDP (up from 55% in 1976). Many services have not only intrinsic value but are also critical to running other parts of large economies. For example, financial services (banking, investment, insurance) are the means by which capital flows throughout an economy from those who have it (savers, investors) to those who need it (borrowers). Financial services are often called the lifeblood of an economy. Delivery services are critical to ensuring that intermediate production goods and final end-user goods are available when needed. Distribution services (retail and wholesale services) provide the means by which goods are made available to consumers. Inefficiencies in any of these industries could have adverse consequences for the whole economy. U.S. trade in services, as customarily measured, plays an important role in overall U.S. trade, albeit, a much smaller role than trade in goods. In 2010 services accounted for 30% of total U.S. exports of goods and services and 17% of total U.S. imports of goods and services. Because most services require direct contact between supplier and consumer, many service providers prefer to establish or must establish a presence in the country of the consumer. For example, hotel and restaurant services require a presence in the country of the consumer. Providers of legal, accounting, and construction services prefer a direct presence because they need access to expert knowledge of the laws and regulations of the country in which they are doing business and they require proximity to clients. Thus, cross-border services trade data do not capture all of the trade in services. Data on sales of services by foreign affiliates of U.S.-owned companies and by U.S. affiliates of foreign-owned firms help to provide a more accurate, albeit still incomplete, measurement of trade in services. In 2008 (the latest year for which published data are available), U.S. firms sold $1,137 billion in services to foreigners through their majority-owned foreign affiliates (compared to $518 billion in U.S. cross-border exports). Foreign firms sold U.S. residents $727 billion in services through their majority-owned foreign affiliates located in the United States (compared to $366 billion in cross-border imports). Even these two sets of figures do not capture the total value of trade in services. Two other modes of services delivery are through the temporary movement of consumers to the location of the provider and the temporary movement of the provider to the location of the consumer. U.S. data on the sales of services via these two modes of delivery are not readily available. The GATS: The International Rules of Trade The seeds for multilateral negotiations in services trade were planted more than a quarter century ago. In the Trade Act of 1974, the Congress instructed the Administration to promote an agreement on trade in services under the General Agreement on Tariffs and Trade (GATT) during the Tokyo Round negotiations. The Tokyo Round concluded in 1979 without a services agreement, but the industrialized countries, led by the United States, continued to press for its inclusion in later negotiations. By contrast, developing countries, whose service sectors are less advanced than those of the industrialized countries, were reluctant to have services covered by international trade rules. Eventually services were included as part of the Uruguay Round negotiations launched in 1986. During the Uruguay Round, GATT members agreed to a new set of rules for services, the General Agreement on Trade in Services (GATS), and a new agency, the World Trade Organization (WTO), to administer the GATS, the GATT, and the other Uruguay Round Agreements, known as the Marrakesh Agreement. Trade scholar Geza Feketekuty identifies three main challenges to constructing rules for international trade in services: (1) to target the rules at domestic regulations that are the primary sources of barriers to trade in services; (2) to distinguish the legitimate use of regulations to protect the health and safety of residents from the use of regulations to protect domestic service providers from competition; and (3) to take into account that most services transactions take place behind customs borders rather than at customs border (as in the case of like goods trade). In addition to these, one might identify a fourth challenge: technology advances, such as the introduction of the internet, make once non-tradable services, for example consulting, tradable and also have led to the rapid introduction of services products that can be "outsourced" across borders. All of these challenges suggest a set of rules sufficiently flexible to meet them yet sufficiently rigid to provide meaningful discipline to WTO members' activities. The Four Modes of Delivery An important element to the structure of the GATS and the negotiations to expand the coverage of the GATS has been the recognition that most services transactions are conducted inside borders and that barriers to trade in services occur inside customs barriers. Effective trade rules would have to take into account the various modes of delivery in order to discern the barriers that foreign providers of services encounter when trying to sell in a trade-partner's market. The GATS divides the modes of delivery of services into four categories. As will be discussed later, the concessions that a member country makes in opening up its services market are largely mode-dependent. The four modes of delivery are:\ Cross-border supply (mode 1) —the service is supplied from one country to another. The supplier and consumer remain in their respective countries, while the service crosses the border. For example, a U.S. architectural firm based in Chicago is hired by a client in Mexico to design a building. The U.S. firm does the design in Chicago and sends the blueprints to its client in Mexico. Consumption abroad (mode 2) —The consumer physically travels to another country to obtain the service. A Mexican client travels to the United States to obtain the services of a U.S. architectural firm. Commercial presence (mode 3) —The supplier of a service establishes a branch, agency, or wholly owned subsidiary in another country and supplies services to the local market. A U.S. architectural firm establishes a subsidiary in Mexico to sell services to local clients. Presence of natural persons (mode 4) —Individual supplier travels temporarily to the country of the consumer. A U.S. architect travels to Mexico to provide design services to her Mexican client. The Structure of the GATS The GATS is an agreement among the 153 WTO members representing many levels of economic development. It provides the only multilateral framework of principles and rules for government policies and regulations affecting trade in services. The GATS remains a work in progress. The preamble to the GATS sets out its overall purposes and principles: trade expansion to promote economic development; progressive trade liberalization; preservation of member governments' right to regulate services sectors to meet national policy objectives; and facilitation of participation of developing countries and recognition of special circumstances of least developed countries (LDCs). The GATS is divided into six parts. Part I (Article I ) defines the scope of the GATS and provides that its provisions apply to all services, except those supplied in the routine exercise of government authority; to all government barriers to trade in services at all levels of government—national, regional, and local; and to all four modes of delivery of services. Part II (Articles II-XV) presents the " principles and obligations. " These principles and obligations apply to all services sectors whether or not the sectors are specifically listed in a member's schedule of commitments—the list of service sectors that are to be covered by the GATS. They include unconditional most-favored-nation (MFN) non-discriminatory treatment— services imported from one member country cannot be treated any less favorably than the services imported from another member country; transparency— governments must publish rules and regulations to ensure that foreign providers have access to those rules and regulations; reasonable, impartial and objective administration of government rules and regulations that apply to services; and monopoly suppliers must act consistently with obligations under the GATS. Part II also lays out some exceptions: a member incurring balance of payments difficulties may temporarily restrict trade in services covered by the agreement; and a member may circumvent GATS obligations for national security purposes . Part III (Articles XVI-XVIII) of the GATS establishes market access and national treatment obligations for members. The GATS binds each member to its commitments once it has made them—a member may not impose less favorable treatment than what it has committed to; prohibits member-country governments from placing limits on suppliers of services from other member countries regarding—the number of foreign service suppliers, the total value of service transactions or assets, the number of transactions or value of output, the type of legal entity or joint venture through which services may be supplied, and the share of foreign capital or total value of foreign direct investment; requires that member governments accord service suppliers from other member countries national treatment —a WTO member service provider may not be treated any less favorably than a domestic provider of a like service; and allows members to negotiate further reductions in barriers to trade in services. Importantly, unlike MFN treatment and the other principles listed in Part II, which apply to all service providers more or less unconditionally, the national treatment and market access obligations under Part III are restricted. They apply only to those services and the four modes of delivery listed in each member's schedule of commitments. National treatment and market access obligations do not apply to services sectors outside the schedule of commitments. (The " Schedule of Commitments " is described in detail below.) This is often referred to as the positive list approach to trade commitments. (The negative list would include all services sectors unless specifically excluded.) Each member country's schedule of commitments is contained in an annex to the GATS. Parts IV-VI (Articles XIX-XXIX) are technical but important elements of the agreement. Among other things, they require that, no later than five years after the GATS went into force, WTO members start new negotiations (which they have done) to expand coverage of the agreement, and they require that conflicts between members involving implementation of the GATS be handled in the WTO's dispute settlement mechanism . The GATS also has annexes. They include annexes on MFN exemptions; financial services that allows governments to take "prudent" actions to protect investors or otherwise maintain the integrity of the national financial system; transportation services; telecommunication services; maritime services; and mode-4 delivery. The schedule of commitments from each WTO member are also included as an annex. Post-Uruguay Round Negotiations and Agreements Signatories to the GATS determined negotiations had not been completed, but they did not want to delay the completion of the rest of the Uruguay Round agreements. The GATS stipulated that negotiations were to continue on financial services, telecommunication services, maritime services, and mode-4 delivery. The agreements reached would be included as part of the GATS when they entered into force. Agreements were concluded on basic telecommunications in February 1997 and financial services on December 1997. Negotiations on mode-4 (movement of natural persons) ended on July 28, 1995, with few results, and negotiations on maritime services ended in June 1996 without conclusion and were to resume in the current round. Schedule of Commitments The commitments that WTO members make regarding national treatment and market access in specific service sectors or subsectors constitute a major portion of a member's obligations under the GATS and a significant element of the negotiations during the Doha Development Agenda round. Therefore, a general explanation of what comprises a member's schedule of commitments (SC) is in order. Each WTO member was required to submit a SC during the negotiations of the GATS. Each new member is required to submit a schedule of commitments when it accedes to the WTO. Each of the national schedules is a part of the GATS. The SC has been compared to the tariff schedules of each WTO member; however, the schedules of commitments on services are more complex than the tariff schedules. The schedule is divided into four columns. The first column lists the sector or subsector for which commitments are made. The second column lists for that sector or subsector the restrictions on market access that are to be applied for each of the four modes of delivery. The third column lists the restrictions on national treatment that are to be applied for each of the four modes of delivery. The fourth column lists any additional commitments the member has made for the sector or subsector. The schedule is also divided into two parts. In the first part, the member country identifies its horizontal commitments, that is, commitments on trade liberalization that apply to all services sectors and subsectors listed in the schedule. The second part lists the sector-specific commitments. The SCs tend to be long documents because the WTO member must identify each service sector and subsector for which it is making a trade liberalization commitment, and the member must identify the exceptions on market access and national treatment for each of the four modes of delivery for each sector and subsector. The Negotiations The negotiations on services in the DDA have two fundamental objectives. One objective is to reform the current GATS rules and principles. The second objective is for each member country to refine and expand its schedule of commitments to increase the number of service sectors to be covered and to reduce the limitations on national treatment and market access. This section examines the evolution of the current negotiations, their structure, and their status. It also discusses U.S. goals and those of other major trading partners and groups of members. The Evolution of the Negotiations At the end of the Uruguay Round, the negotiators acknowledged that they needed to maintain the momentum of the service negotiations even if a comprehensive new round of negotiations was not to be launched. Thus, Article XIX of the GATS required WTO members to begin a new set of negotiations on services no later than five years after the GATS entered into force (that is, 2000) as part of the so-called WTO "built-in agenda." Article XIX stipulates that participants work to resolve some conceptual and procedural issues, for example, how to provide special treatment to least developed countries. The GATS also mandates that the negotiations address the issue of government subsidies in trade in services and possible countervailing actions (Article XV), emergency safeguard measures, that is, measures to counter surges in imports that cause or threaten to cause injury to a domestic industry (Article X), and government procurement in services trade (Article XIII). The new services negotiations began in 2000 but progressed slowly in part because of the adverse political climate caused by the failure of the 1999 WTO Ministerial in Seattle. In March 2001, the WTO's Council for Trade in Services, the body that administers the GATS and oversees negotiations on services, approved the guidelines that shape the current set of negotiations. The guidelines incorporate the mandates and procedures rooted in the GATS. The guidelines stipulate: Objectives and Principles: The main objective is progressive liberalization of trade in services as a means to promote economic growth and development while recognizing the sovereign right of members to regulate services sector and introduce new regulations. Scope: All service sectors and subsectors and all modes of delivery are subject to negotiations. Negotiations on safeguards measures, were to be completed by March 2002. (That deadline was extended eventually to the end of the DDA.) Modalities and Procedures: The negotiations are to be conducted in special sessions of the Council for Trade in Services and open to all WTO members and acceding countries. The starting point of the negotiations would be the scheduled commitments at the time. The "request-offer" format (discussed below) is to be used for negotiating new commitments. In addition, special attention is to be given to the special needs of developing countries in requesting commitments from them and making commitments to them. (Modalities were adopted on September 3, 2003.) Furthermore, the members are to negotiate modalities on how to give negotiating credit for autonomous liberalization—reduction in trade barriers on services undertaken outside of negotiations. (On March 6, 2003, members agreed to a modality on the treatment of autonomous liberalizations.) Modalities are methods or measures, such as formulas, to negotiate trade liberalization. After the false start in Seattle, the WTO members successfully launched DDA in November 2001. The Ministerial Declaration that announced the mandates for the round folded the services negotiation into the agenda of the DDA round. The Declaration reaffirms the March 2001 guidelines but included deadlines to spur the negotiators: participants were to submit their initial requests for market access and national treatment commitments from each member by June 30, 2002, and their initial offers of commitments they would be willing to make by March 31, 2003. The services negotiations floundered as deadlines passed. The rest of the DDA negotiations were on the verge of collapse after the member countries could not agree at the September 2003 Ministerial in Cancun on modalities for the agriculture negotiations and non-agricultural market access. After much consternation and discussion, WTO members forged a negotiating framework or "package" of objectives to put the round back on track in July 2004. The framework reaffirms the mandates contained in the Doha Ministerial Declaration. The July 2004 framework specifically charged the negotiators to complete and submit their initial offers as soon as possible, to submit revised offers by May 2005 and to ensure that the offers are of "high quality." These pronouncements were in response to complaints from WTO officials that only a few of the participants had met the deadlines for initial offers and the quality of those offers left much to be desired. Although the July framework mentioned services only briefly, the fact that it was mentioned at all is considered important to the U.S. business community. In so doing, the DDA negotiators placed services on par with the negotiations on agriculture and on market access for non-agricultural goods. The Structure of the Negotiations The negotiations on rules are conducted by working groups of representatives of interested members. The negotiations on national treatment and market access commitments are addressed by all members using the request-offer format. In the initial phase of the negotiations, each WTO member submits its "wish-list" or "request" of what commitments it would like other members to "offer" to make. The negotiations then continue with each member responding to the requests with its initial "offer" of the commitments it would be willing to make. The process continues with more negotiations and revised offers until the parties have reached a consensus that the commitment offers of each member are acceptable. Unlike the negotiations on goods in the WTO that are conducted multilaterally among all members at the same time, the services "request-offer" negotiations consist of many series of simultaneous bilateral, plurilateral (many participants), and multilateral (WTO-wide) negotiations among WTO members. The final set of commitment offers or agreements must be accepted by all members to become part of the GATS. The Status of the DDA Negotiations and Major Issues The WTO services negotiations have been going on for more than five years. However, as with the negotiations in agriculture and non-agriculture market access that have proceeded slowly with missed deadlines and disappointing results. In July 2006, WTO Director-General Pascal Lamy suspended the entire DDA negotiations, including the services negotiations, because member countries could not agree on fundamental modalities for the negotiations in agriculture trade. He resumed the negotiations in 2007, continuing to the present. Negotiators from major groups of developed and developing countries worked to nail down the basic elements of a draft text; however, they failed so far to reach a consensus on the basic negotiating objectives. This section reviews the main objectives of the United States and of chief trading partners and examines some of the critical issues that have emerged during the negotiations. U.S. Goals17 The United States presented its major goals for the negotiations in the Doha Development Agenda (DDA) Round in July 2002 in its initial set of requests, although it had stated many of the goals in earlier negotiating sessions prior to the launch of the DDA. U.S. negotiators derived these objectives during consultations with U.S. service industry representatives. The main U.S. goal is to secure as many market access commitments from as many trading partners as possible. U.S. policymakers have targeted several other goals for the services negotiations. Quality of Commitments A long-standing U.S. complaint has been that the market access and national treatment commitments that were made during the Uruguay Round were not as liberal as the then-existing market environment. That is, WTO members were reluctant to commit to maintaining (or "binding" in WTO parlance) the market openness at the levels that were actually in place. The United States has called on countries to raise the level of bindings to actual levels to prevent slippage. Regulatory Transparency Government regulation is a pervasive aspect of services trade, even more so than in manufactured goods trade, in virtually all developed and developing economies. GATS rules recognize legitimate needs for governments to regulate services to ensure the health and safety of consumers, for example, by making sure that lawyers and doctors are qualified to practice their professions. However, in most governments, services sectors are regulated by different agencies depending on the service, and one service sector may be regulated by more than one government agency. Some sectors may be regulated by central or federal agencies, while others are regulated by regional or local agencies or perhaps by agencies at various administrative levels. Service providers whether domestic or foreign must be aware of regulations and regulatory procedures in order to conduct business. U.S. service providers have cited the lack of transparency in the development and implementation of regulations as a primary obstacle to increasing foreign trade in services in many markets, particularly in developing countries. The United States wants WTO member countries to make commitments to establish clear, publicly available domestic procedures for application for licenses or authorizations and their renewal or extension; to establish domestic procedures that provide for a standard formal process for informing the public of regulations or changes to existing regulations, prior to their final consideration by the relevant authority and entry into effect; and to provide opportunities for interested parties to comment and ask questions as regulations are developed, changed, and implemented. Commercial Presence (Mode-3) U.S. service providers across a number of sectors point to the importance of establishing a commercial presence in a local market in order to conduct business. U.S. negotiators have requested from WTO members that they commit horizontally (across all sectors) to eliminate unnecessary restrictions on foreign direct investment, such as limits on the forms in which a foreign direct investment can take (partnership, branch, minority ownership, etc.). Financial Services Financial services include insurance, banking, securities, asset management, pension funds, financial information and advisory services. The United States has requested that trading partners make commitments to improve market access in financial services, on transparency in financial services regulations, and fairness in applying financial services regulations. Regarding insurance in particular, the United States proposed commitments to expedite new-to-market initiatives. Telecommunications Services The United States requested that WTO partners increase market access in telecommunications services, including value-added services, adopt commitments made in the 1998 Telecommunications Agreement, and privatize telecommunications carriers. In addition, the United States has requested market access commitments regarding owning and leasing cable facilities. Express Delivery Services The United States has requested increased access for road freight transport, order processing services, inventory management services, among other express delivery services. In addition, the United States asked WTO members to address the issue of cross-subsidization of express delivery services, where government authorized monopolies (such as first class postal services) share revenues with express delivery carriers. Energy Services This category includes energy exploration services, energy transmission and distribution, energy marketing and trading, and energy conservation and anti-pollution services. The United States has requested increased market access to all of these services markets. In addition, the United States has requested that trading partners make commitments regarding third-party access to and use of energy transportation facilities, such as interconnection with energy networks and grids. Energy services do not include energy generation or ownership. Environmental Services Services that protect the environment from degradation have been another priority for the United States in the services negotiations. The United States has requested trading partners to provide increased access to markets for services related to wastewater treatment services, solid/hazardous waste management, soil and water cleanup, noise and vibration abatement, protection of biodiversity and landscape, among other environment-related areas. Distribution Services The United States has requested trading partners to provide full market access to retail, wholesale, and franchising services. This access would include both services direct delivery to the customer or remotely through catalogue, video, or electronic sales. Education and Training Services (ETS) In the context of U.S. requests, ETS includes higher education, training services, and testing services provided in universities and schools, as well as in work places. Training services include job-related courses. ETS do not include primary or secondary education, and U.S. requests for commitments to increased market access do not aim to replace public education. Professional Services The United States has asked that trading partners increase market access for foreign lawyers, accounts, and other providers of professional services. To do so, they should remove citizenship requirements for licensing, remove restrictions on foreign ownership, lift restrictions on form of organization (subsidiary versus branch or partnership), and remove restrictions on associations with local professionals. Other services The United States has requested increased market access for computer and related services including computer consulting, software development, data processing, and systems integration and maintenance services. It has also requested improved market access commitments for audiovisual and advertising services . U.S. Offers The United States presented its initial offer of proposed commitments on March 31, 2003, at the deadline set in the Doha Ministerial Declaration. It submitted a revised offer on May 31, 2005, meeting the deadline set in the July 2004 Framework. The U.S. initial and revised offers would "bind" or commit the United States to maintain national treatment and market access to foreign service providers that are already in place, including improvements that have been made since the Uruguay Round agreements were enacted. In other words, the United States would commit to refrain from reducing its current level of trade liberalization. The United States defends its offers arguing that its services markets are already quite open, and that it looks for WTO members to meet U.S. standards. To a large degree this is an accurate statement. Many U.S. services industries are very competitive and, therefore, can withstand foreign competition. Nations logically open their markets in the areas in which they are competitive while protecting sectors that are not competitive. Nevertheless, as will be noted later, not all U.S. WTO-trading partners have been so sanguine about the U.S. offers. The U.S. offers include horizontal commitments, that is commitments that apply to all sectors and subsectors that are listed in the U.S. schedule of commitments. The horizontal commitments include the following areas: Temporary entry of personnel (Mode-4): The United States categorically makes no commitments regarding the temporary entry of personnel other than for specific groups of personnel most of whom would be working for foreign firms with affiliates in the United States. These include services sales persons, who sell within the company but not to the U.S. public and who are in the United States no longer than 90 days; inter-corporate transferees (managers, executives, and specialists) for up to three years with the possibility for extension for up to an additional two years; and personnel engaged in the establishment of a business entity in the United States. The United States also allows temporary entry for fashion models and service providers in other specialty occupations. Acquisition of land : The United States permits the temporary entry of personnel engaged in the acquisition of land in the scheduled services sectors and subsectors. The U.S. proposal notes, however, that the initial acquisition of federally owned land is restricted to U.S. citizens. Taxation measures: Foreigners engaged in providing scheduled services are taxed the same as U.S. residents with a few exceptions. Besides the horizontal commitments, the United States has offered scheduled commitments in a number of sectors and subsectors: business services, including professional services, accounting and bookkeeping, taxation services, and architectural and engineering services. The format for scheduling commitments requires WTO members to identify any national treatment and market access exceptions for each of the four delivery modes for each of the scheduled sectors and subsectors. In the case of the business services most of the exceptions relate to state restrictions or requirements on foreign service providers. In addition to business services, the United States has offered to make commitments in services related to market research and public opinion polling; management consulting; computer and related services; real estate services (that is, services provided to the ownership or leasing of property); services incidental to agriculture, hunting, forestry, and fishing; express delivery and other delivery services; telecommunication services (with the national treatment exception that foreigners cannot own common carrier or radio licenses); wholesale and retail trade services and franchising; higher education; environmental services; financial services; health related and social services; travel and tourism; recreational, cultural and specialty services; transportation services (except maritime services); energy services; and construction and related services. Developing countries have criticized the United States for not offering broader commitments, arguing that the sectors in which the United States has offered commitments, such as express delivery and energy services, are not ones that would be useful to them. The European Union has criticized the United States for not offering to open maritime services and postal services to foreign competition. Developing countries and some developed countries have focused most of their criticism on U.S. commitments and offers under the mode-4 category of delivery, for example, that U.S. offers are restricted to business executives and other personnel and with close ties to foreign companies having a commercial presence in the United States. India argues that it would need access for software specialists, computer experts, and information technology engineers who would not be directly affiliated to an Indian-owned firm in the United States. (Mode-4 has proved to be one of the most contentious issues in the DDA and is discussed in more detail later.) Major Issues in the Negotiations The original goal of completing the negotiations by January 1, 2005, has long passed, and deadlines accomplishing procedural steps, such as initial and revised offers, have had to be rescheduled. The complexity of the negotiations may go a long way in explaining the retarded pace, but reports by trade negotiators and discussions with experts suggest several underlying challenges. Negotiating Format Some negotiators and other observers have suggested that the "request-offer" negotiating format might be stalling the process. The United States and the EU separately proposed that negotiators establish "benchmarks" of certain targeted sectors on which WTO members would agree to make commitments. U.S. officials argued for commitments in six core sectors—financial services, telecommunications, energy, express delivery, computer and other information-related services, and audio-visual services. The EU argued for a smaller list and would allow members to choose to make commitments from a certain percentage of the core sectors for all four delivery modes. The "benchmark" proposals met with strong opposition from many developing countries who asserted that it was too late in the negotiation to use a different negotiating format and that the established mandate for the DDA negotiations specifically requires the "request-offer" format to be used. (Proponents of "benchmarks" responded that they would be used as a supplement to the "request-offer" approach and not as a substitute.) Some developing countries also argued that benchmarks would probably focus on those sectors that the developed countries favored since they wield the most influence. The U.S. services business community voiced concern that focusing on benchmarks might divert the attention of negotiators and cause additional delays in the process. Canada proposed, supported by the United States and other developed countries, changes in the negotiating process in order to provide a jolt to the negotiations on services. For example, the United States has pressed to have countries identify more clearly concessions that they would we willing to put on the table before issues in the agriculture and non-agricultural negotiations are completed. The proposal was intended to address a frustration on the part of those countries that the current "sequencing" of negotiations—services to follow agriculture and non-agriculture—has frustrated the services negotiations. Developing countries have rejected the proposal and insist on maintaining the current sequencing. The positive list approach (whereby members list only the sectors and subsectors that are to be covered) to market access commitments has also been criticized. The primary criticism has been that it could be a disincentive to market access liberalization: the default in the negotiations is that sectors and subsectors are not covered by WTO rules unless specifically identified and the schedules of commitments would not cover new sectors and subsectors that emerge in between rounds of negotiations. On the other hand, this approach is also viewed as a more conducive way to get reluctant members, particularly developing countries, to participate in the negotiations. The United States prefers the "negative list" approach and has used it in free trade agreements. Mode-4 Mode-4 delivery, temporary entry of supply personnel, has become one of the most controversial issues at this stage of the negotiations in services. It has divided many developed countries and developing countries, although differing positions have emerged among members of each category. Much of developing country criticism of the United States has been regarding mode-4. It has also created some tension between the U.S. business community and the U.S. government. All of this criticism is despite the fact that mode-4 accounts for less that 1% of world trade in services. The controversy arises in part because the issue of mode-4 delivery is closely related to immigration policy in the United States and some other countries, and comes at a time when the United States has tightened restrictions in response to the attacks of September 11, 2001. Article I-1(d) defines mode-4 as pertaining to the supply of a service, "by a service supplier of one [WTO] Member, through presence of natural persons of a Member in the territory of any other Member." An annex to the GATS on mode-4 further states that the GATS, "shall not apply to measures affecting natural persons seeking access to the employment market of a Member, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis." Several developing countries have criticized the United States for not offering more on mode-4 commitments. India has criticized the visa restrictions placed on temporary workers entering the United States, particularly workers not directly affiliated with companies located in the United States and has also called for greater transparency of U.S. immigration regulations pertaining to the temporary entry of personnel. The mode-4 issue has also manifested itself as an issue of congressional authority. In July 2003, during congressional consideration of the implementing bills for the U.S.-Chile and U.S.-Singapore free trade agreements, members of the Senate Judiciary Committee and the House Judiciary Committee objected to the inclusion of changes in U.S. visa policies to allow increases in the quotas of workers entering the United States. They argued that changes in visa rules must be separate from trade legislation that is considered by Congress under expedited (fast-track) procedures. Compromises were reached to allow the two bills to be voted on, but not without bipartisan warnings from both committees that changes in visa policy should no longer be part of bilateral or multilateral trade agreements. The U.S. business community has maintained that the United States needs to be more flexible in its mode-4 offers, arguing that failure to do so stalls the negotiations and prevents United States from obtaining useful commitments from developing countries. Business groups have proposed alternative mode-4 options to move the negotiations forward. Negotiations on Rules Not much has been accomplished regarding establishing rules on subsidies and emergency safeguard measures for services. Developing countries, especially East Asian developing countries, consider these issues a high priority. However, the negotiators have not been able to resolve basic questions, such as, what would constitute a countervailable subsidy, how would it be measured and how to measure import surges to which a WTO member could apply safeguards measures. Negotiations on government procurement have also proceeded slowly. Status and Prospects There is a general consensus that after more than 10 years the services negotiations have not progressed very far. One assessment for World Bank concluded the offers that many WTO members, especially the developing countries, have changed little from the commitments that they made under the Uruguay Round and do not reflect the actual levels of openness of their services market. The study indicates that the best offers made to date are, on average, 1.9 times more restrictive than the actual policies. In other words, WTO members have refused to even lock in (bind) the trade in services they have in place but instead want to have the option of applying more restrictions on trade in services without violating WTO commitments. The prospects of the negotiations were set back when WTO Director-General Pascal Lamy suspended the DDA, including the services negotiations, indefinitely on July 24, 2006, after a meeting of the G-6 WTO members, consisting of the United States, the European Union, Japan, Australia, Brazil, and India, failed to agree on the basic conditions or modalities, for conducting the agriculture and NAMA negotiations. Although the negotiations resumed in 2007, progress on the services negotiations remains sluggish at best. Even before the suspension, the services negotiations had not been going well. Several possible reasons can be cited for the lack of progress. One is the division between developed countries that have advanced services sectors employing highly skilled labor and the developing countries with less-developed services industries. The former group seeks market opportunities for its services providers and is more willing to open its markets to competition. The latter group is more protective of its domestic services providers. The halting progress in the agriculture and NAMA negotiations in the DDA has been a major impediment to the services negotiations. Some developing countries have asserted that they will not improve their offers until the United States and the European Union commit to reduce their agriculture subsidies. The developed countries want commitments from developing countries to reduce the "water" in their commitments, that is, the difference between the liberalization they have agreed to (bound) and their actual level of market liberalization. A third reason could be the complexity of the agenda of the services negotiations and the number of players involved. "Services" includes a broad range of economic activities many with few characteristics in common except that they are not goods. The trade barriers exporters face differ across services sectors making the formulation of trade rules a significant challenge. Furthermore, services negotiations include many participants. In addition to trade ministers, they include representatives of regulatory agencies many of whom do not consider trade liberalization a primary part of their mission. The prospects for the negotiations are difficult to evaluate at this point. It is not unusual for negotiations to lag as participants wait to place their best negotiating positions on the table until just before crucial deadlines are reached. Several factors will determine if and when the services negotiations will be completed. One factor is the political will the WTO members can muster to overcome the obstacles that plague the negotiations. Another factor is the extent the various participants are willing to compromise on goals in order to reach agreements. And a third factor is how quickly the issues in agriculture and non-agriculture market access are resolved; the sooner they are resolved the sooner negotiators can devote their full attention to the services negotiations. From December 13-18, 2005, WTO trade ministers held the sixth WTO Ministerial in Hong Kong. The trade ministers were expected to emerge from meeting with modalities that would accelerate the DDA negotiations to their conclusion by the end of 2006. In the Hong Kong Ministerial Declaration, WTO members reaffirmed their commitment to complete the services negotiations with special consideration given to the needs of developing and the least developed countries. Annex C to the Declaration provides modalities and parameters for completing the negotiations. In September 2007, the chairman of the trade in services negotiations began a process to develop a draft text of an agreement and called on member-country negotiators to submit contributions. However, by the end of 2007, it was clear that the countries were still sharply divided on basic objectives. Developed countries, including the United States, have argued for member-countries at a minimum to commit to binding their current practices on trade in services. Developing countries, including Argentina, argued against such benchmarks and resisted making additional commitments until developed countries commit to greater reductions of subsidies for agriculture. In July 2008, WTO General Director Lamy called a ministerial meeting in Geneva to again try to hammer out the modalities for the agriculture and NAMA negotiations. On July 26, 2008, a "signaling" conference was held with 32 representatives, including the United States and two representing the EU. The conference was designed to ascertain where participants stood in terms of the offers they were willing to make and the expectation they have of their trading partners. While the conference did bring to light some areas of possible commitment, it did little to move the negotiations ahead. In 2009, the WTO members held "cluster" meetings to try to provide some momentum with limited results. There was little accomplished in the services negotiations in 2010, in part because they remained hostage to the agriculture and NAMA and negotiations, but also because many of the participants were reluctant to go beyond current levels of liberalization. In a written question submitted to Michael Punke as part of his confirmation hearing to become deputy USTR, ranking member of Senate Finance Committee Senator Charles Grassley said, "the Doha services negotiations are bogged down. You'll need a strong services package if you want my support for an agreement."

The United States and the other 153 members of the World Trade Organization (WTO) have been conducting a set or "round" of negotiations called the Doha Development Agenda (DDA) since the end of 2001. The DDA's main objective is to refine and expand the rules by which WTO members conduct foreign trade with one another. A critical element of the DDA round is the negotiations pertaining to foreign trade in services. Trade in services has been covered under multilateral rules only since 1995 with the entry into force of the General Agreement on Trade in Services (GATS) and of the Uruguay Round Agreements creating the WTO. The negotiations on services in the DDA round have two fundamental objectives. One objective is to reform the current GATS rules and principles. The second objective is for each member country to open more of its service sectors to foreign competition. The WTO services negotiations have been going on for more than 10 years. However, as with the negotiations in agriculture and non-agriculture market access, the services negotiations have proceeded slowly with missed deadlines and few results. The prospects for the negotiations are difficult to evaluate at this point. It is not unusual for negotiations to lag as participants wait to place their best negotiating positions on the table until just before crucial deadlines are reached. In July 2006, WTO Director-General Pascal Lamy suspended the DDA negotiations, including the services negotiations, because major WTO members could not agree on the terms or modalities for negotiations in agriculture and non-agriculture market access. He resumed the negotiations in 2007. In 2009, negotiators from major groups of developed and developing countries have worked to nail down the basic elements of a draft text; however, they failed so far to reach a consensus on the basic negotiating modalities. 2010 also produced little progress as the services negotiations continued to be hostage to the negotiations on agricultural and non-agricultural market access (NAMA) negotiations, which also showed little progress. In general participants have been reluctant to liberalize services trade much beyond their commitments already established in the GATS. Several factors will determine if and when the services negotiations will be completed. One factor is the political will the WTO members can muster to overcome the obstacles that hamper the negotiations. Another factor is to what degree the various participants are willing to compromise on goals in order to reach agreements. And a third factor is how quickly the issues in agriculture and non-agriculture market access are resolved; the sooner they are resolved the sooner negotiators can devote their attention to the services negotiations. This report will be updated as events warrant. Many Members of Congress consider the services negotiations to be a critical part, if not the most critical part, of the DDA round. These Members require strong commitments from U.S. trading partners to remove barriers in trade in services as part of an overall trade agreement they could support.. The DDA negotiations, including the negotiations on services, could be the subject of oversight during the 112th Congress.

Latest Legislative Developments Comprehensive refugee reform legislation, the Refugee Protection Act of 2011 ( S. 1202 / H.R. 2185 ), would make significant revisions to asylum policy. Senate Committee on the Judiciary Chairman Patrick Leahy and House Committee on the Judiciary Subcommittee on Immigration Policy and Enforcement Ranking Member Zoe Lofgren introduced the companion bills on June 15, 2011. Among the asylum revisions in S. 1202 / H.R. 2185 , the bill would eliminate the time limits on seeking asylum in cases of changed circumstances; proscribe conditions under which an asylum seeker who was a victim of terrorist coercion would not be excluded as a terrorist; provide alternatives to detention of asylum seekers; modify certain elements necessary for the asylum seeker to meet the conditions for the granting of asylum; and, allow aliens interdicted at sea the opportunity to have an asylum interview. Overview of Current Policy Introduction The United States has long held to the principle that it will not return a foreign national to a country where his life or freedom would be threatened. This principle is embodied in several provisions of the Immigration and Nationality Act (INA), most notably in provisions defining refugees and asylees. Foreign nationals seeking asylum must demonstrate a well-founded fear that if returned home, they will be persecuted based upon one of five characteristics: race, religion, nationality, membership in a particular social group, or political opinion. Foreign nationals arriving or present in the United States may apply for asylum with the United States Citizenship and Immigration Services (USCIS) in the Department of Homeland Security (DHS) after arrival into the country, or they may seek asylum before a Department of Justice Executive Office for Immigration Review (EOIR) immigration judge during removal proceedings. Foreign nationals arriving at a U.S. port of entry 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 a USCIS asylum officer and—if found credible—they are referred to an EOIR immigration judge for a hearing. The INA makes it clear that the Attorney General and Secretary of Homeland Security can exercise discretion in the granting of asylum. Foreign nationals who participated in the persecution of other people are excluded from receiving asylum. The law states other conditions for mandatory denials of asylum claims, including when the alien has been convicted of a serious crime and is a danger to the community; the alien has been firmly resettled in another country; or there are reasonable grounds for regarding the alien as a danger to national security. The INA, moreover, has specific grounds for exclusion of all aliens that include criminal and terrorist grounds. This report opens with an overview of current policy, discussing the threshold of what constitutes asylum and the procedures for obtaining it. The second portion of the report identifies the top sending countries and includes a time series analysis of six selected source countries for asylum seekers. The third section of the report analyzes asylum approvals by country of origin. The report rounds out with a discussion of selected legislative policy issues. Recent History of U.S. Asylum Policy In 1968, the United States became party to the 1967 United Nations Protocol Relating to the Status of Refugees (hereafter referred to as the U.N. Refugee Protocol), agreeing to the principle of nonrefoulement . Nonrefoulement means that an alien will not be returned to a country where his life or freedom would be threatened, and it is embodied in several provisions of U.S. immigration law. The U.N. Refugee Protocol does not require that a signatory accept refugees, but it does ensure that signatory nations afford certain rights and protections to aliens who meet the definition of refugee. At the time the United States signed the U.N. Refugee Protocol, Congress and the Administration thought that there was no need to amend the INA, assuming that the provisions to withhold deportation would be adequate. In 1974, the former Immigration and Naturalization Service (INS) issued its first asylum regulations. The Refugee Act of 1980 codified the U.N. Refugee Protocols definition of a refugee in the INA and included provisions for asylum in INA 208. The law defined asylees as aliens in the United States or at a port of entry who meet the definition of a refugee. As Figure 1 illustrates, asylum claims spiked immediately after passage of the Refugee Act in 1980, when over 120,000 Cubans and about 25,000 Haitians set sail for Florida. Known as the Mariel Boatlift, this mass exodus of asylum seekers put the new law to the test. In the 1980s, political violence and civil wars in Central America prompted mass migration of asylum seekers from El Salvador, Guatemala, and Nicaragua. Asylum cases filed with the INS surpassed 100,000 for the first time in 1988. The Tiananmen Square massacre of Chinese protesters in 1989 symbolized events that triggered asylum seekers from China, who contributed, along with conditions in Central America, to the second spike depicted in Figure 1 . The December 1991 military coup d'etat deposing Haiti's first democratically elected president, Jean Bertrand Aristide, led thousands of Haitians to flee by boat to the United States in FY1992. The following year, 285 Chinese came ashore in New York on the "Golden Venture" and a total of 683 Chinese came ashore in three different ocean-going vessels along the coast of California in the summer of 1993. Asylum claims with the INS peaked at 149,566 in FY1995 ( Figure 1 ). Almost half of those cases, however, resulted from the 1990 settlement of the American Baptist Church (ABC) case that allowed Salvadorans and Guatemalans living in the United States who had not obtained asylum in the past to apply for asylum. By the end of FY1995, there were 457,670 asylum cases in the backlog, as the INS asylum corps was unable to keep pace. The Illegal Immigrant Reform and Immigrant Responsibility Act (IIRIRA, P.L. 104-208 ) of 1996 made substantial changes to the asylum process, most notably by establishing summary exclusion provisions (now known as expedited removal), adding time limits on filing claims, and limiting judicial review in certain circumstances. IIRIRA also added a provision enabling refugees or asylees to request asylum on the basis of persecution resulting from resistance to coercive population control policies. Asylum claims with the INS dropped in the years following the passage of IIRIRA, as Figure 1 depicts. It remains difficult to assess the extent to which the IIRIRA revisions to asylum policy affected this decline. The Real ID Act of 2005 ( P.L. 109-13 ) further revised asylum law. Foremost, it established expressed standards of proof for asylum seekers, including that the applicant's race, religion, nationality, social group, or political opinion was or will be one of the central motives for his or her persecution. It also required that the asylum seeker provide evidence which corroborates otherwise credible testimony; such evidence must be provided unless the applicant cannot reasonably obtain it. Standards for Asylum Because "fear" is a subjective state of mind, assessing the merits of an asylum case rests in large part on the credibility of the claim and the likelihood that persecution would occur if the alien is returned home. These two distinct concepts—the credibility of the claim, or "credible fear," and the likelihood that persecution would occur, or "well-founded fear"—are fundamental to establishing the standards for asylum. A third dimension that overlays these concepts is the matter of "mixed motives" for persecuting the alien. Each of these standards are discussed below. Credible Fear The INA states that "the term credible fear of persecution means that there is a significant possibility , taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum under §208." Integral to expedited removal, which is discussed below, the credible fear concept also functions as a pre-screening standard that is broader—and the burden of proof easier to meet—than the well-founded fear of persecution standard required to obtain asylum. Well-Founded Fear The standards for "well-founded fear" have evolved over the years and been guided significantly by judicial decisions, including a notable U.S. Supreme Court case. The regulations specify that an asylum seeker has a well-founded fear of persecution if (A) The applicant has a fear of persecution in his or her country of nationality or, if stateless, in his or her country of last habitual residence, on account of race, religion, nationality, membership in a particular social group, or political opinion; (B) There is a reasonable possibility of suffering such persecution if he or she were to return to that country; and (C) He or she is unable or unwilling to return to, or avail himself or herself of the protection of, that country because of such fear. The regulations also state that an asylum seeker "does not have a well-founded fear of persecution if the applicant could avoid persecution by relocating to another part of the applicant's country.... " In evaluating whether the asylum seeker has sustained the burden of proving that he or she has a well-founded fear of persecution, the regulations state that the asylum officer or immigration judge shall not require the alien to provide evidence that there is a reasonable possibility he or she would be individually singled out for persecution if (A) The applicant establishes that there is a pattern or practice in his or her country of nationality or, if stateless, in his or her country of last habitual residence, of persecution of a group of persons similarly situated to the applicant on account of race, religion, nationality, membership in a particular social group, or political opinion; and (B) The applicant establishes his or her own inclusion in, and identification with, such group of persons such that his or her fear of persecution upon return is reasonable. Mixed Motives The intent of the persecutor is subjective and may stem from mixed or multiple motives. The courts have ruled that the persecution may have more than one motive, and so long as one motive is one of the statutorily enumerated grounds, the requirements have been satisfied. A 1997 Board of Immigration Appeals (BIA) decision concluded "an applicant for asylum need not show conclusively why persecution occurred in the past or is likely to occur in the future, [but must] produce evidence from which it is reasonable to believe that the harm was motivated, at least in part, by an actual or imputed protected ground." Generally, the asylum seeker must demonstrate in mixed motive cases that even though his/her persecutors were motivated for a non-cognizable reason, one of the persecutor's central motives was the asylum seeker's race, religion, nationality, social group, or political opinion. Process of Requesting Asylum An applicant for asylum begins the process either in the United States, if he or she is already present, or at a port of entry while seeking admission. This process differs from a potential refugee who begins a separate process wholly outside of the United States. Depending on whether or not the applicant is currently in removal proceedings, two avenues exist to seek asylum: "affirmative applications" and "defensive applications." The affirmative and defensive applications follow different procedural paths but draw on the same legal standards. In both processes, the burden of proof is on the asylum seeker to establish that he or she meets the refugee definition specified in the INA. Affirmative Claims An asylum seeker who is in the United States and not involved in any removal proceedings files an I-589, the asylum application form, with the USCIS. The USCIS schedules a non-adversarial interview with a member of the Asylum Officer Corps. There are eight asylum offices located throughout the country. The asylum officers either grant asylum to successful applicants or refer to the immigration judges those applicants who fail to meet the definition. The asylum officers make their determinations regarding the affirmative applications based upon the application form, the information received during the interview, and other information related to the specific case (e.g., information about country conditions). If the asylum officer approves the application and the alien passes the identification and background checks, then the foreign national is granted asylum status. There has been a 79% decrease in affirmative asylum cases filed since the enactment of IIRIRA in 1996, falling from 116,877 in FY1996 to 24,550 in FY2009, with a modest rebound in FY2000 and FY2001. As Figure 2 depicts, the number of asylum cases approved more than doubled from 13,532 in FY1996 to 31,202 in FY2002, and then fell to the lowest point over the 14-year period—9,614—in FY2009. This decline in cases approved represents a 29% change over the period. The asylum officer does not technically deny asylum claims; rather, the asylum applications of aliens who are not granted asylum by asylum officers are referred to EOIR immigration judges for formal proceedings. In some respects, these applicants/aliens are allowed a "second bite at the apple." Asylum applicants in the affirmative process are not subject to the mandatory detention requirements while their applications are being adjudicated, though there is broader authority under the INA to detain aliens for other grounds. Defensive Claims Defensive applications for asylum are raised when a foreign national is in removal proceedings and asserts claim for asylum as a defense to his/her removal. EOIR's immigration judges and the BIA, entities in DOJ separate from the USCIS, have exclusive control over such claims and are under the authority of the Attorney General. Generally, the alien raises the issue of asylum during the beginning of the removal process. The matter is then litigated in immigration court, using formal procedures such as the presentation of evidence and direct and cross examination. If the alien fails to raise the issue at the beginning of the process, the claim for asylum may be raised only after a successful motion to reopen is filed with the court. The immigration judge's ultimate decision regarding both the applicant's/alien's removal and asylum application is appealable to the BIA. Applicants/aliens seeking asylum via the defensive application method may be detained until an immigration judge rules on their application. The applicant/alien is not detained due to their asylum claim, but rather because of the broader authority in the INA to detain aliens. Defensive asylum claims made during EOIR proceedings started at a lower level in FY1996 (84,293) than affirmative USCIS claims (116,877). Since that time, defensive asylum claims have dropped by 53%, to 39,279 in FY2009. The number of asylum cases that EOIR judges have approved, however, has risen by 99% over this 14-year period. EOIR approved 5,131 in FY1996 and 10,186 in FY2009, as shown in Figure 3 . Expedited Removal Claims DHS' Customs and Border Protection (CBP) officer must summarily exclude a foreign national arriving without proper documentation, unless the alien expresses a fear of persecution if repatriated. Absent a stated fear, the CBP officer is allowed to exclude aliens without proper documentation from the United States without placing them in removal proceedings. This procedure is known as expedited removal. According to DHS immigration policy and procedures, CBP inspectors, as well as other DHS immigration officers, are required to ask each individual who may be subject to expedited removal the following series of "protection questions" to identify anyone who is afraid of return: Why did you leave your home country or country of last residence? Do you have any fear or concern about being returned to your home country or being removed from the United States? Would you be harmed if you were returned to your home country or country of last residence? Do you have any questions or is there anything else you would like to add? If the foreign national expresses a fear of return, the alien is supposed to be detained by Immigration and Customs Enforcement (ICE) and interviewed by a USCIS asylum officer. The asylum officer then makes the "credible fear" determination of the alien's claim. Those found to have a "credible fear" are referred to an EOIR immigration judge, which places the asylum seeker on the defensive path to asylum. If the USCIS asylum officer finds that an alien does not have a credible fear, the alien may request that an EOIR immigration judge review that finding. The number of "credible fear" claims that USCIS has considered has steadily increased from 4,712 in FY2005 to 5,454 in FY2009—a 16% increase. The number of "credible fear" reviews by EOIR is much lower overall than it is for USCIS, as one would expect. Nonetheless, EOIR numbers have seen a notable rise from 114 in FY2005 to 887 in FY2009. Consistent time series data on "credible fear" claims are not available before FY2005. Aliens Arriving by Sea On November 13, 2002, the former INS published a notice clarifying that certain aliens arriving by sea who are not admitted or paroled into the United States are to be placed in expedited removal proceedings and detained (subject to humanitarian parole). This notice concluded that illegal mass migration by sea threatened national security because it diverts the U.S. Coast Guard and other resources from their homeland security duties. The Attorney General expanded on this rationale in his April 17, 2003, ruling that instructs EOIR immigration judges to consider "national security interests implicated by the encouragement of further unlawful mass migrations ..." in making bond determinations regarding release from detention of unauthorized migrants who arrive in "the United States by sea seeking to evade inspection." The case involved a Haitian who had come ashore in Biscayne Bay, FL, on October 29, 2002, and had been released on bond by an immigration judge. The BIA had upheld his release, but the Attorney General vacated the BIA decision. Background Checks All foreign nationals seeking asylum are subject to multiple background checks in the terrorist, immigration, and law enforcement databases. Those who enter the country legally on nonimmigrant visas are screened by the consular officers at the Department of State when they apply for a visa, and all foreign nationals are inspected by CBP officers at ports of entry. Those who enter the country illegally are screened by the U.S. Border Patrol or the ICE agents when they are apprehended. When aliens formally request asylum, they are sent to the nearest USCIS-authorized fingerprint site. They have all 10 fingers scanned and are subject to a full background check by the Federal Bureau of Investigation (FBI). Victims of Torture Distinct from asylum law and policy, aliens claiming relief from removal due to torture may be treated separately under regulations implementing the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (hereafter, Torture Convention). Article 3 of the Torture Convention prohibits the return of any person to a country where there are "substantial grounds" for believing that he or she would be in danger of being tortured. The alien must meet the three elements necessary to establish torture: 1. the torture must involve the infliction of severe pain or suffering, either physical or mental; 2. the torture must be intentionally inflicted; and 3. the torture must be committed by or at the acquiescence of a public official or person acting in an official capacity. Generally, an applicant for non-removal under Article 3 has the burden of proving that it is more likely than not that he would be tortured if removed to the proposed country. If credible, the applicant's testimony may be sufficient to sustain this burden without additional corroboration. In assessing whether it is "more likely than not" that an applicant would be tortured if removed to the proposed country, all evidence relevant to the possibility of future torture is required to be considered. However, if a diplomatic assurance (deemed sufficiently reliable by the Attorney General or Secretary of State) that the alien will not be tortured is obtained from the government of the country to which the alien would be repatriated, the alien's claim for protection will not be considered further and the alien may be removed. Source Countries for Asylum Seekers For many years, most foreign nationals who sought asylum in the United States were from the Western Hemisphere, notably Central America and the Caribbean. From October 1981 through March 1991, for example, Salvadoran and Nicaraguan asylum applicants totaled over 252,000 and made up half of all foreign nationals who applied for asylum with the INS. In FY1995, more than three-fourths of asylum cases filed annually came from the Western Hemisphere. In FY1999, the People's Republic of China (PRC) moved to the top of the source countries for affirmative asylum claims, with 4,209 new cases. Somalia followed as a leading source country with 3,125 cases in FY1999. As the overall number of asylum seekers fell in the late 1990s, the shrinking numbers from Central America contributed to the decline. Simultaneously, the number of asylum seekers from the PRC began rising and reached 10,522 affirmative cases in FY2002. The PRC remained the leading source country throughout the 2000s. Top 10 Source Countries in FY2009 Asylum seekers from the PRC dominated both the affirmative and defensive asylum caseloads in FY2009, as Figure 5 shows. They comprised 36% of the 24,550 affirmative cases filed with USCIS and 24% of the 39,279 defensive cases filed with EOIR. Five of the top 10 source countries of asylum seekers were Western Hemisphere nations in FY2009. The five were Haiti, Mexico, Guatemala, El Salvador, and Colombia. Ethiopia was the only African nation that was a top 10 source country for asylum seekers in FY2009. As evident in Figure 6 , "credible fear" claims are much smaller in overall numbers—5,454 in FY2009—than the affirmative and defensive asylum caseloads, and the top 10 source countries exhibit a somewhat different pattern as well. The PRC (18%) was still the leading source country, but El Salvador (17%) sent a comparable number of "credible fear" claimants in FY2009, as Figure 6 illustrates. Indeed, more Western Hemisphere nations are among the top 10 source countries for "credible fear" claimants than among the EOIR and USCIS asylum caseloads. As discussed above, "credible fear" typically comes up when an alien arrives without proper documentation and is put into expedited removal proceedings. Those deemed to have a credible fear proceed to a defensive asylum hearing with EOIR. Trends for Six Selected Countries Given the ebbs and flows of asylum seekers over time that Figure 1 , Figure 2 , and Figure 3 depict, the representativeness for policy analysis of FY2009 data—or any single year's data—comes into question. One approach that refines the policy study is the analysis of a subset of source countries' trends in asylum seekers. This section of the report focuses on six major source countries: the PRC, Colombia, El Salvador, Ethiopia, Haiti, and Mexico. Each of the six selected countries were among the major source countries of asylum seekers from FY1997 through FY2009. The analysis presents data on the three asylum gateways of affirmative, defensive, and "credible fear" claims for each of these source countries from FY1997 through FY2009. As noted above, time series data on "credible fear" claims were available only since FY2005. Bear in mind that EOIR defensive cases included many asylum claimants that first appeared as "credible fear" or affirmative cases with USCIS. As a consequence, defensive claims display an echo effect of the spikes and valleys in "credible fear" and affirmative cases. People's Republic of China44 PRC asylum cases peaked in FY2002 for both affirmative and defensive claims—10,522 and 11,499, respectively ( Figure 7 ). The ebbs and flows of PRC asylum seekers over the 13-year period, however, exhibit different patterns depending on the asylum gateway. Affirmative claims rose by 268.4%, from 2,377 cases in FY1997 to 8,758 cases in FY2009. The 13-year average for affirmative claims was 5,607. In contrast, defensive claims increased by only 11.4%, from 8,381 cases in FY1997 to 9,336 cases in FY2009. However, the year-to-year fluctuations in defensive claims were substantial, going from a low of 4,913 in FY1998 to a high of 11,499 in FY2002. The 13-year average for defensive claims (8,581) was higher than the average for the affirmative claims. The "credible fear" claims dropped from a high of 1,711 in FY2005 to 602 in FY2008, and then rose to 962 in FY2009. Colombia45 Colombian asylum cases exhibit a classic bell curve in Figure 8 , peaking in FY2002 at 7,967 (affirmative) and 9,526 (defensive). Although both gateways of affirmative and defensive claims have decreased since FY2002, the overall trends of Colombian asylum seekers from FY1997 through FY2009 are up by 48.2% and 53.6%, respectively. The 13-year average for affirmative claims was 2,351, and for defensive claims it was 3,072. The "credible fear" claims have dipped by 54.6%, from 185 in FY2005 to 84 in FY2009. El Salvador46 Affirmative asylum claims from El Salvador have steadily declined by 90.4%, from a high of 4,706 in FY1997 to 453 in FY2009. The 13-year average of affirmative claims is 1,289. Salvadoran defensive claims exhibit more of a u-shaped distribution in Figure 9 , with spikes of 8,126 in FY1998 and 9,955 in FY2007. The 13-year average of defensive claims is 4,908. Overall, defensive asylum claims are down by 53.2% for Salvadorans, despite peaking at 9,955 in FY2007. Furthermore, the number of "credible fear" claims during expedited removal has risen sharply from 73 in FY2005 to 945 in FY2009, and the number of these "credible fear" claims have surpassed the number of affirmative cases for FY2007 through FY2009. Ethiopia47 Asylum seekers from Ethiopia comprise the smallest number of cases among the six source countries studied. The 13-year average was 972 for affirmative claims and 689 for defensive claims, with only modest variations from year to year. Ethiopian asylum seekers were also noteworthy among the six source countries because each year from FY1997 through FY2009 they filed more affirmative cases than defensive cases ( Figure 10 ). Although small, the number of Ethiopian "credible fear" claims during expedited removal has risen markedly from 13 in FY2005 to 107 in FY2009. Haiti48 Many Haitians who flee Haiti are interdicted by the U.S. Coast Guard and do not appear among those who claim asylum in the United States. The number of asylum seekers from Haiti who do reach the United States has not fluctuated greatly over the 13-year period. All three asylum gateways of affirmative, defensive, and "credible fear" claims, however, have each evidenced a drop since FY2006, when defensive claims peaked at 6,056. The 13-year average was 3,162 for affirmative claims and 4,324 for defensive claims. Affirmative claims hit 4,938 in FY2001 and surpassed the number of defensive claims that year, as Figure 11 illustrates. Overall, the number of Haitian asylum seekers filing affirmative claims fell by 74.5%, defensive claims fell by 65.3%, and "credible fear" claims fell by 57.4%. Mexico50 Asylum seekers from Mexico reached a 13-year high point in the late 1990s. As Figure 12 shows, defensive claims reached 18,389 and affirmative claims hit 13,663 in FY1997. Mexican affirmative cases evidenced a moderate surge in FY2001 (8,747) and FY2002 (8,977), but the overall trend line has declined by 89.8% from FY1997 through FY2009. The number of defensive claims has decreased as well, by 84.7% from FY1997 through FY2009. The 13-year average was 4,258 for affirmative claims and 5,797 for defensive claims. Mexican "credible fear" claims during expedited removal have risen from 107 in FY2005 to 338 in FY2009, but they have not reach the numbers that the PRC and El Salvador claims have. The asylum patterns of these six selected source countries over the 13-year period varied considerably. Asylum seekers from Colombia, for example, were peaking in the early 2000s while the asylum seekers from El Salvador were dipping. Ethiopians and Haitians tracked steadily and revealed similar levels of affirmative versus defensive asylum claims (albeit Haiti's levels were higher overall). In contrast, Chinese, Salvadoran and Mexican levels of affirmative versus defensive asylum claims each yielded unique fluctuations over time. Regardless of the overall decrease in asylum cases since the enactment of IIRIRA in 1996, this data analysis suggests that conditions in the major source countries—whether economic, environmental, political, religious or social—were likely the driving force behind asylum seekers. Approvals of Asylum Cases Country conditions lie at the core of the principle that the United States will not return a foreign national to a country where his life or freedom would be threatened on account of race, religion, nationality, membership in a particular social group, or political opinion. As discussed more fully above, individualized persecution or persecution resulting from group identity may form the basis of the asylum claim. In the individualized instance, if the asylum seeker demonstrates that there is a reasonable possibility of suffering such persecution as an individual if he or she were to return to that country; and he or she is unable or unwilling to return to, or avail himself or herself of the protection of, that country because of such fear; then the fear of persecution is deemed reasonable. In the group identity instance, if the asylum seeker establishes that there is a pattern or practice in his or her home country of persecution of a group of persons similarly situated to the applicant on account of race, religion, nationality, membership in a particular social group, or political opinion; and establishes his or her own inclusion in and identification with such group of persons; then the fear of persecution is deemed reasonable. Analysis of Approvals by Country Given the sheer number of asylum seekers from the PRC in FY2009, it is not particularly surprising that the PRC led in the number of asylum cases approved by USCIS and EOIR in FY2009 ( Figure 13 ). Moreover, abuse of human rights in the PRC has been a principal area of concern in the United States for many years. Presumably, PRC asylum seekers are also benefiting from the provision enabling aliens to claim asylum on the basis of persecution resulting from resistance to coercive population control policies, given the well-known population control policies of the PRC. The portion of approved asylum cases from Haiti was consistent with its portion of asylum seekers in FY2009. Specifically, Haiti represented shares of asylum cases that USCIS and EOIR approved—4.8% and 4.0%, respectively ( Figure 13 )—that were comparable to the portion of asylum cased filed with USCIS and EOIR in FY2009—4.5% and 4.6%, respectively ( Figure 5 ). As noted above, the U.S. Coast Guard interdiction of Haitians has undoubtedly suppressed the number of asylum seekers from that nation. Although the continent of Africa was not home to many of the asylum seekers from the top source countries discussed above, the African nations of Cameroon and Eritrea, as well as Ethiopia, appear in the top 10 source countries for asylum cases approved by USCIS and EOIR in FY2009 ( Figure 13 ). The emergence of the African nations in the top source countries for approved asylum cases is revealed in Table 1 , which presents the top 20 sources countries over the past decade for approved affirmative and defensive asylum cases. Ethiopia, Somalia, Cameroon, Liberia, Egypt, and Sudan were among those countries. Although they were not top 10 source countries for asylum seekers, Middle Eastern and South Asian nations do appear in the top 20 source countries over the past decade for approved affirmative and defensive asylum cases. Iran, Iraq, Indonesia, and Pakistan were top 20 source countries for those who received asylum from FY2000 through FY2009, as were Indonesia, India, and Burma. Iraq and India were the only ones among these countries (along with Nepal) to be among the top 10 in FY2009. Several top sending countries were also among the decade's top 20 approved affirmative and defensive asylum cases: Colombia, Haiti, Guatemala, and, of course, the PRC. For year-by-year data on the top 20 source countries for approved asylum cases, see the Appendix . Approvals by Regional Office and Immigration Court Research studies of the approval rates of cases filed by asylum seekers consistently reveal disparities by USCIS regional asylum offices and EOIR immigration courts. Fredric N. Tulsky of the San Jose Mercury News was a finalist for the Pulitzer Prize for investigative reporting in 2001 "for his illuminating reporting on the arbitrary and inconsistent administration of the federal system that grants political asylum." In 2006, researchers at Syracuse University's Transactional Records Access Clearinghouse (TRAC) found "a surprising lack of consistency" among similarly situated asylum cases considered by EOIR from FY1994 to the early months of FY2005. The Stanford Law Review published "Refugee Roulette: Disparities in Asylum Adjudication" in 2007, which analyzed decisions of USCIS asylum officers as well as EOIR immigration judges. Refugee Roulette The example of asylum seekers from the PRC offers striking differences in the percentage of cases approved across regions and jurisdictions, despite national data trends that appeared consistent. A study of 290 asylum officers who decided at least 100 affirmative cases from the PRC from FY1999 through FY2005 found that the approval rate of PRC claimants spanned from zero to over 90% during this period. In one regional asylum office, the grant rates for affirmative applications from the PRC varied from zero to 68%. Sixty percent of the officers in that regional office deviated from their office's average PRC asylum approval rates by more than 50%. Nationwide, immigration judges granted asylum to 47% percent of defensive cases of PRC claimants from January 1, 2000, through August 31, 2004, but exhibited a pattern of variation similar to the USCIS asylum officers when the cases were broken down by court. The immigration court in Atlanta approved 7% of defensive PRC cases; however, the court in Orlando, FL, approved 76% of defensive cases from PRC claimants. The disparity continued if the applicant lost at the Board of Immigration Appeals and petitioned for review in the U.S. Court of Appeals. From FY2003 to FY2005, the Fourth Circuit did not remand a single case from the PRC (i.e., the court never decided in favor of the applicant), while the Ninth Circuit remanded in 37% of the PRC cases. The authors of this extensive study of affirmative and defensive decisions, "Refugee Roulette: Disparities in Asylum Adjudication," offered the following observations: Asylum seekers from three of these countries faced a grant rate in at least one court that was more than 50% below the national average, and applicants from four of these countries enjoyed a grant rate in at least one court that was more than 50% above the national average.... For one of these countries, China, the high grant rate and the low grant rate deviated by more than 50% from the national average.... Colombian asylum seekers also faced major disparities: those who appeared before the Orlando Immigration Court had a 63% grant rate, while those heard by the Atlanta Immigration Court faced a grant rate of 19%. The average national grant rate for Colombian asylum seekers is 36%. Figure 14 presents the data for the asylee producing countries in the high-volume immigration courts from which these conclusions are drawn. U.S. Government Accountability Office (GAO) The U.S. Government Accountability Office (GAO) analyzed the disparity in asylum decisions as well and found that "significant variation existed." GAO performed multivariate statistical analyses on asylum cases from 19 immigration courts that handled almost 90% of the cases from October 1994 through April 2007. GAO identified nine factors that affected these outcomes: (1) filed affirmatively (originally with DHS at his/her own initiative) or defensively (with DOJ, if in removal proceedings); (2) applicant's nationality; (3) time period of the asylum decision; (4) representation; (5) applied within 1 year of entry to the United States; (6) claimed dependents on the application; (7) had ever been detained (defensive cases only); (8) gender of the immigration judge; and (9) length of experience as an immigration judge. GAO then statistically controlled for these nine factors and found disparities across immigration courts and judges: "For example, affirmative applicants in San Francisco were still 12 times more likely than those in Atlanta to be granted asylum. Further, in 14 of 19 immigration courts for affirmative cases, and 13 of 19 for defensive cases, applicants were at least 4 times more likely to be granted asylum if their cases were decided by the judge with the highest versus the lowest likelihood of granting asylum in that court." GAO also found that the grant rate for affirmative cases exceeded 50% for asylum seekers from countries such as Albania, the PRC, Ethiopia, Iran, Russia, Somalia, and the former Yugoslavia. In contrast, GAO found that the grant rate for affirmative cases was lower than 10% for asylum seekers from El Salvador, Guatemala, Honduras, and Mexico. In terms of defensive cases, GAO observed that about 50% of asylum seekers from Iran and Ethiopia were granted asylum and almost 60% of such cases from Somalia were granted asylum. However, this outcome occurred for 13% or less of the defensive asylum cases from El Salvador, Honduras, and Indonesia. GAO also offered the following important caveat: Because data were not available on the facts, evidence, and testimony presented in each asylum case, nor on immigration judges' rationale for deciding whether to grant or deny a case, we could not measure the effect of case merits on case outcomes. However, the size of the disparities in asylum grant rates creates a perception of unfairness in the asylum adjudication process within the immigration court system. Transactional Records Access Clearinghouse (TRAC) Researchers at Syracuse University's TRAC have been conducting analyses of the immigration courts for several years and were among the earliest to identify wide variations in asylum outcomes that were dependent on the immigration judge. "The typical judge-by-judge denial rate—half denied more and half denied less—was 65% . There were, however, eight judges who denied asylum to nine out of ten of the applicants who came before them and two judges who granted asylum to nine out of ten of theirs." Most recently, analysis performed by TRAC has continued to find disparities in asylum approvals that are similar to their earlier research. TRAC's latest study of the FY2008-FY2010 period found that judge-to-judge disparities in asylum decisions have moderated since their earlier studies, but it concluded that the disparities remained substantial. In the New York immigration court, for example, one judge denied only 6% of the asylum cases, while another denied 70% of the asylum cases. The judge-to-judge range in the San Francisco immigration court was from 32% to 92%. The disparities were also evident when immigration court decisions were analyzed by the asylum seeker's country of origin. As Table 2 indicates, TRAC analysis of decisions on PRC asylum seekers continued to show wide disparities in the New York court, ranging from 4% to 74% denial rates. The denial rates of Iraq asylum seekers were the lowest, spanning from zero to 4%, and their variation was also the lowest at 4%. In contrast, the denial rates of Salvadoran asylum seekers were the highest, spanning 90% to 98%, with only a 8% variation. Selected Issues Although there are many who would revise U.S. asylum law, those advocating change have divergent perspectives. Some cite the seemingly inexplicable disparities in asylum approvals rates and urge broad-based administrative reforms. Others argue that given the religious, ethnic, and political violence in various countries around the world, it has become more difficult to differentiate the persecuted from the persecutors . Some express concern that U.S. sympathies for the asylum seekers caught up in the current political uprisings in the Middle East, northern Africa, and South Asia could inadvertently facilitate the entry of terrorists. Others maintain that current law does not offer adequate protections for people fleeing human rights violations or gender-based abuses that occur around the world. Some assert that asylum has become an alternative pathway for immigration rather than humanitarian protection provided in extraordinary cases. At the crux of the issue is the extent to which an asylum policy forged during the Cold War is adapting to the competing priorities and turbulence of the 21 st century. Some of these issues are highlighted below. U.S. National Interests Some have asserted that U.S. asylum policy attracts asylum seekers who have weak or bogus claims and that additional safeguards are needed to curb abuses and protect U.S. national interests. One critic has concluded that the "U.S. asylum system has become the hole in the fence for millions of dubious claimants—and a major immigration magnet in itself." Others have maintained that migration "push" factors, such as rapid population growth, poverty, and political instability in the sending countries of asylum seekers, are factors over which the United States has little control. Some have warned of "the ongoing separation of asylum from any grounding in the national interest" and argued for a serious examination of the forces that propel asylum seekers. In contrast, others have asserted that the United States should re-calibrate asylum policy to provide more protections for asylum seekers, maintaining that it is in the United States' national interest to set an example. These proponents have expressed a desire for the United States to reaffirm its welcome to those who have fled persecution as well as its commitment to humanitarian efforts. They have argued that some of the statutory revisions in 1996 and 2005 created unnecessary barriers for genuine asylees and that these provisions can be reformed without making the United States more vulnerable to unauthorized migrants, criminals, or terrorists. Disparity in Decisions The body of research that has revealed disparities in asylum decisions has led many to call for greater congressional oversight of the immigration courts. According to a number of observers, while the immigration courts have experienced a substantial increase in caseload, EOIR has not received a commensurate increase in resources. Some are pushing for an increase in funding for immigration judges and law clerks, which they assert would improve the quality of judicial hearings. Others, however, contend that the problems related to disparities in asylum decisions lie less in the funding shortages and more in the quality of immigration judges. Some are recommending higher recruitment standards for immigration judges and more training, particularly training in the culture of asylum seekers' homelands. Some further recommend a requirement of written opinions in asylum cases. Still others maintain that the USCIS asylum officers also display disparate outcomes among similarly situated asylum cases, and that enhanced training and research support should be available for the asylum corps and the immigration judges. Establishing mechanisms to foster communication among asylum offices is offered as an option to improve consistency. A further recommendation is to consider cases in pairs or panels of three asylum offers. Despite concern over the disparate decisions, there is an argument that greater congressional oversight might politicize the process. Legislative intervention to promote more consistent decisions presumably might undermine the independence of the asylum adjudicators and immigration judges. Because none of the studies that documented the disparities had access to the case facts and evidence, the rationale for decisions remains unknown and thus may indeed be justified. Access to Counsel Immigration removal proceedings are civil in nature and, thus, do not entail the right to legal counsel that criminal proceedings do. Foreign nationals can be represented by counsel when they appear in immigration court, but according to the statute, "at no expense to the Government." A list of available pro bono counsel must be provided to aliens in removal proceedings. The issue of asylum seekers' access to counsel, especially during removal proceedings, has arisen in recent years. Many maintain that few can adequately represent themselves and that charitable and pro bono legal projects cannot afford to serve all asylum seekers. Some offer that providing legal counsel is an option for addressing the disparities in outcome. Many cite the GAO study, which found that asylum seekers were three times as likely to obtain asylum if they had legal representation, to emphasize the need for legal counsel. Some further argue that lack of counsel for a bona fide asylum seeker might result in deportation to a country where the person's life and liberty are threatened. Time Limit on Filing Under current law, a foreign national has one year after the date of arrival to apply affirmatively for asylum, unless there are changed circumstances or extraordinary circumstances related to the delay in filing the application. Supporters of current law maintain that the one-year rule prevents abuses of the asylum system and cite the drop in asylum applicants after the 1996 revisions to the law that added the one-year rule. They point out that foreign nationals have the option of seeking asylum defensively during removal proceedings. Others have observed that many asylum seekers who fail to file within one year of arrival subsequently receive withholding of removal or relief under the United Nations Convention Against Torture. Since both of these forms of relief have a higher burden of proof than asylum, they assert such people would have qualified for asylum but for the one-year deadline. They advocate for a good cause exemption to the time rule. Mandatory Detention Opponents to the mandatory detention of asylum seekers in expedited removal usually cite the United Nations High Commissioner on Refugees, who maintains that detention of asylum seekers is "inherently undesirable." Detention is psychologically damaging, some further argue, to an already fragile population that includes aliens who are escaping from imprisonment and torture in their countries. Asylum seekers are often detained with criminal aliens, a practice that many consider inappropriate and unwarranted. Some contend that Congress should provide for alternatives to detention (e.g., electronic monitoring) for asylum seekers in expedited removal. Others argue that the mandatory detention of asylum seekers provision should be deleted, maintaining that there is adequate authority in the INA to detain any alien who poses a criminal or national security risk. Proponents for current law warn that releasing asylum seekers in expedited removal undermines the purpose of expedited removal and creates an avenue for bogus asylum seekers to enter the United States. They argue that mandatory detention of asylum seekers is an essential tool in maintaining immigration control and homeland security. Any loosening of these policies, they allege, would divert the CBP and ICE officers from their homeland security duties to track down wayward asylum seekers. Supporters of current law also contend that it sends a clear signal of deterrence to aliens who consider using asylum claims as a mechanism to enter illegally. Terrorist Infiltration and Material Support83 Some have long been concerned that terrorists would seek asylum in the United States, hoping to remain hidden among the hundreds of thousands of pending asylum cases. Critics point to asylum seekers from countries of "special concern" (i.e., Saudi Arabia, Syria, Iran, North Korea, China, Pakistan, Egypt, Lebanon, Jordan, Afghanistan, Yemen, and Somalia) as potential national security risks. Some argue further that because asylum is a discretionary form of immigration relief, national security risks should outweigh humanitarian concerns, and thus, asylum relief should be restricted and judicial review of asylum cases more limited. Others point out that asylum seekers are subject to multiple national security screenings and that if an asylum seeker is a suspected or known terrorist, the law already bars alien terrorists from entering the United States. They argue that to the extent to which security risks had existed, those risks resulted more from the limits of intelligence data on terrorists in the past rather than the expansiveness of asylum policy. Some further assert that asylees from countries of "special concern" may be beneficial to U.S. national security because they may have useful information that assists in the war on terrorism, much like the assistance provided by communist defectors during the Cold War. Opponents of limiting the judicial review of asylum cases contend that it would erode two traditional values of U.S. polity—the right to due process and freedom from repression and persecution. Some argue that the law should be amended to provide an exception for people who have been forced by terrorists to provide support. The law states that an alien who commits an act that he "knows, or reasonably should know, affords material support" to a terrorist organization is inadmissible. It makes no exception for instances where the alien has been coerced into providing support, and whether it should do so is an issue. Concluding Observations Over the past decade, the United States has admitted or adjusted about 1 million foreign nationals to legal permanent resident (LPR) status each year, and annual asylee adjustments have ranged from 1% to 9% of the total. Overall, asylee adjustments comprised only 4% (411,972) of the 10.3 million LPRs admitted or adjusted from FY2000 through FY2009. Unlike other facets of U.S. immigration policy, asylum issues are less about the number of foreign nationals involved and more about the qualities of the policies and the efficacy of the procedures. Asylum is an adjudication of a person based upon facts, evidence, beliefs, and circumstances that might be clear at some times yet nebulous at other times. The policy tensions of asylum often pit the promotion of our humanitarian values against the prevention of fraudulent abuses; the protection of the persecuted against the security of our borders; and the obligations of our moral responsibilities internationally against the commitments of our social priorities domestically. The balance of these competing concerns may be shaken by a crisis in a neighboring nation or by larger world events. The U.S. Congress plays the key role in considering when and whether revision or re-calibration of asylum law and policies is warranted. Appendix. Approved Asylum Cases for Top 20 Countries, FY2000-FY2009

Foreign nationals seeking asylum must demonstrate a well-founded fear that if returned home, they will be persecuted based upon one of five characteristics: race, religion, nationality, membership in a particular social group, or political opinion. Foreign nationals arriving or present in the United States may apply for asylum affirmatively with the United States Citizenship and Immigration Services (USCIS) in the Department of Homeland Security after arrival into the country, or they may seek asylum defensively before a Department of Justice Executive Office for Immigration Review (EOIR) immigration judge during removal proceedings. Asylum claims ebbed and flowed in the 1980s and peaked in FY1996. Since FY997, affirmative asylum cases decreased by 79% and defensive asylum claims dropped by 53% by FY2009. Asylum seekers from the People's Republic of China (PRC) dominated both the affirmative and defensive asylum caseload in FY2009. Five of the top 10 source countries of asylum seekers were Western Hemisphere nations in FY2009: Haiti, Mexico, Guatemala, El Salvador, and Colombia. Ethiopia was the only African nation that was a top source country for asylum seekers in FY2009. Despite the general decrease in asylum cases since the enactment of the Illegal Immigrant Reform and Immigrant Responsibility Act (IIRIRA ) in 1996, data analysis of six selected countries (the PRC, Colombia, El Salvador, Ethiopia, Haiti, and Mexico) suggests that conditions in the source countries are likely the driving force behind asylum seekers. Roughly 30% of all asylum cases that worked through USCIS and EOIR in recent years have been approved. Affirmative asylum cases approved by USCIS more than doubled from 13,532 in FY1996 to 31,202 in FY2002, and then fell to the lowest point over the 14-year period—9,614—in FY2009. The number of defensive asylum cases that EOIR judges have approved has risen by 99% from FY1996 through FY2009. The PRC led in the number of asylum cases approved by USCIS and EOIR over the decade of FY2000-FY2009. Despite national data trends that appeared to be consistent, approval rates for asylum seekers differ strikingly across regions and jurisdictions. For example, a study of 290 asylum officers who decided at least 100 cases from the PRC from FY1999 through FY2005 found that the approval rate of PRC claimants spanned from zero to over 90% during this period. In a separate study, the U.S. Government Accountability Office (GAO) analyzed asylum decisions from 19 immigration courts that handled almost 90% of the cases from October 1994 through April 2007 and found that "significant variation existed." At the crux of the issue is the extent to which an asylum policy forged during the Cold War is adapting to the competing priorities and turbulence of the 21st century. Some assert that asylum has become an alternative pathway for immigration rather than humanitarian protection. Others argue that—given the religious, ethnic, and political violence in various countries around the world—it has become more difficult to differentiate the persecuted from the persecutors. Some express concern that U.S. sympathies for the asylum seekers caught up in the democratic political uprisings in the Middle East, northern Africa, and south Asia could inadvertently facilitate the entry of terrorists. Others maintain that current law does not offer adequate protections for people fleeing human rights violations or gender-based abuses that occur around the world. Some cite the disparities in asylum approvals rates and urge broad-based administrative reforms. The Refugee Protection Act of 2011 (S. 1202/H.R. 2185) would make significant revisions to asylum policy.

Key Policy Staff Division abbreviations: ALD = American Law Division; G&F = Government and Finance Division; RSI = Resources, Science, and Industry Division, DSP =Domestic Social Policy Division; FDT = Foreign Affairs, Defense, and Trade Division. Most Recent Developments The CJS conferees met on November 8, 2001 and agreed to a total budget authority (after scorekeepingadjustments) of $39.3 billion. The conference report wasfiled on November 9th. In the absence of signed appropriations, the following continuing resolutionshave kept the government running into the new fiscal year: H.J.Res. 65 ( P.L. 107-44 ) which expired October 16th, H.J.Res. 68 ( P.L. 107-48 ) which expiredOctober 23rd, H.J.Res. 69 ( P.L. 107-53 ) which expired October31st, H.J.Res. 70 ( P.L. 107-58 ) which expired November 16th, and H.J.Res. 74 ( P.L.107-70 ) which expired December 7, 2001. The House adopted the conferencereport on November 14th and the Senate adopted it the following day. The President signed the CJSappropriation into law ( P.L. 107-77 ) on November 28th, 2001with a total budget authority of $41.6 billion . Overview This report tracks legislative action by the first session of the 107th Congress on FY2002 appropriations for theDepartments of Commerce, Justice, and State, theJudiciary, and other related agencies (often referred to as CJS appropriations). P.L. 106-553 ( H.R. 5548 ascontained in the conference report on H.R. 4942 ) appropriated $40 billion ($38.1 billion after adjustments) for these agencies for FY2001. TheAdministration's request for FY2002totaled $40.8 billion. The House CJS Subcommittee and full House Appropriations Committee approved a total of$41.46 billion in funding for these agencies inFY2002. The Senate Appropriations Committee and full Senate approved $41.5 billion, $700 million higher thanthe administration's request and slightly higherthan the House version. After the September 11th terrorist attacks, Congress reconsidered fundingallocations in conference to bolster counter-terrorism activitieswithin each agency's title in the bill. Congress enacted its CJS appropriation totaling $41.6 billion for FY2002. Total funding after adjustments was $39.3billion-$38.7 billion in discretionary funding and $627.5 million in mandatory funding. Recent Funding Trends On October 27, 2000, Congress approved total FY2001 CJS funding of $40.0 billion which was about $400 million above both President Clinton's request and thetotal enacted for FY2000. H.R. 4690 was included in the Conference Report approved by Congress in H.R. 4942 ( H.Rept. 106-1005 : Making Appropriations for the Government of the District of Columbia and Other Activities Changeable in Wholeor in Part Against Revenues of Said District forthe Fiscal Year Ending September 30, 2001, and for Other Purposes ). Subsequently, the District of Columbiaappropriations portion of the measure wasseparated from the bill and approved by Congress ( H.R. 5663 ) on November 15. The President signed thismeasure into law on November 22. OnDecember 21, President Clinton signed the remaining portion of H.R. 4942 contained in H.R. 5548 ,the FY2001 CJS appropriations bill, into law on December 21, 2000 ( P.L. 106-553 ). On December 15, 2000, Congress approved additional funding ofabout $103 million for CJS appropriations inthe miscellaneous funding section of H.R. 4577 ( H.Rept. 106-1033 ). This bill was signed into law by thePresident on December 21, 2000 ( P.L.106-554 ). Agency totals affected by this additional funding have been adjusted in this report to reflect this action. The table below shows funding trends for the major agencies included in CJS appropriations over the period FY1997-FY2001. As seen in the table below,funding increased, in current dollars, for the Department of Justice by $650 million (28.3%); for the Departmentof Commerce by $1,360 million (35.8%); for theJudiciary by $1,003 million (30.7%); and for the Department of State by $2,636 million (66%). (1) Every agency except the Department of Commercehas seen acontinual increase in funds between FY1997 and FY2001. The Department of Commerce budget generallyincreased over these years, with a greater than $3.5billion increase in FY2000, largely due to funding the cost of the 2000 decennial census. The FY2001 level iscomparable to its pre-census level. Of the CJS andrelated agencies, the Department of Justice received the greatest nominal increase of $4.65 billion from FY1997 toFY2001. The Department of State fundingtrend since FY1997 shows the greatest percent increase of 66%. Much of the State Department increase wasattributable to increases in embassy security fundingand the consolidation of the U.S. Information Agency (USIA) and the Arms Control and Disarmament Agency(ACDA) into the Department of State. Table 1. Funding Trends for Departments of Commerce, Justice, and State, and the Judiciary (inmillions of current dollars) Sources: Funding totals provided by Budget Offices of CJS and Judiciary agencies, and U.S.House of Representatives, Committee on Appropriations. FY2002 Appropriation President Bush's FY2002 budget request totaled $37.9 billion for discretionary spending for Commerce, Justice, State, Judiciary, and Related Agencies. It is $373million above the FY2001 appropriation which totaled $37.6 billion (after adjustments). (2) Government-wide rescissions of discretionary budget authority (exceptfor certain defense activities) were passed by the 106th Congress in H.R. 4577 ( P.L. 106-554 ). The FY2002 total CJS budget authority requested was$40.8 billion; the House total budget authority was $41.5 billion; the Senate budget authority was $41.5 billion; andthe enacted total CJS budget authority forFY2002 is set at $41.6 billion. Table 2. Departments of Commerce, Justice, and State, and the Judiciary Appropriations (in millions ofdollars) Sources : U.S. House Committee on Appropriations. This table does not include funds for relatedagencies in the CJS legislation. Brief Survey of Major Issues In addition to heightened interest in counter-terrorism and security activities since the September 11th attacks, some other contentious issues and proposals thatsurfaced in the House and Senate debate over CJS appropriations for FY2002 included: Restructuring the Immigration and Naturalization Service; reducing pending immigration and naturalization caseloads; and increasing borderenforcement. Funding for community policing initiatives and crime programs under the Office of Justice Programs. Combating the drug war. Reducing gun crimes through enforcement of existing laws and other initiatives. Other issues or concerns receiving attention included the following: Department of Justice: Combating terrorism. Reducing violence against women. Providing legal assistance for victims of crime. Protecting against worker exploitation. Addressing civil rights violations, including racial profiling and voting rights. Combating cybercrime. Combating drug abuse. Department of Commerce: Funding needs of the Bureau of the Census for processing, tabulating, and disseminating detailed Census 2000 results; evaluating the qualityand coverage of the census; completing the orderly closeout of census activities; and beginning to plan for the 2010census. The extent to which federal funds should be used to support industrial technology development programs at the National Institute ofStandards and Technology (NIST), particularly the Advanced Technology Program (ATP). The extent to which foreign countries comply with trade agreements and U.S. trade laws. The extent to which federal funds should support local economic development activities, specifically in the areas of public works andeconomic adjustment assistance. Funding needs of the National Oceanic and Atmospheric Administration (NOAA) to procure the next generation of weather satellites,mainly for the National Polar-orbiting Operational Environmental Satellite System (NPOESS); and to ensure thecontinuity of environmental satelliteobservations. The extent to which funding is needed for Technology Opportunities Program (TOP) Grants in FY2002. Congressional policymakers agreedwith President Bush's request to reduce the NTIA's Technology Opportunities Program (TOP) grants, from $45.5million in FY2001 to $15.5 million for thecurrent fiscal year. Department of State: Overseas embassy security. Creation of a deputy secretary for management at State. More than double the funding for technology upgrades worldwide. A major push toward increased hiring of foreign, civil service and security experts. The Judiciary: Whether to substantially increase the hourly rate of pay to court-appointed "panel attorneys" representing defendants in federal criminalcases. Whether, as the Judiciary contended, federal judges and justices should receive a cost-of-living salary increase (as they had the previous twofiscal years); Whether, or to what extent, to provide funding for the first major renovation of the Supreme Court building since its opening in 1935. Other Agencies: Adequacy of funding for the Legal Services Corporation. Adequacy of funding for the Equal Employment Opportunity Commission. Adequacy of funding for programs of the Small Business Administration (SBA). Government Performance Results Act (GPRA) Requirements As part of the budget process, the Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L.103-62 ; 107 Stat 285) requires thatagencies develop strategic plans that contain goals, objectives, and performance measures for all major programs.The GPRA requirements apply to nearly allexecutive branch agencies, including independent regulatory commissions, but not the judicial branch. Briefdescriptions of the latest versions of the strategicplans of the major agencies covered by CJS appropriations are contained in the discussions of theFY2002 budget requests of individual agencies included in thisreport. Legislative Status On April 9, 2001, President Bush submitted the FY2002 budget request for appropriations for the Departments of Commerce, Justice, and State, the Judiciary andrelated agencies. The House and Senate CJS Appropriations Subcommittees held hearings throughout April, May,and June. The House Subcommittee markedup and passed its CJS appropriation on June 27, 2001. The House Appropriations Committee reported out the CJSappropriations on July 10, 2001. The Housepassed the bill ( H.R. 2500 ) on July 18th, 2001. The Senate Appropriations Committee passedthe CJS appropriations ( S. 1215 ) on July19th. On September 13th, 2001, the Senate substituted S. 1215 for House languagein H.R. 2500 and passed its version of H.R. 2500 , as amended. After numerous continuing resolutions, the CJS appropriations was signed into law( P.L. 107-770 ) on November 28, 2001. The table below shows the key legislative steps that occurred for the enactment of FY2002 CJS appropriations legislation. Table 3. Status of CJS Appropriations, FY2002 Department of Justice Background Title I of the CJS legislation typically covers the appropriations for the Department of Justice and related agencies. Established by an Act of 1870 (28 U.S.C. 501)with the Attorney General at its head, the Department of Justice (DOJ) provides counsel for citizens and protectsthem through its efforts for effective lawenforcement. It conducts all suits in the Supreme Court in which the United States is concerned and represents thegovernment in legal matters generally,providing legal advice and opinions, upon request, to the President and the executive branch's department heads. The Department contains several divisions: Antitrust, Civil, Civil Rights, Criminal, Environmental and Natural Resources, and Tax. Major agencies within theDepartment of Justice include: Federal Bureau of Investigation (FBI) investigates violations of federal criminal law, protects the United States from hostile intelligenceefforts, provides assistance to other federal, state and local law enforcement agencies, and has concurrentjurisdiction with Drug Enforcement Administration(DEA) over federal drug violations. Drug Enforcement Administration (DEA) is the lead drug law enforcement agency at the federal level, coordinating its efforts with state,local, and other federal officials in drug enforcement activities, developing and maintaining drug intelligencesystems, regulating legitimate controlled substancesactivities, and undertaking coordination and intelligence-gathering activities with foreign governmentagencies. Immigration and Naturalization Service (INS) is responsible for administering laws relating to the admission, exclusion, deportation, andnaturalization of aliens, including the oversight of the process involving the admission of aliens into the country andapplications to become citizens, theprevention of illegal entry into the United States, and the investigation, apprehension, and removal of aliens whoare in this country in violation of thelaw. Federal Prison System provides for the custody and care of the federal prison population, the maintenance of prison-related facilities, and theboarding of sentenced federal prisoners incarcerated in state and local institutions. Office of Justice Programs (OJP) carries out policy coordination and general management responsibilities for the Bureau of JusticeAssistance, Bureau of Justice Statistics, National Institute of Justice, Office of Juvenile Justice and DelinquencyPrevention, Community Oriented PolicingServices (COPS), and the Office of Victims of Crime, including administering programs, awarding grants, andevaluating activities. United States Attorneys prosecute criminal offenses against the United States, represent the government in civil actions in which the UnitedStates is concerned, and initiate proceedings for the collection of fines, penalties, and forfeitures owed to the UnitedStates. United States Marshals Service is primarily responsible for the protection of the federal judiciary, protection of witnesses, execution ofwarrants and court orders, management of seized assets, and custody and transportation of unsentencedprisoners. Interagency Law Enforcement consists of 13 regional task forces composed of federal agents working in cooperation with state and localinvestigators and prosecutors to target and destroy major narcotic trafficking and money launderingorganizations. The total appropriation for the Department of Justice in FY2000 was $18.6 billion and $21.1 billion in FY2001. (For more details on the funding of individualprograms, see the Appendix.) Current Issues Traditionally, state and local governments have primary responsibility for crime control. Especially within the last decade, a greater federal role has developed. Congress has enacted five major omnibus crime control bills since 1984, establishing new penalties for crimes andproviding increased federal assistance for lawenforcement efforts by state and local governments. Federal justice-related expenditure is one of the few areas ofdiscretionary spending that has increased itsshare of total federal spending over the last two decades. FY2002 Budget Request. For DOJ for FY2002, President Bush's budget request was $21.11 billion compared toFY2001 enacted funding of $21.03 billion. FY2002 funding was to address major concerns such as gun violence,violence against women, drug crimes, workerexploitation, civil rights violations, the Voting Rights Act, redistricting provisions, racial profiling, cybercrime,terrorism, and restructuring the Immigration andNaturalization Service. The Administration's budget included a shift in spending from state and local lawenforcement to what it described as DOJ's core federallaw enforcement mission particularly in the areas of detention and incarceration, anti-terrorism, cybercrime andcounter-intelligence. In keeping with this funding approach, the FY2002 budget request for the Office of Justice Programs (OJP) was $3.67 billion, about a billion dollars less than thefunding level of $4.7 billion for FY2001. DOJ sought funding of $855 million for Community Oriented PolicingServices (COPS) compared to FY2001 fundingof $1.03 billion. The Administration stated that the budget proposal would not affect any pending COPS grants. Reportedly, nearly 74,000 officers were hiredunder COPS; President Clinton had pledged that 100,000 new officers would be hired. This request retargetedresources for hiring 1,500 additional officers forsecurity in public schools, for law enforcement technology and for reducing DNA backlogs. Specifically, for publicsafety and community policing grants thePresident requested $272 million in direct appropriations compared to FY2001 funding of $535 million. For crimeidentification technology, the Presidentrequested $255 million compared to FY2001 funding of $130 million. President Bush's budget proposed a decrease in funding for some programs: the FY2002 budget request for the state criminal alien assistance program was $265million compared to enacted funding of $400 million in FY2001; local law enforcement block grants request was$400 million for FY2002 compared to $523million in FY2001; and for state prison grants the FY2002 request was $35 million while funding in FY2001 was$687 million. The President's request for Byrneformula grants (block grants for which individual states apply) for FY2002 was $500 million; in FY2001, totalByrne grant funding was $569 million ($500million for formula grants and $69 million for discretionary grants). There was no request for funding fordiscretionary grants in FY2002, because the Presidentbelieved that the original purpose of discretionary grants, which was to fund anti-drug activities, has not beenpossible in recent years due to the level ofearmarking within the program. Drug Courts' budget request for FY2002 was $50 million, the same funding levelas in FY2001. Areas receiving increased focus by the Bush Administration was violence against women and victims of crime. President Bush proposed a slight increase inFY2002 funding for Violence Against Women Act grants (VAWA), $310 million compared to FY2001 fundingof $289 million. The FY2002 request for newprograms was: $10 million for Violent Crimes Against Women on Campus, $15 million for Safe Havens forChildren pilot program, $5 million for Protection forolder and disabled women, $7.5 million for education and training to end violence against and abuse of women withdisabilities, and $40 million for the legalassistance for victims program. Weed and Seed is an established program in which communities in partnership with federal, state, and local law enforcement agencies "weed" criminals out oftheir neighborhoods with speedy prosecutions, and then reclaim houses, schools, and recreational centers that makethe communities safe places to live. Viewingthe Weed and Seed program as a success, the Administration's budget request for FY2002 for Weed and Seed was$60 million, a $26 million dollar increase overFY2001 funding of $34 million. A major programmatic emphasis of the Bush Administration was reduction of gun crime. For FY2002, President Bush requested $3.46 billion for LegalActivities , compared to FY2001 funding of $3.15 billion. The request included $9 million forProject Sentry, a new federal-state law enforcement partnership toidentify and prosecute both juveniles who violate firearms laws and adults who supply them with guns. Thisfunding request was for 94 U.S. Attorneys' Officesto hire a prosecutor whose major attention would have been devoted to gun crimes involving juveniles. Fundingrequests for gun programs within OJP were: $49.78 million for Project Exile and Project Ceasefire, programs that seek to increase arrests and prosecutions ofgun criminals and increase public awareness todeter gun crime; and $75 million for Child Safe, a new program to provide child safety locks for every handgun inthe nation. Under this program, state and localgovernments on a dollar-for-dollar matching basis were to receive $65 million each year. Organizations that seekthrough private contributions to provide locksfor every handgun in the United States were also eligible for federal matching funds. The remaining $10 millionwere for administrative and advertising costs. The Counterterrorism Fund received $4.99 million for reimbursing a DOJ organization for the cost of reestablishingthe operational capability of an office orfacility that has been damaged or destroyed as a result of a terrorist act and to support efforts to counter, investigateor prosecute domestic or internationalterrorism, including paying rewards. In the area of civil rights, the President proposed several initiatives. The Trafficking Victims Protection Act of 2000 would have expanded protection and servicesfor trafficking victims and would have created new crimes for which the Civil Rights Division would have beenresponsible. DOJ requested $2 million inFY2002 for the Civil Rights Division to hire additional prosecutors and to conduct a community outreach programin enforcing the Trafficking Victims ProtectionAct of 2000. The FY2002 budget requested $1.2 million for three studies by OJP to: research police initiated stopsof motorists for routine traffic violations;address deaths of persons while in law enforcement custody as required by the Deaths in Custody Act, and measurevictimization of persons with disabilities inthe United States. For FY2002, Congress provided funding to combat terrorism in both the Department of Justice and the Department of Defense (DOD). Funding to combatterrorism was provided in a number of DOJ accounts in FY2002. See discussion below on FY2002 appropriationsfor DOJ. (3) In the Department of DefenseAppropriations Act for FY2002 ( P.L. 107-117 ), Congress provided $5 million for transfer from DOD toDOJ's General Administration account for responses toterrorist attacks on the United States under "Patriot Act Activities" ( P.L. 107-38 ). Also to be transferred to DOJ'sAdministrative Review and Appeals accountwas $3.5 million for response to terrorist attacks on the United States. Following are funds to be transferred fromDOD to DOJ accounts for response to terroristattacks: $12.5 million for the Salaries and Expenses, General Legal Activities; $56.4 million for the Salaries andExpenses, the United States Attorneys; $745million for Salaries and Expenses, the Federal Bureau of Investigation; and $10.2 million for Salaries and Expenses,United States Marshals Service and $9.1million for Construction, U.S. Marshals Service. Congress, in FY2002, transferred $400 million from DOD to the Office of Justice Programs' Justice Assistance account for grants, cooperative agreements, andother assistance authorized by the Antiterrorism and Effective Death Penalty Act of 1996 and the USA Patriot Act( P.L. 107-56 ). Of this funding, $9.8 millionwas for aircraft for counterterrorism and activities for the City of New York identified in the EmergencySupplemental Appropriations Act for FY2001 ( P.L.107-38 ). Another OJP account, State and Local Law Enforcement Assistance, received $251.1 million fordiscretionary grants, including equipment, under theEdward Byrne Memorial State and Local Law Enforcement Assistance Program. The Crime Victims Fund had$68.1 million transferred to it for responses toterrorist attacks on the United States. Congress provided $21.7 billion for the Department of Justice for FY2002, an increase of $612 million above FY2001 funding. The Office of Justice Programs received $4.3 billion for FY2002. Under OJP's state and local law enforcement assistance account $2.4 billion wasdistributed as follows: $565 million for thestate criminal alien assistance program, $594 million for the Byrne grant programs ($500 million for formula grantsand $94 million for discretionary grants),$400 million for the local law enforcement block grant program, $70 million for state prison drug treatment, and$50 million for drug courts. Of $249.5 millionfor the Juvenile Accountability Incentive Block Grants program, $38 million was for the Project Child SafeInitiative. Also, the Violence Against Women grantprogram received $391 million. In FY2002, Congress provided funding for the following OJP accounts: $59 million for Weed and Seed; $306 million for Juvenile Justice Programs; and $28million for Public Safety Officers Benefits. Under the Justice Assistance account, Congress provided $251 millionfor the counterterrroism program whichincludes funding for equipment grants ($122.7 million); and training and technical assistance ($72 million). DOJ requested $20.7 million for Crime Identification Technology (CITA); $35 million to reduce the backlog of state convicted offender DNA and crime sceneDNA samples in the nation (CITA); $35 million to improve the forensic science capabilities of laboratories; and$35 million to upgrade the Criminal RecordsUpgrade Program to make criminal history, criminal justice, and identification record systems in the nation morecompatible; and $100 million for technologygrants under the COPS account. Congress appropriated $1.05 billion for the OJP's COPS account for FY2002, of which $496 million was for Public Safety and Community Policing Grants, $352million for crime technology, $100 million for prosecution assistance ($50 million for a national program to reducegun violence and $50 million for theSouthwest Border Prosecutor Initiative), and $70 million for grants, technical assistance and other expenses,including $15 million for Project Sentry and $23million for the Safe Schools Initiative. Under the COPS account for FY2002 the $352 million appropriated forcrime technology was for the followingdistribution: $154.3 for a law enforcement technology program; $35 million for grants to upgrade criminal records;$40 million for DNA analysis and backlogreduction; $87.33 million for grants, contracts and other assistance to states under provisions of CITA; $99.8 millionfor prosecution assistance and $70.2 millionfor grants, training, technical assistance, and other expenses to support community crime prevention efforts. For FY2002, Congress provided $3.47 billion for Legal Activities compared to FY2001 funding of $3.14 billion. Of this funding, $649 million was for the U.S.Marshals Service, of which $619 million was for salaries and expenses of the U.S. Marshals Service and $15 millionthe construction account. This was $8million more than the President's request and a $46 million increase over FY2001 enacted funding. Congressprovided $1.35 billion for U.S. Attorneys, $86million below the President's request. Congress provided $706.2 million for the Federal Prisoner Detention account,which allows U.S. Marshals to contract withstate and local jails, and private facilities to house unsentenced federal prisoners before and during trial and afterconviction until transference to federalinstitutions. To improve coordination between federal, state, tribal, and local law enforcement agencies in combating crime, law enforcement agencies must have accurate andtimely information. In its focus on systems integration, upgrades, network reliability, efficient processes, and thelatest technologies, DOJ request for FY2002 for Federal Bureau of Investigation (FBI) was $3.51 billion, a $255 million increase overFY2001 funding of $3.25 billion. In addition, DOJ requested $31.6million both to improve FBI's assessment and to defeat foreign intelligence threats to national security and tocontinue the Criminal Division's assistance incounterintelligence, especially involving espionage and violations of laws on export of high technology. The budgetrequest included $67.7 million for the secondyear of FBI's 3-year information technology upgrade plan called Trilogy, and $6.5 million for communicationcircuits for quicker transmission of data andimproved network reliability. To continue integration of the INS's Automated Biometrics Identification System(IDENT) and FBI's Automated FingerprintIdentification System (IAFIS), the President requested $28 million -- $1 million in direct appropriations and $27million from the Working Capital Fund. In FY2002, Congress provided total funding of $3.5 billion for the FBI, an increase of $280 million over FY2001 funding. Congress appropriated $142.4 millionfor Trilogy in FY2002; $24 million for the counterterrorism initiative of which $12 million was for the FBI'sparticipation in the 2002 Salt Lake City WinterOlympics; and $31.3 million for the counterintelligence initiative to allow the agency to be more effective inaddressing foreign intelligence threats. Funding of$318.1 million was also provided for forensic, training, and investigative assistance and $247.1 million forinvestigative and information technology. Under theFBI Construction account Congress provided $33.8 million for an annex at the Engineering Research Facility tosupport consolidation of various high technologyprograms at the FBI Academy in Quantico, Virginia. President Bush proposed more funding for the war on drugs for FY2002. For the Drug Enforcement Administration (DEA), he requested $1.48 billion comparedto $1.36 billion that was enacted in FY2001. Methamphetamine (meth) laboratories have been seized in all but 3states. Drug dealers and organizations havetargeted rural communities where the knowledge and resources of law enforcement agencies to combat the problemare lacking. The manufacturing process formeth produces material that is hazardous to the environment and to persons trying to remove it. President Bushproposed a continuation of the funding level, $48million for FY2002, to OJP to help state and local officials with meth enforcement and cleanup efforts. Congress for FY2002 provided $1.5 billion for the DEA, nearly $122 million above FY2001 funding. Funding included $33 million to combat methamphetamineand the abuse of other drugs such as heroin, Oxycontin, and Ecstasy. President Bush's budget request for the Federal Prison System was $4.67 billion; FY2001 funding was $4.32 billion. Although nearly $5 billion has been spenton prison construction in the past decade, the federal prison system is presently operating at 35% over its ratedcapacity. In light of this, the Administrationrequested $809.27 million for the Bureau of Prisons to address the current problem and accommodate future growth: $669.97 million for construction of 3 federalcorrections institutions and 4 penitentiaries; partial site and planning funds for 4 facilities (2 female and 2 male);$139.3 million to activate the Federal CorrectionsInstitute in Petersburg, Virginia and the U.S. Penitentiary and work camp in Lee County, Virginia; and contractconfinement costs associated with the anticipatedincrease in the prison population. Congress appropriated $4.63 billion for FY2002 for the Federal Prison System, of which $814 million was for building construction, modernization, andmaintenance and repair of housing for prisoners under the Buildings and Facilities account. Specifically, $72.8million in funding was for new prisons and $47million was for an additional 1,500 contract beds for the growing criminal alien prison population as well as for1,499 general contract inmate beds, of which 85are for juveniles. The Immigration and Naturalization Service (INS) is the principal federal agency charged with administering the Immigration and Nationality Act (INA). FromFY1993 to FY2001, Congress had more than tripled the INS budget, from $1.5 to nearly $5.0 billion. During thesame years, the number of funded permanentpositions supported by the agency's budget has grown from 18,133 to 33,537, an increase of 85%. Regardingcounter-terrorism, the INS plays an integral role inthe Nation's efforts to ensure an adequate level of border security by excluding "undesirable" persons from theUnited States, including suspected internationalterrorists and their supporters. (4) For FY2002, the Administration requested $5.5 billion and 34,901 full time-funded positions for INS. This amount included $3.5 billion in direct funding and ananticipated $2 billion in offsetting receipts. It included budget enhancements of nearly $380 million and 1,364permanent positions over the agency's basebudget. (5) The requested budget enhancements included 1) $172 million for border management, 2) $89 million for detention and removal, 3) $45 million forbacklog reduction, and 4) nearly $75 million for construction. The Administration's request also included legislativeproposals to increase the airport inspectionfee to $7 (an increase of $1), and to levy a cruise ship fee of $3 for journeys that originate in Mexico, Canada, orthe United States, which were exempt from suchfees. For FY2002, Congress has provided funding for INS in two measures. Total funding for the agency is likely to exceed $6 billion. The CJS Appropriations Actfor FY2002 ( P.L. 107-77 ) includes $5.6 million in funding for INS. This amount includes $3.5 million in directfunding and $2.1 million in anticipated offsettingreceipts. This amount is $132 million more than the Administration's request. Conference report language includesearmarked budget enhancements of 1) $80million in base adjustments that were not requested by the Administration, 2) $178 million for border management,3) $81 million for detention and removal, 4)$51 million for pending caseload reduction, and 5) $128 million for new construction projects. In addition, the Department of Defense (DOD) Appropriations Act for FY2002 ( P.L. 107-117 ) includes another $549 million in emergency counter-terrorismsupplemental appropriations funding for INS. Among other things, this amount includes $56 million for additionalinspectors and support staff for the northernborder, $34 million to redeploy and hire additional Border Patrol agents, and $37 million to continue thedevelopment of a system to monitor nonimmigrantstudents and exchange visitors. The FY2002 CJS Appropriations Act also includes several substantive immigration provisions that: 1) raise existing and establish new inspection fees asrequested by the Administration, 2) provide posthumous citizenship to victims of the September 11thattacks, 3) authorize 90 additional accelerated inspectionprograms at land border ports, 4) authorize the INS Commissioner to waive the $30 thousand overtime cap forinspectors during immigration emergencies, and 5)require all air and sea carriers to provide electronic manifests. The conference agreement does not include aprovision to extend or make permanent �245(i) of theINA. (6) By comparison, the House-passed CJS appropriations bill would have provided $5.6 billion in funding for INS. This amount includes $3.5 billion in directfunding and $2.1 billion in anticipated offsetting receipts, and it was $130 million more than the Administration'srequest. House report language includedearmarked budget enhancements totaling 1) $136 million for border management, 2) $89 million for detention andremoval, 3) $65 million for backlog reduction,and 4) $75 million for new construction projects. The Senate-passed CJS appropriations bill would have provided$5.5 billion. This amount included $3.4 billionin direct funding and $2.1 billion in offsetting fee receipts, and was $4 million less than the Administration's request. Senate report language included earmarkedbudget enhancements totaling 1) $168 million for border management, 2) $10 million for legal services for INSdetainees, 3) $67 million to reduce pendingcaseloads, and 4) $139 million for new construction projects. Both the House and Senate measures includedprovisions to raise the airport inspection fee andestablish a cruise ship inspection fee. In addition, the Senate measure included provisions to authorize 90 additionalaccelerated inspection lanes at land borderports of entry and to make permanent �245(i). The Government Performance and Results Act (GPRA) requires the Department of Justice, along with other federal agencies, to prepare a 5-year strategic planwhich contains a mission statement, a statement of long-range goals in each of the Department's core functions anda description of information to be used toassess program performance. The DOJ submitted its Strategic Plan for 2000-2005 to Congress in September 2000. The DOJ FY2000 Performance Report and FY2002 Performance Plan combines the agency's report on past accomplishments with its plans for the upcoming yearto provide a complete and integrated picture of the Department's performance. The report describes what theDepartment of Justice plans to accomplish inFY2002, consistent with the long-term strategic goals, and complements the Department's budget request. Itprovides a summary statement of themes andpriorities of DOJ for seven core functional areas (investigation and prosecution of criminal offenses, assistance totribal, state, and local governments, legalrepresentation, enforcement of federal laws, and defense of U.S. interests; immigration; detention and incarceration;protection of the federal judiciary andimprovement of the justice system; and management). While it summarizes and synthesizes detailed performanceplans of specific Justice componentorganizations such as the Federal Bureau of Investigation, the Drug Enforcement Administration, the United StatesAttorneys, the United States Marshals Service,and others, it does not reflect every program or activity of the Department. That comprehensive and detailedinformation would be in the budget submissions ofthe individual component organizations. Related Legislation H.R. 45 (Biggert) Federal Telephone Abuse reduction Act of 2001. Would have amended title 18, United States Code concerningprison commissaries, among other purposes. Introduced January 3, 2001; referred to the House Committee on the Judiciary. H.R. 196 (Sweeney) Anti-Drug Legalization Act. Would have prohibited any federal department or agency from conducting orfinancing any study or research on the legalization ofany controlled substance. Introduced January 3, 2001; referred to the House Committee on Government Reform. H.R. 213 (Sweeney) Drug Importer Death Penalty Act of 2001. Would have amended the Controlled Substances Import and ExportAct to direct the court to sentence a person to lifeimprisonment without possibility of release or under certain conditions to death if the person is convicted ofbringing into the United States a proscribed quantityof a mixture or substance containing a controlled substance in a specified amount. Introduced January 3, 2001;referred to the House Committee on the Judiciary. H.R. 417 (Andrews) Open Air Drug Market Penalty Act of 2001. Would have amended the Controlled Substances Act to imposean additional 5 year's imprisonment for knowinglycommitting a federal offense which includes the distribution of a controlled substance for which the maximumprison term equals or exceeds 5 years, within 500feet of the place where such an offense occurred within the preceding 48 hours. Introduced February 6, 2001;referred to the House Committee on the Judiciary. H.R. 503 (Graham, L.) Unborn Victims of Violence Act of 2001. Would have made it a federal crime to harm or kill an "unborn child"in utero during the commission of a violentcrime, and would have exempted those who perform an abortion with the consent of the pregnant woman andwomen whose own actions harmed their fetuses. Would have permitted federal prosecutors to seek the death penalty, but they could also have filed separate chargesfor the woman and the fetus. Introduced Feb.7, 2001; referred to Committees on the Judiciary and on Armed Services. Ordered to be reported by JudiciaryCommittee, March 28 (H.Rept. 207-42, Part 1 filedon April 20). Discharged by Armed Services Committee, April 24. Passed the House, April 26. Referred to Senate,April 24. Placed on Senate LegislativeCalendar Under General Orders on June 8, 2001. Calendar No. 72. H.R. 696 (Rangel) Second Chance for Ex-offenders Act of 2001. Would have permitted the expungement of records of certainnonviolent criminal offenders. Introduced February14, 2001; referred to the House Committee on the Judiciary. H.R. 863 (Smith, L.) Consequences for Juvenile Offenders Act of 2001. Would have authorized the Juvenile Accountability BlockGrants program, would have provided anauthorization of $1.5 billion, $500 million each fiscal year, FY2002-FY2004. Introduced March 6, 2001; referredto the House Committee on the Judiciary. Reported, amended, by the House Judiciary Committee, April 20 ( H.Rept. 107-46 ). Passed House by voice vote,October 16. Received in Senate and referred toCommittee on the Judiciary, October 17, 2001. H.R. 1885 (Gekas) Section 245(i) Extension Act of 2001. Would have extended the date of enactment the filing deadline for animmigration provision (Section 245(i) of theImmigration and nationality Act) that allows aliens who are unauthorized to be in the United States to adjust status,provide they meet all other qualifications. Passed House on May 21, 2001. Passed the Senate amended on September 6, 2001. S. 16 (Daschle) 21st Century Law Enforcement, Crime Prevention, and Victims Assistance Act. Omnibus crimebill including provisions that: would have expanded thecommunity policing grant program by hiring more police and prosecutors; would have provided a $6.9 billionauthorization, $1.15 billion for each fiscal year,FY2002 through FY2007; would have strengthened the Violence Against Women Act, would have increasedfunding for shelters, and would have increasedfairness and respect with which crime victims are treated. Introduced January 22, 2001; referred to the SenateCommittee on the Judiciary. S. 146 (Lugar) Would have amended part S of title I of the Omnibus Crime Control and Safe Streets Act of 1968 to allowcertain funds to assist jail-based substance treatmentprograms, among other purposes. Introduced January 23, 2001; referred to the Senate Committee on the Judiciary. S. 184 (Dorgan) 100 Percent Truth-in-Sentencing Act. Would have amended title 18, United States Code, to eliminate good timecredits for prisoners serving a sentence for acrime of violence, among other purposes. Introduced January 25, 2001; referred to the Senate Committee on theJudiciary. S. 185 (Dorgan) Stop Allowing Felons Early Release (SAFER) Act. Would have provided incentives to encourage strongertruth-in-sentencing of violent offenders, among otherpurposes. Introduced January 25, 2001; referred to the Senate Committee on Judiciary. S. 194 (Biden) Offender Reentry and Community Safety Act of 2001. Would have required the Attorney General to establishthe Federal Reentry Center Demonstration projectto assist federal prisoners in preparing for and adjusting to reentry into the community after their release; would haveamended the Omnibus Crime Control andSafe Streets Act of 1968 to direct the Attorney General to make grants to states, territories, and Indian tribes toestablish adult reentry demonstration projects; stateand local courts to establish reentry courts, and states to establish juvenile offender reentry programs; and to conductstate reentry program research, development,and evaluation. Introduced January 29, 2001; referred to the Senate Committee on the Judiciary. S. 317 (Schumer) Prosecution Drug Treatment Alternative to Prison Act of 2001. Would have established grants for state or localprosecutors to develop, implement, or expanddrug treatment alternatives to prison programs that meet specified requirements. Introduced February 13, 2001;referred to the Senate Committee on the Judiciary. S. 715 (Baucus) Would have designated 7 counties in Montana as High Intensity Drug Trafficking areas and would authorizefunding for drug control activities in those areas. Introduced March 5, 2001; referred to the Senate Committee on the Judiciary. Additional Reading CRS Report 97-196. Community Oriented Policing Services (COPS) Program: An Overview , by [author name scrubbed]. CRS Report 97-265. Crime Control Assistance through the Byrne Programs , by [author name scrubbed]. CRS Report RS20539. Federal Crime Control Assistance to State and Local Governments: Department of Justice , by [author name scrubbed] and David Teasley. CRS Issue Brief IB10071. Gun Control Legislation in the 107th Congress , by [author name scrubbed]. CRS Report RS20908. Immigration and Naturalization Service's FY2002 Budget , by [author name scrubbed]. CRS Report RS20279. Immigration and Naturalization Service Reorganization and Related Legislative Proposals , [author name scrubbed]. CRS Report RL30852. Immigration of Agricultural Guest Workers: Policy, Trends, and Legislative Issues , by [author name scrubbed]. CRS Report RS20627. Immigration: Integrated Entry and Exit Data System , by [author name scrubbed]. CRS Report RL30780. Immigration Legalization and Status Adjustment Legislation , by [author name scrubbed]. CRS Report 96-871. Inmate Privileges in State and Federal Prisons , by [author name scrubbed]. CRS Report RL30741. Juvenile Justice Legislation: Overview and the Legislative Debate , by [author name scrubbed] and David Teasley. CRS Report RS20576. Juvenile Justice: Legislative Activity and Funding Trends for Selected Programs , by [author name scrubbed] and David Teasley. CRS Report 97-460. Police Officers' Bill of Rights , by [author name scrubbed]. CRS Report 97-248. Prison Grant Programs , by [author name scrubbed]. CRS Report RL30257. Proposals to Restructure the Immigration and Naturalization Service , by William Krouse. CRS Report RL30890. Sex Offender Registration: Issues and Legislation , by [author name scrubbed] and David L. Teasley. CRS Report RL31173. Terrorism Funding: Emergency Supplemental Appropriations-Distribution of Funds to Departments and Agencies , by James Riehl. CRS Report RL31187(pdf) . Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30871 . Violence Against Women Act: History, Federal Funding, and Reauthorizing Legislation, by [author name scrubbed]. CRS Report 97-621. Women in Prison , by [author name scrubbed]. Department of Commerce Background Title II typically includes the appropriations for the Department of Commerce and related agencies. The Department was established on March 4, 1913 (37 Stat.7365; 15 U.S.C. 1501). The origins of the Department of Commerce date back to 1903 with the establishment ofthe Department of Commerce and Labor (32Stat. 825). In 1913, Congress designated a separate Department of Commerce. The Department's responsibilitiesare numerous and quite varied, but its activitiescenter around five basic missions: 1) promoting the development of American business and increasing foreign trade;2) improving the nation's technologicalcompetitiveness; 3) encouraging economic development; 4) fostering environmental stewardship and assessment;and 5) compiling, analyzing and disseminatingstatistical information on the U.S. economy and population. The following agencies within the Commerce Department carry out these missions: Economic Development Administration (EDA) provides grants for economic development projects in economically distressed communitiesand regions. Minority Business Development Agency (MBDA) seeks to promote private and public sector investment in minority businesses. Bureau of the Census collects, compiles, and publishes a broad range of economic, demographic, and social data. Economic and Statistical Analysis Programs provide 1) timely information on the state of the economy through preparation, development,and interpretation of economic data; and 2) analytical support to department officials in meeting their policyresponsibilities. Much of the analysis is conducted bythe Bureau of Economic Analysis (BEA). International Trade Administration (ITA) seeks to develop the export potential of U.S. firms and to improve the trade performance of U.S.industry. Bureau of Export Administration (BXA) enforces U.S. export control laws consistent with national security, foreign policy, and short-supplyobjectives. National Oceanic and Atmospheric Administration (NOAA) provides scientific, technical, and management expertise to 1) promote safe andefficient marine and air navigation; 2) assess the health of coastal and marine resources; 3) monitor and predict thecoastal, ocean, and global environments(including weather forecasting); and 4) protect and manage the nation's coastal resources. Patent and Trademark Office (PTO) examines and approves applications for patents for claimed inventions and registration oftrademarks. Technology Administration , through the Office of Technology Policy, advocates integrated policies that seek to maximize the impact oftechnology on economic growth, conducts technology development and deployment programs, and disseminatestechnological information. National Institute of Standards and Technology (NIST) assists industry in developing technology to improve product quality, modernizemanufacturing processes, ensure product reliability, and facilitate rapid commercialization of products based on newscientific discoveries. National Telecommunications and Information Administration (NTIA) advises the President on domestic and international communicationspolicy, manages the federal government's use of the radio frequency spectrum, and performs research intelecommunications sciences. The total appropriation for the Department of Commerce in FY2001 was $5.2 billion, which was about $220 million below the President's request. The enactedamount was also about $950 million above the House-passed bill and about $400 million above the Senate-passedbill. (For more information on funding ofindividual agencies, see the appendix.) Current Issues In his FY2002 budget request to Congress, the President requested $5.17 billion in total funding for Title II, which included the Department of Commerce andrelated agencies. This amount was approximately $60 million (1.5%) less than the $5.23 billion Congressappropriated in FY2001. The House approvedapproximately $5.19 billion for Title II, which is about $19 million more than the President's request. The Senateagreed to $5.68 billion for Title II, over $500million above the President's request and approximately $490 million above the House version. The Conferenceagreed upon a total of $5.11 billion, which ishigher than the Administration's request and the House figure, but lower than the Senate figure. For the Department of Commerce alone, the President requested $5.09 billion, which was about $63 million (1.2%) below the FY2001 appropriation of $5.15billion. Most of the agencies within the Department would have received a modest increase in funding. The overallrequest for the Department of Commerce wasbelow the FY2001 appropriation, however, because three agencies - the Economic Development Agency (EDA),National Telecommunications and InformationAdministration (NTIA), and National Institute of Standards and Technology (NIST) - would have received lessfunding. For the Commerce Department alone,the House approved approximately $5.11 billion, which is about $19 million above the President's request. TheSenate agreed to $5.6 billion, which isapproximately $500 million above the President's request and the House version. The Conference agreed upon$5.43 billion for the Department of Commerce,which is higher than the request and the House figure, but lower than the Senate figure. The President's budget request called for $58.8 million for Departmental Management . This figure was almost $3 million (5.2%) more than the $55.8 millionappropriated for FY2001. The majority of Departmental Management funds go toward salaries and expenses. Thiscomponent included a request of $21.2 millionfor the Inspector General's office, which is about $1.2 million above the $20 million appropriated for FY2001. TheHouse approved $57 million for managementfunds for FY2002. The House's amount was decreased by $2 million in an amendment ( H.Amdt. 176 , Rep.Velazquez) aimed at providing morefunding to the Small Business Administration. The Senate agreed to $63.2 million for this account, which is $6.2million above the amount approved by theHouse. Both the full House and the Senate Appropriations Committees approved the Administration's request for$21.2 for the Inspector General's office. TheConference agreed upon $57.8 million for Departmental Management. In its accompanying report, the SenateAppropriations Committee had expressed concernover the Commerce Department's use of the "Working Capital Fund" for new department initiatives and the lackof congressional oversight of this practice. TheCommittee requested the Department to seek congressional approval before reprogramming funds. The Department's Economic and Statistical Analysis programs are conducted by the Bureau of Economic Analysis (BEA) and the Bureau of the Census. ThePresident requested $62.5 million for these programs, which was about $8.8 million (16.4%) above the $53.6million appropriated in FY2001. The Administrationbelieved that with the growth in electronic commerce and expanding use of stock options, Commerce's timely andaccurate statistical reports are essential forproviding reliable data to policymakers. Both the House and the Senate agreed with the President's request. TheConference also agreed with the amount of $62.5million. For the Bureau of the Census , the President requested a total of $543.4 million for FY2002, an amount $109.8 million higher than the $433.6 millionappropriated for FY2001. The total FY2002 request included $141 million for continuing decennial census (2000)activities; $65 million for Census 2010planning; and $27 million for continuous measurement operations, including further development of the AmericanCommunity Survey, which is intended toreplace the census long form in 2010. The House Committee reported, and the full House approved, $519.8 million in new FY2002 appropriations for the Bureau of the Census. In considering H.R. 2500 , the House agreed to an amendment offered by Representative Carolyn Maloney to designate $2.5million of the $519.8 million for a planto count private American citizens living overseas in the 2010 census. The $519.8 million was $23.6 million belowthe President's budget request, but anapproximately $25 million carryover of balances from previous years was to give the Bureau total FY2002 fundingof $544.8 million. All of the $25 million wasdesignated for activities related to the 2000 decennial census. The Senate Committee recommended $517.1 million in new FY2002 appropriations for the Census Bureau, an amount $2.7 million lower than the Houseapproved and $26.3 million lower than the President requested. The Committee also estimated, however, a $27million carryover of funds from prior years, for atotal of $544.1 million available to the Bureau in FY2002. The full Senate approved the Committee'srecommendation of $517.1 for the Bureau. House and Senate conferees agreed to a total spending level of $544.8 million for the Bureau in FY2002. Of this amount, $54 million was from prior yearunobligated balances. The conferees designated $139.2 million of the total amount for expenses related to the 2000census and $65 million for 2010 censusplanning, but without explicit reference to the Maloney amendment to H.R. 2500 . The President's FY2002 request for the International Trade Administration was $329.6 million. (The FY2001 enacted level was $336.7million-$333.7 millionin appropriations plus $3 million in fee collections.) The House approved $344.7 million in appropriations, a $15.1million increase over the FY2002 request. TheSenate passed $344.1 million in appropriations, $14.5 million more than the President's request. Both the Houseand the Senate Committees' bills restoredfunding in the Trade Development Unit to export promotion programs for textiles and apparel, an export database,and an international competitiveness program. The conference report approved $67.7 million for the Unit, $15.3 million over the President's request. The Housealso increased funding for the U.S. and ForeignCommercial Service (USFCS) by $3.0 million to restore funding for the Rural Export Initiative and the GlobalDiversity Initiative. The Senate Committee's billmaintained the President's request for USFCS and expressed concern with the pace of the Service's consolidationof Export Assistance Centers in certainmetropolitan areas. The conference report allotted $195.8 million, $1 million less than the House version, butretained the initiatives added by the House. Theconference report also provided $27.7 million for the Market Access and Compliance Unit and $43.3 million forthe Import Administration Unit. The FY2002 request for the Bureau of Export Administration (BXA) was $68.9 million. (Congress had enacted $64.7 million in FY2001.) The House andSenate approved the full amount of the President's request for FY2002, an amount reflected in the conference report.This figure includes $7.3 million forinspections under the Chemical Weapons Convention (CWC) conducted in conjunction with the Department ofState. The Administration requested increases, inpart, to complete the redesign of the Export Control Automated Support System (ECASS) in order to provide licenseapplicants with more timely information ontheir applications. The Economic Development Administration (EDA) has experienced a tumultuous appropriations history over the past few years. (7) Its funding level was sharplyreduced by the 104th Congress, then partially restored by the 105th. In the first sessionof the 106th Congress, appropriators placed EDA programs in jeopardy untilthe last possible moment. Last year, the Senate Appropriations Committee recommended a total appropriation of$249.5 million for FY2001, or $187.5 millionless than the agency requested, and $138.9 million less than the total approved by the House. In the end, however,the conference agreement provided a totaladjusted appropriation of $439.8 million, about 3 million more than the agency requested. The FY2001 CJS appropriations bill included nearly $411.9 million for EDA's Economic Development Assistance Programs (EDAP) and slightly less than $28million for Salaries and Administration (S&E), giving the agency a total appropriation of $439.8 million. Thefunding for EDAP increased by more than $51million over the previous year's (FY2000) level. For FY2002, the Administration requested a substantial reduction in EDA's overall funding. While the request included a small increase for S&E, it called forsignificant reductions in EDAP. Specifically, EDA's request of $335 million for EDAP represented a $76 milliondecrease from the FY2001 EDAP adjustedappropriation of $411 million. The agency did not request any funding for the Defense EconomicAdjustment program which received $31.4 million in FY2001. The proposed elimination of funding for this program was consistent with the continued phase down of defenseadjustment activity, particularly base closures,according to EDA's budget submission. The requested funding level for the Public Works Program was $250million, which represented a program reduction of$36 million from the FY2001 appropriation. The amount requested for the Economic Adjustment Program was$40.9 million, or $8.6 million less than it receivedin FY2001. The agency's FY2002 request for funding its other programs reflected only minor changes. EDA requested $24 million for Planning, $9.1 million for TechnicalAssistance, $500,000 for Research and Evaluation, and $10.5 million for Trade Adjustment Assistance. The House set funding for FY2002 at the Administration's requested level, i.e., $30.6 million for S&E and $335 million for EDAP, for a total EDA appropriationof $365.6 million. The Senate-passed bill recommends slightly more -- $371.6 million. The conference agreement provides $30.6 million for S&E and $335 million for EDAP, for a total FY2002 appropriation of $365.6 million. For the Minority Business Development Agency (MBDA), the Bush Administration requested $28.4 million for FY2002. The request was about $1.1 million(4.0%) above the $27.3 million appropriated in FY2001. Both the House and the Senate agreed with the President'srequest. Congress concurred and passed$28.4 million. The U.S. Patent and Trademark Office (USPTO) is funded by user fees collected from customers. For FY2001, P.L. 106-533 provided the Office with thebudget authority to spend $1,038.7 million. According to the legislative language, included in this figure was$783.8 million from fees collected by the USPTO inFY2001 and $254.9 million in fees collected during prior fiscal years. The appropriation represented a 19% increaseover the FY2000 funding level. The Bush Administration's FY2002 budget requested $1139 million for the USPTO, an increase of almost 10% over FY2001. This included $856.7 millionderived from offsetting collections generated by fees in FY2002 and $282.3 million from fees collected in priorfiscal years. H.R. 2500 , as originallypassed by the House, would have provided the USPTO with a total funding level of $1129 million in FY2002;$846.7 million from FY2001 fees and $282.3million derived from fees generated in earlier fiscal years. The Committee report to accompany the bill also notedthat an additional $10 million in unobligatedbalances from FY2001 was expected to be available for use by the USPTO for a total spending level of $1139million. The version of H.R. 2500 firstpassed by the Senate provided budget authority for the USPTO to spend $1139 million including $856.7 millionfrom fees collected during FY2002 and $282.3million from fees paid in prior fiscal years. P.L. 107-77 provided a total funding level of $1,126 million, consistingof $843.7 million from FY2002 feecollections, and $282.3 million from carryover of prior year fees. According to the conference report, the FY2002level falls below the Administration's requestedlevel due to the decrease in the filing of trademark applications. Since 1990, appropriation measures have limited the Patent and Trademark Office's use of the full amount of fees collected in each fiscal year. This is an area ofcontroversy. Opponents argue that since agency operations are supported by payments for services, the total amountof these collections should be available toprovide for those services in the year the expenses are incurred. Proponents of the current approach maintain thatthe fees are necessary to balance the budget andthat the level of fees appropriated back to the USPTO are sufficient to cover operating expenses. (8) For FY2002, President Bush requested a total of $3.063 billion for the National Oceanic and Atmospheric Administration (NOAA) . (9) This amount was about$22 million or 0.7% greater than FY2001 appropriations of $3.041 billion. Of that total, $2.180 billion wasrequested for Operations, Research and Facilities(ORF). Budget authority of $68 million would be derived from the Promote and Develop Fishery Products andResearch Pertaining to American Fisheries(PDAF) account, and $3 million in collected fees would be transferred to ORF from the Coastal Zone ManagementFund (CZMF). A total of $764.8 million wasrequested for the Procurement, Acquisitions and Construction (PAC) account. In addition, $118.4 million wasrequested for Other Accounts to be allotted asfollows: $90 million for the Pacific Coastal Salmon Recovery (PCSR) program; $20 million for PCSR treatyobligations; and $1.4 million for U.S. fisheriesfinancing and liability obligations. Another $10.4 million pass-through was requested for the EnvironmentalImprovement and Restoration Fund (EIRF) for NOSand NMFS ($5.2 million each), which was included in the ORF request. The President did not request funding for"Coastal Impact Assistance" appropriated byCongress in FY2001. (10) President Bush requested funding for NOAA's ORF budget lines as follows: National Ocean Service (NOS) - $364.5 million; National Marine Fisheries Service(NMFS) - $598.0 million; Oceanic and Atmospheric Research (OAR) - $330.2 million; National Weather Service(NWS) - $658.5 million; NationalEnvironmental Satellite Data and Information Service (NESDIS) - $142.4 million; and Program Support - $182.5million. The President's request for Researchand Development (R&D) at NOAA for FY2002, was reported by NOAA's Office of Financial Administration(OFA) to be $762 million. This amountrepresented an increase of 8.4% above FY2001 funding for R&D of $703 million, and was 25% of the FY2002funding request for NOAA. Highlights of President Bush's FY2002 budget request for NOAA included: 1) funding for Stellar Sea Lion research ($29 million) - NMFS; 2) full funding for theNational Undersea Research Program (NURP) for FY2002 ($13.9 million) as the centerpiece for a 2002 OceanExploration initiative ($14 million requested) -OAR; 3) decreases in Great Lakes coastal community protection programs (-$30 million) - OAR; 4) restoration ofbase funding for Forecast & Warning Services($16.7 million) - NWS; 5) funding for the Cooperative Weather Observer Program ($2.3 million) - NWS; 6) transferof research data acquisition funding linesfrom NOS, OAR, and NMFS to Marine Services under Program Support ($62.0 million) - PS/OMAO; 7) fundingfor a Telecommunications Gateway Backup andother data communications improvements, under a Critical Infrastructure Protection initiative to provide backupfor critical weather data and information managedby the agency ($73.3 million) - NWS; 8) funding for a Comprehensive Large-Array [data] Stewardship System(CLASS) to expand, coordinate and centralizeclimate services data ($3.6 million) - OAR; and 9) funding increases for Satellite Programs (NPOESS and GOES),including backup hardware and new sensors($712.3 million) - NESDIS. The President proposed a 47% decrease for the National Estuarine Research ReserveSystem (NERRS), whose funding had doubledin FY2001. The House-passed version of H.R. 2500 appropriated a total of $3.093 billion for NOAA. This amount was 1.7% greater than FY2001appropriations of $3.041 billion, and 0.95% greater than President Bush's FY2002 request of $3.064 billion. Of thistotal, $2.2 billion was appropriated forOperations, Research and Facilities (ORF), about $20 million more than the request. In addition, $749 million wasappropriated for Procurement, Acquisitions,and Construction (PAC), 2% less than that requested by President Bush and 10% more than the FY2001appropriations. Another $143 million was appropriatedfor NOAA's Other Accounts, including PCSR, CZMF, and fishery-related obligations. The House approved $12 million more for NWS and $25 million more for PCSR than the President's request. The House also approved $20 million for Oceans,Coastal, and Great Lakes programs in OAR, less than that requested by the President. The House supported transferof data acquisitions funding (for ship time) toMarine Services under Program Support; it also transferred $10.8 million requested by the President's for NESDISPAC to NESDIS ORF. House appropriationsfor NOAA budget lines were as follows: NOS - $375.6 million; NMFS - $542.4 million; OAR - $317.5 million;NWS - $659.3 million; NESDIS - $149.6 million;and PS - $176.1 million. The PAC account was funded a total of $749.0 million; and Other Accounts would total$143.4 million including $135 million forPCSR, a transfer of $3 million to ORF, and $1.43 million for fishery funding, financing, and liability accounts. The Senate-passed version of H.R. 2500 appropriated a total of $3.363 billion for NOAA. Amendments resulted in an increase of $13 million aboveSenate Appropriation Committee recommendations for S. 1215 . Senate totals included $2.276 billionappropriated for ORF, $940.6 million for PAC,and $146.4 million for Other Accounts (fishery funding and financing), including $137.9 million for the PCSR fundand $10 million for EIRF. Highlights ofSenate amendments included $33.7 million appropriated instead of $30 million for conservation activities definedin �250(c)(4)(E) of the Balanced Budget andEmergency Deficit Control Act of 1985. The SAC managers' amendment approved $23.9 million, rather than $54.3million for NOAA Executive Direction andAdministration, the same as the President's request. The Senate authorized $22.0 million in budget authority fromFY2001 deobligations, from which $5.0million was intended for establishment of a NOAA "Business Management Fund" for operating expenses. TheSenate also directed that no NOAA funding beprovided for DOC's Commerce Administrative Management System (CAMS). Directions were also given toobligate $0.5 million dollars of NWS PAC fundingto the International Trade Administration processing center in OK. Of PCSR funding, $3 million was earmarkedfor disaster assistance, "for ground fishfishermen suffering economic hardship." Another $1.5 million in budget authority was targeted to NOAA to occupya coastal and fishery research facility inLafayette, LA (at the discretion of the Secretary of Commerce). In addition, $29 million was appropriated forAlaskan Stellar seal lion research, same as thePresident's request. Conferees approved a total of $3.26 billion for NOAA. The conference report ( H.Rept. 107-278 ) was adopted by the House on November 14, and by the Senateon November 15, 2001, and H.R. 2500 was signed into law by President Bush as P.L. 107-77 , on November28, 2001. Total appropriations forNOAA were 6.5% greater than the President's request of $3.06 billion, 5.5% greater than the House-passed totalof $3.09 billion, and 10% less than the Senateapproved levels of $3.36 billion. Of total appropriations, $2.25 billion was provided for ORF; $836.6 million forthe PAC account; $157.4 million for PacificCoastal Salmon Recovery (PCSR); and $8.3 million for NOAA's Other Accounts, including a pass through of $10million to NOS for EIRF, and a $3.0 milliontransfer to NOS from the Coastal Zone Management Fund. The balance of $1.43 million was appropriated foradministrative fishery-related funds. Of the NOAAtotal, $439.2 million was provided for conservation activities, including $223.3 million under ORF for CoastalAssistance programs; $58.5 million under PAC fora new Coastal and Estuarine Lands Conservation Program (CELCP); and $157.4 million under Other Accounts forPCSR obligations. NOAA line offices were funded as follows: NOS - $413.9 million; NMFS - $579.2 million; OAR - $366.1 million; NWS - $672.4 million; NESDIS - $139.6million; and Program Support - $180.5 million, including $71.8 million for Corporate Services, $89.6 million forOMAO, and $19.1 million for Facilities. WithinNOAA's PAC account, $87.8 million was appropriated for NOS, $37.2 million for NMFS, $19.7 million for OAR,$70.7 million for NWS, $561.9 million forNESDIS, and $62.4 million for Program Support. Mandatory funding of $7 million is also included in the ORF totalfor agency overhead and operating expenses. Highlights of the committee's agreement included $58.5 million provided to establish CELCP, "[F]or the purpose of protecting important coastal and estuarineareas that have significant conservation, recreation, ecological, historical, or aesthetic values, or that are threatenedby conversion from their natural or recreationalstate to other uses," and to fund the promulgation of regulations for this program in accordance with the CoastalZone Management Act. The conferenceagreement adopted Senate report language about NOAA's FY2003 budget structure, and House report languagerequiring the agency to report quarterly on thestatus of obligations vis a vis the new budget structure. In addition, House report language wasadopted that required NOAA's budget lines totals be reportedunder the section on ORF appropriations. The conference committee did not approve the "Business Management Fund" approved by the Senate, but did direct NOAA to report what management servicesmight be improved at the agency if they were to be centralized. The conference agreement also funded NOAA'sportion of expenses for CAMS at $17.1 million. The committee directed NOAA to design and implement performance measures for the Coastal Zone Managementprogram; and directed the Office of Marine andAviation Operations to provide detailed quarterly reports on its operations. Funding was not included for theproposed for GOES-R satellite which, the committeereported, had experienced scheduling delays. In addition, Conferees approved $15 million for Minority ServingInstitutions. For more detailed information onNOAA Appropriations for FY2002, see CRS Report RL31117(pdf) : National Oceanic and AtmosphericAdministration: Review of FY2002 Budget Request andAppropriations . The National Institute of Standards and Technology (NIST) received an appropriation of $598.3 million in FY2001. The total included $312.6 million for theScientific and Technical Research and Services (STRS) account (with $5.9 million for the Baldrige QualityProgram); $250.9 million for Industrial TechnologyServices (ITS), consisting of $145.7 million for the Advanced Technology Program (ATP) and $105.1 million forthe Manufacturing Extension Partnership(MEP); and $34.9 million for construction. While this was a 6% decrease in overall funding for NIST, primarilydue to a smaller construction budget, support forthe laboratory's internal research and development activities increased by 11% over the previous fiscal year. In his FY2002 budget proposal, President Bush requested $487.5 million in funding for NIST, 19% less than the FY2001 appropriation. Support for the STRSaccount would have been $347.3 million, including $5.4 million for the Quality Program. This represented an 11%increase over FY2001. The ManufacturingExtension Program would have been financed at $106.3 million, while the Advanced Technology Program was tobe suspended pending an evaluation, although$13 million would have been available to support on-going project commitments. Construction efforts would havebeen funded at $20.9 million. The FY2002 appropriations bill, H.R. 2500 , as originally passed by the House, would have provided $490 million for NIST, an 18% decrease insupport due primarily to an absence of funding for the Advanced Technology Program. The STRS account wouldhave received $348.6 million while funding forITS would total $119.5 million, with the major portion going to the Manufacturing Extension Program. Theconstruction budget would have been $20.9 million. H.R. 2500 , as initially passed by the Senate, would have funded NIST at $696.5 million, 42% above the figurecontained in the House bill and 16%more than FY2001. Internal R&D under the STRS account would have received $343.3 million while ITSwould have been financed at $309.3 million, including$105.1 million for MEP and $204.2 million for ATP. The Committee report to accompany the bill stated that theATP activity should be continued contrary to thePresident's budget proposal. Funding for construction at NIST would total $43.9 million, more than double thatcontained in the House bill and theAdministration request. The final legislation, P.L. 107-77 , funds NIST at $674.5 million, an increase of 13% over FY2001. Included in this is $321.1 million for the STRS account (3%above the previous fiscal year) and $291million for ITS. Of this latter amount, MEP is financed at $106.5 millionand ATP receives $184.5 million, a 27%increase. Construction is funded at $62.4 million, triple the figure in the budget request and the House bill andalmost twice that of FY2001. (11) Continued financing of the Advanced Technology Program has been a major funding issue. ATP provides seed financing, matched by private sector investment,to businesses or consortia (including universities and government laboratories) for development of generictechnologies that have broad applications acrossindustries. Opponents of the program cite it as a prime example of "corporate welfare," whereby the federalgovernment invests in applied research activitiesthat, they maintain, should be conducted by the private sector. The Clinton Administration defended ATP, arguingit assisted businesses (and smallmanufacturers) develop technologies that, while crucial to industrial competitiveness, would not or could not bedeveloped by the private sector alone. For theprevious two fiscal years (FY2000 and FY2001), the initial appropriation bills passed by the House, contained nofunding for ATP, although the program didreceive support in the final legislation. Similarly, the FY2002 appropriation bill originally passed by the House alsosuspended financing for the program. However, ATP was ultimately funded at a figure that represented a 27% increase over the previous fiscal year. The Office of the Undersecretary for Technology and the Office of Technology Policy (OTP) was funded at $8.1 million for FY2001, an increase of less than3% over the previous fiscal year. The Bush Administration requested $8.2 million for FY2002. H.R. 2500 ,as initially passed by the House, wouldhave funded the Office at $8.1 million. The first version of H.R. 2500 as passed by the Senate included $8.2million for OTP. The conferenceagreement settled on the Administration-requested and Senate-passed level of $8.2 million. The National Telecommunications and Information Administration (NTIA) provides guidelines and recommendations for domestic and global communicationspolicy, manages the use of the electromagnetic spectrum for public broadcast, and awards grants to industry-publicsector partnerships for research on newtelecommunications applications and development of information infrastructure. The TOP grants provides matchingmerit-based grants to areas eitherunderserved or not served at all by the Internet. The NTIA budget also includes the continued development andconstruction of public broadcast facilities,including funding for transition of broadcasting facilities to digital transmissions. Some policymakers support astronger role for NTIA to close the dividebetween the nation's digital "haves" and "have-nots." They contend that NTIA's TOP grants and public facilitiesprograms would be appropriate avenues forhelping bridge this divide. For FY2001, the Congress provided $100.4 million for the entire NTIA budget. Of this amount, $11.4 million is for salaries and expenses; $45.5 million for theTechnology Opportunities Program (TOP) grants; and $43.5 million for public telecommunications facilities,planning and construction. Both the TOP and publictelecommunications facilities, planning, and construction programs received substantial increases over their FY2000appropriations of $15.5 million and $26million, respectively. For FY2002, the Bush Administration proposed: $73 million for the overall NTIA budget; $15.5 million for TOP; $43.5 million for public telecommunicationsfacilities, planning and construction; and $14 million for salaries. The Bush Administration contends that the TOPprogram should be funded closer to levels itwas at before FY2001, and that the public facilities planning and construction budget should continue to supportconversion of broadcast transmissions to digitaltechnologies. The House-passed appropriations bill approved the following: $72 million for the NTIA budget; $13million for salaries and expenses; $15.5 millionfor TOP grants; and $43.5 million for public telecommunications facilities, planning, and construction. TheSenate-passed appropriation approves an NTIA budgetof $73 million, with $15.5 million for TOP, $43.5 million for public telecommunications facilities, and $14 millionfor salaries. Conference Report 107-278included the Senate-approved marks for the overall budget, TOP, public telecommunications facilities, and salaries. The conference agreement provided $73million - the Administration request - for the overall NTIA FY2002 budget. The Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L. 103-62 ; 107 Stat 285) requires that agencies develop strategic plansthat contain goals, objectives, and performance measures for all major programs. The latest Strategic Plan issuedby the Department of Commerce for yearsFY2000- FY2005 enunciates three strategic goals: Strategic Goal l. Provide the information and the framework to enable the economy to operate efficiently andequitably. Strategic Goal 2. Provide infrastructure for innovation to enhance American competitiveness. Strategic Goal 3. Observe and manage the Earth's environment to promote sustainable growth. As mandated by GPRA, DOC's FY2000 Annual Program Performance Report and FY2002 Annual PerformancePlan were released with the FY2002 budgetproposal. Both the program plan and report are available at: http://www.doc.gov/bmi/budget/ . Related Legislation S. 149 (Enzi et al.); H.R. 2557 (Menendez et al.); H.R. 2568 (Dreier, et al.) Export Administration Act of 2001. A bill to provide authority for national security and foreign policy exportcontrols. S. 149 introduced January 23,2001; reported from the Senate Banking Committee with amendments, March 22, 2001; pass the Senate on Sept.6, 2001; H.R. 2557 introduced July18, 2001, and H.R. 2568 introduced July 19, 2001; referred to House International Relations Committee,House Armed Services Committee. Additional Reading CRS Report 95-36 . The Advanced Technology Program , by [author name scrubbed]. CRS Report 97-104 . Manufacturing Extension Partnership: An Overview , by [author name scrubbed]. CRS Report 95-30 . The National Institute of Standards and Technology: An Overview , by [author name scrubbed]. CRS Report RL31117(pdf) . National Oceanic and Atmospheric Administration (NOAA): Review of FY2002 Budget Request and Appropriations , by Wayne A.Morrissey. CRS Report RL30169. Reauthorization of the Export Administration Act , coordinated by [author name scrubbed]. CRS Report RS20906(pdf) . U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation , by [author name scrubbed]. The Judiciary Background Typically, Title III of the CJS appropriation covers funding for the Judiciary. By statute (31 U.S.C. 1105 (b)) the judicial branch's budget is accorded protectionfrom presidential alteration. Thus, when the President transmits a proposed federal budget to Congress, he mustforward the judicial branch's proposed budget toCongress unchanged. That process has been in operation since 1939. The total appropriation for the Judiciary inFY2001 was $4.25 billion. The Judiciary budget consists of more than 10 separate accounts. Two of these accounts fund the Supreme Court of the United States - one covering the Court'ssalary and operational expenses and the other covering expenditures for the care of its building and grounds. Traditionally, in a practice dating back to the 1920s,one or more of the Court's Justices appear before either a House or Senate appropriations subcommittee to addressthe budget requirements of the Supreme Courtfor the upcoming fiscal year, focusing primarily on the Court's salary and operational expenses. Subsequent to theirtestimony, the Architect of the Capitolsubmits a request for the Court's building and grounds account. (12) Although it is at the apex of the federal judicial system, the Supreme Court represents only avery small share of the Judiciary's overall funding. The CJS appropriations act for FY2001 ( P.L.106-553 ), forinstance, provided a total of $45.1 million for theSupreme Court's two accounts, which was less than 1.1% of the Judiciary's overall appropriation of $4.26 billion. The rest of the Judiciary's budget provides funding for the "lower" federal courts and for related judicial services. Among the lower court accounts, one dwarfs allothers -- the Salaries and Expenses account for the U.S. Courts of Appeals and District Courts. The account,however, covers not only the salaries of circuit anddistrict judges (including judges of the territorial courts of the United States), but also those of retired justices andjudges, U.S. Court of Federal Claims,bankruptcy and magistrate judges, and all other officers and employees of the federal Judiciary not specificallyprovided for by other accounts. Other accounts for the lower courts include Defender Services (for compensation and reimbursement of expenses of attorneys appointed to represent criminaldefendants), Fees of Jurors, the U.S. Court of International Trade, the Administrative Office of the U.S. Courts, theFederal Judicial Center (charged withfurthering the development of improved judicial administration), and the U.S. Sentencing Commission (anindependent commission in the judicial branch, whichestablishes sentencing policies and practices for the courts). The annual Judiciary budget request for the courts is presented to the House and Senate appropriations subcommittees after being reviewed and cleared by theJudicial Conference, the federal court system's governing body. These presentations, typically made by the chairmanof the Conference's budget committee, areseparate from subcommittee appearances a Justice makes on behalf of the Supreme Court's budget request. The Judiciary budget does not appropriate funds for three "special courts" in the U.S. court system: the U.S. Court of Appeals for the Armed Forces (funded inthe Department of Defense appropriations bill), the U.S. Tax Court (funded in the Treasury, Postal Serviceappropriations bill), and the U.S. Court of Appeals forVeterans Claims (funded in the Department of Veteran Affairs and Housing and Urban Development appropriationsbill). Construction of federal courthousesalso is not funded within the Judiciary's budget. The usual legislative vehicle for funding federal courthouseconstruction is the Treasury, Postal Serviceappropriations bill. (For more details on individual appropriations for Judiciary functions, see the appendix.) Current Issues The Judiciary's Response to the Terrorist Attacks. Apart from its FY2002 budget request, the Judiciary wrote lettersto the Office of Management and Budget (OMB) on September 13, 2001, identifying the immediate security needsof the federal courts in light of the September11, 2001 terrorist attacks on the United States. (13) The letters were sent to OMB at the same time that emergency supplemental appropriations legislation, H.R. 2888 , was being considered by Congress. That bill, creating an Emergency Response Fund totaling $40billion, was subsequently passed byboth the House and Senate on September 14, 2001, and signed into law as P.L. 107-38 . In a letter on behalf of the Supreme Court, the Court's director of budget and personnel listed "four security items that address preparedness and mitigation of riskof terrorist incidents," totaling $47 million. These items specifically included: perimeter security improvements, $10million; visitor screening, $3 million;construction of police facilities, $20 million; and window protection, $14 million. A separate letter on behalf ofthe rest of the lower federal courts requested$20.7 million annually for an additional 414 courts security officers to enhance perimeter security at federalcourthouses; $10.6 million annually for an additional106 deputy U.S. Marshals, who would have full-time supervisory responsibility for court security; and $62.1 millionin one-time costs for purchase of"state-of-the-art" X-Ray machines for use in courthouse mail rooms and loading docks. Subsequently, pursuant to P.L. 107-38 , the President took three actions in response to the Judiciary requests for emergency funding: On September 21, 2001, he authorized the transfer from the Emergency Response Fund of $1.25 million to the Supreme Court's Buildingand Grounds budget account, to be used to install protective window film for the Supreme Court building. On September 28, 2001, he authorized the transfer of $19.7 million in emergency funds to the Judiciary's Court Security budget account). These funds would be used for heightened security in courthouses, including converting part-time court securityofficers to full-time as well as covering the costsrequired to maintain enhanced perimeter patrols and visual inspection of vehicles that enter courthousefacilities. On October 17, 2001, he submitted to Congress legislation to allocate $20 billion for various disaster recovery and security needs, $31.5million of which would go to the federal government's judicial branch. Of the $31.5 million, $17.5 would coverthe costs of additional court security officerhours, $10.0 million would be used to enhance the security posture of the Supreme Court building, and $4.0 millionwould support a supervisory deputy marshalresponsible for coordinating security in each judicial district and circuit. The President's September 21 and 28 funding transfers to the Judiciary were made pursuant to his authority, under P.L. 107-38 , to spend the first $20 billion of the$40 billion Emergency Response Fund total without additional congressional action. By contrast, the President'sallocation of the second $20 billion, includingthe $31.5 million designated for the Judiciary, was in the form of a supplemental appropriation measure requiringcongressional passage. That measure wasattached, as Division B, to the FY2002 Department of Defense appropriations bill ( H.R. 3338 ), which wassigned into law as P.L. 107-117 onJanuary 10, 2002. The funding transfers approved by Congress in Division B of P.L. 107-117 included significantly more funding for the Judiciary than proposed by the President. Specifically, the anti-terrorism funding approved by Congress in this law included: $30.0 million for the Supreme Court's Building and Grounds budget account, for security enhancements (instead of $10.0 million proposedby the President and provided for in the House-passed version of H.R. 3338 ); $57.5 million for the Judiciary's Court Security account, to address security requirements of the lower courts, including not less than $4.0million to reimburse the U.S. Marshals Service for a supervisory deputy marshal responsible for coordinatingsecurity in each judicial district. (The President hadproposed, and the House-passed version of H.R. 3338 had provided, that a total of $21.5 million of theanti-terrorism funding be transferred to thelower courts.) $5.0 million for emergency communications equipment in the Salaries and Expenses account of the courts of appeals and district courts,plus $2.9 million for the Administrative Office of the U.S. Courts, to enhance security at the Thurgood MarshallFederal Judiciary Building in Washington, D.C. (Neither of these funding amounts was included in the President's proposal or in the House-passed version of H.R. 3338 .) The Judiciary's Budget Request for FY2002. Congress approved $4.61 billion in total FY2002 budgetappropriations for the Judiciary, an 8.4% increase over FY2001 funding of $4.25 billion. The enacted FY2002 levelis $69.4 million less than what the Houseapproved earlier and $111.5 million more than the Senate-passed amount. At the start of the appropriations process,the Judiciary had requested $4.87 billion, a14.5% increase over FY2001 funding. For the Judiciary's largest account, Salaries and Expenses for the Courts of Appeals, District Courts and Other Judicial Services , (14) Congress approved $3.59billion, a 7.1% increase over $3.35 billion enacted for FY2001. The enacted FY2002 level is $40.8 million less thanwhat the House approved earlier and $32.1million more than the Senate-passed amount. The Judiciary had requested $3.74 billion, an 11.4% increase overFY2001 funding. For this account,House-Senate conferees adopted by reference House report language regarding non-appropriated funds andworkload. (15) The conference agreement alsoadoptedby reference Senate report language requesting that the Judiciary conduct a study for the Appropriations Committeeson whether changes in the jury system maybe necessary. (16) For the Judiciary's Defender Services account, Congress approved the House-passed amount of $500.7 million, a 15.3% increase over FY2001 funding of $434.0million. Earlier the Senate had approved $463.8 million, a 6.8% increase, while the Judiciary had requested $521.5million, a 20.1% increase. The DefenderServices account funds the operations of the federal public defender and community defender organizations, andthe compensation, reimbursement and expensesof "panel attorneys." The latter are private practice attorneys appointed by the courts under the Criminal JusticeAct (CJA) to serve as defense counsel toindigent individuals accused of federal crimes. While most of the Defender Services increase requested by the Judiciary consisted of mandatory adjustments to base, (17) $35.1 million was sought to fund anincrease in the rate of pay for panel attorneys to $113 an hour. For FY2001 Congress had funded hourly pay ratesfor panel attorneys of $75 in-court and $55out-of-court in most locations, which the Judiciary said were well below the amounts the attorneys need just to covertheir overhead costs. In response,House-Senate conferees, following the recommendation of both Appropriations Committees, agreed on an FY2002increase in panel attorney pay to $90 per hourboth in and out of court, effective no later than May 1, 2002. The budget request of the Supreme Court for FY2002, as customary, was in two parts. For its first account, Salaries and Expenses, Congress, as provided in theSenate bill, approved $40.0 million, a 6.6% increase over budget authority of $37.5 million for FY2001. Earlier,the Court had requested, and the Houseapproved, $42.1 million. (18) In their report, House-Senate conferees directed that the Court continue to provide the Appropriations Committees with information regarding the Court's hiringpractices in selecting law clerks and to "make efforts to expand its pool of applicants in a manner to ensure fairnessin hiring." The conference report, however,said it did not adopt language in the Senate report "regarding the containment of mandatory costs and additionalpersonnel." (19) For the Court's second account, Care of the Building and Grounds, Congress approved $37.5 million, instead of $70.0 million as provided in the House bill and$7.5 million in the Senate bill. (20) At thebeginning of the appropriations process, the Court had requested $117.7 million for this account, $110.2 millionoverFY2001 funding of $7.5 million. The purpose of this extraordinary increase, as requested, was to modernize theCourt's building by upgrading its basic lifesafety, security and utility systems. This would be the first major renovation of the Court building since its openingin 1935. (21) The conference agreement, while reducing the earlier-approved House amount by almost 50%, adopted by reference language in the House report related to thesecurity and renovation needs of the Court building. (22) The conferees noted that their agreement did not include language in the Senate report regardingbuildingrenovations. (23) The conference report also notedthat the entire amount of $37.5 million shall remain available until expended. (24) Congress also approved $220.7 million in funding for the Judiciary's Court Security account, a 10.8% increase over FY2001 budget authority of $199.1million. (25) The House and Senate bills respectivelyhad provided $224.4 million and $209.8 million, while the Judiciary had requested $228.4 million. (26) TheHouse-Senate conference report said that it adopted language in the House bill and report clarifying theresponsibilities of the Court Security Program. (27) Congress also authorized, as requested by the Judiciary, a cost-of-living increase in judges' and justices's salaries and appropriated $8.6 million for thatpurpose. While the House bill declined to authorize a judicial pay adjustment, (28) such a provision in the Senate-passed bill (29) was approved in conference,paving the way for a judicial pay increase, based on the Employment Cost Index (ECI), of 3.4%, effective January2002. (30) The Judiciary had called for a payadjustment for judges in its FY2002 budget submission to Congress. Judiciary compensation, it was argued, lagged far behind both inflation and the increasingsalaries of private attorneys, with judges' purchasing power having declined by over 13% over the past eight years. (31) The CJS conference agreement on a pay adjustment for federal judges and justices was reached against the backdrop of an imminent 2002 calendar yearcost-of-living pay increase for Members of Congress and executive branch officials. Annual cost-of-livingadjustments for the latter are automatic, effectiveJanuary of each year (as provided by the Ethics Reform Act of 1989), unless Congress adopts language barring aparticular annual adjustment from taking effect. By January 1, 2002, no legislation had been enacted to withhold the pay adjustment. (32) In contrast to automatic cost-of-living pay adjustments for Members ofCongress and executive branch officials, an annual pay increase for judges must be specifically authorized byCongress, and the legislative vehicle for thatauthorization in recent years has been the CJS-Judiciary appropriations bill At no time since judicial payadjustments have required statutory authorization havejudges received lower pay adjustments than Members of Congress and executive branch officials. Hence, in keepingwith that custom, the conferees' action onthe FY2002 CJS appropriations bill as enacted allowed cost-of-living pay increases for justices and judges to keepapace with those for Members of Congress andexecutive branch officials. (33) Also, without requesting FY2002 funding for this purpose, the Judiciary called for the creation of 54 "Article III" judgeships--judgeships created under Article IIIof the Constitution and having lifetime, as opposed to fixed-term, appointments. (34) The Judiciary noted that since Congress last enacted a major judgeship billin1990, (35) increases in federal jurisdiction and lawenforcement resources had contributed to a more than 25% increase in the workload of the federal courts. However, increased judgeships ultimately were not provided for by Congress in H.R. 2500 as enacted, norwas provision for them included earlier ineither the House or Senate CJS appropriations bill. As part of the budget process, the Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L. 103-62 ; 107 Stat. 285) requires thatagencies develop strategic plans that contain goals, objectives, and performance measures for all major programs. However, as noted earlier, the judicial branch isnot subject to the requirements of this Act. Related Legislation S. 147 (Feinstein) Southwest Border Judgeship Act of 20001. Creates, in federal judicial districts in four southwest border States,nine permanent district judgeships and ninetemporary district judgeships. Introduced, and referred to Judiciary Committee, January 23, 2001. S. 1162 (Feinstein) Companion bill to H.R. 570 (below). Introduced, and referred to Judiciary Committee, July 11, 2001. H.R. 272 (Gonzalez) Companion bill to S. 147 . Introduced and referred to Judiciary Committee, January 30, 2001; referredto Subcommittee on Courts, the Internet, andIntellectual Property, February 12, 2001. H.R. 570 (Biggert) Federal Judicial Fairness Act of 2001. Repeals Federal statute limiting salary increases for Federal judges orSupreme Court Justices to those specificallyauthorized by Act of Congress, increases judicial pay immediately by 9.6%, and provides for automatic annualcost-of-living increases in judicial salaries. Introduced, and referred to Judiciary Committee, February 13, 2001; referred to Subcommittee on Courts, theInternet and Intellectual Property, February 23,2001. H.R. 2522 (Coble) Federal Courts Improvement Act of 2001. Sets forth or modifies various provisions regarding judicial process(including bankruptcy administrator authority toappoint trustees) and judicial personnel administration, benefits, and protections, (including provisions concerningdisability retirement and cost-of-livingadjustments of annuities for territorial judges, compensation for Federal Judicial Center employees; annual leavelimit for judicial branch executives; andsupplemental benefits for judicial branch employees). Introduced, and jointly referred to Judiciary Committee andCommittee on Education and the Workforce,July 17, 2001. Referred to Judiciary Subcommittee on Courts, the Internet, and Intellectual Property, July 20, 2001;subcommittee hearings held, July 26, 2001. Jointly referred to Education and Workforce Subcommittee on Employer-Employee Relations and Subcommitteeon 21st Century Competitiveness, October 9,2001. Additional Reading CRS Report 98-527 . Federal Courthouse Construction, by [author name scrubbed]. CRS Report RS20278. Judicial Salary-Setting Policy , by [author name scrubbed]. Groner, Jonathan, "Budget Bill Bolsters Courts, DOJ," Legal Times, vol.24, Nov. 26, 2001, pp. 1,10. -- . "Lobbying for the Third Branch; Federal Judges Seeking Raises, Resources Turn to AO Advocates for Help on the Hill," Legal Times , vol. 24, June 4, 2001,p. 18. U.S. Administrative Office of the United States Courts. "Appropriations Committees Act on Courthouse Funding, The Third Branch , vol. 33, August 2001, vol33, August 2001, at http://www.uscourts.gov/ttb/august01ttb/august01.html . --. "House Appropriations Committee Approves Judiciary's FY02 Spending Bill," The Third Branch , vol. 33, July 2001, pp. 1 & 3; also at http://www.uscourts.gov/ttb/july01ttb/julyapp2.html . -- . "Judiciary's Slice of Budget Good News for FY02," The Third Branch , vol. 33, December 2001, at http://www.uscourts.gov/ttb/dec01ttb/december01.html . --. "Senate Appropriations Committee Leaves Judiciary Looking to Basic Services," The Third Branch, vol. 33, August 2001, pp. 1 & 6; also at http://www.uscourts.gov/ttb/august01ttb/senate.html . U.S. Supreme Court. "Chief Justice's 2001 Year-End Report on the Federal Judiciary," Jan. 1, 2002, at http://www.supremecourtus.gov/publicinfo/year-end/2001year-endreport.html Department of State and International Broadcasting Background The State Department, established July 27, 1789 (1 Stat.28; 22 U.S.C. 2651), has a mission to advance and protect the worldwide interests of the United Statesand its citizens. Currently, the State Department represents the activities of more than 50 U.S. agencies andorganizations operating at 257 posts in 180 countries. As covered in Title IV, the State Department funding categories include administration of foreignaffairs , international operations , international commissions ,and related appropriations . The total FY2001 State Departmentappropriation was $6.6 billion. Typically, more than half of State's budget (about 72% allocatedfor FY2001) is for Administration of Foreign Affairs, which consists of salaries and expenses, diplomatic security,diplomatic and consular programs, andsecurity/maintenance of overseas buildings. The Foreign Relations Authorization within P.L. 105-277 provided for the consolidation of the foreign policy agencies. As of the end of FY1999, the ArmsControl and Disarmament Agency (ACDA) and the United States Information Agency (USIA) were abolished andtheir budgets and functions were merged intothe Department of State. International broadcasting , which had been a primary function of the USIA prior to 1999, remains as an independent agency referred to as the BroadcastingBoard of Governors (BBG). The BBG includes the Voice of America (VOA), Radio Free Europe/Radio Liberty(RFE/RL), Cuba Broadcasting, Radio Free Asia(RFA), Radio Free Iraq and Radio Free Iran. The BBG's FY2001 appropriation was $441.4 million with just under2,700 positions. Security issues have remained a top priority since the August 7, 1998 terrorist attacks on two U.S. embassies in Africa. An immediate response was a $1.56billion supplemental enacted by the end of that year. In November 1999, the Overseas Presence Advisory Panelreported its findings on embassy security needsand recommendations. Also in November 1999, Congress authorized ( P.L. 106-113 ) $900 million annually forFY2000 through FY2004 for embassy securityspending within the embassy security, construction and maintenance (ESCM) account, in addition to worldwide security funds in the diplomatic and consularprograms (D&CP) account. Current Issues The State Department's Response to the Terrorist Attacks. Immediately after the September 11, 2001 terroristattacks on the United States, the Department of State announced that 50 of its 260 embassies and consulatesworldwide temporarily closed. Three U.S.embassies--in Pakistan, Yemen, and Turkmenistan--were evacuated. Reportedly since then, State recommendedembassies stock up on antibiotics, and mayclose facilities on a case-by-case basis if the local population gets out of control and dangerous to U.S. personnel. The Emergency Supplemental Appropriations Act ( P.L. 107-38 ) provided State with $390,000 for Diplomatic and Consular Programs for added security salariesand expenses, $7.5 million for Capital Investment Fund for improved communications at domestic and overseasfacilities, and $41 million for Emergencies in theDiplomatic and Consular Service account for reward money and evacuation of personnel at high threat embassies,should it be necessary. The supplemental alsoprovided $12.25 million to the Broadcasting Board of Governors (BBG) for expanded broadcasting to Muslimaudiences in and around Afghanistan. The Administration's FY2002 budget request for the Department of State and international broadcasting totaled nearly $8 billion, more than 13% above theFY2001 enacted level of $6.6 billion. The request was comparable to the FY1999 enacted level which had includedthe $1.56 billion emergency supplementalappropriation for overseas security and Y2K computer compliance. Secretary of State Colin Powell testified beforethe House Appropriations Committee on April26, 2001 that the Administration's State Department budget request for FY2002 had 3 top priorities: 1) embassyconstruction and security; 2) informationtechnology; and 3) hiring additional Foreign and Civil Service staff. The House Appropriations Committeerecommended $7.88 billion, slightly less than theAdministration request, for State and international broadcasting for FY2002. The House-passed funding level wasreduced by $15 million to $7.867 billion. TheSenate agreed to $7.63 billion, about $236 million below the House level. The final enacted FY2002 appropriationfor both State and international broadcasting is$7.84 billion-about 11% higher than the FY2001 funding level. The President's FY2002 request of $5,665.8 million for State's administration of foreign affairs was nearly 20% above the FY2001 enacted level. The administration of foreign affairs request included: $3.705 billion for D&CP , $210 million for the capital investment fund(CIF) ; $242 million for the educationand cultural exchanges account ; nearly $1.3 billion for ESCM ; and $15.5 million for emergencies in thediplomatic and consular services account. TheHouse Appropriations Committee set funding for State's administration of foreign affairs at $5,595.7 million. Housefloor action reduced this amount by $15million to $5,580.7 million, transferring the funds to the Small Business Administration. The Senate Appropriations Committee recommended $5,224.1 million for Administration of Foreign Affairs, nearly $357 million below the House level and $442million less than the President's request. The full Senate reduced this amount to $5,196.9 million. The entirereduction was from the Diplomatic and ConsularPrograms account. Congress passed an FY2002 budget of $5,549.2 million for State's administration offoreign affairs account. Continuing an emphasis on overseas security even before the September 11th attacks, the Administration requested a total of $1.3 billion for worldwide securityupgrades. Of this total, $487.7 million was requested within D&CP , primarily for ongoing expenses of past actions such assalaries of increased guards andmaintenance of security technology. In addition, the Administration requested $816 million within ESCM , largely for upgrading overseas facilities, improvingperimeter security, and relocating highest risk posts. The ESCM account requestrepresented an increase of nearly 20% over the FY2001 enacted funding for bothconstruction-related, as well as security-related activities. The House agreed with these funding levels andrecommended nearly the same amount. The Senaterecommended less for security-$409.4 million within D&CP and $661.6 millionwithin ESCM . Congress enacted the House and White House-requested levels. The nonsecurity-related funding request within D&CP was primarily for salaries and expenses of personnel. Secretary Powell testified in early 2001 beforecongressional committees that the Department has ignored warning signs in staffing gaps, both in the Foreign andCivil Service. In addition, near term problemsmay include anticipated retirements, difficulty in attracting applicants, and the need for float staff to fill in whenpersonnel attend training classes. TheAdministration hoped to hire approximately 600 new employees in FY2002, including 360 general staff, 186security professionals, and technical experts. The House-passed bill would provide $3,645.7 million for D&CP -- reducing the full Committee-recommended level by $8million and transferring that amountto the Small Business Administration. In addition, the House expressed concerns about management problems atState, as well as interest in right-sizing overseasposts. The Senate Appropriations Committee recommended $3,498.4 million for D&CP , offering less than the House or the FY2002 requestedamount for worldwidesecurity. The Senate Appropriations Committee had stated that $50 million of unobligated funds would be addedto worldwide security funds. The Committeealso noted that it would not recommend funds for hiring 186 Diplomatic Security (DS) agents, contending that adisproportionate number of rookies-to-seasonedagents could hamper DS effectiveness. The Senate reduced its D&CP funding to $3,471.2 million. Congressional action resultedin a total funding for DC&P FY2002 budget at $3,630 million, including the full request for new hires. The capital investment fund (CIF) , which was established in 1994, provides for purchasing information technology and capital equipment to ensure efficientmanagement, coordination, operation, and utilization of State's resources. For many years, State Departmentofficials have testified that the Department'stechnology problems -- ranging from archaic telephones and copy machines to lack of computers and Internet access-- have received inadequate funding. TheFY2001 request was $97 million -- $17 million above the previous year's level. The Bush Administration requested$210 million for State's CIF account inFY2002. This represented a 117% increase over the FY2001 level. Secretary Powell's goal was to put full Internetcapability on every desktop and improvecommunication equipment in all State Department offices around the world. The House Appropriations Committeeagreed with the Administration request for$210 million; however, the funding was reduced by a floor amendment, transferring $7 million from CIF to theSmall Business Administration. Both the SenateAppropriations Committee and the full Senate agreed with the House level and Administration request of $210million for CIF . Congress enacted $203 millionnoting that additional funds were provided to CIF in the emergencysupplemental. Education and cultural exchange programs include programs such as the Fulbright, Muskie, and Humphrey academic exchanges, as well as the internationalvisitor exchanges and some Freedom Support Act programs. Secretary of State Powell testified on Capitol Hill thathe believes exchange programs are critical topromoting American ideals and democracy abroad. Therefore, the Bush Administration requested $242 million forthe exchange account, an increase of morethan $10 million (4.5%) over the FY2001 level. This amount would be the highest level for exchanges since themid-1990s when the Freedom Support and SEEDprograms were first funded. The FY2002 request is 21% higher than funding in the late 1990s when the educationand cultural exchange programs wereadministered through the U.S. Information Agency (USIA) at funding levels hovering around $200 million. TheHouse bill set funding at $237 million, $5 millionless than the request. The Senate passed the requested level of $242 million. The enacted FY2002 funding levelis the House-passed level of $237 millionincluding $118 million for the Fulbright programs. The United States contributes in two ways to the United Nations and other international organizations: (1) voluntary payments funded in the Foreign OperationsAppropriations bill and (2) assessed contributions included in the Commerce, Justice, and State Appropriationsmeasure. Assessed contributions are provided intwo accounts, international peacekeeping and contributions to international organizations (CIO) . Following a periodof dramatic growth in the number andcosts of U.N. peacekeeping missions during the early 1990s, a trend that peaked in FY1994 with a $1.1 billionappropriation, funding requirements have declinedin recent years. The FY2000 enacted appropriation for CIO was $885 million, $500 million for internationalpeacekeeping, and $351 million for U.S. arrearagepayments to the U.N. if certain reform criteria are met by the United Nations. Only $100 million of the appropriatedarrearage payments have been releasedbecause of a lack of U.N. reform. After the United States was voted off the U.N. Human Rights Commission earlierthis year, the Foreign Relations Authorizationbill added a provision (Sec. 601, H.R. 1646 ) that would restrict payment of $244 million of U.S. arrearagepayments to the U.N. After the September11th attacks, Congress passed S. 248 / P.L. 107-46 which authorized arrearage payments to theU.N. (For more detail, see CRS Issue Brief IB86116, U.N. System Funding: Congressional Issues , by [author name scrubbed]). The Bush Administration requested $878.8 million for CIO which represents full funding of U.S. assessed contributions to 44 U.N. organizations. The FY2002request of $844.1 million for international peacekeeping would providefunding for ongoing peacekeeping activities in Kosovo, East Timor, and Sierra Leone, toname a few. The Administration had asked that 15% of these funds be two-year funding because of theunpredictability of money for this account fromyear-to-year. The House-passed bill provided $850 million for CIO and $844.1 million for peacekeeping . The Senate passed $1,091.3 million for CIO ; the $241 milliondifference is largely for accounting issues. For internationalpeacekeeping , the Senate approved $773.2 million, $71 million less than the Houselevel. Congressenacted the House levels of $850 million for CIO and $844.1 millionfor international peacekeeping . The international broadcasting operations account, established after consolidation under the Broadcasting Board of Governors (BBG) in FY1995, includes Voiceof America (VOA), Radio Free Europe/Radio Liberty (RFE/RL), Cuba Broadcasting, and newer surrogate facilities: Radio Free Asia (RFA), Radio Free Iraq andRadio Free Iran. When USIA integrated into the Department of State at the end of FY1999, the BBG became anindependent agency. The Administration's FY2002 request totaled $470 million for broadcasting, including $24.9 million for Cuba Broadcasting and $16.9 million for capitalimprovements. The request included funding for a "wholesale revamping" of VOA's current Arabic service, as wellas actions to counter massive broadcastjamming, particularly of RFA by China and of Cuba Broadcasting by Cuba. The capitalimprovements funding request provided for technical improvements andmaintenance of existing facilities, as well as new medium wave transmission capability in the Middle East. TheHouse-passed bill provided $9 million more thanrequested for international broadcasting-a total of $479 million. The Senate passed a total of $456.5 million. Theenacted FY2002 appropriation set funding atthe House level of $479 million. The Government Performance and Results Act (GPRA) enacted in 1993 ( P.L. 103-62 ; 107 stat 285) required that agencies develop strategic plans that containgoals, objectives, and performance measures for all major programs. The subsequently published reports: U.S.Department of State FY1999-2000 Performance Plan released February 1, 1999, and the United States Department of State Performance Report, FiscalYear 1999 established target goals and measured howsuccessful the State Department was in attaining those goals. With most of the 27 specified goals, State was closeto, or completely successful in, meeting itsstated goals. The Department of State Performance Plan, Fiscal Year FY2001 was released March2000. In 2001, the Bush Administration released U.S.Department of State Performance Plan, Fiscal Years 2001-2002. Related Legislation H.R. 1646 (Hyde)/ S. 1401 (Biden) The Foreign Relations Authorization Act, Fiscal Years 2002 and 2003. Would authorize State Departmentspending of appropriations and other foreign relationsactivities. Introduced April 27, 2001. Committee reported bill to House ( H.Rept. 107-57 ). Passed by the House(352-73) May 16, 2001. Referred to SenateForeign Relations Committee May 17, 2001. Senate Foreign Relations Committee markup held July 26. Committeereported bill to the Senate ( S.Rept. 107-60 )on September 4th. Additional Reading State Department Issues CRS Report RL30662 . Embassy Security: Background, Funding, and the Budget , by [author name scrubbed]. CRS Report RS20855 . Foreign Policy Budget for FY2002 , by Susan Epstein and [author name scrubbed]. CRS Report RL31046 . Foreign Relations Authorization, FY2002/2003: An Overview , by [author name scrubbed]. CRS Report RL30926 . State Department and Related Agencies FY2002 Appropriations , by [author name scrubbed]. CRS Issue Brief IB86116. U.N. System Funding: Congressional Issues , by [author name scrubbed]. Other CRS Report RL31011 . Appropriations for FY2002: Foreign Operations, Export Financing, and Related Programs , by [author name scrubbed]. Other Related Agencies Background and Current Issues This section includes all other related agencies covered by title V of the CJS appropriations bill whose FY2001 appropriations exceeded $1.8 million. (36) The CJSappropriations also cover funding for several relatively small governmental functions, including several specialgovernment commissions. (For additionalinformation on the funding of other related agencies covered by this legislation, see: Budget of the UnitedStates Government, Fiscal Year 2001-Appendix (106thCong., 2nd sess.)) Maritime Administration (MARAD). MARAD administers programs that aid in the development, promotion,and operation of the Nation's merchant marine (including programs that benefit vessel owners, shipyards, and shipcrews). The Administration requested $103million for MARAD for FY2002, $116.5 million less than Congress appropriated in FY2001. MARAD's proposedbudget for FY2002 is less than half of itsenacted FY2001 budget because the Administration's budget calls for the Department of Transportation (DOT) toshift $98 million to the Department of Defense(DOD) for the Maritime Security Program (MSP). MSP consists of privately-owned, U.S. flag, and U.S. crewedliner fleet in international trade that are availableto support DOD sustainment in a contingency. Zero funding for FY2002 was recommended for the Title XIGuaranteed Loan Program which insures financingfor construction of U.S. built ships and U.S. shipyard modernization and improvement. No new commitments forloan guarantees are projected for the FederalShip Financing Fund as this Fund is used only to underwrite guarantees made under the Title XI loan guaranteeprogram prior to 1992. The Administrationrecommended $89.1 million for operating MARAD and training ship crews for FY2002, which is $2.3 million morethan Congress appropriated in FY2001. TheAdministration proposed $10 million for a new category - Ship Disposal, which is intended to dispose of at leastthree obsolete vessels in the National DefenseReserve Fleet. The House Appropriations Committee recommended $231.7 million for MARAD for FY 2002, $12.6 million more than was appropriated in FY 2001. TheHouse's funding level was $128.7 million more than the Administration's request because the House budgetmaintains the MSP program ($98.7 million) underDOT and includes $30 million for the Title XI Guaranteed Loan Program (versus the Administration's zero funding). The House Committee's recommendationalso included $89.1 million for operations and training, and $10 million for ship disposal, both equal to thePresident's request. The House-passed bill approvedthe Committee's recommendations. The Senate Committee recommended $291.7 million for MARAD for FY 2002, which was $72.6 million more than was appropriated in FY 2001, $60 millionmore than the House's recommendation and $188.7 more than the President requested. The Senate recommended $100 million for the Title XI Guaranteed LoanProgram, $70 million more than the House recommended and $100 million more than the President's request. TheSenate recommended zero funding for the ShipDisposal Program versus the House and President's recommendation of $10 million. The Senate recommended$98.7 million for the MSP program and that theprogram remain under DOT rather than be shifted to the DOD as the Administration requested. The Senaterecommended $89.1 million for operations andtraining, equal to the House and Administration's request. The Senate-passed bill approved the Committee'srecommendations. The conference agreement included $98.7 million for MSP, $89.1 million for operations and training, and $33 million for the Title XI Guaranteed Loan Program. The conference agreement provided no funding for ship disposal. The Small Business Administration (SBA). The SBA is an independent federal agency created by the SmallBusiness Act of 1953. While the agency administers a number of programs intended to assist small firms, arguablyits three most important functions are toguarantee -- principally through the agency's 7(a) general business loan program -- business loans made by banksand other financial institutions; to makelong-term, low-interest loans to victims of hurricanes, earthquakes, other physical disasters, and acts of terrorism;and to serve as an advocate for small businesswithin the federal government. (37) For FY2001, the Administration had requested a total appropriation of $1,057.8 million -- a figure which included $50.5 million in an emergency supplementalappropriation to support the agency's disaster loan program. This compared to a $847 million CJS appropriationfor SBA for FY2000. More specifically, theFY2001 request included $419 million for Salaries & Expenses (S&E), an increase of $96.3 million overthe FY2000 appropriation. (38) For FY2001, the House CJS bill followed the recommendation of the Appropriations Committee. An amendment, however, added $4.5 million for the Women'sBusiness Centers program. The result: a total FY2001 appropriation for SBA of $860.7 million, including $304.1million for S&E. For its part, the SenateAppropriation Committee recommended a total FY2001 appropriation for SBA of $887.5 million, including $143.5for S&E. The conference agreement did notsplit funding for non-credit business assistance programs into a separate account, as proposed in the budget requestand the Senate-reported amendment, but ratherincluded funding for such programs under this account. For FY2002, the Administration requested a total appropriation for SBA of $539 million (and an additional carryover balance of $37.9 million in the agency'sDisaster Loan Programs account). In December 2000, Congress approved a total FY2001 appropriation for SBAof $899.5 million. Thus, the FY2002 requestrepresented a decrease of $360.5 million from the previous year. SBA's FY2002 budget request, however, assertedthat the agency would be able to maintain orincrease its assistance to small business with reduced resources, mainly by increasing user fees and restructuringdisaster relief funding. The House Appropriations Committee recommended a $727.9 million CJS appropriation for the SBA for FY2002, which included $303.6 million for S&E. Notably, the recommendation included $77 million for the guaranteed loan subsidy for the 7(a) program, whereas-- as noted above -- the Administration soughtto offset the subsidy cost by increasing user fees. The full House increased SBA's funding to $744.9 million withtransfers from the Department of State and theDepartment of Commerce. The Senate-passed bill recommended $773.5 million, $28.6 million more than theHouse-passed level and $231.5 million more thanwas requested. The conference agreement provided the SBA with a total appropriation of $768.5 million for FY2002, including $308.5 million for S&E. SBA's Response to the Terrorist Attacks. Following the terrorist attacks on the World Trade Center, the SBAdispatched employees to New York City. The SBA worked in partnership with the Federal Emergency ManagementAgency (FEMA), the American Red Crossand other federal, state and local agencies in support of the New York City Mayor's Office of EmergencyManagement (NYOEM) to assist the residents of NewYork City who were stricken by the terrorist attacks. SBA loan officers were available in Disaster Recovery Centers located throughout the disaster area to assist business owners and individuals. SBA disasterassistance was available not only to small firms; the agency made loans to businesses of all sizes, nonprofitorganizations, homeowners and renters. In addition toPhysical Disaster Loans to repair or replace disaster damage to property and Economic Injury Disaster Loans (EIDL)to cover operating expenses businesses couldhave afforded to pay if the disaster had not occurred, the agency also administered a Military Reservists EIDLprogram. (39) The purpose of the MREIDL programwas to provide funds to eligible small businesses to meet their ordinary and necessary operating expenses they couldhave met, but were unable to meet, becauseof essential employees being "called-up" to active duty in their role as military reservists. (40) Details on SBA's response to the September 11 terrorist attacks canbe accessed from the agency's home page at http://www.sba.gov/ . These programs fell within the funding purposesenumerated in the emergency supplementappropriations bill ( H.R. 2888 ) passed by Congress in response to the terrorist attacks of September 11, 2001 Legal Services Corporation. LSC is a private, non-profit, federally-funded corporation that provides grants tolocal offices that, in turn, provide legal assistance to low-income people in civil (non-criminal) cases. The LSC hasbeen controversial since its inception in theearly 1970s, and has been operating without authorizing legislation since 1980. There have been ongoing debatesover the adequacy of funding for the agency,and the extent to which certain types of activities are appropriate for federally funded legal aid attorneys toundertake. In annual appropriations laws, Congresstraditionally has included legislative provisions restricting the activities of LSC-funded grantees, such as prohibitingrepresentation in certain types of cases orconducting any lobbying activities. P.L. 106-553 included $330 million for LSC for FY2001. This is $25 million higher than the FY2000 LSC appropriation and $10 million lower thanthe Clinton Administration's FY2001 budget request. The LSC appropriation includes $310 million for basic fieldprograms and independent audits, $10.8million for management and administration, $2.2 million for the inspector general, and $7 million for clientself-help and information technology. It should benoted that P.L. 106-554 mandated a 0.22 percent government-wide rescission of discretionary budget authority forFY2001 for almost all government agencies. Thus, the $330 million appropriation for LSC for FY2001 was reduced to $329.3 million. For FY2002, the Bush Administration requested $329.3 million for the LSC, which included $310 million for basic field programs, $12.4 million formanagement and administration, $4.4 million for client self-help and information technology, and $2.5 million forthe inspector general. The budget request alsocontinued all restrictions on LSC-funded activities currently in effect. The Administration's FY2002 request forLSC ($329.3 million) was the same as theamount currently obligated for the program for FY2001. Historically, the Corporation's highest level of fundingwas $400 million in FY1994 and FY1995. For FY2002, the House and Senate also recommended a total of $329.3 for LSC and included existing provisions restricting the activities of LSC grantees. Incarrying out LSC's vision of an effective and efficient statewide system of delivering legal services to the poor,grantees have been merging and reconfiguringtheir legal services programs to better use every federal dollar allocated to them. The House Committee reportindicated concern about the LSC overruling,without appeal, certain configurations implemented by grantees via the state planning process. The HouseCommittee report directed the LSC to review the stateplanning process and the concerns raised and report back to the Committee by September 4, 2001, with a proposal(that includes input from the stakeholders) thatoutlines the reconfiguration standards and the process for states to appeal LSC's decisions. (41) P.L. 107-77 included $329.3 million for LSC for FY2002. This is identical to the FY2001 appropriation for LSC (after the rescission) and the BushAdministration's FY2002 budget request for LSC. The LSC appropriation for FY2002 included $310 million forbasic field programs, $12.4 million formanagement and administration, $4.4 million for client self-help and information technology, and $2.5 million forthe inspector general. P.L. 107-77 alsoincluded existing provisions restricting the activities of LSC grantees. Equal Employment Opportunity Commission (EEOC). The Commission enforces laws banning employmentdiscrimination based on race, color, national origin, sex, age or disability. The EEOC's workload has increaseddramatically since the agency first was createdunder Title VII of the Civil Rights Act of 1964. Passage of the Americans with Disabilities Act of 1990 and theCivil Rights Act of 1991, as well as employees'growing awareness of their rights, have made it difficult for the agency's budget and staffing resources to keep pacewith its heightened caseload. Congress approved $279 million for the agency's FY1999 budget, an increase of $37 million. The following year the appropriation rose minimally to $282million. Although the Commission received $21 million more for FY2001 ($303 million), the increase was abouthalf of that requested by the ClintonAdministration. Nonetheless, the funding increases of the last few years enabled the EEOC to cut by 69% thebacklog of private sector charges from a high of111,000 in mid-1995 and reduce the average processing time for private sector charges to 216 days. (The latter waslargely due to the Commission's expandeduse of alternative dispute resolution procedures, e.g. mediation). President Bush requested $310.4 million for FY2002 - an increase of $7.2 million - to allow the agency to further enhance its record in its private sector programand make improvements in its federal sector program, among other things. The House approved the President'srequest for $310.4 million to fund the EEOC. The House Committee directed the Commission to continue reducing the backlog of private sector discriminationcharges and continue at least its currentspending level ($1.8 million) on contract mediation, which is in addition to the mediation performed by EEOC staff. It expressed concern about the still high levelof these charges and expects the agency to exceed the small (6%) backlog reduction that was assumed in theAdministration's budget request. The Senate versionof CJS provided the same level of funding-$310.4 million-as requested by the Administration and passed by theHouse for the EEOC. Congress enacted thatlevel for EEOC in FY2002. Commission on Civil Rights. The Commission collects and studies information on discrimination or denials ofequal protection of the laws. It received an appropriation of $8.9 million in FY2001 and FY2000. The President's request for FY2002 called for a slight increaseto $9.1 million. The House and the Senate agreed to provide the Administration's request which Congress enacted. Federal Communications Commission (FCC). The FCC is an independent agency charged with regulation ofinterstate and foreign communication by means of radio, television, wire, cable and satellite. For FY2002 Congressapproved total funding for the FCC of $245.1million, a 6.8% increase over FY2001 resources of $229.5 million. The amount enacted was $6.5 million more thanthe $238.6 million approved by the Houseand $7.5 million less than the Senate bill amount of $252.5 million. (42) Of the $245.1 million total, $218.8 million is to be derived from offsettingfee collections,as provided in both the House and Senate bills, resulting in a net direct appropriation of $26.3 million. TheCommission had requested $248.5 million in totalfunding, an 8.3% increase over FY2001 resources. (43) In their report, House-Senate conferees reiterated concerns, expressed earlier by both Appropriations Committees, about "the declining standards of broadcasttelevison and the impact of this decline on Americas's children." (44) The conferees added that they expected the FCC to "continue in its efforts to address theseconcerns." The conference agreement said that it did not include Senate report language which had recommended $4 million for the Commission's Excellence in Engineering program. Instead, the conferees recommended that the FCC pursue a "modified approach to an 'Excellence inEngineering' effort." (45) In keeping with the requirements of the Government Performance and Results Act, the FCC, as part of its FY2002 budget request, set forth its overall mission andgeneral and specific goals for a five-year time frame. Federal Maritime Commission (FMC). The FMC regulates a large part of the waterborne foreign commerce ofthe United States. The Administration requested $16.5 million for the FMC for FY2002, $1 million more thanCongress appropriated in FY 2001. The HouseAppropriations Committee recommended $15.5 million, which was equal to the amount enacted for FY 2001 and$1 million less than the President's request. TheHouse-passed bill approved the Committee's recommendations. The Senate Committee on Appropriationsrecommended $17.5 million, which was about $2million more than Congress appropriated in FY 2001 and $1 million more than the President's request. TheSenate-passed bill approved the Committee'srecommendations. The conference agreement provided $16.5 million for the FMC, equal to the Administration'srequest. The Federal Trade Commission (FTC). The FTC, an independent agency, is responsible for enforcing anumber of federal antitrust and consumer protection laws. In recent years the FTC has used pre-merger filing feescollected under the Hart-Scott-Rodino Act toentirely fund its operations; Zero ($0) direct appropriations have been required. For FY2001, the Administration requested an increase in the FTC's program level from $125 million to $164.6 million. The FY2001 request included $7 millionderived from estimated FY2000 carryover fee balances and an anticipated $157.6 million from pre-merger filingfees; therefore, as was the case the previous year,for FY2001 the FTC requested no net direct appropriation. The House Appropriations Committee recommendeda CJS appropriation of $134.8 million for theagency for FY2001. That request included $13.7 million derived from estimated FY2000 carryover fee balancesand an anticipated $121.1 million for pre-mergerfiling fees. The House bill mirrored the committee's recommendation. The Senate Appropriations Committee recommended a program level for the agency for FY2001 of $159.5 million, to be derived exclusively from the collectionof pre-merger filing fees. The conference agreement approved by Congress in December 2000 included a total operating level of $147.2 million for the FTC for FY2001. The conferenceagreement assumed that, of the amount provided, $145.3 million would be derived from fees collected in FY2001and $1.9 million would be derived fromestimated unobligated fee collections available from FY2000. These actions resulted in a final direct appropriationof zero ($0). For FY2002 the Administration requested a program level of $156.3 million for the FTC, an increase of $9.1 million over the current year appropriation. All ofthe funding would come from offsetting collections derived from fees collected for pre-merger filings duringFY2002, so as to result in a final direct appropriationof zero ($0). The House approved a slightly smaller funding level: $156 million. The Senate-passed billrecommended $156.3 million. This amount, too, wouldbe entirely derived from fees collected by the agency. Congress provided the FTC with $156 million for FY2002. Securities and Exchange Commission (SEC). The SEC administers and enforces federal securities laws inorder to protect investors and to maintain fair and orderly stock and bond markets. The SEC collects fees on varioussecurities market transactions. In recentyears, these collections have exceeded the agency's budget by a wide margin. Legislation before the107th Congress ( S. 143 and H.R. 1088 ) proposed reducing these fees. In 2000, Congress approved a total operating level of $422.8 million for the SEC for FY2001, an increase of $55.0 million over FY2000. The figure wascomprised of $127.8 million in offsetting fee collections for FY2001 and $295 million in FY1999 collections. Theresult: no direct appropriations were requiredfor the agency for FY2001. For FY2002, the Administration requested a total operating level of $437.9 million for the SEC, an increase of $15.1 million over FY2001. As was the case inFY2001, no direct appropriations would be needed - instead, the SEC would be funded entirely by current and prioryear fee collections. The House approved SEC spending at the level of the Administration's request: $437.9 million, of which $109.5 million would come from fees collected inFY2002 and the remaining $324.4 million from prior-year fees. The Senate approved a higher amount - $514.0million ($109.5 million from current year fees and$404.5 million from FY2000 fees). The conference agreement adopted the House proposal. No directappropriations would be needed. The State Justice Institute (SJI). The Institute is a private, non-profit corporation that makes grants andconducts other activities to further the development of judicial administration in State courts throughout the UnitedStates. Under the terms of its enablinglegislation, SJI is authorized to present its request directly to Congress, apart from the President's budget. TheInstitute requested $15.0 million for FY2002,more than double its FY2001 funding amount of $6.835 million. (46) Congress, however, scaled back the SJI appropriation for FY2002 significantly, approving$3.0 million, instead of $6.835 million and $6.2 million approved by the House and Senate respectively. (Separatefrom the Institute's request, the President hadrequested the same funding amount for SJI as appropriated for FY2001--$6.835 million. (47) ) The conference report stated that the $3.0 million appropriated for the SJI is "available for fiscal year 2002 only" and that the conferees did not recommendcontinued federal support for the Institute beyond FY2002. "The termination of funding for this program," the reportexplained, "does not necessarily mean thedissolution of the Institute. The conferees encourage the Institute to solicit private donations and resources fromState and local agencies." Office of the U.S. Trade Representative (USTR). USTR is located in the Executive Office of the President.USTR is the chief trade negotiator for the United States and is responsible for developing and coordinating U.S.international trade and direct investment policies. The President's FY2002 request was $30.1 million, just slightly above the amount ($29.5 million) approved byCongress for FY2001. The House and Senateapproved funding the President's full FY2002 request, which was enacted by Congress. U.S. International Trade Commission (ITC). ITC is an independent, quasi-judicial agency that advises thePresident and Congress on the impact of U.S. foreign economic policies on U.S. industries and is charged withimplementing various U.S. trade remedy laws. Itssix commissioners are appointed by the President for 9-year terms. Its budget request was submitted to Congressby the President without revision. For FY2002, ITC requested $51.4 million, a $3.4 million increase over the FY2001 level ($48.1 million). The House and Senateapproved funding the full FY2002 request,and Congress passed that amount. U.S. Commission on International Religious Freedom. The Commission, established in P.L. 105-292 , is anindependent agency charged with the annual and ongoing review and reporting of the facts and circumstances ofviolations of religious freedom. Theappropriation for FY1999 was $3 million. No additional funds were appropriated for FY2000 or FY2001. The BushAdministration requested $3 million for thisCommission for FY2002 with which the House agreed. The Senate bill provided no funding. Congress passed therequested amount of $3 million. Related Legislation H.R. 518 (Regula et al.) Amends the Trade Act of 1974 to revise the injury threshold the International Trade Commission must considerto determine the risk of increased imports to adomestic industry producing like or directly competitive articles in escape clause (Sec.201) actions. IntroducedFebruary 7, 2001; referred to House Ways andMeans Committee. H.R. 1988 (English et al.); S. 979 (Durbin et al.) Amends the Trade Act of 1974 to revise the injury threshold the International Trade Commission must considerto determine the risk of increased imports to adomestic industry producing like or directly competitive articles in escape clause (Sec.201) actions. Amends theTariff Act of 1930 to revise various factors thatthe Commission must consider in making material injury determinations in countervailing duty and antidumpingduty proceedings. H.R. 1988 introduced May 24, 2001; referred to House Ways and Means Committee. S. 979 introduced May 26, 2001;referred to Senate Finance Committee. S. 422 (Wellstone); H.R. 837 (Oberstar et al.) Directs the International Trade Commission to consider U.S. produced taconite pellets to be like or directlycompetitive with semifinished steel slab for purposesof: (1) Section 201 injury determinations, and (2) antidumping or countervailing duty determinations. S. 422 introduced March 1, 2001; referred toSenate Finance Committee. H.R. 837 introduced March 7, 2001; referred to House Ways and MeansCommittee. S. 187 (Snowe et al.); H.R. 1782 (Manzullo et al.) Small Business Export Enhancement Act of 2001 - Amends the Trade Act of 1974 to establish in the Office ofthe United States Trade Representative (USTR) theposition of Assistant USTR for Small Business to promote the trade interests of small businesses, remove foreigntrade barriers that impede small businessexporters, and enforce existing trade agreements beneficial to small businesses. S. 187 introduced January25, 2001; referred to the Senate Budgetand Senate Governmental Affairs Committee. H.R. 1782 introduced May 9, 2001; referred to HouseCommittee on Ways and Means. S. 714 (Snowe et al.) Expresses the sense of Congress that the U.S. Trade Representative should pursue the establishment of a smallbusiness advocate at the World Trade Organization(WTO) to safeguard the interests of small firms and represent those interests in trade negotiations involving theWTO. Introduced April 5, 2001; referred to theSenate Finance Committee. S. 19 (Daschle et al.) Protecting Civil Rights for All Americans Act. Would authorize $400 million for the Legal ServicesCorporation for FY2002. Introduced January 22, 2001;referred to S. Judiciary Committee. Additional Reading CRS Report 95-178. Legal Services Corporation; Basic Facts and Current Status , by [author name scrubbed]. Appendix. Appropriations Funding for Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies, FY2001 andFY2002 Title I. Department of Justice Title II. Department of Commerce and Related Agencies Title III. Judiciary Title IV. Department of State and International Broadcasting Title V. Other Related Agencies Title VI. General Provisions Title VII. Rescissions Title IX. Total Appropriation Funding, Titles I-IX, FY2001 and FY2002 Sources: U.S. House of Representatives. Committee on Appropriation. Note: Details may not add to totals due to rounding. Figures are for direct appropriations only; in some cases, agencies supplement these amount with offsettingfee collections, including collections carried over from previous years. These agencies include: Immigration andNaturalization Service, Patent and TrademarkOffice, Small Business Administration, Federal Communications Commission, Federal Trade Commission, and theSecurities and Exchange Commission. Information on such fees are contained in the background and issues sections of this report. a The Patent and Trademark Office (PTO) is fully funded by user fees. The fees collected, but not obligated during the current year, are available for obligation inthe following fiscal year. b As of October 1, 1999 both USIA and ACDA were consolidated into the Department of State. International Broadcasting remains an independent agency. c In addition to appropriations, State has authority to spend certain collected fees from machine readable visas, expedited export fees, etc. For FY2000 this amountequals $322.1 million; the estimated amount for such fees for FY2001 is $390.9 million. The President's FY2002request includes use of $414.2 million incollected fees. d For FY2001, Congress approved $229.5 million in overall funding resources for the FCC, consisting of a direct appropriation of $29.3 million and $200.1million in offsetting regulatory fee collections. The President requested $248.5 million in overall FY2002 fundingresources, consisting of a direct appropriationof $29.8 million and $218.8 million in offsetting fee collections. The House approved $238.6 million in overallFY2002 funding resources, consisting of a directappropriation of $19.8 million and $218.8 million in offsetting collections. The Senate approved $252.5 millionin overall FY2002 funding resources, consistingof a direct appropriation of $33.8 million and $218.8 million in offsetting collections. Congress enacted $245.1million for FY2002, consisting of a directappropriation of $26.3 million and $218.8 million in offsetting collections. e The FTC is fully funded by the collection of pre-merger filing fees. f The SEC is fully funded by transaction fees and securities registration fees. g Under the terms of its enabling legislation, the State Justice Institute is authorized to present its budget request directly to Congress. For FY2002, the Instituterequested $15 million--as distinguished from the President's request, which called for $6.8 million. h Other includes agencies receiving appropriations of less than $1.8 million in FY1999 and FY2000. These agencies include Commission for the Preservation ofAmerican Heritage Abroad; Commission on Security and Cooperation in Europe; Commission on ElectronicCommerce; the Marine Mammal Commission, theCommission on Ocean Policy, and the Congressional/Executive Commission on China.

This report tracks action by the 107th Congress on FY2002 appropriations for the Departments of Commerce, Justice, and State, the Judiciary, and other relatedagencies (often referred to as CJS appropriations). President Bush's FY2002 budget request totals $40.81 billion,about one billion dollars (2.6%) above theFY2001 total. The House agreed to $41.46 billion, the committee total, and passed the bill ( H.R. 2500 ) onJuly 18th. The Senate AppropriationsCommittee recommended a total of $41.53 billion ( S. 1215 ). The Senate passed its version of H.R. 2500 , as amended, on September 13,2001. Conferees met on November 8th and agreed to a total funding level of $39.3 billion. Confereesalso agreed to file the conference report on the followingday. Continuing resolutions have kept the government running into the new fiscal year: H.J.Res. 65 ( P.L.107-44 ) expired October 16th, H.J.Res. 68 ( P.L. 107-48 ) expired October 23rd, H.J.Res. 69 ( P.L. 107-53 ) expiredOctober 31st, H.J.Res. 70 ( P.L. 107-58 )expired November 16th, and H.J.Res. 74 expired December 7, 2001. The bill was signed into law ( P.L.107-77 ) on November 28th, prior to the expiration of thecontinuing resolution. Department of Justice. The FY2002 request was $21.11 billion, less than 1% above the FY2001 enacted level. Key issues included: addressing terrorism,reducing gun crimes through enforcement of existing laws; combating drug abuse; funding for community policingprograms under the Office of JusticePrograms; restructuring the Immigration and Naturalization Service, reducing pending immigration andnaturalization caseloads, and increasing borderenforcement. Congress passed $21.7 billion for this agency. Department of Commerce. The FY2002 request was $5.1 billion, 2% below the FY2001 funding level. Congress debated such issues as funding for: NOAA'snext-generation weather satellites, local economic development activities, and the Technology OpportunitiesProgram (TOP) grants. The enacted FY2002 budgetfor Commerce totals $5.4 billion. Department of State . The FY2002 request was $7.5 billion, nearly 14% above the FY2001 enacted level. The Department had three top priorities in its FY2002budget: hiring about 600 new staff in Foreign and Civil Service, as well as security professionals; continuingincreases in embassy security; and more thandoubling its current funds for information technology improvements worldwide. Congress passed $7.4 billion. The Judiciary . The FY2002 request was $4.9 billion, 14.5% above the FY2001 funding level. The Judiciary request included funds for cost-of-living salaryincreases for federal judges and justices, as well as $117 million for the first major renovation of the Supreme Courtbuilding since its opening in 1935. Congressapproved $4.61 billion, an 8.4% increase over FY2001, including $37.5 million for the Supreme Court building and$8.6 million for a cost-of-living payadjustment for judges and justices.

The Pastore Rule Under the rules and precedents of the Senate, debate on the Senate floor is largely unrestricted. In most cases, once recognized, a Senator may speak without time limit and on almost any subject of his or her choosing. Paragraph 1(b) of Senate Rule XIX, however—commonly known as the Pastore rule, after its author, former Rhode Island Senator John Pastore—requires Senate floor debate to be germane during specific periods of a Senate work day. The rule states (b) At the conclusion of the morning hour at the beginning of a new legislative day or after the unfinished business or any pending business has first been laid before the Senate on any calendar day, and until after the duration of three hours of actual session after such business is laid down except as determined to the contrary by unanimous consent or on motion without debate, all debate shall be germane and confined to the specific question then pending before the Senate. In practice, the Pastore rule rarely affects what Senators speak about on the floor. The presiding officer typically will not on his or her own initiative instruct a speaking Senator to keep remarks germane. Instead, another Senator would have to raise a point of order against the speech. For reasons discussed below, these points of order are infrequent in modern practice. The rule, nevertheless, remains in force, and this report discusses related precedents and past instances of enforcement on the floor. Pursuant to the Pastore rule, all floor debate must be germane and confined to the specific question then pending before the Senate for the first three hours after (1) the conclusion of the Morning Hour occurring at the beginning of a new legislative day (in the rare event the Senate should hold a Morning Hour) or (2) after the unfinished business or any pending business has been laid before the Senate on any calendar day. The practical effect of the rule is to require Senators to remain on topic in debate for the first three hours after the Senate begins considering its daily business. Three hours of actual Senate session must occur to fulfill the requirements of the Pastore rule. Recess periods taken prior to three hours of session elapsing are not counted toward the three-hour total. Once three hours of actual session have passed, Senators are no longer bound by the germaneness requirement. The Pastore rule's germaneness requirement can be waived by unanimous consent (UC) or by nondebatable motion. Any Senator may request unanimous consent to speak out of order on a nongermane subject while the Pastore rule is in effect. A Senator might also request UC to waive the rule on behalf of another Senator or request a blanket waiver to allow all Senators to speak on nongermane topics. The Senate also frequently by UC establishes periods for "morning business," when Senators can speak on topics of their choice for a period of time set by the UC agreement (typically 10 minutes). UC agreements can also structure the extent to which the Pastore rule will apply at any given time. For example, in one instance, by UC, the period during which the rule's germaneness of debate requirement applied was expanded from three hours to five hours. Enforcing Germaneness in Debate A Senator may be called to order during the three-hour window described in the Pastore rule if his or her remarks are not germane to the specific question then pending before the Senate. Chamber precedents permit the presiding officer to call a Senator to order under the rule on his or her own initiative. The precedents point out, however, that the rule is "not necessarily self-enforcing," and as such, the rule is customarily enforced only by a call to order from the floor. In current practice, the germaneness requirements of the Pastore rule are rarely formally invoked on the Senate floor. If a Senator calls another Senator to order under the rule, enforcement first results in a reminder from the presiding officer that debate must be germane to the question then pending before the Senate. A Senator does not need to be recognized by the chair in order to call another Senator to order under the rule. The raising of this point of order does not remove speaking privileges from the offending Senator, although the Senator must suspend his or her remarks until the chair rules on the question. Depending on the ruling of the presiding officer on such a point of order, a Senator may either continue speaking (if his or her debate is ruled germane), pivot to a germane topic (if ruled not germane), or yield the floor (if ruled not germane). History of the Pastore Rule Before paragraph 1(b) of Rule XIX was adopted in 1964, there was no rule or precedent requiring the germaneness of debate during regular Senate proceedings. What would become the present-day Pastore rule first appeared with the introduction of S.Res. 89 on February 19, 1963, by Senator Pastore for himself and 30 bipartisan cosponsors. The resolution, as submitted, included two key differences from what would ultimately be adopted: It called for four hours of germane debate (as opposed to three) and placed a germaneness requirement not just on debate but also on motions (except "amendments offered to the bill or resolution under consideration when reasonably related thereto"). During hearings held on S. Res. 89 by the Senate Rules Committee's Subcommittee on Standing Rules of the Senate, Senator Pastore expressed his view that the Senate was unable to sufficiently focus on debating important legislation I am very much disturbed by such a situation as where a member is charged with the responsibility of managing a bill on the floor. He must be there prepared to assume his responsibilities and present the matter to the Senate. But time and time again what has been our experience?... You sit there as the manager of the bill, and someone comes down on the floor with an extraneous speech, which he has a perfect right to deliver, because he must meet a press deadline. All I am saying here is that a period of 4 hours from the time we conclude the morning hour, for those 4 hours we devote ourselves to the business at hand. Senator Pastore argued that his proposed rule would increase attendance and allow the Senate to proceed in a more orderly fashion First of all, [the proposed rule] would accomplish this: The Members of the Senate, knowing that the business at hand will be discussed, will be more readily available on a quorum call. It will not have to take 20 minutes or a half hour, and then probably get into live quorums. Members would know that for 4 hours, if they arrange their program, they would sit on the floor, that they could discuss the business at hand and conclude it, without interruption. I think it would help immensely. The Senate Committee on Rules and Administration adopted three amendments to S.Res. 89 before reporting the resolution, as amended, favorably to the Senate on September 19, 1963. The first amendment inserted language clarifying that the germaneness period in the rule would occur just once each calendar day. By its second amendment, the committee struck language from the resolution that allowed only the introduction of amendments "reasonably related" to the pending business. This second amendment was adopted for the express purpose of continuing "the present practice of permitting legislative riders." The third and final amendment reported by the committee changed the germaneness period from four hours to three hours, as found in the current rule. Regarding this final change, the committee report accompanying S.Res. 89 noted In the opinion of the committee, it is important that there be flexibility of debate in the Senate, but the committee believes it equally important that there be some reasonable limitation on that flexibility. The adjustment in Senate procedure involved in Senate Resolution 89 would probably result in a larger participation in meaningful and coordinated debate on vital and major bills on the floor of the Senate. At the same time adoption of the measure reserves ample opportunity for the discussion of general topics. S.Res.89 was considered on the Senate floor over parts of eight days in January 1964. As noted above, at the time, no Senate rule or precedent existed that required a germaneness of debate during regular Senate session. As such, the resolution was viewed by some as proposing a significant change in chamber procedures. Minority Leader Everett Dirksen of Illinois, among others, took to the floor to express strong opposition to the idea of placing any limits on the rights of Senators in debate Let us make no mistake about it. If I read my history correctly, past and present, whenever the freedom of a parliamentary body is impaired, we go down the road to tyranny. What was the first thing that Hitler did to Germany? He demeaned the Bundestag. He made them, its members, appear to be like a group of urchins who had no sense. What was the first thing Mussolini did to Italy? The Chamber of Deputies was made to appear as if it had no sense, no value, no usefulness. Show me any place in the world where a parliamentary body and its freedoms are impaired and I will show an instance of freedom in retreat. On January 10, 1964, the Senate adopted a floor amendment to S.Res. 89 proposed by Senator Pastore himself to strike the resolution's germaneness requirement for motions and apply the requirement to debate only, as in the present rule. All other floor amendments to the resolution were rejected. Ultimately, S.Res. 89 was agreed to, as amended, in the Senate by a 57-25 vote on January 23, 1964. The resolution, as passed, inserted the new germaneness requirement into Senate Rule VIII, relating to the Order of Business. The language would later be recodified without change as paragraph 1(b) of Rule XIX with the adoption of S.Res. 274 on November 14, 1979, in the 96 th Congress (1979-1980). Use of the Pastore Rule As noted above, the Pastore rule has seen sporadic enforcement since its adoption. In the decade or so after the rule's adoption, Senator Robert Byrd of West Virginia, who served as majority whip and later as both majority and minority leader, was a frequent observer of the rule, often seeking clarification on whether the Senate was operating within the three hours of required germaneness or seeking unanimous consent to waive the rule to allow him or others to speak without restriction. On occasion, Senators have taken to the floor to proclaim an expectation of adherence to the Pastore rule for the duration of the consideration of a particular bill. Despite, or perhaps because of, the sporadic observance of the Pastore rule, a report issued in 1983 by the Study Group on Senate Practices and Procedures—an entity established to examine Senate procedures and recommend improvements to them—recommended that the Senate "require debate to be relevant at all times during the discussion of legislation and executive business." On May 9, 1983, the Senate Committee on Rules and Administration held a hearing on the study group report. The Senate took no further action on the proposal. CRS identified several instances between 1964 and 2017 where a point of order or parliamentary inquiry was raised under the Pastore rule in relation to germaneness of debate or when other actions were taken that appeared to be efforts to enforce the rule, such as objections to unanimous consent requests to waive the germaneness requirement. The earliest instance identified occurred in 1968, four years after adoption of the rule; the most recent identified occurred in 2003. These instances are identified in Table 1 and were identified through full-text electronic searches of the Congressional Record in LIS.gov and the HeinOnline database as well as through a review of relevant chapters in Floyd M. Riddick and Alan S. Frumin, Riddick's Senate Procedure: Precedents and Practices, 101 st Cong., 1 st sess., S.Doc. 101-28 (Washington, DC: GPO, 1992). Not included in the table are simple references to the Pastore rule in debate (e.g., parliamentary inquiries as to whether the Senate was operating under the rule), instances when the requirement for germane debate would expire for the day, or Senators noting that they or others were in violation of the rule without an accompanying point of order made against the Senator holding the floor.

Paragraph 1(b) of Senate Rule XIX—commonly known as the Pastore rule, after its author, former Rhode Island Senator John Pastore—requires Senate floor debate to be germane during specific periods of a Senate work day. The rule has been enforced sporadically since its adoption in 1964. In current practice, the germaneness requirements of the Pastore rule are rarely formally invoked on the Senate floor. Pursuant to the rule, all floor debate must be germane and confined to the specific question then pending before the Senate for the first three hours after (1) the conclusion of the Morning Hour occurring at the beginning of a new legislative day (in the rare event the Senate should hold a Morning Hour) or (2) after the unfinished business or any pending business has been laid before the Senate on any calendar day. The Pastore rule's germaneness requirement can be waived by unanimous consent or by nondebatable motion. A Senator may be called to order during the three-hour window described in the Pastore rule by the presiding officer or by another Senator if his or her remarks are not germane to the specific question then before the Senate. If a Senator calls another Senator to order under the rule, enforcement first results in a reminder from the presiding officer that debate must be germane to the question then pending before the Senate. The raising of a point of order does not remove speaking privileges from the offending Senator. Depending on the ruling of the presiding officer on such a point of order, a Senator may either continue speaking (if ruled germane), pivot to a germane topic (if ruled not germane), or yield the floor (if ruled not germane).

Introduction The Environmental Protection Agency (EPA) Spill Prevention, Control, and Countermeasure (SPCC) regulations include requirements for facilities subject to the regulations to prevent, prepare, and respond to oil discharges that may reach U.S. navigable waters or adjoining shorelines. Requirements include secondary containment (e.g., dikes or berms) for certain storage units and the need for a licensed Professional Engineer to certify a facility's SPCC plan. In recent years, the SPCC program has received considerable interest from Congress. Most of this interest has involved the SPCC program's applicability to farms. Because farms may store oil onsite for agricultural equipment use, they may be subject to the SPCC regulations. Recent legislation would alter the scope and applicability of SPCC regulations to exclude farms that store and use oil below specific volumes or thresholds. The first section of this report provides background information on EPA's SPCC regulations. The second section identifies legislation in the 113 th Congress that has addressed and would address provisions in the SPCC regulations. SPCC Regulations—Background Statutory Authority The Federal Water Pollution Control Act Amendments of 1970 included a provision directing the President to promulgate oil spill prevention and response regulations. Two years later, Congress amended that provision with the enactment of the Federal Water Pollution Control Act Amendments of 1972 —commonly referred to as the Clean Water Act (CWA). The relevant provision from the 1972 Clean Water Act (CWA) remains the same today and reads as follows: Consistent with the National Contingency Plan … the President shall issue regulations consistent with maritime safety and with marine and navigation laws … establishing procedures, methods, and equipment and other requirements for equipment to prevent discharges of oil and hazardous substances from vessels and from onshore facilities and offshore facilities, and to contain such discharges. In 1970, President Nixon reorganized the executive branch delegations of various presidential authorities. Presidential authority for regulations addressing oil discharges from nontransportation-related onshore and offshore facilities was delegated to the Environmental Protection Agency (EPA). Subsequent executive orders and interagency agreements altered the implementation authority framework. As of a 1994 interagency agreement, EPA has jurisdiction over nontransportation-related onshore and offshore facilities, which includes facilities located "landward of the coast line." Pursuant to the 1994 agreement, the Department of Transportation has jurisdiction over vessels, transportation-related onshore facilities, deepwater ports, and transportation-related facilities located landward of coast line, and the Department of the Interior has jurisdiction over offshore facilities, including associated pipelines, located seaward of the coast line. A detailed discussion of these jurisdictions is beyond the scope of this report. In addition, Section 311(o) of the CWA states, "Nothing in this section [CWA Section 311] shall be construed as preempting any State or political subdivision thereof from imposing any requirement or liability with respect to the discharge of oil or hazardous substance into any waters within such State, or with respect to removal activities related to such discharge." Many states have their own oil spill programs. A discussion of these state programs is beyond the scope of this report. Existing Regulations EPA issued the first SPCC regulations in 1973, and they became effective January 10, 1974. Following the enactment of the Oil Pollution Act of 1990, EPA proposed changes and clarifications to the SPCC regulations that were made final in July 2002 and effective in August 2002. Subsequently, 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, an EPA rulemaking extended this compliance date for farms to May 10, 2013. On March 26, 2013, Congress enacted P.L. 113-6 , which prohibited EPA from using appropriations to enforce SPCC provisions at farms for 180 days after enactment (i.e., through September 22, 2013). Notwithstanding these recent deadlines, the July 2002 final rule and subsequent revisions did not alter the requirement for owners or operators of facilities, including farms, to maintain and to continue implementing their SPCC plans in accordance with the SPCC regulations that have been in effect since 1974. Applicability The EPA SPCC plan requirements apply to nontransportation-related facilities that produce, store, use, or consume oil or oil products; and that could reasonably be expected to discharge oil into or upon navigable waters of the United States or adjoining shorelines. Facilities, including farms, are subject to the rule if they meet at least one of the following capacity thresholds: 1. an aboveground aggregate oil storage capacity greater than 1,320 gallons, or 2. a completely buried oil storage capacity greater than 42,000 gallons. In 2009, EPA estimated that approximately 640,000 facilities are subject to the SPCC requirements. Figure 1 illustrates the breakdown of these facilities by industry categories. Facilities involved in oil and gas production represent the largest percentage (29%) of facilities subject to the SPCC regulations, with farms coming in a close second (27%). EPA estimated that the SPCC requirements apply to approximately 152,000 farms, which represents approximately 8% of all farms nationwide. Requirements Most regulated facilities must prepare and implement, but are not required to submit, SPCC plans. (However, a subset of high-risk facilities must submit Facility Response Plans to EPA.) Among other obligations, SPCC regulations require secondary containment (e.g., dikes or berms) for certain oil-storage units. In addition, SPCC plans must be certified by a licensed Professional Engineer unless a facility owner/operator meets the conditions that allow for self-certification. In general, facilities with a clean spill history that store 10,000 gallons or less, in aggregate, can choose to self-certify their SPCC plans. EPA estimated that approximately 145,000 farms—about 95% of all farms subject to SPCC requirements—have an oil storage capacity less than or equal to 10,000 gallons, and would thus be able to self-certify their plans. Enforcement According to a 2012 EPA Inspector General report, EPA regional offices inspected approximately 3,700 facilities for compliance with SPCC requirements; approximately 55% of the facilities were deemed to be out of compliance for various reasons. Unlike EPA regulations promulgated under some other statutes, SPCC regulations have not been delegated to states for implementation or enforcement. Section 311 of the CWA does not provide authority to delegate SPCC authority to the states. Therefore, enforcement of the program is performed by the EPA regional offices. As noted earlier, many states have their own regulatory programs that address oil storage units. Legislation in the 113th Congress SPCC regulations have garnered considerable attention in the 113 th Congress. Some Members have offered multiple proposals that would alter the scope and applicability of the regulations. Table 1 identifies legislation that has been enacted, passed either the Senate or the House, or been reported out of committee. All of these bills involve the treatment of farms in the SPCC regulations. In general, the bills would alter the aggregate oil storage threshold that triggers compliance with SPCC regulations. Such an approach has some precedent in federal environmental law and policy. For example, Congress modified the scope of the liability scheme of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA; P.L. 96-510 ) on several occasions to exclude particular parties. These parties may have contributed only very small quantities of waste (or less toxic wastes) to a contaminated site, or conducted activities, such as recycling, that Congress did not wish to discourage. Legislation identified in Table 1 similarly would exclude farms from SPCC requirements based on oil storage capacity. The argument in support of such legislation often concerns the financial impact of the SPCC regulations. For example, a 2012 House report stated that the "mandated infrastructure improvements—along with the necessary inspection and certification by a specially licensed Professional Engineer will cost many farmers tens of thousands of dollars." However, others have argued that EPA has considered the costs and benefits of its SPCC regulations during multiple rulemaking processes.

In 1970, Congress enacted legislation directing the President to promulgate oil spill prevention and response regulations. This presidential authority was delegated to the Environmental Protection Agency (EPA) by President Nixon in 1970. In 1973, EPA issued Spill Prevention, Control, and Countermeasure (SPCC) regulations that require applicable facilities to prevent, prepare, and respond to oil discharges that may reach navigable waters of the United States or adjoining shorelines. Among other obligations, SPCC regulations require secondary containment (e.g., dikes or berms) for certain oil-storage units. In addition, SPCC plans must generally be certified by a licensed Professional Engineer. In recent years, the SPCC regulations have received considerable interest from Congress. Most of this interest has involved the applicability of SPCC regulations to farms, which account for approximately 25% of SPCC regulated entities, second only to oil and gas production facilities. Farms may be subject to the SPCC regulations, because they store oil onsite for agricultural equipment use. In 2002, EPA issued a final rule that made changes and clarifications to its SPCC regulations. The compliance date for this rule was extended on multiple occasions. For most types of facilities subject to SPCC requirements, the compliance deadline was November 10, 2011. However, EPA extended this compliance date for farms to May 10, 2013. Related to this deadline, Congress enacted P.L. 113-6 on March 26, 2013, which included a provision prohibiting EPA from using appropriations to enforce SPCC provisions at farms for 180 days after enactment (i.e., through September 22, 2013). In addition, some Members in the 113th Congress have offered multiple proposals that include provisions that would alter the scope and applicability of the SPCC regulations. All of these provisions would revise the applicability to farms under the SPCC regulations. In general, the bills' provisions would alter the aggregate oil storage threshold that triggers compliance with SPCC regulations. Such provisions are included in the House version of the farm bill (H.R. 2642) and the Senate version of the Water Resources Development Act of 2013 (S. 601). The argument in support of recent SPCC legislation often concerns the financial impact of the SPCC regulations to farms. For example, a 2012 House report stated that the "mandated infrastructure improvements—along with the necessary inspection and certification by a specially licensed Professional Engineer will cost many farmers tens of thousands of dollars." However, others have argued that EPA has considered the costs and benefits of its SPCC regulations during multiple rulemaking processes.

Introduction Chad, a landlocked country roughly twice the size of Texas, has had a turbulent history of religious and ethnic conflict and intermittent civil war in its 50 years of independence. Bordered by Libya to the north and Sudan to the east, it is considered to be among the world's 10 poorest countries, according to the United Nations Development Program (UNDP) Human Development Index. Persistent conflict has hindered the country's development, despite significant oil reserves. One in five children dies before the age of five, and the country's child malnutrition and mortality rates are rising. Chad also is perceived to be one of the world's most corrupt countries. Foreign Policy magazine ranked Chad second on its 2009 Failed States Index, up from a ranking of fourth in 2008. Political Instability Chad gained its independence from France in 1960. Composed of approximately 200 ethnic groups, Chad's diverse population is broadly divided into predominantly Muslim Arab and non-Arab ethnic groups located in the north and east, and indigenous groups practicing Christian and various traditional beliefs located in the south. The country has been politically unstable since 1965, when a tax protest led northern, Islamic tribes to rebel against the southern, Christian-dominated government. Years of authoritarian rule and civil war followed. Chad's current president, Idriss Déby Itno, a former general, took power by force when he launched a rebellion against then-President Hissein Habré from Sudan in 1989. Déby's forces, reportedly aided by Libya and Sudan and largely unopposed by French troops stationed in Chad, seized the capital, N'Djamena, in 1990, forcing Habré into exile. Habré has been sentenced to death in absentia in Chad and is slated to be tried in Senegal for human rights abuses committed under his regime. Déby, named president in 1991, pledged to create a democratic multi-party political system. Chad's first multi-party presidential elections were held in 1996; legislative elections followed in 1997. Déby won reelection in 2001, and his party won a majority of seats in the 2002 legislative elections. According to the State Department's annual human rights reports, Chad's elections have all been marked by irregularities and fraud. The opposition boycotted the most recent elections, held in 2006 after the constitution was amended to allow Déby a third term. The government initiated a dialogue with the political opposition in 2007; in August, the parties agreed to postpone the 2007 legislative elections to 2009 to allow a new census and the creation of a more representative electoral commission. A new commission was formed in July 2009 and a new census published in October. Legislative and local elections are currently scheduled to be held on November 10, 2010. The opposition now holds half the seats on the electoral commission, but questions remain regarding the body's ability to conduct a credible election. Presidential elections are anticipated in April 2011. The political dialogue between the government and the opposition has been strained, particularly following the February 2008 arrest of several opposition and civic leaders. Seven months later, in September, a commission of inquiry officially concluded that one of those arrested, Ibni Oumar Mahamat Saleh, a respected former minister who was the spokesman of the opposition coalition, Coordination des partis politiques pour la défense de la Constitution (CPDC), had died in custody. European donors nevertheless have continued to support the 2007 political accord and are expected to provide technical support for the upcoming elections. After Déby's appointment of a new prime minister in April 2008 and the subsequent appointment of four former political opponents to high-level cabinet positions, some observers suggested that the president might be moving toward more inclusive governance. Others viewed the appointments as an attempt to divide the opposition, which, with over 100 political parties, remains weak and fragmented. Déby appointed another prime minister in March 2010 after the previous office holder resigned amid allegations of corruption. He also appointed 18 new ministers, including nine women. The Armed Opposition Some opponents of President Déby have used his perceived lack of democratic legitimacy to foment armed efforts to oust the long-serving Chadian leader. Déby has faced several coup attempts, and diverse armed political and regional factions have been active since the 1990s. Shifting rebel alliances, which include defectors from the government, gained strength in the east in 2005-2006 and launched a series of raids on strategic government positions. Inter-communal violence not directly related to the rebellion also increased. Rebels attacked the capital, N'Djamena, in April 2006, and Déby declared a state of emergency in November of that year. Critics charge that he used the state of emergency, which prohibited public rallies and campaigning and allowed the government to censor the press, to silence opposition. In October 2007, the government signed a peace agreement in Sirte, Libya, with the main rebel groups based in eastern Chad. However, the agreement was not fully implemented, and the fighting has continued, sporadically. The Sirte agreement was the latest in a series of failed negotiations to bring a peaceful settlement to the rebellion. In early February 2008, rebel forces advanced on the capital in an unsuccessful attempt to force Déby from power. Hundreds of civilians were reportedly killed in the fighting, and an estimated 30,000 Chadians fled across the Cameroon border, 10 miles from N'Djamena. Rebel groups later attacked and briefly held several towns in eastern Chad in June 2008. In August 2008, a Chadian court issued death sentences in absentia for several of the rebel leaders. Chad's main armed groups, who have been divided by ethnic and personal rivalries, agreed in November 2008 to unify their efforts to overthrow Déby. Their new rebel alliance, Union des forces de la résistance (UFR), which is composed of diverse rebel groups and led by Timane Erdimi, a nephew of President Déby, launched an advance in the east in early May 2009. They were repelled by Chadian forces, who pursued them into Sudanese territory. Like former rebel groupings, the UFR has been prone to infighting and faces a strategic disadvantage against the Chadian military's air power. After one of its factions clashed with Chadian forces in late April 2010, reportedly sustaining significant loses according to some media reports, a new rebel grouping, Alliance national pour le changement démocratique (ANCD) emerged, headed by former UFR leader Mahamat Nouri. Ethnic Conflict Chad's ethnic rivalries are complex and fluid, and they have been compounded by conflict over land and limited natural resources such as water. An increasing focus of concern has become ethnic violence between President Déby's ethnic group, the Zaghawa, and the Tama (both of which are non-Arab, predominantly Muslim, ethnic groups in eastern Chad). Conflict within the factionalized Zaghawa tribe also is a factor. The Zaghawa, who compose less than 3% of Chad's population, control a majority of government positions. Both Chad and the Darfur region of Sudan are home to the Zaghawa, elements of which have played key roles in Chad's complex inter-ethnic alliances and conflicts and in the Darfur conflict. Regional Conflict The ongoing conflict in Darfur has displaced more than 2 million Sudanese and led large numbers to flee into Chad, generating a humanitarian crisis in the east. Refugee inflows from Darfur and the CAR have also increased social tensions linked to increasing demand on local resources, despite the provision of aid to the refugees by international aid groups. The Darfur conflict has also heightened political instability in Chad. Chad and Sudan have periodically accused one another of sponsoring rebellions against their respective governments, despite a May 2007 peace agreement signed by the two countries in Saudi Arabia and another agreement signed in Dakar, Senegal, in March 2008. A 2009 report by a U.N. panel of experts supported such allegations. Chad has alleged that Sudan backed the February 2008 assault on N'Djamena and the June advance in the east. Reports suggest that one of the Darfur rebel groups may have provided support to the Chadian army during the attack. Sudan in turn accused Chad of backing Sudanese rebels involved in a May 2008 attack on Omdurman, a suburb of the Sudanese capitol. The two governments renewed diplomatic ties in November 2008 after mediation by Libya, but allegations of support for each other's respective rebel groups continued. Another agreement was signed in Qatar in early May 2009, only days before a May 2009 advance by Chadian rebels, purportedly staged from Sudan. In response, the Chadian Air Force conducted strikes against rebels within Sudanese territory, which the Sudanese government in turn characterized as "acts of war." Sudan threatened to shoot down Chadian planes if they crossed into Sudanese airspace again. Reports suggest that the Sudanese Air Force bombed a refugee camp in Chad on May 28, 2009 as it pursued Sudanese rebels in the area; Chad conducted further bombing raids in Darfur in July. The United Nations, the African Union, the United States and other international actors pressed the two governments to resume talks, and diplomatic communication resumed in October. On January 15, 2010, the governments of Chad and Sudan signed an agreement in N'Djamena to deny rebel groups the use of their territories and to normalize relations. Following the agreement, President Déby visited Khartoum and appointed a Chadian ambassador to the Sudanese capital in February. The U.N. Secretary-General reports that relations between the governments have "improved significantly." Trade across the Chad-Sudan border at three crossing points that had been closed since 2003 resumed in April 2010. Chad and Sudan have deployed a cross-border force of 3,000 to counter criminal activity and movement by armed opposition groups; the force rotates the location of its joint command between Abeche, Chad, and El Geneina, Sudan. In May, Chadian immigration officials forced Darfur rebel leader Khalil Ibrahim, whose forces have used Chad as a base of operations, to return to Libya when he tried to enter the country through N'Djamena's airport. The Chadian response may indicate an effort to abide by the January agreement. The United Nations currently maintains refugee camps in eastern Chad and the south. In addition to the estimated 268,000 Sudanese refugees, the camps currently provide shelter for some 75,000 CAR refugees and over 170,000 displaced Chadians. Other displaced Chadians live outside the camps among host communities. The camps, and the host communities, struggle with shortages of water and firewood. As a result of a 2007 incident involving French aid workers, Chad reportedly tightened its oversight of non-governmental organizations working in the country and increased travel restrictions. Aid agencies contend that these restrictions have impeded the delivery of humanitarian assistance, as has general insecurity in the east. The region where the camps are located has been plagued by violence and criminal activity, and several international humanitarian aid compounds have been looted and aid workers threatened or attacked. Several international aid staff have been kidnapped. Criminal acts against humanitarian staff rose in 2009 to the highest levels seen during the conflict. Some groups have, at times, had to temporarily suspend operations; others have removed international staff from the region. The director of the humanitarian group Save the Children, a French national, was killed in May 2008, and the director of the Chadian government's refugee agency was killed in an ambush in October 2009. President Déby opposed U.N. proposals to allow a peacekeeping force to secure the borders with Sudan and the CAR until June 2007, when the European Union offered to provide an EU peacekeeping force (primarily from France, which has been Chad's strongest military ally and one of its largest bilateral donors). His position on an international force subsequently changed. Multinational Peacekeeping Operations On September 25, 2007, the U.N. Security Council passed Resolution 1778, approving the establishment of a multinational presence in Chad and the Central African Republic to (1) contribute to the protection of refugees, internally displaced persons (IDPs) and civilians in danger; (2) facilitate the provision of humanitarian assistance; and (3) create favorable conditions for reconstruction and economic and social development. Based on Resolution 1778, two multinational bodies, a U.N. mission and a European Union (EU) military force, were created under a single mandate. The U.N. presence, known as the U.N. Mission in the Central African Republic and Chad (MINURCAT), has been responsible for police training and reinforcing judicial infrastructure, and is working with Chadian forces to reinforce safety for refugees, IDPs, and aid agencies in the camps in the east. The EU force, known as EUFOR Chad/CAR (hereafter EUFOR), was tasked with providing general security for civilians and facilitating the free movement of humanitarian assistance and personnel. EURFOR was authorized to use military force, whereas MINURCAT was not under its original mandate. Some humanitarian officials expressed concern that having two separate international missions in Chad complicated perceptions among the local population, as well as among the region's various rebel groups. At least one rebel group warned that it considered the EU force a "foreign occupation army," because it included French forces, whom the rebels did not see as neutral. The U.N. Security Council extended MINURCAT's mandate through Resolutions 1834 in September 2008 and 1861 in January 2009, but logistical challenges impeded the deployment of the mission. EUFOR's deployment of 3,700 troops, originally expected in November 2007, was also delayed by funding and logistical challenges. The rebel advance on N'Djamena in early February 2008 further delayed deployment, but the force reached initial operating capacity, with almost half its full force deployed, in March, and as of December 2008, 3,300 troops had deployed. Déby criticized EUFOR in June for not engaging the rebel advance, and some aid groups charge that the force failed to protect them. Under Security Council Resolution 1834, the Council expressed its intention for EUFOR to transfer authority to a U.N. military component. That transfer took place on March 15, 2009, when EUFOR's mandate expired. Under the new mandate authorized in Resolution 1861, MINURCAT was authorized to have a military component of 5,200 troops. Anticipating continued deployment delays, due in part to a shortage of helicopter assets, the U.N. Secretary-General revised the target to 4,700 soldiers by the end of 2009; but by the year's end, less than 3,000 troops had deployed. The deployment tempo subsequently increased, and as of late April 2010, the force stood at 3,442 troops. The shortage of troops and equipment over the course of MINURCAT's deployment has impeded its ability to protect IDPs, refugees, and humanitarian staff, although human rights groups argue that the force has played a critical role in security and human rights protection. In January 2010, the Chadian government issued a formal request to the United Nations not to renew the mandate of MINURCAT's military component, which was due to expire in March 2010. Chadian officials based their request on the slow pace of MINURCAT's troop deployment and planned infrastructure projects, the allegedly improved security situation in the east, and a decision by the government to take primary responsibility for the protection of civilians. During ensuing consultations between the government and the U.N. Secretariat, the Chadian government revised its request, and in March the Security Council extended the force's mandate until May 15, 2010, under Security Council Resolution 1913. In May, the Security Council further extended the mandate through the end of May with Resolution 1922. On May 25, the Security Council approved Resolution 1923, which extended MINURCAT's mandate until December 31, 2010, but ordered the gradual reduction of its military component and transfer of civilian protection responsibilities to the Chadian security forces. Specifically outlined in the resolution is the Chadian government's commitment to assuming full responsibility for (1) ensuring the security and protection of civilians in danger, particularly refugees and IDPs; (2) facilitating the delivery of humanitarian aid and the free movement of humanitarian personnel by improving security in eastern Chad; and (3) ensuring the security and freedom of movement of MINURCAT staff and United Nations and associated personnel. A joint Chad-U.N. Working Group is expected to monitor the situation on the ground and assess progress by the government of Chad on several additional benchmarks related to civilian protection, including voluntary return and resettlement of IDPs, demilitarization of the camps, and improved domestic law enforcement capacity. Resolution 1923 commits MINURCAT to reducing its military component to 2,200 personnel by July 15, 2010, and to commence the withdrawal of remaining troops on October 15, to be completed by December 31, 2010. Until the force begins its final withdrawal in October, MINURCAT retains authorization to provide security for U.N. personnel, facilities and equipment and to, when necessary, conduct medical evacuations of U.N. personnel or extractions of U.N. personnel and humanitarian staff in danger. The resolution does permit MINURCAT, "acting within its means and capabilities and where possible in consultation with the Government of Chad," to "respond to imminent threats of violence to civilians in the immediate vicinity." Some humanitarian officials have expressed concern that the withdrawal of the U.N. force could create a "security vacuum" in the east. Among MINURCAT's responsibilities has been the training a special local police unit, the Détachement intégré de sécurité (DIS), to assume security responsibilities for the refugee camps. This directive was extended in Resolution 1923 for the duration of MINURCAT's mandate. The first group of trained officers deployed in October 2008, and as of April 2010, approximately 800 had deployed. According to a report by the U.N. Secretary-General, refugee leaders have indicated that DIS patrols have contributed to an increased sense of security and allowed greater freedom of movement in and around the camps. DIS also provides security escorts for humanitarian aid staff. The United Nations manages a trust fund, to which the United States contributes, to support DIS. MINURCAT, along with other U.N. agencies and international donors, has also supported a range of programs to build judicial and corrections capacity in eastern Chad. U.N. reports point to a shortage of financial and human resources in the Chadian justice sector, a lack of basic court and prison infrastructure, among other shortcomings, in the east, which in turn hampers efforts to address the high level of criminality in the region. Child Soldiers According to U.N. estimates, as many as 10,000 children may have been used in combat and non-combat roles by Chadian rebel groups, paramilitary forces, and the national army in recent years. The government denied the existence of child soldiers in its army until May 2007, when it signed an agreement with UNICEF to end recruitment of persons under age 18 and begin demobilization of those already within the security forces. According to Human Rights Watch, the government continued to limit access by international child protection officials to military installations to verify demobilization after the agreement. In October 2008, however, the U.N. Secretary-General noted that the government had begun an effort to sensitize military commanders and personnel on the issue of child recruitment, and in April 2010, the Secretary-General reported that the Chadian government has "shown a consistent policy position and commitment against child recruitment," and has granted the U.N. and the International Committee for the Red Cross access to military camps to verify the presence of children and facilitate their release from the army. According to his 2010 report, however, the army and other armed groups continued to recruit and use children in 2009; MINURCAT documented 26 cases of child recruitment by the army during the year, and 19 children remained associated with the army as of April 2010. The United Nations continues to express concern regarding the recruitment of children by rebel groups, including armed Sudanese groups such as the Justice and Equality Movement (JEM), and local militias in and around refugee camps. Agriculture, Oil, and the Economy Eighty percent of Chad's population is dependent on subsistence farming and herding, and droughts and locust infestations continue to affect food production and contribute to a high malnutrition rate. Inadequate rains and locust attacks in 2009 contributed to a 34% drop in cereal production, and experts report that the harvest was the worst in five years. Almost half of the country's population is classified as food insecure, and over 16% of children under the age of five currently suffer from acute malnutrition, according to the United Nations. Almost 40% of Chadian children are chronically malnourished, In the western Sahelian region of the country, the World Food Program warns that an estimated 60% of households, some 1.6 million people, are currently food insecure. Humanitarian organizations warn that the situation is critical, particularly for remote areas in the west with little international aid presence, and that the upcoming rainy season is likely to further complicate aid delivery. Lake Chad, the region's largest source of fresh water and once the size of Maryland, has shrunk by 90% in the past 50 years and is expected to dry up completely in the next 20 years, according to the U.N. Food and Agriculture Organization. The U.N. estimates that some 30 million people in Chad, Cameroon, Niger, and Nigeria rely on the lake for their livelihoods, and increasing competition over water resources may lead to further conflict and a possible humanitarian disaster. Experts suggest that major changes to water management must be made. When Chad began oil production in 2003, Chadians had high expectations that oil revenues might serve as a catalyst for economic growth and development. Corruption, weak state institutions, and chronic instability, however, threaten to undermine advances made in the oil sector and could deter future high capital investment projects elsewhere in the region. The Chad-Cameroon Petroleum Development and Pipeline Project is a $4 billion initiative, initially backed by the World Bank, to develop oil fields in southern Chad and export the oil through a 665-mile pipeline to offshore oil loading facilities on Cameroon's coast. World Bank funding for the project was conditional on a portion of the oil revenues being held in a British bank account from which Chad could only draw for poverty-reduction projects. In 2006, the World Bank suspended loans to Chad and froze oil revenue accounts after the government changed its revenue management law and significantly increased military spending. Chad and the World Bank reached a compromise in June 2006, allowing the government to use 30% (formerly 20%) of oil revenues for its own purposes, while the remainder would continue to be used for development programs. In September 2008, the World Bank announced its withdrawal from the project, citing Chad's failure to comply with key aspects of the agreement. Chad has reimbursed the Bank for its loans. The World Bank continues to engage the Chadian government, however, and reopened its office in N'Djamena in January 2009 on a reduced basis. The International Monetary Fund began a new Staff-Monitored Program with the government focusing on fiscal discipline in April 2009, and during a June 2010 Article IV Consultation praised Chadian authorities for their national poverty reduction strategy. Under pressure from the IMF, the government has revised its 2010 budget, although some analysts suggest that it remains based on overly ambitious revenue projections. Declines in both oil and agricultural production have contributed to a decline in real GDP growth, from an estimated 7.9% in 2005 to -2% in 2009. Oil production, estimated at 144,000 barrels/day in 2007, has decreased in recent years, falling by 6% from 2008 to 2009, when production averaged less than 120,000 barrels/day. In April 2010, Chad became a candidate country within the Extractive Industries Transparency Initiative (EITI), a global effort to improve transparency in the oil, gas, and mining sector. Under EITI, candidate countries like Chad commit to publishing all payments of taxes, royalties, and fees they receive from their extractive sector, and extractive companies operating in those countries publish what they pay to the government. Chad has until April 2012 to comply with these standards to be then certified as EITI Compliant. U.S.-Chadian Relations Diplomatic relations between the United States and Chad are cordial. The United States is currently the largest donor of humanitarian assistance to Chad and has provided almost $700 million in humanitarian aid to the country since the onset of the humanitarian crisis in FY2004. This includes over $190 million in FY2009 and an estimated $93 million in humanitarian assistance to date in FY2010. The Obama Administration has requested $7.38 million in non-emergency assistance to Chad for FY2011, the majority of which would be directed toward health and agricultural development programs. The U.S. State Department's foreign policy priorities in Chad include (1) encouraging regional stability and resolving the refugee crisis and humanitarian emergency; (2) promoting democracy and reducing the potential for intolerance and extremism; and (3) strengthening Chadian counterterrorism capabilities. FY2009 Economic Support Fund resources (ESF) continue to be used to support preparations for anticipated 2010-2011 elections. The U.S. Agency for International Development's Mission in Chad closed in 1995 due to declining funding and security concerns; USAID assistance, much of which consists of monetized food aid to support health and agriculture initiatives, is overseen by its West Africa regional office in Ghana, and USAID Food for Peace (FFP) assistance is managed by the regional FFP Office in Senegal. As a result of the USAID mission's departure, the U.S. Embassy in N'Djamena operates a Democracy and Development section to monitor and administer foreign aid programs and identify alternative sources of U.S. government funding to meet humanitarian and development needs. The country's Peace Corps program closed in 2006. The State Department has issued a travel warning to U.S. citizens advising extreme caution for those traveling in the country and recommending that they avoid all travel to eastern Chad and the area bordering the CAR due to an escalated level of violent crime, including carjacking, kidnapping, and murder. USAID has expressed concern that the withdrawal of MINURCAT may jeopardize relief efforts and the safety of aid workers in the east. Security Assistance and Counterterrorism Cooperation Despite concerns regarding poor governance, the U.S. government has considered the Déby government an ally in the effort to counter violent extremism. In 2004, elements of the Salafist Group for Preaching and Combat (GSPC) (now known as Al Qaeda in the Islamic Maghreb or AQIM) entered Chadian territory and met resistance from Chadian forces. Today, reports suggest that AQIM may be associated with smuggling in Chad, but it has yet to conduct attacks in the country. Chad is a part of the Trans-Saharan Counter-Terrorism Partnership (TSCTP), a U.S. interagency effort that aims to increase regional government's border protection and regional counter-terrorism capabilities, as well as "to promote democratic governance as a means to discredit terrorist ideology." The country has received over $8 million in military-to-military assistance since FY2005 through the Department of Defense's (DOD) Operation Enduring Freedom – Trans-Sahara (OEF-TS), the military support component of TSCTP, and in FY2007 Chad received $1.7 million in DOD global train and equip, or "Section 1206", assistance to improve its tactical airlift capacity. Other TSCTP-related security assistance has been funded through the State Department's Peacekeeping Operations (PKO); Foreign Military Financing (FMF); and Nonproliferation, Antiterrorism, Demining and Related Programs (NADR) accounts. The United States also provides bilateral security assistance to Chad to professionalize and modernize its security forces, although annual appropriations legislation in recent years has limited some of this training to that which promotes "democratic values" and respect for human rights. The State Department's FY2011 budget request includes $380,000 in International Military Education and Training (IMET) and $400,000 in Foreign Military Financing (FMF), part of which would be used to continue training for the Chadian police force. The State Department argues that its emphasis on such assistance to Chadian forces "is crucial because of their historic involvement in unconstitutional regime change, suppression of dissent, and lack of adherence to standards of good governance." The U.S. government discontinued demining assistance in 2007 due to "institutional weakness and a lack of political will to address the problem." Landmines continue to kill hundreds of Chadians annually, and approximately 80% of the victims are children, according to U.N. Mine Action. Congressional Action Congress has expressed concern for the violence and humanitarian crisis in the region through various legislation and hearings. In addition to numerous hearings on the conflict in neighboring Darfur and resulting refugee situation, hearings addressing Chad include a March 2007 hearing on Chad and the CAR and a November 2009 hearing on U.S. counterterrorism priorities in the Sahel, both by the Senate Foreign Relations Africa Subcommittee. Prospects Persistent, if sporadic, conflict with rebels in the north and east; continuing refugee inflows and instability from the conflict in Darfur; and ethnic tensions all contribute to concerns for Chad's future. Under President Déby, Chad has made limited progress toward democracy. Human rights conditions remain notably poor, in part due to the actions of state security forces; freedom of expression is often curtailed; and many critics and observers see the government as lacking in transparency, accountability, and functional capacities. Reports of human right abuses, including sexual violence against women, are particularly high in the country's conflict zones. Some suggest that prospective increases in state oil revenues and multifaceted international assistance to bolster political and economic reform could engender more participatory governance and economic growth in Chad. However, international donor frustration, as evidenced by the World Bank's withdrawal from the pipeline project, may affect future assistance and investment. If the Déby government does not embrace political and economic reforms, popular resentment against those in power may perpetuate the current instability.

As the Sahel region weathers another year of drought and poor harvests, the political and security situation in Chad remains volatile, compounding a worsening humanitarian situation in which some 2 million Chadians are at risk of hunger. In the western Sahelian region of the country, the World Food Program warns that an estimated 60% of households, some 1.6 million people, are currently food insecure. Aid organizations warn that the situation is critical, particularly for remote areas in the west with little international aid presence, and that the upcoming rainy season is likely to further complicate the delivery of assistance. In the east, ethnic clashes, banditry, and fighting between government forces and rebel groups, both Chadian and Sudanese, have contributed to a fragile security situation. The instability has forced over 200,000 Chadians from their homes in recent years. In addition to the internal displacement, over 340,000 refugees from the Central African Republic (CAR) and Sudan's Darfur region have fled violence in their own countries and now live in refugee camps in east and southern Chad, according to the United Nations High Commissioner for Refugees (UNHCR). With Chadian security forces stretched thin, the threat of bandit attacks on the camps and on aid workers has escalated. The instability has also impacted some 700,000 Chadians whose communities have been disrupted by fighting and strained by the presence of the displaced. The United Nations and the European Union (EU) began deployment of a multidimensional presence in Chad and the CAR in late 2007 to improve regional security so as to facilitate the safe and sustainable return of refugees and displaced persons. The U.N. mission, known as MINURCAT, assumed peacekeeping operations from the EU force in March 2009, but it faced logistical challenges in its deployment and a shortage of troops. In January 2010, the Chadian government requested that the mission's mandate not be renewed. After consultations between the government and the U.N. Secretariat, the U.N. Security Council resolved in May 2010 to begin a reduction in MINURCAT's presence in Chad, to be completed by December 31, 2010. The Chadian government has expressed a commitment to protecting civilians and humanitarian workers, but some observers question the capacity of its security forces to fulfill this mandate. A January 2010 agreement between the governments of Chad and Sudan has led to improved relations between the two countries, and they have allegedly ceased to provide support for each other's respective rebel groups. Legislative elections, postponed since 2007, are scheduled for November 10, 2010, and presidential elections are to be held in April 2011. This report will be updated as events warrant.

Introduction Beginning with adoption of the Improving America's Schools Act (IASA) in 1994 ( P.L. 103-382 ), and continuing through enactment of the Education Flexibility Partnership Act of 1999 ( P.L. 106-25 ) and the No Child Left Behind Act of 2001 (NCLB, P.L. 107-110 ), the authorization of special forms of flexibility for grantees has been a major focus of most federal K-12 education assistance legislation. In particular, the NCLB extended some flexibility authorities that had been established earlier, and initiated new ones. This report provides an overview of these authorizations for state and local flexibility in administering federal K-12 education programs. It will be updated infrequently to incorporate major new developments in the implementation of these authorities or new information on their use and impact. "Flexibility" is defined for purposes of this report as authority under which federal program requirements, particularly restrictions on the use of federal aid, may be waived by, or on behalf of, state or local aid recipients meeting certain eligibility criteria. In some cases, this flexibility is granted in return for meeting specified accountability requirements related to program outcomes. Such flexibility includes provisions for consolidation of multiple programs, or for transfer of funds among programs, so that federal assistance may be used for a broader range of activities or purposes than ordinarily would be allowed, as well as the authority to waive specified types of program requirements. In general, these flexibility authorities apply to federal aid programs authorized by the Elementary and Secondary Education Act (ESEA), the largest source of federal aid to K-12 education. In contrast, almost none of these authorities involve the second largest source of federal aid, the Individuals with Disabilities Education Act (IDEA). For this reason, as well as the existence of a number of issues regarding requirements and flexibility that are specific to that program, the IDEA will not be discussed further in this report, and discussions of federal involvement in K-12 education in this report should be understood to apply to the ESEA and to exclude the IDEA. ESEA programs are authorized through FY2008, and the 110 th Congress is considering whether to amend and extend the ESEA. This report will be updated regularly to reflect major legislative developments and available information. This report begins with a review of the general nature of federal K-12 education program requirements, including their sources, purposes, and the concerns expressed by some grantees about them. This is followed by a description of the current special flexibility authorities under which many of these requirements may be waived or otherwise made inapplicable, along with an analysis of issues specific to individual authorities. This section is divided between authorities initially adopted before the NCLB and authorities initiated in that legislation. The report concludes with an analysis of selected cross-cutting issues regarding these special flexibility authorities overall. General Nature of Federal K-12 Program Accountability Requirements We begin this report with a brief review of the general types of program requirements applicable to ESEA and related federal K-12 programs. Many of these requirements may be waived, in part or in whole, for some or all states and LEAs under the special flexibility authorities discussed later. We refer to these as "accountability requirements" because they are intended to provide accountability by assuring that federal funds are used in ways that are consistent with the purposes of the federal statutes authorizing the programs. Typically, federal programs of aid to elementary and secondary education exhibit a mix of relatively specific and explicit requirements in such areas as eligibility of pupils to be served, allocation of funds, or (increasingly) outcomes, along with substantial flexibility in many other important respects, such as instructional methods or grade levels to be served. Federal K-12 education programs generally focus upon one or more of the following: (a) student populations with special educational needs, such as disadvantaged or limited English proficient (LEP) pupils; (b) a specific aspect of instructional services, such as educational technology or recruitment and professional development of teachers; (c) development, demonstration, and dissemination of innovative instructional approaches, such as charter schools or demonstrations of comprehensive school reform; or (d) a specific subject area, such as instruction in math or science. Most of the larger federal programs, such as ESEA Title I-A, fall into category (a), while several programs of small to moderate size are in categories (b)-(d). Almost all federal K-12 education programs, in all of categories (a)-(d), are sometimes referred to as "categorical" programs, because their focus is targeted or limited in one or more important respects. In contrast, one ESEA program—the Innovative Programs authority of ESEA Title V-A—provides support for such a broad range of activities that it is generally considered to be a "block grant" at the other end of the intergovernmental assistance spectrum. Sources and Forms of Accountability Requirements There are three general sources of federal requirements or related guidance to state and local recipients of federal aid. An important distinction (at least in theory) can be made between "requirements" and "non-regulatory policy guidance." "Requirements" must be met by grantees, as a matter of law. While they are always derived ultimately from the authorizing statute for a program, or other federal statutes or judicial actions, they may appear in the form of regulations, in addition to statutory text. Program regulations, which are published initially in the Federal Register , then later integrated into annual updates of the Code of Federal Regulations , supplement statutory language primarily with respect to a limited number of major issues or topics which are complex, where U.S. Department of Education (ED) officials place high priority on grantees taking certain specific actions, and where statutory text is deemed by ED to provide insufficient guidance. One example would be ESEA Title I-A requirements regarding curriculum content and pupil performance standards and assessments. In a few cases, authorizing statutes explicitly provide that ED is to publish regulations addressing certain issues, although ED may issue regulations with respect to any aid program which it administers. Non-Regulatory Policy Guidance In contrast, "non-regulatory policy guidance" is also published by ED for many programs. Such "non-regulatory policy guidance" may be published in the form of extensive questions and answers regarding several aspects of a program, or more specific "Dear Colleague" policy letters from the U.S. Secretary of Education to chief state school officers or other state and local officials. As this designation implies, grantees are not legally required to follow this "guidance," which is generally intended to answer relatively specific questions regarding topics such as uses of funds or selection of pupils to be served. Nevertheless, the typical perception and use of "non-regulatory" guidance may be more complex than this stated intent would imply. Grantees may assume that they will face fewer effective challenges to their use of federal aid if they follow such "non-regulatory" guidance, and may often treat such guidance as if it were equivalent to regulations, even if they are not explicitly "required" to do so. A somewhat analogous form of "non-regulatory guidance" may be found in the "competitive priorities" established by ED for competitive or discretionary (i.e., not formula) grant programs. In these grant competitions, ED typically sets certain priorities for applications which would receive preferential consideration in the awarding of grants. For example, a priority might be established for applicants which would use funds to provide services in schools with high percentages of pupils from low-income families. While applicants are not required to meet these priorities, it is obvious that they will have a much greater likelihood of receiving support if they do so. These priorities are not "regulations"; they are typically published only in the announcement of the grant competition in the Federal Register . Over the past several years, especially since adoption of the IASA in 1994, there has been a trend toward the publication of regulations which are less voluminous and address fewer aspects of many federal elementary and secondary education programs than in the past. For several programs, ED has published no regulations at all, implying that guidance in the statute is sufficient and requires no supplementation by regulations, although in most cases some form of "non-regulatory policy guidance" is provided. For ESEA programs where some regulations are still published, such as ESEA Title I-A, the regulations are generally somewhat briefer, and often address fewer issues, than was the case prior to the early 1990s. For example, proposed program regulations for ESEA Title I-A after enactment of the IASA in 1994 followed a rather "minimalist" approach in that they addressed relatively few program issues, primarily standards, assessments, and accountability; schoolwide programs; participation of children who attend private schools; and allocation of funds within states and LEAs. More recently, following enactment of the NCLB of 2001, ED embraced a similar strategy. With respect to ESEA Title I-A, for example, it has thus far published regulations on a relatively limited number of topics. The Department has stated: The Secretary intends to regulate only if absolutely necessary; for example, if the statute requires regulations or if regulations are necessary to provide flexibility or clarification for State and local educational agencies. Rather than regulating extensively, the Secretary intends to issue nonregulatory guidance addressing particular legal and policy issues under the Title I programs. This guidance will inform schools, parents, school districts, States, and other affected parties about the flexibility that exists under the statute, including different approaches they may take to carry out the statute's requirements. Purposes of Accountability Requirements Federal K-12 education assistance program requirements include a broad range of activities, services, or outcomes that SEAs, LEAs, and other aid grantees are expected to provide, perform, or achieve with, or in return for, federal grants, in order to show evidence that program goals are being met—that is, to establish accountability for appropriate use of federal aid funds. Federal elementary and secondary education program requirements are usually intended to provide one or more of three basic types of accountability for use of funds consistent with the purposes of statutes that authorize the programs. These intended forms of accountability include target accountability : assuring that funds are focused on eligible localities, pupils, and purposes, usually for the ultimate purpose of promoting more equal educational opportunities; outcome accountability : assuring that funds are used effectively to improve student achievement and enhance the quality of K-12 instruction—either in specific subject areas or for particular types of pupils, or overall; and fiscal accountability : assuring financial integrity and providing that federal aid funds constitute a net increase in resources for the eligible pupils or purposes, rather than potentially replacing (supplanting) state or local funds that would otherwise be available for the same purpose. Specific types of requirements intended to support one or more of these purposes include requirements to target resources on specific "high need" pupil groups or types of localities or schools, limit the authorized uses of funds to certain high priority types of services, conduct audits or assure that federal funds supplement, and do not supplant, state and local resources, enhance parental participation or provide for equitable treatment of pupils attending non-public schools, implement minimum qualifications for school staff, report to parents and the general public of information on program activities and their impact, meet certain student achievement and other outcome goals, and evaluate the effectiveness of federally supported instructional services. Grantees that violate any of these types of regulations implicitly face the possibility of having to repay funds to the federal government, or being prohibited from receiving further grants, although such sanctions are rarely invoked. In some cases, authorizing statutes explicitly provide for more limited, specific sanctions for states or LEAs which fail to meet some requirements. In addition to such program-specific requirements, a number of general requirements apply to all recipients of federal education assistance under any program. Many of these are published in the Education Department General Administrative Regulations (EDGAR), as well as the financial management requirements contained in relevant "circulars" published by the Office of Management and Budget (OMB). Other regulations that are generally applicable to ED programs include those related to civil rights and privacy of student records. LEAs that participate in the federal child nutrition programs administered by the Department of Agriculture must comply with a variety of related requirements—for example, they must provide free or reduced-price school lunches to pupils from low-income families. Finally, federal regulations published by federal agencies other than ED may be applicable to LEAs and schools in their role as employers (e.g., regulations related to workplace safety, environmental protection, access for persons with disabilities, labor relations, etc.). However, state and local educational agencies are given wide latitude in other aspects of the use of federal education assistance. Such matters as grade levels, subject areas, and instructional techniques have typically been left almost totally to state and local discretion. If a requirement is applied to instructional methods under the ESEA and related programs—for example, the requirement applied to selected programs under the NCLB that instructional methods be "scientifically based"—it is almost always broad, leaving great scope to state and LEA discretion. Concerns About Selected Federal Program Requirements Program-Specific Requirements Complaints about ESEA and related program-specific requirements by proponents of greater flexibility are often focused on a selected range of particular types of requirements. Program-specific requirements that are often the focus of criticism include (a) explicit or implicit prohibitions against commingling (mixing) of funds under different federal programs with each other or with revenues from state and local programs; (b) restrictions on the use of resources purchased with federal program funds for activities other than those conducted under that program; (c) requirements that aid be targeted on certain types of pupils or schools; (d) eligibility thresholds for special forms of flexibility (e.g., ESEA Title I-A schoolwide programs); and (e) ESEA Title I-A outcome accountability requirements under the NCLB. In general, prohibitions against commingling of funds—(a) above—arise from efforts to establish fiscal accountability. Restrictions on the use of instructional resources to the pupils eligible to be served (b), as well as requirements to target aid on pupils and schools with the greatest incidence of poverty (c), are intended to focus limited federal funds on those with the greatest needs. The eligibility thresholds for certain forms of flexibility, such as ESEA Title I-A schoolwide programs (d), have rationales that are discussed later in this report. Finally, the new or expanded outcome accountability requirements (e), which are a key element of the NCLB, are intended to increase the effectiveness of federally supported education services and to help shift the focus away from other types of requirements toward improved outcomes. Nevertheless, from a state or local perspective, these requirements may sometimes seem to be unnecessarily inflexible, especially in relatively low enrollment LEAs that may receive small grants under each of a variety of federal programs. While the categorical approach of most of the larger ED programs directs aid at high-need pupil groups like disadvantaged and LEP pupils, such an approach may have undesirable (and unintended) effects. Some of these effects may include fragmentation of services to children, with challenges for coordinating special program instruction with their regular instruction; inefficient use of resources, that may remain unused when not required by the special needs pupils; treatment of partial needs when a more coherent focus on the whole child and her/his entire instructional program might be more effective, especially with respect to children with multiple special needs; or instruction of pupils in separate settings, whether or not this is explicitly required by the legislation, when this might not be the most effective instructional technique. The traditional federal categorical approach has been criticized as leading to fragmented instruction, and focusing more on targeting resources and inputs than on improving achievement and other outcomes for pupils. Difficulties may also arise from efforts to implement federal programs in states and LEAs with widely varying educational policies and demographic conditions. Some of these problems with categorical program structures and associated requirements may be based on misunderstandings of the requirements of federal statutes and regulations, or overly strict state or local interpretations of these. Others may be the inevitable effects of efforts to ensure that federal aid is focused on pupils most in need, coupled with grantee efforts to avoid problems with federal program monitoring and audits. Whatever their basis, and regardless of whether regulatory burdens have been reduced in recent years, state and local education officials sometimes complain about these, and other, constraints on the use of federal funds. Cross-Cutting Requirements A 1998 Government Accountability Office (GAO) report, based on a survey of staff in a nationally representative sample of LEAs, concluded that in addition to the program-specific varieties of requirements discussed above, LEA staff frequently expressed concern about certain cross-cutting requirements applicable to recipients of federal K-12 education assistance. First, LEA staff complained that it was difficult to obtain current, accurate, and concise information on the wide variety of federal requirements with which they must comply, and that existing sources of technical assistance on these matters were inadequate. The authors of the GAO report concluded that LEA staff often respond to such information gaps in a cautious manner that unnecessarily limits their flexibility—namely, that they often are unaware of, or do not exercise, degrees of flexibility that are available to them. Second, staff in most of the surveyed LEAs expressed concern about the costs of meeting their administrative responsibilities under federal education programs, including the preparation of required reports. Finally, LEA staff indicated that meeting required timelines and other "logistical and management challenges" associated with federal K-12 education programs presented substantial difficulties. Special Flexibility Authorities Initiated Before Enactment of the No Child Left Behind Act of 2001 Prior to enactment of the NCLB, several authorities were adopted that allow the waiver of many types of federal K-12 program requirements by, or on behalf of, SEAs and LEAs. Each of them is limited with respect to either the types of requirements that can be waived, the specific ESEA and other programs affected, or the number of states or LEAs that are currently eligible. Some require waivers to be requested on a case-by-case basis, while others offer "blanket" waiver authority. Further, some of these authorities require some form of additional accountability in terms of pupil outcomes, while others do not. In addition to two general types of waiver authorities, Ed-Flex and Secretarial case-by-case waivers, a high degree of school-level flexibility in the use of funds under several federal programs is provided under the schoolwide program authority under ESEA Title I-A, an exceptional range of flexibility in the use of funds is provided under the Innovative Programs block grant, and an authority for flexibility in small, rural LEAs was initially adopted as part of FY2001 appropriations legislation for ED. These five types of special flexibility, which were initiated before adoption of the NCLB of 2001, are described below. The succeeding section of this report discusses forms of flexibility initiated in the NCLB. Note that in cases where a previously initiated special flexibility authority was significantly amended by the NCLB, the current (amended) version is described below. Ed-Flex Under Ed-Flex, ED is authorized to delegate to SEAs in participating states authority to waive, on behalf of LEAs or schools in that state, a range of requirements under selected ESEA programs. Ed-Flex authority was initially authorized for up to six states in the 1994 Goals 2000: Educate America Act ( P.L. 103-227 ). It was expanded to a maximum of 12 states in FY1996 appropriations legislation for ED ( P.L. 104-134 ). It was modified, and the cap on the number of participating states was removed, by the Education Flexibility Partnership Act of 1999 ( P.L. 106-25 ). Technical amendments were made to P.L. 106-25 by the NCLB of 2001. Finally, legislation was enacted in 2006 to extend Ed-Flex authority until the next reauthorization of ESEA Title I, Part A ( P.L. 109-211 ). The original Ed-Flex authority was granted to 12 states, and Ed-Flex status under P.L. 106-25 was obtained by 10 states: Colorado, Delaware, Kansas, Maryland, Massachusetts, North Carolina, Oregon, Pennsylvania, Texas, and Vermont. No state has been granted Ed-Flex authority since January 2002, and the authority under P.L. 106-25 for ED to grant Ed-Flex authority to additional states expired at the end of FY2004. Ed-Flex authority is granted to a state for up to five years, and the recent congressional action ( P.L. 109-211 ) addressed the prospect that authority would otherwise have expired for all of the 10 Ed-Flex states by January 2007. Under P.L. 109-211 , all states with Ed-Flex authority as of September 30, 2004 (this includes all 10 states that received Ed-Flex authority under P.L. 106-25 ) retain that authority until enactment of legislation to reauthorize ESEA Title I, Part A. However, P.L. 109-211 does not provide authority for ED to extend Ed-Flex authority beyond these 10 states. States participating in Ed-Flex must commit themselves to waiving state, as well as federal, requirements affecting LEAs and schools in the state. States must also meet the requirements for adoption of curriculum content and pupil performance standards, and assessments linked to these, under ESEA Title I-A. States are to monitor the performance of LEAs and schools for which federal or state requirements are waived, and submit annual reports on these outcomes to ED. The federal programs to which Ed-Flex applies are ESEA Titles: I-A (Education for the Disadvantaged), I-B-3 (William F. Goodling Even Start Family Literacy Programs), I-C (Education of Migratory Children), I-D (Prevention and Intervention Programs for Children and Youth Who Are Neglected, Delinquent, or At-Risk), I-F (Comprehensive School Reform Program), II-A (Teacher and Principal Training and Recruiting Fund), II-D-1 (State and Local Technology Grants), III-B-4 (Emergency Immigrant Education Act) if Title III-A is not in effect, IV-A-1 (Safe and Drug-Free Schools and Communities), and V-A (Innovative Programs), plus the Carl D. Perkins Vocational and Applied Technology Education Act (Perkins Act). These include most of the ESEA programs that are administered via SEAs and that allocate funds by formula ("state-administered programs"). ED has also interpreted the Ed-Flex statutes as providing authority for participating states to waive some cross-cutting administrative requirements of the General Education Provisions Act (GEPA) and the Education Department General Administrative Regulations (EDGAR) that apply to the above programs. Several types of requirements may not be waived by Ed-Flex states, unless the underlying purposes of the statutory requirements are otherwise met to the satisfaction of the Secretary of Education. These include requirements related to: fiscal accountability (e.g., requirements for LEAs or SEAs to maintain their level of spending for specified educational services; to use federal aid only to supplement, and not supplant, state and local funds for specified purposes; or to provide state and local funding that is comparable in all schools of an LEA), equitable participation by private school pupils and teachers, parental involvement in program activities and services, allocation of funds to states or LEAs, certain ESEA Title I-A school selection requirements, and applicable civil rights requirements. With the exception of statewide "blanket" waivers, LEAs or schools requesting waivers in Ed-Flex states must apply to their SEA, providing information analogous to that required for LEAs requesting waivers directly from ED (see the following section of this report). SEAs may not waive requirements applicable to the SEAs themselves. In all cases, SEAs must be satisfied that "the underlying purposes of the statutory requirements of each program or Act for which a waiver is granted continue to be met." Local waivers are to be terminated if student performance has been inadequate to justify their continuation, or performance has declined for two consecutive years (unless there are exceptional or uncontrollable circumstances). States are required to submit annual reports on waivers they have granted; beginning with the second annual report, information on the effects of waivers on student performance must be included. Further, beginning two years after enactment of P.L. 106-25 (i.e., April 29, 2001), and annually thereafter, ED is to make these state reports available to Congress and the public, and to submit to Congress a report summarizing the state reports, including information on the effects of Ed-Flex waivers on state reform efforts and pupil performance. While such a report was prepared in 2001, it contained no information on the use of Ed-Flex authority by states or programmatic impacts, in part because it focused only on activities under the new authority in P.L. 106-25 , overlooking ongoing activities in the 12 states that had received Ed-Flex authority earlier (even in cases where the same states were involved). Apparently, no subsequent annual reports have been published by ED. Secretarial Case-by-Case Waiver Authorities A second type of federal education program flexibility authority consists of waivers that may be granted to SEAs or LEAs on a case-by-case basis, directly by the U.S. Secretary of Education. While there are at least three such authorities affecting K-12 education programs, the following discussion will focus primarily on the most broadly applicable and frequently utilized of these, which is in Title IX, Part D of the ESEA, as amended by the NCLB. Under this provision, the Secretary of Education is authorized to waive most requirements associated with any program authorized by the ESEA. The waivers must be specifically requested by SEAs, LEAs, Indian tribes or schools (via their LEAs). Waiver requests must include "specific, measurable educational goals ... and the methods to be used to measure annually such progress for meeting such goals and outcomes" for pupils eligible to be served by the relevant programs. With respect to types of requirements that may not be waived, the provisions regarding case-by-case waivers are generally the same as those for the Ed-Flex program. However, there are four types of requirements that may not be waived under the ESEA Title IX-D case-by-case waiver authority in addition to those that cannot be waived under Ed-Flex: (1) prohibitions against consideration of ESEA funds in state school finance programs; (2) prohibitions against use of funds for religious worship or instruction; (3) certain prohibitions against use of funds for sex education (under ESEA Title IX, Section 9526); and (4) the eligibility requirements for charter schools under the Public Charter Schools program (ESEA Title V-B-1). ESEA Title IX-D also has no authority analogous to the Ed-Flex provision that requirements generally not subject to waiver may be waived if the underlying purposes of the statutory requirements continue to be met to the satisfaction of the Secretary. Waivers granted under the authority of ESEA Title IX-D may not exceed four years, except that they may be extended if the Secretary determines that the waiver has contributed to improved student achievement and is in the public interest. In contrast, waivers are to be terminated if the Secretary determines that pupil performance or other outcomes are inadequate to justify continuation of the waivers, or if the waiver is no longer necessary. The Secretary of Education is required to publish a notice of the decision to grant a waiver in the Federal Register . According to a memorandum from ED's Office of the Inspector General dated April 5, 2007, the Department had failed for several years to publish such notices. Apparently in response to a draft version of this memorandum, ED did publish (on March 12, 2007) a list of waivers granted under ESEA Title IX-D between the enactment of the No Child Left Behind Act of 2001 ( P.L. 107-110 ) in January 2002 and December 31, 2006. A total of 197 waivers were granted during this period; however, relatively few of these were substantive. Almost two-thirds (128 or 65%) were waivers of a 5.0% administrative cost limitation on formula grants for Indian education under ESEA Title VII, Part A, and another 24 were extensions of the period during which funds under an ESEA program could be obligated. Of the remaining 45 waivers granted, 18 were related to the impact of Hurricanes Katrina and Rita in 2005, 5 were granted to allow states to participate in a pilot program using growth models of adequate yearly progress, 6 allowed LEAs to provide supplemental educational services (SES) rather than school choice in schools during their first year of improvement under the ESEA Title I-A accountability provisions, and 6 allowed LEAs identified as needing improvement to act as SES providers. The remaining 10 "general programmatic waivers" allowed exceptions to the ESEA Title I-A requirements for fiscal accountability (comparability) or school selection and allocation, or to a limitation on authority to consolidate state administrative funds under a variety of ESEA programs. The Secretary is also required under ESEA Title IX-D to submit to Congress annual reports on the effects and effectiveness of waivers that have been granted, beginning in FY2002. It is not clear that any such reports have been submitted. Charter Schools Waiver Authority A second case-by-case waiver authority affects only schools participating in the Public Charter Schools (PCS) program authorized by ESEA Title V, Part B. A distinctive aspect of the PCS waiver authority (ESEA Section 5204(e)) is that none of the limitations on types of requirements that may be waived, as listed above for Ed-Flex and the ESEA Title IX-D waiver authority, apply to the PCS waiver authority. Under the PCS authority, any requirement over which the Secretary of Education "exercises administrative authority" may be waived, with the sole exception of requirements associated with the definition of a charter school eligible to receive PCS funds (ESEA Section 5210(1)). However, this authority has been used infrequently and for relatively limited purposes, and therefore will not be discussed further in this report. School-Level Flexibility: ESEA Title I-A Schoolwide Programs Schools participating in the ESEA Title I-A program at which 40% or more of the pupils are from low-income families are eligible to conduct schoolwide programs with a broad and substantial degree of flexibility in the use of funds under almost all federal education programs. In a schoolwide program, federal aid provided under Title I-A plus many other federal K-12 education programs may be used to improve services to all pupils, rather than limiting services to particular pupils deemed to be the most disadvantaged. If they meet the intent and purposes of Title I-A and the other federal programs, and address the needs of the programs' intended beneficiaries, schoolwide programs are exempted from a variety of regulations under Title I-A and most other programs, with specified exceptions, such as regulations regarding health, safety, civil rights, parental participation, services to private school pupils and teachers, or fiscal accountability. Title I-A and other federal program funds must be used so that they supplement, and do not supplant, other federal and non-federal funds that the school would otherwise receive. Further, only commingling or flexibility in the use of funds is authorized with respect to the IDEA in schoolwide programs; all of the IDEA's programmatic requirements must still be met. Although the schoolwide program authority applies to a wide variety of federal K-12 education programs, it is of significance primarily with respect to Title I-A. This is because almost all of the other programs affected typically are focused on LEAs overall, not individual schools. Further, to the extent that the non-Title I-A programs are focused on individual schools, they are not otherwise (i.e., in schools not eligible to conduct schoolwide programs) focused on groups of pupils with specific educational needs (except for the IDEA, where the schoolwide program authority is specifically limited). Nevertheless, the ability to use Title I-A funds on a schoolwide basis, combining them with state and local funds without the need for separate accounting, is in itself quite a significant form of flexibility in comparison to the traditional "targeted assistance" Title I-A program format, under which funds may be used only to serve the lowest achieving individual pupils in a school. There are few additional requirements that schoolwide programs are required to meet in return for this increased flexibility. The number of schoolwide programs has grown rapidly in recent years, and a large majority of the pupils served by Title I-A are now in schoolwide programs; they constitute more than half of Title I-A schools and a large majority of pupils participating in Title I-A programs. The eligibility threshold for schoolwide programs was reduced from 50% to 40% of pupils from low-income families by the NCLB. Before this, many of the Ed-Flex and other waivers granted between 1994 and 2001 had allowed schools below the 50% threshold to operate schoolwide programs. The rationale for providing schoolwide program authority to relatively high poverty schools is that (a) in such schools, all pupils are disadvantaged, so most pupils are in need of special assistance, and it seems less equitable to select only the lowest-achieving individual pupils to receive Title I-A services, and (b) the level of Title I-A grants should be sufficient to meaningfully affect overall school services in high poverty schools, since these funds are allocated on the basis of the (relatively large) number of low-income pupils in these schools. The NCLB has reduced the eligibility threshold to a level that is approximately the national average percentage of pupils from low-income families, which may raise questions regarding the validity of both aspects of this rationale for schools that just meet the new threshold. In addition, there is little direct evidence of the achievement effects of this expansion of schoolwide programs. Flexibility for Small, Rural LEAs A form of flexibility under which small, rural LEAs may transfer funds among selected ESEA programs was initially authorized under P.L. 106-554 , the Consolidated Appropriations Act of 2001. It was extended in essentially similar form by the NCLB. The Rural Education Achievement Program (REAP), under ESEA Title VI-B, includes both a pair of grant programs for rural and/or small and relatively high poverty LEAs, plus a special flexibility authority for certain rural LEAs. Only the latter is relevant to this report and is described below. LEAs with total average daily attendance below 600 pupils, or which are located in a county with a population density of fewer than 10 persons per square mile, and in which all schools are classified as being in rural locations, may combine or transfer any funds received under ESEA Titles II-A (Teacher and Principal Training and Recruiting Fund), II-D (Enhancing Education Through Technology), IV-A (Safe and Drug-Free Schools and Communities), and V-A (Innovative Programs block grant). These funds may be used for any activity authorized under any of these programs or under ESEA Titles I-A (Education for the Disadvantaged), III (English Language Acquisition and Enhancement), and IV-B (21 st Century Community Learning Centers). The primary rationale for this authority is that the smallest LEAs need special flexibility due to the small size of grants which they receive under a number of separate programs. These amounts, typically based in large part on LEA enrollment, are often too small to support separate programs of sufficient size and scope to be effective. Allowing such LEAs to combine and/or transfer funds among a limited range of program activities may facilitate more effective use of those funds. The degree of special flexibility provided to eligible small, rural LEAs under this "REAP Flex" authority is similar to a different Transferability authority (described below) that is available to almost all LEAs under the NCLB. The major differences are that the small, rural LEA authority applies to 100% of the funds under the affected programs, while the broader Transferability authority applies to only 50% (or in some cases less) of such funds; and the small, rural LEA authority includes more programs into which funds may be transferred (ESEA Titles III and IV-B). In addition, perhaps the greatest advantage of the small, rural schools flexibility authority is that LEAs eligible for it are also eligible for supplementary grants that may be used for any of the purposes for which combined or transferred funds may be used under the flexibility authority. According to a study released by ED in July 2007, participation in REAP Flex is widespread, with approximately 4,781 LEAs eligible and an estimated 51% of these participating in the rural LEA flexibility authority in 2005-2006. LEAs participating in REAP Flex most often transferred funds out of ESEA Titles II-A (Teacher and Principal Training and Recruiting Fund) and IV-A (Safe and Drug-Free Schools and Communities), and most frequently into Titles I-A (Education for the Disadvantaged) and V-A (Innovative Programs block grant). Rural LEAs reported that they found this flexibility to be particularly useful because the amount of formula allocations they received under many of the eligible programs was too small to fund substantial school improvement activities. The authors of this evaluation also found a significant amount of confusion at the LEA level between REAP Flex and the general Transferability authority, with several LEAs that are eligible for both not clear on which authority they are using. The Federal K-12 Education Block Grant: ESEA Title V-A Finally, one individual ED program is worthy of mention in the context of special forms of flexibility for states and LEAs in the use of federal aid funds: ESEA Title V-A, Innovative Programs. Although the identification of aid programs as "categorical" versus "block grants" is always somewhat judgmental, ESEA Title V-A is the one major K-12 education program currently administered by ED that is almost universally considered to be a block grant. In the field of education, block grants are aid programs covering an exceptionally wide range of educational activities and types of students, and providing a great deal of flexibility to states and LEAs in using the funds. They are often constructed through consolidation of a number of preceding categorical programs that are more limited in the purposes or activities they support; in the case of Title V-A, the initial consolidation took place in 1981. After reservation of 1% of appropriations for grants to the Outlying Areas, ESEA Title V-A funds are allocated to the 50 states, the District of Columbia and Puerto Rico in proportion to their total population aged 5-17 years, except that no state is to receive less than 0.5% of total grants to states. A majority of Title V-A funds must be allocated by SEAs to LEAs on the basis of state-developed formulas. These formulas must meet general criteria of taking into consideration each LEA's enrollment of pupils in public and private (non-profit) schools, and incorporating adjustments to provide increased grants per pupil to LEAs with the greatest numbers or percentages of "high cost" pupils, including those from economically disadvantaged families and those living in sparsely populated areas or areas of concentrated poverty. The specific minimum percentage of funds that must be suballocated to LEAs varies depending on the program's aggregate funding level and whether the state receives the minimum grant amount (0.5% of total grants to states). All states must suballocate to LEAs an amount equal to at least 85% of the grant which they received under this program for FY2002. In addition, most states are to suballocate to LEAs 100% of their Title V-A grants in excess of the FY2002 level; however, for states receiving the minimum grant amount, the minimum share of Title V-A grants above the FY2002 level that must be suballocated to LEAs is only 50%. Of the funds that may be retained by states, no more than 15% may be used for administrative costs; the remainder is to be used for one or more of seven specified types of programs and services. The latter include the design and implementation of pupil assessments; implementation of achievement standards; planning and implementation of charter schools; independent analysis and reporting on LEA achievement; (apparently) the implementation of policies to offer public school choice options to pupils attending unsafe schools; school repair and renovation; and a broad category of "statewide education reform, school improvement programs and technical assistance and direct grants to" LEAs (Section 5121(3)). LEAs may use their Title V-A funds for any of 27 different types of "innovative assistance programs" listed in Section 5131. Several of these are relatively specific, such as planning and implementation of charter schools, "programs to provide same gender schools and classrooms (consistent with applicable law)," or programs to hire and support school nurses. Others are broad, such as "promising education reform projects," "activities that encourage and expand improvements throughout the area served by the local educational agency," or "programs to improve the academic achievement of educationally disadvantaged elementary and secondary school students." It is essentially because of the existence of these broad, "catchall" categories of authorized use of funds by LEAs and states that Title V-A is generally considered to be a block grant. In addition, the statute includes a prohibition against SEAs exercising influence over LEA decisions on how Title V-A funds will be used. State and Local Experience with the ESEA Title V-A Block Grant The program now authorized by ESEA Title V-A was first enacted in 1981 ( P.L. 97-35 ) as Chapter 2 of the Education Consolidation and Improvement Act (ECIA), which consolidated more than 40 previous federal K-12 education programs. Chapter 2 was the legislative response to a Reagan Administration proposal for a much broader block grant into which almost all federal K-12 education programs would have been consolidated. The block grant initially reduced the number of federal education programs. However, many new categorical programs were authorized in the years immediately following adoption of the consolidated program, including some that were essentially direct successors to programs initially consolidated into the block grant (e.g., aid for magnet schools). The most recent study by ED of the program ( Study of Educational Resources and Federal Funding: Final Report , August 2000), based on a survey of a representative sample of LEAs, found that 58% of recipient LEAs used "a great deal" of their Title V-A funds for instructional materials, while 39% of LEAs used substantial funds for educational technology, and 34% of LEAs for supplemental targeted academic services. Large LEAs were found to be especially likely to use Title V-A funds for teacher professional development services and school-based improvement efforts. Resources or services funded by this program were found to be infrequently targeted at particularly high-need pupils or schools. It was also reported that the primary factors influencing decisions on the use of Title V-A funds were long-term LEA plans and the priorities of individual schools. Appropriations have steeply declined over the life of Title V-A, from $442 million in FY1982, the first year of funding, to $99 million for FY2007. Further, P.L. 110-161 , the Consolidated Appropriations Act for FY2008, provides zero funds for Title V-A, raising the possibility that the program is being effectively terminated, at least in terms of direct appropriations. One reason for this trend is that there have been few constituencies promoting increased funding for the program. Although it is apparently popular with a broad range of state and local public education officials, as well as many private school administrators, its support seems to be diffuse. In recent years, the direct appropriation for Title V-A has been supplemented by funds transferred into the programs under the REAP Flex (see above) and Transferability (see below) authorities, and this trend seems likely to continue as possibly the only source of funding for this program. Limited information on the effects of Title V-A services may have reduced incentives to maintain the program's funding level. Title V-A has tended to receive less favorable treatment in funding decisions than programs that could demonstrate targeting of funds, or a linkage to improved educational outcomes, particularly for high need pupil groups. In part to address this concern, ESEA Title V-A was amended by the NCLB to require participating states to prepare, and submit to ED, annual summaries of "how assistance under this part is contributing toward improving student academic achievement or improving the quality of education for students" (Section 5122(a)(2)). As discussed in later sections of this report, authorities under the NCLB would allow SEAs and LEAs to increase their Title V-A funding by transferring a portion of the funds they receive under selected other federal programs into Title V-A, if they choose to do so. Other Pre-NCLB Flexibility Authorities Finally, a number of additional provisions initially adopted in the years preceding enactment of the NCLB are sometimes cited as providing increased flexibility to states and LEAs. These are not discussed in detail here because their potential impact is substantially more marginal than those of the flexibility authorities described above, and/or their impact is primarily in the area of administrative convenience for SEAs or LEAs. These additional forms of flexibility include authority for consolidated SEA or LEA applications, plans, or reports for a number of ESEA and related programs; and authority to consolidate certain funds used for SEA or LEA administration of federal programs. These authorities are provided currently in Parts B and C of ESEA Title IX. Flexibility Authorities Initiated in the No Child Left Behind Act of 2001 The No Child Left Behind Act of 2001 (NCLB), signed into law on January 8, 2002 ( P.L. 107-110 ), initiated a number of flexibility authorities for ESEA programs, which are described below. The NCLB also expanded and/or extended certain forms of flexibility which had been initiated earlier, such as lowering the eligibility threshold of ESEA Title I-A schoolwide programs; these NCLB amendments were discussed above. Transferability Authority Title VI, Part A, Subpart 2 of the ESEA, as amended by the NCLB, allows most LEAs to transfer up to 50% of their formula grants among four ESEA programs: Teacher and Principal Training and Recruiting Fund (Title II-A), State and Local Technology Grants (Title II-D-1), Safe and Drug Free Schools and Communities (Title IV-A-1), and the Innovative Programs block grant (Title V-A). The affected shares of funds may also be transferred into , but not from , ESEA Title I-A. LEAs which have been identified as failing to meet state adequate yearly progress (AYP) requirements will be able to transfer only 30% of their grants under these programs, and only to activities intended to address the failure to meet AYP standards. Further, according to guidance from ED, LEAs subject to corrective actions under Title I-A may not exercise this authority at all. States may transfer up to 50% of the relatively limited amount of program funds over which they have authority, except for administrative funds, among the first four of these programs plus the 21 st Century Community Learning Centers program. Thus, states could not transfer either any of the funds they are required to suballocate to LEAs or funds reserved for state administration, so the significance of this Transferability authority for states is limited. The overall scale of the programs subject to this authority is moderately significant—the FY2008 appropriations for the four programs subject to LEA Transferability authority total approximately $3.5 billion. The Transferability authority is relatively simple and straightforward; it is available to most LEAs without the need for specific application or approval (although state or LEA plans must be modified to reflect the transfers, and LEAs must inform their SEA). Further, the range of purposes for which transferred funds might be used is especially wide, given that one of the programs into which funds could be shifted is the Innovative Programs block grant. Nevertheless, all program requirements continue to apply to the transferred funds, including any requirements regarding shares of program funds which must or may be used for specified purposes; funds cannot be transferred across fiscal years; and all of the affected programs would continue to exist in places where the authority is exercised, since no state or LEA could transfer more than 50% of its funds out of any program. According to a study released by ED in July 2007, participation in Transferability is relatively modest, with approximately 12-16% of LEAs participating in 2005-2006. Estimates of the level of participation are complicated in part by the significant confusion at the LEA level between REAP Flex and Transferability authorities, as well as many instances of conflicting reports on use of Transferability between LEAs and SEAs (i.e., cases where states identified LEAs as participating in the programs but the LEAs reported that they did not, and vice-versa). As with REAP Flex, LEAs participating in Transferability most often moved funds out of ESEA Title II-A (Teacher and Principal Training and Recruiting Fund) and, to a lesser extent, Title IV-A (Safe and Drug-Free Schools and Communities), and most frequently into Titles I-A (Education for the Disadvantaged) and V-A (Innovative Programs block grant). Many LEAs reported using Transferability to partially compensate for reductions in formula grants under ESEA Title I-A and V-A, to better target resources on schools failing to meet adequate yearly progress standards under Title I-A, or to be able to use funds with the high degree of flexibility allowed under Title V-A. According to this evaluation report, the reasons most frequently cited by LEAs for not participating in Transferability included a lack of information about the authority, satisfaction with the existing level of flexibility under affected federal programs, or funding levels too low to carry out desired activities even if the Transferability authority were exercised. State and Local Flexibility Demonstration Program State-Flex Under a new State and Local Flexibility Demonstration Act (ESEA Title VI, Part A, Subpart 3), up to seven states, selected on a competitive basis after peer review, may be authorized to consolidate all of their state administration and state activity funds under the Education for the Disadvantaged (Title I-A), Reading First (Title I-B-1), Even Start (Title I-B-3), Teacher and Principal Training and Recruiting Fund (Title II-A), State and Local Technology Grants (Title II-D-1), Safe and Drug Free Schools and Communities (Title IV-A-1), 21 st Century Community Learning Centers (Title IV-B), and Innovative Programs block grant (Title V-A) programs. Under this "State-Flex" authority, the consolidated funds can be used for any purpose authorized under any ESEA program (i.e., not just the activities authorized by the programs whose funds may be consolidated). This authority would be granted to states for a period of five years; states would lose the authority if they fail to meet state AYP requirements for two consecutive years. ED may also terminate the authority at any time if a state fails to comply with the terms of the flexibility authority. On the other hand, if all of the requirements associated with this authority have been met at the end of five years, the authority is to be renewed. Each of the selected states is to enter into local performance agreements with between 4 and 10 LEAs; at least one-half of these LEAs must have school-age child poverty rates of 20% or more (slightly above the national average of approximately 18%). These LEAs may consolidate funds under the provisions of the local flexibility authority described below. These LEAs would be required to align the use of the funds they consolidate under this authority with the state's uses of the funds which it consolidates. In addition, participating states may specify the purposes for which all LEAs in the state use the funds they receive under the ESEA Title V-A Innovative Programs block grant. This is in contrast to the general rule, noted above, that LEAs may use Title V-A funds for whatever purpose they choose (among the wide range of purposes authorized in Title V-A). Thus far, State-Flex authority has been granted to only one state, Florida. However, Florida withdrew before beginning to implement its State Flex plan. Therefore, thus far, no state has ever participated in the State-Flex program . Local-Flex Under a companion "Local-Flex" authority, up to 80 LEAs (no more than three per state initially), plus the 4-10 LEAs per state that enter into agreements under the state flexibility demonstration above, would be allowed to consolidate all of their funds under the Teacher and Principal Training and Recruiting Fund (Title II-A), State and Local Technology Grants (Title II-D-1), Safe and Drug Free Schools and Communities (Title IV-A-1), and Innovative Programs block grant (Title V-A) programs, and to use these funds for any purpose authorized under any ESEA program. LEAs may use no more than 4% of the consolidated funds for administration. The authority would be granted for a period of five years; LEAs would lose the authority if they fail to meet state AYP requirements for two consecutive years, or if they fail to comply with the requirements of the flexibility agreement. If LEAs meet the goals established in their agreements, their authority would be renewed for another two-year term. Under both the state and local flexibility demonstration programs, a limited number of specified types of requirements—including those regarding civil rights, fiscal accountability (particularly the requirement that funds be used only to supplement, and not supplant, non-federal funds), and equitable participation by private school pupils and teachers—may not be waived. Participating states and LEAs must also prepare and widely disseminate annual reports on how consolidated funds are used under this authority. However, program requirements other than those specified would not apply to the consolidated funds. Only one LEA—Seattle, Washington—has ever participated in the Local-Flex program. Seattle's eligibility to participate has at least temporarily been suspended, because the LEA failed to make AYP for two consecutive years. Reportedly, Seattle has recently applied for a new Local-Flex agreement. Competition for State-Flex and Local-Flex Authority Beginning in Spring 2002, ED conducted a multifaceted, sometimes complex, series of competitions for State-Flex and Local-Flex authority. However, there has ultimately been very little interest by states and LEAs in obtaining these authorities. As noted above, currently only one LEA has ever participated in Local-Flex, and no states in State-Flex. One state, and eight associated LEAs, initially received approval to participate in these programs, but they subsequently withdrew. With respect to both State-Flex and Local-Flex, a recent ED study reported that major barriers to participation included additional responsibilities but few or no clear benefits, limited organizational capacity (especially during a period when many new NCLB requirements had to be met), and limited dissemination of information about the programs. A new round of competition for these authorities began on March 18, 2004, when ED published in the Federal Register an announcement of a new, simultaneous round of competition for both State-Flex and Local-Flex. There is no deadline for this competition. The announcement indicated that, as an extra inducement to apply, states and LEAs participating in State-Flex or Local-Flex would receive preference in future competitions for grants under relevant discretionary grant programs administered by the Department. The rationale offered for this preference is that "...State-Flex and Local-Flex participants have undergone comprehensive planning to improve teacher quality and the academic achievement of all students, especially disadvantaged students, and are held to a higher degree of accountability...." Comparison With Other Flexibility Authorities in the No Child Left Behind Act In comparison to the Transferability authority described earlier, State-Flex and Local-Flex are relatively broad, since all of the funds under the affected programs may be involved, the funds may be used for any purpose authorized under any ESEA program (including the exceptionally wide range of activities authorized under Title V-A), and only a comparatively small number of specified program requirements apply to the use of these funds. At the same time, the scope of State-Flex and Local-Flex is more narrow in the sense that only a maximum of seven states (and 4-10 LEAs in each of these), plus up to 80 LEAs in other states, may participate. Nevertheless, as indicated above, interest in these provisions on the part of SEAs and LEAs has thus far been very limited, in spite of multiple invitations to compete for them over an extended period of time. The scope of the State-Flex authority in particular is limited in at least two respects. First, although state administration funds may be used for other purposes under this authority, states are still responsible for meeting their administrative responsibilities under each program. Second, for many of these programs, the overall share of funds that may be used for state administration plus state-level activities is relatively small, and it is smallest for the largest affected program. This relevant share of state total grants varies from 1% for ESEA Title I-A, by far the largest program involved, to a high of 26.5% under the Safe and Drug-Free Schools and Communities program. However, participating states would also be given substantial influence over the use of funds consolidated by the 4-10 LEAs with local performance agreements, and over the use of Innovative Programs block grant funds in all of the states' LEAs. In some respects, participating LEAs in the state demonstration program might have diminished flexibility, because their use of consolidated funds must be aligned with the state use of funds which they may consolidate, and because of the authority given to participating states to specify LEA use of Title V-A funds. Finally, the inclusion of the ESEA Title V-A Innovative Programs block grant in the Local-Flex authority (i.e., in states which do not participate in State-Flex) is of limited significance in the sense that those funds may already be used for an exceptionally wide range of activities. Comparison With State and Local Flexibility Authorities in Earlier Senate- and House-Passed Versions of H.R. 1, 107th Congress It is instructive to compare the State-Flex and Local-Flex authority with flexibility authorities that were contained in the earlier House- and Senate-passed versions of H.R. 1 , the legislation which was enacted as the NCLB. The final provisions are in most respects similar to language in the House version of H.R. 1 authorizing local flexibility demonstrations in up to 100 LEAs, but may be contrasted with a broader state and local flexibility/performance agreement authority that was contained in the Senate version of H.R. 1 . Even though the Senate program was not included in the final legislation, it is worthy of mention because of the amount of debate it stimulated during Senate and conference committee consideration of this legislation. Overall, the flexibility/performance agreement provisions of the Senate-passed version of H.R. 1 would have provided significantly greater flexibility than the enacted State-Flex and Local-Flex authorities, in return for at least marginally increased outcome accountability. At the same time, all of these authorities are substantially more limited than optional performance agreement/grant consolidation proposals considered, but not enacted, during the 106 th Congress. The scope of the H.R. 1 /Senate flexibility/performance agreement authority was the same in terms of the maximum number of participating states (7), and more narrow in number of LEAs in other states (25), which could participate. The types of program requirements (e.g., civil rights, fiscal accountability) which continued to apply to the use of consolidated funds was similar. However, the range of ESEA programs subject to the flexibility authority was much more broad and involved substantially higher levels of funding, incorporating most state-administered formula grant programs authorized by the ESEA, including such programs as Title I-A grants for Education of the Disadvantaged, and Limited English Proficient/Immigrant Education. As with State-Flex and Local-Flex, funds could be used for activities authorized under any of the combined programs, including the exceptionally wide range of authorized activities under the Innovative Programs block grant. Under the performance agreement authority, participating states could in general have reallocated funds under all of the affected programs among and within LEAs as long as the resulting allocations targeted funds on concentrations of poor children at least as well as the statutory formulas; State-Flex provides no similar authority to reallocate funds among LEAs. The additional element of outcome accountability required of participating states and LEAs under the Senate version of H.R. 1 is that they would have been required to exceed AYP goals by a statistically significant amount. This would mean that achievement gains in excess of those required under state AYP standards must be sufficiently large that they are unlikely to have resulted from random variations in pupil achievement scores. While statistically significant, such an amount would not necessarily be large, especially in a state or LEA with a large pupil population. Major Cross-Cutting Issues Regarding Special Forms of Flexibility in Federal K-12 Education Programs This report concludes with an analysis of selected cross-cutting issues that have arisen with respect to the special forms of flexibility described above. We introduce this topic with a brief review of the common themes of both the new forms of flexibility included in the NCLB, and the special flexibility authorities enacted previously. In general, these flexibility authorities exhibit the following characteristics. They increase the ability of states and/or LEAs to use federal aid funds more thoroughly in accordance with their own priorities (which may or may not be consistent with federal priorities) than would otherwise be possible. Each of the special flexibility authorities is significantly limited in terms of the number of states and LEAs that may participate, the number and size of the ESEA and related programs affected, and/or the range of program requirements that may be waived. With the major exceptions of the Transferability authority, the Innovative Programs block grant, and Title I-A schoolwide programs, states and/or LEAs are allowed to waive a variety of federal program requirements in return for some degree of accountability based on pupil achievement outcomes. However, the outcome accountability requirements are essentially just increased attention to, and/or consequences related to, outcome accountability requirements that are applicable to all states and LEAs participating in Title I-A and other ESEA programs. These special flexibility authorities, particularly those enacted as part of the NCLB, have been adopted in a policy context of substantially increased accountability requirements and authorized degrees of flexibility in general for the ESEA and related federal programs. At least one of the flexibility authorities adopted under the NCLB has been utilized by an estimated 12-16% of all LEAs (Transferability), while interest in others has been very limited (State-Flex, Local-Flex). However, REAP Flex is the most widely used flexibility authority among eligible small, rural LEAs. The flexibility authorities often include a variety of requirements for regular reporting on ways in which the authorities have been used, and the impact of increased flexibility on pupil achievement. However, there is very limited information regarding the specific impact of special forms of flexibility on pupil achievement. Selected cross-cutting issues associated with these and other common characteristics of special flexibility authorities are discussed below. How Significant Are the Degrees of Flexibility Allowed under These Authorities? The current flexibility authorities are restricted in many important respects, and it may be questioned whether they address the primary concerns of states and LEAs about restrictions on the use of federal funds or administrative burdens accompanying participation in federal programs. While broad in terms of the potential uses of funds and federal programs covered, the ESEA Title I-A schoolwide program authority is limited to the school level, and only schools with low-income pupil rates somewhat above average may generally qualify. Further, as noted earlier, the significance of this authority with respect to programs other than Title I-A is quite limited. The Secretarial case-by-case waiver authorities are limited by the necessity of submitting individual requests to the U.S. Secretary of Education. In most cases, LEAs must similarly apply to their SEAs for waivers under the Ed-Flex authority. While almost all states and most LEAs may exercise the fund Transferability authority, none may transfer more than 50% of the funds received under any program, and therefore all of the requirements associated with participating in any of the affected programs must still be met. The rural LEA flexibility authority is available to only a select group of exceptionally low-enrollment LEAs. In addition, the amount of funds subject to State-Flex authority is limited, and only seven states may participate. Local-Flex authority affects only a limited range of programs and is available in a maximum of only 80 LEAs plus 28-70 LEAs in State-Flex states. The limited increase in flexibility provided by these authorities is a probable reason for the very low rate of participation in these authorities thus far. Importantly, there are several types of requirements that cannot be waived under any of these authorities, including those involving fiscal accountability, participation by private school pupils and staff, or the increasingly important ESEA Title I-A requirements regarding standards, assessments, and school/LEA accountability for pupil achievement. It is noteworthy that many of the flexibility authorities do not include the largest ESEA program, Title I-A, and none of them would allow states to reallocate funds among LEAs. Further, the authors of a 1999 Government Accountability Office (GAO) report ( Elementary and Secondary Education: Ed-Flex States Vary in Implementation of Waiver Process . HEHS-99-17) found that the flexibility authorities enacted as of that time do not address the main regulatory burdens of states and LEAs, which are associated with requirements under the IDEA, the Americans with Disabilities Act, child nutrition program administration, and environmental requirements (e.g., underground storage tanks and asbestos removal). According to this GAO report, SEA staff in some states think Ed-Flex is of limited value because of the relatively few programs and requirements that may be waived. In contrast, SEA staff in other states think its usefulness extends beyond specific use of the authority, through creating a "climate that encourages innovation and flexibility." These remarks would apply also to the new authorities enacted in 2001 and 2002. Finally, it is significant that these authorities have been adopted during a period when "regular" federal program requirements have become more flexible in some important respects. For programs such as ESEA Title I-A, the increased emphasis on outcome accountability beginning in 1994 and continuing under the NCLB has been accompanied by generally increased flexibility for all LEAs and schools in determining how funds may be used, especially in the schoolwide programs which have become the dominant service mode for this program. The NCLB consolidated major groups of programs related to teachers and educational technology, giving states and LEAs substantially greater flexibility in deciding how to use these funds. In this context, the additional flexibility provided by the special authorities described above seems relatively marginal in many respects. For What Purposes Have Special Flexibility Authorities Been Used, and Is There Evidence That These Have Resulted in Increased Pupil Performance or Had Other Major Impacts? Proponents of increased flexibility in federal education programs often argue that waivers can remove federal regulatory barriers to local educational reform and initiative. Very limited information is available on the use of the new forms of flexibility authorized under the NCLB, partly because of low participation in some of them. Available information on waivers granted under pre-NCLB authorities indicates that they have been used for relatively few purposes, at least some of which were not clearly related to innovation or reform. In addition, several of the requirements which were frequently waived in the past were subsequently eliminated or made less restrictive for all states and LEAs by the NCLB. At the same time, the ESEA Title IX-D authority has been used to allow a limited number of states to participate in a growth model pilot for determining adequate yearly progress (AYP) under the ESEA Title I-A accountability provisions, a widely supported modification of that program. As was discussed above, a recent study prepared for ED found that under the two recently-adopted forms of flexibility authority that are widely used—REAP Flex and Transferability—this authority was most often used to move funds out of ESEA Title II-A (Teacher and Principal Training and Recruiting Fund) and, to a lesser extent, Title IV-A (Safe and Drug-Free Schools and Communities), and most frequently into Titles I-A (Education for the Disadvantaged) and V-A (Innovative Programs block grant). Many LEAs reported using these authorities to partially compensate for reductions in formula grants under ESEA Title I-A and V-A, to better target resources on schools failing to meet adequate yearly progress standards under Title I-A, or to be able to use funds with the high degree of flexibility allowed under Title V-A. In the pre-NCLB era, Secretarial waivers, Ed-Flex and other pre-NCLB flexibility authorities during the mid- to late-1990s were most often used to waive the following requirements: (1) the minimum low-income pupil percentage threshold for ESEA Title I-A schoolwide program eligibility (before this was reduced under the NCLB); (2) within-LEA targeting of Title I-A funds on schools with the highest number or percentage of pupils from low-income families; (3) deadlines for adoption and implementation of standards and assessments under ESEA Title I-A; and (4) a series of limitations on the use of funds under two pre-NCLB programs related to teacher recruitment and training: the Class Size Reduction (CSR) and Eisenhower Professional Development Programs. Each of these categories is briefly discussed below. Although schoolwide programs offer a great deal of flexibility to use funds under not only Title I-A but also most other federal programs in ways that might not ordinarily be allowed, it has been questioned whether schools with relatively low percentages of their pupils from low-income families should be granted this authority. If schools with relatively low poverty rates receive permission to operate schoolwide programs, the scope of these programs might be limited (since the size of a school's Title I-A grant is based on its number of children from low-income families), and it would be difficult for such a modest program to have a significant schoolwide impact. Further, no systematic evidence is available that schoolwide programs are more effective than more traditional "targeted assistance" Title I-A programs in improving the education of disadvantaged pupils. The use of waivers to maintain or expand the number of schools participating in Title I-A would tend to disperse Title I-A funds among an increased number of relatively low-poverty schools, reducing the concentration of funds on high-poverty schools. As noted above, Ed-Flex places restrictions on, but does not prohibit, waivers regarding ESEA Title I-A school selection. The use of waivers to delay meeting deadlines for implementing ESEA Title I-A standard and assessment requirements arguably undercut the most substantial pre-NCLB outcome accountability requirement. This increasingly important aspect of federal requirements is discussed further below. With respect to the former CSR and Eisenhower programs, LEAs and states frequently requested the waiver of requirements intended to: focus teacher hiring on the early elementary grades; require small LEAs to form consortia if their CSR grants were too small to pay the salary of a new teacher; ensure that minimum shares of teacher training funds would be used to support instruction in the subject areas of mathematics and science; or to limit the share of CSR funds used for professional development (as opposed to hiring new teachers). Such waivers appear generally to have been requested to accommodate relatively strict and specific limitations on the use of funds to varying local conditions. Following enactment of the NCLB, some of these formerly common uses of Ed-Flex and other pre-NCLB flexibility authorities are no longer as relevant as in the past. As noted earlier, the NCLB lowered the schoolwide program eligibility threshold to 40% of pupils from low-income families nationwide (although some may still seek Ed-Flex or Secretarial waivers for schools below 40% to conduct schoolwide programs). The CSR and Eisenhower programs were consolidated into a broader and more flexible ESEA Title II program supporting teacher and principal recruitment and training. As noted earlier, relatively few substantive waivers have been grated under the ESEA Title IX-D during the post-NCLB era. Impact of Flexibility Regarding the impact of special forms of flexibility on pupil achievement or other outcomes, only limited information has been available. Although states that received Ed-Flex authority have been required to submit annual reports to ED on waivers granted and their impact, the information reported by the original 12 Ed-Flex states (under the pre- P.L. 106-25 authority) was of limited value, and no reports have yet been published on the actual purposes of waivers or their effects in states under the Ed-Flex authority enacted in 1999. Anecdotal information on the achievement effects of a number of Ed-Flex and Secretarial waivers in a limited number of LEAs was included in a 1999 ED report ( Waivers: Flexibility to Achieve High Standards ). The information in this report was primarily limited to whether affected LEAs or schools met state AYP standards in effect at the time. At the same time, supporters of special flexibility authorities often point to broader forms of evidence of their impact on state and local public education systems. These arguments are reflected in a 1998 ED report on Ed-Flex, the authors of which concluded that Ed-Flex authority has supported standards-based reform in the affected states in three major ways: Ed-Flex "facilitates the coordination of programs and strengthens the planning process," by encouraging LEAs and schools to develop instructional programs without regard to the perceived constraints of many standard federal or state program requirements. Ed-Flex "provides the opportunity for States to streamline the administration of programs" by reducing paperwork deemed unessential to meeting basic purposes of federal programs. Ed-Flex "supports the use of resources in a way that can, together with the implementation of standards-based approaches, lead to increased student achievement and reduction in the gap in achievement between different populations" by shifting oversight focus away from inputs or procedures and toward outcomes. Availability and Dissemination of Information on Use and Impact of Special Flexibility Authorities Given the limited amount of data showing improved pupil achievement outcomes in states, LEAs, or schools to which special forms of flexibility have been granted, the conclusions by ED (immediately above) should presumably be considered to be debatable. This is related to a final aspect of this set of issues: Will sufficient information be available on the use of special flexibility authorities, and their effects on pupil achievement, to make it possible to analyze or judge their benefits and impact? As mentioned earlier, while the statutes authorizing several forms of flexibility include significant requirements for reporting to and by ED on the use of waivers and other special authorities, and the pupil achievement and other effects of these activities, little relevant information has been disseminated by ED. Efforts by ED to compile and publish information on the use of waiver or other special flexibility authorities seem to have been a priority only infrequently. This makes it very difficult to evaluate the significance, advantages, and disadvantages of these flexibility authorities. Are the Outcome Accountability Requirements Consistent with the Increased Flexibility Provided under These Authorities? A basic question regarding all special forms of flexibility is whether the increased emphasis on outcomes that is typically associated with them—whether or not such additional outcome requirements are substantial—is an adequate substitute for other forms of accountability requirements, such as required targeting of services on priority activities or high need pupil groups, which may be diminished through the grant of flexibility. In general, the outcome accountability requirements associated with either obtaining or maintaining the special flexibility authorities in this report are a combination of (a) goals established by the states and LEAs themselves, either in the implementation of programs such as Ed-Flex or in competing for (and ultimately implementing) State-Flex or Local-Flex authority; and (b) meeting the state-established adequate yearly progress (AYP) requirements under ESEA Title I-A. In some cases, such as the Innovative Programs block grant or Title I-A schoolwide programs, there is no direct linkage between the flexibility authority and any form of outcome accountability. Regarding (a) above, the most substantial evidence is contained in a GAO study, which found that states granted Ed-Flex authority under the original (pre- P.L. 106-25 ) legislation differed substantially in the clarity and specificity of their outcome goals related to the granting of waivers. Five of the original 12 Ed-Flex states had set no specific objectives at all for LEAs or schools being granted waivers, and only one of the states had established outcome objectives that were specifically linked to the LEAs, schools, and pupils affected by the waivers. The GAO study further concluded that ED oversight of Ed-Flex implementation by the states was limited, involving mostly the collection of annual reports from the states with highly varying degrees of detail in the information they provided. If such practices continue, then the most significant (and the only concrete) outcome accountability requirement associated with any of the special flexibility authorities is (b) above, meeting AYP requirements. Thus, the current flexibility authorities do not actually require substantial additional outcome accountability for participating LEAs and states—that is, accountability for pupil outcomes beyond that which is applicable to all other states and LEAs participating in Title I-A and other ESEA programs. Instead, they place increased emphasis on, attention to, and consequences for failing to meet, generally applicable outcome accountability requirements. Although this outcome requirement is not an additional one, in comparison to states and LEAs which do not receive special flexibility authority, it may nevertheless be substantial, as states continue to implement the AYP and related requirements under the NCLB. While all schools, LEAs, and states are required to meet these requirements, and are to face a variety of consequences if they fail to do so, those with special flexibility authority would have an additional incentive to meet the requirements (i.e., to maintain their eligibility to exercise the flexibility authority), and an additional negative consequence of failing to do so. While limited, such an enhancement of outcome accountability requirements may be consistent with the nature of the special flexibility authorities described in this report. In many respects, both the additional flexibility and the increased outcome accountability are quite limited. At the same time, these provisions take effect in the context of recent legislation, particularly the NCLB, which substantially expands both outcome accountability requirements and, at least in some major respects, flexibility in the use of federal aid funds for all states, LEAs, and schools, whether or not they have been granted one of the special flexibility authorities described in this report. Finally, some proponents of high degrees of state and local flexibility in the use of federal K-12 education aid funds often argue that no increase in outcome or other accountability requirements is necessary to justify the granting of special forms of flexibility. To such proponents, increasing the ability of states and LEAs to use federal funds for purposes which they deem to be most appropriate and effective is sufficient justification for such policies, and is most likely to lead to improved pupil outcomes. At the same time, critics of these authorities might argue that there is no justification for granting special forms of flexibility in return for little or nothing more than the same outcome accountability requirements which are applicable to states, LEAs, and schools which have not been granted such authority. Such critics often defend the full range of generally applicable accountability requirements as embodying important national priorities, and are concerned that special flexibility authorities not only have insufficient accountability provisions, but have been used thus far largely for purposes that have not been proven to increase program effectiveness.

Beginning with the Improving America's Schools Act in 1994, and continuing through the Education Flexibility Partnership Act of 1999 and the No Child Left Behind Act of 2001 (NCLB), the authorization of special forms of flexibility for grantees has been a focus of federal K-12 education legislation. These flexibility authorities apply primarily to programs under the Elementary and Secondary Education Act (ESEA), the largest source of federal aid to K-12 education. In general, federal K-12 education assistance program requirements include activities or outcomes that state or local educational agencies (SEAs, LEAs) are expected to provide or achieve in order to establish accountability for use of funds consistent with the purposes of authorizing statutes. These requirements are usually intended to provide target accountability, ensuring that funds are focused on eligible localities, pupils, and purposes; outcome accountability, ensuring that funds are used effectively to improve student achievement and improve the quality of K-12 instruction; and fiscal accountability, ensuring financial integrity and providing that federal funds constitute a net increase in resources. Special flexibility authorities allow exceptions to these general requirements; they include Ed-Flex, Secretarial case-by-case waivers, ESEA Title I-A schoolwide programs, flexibility for small rural LEAs, the Innovative Programs block grant, Transferability authority, plus the State and Local Flexibility Demonstration Program (State-Flex and Local-Flex). In general, these authorities: (a) increase the ability of states or LEAs to use federal aid more completely in accordance with their own priorities; (b) are significantly limited in terms of the number of states and LEAs that may participate, the number and size of the programs affected, or the range of requirements that may be waived; (c) sometimes require a degree of accountability based on pupil achievement outcomes in return for increased flexibility, although the primary outcome requirements are applicable to all states and LEAs participating in Title I-A and other ESEA programs; (d) often attempt to require reports on ways in which the authorities have been used and the impact of flexibility on pupil achievement; and (e) have been adopted in a policy context of substantially increased accountability requirements and authorized degrees of flexibility in general with respect to some aspects of the ESEA and related programs. Major issues regarding special forms of flexibility in federal K-12 education programs include the following: How significant are the degrees of flexibility allowed under these authorities? Is there substantial state or local interest in the authorized forms of flexibility? For what purposes have special flexibility authorities been used in the past, and is there evidence that these have resulted in increased pupil performance or had other major impacts? And are the outcome accountability requirements consistent with the increased flexibility provided under these authorities? ESEA programs are authorized through FY2008, and the 110th Congress is considering whether to amend and extend the ESEA. This report will be updated regularly to reflect major legislative developments and available information.

Introduction The U.S. Environmental Protection Agency (EPA) established the Clean Energy Incentive Program (CEIP) as a voluntary complement to its regulatory program known as the Clean Power Plan (CPP). The CEIP is intended to promote early reductions of carbon dioxide (CO 2 ) emissions before the CPP is scheduled to take effect in 2022. The goal of the CPP is to reduce CO 2 emissions from existing fossil-fuel-fired electric power plants, which produced 30% of all U.S. greenhouse gas emissions in 2014. Economic modeling indicates that the CPP would significantly reduce future CO 2 emission levels from U.S. electricity generation. The CEIP would support this objective by supporting renewable energy electricity generation and energy efficiency activities through early action incentives. The CPP has generated considerable controversy and garnered interest from Congress and a wide range of stakeholders. After EPA proposed the CPP in 2014, the agency received more than 4.2 million public comments. Some Members in the 114 th Congress have made several attempts to hinder the implementation of the CPP. In particular, after EPA published its CPP final rule in October 2015, both the Senate and the House passed a resolution of disapproval pursuant to the Congressional Review Act. President Obama vetoed the resolution in December 2015. If enacted, the resolution would have prohibited the CPP rulemaking from taking effect. More recently, the House passed H.R. 5538 (Department of the Interior, Environment, and Related Agencies Appropriations Act, 2017) on July 14, 2016. Section 495 of this bill would prohibit EPA from using appropriations to "finalize, implement, administer, or enforce" the CEIP proposed rule. Various state and industry parties applied to the Supreme Court in late January 2016 for an immediate stay of the CPP final rule. In a move that surprised many observers, the Supreme Court issued a stay of the final rule until the legal challenges have been resolved. The first section of this report discusses the details of the CEIP proposed rule. The second section discusses the legal status of the CPP and how the Supreme Court stay may or may not affect the CEIP rulemaking developments. CEIP Proposed Rule—Overview EPA established the framework of the CEIP in its CPP final rule in 2015 and published a proposed rule for the CEIP in the Federal Register on June 30, 2016. The proposed rule seeks to provide additional detail, clarify certain elements that were previously outlined, and alter some of the program eligibility requirements. The CEIP, as described in the proposed rule, is a voluntary program that would encourage states to support energy efficiency measures and renewable energy projects before the first CPP compliance obligations are scheduled to take effect in 2022. Under the CPP, states would submit plans to EPA detailing how they would comply with state-specific interim and final targets. The CPP allows states to use either emission rate targets (measured in pounds of CO 2 emissions per megawatt-hour [MWh] of electricity generation) or mass-based targets (measured in tons of CO 2 emissions). In addition, states would need to include particular design elements in their plans in order to participate in the CEIP. The CEIP would establish a system to award either emission rate credits or emission allowances for two categories of activities: 1. Energy efficiency and solar renewable energy projects in low-income communities, and 2. Renewable energy projects in participating states. The proposed rule altered these two categories from the CEIP introduced in 2015 by adding solar power projects to the low-income community category and expanding the scope of renewable energy project types to include not only wind and solar but also geothermal and hydropower. Electricity generated from nuclear power or biomass would not qualify. Regarding the definition of a "low-income community," EPA decided to let states choose the scope of this term and include the details in their respective state plans. The proposed rule states EPA proposes to provide states with the flexibility to use existing local, state or federal definitions that best suit their specific economic and demographic conditions while ensuring that eligible projects and programs receiving incentives are benefitting low-income communities. The proposed rule modified the eligibility start date for projects. Eligible energy efficiency projects in low-income communities would include those that commence operation on or after September 6, 2018. EPA defines "commence operation" as "the date that a CEIP-eligible low-income community demand-side [energy efficiency] project is delivering quantifiable and verifiable electricity savings." Eligible renewable energy projects, including solar power projects in low-income communities, would include those that commence commercial operation on or after January 1, 2020. Renewable energy projects would receive one credit/allowance from the state and one credit from EPA for every two MWh of renewable energy generation in 2020 and 2021. Projects in low-income communities would receive double credits: For every two MWh of generation from solar power or avoided electricity generation through energy efficiency, these projects would receive two credits/allowances from the state and two from EPA. The CEIP credits take the form of emission rate credits or emission allowances, depending on whether a state plan chooses an emission rate or mass-based target. The credits/allowances could be sold to or used by an affected emission source to comply with the state-specific emission or emission rate reduction requirements. In a CO 2 -constrained regime, these credits/allowances would have monetary value. For example, in the Regional Greenhouse Gas Initiative , a CO 2 cap-and-trade program involving nine Northeast states, emission allowances have sold at auction at prices between $2 per ton and $7.50 per ton. EPA requires state plans to ensure that state-issued credits/allowances for the CEIP will maintain the stringency of the emission or emission rate targets. For example, for mass-based plans, EPA proposes that states allocate CEIP allowances from the state's CPP emission allowance budget in its first compliance period (2022-2024). For states using a rate-based approach, EPA proposes that states apply an adjustment factor to any credits issued in the CPP's first compliance period to account for credits issued pursuant to the CEIP. In contrast to state-issued credits/allowances, states do not need to account for the matching credits/allowances provided by EPA. The proposed rule does not provide details as to the source of the EPA's matching pool. For mass-based programs, EPA would match up to the equivalent of 300 million emission allowances nationally during the CEIP program life. Half of the EPA's pool of matching credits would support renewable energy projects, and half would support energy efficiency and solar energy projects in low-income communities. The amount of EPA credits/allowances potentially available to each state participating in the CEIP depends on the relative amount of emission reduction each state is required to achieve. States with greater reduction requirements would have access to a greater share of the EPA credits. Figure 1 illustrates the allowances available to each state, assuming the state were to adopt a mass-based approach in its compliance plan. Table 1 presents the same information, in list form, alphabetically by state. In its proposed rule, EPA seeks comments from stakeholders on multiple issues. In particular, EPA seeks comments regarding the intersection of the CEIP and the recently renewed tax credits for renewable energy. On December 18, 2015, the President signed into law the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), which, among other provisions, extended and modified the production tax credit and the investment tax credit for specific renewable energy technologies. Prior to the December 2015 development, the PTC had expired and the ITC was scheduled to expire at the end of 2016. Some groups have raised concern about the CEIP rewarding projects that would have been constructed anyway, especially in the context of the extended tax incentives. EPA is seeking comments on how to design a mechanism in the CEIP that would address this possibility. Legal Status of the CPP and CEIP Parties began filing petitions for review in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) challenging the CPP final rule starting on the day the rule was published in the Federal Register , October 23, 2015. By the December 22, 2015, petition deadline, more than a hundred parties, including 27 states, filed dozens of petitions challenging the CPP. Eighteen states, the District of Columbia, five cities, one county, over a dozen nonprofit organizations, and other parties intervened to support the CPP. On February 9, 2016, the Supreme Court issued an order staying the legal effect of the rule for the duration of the litigation. A stay is generally defined as the "postponement or halting of a proceeding, judgement, or the like." Therefore, EPA cannot implement or enforce the CPP during the stay. If the rule is ultimately upheld, some of the deadlines for the states will likely be delayed. While the CPP litigation progresses, with oral arguments before the en banc D.C. Circuit set to occur on September 27, 2016, EPA continues to work on the CEIP and other measures to complement the implementation of the CPP if it survives legal challenge. EPA's release of the CEIP proposed rule following the Supreme Court's order has raised questions regarding the agency's legal authority to move forward with the CEIP and other related measures while the CPP is stayed. The House Committee on Energy and Commerce sent a letter to EPA Administrator Gina McCarthy stating, "Continuing to develop a suite of derivative rules and guidance raises questions about whether EPA is complying fully with the Court's stay order, about what legal authority the agency has to proceed with such actions." Some have argued that EPA is effectively enjoined from engaging in any activities relating to the CPP, which would include the CEIP. Although some have interpreted the stay to require EPA to "put its pencil down" and stop all work related to the CPP, EPA believes that the stay halts only the legal effect and enforceability of the CPP and does not prevent EPA from continuing activities that relate to the CPP but that do not impose legal obligations. An agency or court may stay the effective date of an agency action pending judicial review. In Nken v. Holder , the Supreme Court explained that, unlike an injunction, which direct[s] the conduct of a particular actor, a stay operates upon the judicial proceeding itself. It does so either by halting or postponing some portion of the proceeding, or by temporarily divesting an order of enforceability. A stay pending appeal certainly has some functional overlap with an injunction, particularly a preliminary one. Both can have the practical effect of preventing some action before the legality of that action has been conclusively determined. But a stay achieves this result by temporarily suspending the source of authority to act—the order or judgment in question—not by directing an actor's conduct. Both EPA and opponents of the CPP cite Nken v. Holder to support their positions on what actions, if any, EPA is permitted during the stay of the CPP. In the CEIP proposed rule, the agency cites Nken to argue that "EPA has not been enjoined by any court from continuing to work with state partners in the development of frameworks to reduce CO 2 emissions from affected EGUs." In a request to extend the comment deadline for the CEIP proposed rule, a coalition of 27 states and state agencies (many of which are petitioners in the CPP litigation ) also cites Nken to support its claim that "the agency cannot require States to take any action related to the Power Plan during the stay." The state coalition argues that any actions regarding the CEIP that trigger deadlines for notice-and-comment "would improperly compel action by States to take action ... on a proposal that would not exist but for the [Clean] Power Plan." The coalition claims that the states are forced to act before the stay is lifted because not commenting on the CEIP proposed rule would "forgo their right to raise objections to the CEIP immediately upon judicial review." The letter cites past regulatory efforts to support their claim that "granting an extension would also be consistent with the practice followed by other federal agencies that have promulgated rules potentially affected by pending litigation." The coalition requests that EPA extend the proposed CEIP's comment deadline for at least 60 days following the termination of the CPP stay, arguing that this would also be consistent with the purpose of notice and comment to "ensure the States' full and robust participation[,] not harm EPA or the public interest[, and] could save significant public resources by postponing any further work on the CEIP until it is clear whether the [Clean] Power Plan has survived judicial review." On August 25, 2016, EPA extended the comment period by 60 days until November 1, 2016, stating that this change "allows for requested tribal consultation" on the proposed CEIP rule. In contrast, EPA believes that it has sufficient authority to move forward with rulemakings that relate to the stayed CPP. EPA stated that "while the legal effectiveness of the Clean Power Plan is currently stayed, the EPA has determined that it is appropriate to move forward with the design details of the CEIP component of the Clean Power Plan at this time." In the CEIP proposed rule, EPA argues that the agency has not been "enjoined by any court from continuing to work with state partners in the development of frameworks to reduce CO 2 emissions from affected [power plants]." EPA points to several instances when it continued to revise provisions related to stayed regulations. For example, after the D.C. Circuit issued a stay of the Cross-State Air Pollution Rule (CSAPR) in 2011, EPA issued a final rule in February 2012 correcting errors and delaying the effective date for certain provisions of the stayed CSAPR rule. EPA argued that the rule "is consistent with and is unaffected by the Court's Order staying the underlying final [CSAPR]. Finalizing this action in and of itself does not impose any requirements on regulated units or states." EPA also finalized a second rule in June 2012 that adjusted the state emission budgets under CSAPR while the stay was in effect. It does not appear that EPA's authority to finalize these rules during the CSAPR stay was challenged. These two CSAPR rulemakings tend to demonstrate that, as a matter of practice, a stay does not necessarily prevent the agency from moving forward with finalizing details of the CEIP. Unlike the two final rules issued during the CSAPR stay that revised mandatory requirements and deadlines that would take effect once the stay was lifted, the CEIP does not have any binding requirements for the states and regulated power plants during or after the stay unless a state voluntarily acts to adopt the CEIP. If the CPP survives legal challenge, a state may include the CEIP as part of its CPP implementation plan. The CEIP is mandatory only if it is part of the federal plan imposed by EPA for states that do not submit an approvable implementation plan. There are few judicial opinions that address the types of agency activities allowed during a judicial stay. In the CEIP proposed rule, EPA highlights a 2001 D.C. Circuit opinion that addressed whether EPA could proceed to regulate nitrogen oxide (NO x ) emission sources under CAA Section 126 in light of the stayed NO x state implementation plan (SIP) call for revisions under CAA Section 110. In Appalachian Power Co. v. EPA , the court held that EPA could proceed to regulate the same emissions sources that would be subject to the stayed NO x SIP call because it was acting pursuant to a separate authority under CAA Section 126. In contrast, EPA relied on CAA Section 111(d) as its authority to issue both the CPP and CEIP. In addition to CAA Section 111(d), the agency claims that CAA Sections 102 and 103 "establish that the EPA has the authority [to move forward with the CEIP], and illustrate why the EPA would have good reason to continue coordinating and assisting in the development of CO 2 pollution prevention and control efforts of the states and local governments, even in light of the stay of the Clean Power Plan." EPA recognizes that these additional authorities are typically used to "support" regulatory mandates and programs such as CAA Section 111(d) emission guidelines but argues that these authorities can stand independently to support EPA's actions related to the CEIP. These authorities have been used primarily to maintain uniform implementation and enforcement of CAA regulations and provide authority for EPA to engage in research and development activities to prevent and control air pollution. Under CAA Section 102, EPA "shall encourage cooperative activities by the States and local governments for the prevention and control of air pollution; encourage the enactment of improved and ... uniform State and local laws relating to the prevention and control of air pollution." EPA most commonly cites this authority to approve or disapprove implementation plans developed by states to meet new and revised National Ambient Air Quality Standards. It does not appear that EPA has used Section 102 as authority to develop and issue a standalone program to control air pollution. CAA Section 103 appears to authorize EPA to develop and demonstrate voluntary pollution control strategies and programs such as the CEIP. This section provides EPA with the authority to conduct research and development activities, provide financial and technical assistance to air pollution control agencies and other entities, and collect and disseminate data related to improving air quality and preventing pollution. Of particular relevance to the CEIP, Section 103(g) requires EPA to conduct a basic engineering research and technology program to develop, evaluate, and demonstrate nonregulatory strategies and technologies for air pollution prevention.... Such program shall include ... [i]mprovements in nonregulatory strategies and technologies for preventing or reducing multiple air pollutants, including ... carbon dioxide , from stationary sources, including fossil fuel power plants.... Nothing in this subsection shall be construed to authorize the imposition on any person of air pollution control requirements. This statutory language lends support to EPA's claim that it has the independent authority to issue the CEIP proposed rule as a type of nonregulatory strategy that does not impose air pollution control requirements since states have no obligation to adopt the CEIP. Previously, EPA has used its Section 103 authority to develop nonregulatory programs to help reduce CO 2 emissions. In 1992, EPA established the Energy Star program under the authority of Section 103(g). Energy Star is a voluntary labeling program jointly administered by EPA and the Department of Energy that, among other things, seeks to encourage the purchase and manufacture of energy efficient products that could help reduce GHG emissions such as CO 2 through reduced energy consumption. Similar to the CEIP, manufacturers and other entities are not required to participate in the Energy Star program. EPA will accept comments on the CEIP proposed rule until November 2, 2016. It is possible that EPA may continue to move forward with other CPP-related rulemakings or guidance during the stay, such as finalizing the proposed model emission trading rules and federal plan (that would be imposed if the CPP survives legal challenge in any state that does not submit an approvable state implementation plan) before the courts have completed their judicial review.

In 2015, the U.S. Environmental Protection Agency (EPA) established the Clean Energy Incentive Program (CEIP) as a voluntary complement to its regulatory program known as the Clean Power Plan (CPP). The goal of the CPP is to reduce carbon dioxide (CO2) emissions from existing fossil-fuel-fired electric power plants, which produced 30% of all U.S. greenhouse gas emissions in 2014. The CEIP would support that objective by promoting CO2 emission reductions before the CPP is scheduled to take effect in 2022. The CEIP is a voluntary program that would encourage states to develop energy efficiency measures and renewable energy projects. To participate, a state would need to include specific design elements in its CPP state plan that is submitted to EPA for approval. The CEIP would establish a system to award either emission rate credits (measured in pounds of CO2 emissions per megawatt-hour) or emission allowances (measured in tons of CO2 emissions) that can be used to meet state emission reduction targets for two categories of activities: 1. Energy efficiency and solar renewable energy projects in low-income communities, and 2. Renewable energy projects in participating states. Renewable energy projects would receive one credit/allowance from the state and one credit from EPA for every two megawatt-hour of renewable energy generation. Projects in low-income communities would receive double credits. Under a mass-based approach, EPA would match up to the equivalent of 300 million emission allowances nationally: Half of the credits/allowances would support renewable energy projects, and half would support energy efficiency and solar energy projects in low-income communities. The amount of EPA credits/allowances potentially available to each state participating in the CEIP would depend on the relative amount of emission reduction each state is required to achieve under the CPP. Thus, states with greater reduction requirements would have access to a greater share of the EPA credits. EPA's CPP has generated significant interest from Congress and a wide range of stakeholders. Some Members in the 114th Congress have made several attempts to prevent the implementation of the CPP and more recently the CEIP. In particular, both the Senate and the House passed a resolution of disapproval pursuant to the Congressional Review Act, which President Obama vetoed in December 2015. In July 2016, the House passed H.R. 5538 (Department of the Interior, Environment, and Related Agencies Appropriations Act, 2017), which would prohibit EPA from using appropriations to "finalize, implement, administer, or enforce" the CEIP proposed rule. The CPP is the subject of ongoing litigation involving most states and over 100 entities. In February 2016, the Supreme Court stayed the implementation of the rule for the duration of the litigation. The CPP final rule therefore currently lacks enforceability or legal effect, and if the rule is ultimately upheld, some of the deadlines would likely be delayed. EPA published the CEIP proposed rule in June 2016 to provide additional implementation details for states wishing to participate in the program. EPA's release of the CEIP proposed rule has raised questions regarding the agency's legal authority to move forward with the CEIP while the CPP is stayed. Although some argue that the stay requires EPA to "put its pencil down" and stop all work related to the CPP, EPA believes that it has sufficient authority to move forward with rulemakings that relate to the stayed CPP. To support this assertion, EPA points to several instances when it continued to revise provisions related to previously stayed regulations. However, there are few judicial opinions that address the types of activities allowed during a judicial stay.

Background Foreign nationals not legally residing in the United States who wish to come to the United States generally must obtain a visa to be admitted. Under current law, two departments—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. DOS's Bureau of Consular Affairs (Consular Affairs) is the agency responsible for issuing visas, DHS's U.S. Citizenship and Immigration Services (USCIS) is charged with approving immigrant petitions, and DHS's Customs and Border Protection (CBP) is tasked with inspecting all people who enter the United States. DHS's Immigration and Customs Enforcement (ICE) is the lead agency on enforcing immigration law in the interior of the United States. As Congress debates comprehensive immigration reform and its component parts of immigration control (i.e., border security and interior enforcement), legal reform (i.e., temporary and permanent admissions), and the resolution of unauthorized alien residents, concerns arise over the capacity of the Department of Homeland Security to identify and remove temporary aliens who fail to depart when their visas expire. The phenomenon of foreign nationals who enter legally on a temporary basis and continue to stay after their visas expire is a fundamental problem of immigration control. This issue is not new; indeed, Congress has been grappling with options to address it over the past two decades. In the early 1990s, policy makers became especially concerned about what was perceived to be a growing number of nonimmigrant overstays. At that time, nearly 2.7 million aliens had established legal status through the provisions of the Immigration Reform and Control Act (IRCA) of 1986 ( P.L. 99-603 )—a law which also significantly strengthened border and interior immigration enforcement provisions. Nonetheless, demographers at the former Immigration and Naturalization Service (INS) estimated that 3.5 million unauthorized aliens were residing in the United States in 1990. By 1996, the estimated number of unauthorized alien residents was 5.8 million, with about 2.1 million (41%) estimated to have overstayed their nonimmigrant visas. The remaining 59% were assumed to have entered the United States illegally. Recent estimates indicate that the unauthorized resident alien population (commonly referred to as illegal aliens ) rose from 3.2 million in 1986 to 12.4 million in 2007, before leveling off at 11.7 million in 2012. Elements of Nonimmigrant Visa Control Statutorily, the Immigration and Nationality Act (INA) provides the elements to control the entry and exit of foreign nationals. Provisions of law requiring electronic immigration databases and the collection of biometrics were enacted before the close of the 20 th century. The INA makes clear that nonimmigrants who fail to leave under the terms of their visa become ineligible for readmission. Visa Issuance There are two broad classes of aliens that are issued visas: immigrants and nonimmigrants. The documentary requirements for visas are stated in Section 222 of the INA. Nonimmigrants are admitted for a designated period of time and a specific purpose, and they include a wide range of visitors, including tourists, foreign students, diplomats, and temporary workers. In FY2012, the Bureau of Consular Affairs issued 8.9 million nonimmigrant visas. Combined, visitor visas issued for tourism and business comprised the largest group of nonimmigrants in FY2012, with about 7 million or 78%. Other notable categories were students and exchange visitors (10%) and employment-based nonimmigrants (6%). For well over a decade, the Bureau of Consular Affairs has been issuing machine-readable visas. Consular officers use the Consular Consolidated Database (CCD) to store data on visa applicants. Since February 2001, the CCD stores photographs of all visa applicants in electronic form, and more recently the CCD has begun storing ten-finger scans. In addition to indicating the outcome of any prior visa application of the alien in the CCD, the system links with other databases to flag problems that may affect the issuance of the visa. The CCD is the nexus for screening aliens for admissibility, notably screening on terrorist security and criminal grounds, and links with DHS's automated entry and exit data system, at the time the visa is issued. Many foreign visitors enter the United States without visas through the Visa Waiver Program (VWP), a provision of the INA that allows the visa requirements to be waived for aliens coming from countries that meet certain standards (e.g., Australia, France, Germany, Italy, Japan, New Zealand, and Switzerland). In addition to the Visa Waiver Program, there are a number of exceptions to documentary requirements for a visa that have been established by law, treaty, or regulation. The INA also authorizes the Attorney General (delegated to the DHS Secretary) and the Secretary of State acting jointly to waive the documentary requirements of INA Section 212(a)(7)(B)(i), including the passport requirement, on the basis of unforeseen emergency in individual cases. In 2003, the Administration scaled back the circumstances in which the visa and passport requirements are waived. Border Inspections The INA requires the inspection of all aliens who seek entry into the United States; possession of a visa or another form of travel document does not guarantee admission into the United States. As a result, all persons seeking admission to the United States must demonstrate to a CBP inspector that they are a foreign national with a valid visa and/or passport or that they are a U.S. citizen. In 2013, about 362 million travelers (citizens and non-citizens) entered the United States. There are 329 official ports of entry in the United States, including 15 preclearance offices in Canada, Ireland, and the Caribbean. Because many foreign nationals are permitted to enter the United States without visas, notably as discussed above through the VWP, border inspections are extremely important for those having their initial screening at the port of entry. The Office of Biometric Identity Management—which has absorbed the former U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) system—requires certain foreign nationals to provide fingerprints, photographs, or other biometric identifiers upon arrival in the United States. The automated biometric entry-exit system grew from a photograph and two-finger biometric system for immigration identification to the major identity management and screening system for DHS. Entry-exit data are stored in two DHS databases: the Arrival and Departure Information System (ADIS) and the Automated Biometric Identification System (IDENT). Emigration and Exit Data DHS does not have reliable data on persons who depart the country. Not only does DHS lack data on U.S. citizens and LPRs who move abroad, DHS does not have reliable data on nonimmigrants who exit the United States, despite statutory requirements to do so. The I-94 Arrival/Departure form was routinely collected from foreign nationals exiting at air and sea ports until CBP discontinued issuing the paper forms in 2013. CBP continues to rely on I-94 Arrival/Departure forms at land ports of entry. Several years ago, the U.S. Government Accountability Office (GAO) testified that there were several weaknesses collecting the I-94 Departure Record at land ports of entry. Most notably, GAO concluded that the collection of departure forms is vulnerable to manipulation—"in other words, visitors could make it appear that they had left when they had not. To illustrate, on bridges where toll collectors accept I-94 departure forms at the Southwestern border, a person departing the United States by land could hand in someone else's I-94 form." The exit component of the automated biometric entry-exit system has long been plagued with a variety of budgetary and structural problems, particularly at land ports of exit. In December 2006, DHS officials indicated that they were considering abandonment of plans to implement the exit portion. In 2008, GAO also found weaknesses in the methodology DHS was proposing to use to verify departures of foreign nationals from the United States. GAO concluded that the plan to certify air exit system requirement would not address all potential risks of an expanded Visa Waiver Program. In that report, DHS stated that it would match foreign nationals' departure records against prior records "to determine that the person is a foreign national, and that the person did depart the country through a U.S. airport." A later GAO report on the automated biometric entry-exit system concluded that "an exit capability has yet to be fully deployed." Since 2004, DHS has tested six exit data pilot programs/demonstration projects. Four of the programs were discontinued for various reasons, such as those noted in the GAO reports discussed above. Two programs involving biographic information sharing with air carriers and with the government of Canada have been described by DHS as successful, and are ongoing. Past Legislative Action on Nonimmigrant Overstays Nonimmigrant overstays have been an issue in the debate over immigration control for many years. In 1981, the Select Commission on Immigration and Refugee Policy (SCIRP) cited nonimmigrant visa abuse and document control as concerns and included the establishment of a "fully automated system" to track nonimmigrant arrivals and departures from the United States among its recommendations to the President and the Congress. This unanimous recommendation for an automated entry/exit system to monitor nonimmigrant overstays was part of a comprehensive set of proposals that SCIRP offered as part of its statutory mandate to evaluate the existing laws, policies and procedures governing the admission of immigrants and refugees to the United States. In 1996, Congress put this recommendation into law; nonetheless, the issue of nonimmigrant overstays has remained a congressional concern. Illegal Immigration Reform and Immigrant Responsibility Act Congress strengthened the anti-terrorism provisions in the INA and passed provisions that many maintained would ramp up enforcement activities in the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 ( P.L. 104-208 , Division C). In IIRIRA, there were several provisions aimed at nonimmigrant overstays. Foremost, IIRIRA clarified that the visa of a nonimmigrant is void as soon as the nonimmigrant alien overstays the period of authorized stay. IIRIRA furthermore created new grounds of exclusion for aliens who are unlawfully present in the United States. Those who are unlawfully present for more than 180 days but less than one year and who voluntarily depart the country are ineligible for admission or reentry to the United States for three years. An alien unlawfully present for one year or more who leaves or is removed from the United States is inadmissible for 10 years. These provisions are generally referred to as the 3- and 10-year bars. Finally, Section 110 of IIRIRA required the Attorney General to develop an automated entry/exit system that among other things (1) collects a record of departure for every alien departing the United States, and matches the record against the record of the alien's arrival in the United States; and (2) allows the identification, through online searches, of nonimmigrants who remain beyond their period of authorized stay. As amended by several subsequent laws, Section 110 of IIRIRA became the statutory basis of what is now the Office of Biometric Identity Management system, which uses biometric identification (i.e., finger scans and digital photographs) to check identity. Enhanced Border Security and Visa Entry Reform Act of 2002 The Enhanced Border Security and Visa Entry Reform Act of 2002 ( P.L. 107-173 ) expressly targeted the improvement of visa issuance and alien tracking procedures. Among its provisions, it required the development of an interoperable electronic data system to be used to share information relevant to alien admissibility and removability and the implementation of an integrated entry-exit data system. It also required that all visas have biometric identifiers. The act placed new requirements on the VWP, specifically mandating that the government of each VWP country certify that it has established a program to issue tamper-resistant, machine-readable passports with a biometric identifier. The act also required all VWP countries to certify that they report in a timely manner the theft of blank passports. Legislation Implementing the 9/11 Commission Recommendations The Intelligence Reform and Terrorism Prevention Act (IRTPA) of 2004 ( P.L. 108-458 ) included visa policy and immigration-related provisions aimed at curbing nonimmigrant overstays as well as the specific recommendations offered by the 9/11 Commission. The IRTPA required accelerated deployment of the biometric entry and exit system to process or contain certain data on aliens and their physical characteristics. The act also expanded the pre-inspection program that places U.S. immigration inspectors at foreign airports, increasing the number of foreign airports where travelers would be pre-inspected before departure to the United States. Moreover, it required all individuals entering the United States (including U.S. citizens and visitors from Canada and other Western Hemisphere countries) to bear a passport or other documents sufficient to denote citizenship and identity. The IRTPA required the establishment of new standards aimed at ensuring the integrity for federal use of birth certificates, state-issued driver's licenses and identification cards, and social security cards. The Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) created a waiver allowing the Secretary of Homeland Security (Secretary) to admit countries with visa refusal rates under 10% to the VWP. This waiver authority became available in October 2008, when the Secretary certified that (1) an air exit system was in place that verifies the departure of not less than 97% of foreign nationals that exit through U.S. airports, and (2) the electronic system for travel authorization (ESTA) was operational. The ESTA is a system through which each foreign national electronically provides, in advance of travel, the biographical information necessary to check the relevant databases and "watch lists" to see whether the foreign national poses a law enforcement or security risk. The CBP officer makes a determination on whether the nonimmigrant may enter the United States and the permitted duration of stay. Estimating Overstays Over the years, it became apparent that the data on nonimmigrant overstays were unreliable because these data were based upon the I-94 Arrival/Departure form. The I-94 forms are no longer collected from foreign nationals at air and sea ports, and the integrity of the I-94 collection process at land ports is problematic, as discussed above. Moreover, two major classes of nonimmigrants are exempt from filling out the I-94 when visiting the United States for business or pleasure: Canadian citizens admitted for up to six months and Mexican citizens entering with a border crossing card (laser visa) along the southwestern border who intend to limit their stay to less than 30 days and intend not to travel beyond a set perimeter from the border. Early Demographic Estimates In 1996, the estimated number of unauthorized alien residents was 5.8 million, with about 2.1 million (41%) estimated to have overstayed their nonimmigrant visas. Robert Warren, then a demographer with the former INS, attempted to calculate nonimmigrant overstays based on estimations of the percentage overstays for each country. Warren's efforts yielded an estimate that 2.3 million, or 33%, of the 7.0 million unauthorized immigrants residing in the United States in January 2000 were nonimmigrant overstays. In 2004, the U.S. Government Accountability Office (GAO) attempted to estimate nonimmigrant overstays using samples based upon three different methodologies. GAO concluded, "three alternative data sources on illegal immigrants indicate varying—but uniformly substantial—percentages of overstays: 31%, 27%, and 57%." In 2003, Warren reached the following conclusion: "In general, the net nonimmigrant overstay figures are more likely to be overestimates than underestimates because the collection of departure forms for long-term overstays who depart probably is less complete than for those who depart within the first year." The 2004 GAO study, however, drew two different conclusions: "The extent of overstaying is significant and may be understated by DHS's most recent estimate." In 2006, the Pew Hispanic Center applied the Robert Warren methodology (with some modifications) to their estimates of the unauthorized resident alien population in 2006. Their estimates suggest that out of an unauthorized resident alien population of 11.5 million to 12 million, about 4 million to 5.5 million, or between 33% and 50%, are nonimmigrant overstays. Administrative Estimates For immigration enforcement purposes, ICE's Overstay Analysis Unit identifies foreign nationals who have potentially overstayed their visas by matching ADIS arrival and departure records. DHS had a backlog of 1.6 million unmatched arrival records that had not been reviewed through automated or manual processes in January 2011. GAO reviewed the enhanced biographic exit program's backlog of 1.6 million potential overstay records and found that about half of these cases (863,000) were found to have departed the United States or to have adjusted status. As of June 2013, GAO reported that DHS's unmatched arrival records totaled more than 1 million. Recent Demographic Estimates Most recently, Robert Warren and John Robert Warren published two new analyses of the components of unauthorized migration (using a few refinements to Robert Warren's earlier methodology) and estimated a sharp drop in the number of unauthorized aliens arriving in the United States annually since 2001. In terms of visa overstays, the latest findings of Warren and Warren are stunning in that they concluded that "total nonimmigrant overstays to the United States dropped from 705,000 to 190,000, or about 73%, over the decade" (ranging from 2000 to 2009). Warren and Warren also found that entries without inspections (EWIs) declined in every year after 2005, not just during the economic recession in 2008 and 2009 as other research had suggested. It is essential, however, to emphasize that their work is only estimations based upon broader population trends. As the authors acknowledge: "(N)o direct information is available about either EWIs or overstays." If foreign nationals who are in the country illegally are effectively avoiding census enumeration, then it would impact these analyses. These estimates are not a match for official entry-exit data. Concluding Comments Estimates of nonimmigrant overstays residing in the United States are plagued by the broader difficulties in measuring all three components of unauthorized migration—aliens entering without inspection between ports of entry and aliens entering with fraudulent documents, as well as aliens overstaying or otherwise violating the terms of legal entry. The extent that some nonimmigrant overstays become "quasi-legal" aliens (e.g., those who have legal permanent resident petitions pending or have sought relief from removal from an immigration judge) further complicate the estimates. Reportedly, the failure of DHS to consistently update the alien's record—for example if the authorized period of admission is extended, if deferred departure is granted, or if the immigration status changes—is another major factor that prevents DHS from calculating reliable estimates of overstays. A way forward on the issue of nonimmigrant overstays seems out of reach, absent a reliable method to measure emigration or an effective exit-monitoring system.

As Congress debates comprehensive immigration reform and its component parts of immigration control (i.e., border security and interior enforcement), legal reform (i.e., temporary and permanent admissions), and the resolution of unauthorized alien residents, concerns arise over the capacity of the Department of Homeland Security (DHS) to identify and remove temporary aliens on nonimmigrant visas who fail to depart after their visas expire. It is estimated that each year hundreds of thousands of foreign nationals overstay their nonimmigrant visas or enter the country illegally (with fraudulent documents or bypassing immigration inspections). The most recent estimate (published in 2013) is that 11.7 million foreign nationals resided in the United States without authorization in 2012. DHS does not have reliable data on emigration and nonimmigrant departures from the United States. As a consequence, reliable estimates of the number of nonimmigrant overstays are not available. Over the years, the overstay estimates ranged from 31% to 57% of the unauthorized population (depending on methodology). A 2013 study of visa overstays from 2000 to 2009 estimated that total nonimmigrant overstays to the United States dropped from 705,000 per year to 190,000 per year, or about 73%, over the decade. As of June 2013, the U.S. Government Accountability Office (GAO) reported that DHS's unmatched arrival-departure records totaled more than 1 million; however, the failure of DHS to consistently update the alien's record—for example, if the authorized period of admission is extended, if deferred departure is granted, or if the immigration status changes—is a major factor that prevents DHS from calculating reliable estimates of overstays.

The European Economy This report examines the Small Business Act for Europe (2008), which was adopted by the European Commission and endorsed by the Council of the European Union during the "Great Recession" of 2008-2009. The recession affected many nations across the world, and it hit many European countries particularly hard. For example, in 2009 the United States experienced a 2.8% decline in real gross domestic product (GDP). The European Union (EU) as a whole experienced a 4.4% decline, and nine of its then-27 member states experienced a decline in real GDP exceeding 6% (Estonia, Finland, Hungry, Iceland, Ireland, Latvia, Lithuania, Romania, and Slovenia). Reflecting the economic challenges facing Europe at that time, the European Commission declared in the Small Business Act for Europe's introduction that Managing the transition towards a knowledge-based economy is the key challenge for the EU today. Success will ensure a competitive and dynamic economy with more and better jobs and a higher level of social cohesion. Dynamic entrepreneurs are particularly well placed to reap opportunities from globalisation and from the acceleration of technological change. Our capacity to build on the growth and innovation potential of small and medium-sized enterprises (SMEs) will therefore be decisive for the future prosperity of the EU. In a globally changing landscape characterised by continuous structural changes and enhanced competitive pressures, the role of SMEs in our society has become even more important as providers of employment opportunities and key players for the wellbeing of local and regional communities. Vibrant SMEs will make Europe more robust to stand against the uncertainty thrown up in the globalised world of today. Since then, the EU's economy as a whole has grown, but more slowly than that of the United States. For example, the EU's average unemployment rate in 2016 is nearly twice that of the United States (8.9% versus 4.8%). Moreover, the extent of the economic recovery varies considerably within the EU, with some nations still contracting or experiencing very high levels of unemployment. For example, Greece's and Spain's unemployment rates in June 2016 were 23.3% and 19.9% respectively. Overall, the EU's economy is somewhat smaller than the United States' economy (EU's GDP is $14,861 billion whereas the U.S.'s GDP is $18,628 billion). The EU also has fewer businesses (about 22 million) than the United States (about 29 million). This report opens with a discussion of the European Commission's decision to recommend the use of a size standard that is very different than the size standard used in the United States. It then examines the Small Business Act for Europe's various provisions and the major programs the European Commission has implemented to achieve the act's objectives. Next, it compares and contrasts the European and American approaches to assisting small- and medium-sized businesses. This report provides information and analysis useful to Congress as it crafts small business policy for the United States. The EU's Recommended Small Business Size Standard During the 1980s, there was growing consensus in Europe that providing financial and technical assistance to small- and medium-sized enterprises (SMEs) would help to ensure competitive markets and contribute to economic growth and job creation. There was also general agreement that SMEs often had a difficult time accessing capital for a host of reasons (such as the business was relatively new or the owner did not have sufficient collateral). As a result, many European nations and financial institutions, including the European Investment Bank and European Investment Fund, implemented programs and policies to assist SMEs. They each also crafted their own size standard definitions to determine which businesses would qualify for assistance reserved for SMEs. In March 1985, the EU's Council of Ministers indicated its support of policies designed to assist SMEs as a means to create jobs and promote economic growth. In response, the European Commission established a task force in June 1986 to examine the commission's relevant activities (community laws, financing programs, etc.); assist "in the harmonization of national and community policies;" establish "a system for association with organizations representing SMEs;" and recommend "structures and programmes, at the European level, for solving SMEs' practical problems and, in particular, developing communications and training strategies for SMEs." Later that year, as part of its effort to reduce barriers in the creation of a single, unified market within the EU and to assist in the "harmonization of national and community policies," the European Commission proposed, and the Council of Ministers adopted, the Action Programme for SMEs . It was designed to assist SMEs by encouraging the spirit of enterprise; improving the administrative environment; monitoring the completion of the Internal Market with a view to helping SMEs (i.e. removal of physical, technical and legal barriers and giving SMEs real access to public procurement contracts); adapting company law (i.e. the European Economic Interest Grouping framework); creating a sound competitive structure; creating a favourable tax environment; and improving the social environment of SMEs by involving SME cooperatives at the planning stage. One of the more noteworthy actions arising from the Action Programme for SMEs was imposing a requirement that impact assessments of proposed legislation and policies under consideration by the European Commission and the Council of Ministers take into account the needs of business, especially the needs of SMEs. On July 28, 1989, the European Commission reaffirmed its commitment to assisting SMEs, emphasizing "the removal of undue administrative, financial and legal constraints which check the development and creation of enterprises, and in particular SMEs." As part of its continuing effort to address legal constraints on SMEs, the commission inventoried its member state's SME definitions and found wide differences in the definitions used. On May 28, 1992, the commission proposed "limiting the proliferation of definitions used" by its member states to determine SME status. It recommended a single, EU-wide size standard based on four criteria: (1) number of persons employed, (2) turnover (revenue), (3) balance sheet-total and (4) independence (to ensure that the small business is not controlled by a large business or jointly controlled by several large businesses). The European Commission solicited input from its member states, interested organizations, and financial institutions as it determined the specific thresholds to be used for each of the criteria. As a starting point, its initially recommended employment thresholds of 50 employees and 250 employees for small- and for medium-sized enterprises, respectively. On April 3, 1996, the European Commission approved an official, EU-wide recommended definition for SMEs, formally recognizing SMEs as a distinct category of businesses in Europe. The commission indicated that it took this action to "improve the consistency and effectiveness of policies targeting SMEs," and "limit the risk of distortion of competition" among its members. Although member states are not required to adopt the European Commission's definition, all of them "make use of it, sometimes exclusively and in other cases in parallel to and complementing national definitions." The thresholds are "to be regarded as ceilings." The formal EU-wide recommended definition for SMEs was updated in 2005 to account for inflation and to include a new micro enterprise category (see Table 1 ). About 99.8% of all EU businesses qualify as a SME (about 92.7% qualify as a micro business, 6.1% as a small business, and 1.0% as a medium-sized business). In comparison, about 98% of all American businesses qualify as small under the U.S. Small Business Administration's (SBA) size standards; and about 99.7% of all employer firms in the United States have 500 or fewer employees (the small business size standard typically used for research purposes). Over the next several years, the European Commission enacted policies to reduce regulatory burdens on SMEs and increase "the SME focus in major EU support programs." In 2008, the European Commission declared that it was time to "cement the needs of SMEs in the forefront of the EU's policy" and to make "the EU a world-class environment for SMEs" by adopting a Small Business Act for Europe. The EU's Small Business Act The Small Business Act for Europe is not an act, per se, as understood in the United States. It is a European Commission initiative, endorsed by the Council of the European Union, which provides 10 "guiding principles" for its own policies, and those of its member states. As mentioned previously, it states in its introduction that it is based on the premise that "vibrant SMEs will make Europe more robust to stand against the uncertainty thrown up in the globalised world of today." It later mentions that The symbolic name of an "Act" given to this initiative underlines the political will to recognise the central role of SMEs in the EU economy and to put in place for the first time a comprehensive policy framework for the EU and its Member states through a set of 10 principles to guide the conception and implementation of policies both at EU and Member State level. The Small Business Act for Europe established the following guiding principles: 1. Create an environment in which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded. 2. Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance. 3. Design rules according to the "Think Small First" principle. 4. Make public administrations responsive to SMEs' needs. 5. Adapt public policy tools to SME needs: facilitate SMEs' participation in public procurement and better use State Aid possibilities for SMEs. 6. Facilitate SMEs' access to finance and develop a legal and business environment supportive to timely payments in commercial transactions. 7. Help SMEs to benefit more from the opportunities offered by the Single Market. 8. Promote the upgrading of skills in SMEs and all forms of innovation. 9. Enable SMEs to turn environmental challenges into opportunities. 10. Encourage and support SMEs to benefit from the growth of markets. The European Commission included in the Small Business Act for Europe examples of policies that it had adopted or was planning to adopt to achieve the act's guiding principles. It invited member states to take similar actions. For example, the commission announced that it would "simplify and harmonise existing rules for SMEs and increase investment aid intensities for SMEs, offer member states the option of applying reduced VAT [value added tax] rates principally for locally supplied services, which are mainly provided by SMEs, and consult stakeholders, including SME organisations, for at least eight weeks prior to making any legislative of administrative proposal that has an impact on businesses." In 2011, the commission reviewed the Small Business Act for Europe's implementation from 2008 to 2010 and concluded that some progress had been achieved in meeting its objectives. For example, it found that "a recent Commission survey suggests that SMEs now experience fewer administrative burdens when accessing public procurement and have better opportunities for joint bidding" and more than 100,000 SMEs had received financial support from its SME programs, primarily guaranteed loans. However, it also noted that "the approach taken and the results achieved vary considerably between member states" and while most member states had adopted measures to enhance SMEs' access to capital through subordinated loans, loan guarantees or microcredit programs, "a stronger approach is warranted." Specifically, the European Commission proposed five new priority areas: 1. Making smart regulation a reality for European SMEs, including "a further strengthening of the application of the 'SME test' in its impact assessment procedure to ensure that impacts on SMEs are thoroughly analysed and taken into account in all relevant legislative and policy proposals, with a clear indication of quantified effects on SMEs, whenever possible and proportionate." 2. Paying specific attention to SMEs' financing needs , including encouraging member states to "provide incentives for investing revenue in equity, keeping in mind that the needs of entrepreneurial growth companies and established mainstream European SMEs are different and particular attention should be paid to the problem of financing the first growth phase of firms." 3. Taking a broad-based approach to enhancing market access for SMEs, including measures to facilitate cross-border payments and a single set of rules regarding a Common Consolidated Corporate Tax Base to make it simpler for SMEs to expand their activities within the single market. 4. Helping SMEs to contribute to a resource-efficient economy , including developing incentives to encourage energy and resource audits and promoting low-carbon technologies and resource-efficient innovation. 5. Promoting entrepreneurship, job creation and inclusive growth , by simplifying administrative requirements, ensuring that educational systems "truly provide the right skills to start and manage an SME," and removing barriers for entrepreneurs to "bring ideas to market." European Commission's SME Programs The two primary ways the European Commission assists SMEs are providing regulatory relief from EU legislation and financing various programs to enhance SME access to capital. Regulatory Relief In an effort to lead by example, the European Commission issued an action plan in 2007 designed to reduce regulatory burdens on businesses resulting from EU legislation by 25% by the end of 2012. The following year, in addition to approving the Small Business Act for Europe, the European Commission re-emphasized its commitment to reducing the regulatory impact of its actions on all businesses, but "particularly for micro-enterprises including the self-employed ... who are especially vulnerable to the burdens of bureaucracy due to their smaller size and limited human and financial resources." As part of that effort, the European Commission issued guidance concerning the application of the SME test during required impact assessment analyses, which examine the likely economic, environmental, and social effects of its legislative proposals. The SME test guidance requires that SMEs' needs are considered in each of the analytical steps taken when carrying out an impact assessment. Specifically, the guidance required (1) consultation with SMEs representatives; (2) a preliminary assessment of businesses likely to be affected, including number of businesses and their size; (3) measurement of the impact on SMEs, including "the distribution of the potential costs and of the benefits of the proposals with respect to the business size, differentiating between micro, small, medium and large enterprises;" and (4) an assessment of alternative options and mitigating measures, including whether a temporary or permanent complete or partial size-related exemption for SMEs or micro-businesses is warranted. The European Commission strengthened the SME test, effective January 2012, by requiring all of its legislative proposals to be "based on the premise that in particular micro-entities should be excluded from the scope of the proposed legislation unless the proportionality of their being covered can be demonstrated." As the European Commission put it, "Thus modified, the [SME] test will de facto reverse the burden of proof and focus the preparation of EU law on the specific situation of SMEs and micro companies." In 2013, the European Commission announced that it had achieved its goal of reducing its regulatory burdens on businesses by 25%, noting that much of the savings was realized "in the areas of tax law (moving from paper to electronic billing) and company law (exceptions for micro-enterprises from some provisions on financial reporting obligations)." The commission also reiterated that "reducing unnecessary or excessive regulatory burden remains on the top of the Commission's political agenda." Access to Capital The European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs (currently Elzbieta Bienkowska) and its Directorate-General is responsible for "fostering entrepreneurship and growth by reducing the administrative burden on small businesses; facilitating access to funding for small and medium-sized enterprises; and supporting access to global markets for EU companies." Its stated objectives are to ensure an open internal market for goods and services in the EU; improve the range, quality, and competitiveness of products and services on the internal market; strengthen the industrial base in Europe; provide sector-specific and business-friendly policies; promote industrial innovation to generate new sources of growth; ensure a modernised system for public procurement, which provides better access to public contracts on an EU-wide basis; encourage the growth of SMEs and promote an entrepreneurial culture; support the internationalisation of EU businesses; facilitate access to finance for SMEs; support the free movement of professionals in EU; support the development of global satellite-based navigation infrastructure and services (Galileo); and promote the use of EU earth observation-based services (Copernicus). COSME The European Commission's Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs oversees the implementation of the Programme for the Competitiveness of Enterprises and Small and Medium-Sized Enterprises (COSME). COSME's goals are "to strengthen the competitiveness and sustainability of the Union's enterprises and to encourage an entrepreneurial culture and promote the creation and growth or SMEs" by "improving access to finance for SMEs in the form of equity and debt; improving access to markets, particularly inside the Union but also at [the] global level; improving framework conditions for the competitiveness and sustainability of Union enterprises, particularly, SMEs, including in the tourism sector; and promoting entrepreneurism and entrepreneurial culture." COSME was provided €2.3 billion for 2014 through 2020. COSME has two programs (budgeted at €167 million in 2016) to assist SMEs with access to capital: 1. The Loan Guarantee Facility provides loan guarantees (up to 50% of the transaction) to financial institutions to enable them to provide SMEs access to capital that otherwise would not be available due to the SME's perceived higher risk or lack of sufficient collateral. It is expected to assist between 220,000 and 330,000 SMEs obtain financing totaling between €14 billion and €21 billion (from 2014 through 2020). 2. The Equity Facility for Growth provides risk capital to equity funds investing in SMEs, primarily in the expansion and growth-stage phases. It is expected to provide between 360 and 560 equity firms between €2.6 billion and €4 billion (from 2014 through 2020). COSME also has several programs to assist SMEs access EU member state and international markets (budgeted at €52 million in 2016), including the following: The Enterprise Europe Network consists of more than 600 member organizations, including chambers of commerce and industry, technology centers, universities and development agencies, located in more than 50 countries. These organizations assist SMEs and entrepreneurs access market information, address legal obstacles, and locate potential business partners across Europe. They also advise SMEs applying for Horizon 2020 research and innovation grants (see the following section for additional program details). Your Europe Business Portal provides SMEs and entrepreneurs on-line access to web links and information about support service providers in the EU that focus on the needs of companies interested in developing markets in other member states. The SME Internationalisation Portal provides SMEs and entrepreneurs on-line access to web links and information about support service providers in the EU and beyond that focus on the needs of companies interested in developing international markets. The Internationalisation of Clusters Initiative is designed to promote international cluster cooperation by encouraging "European cluster consortia to work concretely together, notably across sectoral boundaries, to exploit synergies and develop a joint 'European' strategic vision with a global perspective and common goals towards specific third markets, especially in key areas for EU industries." More than 950 clusters have registered to participate in the initiative, which, among other activities, sponsors international cluster matchmaking events to offer opportunities for European cluster organizations to partner with other clusters located within and beyond Europe. The European Small Business Portal provides SMEs and entrepreneurs on-line access to information about the EU's SME policies and programs to assist SMEs access capital and international markets. In addition, COSME sponsors research on the status of SMEs and entrepreneurship; supports the diffusion of best practices among the EU's member states; conducts the annual SME Performance Review, which includes an overview of European SMEs and summarizes recent policy developments affecting SMEs; and monitors the implementation of the Small Business Act for Europe among member states. Programme for Research and Innovation (Horizon 2020) Horizon 2020 is the European Union's largest research and innovation grants and financing program, with a 2014-2020 operating budget of over €77.0 billion. It serves as the financial instrument implementing the Innovation Union , one of the European Commission's seven "flagship" initiatives within its Europe 2020 economic plan for sustainable economic growth. Horizon 2020 is designed to enhance Europe's global competitiveness by increasing funding for research and development and promoting "the strategic use of public procurement budgets to finance innovation." About €2.3 billion in Horizon 2020 funding for 2014 through 2020 has been set aside for the European Commission's Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs to provide competitive research and innovation awards to SMEs (€353 million in 2016). Specifically, Horizon 2020's SME instrument "addresses the financing needs of internationally oriented SMEs, in implementing high-risk and high-potential innovation ideas." It supports projects "with a European dimension that lead to radical changes in how business (product, processes, services, marketing etc.) is done." It offers SMEs business innovation grants to explore and assess the project's technical feasibility and commercial potential (phase I): €50,000 (lump sum) per project (70% of total project cost); business innovation grants for development and demonstration purposes, such as prototyping, scaling-up, and testing (possible phase II): generally €500,000 to €2.5 million (typically 70% of total project cost); commercialization assistance, including access to innovative support services and risk finance, to facilitate the project's commercial exploitation (possible phase III); and free business coaching to support and enhance the SME's innovation capacity and help align the project to strategic business needs (optional in phases I and II). Horizon 2020 also sponsors the InnovFin SME Guarantee Program. It provides approved financial intermediaries a guaranty of up to 50% of incurred losses on loans, leases and guarantees between €25,000 and €7.5 million to research-based and innovative SMEs and Small Mid-caps (businesses with up to 499 employees). It enables financial institutions to provide SMEs and Small Mid-caps access to capital that otherwise would not be available because the business or project deals with (1) complex products and technologies that lenders have difficulty determining the financial risks involved, (2) unproven markets, or (3) intangible assets that are difficult to value for collateral purposes. The program offers borrowers below market interest rates. By 2020, the InnovFin SME Guarantee program is expected to make more than €24 billion of debt and equity financing available to innovative SMEs and Small Mid-caps. Comparisons with the United States The European Commission was very aware of the United States' Small Business Act, the SBA's various programs, and the SBA's definitions used to determine small business eligibility for assistance as it crafted its Small Business Act for Europe and designed its small business programs and size standards. It also examined SME policy in other nations, including Japan and China. In some instances, the European Commission enacted policies that are relatively similar to those found in the United States. In others, the European Commission went in a different direction. Similarities Both the United States and Europe have policies in place to mitigate or eliminate regulatory burdens on small businesses. As mentioned previously, the European Commission requires its SME test to be applied during the impact analyses of its legislative proposals. It also encourages its member states to do the same as part of its "Think Small First" initiative. In the United States, the SBA's Office of Advocacy is responsible for monitoring and reporting on federal agency compliance with the Regulatory Flexibility Act of 1980 (RFA, as amended) and Executive Order 13272, Proper Consideration of Small Entities in Agency Rulemaking (August 13, 2002). The RFA establishes in law the principle that government agencies must analyze the effects of their regulatory actions on small entities (small businesses, small nonprofits, and small governments) and consider alternatives that would be effective in achieving their regulatory objectives without unduly burdening these small entities. Both the United States and Europe have also implemented programs to enhance small business access to capital. For example, COSME's Loan Guarantee Facility and Horizon 2020's InnovFin SME Guarantee programs, like the SBA's 7(a) and 504/CDC loan guaranty programs, provide loan guarantees to financial institutions to encourage lending to small businesses that otherwise would not have access to credit. Europe's loan guarantee programs typically require lenders to shoulder a greater percentage of the risk of defaults (usually 50% of losses compared to 10% to 50% of losses in the United States), even though they operate on the same principle—to provide an alternative source of capital for smaller enterprises having difficulty accessing credit. Furthermore, Europe's Equity Facility for Growth, like the SBA's Small Business Investment Company program, encourages venture capital investments in smaller enterprises. In addition, Europe's Horizon 2020's SME instrument, like Small Business Innovation Research and Small Business Technology Transfer programs in the United States, assists smaller research and technology enterprises conceive and develop commercially viable products. Both Europe and the United States have also developed cluster initiatives and web portals to assist small businesses access capital and find information about available governmental assistance. The European Commission and the SBA also sponsor research on the economic circumstances of small businesses and facilitate the training of aspiring entrepreneurs. They also tend to report performance measures that emphasize the volume of assistance provided (e.g., the number and amount of loans guaranteed and venture capital investments made) as opposed to the economic impact of that assistance (e.g., on the survival rate of recipients or the amount of wealth created). Differences Although the United States and Europe have implemented many programs that look relatively similar, there are important differences in the approaches and focus of the European and American small business policies. These differences derive primarily from the political and economic contexts in which the policies were created. For example, when the Small Business Administration was created in 1953, it inherited from its predecessor federal agency, the Reconstruction Finance Corporation, a role in providing disaster assistance to both small businesses and individuals. The European Commission's SME policies do not include disaster assistance. Both the Small Business Act for Europe (2008) and the U.S. Small Business Act (1953) indicate that its primary purposes are to assist small businesses in fostering competitive markets (e.g., by preventing large businesses from forming market oligopolies and monopolies) and to address market failures (e.g., the difficulties faced by small businesses in accessing capital). However, the Small Business Act for Europe and the European Commission's subsequent implementing policies and programs were created during one of Europe's most severe economic recessions in modern times. This may help to explain why the Small Business Act for Europe is much more explicit in its language concerning the need to focus on supporting SMEs as a means to create jobs than the U.S. Small Business Act. In addition, reflecting prevailing economic conditions in Europe, the Small Business Act for Europe has a greater focus on assisting small businesses engaged in specific industries deemed essential to Europe's competitive position in the world, such as international trade, tourism, and technology-related industries, including space exploration and satellite-based telecommunications and global environmental monitoring. Europe also has a greater focus on assisting small businesses offering products and services related to combating climate change, a relatively new issue not on the American political agenda during the 1950s. Although the SBA does have targeted programs for small businesses interested in trade and export promotion and offers venture capital support for small businesses that provide products, goods, or services that reduce the use or consumption of non-renewable energy resources, its primary focus is on promoting the interests of small businesses generally as opposed to specific industries. The EU is a treaty-based political and economic partnership that represents a unique form of cooperation among 28 sovereign states; in some areas (such as trade), member states have largely pooled their sovereignty—which gives the EU a supranational character—but in other areas (such as foreign policy), decisionmaking is intergovernmental and the EU behaves somewhat more like an international organization based on confederal principles. In contrast, the United States is a republic that is based on a federal system of government. This difference in governmental structure and organizational principles also helps to explain some of the differences between the United States' and the EU's approaches to small business policy. For example, given its supranational structure and deference to the independence of its sovereign member states, the European Commission's Small Business Act for Europe, unlike the United States' Small Business Act, is not legally binding on its member states. Instead, the European Commission must rely on its member states' goodwill in voluntarily adhering to the Small Business Act for Europe's 10 guiding principles. In addition, given its complex nature, there is an expectation in Europe that the EU's sovereign member states should take the lead in promoting small businesses in Europe and the European Commission should supplement its members' efforts. Given its federal nature, the expectation is reversed in the United States, with the federal government expected to take the lead and the states expected to supplement the federal government's efforts. This difference in expectations, in addition to the slightly smaller size of the European economy, may help to explain why the European Commission's SME programs are on a smaller scale than the SBA's programs. For example, COSME's Loan Guarantee Facility's goal is to provide between €14 billion and €21 billion in financing to SMEs over seven years (2014-2020) and Horizon 2020's InnovFin SME Guarantee program's goal is to provide €24 billion of debt and equity financing to innovative SMEs and Small Mid-caps by 2020. The SBA's loan guaranty programs provide between $20 billion and $25 billion in loan guarantees to small businesses each year. In addition, COSME's Equity Facility for Growth program's goal is to provide between €2.6 billion and €4 billion in venture capital financing to SMEs over seven years (2014-2020). The SBA's Small Business Investment Company program provides that amount of venture capital financing to small businesses each year. Size Standards Perhaps the most noticeable difference between the European and American approaches to providing assistance to small businesses is the size standard that is applied to determine if a business is eligible for assistance. With a few exceptions, both Europe and the United States provide small business assistance to independently owned and operated for-profit businesses. Both also have regulations in place to determine eligibility for small business that have affiliations with, or are otherwise linked to, other businesses. Both also provide eligibility to about 98% to 99% of all businesses in their economy. However, beyond these common elements, significant differences exist. SBA Size Standards By statute, the SBA employs size standards that account for differences among specific industries, with the goal of promoting competition in all industries and preventing any business that is considered dominant in its field of operations from receiving assistance. As a result, the SBA examines the structural characteristics of all 1,045 industrial classifications in 18 sub-industry activities described in the North American Industry Classification System (NAICS) and provides an industry specific size standard for each industry. The SBA generally "prefers to use average annual receipts as a size measure because it measures the value of output of a business and can be easily verified by business tax returns and financial records." However, historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small. As a starting point, the SBA presumes $7.0 million as an appropriate size standard for the services, retail trade, construction, and other industries with receipts based size standards; 500 employees for the manufacturing, mining and other industries with employee based size standards; and 100 employees for the wholesale trade industries. These three levels, referred to as "anchor size standards," are not minimum size standards, but rather benchmarks or starting points. To the extent an industry displays "differing industry characteristics," a size standard higher, or in some cases lower, than an anchor size standard is supportable. Before a proposed change to the size standards can take effect, the SBA's Office of Size Standards undertakes an analysis of the change's likely impact on the affected industry, focusing on the industry's overall degree of competition and the competitiveness of the firms within the industry. The analysis includes an assessment of five industry factors: (1) average firm size, (2) degree of competition within the industry, (3) start-up costs and entry barriers, (4) distribution of firms by size, and (5) small business share in federal contracts. The SBA also considers several other secondary factors "as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts on SBA programs." The SBA currently uses employment size to determine eligibility for 508 of 1,045 industries (48.6%), including all 364 manufacturing industries, 25 of 29 mining industries, and all 71 wholesale trade industries. Most manufacturing industries have an upper limit of 500 employees (98 of 364 classifications, or 26.9%), 750 employees (92 of 364 classifications, or 25.3%), or 1,000 employees (90 of 364 classifications, or 24.7%). Some manufacturing industries have an upper limit of 1,250 employees (58 of 364 classifications, or 15.9%) or 1,500 employees (26 of 364 classifications, or 7.2%). All 25 of the mining industries that use employment to determine eligibility have an upper limit of 500 employees. All 71 of the wholesale trades industries have an upper limit of 100 employees. The SBA currently applies one of nine employee-based industry size standards when determining an industry's small business size threshold (no more than 100, 150, 200, 250, 500, 750, 1,000, 1,250, and 1,500 employees). The SBA uses average annual receipts over the three most recently completed fiscal years to determine program eligibility for most other industries (531 of 1,045 industries, or 50.8%). The SBA also uses average asset size, as reported in the firm's four quarterly financial statements for the preceding year, to determine eligibility for five finance industries, and a combination of number of employees and barrel per day refining capacity for petroleum refineries. The SBA currently has 16 receipt based industry size standards in effect, ranging from $0.75 million or less to $38.5 million or less. In some instances, there is considerable variation in the size standards used within each industrial sector. For example, the SBA uses 10 different size standards to determine eligibility for 69 industries in the retail trade sector. In general, most administrative and support service industries have an upper limit of either $15.0 million or $20.5 million in average annual sales or receipts; most agricultural industries have an upper limit of $0.75 million in average annual sales or receipts; most construction of buildings and civil engineering construction industries have an upper limit of $36.5 million in average annual sales or receipts, and most construction specialty trade contractors have an upper limit of $15.0 million in average annual sales or receipts; most educational services industries have an upper limit of either $7.5 million or $11.0 million in average annual sales or receipts; most health care industries have an upper limit of either $7.5 million or $15.0 million in average annual sales or receipts; most social assistance industries have an upper limit of $11.0 million in average annual sales or receipts; many professional, scientific, and technical service industries have an upper limit of $15.0 million in average annual sales or receipts, but range from $7.5 million to $38.5 million; and most finance and insurance industries have an upper limit of $38.5 million in average annual sales or receipts. European Commission's Size Standard When designing its size standard during the 1990s, the European Commission decided not to make distinctions, as the United States does, to account for differences in circumstances among particular industries. Although it recognized advantages to employing a sector-by-sector approach (e.g., taking into account variations across sectors), the European Commission decided to adopt a less complex and more readily understood size standard. As a 2012 European Commission report evaluating its size standard's methodology noted, "the sectoral approach does add a certain amount of complexity to the calculation and revision of ceilings and means that it is not possible to cite a simple, straightforward criterion that apply across the board." After deciding to take an across-the-board approach, the European Commission examined existing small business definitions of other countries and its member states. After receiving recommendations from its member states, the European Commission focused on four criteria: (1) number of persons employed, (2) turnover (annual revenue), (3) balance-sheet total, and (4) independence (to ensure that the small business is not controlled by a large business or jointly controlled by several large businesses). The European Commission stated in its communication announcing its SME size standards in 1996 that "the criterion of number of persons employed is undoubtedly one of the most important and must be regarded as imperative but that introducing a financial criterion is a necessary complement in order to grasp the real importance and performance of an enterprise and its position compared to its competitors." It dismissed a threshold of 500 employees because, in its view, 500 employees "is not truly selective, since it encompasses almost all enterprises (99.9% of the 14 million enterprises [at that time]) and almost three-quarters of the European economy in terms of employment and turnover." It also dismissed a threshold between 250 and 500 employees because, in its view, businesses of that size not only "often have very strong market positions but they also possess very solid management structures in the fields of production, sales, marketing, research and personnel management, which clearly distinguish them from medium-sized enterprises with up to 250 employees." For these reasons, adopting a threshold of 250 employees was viewed as the most appropriate threshold, especially given that a threshold of 250 employees was already "the most prevalent threshold among the definitions used" by its member states at that time. The threshold for turnover (revenue) for the last approved 12-month accounting period was initially set at €40 million because "according to Eurostat figures, the turnover of an enterprise with 250 employees does not exceed €40 million (1994 figures)." The threshold for balance-sheet total was initially set at €27 million because that amount reflected the average ratio at that time between turnover and balance sheet total for smaller enterprises. It was anticipated that the ceilings would be amended "as the need arises" and "normally every four years from the adoption of this recommendation to take account of changing economic circumstances in the Community." Because the SBA's size standard for most manufacturing and mining businesses is 500 employees (or higher), it was initially thought by many observers that the SBA's size standards were "more generous" than the European Commission's size standard. However, while the SBA's employment ceilings for manufacturing and mining industries exceed Europe's 250 employee threshold, the SBA's employment ceilings for wholesale trade (100 employees or fewer) and average annual revenue ceilings for services, retail, construction, and agriculture industries are lower than in Europe. The aforementioned 2012 European Commission report on its size standards concluded that clearly in opting for a single set of criteria for all sectors covered, the EU has in effect reduced the ceiling in manufacturing, but increased it in services. Given the relative weight of services in the modern European economy, it is not altogether clear, therefore, which definition is more "generous" at the international level. Moreover, an economic analysis conducted on behalf of the European Commission found that the United States has "an industrial structure where, taking employment as a reasonable proxy, a greater part of the overall economy takes place in larger enterprises than is the case in Europe." That analysis found that more than 40% of people in the United States work for firms with 300 or more employees, "as compared with 33% for firms with more than 250 in the EU." The analysis concluded that because of this difference, "the ceilings for defining small business are likely to be higher [in the United States], if the objective is to promote a similar degree of competitive pressure." Concluding Observations The Small Business Act for Europe was the product of the political and economic context in which it was created. For example, its emphasis on creating jobs and targeting SME assistance to industries deemed essential to Europe's competitive position in world commerce was largely a reaction to the growing realization that its economic future was no longer going to be primarily decided by how well its member states competed against one another, but by how well Europe as a whole competed against the rest of the world, particularly with the United States, Japan, and China. In addition, its emphasis on assisting businesses engaged in research and innovation reflects the prevailing view in Europe that the nature of economic commerce is changing and that government has a role to play in helping European businesses adapt to an increasingly global and technological, knowledge-based economy. As the first sentence of the Small Business Act for Europe put it, "Managing the transition towards a knowledge-based economy is the key challenge for the EU today." Given Europe's economic circumstances, and lacking the legal authority to impose small business policies on its member states, the European Commission examined the small business policies in other nations, especially in the United States and Japan, and crafted 10 guiding principles it considered to best fit Europe's needs in an increasingly interdependent and global economy—emulating some policies (e.g., access to capital) and taking a different direction in others (e.g., size standards). Of course, given their differing political and economic circumstances, what works well for Europe may not work as well in the United States, and vice versa. Nevertheless, as the Europeans have demonstrated, examining what other developed countries are doing to assist smaller enterprises can be useful as each nation considers which policies may work best for them.

The Small Business Act for Europe (2008) is not an act, per se, as understood in the United States. It is a European Commission initiative, endorsed by the Council of the European Union, that provides 10 "guiding principles" to promote the growth of small- and medium-sized enterprises (SMEs) in Europe (e.g., "Create an environment in which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded," "Design rules according to the 'Think Small First' principle," and "Facilitate SMEs' access to finance and develop a legal and business environment supportive to timely payments in commercial transactions.") The European Commission was very aware of the United States' Small Business Act, the various programs offered by the U.S. Small Business Administration (SBA), and the SBA's definitions used to determine small business eligibility for assistance as it crafted its Small Business Act for Europe and designed its small business programs and size standard. It also examined small business policy in other nations, including Japan and China. In some instances, the European Commission enacted policies that are relatively similar to those found in the United States (e.g., both have programs designed to reduce small business regulatory burdens and enhance their access to capital). In others, the European Commission went in a different direction (e.g., size standards). The Small Business Act for Europe was the product of the political and economic context in which it was created. For example, both the Small Business Act for Europe and the U.S. Small Business Act (1953) indicate that their primary purposes are to assist small businesses in fostering competitive markets (e.g., by preventing large businesses from forming market oligopolies and monopolies) and to address market failures (e.g., the difficulties faced by small businesses in accessing capital). However, the Small Business Act for Europe and the European Commission's subsequent implementing policies and programs were crafted during one of Europe's most severe economic recessions in modern times. This may help to explain why the Small Business Act for Europe (1) is much more explicit in its language concerning the need to focus on supporting SMEs as a means to create jobs than the U.S. Small Business Act; (2) has a greater focus on assisting small businesses engaged in specific industries deemed essential to Europe's economic recovery and its competitive position in the world, such as international trade, tourism, and technology-related industries, including space exploration and satellite-based telecommunications and global environmental monitoring; and (3) has a greater focus on assisting small businesses offering products and services related to combating climate change, a relatively new issue not on the American political agenda during the 1950s. This report opens with a discussion of the European Commission's decision to use a size standard that is very different than the size standard used in the United States. It then examines the Small Business Act for Europe's various provisions and the major programs the European Commission has implemented to achieve the act's objectives. Next, it compares and contrasts the European and American approaches to assisting SMEs. This report provides information and analysis useful to Congress as it crafts small business policy for the United States. Given their differing political and economic circumstances, what works well for Europe may not work as well in the United States, and vice versa. Nevertheless, as the Europeans have demonstrated, examining what other developed countries are doing to assist smaller enterprises can be useful as each nation considers which policies may work best for them.

Current Tax Law Federal income tax laws provide certain allowances for the blind, the most important of which is the additional standard deduction amount allowed to legally blind taxpayers. Other special tax allowances are included in other provisions of the law, such as the exception from the 2% floor for deducting employee business expenses for impairment-related work expenses of handicapped employees. Only the additional standard deduction amount for the blind, however, is discussed in this short report. Under present law in 2008, individuals in general are entitled, for income tax purposes, to deduct from their income in lieu of itemizing deductions a standard deduction amount of $5,450 if single; $8,000 as head of household; or $10,900 if married and filing jointly. In addition, each married taxpayer is allowed an additional standard deduction amount of $1,050 if he/she is at least 65 years of age or blind; if both blind and 65 years of age or older they are each allowed an additional standard deduction amount of $2,100. (Thus, the total added deduction for a married couple, both of whom are blind and over 65, would be $4,200). If single or filing as head of household the additional standard deduction amount is $1,350 for age or blindness, and $2,700 for both. However, the additional standard deduction amount is not allowable for a dependent who is 65 years old or blind. The forgoing amounts are subject to adjustments for inflation. An additional standard deduction for other forms of handicap is currently not allowed by federal tax laws. Legislative History and Rationale The advocates of the special tax provisions for blind taxpayers justify it on the basis of need. They argue that blind persons incur certain expenses that sighted persons normally would not incur. For example, they say the blind often incur taxi fares to go shopping or to their place of employment whereas sighted persons may walk or take a less expensive form of transportation. Further, advocates say, those who are blind cannot mow their lawn, make many necessary home repairs, or perform all their own house cleaning. Consequently, blind persons pay for these services that would ordinarily be performed by those with sight. An employed blind person will frequently live near their place of employment, which may result in a higher rent than if he/she could live elsewhere. Thus, it was the incurring of additional expenses on account of blindness that was recognized when a special tax concession was first allowed blind taxpayers. Initially, in introducing the provision as a deduction in the Revenue Act of 1943, the House Ways and Means Committee stated "the committee has provided for a special deduction of $500 from the gross income of every blind person in order to cover the expenses resulting directly from blindness, such as the cost of readers and guides. This would relieve many blind persons of any tax whatsoever, and would reduce the tax of other blind persons." In a later tax bill (which became the Revenue Act of 1948) the deduction was changed to an additional personal exemption amount of $600 on the basis of these same considerations. In discussing the change, the House Ways and Means Committee noted that blind persons were benefitted by more than the $100 increase in amount. By substituting the exemption for the deduction, blind persons did not forfeit the ability to use the standard deduction. Additionally, as a personal exemption, it was easier to reflect the tax benefit in the income tax withholding tables so that tax relief was provided throughout the year rather than having to wait for a refund after tax filing. The tax provision for the blind in the Revenue Act of 1948 was incorporated in the Internal Revenue Code of 1954 , substantially unchanged. As the personal exemption increased over the years, so too did the amount of the additional exemption provided the blind. The exemption amount increased from $625 in 1970 to $1,080 in 1986. A comprehensive revision of the income tax code was made with enactment of the Tax Reform Act of 1986—designed to lead to a fairer, more efficient and simpler tax system. The act broadened the tax base so that tax rates could be lowered by removing the preferential treatment of certain classes of income and expenditures (e.g., capital gains, two-earner wage deduction, personal interest deductions, etc.). Further, the act provided for the repeal of the dividend exclusion, the political contributions credit and the provision of income averaging for all taxpayers. Both the personal exemption amount and the standard deduction amounts were raised, thus reducing the number of taxpayers who would find it advantageous to itemize their deductions. Further, the act repealed the additional personal exemption amount for the blind (and elderly) and in its place instituted an extra standard deduction amount for both blind and/or elderly taxpayers. This additional standard deduction amount is combined with the increased standard deduction provided by the 1986 act. Both the standard deduction and additional standard deduction amount for blind and/or elderly taxpayers were indexed for inflation in future years. In general, higher income taxpayers are more likely to itemize while lower and moderate income taxpayers more frequently use the standard deduction. The personal exemption is typically of greater value to higher income than lower income taxpayers. Thus, Congress in the 1986 tax act effectively targeted the tax benefits to lower and moderate income elderly and blind taxpayers by substituting an additional standard deduction amount for the additional personal exemption permitted under prior law. Assessment Advocates of the blind justify special tax treatment on the basis of need. It is argued that the blind face increased living costs. These costs arise from the need to hire readers and guides, etc. The blind are also frequently faced with additional expenses associated with earning income. These expenses are typically in the form of cab fares, specialized work equipment, etc. To the extent that the blind make these expenditures, it affects their ability to pay income taxes. Thus, the extra standard deduction amount can be seen as an attempt to compensate the blind for these added living and business expenses. However, as discussed below, it may also be said that the additional standard deduction accorded the blind does not meet horizontal equity principles in that all taxpayers with equal net incomes are not treated equally. Many blind individuals have low incomes. Low-income taxpayers most frequently use the standard deduction while higher income taxpayers are more likely than low-income individuals to itemize deductible items. Thus, as an additional standard deduction amount, this tax benefit for the blind is more likely to go to lower or moderate income blind taxpayers than higher income blind taxpayers who are more likely to itemize deductions. However, if this tax provision is truly based on need, then one objection opponents offer is that the provision does not offer equivalent treatment to other taxpayers with different handicapping conditions who may be in as much need of tax relief. For, just as the blind often incur special expenses due to their blindness, many other handicapped persons (e.g. amputees, learning disabled, hearing impaired, etc.) also incur special expenses due to their individual impairments. Some of the special expenditures made by the blind are frequently the same types of expenditures made by those with other handicapping conditions (i.e., travel costs to work or home, upkeep and repair services). Further, like the blind, the handicapped as a class usually have low incomes. It has been suggested that equity may not be the best tool to measure the merits of the additional standard deduction for blind taxpayers. Rather than equity, the question has been raised as to its effectiveness (that is, does the added standard deduction amount aid those needing tax relief?). The provision fails the effectiveness test since some low-income blind individuals, who already would be exempt from tax without the benefit of the additional standard deduction amount, receive no benefit. While these individuals are the most in need of financial assistance, they receive no benefit from the tax concession. Additionally, the provision does not benefit those blind taxpayers who itemize deductions (for example, those with large medical expenditures). Moreover, the value of the additional standard deduction amount is of greater benefit to higher rather than lower income taxpayers (in those cases where the taxpayer does not itemize). As mentioned in the brief summary of the law, a taxpayer that supports a blind dependent may not claim the additional standard deduction amount. Some believe that a taxpayer who incurs additional expenses on behalf of a blind dependent has as much justification to claim the additional standard deduction amount as that dependent. Questions arise as to why the provision for the blind has not spread to those taxpayers with other serious handicapping conditions. The legislative history indicates that administrative reasons initially precluded the addition of other handicapping provisions. Critics have argued that if it is appropriate and desirable to provide a subsidy to the lower-income blind, then similar subsidies should also be provided to other lower-income groups facing equivalent handicaps. Some have supported a shift from tax provisions to a grant program, since under a grant program, the revenue costs are known and benefits precisely targeted with conclusive rules and regulations. (However, a grant results in taxable income to the recipient unless specifically excluded by statute.) The current provision leads to pressures for tax concessions from other similar groups. However, the passage of an act, which allows many other handicaps the same tax advantage as the blind, would result in a substantial loss of revenue to the federal government. In general, enforcement procedures under the congressional budget process may raise significant hurdles to the consideration of legislation that would cause an additional revenue loss that is not accommodated by the annual budget resolution. Even so, legislation proposing such a revenue loss may be considered without triggering procedural sanctions if it is supported by majorities in the House and Senate sufficient to waive the enforcement procedures. Additional enforcement procedures based in statute (i.e., the "pay-as-you-go" requirement and limits on discretionary spending) effectively expired at the end of FY2002, and Congress and the President have not agreed on whether to renew them. Although it is true that more attention is focused on tax expenditures than in the past, they are still seen by many as "hidden" expenditures. A disadvantage of tax expenditures is that since they are not acted upon in the normal budgetary process, they are able to grow in revenue size and are not subject to periodic review. The Joint Committee on Taxation estimated that the revenue cost over the five fiscal years of 2007-2011 will be $8.9 billion for those who use the additional standard deductions available to the elderly and blind.

In the Revenue Act of 1943, a special $500 income tax deduction was first permitted the blind for expenses directly associated with readers and guides. This deduction for expenses evolved to a $600 personal exemption in the Revenue Act of 1948 so that the blind did not forfeit use of the standard deduction and so that the tax benefit could be reflected directly in the withholding tables. Congress attempted to target the tax benefit to low- and moderate-income blind individuals by replacing the tax exemption with an additional standard deduction amount with passage of the Tax Reform Act of 1986. The extra standard deduction amount provides tax relief that recognizes the increased costs of living and associated costs of employment for blind taxpayers. Since many blind taxpayers have low incomes, they are able to use the additional standard deduction amount provided under current tax law. However, this extra amount arguably does not meet the tax tests of horizontal equity and effectiveness. The provision has not been extended to other taxpayers with handicapping conditions because of administrative difficulties and the loss of additional federal tax revenues. This report will be updated in future years to reflect changes in law or in the additional standard deduction amount that is adjusted for inflation.

Exploited Weaknesses in Aviation Security The National Commission on Terrorists Attacks Upon the United States (the 9/11Commission) found that al Qaeda terrorists exploited weaknesses in the aviation security system tocarry out the attacks of September 11, 2001. Weaknesses in aviation security exploited by the 9/11terrorists included A pre-screening process that focused on detecting potential aircraft bombersand not potential hijackers; Lax checkpoint screening and permissive rules regarding small knives; A lack of in-flight security measures such as air marshals and reinforcedcockpit doors; An industry-wide strategy of complying with hijackers in a non-confrontationalmanner; and A lack of protocols and capabilities for executing a coordinated FederalAviation Administration (FAA) and military response to multiple hijackings and suicidalhijackers. The 9/11 Commission found that underlying these specific weaknesses and vulnerabilitiesin the aviation system was what they termed a failure of imagination among senior policymakers andagencies responsible for intelligence, national defense, and aviation security. The 9/11 Commissionconcluded that while suicide hijackings were by no means a far-fetched possibility given al Qaeda'spast methods and motives, "... these scenarios were slow to work their way into the thinking ofaviation security experts." (1) While some agencies were concerned about hijackings and had speculated about various hijackscenarios, there were no specific constructive actions taken to defend against these possible threatsprior to September 11, 2001. Furthermore, the likelihood of a suicide hijacking scenario was greatlyunderestimated. The 9/11 Commission also concluded that, before September 11, 2001,congressional oversight of aviation security was lacking while Congress focused its aviationoversight activities on airport congestion and passenger service. Regarding Congress's aviationrelated activities prior to September 11, 2001, The 9/11 Commission wrote: "Heeding calls forimproved air service, Congress concentrated its efforts on a 'passenger bill of rights' to improvecapacity, efficiency, and customer satisfaction in the aviation system. There was no focus onterrorism." (2) Legislative Actions Following the 9/11 Attacks In the aftermath of September 11, 2001, Congress moved quickly to pass the Aviation andTransportation Security Act (ATSA, P.L. 107-71 ; 115 Stat. 597). Designed to correct weaknessesin aviation security exploited by the 9/11 hijackers as well as other potential vulnerabilities intransportation systems, ATSA established the Transportation Security Administration (TSA) as anew organization within the Department of Transportation responsible for security matters in allmodes of transportation. Highlights of ATSA included Establishing a federal security screener workforce under TSA atairports; Requiring explosive detection screening of all checkedbags; Deploying air marshals on all high risk flights; and Hardening cockpit doors. ATSA also gave the TSA broad authority to assess threats to security in all transportationmodes, primarily focusing on aviation, and implement appropriate security measures. In this regard,ATSA was seen as a comprehensive legislative vehicle for addressing transportation security witha specific emphasis on aviation security. The following year, the Homeland Security Act of 2002 ( P.L. 107-296 ; 116 Stat. 2135)established the Department of Homeland Security (DHS) and placed the TSA within this newdepartment. The act also authorized the arming of airline pilots as an additional measure to protectaircraft against terrorist hijackers. Additional aviation security measures were included in the mostrecent FAA reauthorization act, Vision 100 - Century of Aviation Reauthorization Act ( P.L.108-176 ; 117 Stat. 2490). Most notably, Vision 100 established an aviation security capital fund tohelp pay for placing explosive detection systems (EDS) "in-line" with baggage conveyers and sortingfacilities in an effort to improve the efficiency and effectiveness of checked baggage screening andexpanded the program to arm pilots to include pilots of all-cargo aircraft. Despite these actions, congressional and administration oversight of aviation security hasidentified several areas of vulnerability that persist. These include air cargo operations; generalaviation; access controls for airport employees; screener performance; and possible terrorist attacksusing shoulder-fired missiles. Recommendations of the 9/11 Commission The 9/11 Commission also recognized many of these vulnerabilities. The 9/11 Commissionconcluded that "[m]ajor vulnerabilities still exist in cargo and general aviation security. These,together with inadequate screening and access controls, continue to present aviation securitychallenges." (3) Based onthese findings, the 9/11 Commission made specific recommendations regarding improvements toairport passenger and baggage screening, and air cargo security. While the commission identifiedpotential threats posed by inadequate access controls to secured areas of airports and general aviationoperations, it did not issue any recommendations pertaining to these risks. Also, while the 9/11Commission acknowledged concerns raised by previous and current administrations over possibleshoulder-fired missiles attacks against commercial airliners, it did not make any specificrecommendations regarding this threat. The 9/11 Commission delineated its recommendations regarding aviation security in a sectiontitled "A Layered Security System." As suggested by this title, the 9/11 Commission concluded thatthe TSA must implement a multi-layered security system that takes into consideration the full arrayof possible terrorist tactics. The 9/11 Commission noted that these various layers of security musteach be effective in their own right and must be coordinated with other layers in a manner thatcreates redundancies to catch possible lapses in any one layer. This conclusion is consistent withaviation security mandates under ATSA and TSA's concept of "concentric rings of security." (4) Since many facets of aviationsecurity have been addressed through legislation and administration actions since the 9/11 attacks,the 9/11 Commission focused its aviation security recommendations on persisting vulnerabilities incommercial aviation. While not all recommendations offered in the 9/11 Commission's final report were formallylabeled as such, CRS has identified six aviation-specific recommendations. (5) These are: 1) enhancingpassenger pre-screening; 2) improving measures to detect explosives on passengers; 3) addressinghuman factors issues at screening checkpoints; 4) expediting deployment of in-line baggagescreening systems; 5) intensifying efforts to identify, track, and screen potentially dangerous cargo;and 6) deploying hardened cargo containers on passenger aircraft. In addition to these sixaviation-specific recommendations, the 9/11 Commission also issued an overarchingrecommendation for transportation security policy to set priorities based on risk and implement themost practical and cost effective deterrents assigning appropriate roles and missions to federal, state,and local authorities, as well as private stakeholders. Enhancing Passenger Pre-Screening On September 11, 2001, passenger pre-screening consisted of three measures: the ComputerAssisted Passenger Prescreening System (CAPPS), answers to two security-related questions askedby airline ticketing and gate agents, and the presentation of photo identification to airline personnel.More than half of the September 11, 2001 hijackers were identified as "selectees" based on one ormore of these pre-screening techniques. However, there was little consequence to their selectionbecause, at the time, pre-screening was used solely as a tool to screen for individuals that might tryto bomb a passenger jet using methods similar to those employed in the bombing of Pan Am flight103. While the CAPPS system is still in use, its purpose has since been expanded to screen forpossible hijackers as well. CAPPS is maintained directly by the airlines as part of their securityprogram and uses computer algorithms to identify "selectees" based on matching passengers'behaviors (e.g., method of ticket purchase) to hijacker and bomber profiles. The follow-on to CAPPS, dubbed CAPPS II, has been embroiled in controversy for the pasttwo years over concerns regarding protection of personal data and civil liberties. As proposed,CAPPS II would implement a two step process to: 1) authenticate a passenger's identity usingcommercial databases; and 2) check that name against terrorist watch lists maintained by the federalgovernment. If flagged by the system, passengers could be either denied boarding or selected forsecondary screening. The 9/11 Commission recommended that improved passenger pre-screeningcapabilities should not be delayed while the argument about a successor to CAPPS continues. The9/11 Commission further recommended that the prescreening system should utilize the larger set ofwatchlists maintained by the federal government. Both the Homeland Security Appropriations Actfor FY2004 ( P.L. 108-90 ; 117 Stat. 1137) and Vision 100 directed the Department of HomelandSecurity to address these concerns and limited implementation of CAPPS II to system testing untilthe Government Accountability Office (GAO) verifies that adequate steps have been taken to addressthese concerns. However, in February 2004, the GAO found that the TSA had adequately addressedonly one of the eight concerns regarding CAPPS II implementation. (6) Continued reluctance by theairlines to provide data for testing CAPPS II due to liability concerns has also stymied progress. The9/11 Commission recommended that airlines should be required to supply the information neededto test and implement passenger pre-screening. Recent media reports indicate that the CAPPS II program has essentially been scrapped overprivacy concerns, however Secretary of Homeland Security Tom Ridge has suggested that a newprogram with a different name might eventually take its place. (7) In light of the 9/11Commission recommendation to forge forward with implementing a passenger pre-screening systemand the current lack of progress toward developing such a system, Congress may intensify itsoversight of the Secure Flight program, the successor to CAPPS, and engage in debate over the bestway to proceed. H.R. 10 contains a provision that would require the TSA to take overresponsibility for prescreening from the airlines withing 180 days on enactment and begin testingof the system by November 1, 2004. This measure is in line with administration plans for the testingand roll-out of the Secure Flight program. Improving Measures to Detect Explosives on Passengers Evidence highlighted by the 9/11 Commission indicated that al Qaeda has had a keeninterest in bombing airliners for some time. The 9/11 Commission's report describes Ramzi Yousef's1994 bombing of a Phillippines Airlines flight bound for Tokyo as a precursor to a larger operation-- the so-called "Bojinka" plot -- to bomb multiple U.S.-bound airliners over the Pacific ocean. Inthe Philippines Airlines bombing, Yousef reportedly assembled an improvised explosive device(IED) in the airplane's lavatory and hid it under a seat during the previous flight affixing a digitalwatch timer he had invented. Concerns over IEDs were brought to public attention in December 2001, when Richard Reidattempted to down a transatlantic flight using explosives concealed in a shoe. Concerns over IEDswere again raised by the media in October 2003 when a college student, Nathaniel Heatwole, snuckbanned items and materials resembling plastic explosives aboard passenger jets. While neither ofthese high profile incidents was cited in the 9/11 Commission report, the 9/11 Commissionacknowledged persisting weaknesses in the ability to detect explosives on passengers by formallyrecommending that the TSA and Congress give priority to improving detection of explosives onpassengers. The 9/11 Commission further recommended that, as a start, all individuals selected forsecondary screening undergo explosives screening. Current screening technologies and procedures offer limited capabilities to detect explosivescarried on passengers. While carry-on items and sometimes shoes are x-rayed and may be subjectedto secondary chemical trace detection screening methods, passengers are typically only screened bymetal detectors. New technology offers the capability to detect bomb-making chemicals onindividuals using trace detection methods. These systems are being operationally tested in varioustransportation settings including ongoing field tests at five airport sites: T.F. Green State Airport,Providence, RI; Greater Rochester International Airport, NY; San Diego International Airport, CA;Tampa International Airport, FL; and Gulfport-Biloxi International Airport, MS . Other possiblemethods for detecting explosives on passengers involve body scan imaging using low dose x-raybackscatter or other techniques. Body scan technology is considered somewhat more controversialbecause it renders a nude image of the scanned individual which is regarded by some as overlyintrusive. Alternative methods to these technologies include the use of bomb-sniffing dogs andphysical searches of individuals. In light of the 9/11 Commission recommendation, Congress maydebate whether and how to implement and fund an initiative for screening passengers using the mosteffective means available. (See CRS Report RS21920 , Detection of Explosives on AirlinePassengers: Recommendation of the 9/11 Commission and Related Issues .) Addressing Human Factors Issues at Screening Checkpoints The 9/11 Commission also recommended that the TSA conduct a human factors study tounderstand problems in screener performance and set attainable objectives for improvingperformance at screening checkpoints. Screener performance deficiencies were highlighted by arecent DHS Inspector General's audit that found poor screener performance among both federal andcontract screeners during covert testing at screening checkpoints. (8) The TSA has launched severalinitiatives to address these concerns. For example, the TSA has greatly expanded the use of threatimage projection (TIP), a system that tests screener on-the-job performance by projecting images ofthreat objects on x-ray monitors. Using data from TIP, researchers can assess certain humanperformance needs in aviation security. The TSA is also examining ways to improve the recurrenttraining of screeners. Key human factors issues are likely to include screener selection and training, fitness forduty, and human interaction with screening technologies. While the TSA maintains a small cadreof human factors researchers and some ongoing research in this area is being conducted byuniversities and contractors, research on aviation security human factors and funding for theseactivities pales in comparison to human factors research programs in the Department of Defense andFAA's safety-related human factors activities. Also, there presently is a lack of a comprehensivestrategic plan for addressing human factors in aviation security. In light of this recommendation and persisting concerns over screener performance, Congressmay conduct oversight to identify areas where TSA's human factors research efforts may not beadequately addressing concerns over passenger and baggage screening performance. Congress mayalso consider whether to task the National Academy of Sciences or some other independent bodywith examining human factors needs in aviation security. While the National Academy of Sciencesdid address human factors in its 1999 assessment of aviation security technologies, it has notconducted a focused study of human factors needs in the aviation security system and has notexamined this issue since the terrorist attacks of September 11, 2001. (9) H.R. 10 containsa provision that would require the TSA to conduct human factors studies to improve screenerperformance as part of a pilot program to examine next-generation checkpoint screeningtechnologies. Expediting Deployment of In-Line Baggage Screening Systems The 9/11 Commission recommended that the TSA expedite installation of in-line baggagescreening systems. Therefore, Congress may debate the adequacy of current funding for this activity. While Vision 100 authorizes up to $500 million annually to be deposited into the aviation securitycapital fund, only $250 million was appropriated in FY2004 and requested in FY2005 for thisactivity. Since the total cost of integrating EDS equipment at all passenger airports is estimated toexceed $4 billion, it may take several years to complete integration of baggage screening systemsgiven current funding levels. Letters of intent (LOIs) issued to airports by the TSA were establishedas a vehicle to leverage limited federal funding by stretching obligations over several years. LOIs were created in appropriations legislation as a means for TSA to convey to airports its intent toobligate future funds for the purpose of EDS integration. However, the TSA has, thus far,implemented LOIs by reimbursing airports for expenses as they are incurred. This approach couldfurther slow the progress of integrating EDS systems at airports. The 9/11 Commission also recommended that "[b]ecause the aviation industry will derivesubstantial benefits from [in-line EDS] deployment, it should pay a fair share of the costs." (10) However, defining thatfair share has been a significant point of contention. Airlines already indirectly pay the federal shareof EDS integration because the first $250 million annually, all that was budgeted in FY2004 for thisactivity, must come directly from aviation security fees paid by the airlines and their passengers. Airports pay a portion of the costs too, albeit a much smaller one. Under the scheme adopted byVision 100, large and medium-sized airports contribute 10% of the cost while small airportscontribute 5%. However, the TSA has proposed to reduce the federal obligations for these programsand increase the local share to 25% at large and medium-sized airports and 10% at small airports,a proposal that airports obviously oppose. The 9/11 Commission did not specifically say what theywould consider to be a more equitable contribution from industry, however their recommendationimplies that they believe industry is not paying its fair share under the current scheme. Congress may continue debate over the equity of cost-sharing for EDS integration in lightof this recommendation. The House homeland security appropriations bill ( H.R. 4567 )as reported included language to limit the federal share for airport security projects to 75% at largeand medium hubs and 90% at all other airports, however, this language was stricken by a point oforder during floor debate. Legislation introduced in the House ( H.R. 5121 ) seeks to double the amountcollected in aviation security fees that must be designated for aviation security capital fund from$250 million annually to $500 million annually for FY2005 through FY2007. H.R. 5121 also seeks to increase the TSA's flexibility to meet checked baggage security screeningrequirements by allowing it to enter into multi-year contracts, not to exceed 10-years, with airportsor third party vendors to provide EDS imaging capabilities. While most of the aviationsecurity-related provisions of H.R. 5121 were incorporated into H.R. 10 ,neither of these measures were included in H.R. 10. Intensifying Efforts to Identify, Screen, and Track Cargo The 9/11 Commission recommended that the TSA needs to intensify its efforts to identifysuspicious cargo, and appropriately screen and track potentially dangerous cargo in aviation as wellas in maritime operations. Stemming from recommendations of the Aviation Security AdvisoryCommittee (ASAC), a standing committee of aviation stakeholders, the TSA unveiled a strategicplan for cargo security in November 2003. That plan consists a multi-layered risk-based approachwith four key strategic objectives: 1) enhancing shipper and supply chain security; 2) identifyingelevated risk cargo through pre-screening; 3) identifying technology for performing targeted air cargoinspections; and, 4) securing all-cargo aircraft through appropriate facility security measures. (11) Goals of the plan includepre-screening all cargo shipments in order to determine their level of relative risk; working withindustry and federal partners to ensure that 100% of items considered to pose an elevated risk areinspected; developing and ensuring that new information and technology solutions are deployed; and,implementing operational and regulatory programs that support enhanced security measures. (12) The 9/11 Commissionrecommendations seem to imply that it concurs with TSA's overall approach as outlined in thisstrategic plan but feels that progress toward achieving these objectives must be accelerated, andperhaps, augmented. Since the 9/11 Commission recommendation provides no specific guidanceon how to intensify the identification, tracking, and screening of cargo, Congress may furtherscrutinize TSA's efforts on cargo security and further debate approaches to air cargo security. Recent debate in Congress over air cargo security has focused on the level of physicalscreening or inspection of cargo needed to adequately mitigate the risks posed by cargo placed onpassenger aircraft. While proposals have been offered to require 100% physical screening orinspection of all cargo placed on passenger aircraft, Congress has thus far supported TSA's plan to,instead, implement a risk-based approach that relies heavily on the known-shipper program anddatabase to assess shipments placed aboard passenger aircraft. Both H.R. 10 and S. 2845 contain measures to improve the screening and tracking of cargo. S. 2845 would specifically require the TSA to double the amount of air cargo screenedwithin one year. (see CRS Report RL32022, Air Cargo Security) . Deploying Hardened Cargo Containers In addition to these measures to improve cargo security, the 9/11 Commission specificallyrecommended the deployment of at least one hardened cargo container on every passenger aircraftthat also hauls cargo to carry suspicious cargo. The National Research Council examined this veryconcept in 1999 and concluded it would cost $125 million to acquire a sufficient number of hardenedcontainers. (13) They alsoestimated that the annual industry-wide cost of lost revenue due to reduced aircraft revenue payloadand increased fuel burn would total $11 million. Thus, even if a proposal were made to federallyfund this initiative, passenger airlines may oppose it because it would increase operational costs. It is likely that opponents of deploying hardened cargo containers would also argue that, ifrecommended initiatives are implemented to improve the identification, tracking, and screening ofcargo, then hardened cargo containers are not needed. On the other hand, proponents of deployinghardened cargo containers may argue that doing so creates a redundant layer of defense, analogousto a hardened cockpit door, that is consistent with the overarching goal of establishing amulti-layered security system with built-in redundancies. However, using just one hardened cargo container per passenger aircraft still leaves thesystem open to potential vulnerabilities that are directly tied to the effectiveness of measures toconduct risk-based assessments of cargo and flag suspicious cargo. For this reason, the TSAcurrently requires that all cargo from shippers that have not been properly vetted and verified throughthe known-shipper program be carried in all-cargo airplanes and not aboard passenger airplanes. While TSA is working on expanding its capabilities to detect high risk cargo, it is unclear how thissystem could be adapted to assign risk levels that would permit certain suspect cargo to travel inhardened cargo containers on board passenger airplanes. Also, from a policy standpoint, it is unclearwhat criteria could be used to permit shipment of suspicious cargo on passenger aircraft in hardenedcargo containers instead of offloading that shipment from passenger aircraft altogether. Congressmay debate whether deployment of hardened cargo containers could provide an effective layer ofsecurity to protect against potential cargo bombings. A key policy issue in this debate is likely tobe the possible implications of allowing suspicious cargo to travel on passenger aircraft even if theyare secured in hardened cargo containers. H.R. 10 contains a provision that would require TSA to carry out a pilot programto evaluate the use of blast-resistant containers for carrying baggage and cargo on passenger airliners. While S. 2845 does not contain a similar provision, legislation passed by the Senate onMay 9, 2003 ( S. 165 ), would require the DHS in coordination with the FAA to submita report evaluating blast-resistant cargo container technology. Risk-Based Prioritization as the Basis for Transportation Security Policy In addition to the aviation specific recommendations discussed above, the 9/11 Commissionalso issued an overarching recommendation that risk-based priorities for protecting all transportationassets be established. Based on this assessment of risks, the 9/11 Commission recommended thatTSA select the most practical and cost effective approaches for implementing defenses oftransportation assets and develop a plan, budget, and funding to implement this effort. The plan,according to the 9/11 Commission, should assign roles and missions to federal, state, and localauthorities, as well as to private stakeholders. Strategic Plan for Aviation Security. Therisk-based approach to aviation security is nothing new and has been viewed for some time as theprincipal policy tool for allocating limited resources. What is lacking, however, is a unified strategicplan for aviation security. To some extent, ATSA has set the strategy for aviation security followingthe terrorist attacks of September 11, 2001. The TSA's initial focus was on meeting the mandatesof ATSA, particularly deploying air marshals and federal screeners. Now that TSA has achievedsome level of normal operations, it should be better poised to focus on developing a more formalstrategy for national aviation security policy. Based on TSA's strategic approaches to date,particularly in addressing air cargo security needs, it is likely that a risk-based multi-layeredapproach to aviation security will form the core of future aviation security policy. This appears tobe largely in step with what the 9/11 Commission is recommending. In light of the 9/11Commission recommendation, Congress may consider whether to formally task the TSA withdeveloping a national strategy for aviation security that addresses funding needs, budgetaryimplications, and the appropriate roles of federal, local, and state authorities, and industrystakeholders. While some may argue that such a plan already exists in various TSA program plansand budget documents, others may argue that a more formal strategic planning document for aviationsecurity needs to be developed. Cooperation and Integration. While aviationsecurity relies extensively on cooperation and the integration of shared responsibilities, challengespersist in defining roles and allocating resources for state and local participation and industryinvolvement. At airports, the local role is defined in the airport security program which is tailoredfor each airport location. Physical security of the airport site is ultimately the role of localjurisdictions carried out by airport operators, while TSA maintains the overall role of securityoversight and enforcement as well as direct responsibility for passenger screening. The role of localgovernments, and in some cases state authorities, in aviation security often involves both lawenforcement support for airport site security and law enforcement presence at screening checkpoints. Passenger air carriers must also participate in security through procedures and training for controllingaccess to aircraft and secured areas of airports, carrying out security inspections of aircraft, and soon. In air cargo and general aviation, security measures rely heavily on the direct participation ofaircraft owners and operators, while the federal role is one of oversight and enforcement of aviationsecurity requirements. While implementing aviation security already involves federal, state, local, and industryparticipation, what appears to be lacking is a unified plan or strategy for: assigning roles andmissions to each stakeholder based on careful consideration of logistics and costs; and adopting asystems approach to define how each element contributes to the overall security strategy. In light of the 9/11 Commission recommendation, Congress and the TSA may consider waysto improve the strategic planning, resource allocation, and integration of federal, state, local, andprivate-sector resources for aviation security. Congress and the TSA may also consider how thespecific strategies and approaches to aviation security may be integrated with an overarchingtransportation security strategy that encompasses rail, maritime, and highway security as well andaddresses logistics, funding, and resource allocation to meet security needs in all modes oftransportation. H.R. 10 requires the Department of Homeland Security (DHS) toprepare and update a transportation security plan and modal security plans including a modal planfor aviation to: set risk-based priorities; select the most practical and cost-effective methods forprotecting aviation assets; and assign roles and missions to Federal, State, regional, and localauthorities, and aviation stakeholders. Congressional Actions in Response to the 9/11 CommissionRecommendations Since the release of the 9/11 Commission report, Congress has given considerable attentionto the recommendations contained in the report. The Senate Committee on Commerce, Science andTransportation held a hearing on the 9/11 Commission recommendations regarding transportationsecurity on August 16, 2004, and the House Subcommittee on Aviation held a hearing reviewing theaviation security recommendations of the 9/11 Commission. The 108th Congress passed two major pieces of legislation containing numerous provisionspertaining to aviation security: Vision 100 -- Century of Aviation Reauthorization Act ( P.L.108-176 ), which was enacted prior to the 9/11 Commission's final report, and the NationalIntelligence Reform Act ( P.L. 108-458 ; 118 Stat. 3638) which was enacted, in large part, in responseto the 9/11 Commission's recommendations.. Vision 100 -- Century of Aviation Reauthorization Act Before the 9/11 Commission had completed its report, several aviation security-relatedprovisions were included in Vision 100 - Century of Aviation Reauthorization Act ( P.L. 108-176 )which was enacted on December 12, 2003. Vision 100 established a redress process for pilots, mechanics or other licensed aviationprofessionals whose certification is denied, suspended, or revoked on the grounds that they pose arisk to aviation security. Vision 100 also requires the Federal Aviation Administration to providea justification to Congress when establishing an Air Defense Identification Zone (ADIZ) aroundcities where pilots are required to use special communications and operating procedures to enableair traffic controllers to identify potential security threats. Vision 100 also modified existing requirements for security training of airline flight andcabin crew members. Under these provisions, the airlines are responsible for providing mandatorybasic training in security for crews, while the TSA was to develop and provide a voluntary advancedself-defense training program for crew members. Vision 100 also required the Department of Homeland Security to study and report toCongress on the effectiveness of the aviation security system, including the air marshal program,hardening of cockpit doors, and security screening of passengers, checked baggage, and cargo. Thereport was to include recommendations, including legislative recommendations, for improving theeffectiveness of aviation security. Vision 100 also created the Aviation Security Capital Fund. The act authorizes up to $500million per year through FY2007 to be appropriated to this fund and requires that the first $250million in aviation security fee collections be deposited in this fund each year through FY2007. Theact also provided the Undersecretary for Border and Transportation Security with the authority toissue grants to airports for projects to integrate baggage explosive detection systems with baggageconveyer systems; reconfigure terminal baggage areas as needed to install explosive detectionsystems; deploy explosive detection systems behind the ticket counter, in baggage sorting areas, orin line with baggage handling systems; and for other aviation security-related capital improvementprojects. Vision 100 set the federal share of costs for such projects at 90% for large and medium hubairports, and at 95% for all other airports and set guidelines for the allocation of Aviation SecurityCapital Fund monies for these projects. Vision 100 also required the implementation of security programs for air charter operatorswho use aircraft weighing more than 12,500 pounds maximum takeoff weight. Vision 100 also required the Government Accountability Office (GAO) to review theproposed CAPPS II passenger prescreening system and prevented the TSA from fully implementingthis program until the Undersecretary for Border and Transportation Security certified that a varietyof enumerated issues pertaining to civil liberties, privacy, data protection, system security, systemperformance, and system oversight had been adequately addressed. The TSA has since scrapped theCAPPS II program and is developing an alterative prescreening system called "Secure Flight." Vison 100 also authorized flight crew members of all-cargo airlines to voluntarily participatein the Federal Flight Deck Officer Program that trains and deputizes armed pilots to guard aircraftcockpits against hostile attacks. Vision 100 also expanded the program to include other flight crewmembers, such as flight engineers, in addition to pilots. Vision 100 also requires the promulgation of regulations to ensure the security of foreign anddomestic aircraft repair stations. The act also requires the TSA, in coordination with the FAA, tocomplete a security review and audit of foreign repair stations that work on air carrier aircraft andcomponents. Vision 100 also modified the background check requirements for foreign pilots seeking flighttraining in the United States. The act transferred the duties of conducting these background checksfrom the Department of Justice to the DHS. The provisions require flight schools or instructors toprovide notification and identification information for individuals seeking training in smaller aircraft,weighing less than 12,500 pounds, and require background checks be completed before training canbe initiated in larger aircraft. The legislation authorizes fee collections to offset the costs ofconducting these background checks. For further discussion see CRS Report RL32498(pdf) , Vision 100: An Overview of the Centuryof Aviation Reauthorization Act ( P.L. 108-176 ) . The National Intelligence Reform Act of 2004 The National Intelligence Reform Act ( P.L. 108-458 ) contains numerous provisions relatedto aviation security, many directly addressing the concerns and recommendations of the 9/11Commission. The act requires the Department of Homeland Security to develop, prepare, implement, andupdate as needed, a National Strategy for Transportation Security as well as modal-specific securityplans including a plan for aviation security. The modal security plan for aviation is to include athreat matrix outlining each threat to the United States civil aviation system and the correspondinglayers of security in place to address these threats and a plan for mitigation and reconstitution of theaviation system in the event of a terrorist attack. The act requires the TSA to issue guidance for the use of biometrics in airport access controlsystems and establish a biometric credential and authentication procedures to identify lawenforcement officers authorized to carry firearms aboard passenger aircraft. The act authorizes $20million, in addition to any other authorized amounts, for research and development of biometrictechnologies for aviation security. The act also authorizes $1 million to establish a center ofexcellence in biometric technologies. The act required the TSA to begin system testing of an advanced passenger prescreeningsystem by January 1, 2005. Although the act does not provide a deadline for the completion oftesting the prescreening system, it requires the TSA to begin to assume the role of passengerprescreening and checking passenger names against watch lists no later than 180 days aftercompleting that testing. The act requires the TSA to establish redress and remedy procedures forpassengers who are delayed or denied boarding because of being falsely identified or targeted by thesystem, and requires the TSA to ensure that the number of such false positives is minimized. Theact also requires the TSA to establish an oversight board and implement safeguards to ensure thesecurity and integrity of the system and address and resolve any privacy concerns. The act alsorequires that the DHS prescreening of international flights to or from the United States be conductedprior to departure. The act further requires that individuals seeking FAA certificates, such as pilots andmechanics, as well as individuals requesting unescorted access to airport secure areas and airoperations areas be screened against the consolidated and integrated terrorist watch list. The act alsorequires the TSA to establish a process where air charter and leasing companies can voluntarilysubmit information regarding prospective customers seeking to use aircraft weighing more than12,500 pounds for prescreening. The act requires the Security Privacy Officer of the Department of Homeland Security toreport on the impact of the automatic selectee and no fly lists on privacy and civil liberties and theDirector of National Intelligence, in consultation with the Secretary of Homeland Security, theSecretary of State, and the Attorney General, to report on the criteria and standards applied in placingthe names of individuals on the consolidated screening watch list. The act also directs the DHS to give high priority to developing, testing, improving, anddeploying airport checkpoint screening technologies to detect nonmetallic, chemical, biological, andradiological weapons, and explosives on passenger and carry-on items and requires the DHS tocreate a strategic plan for the deployment and use of explosive detection equipment at airportscreening checkpoints. The act requires the TSA to initiate a pilot program to test advanced airportcheckpoint screening systems at five or more airports by March 31, 2005 and authorizes $150million per year in FY2005 and FY2006 to carry out this pilot. The act also requires the TSA tocarry out and report on a human factors study to better understand problems with screenerperformance and take such action as may be necessary to improve the job performance of airportscreening personnel. The act requires the Federal Air Marshal Service to continue operational initiatives to protectthe anonymity of Federal air marshals. The act also provides for training law enforcement officersauthorized to carry firearms on passenger aircraft in inflight counterterrorism and weapons handlingprocedures and in the identification of fraudulent identification documents such as passports andvisas. The act also encourages the President to pursue international agreements to enable themaximum deployment of Federal air marshals on international flights, and authorizes the DHS toprovide air marshal training to foreign law enforcement personnel. The act authorizes the TSA to take necessary action to expedite the installation and use ofin-line baggage screening equipment at airports. The act further requires the TSA to establish aschedule to expedite this activity and study cost-sharing options among federal, state, and localgovernments, and the private sector for integrating in-line baggage screening systems. The actincreases the authorization for the aviation security capital fund by authorizing up to $400 millionper year through FY2007, in addition to the initial $250 million deposited from aviation security feecollections set forth in Vision 100. The act directs the TSA to study the application of readily available wireless communicationtechnologies to enable cabin crew members to discreetly notify the pilot in the case of a securitybreach or safety issue occurring in the cabin. The act requires the FAA to begin issuing tamper resistant pilot licences with a photographof the bearer. The licence is to be capable of accommodating a digital photograph, a biometric, orany other unique identifier considered necessary for identification purposes. The act requires the TSA to develop and report to Congress on standards for determiningappropriate screener staffing levels at airports that provide necessary levels of security and keeppassenger wait times to a minimum. The DHS is also to study the feasibility of integratingoperations of the screening workforce and other aviation security-related DHS functions tocoordinate these activities and increase their efficiency and effectiveness. The act also authorizesthe expenditure of $100 million for research and development of improved explosive detectionsystems and directs the TSA to develop a plan and guidelines for implementing these systems. The act also requires the TSA to prohibit airline passengers from carrying butane lighters andany other objects considered by the TSA to be inappropriate carry-on items. The act also directs the President to urgently pursue international treaties to limit theavailability, transfer, and proliferation of Man-portable Air Defense Systems (MANPADSs), suchas shoulder-fired missiles, worldwide. The act further directs the President to continue to pursue international arrangements for the destruction of excess, obsolete, and illicit MANPADS stockpilesworldwide. The act requires the President to report on diplomatic efforts to address MANPADSnon-proliferation and requires the Secretary of State to provide the Congress with annual briefingson the status of these efforts. The act also requires the FAA to establish a process for expeditedcertification of airworthiness and safety for missile defense systems that can be mounted oncommercial aircraft. The act also requires the DHS to provide a report within one year assessing thevulnerability of aircraft to MANPADS attacks and plans for securing airports and aircraft from thisthreat. The act requires that a pilot program be established to evaluate the use of blast-resistant cargocontainers. The act authorizes $2 million to carry out this pilot program. The act also authorizes$200 million each year through FY2007 for improved air cargo and airport security related to thetransportation of cargo on both passenger aircraft and all-cargo aircraft, and $100 million per yearthrough FY2007 for the research, development, and deployment of technologies to better identify,track, and screen air cargo. The act establishes a grant program to encourage the development ofadvanced air cargo security technology. The act also requires the TSA to issue a final rule regardingits proposed regulations for the security of cargo operations for both passenger and all-cargo aircraft. Finally, the act requires the DHS, in coordination with the Department of Defense and the FAA, toreport on the threats posed by international cargo shipments bound for the United States and providean analysis of the potential for establishing secure facilities along established international aviationroutes for the purposes of diverting and securing aircraft believed to pose a security threat. In addition to the air-cargo security provisions in the National Intelligence Reform Act of2004, the Department of Homeland Security Appropriations Act, 2005 (P.L 108-334, Sec. 513)directs the DHS to research, develop, and procure certified systems to inspect and screen air cargoon passenger aircraft at the earliest date possible and amend security directives and procedures to,at a minimum, triple the percentage of cargo inspected on passenger aircraft Possible Continuing Policy Concerns for Congress Since the 108th Congress enacted several major provisions pertaining to aviation security,many directly reflecting the concerns and recommendations of the 9/11 Commission, there are fewpolicy concerns that were not addressed at all during the 108th Congress. However, two areas wheresome may consider that policy concerns were not adequately addressed through legislation in the108th Congress include general aviation security and air cargo security procedures and oversight. The 9/11 Commission made brief reference to concerns over the security of general aviationoperations, however it did not make any formal recommendations to address this concern. Duringthe 108th Congress, legislation on the security of general aviation operations focused on airport andairspace restrictions and examining ways to alleviate what some believed to be unnecessaryconstraints on certain operations. For example, a provision in Vision 100 required the DHS todevelop and implement a security plan allowing general aviation flights to resume at Ronald ReaganWashington National Airport but set no timetable for carrying out this provision. In appropriationslanguage, on the other hand, temporary flight restrictions over stadiums and other venues duringmajor outdoor sports events were kept in full force and made permanent. Arguably, the legislationpertaining to general aviation security enacted during the 108th Congress was viewed by many as notbeing as cohesive and comprehensive as legislation addressing other aviation security concerns. Some have expressed renewed concerns over the risk posed by general aviation corporate jets,private planes, and helicopters in response to a recent assessment prepared jointly by the FederalBureau of Investigation (FBI) and the DHS and widely reported in the press. (14) Some may also argue that comprehensive legislation pertaining to air cargo securityoperations and oversight and expansion of the known-shipper program were not adequatelyaddressed during the 108th Congress. Specifically, comprehensive measures that had been passedby the Senate in S. 165 (108th Congress) were stripped from the final version of theNational Intelligence Reform Bill of 2004 and replaced by language directing the TSA to make finalproposed rulemaking addressing these issues. This was presumably done because the TSA'sregulatory proposals largely reflected the intent of the proposed legislation. However, becauseCongress did not formally enact several of these specific provisions pertaining to air cargo securityoperations and oversight, the 109th Congress may be particularly interested in oversight of the TSA'simplementation of its air cargo security rules and its air cargo strategic plan to ensure that they meetdesired objectives.

The 9/11 Commission found that al Qaeda operatives exploited known weaknesses in U.S.aviation security to carry out the terrorist attacks of September 11, 2001. While legislation andadministration actions after September 11, 2001 were implemented to strengthen aviation security,the 9/11 Commission concluded that several weaknesses continue to exist. These include perceivedvulnerabilities in cargo and general aviation security as well as inadequate screening and accesscontrols at airports. The 9/11 Commission issued several recommendations designed to strengthen aviationsecurity by: enhancing passenger pre-screening; improving measures to detect explosives onpassengers; addressing human factors issues at screening checkpoints; expediting deployment ofin-line baggage screening systems; intensifying efforts to identify, track, and screen potentiallydangerous cargo; and deploying hardened cargo containers on passenger aircraft. In addition to thesespecific recommendations, an overarching recommendation for transportation security policy assertsthat priorities should be set based on risk, and the most practical and cost effective deterrents shouldbe implemented assigning appropriate roles and missions to federal, state, and local authorities, aswell as private stakeholders. In response to the 9/11 Commission's recommendations, the National Intelligence ReformAct of 2004 ( P.L. 108-458 ; 118 Stat. 3638) was enacted on December 17, 2004. The act containsnumerous aviation security provisions, many of which address 9/11 Commission recommendationsrelated to aviation safety. These provisions build upon prior aviation security-related provisions,contained in Vision 100 - the Century of Aviation Reathorization Act ( P.L. 108-176 ; 117 Stat. 2490)that was enacted a year earlier on December 12, 2003, addressing many of the concerns expressedby the 9/11 Commission. This report will not be updated.

General and Limited Purpose Conferees A valid conference report must carry the signatures of a majority of the conferees appointed by each chamber. House precedents state that "to be valid in the House, a conference report must be signed by a majority of the managers of the House and by a majority of the managers of the Senate." Similarly, Senate precedents provide that "[a] conference report to be valid must be signed by a majority of the conferees of each House...." In most cases, no problems arise in determining whether this requirement has been met. Under certain circumstances, however, questions may arise about whether a conference report carries sufficient signatures. These questions may arise especially in the House, and when one or both chambers appoint some of their conferees only for limited purposes. Usually, each house authorizes at least some of its conferees to negotiate on all the matters in disagreement between the two houses. Conferees with this blanket authority may be called "general conferees." Either house or both, however, also may authorize some of its conferees to negotiate only on certain of the matters committed to conference. For example, one chamber might appoint certain of its conferees only to consider title II of the Senate substitute and the corresponding provisions of the House bill. Conferees with this form of authority may be called "limited purpose conferees." Many limited purpose conferees are named as "additional" conferees, to negotiate along with the general conferees on the specified matters. Some, however, may be named as the "sole" conferees on the matters specified (in which case the authority of all other conferees also must be limited, so that they are not to negotiate on these matters). When limited purpose conferees are present, the matters before the conference may be thought of as divided into several portions, on each of which a different group of conferees is authorized to negotiate. The memberships of these different panels of conferees, of course, may overlap. Validity of Conference Reports in House and Senate When limited conferees are present, the House and Senate determine whether a conference report carries a sufficient number of signatures in different ways. Senate Standard The Senate does not often appoint conferees for limited purposes. One reason may lie in how the Senate counts to determine the sufficiency of signatures on conference reports. In the Senate, a valid conference report must carry the signatures of a majority of the Members from each chamber who were appointed as conferees, without regard to whether or not any of those Members were appointed as conferees only for limited purposes. The House Parliamentarian's handbook of current precedent, House Practice , states that "[U]nder Senate practice, signatures are counted strictly per capita." House Standard The House is more likely than the Senate to appoint conferees for limited purposes, and the House has a different standard for determining whether there is a sufficient number of signatures on a conference report. In the House, a valid conference report must carry the signatures of a majority of the Members from each chamber who were appointed to consider each provision or amendment in conference. "In the House," according to House Practice, "each provision must be signed by a majority of the Members appointed for that provision only (including general and additional conferees)." Application Each chamber uses its standard not only to determine whether a majority of its own Members have signed a conference report, but also to determine whether the report carries the requisite number of signatures from Members of the other chamber . For example, consider a typical case, in which the House appoints limited purpose conferees and the Senate does not. In the House, whether a sufficient number of Representatives have signed the conference report depends on a separate determination for each portion of the bill and amendment (or amendments) committed to conference. For each portion of the matters in disagreement, it will be necessary to count how many Representatives were appointed to consider that portion, and then to determine whether a majority of that number signed the report. If a majority of those appointed to consider any one portion of the matters in disagreement fail to sign the report, the report is not valid even if it carries the signatures of all the other House conferees. In the Senate, however, it is sufficient to count the number of Representatives who were appointed as conferees for any purpose—that is, the total number of both general and limited purpose conferees—and ascertain whether a majority of that number signed the conference report. Illustrations Instance When Both the House and Senate Appointed Limited Purpose Conferees To illustrate the application of the House and Senate standards, consider the rosters of Representatives and Senators appointed as conferees on H.R. 1000 of the 106 th Congress, the Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century. In this example, both the House and the Senate appointed both general and limited purpose conferees. The Senate appointed 14 Senators from two committees. Nine Senators from the Committee on Commerce, Science, and Transportation were appointed for the consideration of the entire bill. The Senate also appointed five Senators from the Committee on the Budget to consider only title IX of the bill. The House appointed 29 Representatives, 20 of them for all purposes and nine for only limited purposes. In addition to the 20 managers appointed to consider the entire bill, the Speaker appointed three conferees from the Committee on the Budget for the consideration of titles IX and X of the House bill, three conferees from the Committee on Ways and Means for the consideration of title XI of the House bill, and three conferees from the Committee on Science for the consideration of title XIII of the Senate amendment and modifications committed to conference. In the Senate, the conference report would not be valid unless a majority of all the conferees from each chamber signed it. In other words, if any eight Senators and any 15 Representatives signed the report, then the report would have a sufficient number of signatures for the Senate to consider it. The House, however, would determine whether a sufficient number of Representatives signed the conference report according to its own standard. In our example, the signatures of a majority of the nine Senators appointed to consider the whole bill would be required for all titles except title IX. In other words, five Senators would need to sign the report for those titles. For the report to be valid in the House with respect to title IX, however, a majority of the full 14 Senators appointed would need to sign for the report, or eight Senators. Similarly, for the report to be valid in the House, 11 Representatives, or a majority of the 20 general conferees appointed, would need to sign the report for all the titles except IX, X, XI and XIII. For titles IX and X, signatures would have to be gathered from any 12 of the 23 Representatives appointed for the consideration of those titles. In other words, a majority of the 23 conferees (20 general conferees plus the three limited purpose conferees from the Committee on the Budget) appointed to consider titles IX and X would need to sign the report. In the same way, a majority of the 23 House conferees appointed to consider title XI, and a majority of the 23 House conferees appointed to consider title XIII, would also need to sign the report. Table 1 graphically displays the information in the above paragraphs. Complex Instance The difference between House and Senate standards for the sufficiency of signatures became an issue in the 106 th Congress when S. 900 , the Financial Services Modernization Act of 1999, went to conference. The Senate appointed 20 conferees, 11 Republicans and nine Democrats, all with no restrictions on their authority. The House initially appointed 42 conferees, drawn from four different House committees, each of which had jurisdiction over some provision or provisions of the Senate bill or the House amendment in the nature of a substitute. Of these 42, 23 were appointed as general conferees to consider the entire Senate bill and the entire House substitute. All the other House conferees were appointed for limited purposes, some much more limited than others. The most complex appointments were for members of the House Committee on Banking and Financial Services. Eight Republicans and two Democrats from that committee were appointed to the conference committee for all purposes. Eleven other Democrats from the committee were appointed in five overlapping groups, each consisting of four limited purpose conferees authorized to consider one or more titles of the House and Senate versions of the bill. As a result, each group of conferees from the Committee on Banking and Financial Services consisted of eight Republicans and six Democrats. Republicans constituted a majority of each panel of House conferees. The way in which the separate panels of limited purpose Democratic conferees from the Committee on Banking and Financial Services were made up, however, meant that the total number of House Members appointed as conferees included 20 Republicans and 22 Democrats. Some Senate conferees objected that this configuration opened up the possibility of a conference report that could be held valid for consideration in the Senate, under the Senate standard, even though no House Republicans had signed it. Subsequently, the Speaker appointed four additional Republican members as limited purpose conferees, and correspondingly restricted the role of four Republicans initially appointed as general conferees. The four new conferees were authorized to negotiate only on certain narrowly specified provisions of the bill. The authority of the four initial appointees was restricted to the remaining portions of the bill, so that they became limited purpose conferees as well. This change reduced the total number of House general conferees from 23 to 19. More significantly, however, the four new appointments brought the total number of House conferees to 46, made up of 24 Republicans and 22 Democrats. Additional Information For related information from CRS on conference procedures in Congress, see the following products available on the CRS website, under "Congressional Operations," at http://crs.gov/analysis/Pages/CongressionalOperations.aspx?source=QuickLinks . CRS Report RS20454, Going to Conference in the Senate , by [author name scrubbed]. CRS Report 98-380, Senate Conferees: Their Selection and Authority , by [author name scrubbed]. CRS Report RS22733, Senate Rules Restricting the Content of Conference Reports , by [author name scrubbed]. CRS Report RS20227, House Conferees: Selection , by [author name scrubbed]. CRS Report RS20219, House Conferees: Restrictions on Their Authority , by [author name scrubbed]. CRS Report 96-708, Conference Committee and Related Procedures: An Introduction , by [author name scrubbed]. CRS Report 98-696, Resolving Legislative Differences in Congress: Conference Committees and Amendments Between the Houses , by [author name scrubbed].

The House and Senate both require that a conference report be signed by a majority of House conferees and a majority of Senate conferees. When some conferees are appointed only for limited purposes, the two chambers have different ways of counting to determine whether the conferees' report carries sufficient signatures. The Senate asks whether the report is signed by a majority of all the conferees from each house, without regard to whether those conferees were appointed for all or for limited purposes. The House asks whether the report is signed by a majority of all the conferees from each house who were appointed to consider each of the matters that were submitted to the conference committee. This report will be updated if procedural changes warrant.

Introduction In disputes between Congress and the executive, questions arise about Congress's ability to turn to the federal courts to vindicate its powers and prerogatives or for declarations that the executive is in violation of the law or the Constitution. This report seeks to provide an overview of Congress's ability to participate in litigation before Article III courts. The report is limited to a discussion of Congress's participation in litigation as either a plaintiff (e.g., the party initiating the suit alleging some sort of harm or violation of law) or as a third-party intervener (e.g., a party who is seeking to join litigation already initiated by another plaintiff). The report does not address situations where Congress or individual Members appear as a defendant, or congressional participation in court cases as amicus curiae ("friend of the court"), as those situations do not raise the same legal and constitutional questions at issue when Congress or a Member is the party plaintiff. Congressional plaintiffs, whether they be individual Members, committees, houses of Congress (i.e., the House or Senate), or legislative branch entities, must demonstrate that they meet the requirements established by Article III of the Constitution in order to participate as party litigants. Specifically, a prospective congressional plaintiff must show that he has standing to sue. The failure to establish standing is fatal to the litigation and will result in its dismissal without the court addressing the merits of the presented claims. The Supreme Court's 1997 decision in Raines v. Byrd has had a chilling effect on the ability of individual Members of Congress to demonstrate Article III standing and thereby have their claims adjudicated in federal court. However, Members or committees who are authorized to sue and act on behalf of a whole house have been able to establish standing under certain circumstances, even after the Raines decision. Courts have emphasized the distinction between suits brought by individual congressional plaintiffs asserting abstract and diffuse injuries and suits brought by organs of Congress alleging concrete institutional harms. Recent case law in this area suggests that suits brought by Congress in an institutional capacity have a greater chance of satisfying standing requirements than do cases where individual Members attempt to assert political or institutional injuries based on executive action. Article III Standing Generally, the doctrine of standing is a threshold procedural question that does not turn on the merits of a plaintiff's complaint, but rather on whether the particular plaintiff has a legal right to a judicial determination on the issues before the court. The law with respect to standing is a mix of both constitutional requirements and prudential considerations. Article III of the Constitution specifically limits the exercise of federal judicial power to "cases" and "controversies." Accordingly, the courts have "consistently declined to exercise any powers other than those which are strictly judicial in nature." Thus, it has been said that "the law of Article III standing is built on a single basic idea—the idea of separation of powers." Constitutional Requirements To satisfy the constitutional standing requirements in Article III, the Supreme Court imposes three requirements. First, the plaintiff must allege a personal injury-in-fact, which is actual or imminent, concrete, and particularized. Second, the injury must be "fairly traceable to the defendant's allegedly unlawful conduct." Third, the injury must be "likely to be redressed by the requested relief." Prudential Requirements In addition to the constitutional questions posed by the doctrine of standing, federal courts also follow a well-developed set of prudential principles that are relevant to a standing inquiry. Similar to the constitutional requirements, these limits are "founded in concern about the proper—and properly limited—role of the courts in a democratic society," but are judicially created. Unlike their constitutional counterparts, prudential standing requirements "can be modified or abrogated by Congress." These prudential principles require that (1) the plaintiff assert his own legal rights and interests, rather than those of a third party; (2) the plaintiff's complaint fall within the "zone of interests" protected or regulated by the statute or constitutional guarantee in question; and (3) the plaintiff not assert "abstract questions of wide public significance which amount to generalized grievances pervasively shared and most appropriately addressed in the representative branches." Individual Members of Congress as Plaintiffs As applied to congressional plaintiffs, the doctrine of standing has generally been invoked only in cases involving challenges to executive branch actions or acts of Congress. Prior to the Supreme Court's 1997 decision in Raines v. Byrd , the case law with respect to the standing of Members of Congress had been largely, though not exclusively, developed by decisions of the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit). Individual Member Standing Prior to Raines v. Byrd Before Raines v. Byrd was decided in 1997, the D.C. Circuit relied on two Supreme Court decisions in developing the law of legislative standing. The first case, Coleman v. Miller , involved the ratification of a constitutional amendment, concerning child labor practices by the Kansas state legislature in 1937. Coleman was initiated by 24 members of the Kansas legislature, who asserted that the Lieutenant Governor acted beyond the scope of his authority by casting the tie-breaking vote to ratify a proposed amendment to the U.S. Constitution. The Member plaintiffs asked the court to order the Secretary of the State Senate to erase the state's ratification of the amendment. The Kansas Supreme Court rejected the request, holding that the Lieutenant Governor was authorized to cast the tie-breaking vote to ratify the amendment. On appeal to the U.S. Supreme Court, the Kansas attorney general argued that the legislators lacked standing to challenge the ratification. In addressing the standing argument, the Court held that the legislators had a "plain, direct and adequate interest in maintaining the effectiveness of their votes[,]" and thus, had standing under Article III. In addition, the Court reasoned that these legislators claimed a right and privilege under the Constitution to have their votes against ratification be given full effect, and that the state court denied them that right and privilege. Therefore, the Court declared that the legislators, if their contentions proved true, had a sufficient interest in the controversy. Despite holding that the legislators had standing, the Court affirmed the holding of the Kansas Supreme Court. According to the Court, because Article V of the Constitution grants Congress undivided power to control the amendment process, questions regarding ratification of constitutional amendments are "political questions" and, therefore, non-justiciable. The second major case relied upon by the D.C. Circuit was Powell v. McCormack . Powell involved a challenge by Representative Adam Clayton Powell, Jr., who alleged that he was unconstitutionally excluded from the House of Representatives and, therefore, deprived of his federal salary. The Court held that Representative Powell had standing because he was able to demonstrate a private, personal injury not merely an institutionally related one. As the Supreme Court would later note in Raines v. Byrd , Powell's injury really involved the "loss of [a] private right"—his right to his congressional seat and salary—and not an institutional injury, like the "loss of political power." Given the Supreme Court's limited precedent, D.C. Circuit decisions have been the principal source of jurisprudence regarding the standing of individual Members of Congress to bring civil suits in federal court. The D.C. Circuit has developed several different approaches to the standing question since the 1970s. The first approach arose in Mitchell v. Laird , a suit brought by 12 Members of the House of Representatives against President Richard Nixon and the Secretaries of State, Defense, and the military branches, alleging that they were conducting an unconstitutional military operation in Southeast Asia since Congress had never expressly declared war. In granting the Members standing, the D.C. Circuit adopted a broad theory of legislator standing, best described as the "bears upon" test. The court concluded that the Members had sufficient interest to have standing because a judicial declaration that the defendants were operating beyond the scope of their constitutional duties "would bear upon the duties of the [Members] to consider whether to impeach defendants and upon [the Members] quite distinct and different duties to make appropriations ... or to take other actions to support the hostilities.... " Although the court ultimately dismissed the case on political question grounds without deciding the merits, the rationale for legislator standing remained the law of the circuit and arguably provided fodder for additional lawsuits by Members against other government officials. Beginning in 1974, the D.C. Circuit issued a series of opinions that rejected the "bears upon" test and changed the standard for legislator standing. The first of these cases, Kennedy v. Sampson , involved a suit by Senator Edward M. Kennedy against the General Services Administration (GSA), seeking a GSA certification stating that the Family Practice Medicine Act had become federal law. Although the bill had passed both houses of Congress and was presented to the President, Congress recessed before the 10 days that the President had to sign or veto the bill had elapsed. President Nixon refused to sign the bill into law and argued that because Congress was not in session, the bill failed to become law by virtue of a "pocket veto." Senator Kennedy asserted that the language in the Constitution authorizing a "pocket veto" only applied to end-of-session adjournments, and not intra-session recesses of the Congress. Prior to reaching the merits, the court addressed Senator Kennedy's Article III standing. The court put forth two approaches to adjudicating such claims, neither of which was the "bears upon" test. The court's first approach asked "whether a 'logical nexus' exists between the status asserted by a litigant and the claim sought to be adjudicated." The court found that such a "logical nexus" existed, concluding that Members of Congress can challenge "the validity of executive action which purports to have disapproved of an Act of Congress by means of a constitutional procedure which does not permit Congress to override the disapproval." The court's second approach asked whether the plaintiff alleged that the action caused him "'injury in fact,' economic or otherwise" and whether "the interest sought to be protected [is] 'arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.'" The court concluded that Senator Kennedy's injury denied him the effectiveness of his vote as a U.S. Senator. Furthermore, this interest was within the "zone of interest" protected by Article I, Section 7 of the Constitution. Finally, the court addressed a question unsettled after the Supreme Court's decision in Coleman : can only one or several legislators have standing, or must the entire legislature be before the court? The Nixon Administration had argued that "only the interests of the Congress or one of its Houses as a body are protected by this provision." The court rejected the Administration's reading of Coleman , holding that "the better reasoned view of both Coleman and the present case is that an individual legislator has standing to protect the effectiveness of his vote with or without the concurrence of other members of the majority." The D.C. Circuit further refined its approach to legislative standing cases in Harrington v. Bush and Goldwater v. Carter . Harrington involved a suit by Congressman Michael Harrington seeking a declaratory judgment that the Central Intelligence Agency was engaging in illegal activities. In deciding that Congressman Harrington did not have standing, the court clearly stated that "[t]he most basic point to consider is that there are no special standards for determining Congressional standing questions." Although congressional plaintiffs may have unique issues and concerns, the legal approach for examining those issues is the same, requiring the party to allege "a distinct and palpable injury to himself." In determining whether Congressman Harrington met this standard, the court adopted the Kennedy approach, which "relies on nullification of a specific vote as the requisite injury in fact." Using this standard, the court found that Harrington had no injury because neither his future votes on matters related to funding the CIA were impaired, nor was his effectiveness as a legislator objectively diminished. The D.C. Circuit continued this line of reasoning in Goldwater v. Carter , focusing on how to interpret disenfranchisement of a Member's right to vote. Senator Barry Goldwater brought suit against President Carter over the unilateral termination of the Mutual Defense Treaty with the Republic of China (Taiwan). According to Senator Goldwater, the President's action was unconstitutional because he did not submit the treaty to the Senate for a vote on its termination. Thus, the Senator argued he suffered an "injury in fact" because he was completely denied the right to vote on the treaty's termination. The court agreed, noting that "to be cognizable for standing purposes the alleged diminution in congressional influence must amount to a disenfranchisement, a complete nullification or withdrawal of a voting opportunity." Furthermore, "the plaintiff must point to an objective standard in the Constitution, statutes, or congressional house rules, by which disenfranchisement can be shown." In concluding that Senator Goldwater had been so disenfranchised, the court set forth the standard for determining when a nullification occurs. According to the court, "[w]hether the President's action amounts to a complete disenfranchisement depends on whether [the Members] have left to them any legislative means to vote in the way they claim is their right." After the court's decision in Goldwater , it appeared that the law of legislator standing was settled. Legislators seeking to bring suit in federal court had to demonstrate a concrete injury in fact resulting in the complete disenfranchisement of their right to vote. In addition, a Member had to show that no other legislative remedies were available. The mere fact that the executive had violated the law arguably was no longer sufficient, nor was mere diminution in effectiveness as a Member of Congress. Further, the court established that it did not matter whether one or several legislators brought suit, as the entire Congress or even a single house was not required to be a party. The settled nature of the law, however, did not last long. In 1979, Senator Donald Riegle brought suit against the Federal Open Market Committee, arguing that it was unconstitutionally constituted because its appointees were not submitted to the Senate for its "advice and consent." In Riegle v. Federal Open Market Committee , the D.C. Circuit concluded that, once a Member of Congress can establish standing under the rules applied in non-congressional plaintiff cases, the separation of powers issues raised by the Member's suit should be addressed by applying the "doctrine of circumscribed equitable discretion." As explained by the court, this doctrine is a prudential principle that requires suits brought by Members of Congress, who have demonstrated standing, to be dismissed if the Member "could obtain substantial relief from his fellow legislators through the enactment, repeal, or amendment of a statute.... " This "legislative remedy" aspect of the doctrine seems to reflect a judicial reluctance to provide a forum to a Member who has failed to exhaust possible legislative avenues of relief, or who has done so unsuccessfully. Additionally, in these instances the court suggested that "it is probable" that a private plaintiff could establish standing without implicating the same separation of powers concerns. However, "[w]hen a congressional plaintiff brings a suit involving circumstances in which legislative redress is not available or a private plaintiff would likely not qualify for standing, the court would be counseled under our standard to hear the case." Ultimately, the Riegle court created a distinct division between the standing and separation of powers analyses, placing existence of a legislative remedy under the latter inquiry. After Riegle , it appears that Members had some success in establishing standing, but such suits were frequently dismissed on the basis of the equitable discretion doctrine. The problems presented by congressional plaintiff suits were explained by the D.C. Circuit in an important post- Riegle ruling, Moore v. U.S. House of Representatives : Suits against coordinate branches of government by congressional plaintiffs pose separation-of-powers concerns which may affect a complainant's standing to invoke the jurisdiction of the federal courts. To the extent that the Constitution envisions limited federal court jurisdiction out of respect for the coordinate branches of government, we have been reluctant to grant standing to members of Congress alleging generalized, amorphous injuries due to either the actions of their colleagues in Congress or the conduct of the Executive.... [W]here separation-of-powers concerns are present, the plaintiff's alleged injury must be specific and cognizable in order to give rise to standing.... Deprivation of a constitutionally mandated process of enacting law may inflict a more specific injury on a member of Congress than would be presented by a generalized complaint that a legislator's effectiveness is diminished by allegedly illegal activities taking place outside the legislative forum. Raines v. Byrd In 1997, the Supreme Court decided Raines v. Byrd , which presented a constitutional challenge to the Line Item Veto Act of 1996. The Court, in an opinion by Chief Justice Rehnquist, held that the plaintiffs, Members of Congress who had voted against the act, lacked standing because their complaint did not establish that they had suffered a personal, particularized, and concrete injury. Although the holding was based on the Court's finding that the plaintiffs did not satisfy the personal injury requirement of standing, the Court also questioned whether the plaintiffs could meet the second standing requirement, that the plaintiffs' injury be "fairly traceable" to unlawful conduct by the defendants. The plaintiffs' injury was allegedly caused not by the executive branch defendants' exercise of legislative power, but instead by "the actions of their own colleagues in Congress in passing the act." The majority opinion distinguished between a personal injury to a private right, such as the loss of salary presented in Powell v. McCormack , and an institutional or official injury. The Court held that a congressional plaintiff may have standing in a suit against the executive branch if the plaintiff(s) alleges either (1) a personal injury (e.g., the loss of a Member's seat) or (2) an institutional injury that is not "abstract and widely dispersed" and amounts to vote nullification. In Raines , the Court concluded that the plaintiffs asserted an institutional injury, but their votes were not nullified because of the continued existence of other legislative remedies. As the Court explained, They have not alleged that they voted for a specific bill, that there were sufficient votes to pass the bill, and that the bill was nonetheless deemed defeated. In the vote on the Line Item Veto Act, their votes were given full effect. They simply lost that vote. Nor can they allege that the Act will nullify their votes in the future in the same way that the votes of the Coleman legislators had been nullified. In the future, a majority of Senators and Congressman can pass or reject appropriations bills.... In addition, a majority of Senators and Congressman can vote to repeal the Act, or to exempt a given appropriations bill (or a given provision in an appropriations bill) from the Act.... Coleman thus provides little meaningful precedent for appellees' argument. As a result, under Raines it appears that a congressional plaintiff is more likely to establish standing where he alleges a particular personal injury, as opposed to an injury related to a generalized grievance about the conduct of government or an injury amounting to a claim of diminished effectiveness as a legislator. The Court in Raines seemed prepared to recognize the standing of a Member who alleged a personal injury to a private right. However, it concluded that the Raines plaintiffs' asserted injury, affecting their voting power, was an institutional or official injury that did not confer standing. It appears that the limits on Member standing established in Raines will likely preclude a Member from obtaining standing in a suit challenging an act of Congress because legislative remedies, such as the repeal or amendment of the act in question, would be available, which would prevent a court from finding vote nullification. In addition, though the Court did not expressly overrule Coleman , Kennedy , or Riegle , Raines also appears to restrict, but not eliminate, a Member's ability to establish standing to challenge an executive action. Arguably, a Member plaintiff who can show that an executive action nullified his vote could establish standing to sue based on an institutional injury. Individual Member Standing After Raines v. Byrd D.C. Circuit decisions involving individual Members of Congress following Raines have attempted to clarify both the meaning of "vote nullification" and the status of the D.C. Circuit's pre- Raines rulings. With respect to the status of its pre- Raines rulings, a majority of the D.C. Circuit in Chenoweth v. Clinton concluded that the Supreme Court's decision in Raines limited, but did not overrule, its precedents. Chenoweth involved a dispute between then-President Clinton and several Members of Congress over the implementation of a historic preservation program that was established via executive order and without statutory authorization. The Members brought suit, arguing that "the President's issuance of the [ ] executive order, without statutory authority therefore, deprived [the plaintiffs] of their constitutionally guaranteed responsibility of open debate and vote on issues and legislation involving interstate commerce, federal lands, the expenditure of federal monies, and implementation of [the National Environmental Protection Act]." The D.C. Circuit denied the Members standing, holding that the alleged injury did not rise to the level of vote nullification required by the Court's decision in Raines . The case, however, presented a conflict between the Court's holding in Raines and the D.C. Circuit's precedents established by Kennedy, Goldwater, Moore , and subsequent cases. Rather than expressly overruling its previous cases, the D.C. Circuit pulled back on its expansive standing determination in Kennedy and Moore . The court also suggested that the two-prong analysis utilized in Moore , assessing standing and separation of powers concerns separately, be reincorporated into a more general, unified standing analysis, as seen in Goldwater . In 2000, the D.C. Circuit decided Campbell v. Clinton and more directly addressed the meaning of the term "vote nullification." Campbell was a suit filed by 31 Members of Congress seeking a declaration that President Clinton violated the War Powers Clause of the Constitution and the War Powers Resolution by directing U.S. forces' participation in North Atlantic Treaty Organization (NATO) airstrikes against the Federal Republic of Yugoslavia without congressional authorization. In support of their position, the Members attempted to fit the case into the Coleman exception to Raines , arguing that their votes defeating a War Powers Resolution and congressional declaration of war were "nullified" by the continued involvement of U.S. troops. The court rejected this argument and stated that Raines did not suggest "that the President 'nullifies' a congressional vote and thus legislators have standing whenever the government does something Congress voted against, still less than congressmen would have standing anytime a President allegedly acts in excess of statutory authority." The court concluded that "[i]t would seem the [ Raines ] Court used nullify to mean treating a vote that did not pass as if it had, or vice versa." It interpreted Raines vote nullification to require that no other legislative remedies be available to rectify the executive action. Using this interpretation, according to the court, Coleman was distinguishable from the plaintiffs' claims because [t]he Coleman senators, … may well have been powerless to rescind a ratification of a constitutional amendment that they claimed had been defeated. In other words, they had no legislative remedy. Under that reading—which we think explains the very narrow possible Coleman exception to Raines —appellants fail because they continued, after the votes, to enjoy ample legislative power to have stopped prosecution of the "war." 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. Thus, like the Senators in Raines , who could have repealed the Line Item Veto Act or exempted future appropriations bills from its application, the Members in Campbell had additional legislative remedies available to them. Therefore, because these legislative remedies existed, there was no vote nullification and the Members could not have standing. In 2011, Kucinich v. Obama , a suit alleging violations of the War Powers Clause of the Constitution stemming from U.S. military operations in Libya, was dismissed because the Member plaintiffs lacked standing. Again, the U.S. District Court for the District of Columbia concluded that the institutional injury asserted by the Members did not rise to the level of vote nullification. The Members retained several possible legislative remedies and therefore, did not satisfy the standing requirements as explained in Raines . More recently, the District Court for the Eastern District of Wisconsin dismissed a lawsuit brought by a Member of Congress and his legislative counsel for lack of standing. In Johnson v. U.S. Office of Personnel Management , the plaintiffs challenged an Office of Personnel Management (OPM) rule that provides Members of Congress and congressional staff with a federal contribution towards health insurance premiums for plans purchased on the D.C. Small Business Health Options Program (SHOP), created pursuant to the Patient Protection and Affordable Care Act (ACA). The court concluded that none of the plaintiffs' alleged injuries, which all appear to be personal in nature rather than institutional, could satisfy the standing requirements because they were not concrete and, indeed, speculative in nature. Congressional Institutions as Plaintiffs Congressional Authorization for Suits Alleging Institutional Injuries While Members of Congress often have difficulty establishing standing when alleging an institutional injury, institutional plaintiffs have been more successful at establishing standing under certain circumstances. It appears that an institutional plaintiff has only been successful in establishing standing when it has been authorized to seek judicial recourse on behalf of a house of Congress. Additionally, all of the available cases regarding congressional institutions asserting an institutional injury have dealt with judicial enforcement of a subpoena. It is unclear how or if these precedents would be applied outside of the subpoena enforcement context. While the need for authorization to sue seems clear, there are open questions as to how the Raines vote nullification standard should be applied in cases involving an institutional plaintiff. Although no case has directly addressed this issue, a potential lawsuit recently authorized by the House could shed light on this continuing ambiguity. On July 30, 2014, the House passed H.Res. 676 , which authorized the Speaker to institute a suit against the President or any other executive branch official or employee for a failure "to act in a manner consistent with that official's duties under the Constitution and the laws of the United States with respect to implementation" of the ACA. The resolution allows the Speaker to seek "any appropriate relief" from a federal court of competent jurisdiction. While the Speaker's specific claims regarding implementation of the ACA and the potential relief requested are not known at this time, it appears likely that the suit will allege an institutional injury, which may require a court to grapple with the application of Raines to suits brought by authorized, institutional plaintiffs. What Qualifies as Congressional Authorization? Express Congressional Authorization Is Likely Required In 1928, the Supreme Court decided Reed v. County Commissioners of Delaware County, Pennsylvania, holding that the Court did not have jurisdiction to decide the case. Although this case was decided by interpreting a jurisdictional statute, not standing requirements, it appears to be the first articulation of what it means for a congressional body to be authorized to sue. Reed involved a U.S. Senate special committee charged, by Senate resolution, with investigating the means used to influence the nomination of candidates for the Senate. The special committee was authorized to "require by subpoena or otherwise the attendance of witnesses, the production of books, papers, and documents, and to do such other acts as may be necessary in the matter of said investigation." During the course of its investigation into the disputed election of William B. Wilson to the Senate, the committee sought to obtain the "boxes, ballots, and other things used in connection with the election." The County Commissioners of Delaware County, who were the legal custodians of said materials, refused to provide them to the committee, thus leading to litigation. The Supreme Court, after affirming the Senate's powers to "obtain evidence relating to the matters committed to it by the Constitution" and having "passed laws calculated to facilitate such investigations," dismissed the case on jurisdictional grounds. Citing the existing statute conferring jurisdiction for suits "brought by the United States, or by any officer thereof authorized by law to sue," the Court held that the Senate Resolution creating the special committee did not authorize the Senators to sue. According to the Court, the Senator's authority to take "such other acts as may be necessary" could not be interpreted "to include everything that under any circumstances might be covered by its words." As a result, the Court held that "the Senate did not intend to authorize the committee, or anticipate that there might be need, to invoke the power of the Judicial Department. Petitioners are not 'authorized by law to sue.'" Reed stands for the proposition that Congress must expressly authorize the commencement of litigation if it wishes to allow individual Senators or a committee to represent it in the courts. However, Reed did not specify how this authorization should be provided, leaving open the question or whether a law, passed by both houses and presented to the President, is required or if a concurrent or one-house resolution is sufficient. One-House Resolutions Have Been Accepted as Congressional Authorization On several occasions the House of Representatives has authorized committee counsel to intervene in civil litigation by passing a House resolution. For example, in June, 1976, the Subcommittee on Oversight and Investigations of the House Committee on Interstate and Foreign Commerce issued subpoenas to the American Telephone and Telegraph Company (AT&T). The subcommittee sought copies of "all national security request letters sent to AT&T and its subsidiaries by the FBI as well as records of such taps prior to the time when the practice of sending such letters was initiated." Before AT&T could comply with the subpoena, the Department of Justice (DOJ) and the subcommittee's chairman, Representative John Moss, entered into negotiations to reach an alternate agreement preventing AT&T from having to submit all of its records. When these negotiations broke down, the DOJ sought an injunction in the U.S. District Court for the District of Columbia to prohibit AT&T from complying with the subcommittee's subpoenas. The House of Representatives responded to the litigation by passing a House resolution directing Chairman Moss to represent the Committee and the full House in the litigation "to secure information relating to the privacy of telephone communications now in the possession of [AT&T]." In addition, the resolution authorized Chairman Moss to hire a special counsel, use not more than $50,000 from the contingent fund of the Committee to cover expenses, and to report to the full House on related matters as soon as practicable. The resolution was adopted by the House by a vote of 180-108 on August 26, 1976. The district court noted Chairman Moss's intervention into the proceedings and seemingly neither AT&T nor the DOJ contested it. Chairman Moss remained an intervener pursuant to the House resolution through the district court proceeding and two appeals to the U.S. Court of Appeals for the District of Columbia Circuit, at which point an agreement was reached with respect to the disclosure of the documents sought. During the first appeal, the court recognized Chairman Moss's standing, pursuant to the House resolution, by stating: "It is clear that the House as a whole has standing to assert its investigatory power, and can designate a member to act on its behalf." Therefore, according to United States v. American Telephone & Telegraph Co. ( AT&T ), a one-House resolution appears to be sufficient to authorize a single Member or committee to represent the full chamber in a suit alleging an institutional injury. The House again authorized Chairman Moss to intervene in 1976, in litigation between Ashland Oil and the Federal Trade Commission (FTC). This case arose when Ashland Oil sought to enjoin the FTC from transferring its information to the Subcommittee on Oversight and Investigations of the Committee on Interstate and Foreign Commerce, at the request of Subcommittee Chairman Moss. After Ashland Oil obtained a temporary restraining order preventing disclosure, the Subcommittee issued a subpoena for the documents. Additionally, Chairman Moss filed a resolution for House authorization to allow him to intervene, with special counsel, in Ashland Oil's suit against the FTC. The district court granted Chairman Moss's motion to intervene and ultimately refused to grant the injunction against the FTC. The court of appeals affirmed the decision on the merits, never addressing any defects in Chairman Moss's standing to sue. In Committee on Judiciary, U.S. House of Representatives v. Miers and Committee on Oversight and Government Reform v. Holder , two different judges for the U.S. District Court for the District of Columbia heard cases involving a House committee seeking to enforce a congressional subpoena against current or former executive branch officials through a civil suit. In 2008, the district court in Miers held that the Judiciary Committee "had been expressly authorized by the House of Representatives as an institution " to bring the suit by House resolution. According to the court, Miers existed in "the permissible category of an institutional plaintiff asserting an institutional injury ( AT&T I ... )." Therefore, since the Committee was authorized to sue, its Article III standing was preserved. In 2013, the district court in Holder adopted this same reasoning and cited the D.C. Circuit stating that "[i]t is clear that the House as a whole has standing to assert its investigatory power.... " Since the Committee asserted a concrete and particular injury to this investigatory power and was authorized to sue, it satisfied the Article III standing requirements. Unauthorized Institutions Will Likely Lack Standing Members Purporting to Represent a Congressional Institution In Re Beef Industry Antitrust Litigation provides an example of what may occur if a house of Congress does not expressly authorize a committee to represent it in court. In In Re Beef , the chairmen of two subcommittees of the House of Representatives sought to intervene in a pending antitrust dispute, to obtain trial documents that were subpoenaed by the subcommittees. The subpoenaed documents were gathered during discovery and subject to a standing court protective order. The district court refused to modify its protective order, which would have allowed the party to comply with the subpoena. The subcommittee chairmen appealed to the U.S. Court of Appeals for the Fifth Circuit. On appeal, the Fifth Circuit heard a motion to dismiss by a plaintiff who argued that the chairmen had not obtained House authorization before filing their initial motion to intervene in the district court. The plaintiff relied on what was then House Rule XI, cl. 2(m)(2)(B), which provided that "[c]ompliance with any subpena [sic] issued by a committee or subcommittee ... may be enforced only as authorized or directed by the House." In response, the subcommittee chairmen argued that the rule did not apply since they sought not to enforce a subpoena, but rather to modify a protective order. Therefore, the chairmen argued House authorization to appear in court was unnecessary. The Fifth Circuit rejected the chairmen's arguments, noting specifically that the House Rules "require[] House authorization not only for direct enforcement of a subpoena but also in any instance when a House committee seeks to institute or to intervene in litigation and, of course, to appeal from a court decision, particularly when the purpose is, as here, to obtain the effectuation of a subpoena." The court pointed to Ashland Oil , noting that, like this case, the chairman in Ashland Oil was not seeking to enforce a subpoena directly but merely attempting to prevent an injunction from being issued. The subcommittee chairmen's failure to obtain an authorizing resolution from the full House, therefore, required the dismissal of the appeal without any decision on the merits. As recently as 2006, the court in Waxman v. Thompson continued this line of argument, stating that the holdings in Reed and AT&T suggested that "legislative branch suits to enforce requests for information from the executive branch are justiciable if authorized by one or both Houses of Congress ." Waxman was a case brought in the U.S. District Court for the Central District of California by minority members of the House Government Reform Committee. These Member plaintiffs sought a court order, pursuant to 5 U.S.C. §§ 2954 and 7211, granting them access to Department of Health and Human Services records related to the anticipated costs of the Medicare Prescription Drug Improvement and Modernization Act of 2003. The plaintiffs argued that 5 U.S.C. § 2954, which requires an executive agency to submit any information relating to matters within the Committee's jurisdiction when any seven members of the House Committee on Government Operations request it, implicitly delegated to Members the right to sue to enforce their informational demands. The court, in rejecting this argument, relied on the Supreme Court's holding in Reed . Specifically, the court noted that Reed 's holding "put Congress on notice that it was necessary to make authorization to sue to enforce investigatory demands explicit if it wished to ensure that such power existed." According to the court, like the Senate resolution at issue in Reed , because § 2954 is silent with respect to civil enforcement, arguably Congress never intended to provide Members with the power to seek civil judicial orders to enforce their document demands. Therefore, because the Members were not actually authorized to sue pursuant to § 2954, they could not establish standing, and the suit was dismissed without reaching the merits of the claim. Legislative Agencies as Institutional Plaintiffs In Walker v. Cheney , a 2002 case in the U.S. District Court for the District of Columbia, the then General Accounting Office (GAO), pursuant to its authority under 31 U.S.C. § 716(b)(2), filed suit seeking records regarding the National Energy Policy Development Group (NEPDG). Representative Henry Waxman and John Dingell, then members of the minority party, asked GAO to initiate an investigation regarding NEPDG's activities, based on reports that task force meetings included "exclusive groups of non-governmental participants." After initiating its investigation, GAO asked Vice President Cheney for information regarding NEPDG, including the names and titles of all individuals present at the meetings, the purpose and agenda of the meetings, the process for determining who would be invited to such meetings, and whether minutes or notes were kept. After several attempts to obtain this information were unsuccessful, GAO issued a demand letter pursuant to 31 U.S.C. § 716(b), requesting the aforementioned records, copies of the minutes or meeting notes, and any information presented by private sector attendees. After the demand letter yielded no disclosure of documents, the Comptroller General filed suit. The court in Walker dismissed the suit after conducting an "especially rigorous" standing inquiry because the case presented "core separation of powers questions at the heart of the relationship among the three branches of our government." The court held that the Comptroller General's alleged injury was not personal, stressing that his interest in the suit was "solely institutional, relating exclusively to his duties in his official capacity." Rather, the Comptroller General's alleged institutional injury—the Vice President's refusal to provide the information requested pursuant to GAO's statutory investigative and access enforcement authority—was insufficient to establish standing. The court predicated this finding on its conclusion that the Comptroller General was acting as an agent of Congress in demanding information and bringing suit. He had no "freestanding institutional injury or personal injury of his own to assert;" he only represented Congress's alleged institutional injury. The court then reiterated that justiciability requires that "the plaintiff himself has suffered some threatened or actual injury." Additionally, the court noted that Congress had not expressly authorized GAO's suit, one factor that led to the conclusion that the plaintiff lacked standing. The court stated that the "highly generalized allocation of enforcement power to the Comptroller General ... hardly gives this Court confidence that the current Congress has authorized this Comptroller General to pursue a judicial resolution of the specific issues affecting the balance of power" between the executive and legislative branches. Effect of Raines v. Byrd on Institutional Plaintiff Standing Few cases have addressed the relationship between Raines and pre- Raines precedents regarding congressional institutional plaintiff standing. The Miers case provides the most significant analysis. In Miers , the District Court for the District of Columbia explicitly applied the reasoning in AT&T and concluded that the Committee plaintiff had standing to enforce a subpoena because it was authorized to sue via House resolution. The court emphasized that it could not conclude that Raines overruled or undermined AT&T . The reason why Raines did not apply to Miers was the fact that the House explicitly authorized the Miers plaintiffs to bring suit. That authorization was "the key factor that moves this case from the impermissible category of an individual plaintiff asserting an institutional injury ( Raines , Walker ) to the permissible category of an institutional plaintiff asserting an institutional injury ( AT&T ... )." Several years later in Holder , the District Court for the District of Columbia reinforced the Miers reasoning that AT&T is the controlling precedent and that Raines "did not overrule or limit the precedent established in AT&T I ." The court went on to distinguish Raines and its progeny further by stating that "[n]one of those cases involved a suit specifically authorized by a legislative body to redress a clearly delineated, concrete injury to the institution.... " One important question remains unanswered by the courts: does the Raines vote nullification standard apply at all in cases where an authorized institutional plaintiff alleges an institutional injury? While it is clear that the Miers and Holder plaintiffs were able to establish standing, the courts did not address whether the vote nullification standard should be applied. Even if the standard is applied, it appears that it may not prohibit an authorized institutional plaintiff from suing to enforce a subpoena since there is no legislative alternative for direct enforcement. However, outside the subpoena context, if the vote nullification standard applied, it may prohibit some authorized institutional plaintiffs from establishing standing where their injury has a legislative remedy. Conclusion An individual Member's ability to bring litigation before an Article III court remains severely limited by the Supreme Court's decision in Raines . For Member plaintiffs to successfully establish standing, they must assert either a personal injury, like the loss of their congressional seat, or an institutional injury that amounts to vote nullification, which requires that no other legislative remedy exists to redress the alleged injury. Considering that legislative remedies are rarely entirely foreclosed, these Member plaintiff suits are unlikely to satisfy the standing requirements imposed by Raines and its progeny. It appears that more successful suits could be brought by either Congress as a whole, a house of Congress, or a committee, so long as the entity is acting with the authorization of one or both houses. Institutional plaintiffs with authorization to sue have established standing in several cases when seeking judicial enforcement of a subpoena. However, it remains unclear how or if the Raines vote nullification standard is supposed to be applied to an institutional plaintiff asserting an institutional injury outside of the subpoena enforcement context.

In disputes between Congress and the executive, questions arise about Congress's ability to turn to the federal courts for vindication of its powers and prerogatives, or for declarations that the executive is in violation of the law or the Constitution. This report seeks to provide an overview of Congress's ability to participate in litigation before Article III courts. The report is limited to a discussion of Congress's participation in litigation as either a plaintiff (e.g., the party initiating the suit alleging some sort of harm or violation of law) or as a third-party intervener (e.g., a party who is seeking to join litigation already initiated by another plaintiff). The report does not address situations where Congress or individual Members appear as a defendant, or congressional participation in court cases as amicus curiae ("friend of the court"), as those situations do not raise the same legal and constitutional questions as does the involvement of Congress or its Members as a party plaintiff. Generally, to participate as party litigants, congressional plaintiffs, whether they be individual Members, committees, houses of Congress (i.e., the House or Senate), or legislative branch entities, must demonstrate that they meet the requirements of the standing doctrine, derived from Article III of the Constitution. The failure to satisfy the standing requirements is fatal to the litigation and will result in its dismissal without a decision by the court on the merits of the presented claims. With respect to the ability of Congress and Members to demonstrate Article III standing, the Supreme Court's 1997 decision in Raines v. Byrd has had a chilling effect on the ability of individual Members of Congress to adjudicate claims before federal courts. Despite the Court's holding in Raines, in 2008 the House Judiciary Committee, acting on a resolution from the full House of Representatives, was able to convince the U.S. District Court for the District of Columbia that it had standing to sue the White House for its failure to make subpoenaed witnesses and documents available. In its decision, the court emphasized the distinction between suits brought by individual congressional plaintiffs asserting abstract and diffuse injuries and suits brought by organs of Congress alleging institutional harms. In 2013, the House Committee on Oversight and Government Reform was similarly successful, with a different judge for the District Court for the District of Columbia adopting the same reasoning as the 2008 case, holding that the Committee had standing to sue to enforce a congressional subpoena, in part because the suit was authorized by the House. Recent case law in this area suggests that suits brought by Congress in an institutional capacity have a far greater chance of being decided on their merits than do cases where individual Members attempt to assert personal or political injuries based on executive action. Through the years, Congress has had a fair amount of success bringing suits to enforce subpoenas and intervening as a third party in ongoing litigation when it is specifically authorized to seek judicial recourse. However, outside the subpoena and intervenor contexts, it remains unclear whether a house of Congress could satisfy the requirements of standing as a plaintiff in an authorized lawsuit against the executive branch. In July 2014, the House authorized the Speaker to institute a lawsuit against the executive branch regarding its implementation of the Affordable Care Act, which may lead to the development of case law in this area of congressional standing.

Background On March 27, 2002, the President signed into law the Bipartisan Campaign Reform Act of 2002 (BCRA), P.L. 107-155 ( H.R. 2356 , 107th Cong.), and most provisions of thenew law became effective on November 6, 2002. Shortly after President Bush signed BCRA into law, SenatorMitch McConnell filed suit in U.S. District Court for the District ofColumbia against the Federal Election Commission (FEC) and the Federal Communications Commission (FCC). In summary, the McConnell complaint for declaratory and injunctiverelief argued that portions of BCRA violate the First Amendment and the equal protection component of the DueProcess Clause of the Fifth Amendment to the Constitution. (2) Likewise, shortly after enactment, the National Rifle Association (NRA) filed suit in U.S. District Court for theDistrict of Columbia against the FEC and the Attorney General seekingdeclaratory and injunctive relief against certain provisions of the Federal Election Campaign Act (FECA), asamended by BCRA. In summary, the NRA argued that the new lawdeprives it of freedom of speech and association, of the right to petition the government for redress of grievances,and of the rights to equal protection and due process, in violation of theFirst and Fifth Amendments to the Constitution. Ultimately, eleven suits challenging BCRA were brought by more than 80 plaintiffs and were consolidated into one lead case, McConnell v. FEC , (3) bythe U.S. District Court for theDistrict of Columbia. Section 403(a) of BCRA provides that if an action is brought for declaratory or injunctiverelief challenging the constitutionality of any provision of the Act, itshall be brought in the U.S. District Court for the District of Columbia and shall be heard by a 3-judge court. Itfurther provides that a final decision in such an action shall be reviewableonly by appeal directly to the U.S. Supreme Court by the filing of a notice of appeal within 10 days and the filingof a jurisdictional statement within 30 days after a final decision isrendered. Section 403(a)(4) charges the U.S. District Court for the District of Columbia and the Supreme Court toadvance on the docket and to expedite to the greatest possible extentthe disposition of the action and appeal. On December 4 and 5, 2002 oral argument was heard in McConnell v. FEC before the three-judge panel of the U.S. District Court for the District of Columbia. Under the BCRAexpedited review provision, (4) the court's decision,which was issued on May 2, 2003, will be reviewed directly by the U.S. Supreme Court. Summary of Key Portions of the District Court's Decision Issue Advocacy/Political Advertising by Corporations and Labor Unions (Soft Money). Generally, sections 203 and 201 of BCRA,respectively, prohibit labor unions and corporations (and any persons using funds donated by a corporation or laborunion) from using treasury funds for "electioneeringcommunications" -- they must use a separate segregated fund (also known as a PAC) in order to fund such ads --and require disclosure to the Federal Election Commission (FEC) ofdisbursements for the costs of producing and broadcasting "electioneering communications" by any spender exceeding $10,000 per year. BCRA generally defines an "electioneeringcommunication" as a broadcast, cable, or satellite advertisement that "refers" to a clearly identified federal candidate,is made within 60 days of a general election or 30 days of a primaryand if for House or Senate elections, is targeted to the relevant electorate. (5) In the event that the primary definition of "electioneering communication" isheld to be unconstitutional,Section 201 of BCRA provides a backup definition: any broadcast, cable, or satellite communication which promotes or supports a candidate for that office, or attacks or opposes a candidate forthat office (regardless of whether the communication expressly advocates a vote for or against a candidate) andwhich also is suggestive of no plausible meaning other than anexhortation to vote for or against a specific candidate. In McConnell v. FEC, the three-judge district court ruled 2 to 1 that the primary definition of "electioneering communication" is unconstitutional and accordingly, ruled that theprohibition on labor unions and corporations (and any persons using funds donated by a corporation or labor union)using treasury funds for "electioneering communications" and therequirement for disclosure to the FEC of spending for all "electioneering communications" is unconstitutional underthe primary definition. The court upheld, however, the backupdefinition of "electioneering communication," deleting the last clause, "and which also is suggestive of no plausiblemeaning other than an exhortation to vote for or against a specificcandidate," and hence, generally upheld the disclosure requirements and the prohibition on labor unions andcorporations funding "electioneering communications" as defined by aportion of the backup definition. (6) As a result of thisruling, corporations and labor unions are generally prohibited from using treasury funds to pay for any broadcast,cable, or satellitecommunication -- at any time in the election cycle -- which "promotes or supports" or "attacks oropposes" a candidate for that office, "regardless of whether the communicationexpressly advocates a vote for or against a candidate." Section 203 of BCRA also contains an exemption to the prohibition on corporations directly funding "electioneering communications," ( i.e. using treasury funds instead of funding suchadvertisements through a PAC) for certain non-profit organizations. Under a portion of Section 203 known asSnowe-Jeffords, (7) Internal Revenue Code Section501(c)(4) and 527(e)(1)organizations are permitted to use their general treasury funds for "electioneering communications" so long as thecommunication is paid for exclusively with funds from individualswho are U.S. citizens, nationals, or lawfully admitted for permanent residence. (8) The Snowe-Jeffords provision is an expansion of the law as it existed priorto BCRA. Prior to BCRA,the 1986 Supreme Court decision, FEC v. Massachusetts Citizens for Life (MCFL), (9) had provided an as-applied exception for non-profitcorporations that satisfied certain criteria. (10) Section 204 of BCRA, however, (known as the Wellstone Amendment) (11) effectively withdraws the Snowe-Jeffords exception in Section 203,according to the court in McConnell v.FEC . (12) As a result of the WellstoneAmendment in Section 204, entities that are organized under Internal Revenue Code Sections 501(c)(4) and527(e)(1) are not permitted to use theirgeneral treasury funds for "electioneering communications." (13) As the McConnell court noted, the Wellstone Amendment was codified in a separate portion ofBCRA in order topreserve severability. (14) Indeed, the McConnell three-judge panel struck down the Wellstone Amendment in Section 204 as it applies tocorporations that meet the criteria set forth bythe Supreme Court in MCFL, also known as " MCFL corporations." Hence, according thecourt, the prohibition against corporations using treasury funds to pay for "electioneeringcommunications" applies only to non- MCFL corporations. Raising and Spending of Soft Money by Political Parties. Section 101 of BCRA, which creates a new section in the Federal ElectionCampaign Act (FECA), Section 323(a), (15) prohibitsnational parties from soliciting, receiving, directing, transferring, and spending nonfederal funds, i.e., soft money. In a 2 to 1 split,the McConnell v. FEC court ruled that Section 323(a) is constitutional only to the extent that it bansnational party committees from using nonfederal funds for public communicationsthat "refer" to a clearly identified federal candidate -- "regardless of whether a candidate for State or local office isalso mentioned or identified" -- and that "promotes or supports" or"attacks or opposes" a candidate for that office, "regardless of whether the communication expressly advocates avote for or against a candidate." (16) Section 101 of BCRA creates another new FECA provision, Section 323(b), which prohibits state and local parties from using nonfederal funds (or soft money) for "federal electionactivities." Section 301(20)(A) of FECA, as amended by BCRA, defines "federal election activities" to include:(i) voter registration drives in the last 120 days of a federal election; (ii)voter identification, Get-Out-The-Vote (GOTV) drives, and generic activity in connection with an election in whicha federal candidate is on the ballot; (iii) public communications that"refer" to a clearly identified federal candidate -- "regardless of whether a candidate for State or local office is alsomentioned or identified" -- and that "promotes or supports" or"attacks or opposes" a candidate for that office, "regardless of whether the communication expressly advocates avote for or against a candidate"; or (iv) services by a state or local partyemployee who spends at least 25% of paid time in a month on activities in connection with a federal election. (17) The McConnell v. FEC three-judgecourt ruled that Section 323(b) ofFECA, as amended by BCRA, is constitutional only as applied to Section 301(20)(A)(iii) activities. That is,according to the court, state and local parties are prohibited from spendingnonfederal or soft money on public communications that "refer" to a clearly identified federal candidate --"regardless of whether a candidate for State or local office is also mentionedor identified" -- and that "promotes or supports" or "attacks or opposes" a candidate for that office, "regardless ofwhether the communication expressly advocates a vote for or against acandidate." (18) Raising and Spending of Soft Money by Federal Officeholders and Candidates. Section 101 of BCRA prohibits, with few exceptions,federal officeholders and candidates from soliciting, receiving, directing, transferring, or spending nonfederal or softmoney for any local, state, or federal election. (19) The McConnell v.FEC court upheld the constitutionality of this section of the statute in its entirety. (20) Hard Money Sources for Candidates. Sections 304, 316 and 319 of BCRA, (21) sometimes referred to as the "millionaireprovisions,"were held to be non-justiciable by the McConnell v. FEC district court. (22) In brief summary, Section 304 limits repayment of candidate loans to hisor her own campaign to $250,000,from amounts contributed after the election occurs. Section 304 also raises the limit on individual and party supportfor a Senate candidate whose opponent exceeds the designatedthreshold level of personal campaign funding. Section 319 raises the limits on individual and party support for aHouse candidate whose opponent exceeds the threshold of $350,000 inpersonal campaign funding. Hard Money Contribution Limits. Section 307 of BCRA, (23) increases the limits on the amount that individualscan contribute tofederal office candidates and to political parties. Under Section 307, individuals may contribute no more than$2,000 per candidate, per election, and no more than $25,000 per year tonational party committees. The McConnell v. FEC district court panel held non-justiciable the issuespresented by plaintiffs in regard to Section 307. (24) Limitation on Lowest Unit Charge for Candidates. If a candidate makes any direct reference to another candidate for the same officein a broadcast advertisement, section 305 of BCRA denies a federal candidate the "lowest unit charge" for radio andtelevision broadcast advertisements unless certain attributionrequirements are met. (25) The McConnellv. FEC district court held that no plaintiff had standing at this time to challenge Section 305. (26) Prohibition on Contributions by Minors. Section 318 of BCRA prohibits minors (defined as persons 17 and younger) from makingcontributions or donations to candidates or to a political party. (27) In McConnell v. FEC, the three-judge court unanimously held the prohibition to beunconstitutional. (28)

On March 27, 2002, the President signed into law the Bipartisan Campaign ReformAct of 2002 (BCRA), P.L. 107-155 (H.R. 2356, 107th Cong.), which was also known as the McCain-Feingold campaign finance reformlegislation prior to enactment. Most provisions of the new law became effective onNovember 6, 2002. Shortly after President Bush signed BCRA into law, Senator Mitch McConnell filed suit in U.S.District Court for the District of Columbia against the FederalElection Commission (FEC) and the Federal Communications Commission (FCC). Ultimately, eleven suitschallenging the campaign finance reform law were brought by more than 80plaintiffs and were consolidated into one lead case, McConnell v. FEC. In summary, the McConnellcomplaint for declaratory and injunctive relief argued that portions of BCRA violatethe First Amendment and the equal protection component of the Due Process Clause of the Fifth Amendment to theConstitution. On May 2, 2003, the U.S. District Court for theDistrict of Columbia issued its decision in McConnell v. FEC, striking down many key provisions ofthe law. (See the text of the per curiam opinion athttp://www.dcd.uscourts.gov/02cv582a.pdf.) This report provides a brief overview of the court's decision and willbe updated. The three-judge panel, which was split 2 to 1 on manyissues, ordered that its ruling take effect immediately. Since the court has issued its opinion, several appeals havebeen filed. Under the BCRA expedited review provision, the court'sdecision will be reviewed directly by the U.S. Supreme Court. On May 19 the U.S. district court issued a stay toits ruling, which leaves BCRA, as enacted, in effect until the SupremeCourt issues a decision. For more information see, Campaign Finance Reform Oversight http://www.congress.gov/erp/legissues/html/isele2.html, and CRS Report RL30669,Campaign Finance Regulation Under the First Amendment.

Introduction The United States has played a leading role in global efforts to alleviate hunger and improve food security. Current food assistance programs originated in 1954 with the passage of what is now named the Food for Peace Act (FFPA, P.L. 83-480). This legislation, commonly referred to as "P.L. 480," established the Food for Peace program (FFP). Originally, FFP had multiple aims: (1) to provide food to undernourished people abroad, (2) to reduce U.S. stocks of surplus grains that had accumulated under U.S. Department of Agriculture (USDA) commodity support programs, and (3) to expand potential markets for U.S. food commodities. Since the end of the Cold War, U.S. food assistance goals have shifted away from the latter two aims and more toward emergency response and supporting recipient country agriculture markets. For example, in 2018 the United States provided food assistance to food-insecure people in Ethiopia. This food assistance targeted those affected by flooding in spring 2018 as well as refugees who had fled to Ethiopia from neighboring countries, such as South Sudan. For most of its existence, U.S. international food assistance provided exclusively i n-kind aid —commodities sourced in the United States and shipped to recipient countries. In recent decades, U.S. food assistance programs have shifted from exclusively in-kind to a combination of in-kind and cash-based assistance, such as locally procured food, cash transfers, or vouchers. More recently, Feed the Future (FTF), a government-wide initiative that coordinates U.S. agriculture and food assistance, has increasingly aligned non-emergency food assistance with other food-security-related programs such as agricultural development and global health programs. U.S. law requires federal international food assistance to be provided primarily through in-kind aid. Opinions among policymakers and interested parties differ over whether such requirements make food assistance programs less efficient or whether they have substantive benefits, such as lowering the risk of recipients using assistance for unintended purposes and preserving the coalition of nonprofit organizations, farmers, and shippers who support these programs. This report provides an overview of U.S. international food assistance programs, including authorizing legislation, historical funding trends, and common program features and requirements. It also discusses issues for congressional consideration and recent legislative proposals. This report focuses on international food assistance programs that currently receive funding from Congress. International Food Assistance Programs5 Two main legislative tracks authorize international food assistance programs, each with different authorizing histories and congressional committees responsible for funding. First, the FFPA authorizes traditional food assistance programs based primarily on in-kind aid. These programs (explained later in this section) include FFP Title II, FFP Title V, the McGovern-Dole International Food for Education and Child Nutrition Program, the Bill Emerson Humanitarian Trust, and Food for Progress. Congress has reauthorized the FFPA through periodic farm bills, most recently the 2014 farm bill ( P.L. 113-79 ). These programs are under the jurisdiction of the House and Senate Agriculture Committees. Second, Congress permanently authorized the Emergency Food Security Program (EFSP) as part of the Foreign Assistance Act of 1961 (FAA, P.L. 87-195 ) in the Global Food Security Act of 2016 (GFSA, P.L. 114-195 ). EFSP is under the jurisdiction of the House Foreign Affairs and Senate Foreign Relations Committees. The U.S. Department of Agriculture (USDA) and the U.S. Agency for International Development (USAID) implement international food assistance programs. USDA procures commodities for all food assistance programs, regardless of which agency implements the program. Table 1 lists each active food assistance program along with its primary delivery method, statutory authority, source of funding, and implementing agency. Other key participants in delivering international food assistance are: Non governmental or intergovernmental organizations (NGOs or IOs) : An NGO is a private organization that provides services or advocates on public policy issues, such as an organization that works to solve development problems at the local level. An IO is a multilateral institution such as the U.N. World Food Program. NGOs and IOs implement food assistance projects in countries of need, with oversight and program funding from USAID or USDA. The Commodity Credit Corporation (CCC) : The CCC is a government-owned financial institution, overseen by USDA, which procures commodities, processes financial transactions, and finances domestic and international programs to support U.S. agriculture. The U.S. government provides food assistance through two distinct methods: 1. In-kind contributions are commodities produced in the United States and shipped to the target region. Some shelf-stable (i.e., not easily spoiled) U.S. commodities can be prepositioned in storage facilities in the United States and abroad to enable quicker response to emergencies. Monetization is a form of in-kind aid in which the entity sells U.S. commodities on local markets in developing countries and uses the proceeds to fund development projects. 2. Cash-based assistance provides direct cash transfers or food vouchers to beneficiaries. Under local and regional procurement (LRP), NGOs or IOs purchase food in the country or region where it is to be distributed to beneficiaries rather than in the United States. The Obama Administration created Feed the Future (FTF) in 2010. FTF is a government-wide initiative that aims to improve U.S. international food security efforts by uniting all food-security related programs under common goals and evaluation criteria. Because FTF focuses on long-term food security, it does not coordinate emergency food assistance activities. However, non-emergency food assistance activities—such as McGovern-Dole, Food for Progress, Farmer-to-Farmer, and non-emergency assistance provided under FFP Title II—are part of FTF. Under FTF, non-emergency food assistance programs coordinate activities with other food security efforts, such as global health and agricultural development programs. Non-emergency food assistance programs also submit data to collaborative FTF evaluations. Food for Peace Title II Under FFP Title II, the federal government donates U.S.-sourced commodities to a qualifying IO or NGO to be distributed directly to beneficiaries or monetized to fund development projects. Congress provides funding for Title II annually through agriculture appropriations bills. The majority of Title II funds are used for emergency assistance, such as responding to conflicts or natural disasters. In FY2017, 76% of Title II funds supported emergency assistance, and the remaining 24% supported non-emergency assistance. USAID administers FFP Title II. NGOs and IOs apply to USAID to implement a project under FFP Title II. Once USAID approves a Title II project, the implementing organization requests commodities. USDA procures U.S.-produced commodities on the open market. The implementing organization works with USAID to arrange shipment of commodities by ocean freight in accordance with agricultural cargo preference laws discussed in the " Common Features and Requirements " section. Farmer-to-Farmer (Food for Peace Title V) Congress established the John Ogonowski and Doug Bereuter Farmer-to-Farmer program in the 1966 FFPA reauthorization (P.L. 89-808). Congress first funded the program in 1985, when it established minimum required funding in the 1985 farm bill ( P.L. 99-198 ). This minimum funding was 0.1% of the annual funds appropriated for Food for Peace programs. The Farmer-to-Farmer program's funding is discretionary and tied to annual total funding for Food for Peace programs. Congress has periodically updated minimum required funding levels in the farm bill. The 2014 farm bill ( P.L. 113-79 ) authorized minimum funding of the greater of $15 million or 0.6% of the funds appropriated for Food for Peace programs. From FY2014 to FY2017, Congress provided $15 million per year in funding for the program. USAID administers the Farmer-to-Farmer program, which finances short-term (typically two- to four-week) volunteer placements in developing countries to provide technical assistance to farmers. Volunteers are U.S. citizens drawn from farming, agribusiness, universities, and nonprofit organizations. USAID selects eligible NGOs to coordinate volunteer placements. Potential volunteers apply directly to the coordinating NGOs and are selected based on the needs of the individual or organization in the developing country. The Farmer-to-Farmer program does not provide in-kind or cash-based food assistance. It is included in this discussion because it is part of the suite of programs the FFPA authorizes and receives funding through appropriations for Food for Peace programs. McGovern-Dole International Food for Education and Child Nutrition Congress established the McGovern-Dole International Food for Education and Child Nutrition Program in the 2002 farm bill ( P.L. 107-171 ). USDA administers the McGovern-Dole program, and Congress funds the program through annual agriculture appropriations bills. The McGovern-Dole program aims to advance food security, nutrition, and education for children—especially girls—by providing school meals. The program also focuses on improving children's health before they enter school by providing food to pregnant and nursing mothers, infants, and children under school age. In addition to providing food, the program encourages governments in recipient countries to establish national school feeding programs and provides technical assistance to help them do so. USDA chooses priority countries for McGovern-Dole projects each year based on criteria including per-capita income, literacy, and malnutrition rates. The program primarily uses in-kind aid, but in recent years it was authorized to use LRP. In FY2016 and FY2017, Congress authorized that up to $5 million of the funds appropriated to the McGovern-Dole program may be used for LRP activities within existing McGovern-Dole projects. In FY2018, Congress authorized that up to $10 million of the funds appropriated to the McGovern-Dole program may be used for LRP activities. Bill Emerson Humanitarian Trust Congress first authorized the Bill Emerson Humanitarian Trust (BEHT) in its current form in the Africa: Seeds of Hope Act of 1998 ( P.L. 105-385 ). USDA administers the BEHT. It is a reserve of U.S. commodities or funds held by the CCC. These commodities or funds can supplement FFP Title II, especially when FFP Title II funds alone cannot meet emergency food needs in developing countries. Congress reimburses the CCC for the value of any commodities released from the BEHT through either FFPA appropriations or direct appropriations to the CCC. The CCC may either use these reimbursement funds to replenish the released commodities or hold the funds for BEHT against future need to purchase U.S. commodities for emergency assistance. In 2008 USDA sold the BEHT's remaining commodities—about 915,000 metric tons (mt) of wheat—and currently the BEHT holds only funds. BEHT funds were used in FY2014 to purchase 189,970 mt of U.S. agricultural commodities to supply FFP Title II projects in South Sudan. Food for Progress Under the Food for Progress program, USDA donates U.S. agricultural commodities to partner IOs, NGOs, foreign governments, or private entities, which then monetize the commodities by selling them locally to raise funds for development projects. Food for Progress projects focus on improving agricultural productivity through agricultural, economic, or infrastructure development. Recipient country governments must make commitments to introduce or expand free enterprise elements in their agricultural economies. In FY2017, USDA funded seven Food for Progress projects in nine different countries. Congress first authorized the Food for Progress program in the 1985 farm bill ( P.L. 99-198 ). It may receive funding through either Food for Peace Title I appropriations or CCC financing. Congress has not appropriated Title I program funds since FY2006. Food for Progress now relies entirely on CCC financing. Statute requires that the program provide a minimum of 400,000 mt of commodities each fiscal year. However, this minimum has not been met in recent years, with actual totals averaging 255,418 mt per year between FY2007 and FY2016 and ranging from as little as 160,120 mt in FY2013 to as much as 341,820 mt in FY2015. Statute limits the program to pay no more than $40 million annually for freight costs, which limits the amount of shipped commodities, particularly in years with high shipping costs. Emergency Food Security Program Unlike FFP Title II, EFSP is a cash-based program. It can complement Title II when significant barriers exist to providing in-kind aid—for example, when in-kind food would not arrive soon enough or could potentially disrupt local markets or when it is unsafe to operate in zones of civil conflict. For example, from FY2013 to FY2015, more than half of EFSP outlays were used to respond to the conflict in Syria. This includes assistance provided to internally displaced persons and refugees who fled to neighboring countries such as Jordan, Lebanon, and Turkey. USAID administers EFSP. USAID first employed EFSP in FY2010 based on authority in the FAA to provide disaster assistance. In 2016, Congress permanently authorized EFSP in the GFSA. Congress funds EFSP through the International Disaster Assistance (IDA) account within State and Foreign Operations appropriations bills. Food Assistance Funding U.S. international food assistance outlays for these and other related programs have fluctuated over the past 10 years, rising in FY2008 and FY2009 partly in response to the global food price crisis of 2007-2008 and subsequently declining in the years following FY2009 ( Figure 1 ). Outlays increased again between FY2013 and FY2016 partly in response to conflicts in Syria and Yemen and the Ebola epidemic in West Africa. While FFP Title II has comprised the bulk of food assistance outlays since the mid-1980s, cash-based EFSP assistance has grown from approximately 10% of total international food assistance in FY2010 to 30% in FY2016. During that same period, the share of Title II food assistance outlays decreased from 75% to 57%. Common Features and Requirements U.S. international food assistance programs share a number of common features and requirements, including agricultural cargo preference restrictions, commodity sourcing requirements, and labeling of commodity donations. Statutory requirements also mandate analyses to ensure that adequate storage facilities are available in recipient countries, assistance does not disrupt local markets in recipient countries, and assistance does not compete with U.S. agricultural exports. FFP Title II assistance also has specific requirements in addition to the requirements that apply to all international food assistance programs. These features and requirements are detailed below. Agricultural Cargo Preference In accordance with the Cargo Preference Act of 1954 (P.L. 83-644) and Section 901 of the Merchant Marine Act of 1936 (P.L. 74-835), both as amended, at least 50% of the gross tonnage of U.S. agricultural commodities provided under U.S. food aid programs must ship via U.S.-flag commercial vessels. This requirement is known as "agricultural cargo preference" (ACP). ACP is part of broader cargo preference requirements that apply to other government cargo, such as Department of Defense cargo. According to the Department of Transportation's Maritime Administration (MARAD), the main purpose of cargo preference laws is to sustain a privately owned, U.S.-flag merchant marine to provide sealift capability in wartime and national emergencies and to protect U.S. ocean commerce from foreign control. Under ACP, qualifying U.S.-flag ships must be privately owned and employ a crew consisting of at least 75% U.S. citizens. ACP applies to all in-kind aid provided under international food aid programs. It does not apply to LRP or other cash-based assistance. U.S. Sourcing of Commodities Statute requires all agricultural commodities distributed under food assistance programs authorized in the FFPA to be produced in the United States. However, there are some exceptions to this requirement. The requirement does not apply to food assistance provided under the LRP program authorized in the FFPA. It also does not apply to EFSP or other food assistance provided through authority in the FAA. Lastly, FFPA Section 202(e) allows a portion of FFP Title II funds to be used for storage, transportation, and administrative costs. The 2014 farm bill expanded eligible uses of these funds—referred to as 202 ( e ) funds —to include "enhancing" FFP Title II projects, including through the use of cash-based assistance. Since 2014, 202(e) funds can be used to fund cash-based assistance that enhances existing FFP Title II in-kind assistance. Publicity and Labeling of Commodities The FFPA requires foreign governments, NGOs, or IOs receiving U.S. commodities to widely publicize, to the extent possible, "that such commodities are being provided through the friendship of the American people as food for peace." In particular, governments and organizations must label FFP Title II commodities, "in the language of the locality in which such commodities are distributed, as being furnished by the people of the United States of America." Bellmon Analysis Through the International Development and Food Assistance Act of 1977 ( P.L. 95-88 ), Congress amended the FFPA to prohibit use of U.S. commodities for international food assistance if (1) the recipient country lacks adequate storage facilities to prevent spoilage or waste of commodities or (2) distribution of U.S. commodities in the recipient country would result in substantial disincentive to, or interference with, domestic production or marketing of agricultural commodities in that country. Cooperating organizations providing international food assistance must now conduct a "Bellmon analysis"—named for Senator Henry Bellmon, who sponsored the amendment to the FFPA. The analysis assesses whether the recipient country has adequate storage facilities and whether assistance would interfere with the recipient country's agricultural economy. Bumpers Amendment An amendment to the Urgent Supplemental Appropriations Act, 1986 ( P.L. 99-349 , §209), offered by Senator Dale Bumpers, prohibited the use of U.S. foreign assistance funds for any activities that would encourage the export of agricultural commodities from developing countries that might compete with U.S. agricultural products on international markets. Exceptions to the Bumpers amendment include food-security-related activities, research activities that directly benefit U.S. producers, and activities in a country that the President determines is recovering from a widespread conflict, humanitarian crisis, or complex emergency. Food for Peace Title II Requirements In addition to the requirements listed above, FFP Title II assistance has specific requirements identified in Table 2 . Issues for Congress In-Kind vs. Cash-Based Food Assistance Historically, the United States provided international food aid exclusively via in-kind commodities. The United States remains one of the few major donor countries that relies primarily on in-kind aid. Many other donors—such as Canada, the European Union, and the United Kingdom—have switched to primarily cash-based assistance. U.S. use of cash-based assistance has increased in recent years under EFSP and to support the use of LRP in the McGovern-Dole program. Proponents of in-kind aid emphasize that it supports American jobs. Providing U.S.-grown commodities supports the agricultural sector, and shipping those commodities on U.S.-flag ships supports the transportation sector. In-kind aid also supports American companies that produce ready-to-use therapeutic and supplementary foods, foods that are specially formulated to address malnutrition. Proponents also maintain that the visibility of in-kind food with U.S labels fosters good will between the United States and recipient countries. In-kind aid may be especially appropriate when local food availability is scarce. For example, in 2012 during a severe drought in the Sahel region of Africa, USAID provided in-kind aid to recipients during the "lean season" when markets were not well stocked. According to USAID, in-kind aid allowed local farmers to plant and tend to crops instead of having to migrate in search of food. Prepositioning food at warehouses in the United States and abroad allows aid to reach recipients sooner than traditional in-kind aid in emergency situations. In 2014, the U.S. Government Accountability Office (GAO) found that prepositioning shortened delivery time frames for in-kind aid by one to two months compared to standard delivery methods. Critics of in-kind aid emphasize that it takes longer to reach recipients than cash-based assistance. Although prepositioning in-kind aid shortens delivery times, GAO found that it can involve additional costs due to storage costs and additional shipping costs. Prepositioned commodities can also cost more than traditional in-kind commodities due to a limited supply of commodities available for domestic prepositioning. In 2011, GAO found that in-kind aid may not provide adequate nutrition to recipients during long-term emergencies. In some instances, lack of adequate nutrition led to micronutrient deficiencies. USAID and USDA can use specialized, nutrient-dense food products to supplement traditional commodities, but these products are costly and may be difficult to direct to intended recipients. GAO's analysis also found vulnerabilities in quality control of the food aid supply chain. In some instances, these vulnerabilities led to contamination of food aid commodities. Critics also contend that in-kind aid can be difficult to deliver in situations with geographic and security challenges. In multiple instances, food aid has reportedly been stolen from warehouses near conflict zones in South Sudan. In 2015, Dina Esposito, former director of USAID's Office of Food for Peace, testified that many Syrian refugees who had fled to neighboring countries to escape conflict were widely dispersed rather than congregated in refugee camps. According to Esposito, without the use of cash-based assistance, USAID "would not be able to feed people inside Syria and would have great difficulty feeding those displaced within the region, particularly where refugees are dispersed within host communities." Critics of in-kind aid also assert that in-kind commodities can disrupt local markets and cause price distortions. Cash-based assistance can take the form of direct cash transfers, food vouchers, or LRP. Proponents of cash-based assistance emphasize that it allows for quicker response times than shipping in-kind aid via ocean freight. This response time may be especially relevant to emergencies, when food needs are immediate. Research shows that LRP can arrive 14-16 weeks sooner than in-kind aid. Proponents also contend that cash-based assistance is less costly than in-kind aid, allowing donors to reach more people in need with less funding. The cost savings of cash-based assistance can vary widely based on target destination and current commodity prices. According to GAO, USDA and USAID recover 58%-76% of every dollar spent on monetizing in-kind aid. GAO also concluded that LRP costs 25% less, on average, than in-kind aid. Some research also found that cash-based assistance can better meet local dietary preferences and can support local agricultural markets and producers, both of which may be fragile in the wake of conflict or disaster. According to USAID, cash-based assistance is appropriate in situations in which people are physically spread out or highly mobile or when there are security concerns about transporting in-kind aid. Cash-based assistance may have policy or implementation challenges. Cost differences between LRP and in-kind aid can vary based on the specific commodity involved. For example, one study found that while LRP was less costly than in-kind aid when purchasing bulk cereals and beans, it was more expensive for processed foods such as vegetable oils or corn-soy blends. In addition, using LRP in food-deficit regions or underdeveloped markets could cause local or regional price spikes or provide insufficient access to food due to local unavailability. Lack of reliable suppliers and poor infrastructure can also limit the efficiency of LRP. Critics of cash-based assistance contend that in poorly controlled settings, cash transfers or food vouchers could be stolen or used to purchase nonfood items. In 2015, GAO found instances of fraud and theft in EFSP projects. GAO also determined that USAID risk assessments for EFSP projects did not fully address risks specific to cash-based food assistance. Additionally, in cases of particularly acute malnutrition, local foods may not offer adequate nutritional quality for therapeutic treatment and rehabilitation, especially for highly vulnerable populations such as children and pregnant or lactating women. Under these circumstances, providing fortified or specialized in-kind foods may be preferable. Critics of cash-based assistance also argue that it could undermine the coalition of commodity groups, NGOs, and shippers that advocate for food aid funding, potentially resulting in reductions in total U.S. food assistance funding. Agricultural Cargo Preference The Cargo Preference Act of 1954 (P.L. 83-164), as amended, mandates that at least 50% of U.S. food aid commodities must ship on U.S.-flag vessels. MARAD monitors and enforces ACP. Congress increased the share of food aid commodities required to ship on U.S.-flag vessels from 50% to 75% in the 1985 farm bill ( P.L. 99-198 ) and subsequently lowered it to 50% in a 2012 surface transportation reauthorization act ( P.L. 112-141 ). According to MARAD, the main purpose of cargo preference laws is to sustain a privately owned, U.S.-flag merchant marine to provide sealift capability in wartime and national emergencies and to protect U.S. ocean commerce from foreign control. USA Maritime—an organization representing shipper and maritime unions—asserts that maintaining a U.S.-flag fleet and supply of U.S. mariners through cargo preference is a cost-effective alternative to the U.S. government building ships and hiring employees to maintain sealift capacity. MARAD contends that cargo preference is critical to the financial viability of U.S.-flag vessels and maintaining the supply of qualified U.S. mariners. According to a 2017 report by MARAD's Maritime Workforce Working Group, the current supply of qualified U.S. mariners is sufficient to crew the fleet of government and privately owned U.S.-flag ships necessary during an initial activation (for example, during wartime or a national emergency). However, there are not enough U.S. mariners to support a sustained activation of this fleet for a period longer than 180 days. Shipping on U.S.-flag vessels typically costs more than on foreign-flag vessels. A 2011 study by MARAD found that average daily operating costs for U.S.-flag vessels were 2.7 times higher than for foreign-flag vessels. USA Maritime maintains that a primary reason for the higher cost is that U.S.-flag ships have better working conditions and pay higher wages than foreign-flag ships. Ship owners surveyed by MARAD noted that "the standard of living in the U.S. and the social benefits provided to mariners contribute to U.S.-flag wages being significantly higher than foreign-flag wages." When shipping costs on U.S.-flag ships are higher than foreign-flag ships, ACP can increase food aid costs. This could potentially reduce the volume of food aid provided and, therefore, the number of people aided. According to GAO, "USAID officials stated that for each $40 million increase in shipping costs, its food aid reaches one million fewer recipients each year." USAID officials also noted that in some instances the agency has had to ship food aid on types of vessels that are not meant to carry bulk food cargo and are not compatible with equipment typically used to load and unload bulk grains. They asserted that this has resulted in increased costs and delays. USAID officials also expressed concerns about the appearance and health of bulk food transported on vessels that typically carry cargo such as oil or other fuels. Some opponents of ACP question its contributions to U.S. sealift capacity. They assert that few U.S.-flag ships depend on food aid shipments, and only some of those ships are capable of carrying military cargo. They also argue that ACP often benefits U.S. subsidiaries of foreign shipping companies rather than U.S. shipping companies. A 2010 study asserted that ACP increased food aid costs and contributed little to national security because 70% of ACP vessels did not meet the criteria that would deem them militarily useful. In 2015, GAO found that from April 2011 through July 2014, ACP increased the overall cost of shipping food aid by an average of 23%, or $107 million in total. GAO also concluded that ACP contributions to Department of Defense sealift capacity were uncertain, because in the preceding 13 years, including during conflicts in Iraq and Afghanistan, the entire reserve sealift fleet was not activated. Additionally, MARAD had not fully assessed the potential availability of U.S. mariners needed for a full and prolonged activation. In 2018, GAO analyzed the assessment of U.S. mariner availability in the above-mentioned Maritime Workforce Working Group report. GAO found that although "the working group concluded that there is a shortage of mariners for sustained operations, its report also details data limitations that cause some uncertainty regarding the actual number of existing qualified mariners and, thus, the extent of this shortage." Administrative Proposals and Legislation The Trump Administration and some Members of Congress proposed changes to the structure and intent of U.S. international food assistance programs during the 115 th Congress. The Administration proposed changes through its FY2018 and FY2019 budget requests. Some Members of Congress proposed changes in the House and Senate 2018 farm bills ( H.R. 2 ). Members also proposed changes in the Global Food Security Reauthorization Act of 2017 ( P.L. 115-266 ), which became law in October 2018, and the Food for Peace Modernization Act ( S. 2551 / H.R. 5276 ). These administrative and legislative proposals are detailed below. Administrative Proposals FY2018 Budget Request The Trump Administration's FY2018 budget request proposed a major reorganization of international food assistance funding. The request would have eliminated funding for the McGovern-Dole program and FFP Title II. Instead, it would have funded all international food assistance through the IDA subaccount within the state and foreign operations appropriations. The Trump Administration requested $2.5 billion for IDA, of which $1.1 billion would be allocated for emergency food assistance. Compared to FY2017 appropriated levels, the request would have reduced total IDA funding by 39% and total emergency food assistance funding by 38%. Congress did not enact any of the Administration's proposed changes but instead increased funding for McGovern-Dole, FFP Title II, and IDA. FY2019 Budget Request In its FY2019 budget request, the Trump Administration repeated its proposals from FY2018 to eliminate McGovern-Dole and FFP Title II funding and instead to fund all food assistance through the IDA subaccount. The request would decrease the IDA subaccount by 17% from FY2018-enacted levels. The House FY2019 agriculture appropriations bill ( H.R. 5961 ) was reported by the House Appropriations Committee in May 2018. It would decrease FFP funding by $100 million and maintain McGovern-Dole funding at FY2018-enacted levels. The Senate approved an agricultural appropriations bill for FY2019 ( H.R. 6147 ) in August 2018. The Senate-passed bill would maintain FFP funding at FY2018-enacted levels and increase McGovern-Dole funding by $2.6 million, or 1%. In September 2018, President Trump signed a continuing resolution ( P.L. 115-245 ) funding agriculture-related programs through December 7, 2018. Legislation in the 115th Congress The House and Senate 2018 Farm Bills (H.R. 2) On June 21, 2018, the House passed the Agriculture and Nutrition Act of 2018 ( H.R. 2 ). The Senate subsequently passed its version of H.R. 2 , the Agriculture Improvement Act of 2018, on June 28, 2018. Both the House and Senate farm bills would make changes to U.S. international food assistance programs. Both bills would amend FFP Title II by removing the requirement to monetize a minimum of 15% of Title II non-emergency commodities. The bills would also increase the minimum annual funding allocation for FFP Title II non-emergency assistance from $350 million to $365 million of the annual funds appropriated for FFP Title II. Both bills would include outlays for food security activities authorized by the FAA as part of the minimum non-emergency allocation. The Senate bill would also include Farmer-to-Farmer outlays as part of the minimum non-emergency allocation. The House and Senate farm bills would amend the McGovern-Dole program by directing the Secretary of Agriculture to ensure, to the extent practicable, that assistance coincides with the beginning of the school year and other relevant times during the school year. The Senate bill would authorize USDA to provide locally and regionally procured foods under the McGovern-Dole program in addition to U.S.-sourced foods. It would authorize up to 10% of funds appropriated to the McGovern-Dole program to be used for LRP activities. The Senate bill would also amend the Food for Progress program by designating the Secretary of Agriculture, rather than the President, as having program authority. The bill would authorize a portion of Food for Progress funds to directly fund food security projects in recipient countries rather than monetization proceeds funding all food security projects. Both the House and Senate bills would also amend reporting requirements to allow USAID and USDA to submit annual reports on international food assistance activities either jointly or separately. Current law requires the two agencies to jointly prepare and submit an annual report. The House bill would extend the labeling requirement—that all food aid be labeled as provided by the United States—to apply to food procured outside the United States. The House bill would also amend the requirement that food aid not interfere with markets in recipient countries to apply to all forms of food assistance, including cash-based assistance. The Senate bill does not contain such provisions. The Senate bill would create a new initiative—International Food Security Technical Assistance—that would provide technical assistance to NGOs, IOs, foreign governments, or U.S. government agencies to implement projects to improve international food security. The initiative would prioritize projects related to developing food and nutrition safety net systems in food-insecure countries. The Senate bill authorizes $1 million in annual funding for this initiative. The House bill does not contain such provisions. The Global Food Security Reauthorization Act of 2017 In October 2018, President Trump signed the Global Food Security Reauthorization Act of 2017 ( P.L. 115-266 ) into law. The bill reauthorizes the GFSA—and therefore EFSP and the Feed the Future initiative—through 2023. The bill authorizes appropriations of $2.8 billion per year for EFSP and $1.0 billion per year for the Department of State and USAID to carry out the Global Food Security Strategy (GFSS). The Obama Administration created the GFSS in 2016 in response to the passage of the original GFSA. The Food for Peace Modernization Act (S. 2551/H.R. 5276) In March 2018, S. 2551 / H.R. 5276 , the Food for Peace Modernization Act, was introduced. Both bills would change FFPA requirements by reducing the share of aid that must be U.S. commodities from 100% to 25%. The remaining 75% could be in the form of U.S. commodities or cash-based assistance. The bills would also eliminate the requirement that 15% of food aid be monetized, replacing this required minimum with the option to monetize up to 15% of food aid. S. 2551 and H.R. 5276 would also add the Senate Foreign Relations Committee and the House and Senate Appropriations Committees as committees receiving reports on international food assistance activities from USAID and USDA. Lastly, the bills would remove references in statute to using abundant U.S. agricultural productivity to deliver aid, emphasizing instead the goals of promoting agricultural-led growth in developing countries and reducing long-term reliance on U.S. foreign assistance. S. 2551 was referred to the Senate Foreign Relations Committee, and H.R. 5276 was referred to the House Agriculture Committee. Appendix. U.S. International Food Assistance Programs

The United States has played a leading role in global efforts to alleviate hunger and improve food security. U.S. international food assistance programs provide support through two distinct methods: (1) in-kind aid, which ships U.S. commodities to regions in need, and (2) cash-based assistance, which provides recipients with vouchers, direct cash transfers, or locally procured foods. The current suite of international food assistance programs began with the Food for Peace Act (P.L. 83-480), commonly referred to as "P.L. 480," which established the Food for Peace program (FFP). Congress authorizes most food assistance programs in periodic farm bills. However, Congress authorized the Emergency Food Security Program (EFSP)—a newer, cash-based food assistance program—in the Global Food Security Act of 2016 (P.L. 114-195). Congress funds international food assistance programs through annual agriculture appropriations and state and foreign operations (SFOPS) appropriations bills. Since 2007, annual international food assistance outlays averaged $2.6 billion. In FY2016, FFP Title II and EFSP accounted for 87% of total international food assistance outlays. The U.S. Agency for International Development (USAID) and the U.S. Department of Agriculture (USDA) administer U.S. international food assistance programs. Historically, the United States provided international food assistance exclusively through in-kind aid. Since the mid-1980s, FFP Title II, which provides in-kind donations, has been the dominant U.S. food aid program. (The name "FFP Title II" refers to Title II of the Food for Peace Act, in which Congress first authorized the program.) In the late 2000s, U.S. international food assistance began to shift toward a combination of in-kind and cash-based assistance. This is largely due to the Obama Administration creating the cash-based EFSP in 2010 to complement FFP Title II emergency aid. EFSP is used in conditions when in-kind aid cannot arrive soon enough or could potentially disrupt local markets or when it is unsafe to operate in conflict zones. Despite the growth in cash-based assistance, U.S. international food assistance still relies predominantly on in-kind aid. Many other countries with international food assistance programs have converted primarily to cash-based assistance. U.S. reliance on in-kind aid has become controversial due to its potential to disrupt local markets and cost more than procuring food locally. At the same time, lack of reliable suppliers and poor infrastructure in recipient countries may limit the efficacy and efficiency of cash-based assistance. Also, in poorly controlled settings, cash transfers or food vouchers could be stolen or used by recipients to purchase nonfood items. Agricultural cargo preference (ACP)—the requirement that 50% of all in-kind aid be shipped on U.S.-flag ships—has also become controversial due to findings that it can lead to higher transportation costs and longer delivery times. Higher costs may be partially due to higher wages and better working conditions on U.S.-flag vessels compared to foreign-flag vessels. ACP may also contribute to maintaining a U.S.-flag merchant marine to provide sealift capacity during wartime or national emergencies. The Trump Administration and certain Members of Congress have proposed changes to the structure and intent of international food assistance programs. Some Members of Congress proposed changes in the House and Senate 2018 farm bills (H.R. 2). These proposed changes include amending requirements for some international food assistance programs and expanding flexibility to use cash-based assistance. Other proposed legislation would address ACP, expand flexibility to use cash-based assistance, and consolidate and alter funding for most international food assistance programs.

Wildfire Statistics4 In 2015, more than 68,000 wildfires burned approximately 10.1 million acres, 7.4 million of which were federal lands. This figure was the largest acreage burned on record and is larger than the acreage burned in the previous two years combined (4.3 million acres in 2013 and 3.6 million acres in 2014). Although acreage burned is one indicator of the annual level of wildfire activity, it may also be misleading, since many of these fires may have occurred in areas that are large and relatively undeveloped, with very little impact on human development or communities. Acreage burned also does not indicate the severity of the wildfire or the degree of damage caused to the ecosystem. Thus, other indicators of wildfire activity should also be considered in conjunction with acreage burned, such as the severity of each wildfire or the cumulative number of severe wildfires in a year. In 2015, 1.5% (1,052) of the wildfires were classified as large or significant wildfires. Another statistic used to examine annual wildfire severity is the number of days spent at the highest national preparedness levels. The National Fire Preparedness Levels (PLs) are indicative of the level of nationwide mobilization of resources, with higher numbers indicating higher levels of response. For the six-year period of 2009 through 2014, the PL was at the highest level (PL5) for a total of 7 days; in 2015, the PL was at PL5 for 24 days. Wildfires can have a devastating impact on those communities adjacent to or within wildfire activity. Data reflecting the level of destruction caused by a wildfire can be useful but are not consistently collected on a nationwide scale. In 2015, 4,636 structures were destroyed by wildfires. Wildfires also pose safety risks; in 2015, 13 firefighter fatalities were reported. Wildfire Management Activities and Responsibilities Wildfire management is a series of coordinated activities undertaken by federal, state, and local authorities to prepare for, resolve, and recover from wildfire events. Resolution of an active wildfire may involve immediate and aggressive measures to suppress a wildfire (e.g., personnel and large air tanker response for a wildfire moving quickly toward a populated area), or it may involve immediate but less intense measures (e.g., monitoring a grassland wildfire where there is no immediate threat to humans). Wildfire management activities are generally categorized as fuel reduction, preparedness, suppression, or site rehabilitation. Fuel reduction is manipulation (including combustion) or removal of fuels to reduce the likelihood of ignition and/or to lessen potential damage and resistance to control. Preparedness is any activity that leads to safe, efficient, and cost-effective fire management. Preparedness includes the range of tasks necessary to build, sustain, and improve the capability to protect against, respond to, and recover from incidents. Suppression is the work associated with extinguishing or confining a fire. Site rehabilitation includes efforts undertaken, generally within three years of a wildfire, to repair or improve fire-damaged lands unlikely to recover to a management-approved condition within a specified time frame or actions taken to repair or replace minor facilities damaged by fire. A number of federal, state, and local agencies can and do respond to wildfires. States are responsible for responding to wildfires that begin on nonfederal (state, local, and private) lands, except for lands protected by the federal agencies under cooperative agreements. The federal government is responsible for responding to wildfires that begin on federal lands. The U.S. Department of Agriculture's Forest Service (FS) carries out wildfire response and management across the 193 million acres of national forests and national grasslands. The Department of the Interior (DOI) carries out wildfire management and response for more than 400 million acres of national parks, wildlife refuges and preserves, Indian reservations, and other public lands. Sometimes more than one agency may respond, depending on where the fire occurs, the potential threats, and the expertise required. In these cases, the National Interagency Fire Center (NIFC) coordinates the national mobilization of resources for wildfire and other incidents throughout the United States. Wildfire Management Appropriations Both DOI and FS receive annual discretionary appropriations for wildfire management activities through the Interior, Environment, and Related Agencies appropriations bills. Wildfire management funding for DOI is provided to the Office of Wildland Fire, which then allocates the funding to four DOI agencies—Bureau of Land Management (BLM), Bureau of Indian Affairs (BIA), National Park Service (NPS), and the U.S. Fish and Wildlife Service (FWS). Congress also provides funding for wildfire-related activities through the Federal Emergency Management Agency, such as emergency financial assistance for some nonfederal wildfires through Fire Management Assistance Grants and the Disaster Relief Fund; those funds and activities are discussed in other CRS products. DOI and FS each have two accounts for wildfire: a Wildland Fire Management (WFM) account and a Federal Land Assistance, Management, and Enhancement Act (FLAME) account. FLAME is a reserve fund for wildfire suppression that requires certain conditions be met to transfer funding from FLAME to the WFM account. The WFM appropriation is distributed among two programs: F ire O perations and O ther F ire O perations . The F ire O perations program receives the bulk of the WFM appropriation and funds two activities: preparedness and suppression. Appropriations for preparedness are used to support efforts that assist with fire prevention and detection, equipment, training, and baseline personnel. Suppression appropriations are used primarily for wildfire response. The O ther F ire O perations program funds hazardous fuels reduction activities, such as restoring forest vegetation type and structure to improve a forest's resilience and resistance to catastrophic wildfires. The Other Fire Operations program also funds joint fire research and science programs (e.g., NIFC operations) and programs to provide financial and technical assistance for state and volunteer wildfire management. Table 1 contains annual total wildfire management appropriations from FY2007 to FY2016. Appropriations for preparedness, suppression, hazardous fuels reduction, FLAME, and additional suppression appropriations are discussed in more detail below. Wildfire management appropriations began to increase in the late 1990s and increased significantly after FY2000, partly in response to the severe 2000 fire season ( Figure 1 ). As measured in constant 2015 dollars, wildfire appropriations have varied between $3.8 billion in FY2001 and nearly $5.0 billion in FY2008 and in FY2016 (to date). From FY2007 to FY2016, combined FS and DOI wildfire management appropriations have averaged $3.8 billion. The majority of wildfire management appropriations go to FS. From FY2007 to FY2016, FS received on average 76% of the total wildfire management appropriations and DOI received 24%. In addition, FS wildfire management appropriations constitute a large portion of total FS discretionary funding. For example, in FY2016, FS wildfire management appropriations are approximately 61% of the agency's discretionary funds, although not all of those funds counted against discretionary spending limits. Figure 2 reflects the proportion of FS discretionary funding between wildfire and non-wildfire activities over the past 10 years. Wildland Fire Management Account Of the two programs funded by both agencies' WFM accounts, Fire Operations receives the largest share of the funding, accounting for 78% of the combined WFM appropriation on average over the last five years. Whereas the Fire Operations programs are relatively similar in FS and DOI, the Other Fire Operations program funds some different activities in FS and DOI. For FS, the Other Fire Operations program includes appropriations for hazardous fuels management, as well as fire assistance and joint fire science activities. For DOI, Other Fire Operations includes appropriations for fuels management and joint fire science activities, and it also includes appropriations for burned area rehabilitation. Burned area rehabilitation for FS is funded in the suppression activity. Fire Operations: Preparedness Appropriations for preparedness are used to support efforts that assist with fire prevention and detection, equipment, training, and baseline personnel. FS uses preparedness funds to establish and maintain web-based decision support tools; manage and modernize aviation assets; and conduct predictive services analysis, among other things. DOI uses preparedness funds to prepare and execute fire management plans and cooperative agreements; provide infrastructure support; manage firefighting assets; support NIFC; and more. Congress appropriated a total of $1.41 billion for preparedness activities in FY2016 ($1,082.6 million for FS; $323.7 million for DOI), a decrease from the $1.46 billion appropriated in FY2015. Over the past five years (FY2012-FY2016), the funding level for the DOI preparedness activity saw minor fluctuations through FY2014 but increased 10% with the FY2015 appropriation ($319.0 million). Over the past five years (FY2012-FY2016), appropriations for FS preparedness have averaged $1.0 billion annually, although FS preparedness funding increased by close to 50% from FY2011 ($673.7 million) to FY2012 ($1,004.4 million). This increase was mostly due to a restructuring of the preparedness and suppression activities, which included shifting aviation charges and other changes to the preparedness activity. Fire Operations: Suppression Funds for suppression typically are provided through two accounts in annual Interior appropriations laws: the WFM account and the FLAME account. In addition, other appropriations laws, such as supplemental appropriations laws, sometimes provide additional suppression funds for these accounts. Suppression funding data are thus presented in this report in three different sections corresponding to the three different funding sources and then collectively discussed at the end of this section. More information on wildfire suppression spending is also available in CRS Report R44082, Wildfire Suppression Spending: Background, Issues, and Legislation in the 114th Congress . WFM suppression appropriations are used primarily for wildfire response. Some items covered by the FS suppression activity are firefighter salaries, aviation asset operations, incident support function, and suppression resources for DOI incidents on a reciprocal non-reimbursement basis. The FS suppression activity also covers personnel and resources for the Burned Area Emergency Response (BAER) program. Items covered by the DOI suppression activity include selected personnel expenses above what is covered by the preparedness subaccount, temporary emergency firefighters, and aircraft flight operations and support. Both FS and DOI typically request suppression funds based on the 10-year suppression obligation average. The suppression activity received $1,102.7 million in FY2016 ($811.0 million for FS; $291.7 million for DOI), a 10% increase over FY2015 levels ($999.7 million combined). Over the last five years (FY2012-FY2016), combined appropriations for WFM suppression have averaged $929.7 million annually and have increased in each successive year since FY2013. Other Operations: Hazardous Fuels FS's hazardous fuels appropriation and DOI's hazardous fuels reduction appropriation are used to decrease fuel loads, or alter the arrangement of fuel loads, on federal lands in an effort to make fires less intense and more controllable. Appropriations for this activity are used for fuel reduction projects, or treatments , on federal lands and in high-priority areas in the wildland-urban interface. In FY2016, Congress appropriated $545.0 million for hazardous fuels reduction activities to both FS ($375.0 million) and DOI ($170.0 million), a 4% increase over the total FY2015 level ($525.7 million). On average, the combined hazardous fuels reduction appropriation has been $492.2 million annually over the last five years (FY2012-FY2016). Since becoming a stand-alone budget item in FY2001, the hazardous fuels subaccount has received the third-largest share of WFM appropriations for both agencies. FLAME Congress established a FLAME account—under the Federal Land Assistance, Management, and Enhancement Act of 2009 —to cover the costs of large or complex fires and to be used when amounts provided in the FS and DOI WFM accounts for suppression are exhausted. Both the Secretary of Agriculture and the Secretary of the Interior may transfer funds from their agency's FLAME account into their agency's WFM account, for suppression activities, upon a secretarial declaration. The declaration may be issued if a fire covers at least 300 acres or threatens lives, property, or resources, among other criteria. The conferees of the FY2010 Interior appropriations bill stated their intent that the funding in the FLAME account, together with appropriations to the WFM account, should fully fund anticipated wildfire suppression needs and prevent future borrowing of funds from non-fire programs. DOI transferred $105.0 million from the FLAME reserve fund in FY2016, which exhausted the entire FY2015 FLAME appropriation and any unobligated balances carried over from previous fiscal years. FS also exhausted its FY2016 FLAME appropriation and transferred all FLAME funds in FY2016. Table 2 contains FLAME account funds for FY2007 to FY2016. Since the first appropriation in FY2010 through FY2015, Congress had appropriated $404.2 million on average annually to both FLAME accounts. In FY2016, Congress appropriated $1.0 billion to the FLAME accounts ($823.0 million to FS; $177.0 million for DOI). Supplemental Appropriations If the funding in the WFM suppression activity and FLAME account are exhausted during any given fiscal year, FS and DOI are authorized to transfer funds from their other accounts to pay for continued suppression activities. This practice is sometimes referred to as "fire borrowing" or "fire transfers." When it occurs, the agencies must submit a request for supplemental appropriations to repay borrowed funds. Congress may provide these funds through legislation that supplements the annual Interior appropriations law or in the following fiscal year's annual appropriation law for the agencies. Bill or report language typically specifies how the additional funds are to be used (e.g., for wildfire suppression, for fire transfer reimbursement, for emergency rehabilitation), although for record-keeping purposes, these funds are generally reported in the agencies' WFM suppression activity. Congress has, at times, designated the funds as emergency funding, not subject to certain discretionary spending limits. For example, $700.0 million was provided in FY2016 as additional wildfire suppression appropriations for FY2015 wildfire suppression activities. The $700.0 million was designated as emergency spending and not subject to certain discretionary budgetary constraints, but the additional funds provided in FY2013 and FY2014 were not similarly designated. A breakdown of additional funds since FY2007 is provided in Table 2 . Congress has provided additional wildfire funds in 6 of the 10 fiscal years since FY2007. Since the establishment of the FLAME account in FY2010, Congress has provided additional funds during three fiscal years (FY2013, FY2014, and FY2016). Total Suppression Appropriations For any given fiscal year, total suppression appropriations to DOI and FS may be a combination of three sources: the WFM suppression activity, the FLAME account, and supplemental appropriations. In FY2016, the total combined suppression appropriation was $2,802.7 million, including a $700.0 million supplemental appropriation. This figure is more than double the FY2015 total combined suppression appropriation ($1,394.7 million) and the second-highest suppression appropriation to date. The highest appropriation was in FY2008, when Congress provided $2,845.4 million ($3,154.7 million in FY2015 dollars) in total combined suppression appropriations. The FY2008 total appropriation included a total of $1,710.0 million provided in three supplemental appropriations to cover suppression costs incurred in both FY2007 and FY2008. Total suppression data over the last 10 years are presented in Table 2 (nominal dollars) and displayed in Figure 3 (constant FY2015 dollars). FY2017 Requested and House-Passed Wildfire Management Appropriations The Administration requested a total of $4.4 billion for wildfire management for FY2017 ($3.3 billion for FS and $1.1 billion for DOI). This figure is a decrease of $472.9 million from the FY2016 enacted level of $4.9 billion (see Table 3 ), which included a $700.0 million supplemental appropriation. The Administration proposed a new funding mechanism for wildfire suppression activities, which includes eliminating the FLAME reserve account and providing a portion of the suppression appropriation outside discretionary spending limits. On July 14, 2016, the House passed H.R. 5538 , the FY2017 Interior, Environment, and Related Agencies Appropriations Act. H.R. 5538 would provide a total of $3.9 billion for wildfire management for FY2017 ($3.0 billion for FS and $0.9 billion for DOI), $505.5 million below the requested amount. This appropriation would fully fund the 10-year suppression obligation average, provide additional funds for hazardous fuel management, and include $407.0 million for both FLAME accounts. H.R. 5538 would not adopt the Administration's proposal to eliminate the FLAME account or provide a budgetary adjustment mechanism to fund a portion of the wildfire suppression appropriation. The House Committee on Appropriations supports such a proposal but declines to make a recommendation in regard to the budgetary adjustment mechanism, citing lack of jurisdiction. The House bill would make the FS WFM appropriation available for three fiscal years (through FY2019). Previously, these appropriations were provided without a fiscal year limitation, meaning that any unobligated balance could carry over indefinitely. On June 16, 2016, the Senate Committee on Appropriations reported S. 3068 , the FY2017 Interior, Environment, and Related Agencies Appropriations Act. S. 3068 would provide a total of $4.4 billion for wildland fire management for FY2017 ($3.3 billion for FS and $1.1 billion for DOI), $16.1 million above the requested amount, although $661.3 million would be designated as emergency spending for wildfire suppression purposes and not subject to certain discretionary spending limits. The Senate committee bill would not provide any appropriations to the FLAME reserve accounts and includes a recommendation and legislative language to adopt the framework of the Administration's proposed new funding mechanism for wildfire suppression activities. Administration's Wildfire Suppression Funding Proposal Starting in FY2015, and continuing in FY2016 and FY2017, the Administration has proposed a new funding mechanism for wildfire suppression activities, which includes eliminating the FLAME reserve account. Therefore, the Administration did not request an appropriation to the FLAME reserve account for those years. Congress did not adopt the proposal in FY2015 or FY2016. Currently, wildfire suppression is funded by appropriations that are subject to the statutory discretionary spending limits established in the Balanced Budget and Emergency Deficit Control Act of 1985. The Administration's proposal would maintain this funding stream for most wildfire suppression operations, but it also would establish a new adjustment to the discretionary limits that could be used to fund suppression activities in emergency situations. In FY2017, the maximum amount of this adjustment would be $1.4 billion across both FS and DOI (although the Administration is not requesting the maximum adjustment for FY2017 and is requesting an adjustment of up to $1.2 billion). The maximum adjustment amount would increase each fiscal year until FY2022, when it would be $2.7 billion. This adjustment would allow FS and DOI to request additional wildfire suppression funds—up to the maximum amount of the adjustment each fiscal year—that effectively would not be subject to the discretionary budget limits. Similar legislative proposals have been introduced in the 114 th Congress. Issues Congress is debating several issues related to federal funding for wildfire management. Issues under debate include the level and direction of federal spending on wildfire management as well as the effectiveness of that spending (e.g., whether the funding is allowing agencies to meet wildfire management targets and the adequacy of those targets). Wildfire spending has more than tripled since the 1990s, increasing from $1.6 billion in FY1995 in constant dollars to $4.9 billion in FY2016. A significant portion of that increase is related to rising suppression costs, even during years of relatively mild wildfire activity, although the costs vary and are difficult to predict in advance. Congress also is debating the level of appropriations dedicated for certain wildfire management activities, such as whether the rising cost of suppression should come at the expense of funding other activities or whether investing more funds in hazardous fuel reduction activities now may help reduce wildfire costs in the future. When wildfire suppression funding is exhausted during a fiscal year with severe fire activity, the agencies may have to transfer funds from non-wildfire management suppression accounts, which may impact the performance of those activities. Congress then faces a decision as to whether to reimburse the accounts from which funding was transferred or to otherwise provide supplemental appropriations, sometimes outside of its regular budget. If a reimbursement decision is made after the end of the fiscal year in which transfers were made, the decision may disrupt the regular budget cycle and complicate discussions about how much suppression funding is needed for coming fiscal years during the appropriations process. Congress has provided funding for wildfire management in addition to what was provided in the Interior appropriations bill—usually for wildfire suppression—for 6 of the last 10 years, including FY2013, FY2014, and FY2016. This fact may lead to questions regarding the structure of wildfire funding and wildfire suppression funding estimation methods, among other things. Wildfire suppression funding estimates depend on multiple factors (e.g., weather, fuel load, nearby dwellings, access to wildfire site), and numerous reasons have been given as to why suppression estimates have at times not accurately forecast suppression expenses, with estimates typically underestimating suppression spending. Wildfire suppression is complicated, and both the efficiency of resources used for wildfire suppression and the federal protocol for wildfire management have an impact on wildfire suppression costs. Analyzing trends in wildfire management could provide insights useful for Congress during these debates. However, analyzing wildfire funding trends over time—particularly prior to FY2001—is challenging for many reasons. The agencies' account structures have changed over time, with different activities funded through different programs. Additional accounts and programs have been created. For example, the FLAME account was established in FY2010, with appropriations that previously had gone entirely to WFM suppression then being allocated between two different accounts. A further complication is that costs for one wildfire season (using a calendar year) often are covered by appropriations for two fiscal years, and sometimes appropriations are enacted in one fiscal year to cover costs incurred in previous fiscal years.

The Forest Service (FS, in the U.S. Department of Agriculture) and the Department of the Interior (DOI) are the two primary federal entities tasked with wildland fire management activities. Federal wildland fire management includes activities such as preparedness, suppression, fuel reduction, and site rehabilitation, among others. Approximately 10.1 million acres burned during the 2015 wildfire season, which was more than the acreage burned in 2014 (3.6 million acres) and 2013 (4.3 million acres) combined and represents the largest acreage burned since modern record-keeping began in 1960. There are several ongoing concerns regarding wildfire management. These concerns include the total federal costs of wildfire management, the strategies and resources used for wildfire management, and the impact of wildfire on both the quality of life and the economy of communities surrounding wildfire activity. Many of these issues are of perennial interest to Congress, with annual wildfire management appropriations being one indicator of how Congress prioritizes and addresses certain wildfire management concerns. Annual federal funding for wildland fire management is provided in the Interior, Environment, and Related Agencies appropriations bill. Congress appropriated $4.9 billion combined to both FS and DOI in FY2016, which included a $700 million appropriation for FS to reimburse transfers that occurred in FY2015 to pay for wildfire costs. The combined FY2015 appropriation was $3.5 billion. Federal wildfire spending has increased significantly over the last two decades, driven largely by the rising cost to suppress wildfires. In FY1995, FS spent just over $500 million in constant dollars to suppress wildfires; in FY2001, FS spent $898 million. In FY2015, FS spent $1.7 billion on suppression operations. Appropriations for wildfire management have similarly increased. In FY1995, appropriations for wildland fire management were $1.6 billion in constant dollars, $3 billion less than the FY2016 appropriation. Congress is debating several issues related to federal funding for wildfire management. Issues under debate include the level and direction of federal spending on wildland fire management as well as the effectiveness of that spending (e.g., whether the funding is allowing agencies to meet wildfire management targets and the adequacy of those targets). Congress also faces requests from the agencies for additional appropriations during severe fire activity (e.g., justification for additional funding and the impact on non-fire programs without the additional funding). Congress has provided additional funding for wildfire management above the level provided in the Interior appropriations bill—usually for wildfire suppression—for 6 of the last 10 years, including FY2013, FY2014, and FY2016. The additional funding is typically provided through a supplemental appropriation. The frequent need for additional funds raises questions about the structure of wildfire funding and how the agencies estimate wildfire suppression funding requirements, among other things. Proposals to create alternative mechanisms for funding wildfire suppression have been introduced in the 114th Congress and proposed by the Administration. The proposals generally would create a budgetary adjustment mechanism to fund a portion of the wildfire suppression appropriation outside of statutory discretionary spending limits. This report provides wildfire management appropriations data over the past 10 years, information on the President's FY2017 budget request, and information on FY2017 appropriations for wildland fire management.

Background Intelligence, Surveillance and Reconnaissance (ISR) The ability to gather accurate and timely information on enemy forces is an essential enabler of modern military operations. Joint Vision 2010 , the Pentagon's "conceptual template...to achievenew levels of effectiveness in joint warfighting" specifically highlights the importance of achievinginformation dominance: "We must have information superiority: the capability to collect, processand disseminate an uninterrupted flow of information while exploiting or denying an adversary'sability to do the same." (1) The growing use ofprecision guided munitions (PGMs) which can destroyspecific targets without extensive collateral damage depends upon the availability of preciseinformation. As the Department of Defense (DOD) transforms itself into the force envisioned inJoint Vision 2010 and organizes its components consistent with "network centric"warfightingconcepts, the importance of accurate and timely information will grow. There is a consensus among defense policy makers that no single platform or technology can satisfy DOD's need for information at all times in all scenarios. The United States currentlyemploys a variety of satellites that collect information on enemy forces. These systems are valuable,and their effectiveness and role in intelligence, surveillance and reconnaissance (ISR) is projectedto grow. However, airborne ISR platforms can be more rapidly and flexibly deployed than currentsatellites, and an aircraft's unpredictable deployment and flight pattern makes it difficult foradversaries to effectively conceal themselves from observation. Thus, airborne platforms will likelycontinue to satisfy a great deal of DOD's ISR requirements over the next several decades. Both Congress and DOD face important decisions regarding current and future U.S. ISR capabilities. An overarching question is: Over the next 20 to 30 years, what mix of existing andplanned manned and unmanned ISR aircraft most effectively satisfies DOD's requirement for timelyand accurate information on enemy forces? The information they collect will be integrated (or"fused") with information from satellites, ground-based signals intelligence (SIGINT) intercept sites,human agents, and other sources. The particular mix of platforms will depend upon which sensorsthey can utilize, geopolitical conditions, and the nature of planned operations. Many observers believe that ultimately unmanned aerial vehicles (UAVs) will replace manned aircraft for collecting imagery, radar data, and signals intelligence for operational commanders. Itis not, however, clear that manned airborne reconnaissance is completely obsolete. Some observersbelieve that a pilot can react faster than a distant UAV operator to unexpected targets of opportunityand take evasive actions that might not otherwise be possible. Also, pilots may be less susceptiblethan remote UAV operators to some information warfare techniques. There remain a variety ofmanned reconnaissance aircraft in the inventories of the Air Force and the other services and someattack aircraft can be equipped with reconnaissance "pods" containing sensors of various types toenable them to serve on reconnaissance missions. The U.S. ISR inventory is comprised of a variety of manned and unmanned aircraft, which have various strengths and weaknesses. (See Table 1 below). Presently, the U-2 Dragon Lady forms thebackbone of this fleet. (2) Although based on a designdeveloped in the 1950s, U-2s have performedadmirably in recent operations. They provided 50% of all imagery during Operation Desert Storm,and 90% of ground forces targeting information. During Operation Allied Force, the U-2 providedmore than 80% of the imagery needed for air strikes. (3) There is, however, only a limited inventoryof U-2s, they are heavily used, and the plane is expected to be retired from the Air Force inventoryat some point during the next two decades. Global Hawk UAVs are often suggested as a replacement for U-2s and are portrayed as the main airborne reconnaissance platform of the future. The first test version of these planes has beenundergoing test and evaluation and there is an apparent consensus that it should be acquired for theoperating forces. The Global Hawk can operate at altitudes of 65,000 feet and for periods in excessof 30 hours. Although having the important advantage of not putting pilots at risk, Global Hawksdo not now match all the capabilities of U-2. No Global Hawk is currently in the operationalinventory. Furthermore, current acquisition plans do not call for sufficient numbers of Global Hawksto replace the hours-on-station that can be maintained by existing U-2s. Thus, if Air Force ISR capabilities are to be maintained (and some believe they need to be expanded if current operations tempos are to be maintained in the future), a number of seriousacquisition and budgetary issues need to be addressed. What are the current and anticipated requirements for airborne surveillance platforms? Can Global Hawks be designed to have the capabilities now possessed by the U-2? Or, should multiple UAVs be acquired to replace a single U-2? If a larger or accelerated Global Hawk acquisition effort is approved, where will funding be identified? Should U-2s or other manned aircraft be maintained in the Air Force inventory even as Global Hawks become operational? Are additional U-2s needed, regardless of the introduction of the Global Hawk? What would be the implications for ISR if U-2s were to be decommissioned at a faster rate than planned to free up funds for additional or accelerated Global Hawkacquisition? These questions, and others, will be discussed in the context of the FY2002 Defense budget which the next administration will forward to Congress early in 2001. Although significantbudgetary issues are involved, there are also important implications for the future effectiveness ofISR and the success of defense planning for achieving military goals while minimizing the loss oflife. Table 1. USAF Reconnaissance & Surveillance Aircraft ActiveInventory (May 2000) (4) U-2 Dragon Lady The U-2 is a single-seat, single-engine, high-altitude, reconnaissance aircraft. It provides continuous all-weather, day or night, stand-off intelligence through all phases of conflict in directsupport of theater military commanders. Long, wide, straight wings give the U-2 the appearance andcharacteristics of a glider. The U-2 is a reliable aircraft with a high mission completion rate. (5) U-2s are based at Beale Air Force Base, California and support theater commanders from four operational detachments located throughout the world, which have included in recent years: OsanAir Base, South Korea; RAF Akrotiri Air Base, Cyprus; Sigonella, Sicily; Istres Air Base, France;and Taif and Prince Sultan Air Bases, Saudi Arabia. U-2 detachments can deploy to other operatinglocations if necessary. Intended to overfly the vast expanses of the Soviet Union at a time when there were no satellites, the U-2 was designed to fly at very high altitudes to avoid detection and attack. (6) Beginningin the 1980s an updated version of the U-2 began to replace the earlier models. (7) From 1994 to 1999,U-2R aircraft were upgraded with the General Electric F-118-10 engine, which burns less fuel,reduces weight and increases power. The upgraded aircraft were re-designated as a U-2S/ST. TheAir Force expects this airframe and engine combination to last until 2050. (9) The U-2 can carry a variety of sensors and cameras depending on its assigned mission. It is capable of collecting multi-sensor photo, electro-optic, infrared and radar imagery, as well asperforming other types of reconnaissance functions such as SIGINT collection. Photographicsensors include the HR-329 high resolution camera and the Optical Bar camera. Electro-opticsystems include the Intelligence Reconnaissance Imagery System III, and the Senior YearElectro-Optical Reconnaissance System (SYERS), which also collects information in the infra red(IR) wavelength. These systems vary in resolution and aperture, but when combined, can captureimages of territory on the order of 33 x 21 nautical miles. (10) The Advanced Synthetic Aperture RadarSystem (ASARS) gives the U-2 real-time, high resolution -- although not as high as EO systems-- capability at night and in bad weather (when the EO systems cannot function effectively) with animproved capability to detect moving targets. (11) The U-2's Senior Glass SIGINT capability is composed of the Senior Ruby electronic intelligence (ELINT) sensor and the Senior Spear communications intelligence (COMINT) sensor. These systems can acquire signals and telemetry at 300 nautical miles, downlink data to groundstations 300 nautical miles away, giving the U-2 a real-time "reach of 600 nautical miles (690 statutemiles, 1,110 km). The Senior Span pod, which is attached to the top of the fuselage allows the U-2to transmit SIGINT data via satellites to global ranges." (12) The Senior Spur pod, performs the samefunction for ASARS data. (13) The U-2 is notoriously difficult to fly. Pilots called the U-2 "Dragon Lady" because of its unforgiving handling characteristics at altitude. (14) Landing the U-2 is a complex ballet that oftenentails intentionally stalling the aircraft, employing runway "chase cars,"and oftentimes deliberatelydragging the plane's wingtip down the runway. A major challenge for the Air Force is maintaining an adequate supply of U-2 pilots. U-2 pilots face physical rigors that are unique in the aviation world. Flying at extreme altitudes, pilots mustwear pressure suits similar to those worn by astronauts. The pilots have to engage in special trainingand pre-flight preparations (e.g., special diets and inhaling 100% oxygen 1 hour prior to take-off)to help ward off the profuse sweating, fatigue and dizziness caused by 10 hour missions. There areonly some 50 pilots currently qualified to fly U-2s and they have to spend significantly higherpercentages of their tours of duty on temporary flying assignments than other Air Force officers. Some observers believe that extended deployments and the dangers and hardships involved in flyingU-2s may contribute to significant retention problems that could affect overall capabilities. TheGeneral Accounting Office (GAO) concluded that "It is difficult to find pilots with the aptituderequired to master the difficult handling characteristics of the U-2." (15) The Air Force has, however,taken steps to reduce the average temporary additional duty (TAD) rates of U-2 pilots to bring theminto line with other pilots. Improved U-2 pilot morale may have been influenced by the aircraftwinning the Collier Trophy in 1998, awarded by the National Aeronautic Association for the"greatest achievement in aeronautics or astronautics in America...." (16) U-2s in Post-Cold War Combat Operations. The U-2 was originally designed to fly over the Soviet Union to acquire information about strategic targets such as airfields and missile bases. Information acquired from the U-2 was ofimportance to the U.S. Intelligence Community's ability to provide adequate assessments of Sovietstrategic forces, but the utility of the platform for this purpose was virtually destroyed by thediplomatic embarrassment following the shoot down of a U-2 in May 1960 and the public trial ofits pilot, Francis Gary Powers. Beginning in the 1960s this mission was taken over by surveillancesatellites that presented no danger of captured pilots. U-2s were not especially valuable in Vietnamwhere photography of triple-canopy jungle often provided little useful intelligence on troopmovements along the Ho Chi Minh Trail underneath. It was not until Desert Storm in 1991 thatU-2s demonstrated their value as the platform that could provide the near-real-time intelligence thatallows military commanders to place bombs on the exact targets intended. The greater use of theU-2 derived from improvements in surveillance and communications technologies as well as themuch greater availability of precision guided munitions that benefit from U-2-derived data. Desert Storm saw the largest U-2 operation in history with nine aircraft and thirty pilots flying some five sorties a day. Primary missions were Iraqi Army field positions, bomb damage assessment(BDA), and searching for SCUD missile launching sites. Photography and other data collected fromU-2s was for the first time rapidly available to tactical commanders. Inevitably, there werearguments about collection priorities, and, especially, demands by operational commanders for largervolumes of photographic coverage (especially wide-area coverage) even though some intelligenceofficials believed that electro-optic and radar collection was a better use of assets. There weredifficulties with developing photography in-theater and with disseminating hard copies. Nonetheless, according to one estimate, U-2s provided 30% of total intelligence, 50% of imageryintelligence, and 90% of all Army targeting intelligence for the entire theater. (17) Military operations over the former Yugoslavia in the mid-1990s saw continued reliance on the U-2 by military commanders. Balkan missions were initially related to gathering information ontreaty verification, troop dispositions, and missile sites. During the NATO attack on Serbian forcesin the spring of 1999, known as Operation Allied Force, U-2s were used to identify Serbian targetsand to conduct BDA to determine the accuracy of Allied strikes. Data collected by an airborne U-2was transmitted back to Beale Air Force Base in California for analysis (18) and then sent back tooperations centers and thence to aircraft which could attack the target. Admiral Daniel Murphy,Commander of the U.S. Sixth Fleet during Allied Force, recalled having satellite positioning dataon key Serbian early warning radars. But that was insufficient for targeting a Tomahawk missile, which was the weapon that we intended to employ. So I walked into the intelligence centerand sitting there was a 22-year-old intelligence specialist who was talking to Beale Air Force Basevia secure telephone and Beale Air Force Base was driving a U-2 over the top of this spot. The U-2snapped the picture, fed it back to Beale Air Force base where that young sergeant to my young pettyofficer said, we have got it, we have confirmation. I called Admiral Ellis [Commander, AlliedForces Southern Europe], he called General Clark [Supreme Allied Commander, Europe], and about15 minutes later we had three Tomahawk missiles en route and we destroyed those threeradars. (19) Another senior Air Force general wrote after the Kosovo campaign, "We never dropped a bomb on a target without having a U-2 take a look at it." (20) To meet requirements for Allied Force, U-2 pilots and support personnel were transferred from other theaters. As one senior Air Force commander noted, U-2s were "stretched to the limit duringAllied Force." (21) Observers suggest that if the AirForce were required to conduct operations on ascale larger than Allied Force, limits on U-2 availability would have to be faced and could constrainthe effectiveness of precision bombing campaigns. In addition to missions in the Balkans, U-2s continue to fly collection missions over Iraq and the Korean peninsula. In those regions they supplement collection by satellite and other systems andare intended to provide early warning of attacks. Their chief defense is their ability to operate ataltitudes above 70,000 feet, far higher than most military aircraft and out of the range of most SAMs. U-2s are not, however, by any means invulnerable. Besides the celebrated shootdown of the planecarrying Gary Powers, a number of other U-2s were lost flying classified missions over the Asianmainland in the 1960s and 1970s. In the current environment, U-2s can in many cases collectrequired information by remaining in international airspace. U-2 overflights of Iraqi territory,however, have raised concerns about their vulnerability. Fighter escorts have been assigned to coverthem and stiff warnings have been delivered to Bagdad, threatening dire consequences should effortsbe made to attack U-2 missions. The availabiliy of SAMs to various governments that can reachusual U-2 flying altitude represents a standing threat that air force planners must take intoconsideration. RQ-4A Global Hawk The RQ-4A Global Hawk is a high altitude, long endurance, long range un-piloted aerial vehicle designed to perform many of the same functions as the U-2. Global Hawk is the product of anadvanced concept technology demonstration (ACTD), a program designed to quickly transitionemerging technology from the laboratory to the warfighter. The program started in May 1994 when the Defense Advanced Research Projects Agency (DARPA) solicited industry for submissions for a competitive procurement effort. Phase 2 of theprogram began in May 1995, when Teledyne Ryan/E-Systems was selected as the sole contractor(Ryan Aeronautical was subsequently acquired by Northrop Grumman). (22) The Global Hawkundertook its first flight on February 28, 1998. It flew a second and third time in May 1998. OnMarch 29, 1999, Global Hawk #2 crashed during a flight at China Lake Naval Weapons Center,when it "inadvertently received a test signal for flight termination from a test range on Nellis AirForce Base, Nev." (23) Global Hawk completedits ACTD phase in June 2000 and moved into a"normal" acquisition program in engineering, manufacturing and development (EMD). (24) As ofOctober 2000, the Global Hawk has logged 62 flights for a total of 737 flight hours, 301 of whichhave been in airspace controlled by the Federal Aviation Administration (FAA). The Global Hawkhas flown as high as 66,000 feet and for as long as 31 hours at one time. (25) The Global Hawk's ground-based support is composed of a Mission Control Element (MCE) and a Launch and Recovery Element (LRE). These elements are composed of people (4 in the MCE,2 in the LRE), computers, communications gear and shelters. (26) Together, the MCE and LRE canoperate up to three aerial vehicles simultaneously. The LRE needs to be deployed to the GlobalHawk's operating base, but the MCEs could theoretically be based anywhere. It takes two C-17Globemaster aircraft to deploy the two ground elements. The Global Hawk, as evidenced by a recentflight from the United States to Portugal, can self deploy. As currently designed, the Global Hawk can carry electro-optical, IR, and synthetic aperture radar sensors. It is not designed to carry SIGINT sensors. While the Global Hawk's EO and IRcapabilities are on-par with the U-2s, its SAR capabilities are not. Due to greater power and a largerantenna, the U-2 can more effectively use its SAR to detect moving targets than can the GlobalHawk. If used to find static targets however, the U-2 and Global Hawk SAR capabilities are morecomparable. DOD's current plan is to manufacture twelve Global Hawk air vehicles between FY2003 and FY2009. These UAVs would carry the EO/IR/SAR sensor payload, and are described by the AirForce as a complement to the U-2. In FY2009, the Air Force wants to produce four of the nextgeneration Global Hawks, which could carry SIGINT sensors, instead of either the EO/IR or theSAR payload. The Air Force describes the capabilities of this next generation as being on par withthe U-2 and asserts that they could replace the U-2. (27) Summary: Platform Comparisons A review of Table 2 below highlights the key similarities and differences between the U-2 and Global Hawk. On a one-to-one basis, a comparison of these characteristics is important for policymakers to consider when making decisions on the overall size and composition of the U.S. airborneISR force structure. There are significant similarities. The platforms are of similar physicaldimension. They fly at approximately the same altitude and at similar speeds. Yet, there areimportant differences between the platforms that stand out when comparing the U-2 and GlobalHawk on a platform-to-platform basis. These differences include (1) pilot requirements, (2) rangeand endurance, and (3) mission payload. The first difference between the platforms is the Global Hawk's lack of a pilot. While not putting a pilot in danger appears obviously beneficial, there are a number of associated issues thatmerit discussion. One potential downside to being pilotless is that the platform is not as responsiveto changing circumstances as a piloted aircraft. Remotely located mission control personnel cannot,in theory, make decisions and take action as quickly as a pilot on the scene. However, during amission, U-2 pilots infrequently take action based on what they personally observe from the cockpit. Rather, they typically make adjustments to their pre-planned mission profile based on warnings andorders from mission control elements. Thus, unmanned aircraft may not suffer from a lack ofresponsiveness in the high altitude ISR mission as they would if performing other missions. The lack of a pilot may be more of a hindrance when flying through civil-controlled U.S. and foreign-country airspace than it is when overflying a combat area. Civil authorities are concernedthat in the event of an unforeseen emergency, such as an engine burnout, or malfunction, a pilotlessaircraft would be less able to take corrective action, such as making a controlled landing at a localairfield. Instead, they fear that a pilotless aircraft would be more likely to crash into inhabited areas.Therefore, civil authorities currently impose very demanding mission planning requirements onunmanned systems; if they allow them to overfly at all. This exhaustive mission planning takes time,manpower and money. Finally, the Global Hawk's lack of a pilot doesn't necessarily confer increased operational utility. The Global Hawk's size, flight profile and lack of stealth features suggest it is approximatelyas survivable as the U-2. It will likely be employed as the U-2 is: outside of high threatenvironments such as long-range SAMs. At approximately $50 million each, the Global Hawk istoo expensive to be considered expendable. The second difference between the Global Hawk and U-2 that bears discussion is that of range and endurance. The Global Hawk has superior range and endurance to the U-2. Global Hawk canfly approximately twice as far as the U-2, and its loiter time is three times that of the U-2. Thissuggests important ramifications for the number of platforms required in the overall ISR inventory.All other things being equal, fewer platforms with long endurance can do the same job as moreplatforms with less endurance. The third noteworthy difference between the platforms is payload. The U-2 enjoys an advantage in payload over the Global Hawk of more than two-to one. This allows it to carry more and differentpayloads. A larger payload capability also provides more potential for unforseen upgrades andtradeoffs. Generically speaking, a larger volume on an aircraft presents engineers with more choicesand opportunities than a smaller volume. Additionally, the U-2's large engine provides moreelectrical power than the Global Hawk's, which in turn increases the capabilities of some of itssensor payloads. All things being equal, fewer platforms with more sensors can do the same job asmore platforms with fewer sensors. Table 2. Comparison of Key Characteristics Congressional Action Overview Congress has long taken a special interest in U-2 programs. In the past decade, the planes have been re-engined to enable them to fly at higher altitudes for longer periods. A variety of improvedsensors and communications data-links have been acquired or funded and necessary steps are beingtaken to install them on aircraft. A cockpit upgrade is underway that will bring control systems inthe U-2 up to current Air Force standards. The U-2 has been declared a "congressional interest item." The need of the regional military commanders (CINCs) for tactical airborne intelligence capabilities is universally acknowledged within DOD. U-2s and UAVs are both in high demand andthe inventories ("density") of both types of platforms are low. Although, according to someobservers, the Clinton Administration may have been somewhat more inclined to deploy forces in"peacekeeping" missions than either of its likely successors, most analysts believe that U.S. militaryforces will not escape the types of missions in disparate countries that will require preciseintelligence of potential targets. These missions are as likely to occur in the next few years as theyare in 2010 or 2020. DOD's current plans aim to provide today's and future warfighting CINCs with adequate ISR. Planning envisions the continued upgrading of the U-2, possibly augmenting it, and eventuallyreplacing it with the Global Hawk UAV. ISR for the foreseeable future will inevitably be limited byavailability of airborne platforms. At present there are only some 35 U-2s, the number of pilots andground crew is limited; and there no operational Global Hawks. Many observers believe that, evenif UAVs can ultimately replace the entire U-2 force, many more units than currently envisioned willbe required as well as an extensive period of operational familiarization and training. DOD Budget FY 2001 In considering the FY2001 Defense budget, the four major oversight committees -- House Armed Services, Senate Armed Services, House Appropriations, and Senate Appropriations --expressed concern regarding U-2 procurement issues such as the Senior Year Electro OpticalReconnaissance System (SYERS), the Joint Signals Intelligence Avionics Family (JSAF), and theacquisition of a two-seat training aircraft. Some oversight committees expressed concern that the administration's budget request underfunded initial deployment spares for the SYERS upgrade by at least $3.0 million. Authorization conferees recommended a $3 million increase to remedy this concern, whileappropriations conferees did not. Also, there was consensus among the defense oversightcommittees that the Air Force required additional RDT&E funds to adequately support continueddevelopment of the U-2 SYERS. A polarization technique that would provide the SYERS withincreased ability to penetrate foliage and camouflage was expressly supported in congressionallanguage. The JSAF would provide an upgraded information collection capability for the U-2s. Yet, the administration's request was insufficient to procure an entire JSAF suite and required spares andcabling. Therefore, appropriations and authorizations conferees recommended an increase to theDefense Airborne Reconnaissance Program (DARP) of $8 million for an additional JSAF unit forthe U-2. There are currently four two-seat U-2 training aircraft in DOD's inventory, and, as discussed earlier, producing sufficient numbers of U-2 pilots is a constant concern. To remedy this, Houseauthorizers recommended making available an additional $10 million and $14 million respectivelyto procure a fifth two-seat U-2 trainer; and House appropriators supported that authorization. Appropriations and authorization conferees noted that $111.6 million and $14 million had alreadybeen made available for U-2 sensor improvements and a U-2 trainer respectively in the FY2000Supplemental Appropriations Act ( P.L. 106-246 ) enacted on July 13, 2000. ( H.R. 4425 , P.L. 106-710 .) Appropriations and authorization conferees therefore reduced funding for U-2 relatedprocurement below the administration's request. While supporting the Administration's request for $373.1 million in U-2 (and RC-135) operations and maintenance funding, House authorizers expressed concern that "funding for manyIntelligence Community programs, including intelligence surveillance and reconnaissance (ISR)aircraft are regularly transferred from the pro-grams for which funds were authorized andappropriated to fund shortfalls in other programs, often not related to ISR requirements." (30) Notingtestimony by regional CINCS that shortfalls in ISR aircraft and systems were a top priority, theHouse Armed Services Committee directed that the RC-135 and U-2 programs be designated ascongressional interest items. Table 3: Summary of U-2 & Global Hawk Funding FY2001 (in millions $) The Air Force FY2001 budget requested $22.3 million in procurement funding and $109.2 million in RDT&E funding for the HAE UAVs. The $22.3 million would be used for procurementof long lead items for the first two production Global Hawk UAVs and one common ground station.Continued development of the Global Hawk would be supported by $103.2 of the $109.3 milliontotal for this line item. All defense oversight committees except the Senate Armed ServicesCommittee supported the procurement request. The SASC concurred with a recent GAO report thatfound it premature to enter into production in FY2001 and zeroed out the request. (31) The House Armed Services and Senate Appropriations committees matched the administration's request for RDT&E funding. Expressing interest in the potential of Global Hawkto support counter-drug activities, the Senate Armed Services committee increased the RDT&Erequest by $18 million so Global Hawk engineers could explore the integration and use of an AESA(advanced electronically steered array) radar. (32) The Senate Appropriations Committee andAppropriations conferees also supported an $18 million increase; but the House did not. Authorization conferees adopted the AESA provision language but did not increase fundingaccordingly. Intelligence Budget FY 2001 Some information on actions taken by the Congress on intelligence programs associated with the U-2 and the Global Hawk is available from committee reports on intelligence authorization bills. The published reports are, however, accompanied by classified annexes that provide greater detailand have legal authority. The reports also provide a sense of congressional opinion. In May 2000,the House Intelligence Committee concluded: In the area of Intelligence, Surveillance and Reconnaissance (ISR) assets, we continue to see extensive over-utilization of very limited, butcritical airborne assets, with little relief in sight. While planning for deployment of new ISR airbornecapabilities into the theaters, the Department of Defense has taken money from existing, supposedlycomplementary, platforms to pay for future capabilities. The result: our overall ISR capabilities andresources are decreasing at a time when our military forces are relying on them more andmore. (33) The House Committee approved the Administration's total request of $373.1 for operations and maintenance of the U-2 and RC-135 while designating them as congressional interest items. It alsorecommended increased funding for various U-2 modifications, including $3 million for initialdeployment spares for the SYERS upgrade and $8 million for JSAF as well as the conversion of oneU-2 into a trainer. Taken together the House Intelligence Committee recommended $132.6 million,an increase of $34.2 million for U-2 modifications. The Senate Intelligence Committee did notprovide similar details on its views on the U-2 or the Global Hawk nor were these actions reflectedin the intelligence authorization conference report. (34) It is likely, however, that House IntelligenceCommittee actions were consistent with those taken by the House Armed Services Committee. The budgeting and funding of airborne reconnaissance programs are complicated by overlapping roles of intelligence agencies and congressional intelligence oversight committees onone hand and, on the other, by the military departments (in this case the Air Force) and theircongressional overseers in the armed services and appropriations committees. There is coordinationbetween intelligence and defense programs both within the executive branch and amongcongressional committees, but some observers believe that the ISR platforms inevitably come outsecond best in competition with bombers and fighter aircraft. In May 2000 the House IntelligenceCommittee stated that it "is concerned that funding from many intelligence Community programs,including intelligence surveillance and reconnaissance ISR) aircraft are regularly transferred fromthe programs for which funds were authorized and appropriated to fund shortfalls in other programs,often not related to ISR requirements." (35) In thisas in other areas, current pressures on defensespending inevitably complicate efforts to provide adequate resources for U-2s, Global Hawk UAVs,and other ISR programs. There are also longstanding concerns that the relationships between space-based and airborne surveillance platforms, and between "national" and tactical systems are not always well balanced. Some observers question the extent to which systems have been designed to maximize the usefulnessof systems to both national and tactical consumers, suggesting that bureaucratic obstacles more thantechnological limitations may inhibit use by multiple consumers. Issues and Options The Air Force, persuaded that Global Hawk will meet many, if not all, its airborne surveillancerequirements, is inclined to accelerate the acquisition effort beyond the twelve Global Hawksplanned for FY03-FY09. To supply the $960 million required in additional funding, Secretary of theAir Force Whitten Peters has said that he is considering reductions in the U-2 program beginningin FY2006 and retirement of all U-2s by FY2011. (36) This will inevitably be a controversial decision. The U-2 is one of the most heavily deployed aircraft in the Air Force's inventory, widely acclaimedby the CINCs, and the beneficiary of a series of expensive upgrades in recent years that haveelongated its service life. A "congressional interest item," the U-2 is the "bird in the hand" whereasthe Global Hawk has yet to be fielded. A formal decision to retire the U-2 early to free up funds foradditional UAVs will likely be given close scrutiny by Congress and the public. Advocates of the proposal note that Global Hawks have performed well in tests. They argue that the Global Hawk's long endurance gives it the ability to perform the U-2's imagery collectionmissions with fewer platforms. Furthermore, future upgrades and reconfigurations will give GlobalHawk the U-2's SIGINT collection capability. To lay the groundwork for future airborne surveillancecapabilities, it is reasonable, according to this view, to retire the U-2s beginning in 2006 rather thangradually phasing them out by attrition and make instead the investment in the next generation ofairborne reconnaissance platforms. Air Force options on Global Hawks and U-2s appear to be based on the assumption that funding must be adjusted within overall limits on spending for ISR programs. Apparently an earlytermination of the U-2 effort is the most acceptable way for the Air Force to identify funding for atrade-off to fund accelerated acquisition of the Global Hawk within its budgetary constraints. Someobservers suggest that Air Force officials may anticipate that, at some point, funding might beidentified elsewhere within the defense budget or that Congress might provide funding specificallyfor additional Global Hawks. One report noted, "some service sources say it is unlikely the AirForce will be able to come up with the money without significant help from OSD [Office of theSecretary of Defense] or Congress." (37) Opponents of the proposal believe that the two systems should operate simultaneously. They argue that, considering the very high demand for today's innumerous airborne ISR assets, it isessential that the Air Force increase today's ISR capabilities, not just replace them on a one-to-onebasis. Opponents of Secretary Peters's proposal also argue that the U-2 should not be phased outuntil the Global Hawk is produced and employed in large numbers, and its operational capabilitiesand limitations are well understood. This, they say, would ensure a smooth transition from today'sISR fleet to tomorrow's, and would ensure that the replacement of U-2s does not result in a loss ofan essential capability. Opponents also argue that decommissioning all U-2s which, as a result of extensive investment in upgrades have an expected service life of up to 50 more years, would be wasteful of an importantcapability. They note that whereas fewer UAVs than U-2s might be needed for the same missionif they were identically equipped, the actual number of Global Hawks required might vary since theycannot (at least at present) carry the same set of collection systems as the U-2. Furthermore, theycontend, it is unclear when Air Force scientists will be able to overcome the technologicalimpediments that currently limit the Global Hawk's payload. There may be other options that could be pursued to maintain or improve DOD's aerial ISR capability until the Global Hawk is optimally configured, and produced in sufficient quantities, toreplace the U-2. These options include (1) increasing the number of operational U-2s; (2) moreeffectively managing the existing U-2 inventory; (3) attracting and retaining more U-2 pilots; or (4)returning the SR-71 aircraft to active service. There are currently 31 operational U-2s with another four used as trainers. At any one time, three of the 31 operational U-2s are in depot for maintenance. Since it takes five U-2s to maintaina 24 hour orbit (38) , these 28 U-2s can theoreticallyoperate in five to six different spots on the globeat the same time. Given the limited inventory of U-2s, a key concern is the foreseeable loss ofaircraft through accidents and attrition. In recent years, one U-2 has been lost through attrition everytwo years. If this rate persists, by 2008 the Air Force would only have enough U-2s to provide 24hour coverage of four to five different spots at any one time. Some urge the procurement of additional U-2s by reopening the production line. This idea has received some congressional attention. (39) Someobservers believe that this may be a cost-effectiveway to make additional platforms available in a relatively short period of time. The technology iswell-proven under operational conditions and acquiring new platforms would not require longlead-times for research and development and costs would be relatively manageable. Others argue that such a step would be counterproductive in that the Air Force would have a fleet of U-2s of varying ages which would present maintenance problems at some point.Furthermore, they suggest that the U-2 is representative of decades-old technology and is difficultto fly. Also, the U-2 production line has lain fallow for approximately 20 years. Is re-opening thisline feasible? If so, at what cost? Another key consideration is manning; the U-2 requires speciallytrained pilots whose employability in other Air Force positions becomes limited. Most importantly,it places pilots at risk of death or capture. Proponents of re-opening the U-2 line counter, however,that it should be possible to manufacture future U-2s that don't require a pilot. The additional costsof re-designing the U-2 to fly without a pilot are unclear, but advances and technologies developedunder the Global Hawk and other UAV programs could probably be exploited. Another important action that could be taken to relieve the high operational tempo felt by the U-2 force would be to attract more pilots to the program and better retain the ones already qualifiedto fly the Dragon Lady . U-2 proponents suggest that Congress may wish to enquire about steps theAir Force has or has not undertaken to attract more pilots into the U-2 program. What, for example,would be the impact on overall recruitment and retention if the Air Force were to dictate that agreater percentage of its pilots enter the U-2 program? Options may also exist to more effectively manage DOD's current U-2 inventory. For instance, only four U-2 training aircraft exist. This lack of trainers could slow the pace of preparing new U-2pilots for their missions. It is feasible that two-seat training aircraft could be used to fly operationalmissions if required, though with diminished capabilities. However, the 31 single-seat aircraft usedto fly operations can't be used to train new pilots. Therefore, the reduction in ISR capability causedby converting a handful of single-seat U-2s to two-seat trainers may be outweighed by theimprovement in training capabilities. Another inventory management issue that might be examined is the U-2's foreign basing arrangements. In addition to bases in the United States, U-2s currently operate from five air baseslocated in France, Cyprus, Spain, South Korea, and Saudi Arabia. The Air Force is currentlywithdrawing the U-2 from the French and Cypriot locations. Fewer forward bases may mean thatU-2s could spend a greater percentage of their 10 hour missions transiting to and from the theaterto be observed, and less time collecting intelligence. Additional U-2s would be required to overflythe theater to maintain the same amount of coverage. Base consolidation has been justified by thedissolution of the Soviet Union. Yet there has also been a proliferation of smaller scalecontingencies in which the United States has an interest. This raises questions about the efficacy ofreducing the U-2's operational basing by two fifths at a time of high operational tempo. Someobservers have suggested that examining the utility of opening additional U-2 bases in differenttheaters may be in order. Another inventory management issue pertains to the Expeditionary Air Force concept. To increase deployment predictability and more evenly distribute the deployment burden, the Air Forceis dividing its people and forces into 10 Air Expeditionary Forces (AEFs). These AEFs are looseamalgams of resources that will rotate through set training and deployment cycles. Currently, the AirForce does not have a similar strategy for its "high demand, low density" (HD/LD) assets such asthe U-2. Instead, U-2s are sent to a given theater as demand rises. Some within DOD have suggestedthat the U-2 and other ISR assets could be included in the current AEF concept and thus increase U-2deployment predictability. This idea may help distribute the deployment burden throughout the U-2force, but may not reduce the deployment tempo, due to low numbers of operational platforms. Another suggested option is to devise an AEF-like inventory management scheme specifically forthe U-2. Different variants of the Global Hawk may have to be developed and other UAVs or manned aircraft may be acquired. The Global Hawk is not the only UAV potentially available, but it hasbeen designed to meet certain DOD requirements for range and endurance. Configuring smallerUAVs, such as the Predator, to accomplish at least some of Global Hawk's mission capabilitiesmight be feasible, but would entail considerable delays and could come at the cost of otheroperational capabilities. Yet, this idea may merit further investigation. A final option that may bear investigation is to "un-retire" a handful of SR-71 Black Bird aircraft. Proponents of this approach point out that the SR-71 was a very capable ISR asset. Its veryhigh speed contributed to the SR-71's survivability, and increased the potential volume of territorythat could be surveilled. Also, several SR-71 airframes still exist. They have been preserved at theAir Force facility in Palmdale, California. Also, SR-71 aircraft have been "un-retired" in the past.Opponents of this idea point out that the SR-71 was a very expensive aircraft to fly and maintain,and that flying just a handful would not be cost effective. Also, the airframes may exist, but whatabout pilots? Are there any pilots qualified to fly the aircraft? Are there any pilots qualified to teachand train pilots? Opponents of this idea argue that un-retiring the SR-71 would be too expensive ameasure to simply bridge the gap between the U-2 and Global Hawk. Conclusion It is likely that Congress will play a key role in dealing with the futures of the Global Hawk andthe U-2. Direct congressional interest in UAVs is longstanding and funding and policy direction forthe Global Hawk has been reflected in a series of appropriations and authorization acts. Similarly,Congress has also monitored the U-2 program closely in recent years, identifying funding forupgrades to the aircraft and for additional surveillance and communications equipment. Plans forthe early retirement of the U-2 force will undoubtedly be viewed with care and there will be interestin the progress of Global Hawk acquisition and its integration into the operating forces. Appendix 1: Abbreviations and Acronyms ACTD Advanced Concept Technology Demonstration AEF Air Expeditionary Force ASARS Advanced Synthetic Aperture Radar System BDA Battle Damage Assessment CINC Commander In Chief (of a U.S. Unified or Specified Command) COMINT Communications Intelligence DARP Defense Airborne Reconnaissance Program DOD Department of Defense ELINT Electronic Intelligence EMD Engineering, Manufacturing and Development EO Electro Optical FAA Federal Aviation Administration GAO General Accounting Office HD/LD High Demand, Low Density IOC Initial Operational Capability IR Infra Red ISR Intelligence, Surveillance, and Reconnaissance LRE Launch, Recovery Unit JSAF Joint Signals Intelligence Avionics Family MCE Mission Control Element PGM Precision Guided Munition RDT&E Research, Development, Test and Evaluation SAR Synthetic Aperture Radar SIGINT Signals Intelligence SLAR Side Looking Airborne Radar SYERS Senior Year Electro Optical Reconnaissance System TAD Temporary Additional Duty UAV Unmanned Aerial Vehicle

The ability to gather accurate and timely information on enemy forces is an essential enabler of modern military operations. The growing use of precision guided munitions (PGMs) which candestroy specific targets without extensive collateral damage depends upon the availability of preciseinformation. No single platform or technology can satisfy the needs of the Department of Defense(DOD) for information at all times in all scenarios. However, airborne platforms will likely continueto satisfy a large portion of DOD's ISR requirements over the next several decades. Among airborne ISR platforms, the U-2 Dragon Lady and the RQ-4A Global Hawk are especially valuable. The U-2 stands out for its proven track record of providing vital near-real-timeintelligence to military theater commanders in the 1991 war with Iraq (Operation Desert Storm), the1999 conflict in Kosovo (Operation Allied Force), and other conflict areas. Global Hawk, a soon to be fielded unmanned aerial vehicle (UAV), has been considered a complement to, and potentially a replacement for the U-2. While the un-proven Global Hawkappears to offer some advantages over the U-2 -- such as greater range and endurance, and notexposing a pilot to danger -- as currently designed it does not currently match the U-2's intelligencegathering capabilities. The Air Force is seeking to upgrade these designs so the second generationof Global Hawks would be more similar to U-2s in capability. Both Congress and DOD face important decisions regarding current and future mix of U.S. airborne intelligence, surveillance, and reconnaissance capabilities. An overarching line of inquiryis: Over the next 20 to 30 years, what mix of existing and planned manned and unmanned ISRaircraft can most effectively satisfy DOD's requirement for timely and accurate information onenemy forces? An important immediate issue to be resolved is how to best introduce Global Hawk platforms into the U.S. ISR inventory and at what pace, relative to planned or unplanned U-2 attrition. Keyconcerns are whether manned aircraft can be completely replaced by UAVs, the time that it will taketo integrate the Global Hawks into the operating force structure, and the availability of adequatefunds to support the acquisition of Global Hawks without compromising vital operationalcapabilities for an extended period.

Overview The federal government is the largest energy consumer in the United States, and it is one of the largest energy consumers in the world. Policymakers have highlighted the role of energy efficiency improvement in the federal sector as a mechanism to reduce energy consumption and its associated costs. Many Members of Congress have expressed a continuing interest in improving energy efficiency and increasing the use of renewable energy. One barrier to federal agencies making such investments relates to the availability of capital given the constrained fiscal environment. As a result, agency projects that could reduce federal energy usage, expand the use of renewable energy, and reduce federal energy costs may not be pursued. To address this challenge, Congress established alternative financing methods that utilize private sector resources and capabilities to facilitate federal energy projects. Two such alternative financing methods are energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs). An ESPC is a multiyear contract between a federal agency and an energy service company. In general, under an ESPC, a federal agency agrees to pay an amount not to exceed the current annual utility costs for a fixed period of time (up to 25 years) to an energy service company, which finances and installs facility improvements. In return, the contractor assumes the performance risks of energy conservation measures during the contract period and guarantees that the improvements will generate energy cost savings sufficient to pay for the improvements over the length of the contract, as well as providing the energy services company a return on the investment. After the end of the contract, the agency benefits from reduced energy costs as a result of the improvements. A UESC is a contract between a federal agency and the serving utility. Under a UESC, the utility arranges financing for efficiency projects and renewable energy projects, and the costs are repaid by the agency over the length of the contract. Background The Energy Policy Act of 1992 (EPACT, P.L. 102-486 ) amended the National Energy Conservation Policy Act (NECPA, P.L. 95-619 ) and authorized alternative financing methods for federal energy projects, among other provisions. Section 155 of EPACT (42 U.S.C. §§8287 et seq.) defined the term "energy savings performance contract" and authorized federal agencies to incur obligations through ESPCs to finance energy conservation measures, provided certain conditions were met. Section 152 of EPACT authorized "utility incentive programs" (codified as 42 U.S.C. §8256) and encouraged agencies to participate in programs to increase energy efficiency, conserve water, or manage energy demand. ESPCs and UESCs were devised as part of a strategy to help meet federal energy and emissions reduction goals by improving the energy efficiency of federal facilities. They offer the financial resources needed to make efficiency improvements to aging buildings and facilities. For ESPCs, in return for privately financing and installing conservation measures, a contractor—referred to as an energy service company (ESCO)—would receive a specified share of any resulting cost savings. The ESCO typically guarantees a fixed amount of energy savings and cost savings throughout the term of the contract, bearing the risk of the improvement's failure to produce a projected amount of energy savings and cost savings. The efficiency improvement provided by the ESPC is referred to as an "energy or water conservation measure," and includes improvements such as energy- and water-saving equipment, energy savings measures such as better insulation or windows, and renewable energy systems such as solar energy panels. In the case of UESCs, the federal agency contracts with the utility that is providing services to finance and install energy conservation measures and to provide energy demand-reduction services. The authority for UESCs does not require utilities to guarantee savings; the repayment is based on estimated cost savings. ESPCs and UESCs are seen as having tangible benefits for ESCOs and utilities. For an ESCO, the contract includes a guarantee of a specified amount of annual energy savings and cost savings that is sufficient to pay back the installation and financing costs. When improvements yield savings in excess of the guarantee, the agency benefits and depending upon the contract, the ESCO may also benefit. For utilities, the contracts do not require a savings guarantee although efficiency improvements can provide benefits such as reduction in demand, which can lead to cost savings for the utility. Local, state, or federal tax incentives may also be available to the contractors. Use of ESPCs and UESCs in Federal Energy Management The Department of Energy's Federal Energy Management Program (FEMP) is the lead organization responsible for providing implementing rules and policies for ESPCs. FEMP also provides training, guidance, and technical assistance to assist federal agencies in achieving energy goals including cost or use reduction or renewable use, greenhouse gas reduction goals, and water conservation goals as directed through legislation or executive orders. Federal agencies are required to document progress toward energy saving goals through annual reporting to the President and Congress; FEMP compiles these data annually. ESPCs and UESCs apply to energy use at federal facilities—not to vehicles and equipment. In FY2017, FEMP reports that federal agencies used 915 trillion British thermal units (Btu) of delivered electrical and thermal energy across all end-use sectors. Figure 1 shows the end-use sectors for energy consumption—62% of the energy consumed is from vehicles and equipment such as aircraft, ships, and on-road vehicle fleets. In FY2017, federal facilities used over 347 trillion Btu of delivered electrical and thermal energy. Investments in Energy Efficiency and Renewable Energy As part of annual reporting, FEMP compiles data on federal government investment in energy efficiency and renewable energy through ESPCs, UESCs, and direct obligations. Figure 2 depicts annual investments between FY2005 and FY2017 and shows that investments in ESPCs have fluctuated during that time period. As shown in Table 1 , investment in federal facility energy efficiency improvements during that period totaled nearly $21.7 billion (in constant 2017 dollars): direct obligations funded $14.5 billion, ESPCs funded $5.7 billion, and UESCs funded $1.5 billion. Investment in ESPCs has been supported by executive branch actions. In 2007, the George W. Bush Administration issued Executive Order (E.O.) 13423, which established goals for agencies including to "improve energy efficiency and reduce greenhouse gas emissions of the agency, through reduction of energy intensity." The implementing instructions for E.O. 13423 reference several instruments—including ESPCs and UESCs—that "should be utilized to the maximum extent practical to implement energy efficiency management projects, water management projects, and renewable energy projects with energy conservation measures (ECMs) having long- and short-term payback periods that can be incorporated into life-cycle cost effective contracts." In 2011, the Obama Administration directed agencies to complete $2 billion in ESPCs within two years. In 2015, the goal was increased to $4 billion in ESPCs by 2016. In 2018, the Trump Administration issued E.O. 13834, which established goals for agencies including to "utilize performance contracting to achieve energy, water, building modernization, and infrastructure goals." By 2014, federal buildings reportedly accounted for nearly $1.1 billion in revenue for the ESCO industry (nearly 21% of total ESCO industry revenue). ESCOs that earned more than $300 million in annual revenue in 2014 account for 66% of federal market revenues although their overall market share is 51%. Collectively, 85% of the industry revenue in 2014 came from federal, state, and local government facilities; educational facilities such as universities, colleges, and K-12 schools; and healthcare facilities. Agencies document contracts in different ways. This inconsistency makes it challenging to report the number of contracts in the same manner that dollars are tracked and reported in Table 1 . The number of contracts by mechanism is not aggregated in the same manner. According to FEMP's compliance tracking system, nearly 2,800 projects have been initiated at covered facilities to achieve energy and water savings; however, the financing mechanisms for specific projects are not identified. FEMP separately publishes information for Indefinite-Delivery, Indefinite-Quantity (IDIQ) ESPCs—or "umbrella contracts." These contracts were developed by FEMP to facilitate the use of ESPCs by federal agencies. Since the IDIQ ESPCs were established in 1998, FEMP has awarded approximately 400 projects. FEMP also states that it "has collected data on more than 2,100 UESC projects dating back to 1992 to help demonstrate the value, importance, and impact of the utility energy service contract (UESC) program, but it has kept individual details of the information agencies provided confidential." According to the Government Accountability Office (GAO), a review of the federal use of ESPCs that focused on seven selected agencies, those with the highest energy usage and greatest facility square footage, identified over $12 billion (in 2014 dollars) in awards "to more than 500 ESPCs for projects in fiscal years 1995 through 2014." A separate GAO report focused on alternatively financed energy projects for the Department of Defense. The report indicates that from FY2005 to FY2016, military services entered into 245 UESC contracts and 201 ESPC contracts. Energy and Water Conservation Measures The contribution to energy and water conservation from investments in ESPCs and UESCs is difficult to quantify. In describing the energy and cost savings for an ESPC project, FEMP states, "On average, comprehensive ESPC projects result in about a 19-20% reduction in energy use—and energy and energy-related costs. The average length of the contract period is 17 years, and the average project investment is about $15 million." CRS was unable to determine the cost savings achieved solely from ESPCs and UESCs across the federal government. However, FEMP provides data that may provide insight into broad trends in federal energy water consumption. Between FY2003 and FY2017, the annual total site-delivered energy use declined by more than 19% (a savings of 217 trillion British thermal units). This decline accounts for all end-use sectors and includes reductions that may be the result of downsizing or outsourcing activities. Renewable electricity use (as a share of electricity consumption) and water savings (in gallons used) have been tracked and reported by FEMP over a shorter time period. Renewable electricity use has increased across the federal government from 3% of total electricity consumption (1,909 GWh) in FY2008 to nearly 11% (5,844 GWh) in FY2017. Between FY2007 and FY2017, potable water use declined by more than 25% (a savings of 43 billion gallons). Water use for industrial, landscaping, and agricultural (ILA) purposes has been tracked separately. ILA water use declined by more than 33% (a savings of 46 billion gallons) between FY2010 and FY2017. In addition to comprehensive energy and water data, annual data from selected energy and water conservation measures are available. According to FEMP's compliance tracking system, approximately 700 (or 25%) of the nearly 2,800 projects that implemented energy and water conservation measures have had follow-up measurement and verification completed. These approximately 700 projects have resulted in the following measured benefits: annual energy savings of 14 trillion British thermal units (Btu) (approximately 1.5% of total federal energy consumption in 2017), annual water savings of nearly 2.8 billion gallons, annual renewable electricity output of 150 GWh, and annual renewable thermal output of 106 billion Btu. It is unclear how representative these 700 projects are to the remaining 2,800 projects and if they would provide similar benefits. Assessments of ESPCs and Federal Energy Performance Several entities have assessed the performance of ESPCs (and to a lesser extent UESCs). The following sections highlight the findings of these assessments. Annual Evaluations of DOE IDIQ ESPC Program Oak Ridge National Laboratory (ORNL) has evaluated the reported energy and cost savings from the DOE IDIQ ESPC program on an annual basis for several years. In ORNL's report for FY2016, 172 measurement and verification (M&V) reports were reviewed. Although ORNL found that "the quality of the M&V reports examined varied widely," the reports contained sufficient information to compare estimated, reported, and guaranteed cost savings. During the FY2016 reporting period, these projects collectively reported the following cost savings (in current dollars): Estimated cost savings of more than $298 million; Reported cost savings of more than $296 million; and Guaranteed cost savings of more than $274 million. Of the 172 reports reviewed, on average, ESCOs guaranteed 92% of estimated cost savings. On average, projects reported achieving approximately 99% of the estimated cost savings, and projects reported achieving approximately 108% of the guaranteed cost savings. Regarding energy savings, these projects on average reported achieving over 95% of estimated energy savings for site energy use and 98% of estimated energy savings for source energy use. Although energy use reductions are typically the largest source of cost savings according to ORNL, cost savings can also come from reductions in demand, water use, operations and management costs, and renovation and refurbishment costs and from improvements in the power factor. GAO Reports on Energy Projects and Alternative Financing The Government Accountability Office has examined alternative financing—including ESPCs and UESCs—for federal energy projects. In 2015, GAO reviewed about $12 billion of ESPCs awarded by seven agencies from FY1995 to FY2014 and found that although most ESPCs met or exceeded expectations, "some of these savings may be overstated." GAO found that "the amount of savings reported but not achieved ranged from negligible to nearly half of an ESPC project's reported savings for the year, based on information provided by agencies and [GAO's] analysis of available information from the most recent measurement and verification reports for selected projects." ESCOs must calculate and report annual savings according to the measurement and verification plans in their ESPCs. According to GAO Measurement and verification reports for 14 projects in our sample [of 20 nongeneralizable projects] overstated some cost and energy savings in that they reported savings that were not achieved because of agencies' actions, including (1) agencies not operating or maintaining equipment as agreed when the ESPC was awarded and (2) agencies' removal of equipment from or closure of facilities where energy conservation measures had been installed. GAO recommended several actions to improve oversight of ESPC projects. The Secretary of Energy's Advisory Board (SEAB) summarized GAO's recommended actions to FEMP as "improved oversight of ESPC projects through clearer reporting of savings, improved training, and systematic evaluations of portfolios, among other things." Projects financed through ESPCs and UESCs were also included in a study conducted by GAO in 2016 to examine how the Department of Defense (DOD) determines the costs and benefits of a sample of renewable energy projects. Of the 17 projects evaluated, one project relied on an ESPC (and included a power purchase agreement for power produced from a solar array) and one project relied on a UESC. GAO reported that "according to DOD officials, private developers can obtain federal, state, and local tax incentives, which can significantly lower their overall costs of developing renewable energy." Energy-efficiency tax incentives such as the federal energy-efficiency commercial buildings tax deduction (Internal Revenue Code Section 179D) have reportedly been leveraged by ESCOs to increase investment and savings for ESPC projects beyond what would be possible without the incentives. In the 2016 report, GAO noted that DOD did not emphasize the use of some alternative financing mechanisms for renewable projects, including ESPCs and UESCs. According to DOD, these mechanisms may not realize federal tax benefits under requirements set by the Office of Management and Budget: Access to incentives. Some ESPCs and UESCs may not allow private developers to capture federal tax incentives because Internal Revenue Service rules stipulate that only owners of the projects or those meeting certain standards are eligible to claim key tax expenditures. According to Army officials, the Army has structured ESPCs to allow private developers to capture federal incentives by owning the embedded renewable energy projects, but it stopped doing so after a 2012 Office of Management and Budget memorandum required government ownership of such renewable energy projects to avoid obligating the full cost of the project when the contract is signed. In 2017, GAO examined alternative financing for energy projects for DOD more broadly—the majority of these were financed using ESPCs or UESCs. Of the nongeneralizable sample projects reviewed by GAO, projects achieved expected savings; however, GAO found that measurement and verification of savings varies across military departments. Congressional Budget Office Scoring Policies Congressional Budget Office (CBO) scoring policies for ESPCs and UESCs have changed over time. Initially, the budgetary cost of ESPCs and UESCs were not scored by the CBO. Under the Budget Enforcement Act of 1990 (BEA, P.L. 101-508 ) pay-as-you-go (PAYGO) rules, increases in mandatory spending scored by CBO had to be offset by mandatory spending cuts or increased revenues. The Budget Enforcement Act of 1997 ( P.L. 105-33 ) extended these enforcement mechanisms through FY2002. The BEA also imposed limits on discretionary spending. After an extensive review of whether ESPCs and UESCs imposed a future financial obligation on the federal government, CBO began scoring them as mandatory spending. This coincided with the expiration of the BEA at the end of FY2002. This scoring reflected how ESPCs and UESCs create future commitments to appropriations and was consistent with how appropriations-funded energy conservation projects would be scored throughout the budget. However, the operations and maintenance funds that are used to pay for the ESPCs and UESCs must be appropriated annually. In the 115 th Congress, the 2018 House Budget Resolution ( H.Con.Res. 71 ) directed CBO to change how ESPCs and UESCs are scored. Section 5109 directs CBO to estimate provisions for ESPCs and UESCs on a net present value basis with payments covering the period of the contract (up to 25 years). According to H.Rept. 115-240 , this "would have the effect of capturing any long-term budgetary savings (and costs) resulting from these contracts." The scoring would classify the estimated net present value of the budget authority and any outlays as direct spending, and according to the accompanying report, "it would not change the fact that Federal agencies would continue to cover contractual payments through annual, discretionary appropriations." According to CBO, "the provision [in H.Con.Res. 71 ] that prohibits any savings estimated by CBO to be considered as an offset for purposes of budget enforcement applies only to legislation considered by the House of Representatives, not the Senate." Possible Issues for Congress Both the executive branch and Congress have promoted energy efficiency within federal agencies. Shared energy savings (and later ESPCs and UESCs) were included as part of an overall strategy to meet federal energy reduction goals. Since that time, ESPCs and UESCs have continued to be used to implement energy and water efficiency improvements at federal facilities. Congress has revised the policies enabling ESPCs and UESCs over time, and Congress may wish to assess additional changes going forward. Among the issues for consideration: Should monetary savings be treated consistently for budget enforcement for both chambers of Congress? Federal agencies are authorized to use ESPCs to finance energy conservation measures provided that guaranteed savings exceed the debt service requirements. CBO scores ESPCs as future commitments to appropriations (modified with the net present value (NPV) approach). However, CBO considers savings to offset budget enforcement differently for the House of Representatives and the Senate. For the House of Representatives, savings cannot be used to offset budget enforcement; the same limitation is not in place for the Senate. Should Congress modify reporting requirements for federal energy management? GAO has recommended to federal agencies that they revise guidance for future projects to include additional information in measurement and verification reports for ESPCs and UESCs to provide better understanding of performance and the extent to which the financing mechanisms are achieving expected savings. Additionally, with the revocation of E.O. 13693 and replacement with E.O. 13834, it is uncertain whether DOE will continue to provide annual comprehensive GHG inventory data including progress toward achieving agency scope 1, scope 2, and scope 3 GHG emission goals. Congress may wish to consider whether agencies should continue to report on GHG emissions as part of their annual energy reporting. Should Congress clarify what is to be considered as energy-related savings or what energy conservation measures should be included in alternative financing mechanisms? One of the three challenges facing ESPCs identified by the SEAB was a lack of uniform legal interpretations. GAO recommended "that the Director of OMB document, for the purposes of scoring ESPCs, (1) what qualifies as energy-related savings and (2) the allowable proportion of energy and energy-related cost savings." Congress may wish to define whether energy-related savings would include savings from various sources, such as efficiency improvements from energy-consuming equipment in data centers, renewable energy credits, electric vehicle charging infrastructure, or efficiency improvements from mobile sources. Should Congress expand the use of alternative financing mechanisms such as ESPCs and UESCs to include demonstration and validation of advanced energy technologies at federal facilities or modernization of federal infrastructure? Under the existing structure, SEAB notes that "ESCOs and other third-party financers have an incentive to minimize risk on individual projects," which can lead "these entities to use older, proven technology, rather than the kinds of innovative technologies coming out of the DOD and GSA test bed programs." Should Congress renew the energy-efficiency commercial buildings tax deduction (Section 179D)? ESCOs have reportedly leveraged energy-efficiency tax incentives to increase investment and savings for ESPC projects. Section 1331 of the Energy Policy Act of 2005 ( P.L. 109-58 ) established an energy-efficiency commercial buildings tax deduction. Internal Revenue Code Section 179D provides a tax deduction for implementing energy-efficiency improvements to commercial buildings. As amended, Internal Revenue Code Section 179D allows the tax deduction to be assigned to the person responsible for designing the energy-efficiency improvement—an ESCO in the case of an ESPC—if the property is owned by a federal, state, or local government. The Bipartisan Budget Act of 2018 ( P.L. 115-123 ) extended the deduction through 2017. Congress may wish to consider whether to renew this tax provision. Recent Legislation In the 115 th Congress, several bills would address various issues concerning ESPCs and UESCs. Identical bills, H.R. 723 and S. 239 , "Energy Savings Through Public-Private Partnerships Act of 2017," were introduced in January 2017 and seek to facilitate the use of ESPCs and UESCs by implementing several changes to NECPA. Section 543(f)(4) of NECPA states that Not later than 2 years after the completion of each evaluation under paragraph (3), each energy manager may (A) implement any energy- or water-saving measure that the Federal agency identified in the evaluation conducted under paragraph (3) that is life cycle cost-effective; and (B) bundle individual measures of varying paybacks together into combined projects. The bills would replace "may" with "shall," which would require energy managers to bundle individual energy- or water-saving measures that are found to be life cycle cost-effective into combined projects to be implemented no later than two years after evaluating a facility for energy and water efficiency measures. The bills would also expand annual reporting requirements to the President and to Congress by requiring additional information on ESPCs and UESCs including the investment value of the contracts, guaranteed energy savings compared to the actual energy savings for the previous year, plan for entering into contracts for the coming year, and an explanation for any previously submitted contracting plans that were not implemented. The bills would also make definitional changes: "Energy conservation measures" would be expanded to include energy consuming devices and required support structures. "Federal buildings" would not include dams, reservoirs, or hydropower facilities. "Energy savings" would include "the use, sale, or transfer of energy incentives, rebates, or credits," and any revenue generated from reducing energy or water use. H.R. 723 and S. 239 would also clarify that federal agencies would not be able to limit recognition of cost savings from operation and maintenance improvements associated with energy- or water-conservation measures. According to CBO, the budgetary effects under the two bills are the same. However, as the prohibition on applying savings as an offset under H.Con.Res. 71 only applies to legislation considered by the House of Representatives, CBO's cost estimate states that "while H.R. 723 would have no effect on direct spending for purposes of budget enforcement in the House, S. 239 would be considered as reducing net direct spending in the Senate." Similar versions of the bills have been introduced in previous Congresses. The provisions within H.R. 723 and S. 239 are identical to Section 1006 of S. 2012 (114 th Congress). S. 2012 was passed by the Senate with the provisions; however the House passed an amended version that did not include the same language. A conference committee did not reach an agreement on S. 2012 . In the 115 th Congress, the "Energy and Natural Resources Act of 2017" ( S. 1460 ), introduced in June 2017, would also amend NECPA to facilitate the use of ESPCs and UESCs. Similarly to H.R. 723 and S. 239 , the bill would require energy managers to bundle and implement energy- or water-saving measures that are found to be life cycle cost-effective. S. 1460 would also modify annual reporting requirements for federal agencies regarding ESPCs and UESCs. The bill would clarify that the ESPCs and UESCs are to be considered by the Office of Management and Budget as best practices for meeting performance goals for energy-efficient and energy-saving information technology. Similar language regarding ESPCs and UESCs for implementing energy-efficient and energy-saving information technology is included in H.R. 306 , "Energy Efficient Government Technology Act," introduced in January 2017, and in S. 385 and H.R. 1443 , two companion bills entitled the "Energy Savings and Industrial Competitiveness Act of 2017." S. 1460 would also authorize a Federal Smart Building Program that would be required to leverage existing financing mechanisms including ESPCs, UESCs, and direct appropriations to implement smart building technology and demonstrate the costs and benefits of smart buildings. The bill would authorize a science laboratories infrastructure program that would be required to make use of existing financing mechanisms.

Many in Congress have expressed a continuing interest in improving energy efficiency and increasing the use of renewable energy. To facilitate investment in energy efficiency and renewable energy at federal facilities, Congress established alternative financing methods that utilize private sector resources and capabilities. Two such alternative financing methods are energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs). ESPCs and UESCs are contracts between a federal agency and another party—an energy service company or a utility, depending upon the contract type. In general, a federal agency agrees to pay an amount not to exceed the current annual utility costs for a fixed period of time to the company or utility, which finances and installs the energy-efficiency and renewable energy projects. The costs are repaid by the agency over the length of the contract. After the end of the contract, the agency benefits from any reduced energy costs as a result of the improvements. The Department of Energy's Federal Energy Management Program (FEMP) is the lead organization responsible for providing implementing rules and policies for ESPCs. FEMP also provides training, guidance, and technical assistance to aid federal agencies in achieving energy and water goals. Federal agencies are required to document progress toward energy-saving goals through annual reporting to the President and Congress. FEMP compiles agency data annually. Between FY2005 and FY2017, investment in federal facility energy efficiency improvements totaled nearly $21.7 billion (in constant 2017 dollars): direct obligations funded $14.5 billion, ESPCs funded $5.7 billion, and UESCs funded $1.5 billion. A lack of consistency in reporting across agencies for projects makes it challenging to document the cost savings achieved solely from ESPCs or UESCs. The available data may provide insight into broad trends in federal energy and water consumption. Over available reporting time periods, total site-delivered energy use has declined, renewable electricity use has increased as a percentage of total electricity consumption, and water use has declined. The Government Accountability Office (GAO) has examined alternative financing for federal energy projects, including ESPCs and UESCs. In a 2016 study, GAO reported that the Department of Defense had identified challenges in using ESPCs and UESCs for renewable energy projects, as such financing mechanisms may not realize the federal tax benefits under requirements set by the Office of Management and Budget (OMB). Prior to 2012, the Army had structured ESPCs to allow private developers to capture federal incentives by owning renewable energy projects. The Army stopped doing so after a 2012 OMB memorandum required government ownership of such renewable energy projects to avoid obligating the full cost of the project when the contract is signed. A 2017 study by GAO examined energy projects for DOD more broadly and found that the majority of these were financed using ESPCs or UESCs. Congressional Budget Office (CBO) scoring policies for ESPCs and UESCs have changed over time. The 2018 House Budget Resolution (H.Con.Res. 71) directed CBO to score ESPCs and UESCs on a net present value basis with payments covering the period of the contract. The estimated net present value of the budget authority and any outlays would be classified as direct spending; it would not change the fact that federal agencies would continue to cover contractual payments through annual, discretionary appropriations. H.Con.Res. 71 also prohibited any savings estimated by CBO to be considered as an offset for purposes of budget enforcement. This prohibition applies to budget enforcement in the House of Representatives; CBO considers estimated savings to offset budget enforcement differently for the House of Representatives and the Senate. Congress has revised the policies enabling ESPCs and UESCs over time, and Congress may address additional changes going forward. Issues for possible consideration include reporting requirements, definitions of terminology including federal building and energy savings, and whether to expand the applicability of ESPCs and UESCs. Many in Congress have expressed a continuing interest in improving energy efficiency and increasing the use of renewable energy. To facilitate investment in energy efficiency and renewable energy at federal facilities, Congress established alternative financing methods that utilize private sector resources and capabilities. Two such alternative financing methods are energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs). ESPCs and UESCs are contracts between a federal agency and another party—an energy service company or a utility, depending upon the contract type. In general, a federal agency agrees to pay an amount not to exceed the current annual utility costs for a fixed period of time to the company or utility, which finances and installs the energy-efficiency and renewable energy projects. The costs are repaid by the agency over the length of the contract. After the end of the contract, the agency benefits from any reduced energy costs as a result of the improvements. The Department of Energy's Federal Energy Management Program (FEMP) is the lead organization responsible for providing implementing rules and policies for ESPCs. FEMP also provides training, guidance, and technical assistance to aid federal agencies in achieving energy and water goals. Federal agencies are required to document progress toward energy-saving goals through annual reporting to the President and Congress. FEMP compiles agency data annually. Between FY2005 and FY2017, investment in federal facility energy efficiency improvements totaled nearly $21.7 billion (in constant 2017 dollars): direct obligations funded $14.5 billion, ESPCs funded $5.7 billion, and UESCs funded $1.5 billion. A lack of consistency in reporting across agencies for projects makes it challenging to document the cost savings achieved solely from ESPCs or UESCs. The available data may provide insight into broad trends in federal energy and water consumption. Over available reporting time periods, total site-delivered energy use has declined, renewable electricity use has increased as a percentage of total electricity consumption, and water use has declined. The Government Accountability Office (GAO) has examined alternative financing for federal energy projects, including ESPCs and UESCs. In a 2016 study, GAO reported that the Department of Defense had identified challenges in using ESPCs and UESCs for renewable energy projects, as such financing mechanisms may not realize the federal tax benefits under requirements set by the Office of Management and Budget (OMB). Prior to 2012, the Army had structured ESPCs to allow private developers to capture federal incentives by owning renewable energy projects. The Army stopped doing so after a 2012 OMB memorandum required government ownership of such renewable energy projects to avoid obligating the full cost of the project when the contract is signed. A 2017 study by GAO examined energy projects for DOD more broadly and found that the majority of these were financed using ESPCs or UESCs. Congressional Budget Office (CBO) scoring policies for ESPCs and UESCs have changed over time. The 2018 House Budget Resolution (H.Con.Res. 71) directed CBO to score ESPCs and UESCs on a net present value basis with payments covering the period of the contract. The estimated net present value of the budget authority and any outlays would be classified as direct spending; it would not change the fact that federal agencies would continue to cover contractual payments through annual, discretionary appropriations. H.Con.Res. 71 also prohibited any savings estimated by CBO to be considered as an offset for purposes of budget enforcement. This prohibition applies to budget enforcement in the House of Representatives; CBO considers estimated savings to offset budget enforcement differently for the House of Representatives and the Senate. Congress has revised the policies enabling ESPCs and UESCs over time, and Congress may address additional changes going forward. Issues for possible consideration include reporting requirements, definitions of terminology including federal building and energy savings, and whether to expand the applicability of ESPCs and UESCs.

Introduction On February 16, 2012, the House Natural Resources Committee ordered reported H.R. 1837 , the Sacramento-San Joaquin Valley Water Reliability Act. The bill aims to address water shortages experienced by some California state and federal water contractors, shortages that sponsors attribute to implementation of the Central Valley Project Improvement Act of 1992 (CVPIA, Title 34 of P.L. 102-575 ), as well as state and federal environmental laws (e.g., the federal Endangered Species Act, its state equivalent, and possibly state rules implemented to comply with the federal Clean Water Act). The bill also addresses many other issues associated with California water management, including making substantial changes to the San Joaquin River Restoration Settlement Act (Title X of P.L. 111-11 ) and allowing early or accelerated repayment by private parties of outstanding construction cost obligations. The bill would make numerous changes to federal and state law regarding the management of water, fish, and wildlife resources in California. It also preempts "any" law (subject to certain state water rights priorities identified in Title IV of the bill) pertaining to operation of the federal Central Valley Project (CVP) and the California State Water Project (SWP) and substitutes for those laws operational principles elaborated in a 1994 interim agreement among CVP and SWP parties and others, known as the Bay-Delta Accord. Because the CVP and SWP are operated in a coordinated manner, actions taken by either the state or federal government can and do affect the other's operations. The tensions among the different stakeholders in California water policy are particularly high given current low snowpack conditions and recent state and federal water allocations, which project that some water users will get 30% of their contracted water supplies and that many others, including many municipalities and senior water rights holders, are projected to receive 75% of their contracted supplies. In other drought years, some south-of-Delta contractors have received as little as 10% to 35% of their contracted amounts. Overall, some south-of-Delta contractors have received 90%-100% of their contracts in just five of the last 20 years. At the same time, fish populations throughout the Central Valley of California have dramatically declined due to water diversions and other factors. Fishing communities have also experienced significant losses as a result of salmon population declines. For example, a fishery disaster declaration was in effect for the California and Oregon coast in 2008 and through 2010. Per the disaster declaration, Congress appropriated $170 million to be used to compensate some communities for losses due to the closed fisheries. At issue for Congress is how to address chronic shortages for some in the CVP system without disrupting decades-long federal and state law addressing senior water rights and other priorities. Also at issue is to what degree Congress is willing to change or allow preemption of long-standing federal and state environmental laws, including state water quality and endangered species laws, and at what benefit and cost. For example, what are the tradeoffs embedded in the bill's preemption of state law and fish and wildlife protections as a means to increase the water deliveries to some irrigation contractors and municipalities? What will be the impact on the state's recreation and sport and commercial fishing industries and its long-term flexibility to manage water for new uses? Will potential benefits to some irrigators outweigh such costs? Will water remain in agricultural use or will new and less costly transfer provisions result in more water flowing to more affluent urban areas and water brokers? Will such an outcome create efficiency gains? These are some of the questions that arise in changes proposed by H.R. 1837 . Many of these questions remain unanswered. The remainder of this report provides a brief title-by-title summary of the key provisions and water policy changes proposed in H.R. 1837 . A legal analysis of the proposed legislation is beyond the scope of this report. Summary of H.R. 1837 Each title of H.R. 1837 addresses a different aspect of California water policy. Title I makes numerous changes to the CVPIA: broadening purposes for which water previously dedicated to fish and wildlife can be used; changing the definitions of fish covered by the act; broadening purposes for which the Central Valley Project Restoration Fund (CVPRF) monies can be used; reducing revenues into the CVPRF, mandating operation per a 1994 interim agreement; and mandating development and implementation of a plan to increase the water yield of the CVP by October 1, 2013. Title II directs the Secretary to cease implementation of the San Joaquin River Restoration Settlement Agreement, which is the foundation of the San Joaquin River Restoration Settlement Act (SJRRS). The title also removes the salmon restoration requirement and makes other changes to the SJRRS. Title III directs the Secretary of the Interior, upon request from water contractors, to convert utility-type water service contracts to repayment contracts, and then allows accelerated repayment of those outstanding repayment obligations. (Irrigation and municipal & industrial [M&I] repayment obligations for the CVP for 2010, the last year for which such data are readily available, total approximately $1.2 billion.) Title IV outlines water rights protections for those with water rights senior to the CVP, including Sacramento River Valley contractors and addresses shortage policy for certain north-of-Delta CVP water service contracts. Title V declares that the unique circumstances of coordinated operations of the CVP and SWP "require assertion of Federal supremacy to protect existing water rights throughout the system" and that as such shall not set precedent in any other state. (There has been concern from some western states that the state and federal preemptions contained in H.R. 1837 might be used as precedent in other western states and threaten their allocation of state water rights.) Title I—Central Valley Project Water Reliability Title I of H.R. 1837 makes numerous changes to the CVPIA. When enacted, the CVPIA made broad changes to operations of the Bureau of Reclamation's Central Valley Project. The act set protection, restoration, and enhancement of fish and wildlife on par with other project purposes (such as delivering water to irrigation and M&I contractors), dedicated a certain amount of water for fish and wildlife purposes, established fish restoration goals, and established a restoration fund (Central Valley Project Restoration Fund) to pay for fish and wildlife restoration, enhancement, and mitigation projects and programs. It also made contracting changes and operational changes. The CVPIA was quite controversial when enacted and has remained so, particularly for junior water users whose water allocations were ultimately limited due to implementation of the act. Compounding the controversy over water allocation are other factors that limit water deliveries—namely state water quality control requirements, variable hydrological limitations, the state system of water rights priorities, and implementation of state and federal endangered species and other environmental laws. Title I of H.R. 1837 addresses many provisions of the CVPIA opposed by irrigators, namely dedication of project water to address fish and wildlife purposes, enhancement and mitigation activities, water transfer limitations, tiered pricing formulas, and other restoration and mitigation charges. Title I of H.R. 1837 would amend the CVPIA in numerous ways, including the following: Narrows the scope and definition of fish stocks provided protection by the act (limiting coverage to those found in 1992, and eliminating coverage for non-native species such as bass and shad). Some stocks were already in severe decline by 1992, including winter run Chinook salmon, which were listed as endangered under the ESA in 1990, and some (San Joaquin River runs) had become extinct by the 1950s. Adds a new definition for "reasonable flows," which is arguably more broadly defined than in the CVPIA. Removes a qualified prohibition on new contracts, thus presumably allowing new contracts. Increases the maximum contract term from 25 years to 40 years. Directs the Secretary of the Interior (Secretary) to perpetually renew contracts. It is not clear if such renewals would be subject to negotiation or review (as they are now), or whether such direction would preclude further National Environmental Policy Act (NEPA) review and Endangered Species Act consultation on contract renewals. (This provision is proposed to be stricken in a manager's amendment, and replaced with language referring to renewals under the Act of July 2, 1956). Directs the Secretary to facilitate and expedite water transfers and prohibits environmental or mitigation requirements as a condition to transfers. Eliminates the tiered pricing requirement and other revenue streams that fund fish and wildlife enhancement, restoration, and mitigation under the CVPRF. Removes the mandate that the Secretary modify CVP operations to provide flows to protect fish, and adds the term "reasonable" to the authority to provide such flows. Also directs that any such flows shall be provided from the 800,000 acre feet of water in Section 3406(b)(2), which H.R. 1837 would allow to be used for purposes other than fish protection (also, fish and wildlife purposes would no longer be the "primary" purpose of such flows). Adjusts accounting for Section 3406(b)(2) water. It appears that state water quality requirements, ESA, and all other contractual requirements would need to be met via use of the (b)(2) water; however this is not entirely clear in the language. Also would direct that (b)(2) water be reused. (It currently is reused, but reuse is not currently mandated.) Mandates an automatic 25% reduction of (b)(2) water when Delta Division water supplies are also reduced by 25%. (The Delta Division is a unit of the CVP that serves water districts that often receive less water than under their full contract amount.) Deems pursuit (as opposed to accomplishment) of fish and wildlife programs and activities authorized by the amended Section 3406 as meeting the mitigation, protection, restoration, and enhancement purposes of the CVPIA, as amended. Prohibits donations or other payments or any other environmental restoration or mitigation fees to the CVPRF as a condition to providing for the storage or conveyance of non-CVP water, delivery of surplus water, or for any water that is delivered with the sole intent of groundwater recharge. Requires completion of fish, wildlife and habitat mitigation and restoration actions by 2020, thus reducing water and power contractor payments into the CVPRF. Currently, the CVPRF payments will continue until such actions are complete; then payments are cut substantially. (Note, however, that H.R. 1837 would also deem pursuit of such actions as meeting the obligations to do so, which would also presumably trigger the reduced payments.) Establishes an advisory board responsible for reviewing and recommending CVPRF expenditures. The board is to be primarily made up of water and power contractors (10 of 12). Facilitates transfer and wheeling of non-project water from any source using CVP facilities. Requires a least-cost plan by the end of FY2013 to increase CVP water supplies by the amount of water dedicated and managed for fish and wildlife purposes under CVPIA and otherwise required to meet all purposes of the CVP, including contractual obligations (which are currently approximately 9.3 million acre feet (maf)). Deliveries ranged from 4.9 maf in 2009 (a drought year) to 6.2 maf over the last five years, and are closer to 7 maf in normal hydrologic years. Thus, a gap exists between CVP contractual obligations and average or normal deliveries. Requires implementation of the increased water plan (including any construction of new water storage facilities that might be included in the plan), beginning on October 1, 2013, in coordination with the state of California. If the plan fails to increase the water supply by 800,000 acre feet, implementation of any non-mandatory action under Section 3406(b)(2) shall be suspended until the 800,000 acre feet is replaced. Authorizes the Secretary to partner with local joint power authorities and others in pursuing storage projects (e.g., Sites Reservoir, Upper San Joaquin Storage, Shasta Dam and Los Vaqueros Dam raises) authorized for study under CALFED ( P.L. 108-361 ), but would prohibit federal funds to be used for this purpose or for financing and constructing the projects. (Also would authorize construction as long as no federal funds are used.) Directs that the CVP and the SWP be operated per principles outlined in the Bay-Delta Accord, without regard to the ESA "or any other law" pertaining to operation of the two projects. (§108) Prohibits federal or state imposition of any condition restricting the exercise of valid water rights in order to conserve, enhance, recover, or otherwise protect any species that is affected by operations of the CVP or SWP, or protect any "public trust value" pursuant to the "Public Trust Doctrine." Preempts state law regarding catch limits for nonnative fish that prey on native fish species (e.g., striped bass) in the Bay-Delta. Mandates that hatchery fish be included in making determinations regarding anadromous fish covered by H.R. 1837 under the ESA. Expands the CVP service area to cover a portion of Kettleman City. Allows compliance under the California Environmental Quality Act to suffice for compliance with NEPA. Many of these changes have tradeoffs embedded in them. For example, provisions limiting the scope and definition of fish stocks receiving protection by the act benefit some stakeholders, but are opposed by others. Similarly, expanding the use of dedicated fish flows and funding for fish and wildlife restoration may provide more water to irrigators or other water users, but may contribute to the decline of salmon and other fish populations. This is also true of some of the most controversial sections of the bill, such as directing perpetual contract renewals, which may be viewed on one hand as an attempt to circumvent future NEPA review, but on the other hand as a way to guarantee supplies of water and streamline the regulatory process. Section of 108 of H.R. 1837 , which directs the Secretary to operate the CVP and SWP according to principles outlined in the Bay-Delta Accord also would benefit some water users, but may harm other stakeholders. Title II—San Joaquin River Restoration Background17 Historically, Central California's San Joaquin River supported large Chinook salmon populations. Since the Bureau of Reclamation's Friant Dam on the San Joaquin River became fully operational in the late 1940s, much of the river's water has been diverted for agricultural uses. As a result, approximately 60 miles of the river became dry in most years, making it impossible to support Chinook salmon populations upstream of the Merced River confluence. In 1988, a coalition of environmental, conservation, and fishing groups advocating for river restoration to support Chinook salmon recovery sued the Bureau of Reclamation. A U.S. District Court judge subsequently ruled that operation of Friant Dam was violating state law because of its destruction of downstream fisheries. Faced with mounting legal fees, considerable uncertainty, and the possibility of dramatic cuts to water diversions, parties agreed to negotiate a settlement instead of proceeding to trial on a remedy regarding the court's ruling. A settlement agreement was reached in the fall of 2006. Implementing legislation was debated in the 110 th and 111 th Congresses ( H.R. 4074 , H.R. 24 and S. 27 ) and became law in the spring of 2010 (Title X of P.L. 111-11 ). The Settlement Agreement and its implementing legislation call for new releases of water from Friant Dam to restore fisheries (including salmon) in the San Joaquin River and for efforts to mitigate water supply losses due to the new releases, among other things. Because increased water flows for restoring fisheries (known as restoration flows) would reduce diversions of water for off-stream purposes, such as irrigation, hydropower, and municipal and industrial uses, the settlement and its implementation have been controversial. The quantity of water used for restoration flows and the quantity by which water deliveries would be reduced are related, but the relationship would not necessarily be one-for-one, due to flood flows in some years and other factors. Under the Settlement Agreement, no water would be released for restoration purposes in the driest of years; thus, the Settlement Agreement would not reduce deliveries to Friant contractors in those years. Additionally, in some years, the restoration flows released in late winter and early spring may free up space for additional runoff in Millerton Lake, potentially minimizing reductions in deliveries later in the year—assuming Millerton Lake storage is replenished. Consequently, how deliveries to Friant water contractors might be reduced in any given year depends on many factors. Regardless of the specifics of how much water might be released for fisheries restoration versus water diverted for off-stream purposes (such as irrigation), there will be impacts to existing surface and groundwater supplies in and around the Friant Division Service Area. Although some opposition to the Settlement Agreement and its implementing legislation remains, the largest and most directly affected stakeholders (i.e., the majority of Friant water contractors, their organizations, and environmental, fisheries, and community groups) supported the Settlement Agreement and publicly supported the implementing legislation. On the other hand, others opposed the Settlement Agreement and have continued to oppose its implementation. Title II Proposals Title II of H.R. 1837 would address the ongoing controversy associated with the SJRRS by declaring that the Title "satisfies and discharges" all obligations of the Secretary and others to keep in good condition any fish below Friant Dam, including obligations under Section 5937 of the California Fish and Game Code, the state public trust doctrine, and the federal ESA. It is not clear how such action would affect the stipulated Settlement Agreement or how parties to the Settlement Agreement might react to changes in the implementing legislation ( P.L. 111-11 , which would no longer be implementing terms of the Settlement Agreement if H.R. 1837 became law). For example, Section 201 of H.R. 1837 directs the Secretary of the Interior to "cease any action" to implement the stipulated Settlement Agreement on San Joaquin River Restoration. The bill would also amend the San Joaquin River Restoration Settlement Act's (SJRRS) purpose to be restoration of the San Joaquin River, instead of implementation of the Settlement Agreement. Unlike the original Settlement Agreement and the implementing legislation (Title X of P.L. 111-11 ), however, restoration authorized in this bill is not for salmon, but would be presumably for a warm water fishery upstream of Mendota Pool. Key provisions of Title II would: Provide protections to third parties and allow CVP contactors to bring action against the Secretary for injunctive relief or damages, or both (§208 of H.R. 1837 ). Replace references to the settlement throughout the SJRRS with "this part" (i.e., Title II of H.R. 1837 ). Direct the Secretary to develop and implement within one year a "reasonable plan" to fully recirculate, recapture, reuse, exchange, or transfer all restoration flows (defined as a target of 50 cubic feet per second entering Mendota Pool, 62 miles below Friant Dam) and provide such flows to contractors within the units of the CVP that relinquished such restoration flows. Direct the Secretary to identify, before October 1, 2013, impacts associated with implementation of modified restoration flows and mitigation actions to address those impacts, and to implement such mitigation actions before restoration flows begin. Include a qualified preemption of Section 8 of the Reclamation Act of 1902 (deference to state law). Also "preempts and supersedes any State law, regulation, or requirement that imposes more restrictive requirements or regulations on the activities authorized under this part", while making an exception for certain state water quality rules. Amend the environmental compliance provisions of the San Joaquin SJRRS by adding, "unless otherwise provided by this part" (i.e., unless otherwise provided by title II of H.R. 1837 ). Alter funding for the activities covered by the act. Declare that H.R. 1837 satisfies and discharges certain provisions of CVPIA and state fish and game code Section 5937, the latter of which was the basis of the Settlement Agreement. Repeal Section 10011 of the SJRRS, which addresses implementation issues associated with the re-introduction of Central Valley spring run Chinook salmon. Title III—Repayment Contracts and Acceleration of Repayment of Construction Costs Since the passage of the Reclamation Act of 1902, reclamation law has been based on the concept of project repayment—reimbursement of construction costs—by project water and power users (also known as project beneficiaries). Typical "repayment contracts" were made for terms of 40 or 50 years, with capital costs amortized over the long-term period and repaid in annual installments (without interest for irrigation investments and with interest for M&I investments). According to one account, because the CVP is a "financially integrated" system, a different type of contract was used, known as a "water service contract." Under water service contracts, contractors pay a combined capital repayment and operations and maintenance (O&M) charge for each acre-foot of water actually delivered. This water service payment is different from repayment contracts, in that under repayment contracts the annual repayment bill is due regardless of how much water is used in a given year. Repayment contracts tend to be the norm outside of California; however, some other projects do have some water service contracts. Water service contracts in the CVP were also typically written for 40-year terms. However, in 1992 with the passage of the Central Valley Project Improvement Act (CVPIA, Title 34 of P.L. 102-575 ), contract terms were reduced to a maximum of 25 years. Another early tenet of reclamation law still in existence is a limit on how much land one can irrigate with water provided from federal reclamation projects. The idea behind the limitation was to prevent speculation and monopolies in western land holdings and to promote development and expansion of the American West through establishment of family farms. Over the ensuing decades, several attempts were made to increase the acreage limitation, and in 1982, pursuant to the Reclamation Reform Act (RRA, P.L. 97-293 ), the original acreage limitation of 160 acres was raised to 960 acres. Scholars and others have written extensively on enforcement issues resulting from the 960-acre limit. It has remained on one hand, a thorn in the side of irrigators, particularly in the Central Valley where large industrial farms are more common than other areas of the West, and on the other hand, a key rallying point for taxpayer groups, environmentalists, and others who have opposed using federally subsidized water to irrigate large swaths of land. Under current law, once a repayment contract is paid out, the contractor no longer is subject to the 960-acre limit or other provisions of RRA (e.g., full-cost pricing for water). Key provisions of Title III would: Authorize and direct the Secretary, upon request, to convert agricultural water service contracts (known as 9(e) contracts) to repayment contracts (known as 9(d) contracts), as well as M&I water service contracts to repayment contracts. (It is possible that such direction might also preclude NEPA review.) Direct that under such conversions, the Secretary shall require repayment either in lump sum or accelerated prepayment of a contractor's remaining construction costs. Reiterate current law regarding the elimination of an obligation to pay full-cost pricing rates or abide by the acreage (ownership) limitations of Reclamation law once the repayment obligation is met. It is not clear how many contractors within the CVP might take advantage of these provisions and opt to prepay or accelerate their payments. Current CVP contract rates are based on a target repayment date of 2030; however, because the project is technically not complete, adjustments are made annually to capital cost obligations. Current CVP ratebooks (2012) show outstanding repayment obligations of approximately $1.15 billion for irrigation contracts and $147 million for M&I contracts. Presumably, districts interested in prepaying or accelerating repayment would have to get a loan or issue a bond to raise the capital to make the payment, unless they have cash or other relatively liquid assets on hand. Because the federal repayment amount is akin to a no-interest loan for irrigation contracts, a district would have to weigh the financial costs of new financing with the operating and opportunity costs of continuing to remain under reclamation ownership and full-cost pricing rules. The added permanency of the water contract under Title I (i.e., successive renewals, upon request, and potentially without NEPA review), might make such prepayment more attractive. On the other hand, if under Title I a water service contractor could also enjoy such benefits anyway (due to the successive renewal language), it is not clear that the added benefits of being able to use Bureau of Reclamation water on more land and elimination of other requirements would outweigh the financial and administrative costs of new financing. Title IV—Bay-Delta Watershed Water Rights Preservation and Protection Title IV of H.R. 1837 aims to protect senior water rights and what are known as "area-of-origin" priorities that are currently embedded in state law. The Title also includes specific language protecting Sacramento River Settlement contracts (both base supply and project supply) from potential reductions due to ESA implementation, thereby aiming to protect such contractors from adverse consequences of H.R. 1837 's Section 108 preemption of state and federal law on CVP and SWP Delta operations. While Title IV would protect northern and other senior water rights holders (senior to those rights or permits belonging to the CVP), it does not appear to protect water users in the Delta or others whose water rights may be more junior to the CVP, but perhaps senior to others. Additionally, to the extent the bill would not provide new water to junior contractors beyond what might be garnered from prohibition on environmental restrictions beyond those contained in the Bay-Delta Accord, it is not clear the bill would end water supply shortages until new water supplies or other increases in yield anticipated by the bill were developed or accomplished. Following is a summary of a few key provisions of Title IV. Section 401 would direct the Secretary to strictly adhere to state water rights by honoring senior water rights, "regardless of the source of priority." Section 402 would place new limits on water supply reductions for Sacramento Valley agricultural water service contractors in times of water shortages, similar to those enjoyed by senior water contractors and wildlife refuges (e.g., the Secretary of the Interior in operation of the CVP would have to deliver not less than 75% of water service contractors' contracted water supply in a "dry" year). Currently, water service contractors have no minimum guarantee of water deliveries in dry years. (For example, north-of-Delta agricultural water service contractors are projected to receive just 30% of their contracted supplies in 2012.) The section also provides protections for M&I water contractors. Section 404 would direct the Secretary to ensure "that there are no redirected adverse water supply or fiscal impacts to those within the Sacramento River watershed or to the State Water Project arising from the Secretary's operation of the [CVP]" to meet legal obligations imposed by or through a state or federal agency, including but not limited to the ESA or H.R. 1837 , or actions or activities implemented to meet "the twin goals of improving water supply or addressing environmental needs of the Bay Delta." (The latter clause appears to be a reference to ongoing state and federal efforts to develop a Bay-Delta Conservation Plan [BDCP] and the state's implementation of a Delta action plan.) It is not clear how some sections of Title IV square with the broad preemption language of Section 108 and Title V, or how such legislation would be implemented in practice. Some of the sections in Title IV appear to conflict with the goals of Title I and make unclear how much new water would be available to junior contractors, beyond water used for environmental purposes that would no longer be allowed under H.R. 1837 . Title V Title V of H.R. 1837 states that "Congress finds and declares" that Coordinated operations of the CVP and SWP (previously requested and consented to by the state of California and the federal government) require assertion of federal supremacy (presumably in water allocation) to protect existing water rights throughout the [CVP and SWP] system. Such circumstances are unique to California. "Therefore, nothing in this Act [ H.R. 1837 ] shall serve as precedent in any other State." Concluding Remarks H.R. 1837 is primarily aimed at addressing decreased water deliveries to California's CVP contractors, particularly those south of the Delta, since passage of the CVPIA in 1992. The means would be delivering water to contractors that would become available due to the bill's prohibition on restrictions in environmental and other laws. The bill would primarily accomplish greater water deliveries by preempting federal and state law, including fish-and-wildlife protections and other CVP operational mandates, which are all tied to the coordinated operations of the CVP and SWP. It is unclear what impacts such changes would have on other water users in the state. Title IV of the bill attempts to provide protections for California's senior water right holders, particularly those in the Sacramento Valley watershed and in "area-of-origin" areas. A key remaining unknown is the significance of the bill's use of the fixed 1994 Bay Delta Accord as a basis rather than current (and evolving) in-Delta water quality standards; the current standards impose water flow restrictions and appear to be a contributing factor to annual pumping restrictions in the Delta. H.R. 1837 would make extensive changes to implementation of federal reclamation law under the Central Valley Project Improvement Act, the contracting provisions under the 1939 Reclamation Project Act, restoration efforts under the San Joaquin River Restoration Settlement Act, and state and federal relationships under Section 8 of the Reclamation Act of 1902. The bill would also potentially significantly alter the way the state of California implements its own state laws with regard to operation of the CVP and SWP. While much attention has been paid to the effects of federal and state environmental laws on reductions in water supplies south of the Delta, the extent to which the bill would relieve water supply shortages, particularly in drought years, is uncertain. Without new water to contractors beyond what might be garnered from prohibition on state and federal environmental restrictions (and none from changes in water rights priorities or certain Delta water quality requirements), it is unclear the extent to which the bill would relieve shortages in water deliveries. An analysis of drought years and other years reveals that another significant factor in pumping restrictions is a state water quality control plan, which includes salinity and flow requirements in the Delta, as well as the fundamental tenet of state water rights allocations during times of hydrological and regulatory shortages. For example, in 2009 (a drought year) the Department of the Interior estimated that approximately 25% of the water supply reductions south of the Delta (which were approximately 40% of average annual exports) were due to federal endangered species protections. The rest of the restrictions were due to lack of water and other factors (including CVPIA). For 2011 (a wet year), the Department estimates that pumping restrictions for endangered species and CVPIA purposes totaled 90,000 acre feet (62,000 and 28,000 respectively) – approximately 1.4% of the total 6.9 million acre feet exported from the Delta that year. It is not clear how much of any given year's pumping restrictions are due to state water quality control requirements and to what degree the Bay-Delta Accord matches those requirements, and thus to what degree a similar level of restrictions would remain under H.R. 1837 for water quality purposes. Further, any reduction can be important in the long run, due to the state and federal system's reliance on storage carryover capacity and its ability to store water in wet years for use in dry years. H.R. 1837 goes to the heart of the water supply issue by proposing to prohibit "any" state or federal law (including the public trust doctrine and possibly California water rights laws) from reducing water supplies beyond those allowed in the Bay-Delta Accord and declaring a federal supremacy over water management to "protect existing water rights throughout the system." However, some argue that the bill would undermine efforts to achieve the "co-equal" goals of "providing for a more reliable water supply for California and protecting, restoring, and enhancing the Bay-Delta ecosystem," which is the foundation of state and federal efforts in development of the BDCP. While Section 401 of Title IV would direct the Secretary to strictly adhere to state water rights and honor senior water rights, it is unclear how other sections of Title IV square with the broad preemption language of Section 108 and the federal supremacy language in Title V, and how such legislation would be implemented.

For most of the last 20 years, some water contractors in California have received less than their full contract water supplies from federal and state facilities. Although such allocations are in part the result of the prior appropriation doctrine in western water law and are consistent with the expectation of a "junior" water user in times of drought, tensions over water delivery reliability have been exacerbated by reductions in deliveries even in non-drought years. Such reductions are significant because much of the California urban and agricultural economy operates under junior water rights, and reductions in water allocations can cause significant disruption and economic loss for individual farmers and communities, particularly in drought years. At the same time, fish populations throughout the Central Valley of California have dramatically declined due to water diversions and other factors, and have been accompanied by significant losses for fishing communities and others dependent on fish and wildlife resources. The state and federal governments have been working to address water supply reliability and ecosystem issues through pursuit of a Bay-Delta Conservation Plan (BDCP); however, the plan is not complete and remains controversial. On February 16, 2012, the House Natural Resources Committee ordered reported H.R. 1837, the Sacramento-San Joaquin Valley Water Reliability Act. Proponents of H.R. 1837 argue that implementation of the Central Valley Project Improvement Act of 1992 (CVPIA) and state and federal environmental laws (e.g., the federal Endangered Species Act and its state equivalent) have compounded the impact of drought on water deliveries; the bill is designed to remedy these effects. Others argue that the bill would harm the environment and resource-dependent local economies, particularly coastal communities. Some also argue that it would undermine efforts to resolve environmental and water supply reliability issues through development of the BDCP. At issue for Congress is the extent to which the bill changes decades of federal and state law, including state and federal environmental laws, and at what benefit and cost. For example, there are tradeoffs embedded in the bill's preemption of state water law, including fish and wildlife protections, as a means to increase the water deliveries to some irrigation contractors and municipalities. It appears these changes likely would most benefit water contractors in the southern portion of the CVP service area, but might harm others and potentially reduce environmental protections and improvements and the services and industries they support (e.g., recreational and fishing industries). What impact such tradeoffs might have on other stakeholders is unclear. H.R. 1837 would preempt "any" (including state and federal) law pertaining to operation of the federal Central Valley Project (CVP) and California's State Water Project (SWP) and substitute for those laws operational principles from a 1994 interim agreement, originally supported by many diverse parties, known as the Bay-Delta Accord. The bill also addresses other California water management issues, making significant changes to the San Joaquin River Restoration Settlement Act and allowing early repayment of CVP construction cost obligations. While much attention has been paid to the effects of federal and state environmental laws on reductions in water supplies south of the Sacramento and San Joaquin Rivers delta confluence with San Francisco Bay (Bay-Delta, or Delta), the extent to which the bill would relieve water supply shortages, particularly in drought years, is uncertain. For example, many factors affect pumping restrictions and the overall water allocation regime for CVP contractors. The federal ESA and CVPIA are only two factors in the regime. Other key factors include state water quality regulations (particularly flow and salinity requirements in the Delta), SWP pumping, and state water rights. How H.R. 1837 would in practice affect these factors remains uncertain.

Introduction The Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( H.R. 1627 , P.L. 112-154 , enacted on August 6, 2012) is an "omnibus" bill containing a number of provisions impacting various veterans programs. P.L. 112-154 reflects a compromise agreement by the House and Senate Committees on Veterans Affairs on provisions contained within several bills ( H.R. 1627 ; S. 277 ; S. 914 ; S. 951 ; H.R. 802 ; H.R. 1484 ; H.R. 2074 ; H.R. 2032 ; H.R. 2349 ; H.R. 2433 ; and H.R. 4299 ) reported during the 112 th Congress, and several free-standing provisions. This report provides information on the various provisions of P.L. 112-154 by program, benefit, or topic, rather than by each legislative provision. However, for each change in a program, benefit, etc., the section number of P.L. 112-154 is provided. Health Care1 Medical Care for Camp Lejeune Veterans and Family Members The Department of Veterans Affairs (VA), through the Veterans Health Administration (VHA), operates the nation's largest integrated direct health care delivery system. Veterans' medical care is a discretionary program, and eligibility for VA medical care is based on an array of factors including (but not limited to) veteran status, presence of service-connected disabilities or exposures, income, status as a former prisoner of war (POW) or Purple Heart or Medal of Honor recipient. From time to time, Congress has passed legislation providing special treatment authority for certain groups of veterans. In 1981, Congress enacted the Veterans' Health Care, Training, and Small Business Loan Act of 1981 ( P.L. 97-72 ), which provided special authority to allow the VA to treat some veterans for disorders that may have been related to their exposure to Agent Orange and ionizing radiation, even though according to the Institutes of Medicine (IOM) there was no definitive scientific evidence showing that the disorders treated were related to the exposure. In 1993, Congress passed P.L. 103-210 to provide additional authority for the VA to provide health care for Persian Gulf War veterans, for medical conditions possibly related to exposure to toxic substances or environmental hazards during their active duty service in the Southwest Asia theater of operations during the Persian Gulf War. In the early 1980s, two water-supply systems at Camp Lejeune, North Carolina were found to be contaminated with the industrial solvents trichloroethylene (TCE) and perchloroethylene (PCE). P.L. 112-154 , among other things, addressed the chemical exposure at Camp Lejeune, North Carolina by providing eligibility for VA health care services for certain veterans. Section 102 of P.L. 112-154 provides eligibility to VA provided hospital care, medical services, and nursing home care to certain veterans and their eligible family members who were stationed at Camp Lejeune, North Carolina, from January 1, 1957 to December 31, 1987, during which time the well water was contaminated. These veterans are eligible to receive medical care for the following fifteen illnesses or conditions: esophageal cancer; lung cancer; breast cancer; bladder cancer; kidney cancer; leukemia; multiple myeloma; myleodysplasic syndromes; renal toxicity; hepatic steatosis; female infertility; miscarriage; scleroderma; neurobehavioral effects; and non-Hodgkin's lymphoma, although the law acknowledges that there is insufficient medical evidence to conclude that any particular illnesses are attributable to military service during that period. The VA will be the final payer to other third-party health insurance plans for eligible family members. Contracts for Nursing Home Care The State Veterans' Home (SVH) program is a federal-state partnership to build, modify or acquire nursing home, domiciliary, and adult day health care facilities. In addition to providing grants to states for construction, the VA also provides a fixed per diem to states for each veteran who receives care in a state veterans' home. Although the VA sets basic eligibility criteria for access to nursing home care, state law governs the management and admission criteria for these SVHs. Also, state laws allow an individual SVH to exercise its prerogative on admitting veterans. Under the Veterans Millennium Health Care and Benefits Act ( P.L. 106-117 ), the VA was only required to pay the full cost of care for veterans who had a service-connected disability rated at 70% or more, or whose need for nursing home care was related directly to a service-connected condition, if the veterans were receiving care in a VA Community Living Center (formerly known as a VA Nursing Home) or in a VA contracted private nursing home. However, VA was not authorized to pay the full cost of care if these same veterans received care in a SVH. The Veterans Benefits, Health Care, and Information Technology Act of 2006 ( P.L. 109-461 ) equalized the cost of nursing home care for these veterans regardless of the setting, and included a provision, effective March 21, 2007, for the VA to use higher per diem rates when reimbursing SVHs for providing care to veterans who had a 70% service-connected disability or individual unemployability. P.L. 109-461 also stipulated that SVHs reimbursed at the higher per diem rates were not eligible to receive funding from other federal sources such as Medicare or Medicaid. However, after the VA implemented this new reimbursement methodology, some state veterans' nursing homes reported that they were receiving smaller reimbursements that were not covering the actual cost of care. Section 105 of P.L. 112-154 requires the VA to enter into contracts with SVHs to provide nursing home care to veterans who need nursing home care for a service-connected condition or have a service-connected disability rating of 70% or greater. The reimbursement methodology will be developed in consultation with SVHs. Also, this provision requires the VA, at the request of any SVH, to enter into a contract or agreement with that SVH that would replicate the reimbursement methodology that was in effect on the day before enactment of P.L. 112-154 . Reporting and Tracking Sexual Assault Incidents In June 2011, the Government Accountability Office (GAO) found about 300 sexual assault incidents were reported to the VA police from January 2007 through July 2010—"including alleged incidents that involved rape, inappropriate touching, forceful medical examinations, forced or inappropriate oral sex, and other types of sexual assault incidents." GAO also stated that many of the sexual assault incidents reported to the VA police were not reported to VA leadership officials and/or the VA Office of the Inspector General (OIG), as required by VA regulation due to the lack of a centralized VA management reporting system. Section 106 of P.L. 112-154 requires the VA to establish a comprehensive policy on the reporting and tracking of sexual assault and other safety incidents at VA medical facilities and requires a report on this policy 60 days after initial implementation and annually thereafter. Furthermore, this provision stipulates that in developing this comprehensive policy and related risk assessment tools, the VA should consider the effects on veterans' use of mental health and substance abuse treatments and the ability of the VA to refer veterans to such services. This provision also requires the VA to submit an interim report to Congress on the progress of developing this comprehensive policy within 30 days of the enactment of P.L. 112-154 . Services for Veterans with Traumatic Brain Injury (TBI) Traumatic brain injury (TBI) has become known as a "signature wound" of Operation Enduring Freedom/Operation Iraqi Freedom (OEF/OIF), because servicemembers in these operations have experienced TBI in greater numbers than those serving in past conflicts. Three factors contribute to the increase in TBI. First, the number of blast injuries caused by improvised explosive devices (IEDs), rocket-propelled grenades, and land mines has increased; it has been reported that the primary mechanism of injury in OIF is a blast injury. Second, injuries that would have been fatal in the past may not be fatal now, due to advances in protective equipment, combat medicine, and air evacuation. Third, health care professionals are more alert to the possibility of TBI and may therefore be more likely to diagnose TBI accurately. The total number of veterans who have experienced TBI is not known, in part because TBI is difficult to identify, and in part because some veterans may not have accessed VA health care services. Current law requires the VA to provide comprehensive care to veterans with TBI in accord with individualized rehabilitation plans. However, concerns were raised that the VA has interpreted the statute as limited only to those services that restore function, and that by limiting rehabilitative care, individuals with TBI may risk losing out on therapies that might prove vital in maintaining physical, cognitive, and other progress. Section 107 of P.L. 112-154 requires the VA to provide rehabilitative care to veterans with TBI with the goal of maximizing their independence and improving their behavioral and mental health functioning. Furthermore, this provision requires the inclusion of rehabilitative services within the VA's comprehensive programs of long-term care for veterans with TBI in both VA and non-VA facilities. Teleconsultation and Telemedicine According to the 2001 Telemedicine Report to Congress, telemedicine is referred to as the "use of electronic communication and information technologies for medical diagnostic, monitoring, and therapeutic purposes when distance and/or time separates the participants." Telehealth, a broader concept than telemedicine, is defined as the "use of electronic information and telecommunications technologies to support long-distance clinical health care, patient and professional health-related education, public health and health administration." According to an evidence synthesis prepared by the Agency for Healthcare Research and Quality (AHRQ), "telehealth indicates care beyond that provided in medical encounters (e.g., health education, health-related Web sites, etc.)." According to a paper published by the VA's National Center for Posttraumatic Stress Disorder (PTSD), the term telemental health "typically refers to behavioral health services that are provided using communication technology." These services include clinical assessment, individual and group psychotherapy, psycho-educational interventions, cognitive testing, and general psychiatry. In other words, the term telemental health describes the overall situation in which a clinician uses various technologies to deliver mental health care to a patient who is miles away. Within the Department of Defense (DOD) telemental health is generally referred to as telebehavorial health . The VA has undertaken telehealth activities since 1977, and is generally recognized in published literature as a national leader in telehealth development and usage. Telehealth is frequently used in the delivery of health care to veteran patients, and is frequently used to deliver care to veterans living in rural and remote areas for whom travel to VA hospitals may be difficult. Research has shown that telehealth offers a number of potential benefits as an alternative to in-person treatment. Moreover, some studies have demonstrated that telehealth can be a cost-effective method of delivering care within the VA health care system. Section 108 of P.L. 112-154 requires VA to carry out a teleconsultation program of remote mental health and TBI assessments in VA facilities that are unable to provide such assessments without utilizing contract or fee-basis care. Also, the VA is required to offer training opportunities in telemedicine to medical residents in VA facilities that have and utilize telemedicine, consistent with medical residency program requirements established by the Accreditation Council for Graduate Medical Education. Copayments For Telehealth And Telemedicine Services Currently, veterans enrolled in the VA health care system do not pay any copayments for treatment related to a service-connected condition or illness. Those veterans with service-connected conditions rated at 50% or more disabled are not charged any copayments, including treatment for a nonservice-connected condition or illness. Also, veterans are not charged copayments for the following outpatient services: publicly announced VA health fairs; screenings and immunizations; smoking and weight loss counseling; telephone care; laboratory services; flat film radiology; electrocardiograms; counseling and care for military sexual trauma (MST); readjustment counseling and related mental health services; and hospice care. Veterans with no service-connected conditions and veterans receiving care for nonservice-connected conditions or illnesses are generally required to pay copayments of $15 for primary care visits and $50 for specialty care visits. Veterans do not receive more than one outpatient copayment charge per day. That is, if the veteran has a primary care visit and a specialty care visit on the same day, the veteran only pays for the specialty care visit. Section 103 of P.L. 112-154 authorizes VA to waive collections of copayments from veterans for any telehealth or telemedicine consultations. Service Dogs on VA Property The Department of Veterans Affairs Health Care Programs Enhancement Act of 2001( P.L. 107-135 ) authorized the VA to provide service dogs to veterans that are hearing or mobility impaired. The Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) included a provision allowing the VA to provide service dogs to aid veterans with mental illnesses, including post-traumatic stress disorder (PTSD). Furthermore, the National Defense Authorization Act for FY2010 ( P.L. 111-84 ) authorized the VA to conduct a three-year research study to assess the benefits, feasibility, and advisability of using service dogs to treat or rehabilitate veterans with physical or mental injuries or disabilities, including PTSD. Section 109 of P.L. 112-154 stipulates that a service dog that has been trained by an accredited entity may have access to any VA facility or to any facility or any property that receives funding from the VA. Rural Health Resource Centers In 2006, Congress mandated the establishment of an Office of Rural Health (ORH) within the Veterans Health Administration (VHA). The purpose of this office was to assist the VHA with the collection of data on rural veterans and the "development of strategies that may ultimately help reduce the [disparities in service] between rural and non-rural veterans." The VHA established the ORH in March 2006. At the beginning of FY2009, the VA opened three Veterans Rural Health Resource Centers (VRHRCs) "to develop special practices and products for use by facilities and networks across the country." The Eastern Center is located in Togus, ME, with satellite offices at White River Junction, VT, and Gainesville, FL. The Central Center is located in Iowa City, IA; and the Western Center is located in Salt Lake City, UT. These Centers serve as field-based clinical laboratories experimenting with new outreach and care models. Section 110 of P.L. 112-154 recognizes that there are VRHRCs that serve as satellite offices of the ORH and requires them to perform one or more of the following functions: 1) improve the ORH's understanding of the challenges faced by veterans living in rural areas; 2) identify disparities in the availability of health care to veterans living in rural areas; 3) formulate practices or programs to enhance the delivery of health care to veterans living in rural areas; and 4) develop special practices and products for the benefit of veterans living in rural areas and implement such practices and products throughout the VA. Veterans Affairs Medical Care Collections Fund (MCCF) The Consolidated Omnibus Budget Reconciliation Act of 1985 ( P.L. 99-272 ), enacted into law in 1986, gave the VHA the authority to bill some veterans and most health care insurers for nonservice-connected care provided to veterans enrolled in the VA health care system, to help defray the cost of delivering medical services to veterans. This law also established means testing for veterans seeking care for nonservice-connected conditions. However, P.L. 99-272 did not provide the VA with specific authority to retain the third-party payments it collected, and the VA was required to deposit these third-party collections into the General Fund of the U.S. Treasury. The Balanced Budget Act of 1997 ( P.L. 105-33 ) gave the VHA the authority to retain these funds in the VA's Medical Care Collections Fund (MCCF), a special fund account. The VA can use the MCCF to provide medical services for veterans without fiscal year limitations. To increase the VA's third-party collections, P.L. 105-33 also gave the VA the authority to change its basis of billing insurers from "reasonable costs" to "reasonable charges." This change in billing was intended to enhance VA collections since reasonable charges result in higher payments than reasonable costs. In FY2004, the Administration's budget requested the consolidation of several existing medical collections accounts into one MCCF. Specifically, the conferees of the Consolidated Appropriations Act of 2004, in H.Rept. 108-401 , recommended that collections from the following former funds - the Health Services Improvement Fund, the Veterans Extended Care Revolving Fund, the Special Therapeutic and Rehabilitation Activities Fund, the Medical Facilities Revolving Fund, and the Parking Revolving Fund - should instead be deposited in MCCF. The conference report for the Consolidated Appropriations Act of 2005 ( P.L. 108-447 ; H.Rept. 108-792 ) provided the VA with permanent authority to deposit funds from these five accounts into the MCCF. The funds deposited into the MCCF are available for medical services for veterans, could be spent in any particular fiscal year, and are available until expended. Section 111 of P.L. 112-154 requires the VA to develop and implement a plan to ensure the identification and collection of billable third-party revenue to be deposited in the MCCF. It also requires the following elements to be included in the plan: an effective process to identify billable fee claims, effective and practicable policies and procedures to ensure billing and collection using current authorities; training of employees responsible for billing or collection of funds to enable them to comply with the provisions of this section; fee revenue goals for the VA; and an effective monitoring system to ensure that the VA meets the fee revenue goals. Beneficiary Travel to Vet Centers Currently, the VA provides beneficiary travel payments to eligible veterans and family caregivers traveling to and from VA medical centers. Section 104 of P.L. 112-154 requires the VA to commence a three-year initiative to assess the feasibility and advisability of treating Vet Centers as VA facilities for the purpose of beneficiary travel reimbursement. This reimbursement authority will be valid for three years, and it will be limited only to veterans who live in highly rural areas and travel to and from their nearest Vet Centers. The VA Secretary is required to issue a report to Congress within 180 days of enactment (August 6, 2012) on the beneficiaries of the initiative and an analysis of the initiative. Reimbursement Rate for Ambulance Services Currently, VA is authorized to provide eligible veterans and other beneficiaries mileage reimbursement, special mode (ambulance, wheelchair, van, etc.) transport when medically indicated, and common carrier (plane, bus, etc.) transport when traveling to and from VA or VA authorized health care. For reimbursement of ambulance and common carrier expenses, pre-authorization from the VA is required except in cases of medical emergency where delay would be hazardous to life or health. Previous payment authorities resulted in VA reimbursement for ambulance services based on a contracted rate or, in situations where there was no contract, the providers' billed charges. As a result, in certain cases, VA was paying a higher rate than that allowed by Medicare for similar ambulance services. To address this situation, in its FY2012 budget submission to Congress, VA proposed legislative language to use the local prevailing Medicare ambulance rates to reimburse ambulance providers; which would have resulted in cost savings for the VA.  The Vow to Hire Heroes Act of 2011 (Title II of P.L. 112-56 ) provided VA with the authority to pay the lesser of the actual amount charged by the ambulance provider or the applicable Medicare rate for ambulance services, unless VA has entered into a contract for such transportation with the provider. However, as written this change in law did not have the desired effect because it applied only to situations where VA pays for ambulance service before determining the eligibility of the Veteran for such transport. This situation seldom arises; VA in almost all instances determines the veteran's eligibility prior to authorizing payment for or reimbursement to the veteran for ambulance services and special mode transportation. Section 704 of P.L. 112-154 makes a technical correction to 38 U.S.C. §111 that would authorize VA to reimburse ambulance providers for authorized ambulance transportation at the lesser of the actual charge or the appropriate local prevailing Medicare ambulance rate when the VA has not entered into a contract with the ambulance provider. Where VA has entered into a contract with an ambulance provider the contracted rate would apply. The new reimbursement methodology will apply to all ambulance transportation situations except when transport is provided in relation to unauthorized non-VA emergency care of nonservice- connected conditions that VA approves for payment. Change in Collection and Verification of Veteran's Income The Consolidated Omnibus Budget Reconciliation Act of 1985 ( P.L. 99-272 ), enacted into law in 1986, established means testing for veterans seeking care for nonservice-connected conditions. Currently, veterans report their household income from the previous calendar year to the VA to determine if they are eligible for health care based on income, and whether they are to be billed for certain copayments. Section 705 of P.L. 112-154 authorizes the VA to use the veteran's household income for the most recent year to determine his or her eligibility for VA health care. Housing41 Specially Adapted Housing Program P.L. 112-154 makes a number of changes to the VA's Specially Adapted Housing (SAH) Program, which provides grants to veterans and servicemembers with certain service-connected disabilities to assist them in purchasing or remodeling homes to fit their needs. Within the SAH Program are two separate grant programs for veterans and active duty servicemembers. The first, sometimes referred to as the Specially Adapted Housing Grant (or §2101(a) grant, after the section of the U.S. Code), is generally targeted to veterans with mobility impairments, while the second, sometimes referred to as the Special Housing Adaptation Grant (or §2101(b) grant), aids veterans who are blind or who have lost the use of their hands. The §2101(b) grants may also be used to adapt the home of a family member with whom a veteran is living indefinitely. The dollar limit for the §2101(a) grant is higher than for the §2101(b) grant, and both types of adapted housing grants are available to veterans with severe burn injuries. Section 202 of P.L. 112-154 adds to the qualifying disabilities for §2101(a) grants to cover veterans or servicemembers who have lost use of one or more lower extremities where the loss so affects balance and propulsion as to require the aid of braces, crutches, canes, or a wheelchair for ambulating. The disability must have occurred on or after September 11, 2001, and veterans or servicemembers must be approved for assistance under this provision by the end of FY2013. Section 203 of P.L. 112-154 also changes the §2101(b) measure of blindness from 5/200 visual acuity in both eyes to 20/200 vision in the better eye with the use of a corrective lens. The new standard is in line with the VA visual impairment standard for disability compensation, which was changed from 5/200 to 20/200 as part of the Dr. James Allen Veteran Vision Equity Act ( P.L. 110-157 ). Section 204 of P.L. 112-154 also increases the maximum amount of assistance for §2101(a) grants to $63,780 (the previous statutory limit was $60,000) and for §2101(b) grants to $12,756 (the previous statutory limit was $12,000). The new law continues to require the VA Secretary to annually adjust the statutory award limits based on a cost-of-construction index. P.L. 112-154 brings the statutory limit up to the level of the most recently adjusted limits; for FY2012, the adjusted limits were $63,780 and $12,756. The increased statutory grant limits take effect one year after the enactment of P.L. 112-154 . A separate provision in the SAH law allows veterans to use §2101(a) or §2101(b) grants to modify the homes of family members with whom they are living temporarily. This provision is sometimes referred to as the Temporary Residence Adaptation (TRA) grant. Section 205 of P.L. 112-154 makes the following changes to the TRA grant: (1) Increases the maximum §2101(a) TRA grant from $14,000 to $28,000 and the maximum §2101(b) grant from $2,000 to $5,000. The new, higher limits took effect upon the law's enactment; (2) Provides that the maximum TRA grants be increased using the same cost-of-construction index used to increase the maximum grants for a veteran's or servicemember's own home. Prior to the enactment of P.L. 112-154 , the TRA grants were not subject to annual adjustment; and (3) Extends the authority for TRA grants from December 31, 2012, to December 31, 2022. As previously discussed, the SAH law limits the total amount of grant funding for which a veteran or servicemember can qualify in making adaptations to his or her own home, or to the home of a family member. Section 701 of P.L. 112-154 creates an exception to these limits in cases where a previously-adapted home is "substantially damaged in a natural or other disaster." Section 701 of P.L. 112-154 : (1) provides that where a damaged home was being used and occupied by a disabled veteran or servicemember, he or she may receive funds to acquire another suitable home; (2) makes assistance available as if a veteran or servicemember had not already received assistance, and the assistance does not count toward a veteran's maximum benefit; and (3) sets the maximum benefit at the lesser of: (1) the cost (as determined by VA) to repair or replace the property that is in excess of any insurance coverage; or (2) the statutory grant maximums for §2101(a), §2101(b), or the TRA grants. Loan Guaranty Program The VA Loan Guaranty Program is a mortgage insurance program through which eligible veterans enter into mortgages with private lenders, and the VA guarantees that it will pay lenders a portion of losses that may be suffered as a result of borrower default. Unlike the Federal Housing Administration (FHA) loan insurance program, the VA guarantees only a portion of the loan, which varies depending on the amount of the loan. For a property to be eligible for the loan guaranty, a veteran must occupy the property as his or her home. To participate, veterans pay a one-time fee based on such factors as the amount of the down payment (if any), whether the borrower had active duty service or was a reservist, and whether the borrower is accessing the guaranty for the first time or entering into a subsequent loan. Fees may be waived for veterans receiving compensation for a service-connected disability and for certain surviving spouses. Section 206 of P.L. 112-154 amends the definition of veteran for loan guaranty eligibility to include the surviving spouses of veterans who die while receiving compensation (or who were eligible to receive compensation) for a service-connected disability rated totally disabling. Previously, only surviving spouses of veterans who died from their service-connected disabilities were eligible for the loan guaranty. The disability must meet one of the following three duration requirements: (1) it was continuously rated totally disabling for 10 or more years immediately preceding death; (2) it was continuously rated totally disabling for at least five years from the date of discharge from active duty; or (3) it was continuously rated totally disabling for not less than one year immediately preceding death, and the veteran had been a prisoner of war and died after September 30, 1999. Surviving spouses who qualify for the loan guaranty based on this provision will not be required to pay the guaranteed loan fee. Section 207 of P.L. 112-154 amends the housing occupancy requirement to qualify for the loan guaranty. An exception to the requirement that a veteran occupy the house as a home already exists for veterans called away for active duty—in such cases, their spouses may satisfy the requirement by occupying the property as a home. P.L. 112-154 changes the law to also allow the dependent child of a veteran who is called away for active duty to satisfy the occupancy requirement. Sections 208 and 209 of P.L. 112-154 make permanent the programs for guaranteeing adjustable rate and hybrid adjustable rate mortgages. The VA began guaranteeing adjustable rate mortgages as a demonstration as part of P.L. 102-547 , enacted in 1992. Section 210 of P.L. 112-154 modifies the section of the law describing when veterans with service-connected disabilities may have the loan guaranty fee waived. Before the enactment of P.L. 112-154 , the disability determination was made as part of a "pre-discharge examination and rating." The new law establishes that eligibility to receive disability compensation be based on "a pre-discharge examination and rating or ... a pre-discharge review of existing medical evidence (including service medical and treatment records).... " The intent of the change is to avoid long waits for an examination to occur when existing medical records could be used to make the determination. Section 702 of P.L. 112-154 addresses guaranteed loan fees that veterans must pay, the maximum guaranty amount, and guaranteed loan sales securities that are bundled and sold to investors. Specifically, Section 702 does the following: (1) extends the date for which current loan fees are in effect for loans to purchase or construct dwelling units (governed by 38 U.S.C. §3710(a)), from October 1, 2016 to October 1, 2017; (2) reinstates the higher maximum loan guaranty amount for housing in certain high-cost areas that was put in place through December 31, 2011 by P.L. 110-389 . Prior to the enactment of P.L. 110-389 , the limit at which the VA would guaranty 25% of the loan was the limit set in the Freddie Mac statute. The Freddie Mac statute sets the conforming loan limit at $417,000 for single-family homes. However, for certain high-cost areas, the loan limit may be as high as 115% of the area median home price, though it may not exceed 150% of the conforming loan limit (or $625,500). P.L. 110-389 temporarily increased the maximum guaranty amount through 2011 (it did not make the change in statute), and then P.L. 112-154 again increased the limit through 2014. The two laws set the maximum guaranty amount at 25% of the higher of (1) the Freddie Mac conforming loan limit or (2) 125% of the area median home price, but no higher than 175% of the limit determined under the Freddie Mac statute. According to guidance issued by the VA, this means that in certain high-cost areas, the VA can guarantee loans up to a maximum of 175% of $625,500, or $1,094,625. The higher maximum limits at which the VA will guaranty 25% of the loan will be in effect through December 31, 2014; and (3) extends the VA's authority to bundle and sell vendee loans, which are direct loans that the VA enters into when it sells property that it has acquired after veteran default on a mortgage. The authority had expired on December 31, 2011, and P.L. 112-154 extends the authority through December 31, 2016. Homelessness43 Enhanced Use Leases Prior to the enactment of P.L. 112-154 , the VA used the Enhanced Use Lease (EUL) process to lease unused VA property to another party as long as the property was used in a way that (1) furthered the mission of the VA and enhanced the use of the property, or (2) resulted in the improvement of medical care and services to veterans in the geographic area. The VA was to charge "fair consideration" for the lease, which could include in-kind payment such as goods and services that benefit the VA, as well as improvements to, and maintenance of, VA facilities. While many of the lessees that entered into EULs with the VA did so to provide housing to homeless veterans, EULs were also used for non-housing related purposes. As of December 31, 2011, EULs had been entered into for the purpose of providing child development centers, parking facilities, golf courses, senior housing, assisted living facilities, and nursing homes. Section 211 of P.L. 112-154 changes the EUL program so that properties that are the subject of EULs may only be used for one purpose: "supportive housing." "Supportive housing" is defined as housing combined with supportive services for veterans or their families who are homeless or at risk of homelessness. Among the types of housing that qualify are transitional, permanent, and single room occupancy (SRO) housing, congregate living, independent living, or assisted living. In addition: (1) leases that were entered into prior to January 1, 2012, will be subject to the law as it existed previously; (2) while the VA does not have to receive consideration for an EUL, if it does receive consideration, it may only be "cash at fair value," and not in-kind payment; and (3) each year, the VA is to release a report about the consideration received for EULs. In addition, the first annual report released should address recommendations made as part of a VA Inspector General's report released on February 9, 2012. Homeless Providers Grant and Per Diem Program Also called the Comprehensive Service Programs, the Grant and Per Diem program authorizes the VA to make grants to public entities or private nonprofit organizations to provide services and transitional housing to homeless veterans. The grant portion of the program provides capital grants for the purchase, rehabilitation, or conversion of facilities so that they are suitable for use as either service centers or transitional housing facilities. The per diem portion of the program reimburses grant recipients for the costs of providing housing and supportive services to homeless veterans. Grantees are reimbursed for the cost of care provided, not to exceed the current per diem rate for domiciliary care. The per diem rate increases periodically and is currently $38.90 per day. Section 301 of P.L. 112-154 allows grants to be used for the construction of service centers and transitional housing (in addition to the acquisition and rehabilitation of existing property). Section 301 also allows grantees to use Low Income Housing Tax Credits (LIHTCs) in conjunction with VA Grant and Per Diem funding. P.L. 112-154 changes the law to specify that grantees may receive funds from other public and private sources, as long as the project will be operated by a private nonprofit organization. The definition of private nonprofit organization is expanded to include for-profit limited partnerships or limited liability companies where the sole general partner or manager is a private nonprofit organization. This is the ownership structure used in LIHTC-financed developments. Section 305 of P.L. 112-154 authorizes the VA Grant and Per Diem program at $250 million for FY2013 and $150 million for each subsequent fiscal year. Previous law provided that the program would be authorized at $150 million in FY2013 and each fiscal year thereafter. In 2001, Congress created a Grant and Per Diem program to target homeless veterans with special needs—women, women with children, the frail elderly, veterans with terminal illnesses, and those with chronic mental illnesses. Section 303 of P.L. 112-154 : (1) expands eligibility for the program to include male veterans with dependent children; (2) eliminates the requirement that grantees already be Grant and Per Diem providers as long as they are eligible to be Grant and Per Diem providers; (3) allows grantees to use funds to provide services to dependents of homeless veterans; and (4) extends the authorization level ($5 million per fiscal year) for the Special Needs grant through FY2013. Health Care for Homeless Veterans Health Care for Homeless Veterans (HCHV) is a program through which VA medical center staff conduct outreach to homeless veterans, provide care and treatment for medical, psychiatric, and substance use disorders, and refer veterans to other needed supportive services. Prior to the enactment of P.L. 112-154 , only veterans with serious mental illnesses were eligible to participate in the program. Section 302 of P.L. 112-154 amends the statute to make homeless veterans eligible for the HCHV program, whether mentally ill or not. HUD-VASH HUD-VASH is a collaborative program between the VA (Veterans Affairs Supportive Housing) and the Department of Housing and Urban Development (HUD) through which local Public Housing Authorities (PHAs) distribute and administer Section 8 housing choice vouchers for homeless veterans while local VA medical centers provide case management and clinical services to participating veterans. Section 304 of P.L. 112-154 requires the VA to consider entering into contracts with other entities, such as state or local government agencies or nonprofit organizations, to help veterans find suitable housing and to connect veterans with other services for which they might be eligible. The contract between the VA and the outside service provider may occur in circumstances where (1) there is a shortage of affordable rental housing and a veteran needs more assistance than the VA can provide, (2) a veteran does not live near a local VA facility and it is impractical for the VA to provide assistance, or (3) veterans in the area have lower than average success in obtaining housing when compared to veterans participating in HUD-VASH overall. Other Homeless Provisions Section 305 of P.L. 112-154 extends the authorization for two other programs that serve homeless veterans: the Homeless Veterans Reintegration Program (HVRP) and Supportive Services for Veteran Families (SSVF). The HVRP, administered through the Department of Labor, helps homeless veterans find employment. P.L. 112-154 extends the authorization for HVRP through FY2013 at $50 million per year. The SSVF program assists very low-income veterans and their families who either are making the transition from homelessness to housing or who are moving from one location to another. P.L. 112-154 authorizes the SSVF program for FY2013 at $300 million; the authorization level for the SSVF program in FY2012 was $100 million. Education46 Increased Entitlement When Combining DEA Benefits with Other GI Bill Benefits The Survivors' and Dependents' Educational Assistance Program (DEA; Title 38 U.S.C., Chapter 35) provides educational assistance to the dependents of servicemembers who were disabled, delayed, or died as a result of military service. DEA participants are entitled to 45 months (or the equivalent in part-time attendance) of benefits. Section 401 of P.L. 112-154 allows DEA-eligible individuals who are also eligible for another GI Bill program to combine benefit programs to receive up to 81 months of entitlement, instead of the previous cap of 48 months. The amendment takes effect October 1, 2013, and applies only to entitlement that was not exhausted before that date. Post-9/11 GI Bill and DEA Annual Reports to Congress The Post-9/11 Veterans Educational Assistance Act of 2008 (Post-9/11 GI Bill; Title 38 U.S.C., Chapter 33) provides educational assistance to eligible servicemembers and veterans who served on active duty after September 10, 2001, and to their eligible family members. The All-Volunteer Force Educational Assistance Program (MGIB-AD; Title 38 U.S.C., Chapter 30) primarily provides educational assistance to eligible members of the Armed Forces who entered active duty for the first time after June 30, 1985. Section 402 of P.L. 112-154 requires the Secretary of Defense to report to Congress on the Post-9/11 GI Bill and requires the VA Secretary to report to Congress on the Post-9/11 GI Bill and the DEA. The reports are due annually, starting no later than November 13, 2013, through January 1, 2021. The Defense report must include information on: the extent to which Post-9/11 GI Bill benefit levels affect recruitment to, and retention in, the Armed Forces; the extent to which the benefits help meet the cost of pursuing a program of education; the necessity of the benefits for future recruitment to active duty service; the results from and efforts to inform members of the Armed Forces of the active duty eligibility requirements; and recommendations for administrative and legislative changes. The VA report must include information on: the extent to which Post-9/11 GI Bill and DEA benefits are used; program expenditures; student outcome measures; and recommendations for administrative and legislative changes. Finally, Section 402 repeals the requirement for biennial reports of similar content from the Secretary of Defense and the VA Secretary on the MGIB-AD. Benefits49 Automatic Waiver of Agency of Original Jurisdiction Review of New Evidence During Appeal Process50 When a claimant appeals a decision on a claim for benefits, the claimant is allowed to submit additional evidence to support his or her claim. Currently, the Board of Veterans' Appeals (BVA) must send that evidence to the agency of original jurisdiction (the local VA office that reached the initial decision on the claim) for initial review unless the claimant waives his or her right to have this review. This may delay the BVA from reaching a decision on an appeal as it waits for the local VA office to review the newly submitted evidence. Under Section 501 of P.L. 112-154 , the local VA office's initial review of newly submitted evidence will be automatically waived unless the claimant requests that the local VA office review the evidence. If no such request is made, the BVA will provide the initial review of the newly submitted evidence. This provision will go into effect 180 days after the August 6, 2012 date of the law's enactment. Authority for Certain Persons to Sign Claims on Behalf of Claimants54 Prior to the enactment of P.L. 112-154 , the VA lacked specific authority to authorize court-appointed representatives or caregivers to sign applications on behalf of claimants to permit an adjudication on a claim for benefits to proceed. Section 502 of P.L. 112-154 provides specific authority to the VA to allow a "court-appointed representative, a person who is responsible for the care of the individual, including a spouse or other relative, or an attorney in fact or agent authorized to act on behalf of the individual under a durable power of attorney" to sign an application for a claim on behalf of the claimant. Changes to Duty to Assist Requirement57 Prior to enactment of P.L. 112-154 , the VA's duty to assist claimants obligated the VA to take "reasonable efforts" to gather all private medical records that a claimant identified and authorized the VA to obtain. Section 505 of P.L. 112-154 permits the VA to waive its duty to assist requirement when the Secretary already has enough evidence to award the maximum benefit permitted under the law. It also provides for the Secretary to publish regulations to "encourage claimants to submit relevant private medical records... to the Secretary if such submission does not burden the claimant." The purpose of this section is to prevent the VA from expending unnecessary time and resources to locate private medical records that would be unlikely to change the amount of benefits that may be awarded. Modification of Month of Death Benefit for Surviving Spouses of Veterans61 Section 507 of P.L. 112-154 clarifies that if a veteran who is receiving compensation or a pension from the VA dies, the surviving spouse is due the amount of benefits that the veteran would have received for the entire month in which the veteran died. Furthermore, if a veteran has a claim for compensation pending at the time of his or her death and that claim is subsequently granted, the surviving spouse is eligible to receive those additional benefits for the month in which the veteran died. Electronic Notice to Claimants63 The Veterans Claims Assistance Act of 2000 (VCAA; P.L. 106-475 ) required the VA to notify claimants in writing of evidence that is needed to substantiate their claims, including how the VA can assist them in gathering the required information. The written VCAA notice, provided only after a claim is filed, in addition to providing information specific to that claim, contains basic information about disability compensation, such as how a rating is determined. Because a veteran can file more than one claim for disability, the written notice (containing basic information) is sent to the veteran even if the veteran has just received the same information because he or she filed a previous claim. Section 504 of P.L. 112-154 removes the requirement that the VCAA notice be sent only after a claim is filed, allowing the VA to print the notice on claims forms; removes the requirement that the VA send the notice on a subsequent claim if an issue was covered under a previous claim and notice was sent within the previous year; allows the VA to provide notification by the most efficient means available including electronic communications; and allows the VA to waive the VCAA notification requirements when, at the time the decision to waive the notification is made based on the evidence available, it has been determined that the VA will grant the highest evaluation assignable at the earliest possible effective date to the veteran. Fully Developed Claims—Effective Date64 The VA has developed the Fully Developed Claim (FDC) process as the result of authority granted in P.L. 110-389 for a pilot program to expeditiously process disability claims. Generally the effective date of a claim is the date the VA receives the claim application. Also, generally a claim expires after one year (a veteran generally has one year to provide the evidence necessary to support the claim). Section 506 of P.L. 112-154 provides that, for FDC disability claims that are original claims, the effective date can be up to one year before the VA receives the claim application. As a result, veterans can file a notice under the FDC process that they will be filing a claim, and thereby establish an effective date for their claim while the veteran develops the evidence to support the claim (prior to submission). However, this change in effective date for original FDC disability claims is only available for three years (for original claims received before August 7, 2015). Survivor Benefits—Dependency & Indemnity Compensation and Social Security65 Under current law, the VA Secretary and the Social Security Commissioner are required to use joint application forms for VA survivor benefits and Social Security. When the joint application form is filed with either the VA or the Social Security Administration (SSA), it is considered an application for survivor benefits with both agencies (VA and SSA). Section 503 of P.L. 112-154 permits, rather than requires, the Secretary of the VA and the Social Security Commissioner to develop the joint form to apply for survivor benefits with both agencies (VA and SSA). Section 503 also requires that any document filed with either agency indicating an intent to apply for survivor benefits is to be considered an application for survivor benefits with both agencies (VA and SSA). Improved Disability Pension Program66 The Improved Disability Pension program provides a monthly cash benefit to low-income elderly or totally disabled (nonservice-connected conditions) veterans with active military service during a period of war. Section 508 of P.L. 112-154 increases the maximum annual benefit under the Improved Disability Pension program for a married couple when both of them: (1) are veterans; and (2) require regular aid and attendance. The maximum annual benefit is increased from $30,480 to $32,433. The maximum cash benefit amount for both the Improved Disability Pension and the Improved Death Pension are reduced by income received by the veteran or surviving spouse. One of the exclusions for calculating income for benefit purposes is reimbursements of any kind for a casualty loss (as determined in regulations) up to the greater of fair market value or replacement value of the property. Section 509 of P.L. 112-154 expands this exclusion to include reimbursements for expenses for replacement or repair of equipment, vehicles, items, money, or property as a result of any accident, theft or loss, or casualty loss, up to the greater of fair market value or replacement value. Automobile and Adaptive Equipment Grants69 Disabled veterans and servicemembers may be eligible for financial assistance from the VA to purchase an automobile or adaptive equipment. Section 701 of P.L. 112-154 allows the VA Secretary to provide assistance to a veteran for the purchase of a second automobile (or other conveyance) if the Secretary determines that there is evidence that the first automobile, purchased with VA assistance was: (1) destroyed due to a natural or other disaster, and not through the fault of the veteran; and (2) the veteran is not compensated for the loss from insurance. Vocational Rehabilitation and Employment71 The VA's Vocational Rehabilitation and Employment (VR&E) Program provides employment-related services for veterans with a service-connected disability and an employment handicap. In cases where employment is not a viable outcome, the VR&E program provides or coordinates independent living (IL) services to help veterans live independently in their communities. Section 701 of P.L. 112-154 expands specific provisions of the VR&E program for veterans affected by natural or other disasters, as identified by the VA Secretary. Under current law, veterans enrolled in a VR&E employment program may receive a subsistence allowance for the duration of the program as well as for two months after the completion of the program. Section 701(b) extends the allowance for an additional two months (for a total of four months beyond the completion of the program) for veterans who are displaced as the result of a natural or other disaster. Current law limits annual participation in IL services to 2,700 veterans. Section 701(c) waives this limit in the case of a veteran who "has been displaced as the result of, or has otherwise been adversely affected in the areas covered by, a natural or other disaster." Memorial, Burial, and Cemetery Prohibition on Disruptions of Funerals of Members or Former Members of the Armed Forces72 Prior to the enactment of P.L. 112-154 , the law restricted public demonstrations and protests at veterans' funerals by requiring demonstrators to stay a certain distance away from the cemetery and from roads leading to the cemetery during the period beginning an hour before the service and extending until an hour after the conclusion of the service. Section 601 of P.L. 112-154 increases the time, place, and manner restrictions imposed on demonstrations that take place during funerals of servicemembers and veterans. Section 601 amends 38 U.S.C. §2413, which imposes restrictions on demonstrations that occur at Arlington National Cemetery (ANC) and cemeteries under the control of the VA's National Cemetery Administration (NCA), and also amends 18 U.S.C. §1388, which imposes restrictions on demonstrations that occur at funerals held in places other than ANC or an NCA-controlled cemetery. Under Section 601 , demonstrations are restricted "during the period beginning 120 minutes before and ending 120 minutes after" a funeral. The minimum distance from a funeral for which demonstrations may occur during this time period has also been increased. Statutory damages for violations of these restrictions range from $25,000 to $50,000. Arlington National Cemetery Gravesite Reservations77 Section 602 of P.L. 112-154 codifies current regulations that prohibit the reservation of gravesites at Arlington National Cemetery prior to the death of an individual. The act permits the President to waive the prohibition "as the President considers appropriate." If the President exercises this authority, the President must notify the Committee on Veterans' Affairs and the Committee on Armed Services of both the Senate and the House of Representatives. Monuments80 The Secretary of the Army is allowed to set aside areas, and establish monuments or markers, in Arlington National Cemetery to honor veterans and servicemembers missing in action or those whose remains are not available. Section 604 of P.L. 112-154 establishes requirements for establishing monuments at Arlington National Cemetery. A monument in memory of a particular individual, group of individuals, or military event cannot be established until 25 years after the last day of service of the individual or group of individuals, or the last day of the military event. The Secretary of the Army can waive the 25-year requirement after public and congressional notification. Section 604 provides that a monument, sponsored by a nongovernmental entity and paid for from public sources, may be established in Arlington National Cemetery after the nongovernmental entity provides an independent study of other locations and the Secretary of the Army consults with the Commission of Fine Arts and the Advisory Committee on Arlington National Cemetery. Section 604 also mandates that the Secretary of the Army provide notice to the appropriate congressional committees of any monument proposed to be placed in Arlington National Cemetery. The monument would not be placed if Congress passed, within 60 days, a joint resolution of disapproval of the monument. Presidential Memorial Certificates81 The VA, upon request, prepares and sends a certificate with the President's signature to the eligible survivor of a deceased veteran who was discharged under honorable conditions. An eligible survivor may be the next of kin, a relative, a friend, or an authorized representative acting on behalf of the eligible relative or friend. Because of the requirement that the veteran be discharged under honorable conditions, military personnel who die during active military service were not eligible for the certificate. Section 603 of P.L. 112-154 expands eligibility for the Presidential Memorial Certificate to persons who die in active military, naval, or air service. Other Mortgage and Foreclosure Protection82 The Servicemembers Civil Relief Act (SCRA) provides protections for servicemembers in the event that their military service impedes their ability to meet financial obligations incurred before entry into active military service. The SCRA does not require forgiving of all debts or the extinguishment of contractual obligations on behalf of servicemembers who have been called up for active duty, nor is absolute immunity from civil lawsuits provided. Instead, the act suspends civil claims against servicemembers and protects them from default judgments. The SCRA includes provisions that prohibit the eviction of military members and their dependents from rental or mortgaged property; create a 6% cap on interest on debts incurred before an individual entered active duty military service; protect against the cancellation of life insurance or the non-reinstatement of health insurance policies; allow some professionals to suspend malpractice or liability insurance while on active duty; and proscribe taxation in multiple jurisdictions and forced property sales to pay overdue taxes. The SCRA has been amended since its passage in 2003, and proposed changes continue to be introduced in Congress. Most recently, Section 710 of P.L. 112-154 extended protections related to mortgages and foreclosures until December 31, 2014. Specifically, Section 710 amended Section 303 of the SCRA (50 U.S.C. App. 533) addressing mortgages and trust deeds. This section covers servicemembers who, prior to active military service, entered into a property transaction subject to a mortgage, a trust deed, or other security loan. As amended, if the servicemember is unable to make payments on the loan due to military service, the provision prevents the vendor from exercising any right or option under the contract to rescind or terminate, to resume possession of the property for nonpayment of any installment due, or to breach the terms, except by action in a court of competent jurisdiction, until one year after the term of active duty terminates. A sale, foreclosure, or seizure of property during a servicemember's period of military service, and for one year after, is prohibited unless under a court order issued prior to foreclosure on the property, or if made pursuant to an agreement under Section 107 of the act. Additionally, Section 701 requires the Comptroller General of the United States to submit a report to Congress addressing the protections afforded under Section 303 of the SCRA within 540 days after the date of enactment. Assessment of Veterans Benefit Administration Employees84 Section 703 of P.L. 112-154 requires the Secretary of the VA to, within 180 days of enactment, report to the House and Senate Committees on Veterans Affairs on a plan to: (1) evaluate the skills and capabilities of employees (and managers) at the Veterans Benefits Administration (VBA) who process disability compensation and pension benefit claims; (2) provide training for those employees whose skills and capabilities are deemed unsatisfactory; (3) re-evaluate employees who receive the training; and (4) take appropriate personnel actions if employees' skills and capabilities are still deemed unsatisfactory after additional training and re-evaluation. Penalties for Misrepresentation of Status for Purposes of the "Veterans First" Contracting Program85 Section 502 of the Veterans Benefits, Health Care, and Information Technology Act of 2006 granted the VA special authority to conduct competitions in which only small businesses owned by service-disabled and other veterans may compete (i.e., set-asides), and to make noncompetitive (or sole-source) awards to such firms. Eligibility for these contracting preferences is limited to firms and firm owners listed in a database maintained by the VA, and firms or owners that misrepresent their status in order to qualify for preferences under the 2006 act are subject to debarment, or exclusion from government contracting for a specified period of time. Specifically, Section 502 provided that any firm determined to have "misrepresented [its] status" as a veteran-owned or service-disabled veteran-owned small business for purposes of the VA's "Veterans First" contracting program "shall be debarred from contracting with the Department for a reasonable period of time, as determined by the Secretary." Such debarments—prescribed by law—are known as statutory debarments and, unlike administrative debarments under the Federal Acquisition Regulation (FAR), are imposed for purposes of punishment. Section 706 of P.L. 112-154 amends Section 502 to clarify that debarment is to be imposed only in cases where status has been "willfully and intentionally" misrepresented. Prior law would appear to have authorized debarment for inadvertent or unintentional misrepresentation of status, although it is unclear how often this occurred. Section 706 further amends Section 502 to prescribe that the period of any debarment shall be "not less than five years," as opposed to a "reasonable period of time, as determined by the Secretary." In addition, Section 706 prescribes time frames within which debarment actions are to be commenced and completed, as well as establishes how "principals" of debarred firms are to be treated. Specifically, it requires that the VA begin a debarment action not later than 30 days after determining that a concern willfully and intentionally misrepresented its status, and complete the debarment action within 90 days after this determination. Section 706 also provides that the debarment of a firm includes the debarment of "all principals in that concern for a period of not less than five years." Reporting on Conferences93 Section 707 of P.L. 112-154 requires the VA Secretary to report to the House and Senate Committees on Veterans' Affairs within 30 days of the end of each fiscal quarter on conferences sponsored or co-sponsored by the VA that were attended by 50 or more people and were estimated to cost the VA $20,000 or more. The report must include an accounting of the final costs of the conference by category (i.e., transportation, per diem, lodging, refreshments, entertainment, etc.). Employment of Veterans by Federal Contractors94 Under current law, every federal contractor and subcontractor with a contract value of $100,000 or more must report annually to the Secretary of the Department of Labor (DOL) with information on total employment, new employees, and the number of qualified veterans in total employment and new employees. Section 708 of P.L. 112-154 requires the DOL Secretary to establish and maintain a website for public disclosure of the information federal contractors and subcontractors are required to report to DOL on their employment of veterans. VetStar Program96 Section 709 of P.L. 112-154 directs the VA Secretary to establish an award program, the VetStar program, to recognize businesses' contributions to veterans' employment on an annual basis.

Congress has in the past enacted legislation providing authority for the Department of Veterans Affairs (VA) to treat certain veterans for specific medical conditions resulting from their exposure to certain toxic substances or environmental hazards while on active military duty. In the 1980s, officials at Camp Lejeune became aware of the presence of volatile organic compounds (VOCs) in drinking water samples. Camp Lejeune was placed on the National Priorities List by the Environmental Protection Agency in 1989, and the Agency for Toxic Substances and Disease Registry continues to monitor samples from the water table. The Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 (H.R. 1627, P.L. 112-154, enacted on August 6, 2012) provides authority for the VA to provide medical services for 15 specific illnesses to certain veterans as well as their eligible family members, who were stationed at Camp Lejeune, North Carolina, from January 1, 1957, to December 31, 1987. In addition to providing the VA authority to provide medical services associated with these specific illnesses to veterans and their families stationed at Camp Lejeune during this time period, P.L. 112-154 makes a number of changes to other VA programs, including housing and other benefit programs. Some of these changes affect VA administration and expand congressional oversight of the VA through increased reporting to Congress, while other changes made by P.L. 112-154 would impact the larger population of veterans. That is, the changes would impact all veterans utilizing these programs, not just veterans stationed at Camp Lejeune during the above specified period. This report provides information on the various provisions of P.L. 112-154 by program, benefit, or topic, rather than by each legislative provision. However, for each change in a program, benefit, etc., the section number of P.L. 112-154 is provided.

Telephone Records and the Fourth Amendment The Supreme Court, in Smith v. Maryland , 442 U.S. 735 (1979), in a pen register case, has held that there is no Fourth Amendment protected reasonable expectation of privacy in records of telephone calls held in the hands of third party providers, where the content of any call is not intercepted. The Fourth Amendment to the United States Constitution guarantees: The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. Whether the use of a pen register is a "search and seizure" within the meaning of the Fourth Amendment determines if the government, in compliance with the Constitution, must secure a warrant or court order prior to its installation. In 1979, the United States Supreme Court decided this question in Smith v. Maryland, holding that the Fourth Amendment does not prohibit the use of pen registers without a warrant. Writing the majority opinion joined by four other justices, Justice Harry Blackmun drew a distinction between the acquisition of contents of telephone communications using electronic listening devices, which the Court in Katz v. United States had deemed to be a "search" under the Fourth Amendment, and the capture of electronic impulses that identify the numbers dialed on a telephone using a pen register device. According to the majority in Smith , it is a constitutionally significant difference that pen registers do not record the contents of communications, in contrast to the listening devices employed in Katz . The Court explained that the Fourth Amendment does not apply to the use of pen registers because individuals do not have a legitimate expectation of privacy against invasion by government action, that protects the numbers dialed into a telephone system: All telephone users realize that they must "convey" phone numbers to the telephone company, since it is through telephone company switching equipment that their calls are completed. All subscribers realize, moreover, that the phone company has facilities for making permanent records of the numbers they dial, for they see a list of their long-distance (toll) calls on their monthly bills. In fact, pen registers and similar devices are routinely used by telephone companies "for the purposes of checking billing operations, detecting fraud, and preventing violations of law." The Court stated that telephone customers, by voluntarily conveying phone numbers to the telephone company and "expos[ing] that information to its equipment in the ordinary course of business," assume the risk that the company may disclose such information to law enforcement. Because there is no actual or legitimate expectation of privacy in the numbers dialed from a telephone, the installation and use of a pen register is not a "search" requiring a warrant under the Fourth Amendment, the Court ruled. In contrast, the dissenting opinions in Smith concluded that telephone numbers dialed from a phone are entitled to the same constitutional protection that telephone conversations receive under Katz because such numbers are not without "content" - they "reveal the identities of the persons and the places called, and thus reveal the most intimate details of a person's life." Furthermore, the dissenters objected to the majority's characterization that the use of a telephone involves an assumption of risk on the part of the customer that telephone dialing information might be disclosed to the government; assumption of risk generally requires there to have been a choice to engage in the activity, and "as a practical matter, individuals have no realistic alternative" to the use of a telephone. Although the protections of the Fourth Amendment may not reach records of telephone calls held by third parties, Congress has enacted a number of statutes since the Smith decision that both permit access by the government for foreign intelligence or law enforcement purposes to information relating to telephone numbers dialed from or received by a particular telephone number, as well as duration and usage, while simultaneously imposing limitations as to how such information may be accessed and under what circumstances it may be used. Statutory Provisions Information regarding telephone calling patterns, duration, usage, and length of service may be sought by the government directly through the use of pen registers or trap and trace devices. Statutory provisions authorizing, pursuant to court order, the use of pen registers and trap and trace devices exist in both the Foreign Intelligence Surveillance Act (FISA), 50 U.S.C. Section 1841 et seq ., and, for law enforcement purposes, in 18 U.S.C. Section 3121 et seq . Telephone calling activity may also be collected indirectly by seeking telephone toll or transactional records from third party providers. For example, FISA's "business records" provision, 50 U.S.C. Section 1861, authorizes court orders to compel the production of "any tangible thing" relevant to collection of foreign intelligence information not concerning a U.S. person, or relevant to an investigation into international terrorism or clandestine intelligence activities. Access to stored electronic communications is also addressed in 18 U.S.C. Section 2701 et seq. 18 U.S.C. Section 2702 prohibits voluntary disclosure of customer communications records by a service provider unless it falls within one of several exceptions. Required disclosure of customer records to the government under certain circumstances is addressed under 18 U.S.C. Section 2703, including, among others, disclosure pursuant to a warrant or grand jury or trial subpoena. 18 U.S.C. Section 2709 is a national security letter provision, under which a wire or electronic service provider may be compelled to provide subscriber information and toll billing records information, or electronic communication transactional records in its custody or possession in response to a request by the Director of the Federal Bureau of Investigation (FBI) if the Director of the FBI, or his designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge designated by the FBI Director in a field office, certifies that the records or information sought is relevant to an authorized investigation to protect against international terrorism or clandestine intelligence activities, provided that such an investigation of a U.S. person is not conducted solely on the basis of First Amendment protected activities. Finally, Section 222 of the Communications Act of 1934, as amended, 47 U.S.C. Section 222, restricts the voluntary disclosure of customer proprietary network information by telecommunications service providers. Violations of the pertinent provisions of law or regulation may expose service providers to criminal sanctions, civil penalties and forfeiture provisions, 47 U.S.C. Sections 501-503. Each of these statutory schemes is described in more detail below. Pen Registers and Trap and Trace Devices for Foreign Intelligence and International Terrorism Investigations Under FISA Under 50 U.S.C. Section 1842, the Attorney General or a designated attorney for the government may apply for an ex parte court order authorizing the use of a pen register or trap and trace device to a Foreign Intelligence Surveillance Court (FISC) judge or to a U.S. magistrate judge designated by the Chief Justice of the United States to have the power to hear applications or grant orders approving installation and use of a pen register or trap and trace device on behalf of an FISC judge. The application must be approved by the Attorney General or a designated government attorney; must identify the federal officer seeking to use the pen register or trap and trace device; and must include a certification that the information likely to be obtained is foreign intelligence information not concerning a U.S. person or that the information is relevant to an ongoing investigation to protect against international terrorism or clandestine intelligence activities. An investigation of a U.S. person may not be conducted solely on the basis of First Amendment protected activities. The order must specify the identity of the person who is the subject of the investigation, if known. If known, the order must identify the person to whom the telephone line or other facility to which the pen register or trap and trace device is to be attached is leased or in whose name it is listed. In addition, the order must list the attributes of the communications to which it applies, such as the number or other identifier and, if known, the location of the telephone line or other facility involved. In the case of a trap and trace device, the order must also identify the geographic limits of the trap and trace order. Such an order, at the request of the applicant, also directs the provider of the wire or electronic service, landlord, custodian, or other person, to furnish any information, facilities, or technical assistance needed to accomplish the installation and operation of the pen register or trap and trace device in a manner that will protect its secrecy and minimize interference with the services provided. In addition, the order directs the provider, landlord, custodian, or other person not to disclose the existence of the investigation or the pen register or trap and trace device to anyone unless or until ordered to do so by the court. Records concerning the pen register or trap and trace device or the aid furnished are to be kept under security procedures approved by the Attorney General and the Director of National Security under 50 U.S.C. Section 1805(b)(2)(C). The order also directs the applicant for the order to provide compensation for reasonable expenses incurred by the provider, landlord, custodian, or other person in providing information, facilities, or technical assistance. Under 50 U.S.C. Section 1842(d)(2)(C)(i), upon the request of the applicant for the court order, the court shall direct the wire or electronic service provider to provide the federal officer using the pen register or trap and trace device with the name; address; and the telephone number, instrument number or subscriber number or identifier of the customer or subscriber using the service covered by the order for the period specified by the order, including temporarily assigned network address or associated routing or transmission information. The service provider must also provide, if so ordered by the court upon the applicant's request, information on length of service of the customer or subscriber, as well as local or long distance telephone records of the subscriber or customer, and, if applicable, any records on periods of usage by the customer or subscriber. Further, the court, at the applicant's request, may order disclosure by the service provider of any mechanisms and sources of payment for the service (i.e., credit card, bank account). Similarly, under 50 U.S.C. Section 1842(d)(2)(C)(ii), if the information is available with respect to any customer or subscriber of incoming or outgoing communications to or from the service covered by the order, the court, upon the request of the applicant for the order, is to direct the wire or electronic service provider to provide the name; address; telephone number, instrument number or other subscriber number or identifier, of such customer or subscriber, as well as length of service provided to and types of serviced utilized by the subscriber or customer. In general, the duration of an order issued under this section is not to exceed 90 days, with the possibility of extension for periods of not more than 90 days. However, if the applicant for the order certifies that the information likely to be obtained is foreign intelligence information not concerning a United States person, then an extension may be for up to a year. No cause of action may be brought against any wire or electronic service provider, landlord, custodian, or other person that furnishes information, facilities, or technical assistance pursuant to an order issued under this provision. Unless otherwise ordered by the judge, the results of the pen register or trap and trace device are to be provided to the authorized government official or officials at reasonable intervals. Under 50 U.S.C. Section 1805(i), as added by the FISA Amendments Act of 2008, if an FISC judge grants an application by the government to conduct electronic surveillance under FISA, then, upon the request of the applicant, the FISC judge shall also authorize the installation and use of pen registers and trap and trace devices. In such circumstances, the provisions of 50 U.S.C. Section 1842(d)(2) regarding disclosure of customer or subscriber information to the government would apply. Pen Registers or Trap and Trace Devices Generally, and for Use in an Ongoing Criminal Investigation 18 U.S.C. Section 3121 prohibits the installation and use of a pen register or trap and trace device without first obtaining a court order under FISA or under 18 U.S.C. Section 3123. This prohibition does not apply to use by an electronic or wire service provider relating to: the operation, maintenance and testing of a service or protection of the rights or property of the service provider; the protection of users of the service from abuse or unlawful use of the service; to recording of the fact that a wire or electronic communication was initiated or completed to protect the service provider, another provider furnishing service toward completion of the wire communication, or a user of the service from fraudulent, unlawful or abusive use of the service; or to use where the consent of the user of the service has been obtained. A government agency authorized to install and use a pen register or trap and trace device under the provisions of this chapter of Title 18, U.S.C., or under state law must use technology reasonably available to it that restricts the recording or decoding of electronic or other impulses to the dialing, routing, addressing, and signaling information utilized in the processing and transmitting of wire or electronic communications in a manner that does not include the contents of that communication. An application for a court order authorizing a pen register or trap and trace device under this chapter must be made pursuant to 18 U.S.C. Section 3122 in writing under oath or affirmation to a court of competent jurisdiction. Such an application must include the identity of the attorney for the government or the state law enforcement or investigative officer making the application and the identity of the law enforcement agency conducting the investigation, as well as a certification by the applicant that the information likely to be obtained is relevant to an ongoing criminal investigation being conducted by that agency. Under 18 U.S.C. Section 3123, the court shall enter an ex parte order authorization installation and use of a pen register or trap and trace device anywhere in the United States if the court finds that the applicant for the order has made such a certification. An order may authorize installation and use of a pen register or trap and trace device for a period of up to 60 days, which can be extended by court order for additional periods of no more than 60 days. The order must also direct that the order be sealed until otherwise ordered by the court, and must prohibit the person owning or leasing the line or other facility to which the pen register or trap and trace device is attached or applied, or who is obligated by the order to assist the applicant, from disclosing the existence of the pen register or trap and trace device or of the investigation to the listed subscriber or to any other person unless or until the court orders otherwise. Access to Business Records for Foreign Intelligence and International Terrorism Investigations Under 50 U.S.C. Section 1861, the Director of the Federal Bureau of Investigation (FBI) or a designee of the Director, whose rank shall not be lower than Assistant Special Agent in Charge, may apply to the FISA court for an order granting the government access to any tangible item (including books, records, papers, documents, and other items) for an investigation to obtain foreign intelligence information not concerning a United States person, or to protect against international terrorism or clandestine intelligence activities. Such an investigation of a United States person may not be conducted solely upon the basis of activities protected by the first amendment to the Constitution. The application for such an order must include a statement of facts demonstrating that there are reasonable grounds to believe that the tangible things sought are relevant to an authorized or preliminary investigation to protect against international terrorism or espionage, or to obtain foreign intelligence information not concerning a U.S. person. However, certain tangible items are deemed presumptively relevant to an investigation if the application's statement of facts shows that the items sought pertain to a foreign power or an agent of a foreign power, the activities of a suspected agent of a foreign power who is the subject of such authorized investigation, or an individual in contact with, or known to, a suspected agent of a foreign power who is the subject of such authorized investigation. The FISA court judge shall approve an application for an order under 50 U.S.C. Section 1861, as requested or as modified, upon a finding that the application complies with statutory requirements. The order must contain a particularized description of the items sought, provide for a reasonable time to assemble them, and be limited to things which may be obtained under a grand jury subpoena or an order of a U.S. court for production of records or tangible things. The order to produce the tangible things (production order) is also accompanied by a nondisclosure requirement (nondisclosure order) that prohibits the recipient from disclosing to any other person that the FBI has sought the tangible things described in the order, with limited exceptions. The recipient may immediately challenge the legality of the production order by filing a petition with the FISA court; however, the recipient must wait one year before challenging the nondisclosure order. A FISA court judge considering the recipient's petition to modify or set aside the production order may do so only if the judge finds that the order does not meet statutory requirements or is otherwise unlawful. A nondisclosure order may be modified or set aside if the judge finds that there is no reason to believe that disclosure may endanger the national security of the United States; interfere with a criminal, counterterrorism, or counterintelligence investigation; interfere with diplomatic relations; or endanger the life or physical safety of any person. If, at the time the individual files the petition for judicial review of a nondisclosure order, the Attorney General, Deputy Attorney General, an Assistant Attorney General, or the Director of the FBI certifies that disclosure may endanger the national security of the United States or interfere with diplomatic relations, then the FISA judge must treat such government certification as conclusive unless the judge finds that the certification was made in bad faith. Authority to collect communications records under FISA is currently set to expire on June 1, 2015. Absent a congressional extension, only records from common carriers, public accommodation facilities, storage facilities, and vehicle rental facilities may be sought under FISA for investigations begun on or after June 1, 2015. Access to Stored Electronic Communications and Transactional Records Access to stored electronic communications and transactional records is addressed in 18 U.S.C. Section 2701 et seq. Under 18 U.S.C. Section 2702, voluntary disclosure of customer communications records by a service provider is prohibited unless it falls within one of several exceptions, including disclosure as authorized in 18 U.S.C. Section 2703; disclosure with the lawful consent of the customer or subscriber; or disclosure to a governmental entity, if the provider, in good faith, believes that an emergency involving danger of death or serious physical injury to any person requires disclosure without delay of information relating to the emergency. In various reports regarding the use of "exigent letters," the DOJ OIG noted that one of the justifications for the use of exigent letters and other informal governmental requests for telephone records had been based upon this voluntary emergency disclosure provision. However, these reports also concluded that many of the situations in which these tools were used did not appear to meet the emergency standard provided by this exception. Under 18 U.S.C. Section 2703, a provider of electronic communication service or remote computing service shall disclose to a government entity the name, address, local and long distance telephone connection records, or records of session times and durations, length of service and types of service utilized, telephone instrument number or other subscriber number or identity, including temporarily assigned network address, and means and source of payment for such service pursuant to a warrant; a court order based upon specific and articulable facts showing that there are reasonable grounds to believe that the contents of a wire or electronic communication or the records or other information sought are relevant and material to an ongoing criminal investigation; customer or subscriber consent; a written request from the governmental entity relevant to a law enforcement investigation regarding telemarketing fraud; an administrative subpoena authorized by federal or state statute, or a federal or state grand jury subpoena or trial subpoena. A governmental entity receiving such records or information is not required to provide notice to a subscriber or customer. Nor does any cause of action lie against any service provider of wire or electronic communication service, its officers, employees, agents, or other specified persons for providing information, facilities, or assistance in accordance with the terms of a court order, warrant, subpoena, statutory authorization or certification under this chapter. 18 U.S.C. Section 2706 requires a government entity obtaining records or other information under Sections 2702 or 2703 to reimburse the costs reasonably necessary and directly incurred in searching for, assembling, reproducing or otherwise providing such information. The amount of payment is to be mutually agreed upon by the government entity and the person or entity providing the information, or, in the absence of an agreement, determined by the court issuing the production order. The reimbursement requirement does not apply to records or other information maintained by a communications common carrier that relate to telephone records and telephone listings obtained under 18 U.S.C. Section 2703 unless a court orders payment upon a determination that the information required is unusually voluminous in nature or otherwise caused an undue burden upon the provider. National Security Letters Under 18 U.S.C. Section 2709, a national security letter provision, wire or electronic service providers must provide subscriber information and toll billing records information, or electronic communication transactional records in its custody or possession in response to a request by the Director of the Federal Bureau of Investigation (FBI) if the Director of the FBI, or his designee in a position not lower than Deputy Assistant Director at Bureau headquarters or a Special Agent in Charge designated by the FBI Director in a field office, certifies that the records or information sought is relevant to an authorized investigation to protect against international terrorism or clandestine intelligence activities, provided that such an investigation of a U.S. person is not conducted solely on the basis of First Amendment protected activities. Under 18 U.S.C. Section 2709(b), if the Director of the Federal Bureau of Investigation, or his designee, certifies that disclosure of the request may result in a danger to the national security of the United States, interference with a criminal, counterterrorism, or counterintelligence investigation, interference with diplomatic relations, or danger to the life or physical safety of any person, no wire or electronic communications service provider, or officer, employee, or agent thereof, shall disclose to any person (other than those to whom such disclosure is necessary to comply with the request or an attorney to obtain legal advice or legal assistance with respect to the request) that the Federal Bureau of Investigation has sought or obtained access to information or records under this section. The FBI must notify the person or entity to whom a Section 2709(b) request is made where such a nondisclosure requirement is applicable. A recipient of such a request who notifies those to whom notice is necessary for compliance with the request or who notifies an attorney to obtain legal advice or legal assistance with respect to the request must also advise them of the nondisclosure requirement. At the request of the Director of the Federal Bureau of Investigation or the designee of the Director, any person making or intending to make a disclosure under this section shall identify to the Director or such designee the person to whom such disclosure will be made or to whom such disclosure was made prior to the request, except that nothing in this section shall require a person to inform the Director or such designee of the identity of an attorney to whom disclosure was made or will be made to obtain legal advice or legal assistance with respect to the request. The FBI may only disseminate records obtained under this section as provided in guidelines approved by the Attorney General for foreign intelligence collection and foreign counterintelligence investigations conducted by the Federal Bureau of Investigation, and, with respect to dissemination to an agency of the United States, only if such information is clearly relevant to the authorized responsibilities of such agency. On a semiannual basis, the Director of the Federal Bureau of Investigation is required to fully inform the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate, and the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate, concerning all requests made under subsection (b) of this section. Penalties Except as provided in 18 U.S.C. Section 2703(e), 18 U.S.C. Section 2707 provides a civil cause of action for any provider of electronic communication service, subscriber, or other person aggrieved by a knowing or intentional violation of this chapter. The aggrieved party may receive equitable relief and damages. The damages which may be assessed by the court are actual damages suffered by the plaintiff plus any profits made by the violator as a result of the violation. At a minimum, a person entitled to recover damages must receive no less than $1,000. If a court or appropriate department or agency determines that the United States has violated this chapter and that the circumstances surrounding the violation raise questions as to whether a federal officer or employee acted willfully or intentionally with respect to the violation, disciplinary action against that officer or employee may also be initiated. A person aggrieved by a willful violation of this chapter or a willful violation of 50 U.S.C. Section 1845(a), which deals with the use of information gathered through a pen register and trap and trace under FISA, may commence a civil action against the United States in a U.S. district court to receive money damages under 18 U.S.C. Section 2712. If the claim is successful in establishing such a violation, the court may assess actual damages, but not less than $10,000, whichever is greater, plus reasonably incurred litigation costs. There is a two year statute of limitations applicable to this provision, and this section states that this is the exclusive remedy against the United States for claims within the purview of the section. The agency or department must reimburse any award under this section to the U.S. treasury. Administrative discipline may also be pursued. A proceeding under 18 U.S.C. Section 2712 shall be stayed by the court, upon motion by the United States, if the court determines that civil discovery will adversely affect the government's ability to conduct a related investigation or prosecution of a related criminal case. Such a stay also tolls the statute of limitations. Communications Act of 1934 Telecommunications carriers are also subject to obligations to guard the confidentiality of customer proprietary network information (CPNI) and to ensure that it is not disclosed to third parties without customer approval or as required by law. Section 222 of the Communication Act of 1934, as amended, establishes a duty of every telecommunications carrier to protect the confidentiality of its customers' customer proprietary network information. Section 222 attempts to achieve a balance between marketing and customer privacy. CPNI includes personally identifiable information derived from a customer's relationship with a telephone company, irrespective of whether the customer purchases landline or wireless telephone service. CPNI is defined as (A) information that relates to the quantity, technical configuration, type, destination, location, and amount of use of a telecommunications service subscribed to by any customer of a telecommunications carrier, and that is made available to the carrier by the customer solely by virtue of the carrier-customer relationship; and (B) information contained in the bills pertaining to telephone exchange service or telephone toll service received by a customer of a carrier. CPNI includes customers' calling activities and history (e.g., phone numbers called, frequency, duration, and time), and billing records. It does not include subscriber list information, such as name, address, and phone number. In Section 222, Congress created a framework to govern telecommunications carriers' use of information obtained through provision of a telecommunications service. Section 222 of the act provides that telecommunications carriers must protect the confidentiality of customer proprietary network information. The act limits carriers' abilities to use customer phone records, including for their own marketing purposes, without customer approval and appropriate safeguards. The act also prohibits carriers from using, disclosing, or permitting access to this information without the approval of the customer, or as otherwise required by law, if the use or disclosure is not in connection with the provided service. Section 222(a) imposes a general duty on telecommunications carriers to protect the confidentiality of proprietary information of other carriers, equipment manufacturers, and customers. Section 222(b) states that a carrier that receives or obtains proprietary information from other carriers in order to provide a telecommunications service may use such information only for that purpose and may not use that information for its own marketing efforts. The confidentiality protections applicable to customer proprietary network information are established in Section 222(c). Subsection (c)(1) constitutes the core privacy requirement for telecommunications carriers. Except as required by law or with the approval of the customer, a telecommunications carrier that receives or obtains customer proprietary network information by virtue of its provision of a telecommunications service shall only use, disclose, or permit access to individually identifiable customer proprietary network information in its provision of (A) the telecommunications service from which such information is derived, or (B) services necessary to, or used in, the provision of such telecommunications service, including the publishing of directories. Section 222(c)(2) provides that a carrier must disclose CPNI "upon affirmative written request by the customer, to any person designated by the customer." Section 222(c)(3) provides that a carrier may use, disclose, or permit access to aggregate customer information other than for the purposes described in subsection (1). Thus, the general principle of confidentiality for customer information is that a carrier may only use, disclose, or permit access to customers' individually identifiable CPNI in limited circumstances: (1) as required by law; (2) with the customer's approval; or (3) in its provision of the telecommunications service from which such information is derived, or services necessary to or used in the provision of such telecommunications service. Exceptions to the general principle of confidentiality permit carriers to use, disclose, or permit access to customer proprietary network information to (1) initiate, render, bill, and collect for telecommunications services; (2) protect the rights or property of the carrier, the customers, and other carriers from fraudulent, abusive, or unlawful use of, or subscription to, such services; (3) provide any inbound telemarketing, referral, or administrative services to the customer for the duration of the call; and (4) provide call location information concerning the user of a commercial mobile service for emergency. Section 222(e) addresses the disclosure of subscriber list information, and permits carriers to provide subscriber list information to any person upon request for the purpose of publishing directories. The term "subscriber list information" means any information identifying the listed names of subscribers of a carrier and such subscribers' telephone numbers, addresses, or primary advertising classifications, or any combination of such listed names, numbers, addresses, or classifications; that the carrier or an affiliate has published, caused to be published, or accepted for publication in any directory format. Customer Proprietary Network Information (CPNI) Regulations In 1998, the Federal Communications Commission issued its CPNI Order to implement Section 222. The CPNI Order and subsequent orders issued by the Commission govern the use and disclosure of customer proprietary network information by telecommunications carriers. When the FCC implemented Section 222, telecommunications carriers were required to obtain express consent from their customers (i.e., "opt-in consent") before a carrier could use customer phone records to market services outside of the customer's relationship with the carrier. The United States Court of Appeals for the Tenth Circuit struck down those rules, finding that they violated the First and Fifth Amendments of the Constitution. Subsequently, the FCC amended its CPNI regulations to require telecommunications carriers to receive opt-in (affirmative) consent before disclosing CPNI to third parties or affiliates that do not provide communications-related services. However, carriers are permitted to disclose CPNI to affiliated parties after obtaining a customer's "opt-out" consent. "Opt-Out" consent means that the telephone company sends the customer a notice saying it will consider the customer to have given approval to use the customer's information for marketing unless the customer tells it not to do so (usually within 30 days.) Carriers are required, prior to soliciting the customer's approval, to provide notice to the customer of the customer's right to restrict use, disclosure, and access to the customer's CPNI. Carriers are also required to establish safeguards to protect against the unauthorized disclosure of CPNI, including requirements that carriers maintain records that track access to customer CPNI records. Each carrier is also required to certify annually its compliance with the CPNI requirements and to make this certification publicly available. The FCC recently proposed $100,000 fines on telephone companies with inadequate certifications regarding compliance with FCC rules protecting customer information from disclosure. A suit challenging the opt-in requirement is currently pending before the D.C. Circuit. Penalties Carriers in violation of the CPNI requirements are subject to a variety of penalties under the act. Under the criminal penalty provision in Section 501 of the act, 47 U.S.C. Section 501, any person who willfully and knowingly does, causes or allows to be done, any act, matter, or thing prohibited by the act or declared unlawful, or who willfully and knowingly omits or fails to do what is required by the act, or who willfully or knowingly causes or allows such omission or failure, shall be punished for any such offense for which no penalty (other than a forfeiture) is provided by the act by a fine up to $10,000, imprisonment up to one year, or both, and in the case of a person previously convicted of violating the act, a fine up to $10,000, imprisonment up to two years, or both. Section 502 of the act, 47 U.S.C. Section 502, punishes willful and knowing violations of Federal Communication Commission regulations. Any person who willfully and knowingly violates any rule, regulation, restriction, or condition made or imposed by the Commission is, in addition to other penalties provided by law, subject to a maximum fine of $500 for each day on which a violation occurs. Under Section 503(b)(1) of the act, 47 U.S.C. Section 503(b)(1), any person who is determined by the Commission to have willfully or repeatedly failed to comply with any provision of the act or any rule, regulation, or order issued by the Commission shall be liable to the United States for a civil money "forfeiture" penalty. Section 312(f)(1) of the act, 47 U.S.C. Section 312(f)(1), defines "willful" as "the conscious and deliberate commission or omission of [any] act, irrespective of any intent to violate" the law. "Repeated" means that the act was committed or omitted more than once, or lasts more than one day. If the violator is a common carrier, Section 503(b) authorizes the Commission to assess a forfeiture penalty of up to $130,000 for each violation or for each day of a continuing violation, except that the amount assessed for any continuing violation shall not exceed a total of $1,325,000 for any single act or failure to act. To impose such a forfeiture penalty, the Commission must issue a notice of apparent liability, and the person against whom the notice has been issued must have an opportunity to show, in writing, why no such forfeiture penalty should be imposed. The Commission will then issue a forfeiture if it finds by a preponderance of the evidence that the person has violated the act or a Commission rule.

Public interest in the means by which the government may collect telephone call records has been raised by revelations in recent years regarding alleged intelligence activity by the National Security Agency (NSA) and the Federal Bureau of Investigation (FBI). According to a USA Today article from May 11, 2006, the NSA allegedly sought and obtained records of telephone numbers called and received from millions of telephones within the United States from three telephone service providers; a fourth reportedly refused to provide such records. Additionally, a series of reports issued by the Department of Justice's Office of the Inspector General (DOJ OIG), most recently in January of 2010, indicate that, between 2002 and 2006, consumer records held by telephone companies had been provided to the FBI through the use of "exigent letters" and other informal methods that fell outside of the national security letter (NSL) process embodied in statute and internal FBI policies. The Supreme Court has held that there is no Fourth Amendment protection of telephone calling records held in the hands of third party providers, where the content of any call is not intercepted. However, this report summarizes existing statutory authorities regarding access by the government, for either foreign intelligence or law enforcement purposes, to information related to telephone calling patterns or practices. Where pertinent, it also discusses statutory prohibitions against accessing or disclosing such information, along with relevant exceptions to those prohibitions. Statutory provisions authorizing, pursuant to court order, the use of pen registers and trap and trace devices exist in both the Foreign Intelligence Surveillance Act (FISA), 50 U.S.C. Section 1841 et seq., and, for law enforcement purposes, in 18 U.S.C. Section 3121 et seq. FISA's "business records" provision, 50 U.S.C. Section 1861, provides authority, pursuant to court order, for requests for production of "any tangible thing" relevant to collection of foreign intelligence information not concerning a U.S. person, or relevant to an investigation into international terrorism or clandestine intelligence activities. Under 50 U.S.C. Section 1861, an investigation concerning a U.S. person may not be based solely on activities protected by the First Amendment. Access to stored electronic communications is addressed in 18 U.S.C. Section 2701 et seq. 18 U.S.C. Section 2702 prohibits voluntary disclosure of customer communications records by a service provider unless it falls within one of several exceptions. Required disclosure of customer records to the government under certain circumstances is addressed under 18 U.S.C. Section 2703, including, among others, disclosure pursuant to a warrant or grand jury or trial subpoena. 18 U.S.C. Section 2709 is a national security letter provision, under which a wire or electronic service provider may be compelled to provide subscriber information and toll billing records information, or electronic communication transactional records in its custody or possession. Finally, Section 222 of the Communications Act of 1934, as amended, protects customer proprietary network information, and violations of pertinent provisions of law or regulation may expose service providers to criminal sanctions, civil penalties, and forfeiture provisions.

Regular and Special Elections of the Speaker The traditional practice of the House is to elect a Speaker by roll call vote upon first convening after a general election of Representatives. Customarily, the conference of each major party in the House selects a candidate whose name is formally placed in nomination before the roll call. A Member may vote for one of these nominated candidates or for another individual. In the great majority of cases, Members vote for the candidate nominated by their own party conferences, since the outcome of this vote in effect establishes which party has the majority and therefore will organize the House. Table 1 presents data on the votes cast for candidates for Speaker of the House of Representatives in each Congress from 1913 (63 rd Congress) through 2019 (116 th Congress). It shows the votes cast for the nominees of the two major parties, other candidates nominated from the floor, and individuals not formally nominated. Included in the table are not only the elections held regularly at the outset of each Congress but also those held during the course of a Congress as a result of the death or resignation of a sitting Speaker. Such elections have occurred five times during the period examined: in 1936 (74 th Congress) upon the death of Speaker Joseph Byrns; in 1940 (76 th Congress) upon the death of Speaker William Bankhead; in 1962 (87 th Congress) upon the death of Speaker Sam Rayburn; in 1989 (101 st Congress) upon the resignation of Speaker Jim Wright; and in 2015 (114 th Congress) upon the resignation of Speaker John Boehner. On the two earlier occasions among these five, the election was by resolution rather than by roll call vote. On the more recent three, the same procedure was followed as at the start of a Congress. Size of the House and Majority Required to Elect The data presented here cover the period during which the permanent size of the House has been set at 435 Members. This period corresponds to that since the admission of Arizona and New Mexico as the 47 th and 48 th states in 1912. The actual size of the House was 436, and then 437, for a brief period between the admission of Alaska and Hawaii (in 1958 and 1959) and the reapportionment of Representatives following the 1960 census. By practice of the House going back to its earliest days, an absolute majority of the Members present and voting is required in order to elect a Speaker. A majority of the full membership of the House (218, in a House of 435) is not required. Precedents emphasize that the requirement is for a majority of "the total number of votes cast for a person by name." A candidate for Speaker may receive a majority of the votes cast, and be elected, while failing to obtain a majority of the full membership because some Members either are not present to vote or instead answer "present" rather than voting for a candidate. During the period examined, this kind of result has occurred five times: in 1917 (65 th Congress), "Champ" Clark was elected with 217 votes; in 1923 (68 th Congress), Frederick Gillett was elected with 215 votes; in 1943 (78 th Congress), Sam Rayburn was elected with 217 votes; in 1997 (105 th Congress), Newt Gingrich was elected with 216 votes; and in 2015 (114 th Congress), John Boehner was elected with 216 votes. In addition, in 1931 (72 nd Congress), the candidate of the new Democratic majority, John Nance Garner (later Vice President), received 218 votes, a bare majority of the membership. The table does not take into account the number of vacancies existing in the House at the time of the election; it therefore cannot show whether any Speaker may have been elected lacking a majority of the then qualified membership of the House. If no candidate obtains the requisite majority, the roll call is repeated. On these subsequent ballots, Members may still vote for any individual; no restrictions have ever been imposed, such as that the lowest candidate on each ballot must drop out, or that no new candidate may enter. Because of the predominance of the two established national parties during the period examined, only once in the period did the House fail to elect on the first roll call. In 1923 (68 th Congress), in a closely divided House, both major party nominees initially failed to gain a majority because of votes cast for other candidates by Members from the Progressive Party or from the "progressive" wing of the Republican Party. Many of these Members agreed to vote for the Republican candidate only on the ninth ballot, after the Republican leadership had agreed to accept a number of procedural reforms these Members favored. Thus the Republican was ultimately elected, although (as noted earlier) still with less than a majority of the full membership. Third and Additional Candidates In the first portion of the period covered by Table 1 , it was common for candidates other than those of the two major parties to receive votes. Such action occurred in 11 of the 16 Congresses (63 rd -78 th ) that convened from 1913 through 1943. On 7 of those 11 occasions, candidates other than those of the two major parties were formally nominated. These events reflect chiefly the influence in Congress, during those three decades, of the progressive movement. The additional nominations were offered in the name of that movement, and the votes cast for Members other than the major party nominees also generally represent an expression of progressive sentiments. During this period, the occurrence of additional nominations (displayed in the table) reflects changing views of Members identifying themselves as "progressives" about whether to constitute themselves in the House as a separate Progressive Party caucus or as a wing of the Republican Party. So does the pattern of shifts in the party labels by which these nominees and others receiving votes chose to designate themselves. The last formal Progressive Party nominee appeared in 1937 (75 th Congress). After defeats in the following election, the only two remaining Members representing the Progressive Party were reduced to voting for each other for Speaker, and beginning in 1947 (80 th Congress), the last standard-bearer of the tendency accepted the Republican label. The demise of this movement in the House represented the final stage in the establishment of a two-party system at the national level. From 1945 through 1995 (79 th -104 th Congresses), only the official nominees of the two major parties received votes for Speaker. This pattern, in other words, persisted from the end of World War II and the advent of the "modern Congress" until after the Republicans had regained the majority in the 104 th Congress (1995-1996) after four decades as the minority party. During this period, the presumption became firmly established that a Member's vote for Speaker will reliably reflect his or her party membership. The opening of the 105 th Congress in 1997, accordingly, marked the first time since 1943 that anyone other than the two major party candidates received votes for Speaker. In 10 of the 13 speakership elections since then (1997-2019), at least one Member has voted for a candidate other than ones formally nominated by the major party conferences. Early in this period, votes cast for other candidates seem to have usually reflected specific circumstances and events, but in the most recent instances, some of them may be regarded as reflecting action by identifiable political factions or groupings. During this period, only in the initial election of 2015 have the names of any candidates other than those of the party conferences been formally placed in nomination. The ballots in 1997, 2013, 2015 (both instances), and 2019 were also notable because votes were cast for candidates who were not Members of the House at the time. In the initial election in 2015, two of the votes cast were for sitting Members of the Senate; in 2019, one such ballot was cast. Although the Constitution does not require the Speaker (or any other officer of either chamber) to be a Member, the Speaker has always been so; it is not known that any votes for individuals other than Members to be Speaker had ever previously been cast in the history of the House. Notably, in 2001, a Member who bore the designation of one major party voted for the nominee of the other. Although the table below does not indicate the party affiliation of the Members voting for each candidate, examination of other available records confirms that no such action had occurred at least for the previous half century.

Each new House elects a Speaker by roll call vote when it first convenes. Customarily, the conference of each major party nominates a candidate whose name is placed in nomination. A Member normally votes for the candidate of his or her own party conference but may vote for any individual, whether nominated or not. To be elected, a candidate must receive an absolute majority of all the votes cast for individuals. This number may be less than a majority (now 218) of the full membership of the House because of vacancies, absentees, or Members answering "present." This report provides data on elections of the Speaker in each Congress since 1913, when the House first reached its present size of 435 Members. During that period (63rd through 116th Congresses), a Speaker was elected five times with the votes of less than a majority of the full membership. If a Speaker dies or resigns during a Congress, the House immediately elects a new one. Five such elections occurred since 1913. In the earlier two cases, the House elected the new Speaker by resolution; in the more recent three, the body used the same procedure as at the outset of a Congress. If no candidate receives the requisite majority, the roll call is repeated until a Speaker is elected. Since 1913, this procedure has been necessary only in 1923, when nine ballots were required before a Speaker was elected. From 1913 through 1943, more often than not, some Members voted for candidates other than those of the two major parties. The candidates in question were usually those representing the "progressive" group (reformers originally associated with the Republican Party), and in some Congresses, their names were formally placed in nomination on behalf of that group. From 1945 through 1995, only the nominated Republican and Democratic candidates received votes, reflecting the establishment of an exclusively two-party system at the national level. In 10 of the 13 elections since 1997, however, some Members have voted for candidates other than the official nominees of their parties. Only in the initial election in 2015, however, were any such candidates formally placed in nomination. Usually, the additional candidates receiving votes have been other Members of the voter's own party, but in one instance, in 2001, a Member voted for the official nominee of the other party. In the 1997, 2013, 2015 (both instances), and 2019 elections, votes were cast for candidates who were not then Members of the House, including, in the initial 2015 election and the 2019 election, sitting Senators. Although the Constitution does not so require, the Speaker has always been a Member of the House. The report will be updated as additional elections for Speaker occur.

Eligibility Eligibility for health benefits under CHIP is available to different groups via different federal authority and mechanisms. These groups have included children, pregnant women, parents and childless adults. Groups may be covered under the CHIP state plan or via special waiver authority. Children In general, Title XXI defines a targeted low-income child as one who is under age 19 with no health insurance, and who would not have been eligible for Medicaid under the rules in effect in the state on March 31, 1997. States can set the upper income level for targeted low-income children up to 200% of the federal poverty level (FPL), or 50 percentage points above the applicable pre-CHIP Medicaid income level. However, "(u)nder current statutory and regulatory authority, States are able to effectively expand eligibility of all children under 19 years of age to whatever level they choose." For states seeking CMS approval to expand eligibility, CHIPRA reduces federal CHIP payments for certain higher-income CHIP children. Specifically, the regular Medicaid federal matching rate (FMAP), which is lower than the CHIP enhanced matching rate, will be used for CHIP enrollees whose effective family income exceeds 300% of poverty using the state's policy of excluding "a block of income that is not determined by type of expense or type of income," with an exception for states that already had a federal approval plan (i.e., New Jersey) or that had enacted a state law to submit a plan for federal approval (i.e., New York). Within these general rules, states may provide assistance to qualifying children in two basic ways. They may cover such children under their Medicaid programs and/or they may create a separate CHIP program for this purpose. (More details on available benefits under each approach are described in the next section.) When states provide Medicaid coverage to targeted low-income children, Medicaid rules typically apply. When states provide coverage to targeted low-income children through separate CHIP programs, Title XXI rules typically apply. In both cases, the federal share of program costs comes from federal CHIP funds (also described in further detail below). Title XXI does not establish an individual entitlement to benefits. Instead, Title XXI entitles states with approved state CHIP plans to pre-determined federal allotments based on a distribution formula set in the law (explained further below). Targeted low-income children covered under a CHIP-financed expansion of Medicaid are, however, entitled to the benefits offered under that program as dictated by Medicaid law. No such individual entitlement exists for targeted low-income children covered in separate CHIP programs. States may cover targeted low-income children by expanding their Medicaid programs in the following ways: (1) by establishing a new optional eligibility group for such children as authorized in Title XXI, and/or (2) by liberalizing the financial rules for any of several existing Medicaid eligibility categories. Many states with Medicaid-expansion CHIP programs chose the latter, opting to cover targeted low-income children under existing Medicaid eligibility pathways, especially Medicaid's poverty-related child groups, rather than by establishing the Title XXI optional coverage group. Such a strategy reduces the administrative burden of creating and implementing a new coverage group. States may also provide coverage to targeted low-income children by creating a separate CHIP program. States define the group of targeted low-income children who may enroll in separate CHIP programs. Title XXI allows states to use the following factors in determining eligibility: geography (e.g., sub-state areas or statewide), age (e.g., subgroups under 19), income, resources (assets), residency, disability status (so long as any standard relating to that status does not restrict eligibility), access to or coverage under other health insurance (to establish whether such access/coverage precludes CHIP eligibility), and duration of CHIP eligibility. Pregnant Women Prior to CHIPRA, states were able to cover adult pregnant women (ages 19 and older) in one of three ways: (1) states could apply for Section 1115 waivers to extend coverage to such pregnant women; (2) states could provide health benefits coverage, including prenatal care and delivery services, to unborn children of adult pregnant women through a CHIP state plan amendment (SPA) as permitted through regulation; or (3) states could offer a "family coverage option" through a group health plan that may include maternity care to adult females in eligible families. As of October 2007, 17 states offered pregnancy-related services to adults using CHIP funds. Of those, 6 states used the §1115 waiver authority, and 12 states extended coverage to unborn children of adult pregnant women through unborn child SPAs (Rhode Island extends coverage to adult pregnant women through both authorities). Of the 12 states that offered pregnancy-related services to unborn children under the CHIP SPAs, all but Tennessee extended coverage to the unborn children of undocumented aliens who otherwise would not have access to federally funded pregnancy-related services, except through emergency Medicaid. In FY2008, there were 364,161 unborn children enrolled in CHIP, nearly half of whom (176,822, 48.6%) were in California. CHIPRA added a new state option to cover pregnant women under CHIP through a state plan amendment. To implement this option, states must meet certain conditions (e.g., the Medicaid income standard for pregnant women must be at least 185% FPL but in no case lower than the percentage level in effect on July 1, 2008; no pre-existing conditions or waiting periods may be imposed; CHIP cost-sharing protections described below must apply). The upper income level for pregnant women may be as high as the standard applicable to CHIP children in the state. Other eligibility restrictions applicable to CHIP children (e.g., must be uninsured, ineligible for state employee health coverage) also apply. The period of coverage is during pregnancy through the postpartum period (through roughly 60 days after delivery). States are allowed to temporarily enroll pregnant women for up to two months until a formal determination of eligibility is made (referred to as presumptive eligibility). Benefits include all services available to CHIP children in the state as well as prenatal, delivery and postpartum care. Infants born to these pregnant women are deemed eligible for Medicaid or CHIP, as appropriate, and are covered up to age one year, at which point eligibility could be redetermined. States may continue to cover pregnant women through waivers and the unborn child regulation described above. For the latter case, CHIPRA clarified that states are allowed to offer postpartum services. Legal Immigrants Prior to CHIPRA, legal immigrants arriving in the United States after August 22, 1996, were ineligible for Medicaid or CHIP benefits for their first five years here. Coverage of such persons after the five-year bar was permitted at state option if they met other eligibility requirements for that program. For legal immigrants (but not refugees and asylees), the law requires that their sponsor's income and resources for those who have signed a legally binding affidavit of support would be taken into account in determining eligibility. Generally speaking, for federally means-tested programs (e.g., Medicaid, TANF), the affidavit of support required the sponsor to ensure that the new immigrant will not become a public charge and makes the sponsor financially responsible for the individual. CHIPRA permitted states to waive the five-year bar for Medicaid or CHIP coverage to pregnant women and children who are (1) lawfully residing in the United States and (2) are otherwise eligible for such coverage. The CHIP state plan option made available under this provision is available only to states that (1) elect this state plan option under Medicaid and (2) in the case of pregnant women coverage, elect the CHIP state plan option (described above) to provide assistance for pregnant women. For states that elect to extend such coverage, the provision assured that the cost of care will not be deemed under an affidavit of support against an individual's sponsor. In addition, as a part of states' redetermination processes (i.e., to redetermine eligibility at least every 12 months with respect to circumstances that may change and affect eligibility), individuals made eligible under this provision whose initial documentation showing legal residence is no longer valid will be required to show "further documentation or other evidence" that the individual continues to lawfully reside. Adult Coverage Under current law, Section 1115 of the Social Security Act gives the Secretary of Health and Human Services (HHS) broad authority to modify many aspects of the CHIP programs including expanding eligibility to populations who are not otherwise eligible for CHIP (e.g., childless adults, and parents of Medicaid and CHIP-eligible children). Certain states that have covered adults with CHIP funds were permitted to do so almost entirely through the use of these waivers. Adult coverage waivers, which initially are effective for five years, are subject to renewal at least every three years. Prior to 2007, waiver renewals for states with adult coverage waivers were approved, even for those states that were projected to face federal CHIP shortfalls (e.g., New Jersey, Rhode Island). Beginning in 2007, however, such waiver renewals have not been approved (e.g., Illinois, Oregon) or states have begun to transition adult populations out of CHIP coverage (e.g., Wisconsin, Minnesota). As of January 7, 2009, 4 states have CMS authority to use CHIP funds to extend coverage to certain childless adult populations, and 7 states have such authority to cover parent populations (see Table 1 ). CHIPRA terminates CHIP coverage of nonpregnant childless adults by the end of calendar year 2009. States with existing childless adult waivers that were in effect during FY2009 are permitted to apply for Medicaid waivers to continue coverage for these individuals subject to a specified budget neutrality standard, but in FY2010 childless adult spending under the waiver will be tied to the state's 2009 waiver spending on this population. CHIPRA requires budget neutrality standards for succeeding fiscal years to be tied to waiver spending in the preceding fiscal year. Under CHIPRA, coverage of parents is permitted for states with CHIP parent coverage waivers that were in effect during FY2009, but beginning in FY2012, allowable spending under the waivers will be subject to a set-aside amount from a separate allotment and will be matched at the state's regular Medicaid FMAP unless the state is able to prove it meets certain coverage benchmarks (related to performance in providing coverage to children). In FY2013, even states meeting the coverage benchmarks will not get the enhanced FMAP for parents but an amount between the regular and enhanced FMAPs. Finally, CHIPRA prohibits waiver spending under the set-aside for parents whose family income exceeds the income eligibility thresholds that were in effect under the existing waivers as of February 4, 2009. Enrollment and Access Outreach and Enrollment CHIPRA included provisions to facilitate access and enrollment in Medicaid and CHIP. Besides the bonus payments described below, CHIPRA authorizes $100 million in outreach and enrollment grants above and beyond the regular CHIP allotments for fiscal years 2009 through 2013. Ten percent of the allocation will be directed to a national enrollment campaign, and 10% will be targeted to outreach for Native American children. The remaining 80% will be distributed among state and local governments and to community-based organizations for purposes of conducting outreach campaigns with a particular focus on rural areas and underserved populations. Grant funds will also be targeted at proposals that address cultural and linguistic barriers to enrollment. Also as a part of the outreach-related provisions, CHIPRA requires the state plan to describe the procedures used to reduce the administrative barriers to the enrollment of children and pregnant women in Medicaid and CHIP, and to ensure that such procedures are revised as often as the state determines is appropriate to reduce newly identified barriers to enrollment. Express Lane Eligibility In terms of enrollment facilitation, CHIPRA creates a state option to rely on a finding from specified "Express Lane" agencies (e.g., those that administer programs such as Temporary Assistance for Needy Families, Medicaid, CHIP, and Food Stamps) to determine whether a child under age 19 (or an age specified by the state not to exceed 21 years of age) has met one or more of the eligibility requirements (e.g., income, assets, citizenship, or other criteria) necessary to determine an individual's initial eligibility, eligibility redetermination, or renewal of eligibility for medical assistance under Medicaid or CHIP. States will have the option to institute automatic enrollment through an Express Lane eligibility determination contingent on a family's consent. The provision gives states the option to rely on an applicant's reported income as shown by state income tax records or returns. Under CHIPRA, states are required to inform families that they may qualify for lower premium payments or more comprehensive health coverage under Medicaid if the family's income were directly evaluated by the state Medicaid agency. CHIPRA also drops the requirement for signatures on a Medicaid or CHIP application form under penalty of perjury. Citizenship Documentation The Deficit Reduction Act of 2005 (DRA) required citizens and nationals applying for Medicaid who claim to be citizens to provide both proof of citizenship and identity. Before DRA, states could accept self-declaration of citizenship for Medicaid, although some chose to require additional supporting evidence. CHIPRA provided a specific alternative, which allows a state to use the Social Security Number (SSN) provided by individuals and verified by the Social Security Administration (SSA), and provides an enhanced match for certain administrative costs. (SSNs by themselves do not denote citizenship, because certain noncitizens are eligible for them.) CHIPRA also adds a requirement for citizenship documentation in CHIP. Enrollment Table 1 shows every state's CHIP program type as well as upper-income eligibility and enrollment data by population group. The highest state-reported upper income eligibility limit for children in CHIP is 350% of the FPL, in New Jersey. Eleven states and the District of Columbia (plus four counties and certain children up to age two in California) have CHIP coverage above 250% FPL. An additional 11 states (including California) have income thresholds greater than 200% FPL but less than or equal to 250% FPL. Twenty-two states have upper income limits at 200% FPL. Six states set maximum income levels below 200% FPL. The latest official numbers show that CHIP enrollment reached nearly 7.4 million children in FY2008. Of this total, about 5.3 million were covered in separate state programs, and 2.1 million were targeted low-income children under Medicaid. One of the primary uses of waiver authority under CHIP has been to expand coverage for adult populations, which has proven controversial. (See above for further discussion of adult coverage under CHIP and changes to CHIP adult coverage made by CHIPRA.) Twelve states reported enrollment of about 335,000 adults in CHIP in FY2008 (see Table 1 ). Most of these adults (65%, or 216,000) were parents. Roughly 111,000 were childless adults, and the remainder (7,829) were pregnant women. The number of CHIP-enrolled adults in FY2008 is lower than in FY2006 (701,000) and in FY2007 (587,000). This was because several adult-coverage waivers were not renewed or were scaled back in the latter half of the administration of George W. Bush (see discussion above). In FY2008, Michigan, New Mexico, and Minnesota reported more adult CHIP enrollees than children. Benefits As noted above, when designing their CHIP programs, states may cover targeted low-income children under their Medicaid program, create a new separate CHIP program, or devise a combination of both approaches. States that use Medicaid-expansion CHIP programs must provide the full range of mandatory Medicaid benefits, as well as all optional services specified in their state Medicaid plans. As an alternative to providing all of the mandatory and selected optional benefits under traditional Medicaid, the Deficit Reduction Act of 2005 ( P.L. 109-171 ; DRA) gave states the option to enroll state-specified groups, including children in CHIP-financed Medicaid expansions, in new benchmark and benchmark-equivalent benefit plans. These plans are nearly identical to the benefit packages offered through separate CHIP programs (described below). For any child under age 21 in one of the major mandatory and optional Medicaid eligibility groups, including targeted low-income children, the benefits available through the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) Program must be provided, whether through a benchmark plan or otherwise (per CHIPRA). Under EPSDT, children receive well-child care, immunizations, and other screening services, as well as medical care necessary to correct or ameliorate identified defects, illnesses, or conditions, including optional services states may not otherwise cover in their Medicaid programs. States that choose to create separate CHIP programs may elect any of three benefit options: (1) a benchmark benefit package, (2) benchmark equivalent coverage, or (3) any other health benefits plan that the Secretary of Health and Human Services determines will provide appropriate coverage to the targeted population of uninsured children. A benchmark benefit package is one of the following three plans: (1) the standard Blue Cross/Blue Shield preferred provider option plan offered under the Federal Employees Health Benefits Program (FEHBP), (2) the health coverage that is offered and generally available to state employees in the state involved, and (3) the health coverage that is offered by a health maintenance organization (HMO) with the largest commercial (non-Medicaid) enrollment in the state involved. Benchmark-equivalent coverage is defined as a package of benefits that has the same actuarial value as one of the benchmark benefit packages. A state choosing to provide benchmark-equivalent coverage must cover each of the benefits in the "basic benefits category." The benefits in the basic benefits category are inpatient and outpatient hospital services, physicians' surgical and medical services, lab and x-ray services, and well-baby and well-child care, including age-appropriate immunizations. Benchmark-equivalent coverage must also include at least 75% of the actuarial value of coverage under the benchmark plan for each of the benefits in the "additional service category." These additional services include prescription drugs, vision services, and hearing services. States are encouraged to cover other categories of service not listed above. Abortions may not be covered, except in the case of a pregnancy resulting from rape or incest, or when an abortion is necessary to save the mother's life. All 50 states, the District of Columbia, and five territories have CHIP programs. The territories, the District of Columbia, and 6 states use Medicaid expansions; 18 states use separate state programs; and 26 states use a combination approach. Among other types of separate CHIP programs, data from 2005 indicate that most of the benchmark and benchmark-equivalent plans are based on a state employees' health plan, and most secretary-approved plans are modeled after Medicaid. Recent Changes to Mental Health and Dental Benefits CHIPRA made some changes to coverage of mental health and substance abuse services under CHIP. The new law ensures that, in the case of a state CHIP plan that provides both medical and surgical benefits and mental health or substance abuse disorder benefits, the predominant financial requirements (e.g., deductibles, copayments) and treatment limitations (e.g., number of visits, days of coverage) applicable to such mental health or substance abuse disorder benefits must be no more restrictive than the predominant financial requirements and treatment limitations applicable to substantially all medical and surgical benefits covered under the state CHIP plan. In addition, there can be no separate cost-sharing requirements or treatment limitations applicable only to mental health or substance abuse disorder benefits. State CHIP plans that include coverage of EPSDT services (as defined in Medicaid statute) are deemed to satisfy these mental health parity requirements. CHIPRA also made modifications to dental care under CHIP. Dental services are now a required benefit under separate CHIP programs and include services necessary to prevent disease and promote oral health, restore oral structures to health and function, and treat emergency conditions. (Dental benefits have always been required for CHIP Medicaid expansion children via EPSDT.) States have the option to provide dental services through "benchmark dental benefit packages" modeled after the benchmark plans for medical services described above (e.g., dental benefit plans under FEHBP, state employee programs and commercial HMO options). The new law also includes provisions for dental education for parents of newborns and dental services through federally qualified health centers. States must report detailed information in their annual reports and for EPSDT reporting purposes on, for example, the number of children by age group receiving various types of dental care. Information on dental providers and covered dental services will be available to the public via the federal Insure Kids Now website and hotline. GAO is to conduct a study on children's access to dental care under Medicaid and CHIP. The report on this study is to include recommendations for federal and state actions to address barriers to dental care, and the feasibility and appropriateness of using qualified mid-level providers to improve access. Prior to CHIPRA, CHIP funds could never be used to pay for any services of children enrolled in employer-sponsored coverage. (CHIPRA provided authority for premium assistance programs described in the next section.) CHIPRA provided a state option under separate CHIP programs, subject to certain conditions, to provide dental-only supplemental coverage to children enrolled in group or employer coverage who otherwise meet CHIP eligibility criteria. The provision allows states to provide dental coverage consistent with the new dental benchmark benefits plans or cost-sharing protections for dental coverage applicable under CHIP. States may set the upper income level for this new benefit up to the level otherwise applicable under their separate CHIP programs. States are not allowed to offer dental-only supplemental coverage unless (1) the state has implemented the highest income eligibility permitted in federal CHIP statute (or a waiver) as of January 1, 2009; (2) the state does not limit acceptance of applications for children or impose any enrollment caps, waiting lists, or similar eligibility limitations under CHIP; and (3) the state provides benefits to all children in the state who apply for and meet the eligibility standards. In addition, states may not provide more favorable dental coverage or related cost-sharing protections for children provided dental-only supplemental coverage than the dental coverage or related cost-sharing protections for CHIP children eligible for the full range of CHIP benefits. States would have the option to not apply an eligibility waiting period for children provided dental-only supplemental coverage. Premium Assistance Under prior law, states were permitted to pay a beneficiary's share of costs for group (employer based) health insurance in CHIP if the employer plan was cost effective relative to the amount paid to cover only the targeted low-income children, and did not substitute for coverage under group health plans otherwise being provided to the children. In addition, states using CHIP funds for employer-based plan premiums were required to ensure that CHIP minimum benefits were provided, CHIP cost-sharing ceilings were met, and the children to be enrolled have not had group coverage for a specified period of time (typically four to six months). Under Medicaid, including a Medicaid expansion CHIP program, states may implement a premium assistance program if the employer plan is comprehensive and cost-effective for the state. Under Medicaid, an individual's enrollment in an employer plan is considered cost-effective if paying the premiums, deductible, coinsurance and other cost-sharing obligations of the employer plan is less expensive than the state's expected cost of directly providing Medicaid-covered services. To meet the comprehensiveness test under Medicaid, states are required to provide coverage for those Medicaid-covered services that are not included in the private plans. In other words, they must provide "wrap-around" benefit coverage. It has proved prohibitive for many employer plans and states to meet all of these requirements. To circumvent these restrictions, most states operating CHIP or Medicaid premium assistance programs do so under waivers. CHIPRA created a new state plan option for providing premium assistance and required states to include a description of the procedures to provide outreach, education, and enrollment assistance for families of children likely to be eligible for premium assistance subsidies under CHIP. States have the option to offer premium assistance for Medicaid and CHIP-eligible children and/or parents of Medicaid and/or CHIP-eligible children where the family has access to employer-sponsored insurance (ESI) coverage, if the employer pays at least 40% of the total premium, the employer's group health plan qualifies as "creditable coverage" (as defined by the Public Health Service Act), and the coverage is offered to all individuals in a nondiscriminatory way (as defined by the Internal Revenue Code of 1986). Under CHIPRA, a state offering premium assistance may not require CHIP eligible individuals to enroll in an employer's plan; individuals eligible for CHIP and for employment-based coverage may choose to enroll in regular CHIP rather than the premium assistance program. The premium assistance subsidy will generally be the difference between the worker's out-of-pocket premium that included the child(ren) versus only covering the employee. For employer plans that do not meet CHIP benefit requirements, a wrap-around is required. For the child's coverage using premium assistance, no cost-effectiveness test is required regarding the cost of the private coverage (plus any necessary wrap-around) relative to regular CHIP coverage. CHIPRA establishes a separate test for family coverage. If the CHIP cost of covering the entire family in the employer-sponsored plan is less than regular CHIP coverage for the eligible individual(s) alone, then the premium assistance subsidy may be used to pay the entire family's share of the premium. In states that offered premium assistance, CHIPRA requires states and participating employers to do outreach. Under CHIPRA, states are permitted to establish an employer-family premium assistance purchasing pool for employers with less than 250 employees who have at least one employee who is a CHIP-eligible pregnant woman or at least one member of the family is a CHIP-eligible child. The law stipulates that the new premium assistance provisions under Medicaid, not CHIP, will apply to children enrolled in a Medicaid-expansion CHIP program. Finally, CHIPRA amends applicable Federal laws to streamline coordination between public and private coverage, including making the loss of Medicaid/CHIP eligibility a "qualifying event" for the purpose of purchasing employer-sponsored coverage. The provision also requires health plan administrators to disclose to the state, upon request, information about their benefit packages so states can evaluate the need to provide wraparound coverage. Cost-Sharing Cost-sharing refers to the out-of-pocket payments made by beneficiaries of a health insurance plan. Cost-sharing may include monthly premiums, enrollment fees, deductibles, copayments, coinsurance and other similar charges. Federal law permits states to impose cost-sharing for some beneficiaries and some services under CHIP. States that cover targeted low-income children under Medicaid must follow the nominal cost-sharing rules of the Medicaid program. Under these rules, the majority of such children are exempt. Children who are 18 years of age and enrolled in Medicaid expansions under CHIP may be subject to service-related cost-sharing (e.g., copayments) at state option. DRA provided states with a new option for premiums and service-related cost-sharing that may be applied to targeted low-income children under CHIP Medicaid-expansion programs. For children in families with income under 100% FPL, no premiums are allowed and service-related cost-sharing is limited to nominal amounts. For children in families with income between 100%-150% FPL, no premiums may be imposed; however, service-related cost-sharing may be applied up to 10% of the cost of the item or service rendered. For children in families with income above 150% FPL, premiums are allowed (no limit is specified), and service-related cost-sharing may be applied up to 20% of the cost of the item or service rendered. For all individuals, the total aggregate amount of all cost-sharing cannot exceed 5% of family income (on a quarterly or monthly basis as specified by the state). Preventive services for children are exempt from DRA cost-sharing. The nominal Medicaid cost-sharing amounts in regulation will be indexed by medical care inflation. Special rules apply to cost-sharing for prescription drugs, and for emergency room copayments for non-emergency care. DRA also allows states to condition continuing Medicaid eligibility on the payment of premiums. Providers may also be allowed to deny care for failure to pay service-related cost-sharing. If a state implements CHIP through a separate state program, premiums or enrollment fees for program participation may be imposed, but the maximum allowable amount is dependent on family income. For all families with incomes under 150% FPL and enrolled in separate state programs, premiums may not exceed the amounts set forth in federal Medicaid regulations. Additionally, these families may be charged service-related cost-sharing, but such cost-sharing is limited to (1) nominal amounts defined in federal Medicaid regulations for the subgroup with income below 100% FPL, and (2) slightly higher amounts defined in CHIP regulations for families with income between 100%-150% FPL. For a family with income above 150% FPL, cost-sharing may be imposed in any amount, provided that cost-sharing for higher-income children is not less than cost-sharing for lower-income children and subject to the out-of-pocket limit of 5% of family income. In addition, states are required to inform families of these limits and provide a mechanism for families to stop paying once the cost-sharing limits have been reached. Preventive services are exempt from cost-sharing for all CHIP families regardless of income. The Centers for Medicare and Medicaid Services (CMS) defines such preventive services to include, at a minimum, the following: all healthy newborn physician visits, including routine screening (inpatient and outpatient); routine physical examinations; laboratory tests associated with such routine physical examinations; immunizations and related office visits; and routine preventive and diagnostic dental services (for example, oral examinations, prophylaxis and topical fluoride applications, sealants, and x-rays). New Data Collection and Reporting Requirements Under CHIP CHIPRA 2009 contained several provisions to expand and improve data collection and reporting by both the states and the federal government with respect to CHIP and, for some initiatives, also for Medicaid. For example, the new law directs the Secretary of HHS to develop child health quality measures, a standardized format for reporting such information, and procedures to encourage states to voluntarily report on the quality of pediatric care under both CHIP and Medicaid. In addition, several reporting requirements were added to states' annual CHIP reports including, for example, data on eligibility criteria, access to primary and specialty care, and data on premium assistance for employer-sponsored coverage. GAO is to conduct a study of children's access to primary and specialty care under Medicaid and CHIP. CHIPRA also established a new federal commission, called the Medicaid and CHIP Payment and Access Commission, or MACPAC. This commission will review policies under both programs affecting children's access to benefits including, for example, payment policies and their impact on access and quality of care. Regular, on-going reports to Congress are to detail these findings and are to include recommendations for improving access and quality of care for children under Medicaid and CHIP. CHIPRA also required the Secretary of HHS to conduct a new, independent federal evaluation of 10 states with approved CHIP plans that meet certain criteria (e.g., represent different geographic regions, utilize diverse approaches to CHIP coverage, and have significant portions of uninsured children). This evaluation will be modeled after the first such federal evaluation undertaken in the early 2000s. As with the first federal evaluation, the new evaluation will examine, for example, effectiveness of outreach and enrollment strategies, the effects of cost-sharing on utilization, and factors related to disenrollment and retention of children. Financing and Expenditures Federal financing of CHIP includes three major components: (1) total federal appropriations for states' annual CHIP allotments of federal funds among the states and territories, (2) reallocation of unspent federal funds and appropriations for eliminating states' shortfalls, and (3) other factors affecting federal financing including the federal matching rate and caps on administrative expenses. Federal Appropriations and Allotments Among the States and Territories BBA 97 appropriated a total of approximately $40 billion for CHIP allotments for FY1998 to FY2007. The funding level by fiscal year varied across time. The total annual appropriation for each of FY1998-FY2001 was a little more than $4.2 billion. This annual total dropped to under $3.2 billion in FY2002-FY2004. Then the appropriation rose to about $4.1 billion for FY2005 and FY2006, with a further increase to roughly $5.0 billion in FY2007. The drop in funding for FY2002-FY2004, sometimes referred to as the "CHIP dip," was written into CHIP's authorizing legislation due to budgetary constraints applicable at the time the legislation was drafted. The 110 th Congress passed two bills to "reauthorize" CHIP—providing CHIP funding for FY2008 through FY2012 and making other changes to both CHIP and Medicaid. Both H.R. 976 and H.R. 3963 were vetoed by President George W. Bush, with the Congress unable to override these vetoes. In lieu of reauthorization, the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173 ) appropriated funds to provide CHIP allotments for FY2008 and FY2009, but only to be available through March 31, 2009. Because shortfalls of federal CHIP funds were still projected to occur in certain states, additional funds besides the allotments were also appropriated, as discussed in the next section. CHIPRA provided a national appropriation for CHIP allotments totaling $68.9 billion from FY2009 to FY2013. The national appropriation available for CHIP allotments under CHIPRA are $10.562 billion in FY2009; $12.52 billion in FY2010; $13.459 billion in FY2011; $14.982 billion in FY2012; and $17.406 billion in FY2013. The allotment of the annual federal CHIP appropriation among the states is determined by a formula set in law. Prior to CHIPRA, of the national appropriation ($5 billion for each of FY2007, FY2008 and FY2009, for example), the territories received 0.25%. The remainder ($4.9875 billion for each of FY2007, FY2008 and FY2009) was divided, or allotted, among the states based on a formula using survey estimates of the number of low-income children in the state and the number of those children who were uninsured. These amounts were adjusted by a geographic adjustment factor and were limited by various floors and ceilings to ensure that a state's allotment did not vary substantially from certain past allotments. Rather than dividing a fixed national appropriation on the basis of state survey estimates, a state's allotment is now calculated as described below and if the total of all the states' and territories' allotments does not exceed the national appropriation, that will be the state's allotment. CHIP allotments are basically separate, sequential funding accounts. For each state and territory, the account for a given fiscal year is made available at the beginning of that year and remains available for a certain period of time. Prior to CHIPRA, allotments were available for three years. However, the CHIP allotments for FY2009 and after will only be available for two years. Typically, CHIP payments are taken out of the earliest active account. Once that fiscal year allotment is fully expended, the state can begin drawing from the next available allotment. FY2009 Allotment FY2009 federal CHIP allotments for states are the largest of three state-specific amounts: the state's FY2008 federal CHIP spending, multiplied by a growth factor; the state's FY2008 federal CHIP allotment, multiplied by a growth factor; and the state's own projections of federal CHIP spending for FY2009, submitted by states to the Secretary of Health and Human Services (HHS) as of February 2009. The largest of these three amounts will be increased by 10% and will serve as the state's FY2009 federal CHIP allotment, as long as the national appropriation is adequate to cover all the states' and territories' FY2009 allotments. If not, allotments will be reduced proportionally. FY2010 Allotment For FY2010, the allotment for a state (or territory) will be calculated as the sum of the following four amounts, if applicable, multiplied by the applicable growth factor for the year: the FY2009 CHIP allotment; FY2006 unspent allotments redistributed to and spent by shortfall states in FY2009; spending of funds provided to shortfall states in the first half of FY2009; and spending of Contingency Fund payments (discussed below) in FY2009, although there may be none. FY2011 and FY2013 Allotments For FY2011 and FY2013, the allotment for a state (or territory) will be "rebased," based on prior year spending. This will be done by multiplying the state's growth factor for the year by the new base, which will be the prior year's federal CHIP spending. FY2012 Allotment For FY2012, the allotment for a state (or territory) will be calculated as the FY2011 allotment and any FY2011 Contingency Fund spending, multiplied by the state's growth factor for the year. Redistribution of Unspent Federal Funds and Appropriations to Address Shortfalls At the end of the applicable period of availability, unspent allotments are redistributed to other states. The rules vary by fiscal year. BBA 97 stipulated that only states that exhausted the relevant allotment within three years were eligible to receive unspent funds from other states. However, the Secretary determined how the funds would be redistributed to states that qualified. For FY2006, the amount available for redistribution was inadequate for covering projected federal CHIP shortfalls in 12 states. In DRA, Congress appropriated an additional $283 million to cover the projected shortfalls. Two states (Illinois and Massachusetts) ultimately had higher FY2006 CHIP spending than anticipated, so they experienced shortfalls totaling approximately $100 million, almost all of that from Illinois. In FY2007, $147 million in unspent FY2004 original allotments was available for redistribution. In the closing hours of the 109 th Congress, a bill was passed to specify how those funds would be redistributed. The National Institutes of Health (NIH) Reform Act of 2006 ( H.R. 6164 , P.L. 109-482 , NIHRA) required that the funds go to states "in the order in which such [shortfall] States realize monthly funding shortfalls ... for fiscal year 2007." The purpose was to delay any state facing a shortfall as far into the year as possible with the available funds. CRS projections indicated that this particular provision would delay shortfalls until the end of March 2007. To delay shortfalls even further, the CHIP provisions of NIHRA called for an initial redistribution of up to half of unspent FY2005 original allotments as of March 31, 2007 (capped at $20 million per state)—after 2½ years of availability. For a state to forgo unspent FY2005 funds on that date, NIHRA required not only that the state have unspent FY2005 balances but that the state's total CHIP balances (from the FY2005-FY2007 original allotments) as of March 31, 2007, were at least double what the state projected to spend in federal CHIP funds in FY2007. This was projected to provide an additional $138 million for shortfall states, delaying any state facing a shortfall of federal CHIP funds until May 2007. The shortfalls remaining for the rest of the fiscal year were projected at just over $600 million in 12 states. On May 25, 2007, P.L. 110-28 (the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007; UTRA) was enacted. In it, Congress appropriated up to $650 million to cover shortfalls of federal CHIP funds in 10 states for the remainder of FY2007. Table 2 shows cumulative federal CHIP financing from the BBA 97 era of CHIP—from1998 through FY2007. For FY2008, MMSEA required that unspent FY2005 allotments be redistributed to shortfall states on a monthly basis in the order in which these states experience shortfalls. In addition to this redistribution, MMSEA appropriated up to $1.6 billion for states' remaining shortfalls in FY2008. Actual shortfall funding provided in FY2008 totaled just under $1 billion, as shown in Column E of Table 3 . For FY2009, MMSEA also required that unspent FY2006 allotments be redistributed to states projected to face shortfalls in FY2009 before March 31, 2009, on a monthly basis in the order in which these states experience shortfalls. In addition to this redistribution, MMSEA appropriated up to $275 million for states' remaining shortfalls through March 31, 2009. The increased FY2009 allotments provided by CHIPRA should prevent any federal CHIP funding shortfalls for the second half of FY2009. Under CHIPRA, any unspent funds available for redistribution would first be provided to shortfall states and then, if any redistribution funds still remain, toward bonus payments, which are discussed in the next section. The creation of a Child Enrollment Contingency Fund was an additional CHIPRA measure to prevent states from experiencing shortfalls of federal CHIP funds. This fund receives an appropriation separate from the national CHIP allotment amounts. Direct payments from the Contingency Fund can be made to shortfall states for the federal share of expenditures for CHIP children above a target enrollment level. Payments from the Contingency Fund cannot exceed 20% of that year's national allotment amount and are to be reduced proportionally if necessary. Other Factors Affecting Federal Financing Like Medicaid, CHIP is a federal-state matching program. For each dollar of state spending, the federal government makes a matching payment drawn from CHIP accounts. A state's share of program spending for Medicaid is equal to 100% minus the federal medical assistance percentage (FMAP). The enhanced FMAP (E-FMAP) for CHIP means a state's share of expenditures is 30% lower than under the regular FMAP. One new exception is that the temporary Medicaid FMAP increases specified in the American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1 , P.L. 111-5 ) are not considered in calculating the E-FMAP. Compared with the Medicaid FMAP, which ranged from 50% to 75.84% in FY2009 prior to ARRA, the enhanced FMAP for CHIP ranges from 65% to 83.09%. All CHIP assistance for targeted low-income children, including coverage provided under Medicaid, is eligible for the enhanced FMAP. The Medicaid FMAP and the enhanced CHIP FMAP are subject to a ceiling of 83% and 85%, respectively, and a floor of 50% and 65%. There is a limit on federal spending for CHIP administrative expenses, which include activities such as data collection and reporting, outreach and education, and other activities. For federal matching purposes, a 10% cap applies to state non-benefit expenses. This cap is tied to the dollar amount that a state draws down from its annual allotment to cover benefits and these non-benefit costs under CHIP, as opposed to 10% of a state's total annual allotment. In other words, no more than 10% of the federal funds that a state draws down for CHIP benefit and non-benefit expenditures combined can be used for non-benefit costs including administrative expenses. Under CHIPRA, federal CHIP bonus payments are available to states that (1) increase Medicaid (not CHIP) child enrollment by certain amounts, and (2) implement five out of eight specific outreach and enrollment activities. The source of funding for these payments would be an initial $3.225 billion appropriation in FY2009 as well as unspent national allotment and redistribution amounts.

The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33) established the State Children's Health Insurance Program (CHIP) under a new Title XXI of the Social Security Act and provided annual appropriations for CHIP through FY2007. The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA, H.R. 2, P.L. 111-3), which was signed into law on February 4, 2009, provided CHIP appropriations through FY2013 and made other changes. In general, CHIP allows states to cover targeted low-income children with no health insurance in families with income above Medicaid eligibility levels. States may also extend CHIP coverage to pregnant women when certain conditions are met. The highest state-reported upper income eligibility limit for children in CHIP is 350% of the federal poverty level, in New Jersey. Under CHIP, states may enroll targeted low-income children in a CHIP-financed expansion of Medicaid, create a new separate state CHIP program, or devise a combination of both approaches. States choosing the Medicaid option must provide all Medicaid mandatory benefits and all optional services covered under the state plan. In addition, they must follow the nominal Medicaid cost-sharing rules or apply the new state plan option for premiums and service-related cost-sharing as allowed under the Deficit Reduction Act of 2005 (DRA). In general, separate state programs must follow certain coverage and benefit options outlined in CHIP law. While some cost-sharing provisions vary by family income, the total annual aggregate cost-sharing (including premiums, copayments, and other similar charges) for a family may not exceed 5% of total income in a year. Preventive services are exempt from cost-sharing. All states, the District of Columbia, and the five territories have CHIP programs. The territories, the District of Columbia, and six states use Medicaid expansions; 18 states use separate state programs; and 26 states use a combination approach. At the national level, nearly 7.4 million children were enrolled in CHIP during FY2008. In addition, 12 states reported enrolling about 335,000 adults in CHIP through program waivers in FY2008.

Introduction Lawmakers and the public have expressed increasing concern over the solvency of the Disability Insurance (DI) trust fund, from which Social Security Disability Insurance (SSDI) benefits are paid. Until recently, the DI trust fund was projected to be depleted in the fourth quarter of calendar year 2016, at which time ongoing revenues to the DI trust fund were projected to be sufficient to pay only about 80% of scheduled benefits. In November 2015, the Bipartisan Budget Act of 2015 ( H.R. 1314 ; P.L. 114-74 ) extended the projected solvency of the DI trust fund by authorizing a reallocation of the Social Security payroll tax rate between the DI and the Old-Age and Survivors Insurance (OASI) trust funds to provide DI with a larger share. Although the reallocation averted a potential benefit cut in late 2016, without additional legislation action (i.e., revenue increases, cost reductions, or some combination thereof), the DI trust fund is projected to be unable to pay scheduled benefits in full and on a timely basis by the early 2020s. This report provides an overview of the DI trust fund and its current financial outlook. It begins with background information on the SSDI program and the financing of the Social Security trust funds. Next, the report examines the financial status of the DI trust fund over the past 20 years and the causes of the DI trust fund's financial imbalance. It then discusses the projected status of the DI trust fund under prior law and under the Bipartisan Budget Act of 2015. Lastly, the report provides background information on the use of reallocations by Congress in the past, as well as on a House rules change in the 114 th Congress concerning payroll tax reallocations. The appendix of the report provides a congressional rationale for the creation of a separate DI trust fund as part of the Social Security Amendments of 1956 (P.L. 84-880). Background on SSDI Enacted in 1956 under Title II of the Social Security Act, SSDI is part of the Old-Age, Survivors, and Disability Insurance (OASDI) program, more commonly known as Social Security. As in OASI—the retirement component of Social Security—SSDI is a form of social insurance that replaces a portion of a worker's income based on the individual's work history and career-average earnings in covered employment. Specifically, SSDI provides benefits to nonelderly insured workers who meet the statutory definition of disability and to their eligible dependents. In November 2015, the Social Security Administration (SSA) paid benefits to more than 10.8 million SSDI recipients, including 8.9 million disabled workers, 142,000 spouses of disabled workers, and 1.8 million children of disabled workers. Eligibility To qualify for SSDI, workers must be (1) under the full retirement age (FRA), (2) insured in the event of disability, and (3) statutorily disabled. The FRA is the age at which unreduced Social Security retirement benefits are first payable, which is currently 66. To achieve insured status, individuals must have worked in covered employment for about a quarter of their adult lives before they became disabled and for at least 5 years of the 10 years immediately before the onset of disability. However, younger workers may qualify with less work experience based on their age. In 2014, SSDI provided disability insurance coverage to more than 151 million nonelderly workers. To meet the statutory definition of disability, an insured worker must be unable to engage in any substantial gainful activity (SGA) by reason of any medically determinable physical or mental impairment that is expected to last for at least one year or result in death. In 2016, the SGA earnings limit is $1,130 per month for most workers and $1,820 per month for statutorily blind workers. Disability determinations are based on a five-step sequential evaluation process that takes into account a worker's medical records, age, education, and work experience. In general, workers must have a severe impairment (or combination of impairments) that prevents them from performing any kind of substantial work that exists in the national economy in significant numbers. Benefits Cash benefits begin five full months after a beneficiary's disability onset date. Initial benefits are based on a worker's career-average earnings, indexed to reflect changes in national wage levels. Benefits are subsequently adjusted to account for inflation through cost-of-living adjustments (COLAs), as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Monthly benefits payable to the worker and family members are subject to a maximum family benefit amount. Benefits may be offset if the disabled worker also receives workers' compensation or certain other public disability benefits. In November 2015, the average monthly benefit was $1,166 for disabled workers, $318 for spouses of disabled workers, and $350 for children of disabled workers. In addition to cash benefits, disabled workers and certain dependents are eligible for health care coverage under Medicare after 24 months of entitlement to cash benefits (typically 29 months after the onset of disability). In 2012, Medicare spending per disabled beneficiary averaged about $9,900. Generally, disabled workers retain their benefits as long as they (1) are under the FRA, (2) exhibit no substantial medical improvement, and (3) have average monthly earnings at or below the SGA limit. The Social Security Trust Funds Although Social Security is often viewed as a single program, its financing comes from two legally distinct sources known as trust funds. A trust fund is an accounting mechanism that "records the revenues, offsetting receipts, or offsetting collections earmarked for the purpose of the fund, as well as budget authority and outlays of the fund that are financed by those revenues or receipts." The Federal Disability Insurance Trust Fund finances the benefits of disabled workers and their dependents, and the Federal Old-Age and Survivors Insurance Trust Fund pays for the benefits of retired workers and their dependents as well as survivors of deceased workers. Administrative costs are also drawn from the trust funds. Each trust fund is a separate account in the U.S. Treasury, and under current law, the two trust funds may not borrow from one another. The OASI trust fund was created under the Social Security Amendments of 1939 (P.L. 76-379), and superseded the Old-Age Reserve Account established under the original Social Security Act in 1935 (P.L.74-271). The DI trust fund was established as part of the Social Security Amendments of 1956 (P.L. 84-880)—the same legislation that created SSDI. The creation of a separate DI trust fund appears to have been a compromise to address concerns of some lawmakers at the time about SSDI's potential cost and potential negative impact on the OASI trust fund and its beneficiaries. For more information on the congressional rationale for the creation of a separate DI trust fund, see Appendix A . Financing SSDI and OASI are financed primarily by dedicated payroll and self-employment taxes levied on the earnings of covered workers under the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act (SECA). FICA taxes are split evenly between employees and employers, whereas SECA taxes are borne fully by self-employed individuals. As shown in Table 1 , the Social Security FICA tax rate for employees and employers, each is 6.200%, with 1.185% allocated to the DI trust fund and 5.015% to the OASI trust fund. On a combined basis , the FICA tax rate is 12.400%, with 2.370% allocated to the DI trust fund and 10.030% to the OASI trust fund. The Social Security SECA tax rate is the same as the combined FICA tax rate. Social Security taxes are levied on covered earnings up to a maximum annual amount, which is $118,500 in 2016. The FICA rates for employees and employers are prescribed in Sections 3101 and 3111 of the Internal Revenue Code (IRC), respectively; the SECA rate is specified in Section 1401 of the IRC. The allocation of the tax rates between the OASI and DI trust funds, however, is set in Section 201(b) of the Social Security Act. Section 201(b) specifies the combined share of the Social Security tax rate allocated to the DI trust fund for both wages (FICA) and self-employment income (SECA), which, as noted above, is 2.370% (1.185% for employees and employers, each). Section 201(a) states that the combined allocation to the OASI trust fund for both wages and self-employment income is the combined Social Security payroll tax rate set in the IRC less the combined share prescribed in Section 201(b). Therefore, the combined allocation to the OASI trust fund is 12.400% minus 2.370%, which equals 10.030% (5.015% for employees and employers, each). In addition to payroll taxes, the OASI and DI trust funds are credited with income from the taxation of some Social Security benefits. The share of Social Security benefits that is taxable depends on whether the individual's provisional income exceeds certain thresholds. Provisional income equals adjusted gross income plus otherwise tax-exempt interest income (i.e., interest from tax-exempt bonds), plus 50% of Social Security benefits. Income derived from the taxation of up to the first 50% of Social Security benefits is credited to the OASI and DI trust funds based on the source of the benefits taxed. In other words, up to a certain rate, taxes paid on OASI benefits are deposited in the OASI trust fund and taxes paid on SSDI benefits are deposited in the DI trust fund. Occasionally, the two trust funds receive reimbursements from the General Fund of the U.S. Treasury for various costs imposed on the Social Security program. For example, the OASI and DI trust funds received reimbursements from the General Fund to compensate for the loss of revenues from a temporary payroll tax reduction in 2011 and 2012. The final source of income to the trust funds is from the interest earned on investments held by the trust funds. When income exceeds cost in a given year, the surplus is credited to the trust funds in the form of special-issue (non-marketable) securities, which are backed by the full faith and credit of the U.S. government. These securities earn interest, which the Department of the Treasury credits to the trust funds semiannually in the form of additional government securities. The accumulated securities held by a trust fund represent its balance. A trust fund can use its balance, or asset reserves , to pay benefits whenever total program cost exceeds income. Financial Status of the DI Trust Fund The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds presents an annual report to Congress on the current and projected financial status of the Social Security trust funds. The board is composed of six members: the Secretary of the Treasury, who is the Managing Trustee; the Secretary of Labor; the Secretary of Health and Human Services; the Commissioner of Social Security; and two public representatives, who are nominated by the President for a term of four years and subject to confirmation by the Senate. The Board of Trustees (hereinafter "trustees") specifies the assumptions about future demographic and economic trends used in the projections; however, SSA's Office of the Chief Actuary advises the trustees on the assumptions as well as develops and runs the computer models that produce the forecasts. The trustees' latest report was released on July 22, 2015, and is available at http://www.ssa.gov/oact/tr/2015/index.html . DI Financial Operations in 2014 Table 2 shows the income, cost, and asset reserves of the DI trust fund in 2014. Of the $114.9 billion in total income credited to the DI trust fund, $109.7 billion (about 95%) came from net payroll tax contributions. The interest earned on the investments held by the DI trust fund amounted to $3.4 billion or 3% of total income. Income from the taxation of SSDI benefits and reimbursements from the General Fund totaled $1.8 billion or 2% of total trust fund income. Total cost for the year was $145.1 billion. About 98% of the DI trust fund's cost stemmed from benefit payments totaling $141.7 billion. Disbursements from the DI trust fund for administrative expenses and the financial interchange with the Railroad Retirement Board (RRB) amounted to $3.3 billion or 2% of total cost. According to the trustees, "the Railroad Retirement Act requires an annual financial interchange between the Railroad Retirement program and the OASDI program. The purpose of the interchange is to put the OASI and DI trust funds in the same financial position they would have been in had railroad employment always been covered directly by Social Security." To make up for the shortfall between total income and cost in 2014, the DI trust fund redeemed a net total of $30.2 billion in government bonds. Consequently, the asset reserves held by the DI trust fund decreased from $90.4 billion at the end of 2013 to $60.2 billion at the end of 2014. Recent Experience of the DI Trust Fund Between 1995 and 2004, non-interest income to the DI trust fund exceeded total cost, generating annual surpluses and increasing the fund's balance ( Figure 2 ). Non-interest income includes net payroll tax contributions, revenues from the taxation of SSDI benefits, and General Fund reimbursements. In 2005, total cost started to exceed non-interest income; however, because total income —tax revenues plus net interest on asset reserves—was greater than total cost, the balance of the DI trust fund continued to grow. In 2009, total cost began to exceed total income, requiring the DI trust fund to use some of its asset reserves to cover benefit payments ( Table 3 ). As a result, the balance of the DI trust fund has been declining. At the end of November 2015, the amount of asset reserves held by the DI trust fund was $35.2 billion. Causes of the DI Trust Fund's Financial Imbalance The declining solvency of the DI trust fund is the result of an increasing imbalance between its income and cost. Figure 3 shows income and cost to the DI trust fund expressed as a percentage of taxable payroll. Taxable payroll is the total amount of earnings in the economy that is subject to Social Security taxes (with some adjustments). The ratio of non-interest income to taxable payroll for the year is known as the annual income rate ; the ratio of cost to taxable payroll for the year is known as the annual cost rate . Over the past 20 years, the annual DI income rate has remained relatively flat at about 1.81% of taxable payroll, which is roughly the combined share of the tax rate allocated to the DI trust fund for that period plus a small amount of other income. At the same time, the annual DI cost rate has grown markedly, from 1.44% in 1995 to 2.36% in 2014. The increase in the annual DI cost rate stems largely from the growth in the number of beneficiaries on SSDI. Between 1995 and 2014, the total number of disabled workers and their dependents in receipt of SSDI increased 85%, from 5.9 million to 10.9 million. Because benefit payments account for nearly all spending, the increase in the number of SSDI beneficiaries drove the annual DI cost rate upward. The rise in disability rolls can be attributed to a number of factors. First, the overall growth in the working-age population increased the number of workers insured for disability. Between 1995 and 2014, the insured-worker population increased 19%, from 127 million to 151 million. Second, demographic changes in the composition of the insured-worker population contributed to the increase in the number of beneficiaries on SSDI. Most importantly, the aging of the baby-boomer generation increased the number of older workers, who are more likely to become disabled than are younger workers. In addition, growth in the labor force participation rate of women in the latter half of the 20 th century led to more women being insured for disability. As the size of the female insured-worker population increased, the enrollment rate of women into the SSDI program grew to near parity with men. Third, changes in opportunities for work and compensation induced more individuals to apply for SSDI. For example, according to SSA's chief actuary, economic downturns are associated with a temporary increase in the enrollment rate of insured workers into the program. During the last recession, the number of SSDI awards per 1,000 insured workers increased 25%, from 5.6 in 2007 to 7.0 in 2010. In addition, the value of benefits has made applying for SSDI more desirable than work for some low-wage workers, because such individuals have experienced slower real earnings growth over the past three decades compared with medium- and high-wage workers. Fourth, various amendments to the Social Security program played a role in increasing the number of people on SSDI. For example, the Social Security Amendments of 1983 ( P.L. 98-21 ) raised the full retirement age (FRA) for Social Security retirement benefits, thereby increasing both the number of insured workers in their older and more disability-prone years and the duration of benefit receipt for older SSDI beneficiaries close to the FRA. The increase in the FRA also raised the value of disability benefits relative to early retirement benefits, which likely impelled more individuals between the ages of 62 and FRA to apply for SSDI. Furthermore, the Social Security Disability Benefits Reform Act of 1984 ( P.L. 98-460 ), which changed the evaluative criteria used in making disability determinations, contributed to the growth in the number of SSDI beneficiaries with mental and musculoskeletal disorders. Because such disorders are less likely to result in death compared with other qualifying impairments, the growth in the share of beneficiaries with mental and musculoskeletal disorders likely increased the average duration of benefit receipt and thus SSDI caseloads. Although most researchers agree that changes in the demographic characteristics of the working-age population account for a large share of the growth in the number of beneficiaries on SSDI, there is considerable disagreement among researchers over how more "difficult to quantify factors"—such as changes in opportunities for work and compensation or changes to federal policy—have contributed to the growth in the program. The trustees project that the share of the insured population in receipt of SSDI will stabilize in the future, because some of the principal drivers of past growth—namely, the aging of the insured population and the increase in female enrollment rates—have come to pass and are not likely to occur again. The 2015 Technical Panel on Assumptions and Methods—a panel of expert actuaries, economists, and demographers convened by the Social Security Advisory Board (SSAB) to review the assumptions and methods used by the trustees—recently concurred with this assessment. Projected Status of the DI Trust Fund This section examines the financial outlook of the DI trust fund under prior law and under the Bipartisan Budget Act of 2015 ( H.R. 1314 ; P.L. 114-74 ). Specifically, it discusses the projected depletion year of the DI trust fund, that is, the year in which the balance of the trust fund falls to zero. When a trust fund is depleted , it no longer has any asset reserves; however, it continues to receive income from payroll taxes and the taxation of benefits. The Social Security Act provides no guidance on the payment of benefits once a trust fund's asset reserves have been depleted and current tax revenues are insufficient to meet current cost. Although individuals who meet Social Security's eligibility requirements are legally entitled to disability benefits, a provision in the Antideficiency Act prohibits a federal agency from spending in excess of available funds. Because the Social Security Act stipulates that SSDI benefit payments shall be made only from the DI trust fund, without a change in the law, monthly cash payments to beneficiaries could be delayed or reduced if the DI trust fund were depleted. Under Prior Law The trustees estimate the future financial condition of the OASI and DI trust funds individually as well as on a theoretical combined basis (i.e., as if the two trust funds were a single fund). In their 2015 report, which was released prior to the enactment of the Bipartisan Budget Act of 2015, the trustees projected that the DI trust fund would be depleted in the fourth quarter of calendar year 2016. The trustees also projected that the OASI trust fund would be depleted in 2035 and the theoretical combined OASDI trust funds would be depleted in 2034. Figure 4 shows the actual and projected trust fund ratios of the OASI, DI, and combined OASDI trust funds under prior law. A trust fund ratio is a measure of a trust fund's asset reserves at the beginning of a year expressed as a percentage of total cost for the year. In its June 2015 long-term budget outlook, the Congressional Budget Office (CBO) estimated that the balance of the DI trust fund would be depleted sometime in FY2017. CBO projected that the OASI trust fund would be depleted in calendar year 2031 and the theoretical combined OASDI trust funds would be depleted in calendar year 2029. The Social Security trustees and CBO sometimes project different depletion dates because the two organizations base their forecasts on different demographic and economic assumptions. Upon depletion of its asset reserves in late 2016, the trustees projected that continuing tax revenues to the DI trust fund would have been sufficient to pay 81% of SSDI benefits. That percentage was projected to rise to about 90% in the 2030s and then decline, returning to 81% in 2089 ( Figure 5 ). A recent SSA study examined the characteristics of disabled-worker beneficiaries in 2013. After accounting for SSDI benefits, the study's authors estimated that 18.5% of disabled workers had family income below the poverty threshold. However, if only 81% of benefits had been payable that year, the authors estimated that the poverty rate for disabled-worker beneficiaries would have been 25.5%. Under the Bipartisan Budget Act of 2015 On November 2, 2015, President Barack Obama signed into law the Bipartisan Budget Act of 2015 ( H.R. 1314 ; P.L. 114-74 ). Among its many provisions, the act authorized a temporary reallocation of the Social Security payroll tax rate between the OASI and DI trust funds to provide DI with a larger share for 2016 through 2018. Specifically, the DI trust fund's share of the tax rate for employees and employers, each, increased by 0.285 percentage point at the beginning of 2016, from 0.900% to 1.185% ( Table 4 ). On a combined basis , DI's share of the tax rate increased by 0.570 percentage point, from 1.800% to 2.370%. The change in the SECA rate mirrors the change in the combined FICA rate. Because the act did not change the Social Security payroll tax rate, the portion of the tax rate allocated to OASI decrease d by a corresponding amount. This means that OASI's share of the 6.200% tax rate for employees and employers, each, declined by 0.285 percentage point at the start of 2016, from 5.300% to 5.015%. On a combined basis , OASI's share of the 12.400% tax rate declined by 0.570 percentage point, from 10.600% to 10.030%. Again, the change in the SECA rate mirrors the change in the combined FICA rate. For 2019 and later, the shares allocated to the DI and OASI trust funds are scheduled to return to their 2015 levels. SSA's Office of the Chief Actuary (OACT) projects that the reallocation schedule in the Bipartisan Budget Act of 2015 will extend the solvency of the DI trust fund from the fourth quarter of 2016 to approximately the third quarter of 2022 ( Figure 6 ). Although the reallocation is projected to reduce the solvency of the OASI trust fund by a number of months, OACT estimates that the depletion year for OASI will remain unchanged at 2035. Because the reallocation does not change the total amount of Social Security tax revenues, OACT projects that the depletion year for the theoretical combined OASDI trust funds will remain unchanged at 2034. CBO projects that the reallocation will extend the solvency of the DI trust fund from FY2017 to FY2021. The agency estimates that the reallocation will reduce the solvency of the OASI trust fund slightly, shifting the depletion year from calendar year 2031 to calendar year 2030. The depletion year for the theoretical combined OASDI trust funds is projected to remain unchanged at calendar year 2029 under CBO's extended baseline projections (see Table 5 ). Use of Reallocations by Congress in the Past As shown in Table 6 , Congress has authorized the reallocation of the payroll tax rate multiple times in the past. For the purposes of this report, a reallocation occurs when (1) the overall tax rate remains the same but the shares allocated to the trust funds change proportionally or (2) the overall tax rate changes and the shares allocated to the trust funds change in opposite directions. In other words, a reallocation increases tax revenues to one trust fund and decreases revenues to the other regardless of whether the overall Social Security tax rate increases, decreases, or stays the same. Lawmakers have historically included payroll tax reallocations in major amendments to the Social Security Act in order to put the OASI and DI trust funds on a more or less equal financial footing. However, reallocations have been used at times to extend the solvency of nearly depleted trust funds. Payroll tax reallocations have sometimes benefited the DI trust fund and at other times have favored the OASI trust fund. Reallocation legislation may contain a rate schedule that changes the allocation between the trust funds multiple times and in different directions. With respect to the "number of times" the payroll tax rate has been reallocated, some people tally pieces of legislation authorizing either a single reallocation or a reallocation schedule, whereas others count each instance in which a reallocation occurred. Because FICA taxes account for nearly all payroll tax revenues to the Social Security trust funds, people generally count reallocations affecting the FICA rate. House Rules Change in the 114th Congress Concerning Reallocations Between the Social Security Trust Funds At the start of the 114 th Congress, the House adopted a rule sponsored by Representative Sam Johnson intended to engender structural changes to SSDI. Known as the "Johnson Rule," Section 3(q) of H.Res. 5 allows a point of order to be raised against legislation that would reduce the actuarial balance of the OASI trust fund by at least 0.01% of the present value of projected future taxable payroll over the 75-year period used in the most recent Social Security trustees report. However, the point of order would not apply if the legislation, as a whole, were projected to improve the long-term actuarial balance of the OASI and DI trust funds on a combined basis. Therefore, a short-term financing measure (such as a reallocation) could be considered if it also included revenue increases, cost reductions, or both, even if those changes were projected to have very small positive effects on the theoretical combined OASDI trust funds. In their 2015 report, the trustees project that the present value of future taxable payroll from 2015 through 2089 will be nearly $421 trillion. The current threshold, therefore, is $42.1 billion (0.01% of $421 trillion). CBO projects that the reallocation schedule enacted in the Bipartisan Budget Act of 2015 ( H.R. 1314 ; P.L. 114-74 ) will increase income from payroll taxes to the DI trust fund by $117 billion and reduce income from payroll taxes to the OASI trust fund by the same amount. If the reallocation provision in the Bipartisan Budget Act of 2015 had been proposed as a standalone piece of legislation, it could have been vulnerable to a point of order under the new rule because it would have reduced the actuarial balance of the OASI trust fund by more than $42.1 billion. However, because the budget agreement also contained several provisions that are projected to improve the long-term actuarial balance of the theoretical combined OASDI trust funds by 0.04% of taxable payroll, the point of order under Section 3(q) of H.Res. 5 was not applicable during House consideration of the Bipartisan Budget Act of 2015. Long-Term Policy Options To improve the financial outlook of the DI trust fund over the long term, Congress could consider a variety of legislative changes to increase tax revenues, reduce program cost (i.e., alter benefit levels or program eligibility requirements), or some combination of those approaches. The last major congressional effort to address the financial condition of one of the Social Security trust funds occurred in the early 1980s with the passage of the Social Security Amendments of 1983 ( P.L. 98-21 ). Under the 1983 amendments, Congress used a combination of revenue increases and cost reductions to stabilize and eventually improve the solvency of the OASI trust fund. Congress could enact similar legislation to improve the long-term solvency of either the DI trust fund only or both trust funds. For information on reform proposals that would affect the solvency of the DI trust fund (or both trust funds), see the following resources: CRS Report R43054, Social Security Disability Insurance (SSDI) Reform: An Overview of Proposals to Manage the Growth in the SSDI Rolls , by [author name scrubbed]; CBO's 2012 report, Policy Options for the Social Security Disability Insurance Program , at http://www.cbo.gov/publication/43421 ; CBO's 2015 report, Social Security Policy Options, 2015 , at https://www.cbo.gov/publication/51011 ; OACT's Summary of Provisions That Would Change the Social Security Program , at https://www.ssa.gov/oact/solvency/provisions/summary.pdf ; OACT's collection of cost estimates for various proposals affecting the solvency of the trust funds at https://www.ssa.gov/oact/solvency/index.html ; and the Government Accountability Office's (GAO) 2015 report, Social Security's Future: Answers to Key Questions , at http://www.gao.gov/products/GAO-16-75SP . Congressional Rationale for the Creation of a Separate DI Trust Fund The creation of a separate DI trust fund came about during the debate over the establishment of SSDI as part of the Social Security Amendments of 1956 (P.L. 84-880). Since the late 1930s, policymakers had discussed proposals to amend the Social Security Act to provide covered workers with disability insurance. However, persistent disagreements among policymakers over how to implement a disability insurance program or whether such a program should be enacted at all derailed most proposals early in the deliberative process. Nevertheless, by the 1950s, there was enough support for the creation of a federal disability insurance program for Congress to consider the matter. On July 11, 1955, Representative Jere Cooper (D-TN), the chair of the House Committee on Ways and Means, introduced a bill to amend Title II of the Social Security Act to provide monthly benefits to insured workers aged 50 to 64 with qualifying impairments, among other provisions (H.R. 7225). Under the bill, disability benefits would have been paid from the OASI trust fund and payroll tax rates would have been increased to cover the associated costs. The House report accompanying H.R. 7225 did not discuss the creation of a separate trust fund for the proposed disability insurance program. The House passed H.R. 7225, with amendments, by a vote of 372 (169-R, 203-D) to 31 (23-R, 8-D) on July 18, 1955 (R = Republican, D = Democrat). Although H.R. 7225 passed overwhelmingly in the House, the bill faced marked opposition in the Senate. One of the main concerns among Members who opposed the bill was the uncertainty over its potential cost. Some lawmakers worried that economic downturns would impel unemployed workers to apply to the disability insurance program, affecting the solvency of the OASI trust fund. Given these concerns, the Senate Committee on Finance removed the disability insurance provisions from H.R. 7225. The Senate report accompanying the 1956 amendments stated, Difficulties in determining eligibility, and other factors, lead to uncertainty as to the future costs of a cash disability program. Cost estimates in the field of disability benefits, as pointed out by the Chief Actuary of the Social Security Administration, are subject to a wider range of variation than are estimates for other types of benefits. The basic cost estimates which have been presented to the committee were based on high employment conditions; under low employment conditions, the cost would be significantly higher. The old-age and survivors insurance system is on a sound financial basis; your committee strongly believes that it must be kept so and should not be altered by adding a benefit feature that could involve substantially higher costs than can be estimated. During Senate floor debate on H.R. 7225, Senator Walter F. George (D-GA) offered an amendment reinstating the disability insurance program along with the tax increase to finance it. To address concerns that a disability insurance program would pose a risk to the solvency of the OASI trust fund, the George amendment provided for a separate trust fund from which disability benefits would be paid. Supporters of the George amendment argued that a separate DI trust fund would isolate the OASI trust fund from any cost increases stemming from the new disability insurance program. For instance, during floor debate, Senator Thomas C. Hennings, Jr. (D-MO) remarked, The pending proposal, which the senior Senator from Georgia has submitted for himself ... proposes to set aside a separate trust fund for disability, and consequently does not go so far as to include it within the social-security framework. I believe this to be an extremely workable compromise—one which will eliminate any fear that the old-age and survivors insurance fund will be endangered, although I for one never shared this concern. Opponents of the George amendment argued that the creation of a separate DI trust fund would not sufficiently address their concerns about the potential cost of the program. Senator Wallace F. Bennett (R-UT) noted, The supporters of this amendment tell us that by setting up a separate trust fund they are not going to jeopardize the actuarial balance of the program of social security. I think it is rather obvious that once this amendment is enacted, there is small chance that the program would be discontinued because of lack of funds. The pressure to provide the necessary funds, either through direct Government grant or through increased taxes on the social security taxpayers, would demand the employment of one of those alternatives. The Senate narrowly passed the George amendment by a vote of 47 (6-R, 41-D) to 45 (38-R, 7-D). The Senate went on to pass its version of H.R. 7225 by a vote of 90 (45-R, 45-D) to 0 on July 17, 1956. In conference, the House adopted the Senate provision establishing a separate DI trust fund. The conference report on H.R. 7225 was cleared, without amendments, by voice votes in the House on July 26, 1956, and in the Senate on July 27, 1956. Following consideration of the conference report, Senator George stated in support of his amendment: Another feature of our proposal is that the funds for disability payments are earmarked in a wholly separate fund. These moneys will not be commingled in any way with the funds for old age insurance or for widows and orphans. The contribution income and the disbursements for disability payments will be kept completely distinct and separate. In this way the cost of disability benefits always will be definitely known and the costs always will be shown separately. The disability program is limited to a total of one-quarter of 1 percent of payroll from employers, one-quarter of 1 percent from employees' and three-eighths of 1 percent from the self-employed and disbursements cannot exceed the amount available for this purpose. Thus, the argument that has been made against the original proposal as considered by the Finance Committee, namely, that the cost of the proposal cannot be determined, is met by our amendment. Moreover, another argument that was made against the original proposal that the program eventually may cost more than originally estimated and may thus divert some of the funds from old-age or survivors insurance is also met by our proposal. Senators who have had any doubts about the financial aspects of the proposal can vote for the amendment with complete assurance as to its financial soundness. The DI trust fund was established on August 1, 1956—the day President Dwight D. Eisenhower signed into law the Social Security Amendments of 1956 (P.L. 84-880). Key Dates Projected for the Social Security Trust Funds

Social Security Disability Insurance (SSDI) provides benefits to nonelderly workers and their eligible dependents if the worker paid Social Security taxes for a certain number of years and is unable to perform substantial work due to a qualifying impairment. As in Old-Age and Survivors Insurance (OASI)—the retirement component of Social Security—benefits are based on a worker's past earnings in covered employment. In December 2014, SSDI provided disability insurance coverage to more than 151 million people and paid benefits to about 9 million disabled workers and 2 million of their spouses and children. Benefits and administrative costs for SSDI and OASI are financed primarily by dedicated payroll and self-employment taxes levied on the earnings of covered workers, which are deposited in the Federal Disability Insurance (DI) Trust Fund and the Federal Old-Age and Survivors Insurance (OASI) Trust Fund, respectively. The combined Social Security tax on earnings is 12.40%, which is split equally between workers and employers (6.20% each). Of that amount, 2.37% is allocated to the DI trust fund and 10.03% is allocated to the OASI trust fund. Each trust fund is a legally distinct account in the U.S. Treasury, and under current law, the two trust funds may not borrow from one another. Over the past few years, Congress has grown increasingly concerned with the financial outlook of the DI trust fund. Cost has exceeded total income since 2009, causing the balance of the DI trust fund to shrink. In their July 2015 report, the Social Security trustees projected that the DI trust fund would be depleted in the fourth quarter of calendar year 2016. Upon depletion of its asset reserves, the DI trust fund was projected to have enough ongoing revenues to pay only about 80% of scheduled benefits. The trustees projected that the OASI trust fund would be depleted in 2035. The Social Security Act provides no guidance on the payment of benefits once a trust fund's asset reserves have been depleted and current tax revenues are insufficient to meet current cost. Although individuals who meet Social Security's eligibility requirements are legally entitled to disability benefits, a provision in the Antideficiency Act prohibits a federal agency from spending in excess of available funds. Because the Social Security Act stipulates that SSDI benefit payments shall be made only from the DI trust fund, without a change in the law, monthly cash payments to beneficiaries could be delayed or reduced if the DI trust fund were depleted. The decreasing solvency of the DI trust fund is the result of an increasing imbalance between the fund's income and cost. Over the past 20 years, tax revenues to the DI trust fund have remained relatively flat as a percentage of taxable payroll, whereas cost as a share of taxable payroll has grown markedly. The increase in cost stems largely from the growth in the number of beneficiaries in the program. Between 1995 and 2014, the number of disabled workers and their dependents in receipt of SSDI grew 85%, from 5.9 million to 10.9 million. Because benefit payments account for nearly all program spending, the growth in the SSDI rolls has contributed heavily to the financial difficulties of the DI trust fund. On November 2, 2015, President Barack Obama signed into law the Bipartisan Budget Act of 2015 (H.R. 1314; P.L. 114-74). Among its many provisions, the act authorized a temporary reallocation of the Social Security payroll tax rate between the OASI and DI trust funds to provide DI with a larger share for 2016 through 2018. Specifically, the DI trust fund's share of the combined tax rate increased by 0.57 percentage point at the beginning of 2016, from 1.80% to 2.37%. Because the act did not change the combined payroll tax rate of 12.40%, the portion of the tax rate allocated to OASI decreased by a corresponding amount. This means that OASI's share of the combined tax rate declined by 0.57 percentage point at the start of 2016, from 10.60% to 10.03%. For 2019 and later, the shares allocated to the DI and OASI trust funds are scheduled to return to their 2015 levels (i.e., 1.80% to the DI trust fund and 10.60% to the OASI trust fund). The Social Security Administration's Office of the Chief Actuary (OACT) projects that the reallocation will extend the solvency of the DI trust fund from the fourth quarter of 2016 to the third quarter of 2022. Although the reallocation will reduce the solvency of the OASI trust fund slightly, OACT estimates that the depletion year for OASI will remain unchanged at 2035.

Background Some individuals, who are serving in appointed (noncareer) positions in the executive branch, convert to career positions in the competitive service, the Senior Executive Service (SES), or the excepted service. This practice, commonly referred to as "burrowing in," is permissible when laws and regulations governing career appointments are followed. While such conversions may occur at any time, frequently they do so during the transition period when one Administration is preparing to leave office and another Administration is preparing to assume office. Generally, these appointees were selected noncompetitively and are serving in such positions as Schedule C, noncareer SES, or limited tenure SES that involve policy determinations or require a close and confidential relationship with the department or agency head and other top officials. Many of the Schedule C appointees receive salaries at the GS-12 through GS-15 pay levels. The noncareer and limited tenure members of the SES receive salaries under the pay schedule for senior executives that also covers the career SES. Career employees, on the other hand, are to be selected on the basis of merit and without political influence following a process that is to be fair and open in evaluating their knowledge, skills, and experience against those of other applicants. The tenure of noncareer and career employees also differs. The former are generally limited to the term of the Administration in which they are appointed or serve at the pleasure of the person who appointed them. The latter constitute a work force that continues the operations of government without regard to the change of administrations. Paul Light, a professor of government at New York University, who has studied appointees over the past several administrations, reportedly believes that the pay, benefits, and job security of career positions underlie the desire of individuals in noncareer positions to "burrow in." The President of the Senior Executives Association, Carol Bonosaro, echoed this viewpoint in stating that, "Remember, not everybody who comes in is going to have a very high-profile job where they are going to be able to leave and make really good money.... Not everyone has had necessarily a strong enough background to go back out. They may just have been a campaign worker." Beyond the fundamental concern that the conversion of an individual from an appointed (noncareer) position to a career position may not have followed the legal and regulatory requirements, "burrowing in" raises other concerns. When the practice occurs, there may be these perceptions (whether valid or not): that an appointee converting to a career position may limit the opportunity for other employees (who were competitively selected for their career positions, following examination of their knowledge, skills, and experience) to be promoted into another career position with greater responsibility and pay; or that the individual who is converted to a career position may seek to undermine the work of the new Administration whose policies may be at odds with those that he or she espoused when serving in the appointed capacity. Both perceptions may increase the tension between noncareer and career staff, thereby hindering the effective operation of government at a time when the desirability of creating "common ground" between these staff to facilitate government performance continues to be emphasized. Selected Law and Regulations Appointments to career positions in the executive branch are governed by law and regulations that are codified in Title 5 of the United States Code and Title 5 of the Code of Federal Regulations . For purposes of both, appointments to career positions are among those activities defined as "personnel actions," a class of activities that can be undertaken only in accordance with strict procedures. In taking a personnel action, each department and agency head is responsible for preventing prohibited personnel practices; for complying with, and enforcing, applicable civil service laws, rules, and regulations and other aspects of personnel management; and for ensuring that agency employees are informed of the rights and remedies available to them. Such actions must adhere to the nine merit principles and twelve prohibited personnel practices that are codified at 5 U.S.C. §2301(b) and §2302(b), respectively. These principles and practices are designed to ensure that the process for selecting career employees is fair and open (competitive), and without political influence. Table 1 below presents these principles and practices. Department and agency heads also must follow regulations, codified at Title 5 of the Code of Federal Regulations , that govern career appointments. Among these are Civil Service Rules 4.2 and 7.1: Sec. 4.2. Prohibition against racial, political or religious discrimination. No person employed in the executive branch of the Federal Government who has authority to take or recommend any personnel action with respect to any person who is an employee in the competitive service or any eligible or [sic] applicant for a position in the competitive service shall make any inquiry concerning the race, political affiliation, or religious beliefs of any such employee, eligible, or applicant. All disclosures concerning such matters shall be ignored, except as to such membership in political parties or organizations as constitutes by law a disqualification for Government employment. No discrimination shall be exercised, threatened, or promised by any person in the executive branch of the Federal Government against or in favor of any employee in the competitive service, or any eligible or applicant for a position in the competitive service because of his race, political affiliation, or religious beliefs, except as may be authorized or required by law. Sec. 7.1 Discretion in filling vacancies. In his discretion, an appointing officer may fill any position in the competitive service either by competitive appointment from a civil service register or by noncompetitive selection of a present or former Federal employee, in accordance with the Civil Service Regulations. He shall exercise his discretion in all personnel actions solely on the basis of merit and fitness and without regard to political or religious affiliations, marital status, or race. Other regulations provide that Office of Personnel Management (OPM) approval is required before employees in Schedule C positions may be detailed to competitive service positions, public announcement is required for all SES vacancies that will be filled by initial career appointment, and details to SES positions that are reserved for career employees (known as Career-Reserved) may only be filled by career SES or career-type non-SES appointees. During the period June 1, 2012, through January 20, 2013, defined as the Presidential Election Period, certain appointees are prohibited from receiving financial awards. These appointees, referred to as senior politically appointed officers, are individuals serving in noncareer SES positions; individuals serving in confidential or policy determining positions as Schedule C employees; and individuals serving in limited term and limited emergency positions. OPM and GAO Oversight of Conversions from Noncareer to Career Positions When a department or agency, for example, converts an employee from an appointed (noncareer) position to a career position without any apparent change in duties and responsibilities, or that appears to be tailored to the individual's knowledge and experience, such actions may invite scrutiny. OPM, on an ongoing basis, and the Government Accountability Office (GAO), periodically, each conduct oversight related to conversions of employees from noncareer to career positions to ensure that proper procedures have been followed. An OPM memorandum to the heads of departments and agencies that was issued on November 5, 2009, reiterated that, under Section 1104(b)(2) of Title 5, United States Code , and Section 5.2 of Title 5, Code of Federal Regulations , "OPM requires Federal agencies to seek our approval before selecting a political appointee for a competitive service position during a Presidential election year" and "conducts merit staffing reviews of proposed SES appointments whenever they occur." The memorandum noted that, "if the proposed civil service job is below the SES level, OPM's review has been limited only to competitive service appointments and only those appointments that take place during a Presidential election year." In a significant change to the policy, the memorandum announced that, beginning on January 1, 2010, departments and agencies "must seek prior approval from OPM before they can appoint a current or recent political appointee to a competitive or non-political excepted service position at any level." A written authorization from OPM is now required whenever an department or agency appoints [a] current political Schedule A or Schedule C Executive Branch employee or a former political Schedule A or Schedule C Executive Branch employee who held the position within the last five years to a competitive or non-political excepted service position under title 5 of the U.S. Code; or [a] current Non-career SES Executive Branch employee or a former Non-career SES Executive Branch employee who held the position within the last five years to a competitive or non-political excepted service position under title 5 of the U.S. Code. According to the memorandum, the central personnel agency "will continue to conduct merit staffing reviews for all proposed career SES selections involving a political Schedule A, Schedule C, or noncareer SES political appointee before the SES selections are presented to OPM's Qualifications Review Board (QRB) for certification of executive qualifications." OPM reminded agencies "to carefully review all proposed SES selections to ensure they meet merit system principles before such cases are forwarded to the QRB." OPM Director John Berry explained the policy change by saying that the agency's "responsibility to uphold the merit system is not limited to Presidential election years nor to competitive service appointments." He also said that he "delegated decisionmaking authority over these matters to career Senior Executives at OPM to avoid any hint of political influence." "Pre-Appointment Checklists" for Competitive Service Positions and Non-Political Excepted Service Positions were included as attachments to the OPM memorandum and list the documentation that a department's or agency's Director of Human Resources must submit to OPM along with a dated cover letter. The competitive service pre-appointment checklist includes the following required documentation: The position descriptions for the candidate's current or former appointment and the proposed appointment, including information on why and how the respective positions were established and the relationship between the positions. A statement that explains the disposition of the proposed selectee's current political Schedule A, Schedule C, or noncareer SES position, if vacated. The complete file for the proposed merit selection, including the vacancy announcement published in USAJOBS website; recruiting sources and advertising methods used in addition to USAJOBS; the qualification standard; the job analysis, justification of any selective factor, and rating schedule/crediting plan; applications from all candidates who applied with information on how each was rated; agency correspondence with applicants; information on how the regulatory requirements of the Interagency Career Transition Assistance Program were met; documentation on any candidates who declined offers or were passed over; and the referral list(s) issued to the selecting official and the completed referral list documenting the tentative selection. The name, title, telephone number, and type of appointment (e.g., career SES, Schedule C, presidential appointee) of the selecting official. The name, title, telephone number, and type of appointment (e.g., career SES, Schedule C, presidential appointee) of the rating panel members, if appropriate. The pre-appointment checklist for non-political excepted service positions requires documentation that includes the following: The position descriptions for the candidate's current or former appointment and the proposed appointment, including information on why and how the respective positions were established and the relationship between the positions. A statement that explains the disposition of the proposed selectee's current political Schedule A, Schedule C, or noncareer SES position, if vacated. The complete file for the proposed appointment, including evidence of fair and open competition and the recruiting notice, if one was used; recruiting sources and advertising methods; the established qualifications and previous qualification standards, if changed within the previous 12 months; the agency's policy for accepting applications for excepted service positions; applications from all candidates who applied with information on how each was rated; information showing how veterans' preference was considered; and the referral list(s) issued to the selecting official and the completed referral list documenting the tentative selection. The name, title, telephone number, and type of appointment (e.g., career SES, Schedule C, presidential appointee) of the selecting official. The name, title, telephone number, and type of appointment (e.g., career SES, Schedule C, presidential appointee) of the rating panel members, if appropriate. For the 2012 presidential election year, OPM reminded the heads of departments and agencies of this policy in a memorandum issued on June 8, 2012. Attachment 3 of the memorandum, on the "Do's and Don'ts" of the policy, OPM cautioned departments and agencies not to [c]reate or announce a competitive or non-political excepted service vacancy for the sole purpose of selecting a current or former political appointee, Schedule C employee or Noncareer SES employee; or [r]emove the Schedule C or Noncareer SES elements of a position solely to appoint the incumbent into the competitive or non-political excepted service. To assist departments and agencies, OPM also publishes the Presidential Transition Guide to Federal Human Resources Management . The most current edition, released in June 2008, includes detailed guidance on standards of ethical conduct, appointments, and compensation for federal employees. GAO's oversight focuses on periodic review, after the fact, and, at the request of Congress, of conversions from political to career positions. The agency's last evaluation was published in June 2010, and reported on a review of conversions at 42 agencies. The results of that audit covered the period May 2005 through May 2009, and provide the most current retrospective data. Twenty-six agencies reported 139 conversions. Of that total, 79, or 57% occurred in "five agencies, the Departments of Justice, Homeland Security, Defense, Energy, and Commerce." Sixteen agencies reported no conversions. The evaluation found that 117 of the conversions were at the GS-12 level or above and agencies appear to have used appropriate authorities and followed proper procedures in making the majority (92) of these 117 conversions; for seven conversions, agencies may not have adhered to merit systems principles or may have engaged in prohibited personnel practices or other improprieties. Five of these appointments were career competitive [and] two were appointments to the excepted service; for 18 conversions, agencies did not provide enough information for us to make a determination as to whether appropriate authorities and proper procedures were followed; and thirteen of these conversions were to competitive service positions and five were to career excepted service (non-Schedule C) positions. Oversight by Congress During the 2008 Transition As part of its oversight of government operations, Congress also monitors conversions. In the 110 th Congress, staffing at the Departments of Homeland Security (DHS) and Justice (DOJ), was of particular interest, especially in the wake of the leadership and management deficiencies at DHS during and after Hurricane Katrina, and improper procedures used by DOJ staff in selecting and removing United States attorneys. In a January 2008 report to the DHS Secretary on the transition, the Homeland Security Advisory Council recommended that the department "consider current political appointees with highly specialized and needed skills for appropriate career positions." That same month, an entry in the DHS leadership journal, published on the department's website, discussed transition planning. Then Acting Deputy Secretary Paul Schneider wrote that, as part of this planning, we're filling some of the top jobs previously held by political appointees with career professionals. For example, last year, we made Jay Ahern, a 30-year veteran of the federal government, second-in-command of our Customs and Border Protection component. Just recently, at our Transportation Security Administration, we filled our deputy slot with Gale Rossides, who also has had a 30-year federal career and has served at TSA since its inception six years ago. And we are training and cross-training such senior career people to ensure that DHS will have the continuity of leadership it needs following the transition. The Wall Street Journal discussed the initiative in a January 11, 2008, article noting that DHS "has begun an unusual—and potentially controversial—effort to smooth the transition to a new administration." Both DHS and DOJ received letters from Members of Congress reminding them to examine conversions. On February 7, 2008, Representative Bennie Thompson, Chairman of the House Committee on Homeland Security, wrote a letter to DHS Secretary Michael Chertoff. He reiterated his concerns about personnel vacancies at DHS and stated these views: I am sure that you would agree that it would be inappropriate to fill career non-political executive level positions with political appointees absent an open and fully competitive process. While I understand that some could argue that these individuals may be well-qualified and can provide continuity during a transition period, others could well argue that to permit political appointees to occupy non-political positions could be viewed by some as an attempt to insulate political appointees from the vagaries of the political appointment system and provide an internal obstruction to the policies of the new administration. Clearly, the latter interpretation is deeply troubling. Representative Thompson also requested that Secretary Chertoff "issue a policy directive to prohibit the 'burrowing in' of political appointees into non-political career positions within the Department." CRS research did not locate a publicly available record of any such directive. With regard to personnel actions at the Department of Justice, Senators Dianne Feinstein and Charles Schumer, members of the Senate Committee on the Judiciary, reportedly wrote a letter to Attorney General Michael Mukasey on July 24, 2008. According to the Washington Post , the letter asked the Attorney General to "exercise vigilance" against political appointees moving into career positions, and stated that, "When unqualified political appointees take over jobs better left to skilled candidates, it threatens the agency's professionalism and independence. We don't need ideological stowaways undermining the work of the next administration." On December 19, 2008, Senator Joseph Lieberman, Chairman of the Senate Committee on Homeland Security and Governmental Affairs, sent a letter to the OPM Acting Director, Michael Hager, requesting that data on conversions from noncareer to career positions during the period April 1, 2008, through December 19, 2008, and information on the number of staff responsible for reviewing and approving the pre-appointment requests for FY2005 through FY2009, be provided to the committee by January 9, 2009. Specifically, Senator Lieberman requested these data: "for each agency, the number of completed requests for conversions from noncareer to career positions, the number of requests that have been approved by OPM, the number of requests that have been denied by OPM, and the number of requests that have been withdrawn by the requesting agency; the date that OPM received each pre-appointment review request and the date that OPM completed the request for each selectee; any forms and documentation that provide an explanation of OPM's review of each appointee's pre-appointment review for conversion, including the individual's name, noncareer position, and proposed career position; and the number of staff responsible for reviewing and approving the pre-appointment requests for fiscal years 2005 through 2009." OPM responded to Senator Lieberman in a letter, with an attachment, dated January 16, 2009, and provided information available at that time. During the period April 1, 2008, through June 30, 2008, eight individuals who were political appointees converted to career positions in the competitive service or the SES. The letter also stated that requests for conversion to non-SES positions are reviewed by "ten staff members, including three career Senior Executives," and that requests for conversion to SES positions are reviewed by "eight staff members, including two career Senior Executives." OPM stated that, in carrying out its statutory role as "guardian of the merit system," the personnel agency: rigorously examines each request against mandatory legal requirements that apply in every competitive hiring action. We also apply additional standards aimed specifically at uncovering improper political influence. We require agencies to submit a full record with each request, including vacancy announcements, job analyses and crediting plans, and job applications. We painstakingly look for any evidence that the hiring process was tainted by political influence or unfair competition. If we find such evidence, we withhold our consent to the appointment. In February 2009 (111 th Congress), Senator Feinstein sent a letter to the Secretary of Defense, Robert Gates, related to "allegations that political appointees at the Department of Defense were improperly converted to career positions by the outgoing Bush Administration." Stating that "This is especially disconcerting within the Office of Detainee Affairs due to the nature of the policy recommendations that office provides regarding Guantanamo," she asked the Secretary to "immediately review the circumstances behind the conversion of these positions and the hiring of any former Bush administration appointees as career or temporary appointments in that office." In November 2008, and January 2009, The Washington Post identified several conversions from noncareer to career positions at such departments and agencies as the National Oceanic and Atmospheric Administration of the Department of Commerce, the Department of Housing and Urban Development, the Department of the Interior, the Customs and Border Protection Agency and the Federal Emergency Management Agency of the Department of Homeland Security, and the Department of Labor, as likely examples of "burrowing in." Following publication of the first of these news reports, Senators Feinstein and Schumer reportedly wrote to President Bush expressing concern about conversions: Today's report reveals that senior members of your administration are undermining your public commitment to ease the transition by reorganizing agencies at the eleventh hour and installing political appointees in key positions for which they may not be qualified. We respectfully urge you to stand by your public commitment to a smooth transition by directing executive agencies immediately to halt any conversions of political appointees to career positions. White House Press Secretary Dana Perino responded to a question about "burrowing in" during the press briefing conducted on November 18, 2008, by stating that As a matter of policy, the White House has not encouraged non-career appointees to seek career positions in order to further the President's policies. The White House doesn't play a role in that career hiring process. There's a very specific process that OPM had put forward, ... that gives guidelines for people who are eligible to apply for career positions. Once they do that, they are handled on a case-by-case basis by OPM, and the review is conducted by career employees. The President and General Counsel of the Senior Executives Association, in a November 24, 2008, letter to OPM Acting Director Hager, requested that "evidence" that "the competitive selection process was indeed followed, that the selectee who was the former political appointee was the most qualified candidate, and that political influence had no place in the selection" be provided to the organization. The SEA suggested that the evidence consist of "a copy of the job announcement that was released to the general public, a statement explaining the process for each selection, and an accurate listing of the names of political appointees who have been converted to the career SES and the positions to which they were converted." The American Federation of Government Employees (AFGE) also called for transparency in the conversion process. The Associated Press reported that OPM personnel records show that 135 appointees received career positions over the period January 2001, when the George W. Bush Administration commenced, through June 2008, and that its own review "identified at least 26 such cases approved during Bush's final year in office." Considerations to Enhance Oversight In assessing the current situation, Congress may decide that the existing system of oversight is sufficient. If Congress determines that additional measures are needed to further ensure that conversions from appointed (noncareer) positions to career positions are conducted according to proper procedures and transparent, the following options could be considered: OPM could be directed to report to Congress on the operation of its current policy governing pre-appointment reviews, including recommendations on whether Section 1104 of Title 5, United States Code should be amended to codify the policy. The report could be included in the agency's annual performance plan that accompanies the budget justification submitted to the House and Senate Committees on Appropriations each February. It could provide information on conversions that did not follow proper procedures and the remedial actions taken. OPM is authorized to review awards programs at departments and agencies. Congress could direct OPM to review awards granted in the executive branch and certify in its annual performance plan that awards were not granted during the Presidential Election Period. OPM also could be directed by Congress to report on whether any changes are needed in the time period for the Presidential Election Period, that restricts financial awards to senior politically appointed officers. As discussed above, the dates of the Presidential Election Period are defined by law, and in a presidential election year, cover the period from June 1 through the following January 20. Congress could mandate that the annual performance plans that accompany department and agency budget justifications submitted to Congress in February of each year include detailed information on conversions during the applicable fiscal year. The performance plans, submitted in the month following the inauguration of the President, could include a certification that awards were not granted during the Presidential Election Period. Departments and agencies could mandate that all officials with hiring authority be required to annually certify, in writing, that they understand the legal and regulatory requirements on the conversion of employees from appointed (noncareer) positions to career positions and on the prohibition on awards during the Presidential Election Period. A training session, that could be available electronically, could be provided to those officials who desire to review their knowledge and understanding of the procedures. A hiring official's failure to follow the proper procedures could be noted on the individual's performance evaluation. GAO and OPM could jointly explore options for the personnel agency, and the departments and agencies, to expedite the transmittal of information on conversions to GAO so that any necessary remedial actions can be recommended by GAO and taken by OPM quickly, and closer to the time that the conversions occurred. Congress could amend Title 5 United States Code to increase the penalties for violating Civil Service laws by "creat[ing] a misdemeanor offense for agency personnel who violate or contribute to the violation of the federal hiring statutes." Congress could examine whether Title 5, United States Code should be amended to prohibit conversion from political to career positions.

The term "burrowing in" is sometimes used to describe an employment status conversion whereby an individual transfers from a federal appointed (noncareer) position to a career position in the executive branch. Critics of such conversions note that they often occur during the transitional period in which the outgoing Administration prepares to leave office and the incoming Administration prepares to assume office. Conversions are permissible when laws and regulations governing career appointments are followed, but they can invite scrutiny because of the differences in the appointment and tenure of noncareer and career employees. Appointments to career positions in the executive branch are governed by law and regulations that are codified in Title 5 of the United States Code and Title 5 of the Code of Federal Regulations, and are defined as personnel actions. In taking a personnel action, each department and agency head is responsible for preventing prohibited personnel practices; for complying with, and enforcing, applicable civil service laws, rules, and regulations and other aspects of personnel management; and for ensuring that agency employees are informed of the rights and remedies available to them. Such actions are required to adhere to the merit principles and prohibited personnel practices that are codified at 5 U.S.C. §2301(b) and §2302(b), respectively. These principles and practices are designed to ensure that the process for selecting career employees is fair and open (competitive), and without political influence. The Office of Personnel Management (OPM), on an ongoing basis, and the Government Accountability Office (GAO), periodically, each conduct oversight related to conversions of employees from noncareer to career positions to ensure that proper procedures have been followed. Certain senior politically appointed officers are prohibited from receiving financial awards during the Presidential Election Period, defined in statute and currently covering June 1, 2012, through January 20, 2013. As part of its oversight of government operations, Congress also monitors conversions. In the 110th Congress, staffing at the Departments of Homeland Security (DHS) and Justice (DOJ) was of particular interest, especially in the wake of the leadership and management deficiencies at DHS during and after Hurricane Katrina, and improper procedures used by DOJ staff in selecting and removing United States attorneys. Both departments received letters from Members of Congress reminding them to examine conversions: the Chairman of the House Committee on Homeland Security, Representative Bennie Thompson, wrote to the DHS Secretary in February 2008, and Senators Dianne Feinstein and Charles Schumer, members of the Senate Committee on the Judiciary, wrote to the Attorney General in July 2008 about this issue. In a December 19, 2008, letter to OPM, Senator Joseph Lieberman requested information on conversions that occurred during the period April 1, 2008, through December 19, 2008. In February 2009 (111th Congress), Senator Feinstein sent a letter to the Secretary of Defense related to conversions within the Office of Detainee Affairs. In assessing the current situation, Congress may decide that the existing oversight is sufficient. If Congress determines that additional measures are needed, OPM could be directed to report to Congress on the operation of its current policy governing pre-appointment reviews, including recommendations on whether Section 1104 of Title 5, United States Code should be amended to codify the policy. The GAO and OPM could be asked to explore options that might result in their recommending and taking timely remedial actions that are seen as necessary to address conversions that occurred under improper procedures. Congress could amend Title 5, United States Code to increase the penalties for violating Civil Service laws. This report will be updated as events dictate.

Introduction The Judiciary Committee's blue-slip policy has been a central component in its confirmationof judicial nominations. For a large portion of its history, the blue slip gave Senators the ability todetermine the fate of their home-state judicial nominations. If a home-state Senator had no objectionto a nominee, a blue slip would be returned to the chairman with a positive response. If, however,the Senator had some objection to the nominee and wanted to prevent confirmation, he/she coulddecide not to return the blue slip or return it with a negative response. Over the years, the blue-slippolicy has been modified to prevent a single Senator from having such absolute power over the fateof home-state judicial nominees. Today, a blue slip can stop a judicial nomination only if bothhome-state Senators return a negative blue slip and then only if the President has failed to consultwith the home-state Senators. This report provides a history of the Judiciary Committee blue-slip custom, a practice whichemanated from the chamber's tradition of senatorial courtesy. It first defines "senatorial courtesy"and how the practice is related to the Judiciary Committee's use of the blue slip. Next, this reportdescribes the creation of the blue-slip procedure and the modifications to it. Eight sections profilethe committee's blue-slip policies during the last 43 Congresses. These profiles provide a sense ofthe stated and practiced blue-slip policy at any given time and place that policy in the context of thehistory of the blue-slip system. Case studies are provided to show how a particular Congress appliedthe blue-slip policy to a given circumstance. Finally, a frequently asked questions section and aconcluding analysis on the blue-slip process are included. It should be noted that there are currently two kinds of blue slips used by Congress. TheSenate version of the blue slip (1) is a committee practice employed solely by the Senate JudiciaryCommittee for use in the confirmation of federal judges and other positions. In the House ofRepresentatives, the blue slip is an enforcement tool for the Origination Clause of the U.S.Constitution. (2) CRS Report RS21236 , Blue-Slipping: The Origination Clause in the House of Representatives , by JamesV. Saturno, discusses the use of the House version of the blue slip. (3) Senatorial Courtesy The blue slip is a manifestation of senatorial courtesy. A layman's definition of senatorialcourtesy would be the deference with which one Senator treats another. In the context of theconstitutional responsibility of advice and consent, the term and practice are more expansive. The American Congressional Dictionary defines senatorial courtesy as [t]he Senate's practice of declining to confirm apresidential nominee for an office in the state of a senator of the president's party unless that senatorapproves. Sometimes called "the courtesy of the Senate," the practice is a customary one and notalways adhered to. A senator sometimes invokes the custom by declaring that the nominee ispersonally obnoxious or personally objectionable to him. ... [The Senate] also usually complies with a senator'srequest for a temporary delay in considering a nomination, a request that is referred to as a hold. (4) The concept of senatorial courtesy goes beyond the confines of the Senate and, at times,represents the courtesy a President extends, or arguably should extend, to Senators. Politicalscientist Harold Chase describes the political ramifications of this Senate tradition: Senators, whether chosen by state legislatures, as theywere at an earlier time, or by the voters of the state, must continuously nurture their political supportback home; that is, if they hope for additional terms in office -- and it is a rare senator who does not. In this connection, senators from the First Congress on have recognized that one or two senatorshave a much greater stake in a particular appointment than others. It is, of course, exceedinglyhelpful to a senator to be able to reward supporters with good posts in the federal government. Conversely, it is enormously damaging to a senator's prestige if a president of his own party ignoreshim when it comes to making an appointment from or to the senator's own state. What is even moredamaging to a senator's prestige and political power is for the president to appoint to high federaloffice someone who is known back home as a political opponent to the senator. It was easy forsenators to see that if they joined together against the president to protect their individual interestsin appointments, they could to a large degree assure that the president could only make suchappointments as would be palatable to them as individuals. Out of such considerations grew thecustom of senatorial courtesy. (5) Although the custom of using the "personally obnoxious" or personally objectionable"declaration has fallen out of use in recent years, various chairmen of the Senate Judiciary Committeehave used the blue-slip practice as a means of providing Senators with the opportunity to makeobjections to nominations formally known within the committee. Methodology in Preparing the History of the Blue Slip The following account of the history of the blue slip reflects research in the NationalArchives and Records Administration (NARA) in Washington, D.C. (6) The primary recordsresearched were the executive nominations files from the 56th through the 83rd Congresses(1899-1953) and the correspondence and communications files of the Senate Judiciary Committeeduring the same Congresses. (7) Scholarly studies as well as newspaper accounts of the origination of the blue-slip processwere also used. Most accounts placed the creation of blue slips as having occurred during theEisenhower Administration: the 83rd through the 87th Congresses (1953-1961). (8) Therefore, the research beganin that time period and then worked back through the Congresses until no blue slips were found. Collection of archival records and data focused on locating blue slips for each Congress andany personal correspondence between or among Senators relating to their use. The correspondencefiles contained no information on blue slips. Blue slips were, however, found for every Congressstarting with the 65th (1917-1918) through the 83rd (1953-1954). Although there were no blue slipsfor the 64th Congress (1915-1916), research was conducted as far back as the 56th Congress(1899-1900). During this 15-year time period, no mention or evidence of blue slips was discovered. The information collected permits a more accurate history of the blue slip in the JudiciaryCommittee, correcting the widespread belief that the blue-slip process originated in the 1950s. Origin of the Blue Slip Process Although not mentioned in the Judiciary Committee rules, blue slips are an informal practiceunique to the committee, which has historically used blue slips on all U.S. attorney, U.S. marshal,U.S. district court and U.S. court of appeals nominations. Blue slips have been employed to blocknominations in one of two ways, depending on the preferences of the Judiciary chairman. Judicialnominations have been blocked by a Senator either returning a negative blue slip or failing to returna blue slip altogether. Over the years, there have been various modifications to these basic practices. In the case of U.S. district court nominations, (9) once a nomination is referred to the Judiciary Committee, thecounsel for the committee will send a blue slip (so called because of its color) to each Senator of thenominee's home state, regardless of party affiliation. The Senator may then return the blue slip tothe Judiciary Committee with comments on the particular nominee in question. In most cases, theblue slip is considered to be a pro forma gesture and will be given a positive review by the Senator;however, in a select number of cases a negative review may occur. For U.S. circuit court nominations, the process is similar. The Judiciary Committee will giveblue slips only to the Senators of the retiring judge's home state. This tradition comes from thepractice of reserving circuit court positions for each state to ensure proportional or equal staterepresentation for each circuit. (10) The President is often effectively required by this tradition toselect a circuit court nominee from the state of the retiring judge. If a negative blue slip is received, the chairman may take the following actions on thenominee: (1) stop all committee proceedings; (2) move forward but give added weight to theunfavorable review; or (3) proceed without notice of the negative review. Since the late 1970s, thecommittee has generally used the latter two actions when dealing with a negative blue slip. The precise date on which the Judiciary Committee first used the blue-slip procedure is notknown. The committee has not made the blue slip part of its official rules for more than 30years, (11) and this is stillthe case in the 108th Congress. (12) From research conducted at the National Archives, evidencesuggests that the blue-slip procedure began sometime in the mid- to late 1910s under thechairmanship of Senator Charles A. Culberson of Texas. (13) This impression is based on the appearance of the first known blue slip in the 65th Congress(1917-1918). At the time, Senator Culberson was chairman of the Judiciary Committee, a capacityhe served in from the 63rd through the 66th Congresses (1913-1919). The documentary evidence ofthis time period suggests that Senator Culberson may have created the blue slip. From the 65thCongress onward almost every judicial nominee's file includes a blue slip. Prior to this time(56th-64th Congresses), the files of judicial nominees reveal no evidence of blue slips. Judiciary Committee materials at the National Archives do not provide a specific explanationfor the creation of the blue slip; however, they may help illuminate its early history. For instance,although the White House and the Senate were controlled by the Democratic Party, there wasperiodic tension between the two branches, and this condition may have been a factor in the blueslip's creation. (14) Of particular interest is the creation of blue slips at the same time as the adoption of SenateRule XXII in 1917, which permits Senators to end a filibuster by invoking cloture. (15) Despite this apparentcoincidence, a direct link between the creation of the blue slip and the cloture rule can be dispelled,because Senate Rule XXII did not apply to judicial nominations until 1949. In that year, S.Res.15 modified Senate Rule XXII from, "to bring to a close the debate upon any pendingmeasure is presented to the Senate ..." to the following: "to bring to a close the debate upon anymeasure, motion, or other matter pending before the Senate." (16) Therefore, the JudiciaryCommittee did not need to create a blue-slip policy as a result of the 1917 Senate rule becausecloture at that time did not apply to filibusters on judicial nominations. Structure of the Blue Slip (1917-2003) The basic structure of the blue slip has not changed substantially in the 86 years since itscreation. For the first 27 years (1917-1944), the blue slip was actually handed to senators as a foldedblue "slip" of paper. The blue slip form, printed on Judiciary Committee letterhead, would containthe date, the identity of the nomination, and the name of the Senator. At the top, the blue slip stated,"Sir: Will you kindly give me, for the use of the Committee, your opinion and informationconcerning the nomination of ..." It was signed by the committee chairman. At the bottom of thepage, lines were left for the Senator to reply and provide comments concerning the nomination. This structure did not change until the 67th Congress, when, in 1922, Chairman Knute Nelson(R) of Minnesota placed below the introductory text the following statement: "Under a rule of theCommittee, unless a reply is received from you within a week from this date, it will be assumed thatyou have no objection to this nomination." (17) Before this time, the Judiciary Committee did not have a statedtime limit for a senator to return a blue slip. After that change, the next major modification to the blue-slip policy came during thechairmanship of Senator Strom Thurmond, when the Senator removed from the blue slip the clause,"Under a rule of the Committee," and left the remainder: "Unless a reply is received from you withina week from this date, it will be assumed that you have no objection to this nomination." ChairmanThurmond also added at the bottom of the blue slip, before the comments section, two boxes forchecking, one titled, "I approve" and the other, "I oppose." In 1998, Chairman Orrin G. Hatch replaced the traditional, "Unless a reply is received fromyou within a week from this date, it will be assumed that you have no objection to this nomination"with the following text: "Please return this form as soon as possible to the nominations office inDirksen G-66. No further proceedings on this nominee will be scheduled until both slips have beenreturned by the nominee's home state senators." (18) Shortly after the 2000 elections, when Senator Patrick Leahy held the chairmanship of theJudiciary Committee, (19) the blue slip again was modified. Instead of reinstating the Thurmond blue slip statement of, "Unlessa reply is received from you within a week from this date, it will be assumed that you have noobjection to this nomination," Chairman Leahy inserted the following statement, "Please return thisform as soon as possible to the Committee office in Dirksen 147." The "No further proceedings ..."statement, instituted under Chairman Hatch, was dropped as well. Chairman Leahy also modified the introduction by substituting, "Will you kindly give me,for the use of the Committee, your opinion and information concerning the nomination of," with thestatement of "Please give me your opinion concerning the following nomination now pending beforethe Senate Judiciary Committee." Before Leahy's modification, the text of the initial introductionhad never been changed. The current blue slip form has retained Senator Leahy's phrasing and form except roomnumber designation changes. First Example of a Senator Using the Blue Slip The first example found of a Senator using a blue slip to oppose a judicial nomination wasin the spring of 1917 (65th Congress). President Woodrow Wilson had recently nominated U. V.Whipple to the Southern District of Georgia; Senator Thomas W. Hardwick returned a negative blueslip on April 9, 1917. In his blue slip reply, Senator Hardwick wrote, "I object to this appointment-- the same is personally offensive and objectionable to me, and I can not consent to the confirmationof the nominee." (20) Atthat time, a blue slip did not necessarily prevent committee action on a nomination. As such,Whipple's nomination was reported, albeit adversely, to the Senate, where he was rejected withouta recorded vote on April 23, 1917. (21) The Blue-Slip Policy: 65th-108th Congresses The record on the Judiciary Committee's formal written rule on blue slips is unclear. Evenif complete records were kept on blue slips, a chairman's policy may have been different in practicethan what was stated. Thus, determining the particular policy at any given time can be difficult. Research of historical records and newspaper accounts reveals, however, the following JudiciaryCommittee policies on the blue slip for each of the last 48 Congresses (1917-2003). Each sectionwill highlight the chairman's stated blue-slip policy and show, when necessary, instances where thepolicy differed, in practice from the stated blue-slip policy. In addition, the table at the end of this report provides information on the Senate JudiciaryCommittee's blue slip policy for each of the last 21 Congresses, dating back to 1956. The tablebegins in 1956 because it was then that the Judiciary Committee began to permit Senators to use theblue slip as a way to block judicial nominations. The table is arranged chronologically by the datein which a change occurred in the blue-slip policy of the Senate Judiciary Committee. Working fromleft to right, column one consists of the name of the Judiciary Committee chairman. Columns twoand three list the years and Congresses that a particular blue-slip policy was in use. Finally, columnfour describes the Judiciary Committee's blue-slip policy for those years and Congresses. 65th-84th Congresses Chairman Culberson's written blue-slip policy was to merely ask the opinion of thehome-state Senators on a particular judicial nomination. A specified rule limiting the amount of timeto return a blue slip did not become part of the Judiciary Committee's stated policy until 1922 whenChairman Knute Nelson placed it on the blue-slip form in the 67th Congress. No reason was givenfor that modification, nor does the historical record point to any event that would have given causefor this change. From the 65th through the 84th Congresses, no chair of the Judiciary Committee allowed anynegative blue slips to automatically veto a nomination. For example, despite the blue-slipping ofU. V. Whipple by Senator Hardwick of Georgia, the chairman still moved ahead with a hearing andeven a committee vote. A blue slip apparently did not give a Senator an absolute right to block ajudicial nomination and prevent committee action. This norm can be seen in the statements made by individual Senators who asked if they couldappear before the Judiciary Committee to express their objections to the particular nominee that theywere blue-slipping. For example, in 1936 Senator Theodore G. Bilbo returned a negative blue slipon Edwin R. Holmes, who had been nominated to be U.S. Circuit Court judge for the fifth circuit. On his blue slip, Senator Bilbo stated, "I positively object to Holmes." (22) Although Senator Bilbostated his objection to the nominee, he did not call for the committee to stop all proceedings on thenomination, but instead stated that he would "be pleased to make known my objection to [this]sub-committee when [a] hearing is ordered." (23) Fourteen years later (1950), Senator Bourke B. Hickenlooper, after noting on his blue slipthat he "vigorously object[ed]" to the nomination of Carroll O. Switzer to be U.S. District Courtjudge for the southern district of Iowa, wrote, "I shall be glad to appear before your committee onthis matter." (24) Likewise in the same year, Senator Richard Russell asked the Judiciary Committee Chairman PatrickMcCarran if he could "appear before the Committee and present some of the circumstances relatingto this nomination before the Committee reports it to the Senate, as I am opposed to hisconfirmation." (25) Ineach case, the objecting Senator asked to appear before the Judiciary Committee to state his caseagainst the individual being nominated. What these examples appear to show is that the Judiciary Committee policy during this timewas that a negative blue slip was not intended to prevent committee action. Instead, a Senator'snegative assessment of a nominee was meant to express to the committee his views on the nomineeso that the chairman would be better prepared to deal with the review of the nomination. The endresult was that Judiciary Committee chairmen did not traditionally view a negative blue slip as a signto stop all action on judicial nominations. This is important to note because of the modification tothis policy norm during the 84th Congress. 84th-95th Congresses From 1956 through 1978, Senator James O. Eastland chaired the Judiciary Committee andbrought about the first fundamental change to the way the committee used blue slips. During histenure, it appears that blue slips were handled as absolute vetoes by Senators. (26) The policy was that if aSenator either returned a negative blue slip or failed to return one at all, the committee would stopall action on a nominee. (27) Evidence for this policy is suggested by the fact that no judicial nomination on which therewas a negative blue slip was rejected by the committee and then subsequently reported to the Senateduring this time period. (28) In previous Congresses, the Judiciary Committee would reportmost nominations with a negative blue slip to the Senate with adverse recommendations. With thedecrease in observance of the "personally obnoxious" standard, however, a Senate rejection was nolonger certain. Therefore, the committee changed its traditional blue-slip policy and proceeded tostop all action on a judicial nomination when a home-state Senator returned a negative blue slip orfailed to return one. (29) 96th Congress Senator Edward M. Kennedy chaired the Judiciary Committee during the 96th Congress. Although he led the committee for only one Congress (1979-1981), he ushered in a number ofsignificant changes to the way judicial nominations were handled. (30) In relation to thecommittee's blue-slip policy, Chairman Kennedy informed his colleagues that when a Senator failedto return a blue slip, he would let the full committee vote on whether to proceed. (31) In a 1979 JudiciaryCommittee hearing, Chairman Kennedy stated that he had instructed the committee staff to send to both Senatorsfrom a nominee's State a blue slip requesting the Senator's opinion and information concerning thenominee. If the blue slip is not returned within a reasonable time, rather than letting the nominationdie I will place before the committee a motion to determine whether it wishes to proceed to a hearingon the nomination notwithstanding the absence of the blue slip. The committee, and ultimately theSenate, can work its will. (32) Besides Chairman Kennedy's modification to the stated blue-slip policy, there appeared tohave been another change as well. A home-state Senator's objection to a nominee, in practice, didnot have the same power to automatically stop committee action as before. This unstated change canbe seen in the confirmation proceedings over a Virginia judgeship during the 96th Congress. Againstthe wishes of Virginia Senator Harry F. Byrd Jr., President Jimmy Carter nominated James E.Sheffield to the U.S. District Court for eastern Virginia. In committee, the nomination was opposedby Senator Byrd, who sent a negative blue slip to Chairman Kennedy. Senator Byrd reportedly didnot object to holding a hearing for Sheffield. (33) On August 26, 1980, the Judiciary Committee held a hearing onSheffield despite the blue slip objection. This marked the first reported instance since 1951 in whichthe Judiciary Committee moved forward on a blue-slipped nomination. (34) The committee took nofurther action and the Senate eventually returned the Sheffield nomination on December 16, 1980. Chairman Kennedy established the first post-Eastland changes to the blue-slip system. Thestated modification placed the decision to move forward on a nomination that had not received ahome-state Senator's blue slip with the committee. The de facto alteration permitted the chairmanto use his discretion to determine if the committee would act on a blue-slipped nominee. ChairmanKennedy said that his purpose in modifying the blue-slip policy was to allow "the Federal courts [to]... become more representative of the people of this Nation." (35) He added, "we face thequestion of what to do about the longstanding practice of the one-member veto -- or the blue-slipprocess.... I will not unilaterally table a nomination.... I cannot, however, discard cavalierly thetradition of senatorial courtesy, exception-riddled and outdated as it may be." (36) 97th-99th Congresses Although it was reported that Senator Strom Thurmond was going to change the blue-slippolicy in use under Senator Eastland, (37) at a January 19, 1981 Judiciary Committee organization meeting,Chairman Thurmond stated that he "would follow the same procedure ... [enacted] under SenatorKennedy." This meant that, "if [the committee] do[es] not hear of a Senator objecting, if he just doesnot send in his blue slip and if we do not hear within the seven days, we assume, as Senator Kennedydid, there is no objection." Chairman Thurmond did make a point of stating "that if either Senatorobjects to a nomination we should not go forward with it." (38) Therefore, under Chairman Thurmond's blue-slip policy, a home-state Senator could stop allcommittee action on a judicial nominee by returning a negative blue slip; however, the committeewould not stop action on a nominee if the home-state Senator failed to return it. As such, ChairmanThurmond was following Senator Kennedy's modification to the blue-slip policy but also stating thata single home-state Senator still had the power to stop committee action on a nominee. Like that ofhis predecessor, however, Chairman Thurmond's blue-slip policy was not always consistent, asshown by President Reagan's District Court nominations in 1983 and 1985. In 1983, reportedly at the suggestion of retiring Senator Samuel Hayakawa of California,President Reagan selected John P. Vukasin Jr., to be U.S. District judge for northern California. (39) However, Vukasin wasopposed by Senator Alan Cranston of California, who returned a negative blue slip to thecommittee. (40) DespiteSenator Cranston's objection, Chairman Thurmond went ahead with Vukasin's nomination, and onJuly 21, 1983 the nomination was reported favorably on a party line vote. This vote marked the firsttime since 1951 that the Judiciary Committee voted to report out a nomination despite the blue slipobjection of a home-state Senator. (41) Once through committee, the Senate eventually confirmedVukasin by voice vote. (42) Two years later, in 1985, President Reagan selected Albert I. Moon Jr. to be a U.S. Districtjudge for Hawaii. In this case, both Hawaii Senators, Daniel Inouye and Spark Matsunaga, opposedthe nomination and sent back negative blue slips to the committee. (43) Although tradition dictatedthat negative blue slips from both home-state Senators would prevent committee action, ChairmanThurmond decided to move forward. On November 22, 1985, the committee held a hearing on theMoon nomination. This marked the first reported instance in which the Judiciary Committee actedon a nomination despite the presence of two negative blue slips. After the hearing, the committeetook no further action and the Senate eventually returned the Moon nomination on December 20,1985. Like Senator Kennedy in the 96th Congress, Chairman Thurmond did not allow the failureof a home-state Senator to return a blue slip to stop committee action. Furthermore, the presenceof one or even two negative blue slips was no longer enough to prevent committee action. The endresult was that Chairman Thurmond substantially changed how the blue-slip policy operated. Yetit should be noted that the Moon nomination was the only known example during this time periodof a chairman moving forward on a nomination despite the presence of two negative blue slips. Thisis important because, since the blue slip is not a committee rule, the chairman has the discretion tochange the policy when deemed necessary. Therefore, as the Vukasin and Moon cases show, thestated and practiced blue-slip policies can at times be confusing if not contradictory to one another. 100th-103rd Congresses Under the chairmanship of Joseph R. Biden, Jr., the Judiciary Committee continued to followthe blue-slip modifications put in place by Senators Kennedy and Thurmond. However, ChairmanBiden also made changes to the blue-slip policy. During the 101st Congress, Chairman Biden issueda public statement of the committee's blue-slip policy. Shortly after the inauguration of George H.W. Bush in 1989, Chairman Biden sent a letter to the President stating the committee's blue-slippolicy: The return of a negative blue slip will be a significantfactor to be weighed by the committee in its evaluation of a judicial nominee, but it will not precludeconsideration of that nominee unless the Administration has not consulted with both home stateSenators prior to submitting the nomination to the Senate. (44) Chairman Biden's letter represented the first formal, written statement by a JudiciaryCommittee chairman regarding the blue-slip procedure. In that letter, Chairman Biden expressed,in what had only been practiced and not stated by a chairman before, that the committee would nolonger treat a negative blue slip as an absolute means of stopping committee action. Presidentialconsultation with both home-state Senators might be enough to move the nomination throughcommittee even with the presence of a negative blue slip. This was a important event in terms ofoutlining a clear picture of the standards to be used in the blue-slip process. In particular, ChairmanBiden's letter underscored that prior consultation would be a primary factor in evaluating a negativeblue slip. The 1989 nomination of Vaughn R. Walker to be a U.S. District judge for northern Californiamarked the first time that Senator Biden's policy was put to the test. Walker was originallyrecommended to the President by Senator Pete Wilson of California. California's senior SenatorAlan Cranston opposed the nominee. In committee, Senator Cranston returned a negative blue slipto Chairman Biden, who stated that Cranston's opposition would "affect Walker negatively." (45) However, ChairmanBiden's statement evidently meant that only a delay in the committee's proceedings would occur andnot an outright blocking of the nomination. After a committee investigation, Chairman Biden movedahead with the nomination and eventually Walker was reported out of the committee by a 11 to 2vote. (46) Soon afterward,Walker was confirmed by voice vote on November 22, 1989. Chairman Biden made public the standards that the Judiciary Committee would use inconsidering negative blue slips. The committee had previously worked under the policy that anegative blue slip would not necessarily prevent committee action, however, the previous twochairmen had never publicly stated that modification to the blue-slip policy. Moreover, Presidentstended to consult with home-state Senators before this time but by making the requirements publicChairman Biden placed the pre-nomination selection process in the forefront of the confirmationprocess. Therefore, the letter, in stating this expectation, helped to address the question of the blueslip's place in the appointment process. 104th Congress to June 5, 2001, of the 107th Congress After the Republican Party gained control of the Senate in the 1994 elections, JudiciaryChairman Orrin G. Hatch continued Senator Biden's practice of stating publicly the panel's blue-slippolicy. At the start of his chairmanship, Hatch sent a letter to President William J. Clinton's counsel,Abner J. Mikva, stating how the blue-slip system would be observed. In the letter, Chairman Hatchsaid that he would follow the "policy as articulated and practiced by Senator Biden in 1989," (47) which was to "not precludeconsideration" of a nominee "unless the Administration has not consulted with both home stateSenators." Two years later, in a 1997 press release, Chairman Hatch articulated a more detailed accountof his blue-slip policy. This message was a response to his colleagues' frustrations over not receiving"the level of consultation that they have expected." Chairman Hatch began by quoting MajorityLeader George Mitchell (D) on the requirements of executive and legislative consultations onnominations: [O]ne way to avoid such confrontations [between theSenate and the White House] in the future is for the President to engage in meaningful consultationwith the Senate before making significant nominations .... Countless historical examples justifyconsultations; the public supports it; and common sense counsels it ... In an era of dividedgovernment, the choice the two branches face with respect to nominations is the choice we face withrespect to all other matters: cooperation or confrontation .... We are confident that meaningfulconsultation can occur without reducing the role prerogatives of either branch of government, andin a way which more fully informs the President of other points of view prior to rather than after anomination is made. (48) Chairman Hatch went on to state that he had "sent a letter to the White House counsel ...which clearly explains this policy." (49) In that letter, he laid out five circumstances that would promptthe Judiciary Committee to delay or hold up a nomination: (1) failure to give serious consideration to individualsproposed by home state Senators as possible nominees; (2) failure to identify to home state Senators and theJudiciary Committee an individual the President is considering nominating with enough time toallow the Senator to provide meaningful feedback before any formal clearance (i.e., by the ABA orFBI) on the prospective nominee is initiated; (3) after having identified the name of an individual thePresident is considering nominating, failure to (a) seek a home state Senator's feedback, includingany objections the Senator may have to the prospective nominee, at least two weeks before anyformal clearances are initiated, and (b) give that feedback seriousconsideration; (4) failure to notify a home state Senator, and theJudiciary Committee, that formal clearance on a prospective nominee is being initiated despite theSenator's objections; and (5) failure to notify home state Senators, and theJudiciary Committee, before a nomination is actually made, that the President will nominate anindividual. (50) A little over three months after the start of President George W. Bush's administration,several reports surfaced that Chairman Hatch was planning to modify his blue-slip policy. (51) News reports were basedon two Judiciary Committee meetings. The first, held on April 5, 2001, was a confirmation hearingon the nominations of Larry D. Thompson to be Deputy Attorney General and Theodore B. Olsonto be Solicitor General of the United States. After the question and answer period, in response toa question concerning the selection process by Senator Charles E. Schumer, Chairman Hatch statedwhat his blue-slip policy would be under President Bush. (52) Chairman Hatch began by stating that he would institute the same policy that "I had askedthe Clinton Administration to follow," (53) which was based on the 1989 Biden letter to President Bush andhis own 1995 letter to White House Counsel Abner Mikva. Chairman Hatch went on to describe andquote these letters in detail: Senator Biden's letter explained the return of a negativeblue slip ordinarily does not preclude consideration of a judicial nominee, but is given substantialweight by the Committee in its evaluation of the nominee. Senator Biden also emphasized theimportance of pre-nomination consultation by the administration, with home state Senators, stressinghis belief, that, quote, "The nomination process will function more effectively if consultation is takenseriously," unquote. Thus, as Senator Biden also wrote, quote, "If such good-faith consultation hasnot taken place, the Judiciary Committee will treat the return of a negative blue slip by a home stateSenator as dispositive and the nominee will not be considered," unquote. (54) Chairman Hatch stressed the pre-nomination consultation component of the blue slips and went onto note, "the Senate expects genuine good faith consultation by the administration with home stateSenators before a judicial nomination is made, and the administration's failure to consult in genuinegood faith with both home state Senators itself is grounds for a Senator's return of a negative blueslip." Thus, "[w]here the administration has failed to provide good faith pre-nominationconsultation, a negative blue slip is treated as dispositive and precludes Committee considerationof a judicial nominee." (55) Chairman Hatch warned that "if any of our colleagues here wantto veto the President's constitutional prerogative to make his appointments with the advice andconsent of the Senate, that is a different matter, and one which I think diverges from the policy ofthis Committee since as far back as I can remember, and that is 25 years, since Senator Kennedy wasChairman of this committee." (56) Senator Richard J. Durbin questioned the policy laid out by Chairman Hatch. Senator Durbinbegan by stating that "[t]he practice that has been followed in the 4 years that I have been in theSenate is different than what you have just described. In that time, one Senator could stop a nomineefrom a state." Moreover, he added, that "there have also been times when members of the SenateJudiciary Committee, not even from the same state as the nominee, could stop a nomination." (57) Chairman Hatch responded to Senator Durbin's concerns. The discussion did not, however,settle the questions over the committee's blue-slip policy. The exchange ended with theunderstanding that the blue-slip policy would be discussed by the entire Judiciary Committee laterthat month. The subsequent meeting, held in executive session on April 24, 2001, reportedly focused onthe concerns Senator Durbin and other Democratic Senators had relating to the JudiciaryCommittee's blue-slip policy. However, neither side was able to come to an agreement on what thecommittee's blue-slip policy had been or what blue-slip policy would be followed in the 107thCongress. Reportedly, during this meeting, Chairman Hatch asserted that "his policy has alwaysbeen that a negative blue slip from a single senator should be given great weight, but should notautomatically block a nomination." (58) Democratic Senators were reportedly alarmed, stating that it was "an unfair change in [theblue slip] policy." (59) Part of the problem in reaching a compromise was that Democratic Senators claimed that ChairmanHatch had allowed individual Senators to use a blue slip to prevent nominees from being confirmedduring the Clinton Administration. For example, the CQ Daily Monitor reported that "Jesse Helms,R-N.C., used the 'blue slip' to block Clinton's nominees to the bench in his state even when they hadthe approval of Democrat John Edwards." (60) Chairman Hatch scheduled another committee meeting on May 3, 2001. However, newsreports stated that the Democratic members of the Judiciary Committee "walked out of" the meetingbecause "they [were] being shut out of the judicial nominations process." (61) Both parties held newsconferences shortly after to state their position on the matter of blue slips. At the Democratic news conference, Senator Leahy said that Chairman Hatch had changedthe blue-slip policy in place during the Clinton Administration. (62) Senator Leahy read an oldversion of Chairman Hatch's blue slip: "No further proceedings on this nominee will be scheduleduntil both blue slips have been returned by the nominee's home-state senators." (63) Senator Leahy went onto assert, "this was the Republican policy when there was a Democratic president. It should be thesame policy with a Republican president." (64) Chairman Hatch, at the Republican news conference held the same day, answered theDemocratic Senators' assertions by stating, "As I confirmed in two letters to the White House in 1995and 1997, during my tenure as chairman, I continued as a matter of practice and policy to follow thecommittee's blue slip policy of my predecessor, Joe Biden." (65) That policy, ChairmanHatch stated, was a continuation of Senator Kennedy's blue-slip policy, which was "[a] withholdingof a blue slip or a denial of a blue slip or a negative blue slip will have great weight, but it will notbe dispositive." (66) Chairman Hatch continued by stating that the change in blue-slip policy occurred in 1998: [W]hen we had a conflict between two Republicansenators, and I sent a message to them through the blue slip policy and changed it to the point -- and,by the way, in 1998 we were getting zero -- zero -- consultations with the Clinton White House. Isent them a letter saying this is serious problem, and I made it very clear that we couldn't put up withit. And because of the conflict with the two Republican senators, we changed the policy to theconsent of -- to require the blue slips from both, but mainly because of the lack of consultation...." (67) Chairman Hatch defended the 1998 change in the blue-slip policy by stating, "I agreed to follow thepolicy of Biden up till that point [1998], and I still followed it after that point, except for those wherethere was no consultation, and even then would not allow just one senator to stop a nominee." (68) (69) June 6, 2001, to the End of the 107th Congress On June 6, 2001, Senator Leahy took over as Judiciary chairman. Shortly before the Jeffordsparty switch, Senator Leahy and the other Democratic members of the Judiciary Committee statedin an April 27, 2001 letter to White House Counsel Alberto Gonzales how the Senate should beconsulted by the President in terms of pre-nomination review. This letter, sent to Gonzales over amonth before Senator Leahy became chair of the committee, endorsed the 1997 blue-slip policystatement "made by Chairman Hatch." As the letter notes, "the Administration [should] undertaketo incorporate the following consultative procedures into its selection, vetting and nominatingprocesses": 1. The Administration shall give seriousconsideration to individuals proposed byhome state Senators as possible nominees. 2. The Administration shall consult with homestate Senators and the Judiciary Committee(both majority and minority) regardingindividuals the President is consideringnominating with enough time to allowSenators to consider the potential nominee andprovide a meaningful response to theAdministration before any formal clearance(i.e. by the FBI) on the prospective nominee isinitiated. 3. Should the Administration choose to begin aformal clearance process of a nominee despitea home state Senator's objection, theAdministration shall notify the home stateSenators and the Judiciary Committee that thisis the case before the clearance processstarts. 4. When the President has made the finaldecision to nominate an individual, home stateSenators and the Judiciary Committee shall begiven at least one week's notice before theformal nomination ismade. 5. When a nominee is sent to the Senate,supporting documentation for the nominationshall be simultaneously sent to the Senate inorder to expedite the Senate's evaluation of thenominee. 6. The nominee shall be directed by theAdministration to cooperate fully withSenators who seek information regarding thatnomination. (70) Although Senator Leahy's statement was a further refinement of Senator Hatch's policyregarding blue slips in terms of consultation, it was reported that Senator Leahy would follow adifferent policy than Senator Hatch's. For example, the CQ Daily Monitor reported that ChairmanLeahy indicated he "probably will return to the practice of moving ahead with a nomination onlywith approving 'blue slips' from both senators representing the nominee's home state." (71) This report was supportedlater on June 6, 2001, when CQ Weekly reported that, in an interview, Chairman Leahy identifiedhis blue-slip policy: "unless he is satisfied that both senators from the home state of a nominee havebeen consulted by the Bush administration, a nomination will not move." (72) News reports claim that Chairman Leahy not only adhered to the policy stated on June 6,2001, but went further. (73) These reports indicated that Chairman Leahy permitted MichiganDemocratic Senators Carl Levin and Debbie Stabenow to not only block nominations of fellowMichiganders to the Sixth Circuit Court of Appeals, but all nominations to that Circuit. (74) The Legal Times cited anAugust 6, 2001 letter written to Chairman Leahy by Senators Levin and Stabenow asking thechairman to "halt all movement on any nominations to the 6th Circuit." (75) Reportedly, SenatorsLevin and Stabenow "used their blue slips to block confirmation" of two Sixth Circuit nominations,Jeffrey Sutton of Ohio and Deborah Cook of Ohio, during the 107th Congress. (76) Also during the 107th Congress, Chairman Leahy, along with Ranking Member Hatch, agreedto a fundamental change to the blue-slip system. Under their agreement the blue slips would "betreated as public information." (77) The two Senators stated: "[w]e both believe that such opennessin the confirmation process will benefit the Judiciary Committee and the Senate as a whole." Inorder to confirm continuance of this new reform, both Senators also agreed that "this policy ofopenness with regard to 'blue slips' and the blue slip process will continue in the future, regardlessof who is Chairman or which party is in the majority in the Senate." (78) This agreement wasadhered to, and continues, with blue slips publicly available on the Office of Legal Policywebsite. (79) 108th Congress With Senator Hatch once again chairing the Judiciary Committee, it was reported that hewould reinstate his previous blue-slip policy where "a single negative blue slip from a nominee'shome state won't be enough to block a confirmation hearing." (80) Chairman Hatch toldreporters, "I'll give great weight to negative blue slips, but you can't have one senator holding up, forinstance, circuit nominees." (81) Thus, the blue-slip policy in the 108th Congress is that only oneof the home-state Senators must return a positive blue slip before the Judiciary Committee will moveforward with a nomination -- provided that the Administration engages in pre-nominationconsultation with both home-state Senators. The stated policy was followed when, on April 1, 2003, Chairman Hatch granted a hearingfor Carolyn Kuhl of California to be U.S. Circuit Court judge for the Ninth Circuit. (82) The hearing marked thefirst time in the 108th Congress that the Judiciary Committee moved forward with a nominationwithout the support of both home-state Senators: (83) Senator Dianne Feinstein of California had returned a blue slipto the committee. (84) The Kuhl nomination appears to represent a significant change in the blue slip policies betweenChairman Leahy in the 107th Congress and Chairman Hatch in the 108th Congress. During the 107thCongress, Chairman Leahy required both blue slips to be returned, which meant that no action wastaken on Kuhl's nomination. Without the return of California Senator Barbara Boxer's (D) blue slip,Senator Leahy had declined to advance the Kuhl nomination in the 107th Congress. However, in the108th Congress, even without Senator Boxer returning her blue slip, Chairman Hatch held a hearing. Also in the 108th Congress, shortly before the 2003 August recess, Chairman Hatch held ahearing for Henry Saad of Michigan to be U.S. Circuit Court judge for the Sixth Circuit. ChairmanHatch moved forward with the Saad nomination despite the objection of Michigan Senators CarlLevin and Debbie Stabenow. This marked the first reported instance that a nomination with twonegative blue slips has had any committee action since 1985 and only the second known case incommittee history. Senators Levin and Stabenow had returned negative blue slips on March 19,2003. (85) Frequently Asked Questions As this report indicates, there are varying nuances to the Judiciary Committee's blue-slippolicy. During the tenure of different chairmen, a negative blue slip may or may not have permitteda home-state senator from stopping all committee action on a nomination. Even the failure to returna blue slip has called into question the ability of a chairman to move forward on a nomination. Thereis also the question of consultation and the degree to which a President must consult with bothhome-state Senators in the selection of a nomination. Finally, even if one understands the blue-slippolicy and the requirements it places on a President, a particular chairman's own policy may bedifferent in practice than what is stated. The following questions attempt to address some of theseproblems and concerns. What Is a Blue Slip? A blue slip is a Senate Judiciary Committee custom, in which the chairman seeks eitherapproval or disapproval from both home-state Senators. In practice, the chairman will send a bluecolored form, which is called a blue slip, to the Senators of the state where the President hasnominated either a U.S. Circuit or District Court nominee. Depending on the chairman's policy atthe time, a return of one or two negative blue slips by the home-state Senators could stop furtheraction on the nominee and thus prevent confirmation. What Are the Justifications for a Blue-Slip Policy? The practice of using a blue slip can be seen as a way for Senators to have a role in theselection of an individual who may have some impact on his/her state. Thus, when a Presidentsubmits to the Senate individuals who will either fill a federal position in a Senator's state or willrepresent the state in some capacity, the chairman will give a blue slip to home-state Senators so thatthey may express an opinion on the nomination. How Many Committees Have a Blue-Slip Policy? The Senate Committee on the Judiciary is the only committee in either the Senate or theHouse of Representatives that currently employs the blue slip. Yet many committees that have areview function on executive nominations continue to practice, to varying degrees, the custom ofsenatorial courtesy that the blue slip represents. Who Sets the Blue-Slip Policy? The blue-slip policy is set by the chairman of the Judiciary Committee at the outset of everyCongress. In recent years, the chairman has sent a letter to the President stating committee policyon blue slips and expectations the committee has of the President with regard to pre-nominationconsultation with home-state Senators. Each chairman also has the ability to make changes to theblue slip policy whenever he or she deems it appropriate. Why Does the Blue-Slip Policy Change? Each chairman has the prerogative to set blue-slip policy. It generally changes when thereis a change in the party majority. What Is the Blue-Slip Policy in the 108th Congress? The blue-slip policy in the current Congress is that a negative blue slip is given dueconsideration by the chairman but will not prevent future action by the committee unless thePresident has not consulted with both home-state Senators. What Are the Key Benchmark Dates for Blue Slips? The following are some of the more important dates of note for blue slips: 1917 -- first appearance of a blue slip 1917 -- first appearance of a negative blue slip 1922 -- time limit placed on the return of blue slips 1956 -- first formal change in blue-slip policy since itscreation 1979 -- second alteration in blue-slip policy 1989 -- first public statement of the blue-slip policy 1998 -- time limit removed on the return of blue slips 2001 -- first time blue slips made public When Does a Blue Slip Postpone a Nomination Indefinitely? Depending on the chairman's policy during a given Congress, the postponement of a nomineewould either take a return of a negative blue slip or the failure of a Senator to return a blue slip. Seetable on the blue-slip policy of the last six chairmen. Are Blue Slips Public Information? Yes. As part of the June 2001 reorganization agreement, blue slips were made public for thefirst time starting in the 107th Congress. The status of every blue slip for the 108th Congress can befound on the Office of Legal Policy website page. (86) Conclusion The blue slip represents an aspect of senatorial courtesy. Blue-slip policy has undergonevarious changes in its 86-year history. The blue slip started out as a way for the Judiciary Committeechairman to gain information on a judicial nomination. From 1917 to 1956, the blue slip providedhome-state Senators with a means of notifying the chairman if the President selected an individualwho was personally objectionable to them. A negative blue slip did not stop committee action. Untilthe mid-1950s, other Senators would reject a nomination on the Senate floor if the home-stateSenator would stand and state that the nominee was "personally obnoxious." Eventually, the blueslip evolved from an informal committee device once used to gain information on a nominee to animportant device for checking the executive branch in the appointment process. Since 1979, the impact of negative blue slips has varied as leadership in the SenateCommittee on the Judiciary has changed. Some chairmen have permitted committee action on anomination only when both home-state Senators return positive blue slips. However, other chairmenhave proceeded to consider a nomination with receipt of only one positive blue slip. Even thoughrecent chairmen have implemented different blue-slip policies, each has communicated to thePresident the importance of pre-nomination consultation with both home-state Senators. Pre-nomination consultation has been a key expectation of recent chairmen in the evaluation ofnegative blue slips. The President is now expected to consult and involve each home-state Senatorin the pre-nomination phase of the selection process. Without consultation by the White House,chairmen appear to accord greater value to a negative blue slip submitted by a non-consultedhome-state Senator. While the Judiciary chairman controls the impact of a negative blue slip, individual Senatorscan still determine the fate of a judicial nomination after it is reported to the Senate floor. A Senator,or a group of Senators, may choose to either place a hold on or filibuster a nomination. In eachinstance, at least theoretically, a vote can be delayed indefinitely -- thus preventing confirmation ofthe President's nominee. A negative blue slip, therefore, is not the only means available to preventthe confirmation of a judicial nomination by a home-state Senator. This report will be updated to reflect policy changes relating to blue slips. Table 1. Senate Judiciary Committee Blue-Slip Policy by Committee Chairman (1956-2003) a See Charles R. Babcock, "Picking Federal Judges: Merit System v. Pork Bench," Washington Post , November 7, 1978, p. A4; and W. Dale Nelsonand Fred S. Hoffman. Associated Press, January 25, 1979. b See U.S. Congress, Committee on the Judiciary, Selection and Confirmation of Federal Judges: Hearings Before the Senate Committee on theJudiciary . Part I, 96th Cong., 1st Sess., (Washington: GPO, 1979), p. 4. c See U.S. Congress, Senate Committee on the Judiciary, Business Meeting, unpublished committee transcript, 97th Cong., 1st Sess., 1981, p. 6. (Author's files). d See Mike Robinson. Associated Press, May 19, 1989 and Sen. Joseph R. Biden, Jr., Chairman, Committee on the Judiciary, U.S. Senate, letter toPresident George H. W. Bush, The White House, June 6, 1989. (Author's files). e Sen. Orrin G. Hatch, Chairman, Committee on the Judiciary, U.S. Senate, letter to Counsel to the President Abner J. Mikva, The White House,February 3, 1995. (Author's files). f See Sen. Orrin G. Hatch, Chairman, Committee on the Judiciary, letter to Counsel to the President, Charles C. F. Ruff, The White House, April 16,1997. (Author's files). g See Elizabeth A. Palmer and Amy Fagan, "Power Shift at Judiciary Could Be Problem for Bush," CQ Daily Monitor , May 24, 2001, p. 3; and Elizabeth A. Palmer, "Senate GOP Backs Down From Dispute Over Handing of Nominees," CQ Weekly , June 9, 2001, p. 1360. h Letter from Senators Patrick Leahy and Orrin Hatch, inserted material, Congressional Record , vol. 147, June 29, 2001. See also Helen Dewar, "SenateReorganization Finalized; Democrats Pledge to Follow Tradition on Court Nominees," Washington Post , June 30, 2001, p. A11; and AudreyHudson, "Republicans Back Bench-picks Deal; California Democrats Given Key Role," Washington Times , June 10, 2001, p. A03. i See Jennifer A. Dlouhy, "Blue Slip or Not, Hatch Holds Judiciary Panel Hearing on Bush Court Nominee," CQ Today , July 31, 2003, p. 8; and HelenDewar, "Battle Over Judges Continues," Washington Post , July 31, 2003, p. A17. Additional Resources Chase, Harold W. Federal Judges: The Appointing Process (Minneapolis:University of Minnesota Press, 1972). Denning, Brannon P. "The Judicial Confirmation Process and the Blue Slip." Judicature 85:218-226, 2002. ----. "The 'Blue Slip': Enforcing The Norms of the Judicial Confirmation Process." William & Mary Bill of Rights Journal. 10: 75-101, 2001. Goldman, Sheldon. Picking Federal Judges (New Haven, CT: Yale University Press,1997). Grossman, Joel B. Lawyers and Judges: The Politics of Judicial Selection (NewYork: John Wiley & Sons, 1965). Harris, Joseph P. The Advice and Consent of the Senate: A Study of the Confirmationof Appointments by the United States Senate (Berkeley, CA: University ofCalifornia Press, 1958). Mackenzie, G. Calvin. The Politics of Presidential Appointments (New York: TheFree Press, 1981). Slotnick, Elliot E. "Reforms in Judicial Selection: Will They Affect the Senate'srole? (Part I)" Judicature 64:60-73, 1980.

The blue-slip process had its genesis in the Senate tradition of senatorial courtesy. Under thisinformal custom, the Senate would refuse to confirm a nomination unless the nominee had beenapproved by the home-state Senators of the President's party. The Senate Committee on theJudiciary created the blue slip (so called because of its color) out of this practice in the early 1900s. Initially, the blue slip permitted Senators, regardless of party affiliation, to voice their opinion on aPresident's nomination to a district court in their state or to a circuit court judgeship traditionallyappointed from their home state. Over the years, the blue slip has evolved into a tool used bySenators to delay, and often times prevent, the confirmation of nominees they find objectionable. The following six periods highlight the major changes that various chairmen of the JudiciaryCommittee undertook in their blue-slip policy: From 1917 through 1955: The blue-slip policy allowed home-state Senatorsto state their objections but committee action to move forward on a nomination. If a Senatorobjected to his/her home-state nominee, the committee would report the nominee adversely to theSenate, where the contesting Senator would have the option of stating his/her objections to thenominee before the Senate would vote on confirmation. From 1956 through 1978: A single home-state Senator could stop allcommittee action on a judicial nominee by either returning a negative blue slip or failing to returna blue slip to the committee. From 1979 to mid-1989: A home-state Senator's failure to return a blue slipwould not necessarily prevent committee action on a nominee. From mid-1989 through June 5, 2001: In a public letter (1989) on thecommittee's blue-slip policy, the chairman wrote that one negative blue slip would be "a significantfactor to be weighed" but would "not preclude consideration" of a nominee "unless theAdministration has not consulted with both home state Senators." The committee would take noaction, regardless of presidential consultation, if both home-state Senators returned negative blueslips. From June 6, 2001, to 2003: The chairman's blue-slip policy allowedmovement on a judicial nominee only if both home-state Senators returned positive blue slips to thecommittee. If one home-state Senator returned a negative blue slip, no further action would be takenon the nominee. 2003: A return of a negative blue slip by one or both home-state Senators doesnot prevent the committee from moving forward with the nomination -- provided that theAdministration has engaged in pre-nomination consultation with both of the home-stateSenators. The blue-slip process has been the subject of growing scholarly and legal debate; a selectedlist of reading material is included at the end of this report. This report will be updated to reflect future blue-slip policy developments.

Ocean Resource Jurisdiction Under the United Nations Convention on the Law of the Sea, coastal nations are entitled to exercise varying levels of authority over a series of adjacent offshore zones. Nations may claim a 12-nautical-mile territorial sea, over which they may exercise rights comparable to, in most significant respects, sovereignty. Nations may also claim an area, termed the contiguous zone, which extends 24 nautical miles from the coast (or baseline). Coastal nations may regulate their contiguous zones, as necessary, to protect their territorial seas and to enforce their customs, fiscal, immigration, and sanitary laws. Further, in the contiguous zone and an additional area, the exclusive economic zone (EEZ), coastal nations have sovereign rights to explore, exploit, conserve, and manage marine resources and assert jurisdiction over i. the establishment and use of artificial islands, installations and structures; ii. marine scientific research; and iii. the protection and preservation of the marine environment. The EEZ extends 200 nautical miles from the baseline from which a nation's territorial sea is measured (usually near the coastline). This area overlaps substantially with another offshore area designation, the continental shelf. International law defines a nation's continental shelf as the seabed and subsoil of the submarine areas that extend beyond either "the natural prolongation of [a coastal nation's] land territory to the outer edge of the continental margin, or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance." In general, however, under UNCLOS, a nation's continental shelf cannot extend beyond 350 nautical miles from its recognized coastline regardless of submarine geology. In this area, as in the EEZ, a coastal nation may claim "sovereign rights" for the purpose of exploring and exploiting the natural resources of its continental shelf. Federal Jurisdiction While a signatory to UNCLOS, the United States has not ratified the treaty. Regardless, many of its provisions are now generally accepted principles of customary international law and, through a series of executive orders, the United States has claimed offshore zones that are virtually identical to those described in the treaty. In a series of related cases long before UNCLOS, the U.S. Supreme Court confirmed federal control of these offshore areas. Federal statutes also refer to these areas and, in some instances, define them as well. Of particular relevance, the primary federal law governing offshore oil and gas development indicates that it applies to the "outer Continental Shelf," which it defines as "all submerged lands lying seaward and outside of the areas ... [under state control] and of which the subsoil and seabed appertain to the United States and are subject to its jurisdiction and control...." Thus, the U.S. Outer Continental Shelf (OCS) would appear to comprise an area extending at least 200 nautical miles from the official U.S. coastline and possibly farther where the geological continental shelf extends beyond that point. The federal government's legal authority to provide for and to regulate offshore oil and gas development therefore applies to all areas under U.S. control except where U.S. waters have been placed under the primary jurisdiction of the states. State Jurisdiction In accordance with the federal Submerged Lands Act of 1953 (SLA), coastal states are generally entitled to an area extending three geographical miles from their officially recognized coast (or baseline). In order to accommodate the claims of certain states, the SLA provides for an extended three-marine-league seaward boundary in the Gulf of Mexico if a state can show such a boundary was provided for by the state's "constitution or laws prior to or at the time such State became a member of the Union, or if it has been heretofore approved by Congress." After enactment of the SLA, the Supreme Court of the United States held that the Gulf coast boundaries of Florida and Texas do extend to the three-marine-league limit; other Gulf coast states were unsuccessful in their challenges. Within their offshore boundaries, coastal states have "(1) title to and ownership of the lands beneath navigable waters within the boundaries of the respective states, and (2) the right and power to manage, administer, lease, develop and use the said lands and natural resources...." Accordingly, coastal states have the option of developing offshore oil and gas within their waters; if they choose to develop, they may regulate that development. Coastal State Regulation State laws governing oil and gas development in state waters vary significantly from jurisdiction to jurisdiction. In addition to state statutes and regulations aimed specifically at oil and gas development, a variety of other laws could impact offshore development, such as environmental and wildlife protection laws and coastal zone management regulation. In states that authorize offshore oil and gas leasing, the states decide which offshore areas under their jurisdiction will be opened for development. Federal Resources The primary federal law governing development of oil and gas in federal waters is the Outer Continental Shelf Lands Act (OCSLA). As stated above, the OCSLA codifies federal control of the OCS, declaring that the submerged lands seaward of the state's offshore boundaries appertain to the U.S. federal government. More than simply declaring federal control, the OCSLA has as its primary purpose "expeditious and orderly development [of OCS resources], subject to environmental safeguards, in a manner which is consistent with the maintenance of competition and other national needs...." To effectuate this purpose, the OCSLA extends application of federal laws to certain structures and devices located on the OCS; provides that the law of adjacent states will apply to the OCS when it does not conflict with federal law; and, significantly, provides a comprehensive leasing process for certain OCS mineral resources and a system for collecting and distributing royalties from the sale of these federal mineral resources. The OCSLA thus provides comprehensive regulation of the development of OCS oil and gas resources. Federal Offshore Energy Development Moratoria and Withdrawals In general, the OCSLA requires the federal government to prepare, revise, and maintain an oil and gas leasing program. However, at various times some offshore areas have been withdrawn from disposition under the OCSLA. These withdrawals have usually fallen under three broad categories applicable to OCS oil and gas leasing: those imposed directly by Congress, those imposed by the President under authority granted by the OCSLA, and other statutory or administrative protections intended to protect marine or coastal resources. Congressional/Legislative Moratoria Appropriations-based congressional moratoria first appeared in the appropriations legislation for FY1982. The language of the appropriations legislation barred the expenditure of funds by the Department of the Interior (DOI) for leasing and related activities in certain areas in the OCS. Similar language appeared in every DOI appropriations bill through FY2008. However, starting with FY2009, Congress has not included this language in appropriations legislation. As a result, the Bureau of Ocean Energy Management (BOEM), the agency within the Department of the Interior that administers and regulates the OCS oil and gas leasing program, is free to use appropriated funds to fund all leasing, preleasing, and related activities in any OCS areas not withdrawn by other legislation or by executive order. Language used in the legislation that funds DOI in the future will determine whether, and in what form, budget-based restrictions on OCS leasing might return. The Gulf of Mexico Energy Security Act of 2006 (GOMESA), enacted as part of the Omnibus Tax Relief and Health Care Act of 2006, is another example of a legislative moratorium. The act created a new congressional moratorium over "leasing, preleasing or any related activity" in portions of the OCS. The 2006 legislation explicitly permits oil and gas leasing in areas of the Gulf of Mexico, but also established a new moratorium on preleasing, leasing, and related activity in the eastern Gulf of Mexico through June 30, 2022. This moratorium is independent of any appropriations-based congressional moratorium, and thus would continue even if Congress reinstated the annual appropriations-based moratorium. OCSLA Section 12(a) In addition to the congressional moratoria, Section 12(a) of the OCSLA authorizes the President to issue moratoria on offshore drilling in many areas. The first withdrawal covering substantial offshore areas was issued by President George H. W. Bush on June 26, 1990. This memorandum, issued pursuant to the authority vested in the President under Section 12(a) of the OCSLA, placed under presidential moratoria those areas already under an appropriations-based moratorium pursuant to P.L. 105-83 , the Interior Appropriations legislation in place at that time. That appropriations-based moratorium prohibited "leasing and related activities" in the areas off the coast of California, Oregon, and Washington, and the North Atlantic and certain portions of the eastern Gulf of Mexico. The legislation further prohibited leasing, preleasing, and related activities in the North Aleutian basin, other areas of the eastern Gulf of Mexico, and the Mid- and South Atlantic. The presidential moratorium was extended by President Bill Clinton by a memorandum dated June 12, 1998. On July 14, 2008, President George W. Bush issued an executive memorandum that rescinded the executive moratorium on offshore drilling created by President George H. W. Bush in 1990 and renewed by President Bill Clinton in 1998. President George W. Bush's memorandum revised the language of the previous memorandum to withdraw from disposition only areas designated as marine sanctuaries. President Barack Obama exercised the authority granted by Section 12(a) of the OCSLA to issue moratoria on exploration and production activities in certain areas off the coast of Alaska. On March 31, 2010, President Obama issued an executive memorandum pursuant to his Section 12(a) authority to "withdraw from disposition by leasing through June 30, 2017, the Bristol Bay area of the North Aleutian Basin in Alaska." This withdrawal was superseded on December 16, 2014, with a broader withdrawal "for a time period without specific expiration the area of the Outer Continental Shelf currently designated by the Bureau of Ocean Energy Management as the North Aleutian Basin Planning Area ... including Bristol Bay." A month later, President Obama once again exercised his authority under Section 12(a) of the OCSLA to withdraw certain areas in the Chukchi and Beaufort Seas off the coast of Alaska. Finally, on December 16, 2016, President Obama issued two more withdrawals under Section 12(a) of the OCSLA. One of these withdrew from disposition the entirety of the designated Chukchi Sea and Beaufort Sea Planning areas; the other withdrew from disposition areas "associated with 26 major canyons and canyon complexes offshore the Atlantic Coast." In 2017, President Trump issued Executive Order 13795, which modified the July 2008, January 2015, and December 2016 withdrawals to eliminate all of the areas withdrawn by those orders except "those areas of the Outer Continental Shelf designated as of July 14, 2008 as Marine Sanctuaries under the Marine Protection, Research and Sanctuaries Act of 1972." As a result, only the North Aleutian Basin Planning Area and Bristol Bay, along with the aforementioned Marine Sanctuaries, are currently withdrawn from disposition pursuant to Section 12 of the OCSLA. Other Statutory or Administrative Protections While the OCSLA is the primary statute governing federal offshore energy exploration and production, other statutes play a role in determining what activities may take place in various offshore areas. All offshore activity must comply with generally applicable federal laws, those that protect the environment and public health. In addition, some statutes and administrative actions protect specific offshore regions from certain activities. For example, the National Marine Sanctuaries Act authorizes the Secretary of Commerce to "designate any discrete area of the marine environment as a national marine sanctuary" based on the criteria set forth in the act. It is unlawful to "destroy, cause the loss of, or injure any sanctuary resource," a prohibition which effectively prohibits oil and natural gas exploration and production in the area, although as noted above these areas have also been withdrawn pursuant to Section 12 of the OCSLA. Similarly, Presidents have designated a handful of "marine national monuments" pursuant to their authority under the Antiquities Act. Such designations may explicitly or implicitly prohibit oil and natural gas exploration and production. Leasing and Development In 1978, the OCSLA was significantly amended to increase the role of coastal states in the leasing process. The amendments also revised the bidding process and leasing procedures; set stricter criteria to guide the environmental review process; and established new safety and environmental standards to govern drilling operations. The OCS leasing process consists of four distinct stages: (1) the five-year planning program; (2) preleasing activity and the lease sale; (3) exploration; and (4) development and production. The Five-Year Program Section 18 of the OCSLA directs the Secretary of the Interior to prepare a five-year leasing program that governs any offshore leasing that takes place during the period of coverage. Each five-year program establishes a schedule of proposed lease sales, providing the timing, size, and general location of the leasing activities. This program is to be based on multiple considerations, including the Secretary's determination as to what will best meet national energy needs for the five-year period and the extent of potential economic, social, and environmental impacts associated with development. During the development of the program, the Secretary must solicit and consider comments from the governors of affected states, and at least 60 days prior to publication of the program in the Federal Register , the Secretary must submit the program to the governor of each affected state for further comments. After publication, the Attorney General is also authorized to submit comments regarding potential effects on competition. Subsequently, at least 60 days prior to its approval, the Secretary must submit the program to Congress and the President, along with any received comments and the reasons for rejecting any comment. Once the program is approved by the Secretary, areas covered by the program become available for leasing, consistent with the terms of the program. The OCSLA also requires the Secretary to "review the leasing program approved under this section at least once each year" and authorizes the Secretary to "revise and re-approve such program, at any time." However, any "significant" revisions must comply with the requirements applicable to the original five-year program. The development of the five-year program is considered a major federal action significantly affecting the quality of the human environment and as such requires preparation of an environmental impact statement (EIS) under the National Environmental Policy Act (NEPA). Thus, the NEPA review process complements and informs the preparation of a five-year program under the OCSLA. The current Five-Year Program received final approval from the Secretary of the Interior on January 17, 2017. The Program schedules 11 potential lease sales, "ten in portions of the three Planning Areas in the Gulf of Mexico not subject to moratorium and one in the Cook Inlet offshore Alaska." The Program notes that "[t]hese areas have high resource potential, existing infrastructure and Federal or state leases, and more manageable potential environmental and coastal conflicts with development" than other areas not included in the Program. The Trump Administration has proposed a superseding Five-Year Program, and published a Draft Proposed Program for 2019-2024 in January 2018. The planning areas and proposed dates of lease sales in each area are depicted in Figure 1 and Figure 2 below, while Figure 3 depicts the process for consideration and adoption of a Five-Year Program and the accompanying Programmatic Environmental Impact Statement. Lease Sales The lease sale process involves multiple steps as well. Leasing decisions are impacted by a variety of federal laws; however, Section 8 of the OCSLA and its implementing regulations establish the mechanics of the leasing process. The process begins when the Director of BOEM publishes a call for information and nominations regarding potential lease areas. The Director is authorized to receive and consider these various expressions of interest in specific parcels and comments on which areas should receive special concern and analysis. The Director then considers all available information and performs environmental analysis under NEPA to craft a list of areas recommended for leasing and any proposed lease stipulations. BOEM submits the list to the Secretary of the Interior and, upon the Secretary's approval, publishes it in the Federal Register and submits it to the governors of potentially affected states. The OCSLA and its regulations authorize the governor of an affected state and the executive of any local government within an affected state to submit to the Secretary any recommendations concerning the size, time, or location of a proposed lease sale within 60 days after notice of the lease sale. The Secretary must accept the governor's recommendations (and has discretion to accept a local government executive's recommendations), if the Secretary determines that the recommendations reasonably balance the national interest and the well-being of the citizens of an affected state. The Director of BOEM publishes the approved list of lease sale offerings in the Federal Register (and other publications) at least 30 days prior to the date of the sale. This notice must describe the areas subject to the sale and any stipulations, terms, and conditions of the sale. The bidding is to occur under conditions described in the notice and must be consistent with certain baseline requirements established in the OCSLA. Although the statute establishes base requirements for the competitive bidding process and sets forth a variety of possible bid formats, some of these requirements are subject to modification at the discretion of the Secretary. Before the acceptance of bids, the Attorney General is also authorized to review proposed lease sales to analyze any potential effects on competition, and may subsequently recommend action to the Secretary of the Interior as may be necessary to prevent violation of antitrust laws. The Secretary is not bound by the Attorney General's recommendation, and likewise, the antitrust review process does not affect private rights of action under antitrust laws or otherwise restrict the powers of the Attorney General or any other federal agency under other law. Assuming compliance with these bidding requirements, the Secretary may grant a lease to the highest bidder, although deviation from this standard may occur under some circumstances. In addition, the OCSLA prescribes many minimum conditions that all lease instruments must contain. The statute supplies generally applicable minimum royalty or net profit share rates, as necessitated by the bidding format adopted, subject, under certain conditions, to secretarial modification. Several provisions authorize royalty reductions or suspensions. Royalty rates or net profit shares may be reduced below the general minimums or eliminated to promote increased production. For leases located in "the Western and Central Planning Areas of the Gulf of Mexico and the portion of the Eastern Planning Area of the Gulf of Mexico encompassing whole lease blocks lying west of 87 degrees, 30 minutes West longitude and in the Planning Areas offshore Alaska," a broader authority is also provided, allowing the Secretary, with the lessee's consent, to make "other modifications" to royalty or profit share requirements to encourage increased production. Royalties may also be suspended under certain conditions by BOEM pursuant to the Outer Continental Shelf Deep Water Royalty Relief Act, discussed infra . The OCSLA generally requires successful bidders to furnish a variety of up-front payments and performance bonds upon being granted a lease. Additional provisions require that leases provide that certain amounts of production be sold to small or independent refiners. Further, leases must contain the conditions stated in the sale notice and provide for suspension or cancellation of the lease in certain circumstances. Finally, the law indicates that a lease entitles the lessee to explore for, develop, and produce oil and gas, conditioned on applicable due diligence requirements and the approval of a development and production plan, discussed below. Exploration Lessees planning exploration for oil and gas pursuant to an OCSLA lease must prepare and comply with an approved exploration plan. Detailed information and analysis must accompany the submission of an exploration plan, and, upon receipt of a complete proposed plan, the relevant BOEM regional supervisor is required to submit the plan to the governor of an affected state and the state's Coastal Zone Management agency. Under the Coastal Zone Management Act, federal actions and federally permitted projects, including those in federal waters, must be submitted for state review. The purpose of this review is to ensure consistency with state coastal zone management programs as contemplated by the federal law. When a state determines that a lessee's plan is inconsistent with its coastal zone management program, the lessee must either reform its plan to accommodate those objections and resubmit it for BOEM and state approval or succeed in appealing the state's determination to the Secretary of Commerce. Simultaneously, the BOEM regional supervisor is to analyze the environmental impacts of the proposed exploration activities under NEPA; however, regulations prescribe that BOEM complete its action on the plan review within 30 days. Hence, extensive environmental review at this stage may be constrained or rely heavily upon previously prepared NEPA documents. If the regional supervisor disapproves the proposed exploration plan, the lessee is entitled to a list of necessary modifications and may resubmit the plan to address those issues. Even after an exploration plan has been approved, drilling associated with exploration remains subject to the relevant BOEM district supervisor's approval of an application for a permit to drill. This approval hinges on a more detailed review of the specific drilling plan filed by the lessee. Development and Production While exploration often will involve drilling wells, the scale of such activities is likely to increase significantly during the development and production phase. Accordingly, additional regulatory review and environmental analysis are typically required before this stage begins. Operators are required to submit a Development and Production Plan for areas where significant development has not occurred before or a less extensive Development Operations Coordination Document for those areas, such as certain portions of the Western Gulf of Mexico, where significant activities have already taken place. The information required to accompany submission of these documents is similar to that required at the exploration phase, but must address the larger scale of operations. As with the processes outlined above, the submission of these documents complements any environmental analysis required under NEPA. It may not always be necessary to prepare a new EIS at this stage, and environmental analysis may be tied to previously prepared NEPA documents. In addition, affected states are allowed, under the OCSLA, to submit comments on proposed Development and Production Plans and to review these plans for consistency with state coastal zone management programs. Also, if the drilling project involves "non-conventional production or completion technology, regardless of water depth," applicants might also submit a Deepwater Operations Plan (DWOP) and a Conceptual Plan. This allows BOEM to review the engineering, safety, and environmental impacts associated with these technologies. As with the exploration stage, actual drilling requires approval of an Application for Permit to Drill (APD). An APD focuses on the specifics of particular wells and associated machinery. Thus, an application must include a plat indicating the well's proposed location, information regarding the various design elements of the proposed well, and a drilling prognosis, among other things. Lease Suspension and Cancellation The OCSLA authorizes the Secretary of the Interior to promulgate regulations on lease suspension and cancellation. The Secretary's discretion over the use of these authorities is specifically limited to a set number of circumstances established by the OCSLA. These circumstances are described below. Suspension of otherwise authorized OCS activities may generally occur at the request of a lessee or at the direction of the relevant BOEM Regional Supervisor, given appropriate justification. Under the statute, a lease may be suspended (1) when it is in the national interest; (2) to facilitate proper development of a lease; (3) to allow for the construction or negotiation for use of transportation facilities; or (4) when there is "a threat of serious, irreparable, or immediate harm or damage to life (including fish and other aquatic life), to property, to any mineral deposits (in areas leased or not leased), or to the marine, coastal, or human environment...." The regulations also indicate that leases may be suspended for other reasons, including (1) when necessary to comply with judicial decrees; (2) to allow for the installation of safety or environmental protection equipment; (3) to carry out NEPA or other environmental review requirements; or (4) to allow for "inordinate delays encountered in obtaining required permits or consents...." Whenever suspension occurs, the OCSLA generally requires that the term of an affected lease or permit be extended by a length of time equal to the period of suspension. This extension requirement does not apply when the suspension results from a lessee's "gross negligence or willful violation of such lease or permit, or of regulations issued with respect to such lease or permit...." If a suspension period reaches five years, the Secretary may cancel a lease upon holding a hearing and finding that (1) continued activity pursuant to a lease or permit would "probably cause serious harm or damage to life (including fish and other aquatic life), to property, to any mineral (in areas leased or not leased), to the national security or defense, or to the marine, coastal, or human environment"; (2) "the threat of harm or damage will not disappear or decrease to an acceptable extent within a reasonable period of time"; and (3) "the advantages of cancellation outweigh the advantages of continuing such lease or permit in force...." Upon cancellation, the OCSLA entitles lessees to certain damages. The statute calculates damages at the lesser of (1) the fair value of the canceled rights on the date of cancellation or (2) the excess of the consideration paid for the lease, plus all of the lessee's exploration- or development-related expenditures, plus interest, over the lessee's revenues from the lease. The OCSLA also indicates that the "continuance in effect" of any lease is subject to a lessee's compliance with the regulations issued pursuant to the OCSLA, and failure to comply with the provisions of the OCSLA, an applicable lease, or the regulations may authorize the Secretary to cancel a lease as well. Under these circumstances, a nonproducing lease can be canceled if the Secretary sends notice by registered mail to the lease owner and the noncompliance with the lease or regulations continues for a period of 30 days after the mailing. Similar noncompliance by the owner of a producing lease can result in cancellation after an appropriate proceeding in any U.S. district court with jurisdiction as provided for under the OCSLA. Lease Assignments and Transfers The OCSLA also provides the framework for federal oversight of transfers of offshore oil and gas exploration and production leases. Section 5(b) of the OCSLA states that "[t]he issuance and continuance in effect of any lease, or of any assignment or other transfer of any lease, under the provisions of this Act shall be conditioned upon compliance with regulations issued under this Act." The OCSLA further provides that "[n]o lease issued under this Act may be sold, exchanged, assigned, or otherwise transferred except with the approval of the Secretary [of the Interior, whose authority is exercised by BOEM]. Prior to any such approval, the Secretary shall consult with and give due consideration to the views of the Attorney General." These two requirements—of continued compliance with the OCSLA and the regulations issued pursuant to it, and of obtaining BOEM approval prior to transfer—are the only restrictions placed upon transfers by the OCSLA. The terms of the lease itself create obligations for offshore oil and natural gas exploration and production lessees. BOEM employs a form lease, so all lessees are bound by virtually identical lease terms and conditions. With respect to transfers, Section 20 of the form lease provides that "[t]he lessee shall file for approval with the appropriate regional BOEM OCS office any instrument of assignment or other transfer of any rights or ownership interest in this lease in accordance with applicable regulations." This filing requirement is the only new restriction or condition placed on transfers by the terms of the lease. However, the regulations issued by the agency pursuant to its OCSLA authority set forth more detailed requirements applicable to transfers of all or part of the lease. Royalty Collection and Revenue Distribution As noted above, most leases obligate the lessee to pay royalties based on the "amount or value of the production saved, removed or sold" by the lessee. Most leases obligate the lessee to pay a royalty rate of at least 12.5%, although some leases are exempt from payment pursuant to a statutory or administratively determined exemption. The Office of Natural Resources Revenue (ONRR) is the agency tasked with collection and disbursement of royalties from both onshore and offshore oil and gas production on federal lands. Most of the revenue collected by the ONRR from royalty payments and any other payments associated with offshore oil and gas leases is "deposited in the Treasury of the United States and credited to miscellaneous receipts." However, a few statutory provisions direct some revenue to state and local governments in an effort to offset the disparate impacts of some offshore oil and gas exploration and production activity borne by coastal states and localities. Section 8(g) of OCSLA addresses leasing details for "lands containing tracts wholly or partially within three nautical miles of the seaward boundary of any coastal State," that is, the first three nautical miles of federal waters which border on state waters and, in most cases, are within several miles of the state's shoreline. Under the terms of Section 8(g), all revenue from leases wholly within that three-nautical-mile range must be deposited in a dedicated account in the Treasury. For leases partially within the three-nautical-mile range of state waters, a corresponding portion of the revenue from the lease must be deposited in the special account. The Secretary then must transfer to the coastal state 27% of the revenues collected from leases near their coastal waters. If the tract in question lies only partly within the first three nautical miles of federal waters, the disbursement to the coastal state is adjusted based on the percentage of the tract that lies within those three nautical miles. OCSLA also establishes a procedure for the resolution of boundary disputes. Certain revenue from certain leases in the Gulf of Mexico is also diverted from the general treasury by operation of law. Under GOMESA, 50% of "qualified Outer Continental Shelf revenues" are to be deposited into a special account. The Secretary then must disburse 75% of the revenue deposited in that special account (or 37.5% of the total revenue) to the "Gulf Producing States" in accordance with a formula based in part on each state's distance from the lease tract, including further allocation to political subdivisions within the states. The states and political subdivisions are free to spend that money for any of the "authorized uses" set forth in GOMESA, including mitigation of various types of environmental harms that may result from offshore oil and gas exploration and production. The remaining 25% of the revenue deposited in the special account (or 12.5% of the total revenue) is directed to the states for expenditure in accordance with Section 6 of the Land and Water Conservation Fund Act of 1965, which provides for apportionment of funds to the states for purposes of land acquisition, planning, and development for recreational purposes. Legal Challenges to Offshore Leasing Multiple statutes govern aspects of offshore oil and gas development, and therefore, may give rise to legal challenges. The Marine Mammal Protection Act, Endangered Species Act, and other environmental laws provide mechanisms for challenging actions associated with offshore oil and gas production in the past. Of primary interest here, however, are legal challenges to agency action with respect to the planning, leasing, exploration, and development phases under the procedures mandated by the OCSLA itself and the related environmental review required by the National Environmental Policy Act. The following paragraphs provide an overview of the existing case law, including legal challenges to the five-year plan and other aspects of the leasing process as well as controversies over revenue collection and distribution. Suits Under the Outer Continental Shelf Lands Act Jurisdiction to review agency actions taken in approving the five-year program is vested in the U.S. Court of Appeals for the D.C. Circuit pursuant to Section 23 of the OCSLA, subject to appellate review by writ of certiorari from the U.S. Supreme Court. A few challenges to five-year programs have been brought. The first, California ex. rel. Brown v. Watt , involved a variety of challenges to the 1980-1985 program and established the standard for review for legal challenges to Five-Year Programs. When reviewing "findings of ascertainable fact made by the Secretary," the court required the Secretary's decisions to be supported by "substantial evidence" as per the language of Section 23(c)(6) of the OCSLA. However, the court noted that many of the decisions that inform the Five-Year Program involve policy determinations, and held that such determinations should be subject to a less searching standard. The court summarized this review standard for challenges to Five-Year Programs: When reviewing findings of ascertainable fact made by the Secretary, the substantial evidence test guides our inquiry. When reviewing the policy judgments made by the Secretary, including those predictive and difficult judgmental calls the Secretary is called upon to make, we will subject them to searching scrutiny to ensure that they are neither arbitrary nor irrational—in other words, we must determine whether "the decision is based on a consideration of the relevant factors and whether there has been a clear error of judgment." The court also noted that statutory interpretation by the agency would be subject to stricter scrutiny than either fact or policy judgments because "the interpretation of statutes is a matter which ultimately lies in the province of the judiciary." Based on these standards the court vacated a number of the Secretary's findings in the 1980-1985 Five-Year Program and remanded to the Secretary for revision of the Program. Although the reference to "arbitrary" administrative decisionmaking is reminiscent of the review standard for challenges to agency action under the Administrative Procedure Act (APA), the court explained in a footnote that the agency's decisions to reject certain state recommendations before promulgating the Five-Year Program were not subject to APA review. The court noted the following: First, the Outer Continental Shelf Lands Act itself contains provisions requiring the Secretary to respond to state comments and to explain and articulate his decision ... We see no reason to engraft other provisions onto those found in this comprehensive statute ... Second, the APA itself exempts from its reach "matters relating to agency management or personnel or to public property, loans, grants, benefits, or contracts." ... Since the leasing program related to agency management of the OCS, which is undoubtedly public property ... the APA itself would appear to take the leasing program outside its scope. The standards for review outlined in Watt have been upheld in subsequent litigation related to the five-year program. Litigation under the OCSLA has also challenged actions taken during the leasing phase. As described above, the OCSLA authorizes states to submit comments during the notice of lease sale stage and directs the Secretary to accept a state's recommendations if they "provide for a reasonable balance between the national interest and the well-being of the citizens of the affected State." According to the cases from the Ninth Circuit Court of Appeals, because the OCSLA does not provide clear guidance on how to balance the national interest with state considerations, agency action will generally be upheld so long as "some consideration of the relevant factors ..." takes place. Cases from the federal courts in Massachusetts, including a decision affirmed by the First Circuit Court of Appeals, have, while embracing this deferential standard, found the Secretary's balancing of interests insufficient. However, it should be noted that the Massachusetts cases reviewed agency action that was not supported by explicit analysis of the sort challenged in the Ninth Circuit. Thus, it is possible that, given a more thorough record of the Secretary's decision, these courts may afford more significant deference to the Secretary's determination. Other litigation has focused on mandatory royalty relief provisions. In Kerr-McGee Oil & Gas Corp. v. Allred , the plaintiff, an oil and gas company operating offshore wells in the Gulf of Mexico pursuant to federal leases, challenged actions by the department to collect royalties on deepwater oil and gas production. The plaintiff alleged the department does not have authority to assess royalties based on an interpretation of amendments to the OCSLA found in the 1995 Outer Continental Shelf Deep Water Royalty Relief Act (DWRRA), that the act requires royalty-free production until a statutorily prescribed threshold volume of oil or gas production has been reached, and does not permit a price-based threshold for this royalty relief. The DWRRA separates leases into three categories based on date of issuance. These categories are (1) leases in existence on November 28, 1995; (2) leases issued after November 28, 2000; and (3) leases issued in between those periods, that is, during the first five years after the act's enactment. The third category of leases is the source of current controversy. According to Kerr-McGee, its leases, which were issued during the initial five-year period after the DWRRA's enactment, are subject to different legal requirements from those applicable to the other two categories. Kerr-McGee argued that the department has a nondiscretionary duty under the DWRRA to provide royalty relief on its deepwater leases, and that the statute does not provide an exception to this obligation based on any preset price threshold. To the extent any price threshold has been included in these leases, Kerr-McGee argued that such provisions are contrary to DOI's statutory authority and unenforceable. Section 304 of the DWRRA, which addresses deepwater leases issued within five years after the DWRRA's enactment, directs that such leases use the bidding system authorized in Section 8(a)(1)(H) of the OCSLA, as amended by the DWRRA. Sec tion 304 of the DWRRA also stipulates that leases issued during the five-year post-enactment time frame must provide for royalty suspension on the basis of volume. Specifically, Section 304 states the following: [A]ny lease sale within five years of the date of enactment of this title, shall use the bidding system authorized in section 8(a)(1)(H) of the Outer Continental Shelf Lands Act, as amended by this title, except that the suspension of royalties shall be set at a volume of not less than the following: (1) 17.5 million barrels of oil equivalent for leases in water depths of 200 to 400 meters; (2) 52.5 million barrels of oil equivalent for leases in 400 to 800 meters of water; and (3) 87.5 million barrels of oil equivalent for leases in water depths greater than 800 meters. It is possible to interpret this provision as authorizing leases issued during the five-year period to contain only royalty suspension provisions that are based on production volume with no allowance at all for a price-related threshold in addition. Such an intent might be gleaned from the language of the quoted section alone; in this provision, Congress provides for a specific royalty suspension method and does not clearly authorize the Secretary to alter or supplement it. Kerr-McGee's challenge to the Secretary's authority to impose price-based thresholds on royalty suspension was based on this interpretation of the statutory language above. The U.S. District Court for the Western District of Louisiana agreed with Kerr-McGee's interpretation of the language discussed above. The court found that the DWRRA allowed only for volumetric thresholds on royalty suspension for leases issued between 1996 and 2000, and that the Secretary did not have authority under the DWRRA to attach price-based thresholds to royalty suspension for those leases. On January 12, 2009, the U.S. Court of Appeals for the Fifth Circuit issued a decision affirming the district court's ruling, and on October 5, 2009, the U.S. Supreme Court denied a petition for writ of certiorari. In Center for Biological Diversity v. U.S. Department of the Interior , the plaintiff challenged the five-year program for 2007-2012 on several grounds, including that DOI had failed to satisfy Section 18(a)(2)(G) of the OCLSA, which requires DOI to consider "the relative environmental sensitivity and marine productivity of different areas of the outer Continental Shelf." The court found that DOI's analysis, which relied solely on "physical characteristics" of different shoreline areas, did not satisfy the Section 18(a)(2)(G) requirements because it failed to consider non-shoreline areas of the OCS. The court therefore vacated the five-year program and remanded it to DOI for reconsideration. In a later order, the court clarified that this relief related only to those portions of the five-year program that addressed leasing in the Chukchi, Beaufort, and Bering Seas, as the environmental sensitivity analysis for these areas was the only analysis that was found to be deficient. Suits Under the National Environmental Policy Act In the context of proposed OCS development, NEPA regulations generally require the agency to publish notice of an intent to prepare an EIS, to review comments on the scope of the EIS, to prepare a draft EIS, to hold a comment period on the draft EIS, and to publish a final EIS addressing all comments received at each stage of the leasing process where government action will significantly affect the environment. As described above, NEPA figures heavily in the OCS planning and leasing process and requires various levels of environmental analysis prior to agency decisions at each phase in the leasing and development process. Lawsuits brought under NEPA may indirectly challenge agency decisions by questioning the adequacy of the agency's environmental analysis. In Natural Resources Defense Council v. Hodel , the plaintiff challenged the adequacy of the alternatives examined in the EIS and the level of consideration paid to cumulative effects of offshore drilling activities. The court held that the agency did not have to examine every possible alternative, and that the determination as to adequacy was subject to the "rule of reason." This standard appears to afford some level of deference to the Secretary, and his choice of alternatives was found to be sufficient by the court in this instance. However, without significant explanation of the standard of review to be applied, the court found that the Secretary's failure to analyze certain cumulative impacts was a violation of NEPA. Thus, the Secretary was required to include this analysis, although final decisions based on that analysis remained subject to the Secretary's discretion, with review only under the arbitrary and capricious standard. As mentioned above, NEPA plays a role in the leasing phase as well. The NEPA procedures and standard of review remain the same at this phase; however, due to the structure of the OCSLA process, more specific information is generally required. Still, courts are deferential at the lease sale phase. In challenges to the adequacy of environmental review, courts have stressed that inaccuracies and more stringent NEPA analysis will be available at later phases. Thus, because there will be an opportunity to cure any defects in the analysis as the OCSLA process continues, challenges under NEPA at this phase are often unsuccessful. It is also possible to challenge exploration and development plans under NEPA. In Edwardsen v. U.S. Department of the Interior , the Ninth Circuit Court of Appeals applied the typical "rule of reason" to determine if the EIS adequately addressed the probable environmental consequences of the development and production plan, and held that, despite certain omissions in the analysis and despite an MMS decision to tier its NEPA analysis to an EIS prepared for a similar lease sale, the requirements of NEPA were satisfied. Thus, while additional analysis was required to account for the greater specificity of the plans and to accommodate the "hard look" at environmental impacts NEPA mandates, the reasonableness standard applied to what must be examined in an EIS did not allow for a successful challenge to agency action.

The development of offshore oil, gas, and other mineral resources in the United States is impacted by a number of interrelated legal regimes, including international, federal, and state laws. International law provides a framework for establishing national ownership or control of offshore areas, and domestic federal law mirrors and supplements these standards. Governance of offshore minerals and regulation of development activities are bifurcated between state and federal law. Generally, states have primary authority in the area extending three geographical miles from their coasts. The federal government and its comprehensive regulatory regime govern minerals located under federal waters, which extend from the states' offshore boundaries to at least 200 nautical miles from the shore. The basis for most federal regulation is the Outer Continental Shelf Lands Act (OCSLA), which provides a system for offshore oil and gas exploration, leasing, and ultimate development. Regulations run the gamut from health, safety, resource conservation, and environmental standards to requirements for production-based royalties and, in some cases, royalty relief and other development incentives. The five-year program for offshore leasing for 2017-2022 adopted by the Bureau of Ocean Energy Management focuses only on new exploration and production in the Gulf of Mexico and the Cook Inlet off the coast of Alaska. However, the Trump Administration has published a 2019-2024 Draft Proposed Plan that would supersede the 2017-2022 Program. Congress is also free to alter the scope of offshore oil and gas exploration and production contemplated by the 2017-2022 Program via new legislation. In addition to legislative and regulatory efforts, there has also been significant litigation related to offshore oil and gas development. Over a number of years, courts have clarified the extent of the Secretary of the Interior's discretion over how leasing and development are conducted.

Overview The Big Picture A comprehensive statutory framework for U.S. communications policy, covering telecommunications and broadcasting, was first created in the Communications Act of 1934 ("1934 Act"). That act created the Federal Communications Commission ("FCC" or "Commission") to implement and administer the economic regulation of the interstate activities of the telephone monopolies and the licensing of spectrum used for broadcast and other purposes. It explicitly left most regulation of intrastate telephone services to the states. In the 1970s and 1980s, a combination of technological change, court decisions, and changes in U.S. policy permitted competitive entry into some telecommunications and broadcast markets. In 1996, Congress passed the Telecommunications Act ("1996 Act"), which opened up markets to competition by removing unnecessary regulatory barriers to entry. The 1996 Act attempted to foster competition among providers that use similar underlying network technologies (for example, circuit-switched telephone networks) to offer a single type of service (for example, voice). Thus, there is one regulatory regime for carriers providing voice telephone service and another regime for cable television providers. Information services are not subject to either regulatory regime. The subsequent deployment of digital broadband technologies in telephone and cable networks has resulted in these networks providing services that compete with one another, but that sometimes are subject to different regulatory requirements. Voice and video services can now be provided using Internet protocol and thus might be classified as unregulated information services, but these services compete directly with regulated traditional voice and video services. Moreover, these digital technologies do not recognize national borders, much less state boundaries. There is consensus that the current statutory framework is not effective in the current market environment, but not on how to reform that framework. Key issues of contention have been identified, however, and various proposals have been put forward to resolve these issues. Both houses of Congress have begun debating how to modify the 1996 Act, most of which resides within the Communications Act of 1934, as amended. That debate focuses on how to foster investment, innovation and competition in both the physical broadband network and in the applications that ride over that network while also meeting the many non - economic objectives of U.S. telecommunications policy : universal service, homeland security, public safety, diversity of voices, localism, consumer protection, etc. The underlying cost structure of broadband networks—huge sunk up-front fixed costs—can only support a limited number of broadband networks, though there generally is no similar cost constraint on the number of applications providers. In this new environment, there will be three broad categories of competition: (1) intermodal competition among a small number of broadband network providers that offer a suite of voice, data, video, and other services primarily for the mass market; (2) intramodal competition among a small number of wireline broadband providers that serve multi-locational business customers who tend to be located in business districts; and (3) competition between these few broadband network providers and a multitude of independent applications service providers. These three areas of competition will all be affected by a common factor: will there be entry by a third broadband network to compete with the broadband networks of the local telephone company and the local cable operator? There are four general approaches to the regulation of broadband network providers vis-a-vis independent applications providers: structural regulation, such as open access; ex ante non-discrimination rules; ex post adjudication of abuses of market power, as they arise, on a case-by-case basis; and reliance on antitrust law and non-mandatory principles as the basis for self-regulation. At present, the FCC follows the last two approaches. In this report, a number of regulatory proposals, sometimes incorporating elements from more than one of these approaches, are discussed. At the same time, there is consensus that two sets of mechanisms that are fundamental to U.S. telecommunications policy and the provision of telecommunications services—universal service mechanisms to ensure that basic telephone service remains affordable and available to all households and intercarrier compensation mechanisms by which networks are compensated for carrying traffic that originates or terminates on another network—need to be modified to accommodate the new market conditions. But there is no agreement on what those modifications should be. Problems with the Current Statutory and Regulatory Framework for Telecommunications Technological change is driving the convergence of a number of previously distinct telecommunications and media markets. Digital technologies are being deployed in and carried over wireline, cable, and wireless networks that are increasingly capable of providing voice, data, and video services over a single broadband platform. The U.S. communications infrastructure is evolving from circuit-based networks, in which individual applications (such as voice telephony) are tightly woven into the network architecture, to Internet Protocol ("IP") networks, in which multiple applications ride on top of the physical (transmission) network layer. There is consensus that the current statutory and regulatory framework for telecommunications is ill-suited for the current market environment. There is disagreement, however, about what modifications are necessary and how comprehensive those modifications should be. At the time of the 1996 Telecommunications Act, the last comprehensive review of U.S. telecommunications policy, the environment we live in today was barely contemplated: voice, data, and video transported in packets of digitized bits over routes that pay no attention to state or even national boundaries; network "usage" measured in terms of bandwidth rather than time; an end-user service provided over competing wireline, cable, and/or wireless broadband networks; those networks capable of providing multiple services; and no knowledge of the next "killer application" (comparable to the World Wide Web or e-mail) that will drive network and software investment. Given the distinct, service-specific networks then in use, the 1996 Act created distinct vertical regulatory "silos" that equated specific services with specific network technologies. The statutory framework for regulating telecommunications services is found in one title of the 1996 Act and for cable services in another title. In addition, the 1996 Act defines a category of services, "information services," consisting of the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications. These information services are not subject to any of the specific regulatory regimes in the 1996 Act; FCC jurisdiction over them is limited to its ancillary authority under Title I of the 1934 Act. The distinction in the 1996 Act between telecommunications services and information services was an outgrowth of a line of FCC decisions dating back to the 1970s that distinguished between "basic" services that were subject to regulation and "enhanced" services that the Commission chose not to regulate in order to foster their development and deployment. Keeping with this regulatory history, the Commission has chosen to forbear from regulating information services, again seeking to foster their development and deployment. These distinct regulatory regimes did not create significant problems so long as technological and market forces did not erode the distinctions between cable, telecommunications, and information services—and so long as it was possible to unambiguously classify services into these categories. But they became problematic when technological change made it more difficult to determine which service category a particular service fell under and when market convergence resulted in competition between services that were classified, and thus regulated, differently. Since 1996, the distinctions between these service categories have become increasingly blurred. For example, some providers are offering voice over Internet protocol ("VoIP") services that meet the definition of information services while competing directly with traditional voice telecommunications services. Similarly, some providers have begun to offer IP video services that arguably would meet the definition of information services while competing directly with traditional cable services. Those IP-based service providers assert that their offerings should be subject only to the limited regulatory oversight of information services, not to the more intrusive regulation of telecommunications services and cable services, respectively. It has proven to be an administrative and legal morass to determine whether an information service—which, by definition, provides certain capabilities via telecommunications—is purely an information service, and therefore subject only to a light regulatory regime, or has a distinct telecommunications service component that would make it subject to the more rigorous common carrier regulation imposed on telecommunications services. For example, in 2002 the FCC concluded that the telecommunications functionality in the cable modem service offered by cable companies to provide high speed access to the Internet is integral to the service, and not transparent to the consumer, and therefore cable modem service should be treated as a pure information service, and not subject to the access requirements imposed on telecommunications services. That decision was upheld by the Supreme Court in June 2005. At the same time, although the FCC had tentatively concluded that DSL service, which is offered by telephone companies to provide high-speed access to the Internet, also is an information service, with an integral telecommunications component, rather than a telecommunications service, it had continued to treat the transmission component of DSL as a telecommunications service, and therefore DSL continued for more than three years to be subject to the access and other telecommunications service requirements. Local telephone companies were required to unbundle and separately tariff the underlying transmission component of their DSL Internet access services. On August 5, 2005, the FCC adopted an order that granted DSL Internet access providers the same regulatory classification and treatment as cable modem Internet access providers. There is an expectation that providers of information services will attempt to configure their service offerings in a fashion that will maximize the likelihood that the FCC will classify them as pure information services for regulatory purposes. As explained in greater detail below in the section on VoIP, however, the Commission continues to make determinations, based on the underlying network architectures used, about whether any specific service offering should be classified and regulated as an information service or as a telecommunications service. The current siloed statutory and regulatory framework has not been able to accommodate the rapid pace of market convergence; it sometimes treats differently providers or services that are in direct competition with one another. The disparate rules have sometimes created incentives for providers to tailor their investment decisions and product offerings to avoid/exploit artificial regulatory distinctions rather than to efficiently serve customer needs. Similarly, the mechanisms currently embodied in statutes and rules to support such social policy goals as universal service are based on the pre-1996 market environment and are no longer sustainable or as effective as they could be. Public Policy Issues to Debate While there are many dimensions to the debate about reform of the statutory and regulatory framework for telecommunications, there appear to be two fundamental underlying issues that affect all others. First, in this new environment in which applications are no longer tightly woven into the network architecture, what is the best regulatory framework for fostering investment and innovation in both the physical broadband network and in the applications (services) that ride over that network? The physical network providers (local exchange carriers and cable system operators) argue that they will be discouraged from undertaking costly and risky broadband network build-outs and upgrades if their networks are subject to open access and/or non-discrimination requirements that might limit their ability to exploit vertical integration efficiencies or to maximize the return on (or even fully recoup) their investments. On the other hand, the independent applications providers argue that in order for them to best meet the needs of end users and offer innovative services in competition with the vertically integrated network providers and, in some cases, services not offered at all by network providers. They must have the same unfettered open access to the physical networks that the network providers enjoy or, at the least, be protected by non-discrimination rules. Similarly, many end users argue that their broadband network providers should not be allowed to restrict their usage of the broadband network so long as they do not in any way compromise the integrity of the network. This big-picture issue raises a number of corollary issues: In a complex technical environment in which a broadband platform typically consists of a physical (transmission) network layer, a logical layer (usually the TCP/IP suite of protocols), an applications layer, and a content layer, and in which services pass over both the broadband network provider's last-mile network and the Internet, where and how can denied access harm consumers? What does it mean to have nondiscriminatory access? Should access be viewed from the perspective of an end user or of an independent applications provider or of a competing network? Which access restrictions are justifiable to maintain the integrity and operational efficiency of the network? Should access regulation take the form of structural open access requirements or ex ante non-discrimination rules or ex post adjudication of abuses of market power as they arise on a case-by-case basis? Or should there be no regulation, with industry voluntarily adhering to non-discrimination principles such as the Internet Consumer "four freedoms" enunciated by former FCC Chairman Michael Powell or the principles in the non-binding policy statement adopted by the FCC on August 5, 2005? How many competing physical broadband networks are needed for market forces alone to ensure that the network providers lack the incentive and the ability to restrict access or otherwise discriminate against independent applications providers to the detriment of consumers? To what extent can federal spectrum policy and infrastructure programs foster the deployment of multiple competitive broadband networks, thereby alleviating the need for access rules? Or, is it the case that additional access networks will increase the competitive options available to end users, but may not improve the market position of independent applications providers who do not have the option of choosing among access networks for the best terms, conditions, and rates for interconnection, but rather must connect to all of the access networks in order to reach their customers? Second, while market demand appears to be sufficient to generate competitive broadband network deployment in many urban areas without government intervention, that may not be the case in rural or other high-cost (or low-income) areas, where high costs and/or limited demand may render it economically infeasible to deploy multiple broadband networks, or even a single network, without government intervention. Does Congress want to expand the scope of universal service to include universal access to a broadband network at affordable rates? If so, how can the needed universal service support mechanisms accomplish this in an efficient and sustainable fashion that does not harm other policy goals, such as competitive neutrality? More basically, how "broad" is the "broadband" that should be provided as part of universal service? Bigger may be better, but only at an associated cost. Is it sufficient, for example, to limit a subsidy program in high-cost areas to support for broadband service capable of (relatively low quality) video streaming if the unsubsidized market is driving companies to deploy broadband capable of offering (higher quality) broadcast-quality video service in urban areas? Should the universal service subsidy support access to the physical broadband network or should it support specific services provided over that network? There are corollary issues relating to how the universal service program would be affected by changes in economic regulation. For example, when the FCC recently re-classified DSL service as an information service rather than a telecommunications service, it had two effects on universal service. First, the current universal service assessment base, interstate and international telecommunications revenues, was immediately reduced. Second, currently federal universal service funding is only available to support telecommunications services. If DSL services are no longer telecommunications services, eligible high-cost carriers would no longer be able to obtain universal service funds in support of those services. Thus, reform of economic regulation must be undertaken in conjunction with review of existing universal service programs. Another important element of the debate is how to develop a regulatory framework that will not quickly become obsolete as the market continues to experience rapid technological change. For example, many technologists envision the development of highly decentralized peer-to-peer networks to efficiently deliver interactive services in the future; these networks would have no major nodes and therefore no single points of failure, making them more secure and robust than current networks that rely on key servers. Already there is discussion of the need to construct a new, more secure Internet. Thus, although it would not be appropriate to base a new regulatory paradigm on a presumption that peer-to-peer network architecture will predominate, it also would not make sense to construct a regulatory framework that cannot accommodate that architecture. Further complicating these issues, it will be necessary to chart a transitional course as the shift to a digital, broadband environment will not occur instantaneously and some providers and customers will continue to be dependent on old technology for some period of time. Finally, although the current statutory and regulatory framework allows the FCC to preempt state laws that restrict competition, it generally limits FCC regulatory authority to interstate and international services, leaving jurisdiction over intrastate telecommunications services to the states. It also gives states or localities the authority to grant cable franchises and to regulate rights-of-way. As voice, data, and video services increasingly are provided over technologies and networks that do not follow state, or even national, borders, however, it is becoming less effective to perform certain types of regulation—and especially economic regulation—at the state or local level. One task of telecom reform is to identify those regulatory elements that can continue to be performed effectively at the state or local level and those that should be centralized . The purpose of this report is to provide an analytical overview of the market and technological developments that have rendered the current statutory and regulatory framework ineffective and, in some cases, contrary to stated U.S. telecommunications policy objectives, and to present options for reforming the framework. After a background discussion, it addresses the following issues: What are the advantages and disadvantages of the various different approaches to regulating access to broadband networks? Four options are discussed: open access, ex ante non-discrimination rules, ex post adjudication of abuses of market power, and self-regulation based on non-mandatory principles. How might the current statutory framework be modified to address the head-to-head competition developing between the broadband networks of telephone companies and cable operators? How might public policy foster the deployment of additional broadband networks? How might the rules for intercarrier compensation—the payments that carriers make to one another for terminating the calls originated by their subscribers—be made competitively neutral without impinging on other goals of U.S. telecommunications policy? In a broadband environment, which services should be supported by a universal service subsidy, who should receive the subsidy, who should contribute to a universal service fund, and how should the contributors be assessed? How do other programs and policies, such as federal grant and loan programs and policies toward municipal provision of broadband networks, contribute to the universal availability of broadband networks? How might current policies concerning voice over Internet protocol, access to 911 and E911, CALEA, and localism, competition, and diversity of voice in media change to better accommodate the current and future market and technological environment? Background: The 1996 Act In 1996, Congress passed the Telecommunications Act, the first major rewrite of our nation's telecommunications law since the enactment of the 1934 Communications Act. The general objective of the 1996 Act was to open up markets to competition by removing unnecessary regulatory barriers to entry. Congress attempted to create a regulatory framework for the transition from primarily monopoly provision to competitive provision of telecommunications services. One key provision allowed the FCC to preempt enforcement of any state or local government statute, regulation, or legal requirement that acted as a barrier to entry in the provision of interstate or intrastate telecommunications service. Since the value of a network service, such as telecommunications service, increases as the number of other parties connected to the network increases, new entrants would have a very difficult time entering the market if they could not interconnect their networks with those of the incumbent carriers. Competitive provision of service would benefit consumers most if all carriers' networks were interconnected. Thus, another key provision of the 1996 Act set obligations for incumbent carriers and new entrants to interconnect their networks with one another, imposing additional requirements on the incumbents because they might have the incentive and ability to restrict competitive entry by denying such interconnection or by setting terms, conditions, and rates that could undermine the ability of the new entrants to compete. With competitive provision of service, many calls will originate on the network of the carrier to whom the calling party subscribes but end up on the network of another carrier (to whom the called party subscribes). While it might be possible to have the calling party pay its carrier for originating a call and the called party pay its carrier for terminating that call, for various reasons it has been traditional in the United States for the calling party's carrier to pay the called party's carrier for completing the call—this is called intercarrier compensation —and, in turn, for the calling party's carrier to recover those costs in the rates charged to its subscribers. The 1996 Act requires that intercarrier compensation rates among competing local exchange carriers be based on the "additional costs of terminating such calls." However, as discussed below, the framework created by the 1996 Act set different intercarrier compensation rates for services that were not competing at that time but do compete today. To foster competition in both the long distance and local markets, the 1996 Act created a process by which the Regional Bell Operating Companies ("RBOCs") would be freed from the restriction on their offering long distance service (which was one of the terms of the 1982 Consent Decree settling the government's antitrust case against the former Bell System monopoly) once they made a showing that their local markets had been opened up to competition. Because Congress did not believe it would be viable for competitive entrants to fully build out their networks immediately, it included a provision requiring the incumbent local exchange carriers to make available to entrants, at cost-based wholesale rates, those elements of their network to which entrants needed access in order not to be impaired in their ability to offer telecommunications services. Prior to enactment of the 1996 Act, universal service (primarily for high-cost rural service) had been funded through implicit subsidies in above-cost rates for the "access charges" that long distance carriers paid as intercarrier compensation to local telephone companies for originating and terminating their subscribers' long distance calls, above-cost business rates, and above-cost urban rates. Recognizing that new entrants would target those services that had above-cost rates, and thus erode universal service support, Congress included in the 1996 Act a provision requiring universal service support to be explicit, rather than hidden in above-cost rates. This requirement has only been partially implemented, however, and therefore significant implicit universal services subsidies still remain in above-cost rates for certain services. The regulatory framework created by the 1996 Act was intended to foster "intramodal" competition within distinct markets, that is, competition among companies that used the same underlying technology to provide service, such as the development of competition between the incumbent local and long distance wireline carriers plus new competitive local exchange carriers, all of which used circuit-switched networks to offer voice services. It did not envision the intermodal competition that has subsequently developed, such as wireless service competing with both local and long distance wireline service, VoIP competing with wireline and wireless telephony, IP video competing with cable television. Given the focus on intramodal competition and the lack of intermodal competition, there was little concern about statutory or regulatory language that set different regulatory burdens for different technology modes. As a result, the current statutory and regulatory framework may be inconsistent with, or unresponsive to, current market conditions in several ways: service providers that are in direct competition with one another sometimes may be subject to different regulatory rules because they use different technologies; economic regulations intended to protect against monopoly power may not be fully taking into account intermodal competition; and the framework may not effectively address interconnection, access, and social policy issues for an IP architecture in which multiple applications ride on top of the physical (transmission) network layer. At the same time, it might not be wise to simply replace the statutory provisions fostering intramodal competition with provisions fostering intermodal competition on the expectation that intermodal competition will always be effective. For the foreseeable future, the primary source of competition in the telecommunications service market for large business ("enterprise") customers will be intramodal, rather than intermodal. Cable networks were constructed to serve residential customers and therefore tend not to be ubiquitously deployed in business districts. Even the largest cable companies are only in selected geographic markets in the country, and may not be able to meet the needs of large, multi-locational business customers. Also, it is likely to take many years for wireless carriers to construct networks that can meet the bandwidth and security requirements of large corporations. Competitive provision of broadband services to these enterprise customers therefore is most likely to be intramodal. But even intramodal competition may be decreasing in the enterprise market. Until recently, the long distance carriers, in particular AT&T and MCI, were the largest providers of service to enterprise customers, with various competitive local exchange carriers ("CLECs") also offering enterprise service. In addition, as they began to meet the conditions in the 1996 Act that allowed them to offer service outside their regions, the RBOCs were becoming significant competitors to AT&T and MCI in the enterprise market. The acquisitions of AT&T by SBC (with the new company renamed AT&T) and of MCI by Verizon have eliminated those two RBOCs as competitors in the enterprise market and also in the Internet backbone market. Also, although the remaining CLECs have built fiber rings in business areas that connect directly to their major customers' locations, they have not captured sufficient traffic to capture the scale economies needed to justify buildout of a ubiquitous transport network. Rather, they have relied on the RBOCs, AT&T, and MCI for transport facilities on many routes. As a result, in approving those mergers, the Department of Justice and the FCC set a number of conditions intended to retain competitive options for enterprise and Internet customers, including the divestiture of some key transport facilities and ensuring CLECs and ISPs access to certain facilities or services at set rates for at least two years. Nonetheless, some enterprise customers and CLECs remain concerned about their reduced options for retail services and transport facilities. Competition and Innovation in the Internet Protocol Environment In a relatively short period of time, the telecommunications sector has evolved from monopoly provision of services over service-specific networks, to a brief period of limited intramodal competition (from wireline competitive access providers and competitive local exchange carriers for the provision of telephone services and from a small number of cable "overbuilders") over service-specific networks, to incipient intermodal (wireline, wireless, and cable) competition over increasingly multiple-service broadband platforms. These new broadband networks are the physical vehicle for bringing into the home the applications (services) of both the network providers, themselves, and the independent applications providers. At this stage of the transition, however, most customers continue to receive services over legacy service-specific narrowband networks. It is important to understand what this new environment—characterized by convergence of previously distinct markets and government policy focused on fostering facilities-based intermodal competition—is likely to yield. The market convergence currently underway will not result in a multitude of broadband networks because the underlying cost structure for such networks (the huge sunk up-front fixed costs that can only be recovered if the company can exploit significant economies of scale and scope) will only support a limited number of networks. This is the case for wireline or wireless networks. Moreover, market convergence is not simply the ability to bundle voice, data, and video services into a single product offering. Rather, it is a technological spillover (from digital technology) that reduces entry costs so that firms that already have single - use networks providing voice, data, or video services can now use those networks with relatively inexpensive upgrades to offer multiple services over a single platform. For example, at far less cost than would be required to build an entirely new network, the incumbent local exchange carriers can deploy DSL equipment on their copper networks to offer data and video services or the cable companies can upgrade their networks to offer VoIP. In this situation, in which underlying costs are likely to limit the number of network providers, public policy can nonetheless foster competition by removing impediments to single-use networks expanding into other markets. At the same time, policy makers should remain vigilant that the few network providers not constrain the ability of independent applications providers that do not have their own broadband networks to compete in those applications markets. In the new environment, there will be three broad categories of competition and innovation issues, tied together by one common issue. These three categories are: intermodal competition and innovation among a small number of broadband network providers that offer a suite of voice, data, video, and other services primarily for the mass market; intramodal competition and innovation among a small number of wireline broadband providers that serve multi-locational business customers who tend to be located in business districts; and competition between those few broadband network providers and a multitude of independent service providers, often for applications that have a more specialized customer base. The common issue: how many broadband networks will there be and how will that affect competition among network providers and competition between those network providers and the independent applications providers? Despite all the technological and market changes that have occurred and continue to take place, competition issues in the telecommunications sector will continue to focus on the physical transport link into both business and residential customers' premises. The new network architectures may allow many applications to ride on a single physical transmission layer, but access to that layer and competition among the small number of physical network providers remain the primary competition issues. Applications Innovation: Competition Between Integrated Network Providers and Independent Applications Providers Integrated network providers and independent applications providers come from very different traditions. The network providers (the local exchange carriers, cable companies, and wireless carriers) come from the tradition of employing a vertically integrated business model, providing, as a single product offering, the network connection and a specific service or suite of services. They are used to developing and deploying their networks in the context of a business plan that jointly maximizes profits from the physical network and the services they provide over that network. Their network rollout and applications product rollout are coordinated. Network architecture is driven, at least in part, by the services they intend to offer. Underlying this approach is the assumption that investment can best be supported and innovation can best be achieved by giving the vertically integrated network provider free rein over network architecture, control of network intelligence, and discretion over the extent to which it gives competing applications providers access to its network. In sharp contrast, many of the independent applications providers (and their customers) come from the Internet tradition of "network neutrality," that is, an Internet that does not favor one application (or one applications provider) over others. In practice, even the Internet does not adhere to pure network neutrality; for example, the Internet protocol works well for data applications, which are insensitive to "latency" (delay), and less well for voice and video applications that are sensitive to latency, because it lacks a universal quality of service guarantee. Nonetheless, the assumptions that underlie the Internet tradition are that the innovation process is a survival-of-the-fittest competition among developers of new technologies, that the most promising path of innovation cannot be predicted in advance, and that therefore it is not optimal to allow any private or public entity to direct that path; the network should be "neutral." This reasoning supports the need for "end-to-end" design, by which, whenever possible, communications protocol operations occur at the end-points of a communications system (i.e., a "dumb network" with "smart terminals"). But since until 1995 the Internet was supported by government funding, rather than market funding, this approach has not focused in the past on the task of raising sufficient capital to build out physical networks. The vertically integrated network providers and the independent applications providers are not inherently at odds with one another, however; they share many goals. The Internet environment is characterized by "indirect network externalities," in which independent actions taken by hardware and software providers benefit one another. The greater the investment in physical network to improve connection speed and quality of service, the greater the opportunities for software providers to develop new, potentially profitable applications. At the same time, the greater the number of software applications available, the greater the end-user demand for broadband connections. A network provider will have an incentive not to restrict applications providers' access to its physical network to the extent that could reduce demand for connections to that network (though that effect could be limited if end users have no alternative broadband networks available to turn to). At the same time, vertically integrated network providers might face a counter-incentive to restrict or delay network access to applications providers; an example is if the vertically integrated companies are developing applications that would compete with independent providers' applications and would like to exploit "first-in" advantages. They also will have the incentive to deploy a network architecture most consistent with their own plans for applications, which may not coincide with the needs of the independent applications providers or with the desire of end users to use their broadband network for applications (telecommuting, home networking, or other purposes) that might undermine the ability of the network provider to price discriminate or in other ways jointly maximize the profits from its network and own suite of applications. For example, some critics have claimed that the RBOCs resisted deploying DSL technology in their networks for more than a decade because of concern that offering a high-speed DSL service would cannibalize the revenues and profits that were being generated by their T-1 (large capacity dedicated pipe) service. According to these critics, despite the fact that the relatively inexpensive DSL technology had been available for a long time, the RBOCs began deploying DSL only once there was significant risk of ceding the mass market high-speed connection market to cable modems. (The RBOCs have responded that they had not deployed DSL because the market had not yet developed for the high-speed service.) In a market characterized by economic interdependence between a platform and applications made for that platform, sometimes an arm's-length relationship between the platform provider and the applications providers will be less efficient than a closer vertical relationship. Academic economists have employed the concept of internalizing complementary efficiencies ("ICE") to explain vertical competitive effects—why sometimes the platform provider chooses an open architecture and modular design to interact with the full universe of applications providers and sometimes chooses to interact only with its own vertically integrated applications subsidiaries or affiliates. The ICE theorem suggests that a monopolist broadband network provider has incentives to provide independent applications providers access to its broadband platform when it is efficient to do so, and to deny such access only when access is inefficient. But economic theory further explains that platform providers will not always make the optimal choice. There are a number of circumstances when the platform provider's choice might not be efficient or benefit consumers. Economic theory therefore suggests that there may be pitfalls in either a blanket requirement for access to the broadband network or blanket deregulation. In a market characterized by high sunk up-front fixed costs and very low variable (usage) costs once the up-front costs have been sunk, which is descriptive both of the physical broadband network and the software applications provided over that network, it often is efficient for a firm to employ price discrimination to recover its fixed costs. That is, it may be most efficient to segment customers according to the intensity of their demand for the broadband connection (or application), charging a higher price for the customers with higher intensity of demand. In the case of the broadband connection, that intensity might be measured in terms of the amount of bandwidth demanded. As will be discussed below, such price discrimination based on bandwidth usage need not infringe on network neutrality (need not favor some applications over others) so long as the market segmentation is based on the amount of bandwidth used rather than on the specific application and so long as customers who want to use the network for a bandwidth-intensive application are able to pay more for that additional bandwidth, rather than being prohibited from using the network to access bandwidth-intensive applications. Broadband Network Restrictions In 2002, Professor Tim Wu performed a survey of broadband usage restrictions and network designs for the 10 largest cable operators and six major DSL operators. The survey found that, on the whole, broadband providers' networks and usage restrictions favored client-server applications (such as the World Wide Web) and disfavored home networking, peer-to-peer applications, and home telecommuting. Cable operators tended to impose far more restrictions on usage than DSL operators. Specifically, Nearly every cable operator and one third of DSL operators restricted end users from operating a server and/or providing content to the public. This restriction is potentially very significant because it affects the broadest class of applications: those where the end user shares content, as opposed to simply downloading content. It favors a "one-to-many" or "vertical model" of applications over a "many-to-many" or "horizontal" model. In application design terms, the restriction favors client-server applications over peer-to-peer designs. The inability to provide content or act as a server could serve to restrict a major class of network applications. Every cable operator and most DSL operators had some ban on using a basic residential broadband connection for "commercial" or "enterprise" use. The most controversial of such restrictions barred home users from using virtual public networks, which are used by telecommuters to connect to their work network through a secure connection. When home networking became widespread in 2002, four of the ten largest cable operators contractually limited the deployment of home networks by setting restrictions on the number of computers that could be attached to a single connection. In contrast, some DSL operators in their agreements explicitly acknowledged that multiple computers could be connected to the DSL connection, though sometimes only through a single DSL account and a single IP address obtained from the DSL operator. Several cable operators sought to control the deployment of home wireless networks by banning the connection of Wi-Fi equipment. The practice of designing asymmetric networks, with more downstream bandwidth than upstream bandwidth, favors the development of applications that are one-to-many or client-server in design. Applications that would demand residential accounts to deliver content as quickly as they receive it are limited by asymmetric bandwidth. It was not clear how actively network providers had attempted to enforce those restrictions in their contracts with subscribers, though there was anecdotal evidence of some enforcement. Nor was it clear whether such restrictions would continue when wireless technology was able to provide greater competition to wireline and cable network providers. In some ways, there appear to be fewer usage restrictions today than there were in 2002. It is noteworthy, however, that the cable networks imposed more usage restrictions than did the DSL network. There are two possible explanations for this: (1) cable was the largest broadband platform provider and could offer greater bandwidth and these "first-in" and technology advantages might have allowed it to set strategic usage restrictions that other platforms could only set at their peril, and (2) since cable's broadband architecture requires customers to share bandwidth, there was greater need for cable to manage the bandwidth usage of its customers. Yet, cable operators have not barred streaming video, despite its potential for competing with cable television. It does not appear that these restrictions will go entirely away anytime soon. Vendors are actively marketing equipment designed to facilitate applications-based screening and control for broadcast networks, such as products intended to address peer-to-peer traffic and unauthorized Wi-Fi connections and control over network utilization. Network providers are deploying such equipment, though it is not clear exactly how they are using it. Access and usage restrictions may be justified if they are needed to protect the integrity of the network or to operate the network efficiently (for example, bandwidth management needed to maintain quality of service). But there may be situations where the network provider has chosen an overly restrictive solution that will discourage applications innovation and competition. For example, if a network provider must manage bandwidth usage in order to maintain quality of service for video and voice services, it would be more efficient for the provider to do so by setting rates that rise as bandwidth usage increases rather than by prohibiting all bandwidth-intensive applications. The former represents an application of price discrimination that most economists recognize as efficient; the latter may be unnecessarily restrictive. Professor Wu concluded that, on the whole, the evidence from his survey suggested that the operators were often pursuing legitimate goals, such as price discrimination and bandwidth management. The problem was they often used methods, like bans on certain forms of applications, that are likely to unnecessarily distort the market and future applications development. The use of restrictions on classes of application to pursue bandwidth management and price discrimination may be inefficient and may unnecessarily harm consumers; the objectives may be attainable through less restrictive means. In November 2005, several ISPs alleged that Verizon restricted their access to its broadband network immediately after the FCC's August 2005 decision that DSL service is an information service and therefore not subject to Title II access requirements. They claimed that, prior to the FCC decision, Verizon had offered them access to its broadband network at the Layer 2 or data link level, which allowed them to offer their own services at a guaranteed a quality of service. But after the FCC decision, Verizon replaced that access offering with an offering that only allowed access at the Layer 3 or network level, which in essence is a complete package that the ISP can only resell, without offering additional services. A Verizon representative conceded the change in service offering, but claimed that "No customers have been cut off and no Internet sites are being blocked, and the customers of these ISPs will have full Internet access under the new service arrangement." More recently, the three largest RBOCs have announced their intentions to take advantage of new technology that allows them to distinguish among the digitized packets on their high-speed networks to charge those providers of applications who want to be able to guarantee their customers an assured quality of service—for example, for voice or video service—a premium for such assured high quality delivery. The RBOCs claim that even if an end-user customer pays a high price for a lot of bandwidth, that customer could not receive an assured quality of service for voice or video service received over the public Internet. That customer might blame its broadband network provider or the applications provider for the degraded service quality even if the problem resided in the Internet. But today an RBOC can distinguish the packets destined for that provider's end-user customers and, by connecting the provider directly to its proprietary IP networks, can guarantee the quality of service of the provider's offerings. The RBOCs argue that such guaranteed quality of service is of value to the applications provider as well as to the end user, and therefore they should be able to charge the provider a premium for such assured quality. Independent applications providers have criticized these proposed quality of service charges, arguing that the RBOCs could impose high quality of services charges on them that they do not impose on their own applications. They also have voiced concern that the RBOCs could use the new packet identification equipment to provide better service to their own end-user customers than to competitors' end-user customers, and could strategically deploy network capacity sufficient to meet the quality of service needs of their own applications offerings but not sufficient to meet the needs of their competitors' offerings. Approaches to Regulating Access to Broadband Networks There are four general approaches to the regulation of broadband network providers vis-a-vis independent applications providers: structural regulation, such as open access; ex ante non-discrimination rules; ex post adjudication of abuses of market power, as they arise, on a case-by-case basis; and reliance on antitrust (and unfair methods of competition) law and non-mandatory principles as the basis for self-regulation. There have been a plethora of proposals for such regulation, with the proposals sometimes incorporating elements from more than one of these approaches. Ex ante rules and ex post adjudication both typically focus on anti-competitive discrimination that harms consumers, but in distinct ways. Ex ante rules have been characterized as "positive" anti-discrimination rules in that they create affirmative legal duties that are intended to remedy either past discrimination or the likelihood of future discrimination, prohibiting certain activities before the fact. By contrast, ex post adjudication typically seeks to punish identified episodes of discrimination on a case-by-case basis, after the fact. Positive schemes impose more up-front costs, by restricting certain behaviors, some of which might have proven beneficial to consumers. But, depending on the cost to consumers (in terms of denied access to potentially highly valued applications) of allowing discrimination to occur and then adjudicating after the fact, the ultimate cost of ex ante rules might prove lower than ex post adjudication. Open Access Although there is not a single agreed-upon definition of open access, it generally refers to a structural requirement that would prevent a broadband network provider from bundling broadband service with Internet access from its own in-house Internet service provider and would require the network provider to make its broadband transmission capability available to independent ISPs on a nondiscriminatory basis. Proponents of open access argue that if a broadband network provider, such as a cable operator, is allowed to bundle ISP services with its broadband connection at a single price, and not offer the broadband connection separately, it would be in a position to foreclose competition among Internet applications. They claim that as ISPs expand the services they offer, bundling would foreclose competition in an increasing range of services provided over broadband lines. If the customer has no choice but to accept from the broadband provider a single bundle that includes both the broadband connection and ISP service, then an independent ISP would always be at a price disadvantage and could only compete by offering unique capabilities that are sufficient to overcome that price disadvantage. This is likely to limit an independent ISP's customer base to those customers with unique needs that are not met by the mass market broadband provider. Proponents of open access claim that allowing network providers to restrict independent ISPs' access will (1) eliminate, or at least reduce, ISP competition; (2) allow legacy monopoly networks to improperly affect the architecture of the Internet in an effort to protect their own business plans; (3) discourage innovators from investing in a market in which a dominant player has the power to behave strategically against them; and (4) make government intervention to control certain forms of speech easier and therefore more likely. Open access has been criticized on several fronts. First, broadband network providers and a number of academics claim that, due to indirect network externalities and internalizing network efficiencies, network providers do not have the incentive to restrict independent applications providers access to their networks, or would do so only where it was efficient. They further argue that even if one group of network providers—for example, the cable companies—were to restrict access, wireline broadband providers and other competitors are unlikely to follow suit, so independent ISPs would have access to customers. Some critics claim that open access would retard deployment of broadband networks by reducing the ability of network providers to exploit vertical integration efficiencies and also by reducing the revenues network providers could generate from their applications, thereby making some network investments unprofitable. They also suggest that the close coordination between a network provider and as applications provider needed for optimal joint development of network and applications is sometimes only possible through vertical integration. For example, Professor James Speta argues that "Vertical integration of access providers may be necessary. Especially in initial periods of deployment, broadband access providers must ensure a supply of complementary information services.... [A] broadband provider must either provide those goods itself or arrange for a source of supply." Also, to the extent open access regulation prevents broadband operators from architectural cooperation with independent ISPs for the purpose of providing quality of service ("QOS") dependent applications, it could harm network neutrality. By threatening the vertical relationship required for certain application types, it could maintain IP's discrimination in favor of data applications. In response to these criticisms of open access, its proponents have pointed out a fundamental contradiction among the criticisms. On one hand, critics argue that, due to indirect network externalities, broadband network providers' self-interest will lead them to place minimal restrictions on customers' usage of, and independent applications providers' access to, their networks. On the other hand, critics argue that restricted access is needed to ensure that the network providers generate enough revenues to recoup their investment in the network. Ex Ante Non-Discrimination Rules The basic principle behind a network non-discrimination regime is to give users the right, by rule, to use non-harmful attachments or applications, and to give equipment and applications innovators the corresponding right, also by rule, to supply them. It therefore applies both to end users and to independent applications providers. Proponents claim that such a regime avoids some of the costs of structural regulation by allowing for efficient vertical integration so long as the rights granted to the users of the network are not compromised. Proponents contend that the ability of a network provider to discriminate is greater with a digital broadband network than with an analog narrowband network offering dial-up service. Analog network operators cannot easily distinguish between types of digitized packets of information going across their lines. But digital network operators can distinguish among the packets on their high-speed networks. For example, some universities are performing application-specific screening to identify students illegally copying entertainment materials and, presumably, similar capabilities could be used to identify applications the network provider wishes to restrict or prohibit. Typically proponents of non-discrimination rules are proponents of network neutrality—not favoring one application (or applications providers) over another. They argue that network neutrality, as embodied in ex ante non-discrimination rules, fosters the goal of stimulating investment and innovation in broadband technology and services in two ways: (1) by eliminating the risk of future discrimination, thereby providing independent applications providers greater incentives to invest in broadband applications, and (2) by facilitating fair competition among applications, ensuring the survival of the fittest. Proponents claim that a network that is as neutral as possible, with such neutrality ensured by explicit non-discrimination rules, provides entrepreneurs predictability in that all applications are treated alike. This, they argue, will foster investment in broadband applications by eliminating the unpredictability created by potential future restrictions on network usage. Neutrality provides applications designers and consumers alike with a baseline on which they can rely. Proponents allege the recent restrictions that cable operators placed on virtual private networks is indicative of the tendency of some network providers to restrict new and innovative applications they see as either unimportant or a competitive threat. Such usage restrictions, they claim, particularly harm those small and startup developers that are most likely to push the envelope of what is possible using the Internet's architecture. Proponents also claim that the most promising path of development will be difficult to predict in advance; neutral network development is likely to yield better results than planned innovation directed by a single prospect holder. Any single entity will suffer from cognitive biases (such as a predisposition to continue with current ways of doing business). These proponents conclude that restrictions on usage, however well-intended, tend to favor certain applications over others. A regulatory framework that requires network providers to justify deviations from neutrality would prevent both unthinking and ill-intentioned distortions of the market for new applications. The proponents of non-discrimination rules argue that the restrictions that some network providers have imposed on home networking, online gaming, and VPNs not only directly harm consumers and applications providers today, but also have a chilling effect on innovators and venture capitalists considering future applications development and deployment. They argue that the possibility of discrimination in the future dampens the incentives to invest today. Two very different proposals for ex ante rules merit discussion; one would enact a "pure" ex ante regime, the other would enact a hybrid regime that constructs ex ante rules only where antitrust enforcement might not be sufficient. Ex Ante Neutrality Regime Professor Wu has proposed what he calls a neutrality regime that would set ex ante non-discrimination access rules that would apply to the "inter-network" portion of a broadband network provider's network (that is, the portion that it collectively manages with other network providers), but not to the local portion of the network that is under the provider's sole control. Each broadband network provider is a member of two networks: the local network that provides the last-mile of transport to its end-user customers and which it owns and manages by itself, and the inter-network, which it collectively manages with other service providers. If a broadband network provider imposes local network restrictions, usually those restrictions will only affect its local network. Such restrictions are likely to be necessary for good network management. In contrast, restrictions at the inter-network layer or applications layer will affect the entire network, inter-network as well as local network, and can cause externality problems. The ex ante neutrality regime is based on a non-discrimination rule that distinguishes between discrimination at the local network level (acceptable) and at the inter-network level (unacceptable); the rule would make operational the network neutrality principle at the inter-network level. The rule prohibits discrimination based on such inter-network elements as IP addresses, domain name, and cookie information. Its general principle is: absent evidence of harm to the local network or the interests of other users, broadband network providers should not discriminate in how they treat traffic on their broadband network on the basis of inter-network criteria. Thus, for example, under the ex ante neutrality regime, a broadband network provider concerned about managing bandwidth would be prohibited from blocking traffic from game sites based on either application information or the IP address of the application provider. But it would be allowed to invest in policing bandwidth usage; users interested in a better gaming experience would need to buy more bandwidth, not get permission to use a given application. As another example, in 2005 the FCC entered into a consent decree with Madison River Communications, a rural telephone company, which had been blocking ports used for VoIP applications, thereby affecting their customers' ability to use VoIP through VoIP service providers. Under this regime, such discriminatory behavior would be ex ante illegal. Since Professor Wu would not regulate customer access to the local network portion of the broadband network, he would allow cable operators to tie cable modem service (broadband access) to ISP service (an application) and, similarly, would allow ILECs to tie DSL service (broadband access) to voice service (an application). That is, ILECs would not be required to offer end users what is sometimes referred to as "naked DSL" service: DSL service without voice service. But because he would prohibit discriminatory access to the inter-network, Professor Wu would prohibit a cable operator from refusing to allow a customer to use its cable modem to obtain ISP service from another ISP and would prohibit an ILEC from refusing to allow a customer to use its DSL service to obtain voice service from another voice provider. Ex ante non-discrimination rules have been subject to criticism from parties that argue that such rules would intrude too much into the business plans of broadband network providers. These critics argue that non-discrimination rules impinge on the ability of broadcast network providers to fully exploit efficiencies from vertical integration or to use price discrimination or other pricing strategies to maximize return on investment. Professor Wu responds that his proposal, which limits the non-discrimination prohibition to the inter-network portion, minimizes that effect by allowing the network provider to take advantage of those economies of scope and vertical integration advantages (such as offering service level guarantees not provided on a shared network) that come with building one's own physical network—so long as no restrictions (such as prohibiting access to certain IP addresses) are placed on use of the shared portion of the Internet network. On the other hand, some parties have been concerned that by allowing the broadband network providers unlimited control over the local portion of their networks, those providers still could distort applications markets to their advantage, though it might be more difficult or more expensive to do so. Another criticism of ex ante non-discrimination rules is that they inherently lead to delays, litigation, and other regulatory costs, as parties fight over interpretation of the rules. The complexity of communications networks, it is argued, renders it difficult, if not impossible, to construct clear ex ante rules. These critics point to the industry experience implementing the 1996 Act. Professor Wu has responded that delays, litigation, and other regulatory costs of administering an ex ante non-discrimination rule could be minimized by identifying only two network layers—the transport infrastructure layer and the application services level —and by restricting the rules to the inter-network portion of the network. The other major criticism is that ex ante rules of any sort, and especially those relating to network access, will artificially aid an independent applications provider in its contractual negotiations with a broadband network provider by allowing it to threaten to bring a regulatory complaint and attendant costs if the network provider does not accept its terms. According to this argument, the network provider often might be forced to accept unfavorable or inefficient access terms to avoid the threat of litigation. The European Union Framework The European Union ("EU") has adopted a legislative framework for the regulation of electronic communications ("EU Framework") that includes creation of ex ante rules to supplement an antitrust approach to regulation. The EU Framework creates a single regulatory structure that covers all electronic networks and services within its scope, without regard to underlying technology. It aims to "reduce ex - ante sector-specific rules progressively as competition in the market develops." The rules, requirements, or obligations imposed on providers are service-specific and are determined by the level of competition in the market. The EU Framework calls for periodic review of all regulatory obligations, although no time period is specified. Under the EU Framework, specific ex ante regulatory obligations are imposed only on those providers that: have significant market power; and are operating in markets where competition is not effective; and where national and European Community competition law (i.e., antitrust) remedies are not sufficient to address the problem. The Framework Directive equates "significant market power" with "dominance." It states that a provider "shall be deemed to have significant market power if, either individually or jointly with others, it enjoys a position equivalent to dominance, that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of its competitors, customers, and ultimately consumers." As required by the Framework Directive, the Commission of the European Communities (a body of the EU) has prepared Commission Guidelines that describe in detail how to measure effective competition and significant market power, and also a Commission Recommendation that identifies 18 product and service markets in which ex ante regulation may be warranted because of a lack of effective competition. The Commission, itself, does not devise specific rules, requirements, and obligations for electronic communications providers. Rather, the National Regulatory Agencies of each of the EU's member states must perform market analysis within their national boundaries to determine which providers have significant market power and, based on that market analysis, create the appropriate specific regulations, rules, or obligations to impose on those providers. To date, very few of the member states have performed this market analysis or implemented regulations, rules, or obligations, and thus there is no empirical evidence on the impact of this regulatory framework. The Commission Guidelines state that, although a high market share alone is not considered sufficient to establish possession of significant market power, concerns about single firm dominance arise with market shares of 40% or above. Providers with market share of 25% or less are deemed unlikely to have significant market power. Emerging markets, where de facto the market leader is likely to have a substantial market share, should not be subject to inappropriate ex ante regulation. Proponents of the EU Framework argue that telecommunications regulation should be viewed as an applied case of antitrust and therefore should adhere to antitrust principles. Critics of the EU Framework claim that although the rules are set ex ante , they fail to provide either network providers or independent applications providers the type of certainty that fosters innovative activity because they are determined on a case-by-case basis and do not take advantage of characteristics common to most communications markets. As one critic explains: ...what distinguishes telecommunications problems is that they share consistent features found in some but not all antitrust cases. Most telecommunications problems feature many if not all of the following economic features: (1) a physical infrastructure of high fixed cost, that is (2) a large source of both positive externalities including network externalities, that (3) can be used to provide a range of services, and (4) in an environment of rapid technological change that makes the infrastructure useful for different services than those for which it was originally designed. Given these common market characteristics, it might be possible to construct general rules that provide certainty for network providers and independent applications providers alike. Another criticism of the EU Framework is that reliance on antitrust principles simply replaces the current contentious battle over the classification of services with a new contentious battle over proper market definition, since any determination of whether a firm has significant market power is likely to depend heavily on the geographic and product market definitions chosen. Ex Post Adjudication of Abuses of Market Power The Regulatory Framework Working Group of the Digital Age Communications Act Project of the Progress and Freedom Foundation ("PFF Working Group") has proposed replacing the current statutory and regulatory framework that relies heavily on proscriptive rules that set ex ante structural and behavioral requirements (such as access requirements or non-discrimination rules) with a system that would adjudicate alleged abuses of market power ex post , as they arise, on a case-by-case basis. It proposes enacting a new statute, the Digital Age Communications Act ("DACA"), modeled after the Federal Trade Commission Act, that would give the FCC (or a successor agency) the authority to adjudicate allegations of "unfair methods of competition ... and unfair or deceptive acts in or affecting electronic communications networks and electronic communications services." These unfair practices could include interconnection-related practices (such as the refusal to interconnect or unfair terms, conditions, and rates of interconnection): if such practices were shown to pose a substantial and non-transitory risk to consumer welfare; and if the Commission determined marketplace competition were not sufficient to protect consumer welfare; and if the Commission considered whether requiring interconnection would affect adversely investment in facilities and innovation in services. Under the proposal, the Commission could require the guilty party to pay damages to the harmed party if any violation were found. Also under the proposal, the Commission would have very constrained authority to prescribe rules, which would automatically sunset after five years. The FCC's authority to approve an application to assign or transfer control of a license (that is, to review mergers) would be limited to ensuring that any such change in control did not violate existing FCC rules. The PFF Working Group claims that the potential harm to consumers from bad regulation far exceeds the potential harm from badly functioning markets and therefore the burden of proof must fall on the regulator for imposing any regulation. It seeks to "codif[y] a presumption that regulation is unnecessary to protect consumers and provide[] tools that can adequately address competition problems that arise in communications markets." It states that even inefficient market outcomes are likely to be less problematic than regulatory solution because (1) markets are effective at responding to and overcoming their own inefficiencies, (2) government may not have the incentive to improve matters, and (3) policy makers are likely to lack the information needed to make efficient decisions. Thus, it proposes ex post rather than ex ante regulation and the five-year sunset provision. The PFF Working Group further argues that a new statute is needed in order to replace the current model of regulation based on vague standards such as the "public interest" and "just and reasonable" with the well-established "unfair competition" standard of the FTC. It explicitly seeks, in each and every provision of its proposed statute, to minimize the FCC's regulatory authority. The PFF Working Group proposal for ex post regulation has been subject to several criticisms. First, it is based on the assumption that consumer welfare loss from bad regulation is always far greater than consumer welfare loss from badly performing markets, and that it is therefore best to err on the side of under-regulating. This may or may not be true in the case of markets characterized by networks where the platform provider and applications providers must cooperate to maximize consumer welfare. There is a large and growing academic law and economics literature on these unique markets; there is no consensus in the literature, or from empirical evidence, that in these markets there is less risk from erring on the side of under-regulation than on the side of over-regulation. Nor is there theoretical or empirical proof that the potential harm to consumers from distortions created by ex ante rules are greater than those created by ex post adjudication. It is possible that a narrowly crafted ex ante non-discrimination rule could create less distortion than ex post adjudications that will inherently result in some, and potentially many, innovative independent applications providers being driven from the market, thereby denying customers the benefit of their services. The PFF Working Group proposal appears implicitly to recognize that possibility by giving the FCC rulemaking authority, which, although constrained, would allow the Commission to consider adoption of ex ante rules where appropriate. More generally, critics claim that ex post regulation distorts the business plans, and undermines the negotiating position, of independent applications providers by placing the burden of proof for network access on them if they seek to develop and introduce an application that may not fit into the business plan of the network provider. According to this argument, the independent applications provider might be forced to modify its planned application or accept unfavorable or inefficient access terms to avoid the threat of being denied access to the broadband network. Some critics also oppose the PFF Working Group proposal to eliminate the public interest standard, claiming reliance on what is basically an antitrust standard fails to take into account non-economic objectives of U.S. telecommunications policy, such as localism and diversity of voices. Antitrust Law and Non-Mandatory Principles as the Basis for Self-Regulation The broadband network providers have argued that they should not be subject to access regulation because they face strong market incentives not to restrict the access of independent applications providers to their networks. They cite the existence of indirect network efficiencies, which reward network providers for keeping their network open, and the availability to most Americans of at least two broadband networks. They argue that any access regulation would cause harm, by curtailing their ability to vertically integrate to exploit efficiencies such as ensuring quality of service levels needed for video and voice services. They argue that where they have placed usage restrictions on customers those restrictions were needed to ensure quality of service and other bandwidth management objectives and to make it feasible to undertake their huge infrastructure investments. They also claim that they remain subject to the antitrust laws, which would constrain them from undertaking any anticompetitive activities that are harmful to consumers. These arguments have been subject to a number of attacks. Critics have pointed to the widespread, documented usage restrictions that network providers have placed on end users, which the critics claim have harmed consumers, for example, by denying access to virtual private networks needed for telecommuting. Critics claim that these usage prohibitions are far more restrictive than needed to manage bandwidth, and often are imposed for strategic purposes, not for network efficiency reasons. They also claim that not regulating access will harm innovation by giving the broadband network providers the ability to strategically constrain independent applications. Former FCC chairman Michael Powell has suggested that it might not be necessary to impose regulations if the industry were to agree to follow certain "Internet Freedom" principles as the basis for self-regulation. Mr. Powell has constructed guiding principles, noting that: Promoting competition among high-speed Internet platforms is only half of our task, however. We must ensure that the various capabilities of these technologies are not used in a way that could stunt the growth of the economy, innovation and consumer empowerment. Thus, we must expand our focus beyond broadband networks—the so-called "physical layer" of the Internet's layered architecture. Referring explicitly to the research and analyses performed by Professors Weiser, Farrell, and Wu, cited earlier, Mr. Powell explained that there are circumstances in which broadband network providers might choose to restrict usage on their network, and that some troubling restrictions have appeared in broadband service plan agreements. But he stated that he did not believe that there was yet a case for government imposed regulations regarding the use or provision of broadband content, applications, and devices. Instead, he challenged the industry to avoid future regulation by embracing what he called the four Internet Freedoms. These are: Freedom to Access Content: Consumers should have access to their choice of legal content. Freedom to Use Applications : Consumers should be able to run applications of their choice. Freedom to Attach Personal Devices : Consumers should be permitted to attach any devices they choose to the connection in their homes. Freedom to Obtain Service Plan Information : Consumers should receive meaningful information regarding their service plans. In presenting these principles, Mr. Powell indicated that broadband network providers have a legitimate need to manage their networks and ensure a quality experience; thus reasonable limits sometimes must be placed on service contracts. Such constraints, however, should be clearly spelled out and should be as minimal as necessary. Since no one can know for sure which "killer" applications will emerge to drive deployment of the next generation high-speed technologies, the industry must let the market work and allow consumers to run applications and attach devices unless they exceed service plan limitations or harm the provider's network. (The broadband network providers have not explicitly opposed Mr. Powell's proposal; nor have they explicitly endorsed it.) In its August 5, 2005 order and related actions, the FCC, in effect, implemented Mr. Powell's proposal. It ruled that DBS service, like cable modem service, is an information service and therefore not subject to any of the access requirements in Title II of the Communications Act. It also adopted a non-binding policy statement consisting of four principles: consumers are entitled to access the lawful Internet content of their choice; consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; consumers are entitled to connect their choice of legal devices that do not harm the network; and, consumers are entitled to competition among network providers, application and service providers, and content providers. Critics have challenged Mr. Powell's proposal—and, by extension, the FCC's August 5, 2005, order and policy statement—on several grounds. They point to the many documented instances of usage restrictions placed on end users as proof that, left unregulated, market forces are not robust enough to ensure unrestricted access. They argue that the search for the killer application that might drive investment in both infrastructure and applications is more likely to be successful in a regulatory regime that fosters network neutrality than in a regime that allows the few broadband network providers to determine the direction of the network. They argue that it is impossible to undo harm after it has occurred and that, in light of the identifiable reasons why network providers might have both the incentive and the ability to restrict access, it is dangerous to move forward based on non-mandatory principles that the network providers have not, in any case, endorsed. Critics also claim that antitrust laws, which generically address monopoly behavior and anticompetitive practices, are inefficient vehicles for addressing the impediments to competition and innovation that are most common in communications markets. These critics argue that there is abundant empirical evidence that there are greater opportunities for firms to erect barriers to entry in "network" markets than in traditional markets and that as a result relying primarily on ex post antitrust enforcement leaves consumers subject to unnecessary risk. They also oppose elimination of the public interest standard. Platform Innovation: Mass Market Competition Among Broadband Network Providers Currently, in most locations, the incumbent local exchange carrier ("ILEC") and the local cable company are the only broadband network providers serving the mass market. Wireless (including satellite) carriers, cable overbuilders, or power companies may provide a relatively ubiquitous third broadband connection some time down the road, but in the next few years are likely to offer mass market customers a competitive option in scattered locations at most. Nor have the ILECs demonstrated tangible plans to extend their broadband networks beyond their current service areas to compete head-on with other ILEC broadband providers. It appears that the competition that is developing between telephone and cable providers is taking the form of "triple play" offerings of voice, data, and video services. At present and in the near future, some telephone companies will bundle re-sold satellite video services with their voice and DSL services to compete with cable companies' triple play. But the largest ILECs and even many small rural carriers have begun to upgrade their networks to have the bandwidth capacity to offer video services themselves. Broadband network providers will seek to distinguish themselves by offering premium services such as video on demand, bundles that include wireless service (with that service provided over a separate wireless network, though perhaps using hybrid telephones that can be used on wireless and wireline networks), access to advanced electronic games, etc. A key will be to offer a broadband connection with sufficient bandwidth to accommodate whatever service becomes the killer application, or at least an important application. As explained earlier, these broadband networks actually consist of two parts: the last-mile local network privately owned and operated by the broadband network provider and the inter-network that is jointly operated by multiple Internet backbone providers. Success for any broadband network provider will depend on the bandwidth, security, and service quality it can ensure over its local network. Although currently all ubiquitous broadband networks provide hard wires into the customer premise, the various network providers are each deploying unique network architectures. Most of the large cable companies have upgraded their coaxial cable networks and now are offering video, data, and voice services in many areas of the country, especially in urban areas. Their cables into customers' premises often have sufficient bandwidth to "broadcast" to customers' premises hundreds of video channels for the customers to choose among and their set-top boxes allow customers to select video on demand, although the video choices available at any particular point in time may be limited. Currently deployed cable modem technology, however, requires clustered customers to share bandwidth capacity, so that connection speeds fall as more neighbors use the network. Traditional Cable vs. IP Video The two largest ILECs, AT&T and Verizon, are pursuing quite distinct architectures, with the Verizon architecture in many ways more like cable architecture than like the AT&T architecture. Verizon reportedly will spend $6 billion over five years to bring optical fiber directly to as many as 16 million homes in its service areas. Verizon has begun deployment of its "FiOS TV" network, which will require the replacement of current copper wires into the household premise with optical fiber. This requires a truck roll to physically replace the copper with fiber. But that fiber has such high capacity that it is likely to allow Verizon to bring as much or more bandwidth to the home as cable systems, thus allowing Verizon to simultaneously "broadcast" a large number of video channels and offer video on demand. At the customer premise, the viewer will use the remote control to the set-top box to choose the channel to be watched at any point in time, just as is done for cable service today. Also like cable, the signals for premium channels will be "broadcast" in coded form, and households that do not subscribe to particular premium channels will not be able to decode the signals. Verizon will use a particular wavelength on their fiber to implement QAM, a cable protocol used as a transport mechanism. This architecture appears to be consistent with the definitions of "cable service" and "cable system" in Section 602 of the Communications Act. In contrast, AT&T reportedly is spending $4 billion over three years to string optical fiber cable to neighborhoods totaling as many as 18 million homes, and plans to deliver television services using Internet technology called IPTV. Rather than "broadcasting" a constant stream of all available programs, as the cable companies and Verizon do, IPTV stores a potentially unlimited number of programs on a central server, which users then call up on demand. AT&T will not replace the copper lines that currently run into customer premises. Instead, to make sure there is sufficient bandwidth between the neighborhood node where the optical fiber terminates and the household premise, it will upgrade the DSL equipment currently at those nodes and in households with VDSL technology. At the household, the viewer will use the IP technology to send a signal to the AT&T end-office to send a particular channel or video on demand selection. That signal will be sent over the same bandwidth used for data and VoIP service. In AT&T's system, a single customer line will have enough bandwidth to support up to four active television sets per household at a time, or up to two HDTV channels at a time. The Verizon and AT&T broadband network architectures each have their advantages and disadvantages. For example, AT&T's IP approach has greater two-way capability and therefore probably can better accommodate two-way applications than the Verizon architecture. On the other hand, AT&T's architecture provides far less bandwidth into the household, and thus may not be able to accommodate some bandwidth-intensive applications that the Verizon architecture could accommodate. AT&T may face customer resistance to an IP system that may experience some delay when changing channels. AT&T's reliance on DSL technology also may create problems with home networking. Telephone wires currently enter the house and then the inside wiring goes to the various telephones. But television sets may not be located near the telephones. AT&T's plan requires 20-25 megabits of bandwidth into the home, but with its architecture—deploying optical fiber to the neighborhood node, and then continuing to use copper into the home with VDSL—bandwidth falls as the distance to a customer's house increases. It may be that only those homes within a couple of thousand feet of the neighborhood node will be able to be fully served. On the other hand, Verizon's choice of deploying optical fiber all the way to the home, which requires a very large investment in optical cable, labor-intensive truck rolls, and in some cases digging up of land to replace the copper with optical cable, will be far more expensive per household served and thus may be constrained both by limits on Verizon's capital budget and by customer resistance to digging up their yards to lay fiber. Some observers have questioned whether Verizon's fiber to the home approach can prove out financially, even as they concede that the huge bandwidth provided could give it a leg up in the long run. Unlike current copper networks, both the AT&T architecture and the Verizon architecture could leave customers without telephone service if their electricity goes out, though for different reasons. Fiber to the home technology does not incorporate line powering, so Verizon might have to provision the optical interface at its customers' premises with back-up batteries. But even then, the batteries would probably last at most 8 to 16 hours, less time than might be needed in case of natural disruptions such as hurricanes. At the same time, DSL modem systems of the sort used by AT&T require active electric power at the customer premise, which may not be available during emergencies. In both cases, customers might have to rely on wireless telephone service during time of electric power loss. The marketplace will determine which of these network strengths and weaknesses are most important to end users. These architectural differences, in addition to creating competing platforms for triple play service, offer platform diversity to independent applications providers. Where the competing networks have distinct characteristics that better meet the needs of some sets of applications and are less effective for other sets of applications, applications providers are not constrained in their product development to the characteristics of a single platform. Thus, competing distinct broadband networks fosters applications innovation. AT&T claims that since it will be using IP technology to offer video service, it is not subject to cable television regulation, most notably, franchising requirements. Under federal law, franchise authorities may require a cable operator to pay a franchise fee of up to 5% of cable service revenues; may establish requirements for designation of channel capacity for public, educational, or governmental ("PEG") use and for the construction of "institutional networks" that serve educational and governmental functions of the franchiser; may require the franchisee to provide facilities or financial support for PEG access; may require a cable system to designate channel capacity, up to maximum levels based on system capacity, for commercial use by persons unaffiliated with the cable system; must allow the cable system a reasonable period of time to build out its system to cover all households in the franchise area; and must prohibit the redlining of low-income neighborhoods. Clearly, if AT&T were not subject to a 5% franchise fee and other cable franchising requirements, but its competitors were, it would enjoy a significant competitive advantage. To the extent such advantage would artificially raise the relative costs or otherwise harm competing broadband network providers, or otherwise weaken them, then their ability to foster innovation by providing a unique alternative broadband platform could be undermined. Verizon has agreed that it is subject to franchise requirements, but argues that a streamlined statewide or nationwide franchising process is needed because the extremely time consuming process of negotiating literally thousands of individual franchise agreements could slow down its entry into video by years and could endanger its planned upgrade to a broadband network. Reviewing the Current Framework for Cable Franchising These potential inconsistencies suggest that it is timely to review the current statutory and regulatory framework for cable, found primarily in Title VI of the Communications Act, to determine whether it would be in the public interest to streamline the franchising process (for example, by consolidating it at the state or federal level) and/or to lessen or eliminate some current regulations. For example: Are there elements of the current federal and state regulatory framework for cable service that impede entry into the video market and, if so, would the benefits to consumers from modifying or eliminating these elements outweigh the benefits of maintaining them? Is the potential for competition from the new telephone company-based video providers sufficient to lighten or eliminate the remaining economic regulations of all video providers, including incumbent cable companies? (Already, the only cable rates subject to regulation are basic cable rates and cable equipment rates.) Is there a need for more stringent economic regulation of the incumbent cable companies than of new subscription video providers? Which current regulations are intended to "assure that cable systems are responsive to the needs and interests of the local community"? To what extent can competitive provision of subscription video create market forces that would, on their own, force video providers to be responsive to local community needs and interests? To what extent can centralized (state or federal) regulation, rather than local franchise regulation, address local needs? Is enforcement of consumer protection and customer service requirements better addressed at the local level or centrally at the state or federal level? If there already is a ubiquitous provider of broadband video service—the local cable system—in a municipality, does the public benefit from requiring new entrants also to provide ubiquitous service? On one hand, the existing telephone networks do not conform to municipal boundaries, so even a complete broadband buildout of a telephone company's network might not provide ubiquitous coverage of a particular political jurisdiction. On the other hand, less than ubiquitous coverage might leave some households without a competitive alternative and also might allow the new entrant to strategically "cherry-pick" the most valuable neighborhoods. If the underlying public interest objectives that are served by the current PEG and institutional network requirements are fully met by the incumbent cable companies, such that there would be little public benefit to imposing the same requirements on new entrants, how could these requirements be maintained on the incumbents without placing them at a competitive disadvantage? With respect to the long-standing media policy objective of diversity of voices, the media ownership rules address horizontal ownership relationships, not vertical ones. Congress enacted sections 611 and 612 of the Communications Act to ensure diverse sources of video programming on cable television if cable companies are vertically integrated into program production. Section 612 allows franchising authorities to require a cable system to designate channel capacity, up to maximum levels based on system capacity, for commercial use by persons unaffiliated with the cable system. Section 611 allows franchising authorities to require the designation of channel capacity for public, educational, or governmental use. The public access channels, in particular, are intended to ensure that diverse voices are heard. How should these statutory provisions be applied to telephone company-based video providers? Some observers have argued that fairness in the marketplace requires that the new telephone-based video providers be subject to the same requirements as the incumbent cable operators. In particular, some have argued that the new entrants should be subject to the same buildout requirements as the cable operators. But economists have explained that the costs of a particular regulatory requirement may be very different for an incumbent and a new entrant, and if imposed in exactly the same fashion may act as a barrier to entry and increase the "first mover" advantage already enjoyed by the incumbent. For example, a buildout requirement is one of the costs of entry into the market. For the incumbent cable operator, the buildout requirement may have been imposed at a time when cable operators received an exclusive franchise and thus it represented a cost of entry into a protected monopoly market. Moreover, that cost is now sunk and likely has long since been recovered. In contrast, for a new telephone-based entrant, a buildout requirement would represent an entry cost into a competitive market environment and would not be viewed as sunk when it makes the decision to enter or not enter. Thus, the imposition of identical franchise (or other regulatory) requirements on an incumbent and a new entrant might not represent an equal burden in the marketplace. The FCC determined on its own that it already had the statutory authority to address some of these issues. On March 5, 2007, the FCC released an order in which it adopted rules and provided guidance that set restrictions on the process and requirements that local franchising authorities (LFAs) can employ when considering franchise applications from potential new cable service providers. The FCC based its action on its authority under Section 621(a)(1) of the Communications Act of 1934, as amended, which prohibits franchising authorities from unreasonably refusing to award competitive franchises for the provision of cable services. The Commission found that the current operation of the local franchising process in many jurisdictions constitutes an unreasonable barrier to entry that impedes the achievement of the interrelated federal goals of enhanced cable competition and accelerated broadband deployment. It therefore adopted rules setting strict limits on the amount of time local franchising authorities (LFAs) have to approve or reject the franchise application of an entity seeking to provide cable service in competition with an existing cable provider. It also set restrictions, in the form of guidance, on requirements that LFAs could impose on such applicants for network build-out; franchise fees; obligations to provide PEG and institutional networks; and the provision of non-cable services or facilities. The FCC also concluded that it has the authority to preempt provisions in local laws, regulations, and requirements, including level-playing-field provisions, that permitted LFAs to impose greater restrictions on market entry than the rules and guidance adopted in its order. The most controversial aspect of the FCC order is whether the Commission has the statutory authority, under Section 621(a)(1), to impose rules and guidance restricting the franchising process of local franchising authorities and to preempt local laws, regulations, and requirements that are inconsistent with such rules and guidance. On April 3, 2007, a coalition of local government organizations and associations filed appeals of the FCC order in half a dozen different federal courts; the appeals were consolidated in the Sixth U.S. Court of Appeals. Two other aspects of the FCC order also raised questions. First, although there was empirical evidence in the proceeding record that the current local franchising process often is lengthy and that some of the demands of some LFAs may delay or discourage competitive entry, which may not be in the public interest, the Commission's findings sometimes require a leap of faith that such delays and discouragement constitute an unreasonable refusal to award a competitive franchise, the standard required by Section 621(a)(1) for the Commission to act. Second, there is some concern that the new franchising process imposed by the FCC's rules and guidance will encourage LFAs to deny franchise applications when an impasse occurs, and for the denied parties to seek judicial review in federal or state courts. Although there was no empirical evidence on the record of how long such court actions tend to take, some observers believe these delays are likely to be greater than the delays under the current franchising process. The Commission did not consider potentially more efficient ways to address the current lengthy process, such as a fast-track complaint process at the FCC that both applicants and LFAs could turn to when an impasse develops in negotiations. The rules and guidance adopted in the order are applicable only to "competitive franchise applicants," that is, to applicants for a cable franchise in an area currently served by one or more cable operators. The Commission concurrently adopted a Further Notice of Proposed Rulemaking to gather comment on whether the rules and guidance also should apply to existing cable operators. In addition, the adopted rules and guidance apply only to those situations in which the franchising process, including but not limited to the ultimate decision to award a franchise, is controlled by county- or municipal-level franchising authorities. They are not applicable to franchising decisions where a state is involved (either by issuing franchises at a state level or by enacting laws governing specific aspects of the franchising process). The Video Franchise Working Group of the National Association of Regulatory Utility Commissioners (NARUC) issued a report indicating that, as of the end of 2006, 17 states had established some state-level video franchising authority oversight and 3 states had constrained municipal franchising authority but not replaced it, and that at least 19 additional states could consider statewide video franchising reform in 2007 (with 11 already having bills on the table). The states with some state-level oversight include the three most populous states—California, Texas, and New York—as well as such other high-population states as Michigan, New Jersey, and Massachusetts. In addition to these franchising issues, the advent of IP video potentially raises a new regulatory issue. While it is unlikely that an independent applications provider would be able to put together a suite of video programming to compete head-on with AT&T, Verizon, or cable operators for the provision of multiple channels of subscription video service, it is possible that an independent applications provider might be able to offer specialty video programming, perhaps independent films or local sports programming, using IP technology. While a single applications provider of this sort might not be a threat to the business plan of the large cable and telephone companies, a plethora of such independent video providers—or, in the future, the development of a direct link between content providers and end users via peer-to-peer connections—might be a threat. The network providers might then have the incentive to restrict end user access to these services. This raises the non-discrimination issues discussed earlier: should vertically integrated broadband network providers have the right to restrict IP video or other applications that challenge their own video services or should end users' have nondiscriminatory access to all applications that do not threaten the integrity of the network be mandatory? Fostering Additional Broadband Networks Intermodal Competition from Advanced Wireless Networks In the debate among proponents of the various approaches to regulation of broadband networks—structural requirements, ex ante non-discrimination rules, ex post adjudication of abuses, and reliance on antitrust law and non-binding principles—the only point of agreement is that end users would benefit, and the need for regulation might be reduced, if customers had more than two broadband networks to choose among. In almost all geographic markets today, however, the mass market broadband market structure is characterized by duopoly provision of broadband network services (cable modem service from the local cable system or DSL service from the local telephone company), plus competition among independent applications service providers and the two vertically integrated broadband network providers for the provision of broadband applications (services). Most parties agree that the dynamics in both the network market and the applications market would likely change if there were three or more widely available broadband network options. For example, as discussed earlier, network providers face countervailing incentives. On one hand, due to indirect network externalities, they have the incentive to minimize restrictions on independent applications providers' access to their networks. On the other hand, they sometimes have the incentive to restrict such access when to do so would yield them first-in advantages or other strategic advantages in the applications market or would aid in their ability to bolster profits through price discrimination. A third network provider, entering the market after the first two have been established, is likely to seek customers by differentiating its network access offering—perhaps by offering nomadic, portable, or mobile access services not available from the two wireline providers and/or by configuring its network architecture and service offerings in a fashion to accommodate independent applications not accommodated by the incumbents' architectures and service offerings. A third network therefore may well strengthen the market forces for nondiscriminatory network access and may reduce the need for regulatory intervention. Given the high sunk up-front costs and initially low scale economies, however, a new entrant is less likely to be able to provide strong price competition, even if its underlying cost structure (when operating closer to capacity) were lower than that of the incumbents. Also, if the new entrant can succeed in gaining end-user customers—and thus also independent applications provider customers—primarily because of its nomadic, portable, or mobile feature, it may have the same market incentives as any other network provider enjoying its middle position in a two-sided market. Once the new entrant has acquired end-user customers, independent applications providers may have no choice but to interconnect with the new entrant's broadband network at terms, conditions, and rates over which they have little or no leverage, with possible harmful implications for competition in the applications market. Thus, it is not certain whether entry by a third network provider would eliminate the need for regulation. Still, entry by a third broadband network provider could threaten the profits of incumbent wireline and cable broadband network providers to the extent they lose customers to the entrant and to the extent a third network reduces their negotiating strength vis-a-vis independent applications providers and end users. The incumbent network providers might benefit, however, if such entry justified the easing of regulatory requirements. The incumbents have argued that regulation of their networks inevitably introduces inefficiencies, distortions, and unnecessary costs. If entry of a third broadband network created market forces that decreased both the perceived and the actual need for regulation of the broadband networks, and if such regulation did indeed impose those inefficiencies on network providers, then regulatory relief induced by competitive entry could benefit the incumbents. While ultimately broadband may be provided over power lines ("BPL") and/or satellite, there is general agreement that a third ubiquitous broadband network option is most likely to be provided using terrestrial wireless technology. In recognition of that fact, the FCC created a Wireless Broadband Access Task Force that issued a report in February 2005. The report identified two policy reasons for fostering deployment of wireless broadband networks: Terrestrial wireless technology provides both mobility and portability, efficiently connects devices within short distances, and bridges longer distances more efficiently than wireline and cable technologies. Wireless technologies frequently are a more cost-effective solution for serving areas of the country with less dense population, and provide rural and remote regions new ways to connect to critical health, safety, and educational services. Terrestrial wireless networks can provide competition to existing broadband services delivered through the currently more prevalent wireline and cable technologies. Wireless broadband can create a competitive broadband marketplace and bring the benefits of lower prices, better quality, and greater innovation to consumers. There appears to be consensus that one objective of U.S. telecommunications policy should be to foster the deployment of wireless broadband networks. But any actions to foster deployment should not take the form of industrial policy favoring any specific wireless technology, since there are a variety of technologies that can offer broadband capability. Nor should it provide wireless technology an artificial advantage over other broadband technologies. Wireless broadband can be provided using fixed or portable technologies (such as Bluetooth or ultra-wide band for short-range communications, Wi-Fi for medium-range, and WiMAX for longer-range) or by using mobile technologies (such as those used for third-generation ("3G") or forthcoming fourth-generation ("4G") mobile cellular service). Currently, Wi-Fi primarily provides wireless Internet access for laptop computers and personal digital assistants; WiMAX expands networks with wireless links to fixed locations; and 3G brings Internet capabilities to wireless mobile phones. Over time, the capabilities of all these technologies are likely to expand. The short and medium range technologies share unlicensed spectrum with other technologies. WiMAX and 3G operate on designated, licensed frequencies (though it may soon be possible for WiMAX to operate on unlicensed spectrum). Proponents of each of these technologies share the concern that there may be insufficient unfettered spectrum available for their technologies to be developed to full market potential (though recent FCC actions have at least started the process for making such spectrum available). It is not yet clear whether these various wireless technologies ultimately will be competing for customers or complementing one another by providing a broader base and greater choice of devices for wireless communications and networking. Wi-Fi, or wireless fidelity, is the most widely employed of the family of Institute of Electrical and Electronics Engineers ("IEEE") standards for frequency use in the unlicensed 2.4 GHz and 5.4/5.7 GHz spectrum bands. Those are the bands on which wireless local area networks operate. The FCC's Wireless Broadband Access Task Force and others have identified a variety of actions to foster Wi-Fi usage, including managing spectrum in a fashion that eliminates artificial restrictions on the availability of unlicensed spectrum, promoting voluntary frequency coordination efforts by private industry, considering increasing the power limits in certain bands available for use by unlicensed devices in order to improve their utility for license-exempt wireless Internet service providers. WiMAX is an industry coalition of network and equipment suppliers that have agreed to develop interoperable broadband wireless based on IEEE standard 802.16. It can transmit data up to 30 miles and may ultimately be used to provide the broadband "last mile" to end users, that is, a means to provide fixed and portable wireless services to locations that are not connected to networks by cable or high-speed wires. WiMAX uses multiple frequencies around the world, an impediment to interoperability. In the United States, the biggest band of spectrum currently available for WiMAX use is around 2.5 MHz, which has already been licensed, primarily to Sprint Nextel and Clearwire. It now appears that the successful bidders in the recent auction for the Advanced Wireless Service (AWS) Spectrum will use that spectrum to provide mobile wireless services rather than fixed and portable service using WiMAX. Another spectrum band that could be used for WiMAX is the 78 MHz of spectrum in the 700 MHz band—18 MHz of which has already been auctioned off and the remaining 60 MHz of which will be auctioned off in 2008 as part of the transition of broadcast television from analog to digital technology. But the broadcasters do not have to release that spectrum until February 17, 2009. Moreover, that spectrum is viewed as the equivalent of "Riviera beachfront property," that will be sought by multiple bidders, many of which would not intend to use it for WiMAX service. Today's mobile wireless networks can only provide voice and limited data service. The next major advance in mobile technology, referred to as 3G, has been deployed overseas and is beginning to be introduced in the United States. It dramatically increases communications speed. Fourth generation networks, which may be available in the near future, are expected to deliver wireless connectivity at speeds up to 20 times faster than 3G. Some U.S. providers may choose to leapfrog directly from second to fourth generation technology. Third generation and future developments in wireless technology will be able to support many services for business and consumer markets, such as: enhanced Internet links, digital television and radio broadcast reception, high-quality streaming video, and mobile commerce, including the ability to make payments. The reallocation of spectrum to make more available for advanced wireless services is a specific example of a broader public policy objective: the management of spectrum in a fashion that promotes its efficient use to provide innovative services to Americans. There is a very lively debate about how best to manage the spectrum to maximize consumer welfare. There has been much criticism that legacy command-and-control regulation of spectrum—under which spectrum is assigned to specific uses and access to that spectrum for other uses is prohibited—does not take into account advances in technology that have created the potential for systems to use spectrum more intensively and to be much more tolerant of interference than in the past. Two proposed alternative approaches have been the subject of much discussion: the granting of exclusive, tradeable spectrum usage rights through market-based mechanisms and creating open access to unlicensed spectrum "commons." The three approaches are not necessarily mutually exclusive; some portions of the spectrum could remain subject to command-and-control, while other portions are allocated by the market and the remainder is held as commons. The debate about how best to allocate spectrum, however, is beyond the scope of this report. Some observers have suggested that a third network provider might have less incentive to provide strong price and service competition—to challenge the network access status quo—if it shared ownership or a strategic alliance with one of the incumbent networks. For example, if the new network were an advanced wireless network that shared ownership with one of the RBOCs (Verizon Wireless/Verizon or AT&T Wireless/AT&T) or if the wireless network had a strategic relationship with the major cable companies (an alliance has been formed between four of the major cable companies and Sprint/Nextel to offer bundled "quadruple play" voice/data/video/wireless in competition with the RBOCs), then there might be some reluctance on the part of the new entrant to employ an entry strategy that disrupts the market. This might suggest that, in any auction of spectrum for 3G or 4G services, some preference be given to bidders that are independent of the RBOCs, Sprint/Nextel, and major cable companies, or that some portion of the auctioned spectrum be set aside for independent providers. On the other hand, there appear to be strong incentives for any broadband wireless network provider, even if it were owned by a telephone company or in a marketing relationship with a cable company, to be an aggressive competitor. First, wireless service is growing faster than wireline service, so it would not seem to be in a company's long term strategic interest to constrain its wireless activities to protect its wireline business. Second, the broadband wireless networks are likely to extend geographically beyond the geographic reach of any telephone company or cable company network and therefore wireless providers will in many instances not be competing against an affiliated network. It would be difficult for a national wireless carrier to strategically provide two levels of competition: aggressive competition outside an affiliated network's region and passive within. Third, there will probably be multiple broadband mobile wireless networks—at the national level, AT&T Wireless, Verizon Wireless, Sprint/Nextel, and perhaps T Mobile, and at the regional level Alltel/Western Wireless—so any single network will face intramodal competitive pressure on price and service access. Intramodal Competition from CLECs for Large Business Customers Much of the criticism of the 1996 Act has focused on those provisions that attempted to facilitate the transition from monopoly to competitive provision of telecommunications services, most notably the provisions requiring the incumbent local exchange carriers to make elements of their networks available to new entrants under certain conditions. Those provisions were intended to foster intramodal competition with the understanding that new entrants could not instantaneously build out ubiquitous networks like those of the incumbent monopolies. Ten years after enactment of the 1996 Act, no intramodal entrant has been able to construct a ubiquitous network. It has not proven viable to replicate the local loop ("last mile" connection) between a network's switch and a customer's premise, except in the case of large business customers whose traffic volume is sufficient to justify deploying a large pipe to the premise. As a result, the competitive local exchange carriers' ("CLECs") networks typically consist largely of fiber rings in business areas that connect directly to their major customers' locations. Nor has it proven viable for the CLECs to fully replicate the RBOCs' transport networks, the connections between the nodes in their networks, through which aggregated traffic is routed. Even the CLECs that had been serving the most multi-locational business customers, AT&T and MCI, and which have now been acquired by SBC and Verizon, respectively, had not been able to capture sufficient traffic to create the scale economies needed to support a ubiquitous transport network. Rather, they continued to rely on the RBOCs for transport facilities on many routes. Cable networks were constructed to serve residential customers and therefore tend not to be ubiquitously deployed in business districts. Even the largest cable companies are only in selected geographic markets in the country, and may not be able to meet the needs of large, multi-locational business customers. Also, it is likely to take many years for wireless carriers to construct networks that can meet the bandwidth and security requirements of large corporations. Competitive provision of broadband services to large business market customers therefore is most likely to be intramodal. But the acquisitions of AT&T by SBC, of MCI by Verizon, and of BellSouth by the new AT&T have eliminated significant competitors in the enterprise market and also in the Internet backbone market. In approving those mergers, the Department of Justice and the FCC set a number of conditions intended to retain competitive options for enterprise and Internet customers, including the divestiture of some key facilities and ensuring CLECs and ISPs access to certain facilities or services at set rates for at least two years. Nonetheless, some enterprise customers and CLECs remain concerned about their reduced options for retail services and transport facilities. It therefore might not be wise to simply replace the statutory provisions fostering intramodal competition with provisions fostering intermodal competition on the expectation that intermodal competition will always be effective. Intramodal competition will remain important, especially for large business markets. But given the inability of facilities-based CLECs to attain the economies of scale needed to support ubiquitous transport networks, there might be reason to maintain some of the current statutory provisions intended to foster that competition. Antitrust Savings Clause: The Trinko Decision The 1996 Act includes an "antitrust savings clause" stating that neither the act nor any amendments made by it "shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws." In a 2004 decision, involving an antitrust suit brought against Verizon, an incumbent telephone company that had been disciplined by both the FCC and the New York Public Service Commission ("PSC") for breaching its duty under the 1996 Act to adequately share its network with competitive providers, in which the plaintiff alleged that such breaches represented exclusionary and anticompetitive behavior, the Supreme Court ruled that the breached FCC and PSC rules affirmatively required Verizon to aid its competitors and that failing to meet those requirements was not a sufficient basis for finding a violation of antitrust law. The Court found that "the act does not create new claims that go beyond the existing antitrust standards." The Court also found that the plaintiff, a customer of one of the CLECs, did not have standing to bring the case. Congressional reaction to the Trinko decision was mixed. House Judiciary Committee Chairman Sensenbrenner stated concern that the decision not be "perceived as giving a green light to all manner of anticompetitive behavior by the Bells.... The Committee on the Judiciary ... will not hesitate to develop legislative responses to competitive problems that may arise as a result of this decision." House Judiciary Committee ranking minority member Conyers called for legislation to address the "Supreme Court's horrible blunder." On the other hand, Representative Tauzin, then-chairman of the House Energy and Commerce Committee, expressed his approval that the Supreme Court had "decisively reiterated ... that the regulation of the telecommunications industry should be the purview of the FCC and the state [public utility commissions], rather than judges all across the country. It may be that, when Congress inserted the "antitrust savings" clause in the 1996 Act, many Members believed that the clause was preserving an unlimited private right of action on the part of other-than-directly affected parties to sue under the antitrust laws. But, as this case indicates, the clause may be of little effect in instances such as this in which it is found that traditional antitrust principles/standards are not implicated. Given the Verizon decision, there are at least three congressional options that might have the effect of providing the breadth of private action some members of Congress apparently thought they had assured. First, Congress could amend the savings clause to clarify that the phrase, "the antitrust laws," means the literal words of the statutory provisions, but excludes any judicial interpretation of them. Second, Congress could amend the "enforcement" provisions of the 1996 Act so that even if there had already been regulatory action, certain provisions of the act would remain enforceable by private individuals who are not competitors of local exchange carriers, but, rather, their customers or customers of would-be or actual competitors. Third, Congress could characterize a violation of any (or some) mandatory, competitive obligation(s) of the act as prima facie evidence of violation of the antimonopoly provision of the antitrust laws (15 U.S.C. § 2). Congress could also choose to allow the current law to remain unchanged. Intercarrier Compensation Since the value of access to a network or of a network service, such as a telecommunications service, increases as the number of other parties connected to the network increases, new entrants would have a very difficult time entering the market if they could not interconnect their networks with those of the incumbent carriers under nondiscriminatory terms and conditions. Thus a key provision of the 1996 Act set obligations for incumbent carriers and new entrants to interconnect their networks with one another, imposing additional requirements on the incumbents because they might have the incentive and ability to restrict competitive entry by denying such interconnection or by setting terms, conditions, and rates that could determine the ability of the new entrants to compete. With multiple networks interconnecting to provide service, a necessary component of a competitively neutral regulatory regime is nondiscriminatory intercarrier compensation—the payments that interconnected carriers make to one another when more than one carrier's network must be used to complete a call or other electronic communication. When Congress passed the 1996 Act, there was very limited competition across the boundaries of local exchange service, long distance service, and wireless service, and thus the act did not focus on intercarrier compensation rates, though it did prescribe that intercarrier compensation rates between competing local exchange carriers be based on the "additional costs of terminating such calls." Primarily, though, the 1996 Act left in place existing intercarrier compensation rates. But that system of intercarrier compensation was implemented on a piecemeal basis, as specific existing telecommunications services were opened to competitive provision or providers offering entirely new services (such as wireless service) were allowed to interconnect with the public switched telephone network. Today, these intercarrier compensation payments vary widely, depending on the following: whether the interconnecting party is a local exchange carrier ("LEC"), an interexchange (long distance) carrier, a commercial mobile radio service ("CMRS" or wireless) carrier, or an information service provider, and whether the service is classified as telecommunications or information, local or long distance, or interstate or intrastate, even though in each case basically the same transport and switching functions are provided. As shown in Figure 1 , a chart prepared by the Intercarrier Compensation Forum ("ICF"), today the average intercarrier compensation rate ranges from 0.1 cents per minute for traffic bound to an ISP to 5.1 cents per minute for intrastate traffic bound to a subscriber of a small (rural) incumbent local exchange carrier; individual rates can be as low as zero and as high as 35.9 cents per minute. These intercarrier compensation charges can represent a substantial portion of the costs of providing certain services and, in the case of long distance calls that interexchange carriers are required by statute and FCC rule to offer at a single rate nationally, can exceed the retail price for the service. Given the wide variation in intercarrier compensation rules applied to carriers and technologies that are now competing with one another, the FCC adopted a Further Notice of Proposed Rulemaking in February 2005 to review and reform its rules with the goal of constructing a unified intercarrier compensation regime. The FCC sought public comment on nine comprehensive intercarrier compensation reform proposals or sets of principles that have been submitted to the FCC as well as a staff proposal. The issues raised in the ICC FNPRM are not new to the Federal Communications Commission. In 2001, the FCC opened a rulemaking proceeding and adopted a Notice of Proposed Rulemaking seeking information on how to develop a unified intercarrier compensation regime. Most recently, the FCC has sought comment on an intercarrier compensation reform plan, often referred to as the "Missoula Plan," submitted by the National Association of Regulatory Utility Commissioners ("NARUC"), that was the product of a three-year process of industry negotiations led by NARUC. NARUC itself has not taken a position on the plan, which is supported by many industry parties, but also opposed by many. There is general agreement that intercarrier compensation reform is needed because: The current regime distorts investment decisions and undermines efficient competition by providing artificial advantages/disadvantages to those service providers that happen to be subject to favorable/unfavorable intercarrier compensation rules. For example, for non-local calls made within any of the 51 Metropolitan Trading Areas ("MTAs") in the United States, if the caller uses a wireless telephone, the caller's wireless carrier is subject to a cost-based "reciprocal compensation" charge for the termination of that call; but if the caller made an identical call, from the same location to the same called party, using a wireline telephone (and hence a wireline long distance carrier), that carrier would be subject to an above cost "access charge" for the termination of the call. As another example, when a long distance call is made to a called party's wireline telephone, that party's wireline local exchange carrier can charge the calling party's long distance carrier an above-cost access charge for terminating the call; but if an identical long distance call were made to the same called party, from and to the same physical location, but to the called party's wireless telephone, the called party's wireless carrier is not allowed to charge the calling party's long distance carrier any access charge for terminating the call. The current regime fails to provide innovators certainty about the intercarrier compensation regime to which their services will be subject. For example, since VoIP service is, on one hand, an application of an information service and, on the other hand, functionally equivalent to a traditional voice telephone call, it arguably fits into two different classifications for the purposes of intercarrier compensation. Information services are not subject to access charges; long distance telephone calls are. As discussed in the section on VoIP below, the FCC has begun to make decisions, on a case-by-case basis, about the classification of specific voice product offerings that use IP technology to varying degrees. The business plans of VoIP providers will be strongly affected by the ultimate decision about how they are classified for intercarrier compensation purposes. The current regime encourages uneconomic arbitrage; that is, providers making business decisions based on the artificial rates set for intercarrier compensation, rather than on true underlying costs. For example, because of the traffic patterns of ISPs and some anomalies in the rules, some CLECs have pursued the market strategy of targeting ISPs as customers. They have offered ISPs service at what may have been below-cost rates because they could more than recoup any losses by charging above-cost rates to the carriers of the ISPs' subscribers for terminating the large volume of subscriber calls to those ISPs. Regulators also may seek to exploit uneconomic arbitrage. For example, state regulators as well as rural LECs may have the incentive to limit the scope of rural local calling areas since calls that are classified as long distance will generate more revenues (through toll charges or access charges) than they would if classified as local and also will tend to move the burden of cost recovery from local rural customers to urban long distance customers (since long distance rates are averaged and thus urban customers who can be served at low cost face higher averaged rates that contribute to the recovery of higher rural costs). The current regime creates an artificial cost structure, based on minutes of use, which appears to be inconsistent with actual cost causation in networks and which renders it difficult for carriers to meet the preferences of many consumers for offerings consisting of large baskets of minutes or unlimited calling at a fixed price. For example, under the current access charge regime, interexchange carriers are charged on a per-minute-of-use basis for the switching used to originate and terminate their customers' calls, making the interexchange carriers' underlying cost structure usage-sensitive even though the preponderance of those switching costs appear not to be usage-sensitive. But by facing these artificially imposed usage-based costs, long distance carriers are discouraged from offering large baskets of minutes or unlimited calling at a fixed price since they would lose money when serving high usage customers, who are the customers most likely to select such packages. The current regime requires carriers to expend millions of dollars and scarce information technology resources developing systems to identify, measure, monitor, bill, reconcile, audit and dispute the classification of traffic as local or toll, intrastate or interstate, intraMTA or interMTA, information service or telecommunications service, etc., in order to determine which intercarrier compensation rules apply. It also encourages wasteful litigation as carriers fight among themselves about that classification of traffic. These costly nonproductive activities will continue to grow as providers respond to consumer demand for bundled offerings of services that fit into different classifications. The current regime undermines the stability of universal service subsidy funds. Where ILECs rely at least in part on the profits from above cost access charges to defray the cost of providing universal service, this funding source is in jeopardy because the number of minutes subject to access charges is declining as carriers with more favorable intercarrier compensation treatment (for example, wireless and VoIP carriers) are gaining market share and traditional long distance carriers have an incentive to manipulate the complex packages of services that they offer to minimize their exposure to access charges. At the same time, in some quarters there is resistance to comprehensive intercarrier compensation reform because of concerns that some carriers and some consumers may be harmed by the changes. In this view: If the access charges currently imposed by local exchange carriers on interexchange carriers to originate and terminate long distance calls were reformed to more accurately reflect the low proportion of switching costs that appear to be usage-sensitive (and the high proportion that appear to be fixed), per-minute access charges imposed on the long distance carriers would fall, but the fixed costs of switching would likely be recovered by raising the subscriber line charge imposed on end users for connecting to the network. Consumer groups have consistently opposed line charges of any sort, arguing that such charges unfairly burden low usage and low-income customers. The access charges that long distance carriers must pay to small rural local exchange carriers for originating or terminating the long distance calls of the rural carriers' customers tend to be higher than the access charges paid to urban carriers. This is in part because the small rural carriers' underlying costs are higher than those of urban carriers due to the lack of population density and lack of scale economies and in part due to efforts by regulators to keep rural end users' local rates low. Also, the rural carriers' local calling areas tend to be narrowly defined and to serve only a small number of households. Many of their customers' incoming and outgoing calls therefore are classified as toll (long distance) calls, for which the rural LECs receive above-cost minute-of-use access charges from long distance carriers, rather than the fixed end-user charge typical of local service. As a result, the small rural LECs historically have generated a much larger portion of their total revenues from access charges than have urban LECs. Since the access charges of rural LECs exceed costs by more than those of urban LECs, and since rural LECs have depended on access charges more than urban LECs, reforming access charges to bring them down to cost would place a greater revenue burden on rural LECs than on urban LECs. Absent another revenue source, end-user line charges would have to be raised more in rural areas than in urban areas. To keep line charges from growing to the point where local service becomes unaffordable or non-comparable with urban rates, a new universal service funding mechanism would be needed to replace the implicit universal service funding currently in the rural carriers' access charges. Although all the proposals for intercarrier compensation reform have included new universal service funding mechanisms, the rural LECs prefer not to have to rely so heavily on an explicit universal service funding mechanism. They generally prefer to have three revenue sources—line charges, universal service funds, and above-cost access charges—rather than just the first two. In part, this is because they prefer to recover a larger portion of their costs from long distance carriers (whose averaged rates subsidize rural customers) than from their own end-user customers in subscriber line charges. And in part it is because they are concerned about relying too heavily on universal service funds, which they consider a potentially unstable source of revenue, especially now that rural wireless carriers are seeking these same universal service funds. Although section 254(e) of the 1996 Act requires universal service support to be explicit and sufficient, many state regulators continue to set intrastate access charges, and especially the intrastate access charges of rural carriers, at above-cost rates that exceed interstate access charges, in order to create a revenue source (ultimately borne primarily by customers of long distance carriers that do not live in rural areas) that will help keep local rates low. Some parties question whether the FCC has the authority to modify intrastate access charges (as part of comprehensive intercarrier compensation reform) without the formal involvement of the states. The rural telephone companies have an additional problem relating to intercarrier compensation. They claim that they are unable to receive compensation for the termination of a very substantial portion of the traffic they receive from outside their service areas because they are unable to identify the originating carrier. This problem, referred to as "phantom traffic," has grown in recent years. Typically, it occurs when traffic is passed from an originating local or long distance carrier to an intermediate or "transiting" carrier (most typically the Regional Bell Operating Company located closest to the rural telephone company), which then passes the traffic on to the terminating rural carrier. The transiting carriers sometimes, however, will not pay the rural carrier for terminating the call, but rather will insist that the terminating carrier seek payment directly from the originating carrier. Unfortunately, at times the information identifying the originating carrier has been stripped away before the call reaches the terminating carrier. This allegedly happens most frequently when the originating carrier is a long distance or wireless carrier, which must pay above-cost access charges for the termination of the call but would prefer to transit the call through an intermediate local exchange carrier, since the latter would only have to pay cost-based reciprocal compensation rates for the termination of the call. It is likely that intercarrier compensation reform that equalizes the termination rates for long distance and local calls would reduce this phantom traffic problem, but it still is essential that the identification problem be corrected as it places an unfair burden on rural carriers. Recently, another intercarrier compensation-related issue known as "traffic-pumping" has arisen. Under this scheme, a small rural carrier obtains a high access charge rate based on its historically low calling volume. Then the carrier partners with a service provider (sometimes a "free" pornographic chat-line operator) and gives the provider a local telephone number. The service provider advertises the number on the Internet, and consumers start running up thousands of minutes of use. The carrier then bills a long distance provider such as AT&T for millions of dollars in access charges, kicking back a portion to the service provider. AT&T has acknowledged using call blocking to prevent "unscrupulous" local exchange carriers from using this scheme to obtain millions of dollars in access charges. For example, it acknowledged blocking a service called FreeConference.com, which provides consumers a free conference calling system. (Other long distance carriers have denied performing call blocking.) On May 2, 2007, Qwest filed a complaint with the FCC against Farmers and Merchants Mutual Telephone Company, a local exchange carrier based in Iowa, alleging it was engaging in illegal traffic pumping schemes. In response, a coalition of rural and competitive local exchange carriers in Iowa urged the FCC to take against AT&T and other long distance carriers for allegedly blocking numbers in their areas. The FCC issued a statement clarifying that carriers are not allowed to block calls. Given the many affected interests with conflicting views and the impact of intercarrier compensation on such fundamental public policy objectives as competition and universal service, Congress might choose to use its deliberations on reform of the Communications Act as an opportunity to provide the FCC statutory guidance on how to proceed with its intercarrier compensation reform efforts. Universal Service in a Broadband Environment The universal availability of basic telecommunications service at affordable rates has been a fundamental element of telecommunications policy in the United States since the enactment of the Communications Act in 1934. To achieve this, a universal service subsidy system has been employed to keep end user rates affordable for low-income households and for households and small businesses in high-cost areas (and, since 1996, to provide discounts to schools and libraries for telephone service, Internet access, and internal network wiring, and to public and non-profit rural health care providers for telecommunications services and installations and for long distance Internet connections). This policy goal can be fully compatible with the development of a competitive market for telecommunications services, including the last mile into customers' premises, so long as the universal service funding mechanism is constructed in a competitively neutral and efficient fashion. That cannot be accomplished if any of the universal service subsidy is hidden in above-cost rates for certain services that are intended to subsidize the below cost rates for other services. In that situation, a competitor could successfully enter the market by undercutting the above-cost prices for those services whose rates are raised to include implicit subsidies, but could not compete in the provision of those services whose rates are set below cost. The policy goal also cannot be achieved if the universal service subsidy is not available on the same basis to all competitors in the market. This is especially important today, with competing wireline, cable, mobile wireless, and fixed wireless technologies all potentially able to offer service to rural customers. In addition, if the universal service funding mechanism is not efficient—and therefore requires more resources than is necessary to provide universal availability—it will place an unnecessary burden on telecommunications markets (or on the general public, if supported by general tax revenues). The 1996 Act took a major step in the direction of reconciling universal service with competitive markets by requiring that "[a]ny such support should be explicit and sufficient to achieve the purposes...." This requirement has not yet been achieved, however. Although competitive market forces have driven some above-cost rates down toward cost, especially for business services, and an explicit Federal Universal Service Fund ("FUSF") funding mechanism has been created that provides a significant portion of total universal service subsidies, many rates continue to be set above cost in order to include hidden universal service subsidies (for example, the intrastate access charges of many rural telephone carriers discussed earlier in the section on intercarrier compensation). Which Services Should Be Supported by a Universal Service Subsidy and Who Should Receive the Subsidy? The 1996 Act instructs the FCC and a Federal-State Joint Board on Universal Service to base policies for the preservation and advancement of universal service on seven principles. One of those principles is: "Access to advanced telecommunications and information services should be provided in all regions of the Nation." The act is not specific about how this should be accomplished and does not explicitly include advanced services among those that should be subsidized to achieve universal service. To date, the Joint Board and the FCC have not included advanced services in the definition of universal service. But there has been considerable national discussion of the role of broadband networks in stimulating economic development and some Members of Congress believe the time is ripe to debate the inclusion of access to a broadband network in universal service. While market demand appears to be sufficient to generate competitive broadband network deployment in many urban areas without government intervention, that may not be the case in rural or other high-cost (or low-income) areas, where high costs and/or limited demand may render it economically infeasible to deploy multiple broadband networks, or even a single network, without government intervention. If Congress wants to expand the scope of universal service to include universal access to a broadband network at affordable rates, it must address a number of issues. Most basically, how "broad" is the "broadband" that should be provided as part of universal service? Bigger may be better, but only at an associated cost. As explained earlier, one of the primary drivers of broadband deployment has been network providers' desire to bring sufficient bandwidth to customer premises to support the triple play of voice, data, and subscription video services. Of these three applications, video is the one that requires the most bandwidth, but it also is the one that has the least nexus to public safety or economic development. Thus, it may be difficult to establish a public interest justification for subsidizing the additional bandwidth needed for video. On the other hand, one of the principles in the universal service section of the 1996 Act states that "Consumers in all regions of the Nation ...should have access to telecommunications and information services, including interexchange services and advanced information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas." Is it sufficient, for example, to limit a subsidy program in high-cost areas to support for broadband service capable of (relatively low quality) video streaming if the unsubsidized market is driving companies to deploy broadband capable of offering (higher quality) broadcast-quality video service in urban areas—even though subscription video is needed neither for public safety nor for economic development? Also, the sparse population and longer distances in rural areas translate into low density of demand, limited economies of scale, and hence higher costs, such that there is uncertainty whether even a single broadband network can be sustained. Is it possible, then, to construct a universal service subsidy program that is open to all competing technologies (and thus competitively neutral) without creating incentives for the deployment of multiple networks, none of which can exploit economies of scale to constrain costs? Historically, universal service has been limited to basic telephone service, but the subsidy has been given to the provider, rather than to the end user. (The latter might be accomplished in the form of a voucher that could be used to reduce a cost-based rate to an affordable rate.). Since wireline, wireless, and cable companies all may offer local telephone service in a particular high-cost area, all three can potentially qualify as "eligible telecommunications carriers" ("ETCs") in that locality and receive universal service funds. The competing carriers only receive funds for those customers they capture, but since a customer can elect to obtain service from more than one carrier at the same time, more than one carrier can receive universal service funding for serving that customer. Typically, customers do not receive basic voice service from both the local telephone company and the local cable operator, so it is unlikely that those two carriers would each receive universal service funds for serving the same customer. But many customers do receive both fixed telephone service (from a telephone company or a cable operator) and mobile telephone service (from a wireless carrier), and in that case both the fixed and the mobile telephone service provider would receive the universal service subsidy. Thus, competitive entry in that situation will increase the total size of the universal service fund. Data from the 2005 and 2006 annual reports of the Universal Service Administrative Corporation ("USAC"), which administers the federal universal service fund, corroborates this. High-cost funds in 2006 were distributed as follows: $3,116 million to incumbent ETCs (that is, the incumbent local exchange carriers) and $979 million to competitive ETCs (the vast majority of which were wireless carriers). The potential growth in the size of the federal universal service fund from customers being able to subscribe for services from multiple carriers, with more than one of those carriers becoming eligible for FUSF payments, might be exacerbated if the scope of universal service were expanded to include advanced services or the connection (access) to a broadband network. One possible way to limit the increase in subsidy requirements would be to expand the definition of universal service to include the connection to a broadband network, but, at the same time, to require each customer in a high-cost area eligible for universal service support to choose a single broadband provider as its "principal" provider and only that chosen provider would be eligible for the subsidy. This approach would have the advantage of constraining the size of the universal service fund. But it also likely would reduce the total flow of subsidy dollars to rural areas and might distort the market by encouraging consumers to choose broadband service even if they do not seek it. Having invested in a broadband network, each network provider will seek to maximize its return from that investment, most likely by enticing its customers to choose bundled packages of "value added" services for which it can charge prices that reflect that value. Network providers are likely to avoid the alternative pricing strategy of setting separate charges for the network connection (access) and for individual services for several reasons: (1) most consumers prefer a single bill; (2) there is risk that network access could become a low-markup commodity if competing networks eventually are deployed and the revenues generated by value-added applications then might flow to independent services providers; and, (3) it might not be easy to set up a discriminatory pricing scheme for access that would allow them to maximize their profits. This raises an interesting issue. Today, universal service is defined in terms of providing basic local telephone service and typically only providers that offer, as one option, basic voice service (a connection plus limited local service) are eligible for FUSF funds. If the universal service definition were changed to cover access to broadband, would it be appropriate to make universal service funds available only to those carriers that offer their customers, as one option, a basic service package consisting only of the broadband connection (or of the connection plus basic local voice service)? If that were a requirement for receiving FUSF support, however, network providers would not be able to tie broadband access to the purchase of value-added services and thus might not be able to compel customers to select those service packages that maximize the providers' profits. Currently, the Federal Universal Service Fund subsidy is made directly to those carriers that qualify as ETCs. The specific payments made to individual carriers are subject to a number of very arcane accounting rules, some of which limit funding to wireline providers because only those providers are eligible for certain pools of money. The various mechanisms use different costing methodologies, but where the subsidy is available to the incumbent wireline telephone company and new entrants, the payments to all are based on the costs of the wireline company. The latter have complained that some of the new entrants, in particular the wireless carriers, have lower costs and therefore should receive lower subsidies; otherwise, they claim, the wireless carriers will enjoy a windfall. The lower cost carriers have countered that, for competitive neutrality, each provider should be given the same level subsidy and then allowed to compete on an equal footing in the market. A low cost provider might be able to set lower rates since it needs less subsidy to meet the higher cost provider's rates, and over time the subsidy could be reduced or eliminated if lower cost rural providers could offer affordable service with little or no need for a subsidy. Economists argue that to base universal service payments on providers' costs—so that high-cost providers receive higher subsidy payments—is to subsidize the inefficient at the expense of whoever is paying the subsidy. The incumbent local exchange carriers have made another argument for why they should enjoy superior, or even exclusive, access to the universal service subsidy: they have made a commitment to be the carrier of last resort and serve every customer in their serving area. But those states that have awarded ETC status to other carriers have tended to require such a commitment from those carriers as well (though there may remain issues of the geographic reach of each ETC's services). The Federal-State Joint Board on Universal Service has recommended that the FCC immediately impose an interim statewide cap on the amount of high-cost support that competitive eligible telecommunications carriers can receive from the High Cost program, as a temporary measure to prevent uncontrolled growth of the fund until action is taken to reform the overall fund. In an attempt to determine whether there is a potential market solution to these issues, the Federal-State Joint Board on Universal Service has sought comment on the merits of using reverse auctions to determine high-cost universal service support. Under a reverse auction, each competing provider would bid the lowest amount of subsidy that it would require to serve all the customers in a particular high-cost area, with the lowest bidder gaining the subsidy. The Joint Board sought comment on a number of difficult implementation issues for such a reverse auction mechanism. For example, what is the specific service that the bidders are committing to offer? Should there be separate auctions for fixed voice, mobile voice, and broadband services, or just a single auction? Does the service include a carrier of last resort requirement, so that the winning bidder is obligated to serve each and every customer in the service area? How could end users have access to competitive options under a reverse auction mechanism in which only a single provider receives a subsidy? Who Should Contribute to a Universal Service Subsidy Fund, and How Should Contributors be Assessed? There are several sources of universal service funding. At the federal level, the FCC has proposed a 9.7% assessment on interstate and international telecommunications service revenues for the first quarter of 2007. This assessment provides the bulk of universal service funds. In addition, at the federal level, some interstate access charges and other service charges, particularly those of some rural carriers, may still be set above cost in a fashion to contribute to universal service. At the state level, some states have created state universal service funds financed by assessments on certain intrastate and interstate telecommunications revenues. Also, most states maintain some intrastate rates, in particular the intrastate access charges imposed by rural carriers, above cost to contribute to universal service. There is consensus in the industry that continued reliance on interstate and international telecommunications revenues as the funding base would threaten the predictability, sufficiency, competitive neutrality—and very stability—of the Federal Universal Service Fund, for a variety of reasons. Total end-user interstate and international telecommunications service revenues reached a peak of $81.7 billion in 2000 and fell to an estimated $76.7 billion in 2004. They appear to be falling at a rate of about 1% per year. The precipitous fall in the interstate and international telecommunications revenues of the traditional long distance carriers has been partially, but not completely, countered by an increase in interstate and international telecommunications revenues among wireless carriers and incumbent local exchange carriers. But the downward trend in total end-user interstate and international telecommunications revenues is expected to continue as a result of a number of factors: the continued fall in rates for interstate and international calls as VoIP service grows, continued substitution of e-mail and other Internet applications for long distance service, and the classification of DSL service and certain other services as information services, rather than telecommunications services. (The FCC has taken a step to address the impact of one of these trends. Although the FCC has not yet classified interconnected VoIP services as either telecommunications services or information services, it has extended the universal service obligations to providers of interconnected VoIP service. Although this action will not eliminate the downward pressure that VoIP places on interstate and international rates, it does eliminate one cause of that pressure—VoIP service being exempt from the FUSF contribution assessment.) It has become increasingly difficult to identify (and audit) individual companies' interstate and international telecommunications service revenues because these services are being offered to both business and residential customers as part of bundled packages that include other services. Both customers and service providers have the incentive to understate the proportion of total revenues generated by these bundled services that are attributable to interstate and international telecommunications services. (Here, too, the FCC has taken a step to address the impact of this trend. It raised the "safe harbor" percentage of wireless carriers' total end-user telecommunications revenues attributable to interstate services—and thus subject to the FUSF contribution assessment—from 28.5% to 37.1%, to better reflect end users' actual usage patterns. At the same time, it set a safe harbor percentage of interconnected VoIP providers' total service revenues attributable to interstate revenue—and thus subject to the FUSF contribution assessment—of 64.9%. ) As a result of the significant market changes and substantial revenue shifts, the assessment percentage has not been predictable, further complicating business decisions by adding a regulatory uncertainty to the mix. There are a number of alternatives to an assessment on interstate telecommunications revenues to provide the funding needed for universal service that might better meet the policy objectives articulated by Congress. Some of these could not be implemented without congressional action. These include: an assessment on all telecommunications service revenues: interstate, international, and intrastate. Since telecommunications services increasingly are being offered as bundled packages of interstate and intrastate minutes, at a fixed price, expanding the assessment base in this fashion would have the advantages of both increasing the total subsidy base and eliminating the problem of determining the proportion of a fixed monthly charge that should be attributed to interstate service. Because of a court decision prohibiting the FCC from assessing intrastate revenues, Congress would have to modify the Communications Act before the FCC could include intrastate revenues in the assessment base. But not all services can be readily classified as telecommunications services or information services, as demonstrated by the example of interconnected VoIP services, which the FCC has not yet classified. As a result, the Commission had to make a service-specific ruling that, despite not being classified as a telecommunications policy, interconnected VoIP service is subject to the FUSF assessment. As new and innovative services are offered that have some characteristics of telecommunications services and some characteristics of information services, the Commission may continue to have to make ad hoc decisions about how they should be treated with respect to the FUSF assessment, with the potential for inconsistent treatment of services that compete with one another. as assessment on all telecommunications service and information service revenues. This would increase the assessment base and eliminate the disparate treatment of telecommunications services and information services that compete directly with one another. But it would impose an assessment on information services, which would be inconsistent with congressional and FCC policy to foster the development of these services by minimizing regulatory burdens on them. It also might prove very difficult to determine which information services should be subject to the assessment since information services cover such a wide range of applications. This option also would require modification of the Communications Act before the FCC could include all these revenues in the assessment base. an assessment on the revenues of all services and equipment that benefit from the subsidies provided by the Federal Universal Service Fund, such as revenues from the services and products that receive discounts under the schools and libraries fund, as well as on services. This option would assess not only telecommunications and information service providers, but also companies that manufacture goods or provide other services that are subsidized by the Fund. This would increase the assessment base, but it would be inconsistent with congressional and FCC policy to foster the development of information services and it likely would be extremely difficult to identify the portion of revenues of non-telecommunications service companies that would be subject to the assessment. This option, too would require modification of the act before the FCC could include all these equipment and service revenues in the assessment base. an assessment on all connections to the public switched network, weighted by the bandwidth of those connections. Ultimately, all telecommunications users must connect to the public switched network to complete communications. Thus, a per connection assessment, based on bandwidth, would significantly widen the assessment base and could be structured in a way that is competitively neutral. There would be issues about how to assign different assessment weights to connections of various capacity (bandwidth). Consumer groups have opposed this approach, arguing that it harms end users who have very low network usage, including low-income households. Proponents have responded that since universal service is intended to subsidize connection to the public switched network, a per connection charge is appropriate. They also argue that many low-income households are actually large telecommunications users; many of them make calls to family members in the military or (for immigrants) living overseas or calls from retirees living in the Sun Belt to family members living in more northern climes. In addition, proponents argue that many low-income households are eligible for subsidized telephone service as part of the low-income universal service program and these households would not be subject to the per line assessment. There are differences of opinion about whether the Communications Act would have to be modified before the FCC could use connections as the assessment base. an assessment on all telephone numbers in use. Just as every end user needs a connection to the public switched network, every end user needs a telephone number identifier. A per telephone number connection would significantly widen the assessment base and could be structured in a way that is competitively neutral. Consumer groups have had the same criticisms of a per number assessment as they had for a per connection assessment, and proponents have made the same responses. There is also some possibility that future technological changes will lead to use of a customer identifier other than the telephone number. There are differences of opinion about whether the Communications Act would have to be modified before the FCC could use telephone numbers as the assessment base. using funds from general tax revenues. Since universal service is a subsidy program that is intended to benefit all sectors of the U.S. economy and all segments of the population, some have argued that it should be funded from general tax revenues. This would eliminate the market distortions inevitable when an assessment is imposed only on a subset of competitors or consumers and thus economists have argued this is the most efficient option. But this would make universal service funding subject to annual appropriations, which particularly in times of budget deficits might place such funding at risk. This option requires annual or multi-year appropriations action by Congress to be implemented. continue to fund universal service in part by allowing rural carriers to set above-cost intercarrier compensation rates as a way to maintain lower local rates. Some rural carriers are very concerned about relying entirely on external sources of universal service funding, especially at a time when competitors, such as wireless carriers, are seeking certification as ETCs to compete for those funds. These rural LECs would prefer to be able to ensure an internal funding source by maintaining above-cost rates for originating or terminating certain traffic where the other carrier involved with the call is a captive customer. This, however, would maintain the market distortions that exist today that hamper competition. This option would not require prior congressional action, but it might be challenged in court by parties that seek to remove all implicit universal subsidies from the rates of telecommunications services. Transition Issues As explained earlier, in order not to disrupt markets, when the FCC adopted an order on August 5, 2005, changing the classification of DSL from a telecommunications service to an information service, it created a 270 day transition period (which could be extended) during which the DSL revenues would continue to be treated as interstate telecommunications service revenues for the purposes of funding universal service. In addition, because a blanket re-classification of DSL to information service would, under current rules relating to National Exchange Carrier Association ("NECA") tariffs and pools that help fund universal service, reduce the universal service support available to certain rural telephone companies for the provision of DSL services, those carriers were given the option of continuing to treat DSL as a common carrier (telecommunications) service. Whichever universal service reforms are adopted, given the heavy reliance of rural telephone companies and their customers on universal service funding, there will have to be a transition period to minimize disruptions. Other Programs and Policies that Contribute to the Universal Availability of Broadband Networks High population has a positive association with reports that high-speed subscribers are present, and low population density has an inverse association. According to the latest FCC data on the deployment of high-speed Internet connections, as of June 30, 2006, more than 99% of the U.S. population lives in zip codes where a provider reports having at least one high-speed service subscriber, but high-speed subscribers were reported to be present in only 89% of the zip codes with the lowest population densities. Section 706 of the 1996 Act requires the FCC to determine whether "advanced telecommunications capability [i.e., broadband or high-speed access] is being deployed to all Americans in a reasonable and timely fashion." If this is not the case, the act directs the FCC to "take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market." In its most recent report pursuant to Section 706, the Commission concludes that "the overall goal of section 706 is being met, and the advanced telecommunications capability is indeed being deployed on a reasonable and timely basis to all Americans." Two commissioners, however, dissented from that conclusion, claiming that the FCC's continuing definition of broadband as 200 kilobits per second is outdated and is not comparable to the much higher speeds available to consumers in other countries, and that the use of zip code data does not sufficiently characterize the availability of broadband across geographic areas. Many rural telephone companies already are deploying broadband networks, and some of those are deploying networks capable of offering IP video. According to an article in Rural Telecommunications , by the end of 2003, 100 independent telephone companies were offering digital video content services, another 60 were expected to do so by the end of 2004, and it was projected that between 500 and 800 additional independent telephone companies would be doing so in the next four to five years. According to a report in Broadcasting & Cable , two small, rural telephone companies—Farmers Telephone Cooperative in Kingstree, SC, and Progressive Rural Telephone in central Georgia—are upgrading their copper networks with IPTV technology to offer video service as well as voice and data services, and will be offering service before SBC and Verizon do. Farmers will send three video streams to member households so each can have up to three television sets receiving IPTV signals. It will send standard-definition video signals over DSL lines and high-definition television content over ADSL lines. Progressive will deliver IPTV and music content across its access lines. Its service will include 141 television networks, six local channels, and 35 music channels. Similarly, Rural Telecommunications reports that Dakota Central Telecommunications of Carrington, ND, is using IPTV to offer voice, data, and video services both to the 5,000 customers in its own service area and to 16,000 customers in the neighboring city of Jamestown. A Yankee Group analyst reportedly has stated that, while smaller, rural telephone companies have a disadvantage in terms of available capital and the ability to get the best rates for cable networks, they are likely to be competing with a local cable system that, even if it is owned by a large cable operator, is not technologically cutting-edge. This suggests that the scope of the current universal service subsidy program, in conjunction with various grant and loan programs targeted on rural development, may be sufficient to support deployment of broadband network platforms capable of offering triple play voice, data, and video bundles in many rural areas. At the same time, some industry observers have claimed that broadband deployment is occurring more rapidly in those rural areas served by small telephone companies and cooperatives than in those rural areas served by the RBOCs and other large incumbent telephone companies. For example, in their announcements concerning deployment of broadband networks capable of offering video as well as voice and data services and in their testimonies before Congress, neither Verizon nor SBC (now AT&T) was willing to commit to deployment in their more rural service areas. Grant and Loan Programs In addition to the Federal Universal Service Fund, there are a number of federal programs intended to foster deployment of broadband networks and services. Citing the lagging deployment of broadband in many rural areas, Congress and the Administration acted in 2001 and 2002 to initiate pilot broadband loan and grant programs within the Rural Utilities Service (RUS) at the U.S. Department of Agriculture (USDA). Subsequently, Section 6103 of the Farm Security and Rural Investment Act of 2002 ( P.L. 107 - 171 ) amended the Rural Electrification Act of 1936 to authorize a loan and loan guarantee program to provide funds for the costs of the construction, improvement, and acquisition of facilities and equipment for broadband service in eligible rural communities. Currently, RUS/USDA houses the only two federal assistance programs exclusively dedicated to financing broadband deployment: the Rural Broadband Access Loan and Loan Guarantee Program and the Community Connect Grant Program. The budget authority (subsidy level) for the Rural Broadband Access Loan and Loan Guarantee Program is $10.75 million in 2007, with a loan level (lending authority) of $500 million. The appropriations for the Community Connect Broadband Grants program in FY2007 is $9 million. RUS broadband loan and grant programs have been awarding funds to entities serving rural communities since FY2001. A number of criticisms of the RUS broadband loan and grant programs have emerged, including criticisms related to loan approval and the application process, eligibility criteria, and loans to communities with existing providers. The current authorization for the Rural Broadband Access Loan and Loan Guarantee Program expires on September 30, 2007. The 110 th Congress is considering reauthorization and modification of the program as part of the farm bill. Some key issues pertinent to a consideration of the RUS broadband programs include restrictions on applicant eligibility, how "rural" is defined with respect to eligible rural communities, how to address assistance to areas with pre-existing broadband service, technological neutrality, funding levels and mechanisms, and the appropriateness of federal assistance. Ultimately, any modification of rules, regulations, or criteria associated with the RUS broadband program will likely result in "winners and losers" in terms of which companies, communities, regions of the country, and technologies are eligible or more likely to receive broadband loans and grants. In addition to these programs, RUS, NTIA, the Economic Development Administration in the Department of Commerce, several offices in the Department of Education, several organizations in the Department of Health and Human Services, several offices in the Department of Homeland Security, the National Foundation on the Arts and Humanities, the Appalachian Regional Commission, and the Denali Commission all have programs that could help fund the deployment of broadband network infrastructure or of broadband customer premises equipment. These programs are being used by rural telephone companies to construct broadband networks. For example, Dakota Central Communications ("DCT"), a telephone cooperative serving 5,000 customers, has used the RUS broadband program to fund its deployment of IPTV architecture to offer triple play service both to its own customers and to 16,000 households in a nearby town. As reported in Rural Telecommunications, When money became available through the Rural Utilities Service (RUS) broadband program, moving into triple-play services with residential customers seemed like a natural next step. "We applied for and received a loan from RUS totaling $15.5 million, then supplied an additional $3.5 million of our own, [DCT general manager Keith] Larson said. Municipal Provision of Broadband Networks A growing number of municipalities, in both rural and urban areas, have announced plans to undertake deployment, or already have begun deployment, of broadband networks in their jurisdictions. Some have taken this step to provide broadband access in locations that the private sector has not shown an inclination to serve, typically small towns or low-income neighborhoods in larger cities. Others have chosen to follow the model of Starbucks and other retailers by providing Wi-Fi hot spots as a "loss-leader" to attract upscale customers to retail districts. These municipal networks have used a variety of technologies, ranging from optical fiber to Wi-Fi. But at least 15 states have adopted laws banning or limiting these municipal networks. Proponents of municipal broadband networks argue that the marketplace, on its own, will steer broadband network to those locations that will be most profitable to serve, leaving less financially attractive locations unserved and placing those locations at a disadvantage in terms of attracting and supporting businesses and providing first quality education and health care. They claim government intervention is justified in support of economic development. Critics of municipal broadband networks argue that it is too soon to conclude that the marketplace will not serve all locations, that municipal networks enjoy an artificial advantage over private networks because of cost of capital and rights-of-way advantages, that many of the proposed broadband networks are based on unrealistic financial assumptions that will leave local taxpayers paying for mistakes, and that municipal networks are less likely than private networks to be upgraded as technological advances make improvements possible. Some critics are concerned that with the development of WiMAX technology, municipalities with small Wi-Fi networks will upgrade and expand to WiMAX, which is potentially capable of providing the "last mile" connection to residents in competition with private networks. The RBOCs and cable companies have been supporting efforts at the state and federal level to prohibit municipal broadband networks. In an interview with the Wall Street Journal , FCC chairman Kevin Martin stated: I grew up in what was then a rural area in North Carolina and my parents lived on a gravel road. I think it's critical that we make sure that people who live in rural areas are able to be connected to all the advances in technology that are available. If you're asking about the role that local and city governments can play trying to deploy their own equipment, I think there is, at times, a role for them in that. There's always a balance. You prefer private sector deployment whenever possible and you want to make sure we don't get in a situation where the private sector players are trying to compete with government-sponsored players who have easier access to rights-of-way and government-backing. On the other hand, there are instances and communities where there aren't any private companies that want to deploy. No one is coming to deploy and I think in those instances people need to be able to make sure they can provide a service to their citizens. You have to have the right balance. Corollary Issues Voice over Internet Protocol (VoIP) Today, the vast majority of Americans still obtain voice services over traditional circuit-switched networks that are subject to the common carrier regulations in Title II of the Communications Act. These regulations include specific network interconnection, access, intercarrier compensation, public safety, and law enforcement requirements, as well as assessments on all interstate and international telecommunications services to fund universal service. At the same time, a small, but growing number of customers obtain voice services from VoIP service providers. But depending on how these VoIP services are provided, the FCC has classified them as telecommunications services or as information services—or, in the case of interconnected VoIP services, has not yet classified them one way or the other—which has resulted in uncertainty about the regulatory requirements to which they are subject. The FCC has ruled that a particular type of VoIP service—provided only to customers that already separately receive broadband Internet access service, so that their VoIP provider does not, itself, offer transmission service or transmission capacity, and requiring the customer to have enhanced premise equipment or downloaded software—(1) is neither a "telecommunications service" nor "telecommunications," but rather is an "information service" that should be unregulated; and (2) cannot be characterized as purely intrastate and therefore is subject only to federal jurisdiction. As a result, that service is not subject to the interconnection, access, intercarrier compensation, public safety, law enforcement, and universal service requirements in Title II. But the FCC also has ruled that voice services that are provided partly through IP technology, but that use ordinary customer premises equipment without enhanced functionality, originate and terminate on the public switched telephone network, undergo no net protocol conversion, and provide no enhanced functionality to end users due to the provider's use of IP technology, are telecommunications services and subject to Title II regulation. More recently, the FCC found that, although it was not ready to classify "interconnected VoIP services"—services that are interconnected with the public switched network so that the subscriber is able to receive calls from other VoIP services users and from telephones connected to the public switched telephone network —as telecommunications services or information services, providers of those services are required to provide enhanced 911 service, to accommodate wiretaps under the Communications Assistance for Law Enforcement Act ("CALEA"), and to contribute to the Federal Universal Service Fund. As a result, today competing voice services are subject to different regulatory regimes depending on whether they are classified by the FCC as telecommunications services or information services, or whether the FCC has made an ad hoc finding that services that have certain specific characteristics are subject to particular regulations. The Commission is continuing in its attempt to at classifying IP-enabled services in an on-going rule making proceeding. But it is constrained by current statute in its ability to provide regulatory parity to competing voice services when one subset of those services clearly meets the current statutory definition of telecommunications service, a second subset clearly meets the current statutory definition of information service, and a third subset is ambiguous as to its classification. While the FCC can choose to forbear from regulating those competitive interstate services that are classified as telecommunications services, it may not have the authority to require state jurisdictions to forbear on regulation of intrastate telecommunications services. This suggests that it may be timely to review the Title II telecommunications requirements. That review might address which requirements may be applicable to all voice services, regardless of the technology and network architecture used to provide those services, which may only be relevant for dominant firms, and which may not be relevant at all with the advent of competition. Access to 911 and E911 Competition in the provision of applications (services) is developing today between integrated network providers that have ubiquitous networks and independent applications providers that have more limited networks and capabilities. In some situations, it would be inefficient, if not impossible, for a new entrant to replicate the facilities of a network provider. For example, for public safety reasons, the FCC has determined that all interconnected VoIP providers must be able to provide their customers access to 911 and E911 service, and that for this to happen there is need for cooperation between VoIP providers and ILECs. The FCC thus has required all interconnected VoIP providers to: deliver all 911 calls to the customer's local emergency operator (as a standard, not optional, feature); provide emergency operators with the call back number and location information of their customers (i.e., E911) where the emergency operator is capable of receiving it. Although the customer must provide the location information, the VoIP provider must provide the customer a means of updating this information, whether he or she is at home or away from home; and inform their customers, both new and existing, of the E911 capabilities and limitations of their service. At the same time, the FCC has required ILECs to provide access to their E911 networks to any requesting telecommunications carrier. They must continue to provide access to trunks, selective routes, and E911 databases to competing carriers. Although some proponents of minimal government intervention have argued that customers should be allowed to choose low-cost options that do not include public safety features such as access to 911 and E911 service, the FCC had determined that in this case government intervention was justified by the public safety concern. At the same time, without rules in place to ensure all voice providers access to the E911 network, new entrants could be denied entry into the market. Some observers have argued that the VoIP providers currently are enjoying a "free ride" and an artificial marketplace advantage because their services are not subject to state taxes imposed on telecommunications services to support the E911 call centers (sometimes referred to as public safety answering points or "PSAPs") run by municipalities or states. These PSAPs are the physical locations where emergency calls are received and then routed to the proper emergency services. Law Enforcement (CALEA) In 1994, Congress enacted the Communications Assistance for Law Enforcement Act ("CALEA"), to preserve the ability of law enforcement officials to conduct electronic surveillance effectively and efficiently despite the deployment of new digital and wireless technologies that have altered the character of such surveillance. CALEA requires telecommunications carriers to modify their equipment, facilities, and services, wherever achievable, to ensure that they are able to comply with authorized electronic surveillance actions. In implementing CALEA, the FCC adopted an order on August 5, 2005 concluding that CALEA applies to facilities-based providers of any type of broadband Internet access service—including wireline, cable modem, satellite, wireless, and power line—and to VoIP providers that offer services permitting users to receive calls from, and place calls to, the public switched public network (these providers are sometimes referred to as "interconnected VoIP providers") because these providers offer services that are a replacement for a substantial portion of the local telephone exchange service." At that time the FCC also adopted a Further Notice of Proposed Rulemaking seeking more information about whether certain classes or categories of facilities-based broadband Internet access providers, notably small and rural providers and providers of broadband networks for educational and research institutions, should be exempt from CALEA. On May 3, 2006, the FCC adopted a second order that affirmed that the CALEA compliance deadline for facilities-based broadband Internet access and interconnected VoIP services will be May 14, 2007; clarified that the date would apply to all such providers; explained that the FCC does not plan to intervene in the standards-setting process in this matter; permitted telecommunications carriers the option of using Trusted Third Parties to assist in meeting their CALEA obligations; restricted the availability of compliance extensions to equipment, facilities, and services deployed prior to October 25, 1998; found that it had the authority under section 229(a) of the Communications Act to take enforcement action against carriers that fail to comply with CALEA; concluded that carriers are responsible for CALEA development and implementation costs for post-January 1, 1995 equipment and facilities; and declined to adopt a national surcharge to recover CALEA costs. The important law enforcement objectives of CALEA potentially can conflict with the goals of competition and innovation. Some technologies and network architectures may be able to accommodate the CALEA requirements more readily—more quickly, less expensively, or with less impact on efficiency—than others. Also, CALEA requirements might impose substantial up-front costs on new technologies, architectures, or services that could be an impediment to their successful entry into the market, thus slowing innovation. There may be some tension in the future if network technologies and architectures migrate away from centralized networks to peer-to-peer networks, which have potential benefits to consumers both in terms of security and of allowing service providers and end users to interact more directly, but which may not be very accommodating to law enforcement concerns. Media Policy: Localism, Competition, and Diversity of Voices Localism, competition, and diversity of voices have long been the fundamental goals of U.S. media policy. With the convergence of media, telecommunications, and information service markets, these goals may now have to be considered when developing telecommunications policy as well. Subscription Multi-Channel Video Services As discussed earlier, Section 601 of Title VI of the Communication Act explicitly identifies a local purpose for regulation of cable television: "[to] establish franchise procedures and standards which ... assure that cable systems are responsive to the needs and interests of the local community." Key sections in Title VI related to localism and diversity of voices allow franchise authorities to (1) require cable systems to set aside channels for public, educational, or governmental ("PEG") use and to provide facilities and/or financial support for PEG access; (2) set aside channels for commercial use by persons unaffiliated with the cable system; and (3) place safety and convenience restrictions on the construction of cable systems over public rights-of-way and easements. If new entrants begin to offer subscription multi-channel video services in a fashion that does not meet the definition of cable service—for example, as an IP application that might meet the definition of an information service that is not subject to Title VI regulation—policy makers might want to consider whether the new service offering should be subject to the requirements in these provisions in order to foster the policy goal of localism, or whether the localism concerns are being fully met by the incumbent. In addition, as discussed earlier, policy makers might want to consider the implications, from the perspective of diversity of voices, of a broadband network provider that offers its own subscription multi-channel video service refusing to allow its customers access to the IP video services provided by an independent applications provider. Multicasting and "Must Carry" Requirements As part of the transition to digital television, television broadcast licensees have been given 6 MHz of spectrum on which to operate digitally and on February 17, 2009 will have to return the spectrum on which they currently operate in analog mode. With digital technology, one option available to licensees is to use their 6 MHz of spectrum for multicasting—that is, to broadcast multiple programming streams. In support of the goal of localism, cable operators have been required to carry the "primary" signals of the local broadcast stations in their service areas. The FCC has ruled that a television broadcaster that is multicasting video signals must identify one signal as its primary signal that cable systems must carry, but that cable systems have no obligation to carry additional multicast signals. This decision was based in part on the concern that multicast "must carry" might infringe on the first amendment rights of cable operators and in part on the concern that the multicast signals might tend to be duplicative and might not meet the desires of viewers as well as cable channels. Some observers have suggested that limiting must carriage to a single, primary signal might result in missing an opportunity to foster localism. For example, in considering what public interest obligations might be consistent with allowing broadcasters to air multiple signals, the FCC might consider modifying the current rule that requires cable operators to carry only the primary programming stream of each local television broadcaster by requiring cable operators to carry each programming stream that offers distinct programming aimed at a different, previously unserved geographic portion of the broadcaster's serving area. This could explicitly address those situations in which a broadcaster's serving area crosses state borders, awarding the broadcaster must carry rights for a second signal if the programming on that signal specifically addresses the needs and interests of the viewing households in the second state. If the FCC were to consider this approach, it would want to take into account the impact on cable systems of requiring them to carry additional broadcast channels. It also would want to determine how best to construct a rule that did not artificially encourage or discourage broadcasters from choosing multicasting over other potential applications of digital technology to their 6 MHz of spectrum, such as high definition television. Congress might choose to direct the FCC to study and construct recommendations for rules (and, if necessary, statutory changes) to address the potentially related issues of mandatory carriage of multiple broadcast signals and better serving the needs and interests of viewers in different governmental jurisdictions.

In 1996, Congress enacted comprehensive reform of the nation's statutory and regulatory framework for telecommunications by passing the Telecommunications Act, which substantially amended the 1934 Communications Act. The general objective of the 1996 Act was to open up markets to competition by removing unnecessary regulatory barriers to entry. At that time, the industry was characterized by service-specific networks that did not compete with one another: circuit-switched networks provided telephone service and coaxial cable networks provided cable service. The act created distinct regulatory regimes for these service-specific telephone networks and cable networks that included provisions intended to foster competition from new entrants that used network architectures and technologies similar to those of the incumbents. This "intramodal" competition has proved very limited. But the deployment of digital technologies in these previously distinct networks has led to market convergence and "intermodal" competition, as telephone, cable, and even wireless networks increasingly are able to offer voice, data, and video services over a single broadband platform. However, because of the distinct regulatory regimes in the act, services that are provided by different network technologies, but compete with one another, often receive different regulatory treatment. Also, the act created a classification, "information services," that was not subject to either telephone or cable regulation. Today, some voice and video services that are provided using Internet protocol technology may be classified as information services and therefore not subject to traditional voice or video regulation. There is consensus that the current statutory framework is not effective in the current market environment, but not on how to modify it. The debate focuses on how to foster investment, innovation, and competition in both the physical broadband network and in the applications that ride over that network while also meeting the many non-economic objectives of U.S. telecommunications policy: universal service, homeland security, public safety, diversity of voices, localism, consumer protection, etc. Given the underlying cost structure of broadband networks—huge sunk up-front fixed costs—the marketplace will likely support only a limited number of such networks. Today, the market is largely a duopoly: the telephone company network and the cable company network. The physical network providers argue that they will be discouraged from undertaking costly and risky build-outs if their networks are subject to open access and/or non-discrimination requirements. On the other hand, independent applications providers argue that in order for them to best meet the needs of end users and offer innovative services they must have nondiscriminatory access to the physical network. There is much debate over the advantages and disadvantages of structural regulation (such as open access), ex ante non-discrimination rules (such as mandatory network neutrality requirements), ex post adjudication of abuses of market power on a case-by-case basis, and reliance on non-mandatory principles. There is general agreement that there would be great consumer benefits from entry by a wireless broadband network to compete with the telephone and cable networks. There also is debate about how to modify the universal service program and intercarrier compensation rules in light of the major market changes. This report will be updated as warranted.

Scope of the Prohibition The Export Clause is an absolute prohibition on taxing exports by the federal government. Whether a tax discriminates against exports is irrelevant—even a generally applicable tax that applies to all goods equally is unconstitutional as applied to exports. The Clause prohibits any federal tax or duty that is imposed on goods during "the course of exportation" or targeted at exports, as well as those imposed on services and activities "closely related" to the export process. A situation where a good may be found to be in the course of exportation is when it is loaded onto an export vessel and title is transferred from the producer to a foreign purchaser. Once a good is in the course of exportation, it does not matter that there may be some theoretical possibility it might not actually be exported—the good cannot be taxed. On several occasions, the Supreme Court has found a tax to be impermissible when it was essentially imposed on an export good even though it was not directly imposed on it. For example, in a 1915 case, Thames & Mersey Marine Ins. Co. v. United States , the Court held that a federal stamp tax on insurance policies against marine risks could not be applied to policies covering exports. The Court explained that "proper insurance during the voyage is one of the necessities of exportation" and "taxation of policies insuring cargoes during their transit to foreign ports is as much a burden on exporting as if it were laid on ... the goods themselves." In a more recent case, United States v. IBM Corp., the Court recognized Thames & Mercy as still good law, which led it to conclude that a tax on insurance premiums paid to foreign insurers not subject to the federal income tax could not be applied to insurance for exports. Additional taxes that have been found to be essentially imposed on the good itself are those imposed on charter contracts and a federal stamp tax on bills of lading for export shipments. Other than these examples, there is not much guidance on when an activity or service is protected from tax because it is "closely related" to the export process. Importantly, the Clause does not prohibit a generally applicable tax from being imposed on goods prior to export. In other words, goods that are exported are not exempted "from the prior ordinary burdens of taxation which rest upon all property similarly situated." Thus, for example, a manufacturing tax on filled cheese was permissible even though the specific cheese at issue was manufactured under contract for exportation and was in fact exported. Similarly, a stamp charge of 25 cents per package of tobacco intended for export was upheld when the stamp charge, which indicated the tobacco was otherwise exempt from tobacco excise taxes, was designed to prevent fraud with respect to the excise tax exemption. This purpose led the Court to conclude the stamp charge was not a tax on exports. Tax v. User Fee The Export Clause only prohibits the imposition of "taxes" and "duties." It does not prohibit user fees. Thus, the distinction between a tax and user fee is important. Congress's choice to call something a tax or a fee will not be determinative in assessing the provision's constitutionality. Rather, a court will likely examine the provision's substantive characteristics to determine if it is a fee or tax. Thus, it is possible that a charge referred to in statute as a "fee" could be recharacterized by a court to be a "tax" if it failed to meet the characteristics of a user fee (described below), and vice versa. A case that illustrates this distinction is United States v. U.S. Shoe Corporation . At issue in that case was the harbor maintenance tax (HMT), which imposes a charge on cargo passing through U.S. ports in order to fund harbor maintenance projects. The question was whether the HMT was a tax, in which case it could not be imposed on exports, or a user fee that would fall outside the Export Clause's scope. The Supreme Court held that the HMT was a tax and therefore could not be imposed on goods in the process of exportation. In so doing, it exhibited a willingness to engage in substantive analysis to determine whether a government charge was a user fee or a tax. To make the determination, the Court relied on a prior case, Pace v. Burgess . According to that case, the primary characteristics of a user fee for purposes of the Export Clause are that it, unlike a tax, is (1) proportional to the government services or benefits received by the payor and (2) not determined solely on an ad valorem basis (i.e., not solely based on the quantity or value of the goods or services on which it is placed). Applying that analysis here, the Court determined there was not a close enough relationship between the services rendered by the U.S. ports and the charges levied under the HMT since the HMT was solely determined on an ad valorem basis. Even though the HMT was considered a tax in this context, the Court made clear this should not be interpreted to mean that exporters are exempt from user fees intended to defray costs associated with harbor maintenance. Rather, it meant that any such fee "must fairly match" their use of port services and facilities. Modern Application of the Clause After decades of no serious Export Clause challenges, several taxes were found in the late 1990s to be unconstitutional as applied to exports. In the 1996 IBM case, the Supreme Court struck down the tax on insurance premiums paid to foreign insurers that are not subject to federal income tax as applied to insurance for exports. In 1998, the Court in U.S. Shoe struck down the imposition of the HMT as applied to exports. Later that same year, a federal district court ruled that imposing the excise tax on domestically mined coal in the stream of exportation clearly violated the Export Clause. After that streak of taxes being struck, a different result was reached in several recent cases brought by coal producers and exporters alleging that a reclamation fee imposed by the Surface Mining Control and Reclamation Act of 1977 on exported coal violates the Export Clause. The reclamation fee is based on each ton of "coal produced" by surface and underground mining. Neither the statute nor the agency regulations define the term "coal produced." The coal producers and exporters argued that the term refers to the process of extracting and selling coal, and therefore the imposition of the fee on coal sold to foreign purchasers violates the Export Clause. The government argued the term only refers to the extraction, and not the sale, of coal. In 2008, the Court of Appeals for the Federal Circuit agreed with the government and upheld the reclamation fee statute as constitutional. The court, using the principle of statutory construction that "every reasonable construction must be resorted to, in order to save the [challenged] statute from unconstitutionality," found that interpreting the term "coal produced" to refer to "coal extracted" is reasonable. Claims for Damages Under the Export Clause Courts have found several taxes to be unconstitutional as applied to exports, including the coal excise tax and the harbor maintenance tax (see the text box above). One question that arises in these situations is what remedy exists for taxpayers who paid an unconstitutional charge imposed by the government. Taxpayers who overpay a federal tax are typically required to seek a refund from the IRS using the refund process found in the Internal Revenue Code (IRC). The question here is whether there is another option: can taxpayers bring suit in the Court of Federal Claims under the Tucker Act seeking damages from the government in the amount of unconstitutional taxes paid? The Tucker Act grants the court jurisdiction over claims against the United States, including those founded in the Constitution. This same question may arise in the event that a government charge outside the IRC refund procedure was invalidated (e.g., if a non-IRC "fee" was recharacterized by a court to be a "tax"): could a person who paid the unconstitutional charge bring suit under the Tucker Act outside of any applicable administrative refund procedure? Taxpayers may prefer the Tucker Act because it bypasses two limitations in the IRC refund process. First, the Tucker Act has a longer statute of limitations than the IRC—six years from the time the tax is paid, compared to three years from such time. Thus, taxpayers could seek damages for taxes paid in the several years preceding those for which they could receive IRC refunds. Second, the IRC sometimes gives priority to producers' refund claims, while the Tucker Act does not. As a result, the Tucker Act could allow parties farther down the supply chain (e.g., exporters) to bring claims alleging they deserved damages because they bore the economic burden of the tax through higher prices. A threshold issue is whether the Court of Federal Claims can hear these suits. The Tucker Act only confers jurisdiction—it does not create an enforceable right against the United States for monetary damages. Rather, the right must be found in another source of law, which here would be the Export Clause. Thus, a key question is whether the Export Clause provides a right to monetary damages when the government violates it. If the answer is yes, the next question is whether such a claim can be made independent of an IRC (or other administrative ) refund claim. In 2000, the Court of Federal Claims held that the Export Clause provided a separate cause of action so that taxpayers could bring a suit for damages independent of an IRC refund claim. The court based this conclusion on its findings that the Export Clause was a money-mandating provision, as required for Tucker Act jurisdiction, and that the cause of action founded in a violation of the Export Clause was self-executing. However, in a 2008 decision, United States v. Clintwood Elkhorn Mining Co. , the Supreme Court held that taxpayers seeking refunds for the unconstitutionally imposed coal excise tax must comply with the IRC refund process. Notably, the Court did not address whether the Export Clause provides a cause of action that could be brought under the Tucker Act, finding that the IRC refund provisions would apply regardless. Thus, that question remains unanswered. The taxpayers in Clintwood Elkhorn had filed administrative refund claims for the three tax years open under the IRC's statute of limitations and filed suit in the Court of Federal Claims seeking the amount of taxes paid for the three previous years that were open only under the Tucker Act's longer limitations period. The Supreme Court held that the plain language of the relevant IRC provisions, Sections 7422 and 6511, clearly required taxpayers to file a timely refund claim with the IRS before bringing suit. The Court stated that it had basically decided the issue in a 1941 case where it had reasoned that the Tucker Act's statute of limitations was simply "an outside limit" which Congress could shorten in situations requiring "special considerations," such as tax refunds since suits against the government to recover taxes would hinder administration of the tax laws. As the Court had explained in that case, the IRC's refund provisions would have "'no meaning whatever'" if taxpayers who did not comply with those provisions could still bring refund suits under the Tucker Act. Further, noting that it was clear from its past cases that unconstitutionally collected taxes could be subject to the same administrative requirements as other taxes, the Court rejected the taxpayers' argument that something unique about the Export Clause required different treatment. The Court explained that while the government may not impose unconstitutional taxes, it may create an administrative process to refund them because of its "exceedingly strong interest in financial stability," regardless of whether the tax violated the Export Clause or some other provision of the Constitution. The Court also rejected the taxpayers' claim that the IRC refund scheme could not apply to facially unconstitutional taxes, finding the plain language of Section 7422 clearly included them. Looking to the implications of Clintwood Elkhorn , it seems clear that any tax collected in violation of the Export Clause that is subject to the IRC refund process may only be refunded through that process. Because these issues are matters of statutory construction, Congress has the option to modify the refund procedures for taxes imposed in violation of the Export Clause, if it so chooses (e.g., as it did by providing an alternative refund process for the coal excise tax post- Clintwood Elkhorn ). With respect to whether the Export Clause provides it own cause of action for purposes of Tucker Act jurisdiction, the Court in Clintwood Elkhorn did not address this issue. The Court of Federal Claims has previously answered the question affirmatively, thus indicating that claims for taxes or any fees recharacterized as taxes imposed in violation of the Export Clause that fall outside the IRC (or another administratively mandated) refund process may be brought in that court, unless another provision of law removes jurisdiction.

The Export Clause, found in Article I, Section 9, Clause 5 of the U.S. Constitution, directly states "No Tax or Duty shall be laid on Articles exported from any State." The Clause represents one of the few restrictions on Congress's otherwise broad taxing power. Examples of taxes that have been found unconstitutional as applied to exports include the harbor maintenance tax and the excise tax on domestically mined coal. The Clause prohibits taxes and duties that are targeted at exports or imposed on goods during "the course of exportation." It also protects those services and activities that are "closely related" to the export process. Importantly, pre-export goods and services are not exempt from otherwise generally applicable taxes. The Export Clause only prohibits the imposition of taxes and duties. It does not prohibit user fees. Congress's choice to call something a tax or a fee will not be determinative in assessing the provision's constitutionality; rather, a court will likely examine the provision's substantive characteristics to determine if it is a fee or tax. According to the Supreme Court, the primary characteristics of a user fee are that it, unlike a tax, is (1) proportional to the government services or benefits received by the payor and (2) not determined solely on an ad valorem basis (i.e., not based solely on the quantity or value of the goods or services on which it is placed). Thus, it is possible that a charge referred to in statute as a "fee" could be recharacterized by a court to be a "tax" if it failed to meet these criteria, and vice versa. When a government charge has been imposed in violation of the Export Clause, one issue that arises is the remedy for persons who paid the unconstitutional amount. Typically, taxpayers who overpay a tax are required to seek a refund using the process found in the Internal Revenue Code (IRC). In the event that a "fee" was recharacterized as an impermissible tax, there might be a similar administrative refund procedure. The question here is whether it is possible to bring suit in the Court of Federal Claims under the Tucker Act seeking damages from the government in the amount of unconstitutional amounts paid. Taxpayers may prefer the Tucker Act because it has a longer statute of limitations than the IRC—six years from the time the tax is paid versus three years—and, in some situations, might allow parties farther down the supply chain (e.g., exporters) to bring claims alleging they deserve damages because they bore the economic burden of the tax through higher prices. A threshold issue has been whether the Court of Federal Claims can hear these suits. In order for a claim to be permissible under the Tucker Act, two things must be true: (1) the Export Clause must provide a right to monetary damages when the government violates it, and (2) it must be permissible to make such a claim independent of an IRC (or other administrative) refund claim. In 2008, the Supreme Court held that taxpayers must comply with the IRC procedures when seeking refunds for the unconstitutionally imposed coal excise tax. It appears the Court's holding would apply to any tax covered by the IRC refund process. The Court did not address whether the Export Clause provides a right to monetary damages, finding that the IRC refund process applies regardless. Because these issues are matters of statutory construction, Congress has the option to modify the refund procedures for taxes imposed in violation of the Export Clause, if it so chooses. For example, after the 2008 Supreme Court case, Congress provided an alternative refund process for the coal excise tax that extended the statute of limitations and expanded the opportunity for exporters to seek refunds.

Introduction Most Americans enter the health care system through their local physician's office, which is the setting for 84% of primary care visits. Historically, physicians have operated in what the American Medical Association and others have called a "cottage industry" of small or solo practices around the country. Even now, the majority of the approximately 972,376 doctors and residents in the United States work mainly from smaller, office-based practices. This decentralized network has served to deliver medical services to most Americans, but it has also been cited by analysts as a reason that the health care market is inefficient, with patients seeing duplicate providers who may prescribe overlapping treatments or deliver widely divergent, uncoordinated care. During the past several years, however, physician practices appear to be changing, as a number of doctors merge their offices into larger practices; sell their practices to hospitals, insurance companies, and physician management firms; contract to provide exclusive services to providers such as hospitals; or go to work for larger providers as salaried employees. While there are no definitive statistics, a 2011 American Hospital Association (AHA) survey found the number of doctors on hospital payrolls had increased by 32% from 2000 to 2010, with the rate of increase accelerating after 2005. According to the AHA, about 20% of practicing physicians now work for hospitals. The Medical Group Management Association (MGMA), which represents larger medical practices and outpatient clinics, has noted an increase in the share of medical groups owned by U.S. hospitals, while other surveys have also found rising hospital employment of doctors, with some regional variations. For example, an American College of Cardiology survey found the share of physician-owned cardiology practices declined to 60% in 2012 from 73% in 2007, while the share of such practices owned by hospitals grew from 8% to an estimated 24%. The changes appear to be the result of a number of factors, including broad consolidation in the overall health care industry that has created dominant hospitals and insurers in many areas. In order to gain negotiating leverage with large providers and payers, a number of physicians have merged their practices into larger groups or entered into business arrangements with them. Lifestyle preferences are at play, with younger doctors more willing than their predecessors to work for an outside institution to secure a set schedule and salary; about half of doctors hired out of residencies or fellowships in 2010 took jobs at hospitals. Physicians may be having a harder time finding doctors to buy or join a small practice, as management becomes more complex and average compensation declines. At the same time, hospitals and insurers are eager to hire doctors, given forecasts of a pending physician shortage by the end of the decade (see " Physician Supply "). The shortfall is predicted to occur in the midst of rising demand for medical services by aging baby boomers and millions of Americans who could gain insurance coverage under the 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended). According to some experts, financial incentives in the ACA may provide further incentives for consolidation and integration of services. For example, the health care law creates integrated delivery systems called Accountable Care Organizations (ACO) that contract with payers who agree to be responsible for the entire continuum of care provided to a group of patients. If the treatment costs less than set targets, and certain quality measures are met, the ACO and the payer share in the savings. Hundreds of physician practices, insurers, and hospitals have announced financial and clinical integration to quality as ACOs. The ongoing changes in practice organization—if they alter the way that physicians deliver care—could help determine whether the U.S. health care system expands access, improves quality of treatment, and addresses the growth of government and private health care spending, according to analysts. Though physician payments account for about 20% of medical spending, studies suggest that physicians direct as much as 90% of total health care spending through referrals, tests, hospital admissions, and other actions. Congress is playing dual roles regarding the consolidation. On the one hand, lawmakers designed the ACA in part to reduce health delivery fragmentation and help control government and private spending. In addition, Congress and federal regulators have been monitoring, and continue to monitor, the health care system for signs that mergers and acquisitions may be having negative effects on costs, competition, and consumer access such as distorting prices or creating conflicts of interest in provision of services. Analysts and lawmakers are aware that the health care sector went through a similar round of restructuring during the 1980s and 1990s, as physicians sold their practices and managed care insurance plans expanded. The changes ultimately prompted a consumer backlash, and many of the deals were dissolved. In contrast to the previous round of consolidation, where doctors were seen as gatekeepers for managed care plans that attempted to limit services, the ACA envisions "patient-centered" care where doctors and other providers are rewarded for necessary treatment that improves quality of outcomes. Still, it is not clear how the new round of changes ultimately will play out. This report provides background on factors contributing to changes in physician practice organization, including physician supply, lifestyle changes, and government incentives. Next it examines different types of integration, the legal intricacies of affiliation, and the possible implications for consumer and federal policy. Physician Supply Most U.S. physicians are MDs, or doctors of medicine, who have completed four years of medical school and a minimum of three years of residency, with specialists undergoing additional training. About 7% of the more than 972,376 physicians and residents are osteopaths, who have completed medical education and additional training in areas including the musculoskeletal system. The physician population is about one-third primary care physicians and two-thirds specialists, a distribution that some experts suggest is not optimal. A quarter of U.S. doctors are graduates of international medical schools. The ratio of physicians to the population varies across the country, with New England and the Middle Atlantic regions having the highest number of doctors per capita, and the West South Central and Mountain regions having the fewest. Rural areas are struggling to attract enough physicians. In the 1980s, after a congressional effort to fund an expansion of U.S. medical education, experts forecasted a possible surplus of doctors. More recently, however, analysts have predicted that the country faces a potential shortage, particularly in primary care. The federal Health Resources and Services Administration in 2006 predicted a shortfall of 55,000 to 150,000 physicians by 2020, while the nonprofit Association of American Medical Colleges (AAMC) in 2008 said there could be a dearth of 130,600 patient care physicians by 2025. Following up in 2012, the AAMC found that 33 states had documented current physician shortages or were anticipating shortages. Adding to concerns, nearly a third of physicians are age 55 or older and nearing retirement. In addition, studies indicate that doctors of both sexes and from varying backgrounds are working fewer hours each week, a change more pronounced among younger doctors. A 2010 study found a nearly 6% decrease in hours among nonresident physicians from 1996-1998 to 2006-2008. The reduction in hours was akin to a loss of 36,000 doctors, had the number of hours worked not changed. Some analysts have suggested that the combination of retirements and lifestyle changes will put a tremendous stress on the system and hasten the need for doctors to find more efficient ways to practice. The forecast supply shortage and changes in work patterns are already having impacts, according to analysts. For example, some hospitals have been having increasing difficulty finding physicians to take voluntary duty and have hired more full-time staff doctors, including hospitalists, who oversee patient care in hospitals, and emergency room physicians (see " Hospital Affiliation and Employment "). A number of hospitals are seeking to hire or affiliate with primary care physicians, to ensure supply, staff outpatient centers, gain access to referral networks, and form ACOs. A 2010 survey by the American Hospital Association found 80% of hospitals were looking to hire primary care physicians. Supporting Practitioners Mitigating the projected physician shortage somewhat is the growing use of professionals who are not doctors but who have specialized training and can perform some basic functions of physicians, including nurse practitioners and physician assistants. In 2009, nearly half of all office-based physician practices included nurse practitioners, certified nurse midwives, or physician assistants. However, state laws vary in terms of the scope of services that nurse practitioners and physician assistants are allowed to provide. Nurse practitioners must complete graduate education beyond the bachelor's degree needed to become a registered nurse. They can work with physicians or separately in such areas as taking case histories, performing basic exams, ordering lab work and prescribing some medications, and providing health education and counseling. There are approximately 155,000 active U.S. nurse practitioners. Physician assistants complete at least two years of college courses in basic science and behavioral science before applying to one of the 170 accredited physician assistant programs. Most physician assistants have a bachelor's degree, another 27 months of specialized training, and 2,000 hours of clinical rotations. Physician assistants, once licensed by state boards, generally can take patient medical histories, examine patients, treat minor injuries, order and interpret laboratory tests, and make rounds in medical facilities. There are about 86,000 certified physician assistants in the United States. Practice Consolidation Historically, physicians have operated in small or solo practices, with a number of factors limiting integration with other health care providers. In states such as California, laws designed to bar the corporate practice of medicine complicated efforts at affiliation between physician practices and insurance companies or hospitals. Doctors and hospitals have been paid separately for services, minimizing the need for tight coordination, though physicians benefited from access to and affiliations with hospitals, including serving on voluntary staff or taking call. There has long been a debate about the efficiency of the decentralized physician practice structure. During the 1930s, for example, a health sector-created blue ribbon "Committee on the Costs of Medical Care" suggested improving health care by moving toward a more coordinated system centered on hospitals, including affiliation between doctors and hospitals. The recommendations created controversy, with some groups concerned that such a change would lead to the corporate practice of medicine, affecting quality and physician independence. In the 1980s and 1990s, the type of broad system changes that some health experts had advocated appeared to take root, including the growth of managed care plans, where health insurers coordinate use of health care for enrollees by directly arranging for services through affiliated physicians, hospitals, and other providers. A number of physicians sold their practices to hospitals or specialty physician management companies, as health plans were able to pressure providers to accept lower payment rates and assume some financial risk for patient care. But as consumers protested the managed care restrictions on services, and hospitals and physician management firms found they had overpaid for some physician practices, managed care plans loosened their controls and a number of mergers and acquisitions were dissolved. For example, in California from 1998 to 2002 nearly 150 physician organizations that served millions of patients closed or went into bankruptcy. Though consolidation slowed, it continued (see Table 1 ). According to one estimate, the share of doctors with an ownership stake in their practices declined from 62% in 1996-1997 to 54% in 2004-2005. The percentage of office visits to physicians in solo practices declined from 38.7% in 1997 to 30.5% in 2007, while the share visiting physicians in practices of 6-10 physicians rose from 12.1% in 1997 to 17.7% in 2007. More recently there has been what some analysts call a reconsolidation of physician practices. While there are limited data at the individual office level, general surveys and studies have found a decline in the number of solo practices and an increase in the number of larger practices. There appears to be a rise in the number of practices owned by hospitals and insurers, and in the share of doctors in private practices working under exclusive contract to hospitals and insurance companies. The Center for Studying Health System Change, in a 2010 survey of 12 communities, found rising hospital employment of physicians, with some regional variations. Separately, a 2008 survey by the American Medical Association, which includes more solo and smaller practices than the MGMA data, did not show that the share of physicians working for hospitals had increased significantly since 2000, but did indicate that fewer doctors owned their practices and more were working as employees. The consulting firm Accenture predicted that just a third of U.S. doctors would be truly independent by 2013, which Accenture defines as physicians who are in a partnership or have an ownership share in a practice. The 33% figure compares to 57% in 2000 and 43% in 2009. A 2012 report by the California Health Care Foundation listed a number of factors for the trends in that state, including the complexity and cost of running a practice; health care providers' concern about a potential shortage of physicians; declining reimbursement for services, including Medicare and Medicaid; and the cost of implementing new systems such as electronic health records. Market Trends The practice changes are taking several forms. There is horizontal consolidation, where businesses in the same part of the production process band together for economies of scale and to forestall competition, including mergers of specialty practices. There is vertical consolidation, where different industry segments form financial and clinical affiliations to seek potential efficiency gains. Examples of such consolidation and integration include hospitals buying physician practices or hiring physicians; physicians affiliating with insurers; and formation of ACOs. While not consolidation per say, the growth of concierge practices is another response to economic and other factors, and could affect physician supply and patient care. Larger Group Practices and Physician Organizations The share of solo and small practices has been declining, while the number of larger practices is increasing, with some spanning a number of counties or entire states. Larger physician practices, particularly specialty practices, have advantages such as increased leverage in negotiations with insurance companies, greater purchasing power, and efficiencies in overhead and in their ability to use advanced technology and other patient-management tools. Physicians can organize into different configurations, from mergers to independent practice associations, which are organizations of physicians who maintain their independent corporate status but can integrate financially or clinically and contract as a group. In addition, activity by for-profit practice management companies, which buy and run physician practices, has been growing, particularly those that contract with hospitals. There is also growth in private equity investment in physician practices. There are no definitive figures regarding practice consolidation. However, the accounting and consulting firm Moss Adams has documented a doubling of mergers, acquisitions, and private equity investments in specialty physician practices between 2008 and 2012. In 2008 there were 125 mergers, acquisitions, public offerings, or private equity investments involving specialty practices, according to the firm. In 2010 there were nearly 240, and more than 260 were estimated for 2011. Moss Adams says the ACA "is bringing about or accelerating" changes in the health care system, including creation of larger medical group practices and "transactions among specialty physician groups, medical clinics, hospitals, and other organizations looking to take advantage of scale and cost savings." Some recent examples of growing physician organizations include the 2011 merger of Cogent HMG and the Hospitalists Management Group, which created the largest private hospitalist company in the country. (Hospitalists are physicians who coordinate patient care in hospital settings.) Cogent now contracts with about 130 hospitals around the country. Another example is IPC The Hospitalist Company. The company in 2011 employed or was affiliated with about 1,200 hospitalists, including doctors and other health professionals, and had employment agreements with about 600 additional professionals. Mednax, a physician management firm, oversees 1,400 doctors and nurse practitioners in its Pediatrix division who specialize in neonatal and pediatric care, as well as more than 400 doctors and 500 nurse anesthetists in its American Anesthesiology group. Hospital Affiliation and Employment The AHA survey finding a 32% increase in hospital employment of doctors from 2000 to 2010 is one indication of the growing consolidation in this area. In another example, the physician search and consulting firm Merritt Hawkins told the House Committee on Small Business in July 2012 that from April 1, 2011, to March 31, 2012, company employees conducted more than 2,700 physician search assignments for hospitals, medical groups, and small physician practices. Only 2% of those physician searches were on behalf of entities seeking doctors to start a practice in an area or to join a solo practitioner as a partner, compared with 42% in 2004. Overall, 63% of the group's physician search assignments were carried out for hospitals that wanted to hire doctors, compared with 11% in 2004. Likewise, a 2011 survey by the American College of Cardiology found that 40% of hospital administrators had acquired or considered acquiring a cardiology practice during the previous two years, and 20% were considering a future acquisition. In one example of the changes, the number of hospitalists has risen from less than 1,000 in the late 1990s to nearly 30,000 in 2011. Physician-hospital affiliation can take a number of forms, from contracts for specific services with physician practices or organizations, such as those outlined above, to full-time employment of doctors (see Figure 1 ). Over time, physician-hospital arrangements have shifted as financial incentives have changed. Some general examples of possible affiliations include the following: Physician practices can contract to provide doctors and other staff for a hospital independently or work through intermediaries like physician management companies. Hospitals can directly employ doctors. In states that have laws barring the corporate practice of medicine, some hospitals have created non-profit foundations to secure physician services. Doctors and hospitals can form physician-hospital organizations or other forms of joint ventures to provide services, bid for insurance contracts, or achieve financial and clinical integration. According to the AHA, affiliations involving independent groups of physicians have been declining in prevalence, while arrangements in which physicians are salaried employees have been increasing. For physicians, selling a practice to a hospital or entering into a close financial agreement can reduce overhead, while providing predictable schedules and compensation. For hospitals, buying or affiliating with practices allows development of areas of excellence, ensures staff, provides a network of referrals from physicians, and can give the combined entity more leverage with insurers. Affiliation in the form of a joint venture such as an outpatient center can be a way for the hospital to increase revenues and ward off competition from independent doctors and practices that open such centers. Differing Medicare reimbursement based on provider status may also be providing incentives for physician-hospital affiliations. In 2011, Medicare paid more for a 15-minute evaluation and management physician visit in a hospital outpatient setting than it did for a visit in an independent physician's office. Because hospitals also charge facility fees for physician visits, costs are not only higher costs for payers but also for patients, since the fees are subject to deductibles and coinsurance. In a 2012 report to Congress, Medpac, noting increased outpatient billing as more hospitals employ physicians or buy physician practices, said that if current trends continue, Medicare costs could rise by $2 billion annually by 2020: This payment difference creates a financial incentive for hospitals to purchase freestanding physician offices and convert them into (outpatient departments) OPDs without changing their location or patient mix. Indeed, (evaluation and management) clinic visits provided in OPDs increased 6.7% in 2010, potentially increasing Medicare and beneficiary expenditures without any change in patient care. As the experience of the 1990s showed, hospital employment of physicians has not always been successful. Hospitals may not make as much money as expected, and may incur initial losses. An analysis in The New England Journal of Medicine estimated that hospitals lose $150,000 to $250,000 per year for the first three years they employ a doctor, as physicians adapt to the new system. During the 1990s, some hospitals found that physician productivity declined after practices were purchased by hospitals. Merritt Hawkins data indicate that even though a number of hospitals are now preparing to make the transition to coordinated systems such as ACOs, they are still basing physician compensation on a fee-for-service or volume basis—offering new hires a salary with a productivity bonus. Affiliation with Insurers and Other Payers Insurance companies are affiliating with physicians as they attempt to meld coverage and delivery systems to better control costs. Some analysts suggest that physicians may find their financial and professional interests are more aligned with insurers, given that emerging payment systems such as medical homes and ACOs increase pressure to reduce costs and increase quality by improving preventive care and follow-up care to avoid hospitalizations. However, the AMA in a manual for members notes that the success of such arrangements, as with other ACO configurations, depends on a number of factors regarding the amount of decision making insurers are willing to give physicians and other professional and financial concerns. Some recent examples of affiliation include the following: UnitedHealth Group, a large California insurer, in 2011 bought the management arm of Monarch HealthCare, the largest physician group in Orange County, California. Health insurance firm Cigna has expanded its accountable care network via deals with physician practices in seven states, and now has more than 20 such plans. Pennsylvania-based Highmark Inc., a major insurer in the Blue Cross/Blue Shield system, has been working on an acquisition of the West Penn Allegheny Health System, a physician-led hospital and multi-group practice network. The move is part of a larger effort by Highmark to develop an integrated care system. Delivery Reforms Physician practices, hospitals, and other health care providers in recent months have announced affiliations to qualify as accountable care organizations (ACOs) under the ACA. Group practices, independent practice associations, and networks or independent practitioners can participate if they meet HHS standards. In the simplest case, an ACO contracts with payers to be accountable for the continuum of care provided to a defined population. If the costs of care provided are less than targeted amounts, and certain quality measures are achieved, the ACO and the payer share the savings. Under the Medicare Shared Savings Program, the government will contract with ACOs that will assume responsibility for improving quality of care and coordinating care across providers. ACOs must be financially and organizationally integrated. Some industry analysts say the ACOs could have a notable effect on the health care marketplace. Morgan Stanley in a June 2011 analysis predicted the ACA would accelerate health care consolidation, noting that the share of physicians in independent practices was declining by 1% to 3% a year as doctors entered into financial arrangements with hospitals and other providers. While most of the initial ACOs that formed were sponsored by hospitals, however, a growing number are being built around physician practices or insurers. The ACA includes other provisions intended to increase health system coordination that could help to drive additional integration. One is medical homes, where the primary physician's office assumes the role for coordinating care across other providers to improve outcomes and reduce costs. The ACA also includes Medicare "bundled" payments, where billing is based on the totality of a treatment, and the law gives physicians new ability to form health co-ops or affiliate with insurers and managed care plans. A GAO examination of bundled payments found they are difficult to set up and administer without provider affiliation. Some analysts predict the market changes now underway will be more long-lasting and pervasive than was the case during the 1990s, given moves toward integrated care. For example, private equity firms looking at investing in health care providers are targeting companies that can capitalize on consolidation by providing management services or physician staff for health care providers. Bain & Co. in a recent report predicted that health care providers and services will become more significant for investors. As Bain analysts wrote: "We expect significant strategic interest in accountable-care oriented investments, including investments that stretch across traditional boundaries (such as UnitedHealth Group's acquisition of Monarch Care)." Concierge Practices While the main trends appear to be consolidation, a small but growing number of doctors are responding to pressures to change health care delivery and reimbursement by creating concierge practices, where physicians see fewer patients who pay an annual fee to receive care. In return, patients get enhanced services such as longer office visits, more in-depth physicals, and other preventive and continuous care. Because physicians in concierge practices see fewer patients on average, there have been questions about the potential impact on physician supply. To date, however, the number of such practices remains relatively small. A 2010 study by researchers at the University of Chicago and Georgetown University for Medpac found there were at least 756 retainer-based physicians providing care (a number the report said probably represented the minimum), with average fees from about $1,500 to $2,000, although the physicians interviewed charged anywhere from $600 to $5,400. The physicians interviewed by the researchers had 100 to 425 patients in their practices, compared to more than 2,000 before starting or joining a concierge practice. Large, regional concierge groups include MDVIP, headquartered in Boca Raton, FL, and New York-based Concierge Choice Physicians. Several states have examined whether concierge medicine is in compliance with their insurance laws, and there have also been issues regarding whether the additional fee is in compliance with government and other insurance policies. For example, concierge practices can only include Medicare patients if (1) the physician elects to opt out of Medicare and does not treat any Medicare beneficiaries for two years, or (2) the physician contracts to provide concierge care only for non-Medicare covered services. Legal Issues As physicians seek to affiliate with other practices or providers, through ACOs or other means, they must comply with state and federal laws designed to ensure fair competition and transparency, as well as prevent over-utilization of services in the health care sector. Among the laws are federal antitrust and anti-kickback statutes, state laws barring the corporate practice of medicine, and the Stark law that imposes limitations on physician self-referrals. Federal antitrust laws are directed at ensuring that markets remain competitive. Antitrust is a means of governing market behavior that is, in essence, the flip side of market regulation accomplished via regulatory oversight. The consolidation or integration of health care entities, or other behavior by them (joint and/or unilateral), even if prompted by or taken in furtherance of achieving some level of joint functioning deemed necessary to achieve the stated goals of the ACA or other improvements in the health care sector, could create cause for antitrust concern. Joint negotiation over fees or terms of reimbursement by physicians or other providers is an example of behavior that might implicate the antitrust laws, for example. Applicable antitrust or antitrust-related provisions include Sections 1 and 2 of the Sherman Act (15 U.S.C. §§1, 2), which prohibit, respectively, "contracts or conspiracies in restraint of trade" and monopolization or attempted monopolization; and Section 7 of the Clayton Act (15 U.S.C. §18), the so-called "anti-merger" provision; both are enforceable by the antitrust agencies (Antitrust Division of the Department of Justice, FTC), as well as by individual plaintiffs. Section 5 of the FTC Act, which prohibits "unfair methods of competition in or affecting commerce," is enforceable only by the commission. The FTC and the DOJ have issued guidance regarding ACOs and other configurations that could pass antitrust review, and those that might be problematic. The DOJ and FTC have been investigating some hospital physician mergers. Medicare and Medicaid anti-kickback law (42 U.S.C. §1320a-7b(b)) makes it a felony for a person to knowingly and willfully offer, pay, solicit, or receive anything of value (i.e., "remuneration") in return for a referral or to induce generation of business reimbursable under a federal health care program. The statute prohibits both the offer or payment of remuneration for patient referrals, as well as the offer or payment of anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or ordering of any item or service that is reimbursable by a federal health care program. Persons found guilty of violating the anti-kickback statute may be subject to a fine of up to $25,000, imprisonment of up to five years, and exclusion from participation in federal health care programs for up to one year. The Stark provisions that impose limitations on physician self-referrals were enacted in 1989 under the Ethics in Patient Referrals Act (42 U.S.C. §1395nn). The Stark law, as amended, and its implementing regulations prohibit certain physician self-referrals for designated health services that may be paid for by Medicare or Medicaid. In its basic application, the Stark law provides that if (1) a physician (or an immediate family member of a physician) has a "financial relationship" with an entity, the physician may not make a referral to the entity for the furnishing of designated health services (for which payment may be made under Medicare or Medicaid), and (2) the entity may not present (or cause to be presented) a claim to the federal health care program or bill to any individual or entity for DHS furnished pursuant to a prohibited referral. The general idea behind the prohibitions in the Stark law is to prevent physicians from making referrals based on financial gain, thus preventing overutilization and increases in health care costs. The laws include some exceptions for direct employment arrangements, and some legal experts say direct employment of physicians may be the most straightforward way for hospitals and other providers to integrate with physicians, given the legal complexities that can be involved in other arrangements. There can be financial downsides to direct employment, as hospitals discovered during the 1990s when they did not realize expected financial gains after buying physician practices. Issues for Congress Congress has been paying close attention to consolidation in the health care industry, and specifically in physician practices, including hearings in the Ways and Means Committee and the House Committee on Small Business during the 112 th Congress. There are a number of reasons that lawmakers are taking an active interest in the market developments, including physician complaints about federal policies and concerns that a decline in smaller, independent practices could exacerbate existing physician shortages in areas such as rural regions. Lawmakers also want to ensure that the market changes are meeting the goals of expanding access and addressing government and private health care spending. Because health care is highly regulated, and government payments make up an increasing share of physician revenues, congressional action can affect the pace of practice consolidation and other market trends. In general, Congress is monitoring developments in several broad areas: Medical Spending Rising health care costs have led to federal, state, and private efforts to rein in medical spending, including controlling physician payments and providing incentives for consolidation to realize greater efficiency. One question surrounding affiliation between physicians and other health organizations such as hospitals is whether they will help to reduce costs. There is concern that such affiliations could instead lead to higher prices for consumers and the government as the larger entities gain negotiating leverage with insurers and can charge more for some Medicare-covered services. To date, studies have provided mixed results on whether closer affiliation improves efficiencies and leads to reduction in prices for health care services. A study of integration between physician practices and hospitals that took place in California during the 1990s did not find evidence that such affiliations increased prices. There was evidence that such vertical integration may have reduced prices, though the findings were not precise nor statistically significant. Other studies have found differing effects, while a review of research on doctor-hospital affiliation found that such alignments were often designed to increase market power by reducing competition, and that the limited evidence on price impacts was mixed. The study noted that most of the arrangements studied thus far have involved coordination of services, but not clinical integration of the type envisioned in programs such as ACOs. While the emerging incentives are different, given quality-based initiatives in the ACA and in a number of private insurance plans, some analysts express concerns that large organizations—such as ACOs built around a major regional hospital or large physician group—could gain more market share and negotiating leverage with insurers, which could lead to higher prices. Anecdotally, a growing number of news reports indicate that patients are facing higher charges for services when physicians provide services in hospital outpatient settings, partly due to differences in Medicare payment. Some analysts say pricing concerns can be mitigated with stronger antitrust oversight and have noted an increase in FTC and DOJ investigations of proposed mergers due to concerns about their impact on the competitive landscape. At the same time, coordinated care delivery systems are in the nascent stage, and health care payments are still mainly based on volume of services rather than quality improvements. As Merritt Hawkins data indicate, many hospitals now hiring physicians or buying practices are basing physician compensation partly on productivity, which, combined with higher Medicare reimbursement for hospital-based services, could result in a higher number of physician services going forward. Access According to some experts, the unfolding efforts at physician coordination could improve access to care, by increasing competition in health care markets and creating networks that provide additional services and access to specialists to underserved consumers, such as Medicaid patients. But lawmakers and analysts have expressed concerns that as more doctors work in larger practices, there could be a change in the traditional doctor-patient relationship and potentially fewer entry points into the health care system if physician offices, outpatient clinics, or other facilities in a local area close. Another open question, as government and private payers base more payments on quality improvement measures, is whether such patient-driven systems could perpetuate disparities in the health care system. For example, some experts have asked whether ACOs and other quality-based systems could have a disincentive to treat sicker, more expensive patients and be more selective in their choice of patients, though HHS has designed the ACOs to make such so-called cherry picking difficult. Some lawmakers have suggested that consolidation could make it harder for rural areas to attract physicians. Rural areas have long had trouble recruiting doctors. But precisely because there are fewer physicians in rural areas, they may have more individual clout in negotiating with local hospitals during the current market evolution, some analysts say. The issue of access also goes to the question of whether consumers will have as much freedom to see the doctor of their choice, or visit a specialist, in integrated health care systems where physicians work for insurers or hospitals. In other words, will ACOs and medical homes be managed differently than the managed care plans that created consumer unrest in the 1990s? Some analysts say it will be important to analyze required information on patients' access to primary and specialty physicians in the emerging health organizations. Access is also linked to the issue of physician supply, such as the potential for growth in concierge practices that accept fewer patients and the projected shortage of primary care doctors. In an effort to increase supply, and possibly reduce prices for certain services, state legislatures and Congress have debated initiatives to expand the scope of allowable care provided by nurse practitioners and physician assistants. Coordinated Care/Quality New payment and delivery systems in Medicare and private plans are based on the theory that coordinated care can bring about increased quality, thereby reducing costs and allowing payers to enhance physician reimbursement. Some demonstration programs have shown potential for savings, though the scale is as yet unclear. A Congressional Budget Office analysis of past demonstration programs designed to reduce Medicare spending by implementing quality care initiatives concluded that a number cut hospitalizations and improved measures of patient care, but most did not meet their spending goals. The report also noted that physicians may have incentives to upcode, or increase the severity of an initial diagnosis, in order to show larger quality improvements. A 2012 analysis of a coordinated care pilot study at the University of Washington at St. Louis hospital found notable improvements in quality of care, as well as health savings. There may also be differences in the ability of smaller versus larger physician practices to experiment with new quality-based systems such as medical homes. Practices bear many of the up-front costs of creating new coordinated care services, while many savings may be dispersed through the broader health care system. Another potential factor that could affect efforts to improve coordination of care is increased segmentation of physicians as a result of ongoing market changes. A 2012 report on the future of medical practices noted: These changes in the practice environment have given rise to a large segment of the physician community that no longer hospitalizes patients, but rather manages them exclusively in ambulatory settings (imaging, surgery, chemotherapy, etc.) ... In an increasing number of places, there are now two non-overlapping physician communities: physicians who never visit the hospital and physicians who never leave it, as is the case in most of Europe. Under many quality-based systems, primary care physicians are envisioned as the focal point for managing patient care. In some scenarios, coordinating physicians or medical groups can face financial penalties based on the quality of care by other providers whose actions they do not directly control. With the rise of hospitalists, emergency room physicians, and other hospital-based physicians with segmented roles, such coordination can be more challenging, according to some analysts. For example, many lower-income consumers use emergency rooms as their entree to care. The growing use of specialized emergency room doctors and other hospital-based physicians who make the decision to admit patients may mean that primary care physicians are not brought into the decision-making loop in an early fashion. Such issues could be addressed in structured care organizations, analysts say. Appendix. Physician Income and Practice Costs Although doctors are among the best-paid professionals in the country, they have less ability than some other white collar workers to determine prices for their services, which are largely set by the federal payment rates in the Medicare and Medicaid programs or via negotiations with insurers. Physician income can be affected by factors including (1) specialty, (2) source of payment (public vs. private), and (3) productivity, in terms of the volume or range of services offered. General practitioners and pediatricians make less than specialists such as cardiologists and oncologists, for example. Annual survey data from the MGMA provide detailed information on median compensation for physicians in different medical specialties (see Table A-1 ). Some studies indicate that physician income has been declining in real terms in recent years. According to one analysis, inflation-adjusted physician fees declined by 25% from 1995 to 2006, a time period during which physicians also worked fewer hours. Income did not appear to decline as much as time worked, however, suggesting that some doctors may have found other ways to earn money, such as performing more tests in their offices, opening outpatient clinics, increasing intensity of services, or providing more expensive services. A second study found that average physician net income declined about 7% after inflation from 1995 to 2003, though there were differences among specialties. The recession that began in December 2007 and ended in June 2009 may have had an impact on physician income. Physician visits by privately insured patients under age 65 declined by 17% from spring 2009 to the end of 2011. The decline in the share of people covered by private insurance during that period was smaller than the decline in visits. Physician practice operating costs have not been declining in concert with real compensation, according to the MGMA. That may not only make it more financially challenging for some small practices, it may also mean that practices that want to enter into new payment and coordinated care systems such as ACOs or medical homes may have more difficulty raising necessary capital unless they affiliate with other health providers. Federal Policies Affecting Compensation Most physicians accept patients insured through the federal Medicare program for the elderly and disabled. Determining the proper level of Medicare physician payments has been a challenge for lawmakers. In the Balanced Budget Act of 1997 (BBA97, P.L. 105-33 ), Congress created the Medicare Sustainable Growth Rate (SGR) formula, a system for making annual updates to the physician fee schedule. Since 2002, the SGR formula has resulted in spending above targets and mandated annual cuts in physician reimbursement. With the exception of 2002, when a 4.8% cut went into effect, Congress has voted to override the planned cuts. The ACA did not address the SGR issue, but includes financial incentives to increase some primary care, including a 10% bonus for Medicare primary care services from 2011 to 2016. The ACA also introduced new Medicare payment systems such as the Medicare Shared Savings Program, where doctors who are part of ACOs receive a part of any savings to Medicare from higher quality, more efficient care. Solo and group physician practices face costs for acquiring and using electronic health record (EHR) technology to replace paper-based systems. The transition is being driven by Medicare and Medicaid incentive programs, authorized under the Health Information Technology for Economic and Clinical Health (HITECH) Act, which provide financial assistance to help offset the costs of the systems. In its 2010 final rule establishing the EHR incentive programs, CMS said average EHR implementation costs can be as much as $54,000 per physician, with subsequent annual maintenance costs as much as $20,600 per physician. Physicians who meet certain criteria can receive incentive payments under Medicare of up to $44,000 over five years—plus an additional 10% if practicing in a designated medically underserved area. The payments phase out over time and are replaced by financial penalties. Beginning in 2015, physicians who are not meaningful users of EHR technology will see a slight reduction in Medicare Part B reimbursement.

A growing number of U.S. physicians are combining their practices; affiliating with hospitals, insurance companies, and specialty management firms; or going to work directly for such organizations. The moves are part of a broader trend toward consolidation in health care, with the overall number of mergers and acquisitions in the sector at the highest level in a decade. Alterations in physician practice appear to be a response to a number of factors. Younger doctors are more eager than their predecessors to work for an outside institution, such as a hospital, to secure a set schedule and salary. Private practices have become more complex to manage, even as physician compensation has been declining. Doctors see financial advantages to building larger practices, in terms of ability to control expenses and negotiate higher fees with insurers. Further, not all trends are toward consolidation. A small but growing number of doctors are reacting to market incentives by moving in a different direction: creating concierge practices in which they see a limited number of patients who pay an annual retainer. According to experts, physician practices also may be affected, in part, by provisions of the 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended), designed to spur closer financial and clinical affiliation among health care providers. For example, the ACA creates health care delivery systems called Accountable Care Organizations (ACOs), under which providers contract to oversee a patient's total course of care in a bid to manage costs and improve quality. A number of physician practices, insurers, and hospitals have announced affiliations to qualify as ACOs. In another move partly spurred by the ACA, hospitals and health plans have been hiring physicians to ensure they will have adequate staff to treat the millions of Americans projected to gain insurance during the next few years. Several major studies have warned of a looming shortage of physicians, particularly primary care doctors. Congress is playing dual roles regarding the consolidation. On the one hand, the ACA was designed, in part, to prompt affiliation among doctors and other health care providers in order to reduce fragmentation and help control government and private health spending. At the same time, lawmakers are monitoring the health care system for signs that consolidation is having negative effects on consumer access, prices, and competition. The health care sector went through a similar round of restructuring during the 1980s and 1990s, including mergers and acquisitions of physician practices, ultimately prompting a backlash from some consumers who complained they were being blocked from specialists and procedures. The ACA envisions a different system of "patient-centered care," where doctors and other providers are given incentives to improve quality and efficiency, rather than to limit services. Still, it remains to be seen how the current round of changes will play out as physicians and other providers form larger organizations. This report provides background on factors contributing to changes in physician practice organization, including physician supply, sources of revenue, operating costs, and government incentives. It also examines the different types of integration, the legal intricacies of affiliation, and the possible implications for consumer and federal policy.

Fundamentals of Pharmaceutical Patents Patent Policy The patent system is animated by a number of policy objectives designed to promote the production and dissemination of technological information. Many commentators have argued that the patent system is necessary to encourage individuals to engage in inventive activity. Proponents of this view reason that, absent a patent system, inventions could easily be duplicated by free riders, who would have incurred no cost to develop and perfect the technology involved, and who could thus undersell the original inventor. The resulting inability of inventors to capitalize on their inventions would lead to an environment where too few inventions are made. By providing individuals with exclusive rights in their inventions for a limited time, the patent system allows inventors to realize the profits from their inventions. Further, these rights are grounded in the U.S. Constitution, which authorizes Congress to delineate them. The courts have also suggested that absent a patent law, individuals would favor maintaining their inventions as trade secrets so that competitors could not exploit them. Trade secrets do not enrich the collective knowledge of society, however, nor do they discourage others from engaging in duplicative research. The patent system attempts to avoid these inefficiencies by requiring inventors to consent to the disclosure of their inventions in issued patent instruments. There are still other explanations for the patent laws. For instance, the Patent Act of 1952 is thought by supporters to stimulate technological advancement by inducing individuals to "invent around" patented technology. Issued patent instruments may point the way for others to develop improvements, exploit new markets or discover new applications for the patented technology. The patent system may encourage patentees to exploit their proprietary technologies during the term of the patent. Proponents believe the protection provided by a patent's proprietary rights increases the likelihood a firm will continue to refine, produce and market the patented technology. Finally, the patent law has been identified as a facilitator of markets. Absent patent rights, an inventor may have scant tangible assets to sell or license, and even less ability to police the conduct of a contracting party. By reducing a licensee's opportunistic possibilities, the patent system lowers transaction costs and makes technology-based transactions more feasible. The current patent system has a great number of critics. Some assert that the patent system is unnecessary due to market forces that already suffice to create an optimal level of invention. The desire to gain a lead time advantage over competitors, as well as the recognition that technologically backward firms lose out to their rivals, may well provide sufficient inducement to invent without the need for further incentives. Some commentators observe that successful inventors are sometimes transformed into complacent, established enterprises that use patents to suppress the innovations of others. Others assert that the inventions that have fueled some of our most dynamic industries, such as early biotechnologies and computer software, arose at a time when patent rights were unavailable or uncertain. While these various justifications and criticisms have differing degrees of intuitive appeal, none of them has been empirically validated. No conclusive study broadly demonstrates that we get more useful inventive activity with patents than we would without them. The justifications and criticisms of the patent system therefore remain open to challenge by those who are unpersuaded by their internal logic. U.S. Patent Acquisition and Enforcement As mandated by the Patent Act of 1952, U.S. patent rights do not arise automatically. Inventors must prepare and submit applications to the U.S. Patent and Trademark Office ("USPTO") if they wish to obtain patent protection. USPTO officials, known as examiners, then assess whether the application merits the award of a patent. The patent acquisition process is commonly known as "prosecution." In deciding whether to approve a patent application, an USPTO examiner will consider whether the submitted application fully discloses and distinctly claims the invention. In addition, the application must disclose the "best mode," or preferred way, that the applicant knows to practice the invention. The examiner will also determine whether the invention itself fulfills certain substantive standards set by the patent statute. To be patentable, an invention must be useful, novel and nonobvious. The requirement of usefulness, or utility, is satisfied if the invention is operable and provides a tangible benefit. To be judged novel, the invention must not be fully anticipated by a prior patent, publication or other knowledge within the public domain. A nonobvious invention must not have been readily within the ordinary skills of a competent artisan at the time the invention was made. If the USPTO allows the patent to issue, the patent proprietor obtains the right to exclude others from making, using, selling, offering to sell or importing into the United States the patented invention. The term of the patent is ordinarily set at twenty years from the date the patent application was filed. Patent title therefore provides inventors with limited periods of exclusivity in which they may practice their inventions, or license others to do so. The grant of a patent permits the inventor to receive a return on the expenditure of resources leading to the discovery, often by charging a higher price than would prevail in a competitive market. Patent rights are not self-enforcing. A patentee bears responsibility for monitoring its competitors to determine whether they are using the patented invention or not. Patent owners who wish to compel others to observe their intellectual property rights must usually commence litigation in the federal district courts. The U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") possesses exclusive national jurisdiction over all patent appeals from the district courts, while the U.S. Supreme Court possesses discretionary authority to review cases decided by the Federal Circuit. Pharmaceutical patents are subject to special provisions created by the Drug Price Competition and Patent Restoration Act of 1984. This legislation, which was subject to significant legislative revisions in 2003, is commonly known as the Hatch-Waxman Act. This statute establishes special rules for enforcement of certain patents on certain drugs and medical devices by brand-name firms against generic competitors. The Hatch-Waxman Act includes provisions extending the term of a patent to reflect regulatory delays encountered in obtaining marketing approval by the Food and Drug Administration (FDA); exempting from patent infringement certain activities associated with regulatory marketing approval; establishing mechanisms to challenge the validity of a pharmaceutical patent; and creating a reward for disputing the validity, enforceability, or infringement of a patented and approved drug. The 1984 Act also provides the FDA with certain authorities to offer periods of marketing exclusivity for a pharmaceutical independent of the rights conferred by patents. The Exhaustion Doctrine Patent rights are subject to a significant restriction that is termed the "exhaustion" doctrine. Under the exhaustion doctrine, an authorized, unrestricted sale of a patented product depletes the patent right with respect to that physical object. As a result of this doctrine, the purchaser of a patented good ordinarily may use, charge others to use, or resell the good without further regard to the patentee. The courts have reasoned that when a patentee sells a product without restriction, it impliedly promises its customer that it will not interfere with the full enjoyment of that product. The result is that the lawful purchasers of patented goods may use or resell these goods free of the patent. Because it is the first sale of a patented product that extinguishes patent rights with respect to the item that is sold, some authorities refer to the exhaustion doctrine as the "first sale rule." For example, suppose that a consumer purchases an appliance at a hardware store. The appliance is subject to a patent that is owned by the manufacturer. Later, the consumer sells the appliance to a neighbor at a garage sale. Ordinarily, the patent laws provide the manufacturer with the ability to prevent others from selling an appliance that uses its patented design. In this case, however, the patent right in that particular appliance was exhausted when the manufacturer made its first sale to the consumer. That consumer, as well as any subsequent purchasers of that individual appliance, may freely sell it without concern for the manufacturer's patent. International Aspects U.S. patents provide their owners with rights only within the United States. The grant of a U.S. patent provides its owner with no legal rights in any foreign nation. If inventors desire intellectual property protection in another country, they must specifically procure a patent in that jurisdiction. Ordinarily the foreign patent acquisition process begins with the submission of a patent application to a foreign patent office. As a practical matter, multinational corporations often obtain a set of corresponding national patents for each of their significant inventions. Although these patents concern the same invention—for example, the same chemical compound that possesses pharmacological properties—they often do not have precisely the same legal effect in each jurisdiction. Divergent wordings of the patents' claims, translations into various languages, and distinctions between national patent laws and practice are among the factors that lead to these differences. Under an important international agreement concerning patents, the Convention of Paris for the Protection of Industrial Property ("Paris Convention"), each issued national patent is an independent legal instrument. One significant consequence of the independence of national patents is that they must be enforced individually. For example, suppose that an inventor owns patents directed towards the same invention in both the United States and Canada. Following litigation in Canada, a court rules that the Canadian patent is invalid. Even though the Canadian patent may be similar or identical to the U.S. patent, the U.S. patent may still be freely enforced. Although a U.S. court may find the reasoning of the Canadian court persuasive as it reaches its own judgment regarding the validity of the U.S. patent, the Canadian court decision has no direct effect upon the validity or enforceability of the U.S. patent. The Parallel Importation of Patented Pharmaceuticals In some circumstances, widely divergent drug prices between the United States and other nations have encouraged parallel importation. Price disparities between the United States and other nations create incentives for individuals to purchase medications from abroad, and import them into the United States, in order to lower health care costs or undercut the U.S. distributor. In this context, the term "parallel imports" refers to patented products that are legitimately distributed abroad, and then sold to consumers in the United States without the permission of the authorized U.S. dealer. Although these "grey market goods" are authentic products that were sold under the authorization of the brand-name drug company, they entered the U.S. market outside the usual distribution channels for that drug. The legal situation regarding the parallel importation of patented pharmaceuticals remains somewhat clouded. In such circumstances, the U.S. patent proprietor may be able to use its patent rights to block the importation of grey market pharmaceuticals. Because this scenario involves the distribution of a patented product that initially sold under the authorization of the patent proprietor, it raises issues concerning the exhaustion doctrine. One position, favorable to the patent proprietor, is that the U.S. patent is fully enforceable against imports despite the exhaustion doctrine. Under this line of reasoning, the fact that the sale by the patent proprietor or its representative took place outside the United States is significant. This line of reasoning relies on the fact that U.S. patents exist independently of foreign patents, and that U.S. patents are effective only within the United States. As a result, this reasoning continues, a foreign sale cannot result in exhaustion of a U.S. patent. This legal doctrine—which restricts the exhaustion doctrine to domestic sales only—allows the U.S. patent to be used to block unauthorized imports of a patented pharmaceutical. A competing view is that the exhaustion doctrine is not limited to domestic sales by the patentee or its representative, but to all sales regardless of their location. This position is commonly referred to as "international exhaustion." Under this view, because the importer lawfully purchased authentic goods from the patent holder or its representative, the U.S. patent right is subject to "international exhaustion" due to the sale, despite the fact that the sale technically took place under a foreign patent. In its 2001 decision in Jazz Photo Corp. v. United States International Trade Commission , the U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") rejected the "international exhaustion" position and instead limited the exhaustion doctrine to sales that occur within the United States. There the Federal Circuit issued a succinct statement explaining: United States patent rights are not exhausted by patent rights of foreign provenance. To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent. See Boesch v. Graff , 133 U.S. 697, 10 S.Ct. 378, 33 L.Ed. 787 (1890). Some commentators have criticized the Federal Circuit's reasoning in the Jazz Photo case, and in particular the court's reliance on the Boesch v. Graff decision. In Boesch v. Graff , the plaintiff owned a U.S. patent for a lamp burner. An individual named Hecht, who was not a party to the litigation, enjoyed a "prior user right" pertaining to the lamp burners under German law. The German patent statute allowed individuals who had used an invention prior to the date of another's patent application the privilege of continuing to exploit the invention commercially, without regard to the patent. Hecht had met the conditions for this prior user right to apply, and as a result could sell the burners in Germany. Hecht eventually sold some burners to the defendants, who in turn imported them into the United States and commenced sales. The plaintiff brought suit to enjoin the sale of the imported burners in the United States. In opposing the injunction, the defendants argued that they had lawfully purchased the burners and that the U.S. patent should be subject to the exhaustion doctrine. The Supreme Court rejected the defendant's arguments, holding: The right which Hecht had to make and sell the burners in Germany was allowed him under the laws of that country, and purchasers from him could not be thereby authorized to sell the articles in the United States in defiance of rights of patentees under a United States patent. ... The sale of articles in the United States under a United States patent cannot be controlled by foreign laws. The facts and holding of Boesch have suggested to some commentators that its precedential reach is quite limited. In Boesch , it was a prior user, rather than the patentee or its licensee, which made the foreign sale. The patentee neither consented to the sale of the invention nor received compensation for that sale. According to some observers, this is a much different state of affairs than the typical parallel importation case, where either the patentee or an authorized overseas distributor makes a sale as part of an arm's-length commercial transaction. Given this precedential foundation, as well as the limited consideration of the issue in Jazz Photo , some legal commentators have questioned whether this apparent absolute ban on parallel importation will survive further judicial scrutiny. The Federal Circuit has maintained this holding in subsequent case law, however, so the Federal Circuit's statement in the Jazz Photo case remains the controlling patent law precedent. In particular, the federal district courts are bound by the Jazz Photo decision unless the Federal Circuit or Supreme Court alters the rule. To summarize current law, the Federal Circuit has taken the position that patent exhaustion applies only to sales that occurred in the United States. This rule squarely rejects the principle of "international exhaustion." As a result, brand-name drug companies may potentially block imports of patented medications into the United States even if the imported good is the patent owner's own product, legitimately sold to a customer in a foreign jurisdiction. Related Issues In addition to the issue of patent infringement, the parallel importation of patented pharmaceuticals potentially raises a number of other complex issues. This report next considers three of these issues: the status of state and local governments that have either themselves imported, or have encouraged others to import, patented medications from foreign jurisdictions; the potential use of label licenses on patented drugs; and the implications of international trade rules established by World Trade Organization (WTO). State and Local Governments Several state governments are currently considering plans to import or facilitate the importation of prescription drugs. California, Illinois, Iowa, Minnesota, New Hampshire, North Dakota, Vermont and Wisconsin are among those that have considered importation programs. If a state government or agency of a state encourages the importation of a patented medication in a manner that would infringe a patent, then the patentee's ability to obtain relief is at present time uncertain. Observers have questioned whether the states should be subject to the patent rights of private parties. The U.S. Constitution places a significant jurisdictional hurdle before a patentee seeking to vindicate its rights against a state. The Eleventh Amendment provides that a federal court is without power to entertain a suit by a private person against a state, except under certain limited circumstances. Because the federal courts possess exclusive jurisdiction over patent infringement litigation, this situation creates a dilemma for patentees—the only statutorily authorized forum is constitutionally unavailable, and the only constitutional forum is statutorily unavailable, at least for the assertion of a conventional patent infringement claim. This means that a patentee's only option would be a state court suit charging the state government with a taking, or asserting general unfair competition principles, in order to vindicate its patent rights. The Supreme Court established one notable exception to the Eleventh Amendment prohibition against federal court litigation against a state. In Ex parte Young , the Court allowed private citizens to petition a federal court to enjoin state officials acting in their official capacity from engaging in future conduct that would violate the Constitution or a federal statute. The doctrine is based on a premise that state officers who violate federal law in the course of discharging the duties of their positions are acting outside the authority of their office, and therefore do not qualify as the state or its agent for Eleventh Amendment purposes. The only remedy available under the Ex parte Young ruling is prospective injunctive relief, however, rather than a monetary judgment that would compensate for past harms. Further, some uncertainty exists over the application of the Young exception to patents. Although the federal patent statute establishes the conditions under which inventors may obtain patents, an individual patent is effectively the grant of a private right, not a federal law. Congress attempted to abrogate the Eleventh Amendment immunity of states to patent infringement suits in 1992. The Patent and Plant Variety Protection Remedy Clarification Act introduced section 271(h) into the Patent Act of 1952. That provision specified not only that the states were subject to patent infringement suits in the federal courts, but that they were liable for any remedies that could be had against a private party. However, the 1999 opinion of the Supreme Court in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank found that Congress had not properly abrogated state immunity to patent infringement litigation in the federal courts in keeping with the requirements of the Eleventh Amendment. In Florida Prepaid and other opinions, the Supreme Court did leave open the possibility that a state could waive its Eleventh Amendment immunity by submitting to federal jurisdiction. In addition, Congress may in some cases overcome state Eleventh Amendment immunity through legislation pursuant to another constitutional authority, such as the Fourteenth Amendment. Several bills have been introduced before Congress since the Supreme Court issued the Florida Prepaid decision that would take this approach, but none has been enacted. The immunity to federal suit provided by the Eleventh Amendment is restricted to state governments, and does not ordinarily apply to local governments. As a result, a city or county government is generally not entitled to claim Eleventh Amendment immunity and avoid a suit for patent infringement in a federal court. However, some judicial opinions have reasoned that a political subdivision of a state can qualify for Eleventh Amendment immunity where the locality is only nominally the actor, and the state itself is the real party in interest in the litigation. This determination depends on the precise relationship between the state and its political subdivision under the circumstances of a particular case. Label Licenses As noted previously, the theory behind the exhaustion doctrine is that when a patent proprietor makes an unrestricted sale of a product to a consumer, the proprietor impliedly promises its customer that it will not use its patent rights to interfere with the full enjoyment of that product. As a result, lawful purchasers of patented goods should be able to use or resell these goods free of the patent. In some circumstances, however, the patent owner may attempt to restrict a customer's use of a good. Sales contracts are the typical mechanism for imposing such limitations. Contractual provisions that are placed on the product or its packaging are sometimes termed "label licenses" or "bag tags." A commonly observed label license is "Single Use Only," as applied to printer cartridges or other goods that the manufacturer does not intend for consumers to reuse. Other patent proprietors have attempted to impose geographical limitations upon the use of their products. A label stating "For Use in Canada Only" is representative of such a restriction. Whether such label licenses are enforceable, or are instead nullified by the exhaustion principle, is a complex legal issue. However, the prevailing view of the Court of Appeals for the Federal Circuit is that absent exceptional circumstances—such as an antitrust violation or misuse of the patent by its proprietor—these restrictions will be upheld. The legal theory is that the patent right gives proprietors the ability to exclude others from using the patented product, they may also impose lesser restrictions when they choose to sell the patented product. In addition, customers are presumed to have entered into binding sales contracts that are presumptively valid. As the law currently stands, then, a customer who violates a label license could be liable both for breach of contract and for patent infringement. The TRIPS Agreement As a member of the World Trade Organization (WTO), the United States is a signatory to the so-called TRIPS Agreement, or Agreement on Trade-Related Aspects of Intellectual Property Rights. Under Part III of the TRIPS Agreement, all member countries agreed to enact patent statutes that include certain substantive provisions. In particular, Article 27 stipulates that "patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally prevented." Article 27 ordinarily requires that all classes of invention receive the same treatment under the patent laws, subject to certain minor exceptions. It would generally be impermissible under Article 27, for example, for a country to accord patents on pharmaceuticals a lesser set of proprietary rights than is available for patents on automobile engines, computers, or other kinds of inventions. The TRIPS Agreement places lesser obligations upon signatory states with regard to the exhaustion doctrine, however. Article 6 of the TRIPS Agreement states: For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 above nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights. The referenced Articles 3 and 4 of the TRIPS Agreement impose obligations of national treatment and most-favored-nation status respectively. As a result, a TRIPS Agreement signatory may not permissibly establish more favorable exhaustion rules for its own citizens than for citizens of other WTO countries. In addition, if a TRIPS Agreement signatory provides for favorable treatment with respect to the exhaustion doctrine to one WTO member state, then the same treatment must be extended to all WTO member states. Other than these basic national treatment and most-favored-nation obligations, the TRIPS Agreement does not impose other restrictions regarding the exhaustion doctrine. In particular, the TRIPS Agreement does not appear to require that all types of inventions be treated equally with regard to the exhaustion doctrine. Legislative Issues and Alternatives Should congressional interest continue in this area, a variety of options are available. If the possibility of an infringement action against unauthorized importers of patented pharmaceuticals is deemed sound, then no action need be taken. Alternatively, Congress could confirm the Federal Circuit's decision in Jazz Photo , which rejects the doctrine of international exhaustion and confines the exhaustion principle to sales that occurred within the United States. If legislative activity is deemed appropriate, however, another possibility is the introduction of some form of international exhaustion doctrine into U.S. patent law. The TRIPS Agreement does not seem to require that a country adopt the international exhaustion doctrine as an all-or-nothing proposition, applying either to all patented products or to none. As a result, if Congress chose to limit application of the international exhaustion doctrine to patented pharmaceuticals, or some other specific type of invention, then no ramifications appear to arise with respect to the TRIPS Agreement obligations of the United States. It should be noted, however, that there appears to be no precedent, either domestically or abroad, for establishing an international exhaustion doctrine that is specific to pharmaceuticals. At least two statutory mechanisms exist for implementing the international exhaustion doctrine into U.S. patent law. One possible approach would be to declare that importation into the United States of goods sold abroad by a patent proprietor or its representative is not a patent infringement. Legislation introduced before the 110 th Congress, S. 1082 , takes this approach with respect to patented pharmaceuticals, specifying that: It shall not be an act of infringement to use, offer to sell, or sell within the United States or to import into the United States any patented invention under section 804 of the Federal Food, Drug, and Cosmetic Act that was first sold abroad by or under authority of the owner or licensee of such patent. In addition to codifying the international exhaustion doctrine with respect to pharmaceuticals, the amendment proposed in S. 1082 may conversely led to the implication that the international exhaustion doctrine does not apply to patented inventions other than pharmaceuticals. This provision could potentially fortify the ruling in the Jazz Photo case for inventions outside of the pharmaceutical field. Another statutory mechanism for promoting the importation of patented drugs is to immunize specific individuals from infringement liability. The Patent Act takes this approach in the area of patented medical methods, exempting licensed medical practitioners and certain health care entities from patent infringement in certain circumstances. In the case of drug importation, potential patent infringers include importers, distributors, wholesalers, pharmacies, and individual consumers. Should Congress wish to promote parallel trade in patented pharmaceuticals, an explicit statutory infringement exemption could encourage individuals to engage in drug importation. In considering these or other legal changes to the patent laws, the possibility of label licenses should be kept in mind. Even if Congress exempted drug importation practices or practitioners from patent infringement liability, firms may still be able to stipulate through the contract law that a drug sold in a foreign jurisdiction is for use exclusively within that jurisdiction. If a purchaser instead imported that medication into the United States, then the seller may have a cause of action for breach of contract. As a result, any legal changes may need to account for the ability of firms to use contractual provisions as something of a substitute for patent protection in the area of prescription drug importation. In addition, the issue of drug importation may provide an impetus for clarification of the patent infringement liability of state governments. Some states, as well as political subdivisions of the states, have either seriously considered or commenced the practice of drug importation. To the extent that these authorities continue this trend, their potential Eleventh Amendment immunity to a patent infringement case in federal court may present another significant issue concerning patents and drug importation. Controlling the costs of prescription drug spending, on one hand, and encouraging the development of new drugs, on the other, are both significant goals. These aspirations may potentially conflict, however. Although introducing international exhaustion into U.S. patent law may initially lower the price of patented drugs, it might also decrease the incentive of firms to engage in the research and development of new pharmaceuticals, as well as to shepherd new drugs through time-consuming and costly marketing approval procedures. Consideration of patent law reforms would likely be put into the larger context of drug costs, which may be influenced by the pricing policies of foreign nations, profits earned by wholesalers and other intermediaries, the physical costs of shipment into the United States, and other diverse factors. Striking a balance between increasing access to medications and ensuring the continued development of new drugs by our nation's pharmaceutical firms is a central concern of the current drug importation debate.

Prescription drugs often cost far more in the United States than in other countries. Some consumers have attempted to import medications from abroad in order to realize cost savings. The practice of importing prescription drugs outside the distribution channels established by the brand-name drug company is commonly termed "parallel importation." Parallel imports are authentic products that are legitimately distributed abroad and then sold to consumers in the United States, without the permission of the authorized U.S. dealer. Parallel importation may raise significant intellectual property issues. Many prescription drugs are subject to patent rights in the United States. In the Jazz Photo decision, the U.S. Court of Appeals for the Federal Circuit confirmed that the owner of a U.S. patent may prevent imports of patented goods, even in circumstances where the patent holder itself sold those goods outside the United States. The Jazz Photo opinion squarely declined to extend the "exhaustion" doctrine—under which patent rights in a product are spent upon the patent owner's first sale of the patented product—to sales that occurred in foreign countries. The court's ruling will in some cases allow brand-name pharmaceutical firms to block the unauthorized parallel importation of prescription drugs through use of their patent rights. Several state and local governments are either themselves importing, or encouraging others to import, patented medications from foreign jurisdictions. The Eleventh Amendment of the U.S. Constitution provides that a federal court may not adjudicate a lawsuit by a private person against a state, except under certain limited circumstances. The ability of a private party to obtain a remedy for patent infringement against a state government is therefore uncertain. Eleventh Amendment immunity may in some cases extend to political subdivisions of a state as well. In addition to any patent rights they possess, brand-name drug companies may place label licenses on their medications. It is possible to draft a label license restricting use of a drug to the jurisdiction in which it was sold. As a result, in addition to a charge of patent infringement, an unauthorized parallel importer may potentially face liability for breach of contract. Legislation introduced before the 110th Congress, S. 1082, addresses the importation of prescription drugs. Titled the Food and Drug Administration Revitalization Act, this bill would amend the Patent Act of 1952 to provide that importation into the United States of a regulated pharmaceutical sold abroad by a patent proprietor or its representative is not a patent infringement. Introduction of an "international exhaustion" rule restricted to pharmaceuticals does not appear to be prohibited by the provisions of the so-called TRIPS Agreement, which is the component of the World Trade Organization (WTO) agreements concerning intellectual property. Another possible legislative response is the immunization of specific individuals, such as pharmacies or importers, from patent infringement liability. Alternatively, no legislative action need be taken if the current possibility of an infringement action against unauthorized importers of patented pharmaceuticals is deemed satisfactory.

Introduction Concern among some Members of Congress and the public over the financial sustainability of the Social Security Disability Insurance (SSDI) program has grown. Under current law, the Federal Disability Insurance (DI) Trust Fund—which finances the benefits and administrative costs of the SSDI program—is projected to be exhausted by the fourth quarter of calendar year 2016. If depleted, the DI trust fund would be able to pay about 80% of scheduled SSDI benefits. The declining solvency of the DI trust fund is the result of an increasing imbalance between SSDI's income and outlays. Between 1980 and 2013, non-interest income to the DI trust fund (adjusted for inflation) increased 181%, while spending on benefits grew 219%. The increase in spending is due largely to the growth in the number of beneficiaries on SSDI. Over the same period, the number of disabled workers and their dependents more than doubled, rising from 4.7 million in 1980 to 11 million in 2013. Because benefit payments account for nearly all program spending, the growth in the SSDI rolls has contributed heavily to the financial difficulties of the DI trust fund. To assist lawmakers in addressing the sustainability of the program, this report provides an overview of reform proposals to manage the long-term growth in the SSDI rolls. The report is divided into four sections. The first section provides a brief background on SSDI, including program eligibility criteria, benefits, and the initial determination and adjudication process. The second section discusses the growth in the SSDI rolls since 1980 by examining historical entry and exit trends in the program. The third section investigates some of the causes of growth in SSDI, including changes in the demographic characteristics of the working-age population, changes in opportunities for work and compensation, and changes in federal policy. The fourth section examines various options to manage the growth in the SSDI rolls, namely, (1) stricter eligibility criteria, (2) improved administration of the program, (3) stronger return-to-work incentives, and (4) policies to encourage employers to help disabled workers continue to work. Many of the options discussed in this report could reduce spending by slowing or even reducing the growth of SSDI over the long term; however, such options are unlikely to produce savings in time to prevent the projected exhaustion of the DI trust fund in 2016. For information on financing options to extend the solvency of the DI trust fund in the short term, see CRS Report R43318, Social Security Disability Insurance (DI) Trust Fund: Background and Solvency Issues , by [author name scrubbed]. Background on SSDI Enacted in 1956 under Title II of the Social Security Act, SSDI is part of the Old-Age, Survivors, and Disability Insurance (OASDI) program administered by the Social Security Administration (SSA). OASDI is commonly called Social Security. Like Old-Age and Survivors Insurance (OASI), SSDI is a form of social insurance that replaces a portion of a worker's earnings based on the individual's career-average earnings in jobs covered by Social Security. Specifically, SSDI provides benefits to insured workers under the full retirement age (FRA) who meet the statutory test of disability and to their eligible dependents. FRA is the age at which unreduced Social Security retirement benefits are first payable (currently 66). In November 2014, 10.9 million individuals received SSDI benefits, including 9 million disabled workers, 150,000 spouses of disabled workers, and 1.8 million children of disabled workers. Eligibility To qualify for SSDI, workers must be (1) insured in the event of disability, and (2) statutorily disabled. To achieve insured status, individuals must have worked in covered employment (i.e., jobs covered by Social Security) for about a quarter of their adult lives before they became disabled and for at least five of the past 10 years immediately before the onset of disability. However, younger workers may qualify with less work experience based on their age. In 2014, SSDI provided disability insurance to an estimated 151 million workers. To meet the statutory test of disability, insured workers must be unable to engage in any substantial gainful activity (SGA) because of a medically determinable physical or mental impairment that can be expected to result in death or has lasted or can be expected to last for at least one year. In 2015, the monthly SGA earnings limit is $1,090 for most workers and $1,820 for statutorily blind individuals. In general, workers must have a severe condition that prevents them from doing any kind of substantial work that exists in the national economy, taking into account age, education, and work experience. Benefits Cash benefits begin five full months after a beneficiary's disability onset date. Initial benefits are based on a worker's career-average earnings, indexed to reflect changes in national wage levels (up to five years of the worker's low earnings are excluded). Benefits are subsequently adjusted to account for inflation through cost-of-living adjustments (COLA), as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, benefits may be offset if a disabled worker also receives workers' compensation or other public disability benefits. In November 2014, the average monthly benefit was $1,146 for disabled workers, $309 for spouses of disabled workers, and $343 for children of disabled workers. In addition to cash benefits, disabled workers and certain dependents are eligible for health coverage under Medicare after 24 months of entitlement to cash benefits (29 months after the onset of disability). In 2012, Medicare spending per disabled beneficiary averaged about $9,900. Some SSDI beneficiaries may also qualify for Supplemental Security Income (SSI). SSI provides cash payments to aged, blind, or disabled individuals with limited income and assets. Both programs are administered by SSA and use the same definition of disability; however, unlike SSDI, SSI has no work or contribution requirements. In most states, SSI recipients are automatically eligible for Medicaid. Over 1 million disabled workers ages 18-64 received both SSDI and SSI benefits in December 2013. Determination and Adjudication Process To apply for SSDI, an individual must first file an application with a local SSA field office. Applications that meet the work history and earnings requirements are then forwarded to a state Disability Determination Services (DDS) office for a medical determination. DDSs—state agencies that are fully funded by the federal government—decide whether applicants meet national disability standards established by SSA. State DDS examiners and medical and psychological consultants typically use medical evidence collected from the claimant's treating sources (physicians, psychologists, or other acceptable medical sources) to determine the severity of the claimant's impairment(s). If a claimant's condition is determined to be severe and meets (or is of equal severity to) the medical criteria in SSA's Listing of Impairments , the claimant is considered disabled and therefore eligible for SSDI. Claimants who do not meet the medical criteria in the listings proceed to a more individualized assessment that examines their residual functional capacity to perform any past relevant work or other work that exists in the national economy. If a claimant cannot perform such work, the claimant is awarded benefits. Claimants whose initial applications are denied may appeal. During the appeals process, claimants may present additional evidence or arguments to support their case as well as appoint a representative to act on their behalf. The appeals process is composed of four stages: (1) reconsideration by a different examiner from the state DDS office, (2) a hearing before an administrative law judge (ALJ), (3) a review before the Appeals Council, and (4) filing suit against SSA in U.S. district court. Almost all appeals reach the ALJ stage; few proceed to the Appeals Council or federal court. Trends in the SSDI Program Since 1980 Enrollment Between 1980 and 2013, the number of SSDI applications submitted to SSA's field offices doubled, from 1.3 million to 2.6 million. As Figure 1 illustrates, most of that growth began around 2000. The number of awards for SSDI increased 111% over this same period, from 420,000 in 1980 to 888,000 in 2013. At the same time, the overall incidence (enrollment) rate rose from 4.4 awards per 1,000 disability-exposed to 6.3. The incidence rate is the ratio of the number of new beneficiaries awarded benefits each year to the number of workers who are insured in the event of disability but not currently receiving benefits (i.e., the disability-exposed population ). Termination Entitlement to benefits ends when a disabled worker no longer meets the eligibility criteria for SSDI. Although the overall number of disabled-worker terminations increased 77% between 1980 and 2013, from 435,000 to 769,000, the ratio of annual disabled-worker terminations to the average number of disabled-worker beneficiaries (the termination rate ) actually decreased 41%, from 145 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 86. As depicted in Figure 2 , three main factors drive the termination rate: death, recovery, and conversion. The beneficiary death rate decreased 42% between 1980 and 2013, from 48 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 28, reflecting the trend in the U.S. population of declining mortality rates across all age groups. Recovery refers to individuals whose benefits were terminated because of medical improvement or earnings above SGA. From 1980 to 2013, the recovery rate declined 77%, from 29 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 6.7. A conversion termination occurs when SSA automatically converts a disabled-worker benefit to a retired-worker benefit due to a disabled worker reaching the FRA. Over this same period, the conversion rate fell 25%, from 68 disabled-worker terminations per 1,000 disabled-worker beneficiaries to 51. The rise in the recovery rate during the early 1980s stemmed mainly from the enactment of the Social Security Disability Amendments of 1980 ( P.L. 96-265 ), which expanded the use of continuing disability reviews (CDR) for all non-permanently disabled beneficiaries. CDRs are periodic medical reevaluations conducted to determine if beneficiaries continue to meet SSA's definition of disability. The frequency of CDRs is linked to a beneficiary's probability of recovery. A major review of the SSDI program after the passage of the 1980 amendments resulted in a marked increase in the recovery rate between 1980 and 1982. However, the political backlash over the implementation of the reviews led to a temporary moratorium on CDRs for most mental impairment cases as well as an increase in the percentage of beneficiaries designated as "permanently disabled" and therefore subject to less frequent reviews. These actions, coupled with changes to the disability determination and review process stemming from the Social Security Disability Benefits Reform Act of 1984 ( P.L. 98-460 ), contributed to the subsequent decrease in the recovery rate. The 1997 increase in the recovery rate largely resulted from the passage of the Contract with America Advancement Act of 1996 ( P.L. 104-121 ), which terminated the benefits of SSDI and SSI recipients whose drug addiction and alcoholism (DA&A) significantly contributed to their disability. However, because DA&A beneficiaries represented less than 3% of all disabled adults on SSDI and SSI in 1996 and new applicants could no longer claim disability based on DA&A, P.L. 104-121 's impact on the overall trend in the SSDI recovery rate was minimal. Starting in 2002, the recovery rate contracted again, in part, because of a reduction in the number of medical CDRs conducted by SSA. The Contract with America Advancement Act of 1996 authorized additional funds for CDRs but only for FY1996 through FY2002. In FY2003, the additional funding for CDRs lapsed and SSA shifted its focus away from CDRs toward processing the growing number of initial disability claims. As a result, the number of medical CDRs performed by SSA dropped from an all-time high of 877,000 in FY2000 to 208,000 in FY2007, before climbing back up to 526,000 in FY2014 ( Figure 3 ). Program Size Between 1980 and 2013, the overall number of SSDI beneficiaries increased 134%, from 4.7 million to 11 million. Most of the growth in the program stemmed from disabled workers, whose ranks tripled, from 2.9 million in 1980 to 9 million in 2013 ( Figure 4 ). In contrast, the number of spouses of disabled workers on SSDI decreased 66% during this period, from 462,000 in 1980 to 157,000 in 2013. The number of children receiving benefits grew rather modestly compared with the number of disabled workers on SSDI, from 1.4 million children in 1980 to 1.9 million in 2013. Prevalence Rates The size of the SSDI rolls is largely the function of two factors: the incidence (enrollment) rate of beneficiaries into the program and the termination rate of beneficiaries from the program. From 1980 to 2013, a marked rise in the incidence rate, coupled with a steady decline in the termination rate, resulted in an appreciable increase in the number of beneficiaries on SSDI. The prevalence rate measures the total number of disabled workers relative to the overall insured-worker population at the end of the year. The insured-worker population is the sum of the disability-exposed population and the number of individuals who are already receiving SSDI benefits. Between 1980 and 2013, the gross (unadjusted) prevalence rate grew from 2.8% to 5.9% ( Figure 5 ). When one adjusts the prevalence rate to control for the effects of changes in the age-sex distribution of the insured-worker population, the upward trend is less pronounced. Age-sex adjusting permits a more meaningful comparison over extended periods, insofar as it "isolates the changing trend in the true likelihood of receiving benefits for the insured population, without reflecting changes in the age distribution of the population." From 1980 to 2013, the age-sex-adjusted prevalence rate grew from 3.1% to 4.6%. Because the baby-boom generation is aging and older workers are more likely to qualify for SSDI, the gross rate would have increased even if the rate for each age group remained constant. The growth in the gross rate is due to both population aging (discussed below) and growth in the age-sex adjusted rate. The gap between the age-sex-adjusted rate and the gross rate is the growth that is attributable to changes in the age and sex distribution of the insured population. Causes of the Growth in the SSDI Rolls Ascribing shares of the growth in the SSDI program to specific factors has engendered disagreement among researchers, advocates, and some Members of Congress. In general, people who support higher spending on SSDI focus on changes in the demographic characteristics of insured workers. In contrast, individuals who want to limit program spending typically focus on the effect of changes in the economic incentives to apply for SSDI and legislative changes to the program's eligibility criteria. As Figure 5 highlights, some of increase can be explained by demographic factors such as the aging of the workforce; however, the increase in the age-sex-adjusted rate means the growth in the SSDI rolls is also attributable to non-demographic factors, some of which are not well understood. This section examines some of the more salient explanations for the growth in the program and discusses other potential factors. Changes in the Demographic Characteristics of Insured Workers Growth in the Working-Age Population One factor behind the increase in the total number of beneficiaries on SSDI is the overall growth in the working-age population ( Figure 6 ). From 1980 to 2013, the population ages 20-64 rose from 134 million to 192 million, while the insured-worker population ages 20-64 grew from 94 million to 146 million. The growth in the working-age population accounts for largest the share of the increase in the total number of beneficiaries on SSDI. The Influx of Women into the Labor Force The latter half of the 20 th century witnessed a marked expansion of women in the workforce, which has contributed to the growth in SSDI. Between 1950 and 1999, the annual labor force participation rate for women age 16 and older nearly doubled, from 34% to an all-time high of 60%. As a result, the share of women ages 15-64 who were insured for disability increased from 51% in 1980 to 67% in 2014. The portion of men who were insured declined slightly over this period, from 77% to 71% ( Figure 7 ). The growth in the share of women insured for disability coincided with an increase in the rate at which insured women were awarded benefits. As Figure 8 shows, both male and female age-adjusted incidence rates increased markedly between the late 1980s and early 1990s. However, male age-adjusted incidence rates declined following the 1990-1991 recession while female rates held steady. Researchers refer to this trend as women's "catch-up." Since the late 1990s, age-adjusted incidence rates for women have been more or less at parity with men's rates. Although the reason for the gap between incidence rates during the 1980s is not entirely clear, researchers have speculated that past generations of women may have been less likely to know about SSDI and more likely to turn to family members or means-tested programs, such as Aid to Families with Dependent Children (AFDC), when affected by work-limiting impairments. The Aging of the Workforce The aging of the large baby-boom generation—individuals born between 1946 and 1964—played a marked roll in increasing the number of individuals on SSDI. Beginning in 1996, working-age baby boomers increasingly aged and became more prone to disability, resulting in a shift in the age distribution of the insured-worker population from younger workers to older workers. This shift helped to increase the gross incidence and prevalence rates, inasmuch as older workers have a higher likelihood of benefit receipt relative to younger workers. Between 1996 and 2013, the portion of SSDI awards to disabled workers ages 50 to FRA increased from 54% to 66% ( Figure 9 ). One reason for this is that older workers report suffering from work-limiting disabilities at higher rates relative to younger workers. Another factor is that the definition of disability is effectively less strict at higher ages. In making a disability determination, DDS examiners take into account the claimant's medical condition as well as vocational factors such as age, education, residual functional capacity, and work experience. Under its regulations, SSA considers advancing age to be a limiting factor in a claimant's ability to adjust to other work. Therefore, older workers are more likely to receive benefits than are younger workers, even if they have the same disability. The trustees expect the gross prevalence rates to grow at a slower pace in the future as baby boomers increasingly become eligible for full Social Security retirement benefits. Changes in Opportunities for Work and Compensation Changes in financial incentives also contributed to the growth in the program. In deciding whether to apply, workers compare the value of SSDI benefits (cash payments and health coverage) with their opportunities for work and compensation. When the economy is strong, more individuals who could qualify for SSDI might decide to seek or continue employment. On the other hand, when labor market conditions are adverse, more individuals may find SSDI benefits preferable to the jobs and compensation available to them in the economy. Although the initial determination process screens out most non-meritorious claimants, SSA may grant awards to some claimants on the margin of program entry who could potentially work but choose not to due to economic circumstances. This subsection outlines how changes in the financial incentives to apply for SSDI likely increased the incidence of benefit receipt. High Unemployment During periods of economic weakness, individuals who might otherwise choose to work may be more likely to apply for SSDI benefits as a form of unemployment assistance. There is a positive relationship between the unemployment rate and the SSDI application rate. With the exception of the period between 1980 and 1984, instances of high unemployment are associated with an increase in SSDI applications. As shown in Figure 10 , the recent recession (December 2007 to June 2009) contributed to a conspicuous spike in the number of SSDI applications submitted to SSA; between 2007 and 2010, applications for SSDI increased 32%, from 2.2 million to 2.9 million. The relationship between the unemployment rate and the approval rate is somewhat more ambiguous, inasmuch as the award year may not coincide with the application year due to a prolonged determination and appeals process. Several studies have found an inverse relationship between the approval rate and the unemployment rate. In other words, a claimant's likelihood of receiving an award at the initial determination level decreases as the unemployment rate rises. This is thought to occur because adverse labor market conditions induce more marginally disabled individuals to apply for benefits. Nevertheless, the overall number of SSDI awards issued by SSA appears to increase during economic downturns. One possible reason for this is that some individuals who could qualify for SSDI but choose instead to work when the economy is strong are often less likely to find reemployment opportunities following a job loss when the unemployment rate is high. Between 2007 and 2010, the number of SSDI awards granted by SSA increased 22%, from 819,000 to 1 million. The Value of Cash Benefits Over the past few decades, SSDI appears to have become more attractive to lower-skilled workers because their potential SSDI benefits replace a larger portion of their earnings than before. The share of a worker's pre-disability earnings replaced by cash benefits is known as the replacement rate . Although the replacement rate depends on a worker's past earnings, the Social Security benefit formula also reflects changes in the average earnings of all workers in the national economy, as measured by the Average Wage Index (AWI). Due to the progressive nature of the benefit formula, replacement rates are greater for workers with low lifetime wages than for high-wage workers ( Table 1 ). Some part of the growth in SSDI is driven by rising replacements rates for low-skilled workers, which have made SSDI benefits more desirable than work for an increasing share of workers. The increase in the relative attractiveness of SSDI benefits was likely strongest for low-wage workers, because they experienced slower real earnings growth over the last three decades than medium and high-wage workers. This increase in wage inequality has interacted with the structure of the benefits formula to increase replacement rates for lower-skilled workers. That means that SSDI is more attractive to those workers than it had been in the past. While researchers generally agree that replacement rates "are rising due to the widening distribution of income," there is some disagreement over the extent to which this increase induced low-wage workers to apply for SSDI benefits. The Value of Health Coverage Access to affordable health coverage also affects an individual's decision to apply for SSDI, but the net effect of changes in health policies on SSDI is unclear. As noted earlier, disabled workers and certain dependents are eligible for coverage under Medicare after 24 months of entitlement to cash benefits (29 months after disability onset). Congress extended Medicare to SSDI beneficiaries under the Social Security Amendments of 1972 (P.L.92-603) because the "use of health services by people who are severely disabled is substantially higher than that by the nondisabled ... yet the disabled have limited incomes in comparison to those who are not disabled, and most disabled persons are unable financially to purchase adequate private health insurance protection." Health care is generally more expensive for individuals with disabilities. One study found that health care expenditures per capita were over four times greater for workers with disabilities than those without disabilities. Persons with disabilities have higher health care expenditures because they typically use more health services and have secondary conditions that further impair overall health. These higher costs can make health care coverage prohibitively expensive for some individuals with disabilities. In 2013, 39% of individuals with disabilities had private health insurance coverage, compared with 71% of individuals without disabilities. The lower coverage rate for individuals with disabilities under private health insurance is due, in part, to the availability of government-sponsored health care coverage under Medicare and Medicaid. Some research suggests that the desire to gain access to Medicare induced some individuals with disabilities to apply for SSDI. However, it is difficult to know exactly how many individuals awarded SSDI were motivated to apply in order to gain access to Medicare. One study found that 22% of SSDI beneficiaries ages 18-64 lacked health insurance coverage prior to their entitlement to SSDI. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) is likely to influence SSDI application rates in the future, though the law's net effect on the SSDI prevalence rate is difficult to determine. On the one hand, the ACA may reduce SSDI applications by increasing access to affordable health coverage, making access to Medicare less valuable. On the other hand, the ACA may increase SSDI applications by making it easier for individuals who get health coverage through their work to apply, because they could obtain Medicaid coverage or subsidized coverage in the exchange during the 24-month waiting period for Medicare. Recent research indicates that the health care law's effect on SSDI application rates is likely to vary by locality due to factors such as (1) the availability of Medicaid in a state, (2) local health insurance coverage rates, and (3) the availability and type of state Medicaid buy-in programs. Changes in Federal Policy In addition to demographic and economic changes, various amendments to the Social Security program played a role in increasing the number of people on SSDI. While some of the changes to Social Security were designed to address specific issues with SSDI, modifications to other parts of the program indirectly affected the incentives for individuals to apply for disability benefits. The following subsection examines how changes in the full retirement age for Social Security retired-worker benefits and in the evaluative criteria used to determine disability contributed to the growth in the SSDI rolls. The Social Security Amendments of 1983 The Social Security retirement program faced serious financial challenges in the early 1980s. High inflation and low wage growth starting in the 1970s had eroded the balance of the OASI trust fund, which finances the benefits and administrative costs of the OASI program. In 1982, the Social Security trustees projected that the OASI trust fund would exhaust by the middle of 1983. To improve the financial condition of the OASI trust fund, Congress enacted the comprehensive Social Security Amendments of 1983 ( P.L. 98-21 ). Among the 1983 amendments' many substantial changes was an increase in the FRA from 65 to 67. Between 2002 and 2009, the FRA gradually increased until it reached 66 for workers born between 1943 and 1954. The FRA is scheduled to rise again, reaching 67 for workers born in 1960 and later. Raising the FRA reduced OASI spending but increased DI spending in several ways. First, it increased the number of workers who are eligible for SSDI. From 2003 to 2014, the number of insured workers ages 65-FRA rose from over 200,000 to more than 2.4 million. Because workers aged 65-FRA are more likely to have a qualifying disability, the increase in the number of insured workers led to an increase in the number of workers awarded benefits. In 2013, over 7,400 workers aged 65-FRA were awarded benefits. Second, the increase in the FRA lengthened the duration of benefit receipt for SSDI recipients near retirement age. Disabled workers move from SSDI to OASI when they reach the FRA. As the FRA increased above 65, beneficiaries remained on SSDI longer. In December 2013, over 455,000 disabled workers ages 65-FRA received benefits. Third, the rise in the FRA increased the value of SSDI cash benefits relative to early retirement benefits. Insured workers who choose to retire between the ages of 62 and FRA are subject to a permanent reduction in their monthly cash benefits. Prior to the 1983 amendments, the reduction for claiming retirement benefits at age 62 was 20%; with the increase in the FRA to 66, the reduction at age 62 rose to 25%. That reduction will rise to 30% for workers whose FRA is 67. Because SSDI benefits are approximately the same as full retirement benefits, the increase in the FRA likely impelled some additional workers to apply for SSDI benefits in order to maximize their total cash benefits. Although recent studies suggest that an increase in the value of disability benefits relative to early retirement benefits induces individuals to apply for SSDI benefits, researchers are divided over whether such individuals are actually awarded benefits. The Social Security Disability Benefits Reform Act of 1984 As noted earlier, the Social Security Disability Amendments of 1980 ( P.L. 96-265 ) markedly expanded the use of continuing disability reviews (CDRs) as a means of reducing the growth in program costs. CDRs are periodic medical reevaluations conducted to determine if beneficiaries are still disabled. Between January 1982 and fall 1984, SSA issued benefit termination notices to 490,000 of the 1.2 million SSDI beneficiaries subjected to a CDR. However, the rise in beneficiary terminations due to CDRs sparked a degree of public outcry and had "a very damaging effect on the public perception of SSA's administration of the disability program." News stories at the time often depicted the financial and emotional difficulties faced by recently terminated beneficiaries and their dependents. Ultimately, of the 490,000 beneficiaries who received termination notices, approximately 200,000 had their benefits reinstated on appeal. In response to the contention over the increased use of CDRs, Congress unanimously enacted the Social Security Disability Benefits Reform Act of 1984 (DBRA; P.L. 98-460 ). DBRA changed the statutory standards for evaluating disability in a variety of ways. First, it revised the medical eligibility criteria for CDRs so that SSA could terminate the benefits of a recipient due to medical improvement only if the agency found substantial evidence of medical improvement related to the recipient's ability to work since the most recent favorable determination. Under the 1980 amendments, SSA had treated medical CDRs as a new determination and could revoke benefits even if a beneficiary's health had not changed. Second, it required the Secretary of Health and Human Services to revise the criteria under the "mental disorders" category in the Listing of Impairments . Before the reforms, disability determinations relied primarily on medical factors, which tended to disadvantage claimants with mental impairments from benefit receipt. The revised listings for mental impairments—first published in 1985 —"reduced the weight given to medical factors and put a greater weight on functional capacities, such as the applicant's ability to perform activities of daily living. " Third, it required SSA to consider the combined effect of multiple non-severe impairments on the claimant's ability to engage in SGA. Prior to DBRA, a disability determination could not proceed unless the claimant had one or more independently severe impairments. Lastly, DBRA provided a temporary statutory standard (through the end of 1986) for evaluating pain. Before the reforms, there was no "specific statement in the law" as to how pain should be evaluated. SSA issued new pain regulations in 1991. In enacting DBRA, Congress sought to protect the rights of "those correctly and properly allowed on the rolls" while continuing to remove non-meritorious beneficiaries from the program. To accomplish this, Congress established a national, uniform process for determining disability, which complemented objective medical criteria with more subjective criteria such as pain and functional capacity. Congress, though, explicitly stated that the intent of DBRA was not to change the basic standard of eligibility for SSDI. Nevertheless, a number of researchers argue that despite Congress's intention, the establishment of new evaluative criteria contributed to the growth in the disability rolls by making it easier for claimants with "difficult-to-verify" impairments to qualify for SSDI, such as mental and musculoskeletal disorders. For example, the revision to the "mental disorders" category in the Listing of Impairments , which gave greater weight to functional capacities, may have permitted more claimants with mental impairments to qualify for SSDI. Similarly, the allowance of the combined effect of multiple non-severe impairments and the evaluation of pain may have made it easier for claimants suffering from musculoskeletal disorders (impairments involving bones, muscles, tendons, or ligaments) to enroll in the program. As Figure 11 illustrates, the percentage of awards due to mental and musculoskeletal impairments increased markedly following the passage of DBRA. Between 1985 and 2001, the share of newly awarded beneficiaries with mental impairments increased from 18% to 26% before declining to 17% in 2013. According to one researcher at SSA, the increase in awards resulting from mental disorders in 1986 "is directly attributable to changes in the decision making process due to the 1984 Social Security Disability Benefits Reform Act." From 1986 to 2012, the share of all beneficiaries with mental impairments increased from 24% to 31%. The change in musculoskeletal impairments was even more pronounced. Between 1985 and 1994, awards based on musculoskeletal disorders remained roughly constant, rising from 13% to 13.4%. However, due to a change in the reporting method for awards, the percentage of awardees with musculoskeletal impairments jumped to 22% in 1995, later increasing to 36% in 2013. From 1986 to 2013, the share of all beneficiaries with musculoskeletal impairments grew from 18% to 31%. For an alternative perspective, Figure 12 shows the change in the incidence of various diagnostic groups over time. Although the incidence of other diagnostic groups, such as circulatory-related disabilities, stayed roughly constant over the past 30 years, the growth in musculoskeletal and mental awards was such that the share of awards based on other disabilities declined ( Figure 11 ). In other words, as mental and musculoskeletal awards increased in absolute terms, other impairments remained generally steady. However, because the overall rate of mental and musculoskeletal awards increased, the share of other impairments decreased. The growth in the share of beneficiaries with mental and musculoskeletal impairments may have also increased the disability rolls by increasing the average length of time that beneficiaries stay on SSDI. Mortality rates for beneficiaries with mental or musculoskeletal impairments are lower than average, while their conversion rates are higher than average. As a result, they experience a longer-than-average duration of benefit receipt. Furthermore, because beneficiaries with mental impairments enter the program at younger-than-average ages, their time on SSDI could last decades. Other Potential Factors Changes in the Health of the Working-Age Population It is unclear whether overall changes in population health have affected the size of the SSDI program. Although mortality rates at all ages have fallen markedly over the last half-century, indicating generally improved health, the rise in conditions such as obesity and diabetes—which may increase the risk for certain diseases and other health problems—might have increased the share of the population with severe disabilities. Thus far, researchers have failed to reach a consensus on whether working-age adults are healthier or unhealthier. Some research indicates that reported rates of disability have grown, especially among the younger working-age population. On the other hand, some researchers have found that the likelihood of near-elderly individuals (ages 50-64) to report a work-limiting disability has declined, while the health of younger workers has stayed roughly the same. Part of the problem in determining trends in the prevalence of disability in the working-age population stems from the fact that there is no single, universally accepted definition or measure of disability. Although many of the large surveys used by researchers specifically ask questions pertaining to disability, the wording and complexity of the questions often differs. Because many surveys are self-reporting, the definition of what constitutes a work-limiting disability often rests entirely on the subjectivity of the respondent. As a result, trends in the prevalence of disability vary by survey and by the definition of disability. Given the inconclusive literature, it seems unlikely that changes in the prevalence of disability in the working-age population can adequately explain the growth in the SSDI rolls. Variation in the Disability Determination and Appeals Process Some researchers have suggested that inconsistency in the disability determination and appeals process contributed to the growth in the program, but the evidence on the issue is inconclusive. Depending on the case, variation can both increase and decrease the overall allowance rate. Disability examiners and ALJs with high allowance rates may be offset by examiners and judges with low allowance rates. As earlier noted, DDS examiners use a combination of medical and functional evidence to determine whether an impairment precludes a claimant from engaging in SGA. Although DDS examiners base their initial determinations on uniform guidelines established by the SSA, regional differences in demographic, health, and employment characteristics may produce variation in initial allowance rates among DDS offices. However, one study found an appreciable degree of variation in determination outcomes across examiners within the same DDS office. The study estimated that up to 60% of applicants "could have received a different initial determination from at least one other examiner in the DDS office." Even though the appeals process mitigated some of this variation, the study concluded that up to 23% of claimants could have ultimately received different outcomes had other examiners in the DDS office performed the determination. Some have speculated that the uncertainty of an outcome at the initial determination level due to variation across DDS examiners likely encouraged denied claimants to pursue the appeals process, increasing their likelihood of SSDI receipt. The aforementioned study found that claimants denied by stricter examiners were more likely to appeal their determinations. Although most of the awards granted by SSA are made at the initial determination level, the hearing level has the highest allowance rate of any step in the determination and appeals process. In FY2013, the allowance rate at the hearing level was 48%, compared with 33% at the initial level, 11% at the reconsideration level, 1% at the Appeals Council level, and 2% at the federal court level. The study found that 75% of denied claimants who contested their initial determinations had their denials overturned eventually on appeal. Others contend that variation in the allowance rates at the hearing level of the appeals process contributed to the number of workers on SSDI. A 2013 report by SSA's Office of the Inspector General (OIG) discovered wide variances in the allowance rates among some ALJs within the same hearing office. Additionally, an earlier OIG report found a direct relationship between the number of cases adjudicated by outlier ALJs (i.e., judges at the extreme ends of the distribution scale) and allowance rates. ALJs with the highest allowance rates adjudicated more dispositions relative to the office average, while ALJs with the lowest allowance rates adjudicated fewer dispositions compared with the office average. A 2014 OIG report estimated that judges with 700 or more dispositions and allowance rates of 85% or higher improperly allowed benefits in approximately 24,900 cases over a seven-year period, resulting in "questionable costs" of more than $2 billion. Even in the absence of such variation, those claimants improperly granted awards by outlier examiners and judges might have eventually been found disabled in the future. One study found that over 60% of claimants denied at the hearing level of the appeals process were later awarded benefits within 10 years. One possible explanation is that the health of some initially rejected claimants with marginal disabilities may deteriorate to the point that they meet SSA's definition of disability several years later. Therefore, inconsistency in the disability determination and appeals process may simply accelerate receipt of benefits for some workers. Reform Proposals This section examines options to manage the long-term growth in the SSDI program. These options have been proposed by numerous sources, including researchers, advocacy organizations, federal agencies, and the Social Security Advisory Board (SSAB). For an overview of options to reduce benefit levels or to increase program revenues, see CBO's 2012 report, Policy Options for the Social Security Disability Insurance Program , available at https://www.cbo.gov/publication/43421 . As noted previously, while many of the proposals discussed in this report have the potential to slow or even reverse the prevalence of SSDI receipt and thus generate savings to the program over the longer term, such proposals are unlikely to produce savings in time to forestall the projected exhaustion of the DI trust fund. To avoid a 20% cut in benefits in 2016, lawmakers would likely need to enact some kind of short-term financing, such as a reallocation of the Social Security payroll tax rate or interfund borrowing. Tighten Eligibility Criteria One policy option to reduce the growth in the SSDI rolls is to tighten the program's eligibility requirements. In general, the aim of tightening eligibility criteria is to mitigate the number of marginally disabled individuals on the program while continuing to grant awards to the most severely disabled individuals. Because marginally disabled individuals have some remaining capacity to work, rejecting their applications would generally cause less harm to them than to more severely disabled individuals. That said, there is no guarantee that all marginally disabled individuals can work. Although it is difficult to discern which type of claimants would be affected by more stringent eligibility requirements, a recent study found that marginal program entrants are more likely to be younger, suffer from mental impairments, and have low earnings histories. Henry Aaron, chair of the Social Security Advisory Board, summarized that "the challenge for society is to choose a definition that best balances its willingness to award benefits to some people who do not 'deserve' them and to deny benefits to some who do." Enacting stricter eligibility criteria would also affect other federal spending and tax programs. On the one hand, tightening standards would not only directly reduce spending through a higher rejection rate; it would also likely discourage some individuals from applying for SSDI in the first place. Additionally, stricter standards would likely encourage some prospective applicants to continue to work, which would increase tax receipts. On the other hand, some people who could no longer qualify for SSDI would seek other federal support. For example, individuals with sufficiently low income and assets could potentially qualify for SSI, increasing federal spending. Eliminate Eligibility for SSDI Benefits at Age 62 or Later As noted earlier, workers between the ages of 62 and FRA who apply for early Social Security retirement benefits are subject to a reduction in their monthly benefits. In contrast, workers between the ages of 62 and FRA who apply for SSDI benefits receive about the same benefit that they would have received had they applied for retirement benefits at their FRA. Some Members of Congress have expressed concern that the differential between disability and early retirement may induce workers between the ages of 62 and FRA to apply for SSDI as a means of increasing their total benefits. In 2013, 9% of the nearly 869,000 awards issued by SSA went to individuals between the ages of 62 and FRA. To reduce the growth in the SSDI rolls, policymakers could eliminate eligibility for SSDI benefits starting at age 62. Instead, workers between the ages of 62 and FRA would be eligible only for early retirement benefits. Under current law, the penalty for taking early retirement at age 62 is a 25% to 30% monthly reduction in cash benefits, depending on year of birth. CBO recently estimated that preventing workers from applying for SSDI benefits after their 62 nd birthday or receiving SSDI benefits if they became eligible after that date starting in 2016 would reduce federal outlays by $10.6 billion between 2015 and 2024, or 0.6% of scheduled outlays for SSDI. One reason to eliminate eligibility starting at age 62 is that it could "encourage individuals that seek disability benefits as an early retirement program to remain in the work force." However, opponents point out that this option would adversely affect older workers with little or no capacity to work in the national economy, especially those workers near or below the poverty line. Increase the Recency-of-Work Requirement To become insured under the Social Security program, workers must accrue work credits—known as quarters of coverage —based on their earnings in covered employment. In 2015, workers are credited with one quarter of coverage for each $1,220 in earnings, up to the maximum of four quarters of coverage per year. To qualify for SSDI, workers must have earned a minimum number of quarters of coverage based on their age and generally must have earned at least 20 quarters of coverage during a 40-calendar quarter period ending with the quarter in which their disabilities began. In other words, disability claimants must have worked for five of the past 10 years to be eligible for SSDI. That "recency-of-work" requirement—sometimes known as the 20/40 rule—restricts the program to individuals who have worked of late and for a reasonable length of time in covered employment. CBO recently estimated the impact of increasing the recency-of-work requirement on beneficiary enrollment. According to the agency, requiring non-blind disability claimants to have worked four of the past six years (instead of five of the past 10) starting in 2016 would reduce federal outlays by $32.4 billion between 2015 and 2024, or 1.8% of scheduled outlays for SSDI. The stricter recency-of-work requirement would likely affect individuals with intermittent work histories, specifically workers with prolonged and sustained bouts of absence from covered employment due to unemployment or withdrawal from the labor force. One study found that while working-age men (ages 25-54) report leaving the labor force primarily because of disability, working-age women typically report leaving the labor force to care for someone in their household. Consequently, the more stringent recency-of-work requirement may disproportionately affect women who drop out of the labor force to act as caregivers. Adjust the Age Categories for Vocational Factors Another option is to raise the age categories for "vocational factors." In addition to assessing an applicant's medical condition, DDS examiners take into account the individual's ability to perform any past relevant work or other work that exists in the national economy. Vocational factors such as age, education, and work experience—in combination with the individual's residual functional capacity—help an examiner to determine whether an applicant's impairment precludes him or her from engaging in SGA. Since vocational factors such as education and work experience typically become less stringent with age, SSA is more likely to award benefits to older insured workers. Currently, SSA categorizes older workers across four age ranges: 45-49, 50-54, 55-59, and 60 and older. CBO examined the effects of increasing the 45-49 and 50-54 age ranges by two years to 47-51 and 52-56 and making 57 to FRA the new maximum range, thereby eliminating the 45, 46, and 60 and older categories. According to CBO, if this option had been implemented in 2013, it would have decreased the number of SSDI beneficiaries by 50,000 or 0.5% in 2022, as well as reduced program expenditures by $1.0 billion in that year. SSA explored raising the age categories in the past but ultimately decided against it. In 2005, SSA issued a Notice of Proposed Rulemaking (NPRM) to increase the age categories for older insured workers by two years. However, after collecting feedback from the public, SSA withdrew the NPRM in 2009. Improved Administration of the Program One option is to improve the way in which SSA administers the program so that fewer non-meritorious people receive benefits. Variation in the application of program rules can distort the disability determination and adjudication process, resulting in SSA granting awards to non-meritorious claimants or denying benefits to claimants with little or no capacity to work. Similarly, diminished program integrity—whether through waste, fraud, or abuse—may permit some beneficiaries to remain on SSDI even after their health improves. This subsection outlines reforms to the administration of the program that could conceivably reduce the growth in the SSDI rolls. Permit SSA to Be Represented at the Hearing Level of the Appeals Process In general, a claimant displeased with the decision at the reconsideration level of the appeals process may request a hearing before an ALJ, in writing, within 60 days upon receipt of the previous determination. At the hearing level, a claimants may present additional evidence or arguments to support the case and appoint a representative to act on his or her behalf. Most claimants are represented by attorneys at ALJ hearings. Since SSA is not represented at the hearing, the proceeding is considered inquisitorial or non-adversarial. Under the inquisitorial process, an ALJ investigates the merit of an appeal by informally questioning the claimant and any scheduled witnesses (e.g., medical or vocational experts). Proponents of this process argue that the informal nature of the proceedings and lack of cross-examination by an opposing attorney encourages claimants to share more information with the ALJ. Moreover, supporters note that in Richardson v. Perales , the Supreme Court found that SSA hearings should be "understandable to the layman claimant, should not necessarily be stiff and comfortable only for the trained attorney, and should be liberal and not strict in tone and operation. This is the obvious intent of Congress so long as the procedures are fundamentally fair." Opponents contend that inquisitorial process makes it harder for ALJs to make informed decisions on a consistent basis, because they must remain impartial while simultaneously representing the interests of both claimants and SSA. According to the Association of Administrative Law Judges (AALJ), having to wear all three "hats" during a hearing sometimes places an ALJ in an untenable situation, in which the judge must represent clients whose interests are at odds with one another. The difficulty of maintaining impartiality while simultaneously representing the interests of both parties may cause an ALJ to overlook a key piece of evidence or argument, thereby affecting the outcome of the decision. To improve the accuracy of ALJs' decisions, the AALJ, the SSAB, and some Members of Congress have advocated switching from an inquisitorial to an adversarial process in which claimants and SSA are each afforded representation. The AALJ and SSAB argue that the vigorous cross-examination of claimants by SSA representatives would provide ALJs with additional information, resulting in better decisions. According to SSAB, under the inquisitorial process, some ALJs may be reluctant to question claimants aggressively for fear of appearing to be biased. SSAB contends that switching to an adversarial process would allow ALJs to investigate the history and extent of claimants' medical impairments more thoroughly, resulting in better-reasoned decisions and greater judicial consistency. Another potential advantage of the adversarial process is that government representation may reduce the number of cases that an ALJ would need to hear, which could further improve the quality of their decisions. In 2013, SSA Deputy Commissioner Glenn Sklar testified that the agency expects ALJs to issue 500-700 decisions annually. Some researchers speculate that the pressure to adjudicate a high number of disability claims quickly has led to poorer ALJ decisions and consequently a higher allowance rate. According to a 2013 Senate report, this pressure stems from a 2007 plan by SSA to reduce its backlog of disability hearings. One reason why the pressure to hear a large volume of cases may have increased the overall allowance rate is that issuing an award is generally not appealed by a claimant and is therefore subject to less scrutiny than a denial would be. A 2014 story on SSA's disability backlog in the Washington Post noted that "judges complain that saying 'yes' is a lot easier—and faster—than saying 'no.' A negative decision often requires a lengthier write-up, which goes through all the different ailments that might have rendered this person disabled. That means 10 pages of text to prepare for a future appeal. A 'yes' decision is rarely appealed. So, they say, it takes less writing." The AALJ contends that switching to an adversarial process would allow government attorneys to settle cases with a high probability of reversal before the hearing level, giving ALJs more time to adjudicate complicated cases or ones with a lower likelihood of being reversed. By allowing government representatives to decide which cases to defend, the adversarial process could reduce the pressure for ALJs to decide a high number of claims, which, in turn, could improve the quality of their decisions. At a hearing in November 2013, SSA refuted the characterization that it is sacrificing quality by granting claims "too readily" and insisted that it is "making quicker, higher quality disability decisions." The agency also noted that between FY2007 and FY2013, the share of ALJs with allowance rates of 85% or greater fell from 20% to 3%. Difficulties with Switching to an Adversarial Process Successfully implementing an adversarial process at the hearing level poses several challenges for SSA. First, it would require additional expenditures to hire attorneys and appropriate staff. Disability hearings are already quite costly for SSA. In FY2011, the unit cost of adjudicating a disability hearing was about $2,750, compared with about $1,060 to process an initial disability claim. Those extra costs would offset any savings from reduced benefit outlays. Second, a federal judge issued an injunction against SSA's previous adversarial pilot program in 1986, so an adversarial process might require new legislative authority. In 1982, SSA initiated the Social Security Administration Representation Project (SSARP) in five hearing offices across the country to test "whether the participation of SSA representatives in disability cases at the administrative hearing level can contribute toward improving the quality and timeliness of hearing dispositions." Under the SSARP, government representatives reviewed hearing requests, initiated case development, and represented the agency whenever a claimant had an appointed representative at a hearing. The SSARP sparked concern among some Members of Congress and the public over the "fairness of SSA's disability adjudication process." One month into the pilot program, seven disability claimants challenged the SSARP in the Western District of Virginia seeking injunctive and declaratory relief. In Salling v. Bowen , a district judge issued an injunction against the SSARP, finding that its procedures did not meet the standard for due process and were not "fundamentally fair." The judge also held that the pilot program violated the Social Security Act and intruded on the independence of ALJs. Although SSA appealed the court's decision, the agency ultimately discontinued the SSARP and revoked its regulations in 1987. According to the General Accounting Office (GAO; now the Government Accountability Office), the preliminary results of the pilot were never verified and a final report was never issued. Third, the effects of switching to an adversarial process are difficult to predict. To determine the effectiveness of government representation, SSA would need to know: whether representation can improve the quality of ALJ decisions, and if so, whether higher-quality decisions reduce the overall allowance rate, and if so, whether the adversarial process can be done in a cost-effective manner. Update SSA's Listing of Impairments During the disability determination process, DDS examiners and medical and psychological consultants typically use medical evidence collected from the claimant's treating sources to determine the severity of the claimant's impairment. To assess whether the impairment precludes the claimant from working, state disability examiners evaluate it against SSA's Listing of Impairments (hereinafter "listings"). The listings describe medical impairments that are considered severe enough to prevent an individual from performing any gainful activity for each of the 14 major adult body systems. Most of the impairments described in the listings are permanent or expected to result in death. All other listings must show that the impairment has lasted or is expected to last for at least one year. If the claimant's impairment meets (or is of equal severity to) the criteria in the listings, SSA considers the claimant disabled and therefore eligible for benefits. Claimants who do not meet the medical criteria in the listings proceed to a more individualized assessment that examines their remaining ability to work, taking into account certain vocational factors. Although the listings serve as a useful guide for DDS examiners, the percentage of awards determined at the listings stage has decreased substantially over the years. Between FY1980 and FY2010, the share of initial allowances based on claimants meeting the medical listings declined from 58% to 38%, while the portion based on claimants having an impairment equal in severity fell from 16% to 8% over the same period ( Figure 13 ). SSAB, GAO, and SSA's OIG all attribute this decline to the increasingly outdated nature of the listings. In 2000, the OIG found that SSA had not updated certain listings in over 10 years; moreover, SSA had not updated the listings for mental disorders in 15 years. In 2003, GAO identified SSDI as a high-risk program because it relied on listings that did not reflect the impact of medical and technological advances on work-limiting impairments. To improve the quality and accuracy of disability determinations, SSA initiated a two-tiered process for updating its medical listings beginning in 2003. Under the new process, the agency is to first complete a comprehensive revision of each listing category, taking into account any medical disorder or disease that may inhibit an individual's ability to work. Once the comprehensive update is complete, SSA is to conduct periodic reviews of each listing category to ensure that the listings are current. SSA has completed comprehensive revisions to nine of the 14 major adult body systems. SSA has experienced delays in completing comprehensive updates to the remaining five major adult body systems. For example, SSA has still not completed a final revision of the listing for mental disorders—SSDI's second most diagnosed impairment—which last received a comprehensive update in 1985. SSA officials attribute the delay to a shortage of qualified staff and to the enormous complexity of implementing and revising new medical listings. Updating the listings to take into account medical and technological advances, as well as changes in the labor market, could allow DDS examiners to better identify individuals with severe work-limiting disabilities, while screening out non-meritorious claimants who could potentially engage in SGA. The impact of updated medical listings on the prevalence of benefit receipt remains unclear, because claimants denied at the medical listings stage of the determination process may still be awarded benefits based on vocational factors. Update SSA's Occupational Information System If a claimant fails to meet the eligibility criteria described in the medical listings, SSA is to proceed with a more individualized assessment that examines the claimant's ability to engage in SGA. To "minimize subjectivity and promote national consistency," SSA employs a system of medical and vocational rules designed to assist examiners in discerning whether a claimant can perform any past relevant work or other work that exists in the national economy. SSA considers claimants who cannot perform such work to be disabled and therefore eligible for SSDI. Currently, SSA uses the Department of Labor's (DOL) Dictionary of Occupational Titles (DOT) to determine the physical and mental demands of available work in the national economy. Because DOT last received a major update in 1977, its occupational information is considered largely outdated. Although DOL replaced DOT with the Occupational Information Network (O*NET) in 1998, SSA concluded that O*NET's occupational information was insufficient to meet its requirements. A 2012 Senate report expressed concern that DOT's increasingly outdated information may result in awards to claimants who could work in unlisted occupations. To improve program integrity, SSA in December 2008 established the Occupational Information Development Advisory Panel to develop a new occupational information system (OIS) for use in the vocational stages of the disability determination process. In July 2012, SSA signed an interagency agreement with the Bureau of Labor Statistics (BLS) to test the viability of using BLS's National Compensation Survey (NCS) to collect occupational data for the new OIS. In FY2013, SSA and BLS conducted a three-phase test to assess the NCS's accuracy and reliability in capturing occupational data that are relevant for disability determinations. SSA expects to start developing the new OIS in FY2015 and implement it by FY2016. In the future, SSA's updated OIS may help to mitigate the growth in the SSDI rolls. According to SSA, the occupational information in DOT reflects an industrial economy, whereas today's economy has become more service oriented. Therefore, modern occupations that require less physical exertion may allow individuals with certain disabilities to remain in the labor force. On the other hand, some individuals may be more likely to qualify for SSDI when evaluated using the updated OIS. For example, older individuals with disabilities may have difficulty adjusting to the intensity and pressure of many of today's employment opportunities, while individuals with less extensive education may be less suited to "cognitively demanding" work. Another complicating issue is that individuals with disabilities still tend to work in occupations that require physical labor. For instance, one study found that individuals with cognitive or multiple disabilities are more likely to work in physically demanding, low-skilled jobs. Consequently, an updated OIS may not reduce the number of individuals with certain chronic conditions from applying for benefits. Increase the Number of Full Medical CDRs Conducted by SSA As noted earlier, medical CDRs are periodic reevaluations conducted to determine if beneficiaries are still disabled. If SSA finds substantial evidence of medical improvement related to a beneficiary's ability to work, the agency typically considers the beneficiary no longer disabled. By increasing the number of full medical CDRs conducted each year, SSA could increase the recovery rate of beneficiaries with work-related medical improvements, which would help to reduce the disability rolls. According to SSA, periodic medical evaluations are one of the most cost-effective tools for improving program integrity. Of the more than 443,000 full medical CDRs conducted in FY2012, SSA estimates that it will cease paying benefits to over 76,000 individuals and their eligible dependents after all appeals (a cessation rate of 17%). For every dollar spent on CDRs in FY2012, the agency estimates approximately $14.60 in future savings to the federal government. Prior to that, the CDR process yielded an estimated savings-to-cost ratio of $10 to $1. (Note that benefit savings from CDRs are not counted for congressional scorekeeping purposes. ) However, a loss of dedicated funding for program integrity activities between FY2003 and FY2008 left SSA with fewer resources with which to conduct disability reviews, resulting in a CDR backlog ( Figure 14 ). In 2010, the OIG estimated that if SSA had conducted all full medical CDRs when they were originally scheduled between 2005 and 2010, the agency would have removed an additional 90,000 to 180,000 SSDI and SSI beneficiaries from the rolls, thereby avoiding between $1.3 billion and $2.6 billion in benefit payments from 2005 to 2010. Despite recent efforts to reduce the backlog, SSA estimated that there were 1.3 million pending medical CDRs at the end of FY2013. Reducing the CDR backlog has posed a challenge for SSA, in part because of a reduction in DDS staffing levels over the years. In response to budget deficits following the last recession, some states instituted furloughs or hiring freezes of state employees, including DDS examiners. The reduced staffing at DDSs limited SSA's ability to conduct periodic medical reviews and contributed to the backlog of CDRs. To address the lower staffing levels, SSA transferred a portion of disability cases from furloughed DDS offices in some states to non-furloughed DDS offices in other states. Additionally, the agency received funding in FY2009 and FY2010 to increase the number of DDS staff by more than 2,900 employees. However, due to an agency-wide hiring freeze that began in FY2011, SSA did only limited critical hiring between FY2011 and FY2013. The combination of attrition and hiring freezes during this period resulted in a net decline in DDS staffing levels ( Table 2 ). To address the mounting backlog of CDRs and enhance program integrity, advocacy organizations, researchers, and the Obama Administration have all expressed their support for increasing CDR funding. The Budget Control Act of 2011 (BCA; P.L. 112-25 ), which places caps on discretionary spending, includes a provision to adjust the caps to permit additional appropriations to SSA for program integrity activities such as CDRs and SSI redeterminations. SSI redeterminations are periodic reviews to ensure that beneficiaries meet SSI's financial eligibility requirements. The Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) appropriated a total of $1.197 billion for CDRs and SSI redeterminations, which was the maximum amount allowed under the BCA for FY2014. With this level of funding, SSA completed nearly 526,000 full medical CDRs and 2.6 million SSI redeterminations (see Figure 3 ). The FY2014 appropriation also allowed the agency to hire about 2,600 DDS employees, including both replacement staff and additional hires. For FY2015, the Administration requested the full amount authorized for program integrity activities under the BCA: $273 million in base funding and $1.123 billion in cap adjustment funding. The Administration estimates that the $1.396 billion in total program integrity funding would allow SSA to perform at least 888,000 full medical CDRs and 2.6 million SSI redeterminations in FY2015. Congress appropriated the maximum amount for FY2015 in the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ). According to SSA, the agency would need $11.8 billion in program integrity funding during FY2014-2023 to eliminate the CDR backlog by FY2018 and prevent it from growing back again through FY2023. This level of funding would allow SSA to conduct an estimated 8.8 million full medical CDRs. However, at the funding levels prescribed in the BCA, SSA projects that it would be able to conduct only 7.8 million full medical CDRs at a cost of $10.3 billion. For FY2016, the Administration proposes replacing the discretionary spending caps established under the BCA with a dedicated source of mandatory funding to enable SSA to conduct more CDRs and SSI redeterminations on a consistent basis. Under this option, SSA estimates that it would conduct more than 8 million full medical CDRs at a cost of $10.7 billion during FY2014-FY2023. Limitations of Full Medical CDRs While additional funding and new hires would allow the agency to perform more full medical CDRs, the shortage of veteran examiners complicates the issue. Part of the problem stems from the fact that DDS examiners experience high rates of turnover. According to GAO, over 20% of DDS examiners hired between September 1998 and January 2006 left or were terminated within their first year. Of the examiners who remain, it takes about two years of experience before SSA considers them to be fully trained. Thus, even with additional hiring, it may take the agency years to reestablish a robust pool of highly experienced disability examiners. Additionally, because of diminishing returns, future marginal savings from additional CDRs would be less than the past average. When SSA performs CDRs, it prioritizes the beneficiaries who are most likely to have substantial medical improvement related to their ability to work. However, as the number of completed CDRs increases, the chance of benefit cessation declines for subsequent reviews. The savings-to-cost ratio would also decrease if former SSDI beneficiaries who were terminated due to medical improvement reapply and return to the program. According to one study, of those whose eligibility ceased after CDRs from 2003 to 2008, an estimated 20% of former SSDI-only beneficiaries will come back onto the rolls within eight years. It is important to note that program integrity activities alone would be unable to substantially improve the financial outlook of the SSDI program, because potential savings from CDRs take time to accumulate and apply to multiple programs. For example, SSA projects that the full medical CDRs conducted in FY2012 will result in a present value of nearly $7 billion in lifetime savings to the federal government; however, these savings are spread out over decades and are attributable not only to SSDI but also to OASI, SSI, Medicare, and Medicaid. Return-to-Work Incentives249 Another policy option to combat the growth in the SSDI rolls is to provide stronger incentives for beneficiaries to return to work. Currently, SSA allows beneficiaries to test their ability to work by participating in a trial work period (TWP), during which participants may earn any amount for nine months within a rolling 60-month period without having their benefits reduced or their entitlement to SSDI terminated. In addition, SSA provides employment and support services. Still, few beneficiaries leave the program. In 2013, SSA terminated the benefits of 0.4% of all disabled-worker recipients due to earnings above SGA. Increase Awareness of Return-to-Work Services To address some of the barriers to employment faced by disabled workers, Congress enacted the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ), which established the Ticket to Work and Self-Sufficiency program (hereinafter "Ticket to Work"). Ticket to Work assists beneficiaries between the ages of 18 and 64 in returning to the labor force by providing a voucher or ticket for employment, vocational rehabilitation (VR), or other support services through public or private contractors known as Employment Networks (EN), as well as through traditional state VR agencies. Participation in the Ticket to Work program is voluntary, and ticket holders (beneficiaries) decide when and whether to assign a ticket to a particular state VR agency or EN. Under the program, state VR agencies and ENs receive payments from SSA for services provided to ticket holders based on specific work-related performances measures. Thus far, the Ticket to Work program has met with little success. Although program participants are more likely to be employed than other beneficiaries, only about 2.3% of all active tickets issued by SSA are in use (i.e., assigned to an EN or state VR agency). According to GAO, EN representatives partially attribute Ticket to Work's low beneficiary participation rate to "a lack of understanding and awareness of the program." Meanwhile, some disability-advocacy organizations contend that the fear of losing benefits may deter beneficiaries from participating. To improve the return-to-work rate of SSDI recipients, researchers Bonnie O'Day and David Stapleton have proposed testing early intervention policies that provide beneficiaries with employment and other support services shortly after receipt of benefits. The researchers argue that current programs have failed to increase the return-to-work rate, because many beneficiaries "have been separated from the labor force, often for years, before they are offered assistance." The researchers posit that beneficiaries may have a greater chance of returning to work if they receive services earlier during their stay on SSDI. One early intervention option is to require all future beneficiaries to participate in work preparation counseling to educate them about available services. Beneficiaries may be more likely to participate in programs they understand. Although mandatory work preparation counseling would require new funding, the counseling might be cost-effective if it improves the return-to-work rate of SSDI recipients, especially if it targeted those with the best chance of success. SSA oversees two voluntary grant programs aimed at increasing beneficiary awareness of return-to-work services. In addition to the Ticket to Work program, P.L. 106-170 also established the Work Incentives Planning and Assistance (WIPA) program and the Protection and Advocacy for Beneficiaries of Social Security (PABSS). WIPA awards grants to community organizations that provide education and assistance for beneficiaries interested in returning to work, and PABSS provides grants for legal assistance and advice on how to obtain VR, employment, or other services. Estimating the overall impact of mandatory counseling on the SSDI beneficiary return-to-work rate is difficult because the results of SSA's current employment-counseling initiatives are inconclusive. According to one study, the use of WIPA services possibly has a positive effect on the employment outcomes of SSDI and SSI beneficiaries. However, it is difficult to discern whether beneficiaries who received WIPA services would have enjoyed the same employment outcome in the absence of such services. Benefit Offset One reason why few workers leave the rolls due to substantial earnings is that some beneficiaries deliberately "park" their earnings from work below the SGA threshold. After completing the TWP and a 36-month extended period of eligibility (EPE), beneficiaries who earn more than the SGA limit have their benefits terminated. One study found that between 0.2% and 0.4% of all SSDI beneficiaries parked their earnings below SGA in a typical month from 2002 to 2006 in order to retain their benefits. Beneficiaries may park their earnings below SGA (sometimes called the "cash cliff") in part because their impairment prevents them from working consistently. Another study found that 59% of Ticket to Work participants reported working at a job for at least one month during 2003-2005; however, of those participants who later left work, the most cited reason was due to poor health. Parking one's earnings below SGA may weaken a work-oriented beneficiary's attachment to the labor force, possibly resulting in an erosion of skills and thus a reduced likelihood of returning to work following a health-related withdrawal from the labor force. To remedy the phenomenon of parked earnings, several disability-rights organizations have advocated eliminating the fixed cash cliff (SGA threshold) and replacing it with a gradual benefit-offset model that allows beneficiaries to increase their earnings while remaining on SSDI. The SSI program operates under a benefit-offset system, deducting $1 in benefits for every $2 in earnings over $65. Advocates argue that a benefit-offset model would make SSDI beneficiaries "financially better off" by allowing them to maximize their total income and work potential. A benefit-offset model could also improve the finances of the SSDI program by reducing the amount of cash benefits paid out to recipients. Additionally, adopting a benefit-offset model could increase beneficiaries' attachment to the labor force by making work more attractive. On the other hand, benefit offset may induce only a small number of beneficiaries to increase their earnings (i.e., those beneficiaries who park their earnings). Although benefit outlays from the DI trust fund would decrease under this scenario, such savings would have little impact on the solvency of the DI trust fund. Additionally, by making it easier for recipients to maintain their eligibility for benefits, benefit offset could decrease the SSDI termination rate further, which, in turn, could increase the total number of beneficiaries on the rolls. Furthermore, benefit offset may increase the attractiveness of SSDI benefits, impelling more workers to apply to the program. SSA is currently in the process of conducting a Benefit Offset National Demonstration (BOND) project, in which treatment participants lose $1 in benefits for every $2 in earnings exceeding a BOND Yearly Amount (BYA) equal to 12 times the monthly SGA limit. Some BOND participants are also eligible for Enhanced Work Incentives Counseling (EWIC), which is designed to address a range of issues related to returning to work, including access to medical treatment, employment services, and job training. In implementing BOND, SSA seeks to test whether benefit offset can increase earnings and reduce dependence on SSDI for work-oriented beneficiaries. In preparation for BOND, SSA implemented a four-state pilot program known as the Benefit Offset Pilot Demonstration (BOPD) from 2005 to 2008. According to SSA, participation in the BOPD had a positive effect on the earnings of individuals in the treatment group; however, the pilot also increased average benefit payments because of partial payments made to beneficiaries whose benefits would have been suspended under normal program rules for earning above SGA. In August 2013, SSAB called for the early termination of BOND. The board cited the implementation problems associated with the pilot program and BOND's low participation rate as evidence that BOND would likely fail to increase beneficiary return-to-work rates in a cost effective manner. SSAB estimated that terminating BOND would save approximately $17 million in FY2015. Promote Supported-Work Policies Some researchers have suggested shifting the focus of SSDI reform away from terminating beneficiaries already on the rolls toward attenuating the inflow of new beneficiaries into the program. Advocates of this approach—sometimes referred to as supported work —argue that offering employment supports shortly after the onset of disability would allow more workers who experience disability to keep working. Most supported-work policies use financial incentives to encourage employers to provide preventive, accommodative, rehabilitative, and other return-to-work services. Although Title I of the Americans with Disabilities Act (ADA; P.L. 101-336 , as amended) requires employers to provide some level of reasonable accommodation for employees with disabilities in the workplace, some employers fail to comply with the provisions of the ADA. Faced with few employment opportunities, individuals with disabilities who could conceivably work given appropriate accommodation may turn to SSDI as a last resort. This subsection provides an overview of two supported-work policies that have the potential to reduce the incidence of benefit receipt. Experience Rate the Employer's Portion of the Payroll Tax Rate Experience rating is a process for determining insurance premiums based on the cost of an insurance pool's past claims. In essence, an insurer calculates a firm's insurance premium based on the likelihood, or risk, of the firm submitting a future claim given its previous behavior. Many types of employer-sponsored insurance use experience rating to determine premiums, including state workers' compensation (WC), unemployment insurance (UI), and private disability insurance (PDI). Because premiums are a function of past claims, firms' costs reflect their use of the insurance program, creating incentives for them to reduce the number of claims. To reduce the incidence of SSDI receipt, several researchers have suggested that the federal government should experience rate the employer's portion of the payroll tax used to fund SSDI. Currently, employers pay the same payroll tax rate, regardless of the rate at which their employees enroll in the program. However, an experience rated system would link payroll tax rates to the claim rate, which would give employers an additional incentive to support disabled workers. Proponents of experience rating often point to its use in the Netherlands' disability insurance (DI) system as evidence of its potential impact in the United States. Between 1998 and 2003, the Netherlands gradually incorporated experience rating into its DI system. According to one study, instituting experience-rated DI premiums resulted in a 15% reduction in the Dutch DI incidence rate. Since the early 2000s, the Netherlands has witnessed a marked decline in its DI prevalence rate. Experience rating could be implemented relatively simply. Employers already report payroll tax data to the Internal Revenue Service (IRS), which the agency shares with SSA. Moreover, most employers are accustomed to the concept of experience rating because of their experience paying state WC and UI premiums. By compiling both payroll tax and beneficiary award data, SSA could experience rate the SSDI payroll tax "without imposing substantial new reporting requirements or administrative burdens on employers." Opponents of experience rating argue that the policy would adversely affect some workers. For example, experience rating could make employers hesitant to hire or retain workers "perceived to be a high risk for disability." Employers may discriminate against older workers, people with chronic conditions such as diabetes, or individuals prone to risky behaviors. To address this possibility, supporters of experience rating suggest implementing risk adjustments specific to factors such as age, occupation, and health status, as well as enforcing existing anti-discrimination laws. Critics also point out that experience rating could reduce the compensation of low-wage workers. For instance, some employers subject to higher payroll tax rates could shift the additional cost onto workers in the form of reduced take-home pay or benefits. Employers unable to shift additional labor costs onto their employees may instead offset the higher payroll tax rate by hiring fewer workers in the future. Since low-wage individuals tend to work in professions with high rates of disability, they may be disproportionately affected by employer cost avoidance and therefore more likely to suffer financially. Opponents argue that workers harmed by employer cost avoidance could end up on SSDI, increasing the size of the program. Furthermore, some critics say that while the system changes employers' incentives, it fails to address the incentives for workers to apply for SSDI. For example, some workers may apply in response to factors beyond the employers' control, such as low market wages. Employer-Sponsored Private Disability Insurance Another option to reduce the number of SSDI beneficiaries is for the federal government to promote employer-sponsored private disability insurance (PDI). PDI provides beneficiaries with a partial wage replacement and return-to-work services. As of March 2014, 40% of all workers in private industry had access to short-term disability (STD) insurance, and 34% had access to long-term disability (LTD) insurance. STD insurance typically lasts a fixed number of weeks or months, while LTD insurance can last anywhere from a year to several decades. PDI is less expensive than other forms of employer-sponsored insurance, such as health care. In addition, employers can partially offset the cost of PDI by requiring employees to contribute to the insurance plans. Some researchers have advocated that the federal government should promote employer-sponsored PDI to reduce the growth in the SSDI rolls. Employer-sponsored PDI plans could reduce the incidence of SSDI benefit receipt, because they provide employment-support services soon after the onset of disability when the likelihood of recovery is highest. By intervening with robust supported-work services early in the disability process, PDI may keep workers with disabilities attached to the labor force and therefore reduce the number who apply for SSDI. Offering employers financial incentives is one way to promote employer-sponsored PDI. For example, SSA could lower the tax rate of employers who purchase PDI and whose insurance agents coordinate with SSA to manage disability cases in a cost-effective manner. Alternatively, the federal government could award subsidies or tax credits to firms that provide PDI. A second way to promote PDI would be to require all employers to provide it. Companies that refuse to provide PDI would be subject to possible legal action, financial penalties, or both. Currently, New Jersey, New York, Hawaii, and Puerto Rico require employers to contribute toward some form of STD insurance, generally known as temporary disability insurance (TDI). Employer-mandated PDI has become increasingly popular in many European countries. The Netherlands, for example, requires employers to cover the cost of sick pay for two years following the onset of a disabling condition, while the U.K. requires employers to pay up to six months of statutory sick pay. Researchers David Autor and Mark Duggan have proposed requiring all employers to provide short-term PDI, which would provide workers with rehabilitation services, workplace accommodation, and a partial wage replacement for two years. Under this proposal, plans would be purchased on the existing PDI market, and employers would be permitted to require employees to contribute up to 40% of the cost of their coverage. Following the exhaustion of employer-sponsored PDI, beneficiaries who are found to be disabled would qualify for SSDI. Workers with extremely severe or terminal disabilities would be exempt from the two-year PDI requirement and would qualify for SSDI immediately. Using the financial incentives approach would be relatively simple, because the federal government already encourages employers to hire workers with disabilities by offering tax credits to offset the cost of providing workplace accommodation. Having SSA work with employers and insurers under an experience-rating system would likely require significantly more resources than the tax credit proposal, but the system could be structured to limit federal costs. In spite of these advantages, financial incentives might be ineffective. As noted above, the federal government currently offers employers tax incentives to hire workers with disabilities; however, the evidence that such incentives actually drive employers to hire such workers has been "limited and inconclusive." Similarly, the lure of a lower payroll tax rate under an experience-rating model may not cause employers to purchase PDI, especially if the cost of providing PDI outweighs any savings from the reduced payroll tax rate. A mandate, on the other hand, would likely have a larger effect. The prospect of having to pay financial penalties due to noncompliance is typically a more powerful incentive for employers than tax credits. Although a government mandate does not guarantee universal compliance because some employers could simply pay the appropriate penalty, requiring employers to provide PDI might still have a marked effect on the inflow of beneficiaries into the SSDI program. One of the biggest unknown factors of the mandate approach outlined by Autor and Duggan is whether the private insurance market can offer an economically feasible two-year PDI plan. Most insurers sell PDI plans as either short-term (around 26 weeks) or long-term (anywhere from a year to several decades). Although both types of PDI cost employers about the same amount per hour worked, LTD insurance plans typically have stricter eligibility standards. For instance, LTD plans may have more stringent definitions of disability or have a larger list of pre-existing medical conditions that make employees ineligible. LTD plans are generally stricter because beneficiaries could receive benefits for years or even decades. To offset some of the risk associated with LTD plans, insurers often require beneficiaries to apply for SSDI after the onset of disability and deduct any SSDI income from a beneficiary's LTD benefit. However, because the Autor and Duggan proposal does not permit insurers to offset part of their costs by requiring beneficiaries to apply for SSDI, such two-year PDI plans may not be financially viable in the current insurance market. Autor and Duggan contend that their proposal would be economically feasible for insurers because their PDI plan would be less generous that current LTD policies. Based on their conversations with private insurers, they believe that two-year policies would not substantially increase the costs associated with PDI. Additionally, private insurers could simply raise premiums to a level sufficient to make two-year PDI policies profitable. The extent to which insurers could raise rates would depend on the structure of the federal mandate as well as on state insurance laws. However, if insurers raised premiums too high and compliance penalties for employers were too low or not adequately enforced, then employers could choose not to provide PDI. Acronyms

Social Security Disability Insurance (SSDI) provides benefits to nonelderly workers with certain disabilities and their eligible dependents. As in Old-Age and Survivors Insurance (OASI)—Social Security's retirement program—SSDI benefits are based on a worker's past earnings. To qualify, individuals must have worked and paid Social Security taxes for a certain number of years and be unable to engage in substantial gainful activity (SGA) due to a severe mental or physical impairment that is expected to last for at least one year or result in death. In 2015, the monthly SGA earnings limit for most individuals is $1,090. In general, disabled workers must be unable to do any kind of substantial work that exists in the national economy, taking into account age, education, and work experience. Recently, some Members of Congress and the public have expressed concern over the growth in the SSDI program. Between 1980 and 2013, the number of disabled workers and their dependents more than doubled, rising from 4.7 million to 11.0 million. This increase has placed pressure on the Disability Insurance (DI) trust fund, from which SSDI benefits are paid. Over the same period, spending on benefits increased by more than 50%, from 0.54% of gross domestic product (GDP) in 1980 to 0.84% of GDP in 2013. Without legislative action, the DI trust fund is projected to be depleted by the end of 2016. After that, ongoing tax revenues would be sufficient to pay about 80% of scheduled benefits. Most researchers agree that changes in the demographic characteristics of the working-age population account for a large share of the growth in the number of individuals on SSDI. Demographic changes consist of (1) the aging of the baby boomers, (2) the influx of women into the labor force, and (3) the overall growth in the working-age population. However, there is considerable disagreement among researchers over how much non-demographic factors contributed to the growth. Non-demographic factors include (1) changes in opportunities for work and compensation (e.g., slow wage growth for low-skilled workers and high unemployment), (2) changes in federal policy that made it easier for some people to qualify as disabled, and (3) the rise in the full retirement age for unreduced Social Security retirement benefits. In general, people who support higher spending on SSDI focus on changes in the demographic characteristics of workers. In contrast, individuals who want to limit program spending typically focus on the effect of changes in the economic incentives to apply for SSDI and legislative changes to the program's eligibility criteria. To assist lawmakers in addressing the sustainability of the program, this report provides an overview of proposals to manage the long-term growth in the SSDI rolls. Most of the proposals focus on reducing the inflow (enrollment) of new beneficiaries into the program. These proposals involve (1) tightening eligibility criteria, (2) improving the administration of the program, and (3) providing incentives for employers to help keep employees working when they become disabled. On the other hand, some of the proposals seek to increase the outflow (termination) of beneficiaries from the program. These proposals entail (1) providing stronger incentives for beneficiaries who can work to return to the labor force, and (2) increasing the number of periodic continuing disability reviews, which stop benefits for people found to be no longer disabled. This report does not examine options to reduce benefit levels or increase program revenues. Although many of the options discussed in this report have the potential to slow or even reverse the growth of SSDI receipt and thus generate savings to the program over the longer term, such proposals are highly unlikely to significantly forestall the projected exhaustion of the DI trust fund. To avoid a 20% cut in benefits in late 2016, lawmakers would almost certainly have to use cash infusions to bolster the assets of the DI trust fund. For example, Congress could reallocate the Social Security payroll tax rate to give the DI trust fund a larger share (as was done in 1994), or it could authorize interfund borrowing from the OASI trust fund or Medicare's Hospital Insurance (HI) trust fund. These short-term financing options would give lawmakers more time to develop and implement some of the longer-term proposals mentioned in the report if they wished to slow the growth in the disability rolls.

Funding for Homeland Security R&D Federal agency funding for homeland security R&D was requested at about $5.1 billion for FY2007, about the same amount as in FY2005 and FY2006. The American Association for the Advancement of Science (AAAS) reports that the top three agency supporters are the Department of Health and Human Services (DHHS), specifically the National Institutes of Health (NIH) at 40% of the total, DHS with about 23%, and the Department of Defense (DOD), with 21%. See Table 1 . Other funding agencies in descending order are the National Science Foundation (NSF), the Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the National Aeronautics, and Space Administration (NASA), the Department of Energy (DOE), and the Department of Commerce (DOC). DHHS (NIH) manages most of the federal civilian effort against bioterrorism. DHS R&D focuses largely on technology-oriented projects, which for FY2007, emphasize countermeasures against weapons of mass destruction (WMD). DOD's homeland security R&D portfolio includes work on countering chemical and biological threats, emergency preparedness, and R&D supported by the Technical Support Working Group (TSWG), a State Department/DOD group that coordinates interagency R&D on new technologies to combat terrorism. USDA's work includes physical protection for agricultural resources and maintaining security of the food supply. NSF's homeland security R&D focuses on protection of critical infrastructures and key assets and includes cybersecurity R&D. EPA has focused on toxic materials research. In the DOC, R&D at the National Institute of Standards and Technology (NIST) deals with protecting information systems. In the past, DOE's counterterrorism R&D included work on materials, detection of toxic agents, genomic sequencing, DNA-based diagnostics, and microfabrication technologies. NASA's homeland security R&D deals with aviation safety and remote sensing. Creation of a Department of Homeland Security and Other Laws The Homeland Security Act of 2002, P.L. 107-296 , created DHS and, as one of its four directorates, a Directorate of Science and Technology (S&T). The Under Secretary for S&T, created by Title III, has responsibility for most of DHS's research, development, test, and evaluation (RDT&E). The Under Secretary's responsibilities are to: coordinate DHS's S&T missions; in consultation with other agencies, develop a strategic plan for federal civilian countermeasures to threats, including research; except for human health-related R&D, conduct and/or coordinate DHS's intramural and extramural R&D; set national R&D priorities to prevent importation of chemical, biological, radiological, nuclear and related (CBRN) weapons and terrorist attacks; collaborate with DOE regarding using national laboratories; collaborate with the Secretaries of USDA and DHHS to identify biological "select agents;" develop guidelines for technology transfer; and support U.S. S&T leadership. If possible, DHS's research is to be unclassified. Title III transferred to DHS DOE programs in chemical and biological security R&D; nuclear smuggling and proliferation detection; nuclear assessment and materials protection; biological and environmental research related to microbial pathogens; the Environmental Measurements Laboratory; and the advanced scientific computing research program from Lawrence Livermore National Laboratory. DHS was mandated to incorporate a newly created National Bio-Weapons Defense Analysis Center and USDA's Plum Island Animal Disease Center, but USDA is permitted to continue to conduct R&D at Plum Island. Coast Guard and Transportation Security Administration (TSA) R&D are now located within DHS. DHS's Secretary is to collaborate with the DHHS Secretary to set priorities for DHHS's human health-related CBRN R&D. Title III authorized establishment of the Homeland Security Advanced Research Projects Agency (HSARPA) to support applications-oriented, innovative RDT&E in industry, FFRDCs, and universities. Extramural funding is to be competitive and merit-reviewed, but distributed to as many U.S. areas as practicable. The law mandated creation of university-based centers of excellence for homeland security; five multi-year awards ranging between $10 million to $18 million have been made for centers on: risk and economic analysis of terrorism at the University of Southern California; agro-security at the University of Minnesota and at Texas A&M; on behavioral and sociological aspects of terrorism at the University of Maryland; and on high consequence event preparedness and response at Johns Hopkins. DHS and EPA jointly fund a cooperative center on advancing microbial risk assessment at Michigan State; there are plans for a DHS-Lawrence Livermore National Laboratory cooperative center on computational challenges for homeland security. DHS also supports a university fellowship/training program, which plans to train 200 students in 2007, down from 300 in 2006, and up to 15 postdoctoral fellows. Regarding intramural R&D, DHS may use any federal laboratory and may establish a headquarters laboratory to "network" federal laboratories. DHS relies mostly on the following DOE laboratories: Los Alamos, Lawrence Livermore, Sandia, Pacific Northwest and Oak Ridge. A Homeland Security Institute (HSI), an FFRDC operated by Analytic Services Inc., funded in May 2004, is authorized to conduct risk analysis and policy research on vulnerabilities of, and security for, critical infrastructures; improve interoperability of tools for field operators and first responders; and test prototype technologies. A clearinghouse was authorized to transfer information about innovations. In addition, DHS created the Interagency Center for Applied Homeland Security Technology (ICAHST), which validates technical requirements and conducts evaluations for threat and vulnerability testing and assessments. P.L. 107-296 gave the DHS Secretary special acquisitions authority for basic, applied, and advanced R&D (Sec. 833). The Special Assistant to the Secretary, created by Sec. 102 of the law, is to work with the private sector to develop innovative homeland terrorism technologies. DHS issued rules for liability protection for manufacturers of anti-terrorism technologies pursuant to the Support Anti-Terrorism by Fostering Effective Technologies (SAFETY) Act of 2002, part of P.L. 107-296 . DHS also issued a rule to handle critical infrastructure information that is voluntarily submitted to the government in good faith that will not be subject to disclosure under the Freedom of Information Act ( Federal Register , Feb. 20, 2004, pp. 8073-8089). Sec. 1003 of P.L. 107-296 authorized NIST to conduct R&D to improve information security. P.L. 107-305 , the Cyber Security Research and Development Act, authorized $903 million over five years for NSF and NIST R&D and training programs to combat terrorist attacks on computers. For FY2007, DHS requested funding for R&D per se of $1.1 billion, and Congress, in P.L. 109-295 , appropriated $1.0 billion, about 22% less than the estimated FY2006 level. This is the first reduction in the agency's R&D budget since DHS was created in 2002. The FY2007 budget increased R&D support for explosives countermeasures, interoperable communications, and cybersecurity. Other areas of R&D, including university centers, received decreased funding. See Table 2 . The FY2006 appropriations law had increased R&D funding above the President's requested levels for biological countermeasures, explosives countermeasures, DNDO, rapid prototyping, SAFETY Act, interoperable communications, and critical infrastructure. See CRS Report RL33428, Homeland Security Department: FY2007 Appropriations and CRS Report RL33345, Federal Research and Development Funding: FY2007 , (section on DHS). Interagency Coordination Mechanisms The Office of Science and Technology Policy (OSTP) is a statutory office in the Executive Office of the President; its director advises the President and recommends federal R&D budgets. The OSTP Director is responsible for advising the President on homeland security (Sec. 1712 of P.L. 107-296 ). The Director has chaired the National Security Council's Preparedness Against Weapons of Mass Destruction R&D Subgroup, comprised of 16 agencies. OSTP also manages the interagency National Science and Technology Council (NSTC)'s Committee on Homeland and National Security to help set R&D priorities in eight functional areas. OSTP's interagency work has focused on such topics as anthrax, regulations to restrict access to research using biological "select agents," access to "sensitive but unclassified" scientific information, policy for foreign student visas, access to "sensitive" courses, and advanced technology for border control. Pursuant to Executive Order 13231, OSTP worked with the interagency President's Critical Infrastructure Board to recommend priorities and budgets for information security R&D. The working group on bioterrorism prevention, preparedness, and response, established by Sec. 108 of P.L. 107-188 , the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, consists of the DHHS and DOD Secretaries and other agency heads. The Homeland Security Council (HSC), created by P.L. 107-296 , provides policy and interagency guidance. An HSC Policy Coordination Committee on R&D was created pursuant to Executive Order 13228. Former DHS Under Secretary McQueary testified that, by the fall of 2004, all U.S. government R&D "relevant to fulfilling the Department's mission will have been identified and co-ordinated as appropriate." He inventoried DHS's many R&D-related interagency activities in testimony before the House Committee on Science on February 16, 2005. In 2006, GAO issued a report dealing with Plum Island, DHS and USDA Are Successfully Coordinating Current Work, But Long-Term Plans Are Being Assessed (GAO-06-132). Oversight Issues Controversial issues about DHS's R&D include preventing conflicts of interest in awarding R&D funds since many DHS S&T portfolio managers are hired from, and will return to, national laboratories which are among the contenders for DHS R&D contracts and awards' decisions, which according to GAO, are often undocumented (based on DHS Needs to Improve Ethics-Related Management Controls for the Science and Technology Directorate, December 2005, GAO-06-206); providing Congress with more detailed information regarding priority setting and R&D budgeting and spending (see H.Rept. 109-476 and S.Rept. 109-273 on DHS's FY2007 appropriations request); monitoring HSARPA's mission and performance in transitioning homeland security technology to the field; assessing possible waste in technology procurement; improving the effectiveness of DHS's S&T (only one program of six that were evaluated using OMB's Performance Assessment Rating Tool (PART) received a score of "highly effective"); developing S&T priorities that meet responder needs and benefit from external experts' advice; monitoring the adequacy of cybersecurity R&D; and improving linkages between providing rapid scientific and technical expertise and decisionmaking and responding to weapons of mass destruction attacks and incidents. DHS's Acting Inspector General testified on January 26, 2005 before the Senate Committee on Homeland Security and Governmental Affairs that the S&T Directorate needs to better integrate threat assessment information into its priority-setting and to improve inter- and intra-agency coordination. Executive Order 13311 transferred to DHS the President's responsibilities to design procedures to protect sensitive unclassified homeland security information that were mandated by Sec. 892 of P.L. 107-296 . DHS issued guidance for its own information control procedures in Management Directive System MD Number: 11042.1 , 01/05/05 , but has not yet released government-wide guidance on this controversial topic. For additional information, see CRS Report RL33303, "Sensitive But Unclassified" Information and Other Controls: Policy and Options for Scientific and Technical Information . Legislation During the 109 th Congress, the House passed H.R. 1817 , a DHS authorization bill, on May 18, 2005; it was referred to the Senate Committee on Homeland Security and Governmental Affairs. It would have required creation of the Technology Clearinghouse mandated in P.L. 107-296 , a homeland security technology transfer program, and a working group, including the DOD Secretary, to advise the clearinghouse to identify relevant military technologies. It would also have required assessment of whether DHS procurements are candidates for the litigation and risk management protections of P.L. 107-296 , established a university center of excellence for border security, authorized academic and other types of cybersecurity R&D, and allowed DOE laboratories to participate in proposal writing and other activities of the university centers of excellence. On June 14, 2006, the Homeland Security Committee reported two bills. An amended H.R. 4941 , the Homeland Security S&T Enhancement Act, would have required DHS to transfer anti-terrorism technology developed by federal agencies or the private sector, to develop standards for first-responder communications equipment, require the government to share results of tests of equipment with first responders, to develop a strategic plan for S&T activities, and to work to develop guidelines for researchers about the potential homeland security implications of their work. H.R. 4942 , the Promoting Anti-Terrorism Capabilities Through International Cooperation Act, would have required DHS's S&T Directorate to support homeland security R&D with U.S. allies. It was reported ( H.Rept. 109-674 ), amended, and approved on September 26, 2006. H.R. 5814 , an authorization bill, reported by the Homeland Security Committee on July 19, 2006, would have streamlined SAFETY Act procedures to develop anti-terrorism technology, enhanced biosurveillance systems, and created an assistant secretary for cybersecurity.

P.L. 107-296, the Homeland Security Act, consolidated some research and development (R&D) in the Department of Homeland Security (DHS). For FY2007, Congress appropriated an R&D budget (excluding management/procurement) totaling about $1.0 billion, about 22% less than FY2006, and representing the first decline in DHS's R&D funding since the inception of DHS in 2002. DHS is mandated to coordinate all federal agency homeland security R&D, which was requested at about $5.1 billion. During the 110th Congress, contentious policy issues relating to DHS's R&D are likely to include priority-setting, management, possible waste in research and technology programs, and improving program performance results. This report will be updated.

Introduction As of June 2009, the General Schedule (GS) covered roughly 59.8% of federal employees. The GS contains 15 pay grades, each of which is divided into 10 steps. The higher an employee's grade and step, the higher his or her pay. Federal employees rise within grades in the GS pay scale based on performance and length of service. The Department of Defense (DOD), however, operates a pay system called the National Security Personnel System (NSPS), which attempts to link pay increases more closely to employee performance without the use of grades or steps. NSPS is "the first civilian alternate personnel system to be implemented on a broad basis, across an entire Executive Department," and DOD is "the largest department in the Federal government." As of June 2009, DOD employed more than 717,000 civilian employees—about 35.4% of federal civilian executive branch personnel worldwide. Not every DOD employee, however, is eligible to enter NSPS. As of June 2009, 211,000 (29.4%) of DOD's 717,000 employees were covered by NSPS. On October 7, 2009, House and Senate conferees reported a version of the National Defense Authorization Bill for Fiscal Year 2010 that included language to terminate NSPS by 2012. The legislation to eliminate the pay system follows years of complaints of NSPS performance evaluation inconsistencies and litigation related to NSPS payouts. On October 8, 2009, the House agreed to the conference report. The Senate agreed to the conference report on October 22, 2009. On October 28, 2009, the President signed the bill into law ( P.L. 111-84 ). DOD must now return employees to the pay system in which they were formerly enrolled prior to the installation of NSPS. This report reviews the creation of the NSPS, examines how NSPS operates, and discusses litigation against it. The report then analyzes lessons that can be learned from NSPS and that may be applied to future attempts to create a federal performance-based pay system. This report will be updated as necessary. National Security Personnel System History NSPS grew out of George W. Bush Administration assertions that the GS system was incapable of creating a responsive and flexible national security workforce. In April 2003, DOD sent a proposal, entitled "The Defense Transformation for the 21 st Century Act," to Congress. The proposal recommended changing the statutory basis for much of DOD's civilian personnel system to create a "more flexible, mission-driven system of human resources management" that could "adequately address the 21 st century national security environment." Many provisions in the DOD proposal were ultimately included in Title XI of the National Defense Authorization Act for Fiscal Year 2004 ( P.L. 108-136 )—including personnel flexibilities to create NSPS. The act made some DOD personnel policies more flexible than those governed by Title 5 of the U.S. Code, which includes most of the provisions governing civilian employees. The flexibilities, including the authority to eliminate pay grades and steps, gave DOD and Office of Personnel Management (OPM) officials the opportunity to design a pay system that attempted to more closely link employee performance to pay. The new system was to help the department "develop a more flexible civilian personnel management system that would enhance [the department's] ability to execute [its] national security mission." On June 2, 2003, shortly after DOD released its proposed changes in personnel flexibilities for NSPS, Senator Susan Collins, then-chairman of the Senate Committee on Governmental Affairs, introduced S. 1166 (108th Congress). The bill, entitled the National Security Personnel System Act, would have granted DOD additional pay flexibilities for its large civilian workforce. The bill was referred to the Senate Governmental Affairs Committee. On June 4, 2003, the committee conducted a hearing on the bill. Following the hearing, Senators George V. Voinovich and Thomas Carper asked then-Comptroller General David M. Walker to respond to several additional questions about DOD's ability to motivate and control its workforce. Walker's response, submitted on July 3, 2003, included the following comments: Based on our experience, while DOD's leadership has the intent and the ability to transform the department, the needed institutional infrastructure is not in place in a vast majority of DOD organizations.... In the absence of the right institutional infrastructure, granting additional human capital authorities will provide little advantage and could actually end up doing damage if the authorities are not implemented properly by the respective department or agency. The bill was reported by the Committee on Governmental Affairs on September 9, 2003, and was placed the Senate Legislative Calendar, but was not passed. Another bill that addressed DOD personnel, however, H.R. 1588 , was concurrently moving through the legislative process. H.R. 1588 , the National Defense Authorization Act for Fiscal Year 2004, set definitions and provided guidelines for a new DOD personnel system. The Senate passed the bill, as amended, by voice vote on June 4, 2003. Then-President George W. Bush signed the legislation on November 24, 2003, as P.L. 108-136 (117 Stat. 1392). P.L. 108-136 , among other things, authorized the director of OPM to "establish, and from time to time adjust, a human resources management system for some or all of the organizational or functional units of the Department of Defense." The law protected employees' collective bargaining rights, and required that the system be "fair, credible, and transparent" and provide "effective safeguards to ensure that the management of the system is fair and equitable and based on employee performance." DOD began transitioning employees to NSPS in 2006. The system has weathered several delays in its implementation, but currently covers 211,000 of DOD's civilian employees. On January 28, 2008, the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) was enacted. The law required the NSPS system to pay annual bonuses and supplements that are closer in value to those given GS employees. More specifically, the law required NSPS employees with satisfactory ratings to receive at least 60% of the annual pay increase given to GS employees, and ensured that all employees receive a pay supplement to keep pace with growing labor costs. Additionally, on May 22, 2008, DOD and the Office of Personnel Management jointly published proposed rules in the Federal Register that clarified NSPS labor-management regulations. The July 2009 Review of the National Security Personnel System performed by the Defense Business Board recommended DOD a "reconstruction" of NSPS, saying a "'fix' could not address the systemic problems discovered" during the review. NSPS Implementation The timetable for implementing NSPS changed several times. Initially, DOD planned to publish details of the new system by April 2004, and transition 300,000 civilian DOD employees to NSPS by October 1, 2004. In early February 2004, then-Secretary of Defense Donald Rumsfeld named then-Navy Secretary Gordon England as the DOD official responsible for negotiating with labor organizations on the personnel reform effort. On April 14, 2004, Mr. England announced that implementation of the NSPS would be phased in over several years so that all eligible DOD employees would be covered by October 1, 2006. Mr. England announced more specific implementation steps and a revised implementation timetable on December 15, 2004. Civilian DOD employees converting to NSPS were to be grouped into three "spirals" or phases of implementation. Spirals are further separated into three distinct implementation segments. Spiral One was scheduled for implementation over 18 months beginning around July 2005 and covering some 60,000 employees. On October 26, 2005, DOD announced further revised NSPS plans, and pushed back initial implementation of the system to calendar year 2006. On January 17, 2006, DOD identified the 11,124 employees in Spiral 1.1, the first employees to enter NSPS. NSPS began its phase-in of Spiral 1.1 in April 2006. Spirals 1.1, 1.2, and 1.3 were completed in March 2007. Spiral 2 began in October 2007, and was completed in April 2008, with more than 180,000 of roughly 670,000 DOD employees placed in NSPS. The final spiral began in October 2008 and was completed in March 2009, adding 14,000 additional employees to NSPS, bringing the total of DOD employees covered by NSPS to 211,000. Concerns of Transparency At times during NSPS's development, some employees and their representative organizations claimed that OPM and DOD had been reluctant to include them in their planning and roll out processes. In addition to exempting blue-collar employees from NSPS, P.L. 108-136 required the Secretary of Defense and the Director of OPM to provide DOD employees and their representatives "a written description of the proposed system" and "at least 30 calendar days (unless extraordinary circumstances require earlier action) to review and make recommendations with respect to the proposal." Some Members voiced concerns that employees and unions were not given this statutorily required access to the agencies' pay-for-performance plans. A March 12, 2004, letter from Senator Daniel Akaka to Secretary of Defense Rumsfeld, for example, urged DOD and OPM to jointly publish all proposals on the NSPS in the Federal Register and not as internal regulations in order to promote "openness, transparency, public comment, and scrutiny of the details." Government Executive reported that Senator Edward Kennedy wrote to Secretary of Defense Donald Rumsfeld and OPM Director Kay Coles James on November 19, 2004, to voice opposition to DOD's refusal to share the details of the new personnel plans with union officials representing DOD employees in advance of the publication of regulations in the Federal Register . Reportedly, DOD believed that to share its intentions would "depart from the intent of the Administrative Procedure Act." Senator Kennedy, in a December 10, 2004, press release, also emphasized development of the new system "in the most transparent way possible." According to the Senator: Congress gave the Department of Defense the authority to make major personnel changes affecting 700,000 defense employees, but only with the understanding that those changes would be made in consultation with representatives of the employees. It's appalling that the Bush Administration is ignoring that understanding by stonewalling the representatives and refusing to let them review personnel changes before they are published. In a February 10, 2005, press release, Senator Joseph Lieberman expressed his deep disappointment with DOD's and OPM's refusal to publish the system's guidelines and include employees in its creation, stating, "The proposal imposes excessive limits on collective bargaining ... changes the appeals process to interfere with employees' rights to due process ... and ... contains unduly vague and untested pay and performance provisions." DOD Personnel System Proposal DOD and OPM published proposed rules for NSPS in the Federal Register on February 14, 2005. In the November 1, 2005 final rules, which were also published in the Federal Register , DOD and OPM stated that the GS personnel system failed to allow the department to keep pace with the George W. Bush Administration's demands to "transform the way we think, the way we train, the way we exercise, and the way we fight." At best, the current personnel system is based on 20 th century assumptions about the nature of public service and cannot adequately address the 21 st century national security environment. Although the current Federal personnel management system is based on important core principles, those principles are operationalized in an inflexible, one-size-fits-all system of defining work, hiring staff, managing people, assessing and rewarding performance, and advancing personnel. These inherent weaknesses make support of DoD's mission complex, costly, and ultimately risky. Currently, pay and the movement of personnel are pegged to outdated, narrowly defined work definitions; hiring processes are cumbersome; high performers and low performers are paid alike; and the labor system encourages a dispute-oriented, adversarial relationship between management and labor. These systemic inefficiencies detract from the potential effectiveness of the Total Force. A more flexible, mission-driven system of human resources management that retains those core principles will provide a more cohesive Total Force.... The immense challenges facing DoD today require a civilian workforce transformation: Civilians are being asked to assume new and different responsibilities, take more risk, and be more innovative, agile, and accountable than ever before. It is critical that DoD supports the entire civilian workforce with modern systems—particularly a human resources management system and a labor relations system that support and protect their critical role in DoD's Total Force effectiveness. The enabling legislation provides the Department of Defense with the authority to meet this transformation challenge. Description of the National Security Personnel System To date, the vast majority of employees that have transitioned to NSPS are white-collar, non-bargaining DOD personnel. Each employee in the NSPS system is assigned to a career group, a pay band, and a pay schedule. Instead of the 15-step GS pay system, those who are in NSPS have pay bands that usually encompass a wider pay range than a single GS grade. The wider pay bands are designed to give managers greater flexibility to hire qualified employees at a higher rate of pay than they could under the GS scale, and to retain high-performing employees by increasing their pay at a faster pace than was possible under the GS scale. Pay bands, like GS grades, limit minimum and maximum pay rates. Unlike the GS scale's pay grades, pay bands do not have steps through which employees advance automatically with satisfactory job performance. Instead, in NSPS, funds formerly used to pay for within-grade, quality-step, and other increases in the general schedule are pooled and used to fund the pay increases determined at the end of the performance appraisal cycle. NSPS contains four career groups: Standard Career Group; Scientific and Engineering Career Group; Investigative and Protective Services Career Group; and Medical Career Group. According to DOD's NSPS website, "[c]areer groups are sets of occupations that involve similar types of work and have similar career and pay progression patterns. Career groups are based on mission or function, nature of the work, qualifications or competencies, promotion or pay progression patterns, and relevant labor market features." Finally, NSPS has four pay schedules: Professional/Analytical; Technician/Support; Supervisor/Manager; and Student. And there are between two and four pay bands within each pay schedule. Pay schedules divide employees into groups by the "types of work being performed, knowledge or skill level, and pay ranges." Because of the nature of career groups, some groups have higher starting salaries and higher salary caps than others. A Professional/Analytical employee, for example, has a higher salary cap than a Technician/Support employee. Most pay schedules have three pay bands: Expert; Journey; and Entry/Development. Figure 1 uses the Standard Career Group to demonstrate how pay schedules and pay bands fit within career groups. Performance Appraisal Within 30 days of the start of a new performance-evaluation period—which runs from October 1 through September 30 of each year—each employee is to be issued a performance plan, which outlines his or her performance criteria and goals for the year. The performance expectations in the plan "shall support and align with the DoD mission and its strategic goals, organizational program and policy objectives, annual performance plans, and other measures of performance." These goals can be generalized across the department, or they can be specific to an individual employee. Performance elements can include knowledge of the department's standard operating procedures, specific goals or objectives, contributions to the department that are expected of the employee, and overall employee conduct and behavior. An employee is required to meet with his or her supervisor at least one time during his or her performance-appraisal period prior to a final evaluation. The interim evaluation is to "acknowledge achievements and suggest areas for improvement, and provide meaningful dialogue and exchange of concerns." A supervisor is responsible for informing an employee which performance criteria are considered more important and may be weighted higher in his or her evaluation. A supervisor should also communicate "measures of job objective accomplishment (quantitative, qualitative, timeliness)." Performance expectations, or competencies, "should be reviewed regularly," and "[s]upervisors are encouraged to involve employees in the development of their job objectives and the identification of applicable contributing factors." Supervisors are encouraged to engage in continued dialogue with employees throughout the performance appraisal period, and to update individual performance plans as necessary. An employee has 24-hour online access to his or her performance plan through the Performance Appraisal Application (PAA) 2.0. The application runs through computer programs that already exist on the Defense Civilian Personnel Data System (DCPDS). The online performance plan is available to both employees already in NSPS and those who will transition to NSPS. The DCPDS website also includes a conversion calculator for employees who are scheduled to transition from the GS to NSPS. At the end of the performance appraisal period, employees are encouraged to provide supervisors with a self assessment in each competency to "better inform the rater of performance and contribution." Supervisors are to evaluate narratively each employee using the performance criteria, and then translate the narrative into a five-point numeric scale, with the lowest score of 1 and the highest of 5. When evaluating individual criteria, supervisors may choose to include a "contributing factor" that reflects "the manner of performance important for the accomplishment of the job objective." Contributing factors include technical proficiency, critical thinking, cooperation and teamwork, communication, customer focus, resource management, and leadership. In general, no more than three contributing factors should be considered when evaluating a single criterion, and leadership should be considered when evaluating any supervisory element. Each contributing factor may be used to increase or decrease a competency's numeric rating by one point. For example, if the employee demonstrated critical thinking when performing a competency, his or her score for that criterion could rise from 3 to 4. In contrast, if the employee failed to use critical thinking, he or she would receive no additional point, or a supervisor may decide to take a point away from his or her numeric assessment, dropping a score from 3 to 2. Supervisors do not have to use whole numbers when assessing employees, but final ratings—the recommended rating of record—must be rounded to the nearest whole number. Each numeric performance rating matches to a nominal one ( Table 1 ). An employee must score at least a three—which is equal to a nominal rating of "valued performer"—to be eligible for performance-based pay increases. If an employee scored a one on any individual objective, their overall rating is required to be a one. If an employee is performing below expectations at any time throughout the appraisal process, supervisors and management must determine "corrective action," which may include "remedial training, an improvement period, a reassignment, an oral or written warning, a letter of counseling, a written reprimand, and/or adverse actions." As of June 10, 2008, NSPS corrective action may also include reduction in salary as well as retention of pay, so an employee may have his or her pay withheld and/or his or her salary decreased concurrently if his or her performance is deemed unsatisfactory. Within 10 days of receiving his or her performance evaluation, an employee may request a reconsideration of the rating by submitting "a written request for reconsideration to the pay pool manager." The request must include a copy of the rating and a statement clarifying which part of the rating is being challenged. A copy of the reconsideration request also may be given to the rating official and the human resources office. Within 15 days of receiving the request, the pay pool manager is to render a written statement explaining his or her determination. If the employee remains unsatisfied, he or she may—within five days of receiving the pay pool manager's decision—submit a written request for final review with the Performance Review Authority (PRA), which oversees all pay pools and ensures consistency in performance and evaluations across the agency. The PRA has 15 days to respond to the request. Bargaining employees may also file a grievance under the agency's negotiated grievance process. In a January 1, 2008, Government Executive.com article, a DOD executive director said that supervisors and managers in the agency would need to spend 40 to 60 hours per employee per year on performance evaluations and ratings. These hours were to include at least four conversations with each employee annually. On April 1, 2009, Brenda S. Farrell, director of defense capabilities and management at the Government Accountability Office (GAO), testified that DOD "employees and supervisors were concerned about the excessive amount of time required to navigate the process." Linking Performance to Pay The agency-wide performance-based pay pool is comprised of three funding sources: basic pay funds that ... were historically spent on within-grade increases, quality-step increases, and promotions between general schedule grade levels that no longer exist under NSPS; funds (if any) that remain available from the government-wide general pay increase after the Secretary has exercised his authority to fund any Rate Range Adjustments and/or Local Market Supplements ; and funds spent for performance-based cash awards. Within the larger pay pool are smaller pay pools for groups of employees "who share in the distribution of a common pay-for-performance fund." Group pay pools are divided by organization structure, employee job function, location, and organization mission. In NSPS, each employee may be assigned a certain number of performance pay shares. Each pay share represents a monetary value that is a predetermined percentage of pay that will be used to calculate performance-based pay increases. The amount of pay shares allocated to each employee reflects his or her numerical performance rating: the higher an employee's numeric rating, the more shares he or she is allocated. Employees with a performance rating of 1 or 2 are assigned no performance shares. The pay pool panel, which consists of DOD administrators and senior staff and assigns performance shares to employees, may award an employee with a rating of 3 either one or two shares; a rating of 4 can warrant three or four shares. An employee with a rating of 5 may receive either five or six performance shares. Table 2 shows the performance shares allowed for each of the 5 possible ratings of record. If a single performance share, for example, equaled 1% of an employee's pay, that employee's pay supplement is calculated by multiplying his or her basic pay by the number of performance shares they have been assigned. An employee with 5 performance shares, therefore, would be entitled to a performance-based pay increase that was equal to 5% of his or her basic pay. The pay pool manager ensures that the pay performance shares are distributed in a legal and consistent manner. An employee who is at the maximum level of his or her pay band may receive his or her performance-based bonus as a one-time lump sum paid at the beginning of the following year. The lump sum does not count as basic pay, and is not included when calculating an employee's pension, life insurance, premium pay, or other retirement benefits. NSPS pay also includes a local market supplement (LMS), which functions much like locality pay or special rates on the GS scale. LMS is an "additional payment to employees in specified local market areas, occupations, specializations, or pay bands." The supplements are used to attract certain employee expertise, bridge the difference in labor costs in the public or private sector, and provide additional pay to employees who work in a hazardous environment. LMSs are added to base salary, and, therefore, are included when calculating pension, life insurance, premium pay, and other retirement benefits. Employees must have been employed by the agency for at least 90 days and have a performance evaluation of 2 ("Fair") or higher to be eligible for the LMS increase. Unless the Secretary of Defense deems otherwise, the LMS is usually equal to annual locality pay increases, which are based on cost of labor differences between federal and non-federal employees within the same geographic area. In addition to pay increases that are awarded based on annual performance evaluations, DOD employees may receive discretionary performance payouts that include Extraordinary Pay Increases (EPI) and Organization Achievement Recognitions (OAR). Only employees who have an annual performance evaluation of 5 are eligible for an EPI, which can be awarded as an increase in basic salary or as a one-time lump sum. OARs award members of a team, organization, or branch that advanced department goals. OARs may be awarded as an increase in basic pay or as a one-time lump sum. Employees must have a numeric performance evaluation of 3 or higher to be eligible for an OAR. Litigation On November 7, 2005, a coalition of ten unions that represent DOD employees—including the American Federation of Government Employees (AFGE)—filed a lawsuit in federal district court challenging the DOD's final regulations for NSPS published in the Federal Register . On February 27, 2006, the court enjoined the regulations, saying they failed to ensure collective bargaining rights; did not provide for independent, third-party review of labor relations decisions; and failed to provide a fair process for appealing adverse actions. DOD originally stated that it would not appeal the decision, but the Department of Justice—on behalf of DOD and OPM—filed an appeal on April 17, 2006. The United States Court of Appeals for the District of Columbia reversed the federal district court decision and upheld the DOD's regulations, saying the National Defense Authorization Act "grants DOD expansive authority to curtail collective bargaining through November 2009." The decision also upheld all other regulations that were contested by the unions. On July 2, 2007, the coalition of unions requested a full court review of the appellate court decision. The courts denied the request on August 10, 2007. On August 29, AFGE filed an appeal with the U.S. Supreme Court to stop DOD implementation of NSPS. On September 5, 2007, the Court denied the motion for a stay, and DOD continued its implementation of NSPS. The 110th Congress Hearings Committees in both congressional chambers continued to hold hearings on performance-based-pay systems, with a focus on NSPS. Some common themes throughout the hearings were DOD employees' mistrust of the system and concerns over how much time the agency would need to fully implement NSPS. On March 6, 2007, the House Committee on Armed Services' Subcommittee on Readiness, held a hearing on DOD's NSPS pay, at which Members questioned whether NSPS was "working," and whether it was adjusting to the challenges it faced. Representatives from DOD stated that the system was effective. It is early in the journey as it will take years before the Department realizes all of the results NSPS was designed to produce, but we are already showing a powerful return on investment. We are seeing an unprecedented training effort focused on performance management for employees and supervisors who are seeing greater communication between supervisors and employees. People are talking about performance, results, and mission alignments. We are seeing increased flexibility and rewarding exceptional performance. Finally, we are seeing positive movement in behaviors and in organizational culture. These early returns are cause for optimism as we continue to deploy the system. At that hearing, John Gage, the national president of the American Federation of Government Employees, stated that NSPS was "unfair to employees," and it should be repealed because it violated workers rights to collectively bargain, as well as other protections normally provided to federal employees. NSPS's effects on the collective bargaining rights of employees was also considered at a House Committee on Oversight and Government Reform, Subcommittee on the Federal Workforce, Postal Service, and the District of Columbia hearing on March 8, 2007. Kevin Simpson, the executive vice president and general counsel for the Partnership for Public Service, a nonprofit organization that seeks to create a more effective workforce, said that NSPS needed employee support if it were to succeed. [W]e believe that many (but not all) aspects of NSPS—if implemented with employee involvement and strong congressional oversight—have a potential to make a positive difference and to gain acceptance by the DOD workforce. At a February 12, 2008, congressional hearing before the House Subcommittee on the Federal Workforce, Postal Service, and the District of Columbia, Gage said that the NSPS and other merit-based systems were subjective, implemented inconsistently across the agency, and infused with bias. Employees with lower ratings in one office could receive a higher pay bonus than an employee with a higher rating in another, Gage said. Moreover, Gage said, the NSPS system permitted certain managers to determine what percentage of an employee's pay increase would be distributed as an increase in basic pay or as a one-time lump sum bonus. Obviously, the more compensation placed in bonuses as opposed to salary increases has profound implications for the employee's standard of living not only in subsequent years while he or she is still working, but also into retirement. At a February 29, 2008, hearing before the Senate Committee on Homeland Security and Governmental Affairs' Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia, then-Comptroller General David M. Walker testified that NSPS could serve as an example for other agencies or departments as they transition to performance-based pay systems. Most important, we have noted in testimonies and reports that DOD and other federal agencies must ensure that they have the necessary institutional infrastructure in place before implementing major human capital reform efforts, such as NSPS. This institutional infrastructure includes, at a minimum, a human capital planning process that integrates the agency's human capital policies, strategies, and programs with its program goals, mission, and desired outcomes; the capabilities to effectively develop and implement a new human capital system; and the existence of a modern, effective, and credible performance management system that includes adequate safeguards to ensure a fair, effective, nondiscriminatory, and credible implementation of the new system. At a July 22, 2008 hearing, Bradley Bunn, the program executive officer for NSPS said the pay system was successfully linking employee performance to department goals, but that there were difficulties with the system. NSPS is a significant change, particularly in the area of performance management, for employees and supervisors. It requires more time and energy than previous systems, and many of our employees are not yet completely comfortable with the system. Performance plans and assessments need improvement, as many are struggling with translating organizational goals into individual, results-oriented, and measurable job objectives. Employees have expressed concern over the pay pool process, and whether it produces fair results. It is clear, however, that employees have a better understanding of how their jobs relate to the mission and goals of the organization, and there is increased communication between employees and supervisors about performance. At the same hearing, AFGE President John Gage stated that many federal employees "express skepticism about their chances to excel in the workforce" under NSPS. Additionally, Gage stated that "subjectivity and bias pervades the NSPS system." Legislation On January 28, 2008, the National Defense Authorization Act for Fiscal Year 2008 was enacted ( P.L. 110-181 ). The statute modified certain elements of NSPS, requiring DOD to award every NSPS employee who received a satisfactory rating at least 60% of the pay increase given to GS employees. The law required NSPS to link "performance management and the agency's strategic plan"; provide "adequate training and retraining for supervisors, managers, and employees in the implementation and operation of the performance management system"; and create "[a] process for ensuring ongoing performance feedback and dialogue between supervisors, managers, and employees throughout the appraisal period, and setting timetables for review." The law also ensures employees' rights to bargain collectively and establish labor organizations. Department of Defense Rulemaking On May 22, 2008, the Department of Defense proposed new rules for NSPS in the Federal Register . Some of the proposed new rules include removing references to a new labor-management system in existing NSPS regulations and deleting the prohibition on collective bargaining. The proposed rules would flesh out some definitions of pay, and permit employees who were rated "unacceptable" to begin receiving pay increases after they improve their performance—even if the improvement occurs prior to the completion of a full performance appraisal cycle. Comments on the proposed rules were accepted until June 23, 2008. DOD and OPM received more than 500 comments on the proposed regulations. The 111th Congress Hearings On April 1, 2009, the House Committee on Armed Services held a hearing to discuss the future of NSPS. At the hearing, Bradley Bunn, of DOD, testified that NSPS had both some successes and failures. In particular, Mr. Bunn said that the NSPS "performance rating and payout results demonstrate that NSPS organizations are making meaningful distinctions in performance and the associated rewards. We are also seeing improvement in communication between employees and supervisors, and better alignment between performance plans and organizational mission and goals." Mr. Bunn also said, "[e]mployees and supervisors are struggling with the more stringent performance measures used in the evaluation process, and employees are questioning whether the ratings are fair. Some of the concern is over whether supervisors have the skills necessary to fairly assess performance, while others question the appropriateness of the pay pool panels being involved in performance ratings. Employees and supervisors, particularly those who are new in the system, often struggle to define measurable, results-oriented job objectives, and have difficulty in writing narrative assessments. Also at the hearing, Darryl Perkinson, the national president of the Federal Managers Association, testified that rewarding federal employees for quality performance was a desirable goal, but NSPS was not always an effective tool to execute that goal. Overall, FMA managers and supervisors believe a switch to pay-for-performance is necessary not only to compete with the private sector for talent, but also to encourage and reward high performance. The time for rewarding employees simply for longevity has passed. Many of the hard-working federal managers entering NSPS want to be rewarded for the job they do. However, the system is not without its flaws. Among the concerns Perkinson expressed from employees was a belief that their evaluations were unfair or inaccurate. Many employees continue to feel uncomfortable in the assessment of their own work as required under NSPS. Inadequate training in this area has contributed to employees' lack of confidence in the delivery of their own rating, as they are not sure how to properly convey the value of the work they perform each day. Legislation Both the House and Senate included language to eliminate NSPS in their versions of the National Defense Authorization Act for Fiscal Year 2010 ( H.R. 2647 , introduced on June 2, 2009; S. 1390 , introduced on July 2, 2009). The defense authorization act's conference report ( H.R. 2647 , H.Rept. 11 1 -288 ), in Section 1113, also included these provisions. Pursuant to the legislation, NSPS will be eliminated by 2012, and DOD would begin removing employees from the pay system six months after the October 28, 2009, enactment of the bill. DOD employees currently in NSPS will be returned to the GS or to whichever pay scale they were on prior to their transition into NSPS. Moreover, the bill required DOD to ensure that no employee's pay would be reduced as a result of the elimination of NSPS. The bill also afforded the Secretary of Defense the authority to establish a "Department of Defense Civilian Workforce Incentive Fund," from which agency officials could provide additional pay incentives to individual employees or employee teams " for purposes of the employment and retention as employees of qualified individuals with particular competencies or qualifications." On October 7, 2009, House and Senate conferees reported a version of the National Defense Authorization Bill for Fiscal Year 2010 that included language to terminate NSPS. On October 8, 2009, the House agreed to the conference report. The Senate agreed to the conference report on October 22, 2009. On October 28, 2009, the President signed the bill into law. NSPS Assessments NSPS has been assessed by both the federal government and private entities. A 2007 OPM assessment of NSPS implementation, for example, concluded that DOD was successfully transitioning to the new system, but found continued measurement of the department's ability to retain key employees and hire quality workers was needed. In October 2007, three Members of the Virginia congressional delegation—Representatives Tom Davis, Frank Wolf, and James Moran—sent Defense Secretary Robert Gates a letter condemning DOD's announcement that 110,000 NSPS employees with satisfactory performance ratings would receive pay increases that were equal to only half of the annual pay increase given to GS employees. "[T]hese employees ... reportedly were informed from the outset that for the first year in NSPS they would at least receive their base bay increase." The Members added: It would be difficult if not impossible to recruit or retain employees if they could not rely on their promised salaries. But an even more difficult task will be meeting the cost of replacing employees or increasing hiring efforts in general if employees do not have confidence in the personnel system. According to media reports, the average raise for employees covered by the NSPS in 2008 was 7.6%—more than double the average raise for employees on the GS pay scale (3.5%—2.5% across the board, and a 1% increase in locality pay). AFGE President John Gage told the Federal Times that he believed the high percentage pay increases will drop in the future because it would cost too much to continue them. NSPS Program Executive Officer Mary Lacy responded by saying the pay system does not cost more to run because some employees get no pay increases, while others receive large ones. In April 2008 media reports, unions criticized NSPS for its lack of transparency. Greg Junemann, president of the International Federation of Professional and Technical Engineers told Government Executive that, "Defense is intentionally misleading employees by simply releasing a [pay raise] number without releasing the data that supports their number. Congress should ask the DOD to release any and all data relating to their 7.6% payout." In August 2008, the Federal Times acquired performance evaluations of 102,239 civilian DOD employees in the NSPS system and analyzed pay outcomes. In one report, the Federal Times claimed NSPS was "living up to its promise of tying bigger raises and bonuses to better performance on the job." The Federal Times stated that "all but 165 employees at [rating] [l]evels 1 through 5 receive total pay increases that were equal to or greater than the average 3.5 percent pay raise that General Schedule employees received." But many of these pay increases were distributed as one-time bonuses, and not as increases to an employee's basic salary that would be paid to the employee in perpetuity. Moreover, when the local market supplement is not included as a performance-based increase, 5,039 employees who were rated as valued performers (level 3) received a pay increase of less than 1 percent. According to another Federal Times report that used the same data, "[w]hite employees received higher average performance ratings, salary increases and bonuses ... than employees of other races." In addition, civilian employees at DOD agencies were assigned overall higher performance ratings than civilian personnel in the Air Force, Navy, and Marine Corps. Finally, employees who received similar rating scores were, in some cases, given different pay increases. The Government Accountability Office released a report on NSPS in September 2008 stating that DOD had "taken some steps to implement internal safeguards to ensure that NSPS is fair, effective, and credible," but added "some safeguards could be improved." Specifically, GAO cited nine "safeguards" currently in place that aim to improve NSPS operation, including linking "employee objectives and the agency's strategic goals and mission," and requiring "ongoing performance feedback between supervisors and employees." GAO added that DOD could improve the implementation of some of the safeguards by having an uninvested third-party analysis performed on NSPS's pay determinations as well as requiring publication of department-wide rating results to increase the system's transparency. Additionally, the report recommended DOD give pay pool administrators and supervisors more guidance on rating employees "appropriately" and charged DOD with creating a plan to combat the increasingly negative perception employees have of NSPS. Bradley Bunn responded to GAO's recommendations on behalf of DOD in September 2008 saying "the [d]epartment does not concur with all the finding and recommendations in the ... report" but "[a]s we have implemented NSPS, we have heard many of the same concerns as your auditors and have attempted to differentiate between those that warrant prompt action, and those that reflect the uncertainty and skepticism that typically accompany major changes." Further, DOD disagreed with GAO's recommendation to require third-party analysis of pay pool decisions, saying that NSPS was "fair, equitable, and based on employee performance," and had clear grievance procedures in place for an employee who disagreed with his or her rating. DOD also disagreed with GAO's assertion that some rating scores may not have made "meaningful distinctions" among employees' performances. GAO agreed that it should publish its agency-wide rating results, and said it would take steps to accomplish that goal. Prior to his election on November 4, 2008, then-presidential candidate Barack Obama wrote a letter to AFGE President John Gage saying that he had "several concerns about the NSPS pay system," including "restrictions of bargaining rights, the disconnection between pay and performance despite what employees have been told, the requirement that performance ratings be pushed into a forced distribution, or bell cure, the suppression of wages by permitting bonuses to be paid instead of base salary increases, and the virtual elimination of merit consideration in the promotion process." On October 28, 2009, President Obama signed into law a bill that eliminated NSPS ( P.L. 111-84 ). For 2009, NSPS employees who were rated a "2" or above were eligible to receive a 1.74% pay increase, or 60% of the GS pay increase for 2009. Employees rated "3" or higher were additionally eligible to receive a performance-based pay increase. On April 1, 2009, Brenda S. Farrell, director of defense capabilities and defense management at GAO testified at a congressional hearing on NSPS, and reiterated some of the same concerns about the pay system that were previously reported by GAO. In her testimony, Ms. Farrell said that DOD had "taken some steps to implement internal safeguards to ensure that the NSPS performance management system is fair, effective, and credible," but added that implementation of other safeguards could be improved. The areas cited for possible improvement were as follows: to involve employees in the system's design and implementation; to link employee objectives and the agency's strategic goals and mission; to train and retrain employees in the system's operation; to provide ongoing performance feedback between supervisors and employees; to better link individual pay to performance in an equitable manner; to allocate agency resources for the system's design, implementation, and administration; to include predecisional internal safeguards to determine whether rating results are consistent, equitable, and nondiscriminatory; to provide reasonable transparency of the system and its operation; and to impart meaningful distinctions in individual employee performance. In July 2009, the Defense Business Board, a federal entity that advises the Secretary of Defense on ways to adopt private sector employee practices in DOD, released its Review of the National Security Personnel System. The review, which was drafted after the board collected public comment and administered a series of interviews and public meetings, recommended a "reconstruction" of NSPS "that begins with a challenge to the assumptions and design" of the pay scale. The report also recommended that DOD "reestablish … a commitment to partnership" by "collaborating with employees through their unions," "establish DoD's commitment to strategic management and investment in career civil servants," and stop moving additional employees into the NSPS system. Although he has not addressed NSPS directly, OPM Director John Berry has called the multitude of performance-based pay structures across the federal government "balkanized." Mr. Berry has reportedly stated his desire to create a government-wide performance-based pay system. Analysis of Options DOD is one of many federal departments and agencies seeking to create a more effective workforce. The elimination of NSPS will affect the pay system of more than 200,000 federal employees, all within DOD. Modifying Title 5 of the U.S. Code , another approach, could affect more than 2 million federal employees. Although Congress has mandated the elimination of NSPS, it has not eliminated all performance-based pay systems across the federal government. Congress may choose to keep the GS as the primary pay system for federal employees, or it may choose to create a new performance-based pay system in the future. This section analyzes possible legislative, oversight, and policy options for the future of performance-based pay, using examples from DOD's experience with NSPS. Flexibilities DOD officials have stated that one particularly beneficial flexibility of NSPS is the ability of the department to use higher starting salaries than are available under the GS scale to attract a higher caliber of college graduates to the workforce. Under Title 5 statutes, federal agencies and departments may offer a one-time lump sum recruitment bonus to employees "if the agency has determined that the position is likely to be difficult to fill in the absence of an incentive." In contrast, the pay banding system under NSPS allows a department or agency to offer a new recruit a higher starting salary because the bands include a range of pay options that are much wider than the spectrum within individual GS pay grades. Although DOD has cited this pay flexibility as an advantage of the NSPS, the department has presented no data on how many DOD employees were recruited under the NSPS flexibility, the pay levels at which such recruits were hired, or whether these recruits received higher performance appraisal ratings than similar employees hired without (or prior to) use of the NSPS pay flexibilities. Recruitment and Retention Prior to the phase out of NSPS, Congress may choose to require DOD to collect data on how it used pay flexibilities to recruit—and possibly retain—effective and efficient federal employees under NSPS. Such information may be useful to Congress in the future if it chooses to authorize a new performance-based pay system. The information could show whether NSPS flexibilities aided in recruitment and retention of effective employees. Measuring effective employee performance, however, is a controversial topic. Sometimes the executive and legislative branches disagree on how an agency's workforce can best achieve its mission. Congress may need to specifically identify how it would want DOD to define the term "effective employee," to ensure that any data collected would reflect the policy designs of Congress. P.L. 108-136 statutorily required DOD to create a pay system that linked pay to employee performance. The performance appraisal system could be used to measure and compare performance ratings among its employees, and provide the federal government an opportunity to record how many employees were recruited or retained with use of this performance-based pay system's flexibilities. Moreover, the system could be used to compare performance ratings between employees recruited or retained with use of the flexibilities to those NSPS employees who were already in the pay system and were not recruited or retained as a result of new pay flexibilities. Such a comparison may identify whether NSPS attracted and retained more effective government employees than other pay systems—a primary goal of the more flexible pay system. Such analyses may be useful as both Congress and the Administration face whether to maintain the GS pay scale or create a new pay scale that more directly links pay to an employee's performance. Employee Resignation Prior to the NSPS phase out, data could also be collected to determine whether NSPS encouraged employees who did not receive successful performance ratings to leave their positions. NSPS does not give supervisors any additional flexibilities from Title 5 to fire employees. An employee rated a "2" under the NSPS rating system, however, does not receive a performance-based pay increase. An employee who is rated "1" receives neither a performance-based pay increase nor the annual across-the-board pay adjustment that is annually enacted. Mr. Bunn suggested that an employee who does not receive performance-based or other pay increases would be likely to resign from his or her position. Congress may consider requiring DOD to compile records on employees with low ratings, and study whether NSPS's policies to deny such pay increases were, in fact, prompting low performers to resign. Such information may be useful to Congress and the Administration in future determinations of how federal employees should be paid. Costs NSPS currently covers approximately one-third of the personnel coverage initially planned. DOD estimated that $158 million was spent implementing the new pay system from 2005 through 2008. In September 2008, DOD and OPM estimated that $143 million will be spent on NSPS from 2009 through 2011. According to Mr. Bunn, the NSPS pay system does not receive congressional appropriations in excess of what it would have received if it had remained the GS pay system. Instead, any needed additional funding comes from within the DOD's overall appropriations. Additional costs for NSPS, therefore, consist mainly of the expenses to run the NSPS resources office in Arlington, VA, and costs to create and install performance appraisal software. DOD employees are covered by a variety of pay scales. The complete cost of running several pay systems within one department has not been calculated. Congress might consider requiring DOD to calculate the costs of creating software for, and implementation of, each unique pay system. This cost could then be compared to costs for pay systems of other agencies (e.g., the Department of Veterans Affairs, the Department of Homeland Security, the Department of Treasury, or the Department of Transportation). Congress would then have more thorough information on the costs of running a variety of pay systems, and may gain a greater understanding of which pay systems are more efficient and effective for the federal workforce. Pay Pools The 211,000 employees currently in NSPS are divided into roughly 1,600 "pay pools." Each pay pool consists of between 35 and 150 employees. Employees assigned to a pay pool draw their performance-based pay increases from the same funds. In NSPS, pay pool managers have the authority to increase the size of the funding pot by adding an overall performance bonus to the pool if, for example, the pool's members as a whole accomplish pre-set goals as a unit. The bonus increase may be small, but could increase the pay of all employees who qualify for performance-based pay increases at the end of the year. Authorities granted to pay pool managers can help the manager use pay to further motivate employees to perform their jobs. Allowing individual pay pool managers to influence the size of the pay pool pot, however, may prompt employees to believe the payout process is unfair – especially if they are in a pay pool with a manager that does not increase the funding pot. Moreover, if an employee is assigned to a pay pool with colleagues who have disparate job assignments, it may be difficult for a pay pool manager to define overall pay pool goals to which all employees could contribute equally. Some employees may believe that their job assignment may not affect whether pay pool goals are reached. Other employees may believe that their job assignment carries most of the burden toward reaching their assigned pay pool's goals. If Congress decides to authorize a performance-based pay system in the future, it may choose to remove the ability of pay pool managers to change the size of the funding pot for employees. Anonymous Pay Pool Ratings Performance-based bonus amounts in NSPS are determined by both a pay pool manager and pay pool panel, which is a collection of higher-level supervisors within DOD. Each pay pool is assigned its own pay pool panel. Employees are informed of which supervisors serve on their pay pool's panel. Some employees may personally know members of the pay pool panel or the pay pool manager, while other employees may not. NSPS policies do not require pay pool managers or panel members to remove employees' names from performance appraisals when they are using the rating scores to determine individual annual payouts. Keeping the names of employees visible during payout determination may cause certain employees to believe favoritism may influence pay pool panel decisions. If Congress chose to create a performance-based pay system in the future, it may consider removing the employee's name from a performance appraisal to eliminate concerns of favoritism toward a well-known and well-liked employee. Such action may also eliminate concerns of an employee who believes knowledge of his or her identity could harm the payout determination. Outlier Ratings Certain organizations within DOD may be staffed with employees who collectively perform either much higher, or much lower, than average units. These outlier units may be assigned to their own pay pool. If an outlier group consists of extraordinarily high-performing employees, then the performance-based pay increases for these employees may be less than that of employees with similar ratings in pay pools with colleagues who receive average rating scores. The pay pool is a finite amount of money from which to draw pay increases. If every employee achieves high ratings, the size of the pay pool remains the same. The size of an individual's share, however, may be less than an employee with a similar rating in a different pay pool if his or her pay pool colleagues all receive high ratings. The size of the pay pool's funding pot would remain constant whether the pool was high-performing or low performing. A pay pool that received comparatively low ratings (mostly 2s and 3s), therefore, may have members that receive a disproportionately high payout when compared to a colleague with a similar performance rating from an average or high-performing pay pool. An employee who received a rating of 3 in a low-performing pay pool may receive a payout equal to or greater than an employee who received a 4 in a higher-performing pay pool. Congress may consider NSPS's payout process the appropriate payout process, or it may choose to consider a different payout process if a performance-based pay system is authorized in the future. Performance-based pay system administrators may consider adding or subtracting funding from individual pay pools based on the average performance ratings of the individuals that compose the pay pool. In the case of a comparatively high-performing collection of workers, they could have additional funding added to their pay pool because their ratings were statistically higher than those of average or underperforming divisions. This pay increase would increase the payouts for those high-performing employees. Conversely, employees in comparatively low-performing divisions could have funding removed from their pay pool and decrease the payout for employees with statistically lower performance ratings. Money taken away from pay pools of lower-performing divisions could be reallocated into the pay pools of higher performing divisions. Adding such a provision to a performance-based pay system, however, may cause confusion and frustration among employees. The provision could prompt employees to believe that payout results are inconsistent and arbitrary, and based more on variations among supervisors' ratings approaches than on the relative strengths of individual pools. If employees do not believe their performance will lead to a pay increase of a sizeable value, the system may not operate properly. Additionally, because employee performance may stay consistent from year to year while payouts vary, employees may fail to see a solid link between their performance and their pay increase. Opportunities for Employee Grievance Pursuant to NSPS policy, an employee who is dissatisfied with his or her performance appraisal may request a reconsideration of the employee's rating within 10 days of receiving his or her rating by submitting "a written request for reconsideration to the pay pool manager." The request must include a copy of the rating and a statement clarifying which part of the rating is being challenged. Within 15 days of receiving the request, the pay pool manager is to render a written statement that explains his or her determination. If the employee remains unsatisfied, he or she may—within five days of receiving the pay pool manager's decision—submit a written request for final review with the Performance Review Authority (PRA), which oversees all pay pools and ensures consistency in performance and evaluations across the agency. The PRA has 15 days to respond to the request. Bargaining employees may also file a grievance under the agency's negotiated grievance process. Congress may consider the NSPS reconsideration process appropriate, or it may choose to consider other options for reconsideration in any future performance-based pay system. Some government agencies have created complaint-handling or internal ombudsman offices. Creation of an ombudsman-like office could serve as a resource for employees who believe the pay system is flawed or treated them unfairly. These offices can be designed in a variety of ways. Among the most essential design decisions are determining the powers and duties of the office, the jurisdiction of the office, and the office's location within a department or agency. The office's location would determine to whom the ombudsman would report any findings or recommendations. If, for example, the ombudsman reported to DOD officials, the office may have less influence than if it reported to the Secretary of Defense, President, or Congress. Other decisions to consider when designing an ombudsman's office are determining who would select and appoint the ombudsman, whether the ombudsman would serve as a neutral fact-finder or an employee advocate, and the office's annual budget. New Hires NSPS requires employees to work with supervisors at the beginning of the performance-appraisal year to determine goals for the year. A new hire, who serves at least his or her first year of federal service on a probationary period, may not have the necessary information available to determine achievable and effective work goals. Congress may consider the policies adopted by NSPS appropriate. On the other hand, Congress may choose to consider a different performance-based pay system design for future pay systems that could include additional performance-appraisal consultations for new hires during their probationary period. The additional consultations could be used to give probationary employees opportunities to discuss and modify the goals that they and their supervisor create. Congress also may consider requiring additional training for supervisors on how to help acclimate new hires to any federal pay system. Measuring Success DOD asked Congress to grant the department flexibilities from Title 5 of the U.S. Code to make the workforce more agile and effective. DOD, however, has not provided to Congress data that would clearly demonstrate the agency has been working toward the goals it sought to achieve when requesting workforce flexibilities. Congress may choose to directly ask for aggregate data on how many employees have been recruited under the NSPS pay system, how quickly employee pay increased in the pay band structure, and how many applications for promotion into a new pay band were processed. In addition, NSPS administrators could aggregate data on information already collected. For example, the Performance Appraisal Application requires supervisors to select the method by which they conduct each of the three annually required employee meetings. These data could demonstrate whether NSPS met its goal of encouraging employee-supervisor face-to-face interaction if they were looked at over time. NSPS has not aggregated such data to determine what percentage of employee performance appraisals are performed face-to-face, via telephone, or via computer. Such information may be helpful when attempting to design a more effective performance-based pay system. Workplace Incentives Currently, the federal government can offer its employees a variety of incentives to enhance job performance other than pay increases (5 U.S.C. 5753 and 5754), including retention, recruitment, and relocation incentives. As noted earlier, Congress could enact legislation that would modify Title 5 and create additional recruitment, retention, and relocation flexibilities for a majority of federal departments and agencies. Congress may choose to allocate more funding for existing incentives or enact laws that would create new incentives, giving agencies a variety of rewards for effective employee performance. Among many options is the possibility of permitting departments and agencies to offer additional vacation days or sick leave in order to attract and retain employees. Congress could also require federal employers to offer programs that help employees pay back school loans. Such programs may attract more recent graduates to federal service. Congress could also consider creating programs that would make child care more accessible to federal employees. Making child care more accessible to federal employees could make federal government an attractive option for potential employees starting a family. President Obama and the Office of Personnel Management have also announced their intention to seek health and other benefits for the domestic partners of employees involved in same-sex relationships. Adding new flexibilities to Title 5 could give all government agencies and departments a variety of new options to attract and retain effective federal employees. All of these options may require additional congressional appropriations, as well as changes or additions to existing federal statutes. Congress may also be concerned that such additional incentives may not be necessary during a time of increasing unemployment rates. Instead, the additional incentives could be made available only in federal agencies where there has been difficulty hiring or maintaining staff. Concluding Observations Congress created NSPS and granted DOD pay flexibilities to run the performance-based system. Many members have consistently been interested in ensuring that the federal government maintains a transparent and fair pay system that is trusted by administrators, supervisors, and employees. Unions have, historically, not favored pay-for-performance systems, and DOD's NSPS was no exception. Congress may use NSPS as a model—evidencing both good and bad experiences—for a federal workforce that may transition to a performance-based pay system in the future. NSPS has faced, solved, and failed to solve a variety of challenges in its attempt to attract and retain a high-quality workforce. Overall, NSPS serves as a demonstration of how elements of a performance-based pay system can work or cannot work in certain large federal agencies.

Most federal employees (59.8%) are paid on the General Schedule, a pay scale that consists of 15 pay grades in which an employee's pay increases are to be based on performance and length of service. Some Members of Congress, citizens, and public administration scholars have argued that federal employee pay advancement should be more closely linked to job performance. With explicit congressional authorization enacted in 2003, the Department of Defense (DOD) created the National Security Personnel System (NSPS) as a unique pay scale attempting to more closely link employee pay to job performance. NSPS has been plagued by criticisms since it went into effect in 2006. The system has faced legal and political challenges from unions and employees who claim it is inconsistently applied and causes undeserved pay inequities, among other concerns. On October 7, 2009, House and Senate conferees reported a version of the National Defense Authorization Bill for Fiscal Year 2010 that included language to terminate NSPS. On October 8, 2009, the House agreed to the conference report. The Senate agreed to the conference report on October 22, 2009. On October 28, 2009, the President signed the bill into law (P.L. 111-84). DOD must now return the employees currently enrolled in NSPS to the GS or to the pay scale in which they were previously enrolled. The return to the GS or other pay scales must be completed by 2012, pursuant to the legislation. NSPS was initially intended to cover all DOD employees, but has a current enrollment of roughly 211,000 civilian employees, or 29.4% of the department's 717,000-person workforce. Like other performance-based pay systems, NSPS makes job performance a predominant factor in determining employee pay. A supervisor and an employee who use NSPS are to work together to create an annual appraisal plan that accurately reflects an employee's performance. A supervisor then is to use the appraisal to evaluate the employee. At the end of each appraisal year, an employee may be assigned a percentage increase in pay based on his or her performance. These increases are called pay shares. Lower-performing employees may receive fewer pay shares or no pay shares. An employee must acquire at least a satisfactory performance rating to be eligible for any performance-based bonuses. This report reviews the creation of the NSPS, examines how NSPS operates, discusses litigation against it, and analyzes lessons that can be learned from NSPS as Congress decides whether to maintain the GS, create a new federal pay system, or modify existing ones. It will be updated as necessary.

Introduction The VH-71 program is intended to provide 23 new presidential helicopters to replace the current fleet of 19 aging presidential helicopters. As part of its proposed FY2010 Department of Defense (DOD) budget, the Administration proposed terminating the VH-71 program in response to substantial cost growth and schedule delays in the program. As a successor to the VH-71 program, the Administration proposed beginning a new presidential helicopter program in FY2010 called the VXX Presidential Helicopter Program. On May 15, 2009, Ashton Carter, the DOD acquisition executive, issued an internal DOD memorandum directing that the VH-71 program be cancelled. The Navy announced the same day that it had issued a stop-work order on the VH-71 program. On June 1, 2009, the Navy announced that it would terminate the main contract for the program, called the System Development and Design (SDD) contract. The Administration's proposed termination of the VH-71 program is one of the higher-profile program cancellations or reductions in the proposed FY2010 DOD budget, and has become an item of discussion in the debate on FY2010 defense funding. The issue for Congress is whether to approve the Administration's proposal to terminate the VH-71 program and initiate a successor VXX program, or pursue another course, such as continuing the VH-71 program in some restructured form. Congress's decision on the issue could affect DOD funding requirements, the schedule for replacing the 19 older helicopters, and the helicopter industrial base. Background Mission of Presidential Helicopters Presidential helicopters are operated by the Marine Corps in a squadron called Marine Helicopter Squadron One (HMX-1). DOD states that HMX-1 "is required to provide safe and timely transportation for the President and Vice President of the United States, heads of state and others as directed by the White House Military Office (WHMO)." In addition to providing the president and others with safe and timely transportation, presidential helicopters are equipped with specialized self-defense features and specialized communications systems that permit the president to carry out critical command functions while aboard. Presidential helicopters need to be large enough to carry a certain number of passengers and mission equipment, but small enough to operate from the White House lawn. Existing Presidential Helicopters The existing presidential helicopter fleet of 19 helicopters includes 11 VH-3D helicopters that achieved Initial Operational Capability (IOC) in 1975, and 8 VH-60N helicopters that achieved IOC in 1989. The helicopters have had their services lives extended and have been regularly upgraded over time. Examples of upgrades include new and more effective main rotor blades, improved communications, and better cockpit displays. A September 7, 2009, press report states that: the presidential helicopter program is busy with a service life assessment program to try to keep aging legacy VH-3 and VH-60 helos in the fleet for as long as possible, [Marine Corps Lt. Gen. George Trautman, deputy commandant for aviation] said. "Obviously the concern for HMX [Marine One] and me is that the VH-3s and the H-60s are being taken care of, and they are being taken care of," he said. "We're still going through service life assessment programs on both, so we're assessing what needs to be done." The program is also making some cockpit upgrades to the VH-60, as well as dealing with some cabin and structural issues to be expected on aging aircraft. "The H-60 is in pretty good shape," he said. "The H-3s are in good shape too, but what we're doing is ... [deciding] how much and what would need to be done if we had to extend their lives past about the 2018, 2019 time frame, if we had to do that." VH-71 Program6 Program Origin and Lead Service The VH-71 program traces back to the late-1990s, but was formally started earlier in this decade. HMX-1 submitted a Fleet Operational Needs document in March 1998. A Mission Needs Statement (MNS) was approved in September 1999. In November 2002, a White House memorandum stated a need to accelerate the effort. The Center for Naval Analyses (CNA) completed a presidential helicopter Analysis of Alternatives (AOA), meaning a comparison of acquisition alternatives, in July 2003. An Operational Requirements Document (ORD) was approved by DOD's Joint Requirements Oversight Council (JROC) in December 2003, and a DOD Acquisition Decision Memorandum (ADM) that same month directed a program that would provide replacement helicopters with an IOC of the first quarter of FY2009. The program received Milestone B/C approval—its initial milestone approval—on January 27, 2005. The VH-71 program was established with a sense of urgency. DOD officials argued at the time that in light of security issues raised by the terrorist attacks of September 11, 2001, replacing the existing presidential helicopter was an urgent matter. It was reported that White House officials repeatedly urged DOD to accelerate the VH-71 program, proposing an IOC by 2007. Numerous VH-71 program documents and statements by DOD officials referred to the "urgent need" to field a new presidential helicopter. The Navy is the lead service for the VH-71 acquisition program. The Navy and Marine Corps are organized under the Department of the Navy, and Marine Corps aircraft are acquired through the Navy's research and development and aircraft procurement appropriation accounts. Competition, Contract Award, and Contractors The Navy conducted a competition for the VH-71 program, which was earlier called the VXX program (not to be confused with the successor VXX program that the Administration is now proposing to initiate). The competitors for the program were industry teams led by Sikorsky and Lockheed Martin. Sikorsky, a leading U.S. helicopter manufacturer and the maker of the existing VH-3D and VH-60N presidential helicopters, submitted a bid based on Sikorsky's S-92 helicopter. Lockheed Martin submitted a bid based on the EH-101, a somewhat larger helicopter made by AugustaWestland, an Anglo-Italian helicopter manufacturer. The competition was closely followed by various observers, in part because of the prestige of being the maker of the helicopter used by the U.S. president, and also because the competition pitted a U.S. helicopter design against a European helicopter design. On January 28, 2005 (three days after the program received Milestone B/C approval), John Young, the Navy's acquisition executive, announced that the Lockheed-led team had won the competition. Navy representatives stated the Lockheed bid was chosen over the Sikorsky bid in part because the EH-101 was deemed more likely to be able to meet the program's operational requirements on time and at a lower cost. Some observer's criticized the Navy's award decision, in part because the winning team included foreign companies. The prime contractor for the VH-71 program is Lockheed Martin System Integration (LMSI) of Owego, NY. Lockheed's contract for the program, called a System Development and Design (SDD) contract, is a Cost Plus Award Fee (CPAF) contract. Major VH-71 program subcontractors include AugustaWestland of the UK and Italy, which is responsible for production of the basic VH-71 helicopter, and Bell Helicopter of Fort Worth, TX, which is responsible for VH-71 final assembly and logistics. Prime contractors for the existing fleet of VH-3D and VH-60N helicopters include Sikorsky of Stratford, CT, which manufactured the helicopters and operates a rework facility for them, and Rockwell Collins of Cedar Rapids, IA, which is responsible for VH-60N Cockpit Upgrade Program (CUP) avionics integration. General Electric of Lynn, MA, is a major subcontractor responsible for engines on both the VH-71 helicopter and the existing VH-3D and VH-60N helicopters. A November 17, 2009, press report states: Bethesda-based Lockheed Martin said Monday that it is revamping its missile-making Electronic Systems unit and appointing a new person to head it—moves that could result in an undisclosed number of job losses after the giant defense contractor lost two lucrative deals at its facility in Owego, N.Y. Lockheed said it will also realign the division, which makes the Aegis [air and] ballistic missile [defense system] and the Pac-3 surface-to-air guided missile, to improve operations and affordability. The company's ground-vehicle business will no longer report to Owego, where it was part of Systems Integration, but to Dallas, where it will be part of Missiles and Fire Control. The rest of Owego's business will become part of the company's Maritime Systems and Sensors division, which makes ships and radars. Lockheed cut nearly 1,000 jobs this year at its Owego operations after the Pentagon canceled several weapons systems, including the presidential helicopter program and a search-and-rescue helicopter, which were run out of Owego. Increment I and II Helicopters The goal of the VH-71 program is to provide 23 new presidential helicopters to replace the 19 existing presidential helicopters. The VH-71 program is divided into Increment I and Increment II helicopters. Increment I helicopters, which meet some but not all of the operational requirements in the VH-71 ORD, were to enter service first as near-term replacements for some of the existing presidential helicopters. Increment II helicopters, which were to fully meet the requirements in the VH-71 ORD, were to enter service later. The numbers of Increment I and Increment II helicopters to be acquired through the VH-71 program have changed over the life of the program. Just prior to the submission of the proposed FY2010 budget, the program included eight government-funded Increment I helicopters and 26 government-funded Increment II helicopters, for a total of government-funded 34 helicopters. The eight Increment I helicopters include three test aircraft not intended to enter operational service, and five pilot production aircraft intended to enter operational service as interim replacements for some of the existing presidential helicopters. The 26 Increment II helicopters include three test aircraft not intended to enter operational service, and 23 production aircraft intended to enter operational service. The VH-71 program as of early-2009 also included a fourth Increment I test aircraft that was funded by industry, and a fourth Increment II test aircraft that would be funded by industry. Including these two industry-funded test aircraft would make for a total of 36 industry- and government-funded aircraft, including nine Increment I aircraft and 27 Increment II aircraft. At an earlier stage in the VH-71 program, four of the five pilot production Increment I helicopters were to be retrofitted to the Increment II standard (the fifth is to be used for live-fire testing), and 19 additional Increment II helicopters were to be procured, making for a total of 23 new and retrofitted Increment II helicopters. The program was subsequently changed to drop the plan for retrofitting four pilot production Increment I helicopters and to purchase 23 new Increment II helicopters instead. Program Funding Location in Budget The VH-71 program has been funded through the Navy's research and development appropriation account, known formally as the Research, Development, Test & Evaluation, Navy (RDT&EN) account. The funding is contained in Program Element (or PE, meaning line item) 0604273N in the RDT&EN account, entitled VH-71A Executive Helo (i.e., helicopter) Development. The program was to be funded in future fiscal years through both the RDT&EN account and the Navy's aircraft procurement appropriation account, known formally as the Aircraft Procurement, Navy (APN) account. There is also some military construction (MilCon) funding associated with the VH-71 program for the construction of VH-71-related facilities. FY2009 Funding The Navy requested a total of $1,047.8 million for the VH-71 program in FY2009. Congress appropriated $835.0 million—a reduction of $212.8 million from the request. The reduction came from $312.8 million that was requested for the Increment II portion of the program, leaving $100 million for Increment II. Following enactment of the FY2009 defense budget, DOD adjusted the appropriated figure of $835 million downward to $831.8 million. FY2010 Funding Request The Navy's proposed FY2010 budget requested $85.2 million for the VH-71 program, all of which is in PE0604273N of the RDT&EN account. Of this total, $55.2 million is for Increment I, for use in terminating the program, none is for Increment II, and $30 million is for initial studies on the proposed successor VXX program. Obligations and Expenditures of Prior-Year Funding As of April 10, 2009, about $3.3 billion in funding had been obligated for the VH-71 program (including about $3.1 billion in RDT&E funding and about $179 million in MilCon funding), and about $2.9 billion had been expended (including about $2.7 billion in RDT&E funding and $171 million in MilCon funding). Of the $831.8 million in FY2009 funding for the program, the Navy as of May 12, 2009, had obligated $709.2 million and expended $288.2 million. Cost Growth and Schedule Delays Cost Growth and Nunn-McCurdy Breach The estimated total acquisition (i.e., development plus procurement) cost of the VH-71 has grown considerably over time. In January 2005, the program's total acquisition cost was estimated at about $6.5 billion in then-year dollars. In January 2008, it was estimated at about $11.2 billion in then-year dollars. In December 2008, it was estimated at about $13.0 billion in then-year dollars—twice the January 2005 estimate. The figure of about $13.0 billion in then-year dollars translates into about $11.9 billion in constant FY2009 dollars. Of the total estimated acquisition cost of $13.0 billion in then-year dollars, about $9.9 is RDT&EN funding, $2.9 billion in APN funding, and about $200 million in MilCon funding. Of the $9.9 billion in RDT&EN funding, about $4.6 billion is for Increment I and about $5.3 billion is for Increment II. The total estimated cost of the Increment II aircraft would appear to be about $8.2 billion (this includes the $2.9 billion in APN funding, which appears to be for Increment II aircraft only, plus the $5.3 billion in RDT&EN funding for Increment II). The growth in the program's estimated total acquisition cost led to what is known as a Nunn-McCurdy breach, meaning a growth in cost sufficient to trigger the Nunn-McCurdy provision (10 USC 2433), which requires DOD to notify Congress whenever a major defense acquisition program breaches an established cost overrun threshold. Programs that experience a Nunn-McCurdy breach face cancellation unless they are certified for continuation by the Secretary of Defense. DOD notified Congress of the program's Nunn-McCurdy breach in late-January 2009. Schedule Delays The VH-71 program has experienced significant schedule delays, and estimated dates for having VH-71s enter operational service are now years beyond what was originally planned. Under the original program milestones for the VH-71 program, the Increment I helicopters were to achieve IOC at the start of FY2009, the Increment II helicopters were to achieve IOC toward the end of FY2011, and the VH-71 fleet was to achieve full operational capability (FOC) in mid-FY2015. As of early 2009, the date for Increment I IOC had slipped to mid-FY2012 (a delay of about three and a half years), the date for Increment II IOC had slipped to late-FY2019 (a delay of almost eight years), and the FOC date had slipped to late FY2021 (a delay of more than six years). Some observers believe that cost growth and schedule delays in the VH-71 program were made likely by the program's aggressive original schedule, which in turn reflected the view that there was an urgent need to replace the 19 existing presidential helicopters. Status of Increment I Aircraft14 The nine Increment I aircraft include four test vehicles (TVs), one of which was industry-funded and the others government-funded, and five pilot production (PP) aircraft, all of which were government-funded. As of June 17, 2009, the status of these nine aircraft was as follows: TV-4—the industry-funded test vehicle—was complete and about 75% missionized (i.e., equipped with mission-related systems). TV-3 was located at the Naval Air System Command's facility at Patuxent River, MD. It was complete and 100% missionized. TV-2 and TV-5 were also located at Patuxent and were being used as air-quality trainers, meaning that they flew for purposes such as vibration testing and evaluation of handling characteristics. They were complete as aircraft, but were not missionized. PP-2 and PP-5 were located at Patuxent and were being used for test flights. They were complete as aircraft, but were not missionized. PP-1, PP-3, and PP-4 were located at Owego, NY. They were in various stages of disassembly for the purpose of being missionized, but no missionization had been accomplished. March 2009 GAO Report A March 2009 Government Accountability Office (GAO) report on the status of various DOD major weapon acquisition programs stated the following in its entry on the VH-71 program: Technology Maturity and Design Maturity Increment I of the VH-71 program is nearing technology maturity and design stability. A January 2004 Technology Readiness Assessment concluded that there are no critical technologies on the program. One of the two critical technologies originally identified by the program—the Communication and Subsystem Processing Embedded Resource Communication Controller—has been tested in a laboratory setting, but not demonstrated in a realistic environment. As of May 2008, about 90 percent of expected Increment I engineering drawings were released. For Increment II, no critical technologies have been identified. Program officials estimate roughly 50 percent of the Increment I and II designs will be common. The most significant differences will be a new engine, transmission, and main rotor blade. The Increment II blade will be larger than Increment I, and will employ a new design, which has been implemented on another aircraft but must be scaled up by 30 percent. Production Maturity Increment I production is underway, but concurrent design, production, and testing continues to drive program risk. Although VH-71 officials have identified metrics to evaluate production, they said that they have not been able to set specific targets for these measures because of continued design iterations. Program officials reported some quality concerns with the initial aircraft, including foreign object debris, but DCMA officials noted that these issues are of concern only because of the rigorous standards of a presidential aircraft, and would not otherwise be seen as problems. The program office is flight testing two Increment I aircraft. Delivery of the first missionized test article is expected in April 2009, which will allow testing of the aircraft's integrated systems. Other Program Issues The VH-71 program began with a compressed schedule dictated by White House needs stemming from the September 11, 2001, terrorist attacks. According to the program manager, this aggressive acquisition strategy included a source selection process that was shorter than desired and contributed to confusion regarding specifications between the program office and the contractor and concurrent design, testing, and production that resulted in increased program risk, an unsustainable schedule, and inaccurate cost estimates. As a result of continued cost growth, program officials expect to initiate the certification process for a critical Nunn-McCurdy breach in January 2009. Increment II is being restructured and the VH-71 program office recently requested a proposal from Lockheed Martin to modify its existing contract to reflect the restructured program. The program faces significant challenges due to funding instability. Fiscal year 2008 budget reductions slowed program progress, and a stop work order has been in place for Increment II since December 2007. In addition, the joint statement accompanying the 2009 Defense Appropriation Act recommended $212 million less funding than requested for Increment II. According to program officials, this will prevent any Increment II work during fiscal year 2009 and result in a further 18-month delay in Increment II initial operating capability beyond the fiscal year 2017 date anticipated in the proposed restructured schedule. Officials also said the shortfall would cause about $640 million in cost growth above the $11.2 billion estimated total program cost. Increment I aircraft will have a short service life of 1,500 hours compared to the 10,000-hour service life of Increment II aircraft. The program manager estimated that remedies to extend use of Increment I aircraft would take about 4 years to implement, making this approach of limited use to address delays in Increment II availability. According to program officials, the short service life is in part because Increment I lacks some redundant fail-safe design elements. Program officials have requested funding for a fatigue test article, but they stated that it would take 2 years to assess fatigue problems and another 2 years to develop remedies. Program Office Comments In commenting on a draft of this assessment, the Navy stated that the program is executing an accelerated schedule driven by an urgent need to replace existing aging assets. Concurrency in development, design, and production was necessary to meet the accelerated schedule, but Increment II will follow a more typical acquisition approach. The Navy reported that significant production maturity has been demonstrated for Increment I, including the first flights of two pilot production aircraft. Proposed Cancellation of VH-71 Program February 23 Remarks by President Obama On January 23, 2009, President Obama stated that he thought the VH-71 program was "an example of the procurement process gone amuck." Obama's comments led some observers to speculate that the Administration might propose the termination of the program as part of its FY2010 budget submission. April 6 Announcement by Secretary Gates On April 6, 2009, Secretary of Defense Robert Gates announced a series of recommendations he was making to the president regarding the Administration's proposed FY2010 defense budget. Among these, he said, was a recommendation to terminate the VH-71 program. In his announcement, Secretary Gates stated that: In today's environment, maintaining our technological and conventional edge requires a dramatic change in the way we acquire military equipment. I believe this needed reform requires three fundamental steps. First, this department must consistently demonstrate the commitment and leadership to stop programs that significantly exceed their budget or which spend limited tax dollars to buy more capability than the nation needs.... Second, we must ensure that requirements are reasonable and technology is adequately mature to allow the department to successfully execute the programs. Again, my decisions act on this principle by terminating a number of programs where the requirements were truly in the "exquisite" category and the technologies required were not reasonably available to affordably meet the programs' cost or schedule goals. Third, realistically estimate program costs, provide budget stability for the programs we initiate, adequately staff the government acquisition team, and provide disciplined and constant oversight. We must constantly guard against so-called "requirements creep," validate the maturity of technology at milestones, fund programs to independent cost estimates, and demand stricter contract terms and conditions. I am confident that if we stick to these steps, we will significantly improve the performance of our defense acquisition programs. But it takes more than mere pronouncements or fancy studies or reports. It takes acting on these principles by making tough decisions and sticking to them going forward.... Fully reforming defense acquisition also requires recognizing the challenges of today's battlefield and constantly changing adversary. This requires an acquisition system that can perform with greater urgency and agility. We need greater funding flexibility and the ability to streamline our requirements and acquisition execution procedures. The perennial procurement and contracting cycle—going back many decades—of adding layer upon layer of cost and complexity onto fewer and fewer platforms that take longer and longer to build must come to an end. There is broad agreement on the need for acquisition and contracting reform in the Department of Defense. There have been enough studies. Enough hand-wringing. Enough rhetoric. Now is the time for action. First, I recommend that we terminate the VH-71 presidential helicopter: • This program was originally designed to provide 23 helicopters to support the president at a cost of $6.5 billion. Today, the program is estimated to cost over $13 billion, has fallen six years behind schedule, and runs the risk of not delivering the requested capability. • Some have suggested that we should adjust the program by buying only the lower capability "increment one" option. I believe this is neither advisable nor affordable. Increment One helicopters do not meet requirements and are estimated to have only a five- to 10-year useful life. This compares to the current VH-3 presidential helicopters that are 30 to 40 years old. • We will promptly develop options for an FY11 follow-on [presidential helicopter] program. FY2010 Budget Submission The Administration's proposed FY2010 budget, with its proposal to terminate the VH-71 program and initiate a successor VXX program, was submitted to Congress in early May 2009. The Administration's FY2010 budget submission includes a document summarizing program terminations, reductions, and savings. The document's entry on the VH-71 program stated: The VH-71 program is six years behind schedule, and its cost has grown from $6.5 billion to over $13 billion. Over $3.2 billion has already been spent on this program with no operational aircraft delivered. The Government Accountability Office has warned that future costs of the VH-71 are unknown, and the Congressional Research Service has raised the question if the current program should be cancelled. These high costs and schedule slippage have occurred because of challenging program requirements and an ambitious schedule. Instead of continuing to pursue the current program, the Administration proposes to cancel it, review requirements, and establish a new program. A new Presidential Helicopter replacement program will allow the Administration to take advantage of new technologies and develop a helicopter that is fiscally responsible while still meeting the President's requirements. Funding in 2010 will cover termination costs, Government efforts to develop options for a Presidential Helicopter replacement program, and service life extensions for the current Presidential Helicopter fleet. May 15 Termination Memorandum and Navy Stop-Work Order On May 15, 2009, Ashton Carter, the DOD acquisition executive, issued an Acquisition Decision memorandum (ADM)—an internal DOD memorandum—directing that the VH-71 program be cancelled. The Navy announced the same day that it had issued a stop-work order for both Increment I and Increment II of the VH-71 program. A press report on the Navy's announcement stated: "The Naval Air Systems Command Contracting Office directed stop-work on all activities associated with VH-71 Systems Design and Demonstration requirements, with the exception of security requirements and protection of government property, information and equipment during the orderly transition of these functions to the government," Navy spokesman Lt. Clay Doss said in a statement. The order allows the government to reduce program expenditures and secure property and equities for future decisions on the presidential helicopter program, Doss said. He attributed the cancellation to cost growth that breached thresholds set by the Nunn-McCurdy act. A comprehensive program review that took place during the development of the fiscal year 2010 president's budget submission led to its cancellation. "The Navy will begin to develop options for a presidential helicopter replacement program and present these to the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics within 30 days," Doss' statement reads. He added that the FY-10 budget submission, released earlier this month, includes money for service life extensions of legacy presidential helicopters and to develop options for the presidential helicopter replacement program. "The Navy continues to review a range of options regarding for already-built VH-71 aircraft to include sales to interested parties, contractor buy-back or potential applications to other [Pentagon] needs," Doss said. June 1 Announcement of Intent to Terminate On June 1, 2009, the Navy announced that it would terminate the main contract for the VH-71 program, called the System Development and Design (SDD) contract. A news report on the announcement from the Navy's news service stated: The Navy announced June 1 that it will terminate the VH-71 System Development and Demonstration (SDD) program contract. The announcement follows a Department of Defense (DoD) decision to cancel the existing presidential helicopter replacement program. The VH-71 was intended to replace both the VH-3D and VH-60N aircraft currently used to conduct presidential support missions. Navy contract N00019-05-C-0030 and associated work with Lockheed Martin Systems Integration—Owego (LMSI-O), Owego, N.Y., awarded Jan. 28, 2005, for the SDD of the VH-71 program, has been terminated for the convenience of the government. The under secretary of defense for acquisition, technology and logistics issued a VH-71 program acquisition decision memorandum May 15, 2009, which directed the program be cancelled, to include both Increment 1 and Increment 2. Estimated Cancellation and Termination Costs The Navy in February 2009 estimated the liability costs for terminating the VH-71 program at $555 million, including $405 million for Increment I and $150 million for Increment II. The Navy further stated that program-cancellation costs beyond these estimated termination liability costs had not yet been determined. The Navy stated in May 2009 that all prior-year funding available for the VH-71 program would be needed to cover costs associated with terminating the program. The $55.2 million in FY2010 funding requested for Increment I is also requested to cover costs associated with terminating the program. Disposition of Existing VH-71 Aircraft A September 7, 2009, press report states that: Lockheed has already built some VH-71 aircraft. No decision has been made yet on what to do with them, though, according to Naval Air Systems Command spokeswoman Stephanie Vendrasco. "The Navy continues to review a full range of options regarding the future of already-built VH-71 aircraft to include, but not limited to, sales to interested parties, contractor buy-back and potential applications to other [Defense Department] needs," she said in a Sept. 2 e-mail in response to questions from [ Inside the Navy ]. Proposed VXX Successor Program In General27 The Administration's proposed successor VXX Presidential Helicopter Program is not yet defined. At a May 20, 2009, hearing before the Defense subcommittee of the House Appropriations Committee on the proposed FY2010 DOD budget, Secretary Gates stated that one idea "worth pursuing" would be to procure two different presidential helicopters—"one that the president basically uses here in town to go to Andrews [Air Force Base] and on regular trips here in the United States and things like that, and an escape helicopter that has different kinds of capabilities and that could perhaps be a modified kind of helicopter that we use now in combat." Gates stated that "all of the [performance] requirements that are being placed on this helicopter may not be feasible in a single helicopter and maybe we look at one for escape and one for regular everyday use." A September 7, 2009, press report states: Navy leadership is casting a "very wide" net as the Pentagon mulls its options for the next-generation presidential helicopter to replace the terminated VH-71 program, according to Marine Corps Lt. Gen. George Trautman, deputy commandant for aviation. After the VH-71 program was canceled earlier this year due to cost increases and schedule delays, the Navy went back to referring to the next-generation Marine One helicopter as VXX. Inside the Navy [ITN] reported in April that the government had talked to Sikorsky, manufacturer of the H-92, the runner-up from the original competition. Trautman told ITN on Aug. 28 that all options are on the table. "The net is being purposely cast very wide," Trautman said. "So literally, all options are being assessed by this team, and they'll narrow it down as they do their work. They'll narrow down to the feasible best options and those will be assessed by senior leaders. The White House is obviously involved in that endeavor." The acquisition and requirements communities "are working very hard" on the issue, he said. "It's at the one-star level," he said. "What they're trying to do is move forward on essentially an analysis of alternatives process very quickly. That's probably a 30-, 45-, 60-day process, and so all they're doing is canvassing the whole landscape to see what the alternatives are, and then we'll go to the next stages of the acquisition process. "You really want to go through these steps so that you make a wise decision about where we're going to go next," he continued. The group reports its findings to Sean Stackley, the assistant secretary of the Navy for research, development and acquisition, and Ashton Carter, the under secretary of defense for acquisition, technology and logistics, Trautman said.... Trautman said the Pentagon will have to decide on a Marine One replacement program soon in order to get the new helicopter to the fleet by about 2019. An October 9, 2009, press report states: The next U.S. presidential helicopter program will cost less than the $13-billion program that was canceled because of its excessive price tag, the Pentagon said on Friday. "We are not going to pursue a program that costs more than the VH-71 program," Pentagon Press Secretary Geoff Morrell told reporters. He said the Pentagon was still reviewing options but hoped to have the new helicopters fielded by 2020.... Morrell said the Pentagon was still in the initial stages of working through what the follow-on program should look like. Some options have been laid out, Morrell said, but added: "None of those options comes close to the $20 billion figure, and frankly, for that matter, none of them comes close to the cost of the canceled program." Another October 9, 2009, press report states: "The notion that we are somehow considering a follow-on program to the VH-71 that would cost $20 billion is simply not true," [Pentagon spokesman Geoff] Morrell said. "We are not going to pursue a program that will cost more than the current program." Morrell also said it would cost far more than $500 million to finish off the five helicopters that are already partially made. Building just those choppers "will cost us between $2 billion and $3 billion," Morrell said. "To complete all 23 helicopters, it will cost us $8 billion." Besides, that type of helicopter wouldn't meet the president's needs, he said. "It's basically useless to us. There's nothing salvageable about that program," Morrell said. "They are not suitable for the presidential fleet." An October 12, 2009, press report states: The Navy plans to extend the service lives of the current fleet of aging presidential helicopters instead of spending billions to field five of the canceled VH-71 aircraft built by Lockheed Martin, a sea service official told Inside the Navy last week. "When the VH-71 contract was terminated in June, the estimated cost to complete development, test and squadron stand-up for the five increment 1 pilot-production aircraft was greater than $2 billion," the Navy official, who spoke on the condition of anonymity, said. "That estimate is significantly higher today and continues to increase. "The new program is being structured from its inception to cost less than the VH-71 program, including sunk costs," the source continued. "A preliminary examination of the broadest possible range of alternatives has already discarded the high-cost approaches. Because it will take time to properly establish the new program, the Navy will extend the current mission aircraft at a cost of approximately $500 million. "This will continue to provide 19 mission capable aircraft until the replacement program can be fielded, which is more cost-effective for the Navy and the nation than spending billions to qualify and field the five increment 1 aircraft," the source added.... However, the Navy official said the first increment of VH-71 aircraft were not intended for long-term service and the aircraft do not meet the full operational requirements. "To operationalize the increment 1 aircraft for long-term service, significant technical modifications to the aircraft would be required and the VH-71 contract would have to be significantly restructured," the official said. "In view of the significant technical shortfalls, structural modifications required and the inescapable fact that the aircraft does not meet requirements, the Navy has found continued investment in an interim, partial solution, such as increment 1, is not an affordable solution for a replacement presidential helicopter program…." The Navy's fiscal year 2010 budget request includes $85.2 million for terminating the program and to fund the early steps of development of a new presidential helicopter program. If the president and Congress approve the appropriations request, the Navy will move forward with an analysis of alternatives study to determine the way forward. "The analysis of alternatives will provide solid projections of the cost and schedule for each alternative considered, informing our selection of the best way forward," the official noted. In August, the Navy completed an initial capabilities document for VXX. This document established "preferred values" for what had previously been firm requirements, the source explained. "This allows expansion of the trade space in considering more affordable alternatives," the official noted. VXX Initial Capability Document (ICD) of August 6, 2009 DOD has produced an Initial Capability Document (ICD) for the VXX program, dated August 6, 2009, and approved by DOD's Joint Requirements Oversight Council (JROC) on that date, that includes the following points, among others: "The VXX replacement(s) as a standalone (single TMS) or in the aggregate (multiple TMS) must fill these [VXX] mission requirements completely." "The end of the operational service life of the current in-service fleet of VH-3D/VH-60N aircraft begins in approximately 2017. Coupled with this fact and the capability shortfalls of the existing fleet, an IOC in the 2017 time frame is preferred and platform(s) will require support through the anticipated life cycle of approximately 40 years." "The VXX must be maintainable and upgradeable to keep pace with projected aviation standards and requirements." "Previously conducted analysis identified platform, interior, and communications systems capability gaps" in the existing presidential helicopter fleet in 18 areas. These capability gaps are caused by several factors, including the age and inherent limitations of the existing helicopters. Capability metrics for the presidential helicopter fleet, and "preferred values" for these metrics, include the following, among others: 14 passenger seats, an ability to fly or land with one engine inoperative, a certain range for administrative lift missions and a certain longer range for contingency missions, and a high availability rate. "The analysis to date concluded that there were no non-materiel approaches that would significantly improve or resolve the capability gaps. Due to advances in technology coupled with the age and status of the current platform[,] non-materiel solutions cannot fill the capability gaps present. Additionally, numerous policy and procedural measures have been undertaken to improve the efficiency and effectiveness of the current platform(s) since initial delivery. These have been stopgap solutions; but have necessitated greater aircrew workload. Non-materiel approaches are no longer effective due to analog systems, physical limitations of the platform(s), and aging platform(s) airframes and systems with increased maintenance requirements." "Based upon the analysis to date there are no non-materiel recommendations that should be considered for implementation." "The following are the materiel approaches identified in the analysis to correct/mitigate some or all of the identified platform, interior, and communications gaps[:]... "Product Improvement Program. Platform(s) currently or programmed to be in the DOD inventory could be improved to satisfy the requirement.... "Non-developmental Approach. A commercially available, non-developmental item could be procured.... "Research and Development (R&D). A R&D (clean sheet) effort could be initiated to meet this requirement.... "Other Service Program. No other service is assigned the vertical lift requirement for Presidential support and WHMO operations." "Three materiel approaches from the analysis to date each satisfy the capability gaps to varying degrees of effectiveness." "Capability gaps have been identified and the analysis to date recommends three viable materiel approaches to resolve the identified gaps. An AoA to address these capability gaps has been previously completed, however; due to age of the data and evolution of required capabilities[,] an update is warranted." Potential VXX Options Range of Potential Airframe Options There are several potential airframe options for new presidential helicopters, including but not limited to the following: a new, "clean sheet" helicopter designed specifically for the VXX program; the VH-71 Increment I or Increment II designs, or variations thereof; existing military or civilian helicopters other than the VH-71, of which there are several; and the V-22 tilt-rotor aircraft, which can takeoff and land vertically like a helicopter. A fleet of new presidential helicopters could consist entirely of a single helicopter type, as envisioned in the VH-71 program, or consist of more than one type, like the current presidential helicopter fleet. A November 24, 2009, press report states: The Pentagon's top acquisition official said Monday that the military has begun drawing the outlines of a new presidential helicopter program.... Acquisition chief Ashton Carter said he hoped to have an acquisition strategy in place for the new program by the spring.... Carter told reporters that the White House has been presented with a number of options and trade-offs to consider. He said that where there were once 48 "alternative program approaches," the Pentagon and the White House now are considering 17. Carter said some of the trade-offs affect the aircraft's range, payload and communications as well as the number of passengers it can carry. The Pentagon and White House are also examining approaches that would involve the use of different types of helicopters, as well as varying numbers of aircraft. He said it might be preferable to adapt an existing helicopter to do the job. The problem faced by the VH-71 program was the "piling on of requirements" that sent costs beyond expectations, Carter said. He said the Pentagon was looking at a program that would require "a lot less money than the canceled program would have cost." Notional Options in May 2009 Navy Briefing43 A May 2009 Navy briefing provided preliminary information on some notional options for presidential helicopters, as the options were understood at that time. These options included: a new VXX helicopter acquisition program with a certain notional acquisition strategy; continuing with the VH-71 program in more or less its current form—with program restructuring (e.g., schedule adjustments) as required to take recent program developments into account—and procuring 23 Increment II aircraft; restructuring the VH-71 program to one that would provide a total of 23 Increment I aircraft, including the five pilot production Increment I aircraft already procured, plus 18 additional Increment I aircraft; and upgrading and extending the service life of the 19 existing presidential helicopters, and pursue no new presidential helicopter program of any kind, at least for the next several years. Each of these options is outlined briefly below. New VXX Helicopter with a Certain Notional Acquisition Strategy The Navy briefing stated that one possibility for a new VXX program would be a program that maintained a competition between two contractors (e.g., Lockheed and Sikorsky) through the preliminary design review (PDR) stage of a new helicopter, and then procured 27 aircraft—four test aircraft not intended to enter operational service, and 23 production aircraft. The briefing estimated that under such an approach, the production aircraft might achieve IOC around FY2024, and FOC around FY2026. The production aircraft would presumably be intended to meet all of the operational requirements established for the new program, which might equate to something less than, equal to, or greater than the operational requirements in the VH-71 ORD. The briefing estimated the acquisition cost of such a program at $10 billion to $17 billion, depending on the operational requirements that are established for the program, and not including sunk costs of the VH-71 program of more than $3 billion. This estimate included the cost of reviewing operational requirements and conducting a new AOA, and of maintaining two contractors through PDR. It did not include costs to keep the 19 existing presidential helicopters in operation until they are replaced by new helicopters. Continue with VH-71 Program in More or Less Current Form The Navy briefing stated that under this option, 23 Increment II aircraft would be procured. The briefing estimated that under this option, the aircraft might achieve IOC in late FY2019, and FOC in late FY2021. The aircraft would be intended to fully meet the operational requirements in the VH-71 ORD. The briefing estimated the acquisition cost of this option at $13 billion (or more), including sunk costs on the VH-71 program of more than $3 billion, leaving a potential net cost going forward of about $10 billion (or more). This estimate did not include costs of keeping the 19 existing presidential helicopters in operation until they are replaced by new helicopters, the cost of taking steps to reduce the weight of the Increment I pilot production aircraft so as to make them more effective during the time that they are in operation pending the delivery of Increment II aircraft, additional support costs for Increment I aircraft, and the effects on total program cost resulting from recent decisions regarding the VH-71 program, such as the May 15, 2009, stop-work order. Restructure VH-71 Program to One That Provides 23 Increment I Aircraft The Navy briefing stated that under this option, 18 Increment I aircraft would be procured. These 18 aircraft, plus the five pilot production Increment I aircraft, would make for a total fleet of 23 Increment I aircraft. The Navy estimates that the aircraft might achieve IOC in mid-2012, and FOC in late FY2019. The aircraft would meet some but not all of the operational requirements in the VH-71 ORD. The Navy estimates the acquisition cost of this option at $9.4 billion, including Increment II termination costs and sunk costs on the VH-71 program of more than $3 billion, leaving a potential net cost going forward of less than $6.4 billion. The estimate did not include costs of keeping the 19 existing presidential helicopters in operation until they are replaced by new helicopters, the cost of a potential follow-on program to eventually replace the Increment I helicopters with new helicopters, and performance modifications to Increment I helicopters. A variation on this option that was not detailed in the Navy briefing would be to procure 14 (rather than 18) additional Increment I aircraft, and combine these 14 aircraft with the five pilot production Increment I aircraft to produce an Increment I fleet of 19 aircraft—the same number of aircraft as in the current presidential helicopter fleet. The acquisition cost of this option would be hundreds of millions of dollars less than that of the previous option due to the avoidance of costs associated with procuring four Increment I aircraft. Upgrade and Extend Lives of Existing Helicopters; No Acquisition Program The Navy briefing stated that under this option, the 19 existing presidential helicopters would be upgraded and their service lives would be extended. The briefing stated that the VH-60Ns would have their service lives extended from 10,000 flight hours to 12,000 flight hours, providing another 6.9 years of operation, and the VH-3Ds would have their service lives extended from 14,000 hours to 16,000 hours, providing another 6.7 years of operation. No new acquisition program for presidential helicopters would be pursued, at least for the next several years. The 19 existing aircraft would not meet at least some, and perhaps many, of the operational requirements in the VH-71 ORD. The Navy briefing estimated the cost of this option at $4.4 billion, including VH-71 program termination costs and sunk costs on the VH-71 program of more than $3 billion, leaving a net cost going forward of less than $1.4 billion. This option did not include the cost of a potential follow-on program to eventually replace the 19 existing helicopters with new helicopters. Issue For Congress Administration's Proposal A primary issue for Congress is whether to approve the Administration's proposal to terminate the VH-71 program and initiate a successor program, or pursue another course. Factors to Consider In assessing this issue, factors to consider include but are not limited to the following: operational requirements for presidential helicopters, including which of these requirements should be mandatory (i.e., "must have") or preferred (i.e., "nice to have," but not mandatory), and how these operational requirements compare to those used for the VH-71 program; characteristics of potential presidential helicopter programs based on various airframe options, including costs (development, procurement, and life-cycle operation and support), operational capabilities (including potential for accepting future upgrades), potential IOC and FOC dates, and development risks, the feasibility, costs, and operational implications of extending the service lives of the existing presidential helicopters by various amounts of time; and potential implications for the helicopter industrial base. Notional Arguments Supporters of the Administration's proposed course of action could argue the following: Terminating the VH-71 program would improve future DOD acquisition practices by sending a signal to both the services and industry that programs that experience significant cost growth and schedule delays will be subject to termination. A successor VXX program could be structured to incorporate best practices in acquisition, including reasonable rather than overly aggressive program goals and the use of mature technologies. Establishing a new VXX program would provide an opportunity to review operational requirements for presidential helicopters, eliminating excessive requirements, and permit the use of competition between industry teams to identify the most cost-effective solution. Increment I helicopters would not fully meet the operational requirements for future presidential helicopters, creating operational risk, could have limited service lives (meaning that a program for new replacement helicopters would still be needed), could pose significant supportability challenges, and would have limited or no capacity to accept future upgrades. The past history of upgrades and service life extensions of the 19 existing presidential helicopters suggests that these helicopters can continue to be upgraded and extended until they are replaced by new VXX helicopters. Supporters of certain potential alternatives to the Administration's proposed course of action—particularly the option of continuing the VH-71 program in some restructured form—could argue one or more of the following: Terminating the VH-71 program would waste more than $3 billion in sunk VH-71 costs, including five pilot production Increment I aircraft that are built and were scheduled to enter operational service. Continuing the VH-71 program and procuring Increment II aircraft is the option that offers the lowest technical and schedule risk for procuring new helicopters that fully meet the operational requirements in the VH-71 ORD. A new VXX program could cost as much, if not more, than continuing the VH-71 program, and new VXX helicopters would enter service later than Increment II (or additional Increment I) helicopters, requiring the 19 existing presidential helicopters, which do not meet requirements for future presidential helicopters, to be kept in service longer. The ability of the 19 existing presidential helicopters to accept future upgrades is not certain, since some of those upgrades are not yet fully defined, and there may be unknown technical risks associated with attempting to extend their service lives until they would be replaced by VXX aircraft. A past history of successful upgrades and service life extensions does not guarantee that additional upgrades and service life extensions would be feasible or cost effective. A review of operational requirements for presidential helicopters is unlikely to lead to major changes from operational requirements in the VH-71 ORD, meaning that a new VXX helicopter would be very similar to a VH-71, except that its IOC and FOC could occur years later. Increment I helicopters could be certified for substantial service lives if funding is provided for the necessary testing and certification, and while Increment I helicopters would not fully meet operational requirements in the VH-71 ORD, they could meet enough of them to represent a cost-effective compromise between desired performance and affordable procurement. Increment I helicopters could also be upgraded (either during original construction or at a later point) to meet more of the operational requirements in the VH-71 ORD. DOD's Understanding of Alternatives When VH-71 Cancellation Was Proposed Another potential issue for Congress concerns DOD's understanding earlier this year of potential alternatives to the VH-71 program (including both a restructured VH-71 program or VXX programs based on alternate airframes). At the time DOD proposed the cancellation of the VH-71 program, how well did DOD understand the potential costs, operational capabilities, IOC and FOC dates, and development risks of these alternatives? If DOD earlier this year did not understand potential alternatives to the VH-71 program very well in terms factors such as these, then how firm was the analytical basis for DOD's decision to propose canceling the VH-71 program? President's February 23 Remarks Another potential issue for Congress concerns the president's remarks on February 23, 2009 (see " February 23 Remarks by President Obama "), in which he stated that that he thought the VH-71 program was "an example of the procurement process gone amuck." A potential question for Congress is whether this remark made it difficult for DOD, in preparing the proposed FY2010 defense budget, to consider any option other than canceling the VH-71 program, or to consider completing the five existing Increment I VH-71s and putting them into operation as presidential helicopters, and, if so, whether this distorted DOD decision making regarding the VH-71 program. Causes of VH-71 Cost Growth and Schedule Delays Another potential for Congress concerns the causes of cost growth and schedule delays in the VH-71 program. To what degree were cost growth and schedule delays in the VH-71 program due to potential causes such as unrealistically low initial cost estimates, growth in requirements (or sticking with overly ambitious requirements), insufficiently mature technologies, schedule compression resulting from a sense of urgency, unclear lines of authority and responsibility between the Navy and the White House in managing the program, or contractor performance? Legislative Activity in 2009 FY2010 Funding Request The Navy's proposed FY2010 budget requested $85.2 million for the VH-71 program, all of which is in PE0604273N of the RDT&EN account. Of this total, $55.2 million is for Increment I, for use in terminating the program; none is for Increment II; and $30 million is for initial studies on the proposed successor VXX program. FY2010 Defense Authorization Act (H.R. 2647/P.L. 111-84) Conference The conference report ( H.Rept. 111-288 of October 7, 2009) on H.R. 2647 / P.L. 111-84 of October 28, 2009, approves the Administration's FY2010 funding request for the VH-71 program (page 1003). The conference report states: VH–71 Presidential helicopter program In April 2009, the administration proposed in budget documents, including a document called ''Terminations, Reductions, and Savings, Fiscal Year 2010,'' to terminate the Presidential helicopter replacement (VH–71) program and initiate a new Presidential helicopter replacement program. The Secretary of Defense announced on April 6, 2009, the cancellation of the VH–71 program, after that program experienced a history of excessive and uncontrolled cost growth and persistent slips in its delivery schedule. On May 15, 2009, the Under Secretary of Defense for Acquisitions, Technology, and Logistics issued an acquisition decision memorandum implementing the Secretary's decision and the Department of the Navy issued a stop-work order on the program. Subsequently, on June 1, 2009, the Secretary of the Navy canceled the System Development and Design contract for the program. While the conferees agree that cancellation of the program was warranted under the circumstances, they are disappointed that: (1) the Nation has invested more than $3.0 billion in this program and has little to show for that investment; (2) the Navy invested considerable time and talent in trying to implement the acquisition program without success; and (3) the ''requirements'' system failed to do its fair share of trading requirements or adding resources when the acquisition program ran into immovable obstacles. During this process, the Navy and its acquisition system failed to receive adequate support, resources, and authority from the Office of the Secretary of Defense (OSD) and the White House Military Office (WHMO) to execute a successful acquisition program. The conferees understand that despite the many warnings and expert advice from the Government Accountability Office, Navy acquisition officials were directed by OSD and WHMO to execute a schedule-driven program and were unable to adhere to prudent acquisition practices. The conferees note that a June 5, 2009, Congressional Research Service report cites Navy estimates that a new acquisition program would probably cost between $10.0 billion and $17.0 billion. Therefore, given that level of possible investment, the conferees strongly encourage the Department of Defense and the Executive Branch to consider a complete range of alternatives for meeting requirements. The conferees believe that such consideration must include evaluating both single- and multi-platform solutions to meet the complete transportation requirements of the President, and [in] evaluating costs, consider the investment already made in the VH–71 program for possible use for some portion of the mission within a multi-platform solution. The conferees also believe that a program to replace the Presidential helicopter presents a particularly valuable opportunity for the Department of Defense to demonstrate the right way to develop and procure major weapon systems. Accordingly, the conferees expect that, in implementing such a program, the Department will fully comply with the letter and the spirit of the recently enacted Weapon Systems Acquisition Reform Act of 2009 (Public Law 111–23). (Pages 676-677) House The House Armed Services Committee, in its report ( H.Rept. 111-166 of June 18, 2009) on H.R. 2647 , recommends approving the Administration's request for $85.2 million in FY2010 RDT&E funding for the VH-71 program (page 167). The committee's report states: The budget request contained $85.2 million for cancellation costs of the VH–71 Presidential helicopter recapitalization program recently terminated by the Secretary of Defense. The committee understands that the Secretary of Defense announced on April 6, 2009 the cancellation of the VH–71 program based on excessive cost growth and schedule delays. The committee is disappointed that the Navy has invested $3.3 billion in this program to date. The committee is also disappointed that the Navy's acquisition system was not provided adequate support, resources, and authority by the Office of the Secretary of Defense (OSD) and the White House Military Office (WHMO) to execute a successful acquisition program. The committee understands that despite the many warnings and expert advice from the Government Accountability Office, Navy acquisition officials were directed by OSD and WHMO to execute a schedule-driven program and were unable to adequately synchronize and adhere to prudent acquisition practices. The committee supports a new acquisition plan which may incorporate more than a one platform solution to the needs of the President. The committee notes that a June 5, 2009 Congressional Research Service (CRS) report cites Navy estimates that a new acquisition program would cost $10.0 to $17.0 billion. Therefore, the committee strongly suggests that the Department of Defense consider continuing procurement of the current ''increment 1'' helicopter for use as the normal transport for the President, and study other alternatives for Presidential transport in other situations. The committee notes that this approach will leverage on the investment already made by the taxpayer in developing a helicopter that would meet all normal requirements of the President. (Pages 182-183) Senate Division D (Section 4001) of the FY2010 defense authorization bill ( S. 1390 ) as reported by the Senate Armed Services Committee ( S.Rept. 111-35 of July 2, 2009) contains the detailed line-item funding tables that in past years have been included in the committee's report on the defense authorization bill. Section 4001 recommends approving the Administration's request for $85.2 million in FY2010 RDT&E funding for the VH-71 program (page 677 of the printed bill). FY2010 DOD Appropriations Bill (H.R. 3326) Final Version  In lieu of a conference report, the House Appropriations Committee on December 15, 2009, released an explanatory statement on a final version of H.R. 3326 . This version was passed by the House on December 16, 2009, and by the Senate on December 19, 2009, and signed into law on December 19, 2009, as P.L. 111-118 . The explanatory statement states that it "is an explanation of the effects of Division A [of H.R. 3326 ], which makes appropriations for the Department of Defense for fiscal year 2010. As provided in Section 8124 of the consolidated bill, this explanatory statement shall have the same effect with respect to the allocation of funds and the implementation of this as if it were a joint explanatory statement of a committee of the conference." The explanatory statement provided $130.0 million for VHXX Executive Helo Development, an increase of $44.8 million from the Administration's request. This includes a $100.0 million increase for technology capture and a decrease of $55.2 million for "termination costs funded ahead of estimate." The explanatory statement also included this text: PRESIDENTIAL HELICOPTER The House report directed the Secretary of Defense to report on the use of certain funds for the VH-71 Presidential Helicopter. The Senate report contained no similar language. The recommendation· does not retain the House language. (Page 282) House The House Appropriations Committee, in its report ( H.Rept. 111-230 of July 24, 2009) on H.R. 3326 , recommends $485.2 million—an increase of $400 million over the request—"to operationalize and incorporate the five [Increment I pilot production] VH-71 Presidential Helicopters into the current fleet.... " (Page 12; see also page 257.) The report states: VH–71 PRESIDENTIAL HELICOPTER The Committee has included $400,000,000 above the President's request to make the five Increment I VH–71 Presidential helicopters operational. Although the Navy would not respond to the Committee regarding costs to operationalize the previously purchased five aircraft, the Future Year's Defense Plan for fiscal year 2009 proposed $328,000,000 for fiscal year 2010 and $140,000,000 in fiscal year 2011 to complete testing and outfitting to make the aircraft operational. The Navy has invested over $3,200,000,000 in the VH–71 Presidential helicopter program. On April 6, 2009, the Secretary of Defense announced the cancellation of the program. To date, the Navy has provided no plan for the disposition of the five aircraft that were intended to provide interim service in the Presidential helicopter fleet due to the age of the current fleet. If these aircraft are not made operational, the previously appropriated funds will have been wasted. The Committee directs the Secretary of Defense to submit a report on progress toward making the five Increment I VH–71 Presidential helicopters operational. The report shall be submitted to the congressional defense committees no later than 30 days after the enactment of this Act. (Page 261) Senate The Senate Appropriations Committee, in its report ( S.Rept. 111-74 of September 10, 2009) on H.R. 3326 , recommends $30 million—a reduction of $55.2 million from the request, with the reduction being for "Termination costs funded ahead of estimate." (Page 183) FY2009 Supplemental Appropriations Act (H.R. 2346/P.L. 111-32) House Section 10012 of H.R. 2346 as passed by the House would rescind, among other things, $30.51 million in FY2009 RDT&EN funding and $5 million in FY2008 RDT&EN funding, but the House Appropriation Committee's report on H.R. 2346 ( H.Rept. 111-105 of May 12, 2009, page 32) states that these rescissions are for fuel and for a classified program, respectively, rather than for the VH-71 program. Senate Section 308 of H.R. 2346 as passed by the Senate would rescind, among other things, $270.26 million in FY2009 funding for the Research, Development, Test and Evaluation, Navy (RDT&EN) appropriation account. This provision is also present in S. 1054 as reported by the Senate Appropriations Committee. The committee's report on S. 1054 ( S.Rept. 111-20 of May 14, 2009, page 55) states that the $270.26 million includes a rescission of $47 million in FY2009 funding for the VH-71 program. Conference Section 309 of H.R. 2346 / P.L. 111-32 of June 24, 2009, rescinds $217.06 million in FY2009 and FY2010 RDT&EN funding. The conference report on H.R. 2346 ( H.Rept. 111-151 of June 12, 2009) states that this sum includes $47 million in FY2009 RDT&E funding for the VH-71 program (page 106). Appendix. May 19, 2009, Hearing on FY2010 Navy Aviation Programs This appendix presents excerpts from a May 19, 2009, hearing on FY2010 Navy aviation programs before the Seapower and Expeditionary Forces subcommittee of the House Armed Services Committee. Chairman's Opening Statement In his opening remarks for the hearing, the chairman of the subcommittee, Representative Gene Taylor, stated the following: Briefly I would like to address the VH 71 program. The Navy invested over $3.2 billion dollars, received nine test and pilot-production aircraft, yet was unable to successfully execute this program that ultimately was cancelled by Secretary Gates. I would like to understand what the plan is for the current aircraft assets that have already been delivered, what the plan is going forward, and how the mistakes of the original program will be prevented from happening in the next program? Question-and-Answer Portion During the question-and-answer portion of the hearing, the following exchanges took place regarding the VH-71 program: COURTNEY: In Mr. Taylor's opening statement, he sort of walked through a number of issues that he was asking for some responses from the witnesses. I think the last item was on the presidential helicopter. You've referenced the fact, obviously, that Secretary Gates, on Friday, announced the cancellation of the program. And I was just following on his comments. I don't know which witness would be appropriate to respond. But what do you sort of see as the next steps in the way forward? Obviously, we need a new helicopter. TRAUTMAN (?): Congressman Courtney, let me start and I'll turn it over to anyone else. You're correct. Secretary Gates did announce—recommend cancellation. And his basis to that was the original $6 billion program which was headed towards $13 billion, six years overdue; does not meet the requirements of the White House. And (inaudible) in fact was the long way to meet that requirement. So this has been an extremely challenging requirement in this program, complicated and exacerbated by us trying to bring this program to meet a need earlier, when we hadn't really defined what we needed to do. There were mistakes that were made. We drove significant developmental efforts forward at time when we weren't certain what those impacts would be. And we grossly underestimated the cost and schedule required to deliver this. As a result of that, Undersecretary Defense Carter directed the cancellation of the program to Mr. Stackley (ph). We are taking those initiatives now to cancel that program, and bring it to a resolution. the path forward is within 30 days, we will come forward with a high level plan of what we will—how will we anticipate going forward in the future. That's not all the details that go with every facet of the program to understand, but it is a high level, if you will, plan of action, how we're going to go forward to meet the direction; also to have a program developed so we can do the presidential replacement helicopter program. So in this case, I believe, what we need to do now is we need to meet the requirements. We need to understand what those requirements are going to be. Understand the impacts of those requirements. Begin with requirements, take them through to the impacts of that, and do the due rigor we needed to do—we need to do an executable program, sir. And I'll turn it over for other comments. ARCHITZEL: Well, then let add then, sir. Two things come to my mind. First is: Are the legacy VH-3s and VH-60s preserved and remain safe for carrying our president? And the answer to that is "yes." And this budget includes requested dollars to make that a reality. The second is: These airplanes are going to need to be replaced. The VH-3 is 40 years old by 2017 even with the service life extension programs that we are assessing now. They are near the end of their life. I am very anxious to get back into the requirements generation process. Work with the White House military office to decide what requirements they will lay out, and then help move those requirements to the joint requirements oversight council into the acquisition community so that we can each start on a new replacement for the VH-3 and the VH-60. COURTNEY: I realize you said 30 days from now, you'll come out with a new position or a new plan. And I don't want to get ahead of that. But one argument that's been out there—"The New York Times" had a column about it the other day—about—that we shouldn't cancel because there's so much sunk cost already into the VH-71. I guess—I was wondering—I was thinking that through. The Navy is not going to just sort of walk away from the research and the development and the investment that's already taken place. I mean, there's some ways to recoup some of what's already been paid for. I mean, is that a safe assumption to make so that the taxpayers won't feel like it was just completely thrown away? TRAUTMAN (?): Congressman Courtney, if I could, let me begin—I know you want my colleagues to comment. But, first off, what I mentioned to you was a high level comeback, if you will, or a plan to go forward. But we have to—simultaneous with that, we have another course of action we have to follow. Following the cancellation program, we have to bring about what we do with this program, and how we bring it to closure. So the first thing that was done was this, for example, this stop work due, which allows us to—the contracting officer to issue actions, that then would result in us being able to—as I said, bring the thing to closure. That involves understanding all that we have invested, and where we are, and be able to close out the books; be able to make sure we understand where we are in funding, be it '09 or '10 funding, et cetera, and what we need to do to follow through that once the contracting officer takes actions on the termination. So understanding what we want to do in the future, obviously, we will take advantage of anything we can from a technology standpoint that would go into future helicopter programs or other programs of similar nature. Again, as we start back in this program, we have to understand the requirements—that to begin with requirements—understand what they mean and what we have to meet those missions that are set in front of us. That was fundamental to it. Now, to your point: The investments that were made—understanding the technology investments that were ongoing—certainly, we'll take advantage of that going forward. Thank you, Mr. Chairman. TAYLOR: Chair thanks the gentleman. Chair now recognizes the gentleman from Maryland, Mr. Bartlett. BARTLETT: Thank you very much. You know, you would think from the discussion we've been having that we hadn't spent $3.2 billion and a number of years building the 71. And the original requirements document for the VH-71 program, the Navy gave a litany of reasons why the legacy fleet was in urgent need of replacement—so urgent that we were working around some of the usual procedures to get a plane more quickly so the president could have it. They—the planes, Navy said, was overweight. They lack all weather capability. They have extremely limited range, speed and payload. And I quote from the document, "The legacy aircraft is no longer capable of implementing upgrades for mission requirements." And now, we're told that the current fleet is OK. It can, indeed, be upgraded and the cost of doing so will likely—might be enormous. We already spent $3.2 billion to produce the nine increment one helicopters. They neither exceed their performance requirement. They're always intended to fly the president. Why isn't it reasonable that Congress would expect the Navy to field these aircraft to meet the highly urgent need we have been briefed on for years? But instead, congressmen are given a list of reasons why flying the 35-year-old legacy fleet for another decade is preferable to fielding a modern V8-71 [sic: VH-71] helicopters we have already paid to produce. For instance, we're told that increment one only has a five year service life, even though the committee knows that it was designed for a minimum of 30 years that the Navy has not even performed a basic airframe fatigue testing to make a sound determination. We need real answers as we consider the budget request. Frankly, Congress has been ignored for too long on this critical program. And I'm concerned that in the stop-work order, we're now being ignored. The Navy said that we needed a new aircraft to fly the president. We bought that. We asked the Navy to build that aircraft and now, without coming back to Congress for consultation, the Navy has issued a stop work order. This very limits our options because there will be costs involved with a stop work order. If we decide that we really ought to continue building these planes then there's additional cost involved in making the line hot again. First, what is the estimated cost of extending and maintaining the current legacy fleet, if the VH-71 is terminated? How much will it cost to provide service life extension for the current fleet? What kind of new improvements will be made and at what cost? We were previously told that we really couldn't make the necessary improvements, which is why we needed a plane so urgently that we were bypassing some of the usual procurement procedures. And second, are you telling this committee the Increment 1 helicopters did not in fact provide a better overall capability than the current VH-3? General Trautman, you have flown the VH-71, would you not agree that on its own it represents a more capable, modern and safer aircraft? TRAUTMAN: Yes, sir, let me start—I've flown the VH-3 and the VH-71 Increment 1 aircraft recently and there's no doubt that the VH- 71 increment three—Increment 1 aircraft is a better aircraft then the VH-3. The challenge has been, sir, that the VH-71 Increment 1 aircraft does not meet the requirements that were passed to us by the White House military office and the requirements... BARTLETT: General,... (CROSSTALK) BARTLETT: ...if you would let me comment for just a moment... TRAUTMAN: Yes, sir. BARTLETT: ...we know that. We know that the Increment 1 was designed to provide what we were told was essential transportation for the president, while Increment 2 was being developed. We know that Increment 1 is deficient in—a little deficient in payload capability, in speed and in how far it can go, in range, but the essential reason we were told for moving away from the current fleet was to have better communication capabilities we understand the VH-71 provides, the Increment 1. If the gentleman's got just a moment, I'd like to go through some numbers that I think are absolutely compelling that we ought to continue. We've now invested $3.2 billion. If we now shut down, it's going to cost about half a billion in the industry to shut down. It's going to cost about a tenth of a billion in the Navy to shut down and for another $1.3 billion, we could make ready five of the nine planes so that the president could use them. And I am told by the manufacturer that for roughly $100 million each, which comes well under the original figure of $6.8 billion, that they will enter into a firm, fixed price contract to deliver another 14, which would mean we would have a total fleet then of 19 planes. You—the additional cost to provide nineteen planes is small compared to the investment we've already made. Why isn't it in the taxpayers' and the president's best interest to go ahead and provide these extra planes? We'll have essentially nothing if we simply terminate and shut down. TAYLOR: If the General would answer the question, please. TRAUTMAN: Congressman Bartlett, if I could, the—part of what your discussion is on the Increment 1. As I mentioned before, this VH-71 is an extremely challenging requirement. There are significant developmental efforts that were grossly underestimated. On top of that, we went to a two increment approach in an effort to deliver near-term as well as long-term solutions. Sir, we are not delivering on the capability with Increment 1. The program does not meet the requirements, and that was what the recommendation for cancellation was for. BARTLETT: But, sir, if I might interrupt for just a moment. It was going to be sufficiently superior to the present fleet, that it was deemed desirable to spend the money to produce it and use it for five years while we produced Increment 2. Why isn't that analysis still valid? TRAUTMAN: Sir, the second estimate—you're referring to numbers. In terms of operational use and, quite frankly, the VH-71 Increment 1, the additional weight was the—that has to do with the aircraft itself would be a different aircraft than the one you're talking to, when you're talking 30 years aircraft life. That's another factor in the Increment 1, in terms of its not being able to make more than approximately, estimates now, 1,500 hour life. But the overarching consideration was not making the requirements needed for the helicopter and the decision to cancel Increment 1 and 2 from Secretary Gates, sir. BARTLETT: Thank you. Mr. Chairman, I think that the original five year life was not what the plane was expected could do. It was just that, well, they only needed it for five years until they had Increment 2, but nobody doubts that this plane is built as well as other helicopters and it should have the usual 30, 35, 40 year life, should it not? TRAUTMAN: Our understanding is that systems command would have to inspect the airplane and go through a rigorous service life extension program seeking hot spots and areas of interest, similar to the discussion we had previously [at this hearing] about the F/A-18A through D [strike fighters]. That work has not been done yet.

The VH-71 program is intended to provide 23 new presidential helicopters to replace the current fleet of 19 aging presidential helicopters. As part of its proposed FY2010 Department of Defense (DOD) budget, the Administration proposed terminating the VH-71 program in response to substantial cost growth and schedule delays in the program. As a successor to the VH-71 program, the Administration proposed beginning a new presidential helicopter program in FY2010 called the VXX Presidential Helicopter Program. The Administration's proposed FY2010 budget requested $85.2 million in Navy research and development funding for the VH-71 program. Of this total, $55.2 million is for terminating the VH-71 program and $30 million is for initial studies on the proposed successor VXX program. The issue for Congress is whether to approve the Administration's proposal to terminate the VH-71 program and initiate a successor VXX program, or pursue another course, such as continuing the VH-71 program in some restructured form. Congress's decision on the issue could affect DOD funding requirements, the schedule for replacing the 19 older helicopters, and the helicopter industrial base. This report will be updated as events warrant. FY2010 defense authorization act: The conference report (H.Rept. 111-288 of October 7, 2009) on the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28, 2009) approves the Administration's FY2010 funding request for the VH-71 program. The conference report states that "the conferees strongly encourage the Department of Defense and the Executive Branch to consider a complete range of alternatives for meeting requirements. The conferees believe that such consideration must include evaluating both single- and multi-platform solutions to meet the complete transportation requirements of the President, and [in] evaluating costs, consider the investment already made in the VH–71 program for possible use for some portion of the mission within a multi-platform solution." FY2010 DOD appropriations bill: In lieu of a conference report, the House Appropriations Committee on December 15, 2009, released an explanatory statement on a final version of H.R. 3326. This version was passed by the House on December 16, 2009, and by the Senate on December 19, 2009, and signed into law on December 19, 2009, as P.L. 111-118. The explanatory statement includes $130.0 million for VHXX Executive Helo Development in 2010, an increase of $44.8 million from the Administration's request. This includes a $100.0 million increase for technology capture and a decrease of $55.2 million for "termination costs funded ahead of estimate."

Introduction Policymakers and other stakeholders may hold a variety of views regarding the appropriate role of the private sector in meeting the health care needs of eligible veterans. Some believe that the best course for veterans is to provide all needed care in facilities under the direct jurisdiction of the Department of Veterans Affairs (VA), Veterans Health Administration (VHA), health care system. On the other hand, some see the use of private sector providers as important in ensuring veterans' access to a comprehensive slate of services (in particular, to specialty services that are needed infrequently), or in addressing geographic or other access barriers, such as long wait times for an appointment. In addition, those who believe that all needed care should be provided by VA providers in VA-owned facilities express concern that private sector options for providing care to veterans may dilute the quality of care in the VA health care system, and could fail to leverage key strengths of the VA health care network. Furthermore, studies have shown that private sector community providers may not have the necessary training and skills to provide "complex and specialized multidisciplinary care including integrated behavioral health services that many veterans require." Some are concerned that if veterans leave the VA health care system for the private sector, some VHA sites and specialized medical services may be eliminated from the VA health care system, if comparable care is provided in the private sector. However, some propose that over the long term, having private sector options could improve the quality of services within the VA health care system through competition. Reaching the correct balance between providing care through VHA's health care system and through non-VA community providers has been an issue for policymakers, as well as for the VA and other stakeholders, for many years. On June 6, 2018, President Donald Trump signed into law the John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018, or the VA MISSION Act of 2018 ( S. 2372 ; P.L. 115-182 ; H.Rept. 115-671 ). The Department of Veterans Affairs Expiring Authorities Act of 2018 ( S. 3479 ; P.L. 115-251 ), enacted on September 29, 2018, made some changes and technical amendments to the VA MISSION Act. Section 101 of this act, establishing the Veterans Community Care Program, or VCCP, is a legislative outcome of this long-standing policy debate on the role of the private sector in the delivery of health care to the nation's veterans. To understand the key amendments made by the VA MISSION Act with respect to care provided through private sector community providers, this report begins with a brief history of key legislative changes to community care passed by Congress from the 1920s onwards. It should be noted that over the years, care provided through private sector providers has been known by many names, including "Hometown Medical Program," "Non-VA Fee Care," "Fee-Basis Care," "Purchased Care," "Preauthorized Care," and the "Fee-Care Program," among others. In this report, such care is referred to as the Veterans Community Care Program, or VCCP, as established by the VA MISSION Act. Following the brief legislative history of VA provided community care, the report describes the background and legislative history leading up to the enactment of the VA MISSION Act. This is followed by summaries of the major provisions in the VA MISSION Act by title. The report concludes with an appendix providing implementation and reporting deadlines contained in the VA MISSION Act. Brief Legislative History of Community Care Since the early 1920s, Congress has authorized the VA to contract for care in the community. For instance, the World War Veterans Act of 1924 (P.L. 68-242), enacted on June 7, 1924, included language that authorized the Director of the then Veterans Bureau to contract with private facilities in exceptional cases: In the event Government hospital facilities are insufficient or inadequate the director may contract with State, municipal, or in exceptional cases, with private hospitals for such medical, surgical, and hospital services and supplies as may be required, and such contracts may be made for a period of not exceeding three years and may be for the use of a ward or other hospital unit or on such other basis as may be in the best interest of the beneficiaries under this Act. VA's Hometown Medical Care Program, which was also known as the fee-basis care program, was established by the VA in FY1946, and under this program the VA entered into contracts with state medical societies, or with designated agencies for authorized services, and was reimbursed based on a VA fee schedule. Generally, the Hometown Medical Program was used to provide out-patient care—including dental care for veterans who were in need of treatment for a service-connected disability—because at that time outpatient care was generally authorized for treatment of service-connected disabilities. According to VA's annual report from FY1950: This program has saved veterans many hours they would otherwise have been required to use in traveling to and from VA clinics, some of which would have been lost from their work. The convenience of treatment in their own hometown, together with the privilege of being treated by a doctor of their own choice, has made this [program] highly acceptable to veteran-patients. In June 1957, Congress passed the Veterans' Benefit Act of 1957 (P.L. 85-56), which provided the VA the authority to contract with private facilities "in order to provide hospital care (i) in emergency cases for persons suffering from service-connected disabilities or from disabilities for which such persons were discharged or released from the active military, naval, or air service; (ii) for women veterans of any war; or (iii) for veterans of any war in a Territory, Commonwealth, or possession of the United States." The Veterans Health Care Expansion Act of 1973 ( P.L. 93-82 ) broadly expanded out-patient care to nonservice-connected veterans, and by 1976, to address the "patient and staff complaints generated by the overcrowded conditions in outpatient programs and ambulatory care services at VA health care facilities across the Nation." Congress passed the Veterans Omnibus Health Care Act of 1976 ( P.L. 94-581 ). This law made several changes to the fee-basis program. It added current (38 U.S.C. §1703) statutory language stating that "when facilities [Departmental] are not capable of furnishing economical care because of geographical inaccessibility or of furnishing the care or services required" and further limited fee-basis or contract care to specific categories of veterans. These included veterans receiving hospital care or medical services for the treatment of a service-connected disability or a disability for which a veteran was discharged or released from the active military, naval, or air service, among other categories. Further changes made by the Veterans' Health Care Amendments of 1979 ( P.L. 96-22 ) provided authority for fee-basis care for veterans with nonservice-connected disabilities and in receipt of increased pension or other additional compensation who are in need of regular aid and attendance or who are housebound. The Consolidated Omnibus Budget Reconciliation Act of 1985 (Veterans' Health-Care Amendments of 1986; P.L. 99-272 ) clarified the definition of the term "Veterans' Administration facilities" and authorized the VA to contract for medical care in private facilities. These and other legislative changes in subsequent Congresses eventually became codified at Title 38 United State Code (U.S.C.) section 1703. This section was completely amended by the VA MISSION Act ( S. 2372 ; P.L. 115-182 ; H.Rept. 115-671 ; and P.L. 115-251 ). Over time, Congress has authorized additional programs to provide care through non-VA community providers or entities, each with their own unique requirements. In general, the VA MISSION Act amends the legal framework around several existing veterans care programs: the Veterans Choice Program (38 U.S.C. §1701 note), Traditional VA Care in the Community (38 U.S.C. §1703), Project ARCH (Access Received Closer to Home) (38 U.S.C. §1703 note), community nursing home and adult health day care, home health care services, respite care, and hospice care (38 U.S.C. §§1720; 1720B and 1720C). It also creates a new program for walk-in care (38 U.S.C. §1725A). However, it leaves intact other statutory provisions for emergency care for nonservice-connected conditions to certain veterans (38 U.S.C. §1725), authority to provide reimbursement for emergency care for service-connected veterans (38 U.S.C. §1728), authority to share health care resources with the Department of Defense (38 U.S.C. §8111), health care sharing and contracting authority (38 U.S.C. §8153), and agreements with Indian Health Service and tribal health program providers (25 U.S.C. §1645). Background and Legislative History of the VA MISSION Act In response to the allegations of wait time manipulation and access issues at many VHA hospitals and clinics across the country, which were brought to the attention of congressional committees in the spring and summer of 2014, the Veterans Access, Choice and Accountability Act of 2014 (VACAA; P.L. 113-146 , as amended) was enacted. This act, among other things, established the temporary Veterans Choice Program (VCP), which authorized veterans meeting certain criteria, such as wait times for appointments and distance from the nearest VA medical facility, to access care in the community. In addition, Section 802 of VACAA established the Veterans Choice Fund (VCF) and provided $10 billion in mandatory appropriations. Significant challenges surrounding the implementation of the VCP are documented in several VA Office of Inspector General (OIG) and Government Accountability Office (GAO) reports, as well as congressional hearings. Acknowledging these implementation challenges associated with VCP, as well as the confusing and complex community care landscape created by the various statutory authorities, coupled with pilot programs such as Project Access Received Closer to Home (ARCH) and Patient-Centered Community Care (PC3), Congress passed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 ( P.L. 114-41 ) and mandated the VA to provide a plan to consolidate existing community care programs. This plan was submitted to Congress on October 30, 2015. Numerous hearings were held during the 114 th Congress, and several measures were introduced to incorporate many of the concepts addressed in the VA's Plan to Consolidate Programs of Department of Veterans Affairs to Improve Access to Care , such as the Improving Veterans Access to Care in the Community Act ( S. 2633 ) and the Veterans Choice Improvement Act of 2016 ( S. 2646 ). However, at the end of the 114 th Congress, no major legislative action occurred to revamp and consolidate veterans community care programs. At the beginning of the 115 th Congress, once again Congress faced implementation issues regarding the VCP, including its expiration in August 2017 and funding shortfalls. In response to this, Congress passed P.L. 115-26 (unofficially referred to as the Veterans Choice Program Improvement Act), eliminated the August 7, 2017, sunset date, and allowed the VCP to continue until all funds in the VCF were expended. Later in 2017, as VCF funding was diminishing, Congress passed the VA Choice and Quality Employment Act of 2017 ( P.L. 115-46 ), and P.L. 115-96 , and provided additional funding of $4.2 billion to continue VCP. In the meantime, on October 6, 2017, the VA submitted to the House and Senate Veterans' Affairs Committees another plan to consolidate and streamline community care programs to replace the VCP. This plan, known as the Veterans Coordinated Access & Rewarding Experiences (CARE) plan, made additional enhancements to the initial plan that was provided in October 2015. More specifically, it focused on eligibility criteria for veterans to access care in the community, with criteria based on clinical need, quality of care, and convenience—which had not been specifically addressed in the October 2015 plan. The House Veterans' Affairs Committee (HVAC) held a hearing on the CARE plan and other legislative proposals on October 24, 2017. Based on major concepts in this plan and other legislative proposals, the Senate and House Veterans' Affairs Committees began drafting legislation. On November 3, 2017, the VA Care in the Community Act ( H.R. 4242 ) was introduced, and the measure was marked up by the HVAC and ordered reported as amended on December 19, 2017. It was subsequently reported with an amendment by the HVAC ( H.Rept. 115-585 ) on March 5, 2018. On November 29, 2017, the Senate Veterans' Affairs Committee (SVAC) marked up a draft measure, and it was reported to the Senate on December 5, 2017, entitled the Caring for Our Veterans Act of 2017 ( S. 2193 ; S.Rept. 115-212 ). However, no further action occurred at the close of the first session of the 115 th Congress. At the beginning of the second session of the 115 th Congress, combining various provisions of the VA Care in the Community Act ( H.R. 4242 ; H.Rept. 115-585 ), the VA Asset and Infrastructure Review Act of 2017 ( H.R. 4243 ), and the Caring for Our Veterans Act of 2017 ( S. 2193 ; S.Rept. 115-212 ), HVAC Chairman Dr. Phil Roe introduced the VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018, or the VA MISSION Act of 2018 ( H.R. 5674 ), on May 3, 2018. The HVAC marked up the legislation on May 8. The measure was reported by the HVAC on May 11 ( H.Rept. 115-671 , Part 1). The text of H.R. 5674 was then substituted as an amendment to S. 2372 and modified to include a new short title known as the John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018. The House passed S. 2372 on May 16. The Senate began consideration of the House amendment to S. 2372 on May 17, and it passed the measure by concurring to the House amendment to S. 2372 on May 23. President Donald Trump signed the VA MISSION Act to law ( S. 2372 ; P.L. 115-182 ) on June 6, 2018. The Department of Veterans Affairs Expiring Authorities Act of 2018 ( S. 3479 ; P.L. 115-251 ) made amendments and technical corrections to the VA MISSION Act. Budgetary Impact20 The VA MISSION Act of 2018 ( P.L. 115-182 ) provides $5.2 billion in direct or mandatory appropriations for the VCF established by Section 802 of the VACAA ( P.L. 113-146 , as amended). The Congressional Budget Office (CBO) estimates that this amount would continue to provide funding for the current VCP until about the first half of calendar year 2019. Excluding this direct appropriation, the CBO estimates that implementing all the provisions of the VA MISSION Act would cost approximately $46.5 billion over the FY2019-FY2023 time frame, subject to discretionary appropriations from Congress. This estimate includes a cost of $21.4 billion for the new Veterans Community Care Program (VCCP) and $6.7 billion for the provisions related to expansion of the Program of Comprehensive Assistance for Family Caregivers to those veterans injured or disabled during military service on or before September 11, 2001. The $6.7 billion estimate excludes any long-term implementation costs of this expansion, since the expansion would happen in two stages. The CBO estimates that the VA MISSION Act would increase the deficit by $5.2 billion over six years (FY2018-FY2023) and almost $4.5 billion over 11 years (FY2018-FY2028). Provisions in the VA MISSION Act of 2018 This report summarizes the major provisions of the John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (VA MISSION Act; P.L. 115-182 , H.Rept. 115-671 ), including amendments made by the Department of Veterans Affairs Expiring Authorities Act of 2018 ( S. 3479 ; P.L. 115-251 ). It does not analyze every provision in the act, but instead provides brief outlines of the matters addressed. Subsequent sections of the report are organized as follows: a summary is provided for each title of the act, followed by a summary of the provisions under that respective title. Relevant background is provided for context, where applicable, at the title level or subtitle level. Throughout this report, unless otherwise stated, the Secretary means the Secretary of Veterans Affairs, and the VA means the U.S. Department of Veterans Affairs. In addition, this section refers to matters addressed under that specific section of the act. This report uses a number of acronyms, Title I: Caring for Our Veterans This title amends current law (codified at 38 U.S.C. §1703) that provided the Secretary the authority—whether under a contract or an individual authorization—to provide care under certain circumstances care of a service-connected disability; care for a disability for which a veteran was discharged or released from the active military, naval, or air service; care of a disability of a veteran who has a total disability permanent in nature from a service-connected disability; care of a disability associated with and held to be aggravating a service-connected disability; care of a disability of a veteran participating in a rehabilitation program under 38 U.S.C. Chapter 31; hospital care for women veterans; outpatient dental care for certain veterans; and when there is a need for hospital care for reasons set forth in VA regulations (38 C.F.R. §17.52). Title I liberalizes the VA's current community care program by establishing a new Veterans Community Care Program (VCCP), which amends the above-mentioned statutory hierarchy and provides greater flexibility to all enrolled veterans in accessing care in the community, for hospital care, medical services, and extended care services, at their election. Under the new VCCP, eligibility will apply more broadly to all enrolled veterans and service-connected disability will not be a major factor for eligibility for care in the community. In addition, this title would eventually sunset the current Veterans Choice Program (VCP) one year after the date of enactment of the VA MISSION Act (i.e., on June 6, 2019). This title requires the Secretary to establish access and quality standards for medical care and extended care services. It authorizes the VA to enter into Veteran Care Agreements (VCAs) that are not subject to the contracting requirements generally required under federal contracting regulations. In addition, the VA is authorized to enter into VCAs with State Veterans Homes, thereby eliminating the need for contractual agreements with the VA. These VCAs will not be considered federal contracts with the United States; however, State Veterans Homes will still have to comply with all other applicable federal laws concerning employment and hiring practices. Title I also requires the Secretary to conduct a quadrennial market area assessment of VA health services, and to develop a broad-ranging quadrennial review of the VHA. It also expands eligibility for veterans to access walk-in care from private community providers. Moreover, this title amends VA's prompt payment standards for all community care providers. It also requires the Secretary to develop and administer a program to educate veterans about the interaction between health insurance programs such as Medicare, Medicaid, and TRICARE and the services provided by the VA health care system. Title I also requires the Secretary to improve information sharing with community providers and to ensure the competency of private community providers. It also provides VA clinicians access to State Prescription Drug Monitoring Programs (PDMPs). This title also provides authority for VA providers to provide a telemedicine episode of care without regard to where the veteran patient and VA provider are located within the United States and U.S. territories. Furthermore, it establishes a VA Innovation for Care and Payment Center, and provides the Secretary with authority to conduct pilot programs to develop innovative payment and health care delivery models. Lastly, Title I liberalizes eligibility for the Program of Comprehensive Assistance for Family Caregivers to pre-9/11 veterans under two phases. Under the first phase, veterans with serious service-connected injuries incurred on or before May 7, 1975, will qualify for benefits over a two-year period beginning on the date when the VA certifies to Congress that it has fully implemented the information technology system required for this program. Under the second phase, those with serious service-connected injuries incurred between May 7, 1975, and September 11, 2001, will qualify for the Comprehensive Assistance for Family Caregivers program two years after the implementation of the first phase. Subtitle A: Developing an Integrated High-Performing Network Section 100. Short Title This section provides the title as the "Caring for Our Veterans Act of 2018." Section 101. Establishment of the Veterans Community Care Program (VCCP) This section amends current law (38 U.S.C. §1703) and establishes a new Veterans Community Care Program (VCCP) to provide hospital care, medical services, and extended care services to eligible veterans through specified non-VA health care providers. Once VCCP is implemented by the Secretary, it would entirely replace current provisions in Section 1703 that provide authority for hospital care and medical services in non-VA facilities. In the following paragraphs, this section means the newly amended Section 1703 and its subdivisions. Care Coordination This section requires the Secretary to coordinate care provided through the VCCP to eligible veterans. This care coordination must include at least the following: (1) timely scheduling of medical appointments, including the establishment of a mechanism to receive medical records from non-VA providers; (2) ensuring the continuity of care and services; (3) coordinating among regional networks if the eligible veteran accesses care and services in a different network than the regional network in which the veteran resides; and (4) ensuring that eligible veterans do not experience a lapse in care or an unusual or excessive burden in accessing care because of errors or delays by the VA or its contractors. Eligible Veterans This section stipulates that any veteran enrolled in the VA health care system, or any veteran who is not enrolled in the VA health care system but is entitled to hospital care, medical services, and extended care services, is eligible for care through the VCCP. Specified Community Health Care Providers This section requires that eligible veterans be provided care through the following non-VA health care providers: (1) any physician or practitioner or health care provider participating in the Medicare program, (2) DOD medical facilities, (3) IHS medical facilities, (4) any FQHCs, or (5) any other health care provider that meets criteria established by the Secretary. Eligibility for Community Care This section stipulates two major provisions under which the Secretary is required to authorize care, subject to the availability of annual appropriations, to eligible veterans through VCCP; or may authorize care through VCCP to eligible veterans. These provisions are further delineated below (see Figure 1 and Figure 2 ). Conditions under which care is required to be provided by the VA through VCCP: An eligible veteran can elect to receive care if he or she meets one of the five major conditions: 1. the VA does not offer the care or services the veteran requires; or 2. the VA does not operate a full-service VA medical facility in the state the veteran resides; or 3. the veteran was eligible for care under the 40-mile distance eligibility criteria under the previous Veterans Choice Program (VCP) on the day before the date of enactment of the Caring for Our Veterans Act of 2018 (i.e., the veteran was eligible on June 5, 2018); and continues to reside in the same location that qualifies the veteran under the 40-mile distance eligibility criteria; and (a) resides in one of the five states with the lowest population density based on data from the 2010 decennial census or (b) resides in a state other than the five states with the lowest population density and received care or services through the VA within one year before the enactment of the Caring for Our Veterans Act of 2018 (i.e., June 6, 2018) and is seeking care or services within two years of the date of the enactment of the Caring for Our Veterans Act of 2018 (i.e., June 6, 2018); or 1. the VA is unable to provide care or services that is requested by the veteran in a manner that meets designated access standards for care or services as developed by the Secretary; or 2. the veteran's referring clinician agrees, after consultations with the eligible veteran, that care and services through VCCP would be in the best medical interest of the veteran based on criteria established by the Secretary (see text box below). Election of the Veteran This section stipulates that the decision to receive care or services authorized by the Secretary through VCCP by an eligible veteran will be at the election of that veteran. Conditions under which care may be authorized by VA to be provided through VCCP: This section authorizes the Secretary to provide care through the VCCP to an eligible veteran if a VA medical service line (defined as a clinic within a VAMC) required by the veteran fails to comply with access and quality standards. The Secretary is required to develop access and quality standards, and is required to consider the following factors when developing those quality standards: compare the timeliness of a VA medical service line at two VA facilities, and compare the quality of care of a VA medical service line at one VA facility with two or more distinct and appropriate quality measures at non-VA medical service lines in the community. This section limits the number of medical service lines that the Secretary could compare at any one VA facility to no more than three; it limits the total number of medical service lines nationwide to no more than 36. The care provided under this authorization would end when the deficient medical service line has been remedied. A veteran is eligible to receive care through VCCP under this provision until the completion of an episode of care, and the Secretary is required to ensure the coordination of such care through VCCP. Federal Register Publication This section requires the Secretary to publish a notice in the Federal Register , at least once a year, stating (1) the time period during which such care and services will be available, (2) the location or locations where such care and services will be available, and (3) the clinical services available at each location. Review of VCCP Authorization Decisions This section states that eligible veterans who disagree with authorization of care decisions determined through VCCP may appeal such decisions through VHA's internal clinical decision appeals process and cannot file an appeal with the Board of Veterans' Appeals (BVA). Tiered Network This section authorizes the Secretary to develop a tiered network of eligible providers based on criteria established by the Secretary. However, the Secretary is prohibited from prioritizing providers in one tier over those in another tier in a manner that limits the choice of an eligible veteran to select an eligible VCCP health care provider. Contracts to Establish Networks of Health Care Providers31 This section requires the Secretary to enter into consolidated, competitively bid contracts to establish networks of health care providers, including any physician or practitioner or health care entity participating in the Medicare program and any other health care provider that meets criteria established by the Secretary. The section stipulates that it does not restrict the Secretary's authority to modify a contract after entering into such a contract. Appointments Using Advanced Technology This section requires the Secretary to ensure that eligible veterans are able to make their own appointments using advanced technology. Responsibility for the Scheduling of Appointments This section requires the Secretary to be responsible for the scheduling of appointments for eligible veterans. Termination of Contracts This section authorizes the Secretary to terminate contracts intended to establish networks of health care providers. When the Secretary notifies an entity of his or her intention to terminate the contract, the Secretary is required to notify the SVAC and HVAC that the entity failed to meet, at a minimum, at least one of the following provisions: comply substantially with the provisions of the contract or with VCCP regulations established by the Secretary; or comply with the access standards or the standards for quality established by the Secretary; or be excluded from participation in a federal health care program; or be identified as an excluded source on the list maintained in the System for Award Management, or any successor system; or have been convicted of a felony or other serious offense under federal or state law, and the continued participation of the entity would not be in the best interests of veterans or the VA. The Secretary may also terminate a contract if it is no longer needed based on the health care needs of veterans, or if there are other contracts or sharing agreements. This section also requires the Secretary to submit a report to SVAC and HVAC regarding contract terminations. Whenever the Secretary notifies a contractor that it is failing to meet contractual obligations required by the Secretary in the respective contract, the Secretary shall submit to SVAC and HVAC a report on such failure. The report must include the following: an explanation of the reasons for providing a notice to a contractor for terminating a contract; a description of the effect of the contractor's failure to meet contractual obligations, including with respect to cost, schedule, and requirements; a description of the actions taken by the Secretary to mitigate failures by the contractor to meet its contractual obligations; a description of the actions taken by the contractor to address failures in meeting its contractual obligations; and a description of any effect on the community provider market for veterans in the affected area. Interim Recognition of Credentials and Qualifications33 This section requires the Secretary to instruct an entity that was awarded a contract to establish networks of health care providers to recognize and accept, on an interim basis, the credentials and qualifications of health care providers who are authorized to furnish care to veterans under a community care program prior to the establishment of the VCCP. These include providers under the Patient-Centered Community Care Program (PCCC) and the Veterans Choice Program (VCP). Systems for Monitoring the Quality of Care This section requires the Secretary to establish a system to monitor the quality of care provided through a network, or networks, of providers prior to contract renewal for such a network. Payment Rates for Care and Services This section stipulates that, with some exceptions, the rate paid for care or services through VCCP may not exceed the rate paid to providers under the Medicare program under Title XVIII of the Social Security Act, set by the Centers for Medicare & Medicaid Services (CMS), including rates paid under Medicare for Durable Medical Equipment (DME). However, the Secretary may negotiate and pay a higher rate than the established Medicare rate for eligible veterans in highly rural areas. Furthermore, in the state of Alaska, the VA will be able to reimburse providers under the VA Alaska Fee Schedule; in states with an All-Payer Model agreement, the VA will calculate Medicare payments based on payment rates under such agreements. When a given type of care or service is not payable under Medicare rates, or is payable under Medicare but does not have established pricing at the national or local level, those services are required to be paid based on rates established by the Secretary. The Secretary may also use alternative value-based reimbursement models to promote high-quality care through VCCP. Treatment of Veterans Other Health Insurance This section requires the Secretary to collect or recover reasonable charges for the cost of medical care or services furnished to an eligible veteran under VCCP for a nonservice-connected disability if the veteran has third-party health insurance coverage. The VA's right to recovery and collections is limited to the same extent as when the veteran or community care provider would otherwise be eligible to receive payment for such medical care or services from a third-party payer, such as a private medical insurer, if the care or services had not been furnished by the VA. Veterans Out-of-Pocket Expenses This section stipulates that an eligible veteran's copayments under VCCP will be the same as the copayments paid for the same nonservice-connected care or services provided at a VA medical facility. Authority for Organ Transplant Coverage This section requires the Secretary to authorize organ or bone marrow transplants to eligible veterans at non-VA facilities. An eligible veteran under this section is a (1) veteran who requires an organ or bone marrow transplant, and (2) based on the veteran's primary care provider's opinion, has a medical necessity to travel outside the Organ Procurement and Transplantation Network (OPTN) region in which the veteran resides. Monitoring and Assessing of Care Provided Through VCCP This section requires the Secretary to submit a report to the SVAC, HVAC, SAC, and HAC on the types and frequency of care provided under VCCP. The first report is due no later than 540 days after the enactment of the Caring for Our Veterans Act of 2018, and annually thereafter. The report must include the following data elements, among others: (1) the top 25% of types of care and services most frequently provided under VCCP because the VA is not providing such care and services; (2) the frequency of care and services that were sought by eligible veterans under VCCP; (3) an analysis of why the VA was not able to provide care and services sought by eligible veterans; (4) steps the VA took to provide care and services at a VA medical facility; and (5) the cost of care and services provided under VCCP. This section also requires the Secretary to compile various data elements, gap analysis, and assessments of care provided under VCCP. These include, among others, (1) data on the types of care and services and the number of veteran patients using each type of care; (2) gaps in care and services provided through VCCP community care networks; (3) identification of ways in which those gaps can be fixed; (4) assessment of the total amounts spent by the VA to provide care to eligible veterans through VCCP community care networks; (5) assessment of the timeliness of VA referrals to VCCP community care networks; and (6) assessment of the timeliness of VCCP community care networks in accepting referrals and scheduling appointments. Furthermore, the Secretary is required to report on the number of VA medical service lines not providing care under standards developed by the Secretary, and to assess the use of academic affiliates and other federal health care facilities under VCCP. The Secretary is required to provide a report on all the above information to SVAC and HVAC no later than 540 days after the date of the enactment, and annually thereafter. Prohibition on Limiting Medical Care and Services This section prohibits the Secretary from limiting hospital care, medical services, or extended care services under VCCP if it is in the best interest of the eligible veteran, as determined by the veteran and the veteran's health care provider. No Changes in Eligibility Criteria This section states that no changes are made to a veteran's eligibility criteria for hospital care, medical services, or extended care services under VCCP (i.e., if a veteran is not eligible under current law for a specific care or service, he or she is not eligible for that specific care or service under VCCP). Effective Date of VCCP and Publication of Regulations to Implement VCCP This section stipulates that the effective date of VCCP implementation would be the later of (a) a date that is 30 days after the date the Secretary submits a final report to Congress in which the Secretary determines that 75% of the amounts deposited in the Veterans Choice Fund, established under the Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 ; as amended), have been exhausted, or (b) on the date when the Secretary is required to promulgate regulations implementing VCCP, which is one year after the date of the enactment (i.e., June 6, 2019). Continuity of Existing Community Care Agreements This section requires the Secretary to continue all existing contracts, memorandums of understanding, memorandums of agreement, and other arrangements between the VA and the American Indian and Alaska Native health care systems and Native Hawaiian health care systems. Section 102. Authorization of Agreements Between Department of Veterans Affairs and Nondepartment Providers This section amends current law to add a new 38 U.S.C. §1703A, which authorizes the Secretary to enter into agreements with community providers. In the following paragraphs, "this section" means the newly amended §1703A and its subdivisions. Authorization of Community Care Agreements This section authorizes the Secretary to enter into agreements known as Veterans Care Agreements (VCAs) if care cannot be feasibly delivered through VA facilities, VCCP community care networks, or other statutory authorities to provide care in the community. When authorizing care under VCAs, the Secretary is required to consider factors that would make the use of a VA facility or a community care network facility impracticable or inadvisable for the eligible veteran, such as a veteran's medical condition, the travel involved, the nature of the care or services required, or a combination of these factors. The Review of Each VCA This section requires the Secretary to review each VCA of material size that has been entered into for at least six months by the date of review. The reviews are required within the first two years after going into effect, and not less than every four years thereafter. For VCAs used for the purchase of extended care services in FY2019 and after, the material size will be defined as those exceeding $5 million annually. Entities and Providers Eligible to Enter into VCAs This section stipulates which entities and providers are eligible to enter into VCAs. These include (1) any provider of services that has enrolled and entered into a provider agreement under Medicare, and any physician or other supplier who has enrolled and entered into a participation agreement under Medicare; (2) any provider participating under a State Medicaid program; (3) an Aging and Disability Resource Center, an area agency on aging, or a state agency (as defined in Section 102 of the Older Americans Act of 1965); (4) a center for independent living (as defined in Section 702 of the Rehabilitation Act of 1973); and (5) any other entity or provider as determined by the Secretary. Certification of Eligible VCA Entities and Providers This section requires the Secretary to develop a certification process through the promulgation of regulations. The regulations at a minimum must (1) set deadlines for applications for certification; (2) provide standards for approval or denial of certification; (3) require the denial of certification if an entity or provider is excluded from participation in a federal health care program such as Medicare and Medicaid; and (4) establish procedures for screening providers or entities for the risk of fraud, waste, and abuse. Reimbursement Rates Under VCAs This section requires that rates paid by the VA for hospital care, medical services, and extended care services provided under VCAs be similar to rates paid under the VCCP. (Rates paid for care or services through VCCP may not exceed rates paid to providers under the Medicare program, set by CMS, including rates paid under Medicare for Durable Medical Equipment [DME].) Requirements for Providers and Entities Entering into VCAs This section requires the Secretary to promulgate regulations that define the terms under which providers and entities could enter into to VCAs with the VA. VCAs will be required to accept payments at the rates established through regulations, to accept payments in full, and to not hold a veteran liable for any care provided through a VCA authorization. In addition, entities are not allowed to bill a veteran's third-party health insurance provider for any care or service that is furnished or paid for by the VA, and entities are required to meet all other terms and conditions, including quality of care standards specified in regulations. Discontinuation or Nonrenewal of a VCA This section authorizes the Secretary to discontinue a VCA based on the following factors: (1) it is determined that the eligible entity or provider failed to comply with the requirements of the VCA; (2) it is determined that the eligible entity or provider is excluded from participation in a federal health care program; (3) it has been ascertained that the eligible entity or provider has been convicted of a felony or other serious offense, or the provider's continued participation would be detrimental to the best interests of veterans or the VA; or (4) it has been determined that it is reasonable to terminate the agreement based on the health care needs of the veteran. Monitoring Quality of Care of VCAs This section requires the Secretary to establish a system for monitoring the quality of care provided to veterans through VCAs, and to use such information when determining whether to renew VCAs. Exclusion of VCAs from Federal Laws Governing Federal Contracts This section stipulates that VCAs are not subject to competitive procedures associated with federal contracts for the acquisition of goods or services, and that VCAs are exempt from any provisions in law similar to those provisions that exempt Medicare providers. Entities that enter into VCAs would not be considered federal contractors or subcontractors. However, entities and providers that enter into VCAs with the VA are subject to all federal laws regarding integrity, ethics, and fraud, as well as all laws that protect against employment discrimination or that otherwise ensure equal employment opportunities. Definition of Covered Individuals under VCAs38 This section defines those eligible to receive care through VCAs as any individual eligible for hospital care, medical services, or extended care services under any law administered by the VA. Parity of Treatment This section requires that care and services provided to veterans through VCAs should be similar and be subject to the same terms as care provided in a VA facility. Section 103. Authorizing State Veterans Homes to Enter into VCAs This section amends current law 38 U.S.C. §1745 to authorize the VA to enter into VCAs with State Veterans Homes. These VCAs, similar to Medicare providers, are exempt from certain federal contracting laws and are not subject to competitive procedures associated with federal contracts for the acquisition of goods or services, including any provisions in law similar to those provisions that exempt Medicare providers. State Veterans Homes that enter into VCAs are not considered federal contractors or subcontractors. However, State Veterans Homes that enter into VCAs with the VA are subject to all federal laws regarding integrity, ethics, and fraud, as well as laws that protect against employment discrimination or that otherwise ensure equal employment opportunities. Section 104. Access Standards and Standards for Quality This section amends current law to add two new sections (38 U.S.C. §1703B and §1703C) that require the Secretary to develop access and quality standards for furnishing hospital care, medical services, or extended care services to eligible veterans under the VCCP. In the following paragraphs, this section means the newly amended Section 1703B and Section 1703C and their respective subdivisions. Access Standards This section requires the Secretary to establish access standards for hospital care, medical services, and extended care services furnished by the VA and health care providers under the VCCP. It also requires the Secretary to ensure that the access standards established by the VA are clear, useful, and timely so that veterans, employees of the VA, and health providers in the VCCP have relevant comparative information upon which to make informed and responsible decisions. It also requires the Secretary to consult DOD, HHS, CMS, private sector entities, and other nongovernmental entities when establishing access standards. The Secretary is required to submit a report detailing the access standards to SVAC, HVAC, SAC, and HAC no later than 270 days after enactment. Prior to this, the Secretary is required to provide the first update no later than 120 days after enactment. No later than 540 days after the Secretary implements access standards, the Secretary is required to submit a report to SVAC, HVAC, SAC, and HAC detailing the implementation. The Secretary is also required to review the access standards on a periodic basis. The first review is required three years after the access standards are first established, and not less than every three years thereafter. It requires the Secretary to publish the established access standards in the Federal Register and on the VA website. This section stipulates that an eligible veteran could contact the VA at any time and request care through the VCCP, provided that a VA facility is unable to provide care or services based on access standards established by the VA. Standards for Quality This section requires the Secretary to establish standards of quality for hospital care, medical services, and extended care services provided by the VA and the VCCP, and requires the Secretary, when establishing standards for quality, to consider existing health quality measures in both the private and public health care systems in order to provide veterans relevant comparative information. The Secretary is required to consult with DOD, HHS, CMS, and other entities in developing these standards. The Secretary is required to submit a report detailing the standards for quality to SVAC, HVAC, SAC, and HAC no later than 270 days after enactment, and to provide periodic updates to SVAC, HVAC, SAC, and HAC prior to submitting the quality standards report. The first update is due 120 days after enactment. Moreover, no later than two years after the Secretary establishes quality standards, the Secretary is required to seek public comment and make any changes to quality measures. Section 105. Access to Walk-In Care This section amends current law to add a new 38 U.S.C. §1725A, which requires the Secretary to develop procedures to allow certain veterans to access walk-in care through community providers. All veterans enrolled in the VA health care system, and who have received VA care or services within 24 months prior to accessing a walk-in care clinic, are eligible. Both requirements must be satisfied for eligibility under this provision. Walk-in clinics that have entered into contracts or other agreements with the VA, including FQHCs, are eligible to participate in the walk-in care clinic program. Under this section, walk-in care means nonemergent care provided by qualifying non-VA providers or entities that furnish episodic care and not longitudinal management of conditions, and as defined by the Secretary in regulations. Copayments This section requires veterans to pay certain copayments when receiving care through a walk-in clinic or facility. If a veteran is required to pay a copayment for care at a VA facility, then the veteran may be required to pay a copayment when accessing walk-in care. If a veteran is not required to pay a copayment at a VA facility, then the first two visits in a calendar year will be free, and any additional visits after the first two visits may require copayments, as determined by the Secretary in regulations. If a veteran is required to pay a copayment for care at a VA facility, then the veteran would be required to pay the same regular copayment amount for the first two walk-in care visits in a calendar year. For any additional visits, a higher copayment amount, as determined by the Secretary in regulations, may be required. Effective Date The Secretary is required to publish regulations no later than one year after the date of enactment, and the effective date for walk-in care is the date when the final regulations pertaining to walk-in care take effect. Section 106. Strategy Regarding the VA High-Performing Integrated Health Care Network. This section amends current law to add a new 38 U.S.C. §7330C, which requires the Secretary to conduct a quadrennial market area assessments regarding VHA health care services. The assessment must assess the demand for VA health care; the VA's health care capacity; the capacity of VCCP providers; and the capacity of academic affiliates and other federal partners that provide health care to veterans, among other factors. The Secretary is required to use this assessment data when developing the President's annual budget request to Congress. This section requires the VA to submit the quadrennial market area assessments to SVAC, HVAC, SAC, and HAC. Strategic Plan to Meet Health Care Demand This section requires the Secretary to submit to SVAC, HVAC, SAC, and HAC a strategic plan that provides a four-year forecast of (1) the demand for VA health care, (2) the health care at each VAMC, and (3) the health care capacity to be provided through community care providers. The first plan is required one year after the enactment, and then once every four years. Section 107. Applicability of Directive of Office of Federal Contract Compliance Programs This section stipulates that the Office of Federal Contract Compliance Programs' (OFCCP) moratorium, which is currently applicable to all health care entities that participate in the TRICARE program as subcontractors under a prime contract between DOD and the TRICARE Management Activity, will be applicable in a similar manner to VCAs throughout the duration of the moratorium. Section 108. Prevention of Certain Health Care Providers from Providing Non-VA Health Care Services to Veterans This section requires the Secretary to deny and revoke the eligibility of certain previous VA health care providers from providing health care services to veterans in the community. Such providers include those who have been removed from VA employment due to conduct that violated VA policies pertaining to the safe delivery of health care to veterans, or those who violated their medical licensing requirements and lost their medical license to practice. This section stipulates that no later than two years after enactment, the GAO must submit a report to Congress regarding the Secretary's implementation of this provision. Section 109. Remediation of Medical Service Lines This section amends current law to add a new 38 U.S.C. §1706A, which requires the Secretary to take steps to improve a medical service line that fails to meet the quality standards established by the Secretary. These steps include, among others things, increasing personnel; utilizing special hiring incentives, such as the Education Debt Reduction Program (EDRP) and recruitment, relocation, and retention incentives; utilizing direct hiring authority; providing improved training for staff; purchasing improved equipment; and making structural modifications to the VAMC. This section requires the Secretary to submit an annual report to Congress analyzing the remediation actions taken by the Secretary to improve the VA medical service line. Section 111. Prompt Payment to Providers This section amends current law to add a new 38 U.S.C. §1703D, which delineates prompt payment standards that the Secretary is required to follow for care provided to eligible veterans in the community. This section requires the Secretary to pay health care providers and entities for care furnished to veterans within 45 calendar days of receiving a clean paper claim, or within 30 calendar days of receiving a clean electronic claim. In addition, if the Secretary denies a paper claim, the Secretary must within 45 calendar days notify the entity regarding the reasons for denial and request additional information to process the claim. If an electronic claim is denied, the Secretary has 30 days to notify an entity and request additional information. Submittal of Claims by Health Care Entities and Providers This section requires a community health care provider or entity to submit a claim for payment to the VA no later than 180 days after the date in which care or services were provided to an eligible veteran. Fraudulent Claims This section stipulates that penalties and civil action applicable to false or fraudulent claims for payment or approval as delineated in 31 U.S.C. §§3729-3733 will be applicable in the same manner to entities and providers submitting false or fraudulent claims to the Secretary. Overdue Claims This section stipulates that any claim that has not been denied by the Secretary and for which payment is pending for more than 45 calendar days following the receipt of a clean paper claim, or more than 30 calendar days of receiving a clean electronic claim, will be deemed an overdue claim. Such overdue claims may be subject to the Prompt Payment Act (31 U.S.C. Chapter 39) requirements. Overpayment40 This section stipulates that the Secretary may deduct overpayments to a health care provider or entity after reasonable steps have been taken to resolve the dispute. The Secretary may also use other means as authorized by federal law to correct or recover overpayments. Information and Documentation Required This section requires the Secretary to provide all relevant documentation to community health care providers and entities in order for them to generate clean claims. Processing of Claims The sections authorizes the Secretary to contract with the entity contracted to develop the VCCP network, or another private medical claims processor, to process community care medical claims. Report on Encounter Data System This section requires the Secretary to submit a report to SVAC, SAC, HVAC, and HAC on the feasibility and advisability of adopting a funding mechanism similar to other federal agencies that use a fiscal intermediary (a private insurance company) to serve as the federal government's agents in the administration of a health care program, including the payment of medical claims. This report is due no later than 90 days after enactment. Section 112. Authority to Pay for Authorized Care Not Subject to an Agreement This section amends current law to add a new U.S.C. §8159, which authorizes the Secretary to compensate for care provided to a veteran, even if the provider or entity does not have a contract or agreement with the VA. The Secretary is required take reasonable steps to enter into a contract or other arrangement with such an entity or provider so that future care provided to a veteran will be subject to an agreement, contract, or other reimbursable arrangement. Section 113. Improvement of Authority to Recover the Cost of Services Furnished for Nonservice-Connected Disabilities This section amends current law 38 U.S.C. §1729, which authorizes the Secretary to recover the cost of care for nonservice-connected conditions of veterans, and expands it to include care furnished by the VA to nonveterans requiring emergency services as well. It also authorizes the Secretary to seek collections in the event that the VA pays for care, rather than just furnishes it. This section also authorizes the Secretary to recover the cost of care of a nonservice-connected disability incurred by an individual who is entitled to care, or payment for the expenses of care, under a private health insurance plan. Section 114. Processing of Claims for Reimbursement Through Electronic Interface This section authorizes the Secretary to enter into an agreement with a third party to process medical claims using an electronic method. Section 121. Education Program on Health Care Options This section requires the Secretary to develop and conduct an education program to teach veterans about their health care options through the VA health care system, as well as VCCP eligibility criteria and any financial obligations they may have for their nonservice-connected care. It also requires that veterans be taught about the interaction between Medicare, Medicaid, TRICARE, tribal health programs, and VA health care. Section 122. Training Program for Administration of Non-VA Health Care This section requires the Secretary to develop and implement a training program to educate VA employees and contractors about VCCP, reimbursement for non-VA community emergency room services, and safe opioid prescription management, and how to administer these programs. This section also requires the Secretary to develop a method to evaluate the training program, and to submit a report to Congress each year regarding the findings from the most recent evaluation. Section 123. Continuing Medical Education for Non-VA Medical Professionals This section requires the Secretary to establish a continuing medical education program to provide education material to non-VA medical professionals. These education materials must include, among other things, information on identifying and treating mental and physical conditions of veterans, as well as the VA health care system. The materials provided to non-VA community care providers must be the same as those provided to VA health care providers. The Secretary is required to determine the curriculum of the program and the credit hour requirements, to develop a method to evaluate the continuing medical education program, and to provide a report to Congress about its effectiveness. A non-VA medical professional is defined in this section as "any individual who is licensed by an appropriate medical authority in the United States and is in good standing, is not an employee of the Department of Veterans Affairs, and provides care to veterans or family members of veterans under the laws administered by the Secretary of Veterans Affairs." Section 131. Establishment of Processes to Ensure Safe Opioid Prescribing Practices by Non-VA Health Care Providers This section requires the Secretary to ensure that all non-VA, nonfederal community providers are knowledgeable about opioid-prescribing practices described in the "Opioid Safety Initiative of the Department of Veterans Affairs." It further requires the Secretary to create a process to ensure that VA, non-VA, and nonfederal community providers share all medication and medical history of an eligible veteran. The VA is responsible for monitoring an eligible veteran's prescriptions, as described in the "Opioid Safety Initiative of the Department of Veterans Affairs." Section 132. Improving Information Sharing with Community Providers This section amends current law 38 U.S.C. §7332 regarding the confidentiality of certain medical records and adds a new subparagraph. This amended section authorizes the Secretary to share a veteran's confidential VA medical records with non-VA entities, including private entities and other federal agencies, for the purposes of providing health care, as well as with third-party insurance providers, for the purposes of recovering charges for care provided to a veteran with a nonservice-connected condition. Section 133. Competency Standards for Non-VA Health Care Providers Establishment of Standards and Requirements This section requires the Secretary to establish standards and requirements for non-VA community providers to follow when providing care to eligible veterans. Specifically, these standards and requirements must focus on clinical areas for which the VA has special expertise, including post-traumatic stress disorder, military sexual trauma-related conditions, and traumatic brain injuries. Condition for Eligibility to Furnish Care Each non-VA community provider must meet the standards and training requirements specified by the Secretary before providing care to an eligible veteran in the clinical areas for which the VA has special expertise, including post-traumatic stress disorder, military sexual trauma-related conditions, and traumatic brain injuries. Effective Date This section will take effect one year after the date of the enactment. Section 134. VA Participation in National Network of State-Based Prescription Drug-Monitoring Programs41 This section amends current law to add a new 38 U.S.C. §1730B. It requires the VA to enter into an agreement with a national network of prescription drug-monitoring programs (PDMPs) or any state or regional prescription drug-monitoring program, to allow licensed VA health care providers to query controlled substance prescriptions (21 U.S.C. §802(6)) written in participating states or regions. It requires VA health care providers practicing in states that do not have a PDMP to join the nearest state or regional PDMP. Section 141. Plans for Use of Supplemental Appropriations Whenever the Secretary requests from Congress supplemental appropriations or any other type of appropriation outside the annual congressional appropriations process, this section requires the Secretary to submit to Congress a justification detailing how the Secretary intends to use the requested appropriation and the expected duration of the supplemental appropriations. Section 142. Veterans Choice Fund Flexibility This section authorizes the Secretary, beginning on March 1, 2019, to use the remaining funds in the VCF for care in the community programs provided at non-VA facilities. However, the Secretary is prohibited from using the remaining VCF funds for VCCP. Section 143. Sunset of Veterans Choice Program This section amends VACAA and stipulates that the Secretary may not authorize care under the VCP program one year after the date of enactment (i.e., on June 6, 2019). Subtitle B: Improving VA Health Care Delivery In general, VA providers are able to practice across state lines in VA health care facilities with clinical privileging and a single, unrestricted, active state license. However, these providers cannot practice in non-VA health care facilities located in states where they are not licensed. For that reason, according to the VA, some VA providers were concerned that their state licensing boards might take action against their licenses if they provided telehealth services in non-VA health care facilities in states where they were not licensed. To address this issue, on May 11, 2018, the VA finalized a rule to exempt its providers that deliver care via telemedicine from certain state licensing laws and regulations. The VA's final rule became effective on June 11, 2018. The passage of the VA MISSION Act codified the core elements of VA's final rule in statute. The rule provides the details of how VA will implement the provisions contained in the new law. Section 151. Licensure of Health Care Professionals of the VA Providing Treatment Via Telemedicine This section amends current law to add a new 38 U.S.C. §1730B, which removes all geographical barriers to telemedicine, therefore allowing a telemedicine episode of care to be delivered without regard to where a veteran patient and VA provider are located within the United States and U.S. territories, and without regard to whether the veteran patient is located in a non-VA health care facility. It also protects VA providers against possible liability issues stemming from state licensure laws by prohibiting states from denying or revoking the licenses, registrations, or certifications of VA providers that practice under this authority. This section also requires the Secretary, not later than one year after enactment, to submit an annual report to Congress outlining the effectiveness of the agency's use of telemedicine. The report must contain six elements: (1) incurred savings; (2) veteran patients' satisfaction in receiving telemedicine; (3) VA providers' satisfaction in providing telemedicine; (4) the types of telemedicine services delivered; (5) the number of telemedicine episodes of care delivered, by medical facility; and (6) outcome measurements, such as accessibility to and the frequency of use of telemedicine services by veteran patients. Section 152. Authority for the VA Center for Innovation for Care and Payment This section amends current law to add a new 38 U.S.C. §1703E, which establishes within the VA a Center for Innovation for Care and Payment. The Secretary may implement appropriate pilot programs to develop innovative approaches to testing payment and service delivery models, with the goal of reducing expenditures and enhancing the quality of care for veterans. However, the Secretary is prohibited from testing payment and service delivery models that would allow the VA to bill or recover charges from Medicare, Medicaid, or TRICARE for health care services provided to veterans eligible under those programs. In implementing this section, the Secretary may waive certain requirements. However, the Secretary is required to notify Congress before waiving such requirements. Section 153. Authority for Operations on Live Donors for the Purposes of Conducting Transplant Procedures for Veterans This section amends current law to add a new 38 U.S.C. §1788, which, subject to the availability of appropriations, requires the Secretary to furnish to any live donor, regardless of whether the donor is a veteran, any care or services that may be required in connection with such procedure before and after conducting the transplant procedure for an eligible veteran. The Secretary could provide for the operation on a live donor and furnish to the live donor the care and services at a VA or Non-VA facility. Subtitle C: Family Caregivers In recognition of the significant role that family caregivers play in providing personal care services and other supports to veterans, the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ) was signed into law on May 5, 2010. The law requires the Secretary to establish the following two programs: Program of General Caregiver Support Services , which includes caregiver programs for veterans of all eras. Program of Comprehensive Assistance for Family Caregivers (Comprehensive Care Program) , which provides additional supports and services, including financial compensation in the form of a caregiver stipend, to family caregivers of eligible veterans or servicemembers seriously injured in the line of duty on or after September 11, 2001 (post-9/11 veterans). Subtitle C expands the VA's Comprehensive Care Program over time to include veterans of all eras (pre-9/11 veterans) and makes certain modifications to the services and assistance to family caregivers in such program. These provisions also require the VA to implement an information technology (IT) system that supports the Comprehensive Care Program and to amend the requirements for VA's annual evaluation report. Section 161. Expansion of Family Caregiver Program of the VA Eligibility This section amends 38 U.S.C. §1720G(a)(2) to expand eligibility for the Comprehensive Caregiver Program to pre-9/11 veterans, beginning on the date when the Secretary submits to Congress the certification that the VA has fully implemented the IT system (described in Section 162), herein referred to as the certification date. Beginning on the certification date, the Comprehensive Caregiver Program is extended over a two-year period to pre-9/11 veterans who have a serious injury incurred or aggravated in the line of duty in the active military, naval, or air service on or before May 7, 1975. Two years after the certification date, the Comprehensive Care Program is extended to all pre-9/11 veterans, covering veterans of all eras. It requires the Secretary, no later than 30 days after the date the Secretary submits to Congress the above certification, to publish the certification date in the Federal Register. It also amends 38 U.S.C. §1720G(a)(2) to expand the eligibility criteria for the Comprehensive Caregiver Program to include those veterans in need of personal care services because of a need for regular or extensive instruction or supervision, without which the ability of the veteran to function in daily life would be seriously impaired, among other existing criteria. Caregiver Assistance This section amends 38 U.S.C. §1720G(a)(3) to expand the types of assistance available to family caregivers under the Comprehensive Care Program to include financial planning services and legal services relating to the needs of injured veterans and their caregivers. It further amends this subsection regarding the monthly stipend determination to specify that in determining the amount and degree of personal care services provided to an eligible veteran whose need is based on a need for supervision or protection, as specified, or regular instruction or supervision, as specified, the determination must take into account (1) the assessment by the family caregiver; (2) the extent to which the veteran can function safely and independently without supervision, protection, or instruction; and (3) the amount of time required for the family caregiver to provide supervision, protection, or instruction. It also adds new language under 38 U.S.C. §1720G(a)(3) that in providing instruction, preparation, and training to each approved family caregiver, the Secretary is required to periodically evaluate the needs of the eligible veteran and the skills of the family caregiver to determine if additional support is necessary. It amends 38 U.S.C. §1720(a)(5) to require the Secretary to evaluate each application submitted jointly by an eligible veteran in collaboration with the primary care team for the eligible veteran to the maximum extent practicable. It further adds a new paragraph under 38 U.S.C. §1720(a) that in providing assistance to family caregivers of eligible veterans, the Secretary may enter into contracts or agreements with specified entities to provide family caregivers such assistance. The Secretary is required to provide such assistance only if it is reasonably accessible to the family caregiver and is substantially equivalent or better in quality to similar services provided by the VA. It authorizes the Secretary to provide fair compensation to federal agencies, states, and other entities that provide such assistance. It amends the definition of personal care services under 38 U.S.C. §1720(d)(4) to include services that provide the veteran with (1) supervision or protection based on symptoms or residuals of neurological or other impairment or injury, and (2) regular or extensive instruction or supervision without which the ability of the veteran to function in daily life would be seriously impaired. Section 162. Implementation of Information Technology System of the VA to Assess and Improve the Family Caregiver Program This section requires the Secretary to implement an IT system, no later than October 1, 2018, with certain specified elements that fully supports the Comprehensive Caregiver Program and allows for data assessment and program monitoring. No later than 180 days after implementing the IT system, the Secretary is required, through the Under Secretary for Health, to conduct an assessment of how key aspects of the Comprehensive Caregiver Program are structured and carried out using data from the IT system and any other relevant data. The Secretary is required to use the IT system to monitor and assess program workload, and to implement certain modifications necessary to ensure program functioning and timeliness of services. It also requires the Secretary, no later than 90 days after enactment, to submit an initial report to the SVAC, HVAC, and GAO on the status of the planning, development, and deployment of the IT system. The initial report must include an assessment of the needs of family caregivers of veterans eligible for the Comprehensive Program solely due to a serious injury incurred or aggravated in the line of duty in the active military, naval, or air service before September 11, 2001; the resource needs for including such family caregivers; and any changes necessary to ensure successful program expansion. The GAO is required to review the initial report and notify SVAC and HVAC with respect to the progress of the Secretary in fully implementing the required IT system, as well implementation of a process to monitor, assess, and modify the program as necessary. No later than October 1, 2019 , the Secretary is required to submit a final report to SVAC, HVAC, and the GAO on system implementation, including program monitoring, assessment, and modification, as specified. Section 163. Modification to Annual Evaluation Report on Caregiver Program of the VA This section amends 38 U.S.C. §1720G note to add certain reporting requirements to VA's submission of the annual evaluation report to the SVAC and HVAC regarding program implementation. With respect to both caregiver programs, it requires the annual evaluation report to describe any barriers to accessing and receiving care and services under such programs. With respect to the Comprehensive Caregiver Program, it adds new reporting language to evaluate the sufficiency and consistency of the training provided to family caregivers under such programs. Title II: VA Asset and Infrastructure Review The VHA operates in approximately 5,670 buildings and another 1,648 leased facilities. The last major comprehensive review of VA real property and medical facilities throughout the country was done under the Capital Asset Realignment for Enhanced Services (CARES) program. In October 2000, the VA established the CARES program with the goal of evaluating the projected health care needs of veterans over the next 20 years and of realigning VA's infrastructure to better meet those needs. In August 2003, VA's then-Undersecretary for Health issued a preliminary Draft National CARES Plan (DNCP). The DNCP, among other things, recommended that seven VA health care facilities close and that duplicative clinical and administrative services delivered at over 30 other VHA facilities be eliminated. The sites slated to be closed were in the following locations: Canandaigua, NY; Pittsburgh, PA (Highland Drive Division); Lexington, KY (Leestown Division); Cleveland, OH (Brecksville Unit); Gulfport, MS; Waco, TX; and Livermore, CA. Patients currently receiving services at these VHA facilities would have been provided care at other nearby sites. The DNCP recommended that new major medical facilities be built in Las Vegas, NV, and East Central, FL. Furthermore, the DNCP recommended significant infrastructure upgrades at numerous sites including, at or near locations where the VA proposed to close facilities. In addition, the draft plan called for the establishment of 48 new high-priority Community Based Outpatient Clinics (CBOCs). Following the release of the DNCP, the then-VA Secretary Anthony Principi appointed a 16-member independent commission to study the draft plan. The commission was composed of individuals from a wide variety of backgrounds outside of the federal government. The CARES Commission developed and applied six factors in the review of each proposal in the DNCP: (1) impact on veterans' access to health care, (2) impact on health care quality, (3) veteran and stakeholder views, (4) economic impact on the community, (5) impact on VA missions and goals, and (6) cost to the government. The commission conducted 38 public hearings and 81 site visits throughout 2003 and submitted its recommendations to the Secretary in February 2004. After reviewing the recommendations, the then Secretary announced the final details of the CARES plan in May 2004 (Secretary's CARES Decision). The final plan called for consolidating several facilities, as well as building new hospitals in Orlando and Las Vegas; adding 156 new CBOCs, four new spinal cord injury centers, and two blind rehabilitation centers; and expanding mental health outpatient services nationwide. However, critics of the CARES plan contended that closures were considered without assessing what kind of facilities would be needed for long-term care and mental health care in the future. Also, some believed that the CARES plan did not focus enough on future nursing home needs, would leave the VA short of beds in a few decades, and, as a result, would leave the VA with no choice but to privatize some parts of the health care system. Moreover, some veterans' groups believed that CARES was only about closing "surplus" hospitals and did not believe that CARES would result in the building of new and modern facilities. Finally, the closure of some VA medical facilities raised serious concern among some Members of Congress who felt that they had little control over the CARES process. The Independent Assessment required by Section 201 of VACAA found that [c]urrent facilities, whether they have been maintained adequately or not, often do not match current models of care. The overwhelming majority of VHA hospitals were designed when care was focused more heavily around inpatient hospital treatments. Over the past eight years, Veteran inpatient bed days of care have declined nearly ten percent while outpatient clinic workload has increased more than 40 percent. Space for outpatient care is typically housed in converted inpatient spaces or VHA's growing number of clinics. As a result, VHA's capital needs fall into a broad range of categories, including ensuring adequate facility condition, providing sufficient and appropriate space for Veteran care, and upgrading infrastructure. As facilities age further and care continues to shift to the outpatient setting, the size of the capital need could continue to grow. Furthermore, the Commission on Care was established by VACAA "to examine the access of veterans to health care from the Department of Veterans Affairs and strategically examine how best to organize the [VHA], locate health resources, and deliver health care to veterans." In its final report, it recommended that the VA "develop and implement a robust strategy for meeting and managing VHA 's facility and capital asset needs." Within this context, the HVAC began to examine VA's capital asset program in the summer of 2017. At a hearing held on July 12, 2017, the then-VA Secretary who was involved in the CARES plan testified that "under CARES there was no requirement for Congress to adopt or reject the commission's final recommendations as a package. As a result, recommendations for some needed new hospitals and outpatient clinics were accepted. Most of those to change, realign, or maybe close the mission of other facilities were rejected." Based on input and recommendations from various stakeholders, on November 3, 2017, the VA Asset and Infrastructure Review Act of 2017 ( H.R. 4243 ) was introduced; it was ordered reported on November 8 (without a written report). Provisions from H.R. 4243 were then incorporated as Title II of the VA MISSION Act. Subtitle A: Asset and Infrastructure Review This title establishes a process for realigning and modernizing facilities of the VHA. Under this process, the VA will develop criteria for selecting VHA facilities to dispose of, modernize, or acquire, so as to better meet the health care needs of veterans. The VA must then create a list of recommendations based on those criteria and submit it to a newly created Asset Infrastructure Review Commission (the Commission). This nine-member commission reviews the VA's recommendations but may not alter them, unless it determines that one or more recommendations are inconsistent with the criteria. The Commission submits the list of recommendations to the President, who either approves the list in its entirety or sends it back to the Commission with the reasons for disapproval. The Commission shall take into account the reasons for disapproval and submit a second report to the President with recommendations for realignment and modernization of VHA facilities. The President may approve or disapprove of the revised list. If the President approves of the original or revised list, then VA must begin implementation of the recommendations within three years, unless Congress passes a joint resolution of disapproval, in which case the process terminates. Section 201. Short Title This section provides the title as the "VA Asset and Infrastructure Review Act of 2018." Section 202. The Commission Establishment This section establishes an independent commission to be known as the "Asset and Infrastructure Commission" (the Commission). Duties This section requires the Commission to carry out the duties specified for it in this subtitle. Appointment This section establishes a nine-member Asset and Infrastructure Review Commission. All nine members are to be appointed by the President, with the advice and consent of the Senate. The President is required to consult with House and Senate leadership, along with congressionally chartered, membership-based veterans organizations (VSOs), when selecting individuals to nominate to the Commission. The President shall designate one nominee to serve as Chair of the Commission and one nominee to serve as Vice Chair. In nominating individuals, the President shall ensure that the Commission adequately represents the current demographics of veterans. In addition, the Commission must include at least one member with experience working for a private integrated health care system with annual gross revenues of more than $50 million; at least one member with experience with capital asset management for the federal government and who is familiar with trades related to building and real property; and at least three members who represent congressionally chartered, membership-based VSOs. Nominations must be submitted to the Senate no later than May 31, 2021. Meetings The Commission shall meet only during calendar years 2022 and 2023, and all of its proceedings are required to be open to the public. Vacancies A vacancy shall be filled in the same manner as the original appointment, but the individual appointed shall serve only for the unexpired portion of the term for which the individual's predecessor was appointed. Pay Members of the Commission shall serve without pay. Members who are officers or employees of the United States shall serve without compensation in addition to that received for serving as officers or employees of the United States. Director and Staff The Commission shall appoint a Director who has not served as an employee of the Department of Veterans Affairs in the one-year period preceding the date of such appointment, and who is not otherwise barred or prohibited from serving as Director under federal ethics laws and regulations. The Director shall be paid at the rate of basic pay established for Level IV of the Executive Schedule. The Director may, with the approval of the Commission, appoint and fix the pay of additional personnel. Not more than two-thirds of the personnel employed by or detailed to the Commission may be on detail from the VA. A person may not be detailed from the VA if, within the previous six months, that person participated substantially in the development of recommendations regarding VHA facilities. The head of any federal department or agency may provide detailees to the Commission. Other Authority To the extent funds are available, the Commission may (1) procure the temporary or intermittent services of experts or consultants, and (2) lease real property and acquire personal property, either on its own accord or in consultation with the General Services Administration (GSA). Termination The Commission shall terminate on December 31, 2023. Prohibition Against Restricting Communications No person may restrict a VA employee in communicating with the Commission, except for communications that are unlawful. Section 203. Procedure for Making Recommendations Selection Criteria Not later than February 1, 2021, after consulting with VSOs, the Secretary is required to publish in the Federal Register and transmit to SVAC and HVAC the criteria the VA will use in making recommendations for the modernization and realignment of VHA facilities. There is a 90-day public comment period on the proposed criteria, and the VA must publish the final criteria in the Federal Register and transmit them to HVAC and SVAC no later than May 31, 2021. Recommendation of the Secretary The VA is required to consult with VSOs when developing its recommendations, which must be published in the Federal Register and transmitted to HVAC and SVAC no later than January 31, 2022. The VA must take into account the following factors when developing the list of recommendations: The degree to which any health care delivery or other site for providing services to veterans reflects the metrics of VA regarding market area health system planning. The provision of effective and efficient access to high-quality health care and services for veterans. The extent to which the real property that no longer meets the needs of the federal government could be reconfigured, repurposed, consolidated, realigned, exchanged, outleased, replaced, sold, or disposed. The need of VHA to acquire infrastructure or facilities that will be used for the provision of health care and services to veterans. The extent to which the operating and maintenance costs are reduced through consolidating, colocating, and reconfiguring space, and through realizing other operational efficiencies. The extent and timing of potential costs and savings, including the number of years such costs or savings will be incurred, beginning with the date of completion of the proposed recommendation. The extent to which the real property aligns with the VA's mission. The extent to which any action would affect other missions of the VA (including education, research, or emergency preparedness). Local stakeholder inputs and any factors identified through public field hearings. Commercial market assessments. The extent to which the VHA has appropriately staffed the medical facility, including determinations regarding insufficient resource allocation or deliberate understaffing. Any other such factors that the VA deems appropriate. The VA is required to assess the capacity of each Veterans Integrated Service Network (VISN) and medical facility to furnish hospital care or medical services to veterans. Each assessment must identify gaps in furnishing care or services and how those gaps can be filled by (1) entering into contracts or agreements with network providers or other entities; (2) making changes in the way care and services are furnished, such as by extending hours of operation, adding personnel, or expanding space through the construction, leasing, or sharing of health care facilities; and (3) the building or realignment of VA resources or personnel; forecast the short-term and long-term demand in furnishing care and services and how such demand affects the need to use these providers; include a commercial health care market assessment of designated catchment areas conducted by a nongovernmental entity; and consider the ability of the federal government to retain a presence in an area otherwise devoid of commercial health care providers or from which such providers are at risk of leaving. The VA is required to consult with VSOs and veterans served by each VISN and medical facility affected by an assessment and submit the assessments, along with the recommendations, to HVAC and SVAC. The VA must also submit a summary of the selection process that resulted in the recommendation for each facility, including a justification for each recommendation to HVAC and SVAC; consider all VHA facilities equally, without regard to whether the facility has been previously considered or proposed for reuse, closure, modernization, or realignment; and make all information used by the VA to prepare the recommendations available to the Commission and the Comptroller General. Review and Recommendation by the Commission The Commission must conduct public hearings on the VA's recommendations, including regions affected by a recommendation to close a facility. The Commission must also, to the greatest extent possible, hold hearings in regions affected by a recommendation to modernize or realign a facility. The witnesses at each public hearing must include a veteran identified by a local VSA who is enrolled in the VA health care system, and a local elected official. The Commission must transmit its recommendations to the President, along with a review and analysis of the Commission's findings and conclusions, not later than January 31, 2023. The Commission's recommendations may deviate from the VA's recommendations only if the Commission determines that the VA deviated substantially from the final criteria; determines that the change is consistent with the final criteria; publishes a notice of the proposed change in the Federal Register not less than 45 days before transmitting its recommendations to the President; and conducts public hearings on the proposed change. In addition, the Commission shall justify and explain in its report to the President any recommendations it makes that are different from the VA's recommendations. The Commission is also required to submit a copy of the report to HVAC and SVAC on the same date that it is transmitted to the President, and to promptly provide, upon request, to any Member of Congress, the information used by the Commission in making its recommendations. Review by the President Not later than February 15, 2023, the President is required to transmit to the Commission and to Congress a report containing the President's approval or disapproval of the Commission's recommendations. If the President approves all the recommendations of the Commission, the President must transmit a copy of the Commission's recommendations to Congress, together with a certificate of approval. If the President disapproves of the Commission's recommendations, in whole or in part, the President must transmit to the Commission and to Congress, not later than March 1, 2023, the reasons for that disapproval. The Commission, after considering the President's reasons for disapproval, must transmit to the President, not later than March 15, 2023, a report containing (1) the Commission's findings and conclusions based on a review and analysis of the President's reasons for disapproval, and (2) recommendations that the Commission determines are appropriate. If the President approves all the revised recommendations, the President must transmit a copy of those recommendations and a certificate of approval to Congress. If the President does not transmit an approval and certification to Congress for the initial or revised Commission recommendations by March 23, 2023, the process for modernizing or realigning VHA facilities shall terminate. Section 204. Actions Regarding Infrastructure and Facilities of the VHA This section requires the VA to begin implementing the recommendations not later than three years after the date on which the President transmits the report containing the recommendations to Congress. The VA may not carry out any facility modernization or realignment project identified in a report transmitted by the President if a joint resolution of disapproval is enacted in accordance with Section 207 of the act. Section 205. Implementation This section authorizes the VA to take any action necessary to implement the Commission's recommendation transmitted by the President (absent a congressional resolution of disapproval). It authorizes the Secretary to modernize or realign any facility—including through alteration, lease, acquisition, construction, or disposal of property—as well to carry out environmental mitigation, abatement, or restoration. The VA is authorized to reimburse other federal agencies for any work performed at the VA's request. In addition, the VA is required to carry out environmental abatement, mitigation, and restoration, as well as comply with historic preservation requirements, on any properties that exceed VA's needs as a result of modernization or realignment. Management and Disposal of Property To transfer or dispose of surplus real property or infrastructure located at any VHA facility to be modernized or realigned, the Secretary may exercise the authorities under subchapters I and II of 38 U.S.C. §81, or the GSA's delegated authorities. Prior to disposing of any surplus real property, the VHA must consult with the governor of the state and the heads of the local governments concerned for the purpose of considering any plan for the use of the property by the local community. Similarly, the VHA must consult with the governor of the state and heads of local governments to ensure that the continued availability of any roads used for public access around a facility recommended for closure or realignment. The Secretary may transfer the title of a VHA facility approved for closure or realignment to the redevelopment authority for the facility if the redevelopment authority agrees to lease a portion of the property to a federal department or agency. The lease shall be for a term not to exceed 50 years, but the term may be renewed or extended. The lease may not require rental payments by the United States. The provisions of Section 120(h) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §9620(h)) applies to any transfer of VA real property. Additionally, the McKinney-Vento Act (42 U.S.C. §11301 et seq.) applies to the closure of VA facilities. Applicability of National Environmental Policy Act of 1969 The provisions of the National Environmental Policy Act of 1969 (42 U.S.C. §4321 et seq.) shall apply to VA actions under this subtitle only during the processes of (1) real property disposal and (2) relocating functions from a VHA facility being closed or realigned to another facility. Waiver This section allows the Secretary to close or realign any VHA facility without regard to (1) any provision of law restricting the use of funds for those purposes included in any appropriation or authorization act, and (2) the restrictions of 38 U.S.C. §8110. Transfer Authority in Connection with Payment of Environmental Remediation Costs The Secretary may enter into an agreement to transfer by deed a VHA facility to any person who agrees to perform all required environmental restoration, waste management, and environmental compliance activities. Such transfer may be made only if the costs of compliance activities otherwise to be paid by the Secretary are equal to or greater than the fair market value of the property to be transferred, or if compliance costs are lower than fair market value of the facility and the recipient of the transfer agrees to pay the difference. Section 206. Department of Veterans Affairs Asset and Infrastructure Review Account Establishment This section establishes a VA Asset and Infrastructure Review Account, which is to be administered by the VA. Credits to the Account The account is authorized to receive appropriated funds and proceeds realized from lease, transfer, or disposal of any VHA property closed or realigned under this subtitle. Use of Account The VA may use the funds to carry out recommendations—including costs associated with the disposal and construction of facilities—and other purposes that the VA determines support the mission and operations of the department. Consolidated Budget Justification Display for Account The VA is required to establish a consolidated budget justification display that provides details on the credits to, and expenditures from, the account in the preceding fiscal year. The VA must provide this information to Congress in its budget submission. Closure of Account; Treatment of Remaining Funds The account shall be closed at the time and in the manner provided for appropriations accounts under 31 U.S.C. §1555, except the unobligated funds in the account shall be held by the Secretary of the Treasury until transferred by the VA Secretary after the final report on the account is received by SVAC and HVAC. Section 207. Congressional Consideration of Commission Report This section defines the expedited procedures for congressional consideration of the commission report. The procedures have the same force and effect as standing House and Senate rules and exempt the joint resolution of disapproval from many of the time-consuming steps and obstacles that apply to most measures Congress considers. Specifically, the procedure dictates when a joint resolution may be introduced, specifies its text, structures committee and floor consideration of the measure, prohibits amendments and other motions, and establishes an automatic "hook-up" of joint resolutions passed by both chambers. Significantly, because consideration is limited on the joint resolution of disapproval, a simple majority of the Senate may call up and reach a final vote on the measure without having to first assemble 60 votes to limit debate through the cloture process. Introduction and Referral Ordinarily, Members of the House and Senate may introduce legislation at any time that their chamber is in session during the two-year Congress. Under the commission procedure, however, a qualifying joint resolution of disapproval must be submitted within a five-day period beginning on the date the President transmits a certified commission report to Congress. Joint disapproval resolutions may be introduced by any Member in his or her respective chamber. In the Senate, such resolutions are referred to the SVAC. A joint resolution submitted in the House is to be referred under the chamber's standing procedures, which would likely result in a referral to HVAC, but could also include referral to additional House committees. There is no limit to the number of disapproval resolutions that can be introduced; multiple disapproval resolutions aimed at the same commission report could be submitted. Notably, submission of a disapproval resolution is not mandatory. It is possible that no Member will submit a disapproval resolution during the five-day period, and if so, the Secretary would implement the commission recommendations at the conclusion of the 45-day layover period described above. Text of the Joint Resolution of Disapproval Provisions in the act specify the text of the disapproval resolution. These provisions are meant to make it clear exactly which legislation is eligible to be considered under the expedited procedures. The joint resolution of disapproval may not contain a preamble. The title of the measure is to read: ''Joint resolution disapproving the recommendations of the VHA Asset and Infrastructure Review Commission.'' The text of the joint resolution after the resolving clause is to read: ''that Congress disapproves the recommendations of the VHA Asset and Infrastructure Review Commission as submitted by the President on ___'' (with the appropriate date filled in the blank). Committee Action With certain exceptions—for example, when time limits are placed by the Speaker on a House sequential referral of a bill —Congress generally does not mandate that a committee act on a bill referred to it within a specified time frame or at all. The commission procedure, however, places deadlines on the House and Senate committees of referral to act and creates a mechanism to remove the joint resolution from committee if they do not. These expediting provisions are intended to make it impossible for a joint resolution of disapproval to be long delayed or blocked outright in committee. As noted, upon introduction, a Senate joint resolution of disapproval is to be referred to the SVAC and a House joint resolution to the relevant House committees of jurisdiction. A committee may choose to mark up and report such a joint resolution, but it may not report amendments to it. If a House or Senate committee does not report a referred joint resolution of disapproval within 15 legislative days in the House or 15 session days in the Senate after the date of its introduction, the committee is automatically discharged from further consideration of the joint resolution, and the measure is placed directly on the chamber's appropriate calendar. Calling Up the Joint Resolution on the Floor After the third legislative day following the day that each House committee of referral has reported a joint resolution of disapproval or been discharged from its further consideration, any Member may move to proceed to consider the measure on the House floor. All points of order are waived against the motion to proceed. The motion is not debatable and cannot be made if the House has already disposed of a motion to proceed to consider a joint resolution proposing to disapprove the same commission package of recommendations. This ensures that the House may only vote on one motion to consider a disapproval resolution (even if multiple such resolutions have been submitted or if the House has already declined to consider such a joint resolution). Should the motion to proceed be adopted, the House would immediately consider the joint resolution of disapproval. All points of order against the joint resolution and its consideration are waived, and a motion to reconsider the vote on the motion to proceed is not in order. After the third session day following the day on which the SVAC has reported a joint resolution of disapproval or been discharged of its further consideration, it is in order for any Senator to move to consider the measure on the Senate floor. In the Senate, under most circumstances, a motion to proceed to the consideration of a measure is debatable. Under the commission procedure, however, the motion to proceed to the consideration of the joint resolution of disapproval is not debatable, and it may not be postponed. A motion to reconsider the vote on the motion to proceed is not in order. Unlike in the House, this motion to proceed can be made in the Senate even if an identical motion has previously been defeated. This provision serves as incentive for the chamber to get to a vote on the underlying joint resolution of disapproval; if a motion to proceed is defeated, supporters can simply reoffer it until it passes or force the chamber to expend time and energy disposing of repeated motions. If the motion to proceed is adopted, the Senate will immediately consider the joint resolution. Once taken up, consideration of the joint resolution is "locked in," that is, the measure is to remain the unfinished business of the Senate until disposed of. All points of order against the resolution and its consideration are waived. Floor Consideration In the absence of a special rule dictating otherwise, the standing rules of the House of Representatives generally provide that measures are debated in the House under the one-hour rule. In the Senate, debate is usually unlimited, except by unanimous consent, by the invocation of cloture, or by some other special procedure, such as the statutory rules governing the consideration of budgetary legislation. In keeping with its "fast track" nature, floor consideration of a commission joint resolution of disapproval is limited in both houses. Debate in a chamber on the joint resolution, and all debatable motions and appeals connected with it, is limited to not more than two hours, equally divided in the House between a proponent and an opponent, and in the Senate between the majority and minority leaders or their designees. All debatable motions and appeals in relation to consideration of the resolution would fall under the two-hour time cap, and all appeals are to be decided without debate. A nondebatable motion to further limit debate is in order in the Senate. Motions and Amendments The commission procedure limits Members' ability to delay consideration of a joint resolution of disapproval by barring amendments and motions that would ordinarily be permissible under the House and Senate standing rules. Amendments to the joint resolution, a motion to postpone its consideration, or motions to proceed to the consideration of other business are not permitted. A motion to recommit the joint resolutio n of disapproval is not in order in either chamber. Voting It is extremely difficult from a parliamentary standpoint to avoid a final vote on a joint disapproval resolution once a chamber has decided to take it up. At the conclusion of debate, a chamber is to immediately vote on passage of the joint resolution of disapproval. A motion to reconsider the vote on passage of the measure in not permitted. As noted above, because debate is limited by the act, it is not necessary for the Senate to invoke cloture on the question of calling up or on reaching a final vote on the joint resolution; all votes under the procedure are simple majority votes. Automatic Legislative "Hook -U p" If, before voting upon its own disapproval resolution, either chamber receives a joint resolution passed by the other chamber, that engrossed joint resolution is not referred to committee. Instead, the second chamber may proceed to consider its own joint resolution, as laid out above, up until the point of final disposition, when the second chamber will lay it aside, take up the joint resolution received from the first chamber, and vote on it. This provision is included to avoid the need to expend time choosing whether ultimately to act upon the House or Senate joint resolution. If the Senate does not introduce or consider its own joint resolution, a House joint resolution of disapproval is entitled to expedited floor procedures in the Senate. If, following passage of a joint resolution in the Senate, the Senate receives a companion measure from the House, the House measure is to be treated as nondebatable in the Senate. Presidential Consideration and Subsequent Action For a joint resolution of disapproval to become law, it must be signed by the President, enacted over his veto, or become law without his signature. In the event a disapproval resolution is subsequently vetoed by the President, a two-thirds vote in each chamber would then be required to override the veto. The commission procedure does not include expedited provisions governing House and Senate consideration of a joint resolution of disapproval vetoed by the President. Such a veto message would be considered pursuant to the normal procedures of each house. Either Chamber May Alter the Expedited Procedure The fact that an expedited legislative procedure is contained in statute does not mean that another law must be enacted to alter its application. Article I, Section 5, of the Constitution gives each chamber of Congress the power to determine the rules of its proceedings; as a result, statutory expedited procedures such as those governing the Commission can (like all rules of the House or Senate) be set aside, altered, or amended by either chamber at any time. As several House Parliamentarians have observed, a chamber may "change or waive the rules governing its proceedings. This is so even with respect to rules enacted by statute." These changes can be accomplished in the House, for example, by the adoption of a special rule from the House Committee on Rules, by suspension of the rules, or by unanimous consent agreement. In fact, in most cases in which a measure is made privileged by statute, the House still brings the measure in question to the chamber floor under the terms of a special rule reported by the House Committee on Rules and adopted by the House. In the Senate, the statutory procedures could be waived or altered by unanimous consent or suspended entirely using the suspension of the rules procedure. In a sense, then, the expedited procedures in the statute establish a default set of parliamentary ground rules for consideration of a disapproval resolution; these provisions can be tailored by either chamber to meet specific situations or for their convenience. Section 208. Other Matters Online Publication of Communications The VA shall publish online any information transmitted or received by VA, the Commission, or the President regarding the act within 24 hours. Continuation of Existing Construction Projects and Planning The VA may not stop, due to implementation of approved recommendations, (1) VHA construction or lease projects, (2) long-term planning of VHA infrastructure, or (3) VHA budgetary processes. Recommendation for Future Asset Reviews The VA may, after consulting with VSOs, include in its budget submissions after the termination of the commission recommendations other capital asset realignment and management processes. Section 209. Definitions This section defines the following terms for this title: Facility. Land, building, structure, or infrastructure under the jurisdiction of VA, under the control of VHA, and not under the control of GSA. Infrastructure. Improvements to land other than buildings or structures. Modernization. Any action required to align the form and function of VHA facility to the provision of modern health care. Includes construction purchase, lease, sharing, or closure. Also includes realignments, disposals, exchanges, and collaborations between VA and federal or nonfederal entities, including tribal organizations. Realignment. Any action that changes the numbers or relocates services, functions, and personnel positions; disposals or exchanges between VA and other federal entities; and strategic collaborations between VA and nonfederal entities, including tribal organizations. Redevelopment a uthority. The entity responsible for developing the redevelopment plan or directing implementation of it. Redevelopment p lan. A plan for the closure or realignment of a VHA facility that is agreed to by the local redevelopment authority and provides for the reuse of the real and personal property of the facility. Subtitle B: Other Infrastructure Matters Section 211. Improvement to Training of Construction Personnel This section requires the VA to implement training and certification programs for construction and facilities management personnel, and for staff who award construction and maintenance contracts. Section 212. Review of Enhanced Use Leases This section requires the Office of Management and Budget to review all proposed VA-enhanced use leases to ensure they are compliant with federal law. Section 213. Assessment of Health Care Furnished by the VA to Veterans Who Live in U.S. territories68 This section requires the VA to submit a report to Congress, within 270 days of enactment, that assesses the ability of the department to provide veterans in U.S. territories with hospital care, medical services, mental health services, geriatric services, and extended care. The report must also assess the feasibility of establishing a medical facility in any U.S. territory that does not already have such a facility. U.S. territories are defined as American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. Title III: Improvements to Recruitment of Health Care Professionals This title aims to address VHA clinical workforce shortages by amending and creating new programs that provide scholarships, loan repayments, and bonuses to VA personnel in hard-to-recruit fields as determined by the Inspector General (IG), who is required to publish annual reports on staffing shortages. One provision amends the VA's Health Professional Scholarship Program (38 U.S.C. §7611) to prioritize recruiting physicians and to extend the program's authorization, which was set to terminate on December 31, 2019. Another three provisions amend the VA's Education Debt Reduction Program, which provides loan repayment to VHA clinical employees in hard-to-recruit and hard-to-retain specialties. One provision increases the annual and cumulative limits, the second makes new provider types eligible for the program, and the third adds Vet Centers to the locations where they can fulfill their service commitment. Other provisions create a new pilot program to recruit veterans into medical schools in exchange for their commitment to provide clinical care at the VHA, and to increase the amount of bonus payment that the VA can award in certain years. Section 301. Designated Scholarships for Physicians and Dentists Under the VA Health Professional Scholarship Program This section amends 38 U.S.C. §7612(b) to make a number of changes to the Health Professional Scholarships program. First, it requires the VA to ensure that of the scholarships awarded (under this subchapter), not less than 50% are awarded each year to individuals who are enrolled (or accepted for enrollment) in a training program in medicine or dentistry. This requirement will remain in effect until the Secretary determines that the staffing shortage of physicians and dentists is less than 500. Second, it specifies that if this requirement is met, the Secretary is required to ensure that the number of awards of Health Professional Scholarships made to individuals in training to become physicians and dentists is not less than 10% of the VHA staffing shortages in these professions. Third, it specifies that physicians and dentists who enter into such Scholarship Program agreements must serve as a full-time VHA employee for 18 months for each school year or part of school year that they received scholarship support. It specifies that the support received may range from two to four years of scholarship support and permits the Secretary to give preference to Veteran applicants when awarding scholarships. Finally, it requires the Secretary to provide information annually to medical and dental schools about the availability of this scholarship program. This section also amends 38 U.S.C. §7617 regarding the situations in which a scholarship participant would be considered to have breached an agreement to add that physician scholarships participants who fail to successfully complete their post-graduate (i.e., residency) training are considered to have breached their agreement. Finally, the section amends 38 U.S.C. §7619 to extend the authority for the Health Professional Scholarships program to December 31, 2033. Section 302. Increase in Maximum Amount of Debt That May Be Reduced Under Education Debt Reduction Program (EDRP) of the VA This section amends 38 U.S.C. §7683 to increase the maximum total and annual amounts that may be forgiven under the EDRP. The new maximum total is $200,000, and the new annual amount is $40,000. The section also requires the VA, within one year of enactment, to examine the demand for loan repayment through this program, the staffing needs of the VA, the total number of VHA vacancies whose applicants are eligible for the EDRP, and the overall U.S. demand for medical professionals, and to report these findings to SVAC and HVAC. Section 303. Establishing the VA Specialty Education Loan Repayment Program This provision creates new 38 U.S.C. §§7691-7697, which authorize the Secretary to create, as part of the VA's Educational Assistance Program, a new program called the "Department of Veterans Affairs Specialty Education Loan Repayment Program." The purpose of the new program is to assist—via an incentive program—in recruiting physicians who are practicing in certain hard-to-recruit medical specialties to work at the VHA. The provision specifies the program's eligibility, funding preferences, covered costs, total and annual maximum amount of payments, and service requirements, among other program elements. The provision makes conforming and technical amendments to Title 38 U.S.C. and requires that the Secretary, when determining whether to make awards through the newly authorized program, to consider the VHA's anticipated staffing needs two to six years in the future. It also requires the Secretary, when determining awarding preference, to assess whether a VA facility is considered underserved based on the criteria developed in Section 401 of the act, and specifies the VA's awarding deadlines and the steps it may take to publicize the new program. Section 304. Veterans Healing Veterans Medical Access and Scholarship Program The section requires the Secretary to establish a pilot program that provides funding for 18 eligible veterans who are enrolled in medical school, with two veterans enrolled at each eligible medical school. The section specifies that eligible veterans must have been discharged from the Armed Forces not more than 10 years before they apply to the program, and must not be entitled to other education benefits under Title 38 U.S.C. Chapters 30, 31, 32, 33, 34, or 35 or Title 10 U.S.C. Chapters 1606 or 1607. They must apply for admission for medical school beginning in 2019 in one of the covered medical schools and indicate that they would like to be considered for one of the school's two covered slots. They must also meet the school's minimum admission criteria and agree to fulfill a service commitment to the VA. Covered medical schools may opt to participate in this program. If they do so, they are required to reserve two seats in the 2019 entering class for eligible veterans with the highest admissions rankings for the applicant class. The section specifies the expenses that the program covers for eligible veterans and the procedures to be followed if two or more eligible veterans do not apply for admission at one of the covered medical schools. In exchange for receiving support, eligible veterans are required to complete medical school while maintaining an acceptable level of academic standing, as determined by the Secretary; complete residency training leading to board eligibility in a specialty that is applicable to the VA, as determined by the Secretary; and obtain a medical license. Upon completing training, the eligible veteran must serve as a full-time clinical practice employee at the VA for four years. The section specifies penalties for breaching an agreement. The section specifies that the provision does not prevent a covered medical school from accepting more than two eligible veterans for the 2019 entering class. It also requires a report evaluating the pilot program, including certain specified elements. The report is required to be submitted to Congress not later than December 31, 2020, and annually thereafter for the next three years. Section 305. Bonuses for Recruitment, Relocation, and Retention This section amends VACAA §705(a) to increase the aggregate amount of bonuses that can be paid to employees, from $230,000,000 to $250,000,000 for FY2017 and FY2018 and from $225,000,000 to $290,000,000 for FY2019 and FY2021, and specifies that in each of those years not less than $20,000,000 must be used for recruitment, relocation, and retention bonuses. Section 306. Inclusion of Vet Center Employees in Education Debt Reduction Program (EDRP) of the VA This section requires the Secretary to ensure that Vet Center clinical staff are eligible to participate in the VA's Education Debt Reduction Program established in 38 U.S.C. §§7681-7684. It also requires the Secretary to submit a report on the number of participants in the debt reduction program who work at Vet Centers to the HVAC and SVAC not later than one year after enactment. Title IV: Heath Care in Underserved Areas The provisions in this title aim to increase health services to veterans in underserved areas –– areas where there are access issues or shortages of health professionals. It does so by developing a process to designate VA facilities as underserved and reporting requirements around that process. It also includes two provisions that aim to address staffing issues at these underserved facilities: the first by developing mobile teams that can be deployed to provide clinical services at underserved facilities, and the second to establish a medical residency training program at certain VA and non-VA facilities, including facilities operated by the Indian Health Service (IHS) or an Indian Tribe or tribal organization. Prior to enactment of the VA MISSION Act of 2018, the VA did not have a process to designate its facilities as underserved and thereby to direct resources to facilities with greater need. In contrast, the Department of Health and Human Services (HHS) designates facilities that serve the general population, Indian Tribes, or prisoners as being underserved if they meet certain criteria, including a low ratio of providers to population and high rates of certain health conditions. HHS uses this designation to direct resources, including loan repayment for providers and higher reimbursement rates in certain programs to facilities that have this designation. HHS does not designate whether VA-operated facilities are underserved. The VA has a long-term historical role in supporting and directly training medical residents (among other types of health professionals). Generally, its support for medical residency training (called graduate medical education, or GME) is through partnerships with non-VA hospitals and medical schools that operate programs where residents spend a period of time training at a VA facility. Generally, the VA does not operate these programs, but it pays for resident training costs (including faculty support) during the time that a resident is at the VA. The VA has not paid for costs when a resident is training at non-VA facilities, because these costs are generally covered by other federal programs. The VACAA required an increase in the number of GME positions by up to 1,500 over a 10-year period, beginning July 1, 2015, through 2024, with an emphasis on primary care, mental health, and other specialties the VA Secretary deems appropriate. The VACAA also required that the expansion focus on creating new programs at VA facilities where there had not previously been GME training, and that the new positions be awarded for training in rural or otherwise underserved areas. As of September 2017, the VA had allocated about one-third of these new positions; it has not completed the expansion. Instead, the VA's objective is to complete the expansion by 2025. The VA, like other sources of GME support, tends to focus on hospital-based training that generally does not occur in rural areas. The GAO, among others, has raised a number of concerns about medical residency training, noting in particular that more training should occur in rural areas and outpatient settings. HHS, through the Teaching Health Center GME Program, does fund training in outpatient settings, particularly at federally qualified health centers (FQHCs), which are outpatient primary care based facilities that are required to be located in an underserved area or to serve an underserved population. The Teaching Health Center GME Program is approximately 1% of federal GME funding. The Choice GME expansion did prioritize training rural or underserved areas, but it did not require that training be in outpatient settings. Under a pilot program in this title, the VA is required to establish GME programs at community-based facilities, including those operated by an FQHC, IHS, or Indian Tribes, or at underserved VA facilities. Under the program, the VA would pay for costs associated with developing a program and would pay for residents' time when they are not in training at VA facilities. Section 401. Development of Criteria for Designation of Certain Medical Facilities of the VA as Underserved Facilities and Plan to Address Problem of Underserved Facilities. The section requires the Secretary, not later than 180 days after enactment, to develop criteria to designate certain medical centers, ambulatory care facilities, and CBOCs as underserved facilities. When developing this criteria, the Secretary is required to consider the following: (1) the ratio of veterans to VA health care providers standardized for the geographic area that surrounds the VA facility, including separate ratios for general practitioners and specialists; (2) the range of clinical specialties covered by providers in the geographic area; (3) whether the surrounding community is medically underserved; (4) the type, number, and age of open consults; (5) whether the facility is meeting the wait-time goals of the department; and (6) any other criteria developed by the Secretary to determine which facilities are not adequately serving veterans. The section also requires the VISN directors, not less frequently than each year, to determine which facilities within their VISN meet the newly developed criteria as underserved facilities. The section further requires the Secretary to submit an annual plan to Congress to address the newly designated underserved facilities. The first plan is due not later than one year after enactment. The plan must include certain specified elements related to personnel, including the use of mobile deployment teams, special hiring incentives, direct hire authority, and improved training opportunities for facility staff. Section 402. Pilot Program to Furnished Mobile Deployment Teams to Underserved Facilities The section requires the Secretary to carry out a three-year pilot program that will furnish mobile deployment teams to underserved facilities. When furnishing these teams, the Secretary is required to consider a number of specified elements related to the staffing of these teams and program oversight. The Secretary is required to use the annual plans developed under Section 401 of the act to form mobile deployment teams that are composed of the medical personnel most needed by underserved facilities. The section requires the Secretary to report to Congress, not later than one year after enactment, on the implementation of the pilot program. The section also requires the Secretary to submit a final report on the pilot program not later than the termination of the program that includes recommendations about the feasibility and advisability of extending and expanding the pilot program, including making the pilot program permanent. Section 403. Pilot Program on Graduate Medical Education and Residency This section requires the Secretary to establish a pilot program to create the medical residency positions authorized under the VACAA at covered facilities. Covered facilities are defined as a facility operated by the IHS or by Indian Tribes, an FQHC, a DOD facility, or another facility that the Secretary deems appropriate. To carry out the pilot program, the Secretary is authorized to enter into agreement with entities that operate a covered facility where the Secretary places medical residents. When selecting participating covered facilities, the Secretary is required to consider certain elements of the area where the facility is located, including the ratio of veterans to providers in the geographic area surrounding the facility, the specialty of providers in the surrounding geographic area, and whether the area is considered to be a HPSA by HHS, among others. During the pilot program, the Secretary is required to place no fewer than 100 residents in covered facilities operated by IHS, an Indian Tribe, or tribal organization, or at facilities located in areas that the Secretary has designated as underserved under Section 401 of the act. Under the pilot program, the Secretary is authorized to pay resident stipends and benefits regardless of whether the resident has been assigned to a VA facility. In the event that a covered facility establishes a new residency program, the Secretary is required to reimburse the facility for associated costs, including curricula development, faculty salaries, faculty and resident recruitment, costs associated with the program becoming accredited, and resident educational expenses. The Secretary is required to report to Congress annually, beginning within one year of enactment, on multiple aspects of the pilot program. The section requires that the pilot program terminate on August 7, 2024. Title V: Other Matters This title aims to address broad topics within the VA. It requires the Secretary to submit an annual report on performance awards and bonuses awarded to certain high-level employees of the VA, including Regional Office Directors, VAMC Directors, VISN Directors, and other senior executives. It also amends current law and authorizes podiatrists with a doctor of podiatric medicine qualification to be appointed to any supervisory position similar to a physician with a doctor of medicine qualification. This title also requires the VA to publicize staffing and vacancy information on its website. It also amends current law and raises the dollar threshold for congressional authorization of a major medical facility project from $10 million to $20 million, and it authorizes the VA to carry out major medical facility projects, including the East Bay CBOC and the Central Valley Engineering and Logistics support facility. This title also establishes two pilot programs. One of the pilot programs involves adding peer specialists onto patient-aligned care teams (PACTs) within VAMCs. The other pilot program requires the Secretary to increase the use of medical scribes at VAMCs. The title also includes provisions postponing the VA Home Loan guarantee fee reductions on housing loans, thereby increasing some of the VA Home Loan guarantee fees that VA charges some veterans until 2028. It also extends until September 30, 2028, the $90 per month limit on a VA pension for certain veterans covered by Medicaid who receive nursing care in a Medicaid-approved nursing facility. These provisions are included as offsets for the costs of the VA MISSION Act. Lastly, it authorizes and appropriates $5.2 billion for VCF to continue VCP. Section 501. Annual Report on Performance Awards and Bonuses Awarded to Certain High-Level Employees This section amends current law to add a new 38 U.S.C. §726 that requires the Secretary to submit an annual report to SVAC, HVAC, SAC, and HAC on performance awards and bonuses awarded to certain high-level employees, including Regional Office Directors, VAMC Directors, VISN Directors, and other senior executives. The annual report must include, among other things, the amount of each award or bonus, the job title of the individual who obtained the award or bonus, and the location where the individual works. Section 502. Role of Podiatrists in the VA This section amends current law to add a new 38 U.S.C. §7413 that authorizes the Secretary to appoint a podiatrist with a doctor of podiatric medicine (DPM) qualification to any supervisory position in the VHA similar to allopathic physicians (MD's) and osteopathic physicians (DO's) appointed by the VHA. This section also requires the Secretary to establish standards to ensure that specialists appointed to supervisory positions within the VHA do not provide direct clinical oversight, such as peer review or practice evaluation, for providers of other clinical specialties. Lastly, this section amends current law (38 U.S.C. §7404(b)) and includes podiatrists within the VHA physician and dentist pay schedule. Section 503. Definition of Major Medical Facility Project This section amends current law 38 U.S.C. §8101(3) to define a major medical facility as any facility or part thereof which is, or will be, under the jurisdiction of the Secretary, or as otherwise authorized by law, for the provision of health-care services (including hospital, outpatient clinic, nursing home, or domiciliary care or medical services), including any necessary building and auxiliary structure, garage, parking facility, mechanical equipment, trackage facilities leading thereto, abutting sidewalks, accommodations for attending personnel, and recreation facilities associated therewith. It also amends current law 38 U.S.C. §8104(a) to increase the dollar threshold for congressional authorization of major medical facility projects from $10 million to $20 million. Any major medical facility project involving construction, alteration, or acquisition of a medical facility where the total expenditure is more than $20 million will require congressional authorization prior to appropriation of funds. Section 504. Authorization of Certain Major Medical Facility Projects This section authorizes the Secretary to carry out the following major medical facility projects in Livermore, CA. These include the construction of the new East Bay CBOC and all associated site work, utilities, parking, and landscaping; the construction of the Central Valley Engineering/Logistics support facility; and enhanced flood plain mitigation at the Central Valley and East Bay CBOCs. (Central Valley CBOC was authorized and funded in FY2016.) The Secretary is required to submit a report listing information about facility projects, including expenditures related to construction management and future amounts budgeted for the above projects, and it is required to do so no later than 90 days after the enactment. An amount not to exceed $117.3 million is authorized for these projects. Section 505. VA Personnel Transparency This section requires Secretary to publish on the VA website, no later than 90 days after enactment, the following information broken down by VAMC: the number of actually occupied (filled) positions, the number of accessions and separation actions processed during the quarter, the number of vacancies by occupation, and the percentage of new hires who were hired within the time-to-hire target of the Office of Personnel Management. This information must be updated quarterly on the VA's website. This section stipulates that the Secretary may withhold sensitive information, such as that relating to law enforcement and information security, among others. In addition, the Secretary is required to submit an annual report to Congress on steps the VA is taking to achieve full staffing capacity. Lastly, on a semiannual basis, the OIG is required to review the website and provide recommendations. Section 506. Program on Establishment of Peer Specialists in Patient-Aligned Care Team Settings Within VAMCs This section requires the Secretary to establish a program to assign not less than two peer specialists to patient-aligned care teams in the VA. The purpose of this program is to promote services in relation to mental health, substance use treatment, and behavioral health in a primary care setting. The Secretary is required to carry out this program in at least 15 VAMCs no later than May 31, 2019, and by May 31, 2020, the peer specialist program is required to be established in at least 30 VAMCs. This section also specifies the selection criteria for selecting VAMCs to establish the peer specialists program. It stipulates that at least 5 of the locations chosen must be polytrauma centers, and at least 10 other locations can be nonpolytrauma centers. In addition, the Secretary must consider the feasibility and advisability of choosing medical centers in rural area, areas that are not in close proximity to an active military installation, and different geographical locations in terms of the census tracts developed by the Census Bureau. It also specifies that female veterans' needs be taken into consideration and to make available female peer specialists. This section also requires the Secretary to submit a report to Congress on the progress made in establishing the peer specialist program. When the Secretary has carried out the program at the final location, the final report on the program should include recommendations by the Secretary in terms of the feasibility and advisability of expanding the program to additional locations. Section 507. VA Medical Scribe Program This section requires the Secretary to establish a two-year pilot program to increase the use of medical scribes. The pilot program must be established in at least 10 VAMCs. Four of the pilot sites must be located in rural areas, four must be in urban areas, and two must be in areas in need of increased access or efficiency. The section also stipulates that the VA must hire 20 new medical scribes and enter into contracts with appropriate entities for 20 additional medical scribes. It also requires that medical scribes be assigned as follows: four medical scribes must be assigned to each of the 10 medical centers, and of those four, two scribes must be assigned to each of two physicians. In addition, 30% of the medical scribes will be employed in emergency care, while 70% of the medical scribes will be employed in specialty care, specifically those with long patient wait times or low efficiency ratings. This section also requires the Secretary to submit a report on the pilot program to Congress 180 days after enactment, and every 180 days thereafter. The VA is also required to conduct an analysis on medical scribes under a contract. The analysis should include information on provider efficiency, patient satisfaction, average wait time, the number of patients seen per day by each physician or practitioner, and the amount of time required to hire and train an employee to perform medical scribe functions under the pilot program. The information for the analysis should also include metrics and data for analyzing the effects of the pilot program, including an evaluation of the information above. In addition, not later than 90 days after the termination of the pilot program, the GAO is required to submit a report to Congress on the pilot program, including comparisons with the private sector. In this section, a medical scribe is defined as an unlicensed individual hired to enter information into the electronic health record or chart at the direction of a physician or licensed independent practitioner whose responsibilities include the following: (A) Assisting the physician or practitioner in navigating the electronic health record; (B) Responding to various messages as directed by the physician or practitioner; and (C) Entering information into the electronic health record, as directed by the physician or practitioner. Section 508. Extension of VA Home Loan Guarantee Fees This section extends the authorization period in which fees are charged from certain veterans for obtaining home-loan guarantees from the VA. Section 509. Extension of Reduction in VA Pensions for Certain Medicaid-Covered Veterans in Nursing Facilities This section extends the authorization period until September 30, 2028, that requires the VA pension benefits for veterans and survivors who are residing in Medicaid-approved nursing homes to be reduced to $90 per month to September 30, 2028. Section 510. Appropriation of Funds This section authorizes and appropriates $5.2 billion for the VCF established by VACAA. The funds would remain until expended without fiscal year limitation. Section 512. Budgetary Effects This section provides that the estimated budgetary effects of the VA MISSION Act are not entered on Pay-As-You-Go (PAYGO) scorecards, thus precluding any possible sequestration as a result of the enactment of this act. The CBO estimated that the act would increase the deficit by $5.2 billion over six years (FY2018-FY2023) and almost $4.5 billion over 11 years (FY2018-FY2028). Generally, PAYGO scorecards record the effects on the budget deficit resulting from legislative changes affecting mandatory spending and revenues. In particular, a net increase in the deficit on the statutory PAYGO scorecards at the end of the year would require a sequestration (i.e., reduction) of certain mandatory spending by an equivalent amount. Appendix. The VA MISSION Act of 2018: Implementation, Reporting Requirements, and Deadlines

On June 6, 2018, the John S. McCain III, Daniel K. Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018, or the VA MISSION Act of 2018 (S. 2372; P.L. 115-182; H.Rept. 115-671), was signed into law. The Department of Veterans Affairs Expiring Authorities Act of 2018 (S. 3479; P.L. 115-251), enacted on September 29, 2018, made some changes and technical amendments to the VA MISSION Act. This act, as amended, broadly addresses four major areas. First, it establishes a new permanent Veterans Community Care Program (VCCP), replacing the current Veterans Choice Program (VCP). The VA MISSION Act stipulates that the new program must be operational when regulations are published by the Department of Veterans Affairs (VA) no later than one year after the date of enactment (June 6, 2018), or when the VA determines that 75% of the amounts deposited in the Veterans Choice Fund (VCF) have been exhausted. Second, it expands the current Program of Comprehensive Assistance for Family Caregivers, in two phases, to all eligible veterans who served prior to September 11, 2001. Third, it establishes an asset and infrastructure review process by establishing an Asset and Infrastructure Review Commission. The purpose of the commission is to examine the VA's assets and to make recommendations for modernizing and realigning medical facilities. Fourth, it provides various statutory authorities to the Veterans Health Administration (VHA) of the VA to recruit and retain health care providers. Veterans Community Care Program (VCCP) The VA MISSION Act establishes a new permanent discretionary community care program known as VCCP. The act provides conditions under which the VA is required to provide care in the community once the program is established. Generally, all veterans enrolled in the VA health care system would be able to qualify when (1) the VA does not offer the care or service required by the veteran; or (2) the veteran resides in a state without a full-service VA medical facility; or (3) the veteran previously qualified under the 40-mile criterion of the VCP; or (4) the VA cannot provide the veteran with care and services that comply with designated access and quality standards; or (5) the veteran and the veteran's primary care provider agree that it is in the best interest of the veteran to receive care in the community. In addition, the VA is required to enter into contracts to build a network of private community providers. Expansion of Comprehensive Assistance for Family Caregivers The VA MISSION Act expands the Program of Comprehensive Assistance for Family Caregivers to pre-9/11 veterans in two phases. Under the first phase, veterans with serious service-connected injuries incurred on or before May 7, 1975, would qualify for benefits over a two-year period beginning on the date when the VA certifies to Congress that it has fully implemented the information technology system required for this program. Under the second phase, those with serious service-connected injuries incurred between May 7, 1975, and September 11, 2001, would qualify for the Comprehensive Assistance for Family Caregivers program two years after implementation of the first phase. Capital Asset Review The VA MISSION Act establishes a process for realigning and modernizing facilities of the VHA. Under this process, the VA will develop criteria for selecting VHA facilities to dispose of, modernize, or acquire, so as to better meet the health care needs of veterans. VA must then create a list of recommendations based on those criteria and submit it to a newly created Asset Infrastructure Review (AIR) Commission. The AIR Commission shall review the VA's recommendations but may not alter them, unless it determines that one or more recommendations are inconsistent with the criteria. The commission shall submit the list of recommendations to the President, who shall either approve the list in its entirety or send it back to the AIR Commission. The AIR Commission may change the recommendations and resubmit a revised list to the President for reconsideration. The President may approve or disapprove of the revised list. If the President approves of the original or revised list, then VA must begin implementation of the recommendations within three years, unless Congress passes a joint resolution of disapproval, in which case the asset review process terminates. Recruiting and Retaining Health Care Providers in the VHA The VA MISSION Act authorizes or expands several programs, with the intention of recruiting and retaining health care providers in the VHA. Among other things, the act increases the maximum amount of student loan debt that may be reduced under VA's Education Debt Reduction Program (EDRP); authorizes designated scholarships for physicians and dentists under the VA Health Professional Scholarship Program (HPSP); establishes the VA specialty education loan repayment program to incentivize VHA employees to pursue education and training in medical specialties for which VA determines there is a shortage; establishes a pilot Veterans Healing Veterans Medical Access and Scholarship Program; and extends eligibility for VA's EDRP to clinical staff working at Vet Centers. The act also requires the VHA to establish a program to deploy mobile health teams to serve in underserved VA medical facilities. Lastly, the VA MISSION Act authorizes and appropriates $5.2 billion in mandatory funding for the VCP until the VCCP is operational.

The Nonprofit and Charitable Sectors2 This report analyzes data relating to the nonprofit and charitable sectors. For purposes of this report, the term "nonprofit sector" is generally intended to include all organizations with federal tax-exempt status. The term "charitable sector" is used to refer to one type of tax-exempt organization, specifically those organizations with 501(c)(3) public charity status. The Internal Revenue Code (IRC) describes approximately 30 types of tax-exempt organizations. Examples include charitable organizations, social welfare organizations, labor unions, trade associations, fraternal societies, and political organizations. The largest category, and the primary focus of this report, are the organizations described in Internal Revenue Code (IRC) Section 501(c)(3). Organizations eligible for 501(c)(3) status include charities, religious organizations, hospitals, and educational institutions. The entire universe of these organizations is commonly referred to as "charitable organizations." Every 501(c)(3) organization is classified as either a "public charity" or "private foundation." Public charities have broad public support and tend to provide charitable services directly to the intended beneficiaries. Private foundations often are tightly controlled, receive significant portions of their funds from a small number of donors or a single source, and make grants to other organizations rather than directly carry out charitable activities. 501(c)(3) organizations are presumed to be private foundations unless they qualify for public charity status based on support and control tests. IRS Filing Requirements A primary source for some of the data contained in this report is Form 990, which is the annual information return that must be filed with the IRS by most tax-exempt organizations. Form 990 collects information about the organization's finances, assets, and activities. For tax year 2009, public charities with gross receipts of at least $500,000 or total assets of at least $1.25 million must file the regular Form 990, while public charities with gross receipts between $25,000 and $500,000 and total assets of less than $1.25 million may file the Form 990-EZ. Public charities whose gross receipts normally do not exceed $25,000 file the Form 990-N ("e-Postcard"), which only requires basic identifying information such as the names and addresses of the organization and a principal officer. Private foundations file using the Form 990-PF. Churches and other qualifying religious organizations are exempt from the annual information-reporting requirements. In addition to the information return, there are other situations when tax-exempt organizations must file a tax return. For example, tax-exempt organizations are subject to tax on income from business activities unrelated to their exempt purpose. Organizations subject to this tax, known as the unrelated business income tax (UBIT), must file a tax return using the Form 990-T. Additionally, tax-exempt organizations must generally pay the same employment taxes (i.e., withhold income and payroll taxes of their employees) as for-profit employers and file the applicable returns. Finally, an organization's activities might require it to file other returns, such as an excise tax return. Table 1 presents information on the number of nonprofit and charitable organizations as of July, 2009. Of the 1.5 million registered nonprofit organizations, nearly 64% are public charities. Nearly 8% are private foundations, while 29% are other types of nonprofits. Only 52% of registered charities file Form 990. Non-filers include qualifying religious organizations, small organizations, and organizations that may no longer exist but have not been removed from the IRS Business Master File (BMF). Very little information is available regarding non-filing organizations. Size and Scope of the Nonprofit and Charitable Sectors Employment Measuring employment in the nonprofit and charitable sector is not an easy task. There is no government agency that regularly collects systematic employment data on the nonprofit sector. There are two major studies that have attempted to measure employment in the nonprofit and charitable sector in recent years. Their results are presented in Table 2 and Table 3 below. The first is employment in the nonprofit sector. In 2005, the estimated total employment in the nonprofit sector was 12.9 million. The second is employment in the charitable sector. The estimated number of paid workers employed by charities in 2004 was 9.4 million. At the end of 2004, there were 132.5 million employees nationwide. Nearly 10% of America's workforce works in the nonprofit sector, with more than 7% of the workforce employed by charities. Table 2 provides estimates of nonprofit employment by industry. More than half of nonprofit employment (approximately 54%) is involved in health care and social assistance. In 1998, nearly 23% of nonprofit employees were involved in other services. This proportion fell by 2005 to just over 21%. In both 1998 and 2005, approximately 18% of nonprofit employees provided educational services. Arts, entertainment, and recreation was the fourth largest category, with nearly 4% of all nonprofit employment within this category. Between 1998 and 2005, employment in the nonprofit sector grew by an estimated 16.4%. Overall, nationwide growth in employment was approximately 6.2%. While the utilities; transportation and warehousing; accommodation and food services; and professional, scientific, and technical services sectors experienced the most growth between 1998 and 2005, each of these four sectors still represents less than 1% (1.3% for the professional, scientific, and technical services) of total nonprofit employment. The first and third largest sectors in terms of nonprofit employment—health care and social assistance and education services, respectively—experienced increases in employment that exceeded employment increases for the nonprofit sector as a whole. The second employment estimate is that of the number of persons employed by the charitable sector. Table 3 presents 2004 estimates of employment by charities across various sectors. Generally, the estimates of employment in the charitable sector are consistent with estimates for total employment by nonprofits. Since charities are a subset of nonprofits, it is expected that there would be fewer persons employed by charities as compared to nonprofits. Figure 1 depicts regional variation with respect to the percentage of the workforce employed by the charitable sector. In relative terms, the northeast tends to see a larger proportion of its workforce employed by the charitable sector. The District of Columbia has the largest proportion of workers employed by the charitable sector, with 16.3%. In Rhode Island, 13.6% of workers are employed by a charitable organization. New York ranks third when ranking states by employment in the charitable sector, with 13.3%. Relative to other parts of the country, fewer persons are employed by the charitable sector in the south. In addition to paid workers, volunteer workers make up a significant portion of the labor involved in providing charitable goods and services. In 2004, there were an additional 4.7 million full-time equivalent (FTE) volunteer workers employed by charitable institutions. Figure 2 depicts FTE volunteers as a percentage of total employment in each state. While states in the northeast tend to have a larger proportion of workers employed in the charitable sector, a similar pattern does not appear for volunteers as a share of total employment. In fact, there is very little (if any) relationship between the proportion of workers employed by the charitable sector and volunteers relative to total employment. Revenue Table 4 reports the revenue of 501(c)(3) public charities reporting as of July 2009. For charities filing Form 990, total revenues for 2009 are $1.40 trillion. Revenue information is provided by 512,889 public charities filing Form 990 with the IRS. The revenue raised differs significantly across sectors. For example, nonprofit hospitals that are charitable organizations are less than 1% of all filing organizations. Yet amongst revenues for filing charitable organizations, 41% is reported by hospitals. More than 29% of assets held by filing charitable organizations are held by hospitals. Charitable hospitals receive the largest share of revenue. Other health-orientated charitable organizations are also responsible for a relatively large share of revenue flowing into the charitable sector, more than 15%. Given that 9.6% of filing organizations are health organizations, the fact that these organizations bring in 15% of revenue is closer to being proportional. The higher-education sector, like the hospital sector, generates a highly disproportionate level of revenue and holds a disproportionate quantity of assets. While only 0.5% of charities are higher-education organizations, higher-education organizations generate more than 11% of revenue flowing to charitable organizations and hold more than 21% of the charitable sector's assets. These data suggest that while higher-education and hospital charitable organizations are relatively few in number, they are a very large part of the charitable sector in terms of revenue and assets. Charitable organizations focusing on providing goods and services in the realm of arts, culture, and humanities tend to have below-average revenue. While more than 12% of charitable organizations filing Form 990 are in the arts, culture, and humanities category, the sector only generates 2.3% of total revenue flowing into the charitable sector. In terms of revenue, arts, culture, and humanities charities are markedly smaller than health and education charitable organizations. Charitable organizations with a focus on the environment, human services, and the public benefit also tend to be smaller, as evidenced by the fact that these sectors represent a larger share in the number of organizations than the sectors' share in revenue generation or asset holdings. The data in Table 4 also highlight the limited amount of information reported by religious charitable organizations. While 22.6% of registered charitable organizations are religious organizations, only 6.5% of organizations filing 990 are religious charities. Since religious organizations are not required to file Form 990, very little is known about the revenue generated and assets held by religious charities. Assets Table 4 also reports total assets across different types of public charities. Charities reporting as of July 2009 held $2.6 trillion worth of assets. These assets are held by the 512,899 public charities filing Form 990. As was seen with respect to revenue, asset holding patterns vary across charitable sectors. Charities in the education sector stand out when examining asset holdings. Specifically, education charities hold nearly 33% of assets held by charitable institutions, while only 18% of charitable organizations filing Form 990 are in the education sector. Relative to other types of charities, education charities hold more assets. This observation is driven by asset holdings of higher-education institutions, and the large asset holdings in the endowments of some of these institutions. Health-related charities also hold a disproportionate volume of assets relative to the number of organizations in the health sector, while charities in the human services and housing sectors hold a share of assets that is less than their share of filing organizations. Specifically, health charities hold nearly 36% of assets while only 5.5% of charitable organization filing Form 990 are in the health sector. More than 10% of charities filing Form 990 are in the human services sector, yet the human services sector holds less than 6% of charitable organizations' assets. Housing charities are another sector where the share of assets held is relatively low. Nearly 4% of all charitable organizations filing Form 990 are in the housing sector yet the housing sector only holds 2.5% of all charitable organizations' assets. One important point to note when examining the revenue and asset data presented in Table 4 is that there is no adjustment or control for charity size. Revenue and assets for the health and education sectors are relatively high, reflecting in part their tendency to be larger than other types of charities. Health charities, for example, averaged $26.5 million in revenue and $33.3 million in assets. Arts, culture, and humanities organizations are much smaller, with the average institution in this sector generating $0.5 million in revenue and holding $1.6 million in assets. Charitable sectors that tend to have organizations smaller in size hold a lesser share of the charitable sectors' total revenue and assets. Revenue and Assets in the Broader Nonprofit Sector Table 5 contains information on the assets and revenue for public charities relative to private foundations and other nonprofits. While public charities represent approximately 59% of nonprofit organizations filing Form 990, charities bring in 71% of revenue, a disproportionately large share. Nearly 10% of nonprofit organizations filing Form 990 are private foundations. Private foundations hold a disproportionate amount of assets, with nearly 15% of nonprofit assets held by foundations. While nearly 32% of nonprofits are neither charities nor foundations, less than 20% of revenue and 24% of assets are held by these other nonprofits. Contribution of Charities to GDP To evaluate the contribution of nonprofits and charitable organization to total output, data from the agency charged with measuring the size of the U.S. economy, the Bureau of Economic Analysis of the Department of Commerce (BEA), is utilized. As illustrated in Figure 3 , in 2008 nonprofit institutions serving households (NPISH) were responsible for generating 5.2% of U.S. GDP, or $751.2 billion worth of output. The share increased 0.4 percentage points between 1998 and 2008. Nonprofits' share of output consists of wages paid to nonprofit employees, the rental value of assets owned and used by nonprofits while providing services, and rental income from tenant-occupied housing owned by nonprofits. While the Bureau of Economic Analysis's data provide the best representation of the nonprofit sector's share in the economy, some care should be taken in interpretation. First, the NPISH classification represents a subset of all nonprofits, and therefore represents a share of economic activity smaller than that of the entire nonprofit sector. The NPISH classification also is not synonymous with what is typically thought of as the charitable sector 501(c)(3) organizations. Social welfare organizations and labor unions, for example, may be included in the BEA's NPISH category but are not 501(c)(3) charitable organizations. On the other hand, some 501(c)(3) organizations may not fall within the NPISH classification, such as those that sell goods or services in a manner similar to businesses. Overall, it is likely that the NPSIH's share in GDP is greater than that of the charitable sector, but less than that of the nonprofit sector. Other cautions include the fact that there are difficulties in placing a value on much of the output of charitable organizations. Since pricing the value of charitable output is difficult, the BEA estimates the value of output by using the cost of the inputs. Determining the cost of inputs, however, presents its own set of problems. Employee wages are the largest component of charitable organizations' costs. As was noted above, the data on the number of employees in the charitable sector are not precise. A final issue is the fact that the BEA's method for measuring the nonprofit sector's output only includes measurable costs of inputs. However, many nonprofit and charitable organizations are supported via volunteer efforts. Since these efforts do not represent a cost they are not included in the measure of output. The Nonprofit & Charitable Sectors vs. Other Major Economic Sectors To compare the size of the nonprofit sector to other major economic sectors, employment levels are examined. As was noted above, there were nearly 13 million nonprofit employees in 2005, and an estimated 9.4 million employees in the charitable sector in 2004. Table 6 presents employment in selected industries in 2005. In terms of employment, the charitable sector is larger than the construction sector. The charitable sector is also larger than the finance and insurance, and real estate sectors combined when size is measured by employment. The charitable sector has nearly half as many employees as the government, where the government includes all federal, state, and local government employees. Table 7 provides the contributions of various economic sectors to GDP. As was illustrated in Figure 3 , nonprofit institutions serving households (NPISHs) represented 5.2% of GDP, or $751.2 billion in 2008. In terms of contribution to GDP, NPISHs are a larger part of the economy than the construction sector and the educational services sector. NPISHs contribute nearly half as much to GDP as the manufacturing sector. Drawing conclusions regarding the importance of the charitable sector in the economy depends critically on what is being measured. When looking at employment figures, the charitable sector appears to be larger than the construction, manufacturing, finance and insurance, real estate and rental and leasing, and educational services sectors. However, only the construction and educational services sectors had contributions to GDP below the contributions of NPISHs in 2008. Further, direct comparison of the data presented on the nonprofit and charitable sectors' employment to NPISHs contribution to GDP is not appropriate since NPISHs, by definition, are not all charitable organizations nor all nonprofit organizations. To gain further perspective on the relative size of nonprofit organizations, Table 8 compares the distribution of employees at the establishment level of nonprofit firms to establishments in the financial services and real estate industry and to establishments across all industries. While establishment data do not provide information regarding the overall size of nonprofit firms to for-profit firms, the establishment data do allow for a couple of observations. First, relatively speaking, there are fewer very large establishments in the nonprofit sector. Only 6% of nonprofit establishments have more than 1,000 employees on site, while 14.6% of all establishments (for-profit and nonprofit) have more than 1,000 employees on site. In the financial services and real estate sector, 27.2% of establishments have 1,000 or more employees. Second, there are fewer very small establishments in the nonprofit sector than in all sectors taken together. While 52% of nonprofit establishments have less than 10 employees, 58.1% of all establishments have less than 10 employees. In the financial services and real estate sector, 51% of establishments have less than 10 employees. Nonprofit establishments are more likely than the typical establishment to be mid-sized, with more than 10 but less than 1,000 employees. How Are Charities Funded? Revenue Charities raise revenue from a variety of sources. The first source of revenue is from fees or private payments for service. The second way charities raise money is through the receipt of government grants and payments. Charities also rely on funding via private contributions (from individuals, corporations, bequests, and foundations). Finally, charities are able to raise revenue by earning returns on investments as well as through some other revenue sources. Figure 4 illustrates how much total revenue was raised in 2005 from each of these revenue sources. Overall, charitable organizations raised $1.2 trillion in revenue in 2005. Private payments for service are the largest category of revenue for charitable organizations. Private payments for service may include a wide variety of services, such as payments for medical care and education tuition. In 2005, charities collected $590 billion in payments for services. Payments for services constituted 49% of total revenue in 2005. Government grants and payments represent the second largest revenue source for charitable organizations. In 2005, $351 billion worth of government grants and payments were made to charities, or 29% of total revenue. While it appears from this measure that the government plays only a moderate role in financing charitable organizations, it is important to remember that the government subsidizes the activities of charitable organizations in other ways. For example, charities receive various tax benefits, such as exemption from federal income tax, eligibility to receive tax-deductable donations, and the ability to issue tax exempt bonds, in addition to indirect benefits that may arise from undertaking activities encouraged by other incentives in the tax code. This report provides further detail on the government's relationship with the nonprofit and charitable sector below. Private contributions in 2005 were $143.77 billion, or 12% of overall revenue to charitable organizations. There is substantial attention given to this revenue source, as it is believed that private contributions to charities are likely to fluctuate in response to changes in economic conditions and the tax treatment of contributions. These issues are explored in greater detail below. Charitable organizations made $81 billion from investments in 2005, which represents 7% of their overall revenue. Investment income includes the sales of securities, interest, and dividends. The recent recession has likely decreased revenue flowing into charitable organizations from investment income. For example, university endowments lost 23% on average between July 1, 2008, and November 30, 2008. Other revenue, of which there were $30 billion in 2005, make up 3% of overall revenue received by charitable organizations. These revenue come from revenue sources such as membership dues, net special events income, and other miscellaneous revenue-raising activities. Revenue Sources by Charitable Sector Charitable organizations are highly heterogeneous. One aspect of heterogeneity is charitable organizations' revenue sources. To explore this further, Figure 5 examines the distribution of revenue sources across different types of charities. The data used to derive Figure 5 is available in Table A-1 . While the reliance of different types of charities on various revenue sources varies along a number of dimensions, there are a few patterns of particular interest. First, it is clear from the chart that charities providing education and health care receive the majority of their revenue from private payments for service. These fee-for-service organizations are much less reliant on private contributions than other types of charities. It is also important to note that for hospitals, the government grants and payments category includes government payments via Medicare and Medicaid. The charts in Figure 5 also show that arts, culture, and humanities and environment and animals charities rely most heavily on private contributions. Charities that rely heavily on private contributions are more susceptible to economic fluctuations and changes in the tax code that would affect individual giving. These issues are discussed further below. The charitable sector that is most reliant on investment income is education. Nearly 17% of the charitable education sector's revenue in 2005 were generated from investments. For higher education institutions, this figure was over 19%. As noted above, university endowments suffered substantial losses in 2008. Revenue for educational institutions are more susceptible to fluctuations in markets likely to impact investment income than other types of charitable organizations. Overall, understanding what types of charitable organizations have a greater reliance on specific sources of revenue may help policymakers understand the potential for external economic conditions to impact the well-being of the charitable sector. Educational institutions, with a greater reliance in investment income, are more likely to be adversely affected directly by the downturn of financial markets. Charities where a larger proportion of revenue come from private contributions, such as arts, culture, and humanities and environment and animals, are more likely to be impacted by changes apt to cause fluctuations in private giving, such as changes to the tax code. Charities that derive the majority of their revenue from private payments, such as health care and education institutions, are less likely to suffer revenue losses when external factors cause changes to the level of private giving. Growth in Revenue Sources Table 9 shows the percentage change in real revenue between 1995 and 2005 delineated by charitable sector. Total revenue received by charitable institutions grew by 68.6% over this time period. Private payments to charitable organizations grew more during the time period than other revenue sources. Much of this increase appears to be driven by the increase in private payments received by hospitals. The portion of the charitable sector involved in health care receives the majority of their revenue from private payments. Private payments in the health care sector have also grown faster than private payments in any other sector. As the revenue demands for health care charities generally have increased, these charities have seen a greater increase in private payments than in other revenue sources. In fact, between 1995 and 2005, the portion of revenue from private payments declined in real terms for charitable health care organizations (although this figure still increased for hospitals). Some charitable sectors have experienced much larger growth in revenue with respect to private contributions than others. Overall, private contributions to charitable sectors increased nearly 69% between 1995 and 2005. However, charities involved with the environment and animals, human services, and international issues all experienced growth in revenue from private contributions in excess of 100% during that time period. It is also noteworthy that growth in investment income between 1995 and 2005 was highest for charities in the education sector. Education receives a larger proportion of their revenue from investment income than most other charitable sectors. This trend is driven by higher education institutions, where the growth in the share of revenue coming from investment income has been the highest in the time period observed. Again, it should be noted that the financial assets of higher education institutions did not fare well in 2008, and the growth in the revenue coming from investment income has likely slowed. Finally, the charitable sectors that have seen the largest growth in revenue overall are relatively small. Between 1995 and 2005 the revenue flowing into the international charitable sector increased by 190%. The international sector, however, still earned less than 1.7% of the charitable sector's total revenue. The environmental charitable sector's revenue also increased more than average, 90% between 1995 and 2005. Even in the face of this rapid growth, the environmental charitable sector captures less than 1% of charitable organizations' total revenue. Nongovernmental Financing: Private Contributions Private contributions to charitable organizations come from four different sources. The first is gifts from individuals. In 2008, individuals gave $229.28 billion. The second is charitable bequests, or gifts from estates. In 2008, total bequests were valued at $22.66 billion. The third source of giving comes from corporations. Corporations gave $14.50 billion in 2008. Finally, grants to charitable organizations are made by foundations. In 2008, it is estimated that foundations gave $41.21 billion. Total giving by all four groups was $307.65 billion in 2008. Total giving in 2008 was 2% less (5.7% less after adjusting for inflation) than total giving in 2007. This is the first decline in giving since 1987. Figure 6 shows giving by individuals, bequests, corporations, and foundations in real terms in 1998, 2007, and 2008. Between 2007 and 2008, giving by individuals and from bequests both fell by more than 6% (in real terms). Giving by corporations fell by 8% (in real terms). Giving from foundations remained relatively constant, falling by less than 1% (in real terms). Despite the recent reduction in the amount of contributions charities receive from gifts, charitable organizations still received more in 2008 than they did a decade earlier. In real terms, gifts from individuals increased by 25% between 1998 and 2008, bequests increased 32%, corporate giving increased 30%, and gifts from foundations increased by 83%. While real giving has increased, looking at giving relative to the size of the overall economy provides a better picture of society's generosity. To evaluate the generosity of society over time the ratio of charitable giving to GDP is examined. Figure 7 plots giving as a percentage of GDP and disaggregates giving across sources. Giving as a percentage of GDP was greater than 2% into the 1970s. From the early 1970s through the late 1990s giving as a percentage of GDP remained below 2%. In the late 1990s, giving as a percentage of GDP began to increase, reaching a peak of 2.37% of GDP in 2005. Since 2005, giving as a percentage of GDP has fallen. In 2008, giving as a percentage of GDP was 2.16%. The increase in giving as a percentage of GDP between the 1990s and 2000s was driven primarily by giving from individuals and giving from foundations. Prior to the late 1990s, giving by individuals was less than 1.5% of GDP. Since 1999, giving as a percentage of GDP by individuals has not fallen below 1.6%. In 2008, giving as a percentage of GDP by individuals was 1.61%, down from its peak of 1.78% in 2005. Throughout the 1980s and most of the 1990s giving by foundations never exceeded 0.15% of GDP. In 2008, this ratio was 0.29%. Giving as a percentage of GDP by foundations increased between 2007 and 2008. Overall, giving as a percentage of GDP by foundations has nearly tripled since the 1970s. Giving relative to GDP by bequests and corporations does not exhibit such clear patterns. Corporate giving as a percentage of GDP in 2008 was 0.10%. Relative to GDP, corporate giving in 2008 was the same as it was throughout most of the 1990s. Corporate giving relative to GDP was lower (0.07% - 0.08%) in the 1970s and higher (0.12% - 0.13%) in 2005 and 2006. Bequests relative to GDP were 0.16% in 2008, lower than they were in the early 2000s (when the ratio was 0.20%). Compared to the 1970s and 1980s, bequests as a percentage of GDP are still 0.03 – 0.06 percentage points higher. To more fully understand the impact of giving on the charitable sector, it is important to address what types of charities receive gifts. Figure 5 illustrates that the largest source of funding for arts, culture, and humanities as well as for environment and animals charities is private donations. Both of these types of charitable organizations received more than 40% of their revenue from private donations in 2005. Figure 8 plots giving to different types of charitable organizations in 2008, 2007, and 1998. When looking at data from the giving perspective, it is clear that religious organizations are the recipients of the largest share of gifts. Further, religious organizations were one of the few categories to experience an increase in giving between 2007 and 2008. Overall, giving fell by 5.7% between 2007 and 2008, with the largest declines in gifts to grantmaking foundations (-22%); human services (-16%); and arts, culture, and humanities (-9%). Between 1998 and 2008 overall giving increased by nearly 32% in real terms. Again, there was wide variation across sectors. The sectors that experienced the largest increases in giving over the course of the decade were international affairs (98%), environment and animals (42%), and education (30%). Giving to religion grew over the course of the decade, but the rate of growth was relatively low (19%). Giving to arts, culture, and humanities decreased by 2% between 1998 and 2008. This is particularly noteworthy since the arts, culture, and humanities charitable sector receives the largest share of revenue from private contributions. There are a number of issues which may affect giving by individuals. These include whether or not individuals can deduct contributions, fluctuations in personal income, and broader economic conditions. Individuals who itemize deductions have a greater incentive to give, as the price of giving is reduced by the marginal tax rate. In 2005, those itemizing gave on average 3.54% of their adjusted gross income. Non itemizers gave on average 1.34% of their adjusted gross income. It is important to note, however, that those choosing to itemize deductions tend to have higher incomes and thus perhaps a greater ability to give. Individual charitable deductions are subject to various restrictions, which include being generally limited to 50% of modified adjusted gross income. Individual giving to charity is also responsive to income. Table 10 shows how giving and the amounts given vary across three different income groups. In 2004, 56.3% of households with less than $50,000 in income gave to charity, 81.4% of households with income between $50,000 and $99,999 gave to charity, and 93.3% of households with income greater than $100,000 gave to charity. In 2004, the average household gave just over $2,000. This figure appears to be driven by a few households making relatively large gifts as the median charitable gift was $775. The average giving for households making $100,000 or more per year was more than three times the average giving of households making less than $50,000. The median gift by households making more than $100,000 was more than four times as much as the median level of giving by households making less than $50,000 per year. Economists have also made attempts to measure the elasticity of charitable giving with respect to income, which is the percentage change in giving relative to the percentage change in income. Empirical work that has attempted to estimate the elasticity of charitable giving with respect to income has produced a wide range of results. While many studies have found an income elasticity of less than one, the fact that individual contributions relative to GDP have remained relatively constant over time (see Figure 7 ) suggests that income elasticity is more likely unit elastic. If the income elasticity were in fact less than one, as income increased over time one would expect charitable giving relative to income to decline. Charitable bequests are given by estates upon an individuals' death. It is estimated that about 120,000 estates leave bequests each year. Most bequests come from small to mid-sized estates, where the estate is small enough in size that filing of estate tax returns is unnecessary. Only about 8,000 estates filed estate tax returns in 2008. These 8,000 estates were responsible for about 85% of all giving via bequests, illustrating that giving via bequests is highly concentrated amongst the most wealthy decedents. Concern is often expressed that a reduction in or elimination of the estate tax would lead to reduced giving to the charitable sector. Recent work has found that bequests are responsive to changes in estate taxes as well as overall wealth. Corporate giving can be made in one of two ways. The first way is as a direct gift from the corporation. The second way is via a corporate foundation. A typical corporation is estimated to give about 1% of its domestic pre-tax income to charitable organizations, or about 0.08% of corporate sales. Corporations' charitable deductions are generally limited to 10% of taxable income, among other restrictions. The final source of private contributions or charitable gifts comes from foundations. As noted above, in relative terms, giving by foundations has increased more than giving by individuals, bequests, and corporations over the past decade. In 2008, The Bill and Melinda Gates Foundation gave $2.8 billion in grants (giving by all foundations was $41.2 billion in 2008). Giving by the Gates Foundation increased by $0.8 billion between 2007 and 2008, contributing to the overall stability of foundation giving between 2007 and 2008 as grantmaking by other foundations fell. Government Financing: Grants and Transfers From Figure 4 , government grants and payments to charitable organizations were $351 billion, or 29% of charitable organizations' total revenue. What Figure 4 does not do is identify whether payments were made for fees for service (such as Medicare payments), grants, or transfers. Similarly, Figure 5 shows that the share of government grants and payments in total revenue varies substantially across different types of charities. Government grants and payments are much more important in health (37%) and human services (36%) than in other types of charitable organizations. Table 11 reports estimates of the share of revenue that comes from grants alone, excluding fees for services. These data are gathered directly from the Form 990 for charitable organizations that were required to report. The data used to generate Figure 4 and Figure 5 were from the IRS Statistics of Income division exempt organization sample files on public charities. In a few cases grants are larger as a share of income than the share of total payments reported above. These grants, of course, may have performance requirements, but they are not allocated to particular individuals and services received. Government grants are about 9% total revenue for the charitable sectors included in Table A-1 , or about $100 billion for 2005. The data indicate that government payments for health as a share of revenue are primarily due to fees. Virtually all of the government payments in the remaining sectors, other than human services, reflect grants. Grants are most important in human services and international organizations, and least important in health. These data do not include religious organizations, where government grants are unlikely to be an important source of revenue. Grants reflect the nature of the specific charities (they are less important for organizations such as hospitals that rely heavily on fees). Grant support is more important in areas where the government has a special interest, such as the human services and international sectors. The Bureau of Economic Analysis's (BEA's) National Income and Product Accounts provides information on government transfers, which are relatively small. In 2007, the government provided approximately $20 billion in transfer payments for all nonprofit organizations serving households. It is not clear how transfers are defined, but grants can include contracts and agreements for services, as well as transfers. The BEA data does not separate these transfers by type of charitable organization. The data presented here do not separate state and local government funding from federal government funding. Government funding to charitable organizations may come directly from the federal government, from state and local governments that have received the funding from the federal government (rather than raised the revenue themselves), or directly from state and local governments. One study finds that, for 2001, only 12% of grants and fees originate with state and local governments; 37% are financed by the federal government but flow through to nonprofits via state and local programs, and the remaining 51% are provided directly by the federal government. If Medicare and Medicaid, the main fee-related items, are excluded, the states continue to supply only a small share (9% of their own funds) but administer a much larger share of federal funds (61%). While the federal government appears to be the primary source of funds via grants, state and local governments are the primary source of oversight. The Business Cycle's Impact on Funding As is the case for many entities during an economic downturn, charities may suffer declines in funding. For some, the decline comes at the time when their services may be in greater demand. Analysis of past recessions suggests that the level of charitable giving declines during downturns, but that charitable giving as a percentage of income does not decline. The level of giving has declined during the current recession. Nonprofits overall tend to fare no worse than, and perhaps better than, other sectors during downturns, although this recession may have been more troubling because of the fall in asset values. There are significant differences in giving trends across different types of charitable organizations. The greatest decline in giving during the recent economic downturn has been for human welfare organizations. Human welfare organizations as a sector are likely to experience increased needs for their services during a downturn. While giving declined in inflation-adjusted terms between 2007 and 2008 by 6%, the decline for human services organizations was 16%. Recessions can also affect assets, such as those held by university endowments and foundations (whose purpose is primarily to provide grants to active charitable organizations). The current recession has been accompanied by a significant fall in the value of assets which affected charitable organizations' assets. Despite the fall in asset values and in gifts to foundations, foundation grants to other organizations fell less than inter-vivos giving by individuals, bequests, and corporate giving. Another major pressure on nonprofits during the recession has been the decline in support by governments (primarily state governments), including delays in payments. A recent survey of nonprofit organizations found that 35% have experienced a loss in government support while 37% reported experiencing delays in government payments. How Have Nonprofits Fared During Past Economic Downturns? Sectors of the economy fare differently during a recession. Generally, sectors that produce investment and durable consumer goods (such as housing, automobiles, and household furnishings) and luxuries tend to suffer the largest declines in demand. Necessities and items that are immediately consumed, such as food and health care, tend to be more resistant, as are items that are a small part of the household budget. That is, individuals tend to economize on big-ticket items whose purchase they can delay. Charitable contributions tend to share features of both types of goods. While charitable contributions are not a necessity, they are typically small as a part of individuals' budgets. Evidence indicates that there is a tendency for giving to fall in real (inflation adjusted) terms during a recession. During the 12 recession years since 1967, charitable giving declined in 8 of those years. Charitable Contributions in Past Recessions Although real giving tends to decline during recessions, it is not clear that giving is affected more than average expenditures. Figure 9 shows the pattern of giving as a percentage of GDP from 1967 through 2008. Recession years are noted via shaded bars. Charitable giving as a percentage of GDP has remained relatively stable over business cycles. Overall, there has been an upward trend in giving as a share of output since the 1980s. The Current Recession: Charitable Giving in 2008 Charitable giving declined during the recent recession, with a fall of 2% in nominal terms from 2007 to 2008. This reduction was a decline of 5.7% adjusted for inflation. The declines differed depending on both the source of giving and the recipient as shown in Table 12 . The pattern for foundation grants suggests that, despite the loss in value that occurred in assets in this period, using assets to finance grants seemed to provide more stability in giving. There is evidence that giving by foundations has acted as a stabilizing force in the past. The effects also differed by the recipient of giving. As shown in Table 13 , different types of charities are affected in different ways. Religious giving, which accounts for the largest share of the total, had an increase in real giving between 2007 and 2008 of 1.6%, a differential of 7.3 percentage points from the average effect. The other sector with an increase, public society benefit organizations, include organized giving arrangements that flow through to other beneficiaries, such as United Way, Jewish funds, and donor-advised funds. The largest decline in giving was for foundations, but these institutions largely accumulate assets and make grants to other organizations, and their giving to other organizations was more stable than other giving. Outside of foundations, the organization that had the greatest drop in inflation-adjusted contributions, 16%, was for human services, where the needs during a downturn and dependence on contributions are likely the greatest. Most other institutions had a real decline of 9% to 10% (education, health, arts, environment), 4 percentage points worse than the average across all institutions. International affairs had a smaller drop than average, 3.6%. It is important to note that nonprofit organizations that receive charitable contributions generally have other important sources of revenue, such as user fees, earnings from assets, or government support. Figure 4 shows that total charitable contributions received as a share of total revenue of public charities was approximately 12% in 2005. For the health care sector, which includes nonprofit hospitals, charitable contributions were approximately 2% of total revenue in 2005 (see Figure 5 ). The share of charitable contributions in total revenue varies for other sectors. In 2005, arts, culture, and humanities organizations received approximately 43% of their revenue from charitable contributions, the education sector about 13%, environment and animals 48%, and human services 16%. Some of these nonprofit institutions may be fairly resilient to cyclical pressures (such as hospitals). Attendance at colleges and universities is also likely to rise when jobs are scarce. Charitable organizations and giving are also linked to endowments which can be a source of funds in difficult times (but may also fall in value during a recession). Endowments and Assets The National Association of College and University Business Officers (NACUBO) follows the endowment size of colleges and universities, covering their fiscal years which normally begin on July 1. For the 2008 fiscal year (covering the second half of 2007 and the first half of 2008) asset values rose by 0.5%, a loss in real terms and much smaller than previous growth. A special follow-up survey found a 22.9% decline in the five months from July 1, 2008, to November 30, 2008. (Corporate stocks fell further, but have since begun to recover.) Foundations experienced a 28% drop in the value of assets during 2008. Foundations hold a large quantity of financial assets. In 2007, total foundation assets were estimated to be $682 billion. Community foundation assets represent a relatively small share of that total, $56 billion in 2007. The largest foundation, the Bill and Melinda Gates Foundation, had assets of $39 billion, while the top 10 foundations by asset size held $112 billion in 2007. Data on returns filed with the Internal Revenue Service on public charities showed assets held by charities in 2006 to be $2.2 trillion, but a large share of this figure is likely to be buildings and other physical assets. (This amount does not include most assets of religious organizations.) Charitable organizations related to health (likely to be hospitals) accounted for $867 billion. Education accounted for $682 billion. Educational institutions are known to have large endowments, and endowments accounted for half their assets. University endowments had been growing rapidly, and in the latest reports, total assets rose to $837 billion (the total for all public charities was $2.6 trillion, and for hospitals $921 billion). Earnings from endowments appear, overall, to be larger than receipts from charitable contributions for colleges and universities, although endowments are highly concentrated in large institutions. Another consequence of loss of asset value is likely reduced individual giving, especially by high-income donors and through bequests. High-income donors tend to be more likely than the average donor to contribute to certain types of nonprofits, such as health, education, and arts, as well as foundations, and less likely to contribute to religious and human welfare organizations. As asset values fall, reducing the wealth of high-income donors, charitable contributions tend to decline. Outlook 2009 Although annual data for 2009 are not available, surveys have been conducted regarding how charities are faring. A summary report has been published by the National Council of Nonprofits. This overview provides information suggesting nonprofits continue to feel the pressures of increased demand for their services coupled with decreasing revenue. More than a third of nonprofits have had to cut operations. The surveys, particularly several state surveys, cite reduced support from governments as more problematic than reduced support from individual and foundation giving (corporate giving is also cited as declining significantly). Although all three levels of government (federal, state, and local) are mentioned, it is primarily state support that is falling. In addition to funding cuts, states apparently have been delaying payments for services they have contracted with nonprofits to provide. One study, from Connecticut, is specifically focused on contract payment delays. One national survey found that 35% of respondents reported declines in government support and 37% reported delayed payments from the government. Some additional funds for charitable activities were provided in the 2009 federal stimulus plan, many of these funneled through state and local governments. The additional funding was summarized in a publication by the National Council of Nonprofits. Overall, however, it appears that governments, particularly state governments, may be contributing to the financial difficulties of nonprofit organizations, even to the point of not paying for contracted services. The Charitable Sector's Relationship with Government Various charitable activities are subsidized by the federal tax code or funded via government grants. In order to understand the rationale for government support of the charitable sector, it is important to understand the economic theories relevant for charitable activities. Market Failures: Justifying the Subsidization of Charities There are two types of market failures used to justify government subsidization or support of the charitable sector. The first is the notion of public goods. Generally, the free market will provide too few public goods, due to the free-rider problem. Government intervention can help by increasing the quantity of public goods provided. The second relevant market failure is externalities. An externality is an outcome of a transaction whereby the market participants do not face the full cost or benefit of their actions. Each of these market failures is discussed in the context of the charitable sector in the following sections. Public Goods Pure public goods are characterized by two properties: the fact that they are non-rival and non-excludable . For a good to be non-rival, one person's consumption of the good does not diminish another's ability to consume that same good. For a good to be non-excludable, it is either impossible or prohibitively expensive to prevent consumption of the good once the good has been provided. One example of a pure public good is clean air. The market itself is unlikely to provide a public good due to the free-rider problem. Once a public good, such as clean air, is provided, it is available for everyone to enjoy. Since individuals know that the pure public good, such as clean air, will be available to them once provided they may wait for others to provide the good and not contribute themselves. Without contributions, the good is not provided. Just because a good has the characteristics of a public good, it does not mean that this good will not be provided (at least partially) by the private market. In some cases, one person's demand for a good may be high enough that they are willing to provide the good on their own. Once provided, the public good is there for all to enjoy. Individuals also tend to give more towards providing public goods than standard economic models would predict. This happens to the extent that individuals are altruistic, and care about the well-being of others in addition to their own well-being. Altruism, and the well-being that individuals get from giving, motivates people to give both time and money to causes like religious organizations, disaster relief, local charities, educational institutions, and research causes among others. Economists have also postulated that the warm glow model can be useful in explaining why individuals give to charity. In the warm glow model, individuals not only care about the total amount of the public good provided, but also about their individual contribution to the total. Individuals are expected to contribute to a charitable cause up to the point where their contributions cease to make them better-off. Even under a warm glow model, economists expect public goods to be underprovided, since individuals do not take into account the positive external effects of their contributions. Individuals may be motivated to give to charitable causes to the extent that their own well-being depends on the well-being of others in society. Here, redistribution has the potential to make all members of society better off. In this sense, increasing the consumption of the poor can be viewed as a public good. Redistribution can improve everyone's well-being, but the optimal level of redistribution is not likely to be achieved by the market absent government intervention, due to the free-rider problem. To the extent that charitable goods and services are underprovided by the market, government subsidization of charitable activities (or government provision of goods and services provided by charities) can increase overall well-being. The government supports charitable organizations that provide public goods in two major ways. First, the government provides grants directly to charitable organizations providing public goods. Second, the government provides tax breaks to charitable organizations providing public goods. Externalities The second rationale for government intervention via the charitable sector is the case of externalities. A number of activities in the charitable sector are associated with positive externalities. With a positive externality, there are benefits to engaging in certain transactions that do not accrue to either party involved in the transaction. For example, education is thought to have positive externalities. Not only does the person receiving an education benefit, but educated people are better equipped to participate in a functional democracy. Knowledge has positive externalities to the extent it is transferred between individuals outside of the formal education setting. Health care provision may also have positive external effects. When an individual receives a vaccine against a communicable disease, not only does that individual benefit by not becoming ill, but the entire community benefits as the risk that the individual will spread the disease to others is diminished. Subsidization of organizations providing goods and services associated with positive externalities has the potential to increase society's overall well-being. Is There an Economic Rationale for Nonprofit Hospitals? Some have come to question whether the favorable tax treatment for some charities is justified, such as the exemption for nonprofit hospitals. In the United States, there are both for-profit hospitals and nonprofit hospitals. Only nonprofit hospitals may qualify for tax-exempt status as 501(c)(3) charitable organizations. In order to qualify, the hospital must provide charity care and "community benefits." Under the community benefit standard, hospitals are judged on whether they promote the health of a broader class of individuals in the community. A hospital could meet the standard by providing charity care (i.e., free or reduced-cost care). However, there is no requirement that hospitals provide charity care, and they may qualify for the 501(c)(3) charitable status by providing other types of community benefits. Given the large loss in tax revenue associated with treating nonprofit hospitals as tax-exempt 501(c)(3) organizations, it has come into question whether the benefits provided by these institutions are worth the costs. Some have argued that since hospital services are not a public good (a person's consumption of medical care is rival and excludable), hospitals should not be given the same tax advantage as other charitable organizations providing true public goods. Analysis comparing nonprofit hospitals to for-profit hospitals has found that nonprofit hospitals do provide higher levels of uncompensated care, more emergency room care and labor and delivery care, but less Medicaid care. The monetary value of community benefits provided by nonprofit hospitals is unclear, leaving open the question as to whether the favorable tax treatment is justified. Relationship with the Federal Government The government supports and affects nonprofits in several ways in addition to providing grants and transfers. Recently, the federal government has begun undertaking social innovation initiatives involving nonprofits. As noted above, payments and grants to nonprofits from the government represent a significant share of receipts, although the importance of the share varies by type of nonprofit, and transfers per se are small. Another significant source of government support to the charitable and nonprofit sector arises from tax benefits, provided by both federal and state governments. These relationships are discussed below first for the federal government and then for state and local governments. Estimates regarding the value of the government's relationship with the charitable sector suggest that grants amount to about $100 billion, with the federal government supplying about 90% of the funds. Federal tax subsidies are valued to be approximately $115 billion to $130 billion, and state and local tax subsidies are approximately $30 billion to $50 billion. In sum, the government provides approximately $245 billion to $280 billion to the nonprofit and charitable sector via grants and tax subsidies. Federal Government The federal government's oversight over charities largely stems from the tax benefits provided to the sector. Nonprofit and charitable organizations are generally exempt from tax on most income, including investment income. Additionally, donations to charitable organizations are tax deductible, effectively subsidizing charitable giving. Recent legislation established a social innovation fund in the Corporation for National and Community Service, and President Obama has created the White House Office of Social Innovation and Civic Participation to coordinate these efforts. This program is briefly discussed before turning to a discussion of several types of 501(c)(3) organizations and issues that have been subject to recent congressional interest and the financial benefits related to taxes and the postal subsidy. Social Innovation Initiatives The Edward M. Kennedy Serve America Act ( P.L. 111-13 ) enacted in 2009 established a social innovation fund that is administered by the Corporation for National and Community Service. This corporation administers domestic volunteer initiatives (such as VISTA). A budget request for $50 million has been submitted. In addition, a White House Office of Social Innovation and Civic Participation has been established to coordinate these efforts. According to White House officials the objectives of this initiative were to develop partnerships with the private sector (nonprofits, businesses, and philanthropists), support and spread innovative ideas (such as Harlem Children's Zone), support greater civic participation through media, and promote national service. Foundations Most foundations differ from operating charities in that they often have a single donor. In addition, while a gift to a foundation is deductible for income (and estate and gift) tax purposes, the funds are not immediately used for active charitable purposes. Rather, funds are invested and donations are often made to charitable organizations from earnings that may allow the corpus of the foundation to be maintained and grow. Contributing to a foundation and allowing the funds to grow allows the benefits of both the charitable deduction and the exemption of tax on earnings. To address concerns that foundations could simply retain earnings and grow indefinitely, and because foundations are often closely tied to a family or specific group of donors, tax laws require a minimum payout rate (5%) and restrict activities that may benefit donors. The tax code imposes taxes and/or penalties for self-dealing, failure to distribute income on excess business holdings, for investments that jeopardize the charitable purposes, and for taxable expenditures (such as lobbying or making open-ended grants to institutions other than charities). There is a 1% tax on investment income of foundations, and an additional 1% penalty if the foundation does not make a certain minimum distribution (based on distributions made in the previous five years), or has been subject to a tax for failure to distribute in the previous five years. Donor-Advised Funds and Supporting Organizations In recent years, concerns have been raised about charitable vehicles that have some of the same features as foundations: donor-advised funds and supporting organizations. Donor-advised funds are funds where donors make contributions to the fund and the institution holding the accounts makes contributions to charitable organizations with the advice of the donor. While the donor has no legal control, in practice the donor's wishes are likely to be respected. Supporting organizations do not actively engage in charitable activities but support organizations that do by contributing funds. Supporting organizations fall into three categories: type I organizations directly controlled by the charitable organizations; type II organizations controlled by the same entity controlling the charitable organization; and type III organizations related to the charitable organization (these organizations may support many charitable organizations). Donor-advised funds and supporting organizations share many features with private foundations, but have historically not been generally subject to self-dealing rules and other restrictions (meant to prevent the donor from receiving a private benefit) or payout requirements (meant to keep the organization from accumulating funds without paying out some amount for charitable purposes). In an effort to address concerns that abuses were occurring and that, in some cases, little was being paid out, the Pension Protection Act of 2006 ( P.L. 109-280 ) imposed a number of regulatory requirements and also required a Treasury study of donor-advised funds and other supporting organizations to evaluate whether they should continue to receive tax-exempt status. Donor-advised funds eligible for charitable contributions are prohibited from providing benefits to the donors, and are required to have a governance structure if grants are made to individuals (such as a scholarship fund). Contributions of closely held businesses must be sold within a short period of time. Supporting organizations must indicate which type they are and certain type III organizations will eventually be subject to a minimum payout. The Treasury Secretary was charged with determining the details of the minimum payout requirement through regulation. On September 24, 2009, the Treasury issued a proposed regulation to impose a 5% rate (which is the same rate that applies to private foundations), pending comments due in December 2009. At this time, however, donor-advised funds are not subject to a payout requirement. Endowments Endowments also share a number of characteristics with foundations. Specifically, deductions for the contribution are made in advance of the expenditure and the endowment principal may be maintained or grow. Endowments receive tax-exempt earnings, but there is no payout requirement. In recent years the growth of university and college endowments raised concerns and led to discussions of possible payout requirements. The Senate Finance Committee received testimony on college endowments in connection with hearings held on offshore funds in 2007. Major university endowments are invested in, among other assets, offshore hedge funds, and one issue discussed during the hearing was whether these investments were being used to avoid the unrelated business income tax. The witnesses discussed the growth of endowments and also addressed the relationship between endowments and affordability, showing that a very small increase in payout of universities and colleges with the largest endowments could obviate the need for tuition increases and could fund significant increases in student aid. The Senate Finance Committee also sent a survey to colleges with endowments of more than $500 million to obtain more details about their endowments and payouts. Charitable Contributions While charitable deductions are available to all taxpayers, individuals who take the standard deduction do not use the charitable contribution deduction. (The logic behind the standard deduction is that it accounts for the tax-deductable activities of individuals choosing not to itemize deductions.) Slightly over one-third of individual taxpayers itemize; about 30% deduct charitable contributions. Individuals' contributions are, in general, limited to 50% of income for most charities, but are restricted to 30% for certain nonprofits, including non-operating foundations and institutions set up for the benefit of members (such as fraternal lodges). Individuals can contribute property as well as cash. The contribution of appreciated assets has particularly beneficial treatment, as the value of most appreciated assets can be deducted without including the capital gains in income which would be subject to tax. (Some contributions of property are limited to the smaller of basis or fair market value, such as business inventory.) For that reason, gifts of appreciated property are limited to 30% of a donor's adjusted gross income for most general charitable donations, and to 20% for donations to organizations with more restricted giving limits, such as non-operating private foundations. Deductions for inventory property used in a business are generally limited to the cost of production and not market value. Individuals can also deduct costs of volunteering for charitable purposes, including out-of-pocket expenditures, costs of using a vehicle, and travel costs when there is no significant personal element. In lieu of calculating costs of operating an automobile, volunteers may deduct 14 cents per mile. This amount is set by statute and is smaller than amounts allowed for medical and moving purposes (24 cents), which are in turn smaller than the amounts allowed for business purposes (55 cents). These latter rates are adjusted for changes in costs. Like individuals, corporations are subject to restrictions on their ability to deduct charitable contributions. For example, corporate contributions are generally limited to 10% of taxable income. In some cases, the tax code encourages the donations of certain types of property: for example, there is an enhanced deduction for donations of food inventory to organizations serving the needy. There are a number of temporary provisions, referred to as extenders, that allow more generous tax treatment for certain contributions. The most important, in revenue terms, is the IRA rollover provision allowing individuals who are 70½ to contribute amounts in individual retirement plans directly to charity without including the distribution in income. This provision is advantageous to those who do not itemize deductions and benefits taxpayers because certain provisions (such as the taxation of social security benefits) are triggered by adjusted gross income. Other major extenders relate largely to gifts of inventory. A number of difficulties arise in administering the charitable deduction tax provision. For example, there is no third-party reporting to help confirm that deductions are legitimate. There are also concerns about the valuations of certain types of property, including not only gifts by the wealthy, but also gifts of vehicles and household furniture. Recent legislative initiatives have increased recordkeeping requirements and placed other restrictions on non-cash charitable contributions. Exemption of Tax on Investment Income of Nonprofits Direct data on the cost of the tax exemption for investment income for nonprofits are not available. The lack of tax on earnings of nonprofit organizations is not considered a tax expenditure. Consequently, the Joint Committee on Taxation does not provide estimates of the cost of this provision. In an effort to estimate the cost of the tax exemption of investment income for nonprofits two different data sources are reviewed. The Bureau of Economic Analysis (BEA) reports for 2005, $128 billion in dividends, interest, and capital gains for nonprofit institutions serving households. At a 35% tax rate, this would result in $45 billion of revenue loss. This estimate does not include net rent (which is likely to represent a relatively small share) and also excludes some capital gains income of religious organizations. Data taken from all organizations filing Form 990, including net rent, dividends, interest, and capital gains on securities, indicate $170 billion of income for FY2006. At a 35% rate, total revenue loss is $60 billion. For the data from the Form 990, charitable organizations with contributions deductible under 501(c)(3) accounted for 55% of the investment income, foundations about 32%; the remainder of the income is attributable to charitable organizations not exempt under 501(c)(3). Among the charitable organizations, half the investment income was received by the education sector (over a third in higher education) and about 30% in the health category. Income from university endowments soared in recent years before declining during the recession. For FY2007, total increases of university endowments were $88 billion; with 30% projected to be unrealized capital gains, income was about $53 billion, as compared to the $34 billion reported the previous year. As the economy fell into recession, however, earnings fell precipitously. These fluctuations in earnings make it difficult to determine a steady state rate of growth, but had the BEA estimate increased by a normal growth rate of 5% or so per year, endowment income would be $55 billion for 2009. Estimates using data from the Form 990 are closer to $70 billion. In either case, the estimated cost of exempting this income from taxation exceeds the cost of the charitable contribution deduction, which is approximately $50 billion. The asset income estimates include foundations, supporting organizations, and endowments, but do not include donor-advised funds. The amounts in these funds are small relative to the remaining nonprofits' assets, but have been growing quickly. As is the case with other provisions, this value of the exemption varies substantially across different types of charitable organizations. On average, charities filing with the IRS report that investment income is less than 7% of revenue. However, for higher education and supporting organizations, that portion of income is close to 20%. Investment income is 9% for arts, culture, and the humanities, but less than 3% for environment and animals, health, human services, and international. The lesser importance of investment income for health stems from the fact that the majority of the health revenue comes from fees for services (whether private or public). In health care, investment income is similar in size to charitable contributions while in the education sector investment income is about twice as large as charitable contributions. In other sectors, investment income represents a much smaller share of overall income than do charitable contributions. The exemption of income for nonprofits and charitable organizations also interacts with attempts to provide relief or incentives for businesses that are channeled through the income tax system. For example, in stimulus proposals enacted in 2008 and extended in 2009, provisions such as bonus depreciation which were provided to stimulate investment spending were not available to nonprofits because they depended on tax liability. Similarly, proposals designed to provide relief for small businesses to help pay costs of providing health insurance for low-income employees in some versions of proposals (e.g., H.R. 3200 ) would not be available to nonprofits. Charitable Contributions and Other Tax Expenditures Table 14 provides the estimated cost of various provisions benefitting the charitable sector. The tax savings from deducting charitable contributions is estimated at approximately $50 billion, with the majority of the costs reflecting deductions for the individual income tax. Table 14 also provides the revenue effects for allowing nonprofit educational institutions and hospitals to issue tax exempt bonds, and the provisions exempting housing allowances of ministers from tax. In addition to the tax benefit for income taxes, there is also a charitable contribution deduction for the estate tax. This deduction is estimated at $4.3 billion. Estimates for the value of the charitable contribution subsidies are provided separately for education and health. Specifically, 14% of the tax expenditures associated with allowing charitable contributions to be tax deductable accrue to the education sector, while 9% accrue to the health-oriented charities. These shares are similar to their shares of total charitable giving (14% and 7%) but are higher than the shares for individuals, which are about 11% and 4%. Foundations tend to give a larger share to education and health, 23% and 24% respectively, and account for 13% of contributions. The larger shares of charitable contributions deduction benefits for education and health reflect the pattern of giving by income class. Those who itemize deductions (about 30% of returns) are in the higher income classes. Itemizers account for over 80% of contributions. Table 15 provides data on the distribution of giving by income class. Higher-income individuals give more than the average share of contributions to health, education, and the arts, and are less likely to give to religious organizations and those providing for basic needs. For example, while only 0.2% of households have income over $1 million, these households provide 59.1% of charitable giving to health. The 0.2% of households with income over $1 million is responsible for 20.3% of total giving. Table 15 also provides information on giving directed at the poor. The data on giving directed at the poor show the percentage of total giving focused on the needs of the poor coming from each income class. Because the types of charities higher-income individuals contribute to tend to help the poor somewhat less, they provide a smaller-than-average share of their contributions to the poor. Relative to revenue, arts, culture, and humanities is likely to have the largest benefit from the tax subsidy for charitable contributions because this sector is favored by higher-income individuals and, as shown in Figure 5 , contributions are a large share of receipts. Most of the tax benefit from the estate tax goes to foundations (over half). Bequests are disproportionately given to education, health, and arts and culture. Foundation grants also tend to favor these types of activities. Postal Subsidies Qualifying nonprofits are eligible for reduced postal rates. In the past when the federal government appropriated funds to cover this cost, the value appeared to be several hundred million, and could perhaps be as much as $1.15 billion today. Currently, the cost is shifted to other mailers. The provision has been criticized by for-profit competitors as an inefficient and potentially unfair way to aid nonprofits. State and Local Governments State and local governments provide benefits to nonprofits through mechanisms such as grants (as discussed above) and tax subsidies. Tax subsidies include state income and estate tax provisions similar to the federal provisions, as well as property tax and sales tax exemptions. State and Local Tax Benefits State and local governments provide tax subsidies for charities through income taxes (largely state tax sources, which oftentimes piggyback on the federal income tax structure), property tax exemptions (primarily local tax sources), and sales tax exemptions (primarily state tax sources). There are also state inheritance taxes. The value of these subsidies is more difficult to determine given the heterogeneity in state tax systems and revenue sources. This is particularly true for property taxes which are collected locally, leading to greater data limitations and overall revenue uncertainty. Table 16 provides estimates of the value of state and local tax subsidies to nonprofit organizations. Regardless of the uncertainties, the property tax exemption provides charitable organizations with the most tax savings. The property tax exemption is particularly useful to organizations with significant real property such as churches, educational institutions, housing nonprofits, and art museums. Adding income subsidies, worth approximately $10 billion to $12 billion, and sales tax exemptions brings the total value of state and local tax subsidies to $30 billion to $50 billion. Potential Impacts of Government Grants on Giving The amount of money spent on grants is not necessarily the amount of money the charities ultimately receive. With grants, there is a possibility that government grants will displace individual contributions (government funds substitute for private funds) or that government grants will lead to more private contributions (government funds and private funds as complementary). Government Funds and Private Funds as Substitutes Crowd-out, or charities substituting government funds for those that would have been raised privately, is an important issues for policymakers in considering funding levels for charitable activities. The level of crowding out determines how much the government must spend to increase the supply of the public good. Most economists expect that crowd-out is partial. Crowd-out would be full, meaning that each additional dollar of government spending on the public good corresponds to a dollar decrease in private funding, when individuals only care about the total amount of the good provided (as opposed to caring about where the funding for providing a good comes from). When non-contributors are taxed to provide the public good, crowd-out will be partial. Crowd-out will also be partial when there is a warm glow associated with giving. The empirical evidence on the existence and magnitude of crowd-out provides mixed results. A number of studies find significant, although mostly partial, crowding-out effects. Other studies find empirical evidence of crowding-in. (Crowding-in occurs when government spending leads to additional private-sector spending. Why this may occur is discussed below.) It spite of these seemingly inconsistent findings, there are some trends that appear to be emerging. The first is that the degree of crowding-out varies by charity type. While crowd-out has been found for public radio, shelter, and human services, crowd-in has been found for crime and legal-related charities; food, agriculture, and nutrition charities; and other specific human services charities. Other work has found that government grants crowd-in donations for libraries, hospitals, scientific research, and higher education. Some of this could have to do with the fact that different types of charities generally rely on different funding sources. The second is that crowding-out also depends on levels of support and where the money is coming from (what level of government). Empirical work looking at American theaters found that theaters with low levels of public support tended to experience crowding-in, while crowding-out was more common for theaters with larger levels of government support. Federal support appears to have a crowding-in effect at any level, while local support initially crowds in at low support levels but begins to crowd out at higher levels of support. Considering the possibility of crowding-out is important for policymakers looking to boost charitable activity within a given sector. Recent work has found that governments should not only be concerned with the fact that government spending can potentially crowd out private support for charities, but also that government grants can cause charities to reduce their fund-raising efforts. Empirical work shows that crowd-out via reduced fund-raising is partial, but at least one study has found that crowd-out of fund-raising is greater than crowd-out of private donations. There is also evidence that private contributions and fund-raising efforts both increased in the arts when the government cut funding for the National Endowment for the Arts. This observation may have implications for policy. Governments providing grants to charitable organizations may want to consider matching grants, where receiving organizations are required to show increased fund-raising efforts in order to receive the grant. Alternatively, government grants could be accompanied by a maintenance of fund-raising effort clause. On the flip side, when the government reduces funding to charitable organizations the loss may be mitigated by increased fund-raising efforts leading to greater levels in private funding. Government Funds and Private Funds as Complements At other times, the government and charities work together and their efforts to provide goods and services are complementary in nature. One reason for this relationship may be that in those instances, it is more efficient for the government to hire an outside organization than to provide goods and services themselves. With large bureaucratic organizations, such as the government, providing additional services may not be cost effective. Nonprofits and charitable organizations may also have better information with respect to the needs of the communities they serve, leaving these institutions equipped to meet the needs of specific communities. The government may be more inclined to partner with nonprofit as opposed to for-profit institutions since monitoring costs are lower. Since nonprofits do not face a profit incentive, the motivation may be tilted more toward providing quality services rather than minimizing costs. When the government's relationship with nonprofit and charitable organizations is complementary in nature, it is not expected that additional government spending would crowd out private support. Over the past few decades, social welfare spending by governments has increased dramatically, while the rate of charitable giving has remained relatively constant. This fact alone lends support to the argument that the government and nonprofit or charitable sectors complement one another in aggregate, rather than act as substitutes. Government funding of nonprofits or charitable activities can serve as a signal of institutional quality. In this case, when government funding to a specific charitable sector or institution increases, private funding will also increase. This observed phenomena is referred to as crowding-in. Instances where crowding-in has been observed empirically were noted above. While it might seem that there is little consensus regarding whether government spending leads to crowding-out or crowding-in of private giving to nonprofit and charitable organizations, there are some lessons the empirical literature can provide. The main lesson is that government support can either be a complement to or substitute for private funding, depending on circumstances. Circumstances that may matter, for example, might be the initial level of funding and the source of the government spending. Circumstances will vary across nonprofit and charitable sectors as well as across institutions within sectors. This would suggest that government grants and support to the charitable sector be targeted as the potential for crowding effects are considered. Taxes and Charitable Contributions The effect of tax subsidies provided to charitable contributions on giving depend on the extent to which the tax subsidies induce additional charitable giving. If tax subsidies do not induce additional charitable giving, the subsidy provides a windfall to the taxpayer (without providing additional funding to charitable organizations). It is useful for policymakers to understand how much charitable giving is induced by the tax code, and the revenue losses associated with these provisions. The relationship between the amount of contributions and the revenue cost of the subsidy depends on the price elasticity of giving. The price elasticity of giving is defined as the percentage change in quantity given divided by the percentage change in price (in this case, the price of charitable giving is 1- t , where t the marginal tax rate). This relationship is always expected to be negative, as an increase in the price of giving (decrease in tax rate) should be associated with decreased giving. Since the relationship is expected to be negative, elasticities here are referred to in absolute value. If this elasticity is less than one (in absolute value), the induced giving will be less than the cost of the charitable contribution deduction. When this is the case, more funds for the charitable sector could be generated by spending government funds using alternative means, such as grants (absent crowding-out). The most recent estimates of the price elasticity of charitable giving by living individuals (inter-vivos giving) suggest that the elasticity is below one. A recent CRS report uses a value of 0.5 as a central estimate. This price elasticity suggests that a dollar of revenue loss induces $0.50 of giving. Therefore, the $50 billion of loss from itemized deductions is expected to induce increased giving of $25 billion. Giving from estates via bequests also represents an issue of concern for charitable organizations. Giving from estates is affected by both the estate tax rate and the wealth of individuals. The percentage change in giving relative to the estate tax rate is the price elasticity. Empirical evidence tends to suggest that the price elasticity in giving from estates is greater than one. This suggests that the giving received by charitable organizations from estates exceeds the revenue loss from allowing the tax deduction. Revenue losses from allowing estates to deduct gifts are relatively small, about $4 billion annually. Policy Considerations This section considers a variety of policy issues, drawn from a number of sources. Some of these issues stem from current and past legislative proposals, others arose during current debates, and still others are the result of this report's findings. Given the size and diversity of the nonprofit and charitable sector, an exhaustive list of policy options is not feasible. Instead, some of the most legislatively relevant have been presented below. Before considering possible policy proposals, it is useful to consider what nonprofits themselves indicate are their most important policy priorities. The Johns Hopkins Listening post project surveyed nonprofit executives focusing on children and family services, elderly housing and services, community and economic development, and arts and culture. The survey results indicated the four top priorities were restoration and growth of federal funds in their field; reinstatement and expansion of tax incentives for individual charitable giving; federal grant support for nonprofit training and capacity building; and reform of reimbursements under Medicare, Medicaid, and other programs to ensure they cover the cost of services. Other proposals that more than half of respondents identified as somewhat or extremely useful included expansion of tax incentives to encourage volunteering; student loan forgiveness for those working in the nonprofit sector; a credit for investment making low-cost private capital available; restoration of the estate tax; a commitment to support research and improve data on the nonprofit sector; expansion of national service programs like Americorps; replacement of the charitable contribution deduction with tax credits; a federal agency to represent and promote the interests of the nonprofit sector; strengthening of government oversight agencies; clarifying the community benefits standard (this issue relates to nonprofit hospitals); eliminating or reducing the limits on lobbying activities; and providing a special category of "hybrid" organizations, such as social enterprises (organizations that operate businesses but with a social mission, such as hiring the hard to employ or using the surplus for a charitable purpose). The importance of different priorities varied by type and size of charitable organizations. All organizations considered federal funding important, while those organizations that rely on reimbursement for services considered reform in that area important. Museums considered tax provisions (restoring the estate tax and expanding charitable giving) important while community and economic development organizations considered nonprofit training and capacity development important. Small nonprofits (less than $500,000) considered tax incentives for individual charitable giving, health insurance tax credits, and training funds important. The Independent Sector, an organization representing the charitable community, has also provided a list of policy proposals. Most of the policies indicated above were suggested in their report. Their work also included some specific tax proposals, including extending and expanding the IRA rollover provision, revising the excise tax on foundation income, and allowing mileage deduction rates to be the same as those of business. The Independent Sector also suggested, in addition to loan forgiveness, offering scholarships in return for a specific term of service in the nonprofit community. They proposed that loans, training, and technical assistance similar to that provided by the Small Business Administration to for-profit firms be provided to nonprofits. They also proposed relief from new funding obligations under the Pension Protection Act of 2006. Modifying lobbying rules, including allowing private foundations to support non-partisan lobbying of organizations they contribute to, was also suggested. The Independent Sector indicated that anti-terrorism restrictions may have discouraged international charity and might be revised. Proposals from the Independent Sector also emphasized that subsidies provided to employers in a health care reform should also be made available to nonprofits. It is natural that nonprofits and charitable organizations want more support from the government. These desires should be weighed against the effectiveness and efficiency of nonprofits and other potential uses of government funding. GAO testimony suggested that improving the governance and skills, particularly of nonprofits, and collecting more comprehensive data are among the issues that might be addressed. There have also been a series of legislative proposals that relate to the tax treatment of charitable contributions and organizations. Some of these proposals expanded benefits, while others were designed to address potential abuses. Increased Funding for Grants and Subsidies Are federal grants for nonprofits and charities insufficient, adequate, or too generous? This type of assessment is almost impossible to make, although the questions that need to be answered are straightforward. Is the objective worthy of diversion from other budgetary purposes or diversion from private consumption and investment if financed by tax increases? Will the funds provided cause crowding-in or crowding-out of private giving? Can the objective be met more efficiently with a government program or a nonprofit one? These questions, of course, must be considered on a project by project basis. For example, evidence on crowding-out and crowding-in suggested variation by type of charity. Are subsidies that are tied to specific features of the charity desirable compared to grants? These subsidies include existing ones, such as the postal subsidy and tax subsidies that are tied to reliance on charitable giving or investment funds, or, in the case of state and local subsidies, need for real property. Normally having benefits triggered by these characteristics might be thought to be less desirable than targeted grants, because the government can make a judgment about whether the activity is desirable. That is, the tax subsidies tend to favor education and arts, while grants tend to be more important in other charities. Moreover, while the information on crowding-in or crowding-out of grants is mixed, it largely suggests crowding-in. On the other hand, recent evidence on price elasticities suggests that the government spends more than a dollar to induce an additional dollar in charitable contributions. The government may want to seek to design policies that provide the greatest increase in revenue for nonprofit and charitable organizations with the least cost to the government. (See the discussion below for ways to increase the "bang for the buck.") One advantage of subsidies that are triggered automatically (by contributions, investment income, real property, or use of the mail) is that no administrative oversight is required. Moreover, some would argue that the federal government cannot easily make judgments about the value of different options or charitable objectives, leading one to conclude that a general subsidy may be in order. It is also important to consider proposals for reform which could affect not only the level of funding, but the mix of existing funding. Since different types of charities receive different shares of their funds from different sources, policies that change incentives regarding one funding source will have a larger impact on some charities relative to others. One example would be taxing investment income for charitable organizations. Such a reform would affect university endowments. But would it be better to tax the returns of university endowments and use the revenue to expand aid for poor students or expand funding for university research grants? These types of questions prove very difficult to answer in practice. The consequences of new initiatives can also vary across charitable sectors, and should be considered. For example, one policy proposal mentioned above is to forgive student loans for those who work in the nonprofit sector. Is student loan forgiveness for charitable sector employees a better way to benefit charities than grants or other mechanisms? Such a policy would favor charities that are more labor intensive and that tend to employ younger, less experienced workers. Is tipping the scales in favor of charities with these types of employees a desirable outcome? A similar issue might be raised about a special health insurance credit (although the issue of parity under current health care reform proposals is different). An Oversight Agency in the Federal Government One proposal is to provide an oversight agency in the federal government that, for example, might be similar to the Small Business Administration. Such an agency could support the nonprofit sector in two ways: conduct research and data collection and serve as an advocacy organization. Such an agency could fulfill a number of functions that are discussed in this report. It could collect data, process existing data, and provide research on the nonprofit sector to guide federal policy. It could coordinate broad government initiatives including social innovation and volunteerism. It could also collect and provide information to the public. Such an agency could also provide information on foundations and advice on grant applications (information now available but typically at a cost) and information on donor-advised funds. An oversight agency could provide outreach efforts, either free or at a small charge, to assist small nonprofits with efficient and effective organization management, including training of staff and grants for such training. It could also provide low-interest loans, similar to the Small Business Administration. Finally, an organization whose mission was to make the nonprofit sector more efficient would have a very different objective from the Internal Revenue Service, whose purpose is to enforce the tax laws. In the survey of charitable organizations discussed above, 79.6% of respondents believed more research and data were somewhat or extremely useful (29.2% believed them extremely useful). 64.1% believed creating a government agency to represent nonprofits' interests was somewhat or extremely useful (36.4% believed it extremely useful). In addition, one of the top priorities, supported by 88.2% of respondents as either somewhat or extremely useful (51.4% as extremely useful), was federal grants for training and capacity building. All of these issues along with improved oversight could be addressed with an new oversight agency. The main concern about such an agency is whether the benefits exceed the costs, a question that is difficult to answer. The cost would depend on whether the agency also provided grants and loans. In general, however, the cost would be small compared to tax subsidies and grants. The Small Business Administration's budget was $923 million in FY2009 and much of the cost was for loan guarantees; $345 million was for disaster loans (which also cover nonprofits) while only $20 million was for general administrative overhead. Relative to an oversight agency for the nonprofit sector, the Small Business Administration serves a much larger group of small entities, and would be likely to have higher costs. Additionally, it is important to note that a government agency is not the only entity capable of providing information and data on the charitable sector. There are a number of other organizations and educational institutions that currently collect data and disseminate research on the charitable sector (much of their work is cited throughout this report). If other organizations and educational institutions can more efficiently collect, analyze, and report data on the charitable sector, perhaps providing more funds to these organizations, rather than creating a government agency, is an option. An alternative to an executive agency would be a congressional committee or agency. This option may be preferable if the main objective of the proposed entity is to advocate for the health of the nonprofit sector, rather than providing some of the other functions discussed above. Or, as in the case of small business, both an agency and a committee could be considered. Proposals to Aid Nonprofits in Economic Downturns The nonprofit and charitable sector faces a number of challenges during economic downturns. This section addresses three issues of potential importance for the sector during periods of slow economic growth: encouraging foundations to give during downturns, encouraging states to maintain efforts and pay bills on time, and how to effectively provide funds directly to nonprofits as economic stimulus. Foundation Grants One observation discussed in this report is that foundations played, or could play, a stabilizing role by making more grants during recessions (or at a minimum not reducing grants). One policy option is to remove any tax impediments to foundations temporarily increasing payouts. Currently, foundations are discouraged from making large one-time grants as the excise tax on investments increases if the payout ratio falls. Currently, if a foundation's payout ratio falls from one year to the next, the foundation incurs an additional 1% tax on their investment income for that year. This disincentive could be eliminated by altering the excise tax treatment on foundation investment by going to a single rate, one that does not penalize large contributions. Under the current system, foundations are required to payout 5% of the average market value of total assets. Allowing foundations to carryforward excess payouts to use in the future (so that if the foundation paid out 6% rather than 5% in one year, the extra 1% could be used to satisfy part of future payout requirements) could help foundations smooth giving during slow economic times. This carryforward might only be allowed in recessions. Alternatively, foundations could be given a refundable credit for a share of payouts in excess of the required amounts during recessions. State Funding and Payments In the recent economic crisis, states reduced funding to nonprofit and charitable organizations and in some cases were delinquent on payments. To avoid this in the future, incentives could be put in place to encourage states to maintain funding for nonprofits. An example would be to set up a fund to head off a shortfall in nonprofit funding, with receipt of funds contingent on sustaining the current level of spending and providing payments on time. It is always risky, however, to create incentives of this nature because it requires determining the base level of funding and avoiding situations where states reduce funding in advance in anticipation of a slowdown. Having an advocacy agency in the federal government also might help address issues pertaining to state support and contract payments. If there were a spotlight on states' behaviors, especially states not making their contract payments on time, they might be less willing to address their short-term cash flow problems in this manner. An agency in the federal government might also offer low-cost loans to either states or nonprofits for cash flow stresses of this type. Providing Economic Stimulus Funds The principal objective of a government stimulus in a recession is to induce additional spending. Monetary expansion, which is often the first measure taken by the government, eases credit and helps to restore spending on investment goods and durable consumer goods (such as houses and cars). Fiscal policy can either provide direct spending (through government spending) or induce consumers through tax cuts. Reducing taxes increases wages and leads to spending by those working to produce the additional demand, through multiplier effects. To accomplish the objective of increasing demand, a fiscal stimulus needs to translate into increased spending and do so fairly quickly. The demand for goods and services provided by charities increases during recessions. It is unclear, however, whether stimulus money can quickly and effectively flow through charities, simultaneously meeting the increased demand for charitable services and providing economic stimulus. Information and administration issues limit what types of organizations are eligible for stimulus funds, including nonprofits. Since stimulus spending needs to work quickly, taking the time to identify specific recipients on a case by case basis would defeat the purpose. Funds are therefore often disbursed based on formulas and existing identification of potential recipients. This suggests that funds targeted to existing and established nonprofits are more likely to be effective economic stimulus, as opposed to funds targeted towards establishing new nonprofit or charitable organizations. Currently, the rules of the tax code effectively provide a formula for funding for both individuals and businesses. General attributes (such as income, family size and composition, investments) trigger tax benefits. Similarly, expansions of existing programs with recipients identified by specific characteristics (income, age, disability, unemployment, etc.) can be used for transfers. The government can rely on formulas to provide funds and can identify states and to some extent local governments. Nonprofits do not generally have these mechanisms in place and are therefore not normally the recipients of automatically distributed funds. Nonetheless, policies could be established to direct stimulus funds, via grants, to nonprofits during times of economic distress. A second object of government policy during economic downturns could be to assist those groups most impacted by the slowdown, and, indeed, programs such as expanded unemployment payments are often considered during recessions. Were the government able to direct funds to nonprofits, it might wish to target them in the same fashion, and direct them to specific nonprofit activities. Again, this would be administratively difficult to implement. Having a system in place where certain nonprofits were pre-registered with the government could expedite the grantmaking process when needs increase. Even if nonprofits cannot easily be direct recipients of funds, they benefit from economic stimulus programs. Grants to state and local governments may, in part, flow through to nonprofits, and even if state funding has fallen, it might have fallen more without stimulus funds. In addition, nonprofits benefit from the overall improvement in the economy that is aided through federal fiscal and monetary policy. Nonprofits could also be allowed investment subsidies provided to for-profit firms by providing the credit equivalent of the subsidy which they could file for using the income tax form (as was done for social security payments in 2008). Subsidies could also be provided based on number of employees or their wages. Programs could also require a certain fraction of funds to be directed to nonprofits, as is the case for the low-income housing tax credit. The Itemized Deduction for Charitable Contributions A number of proposals have developed over the years relating to the itemized deduction for charitable contributions. Recently, the President proposed a cap on all itemized deductions to finance health-care reform, which would have automatically affected charitable deductions and resulted in some concerns being expressed. However, a CRS report indicated the effects on charities would be small. This report reviewed the evidence on price elasticities which suggests that the response of charitable contributions to tax incentives is small. It also reviewed some survey evidence and evidence on the response to matching gifts, as well as historical data, which all point to a small response as well. As noted above, more recent evidence on price elasticities suggests that charitable contribution deductions are not very efficient, in that the government spends more than a dollar to induce a dollar of contributions. Using the elasticity of 0.5, which was identified as a central estimate, a dollar of revenue loss results in 50 cents of contributions. The itemized deduction has also been criticized because it favors the charities preferred by high-income taxpayers, who tend to be those claiming the deduction, since only about 30% of taxpayers itemize their deductions. Some have suggested allowing all taxpayers to deduct charitable contributions on top of the standard deduction or converting the deduction to a credit available to all taxpayers. Converting the deduction to a credit could be designed to be revenue neutral which would reduce the benefit for current itemizers while extending it to non-itemizers. There are other policy options that could potentially address the concern that the current system tends to direct more donations towards charities preferred by those with higher incomes. For example, a floor on charitable contributions could be imposed. Specifically, only charitable contributions in excess of 2% of adjusted gross income could be deducted, and this deduction made available for all taxpayers. Revenue gains from such a policy could be used to finance deductions from non-itemizers or to provide grants. Imposing a floor alone would likely raise revenue and increase the efficiency of the charitable deductions without having much of an effect on giving. According to the 2004 Statistics of Income Public Use File, 96% of contributions are made by taxpayers who contribute at least 1% of income and 88% are made by those who contribute at least 2% of income. According to the Congressional Budget Offices Options Report, a 2% floor would raise an average of $22 billion, per year, over the next 10 years. There is some evidence that price elasticities are smaller for lower-income individuals, although the evidence is not definitive. Many of these individuals' contributions go to religious organizations where donors may not be very sensitive to price. In any case, extending the deduction for non-itemizers would likely cost more than it induced in additional deductions. Converting to a credit might also reduce charitable contributions. But it could increase the equity between charitable preferences of higher-income and lower-income individuals. Other Tax Issues This section summarizes several other tax issues that relate to charitable contributions and organizations. Channeling Benefits Through the Federal Income Tax System (Including Health Insurance Credits) The use of the tax system to provide incentives or benefits generally excludes nonprofits since they are generally exempt from federal income tax. This effect occurred for the stimulus proposals to provide investment incentives, and it is also in some versions of the health reform bills ( H.R. 3200 ). Specifically, the use of tax credits to assist small businesses in obtaining health insurance coverage for employees provides no assistance for tax-exempt organizations. Nonetheless, it is possible to provide a separate credit (or grant) for nonprofits. The current Senate Finance Committee proposal provides a credit for small nonprofits to provide health insurance for low-income employees as it did for profitable firms, although the credit rate is 35% rather than 50%. The Senate Health, Education, Labor and Pensions proposal did not use the tax system as the mechanism for health insurance subsidy. As noted above in the discussion of economic downturns, other tax subsidies, even deductions, could be converted into equivalent credits and provided to nonprofits. Job tax credits, which have recently been proposed by some, would not automatically be available if credited against the income tax, but would be if credited against payroll taxes. For provisions that are not related to the tax structure but rather use the tax system as a convenient delivery mechanism, there might not be a reason to deny benefits to nonprofits. Restrictions on Donor-Advised Funds (DAFs), Supporting Organizations, and Endowments The two basic issues associated with donor-advised funds and supporting organizations are the possibility of receiving private benefits by donors and payout rates. While some changes were enacted, others remain possible. Although payout requirements are planned for certain type III supporting organizations, there are no payout requirements for donor-advised funds and for other supporting organizations. These issues might be revisited when Treasury completes its studies. The Treasury was directed to study specific issues: whether deductions for contributions to donor-advised funds and supporting organizations are appropriate given the use of the assets or benefits to the donor, whether donor-advised funds should have a distribution requirement, whether the retention of rights by donors means that the gift is not completed, and whether these issues apply to other charities or charitable donors. Thus, it is possible that results of the studies could also have implications for charities in general. As noted earlier, concerns have also been raised about college endowments, and the Senate Finance Committee received testimony on college endowments in connection with hearings held on offshore funds in 2007. A possible legislative change might impose payout requirements on university and college endowments. Gifts of Appreciated Property In past years discussions were also directed at possible abuses of gifts of appreciated property, which led to some limited changes (such as disallowing partial gifts). A more restrictive proposal for charitable gifts would be to allow only the basis (generally the cost of the property) rather than the fair market value to be deducted. The CBO estimates the revenue gain from that change to raise an average of $2 billion per year over the next 10 years. An alternative could be to require taxpayers to sell the asset and donate the proceeds to charity. This would likely result in a revenue loss to the government but might address valuation problems. Taxpayers could avoid payment of the capital gains tax if donations were made in a timely fashion. Other approaches for valuation have included proposals for "baseball arbitration" where the court may only choose either the IRS or the taxpayer's valuation, which would provide an incentive to the taxpayer to state a value closer to market value. Nonprofit Hospitals Some in Congress have also been interested in nonprofit hospitals. A major concern raised by some is the degree of charity care provided by these hospitals and whether they are providing benefits that justify their tax-exempt charitable status. The Congressional Budget Office released a study in 2006 that found that nonprofit hospitals overall provided only slightly more charity care than for-profit hospitals. The Senate Finance Committee held hearings on the topic, "Taking the Pulse of Charitable Care and Community Benefits at Nonprofit Hospitals," on September 13, 2006, and the House Ways and Means Committee held hearings on "The Tax Exempt Hospital Sector," on May 26, 2005. The following concerns have been raised about nonprofit hospitals: establishing and publicizing charity care, the amount of charity care and community benefits provided, conversion of nonprofit assets for use by for-profits, ensuring an exempt purpose for joint ventures with for-profits, governance, and billing and collection practices. In July 2007, the IRS released an interim report on nonprofit hospitals, where they found that the median share of revenue spent on charity care was 3.9% and almost half of hospitals spent 3% or less. The average was 7.4%. Another concern that has been expressed is that, since a 1969 revenue ruling issued by the Internal Revenue Service, nonprofit hospitals are no longer required to provide charity care to qualify for exempt status as a charitable organization; rather they must meet a "community benefit" standard that does not require charity care and is not precisely defined. Extenders As discussed above, there are several charitable provisions that are temporary, with the major one being the IRA rollover deductions. Whether to extend, make permanent, or expand this treatment is one policy issue. Some might argue that there is no reason for providing benefits for contributions made from IRAs, but there is a benefit in having the certainty of a permanent provision. Other provisions relate to gifts of inventory and other, largely business, issues. The Estate Tax A number of charitable organizations have expressed concerns about retaining the estate tax. The estate tax rates were reduced and the exemptions increased in 2001, although those tax changes are scheduled to expire in 2010, and then revert to the levels prior to the 2001 tax changes. President Obama has proposed to maintain the estate tax permanently at current rates and exemptions. The empirical evidence suggests that the response of bequests to tax incentives is larger than that of lifetime giving and that charitable contributions could fall. If so, the charitable deduction for estate taxes is an efficient method of providing benefits, but, of course depends on the retention of the estate tax and the magnitude depends on its features. Appendix. Table A-1 contains data on the sources of revenue across various sectors of charitable organizations. This data was used to generate Figure 5 in the text.

A number of policy issues have direct or indirect consequences for the nonprofit and charitable sector, including the establishment of a social innovation initiative, changes in the tax treatment of charitable donations, responses to the economic downturn, and health care reform. The nonprofit and charitable sector represents a significant portion of the U.S. economy. The sector is also highly diverse. Having a greater understanding of the nonprofit and charitable sector as a whole may help policymakers evaluate proposals that may impact the sector. The first section of this report provides a formal definition of the nonprofit and charitable sector. The term "nonprofit sector" is generally intended to refer to organizations with federal tax-exempt status; "charitable sector" refers to the subset of these organizations that have 501(c)(3) public charity status. The next section reports on the size and scope of the charitable sector. Charitable organizations are estimated to employ more than 7% of the U.S. workforce, while the broader nonprofit sector is estimated to employ 10% of the U.S. workforce. In 2009, the charities filing Form 990 with the Internal Revenue Service reported approximately $1.4 trillion in revenue and reported holding nearly $2.6 trillion in assets. Nonprofit institutions serving households (largely charities) constituted more than 5% of GDP in 2008. The third section of this report examines how charities are funded. Revenue comes from a variety of sources, including private contributions, payments (fees for service), government grants, and investment income. Revenue sources vary significantly across different types of charities: charities involved in health care (including nonprofit hospitals) and educational institutions rely heavily on private payments while arts, culture, and humanities charities and environment and animals charities are more reliant on private contributions. Private contributions to charities are of particular interest as charitable giving may respond to changes in the tax code. As the recent economic downturn has increased the demand for goods and services provided by a number of charities, the impact of the business cycle on funding is also discussed. The fourth section provides an overview of the charitable sector's relationship with government. From a theoretical perspective, economics suggests that the government should subsidize activities that are either public goods or have positive external effects. It can be argued that some charitable activities possess these qualities. The costs to the government of providing grants, allowing charitable contributions to be tax deductible, exempting investment income of charities from tax, and providing property and sales tax exemptions are presented. The oversight role of the government is also reviewed. Finally, the report concludes with policy considerations. This section opens by surveying what policy options are considered most important by charitable organizations themselves. Building on this, a number of policy options are examined, including (1) increasing government grants and subsidies to charitable organizations; (2) creating an oversight agency within the federal government to gather data, conduct research, and advocate for the charitable sector; (3) implementing policies designed to help charities and foundations in economic downturns; (4) changing the itemized deduction for charitable contributions by limiting, converting to a credit, or making the deduction more widely available; and (5) a variety of other tax issues.

What Are Geographical Indications? The Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) defines geographical indications as"indications which identify a good as originating in the territory of a Member, or a region or locality in that territory,where a givenquality, reputation or other characteristic of the good is essentially attributable to its geographical origin." (1) The term is most often,although not exclusively, applied to wines, spirits, and agricultural products. Examples of geographical indicationsare Roquefortcheese, Idaho potatoes, Champagne, or Tuscan olive oil. Why Are Geographical Indications Important? Geographical indications protect consumers from the use of deceptive or misleading labels. They also provide consumers withchoices among products and with information on which to base their choices. Producers benefit becausegeographical indicationsgive them recognition for the distinctiveness of their products in the market. They are thus commercially valuable.As intellectualproperty, geographical indications are eligible for relief from acts of infringement and/or unfair competition. (2) The use of geographical indications for wines and dairy products particularly, which some countries consider to be protectedintellectualproperty, and others consider to be generic or semi-generic terms, has become a contentious international trade issue. What Does the Trips Agreement Say About the Protection of Geographical Indications? The TRIPS Agreement provides two levels of protection for geographical indications and lists exceptions to TRIPS rules for theirprotection. TRIPS provides general standards of protection for all geographical indications . WTO members must provide the legal means forinterested parties to prevent the misleading or deceptive use of these terms and other forms of unfair competition. WTO membersmust refuse or invalidate the registration of a misleading trademark which contains or consists of a geographicalindication, if amember's legislation so permits or at the request of an interested party. TRIPS provides additional protection for geographical indications for wines and spirits . WTOmember countries must provide thelegal means for interested parties to prevent misuse of a geographical indication of wines and spirits even wheresuch use does notmislead the public. No exception is granted even if the true origin of the goods is indicated, the geographicalindication is used intranslation, or is accompanied by expressions such as "kind," "type," "style," "imitation," or the like. Theregistration of a misleadingtrademark for wines or spirits must be refused or invalidated. To facilitate the protection of geographical indicationsfor wines, WTOmembers agreed to negotiate the establishment of a multilateral system of notification and registration ofgeographical indications forwines eligible for protection in those members participating in the system. Exceptions to the protection of geographical indications include: where a term has been used for at least 10 years prior to April 15,1994, or in good faith if prior to that date; where a term is also subject to good faith trademark rights; where a termhas significance asa personal name; and where a term has become identified with the common name for a good or service. Why Was Protection of Geographical Indications Included in the Trips Agreement? During the Uruguay Round multilateral negotiations (1986-1994), the European Union (EU) and Switzerland made proposals for ahigher level of protection for geographical indications than provided in existing international agreements. They alsoproposed amultilateral registry for geographical indications. (3) The EU/Swiss proposal would have eliminated most of the exceptions in Article24 which permit the use, for example, of such names as Chablis, Burgundy, or Champagne based on prior or goodfaith use. TheUnited States, on the other hand, while pressing for strong intellectual property protections in general, proposedmore limitedprotections for geographical indications. (4) The UnitedStates proposed simply (1) that member countries would protect geographicalindications of any products through registration of certification or collective marks (see below), and (2) thatappellations of origin ofwines that had not become generic names would be guaranteed protection against misleading use. The resulting TRIPS provisions for geographical indications represented a compromise between these two positions and postponeddebate over a multilateral registry for wines and spirits and over extending higher protections to agriculturalgeographical indications. The TRIPS compromise on protection of geographical indications reflects more the EU's expansive proposals thanthe United States'more modest ones. How Are Geographical Indications Protected in the United States? (5) In the United States, geographical indications are protected under the U.S. Trademark Act (15 U.S.C. 1051 et seq.). Section 4 of theTrademark Act (15 U.S.C. 1054) provides for the registration of "certification marks including indications ofregional origin." Thekinds of certification marks recognized in the Trademark Act include marks that certify that goods or servicesoriginate in a specificgeographic region. These would be the kinds of marks most likely viewed as geographical indications underTRIPS. (6) Partiesasserting rights to use a geographical indication can obtain formal protection via use of the trademark systemthrough registration as acertification mark. (7) The U.S. system for recognitionfor geographic indications applies equally to foreign geographic indications. Anexample is U.S. Registration No. 571,798 ("ROQUEFORT") for that French cheese. Other means also would beavailable to protectgeographical indications (see footnote 5 for details). The North American Free Trade Agreement (NAFTA) provides protection for some specific geographical indications by recognizingthat Bourbon Whiskey, Tennessee Whiskey, Canadian Whiskey, Tequila, and Mezcal are "distinctive products" inthe NAFTA countries where they are produced (NAFTA, Chapter 3, Annex 313). The so-called D'Amato amendment (Section910 of P.L.105-32 ) provides authority for the use of "semi-generic" names of wines if the true place of origin also isindicated. (8) (This use is amain point of contention in both multilateral and bilateral negotiations with the EU.) What GI Issues Are Being Debated in the Doha Round? Two issues concerning geographical indications are under consideration in the Doha Development Agenda: negotiations concerning amultilateral registry for wine and spirits; and debate over extending additional protections for agriculturalgeographical indications. (1) Negotiating a Multilateral Registry for Wine and Spirits The Ministerial declaration launching the Doha round of multilateral trade negotiations established the fifth WTO MinisterialConference (September 10-14, 2003 in Cancun, Mexico) as the deadline for completing negotiations for amultilateral system ofnotification and registration. (9) In the negotiations, the EU has proposed a multilateral system of notification and registration that would create obligations for WTOmember countries to grant exclusive rights for individual geographic indications, rather than allow interested partiesto apply forprotection according to a country's national legal procedures. (10) Participation would be voluntary, but the multilateral registry wouldhave mandatory effect, so that notification of a geographical indication by one country creates a presumption thatit must be protectedeverywhere. Under the EU proposal, a country would be required to grant exclusive rights to producers in thenotifying country,unless it successfully challenged the notification in WTO dispute settlement. The EU lists among the advantages of a registry with mandatory effect the following. It would provide information to members aboutwhich geographical indications are protected in each member's territory. It would make operational the protectionsextended togeographical indications for wines and spirits provided in TRIPS Article 23, without requiring members to enactnew legislation oradministrative procedures. It would provide transparency and legal certainty to international trade in wine andspirits. The United States, Japan, Chile, Canada, New Zealand, Australia and others have all expressed concern about a registry withmandatory effect on grounds that it would lead to new and costly administrative burdens and legal obligations. Theysee the proposedmultilateral registry as a clearing house for information about the protection of specific geographical indications ineach country. Applications for protection of geographical indications would be made through existing legal procedures in a WTOmember country. While multilateral negotiations have been underway, the United States and the EU have been negotiating a bilateral wine agreement. A principal EU objective is to secure an end to U.S. use of "semi-generic" names for wines (see footnote 5). TheEU is also seekingprotection for what it calls traditional terms applied to wines such as "tawny" or "ruby red", among others. Aprincipal U.S. objectiveis to gain acceptance by the EU of U.S. wine-making practices. Because the EU only permits wine made inaccordance with itsregulations to be sold in the EU, a substantial amount of U.S. wine is blocked from that market. Australia and, morerecently, Canadahave concluded bilateral wine agreements with the EU which contain mutual recognition of wine making practicesand agreement byAustralia and Canada to phase out the use of the generic names still permitted under U.S. law. (2) Extending Additional Protection to Geographical Indications for Agricultural Products The second issue under debate in the TRIPS Council is that of extending the protection of geographical indications provided for inArticle 23 of the TRIPS Agreement to products other than wines and spirits. This and other so-calledimplementation issues ofimportance to developing countries were to have been addressed by the end of 2002, but were not. Proposals to extend protection accorded wines and spirits to other agricultural products have been made by the EU (11) and by a groupof European and developing countries. (12) Additional protection for geographical indications of agricultural products is viewed as acorollary of efforts to liberalize agricultural trade and to promote trade of goods with higher added value. Forexample, the EUexplicitly links extending protection for geographical indications to its strategy to promote the development ofquality agriculturalproducts. (13) Proponents also argue that increasedprotection would bring more effective protection of consumers. Negotiations onthis issue are taking place in the TRIPS Council, but the EU has linked reaching agreement on geographicalindications to itswillingness to deal with the agricultural negotiating issues of market access, domestic support, and export subsidies. Conversely, the United States and a number of other countries argue that the existing level of protection provided by TRIPS enablescountries to maintain access to existing markets; maintains ongoing access to trade opportunities in new andemerging markets;provides adequate protection to producers and consumers; and does not impose new administrative costs and legalobligations onmembers. (14) Additional costs cited by the UnitedStates include potential for consumer confusion (from re-naming and re-labelingproducts), potential producer conflicts within the WTO, and a heightened risk of WTO disputes. The debate over extending protection for geographical indications of agricultural products is reflected in the U.S. request forconsultations (the first step in WTO dispute settlement) with the EU on EU regulations for the protection ofgeographical indicationsfor wines and spirits (Community Regulation 1493/99) and for other agricultural products (Community Regulation2081/92). TheU.S. request, which has been joined by Australia, argues that the EU regulations violate the TRIPS Agreement(Article 22) byrequiring specific bilateral agreements, rather than recourse to national legal systems, before according recognitionto other countries'registered geographical indications. Commentators have suggested that this possible challenge to EU regulationsanticipates that EUenlargement to include 10 central and eastern European countries could create additional problems for U.S.registered trademarkowners vis-a-vis EU protected geographical names. (15) A case in point is the U.S.-owned Budweiser beer trademark which, althoughregistered in a number of EU countries, could come into question if the Czech Republic registers and claims thename Budweiser,even in translation, as a protected geographical indication in the EU. Outlook and Congressional Role Decisions about geographical indications will be on the agenda of the WTO Ministerial Conference in Cancun. The Chairman of theAgriculture negotiating group has identified geographical indications for agricultural products as an unresolvedissue. (16) Congress isclosely monitoring the Doha negotiations; the House Agriculture Committee has scheduled oversight hearings onthe protection ofgeographical indications for agricultural products. Should negotiations result in agreements that require changesin U.S. law coveringgeographical indications, Congress would take up legislation to implement such an agreement under expedited (fasttrack) proceduresestablished in the Trade Act of 2002 ( P.L. 107-210 ).

The issue of expanding intellectual property protections for geographical indicationsforwines, spirits, and agricultural products is being debated in the World Trade Organization (WTO). Geographicalindications areimportant in international trade because they are commercially valuable. Some European and developing countrieswant to establish tougher restrictions and limits on the use of geographical names for products, while the United States and associatedcountries arguethat the existing level of protection of such terms is adequate. Decisions about the future scope of protection ofgeographicalindications will be made as the current (Doha) round of multilateral trade negotiations continues. Congress ismonitoring thenegotiations and their potential impacts on U.S. producers. This report will be updated as events warrant.

Introduction This is the third in a series of CRS reports on pit manufacturing. A "pit" is the core of the primary stage of a thermonuclear weapon. Its key ingredient is weapons-grade plutonium (WGPu), which is composed mainly of the fissile isotope plutonium-239 (Pu-239) along with small quantities of other plutonium isotopes. Detonating the pit provides the energy to detonate a weapon's secondary stage. During the Cold War, the Rocky Flats Plant (CO) made up to 2,000 "war reserve" pits per year (ppy). (A war reserve pit is one that has been accepted for use in the nuclear stockpile, as distinct from developmental or production prove-in pits.) Production at Rocky Flats halted in 1989. Since then, the United States has made 29 war reserve pits total for replacement in W88 submarine-launched ballistic missile warheads between 2007 and 2011. Yet as discussed in " Install Equipment with a Single-Shift Capacity of 50 ppy ," the Department of Defense (DOD) stated it needed the National Nuclear Security Administration (NNSA, the separately organized agency within the Department of Energy (DOE) in charge of maintaining the U.S. nuclear stockpile) to have the capacity to produce 50 to 80 ppy. This capacity, it is argued, would support nuclear weapon life extension programs, permit replacement of pits found to be defective, and address geopolitical developments. Pits are to be made at Los Alamos National Laboratory (LANL, NM) in the PF-4 (Plutonium Facility 4) building, potentially in proposed smaller structures called modules that would be connected to PF-4 by tunnels, or in both. In an effort to increase pit production capacity, Congress focused on inputs, such as requiring a plutonium processing building to be constructed by a certain date at a certain cost. However, in Section 3112 of P.L. 113-291 , the Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015, Congress changed tack and focused on output. It directed NNSA to ramp up pit production and demonstrate the capacity to produce at a rate of 80 ppy for at least a 90-day period in 2027. (The legislation permits extending this deadline by two years under certain conditions.) Accordingly, while some argue that the capacity should be larger and others hold that it should be smaller, this report takes as its focus how to move toward 80 ppy, not whether it is the right number. Production at that rate requires enough "Material At Risk" (MAR) and space. DOE defines MAR as "the amount of radioactive materials … available to be acted on by a given physical stress." It is material that could be released by a disaster, such as an earthquake that collapses a building followed by a fire. It is measured in units of plutonium-239 equivalent to convert all types of radioactive material to a common unit. Space is laboratory floor space, in square feet, available for plutonium operations. To measure "enough," this report uses the concept of margin, which is space available for pit production and supporting tasks minus space required for them to be able to produce at a specified rate, and MAR available for pit production and supporting tasks minus MAR required for them to do so. Space margin and MAR margin are separate; both must be greater than zero to accommodate pit production at the specified rate. PF-4 has 60,000 square feet (sf) of laboratory space on its main floor. It supports many plutonium missions. Some involve pit production, such as pit fabrication (casting pits from molten plutonium) and purifying plutonium for use in pits; others include preparing plutonium-238 (Pu-238) for use as a power source for space probes, disassembly of pits and conversion of their plutonium to plutonium oxide, and surveillance of pits to check their condition. PF-4 has a ceiling on permitted MAR; as of February 2013, that ceiling was 1,800 kilograms Pu-239 equivalent. To provide perspective, in 2012 pit fabrication and plutonium purification accounted for 12,000 sf and 10,400 sf of PF-4's laboratory space, respectively; as of February 2013, they accounted for 295 kg and 143 kg Pu-239 equivalent of PF-4's MAR ceiling, respectively. A CRS report provides a detailed breakout of PF-4's space and MAR usage. MAR and space also figure in a function that supports pit production, analytical chemistry (AC). AC analyzes very small samples of plutonium to determine the content of impurities, alloying material, and different isotopes of plutonium. AC techniques include mass spectrometry, x-ray fluorescence, radiochemistry, and material assay. The Radiological Laboratory-Utility-Office Building (RLUOB), which was completed in 2010 and is near PF-4, is to house most AC; PF-4 is to perform some higher-MAR AC and AC support work involving larger samples, such as material preparation. RLUOB's MAR ceiling is 38.6 g Pu-239 equivalent, though NNSA is evaluating a proposal to increase that to 400 g. AC equipment requires substantial laboratory floor space, and RLUOB has 19,500 square feet of space ideally configured for AC. This report presents options that may increase margin, many of which NNSA and its laboratories are considering. However, while figures for space and MAR available for pit production exist, though they may need updating, figures for space and MAR required to produce 80 ppy do not exist because they have never been calculated rigorously. Accordingly, this report cannot find that one or more options would provide enough margin for producing 80 ppy or supporting AC. Instead, it presents a progression of options to move toward that goal: options not involving modifications to pit production processes; options involving modification to those processes but not structural modifications to PF-4; and options involving structural modifications to PF-4. While the options seek to increase the feasibility of producing 80 ppy by 2027, the report cannot address whether they could meet that date because time to implement them cannot be determined. Potential hurdles render schedules unpredictable. Construction may encounter delays. Moving equipment in PF-4, making structural changes, or changing plutonium processes must follow detailed procedures supported by extensive analysis. Organizations within DOE, oversight agencies, communities, nongovernmental organizations, and others may contest proposed changes to regulations or to assumptions used in calculations. Implementing such changes may be time-consuming; lawsuits may add delay. Efforts to develop new technologies may fail. This report considers 16 options. A combination of these and other options may be needed to meet the congressional requirement. While any combination can only be selected if it provides enough MAR margin and enough space margin, other factors will also enter into a choice among options by Congress and NNSA. These include: reducing cost; accelerating schedule (i.e., making capacity available sooner); increasing throughput, the rate at which pits are made or processes completed; improving worker safety, which includes reducing the risk of injury from building collapse, fire, industrial accidents, and radiation exposure; reducing the risk to the public from radiation exposure if PF-4 were to release a large quantity of plutonium as a result of an earthquake or major accident; and reducing radioactive waste. Each option contributes to increasing the feasibility of producing at a rate of 80 ppy by 2027. Table 1 summarizes the contributions of each option to that requirement; each section of the report begins with a few words highlighting the most important contributions of that option. Options Not Involving Process Modifications Install Equipment with a Single-Shift Capacity of 50 ppy This option holds the potential to reduce space requirements and cost, and to accelerate schedule. DOD has stated a need for NNSA to have a capacity to manufacture 50 to 80 ppy. As John Harvey, then Principal Deputy Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs, said in 2013, We established that requirement back in 2008 for a capability to produce in the range of 50 to 80 per year. That evolved from a decision to basically not take the path that we originally were taking with the Modern Pit Facility, but to go and be able to exploit the existing infrastructure at Los Alamos to meet our pit operational requirements. The capability at Los Alamos was assessed to be somewhere in the range of 50 to 80 per year that they could get with the modernization program they anticipated. The Nuclear Weapons Council looked at that number. It's a capacity-based number, and said it's probably good enough. We'll have to accept some risk, but it's probably good enough. As it happens, Los Alamos "estimates that a second shift would increase pit-manufacturing capacity by 60% so that establishing a 50-ppy capacity could supply 80 ppy using a second shift." This range leaves uncertain whether there will be a need for 80 ppy, or whether 50 ppy would suffice. Adding to this uncertainty are NNSA's decision to defer to FY2030 the projected delivery of the first production unit of the first interoperable warhead (IW-1), which might be the first to use a newly manufactured pit since 2011; the possibility that certain retired pits might prove suitable for reuse, reducing the number of newly manufactured pits needed; and the possibility that pit lifetime could turn out to be longer than currently expected. (Estimates of pit lifetime have increased. In 2003, pit life was thought to be 45 to 60 years. A 2007 study placed the intrinsic life for plutonium in most pit types in the stockpile at over 100 years. A 2012 study by Lawrence Livermore National Laboratory placed the figure at 150 years; Los Alamos raised uncertainty about that claim. ) Compared to equipment to manufacture 80 ppy with a single shift, installing equipment to manufacture 50 ppy with a single shift would reduce cost and space because fewer pieces of equipment would be needed. Space reduction is of particular value because if this and other space-saving techniques could enable pit production to be done in PF-4, it may be possible to avoid the need for one or more modules for that purpose, potentially avoiding several billion dollars of added cost. There are several disadvantages to building capacity for 50 ppy as a means to reach production of 80 ppy. A higher operating tempo would place more strain on the equipment while allowing less time in which to maintain and repair it, though this disadvantage would occur only if the equipment were operated with two shifts a day. A few production processes run continuously for more than one shift, so adding a shift would not increase their capacity. It would be much harder to surge production beyond 80 ppy if that proved necessary. Increasing PF-4's capacity substantially would require changing the layout of gloveboxes and equipment. Such actions would have to comply with many regulations and other requirements; as a result, they would be time-consuming and costly. This would be true for any reorganization of space, but time and cost would in all likelihood increase as capacity in PF-4 increased, so it would probably be faster and less costly to reorganize space for 50 ppy than for 80 ppy. Relocate a Trailer Park at Los Alamos This option holds the potential to increase MAR permitted in PF-4 faster and at lower cost than new construction. Los Alamos National Laboratory is located on one side of Los Alamos Canyon; the city of Los Alamos is located on the other side. The Royal Crest trailer park, with several dozen trailers, is on the lab side of the canyon. It contains the non-lab inhabited structures closest to PF-4, about 3,500 feet away. The next closest structures occupied by the public are located on Trinity Drive in the city of Los Alamos, about 6,000 feet from PF-4, and the next closest such structures after those in Los Alamos are in the city of White Rock, about five miles southeast of PF-4. Figure 1 shows the location of Royal Crest, PF-4, and the southern portion of the city of Los Alamos. Royal Crest is the posited location of the maximally-exposed offsite individual (MEOI), the hypothetical person outside the lab boundary who would receive the highest radiation dose from an accident in PF-4 that released plutonium. The significance is that if Royal Crest were no longer the location of the MEOI—and the road, E. Jemez, that it is on were to be placed under the control of the lab—then the next closest inhabited structure would be 2,500 feet farther away. The quantity of radioactive particles deposited per unit of area generally decreases with distance from the radioactive source because more particles are deposited closer to the source and those deposited at a greater distance are spread out over a wider area. As a result, for a wind blowing from PF-4 toward Royal Crest and Los Alamos, dose to an MEOI in Los Alamos would be expected to be less than to an MEOI at Royal Crest. Since the MAR ceiling in PF-4 depends on dose to the MEOI, reducing the dose to the MEOI would—by itself—permit increasing MAR in PF-4. Based on preliminary calculations related to the dispersion of radioactive materials from PF-4 in an accident, Los Alamos National Laboratory estimates that if the MEOI is at E. Jemez Road, dose to him or her would be reduced by 4%, and if that individual is at the southern border of Los Alamos city, dose would be reduced by 40%. The reduction in dose would, if incorporated into PF-4 safety calculations, permit an increase in MAR in PF-4. If wind always blew directly from PF-4 toward Royal Crest and the city of Los Alamos, then a 40% reduction in dose would permit a 67% increase in PF-4 MAR. However, calculation of dose must factor in the probabilities of each direction the wind blows at PF-4. As a result, the increase in MAR permitted by relocating Royal Crest would be considerably less than 67%. A detailed calculation would be required to arrive at a precise figure. Nonetheless, relocating Royal Crest could permit an increase in MAR at PF-4 faster, and probably at substantially lower cost, than new construction. Improve Modeling of Atmospheric Dispersion of Plutonium Compared to the current calculation, using a different computer model and different assumptions on plutonium dispersion reduces calculated dose by up to orders of magnitude. This revised calculation holds the potential to permit more than doubling of PF-4 MAR quickly and at essentially no cost. NNSA calculates dose to an MEOI from an accident at PF-4 using computer models. The models use assumptions on the amount and form of plutonium released into the atmosphere, mechanisms for releasing it from PF-4, wind direction and speed, temperature, humidity, and the like. Three changes to accident modeling produce very different results than those currently assumed in the PF-4 safety documentation. First, LANL, consistent with guidance from NNSA, uses a particular atmospheric transport and dispersion model to calculate how much material reaches the MEOI. However, a different model that the Nuclear Regulatory Commission has used for decades, which includes "plume meander," generates a wider dispersion pattern and thus a lower dose. Second is an assumption on how long the doors to PF-4 are open during the accident as personnel evacuate. This seemingly minor assumption is important because less plutonium would escape if the doors were open for less time. The new calculation reduces the time that the doors are assumed to be open based on historical data during drills. A third assumption has to do with time of day. The least dispersion of particles occurs at night, when winds are calmer. More dispersion occurs with daytime wind patterns. Greater dispersion results in a lower dose to an MEOI at any spot. Yet more plutonium is in process, and at risk, during the day, when technicians are working with it; at night, it is stored in a minimally vulnerable state. At present, the model assumes daytime MAR and nighttime dispersion. Harmonizing MAR and time of day reduces dose: at night, there is less dispersion but less plutonium that can be dispersed, reducing dose; during the day, more plutonium is at risk but an accident would disperse it more widely, reducing dose. These three changes, plus others, in PF-4 accident modeling could reduce the calculated dose to the MEOI by several orders of magnitude. That reduction, if incorporated into PF-4's safety documents, would permit more than doubling the MAR permitted in PF-4. It would surely be faster and less costly to change to a more realistic model and assumptions than to build a new plutonium building. A more conservative model, almost by definition, produces a lower dose, though changes to reduce conservatism a model, if valid, do so as well. At issue for Congress are whether a change made to PF-4's MAR allowance in consequence of using the more realistic model would increase risk to the public and, if so, whether the benefits obtained by using that model would be worth the added risk. Public perception is also at issue: would members of the public believe that NNSA permitted the change in model in order to save money at the expense of public safety? Remove Contaminated Equipment This option holds the potential to reduce the risk of contamination—thereby improving worker safety and reducing risk to throughput—and to increase space available in PF-4. The Defense Nuclear Facilities Safety Board (DNFSB) monitors health and safety issues at DOE defense nuclear facilities, and provides the President and Secretary of Energy with advice and recommendations on these issues. A DNFSB report of October 2014 stated, in a section on PF-4, an entire wall of legacy gloveboxes, including some that housed a former incineration process for plutonium-238 contaminated rags, contains degraded conditions that workers suspect has contributed to multiple contamination events during the past few years. LANL management does not currently have a plan to remove these gloveboxes in order to both eliminate the hazard and free up the considerable space for new programmatic work. While the amount of Pu-238 is apparently small, it is much more radioactive than Pu-239, so removing the gloveboxes would reduce MAR by a small amount. Of greater importance, removing the gloveboxes would reduce the risk of a contamination accident, which would remove a room from service until the contamination was cleaned up. Minimizing the risk of such accidents increases the availability of the room to support pit production. Removing these gloveboxes would also "free up the considerable space." The gloveboxes will have to be removed eventually for decontamination and decommissioning at the end of PF-4's life; there is a tradeoff between gaining the advantages of removing them sooner and the drawback of incurring the cost now rather than later. Increase Material-At-Risk Ceilings by Using Conservative Rather Than Very Conservative Assumptions This option holds the potential to increase permitted MAR in PF-4 by several orders of magnitude by using different assumptions in a calculation. While such a n increase is vastly more than needed, the analysis shows how it might be possible to increase permitted MAR enough to meet mission requirements without construction. It would be faster to change assumptions than to build a new plutonium building, thereby accelerating schedule and avoiding a substantial cost . This section highlights a tradeoff among costs, benefits, and risks. Using the most conservative assumptions provides the greatest margin of safety, but does so at the highest cost. At issue for Congress is a political judgment: for risk reduction, at what point are the marginal costs no longer worth the marginal benefits? Could funds spent for a small reduction in dose from a sequence of events occurring once in perhaps hundreds of thousands of years be more beneficially spent elsewhere? A MAR limit is imposed uniquely for each building (except those with a very small amount of material) by a Documented Safety Analysis that is intended to limit MAR so as to ensure that the radiation dose to nearby workers and the public from such a disaster does not exceed certain limits specified by DOE. Dose is calculated for a MAR value using a ten-factor equation that includes the amount of damage the building sustains, the fraction of plutonium that is released into the atmosphere by the event, an individual's breathing rate, and others. MAR is the input variable, and dose is the resultant. Each variable is assigned a value pursuant to a DOE standard or other source. One variable, specific activity (radioactivity per unit mass), varies with the type of material (e.g., uranium, WGPu, or Pu-238). Other variables, such as breathing rate, would under most circumstances be taken as a constant. To keep dose below the specified levels, NNSA typically assigns several variables a very conservative worst-case, or "bounding," value. In 2014, Kamiar Jamali, Associate Administrator for Safety and Health, Office of Nuclear Safety, NNSA, described the consequences of using multiple variables, each with worst-case values: When complex analyses are employed to derive distributions for output variables for calibration of the degree of uncertainties in analysis results, the 95 th percentile is generally associated with the upper-bound. … [However,] when several input parameters are taken at their bounding values, the obtained result dwarfs the derived 95 th percentile of the output by orders of magnitude. Extreme conservatism is often intentionally exercised in safety analyses because it can pay dividends in simplified analysis and review efforts. However, the search for increased conservatism cannot be pursued without consequences. Extreme conservatism can lead to safety conclusions and decisions with significantly higher safety costs, which can make nuclear facilities, even those with very low hazard and risk profiles, prohibitively expensive. Jamali also stated, "The mean value is proposed as the metric that is consistent with the concept of reasonable conservatism in nuclear safety analysis, as its value increases towards higher percentiles of the underlying distribution with increasing levels of uncertainty." That is, the more variables in a nuclear safety equation, the closer the product of the equation moves toward (if not beyond) the 95 th percentile. Excessive conservatism has been a concern for years. In 1999, another DOE staff member wrote, While nuclear safety analyses must always be conservative, invoking excessive conservatisms does not provide additional margins of safety. Rather, beyond a fairly narrow point, conservatisms skew a facility's true safety envelope by exaggerating risks and creating unreasonable bounds on what is required for safety. The conservatism has itself become unreasonable. … Unreasonable conservatisms require expensive preventive or mitigative features that provide little or no real improvement in facility safety. Indeed, they are often counterproductive to real safety, diverting attention from other equipment whose actual importance to safety is greater. Another study found that the assumptions used to calculate health effects of a given dose can make a difference in the projected health effects by as much as several orders of magnitude. A catastrophe that results in all terms being at their bounding values has a much lower probability of occurring than does the initiating event. An earthquake that collapses PF-4 has a probability of occurring once in 10,000 years. But the worst-case sequence would require a complete building collapse followed by fire. The plutonium in the building would have to be in a form and condition in which it could be dispersed (e.g., spilled onto the floor as a result of a glovebox being knocked over while the plutonium was in molten form). A substantial part of that plutonium would have to be in the form of plutonium oxide particles of a size small enough to reach the lungs when inhaled, and all these particles would have to reach the atmosphere. A high wind would have to be blowing in the "right" direction to expose the MEOI to more than a negligible dose. That unfortunate individual would have to be doing moderate exercise for two hours at the spot at the site boundary that received the most deposition of plutonium. In sum, if the earthquake that initiates this sequence occurs once in 10,000 years, the concatenation of all these events would occur far less frequently. The odds of all these events occurring all at once within the service life of PF-4 are extremely low. While desirable in an ideal world, guarding against the worst case has its costs. It requires much more stringent safety features, much more rigorous standards for equipment, and construction that is much more resistant to threats such as earthquakes. Such features drive up the cost of a building, perhaps to the point where it is no longer affordable. Alternatively, bounding assumptions might require construction of one to three modules costing perhaps $1 billion each. An alternative is to use the expected, or median, value for each of five variables (airborne release fraction, respirable fraction, damage ratio, leak path factor, and chi/Q, as described in Table 2 ) that could readily be varied. While Jamali suggests using mean values, some DOE documents provide mean values and others provide median. For purposes of safety basis calculations applicable to LANL, however, mean and median are so close together as to be virtually indistinguishable. It is reasonable to use mean or median values rather than bounding values because, as noted, use of multiple bounding values in an equation produces a result—i.e., a dose to the MEOI—orders of magnitude greater than the standard bounding value, i.e., the 95 th percentile. Yet an increase in the MAR ceiling in PF-4 by a factor of less than ten, and perhaps less than two—especially when combined with other MAR reduction measures described in this report—would probably provide enough MAR to permit production of 80 pits per year in PF-4. (Meeting MAR requirements would not address space requirements.) Increasing the MAR ceiling could also benefit analytical chemistry. The Radiological Laboratory-Utility-Office Building is ideally configured for AC, but DOE's regulations, which it has set for itself, limit "radiological facilities" like RLUOB to 38.6 g Pu-239 equivalent. About 26 g of WGPu has the radioactivity of 38.6 g of Pu-239—and the volume of two nickels. Increasing that ceiling by a factor of 40 or less might permit RLUOB to perform most of the AC needed to support production of 80 ppy. Table 2 shows the relationship between MAR and dose and how different assumptions affect dose. Each row is an equation, with the first nine terms multiplied together to yield dose. In Equation 1, which follows DOE guidelines, a PF-4 MAR of 2,600 kilograms produces a dose to an MEOI of 166 rem in a worst-case accident. (Rem is a measure of radiation dose.) The dose would mainly result from plutonium oxide particles inhaled within two hours of the accident, but since some plutonium would remain in the body for many years, the dose would be the cumulative dose received over 50 years. In Equation 2, which uses median values, that same MAR produces a dose of 0.005 rem. Thus Equation 1 results in a MAR 35,000 times as great as in Equation 2. The same result holds for RLUOB in Equations 3 and 4. Two scenarios illustrate the difference. Imagine that PF-4 collapsed in an earthquake and was subject to a fire. In one scenario, PF-4 has 35,000 kg of plutonium MAR and the dose to an MEOI is calculated using median values in the equation. In the other scenario, PF-4 has 1 kg of plutonium MAR and the dose to an MEOI is calculated using bounding values. The dose to the MEOI would be the same for both scenarios. The March 2011 Fukushima Daiichi accident offers a concrete example of the divergence between calculated and actual effects of an accident involving radioactive release. In an article submitted in April 2012, the authors "[found] that inhalation exposure, external exposure, and ingestion exposure of the public to radioactivity may result in 15 to 1300 cancer mortalities and 24 to 2500 cancer morbidities worldwide, mostly in Japan. Exposure of workers to radioactivity at the plant is projected to result in another 2 to 12 cancer cases." In contrast, a report of May 2013 by the U.N. Scientific Committee on the Effects of Atomic Radiation noted a "release, over a prolonged period, of very large amounts of radioactive material into the environment" from the accident. While those closest to the accident would have been at greatest risk, the report found No radiation-related deaths or acute diseases have been observed among the workers and general public exposed to radiation from the accident. The doses to the general public, both those incurred during the first year and estimated for their lifetimes, are generally low or very low. No discernible increased incidence of radiation-related health effects are expected among exposed members of the public or their descendants. Use Additive Manufacturing to Make Tooling for Pit Work This option holds the potential to reduce turnaround time, thereby accelerating schedule, and to reduce cost. Many see additive manufacturing (AM) as transformative for manufacturing. At issue for Congress: given the potential of AM, what applications, if any, might it have for pit production? Additive manufacturing, often called 3-D printing, forms physical objects by depositing multiple layers of material using a "digital build file," a computer program that instructs the AM machine where to deposit the material. Objects can range from simple to so complex that they cannot be manufactured in any other way. Many analysts view AM as the future of manufacturing. According to Lawrence Livermore National Laboratory, Today, a metal part can be designed using computer-aided design tools and then uploaded to a machine where the part can be built layer by layer, that is, additively manufactured with quality approaching that of wrought alloys. Within the next decade or two, additive manufacturing (AM) is going to completely change how we view the design and production of metal parts. AM will both replace and complement traditional manufacturing methods and reduce the time, cost, and energy consumption of producing new and existing metal parts. In order to fully implement AM, specific scientific and technical challenges must be addressed. Industry uses AM to produce complex high-precision parts that require high reliability. For example, General Electric is planning to build fuel nozzles for new jet engines using AM: GE chose the additive process for manufacturing the nozzles because it uses less material than conventional techniques. That reduces GE's production costs and, because it makes the parts lighter, yields significant fuel savings for airlines. Conventional techniques would require welding about 20 small pieces together, a labor-intensive process in which a high percentage of the material ends up being scrapped. Instead, the part will be built from a bed of cobalt-chromium powder. A computer-controlled laser shoots pinpoint beams onto the bed to melt the metal alloy in the desired areas, creating 20-micrometer­thick layers one by one. The process is a faster way to make complex shapes because the machines can run around the clock. And additive manufacturing in general conserves material because the printer can handle shapes that eliminate unnecessary bulk and create them without the typical waste. General Electric "is using laser-powered 3-D printers, 3-D 'inking' and 'painting' machines, and other advanced manufacturing tools to make parts and products that were thought impossible to produce … We see advanced manufacturing as the next chapter in the industrial revolution." A second example concerns AM for making large parts that undergo high stress: In gas turbines, the blades move at the speed of sound and heat up to 1,400°C. The elaborately shaped components are hard to design and costly to make. But Siemens, a big industrial group, is using SLM Solutions' [AM] machines to cut the cost and the time needed to replace the blades on customers' turbines when they break. It hopes eventually to cut the time from order to delivery from 44 weeks to perhaps four. … Additive manufacturing cuts the cost of tooling and materials: a piece can have all of its holes incorporated into it, with great precision, as it is built up from powder, instead of needing to have them expensively drilled afterwards. Siemens hopes to cut the cost of some parts by perhaps 30%. These examples show that AM can save time, space, and money; reduce waste; reduce the reject rate, increasing throughput; make parts on demand; and switch rapidly from making one part to making another. It can make complex parts. It can avoid some manufacturing steps, such as drilling holes, saving time and reducing the risk of error. Not all advantages apply to each product. AM is not the best manufacturing method for all materials and components, and it may not be suitable for some. But because it is adding value in many ways, it is likely to attract more R&D dollars, leading to advances that will make it applicable to a wider range of products. Recognizing the potential of AM to transform manufacturing, Congress, in P.L. 113-235 , the Consolidated and Further Continuing Appropriations Act for FY2015, provided $12.6 million for AM for the nuclear weapons program, and the appropriations committees directed NNSA to provide "a ten-year strategic plan for using additive manufacturing to reduce costs at NNSA production facilities while meeting stringent qualification requirements." The report is due to the House and Senate Committees on Appropriations 120 days after enactment of this act, which was signed into law on December 16, 2014. In late April 2015, NNSA indicated that it expects to transmit the report, which will be classified, to Congress in several weeks. NNSA is exploring applications of AM in the nuclear weapons complex. Donald Cook, Deputy Administrator for Defense Programs at NNSA, said in January 2015, "within the last year, more than half of the new fixturing within the new Kansas City National Security Campus was made with AM processes." (Fixtures hold material in place for machining and inspection.) A Livermore publication states, A match drill fixture, the first piece of production-qualified tooling made by AM, has already entered use at Y-12. The new approach for producing this tool consolidates 5 parts into 1, thereby eliminating 12 welds and reducing waste. NNSA sites estimate that 50 percent of its tools could be made using AM in five years. In which case, tooling production costs would be reduced 75 percent, development time 80 percent, and production time 60 percent, while potentially improving tool performance. Further, the items could be printed on demand, reducing inventory and freeing space. Figure 2 illustrates the capability of AM to develop prototypes rapidly. It shows a tool, in this case a fixture for holding a part, as it moves through four iterations. Iteration 1 has a screw in the back. Iteration 2 has a shorter horizontal plate, a cutout in the vertical plate, and the screw on top, where it is easier to access. Iteration 3 uses the same material, a plastic, as iteration 2 but with a different color. The metal piece on top was made in a machine shop. The customer drew by hand where an additional indent should be. Iteration 4, with the indent, is the final tool. It took two days for Sandia National Laboratories to make each iteration, for $77 apiece, as compared to 42 days for an outside machine shop to manufacture each iteration at a cost of $500 apiece. AM parts, such as fixtures and tools, might be used in support of pit production. In some cases, they can be stronger and lighter than tools made with conventional methods. For example, AM tools can be "lightweighted," e.g., made with honeycomb in areas that do not require much strength and solid in areas that do, providing ergonomic benefit for glovebox work. AM for tooling might offer modest savings, as tooling is a minor cost of pit manufacturing, but it more likely would save time, as AM can prototype tools quickly and can make them to order. Saving time would help increase throughput. Currently, tools for pit work are made with conventional methods, which is generally satisfactory. However, Livermore notes, "very little work is being done to explore tooling used in conjunction with pit production." Use a Different Process to Fabricate Crucibles34 This option holds the potential to reduce risk to workers, cost, and waste, and to increase throughput. The electrorefining process for purifying plutonium, discussed in " Discard Byproducts of Electrorefining ," below, is conducted in magnesium oxide crucibles, and produces a ring of purified plutonium. To fit in a furnace, this ring must be broken into several pieces in order to be melted down for casting. This procedure has several problems: Crucibles are made by casting a slurry of magnesium oxide particles followed by sintering. The crucibles have historically not been made as a single piece because it has been simple to make two separate cups and join the inner cup with an adhesive to the bottom of the outer cup. Sometimes, given the high heat and the reactive nature of plutonium, the adhesive fails and the cups come apart. A failed electrorefining run produces more waste, such as the adhesive, than a successful run, and reduces throughput and increases cost. The plutonium ring is broken in a glovebox located in the electrorefining area. The glovebox uses a hydraulic breaking press; the breaking operation produces chunks, shards, and grains of plutonium metal. Shards may puncture gloves used in gloveboxes, posing a risk to technicians. Shards and grains must be reprocessed through the chloride recovery line, generating waste and increasing cost. The operation adds a process step and entails worker exposure to radiation. The breaking press glovebox takes up space that could be used to add a metal recovery glovebox, such as an additional electrorefining station. So doing would increase the throughput of that process and support a higher pit production rate. The United Kingdom's Atomic Weapons Establishment is conducting final development trials of a crucible that addresses these problems. It is made in one piece with ridges running from the outer wall of the inner cup to the inner wall of the outer cup in order to deposit molten purified plutonium in segments. This eliminates the need for a separate glovebox for breaking the plutonium ring and the resulting problems. The crucible is made with the same "slip casting" process used to make current crucibles. "Slip" refers to the thick water-magnesium oxide slurry. The molds are made of plaster of paris; an inner and outer mold are used to make complex shapes such as the ridged crucible. The slurry is poured between the two molds. Plaster of paris draws water out of the slurry, leaving magnesium oxide in the desired shape, which is then heated to high temperature in a furnace to sinter the magnesium oxide particles into a dense solid. These crucibles would appear to be applicable to U.S. electrorefining operations. On the other hand, development of the new crucibles is not complete, and there is no operational experience with them, so there is no guarantee that they will function properly in practice. A decision on whether to use them, or to continue using existing crucibles, must therefore await additional data. Options Involving Process Modifications Develop and Qualify Accident-Resistant Containers This option holds the potential to improve worker safety, reduce MAR, and reduce risk to the public. Radioactive material is "at risk" if it can be acted upon by an event. In the case of PF-4, "acted upon by an event" means plutonium released into the atmosphere by a worst-case accident, such as an earthquake followed by a fire. One way to reduce MAR in PF-4 is to place plutonium in containers designed to withstand an accident. If 10% of the plutonium in a container is expected to escape, as compared to all of that plutonium in a glovebox, MAR for that plutonium is reduced by 90%. The damage ratio indicates the fraction of plutonium expected to escape: for a damage ratio of 1.0, all the plutonium is expected to escape; for a damage ratio of 0.1, one-tenth is expected to escape. To reduce MAR, the reduction in damage ratio must be credited in PF-4's Documented Safety Analysis, which, among other things, sets the ceiling on the amount of MAR allowed in PF-4. To qualify containers as having a certain damage ratio, they are subjected to intense testing, such as dropping them from a height of several meters, placing them in a pool of burning kerosene, and heating them to red-hot in an oven. Technicians measure the amount of particulate that comes out of the container after each test. The damage ratio does not apply to a complete collapse of PF-4, as containers are not expected to survive that event. Some years ago, Los Alamos used a Hagan container, which had a damage ratio of 0.05. Since then, a newer container, a SAVY-4000, has been introduced commercially, with a damage ratio of 0.01. These containers are intended for long-term storage, not for ease of use in gloveboxes. Yet a substantial amount of plutonium on PF-4's lab space is in process. Placing more of that plutonium in containers when not in immediate use would reduce MAR on the main floor. Examples of how broader use of qualified containers could further reduce MAR include: Containers could be designed for use on the pit production line, such as in gloveboxes. These containers would have to be small enough to fit in a glovebox, heavy enough to withstand severe accident conditions, and easy to open and close. They would have to be tested in various ways to confirm that they meet a certain damage ratio. Since plutonium and other radioactive materials are tracked continually in PF-4, containers on the production line would have more impact on MAR fluctuations, and the ability to stay within MAR limits, than would containers holding plutonium for long-term storage, which are seldom opened. Pu-238 is 277 times more radioactive than Pu-239, so while PF-4 housed less than 2 kg of Pu-238 in February 2013, it contributed about a quarter of PF-4's MAR. The main application of Pu-238 is in space probes: radioisotope thermoelectric generators convert the intense heat from its radioactive decay to electricity. Pu-238 for use in these generators is converted to a powder. This is done by ball milling, in which a piece of Pu-238 is put in a container with stainless steel shot pellets. The container is tumbled, and the pellets grind the Pu-238. Given the intense radioactivity of Pu-238, this operation is performed in a particularly robust container, which has a damage ratio of 0.01. However, the container has not been credited in the Documented Safety Analysis as having that damage ratio, so tests would have to be done and paperwork completed so it could be credited. So doing would reduce MAR in PF-4. Plutonium casting is a major source of MAR in PF-4, second only to Pu-238 operations. Arranging casting equipment so that plutonium is not at risk during casting would help reduce MAR in PF-4. Minimizing MAR from casting would be particularly important in a ramp-up to 80 ppy because more casting would be needed to make more pits. A concern is that, as a result of a catastrophic accident, molten plutonium could spill out into the room and could then burn, forming plutonium oxide particles that could be lofted into the air, resulting in dose to workers or the public. Conducting plutonium casting in a credited container would reduce this risk. At present, molten plutonium is poured into graphite molds to form hemishells. This operation takes place inside robust stainless steel containers attached to the bottom of gloveboxes. However, these containers have not been qualified, so the plutonium in them counts toward MAR. Upgrading the containers so they could be qualified would require a tight and sturdy lid, and the upgraded container would have to be put through various tests. A key advantage of this approach is that it is passive. It would not rely on electrical, plumbing, or other systems to function, a major advantage in the event of a catastrophic accident. Process Plutonium Samples More Efficiently This option holds the potential to reduce cost, MAR, space, and waste, and increase throughput. Pit production requires a detailed characterization of plutonium at various stages, from the electrorefined product to hemishells to waste streams, to determine if the sample falls within required specifications. This characterization is done with analytical chemistry. Samples of metal for AC are taken from larger pieces of plutonium, such as purified metal produced by electrorefining and excess material from hemishell casting. These metal samples, typically 5 g each, are dissolved in acid and the resulting liquid is split into smaller samples for analysis. Many of these samples contain milligram or smaller quantities of plutonium. Samples are also taken from liquid waste, such as from nitric or hydrochloric acid processes. Rocky Flats Plant, which produced up to 2,000 ppy during the Cold War, took an average of 10.5 metal samples per pit in 1989, the year when plutonium operations at that plant halted. When LANL produced pits after Rocky Flats closed, it took an average of 12 metal samples per pit. Most of LANL's plutonium AC is conducted in the Chemistry and Metallurgy Research (CMR) building. CMR opened in 1952 and is in poor condition. NNSA plans to halt programmatic activities there by FY2019. As part of that plan, NNSA plans to move most AC from CMR to the Radiological Laboratory-Utility-Office Building. However, as noted, it is not known if RLUOB has enough space and a high enough MAR limit (even if increased to 400g Pu-239 equivalent) to conduct, along with PF-4, the AC needed to support production of 80 ppy. One way to reduce space and MAR required for AC is to reduce the number of samples per pit, or the amount of plutonium per sample. So doing would offer several advantages: The amount of equipment needed for AC increases, though not linearly, with number of samples. Analyzing fewer samples per pit would enable fewer pieces of equipment, and fewer gloveboxes, to support a given rate of production, reducing space requirements and cost and increasing throughput. Processing fewer samples per pit would increase the likelihood that RLUOB could perform most AC needed, which would reduce the AC capacity and the types of AC capabilities needed in PF-4, reducing encroachment on space there. Reducing the number of samples per pit would reduce the amount of waste generated per pit. This would reduce the load on AC—permitting more AC capacity to be used to support pit production—and on waste processing. New equipment may provide sufficient confidence with smaller samples, reducing MAR for those analyses. For example, LANL is developing techniques, using new instruments, to reduce the quantity of plutonium per AC sample from 250 mg to 50 mg for certain analyses. This reduction in MAR becomes particularly important as production rate increases. Accepting less accurate analytic techniques may increase throughput. Hemishells require detailed isotopic analysis, which can take 7 to 10 working days for the "gold standard" technique (thermal ionization mass spectrometry). In contrast, samples not requiring war reserve certification, such as metal supply and recovery, could use a less precise technique (gamma ray analysis), which takes 2 to 3 days. The latter approach would also generate less waste. The chief concern about taking fewer or smaller samples per pit or performing fewer or less accurate analyses is a reduction in precision. This concern can be addressed in several ways. Not all pit production process steps for which samples are taken require the highest level of precision. The final product, plutonium in hemishells, requires the greatest accuracy. Less accurate methods, or fewer samples per pit, could provide adequate precision for the initial supply of plutonium, because the goal would be to ensure that production processes were operating properly. Characterization of plutonium metal recovered from salts remaining after electrorefining may not require a full suite of AC with the highest accuracy because the metal would undergo further processing and characterization. Samples taken for waste processing, criticality analysis, and material control and accountability do not require the same level of accuracy as samples for weapon certification. Thus, alternative AC methods might be used or number of samples reduced for some steps. As pit production rate increases, fewer samples per pit taken during metal production would probably suffice to demonstrate that production processes were operating properly; the number of samples leading to final certification of a pit would presumably remain unchanged. Skill and experience level of personnel affect the success of analysis and production. The experience level of technicians would be expected to increase as production rate increased, which would reduce the need for rework and increase throughput of sample analysis. Discard Byproducts of Electrorefining This option holds the potential to reduce cost and waste, increase throughput, and make more space available. Plutonium decays radioactively, yielding, directly or indirectly, uranium, americium, and neptunium, as detailed in Table 4 . These, and any impurities from other sources, must be removed before plutonium can be used in pits. There are several steps in purifying plutonium for weapons use; the final step is electrorefining. In electrorefining, an ingot of impure plutonium is placed in a small magnesium oxide crucible at the bottom center of a larger crucible of the same material. (See Figure 3 .) The rest of both crucibles are filled with a salt mixture (sodium chloride and potassium chloride) that acts as an electrolyte. Both are melted at 740°C, well above the melting point of plutonium (639°C). An electric current is used; the anode is a tungsten rod inserted into the molten plutonium and the cathode is a circular ribbon of tungsten in the molten salt above and outside the inner ring. The current draws plutonium atoms through the salt to the cathode, where drops of metallic plutonium fall into the space between the two crucibles, forming a ring. (See Figure 4 .) The United States has used this process for decades, so it is well characterized—a major advantage. As plutonium is drawn from the ingot of impure plutonium, the concentration of impurities in the inner crucible increases, eventually becoming so high that the temperature is not high enough to keep the mixture remaining in the inner crucible from solidifying. At that point, the reaction stops. The process produces the ring of purified plutonium and two byproducts, the remaining ingot of plutonium with impurities concentrated, called the "heel," in the inner crucible, and the salt, which retains some plutonium (here referred to as the Pu-salt mixture). The plutonium in the heel is converted to plutonium oxide; it and the Pu-salt mixture are dissolved (separately) in hydrochloric acid to recover their plutonium. PF-4 has two "aqueous" process lines, i.e., those that involve a liquid, in this case one line that uses hydrochloric acid and another that uses nitric acid. They dissolve plutonium-bearing salts or oxide in acid, and use various processes to recover plutonium from the liquid. Aqueous recovery involves extensive MAR, space, and labor. Might it be possible to reduce this burden? Table 3 shows the results of 653 electrorefining runs at Los Alamos from 1964 to 1977. While the data are old, the process for electrorefining plutonium has not changed much since that time, so the figures are useful as a rough order of magnitude of the products of electrorefining. The table shows 9.2% of the plutonium left at the anode (the heel); 10.7% left in the salt and stuck to the crucible, almost all of which is in the salt; a small amount stuck to the cathode; and 78.8% purified in the product ring. Might it be possible to discard the Pu-salt mixture, the heel, or both? So doing would lose some plutonium, but would avoid the need to use aqueous processes to recover the plutonium. The loss of plutonium would arguably not be a problem. The U.S. plutonium inventory was 95.4 metric tons as of September 2009, of which 43.4 metric tons were surplus to defense needs; pits use kilogram quantities of plutonium. Secretary of Energy John Herrington said in 1988, "Plutonium, we're awash with plutonium. We have more plutonium than we need." The need for plutonium has fallen since 1988 because the size of the U.S. nuclear stockpile has decreased considerably in the intervening years. Thousands of pits in storage at the Pantex Plant (TX) could be melted to purify their plutonium for use in new pits. Pits from weapons requiring new pits could similarly be recycled. At a rate of 80 ppy, existing plutonium would supply needs for many decades, if not centuries, and would do so for longer if existing pits could be used without modification in an LEP, as has been done, or if retired pits could be reused, a concept under study. The Pu-salt mixture from an electrorefining run could probably be sent directly to the Waste Isolation Pilot Plant (WIPP), the nation's underground storage repository for defense transuranic waste, once it reopens, or to another storage repository. The heel could not be sent directly to WIPP, as that facility does not accept plutonium in metal form, but it could readily be converted to plutonium oxide for shipment. Plutonium-containing waste bound for WIPP must be placed in drums (similar in size to 55-gallon drums). This process is elaborate, requiring nondestructive analysis to verify the contents of each drum; material control and accountability; ensuring that each drum is compliant with limits on plutonium content, heat generation, surface dose, and so on. This process is well understood, as it has been performed thousands of times over the years. Shipping the material directly to WIPP would avoid the need to send it through aqueous processes. That would permit either a reduction in the space and MAR needed for these processes, though offset somewhat by added space and MAR needed for packaging the drums, or would permit existing equipment to process more plutonium in order to support a higher rate of pit production. It would involve more shipments to WIPP and more work at that facility, but less work at LANL. Congress may wish to consider the tradeoffs involved, and the consequences of the loss of plutonium. More generally, Congress may wish to have NNSA analyze, on a case-by-case basis, whether the benefit of recovering nuclear material from the many waste streams resulting from nuclear weapons complex activities is worth the cost. Use Calcium Chloride for Electrorefining This option holds the potential to reduce cost and waste, increase throughput, and make more space available. Electrorefining using sodium chloride and potassium chloride has several problems: Plutonium held in salts reduces yield (fraction of total plutonium recovered as pure plutonium), increasing time, space, equipment, MAR, cost, process steps, and worker exposure required to produce a given amount of pure plutonium. Hydrochloric acid processing for recovering plutonium produces a substantial waste stream that requires further treatment. The plutonium content of this waste must be monitored with analytical chemistry techniques, adding to the workload, to provide for material control and accountability and to ensure against criticality problems (concentration of enough plutonium to create a fission reaction). The latter is a serious concern, as 21 of 22 known criticality accidents from 1953 to 1999 involved aqueous processes. Preparing this plutonium-contaminated waste for disposition takes up space in PF-4 and elsewhere at LANL. The back end of this process, from waste generation to processing to disposition, is costly and imposes a high workload. An alternative would be to use calcium chloride as the electrolyte. Lawrence Livermore National Laboratory (LLNL) has used this method since 1992 and the United Kingdom's Atomic Weapons Establishment (AWE) has used this method for over a decade. This approach offers several advantages. Compared with sodium chloride and potassium chloride, calcium chloride retains less plutonium after an electrorefining run because plutonium has different electrochemical behavior with calcium chloride, increasing the yield. As a result, fewer gloveboxes would be needed to supply a given amount of plutonium, making more space in PF-4 available, or a given number of gloveboxes could be used to support a higher rate of pit production. It is possible to remove plutonium, in combination with chlorine or other elements, from the calcium chloride-plutonium mixture using a "salt scrub": adding calcium metal to the mixture and heating it produces calcium chloride and plutonium metal. The latter, which is nearly twice as dense as lead, sinks to the bottom of the crucible and forms a "button" that is easily separated from the salt. Electrorefining with calcium chloride would remove more plutonium than would sodium chloride and potassium chloride, and the salt scrub would remove most of the rest of the plutonium. As a result, the salt left after the salt scrub would be expected to contain very little plutonium. Disposing of that salt as waste would release aqueous process capacity, which could be used to recover plutonium from the "button." In this way, the equipment could produce more plutonium, supporting a higher rate of pit production. While LLNL and AWE use this method, LANL had poor results when it tried it in the 1990s. This might have been because there was too much moisture in the calcium chloride; the salt is extremely hygroscopic (attracts and holds water molecules from the atmosphere). Alternatively, LANL might not have been able at that time to control the process so as to maximize yield. LANL plans to revisit this option. While LANL will use sodium chloride and potassium chloride when electrorefining in PF-4 resumes, it plans to convert to calcium chloride if the process can be successfully demonstrated. The process would require not only a dry atmosphere in the gloveboxes, but also a facility for producing dry calcium chloride and equipment for moving calcium chloride from production through use in dry conditions. LANL expects to draw on LLNL and AWE resources and experience in this effort. Remove Americium from Plutonium This option holds the potential to reduce worker exposure to radiation, to reduce MAR and cost, and to make more space available in PF-4. Weapons-grade plutonium consists of about 94% Pu-239, the main isotope that supports a nuclear chain reaction, and several other plutonium isotopes. Each isotope undergoes radioactive decay at a rate (the half-life) particular to that isotope. With radioactive decay, each plutonium isotope becomes an isotope of a different element. Pu-241 decays much more rapidly than the other isotopes in WGPu; its half-life is 14.4 years. It decays into americium-241 (Am-241, half-life 432 years), which in turn decays into neptunium-237 (half-life 2.1 million years). All the other plutonium isotopes decay into uranium isotopes. As a result, the composition of WGPu—both the plutonium isotopes and their decay products—changes slightly over time. Table 4 shows the composition of WGPu, the decay products, and the approximate amount of various plutonium isotopes remaining after 50 years. The main reason to remove americium-241 is that it is an intense emitter of gamma rays. Workers handling aged WGPu in gloveboxes have only their gloves to protect them, so the main gamma ray dose they receive is to their hands. This dose can be the limiting factor in how many days per year federal regulations and LANL policies permit them to handle plutonium while staying within dose guidelines. Purifying plutonium for weapons use involves several chemical processes. (These processes do not alter the isotopic composition of plutonium.) Electrorefining, for example, produces pure plutonium, but does not work efficiently for plutonium with a large fraction of impurities because the impurities stop the electrorefining process while much of the plutonium remains unpurified. Another process, metal chlorination, removes most americium but leaves uranium, neptunium, alloying material, and any other impurities. Metal chlorination involves bubbling chlorine gas through molten impure plutonium. This produces a salt, americium chloride, that captures almost all the americium from the plutonium. Chlorine also forms another salt, plutonium chloride. These salts form a crust, which is easily removed, on top of the plutonium metal. This metal, which includes uranium and neptunium, can then be processed through electrorefining. The salt crust contains about 90% plutonium chloride; this plutonium is recovered by dissolving the crust in hydrochloric acid and using several other process steps. Of the Pu-241 in newly produced WGPu, 89% will have decayed into Am-241 after 50 years. U.S. WGPu is quite old. Some was produced during the Manhattan Project of World War II; most was produced between 1956 and 1970. When newly produced, it had essentially no radioactive impurities; plutonium that has been purified since then has, in effect, had its age reset to zero, albeit with a slightly different mix of plutonium isotopes. As of September 2009, the United States had produced or acquired 111.7 metric tons (MT) of plutonium, an inventory of 95.4 MT, 14.0 MT removed from inventory, and an "inventory difference" (production and acquisition minus inventory and removals) of 2.4 MT. Further, "there remain uncertainties about how much plutonium was actually produced, processed, and discarded to waste, especially for the period from the mid-1940s to 1970." Accordingly, there is no official unclassified figure (and perhaps no classified figure) for the average age of plutonium remaining in the DOE inventory. It appears, however, based on preliminary calculations by Los Alamos, that the average age of that plutonium is about 50 years. Because of radioactive decay, little Pu-241 is left to form additional Am-241 after 50 years. Since Pu-241 decay is the only source of Am-241, after passing aged plutonium through a final run of metal chlorination to remove Am-241, so little Pu-241 would remain that even if all of it decayed to Am-241, the latter would never reach the level found in 30-year-old WGPu, and the weapons laboratories have certified weapons with pits that old (and older) as acceptable for use in the stockpile. This final run would have two results. First, it would greatly reduce worker exposure to gamma radiation. Second, since additional runs of metal chlorination would not be needed for WGPu thus processed, the metal chlorination line could be reduced in capacity, reducing space and operating cost. (The line could not be eliminated entirely because it would be needed if, for example, a batch of old pits was sent to Los Alamos for purification.) Accept More Uranium in Weapons-Grade Plutonium This option holds the potential to reduce cost and space and increase throughput. Pu-241 has the shortest half-life of the plutonium isotopes in WGPu. The others have half-lives ranging from 87.7 years for Pu-238 to 373,000 years for Pu-242. Pu-239, which accounts for 94% of the plutonium in WGPu, has a half-life of 24,110 years. As a result, uranium ingrowth will continue for many thousands of years. ("Ingrowth" refers to decay products that remain in the plutonium.) A concern is that a change in the composition of WGPu could affect its performance during implosion. After 50 years, uranium ingrowth accounts for 0.17% of WGPu, and ingrowth will continue at this rate, declining only slightly, for millennia. Further, 79% of the uranium ingrowth will be U-235; that fissile isotope has also been used in nuclear weapons, though it is not as effective (in terms of explosive yield per kg) as WGPu. At issue is whether newly fabricated pits can use plutonium that has not been purified for several decades, despite the ingrowth of uranium. Some weapons in the U.S. stockpile are old. For example, the first B61 bomb was produced in 1966. The last year in which the United States made war reserve pits, excepting 29 for the W88 warhead, was 1989. NNSA plans a B61 life extension program (LEP), with the first production unit expected in FY2020. Thus, while some versions of the B61 were produced after 1989, the newest pit in B61s would, in 2020, be at least 30 years old. Yet the LEP is to use existing pits, and weapon designers expect to be able to certify the performance of life-extended B61 bombs. Similarly, the W76 warhead was first manufactured in 1978 and is now undergoing an LEP that does not use new pits. A 2007 report by the JASON group evaluated studies on pit lifetime performed by Los Alamos and Lawrence Livermore National Laboratories. The JASON report found, Most primary types have credible minimum lifetimes in excess of 100 years as regards aging of plutonium; those with assessed minimum lifetimes of 100 years or less have clear mitigation paths that are proposed and/or being implemented. … As a result of the Los Alamos/Livermore efforts, JASON concludes that there is no evidence from the [underground nuclear testing] analyses for plutonium aging mechanisms affecting primary performance on timescales of a century or less in ways that would be detrimental to the enduring stockpile. Thus there may not be a need to conduct electrorefining to purify plutonium for pits for decades. Further, there may be a benefit from delaying plutonium purification. Livermore notes a difference between uranium in aged pits and in pits made from purified plutonium: The uranium present in existing pits is formed within the plutonium lattice and does not significantly affect the nuclear or mechanical properties of the plutonium. Therefore, uranium ingrowth in existing plutonium containing pits is not considered an issue. However, if the plutonium is recovered from an existing weapon and recast, the uranium is likely to go to the plutonium grain boundaries which may affect the mechanical properties. There is thus a tradeoff between the advantages of purifying aged plutonium to remove Am-241, as discussed in " Remove Americium from Plutonium ," and delaying purification. Capacity and space could be further reduced if weapon designers were willing to accept a larger maximum allowable uranium content in the WGPu specification. Acceptance would depend on detailed studies of metallurgical and other properties of WGPu with levels of uranium isotopes that are in existing pits. If the study results proved acceptable, electrorefining capacity and space could be reduced. Use Near Net Shape Casting to Fabricate Hemishells This option holds the potential to reduce MAR, waste, and cost. A hemishell may be visualized as a "bowl" made of plutonium. The current method to cast hemishells involves pouring molten plutonium between an inner and outer mold. When the plutonium solidifies, the molds are separated and the cast part is removed. The part is then heat-treated to impart the required material properties. It is then machined to final dimension. The cast part, before machining, is necessarily thicker than the hemishell. Machining it produces plutonium chips. If these chips are to be recycled for use in subsequent pits, they would have to undergo purification processes, such as metal chlorination and electrorefining. Alternatively, they could be converted to plutonium oxide and sent to WIPP. Near net shape casting (NNSC) simply has a thinner space between the inner and outer molds, and the molds produce a cast part much closer to final dimension. Otherwise, the processing (casting, heat treating, machining, etc.) is the same. The thinner space between molds reduces the amount of plutonium needed for casting, reducing the amount of plutonium that must be machined away to produce the hemishell. On the other hand, a thinner cast part could result in a higher reject rate, as there would be less margin for error in machining. To offset this disadvantage, NNSC could use various electronic techniques to align the part more precisely and remove excess material more precisely. One such technique is in-process inspection. With traditional casting, hemishells are measured after they are machined to determine if they meet dimensional specifications. With in-process inspection, hemishells could be measured and, if necessary, realigned while in production, such as after each pass of a cutting machine, allowing the technician to compensate for errors while there was some excess material. Current equipment is adequate to purify enough plutonium to support low production rates. The critical advantage of NNSC would come into play with higher pit production rates, when the supply of purified plutonium would become a major bottleneck. NNSC would use less plutonium per hemishell, and would produce less scrap that must be recycled. As a result, it would place less demand on the existing plutonium purification equipment, enabling it to support a higher production rate. Reducing the amount of purified plutonium per pit would also reduce the waste stream, such as the plutonium-contaminated acids and salts from purification processes. This reduction is another advantage given the cost, effort, and procedural requirements of processing radioactive waste. Using less plutonium per pit would reduce the burden on material control and accountability: less material results in less material to be accounted for, saving time and effort. Using less plutonium per pit would also reduce, on a per-pit basis, worker exposure, MAR, and cost. It would not save space, but since each pit would require less plutonium, it would allow existing equipment, in the existing space, to provide plutonium for a higher rate of pit production. LANL has conducted some R&D into NNSC using gravity feed and plans to use this method in the future if it proves successful. It is included in LANL's planning basis for future pit manufacture. Manufacture could include new pits for certain LEPs and new pits to replace pits destroyed during surveillance. Livermore worked on developing NNSC as early as 1994. It has demonstrated NNSC using plutonium die casting, in which molten plutonium is forced into the space between an inner and outer mold. Livermore states, "Die casting technology is another approach to significantly reduce the amount of plutonium required per casting and therefore, the amount of feed metal." Options Involving Structural Modifications to PF-4 Augment Seismic Resilience of PF-4 This option would increase permitted MAR, worker safety, and public safety. PF-4 became operational in 1978; since then, seismic studies have shown a greater threat to the building than was envisioned when it was designed. For example, an older model assumed that an earthquake would shake the building, while a newer model treated an earthquake as a wave of earth moving toward PF-4 that could push the building over. As a result of these studies, concern grew that PF-4 could collapse in a major earthquake: In public comments at a Capitol Hill Club event this summer [2013], DNFSB member Jack Mansfield explained the Board's concerns. The [PF-4] facility, built in the late 1970s, is "brittle," Mansfield said. "It was discovered after this facility was built that large buildings, to be survivable in serious earthquakes, have to have a bit of ductility. It was also discovered after the Loma Prieta earthquake that round columns, if accelerated up into the plywood they support, crumble. Those two vulnerabilities were identified early, but they're not built into PF-4." He added: "The result is that there is a probability, albeit small, that the building could collapse, with great loss of life within and with dispersal of plutonium." Previous upgrades were based on calculations that did not fully characterize the problems facing the facility, Mansfield said. Those calculations were "very good" and "did a lot," Mansfield said, but "the problem is that any of the columns, crushed like the ones on the highway did—the whole roof would go down like a zipper." To reduce the dose resulting from an earthquake that collapsed the building, followed by a fire that lofted plutonium oxide particles into the air, LANL reduced PF-4's MAR allowance for the main (laboratory) floor in 2013 from 2,600 kg of plutonium to 1,800 kg. To increase MAR, reduce potential dose, and reduce the risk of collapse, LANL is taking steps to protect PF-4 against collapse and fire. To strengthen PF-4 against seismic shaking, LANL added a drag strut to the roof, among other things, as described in more detail in CRS Report R43685, Manufacturing Nuclear Weapon "Pits": A Decisionmaking Approach for Congress . (A drag strut gathers lateral forces from a large flat surface and transmits them to a shear wall, which is designed to resist those forces.) Other steps were taken to strengthen PF-4 against pushover. Many columns that run from the basement to the roof support PF-4. Some of these columns run through the vault, which holds a large quantity of plutonium, in the basement. These columns are held rigidly in place by the vault ceiling and are not free to move, making them more vulnerable to shear forces that could cause them to collapse. Their collapse could result in massive pieces of concrete and steel crashing through the vault ceiling, killing workers and releasing plutonium. To strengthen the columns, LANL wrapped them in carbon fiber sealed with epoxy, a measure completed in February 2014. LANL is now working to strengthen the ties between girders, which are located above the laboratory floor of PF-4, and other structural elements. As with columns, collapse of girders onto the laboratory floor could kill workers and release plutonium. Structural upgrades to PF-4 can make a very large difference in the amount of plutonium released in a major earthquake. An NNSA accident analysis of PF-4 in June 2011 evaluated the effect of a combined earthquake, fire, and partial building collapse. The calculated radiation dose to the hypothetical maximally exposed off-site individual (MEOI) was conservatively estimated to be 2,100 rem Total Effective Dose Equivalent1 (TEDE) for a postulated once-in-5,000-year accident (Case 1). By October 2011, PF-4 was structurally upgraded, reducing the calculated MEOI dose to 143 rem once-in-2,000 years (mitigated, Case 2). By April 2012, additional repairs will be completed that protect PF-4 safety basis assumptions and reduce the calculated MEOI dose to less than 25 rem TEDE. LANL has taken steps to reduce the risk of fire. For example, it removed about 20 tons of combustible material from PF-4, mostly from the laboratory floor. It is planning to enhance the capability of the fire water loop to protect PF-4. This loop includes two 40,000-gallon water tanks, two pump houses, and an underground pipe loop that carries water to buildings in TA-55 for fire suppression. (Technical Area 55, or TA-55, is the main area at LANL for plutonium work; it consists of PF-4 and supporting buildings.) Some buildings in TA-55 are not seismically qualified, and would be more likely than PF-4 to collapse in an earthquake. If they collapsed or began to burn, water from the tanks would flow to them, reducing or eliminating the amount available for PF-4. LANL proposes to decouple these buildings from the loop and provide them with their own separate fire water supply. The Consolidated and Further Continuing Appropriations Act, 2015, P.L. 113-235 , provides $1,000,000 for TA-55 seismic safety mitigation for FY2015. Build One Module for Plutonium-238 Work This option would make more space and MAR available in PF-4, and holds the potential to reduce risk to the public. Pu-238 is 277 times more radioactive than Pu-239, the fissile material in weapons-grade plutonium. It is so radioactive that energy from its radioactive decays generates enough heat to make a small quantity, even 200 grams, glow red. It is used in deep space probes, where its heat is used to generate electricity. It has some military applications but is not used in pits. As of February 27, 2013, before most of its operations were suspended, PF-4 held about 1.6 kg of Pu-238, but because of its high radioactivity it accounted for 24.5% of the building's MAR, or 441 kg of Pu-239 equivalent. For comparison, pit fabrication accounted for 26.4% of the building's MAR. In addition, Pu-238 programs accounted for 9,600 square feet, or 16%, of PF-4 laboratory floor space. One approach to providing more MAR and space in PF-4 for pit fabrication is to build modules, buried reinforced-concrete structures with about 5,000 square feet of lab space connected to PF-4 by tunnels. As stated in the FY2016 DOE budget request, "NNSA is planning to construct not less than two modular structures that will achieve full operating capability not later than 2027." However, Pu-238 is not uniformly distributed within the space for Pu-238 programs. If some Pu-238 work were moved to a 5,000-square foot module, that module could accommodate most of the Pu-238-related MAR from PF-4, making that same amount of MAR and space available for pit production or other plutonium work. Thus one module for Pu-238 might suffice to enable pit production within PF-4. Building one module may offer other advantages. It would provide experience and lessons that could help reduce cost if additional modules were built at LANL or elsewhere in the nuclear weapons complex. In particular, a review of the Uranium Processing Facility at the Y-12 National Security Complex recommended against what it called a "big box" approach in which all capabilities would be placed in one large building, and instead favored perhaps four smaller "new builds." Further reducing cost if multiple modules were to be built, modules as envisioned would have a basic design, and each module would be customized with only the equipment and capabilities needed for its specific mission and hazards. In contrast, a large multi-mission building would need all features needed for any one mission, adding cost, and it would probably cost less to fix a problem in subsequent modules after building one than to retrofit a big box building. NNSA also states that modules also offer "the potential to scale facility acquisition to appropriations and adapt more quickly to changes in program requirements." Since the module would be buried, it would be expected to contain plutonium better than PF-4 in the event of an earthquake, reducing risk to the public. On the other hand, some lessons from building a module might increase cost. For example, if it turned out that there was a design flaw, that modules needed to be larger, or that more concrete was needed, the second module could be more expensive than initial construction (excluding retrofits) of the first. Also at issue is whether other measures to increase MAR and space margin, such as those discussed in this report, might provide enough margin without building any modules. Conclusion: Choosing a Package of Options This report shows options, many of which NNSA and its labs are pursuing, that can help move toward enough capacity to manufacture pits at a rate of 80 per year. One option by itself will not provide the capacity to manufacture pits at that rate. As a result, NNSA faces the prospect of assembling a package of options, whether from the ones presented here or others, and Congress faces the prospect of evaluating, perhaps amending, and approving it. Any package chosen would need to optimize among such goals as margin, cost, worker safety, and throughput. Questions and tradeoffs to consider in formulating a package include the following: MAR reduction techniques include seismic strengthening of PF-4, using special containers to hold plutonium not in use, and removing contaminated gloveboxes. Would all such techniques need to be implemented, or would some, by themselves, provide enough MAR margin? Relocating the Royal Crest trailer park could also reduce the need for these techniques. Conversely, some of these techniques might provide more MAR margin than relocating Royal Crest, though perhaps at higher cost. Using a different wind model and more realistic assumptions could result in a calculated dose reduction by more than half in the event of a major accident at PF-4, permitting more than doubling the MAR allowance for PF-4 quickly and at essentially no cost, producing more MAR allowance than relocating Royal Crest. But would a doubling of the MAR allowance suffice? If not, what combination of measures that increased MAR allowance would do so? Techniques to increase space margin include removing contaminated gloveboxes, setting up a production line able to make 50 ppy with one shift per day and operating it with two shifts per day, and building a module for Pu-238 work. Which combination of techniques would be most cost-effective? Building a module, whether at Los Alamos or elsewhere, for Pu-238 work would move a substantial amount of MAR out of PF-4 and would free up some space there as well. Would that module be cost-effective, or would other alternatives provide enough space and MAR margin so as to render the module unnecessary? Or would other advantages argue for building a Pu-238 module even if sufficient margin could be obtained by other means? Using calcium chloride instead of sodium chloride and potassium chloride in electrorefining would reduce the amount of plutonium to be recovered through aqueous processes; near net shape casting would do so as well. Both together may permit a reduction in the space needed for aqueous processes, and a reduction in MAR as well, since aqueous processes are high in MAR. Alternatively, would it be cost-effective to recover the plutonium remaining in the salt and in the ingot of impure plutonium after electrorefining runs? If not, these materials could be packaged and shipped to WIPP. Some techniques offer increases in both space margin and MAR margin, such as removing contaminated gloveboxes. Some techniques may increase margin at little or no cost, and may provide savings. Using conservative rather than very conservative assumptions in calculating dose could reduce the need for costly physical changes, such as construction or procurement. The cost to remove contaminated gloveboxes is essentially zero, as the boxes would need to be removed at the end of PF-4's life, and removing them would avoid the risk of contamination accidents that are costly and time-consuming to clean up. In sum, while arriving at a satisfactory package will require complex analyses, many options offer the potential to boost U.S. pit production capacity toward, if not to, the congressionally mandated capacity of 80 pits per year. Appendix. Explanation of Terms in Table 2 Terms are listed in the order in which they appear in Table 2 . Material At Risk (MAR): The amount of material, in this case plutonium, acted upon by an event. It is measured in units of grams of Pu-239 equivalent, a standard used to compare the radioactivity of diverse materials. Airborne Release Fraction (ARF): The fraction of Material At Risk released into the air as a result of the event. ARF is specific to the type of material (e.g., plutonium oxide, plutonium metal, plutonium in solution). Respirable Fraction (RF): The fraction of the material released into the air that is of a particle size (3 microns in diameter or less for plutonium oxide) that, when inhaled, remains in the lungs. An RF of 1 represents the worst case. Damage Ratio (DR): The amount of damage to a structure or container, with 0 being no damage and 1 being complete collapse. A DR of 1 represents the worst case, complete collapse of PF-4 or full destruction of a container. Leak Path Factor (LPF): The fraction of material that escapes the building; even if a building or container was fully destroyed, not all material would necessarily be released into the air. While ARF is related to material type, LPF is related to engineered containment mechanisms, such as robust containers. An LPF of 1 represents the worst case (i.e., no containment is assumed). Chi/Q: The rate at which plutonium particles are deposited (fall to the ground). It includes such factors as wind speed, wind direction, and distance from the facility to the individual receiving the dose. Breathing Rate (BR): The volume of air, in cubic meters per second, that an individual breathes in. This is important in calculating dose because the more air an individual breathes in, other things being constant, the higher the dose. Specific Activity (SA): A measure of the radioactivity of a material, expressed in curies (a measure of the number of radioactive disintegrations per second) per gram of material. Table 2 shows SA for Pu-239. Dose Conversion Factor (DCF): Multiplying SA by this factor converts SA to dose. Dose is expressed in rem, a measure of ionizing radiation absorbed by human tissue.

A pit is the plutonium core of a thermonuclear weapon. Imploding it with conventional explosives provides the energy to detonate the rest of the weapon. The Rocky Flats Plant made up to 2,000 pits per year (ppy) through 1989; since then, the United States has made 29 pits for the stockpile. Yet the FY2015 National Defense Authorization Act requires the National Nuclear Security Administration (NNSA), which manages the nuclear weapons program, to produce at a rate of 80 ppy for 90 days in 2027. How can that requirement be met? Pits are to be made at Los Alamos National Laboratory's main plutonium facility, PF-4. To manufacture pits, a facility must have enough laboratory floor space and a high enough limit for Material At Risk (MAR), the amount of radioactive material a worst-case accident could release. Producing 80 ppy requires enough "margin," the space or MAR available to produce pits minus space or MAR required for that production rate. While space and MAR available have been calculated, amounts required to produce 80 ppy have never been calculated rigorously, leaving space and MAR needs undefined. Further, the report cannot address whether certain options could meet the 2027 date because time to implement them cannot be determined. Accordingly, this report presents 16 options that seek to increase the feasibility of producing 80 ppy by 2027, including: The radiation dose an individual would receive from a worst-case accident determines MAR permitted in PF-4. A ten-factor equation calculates dose as a function of MAR. NNSA uses worst-case values in this equation, yet median values may provide sufficient conservatism. Median values reduce calculated dose by orders of magnitude, permitting a large increase in PF-4 MAR. Yet merely doubling permitted MAR might suffice for producing 80 ppy. Providing this increase through construction at PF-4 could be costly and take years. In determining MAR for PF-4, the closest offsite individual is at a nearby trailer park. Relocating it would place the next closest individual farther away. The added distance would reduce dose, permitting increased MAR in PF-4. Using a different meteorological model and different assumptions would greatly reduce the currently calculated dose, perhaps permitting doubling PF-4 MAR. Plutonium decays radioactively, creating elements that various processes remove to purify plutonium. One process generates byproducts; plutonium is recovered from them with processes that take space and MAR. Since the United States has tons of plutonium surplus to defense needs, byproducts could be dispositioned as waste. Pits use weapons-grade plutonium (WGPu). U.S. WGPu is about 50 years old. About nine-tenths of plutonium-241, a WGPu isotope, decays to americium-241 in that time. Since plutonium-241 is the source of americium-241 in WGPu, removing the current americium-241 would prevent WGPu from ever reaching its americium-241 limit, permitting reduction in equipment for that process and reducing worker radiation exposure. A plutonium isotope used in space probes, plutonium-238, is extremely radioactive. It accounts for a small quantity of PF-4 plutonium but a quarter of PF-4's MAR. Building a "module" near PF-4 for plutonium-238 work would free MAR and space in PF-4, so one module might suffice instead of two or three. To reduce risk of collapse, loss of life, and radiation release from an earthquake, NNSA increased the seismic resilience of PF-4. More steps are planned; more could be taken. Achieving the congressionally mandated capacity will probably require choosing among options to create a package. MAR margin could be increased by relocating a trailer park, using a new meteorological model, installing rugged containers in the PF-4 production line, increasing PF-4's seismic resilience, and using less conservative assumptions in the MAR-to-dose equation. Similar choices exist for other options. At issue for Congress: What are the risks, costs, and benefits of the options? What is the optimum combination of options? CRS Report R44047, In Brief: Options to Help Meet a Congressional Requirement for Nuclear Weapon "Pit" Production, by [author name scrubbed], is a condensed version of this report.

Background In the wake of the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) embargo of oil shipments to the United States, and during an era of U.S. oil price controls, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163 ), which included a provision directing the President to promulgate a rule prohibiting the export of crude oil and natural gas. For nearly four decades, total repeal of the crude oil export prohibition was not a major policy issue since U.S. oil production was declining and import volumes were increasing. However, circumstances changed around 2010/2011 with the successful application of horizontal drilling and hydraulic fracturing technologies to economically extract oil from tight/shale formations that were previously known but considered to be too difficult and expensive to produce. From January 2010 to April 2015 U.S. crude oil production increased by approximately 4.3 million barrels per day, a nearly 80% increase. Crude oil production in April 2015 was 9.7 million barrels per day. While this production level did not exceed domestic crude oil consumption, infrastructure bottlenecks and limitations resulted in domestic oil prices that were discounted relative to international crude oil prices. During certain periods, these discounts were as large as $30 per barrel (see Figure 1 ). This price differential was primarily the result of changing oil production patterns and infrastructure constraints on the delivery of oil from new and growing production areas to U.S. refining locations. Nevertheless, this price differential was a principal factor that motivated the interest in marketing, selling, and exporting U.S. crude oil globally. Although Congress had debated aspects of the crude oil export restrictions in the past, recent congressional debate about U.S. crude oil export policy started in earnest in January 2014 with calls from Members of Congress to remove the export prohibition as well as one of the first hearings on the topic. Numerous analytical studies from government, industry, and non-profit organizations about the potential effects associated with removing crude oil export restrictions were published during 2014 and 2015. Additionally, hearings within various congressional committees were held during this time to debate the many and varied aspects of this complex and multi-dimensional policy issue. Topics covered in studies and hearings included price effects, impacts on the domestic refining industry, geopolitical considerations, economic impact, government revenues, and environmental concerns. On December 18, 2015, Congress passed the Consolidated Appropriations Act, 2016 ( H.R. 2029 ), which was signed by the President and became P.L. 114-113 . The law includes a provision that repeals the EPCA crude oil export prohibition. U.S. producers and traders can now sell and export crude oil to international customers. In addition to repealing crude oil export restrictions, P.L. 114-113 also included provisions that addressed two topics that were part of the export restriction debate: (1) maritime transportation of crude oil from the United States to foreign destinations, and (2) the effects of policy changes on independent oil refiners. Export Restrictions Repeal Division O, Title I, Section 101 of P.L. 114-113 repeals Section 103 of the Energy Policy and Conservation Act (EPCA; P.L. 94-163 ), which provided the President authority to restrict the export of various hydrocarbon materials and directed the President to "promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States." Additionally, P.L. 114-113 includes a National Policy on Oil Export Restrictions stating that "no official of the Federal Government shall impose or enforce any restriction on the export of crude oil." P.L. 114-113 essentially removes all existing crude oil export restrictions. However, the law does include a "Savings Clause" and exceptions that either maintain or provide the President with authority to restrict crude oil exports under certain circumstances such as national emergencies or demonstrable effects to prices and supply that might result from allowing crude oil exports. Savings Clause During the crude oil export debate, some Members of Congress expressed concern that the National Policy on Oil Export Restrictions language included in the bill might limit presidential authority to restrict crude oil exports during emergency or other circumstances. To address these concerns, a "Savings Clause" was included in the bill language affirming presidential authority to prohibit exports under the Constitution, the International Emergency Economic Powers Act or regulations issued under that act, the National Emergencies Act, part B of title II of EPCA, the Trading with the Enemy Act, or other laws that impose sanctions on a foreign person or foreign government. Exceptions P.L. 114-113 also provides the President with authority to impose crude oil export licensing requirements or other restrictions should conditions for a set of exceptions be met. Such licensing requirements and restrictions on the export of U.S. crude oil would be limited in duration to not more than one year, although they could be renewed for additional time periods up to one year each. Three exceptions under which the President can impose crude oil export restrictions are: 1. The President declares a national emergency and provides notice in the Federal Register ; 2. In the event that sanctions or trade restrictions are imposed by the President or by Congress; or 3. The Secretary of Commerce determines and reports to the President that (i) U.S. crude oil exports have resulted in oil supply shortages or oil prices significantly higher than global prices, and (ii) supply shortages and price increases have or will result in adverse employment effects in the United States. Exceptions one and two are, to some degree, similar to the presidential authority that is expressly maintained by the Savings Clause. However, the third exception provides a two-part test that could result in the President restricting exports should data and analysis determine a direct relationship between crude oil exports, supply shortages, and prices above global levels as well as sustained adverse effects on U.S. employment. While this provision provides for a possible means of restricting crude oil exports in the future, determining a direct relationship that correlates the effects of U.S. crude oil exports on supply shortages, price increases, and U.S. employment may be difficult due to the numerous, and interrelated, factors that influence crude oil supplies and prices. Potential Crude Oil Export Volumes During the crude oil export debate, and since enactment of P.L. 114-113 , understanding the potential volumes and oil market impacts that might result from removing export restrictions are areas that have received congressional interest. Areas of interest related to export volumes include potential economic impacts and environmental concerns, among others. Analytical studies published during the debate about the effects of removing crude oil export restrictions estimated that exports may range from 0 to approximately 2 million barrels per day. This relatively large disparity is a result of the varied assumptions used to calculate the estimates. However, the motivation for companies to export crude oil is generally contingent on the existence of financial and market conditions that economically justify selling crude oil to international customers. One market condition monitored by crude oil producers and traders to determine if exports are economically justified is the price differential between domestic and international crude oil benchmark prices. Two price benchmarks that are closely monitored are West Texas Intermediate (WTI) and Brent (a combination of North Sea crudes priced in Europe), although Dubai is another important price benchmark for Asian markets. Domestic prices are typically represented by WTI and international prices are generally represented by Brent, two crude oils with similar quality characteristics. The WTI/Brent price differential has fluctuated over time and experienced a period of volatility, most recently during the years 2010 to 2015. See Figure 1 . As indicated in Figure 1 , WTI spot prices were as much as $30 per barrel below Brent spot prices in 2011 and were consistently more than $10 below Brent during most of 2011 and 2012. When the WTI/Brent price differential is large enough to compensate for the costs associated with exporting crude oil (e.g., pipeline transportation from the WTI price point in Cushing, OK, to a port facility, storage fees, loading fees, shipping fees, offloading fees, insurance fees) then the economic incentive exists to market, sell, and deliver crude oil to international markets. Total costs associated with exporting crude oil vary by destination, although as a general rule the closer the destination the lower the transportation cost. Taking into account this consideration, Atlantic basin countries in Europe and the Americas are likely to be the preferred destinations for U.S. oil exports. Analysis by the Energy Information Administration suggests that total export costs can range from $6 to $8 per barrel. Based on this cost range, the economic incentive to export crude oil existed at some point during each of the years 2011 to 2015. However, price differentials have since narrowed and have been in the $1 or less per barrel range since the start of 2016. WTI sold at a premium to Brent on certain days in January 2016. While the WTI/Brent price relationship provides some indication of the economic attractiveness of exporting crude oil, there are other price and non-price considerations that may motivate crude oil exports. Logistics, storage, and localized price relationships could potentially influence export decisions even when the WTI/Brent differential may not economically justify exports. For example, oil producers in the Eagle Ford and Permian Basin areas in Texas have direct pipeline routes to the Gulf Coast and may be subject to pricing dynamics that are not reflected in the WTI/Brent price differential. When considering pipeline capacity constraints to Cushing, OK, along with local storage limits, there could be instances when an oil producer in Texas might choose to pursue exports to global markets regardless of the WTI/Brent differential. According to an industry database of crude oil cargoes, during the period from December 19, 2015, to February 19, 2016, three crude oil shipments totaling approximately 1.7 million barrels—roughly 27,000 barrels per day—of crude oil have been exported to destinations that were prohibited prior to enactment of P.L. 114-113 . Two of the shipments were delivered to France and the Netherland Antilles. One shipment is projected to be delivered in the Mediterranean region. This level of exports is somewhat small, compared to total U.S. crude oil production of approximately 9.3 million barrels per day, and reflects the narrow WTI/Brent price differential that has existed since crude oil export restrictions were removed. Additionally, preliminary EIA information indicates that total crude oil exports—including those to Canada—declined by approximately 100,000 barrels per day in mid-January 2016 compared to December 2015. While current market conditions may not economically support large volumes of U.S. crude oil exports, market conditions tend to change over time. Should U.S. oil production increase, it is possible that the price differential could widen in the future to reflect an oversupply of light/sweet crude oil in the Gulf Coast where many refineries are currently configured to process heavier crude oil types. A widening price differential could result in an increase in export volumes. Nevertheless, the elimination of crude oil export restrictions provides two relevant benefits to U.S. oil producers. First, should domestic/international crude price differentials return to levels observed in 2011, some producers and traders can now sell crude oil to international buyers for potentially higher prices. Second, and perhaps more important for all U.S. oil producers, domestic/international price differentials will likely be moderated by the ability to export crude oil on an unrestricted basis. Should price differentials in the future be large enough to motivate international sales, the resulting exports will likely limit the differential value to the total costs—$6 to $8 per barrel based on EIA analysis referenced above—associated with exporting crude oil to non-U.S. destinations. Allowing exports reduces the likelihood that domestic prices will be severely discounted in the future, which benefits all U.S. producers, even those that do not export crude oil. However, U.S. refiners may not be able to financially benefit from large price differentials in the future should crude oil exports have the anticipated effect of eliminating or limiting the domestic/international price differential. National Defense Sealift Enhancement The debate over allowing crude oil exports proceeded in tandem with a debate over providing cargoes for the U.S.-flag merchant fleet. U.S.-flag international vessels, which must have U.S. ownership and be crewed by U.S. citizens, are guaranteed a large share of government-impelled cargoes, such as military shipments and food aid. However, U.S.-flag international vessels carry almost no commercial cargo, because their daily operating costs are estimated to be nearly three times those of similar foreign-flag ships. In a 2015 hearing, Paul Jaenichen, head of the U.S. Maritime Administration (MARAD), said that the lack of cargo has contributed to a decline in the number of ships participating in the Maritime Security Program (MSP), under which vessels receive operating subsidies in return for being made available to the Department of Defense in time of war or national emergency. A requirement that some portion of crude oil exports be carried by U.S. flag ships was advanced as a means of ensuring additional cargoes for U.S.-flag tankers, but encountered opposition due to concerns that the cost of U.S.-flag shipping could make U.S. oil uncompetitive in foreign markets. P.L. 114-113 does not require U.S. crude oil be exported on U.S.-flag vessels, but it does increase the annual operating subsidies for MSP vessels for FY2017 through FY2021. The increase is intended to encourage ship operators to keep their vessels in the MSP fleet. The annual subsidy increases from $3.1 million per ship to around $5 million per ship through FY2020 and then $5.2 million per ship in 2021. In 2022, the annual subsidy is to revert back to $3.1 million per ship. This subsidy increase further offsets the cost of employing U.S. merchant mariners aboard ship and complying with other requirements to operate under the U.S. flag. Higher subsidies potentially could assist these ships in competing with foreign-flag ships to carry private-sector imports and exports. However, the increased subsidy could also encourage U.S. seafarers and ship supply vendors to negotiate higher compensation for services provided to U.S.-flag operators. It was out of concern for rising U.S. crew costs that Congress changed the operating subsidy program from a fluctuating amount based on the cost differential between U.S.- and foreign-flag ships, to a fixed amount in 1996, the intent being that a fixed payment would create better incentives for U.S. flag operators to constrain costs. At the end of 2015, 57 ships were enrolled in MSP; 60 ships are authorized. The MSP fleet includes 33 container ships, 16 roll-on/roll-off ships (ships with ramps for transporting vehicles), and two tankers. These ships employ about 2,500 U.S. mariners. About 75% of the fleet is owned by U.S. entities affiliated with a foreign shipping line. Enhanced Section 199 Tax Deduction for Independent Refiners Division P, Section 305 of P.L. 114-113 enhanced the Section 199 domestic production activities deduction for refiners that are not a major integrated oil company. Motivation for Tax Relief for Independent Refiners The provision was designed to address concerns that some U.S. refiners would be disadvantaged should there be a change in crude export policy. Domestic and international price differentials that motivated oil producers to advocate for allowing exports (see Figure 1 ) were a benefit to U.S. refiners and contributed to an increase in refinery profit margins. Allowing crude oil exports will likely cap price differentials in the future, thus potentially reducing opportunities for refineries to realize these margins. Refinery advocates presented two oil transportation-related concerns that would result in a competitive disadvantage should crude oil export restrictions be removed. First, the Jones Act cost premium associated with moving crude oil from the Gulf Coast to the Northeast would result in East Coast refineries being at a competitive disadvantage vis-a-vis European refineries. It was suggested by the American Fuels and Petrochemicals Manufacturers (AFPM) that the Jones Act might need to be modified in conjunction with any change to crude export policy. Second, some refineries invested in rail transportation, one of the most expensive crude oil transportation modes. These infrastructure investments were motivated by the large price differentials observed periodically since 2010. To the extent that a change in crude oil export policy either eliminates or limits future price differentials, this effect could potentially adversely affect the value of these rail transportation investments. Modification to Section 199 for Independent Refiners Broadly, the Section 199 deduction serves to reduce effective tax rates on domestic manufacturing activities. Section 305 of Division P of P.L. 114-113 changed how independent refiners account for transportation costs when calculating the deduction, potentially allowing higher oil transportation costs to be associated with greater tax relief. The Section 199 production activities deduction allows taxpayers to deduct a fixed percentage of either income derived from qualified production activities (qualified production activity income; QPAI) or taxable income, the lesser of the two. A taxpayer's QPAI is equal to the taxpayer's domestic production gross receipts (DPGR), reduced by (1) the cost of goods sold that is allocable to those receipts; and (2) other deductions, expenses, and losses that are properly allocable to those receipts. The Section 199 deduction is 6% for oil-related activities, and 9% for other domestic production activities. The change to Section 199 in P.L. 114-113 for independent refiners allows qualifying entities to reduce oil transportation costs accounted for when calculating QPAI. Specifically, the provision states that "costs related to the transportation of oil shall be 25 percent of the amount properly allocable." Thus, independent refiners are allowed to exclude 75% of oil transportation costs when calculating income for the purposes of determining their Section 199 deduction. Assuming that refiners incur oil-related transportation costs, the effect of this change is an increase in QPAI and thus an increase of the deduction amount. The modified treatment for transportation costs became available starting in 2016, and is scheduled to expire at the end of 2021. The Joint Committee on Taxation estimates that the provision will reduce federal revenues by $1.9 billion between 2016 and 2025. A simplified and stylized hypothetical example of how this deduction is calculated appears in Table 1 . Receipts, expenses, and subsequent calculations are illustrative only and actual receipts and expenses for a specific refiner will likely be different. In this example, an independent refiner is assumed to have $80 million in oil-related receipts, $40 million in oil-related expenses, and an additional $10 million in oil transportation expenses. Without the Section 199 deduction, at a 35% tax rate, the tax on this income would be $10.5 million in this example. If the taxpayer were allowed to claim the Section 199 deduction, the deduction would be $1.8 million, or 6% of QPAI. The deduction reduces taxable income by $1.8 million. Thus, assuming a 35% tax rate, tax liability would be reduced by $630,000 (tax liability is reduced from $10.5 million to $9.87 million). With the enhanced deduction, for the purposes of calculating the Section 199 deduction, only 25% of oil transportation expenses are included when calculating QPAI. Thus, QPAI is $37.5 million, and the Section 199 deduction is $2.25 million. At a tax rate of 35%, the additional deduction results in a further reduction in tax liability of $157,500 (tax liability is reduced from $9.87 million to $9.71 million). Overall, the enhanced deduction for independent refiners has the potential to reduce tax liability by up to 1.575% of oil transportation costs. Thus, in the above example, if oil transportation expenses were $5 million, instead of $10 million, the enhanced tax benefit would result in a tax liability reduction of $78,750, instead of $157,500. It is possible that certain independent refineries will not receive any reduction in tax liability from this provision, even if they have substantial oil transportation costs. For taxpayers where taxable income is less than QPAI, the modification of how oil transportation costs are accounted for does not change tax liability since the Section 199 deduction is calculated from taxable income, not QPAI. If the purpose of the provision was to provide relief for independent refineries, particularly those with high transportation costs, the modifications to Section 199 in P.L. 114-113 have several notable limitations. Independent refiners with zero taxable income, or with taxable income that is less than QPAI, will not receive additional tax relief from the modifications of Section 199's treatment of transportation expenses in P.L. 114-113 . Additionally, for independent refiners that are able to claim the enhanced deduction, the reduction in tax liability will generally be worth, at most, 1.575% of oil transportation costs. Finally, as a temporary provision, it may provide some relief during a period of transition, but could also contribute to uncertainty as the modified treatment of transportation expenses is scheduled to expire at the end of 2021. Tax provisions enacted with an expiration date are often extended. Since temporary tax provisions may or may not be extended, expiration dates on tax provisions may be associated with uncertainty.

On December 18, 2015, Congress passed the Consolidated Appropriations Act, 2016 (H.R. 2029), which was signed by the President and became P.L. 114-113. Included in P.L. 114-113 is a provision that repeals Section 103 of the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163), which directs the President to promulgate a rule prohibiting crude oil exports. For nearly four decades, repeal of EPCA was generally not a policy issue since oil production was declining and imports were rising. However, increasing U.S. light oil production starting in the 2010/2011 timeframe, projected production increases, and domestic-to-international oil price differentials that were as large as $30 per barrel, motivated many companies and trade organizations to advocate removing the EPCA crude oil export prohibition. P.L. 114-113 also includes a "savings clause" and a list of exceptions that maintain and provide the President with authority to restrict exports under certain circumstances. Enactment of P.L. 114-113 allows U.S. crude oil to be marketed and sold to international buyers and concludes a nearly two-year debate about the varied and multi-dimensional considerations associated with allowing the export of crude oil produced in the United States. Some oil producers may benefit from this policy change, when market conditions warrant, by potentially selling crude oil for a higher price to global buyers. Perhaps more important for all U.S. oil producers is that allowing crude oil exports may limit the domestic/international price differential in the future. Studies published during the debate estimated that crude oil exports might range between 0 and 2 million barrels per day, reflecting the uncertainty of future market conditions that might motivate exports. Exactly how much crude oil will be exported will depend on oil price differentials, which had narrowed to less than $1 per barrel in January 2016. In addition to repealing EPCA Section 103, P.L. 114-113 also includes provisions that address two considerations discussed during the crude oil export debate. First, owners of U.S. flag ships advocated that crude oil exporters be required to use such ships for overseas transport. While this requirement was not included in P.L. 114-113, the law does include a provision that authorizes increasing the annual subsidy paid to U.S. flag cargo ships participating in the Maritime Security Program (MSP), which provides an operating subsidy in exchange for participating ships being subject to Department of Defense acquisition during times of war. The operating subsidy for each participating ship was increased from $3.1 million to around $5 million per year thru 2021. Second, independent U.S. refiners were generally opposed to allowing unrestricted crude oil exports as many of them were benefiting from price discounts that might either be eliminated or limited as a result of removing export restrictions. Some refiners expressed concern that the cost of waterborne crude shipments from the Gulf coast may result in a competitive disadvantage and that the value of investments made in crude-by-rail infrastructure may be adversely affected should crude oil export restrictions be removed. P.L. 114-113 modified the Section 199 tax deduction for independent refiners by changing how independent refiners account for transportation costs when calculating the deduction, potentially allowing higher oil transportation costs to be associated with greater tax relief. Overall, the enhanced deduction for independent refiners may have fairly modest effects. For most independent refiners that are able to claim the enhanced deduction, the change has the potential to reduce tax liability by up to 1.575% of oil-related transportation costs.

Development of ARRA's Oversight Provisions Examination of how ARRA and its general oversight provisions were developed may provide perspectives on congressional objectives associated with the legislation. In addition, reflection on the development of the provisions may suggest opportunities to make enhancements in ARRA's existing oversight provisions or to address any perceived gaps in the provisions' coverage of significant matters. Obama Transition Planning for Fiscal Stimulus and Oversight On November 7, 2008, then President-elect Barack Obama held his first news conference since the presidential election. In view of continued monthly job losses, he called for a "fiscal stimulus plan that will jump-start economic growth." In response to a question about the prospect that "a stimulus package may be in trouble" during the remainder of the 110 th Congress, the President-elect said "[i]f it does not get done in the lame-duck session, it will be the first thing I get done as President of the United States." Later that month, he announced he had directed his transition "economic team to come up with an Economic Recovery Plan." On December 23, 2008, Vice President-elect Joe Biden said "there will be no earmarks in this economic recovery plan." After the holidays, President-elect Obama referred to the plan as an "American Recovery and Reinvestment Plan." He reiterated on January 6, 2009, that under the economic recovery plan, "[w]e are going to ban all earmarks." He also said that the plan "will set a new higher standard of accountability, transparency, and oversight." Legislative Action in the 111th Congress on Stimulus and Oversight Planning for Stimulus Legislation and Related Oversight Provisions In the wake of a rapidly deteriorating economic picture, CBO released an economic forecast on January 7, 2009. CBO issued the forecast "several weeks earlier than usual to aid the new [111 th ] Congress in its deliberations." The Senate Budget Committee held a hearing on the forecast the next day. In the forecast, CBO said that a "downturn in housing markets across the country, which undermined the solvency of major financial institutions and severely disrupted the functioning of financial markets, has led the United States into a recession that will probably be the longest and the deepest since World War II." To help establish a basis for Congress to consider alternative courses of action, the forecast was done under an assumption that current laws and policies regarding federal spending and taxation would remain the same. CBO noted, for example, that the forecast did not include "the effects of a possible fiscal stimulus package." CBO anticipated that the recession, which began in December 2007, would last until the second half of 2009. Economic output over the next two years, CBO estimated, would average "6.8 percent below its potential—that is, the level of output that would be produced if the economy's resources were fully employed." CBO explained that this gap in gross domestic product (GDP)—a "GDP gap"—is "the difference between real (inflation-adjusted) gross domestic product and its estimated potential level (which corresponds to a high level of resource—labor and capital—use)." In accompanying testimony, CBO's acting director said that "[m]any economists believe that a stimulative fiscal policy (that is, an increase in spending or reduction in taxes designed to foster faster economic growth in the short run) is desirable under the current economic conditions." Congress soon considered legislation intended to diminish this GDP gap and, in the process of doing so, to bolster employment and address perceptions of other economic and policy problems. An early version of the legislation reportedly was drafted by then President-elect Barack Obama's transition team working with Members of the House Committee on Appropriations. On January 14, 2009, then OMB Director-designate Peter Orszag appeared before the Senate Committee on Homeland Security and Governmental Affairs for a confirmation hearing. Among other things, he was asked about his plans for oversight of the economic stimulus package that was anticipated to be considered at the beginning of the 111 th Congress. Director-designate Orszag said the incoming Administration would favor creating a special oversight board. The board would be composed of relevant IGs and chaired by a newly established White House position of Chief Performance Officer (CPO). The board "would review problems and ... would conduct regular meetings to examine specific problems that might be identified." Director-designate Orszag also said the Administration planned "to create a website that will contain information about the contracts and include PDFs [of] contracts themselves." Soon after President Obama was inaugurated, the Obama Administration established a website called Recovery.gov in anticipation of enactment of stimulus legislation. The home page explained the Administration's future intentions for the website: "Check back after the passage of the American Recovery and Reinvestment Act to see how and where your tax dollars are spent. An oversight board will routinely update this site as part of an unprecedented effort to root out waste, inefficiency, and unnecessary spending in our government." Action on Legislation and Oversight Provisions Numerous oversight provisions subsequently were included in economic stimulus legislation considered by the House and Senate. On January 21, 2009, after mark-up of a draft bill by the House Committee on Appropriations, the committee issued a press release that characterized the stimulus as providing "unprecedented accountability" (see Box 1 ). On January 26, 2009, the American Recovery and Reinvestment Act of 2009 ( H.R. 1 , 111 th Congress) was introduced in the House. Shortly before introduction, the White House reportedly had released a document describing several goals of the legislation, both in terms of economic stimulus and achievement of various public policy objectives relating to energy, health care, education, infrastructure, tax policy, income maintenance, and accountability. On January 28, the House passed an amended version of the measure by 244-188. Senate versions of components of ARRA were introduced and reported on January 27 ( S. 336 , with written report) and January 29 ( S. 350 ). At the same time, general concerns had been expressed about the capacity of agencies and "a depleted contracting workforce" to spend funds rapidly "while also improving competition and oversight." In addition, the question had been raised whether IGs and the Government Accountability Office (GAO) have sufficient resources to conduct oversight of the stimulus legislation. Situated in the context of these concerns, however, many observers felt quick action on the stimulus legislation was critical. According to one press report, "[w]hile economists remain divided on the role of government generally, an overwhelming number from both parties are saying that a government stimulus package—even a flawed one—is urgently needed to help prevent a steeper slide in the economy." The Senate amended the House version and passed an amendment in the nature of a substitute on February 10, 2009, by a vote of 61-37. A conference report, which included a joint explanatory statement, was filed on February 12, 2009, stating that it contained no congressional earmarks, limited tax benefits, or limited tariff benefits. The conference report was agreed to in the House on February 13, 2009, by a vote of 246-183, with one Member voting present. On the same day, the Senate agreed to the conference report by a vote of 60-38, clearing the measure for presentment to the President. President Obama signed the measure into law on February 17, 2009. General Oversight Provisions in ARRA Context in Which Oversight Provisions Will Operate Several aspects of ARRA establish the context in which the legislation's general oversight provisions will operate. These include the structure of the legislation, the legislation's explicit purposes and "general principles," and the scale of the oversight task at hand. Structure of Legislation ARRA was enacted in two divisions. Division A, titled "Appropriations Provisions," included many discretionary appropriations provisions in 16 titles. Some of the appropriations were provided for IGs and other oversight-related institutions. Division A also included substantive legislative provisions in some titles. These included provisions to, among other things, promote health information technology (Title XIII), establish a State Fiscal Stabilization Fund (Title XIV), and create a variety of mechanisms and entities focused on oversight (Title XV). A title containing general provisions for Division A focused on oversight (Title XVI). Division B, titled "Tax, Unemployment, Health, State Fiscal Relief, and Other Provisions," included seven titles. Titles in Division B appeared to contain very few general oversight provisions, as discussed later. References to "the Act" within ARRA generally refer to either Division A or Division B, not to the entire law. Therefore, most of ARRA's substantive general oversight provisions that are located in Titles XV and XVI of Division A appear to cover activities and provisions associated with Division A rather than the entire law. Many, but not all, oversight-related appropriations also focused on oversight of funding provided by Division A, as opposed to the entire law. ARRA's Purposes and "General Principles" A conventional approach for oversight is to assess a program, agency, or law in terms of its purposes and related objectives. ARRA identified several explicit purposes and "general principles concerning use of funds," which are excerpted in Box 2 . As discussed later in this report, the purposes and principles might be thought of as falling roughly into three categories: macroeconomic objectives related to recovery from the recession; discrete programmatic, microeconomic, and other policy objectives; and process objectives, which include balancing speed (to address macroeconomic objectives) with "prudent management" (e.g., to minimize waste and fraud). Many of ARRA's specific appropriations and nonfunding provisions, which concern myriad policy areas, might be viewed as falling roughly into these categories, as well. In some cases, there may be ambiguity around, or disagreement about, the specific purposes and objectives of a law and how to define "success" in its implementation. To the extent these phenomena may be evident, stakeholders may believe other criteria are important to consider when overseeing or evaluating a program, agency, or law. Unintended consequences also may be of interest or concern. Scale of Oversight Task: CBO Estimates of ARRA Impacts In response to a congressional request, CBO prepared a year-by-year estimate of the short-term economic impacts of ARRA. In addition, CBO included tables that showed estimated economic "multipliers" corresponding to many provisions, and, in addition, the agency's cost estimate for the conference agreement on H.R. 1 . In the letter, CBO estimated that ARRA would increase the federal government's budget deficit by an overall total of $787.2 billion over 11 years. CBO also broke down the legislation's estimated fiscal impacts on spending and revenues. With regard to spending, CBO estimated that Division A of the legislation would increase discretionary spending by $308.3 billion over the 11-year period from FY2009 through FY2019. Nearly half of the total amount would be spent by the end of FY2010 (September 30, 2010), and nearly 72% would be spent by the end of FY2011 (September 30, 2011). CBO estimated that Division B would increase direct spending by $267.0 billion over the same 11-year period. Nearly 73% of this total would be spent by the end of FY2010, and over 91% would be spent by the end of FY2011. Overall, spending from the perspective of the federal government's unified budget was estimated to total $575.3 billion from FY2009 through FY2019. CBO estimated that Division A would decrease revenues by $0.1 billion over 11 years. Division B would decrease net revenues by $211.8 billion over 11 years, with $244.9 billion in revenue reductions occurring by the end of FY2010. The tax provisions of Division B's Title I accounted for the vast majority of these estimated decreases. The total revenue decrease would be $211.9 billion over 11 years. Two Categories of General Oversight Provisions ARRA's general oversight provisions might be grouped into two categories: nonfunding provisions, which established federal agencies, required agencies to undertake certain tasks, established procedures that must be followed, etc.; and funding provisions, which provided appropriations to oversight-related entities including IGs, GAO, and the newly established Recovery Accountability and Transparency Board. General oversight provisions that fall within each category are discussed in the sections below. Nonfunding General Oversight Provisions Nonfunding general oversight provisions appeared to be included only in Division A, chiefly in Titles XV and XVI. Nevertheless, they were included in considerable variety. Among other things, these substantive provisions established new oversight-oriented entities like the Recovery Accountability and Transparency Board (RATB), enumerated diverse reporting requirements for federal agencies and nonfederal recipients of funds, and tasked RATB, IGs, and GAO with numerous duties. Some highlights of these statutory provisions and related reporting requirements are summarized in bulleted form, below. A more comprehensive tabular presentation of provisions, their ARRA citations, and related reporting requirements, including when ARRA requires specific information to be posted on the Recovery.gov website, is provided in Table B -1 , in Appendix B . IG and GAO Reviews and Reports IGs are required to review "any concerns raised by the public about specific investments using funds made available in [Division A]" and relay findings to agency heads. (Title XV, Sections 1514 and 1515). The Comptroller General is required to conduct bimonthly reviews on the use of funds made available in Division A by selected states and localities. (Title IX, Sections 901 and 902). Reports on Use of Funds Recipients of funds are required to report certain information within 180 days of ARRA's enactment, where recipient is defined as a state or any entity "other than an individual" that receives funds directly from the federal government from appropriations in Division A. (Title XV, Section 1512(c)). Federal agencies are required to publicly report information submitted by funding recipients to the agency. (Title XV, Section 1512(d)). State and local governments' reporting and recordkeeping may be funded, at least in part, by flexibility granted to federal agencies to adjust applicable limits on administrative expenditures for federal awards. (Title XV, Section 1552). State and Local Certification Chief executives of state and local governments are required to certify that infrastructure investments have "received the full review and vetting required by law and that the chief executive accepts responsibility that the infrastructure investment is an appropriate use of taxpayer dollars." (Title XV, Section 1511). Establishment and Functions of RATB RATB is established "to coordinate and conduct oversight of covered funds to prevent fraud, waste, and abuse." RATB's membership is to consist of at least 10 IGs, including, or in addition to, a chairperson, who may be designated or appointed by the President according to certain criteria (Title XV, Sections 1521 and 1522). RATB has several enumerated functions, including to review whether reporting for contracts and grants "meets applicable standards" and "specifies the purpose of the contract or grant and measures of performance." The board also is required to coordinate oversight activities with the Comptroller General and state auditors. RATB is tasked with four categories of reporting requirements. (Title XV, Sections 1523 and 1528). RATB is required to make recommendations to agencies "on measures to prevent fraud, waste, and abuse relating to covered funds." An agency that receives a RATB recommendation is required to submit a "responsive report" to the President, the congressional committees of jurisdiction, and RATB within 30 days of receipt. (Title XV, Section 1523). RATB is required to conduct audits and reviews, and in doing so, may issue subpoenas to compel testimony from nonfederal officers and employees. RATB is authorized to hold public hearings and may enter into certain contracts. RATB has authority to transfer up to 100% of its appropriated funds to any office of inspector general, OMB, the General Services Administration, and an independent advisory panel established by Section 1541 of Title XV. (Title XV, Section 1524). RATB is required to establish a website. (The website was established by the Obama Administration as Recovery.gov in anticipation of enactment of ARRA.) As agencies implement ARRA, the website is to contain, among many other things, considerable information about how funds are allocated and used. Fifteen specific requirements for the website are identified in one provision of Title XV, and other provisions in Division A describe additional information that is required to be posted on, or linked to, the RATB website. (Title XV, Section 1526). IGs are instructed that nothing in the provisions related to RATB shall affect the independent authority of an IG "to determine whether to conduct an audit or investigation of covered funds." An IG's decision "shall be final." (Title XV, Section 1527). Additional Oversight Provisions Contracts funded under Division A are required to be awarded as fixed-price contracts through the use of competitive procedures "to the maximum extent possible," and exceptions are required to be posted on RATB's website. (Title XV, Section 1554). The Council of Economic Advisers, an entity in the Executive Office of the President, is required to submit quarterly reports to the House and Senate Appropriations Committees that "detail the impact of programs funded through covered funds on employment, estimated economic growth, and other key economic indicators." (Title XV, Section 1513). Employees of nonfederal employers receiving funds are granted certain whistleblower protections when disclosing certain information to RATB, an IG, the Comptroller General, a Member of Congress, or other specified entities and persons. (Title XV, Section 1553). Funding Provisions with Appropriations for IGs, GAO, and RATB Appropriations to IGs, GAO, and RATB were included predominately in Division A. In total, the appropriations provided to these oversight-oriented entities summed to $363.75 million. Highlights of these appropriations are discussed here. A more comprehensive listing of the various oversight entities for which ARRA provided funds is presented in Table C -1 , located in Appendix C . Twenty-three IGs received $254.75 million in 25 separate appropriations. Sixteen IGs in all 15 executive departments received appropriations, ranging from a single appropriation of $1 million for the Department of Veterans Affairs to two appropriations totaling $48.25 million for the Department of Health and Human Services. IGs in an additional seven independent agencies also received appropriations. ARRA provided the funding with widely varying periods of availability. For the IG at the Department of State, for example, funds are available until the end of FY2010. Other IGs variously have funds available until the end of FY2011, FY2012, FY2013, or "until expended" (i.e., "no-year" funds). GAO received $25 million, available through the end of FY2010, and RATB received $84 million, available through the end of FY2011. Some of the appropriations were designated for specific purposes, chief among them oversight of programs, grants, and projects funded by ARRA. Other appropriations were essentially supplemental increases without a restrictive specification of purpose. RATB has authority to transfer up to 100% of its funds to any office of inspector general, OMB, the General Services Administration, and an advisory panel for RATB that ARRA established. Potential Issues for Congress With enactment of ARRA, a flurry of activity commenced in executive agencies and the Executive Office of the President. Further requirements and guidance concerning ARRA implementation were forthcoming from the White House and OMB. These documents focused especially on issues related to oversight, accountability, and transparency. Some of the requirements also went beyond ARRA's statutory requirements. On February 18, 2009, OMB issued to agencies "initial implementing guidance" regarding ARRA, including numerous reporting requirements, in a 62-page document. Some of the required information is to be posted on Recovery.gov and agency-specific ARRA-related websites. A month later, President Obama issued a presidential memorandum entitled "Ensuring Responsible Spending of Recovery Act Funds." The memorandum directed agencies in how to use "available discretion" when allocating and spending certain ARRA-related funding. The memorandum also directed agencies to disclose certain communications with federally registered lobbyists. On April 3, 2009, OMB issued "updated implementing guidance" to agencies in a 175-page document. Further guidance from OMB and RATB is expected. In addition, the White House announced the designation of RATB's chairperson (Department of the Interior IG Earl E. Devaney) and the board's full membership in February and March 2009, respectively. The Obama Administration also identified a number of leadership roles for purposes of ARRA implementation (e.g., the appointment of Mr. Edward DeSeve to a White House coordination role for ARRA implementation). Several congressional committees have incorporated ARRA into their oversight agendas and convened hearings. Based on experience with ARRA implementation and other emerging developments, Congress may revisit the structure and contents of ARRA's general oversight provisions. Even before considering experience with implementation, however, several broad issues related to ARRA oversight may be of interest to Congress. Oversight and Crises: Short- and Long-Term Perspectives In the event of a crisis to which Congress, the President, and federal agencies feel compelled to respond, several challenges may present themselves. Some challenges might be characterized as relatively short term. Others may involve a longer-term orientation. Among the short-term challenges, in the present context, is the question of how to balance speed (to address macroeconomic objectives) with "prudent management" (e.g., to minimize waste and fraud). Other challenges in formulating a response to a crisis occur when allocating funding during budget execution. When allocating resources to specific projects and priorities, how should the federal government reconcile values of accountability, efficiency, effectiveness, transparency, public participation, fairness, and equity? Oftentimes in such circumstances, values "trade off" against each other. In making these judgments, agencies and policy makers typically have little time for planning or reflection. For purposes of oversight, prioritization likely will be necessary. The need to prioritize raises a number of difficult questions. Which policy areas (e.g., transportation, health care information technology) or processes (e.g., contracting, grant management) should receive initial attention? Which should receive the most attention? Also, what types of oversight activity will be most effective at preventing future problems, catching current problems when changes still may be made, or identifying problems after the fact? Some of these shorter-term issues are explored in greater detail under subsequent headings. Some longer-term issues include questions of how to build the capacity of federal agencies, Congress, and the President to better prepare for and respond to crises. For example, concerns have been expressed by some observers for years about the adequacy of agency capabilities and workforces in areas such as contract management and program evaluation. To address longer-term issues like these, Congress might explore advantages and disadvantages of options for assessing (or grading) the adequacy of agency management capabilities, both under "normal" circumstances and for contingencies. If Congress wished to consider related options, Congress might explore how systematic, periodic, and transparent such assessments could be. In addition, and arguably no less significant, questions arise of how to anticipate, avoid, and mitigate preventable crises. For example, the National Commission on Terrorist Attacks Upon the United States, generally known as the 9-11 Commission, described an aspect of this capability as "institutionalizing imagination." Organizational, procedural, and system-related options might be explored to address any of these questions. Overseeing Extent to Which ARRA Meets Objectives A typical purpose of oversight is to assess the extent to which an agency, program, or law is meeting its objectives. Through a variety of tools and approaches, Congress may learn what seems to be working well or not well, where more study may be necessary, and about consequences that may not have been intended. Furthermore, both oversight activity and the prospect of scrutiny may prompt behavior changes by agencies and nonfederal actors to address areas of concern. Potential Frameworks for Evaluation As noted earlier, ARRA specified several explicit purposes and "general principles concerning use of funds" (see Box 2 , earlier in this report). These purposes and principles might be thought of as falling into three general categories: macroeconomic objectives (e.g., creating or saving jobs; other indicators of economic activity affected by a reduction of the GDP gap, compared to situation without stimulus); programmatic, microeconomic, and other discrete policy objectives (e.g., impact on public policy outcomes in myriad policy areas addressed by ARRA); and process objectives (e.g., quick action; transparency; prudent management; low levels of waste, fraud, error, and abuse). ARRA also could be examined through the lens of additional or different criteria, which may be based on corresponding views about the proper goals of public policy. For example, alternative criteria could be used if an observer perceived the law's specified purposes as not being sufficiently comprehensive. Certain non-governmental and non-ARRA activities, such as scams perpetrated on the public by impersonators of federal agencies and personnel, also may be of concern for oversight purposes. For objectives related to the first two general categories, many quantitative and qualitative data may be informative, including data from metrics, studies, and program evaluations. For example, in testimony before the Senate Budget Committee, CBO identified three criteria for judging the effectiveness of a fiscal stimulus policy: timeliness (i.e., the increase in aggregate demand caused by a stimulus should match the period when there is a GDP gap); cost-effectiveness (i.e., for a given budgetary cost, the increase in aggregate demand should be maximized, in order to bring real GDP as close as possible to potential GDP and thereby diminish the GDP gap); and consistency with long-term budget objectives (i.e., a short-term stimulus should not significantly exacerbate the nation's long-run fiscal imbalance). For the third general category, relating to process objectives, a typical inference is that effective implementation (e.g., balancing speed with prudent management) increases the probability of achieving objectives associated with the first two categories. Nevertheless, some aspects of speed or prudent management may prove to be more important than others, or to trade off against each other (see related discussion further below). Experience with implementation may yield corresponding "lessons learned." Likely Considerations In assessing the extent to which ARRA meets its objectives, several related considerations likely will be significant. For example, a frequent challenge with metrics and evaluations is estimating the impact of a policy. That is, did a policy intervention such as ARRA (or one of its constituent parts) change the state of affairs for the better, compared to what would have happened without the policy intervention? The task of validly estimating an answer to this question may require grappling with another, related question: to what extent are observed outcomes due to the policy intervention, as opposed to other factors? In order to estimate ARRA's impact, it therefore may be necessary to make comparisons between observed data, on one hand, and estimates of what would have happened in the absence of ARRA, on the other. From a macroeconomic perspective, for example, what impact is ARRA having on GDP, employment, and other indicators of economic activity, compared to what would have happened without a fiscal stimulus? What often makes this evaluation difficult is that experience without a fiscal stimulus, under identical conditions, is not observed. In addition, other factors unrelated to the stimulus may affect macroeconomic results or modify the stimulus' potential impact. For example, CBO cited the importance of an assumption in its March 2009 economic forecast, which included the estimated impact of ARRA. Specifically, the forecast assumed "that financial markets will begin to function more normally and that the housing market will stabilize by early next year. The possibility that financial markets might not stabilize represents a major source of downside risk to the forecast." Because a number of such factors may influence overall economic results, some level of uncertainty arguably is unavoidable in making any estimates of ARRA's impact. Another potential consideration relates to trade-offs among ARRA's multiple objectives. A frequent complication of multidimensional goals (e.g., speed, effectiveness, efficiency, transparency, fairness, and accountability) is that some goals may trade off against each other. For example, the use of speed in the obligation of funds has been seen as essential for economic recovery. Greater speed may promote economic stimulus, but at a cost of some efficiency in the use of tax dollars to achieve public policy outcomes in discrete areas. Speed also may increase the risk of waste or fraud, particularly when agency capacities to handle a sudden infusion of funding may be in question. On the other hand, greater scrutiny and accountability may diminish speed and therefore economic stimulus. They also may increase or decrease efficiency and effectiveness, depending on whether the nature and level of scrutiny are adequately calibrated. When governmental decision makers evaluate policy options and make choices, they implicitly make trade-offs. Decision making regarding ARRA most likely will be no exception. The reconciliation of trade-offs in decision making may be informed by policy analysis and management of risks. Ultimately, however, judgments about trade-offs arguably always are informed by an observer's priorities, beliefs, values, and ethics. A third consideration relates to assessing what is realistically achievable in the short to medium term for each of the three general categories of objectives that were outlined above (i.e., macroeconomic, policy-specific, and process). With respect to process objectives, for example, a subject of considerable attention has been how to build the capability of the Recovery.gov website to provide full transparency for federal funds. Data availability, however, hinges on a number of complex factors, including legacy information technology systems, disparate state and federal systems and data definitions, uneven data quality, and a need for effective project management across a variety of jurisdictions. In that light, it is unclear how much capability may be realistically achievable by the end of FY2010, at which point CBO estimated nearly half of ARRA's discretionary spending will have been spent. In building the capacity of Recovery.gov, the experience of implementing the USASpending.gov website may in some ways be instructive with regard to data availability and quality. Assessing Oversight Systems, Coverage, and Objectives Potential Questions Regarding ARRA Oversight An Obama Administration official has called ARRA "the largest peacetime economic expansion program in the country's history." The Administration and Congress negotiated numerous general oversight provisions for inclusion in the legislation. ARRA's oversight provisions—a collection of new institutions, processes, systems, and resources—supplement the federal government's existing systems of oversight in numerous respects. Some of ARRA's provisions cover all government operations funded by Division A (e.g., many provisions in Title XV). Others operate in specific policy areas (e.g., specific appropriations set-asides). Over time, Congress may consider whether existing management and oversight mechanisms, in combination with ARRA's additional provisions, adequately support effective management and oversight of ARRA implementation. In so doing, several topics and questions that are specific to ARRA might be examined. Does the combination of existing and new oversight mechanisms adequately address ARRA's objectives and risks? Are there some potential oversight topics that are not explicitly addressed in ARRA? Does the combination of new and existing oversight systems leave gaps? Is there a point at which oversight efforts and scrutiny become counterproductive? If so, in what sense(s)? How are competing imperatives (transparency, accountability, flexibility, cost, etc.) to be reconciled? Are some approaches to oversight more helpful than others? Do some approaches produce unintended consequences? Does the experience with ARRA offer lessons learned for the "normal" systems of oversight? If so, are some changes in the "normal" system of oversight advisable? What approaches to oversight work well in a separation of powers system, in which federal government branches compete for control over public policy, and in a federal system, in which the federal government and states have potentially overlapping lines of authority? If Congress wishes to assess the overall oversight framework for ARRA, several overarching considerations about federal oversight may be relevant to assessing questions like the foregoing. A number of these considerations are analyzed below. Federal Oversight Systems and Objectives As a threshold matter, the federal government might be viewed as embodying a system of "nested" oversight. That is, multiple entities engage in simultaneous and multi-tiered oversight activities. For example, Congress oversees the President, EOP (including OMB), agencies, and nonfederal entities. Furthermore, Congress has established, structured, and funded executive agencies to allow for oversight of agency actions. Congress also has passed a variety of "general management laws" for executive agencies to establish procedures that may be overseen. At the same time, IGs and congressional support agencies such as GAO provide assistance to Congress, agencies, and the President with oversight. Within the executive branch, OMB has a statutory responsibility to provide management leadership for many agencies, including monitoring and oversight of their activities. Agencies oversee their own activities, the activities of regulated entities, and the activities of recipients of federal funds. Agencies undertake these tasks through a variety of organizational and procedural arrangements, often as Congress has mandated via statute. When state governments receive federal dollars, they may oversee the activities of local governments. All of the foregoing entities also oversee in many respects the activities of industries, firms, and other nongovernmental actors. Viewed together, for example, GAO may attempt to oversee OMB's oversight of an agency's oversight of a state agency, which in turn attempts to oversee the use of funds it made available via contract or grant to a firm, local government, or nonprofit organization. Throughout, tools such as monitoring, analysis, and evaluation may be utilized. In assessing and potentially considering how to modify an oversight framework, there also are multiple perspectives on the potential objectives of oversight. These include the following: compliance with applicable laws and regulations (e.g., adherence to legal requirements and avoidance of fraud); implementation that is faithful with congressional intent, when an agency or the President exercises discretion; avoidance of mismanagement (e.g., adherence to sound management practices); avoidance of undesired bias in funding allocations and policy execution (e.g., fair allocation of resources and fair implementation of policy, with intended equity); effectiveness of funded activities (e.g., achievement of programmatic missions and purposes); and efficiency of funded activities (e.g., minimization of avoidable "waste" and unnecessary redundancy). The ways in which RATB, IGs, GAO, OMB, implementing agencies, and nonfederal recipients of funds (e.g., state governments) approach these perspectives on oversight, in the context of ARRA, may reveal lessons learned and patterns over time. Topics Not Explicitly Addressed by General Oversight Provisions in ARRA Assessments of ARRA's implementation and oversight framework likely will be informed by an observer's values, short- versus long-term orientation, and perspectives on the proper structure and objectives of oversight. Nonetheless, as a point of departure, some initial observations still might be made regarding topics that do not appear to be explicitly addressed by general oversight provisions in ARRA. Coverage of Division B Almost all of ARRA's general oversight provisions apply to provisions included in Division A of the legislation. Very few appear to apply explicitly to Division B (e.g., regarding tax expenditures). At the same time, however, some provisions in Division B are subject to study or oversight in specific cases. In addition, although some appropriations to IGs in Division A specified that funds were to be used for oversight of activities related to Division A (thereby restricting their use to that purpose), other appropriations to IGs and GAO did not contain a specification of purpose related only to Division A. Therefore, some appropriations presumably could be used for oversight of activities and funding associated with Division B. Consideration of the extent to which ARRA's general oversight provisions cover Division B may raise questions. For implementation purposes, will Division B receive the same level of oversight as Division A? Will existing oversight mechanisms provide adequate oversight for all of ARRA's provisions, notwithstanding the focus of ARRA's general oversight provisions on Division A? Funding for, and Capacity of, State and Local Oversight Entities State and local governments will receive a surge of many billions of dollars under ARRA, raising the potential issue of whether these governments will have capacity to effectively manage the influx of funds. ARRA authorized agencies that receive funds under Division A to "reasonably adjust applicable limits on administrative expenditures for Federal awards to help award recipients defray the costs of data collection requirements initiated pursuant to [Division A]" (Division A, Title XV, Section 1552). However, it is not clear if state and local oversight entities (e.g., state-level auditors general) will have access to increased resources, if they are needed in order to accommodate a surge in activities funded by ARRA. To what extent might this be an issue that state and local governments confront? Transparency Regarding Agency and OMB Decision Making In addition, many of the general oversight provisions in Division A focus on transparency regarding final allocations of funds and the outcomes of expenditures. However, not as much attention in ARRA appears to focus on the process within executive agencies for deciding how to allocate funds in the first place. When early versions of ARRA were being developed, then President-elect Obama and Vice President-elect Biden indicated an Obama Administration position that ARRA should contain no congressionally originated earmarks. The President later made a policy statement on the general subject of congressionally originated earmarks, outside the context of ARRA. He said that "on occasion, ... [p]rojects have been inserted [in legislation and report language] at the 11 th hour, without review, and sometimes without merit, in order to satisfy the political and personal agendas of a given legislator, rather than the public interest." Some of the same concerns, however, might be raised in the context of OMB and agency decision making during budget execution under ARRA. Agencies frequently are granted considerable discretion during budget execution. Given this discretion, to what extent might political appointees within agencies cause certain projects to be funded, without substantial review or merit? Similar concerns about "presidential earmarking" and "executive earmarking" sometimes have been raised. At the same time, the Obama Administration has issued presidential memoranda regarding agency use of discretion under ARRA and in contracting. Experience with ARRA's implementation may indicate what level of transparency regarding executive agency and OMB decision making ultimately will be forthcoming. Appendix A. CBO January 2009 Estimate of GDP Gap, Without Enactment of ARRA Graphical displays may assist with visualizing the concept of a GDP gap. CBO's January 2009 testimony before the Senate Budget Committee included such a graphic, showing an estimate of the GDP gap without enactment of a stimulus law. Based on CBO's economic forecast, which assumed no changes in policy, CBO projected "that the economy will produce about $1 trillion less output per year than its estimated potential in each of 2009 and 2010 and significantly less than its potential in 2011 and 2012 as well." See Figure A -1 . Appendix B. Table of Selected ARRA General Oversight Provisions Appendix C. Detail of ARRA Appropriations to IGs, GAO, and RATB IGs are listed in alphabetical order of their parent departments, followed by IGs located within independent agencies. GAO and RATB are listed at the table's end. The table indicates the division and title of ARRA in which the appropriation was included, the funding amount, the period of availability for the funds, and, in the last column, whether appropriations language specified that resources be used only for the purpose of overseeing ARRA-provided funds. Appendix D. Early CBO Estimates of GDP Gap, Including Impact of ARRA Congress required in ARRA's Division A that the law's impact on economic indicators be evaluated (Title XV, Section 1513). Congress may conduct oversight over the federal government's attempts to diminish the recession's GDP gap and ARRA's contribution to the effort. Graphical displays may assist with visualizing the concept. After ARRA was enacted, CBO prepared a year-by-year estimate of the short-term economic impacts of the law. CBO noted that "[t]he macroeconomic impacts of any economic stimulus program are very uncertain," and that "[e]conomic theories differ in their predictions about the effectiveness of stimulus." Nonetheless, CBO developed a range of estimates of the impacts of ARRA "that encompasses a majority of economists' views." CBO's letter included a graphic that showed the estimated impact of ARRA on actual GDP. CBO explained that the previous figure "shows three different projections of the economy's actual output: CBO's January baseline projection of GDP (which does not include the effects of ARRA), GDP using CBO's high estimate of the effects of the legislation; and GDP using CBO's low estimate of the effects of the legislation." CBO subsequently updated its economic forecast of the GDP gap in its analysis of the Obama Administration's preliminary budget proposals for FY2010. In two graphics, CBO showed "the middle of the range of the agency's [March 2009] estimates of ARRA's impact on GDP and employment." In brief, CBO estimated ARRA likely would contribute to helping end the recession, in concert with actions by the Federal Reserve and Department of the Treasury. The current recession, which began in December 2007, took a sudden and severe turn for the worse late last year. Of the 4.4 million jobs lost since the recession began, more than half have been lost in just the past four months. According to the Congressional Budget Office's economic projections, the economy will continue to deteriorate for some time, although the adoption of the American Recovery and Reinvestment Act and very aggressive actions by the Federal Reserve and the Treasury will help end the recession this fall. CBO performed similar analysis regarding the unemployment rate. See Figure D -3 , below. CBO noted, however, that the range of estimates of ARRA's impact "is quite large," and that CBO's "current [economic] forecast, particularly for the near term, is subject to a greater than normal degree of uncertainty."

In the wake of a rapidly deteriorating economic picture and year-long recession that the Congressional Budget Office has called the most severe since World War II, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). This report discusses ARRA's "general oversight provisions" and several related issues for Congress. For purposes of this report, the term "general oversight provision" means an oversight-related provision that addresses multiple programs, agencies, or appropriations accounts. Provisions that are specific to a single program or appropriation (e.g., appropriations set-asides and reporting requirements) are excluded from the report's scope. The report includes tabular presentations of ARRA's general oversight provisions. The provisions provide for, among other things, establishment of a Recovery Accountability and Transparency Board, numerous reporting and evaluation requirements, and increased resources for agency Inspectors General (IGs) and the Government Accountability Office (GAO). Even before considering experience with implementation, several broad issues related to ARRA oversight may be of interest to Congress. These include assessments of ARRA's role in achieving economic objectives. Typical objectives of a fiscal stimulus policy relate to increasing economic activity in the short term, compared to what would have happened without a stimulus. In addition, some stakeholders have emphasized that stimulating the economy in the short term alone is not a sufficient definition of "success." From this perspective, the manner in which spending, tax, and other public policies are implemented, and also the impacts of these policies, may be important. All of these perspectives appear to have been included among the law's explicit purposes and "general principles concerning use of funds." Given ARRA's direction to "commenc[e] expenditures and activities as quickly as possible consistent with prudent management," difficult trade-offs among goals may be inevitable. Over time, Congress may consider whether existing management and oversight mechanisms, in combination with ARRA's additional provisions, adequately support effective management and oversight of ARRA implementation. The experience with ARRA also may offer lessons learned for the "normal," non-ARRA systems of oversight. Beyond the immediate situation, additional oversight issues for Congress may relate to longer-term questions. These include how to build and monitor capacity within agencies to respond effectively to crises. Questions also may arise regarding how to build and monitor capacity in agencies and government overall to anticipate crises, mitigate their risks, and avoid preventable crises. This report analyzes these and other issues after reviewing how the oversight provisions were developed and providing an overview of the enacted provisions themselves, including related appropriations and reporting requirements. The topic of subsequent implementation of the oversight provisions, including actions by executive agencies and the Office of Management and Budget (OMB), is not included in the scope of this report. This report will be updated as events warrant.

Introduction Following the 9/11 terrorist attacks, Congress authorized the President's use of "all necessary and appropriate force" against those "nations, organizations, or persons" who "planned, authorized, committed, or aided the terrorist attacks." As a result of subsequent military action, particularly in Afghanistan, the United States captured numerous persons whom it suspected of ties to Al Qaeda or the Taliban—groups alleged to have perpetrated the 9/11 attacks or to have aided the perpetrators. The United States transferred many such persons to the U.S. Naval Station at Guantanamo Bay, Cuba. The Guantanamo detentions prompted difficult legal questions regarding wartime detention and the separation of powers, some of which had previously been explored only in the context of traditional wars. What legal frameworks limit the Executive's authority to detain and try persons captured in a military conflict as it sees fit? Do statutory and constitutional rights to challenge one's detention extend to non-citizens detained outside of the United States? In what circumstances may Congress limit the federal courts' jurisdiction over petitions for habeas corpus? Justice Stevens has been a key player in the Supreme Court's resolution of such questions. He authored majority opinions in two significant cases, Rasul v. Bush and Hamdan v. Rumsfeld . In those cases, the Court decided questions regarding Guantanamo detainees' access to habeas review on statutory grounds, without addressing whether the U.S. Constitution might guarantee such a right. Nevertheless, they arguably provided the legal underpinning for the 2008 decision Boumediene v. Bush , in which the Court reached the constitutional question. Likewise, although the Hamdan decision struck down early military commission procedures on statutory grounds, it arguably framed the Court's approach to reviewing the balance of the three branches' powers during wartime and set the stage for future reviews of military commission procedures. Justice Stevens might also be characterized as the leading voice among the justices encouraging the Court to rule on difficult separation-of-powers questions implicated by wartime detentions. In 2004, for example, he wrote a dissenting opinion, joined by three other justices, in Rumsfeld v. Padilla . The case involved a man, determined by the President to be an enemy combatant, arrested in Chicago and detained in a military brig. The Court resolved his subsequent habeas challenge on statutory grounds, and did not resolve questions regarding the President's authority to conduct military detentions. In dissent, Justice Stevens argued that the Court had a duty to address the "questions of profound importance to the Nation" raised in the case. He used relatively strong language to describe the importance of the questions at stake, concluding with the argument that "if this Nation is to remain true to the ideals symbolized by its flag, it must not wield the tools of tyrants even to resist an assault by the forces of tyranny." Historical Interpretation in Habeas Corpus Questions Over time, the writ of habeas corpus has evolved as the primary means to challenge executive detentions. The U.S. Constitution does not mention the writ, except to limit the circumstances in which it may be suspended. A federal statute, 28 U.S.C. § 2241, provides the federal courts with jurisdiction to grant writs of habeas corpus to specified petitioners, including those whose custody is shown to violate the U.S. Constitution, federal statute, or international law. However, the writ has a history "antecedent to statute … throwing its root deep into the genius of our common law." Thus, the historical use and interpretation of the writ are crucial factors for interpreting its scope. It is common for Supreme Court justices to emphasize history in their interpretation of the habeas writ; however, their views of history differ. A case decided shortly before the 9/11 attacks, INS v. St. Cyr , offers a pre-9/11 glimpse of Justice Stevens's historical interpretation of the writ. In that case, a lawful permanent resident of the United States was subject to deportation by the executive branch because of an earlier conviction, but a legal issue arose on whether he was eligible for discretionary relief from removal. He filed a habeas petition in federal court to challenge his continued detention pending deportation. Although the case was resolved on statutory grounds, Justice Stevens emphasized the traditional role the habeas writ plays in limiting executive-branch detention authority. Writing for the majority in the 5-4 case, he asserted that "[a]t its historical core, the writ of habeas corpus has served as a means of reviewing the legality of Executive detention…." Contrasting petitions brought to challenge detentions initiated by the executive with petitions asserted in other contexts, including petitions filed by prisoners convicted by criminal courts, he asserted that "it is in [the executive detention] context that [the writ's] protections have been the strongest." This view of the habeas writ's historical role appeared to inform Justice Stevens's approach in post-9/11 cases. For example, in Hamdan , he emphasized the "compelling historical precedent" supporting civilian courts' intervention in military commission proceedings. Contrast with Justice Scalia Some commentators have characterized the post-9/11 wartime detention cases as evidencing a jurisprudential clash between Justice Stevens and Justice Scalia. Nevertheless, though subsequently drawing differing conclusions from its application, the two justices have proceeded from a common analytical premise, as evidenced in Hamdi v. Rumsfeld , one of the early landmark cases decided after the 9/11 attacks. In that case, a plurality of the Supreme Court justices upheld, with limitations, the domestic detention of a U.S. citizen who was captured in Afghanistan and alleged to have been fighting for the Taliban. In a dissenting opinion, Justices Stevens and Scalia agreed on a position that none of the other justices shared. Specifically, they viewed the domestic, preventative (i.e., non-criminal) detention of a U.S. citizen as exceeding the Executive's power. The dissenting opinion articulated the most restrictive view of executive power among the various opinions. It asserted that, historically, "the Executive's assertion of military exigency has not been thought sufficient to permit detention without charge." However, as the factual scenarios moved beyond U.S. boundaries and involved non-citizens—including in Rasul (decided the very same day as Hamdi )—the two justices' interpretations diverged. Although both justices emphasized historical context and prior precedents, they reached opposite conclusions. Specifically, whereas Justice Stevens continued to interpret executive authority relatively narrowly as applied to non-citizens in Guantanamo, Justice Scalia perceived a historical distinction between the treatment of detainees on U.S. soil, on one hand, and the treatment of aliens outside U.S. territory, on the other hand. That difference is evident throughout the post-9/11 wartime detention cases. In several dissenting opinions, Justice Scalia argued in favor of bright-line rules, in which jurisdiction would end at the boundaries of U.S. sovereign territory. In contrast, Justice Stevens adopted a more case-specific approach, in which history and precedents were viewed as supporting the application of rights and jurisdiction to Guantanamo detainees. One result of this split was that if Justice Scalia's approach had prevailed in the post-9/11 cases, the Court would have resolved many of the wartime detention cases by declining to exercise jurisdiction. Instead, Justice Stevens's approach led to the Court's resolution of various questions on the merits. Rasul v. Bush After 9/11, numerous Guantanamo detainees submitted habeas petitions in federal courts to challenge their detentions. The petition in Rasul was filed on behalf of two Australian and 12 Kuwaiti citizens whom the United States had captured in Afghanistan. The question before the Court was whether the federal habeas statute granted jurisdiction to consider petitions brought by non-citizens located in Guantanamo. The government argued that the statute did not apply extraterritorially. The statutory text made no reference to petitioners' geographic location or citizenship. Supreme Court precedents did not necessarily decide the issue. In several cases predating the habeas statute, the Court upheld federal courts' jurisdiction over writs of habeas corpus challenging wartime detentions. However, those cases typically involved persons detained in the United States. In contrast, in Johnson v. Eisentrager , a post-World War II case decided a few years after Congress enacted the current habeas statute, petitioners were serving sentences in Germany after a trial by a U.S. military commission in China. Noting six factors, the Court held that the courts lacked jurisdiction over the Eisentrager petitions. Writing for the five-justice majority in Rasul , Justice Stevens relied on case-specific facts to distinguish Eisentrager and hold that the "[a]pplication of the habeas statute to persons detained at [Guantanamo] is consistent with the historical reach of the writ of habeas corpus." To reach that conclusion, he characterized the Eisentrager holding as limited to its facts. He then distinguished the Guantanamo detainees from the petitioners in Eisentrager , concluding that the two groups "differ … in important respects." In particular, he emphasized that unlike the Eisentrager petitioners, the Guantanamo detainees were not alien enemy combatants in a traditional conflict between state armies. He also noted that unlike its detention facility in post-war Germany, the United States exercises "complete jurisdiction and control" over the Guantanamo Naval Station, pursuant to an agreement with Cuba. Justice Stevens relied on a second line of argument to support the Court's holding. He recalled Ahrens v. Clark , a case decided a few years prior to Eisentrager , in which the Court interpreted the federal habeas statute as not providing jurisdiction for petitions brought by persons located outside of a court's territorial jurisdiction. (Justice Stevens was well situated to recollect that case: when the Court considered Ahrens , he was serving as a law clerk for Justice Rutledge, who wrote a dissenting opinion.) He then interpreted a 1973 decision as having limited Ahrens . Particularly given the sparse precedent on the issue of the extraterritorial reach of habeas corpus rights, Justice Stevens's unique historical understanding might have been persuasive to some of the other justices. Justice Scalia wrote a dissenting opinion in Rasul that rejected Justice Stevens's fact-specific distinctions in favor of a bright-line rule. He characterized Eisentrager as "settled law." Under that precedent, he argued, courts lack jurisdiction over habeas claims brought by non-citizens outside U.S. sovereign territory. Hamdan v. Rumsfeld The petitioner in Hamdan was a Yemeni national alleged to have worked as Osama Bin Laden's bodyguard and driver. Like the petitioners in Rasul , he was captured in Afghanistan and detained at Guantanamo. Two years into his detention at Guantanamo, he was determined by the President to be subject to a military order establishing military commissions and charged with one count of conspiracy "to commit … offenses triable by military commission." He challenged the planned military commission proceeding, arguing that (1) the Executive lacked the authority under existing statutes and the laws of war to use a military commission as the forum for a trial for the crime of conspiracy; and (2) the military commission procedures violated both the Uniform Code of Military Justice (i.e., Chapter 47 of Title 10 of the U.S. Code) and the Geneva Convention, under which he was entitled to be treated as a prisoner of war. In response, the government urged the Court to dismiss the case based on a provision of the Detainee Treatment Act that had removed federal courts' jurisdiction over habeas challenges brought by aliens held in U.S. custody as enemy combatants. The petitioner argued that the provision did not apply to cases that, like his, were pending when the measure passed, and that, in any event, it was unconstitutional. Hamdan prompted a complicated set of opinions by the justices. Justice Stevens wrote the main majority opinion, but the opinion was divided into multiple parts, with other justices joining some but not all of them. For example, only three other justices joined a portion of Justice Stevens's opinion that held that the offense of "conspiracy … to commit offenses triable by military commissions" was one that could not be tried by military commission. Other parts of Justice Stevens's opinion were joined by a majority of justices and thus expressed a holding of the Court that has precedential weight. Writing for a majority of the justices, Justice Stevens rejected the argument that the Detainee Treatment Act removed federal courts' jurisdiction over Hamdan's habeas challenge. That holding was grounded on an analysis of the Court's precedents regarding retroactivity of statutes, under which a presumption generally favors a prospective effect only. Also writing for a majority, he concluded that the military commissions' procedures, as then designed, violated precepts of the Uniform Code of Military Justice (UCMJ), international laws of war incorporated into the UCMJ, and UCMJ provisions regulating military commissions. An Executive Order signed in November 2001 governed the detention and trial of non-citizens whom the President determines might have an Al Qaeda connection or might have engaged in terrorist activities directed at the United States. It then provided that such individuals would be tried by military commission "for any and all offenses triable by military commissions." The Court held that any power to create them must flow from the Constitution and must be among those "powers granted jointly to the President and Congress in time of war." In other words, it viewed the statutes as, at most, "acknowledg[ing] a general Presidential authority to convene military commissions in circumstances where justified under the 'Constitution and laws,' including the law of war," rather than as providing an independent basis of authority for the convening of special military trials. It also held that even alleged Al Qaeda members, such as Hamdan, fell within the protections of the Geneva Conventions. Justices Scalia, Thomas, and Alito wrote dissenting opinions. One point of disagreement concerned statutory interpretation. For example, Justice Scalia asserted that under the plain text of the Detainee Treatment Act, federal courts lack jurisdiction over Hamdan's habeas petition. He likewise disagreed with the majority's reading of the precedents regarding retroactivity. Other areas of contention seemed to strike closer to the heart of separation-of-powers concerns. For instance, Justice Scalia argued that the Court should refrain from exercising jurisdiction in the case even if Congress had not prohibited its exercise, in part because of the "military exigencies" supporting the detentions and the military commission process. Similarly, Justice Alito's dissenting opinion argued that the Court is bound to defer to the President's plausible interpretation of the treaty language. Role in Subsequent Cases Because the questions regarding habeas jurisdiction were decided on statutory grounds in Rasul and Hamdan , those cases did not resolve a looming constitutional question: did the U.S. Constitution's Suspension Clause prevent Congress from stripping the federal courts of jurisdiction over Guantanamo detainees' habeas challenges? The Suspension Clause of the U.S. Constitution provides that "[t]he Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it." After the Hamdan decision, Congress again enacted a statutory provision in 2006 that purported to explicitly remove federal courts' jurisdiction to review habeas challenges, including pending cases, brought by aliens held in U.S. custody as enemy combatants. The constitutional question was thus prompted. A case raising the question, Boumediene v. Bush , was soon brought. Although Justice Stevens did not write the majority opinion in Boumediene , he arguably had two important roles in the case. First, when the Court earlier declined to review the case, he and Justice Kennedy issued a statement noting the "obvious importance of the issues raised" by the case, signaling a possible willingness to vote to review the case after some procedural circumstances had changed. Second, as the senior Associate Justice on the Court, Justice Stevens has the role of assigning the writing of opinions in cases in which the Chief Justice is not in the majority. In Boumediene , Justice Stevens assigned the majority opinion to Justice Kennedy, an assignment that might have been important in retaining a five-justice majority in the case. Justice Stevens's Legacy Although the Rasul and Hamdan decisions were largely resolved on statutory grounds, it can be said that Justice Stevens has been instrumental in developing post-9/11 jurisprudence regarding the limits of executive power during—and following—armed conflicts. Prior to 9/11, the Supreme Court had rarely considered questions regarding potential limits on the President's Commander in Chief power. The wartime detention cases provide key insights into the Court's views on the reach of executive authority, as well as on other separation-of-powers concerns, including Congress's role. The 9/11 attacks were arguably indicative of broad and long-lasting shifts in the manner in which wars are waged. Rasul , Hamdan , and other key post-9/11 cases will likely serve as the leading line of precedents in future non-traditional conflicts. Justice Scalia and some other justices have perceived a broad vision of executive power to be well grounded in historical and legal precedents, as least where non-citizens are concerned. In contrast, Justice Stevens and other justices have viewed historical precedents as placing limits, in some circumstances, on the Executive's authority to indefinitely detain wartime captives or to set procedures for their trial. It has been asserted that Justice Stevens's jurisprudential views on such issues may have been focused, to some degree, by both his experience as a World War II veteran and his time as a law clerk for Justice Rutledge, who is said to have regretted legal interpretations he adopted to uphold the internment of Japanese Americans. Regardless, Justice Stevens's case-specific approach to such issues is likely to have both a short-term and a long-standing effect. For example, in the near future, the Court will likely review newly enacted military commission procedures, which are currently being utilized in trials of detainees. Looking into the future, the decisions are likely to impact future decisions in which the Court is called upon to decide the extent to which aliens held outside of U.S. territory are entitled to rights under the U.S. Constitution.

Justice John Paul Stevens played a pivotal role in determining the scope of executive-branch power in a post-9/11 world. After 9/11, Congress quickly authorized the Executive to respond to the terrorist attacks using military force. Difficult legal questions emerged from the consequences of the ensuing military actions, particularly as suspected members of Al Qaeda and the Taliban were captured in Afghanistan and elsewhere and transferred to the U.S. Naval Station at Guantanamo Bay, Cuba. Key questions included: What legal authorities restrict the Executive's ability to detain and try such persons as it sees fit? To what extent do detainees outside of the United States have the right to challenge their detentions in federal courts? When may Congress remove federal courts' jurisdiction over habeas cases? Justice Stevens authored majority opinions in two leading cases, Rasul v. Bush and Hamdan v. Rumsfeld, in which the Court allowed detainees' habeas petitions to proceed and invalidated the early incarnation of military commissions, thereby rejecting the broader views of executive power articulated shortly after the 9/11 attacks. In the cases, his view prevailed over strongly articulated dissenting opinions authored by Justice Scalia and other justices. For a more in-depth examination of the Supreme Court's post-9/11 decisions regarding habeas corpus, see CRS Report RL33180, Enemy Combatant Detainees: Habeas Corpus Challenges in Federal Court, by [author name scrubbed] and [author name scrubbed].

Introduction In recent years, congressional attention has been drawn to the roles and responsibilities of U.S. ambassadors who serve as Chiefs of Mission in U.S. embassies abroad. The death of Ambassador Christopher Stevens in Benghazi, Libya, in September 2012 highlighted the dangers that ambassadors may encounter as the front-line face of U.S. diplomacy, and the availability of resources, leadership, and communication relative to those dangers. The ongoing debate on interagency reform for missions abroad stresses the need to improve coordination among all U.S. agencies, a key responsibility of U.S. ambassadors. The State Department and United States Agency for International Development (USAID) 2010 Quadrennial Diplomacy and Development Review (QDDR) emphasized the need to equip ambassadors to better perform that role. In addition to these specific concerns, congressional interest stems from Congress's part in selecting U.S. ambassadors (as the U.S. Senate advises and consents on their appointment), providing the resources they need to accomplish their missions, and overseeing their conduct of those missions. This report addresses the role and effectiveness of U.S. ambassadors and others who serve as a Chief of Mission (COM) abroad, particularly their responsibility for coordinating interagency activities and their control over U.S. forces operating in their countries of assignment. After a background section on the history of COM roles and a section on the sources of COM legal authority, this report addresses four commonly asked questions regarding the scope and exercise of COM authority. It concludes with a discussion of two prominent congressional concerns: (1) how effective is COM authority in practice? and (2) how might the exercise of COM authority be improved? It will be updated as warranted. Background on the COM Role "Chief of Mission," or COM, is the title conferred on the principal officer in charge of each U.S. diplomatic mission to a foreign country, foreign territory, or international organization. Usually the term refers to the U.S. ambassadors who lead U.S. embassies abroad, but the term also is used for ambassadors who head other official U.S. missions and to other diplomatic personnel who may step in when no ambassador is present. The U.S. Constitution authorizes the President to appoint ambassadors with the advice and consent of the Senate, that is to say, subject to Senate confirmation. In circumstances where no presidentially appointed ambassador is currently serving at a U.S. mission abroad, legislation further authorizes the President to appoint a career U.S. foreign service officer as a chargé d'affaires or "otherwise as the head of a mission ... for such period as the public interest may require." An ambassador or other foreign service official may hold the COM position within a given U.S. mission abroad. Appointed by the President, each COM serves as the President's personal representative, leading diplomatic efforts for a particular mission or in the country of assignment under the general supervision of the Secretary of State and with the support of the regional assistant secretary of state. The role of the COM has expanded considerably since World War II. With the postwar expansion of U.S. foreign assistance around the world, COMs assigned to head U.S. embassies or other country-based diplomatic missions abroad have been charged with responsibility for overseeing nearly all U.S. government activities in their country of assignment, with the primary exception of military operations. Most often, they exercise this authority through their leadership of the embassy's "country team," the membership of which includes the chief representative of each U.S. government agency undertaking activities in a host country or other mission. The State Department/USAID 2010 Quadrennial Diplomacy and Development Review (QDDR) casts ambassadors as chief executive officers or "CEOs" of multi-agency missions, not only conducting traditional diplomacy, but also leading and overseeing civilians from multiple federal agencies in other work. The QDDR highlights the key role of country teams and ambassadors in the conduct of foreign policy and assistance, and sets forth ways in which the Obama Administration would try to improve the knowledge and skills of COMs and their ability to lead country teams. Civilian agencies "possess some of the world's leading expertise on issues increasingly central to our diplomacy and development work," the QDDR states. "The United States benefits when government agencies can combine their expertise overseas as part of an integrated country strategy," when "implemented under Chief of Mission authority, and when those agencies build lasting working relationships with their foreign counterparts." At the time of the QDDR's release, then-Secretary of State Clinton also announced that Chiefs of Mission were to play a role in integrating country-level strategic plans and budgets. Current Legal Authority of Chiefs of Mission The authorities and responsibilities of COMs are explained primarily in the Foreign Service Act of 1980, as amended (FSA 1980; P.L. 96-465 ). (This legislation also explains the responsibility of all U.S. government officials operating under a U.S. mission abroad to report to the COM and abide by COM directives.) Section 207 of FSA 1980 serves as a codification in legislation of many of the provisions in previous executive orders setting out and developing COM authority as U.S. government activities abroad increased throughout the latter half of the 20 th century. COM authority is also shaped by executive branch directives, which include executive orders and other presidential directives and State Department regulations, some of which provide more extensive authority than FSA 1980. According to State Department regulations, COM authority derives originally from the President's general constitutional powers in foreign affairs. Because of this constitutional basis for COM authority, according to the State Department, the President's letter of instruction (see " Letter of Instruction ," below) providing greater detail to COMs is of greater significance in determining a COM's authority than the pertinent legislative provisions relating to such authority. Legislation Section 207 of the FSA 1980 (22 U.S.C. §3927) sets out the three main components of COM authority: (1) the COM's responsibilities, (2) the COM's authority over the personnel stationed at the embassy and in the country of assignment, and (3) the obligations of U.S. government personnel and agencies to that COM. Each component is outlined below. COM Responsibilities . Section 207(a)(1) of FSA 1980 states that, under the direction of the President, a COM "shall have full responsibility for the direction, coordination, and supervision of all Government executive branch employees in that country," except for Voice of America (VOA) correspondents on official assignment and employees under the command of a U.S. Geographic Combatant Commander (GCC). (Recent Presidential Letters of Instruction exclude personnel on the staff of an international organization, but do not reference VOA correspondents, see below.) Pursuant to Section 207(a)(2), the COM is also responsible for keeping " fully and currently informed with respect to all activities and operations of the Government within that country, and shall insure that all Government executive branch employees in that country (except for Voice of America correspondents on official assignment and employees under the command of a United States area military commander) comply fully with all applicable directives of the chief of mission." A principal duty of each U.S. Chief of Mission in a foreign country, under Section 207(c) is "the promotion of United States goods and services for export to such country." COM Authority o ver Personnel . Section 207(b) of FSA 1980 states that any executive branch agency with employees in a foreign country "shall insure that all of its employees in that country" (except for VOA correspondents on official assignment and those under the command of a GCC) "comply fully with all applicable directives" of the COM. Obligation to Keep COM Fully Informed. Subsection (b) also provides that any executive branch agency with employees in a foreign country "shall keep the chief of mission to that country fully and currently informed with respect to all activities and operations of its employees in that country…." Section 207 of FSA 1980 limits COM authority to coordinate and supervise U.S. government activities in a host country to executive branch agencies. In general, representatives of the judicial and legislative branches, including Members of Congress and their staffs, are not subject to the same coordinating and supervisory authorities of the COM. Executive Branch Directives and Regulations In addition to and in accordance with the relevant legislative mandates, COM authority derives from an array of executive branch orders and directives, explained below. Letter of Instruction Presidents provide their primary directives in a Letter of Instruction to each COM, setting out each COM's role and responsibilities as the President's personal representative at each U.S. mission abroad. Although the State Department stresses the distinction between the constitutional and legislative sources of COM authority, the Letter of Instruction and Section 207 of FSA 1980 contain similar language on the central points of COM authority. They do not contradict each other in their explanation of responsibilities of the COM and the obligations of other U.S. agency representatives to adhere to the COM's directives in each host country. One difference with the FSA 1980 is the personnel excluded from COM authority. The FSA 1980 excludes VOA correspondents on assignment and personnel under the command of a GCC, as mentioned above. The template of an Obama Administration Letter of Instruction excludes personnel on the staff of an international organization. Another difference is that Letters of Instruction (as indicated by templates of presidential Letters of Instruction of two administrations) state that ambassadors have the right to see "all communications to and from Mission elements," except those exempted by law or executive decision. Executive Orders Executive orders have gradually expanded the authority and responsibilities of COMs. The requirement that COMs coordinate all U.S. government activities in a host country and be kept informed of all activities by U.S. government personnel dates back at least to the early years after World War II, when concerns surfaced about the management of U.S. humanitarian and security assistance to various Western European countries. In 1952, President Harry S. Truman issued Executive Order 10338, which directed the Chief of Mission to coordinate the activities carried out by representatives of U.S. government agencies under the Mutual Security Act of 1951. This included the activities of chiefs of economic missions, military assistance, advisory groups, and other representatives of U.S. government agencies. The COM was also tasked with responsibility "for assuring the unified development and execution of the said program in each country." To that end, the representatives of U.S. agencies covered by the order were directed to "keep the respective Chief of United States Diplomatic Missions and each other fully and currently informed on all matters, including prospective plans, recommendations, and actions relating to the programs under the Act…." Subsequent executive orders conferred on each COM to a country broader authority over U.S. government agencies' activities in that country, not specifically including or excluding any agency or type of activity. Section 201 of Executive Order 10893 of 1960, which remains in force, states, Sec. 201. Functions of Chiefs of United States Diplomatic Missions . The several Chiefs of the United States Diplomatic Missions in foreign countries, as the representatives of the President and acting on his behalf, shall have and exercise, to the extent permitted by law and in accordance with such instructions as the President may from time to time promulgate, affirmative responsibility for the coordination and supervision over the carrying out by agencies of their functions in the respective countries. National Security Decision Directive 38 National Security Decision Directive 38 of June 1982 (NSDD-38) provides that a COM's approval is required before executive agencies may change the size, composition, or mandate of the staff at a diplomatic post. NSDD-38 states that the COM shall make such decisions through a process determined by the President. Current legislation requires the Secretary of State to direct each COM to review at least every five years "every staff element under chief of mission authority, including staff from other departments or agencies" and recommend approval or disapproval of each element pursuant to the "NSDD-38 process." NSDD-38 disputes concerning staffing between the COM and executive agency representatives are resolved by the decision of the COM or of the President. Agreement concerning mission structure and individual agency presence and activities in a host country are often set out in a memorandum of understanding (MOU) executed by a COM and a U.S. government agency operating in the mission. Internal State Department Guidelines In General. The Foreign Affairs Manual (FAM) and the Foreign Affairs Handbook (FAH) provide further detail on COM authority based on legislative and executive directives. Many pertinent provisions relate to the COM's overall authority over a given U.S. diplomatic mission abroad, stating that the COM "determines the precise structure of a mission, in light of local circumstances and the specific nature and scope of function assigned to the post." As per the President's Letters of Instruction, FSA 1980, and E.O. 10893, each COM is charged with integrating all mission activities at all posts within a host country, and attachés from other executive branch agencies, including Department of Defense attachés and other military personnel attached to a U.S. Embassy, perform their duties under the direction of the COM. The FAM also specifies that while the COM is the President's personal representative in a foreign country or international organization, the Secretary of State supervises the COM generally, and the pertinent regional Assistant Secretary of State is tasked with providing support to the COM. Security. As explained above, COM authority over coordination and supervision of U.S. government activities in a host country extends only to the executive branch, and not generally to the legislative and judicial branches. The Secretary of State, however, is tasked with ensuring the security of all U.S. government personnel, including all branches of the federal government, pursuant to the Omnibus Diplomatic Security and Antiterrorism Act of 1986, as amended ( P.L. 99-399 ; 22 U.S.C. §4801 et seq.). According to the FAH, the COM is also responsible for the security of personnel "by extension," except for VOA personnel and employees under the command of a GCC. The State Department and DOD in 1997 executed a comprehensive memorandum of understanding on the security of DOD personnel in foreign countries. Supplementary memoranda of agreement (MOAs) must be executed between the State Department and DOD in each country to carefully delineate between personnel under the security protection of the COM and the GCC. VOA personnel are required to inform the COM of their presence in a host country and receive a security briefing, but are otherwise treated like other U.S. journalists, due to journalistic independence requirements in U.S. law. Personnel. The NSDD-38 process ensures that the COM is informed of, reviews, and approves all changes in the size, composition, and mandate of each executive agency operating in a host country. The FAM and the FAH provide additional information concerning staffing decisions for each mission abroad. The COM must approve entry into a host country by all personnel, including personnel assigned to temporary duty in a country. The COM maintains supervisory authority over all personnel, including full-time, non-full-time, non-permanent, and non-direct-hire personnel operating in a foreign country or at a U.S. mission abroad. Decisions as to additions or subtractions of such personnel are also subject to COM approval under the NSDD-38 process. In general, contractors working for commercial firms engaged by executive agencies in a host country are not under COM coordinating and supervisory authority, but any such engagement that would change the composition of an agency's presence in a host country is subject to COM approval. Common Questions A number of questions are often raised regarding the scope and exercise of COM authority. This section responds to four of the most common questions: 1. Does COM authority extend to Department of Defense (DOD) personnel? 2. Who exercises COM authority in a country without a U.S. embassy or U.S. diplomatic presence? 3. Is COM authority in effect in countries where the United States is engaging in hostilities? 4. What is the COM's authority over Members of Congress, legislative branch employees, and congressional foreign travel? Does COM Authority Extend to DOD Personnel?32 COM authority extends to all DOD personnel in a country except those under the command of a GCC. An ambassador is also charged with responsibility for the activities of in-country military personnel by a variety of statutes, presidential directives, and executive branch arrangements, as well as the President's Letter of Instruction. The following is an overview of key aspects of the COM relationship with GCCs and military personnel, but it is not exhaustive. In practice, this relationship may vary because of personalities, special circumstances, or different perceptions of COM responsibilities. DOD Personnel Under COM Authority As mentioned earlier in this report, Section 207 of the FSA 1980 place under COM authority, that is to say, subject to a COM's "direction, coordination, and supervision," all executive branch personnel, with specified exclusions, including those under the command of an "area military commander" (now referred to as a geographic combatant commander). This FSA 1980 exclusion is reiterated in the Presidential Letter of Instruction that each ambassador receives when assigned to a post. Thus, COM authority extends to military personnel such as Marine security guards, the Defense Attaché, personnel serving in Security Cooperation Organizations (SCOs) in-country who plan and implement U.S. military assistance programs under specified provisions of the FAA and under the Arms Export Control Act (AECA), and a number of other military personnel. The FSA 1980 COM authority is augmented by other provisions of law that create overlapping or additional COM responsibilities regarding certain military personnel stationed abroad. The Foreign Assistance Act of 1961, as amended (FAA 1961), places under COM "direction and supervision" military personnel serving in a SCO. These personnel, as well as other military personnel stationed in-country, including Marine security guards, are subject to NSDD 38 of June 1982, mentioned earlier, which requires the COM's approval before executive agencies may change the size, composition, or mandate of their staff at a diplomatic post. In addition, the FAA 1961 charges the COM with responsibility for seeing that the recommendations of DOD representatives "pertaining to military assistance (including civic action) and military education and training programs are coordinated with political and economic considerations, and his comments shall accompany such recommendations if he so desires." Special COM authorities are conveyed by presidential order or directive. For instance, National Security Policy Directive 36 (NSPD-36) of May 11, 2004, charged the Secretary of State with responsibility for "the continuous supervision and general direction" of all assistance for Iraq. At the same time, it charged the commander of the U.S. Central Command (USCENTCOM) with responsibility for directing "all U.S. government efforts" and coordination of "international efforts in support of organizing, equipping, and training all Iraqi security forces." NSPD-36 mandated that the Commander was to exercise his responsibility "with the policy guidance of the Chief of Mission." It also instructed the Commander and the COM to "ensure the closest cooperation and mutual support" in all activities. COM Relationship to GCCs COMs have no authority over GCCs, who are responsible by law to the President and Secretary of Defense, but the COM and the GCC are expected to maintain a cooperative relationship. The FSA 1980 requirement that executive branch agencies with employees in a foreign country keep the COM "fully and currently informed with respect to all activities and operations of its employees in that country," applies to the GCC. In addition, templates of presidential Letters of Instruction of two administrations indicate that presidents expect such communication to flow both ways and differences of opinion to be reported to Washington. "You [the Ambassador] and the area military commander must keep each other currently and fully informed and cooperate on all matters of mutual interest," according to the more recent template. "Any difference that cannot be resolved in the field will be reported to the Secretary of State and the Secretary of Defense." As directed by legislation and presidential directive, the Secretary of State, and by extension COMs, are responsible for the security of all U.S. government personnel on official duty abroad and their accompanying dependents, except for personnel under the command of a U.S. area military commander and Voice of America correspondents on official assignment. By definition, this includes DOD personnel serving under COM authority. However, the law allows the Secretary of State to delegate operational responsibilities to the heads of agencies. Thus, responsibility for DOD personnel under COM authority may be delegated to the GCC if so negotiated in a memorandum of agreement (MOA) between the GCC and the COM. COM Relationship to Special Operations Forces A COM's relationship to Special Operations Forces (SOF) in-country depends on the activity being performed and under whose command they are operating. When operating abroad, SOF will generally be under the command of the GCC. These personnel are performing activities that the GCC is explicitly given authority to oversee. Like other GCC personnel, SOF forces deployed under the GCC are not subject to COM authority. However, SOF forces may operate under COM authority when performing certain functions or conducting certain activities. In addition, in some cases, the Special Operations Command (SOCOM) commander, who is not a GCC, may exercise command of a special operations mission at the direction of the President or Secretary of Defense. These are limited circumstances authorized by the President where SOF personnel are deployed outside of COM or GCC authority. In such cases the relationship with the COM would generally be clarified in the President's authorizing directive. Other COM Responsibilities Concerning Military Activities or Missions The COM's position as the eyes, ears, and hands on the ground of the President and the Secretary of State, with responsibility for the overall bilateral relationship with a country, may have implications for the role that the COM plays in relation to military activities. Presidential Letters of Instruction make clear that the Secretary of State is responsible, under the direction of the President and to the fullest extent provided by law, for the overall coordination of U.S. government activities abroad. The FAA 1961 charges the Secretary of State with responsibility for the "continuous supervision and general direction of ... military assistance" (an undefined term). Some perceive the COM as the best-placed person to exercise these responsibilities on behalf of the Secretary. In effect, a COM sometimes carries out this role, but there appears to be no consistency in practice or consensus on when and how this should occur. In a number of cases, Congress has mandated in law a COM role regarding specific military activities or DOD has written such a role into its guidance for an activity that falls under the command of the GCC. For instance, Congress requires COM concurrence (i.e., approval) for Special Operations Forces to provide support to "foreign forces, irregular forces, groups, or individuals" that assist or facilitate U.S. military operations to combat terrorism. In a case of DOD policy guidance, SOCOM Directive 350-3 "specifies that planners coordinate with ambassadors and country teams during the planning process" for Title 10 Section 2011 Joint Combined Exchange Training (JCET) events "and with State during the approval process.... " Why Are Voice of America Correspondents Exempted from COM Authority? Congress amended Section 207 of the FSA 1980 in 2002, exempting Voice of America (VOA) correspondents from COM authority. In explaining this decision, the conference report accompanying the Foreign Relations Authorization Act, Fiscal Year 2003 ( P.L. 107-228 ) stated, Although VOA correspondents are on the federal payroll, they are unique in that they are working journalists. Accordingly, their independent decisions on when and where to cover the news should not be governed by other considerations. This exemption is in accord with legislation authorizing VOA broadcasts and U.S. international broadcasting in general, which requires such broadcasting to comport with journalistic standards of objectivity and independence. Who Exercises COM Authority in Countries Without a U.S. Embassy or U.S. Diplomatic Presence? The United States does not maintain an embassy or even a diplomatic presence in all countries and political entities due to severed or strained diplomatic relations, contested sovereignty claims in a given geographic area, autonomous, semi-autonomous, or other special status of entities or regions, or geographic remoteness, among other reasons. Nevertheless, in most cases there are fully authorized COMs assigned to such countries and entities. COMs assigned to such countries exercise COM authority regarding diplomatic relations and U.S. government activities in such countries and political entities, despite the limited nature of such activities when access is restricted. For instance, in the case of Cuba, with which the United States has no diplomatic relations, the principal officer of the U.S. Interests Section in Havana has been designated a COM. Also, with the February 2012 closure of the U.S. embassy in Damascus, the current U.S. ambassador exercises his COM authority via the U.S. Interests Section of the Czech Republic's Damascus embassy. Consuls general leading the U.S. consulates in Jerusalem and Hong Kong also possess COM authority. Some ambassadors are appointed to cover a number of states at one time and therefore exercise COM authority over a number of countries at once; for example, the U.S. ambassador to Fiji is also U.S. ambassador to Kiribati, Nauru, Tonga, and Tuvalu. In some cases, online websites function as virtual diplomatic posts to extend a U.S. diplomatic presence to those countries lacking a physical U.S. diplomatic presence, such as the Virtual Embassy of the United States for Tehran. In the case of a country experiencing an irregular change of government or the collapse of government, COM's authority does not appear to change under U.S. law and practice. The State Department's Foreign Affairs Manual states that "diplomatic relations are maintained between states, not governments. The absence of a government that has clear control or that has obtained power through legitimate means does not automatically result in a rupture of diplomatic relations." In the case of a change in government or other political or social upheaval in a foreign country resulting in a U.S. government policy of non-recognition, the COM is tasked with establishing guidelines for U.S. government communications with the country's officials in accordance with that policy, and all U.S. government representatives are required to abide by those guidelines. Is COM Authority in Effect in Countries Where the United States Is Engaging in Hostilities? COM authority in a specific country is not necessarily terminated or curtailed if the United States engages in hostilities with that country or within that country's borders. Only if hostilities lead to the permanent withdrawal of an ambassador, permanent closure of U.S. diplomatic facilities, and evacuation of diplomatic mission personnel and dependents, does COM authority effectively cease. A COM may decide to suspend operations of a U.S. diplomatic mission in a foreign country in emergency circumstances, including circumstances of armed hostilities, whether the United States is participating in such hostilities or not. A U.S. diplomatic mission officially closes upon termination of diplomatic relations between the United States and the pertinent foreign country. In all circumstances, the President makes the final decision to close any U.S. diplomatic mission. In both Iraq and Afghanistan during the recent conflicts in those two countries, U.S. ambassadors and chargés d'affaires acted with COM authority contemporaneously with ongoing U.S. military operations, although it can be noted that these COMs were installed only after the success of the initial invasions in toppling each of the governments of these two countries. As discussed above, a COM in a foreign country where U.S. armed forces are conducting military operations must coordinate with the pertinent GCC on many matters. A non-permissive security environment in a foreign country where armed conflict is taking place may limit a COM's options otherwise available in carrying out COM roles and responsibilities. When Congress declares war under its constitutional powers, or some state of armed conflict otherwise prevails between the United States and a foreign country, the ambassador or other COM to that country can be expected to be recalled, and the diplomatic mission closed or substantially curtailed. For instance, Ambassador Joseph Grew left Japan in 1942, soon after Japan attacked Pearl Harbor and Congress declared war on Japan. Although the United States occupied Japan after the war, no ambassador in the role of the COM was appointed until 1952, after the Allied handover of control to the Japanese government. What Is the COM's Authority over Members of Congress, Legislative Branch Employees, and Congressional Foreign Travel? As explained above, COM authority to approve or supervise U.S. government personnel in a foreign country does not extend to the legislative branch. State Department guidelines nonetheless assert the primacy of the COM as the President's representative to a foreign government. Given the presidential prerogative concerning the conduct of foreign relations, the guidelines suggest that any relations with a foreign government must be coordinated through the COM, including those undertaken by the legislative branch. Members of Congress and their staffs may travel to foreign countries without specific COM approval, but accepted practice includes notification to (rather than clearance by) the COM concerning congressional travel to a foreign country. The State Department's Bureau of Legislative Affairs is tasked with informing U.S. missions abroad of planned visits by Members of Congress and their staffs. The COM will advise on current local conditions within a host country in relation with such travel, and the COM remains responsible for the security of Members and other legislative branch personnel in the host country. With regard to employees of the Government Accountability Office (GAO), the State Department and the GAO have executed an MOU that places GAO personnel under the authority of the COM except with regard to their overseas audit, investigation, and evaluation-related activities. Library of Congress personnel stationed abroad are subject to COM authority, pursuant to an MOU executed between the Library and the State Department. Current Concerns and Possible Options Congress plays an important role in setting standards for the exercise of COM authority and providing COMs with the resources—training, personnel, monetary—to promote its effective exercise. The following two sections address current concerns regarding the effectiveness of COM authority in practice and possible options to improve COM performance. How Effective Is COM Authority in Practice? The State Department's 2010 QDDR stressed the need for capable COMs to act as CEOs of U.S. embassies. Although there have not been systematic studies of the exercise of COM powers, recently some analysts have raised questions concerning the effectiveness of individual ambassadors and other COMs in managing their embassies and exerting their authority. In a report released in September 2012, weaknesses in COM leadership and management were discerned by the State Department's Office of Inspector General (OIG), which reportedly have caused "reduced productivity, low morale, and stress-related curtailments" of tours of duty at approximately 25% of posts abroad. These findings, based on surveys of personnel at a select grouping of diplomatic posts abroad, do not clearly spell out the exact weaknesses of COMs, but state that they are related to "basic leadership or management principles and the failure to observe [these] basic principles.... " Assessing the ability of COMs to carry out a key function, the coordination of the activities of all U.S. government agencies in a country, one former U.S. ambassador has asserted that COMs cannot count on State Department officials to support their efforts to assert and protect their authority over other executive branch representatives, and thus are discouraged from exercising the authority granted to them as the President's representative. He found that the authority provided by statutes and hierarchical position can easily be undermined by actual practices: Solid backing from [the Department of] State in a difference of opinion with another agency's representatives, for example, cannot be depended upon. Messages from the department on the subject, often distributed to other agencies, sometimes dismiss legitimate concerns in an offhand manner. Similarly cables addressed to chiefs of mission, often prepared by individuals not in the proximate chain of command, do not always convey the impression that the COM's authorities or views are of particular importance. If State does not treat chiefs of mission as personal representatives of the president, especially in open communications, it cannot expect others to do so—or respect their authority in the interagency process. How Might the Exercise of COM Authority Be Improved? Over the past several years, a number of institutions, including think tanks and government agencies, have advanced proposals to improve the exercise of COM authority. These have included selecting potential ambassadors and others in line for COM posts for interagency experience, expertise, and inclination, and standardizing the education and training of potential ambassadors. With regard to COM education and training, the Foreign Service Institute (FSI) has taken steps to enhance its two-week training course for new COMs. In response to suggestions in the QDDR, FSI has created a new handbook on COM interagency leadership, and has stressed COM authority with regard to coordination and supervision of all U.S. government activities related to a mission, NSDD-38 procedures, and diplomatic security responsibilities. The "ambassador as CEO" concept found in the QDDR has been integrated into COM training, and interagency panels conducted during the training educate new COMs on the many interagency aspects of COM authority. The State Department OIG, in the report mentioned above, cited a lack of management and leadership guidance in the FAM and FAH, and called for creating a new handbook for COMs focusing on post management. OIG also recommended instituting a performance assessment system across U.S. missions abroad to consistently monitor COM performance, identify trouble spots, and inform COM training and best practices, through regular confidential surveys of post personnel. Nevertheless, some analysts doubt that such steps will suffice if an ambassador or other COM does not have the support of officials in Washington at the appropriate time to overcome the pull of agency interests and pressures on a country team. A COM's ability to manage and coordinate effectively depends on respect for an ambassador's authority and expertise within the State Department itself, and the Department's direct support for a COM's position when necessary, as well as recognition of the COM's role with respect to other agencies. In line with these concerns, it has been recommended that documents on COM authority be provided to all regional assistant and deputy assistant secretaries in order to improve relations between Department bureaus in Washington and COMs in the field. It has also been suggested that State representatives to DOD training facilities make presentations explaining the extent and importance of COM authority. Conclusion U.S. ambassadors and others exercising COM authority are by law the cornerstone of U.S. foreign policy coordination in their respective countries. Their jobs are highly complex, demanding a broad knowledge of the U.S. foreign policy toolkit and the ability to oversee the activities and manage the representatives of from many U.S. government entities, which in some embassies number about 40 U.S. departments and agencies. Understanding the position and core authorities of U.S. Chiefs of Mission is a key element to appreciating the conduct of U.S. foreign policy abroad. Moreover, Members of Congress may wish to examine whether current efforts to improve COM effectiveness in ensuring interagency coordination are sufficient. Specific questions might include whether (1) the two-week FSI training course required for new ambassadors is adequate; (2) interagency experience should be a standard expectation for prospective COMs; (3) FSI career-long leadership training courses are sufficient to build effective leaders and managers at the COM and Deputy COM level; (4) agency representatives on country teams, and their supervisors in Washington, fully understand and comply with their obligations to the COM; and (5) State Department leaders provide the needed backing, support, and resources.

"Chief of Mission," or COM, is the title conferred on the principal officer in charge of each U.S. diplomatic mission to a foreign country, foreign territory, or international organization. Usually the term refers to the U.S. ambassadors who lead U.S. embassies abroad, but the term also is used for ambassadors who head other official U.S. missions and to other diplomatic personnel who may step in when no ambassador is present. Appointed by the President, each COM serves as the President's personal representative, leading diplomatic efforts for a particular mission or in the country of assignment. U.S. ambassadors and others exercising COM authority are by law the cornerstone of U.S. foreign policy coordination in their respective countries. Their jobs are highly complex, demanding a broad knowledge of the U.S. foreign policy toolkit and the ability to oversee the activities and manage the representatives of many U.S. government entities, with some exceptions for those under military command. Congress plays an important role in setting standards for the exercise of COM authority and providing COMs with the resources—training, personnel, monetary—to promote its effective exercise. A number of recent developments have increased congressional attention to issues associated with the roles and responsibilities of COMs. The statutory basis for COM authority and responsibilities is the Foreign Service Act of 1980, as amended (FSA 1980; P.L. 96-465), which states that the COM has "full responsibility for the direction, coordination, and supervision of all Government executive branch employees in that countries," with some exceptions; and for keeping "fully and currently informed" about all government activities and operations within that country. COM authority is also conferred by other sources of legal authority, which include executive orders and other presidential directives and State Department regulations, some of which provide more extensive authority than the FSA 1980. The Chief of Mission role in conducting and coordinating diplomacy abroad was also invoked in the first Quadrennial Diplomacy and Development Review (QDDR), released by the State Department in 2010. The scope and exercise of COM authority, both generally and in specific instances, have been of ongoing interest and concern to Congress. This report summarizes the current legal authority of Chiefs of Mission to include relevant legislation and executive branch directives and regulations. It includes brief discussion of common questions related to COM authority such as: Does COM authority extend to Department of Defense (DOD) personnel? Who exercises COM authority in countries without a U.S. embassy or diplomatic presence? Is COM authority in effect in countries where the United States is engaging in hostilities? What is the COM's authority over the legislative branch? Finally, specific concerns, possible options, and reform proposals for improving COM authority and effectiveness are explored. This report may be updated as events warrant.

Introduction Background The United States has long held to the principle that it will not return a foreign national to a country where his life or freedom would be threatened. This principle is embodied in several provisions of the Immigration and Nationality Act (INA), most notably in provisions defining refugees and asylees. Aliens seeking asylum must demonstrate a well-founded fear that if returned home, they will be persecuted based upon one of five characteristics: race, religion, nationality, membership in a particular social group, or political opinion. Aliens present in the United States may apply for asylum with the United States Citizenship and Immigration Services Bureau (USCIS) in the Department of Homeland Security 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. The INA makes clear that the Attorney General can exercise discretion in the granting of asylum. Aliens who participated in the persecution of other people are excluded from receiving asylum. The law states other conditions for mandatory denials of asylum claims, including when: the alien has been convicted of a serious crime and is a danger to the community; the alien has been firmly resettled in another country; or there are reasonable grounds for regarding the alien as a danger to national security. The INA, moreover, has specific grounds for exclusion of all aliens that include criminal and terrorist grounds. Current Concerns The core concern is the extent an asylum policy forged during the Cold War can adapt to a changing world. Most people who have traditionally received refugee or asylum status were fleeing communist or socialist countries. From 1946 through 2000, the United States gave legal permanent resident (LPR) status to 3.5 million refugees, asylees, and other humanitarian entrants. Over half (53%) of all of these refugees and asylees were from three countries: Vietnam (19%), Cuba (18%), and the former Soviet Union (16%). During FY2001-FY2004, nationals from four countries comprised more than half (55%) of all the 350,747 refugees, asylees and humanitarian entrants who became LPRs: Cuba (20.0%), Bosnia-Herzegovina (18.3%), Ukraine (8.6%), and Vietnam (6.2%). Although there are many who would revise U.S. asylum law and policy, those advocating change have divergent perspectives. Some express concern that potential terrorists could use asylum as an avenue for entry into the United States, especially aliens from trouble spots in the Mideast, northern Africa and south Asia. Others argue that—given the religious, ethnic, and political violence in various countries around the world—it is becoming more difficult to differentiate the persecuted from the persecutors . Some assert that asylum has become an alternative pathway for immigration rather than humanitarian protection provided in extraordinary cases. Others maintain that current law does not offer adequate protections for people fleeing human rights violations or gender-based abuses that occur around the world. This report is organized into four substantive sections. The first section summarizes the legislative history of U.S. asylum policy, highlighting the key provisions of the major immigration laws that established this policy. The second section presents an overview of current policy, discussing the concepts of "credible fear" and "well-founded fear," explaining affirmative and defensive avenues to seek asylum, and describing key procedures such as background checks and expedited removal. The third section analyzes asylum data, exploring trends over time as well as source countries and regions of the world. The fourth section highlights major bills with asylum provisions that received action in one or both chambers during the 108 th and 109 th Congresses. The final section synthesizes the issues of current debate, offering a range of alternative views. Legislative History Refugee Act of 1980 In 1968, the United States became party to the 1967 United Nations Protocol Relating to the Status of Refugees (hereafter, U.N. Refugee Protocol). The U.N. Refugee Protocol does not require that a signatory accept refugees, but it does ensure that signatory nations afford certain rights and protections to aliens who meet the definition of refugee. At the time the United States signed the U.N. Refugee Protocol, Congress and the Administration assumed that there was no need to amend the INA and that the withholding of deportation provisions—then §243(h) of INA—would be adequate. In 1974, the INS issued its first asylum regulations as part of 8 C.F.R. §108. Prior to the passage of the Refugee Act of 1980, there was no direct mechanism in the INA for aliens granted asylum to become legal permanent residents (LPRs). The Refugee Act of 1980 codified the U.N. Refugee Protocol's definition of a refugee in the INA, included provisions for asylum (§208 of INA), and instructed the Attorney General to establish uniform procedures for the treatment of asylum claims of aliens within the United States. Under the INA, a refugee is defined as an alien "displaced abroad who is unable or unwilling to return to, and is unable or unwilling to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion." The law defined asylees as aliens in the United States or at a port of entry who meet the definition of a refugee. For the first time, the Refugee Act added statutory provisions to INA that enabled those granted refugee and asylee status to become LPRs after certain general requirements were met. The 1980 law specified that up to 5,000 of the refugee admissions numbers, which are set annually by Presidential Determination in consultation with Congress, could be used by the Attorney General to give LPR status to aliens who had received asylum (and their spouses and children), and who have been physically present in the United States for one year after receiving asylum, continue to meet the definition of a refugee, are not firmly resettled in another country, and are otherwise admissible as immigrants. At that time, it appears that Congress and the Administration assumed that the 5,000 ceiling would be more than adequate. Immigration Act of 1990 By 1986, the number of aliens receiving asylum annually was growing, and a backlog in obtaining LPR status developed due to the 5,000 ceiling. Compounding the frustration with the backlog was the worry of many of those asylees from Eastern Europe that—as a result of the improved political and human rights conditions in their native countries—they no longer would qualify as refugees under the law. Meanwhile, the number of aliens filing asylum claims surpassed 100,000 in 1989. The Immigration Act of 1990 sought, among other major immigration reforms, to address the backlogs in asylee adjustments to LPR status. Foremost, it doubled the annual limit from 5,000 to 10,000 LPR adjustments. It also allowed those asylees who had filed for LPR adjustments before June 1, 1990, to do so outside of the numerical limits, effectively clearing out the existing backlog. The Immigration Act of 1990 further granted LPR status to those asylees who had qualified for LPR status as of November 29, 1990, but were unable to obtain it because of the prior numerical limits and improved country conditions. The crumbling of communism in Eastern Europe and the Arias Peace talks in Central America gave optimism to many that the number of asylum seekers would lessen in the future. 1996 Revisions to Asylum Policy Prior to 1996, aliens arriving at a port of entry to the United States without proper immigration documents were eligible for a hearing before an immigration judge to determine whether the aliens were admissible. Aliens lacking proper documents could request asylum in the United States at that time. If the alien received an unfavorable decision from the immigration judge, he or she also could seek administrative and judicial review of the case. Critics of this policy argued that illegal aliens were arriving without proper documents, filing frivolous asylum claims, and obtaining work authorizations while their asylum cases stalled in lengthy backlogs. In the late 1980s and early 1990s, the mass exodus of thousands of asylum seekers from Central America, Cuba, and Haiti prompted further concerns that the then-current policy was unwieldy and prone to abuses because it provided for multiple levels of hearings, reviews, and appeals. The 1993 bombing of the World Trade Center heightened fears that international terrorists might enter the United States with false documents, file bogus asylum claims, and disappear into the population. Supporters of the then-current system asserted that the regulatory reforms begun by the first Bush Administration and expanded by the Clinton Administration had already corrected the bureaucratic problems that had plagued the asylum process. They emphasized that the United States was a signatory to the UN Refugee Protocol and that INA codified the internationally-held legal principle of nonrefoulement (i.e., that an alien would not be forced to return to a country where his life or freedom would be threatened). They also pointed out that aliens considered to be terrorists were already excluded by law from entering the United States. Proponents argued that aliens fleeing the most dangerous situations were likely to escape with fraudulent documents to hide their identity, and maintained therefore that even aliens lacking proper documents should be entitled to a full hearing and judicial review to determine if they might be admissible. The Illegal Immigrant Reform and Immigrant Responsibility Act of 1996 (IIRIRA, P.L. 104-208 ) made substantial changes to the asylum process: establishing expedited removal proceedings; codifying many regulatory changes; adding time limits on filing claims; and limiting judicial review in certain circumstances, but it did not alter the numerical limits on asylee adjustments. Expedited Removal Among the significant modifications of the INA made by the IIRIRA are the provisions that created the expedited removal policy. The goal of these provisions was to target the perceived abuses of the asylum process by restricting the hearing, review, and appeal process for aliens at the port of entry. As a result, if an immigration officer determines that an alien arriving without proper documentation does not intend to apply for asylum or does not fear persecution, the immigration officer can deny admission and order the alien summarily removed from the United States. The amendments to INA made by IIRIRA provide very limited circumstances for administrative and judicial review of those aliens who are summarily excluded (including those who are deemed not to have a "credible fear" as discussed below). Mandatory Detention Foreign nationals arriving without proper documents who express to the immigration officer a fear of being returned home must be kept in detention while their "credible fear" cases are pending. If an asylum officer determines that an alien does not have a "credible fear" of persecution, the alien is removed. If the asylum seeker meets the "credible fear" threshold, they may be released on their own recognizance while an immigration judge considers the case. Deadlines Another important change IIRIRA made to the asylum process is the requirement that all applicants must file their asylum applications within one year of their arrival to the U. S. Aliens may be exempted from this time requirement if they can show that changed conditions materially affect their eligibility for asylum, or they can present extraordinary circumstances concerning the delay in their application filing. Safe Third Country IIRIRA amended INA to bar asylum to those aliens who can be returned to a "safe-third country." This provision was aimed at aliens who travel through countries that are signatories to the U.N. Refugee Protocol (or otherwise provide relief from deportation for refugees) to request asylum in the United States. In order to return a potential applicant to a safe-third country, the United States must have an existing agreement with that country. Other Limitations An additional restriction on the filing of asylum applications includes a bar against those who have been denied asylum in the past, unless changed circumstances materially affect their eligibility. The reforms also established serious consequences for aliens who file frivolous asylum applications. For example, the Attorney General now has the authority to permanently bar an alien from receiving any benefits under the INA if he determines that they have knowingly filed a frivolous asylum application. Employment Authorization IIRIRA codified many regulatory revisions of the asylum process that the former Bush and Clinton Administrations made. Most notably, aliens are statutorily prohibited from immediately receiving work authorization at the same time as the filing of their asylum application. Now the asylum applicant is required to wait 150 days after the USCIS receives his/her complete asylum application before applying for work authorization. The USCIS then has 30 days to grant or deny the request. Coercive Family Planning IIRIRA also added a provision that enabled refugees or asylees to request asylum on the basis of persecution resulting from resistance to coercive population control policies, but the number of aliens eligible to receive asylum under this provision was limited to 1,000 each year. Overview of Current Policy Standards for Asylum Because "fear" is a subjective state-of-mind, assessing the merits of an asylum case rests in large part on the credibility of the claim and the likelihood that persecution would occur if the alien is returned home. Two concepts—"credible fear" and "well-founded fear"—are fundamental to establishing the standards for asylum. The matter of "mixed motives" for persecuting the alien is also an important concept. Credible Fear The INA states that "the term credible fear of persecution means that there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien's claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum under §208." Integral to expedited removal, the credible fear concept also functions as a pre-screening standard that is broader—and the burden of proof easier to meet—than the well-founded fear of persecution standard required to obtain asylum. Well-Founded Fear The standards for "well-founded fear" have evolved over the years and been guided significantly by judicial decisions, included a notable U.S. Supreme Court case. The regulations specify that an asylum seeker has a well-founded fear of persecution if: (A) The applicant has a fear of persecution in his or her country of nationality or, if stateless, in his or her country of last habitual residence, on account of race, religion, nationality, membership in a particular social group, or political opinion; (B) There is a reasonable possibility of suffering such persecution if he or she were to return to that country; and (C) He or she is unable or unwilling to return to, or avail himself or herself of the protection of, that country because of such fear. The regulations also state that an asylum seeker "does not have a well-founded fear of persecution if the applicant could avoid persecution by relocating to another part of the applicant's country.... " In evaluating whether the asylum seeker has sustained the burden of proving that he or she has a well-founded fear of persecution, the regulations state that the asylum officer or immigration judge shall not require the alien to provide evidence that there is a reasonable possibility he or she would be singled out individually for persecution if: (A) The applicant establishes that there is a pattern or practice in his or her country of nationality or, if stateless, in his or her country of last habitual residence, of persecution of a group of persons similarly situated to the applicant on account of race, religion, nationality, membership in a particular social group, or political opinion; and (B) The applicant establishes his or her own inclusion in, and identification with, such group of persons such that his or her fear of persecution upon return is reasonable. Mixed Motives The intent of the persecutor is also subjective and may stem from multiple motives. The courts have ruled that the persecution may have more than one motive, and so long as one motive is one of the statutorily enumerated grounds, the requirements have been satisfied. A 1997 BIA decision concluded "an applicant for asylum need not show conclusively why persecution occurred in the past or is likely to occur in the future, [but must] produce evidence from which it is reasonable to believe that the harm was motivated, at least in part, by an actual or imputed protected ground." Generally, the asylum seeker must demonstrate in mixed motive cases that—even though his/her persecutors were motivated for a non-cognizable reason (e.g., the police's desire to obtain information regarding terrorist activities in the Sikh cases)—the persecutors were also motivated by the asylum seeker's race, religion, nationality, social group, or political opinion. Process of Requesting Asylum An applicant for asylum begins the process either already in the United States or at a port of entry seeking admission. This process differs from a potential refugee who begins a separate process wholly outside of the United States. Depending on whether or not the applicant is currently in removal proceedings, two avenues exist to seek asylum: "affirmative applications" and "defensive applications." The affirmative and defensive applications follow different procedural paths, but draw on the same legal standards. In both processes, the burden of proof is on the asylum seeker to establish that he or she meets the refugee definition specified in the INA. Affirmative Applications An asylum seeker who is in the United States and not involved in any removal proceedings files an I-589, the asylum application form, with the USCIS-Regional Service Center. The USCIS schedules a non-adversarial interview with a member of the Asylum Officer Corps. There are eight asylum offices located throughout the country. The asylum officers either grant asylum to successful applicants or refer to the immigration judges those applicants who fail to meet the definition. The asylum officers make their determinations regarding the affirmative applications based upon the application form, the information received during the interview, and other potential information related to the specific case (e.g., information about country conditions). If the asylum officer approves the application and the alien passes the identification and background checks, then the alien is granted asylum status. The asylum officer does not technically deny asylum claims; rather, the asylum applications of aliens who are not granted asylum by the asylum officer are referred to EOIR immigration judges for formal proceedings. In some respects, these applicants/aliens are allowed a "second bite at the apple." Asylum applicants in the affirmative process are not subject to the mandatory detention requirements while their applications are being adjudicated, though there is broader authority under the INA to detain aliens for other grounds. Defensive Applications Defensive applications for asylum are raised when an alien is in removal proceedings and asserts claim for asylum as a defense to his/her removal. EOIR's immigration judges and the Board of Immigration Appeals (BIA), entities in DOJ separate from the USCIS, have exclusive control over such claims and are under the authority of the Attorney General. Generally, the alien raises the issue of asylum during the beginning of the removal process. The matter is then litigated in immigration court, using formal procedures such as the presentation of evidence and direct and cross examination. If the alien fails to raise the issue at the beginning of the process, the claim for asylum may be raised only after a successful motion to reopen is filed with the court. The immigration judge's ultimate decision regarding both the applicant/alien's removal and asylum application is appealable to the BIA. Applicant/aliens seeking asylum via the defensive application method may be detained until an immigration judge rules on their application. The applicant/alien is not detained due to their asylum claim, but rather, because of their unlawful status in the United States. Expedited Removal An immigration officer must summarily exclude an alien arriving without proper documentation, unless the alien expresses a fear of persecution. When expedited removal initially went into effect in April 1997, the INS applied the provisions only to "arriving aliens," although the law provides the option of applying it to aliens illegaly present in the United States for less than two years. According to DHS immigration policy and procedures, Customs and Border Protection (CBP) inspectors, as well as other DHS immigration officers, are required to ask each individual who may be subject to expedited removal the following series of "protection questions" to identify anyone who is afraid of return: Why did you leave your home country or country of last residence? Do you have any fear or concern about being returned to your home country or being removed from the United States? Would you be harmed if you were returned to your home country or country of last residence? Do you have any questions or is there anything else you would like to add? If the alien expresses a fear of return, the alien is supposed to be detained by the Immigration and Customs Enforcement (ICE) Bureau and interviewed by an USCIS asylum officer. The asylum officer then makes the "credible fear" determination of the alien's claim. Those found to have a "credible fear" are referred to an EOIR immigration judge, which places the asylum seeker on the defensive path to asylum. EOIR reports that it completed 91% of the 50,017 expedited removal asylum cases in 180 days or less in FY2003. Aliens Arriving by Sea On November 13, 2002, the former INS published a notice clarifying that certain aliens arriving by sea who are not admitted or paroled are to be placed in expedited removal proceedings and detained (subject to humanitarian parole). This notice concluded that illegal mass migration by sea threatened national security because it diverts the Coast Guard and other resources from their homeland security duties. The Attorney General expanded on this rationale in his April 17, 2003, ruling that instructs EOIR immigration judges to consider "national security interests implicated by the encouragement of further unlawful mass migrations ..." in making bond determinations regarding release from detention of unauthorized migrants who arrive in "the United States by sea seeking to evade inspection." The case involved a Haitian who had come ashore in Biscayne Bay, Florida, on October 29, 2002, and had been released on bond by an immigration judge. The BIA had upheld his release, but the Attorney General vacated the BIA decision. Background Checks All aliens seeking asylum are subject to multiple background checks in the terrorist, immigration, and law enforcement databases, notably the Interagency Border Inspection System (IBIS). Those who enter the country legally on nonimmigrant visas are screened by the consular officers at the Department of State when they apply for a visa, and all foreign nationals are inspected by CBP officers at ports of entry. Those who enter the country illegally are screened by the U.S. Border Patrol or the ICE agents when they are apprehended. When aliens formally request asylum, they are sent to the nearest USCIS authorized fingerprint site. They have all 10 fingers scanned and are subject to a full background check by the Federal Bureau of Investigation (FBI). Safe Third Country Agreement with Canada On August 30, 2002, Canada and the United States signed the final draft text for the "safe third country" agreement regarding asylum claims made at land border ports of entry. The agreement states that any person being removed from Canada in transit through the United States, who makes an asylum claim in the United States, will be returned to Canada to have the claim re-examined by Canada. Further, any person being removed from the United States in transit through Canada, who makes an asylum claim in Canada, and whose asylum claim has been rejected by the United States, will be returned to the country from which the person is being removed. If the person has not had a refugee status or asylum claim determined by the United States, he or she will be returned to the United States to have the claim examined by the United States. Responsibility for determining the asylum claim will rest with the receiving country. On March 8, 2004, DHS published the proposed rule to implement the safe third country agreement with Canada, but has not yet issued the final rule. Victims of Torture Distinct from asylum law and policy, aliens claiming relief from removal due to torture may be treated separately under regulations implementing the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (hereafter, Torture Convention). Article 3 of the Torture Convention prohibits the return of any person to a country where there are "substantial grounds" for believing that he or she would be in danger of being tortured. The alien must meet the three elements necessary to establish torture: (1) the torture must involve the infliction of severe pain or suffering, either physical or mental; (2) the torture must be intentionally inflicted; and (3) the torture must be committed by or at the acquiescence of a public official or person acting in an official capacity. Generally, an applicant for non-removal under Article 3 has the burden of proving that it is more likely than not that he would be tortured if removed to the proposed country. If credible, the applicant's testimony may be sufficient to sustain this burden without additional corroboration. In assessing whether it is "more likely than not" that an applicant would be tortured if removed to the proposed country, all evidence relevant to the possibility of future torture is required to be considered. However, if a diplomatic assurance (deemed sufficiently reliable by the Attorney General or Secretary of State) that the alien will not be tortured is obtained from the government of the country to which the alien would be repatriated, the alien's claim for protection will not be considered further, and the alien may be removed. Statistical Trends Asylum Requests and Approvals Asylum Officers As Figure 1 illustrates, the number of affirmative asylum claims has varied greatly over the past 30 years, shaped by the prevalence of repression, civil unrest and violence around the world, as well as by changes in asylum policy. There was a drop in affirmative asylum claims being filed in the late 1990s followed by an upturn in FY2001 and FY2002. In FY2004, the affirmative claims dropped back to 27,551—a level below the previous low point of 38,013 in FY1999. This decline in affirmative asylum claims has enabled USCIS to work through some of the backlog of pending cases. By the close of FY2005, there were 98,499 affirmative asylum cases pending at USCIS, down from a recent high of 393,699 at the close of FY1997. The number of affirmative asylum claims being approved also has fluctuated in recent years. Approvals by the INS asylum corps first surpassed 10,000 in FY1995 when 12,454 cases were approved. In FY2000, INS approved 16,693 asylum cases, and 31,202 cases were approved in FY2002. The number of cases USCIS asylum officers approved dropped to 10,101 cases in FY2004. The percentage of affirmative cases approved dropped from 44% of cases in FY2000 to 32% in FY2004. The approval rate has ranged historically from a high of 55% in FY1980 to a low 15% in FY1990. Immigration Judges Recent trends in asylum statistics from EOIR exhibit a similar pattern of an overall decline in cases received in the late 1990s followed by a reversal of the trend in FY2001 and FY2002, as Figure 2 illustrates. The number of cases dropped from 74,127 in FY2002 to 55,067 in FY2004, making the number of cases filed comparable to the low point of 54,916 in FY2000. Generally, over two-thirds of all asylum cases that EOIR receives are affirmative cases referred to the immigration judges by the asylum officers. The number of EOIR asylum approvals has risen gradually, as Figure 2 depicts. (The Y axis is scaled to be comparable to Figure 1 , and as a result the change over time is less apparent). Asylum cases granted by EOIR judges rose from 5,131 in FY1996 to 9,170 in FY2000. EOIR reached a high of 13,365 approvals in FY2003 and granted 10,796 cases in FY2004. The percentage of EOIR asylum cases approved (of the cases decided) in the past five years ranged from 32% in FY1991 to 40% in FY2001, and now has leveled at 34% in FY2004. Source Countries In FY2004, just over half (55%) of all affirmative asylum claims filed with USCIS were from the top 10 source countries. This percent is down from FY2003, when the top 10 source countries of aliens who made affirmative asylum claims comprised 62% of the 42,114 asylum cases. As Table 1 indicates, the percentage of cases approved among the top 10 countries ranges from a high of 60% for asylum seekers from Ethiopia to a low of 10% for asylum seekers from Haiti. Haiti became the top source country in FY2004 with numbers comparable to FY2003 when it ranked fourth (i.e., 3,543 and 3.276 respectively). The People's Republic of China dropped from 4,750 in FY2003 to 2,839 in FY2004. Asylum seekers from the top five source countries in FY2003—People's Republic of China, Colombia, Mexico, Haiti, and Indonesia—made up 45.7% of all claims filed that year. It is important to acknowledge that Mexico went from being a source country of 3,846 asylum claimants in FY2003, to a number so small that disclosure standards were not met in FY2004. In addition to the top source countries overall, there were five source countries that had (1) more than 50% of their cases approved, and (2) more than 100 cases approved by USCIS in FY2004. These countries were Burma (Myanmar), Ethiopia, Eritrea, Iran, and Pakistan. In FY2003, there were six countries meeting these criteria: Ethiopia, Eritrea, Liberia, Burma (Myanmar), Togo, and Iraq. The EOIR country data on asylum cases are similar to USCIS's affirmative asylum case data. In FY2004, the top 10 source countries of aliens who made defensive asylum claims comprised 62% of the 55,067 asylum cases filed with EOIR. Likewise, the top 10 source countries of aliens who made defensive asylum claims comprised 62% of the 65,153 asylum cases filed with EOIR in FY2003. In FY2004, asylum claimants from the top five source countries—People's Republic of China, Colombia, Haiti, Guatemala, and Mexico—made up 43% of all defensive claims filed with EOIR. Asylum claimants from the top five source countries—People's Republic of China, Mexico, Colombia, Haiti, and Indonesia—made up 49% of all claims filed with EOIR in FY2003. The percentage of asylum cases approved (of those decided) by EOIR, however, exhibits a somewhat different pattern, as Table 2 presents. While EOIR generally has a higher approval rate than USCIS asylum officers (37% compared to 29% in FY2003), the percentage are fairly close in FY2004—34% to 32% respectively. The percentage of EOIR cases approved among the top 10 countries ranges from a high of 54% for asylum seekers from Albania to a low of 6% for asylum seekers from El Salvador. In FY2003, there were six source countries that had (1) more than 50% of their cases approved and (2) more than 100 cases approved by EOIR. These six source countries were: Bangladesh, Burma (Myanmar), Egypt, Iran, Liberia, and Russia. In FY2004, there were ten source countries that met this criteria: Albania, Russia, Egypt, Ethiopia, Guinea, Mauritania, Iran, Yugoslavia, Burma (Myanmar), and the Congo. Asylum seekers come from all over the world, as Figure 3 illustrates, and the regional distribution of the USCIS claims differs from that of the EOIR claims, as do the sheer numbers. In FY2004, the top source regions for USCIS asylum claimants were Africa (26.4%) followed by Asia (19.1%) and South America (19.1%). In terms of EOIR asylum claims, the top source regions were Central America and the Caribbean first at 29.1%, Asia second at 24.7% and South America third at 16.3%. African asylum claimants comprised 14.8% of EOIR claims. Individuals Granted Asylum It appears that the number of individuals granted asylum has declined for FY2005 ( Figure 4 ) for both affirmative (USCIS) and defensive (EOIR) cases. Although comprehensive FY2005 asylum data are not available, the DHS Office of Immigration Statistics has published the number of individuals who gained asylum in FY2005. The total number of individuals who received asylum in FY2005 was 25,257, down from a high of 38,641 in FY2001. Coercive Population Control Cases Since 1998, the second year the provision was available, the number of aliens eligible to receive asylum based on persecution resulting from coercive population control policies has exceeded the initial numerical limits of 1,000 annually, as Figure 5 illustrates. As a result, USCIS and EOIR issued conditional asylum status to asylum seekers who demonstrate a well-founded fear that if returned home, they will be persecuted based on coercive population control policies. In FY2003, USCIS and EOIR granted conditional asylum status to 2,353 aliens based on resistance to coercive population control policies. USCIS issued 194 conditional grants of asylum, and EOIR issued 2,159 conditional grants of asylum. The country of origin for all conditional coercive population control grantees as of FY2003 has been the People's Republic of China. USCIS issued all 1,000 final grants of asylum for FY2003. At the end of FY2003, there were at least 7,665 principal conditional grantees on the waiting list for final approval authorization numbers, comprising 6,401 EOIR cases and 1,264 USCIS cases. LPR Adjustment Cases Pending As evident in Figure 3 above, the number of people granted asylum each year exceeds the number who had been permitted to adjust to LPR status—10,000 annually prior to 2005. When assessing the potential number of LPR adjustments and the pressure on the 10,000 limit, the spouses and minor children of the asylees also must be factored in, even though they are not enumerated in the asylum caseload data depicted in the figures, because they count toward the cap when adjusting as LPRs. At the end of FY2004, there were 182,015 cases pending for asylees to adjust to LPR status. As Figure 5 illustrates, the growth of the backlog accelerated in the late 1990s. Prior to the enactment of the REAL ID Act (discussed below), which changed the law on numerical limits, a person who received asylum at the end of FY2004 would have had to wait about 18 years to become an LPR. According to the most recent (unpublished) data, the number of pending asylum adjustments went to 185,890 at the end of FY2005 and then down to 101,193 at the end of FY2006. Some maintained that the 10,000 annual limit on asylee adjustments to LPR status was an arbitrary provision and unfair, particularly because refugees coming from abroad do not have statutory limits on adjustment of status after a year of conditional residence. They argued that it served no policy function and only created unnecessary bureaucratic delays, reaching a 18-year wait for asylees to obtain the LPR "green card" by the end of FY2004. Some also criticized the 1,000 cap on asylees who flee coercive population control policies, arguing that it too was arbitrary and unfair, singling out one group of asylees for differential treatment. Supporters of numerical limits expressed a concern that unlimited asylum adjustments would have a "magnet effect" that would encourage unauthorized migration, and they maintained that the numerical limits dampen this flow of migrants. They pointed out that those who obtain asylum are permitted to stay in the United States and thus have the necessary humanitarian relief from forced return. Legislation in the 108th and 109th Congresses The Legislative Information System (LIS) listed 83 bills or resolutions with "asylum' in the title or summary that were introduced in the 108 th and 109 th Congresses. This section of the report highlights major bills with asylum provisions that received action in one or both chambers. 108th Congress Among over three dozen bills that included provisions on asylum introduced in the 108 th Congress, H.R. 4011 , S. 710 , and House-passed S. 2845 (substituting language from H.R. 10 ) received action. The asylum-related provisions of these three bills are summarized below. House-passed S. 2845 The Speaker of the House of Representatives Dennis Hastert introduced H.R. 10 , to provide for reform of the intelligence community, terrorism prevention and prosecution, border security, and international cooperation and coordination. The House passed H.R. 10 as amended on October 16, 2004 as the substitute language for S. 2845 , National Intelligence Reform Act of 2004, which the Senate had passed October 6, 2004. Among its provisions, House-passed S. 2845 would have expanded authority for expedited removal and revise asylum law. More specifically, House-passed S. 2845 would have expanded the class of aliens subject to expedited removal without further hearing or review, by increasing the prior continuous U.S. physical presence required for exemption from such removal from two years to five years. It also would have restricted the ability of those aliens in expedited removal who are seeking asylum to be given an interview with an asylum officer to those aliens who have been physically present in the United States for less than a year. House-passed S. 2845 would have established expressed standards of proof for asylum seekers, including that the applicant's race, religion, nationality, social group, or political opinion was or will be the central motive for his or her persecution. In addition, H.R. 10 would have codified that the burden of proof is on the asylum seeker to establish that he or she meets the refugee definition specified in the INA. As would have been required by §3007 of House-passed S. 2845 : the testimony of the asylum seeker may be sufficient to sustain such burden without corroboration, but only if it is credible, is persuasive, and refers to specific facts that demonstrate that the applicant is a refugee. Where it is reasonable to expect corroborating evidence for certain alleged facts pertaining to the specifics of the claim, §3007 would have required that such evidence be provided unless a reasonable explanation is given as to why such information is not provided. House-passed S. 2845 would have limited judicial review by barring a court from reversing the decision of the asylum adjudicator about the availability of corroborating evidence, unless it finds that a reasonable adjudicator is compelled to conclude that such evidence is unavailable. H.R. 4011 The North Korean Human Rights Act of 2004 ( P.L. 108-333 , H.R. 4011 ) also included a provision pertaining to asylum. It requires that a national of the Democratic People's Republic of Korea (i.e., North Korea) not be considered a national of the Republic of Korea for purposes of eligibility for refugee or asylum status. S. 710 The Senate Judiciary Committee reported S. 710 , Anti-Atrocity Alien Deportation Act, which included a provision that would bar any alien who commits of acts of torture or extrajudicial killings from obtaining asylum. Language similar to S. 710 was added to House-passed S. 2845 and was included in the National Intelligence Reform Act of 2004 ( P.L. 108-458 ). 109th Congress Of the four dozen bills that included provisions on asylum introduced in the 109 th Congress, several saw action. One bill with substantive revisions to asylum law was enacted: the REAL ID Act of 2005 ( P.L. 109-13 , Division B). The Real ID Act Many (but not necessarily all) of the immigration provisions that the conferees dropped from the National Intelligence Reform Act of 2004 ( P.L. 108-458 ) were included in H.R. 418 introduced by House Committee on the Judiciary Chairman James Sensenbrenner. Some of the asylum provisions in H.R. 418 were comparable to provisions in the 108 th Congress's H.R. 10 as introduced or H.R. 10 as passed by the House. The asylum provisions in H.R. 418 's original language (§101) had several key features. It would have established expressed standards of proof for asylum seekers, including that the applicant's race, religion, nationality, social group, or political opinion was or will be the central motive for his or her persecution. It would have codified that the burden of proof is on the asylum seeker to establish that he or she meets the refugee definition specified in the INA and would have required that, where the trier of fact determines that the asylum seeker should provide evidence which corroborates otherwise credible testimony, such evidence must be provided (unless the applicant does not have the evidence or cannot obtain the evidence without leaving the United States); It would have required an alien applying for withholding of removal to be subject to the same credibility determinations and burdens as an alien applying for asylum. It would have provided that no court shall reverse a determination (as made by a trier of fact with respect to the availability of corroborating evidence) in either asylum or withholding of removal cases, unless the court finds that a reasonable trier of fact would be compelled to conclude that such corroborating evidence is unavailable. H.R. 418 would also have repealed §5403 of the Intelligence Reform and Terrorism Prevention Act of 2004, which requires the Comptroller General of the United States to evaluate the extent to which weaknesses in the United States asylum system and withholding of removal system have been or could be exploited by aliens "connected to, charged in connection with, or tied to terrorist activity." Among other things, the Manager's Amendment to H.R. 418 added a provision to the bill to eliminate the annual cap of 10,000 on asylee adjustments to LPR status. H.R. 418 as amended passed the House of Representatives on February 10, 2005, by a vote of 261 to 161. The Real ID Act also passed the House on March 12, 2005 as part of the FY2005 supplemental appropriations for military operations in Iraq and Afghanistan, reconstruction in Afghanistan and other foreign aid ( H.R. 1268 ). The conferees for H.R. 1268 modified the asylum provisions, the most significant revisions from the original language being: established expressed standards of proof for asylum seekers, including that the applicant's race, religion, nationality, social group, or political opinion was or will be one of the central motives for his or her persecution; required that the asylum seeker provide evidence which corroborates otherwise credible testimony, such evidence must be provided, unless the applicant cannot reasonably obtain the evidence ; and eliminated the 10,000 numerical limit on asylee adjustments and the 1,000 cap on asylum based on persecution resulting from coercive population control policies. Because H.R. 1268 was an emergency supplemental appropriation, it was considered "must pass" legislation. It passed the House on May 5, 2005 and the Senate on May 10, 2005. The President signed H.R. 1268 as P.L. 109-13 on May 11, 2005. Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005 As passed by the House, the Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005 ( H.R. 4437 ) had several provisions on which advocates for asylum seekers expressed concern. Foremost, §407 of H.R. 4437 would have mandated that expedited removal be applied to all aliens (except those from Canada and Mexico) encountered within 100 miles of an international land border who have not been in the United States more than 14 days. In addition, Title II of H.R. 4437 would have upgraded the consequences of illegal presence from a civil offense to a criminal offense. Since many asylum seekers arrive without proper documents or are in the United States illegally when they claim asylum, some argued the bill would have subjected them to mandatory detention and generally barred them forever from obtaining asylum, and subjected them to arrest by state and local law enforcement who encounter them. Others pointed out that H.R. 4437 retained the protections in current law for aliens who express a fear of persecution or an intention to seek asylum the opportunity for a credible fear determination. When the 109 th Congress closed, the major immigration reform proposals remained pending. Current Issues of Debate Terrorist Infiltration and Screening60 Some have long been concerned that terrorists would seek asylum in the United States, hoping to remain hidden among the hundreds of thousands of pending asylum cases. Critics point to asylum seekers from countries of "special concern" (i.e., Saudi Arabia, Syria, Iran, North Korea, China, Pakistan, Egypt, Lebanon, Jordan, Afghanistan, Yemen and Somalia) as potential national security risks. Some argue further that—since asylum is a discretionary form of immigration relief—national security risks should outweigh humanitarian concerns, and thus asylum relief should be restricted and judicial review of asylum cases more limited. Others point out that asylum seekers are subject to multiple national security screenings and that—if an asylum seeker is a suspected or known terrorist—the law already bars alien terrorists. They argue that the extent to which security risks exist, the risks result more from the limited intelligence data on terrorism, rather than an expansive asylum policy. Some assert further that asylees from countries of "special concern" may be beneficial to U.S. national security because they may have useful information that assists in the war on terrorism, much like assistance provided by communist defectors during the Cold War. Opponents of limiting the judicial review of asylum cases contend that it would erode two traditional values of U.S. polity—the right to due process and freedom from repression and persecution. Coordination with Customs and Border Protection and Immigration and Customs Enforcement Although USCIS and EOIR are clearly the lead agencies in asylum policy, the first contacts many asylum seekers have with the U.S. government are with Customs and Border Protection (CBP) inspectors, border patrol officers, and Immigration and Customs Enforcement (ICE) agents, whom some maintain are not adequately trained in asylum policy and other humanitarian forms of immigration relief. They maintain that these CBP officers and ICE agents are front line law enforcement who are so geared up to protect against potential terrorists, criminals and other threats that the they may not be flexible enough to recognize bona fide asylum seekers. They also question whether there is sufficient communication among the key immigration agencies: CBP, EOIR, ICE and USCIS. Others point out that the CBP inspectors, border patrol officers, and ICE agents follow the policy and procedural guidelines to ensure that aliens who express a fear of returning home are given the opportunity to have their fears considered by an asylum officer and/or an immigration judge. They maintain the training is more than adequate and that ample protections are afforded to those who express fears of persecution. Expanding Expedited Removal61 Proponents of expanding expedited removal refer to the provisions giving aliens who express a fear of persecution or an intention to seek asylum the opportunity for a credible fear determination. They usually cite statistics indicating that more than 90% of aliens who express a fear are deemed to be credible (pass their credible fear hearing) and are able to bring their cases to an immigration judge. They also note that the U.S. Commission on International Religious Freedom (USCIRF) study found that DHS has mandatory procedures in place to ensure that asylum seekers are protected under expedited removal. Testifying on the issue of expedited removal, C. Stewart Verdery, Jr., formerly Assistant Secretary for Border and Transportation Security Policy and Planning in DHS, concluded, "I am heartened to see that internal and external reviews of the asylum process largely have concluded that DHS has handled this subset of cases appropriately." Critics of expedited removal maintain that a low-level immigration officer's authority to order removal is virtually unchecked. The officer's decision to place the person in expedited rather than regular removal proceedings, they argue, can result in the person losing substantive rights. Indeed, they assert that there have been reports of abuse of the procedure since it was first implemented at the ports of entry and many individuals with valid claims have been erroneously removed. Critics refer to one investigation that found cases where aliens had requested the opportunity to apply for asylum but were refused and "pushed back" at primary inspection. Mandatory Detention Opponents to the mandatory detention of asylum seekers in expedited removal usually cite the U.N. High Commissioner on Refugees, who maintains that detention of asylum seekers is "inherently undesirable." Detention is psychologically damaging, some further argue, to an already fragile population that includes aliens who are escaping from imprisonment and torture in their countries. Asylum seekers are often detained with criminal aliens, a practice that many consider inappropriate and unwarranted. Some contend that Congress should provide for alternatives to detention (e.g., electronic monitoring) for asylum seekers in expedited removal. Others argue that the mandatory detention of asylum seekers provision should be deleted, maintaining that there is adequate authority in the INA to detain any alien who poses a criminal or national security risk. Proponents for current law warn that releasing asylum seekers in expedited removal undermines the purpose of expedited removal and creates an avenue for bogus asylum seekers to enter the United States. They argue that mandatory detention of asylum seekers is an essential tool in maintaining immigration control and homeland security. Any loosening of these policies, they allege, would divert the CBP and ICE officers from their homeland security duties to track down wayward asylum seekers. Supporters of current law also contend that it sends a clear signal of deterrence to aliens who consider using asylum claims as a mechanism to enter illegally. Cuban and Haitian Policies U.S. policy toward asylum seekers from Cuba and Haiti are often discussed in tandem because there are several key points of comparison. Both nations have a history of repressive governments with documented human rights violations. Both countries have a history of sending asylum seekers to the United States by boats. Finally, although U.S. immigration law is generally applied neutrally without regard to country of origin, there are special laws and agreements pertaining to Cubans and Haitians. Despite these points of similarity, the treatment of Cubans fleeing to the United States differs from that of Haitians. Many observe that Cuban migrants receive more generous treatment under U.S. law than Haitians or foreign nationals from any other country. As a consequence of special migration agreements with Cuba, a "wet foot/dry foot" practice toward Cuban migrants has evolved. Put simply, Cubans who do not reach the shore (i.e., dry land), are interdicted and returned to Cuba unless they cite fears of persecution. Those Cubans who successfully reach the shore are inspected for entry by DHS and generally permitted to stay and adjust under the Cuban Adjustment Act (CAA) the following year. Despite what some consider generous treatment of Cubans, there are others who charge that the forced return of Cubans interdicted at sea violates the spirit, if not the letter, of U.S. asylum and refugee law. Critics maintain that the Haitians are being singled out for more restrictive treatment than any other group of asylum seekers. Haitians interdicted at sea are repatriated, as are Cubans; however, critics charge that Haitians who reach the United States are more likely to be detained and less likely to be paroled after the credible fear determination. The Administration maintains that paroling Haitians (as is typically done for aliens who meet the credible fear threshold) may encourage other Haitians to embark on the risky sea travel and potentially trigger a mass migration from Haiti to the United States. The Administration further argues that all migrants who arrive by sea pose a risk to national security and warns that terrorists may pose as Haitian asylum seekers. Gender-Based Persecution Some advocate amending the INA's definition of refugee and asylee to expressly mention gender-based persecution, as was done for resistance to coercive population control policies. Proponents argue that those aliens fleeing such acts as female genital mutilation (FMG), rape by military or police forces, "honor killings," or domestic violence are not adequately protected by the INA because the alien must demonstrate that the abuse was based on race, religion, nationality, membership in a particular social group, or political opinion. They contend that the judicial decisions thus far have been contradictory and often cite Attorney General John Ashcroft's announcement that he is reconsidering the decision of his predecessor Attorney General Janet Reno to vacate the BIA ruling denying asylum to a Guatemalan woman who sought asylum based on repeated domestic violence by her husband. They assert that amending the INA to add gender as a basis would strengthen the policy, clarify the ambiguities resulting from varied judicial decisions, and speed up the lengthy asylum adjudication process. Others maintain that current law affords sufficient protections for aliens fleeing gender-based violence and persecution. They cite the legal guidance for Asylum Officers issued in 1995 that stated: "severe sexual abuse does not differ analytically from beatings, torture, or other forms of physical violence that are commonly held to amount to persecution." Supporters of current law point out that the BIA held In Matter of Kasinga , that a subjective 'punitive' or 'malignant' intent is not required for harm to constitute persecution and set the precedent for asylum on the basis of FMG in1996. They assert that adding gender as basis for asylum would impose western cultural norms as well as create a migration magnet for women living in male-dominated cultures and countries.

The United States has long held to the principle that it will not return a foreign national to a country where his life or freedom would be threatened. This principle is embodied in several provisions of the Immigration and Nationality Act (INA), most notably in provisions defining refugees and asylees. Aliens seeking asylum must demonstrate a well-founded fear that if returned home, they will be persecuted based upon one of five characteristics: race, religion, nationality, membership in a particular social group, or political opinion. Aliens present in the United States may apply for asylum with the United States Citizenship and Immigration Services Bureau (USCIS) in the Department of Homeland Security (DHS) after arrival into the country, or they may seek asylum before the Department of Justice's Executive Office for Immigration Review (EOIR) 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" review with an USCIS asylum officer and—if found credible—are referred to an EOIR immigration judge for a hearing. In FY2004, there were 27,551 claims for asylum filed with USCIS, and 55,067 asylum cases filed with EOIR in FY2004. Generally, over two-thirds of all asylum cases that EOIR received were cases referred to the immigration judges by the asylum officers. The USCIS asylum officers approved 10,101cases in FY2004, a 32% approval. Of asylum cases EOIR decided in FY2004, the approval rate was 34%. The total number of individuals who received asylum in FY2004 was 27,222, down from a high of 38,641 in FY2001. The individuals approved in FY2005 fell to 25,257. Although there are many who would revise U.S. asylum law, those advocating change have divergent perspectives. Some express concern that potential terrorists could use asylum as an avenue for entry into the United States, especially aliens from trouble spots in the Mideast, northern Africa and south Asia. Others argue that—given the religious, ethnic, and political violence in various countries around the world—it is becoming more difficult to differentiate the persecuted from the persecutors. Some assert that asylum has become an alternative pathway for immigration rather than humanitarian protection provided in extraordinary cases. Others maintain that current law does not offer adequate protections for people fleeing human rights violations or gender-based abuses that occur around the world. At the crux is the extent an asylum policy forged during the Cold War can adapt to a changing world and the war on terrorism. During the 109th Congress, major asylum provisions that were dropped from the Intelligence Reform and Terrorism Prevention Act of 2004 (P.L. 108-458) were included in the REAL ID Act of 2005 (P.L. 109-13, Division B). This law also eliminated the annual cap of 10,000 on asylee adjustments. The 110th Congress may consider other revisions to asylum, especially in the context of comprehensive immigration reform. This report will be updated as warranted.

Overview The Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury, the Executive Office of the President (EOP), the judiciary, the District of Columbia, and more than two dozen independent agencies. For each title of the regular FSGG appropriations bill, Table 1 lists the enacted amounts for FY2010, FY2011, and FY2012, as well as amounts requested by the President for FY2013. FY2013 Appropriations by Title Title I: The Department of the Treasury Title I of the FSGG appropriations bill provides funding for the Department of the Treasury and its bureaus, including the Internal Revenue Service (IRS). The President requested $13.24 billion for the Treasury Department for FY2013, an increase of $1.03 billion above FY2012 enacted amounts. The President's request includes a proposal to create a new bureau, the Fiscal Service, which would result from the merger of the Financial Management Service and the Bureau of the Public Debt. According to the budget request, the new bureau would reduce duplicative functions. Table 2 lists the enacted amounts for FY2010, FY2011, and FY2012, as well as amounts requested by the President for FY2013. Title II: Executive Office of the President Title II of the FSGG appropriations bill provides funding for all but three offices under the Executive Office of the President (EOP). The President requested $649 million for the EOP for FY2013, a decrease of $10 million below FY2012 enacted amounts. Table 3 lists the enacted amounts or FY2010, FY2011, and FY2012, as well as amounts requested by the President for FY2013. Title III: The Judiciary Title III of the FSGG appropriations bill provides funding for the judicial branch of the federal government, including the Supreme Court. As a co-equal branch of government, the judiciary presents its budget to the President, who transmits it to Congress unaltered. The President's FY2013 budget request for the judiciary is $7.19 billion, which is $219 million more than appropriated for FY2012. Table 4 lists the enacted amounts for FY2010, FY2011, and FY2012, as well as amounts requested by the President for FY2013. Title IV: District of Columbia Title IV of the FSGG appropriations bill provides funding for the District of Columbia. The President's FY2013 budget request includes $680 million for special federal payments to the District, an increase of $15 million above FY2012 enacted amounts. Table 5 lists the enacted amounts for FY2010, FY2011, and FY2012, as well as amounts requested by the President for FY2013. Title V: Independent Agencies Title V provides funding for more than two dozen independent agencies which perform a wide range of functions, including the management of federal real property (GSA), the regulation of financial institutions (SEC), and mail delivery (USPS). The President's FY2013 budget request includes $24.05 billion for independent agencies that receive their funding through the FSGG appropriations bill, an increase of $159 million over FY2012 funding levels. Table 6 lists the enacted amounts for FY2010, FY2011, and FY2012, as well as amounts requested by the President for FY2013.

The Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury, the Executive Office of the President (EOP), the judiciary, the District of Columbia, and more than two dozen independent agencies. Among those independent agencies are the General Services Administration (GSA), the Office of Personnel Management (OPM), the Small Business Administration (SBA), the Securities and Exchange Commission (SEC), and the United States Postal Service (USPS). The Commodity Futures Trading Commission (CFTC) is funded in the House through the Agriculture appropriations bill and in the Senate through the Financial Services and General Government bill. CFTC funding is included in all FSGG funding tables in this report. For FY2013, the President has requested $45.83 billion for agencies funded through FSGG appropriations, an increase of $1.41 billion above amounts enacted for FY2012.

Introduction In 1794, Congress granted President George Washington the authority to establish national arsenals to arm of the new United States Army with domestically produced weapons. In 1853, Congress gave the Secretary of War (the predecessor to the Secretary of the Army) the authority to abolish any arsenal that he deemed to be unnecessary. In 1920, Congress again stepped into the operation of the nation's weapons factories by requiring the Secretary of War to have all of the supplies needed by the Army to be produced in government-owned factories or arsenals, so long as it could be done on an "economical basis." These latter two provisions still exist in today's United States Code in the form of what is called the Arsenal Act. The great bulk of materiel used by today's Army is manufactured by private corporations, encouraging some to question the statute's efficacy. Others have expressed concern that the act could place the arsenals at a disadvantage should DOD to look to base closures as a means to reduce defense spending. The terms "arsenal" and "armory" have often been interchangeable through the decades since the nation was founded. Both have been used to describe manufacturing sites, supply centers, repair depots, and other military facilities. Nevertheless, this report will focus on those industrial arsenals that have been instrumental in providing the materials of war for the Army since the last years of the 18 th century. It is to these installations that the Arsenal Act (10 U.S.C. §4532) is directed. The Role of Arsenals in Supplying the Army Unlike England, France, and Germany, the United States has never sponsored private manufacturing establishments that specialized in the design and production of heavy munitions. Instead of relying upon a Vickers-Armstrong, a Schneider-Creusot, or a Krupp, the country from its beginning followed the policy of assigning responsibility for Army munitions supply to a special government agency, the Ordnance Department of the Army. During the Revolutionary War and through the first few years of the country's existence, the Army depended almost exclusively on foreign manufacturers for arms. Desiring to break this reliance on foreign supply, Congress authorized President George Washington in 1794 to establish a federal manufacturing arsenal at Springfield, MA. By the end of 1795, the arsenal had produced its first 295 muskets. Within a few years of the end of the War of 1812, five federal arsenals, specializing in particular products they offered, were in operation. Springfield and Harpers Ferry, VA, manufactured small arms (primarily muskets and pistols). Watervliet, NY, produced artillery equipment and ammunition. Watertown, MA, fashioned artillery gun carriages and small arms. Frankford, PA, fabricated ammunition. Two more facilities were built after the mid-nineteenth century, Rock Island, IL, specializing in artillery recoil mechanisms, and Picatinny, NJ, mixing artillery ammunition, propellants, and explosives, while Harpers Ferry was destroyed at the beginning of the Civil War and never rebuilt. The six surviving factories, along with a number of Department of the Navy shipyards, formed the core of a federally owned and operated 19 th century military production complex. These Army arsenals, under the command of Ordnance Department officers or, for some periods prior to the Civil War, civilian superintendants, were typically manned by a small cadre of military personnel and a large number of skilled civilian "artificers." Production, not innovation, was the strength of the arsenal system. Although the Ordnance Department was officially tasked with responsibility to design weaponry after 1834, new models of all types were normally brought to the Department by entrepreneurs or commercial companies for testing and evaluation. If the evaluators found the prototype worthy, it would be adapted for military use, standardized for manufacture, and placed into production either at an arsenal or on contract at a commercial firm under the close supervision of Ordnance officers. During the decades immediately prior to the Civil War, the arsenals collaborated closely with small arms manufacturers, making the technical expertise of arsenal artificers available to help nurture the nation's fledgling precision gauge and machine tool industries. As industry evolved in the United States during the mid-19 th century, competition between commercial enterprise and the government arsenals to supply the Army's needs became more intense. Several attempts to privatize arms production were made prior to the Civil War, culminating in a provision written into the Army Appropriations Act for 1854, addressed below, that gave the Secretary of War the explicit statutory authority to abolish any arsenal that he deemed unnecessary or useless. Nevertheless, both the Chief of Ordnance at the time, Colonel Henry K. Craig, and the Pierce Administration's Secretary of War, Jefferson Davis, resisted any further move toward commercialization, arguing that the continued use of government manufacturing facilities "guaranteed constant improvement in models and enabled the Ordnance Department to check not only on the quality of contractors output but also on their prices." Federal arsenal production was not again seriously threatened until the late 1960s. The War Department relied on a steady stream of military equipment, principally manufactured in its arsenals, to satisfy the needs of a very small peacetime Army. During war, the Department resorted to contracting with private enterprise to supply a "surge" capacity for the duration of the emergency. Even after industrialization took hold, the peacetime Army of the 19 th century did not present a market of sufficient size to attract the attention of the manufacturing concerns that focused on serving a rapidly expanding civilian sector. Growing public confidence in the ability of American industry to adapt quickly to any situation, plus the lengthy tenure of relatively conservative Chiefs of Ordnance, encouraged a complacency in the development of arms for the Army during the latter half of the century. By the first decades of the 20 th century, the roles of Congress and the Chief of Ordnance had reversed from those held a half-century earlier. Though appropriations for arms were modest, Congress became a champion of arsenal production. On the other hand, Brigadier General William B. Crozier, senior Ordnance officer from 1901 through 1918, routinely protested this policy, arguing that concentrating on federal manufacturing, while it might be less costly than contracting to civilian industry, could hamper efforts to expand production rapidly in the event of future emergency. Though presaged by the experience of an unprecedented mobilization during the Civil War, the first truly industrial war effort for the United States began in April 1917 with the U.S. entry into World War I. The demands of creating and supplying an army of a size sufficient for the fields of France resulted in an industrial mobilization of unprecedented magnitude and speed. Nonetheless, the mobilization effort was so badly orchestrated by the Army's Ordnance Department (weapons manufacturing) and Quartermaster Department (transportation) that by December 1917 the chiefs of both had been sacked and military supply and procurement responsibilities had been vested in a new civilian-managed wartime Division of Purchase, Storage, and Traffic. The civilian side of the industrial mobilization proved similarly difficult. Too many contracts, concluded too quickly, contributed to the supply logjams that proved the Army departments' undoing. When the Armistice was declared on November 11, 1918, many of those contracts were abruptly cancelled, precipitating litigation that lasted for decades. Private industry returned to civilian production as soon as possible, leaving the task of supplying the postwar Army largely to the traditional arsenal system. Nevertheless, the immediate post-war period proved to be one of considerable stress at the arsenals within the Ordnance Department. Although the Defense Act of 1920 stipulated that the Secretary of War would have needed Army supplies made by federally owned factories and arsenals, the large stockpiles of munitions and other materials remaining in war's aftermath made procurement almost moot for the foreseeable future. Appropriations and personnel strengths plunged. For Fiscal Year (FY) 1920, Congress appropriated $20.8 million for ordnance. By FY1923, appropriations amounted to $6.9 million. Personnel strengths saw similar contractions, with the number of military personnel assigned to the Ordnance Department dropping from 10,597 in 1919 to 3,087 in 1922. The number of civilians employed by the Department saw a similar decline. Though numbers for 1919 and 1920 are not available, the Department employed more than 14,000 civilians in 1921. By the next year, almost half had been let go, and civilian end strength stood at 8,119. This combined military and civilian workforce continued to shrink over the next several years. Thus, impacts of both the nation's rapid, mid-19 th century industrialization and the post-World War I contraction of the defense industrial base were captured in contemporary legislation and continue to reverberate in what is now the Arsenal Act. The Arsenal Act The act itself consists of only two subsections. 10 U.S.C. §4532. Factories and arsenals: manufacture at; abolition of (a) The Secretary of the Army shall have supplies needed for the Department of the Army made in factories or arsenals owned by the United States, so far as those factories or arsenals can make those supplies on an economical basis. (b) The Secretary may abolish any United States arsenal that he considers unnecessary. The statute is a combination of two different provisions of law, enacted nearly 70 years apart, that were eventually combined into a single provision during the early 1950s when the United States Code took its current form. Subsection (a), which requires the Secretary of the Army to have departmental supplies manufactured in government factories and arsenals to the extent that they can be manufactured "on an economical basis," first appeared in statute in the Defense Act of 1920. Subsection (b) originated in the Army Appropriations Act for 1854. The language of both sections has remained essentially unchanged since their enactment. The Army Appropriations Act for 1854 In 1853, only a few years after the conclusion of the Mexican War, federal arsenals were managed by military superintendents, and congressional debate on arsenals centered on whether or not to revert to civilian management, an arrangement that had been abandoned in 1840. At the time, the federal arsenals were assisting the machine tool and manufacturing industries to refine their skills and enter into competition with foreign manufacturers of both military and civilian goods. Nevertheless, during floor debate in the House on February 1, 1853, Representative Willis Arnold Gorman, chair of the Committee on Military Affairs, proposed an amendment to the Army Appropriation Bill on behalf of the committee stating that "That the Secretary of War be, and he is hereby, authorized to abolish such of the arsenals of the United States as, in his judgment, may be useless or unnecessary." Mr. Gorman offered to explain the amendment to the chamber, but the Members present suggested that no explanation was needed. The amendment was subsequently adopted by the House, survived conference, and was enacted. In slightly altered form, it can be found in 10 U.S.C. §4532(b). Notwithstanding this new authority, Secretary of War Jefferson Davis, who took office in March 7, 1853, and his Chief of Ordnance expressed a strong desire to preserve the manufacturing capabilities of the arsenals in order to provide competition to the private sector. The Defense Act of 1920 In 1920, the emphasis was somewhat different. The experience of World War I and its aftermath had led some in Congress to conclude that retention of a certain minimum level of surge manufacturing capacity within the federally owned industrial base would help in wartime mobilization. Given the massive stocks of war material left over from the recent conflict, apparent remoteness of renewed conflict, and the small size of the postwar Army, arsenal managers, the War Department, and Congress expressed concern that arsenals might not be able to generate sufficient work to maintain a core of manufacturing skills and industrial capacity to respond to an emergency. Hence, the reorganization of the Army embodied in the Defense Act of 1920 included the creation of a permanent Assistant Secretary of War and his appointment as the individual charged with responsibility for procurement of all military supplies and for the regulation of the federal arsenals. Emphasis in congressional debate focused on the need to render the arsenals as efficient as possible in the manufacture of high-quality military goods. This is reflected in the language seen in subsection (a) of the current law. Notwithstanding the language of the statute, the paucity of Army appropriations over the next several years rendered the statute of minimal economic importance. The following section discusses Army policy on implementation of the Arsenal Act in the current operation of its arsenals. Arsenal Operations Except for wartime emergency, the War Department (predecessor to the Department of the Army) did not place significant reliance on private industry to provide military arms and ammunition until after World War I. The first decades of the 20 th century saw significant military reform as Congress created the General Staff system and reorganized both the Army and the War Department before and after U.S. involvement in World War I. Two of those reforms, included in the act of 1920, had a direct impact on Army supply. The first of these created a permanent Assistant Secretary of War, designating him as the chief procurement official for the Army. The second stipulated that arsenals and factories be used for the manufacture of Army supplies, as noted above. The policy for implementing this provision of the Arsenal Act is outlined in detail in the current Army Regulation (AR) 700-94, Army Industrial Base Process , dated December 14, 2004. Paragraph 3-7 quotes 10 U.S.C. §4532(a), noting that the statute does not define the term "supplies," but suggesting that the term's definition in 10 U.S.C. §101(a)(14), "'supplies' includes material, equipment, and stores of all kinds," is broad enough to preclude the arsenals, whose production capacity is finite, from being able to provide for all the Army's considerable supply needs. The Assistant Secretary of the Army for Acquisition, Logistics, and Technology (ASA(ALT)), is tasked in the regulation by the Secretary of the Army with determining which supplies the arsenals can and should manufacture. This authority extends to selecting those Army-required items that will be subject to a "make (by the arsenals) or buy (from commercial manufacturers)" analysis. AR 700-94 goes on to provide policy on the use of the government-owned industrial base. Paragraph 5-1 begins by stating, "The intent of the Army-owned industrial base is to be postured to support the force structure with efficient, economical, practical, responsive, multifunctional, environmentally responsible, and compliant facilities." Nevertheless, paragraph 5-2 states that, "The Army will rely on the private sector for support of defense production to the maximum extent practical. When market research and ICA (independent cost analysis) confirms that the private sector is either inadequate or unavailable to reliably provide critical materiel needs, an essential nucleus of Government-owned facilities may be established or retained." Chapter 2 of AR 700-94 assigns the following responsibilities: 1. ASA(ALT) is responsible for deciding "whether Army materiel or its components should be made in an arsenal or bought from the private sector in those cases where the PEO [program executive officer] and AMC [Army Materiel Command] disagree (Para. 2-1(j), p. 3). 2. Commanding General, Army Materiel Command (AMC) is responsible for a. managing government-owned, government-operated (GOGO) production installations (para. 2-8(d), p. 5); b. analyzing whether to make or buy under the authority of 10 U.S.C. §4532, including the preparation of the analysis for AMC managed items and coordination with the applicable PEO/PM [program manager]. For PEO/PM managed items, he is responsible for providing the "make" estimate for Army materiel and/or its component that is potentially more economically manufactured at an arsenal and providing this analysis to the applicable PEO/PM early in the acquisition life cycle to avoid disruption of program milestones (para. 2-8(d)(4), p. 5). c. exercising command and control over Army government-owned, contractor- operated (GOCO) production installations (para. 2-8(e), p. 5). d. Develop and implement a phase down of ownership plan for Army-owned production installations in coordination with applicable PEOs/PMs (para. 2-8(f), p. 5). 3. Program Executive Officers (PEOs) and Program Managers (PMs) are tasked with a. assessing the ability of the industrial base to support the life cycle requirements for assigned programs and ensuring that an independent cost analysis is conducted when a potential problem exists. PEOs and PMs are to rely on the private sector to the maximum extent possible unless core depot-level maintenance and repair or Army-owned factories are more economical (para. 2-11(a), p. 6). b. performing the "make or buy" analysis under the authority of 10 U.S.C. §4532. PEOs and PMs are to prepare the analysis for PEO/PM managed items in coordination with AMC early in the acquisition life cycle so as not to disrupt program milestones (AMC is to furnish the "make" estimates). PEOs and PMs review "make or buy" analyses for AMC managed items that are part of the PEO's/PM's life cycle management responsibility. They are responsible for submitting these analyses to ASA(ALT) for a decision when they and AMC disagree on whether to manufacture items at arsenals or source procurement to a commercial vendor (para. 2-11(e), p. 6). Conclusion Federal manufacturing arsenals have supported the Army and the nation virtually since their births. Among other functions, the arsenals have designed and manufactured military arms and supplies, nurtured the country's early industrialization, and provided competition to private enterprise. The sophistication evident in arsenal facilities has evolved along with the nation's industrial base, sometimes leading, often trailing commercial industry in technological development, particularly during the years prior to World War I. Congress has provided statutory guidance for the operation and continued existence of the arsenals in legislation now consolidated in 10 U.S.C. §4532. The statute gives the Secretary of the Army the authority to "abolish" any arsenal that he considers unnecessary. It also requires the Secretary of the Army to have the supplies needed by the Department of the Army made at factories and arsenals owned by the United States, so long as this production can be carried out "on an economical basis." Yet, this section fails to define "supplies," or to explain what is meant by an "economical basis." The Department of the Army interprets the Arsenal Act in AR 700-94, Army Industrial Base Process , and lays out policy for its implementation. The ASA(ALT) retains the authority to decide whether a given article shall be manufactured in a federal facility or by a commercial supplier. To make that decision, he relies on AMC and the individual PEOs/PMs to assess the relative merits of the two choices and perform the analyses necessary to provide a basis for the decision. While the statute appears to emphasize the use of arsenals for supplying the Army, AR 700-94 directs PEOs/PMs "to rely on the private sector to the maximum extent possible unless ... Army-owned factories are more economical."

The Arsenal Act (10 U.S.C. §4532) requires the Secretary of the Army to have all supplies needed by the Army to be made in government-owned factories or arsenals if this can be accomplished "on an economical basis." It also grants the Secretary the authority to "abolish any United States arsenal that he considers unnecessary." This broad mandate, and even broader authority, has lead some observers to question whether the Department of the Army is abiding by either the spirit or the letter of the law in awarding development and procurement contracts. Others have expressed concern that the seeming unilateral authority to abolish arsenals could place them at a disadvantage should the Department of Defense (DOD) seek to close military installations. Federal arsenals, those government-owned industrial sites that have produced the engines of war for the United States Army virtually since the birth of the nation, exist and operate under the jurisdiction of the Secretary of the Army. They, along with their naval counterparts in the form of federally owned shipyards, have sustained the military services for more than two centuries. The two sections of the act were written approximately seven decades apart and are grounded in the events of their time. The authority to abolish dates to the era just prior to the Civil War, when the arsenals functioned not only as the nation's principal source of military arms, but also helped to nurture and sustain the country's early commercial industrialization. It was a period when the arsenals were beginning to experience competition in satisfying the Army's needs. The requirement to have Army supplies made in U.S.-owned factories or arsenals dates to the years immediately following the conclusion of World War I, when Congress, realizing that the United States faced increasing global responsibilities at a time of much-reduced defense appropriations, moved to ensure the continued existence of this "in-house" industrial base. Nevertheless, the statute does not define "supplies," nor does it spell out what is meant by making supplies "on an economical basis." The Department of the Army has promulgated policy for the implementation of the authority to produce supplies, embodying it in Army Regulation (AR) 700-94, Army Industrial Base Policy, of December 2004. AR 700-94 assigns the responsibility for deciding whether a given article is to be manufactured at a government-owned facility or contracted to a commercial vendor to the Assistant Secretary of the Army for Acquisition, Technology, and Logistics (ASA(ATL)). It also requires the Commanding General of Army Materiel Command (AMC) and the individual Program Executive Officers (PEOs) and Program Managers (PMs) to provide the Assistant Secretary with the analyses needed to make that decision. This report describes the roles of the federal manufacturing arsenals during the years surrounding the enactment of the two sections of the Arsenal Act, one as part of the Army Appropriations Act for 1854, and the other within the Defense Act of 1920, also known as the Army Reorganization Act of 1920, and provides historical context. The report also shows the change in language between the sections' original enactment and today, and it provides details on the Army's policy in implementing the manufacturing sourcing portion of the statute.

Background on the VCCR and U.S. Implementation The VCCR is a multilateral agreement codifying consular practices which have traditionally been governed by custom and bilateral agreements between nations. The VCCR enumerates basic legal rights and duties of signatory States relating to, inter alia , the conduct of consular relations and the privileges and immunities accorded to consular officers and offices. The United States ratified the VCCR in 1969, and most countries are parties to the agreement. When the United States became a party to the VCCR, it also chose to become a party to the VCCR's Optional Protocol Concerning the Compulsory Settlement of Disputes (Optional Protocol). Parties to the Optional Protocol agree to accept the jurisdiction of the International Court of Justice (ICJ) to resolve disputes arising between nations with respect to the VCCR. On March 7, 2005, the United States withdrew from the Optional Protocol. As a result, the ICJ's jurisdiction over VCCR claims is no longer recognized by the United States. VCCR Article 36 VCCR Article 36 provides that when a foreign national of a signatory State is arrested or otherwise detained, appropriate authorities within the receiving signatory State must inform him "without delay" of his right to have his consulate notified. This requirement is potentially beneficial to a detained national. For example, if the consulate of the detained national is given notice of the arrest, it might take diplomatic steps to ensure that its national is treated fairly in the receiving State. A consulate might also arrange for legal representation, or assist in obtaining evidence or witnesses from the sending State to bolster the national's defense in any subsequent criminal case. U.S. Implementation of the VCCR Article 36 When the VCCR was ratified by the United States, the agreement was understood to be self-executing; that is, no additional, implementing legislation was required for it to take effect or be judicially enforceable. Under regulations implemented prior to U.S. ratification of the VCCR, a foreign national arrested by federal law enforcement authorities will have his consul advised of his arrest unless the national does not wish such notification to be given. Perhaps due to constitutional concerns related to federalism, there is no federal statutory mechanism to ensure adherence to VCCR Article 36 by state and local law enforcement, though the State Department provides informational materials to state and local entities regarding their consular notification obligations under the VCCR. Despite these measures, foreign nationals detained by state and local authorities are not always provided with requisite consular information. Additionally, state and federal procedural default rules might prevent foreign nationals from obtaining a remedy for an Article 36 violation when they become aware of the VCCR's consular notification requirements after having been convicted of an offense. As is the case on the federal level, state procedural default rules generally prevent the reopening of cases to consider claims that were not raised on a timely basis (e.g., before or during trial). The rule may preclude the raising of claims based on the violation of a treaty or (in many cases) a constitutional right. Although lower federal courts have jurisdiction to review state criminal convictions pursuant to writs of habeas corpus, the scope of such review is limited. A person convicted in state court who petitions for federal habeas relief on account of a violation of the Constitution or a federal statute or treaty must have first raised the claim in state court if he is to be provided an evidentiary hearing under federal habeas review. The Consolidated Cases of Sanchez-Llamas v. Oregon and Bustillo v. Johnson On November 2, 2005, the Supreme Court granted certiorari in two cases concerning Article 36 violations, Moises Sanchez-Llamas v. Oregon and Bustillo v. Johnson . The Court consolidated these cases for argument. The cases involved review of state convictions of two foreign nationals who were not promptly informed of their ability under VCCR Article 36 to have their consul notified of their arrest. This was not the first instance where the Court was asked to adjudicate matters relating to the enforcement of VCCR Article 36. Most notably, in the 1998 per curium opinion issued in the case of Breard v. Greene , the Court concluded that, among other things, Article 36 did not alter or create an exception to traditional U.S. procedural default rules in cases where a foreign national was not provided with requisite consular information. Nevertheless, more recent legal developments raised questions regarding the continuing precedential value of Breard . Acting pursuant to the Optional Protocol, Germany and Mexico brought claims before the ICJ against the United States in 1999 and 2003, respectively, for alleged Article 36 violations. In the LaGrand Case (Federal Republic of Germany v. United States ), the ICJ concluded, inter alia , that (1) Article 36 provides covered individuals with a right to consular notification, and a violation of that right may require review and reconsideration of a foreign national's sentence and conviction in certain instances; and (2) the application of procedural default rules to bar the raising of Article 36 claims, at least in certain instances, prevents "full effect" from being given to the purposes for which the rights accorded under Article 36 were intended. Subsequently in the case of Avena and Other Mexican Nationals ( Mexico v. United States of America ) , the ICJ reaffirmed LaGrand 's interpretation of U.S. obligations under VCCR Article 36. At the time that Avena was decided, the United States was still a party to the VCCR's Optional Protocol, and accordingly recognized the ICJ as having jurisdiction to settle disputes between Protocol parties regarding the interpretation and application of the VCCR. Although the United States withdrew from the Optional Protocol several months prior to the U.S. Supreme Court granting certiorari in Sanchez-Llamas and Bustillo , there was some question as to whether the ICJ's decisions in LaGrand and Avena would compel or persuade the Court to overrule its earlier decision in Breard . Case Background Petitioner Sanchez-Llamas, a Mexican national, was arrested for attempted murder and other offenses on account of a shootout with Oregon police. When initially arrested, he was informed of his Miranda rights but was not told that he could have the Mexican consulate notified of his detention. During subsequent interrogation, Sanchez-Llamas made incriminating statements. Prior to his trial, Sanchez-Llamas moved to have these statements suppressed because authorities had failed to notify him of his right to consular notification under VCCR Article 36. This motion was denied by the trial court and Sanchez-Llamas was convicted. The conviction was affirmed by the Oregon State Court of Appeals and Oregon State Supreme Court, which held that VCCR Article 36 does not create a judicially-enforceable right to consular access. Sanchez-Llamas appealed this ruling to the U.S. Supreme Court. Petitioner Bustillo, a Honduran national, was arrested and charged with murder by Virginia law enforcement authorities, but only learned of his ability to have his consulate notified after having been convicted. Following the affirmation of his conviction on appeal, he filed a habeas petition in Virginia state court arguing for the first time that authorities had violated his rights under Article 36. The Virginia Court of Appeals dismissed this claim as procedurally barred because Bustillo did not raise this argument at trial or on appeal, as required under Virginia law, and the dismissal was upheld by the Virginia Supreme Court. Bustillo appealed to the U.S. Supreme Court. The Supreme Court granted review to both cases and, in an opinion by Chief Justice Roberts (joined by Justices Alito, Kennedy, Scalia, and Thomas), denied petitioners' claims for relief. Existence of a Judicially-Enforceable Right under VCCR Article 36 Before considering what remedy, if any, was available to the petitioners for a violation of Article 36, the Court first considered whether Article 36 creates a judicially-enforceable right to consular notification. In the previous case of Breard , the Court had only gone so far as to say that Article 36 "arguably confers" an individual right to consular assistance following arrest, and lower federal and state courts had reached differing conclusions on the matter. A five-justice majority of the Court decided not to definitively resolve this issue, concluding that regardless of whether such a right existed, petitioners were not in any event entitled to the remedies they sought. In dissent, Justice Breyer joined by Justices Stevens, Souter, and Ginsburg would have definitively held that Article 36 grants rights that may be invoked by a foreign national in a judicial proceeding. Exclusion of Evidence as a Remedy to an Article 36 Violation The exclusionary rule is used to deter constitutional violations by requiring certain evidence gathered in violation of a defendant's constitutional rights to be suppressed at trial. With respect to the question of whether suppression of evidence is an appropriate remedy for an Article 36 violation, a five-justice majority held that suppression is never a suitable response. As an initial matter, the Court rejected any suggestion that the VCCR requires the suppression of a defendant's statements to police as a remedy, emphasizing that the text of Article 36 acknowledges that the rights accorded therein are to be "exercised in conformity with the laws and regulations of the receiving State." Asserting that the "exclusionary rule as we know it is an entirely American legal creation" and that the automatic exclusionary rule is still almost "universally rejected" by other countries 40 years after the drafting of the VCCR, the Court concluded it would be "startling" to read the VCCR as requiring suppression of evidence. Petitioner Sanchez-Llamas argued that suppression of evidence is nevertheless the appropriate remedy under the U.S. system of law to give "full effect" to the rights accorded by Article 36. He further argued that such a remedy should be required by the Court under its authority to develop remedies for the enforcement of federal law in state-court criminal proceedings. The Court rejected this argument, noting that well-established precedent left it "beyond dispute" that the Court did not have a supervisory power over state courts, but only federal. Accordingly, any authority possessed by the Court to craft a judicial remedy applicable to state courts for an Article 36 violation must be derived from the VCCR itself. "Where a treaty does not provide a particular remedy, either expressly or implicitly," the Court reasoned, "it is not for the federal courts to impose one on the States through lawmaking of their own." Even assuming arguendo that a judicial remedy was required to give "full effect" to the rights accorded under Article 36 (an assumption the Court viewed with skepticism), the Court concluded that applying the exclusionary rule would not be the appropriate remedy. Under U.S. law, the exclusionary rule has traditionally been used to deter constitutional violations under the Fourth Amendment and Fifth Amendments (e.g., unreasonable searches and seizures, confessions obtained by police in violation of the right against self-incrimination, and due process violations). The Court found that the rights accorded to a foreign national under Article 36 are different than those for which the exclusionary rule traditionally applies. Article 36 only provides a foreign national with the right to have his consulate informed of his arrest, not a substantive guarantee of consular intervention or a prohibition on police interrogation pending consular notice or intervention. Suppression would accordingly be "a vastly disproportionate remedy for an Article 36 violation." The Court further noted that any cognizable interests the petitioner claimed were advanced under Article 36 were already protected by other constitutional and statutory protections, including those concerning the right to an attorney and protection against self-incrimination. In conclusion, the Court suggested the availability of other remedies for an Article 36 violation. These included diplomatic options and the possibility of raising Article 36 claims in judicial proceedings as part of a broader challenge as to the voluntariness of a police interrogation. In a concurring opinion, Justice Ginsburg agreed with the judgment of the Court finding that suppression was inappropriate in the cases before it, but would have left open the question of whether suppression could be an appropriate remedy in different circumstances. Writing in dissent, Justice Breyer (joined by Justices Stevens and Souter) agreed with the majority that the VCCR does not "create a Miranda -style automatic exclusionary rule" concerning incriminating statements made by a foreign national who is not provided with requisite consular information, but disagreed with the majority's conclusion that suppression is never the proper remedy. The dissenting justices believed that suppression may be an appropriate remedy when it is the only available remedy to cure prejudice related to an Article 36 violation. They would have remanded both cases to the state courts to consider whether suppression was appropriate given the factual circumstances of each case. Application of State Procedural Bars to VCCR Claims The third and final issue considered by the Court was whether state procedural default rules may prevent the raising of Article 36 claims that are not made on a timely basis. Here, the Court reaffirmed its decision in Breard , which held that state procedural default rules apply to Article 36 claims. In reaffirming Breard , the Court considered the ICJ's decisions in LaGrand and Avena , and declined to follow the ICJ's ruling that procedural default should not prevent the consideration of Article 36 claims. Both petitioners and several amici argued that the United States was obligated to comply with the VCCR as it had been interpreted by the ICJ. The Court stated that it found nothing in the structure or purpose of the ICJ suggesting that its interpretations were intended to be conclusive for U.S. courts. While the Court noted that the ICJ's interpretation "deserves respectful consideration," it did not deem it to be binding. The Court elaborated that under the U.S. constitutional system, "[i]f treaties are to be given effect as federal law...determining their meaning as a matter of federal law 'is emphatically the province and duty of the judicial department,' headed by the 'one supreme Court' established by the Constitution." The Court also stated that the U.S. withdrawal from the Optional Protocol further made it "doubtful that our courts should give decisive weight" to the ICJ's interpretation of VCCR Article 36. Even according "respectful consideration" to the ICJ's interpretation of Article 36, a majority of the Court found its reading to be unpersuasive. Here, the Court focused on the language of Article 36 providing that the rights contained therein are to be "exercised in conformity with the laws...of the receiving State." Specifically, the Court disagreed with the ICJ's conclusion in LaGrand that procedural default rules could prevent "full effect" from being given to the purposes of Article 36. The Court viewed the ICJ's interpretation as overlooking the importance of procedural default rules in an adversary system such as that used in the United States, which relies chiefly on parties to raise significant issues to a court in a timely and appropriate manner for adjudication (in contrast to the inquisitorial, magistrate-directed systems employed by many VCCR parties, where inquisitors engage in factual and legal investigations themselves). Under the ICJ's reading of Article 36, the Court suggested, Article 36 claims could potentially trump not only procedural default rules, but also other requirements on parties to present legal claims at the proper time for adjudication (e.g., statutes of limitations, prohibitions against filing successive habeas petitions). The Court disposed of Bustillo's claim for suspension of procedural default rules by analogizing Article 36 to Miranda claims. Although a failure to inform a foreign national of his Article 36 rights may prevent him from becoming aware of those rights in time to assert them at trial, the same is also true with respect to Miranda claims. If, for example, a defendant is not informed of his Miranda rights and subsequently fails to raise a Miranda claim during trial, procedural default rules can and do prevent him from raising the claim in a post-conviction proceeding. The Court declined to provide an exception to procedural default rules for Article 36 claims when a similar exception "is accorded to almost no other right, including many of our most fundamental constitutional protections." Finally, the Court stressed that its holding "in no way disparages the importance of the Vienna Convention." The relief petitioners requested was extraordinary, and there was "no slight to the Convention to deny petitioners' claims under the same principles as we would apply to an Act of Congress, or to the Constitution itself." In a concurring opinion, Justice Ginsburg agreed with the judgment of the Court concerning the application of procedural default rules to the cases before it, but would have left open the question of whether an exception to default rules for Article 36 claims might be required in different circumstances. Justice Breyer, writing in dissent for himself and Justices Souter and Stevens, argued that the majority had overstated the breadth of the ICJ's rulings in LaGrand and Avena , and that the ICJ understood the VCCR only to require an effective remedy for Article 36 violations. In some (but not all) cases, this could require an exception to traditional procedural default rules to permit the raising of an Article 36 claim. While assuming that the ICJ opinions were not controlling, Justice Breyer argued that "respectful consideration" of ICJ decisions compelled deference to its expertise on VCCR issues and adherence to its interpretation of VCCR Article 36 in the present case. Accordingly, the dissent would have allowed procedural default rules to give way to Article 36 claims when states do not provide any effective remedy for Article 36 violations. Possible remedies could include an ineffective-assistance-of-counsel claim when a defendant's attorney acts incompetently with respect to VCCR rights of which the attorney was aware. Unresolved Issues Despite the Court's holdings in the consolidated cases of Sanchez-Llamas and Bustillo , some issues related to interpretation and application of VCCR Article 36 remain unresolved. As mentioned previously, the issue of whether the VCCR confers an individually enforceable right has not been decided by the Court. The question of whether such a right is conferred by Article 36, and what judicial remedy, if any, is available for a violation of that right, will likely be the subject of continued litigation. Perhaps the most notable unresolved issue concerns U.S. implementation of the ICJ's ruling in Avena with respect to the 51 Mexican nationals at issue in that case. As previously mentioned, in Avena the ICJ ruled that the United States failed to comply with its obligations owed to Mexico and its foreign nationals under the VCCR. It further instructed the United States to review and reconsider the convictions and sentences of named Mexican foreign nationals awaiting execution who were denied requisite consular information owed under VCCR Article 36. In 2004, the Supreme Court granted certiorari in the case of Medellin v. Dretke , in which it would have likely ruled on the enforceablity of Avena by U.S. courts. Petitioner Medillin, one of the Mexican nationals named in the Avena case, argued, among other things, that his conviction by a Texas court should be reconsidered in light of the ICJ's ruling, despite such reconsideration being barred by Texas's procedural default rules. Prior to the Supreme Court reaching a decision on this issue, President Bush issued a memorandum instructing state courts to give effect to the Avena decision in accordance with general principles of comity, in cases filed by the Mexican nationals addressed in that decision. The memorandum did not instruct state courts to reconsider Article 36 claims by persons who were not named in Avena. Days later, the United States withdrew from the Optional Protocol. The Supreme Court subsequently dismissed its writ of certioriari in Medellin as improvidently granted, as it was no longer clear that Medellin had exhausted his remedies at the Texas state level in light of the President's memorandum. The Court in Sanchez-Llamas cites the Presidential memorandum only once, to indicate that the United States "has agreed to 'discharge its international obligations' in having state courts give effect to the decision in Avena , [but] it has not taken the view that the ICJ's interpretation of Article 36 is binding on our courts." Accordingly, the issue of whether the President may order state courts to provide a remedy for VCCR violations remains unresolved. Whether the President may instruct state courts to implement an ICJ order raises novel constitutional questions concerning federalism and the scope of the Executive's foreign affairs power. The Supreme Court has found that executive agreements—those entered into by the Executive branch that are not submitted to the Senate for its advice and consent—may, at least in certain areas, preempt inconsistent state laws. Most recently in the case of American Insurance Association v. Garamendi , the Supreme Court held in a 5-4 opinion that a California law requiring companies to disclose Holocaust-era insurance policies sold in Europe was preempted, as it conflicted with the President's foreign policy objectives, reflected in various executive agreements, concerning the settlement of claims involving insurance policies confiscated by Nazi Germany. However, the President's memorandum ordering state courts to implement the ICJ's order is not an executive agreement, and a reviewing court might therefore treat it differently. Further, even if state procedural default rules may be preempted to the extent that they conflict with a President's foreign policy objectives relating to the VCCR, it is unclear whether the President has the constitutional authority to direct state courts to adopt measures to facilitate those foreign policy objectives. Although the Supreme Court has found in several cases that state law is preempted to the extent that it conflicts with international agreements or U.S. foreign policy objectives, these cases have not involved situations in which the federal government instructed state and local institutions to take affirmative steps to advance U.S. foreign policy interests, as is arguably the case with the President's memorandum instructing state courts to give effect to the Avena decision ( i.e. , requiring state courts to reconsider the convictions and sentences of persons who were not provided requisite consular notification information). Accordingly, the extent to which the Tenth Amendment restricts the scope of the Federal government's treaty and foreign affairs powers remains unclear. On November, 15, 2006, the Texas Criminal Court of Appeals held in the case of Ex Parte Medellin that neither Avena nor the President's memorandum preempted state procedural default rules, and it rejected Medellin's petition for habeas relief. Citing the Supreme Court's ruling in Sanchez-Llamas , the Texas state court held that the ICJ's ruling in Avena was not binding federal law, and therefore did not preempt Texas's procedural bar. The lead opinion also found that the President's memorandum could not be sustained under either his express or implied constitutional powers or through any power granted by Congress and held that the memorandum violated the separation of powers doctrine by intruding into the domain of the judiciary. The court suggested that Texas's procedural bar might have been preempted by an executive agreement between Mexico and the United States permitting reconsideration of the sentences of Mexican nationals by U.S. courts, even though state law could not be preempted via unilateral action by the President to achieve a settlement. Though the majority opinion was joined by all nine members of the Texas court, a concurring opinion would have also rejected the legal authority of the President's memorandum on federalism grounds, while another would have held that the memorandum did not constitute federal law and was therefore not binding on state courts. The court's decision is potentially subject to appeal to the U.S. Supreme Court.

The Vienna Convention on Consular Relations (VCCR) is a multilateral agreement codifying consular practices originally governed by customary practice and bilateral agreements between States. Pursuant to Article 36 of the VCCR, when a foreign national of a signatory State is arrested or otherwise detained, appropriate authorities within the receiving signatory State must inform him "without delay" of his right to have his consulate notified. Nevertheless, foreign nationals detained by U.S. state and local authorities are not always provided with requisite consular information. Until March 2005, the United States was also party to the VCCR's Optional Protocol Concerning the Compulsory Settlement of Disputes. Parties to the Optional Protocol agree to accept the jurisdiction of the International Court of Justice (ICJ) to resolve disputes arising between nations with respect to the VCCR. Prior to U.S. withdrawal from the Optional Protocol, the ICJ ruled in the LaGrand Case (Federal Republic of Germany v. United States) and the Case Concerning Avena and Other Mexican Nationals (Mexico v. United States of America) that Article 36 confers an individually-enforceable right to consular notification. Further, the ICJ concluded that procedural default rules should not, at least in certain circumstances, bar the raising of Article 36 claims by foreign nationals who were not provided with requisite consular information and were subsequently convicted in criminal proceedings. In the consolidated cases of Moises Sanchez-Llamas v. Oregon and Bustillo v. Johnson, decided on June 28, 2006, the Supreme Court considered arguments as to what judicial remedy, if any, is available to foreign nationals in U.S. criminal proceedings who are not provided requisite consular information. By a vote of 5-3 the Court held that (1) suppression of evidence in a criminal proceeding is never an appropriate remedy for an Article 36 violation; and (2) federal and state procedural default rules prevent the raising of Article 36 claims that were not made on a timely basis. Although the Court considered the ICJ's interpretation of Article 36 as deserving respectful consideration, it did not deem it to be legally binding or necessarily persuasive. The Court did not determine whether Article 36 creates an individually-enforceable right. Nor did the Court assess the legal implications of the President's 2005 memorandum instructing state courts to give effect to the ICJ's decision in Avena with respect to the 51 Mexican nationals at issue in that case. On November 15, 2006, the Texas Court of Criminal Appeals held in the case of Ex Parte Medellin that neither Avena nor the President's memorandum preempted state procedural default rules.

Panama's Political and Economic Environment1 A Central American nation with a population of about 3.8 million, Panama has made notable political and economic progress since the December 1989 U.S. military intervention that ousted the military regime of General Manuel Antonio Noriega from power. The intervention was the culmination of two and a half years of strong U.S. pressure against the de facto political rule of Noriega, commander of the Panama Defense Forces. Since that time, the country has had five successive elected civilian governments, and a sixth is scheduled to assume power on July 1, 2014 with the inauguration of current Vice President Juan Carlos Varela as President. Current President Ricardo Martinelli, elected in 2009, remained generally popular during his presidency despite criticism at various junctures for his combative style of governing. Panama's largely services-based economy has been booming in recent years, spurred on by the Panama Canal expansion project that began in 2007 and is expected to be completed in early 2016. The endurance of elected civilian democracy in Panama for almost 25 years is a significant departure from the country's previous 21-year history of military rule. This included the populist rule of General Omar Torrijos (1968-1981), who initially governed as a social reformer, and the increasingly repressive rule of General Noriega (1983-1989). In the aftermath of the ouster of the Noriega regime, the duly elected winner of the 1989 presidential election, Guillermo Endara (1989-1994), took office; his coalition government made significant progress in restoring functioning democratic political institutions, although the demilitarization process was difficult at times. The center-left government of President Ernesto Pérez Balladares (1994-1999) of the former pro-Noriega Democratic Revolutionary Party (PRD) implemented an economic reform program that included trade liberalization and privatization of state-owned enterprises. Pérez Balladares sought to amend the Constitution to allow for presidential reelection, but Panamanians rejected the proposal by a large margin in a national referendum. The center-right Arnulfista Party government of President Mireya Moscoso (1999-2004), Panama's first female President, partially reversed the trade liberalization efforts of her predecessor. The center-left PRD government of President Martín Torrijos (2004-2009), the son of the former military ruler, initiated the Panama Canal expansion project, negotiated a free trade agreement with the United States, and enacted judicial, penal, and anti-corruption reforms. Current President Ricardo Martinelli, a businessman and former government minister from the small center-right Democratic Change (CD) party, defeated the PRD candidate by a landslide in the May 2009 presidential election. His electoral alliance, known as the Alliance for Change, also won a majority of seats in the National Assembly. Until September 2011, President Martinelli governed in a coalition with the center-right Panameñista Party (PPA, previously known as the Arnulfista Party), but the coalition fell apart in August 2011 after a rupture in relations between Martinelli and Vice President Juan Carlos Varela of the PPA. Varela was sacked as foreign minister, but continued in his elected position as Vice President, albeit as a strong critic of President Martinelli. In the last year of his term, President Martinelli remained broadly popular in large part because of the strong performance of the Panamanian economy under his government buoyed by the ongoing Canal expansion and other large infrastructure projects (see " Economic Situation " below). Yet over the course of his tenure, Martinelli's public approval ratings had dropped several times after strong public opposition and protests over some of his policy proposals related to labor issues, mining, and the sale of land in the Colón Free Zone (the world's second largest duty free zone after Hong Kong). He was also criticized by civil society groups and political opponents for taking a heavy-handed approach toward governing and for not being more consultative. May 2014 Elections In Panama's May 4, 2014 elections, current Vice President Varela of the center-right PPA won the presidency with 39% of the vote in what was essentially a three-candidate race. President Martinelli was ineligible to run for reelection since, according to Article 178 of Panama's Constitution, the President may not be reelected until two presidential terms have passed. Under Panama's electoral system, the President is elected by simple majority, with no provisions for a second round. Varela defeated José Domingo Arias of the ruling center-right CD party of President Martinelli, who received 31%, and Juan Carlos Navarro of the center-left PRD, who received 28%. Arias had led opinion polls during much of the campaign, but the race tightened in the month leading up to the vote. Initially, the popularity of President Martinelli was a key factor helping Arias in the race. One controversy that emerged, however, was the selection of Martinelli's wife, Marta Linares, as the CD's vice presidential candidate. Some critics feared that the first lady's candidacy could have allowed Martinelli to retain influence in the next government and give rise to a political dynasty. There were also concerns that if Arias had won the presidency, his government could have submitted a constitutional reform to shorten the reelection ban period from 10 years to 5 years, allowing Martinelli to run again in 2019. President-elect Varela, a long-time businessman who received a degree in industrial engineering from Georgia Tech, has served as leader of the PPA since 2006. As noted above, Varela has served as Vice President since 2009 despite his break in relations with President Martinelli in 2011. He also served as Minister of Foreign Relations from July 2009 until August 2011. During the 2014 electoral campaign, Varela advocated programs such as emergency price controls for basic products, an electricity project with Colombia, and an integrated public transportation plan for Panama City. Varela also has vowed to combat inequality. As Vice President, Varela reportedly was instrumental in shaping some of the popular social policies of the Martinelli government, including monthly payments to Panamanian seniors without pensions as well as housing and scholarship programs for the poor. Anti-corruption was also a major campaign theme for Varela, especially since the Vice President's break with President Martinelli involved Varela's allegations of governmental corruption. Since Varela hails from the private sector, where for many years he worked for his family's rum company, Varela Hermanos, many of the pro-business economic policies of the Martinelli government are likely to remain in place. In terms of foreign policy, Varela has indicated a willingness to resume diplomatic relations with Venezuela, which had been severed in March by Venezuela because of Panama's efforts to encourage action at the OAS on Venezuela's recent political unrest. Varela's vice presidential running mate, Isabel de Saint Malo, is a political independent who had worked developing Varela's campaign platform. She has already been tapped to become Minister of Foreign Affairs in the new government. Some reports describe her as a consensus-builder. She previously served as Panama's alternative Ambassador to the OAS under the Endara Administration in the aftermath of Panama's return to democratic rule. In addition to the presidential race, voters selected members of Panama's 71-seat unicameral National Assembly and hundreds of local officials—all for five-year terms. While to date not all of the legislative races have been certified, reportedly the CD-led electoral coalition known as Unidos Por Más Cambios (United for More Change) won 33 of the 71 seats; the PRD won 24; President-elect Varela's PPA-led electoral alliance known as El Pueblo Primero (People First) won 13; and one independent deputy was elected. With just 13 legislative seats, Varela faces the challenge of securing legislative support for his agenda. Varela's coalition and the PRD reportedly have agreed to a pact of governance that will provide the Varela government with a majority in the legislature. Some analysts question whether such a pact will be able to hold together over the long-term given the different political orientations of the PRD and the Panameñista Party and because of the multiple factions within the PRD. The 2014 elections were considered free and fair by independent observers, including the Organization of American States (OAS) and the Carter Center . Both organizations lauded Panama's Electoral Tribunal (TE) for its conduct of the elections, but also raised some concerns about some aspects of the electoral process, including the use of public resources by the candidates of the incumbent party. The OAS, which has observed nine elections in Panama since1972, had raised concerns in March about some attempts to discredit the TE. Economic Situation Panama's services-based economy has been flourishing in recent years, in large part because of the Panama Canal expansion and other large infrastructure projects, such as a metro system for Panama City, a third bridge over the Canal, and expansion of the country's international airport, regional airports, and several roads and highways. When the Martinelli government took office in 2009, it had to deal with the fallout stemming from the global financial crisis, but the economy weathered the storm and avoided the contraction experienced by many Latin American economies. Before the financial crisis, Panama's economy had been booming, growing by over 10% in 2007 and 2008. The global financial crisis and U.S. recession slowed Panama's economic growth to 3.9% in 2009, but this still made Panama's economy one of the few in the region registering positive economic growth. Since then, the economy has rebounded. Economic growth averaged 9.4% from 2010-2013, and in 2014 the forecast is for 7% growth. The International Monetary Fund issued its latest Article IV consultation staff report on Panama in early June 2014 and concluded that the country's economic performance remains buoyant, with banks that are well capitalized, profitable, and liquid. Strong economic growth in recent years has contributed to poverty reduction in Panama. According to the U.N. Economic Commission for Latin America and the Caribbean, the poverty rate declined from 31% in 2005 to 25% in 2011, while indigence or extreme poverty fell from 14.1% in 2005 to 12.4% in 2011. Targeted social programs have also contributed to a reduction in poverty. The Torrijos government initiated a social support program of conditional cash transfers to poor families and the elderly, and the Martinelli government established a program to provide monthly payments (now $120) to seniors over 70 years of age who do not receive a pension, as well as a universal scholarship program that provides monthly grants to students. Nevertheless, while Panama is classified by the World Bank as having an upper-middle-income economy because of its per capita income ($8,510 in 2012), inequality still remains relatively high, with large disparities between the rich and poor. The World Bank asserts that challenges persist in the provision of public services, particularly for children in indigenous communities who have significantly less access to basic services than children in rural or urban areas. It maintains that accelerating poverty reduction depends on the country developing a more effective social protection system for the poor. Panama has received support from the World Bank for a variety of projects focused on health, social protection, rural development, environment, infrastructure, and efficiency in the public sector. U.S.-Panama Relations U.S. relations with Panama date to the country's independence from Colombia in 1903. While historically there were strains in relations at various times over the operation of the Panama Canal, the Panama Canal treaties negotiated in 1977 reduced tensions in the relationship and set a path for Panama's assumption of full jurisdiction over the Canal by the end of the century. Relations deteriorated significantly in the 1987-1989 period under the de facto political rule of General Manuel Noriega. Since the December 1989 U.S military intervention, however, and Panama's return to elected civilian democratic rule, U.S. relations with Panama have been close. Bilateral relations were strengthened with the approval of a bilateral free trade agreement that entered into force in October 2012. According to the State Department, the country's central location in the hemisphere, the Panama Canal, its transportation infrastructure, and its financial sector make it an important hub for global trade and a key U.S. strategic partner, but these same characteristics make Panama vulnerable to drug trafficking, money laundering, and organized criminal activity. Upon Juan Carlos Varela's election in May 2014, Secretary of State John Kerry commented that "our longstanding cooperation and commitment to Panama and the Panamanian people will endure with the next Administration." In terms of foreign policy, Panama has been a strong U.S. ally in the region. While many other Latin American countries had a timid response to the Venezuelan government's suppression of protests beginning in February 2014, Panama spoke out and called for a special meeting of the OAS and even made a Venezuelan opposition legislator a temporary member of its OAS delegation. In July 2013, Panama detained a North Korean freighter, which had made stops in Cuba, as it prepared to enter the Panama Canal due to suspicion that the ship was carrying illicit narcotics; instead, the ship was found to be carrying military weapons. The U.N. Security Council's Panel of Experts for North Korea visited Panama and concluded in a report issued by the Security Council in March 2014 that the military shipment destined for North Korea constituted a violation of U.N. sanctions violation. During a trip to Panama in November 2013, Vice President Biden lauded Panama for stepping up and taking on that international responsibility and contribution to global security. Looking ahead, Panama is scheduled to host the next Seventh Summit of the Americas in 2015. At issue is a possible invitation to Cuba to participate in the summit; Panama's Minister of Foreign Affairs reportedly has suggested extending an invitation to Cuba. Several Latin American nations have vowed not to attend the summit unless Cuba is allowed to participate. The United States and Canada opposed Cuba's attendance at the 2012 summit because it was not a democracy, and ultimately Cuba was not invited. U.S. Foreign Aid and Other Support A number of U.S. agencies provide support to Panama. The State Department, the Drug Enforcement Administration, the U.S. Coast Guard, the Department of Homeland Security, and the Department of Defense are all involved in providing counternarcotics support. The U.S. Southern Command (Southcom) provides support to Panama through military exercises providing humanitarian and medical assistance, and at times provides emergency assistance in the case of natural disasters such as floods or droughts. Southcom has sponsored annual multinational training exercises since 2003 focused on the defense of the Panama Canal. Panama also participates in the Container Security Initiative (CSI) operated by the U.S. Customs and Border Protection of the Department of Homeland Security, and the Megaports Initiative run by the National Nuclear Security Administration of the Department of Energy. Panama hosts the Smithsonian Tropical Research Institute dedicated to studying biological diversity. The Peace Corps has about 190 volunteers in the country working on a range of development projects. Because of Panama's relatively high per capita income level and progress in economic development, the United States has not provided large amounts of foreign aid to the country in recent years. At this juncture, the United States provides just small amounts of bilateral assistance to Panama, but Panama has also received U.S. assistance through the Central American Regional Security Initiative (CARSI), a U.S. regional security program begun in FY2008 to help Central American states reduce drug trafficking while advancing citizen security. U.S. bilateral assistance to Panama amounted to $3.4 million in FY2013 and an estimated $3 million in FY2014. The Administration's FY2015 request for bilateral assistance is for $4 million, including: $1.8 million in Foreign Military Financing (FMF) to help support Panama's capacity to protect its borders and maritime territory from transnational threats such as drug trafficking; $720,000 for International Military Education and Training (IMET) to support training for Panamanian defense personnel at U.S. military institutions in the United States; and $1.5 million in Nonproliferation, Antiterrorism, Demining and Related Programs (NADR) assistance to support a Department of Justice program to strengthen Panama's ability to detect, investigate, and prosecute money laundering and terrorist financing cases, and to help Panama refine its strategic trade management system. Under CARSI, approximately $51.2 million was designated for Panama from FY2008 through FY2012, a little over 10% of the almost $500 million appropriated for CARSI for those years. The assistance funds programs for crime prevention efforts, justice sector reform, counternarcotics interdiction, and law enforcement professionalization and support. Those funding figures are derived from a Government Accountability Office report on CARSI issued in September 2013. CARSI funding figures for Panama for FY2013 and FY2014, as well for the FY2015 CARSI request, are not available since the State Department does not release funding information by country. Overall funding for CARSI, however, amounted to $145.6 million in FY2013 and an estimated $161.5 million in FY2014, while the Administration's FY2015 request is for $130 million. Panama will receive a portion of this assistance. (Also see discussion on " Drug Trafficking and Money Laundering " below.) Drug Trafficking and Money Laundering Securing Panama's cooperation to combat drug trafficking and money laundering has been an important concern to U.S. policy makers for many years. Because of its geographic location, large maritime industry, and containerized seaports, Panama remains a major transit country for illicit drugs from South America. According to the State Department's March 2014 International Narcotics Control Strategy Report (INCSR) , transnational drug trafficking organizations, including Mexican and Colombian groups, use Panama's remote Darién province (bordering Colombia, see Figure 1 ) and the country's coastline and littoral zones to move illicit drugs. Drug traffickers also exploit the country's well-developed transportation infrastructure, including four major container seaports, the Pan-American Highway and the fourth busiest airport in Latin America. Panama's large financial sector and the Colon Free Zone (CFZ), also make the country vulnerable to money laundering, which is attributed largely to drug trafficking proceeds. According to the INCSR , lax enforcement of existing controls in the CFZ and other free trade zones leaves Panama susceptible to other illicit financial activities by various criminal groups. Panama seized 41 metric tons of cocaine in 2013, a significant increase compared to 34 tons seized in 2012. This increase reversed a three-year downward trend for Panama's rate of interdiction. According to the State Department, this can be credited to Panama's enhanced operational readiness of its maritime interdiction vessels and continued forward deployment of U.S. air and maritime surveillance and interdiction assets. With regard to bilateral cooperation, in a November 2013 trip to Panama, Vice President Joe Biden lauded Panama for its efforts to stop illegal drug trafficking and characterized U.S.-Panamanian law enforcement cooperation as excellent. The State Department also asserted in the INCSR that the United States enjoys a strong partnership with all Panamanian security services. U.S. assistance, provided largely through CARSI noted above, has included support for citizen security, law enforcement, and rule-of-law programs with the goal of expanding Panama's capabilities to interdict, investigate, and prosecute illegal drug trafficking and other transnational crimes. Under CARSI, the United States has also provided training and equipment to the Panamanian National Police (PNP) for anti-gang enforcement and community policing. U.S. support for Panama's interdiction efforts includes assistance to modernize and maintain vessels and facilities of the Air Naval Service (SENAN), the National Border Service (SENAFRONT), and the PNP. Technical training has been provided to improve the professionalism and effectiveness of Panama's security services in such areas as small boat operations, small unit tactics, maritime interdiction, equipment, and logistics support. As a result of support from the United States and Colombia, SENAFRONT has been able to provide training to regional partners such as Belize, Costa Rica, and Honduras. For a number of years, the leftist Revolutionary Armed Forces of Colombia (FARC), a U.S.-designated foreign terrorist organization, had a small presence in the Darién region, which they used as a safe haven. In 2013, however, Panama's SENAFRONT undertook several operations against the FARC that degraded their capabilities and Panama reports that the guerrilla group no longer has a permanent presence in the country. Nevertheless, the FARC reportedly continues to use Panamanian territory for the transit of illegal drugs. The State Department lists Panama as a "major money laundering country," and in the 2014 INCSR maintained that numerous factors hinder the country's efforts to combat such activity, including the existence of bearer share corporations (see discussion below), a lack of cooperation among Panamanian government agencies, inconsistent enforcement of laws and regulations, and a weak judicial system susceptible to corruption and favoritism. Taking a longer view, Panama has made significant progress in strengthening its anti-money laundering regime since the year 2000, when it was cited as a 'non-cooperative country' in combating money laundering according to the Financial Action Task Force (FATF), a multilateral anti-money laundering body. The Panamanian government subsequently took comprehensive action by enacting laws and issuing decrees to improve its operations against money laundering that led the FATF to remove Panama from its non-cooperative country list in June 2001. Panama has also made progress in improving financial transparency. In November 2010, the government signed a Tax Information Exchange Agreement (TIEA) with the United States as part of its negotiations for implementing a free trade agreement. By early July 2011, Panama had signed enough tax agreements with other countries that the Organization for Economic Co-Operation and Development (OECD) remove it from the so-called "gray list" of countries judged to lack an internationally agreed tax standard. (Jurisdictions with at least 12 signed agreements for exchanging tax information are considered by the OECD to have substantially implemented the tax standard, and are removed from the list). Although Panama was removed from the OECD's "gray list," its legal and regulatory system for the exchange of information for tax purposes are still subject to peer reviews. Another issue, noted above, that arose during talks for implementing a bilateral free trade agreement was U.S. concern regarding the use of bearer shares in Panama because of their frequent use for laundering money connected to drug trafficking. In February 2011, former President Martinelli signed into law "know your client" legislation meant to immobilize (but not eliminate) bearer shares, although the law only goes into effect in 2018. The State Department's Country Reports on Terrorism 2013 maintains that continued existence of bearer share corporations in Panama remains a prime vulnerability of its regulatory framework. On a positive note, in October 2013, Panama and the United States signed an asset-forfeiture sharing agreement that provides some $36 million from a past money laundering investigation involving the U.S. Drug Enforcement Administration and Panamanian authorities. The funds are to be used to support jointly-agreed upon projects that support anti-money laundering efforts in Panama. Commercial Relations: Trade and Investment22 Panama is largely a services-based economy, and has historically run a merchandise trade deficit with the United States. In 2013 the United States ran a $10.1 billion trade surplus with Panama, exporting about $10.6 billion in goods and importing $449 million (see Table 1 ). Panama's major exports to the United States include repaired goods, seafood, gold, electrical machinery, and sugar. Major imports from the United States include oil, machinery, electrical machinery, iron and steel products, aircraft, and agricultural products. The stock of U.S. foreign direct investment (FDI) in Panama was estimated at $5.1 billion in 2012 (based on a historical-cost basis), led by the nonbank holding and manufacturing sectors, and accounted for about 44% of all U.S. FDI in Central America. As noted above, Panama and the United States originally negotiated a free trade agreement (FTA) in 2007. While Panama's National Assembly approved the agreement that year, the United States did not approve and enact implementing legislation until October 2011 ( P.L. 112-43 ). Following approval of the FTA, both countries conducted a thorough review of their respective laws and regulations related to the agreement's implementation. In late September 2012, Panama's National Assembly approved a final package of laws needed for FTA implementation, including regulations on the country's copyright and intellectual property rights regime. President Martinelli signed these measures into law in October 2012, along with an executive decree tied to Panama's administration of tariff-rate quotas. This cleared the way for the exchange of letters and for the FTA to enter into force on October 31, 2012. Panama sought the FTA to make its trade rules with the United States permanent, and as a means of increasing foreign investment in the country. The United States stressed that an FTA with Panama would not only enhance U.S. access to Panama's growing market, but also provide access to the country's large services market. According to U.S. officials, Panama's strategic location as a major shipping route (with some 10% of U.S. international trade passing through the Canal) enhanced the significance of a free trade agreement for the United States. The FTA includes disciplines related to customs administration and trade facilitation, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights and labor and environmental protection. Since the FTA entered into force in October 2012, over 87% of U.S. exports for consumer and industrial goods to Panama have been duty-free, as well as over 50% of U.S. agricultural goods. Panama will gradually phase out remaining tariffs over the next decade, although tariffs on most U.S. farm products will be phased out within 15 years. The agreement also provides improved access for U.S. companies to Panama's $22 billion services market, which includes financial, telecommunications, computer, express delivery, energy, environmental, and energy services. Panama has no formal restrictions on capital flows or discrimination between foreign and domestic investment. According to the Department of State, however, several factors add risk and complication to doing business in the country; these include poor rule of law, lack of judicial independence, a shortage of skilled workers, high levels of corruption, and poorly staffed government institutions. The U.S. Embassy also has received numerous reports of fraud and corruption in connection with titles to property purchased by U.S. investors as well as complaints from U.S. companies about inconsistent treatment of their concessions. Nevertheless, U.S. companies are well represented in Panama's various sectors, including its largest container port facility, multiple financial institutions, transportation firms, and manufacturing facilities. Panama Canal Operations Historical Background After Panama's independence from Colombia in 1903, it concluded a treaty with the United States ceding rights to build, administer, and defend a canal cutting across the country and linking the Pacific and Atlantic oceans. The Hay-Buneau-Varilla Treaty established the so-called Canal Zone (about 10 miles wide and 50 miles long) to be managed by the United States "as if it were sovereign" and "in perpetuity." Subsequent construction of the Canal was completed in 1914. However, this treaty soon became a source of conflict between the U.S. and Panamanian governments. In the 1960s, growing Panamanian resentment over the extent of U.S. rights in the country led to riots that spurred negotiations for a new treaty arrangement for the operation of the Canal. Draft treaties were completed in 1967, but rejected in 1970 by Panama. New negotiations, however, ultimately led to agreement on two Panama Canal Treaties that were signed in September 1977 by U.S. President Jimmy Carter and Panama's head of government, General Omar Torrijos. Under the first treaty, known as the Treaty on the Permanent Neutrality and Operation of the Panama Canal, or simply the Neutrality Treaty, the two countries agreed to maintain a regime of neutrality for keeping the Canal open to ships of all nations. The Neutrality Treaty has no termination date, and under the first condition to the treaty (known as the DeConcini condition), if the Canal is closed or its operations are interfered with, both countries independently have the right to take steps as each deems necessary, including the use of military force, to reopen the Canal or restore its operations. The second treaty, known simply as the Panama Canal Treaty, gave primary responsibility for operating and defending the Canal to the United States until December 31, 1999. The U.S. Senate gave its advice and consent to the Neutrality Treaty in March 1978, and to the Panama Canal Treaty in April 1978; Panama and the United States exchanged instruments of ratification for the two treaties in June 1978, and the two treaties entered into force on October 1, 1979. After the treaties were signed, U.S. officials consistently affirmed over the years their commitment for ensuring a smooth transition of the Canal to Panamanian control. At the end of 1999, when the Panama Canal Treaty terminated, the U.S. agency operating the Canal, the Panama Canal Commission (PCC), was succeeded by its Panamanian government counterpart, the Panama Canal Authority (ACP). Canal Expansion Project Since the ACP has run the Canal beginning in 2000, it has been lauded for increasing Canal safety and efficiency. In September 2012, Jorge Quijano was appointed by the ACP's Board of Directors to become the new Canal administrator for a seven-year term, succeeding Alberto Alemán Zubieta who had served as administrator since 1996. Quijano, an engineer, has worked at the Canal since 1975, and led the Canal expansion project beginning in 2006. In April 2006, the ACP presented to then-President Martin Torrijos its recommendation to build a third channel and new set of locks (one on the Atlantic and one on the Pacific) that would double the capacity of the Canal and allow it to accommodate giant container cargo ships known as post-Panamax ships. The estimated cost of the seven-year project was $5.25 billion, to be self-financed by the ACP through graduated toll increases and external bridge financing. According to the ACP, the overall objectives of the expansion project are to (1) achieve long-term sustainability and growth for the Canal's financial contributions to the Panamanian national treasury; (2) maintain the Canal's competitiveness; (3) increase the Canal's capacity to capture the growing world tonnage demand; and (4) make the Canal more productive, safe, and efficient. The Canal expansion project was approved by a national referendum in October 2006 with 78% support, and officially launched in September 2007. While the project originally was expected to be completed by October 2014, delays have pushed the completion date to the first quarter of 2016. In February 2014, the multinational consortium constructing the third set of locks known as Grupo Unidos Por el Canal (United Group for the Canal or GUPC), led by a Spanish construction company, halted its work due to disagreement with the ACP over who would pay some $1.6 billion in cost overruns. ACP officials complained that the consortium underestimated its costs when it bid $3.12 billion to build the new set of locks, well below bids from competing companies. By March 2014, however, the ACP and the GUPC settled the dispute. Another delay involved a two-week strike by construction workers that ended in early May 2014 after a wage-increase agreement was reached. According to the ACP, the expansion project was 76% complete at the end of May 2014. The Canal expansion is expected to reduce shipping rates between Asia and the U.S. Gulf and East coasts, resulting in significant savings and increased trade using that route; it is also expected to increase Latin American trade with Asia as well as intra-Latin American trade. ACP Administrator Jorge Quijano maintains that when the expansion project is complete, it will be able to accommodate 98% of all containerships. Quijano and energy analysts expect an increase in the export of liquefied natural gas from the United States to Asian markets, particularly in light of the rapid increase in natural gas production from shale in the United States. As a result of the reduced transportation cost, U.S. grain producers are expected to gain from increased exports as they become more competitive with other world producers. A number of U.S. ports have begun readying themselves in order to take advantage of the trade expansion. While the largest trade route using the Canal is East Coast/United States to Asia, which accounted for almost 37% of all Canal traffic in FY2013, the second largest trade route is East Coast/United States to West Coast/South America, which accounted for about 13% of all traffic. Several countries in this region – Chile, Colombia, and Peru – already have free trade agreements with the United States, and lower transportation costs resulting from the Canal expansion could further boost their trade linkages with the United States. Outlook Panama's political and economic outlook appears promising. The country is now approaching 25 years of elected civilian democratic rule, and its services-based economy remains strong. The Panama Canal expansion project, other infrastructure projects, and the country's large financial sector position Panama to continue to play a significant role in international and regional trade. The government's challenges include efforts to combat poverty and inequality and to continue to make headway in combating threats from drug trafficking, money laundering, and organized crime. U.S. relations with Panama under the incoming government of Juan Carlos Varela are expected to continue to be strong, with extensive cooperation on drug trafficking and other security issues and robust trade and investment linkages. Panama is scheduled to host the Seventh Summit of the Americas in 2015. Several Latin American nations have vowed not to attend unless Cuba is invited to participate. Appendix. Selected Executive Branch Reports Bilateral Relations Fact Sheets, Panama, State Department Date: October 15, 2013 Full Text: http://www.state.gov/r/pa/ei/bgn/2030.htm Congressional Budget Justificati on for Foreign Operations FY2015 , Annex 3 : Regional Perspectives (pp. 693-695), State Department Date: April 18, 2014 Full Text: http://www.state.gov/documents/organization/224070.pdf Country Reports on Human Rights Practices 2013, Panama, State Department Date: February 27, 2014 Full Text: http://www.state.gov/j/drl/rls/hrrpt/2013/wha/220460.htm C ountry Reports on Terrorism 2013 (Western Hemisphere Overview), State Department Date: April 2014 Full Text: http://www.state.gov/j/ct/rls/crt/2013/224825.htm International Religious Freedom Report 2012, Panama, State Department Date: May 20, 2013 Full Text: http://www.state.gov/j/drl/rls/irf/2012/wha/208496.htm International Narcotics Control Strategy Report 2 014, Vol. I, Panama , State Department Date: March 2014 Full Text: http://www.state.gov/j/inl/rls/nrcrpt/2014/vol1/222990.htm International Narcotics Control Strategy Report 20 14, Vol. II, Panama , State Department Date: March 2014 Full Text: http://www.state.gov/j/inl/rls/nrcrpt/2014/vol2/222762.htm Investment Climate Statement, 2014, Panama, State Department Date: June 26, 2014 Full Text: http://www.state.gov/e/eb/rls/othr/ics/2014/227928.htm National Trade Estimate Repor t on Foreign Trade Barriers , 2014, Panama, Office of the United States Trade Representative Date: March 31, 2014 Full Text: http://www.ustr.gov/sites/default/files/2014%20NTE%20Report%20on%20FTB%20Panama.pdf Tr afficking in Persons Report 2014 (Panama, pp. 292-295), State Department Date: June 20, 2014 Full Text: http://www.state.gov/j/tip/rls/tiprpt/countries/2014/226795.htm

The Central American nation of Panama has had five successive elected civilian governments since its return to democratic rule in 1989, and a sixth is scheduled to assume power on July 1, 2014 with the inauguration of current Vice President Juan Carlos Varela as President. Hailing from the center-right Panameñista Party, Varela won the May 4, 2014 presidential election with 39% of the vote in a three-candidate race. Significantly, Varela defeated the candidate of the ruling Democratic Change party of current President Ricardo Martinelli, who was constitutionally prohibited from running for reelection. Elected in 2009, Martinelli remained generally popular during his presidency despite criticism at various junctures for his combative style of governing. Nevertheless, his popularity ultimately was not enough to convince voters to support his party's candidate. One controversy that emerged in the campaign was that Martinelli's wife became his party's vice presidential candidate. This led to some critics complaining of an attempt by Martinelli to extend his influence in the next government. Panama's largely services-based economy has been booming in recent years, spurred on by several large infrastructure projects, including, most significantly, the Panama Canal expansion project that began in 2007 and is expected to be completed in early 2016. A challenge for the Varela government will be how to contend with slower economic growth rates as the Canal expansion project winds down. Another challenge for the government is making more headway in combating poverty and inequality in Panama, which still remain relatively high. U.S. Relations The United States has close relations with Panama, stemming in large part from the extensive linkages developed when the Panama Canal was under U.S. control and Panama hosted major U.S. military installations. Relations have been strengthened by a bilateral free trade agreement that entered into force in October 2012. As noted by the State Department, Panama's central location in the hemisphere, its transportation infrastructure (most notably the Canal), and its financial sector make it an important hub for global trade and a key U.S. strategic partner, but these same characteristics also make Panama vulnerable to drug trafficking, money laundering, and organized criminal activity. Since Panama is relatively well developed economically compared to its Central American neighbors, the United States provides just small amounts of bilateral assistance to Panama. Nevertheless, the country receives additional assistance through the Central American Regional Security Initiative (CARSI), a U.S. regional security program begun in FY2008 to help Central American states reduce drug trafficking while advancing citizen security. Panama's anti-drug cooperation with the United States is strong. While the country has made progress in improving its anti-money laundering regime, there are several factors that hinder the country's efforts to combat such activity. The Panama Canal expansion project, which will accommodate a new generation of massive container ships, is expected to reduce shipping rates between Asia and the U.S. Gulf and East coasts, resulting in increased Canal transits and trade. A number of U.S. ports have begun readying themselves in order to take advantage of the expansion. This report provides background on the political and economic situation in Panama and U.S.-Panama relations. An appendix provides links to selected U.S. government reports on Panama. For additional information, see CRS Report R41731, Central America Regional Security Initiative: Background and Policy Issues for Congress, by [author name scrubbed] and [author name scrubbed]. For further historical background, see the following two archived CRS reports: CRS Report RL30981, Panama: Political and Economic Conditions and U.S. Relations Through 2012, by [author name scrubbed], and CRS Report RL32540, The U.S.-Panama Free Trade Agreement.

Introduction "'Extradition' is the formal surrender of a person by a State to another State for prosecution or punishment." Extradition to or from the United States is a creature of treaty. The United States has extradition treaties with over a hundred of the nations of the world, although there are many with which the United States has no extradition treaty. Extradition treaties are in the nature of a contract. Subject to a contrary treaty provision, federal law defines the mechanism by which the United States honors its extradition treaty obligations. Although some countries will extradite in the absence of an applicable treaty as a matter of comity, it was long believed that the United States could only grant an extradition request if it could claim coverage under an existing extradition treaty. Dicta in several court cases indicated that this requirement, however, was one of congressional choice rather than constitutional requirement. Extradition is generally limited to crimes identified in the treaty. Early treaties often recite a list of the specific extraditable crimes. While many existing U.S. extradition treaties continue to list specific extraditable offenses, the more recent ones feature a dual criminality approach, and simply make all felonies extraditable (subject to other limitations found elsewhere in their various provisions). Political Offenses In addition to an explicit list of crimes for which extradition may be granted, most modern extradition treaties also identify various classes of offenses for which extradition may or must be denied. Common among these are provisions excluding political offenses. The political offense exception has proven troublesome. The exception is and has been a common feature of extradition treaties for almost a century and a half. In its traditional form, the exception is expressed in deceptively simple terms. Yet it has been construed in a variety of ways, more easily described in hindsight than to predicate beforehand. As a general rule, American courts require that a fugitive seeking to avoid extradition "demonstrat[e] that the alleged crimes were committed in the course of and incidental to a violent political disturbance such as a war, revolution or rebellion." Contemporary extradition treaties often seek to avoid misunderstandings over the political offense exception in a number of ways. Some expressly exclude terrorist offenses or other violent crimes from the definition of political crimes for purposes of the treaty; some explicitly extend the political exception to those whose prosecution is politically or discriminatorily motivated; and some limit the reach of their political exception clauses to conform to their obligations under multinational agreements. Separately, several multinational agreements contain provisions that effectively incorporate enumerated offenses into any preexisting extradition treaty between parties. A few of these multilateral agreements also specify that enumerated activities shall not be considered political offenses for purposes of extradition. Capital Offenses A number of nations have abolished or abandoned capital punishment as a sentencing alternative. Several of these have preserved the right to deny extradition in capital cases either absolutely or in absence of assurances that the fugitive will not be executed if surrendered. More than a few countries are reluctant to extradite in a capital case even though their extradition treaty with the United States has no such provision, based on opposition to capital punishment or to the methods and procedures associated with execution bolstered by sundry multinational agreements to which the United States is either not a signatory or has signed with pertinent reservations. Dual Criminality Dual criminality addresses the reluctance to extradite a fugitive for conduct that the host nation considers innocent. Dual criminality exists when the parties to an extradition treaty each recognize a particular form of misconduct as a punishable offense. Historically, extradition treaties have handled dual criminality in one of three ways: (1) they list extraditable offenses and do not otherwise speak to the issue; (2) they list extraditable offenses and contain a separate provision requiring dual criminality; or (3) they identify as extraditable offenses those offenses condemned by the laws of both nations. Today, as one commentator has pointed out, "[u]nder most international agreements ... [a] person sought for prosecution or for enforcement of a sentence will not be extradited ... (c) if the offense with which he is charged or of which he has been convicted is not punishable as a serious crime in both the requesting and requested state.... " When a foreign country seeks to extradite a fugitive from the United States, dual criminality may be satisfied by reference to either federal or state law. U.S. treaty partners do not always construe dual criminality requirements as broadly. In the past, some have been unable to find equivalents for attempt, conspiracy, and crimes with prominent federal jurisdictional elements (e.g., offenses under the Racketeer Influenced and Corrupt Organizations [RICO] and Continuing Criminal Enterprise [CCE] statutes). Many modern extradition treaties contain provisions addressing the problem of jurisdictional elements and/or making extraditable an attempt or conspiracy to commit an extraditable offense. Some include special provisions for tax and customs offenses as well. Extraterritoriality As a general rule, crimes are defined by the laws of the place where they are committed. There have always been exceptions to this general rule under which a nation was understood to have authority to outlaw and punish conduct occurring outside the confines of its own territory. In the past, U.S. extradition treaties applied to crimes "committed within the [territorial] jurisdiction" of the country seeking extradition. Largely as a consequence of terrorism and drug trafficking, however, the United States now claims more sweeping extraterritorial application for its criminal laws than recognized either in its more historic treaties or by many of today's governments. Success in eliminating extradition impediments by negotiating new treaty provisions has been mixed. More than a few call for extradition regardless of where the offense was committed. Yet perhaps an equal number of contemporary treaties permit or require denial of an extradition request that falls within an area where the countries hold conflicting views on extraterritorial jurisdiction. Nationality The right of a country to refuse to extradite one's own nationals is probably the greatest single obstacle to extradition. The United States has long objected to the impediment, and recent treaties indicate that its hold may not be as formidable as was once the case. A growing number of U.S. treaties go so far as to declare that "extradition shall not be refused based on the nationality of the person sought." Another form limits the nationality exemption to nonviolent crimes. A third bars nationality from serving as the basis to deny extradition when the fugitive is sought in connection with a listed offense. A final variant allows a conflicting obligation under a multinational agreement to wash away the exemption. Even where the exemption is preserved, contemporary treaties more regularly refer to the obligation to consider prosecution at home of those nationals whose extradition has been refused. Double Jeopardy Depending on the treaty, extradition may also be denied on the basis of a number of procedural considerations. Although the U.S. Constitution's prohibition against successive prosecutions for the same offense does not extend to prosecutions by different sovereigns, it is common for extradition treaties to contain clauses proscribing extradition when the transferee would face double punishment and/or double jeopardy (also known as non bis in idem ). The more historic clauses are likely to bar extradition for a second prosecution of the "same acts" or the "same event" rather than the more narrowly drawn "same offenses." The new model limits the exemption to fugitives who have been convicted or acquitted of the same offense and specifically denies the exemption where an initial prosecution has simply been abandoned. Lapse of Time As the Restatement explains, lapse of time or statute of limitation clauses are also prevalent in extradition treaties: Many [states] ... preclude extradition if prosecution for the offense charged, or enforcement of the penalty, has become barred by lapse of time under the applicable law. Under some treaties the applicable law is that of the requested state, in others that of the requesting state; under some treaties extradition is precluded if either state's statute of limitations has run.... When a treaty provides for a time-bar only under the law of the requesting state, or only under the law of the requested state, United States courts have generally held that time-bar of the state not mentioned does not bar extradition. If the treaty contains no reference to the effect of a lapse of time neither state's statute of limitations will be applied. Left unsaid is the fact that some treaties declare in no uncertain terms that the passage of time is no bar to extradition, and others rest the decision with the discretion of the requested state. In cases governed by U.S. law and in instances of U.S. prosecution following extradition, applicable statutes of limitation and due process determine whether preindictment delays bar prosecution and speedy trial provisions govern whether postindictment delays preclude prosecution. Extradition from the United States A foreign country usually begins the extradition process with a request submitted to the State Department sometimes including the documentation required by the treaty. When a requesting nation is concerned that the fugitive will take flight before it has time to make a formal request, it may informally ask for extradition and provisional arrest with the assurance that the full complement of necessary documentation will follow. In either case, the Secretary of State, at his discretion, may forward the matter to the Department of Justice to begin the procedure for the arrest of the fugitive "to the end that the evidence of criminality may be heard and considered." The United States Attorneys' Manual encapsulates the Justice Department's participation thereafter in these words: OIA [Office of International Affairs] reviews ... requests for sufficiency and forwards appropriate ones to the district [where the fugitive is found]. The Assistant United States Attorney assigned to the case obtains a warrant and the fugitive is arrested and brought before the magistrate judge or the district judge. The government opposes bond in extradition cases. A hearing under 18 U.S.C. §3184 is scheduled to determine whether the fugitive is extraditable. If the court finds the fugitive to be extraditable, it enters an order of extraditability and certifies the record to the Secretary of State, who decides whether to surrender the fugitive to the requesting government. In some cases a fugitive may waive the hearing process. OIA notifies the foreign government and arranges for the transfer of the fugitive to the agents appointed by the requesting country to receive him or her. Although the order following the extradition hearing is not appealable (by either the fugitive or the government), the fugitive may petition for a writ of habeas corpus as soon as the order is issued. The district court's decision on the writ is subject to appeal, and extradition may be stayed if the court so orders. Hearing The precise menu for an extradition hearing is dictated by the applicable extradition treaty, but as described by one district court, a common check list for a hearing conducted in this country would include determinations that 1. there exists a valid extradition treaty between the United States and the requesting state; 2. the relator is the person sought; 3. the offense charged is extraditable; 4. the offense charged satisfies the requirement of double criminality; 5. there is "probable cause" to believe the relator committed the offense charged; 6. the documents required are presented in accordance with United States law, subject to any specific treaty requirements, translated and duly authenticated ...; and 7. other treaty requirements and statutory procedures are followed. An extradition hearing is not, however, "in the nature of a final trial by which the prisoner could be convicted or acquitted of the crime charged against him.... Instead, it is essentially a preliminary examination to determine whether a case is made out which will justify the holding of the accused and his surrender to the demanding nation.... The judicial officer who conducts an extradition hearing thus performs an assignment in line with his or her accustomed task of determining if there is probable cause to hold a defendant to answer for the commission of an offense." The purpose of the hearing is in part to determine whether probable cause exists to believe that the individual committed an offense covered by the extradition treaty. The rules of criminal procedure and evidence that would apply at trial have no application at the hearing. Warrants, depositions, and other authenticated documents are admissible as evidence. The individual may offer evidence to contradict or undermine the existence of probable cause, but affirmative defenses that might be available at trial are irrelevant. Hearsay is not only admissible but may be relied upon exclusively; the Miranda rule has no application; initiation of extradition may be delayed without regard for the Sixth Amendment right to a speedy trial or the Fifth Amendment right of due process; nor do the Sixth Amendment rights to the assistance of counsel or cross examine witnesses apply. Due process, however, will bar extradition of informants whom the government promised confidentiality and then provided the evidence necessary to establish probable cause for extradition. Moreover, extradition will ordinarily be certified without "examining the requesting country's criminal justice system or taking into account the possibility that the extraditee will be mistreated if returned." This "noninquiry rule" is a judicially created rule premised on the view that "[w]hen an American citizen commits a crime in a foreign country, he cannot complain if required to submit to such modes of trial and to such punishment as the laws of that country may prescribe for its own people, unless a different mode be provided for by treaty stipulations between that country and the United States." Review If at the conclusion of the extradition hearing, the court concludes there is some obstacle to extradition and refuses to certify the case, "[t]he requesting government's recourse to an unfavorable disposition is to bring a new complaint before a different judge or magistrate, a process it may reiterate apparently endlessly." If the court concludes there is no such obstacle to extradition and certifies to the Secretary of State that the case satisfies the legal requirements for extradition, the fugitive has no right of appeal, but may be entitled to limited review under habeas corpus. "[H]abeas corpus is available only to inquire whether the magistrate had jurisdiction, whether the offense charged is within the treaty and, by a somewhat liberal extension, whether there was any evidence warranting the finding that there was reasonable ground to believe the accused guilty." In this last assessment, appellate courts will only "examine the magistrate judge's determination of probable cause to see if there is 'any evidence' to support it." Limitations on review or application of the rule of noninquiry may be modified by treaty or statute. Whether a particular treaty or statute precludes review or application of the rule, however, can be a complicated issue. For example, the U.N. Convention Against Torture (CAT) provides that no State Party "shall expel, return … or extradite a person to another State where there are substantial grounds for believing that he would be in danger of being subjected to torture." Following U.S. ratification of CAT, Congress enacted Section 2242 of the Foreign Affairs Reform and Restructuring Act of 1998 (FARRA), which requires all relevant federal agencies to adopt appropriate regulations to implement this policy. Some fugitives have argued that CAT or FARRA operate as exceptions to the noninquiry rule. The argument has produced hollow victories at the appellate court level. The Fourth Circuit concluded that the rule of noninquiry posed no obstacle, but went on to hold that FARRA itself barred habeas review of a fugitive's torture claim. The Ninth Circuit, on the other hand, concluded that FARRA required the Secretary of State to pass upon on a fugitive's torture claim, but that "[t]he doctrine of separation of powers and the rule on non-inquiry block[ed] any [judicial] inquiry into the substance of the Secretary's declaration." Surrender If the judge or magistrate certifies the fugitive for extradition, the matter then falls to the discretion of the Secretary of State to determine whether as a matter of policy the fugitive should be released or surrendered to the agents of the country that has requested his or her extradition. The procedure for surrender, described in treaty and statute, calls for the release of the prisoner if he or she is not claimed within a specified period of time, often indicates how extradition requests from more than one country for the same fugitive are to be handled, and frequently allows the fugitive to be held for completion of a trial or the service of a criminal sentence before being surrendered. Extradition treaties may also provide that, in cases where a fugitive faces charges or is serving a criminal sentence in a country of refuge, he may be temporarily surrendered to a requesting State for purposes of prosecution, under the promise that the State seeking extradition will return the fugitive upon the conclusion of criminal proceedings. Extradition for Trial or Punishment in the United States The laws of the country of refuge and the applicable extradition treaty govern extradition back to the United States of a fugitive located overseas. The request for extradition comes from the Department of State whether extradition is sought for trial in federal or state court or for execution of a criminal sentence under federal or state law. The first step is to determine whether the fugitive is extraditable. The Justice Department's checklist for determining extraditability begins with an identification of the country in which the fugitive has taken refuge. If the United States has no extradition treaty with the country of refuge, extradition is not a likely option. When there is a treaty, extradition is only an option if the treaty permits extradition. Common impediments include citizenship, dual criminality, statutes of limitation, and capital punishment issues. Many treaties permit a country to refuse to extradite its citizens even in the case of dual citizenship. As for dual criminality, whether the crime of conviction or the crime charged is an extraditable offense will depend upon the nature of the crime and where it was committed. If the applicable treaty lists extraditable offenses, the crime must be on the list. If the applicable treaty insists only upon dual criminality, the underlying misconduct must be a crime under the laws of both the United States and the country of refuge. Where the crime was committed matters; some treaties will only permit extradition if the offense was committed within the geographical confines of the United States. Timing also matters. The speedy trial features of U.S. law require a good faith effort to bring to trial a fugitive who is within the government's reach. Furthermore, the lapse of time or speedy trial component of the applicable extradition treaty may preclude extradition if prosecution would be barred by a statute of limitations in the country of refuge. Some treaties prohibit extradition for capital offenses; more often they permit it but only with the assurance that a sentence of death will not be executed. Prosecutors may request provisional arrest of a fugitive without waiting for the final preparation of the documentation required for a formal extradition request, if there is a risk of flight and if the treaty permits it. The Justice Department encourages judicious use of provisional arrest because of the pressures that may attend it. If the Justice Department approves the application for extradition, the request and documentation are forwarded to the State Department, translated if necessary, and with State Department approval forwarded through diplomatic channels to the country from which extradition is being sought. The treaty issue most likely to arise after extradition and the fugitive's return to this country is whether the fugitive was surrendered subject to any limitations such as those posed by the doctrine of specialty. Specialty Under the doctrine of specialty, sometimes called speciality, a person who has been brought within the jurisdiction of the court by virtue of proceedings under an extradition treaty, can only be tried for one of the offences described in that treaty, and for the offence with which he is charged in the proceedings for his extradition, until a reasonable time and opportunity have been given him after his release or trial upon such charge, to return to the country from whose asylum he had been forcibly taken under those proceedings. The limitation, expressly included in many treaties, is designed to preclude prosecution for different substantive offenses but does not bar prosecution for different or additional counts of the same offense. And some courts have held that an offense whose prosecution would be barred by the doctrine may nevertheless be considered for purposes of the federal sentencing guidelines, or for purposes of criminal forfeiture. At least where an applicable treaty addresses the question, the rule is no bar to prosecution for crimes committed after the individual is extradited. The doctrine may be of limited advantage to a given defendant because the circuits are divided over whether a defendant has standing to claim its benefits. Additionally, one circuit has held that a fugitive lacks standing to allege a rule of specialty violation when extradited pursuant to an agreement other than treaty. Regardless of their view of fugitive standing, reviewing courts have agreed that the surrendering State may subsequently consent to trial for crimes other than those for which extradition was had. Alternatives to Extradition The existence of an extradition treaty does not preclude the United States acquiring personal jurisdiction over a fugitive by other means, unless the treaty expressly provides otherwise. Waiver Waiver or "simplified" treaty provisions allow a fugitive to consent to extradition without the benefit of an extradition hearing. Although not universal, the provisions constitute the least controversial of the alternatives to extradition. Immigration Procedures Whether by a process similar to deportation or by simple expulsion, the United States has had some success encouraging other countries to surrender fugitives other than their own nationals without requiring recourse to extradition. Ordinarily, U.S. immigration procedures, on the other hand, have been less accommodating and have been called into play only when extradition has been found wanting. They tend to be time consuming and usually can only be used in lieu of extradition when the fugitive is an alien. Moreover, they frequently require the United States to deposit the alien in a country other than one that seeks his or her extradition. Yet in a few instances where an alien has been naturalized by deception or where the procedures available against alien terrorists come into play, denaturalization or deportation may be considered an attractive alternative or supplement to extradition proceedings. Irregular Rendition/Abduction Although less frequently employed by the United States, "irregular rendition" is a familiar alternative to extradition. An alternative of last resort, it involves kidnaping or deceit and generally has been reserved for terrorists, drug traffickers, and the like. Kidnaping a defendant overseas and returning him to the United States for trial does not deprive American courts of jurisdiction unless an applicable extradition treaty explicitly calls for that result. Nor does it ordinarily expose the United States to liability under the Federal Tort Claims Act or individuals involved in the abduction to liability under the Alien Tort Statute. The individuals involved in the abduction, however, may face foreign prosecution, or at least be the subject of a foreign extradition request. Moreover, the effort may strain diplomatic relations with the country from which the fugitive is lured or abducted. Foreign Prosecution A final alternative when extradition for trial in the United States is not available, is trial within the country of refuge. The alternative exists primarily when a U.S. request for extradition has been refused because of the fugitive's nationality and/or when the crime occurred under circumstances that permit prosecution by either country for the same misconduct. The alternative can be cumbersome and expensive and may be contrary to U.S. policy objectives.

"Extradition" is the formal surrender of a person by a State to another State for prosecution or punishment. Extradition to or from the United States is a creature of treaty. The United States has extradition treaties with over a hundred nations, although there are many countries with which it has no extradition treaty. International terrorism and drug trafficking have made extradition an increasingly important law enforcement tool. Extradition treaties are in the nature of a contract and generate the most controversy with respect to those matters for which extradition may not be had. In addition to an explicit list of crimes for which extradition may be granted, most modern extradition treaties also identify various classes of offenses for which extradition may or must be denied. Common among these are provisions excluding political offenses; capital offenses; crimes that are punishable under only the laws of one of the parties to the treaty; crimes committed outside the country seeking extradition; crimes where the fugitive is a national of the country of refuge; and crimes barred by double jeopardy or a statute of limitations. Extradition is triggered by a request submitted through diplomatic channels. In this country, it proceeds through the Departments of Justice and State and may be presented to a federal magistrate to order a hearing to determine whether the request is in compliance with an applicable treaty, whether it provides sufficient evidence to satisfy probable cause to believe that the fugitive committed the identified treaty offense(s), and whether other treaty requirements have been met. If so, the magistrate certifies the case for extradition at the discretion of the Secretary of State. Except as provided by treaty, the magistrate does not inquire into the nature of foreign proceedings likely to follow extradition. The laws of the country of refuge and the applicable extradition treaty govern extradition back to the United States of a fugitive located overseas. Requests travel through diplomatic channels, and the treaty issue most likely to arise after extradition to this country is whether the extraditee has been tried for crimes other than those for which he or she was extradited. The fact that extradition was ignored and a fugitive forcibly returned to the United States for trial constitutes no jurisdictional impediment to trial or punishment. Federal and foreign immigration laws sometimes serve as an alternative to extradition to and from the United States. This is an abbreviated version of CRS Report 98-958, Extradition To and From the United States: Overview of the Law and Contemporary Treaties, by [author name scrubbed] and [author name scrubbed], without the appendices, footnotes, and citations to authority found in the longer report.

Introduction Publication of scientific research results that might be used by terrorist groups has led some policymakers to question whether the method used to control scientific research results, namely classification, should be revisited. The Administration, legislators, and scientific professional societies are reexamining policies relating to scientific information that might threaten national or homeland security. Policymakers may wish to determine what changes, if any, should be made to current government policy regarding publication of federally funded research results, and whether the options currently under consideration adequately balance the concerns and needs of the security and scientific communities. This report presents examples of scientific research results whose publication raised concern regarding the threat they potentially pose to national security. Past and current information control mechanisms are discussed, along with current federal policy concerning dissemination of fundamental research results through the open literature. Recent policy actions regarding dissemination of federal information and federally funded research results are outlined, along with the responses these actions have evoked from various professional societies and publishers. The advantages and disadvantages to potential policy actions addressing classification and other controls over open publication of federally funded research results are also described. Historical Overview and Context Since the 1950s, the United States has developed an established policy of identifying, prior to publication, areas of basic and applied research where information controls may be required. This research, typically related to weapon systems or nuclear technologies, may be designated classified and have strict information controls placed upon it. When fundamental research is not classified, the government generally did not place other information controls on it. This policy remained essentially unchanged until the 1970s, when controls were developed on the export of domestically developed, advanced, dual-use technologies and technological information. Under export control regulations, even if a technology is barred from export, the fundamental, basic science underlying the technology is generally exempt from controls and can be published in the open literature. In the early 1980s, foreign student and scientist access to technological information that might fall under export control regulations became the focus of a Department of Defense effort to restrict such information presented in classrooms and conferences. In 1985, following a report from the National Academy of Sciences asserting that openness in science leads to stronger long-term security, President Reagan issued National Security Decision Directive 189 (NSDD-189), reiterating that fundamental research results were to be controlled only through classification. NSDD-189 continues to define federal policy on restricting the dissemination of fundamental research results. Since then, the conduct of science and the composition of the scientific community have become increasingly international, and concerns about the effectiveness of export control regulations have grown. The international spread and independent development of dual-use technologies has made the United States the sole technology source less often. Concern that export control regulation is negatively impacting domestic business prosperity has led to attempts to lower the trade barriers erected by export control. Additionally, the presence of foreign students and scientists in the United States has increased the availability of education and training in basic skills that may be transferred to other countries upon the return of those individuals to their home countries. Since the terrorist events of 2001, concern that open publication of scientific and technological results may provide unwitting assistance to other nations or terrorist groups in developing weapons of mass destruction has resurged. Scientific research is conducted in many disparate areas. Historically, the areas where the balance between scientific openness and national security required consideration have been centered in the mathematical and physical sciences and their applications, such as aerospace engineering, advanced computer technology, and cryptography. Research in biology – such as the origins of virulence, development of vaccines, and the genetic manipulation of biological agents – has emerged as an area of concern because of its potential relevance to biological weapons of mass destruction. Whether the current method of using classification to limit the dissemination of fundamental research results is the best or most effective method of maintaining national security is an open question. It is unclear whether classification will be effective when applied to research areas that have not historically been classified, and whether a system of classified research will be embraced by scientists working in these areas. In March 2002, executive branch agencies were instructed by then-Assistant to the President and Chief of Staff Andrew Card to determine if government-owned information, especially that regarding weapons of mass destruction, was being inappropriately disclosed. Also in March 2002, the Department of Defense (DOD) promulgated a draft regulation expanding information controls to basic and applied science research and development. Scientific professional societies are engaged in developing self-regulatory mechanisms to address the concerns of the national security community. In 2003, at the annual meeting of the American Association for the Advancement of Science, 32 editors of leading scientific journals issued a policy statement regarding publication of research results that could be misused. Additionally that year, the National Academy of Sciences held a meeting discussing whether current publication policies and practices in the life sciences could lead to the inadvertent disclosure of "sensitive" information to those who might misuse it. In 2004, the National Research Council issued a report, Biotechnology Research in an Age of Terrorism , which recommended an oversight structure, based on institutional biosafety committees, for research in select areas of concern. Following some of the recommendations presented in this report, the Department of Health and Human Services established the National Science Advisory Board for Biosecurity to, among other duties, provide advice, guidance, and leadership regarding biosecurity oversight of dual-use research. Competing proposals regarding how to control federally funded research results have been proposed, ranging from strict information control on all federally funded research to maintaining the status quo. Some scientific professional societies have suggested that self-regulation, either by scientists themselves or through the editors of scientific journals, would be an appropriate mechanism for limiting the publication of research results that might aid terrorist groups. Others have advocated more formal government oversight of potentially contentious research. The development of a new category of "sensitive, but unclassified" information to protect information which does not require classification, but may still have the potential to damage national security, might encompass such research results. The potential impact of these options raises much concern and debate. A fundamental trade-off between scientific progress and security concerns is the crux of the policy debate. The scientific enterprise is based upon open and full exchange of information and thrives on the ability of scientists to collaborate and communicate their results. On the other hand, this very openness provides potential enemies with information that may allow them to harm U.S. interests. The technological advances arising from scientific breakthroughs contribute to economic prosperity, but the openness required to continue this process creates risks, which may be perceived as more acute since September 11, 2001. What level of risk caused via publication of scientific advances is acceptable in the eyes of policymakers and the public? How will controlling the publication of federally funded research results increase safety? If policymakers determine that more control of these sorts of research results is warranted, what possible mechanisms could be used to oversee these results? Examples of Research Results of Concern The publication of several scientific articles reignited concerns that information published in the open literature may aid terrorist groups in developing weapons of mass destruction. Presented below is a selection of some of the more highly publicized examples. In 2000, researchers at the Co-operative Research Centre for the Biological Control of Pest Animals (CRC) in Australia genetically modified mousepox virus while conducting rodent fertility research. This modification unintentionally enabled the virus to infect mice that had been previously vaccinated against mousepox. The publication of this result was greeted with criticism due to its weapons potential. This experiment was repeated in 2003 by Dr. Mark Buller at the University of St. Louis using funding supplied by the National Institute of Allergy and Infectious Diseases. Another article widely viewed as having bioweapon potential was published in July 2002. Researchers at the State University of New York at Stony Brook assembled functional poliovirus from chemical sequences ordered from a scientific mail-order firm. Dr. Eckard Wimmer, the lead scientist, described the experiment as graphic proof that bioterror agents can be made without a terrorist ever having access to dangerous microbes. Other scientific publications have been viewed as potentially aiding development of biological weapons by terrorist groups or countries. Publication of successes in "reverse genetics" has led some to believe that other viruses could be constructed in the laboratory without having access to actual virus ahead of time. In October 2001, the full genome of Yersinia pestis , the bacteria which causes bubonic and pneumonic plague, was published in the journal Nature . Simultaneous with the release of this article was the publication of an accompanying news article in Nature Science Update that highlighted the existence of "a debate about whether releasing genomic information for virulent diseases, such as plague or smallpox, might aid malicious science." The full genome sequence of Coxiella burnetii , the causative agent of Q fever, was published in Proceedings of the National Academies of Science of the United States of America (PNAS) in April 2003, and the annotated genome of Bacillus anthracis , the causative agent of anthrax, was published in Nature . Researchers at the University of Pittsburgh identified key proteins which provide Variola major , the causative virus of smallpox, with high virulence. Accompanying this article was a commentary explaining how "the work is far more likely to stimulate advances in vaccinology or viral therapy than it is to become a threat to biosecurity." Researchers published in the Journal of Clinical Microbiology a potential cause of enhanced virulence for some strains of Bacillus anthracis . The assessment of antibiotic resistance in select Bacillus anthracis isolates was also identified as an article of potential concern. Articles such as these have led some to question the wisdom of openly publishing information that could be used to threaten national security. An editorial in New Scientist stated: That this mind-boggling quantity of information is going to transform medicine and biology is beyond doubt. But could some of it, in the wrong hands, be a recipe for terror and mayhem? Bioethicist Arthur Caplan from the University of Pennsylvania was reported as saying: We have to get away from the ethos that knowledge is good, knowledge should be publicly available, that information will liberate us. ... Information will kill us in the techno-terrorist age, and I think it's nuts to put that stuff on Web sites. Stewart Simonson, then-Assistant Secretary for Public Health Emergency Preparedness for the Department of Health and Human Services (HHS), when discussing the decision of the Proceedings of the National Academy of Sciences of the United States of America to publish an article on vulnerabilities of the milk supply chain, reportedly stated through a spokesman that he regretted the journal's decision to publish the paper: We recognize, of course, that this is an issue about which good and reasonable people disagree. But I must say that if the Academy is wrong, the consequences could be dire and it will be HHS–not the Academy–which will have to deal with it. Past and Current Controls on Information Past examples of research excluded from publication in the open literature have focused on military applications such as cryptography and nuclear weapons. Prior to U.S. entry into World War II, physicists in the private sector researching nuclear fission voluntarily stopped publishing results in scientific journals, fearing that they would provide crucial information to Germany's nuclear bomb project. A joint National Academy of Sciences–National Research Council Advisory Committee on Scientific Publications was established to restrict publication on nuclear fission. While the United States was involved in World War II, this committee secured the cooperation of scientific journals in restricting the transfer of select scientific information within the United States. Nuclear power is another area where information controls have been instituted. Private industry was permitted to explore applications of nuclear power under the Atomic Energy Act of 1954. Prior to this act, nuclear energy activities were protected by the federal government with security and secrecy programs. The federal government retains authority over results which relate to atomic weapons, production of special nuclear material, and use of special nuclear material in the production of energy. Information developed in those areas, even if developed privately without federal government aid, is regarded as "born classified." Genetic engineering and recombinant species were an area of great contention in the 1970s, and there were calls for regulation of the methods for manipulating DNA and of experiments containing genetically engineered species. In response to criticism and public pressure, a voluntary moratorium on such research was set. In 1975, at the Asilomar conference center in Pacific Grove, California, discussion on how scientists could self-regulate such research was held. A consensus statement regarding a voluntary moratorium on some types of recombinant research and an increase in security and containment requirements for other research areas successfully allayed many public concerns, and provided a uniform framework to address such issues. This consensus statement formed the starting point for research rules developed by the National Institutes of Health Recombinant DNA Advisory Committee, which was formed to oversee such research. Current Federal Policy on Scientific Publication In the United States, there has long been support for a policy of not restricting publication of federally supported extramural and intramural research results, except where classified for national security reasons. This position was restated in 1985 by President Ronald Reagan in National Security Decision Directive 189, which said: It is the policy of this Administration that, to the maximum extent possible, the products of fundamental research remain unrestricted. It is also the policy of this Administration that, where the national security requires control, the mechanism for control of information generated during federally-funded fundamental research in science, technology and engineering at colleges, universities and laboratories is classification. Each federal government agency is responsible for: a) determining whether classification is appropriate prior to the award of a research grant, contract, or cooperative agreement and, if so, controlling the research results through standard classification procedures; b) periodically reviewing all research grants, contracts, or cooperative agreements for potential classification. No restrictions may be placed upon the conduct or reporting of federally-funded fundamental research that has not received national security classification, except as provided in applicable U.S. Statutes. Fundamental research is also defined within NSDD-189: 'Fundamental research' means basic and applied research in science and engineering, the results of which ordinarily are published and shared broadly within the scientific community, as distinguished from proprietary research and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary or national security reasons. NSDD-189 has not been superceded and continues to be the government policy regarding controls on federally funded research results. In the wake of the terrorist attacks of September 2001, then-Assistant to the President for National Security Affairs Condoleezza Rice reaffirmed this position in a letter to the Center for Strategic and International Studies, by stating, ...this Administration will review and update as appropriate the export control policies that affect basic research in the United States. In the interim, the policy on the transfer of scientific, technical, and engineering information set forth in NSDD-189 shall remain in effect... Executive branch agencies have followed this general policy by requiring that the results of agency-funded extramural research be published promptly and with wide dissemination. For example, the National Science Foundation research policy states: NSF expects significant findings from research and education activities it supports to be promptly submitted for publication, with authorship that accurately reflects the contributions of those involved. It expects investigators to share with other researchers, at no more than incremental cost and within a reasonable time, the data, samples, physical collections and other supporting materials created or gathered in the course of the work. Research performed with National Institutes of Health funding is also to be disseminated to the public: It is NIH policy to make available to the public the results and accomplishments of the activities that it funds. Therefore, PIs [principal investigators] and grantee organizations are expected to make the results and accomplishments of their activities available to the research community and to the public at large, and to effect their timely transfer to industry for commercialization. The Department of Defense also encourages the publication of research it funds. For example, Office of Naval Research policy states: Publication of results of the research project in appropriate professional journals is encouraged as an important method of recording and reporting scientific information. In general, federal agencies appear to agree that there should be open publication of research results when the research has been funded by taxpayer dollars. The exception is when research is classified. Classified research projects, even those performed by scientists outside of government laboratories, are not published in the open literature, with information being transferred only between those who possess requisite clearance. Some classified research areas are later declassified, and the advances developed in these programs used more generally. Mechanisms of Governmental Control Current mechanisms for federal agencies to control the publication of federally funded extramural research results include classification, export and arms trafficking regulations, and specifications in federal contracts, such as prepublication review. Classification Generally, classification is to be used when it is necessary to control scientific information. The advent of classified extramural research led most universities to clarify their positions on acceptance of funding for classified research. Significant debate exists over the propriety of conducting classified research in an academic setting. Some universities elect not to perform classified research on campus, espousing that this is contrary to the founding beliefs of the university or their university charters. For example, Duke University maintains: No research can be undertaken at the University that involves information, research, or results of research that are, or would be, classified by the sponsor or any third party. For example, research for the federal government under a subcontract which is classified as secret is not permitted. Universities that perform classified research typically establish research facilities specifically to handle classified materials and research. These research facilities are often located off-campus. Examples of such universities include the Massachusetts Institute of Technology and the Johns Hopkins University. Some universities have developed mechanisms by which classified research may be approved on a case-by-case basis. Export Controls Export of Technologies Another federal control mechanism for private research results occurs through export control and arms trafficking regulations. The Department of Commerce implements Export Administration Regulations (EAR), which bar the export of items, technology, and technological information found on the Commerce Control List without appropriate export license. The Department of State implements the International Traffic in Arms Regulations (ITAR), which regulate the export of items, technology, and technological information maintained on the Munitions Control List. Export control laws primarily constrain the flow of technology and technical information from the United States to other nations. The EAR covers the transfer of dual-use commercial goods, while ITAR is focused on armaments and military technologies. These regulations exist to prohibit the proliferation of certain specific technologies for either national security or trade reasons. Because of the technological breadth of EAR and ITAR, private researchers, using private funds, sometimes perform research in areas that fall within these regulations. For example, research relating to aerospace technology or cryptography could fall under export regulation. Universities performing basic research are sometimes uncertain whether the research being performed at the institution falls under EAR or ITAR restrictions. Both EAR and ITAR possess exemptions for "fundamental research." Fundamental research is defined under ITAR as: ... basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community, as distinguished from research the results of which are restricted for proprietary reasons or specific U.S. Government access and dissemination controls. University research will not be considered fundamental research if: (i) The University or its researchers accept other restrictions on publication of scientific and technical information resulting from the project or activity, or (ii) The research is funded by the U.S. Government and specific access and dissemination controls protecting information resulting from the research are applicable. Universities generally rely on the fundamental research exclusion to exempt the research performed there from export control. If the university research is not exempt through the fundamental research exclusion, export licensing must be obtained and information controls with respect to foreigners performed. Failure to obtain such a license can result in prosecution and large fines. Export of Information A further complication to export regulation is the concept of a "deemed export." A deemed export is transfer of information, not physical items, to a foreign national from select countries without first obtaining an export license for that technology. This provision has been especially troubling for universities, as foreign students and researchers who attend graduate-level classes may be exposed to information relating to technology which falls under export controls. There have been cases where export control of information and scientific research have coincided. In the 1980s, research papers were removed by the Department of Defense from a scientific convention because foreign nationals ineligible for export licenses would be attending, and other conventions were held in private session, to avoid violation of the deemed export aspect of these regulations. Some universities have reported problems in collaborations with foreign researchers, and cited, as an example, difficulty in transferring some technologies developed by foreign graduate students to industry. The Export Administration Act of 1979 ( P.L. 96-72 ) has not been reauthorized. As a consequence, President George W. Bush invoked the International Economic Emergency Powers Act ( P.L. 95-223 ) to maintain export administration regulation. While the International Economic Emergency Powers Act continues export administration regulation, the penalties for violating this act and the enforcement authority granted under this act are less than those under the Export Administration Act of 1979. The USA PATRIOT Act ( P.L. 107-56 ) created another mechanism to block certain foreign nationals from obtaining specific information. Access to or information about biological and toxin agents on the "select agent" list is barred to individuals, including students, originating from countries which support terrorism. Under the USA PATRIOT Act, universities are charged with improving security and access controls to select agents, and the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 ) requires sites with select agents to keep a current inventory of those agents and register their possession with the Department of Health and Human Services or with the Department of Agriculture, depending on the nature of the select agent. Most universities generally reconcile their dual roles, that of providing educational and research opportunities to their students while simultaneously remaining in compliance with the limits of export regulations, by relying on the fundamental research exclusion. Some universities affirm their role as disseminators of knowledge and do not identify the nationality of students attending classes, citing the incompatibility of closed classrooms with their academic charter. Prepublication Review Some federal funding agencies, for example, the U.S. Army Research Laboratory, Army Corps of Engineers, the Department of Energy, and the Federal Aviation Administration, have occasionally incorporated publication restrictions in the terms and conditions of their research contracts when the area of research either may have potential defense applications or contain sensitive material. In general, these restrictions have not been applied to entire research fields, but, instead, have been targeted at specific research considered to be of import or relevance to national defense or where portions of a contract may contain classified information. University administrators have been reportedly uneasy about such prepublication review clauses within funding vehicles. Officials at Duke University reportedly renegotiated and rejected contracts that had prepublication clauses inserted into them by the Department of Defense. Administrators at the Massachusetts Institute of Technology have refused contracts including prepublication review language. While prepublication review clauses within Department of Defense funding vehicles have caused concern among the academic community that they may violate NSDD-189, the Director of the Office of Science and Technology Policy (OSTP), Dr. John Marburger, has stated that the Department of Defense use of prepublication clauses in contracts has been consistent with prior policy. Dr. Marburger requested that the academic community provide OSTP with examples of such clauses. The Council on Government Relations and the American Association of Universities prepared a joint report submitted to OSTP documenting 103 prepublication clauses presented over a six month period to a sample of 20 universities. Some universities fear that federal prepublication review clauses might invalidate the fundamental research exemption that such research results normally enjoy. As a consequence, university research done in an export-controlled area would no longer be excluded from export control regulations. Policy Actions The catastrophic terrorist attacks of 2001 led to an executive branch reevaluation of the treatment of government-owned information. In the wake of these events, many government agencies evaluated information which was available to the public through government websites and began to reassess documents that had recently been declassified. The Card Memorandum This process was marked by a memorandum on March 19, 2002 sent by Assistant to the President and Chief of Staff Andrew Card to executive branch departments and agencies. This memorandum became known as the "Card memo." It cautioned that information possessed by the federal government which could be reasonably expected to assist in weapons of mass destruction development or use should not be inappropriately disclosed. Additionally, the guidance contained within the Card memo reinforced the need to protect "sensitive, but unclassified" information related to homeland security. The term "sensitive, but unclassified" was not defined in the memorandum and it is not clear how sweepingly construed this category might be. Further guidance regarding the use of this category is found within the memo itself: The need to protect such sensitive information from inappropriate disclosure should be carefully considered, on a case-by-case basis, together with the benefits that result from the open and efficient exchange of scientific, technical, and like information. Several comparable, but still dissimilar, definitions of "sensitive, but unclassified" are in use at different agencies. The Department of State describes "sensitive, but unclassified" information as: ...information which warrants a degree of protection and administrative control that meets the criteria for exemption from public disclosure set forth under Sections 552 and 552a of Title 5, United States Code: the Freedom of Information Act and the Privacy Act. The Department of Energy's use of "sensitive, but unclassified" is described as: Information for which disclosure, misuse, alteration or destruction could adversely affect national security or government interests. National security interests are those unclassified matters that relate to the national defense or foreign relations of the Federal Government. Governmental interests are those related, but not limited to, the wide range of government or government-derived economic, human, financial, industrial, agricultural, technological, and law enforcement information, as well as the privacy or confidentiality of personal information provided to the Federal Government by its citizens. The Department of Defense maintains several types of controlled, unclassified information. The Department of State category of "sensitive, but unclassified" is a document designation comparable to For Official Use Only. The criteria for allowing access to For Official Use Only and "sensitive, but unclassified" information are the same. The Department of Defense describes For Official Use Only as: ... a designation that is applied to unclassified information that may be exempt from mandatory release to the public under the Freedom of Information Act (FOIA). Response of Scientific Community Scientists are divided about how to balance scientific openness and national security concerns. While recognizing that security concerns are valid, some scientists assert that the value of publication of research results is greater than the potential risks. Others state that publication of select research results is troublesome and that mechanisms for determining which research results fall into this category and addressing publication of these results need to be determined. The National Academies of Science and multiple scientific professional societies have engaged with other stakeholders in exploring the role of scientists, publishers, and the government in assessing the security concerns of such research results. Professional Societies While many professional societies have wrestled with the balance between scientific openness and security concerns, the actions of the American Society for Microbiology will be highlighted here as an example of the actions taken to address these concerns. The American Society for Microbiology, a professional organization which publishes many scientific journals, including the Journal of Virology in which the mousepox article was printed, has received requests by authors to be allowed to omit certain information from their submissions. By omitting such information, the experiments described in the article would be much more difficult to reproduce, perhaps impossibly so. The American Society for Microbiology has adopted the position that all information necessary to reproduce an experiment must be included in any submission for publication. Former American Society for Microbiology president, Dr. Ronald Atlas, testified: Omission of materials and methods from scientific literature would compromise the scientific process and could lead to abuses as well as the perpetuation of errors. Independent reproducibility is the heart of the scientific process. Even within the context of heightened scrutiny, research articles must be published intact. If scientists cannot assess and replicate the work of their colleagues, the very foundation of science is eroded. Recognizing as valid the concern that scientific information in journals might be inappropriately used, the American Society for Microbiology has developed and established policy guidelines for reviewers and editors of their journals. These guidelines establish a procedure for special review of submissions concerning select agents, as defined by regulation, and for those submissions which reviewers feel may possess the potential for inappropriate use. The American Society of Microbiology's guidelines for publishing potentially contentious research were tested with the publication of a manuscript in March 2003 in the journal Infection and Immunity . This paper described the effects of proteins that accompany botulinum toxin during natural production and assessed the proteins' effects when inhaled. Upon receipt of the manuscript, editors requested that some portions of the paper be modified, in order to allay the editors' security concerns. The National Academies The Presidents of the National Academies released a joint statement and background paper which avers that the federal government should continue its current practice of classification and not further develop a less well-defined category to encompass sensitive research results. They asserted that scientific creativity and national security would both be lessened if clear distinctions are not drawn between areas where open publication is acceptable or not. They also emphasized that wide dissemination of research results and peer review are important aspects of research science. A meeting entitled "Scientific Openness and National Security" was held at the National Academy of Sciences on January 9, 2003. It addressed some aspects of the debate regarding scientific publication and national security. Members of the academic scientific community, the non-profit community, and the federal government met for a day-long symposium identifying the significant contentious issues. At this meeting, Dr. Marburger reiterated that NSDD-189 continues to define policy for publication of federally funded research results. He suggested that research should be designated as classified prior to awarding a federal grant or contract, and that the need for deviation from this policy should be uncommon. He also stated that previous precedents of control in the physical sciences may not provide adequate guidance for bioterrorism. Dr. Penrose Albright, then of the Office of Science and Technology Policy and the Office of Homeland Security, also stated that an articulated and defensible criteria for inappropriate research, able to distinguish dangerous and benign research results, combined with a mechanism for identifying articles containing dangerous but valuable information would be well received by the Executive Branch. Following the National Academies' meeting, journal editors, scientist-authors, and other stakeholders met and discussed the challenges posed by publication of certain research results, eventually issuing a statement calling for renewed vigilance and personal responsibility for potentially dangerous research presented to them for publication. This joint statement provided the base for subsequent announcements in Science , Proceeding of the National Academies of Science of the United States of America , and the British journal Nature affirming editorial policy to both deal responsibly and effectively with security issues while maintaining the integrity of the scientific publishing process. It has been asserted that the joint statement should be understood as augmenting, but not supplanting, existing editorial policy at the signatory journals. For example, the American Association for the Advancement of Science, the professional organization which publishes Science , has implemented a formal policy on how to deal with potentially dangerous reports in conjunction with existing editorial policy. While consensus was not achieved among the attendees of the National Academies' meeting regarding the potential solutions, there was general agreement that a growing dialogue between the scientific and security communities would aid in satisfying community members' concerns. Towards this goal, the National Academy of Sciences and the Center for Strategic and International Studies convened a two-year, joint Roundtable on Scientific Communication and National Security. Both the scientific and security community were invited to informally discuss, and potentially develop, solutions to the tension over publication. This led to the formation of a Commission on Scientific Communication and National Security by the Center for Strategic and International Studies. This Commission published a white paper in 2005, recommending that the federal government maintain NSDD-189 and that research institutions establish mechanisms to ensure informed compliance with applicable regulations regarding dissemination of scientific information. The National Academies continue to explore the issue of performing and publishing research that has potential homeland security impact. Committees have been empaneled to consider these impacts and possible mitigating approaches. The National Academies have released several reports containing recommendations for the federal government on handling contentious research and research results. One report recommended that the policies of NSDD-189 be continued and that other mechanisms should be developed to address the difficulties of assessing and responding to contentious research. The report identified seven research areas where results might pose a security concern and advocated that proposed research in these areas be reviewed, and potentially rejected, by a committee, specifically the institutional biosafety committee within each research institution, before the research is performed. Thus, research of concern could be identified and weighed before results were generated. Editors and publishers would continue to exercise their professional judgement in the publishing of manuscripts, without federal review or requirements. Response to this proposal has been mixed. While many in the scientific community have supported this framework as an appropriate balance of scientific self-regulation and federal advisory oversight, others have criticized the proposal for not being legally binding or requiring such review of government or industrial research. Additionally, it would not act as a barrier to informal dissemination of research results that might fall in one of the seven research areas. As an example of the limitations of the National Academies proposal, critics refer to the open discussion of mousepox research results by Dr. Buller at a biosecurity convention in Geneva, Switzerland. A different report suggested the creation of an independent advisory body to partner with intelligence officials and government leaders to analyze science and technology in order to anticipate future biological threats. The report asserted that scientists need to adopt a common culture of awareness and responsibility regarding research in the life scientists, to prevent the malevolent use of such research's results. While some professional societies have adopted codes of conduct, biosecurity experts assert that these codes are not all equivalent and may not pose a sufficient barrier to prevent the misuse of benevolent science. Department of Homeland Security The Homeland Security Act ( P.L. 107-296 ) created the Department of Homeland Security, within which many research and development functions relating to homeland security were aggregated under the Science and Technology directorate. This directorate is responsible for researching, developing, and deploying biological, chemical, nuclear, and radiological countermeasures. It also has management of the Homeland Security Advanced Research Projects Agency, which funds extramural homeland security research. How homeland security information shall be handled by the Department of Homeland Security is further described in the Homeland Security Act. While to the greatest extent practicable, the results of research funded by the Department of Homeland Security are to be unclassified, the President is also instructed to: prescribe and implement procedures under which relevant Federal agencies ... identify and safeguard homeland security information that is sensitive but unclassified. ... The President shall ensure that such procedures apply to all agencies of the Federal Government. Congress has held many hearings to perform oversight of the Department of Homeland Security. Issues raised in these hearings indicate that some policies are not yet in their final form. Since extramural scientific research funded by the Department of Homeland Security might be reasonably expected to also have security ramifications, an explicit policy relating to publication of such sensitive but unclassified information will likely be needed. The Department of Homeland Security has not, as of this writing, developed the methods by which potentially contentious extramural research results will be identified and handled or publicly disseminated policies regarding these results. Then-DHS Secretary Ridge, in remarks to the Association of American Universities in April 2003, stated that the federal government continued to uphold NSDD-189, and that he did not plan to apply sensitive but unclassified or sensitive homeland security information guidelines to federally funded research. Instead, sensitive homeland security information and sensitive but unclassified information would only be information that the federal government already possesses. Then-Under Secretary for Science and Technology Charles McQueary told the American Association for the Advancement of Science Colloquium on Science and Technology Policy that scientific organizations should establish their own criteria for prepublication review of risky research articles and that scientists and journal publishers should set the bar for themselves. It has been reported that the Homeland Security Advanced Research Projects Agency follows a Department of Defense model for quasi-classified broad agency announcements. The Homeland Security Advanced Research Projects Agency reportedly holds back, in some circumstances, information from broad agency announcements in order to avoid revealing vulnerabilities. The criteria for these circumstances has not been made publicly available. Whether research results arising from such broad agency announcements could be freely published has not been made clear. Department of Health and Human Services Following the publication of Biotechnology Research in an Age of Terrorism , the Department of Health and Human Services announced the establishment of a National Science Advisory Board for Biodefense (NSABB), building on several of the National Academies' recommendations. The NSABB is, among other duties, to provide advice, guidance, and leadership regarding biosecurity oversight of dual-use research. While the NSABB is managed and supported by the National Institutes of Health (NIH), it is to advise the Secretary of HHS, the Director of NIH, and the heads of all federal departments and agencies that conduct or support life sciences research. The NSABB is composed of not more than 25 non-federal voting members appointed by the Secretary of Health and Human Services in consultation with the heads of other federal departments and agencies conducting life sciences research. It also contains non-voting ex officio federal members who represent agencies and departments that conduct or support life sciences research. The NSABB is developing guidelines and an oversight framework for considering federally funded research that might pose security challenges. So far, the guidelines developed have closely followed those suggested by the National Academies, while the issue of what oversight framework would be most optimal is still under discussion. The NSABB has also provided advice to the HHS Secretary regarding dual-use research and reviewed the publication of specific scientific research results. In October 2005, a research article was published in Science magazine describing the reconstruction of an influenza virus bearing all of the identified gene sequences of the 1918 influenza virus. Prior to the publication of the research article, the HHS Secretary consulted with the NSABB for guidance. The NSABB met and unanimously recommended that the scientific benefit of the information outweighed the potential risk of misuse. It recommended that publication of the article be accompanied by an editorial discussing the potential biosecurity implications of the research and how they compare with its potential benefits. The use of the NSABB in vetting the publication of the 1918 flu research paper has been identified by some observers as a successful exercise of the NSABB advisory mission. Nevertheless, others have criticized the timing and mechanism of the review process, questioning the role the board plays in advising policymakers and the threshold used for determining whether NSABB guidance would be sought on a submitted publication. Policy Options The balance between publication of federally funded research results and protecting national security raises numerous questions, such as: Should there be regulation of the publication of federally-funded research results? Is the potential impact on scientific quality, productivity, and advancement resulting from publication controls worth the added potential security gained through such controls? How might relevant policy be uniformly employed by all agencies of the federal government? Should such policy vary by scientific and technical disciplines? At what stage, if any, of the civilian research process might regulation or restriction occur? How much authority, if any, does the federal government have over the publishing of research results developed through private funding? How might development or implementation of such authority introduce first amendment conflicts? Since science is an increasingly international discipline, how would national security concerns regarding federally funded research results be implemented in a global context? How might the federal government encourage scientists to develop guidelines for self-regulation? Given the international nature of scientific publication, might self-regulation by domestic publishers cause sensitive research results to be published in international journals rather than domestic journals? How might Congress provide oversight of this issue with respect to extramural research and development funded by the Department of Homeland Security? Using Classification Some members of the scientific community advocate that the status quo, where the mechanism for blocking publication of federally-funded research results is classification, should remain the federal government's policy on controlling research. They assert that this mechanism has been sufficient in the past, and that the vigor of scientific research could be unduly, and perhaps seriously, impeded if new controls were developed and added. Advocates of classification assert that, with the addition of the Secretary of Health and Human Services, the Secretary of Agriculture, and the Administrator of the Environmental Protection Agency to the list of those persons authorized to classify information, the federal government has greater capacity to identify information for classification. They assert that, in line with NSDD-189, information which is not classified should be freely publishable and distributable. Advocates of this position claim that areas of proscribed research should be well defined and protected by strong barriers, such as those provided under classification. Advocates of retaining the status quo also cite substantial concern about the impact of publication controls on science, especially in biological sciences. Some have claimed that there would be a flow of scientists out of contentious research areas into areas where there is less concern about the legal ramifications of their work. Additionally, some scientists believe that an unimpeded flow of scientific information is important to maintaining national security. They assert that national security will be increased if many researchers have access to information that may lead to new vaccines, detectors, and treatments, or conversely, that impeded access may limit the development of countermeasures. Dr. Paul Keim, a scientist at Northern Arizona University, stated: If the Bacillus anthracis genome had not been released, we would not have been able to develop the high-resolution system that is currently so important [to the investigation of the anthrax attacks]. On the other hand, advocates for changing the current system contend that scientists are currently making available to terrorist groups information that can be used to harm the populace. Classification is not applied to information already published in the open literature, and research results that threaten national security may arise from normally unclassified fields. Thus, advocates of changing the current system assert that classification is insufficient to stop dissemination of information arising from normally unclassified fields, as it may enter into the open literature before it is identified as potentially harmful to national security. These proponents claim that the continued publication of such information will harm national security, and that changes should be made so that such federally funded research results can be classified before they are distributed. Some policymakers have also asserted that the current classification system may not be appropriate for all sciences. They emphasize the difficulties in clearly defining what aspects of biological research should be subject to regulation, and that, unlike other classified research areas, much of microbiology is performed outside of the federal government. They suggest that classifying basic biological research might be necessary for homeland security, but also might unduly restrict future applied research. Thus, they claim a different method for handling such results may be necessary. Advocates for adjusting the current system also assert that information published in scientific journals may undermine biodefense efforts. For example, publishing which portion of a pathogen's genome is used in a new biodetection device could inform terrorists how to create a pathogen which would avoid detection by that method. , The scientific and export communities interact when changes to export control regulation are suggested. These interactions may indicate how different policy approaches regarding publication of potentially dangerous research results may be discussed and developed in a mutually acceptable manner. In export control, the concerns of national security are met while simultaneously allowing research to continue. That said, implementation of export control regulations has posed some challenges to researchers. Application of deemed export provisions and proposed revision of these provisions have raised concerns among the academic community as being unwieldy and potentially injurious to the research process. Self-Regulation by Scientists While many individual scientists may identify reasonable and valid concerns regarding the potential inappropriate use of information in scientific journals, opinions vary about how to best address these concerns. Some have advocated a self-policing framework where scientists regulate themselves through a combination of ethical agreements and publishing oversight. They claim that scientists are in the best position to determine the threshold for responsible science and to respond to new scientific developments. As was shown through the experience of the National Institutes of Health Recombinant DNA Advisory Committee, amendment or adjustment of regulation and rules related to science is often needed, as the subject matter continues to evolve and progress. Several mechanisms are possible within a self-regulating framework. One might involve review boards within institutions to assess research results. Much research involving human subjects, for example, is governed by local institutional review boards. A board's purview generally extends to all human research at the institution, irrespective of funding source. Although required by the Public Health Service Act and the Federal Food, Drug and Cosmetic Act for certain human experimentation, the boards at extramural research institutions are not federal entities. These institutional review boards have the ability and authority to approve, require modifications within, or disapprove research projects. Similar review boards established within research facilities could be given the role of screening manuscripts in a formal or informal manner prior to their publication. Another possibility would be to convene a new "Asilomar-like" conference, where members of the scientific and national intelligence communities, along with public input, come together and craft codes of conduct which will satisfy the varying needs of these disparate groups. By doing so, a framework could be developed to identify sensitive research results and provide alternate dissemination routes. NIH National Institute of Allergy and Infectious Diseases Director Anthony Fauci has voiced support for the establishment of an oversight panel. For example, he suggested the formation of a panel to determine the appropriateness of certain types of biomedical research and stated: There should be a committee – a combination of academics and societies and perhaps journal editors – to discuss [publication], so if there is a question in the mind of someone, you can bring it to a body who can, in an unbiased way, give you an idea about whether or not you should [publish]. Whether scientific researchers would be able to properly weigh the security concerns of research results is uncertain as well. For example, Dr. Stephen Morse, in endorsing the idea of an Asilomar-like conference, pointed out: Scientists are not in the age of innocence anymore. And they should be aware of the moral implications of what they're doing. Some have maintained that the natural inclination of scientists is to err on the side of openness and publication, while others posit that since the science and security communities are separated, trust in the actions of the opposing community is difficult to develop. Other complications to self-regulation exist as well. As scientific research has become more international in scope, it would be necessary for such a self-regulatory framework to be adhered to on an international basis for optimal effectiveness. Without the agreement of international scientists to maintain similar codes of conduct, contentious research results generated by international scientists would continue to enter the open literature. Also, scientists within the U.S. might preferentially publish in international journals, should the barrier to publication in a domestic journal be raised significantly higher than found in international publishing. The NIH guidelines developed out of the Asilomar conference are generally followed on an international level, but the scientific community is much larger now than in the 1970s, and developing agreement among such a community may be more difficult to achieve. Genetically modified foods and stem cell research are examples of biological research areas around which a community-wide, international consensus has not evolved. The National Research Council report Biotechnology Research in an Age of Terrorism provides recommendations for a potential self-regulatory mechanism. It identifies seven areas where "experiments of concern" might exist, and recommends that experiments within these areas be reviewed by an institutional biosafety committee to determine whether the experiments present some degree of concern. The institutional biosafety committees would thus provide an initial review of proposed experiments. If further review or consultation was needed to determine whether an experiment was of concern, then the experiment could be referred to an expanded Recombinant DNA Advisory Committee or to a higher authority for adjudication. The establishment of the National Science Advisory Board for Biosecurity may be interpreted as fulfilling this role and function, but issues regarding the authority and scope of the NSABB have yet to be fully resolved. Regulation by Publishers The actions undertaken by select journal editors for handling the results of potentially sensitive research may be models for publishing houses to adhere to in the face of potential legislation or federal regulation. By empowering journal editors to screen, review, and reject research papers on the basis of their weapons potential, advocates hope to avoid new laws or regulations that might constrain the research process and scientific productivity. The revelation that some journal papers have been modified because of ethical concerns raised through the editorial process has been seen as a success for this style of oversight. Still, some cite the opinions of the editor of Science and chief executive of the American Association for the Advancement of Science initially expressed regarding the need for open publication as indicative that the publishing community is not unified in perspective, and that an editor-based effort might yield unsatisfactory results. Even if domestic publishers develop a consensus protocol for handling research results which might threaten national security, it is unclear if this would stop such information from entering the open literature. The competitive, international nature of scientific publishing may lead foreign journals that lack such a protocol to legally acquire and publish material that is prohibited from publication in domestic journals. Finally, with the growing ability to disseminate scientific information to a wide audience without resorting to formal publication, it has been questioned whether a publisher-based policy will be effective in restricting the dissemination of contentious research. The National Research Council report Biotechnology Research in an Age of Terrorism recommends that journal editors continue to assess whether potentially contentious manuscripts should be published. It asserts that a voluntary approach, where scientists and editors can continue to refine and respond to criticism or other input, is essential to the credibility of such a system within the research community. Without such credibility it is believed that scientists may not take part in potentially contentious biodefense research. Federal Regulation Prepublication Review of Sensitive, But Unclassified Results An option is the imposition by the federal government of sensitive, but unclassified status and subsequent prepublication review of scientific research resulting from federal government sponsorship or funding. Application of this standard would likely allow scientists with appropriate credentials or need-to-know access to such scientific literature, but would bar others' access. Advocates of such a standard point out that such information could be transferred among scientists with fewer controls than classified information. It has been suggested that access to sensitive, but unclassified research results could be controlled by the publisher through secure, password-controlled websites. Other options might include dissemination of such material via professional societies or directly from the federal government. Opponents of such an approach cite the logistical difficulties in determining those scientists with a bona fide reason for access to this information; determining how and in what manner application of such a label would be implemented; and determining how such sensitive, but unclassified material would be disseminated to those scientists eligible to receive it. A further complication is that the categorization of what information might be sensitive, but unclassified is still not clear or uniformly codified across all federal scientific funding agencies. Additionally, some scientists or universities might choose not to participate in a process which would determine access eligibility. A Massachusetts Institute of Technology report rejects such security reviews as potentially becoming arbitrary. Another concern is the effectiveness of such a federally based review. The federal government funds about 30% of the total research and development efforts in the United States. In terms of basic and applied research, the federal government funds 62% and 38% respectively. If prepublication review resides within the federal government, in contrast to a voluntary submission to professional societies or an ethical or moral statement developed and overseen by journal publishers, then all basic and applied research would not be reviewed. A strong sentiment held by many members of the scientific community is that all unclassified scientific results should be shared widely. Results are sometimes construed to include actual samples of research materials and all information necessary to reproduce an experiment. For example, the National Academy of Sciences' Board on Life Sciences has recommended that authors of scientific papers allow unrestricted access to data and supporting materials related to published findings. Such a position indicates a potential lack of support within the science community for any credential system barring access to research results. Lastly, universities fear that federal prepublication review to determine the sensitive, but unclassified status of material in a publication might invalidate the fundamental research exemption that such research results normally enjoy under EAR and ITAR. As a consequence, university research done in an export-controlled area would no longer be excluded from export control regulations. Security Review at the Funding Stage Another suggestion to addressing research with security implications is to categorize such research at the funding stage, rather than at the publication stage. Including voluntary or mandatory prepublication review for federally funded research or the development of new funding opportunities containing prepublication review as a condition of acceptance are potential remedies. Individual funding vehicles have been offered to universities which would provide the funding agency with access to research results prior to publication. Opponents of this approach cite the general unwillingness that universities have towards restricted research funding. Some universities have explicit policies barring acceptance of federal funding requiring prepublication review. Also, scientists may not be as willing to work in research areas where publication is not allowed as in areas where publication is encouraged. As a consequence, the pool of eligible scientists competing for federal funding might decrease, potentially lowering the quality of research and development performed in these areas. Additionally, determining at the funding stage whether research will lead to sensitive results is considered difficult. For example, the often cited mousepox experiments were part of a fertility research program aimed at techniques for pest control, and the results of the experiment were unexpected. Federal Licensing of Research Some experts have suggested that the role of the federal government should be expanded beyond a gatekeeping role when considering research. Since much research that has potential terrorism concerns also may play a role in biodefense, it has been suggested that such research should continue, but only performed by select researchers at specific facilities. For example, Dr. John Steinbruner has suggested, as part of a Biological Research Security System, that a national federal authority be established to license qualified researchers and research facilities and oversee research by licensed researchers in licensed facilities. Some scientists have asserted that licensing researchers, facilities, or experiments would have a strong, negative impact on scientific productivity in those areas. The registration of life scientists wishing to work with select agents has shown though that some scientists are willing to engage in such licensed research. Oversight of Homeland Security-Related Research Congress may continue to oversee development of policies relating to publication of extramural research results funded by the Department of Homeland Security's Science and Technology directorate. Whether the Department of Homeland Security should adopt a currently existing policy on extramural research or create a new policy; how this policy might be implemented; and the degree to which extramural research funded by the Department of Homeland Security might present security concerns may be areas where further congressional direction occurs. Additional oversight may focus on the activities underway in the Department of Health and Human Services, where the National Science Advisory Board for Biosecurity has been established. The charter of the NSABB is broad and recommendations brought forth from the body may impact much federally funded, homeland security-related research. The degree of impact, the comprehensiveness of such recommendations, and their ramifications may be areas of congressional interest. Alternately, should the NSABB be unable to provide practical recommendations, the difficulties and barriers encountered by the board may draw attention. Concluding Observations Developing policy in this area balances many concerns, some of which may be more difficult to address than others. How would a federal policy that encouraged self-regulation of manuscript submissions, either by journal publishers or scientists, be enforced? How would the concerns of security officials regarding national security be met if scientists are relied upon to review articles? Conversely, how would the concerns of scientists regarding scientific openness and academic freedom be met if security officials review articles? A policy involving review of research may require the cooperation of members of both the scientific and security community, two communities that generally have limited interaction. Finally, how would the success of a program controlling scientific research results be measured? Some aspects of such a program, like the economic costs involved in processing the articles, might be directly measurable, while others, such as the success in blocking terrorist group access to this information, might not be so easily measured.

The federal government has historically supported the open publication of federally funded research results. In cases where such results presented a challenge to national security concerns, several mechanisms have been employed. For fundamental research results, the federal policy has been to use classification to limit dissemination. For advanced technology and technological information, a combination of classification and export and arms trafficking regulation has been used to inhibit its spread. The terrorist attacks of 2001 increased scrutiny of nonconventional weapons, including weapons of mass destruction, and publication of some research results have increased concerns over whether publication of federally funded extramural research results could threaten national security. The current federal policy, as described in National Security Decision Directive 189, is that fundamental research should remain unrestricted and that in the rare case where it is necessary to restrict such information, classification is the appropriate mechanism. Other mechanisms restrict international information flow, such as Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) that control export of items and technical information on specific lists. Both EAR and ITAR do not apply to sharing fundamental research results, so long as they are not subject to any governmental prepublication review. Historically, the areas where export regulation and classification have predominantly occurred have been in mathematical, engineering, and physical sciences. Other contentious research areas, such as genetic engineering and manipulation, have been overseen through scientists' self-regulation and monitoring. The 1975 Asilomar conference produced a consensus statement on recombinant DNA research that formed the basis for the National Institutes of Health Recombinant DNA Advisory Committee. Recent research publications that have raised national security concerns have fallen outside of the areas traditionally regulated through classification and export control, and it is unclear how effective these mechanisms will be. The National Science Advisory Board for Biosecurity was established to aid in determining whether proposed federally funded research presents a biosecurity threat. Stakeholders do not agree on the best method of balancing scientific publishing and national security. Some believe that the current method of selective classification of research results is the most appropriate. They assert that imposing new restrictions will only hurt scientific progress, and that the usefulness of research results to terrorist groups is limited. Others believe that self-regulation by scientists, using an "Asilomar-like" process to develop a consensus statement, is a better approach. They believe that, through inclusion of scientists, policymakers, and security personnel in the development phase, a process acceptable to all will be found. Relying on publishers to scrutinize articles for information which might potentially have security ramifications is third option. Finally, mandatory review by federal funding agencies, either before funding or publication, is seen as a potential federally based alternative. This report will not be updated.

Background Twice during the 107 th Congress, the Senate had to address fundamental organizational questions. First, the 2000 senatorial elections produced a tied Senate, necessitating the negotiation of a "powersharing agreement" to govern many aspects of committee and floor activities. Then, the decision of Senator James Jeffords of Vermont to change his party affiliation from Republican to Independent gave Senate Democrats numerical control of the body. The shift in party strength caused a second round of negotiations about the organization and operation of the Senate. This report reviews these events and the agreements made by the Senate on organizational and procedural issues. 107th Congress: Opening Day Actions The November 2000 elections caused the Senate to be tied with 50 Republicans and 50 Democrats. Only once before, in 1881, had the two major parties been equally represented in the Senate. Due to significant changes in Senate procedures, 1881 precedents had little relevance to the contemporary Senate. The issue of Senate organization was further complicated by the election of Richard B. Cheney as Vice President. When the 107 th Congress convened on January 3, 2001, the incumbent Vice President, Albert Gore, Jr., presided until Vice President-elect Cheney was sworn in on January 20. Although a titular Democratic majority existed (because Vice President Gore was available to break tie votes) that could have tried to organize the Senate, any such organizational proposals might well have been blocked and, even if adopted, could have been reversed under Republican auspices once Vice President Cheney was in the chair to break ties. The Senate often negotiates formal and informal agreements to govern the legislative agenda and its consideration of individual measures. Similar negotiations about the organization of the Senate began informally in late November between the Democratic leader, Senator Tom Daschle (D-SD), and the Republican leader, Senator Trent Lott (R-MS). Talks continued after the Senate convened, and proposals under consideration by the two leaders were discussed at meetings of the party conferences. When the 107 th Congress first convened, Senator Daschle, recognized as majority leader by Vice President Gore, who was presiding, made no attempt to replace the incumbent Senate administrative officers with Democratic nominees. In an unprecedented step, the Senate agreed to S.Res. 3 , electing Senator Robert C. Byrd (D-WV) President pro tempore upon the adoption of the resolution, and simultaneously electing Senator Strom Thurmond (R-SC) President pro tempore, to be effective at noon on January 20. The Senate designated committee chairmen on opening day. Given that Senate committees are continuing bodies, Senators who had served on panels as of the end of the 106 th Congress retained their positions and roles when the 107 th Congress convened. Several committee chairmen did not return to the 107 th Congress, however, and, for administrative reasons, it was necessary for the Senate, at a minimum, to designate acting committee chairs to replace them, pending election of the full committee slates. The Senate went further in adopting S.Res. 7 , naming Democratic committee chairs on all Senate committees to serve as such through January 20, and naming Republican chairs to assume their posts at noon on that day. The Powersharing Agreement: S.Res. 8, January 5, 2001 Two days later, on the afternoon of January 5, 2001, Senator Daschle presented to the Senate S.Res. 8 , a measure to provide the organizational basis for powersharing in the Senate when the parties were equally divided. The resolution was agreed to later that day. Its provisions applied for the duration of the 107 th Congress, unless Senate party strength changed. The key provisions of the resolution were: Committees All Senate committees had equal numbers of Republicans and Democrats. A full committee chair could discharge a subcommittee from further consideration of a measure or matter, if it was not reported because of a tie vote. Budgets and office space for all committees were equally divided, with overall committee budgets to remain within "historic levels." Equal ratios on committees were to remain for the duration of the 107 th Congress, unless the Senate voting strength of the parties changed, whereupon committee assignments and party ratios were to be renegotiated. Discharging Measures or Matters If a measure or nomination had not been reported because of a tie vote in a committee, the majority or minority leader (after consultation with committee leaders) could move to discharge the committee from further consideration of that measure or nomination. This discharge motion was to be debatable for 4 hours, equally divided and controlled by the majority and minority leaders. After the expiration (or yielding back) of time, the Senate would vote on the discharge motion, without any intervening action, motion, or debate. If the committee were discharged by majority vote, the measure or matter would be placed on the appropriate Senate calendar to await further parliamentary actions. Agenda Control and Cloture The agreement prohibited a cloture motion from being filed on any amendable item of business during the first 12 hours it was debated. The agreement required both party leaders "to seek to attain an equal balance of the interests of the two parties" in scheduling and considering Senate legislative and executive business. The agreement also noted that the motion to proceed to any calendar item "shall continue to be considered the prerogative of the Majority Leader," although the resolution qualified this statement with the observation that "Senate Rules do not prohibit the right of the Democratic Leader, or any other Senator, to move to proceed to any item." Supplemental Colloquy, January 8, 2001 On January 8, 2001, the agreement was further clarified and other new procedures were announced. Senator Harry Reid (D-NV), the assistant Democratic floor leader, received unanimous consent to enter a printed colloquy between Senators Daschle and Lott into the Congressional Record , and to direct that "the permanent [ Congressional ] Record be corrected to provide for its inclusion with the resolution when it passed the Senate last Friday." In addition to summarizing the provisions of S.Res. 8 , the colloquy covered several more issues. "Filling the Amendment Tree": Limits on Floor Leaders In perhaps the most significant announcement, the two leaders pledged to refrain from using their preferential rights of recognition to "fill the amendment tree" in an effort to block consideration of controversial issues. Senator Lott, on behalf of both leaders, declared the policy in the written colloquy: ... [I]t is our intention that the Senate have full and vigorous debates in this 107 th Congress, and that the right of all Senators to have their amendments considered will be honored. We have therefore jointly agreed that neither leader, nor their designees in the absence of the leader, will offer consecutive amendments to fill the amendment tree so as to deprive either side of the right to offer an amendment. We both agree that nothing in this resolution or colloquy limits the majority leader's right to amend a non-relevant amendment, nor does it limit the sponsor of that nonrelevant amendment from responding with a further amendment after the majority leader's amendment or amendments are disposed of. Minority Senators as Presiding Officers The party leaders agreed that minority party Senators would be permitted to serve as presiding officers of the Senate. This ended, during the powersharing period, the Senate practice of the past 2 decades under which only majority party Senators served as temporary presiding officers. Party Access to Space in the Capitol The colloquy further specified that both parties would "have equal access" to common space in the Capitol complex to hold meetings, press conferences, and other events. This supplemented the provisions in S.Res. 8 guaranteeing the minority equal committee office space. The Shift to Democratic Control, May-June 2001 On May 24, 2001, Senator James Jeffords announced his intention to leave the Republican party, to become an Independent, and to caucus with the Senate Democrats. With Senator Jeffords' announcement, the Democrats held a numerical edge in the Senate. On June 5, 2001, Senator Jeffords met with Senate Democrats at their weekly conference meeting. On June 6, the Senate convened with the Democrats as the acknowledged Senate majority party. When Senator Jeffords announced his intention to vote with the Democrats on organizational questions, the two parties began talks about arrangements to be made under the new party division. Senator Lott named Senators Pete Domenici (R-NM), Phil Gramm (R-TX), Orrin Hatch (R-UT), Mitch McConnell (R-KY), and Arlen Specter (R-PA) to take a lead role in negotiating with Democratic leaders about the steps to be taken in the partisan transition. The Democrats named no comparable negotiating team, and Senator Daschle met with the Republican team for the first time on the evening of June 5. Discussions continued throughout the month of June. As these negotiations were taking place, the Senate took (or prepared to take) some actions not directly connected to the inter-party discussions. Election of a new President Pro Tempore. On June 6, the Senate approved by voice vote, S.Res. 100 , electing Senator Robert C. Byrd as President pro tempore. Senator Harry Reid (D-NV), the acting president pro tempore, immediately thereafter administered the required oath to Senator Byrd. The Senate subsequently agreed by voice vote to S.Res. 101 and S.Res. 102 , formally notifying the House and the President of the United States, respectively, of this action. The Senate also agreed by voice vote to S.Res. 103 , expressing its thanks to Senator Thurmond for his service as President pro tempore, and designating him President pro tempore emeritus, a new position in the Senate. Election of Party Secretaries. The majority and minority party secretaries are elected by the Senate. They serve as strategy consultants and communications links for senators in their party. On June 6, by voice vote, the Senate agreed to S.Res. 104 , electing Martin P. Paone as secretary for the majority, and S.Res. 105 , electing Elizabeth Letchworth as secretary for the minority. Paone and Letchworth held the opposite titles during the earlier period of Republican control of the Senate. Subsequently, Elizabeth Letchworth announced her intention to retire from the post, effective July 31, 2001. On August 3, 2001, the Senate agreed to S.Res. 154 , commending Letchworth for her 25 years of service to the Senate, and immediately thereafter agreed to S.Res. 155 , electing David Schiappa, formerly Assistant Secretary, to the post of Secretary for the Minority. Time for votes in the Senate. Majority Leader Daschle announced his intention to conduct votes more expeditiously, beginning with the Senate session on June 7, 2001. Except for extraordinary circumstances, Senators would have no more than 20 minutes during a roll call vote to come to the floor and record their position. Senator Daschle explained on the floor: Madam President, this has been a constant lament of both Senator Lott and myself. He has attempted to address it on occasion. I have always been supportive of the effort, to try to be as managerial with these votes as we can be. He and I have talked about it as recently as just prior to the break. My intent ... is to do all that we can to terminate the vote at the end of 20 minutes. I think that is ample time. If we are going to be efficient in the use of our time, we cannot allow these votes to drag on. This has been a source of increasing concern to me personally. So we will do our utmost-in fact, I will ask that the votes be terminated at the end of 20 minutes. I hope Senators can be made aware that will be the policy and we will implement it. If there is an emergency, we can accommodate that. But I also will attempt to impose some discipline with regard to the votes. We will attempt to implement that beginning tomorrow. I put all Senators on notice in that regard. Senator Daschle announced his intention to continue having Senators from both parties share the duties of presiding over Senate sessions. This policy had been contained in the powersharing agreement. During the week of July 16, 2001, Senate Republicans informed the Democratic leadership that Republican Senators would no longer agree to preside over the Senate. After the switch in party control, the Senate took` steps to choose new administrative officers. During the powersharing period, the incumbent Republican Secretary of the Senate and Sergeant at Arms remained in their posts. After the switch in party control, however, Gary Sisco, the Secretary of the Senate, tendered his resignation. Jeri Thomson, who previously held the post of Executive Assistant for the Minority in the office of the Senate Sergeant at Arms, was elected Secretary of the Senate on July 12, 2001. On June 12, 2001, the Senate received the nomination of James Ziglar, the incumbent Sergeant at Arms, to become Commissioner of the Immigration and Naturalization Service. The Senate confirmed Ziglar's nomination on August 1, 2001, and also agreed to a resolution ( S.Res. 144 ) commending him for his service as Sergeant at Arms. Senator Daschle announced his intention to nominate retired Army Major General Alfonso Lenhardt to the post. Lenhardt, since his retirement after 31 years of military service, had served as the Chief Operating Officer for the Washington-based Council on Foundations. On August 2, 2001, the Senate agreed to S.Res. 149 , electing Lenhardt Senate Sergeant at Arms, effective September 4, 2001. S.Res. 120 and Other Organizational Issues An agreement on committees and related organizational issues was reached by resolution just before the Senate adjourned for the Independence Day recess on June 29, 2001. Less formal assurances contained in "Dear Colleague" letters from the chairs and ranking members of the appropriate committees were printed in the Congressional Record to set procedures for the public disclosure of so-called "blue slips" on nominees, for Senate action on future Supreme Court nominations, and future decisions concerning the allocation of space. S.Res. 120 of June 29, 2001 provided for Democratic majorities on all Senate standing and select committees (except for the Select Committee on Ethics which always has equal party representation). The resolution assured that "no Senator shall lose his or her current committee assignments by virtue of this resolution." Section 3 of the resolution expressly provided that, regardless of any future shifts in party strength in the Senate during the 107 th Congress, existing agreements about the allocation of committee staff and funds made by committee chairs and ranking minority members would remain in effect, unless modified by them. Disclosing "Blue-Slipped" Nominations The tradition of "senatorial courtesy" has a long history. Under this practice, the Senate often declined to confirm a presidential nominee for an office in the state of a Senator of the President's party unless that Senator approved. The practice is a purely customary one and not always followed by the Senate. The term "blue slip" derives from the blue buckslip that the Senate Judiciary Committee uses to solicit Senators' comments on the suitability of nominees in their states. Customarily, Senators have been able to block such nominees without their objections being made publicly known. This largely private custom became more formal and more public under terms of a Dear Colleague letter announced by Senators Patrick Leahy (D-VT) and Orrin Hatch, the chair and ranking minority member of the Senate Judiciary Committee: The "blue slips" that the (Judiciary) Committee has traditionally sent to home State Senators to ask their views on nominees to be U.S. Attorneys, U.S. Marshalls and federal judges, will be treated as public information. We both believe that such openness in the confirmation process will benefit the Judiciary Committee and the Senate as a whole. Further, it is our intention that this policy of openness with regard to "blue slips" and the blue slip process continue in the future, regardless of who is Chairman or which party is in the majority in the Senate. Therefore, we write to inform you that the Chairman of the Judiciary Committee, with the full support of the former Chairman and Ranking Republican Member, is exercising his authority to declare that the blue slip process shall no longer be designated or treated as Committee confidential. Due to the fact that the Dear Colleague letter related only to nominees considered by the Judiciary Committee, the secrecy of "senatorial courtesy" requests on appropriate nominations that might be considered by other Senate committees was not changed. Consideration of Supreme Court Nominees Discussions between the parties focused on possible ways to guarantee Senate floor votes on nominations to fill any future vacancies on the Supreme Court. Senate Democrats opposed any such formal guarantee, and Republican negotiators were reluctant to insist on a vote to make this procedure a formal part of the rules or of the organizing resolution. The issue was ultimately addressed by another Leahy-Hatch Dear Colleague letter: We are cognizant of the important constitutional role of the Senate in connection with Supreme Court nominations. We write as Chairman and Ranking Republican Member on the Judiciary Committee to inform you that we are prepared to examine carefully and assess such presidential nominations. The Judiciary Committee's traditional practice has been to report Supreme Court nominees to the Senate once the committee has completed its consideration. This has been true even in cases where Supreme Court nominees were opposed by a majority of the Judiciary Committee. We both recognize and have every intention of following the practices and precedents of the Committee and the Senate when considering Supreme Court nominees. During his remarks on S.Res. 120 , Senator Daschle referred to the discussions about Senate action on future Supreme Court nominations: In the course of our negotiations, a number of our Republican colleagues also raised concerns about how Democrats would deal with potential Supreme Court nominations, should that need arise. A second letter to which Senators Leahy and Hatch agreed says clearly that all nominees to the Supreme Court will receive full and fair consideration. This is the same position I stated publicly many times during our negotiations, and I intend to see that the Senate lives up to this commitment. It has been the traditional practice of the Judiciary Committee to report Supreme Court nominees to the Senate floor once the committee has completed its consideration. This has been true even for a number of nominees that were defeated in the Judiciary Committee. Now, Senators Leahy and Hatch have put in writing their intention that consideration of Supreme Court nominees will follow the practices and precedents of the Judiciary Committee and the Senate. In reaching this agreement, we have avoided an unwise and unwarranted change to the Standing Rules of the Senate and a sweeping revision to the Senate's constitutional responsibility to review Supreme Court nominees. Space Allocations With the shift in political control of the Senate, substantial concern was expressed about relocating committee staff, with the new committees' Democratic majority staff moving into space previously occupied by committees' Republican staff. The Senate Rules and Administration Committee announced that, as in 1995, staff and equipment in committee rooms would be moved according to a schedule in which staff would move to new majority or minority committee rooms first, with equipment from their former offices following later. The controversy surrounding changes in office space led to the inclusion of language in S.Res. 120 recognizing the validity of committee space and staff allocation agreements between committee chairs and ranking minority members, and continuing such agreements in force unless modified by subsequent agreements between each committee's leaders. An additional Dear Colleague letter, this one signed by Senators Christopher Dodd (D-CT) and Mitch McConnell (R-KY), the chair and ranking member of the Senate Rules and Administration Committee, clarified the space issue. The letter reaffirmed the authority of the Rules and Administration Committee over space allocation in Senate office buildings, but left to committee chairs the duty to implement any space allocation decisions regarding their panels: In the allocation of office space to Senate committees, pursuant to Rule XXV of the Standing Rules of the Senate, it is the practice of the Committee on Rules and Administration to assign all such space to the chairman of each committee. Further, the Rules Committee does not traditionally intervene in the internal space allocation decisions of the committees and therefore is not a party to any agreements between the chair and ranking member regarding space allocation. It is the intent of the Committee on Rules and Administration to continue such practice. Small Business Committee Renamed In a separate and unrelated action on June 29, the Senate agreed to S.Res. 123 , a resolution amending Senate Rule XXV to change the name of the Senate Committee on Small Business to the Committee on Small Business and Entrepreneurship. The resolution was submitted by Senators John Kerry (D-MA) and Christopher Bond (R-MO), the chair and ranking minority members of the committee. Senator Kerry observed that "adding 'Entrepreneurship' to the Committee on Small Business's name will more accurately reflect the Committee's valuable role in helping to foster and promote economic development by including entrepreneurial companies and the spirit of entrepreneurship in the United States." S.Res. 123 did not alter the committee's jurisdiction. Nomination Standing Order By unanimous consent on August 2, 2001, the Senate agreed to a standing order "for the 107 th Congress" governing the referral of future nominations to the post of Assistant Secretary of the Army for Civil Works. The order provided that, when such nomination is received by the Senate, it is to be referred to the Committee on Armed Services and, if the Armed Services Committee reports, the nomination is then to be sequentially referred to the Committee on Environment and Public Works for a period of 20 session days. If not reported by the Environment and Public Works Committee within that period, the nomination is to be discharged and placed on the Senate's Executive Calendar. Typically, a nomination will be referred only to one committee or, in a small number of instances, to two or more committees by unanimous consent on a case-by-case basis. Additional Issues Agreement to S.Res. 120 did not complete Senate work on reorganization under Democratic control. The two party conferences approved new assignments for their members (including the designation of Senator Jeffords as the new chair of the Senate Environment and Public Works Committee) on July 10. No floor action to approve the new committee chairs was thought to be necessary under the terms of S.Res. 120 . Some committees decided to revise the internal rules they adopted earlier in the 107 th Congress. The Senate did not name conferees through its traditional mechanisms during the powersharing period. The parliamentary stages though which the Senate passes to get to conference are usually handled by unanimous consent. This consent includes granting authority to the presiding officer to appoint conferees, based on the recommendations of the relevant committee and floor leaders. Disputes between the parties on the appropriate ratio between Republicans and Democrats on Senate conference delegations caused the Senate to avoid going to conference with the House during the powersharing period. Only two measures went to conference up through the July Fourth recess, the budget resolution and the reconciliation bill, conference procedures for which were governed by the Budget Act. After the shift in party control, there was not a public objection to having the chair appoint conferees. Of course, private negotiations among Senators and party leaders about the size and composition of conference delegations continued. Conclusion The powersharing agreement was an experiment. The new Senate organization resolution departed as well from many established practices. The success of any Senate organizational settlement depends upon its adaptability and that of its members to changing circumstances. The comments of Senator Lott on the powersharing agreement can also apply to the provisions of S.Res. 120 : There are those in this Chamber who will not agree with me that we are going to support this resolution. There are those in this Chamber who probably will not agree with Senator Daschle that this is enough. Some will say it is too much; others will say it is not enough. Who is to say? The day may come when we will say: Well, yes, we didn't do that right; we didn't figure some of the things that might happen or the way the rules might be used or abused. If that happens, then we will have to deal with it. Senator Daschle and I will have to go to the Member on his side of the aisle or my side of the aisle and say: That is not in good faith. That is not what we intended. Or, when we make a mistake, change it. Appendix A. S.Res. 8 107 th CONGRESS 1 st Session S. RES. 8 Relative to Senate procedure in the 107 th Congress. IN THE SENATE OF THE UNITED STATES January 5, 2001 Mr. Daschle (for himself and Mr. Lott) submitted the following resolution; which was considered and agreed to RESOLUTION Relative to Senate procedure in the 107 th Congress. 1 Resolved , That notwithstanding the provisions of rule 2 XXV, or any other provision of the Standing Rules or 3 Standing Orders of the Senate, the committees of the Sen- 4 ate, including Joint and Special Committees, for the 107 th 5 Congress shall be composed equally of members of both 6 parties, to be appointed at a later time by the two Leaders; 7 that the budgets and office space for such committees, and 8 all other subgroups, shall likewise be equal, with up to an 9 additional 10 percent to be allocated for administrative ex- 10 penses to be determined by the Rules Committee, with the 11 total administrative expenses allocation for all committees 12 not to exceed historic levels; and that the Chairman of 1 a full committee may discharge a subcommittee of any 2 Legislative or Executive Calendar item which has not been 3 reported because of a tie vote and place it on the full com- 4 mittee's agenda. 5 SEC. 2. Provided , That such committee ratios shall 6 remain in effect for the remainder of the 107 th Congress, 7 except that if at any time during the 107 th Congress ei- 8 ther party attains a majority of the whole number of Sen- 9 ators, then each committee ratio shall be adjusted to re- 10 flect the ratio of the parties in the Senate, and the provi- 11 sions of this resolution shall have no further effect, except 12 that the members appointed by the two Leaders, pursuant 13 to this resolution, shall no longer be members of the com- 14 mittees, and the committee chairmanships shall be held 15 by the party which has attained a majority of the whole 16 number of Senators. 17 SEC. 3. Pursuant to the provisions and exceptions 18 listed above, the following additional Standing Orders 19 shall be in effect for the 107 th Congress: 20 (1) If a committee has not reported out a legis- 21 lative item or nomination because of a tie vote, then, 22 after notice of such tie vote has been transmitted to 23 the Senate by that committee and printed in the 24 Record, the Majority Leader or the Minority Leader 25 may, only after consultation with the Chairman and 1 Ranking Member of the committee, make a motion 2 to discharge such legislative item or nomination, 3 and time for debate on such motion shall be limited to 4 4 hours, to be equally divided between the two Lead- 5 ers, with no other motions, points of order, or 6 amendments in order: Provided , That following the 7 use or yielding back of time, a vote occur on the mo- 8 tion to discharge, without any intervening action, 9 motion, or debate, and if agreed to it be placed im- 10 mediately on the Calendar of Business (in the case 11 of legislation) or the Executive Calendar (in the 12 case of a nomination). 13 (2) Notwithstanding the provisions of rule 14 XXII, to insure that any cloture motion shall be of- 15 fered for the purpose of bringing to a close debate, 16 in no case shall it be in order for any cloture motion 17 to be made on an amendable item during its first 12 18 hours of Senate debate: Provided , That all other pro- 19 visions of rule XXII remain in status quo. 20 (3) Both Leaders shall seek to attain an equal 21 balance of the interests of the two parties when 22 scheduling and debating legislative and executive 23 business generally, and in keeping with the present 24 Senate precedents, a motion to proceed to any Leg- 25 islative or Executive Calendar item shall continue to 1 be considered the prerogative of the Majority Lead- 2 er, although the Senate Rules do not prohibit the 3 right of the Democratic Leader, or any other Sen- 4 ator, to move to proceed to any item. Appendix B. S.Res. 120 107 th CONGRESS 1 st Session S. RES. 120 Relative to the organization of the Senate during the remainder of the 107 th Congress. IN THE SENATE OF THE UNITED STATES June 29, 2001 Mr. Daschle (for himself and Mr. Lott) submitted the following resolution; which was considered and agreed to RESOLUTION Relative to the organization of the Senate during the remainder of the 107 th Congress. 1 Resolved , That the Majority Party of the Senate for 2 the 107 th Congress shall have a one seat majority on every 3 committee of the Senate, except that the Select Committee 4 on Ethics shall continue to be composed equally of mem- 5 bers from both parties. No Senator shall lose his or her 6 current committee assignments by virtue of this resolu- 7 tion. 8 SEC. 2. Notwithstanding the provisions of Rule XXV 9 the Majority and Minority Leaders of the Senate are here- 1 By authorized to appoint their members of the committees 2 consistent with this resolution. 3 SEC. 3. Subject to the authority of the Standing 4 Rules of the Senate, any agreements entered into regard- 5 ing committee funding and space prior to June 5, 2001, 6 between the Chairman and Ranking member of each com- 7 mittee shall remain in effect, unless modified by subse- 8 quent agreement between the Chairman and Ranking 9 member. 10 SEC. 4. The provisions of this resolution shall cease 11 to be effective, except for Sec. 3, if the ratio in the full 12 Senate on the date of adoption of this resolution changes.

The 2000 elections resulted in a Senate composed of 50 Republicans and 50 Democrats. Not since the Senate of 1881 (37 Republicans, 37 Democrats, and two Independents) had the two major parties been equally represented. An historic powersharing agreement, worked out by the party floor leaders in consultation with their party colleagues, was presented to the Senate ( S.Res. 8 ) on January 5, 2001 and agreed to the same day. The agreement was clarified by a leadership colloquy on January 8, 2001. In May of 2001, Senator James Jeffords of Vermont decided to leave the Republican party, to become an Independent, and to support the Democratic conference on organizational issues. Control of the Senate shifted to the Democratic party. The power shift annulled major portions of the powersharing agreement. After negotiations between the parties, a new organizing resolution, S.Res. 120 , was agreed to on June 29, 2001. The resolution provided for the appointment of a Democratic majority on all Senate standing committees, and also covered such issues as staffing and space assignments on Senate committees. Other issues connected to Senate organization were addressed by letters signed by relevant committee chairs and ranking members, entered into the Congressional Record of June 29, 2001. On July 10, the two Senate party conferences approved new committee assignments for certain of their members. In late July and early August, new Senate administrative and party officers were chosen. This report describes the principal features of S.Res. 8 and S.Res. 120 , as well as supplementary agreements and understandings between the parties that operated during the 107 th Congress. The report will not be updated.

Background The Andean-U.S. free trade agreement (FTA) negotiations began in May 2004, when theUnited States, Colombia, Peru, and Ecuador participated in the first round of talks, with Boliviaparticipating as an observer. After thirteen rounds of talks, however, negotiators failed to reach anagreement. Peru decided to continue negotiating alone with the United States and concluded abilateral agreement in December 2005. On January 6, 2006, President Bush notified the Congressof his intention to enter into a free trade agreement with Peru. Colombia later continued negotiationswith the United States and this agreement was concluded on February 27, 2006. Negotiations withEcuador are stalemated. This report discusses the Andean-U.S. FTA negotiation process and theevolution from the concept of a single FTA into more than one bilateral agreements. The report alsodiscusses U.S.-Andean trade relations and the major trade issues in the negotiations. Given that theprospects of a single Andean-U.S. FTA now appear low, this report will not be updated. The Negotiations Developments Prior to the Negotiations At a meeting with President George W. Bush on April 28, 2003, in Washington, ColombianPresident Alvaro Uribe sought a free-trade agreement (FTA) with the United States as a means toimprove Colombia's economy, provide employment, and offer an attractive alternative to drugactivity in his country. President Bush was reluctant to agree to free-trade talks, however, becausehe wanted to achieve broader market opening through the hemispheric Free Trade Agreement of theAmericas (FTAA). (1) Because the FTAA talks appeared to be stalled, President Bush reportedly offered at the meeting tosend then-U.S. Trade Representative (USTR) Robert Zoellick to Colombia to discuss bilateral tradebetween the two countries. At the time, some Members of Congress supported free-trade talks with Colombia. On June11, 2003, Senator Max Baucus, Ranking Member of the Senate Finance Committee, and threeDemocratic Members on the House Ways and Means Committee urged USTR Zoellick to give"significant weight" to market size in selecting countries for FTAs and included Colombia in a listof possible FTA partners. (2) On August 1, 2003, Senator Charles Grassley, Chairman of the Finance Committee, and a bipartisangroup of four other Senators on the Senate Finance Committee sent the USTR a letter asking for"serious consideration of initiating [FTA] negotiations with Colombia...." (3) The USTR traveled to Bogota and met with Colombia's President and others on August 8,2003. The purpose of his trip, according to the USTR, was "...to clearly lay out the scope and depthof such a possible negotiation, what it would involve, and to listen and learn from Colombians abouttheir goals and expectations." (4) Peru and Ecuador also expressed interest in FTA negotiations withthe United States. On November 18, 2003, USTR Zoellick formally notified Congress of the Administration'sintent to begin FTA negotiations with Colombia, Peru, Ecuador, and Bolivia. A press release thataccompanied the notification said that the Administration planned negotiations to begin the secondquarter of 2004, initially with Colombia and Peru, and that the United States would work withEcuador and Bolivia "with a view to including them in the agreement as well." (5) The USTR's letter of notification to Congress identified economic reasons for thenegotiations. It said that an FTA would help U.S. interests "...by reducing and eliminating barriersto trade and investment between the Andean countries and the United States. The FTA will alsoenable us to address impediments to trade and investment in the Andean countries...." The combinedmarkets for the four Andean countries, according to the USTR, have a gross domestic product (ona purchasing power parity basis) of $463 billion and a combined population of 93 millionpeople. (6) The letter ofnotification also stated that an Andean FTA would add momentum to the broader negotiations onan FTAA. Those negotiations were still stalled, primarily because of differences between the UnitedStates and Brazil. The notification identified political reasons for the talks as well. It said that an FTA "...willalso enhance our efforts to strengthen democracy and support for fundamental values in the region." It said that one reason for negotiating with all four countries was that a regional strategy would helpin combating narcotrafficking. (7) It also pointed out several issues of concern to the United States: protection of worker rights in Ecuador; disputes involving U.S. investors in Peru; violence againsttrade unionists and disputes with U.S. investors in Colombia; and the need to work with Bolivia andthe other Andean countries on capacity building. On March 23, 2004, the USTR issued a press release announcing that the United States andColombia would begin FTA negotiations between the two countries, and possibly other Andeancountries, on May 18-19, 2004. (8) The naming of only Colombia made it clear that there were stillconcerns with Peru and Ecuador that had not been addressed. The press release mentionedoutstanding disputes between U.S. investors and the Peruvian government and concerns aboutprotection of worker rights and investor disputes in Ecuador. According to the press release, "We[the U.S. government] hope that in the coming weeks these countries will take the follow-on stepsthat will enable us to include them at the negotiating table, along with Colombia, at the start of thenegotiations. We look forward to including Bolivia at a later stage, and are working with them toincrease their readiness." On May 3, 2004, the USTR announced that issues with respect to Peru andEcuador had been addressed, and those two countries would join with Colombia in the first roundof the negotiations. (9) Negotiation Process and Outcome During the first round of FTA negotiations in Cartagena, Colombia in May 2004, negotiatorsagreed on a schedule that, according to chief U.S. negotiator Regina Vargo, would probably involveseven rounds by early 2005 -- one round every five to seven weeks. (10) Fourteen working groupswere established during that first round. On the day that negotiations began, students, unionmembers, farmers, and others in Cartagena held a one-day protest against the negotiations becauseof feared job loss in the agriculture sector. (11) By November 2005, thirteen rounds of negotiations for the U.S.-Andean FTA were held withno successful conclusion: Cartagena (May 18-19, 2004); Atlanta (June 18, 2004); Lima, Peru (July26-30, 2004); San Juan (September 13-17, 2004); Guayaquil, Ecuador (October 25-29, 2004);Tucson (November 20-December 4, 2004); Cartegena (February 7-11, 2005); Washington (March14-18, 2005); Lima (April 18-22, 2005); Guayaquil (June 6-10, 2005); Miami (July 18-22, 2005);Cartagena (September 19-23, 2005); and Washington (November 14-22, 2005). Bolivia attended the negotiating sessions as an observer, but was not expected to be a partyto an agreement. The USTR said, "We want to maintain the door being open....but we also have torecognize realities," and noted that Bolivia's government had "'some basic stability issues.'" (12) In mid-June 2005, theBolivian president resigned amid widespread opposition to foreign participation in the naturalresource sectors and other policies, and an interim president took office. In the December 2005elections, Bolivians elected Evo Morales as their president. When Morales was inaugurated onJanuary 22, 2006, he started a five-year term as Bolivia's fourth president since August 2002. Ecuador experienced political change as well during the negotiations. On April 20, 2005, during theninth round of FTA negotiations, the Congress in Ecuador impeached Ecuador's president LucioGutierrez and replaced him with the vice president, Alfredo Palacio, a physician and politicalindependent. Palacio is the country's seventh president in nine years. The thirteenth round of negotiations in Washington was expected to be the last, butnegotiators failed to conclude the talks over disagreements in intellectual property rights andagriculture. Colombian and Ecuadorian negotiators said they pulled out because they could notaccept U.S. demands for stricter patent protections and reductions in agricultural barriers, whilePeruvian negotiators appeared to be more flexible. The Peruvian negotiators decided that they wouldcontinue talks with the United States without the other countries. The two countries arrived at anagreement in the first week of December 2005. (13) On December 7, 2005, U.S. Trade Representative Rob Portman and Peru's Minister ofForeign Trade and Tourism, Alfredo Ferrero Diez Canesco, announced a successful conclusion tothe U.S.-Peru free trade agreement negotiations. The agreement would eliminate tariffs and otherbarriers to goods and services. (14) Ambassador Portman stated that "An agreement with Peru is akey building block in our strategy to advance free trade within our hemisphere, which we hope tolater bring in the other Andean countries including Colombia and Ecuador." (15) Afterwards, Colombia andEcuador both announced that they would also like to see a successful conclusion to theirnegotiations. On February 27, 2006, U.S. Ambassador Portman and Colombia's Minister of Trade,Industry, and Tourism, Jorge Humberto Botero, announced that the United States and Colombia hadconcluded their work on a free trade agreement. Ambassador Portman announced that the agreementis an essential component of the U.S. regional trade strategy and that it would "...generate exportopportunities for U.S. agriculture, industry, and service providers and help create jobs in the UnitedStates". He also stated that the agreement would "...help foster economic development in Colombia,and contribute to efforts to counter narco-terrorism, which threatens democracy and regionalstability." (16) The government of Ecuador has stated that it too would like to continue negotiations withthe United States and arrive at an agreement, but these talks have been postponed several times. Andean Perspective The Andean governments are pursuing FTAs with the United States to assure access to theimmense U.S. market. They have preferential access now under unilateral U.S. programs (seefollowing section), but that access is scheduled to expire at the end of December 2006. An FTAwould lock in those preferences and additional duty-free treatment. The Andean governments alsowant to attract foreign investment and see an FTA with the United States as a way to establish amore secure economic environment and increase foreign investment. Within the Andean countries, however, there is broad grass-roots opposition to free tradewith the United States. Opponents argue that any economic benefits from increased trade under anFTA will be realized by only a small segment of the economy, worsening the separation of theclasses. They also argue that a large part of the Andean population is poor farmers, who areespecially vulnerable and cannot compete against increased agricultural imports from the UnitedStates, which some Andean officials claim are heavily subsidized. The Development Group forAlternative Policies states that one of the few remaining mechanisms protecting family farmers inthe Andean region is the Andean Community's "price band" system which, they argue, has servedto cushion farmers from the vagaries of international commodity prices. (17) A further argument is thatan FTA would mean reduced revenues for the Andean governments, and some opponents state thatrevenue losses will have to be replaced with regressive domestic taxes. (18) The three Andean countries have faced considerable opposition in their countries over a tradeagreement with the United States. News accounts reported that during the Cartagena round inSeptember 2005, an estimated 7,000 anti-free trade activists gathered in Cartagena and Bogota, whileprotesters in Peru erected roadblocks. (19) These protests may have influenced the governments to delayentry into an agreement, but after the successful completion of Peru's agreement with the UnitedStates, there likely was more pressure for Colombia and Ecuador to continue negotiations. Ecuador'schief trade negotiator, Manuel Chiriboga, stated in January 2006 that if Colombia concluded anagreement, Ecuador "cannot fail to conclude" due to the risk that Ecuador would be left out of theagreement to be voted on in the U.S. Congress. (20) Perspective of U.S. Industry and Other Groups In the United States, much of the business community supported an Andean FTA. TheNational Association of Manufacturers (NAM), for example, states in its trade agenda that one ofits key objectives is the congressional approval of the Andean FTA and other FTAs now beingnegotiated. The NAM has written comments on its position in various aspects of the negotiationssome of which include the removal of tariff and non-tariff barriers, transparency and accountabilityin technical regulations, enforcement of national customs laws, protection of U.S. investment abroad,and strengthening and enforcement of intellectual property rights laws. (21) NAM's trade agendastates, "The NAM supports FTAs because U.S. manufacturers face much higher barriers in foreignmarkets than foreign producers face here." A number of other groups, however, oppose an Andean FTA. A coalition of 51 labor,religious, and environmental groups wrote to the USTR on September 9, 2004, urging him tosuspend the negotiations. They argued that the negotiations have been conducted in secret, there hasbeen no meaningful dialogue with the public, and the Andean negotiations are modeled on failedtrade agreements. (22) Among the signatories were the AFL-CIO, American Friends Service Committee, and PublicCitizen. U.S.-Andean Trade The United States extends special duty treatment to imports from Bolivia, Colombia,Ecuador, and Peru under a regional trade preference program. This program accounted for over halfof all U.S. imports from the four countries in 2005. The program began under the Andean Trade Preference Act (ATPA; title II of P.L. 102-182 ),enacted on December 4, 1991. ATPA authorized the President to grant duty-free treatment to certainproducts from the four Andean countries that met domestic content and other requirements. It wasintended to promote economic growth in the Andean region and to encourage a shift away fromdependence on illegal drugs by supporting legitimate economic activities. ATPA was originallyauthorized for 10 years and lapsed on December 4, 2001. After ATPA had lapsed for months, the Andean Trade Promotion and Drug Eradication Act(ATPDEA; title XXXI of P.L. 107-210 ), was enacted on August 6, 2002. ATPDEA reauthorizedthe ATPA preference program and expanded trade preferences to include additional products thatwere excluded under ATPA. The additional products under ATPDEA included petroleum andpetroleum products, certain footwear, tuna in flexible containers, and certain watches and leatherproducts. ATPDEA also authorized the President to grant duty-free treatment to U.S. imports ofcertain apparel articles, if the articles met domestic content rules. Duty-free benefits under ATPDEAend on December 31, 2006. In 2005, a considerable share (46%) of all U.S. imports from the four Andean countriesentered duty-free under ATPDEA, and a smaller share (11%) entered duty-free under ATPA. (23) A very small share (2%)entered duty-free under the U.S. Generalized System of Preferences, which applies to mostdeveloping countries throughout the world. Of the remaining 41% of imports, most entered duty-freeunder normal trade relations, which applies on a nondiscriminatory basis to almost all U.S. tradingpartners. Only 7% of the value of U.S. imports from the four countries was dutiable in 2005. Thus,compared to the status quo, only a relatively small share of U.S. imports would become duty-freeunder an FTA. That small share, however, might include products that are relativelyimport-sensitive in the United States or disproportionately important to the Andean countries. In 2005, the United States imported $20.1 billion, or 1% of total U.S. imports, from the fourcountries. The same year, the United States exported $9.9 billion, or 1% of all U.S. exports, to thefour countries. Colombia accounted for 44% of those U.S. imports and 55% of the U.S. exports (see Table 1 ). Peru and Ecuador split nearly all of the other half of imports and exports, and Boliviaaccounted for a very small share. The leading U.S. import from the region in 2005 (35% of imports) was petroleum oil,principally crude oil from Ecuador and Colombia. Other leading U.S. imports were jewelry, gold,coal, coffee, articles of copper, and cut flowers. Leading U.S. exports to the region were petroleumproducts, mining equipment, broadcasting equipment, and data processing machines. Table 1. U.S. Trade with the ATPA Countries,2005 Source: USITC Interactive Tariff and Trade DataWeb at http://dataweb.usitc.gov . Data are forU.S. imports for consumption (Customs value) and domestic exports (Fas value). Regional sharesmay not add to 100% due to rounding. Selected Issues in the Negotiations The following highlights some of the more difficult issues in the Andean-U.S. FTAnegotiations. (24) Inaddition to the following, the negotiations also covered other issues such as services trade, electroniccommerce, and government procurement. Trade negotiators identified the difficulties in agricultureand intellectual property rights as the main obstacles in reaching agreement. Andean negotiatorsstated at the time that the United States needed to be more flexible in these areas. U.S. trade officialssaid that the United States was very interested in reaching agreement in these areas, but that it hadalso been clear in laying out its expectations before the negotiations began. (25) Agriculture U.S. negotiators refused to talk about rules for agricultural subsidies, saying that subsidiesshould be dealt with in the on-going multilateral trade negotiations in the World Trade Organization. Nevertheless, an important goal for the United States in the FTA talks was the elimination of apractice called the "price-band mechanism." Under this mechanism, a fluctuating tariff is imposedon an import for the purpose of keeping the import's price within a specific range. The bandaddresses changes in world commodity prices. Colombia and Ecuador have these variable dutieson over 150 items, including corn, rice, soybeans, and powdered milk. (26) Andean negotiators saidthat the price-band mechanism is necessary to protect their farmers, especially small farmers, againstsubsidized imports. A spokesperson for small farmers in Colombia said that there is a large ruralpopulation and high unemployment in Colombia, and without protected alternative crops, the peoplewill produce drugs. (27) Some specific products were especially important to the trading partners. For example,access to the U.S. market is critical for Andean producers of cut flowers (Colombia and Ecuador)and asparagus (Peru). These products, however, have the largest potential displacement effects onU.S. producers under ATPDEA (28) , so they are worrisome to U.S. growers. Also, U.S. sugarproducers are concerned about increased imports from the Andean countries. Conversely, Andeanfarmers see some U.S. products, such as corn and chicken parts, as threatening. Intellectual Property Rights (IPR) A major area of disagreement was the so-called "data exclusivity." This term refers to anadditional period of patent protection that is given to test data, especially data on pharmaceuticalsand agricultural chemicals. The United States wanted rules on data exclusivity in an FTA to protectthe results of research by pharmaceutical companies for five years. (29) In related action, thePharmaceutical Research and Manufacturers of America (PhRMA) petitioned the U.S. governmentto withdraw ATPDEA benefits for Peru and Ecuador because they have no data exclusivitylaws. (30) Oxfam, adevelopment and relief organization, argued, "Guaranteeing exclusive rights over pharmaceuticaldata will result in delays and limit generic competition in cases where the patent has expired or acompulsory license has been granted." (31) The Andean countries opposed rules on data exclusivity, arguingthat the additional period keeps generic pharmaceuticals from entering the market and thus hurtspoor people. Another IPR issue was the so-called "bio-piracy." Andean negotiators wanted IPR provisionsto go beyond those contained in the WTO. They wanted protection against the use of "traditionalknowledge" and "genetic resources" without fair compensation. The United States wanted "seconduse" protection, where a product gets additional protection if it is found to serve a use other than theoriginal one under the patent. It also wanted protection against parallel imports, which are productslegitimately made in one foreign country, but imported into another country without the approval ofthe IPR holder. The Andean countries opposed these U.S. positions. Worker Protections and Human Rights Some unions and labor rights groups protested against trade negotiations with Ecuador andColombia, because they claimed that these countries have unacceptable records on worker rights andpermit violence against trade unionists. For example, an official with the InternationalConfederation of Free Trade Unionists (ICFTU) criticized Colombia's president for negotiating withparamilitary forces, who are the killers of trade unionists according to the ICFTU official, and saidthat the more a union protests the president's economic policy, the more the union is persecuted. (32) The Colombiangovernment responded that through several programs it instituted, it "...clearly demonstrated itscommitment to the protection of human rights and has given special priority to the protection ofunion members." (33) TheU.S. State Department country report on human rights for Colombia identifies many legal rights forunions, but recognizes problems with protecting those rights. (34) For example, the reportstates that in Colombia, the Constitution provides a right for most workers to organize unions, butin practice, "...violence against union members and anti-union discrimination were obstacles tojoining unions and engaging in trade union activities...." Another point of controversy was Ecuador's record on human rights. On February 1, 2005,38 House Members (37 Democrats, 1 Independent) wrote to the foreign trade minister of Ecuador,expressing concern with "...serious workers' rights violations in Ecuador and Ecuador's failure to liveup to commitments made to the U.S. government in October 2002, as part of a review of Ecuador'sbenefits under the [ATPDEA]." (35) They said that they would recommend the gradual withdrawalof Ecuador's ATPDEA benefits and that Ecuador's continued failure to observe the ATPDEAcommitments "...casts doubt on whether Ecuador will be able to follow through with obligations..."under an FTA. (36) Textiles A small but significant share of U.S. apparel imports from Andean countries still pay fullduty under ATPDEA. The Andean region is not considered a major supplier, but free trade couldcause some increase in imports. In addition, the rule of origin for textiles and apparel was animportant issue in the negotiations. Investor/State Disputes One of the most important issues in the negotiations was the unresolved disputes involvingU.S. investments in Andean countries. On October 6, 2004, the House Committee on InternationalRelations, Subcommittee on the Western Hemisphere, held a hearing on U.S. investment disputesin Peru and Ecuador. At the hearing, E. Anthony Wayne, Assistant Secretary of State for Economicand Business Affairs, testified, "Nearly every U.S. company doing business in Ecuador has facedproblems with Ecuadorian government entities, from regulatory bodies to the courts and the customsagency." He said that the situation in Peru was "...considerably better," although there still wereproblems. He stated that both countries had been cautioned that, "...left unresolved, these disputesare a stumbling block to achieving an FTA." A few months later in October 2004, Deputy USTRPeter Allgeier warned that Peru and Ecuador could be dropped from the FTA, if outstanding investordisputes were seen as endangering congressional approval of an FTA with Colombia. (37) On April 13, 2005, the House Committee on International Relations, Subcommittee on theWestern Hemisphere, held a hearing on U.S. trade agreements with Latin America. At the hearing,John Murphy, Vice President for Western Hemisphere Affairs of the U.S. Chamber of Commerce,said that the situation regarding investment disputes with Peru and Ecuador was difficult and thatpersistent disputes could "...stand as a substantial obstacle that could block the participation of thesecountries [in an FTA]." These disputes were discussed at the negotiations. Since the beginning of2005, progress was made in resolving disputes with U.S. companies. Visas Andean countries, especially Colombia, wanted to have visa and immigration issues in thetalks. They said that heightened U.S. security made it hard for their business representatives to enterthe United States. U.S. negotiators insisted that immigration issues were not negotiable. Environment An important environmental issue concerned investment provisions. In a letter datedSeptember 13, 2004, a number of environmental groups, including Friends of the Earth, NaturalResources Defense Council, and Sierra Club, expressed concern about the possible inclusion in anAndean FTA of an investment chapter similar to Chapter 11 of the North American Free-TradeAgreement. (38) Thatchapter allowed private investors from one signatory country to seek binding arbitration against thegovernment of another signatory. Such provisions, environmental groups argued in their letter, couldallow "... foreign companies to completely bypass domestic courts to challenge public interestsafeguards." On the other hand, U.S. negotiators sought such provisions in trade agreements, sinceU.S. companies wanted such protections for their foreign investments. Prospects The last round of negotiations in which the United States and the three Andean countries allparticipated was held in Washington on November 14-22, 2005. Subsequently, Peru and Colombiaconcluded bilateral FTAs with the United States and talks with Ecuador have been postponed severaltimes due to a number of differences. The main outstanding issues are related to agriculture. Ecuadorian President Alfredo Palacio has said that he would like to see a trade agreement with theUnited States but would not sign a deal that is unfair to Ecuador. He is facing considerable pressurefrom indigenous groups not to enter into an agreement. Thousands of Ecuadorean Indians have beenprotesting the free trade talks saying that they cannot compete with farm products from the UnitedStates. They believe a trade agreement would put them at a disadvantage with U.S. farmers anddisrupt their ancestral culture. (39) There has been some speculation that the United States will not renew the ATPDEA in theabsence of a PTPA. In September 2005, the House Ways and Means Committee released a reporton a bipartisan congressional trade mission to Colombia, Ecuador, and Peru. (40) The purpose of the tripwas to focus on the ongoing negotiations of the U.S.-Andean free trade agreement and to discussinvestment and security issues in the region. The report states that the current unilateral tradepreferences received by the Andean countries set to expire in December 2006 may not be renewed. It indicates that a "reciprocal, mutually beneficial arrangement must take the place of the unilateralaccess." (41) A senior US trade official recently said that the U.S. trade agreements with Colombia andPeru are likely to be treated as separate agreements by the Congress, thereby narrowing thepossibility of a stand-alone Andean-U.S. FTA. (42) Under current deadlines in the Trade Promotion Authority Act(TPA), expedited legislative procedures apply to implementing bills for trade agreements, if, amongother requirements, the agreements are entered into by June 30, 2007. Given the TPA notificationprocedures, the free trade agreements with Colombia and Peru could be voted on by the Congresssometime this summer. It is not known if or when a U.S.-Ecuador FTA might be reached. The narrow passage of CAFTA-DR ( P.L. 109-53 ) had been viewed as an indicator that anyU.S.-Andean FTA might also face considerable opposition. How the Bush Administration's decisionto negotiate and submit separate FTAs with Peru and Colombia may affect this calculation remainsuncertain. (43)

In November 2003, the Administration notified Congress that it intended to beginnegotiations on a free-trade agreement (FTA) with four Andean countries - Colombia, Peru,Ecuador, and Bolivia. The notification said that an FTA would reduce and eliminate foreign barriersto trade and investment and would support democracy and fight drug activity in the Andean region. The Andean governments wanted to ensure access to the U.S. market, especially since their currenttrade preferences will terminate at the end of 2006. In the United States, the business communityindicated strong support for the trade agreement, with labor opposing it as the case for many FTAs,and the agriculture community was split. The Andean-U.S. FTA negotiations began in May 2004, when the United States, Colombia,Peru, and Ecuador participated in the first round of talks. Bolivia participated as an observer. Afterthirteen rounds of talks, however, negotiators failed to reach an agreement. After the last set of talks,Peru decided to continue negotiating, without Colombia or Ecuador, and concluded a bilateralagreement with the United States in December 2005. Colombia later continued negotiations withthe United States and this agreement was successfully concluded on February 27, 2006. Negotiationswith Ecuador are stalemated. A senior US trade official recently stated that the Peru and ColombianFTAs are likely to be submitted to Congress as separate agreements, thereby constraining thepossibility of an Andean-U.S. FTA. The United States currently extends duty-free treatment to imports from the four Andeancountries under a regional preference program. The Andean Trade Preference Act (ATPA)authorized the President to grant duty-free treatment to certain products, and the Andean TradePromotion and Drug Eradication Act (ATPDEA) reauthorized the ATPA program and addedproducts that had been previously excluded. Over half of all U.S. imports in 2005 from the Andeancountries entered under these preferences. In 2005, the United States imported $20.1 billion from the four Andean countries andexported $9.9 billion. Colombia accounted for about half of U.S. trade with the region. Peru andEcuador almost evenly split the other half, and Bolivia represented a very small share. The leadingU.S. import from the region in 2005 was crude petroleum oil, which accounted for 35% of imports. Leading U.S. exports to the region were petroleum products, mining equipment, and broadcastingequipment. There were several important issues in the FTA negotiations. The trade negotiators statedthat the main obstacles to concluding an overall agreement were in agriculture and intellectualproperty rights. Another major concern was the issue of labor standards. Under the notificationprocedures founded in the Trade Promotion Authority Act, the trade agreements with Peru andColombia could be voted on by the Congress sometime this summer. The narrow passage ofCAFTA-DR had been viewed as an indicator that any U.S.-Andean FTA might also faceconsiderable opposition. How the Bush Administration's decision to negotiate and submit separateFTAs with Peru and Colombia might affect this calculation remains uncertain. This report will notbe updated.

Introduction In January 2004, federal white-collar employees received a 1.5% annual pay adjustment anda 0.5% locality-based comparability payment under Executive Order 13322, issued by PresidentGeorge Bush on December 30, 2003. (1) A larger payadjustment of 4.1% for 2004 was included inthe conference agreement for the Consolidated Appropriations Act for FY2004 ( H.R. 2673 ). (2) H.R. 2989 , the Departments ofTransportation and Treasury and IndependentAgencies Appropriations Bill, 2004, as passed by the House of Representatives and the Senate in thefirst session of the 108th Congress, provided a 4.1% pay adjustment to federal civilian employees. As the first session was drawing to a close, H.R. 2989 was incorporated in H.R.2673. The House of Representatives agreed to the conference report accompanying H.R.2673 on December 8, 2003, and the Senate agreed to the conference report on a 65-28 (No.3) vote on January 22, 2004. President Bush signed H.R. 2673 into law on January 23,2004, and it became P.L. 108-199 . The law provides an additional 2.1% pay adjustment to federalcivilian employees. The President issued Executive Order 13332 on March 3, 2004, to provide theadditional pay adjustment, which was allocated as an average 1.2% annual and 0.9% locality. (3) OPMpublished revised salary tables for 2004 on its website on March 4, 2004; these are available on theInternet at http://www.opm.gov . Table 1 shows the recommended locality payments, theauthorized locality payments, and the net annual and locality pay increases. Federal white-collar employees are to receive an annual pay adjustment and a locality-based comparability payment, effective in January of each year, under Section 529 of P.L. 101-509 , theFederal Employees Pay Comparability Act (FEPCA) of 1990. (4) Although the federal pay adjustmentsare sometimes referred to as cost-of-living adjustments, neither the annual adjustment nor the localitypayment is based on measures of the cost of living. FEPCA has never been implemented asoriginally enacted. The annual pay adjustment was not made in 1994, and in 1995, 1996, and 1998,reduced amounts of the annual adjustment were provided. For 1995 through 2004, reduced amountsof the locality payments were provided. Federal white-collar employees received a combined annualand locality pay adjustment of 4.1% in January 2003. (5) The nationwide average net pay increase inJanuary 2003, if the Employment Cost Index (ECI) and locality-based comparability payments hadbeen granted as specified by FEPCA, would have been 18.56%. In 2004, federal white-collaremployees also received a 4.1% combined annual and locality pay adjustment. The nationwideaverage net pay increase in January 2004, if the ECI and locality-based comparability payments hadbeen granted as specified by FEPCA, would have been 15.15%. This report discusses the January 2004 annual adjustment and locality payments. It does not cover salary adjustments for federal officials, federal judges, or Members of Congress. (6) 2004 Pay Adjustments Annual Pay Adjustment Federal employees under the General Schedule (GS), Foreign Service Schedule, and Veterans Health Administration Schedule receive an annual pay adjustment. The President may annuallyadjust salaries of administrative law judges. Individuals in senior-level (SL) and scientific andprofessional (ST) positions may receive the annual adjustment at the discretion of agency heads. (7) Annual adjustments for contract appeals board members depend on whether Executive Schedule payis adjusted. The annual pay adjustment is based on the Employment Cost Index (ECI), which measures change in private sector wages and salaries. Basic pay rates are to be increased by an amount thatis 0.5 percentage points less than the percentage by which the ECI, for the quarter ending September30 of the year before the preceding calendar year, exceeds the ECI for that same quarter of thesecond year (if at all). The ECI shows that the annual across-the-board pay adjustment would be2.7% in January 2004, reflecting the September 2001 to September 2002 change in private sectorwages and salaries of 3.2%, minus 0.5%. (8) The payadjustment is effective as of the first day of thefirst applicable pay period beginning on or after January 1 of each calendar year. FEPCA authorizes the President to issue an alternative plan, calling for a different percentage than the ECI requires, in the event of a national emergency or of serious economic conditionsaffecting the general welfare. The alternative plan must be submitted to Congress before theSeptember 1 preceding the scheduled effective date. (9) On August 27, 2003, President Bush issuedan alternative plan to provide a 1.5% annual pay adjustment in January 2004. (10) Executive Order13322, issued by the President on December 30, 2003, implemented the alternative plan. (11) Locality-Based Comparability Payments GS employees receive the locality-based comparability payments; the Pay Agent (12) may alsoextend those payments to employees in the Foreign Service and in senior-level, scientific andprofessional, administrative law judge, administrative appeals judge, and contract appeals boardmember positions. (13) These employees will receivea locality pay adjustment in 2004. (14) The PayAgent determines the applicable pay cap level for certain non-General Schedule employees to whomlocality pay is extended. (15) OPM published finalregulations in December 2001 to clarify and redefinethe limitations. (16) Blue-collar workers under theFederal Wage System (FWS) receive a prevailingrate adjustment that is generally capped at the average percentage pay adjustment received by federalwhite-collar employees. (17) Notwithstanding thecap, for 2004 the blue-collar pay adjustment in aparticular location will be no less than the increase received by GS employees in that location. Blue-collar workers in Alaska, Hawaii, and other non-foreign areas will receive a pay adjustmentthat is no less than the increase received by GS employees in the RUS pay area. (18) Special rateemployees receive either the special rate or the locality payment, whichever is higher. Lawenforcement officers receiving special rates under Section 403 of FEPCA get both special rates andlocality pay. (19) Federal employees in Alaska andHawaii, and outside the continental United States,receive a cost-of-living (COLA) allowance rather than locality pay. The locality-based comparability payments procedure was established by FEPCA. It provides that payments are to be made within each locality determined to have a non-federal/federal paydisparity greater than 5%. When uniformly applied to GS employees within a locality, theadjustment is intended to make their pay rates substantially equal, in the aggregate, to those ofnon-federal workers for the same levels of work in the same locality. FEPCA provides the President with the authority to fix an alternative level of locality-based comparability payments if, because of national emergency or serious economic conditions affectingthe general welfare, he considers the level that would otherwise be payable to be inappropriate. Atleast one month before those comparability payments would be payable (by November 30, 2003),he would have to prepare and transmit to Congress a report describing the alternative level ofpayments he intended to provide, including the reasons why that alternative level would benecessary. (20) President Bush issued an alternativeplan on August 27, 2003, to provide a 0.5%locality pay adjustment in January 2004. (21) Executive Order 13322, issued by the President onDecember 30, 2003, implemented the alternative plan. (22) Bureau of Labor Statistics (BLS) Surveys. Under the law, the BLS conducts surveys that document non-federal rates of pay in each pay area. Currently, there are 32 pay areas nationwide. Until October 1996, the surveys were conducted underthe Occupational Compensation Survey Program (OCSP), which had been approved by the FederalSalary Council and the Pay Agent. Since then, the surveys had been conducted under the NationalCompensation Survey (NCS) program, which was not approved for use with the January 2000,January 2001, January 2002, and January 2003 locality payments. For the January 2004 localitypayments, a phase-in of NCS survey data was approved. The survey results are submitted to OPM,which serves as the staff to the Federal Salary Council and the Pay Agent. OPM documents federalrates of pay in each of the pay areas and compares non-federal and GS salaries, by grade, for eachpay area. The average salaries at each grade, both federal and non-federal, are then aggregated andcompared to determine an overall average percentage pay gap for each area. By law, the disparitybetween non-federal and federal salaries is to be reduced to 5%. Therefore, the overall averagepercentage pay gap for each pay area is adjusted to this level each year by OPM. This adjusted gapis called the target gap. FEPCA also stipulates that a certain percentage of the target gap between GS average salaries and non-federal average salaries in each pay area is to be closed each year. Twenty percent of thegap was closed in 1994, the first year of locality pay, as authorized by FEPCA. An additional 10%of the gap was to be closed each year thereafter, meaning that 30% of the gap was to be closed in1995, 40% in 1996, 50% in 1997, 60% in 1998, 70% in 1999, 80% in 2000, and 90% in 2001. Ineach of these years, the locality pay increase has been implemented at a much lower percentage,reducing the gap slowly; 23.5% of the gap was closed in 1995, 25.9% in 1996, 28.3% in 1997,29.2% in 1998, 31% in 1999, 33.5% in 2000, 38.1% in 2001, 42.3% in 2002, and 44% in 2003. These percentages represent the gap as recalculated after each adjustment. By January 2002, andcontinuing each year thereafter, FEPCA specified that amounts payable could not be less than thefull amount necessary to reduce the pay disparity of the target gap to 5%. This percentage is appliedto the target gap in each pay area to determine the locality rates recommended by the Pay Agent tothe President, after receiving advice from the Federal Salary Council. (23) The pay gaps on which the locality payments are based are 22 months old by the effective date of the adjustment; thus, March 2002 gaps determine the January 2004 locality payments. Due to thefact that the NCS surveys were not approved for use in determining the January 2000, January 2001,January 2002, and January 2003 locality payments, and that the NCS surveys are being phased in forthe January 2004 locality payments, the gaps were determined as follows. The March 2002 gapswere determined by using the most recent OCSP survey data and NCS survey data, which rangedfrom December 2000 through October 2001 for each pay area. Since the BLS had discontinued theOCSP program in October 1996, the OCSP pay survey data for some of the largest pay areas wereat least seven years old. Specifically, the New York data were as of July 1995; the Washington, DC,data were as of October 1995; and the Los Angeles data were as of November 1995. Survey datafor each of the other 28 pay areas varied from January 1996 to November 1996. The data for the"Rest of the United States" pay area were as of November 1995 and aged to November 1996. In itsreport to the Pay Agent on the 2004 locality payments, the Federal Salary Council explained howthe pay gaps were determined, stating that "To ensure that local pay disparities are measured as ofone common date, it is necessary to 'age' the BLS survey data [using the ECI] to a commonreference date [March 2002] before comparing it to GS pay data of the same date." (24) Report of the Federal Salary Council. The council reported the following results from the application of this methodology. As of March 2002,the overall gap between GS average salaries (excluding existing locality payments, special rates, andcertain other payments) and non-federal average salaries was 32.02%. The amount needed to reducethis disparity to 5%, as mandated by FEPCA, averaged 25.73% for 2004. In order to meet the target for closing the pay gap, the council recommended locality pay raises ranging from 19.45% in the "Rest of the United States" (RUS) pay area to 47.64% in the SanFrancisco pay area. The payment recommended for the Washington, DC, pay area was 28.78%. (25) Because the new locality rate replaces the existing locality rate, the change in locality rates is derivedby comparing 2003 locality payments with those recommended for 2004. This comparison resultedin recommended increases in locality rates from 2003 to 2004 of 11.90% in the RUS pay area to25.23% in the San Francisco pay area, and 17.31% in the Washington, DC, pay area. Thenationwide average net pay increase, if the ECI and locality-based comparability payments weregranted as required by law, would have been 15.15% in 2004. As in previous years, the council recommended that areas with pay gaps below the pay gap in RUS receive the same adjustment as RUS. Under the methodology which has been used sincelocality pay was first implemented in 1994, areas with low publishability (did not meet BLSstandards for publishing data) and pay gaps that were two-tenths of a percentage point (0.2%) ormore below RUS for three surveys were to be dropped as surveyed discrete pay areas, and theresources used to conduct these surveys were to be redirected to new survey locations. The council,as it has done the last four years, recommended that these pay areas again be included with RUS in2004. Since not all of the improvements have been completed in NCS and because the list of cities below RUS varies depending on whether we use OCSP or NCSdata, we recommend that none of these locations [Indianapolis, Kansas City, Orlando, St. Louis] bedropped as separate pay areas at this time. The Council plans to consider whether some of theseareas should be dropped and the resources used to increase the sample in other locations or used toadd a few new locality pay surveys. (26) Basic criteria used to determine whether a county or installation would be included as part of a pay area for purposes of applying locality pay were established by the council in 1993 and remainunchanged. In its report, the council notes that "In 2000 and 2001, the Council concluded that itwould recommend no changes in locality pay area definitions until it had an opportunity to reviewnew commuting pattern and population data from the 2000 census and the new metropolitan areadefinitions to be produced by the Census Bureau and OMB in 2003." (27) Other criteria which wouldremain unchanged are that a county be contiguous to a pay area, contain at least 2,000 GSemployees, and demonstrate some economic linkage with the pay area. The council recommendedan exception, however, in the case of Barnstable County, MA, which was seeking to become an areaof application to the Boston pay area. According to the council, Barnstable County is the only county on the eastern seaboard from southern Maine to Delaware that is not in a separate locality pay area. It is also cut off from the remainderof the country by the Boston locality pay area and passes all our criteria except that it does not have2,000 GS employees. While we do not believe this is the time to make wholesale changes in localityarea boundaries, the Council concluded that something should be done for Barnstable County. Therefore, the Council as a whole voted at its October 1 meeting to recommend that the Pay Agentmake an exception and include Barnstable County, MA, in the Boston locality pay area in 2004 inorder to remedy what we consider to be an egregious situation. The Vice Chair of the Councildissented from this recommendation. (28) Since 1994, St. Mary's County, MD, has been included in the Washington, DC-Baltimore, MD, pay area. It continues to meet the county criteria, and the council recommended that it be includedwith this pay area for 2004. Santa Barbara County, CA, has been included in the Los Angeles payarea since 1994, and New London, CT, has been included in the Hartford, CT, pay area since 1998. Employment in New London, CT, and Santa Barbara County, CA, again has fallen below thethreshold of 2,000 employees that one criterion requires. The council recommended in 1997,however, "that once an area of application has been approved, it should not be removed for theduration of FEPCA's nine-year phase-in for the locality pay program (1994 through 2002)." (29) Therefore, the council recommended that New London and Santa Barbara continue to be areas ofapplication for their respective pay areas for 2004. The council noted that "new census data willsoon be available that will affect locality pay area definitions in the future" and "the Office ofManagement and Budget (OMB) and the Census Bureau are revamping how metropolitan areas aredefined." According to the council, it "plan[s] to conduct a major review of all aspects of the localitypay program [in 2003] when this new information is available. (30) (See the discussion under"Definition of Metropolitan Areas" below.) Monterey County, CA, which became an area ofapplication to the San Francisco pay area in 2001, meets the criteria and is recommended to beincluded with this pay area in 2004. The State of Rhode Island was designated as an area of application to the Boston pay area beginning in 2001. Because counties in Rhode Island are small in comparison to counties in otherstates, Rhode Island cannot meet the requirement that a county contain at least 2,000 GS employees. Therefore, the council recommended that "Full State" criteria be adopted in this case. Under therecommended criteria, "States smaller than 115 percent of the average county size in square milesin the lower 48 states and Washington, DC, are treated as a single county for applying the countycriteria." Thus, Rhode Island is "considered as a single county." (31) The state meets the criteria andis recommended for continued inclusion with the Boston pay area in 2004. As for the criteria for an installation, the portion of a federal facility that crosses pay area boundaries, and that is not in the pay area, must have at least 1,000 GS employees; the duty station(s)of the majority of GS employees must be within 10 miles of the prime-critical survey boundary area;and a significant number of the facility's employees must be commuting from the pay area. Since1994, a portion of Edwards Air Force Base has been included in the Los Angeles pay area. The baseno longer meets the employment criteria, but the council recommended that it continue to beincluded with the Los Angeles pay area in 2004 for the same reasons that New London and SantaBarbara were recommended to continue as areas of application. Methodology. (32) The council, in its report to the PayAgent on the 2001 locality payments, recommended that five improvements be made in the BLSNational Compensation Survey program. The council's memorandum to the Pay Agent on the 2004locality payments provided a progress report. Listed according to their levels of priority, theimprovements and progress to date are as follow. Use three-factors, rather than nine, to assign the correct federal grade level to the non-federal jobs surveyed, and provide grade level guides for occupational families. "OPM hascompleted development of a four-factor evaluation system for use in the surveys, and BLS hassuccessfully used the new approach in field tests. BLS will begin to phase the new approach intoBLS surveys in December 2003." Develop a model to estimate missing data. "BLS has designed and implemented an econometric model to estimate salaries for jobs not randomly selected in thesurveys." Improve the matching of federal survey jobs with non-federal survey jobs, and provide subcategories for occupations which are "not elsewhere classified." "OPM formed aninteragency working group that developed a crosswalk between Federal job classifications and thenew Standard Occupational Classification System. BLS used the new crosswalk and March 2001GS employment weights for data delivered this year .... We anticipate that additional improvementscould be made in the crosswalk and that OPM will provide updated GS employment information toBLS each year." For supervisory occupations, grade the highest level of work supervised. Adjust the grade level based on the level of supervision, instead of grading the supervisory job itself."BLS and Pay Agent staffs have designed a new approach based on grading the highest level of worksupervised and adding one, two, or three grades based on the level of supervision. Final tests of thenew approach are to be conducted this fall, and BLS hopes to be ready to implement the methodsin surveys conducted in December 2003." Develop criteria to identify and exclude jobs that would be classified above GS-15 in government. "BLS has developed methods for identifying and excluding non-Federal jobsthat would be classified above GS-15. These data were excluded from the data delivered to the PayAgent this year." (33) The council's report on the 2004 locality payments stated that while it "recommended the phase-in of NCS data beginning with locality payments in 2004, [it] continue[s] to have concernsabout the reliability of data produced by the NCS." The council recommended that [A]ny further implementation of (or additional weight given to) the NCS data must be expressly conditioned on action by BLS to implement the remainingtwo improvements identified by the Council. [A]dditional resources should be committed by BLS to increase the sample size of its surveys, particularly in those localities where the NCS data indicatea pay gap that is more than 5 percentage points below the gap measured using OCSP data, or, at aminimum, conducting "augmentation surveys" for areas under-represented in BLSsamples. (34) Definition of Metropolitan Areas. The component parts of the 32 locality pay areas are determined by using the OMB definitions of metropolitan areas.Whenever OMB revised the definitions, the locality pay areas changed automatically. On April 22,2003, OPM published final regulations which provide that locality pay areas no longer changeautomatically when the definitions of metropolitan areas change. (35) On June 6, 2003, OMB publishedrevised definitions for Metropolitan Statistical Areas (MSAs) based on new criteria and 2000 censusdata. (36) At the time, OPM advised that the newdefinitions would have no immediate or automatic impact on the GeneralSchedule (GS) locality pay program. As a result of previous recommendations made by the FederalSalary Council, ... OPM recently modified the GS locality pay regulations to maintain themetropolitan area portion of each locality pay area consistent with the former OMB statistical areadefinitions. This will provide the Federal Salary Council and the President's Pay Agent ... anopportunity to review the new statistical area definitions before making recommendations anddecisions later [in 2003]. (37) Some of the major changes that the council and the Pay Agent considered in autumn 2003 were these: The new statistical area definitions are different than the ones that have been used in [the] locality pay program since it was created in the early 1990s. The concept of 'Consolidated Metropolitan Statistical Areas' which is used to define 18 locality payareas, is no longer used. New concepts -- 'Micropolitan Statistical Areas' and 'Combined StatisticalAreas [CSAs] -- have been introduced. Population density is no longer a criterion for evaluatingoutlying counties and the threshold levels of commuting in or out of a core area have beenchanged. (38) A Federal Salary Council working group reviewed the new OMB definitions, commuting patterns, and other changes, and reports of the working group were discussed at two council meetingsthat were open to the public. At the first meeting conducted on September 3, 2003, the workinggroup presented its initial findings. According to the group's report, it "recommends that theCouncil seriously consider using the new MSA definitions in some fashion for the locality payprogram" and "asks that no decisions be made until the next public meeting because additional studyis needed." (39) The report stated that, "If the FederalSalary Council were to recommend that the newCSAs and MSAs be used for locality pay areas without any modifications, excluding the locality payareas in New England (Boston, Hartford, and part of New York), a total of 83 additional countieswould be added to existing metropolitan locality pay areas, and 10 counties currently in separatemetropolitan locality pay areas would be excluded (13 counties including pay areas in NewEngland)." (40) At a second council meeting conducted on October 7, 2003, the working group recommended "that the Council adopt the new MSA definitions as the basic definitions for locality pay areas,acknowledging that changes in MSAs are the result of both changes in demographics and changesin the criteria for establishing MSAs." (41) Withregard to the January 2005 pay adjustments, theworking group recommended that the largest defined areas, called Combined Statistical Areas(CSAs), be used; that the pay area definitions be revised (which in some pay areas expands thenumber of communities covered); and that three current discrete pay areas (Kansas City, Orlando,and St. Louis) with pay gaps below RUS be folded into RUS, and the resulting savings in resourcesbe used to survey other areas. (42) The counciladopted the working group recommendations in itsreport to the Pay Agent, which in turn tentatively approved the council's recommendations in itsreport to the President, on the January 2005 pay adjustments. (43) In 2004, OPM will publish theproposed changes on locality pay in the Federal Register and solicit public comments on thosechanges. An amendment to H.R. 2989 , Departments of Transportation and Treasury and Independent Agencies Appropriations Bill, 2004, offered by Representative Sam Farr was agreedto by voice vote by the House of Representatives on September 4, 2003. The amendment at Section742 states the sense of the Congress that none of the funds made available in theTransportation/Treasury bill could be used to disestablish any pay locality. Earlier, during markupof the bill by the House Committee on Appropriations, a similar amendment proposed byRepresentative Sam Farr was withdrawn after the Committee chairman, Representative ErnestIstook, agreed to work with Representative Farr on the issue. (44) Representative Farr testified beforethe Federal Salary Council at its September 3, 2003, meeting about the reduction in pay that wouldresult for federal employees in Monterey County, California, if the county was not continued as anarea of application to the San Francisco locality pay area. Senator Jack Reed offered an amendment ( S.Amdt. 1944 ) similar to Representative Farr's that was agreed to by the Senate by voice vote during its consideration of the Transportationand Treasury appropriations bill on October 23, 2003. Under the amendment, Section 646 of the billwould provide that none of the funds appropriated or otherwise made available by theTransportation/Treasury bill could be used to remove any area within a locality pay area fromcoverage under that locality pay area. The amendment would not be applicable to RUS. As the first session of the 108th Congress was drawing to a close, H.R. 2989 was incorporated in H.R. 2673 , the Consolidated Appropriations Act for FY2004. Theconference agreement for H.R. 2673, as agreed to by the House of Representatives and theSenate, at Section 644, provides that none of the funds in the Transportation/Treasury bill could beused to implement or enforce regulations for locality pay areas in FY2004 that are inconsistent withthe Federal Salary Council's October 7, 2003, recommendations. (45) This provision was enacted asSection 644 of P.L. 108-199 on January 23, 2004. (46) Pay Agent Report. After considering the council's recommendations, the Pay Agent submitted its annual report to the President on the 2004locality payments on December 5, 2002. (47) According to the Pay Agent: the "report shows theadjustments we would recommend for January 2004 if the methodology and rates required bycurrent law were to be implemented . (48) Given the current national emergency situation and theconsequent slowdown in the American economy, however, we believe it would be unwise to allowthe locality pay increases shown in this report to take effect in January 2004." Stating that "it is timeto consider alternative approaches to the compensation of Federal employees," the Pay Agent notedthat it "continues to have serious concerns about the utility of a process that requires a singlepercentage adjustment in the pay of all white-collar civilian Federal employees in each localitywithout regard to the differing labor markets for major occupational groups or the performance ofindividual employees." (49) The Pay Agent's reportdoes not include any further discussion of theseconcerns. The cost of the January 2004 locality-based comparability payments would be $8.830 billion if the full amount necessary to reduce the pay disparity of the target gap to 5% were provided inJanuary 2004 as required by FEPCA, according to the Pay Agent. (50) Table 1 includes the council'sand the Pay Agent's recommended locality payments for January 2004. The Pay Agent did not adopt the council's recommendation to include Barnstable County, Massachusetts, as part of the Boston locality pay area because it "continue[s] to believe any changesin locality pay area boundaries should be made after the Federal Salary Council and the Pay Agenthave had an opportunity to review new commuting patterns data and new metropolitan areadefinitions [released in 2003 and] based on the 2000 census." (51) As for the recommended improvements in the BLS National Compensation Survey Program, the Pay Agent stated that those focused on problems associated with random selection of survey jobs,matching federal and non-federal jobs, and excluding randomly selected jobs that would be classifiedabove GS-15 have been implemented and that those focused on assigning GS grades to randomlyselected survey jobs and to randomly selected survey jobs with supervisory duties were to beintroduced in December 2003. According to the Pay Agent, it looks "forward to reviewing theresults of NCS data delivered next year, when we will have 2 years of modeled data to consider" and"[t]he last two improvements in NCS surveys will begin to affect data delivered in 2005." The PayAgent encouraged BLS and Pay Agent staff to expedite completion of the remaining twoimprovements. (52) Once both the annual and locality pay percentage amounts are determined, the actual pay rates are calculated as follows. First, the basic General Schedule (GS) is increased by the annualadjustment percentage, resulting in a new GS schedule. These new basic GS rates are then increasedby the locality payment. The resulting pay rates (annual + locality) are compared with the 2003 payrates (annual + locality) to derive the net increase in pay for 2004. The President's Recommendation President George W. Bush issued his administration's FY2004 budget on February 3, 2003. The budget proposed a 2.0% federal civilian pay adjustment, but did not state how the increasewould be allocated between the annual and locality adjustments required by FEPCA in January2004. (53) The statutory annual pay adjustmentrequired in January 2004 is 2.7%. If the Presidentwants to change the required rate of the annual adjustment, he has to submit an alternative plan forthe annual adjustment to Congress by September 1, 2003. If he wants to change the amount oflocality-based comparability payments, he has to submit an alternative plan for the locality paymentsto Congress by November 30, 2003. He may include his locality pay authorization in the alternativeplan for the annual adjustment. The President issued an alternative plan to change the amount of the annual adjustment and locality-based comparability payments on August 27, 2003. The plan called for a 2.0% payadjustment in January 2004 allocated as 1.5% annual and 0.5% locality pay. The cost of the 2.0%adjustment would be about $2 billion dollars, according to OMB and OPM. The alternative planstates that implementation of the annual and locality pay adjustments as required by FEPCA wouldhave cost about $13 billion. Executive Order 13322, issued by the President on December 30, 2003,implemented the alternative plan. (54) In the plan, the President states that the pay adjustment should be complemented by a $500 million dollar Human Capital Performance Fund which would reward the highest-performing andmost valuable employees in an agency. The fund is authorized by Section 1129 of P.L. 108-136 , theNational Defense Authorization Act for FY2004 ( H.R. 1588 ), enacted on November24, 2003. (55) (The authorization was Section 1111of H.R. 1588 , as passed by the Houseof Representatives, amended, on May 22, 2003.) (56) The House Committee on Appropriations recommended an appropriation of $2.5 million ($497,500,000 less than the President's request) for the Human Capital Performance Fund in H.R. 2989 , the Departments of Transportation and Treasury and Independent AgenciesAppropriations Bill, 2004, as reported to the House on July 30, 2003, and passed by the House onSeptember 9, 2003. Obligation of the funding was contingent upon enactment of the legislationauthorizing the creation of the fund within OPM. No funds would be available until the OPMDirector notifies the relevant subcommittees of jurisdiction of the Committees on Appropriationsof the approval of a performance pay plan for an agency and the prior approval of the subcommitteeshas been attained. The committee directs OPM "to report annually to the Committees onAppropriations on the performance pay plans that have been approved, and the amounts that havebeen obligated or transferred." (57) The SenateCommittee on Appropriations, in reporting its versionof the Transportation and Treasury appropriations bill ( S. 1589 ) on September 8, 2003,did not recommend an appropriation for the fund. "The Committee believes that an initiative of thistype should be budgeted and administered within each individual agency," according to the reportaccompanying the bill. (58) Funding was notprovided in H.<108>R. 2989 as passedby the Senate, amended, on October 23, 2003. As the first session of the 108th Congress was drawing to a close, H.R. 2989 was incorporated in H.R. 2673 , the Consolidated Appropriations Act for FY2004. Theconference agreement for H.R. 2673, as agreed to by the House of Representatives and theSenate, provides an appropriation of $1 million for the Human Capital Performance Fund. Obligation or transfer of the funding was contingent upon the enactment of the legislation toestablish the fund within OPM. Funds shall not be obligated or transferred to any federal agency untilthe OPM director notifies and receives prior approval from the relevant subcommittees ofjurisdiction of the Committees on Appropriations of OPM approval of an agency's performance payplan. Such amounts as determined by the OPM Director may be transferred to federal agencies tocarry out the purposes of the fund. (59) Thisprovision was enacted in P.L. 108-199 on January 23,2004. (60) In his alternative plan, the President also said that, "since any pay raise above the 2 percent I have proposed would likely by unfunded, agencies would have to absorb the additional cost andcould have to freeze hiring in order to pay the higher rates." He noted that the quit rates for GeneralSchedule employees are at an all-time low of 1.7% per year. (61) Federal employee union representatives expressed discouragement about the 2.0% pay adjustment. (62) Alternatives to the General Schedule The National Commission on the Public Service, in its January 2003 report, "recommend[ed]that the General Schedule classification system be abolished." The commission mentioned thesubstantial "resources and effort needed to maintain the General Schedule system" and the "constanttinkering [needed] to define equal work so that it can ensure equal pay" as reasons behind theproposal. "As a default system," the commission suggested a broad-band system under which the 15 pay grades and salary ranges would be consolidated into six to eight broad bands with relatively wide salary ranges.Managers would be able to determine individual pay based on competence andperformance. The commission also acknowledged the possibility that "other agencies might adopt systems with an entirely different form." (63) Currently, pay banding systems are being implemented at several agencies, including the Federal Aviation Administration, the Transportation Security Administration, and the InternalRevenue Service. Pay parity provisions that "allow the SEC [Securities and Exchange Commission]to raise salaries for certain employees to levels comparable to the salaries of federal bank examiners"are included in P.L. 107-123 , enacted on January 16, 2002. (64) New human resources management(HRM) systems for civilian employees of the Departments of Homeland Security and Defense areauthorized in P.L. 107-296 , the Homeland Security Act of 2002, enacted on November 25, 2002, and P.L. 108-136 , the National Defense Authorization Act for FY2004, enacted on November 24, 2003. (65) Changes to the pay setting systems at both agencies are expected to include broad pay bands. Congressional Recommendations and Considerations The size of the federal white-collar pay adjustment is considered annually by Congress, whichmay legislate a pay adjustment that is different from the adjustment recommended by the Presidentin the budget or that might be authorized by the President in an alternative plan. The January 1999(3.6%), January 2000 (4.8%), January 2002 (4.6%), and January 2003 (4.1%) overall pay adjustmentamounts were set by Congress. (66) Concurrent resolutions introduced in the Senate by Senator Paul Sarbanes ( S.Con.Res. 1 ) on January 9, 2003 and in the House of Representatives byRepresentative Steny Hoyer ( H.Con.Res. 19 ) on January 28, 2003, expressed the senseof the Congress that there should be parity between the pay adjustments for the uniformed militaryand federal civilian employees. The resolutions noted the longstanding policy of parity between boththe military and civilian pay increases. Such resolutions are effective only in the chamber in whichthey are proposed, express nonbinding opinions on policies, and do not require the President'ssignature. A number of Members of Congress from the Washington, DC, metropolitan area reportedly wrote letters to President Bush and Representatives Jim Nussle and John Spratt, Jr., Chairman andRanking Member, respectively, of the House Committee on the Budget, on February 27, 2003,urging them to support equal pay raises for federal civilian employees and the uniformed military. (67) The FY2004 budget proposes an average 4.1% pay increase for the military and 2.0% for civilianemployees. (68) Concurrent Budget Resolutions The Concurrent Resolution on the Budget for FY2004 ( H.Con.Res. 95 ) was agreed to by the House of Representatives by a 215 to 212 vote (Roll No. 82) on March 21, 2003. TheHouse Committee on the Budget report that accompanied the bill included language stating that"[t]he committee believes that rates of compensation for civilian employees of the United Statesshould be adjusted at the same time, and in the same proportion, as are rates of compensation formembers of the uniformed services." (69) The Senate version of the Concurrent Resolution on the Budget ( S.Con.Res. 23 ), as reported (without written report) from the Senate Committee on the Budget on March 14, 2003,included the exact same language as the House at Section 301 as a Sense of the Senate provision. The Concurrent Budget Resolution does not become law, but provides the framework within which Congress subsequently considers spending legislation. Any congressional recommendationon the civilian federal pay adjustment has usually been included in the Treasury, Postal Service, andGeneral Government Appropriations bill, which as of the 108th Congress has been combined withthe Department of Transportation Appropriations bill to be the Transportation, Treasury, PostalService, and General Government Appropriations bill. Departments of Transportation and Treasury and Independent Agencies AppropriationsBill, 2004 The Departments of Transportation and Treasury and Independent Agencies Appropriations Bill, 2004, as reported to the House of Representatives ( H.R. 2989 ) would provide a4.1% pay adjustment for federal civilian employees, including those in the Departments of Defenseand Homeland Security. The bill did not recommend how the increase should be divided betweenthe annual and locality pay adjustments. The House Subcommittee on Transportation, Treasury, andIndependent Agencies marked up H.R. 2989 on July 11, 2003, and by voice vote approvedthe bill, as amended, for consideration by the full committee. On July 24, 2003, the HouseCommittee on Appropriations marked up H.R. 2989 and by voice vote ordered it to bereported favorably to the House of Representatives. During the markup, the committee agreed toan amendment offered by Representative Steny Hoyer, joined by Representatives James Moran andFrank Wolf, to provide the 4.1% pay adjustment. H.R. 2989 was reported ( H.Rept.108-243 ) to the House by the House Appropriations Committee on July 30, 2003. (70) Section 740(a)includes the pay adjustment language. Section 602 would provide that the pay increase would beabsorbed within the levels appropriated in the act or in previous appropriations acts. The bill passedthe House on September 9, 2003, on a 381-39 (Roll No. 489) vote. The Bush Administration opposes the 4.1% pay adjustment for federal civilian employees. The Administration explained its views in comments submitted to the House of Representatives. According to a Statement of Administration Policy on H.R. 1588 , the National DefenseAuthorization Act for FY2004: Civilian and military pay linkage is not necessary. The Administration proposed a 2.0% pay raise for all civilian employees, which is very generous at thistime when many in the private sector are unemployed or facing shrinking paychecks. TheAdministration has proposed a Human Capital Performance Fund to finance higher pay raises forhigh-performing federal employees. DOD [Department of Defense] has different recruiting andretention needs for each group, and recent civilian pay raises have exceeded the rate of inflation. TheAdministration is particularly concerned that these additional civilian pay increases are unfunded(costing DOD about $660 million, and Government-wide about $2.1 billion if soapplied). (71) The Statement of Administration Policy on H.R. 2989 , Departments of Transportation and Treasury and Independent Agencies Appropriations Bill, FY2004, expressesextreme disappointment that the bill does not fund the President's request for a $500 million HumanCapital Performance Fund. It also states that the 4.1% pay adjustment included in the bill provides a percentage increase that exceeds inflation, the statutory base pay increase, and even exceeds the average increase in private-sector pay,measured by the Employment Cost Index. The higher pay raise ... does not address any particularissue related to Federal employee turnover. According to a recent survey of Federal employees, amajority are satisfied with their pay rate and the 'quit rate' (the rate at which Federal employeesleave the government voluntarily) among Federal employees is at an all-time low of 1.7 percent peryear, well below the overall average quit rate in privateenterprise. (72) The statement says that providing a 4.1% pay adjustment for civilian employees in the Departments of Defense and Homeland Security would limit the flexibility of those agencies as theydesign new personnel and pay systems. S. 1589 , the Senate version of the Transportation/Treasury appropriations bill, as forwarded to the Senate Committee on Appropriations by its Subcommittee on Transportation,Treasury and General Government on September 3, 2003, by voice vote, would provide a 4.1% payadjustment. The full committee approved the bill on a 29-0 roll call vote on September 4, 2003, andreported the measure to the Senate ( S.Rept. 108-146 ) on September 8, 2003. (73) Section 636 wouldprovide the 4.1% adjustment. Section 502 would provide that the pay increase would be absorbedwithin the levels appropriated in the act or in previous appropriations acts. When the Senateconsidered the Transportation and Treasury appropriations bill on October 23, 2003, Senator RichardShelby, for himself and Senator Patty Murray, offered an amendment ( S.Amdt. 1899 )to the House version of the appropriations bill, H.R. 2989 , which was agreed to by voicevote. Under the amendment, Section 636 would provide a 4.1% pay adjustment for federal civilianemployees, including those in the Departments of Defense and Homeland Security. Section 502would provide that the pay increase would be absorbed within the levels appropriated in the act orin previous appropriations acts. The Senate passed H.R. 2989, amended, on a 91 to 3 vote(No. 410) on October 23, 2003. At the Federal Salary Council's October 7, 2003, meeting, the council's methodology working group recommended that if the January 2004 pay adjustment were to be 4.1%, it be allocated as a2.7% annual pay adjustment and a 1.4% locality pay adjustment. According to OPM, the net (annualplus locality) pay adjustment in the Washington, DC, pay area under this allocation would be4.42%. (74) (The net pay adjustment was initiallyprojected at 4.41%.) As the first session of the 108th Congress was drawing to a close, H.R. 2989 was incorporated in H.R. 2673 , the Consolidated Appropriations Act for FY2004. TheHouse of Representatives agreed to the conference report accompanying H.R. 2673 onDecember 8, 2003, and the Senate agreed to the conference report on a 65-28 (No. 3) vote on January22, 2004. The conference agreement, at Section 640(a), provides a 4.1% pay adjustment for federalcivilian employees, including those in the Departments of Defense and Homeland Security. Theadjustment is effective as of the first day of the first applicable pay period beginning on or afterJanuary 1, 2004. Section 502 of the conference agreement requires the pay raises to be funded withinappropriated levels. (75) The conferees also directOPM to consider implementing the Federal SalaryCouncil's recommendation to include Franklin, Hampshire, and Hampden Counties in Massachusettsin the Hartford, CT pay area. (76) President Bushsigned H.R. 2673 on January 23, 2004, andit became P.L. 108-199 . The pay provisions are at Section 640(a) and Section 502 of the law. (77) The Consolidated Appropriations Act provides an additional 2.1% pay adjustment to federal civilian employees. On March 3, 2004, President Bush issued Executive Order 13332, whichallocated the additional amount as 1.2% annual and 0.9% locality. (78) According to OPM, the cost ofthe 4.1% (2.7% annual and 1.4% locality) pay adjustment is about $4.1 billion dollars. OPM issuedrevised salary tables for 2004 on its website the next day; these are available on the Internet at http://www.opm.gov . Table 1 shows the recommended locality payments, the authorizedlocalitypayments, and the net annual and locality pay increases. The Federal Salary Council and Pay Agent recommendations for the January 2005 pay adjustments are discussed in CRS Report RL32355 , Federal White-Collar Pay: FY2005 SalaryAdjustments . With regard to the federal white-collar pay-setting system, in addition to considering the recommendations of the National Commission on the Public Service, Congress could examine waysto amend FEPCA, which has never been implemented as enacted. As discussed above (underlocality-based comparability payments), FEPCA provides that the disparity between non-federal andfederal salaries is to be reduced to 5%. The overall average percentage pay gaps for each of the 32discrete pay areas are adjusted to this level to derive a target pay gap for each pay area. The lawprovided that, beginning in 1994, an increasing percentage of the target pay gaps was to be closedeach year. By January 2002, 100% of a pay area's target pay gap was to be closed. A much smallerpercentage of the target pay gaps has been closed each year, and as a result, the Federal SalaryCouncil and the Pay Agent report that the pay disparity between non-federal and federal salaries,rather than being 5%, averages 25.73% for 2004. The methodology for setting federal pay adjustments has been questioned since FEPCA's enactment. In 1993, a draft memorandum from the Pay Agent to the Federal Salary Councilconcluded that "the current methodology is flawed because the completeness of the data variesgreatly among survey areas, because the gaps are not credible in light of other labor marketindicators, and because the single percentage adjustment for all jobs in a locality is a poor reflectionof market realities." (79) Despite these concerns,no proposals were made to change FEPCA. Themethodology has remained a concern because the Bureau of Labor Statistics surveys documentingnon-federal rates of pay were not approved for use in determining the 2000, 2001, 2002, and 2003locality payments. Previous survey data from 1995 and 1996 have had to be aged to make themusable for purposes of the locality payments in these years. In P.L. 106-554 , the ConsolidatedAppropriations Act, 2001, Congress noted this situation and directed the President's Pay Agent toprepare a report for the Senate and House Committees on Appropriations, the Senate Committee onGovernmental Affairs, and the House Committee on Government Reform on the methodologicalconcerns. (80) The Pay Agent reported to Congresson May 15, 2001 and reiterated the methodologicalconcerns which are stated above under the methodology section. (81) Improvements to the surveymethodology are underway as discussed above. The Office of Personnel Management issued a white paper on compensation in April 2002, which reviewed current policies and the need for more flexibility in setting General Schedule pay,but did not include any recommendations. (82) Ina November 2002 study, the Congressional BudgetOffice (CBO) "compared the salaries of federal General Schedule employees with the pay (83) ofnonfederal employees in similar jobs." (84) Thecomparison yielded the following results: [F]ederal employees in selected professional and administrative occupations tended to hold jobs that paid less than comparable jobs in private firms. For about 85 percent of those federal employees their pay lagged behind private salaries by morethan 20 percent. By contrast, about 30 percent of federal employees in selected technical and clericaloccupations held jobs with salaries above those paid by private firms. In general, jobs in technicaland clerical occupations showed much smaller differences in pay between federal and privateworkers. About three-quarters of federal employees in this analysis held jobs in those occupationswith salaries that were within 10 percent, plus or minus, of privatelevels. (85) Acknowledging the limitations presented by comparing only selected jobs and localities, CBO concluded that the results nevertheless "reinforce a long-standing concern about the federal paysystem: it allows no variation in pay raises by occupation." According to CBO, this presents the potential result that employees in professional and administrative occupations may receive smaller pay raises than those needed to match privatesalaries for similar jobs, and employees in technical and clerical occupations may receive pay raisesthat are higher than those needed to match salaries in the private sector. Thus, even if the currentsystem was fully implemented as envisioned in FEPCA, it would fail in its aim to provide federalpay that was comparable to pay for nonfederal jobs. Granting the same percentage raise to allworkers in an area will result in above-market salaries for some occupational groups andbelow-market salaries for others. Moreover, the jobs that show the greatest pay disadvantage forfederal workers make up an increasing share of the federal workforce. From 1985 through 2000, forexample, federal employment in professional and administrative occupations rose from 41 percentto 56 percent of total federal civilian employment. (86) The cost of fully implementing FEPCA is another concern. The Pay Agent estimated that the January 2004 locality-based comparability payments would cost $8.830 billion if the full amountnecessary to reduce the pay disparity of the target gap to 5%, as required by FEPCA, were providedin January 2004. Employee Views The American Federation of Government Employees (AFGE) and the National TreasuryEmployees Union (NTEU) endorse pay parity between federal civilian employees and the uniformedmilitary. The unions criticized the President's proposal on federal pay as inadequate anddisregarding of FEPCA. (87) According to AFGE, Bush's budget issues his standard rationale for failing to uphold the Federal Employees Pay Comparability Act (FEPCA) ... problems with the Departmentof Labor's methodology in determining the comparability of federal pay with the private sector. Yetnowhere does he ever describe his methodological problems. I have asked repeatedly -- whatchanges in methodology would you like to implement so that FEPCA can go forward? Previously,the methodological problems appeared to be related to the locality component of federal pay, whichBush has tried to eliminate for the past two years. Yet this year, his methodological problems seemto have spread to the Employment Cost Index (ECI) component. (88) Table 1. January 2004 Recommended Locality Payments, Authorized Locality Payments, and Net Annual and Locality Pay Increases Source: Memorandum for the President's Pay Agent from the Federal Salary Council, Level ofComparability Payments for January 2004 and Other Matters Pertaining to the Locality PayProgram (Washington: Oct. 17, 2002), Attachment 1; and Report on Locality-BasedComparability Payments for the General Schedule, Annual Report of the President's Pay Agent (Washington: 2002), p. 21. The Pay Agent stated: "This report shows the adjustments wewould recommend for January 2004 if the methodology and rates required by current law wereto be implemented. Given the current national emergency situation and the consequentslowdown in the American economy, however, we believe it would be unwise to allow thelocality pay increases ... to take effect in January 2004." U.S. President (Bush), "Adjustmentsof Certain Rates of Pay," Executive Order 13322, Federal Register , vol. 69, Jan. 2, 2004, pp.231-232. The Executive Order provides a 1.5% annual pay adjustment and a 0.5%locality-based comparability payment. U.S. President (Bush), "Further Adjustment of CertainRates of Pay," Executive Order 13332, Federal Register , vol. 69, Mar. 8, 2004, pp.10889-10900. The Executive Order provides an additional 2.1% pay adjustment, allocated asan average 1.2% annual adjustment and 0.9% locality-based comparability payment. Notes: The actual pay rates are calculated as follows. First, the basic General Schedule (GS) isincreased by the annual adjustment percentage, resulting in a new GS schedule. These newbasic GS rates are then increased by the locality payment. The resulting pay rates (annual +locality) are compared with the 2003 pay rates (annual + locality) to derive the net increase inpay for 2004. Salary tables for 2004 are available on the Internet at http://www.opm.gov . MSA refers to a Metropolitan Statistical Area. CMSA refers to a Consolidated MetropolitanStatistical Area. The component parts of each pay area are described at 5 CFR 531.603(b).

Federal white-collar employees are to receive an annual pay adjustment and a locality-based comparability payment, effective in January of each year, under Section 529 of P.L. 101-509 , theFederal Employees Pay Comparability Act (FEPCA) of 1990. In January 2004, they received a 1.5%annual pay adjustment and a 0.5% locality-based comparability payment under Executive Order13322, issued by President George W. Bush on December 30, 2003. P.L. 108-199 , enacted onJanuary 23, 2004, provides a 4.1% pay adjustment for 2004. Under the law, an additional 2.1% payadjustment, allocated as an average 1.2% annual and 0.9% locality, was provided to federal civilianemployees under Executive Order 13332, issued by the President on March 3, 2004. OPM publishedrevised salary tables for 2004 on its website the next day. Although the federal pay adjustments aresometimes referred to as cost-of-living adjustments, neither the annual adjustment nor the localitypayment is based on measures of the cost of living. The annual pay adjustment is based on the Employment Cost Index (ECI), which measures change in private-sector wages and salaries. The index showed that the annual across-the-boardincrease would be 2.7% in January 2004. The size of the locality payment is determined by thePresident, and is based on a comparison of non-federal and General Schedule (GS) salaries in 32 payareas nationwide. By law, the disparity between non-federal and federal salaries was to be graduallyreduced to 5% over the years 1994 through 2002; FEPCA requires that amounts payable may not beless than the full amount necessary to reduce the pay disparity to 5% in January 2004. The FederalSalary Council and the Pay Agent recommended that the 2004 locality payments range from 19.45%in the "Rest of the United States" (RUS) pay area to 47.64% in the San Francisco pay area. Thepayment recommended for the Washington, DC, pay area was 28.78%. Because the new localityrate replaces the existing locality rate, the change in locality rates is derived by comparing 2003locality payments with those recommended for 2004. This comparison resulted in recommendedincreases in locality rates from 2003 to 2004 of 11.90% in the RUS pay area to 25.23% in the SanFrancisco pay area, and 17.31% in the Washington, DC, pay area. The nationwide average net payincrease, if the ECI and locality-based comparability payments were granted as stipulated in FEPCA,would have been 15.15%. President Bush proposed a 2.0% federal civilian pay adjustment in hisFY2004 budget. On August 27, 2003, he issued an alternative plan to provide the 2.0% adjustmentin January 2004. H.R. 2989 , the Departments of Transportation and Treasury andIndependent Agencies Appropriations Bill, 2004, as passed by the House of Representatives and theSenate, and as incorporated in H.R. 2673 , the Consolidated Appropriations Act forFY2004, provides a 4.1% pay adjustment for federal civilian employees. H.R. 2673 wasenacted as P.L. 108-199 . FEPCA has never been implemented as originally enacted. Since 1995, locality payments have been much lower than FEPCA requires. Additionally, the Bureau of Labor Statistics surveysdocumenting non-federal rates of pay were not approved for use in determining the 2000, 2001,2002, and 2003 locality payments. A phase-in of BLS survey data was approved for 2004.

Introduction With the large federal deficit, some Members of Congress have become interested in institutional mechanisms that Congress has used in the past in attempts to address one component of this issue—federal spending. One of the mechanisms that has drawn interest is the Joint Committee on Reduction of Non-Essential Federal Expenditures, which existed from 1941 to 1974. The Joint Committee on Reduction of Non-Essential Federal Expenditures was established at the initiative of Senator Harry F. Byrd by Section 601 of the Revenue Act of 1941. (Section 601 appears as Appendix of this report.) When the Senate Finance Committee reported the Revenue Act of 1941 to the Senate, it recommended a committee amendment to establish the joint committee. The amendment was agreed to on the Senate floor and retained in conference. Senator Byrd chaired the joint committee from its inception until his retirement from Congress in 1965. During the 91 st Congress (1969-1970), the joint committee was renamed the Joint Committee on Reduction of Federal Expenditures. Its existence was terminated in the Congressional Budget and Impoundment Control Act of 1974. This report traces the history of the joint committee and describes the subject matter of some of its principal work products. The report concludes with some considerations involved with the creation of a committee—the purpose of which is to assist Congress in reducing federal spending—and with a brief examination of committee oversight authority extant in House and Senate committees and of alternative mechanisms for cutting spending. Duties and Purpose Senator Byrd initially introduced S.Con.Res. 5 to create a joint committee in February 1941 in the course of debate on a measure to increase the federal debt limit. As proposed, the joint committee would have had a broader mandate than making recommendations on nonessential federal expenditures. The joint committee under the concurrent resolution was to investigate and make recommendations on "[meeting] Federal fiscal post-war problems from the current war"; "impounding in the Treasury … unexpended appropriations made for non-essential purposes"; and "revision of the Federal tax system as may be necessary in order to simplify and equalize the tax burden and to place the United States in such a sound financial condition as will enable it to make such imperative expenditures as may be necessary in order to adequately provide for the national defense." The concurrent resolution was referred to the Committee on Finance. Although war would not be declared until December 1941, Senator Byrd was concerned with impending war costs. He wanted to cut nondefense spending, reduce the public debt, and rationalize what he characterized as a "hodgepodge" tax system to make maximum resources available for national defense and to prepare for post-war economic adjustment. Later in 1941, in an amendment to the Revenue Act of 1941 recommended by the Senate Finance Committee, the duties and purposes of the joint committee were solely to "make a full and complete study and investigation of all expenditures of the Federal Government with a view to recommending the elimination or reduction of all such expenditures deemed by the joint committee to be nonessential." Duties for the joint committee related to taxation and post-war planning were not included in the amendment. The amendment was agreed to without debate or objection by the Senate and retained in conference. Authority and Organization of the Joint Committee To accomplish its statutory objective, the joint committee was authorized to hold hearings, and to employ experts and staff to examine and assist the committee in order to make recommendations. The joint committee was also authorized to utilize the resources of departments and agencies of the federal government to assist the joint committee in formulating its recommendations to Congress. An appropriation of $10,000 was authorized and subsequently appropriated. The joint committee comprised 14 members: six Senators from the Committees on Appropriations and Finance, six Representatives from the Committees on Appropriations and Ways and Means, the Secretary of the Treasury, and the director of the Bureau of the Budget. The Joint Committee on Reduction of Non-Essential Federal Expenditures was a study committee, without legislative authority. Its recommendations on cutting or reducing nonessential spending were reported to the House and Senate and submitted to the Committees on Appropriations. Thereafter, the Appropriations Committees could use the work of the joint committee in their consideration of appropriations measures. Individual Members might also have been interested in the joint committee's work and have based arguments or amendments on the committee's recommendations. It is not possible to track the joint committee's influence over the course of its existence, although the provenance in 1974 of the Budget Committees' scorekeeping was the joint committee's scorekeeping reports. Termination of the Joint Committee The joint committee was terminated by Section 202(e) of the Congressional Budget and Impoundment Act of 1974, and its functions and personnel were transferred to the Congressional Budget Office (CBO). The report of the Senate Rules and Administration Committee explained: Section 202(e) transfers the duties, functions, and personnel of the Joint Committee on Reduction of Federal Expenditures to CBO. The work of this joint committee, although not widely publicized, has been of excellent professional quality and tremendously helpful in providing a scorekeeping record of congressional action and its impact on the Nation's budgetary posture. The Committee's intent is to incorporate this expertise into the function of the CBO so that it can be further developed and highlighted as an essential part of the congressional budget process. The Joint Committee's Work Created to recommend potential savings in federal spending, the work of the Joint Committee on Reduction of Non-Essential Federal Expenditures was characterized by a dual narrative—one of genuine interest in reducing federal expenditures, and another concerned with projecting legislative control over spending in government programs. An example of the latter case is a 1947 report on postwar foreign assistance, which found that some foreign-aid spending had been "specifically defined and authorized, and that this ... may be compiled, verified, and estimated," but that other aid was not documented, could not be estimated, and was not monitored by Congress. In that report, and many others, the joint committee identified areas where government agencies were too autonomous from congressional control in determining how money was spent. While neither narrative is necessarily exclusive of the other, being aware of each helps to understand the joint committee's interests. On the eve of World War II, the United States owed $55 billion to its creditors. In two years, massive national defense requirements expanded the debt by nearly 50% to $80 billion, with the "prospect [of] a national debt of at least $200 billion by conservative estimates." While these figures may today seem modest, a $200 billion debt in 1942 represented 123% of gross domestic product (GDP), compared with current debt, which stands at 92% of GDP. For many policymakers, the debt was so high and the prospect of war so certain that immediate action was required to strengthen federal finances. This view was reflected on the pages of many of the nation's leading newspapers. A 1940 Chicago Tribune headline warned: "America Limps Financially As Arming Starts." The Los Angeles Times reported that the National Chamber of Commerce cautioned that even entering the war would bankrupt the country. Furthering the call for fiscal austerity was a quickly increasing inflation rate. Testifying before the Senate Committee on Finance in 1941, Secretary of the Treasury Henry Morgenthau warned that a "strong fiscal program" was required to counteract an accelerated increase in prices and the cost of living. Fears of inflation as a result of the fiscal situation ran so high that President Franklin Delano Roosevelt considered price fixing to control rising prices. Marriner Stoddard Eccles, chair of the Federal Reserve, echoed these concerns in December 1940 in a special report to Congress encouraging higher taxes and reduced federal expenditures as an alternative to deficit spending to finance the war in order to "forestall the development of inflationary tendencies." Deficit reduction was seen as an essential component of war preparedness. These fears were not lost on Members of Congress, who began to discuss the federal debt as a national security concern. Just three weeks after the attack on Pearl Harbor, Senator Byrd, the joint committee's chairman, capturing the sentiment of the time, noted, "[B]efore the war, economy in nonessential spending was important. Now it is vital." Thus, the call for a reduction of nonessential federal expenditures served many purposes. Spending that was eliminated would save money that could be applied to the war effort. Additionally, it was argued, American taxpayers would be more willing to shoulder the high taxes needed to fund the war if they saw that the federal government was acting frugally. Finally, reduced federal deficit spending could help control potentially damaging rates of inflation. For the duration of the war, the joint committee was fairly active in identifying potential savings in the federal budget. The conclusion of the war, however, may have deprived both the joint committee and Congress as a whole of such a strong sense of urgency to control spending. The joint committee's interests narrowed as time passed, and Senator Byrd's retirement in 1965 further slowed the output of the joint committee. Initial Reports (1941–1943) On December 26, 1941, the Joint Committee on Reduction of Non-Essential Federal Expenditures released a "partial report," in the nature of a working draft, largely limited to programs "established originally as depression measures." In this report, the joint committee pledged to determine which permanent agencies were essential to the operation of the government and how those agencies could operate more efficiently. In particular, the report singled out government corporations and the Department of Agriculture as prospective targets of scrutiny, and suggested immediately abolishing the Office of Education, Works Progress Administration, Civilian Conservation Corps, and National Youth Administration, totaling $1.3 billion in potential reductions. A supplemental report issued in July 1942 followed up on each of these suggested reductions and claimed that $1.313 billion had been saved as a result of the joint committee's recommendations. A progress report issued in December 1943 claimed credit for approximately $2 billion in savings to-date. Debate and statements in the Congressional Record reflect only limited disagreement on the need to cut certain agencies. Senator Byrd and Treasury Secretary Henry Morgenthau supported "drastic cuts" in these programs, while Senators Gerald Nye and Robert M. La Follette Jr. urged caution in jeopardizing the nation's food sources in a time of war. In minority views to the 1941 report, Senator La Follette expressed concern about unforeseen problems with Senator Byrd's proposals. Cuts in aid to farmers and youth would disproportionately affect lower-income Americans. Nearly half of all farm families earned less than $3 per month and depended on assistance from the Farm Security Administration, a program the joint committee recommended be abolished. Additionally, the Works Progress Administration and National Youth Administration, programs also recommended for discontinuation, provided school lunches to over 3 million underprivileged children. Like those demanding the cuts, Senator La Follette framed his views as a national security issue in saying that "the greatest foe of democracy … is poverty and underprivilege." Specific Investigations (1943–1965) The first decade of the joint committee's existence seemed to be its most productive. In 1943 and 1944, five reports contained suggested cuts and modifications in key areas, as did an additional report in 1953. The following are examples of the reports that the joint committee made during this time: Questionnaires and Reports Required from the Public —The joint committee recommended that the Bureau of the Budget reduce the approximately 7,000 surveys issued and take a stronger administrative role. Regional Agricultural Credit Corporations —The joint committee recommended liquidating the corporations and transferring some of their duties to the Farm Credit Administration. Report on the Home Owners' Loan Corporation —The joint committee recommended that all of the corporation's holdings be liquidated by the end of FY1945. Report on Federal Personnel —The report detailed some success in reducing the size of the federal workforce and mentioned an amendment to the Overtime Pay Act that gave the director of the Bureau of the Budget "authority to order reductions in establishments subject to the overtime pay laws." Report on Government Corporations —The joint committee noted that Congress lacked oversight capabilities over these corporations and suggested that the comptroller general of the United States be made the auditor and comptroller, ex officio, of every government corporation. Report on the Control of Collection and Use of Foreign Currencies by Federal Agencies —The joint committee determined that Congress lacked necessary oversight over funds collected and spent by government agencies operating internationally and suggested that Treasury exercise authority in monitoring their collection and use. Again, it should be noted that, in each of these issue areas, the joint committee stressed that government agencies, particularly those that generated revenue independently, should be accountable through congressional oversight. Continuing Issues The committee maintained interest in certain issues throughout much of its existence. Some examples are described here. Unexpended Balances The joint committee expressed concern that, like the operations of government corporations and the collection of foreign currencies by federal agencies, the spending of unexpended balances was not monitored by Congress. According to a June 1953 report, agencies were spending more money from previous appropriations than money from the current fiscal year. Dozens of reports from 1953 to 1956 reflected a particular interest in unexpended balances in the Defense Department. As a long-time member of the Senate Armed Services Committee, Senator Byrd may have been concerned about military oversight being wrested from Congress. Federal Personnel38 During most of the joint committee's existence, it issued monthly reports detailing the number of employees in the executive agencies of the federal government. Although the impact of these reports is hard to measure, it seems the reports caused some friction with administrators whose agencies were under increased surveillance. An example of one such conflict is discussed in more detail below under " Debate over the Joint Committee's Role ." Federal Stockpiles40 Beginning in 1960, the joint committee began monthly reporting of the federal government's stockpiles of agricultural products, strategic and critical materials, military equipment, and medical supplies. As with other joint committee interests, the stockpiles reports may have been prompted by a concern about congressional oversight in this area. Senator Byrd offered a caveat in these reports in noting that the joint committee had not been given unrestricted access to government data about the stockpiles. In 1962, the day after President John F. Kennedy requested a congressional investigation of the federal stockpiles, Senator Byrd in a letter to the President explained that "effective work in [the area of federal stockpiles] will continue to be difficult until the mantle of secrecy is lifted." He went on to request an executive order declassifying more information on the stockpiles. Although the President in calling for the investigation said he was "astonished" by the size of the stockpiles, being more than double emergency requirements, the President's action may be an instance where the joint committee's interest played a role. The investigation was undertaken by the Senate Armed Services Committee, of which Senator Byrd was also a member. Federal Housing Programs A 1950s Federal Housing Administration scandal in which developers allegedly pocketed excess money from federal loans—excess over construction costs—prompted aggressive joint committee scrutiny. On a number of occasions, in addition, Senator Byrd protested funding for housing programs and, later, the creation of a federal Department for Housing and Urban Development. However, as with other areas, the joint committee may have been as much interested in congressional oversight of funds collected through the loan activities of the Federal Housing Administration (and other housing agencies) as it was in the fiscal justification of these activities. Last Years (1965–1974) Following Senator Byrd's retirement from the Senate in 1965, the joint committee became less active. The most significant development in this period was scorekeeping reports introduced by Representative George H. Mahon, chairman of both the joint committee and the House Appropriations Committee. The reports, intended to show "how various actions of the President and the Congress have affected the President's budget estimates," became a periodic (and eventually monthly) feature of the joint committee's work. Although the impact of scorekeeping reports on deficit reduction during this period is unclear, scorekeeping, as noted above, was incorporated into the Congressional Budget and Impoundment Control Act of 1974. Debate over the Joint Committee's Role Conflict with Senator Humphrey In a series of floor exchanges in early 1950, Senators Byrd and Hubert H. Humphrey debated the value of the joint committee. Introducing a bill in February 1950 to dissolve the so-called Byrd committee, Senator Humphrey argued that the joint committee's reports contained misleading and incomplete information, and that its activities duplicated the efforts of another committee created by the 1946 Legislative Reorganization Act, the Committee on Expenditures in the Executive Departments, the predecessor committee of the Committee on Homeland Security and Governmental Affairs. Senator Byrd replied on the Senate floor in early March of that year by citing a number of budget reductions he credited to the efforts of the joint committee and by attacking the accuracy of Senator Humphrey's charges. Though Senator Humphrey was new to the Senate that term, his objection to the joint committee may have in part derived from the fact that one of Senator Byrd's favorite targets for scrutiny was the Post Office Department. Senator Humphrey was a member of both the Committee on Post Office and Civil Service and the Senate Committee on Expenditures in the Executive Departments, the committee whose duties he argued were duplicated by activities of the joint committee. Senators Byrd and Humphrey also differed in their views on the role and responsibilities of government. Conflict with the Postmaster General In April 1953, the Post Office Department stopped reporting personnel data to the joint committee, prompting a series of explanatory letters from the acting postmaster general to Senator Byrd. The acting postmaster general explained that the department had found inaccuracies in the data and decided to correct these problems before making official reports. Following the receipt of the first such letter, Senator Byrd lamented that this department had many times committed personnel errors, but commended the postmaster general for taking action to correct its mistakes. It is unclear whether being the constant object of the joint committee's interest also contributed to the Post Office Department's actions. The department resumed submitting reports in July 1953, noting a slight increase in the number of personnel it employed. Prelude to the Congressional Budget Act In hearings beginning in 1965 on congressional organization and on congressional control of the federal budget, committees heard proposals to give the joint committee a new, stronger legislative purpose as well as to abolish it. The newly established Joint Committee on the Organization of Congress heard from representatives of the National Association of Manufacturers, who in the course of their testimony on appropriations and budgeting proposed that the Joint Committee on Non-Essential Federal Expenditures be strengthened "through broadening its mandate and membership and giving it a less restrictive title." Witnesses from the American Institute of Certified Public Accountants proposed integrated information systems and central staff facilities to serve committees in their budget-related work; they offered the idea of using the joint committee as the location of this initiative. The National Taxpayers Conference made a very similar proposal. Not all testimony received by the Joint Committee on the Organization of Congress concerning the Joint Committee on Non-Essential Federal Expenditures was positive. Representative George H. Mahon, at that time a member of the joint committee as chair of the House Appropriations Committee, testified about budget decision making in Congress, expressing skepticism about proposals for improvement and, in the course of his testimony, commenting on the joint committee: If we would establish a practice of the committee chairmen and the ranking minority members meeting early in the session and having maybe the Director of the Budget present, with the budget proposals … if the top leadership should discuss these matters it might be somewhat fruitful, but … we tried this in the Committee on the Reduction of Nonessential Federal Expenditures. This committee has not met for years. Later in 1965, Senator Byrd submitted a letter to the chair of the Joint Committee on the Organization of Congress in response to an inquiry of all chairs concerning committee meetings. Senator Byrd indicated that the membership of the committee—the chairs and ranking minority members of very busy, important committees handling complex legislation—resulted in the Joint Committee on Non-Essential Federal Expenditures conducting its work informally and through correspondence. He went on, however, to echo Representative Mahon's comment on the need, unfulfilled, for Congress to look at the President's budget as a whole after Congress received it. Senator Byrd likewise said that that was a purpose of the joint committee and that it explained the concept behind the joint committee's membership makeup, but that the joint committee fulfilled its role only through reports rather than through hearings and other formal meetings. Senator Byrd traced his support for budget process reform proposals, and concluded: "the requirement for more and better factual information relating to fiscal legislation … has been demonstrated." When congressional committees several years later took up the issue of congressional control of the budget, the role of the Joint Committee on Reduction of Non-Essential Expenditures was again discussed. Congressional scholar Stephen Horn (who was, years later, elected to the House of Representatives) suggested a "revitalized" joint committee with information technology and professional staff to provide budget analyses. A New Committee or Existing Alternatives? The second purpose of this report is to briefly explain the creation of a new committee, should the House or Senate, alone or together, wish to establish a new committee with a role in cutting federal spending. The succeeding sections of the report examine some considerations involved with the creation of a committee—the purpose of which is to assist Congress in reducing federal spending—and examine committee oversight authority extant in House and Senate committees and of alternative mechanisms for cutting spending. The House or Senate may create a standing, select, or special committee by adoption of a simple resolution or as a provision of another piece of legislation that becomes law. A joint committee may be created by adoption of a concurrent resolution or as a provision of another piece of legislation that becomes law. A committee may be established as a permanent or temporary committee. A committee may be given authority to report legislation—legislative authority—or it may be authorized only as a study or investigatory committee. The Congressional Budget and Impoundment Control Act or 1974 does not apply to the creation of a committee or to the parent chamber's grant of legislative or oversight authority to a committee. Many House and Senate committees with legislative authority may report one or more types of legislation with budgetary impact—appropriations measures, revenue bills, direct-spending bills, or other measures. These measures are considered on the House and Senate floor within the framework of the Congressional Budget Act, other budget laws and rules, and the annual concurrent resolutions on the budget, which are also adopted within the Budget Act's framework. If a newly created committee is given legislative authority and not solely study authority, legislation that it reports and that has a budgetary impact would also be considered within the framework of the Budget Act and each chamber's rules. If a committee is given authority only to study a matter and make recommendations, provisions of the Budget Act would not be triggered by the committee's work. In creating a committee with legislative authority, the House and Senate may alter budget or legislative procedures applicable to legislation that the committee reports or could exempt such legislation from certain chamber rules or from statutory provisions that operate as chamber rules. The House and Senate, in statute, chamber rules, or special rules or orders, might create expedited procedures that foreclose extended debate, restrain or curtail the amendment process, and restrict other procedures normally applicable to a chamber's consideration of measures. For example, in their amendment, the Bipartisan Task Force for Responsible Fiscal Action Act of 2010, to a debt-limit bill considered by the Senate in January 2010, Senators Kent Conrad and Judd Gregg included expedited committee and floor procedures for considering task force recommendations to "significantly improve the long-term fiscal imbalance of the Federal Government." Currently, savings may be obtained through the appropriations process, the legislative process, or the reconciliation process. Appropriations measures are written pursuant to ceilings established in a budget resolution. Appropriations bills and resolutions can increase, cut, modify, or eliminate or not fund spending for federal programs and activities that receive budget authority through the appropriations process. Authorizations and spending measures other than appropriations are written in legislative committees. These kinds of measures can make changes to a direct-spending program to increase or reduce its cost or to change or eliminate a program. Finally, Congress may use, and has used, the reconciliation process, established in the Congressional Budget Act, to cut spending, as well as to make changes to other laws with budgetary impact, such as tax laws. Under the reconciliation process, a budget resolution may contain instructions to named congressional committees to report legislation by a specific date to, for example, cut spending within their jurisdiction by specific amounts. The respective House and Senate Budget Committees normally bundle the reported legislation into a reconciliation bill, which the chambers may consider and come to agreement on pursuant to procedural limitations in the Budget Act . Congressional Oversight If the House or Senate created a new committee within its chamber or together created a joint committee with a role in reducing federal expenditures, it would presumably conduct oversight—committee studies and hearings—to identify savings. Both House and Senate committees already have very broad oversight authority, which could alternately or also be harnessed in support of an identified purpose, such as identifying reductions in federal spending. Standing committees are responsible for conducting oversight, also called legislative review, which includes the examination of the implementation of laws, efficiency in their administration, costs and wastefulness, and program effectiveness; identification of potential changes; and other matters. In both the Legislative Reorganization Act of 1946 and the Legislative Reorganization Act of 1970, Congress included oversight provisions directed at its standing committees. The 1946 act included this provision: Sec. 136. To assist the Congress in appraising the administration of the laws and in developing such amendments or related legislation as it may deem necessary, each standing committee of the Senate and the House of Representatives shall exercise continuous watchfulness of the execution by the administrative agencies concerned of any law, the subject matter of which is within the jurisdiction of such committee; and, for that purpose, shall study all pertinent reports and data submitted to the Congress by the agencies in the executive branch of the Government. The 1970 act contained a more specific provision, with individual subsections applicable to the House and Senate, respectively. The provision applicable to the House stated: Sec. 118. (b) [amending a rule of the House, since recodified] …(a) In order to assist the House in— (1) its analysis, appraisal, and evaluation of the application, administration, and execution of the laws enacted by the Congress, and (2) its formulation, consideration, and enactment of such modifications of or changes in those laws, and of such additional legislation, as may be necessary or appropriate, each standing committee shall review and study, on a continuing basis, the application, administration, and execution of those laws, or parts of laws, the subject matter of which is within the jurisdiction of that committee. (b) Each standing committee shall submit to the House, not later than January 2 of each odd-numbered year beginning on or after January 1, 1973, a report on the activities of that committee under this clause during the Congress ending at noon on January 3 of such year. (c) The preceding provisions of this clause do not apply to the Committee on Appropriations, the Committee on House Administration, the Committee on Rules, and the Committee on Standards of Official Conduct. The provision applicable to the Senate stated: Sec. 118. (a)… (a) In order to assist the Senate in— (1) its analysis, appraisal, and evaluation of the application, administration, and execution of the laws enacted by the Congress, and (2) its formulation, consideration, and enactment of such modifications of or changes in those laws, and of such additional legislation, as may be necessary or appropriate, each standing committee of the Senate shall review and study, on a continuing basis, the application, administration, and execution of those laws, or parts of laws, the subject matter of which is within the jurisdiction of that committee. (b) Each standing committee of the Senate shall submit, not later than March 31 of each odd-numbered year beginning on and after January 1, 1973, to the Senate a report on the activities of that committee under this section during the Congress ending at noon on January 3 of such year. (c) The preceding provisions of this section do not apply to the Committee on Appropriations of the Senate. Federal statutes also support congressional committees in their oversight work. For example, numerous reports are required from the President and executive departments and agencies, and reports of inspectors general must be transmitted to Congress. The Government Accountability Office (GAO) serves Congress with program evaluations and other reports, while the Congressional Research Service provides policy research and analyses. Additional governmental and private resources are available to congressional committees in their oversight work. The House and Senate each have additional provisions in their rules pertaining to oversight, as explained next. House Oversight The House Appropriations Committee and its survey and investigations unit conduct oversight and investigations year-round. In addition, House legislative committees are authorized by House rules to study, inform themselves, or make recommendations on matters related directly or indirectly to spending. These rules provisions include General oversight authority granted all standing committees (House Rule X, clause 2(a) and (b)); A requirement for an oversight plan from each standing committee (House Rule X, clause 2(d)); A requirement that any committee with more than 20 members must establish an oversight committee or assign each subcommittee responsibility for oversight (House Rule X, clause 2(b)); A coordinative role for committees' oversight assigned to the Oversight and Government Reform Committee, in consultation with the Speaker, majority leader, and minority leader (House Rule X, clause 2(d)); Special oversight authority granted named standing committees (House Rule X, clause 3); Additional functions assigned to the Appropriations Committee (House Rule X, clause 4(a)), the Budget Committee (House Rule X, clause 4(b)), the Oversight and Government Reform Committee (House Rule X, clause 4(c)), and the House Administration Committee (House Rule X, clause 4(d)); An additional function assigned to the Oversight and Government Reform Committee to make recommendations based on GAO reports (House Rule X, clause 4(c)); Authority to issue subpoenas (House Rule XI, clause 2(m)); A requirement for standing committees to review appropriations for legislation and programs within their jurisdiction (House Rule X, clause 4(e)); A requirement for each standing committee to submit "views and estimates" to the Budget Committee following the submission of the President's budget to Congress (House Rule X, clause f); A requirement that each standing committee hold at least one hearing in each 120-day period on "waste, fraud, abuse, or mismanagement," one hearing in any session when a committee has "received disclaimers of agency financial statements from auditors," and one hearing whenever GAO has identified a federal program as "high risk" (House Rule XI, clause 2(n), (o), and (p)). A requirement for committees' reports on legislation to include oversight findings, cost estimates, and related information (House Rule XIII, clause 3(c) and (d)); A requirement that information on unauthorized appropriations and other matters be included in reports on general appropriations measures reported from the Appropriations Committee (House Rule XIII, clause 3(f)); A layover rule of three days applicable to the availability of printed hearings on a general appropriation bill (House Rule XIII, clause 4(c)); A requirement that a special rule be specific in precluding consideration of an amendment to strike an unfunded mandate from a measure to be considered on the floor (House Rule XVIII, clause 11); Restrictions on appropriations bills, such as disallowing unauthorized appropriations (House Rule XXI, clause 2); Disallowing appropriations in legislative measures (House Rule XII, clause 4); A requirement for disclosing earmarks (House Rule XXI, clause 9); and A pay-go requirement (House Rule XXI, clause 10). The Committee on Oversight and Government Reform also has very broad authority over the "overall economy, efficiency, and management of government operations and activities" (House Rule X, clause 1(m)), and may conduct investigations "without regard" to the jurisdiction of another committee (House Rule X, clause 4(c)(2)). The Joint Committee on Reduction of Non-Essential Federal Expenditures was created after and existed concurrently with the predecessor committees to the House Oversight and Government Reform Committee, and their existence overlapped until 1974, when the joint committee was abolished. Senate Oversight The Senate Appropriations Committee conducts oversight year-round. In addition, Senate legislative committees are authorized by Senate rules to study, inform themselves, or make recommendations on matters related directly or indirectly to spending. In the jurisdictional statement for individual standing committees (except for Appropriations, Budget, Finance, Homeland Security and Governmental Affairs, Judiciary, Rules and Administration, and Veterans' Affairs), there is an oversight statement based on the language of the oversight provision of the Legislative Reorganization Act of 1970. For example, the jurisdictional statement for the Health, Education, Labor, and Pensions Committee provides: Such committee shall also study and review, on a comprehensive basis, matters relating to health, education and training, and public welfare, and report thereon from time to time. The Budget Committee is given the duty to conduct "continuing studies" of budget outlays, tax expenditures, and the conduct of the Congressional Budget Office (Senate Rule XXV, paragraph 1(e)(2)). The Committee on Homeland Security and Governmental Affairs has very broad authority to study the "efficiency, economy, and effectiveness of all agencies and departments of the Government," executive and legislative reorganizations, and intergovernmental relationships both with states and localities and with international organizations of which the United States is a member (Senate Rule XXV, paragraph 1(k)(2)). The Joint Committee on Reduction of Non-Essential Federal Expenditures was created after and existed concurrently with the predecessor committees to the Senate Homeland Security and Governmental Affairs Committee, and their existence overlapped until 1974, when the joint committee was abolished. The oversight provision of the 1970 Legislative Reorganization Act appears in Senate Rule XXVI, paragraph 8, with only the Appropriations and Budget Committees exempted from the rule. In addition, Senate Rule XXVI, paragraph 1 empowers each standing committee to act throughout a Congress, to issue subpoenas, and to take testimony. This rule specifically authorizes committees to conduct investigations: Each such committee may make investigations into any matter within its jurisdiction, may report such hearings as may be had by it. Pursuant to Senate Rule XXVI, paragraph 13, each committee with legislative authority except the Appropriations Committee is exhorted to ensure that continuing federal and District of Columbia "programs" are "designed" and continuing federal "activities" are "carried out" so that appropriations are made annually for programs and activities, consistent with their "nature, requirements, and objectives." Conversely, the rule directs each committee to "review" any program within its jurisdiction that does not receive an annual appropriation and to determine whether the program could be "modified" so that future appropriations would be made. When Senate committees issue a report to accompany legislation, they must include a cost estimate, a regulatory impact statement, and other information. Concluding Observations In the first decade and a half of its existence, the Joint Committee on Reduction of Non-Essential Federal Expenditures' work was oftentimes specific enough that one might surmise it could have had an impact on Members and committees in their budget decision making, but CRS research did not uncover instances that could be specifically attributed to a recommendation of the joint committee or documentation that attributed a specific cut in spending to a joint committee recommendation. The joint committee shone a light on many federal programs and activities, but it was the responsibility of other committees to follow through. The joint committee's role was solely oversight. The joint committee's authority also duplicated the oversight authority of the Appropriations Committees and other committees, and it lacked legislative authority. The joint committee was so synonymous with the interests and perspectives of Senator Byrd that its eponymous byname was the Byrd committee. The joint committee existed in the era of strong committee chairs, which may be part of the explanation for the committee's activities and recommendations. Its membership also comprised chairs and ranking minority members of other committees, who could exercise legislative authority in those roles without resorting to any power or influence that might reside in the joint committee, leaving it to Senator Byrd to define the joint committee's role. Senator Byrd was an advocate for viewing the federal budget as a whole, rather than in its separate parts as the House and Senate divided the President's budget for individual committees to act on. Senator Byrd's idea, however, was not broadly embraced in Congress during his tenure. Acceptance came later. In addition, Senator Byrd's purposes generally aligned with a perspective favoring fewer federal commitments—a perspective congressional observers have noted was increasingly out of step with his party in the post-war era. Perhaps the most enduring legacy of the joint committee was Senator Byrd's desire to exert congressional control over all components of federal spending and to recapture congressional authority where the executive branch had managed to obtain discretion to make budget decisions. Many subsequent legislative enactments of the modern congressional era, including the Congressional Budget and Impoundment Control Act of 1974, projected congressional budget authority. Senator Byrd's views on Congress's own consideration of the budget in its totality and Representative Mahon's scorekeeping reports live on as key components of the Congressional Budget Act. As indicated, with political support, it is a straightforward process to create a House, Senate, or joint committee. The challenge arises in assigning it a role. Standing committees are protective of their jurisdictions, and the House is protective of its constitutional prerogatives over budget decision making vis-à-vis the Senate. It can be difficult to carve out a unique role for a new committee, whether it is temporary or permanent. If the committee is given only study authority, it may be difficult to obtain legislative results based on its recommendations. If the committee is granted legislative authority, it may be difficult to avoid crippling conflict with standing committees. The creation of a committee charged with a role in cutting federal spending could itself be challenging. Does federal spending include only appropriations or also entitlements and possibly even tax expenditures? There are committees that could assume such a charge, and there are processes—appropriations, authorization, and reconciliation—that could be used to consider and pass legislation making cuts. Moreover, the objective of a new committee would be its role in cutting federal spending—cutting spending would be the desired end, not the means to the end. Attaining that objective responsibly and with public support would require one or more committees to examine federal programs and activities on the basis of some agreed-on criteria, for example, cost-benefit, effectiveness, duplication of similar programs or activities, constitutional authority, administrative controls and potential for corruption, national purpose, need for federal action and capacity of states and localities, market failure addressed, economic impact, demographic and socioeconomic impact, alternatives, or continuing need. Alternately, standing congressional committees have oversight power circumscribed only by constitutional limits, and legislative authority circumscribed only by chamber rules. Either chamber can direct one or more of its committees to undertake an activity or set of activities or series of activities, and party conferences can condition chairmanships on adherence to an oversight or legislative agenda. Coordination of many actors in a large legislative purpose, however, can be a complex exercise. The first 25 years of the joint committee's existence preceded the modern era's expansion of the federal government's role and responsibilities, including the creation and growth of health-care entitlements. In designing a new committee or harnessing congressional committees to scale back federal spending, the complexity of today's society, economy, and federal programs and activities would need to be taken into account. Appendix. Section 601 of the Revenue Act of 1941 (P.L. 250, 77th Congress, 1st Session (1941)) (a) There is hereby established a committee to investigate Federal expenditures (hereinafter referred to as the "committee"), to be composed of (1) three members of the Senate Committee on Finance and three members of the Senate Committee on Appropriations, to be appointed by the President of the Senate; (2) three members of the House Committee on Ways and Means and three members of the House Committee on Appropriations, to be appointed by the Speaker of the House of Representatives; and (3) the Secretary of the Treasury, and the Director of the Bureau of the Budget. A vacancy in the committee shall not affect the power of the remaining members to execute the functions of the committee, and shall be filled in the same manner as the original selection. A majority of the committee shall constitute a quorum, and the powers conferred upon them by this section may be exercised by a majority vote. (b) It shall be the duty of the committee to make a full and complete study and investigation of all expenditures of the Federal Government with a view to recommending the elimination or reduction of all such expenditures deemed by the committee to be nonessential. The committee shall report to the President and to the Congress the results of its study, together with its recommendations, at the earliest practicable date. (c) The committee, or any duly authorized subcommittee thereof, is authorized to hold such hearings, to sit and act at such times and places, to employ such experts and such clerical and other assistants, to require by subpena or otherwise the attendance of such witnesses and the production of such books, papers, and documents, to administer such oaths, to take such testimony, and to make such expenditures, as it deems advisable. The provisions of sections 102 to 104, inclusive, of the Revised Statutes shall apply in case of any failure of any witness to comply with any subpena, or testify when summoned under the authority of this section. (d) The committee is authorized to utilize the services, information, facilities, and personnel of the departments and agencies of the Government. (e) There is hereby authorized to be appropriated, the sum of the $10,000, or so much thereof as may be necessary, to carry out the provisions of this section. (f) All authority conferred by this section shall terminate upon the submission of the committee's final report.

With today's large federal deficit, some Members of Congress have become interested in institutional mechanisms that Congress has used in the past in attempts to address one component of this issue—federal spending. One mechanism that has drawn interest is the Joint Committee on Reduction of Non-Essential Federal Expenditures, which existed from 1941 to 1974. It was also known eponymously as the Byrd committee, after its advocate and long-time chair, Senator Harry F. Byrd. The joint committee was established by Section 601 of the Revenue Act of 1941, and terminated by the Congressional Budget and Impoundment Control Act of 1974. In reporting the Revenue Act, the Senate Finance Committee recommended an amendment to create the joint committee with the duty to "make a full and complete study and investigation of all expenditures of the Federal Government with a view to recommending the elimination or reduction of all such expenditures deemed by the joint committee to be nonessential." On the eve of U.S. entry into World War II, the federal debt was so high and the prospect of war so certain that immediate action was required to strengthen federal finances. The call in Congress and among policymakers, then, for a reduction of nonessential federal expenditures served many purposes. Spending that was eliminated would save money that could be applied to the war effort. American taxpayers, it was argued, would be more willing to shoulder the high taxes needed to fund the war if they saw that the federal government was acting frugally. Finally, reduced federal deficit spending could help lessen potentially damaging rates of inflation. The joint committee was a study committee, without legislative authority. Its recommendations on cutting or reducing nonessential spending were reported to the House and Senate and submitted to the Appropriations Committees. Individual Members might also have been interested in the joint committee's work and have based arguments or amendments on the committee's recommendations. It is not possible to track the joint committee's influence over the course of its existence, although the provenance in 1974 of the Budget Committees' scorekeeping was the joint committee's scorekeeping reports. The work of the joint committee was characterized by a dual narrative—one of genuine interest in reducing federal expenditures, and another concerned with projecting legislative control over federal spending. This report briefly discusses representative investigations conducted by the joint committee and several issues that interested the joint committee over much of its existence. With political support, creation of a new committee with a role in cutting federal spending would be a straightforward process. The House or Senate may create a committee through adoption of a simple resolution or by law. Together they may create a joint committee through adoption of a concurrent resolution or by law. A committee may be created as a study committee, or it may be given legislative authority. This report concludes with some considerations involved with the creation of a committee—the purpose of which is to assist Congress in reducing federal spending—and with a brief examination of committee oversight authority extant in House and Senate committees and of alternative mechanisms for cutting spending.

Introduction From an environmental quality standpoint, much of the public and policy interest in animal agriculture has focused on impacts on water resources, because animal waste, if not properly managed, can adversely impact water quality through surface runoff and erosion, direct discharges to surface waters, spills and other dry-weather discharges, and leaching into soil and groundwater. However, animal feeding operations (AFO), enterprises where animals are kept and raised in confinement, can also result in emissions to the air of particles and gases such as ammonia, hydrogen sulfide, and volatile organic chemicals. At issue are questions about the contribution of AFOs to total air pollution and corresponding ecological and possible public health effects. The Environmental Protection Agency (EPA) has authority to address AFO air emissions under several laws—the Clean Air Act, Comprehensive Environmental Response, Compensation, and Liability Act, and the Emergency Planning and Community Right-to-Know Act. Implementation and enforcement of these laws requires scientifically credible data on air emissions and accurate measurement of emissions to determine whether regulated pollutants are emitted in quantities that exceed specified thresholds. This report discusses an EPA plan called the Air Compliance Agreement intended to produce air quality monitoring data on animal agriculture emissions from a small number of farms, while at the same time protecting all participants (including farms where no monitoring takes place) through a "safe harbor" from liability under certain provisions of federal environmental laws. Some industry sectors involved in negotiating the agreement, which was announced in January 2005—notably many pork and egg producers—strongly supported it, but other industry groups that were not involved in the discussions had concerns and reservations. State and local air quality officials and environmental groups opposed the agreement. The monitoring phase of the plan is complete, and EPA is now using the data to determine emissions estimating methodologies, as discussed below. Background1 AFOs can affect air quality through emissions of gases (ammonia and hydrogen sulfide), particulate matter, volatile organic compounds, hazardous air pollutants, microorganisms, and odor. AFOs also produce gases (carbon dioxide and methane) that are associated with climate change. The generation rates of odor, manure, gases, particulates, and other constituents vary with weather, time, animal species, type of housing, manure handling system, feed type, and management system (storage, handling, and stabilization). Emission sources include barns, feedlot surfaces, manure storage and treatment units, silage piles, animal composting structures, and other smaller sources, but air emissions come mostly from the microbial breakdown of manure stored in pits or lagoons and spread on fields. Pollutants associated with AFOs have a number of environmental and human health impacts. Most of the concern with possible health effects focuses on ammonia, hydrogen sulfide, and particulate matter, while major ecological effects are associated with ammonia, particulates, methane, and oxides of nitrogen. The animal sector of agriculture has undergone major changes in the last several decades, a fact that has drawn the attention of policy makers and the public. In the United States there are an estimated 238,000 animal feeding operations where livestock and poultry are confined, reared, and fed, according to the U.S. Department of Agriculture's 1997 Census of Agriculture. Organizational changes within the industry to enhance economic efficiency have resulted in larger confined production facilities that often are geographically concentrated. The driving forces behind structural change in livestock and poultry production are no different than those that affect many other industries: technological innovation and economies of scale. From 1982 to 1997, the total number of U.S. operations with confined livestock fell by 27%. At the same time, the number of animals raised at large feedlots (generally confining 300 animals or more) increased by 88%, and the number of large feedlots increased by more than 50%. The traditional image of small farms, located in isolated, rural locales, has given way to very large farming operations, some on the scale of industrial activities. Increased facility size and regional concentration of livestock and poultry operations have, in turn, given rise to concerns over the management of animal wastes from these facilities and potential impacts on environmental quality. Agricultural operations often have been treated differently from other types of businesses under numerous federal and state laws. Some laws specifically exempt agriculture from regulatory provisions, and some are structured in such a way that farms escape most, if not all, of the regulatory impact. Moreover, in implementing environmental laws, federal and state regulators have traditionally focused most effort on controlling the largest and most visible sources of pollution to the water, air, and land—factories, waste treatment plants, motor vehicles—rather than smaller and more dispersed sources such as farms. Nevertheless, certain large animal feeding operations are subject to environmental regulation. The primary regulatory focus has been on protecting water resources and has occurred under the Clean Water Act. While air emissions from farms typically do not exceed thresholds specified in the Clean Air Act (CAA) and thus generally escape most CAA regulatory programs, facilities that emit large quantities of air pollutants may be regulated under the act and state programs which implement the CAA. A number of state air quality programs supplement federal CAA requirements with facility construction and operation permits, air quality standards for odor and certain AFO pollutants, monitoring, inspection, and testing. Some observers believe that increased federal and state attention to air emissions from AFOs, precipitated in part by structural changes in animal production and public concern, will likely lead to stricter federal regulation. Some livestock operations may also be subject to the release reporting requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, the Superfund law) and the Emergency Planning and Community Right-to-Know Act (EPCRA). The reporting requirements of these laws are triggered when large quantities of certain substances are released to the environment, including ambient air. Livestock facilities emit hydrogen sulfide and ammonia, which are reportable substances under these laws. There has been little enforcement of these provisions against livestock operations, but in lawsuits brought by citizen groups, federal courts in two circuits found AFOs in violation of the reporting requirement provisions of the laws. Applicability of other provisions of CERCLA to agriculture (provisions concerning liability for costs of cleanup of hazardous substance releases and recovery for damages of releases to natural resources) also have drawn attention. The net result has been concern by the agriculture community that other legal actions will be brought, thus potentially exposing more of these operations to enforcement under federal law. EPA's Air Compliance Agreement with Industry Enforcement of applicable provisions of federal environmental laws such as CERCLA, EPRCRA, and the Clean Air Act (CAA) requires accurate measurement of emissions to determine whether facilities and operations emit regulated pollutants in quantities that exceed specified thresholds. Monitoring air emissions from feedlots, waste lagoons, animal confinement buildings, and other components of livestock facilities is complex and has been controversial. Resolving questions about AFOs' contribution to total air pollution and corresponding ecological and possible public health effects is hindered by a lack of adequate, accurate, scientifically credible data on air emissions. At the same time, increasing public concern about AFO emissions and the possibility of enforcement actions brought against large AFOs seeking compliance with environmental laws have led to efforts to gather more and better data. Early in 2002, representatives of some agriculture industry groups—especially pork and egg producers—approached EPA officials with a proposal to negotiate a voluntary agreement that would produce air quality monitoring data on emissions from animal feedlot operations. Discussions between EPA and the industry groups continued for more than two years and eventually led to a plan, called the Air Compliance Agreement, that EPA announced in January 2005. It was published in the Federal Register on January 31, 2005, thus triggering a 90-day period during which AFOs could sign up to participate in the agreement. The signup period was subsequently extended to August 12, 2005, in order to provide more time for AFO operators to make decisions about participation. The agreement was intended to enable scientists to collect and analyze emissions data and create tools that AFOs could use to estimate their emissions, for purposes of regulatory compliance, while at the same time protecting participating AFOs under a "safe harbor" in which EPA granted covenants not to sue and released participants from EPA liability for failing to comply with certain provisions of the CAA, CERCLA, and EPCRA. EPA retained the authority to respond to an imminent and substantial endangerment to public health or the environment, and participants were not protected against liability for criminal violations of environmental laws. The agreement applied to AFOs in the egg, broiler chicken, turkey, dairy cattle, and swine industries. (It did not address AFOs that only have open-air feedlots, such as cattle feedlots.) Those that signed up to participate paid a civil penalty ranging from $200 to $1,000, depending on the number of animals at the AFO, and contributed $2,500 per farm to implement a nationwide air monitoring program for AFOs. EPA estimated that as many as 4,000 AFOs might sign up to participate in the agreement. Of those that signed agreements with EPA, a small number—perhaps no more than three dozen representative farms nationwide—would be selected to participate in on-farm monitoring, but all who signed up were protected by EPA's covenant not to sue. EPA reserved the right to decide not to go forward with the agreement and monitoring study if, for example, an insufficient number of AFOs signs up to generate the $10 million to $12 million estimated to be needed for the study, or if some individual animal groups were under-represented. EPA also could decline to enter into agreement with an individual AFO if, for example, it was the subject of ongoing federal, state, or local environmental enforcement. EPA expected that within 30 days after the end of the sign-up period (August 12, 2005), agency officials would decide whether to proceed with all, part, or none of the monitoring study and sign the Air Compliance Agreements submitted by industry participants. (As described below, this process took longer than was anticipated.) Signed agreements would then be forwarded to the agency's Environmental Appeals Board (EAB) for final approval. Unlike civil enforcement actions that are resolved by judicially approved consent decrees, the Air Compliance Agreements were administrative agreements. Among other responsibilities, the EAB is the final EPA decisionmaker on administrative appeals under all major environmental statutes that the agency administers. Monies collected from participants were to go to a nonprofit organization (NPO) set up by the AFOs, called the Agricultural Air Research Council. The NPO, in turn, was to subcontract with a science advisor and independent monitoring contractor to run the monitoring study, including recommending facilities to be monitored. EPA's role was to review and approve the contractor's study plan and, later, to use and analyze the data generated by the study. EPA also collaborated with industry and other stakeholders to develop protocols for the study, which were published with the January 2005 Notice of the agreement. Monitoring was to continue for two years. EPA will use the data and other relevant, available data to develop methodologies for estimating annual emissions, which are commonly used where site-specific monitoring data are not available. With use of the methodologies, AFOs will be able to determine whether they are complying with applicable notification provisions of federal law, as well as applicable requirements of the CAA. EPA expected that within 18 months after the conclusion of the nationwide monitoring study, it would publish emission-estimating methodologies for AFOs in the eligible animal groups. Once the methodologies are final and published, an AFO will have 120 days to apply the methodologies to its facilities, apply for all applicable air permits and comply with permit conditions, and report any qualifying releases of ammonia and hydrogen sulfide as required by CERCLA and EPCRA. Under the agreement, the EPA's covenant not to sue and waiver from liability covered an AFO's liability for failing to comply with certain provisions of CERCLA, EPCRA, and the CAA retroactively and from the start of the agreement up to the time it reports releases and applies for and receives CAA permits (i.e., 120 days after publication of estimating methodologies) or December 31, 2011, whichever is earlier. This time period can be extended by mutual agreement of EPA and participants, without limit to how long such an extension might last. Critiques of the Air Compliance Agreement In comments submitted to EPA, many livestock and poultry groups and individual producers supported the Air Compliance Agreement—especially those that expected to participate in it. In their view, comprehensive, valid data are needed to develop appropriate public policy regarding emissions from animal agriculture operations. The air monitoring study linked to the agreement is an important effort to establish the criteria that farmers and regulators need to correctly interpret agricultural compliance requirements. Supporters believe that data from the study will enable EPA to produce charts that livestock and poultry producers can use to know whether their farms are subject to federal environmental laws. Additionally, supporters said that producers need the protection provided by the agreement in order to volunteer their farms for participation in the study. Without this protection, there was no incentive for producers to participate in the research, because the potential penalties for alleged past violations are so great. Many among those who supported the agreement believed that livestock operations should be entirely exempt from CERCLA and EPCRA reporting requirements because, in their view, Congress did not intend for these laws to apply to animal agriculture. Several groups, including cattle feedlots (even though they are not included in the compliance agreement) and chicken and turkey producers, have for some time requested that EPA resolve the issue for producers through a finding or guidance to clarify that animal agriculture facilities are not subject to CERCLA and EPCRA. They fear that, barring statutory change or some clarification from EPA, the courts will continue to rule that the laws do apply to animal agriculture. Thus, they view the monitoring study, and the legal protection provided under it, as an incentive to participants that will provide the data needed to determine on a national scale which farms are subject to compliance with regulatory requirements. State and local air quality officials and members of the environmental advocacy community strongly objected to the agreement, which some characterized as a grant of "retrospective and prospective immunity from liability" for every AFO in the United States, a sweeping liability shield to the entire industry. Environmental groups and air program administrators were not included in EPA-industry negotiations on the agreement, but several draft versions of the agreement document were publicly circulated throughout the period of its development. Letters to EPA objecting to the proposal were sent by both, and environmental groups unsuccessfully attempted to halt the plan with a September 2003 lawsuit alleging that EPA had violated the Freedom of Information Act by failing to disclose documents about the proposed agreement. A legal challenge to the Air Compliance Agreement was brought by several environmental advocacy groups. The lawsuit was dismissed in July 2007, when the court held that the agreements constitute an action that is not reviewable by the court, because the agreements fall within the enforcement discretion of EPA. In a dissenting opinion, one judge said that the agreement is broader than a discretionary enforcement action, because it could be in force for years while EPA formulates an emissions regulatory program tailored to livestock operations ( Association of Irritated Residents v. EPA , No. 05-1177, D.C. Cir., July 17, 2007). Not all industry groups were fully supportive of the agreement, for a number of reasons. Some agriculture industry groups that did not participate in negotiating the compliance agreement had a number of their own concerns. Issues presented in critical comments submitted on the January 2005 publication of the agreement addressed a number of points. Environmental Advocates and Air Program Administrators Environmental critics argued that the agreement unlawfully exempts AFOs from requirements of the Clean Air Act, CERCLA, and EPCRA. They argued that EPA has no authority to defer a major stationary source's or a facility's compliance with these laws, through permit deferrals or requirements. These opponents argued that the broad liability shield provided by the agreement is not justified by contending that there is a lack of data. They pointed to research that has been conducted for quite some time by academic and government researchers (including USDA) that has documented emissions and adverse health and environmental effects from AFO emissions. Further, they argued that EPA has authority under CAA Section 114 to require that AFOs provide emission monitoring data, without the need to provide an industry-wide exemption. In the view of environmentalists, the penalties required under the agreement (averaging $500 per farm) were a "payment to pollute," especially compared with penalties available to EPA under those laws ($27,500 for each civil violation). EPA's position was that the agreement is the quickest and most effective way to address the current uncertainties regarding air emissions and to bring the entire AFO industry into compliance with the CAA, CERCLA, and EPCRA, in contrast to lengthy litigation and case-by-case enforcement of the laws. Environmental critics also were concerned that the agreement did not require AFOs to reduce pollution. EPA's publication of emission-estimating methodologies will trigger the obligation of participating AFOs to determine their emissions and to comply with all applicable CAA requirements (including permits) and CERCLA and EPCRA reporting requirements. Critics said, however, that it did not guarantee air pollution controls at any AFO or even require participants to test technologies or management practices to reduce their emissions, although all AFOs were eligible to secure a lengthy, perhaps indefinite CAA amnesty. At the end of the study EPA could make regulatory or policy decisions that would leave AFO emissions unregulated, they said, even if monitoring indicates there are emissions in amounts that would be of concern. In addition, they were critical of the open-ended timelines in the agreement (especially the 18 months after monitoring when EPA expects to publish emission-estimating methodologies): if EPA fails to issue the methodologies, the waiver could last indefinitely, they said. A number of commenters criticized the small number of sites that EPA expected would be monitored: the final study plan included 25 farms in 10 states. Such a small number, critics said, would be insufficient to develop emission-estimating methodologies for all of the covered animal sectors and possible farm configurations and geographic locations. In response, EPA said that its technical experts believed that the monitoring protocol will provide sufficient data to get a valid representative sample. Moreover, significantly increasing the number of farms to be monitored would be prohibitively expensive and would not add substantially to the value of the data collected, according to EPA. Critics also said that the small sample size for monitoring was inconsistent with recommendations made by the National Research Council (NRC) of the National Academy of Sciences calling for a process-based rather than a model farm approach to estimating emissions. EPA's current approach is to develop emission factors based on representative AFOs, estimating emissions as the product of the specific factor for a particular animal production sector and the number of animals associated with the farm or geographic region. To determine accurate emission factors using this approach requires considerable amounts of data that explain variations in emissions. The NRC's preferred approach is to develop process-based models that analyze the component parts of a farm enterprise, using research studies and mass balance equations to simulate conversion (changes in form of relevant compounds) and transfers (changes in location of compounds), as well as emissions. Estimates would be based on understanding of processes inherent in animal production. EPA said that developing a process-based model of emissions is part of the agency's long-term strategy but will take a period of years. Other critics said that the monitoring protocol under the agreement lacked adequate peer review and involvement of qualified, independent scientists who were not involved in its formulation. To assure the scientific rigor of the monitoring program, some commenters recommended an independent peer review process using reviewers with no active ties to the livestock industry. In June 2007, when EPA announced that the study was ready to proceed, agency officials said that Purdue and the other participating universities developed 2,000 pages of protocol for the design of the study and that it was peer-reviewed by EPA and its contractors, as well as by outside research groups. Still, some critics complained that the public had not been notified or involved in the external review process. State and local air quality officials said that the agreement interferes with their ability to attain air quality standards and enforce air pollution control laws. In their view, several of the agreement's provisions were unclear and could be interpreted to limit the ability of states and localities to enforce air laws. These groups, along with environmentalists, were greatly concerned that the broad waiver of liability would curtail state or local and citizen enforcement, or, at the very least, create a very high hurdle for enforcement. The agreement said that it was not intended to affect the ability of states or citizens to enforce applicable state laws. However, these critics contended that, by saying that the agreement resolved an AFO's civil liability for certain potential violations, it seriously raised the bar for state or citizen enforcement, since a participating AFO might claim in an enforcement action that the agreement provided immunity from state laws or local ordinances. EPA's position was that the agreement did not undermine state or local enforcement authorities and had no impact on the most important state enforcement tools, including zoning classification, state permits, nuisance actions, workplace regulations, and health and safety laws. Further, the agreement did not affect the ability of regulators to bring an action under emergency provisions of the Clean Air Act and other statutes in order to prevent an imminent and substantial endangerment to public health, welfare, or the environment. EPA also was criticized for failing to resolve two important definitional issues. In the Notice announcing the agreement, EPA said that after the monitoring study is complete, it would issue guidance or a rule on whether to treat emissions from different areas at AFOs as fugitive or nonfugitive emissions. Fugitive emissions are not counted for purposes of determining whether under the Clean Air Act a source is major or minor and, thus, subject to pollution controls. Critics said that EPA should clarify this important issue quickly, should do so in consultation with states and localities, and should take any action through a formal rulemaking, not a guidance document. Similarly, EPA said that at the end of the monitoring study, it would issue guidance on the scope of the term "source" as it relates to animal agriculture and farm activities. State and local air quality officials were concerned that, like the fugitive emissions issue, EPA could define "source" in such a way that emissions from AFOs do not rise to a threshold of regulatory concern. In their view, this would be contrary to federal court rulings in cases concerning applicability of CERCLA and EPCRA reporting requirements to AFOs. States and localities believe that the laws should be interpreted liberally to accomplish goals of cleaning up and maintaining clean air. Other Animal Producers Critical comments on the agreement also were submitted by some industry groups that did not participate in negotiations with EPA to develop the program, but might be expected to participate in the agreement. A number of commenters from the dairy farming and broiler and turkey producer industries noted confusion about many details of the agreement, especially for small farmers, resulting in uncertainty about implications and costs to them of participating in it (actual costs and transaction costs). Several asked EPA to review public comments on the agreement, make suggested changes where appropriate, and allow producers and processors additional time to sign up, once a final agreement was published. Extending the signup period would allow groups that are less familiar with the agreement the time that they need to assess it, they said. Based partly on requests for additional time, EPA did extend the signup deadline until August 12, 2005, but the agreement remained unchanged from what was published in January 2005. A number of industry commenters objected that the agreement required an admission of liability and that the term "civil penalty," which participants were required to pay in order to participate, carries negative connotations that imply guilt. Some companies objected to having to pay to resolve unproven violations. EPA responded that, by voluntarily signing the agreement, farmers were not admitting any liability or any sort of wrongdoing. Payment of a penalty was part of the process to obtain a release from liability for possible violations, according to EPA, and was not intended to be used for any purposes other than this agreement. In EPA's view, signing the agreement was not an admission that participating agricultural operations have been operated negligently or improperly or in violation of any federal, state, or local law or rule. Some dairy farmers also raised concerns that the agreement could jeopardize their role in farm programs, bank loans, and insurance policies. In response, the Secretary of Agriculture informed Members of Congress that the department had concluded that "voluntary participation in the Air Compliance Agreement by a producer or processor will not cause the producer or processor to be ineligible for USDA programs." Both poultry producer groups (sometimes called the meat-bird sector, in contrast to the egg-laying segment of poultry) and dairy groups said that they would prefer to work with a nonprofit organization of their own choosing to manage their participation (handling funding, monitoring facilities, presenting the data), rather than a single organization selected to represent all of the industry. Purdue University was selected to manage the study. The dairy industry preferred to work with its own Dairy Environmental Task Force, which already was addressing dairy air quality issues, and poultry and egg producers preferred to work with researchers that they believe are more familiar with their operations, such as scientists from the University of Georgia. Producers in the poultry and dairy sectors also objected to the small number of sites that EPA planned to monitor (for example, the protocol called for monitoring only four dairy farms and two broiler operations across the country), saying that the proposed monitoring program was too limited and that the data would not accurately reflect the variation or range of climatic, geographic, and operational factors that influence emissions from facilities. Whereas the environmentalists' concern about the small number of sites to be monitored was that the majority of producers would benefit from the safe harbor without having to do anything, industry groups had different concerns. They feared that EPA would impose future requirements that will be both costly and scientifically inappropriate, because the limited monitoring under the protocol would not adequately reflect different types of operations within specific sectors or for all segments of animal agriculture. One commenter noted as follows: [A]n insufficient number of farms are included in the monitoring to allow for the development of models to estimate emissions from individual AFOs.... It is unclear how the very limited number of representative farms selected, and the resulting emission estimating methodologies, will result in data capable of accounting for the various differences in management styles, feed regimes, water control and numerous other factors that can affect emissions. Comments from poultry and dairy groups raised other concerns, including financial obstacles to participating in the agreement. Dairy farmers noted that while some animal producers were able to use funds from national check-off programs to pay for the study so that individual producers did not have to pay the costs out-of-pocket (e.g., the National Pork Board committed $6 million of check-off funds for pork producers' participation), the national dairy check-off program might not be used to fund production-oriented research at the farm level. Thus, there was no central mechanism to fund dairy farmers' participation in the monitoring study. A group of pork producers who operate small farms, called the Campaign for Family Farms, and several individual hog farmers objected to use of mandatory pork check-off funds to support producers' participation in the Air Compliance Agreement. In May 2005 they petitioned the Secretary of Agriculture to halt pork check-off commitments for expenses related to the agreement. In their view, the EPA study was beyond the type of research and promotion that is permissible under the Pork Promotion, Research, and Consumer Information Act, which authorizes the check-off. According to the petitioners, the proposed use of pork check-off funds was a means for large concentrated animal feeding operations (CAFOs) to buy legal immunity from environmental laws that would not benefit those producers who are too small to be subject to the CAA, CERCLA, or EPCRA. Despite this challenge, USDA approved use of the pork check-off funds for the study. Status The signup period for participating in the agreement closed on August 12, 2005, and EPA then began compiling and evaluating responses. Ultimately, 2,681 AFOS, representing more than 6,700 farms, signed up to participate. In November 2005, an initial group of agreements was forwarded to the Agency's Environmental Appeals Board for approval. By August 2006, the EAB ratified a total of 2,568 agreements, representing approximately 13,900 farms in 42 states. According to EPA, these farms comprise more than 90% of the largest animal feeding operations in the United States. The total consists of 1,856 swine, 468 dairy, 204 egg-laying, and 40 broiler operations. According to EPA, the EAB's determination that the agreements are consistent with applicable statutes and CAA regulations allowed the monitoring study to officially begin developing quality assurance and site-specific monitoring plans for those livestock sectors. In June 2007, EPA announced that the two-year air monitoring study was ready to proceed. The study involved 25 swine, dairy, and poultry farms located in nine states and included monitoring of both open source sites and barn sites. Farms chosen for monitoring were selected based on location (relative to climate and typical practice), method of manure collection, and manure storage structures and buildings relative to the surrounding terrain. Monitoring was managed by Purdue University, designated by EPA as the Independent Research Contractor (IRC). The IRC selected equipment and methods in consultation with EPA, and researchers from Purdue and seven other universities carried out the actual monitoring, with EPA oversight. Monitored pollutants included pollutants commonly emitted by AFOs: particulate matter, ammonia, hydrogen sulfide, and volatile organic compounds. Greenhouse gas emissions (e.g., methane) were not measured as part of the study, although carbon dioxide was measured for quality assurance purposes. The monitoring study had three primary goals: (1) to quantify aerial pollutant emissions from dairy, pork, egg, and broiler production facilities; (2) to provide reliable data for developing and validating emissions models for livestock and poultry production and for comparison with government regulatory thresholds; and (3) to promote a national consensus on methods and procedures for measuring emissions from livestock operations. As contemplated in the agreement, the monitoring was carried out from mid-2007 through the end of 2009. Purdue University researchers then conducted final processing and reviews of the data and prepared reports on the individual sites. In January 2011, EPA released the data and reports on the monitored AFOs. The agency has not yet issued a final summary report to interpret all of the data, but an analysis was prepared by the Environmental Integrity Project (EIP), a nonprofit organization that focuses on environmental enforcement issues. EIP's analysis found that, despite the small number of monitored sites, measured levels of several pollutants—particles, ammonia, and hydrogen sulfide—exceeded CAA health-based standards, worker protection standards, and federal emission reporting limits at some of the study sites. EIP was critical of aspects of the study design (e.g., failure to measure short-term emissions at all sites, and inclusion of "negative" values that could represent erroneous samples and thus may underestimate pollution) and recommended that the data be thoroughly peer reviewed. EPA acknowledged the need for peer review of both the study data and methodologies for estimating AFO emissions, which the agency began to develop based on the monitoring data. In September 2011, EPA asked the agency's Science Advisory Board (SAB) to provide peer review on the methodologies. At the same time that it released the data from the study, EPA agreed to an AFO industry request to issue a "Call for Information," seeking any additional peer-reviewed monitoring data on AFO emissions, along with information about how animals and waste are managed at specific sites. EPA expected that the information will help ensure that the agency has the best available information as it develops the improved emissions estimating methodologies. One reason for seeking additional data, EPA said, was because the monitoring data alone are inadequate to develop a process-based modeling approach that incorporates "mass balance" constraints to determine emissions from AFOs, which was a key recommendation made in NRC reports in 2002 and 2003. Consequently, EPA's current focus is on developing emissions-estimating methodologies (EEMs), and the agency expects to develop a process-based modeling approach at a later unspecified date. In February 2012, EPA released draft EEMs for some animal sectors—one for broiler AFO emissions of ammonia, hydrogen sulfide, particles, and VOCs, and one for ammonia emissions from lagoons and basins at swine and dairy AFOs. EPA made the drafts available for public review and comment, and review by the SAB. EPA intends to develop draft EEMs for emissions from egg-layers, swine, and dairy confinement houses and other pollutants from swine and dairy lagoons and basins. The agency's initial efforts to develop EEMs based on the national monitoring study data have been widely criticized by stakeholder groups, members of the public, and the agency's science advisers. Much of the criticism so far focuses on significant limitations of the study data, with critics observing that limited data from a small number of sites do not adequately reflect large differences in animal types, farm operations, geography, and other factors. Data limitations make it extremely difficult to effectively predict emissions, critics say. This criticism was predictable from the time when EPA announced that the monitoring study would only consider 25 farms nationwide. For example, many commenters object to EPA's development of a single EEM that combines swine and dairy farms (different animal types) using different waste management systems (i.e., lagoons and basins). EPA's explanation is that the monitoring study did not produce sufficiently robust data for developing separate EEMs. The quality of the data also has been challenged. Key data are missing or confounded, critics point out, with significant instances of negative and zero emissions values. Commenters and EPA's science advisers do not agree on whether negative and zero emissions data should be used or not. Further, critics say that EPA's criteria for including certain data and excluding other data are unclear or unsupported. Also, EPA rejected almost all data that were submitted in response to the agency's call for additional data to supplement the study, for reasons such as use of protocols that differed from the EPA study or lack of peer review. Critics contend that the submitted data could have increased robustness of the monitored data. Many critics continue to fault EPA for not developing a process-based, whole-farm modeling approach for estimating AFO emissions, as recommended by the National Research Council (discussed above). In an April 2013 report to the EPA Administrator, the agency's Science Advisory Board rejected the agency's first two draft EEMs. The SAB concluded that the data and predictor variables used in the draft statistical models that it reviewed are not useful beyond the small number of farms in the dataset. The SAB did not support key aspects of EPA's methodology, including combining data across animal species and using predictor variables as surrogates for certain kinds of data. The SAB did provide recommendations on how EPA might expand the existing datasets and the applicability of the models. The SAB strongly recommended that EPA develop a process-based modeling approach to predict air emissions, as recommended in the 2003 NRC report. Some observers, especially among industry groups, argue that the available data are too flawed and limited to support EPA's current approach, while others, including states and environmental groups, urge the agency to move forward, even with the imperfect data in hand, in order to develop EEMs for air regulatory purposes. EPA has not formally responded to the SAB's criticisms, but the agency is reportedly reprocessing data from the study and trying to obtain datasets from other published studies in order to address issues raised by its advisors. EPA has not indicated when it will complete the process. Environmental groups are frustrated with EPA's delays; some believe that an explicit CAA regulatory program is necessary in order to address problems of air pollutants from CAFOs. Other observers say that the delays also raise questions about how relevant the emissions factors will be, once they are done, given improvements in livestock management practices and technologies since the data were originally gathered. CERCLA/EPCRA Reporting Exemption In 2005, a group of poultry producers petitioned EPA for an exemption from EPCRA and CERCLA emergency release reporting requirements, arguing that releases from poultry-growing operations pose little or no risk to public health, while reporting imposes an undue burden on the regulated community and government responders. In December 2007, EPA responded to the poultry industry petition with a proposal to exempt releases of ammonia, hydrogen sulfide, and other hazardous substances to the air from animal waste at farms from the notification requirements of CERCLA and EPCRA. The exemption would apply to releases to the air from manure, digestive emissions, and urea, including animal waste mixed with bedding, compost, and other specified materials. EPA explained that the rule was justified because of the resource burden to industry of complying with reporting requirements, since the agency cannot foresee a situation where a response action would be taken as a result of notification of releases of hazardous substances from animal waste at farms. The proposal drew significant public response during the public comment period, including criticism from environmental groups and some states. Some argued that an exemption was premature, since EPA was moving forward with research on emissions levels under the Air Compliance Agreement, and that the agreement could be undermined by a regulatory exemption. Industry groups support the proposed exemption. In September 2008, the Government Accountability Office (GAO) issued a report evaluating EPA's activities to regulate air emissions and water discharges from animal feeding operations. GAO noted the criticism of EPA's air emissions monitoring activities and concern that the research may not produce sufficient information to shape future regulation. Moreover, GAO questioned the basis for the proposed CERCLA/EPCRA exemption. "It is unclear how EPA made this determination when it has not yet completed its data collection effort and does not yet know the extent to which animal feeding operations are emitting these pollutants." In December 2008, EPA finalized the CERCLA/EPCRA administrative reporting exemption with some modifications to the original proposal. The final rule exempts hazardous substance releases that are emitted to the air from animal waste at farms from the notification requirement of CERCLA. As proposed, the final rule relieves all livestock operations of all size, not just poultry farms, from CERCLA's requirement to report hazardous substance releases to the air to federal officials. In addition, the final rule provides a partial exemption for such releases from EPCRA's requirement to report releases to state and local emergency officials. Partially responding to public comments, the final rule continues to apply EPCRA's reporting requirement to large animal feeding operations (those that are subject to permitting requirements under the Clean Water Act), but exempts smaller facilities. A number of groups criticized the final rule, again raising concern about the toxicity of chemicals such as ammonia and hydrogen sulfide that are emitted from animal waste facilities and arguing the CERCLA and EPCRA do not authorize administrative exemptions for specific industries. A coalition of environmental advocates challenged the rule in federal court, as did the National Pork Producers Council ( Waterkeeper Alliance v. EPA , D.C. Cir., No. 09-1017). Environmental advocates continue to argue that the entire rule is deficient, while the pork producers group objects to the fact that the rule only partially exempted releases from EPCRA. Other industry groups such as the National Chicken Council intervened in the litigation in support of the final rule. Parties to the litigation entered into talks to mediate the issues, but in June 2010, the federal government asked to remand the final rule for EPA to reconsider and possibly modify the rule. The court approved the government's request for a remand in October 2010. EPA anticipated proposing a new or revised rule in 2012, but it has not done so yet. In the meantime, the 2008 exemption rule remains in effect. Congressional Interest Congressional attention to the issues discussed in this report has been limited, with the result that developments have proceeded largely by administrative and some judicial actions, not through legislative policymaking. Prior to release of the Air Compliance Agreement in January 2005, some individual Members wrote letters to EPA objecting to the pending plan. Some Members also were critical of EPA's proposal to exempt routine animal waste air releases from CERCLA and EPCRA's reporting requirements, questioning the potential for harmful environmental and enforcement impacts of the proposal. At a 2008 hearing where GAO's report was discussed, several House Energy and Commerce subcommittee members said that they were skeptical of the EPA's authority for a blanket exemption. Others suggested that an exemption for small farms, whose emissions are unlikely to cause environmental harm, would make sense. EPA and USDA witnesses supported the proposal, saying that the air release waiver would only affect reporting meant for emergency response situations, but would not affect requirements to report emissions of hazardous substances from other farm sources, or releases of hazardous substances from manure into soil, ground water, or surface water. No legislation regarding the Air Compliance Agreement has been introduced. However, in several Congresses since 2005, legislation has been introduced that would exclude "manure" from the definition of hazardous substances under CERCLA and remove reporting liability under CERCLA and EPCRA for releases of manure. Proponents have argued that Congress did not intend that either of these laws apply to agriculture and that enforcement and regulatory mechanisms under other laws are adequate to address environmental releases from animal agriculture. Opponents responded that enacting a statutory exemption would severely hamper the ability of government and citizens to know about and respond to releases of hazardous substances caused by an animal agriculture operation. In the 112 th Congress, bills on this topic were H.R. 2997 and S. 1729 . Both were intended to clarify that manure is not a "hazardous substance" or "pollutant or contaminant" under CERCLA and to remove emissions reporting liability under CERCLA and EPCRA. Supporters of these bills have sought to block EPA from revising the 2008 exemption rule so as to require reporting of releases. A House Energy and Commerce subcommittee held a hearing on H.R. 2997 on June 27, 2012. At that hearing, an EPA witness said that the agency "has concerns with the broad impacts of H.R. 2997 ," which the witness described. The effect of the bill would be to prevent the EPA from using CERCLA response authorities to respond to releases to the environment when manure is the source of those hazardous substances, even if the release, for instances such as the failure of a large manure waste lagoon, presented a substantial danger to the public health and the environment. It would also prevent the Agency from issuing CERCLA abatement orders to require response to damaging releases. No similar legislation has been introduced in the 113 th Congress.

From an environmental quality standpoint, much of the interest in animal agriculture has focused on impacts on water resources, because animal waste, if not properly managed, can harm water quality through surface runoff, direct discharges, spills, and leaching into soil and groundwater. A more recent issue is the contribution of emissions from animal feeding operations (AFO), enterprises where animals are raised in confinement, to air pollution. AFOs can affect air quality through emissions of gases such as ammonia and hydrogen sulfide, particulate matter, volatile organic compounds, hazardous air pollutants, and odor. These pollutants and compounds have a number of environmental and human health effects. Agricultural operations that emit large quantities of air pollutants may be subject to Clean Air Act (CAA) regulation and permits. Further, some livestock operations also may be regulated under the release reporting requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (Superfund, or CERCLA) and the Emergency Planning and Community Right-to-Know Act (EPCRA). Questions about the applicability of these laws to livestock and poultry operations have been controversial and have drawn congressional attention. Enforcement of these federal environmental laws requires accurate measurement of emissions to determine whether regulated pollutants are emitted in quantities that exceed specified thresholds. Yet experts believe that existing data provide a poor basis for regulating and managing air emissions from AFOs. In an effort to collect scientifically credible data, in 2005 the Environmental Protection Agency (EPA) announced a plan that had been negotiated with segments of the animal agriculture industry. Called the Air Compliance Agreement, it is intended to produce air quality monitoring data on AFO emissions during a two-year study, while at the same time protecting participants through a "safe harbor" from liability under certain provisions of federal environmental laws. Many producer groups supported the agreement as essential to gathering valid data that are needed for decision making. However, critics, including environmentalists and state and local air quality officials, said that the agreement would grant all participating producers a sweeping liability shield for violations of environmental laws, yet because fewer than 30 farms would be monitored, it was too limited in scope to yield scientifically credible estimates of AFO emissions. Some industry groups had their own questions and reservations. In 2006, EPA approved agreements with 2,568 AFOs, representing nearly 14,000 farms. Monitoring of 25 farms in nine states occurred from mid-2007 to the end of 2009. In 2011, EPA released the data from the individual monitored sites and began developing improved emissions estimating methodologies (EEMs) based on the data. Draft EEMs for some animal sectors were released for review and public comment in 2012 and have been widely critiqued, including by EPA's science advisers. Separately, in 2008, EPA issued a rule to exempt animal waste emissions to the air from most CERCLA and EPCRA reporting requirements. Legal challenges to the rule followed. In 2010, a federal court approved the government's request to remand the rule to EPA for reconsideration and possible modification. EPA has not yet proposed a new or revised rule. This report reviews key issues associated with the Air Compliance Agreement. Background information on air emissions from poultry and livestock operations, relevant federal environmental laws and regulations, congressional interest, state activities, and research needs are discussed in CRS Report RL32948, Air Quality Issues and Animal Agriculture: A Primer, by [author name scrubbed].